KOTHA VENKATARATHNAM RAJESH,DHARMAPURI, TAMIL NADU vs. DCIT, CENTRAL CIRCLE SALEM, SALEM

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ITA 484/CHNY/2026Status: DisposedITAT Chennai13 October 2026AY 2017-1825 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the additions made by the AO could not be sustained. Regarding the first two issues concerning the additions for AY 2018-19, the Tribunal noted infirmities and inconsistencies in the third-party "J-Pack" application software entries. The Tribunal found merit in the assessee's argument that erroneous entries might not pertain to it. Crucially, once the assessee denied unaccounted transactions and challenged the veracity of the "J-Pack" entries, the AO should have examined MJPL personnel and provided the assessee an opportunity to cross-examine them. The Tribunal observed that the assessee had denied any unaccounted transactions and MJPL had submitted confirmations of accounts. In the absence of corroborative evidence beyond the "J-Pack" ledger, which the assessee did not accept in its entirety, it was unsafe to fasten liability. Therefore, the addition for AY 2018-19 was directed to be deleted. The Tribunal extended this reasoning to the other AYs, allowing the grounds of appeal on merits and directing the deletion of impugned additions for all assessment years. The legal issue raised by the assessee regarding jurisdiction under Section 153C was left open, as a stay had been granted by the High Court in a similar case, and the appeal was pending.

What were the facts?

The assessee, Kotha Venkataratnam Rajesh, proprietor of Rajesh Jewellery Mart Pvt Ltd, 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 estimated income from alleged unaccounted transactions with M/s Mohanlal Jewellers Pvt Ltd (MJPL). A search under Section 132 of the Income Tax Act, 1961, on MJPL led to the seizure of electronic data from "J-Pack" accounting software, which contained a ledger for "BLR RAJESH," allegedly linked to the assessee. The AO reopened the assessee's cases under Section 153C, issuing notices on 10.10.2023. The AO observed statements from MJPL personnel indicating the "J-Pack" software contained details of transactions outside regular books. The AO quantified unaccounted gold purchases for AY 2018-19 at Rs. 9,50,02,010/- and made an addition of Rs. 57,00,121/-. Further, an addition of Rs. 34,60,180/- was made under Section 69A for excess gold purchased.

What were the issues?

1. Whether the addition of Rs. 57,00,121/- for AY 2018-19, representing estimated income from unaccounted gold transactions with MJPL, is sustainable based on the "J-Pack" software ledger entries, and if the AO discharged the burden of proof. (Mixed question of law and fact, turning on Section 143(3) and Section 145 of the Act). 2. Whether the addition of Rs. 34,60,180/- under Section 69A for AY 2018-19, on account of alleged excess gold purchased but not recorded in the assessee's books, is justified. (Mixed question of law and fact, turning on Section 69A of the Act). Assessee's Contentions: - The assessee denied any unaccounted transactions with MJPL and asserted that all transactions were recorded in its books. The assessee provided its own ledgers and bank statements to support its claims. - The assessee argued that the "J-Pack" software entries were unreliable and contained errors such as wrong side entries, double entries, and unmatched entries. - The assessee contended that the AO failed to examine MJPL personnel or provide an opportunity for cross-examination to verify the "J-Pack" data. - The assessee also raised a legal issue challenging the jurisdiction of the AO to make additions under Section 153C, citing the decision in Hari Govind v. ACIT, arguing the assessment order was void ab initio due to procedural infirmities related to the satisfaction note and the date of search initiation. Revenue's Contentions: - The revenue relied on the "J-Pack" ledger entries and statements from MJPL personnel as incriminating material indicating unaccounted transactions. - The AO presumed that since the assessee could not prove no unaccounted transactions occurred, such transactions must have taken place. - The AO found corroboration of some entries between the "J-Pack" ledger and the assessee's books, inferring that while some entries were accounted for, the balance was not.

Which sections of the Income-tax Act were involved?

Section 132,Section 143(3),Section 153C,Section 69A,Section 250

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. 484 to 488 /Chny/2026 िनधा�रणवष�/Assessment Year: 2017-18 to 2021-22 KOTHA VENKATARATHNAM VS DCIT, RAJESH CENTRAL CIRCLE, SALEM H 2, OLD TEMPLE LAND, HUDCO, HOSUR, DHARMAPURI, 635109, TAMIL NADU [PAN: AEIPR 6515 H] (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 17.12.2025 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”)

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.

ITA No.484 to 488/Chny/2026 (AY 2017-18 to 2021-22) KOTHA VENKATARATHNAM RAJESH :: 2 ::

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 Ltd (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 2018-19, 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 2018-19. The assessee is Kotha Venkataratnam Rajesh who is the proprietor of M/s Rajesh Jewellery Mart Pvt Ltd engaged in the business of trading and sale of gold jewellery. The assessee filed his return of income for AY 2018-19 on 31.10.2018 declaring total income of Rs.74,82,210/-. 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, Salemon 31.07.2023 and thereafter the

ITA No.484 to 488/Chny/2026 (AY 2017-18 to 2021-22) KOTHA VENKATARATHNAM RAJESH :: 3 :: case for AY.2017-18 to 2021-22 were re-opened u/s.153C of the Act by issuing notice on 10.10.2023.

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 “BLR RAJESH”, which was allegedly linked to the assessee. The ledger reflected the transactions of purchase of gold jewellery ornaments. Shri Rajendra Kothari stated that “J-Pack” software tally in the Pen drive contained account data for FY 2016-17 to 2019-20, however, the account data for FY 2020-21 is available in the red Sand Disk Pen drive inside black laptop bag. Further, Shri Suresh Khatri in response to question No.27 in statement recorded u/s.131 dated 11.11.2020 concurred with the statement given by Shri Rajendra Kothari. Having regard to the details of the opening and closing balances recorded under the ledger “BLR RAJESH” in the “J-Pack” software of MJPL, the AO tabulated the data concerning the assessee which is found at Page No.3.6 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

ITA No.484 to 488/Chny/2026 (AY 2017-18 to 2021-22) KOTHA VENKATARATHNAM RAJESH :: 4 :: explain the transactions maintained in the ledger extract from the “J- Pack” software along with documentary evidences. Pursuant to which the AO notes that assessee filed his reply along with ledgers of M/s MJPL in its books, copies of bank statement. The AO also noted that the assessee had produced bills/invoices in respect of purchases made by his proprietary concerned M/s Rajendra Jewellery – PAN No. AEIPR6515H (Assessee), from MJPL during the year under consideration. The assessee also asserted before the AO that it had done only those transactions with MJPL which were recorded in its books of account. Thus, the assessee is noted to have denied whatever additional transactions which were reflected in the “J-Pack” account maintained by M/s MJPL. However, the AO taking note of the unaccounted transactions as per “J-Pack” ledger issued show-cause notice to the assessee on 06.11.2024 to explain why the undisclosed income should not be brought to tax. In response, the AO notes that the assessee submitted its reply on 22.11.2024 wherein assessee submitted that he did not have any documentary evidence with regard unaccounted gold purchase as per 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 he didn’t carry out any unaccounted

ITA No.484 to 488/Chny/2026 (AY 2017-18 to 2021-22) KOTHA VENKATARATHNAM RAJESH :: 5 :: transactions with MJPL. The assessee reiterated his stand that he didn’t carry out any unaccounted transaction with MJPL. The AO brushed aside the assertion of the assessee, since, the impugned transactions in the ledger extract named as “BLR Rajesh” from the J-Pack software of M/s MJPL are matching with the copy of the ledger of M/s MJPL submitted by assessee which according to AO, indicates that some of the entries are accounted by the assessee in its books of accounts & balance are not accounted. Further, since assessee couldn’t prove that it didn’t carry out any unaccounted transaction with MJPL, the AO took a 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 A.Y.2018-19 made with MJPL recorded in the books of the assessee till 31.03.2018. The AO is noted to have analyzed the seized material and thereafter quantified the unaccounted transactions conducted by the assessee during the period from 01.04.2017 to 31.03.2018 at Rs.9,50,02,010/- (i.e. 32,022.25 grams) on which he applied gross rate of 6% and made addition of Rs.57,00,121/-.

6.

Further, the AO on perusal of the ledger extracted from ‘J-Pack’ software for the FY 2017-18, took note of the opening metal/gold jewellery of 2375.090 grms, and noted that MJPL issued to the assessee total metal/gold jewellery of 40,938.750 grms and MJPL received gold jewellery of 37397.340 grms from assessee. Considering the issued &

ITA No.484 to 488/Chny/2026 (AY 2017-18 to 2021-22) KOTHA VENKATARATHNAM RAJESH :: 6 :: receipt entry in the ledger extracted from ‘J-Pack’, the AO was of the view that assessee had purchased excess gold of 1166.32 grms (40,938.750 – 37397.340 – 2375.090) over supply of gold to MJPL, which wasn’t recorded in the books of account of assessee for AY 2018-19. Hence, the AO gave show-cause notice to assessee on 06.11.2024 as to why Section 69A addition is not to be made on the excess gold purchased of 1166.32 grms in FY 2017-18. Pursuant to which, assessee replied that he didn’t purchase any excess gold as alleged by the AO. The assessee pointed out that he started business in the previous year (AY 2017-18) and didn’t had any transactions with MJPL. So, assessee contested the purported entries made in the ledger extract of ‘J-Pack’ showing opening balance of 2375.090 grms. The assessee reiterated his stand that he didn’t make any other purchases which was not recorded in his books. However, the AO finding corroboration of some transactions in ‘J-Pack’ & ledger of assessee, presumed that assessee has only accounted few entries in his books and balance entries reflecting in the ledger extracted from ‘J-Pack’ has not been accounted by the assessee and hence, added Rs.34,60,180/- (1166.32 grms of gold) u/s.69A of the Act.

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 by deleting the addition of Rs.34,60,180/- u/s. 69A of the Act by holding as under;

ITA No.484 to 488/Chny/2026 (AY 2017-18 to 2021-22) KOTHA VENKATARATHNAM RAJESH :: 7 ::

6.5.3. I have perused the assessment order and the submissions made by the appellant. It is noted that the entire purchases of 38,563.66 grams have already been considered by the AO and addition of Rs.57,00,121/- had been made to the business income of the appellant. However, the AO has once again considered the entire purchases of 38,563.66 grams and worked out 1,166.32 grams of gold jewellery as excess gold jewellery issued by MJPL to the appellant. In this regard, it is noticed that once the profit element from the unaccounted purchases has already been added to the business income, there is no need to make any further addition in respect of the same transaction. Further, it is noticed that the said ledger maintained in J-pack is running ledger and, in such circumstances, any excess gold jewellery issued by MJPL to the appellant during the year under consideration would be adjusted against the receipts in the next year. Therefore, I am of the opinion that no addition can be made u/s 69A of the Act. 6.5.4. However, it is also noted that the appellant had purchased 38,563.66 grams of gold jewellery from MJPL for the year under consideration, out of which purchases of only 3000 grams were accounted in the books of the appellant. Further, it is noted that there was a closing balance of 3,541.41 grams in ‘BLR RAJESH’ ledger (which consists of opening balance of 2,375.09 gms & 1,166.32 gms for excess issued during the year under consideration for which addition was made u/s69A of the Act). The AO was of the opinion that the said closing balance of 3,541.41grams was not sold by the appellant during the year under consideration and removed the same from the unaccounted purchases of 35,563.66 grams (38,563.66– 3,000.00). Thus, the AO had quantified the unaccounted purchases at 32,022.25grams (35,563.66 - 3,541.41) and made addition of Rs.57,00,121/- as unaccounted profit earned from sale of 32,022.25 grams of gold jewellery. In this regard, it is noted that entry is made on the ‘Issued’ side in J-Pack ledgers only when gold jewellery of the said weight has been delivered to the purchaser by MJPL. Similarly, entry is made on ‘Receipt’ side in J-Pack ledgers once MJPL receives the payment in form of RTGS/NEFT/Cash or in the form of old gold or bullion. Meaning thereby, the closing balance on ‘Issued’ side denotes the gold jewellery issued by MJPL for which payment is yet to be received and the same would be settled in the next year. Further, it is also crucial to note that the AO had already removed the opening balance of 2,375.09 gms while working out the total purchases for the year under consideration. In view of the same, I am of the opinion that the interpretation of the AO that the weight of jewellery reflected in the closing balance means jewellery not sold by the appellant during the year, is

ITA No.484 to 488/Chny/2026 (AY 2017-18 to 2021-22) KOTHA VENKATARATHNAM RAJESH :: 8 :: erroneous. Hence, the closing balance of3,541.41 grams of gold jewellery, valued at Rs.1,05,06,478/- (by adopting the rate ofRs.2966.75 per gram), has to be considered as the additional unaccounted purchases, which was subsequently sold by the appellant for the year under consideration. This was the stand adopted by different AOs of assessees who were assessed u/s 153C on account of similar transactions with MJPL. Meaning thereby, the department had consistently considered that the entire quantity of gold recorded on ‘Issued’ side of J-Pack ledgers was purchased and sold during the same year and the income arising out of the unaccounted sales was worked out by applying the GP rate reported in the books of account for the said year. Thus, by applying the GP @6% for the year under consideration (as per appellant’s Audit Report), the gross profit on the additional unaccounted purchases of Rs.1,05,06,478/- works out toRs.6,30,389/-. Therefore, the AO is directed to delete the addition u/s 69A of Rs.34,60,180/- and add only Rs.6,30,389/- to the business income of the appellant.”

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.484 to 488/Chny/2026 (AY 2017-18 to 2021-22) KOTHA VENKATARATHNAM RAJESH :: 9 :: 10. Heard both parties and perused the material placed before us. At the outset, the Ld AR has withdrawn ground nos. 3 regarding satisfaction note, ground no. 4.1, ground no. 5.2 regarding non-adjudication of the cross-examination plea before CIT(A) and ground no. 6 regarding the jurisdiction.

11.

Coming to the merits of the addition sustained is concerned, it is noted that, a search action was conducted on the premises of the MJPL, during 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 there from. 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 “BLR RAJESH”. 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 said ledgers. It is also noted that Shri Suresh Khatri, key person of MJPL has confirmed the version of Shri Kothari. We observe that when assessee was confronted with this “J-Pack ledger”, has denied to have carried out any unaccounted purchases from MJPL and filed a copy of the ledger account of M/s MJPL as appearing in its books,

ITA No.484 to 488/Chny/2026 (AY 2017-18 to 2021-22) KOTHA VENKATARATHNAM RAJESH :: 10 :: along with copies of bank statement and reconciliation of issued & receipts and entries shown in “J-Pack” ledgers. The assessee also furnished bills/invoices copies for accounted purchases made from M/s MJPL during the relevant years, as well as the details of making charges paid to M/s MJPL and 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. The AO at Para 10 and 16 of the assessment order, acknowledged that assessee denied the transaction reflected in the “J- Pack” account which have not been recorded in his (assessee’s) books of accounts. However, the AO brushed aside the denial made by the assessee on the reason that some of the transactions which have been recorded in the books of account of the assessee are 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 denied by the assessee. In other words, the transactions recorded by assessee in his book’s tallies 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 proved that it didn’t carry out any unaccounted transaction with MJPL. Hence, the AO rejected the assessee’s denial and proceeded to quantify the unaccounted

ITA No.484 to 488/Chny/2026 (AY 2017-18 to 2021-22) KOTHA VENKATARATHNAM RAJESH :: 11 :: transactions conducted by the assessee during the period from 01.04.2017 to 31.03.2018 at Rs.9,50,02,010/- (i.e. 32,022.25 grams) on which he applied gross profit rate of 6%, and made addition of Rs.57,00,121/-.The assessee is noted to have preferred appeal before Ld CIT(A), who granted partial relief to the assessee subject to verification, as stated therein the order, which impugned action is under challenge before us.

12.

We find that the impugned addition hinges on the entries of ledger extract of “BLR RAJESH” in the books of MJPL maintained in J-Pack software and the statements of Shri Kothari and Suresh Khatri of MJPL. When confronted with the ledger extract of “BLR RAJESH” in the books of MJPL, the assessee is noted to have denied the unaccounted transactions and asserted that it has purchased only 3,107.18 gms of gold from MJPL during AY 2018-19 and furnished relevant evidences including 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 32,022.25 gms had been issued, whereas only gold weighing 3,107.18 gms was accounted for in the books of the assessee. Accordingly AO proceeded to treat the difference of 32,022.25 gms as unaccounted purchases. The AO further relied upon the failure of the assessee to reconcile the unmatched entries, and to prove that it didn’t

ITA No.484 to 488/Chny/2026 (AY 2017-18 to 2021-22) KOTHA VENKATARATHNAM RAJESH :: 12 :: carry out unaccounted transaction with MJPL, as the basis for rejecting the assessee’s contention. We do not agree with the reasoning given by the AO for fastening the liability/addition for the following reasons discussed hereunder.

13.

We agree with the 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 provided nor opportunity to cross- examine Shri Kothari/Suresh Khatri was given to the assessee.

ITA No.484 to 488/Chny/2026 (AY 2017-18 to 2021-22) KOTHA VENKATARATHNAM RAJESH :: 13 :: We thus, find force in the Ld.AR’s plea that the statement of Shri Kothari cannot come to the aid of the AO to fasten a liability on the assessee without corroborative material which is absent in this case.

14.

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. Thus, said presumption cannot 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 by that party (MJPL) cannot be 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

ITA No.484 to 488/Chny/2026 (AY 2017-18 to 2021-22) KOTHA VENKATARATHNAM RAJESH :: 14 :: 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, 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 these accounts of the assessee.

15.

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

ITA No.484 to 488/Chny/2026 (AY 2017-18 to 2021-22) KOTHA VENKATARATHNAM RAJESH :: 15 ::

16.

Further, the Ld.AR submitted that the contents of the ledger 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 III at Page No.1 to 6, 10 to 35, 39 to 49, 53 to 66 and also the “J-Pack” ledger which is kept at Page No.7 to 9, 36 to 38, 50 to 52, 67 at paper book III, basis AO has quantified the purported unaccounted transaction allegedly conducted by the assessee on which he applied gross 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

ITA No.484 to 488/Chny/2026 (AY 2017-18 to 2021-22) KOTHA VENKATARATHNAM RAJESH :: 16 :: 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, wondered as to how same transactions can appear in both sides of the “J-Pack” ledger. Certain instances, brought to our notice as noted below:

17.

(a) Purchase Bill No. GJ-1/361/17-18 dated 22.11.2017 (relevant to AY 2018- 19):

The screenshot of the invoice is captured below:

ITA No.484 to 488/Chny/2026 (AY 2017-18 to 2021-22) KOTHA VENKATARATHNAM RAJESH :: 17 :: The screenshot of the J-Pack ledger relevant for AY 2018-19 wherein the 1029.420 grams purchased from MJPL is not reflecting under ‘Issued Column’ during the relevant period but reflecting under “Receipt Column”:

The amount of Rs. 30,30,000/- 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. 30,30,000/- are shown under the “Receipt” side even though the appellant has made the

ITA No.484 to 488/Chny/2026 (AY 2017-18 to 2021-22) KOTHA VENKATARATHNAM RAJESH :: 18 :: payment of Rs. 30,30,000/- through banking channel only. The details of the metal is not matching with the invoice. The invoice shows 1029.420 gms but the J-Pack ledger shows 1010.100 gms.

(b) Purchase Bill No. GJ-1/190/17-18 dated 14.09.2017 (relevant to AY 2018-19): The screenshot of the invoice is captured below:

The screenshot of the J-Pack ledger relevant for AY 2018-19 wherein the entry is appearing on “Receipt” side of the J-Pack ledger which is contrary

ITA No.484 to 488/Chny/2026 (AY 2017-18 to 2021-22) KOTHA VENKATARATHNAM RAJESH :: 19 :: to the explanation given by the assessing officer in the assessment order because, the assessing officer has stated that the sale transaction will appear on the “Issued” side. The amount of Rs. 62,04,000/- is not appearing in the J-Pack ledger. However, the item details are shown under the “receipt” side even though the appellant has made the payment of Rs. 62,04,000/- through banking channel only.

18.

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.484 to 488/Chny/2026 (AY 2017-18 to 2021-22) KOTHA VENKATARATHNAM RAJESH :: 20 :: taxes and effected the payments through proper banking channels. The said purchases were not reflecting in J-Pack software in the relevant side and some times both the sides thereby raises serious questions about its reliability. The Ld AR brought to our notice that similar discrepancies are existing in other captioned 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, no adverse inference can be conclusively drawn against the assessee on the strength of such a document.

19.

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 Jewellers Pvt. Ltd. (MJPL). Respectfully following the aforesaid decision of

ITA No.484 to 488/Chny/2026 (AY 2017-18 to 2021-22) KOTHA VENKATARATHNAM RAJESH :: 21 :: 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.

20.

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.

21.

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

ITA No.484 to 488/Chny/2026 (AY 2017-18 to 2021-22) KOTHA VENKATARATHNAM RAJESH :: 22 :: specifically denied having any unaccounted transaction with MJPL and asserted that the entries maintained is unreliable qua assessee. In such a scenario, in order to fasten 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 the hands of assessee. Therefore, in the light of fore going discussion, we direct the deletion of addition for AY 2018-19.

22.

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.2018-19. Thus, assessee succeeds and we direct the impugned additions be deleted for all the assessment years.

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 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

ITA No.484 to 488/Chny/2026 (AY 2017-18 to 2021-22) KOTHA VENKATARATHNAM RAJESH :: 23 :: 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.

24.

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,

ITA No.484 to 488/Chny/2026 (AY 2017-18 to 2021-22) KOTHA VENKATARATHNAM RAJESH :: 24 :: 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.

25.

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.

26.

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

27.

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 YASHVI Digitally signed by YASHVIR SINGH R SINGH Date: 2026.10.15 11:50:26 +05'30'

ITA No.484 to 488/Chny/2026 (AY 2017-18 to 2021-22) KOTHA VENKATARATHNAM RAJESH :: 25 :: 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

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