SUSHEEL JEWELLERY MART PRIVATE LIMITED,HOSUR vs. DCIT, CENTRAL CIRCLE 3(3), CHENNAI, CHENNAI

PDF · subscribers
ITA 482/CHNY/2026Status: DisposedITAT Chennai13 October 2026AY 2020-2126 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the impugned addition cannot be sustained. It found merit in the assessee's case regarding infirmities and inconsistencies in the third-party software entries. The Tribunal noted that once the assessee denied unaccounted transactions and challenged the veracity of the 'J-Pack' entries, the AO should have examined MJPL personnel and provided an opportunity for cross-examination. The Tribunal considered it unsafe to fasten the addition based solely on the third-party software entries without corroborative evidence, especially when the assessee denied unaccounted transactions and MJPL had submitted confirmations of accounts. Consequently, the addition for AY 2017-18 was directed to be deleted. The same reasoning was applied to other assessment years, leading to the deletion of additions for all AYs. The legal issue regarding jurisdiction under Section 153C was left undecided as the High Court had stayed the operation of the relied-upon judgment in Hari Govind v. ACIT.

What were the facts?

The assessee, Susheel Jewellery Mart Private Limited, is in appeal against the orders of the CIT(A) for Assessment Years (AY) 2017-18 to 2021-22. The appeals stem from additions made by the Assessing Officer (AO) based on unaccounted transactions with M/s Mohanlal Jewellers Pvt Ltd (MJPL). A search at MJPL on 10.11.2020 yielded electronic data from 'J-Pack' software, containing a ledger for 'Susheel Hosur' allegedly linked to the assessee. Statements from MJPL personnel identified this ledger as belonging to the assessee. The AO, after reopening cases under Section 153C for AY 2017-18 to 2020-21 and issuing a notice under Section 143(2) for AY 2021-22, quantified unaccounted purchases at Rs. 24,63,56,680/- and made an addition of Rs. 3,34,00,007/- for AY 2017-18. The CIT(A) partly allowed the appeal, directing the exclusion of opening balance from purchases.

What were the issues?

1. Whether the addition made on account of alleged unaccounted transactions with MJPL, based on data from MJPL's 'J-Pack' software, is sustainable in law, particularly when the assessee denied such transactions and requested cross-examination of MJPL personnel? (Question of law and fact, turning on Sections 153C and 143(3) of the Income Tax Act, 1961). Assessee's contentions: The assessee argued that the 'J-Pack' ledger entries are unreliable and do not pertain to it, as it had only recorded transactions with MJPL in its own books. It asserted that it had no unaccounted purchases and requested cross-examination of MJPL personnel (Shri Rajendra Kothari and Shri Suresh Khatri) to verify the 'J-Pack' data. The assessee also raised a legal issue regarding the jurisdiction of the AO to frame assessments under Section 153C, citing the decision in Hari Govind v. ACIT. Revenue's contentions: The revenue, through the AO, relied on the 'J-Pack' ledger and the statements of MJPL personnel to establish unaccounted transactions. The AO did not agree with the assessee's denial and proceeded to make additions. The judgment does not explicitly record the revenue's arguments before the Tribunal.

Which sections of the Income-tax Act were involved?

Section 153C,Section 143(3),Section 132(4),Section 131

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: SHRI ABY T. VARKEY & SHRI S.R. RAGHUNATHA

Hearing: 24.09.2026

आयकर अपीलीय अिधकरण, ’सी’ �यायपीठ, चे�ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH: CHENNAI �ी एबी टी. वक�, �ाियक सद� एवं �ी एस. आर. रघुनाथा, लेखा सद� के सम� BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI S.R. RAGHUNATHA, ACCOUNTANT MEMBER

ITA. 479 to 483/Chny/2026 िनधा�रणवष�/Assessment Year: 2017-18 to 2021-22 SUSHEEL JEWELLERY MART VS DCIT, PRIVATE LIMITED CENTRAL CIRCLE 3(3), CHENNAI NO 100, MG ROAD, HOSUR, TAMIL NADU, HOSUR-635109, TAMIL NADU [PAN: AAICS 3992 A] (अपीलाथ�/Appellant/Revenue) (��यथ�/Respondent) : अपीलाथ� क� ओर से/ Appellant by Mr. Sandeep Chalapathy,CA : ��यथ� क� ओर से /Respondent by Ms. Nayani Swapna, CIT : सुनवाईक�तारीख/Date of Hearing 24.09.2026 : घोषणाक�तारीख /Date of 13.10.2026 Pronouncement 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, all dated 26.11.2025 for the Assessment Years (hereinafter referred to as “AY”) 2017-18 to 2021-22 passed u/s.250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).

ITA No.479 to 483/Chny/2026 (AY 2017-18 to 2021-22) SUSHEEL JEWELLERY MART PRIVATE LIMITED :: 2 :: 2. Since the issues involved are common, and the appeals for all the assessment years were heard together and, for the sake of convenience and brevity, we dispose of the appeals by this consolidated order.

3.

Grievance raised by the assessee in all above appeals relate to the addition made by way of estimated income derived from unaccounted transactions with M/s Mohanlal Jewellers Pvt (in short ‘MJPL’).

4.

Both sides agree that facts and the issue involved are identical in all appeals. Hence, we take up the appeal for AY 2017-18, which decision will apply mutatis mutandis for other appeals. Before adverting to the grounds raised by the assessee, we first consider it fit to cull out the basic facts in the case by referring to the facts for AY 2017-18. The assessee is M/s Susheel Jewellery Mart Private Limited, company is engaged in the business of trading and sale of gold jewellery. The assessee filed its return of income for AY 2017- 18 on 31.12.2017 declaring a total income of Rs.4,25,04,130/-, which was selected for scrutiny and the AO vide order passed u/s.143(3) dated 12.12.2019 assessed total income of

ITA No.479 to 483/Chny/2026 (AY 2017-18 to 2021-22) SUSHEEL JEWELLERY MART PRIVATE LIMITED :: 3 :: Rs.4,25,04,134/-. A search u/s.132 of the Act was conducted on 10.11.2020 in the case of M/s Mohanlal Jewellers Chennai Pvt Ltd (in short ‘MJPL’) and other related persons. During the course of the search, certain electronic records including desk-top data and pen drives containing information from the “J-Pack” accounting software were seized which inter alia contained incriminating material having a bearing on the total income of the assessee. The case of the assessee was centralized to the office of the Deputy Commissioner of Income Tax, Central Circle 3(3), Chennai on 11.02.2022 and thereafter the case for AY.2017-18 to 2020-21 were reopened u/s.153C of the Act by issuing notice on 18.02.2022 and notice u/s. 143(2) for AY 2021-22 on 18.02.2022.

5.

The AO observed that the statements of certain persons including Shri Rajendra Kothari of MJPL were recorded u/s.132(4) of the Act, wherein it was stated that “J-Pack” software inter alia contained details of transactions relating to purchase and sale of gold made outside the regular book of accounts. On examination of the data retrieved from the “J-Pack” software the AO of the searched person noticed a ledger account in the name of “Susheel Hosur”, which was allegedly linked to the assessee. The ledger

ITA No.479 to 483/Chny/2026 (AY 2017-18 to 2021-22) SUSHEEL JEWELLERY MART PRIVATE LIMITED :: 4 :: reflected the transactions of purchase of gold jewellery ornaments. Shri Rajendra Kothari, in his statement recorded u/s.131 of the Act dated 30.11.2020, had identified that the said ledger pertains to M/s Susheel Jewellery Mart Private Limited, Hosur (PAN No. AAICS3992A). Further, Shri Suresh Khatri in response to question No.27 in statement recorded u/s.131 dated 04.12.2020 concurred with the statement given by Shri Rajendra Kothari. Having regard to the details of the opening and closing balances recorded under the ledger “SUSHIL HOSUR” in the “J-Pack” software of MJPL, the AO tabulated the data concerning the assessee which is found at Page No.4 and 5 of the assessment order. The AO is noted to have provided the copy of the ledger extracted from “J-Pack” software and asked the assessee to explain the transactions reflected therein, along with supporting documentary evidences. The response furnished by the assessee in this regard is noted by the AO, wherein he acknowledges that the assessee enclosed the ledger account of M/s. MJPL as recorded in its books of account, along with copies of the relevant bank statements. The assessee further asserted before the AO that it had undertaken only those transactions with MJPL which were recorded in its books of accounts. Accordingly, the

ITA No.479 to 483/Chny/2026 (AY 2017-18 to 2021-22) SUSHEEL JEWELLERY MART PRIVATE LIMITED :: 5 :: assessee is noted to have denied whatever additional transactions beyond those reflected in its books, despite the transactions which were reflected in the “J-Pack” account maintained by M/s MJPL.

6.

However, taking note of the unaccounted transactions reflected in “J-Pack” ledger, the AO issued show-cause notice to the assessee on 11.03.2023 to explain why the undisclosed income arising from unaccounted purchases should not be brought to tax. Further, the AO notes that the assessee submitted its reply on 20th March, 2023 wherein assessee submitted that it did not have any documentary evidence regarding respect of unaccounted gold purchase reflected in the “J-Pack” ledger. The assessee again reiterated before the AO that no unaccounted purchases were made during the year under consideration with the MJPL and requested the AO to accept the audited financial statements of the assessee for the relevant years. However, the AO didn’t agree and asked the assessee to prove that it didn’t carry out any unaccounted transactions with MJPL. The assessee reiterated its stand that it didn’t carry out any unaccounted transaction with MJPL and specifically requested for copies of the statements of Suresh Kathri and Rajendra Kothari and an opportunity to cross-examine the said

ITA No.479 to 483/Chny/2026 (AY 2017-18 to 2021-22) SUSHEEL JEWELLERY MART PRIVATE LIMITED :: 6 :: persons. The AO brushed aside the assessee’s request for cross- examination of Suresh Kathri and Rajendra Kothari (MJPL), stating that adverse view taken against assessee was not based on their statements. And since assessee couldn’t prove that it didn’t carry out any unaccounted transaction with MJPL, the AO took the view that assessee had carried out unaccounted transactions with M/s MJPL. Thereafter, the AO verified the transaction recorded in the “J- Pack” ledger pertaining to AY 2017-18 to AY 2020-21 and A.Y.2021- 22 (till 10.11.2020 date of search of MJPL) with the transactions made with MJPL recorded in the books of the assessee. The AO is noted to have analyzed the seized material and thereafter quantified the unaccounted transactions conducted by the assessee during the period from 01.04.2016 to 31.03.2017 at Rs.24,63,56,680/- (i.e. 90,660.97 grams) on which he applied gross rate of 13.55% and made addition of Rs.3,34,00,007/-.

7.

Aggrieved, the assessee is noted to have preferred an appeal before the Ld.CIT(A) who has partly allowed the appeal of the assessee. In this context, it is noted that the assessee submitted that the opening balance of 5,088.71 gms is included in the above addition and it is pertaining to earlier years and therefore, the same

ITA No.479 to 483/Chny/2026 (AY 2017-18 to 2021-22) SUSHEEL JEWELLERY MART PRIVATE LIMITED :: 7 :: cannot be considered for the purpose of the addition. The Ld.CIT(A) directed the AO to delete the same by holding as under;

“6.7.2. With regard to this contention of the appellant, it is observed that as per‘SUSHIL HOSUR’ ledger in J-pack, the total purchases for the year underconsideration is 85658.11 grams only. However, the AO has taken the purchasesduring the year at 90746.820 grams, which includes the opening balance of 5088.710grams. Thus, I am of the opinion that the opening balance cannot form part of thepurchases made during the year and hence, the same needs to be excluded whileworking out the unaccounted purchases for the year under consideration. Therefore,the AO is directed to consider the total purchases at 85658.11 grams while workingout the unaccounted purchases of the appellant for the year under consideration.” 8. Even though, the assessee had furnished reconciliation statement of the transactions recorded in the books of assessee and J-Pack ledger showing the transactions appearing in the books of the account of the assessee but not appearing in the J-Pack ledger, and asserted that the “J- Pack” software was riddled with inconsistencies and pointed out that certain purchase entries recorded in the books of the assessee are not recorded in the J-Pack ledger. Hence, the same is not reliable. However, the Ld.CIT(A) didn’t accept the said contention and dismissed it. Thus, the Ld. CIT(A) partially allowed the appeal of the assessee.

9.

Still not satisfied by the partial relief granted by the Ld CIT(A), the assessee is before us.

ITA No.479 to 483/Chny/2026 (AY 2017-18 to 2021-22) SUSHEEL JEWELLERY MART PRIVATE LIMITED :: 8 :: 10. Before addressing the issues involved in the grounds of appeal, the Ld AR drew our attention to certain grounds which are being withdrawn and not pressed. The Ld AR has withdrawn ground nos. 3 regarding satisfaction note, ground no. 4.1, and ground no. 5.2 regarding non-adjudication of the cross-examination plea by CIT(A) and ground no. 6 regarding the jurisdiction. All other grounds are argued and decided as under;

11.

Heard both parties and perused the material placed before us. We note that, a search action was conducted on the premises of the MJPL, in the course of which a pen drive was found and seized which contained accounts maintained in “J-Pack” software. The facts available on record shows that MJPL had admitted that the accounts maintained in its 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 “J-Pack” software also contained ledgers of the parties with whom MJPL inter alia had unaccounted transactions and one of the ledgers was titled “SUSHIL HOSUR”. It is seen that Shri Rajendra Kothari from whose possession the Pen-drive was found, had explained the modus

ITA No.479 to 483/Chny/2026 (AY 2017-18 to 2021-22) SUSHEEL JEWELLERY MART PRIVATE LIMITED :: 9 :: operandi adopted for recording unaccounted transactions in said ledgers. It is also noted that Shri Suresh Khatri, keyperson of MJPL has confirmed the version of Shri Kothari.

12.

We further observe that when assessee was confronted with this “J-Pack” ledger, the assessee has denied to have carried out any unaccounted purchases from MJPL and furnished a copy of the ledger account of M/s MJPL as appearing in its books, along with copies of bank statement and reconciliation of issued & receipts and entries shown in “J-Pack” ledgers. The assessee also furnished copies of bills/invoices in respect of accounted purchases made from M/s MJPL during the relevant years, as well as the details of making charges paid to M/s MJPL. The assessee contended that it had undertaken only such transactions with MJPL which were recorded in its books of account and requested the AO to accept the audited financial statements of the assessee.

13.

The AO in Para 8.5 of the assessment order, has acknowledged that assessee denied the transactions reflected in the “J- Pack” account which have not been recorded in its (assessee’s) books of accounts. However, the AO brushed aside the denial made

ITA No.479 to 483/Chny/2026 (AY 2017-18 to 2021-22) SUSHEEL JEWELLERY MART PRIVATE LIMITED :: 10 :: by the assessee on the ground that certain transactions which have been recorded in the books of account of the assessee were also found recorded in the J-Pack account in the same manner. Therefore, according to AO the correctness of the entries appearing in the J-Pack account cannot be disputed by the assessee. In other words, the transactions recorded by assessee in its book’s tallied with the entries in J-Pack account, in the same manner date wise. Hence, it is improbable that ledger maintained by MJPL in J-Pack software would be wrong. Further, according to AO, assessee failed to reconcile the unmatched entries, nor prove that it didn’t carry out any unaccounted transaction with MJPL. Accordingly, the AO rejected the assessee’s denial and proceeded to quantify the unaccounted transactions undertaken by the assessee during the period from 01.04.2016 to 31.03.2017 at Rs.24,63,56,680/- on which gross profit rate of 13.55% was applied, resulting in an addition of Rs.3,34,00,007/-. The assessee is noted to have preferred appeal before Ld CIT(A), who granted partial relief to the assessee subject to verification, as recorded in the said the order. The impugned action of Ld CIT(A) is under challenge before us.

ITA No.479 to 483/Chny/2026 (AY 2017-18 to 2021-22) SUSHEEL JEWELLERY MART PRIVATE LIMITED :: 11 :: 14. We find that the impugned addition hinges on the entries of ledger extract of “SUSHIL HOSUR” in the books of MJPL maintained in J-Pack software and the statements of Shri Kothari and Suresh Khatri of MJPL. When the said ledger extract was confronted to the assessee, the assessee is noted to have denied the unaccounted transactions and asserted that it has purchased only 85.850gms of gold from MJPL during AY 2017-18. In support thereof, the assessee furnished relevant evidencesincluding bills/invoices, books of account and details of payments made through banking channel. However, the AO didn’t accept the denial of unaccounted purchases on the ground that, as per the “J-Pack” ledger, gold weighing 90,660.97gms had been issued, whereas only gold weighing 85.850gms was accounted for in the books of the assessee. Accordingly AO proceeded to treat the difference of 90,660.97gms as unaccounted purchases. The AO further relied upon the failure of the assessee to reconcile the unmatched entries, and failure to prove that it didn’t carry out unaccounted transaction with MJPL, as the basis for rejecting the assessee’s denial of carrying out any unaccounted transaction with MJPL. We do not agree with the

ITA No.479 to 483/Chny/2026 (AY 2017-18 to 2021-22) SUSHEEL JEWELLERY MART PRIVATE LIMITED :: 12 :: reasoning given by the AO for fastening the liability/addition for the following reasons discussed hereunder.

15.

We agree with contention of the Ld.AR that, the assessee cannot be expected to prove a negative. Instead, the onus lay on the Revenue to substantiate the unmatched entries with some independent tangible material, if they were seeking to use the same against the assessee. According to us, the entries found in “J-Pack” application software which was seized from the premises of MJPL, could have been explained by MJPL alone. The case of the Revenue is that Shri Kothari of MJPL had claimed these entries to be unaccounted for, and thus it was rightly added in the hands of the assessee. On the other hand, the Ld.AR has submitted that, the statement given by Shri Kothari could have been in the context of the books of account of the MJPL and not the assessee. The Ld.AR submitted that, the Shri Kothari who was an employee of MJPL could not have possibly known as to whether the assessee had accounted or not, these transactions in their books of account. He corroborated his submission by showing that some of these entries were recorded in the books of account of the assessee. We also note that neither the copies of the statements recorded during the search were

ITA No.479 to 483/Chny/2026 (AY 2017-18 to 2021-22) SUSHEEL JEWELLERY MART PRIVATE LIMITED :: 13 :: provided nor opportunity to cross- examine Shri Kothari/Suresh Khatri were provided to the assessee. We thus, find force in the Ld.AR’s plea that the statement of Shri Kothari/Suresh Khatri cannot come to the aid of the AO to fasten a liability on the assessee without corroborative material which is absent in this case.

16.

It is settled position in law that presumption set out in section 132(4), 132(4A) and 292C is only against the searched person which in this case is MJPL. Hence, contents of the material seized from the possession of the MJPL viz. entries in J-Pack application software seized from MJPL, can be presumed to be true only qua MJPL. Likewise, the statement of Shri Kothari recorded on the basis of material found in his possession can be used as valid evidence in the income tax proceedings of MJPL. However, said presumption cannot by itself, be extended to the assessee, unless the assessee was afforded an opportunity to cross-examine him. It is well settled in law that such 3rd party material or statement cannot be treated as conclusive proof against an assessee, unless there is other corroborative material linking the same to the assessee. Hence, we thus agree with the assessee that the contents of J-pack software, which was unilaterally maintained bythat party (MJPL) cannot be

ITA No.479 to 483/Chny/2026 (AY 2017-18 to 2021-22) SUSHEEL JEWELLERY MART PRIVATE LIMITED :: 14 :: straight away used adversely against the assessee, without any corroborative material evidence. It is noted that assessee was able to substantially reconcile the entries out of the total entries found in the J-Pack application software. Insofar as the unmatched entries are concerned, the assessee had contended that, these could have been mistakenly entered by Shri Rajendra Kothari in the software under the name of assessee. To support his contentions, he referred to certain contra entries, which suggest that when Shri Kothari identified the entries which were wrongly posted to the name of the assessee, he would pass a contra entry to transfer it to the correct head, which this Tribunal in identical facts and circumstances noted in Lalitha Jewelry Case [ITA Nos.675 to 680/Chny/2025 dt.12.06.2025]. We, therefore, agree with the Ld AR that these unmatched entries could also be a case of incorrect accounting, mistaken identity or the possibility of transactions pertaining other customers were wrongly posted to the accounts of the assessee.

17.

According to us, ordinarily, the presence of any unmatched entries with the books of accounts of 3rd party raises a suspicion against the assessee. However, once the assessee specifically denies having undertaken such transactions then AO has to make

ITA No.479 to 483/Chny/2026 (AY 2017-18 to 2021-22) SUSHEEL JEWELLERY MART PRIVATE LIMITED :: 15 :: necessary enquiries and bring on record corroborative evidence to establish that the entries in question actually pertain to the assessee. However, the AO despite assesee’s denial has not enquired about the veracity of such entries found in the ledger of MJPL and has refused to allow cross-examination of the makers of statement on behalf of MJPL. Such an omission on the part of AO in the given facts of the case vitiates the adverse view taken against the assessee that it indulged in unaccounted transaction with MJPL and the addition made is fragile for violation of natural justice.

Further, the Ld.AR submitted that the contents of the ledger 18. extracted from the “J-Pack” software of MJPL is riddled with inaccuracies, so it is unreliable and hence it is unsafe to rely on it to make additions, based on unreliable ledger. For such a proposition, he invited our attention to the ledger extracts of MJPL in the books of the assessee (for AY 2017-18 & AY 2021-22) found kept in paper book IIIat Page No.1 to 3, 9 to 24, 31 to 33, 39 to 49, 55 to 65 and also the “J-Pack” ledger which is kept at Page No.4 to 8, 25 to 30, 34 to 38, 50 to 54, 66 to 67 at paper book III,on the basis of which the AO has quantified the purported unaccounted transaction allegedly conducted by the assessee on which he applied gross

ITA No.479 to 483/Chny/2026 (AY 2017-18 to 2021-22) SUSHEEL JEWELLERY MART PRIVATE LIMITED :: 16 :: profit and made the addition while passing the quantum order u/s. 153C / 143(3) order for the captioned assessment years. He pointed out that ‘bills’ accounted in the assessee's regular books and paid through banking channels are appearing on the “Receipt” side of the J-Pack ledger which is contrary to the findings and explanation of the modus operandi by the assessing officer in the assessment order. According to him, if the J-Pack ledger were a complete or reliable mirror of the assessee's dealings with MJPL, every bill recorded in the assessee's regular books ought to find a corresponding entry in J-Pack on the “Issued” side since the assessee has only purchases from MJPL. Therefore, there are instances of purchase bills not reflecting under the ‘Issue column’ of J- Pack ledger, thereby raising serious question of the reliability of the J- Pack ledger relied upon by the Assessing Officer, to draw adverse inference against assessee. The assessee also explains that there are certain transactions where the amounts are appearing on both “Issued” and “Receipt” side and the same is appearing in the audited books of account of the assessee. Therefore, he wondered as to how same transactions can appear in both sides of the “J- Pack” ledger. Certain instances, brought to our notice as noted

ITA No.479 to 483/Chny/2026 (AY 2017-18 to 2021-22) SUSHEEL JEWELLERY MART PRIVATE LIMITED :: 17 :: below: (a) Purchase Bill No. 461 dated 25.08.2016 (relevant to AY 2017- 18):

The screenshot of the invoice is captured below:

The screenshot of the J-Pack ledger relevant for AY 2017-18 wherein the 28.050grams purchased from MJPL is not reflecting under ‘Issued Column’ during the relevant period but reflecting under “Receipt Column”contrary to the explanation of the assessing officer:

ITA No.479 to 483/Chny/2026 (AY 2017-18 to 2021-22) SUSHEEL JEWELLERY MART PRIVATE LIMITED :: 18 ::

(b) Purchase Bill No. 438 dated 13.10.2016 (relevant to AY 2017-18): The screenshot of the invoice is captured below:

ITA No.479 to 483/Chny/2026 (AY 2017-18 to 2021-22) SUSHEEL JEWELLERY MART PRIVATE LIMITED :: 19 ::

ITA No.479 to 483/Chny/2026 (AY 2017-18 to 2021-22) SUSHEEL JEWELLERY MART PRIVATE LIMITED :: 20 ::

The screenshot of the J-Pack ledger relevant for AY 2017-18 wherein The amount of Rs. 1,75,128/- is also appearing both on the “Receipt” and “Issued” side again contrary to the explanation of the assessing officer.The item details for payment of Rs. 1,75,128/- are shown under the “Receipt” side even though the appellant has made the payment of Rs. 1,75,128/- through banking channel only:

19.

The Ld AR brought to our notice that above purchases from M/s Mohanlal Jewellers Private Ltd were duly carried out and suffered indirect

ITA No.479 to 483/Chny/2026 (AY 2017-18 to 2021-22) SUSHEEL JEWELLERY MART PRIVATE LIMITED :: 21 :: taxes and effected the payments through proper banking channels. The said purchases were not reflecting in J-Pack software in the relevant side and sometimes both the sides thereby raising serious questions about its reliability. The Ld. AR pointed out that these similar discrepancies are existing in all the assessment years and in some cases certain accounted transactions do not appear in the J-Pack ledger at all. The Ld AR emphasized that when bills, supported by tax invoices and bank payments, do not appear in J-Pack shows that J-Pack is neither complete nor a parallel "true" ledger. According to him, it is, at best, a private working file unilaterally maintained by a third party (MJPL) with admitted omissions and errors. He submitted that when J-Pack has been shown to omit genuine, undisputed transactions cannot be relied upon for accepting or rejecting transactions claimed in the assessee's books. Hence, according to him, no adverse inference can conclusively be drawn against the assessee on the strength of such a document.

20.

We find that the issue under consideration is also squarely covered by the decision of the co-ordinate Bench of this Tribunal, Chennai, in the case of LKS Gold House Pvt. Ltd. v. DCIT, Central Circle-3(4), Chennai [ITA Nos. 3148 to 3152/Chny/2025, dated 18.05.2026], wherein, on identical facts, the additions were made on the basis of the entries contained in the “J-Pack” software maintained by M/s. Mohanlal

ITA No.479 to 483/Chny/2026 (AY 2017-18 to 2021-22) SUSHEEL JEWELLERY MART PRIVATE LIMITED :: 22 :: Jewellers Pvt. Ltd. (MJPL). Respectfully following the aforesaid decision of the co-ordinate Bench, and having regard to the similarity in the facts and circumstances, we are of the considered view that the entries contained in the “J-Pack” ledger, by themselves, cannot form the sole basis for sustaining the impugned addition in the hands of the assessee.

21.

Hence, in the given facts of the present case, having regard to the infirmities and inconsistencies pointed out in the entries maintained by the 3rd party in their application software as discussed above, there is merit in the case of assessee that the wrong side entry, double side entry, unmatched entries may not relate or pertain to it

Hallmark charges

22.

The Ld AR also brought to our notice that J-Pack ledger also contains cash transactions of Hall mark charges of Rs. 1,37,842. The details are noted to be provided in Para 10 of the assessment order. The assessee asserted that said amounts were not paid by the assessee and hence, it is not appearing in the books of account. According to the assessee, if any charges were incurred then it will be included in the bills along with the item and therefore, no separate charges will be paid by the buyers. Considering the facts of the case in hand and having taken note of the infirmities and inconsistencies pointed out in the entries maintained

ITA No.479 to 483/Chny/2026 (AY 2017-18 to 2021-22) SUSHEEL JEWELLERY MART PRIVATE LIMITED :: 23 :: by the 3rd party in their application software as discussed above, we find considerable merit in the case of assessee that the wrong side entry, double side entry, unmatched entries may not relate or pertain to it.

23.

Moreover, once the assessee had denied unaccounted transactions with MJPL, thereby challenged the veracity of the contents of the entries in the J-Pack application software, then not only the AO ought to have examined Shri Kothari to test the veracity of his statement but he also ought to have confronted Shri Kothari of M/s MJPL to ascertain the true content and nature of the unmatched entries. Also, an opportunity should have been given to the assessee to cross-examine Shri Kothari/Suresh Khatri particularly when the assessee at all times had denied having any unaccounted transaction with MJPL and even MJPL had submitted their confirmation of accounts. In our considered view on the given facts, the impugned addition cannot be sustained since assessee has not accepted the contents of the J-Pack ledgers in its entirety qua assessee, and specifically denied having any unaccounted transaction with MJPL andasserted that the entries maintained is unreliable qua assessee. In such a scenario, in order tofasten liability, there should be corroborative evidence, which is absent. Anyway, the entries maintained by the 3rd party in their application software alone cannot be held to be conclusive proof against the assessee, hence, it would be unsafe to fasten addition in

ITA No.479 to 483/Chny/2026 (AY 2017-18 to 2021-22) SUSHEEL JEWELLERY MART PRIVATE LIMITED :: 24 :: the hands of assessee. Therefore, in the light of fore going discussion, we direct the deletion of addition for AY 2017-18.

24.

No change in facts or law could be pointed out qua other captioned AYs, hence on the aforesaid reasoning, the grounds of appeal on merits against addition are allowed on the basis of the same reasoning given for A.Y.2017-18. Thus, assessee succeeds and we direct the impugned additions be deleted for all the assessment years.

25.

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 2017-18 to AY 2021-22, which according to him was without jurisdiction, illegal, bad in law and void ab- initio. The Ld. AR in support of the legal issue submitted that the impugned assessment order dated 16.12.2024 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 2017-18 to AY 2021-22. Hence, the action of AO making additions for AY 2017-18 to AY 2021-22 is wholly without jurisdiction and was issued without authority, non-est in eyes of law.

ITA No.479 to 483/Chny/2026 (AY 2017-18 to 2021-22) SUSHEEL JEWELLERY MART PRIVATE LIMITED :: 25 :: 26. The Ld. AR explained the legal issue by pointing out that in this case, ‘Satisfaction Note’ (before issuance of notice u/s.153C of the Act) was dated 10.10.2023, and hence, the date of initiation of search (for the purpose of section 153C of the Act) would be the date on which the materials/books of accounts, etc., are handed over to the JAO of the assessee/other-person; and then such a date would be considered as the date of initiation of search for the assessee/other-person for all purposes u/s 153C of the Act. Thus, in this case, according to the Ld.AR, since the date of recording of ‘Satisfaction Note’ is on 10.10.2023, the date of search should be deemed as 10.10.2023. And once the date of search is deemed to be 10.10.2023, according to the Ld.AR, 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.AR, the very act of AO recording ‘Satisfaction Note’ and the consequent issuance of notice u/s.153C 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.AR, 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.479 to 483/Chny/2026 (AY 2017-18 to 2021-22) SUSHEEL JEWELLERY MART PRIVATE LIMITED :: 26 :: 27. However, we are not inclined to answer the legal issue raised by assessee since it was brought to our notice that Hon’ble Division Bench of High Court has stayed the operation of the order passed in the case of Hari Govind v. ACIT (supra) and the appeal has not been disposed of till date. Hence the legal issue is left open.

28.

Since the issue on merits is decided in favour of the assessee and therefore, the legal grounds become academic and left open.

29.

In the result, appeals of the assessee are partly allowed.

Order pronounced on the 13th day of October, 2026 in Chennai.

Sd/- Sd/- (एस. आर. रघुनाथा) (एबी टी. वक�) (S.R.RAGHUNATHA) (ABY T. VARKEY) लेखा सद�/ACCOUNTANT MEMBER �याियक सद�य/JUDICIAL MEMBER चे�ई/Chennai, �दनांक/Dated: 13th October, 2026. YS आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF YASHVI Digitally signed by YASHVIR SINGH R SINGH Date: 2026.10.15 11:41:23 +05'30'

More judgments on Section 153C

All 9,619 judgments and leading authorities on Section 153C →

Recent GST High Court judgments

Search GST case law →