Nitin Kumar Ahuja vs. Principal Commissioner Income Tax Department

IN THE HIGH COURT OF MADHYA PRADESH AT JABALPUR BEFORE HON'BLE SHRI JUSTICE VIVEK RUSIA & HON'BLE SHRI JUSTICE PRADEEP MITTAL ON THE 5th OF JANUARY, 2026 INCOME TAX APPEAL No. 229 of 2024 NITIN KUMAR AHUJA Versus PRINCIPAL COMMISSIONER INCOME TAX DEPARTMENT Appearance: Shri Sapan Usrethe - Advocate for the appellant. Shri Harpreet Singh Gupta- Advocate for the respondent. ORDER Per: Justice Vivek Rusia Heard on the question of admission. The appellant/assessee has filed this appeal under section 260-A of the Income Tax Act against the order dated 28.06.2024 (Annexure A-6) passed by the Income Tax Appellate Tribunal, Jabalpur in ITA No. 21/JAB/2023 for assessment year 2018-19, whereby the order passed by the Commissioner of Income Tac (Appeals)-3 dated 29.11.2022 (Annexure A-4) has been affirmed. 2. The facts of the case, in short, are as under:- (a) A survey under section 133A of the Income Tax Act (hereinafter in short referred to as IT Act) was conducted at the premises of Shri Devendra Shobhawani, C/o Nitin Jewellers, Shalimar Market, Katni. The nature of the 1 ITA-229-2024 NEUTRAL CITATION NO. 2026:MPHC-JBP:49 Signed by: TARUN KUMAR SALUNKE Signing time: 07-01-2026 13:45:33 Signature Not Verified

business was trading of imitation/artificial jewellery, cosmetics etc., under the name and style of M/s Nitin Jewellers. The police raid was conducted on 27.10.2018 at Saurabh Stationery proprietors' concern of Shri Shankar Lal Ahuja, in which his son Shri Nitin Ahuja, Rahul Ahuja and Devendra Shobhwani had been found running the business due to the old age of Shri Shankar Lal Ahuja. The case of Shri Devendra Shobhwani was selected for scrutiny. The appellant/Assessee Nitin Aahuja was present during the survey proceedings and admitted in his statements recorded under section 131(1A) of the I.T.Act that he has made some cash payments in the relevant assessment years through hawala and no tax was paid on such income. The case of the appellant/assessee was reopened, and notice under section 148 was issued on 30.03.2021. (b) The appellant filed the Income Tax Return on 31.07.2018, declaring his total income of Rs.3,20,837/- and survey proceedings were carried out at the premises of M/s Nitin Jewellers, which belongs to the appellant. His statement under section 131(1A) was recorded on 17.10.2018, in which he made certain admissions in respect of WhatsApp chats with his brother related to payment in cash against the purchase of M/s Nitin Jewellers, and these transactions were not recorded in the books of account. He did not give any proper explanation of the surrender of Rs.1,10,27,000/- as payment by way of cash to the parties. After considering the facts and circumstances of the case, the Assessment Officer has added Rs.20,53,984/- on account of unexplained investment under section 69 and Rs.1,10,27,000/- on account of unexplained investment under section 69. Accordingly, 2 ITA-229-2024 NEUTRAL CITATION NO. 2026:MPHC-JBP:49 Signed by: TARUN KUMAR SALUNKE Signing time: 07-01-2026 13:45:33 Signature Not Verified

assessed notice under section 147 read with section 143(3) of the I.T Act Rs.1,34,01,821/- along with interest and penalty to be assessed separately. (c) Being aggrieved by the order of assessment dated 31.03.2022, the appellant preferred Appeal No.CIT (A)-3/ Bhopal/IT-1245/2017-18 (Annexure A-4) to Commissioner of Income Tax (Appeals)-3, Bhopal. The learned Appellate Authority, after considering all material available on record and submissions raised by the appellant, found that there is an admission of undisclosed income for the year under consideration is Rs.1,10,27,000/- as per LPI-2 (Whatsapp Chat) and Rs.20,46,184/- as per LPI-1. Learned Appellate Authority has held that the contention of the appellant that Whatsapp Chat messages should be treated as dumb documents is hereby rejected as the LPI-2 and LPI-4 are the printouts of whatsapp chats done by the appellant with his brother Rahul Aahuja, which contains the details of transfer of cash to various parties either on the instructions of the appellant and his brother or on getting instructions from others. Therefore, these electronic evidences cannot be discarded as dumb documents, which are written by the appellant or his brother, relate to their unaccounted or undisclosed business. Learned CIT has rejected the contention of the appellant that the statement given by him was in relation to M/s Nitin Jeweller and not in relation to him; therefore, the Assessment Officer should not have made an addition in the hand of the appellant. According to the learned CIT, the appellant was found operating his business activity from the premises of M/s Nitin Jewellers. His stock was found lying along with the stock of M/s Nitin Jewellers and his brother, Shri Rahul 3 ITA-229-2024 NEUTRAL CITATION NO. 2026:MPHC-JBP:49 Signed by: TARUN KUMAR SALUNKE Signing time: 07-01-2026 13:45:33 Signature Not Verified

Ahuja, which has been done by the appellant only; therefore, it cannot be said that the facts narrated in the statement taken under section 131(1A) of the I.T. Act are not related to him. Learned CIT further held that the appellant has not submitted any cogent material to prove the statement wrong. (d) During the pending proceedings, the Appellate Authority sought the remand report from the Assessment Officer and found that the appellant was involved in the transfer of cash relating to others on the basis of commission. The Chat entries confirm various payments made towards purchases of artificial jewellery by the appellant. (e) Regarding Rs.20,53,984/-, the said figure was found on the basis of pages no.1 to 34 of LPI-1, where the appellant himself excluded entries in pages no.30 to 34; therefore, there was an admission of the amount of Rs.20,46,184/- as unaccounted purchases for the year under consideration. The CIT has confirmed the transaction of Rs.20,53,984/-. So far, the addition of Rs.1,10,27,000/- by the Assessment Officer, the CIT found the transaction of Rs.67,10,000/- only through Hawala and out of which amount of Rs.20,130/- has been confirmed as unaccounted commission income, by partly allowing the appeal. Vide order dated 29.11.2022 (Annexure A-4), the Appellate Authority/CIT partly allowed the appeal while reducing the addition from Rs 20,53,984/- to Rs.9,44,138/- and Rs.1,10,27,000/- to Rs.20,130/-. Therefore, the learned CIT has already granted substantial relief to the appellant by reducing the addition from Rs 20,53,984/- to Rs.9,44,138/-and Rs.1,10,27,000/- to Rs.20,130/-. (f) Being aggrieved by the order dated 29.11.2022, the appellant still 4 ITA-229-2024 NEUTRAL CITATION NO. 2026:MPHC-JBP:49 Signed by: TARUN KUMAR SALUNKE Signing time: 07-01-2026 13:45:33 Signature Not Verified

preferred an appeal (Annexure A-5) to Income Tax Appellate Tribunal, Jabalpur in respect of the assessment year 2018-19 for the addition of Rs.9,44,138/- only, which was registered as ITA No.21 & 22/Jab/2023. However, the Joint Commissioner challenged the order of the CIT by way of two appeals i.e ITA No.19 & 20/Jab/2023. The learned Income Tax Appellate Authority heard all these appeals together and dismissed all of them vide common order dated 28th June, 2024 (Annexure A-6). Since the tax effect is below two crores, therefore, the revenue has not preferred any income tax appeal before this Court. Only the appellant has preferred this appeal, in which the total tax liability is Rs.9,44,138/-. So far addition of Rs.1,10,27,000/- is concerned, the order of the CIT has attained finality, and the reduced amount Rs.20,130/- is not a subject matter of this appeal. The appellant is challenging only the addition of Rs.9,44,138/-by way of this appeal. 3. We have heard learned counsel for the appellant. 4. According to learned counsel for the appellant, the learned Tribunal was not justified in appreciating the reply submitted by the appellant and the ground raised in the memo of appeal. Learned Tribunal was not justified in appreciating that the addition was based on the statement recorded during the survey, which has no evidentiary value. Learned CIT was not justified in enhancing the amount of Rs.20,53,984/- to Rs.23,68,399/- without giving any opportunity, which is a violation of section 251(2) of the IT Act. 5. Learned counsel for the appellant has proposed various substantial questions of law in paragraph 7 of the memo of appeal, which is reproduced 5 ITA-229-2024 NEUTRAL CITATION NO. 2026:MPHC-JBP:49 Signed by: TARUN KUMAR SALUNKE Signing time: 07-01-2026 13:45:33 Signature Not Verified

as below:- "7.1 Whether on the facts and circumstance of case tribunal was justified in not appreciating the legal position that Assessing officer is bound to supply the reason recorded when demanded by the appellant and was duty bound to decide the objection and by not doing so the assessment proceeding deserves to be quashed. 7.2 Whether on the facts and circumstance of case the tribunal was justified in law in not appreciating the settled legal position that Addition on the basis of statement recorded during survey under section 133A does not empower any IT authority to examine any person on oath and thus, any such statement has no evidentiary value and therefore, any admission made during such statement cannot, by itself, be made the basis for addition and that too when it was taken under threat. 7.3 Whether on the facts and circumstance of case the tribunal was justified in not appreciating the settled legal position that CIT(A) cannot make any enhancement without making compliance of section 251(2)of the IT Act and in the present case no such opportunity was given and hence such addition of income is bad in law and deserves to be deleted. 7.4 Whether on the facts and circumstances of case tribunal was justified in confirming the net profit at the rate of 26.40 % which is highly excessive without properly appreciating the Judgment of Hon’ble M P High Court in the case of CIT Vs. Balchand Ajit Kumar reported in 263 ITR 610 wherein it was held that even in undisclosed sales or purchases maximum net profit rate has to be applied as per section 44AD of Income Tax Act." 6. As discussed above, the valuation in this appeal is only Rs.9,44,138/- against the discloser of income by the appellant Rs.3,20,837/-. We find that the learned CIT has duly examined the matter in detail. While hearing the appeal, the Assessment Officer was directed to conduct a re-assessment. As per the report submitted by the Assessment Officer, learned CIT has rightly found that there is an unexplained transaction of Rs.20,53,984/- and there is an admission by the appellant, which has not been found wrong. Instead of 6 ITA-229-2024 NEUTRAL CITATION NO. 2026:MPHC-JBP:49 Signed by: TARUN KUMAR SALUNKE Signing time: 07-01-2026 13:45:33 Signature Not Verified

(VIVEK RUSIA) JUDGE (PRADEEP MITTAL) JUDGE approving the addition made by the Assessment Officer mechanically, the learned CIT has found that there should be an addition of Rs.20,46,184/- and found it justified to apply the net profit ratio to the unrecorded sales in the year under consideration. The appellant himself has shown a net profit and gross profit rate at the rate of 26.40%. Applying the same profit ratio, the total unaccounted profit is worked out to Rs.9,44,138/-. Hence, in place of the addition of Rs.20,53,984/-, an addition of only Rs.. 9,44,138/-was made, which is fully justified. Learned Income Tax Appellate Tribunal has also found it correct and approved, while dismissing the appeal of the assessee as well as the revenue; therefore, there are concurrent findings recorded by both the appellate authority as well as the learned Tribunal. The substantial relief has been granted to the appellant by the CIT. We do not find any substantial question of law in this appeal. Accordingly, the admission is declined, and this appeal is dismissed. tarun

7 ITA-229-2024 NEUTRAL CITATION NO. 2026:MPHC-JBP:49 Signed by: TARUN KUMAR SALUNKE Signing time: 07-01-2026 13:45:33 Signature Not Verified