SANTHILAL JAIN VIJAY KUMAR,THIRUVANNAMALAI vs. DCIT, CC-3(3), CHENNAI

आयकर अपीलीय अिधकरण, ‘ए’ �यायपीठ, चे�नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH: CHENNAI �ी एबी टी. वक�, �ाियक सद� एवं सु�ी प�ावती. एस., लेखा सद� के सम� BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND MS. PADMAVATHY. S, ACCOUNTANT MEMBER

आयकर अपील सं./ITA No.3167 to 3170/Chny/2025 �नधा�रणवष�/Assessment Year: 2018-19 to 2021-22 v. Santhilal Jain Vijay Kumar, The DCIT, 19/21, Asaliamman Koil Street, Central Circle-3(3), Thiruvannamalai-606 601. Chennai. [PAN: AADPV 0516 B] (अपीलाथ�/Assessee) (��यथ�/Respondent) अपीलाथ� क� ओर से/ Assessee by : Mr. D. Anand, Advocate & Mr. Hitesh, Advocate & Mr. Anil Krishna Nair, Advocate : ��यथ� क� ओर से /Respondent by Mr.V. Justin, CIT : सुनवाईक�तार�ख/Date of Hearing 30.04.2026 : घोषणाक�तार�ख /Date of Pronouncement 18.05.2026 आदेश / O R D E R PER ABY T. VARKEY, JM: These are appeals preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), (hereinafter referred to as ‘Ld.CIT(A)‘), Chennai-20, dated 06.10.2025 for the Assessment Year (hereinafter referred to as ‘AYs’) 2018-19 to 2021-22.

ITA No.3167 to 3170/Chny/2025 (AY 2018-19 to 2021-22) Santhilal Jain Vijay Kumar :: 2 :: sake of convenience and brevity, we dispose all the appeals by this consolidated order.

ITA No.3167 to 3170/Chny/2025 (AY 2018-19 to 2021-22) Santhilal Jain Vijay Kumar :: 3 :: 7. The Learned Commissioner of Income Tax (Appeals) and the Learned Assessing Officer failed to appreciate and address the factual discrepancies in the material relied upon, thereby making and sustaining an arbitrary addition. 8. The Learned Commissioner of Income Tax (Appeals) erred in confirming the additions by the Learned Assessing Officer by disregarding the substantial documentary evidence and submissions presented by the Assessee in support of its claims. 9. The Learned Commissioner of Income Tax (Appeals) and the Learned Assessing Officer completed the proceedings on the sole basis of suspicion and surmise. For these and other grounds that may be adduced during the course of hearing it is hereby prayed that the order passed by the Learned Commissioner of Income Tax (Appeals) u/s 250 of the Act may kindly be deleted and thus render justice. 6. The grievance raised by the assessee in all the above grounds relate to the addition made by way of estimated income of Rs.8,40,250/- derived from unaccounted transactions with M/s MJPL

ITA No.3167 to 3170/Chny/2025 (AY 2018-19 to 2021-22) Santhilal Jain Vijay Kumar :: 4 :: assessee was centralized on 05.07.2021 and thereafter the case for AY 2021-22 selected for regular scrutiny u/s 143(2) of the Act.

ITA No.3167 to 3170/Chny/2025 (AY 2018-19 to 2021-22) Santhilal Jain Vijay Kumar :: 5 :: excerpts from his statement, as extracted in the assessment order, are noted to be as follows:- "Q. 8 During the search action u/s. 132 of the I.T Act, 1961 at M/s. Mohanlal Jewellers Pvt. Ltd., software "J - Pack", in that ledger named "Shanti Thiruvannamalai" is maintained for the years 2016-17 to 2020-21. On questioning Shri. Suresh Khatri, he had identified the ledger belongs to your firm M/s. Shanti Swarnamahal. Please explain the transactions with Shri. Suresh Khatri (Copy of ledger annexed). Ans: Yes, I have done these gold and cash transactions with Suresh Khatri. However, after verifying my ledger and accounts, I will submit the details within one week. Q.9. Can you please tell me why these cash of Rs. 65 lakhs & gold weighing 38 Kgs (Cumulative), cannot be treated as undisclosed income? Ans: Sir, these are business transactions i.e. sales and purchases. Please consider Gross profit percentage for the amounts reflecting in this ledger. Sir, I will verify my accounts since these are transactions i.e. Sales & Purchases, kindly give one-week time." 9. The assessee thereafter was issued notices u/s 142(1) of the Act asking to explain the above transactions from Jpack Software and a show cause notice was also issued on 04.03.2023. The assessee vide his letter dated 10.03.2023 is noted to have in principle denied having any transactions, but without prejudice, urged that, the entire value should not be assessed to tax but only the profit element embedded therein, be brought to tax. The AO is noted to have extensively analyzed the seized material, admission of the assessee and other relevant details and evidences and thereafter quantified the unaccounted transactions conducted by the assessee at Rs.40,86,815/- on which he applied gross profit rate of 20.56% and made addition of Rs.8,40,250/-. On appeal, the

ITA No.3167 to 3170/Chny/2025 (AY 2018-19 to 2021-22) Santhilal Jain Vijay Kumar :: 6 :: Ld. CIT(A) concurred with the action of the AO. Aggrieved the assessee is now in appeal before us.

ITA No.3167 to 3170/Chny/2025 (AY 2018-19 to 2021-22) Santhilal Jain Vijay Kumar :: 7 :: nature, authenticity, or taxability of the underlying transactions recorded therein. The Ld. AR further submitted that, though the assessee had admitted to the unaccounted transactions reflected in the ledger extracted from Jpack Software of MJPL, but in his view, this statement cannot be treated as conclusive evidence to justify the impugned addition. He thus wants us to delete the same. The Ld. AR alternatively urged that, the estimation of profits at 20.56% was excessive and submitted that the coordinate Benches in similar cases had estimated the profits at 2%.

ITA No.3167 to 3170/Chny/2025 (AY 2018-19 to 2021-22) Santhilal Jain Vijay Kumar :: 8 :: maintained in Jpack software. The facts available on record shows that, MJPL had admitted that the accounts maintained in this software contained both their unaccounted and accounted transactions and also offered additional income across several years with reference to the details and ledgers found therefrom. It is further observed that, the Jpack software also contained ledgers of the parties with whom MJPL inter alia had unaccounted transactions and one of the ledgers was titled “SHANTI TIRUNAMALAI”. It is seen that, Shri Rajendra Kothari, from whose possession this pen-drive was found had explained the modus operandi for recording unaccounted transactions in these ledgers. It is also noted that, Shri Suresh Khatri, key person of MJPL had affirmed the version of Shri Kothari. We observe that, when the assessee was confronted with this ledger, he also accepted in his statement recorded on 14.12.2020 that, this ledger inter alia contained record of his unaccounted transactions with MJPL and also offered to pay tax on the profit derived from the same. It is not the case before us that, the admission obtained from the assessee was not based on certain incriminating material unearthed by the Revenue. It is also not the case that, the assessee had subsequently retracted his statement. Rather, we find that, only at the fag-end of the assessment and that too after a gap of more than two years, the assessee had simply denied having any unaccounted transaction with MJPL by his reply to notice u/s 142(1) in 2023. The

ITA No.3167 to 3170/Chny/2025 (AY 2018-19 to 2021-22) Santhilal Jain Vijay Kumar :: 9 :: assessee did not bring on record any cogent material to objectively rebut and show that his original admission was incorrect. According to us, the contention now being raised by the assessee urging us that, the admission made by him in his statement be ignored, cannot be countenanced and for this, we rely on the decision of the Hon’ble Rajasthan High Court in the case of Bannalal Jat Constructions Pvt Ltd Vs ACIT (106 taxmann.com 127) wherein it was held as follows: -

“13. This court in Ravi Mathur, (supra) which was relied by the ITAT in the present case, after considering catena of previous decisions, held that the statements recorded under Section 132(4) of the IT Act have great evidentiary value and it cannot be discarded in a summary and cryptic manner, by simply observing that the assessee retracted from his statement. One has to come to a definite finding as to the manner in which the retraction takes place. Such retraction should be made as soon as possible and immediately after such statement has been recorded by filing a complaint to the higher officials or otherwise brought to the notice of the higher officials by way of duly sworn affidavit or statement supported by convincing evidence, stating that the earlier statement was recorded under pressure, coercion or compulsion. ….. 14. The judgment of the Delhi High Court in Sunil Aggarwal, (supra) relied by the assessee does not in any manner extend any assistance to him because that was a case in which the court found that the assessee, apart from retracting the statement, also discharged the onus on him through cogent material to rebut the presumption that stood attracted in view of the statement made under Section 132(4) of the IT Act with reference to the entries in the books of accounts of the sales made during the year and the stock position. Similar was the position in Kailashben Manharlal Chokshi v. CIT [2008] 174 Taxman 466/[2010] 328 ITR 411, wherein the High Court of Gujarat found that the assessee gave proper evidence in support of his retraction. The High Court of Madras in M. Narayanan & Bros. (supra) held that when assessee had explained his statement as not correct in context of materials produced, no amount could be added to his income on the basis of his statement. Similarly, what has been held by the High Court of Bombay in CIT v. Omprakash K. Jain [2009] 178 Taxman 179[2010] 322 ITR 362 was that the assessing officer, while considering

ITA No.3167 to 3170/Chny/2025 (AY 2018-19 to 2021-22) Santhilal Jain Vijay Kumar :: 10 :: whether retraction was under duress or coercion, had also to consider genuineness of documents produced before him. …. 16. The Punjab and Haryana High Court in Bachittar Singh (supra) in para 7 of the report, held as under: — "7. It is not disputed that the statement was made by the assessee at the time of survey, which was retracted on May 28, 2003, and he did not take any further action for a period of more than two months. In such circumstances, the view taken by the Tribunal that retraction from the earlier statement was not permissible, is definitely a possible view. The mere fact that some entries were made in a diary could not be held to be sufficient and conclusive to hold that the statement earlier made was false. The assessee failed to produce books of account which may have been maintained during regular course of business or any other authentic contemporaneous evidence of agricultural income. In the circumstances, the statement of the assessee could certainly be acted upon." … 20. Subsequently, on 04.12.2014 during the post-search proceedings, statement of Shri Bannalal Jat was again recorded under Section 131 of the IT Act, wherein he was again confronted with the various documents seized and cash found during the course of search and the consequent surrender made by him in respect of his two concerns and in response thereto, he again confirmed the surrender of undisclosed income amounting to Rs.1,21,43,210/- and Rs.1,35,00,000/-. It is in this background that we have to view his reply to the show-cause notice submitted on 02.12.2016. This show-cause notice was issued to him by the assessing officer when the appellant-company offered the said undisclosed income to tax. The reliability, importance and sanctity of admission made during search could be refuted only by cogent and convincing evidence. We may in this connection refer to earliest judgment of the Supreme Court in Pullangode Rubber Produce Co. Ltd., (supra) wherein it was held that admission is an extremely important piece of evidence but it can't be said that it is conclusive. It is open to the person, who made admission to show that it is incorrect. The assessee should be given proper opportunity to show the correct state of affairs. The law with regard to this has developed much thereafter. There is no gainsay the fact that admission made during the search can be disputed by the assessee and at the same time however it is equally well settled that the statement made voluntarily by the assessee could form the basis of assessment. Mere fact that the assessee retracted the statement at later point of time could not make the statement unacceptable. The burden lay on the assessee to show that the admission made by him in the statement earlier at the time of survey was wrong.

ITA No.3167 to 3170/Chny/2025 (AY 2018-19 to 2021-22) Santhilal Jain Vijay Kumar :: 11 :: Such retraction, however, should be supported by strong evidence stating that the earlier statement was recorded under duress and coercion, and this has to have certain definite evidence to come to the conclusion that indicating that there was an element of compulsion for assessee to make such statement. However, a bald assertion to this effect at much belated stage cannot be accepted. The assessee indulged in maintaining transaction on diaries and loose papers which was not permissible in any of the method of accounting. The assessee, while filing the return of income, has not disclosed any undisclosed income and hence, retracted from the admission made by him during the course of search. Subsequent retraction from the surrender without having evidence or proof of retraction is not permissible in the eyes of law. The statement recorded during the course of search action which was in presence of independent witnesses has overriding effect over the subsequent retraction.” 13. The reliance placed by the Ld. AR on the decision of Kasthoori Raja Dhanush (supra) is found to be misplaced and factually distinguishable. The said decision was rendered in the context of validity of reopening of assessment u/s 153C of the Act and we find that the material facts involved in that decision was not factually distinguishable in as much as there was no such admission made by the assessee, as done in the present case.

ITA No.3167 to 3170/Chny/2025 (AY 2018-19 to 2021-22) Santhilal Jain Vijay Kumar :: 12 :: estimated the value of unaccounted sales and also worked out the unaccounted profit from the same.

ITA No.3167 to 3170/Chny/2025 (AY 2018-19 to 2021-22) Santhilal Jain Vijay Kumar :: 13 :: profit at 2%. In M/s Gold AIK (supra), this Tribunal directed the AO to adopt the G.P @ 2% on the unaccounted sale as below; We are of the view that a reasonable profit rate should be estimated and if the gross profit rate is to be added that can be added at the rate of 2%, going by the nature of business of the assessee and similar line of business only on the unaccounted part or payment made in cash for which cash was utilized for making purchases and consequent sale of MJPL. Hence, we are of the view that a reasonable estimate of gross profit of 2% will meet the ends of justice for both sides i.e., for the Department as well as for the assessee for all these six assessment years for unaccounted purchases only of gold from MJPL not recorded in the regular books of accounts. Hence, we direct the AO to apply gross profit rate of 2% on cash payment made for unaccounted purchases of gold from MJPL for these relevant six assessment years and not on recorded purchases. The assessee will file complete detail of purchases made in cash payment and purchases made through banking channel i.e., RTGS etc., before the AO and the AO will accordingly apply profit rate only on unaccounted purchases made through cash payments of gold through MJPL as recorded in the seized document 'Amanullah KDR' i.e., ledger account find in J-Pack software. Hence, in view of the above direction for computation of income, the matter is restored back to the file of the AO for applying profit rate of 2% only on unaccounted cash payments made to MJPL. 17. To consider this plea, the Bench queried the Ld. AR the basis for adoption of G.P @ 2% as opposed to the G.P as per the assessee- appellant’s books. In reply, the Ld. AR stated that the G.P rate as per the books of accounts is the result of retail sale of gold jewells, which involves incurring several expenses to make the product fit for sale, such as, making charges, wastage charges etc. Furthermore, the retail sale of gold and gold jewells is a wide market, and the demand for the products sold is high with various players involved in said line of business. In such a

ITA No.3167 to 3170/Chny/2025 (AY 2018-19 to 2021-22) Santhilal Jain Vijay Kumar :: 14 :: scenario with high demand, the appellant would be free to sell the goods at healthy prices, which at the same time need to be competitive.

ITA No.3167 to 3170/Chny/2025 (AY 2018-19 to 2021-22) Santhilal Jain Vijay Kumar :: 15 :: comes to sale of unaccounted stock. The profit on the sale of such unaccounted stock depends purely on how quickly the stock is moved on, which results in very thin profits. The sale outside the books of accounts is akin to sale in the wholesale market, as it does not involve any charges being incurred to make the gold saleable as an item of jewellery, but in the nature of bullion.

ITA No.3167 to 3170/Chny/2025 (AY 2018-19 to 2021-22) Santhilal Jain Vijay Kumar :: 16 :: the facts of the present case and logical. The nature of gold transacted in relation to MJPL seems to be pure gold, which would mean gold bullion and not jewellery, which would not retain 100% purity/touch. We thus agree to the submission that the transactions outside the books of accounts would be in the manner of wholesale dealing in gold, which has much lower profit earning capacity. In support of his plea regarding adoption of G.P @2%, he relied on the research report mentioned above, which does indicate that the profits earned by some wholesalers is in the range of 0.9% to 2.15%. This may be the reason; this Tribunal had in the case of Gold AIK (supra) adopted the G.P @2%. Respectfully following the same, we direct the AO to re-work and estimate the profit at 2% instead of 20.56% as computed in the assessment order for AY 2020-21. The Ld. AR has shown us that, the revised figure of addition would stand at Rs.81,740/-. The AO is directed to verify the said calculations and accordingly re-compute the final assessable income.

ITA No.3167 to 3170/Chny/2025 (AY 2018-19 to 2021-22) Santhilal Jain Vijay Kumar :: 17 :: 23. Before parting, we would like to note that Ld AR of assessee has inter-alia, raised legal issue challenging the action of the Income Tax Authorities making additions for AY 2018-19 to AY 2020-21, which according to him was without jurisdiction, illegal, bad in law and void ab- initio. The Ld.Counsel in support of the legal issue submitted that the impugned assessment order dated 27.03.2023 passed by AO u/s.153C r.w.s.143(3) of the Act was itself void ab-initio [refer the decision of the Hon’ble Madras High Court in the case of Hari Govind v. ACIT [2025] 180 taxmann.com 197 (Madras) as it is against the provisions of sub-section (3) of Section 153C of the Act]. Accordingly, the assessment-order framed u/s 153C itself was ‘null’ in the eyes of law for AY 2018-19 to AY 2020-21. Hence, the action of AO making additions for AY 2018-19 to AY 2020-21 is wholly without jurisdiction and was issued without authority, non-est in eyes of law.

ITA No.3167 to 3170/Chny/2025 (AY 2018-19 to 2021-22) Santhilal Jain Vijay Kumar :: 18 :: since the date of recording of ‘Satisfaction Note’ is on 09.02.2022, the date of search should be deemed as 09.02.2022. And once the date of search is deemed to be 09.02.2022, according to the Ld.Counsel, then as per Section 153C (3), special provisions of Section 153C of the Act will not apply to a search initiated on or after 01.04.2021. Hence, according to the Ld.Counsel, the very act of AO recording ‘Satisfaction Note’ and the consequent issuance of notice dated 09.02.2022 by the AO is without any authority and contrary to sub-section (3) of Section 153C of the Act and therefore, resultant framing of assessment is non-est in the eyes of law. For such a proposition, he cited the decision of the Hon’ble Madras High Court in the case of Harigovind v. ACIT [supra]. In such a scenario, according to the Ld.Counsel, the addition saddled by passing assessment order u/s.153C read with section 143(3) of the Act is unsustainable, and bad in law, and null in the eyes of law.

ITA No.3167 to 3170/Chny/2025 (AY 2018-19 to 2021-22) Santhilal Jain Vijay Kumar :: 19 :: 26. In light of our above discussions, the appeals of the assessee are partly allowed.

Order pronounced on the 18th day of May, 2026, in Chennai. Sd/- Sd/- (प�ावती .एस) (एबी टी. वक�) (PADMAVATHY. S) (ABY T. VARKEY) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER चे�नई/Chennai, �दनांक/Dated: 18th May, 2026. YS आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Assessee 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF