NITIN VIRJI GALA,GIRGAUM vs. CIRCLE 19(1), PIRAMAL CHAMBER,MUMBAI

आयकरअपीलीयअिधकरण�ायपीठमुंबईम�। IN THE INCOME TAX APPELLATE TRIBUNAL “J (SMC)” BENCH, MUMBAI BEFORE SHRI NARENDER KUMAR CHOUDHRY, JM & SHRI ARUN KHODPIA, AM I.T.A. No.8291/Mum/2025 (Assessment Year: 2016-17) Nitin Virji Gala Circle 19(1) Room No. 6, Kalyan Building Piramal Chamber, Mumbai - 400013 Vs. No. 5, Khadilkar Road, Girgaum, Mumbai - 400004 PAN: AACPG4709J

Assessee- अपीलाथ� / Appellant : Revenue-��यथ�/ Respondent Assessee by : Shri Suraji Chheda Revenue by : Shri Aditya Rai(Sr. DR.) Date of Hearing : 16.04.2026 Date of Pronouncement : 18.05.2026

O R D E R Per Arun Khodpia, AM: This appeal is preferred by the assessee, directed against the order of Commissioner of Income Tax Appeal, ADDL/JCIT (A)-Udaipur [in short, “the Ld. CIT(A)”] dated 06.11.2025, for the assessment year 2016-17, which in turn arises from assessment order u/s 143(3) of the Income Tax Act, 1961 (“the Act”) dated

ITA NO. 8291/Mum/2025 Nitin Virji Gala 24.12.2018, passed by Assistant Commissioner of Income Tax Circle 19(2),

Mumbai (in short, “the Ld. AO”).

case of assessee was selected for scrutiny assessment. Accordingly, statutorynotices

were issued along with questionnaires. During the assessment proceedings, it is

observed by the Ld. AO that, during the relevant year,an immovable property has

been purchased by the assessee. In that context, requisite details were called for

from the assessee, in response copy of registered deedfor purchase of flat no. 1503,

Laburnum Building, S.V. Road, Goregaon, Mumbai was furnished. It is noted that

the subjected property was purchased for a consideration (stamp duty valuation) of

Rs. 2,30,00,000/-. Further, the assessee was asked to provide the source of

investment in the said property, to which the assessee had submitted necessary

details. From the details of source of funds furnished by the assessee, as per the Ld.

AO certain transactions were doubtful,that the assessee hadclaimedthe source of

fund from sale of gold jewellery for Rs. 14,10,000/-, whereas the copy of bill

furnished by the assessee was only for Rs. 9,86,000/-. Accordingly, the difference

amount of Rs. 4,64,000/- was considered as unexplained investment of the assessee

under section 69 of the Act. Further, in absence of information about the

acquisition of the jewellery during the F.Y. 2015-16 itself, the entire amount of Rs.

9,86,000/- as per invoice, was also added to the income of assessee treating the

ITA NO. 8291/Mum/2025 Nitin Virji Gala same againas undisclosed investment in purchase of jewellery under section 69 of

the Act.

before the Ld. CIT(A). However, the contentions raised and explanations by the

assessee could not satisfy the Ld. CIT(A). Therefore, the appeal of assessee was

dismissed with the following observations:

“5.1 Ground No. 1: That the learned Assessing Officer has erred in law and in facts in adding Rs. 4,64,000/- as unexplained income u/s 69 of the Income-tax Act, 1961. I have carefully considered the facts of the case, the assessment order, and the submissions made by the appellant. The issue under consideration is the addition of Rs. 4,64,000/- treated by the AO as unexplained investment u/s 69 of the Act, 1961. The AO noted that the appellant had claimed to have sold jewellery for Rs. 14,10,000/- as a source of investment in a flat. However, during the course of assessment proceedings, only a sale invoice of Rs.9,86,000/- was produced. Thus, there was a clear discrepancy of Rs.4,64,000/- in the explanation offered by the appellant. The appellant could not reconcile this difference or furnish any documentary evidence of the alleged loan from "Daksha Narendra Nishar" as claimed later. Therefore, the A.O. concluded that to the extent of Rs. 4,64,000/-the investment remained unexplained and was liable to be treated as unexplained investment u/s 69 of the Act. 5.2 The primary onus lies upon the appellant to explain the nature and source of investment. Merely filing a self-serving statement that the difference was met through a loan is insufficient without corroborative evidence such as loan confirmation, bank entries clearly matching the transaction. It is a settled law that the burden of proof under section 69 lies squarely on the appellant. Failure to discharge such onus entitles the A.O. to make an addition. Reliance is placed on: • CIT v. Durga Prasad More (1971) 82 ITR 540 (SC) - the taxing authorities are entitled to look into the surrounding circumstances to determine the reality of the transaction. • Sumati Dayal v. CIT (1995) 214 ITR 801 (SC) – human probabilities and surrounding circumstances must be considered to determine genuineness. • Roshan Di Hatti v. CIT (1977) 107 ITR 938 (SC) - the onus to explain the nature and source of investment lies on the assessee; mere assertion without evidence does not discharge that burden.

ITA NO. 8291/Mum/2025 Nitin Virji Gala • CIT v. P. Mohankala (2007) 291 ITR 278 (SC) – if the explanation offered is not satisfactory in the opinion of the A.O., the amount can rightly be treated as income of the assessee. 5.3 In this case, the A.O. had duly confronted the appellant through notices under sections 143(2) and 142(1) calling for details of the source of investment and sale of jewellery. The appellant's replies failed to substantiate the discrepancy. Hence, it cannot be said that the A.O. made the addition without giving an opportunity. In the result, the appellant failed to substantiate the source of Rs. 4,64,000/-. Accordingly, the addition of Rs. 4,64,000/- made by the A.O. is confirmed Ground no. 1 is dismissed. 5.4 Ground no.2: Regarding the alleged violation of CBDT Instruction No. 20/2015: CBDT Instructions are administrative guidelines meant for internal control and do not confer enforceable legal rights on the assessee. Non-adherence to such internal guidelines does not render an otherwise valid assessment order illegal, provided that the assessee has been given adequate opportunity of being heard, which is evident from the notices issued under sections 143(2) and 142(1). Reliance is placed on: • Lachman Chaturbhuj Java v. R. G. Nitsure, AAC (1981) 132 ITR 631 (Bom) non- compliance with internal instructions of CBDT does not invalidate an assessment. • ITO v. Techspan India (P.) Ltd. (2018) 404 ITR 10 (SC) -procedural irregularities do not vitiate assessment unless prejudice is shown. • Smt. Shraddha Shantilal Shah v. ITO (2014) 367 ITR 245 (Guj) CBDT instructions are directory, not mandatory, and non-observance thereof cannot by itself be ground for annulment of assessment.

Therefore, the appellant's argument that no separate "show cause notice" was issued specifically for this difference does not hold. The entire scrutiny process, including repeated notices and queries about the source of investment, constituted sufficient opportunity. The record shows that several opportunities were provided to the appellant. Notices u/s 142(1) dated 20.08.2018, 20.11.2018, and 14.12.2018 were duly issued and responded to by the appellant. Thus, there is no violation of natural justice. 5.5 The Hon'ble Supreme Court in State Bank of Patiala v. S.K. Sharma (1996) 3 SCC 364 held that unless prejudice is demonstrated, mere procedural irregularity cannot vitiate the order. Hence, ground no. 2 is dismissed being without any merit. 5.6 In Ground No. 3 to 5, appellant contended the addition of Rs.9,86,000/- made by the AO u/s 69. Since Ground no. 3 to 5 are inter-related, hence, the same are being adjudicated together. I have carefully considered the facts of the case, the assessment order, and the submissions made by the appellant. The AO made an addition of Rs. 9,86,000/- under section 69 of the Act on account of unexplained Investment in jewellery. The appellant contended that the jewellery was ancestral or received as gifts from his mother and submitted that the A.O. failed to consider the explanation filed on 22/12/2018 and proceeded on mere surmises. However, the record clearly shows that during assessment proceedings, the appellant was provided repeated opportunities to substantiate the source

ITA NO. 8291/Mum/2025 Nitin Virji Gala and nature of the jewellery, but failed to produce any credible documentary evidence such as gift deeds, wealth-tax returns, or valuation reports to prove ownership or acquisition in earlier years. The A.O. has discussed the issue in detail and given cogent reasons for rejecting the unsubstantiated explanation. The burden under section 69 lies squarely on the appellant, and mere oral statements without corroborative proof cannot be accepted. 5.7 In the case of the Hon'ble Supreme Court in CIT v. P.Mohankala (2007) 291 ITR 278 (SC) and Roshan Di Hatti v. CIT (1977) 107 ITR 938 (SC) has held that where the explanation offered is not satisfactory, the addition as unexplained investment is justified. Similarly, in Sumati Dayal v. CIT (1995) 214 ITR 801 (SC), it was held that the test of human probabilities must be applied in such cases. The A.O., based on material available on record, rightly inferred that the jewellery was purchased during the year out of undisclosed income and sold to introduce unaccounted money into the books. Therefore, the addition cannot be said to be based on surmises or conjectures but on a reasonable and logical conclusion arising from the appellant's failure to prove the genuineness of the source. Accordingly, I find no merit in the appellant's contentions, and the addition of Rs.9,86,000/- made under section 69 is sustained. Thus, grounds 3 to 5 are dismissed. 5.8 Ground No. 6 raised by the appellant is related with the non-consideration by the AO of the CBDT's Circular No. 1916, 11.05.1994 which is related with the permissible limit of holding Gold. I have carefully considered Ground No. 6 and the submissions made by the appellant. The grievance of the appellant is that the AO failed to consider CBDT Circular No. 1916 dated 11.05.1994 while making the addition of Rs.9,86,000/- under section 69 in respect of gold ornaments. However, the said Circular only provides administrative guidelines to field officers regarding the quantity of jewellery that need not be seized during search and seizure operations and does not, in any manner, confer immunity from assessment or addition when the source of such jewellery is not explained. The Circular cannot be interpreted as an authority to treat all jewellery within the prescribed limits as explained for the purposes of section 69. The onus remains on the appellant to prove the nature and source of investment to the satisfaction of the AO. In the present case, the appellant failed to establish ownership or acquisition of the jewellery through credible evidence such as gift deeds, or balance sheet disclosures. 5.9 The Hon'ble Gujarat High Court in CIT v. RatanlalVyaparilal Jain (2011) 339 ITR 351 (Guj) and the Hon'ble Delhi High Court in CIT v. Ashok Chaddha (2011) 14 taxmann.com 57 (Del) have categorically held that CBDT Circular No. 1916 is relevant only for non-seizure during search and cannot be relied upon to explain the source of jewellery under section 69. Therefore, the reliance placed by the appellant on the said Circular is misplaced and the AO was fully justified in treating the unexplained investment in jewellery as income under section 69. Accordingly, Ground No. 6 is dismissed. 5.10 Ground No. 7 is general in nature and does not call for any specific adjudication. It merely reserves the right of the appellant to amend, add, or alter the grounds of appeal at the time of hearing and is stated to be without prejudice to other grounds. Since all specific issues raised in the preceding grounds have already been dealt with and decided on merits, no separate finding is required on this general ground. Accordingly, Ground No. 7 is treated as general and is dismissed. 6. In the result, the appeal filed by the appellant is fully dismissed.”

ITA NO. 8291/Mum/2025 Nitin Virji Gala 3. Being dissatisfied with the aforesaid observations of Ld. CIT(A), confirming

the additions made by the Ld. AO u/s 69 of the Act, the assessee preferred the

present appeal.

source of funds for purchase of property qua the difference in sale bill of jewellery,

which is found out by the Ld. AO was a correct observation or not. In this respect

the Ld. AR of the assessee furnished before us, the details of the entire transactions

at page no. 10 of the assessee’s paper book explaining therein,the details of source

of funds according to which certain transactions from bank are wrongly narrated by

the assessee as sale of gold ornaments, which created some confusion before the

Ld. AO. Since, the clarification is furnished before us by the assessee along with

further details and evidences, which needs proper verification, so as to arrive at a

logical and correct conclusion regarding the legitimate taxable income of the

assessee. We, thus,in terms of aforesaid deliberations deem it appropriate to restore

this matter back to the file of Ld. AO for verification of the information furnished

by the assessee, in terms of submissions / clarification / evidence regarding

misreading of information about the source of funds, may be due to mis

representation by the assessee, as clarified before us. The assessee is directed to

provide complete details of the source of investment to the satisfaction of Ld. AO,

for his verification and examination.

ITA NO. 8291/Mum/2025 Nitin Virji Gala

Needless to say, the assessee shall be provided with reasonable opportunities to be

heard in the set aside proceedings. At the same time, the assessee is directed to

furnish necessary evidences, explanations and submissions as required by the Ld.

AO, failing which the Ld. AO would be at liberty to decide the issue as per law.

above terms.

Order pronounced in the open court on 18-05-2026.

Sd/- Sd/- (NARENDER KUMAR CHOUDHRY) (ARUN KHODPIA) JUDICIAL MEMBER ACCOUNTANT MEMBER

Mumbai, Dated: 18-05-2026. Soumili Das, PS

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT BY ORDER,

(Dy./Asstt. Registrar) ITAT, Mumbai