ACIT, CENTRAL CIRCLE, ALWAR vs. RAJAN JHIRIWAL, ALWAR

IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, “B” BENCH, JAIPUR BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI T. R. SENTHIL KUMAR, JUDICIAL MEMBER ITA No.1327/JPR/2025 (Assessment Year: 2023-24)

ACIT Vs. Rajan Jhiriwal Room No.23, Aaykar 262, Scheme No.3, Basant Bhawan, Moti Doongri, Vihar, Alwar Alwar �थायीलेखासं./जीआइआरसं./PAN/GIR No:AHZPJ 5802F Appellant .. Respondent Appellant by : Sh. Shravan Kumar Meena, CIT Respondent by : Sh. P.C. Parwal, FCA Date of Hearing 28.07.2026 Date of Pronouncement 27.10.2026 O R D E R Per Annapurna Gupta, AM:- The present appeal has been filed by the Revenue against the order passed by the Office of the Commissioner of Income Tax, Appeal CIT(A), Jaipur 04 (hereinafter referred to as “Ld. CIT(A)”), dated 18.07.2025 under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).

P a g e | 2 ITA No.1327/JPR/2025 ACIT Vs. Rajan Jhiriwal 2. Ground No.1 raised by the Revenue reads as under:- 1. Whether on the facts and in the circumstances of the case, theLd. CIT(A) is justified in the deleting the protective addition ofRs. 18,82,71,189/- in the hands of the assessee and Sh. RobinJhiriwal as the tax on the surrendered income of Rs.37,65,42,377/- by the Mama group entities which have not beenpaid yet as per the provisions of sec. 45(2) of the IT Act, 1961without Jhiriwal appreciating the fact that the assssees' Shri Rajan and Shri Robin Jhiriwal are the ultimate beneficiaries ofthe said capital assets(being the major shareholder and promoterof the group entities); also, the possibility of intentional delay &outstretching in selling the said converted stock-in trade by the assessee cannot be ignored with an intention to escape from theeyes of revenue authorities. 3. Brief facts relating to the issue are that, a search and seizure action U/s 132 and survey action u/s 133A of the Income Tax Act, 1961 was carried out on the members/business concerns of Mama Group, Alwar on 20.07.2022. The assessee Sh. Rajan Jhiriwal is one of the key members of the group. In the statement recorded on oath, the assessee’s brother (Shri Robin Jhiriwal) surrendered income of Rs.50-51 cr. During post search proceedings, statement of Sh. Robin Jhiriwal was recorded where he gave the breakup of surrendered income. Vide reply to Q. No 8 of his statement recorded, he stated that he along with his brother Sh. Rajan Jhiriwal are involved in the property market and real estate business and do settlement between seller and the purchaser. From this work, they have earned an income of Rs.1.00 crore in F.Y. 2021-22 and Rs.2.75 crore in the F.Y. 2022-23 i.e. total of 3.75 crore. Sh. Robin Jhiriwal further stated that properties are mainly owned by three companies namely M/s Makarr Buildcon Pvt Ltd, M/s Ken Infra Vision LLP and M/s Makson India Hospitality Pvt Ltd. The assessee himself along with his brother surrendered amount of Rs.1 crore in A.Y. 2022-23 and it was offered for taxation in the return of income and due tax thereon was paid. Further, on

P a g e | 3 ITA No.1327/JPR/2025 ACIT Vs. Rajan Jhiriwal perusal of details of surrendered income provided by the assessee, the ld.AO noted that amount of Rs. 1,00,00,000/- has been taxed in A.Y. 2022-23 & Rs.3,51,89,364/- has been duly surrendered by the assessee group in the year under consideration. 4. As per the submission filed by the assessee during search and post search proceedings, ld. AO noted that out of the surrendered income of Rs.51 crore, taxes on the sum of Rs.3,51,89,364/- stood paid in various group entities on account of stock and real estate income while filing the return of respective assessee. The remaining amount of surrendered income of Rs.46,48,98,002/- was noted to be on account of conversion of capital asset in to stock in trade in M/s Makson India Hospitality Pvt. Ltd., M/s Makarr Buildcon Pvt. Ltd. & M/s Ken Infra Vision LLP. The AO noted that certain properties had been sold and taxes paid on the income of Rs.8,83,55,625/-. On the balance of the surrendered income of Rs.37,65,42,377- (Rs.46,48,98,002/- minus Rs.8,83,55,625/-), it was found that no taxes had been paid. When confronted with the same the assessee submitted that as per provisions of section 45(2) of the Act, tax liability would arise on this income upon transfer of the property. In view of the same an amount of Rs.37,65,42,377/- income was found still liable to tax. It was contended that the tax liability lay in the hands of M/s Makson India Hospitality Pvt Ltd., M/s Makarr Buildcon Pvt. Ltd.& M/sKen Infra Vision LLP on the transfer of this stock in trade. Assessee submitted that properties would be sold within a year and the due taxes would be paid on the same.

P a g e | 4 ITA No.1327/JPR/2025 ACIT Vs. Rajan Jhiriwal 5. The AO noted that ITR of these three companies for the F.Y. 2025- 26 would beexamined and selected for compulsory scrutiny to ascertain the paymentof taxes by these concerns in the relevant assessment year. However, in order toprotect the interest of revenue, the AO made protective addition in the hands of Sh.Robin Jhiriwal & Sh. Rajan Jhiriwal of Rs.37,65,42,377/- in the ratio of 50% each onthe basis of the surrender made in A.Y. 2022-23. Accordingly, addition of Rs.18,82,71,189/- was made to total income of Sh. Rajan Jhiriwal on protective basis u/s 69 of the Income Tax Act. 6. During appellate proceedings, the appellant contended that during post searchproceedings, details of surrender made of Rs.51 crore were furnished, which included cash foundduring the search of Rs.2.80 crores plus undisclosed investment/expenditure forRs.0.95 crore (Total 3.75 crore) and stock found excess approx. 0.76 crore andremaining amount of Rs.46.49 crore represented the difference between purchaseprice and market value of the assets owned by Makarr Buildcon Private Limited, Ken Infra Vision LLP and Makson India Hospitality Pvt Ltd. The assessee contended that despite a detailed explanation, the departmentproceeded with a protective addition of Rs.18,82,71,189/- even though the incomeclearly pertained to M/s Makarr Buildcon Pvt. Ltd., M/s Makson India Hospitality Pvt Ltdand Ken Infra vision LLP. The assessee submitted that principle of protective assessment is applied only incases where there is ambiguity regarding the ownership of the income whereas inpresent case there was no such ambiguity as the relevant income had already beensurrendered by the respective legal

P a g e | 5 ITA No.1327/JPR/2025 ACIT Vs. Rajan Jhiriwal entities and these entities hadcategoricallyaccepted the income arising from conversion of capital assets into stock in trade andhad committed to discharge the associated tax liability. The assessee contended that the protective addition ofRs.18,82,71,189/- made in the hands of Mr. Rajan Jhiriwal therefore was unwarranted, both onfacts and in law. It was contended thatthe relevant income had already been surrendered and accepted bythe actual owners – M/s Makarr Buildcon Pvt. Ltd., M/s Makson India Hospitality Pvt Ltd and Ken Infra vision LLP who had duly acknowledged their tax liability and undertaken to pay taxes within the prescribed time. Thatthe ld. AO himself had admitted that the tax liability lay with these entities. Therefore, the assessee pleaded that the protective addition made in his hands was unjust. 7. The Ld. CIT(A) found merit in the contention of the assessee. He noted the facts relating to the surrender of 45 Crs as pertaining to the capital assets of the Companies and firms which were converted into stock in trade and valuation of property at market price was done and the difference of purchase price and market value was around 45 to 60 crores, which was surrendered. In the backdrop of facts relating to income surrendered of Rs.46,48,98,002/-being on account of conversion of capital assets into stock in trade in M/s Makkar Buildcon Pvt. Ltd., M/s Makson India Hospitality Pvt. Ltd and M/s. Ken Infra Vision LLP, and noting the provisions of law in this regard contained in Section 45(2) of the Act, he found that the tax liability arose on conversion of capital asset into stock in trade upon transfer of the property in the hands of the owner of property. He noted that the chargeability of capital gains as per Section

P a g e | 6 ITA No.1327/JPR/2025 ACIT Vs. Rajan Jhiriwal 45(2) of the Act did not arise at the time of conversion. Instead capital gain was deemed to accrue and was chargeable to tax only in the previous year in which such stock-in-trade was actually sold or otherwise transferred. He noted the AO to have admitted in the assessment order that the tax liability for the surrender made on account of conversion of capital asset into stock-in-trade lay in the hands of companies of the assessee i.e. M/s Makkar Buildcon Pvt. Ltd., M/s Makson India Hospitality Pvt. Ltd and M/s. Ken Infra Vision LLP. Noting so, he held that there was therefore no ambiguity in the ownership of the stock-in- trade. Finding the assessee to have no connection with the surrender of income of 46 Crs, being neither the owner of property converted to stock from capital asset, nor the income on conversion being liable to tax in the impugned year as per law, he held that there was no question of making any protective addition in the hands of the assessee. His findings are as under:- …… I have gone through the facts of the case and submission filed by the appellant. Onperusal of appellant’s brother Sh. Robin Jhiriwal’s statement recorded during postsearch proceedings as reproduced in assessment order, it is noticed that capitalassets of companies/firm were converted into stock in trade and valuation of propertyat market price was done and the difference of purchase price and market value ofstock in trade was around 45 to 46 crores which was surrendered. However, the taxwill be paid only on sale of such stock in trade. As per the facts of the case, out of the surrendered income of Rs.51 crore made byappellant group, sum of Rs.1 crore pertained to A.Y. 2022-23 and the sum ofRs.50,00,87,366/- pertained to A.Y. 2023-24. Out of this amount, appellant had paidtaxes on the sum of Rs.3,51,89,364/- in various group entities on account of cash,stock and real estate income while filing the return of respective assesse. Out of the surrendered income of Rs.46,48,98,002/- on account of conversion ofcapital asset in to stock in trade in M/s Makson India Hospitality Pvt. Ltd., M/s MakarrBuildcon Pvt. Ltd. & M/s Ken Infra Vision LLP, the appellant has sold certainproperties and has paid taxes on

P a g e | 7 ITA No.1327/JPR/2025 ACIT Vs. Rajan Jhiriwal the income of Rs.8,83,55,625/-.As regards surrender income of Rs.46,48,98,002/-, it is noted that surrenderedincome of Rs.46,48,98,002/- has been worked out as under:-

In view of above, it is seen that surrender amount of Rs.46,48,98,002/- has beenarrived at by calculating surplus amount on conversion of capital asset i.e. land of thecompanies namely, MakarrBuildcon Pvt Ltd, Makson India Hospitality Pvt Ltd andKen Infra vision LLP into stock-in-trade. Thus, before conversion of the lands intostock-in- trade, the ownership of these capital assets were with these threecompanies. There is no ambiguity in ownership of these lands.

Further, post conversion of capital assets into stock-in-trade, there is surplus ofRs.46,48,98,002/- in terms of valuation of these assets. However, these stock are yetto be sold and taxability will arise on date of transfer of ownership of these assets tobuyers.

Section 45(2) of the Income Tax Act, 1961 is reproduced as under: “

P a g e | 8 ITA No.1327/JPR/2025 ACIT Vs. Rajan Jhiriwal (2) Notwithstanding anything contained in sub-section (1), the profits or gains arisingfrom the transfer by way of conversion by the owner of a capital asset into, or itstreatment by him as stock-in-trade of a business carried on by him shall bechargeable to income-tax as his income of the previous year in which such stock-in-trade is sold or otherwise transferred by him and, for the purposes of section 48, thefair market value of the asset on the date of such conversion or treatment shall bedeemed to be the full value of the consideration received or accruing as a result ofthe transfer of the capital asset. “

As per the provisions of section 45(2) of the Income Tax Act, 1961, tax liability willarise on this income upon transfer of the property.

In view of above, in a case where capital asset is converted into stock in trade, thechargeability of capital gains does not arise at the time of conversion. Instead, thecapital gain is deemed to accrue and is chargeable to tax only in the previous year inwhich such stock-in-trade is actually sold or otherwise transferred.

Further, the ld. AO has admitted in the assessment order that the tax liability lies inthe hands of the companies of the appellant namely M/s MakarrBuildcon Pvt. Ltd,M/s Makson India Hospitality Pvt. Ltd. and M/s Ken Infra Vision LLP. Thus, there isno ambiguity in the ownership of the stock in trade.

Therefore, by no stretch of imagination, the appellant can be assumed to be owner ofthe stock-in-trade. Further, when the tax liability lies in the hands of companies/firmas mentioned above, there is no justification for making protective addition in thehands of appellant.

It is also to be noted there is no condition with respect to the time that has beenstipulated in the Income Tax Act to sell such converted stock in trade. Taxability willarise as and when the stock-in-trade will get sold.

Therefore, I find that in such circumstances where there is no ambiguity in ownershipof stock in trade, taxability on sale of such stock-in-trade coupled with consequentreflection in the books of accounts of these three companies and payment of taxeson the income of Rs.8,83,55,625/- out of total surrendered income ofRs.46,48,98,002/- on account of conversion of capital asset into stock in trade andadmission by these companies regarding payment of taxes whenever taxabilityarises, protective addition made in the hands of appellant is not justified.

Considering the factual matrix of the case and the undisputed fact that the tax liabilitylies in the hands of M/s MakarrBuildcon Pvt. Ltd, M/s Makson India Hospitality Pvt.Ltd. and M/s Ken Infra Vision LLP, the protective addition made in the hands ofappellant is hereby directed to be deleted. ……

P a g e | 9 ITA No.1327/JPR/2025 ACIT Vs. Rajan Jhiriwal 8. Aggrieved by the order of the Ld. CIT(A) the Revenue has preferred the present appeal before us . 9. The Revenue in its grounds raised before us has not controverted / challenged either the facts noted by the Ld.CIT(A) nor the law applied to the facts for holding that no protective addition could be made in the hands of the assessee. 10. The Ld. CIT(A) has deleted the addition of Rs.18,82,71,189/- in the hands of the assessee made on protective basis noting that the AO himself admitted in his assessment order that the tax liability lay in the hands of the company of the assessee group. 11. The Ld. CIT(A) has noted the facts relating to the issue that the addition made on protective basis in the hands of the assessee was in relation to 50% of the surrender of Rs.50,00,87,366/- made by the Group. This surrender, he noted was in relation to land owned by the Companies of the Group i.e. M/s Makkar Buildcon Pvt. Ltd., M/s Makson India Hospitality Pvt. Ltd and M/s. Ken Infra Vision LLP, which land were converted from capital asset into stock-in-trade and the surplus of the cost of the capital asset and there fair market value as on the date of conversion, which amounted to Rs.46,48,98,002/- was surrendered. Thus, he noted the surrender to be on account of surplus value of the capital assets converted into stock-in-trade. Noting the aforesaid facts, he held that the ownership of the land was not of the assessee’s but of the companies of the assessee group. 12. Thereafter, he noted that as per the provisions of law, the surplus on conversion of capital asset into stock-in-trade as per Section 45(2) of the

P a g e | 10 ITA No.1327/JPR/2025 ACIT Vs. Rajan Jhiriwal Act was to be taxed for the year in which the asset was sold and not in the year in which conversion took place. 13. He found that the AO also admitted to the fact that the ownership of land lay with the companies and as per the provisions of law, the surplus was to be taxed for the year in which the assets were sold. Noting that, the surrender did not relate to the assessee at all and in any case, the tax on the same was to be paid in subsequent years as per law, He held there was no case of making any protective addition in the hands of the assessee at all. 14. The facts noted by the Ld. CIT(A) have remained uncontroverted before us. In fact, the finding of the Ld. CIT(A) that the AO himself had noted the fact of the surrender relating to land owned by Companies of the assessee group and not by the assessee himself is, we find recorded in the assessment order and has not been controverted by the Ld. DR before us. 15. Ld. DR has also been unable to controvert the fact that the AO himself noted that as per the applicable provisions of law i.e. Section 45(2) of the Act, the surrender made was to be taxed in the year of sale of stock-in-trade. 16. Since the findings of the Ld. CIT(A) that as per the AO himself the land on account of which the surrender was not in the name of the assessee and the income in any case was liable to be taxed in the subsequent year as per law, has remained uncontroverted before us. We see no reason to interfere in the order of the Ld. CIT(A) holding that no protective addition lay in the hands of the assessee.

P a g e | 11 ITA No.1327/JPR/2025 ACIT Vs. Rajan Jhiriwal 17. The only reason for challenging the deletion of protective addition made in the hands of the assessee is that there is a possibility of the payment of taxes on the surrendered income being intentionally delayed by the companies so as to escape the eyes of Revenue. 18. The case of the Revenue is that the protective addition should be confirmed so as to keep track and tab on the payment of taxes on the surrendered income by the companies to whom the surrendered income belongs. 19. This definitely cannot be reason for making or for that matter confirming a protective addition. It is only when there is possibility of income being found relating to the assessee that such additions, if at all are made. Where there is no possibility of income being related to any assessee, there is no question of any addition, substantive or protective being made in the hands of the assessee. There is therefore no merit in the ground raised by the Revenue before us. 20. The deletion of protective addition of Rs.18,82,71,189/- made in the hands of the assessee is therefore confirmed. 21. Ground of appeal No.1 raised by the Revenue is dismissed.

P a g e | 12 ITA No.1327/JPR/2025 ACIT Vs. Rajan Jhiriwal and the value of silver was Rs. 611,400/-. As the assessee failed to substantiate the same with bills, an addition of Rs.6,00,000/- was made to total income of assessee u/s 69A of the IT Act, 1961. 24. During appellate proceedings, the appellant contended that ld. AO did not give the assessee a proper chance to explain the silver found during the search. During the assessment proceedings, no specific question was asked and no show cause notice was issued about this silver. 25. The assessee further contended that Silver jewellery weighing 7630 gms were declared by the appellant’s different family members (Smt. Madhu Devi – 2.25 Kg, Smt. Shweta Jhiriwal – 2.69 Kg and Smt. Deepali Jhiriwal – 2.69 Kg.) in their Income Tax/ Wealth Tax Return for A.Y. 2015-16. 26. With respect to remaining silver jewellery weighing 2560 gms, the assessee contended that assessee is a well-respected individual in society having a stablesource of income and long standing reputation for financial integrity. At the time ofsearch, the appellant was around 45 years old and belonged to a reputed family with asound social and financial standing. Considering the appellant age, socialbackground and creditworthiness, the possession of approximately 2560 gms of silver can’t be considered unusual or disproportionate. The assessee also contended that in Indian households, especially those with traditional and cultural roots, it is quitenormal possess silver utensils, ornaments and items of puja or ceremonial use,accumulated over decades through marriages, gifts and religious customs. The valueinvolved is modest in the context of the appellant background and stability. Thea ssessee further

P a g e | 13 ITA No.1327/JPR/2025 ACIT Vs. Rajan Jhiriwal submitted that merely because purchase bills could not be furnished– due to the passage of time and manner of acquisition – the silver should not bepresumed to be unexplained. 27. Ld. CIT(A) after considering the submissions made by the assessee deleted the addition made, holding as under:- ….. I have gone through the facts of the case as well as submission filed by the appellant.As per the assessment order silver jewellery weighing 10190 gms worth Rs.6,11,400/- were found during search. The appellant claimed that out of 10190 gms of silver weighing 7630 gms were disclosed in the income tax/wealth tax return of A.Y.2015-16 by Smt. Madhu Devi, Smt. Shweta Jhiriwal and Smt. Deepali Jhiriwal. With respect of remain silver weighing 2560 gms. (10190 gms – 7630 gms.), theappellant claimed to have accumulated on different occasions such as marriages,gifts and religious customs considering the fact that in Indian households, especiallythose with traditional and cultural roots, it is quite normal to possess silver utensils,ornaments, and items of puja or ceremonial use, accumulated over decades throughmarriages, gifts and religious customs. As the silver weighing 7630 gms was disclosed by the different members of theappellants family in their Income Tax / Wealth Tax Return for A.Y. 2015-16, the sameis treated as explained. The appellant’s family is a joint family and it is also true that silver underconsideration do not belong to any one person as it has been disclosed by differentmembers in their income tax/ Wealth Tax return. Thus, the silver found does notbelong to any one person rather it belongs to entire family. Considering this fact andappellant contention that in Indian households, especially those with traditional andcultural roots, it is quite normal to possess silver utensils, ornaments and items ofpuja or ceremonial use, accumulated through marriages, gifts and religious customsin a joint family is found acceptable. Hence, the remaining silver weighing 2560 gmsis also held as explained. Accordingly, addition on account of unaccounted moneyu/s 69A of unexplained silver jewellery is directed to be deleted. …… 28. On going through the order of the Ld. CIT(A), we find that he has deleted the addition made by the AO on account of silver found during search recording factual findings that out of the total silver weighing 10,190 grams of silver weighing 7,630 grams were disclosed in the

P a g e | 14 ITA No.1327/JPR/2025 ACIT Vs. Rajan Jhiriwal income tax/wealth tax return of the family members of the assessee, Smt. Madhu Devi, Smt. Shweta Jhiriwal and Smt. Deepali Jhiriwal. With respect to the remaining jewellery, the assessee’s contention of having accumulated on different occasions such as marriages, gifts and religious customs found favour with the Ld. CIT(A),noting the assessee to be living in a joint family and considering the traditional and cultural roots of Indian households, wherein he found, it is quite normal to possess silver utensils, ornaments, and gift items of puja or ceremonial use. 29. The factual findings of the Ld. CIT(A) have remained uncontroverted before us. The only plea of the Ld. DR before us, was that the documents relied upon by the Ld. CIT(A) while holding the silver jewellery wherein 7,630 grams to be explained were not confronted to the AO. 30. We do not find any merit in the contention of the Ld. DR. The Ld. CIT(A) has relied upon the income tax/wealth tax returns of the members of the family. The Ld. CIT(A) has coterminus powers with the AO; has examined the income tax/wealth tax returns and found the said jewellery duly reflected therein. Therefore, merely for the reason that the said documents were not confronted to the AO is no ground for finding any infirmity in the order of the Ld. CIT(A). The contention of the Ld. DR in this respect is therefore rejected. 31. As per the remaining jewellery, wherein 2,560 grams, which was attributed to have been accumulated by the assessee on account of traditional and cultural customs, we do not find any infirmity in the same, nor has the Ld. DR pointed out any reason to disbelieve the Ld. CIT(A).

P a g e | 15 ITA No.1327/JPR/2025 ACIT Vs. Rajan Jhiriwal 32. In view of the same, the order of the Ld. CIT(A) deleting the addition made on account of silver found during search amounting to Rs.6,00,000/- is upheld. 33. Ground of appeal No.2 raised by the Revenue is dismissed. 34. In effect, the appeal of the Revenue is dismissed. Order pronounced in the Open Court on 27.10.2026

Sd/- Sd/- (T.R. Senthil Kumar) (Annapurna Gupta) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated 27.10.2026 Mittali, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT By Order, Mittali Digitally signed by: Mittali DN: CN = Mittali email = Asst. Registrar mittaligupta34671@gmail.com C = IN O = Personal ITAT, Jaipur Date: 2026.10.30 12:37:44 + 05'30'