AJAY RAWAT,JAIPUR vs. ACIT CC 2, JAIPUR

IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, JAIPUR (PHYSICAL HEARING) Before: Shri T.R. Senthil Kumar, Judicial Member And Shri Prakash, Accountant Member ITA Nos: 268 to 277/JPR/2026 Assessment Years: 2012-13 to 2013-14 & 2015-16 to 2022-23

Ajay Rawat ACIT, 13, Bhairav Path Jawahar Central Circle- Lal Nehru Marg, Jaipur Vs 02, PAN: ALKPR7336R Jaipur (Appellant) (Respondent)

Assessee Represented: Sh. Vinod Kumar Gupta, CA & Mohammed Azharuddin, CA Revenue Represented: Sh. Ananad Swaroop, CIT Date of hearing : 24-08-2026 Date of pronouncement : 29-10-2026 आदेश/ORDER PER BENCH:-

A.Y. ITA No. Issues raised (ground numbers in brackets) 2012-13 268/JPR/20 Jurisdiction and limitation (1); refusal to condone the delay of 28 days 26 (2); total income and telescoping (3); interest expenditure Rs 27,84,092 (4); commission Rs 6,500 (5); section 115BBE (6); penalty (7); general (8) 2013-14 270/JPR/20 Jurisdiction and limitation (1); unexplained advances Rs 6,44,38,563 (2); 26 interest expenditure Rs 22,04,728 (3); commission Rs 3,200 (4); section 115BBE (5); total income (6); penalty (7); general (8) 2015-16 272/JPR/20 Jurisdiction and limitation (1); interest income Rs 72,26,206 (2); 26 commission Rs 1,600 (3); payments to Shri Divyank Jain Rs 1,98,530 (4); section 115BBE (5); total income (6); penalty (7); general (8) 2016-17 274/JPR/20 Jurisdiction and limitation (1); unexplained advances Rs 3,54,03,273 (2); 26 interest income Rs 18,46,961 (3); commission Rs 2,000 (4); Shri Divyank Jain Rs 54,167 (5); section 115BBE (6); total income (7); penalty (8); general (9) 2017-18 271/JPR/20 Jurisdiction and limitation (1); unexplained advances Rs 21,65,654 (2); 26 interest income Rs 45,96,425 (3); Shri Divyank Jain Rs 1,44,598 (4); section 115BBE (5); total income (6); penalty (7); general (8) 2018-19 269/JPR/20 Jurisdiction and limitation (1); unexplained advances Rs 3,34,57,785 (2); 26 interest income Rs 23,23,938 (3); commission Rs 1,650 (4); Shri Divyank Jain Rs 1,36,951 (5); estimate of profit Rs 3,88,490 (6); section 115BBE (7); total income (8); penalty (9); general (10)

A.Y. ITA No. Issues raised (ground numbers in brackets) 2019-20 275/JPR/20 Jurisdiction and limitation (1); commission Rs 14,150 (2); Shri Divyank 26 Jain Rs 8,40,503 (3); profit on foreign currency Rs 1,65,900 (4); estimate of profit Rs 83,744 (5); section 115BBE (6); total income (7); penalty (8); general (9) 2020-21 277/JPR/20 Jurisdiction and limitation (1); interest expenditure Rs 6,31,750 (2); 26 payments to Shri Godhaji Rs 43,60,000 (3); profit on foreign currency Rs 38,880 (4); Shri Divyank Jain Rs 22,14,651 (5); estimate of profit Rs 2,03,928 (6); section 115BBE (7); total income (8); penalty (9); general (10) 2021-22 276/JPR/20 Validity of the assessment and reliability of the seized material (1); 26 estimate of profit Rs 1,31,250 (2); interest expenditure Rs 8,28,653 (3); stole business Rs 20,11,665 (4); house property Rs 44,00,000 (5); payments to Shri Godhaji Rs 25,00,000 (6); Shri Divyank Jain Rs 3,06,001 (7); telescoping (8); section 40A(3) Rs 1,20,000 (9); section 115BBE (10); total income (11); penalty (12); general (13) 2022-23 273/JPR/20 General, not pressed (1); refusal to condone the delay of 29 days (2); 26 excess jewellery Rs 3,53,71,140, excess stock Rs 10,93,32,119, seized documents Rs 15,52,750 and Rs 3,93,750, estimate of profit Rs 5,07,296 (3 to 8); section 115BBE, penalty and general (9 to 12)

The surrender made at the time of search is recorded at paragraph 7.5 of the assessment order for the assessment year 2013-14 as under:

“7.5 On perusal of above statement of Shri Ajay Rawat, it is clear that, he voluntarily surrendered excess stock of Rs. 10,93,32,119/- for the taxation, however, he specifically mentioned that total amount of Rs. 8,77,00,000/- received back from Shri Radha Mohan Totla (out of the total amount Rs. 13,00,000/-) is the part of this excess stock. For better understanding, the bifurcation of total amount surrendered by Shri Ajay Rawat is tabulated below:”

Item Amount (Rs) Voluntary surrender of excess stock 10,93,32,119 Less: amount received back from RMT, stated to be part of the excess stock 8,77,00,000 Net surrender against excess stock 2,16,32,119 Surrender against incriminating documents seized at the residence 1,50,00,000 Jewellery seized from locker no. 2048, ICICI Bank Ltd. 99,80,725 Jewellery seized at the residence 1,54,64,485 Jewellery seized from locker no. 2078, ICICI Bank Ltd. 99,25,930 Total amount surrendered 20,20,03,259 The figure of “Rs. 13,00,000/-” in the extract evidently refers to the sum of Rs 13,00,00,000 offered for taxation. The table is reproduced only to complete the narrative; the surrender relates to the year of search, the appeal for which is dealt with at the end of this order.

A.Y. ITA Notice Assessment order Returned Assessed Additions No. (section, date) income (Rs) (Rs) under income section 148 (Rs) 2012-13 268 28.03.2023 147 r.w.s. 143(3), 1,28,270 29,18,860 27,90,592 09.03.2024 2013-14 270 25.03.2023 147, 29.02.2024 2,60,210 6,69,06,700 6,66,46,491 2015-16 272 25.03.2023 147, 29.02.2024 15,75,880 90,02,220 74,26,336 2016-17 274 25.03.2023 147, 29.02.2024 27,49,450 4,00,55,850 3,73,06,401 2017-18 271 25.03.2023 147, 29.02.2024 2,39,700 71,46,380 69,06,677 2018-19 269 25.03.2023 147, 29.02.2024 (-) 3,08,987 3,59,99,830 3,63,08,814 2019-20 275 23.03.2023 147, 29.02.2024 9,31,450 20,35,750 11,04,297 2020-21 277 26.03.2023 147, 28.02.2024 11,80,030 86,29,240 74,49,209 2021-22 276 Not 143(3), (-) 1,03,13,660 1,02,97,569 applicable 29.12.2022 16,25,047 2022-23 273 Not 143(3), 7,39,430 14,78,96,490 14,71,57,055 applicable 08.03.2024

Head of addition A.Y. Amount (Rs) S. No. 1 2013-14 6,44,38,563 Unexplained advances under section 69A of the Act (incremental peak) 2016-17 3,54,03,273 2017-18 21,65,654 2018-19 3,34,57,785 2 Interest expenditure under section 69C of the Act 2012-13 27,84,092 2013-14 22,04,728 2020-21 6,31,750 3 Interest treated by the AO as income 2015-16 72,26,206 2016-17 18,46,961 2017-18 45,96,425 2018-19 23,23,938 2021-22 8,28,653 4 Commission under section 69C of the Act 2012-13 6,500 2013-14 3,200 2015-16 1,600 2016-17 2,000 2018-19 1,650 2019-20 14,150 5 Payments to Shri Divyank Jain for jewellery manufacturing 2015-16 1,98,530 2016-17 54,167 2017-18 1,44,598 2018-19 1,36,951 2019-20 8,40,503 2020-21 22,14,651 2021-22 3,06,001 6 2020-21 43,60,000 Payments to Shri Godhaji, that is Smt. Champa Godha, proprietor of M/s Ammalya Jewels 2021-22 25,00,000 7 Profit on alleged sales in foreign currency 2019-20 1,65,900 2020-21 38,880 8 Estimate of profit on rejection of the books 2018-19 3,88,490 6 Head of addition A.Y. Amount (Rs) S. No. 2019-20 83,744 2020-21 2,03,928 2021-22 1,31,250 9 2021-22 44,00,000 Unexplained investment under section 69 of the Act in the construction of the residence 10 Unaccounted profit from a business of stoles 2021-22 20,11,665 11 Disallowance under section 40A(3) of the Act 2021-22 1,20,000

The incremental peak was worked out at nil for the assessment years 2012-13 and 2015-16 and for every year after 2018-19, so that no addition on that account was made for those years.

“I have decided the similar issue in the case of the appellant for the assessment year 2018-19 in the ground of appeal number 1, 2 and 8 where grounds of appeal have been dismissed after detailed adjudication. Material facts of the present appeal in the relevant grounds of appeal being pari-materia with the facts of the appeal in the assessment year 2018-19, the findings of the appeal order in the case of assessment year 2018-19 in the grounds of appeal numbers 1, 2 & 8 will apply mutatis-mutandis to the present grounds of appeal.” Independent reasons were recorded only on a few grounds relating to the estimates of profit and the seized foreign currency notes, and all eight appeals were dismissed. The appeals for the assessment years 2012-13 and 2022-23 were not decided on merits at all: the learned CIT(A) declined to condone delays of 28 days and 29 days respectively and dismissed both in limine, recording that the grounds of appeal were not required to be taken up on merits.

Delay before the learned CIT(A): assessment years 2012-13 and 2022-23 12. The assessment orders for these two years were passed on 09.03.2024 and 08.03.2024 respectively, and the appeals before the learned CIT(A) were presented on 06.05.2024, late by 28 days and 29 days. The explanation, in identical applications dated 10.12.2024 reproduced in the impugned orders, is that a large number of assessment orders of the group for the assessment years 2012-13 to 2022-23 were passed in quick succession; that the orders for every year except these two had been received by February 2024 and were appealed within time; that some orders were received by electronic mail and some physically; and that the assessee, believing that no further order remained to be received, did not thereafter look at the electronic mail by which these two orders came. The learned CIT(A) rejected the explanation as generic and self serving, held that the filing of the other appeals within time showed a want of diligence, and observed that no material such as hospitalisation or incapacitation had been placed on record.

The operative reasoning of the learned CIT(A), at pages 8 and 9 of the order for the assessment year 2012-13, reads as under:

“No material has been placed on record to show any extraordinary circumstance, such as hospitalization, incapacitation, or circumstances beyond the appellant’s control. The appellant was admittedly represented by tax professionals and had successfully filed appeals for other assessment years within limitation during the same period. This fact clearly negates the plea that the appellant was overburdened or incapacitated. … The appellant himself admits that appeals for other assessment years were filed within time, whereas the appeal for the present year was delayed. This selective lapse indicates lack of due diligence rather than unavoidable hardship.” 13. We are unable to sustain that approach. The circumstance that the appeals for the other years were filed within time was treated as establishing a want of diligence. In our view it points the other way. The assessee was not indifferent to his remedies; he pursued them for every other year of the group and within time. What he says is that two orders came later than the rest and escaped attention. That is an ordinary and credible explanation for a lapse of four weeks, and it is corroborated by the very fact relied upon to reject it. Section 249(3) of the Act empowers the Commissioner (Appeals) to admit a belated appeal where he is satisfied that the appellant had sufficient cause for not presenting it in time. It does not require proof of hospitalisation or incapacitation, and to demand such proof is to apply a test stricter than the statute lays down.

The principles laid down by the Hon’ble Supreme Court in Esha Bhattacharjee (supra), as reproduced at page 5 of the impugned order for the assessment year 2012-13, include the following:

“(i) There should be a liberal, pragmatic, justice-oriented, nonpedantic approach while dealing with an application for condonation of delay, for the courts are not supposed to legalise injustice but are obliged to remove injustice. … (viii) There is a distinction between inordinate delay and a delay of short duration or few days, for to the former doctrine of prejudice is attracted whereas to the latter it may not be attracted. That apart, the first one warrants strict approach whereas the second calls for a liberal delineation. (ix) The conduct, behavior and attitude of a party relating to its inaction or negligence are relevant factors to be taken into consideration. It is so as the fundamental principle is that the courts are required to weigh the scale of balance of justice in respect of both parties and the said principle cannot be given a total go by in the name of liberal approach.” Weighed on that scale, the conduct of the assessee does not show inaction or a casual approach. He filed every other appeal of the group within time, and the delays of 28 days and 29 days are of short duration, calling for a liberal rather than a strict approach. No prejudice to the Revenue has been shown, and none can arise from a decision on merits. To shut out a challenge to additions at the threshold, for a lapse of four weeks, would put form above substance.

In Collector, Land Acquisition v. Mst. Katiji (supra) the Hon’ble Supreme Court held that the expression is to receive a liberal construction so as to advance substantial justice.

Jurisdiction: the first proviso to section 149(1) of the Act read with section 153A of the Act 15. Ground 1 in the appeals for the assessment years 2012-13 to 2020-21 questions the assumption of jurisdiction. The search having been conducted on 22.03.2022, the reassessments were initiated under sections 147 and 148 of the Act. The question is whether the notices were within time. The first proviso to section 149(1) of the Act, as it stood when the notices were issued, reads as under:

“Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if a notice under section 148 or section 153A or section 153C could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section or section 153A or section 153C, as the case may be, as they stood immediately before the commencement of the Finance Act, 2021:” 16. In the order for the assessment year 2018-19, which the learned CIT(A) applied to the other years, this ground was rejected for the following reasons, at pages 70 and 71 of that order:

“In this regard, it is noted that the search on the Rawat (MPR) Group was conducted on 22.03.2022, i.e., after 01.04.2021. After the Finance Act, 2021, the earlier special assessment regime under sections 153A/153C ceased to apply to searches conducted on or after 01.04.2021. The legal position is unambiguous. Assessments for post-2021 searches must proceed only under sections 147–148A. CBDT Instruction No. 01/2022 prescribes the same. Therefore, the AO rightly initiated proceedings under section 147/148A, not section 153A.

As regards appellant’s contention that notice has been issued without acquiring the jurisdiction as stipulated in proviso to section 149(1), the reliance placed by the appellant on the first proviso to section 149(1) is misplaced. The said proviso only restricts issuance of notice under section 148 for assessment years beginning on or before 01.04.2021 where notice under section 148 could not have been issued earlier due to limitation under the old law.

…

The income escaping assessment is represented in the form of entries in books of account / electronic records, squarely falling within section 149(1)(b)(iii). Since the quantum of escapement exceeded Rs.50 lakh for the relevant assessment years, the extended limitation period of up to ten years as prescribed under section 149(1)(b) was rightly invoked.” The first proviso to section 149(1) of the Act does not merely save notices for the old years; it imports into the new regime the time limits of section 153A of the Act “as they stood immediately before the commencement of the Finance Act, 2021”. The view of the learned CIT(A) cannot be sustained in the face of the judgment of the Hon’ble jurisdictional High Court in Sachin Panchal v. DCIT [2025] 180 taxmann.com 629 (Raj.), where the Division Bench, dealing with a search conducted after 31.03.2021, held as under:

“17. However, we notice that the search was conducted of SKR Group on 19.05.2023 under Section 132 of the Act and documents were seized which reflected escaping of income for the AY 2015-2016, while the proceedings under Section 153C of the act were, admittedly, not required to be conducted in relation to the search which was conducted after the cut off date (supra), we find that First Proviso to Section 149 allows notice to be issued for such escaping of income and reassessment can be done. As the Proviso allows notice under Section 148 in the amended provision to be issued if the same could have been issued under the old provision of Section 153A and 153C of the Act.

“Provided also that no notice for assessment or reassessment shall be issued by the Assessing Officer for the relevant assessment year or years unless—

(a) the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate in the relevant assessment years;

(b) the income referred to in clause (a) or part thereof has escaped assessment for such year or years; and

(c) the search under section 132 is initiated or requisition under section 132A is made on or after the 1st day of April, 2017.

Explanation 1.—For the purposes of this sub-section, the expression "relevant assessment year" shall mean an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made.

Explanation 2.—For the purposes of the fourth proviso, "asset" shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account.”

Therefore, Ground 1 in the appeals for the assessment years 2016-17 to 2020-21 in ITA Nos. 274, 271, 269, 275 & 277/JPR/2026 is dismissed. Ground 1 for the assessment year 2021-22, though framed as a challenge to the assessment itself, was argued only on the reliability of the seized material, which we deal with under the respective heads. 19. We may add that the learned CIT(A) also held, at page 71 of the order for the assessment year 2018-19, that the objection could not be entertained at all:

“Moreover, the law mandates that jurisdictional objections must be raised at the earliest stage, i.e., during the assessment/reassessment proceedings. In the instant case, it is noticed from the perusal of the assessment order that the appellant did not raise any objection regarding jurisdiction before the AO during the course of assessment proceedings. The appellant only raised the objection at the appellate stage. In view of the provisions of section 292BB of the Income Tax Act, objection to jurisdiction raised for the first time at the appellate stage, after the assessment proceedings are concluded, cannot be entertained. It is also well established that the assessee cannot challenge the jurisdiction belatedly, especially when he had the opportunity to raise it during assessment proceedings.”

We are unable to agree. Section 292BB of the Act deems a notice to have been duly served where the assessee has participated in the proceedings; it cures a defect in service and nothing else. It has nothing to say on whether the notice was issued within the time allowed by law. Limitation goes to the root of jurisdiction, and a notice issued beyond the time allowed by law is not validated by participation or by silence. The Hon’ble Delhi High Court in Deepak Nagar v. ACIT (W.P.(C) 4304/2026, order dated 02.04.2026), relied upon by the learned AR, rejected the very objection that the plea had not been raised before the AO, observing at paragraph 7:

“7. Having heard learned counsel for the parties, we are of the prima facie view that the issue of limitation being a fundamental jurisdictional aspect is required to be examined by the AO himself on the basis of statute or judicial precedence. May be the assessee has not taken this plea but since he had approached this Court on 26.03.2026 i.e. before the assessment order was passed, we are of the view that the writ petitions can be entertained and merely because an assessment order has been passed, petitioner’s right to raise jurisdictional issue and invocation of writ jurisdiction cannot be denied.” We therefore examine the objection on its merits for the years in which it arises.

“8.3. Thus, it is precisely held herein-above that the statute prescribes different modes of computation for six years and ten years. We reiterate that the provisions of Section 153A(1)(b) of the Act stipulate that the Assessing Officer shall assess or reassess the total income of six years immediately preceding the assessment year relevant to the previous year in which the search is conducted. However, the ten assessment year period, consequently, is to be reckoned from the end of the assessment year pertaining to the previous year in which the search was conducted, as distinct from the preceding year which is spoken of in the case of the six relevant assessment years. Thus, the contention with regard to the computation of six years as well as ten years under the provisions of Section 153A of the Act has already been gone into by the Delhi High Court as well as the Madras High Court, and we have no convincing reason to take a divergent view from the view expressed herein-above. Applying the aforesaid computation to the facts of the present case, taking the date of the search as 08.09.2021 during the Financial Year 2021-22, the Assessment Year 2022-23 will become the first assessment year and, in the same manner, the Assessment Year 2013-14 will become the tenth assessment year. Thus, the year under consideration, namely, Assessment Year 2012-13, for which the impugned notice has been issued under Section 148 of the Act, would fall beyond the period of ten years prescribed under the statute as it stood immediately before the commencement of the Finance Act, 2021, and hence, on this count, the impugned notice can be said to be barred by limitation.” The same Court reiterated that view in Nirma Ltd. v. ACIT [2026] 184 taxmann.com 586 (Guj.), at paragraph 8.2, on a search conducted on 04.03.2022, again in the same financial year as ours. The computation for the present case is set out below:

Count Assessment year Remarks 1 2022-23 Year of search (search on 22.03.2022)

Count Assessment year Remarks 2 to 7 2021-22 to 2016-17 Six assessment years under section 153A(1)(b) of the Act 8 to 10 2015-16 to 2013-14 “Relevant assessment years” under Explanation 1, subject to the fourth proviso [to section 153A(1) of the Act] thereto. 11 2012-13 Beyond ten years; notice dated 28.03.2023 barred Explanation 1 to section 153A(1) of the Act is explicit, and a provision prescribing a period of limitation is to be construed strictly. As was observed by the Hon’ble Madras High Court in the passage approved in Ojjus Medicare (P.) Ltd. (supra), “The long arm of the law can go up to this terminal point and not one day beyond.”

Even if the matter were thought to be open to two views, there being a divergence among Hon’ble High Courts other than the Hon’ble jurisdictional High Court, the Hon’ble Supreme Court in CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 (SC) laid down the rule to be applied:

“… if two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted. This is a well- accepted rule of construction recognised by this court in several of its decisions.” 21. The notice dated 28.03.2023 for the assessment year 2012-13 could not therefore have been issued under section 153A of the Act at that time, and is barred by the first proviso to section 149(1) of the Act. The learned CIT(A), having refused to admit the appeal, did not decide this ground. It raises a pure question of law on facts that are not in dispute, namely the date of search and the date of the notice, and no further fact needs to be found. The Hon’ble Supreme Court in National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC) held, at paragraph 7:

“7. The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner (Appeals) takes too narrow a view of the powers of the Tribunal … Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee.” The notice under section 148 of the Act and the assessment order dated 09.03.2024 for the assessment year 2012-13 are quashed. Ground 1 in ITA No. 268/JPR/2026 is allowed.

The remaining grounds for that year, on the interest expenditure of Rs 27,84,092, the commission of Rs 6,500, section 115BBE of the Act and the total income, do not survive and are left open as academic, and the ground against the initiation of penalty is rendered infructuous.

“As evident from the above statement, Shri Ajay Rawat accepted that, the documents found from his residence pertain to cash transactions between him and Shri Radha Mohan Totla. Shri Ajay Rawat further agreed that the transactions recorded on such print out of excel sheet also pertains to him and Shri Radha Mohan Totla and also accepted that he had given the cash amount to Shri Radha Mohan Totla which was actually earned from his business only but was not recorded in the regular books. He confirmed that he had received back some cash from Shri Radha Mohan Totla, which was also utilized by him for the purchase of stock in his business.” The reasons then tabulate, year by year, the cash taken from and the cash given to RMT, and conclude as under (pages 12 and 14 of the paper book):

Extract from the reasons recorded: cash taken and given, decoded (page 12 of the paper book)

Extract from the reasons recorded: conclusion (page 14 of the paper book) The decoded figures of cash given are Rs 12,32,71,970 for the assessment year 2013-14 and Rs 4,95,11,897 for the assessment year 2015-16. The conclusion is that the AO is “in possession of books of accounts/ other documents/ evidence which reveals that income chargeable to tax, as represented in the form as detailed above, has escaped assessment and the same amounts to or is likely to amount to 50 lakh Rupees or more, for the assessment years as relevant.”

“155. We must state that the fourth proviso to Section 153A of the Act lays down the conditions precedent for issuance of notice for reassessment. It is only upon fulfillment of such conditions that the Assessing Officer assumes jurisdiction to issue a notice under Section 148 of the Act. Since satisfaction of the conditions therein is a jurisdictional requirement, it is incumbent upon the Assessing Officer to demonstrate in writing as to how the conditions have been satisfied for him to assume jurisdiction. Therefore, initiation of re-assessment has to be examined on the basis of the notice and the subsequent satisfaction note containing the reasons recorded.” Applying that test, the Court upheld the notice for the assessment year 2015-16 in that case because the reasons disclosed receivables, which it held to be an asset (paragraph 166 of the order).

If receivables are an asset, cash advanced to a broker and recoverable from him is no less so; Explanation 2 to Section 153A(1) of the Act names loans and advances in terms. The reasons before us meet the same test. Smart Chip (P.) Ltd. (supra) is distinguishable. There the reasons concerned only the disallowance of expenses, and the Court held at paragraph 17:

“17. It is clear from the above that there is no allegation that the income which has escaped assessment was represented in the form of an asset. Therefore, the conditions as stipulated in Clause (a) of the fourth proviso to Section 153A(1) of the Act are not satisfied. The AO does not have the possession any books of account, other documents or evidence, which reveals that the petitioner’s income that is represented in the form of an asset has escaped assessment.” Deepak Nagar (supra) is distinguishable for the same reason. The reasons there, extracted at paragraph 11 of that order, described the escaped income as “unexplained cash expenses” and as “expenditure in respect of a transaction or in relation to an event or occasion”, and the Court found that they did not “make a whisper about existence or creation of an asset”.

The judgment in Huawei Telecommunications (India) Company (P.) Ltd. (supra), rendered on 30.03.2026, is the most recent decision of a Hon’ble High Court on the point, and we have found no decision of the Hon’ble jurisdictional High Court or of the Hon’ble Supreme Court which takes a different view. The Hon’ble Bombay High Court in Ashok Commercial Enterprises v. ACIT [2023] 154 taxmann.com 144 (Bom.) approached the question from the other side. There the item relied upon in the satisfaction note was a loan written off as a bad debt during the year, and the Court held at paragraph 21(b):

“(b) Since the write-off of a bad debt cannot be held to be an asset, clause - (a) of the 4th proviso to Section 153A(1) of the Act would bar any assessment that is proposed to be made for the relevant assessment year/years, i.e., Assessment Year 2011-2012, 2012-2013 and 2013- 2014;” A loan that has been written off has ceased to be an asset. A loan that remains recoverable is the very thing Explanation 2 to Section 153A(1) of the Act names. The cash with RMT was of the second kind. The reasons record it as given to RMT and received back from him over the years, and the assessee himself stated at the time of search that a balance of Rs 4,28,80,361 was still receivable from RMT. Here the asset is the very subject of the reasons and, for the assessment year 2013-14, of the addition made. We may add that even after excluding the duplicated entries referred to later in this order, the cash given in each of these years remains far above Rs 50,00,000. Ground 1 in the appeals for the assessment years 2013-14 and 2015-16 is dismissed.

Unexplained advances on the peak credit: assessment years 2013-14, 2016-17, 2017-18 and 2018-19 24. We deal first with these additions in principle. The learned AR attacked the seized material on several fronts: that it was found with a third party, that ‘MPR’ denotes the larger family, that the statement under section 132(4) of the Act was retracted, and that RMT was not offered for cross examination. Each plea has to be weighed against the material as a whole. That material is of three kinds, and each supports the others.

The first is the documents themselves. The excel sheets were found in the pen drives seized from the residence of Shri Arun Snehi, whose ownership RMT admitted, and printouts of the same sheets were found at the assessee’s own residence. Under section 132(4A) of the Act, where documents are found in the possession or control of a person in the course of a search, it may be presumed that they belong to that person and that their contents are true, and section 292C of the Act carries the same presumption into every proceeding under the Act. The printouts found with the assessee attract that presumption, and their agreement with the sheets kept by RMT confirms it. The sheets carry dates, descriptions, party codes and running balances. They are not dumb documents.

The second is the admissions. RMT, the author of the sheets, admitted on oath that they record his unaccounted cash dealings with various parties. The assessee, confronted with the sheets during the search, accepted in his statement under section 132(4) of the Act, extracted in the reasons reproduced in paragraph 22, that he had given cash to RMT out of business income not recorded in his books and had received some of it back. He put the cash advanced at Rs 12,54,37,550 and the cash received back at Rs 8,25,57,189, and offered Rs 13,00,00,000 for taxation. An admission is not conclusive, but it is strong evidence, and it is for its maker to show that it is wrong. The Hon’ble Supreme Court in Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18 (SC) held at paragraph 4:

“4. There is material on record to show that in respect of the assessment year 1963-64, the year previous to the one with which we are concerned in this case, the Tribunal refused to refer similar questions which the assessee wanted it to refer to the High Court. But, at the instance of the assessee those questions were referred to the High Court as ordered by the High Court and the High Court answered those questions in favour of the assessee. It is no doubt true that entries in the account books of the assessee amount to an admission that the amount in question was laid out or expended for the cultivation, upkeep or maintenance of immature plants from which no agricultural income was derived during the previous year. An admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the person who made the admission to show that it is incorrect.” The assessee has not shown that his admission was incorrect. Nothing was placed before the AO, the learned CIT(A) or this Tribunal to show that the transactions recorded in the sheets did not take place, or that they took place with someone else.

The third is the retraction. The statement was retracted by a letter dated 16.11.2022, that is 239 days after the search of 22.03.2022, and, as the learned CIT(A) found, the retraction is unsupported by any material. The Hon’ble jurisdictional High Court in Pr. CIT v. Roshan Lal Sancheti [2023] 150 taxmann.com 227 (Raj.), against which the Special Leave Petition of the assessee was dismissed in [2023] 150 taxmann.com 228 (SC), held at paragraph 19:

“19. In view of the law discussed above, it must be held that statement recorded under section 132(4) of the Act and later confirmed in statement recorded under section 131 of the Act, cannot be discarded simply by observing that the assessee has retracted the same because such retraction ought to have been generally made within reasonable time or by filing complaint to superior authorities or otherwise brought to notice of the higher officials by filing duly sworn affidavit or statement supported by convincing evidence. Such a statement when recorded at two stages cannot be discarded summarily in cryptic manner by observing that the assessee in a belatedly filed affidavit has retracted from his statement. Such retraction is required to be made as soon as possible or immediately after the statement of the assessee was recorded. Duration of time when such retraction is made assumes significance and in the present case retraction has been made by the assessee after almost eight months to be precise, 237 days.” In that case the statement had also been confirmed under section 131 of the Act. Here the confirmation comes from the documents found at the assessee’s own residence, which is no weaker. The retraction came after almost the same interval and carries no greater weight.

The remaining pleas do not survive this material. The plea that ‘MPR’ denotes the wider family does not meet the assessee’s own admission that he gave the cash; the reliance placed on his answer to question 15, that the family firms had old business relations with RMT, does not detract from the specific admission made in respect of the sheets themselves. Nor does the formation of M/s MPR on 22.12.2017 matter, for the sheets record the dealings of the assessee and not of that proprietary concern. As to cross examination, where an addition rests not upon a third party’s statement alone but upon the assessee’s own admission and upon documents found at his own premises, the absence of cross examination of the third party does not by itself vitiate it. In Andaman Timber Industries v. CCE (Civil Appeal No. 4228 of 2006) (SC) the order rested on the statements of two buyers which the assessee was not allowed to test; here the addition does not rest on the word of RMT alone. Therefore, the additions are sustainable in principle, and the plea that they be deleted in their entirety is rejected.

“13.1 To work out the unaccounted income of the assessee, the “Peak Credit Theory” has been opted for. In the consolidated excel sheet of the party, the column ‘balance’ determines the peak credit.

In cases where there is a negative ‘balance’ figure as peak, it means the assessee has paid cash to Shri Radha Mohan Totla (RMT) and hence peak credit is his unaccounted income that has escaped taxation for the assessment year in which the peak is determined. In the case of the assessee, the peak credit appearing on or after 1.4.2011 has been considered and in the cases where the original negative peak is appearing after 31.03.2011, that peak credit is considered to be the unaccounted income for the assessment year in which the peak is determined, after setting-off the opening balance as on 1.4.2011, if any. In this manner, the peak amount for year to year has been worked out on incremental peak theory basis.” The year wise peak worked out by the AO, at pages 92 and 93 of that order, is summarised below. The peak and the incremental peak are in the coded form, at one hundredth of the actual amount, and the last column shows the addition actually made in the assessment order of each year:

F.Y. A.Y. Peak Addition made (Rs) Date of Incremental peak peak 2011-12 2012-13 Nil 0 0.00 Nil 29 F.Y. A.Y. Peak Addition made (Rs) Date of Incremental peak peak 2012-13 2013-14 05.02.2013 -644385.63 -644385.63 6,44,38,563 2013-14 2014-15 03.12.2013 -662110.14 -17724.51 Not in Appeal 2014-15 2015-16 11.03.2015 -493552.12 0.00 Nil 2015-16 2016-17 18.02.2016 -1016142.87 -354032.73 3,54,03,273 2016-17 2017-18 12.05.2016 -1232708.27 -216565.4 21,65,654 2017-18 2018-19 04.08.2017 -1567386.12 -334677.85 3,34,57,785 2018-19 2019-20 15.06.2018 -1173965.70 0.00 Nil 2019-20 2020-21 10.04.2019 -952644.14 0.00 Nil

The method is a sound one in principle. As the learned CIT(A) himself put it, at page 73 of the order for the assessment year 2018-19, “peak credit theory is the most reasonable method to avoid double counting”. But a peak is only as true as the running balance from which it is struck. On that aspect the learned CIT(A) observed on the same page:

“As regards, methodology adopted by the Assessing Officer for consolidation of data, it is noted that the excel files contained multiple ledgers, duplicate entries, suppressed two zeros and mixed currencies and that consolidation of entries into a chronological ledger is standard forensic practice, especially when data is scattered across several devices, two-zero suppression is acknowledged by the author (RMT) and currency conversions are mandatory to decode actual INR figures. The appellant, having admitted the correctness of seized data during search, cannot subsequently challenge the very decoding that makes the data readable.” The presence of duplicate entries was thus noticed, but whether they had been carried into the running balance, and so into the peak, was not examined. The assessee does not challenge the decoding; the challenge is to the counting. The AO’s description of the merger, in identical terms in each of the orders, reads in the order for the assessment year 2015-16 as under:

“8.4.1 As has been stated above, the excel sheets of the assessee were maintained in the name of ‘MPR’ & ‘MPR-II’ and was found in different pen drives. The transactions related to the assessee Shri Ajay Rawat (i.e. all the related transactions in these excel sheets of pen drive) were combined / merged to form a single running ledger. The combined sheet has been prepared by considering all the accounts in INR and any other converted currency maintained by Shri Radha Mohan Totla. In case of foreign currency, currency conversion multiply has been used. All the figures are recorded in 1/100 of the actual amount.” Two defects follow from this method, and both appear on the face of the AO’s own ledger, which records against every entry the pen drive from which it was taken and the account to which it belongs.

Extract from page 47 of the assessment order for the assessment year 2013-14 31 Each of the two cash entries of 23.01.2013 and 05.02.2013 appears twice, on the same date, with the same description and for the same amount, once from each of two pen drives, and both copies are run through the balance. That these are copies and not separate transactions is confirmed elsewhere in the same ledger, where interest entries of an identical amount on the same date are likewise repeated from the second pen drive, as on 31.07.2013 (19274.00), and the peak entry of the next year, “HR 1117.33” of 71173.92 on 03.12.2013, also appears twice. Interest is not credited twice on one account on the same day. Without the second copies the balance on 05.02.2013 would have been - 244385.63 and not -644385.63; the two duplicated entries alone account for Rs 4,00,00,000 of the addition of Rs 6,44,38,563. A method which, by the AO’s own description, merges the data of several pen drives must remove the duplicates; one which counts the same rupee twice cannot yield a peak that is true.

The AO himself recognised the problem when he came to the assessment year 2021-22. At paragraph 9.6 of the order for that year he recorded:

“9.6 When the assessee was confronted with above ledger, he has accepted that the entries in above ledger do belongs to his business concerns, however, there are certain entries which are duplicate in the nature. On the basis of submission, new combined sheet is prepared which is being reproduced here:” The ledger on which the peak for the assessment year 2013-14 was struck, extracted above, shows that no such correction was made there.

Date Description Taken Given Balance A/c 31-Jan-16 INTT.REVERSE 282.49 -946242.87 RS 18-Feb-16 TRF D 1000.00 69900.00 -1016142.87 RS 18-Feb-16 C-20+30 50000.00 -966142.87 RS 18-Feb-16 TRF RS 65000.00 0.00 -901142.87 D

The peak of Rs 10,16,14,287 upon which the whole of the addition for that year rests is struck by an entry described “TRF D 1000.00”, the balance immediately before it being Rs 9,46,24,287. On the same date the dollar account carries the reciprocal entry “TRF RS” of 65000.00, which at the AO’s own average rate of 65 is the rupee equivalent of the very 1000.00 named in the first entry. The peak for the assessment year 2017-18, struck on 12.05.2016 at -1232708.27, is reached in exactly the same way, by an entry “RECD.FROMD 1570.00” of 107545.00 in the rupee account followed the same day by “TRF RS” of 102050.00 in the dollar account, that is 1570 at the rate of 65. These descriptions are the author’s own, on whose correctness the Revenue itself relies.

The AO answered the objection in the remand report dated 11.09.2025, at page 32 of the paper book, as under:

Extract from the remand report dated 11.09.2025 (page 32 of the paper book) The answer does not meet the objection. The identity and confirmation of third parties are beside the point where the entry records nothing more than the movement of a balance between the rupee account and the dollar account of the same party. Nor is it an answer that no separate addition was made for these entries: the grievance is not of a separate addition but that each such movement is counted twice within the very balance from which the peak is struck. The AO in his revised remand report also referred to an entry of 31.12.2016 described “TRF 351 A/C”, which represents a transfer to a third party; that stands on an altogether different footing from a transfer of a balance between two currency accounts of the same party within the ledger the AO has himself merged. The two were not distinguished.

Interest 29. For the assessment years 2016-17, 2017-18 and 2018-19 the AO added interest income of Rs 18,46,961, Rs 45,96,425 and Rs 23,23,938 separately from the peak. On the contention that these duplicate an amount already embedded in the peak, the AO stated in his revised remand report:

“(b) Various entries of interest income and interest expenses were taken into account while working out peak credit. Some entries increased peak amount and some entries decreased peak amount and accordingly, amount of addition of incremental peak was increased and decreased respectively.” The position is thus admitted, and for the assessment year 2016-17 it is borne out by Table 2 at page 88 of that assessment order. Of the eleven interest entries for the previous year 2015-16, the two of 29.02.2016 fall after the peak date of 18.02.2016. The remaining entries aggregate 21059.39 in the taken column and 43086.00 in the given column, and the running balance shows that a given entry increases the amount outstanding while a taken entry reduces it. The net accretion to the peak from interest is thus 22026.61 in coded figures, or Rs 22,02,661, which is 35 more than the Rs 18,46,961 separately added. The same reasoning governs the assessment years 2017-18 and 2018-19, in which the interest entries form part of the very running balance from which the incremental peak is derived. To sustain the separate additions would be to tax the same accretion twice. The additions of Rs 18,46,961, Rs 45,96,425 and Rs 23,23,938 are deleted. In re-working the peak for those years the AO shall continue to take the interest entries, other than duplicated ones, into the running balance.

Extract from page 89 of the assessment order for the assessment year 2015-16 The given column, totalling 99870.54 against 27608.48 in the taken column, consists of only four entries: “INTT” of 48816.77 on 31.01.2015 twice and “INTT.” of 1118.50 on 12.02.2015 twice. The ledger shows that in each pair one entry is taken from “Kingston USB G3” and the other from “Kingston USB 8GB”. The working, after excluding the second copies, is as under:

Particulars Amount (coded) Interest given as per Table 2 99870.54 Less: second copies (48816.77 + 1118.50) 49935.27 Interest given, net of duplicates 49935.27 Less: interest taken as per Table 2 27608.48 Net interest 22326.79 Net interest in rupees Rs 22,32,679 The addition is sustained to the extent of Rs 22,32,679 and the balance of Rs 49,93,527 is deleted. Ground 2 for the assessment year 2015-16 is partly allowed.

Extract from page 32 of the assessment order for the assessment year 2021-22 Both entries stand in the taken column, and each reduces the amount owed by RMT to the assessee. On the AO’s own reading of the sheets, set out at page 17 of the order for the assessment year 2013-14 and reproduced in paragraph 33 below, an interest entry in the taken column is interest charged by RMT to the assessee, that is, the assessee’s interest expenditure, and not his income. Applied consistently, the same test shows that these two entries reduced the balance due to the assessee and were therefore paid, not earned. The assessee raised this point in respect of the entry of 2,613.10 in his reply dated 16.11.2022, reproduced in that order, and the ground before us describes the addition as one of interest expense. The AO did not deal with it. So understood, the addition stands on the same footing as the interest expenditure of the assessment years 2013-14 and 2020-21. It was charged against the running account with RMT whose corpus has been assessed through the peak, and its source is not unexplained. Hence, the addition of Rs 8,28,653 is deleted.

Commission 33. The additions of commission of Rs 3,200, Rs 1,600, Rs 2,000, Rs 1,650 and Rs 14,150 for the assessment years 2013-14, 2015-16, 2016-17, 2018- 19 and 2019-20 were made under section 69C of the Act. The reasoning, identical in each year, appears at paragraph 13.4 of the order for the assessment year 2013-14:

“13.4 Further, the commission expenditure of Rs. 3,200/- as worked out in table -3 above, is also added to the total income of the assessee, as the same has not been disclosed by the assessee. Accordingly, the undisclosed commission expense of Rs. 3,200/- is added to assessee's total income as unexplained expenditure u/s 69C and taxed u/s 115BBE of the Income Tax Act. Penalty proceedings u/s 271(1)(c) is being initiated separately for concealment of income.” The AO had earlier explained, at page 17 of the same order, how the columns of the seized sheets are to be read:

Extract from page 17 of the assessment order for the assessment year 2013-14 Two things follow from the AO’s own reading. The commission is an entry in the taken column, that is, an amount charged by RMT against the money the assessee had placed with him. And the balance column, from which the peak is struck, is “inclusive of cash transactions, interest and commission transactions”. The commission was therefore not paid out of some other undisclosed purse. It was adjusted against the very money that has been assessed in the assessee’s hands under section 69A of the Act through the peak. Section 69C of the Act applies where the source of an expenditure is not explained; here the source is the running account itself. The same reasoning led us to delete the interest expenditure in paragraph 30. All five additions are deleted.

Payments to Shri Divyank Jain 34. Payments said to have been made to Shri Divyank Jain towards jewellery manufacturing were added in every year from 2015-16 to 2021-22, of Rs 1,98,530, Rs 54,167, Rs 1,44,598, Rs 1,36,951, Rs 8,40,503, Rs 22,14,651 and Rs 3,06,001. They rest upon a working furnished by Shri Divyank Jain when summoned under section 131 of the Act. In each year the AO held that the assessee had made a cash payment of a stated sum and a further sum “towards gold used”, and added the two together.

“As far as alleged total payment of INR 4,81,938/- (3,80,000 + 1,01,938) /- is concerned, it covers value of gold of INR 3,58,565/-, value of diamond + stones of INR 72,460/- and labour charges of INR 50,913/-.” Rs 3,58,565, Rs 72,460 and Rs 50,913 aggregate exactly to Rs 4,81,938, so that the gold is a constituent of the payment and not something in addition to it; yet the AO added Rs 4,81,938 and Rs 3,58,565 together as Rs 8,40,503. The same pattern appears for the assessment year 2018-19, where Rs 74,500 is made up of gold of Rs 62,451, stones of Rs 11,220 and labour of Rs 829 and the AO added Rs 74,500 and Rs 62,451 together, and for the assessment year 2020-21, where the gold of Rs 15,16,291 forming part of a total payment of Rs 19,96,137 was added over again.

“Now it can hardly be denied that when an “intangible” addition is made to the book profits during an assessment proceeding, it is on the basis that the amount represented by that addition constitutes the undisclosed income of the assessee. That income, although commonly described as “intangible”, is as much a part of his real income as that disclosed by his account books. It has the same concrete existence. It could be available to the assessee as the book profits could be. …

There can be no escape from the proposition that the secret profits or undisclosed income of an assessee earned in an earlier assessment year may constitute a fund, even though concealed, from which the assessee may draw subsequently for meeting expenditure or introducing amounts in his account books. But it is quite another thing to say that any part of that fund must necessarily be regarded as the source of unexplained expenditure incurred or of cash credits recorded during a subsequent assessment year. … It is a matter for consideration by the taxing authority in each case whether the unexplained cash deficits and the cash credits can be reasonably attributed to a pre-existing fund of concealed profits or they are reasonably explained by reference to concealed income earned in that very year.” The Hon’ble jurisdictional High Court applied the principle in CIT v. Tyaryamal Bal Chand [1987] 165 ITR 453 (Raj.), the holding in which is extracted at paragraph 4 of Malpani House of Stones v. CIT [2017] 395 ITR 385 (Raj.) (page 28 of the case law paper book):

“The ITO was within his right to tax the amount of Rs.16,950 as income from disclosed source, even though he had added the amount of Rs.18,117 in addition to the profits shown by the respondent-firm in its account books. However, the assessee was well within his rights to plead that this amount of Rs.16,950 is covered by the intangible income assessed at Rs.18,117 and added to the income of the firm and 42 apart from this, since for the last preceding three years, substantial additions amounting to Rs.32,797 have been made, the amount of Rs.16,950 could be taken as having come out of such intangible additions. …” The caution in AnantharamVeerasinghaiah& Co. (supra) is that the availability of a fund is not by itself conclusive, and that the attribution must be reasonable on the facts. On the facts here it is. The peak method adopted by the AO treats the whole of the money given to RMT, up to the peak, as the assessee’s income, and treats every rupee that comes back from RMT as the return of that very money; that is why the receipts back are not separately taxed. Those receipts were large in every year in which the payments were made, as the reasons themselves record (page 12 of the paper book):

A.Y. Cash given to RMT (Rs) Payments added (Rs) Cash taken back from RMT (Rs) 2015-16 3,69,54,545 4,95,11,897 1,98,530 2016-17 7,88,73,678 11,88,21,902 54,167 2017-18 8,46,78,950 9,67,35,465 1,44,598 2018-19 10,29,11,190 11,43,49,880 1,36,951 2019-20 5,36,51,260 3,92,05,519 8,40,503 2020-21 2,75,79,615 Nil 22,14,651 and 43,60,000

For the assessment year 2021-22 the table above has no row, because the year wise figures in the reasons stop at the assessment year 2020-21. The AO’s own peak table, reproduced in paragraph 25 from pages 92 and 93 of the order for the assessment year 2013-14, fills the gap. It shows, for each financial year, the highest amount owed by RMT to the assessee. That amount rose to Rs 15,67,38,612 on 04.08.2017 and then fell. The highest amount in the financial year 2018-19 was Rs 11,73,96,570, and in the financial year 2019-20 only Rs 9,52,64,414. The balance with RMT falls when money comes back to the assessee. At least Rs 6,14,74,198, that is Rs 15,67,38,612 less Rs 9,52,64,414, had therefore come back to the assessee by the financial year 2019-20, out of money that the AO has treated, through the peak, as the assessee’s undisclosed income. The payments added for the assessment year 2021-22, namely Rs 3,06,001 to Shri Divyank Jain, Rs 25,00,000 to Shri Godhaji and Rs 44,00,000 for the residence, together come to Rs 72,06,001, a small part of that sum.

We have not overlooked the assessee’s statement, recorded at paragraph 7.5 of the order for the assessment year 2013-14, that Rs 8,77,00,000 received back from RMT formed part of the stock found at the time of search. That statement speaks of the position in March 2022. It does not displace what the ledger shows of money flowing back in each of the years before us, and the direction given in paragraph 45 below in this order ensures that the same money is not counted twice. The Revenue has pointed to no circumstance suggesting that these payments were made out of some further undisclosed income of the same year, apart from what has been assessed. The absence of a formal cash flow statement cannot displace a finding the AO has himself recorded, and the coordinate bench at Jaipur in ACIT v. Naresh Jain (ITA No. 374/JP/2024, order dated 05.08.2024), relied upon by the learned AR, allowed telescoping in similar circumstances. A separate addition would tax the same money twice. All seven additions are deleted.

Profit on alleged sales in foreign currency: assessment years 2019-20 and 2020-21 37. The additions of Rs 1,65,900 and Rs 38,880 are of profit estimated on alleged sales in foreign currency of Rs 11,06,000 and Rs 3,24,000, the first being US$ 8,000 and Swiss francs 7,800 at Rs 70 and the second US$ 4,500 at Rs 72. The material consists of four loose notes forming part of Exhibit 15 of Annexure AS, of which the AO himself observes that “many entries are repeated on these papers”. The note numbered 3 bears the endorsement that it is a photocopy of the note numbered 5, and the note numbered 2 is reproduced twice. The note numbered 3 records “8,000 $ Used in March. 2019” and then breaks that very figure into “(a) 4000 taken in Swis Frank for Philip against jewellery” and “(b) 4000 take to N.Y for Janvi born 2019”. The Swiss franc amount is thus a part of the 8,000 and not an addition to it, and the figure of 7,800 is not to be found in any of the notes. The note numbered 5 places the second part in “July - Aug. 2019” at “approx 4000-4500”, and that is the US$ 4,500 assessed again in the assessment year 2020-21. The notes moreover speak of currency “used”, the only reference to a sale being the unquantified words “Plus some in India against sale in R.B.”. Neither figure of sales is supported by the documents from which it is drawn, and there is nothing to which a rate of profit can be applied. Both additions are deleted.

Rejection of books and estimate of profit: assessment years 2018-19 to 2021-22 38. The AO records in each year that the assessee maintains no stock register and no quantitative or qualitative details of stock, and that in a business of gem stones and studded jewellery, where value turns upon size, shape, quality and clarity, neither the stock nor the trading results can be verified without them. The answer that the books are audited and supported by bills does not meet that difficulty. The rejection of the books under section 145(3) of the Act is upheld.

A.Y. Result declared Rate applied by the AO Addition (Rs) 2018-19 Loss 8 per cent on Rs 7,96,879 3,88,490 2019-20 14 per cent 83,744 15 per cent on Rs 86,56,839 2020-21 10.34 per cent 12 per cent 2,03,928 2021-22 Loss 1,31,250 8 per cent on Rs 16,40,633

“… in making the assessment under sub-section (3) of Section 23 of the Act, the Income-tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under section 23(3).” The two pairs of years stand on different footings. For the assessment years 2019-20 and 2020-21 the assessee declared 14 per cent and 10.34 per cent. The AO substituted 15 per cent and 12 per cent without citing a comparable case, without examining the assessee’s own history and without recording why the declared rates were low for this trade, and the rates moved from year to year without stated reason. A marginal increase that rests on no material is the kind of guess the Hon’ble Supreme Court disapproved. The additions of Rs 83,744 and Rs 2,03,928 are deleted.

For the assessment years 2018-19 and 2021-22 the position is otherwise. The assessee declared a loss. Having upheld the rejection of the books, we cannot accept the very result those books produce, for that would be to reject the books and adopt them in the same breath. An estimate has therefore to be made, and the nearest material is the assessee’s own record. In the two intervening years the assessee itself declared 14 per cent and 10.34 per cent. The rate of 8 per cent applied by the AO is well below both. It thus has a nexus with the assessee’s own results, and it already allows for the circumstances urged before us, namely that the assessment year 2018-19 was the first, part year of M/s MPR and that the previous year 2020-21 was affected by the pandemic, the turnover having fallen to Rs 16,40,633. That the AO drew the rate for 2021-22 from section 44AD of the Act does not by itself make it unreasonable; the test is its nexus with the material, and that test is met. The estimates of Rs 3,88,490 and Rs 1,31,250 for the assessment years 2018- 19 and 2021-22 are sustained.

Further additions for the assessment years 2020-21 and 2021- 22 41. The payments to Shri Godhaji, of Rs 43,60,000 for the assessment year 2020-21 and Rs 25,00,000 for the assessment year 2021-22, rest on a seized page headed “Paid to Godhaji”. Of the total of Rs 75,33,267 recorded on it, Rs 9,73,267 was paid by cheque and matches the ledger of M/s Ammalya Jewels in the books of M/s Euro Jewels; the balance of Rs 68,60,000 was paid in cash. The assessee accepted the payments, his case being that he had withdrawn large sums from RMT which were available with him. The AO rejected that case at paragraph 11.3.6 of the order for the assessment year 2021-22:

“11.3.6 Thus, it is clear that there is acceptance from the side of the assessee regarding the transactions noted in the loose paper. The sole claim made by the assessee is that the telescopic benefit may be granted. The claim of the assessee cannot be accept at this point as no day-to-day cash flow statement has been furnished. Therefore, addition of Rs. 25,00,000/- on account of unaccounted cash payment against the purchase of jewellery items in the hands of Shri Ajay Rawat / Euro Jewels for the FY 2020-21 (Rs. 25,00,000/-) relevant to 2021-22 is hereby made in the hands of Shi Ajay Rawat, the assessee and added u/s 69C of the I.T. Act, 1961 to be taxed u/s 115BBE of the I.T. Act, 1961. Penalty proceedings u/s 271AAC(1) are also initiated on this count.” Three features of this finding decide the issue. First, the AO accepted the transactions and described their source as no more than unaccounted cash; he did not find any source of income other than the money placed with and received back from RMT. Second, the only reason for refusing the set off is the absence of a day to day cash flow statement. Such a statement is a convenient way of showing that funds were available; it is not a condition laid down by the Act. Here the availability of funds appears from the AO’s own record. For the assessment year 2020-21 the reasons record cash of Rs 2,75,79,615 taken back from RMT, while the payments added for that year to Shri Godhaji and Shri Divyank Jain total Rs 65,74,651; for the assessment year 2021-22 the fall in the balance with RMT is set out in paragraph 36. Third, on the AO’s own finding the payments were made “against the purchase of jewellery items”. Jewellery bought outside the books would form part of the unaccounted stock, and the excess stock found at the time of search has been brought to tax for the assessment year 2022-23. The assessee made this point before the AO in his reply dated 23.12.2022, and the AO did not answer it. To add the payments as well would tax the same money more than once. For these reasons, and on the authorities referred to in paragraph 36 of this order above, both additions are deleted.

“11.1.7 The reply filed by the assessee has been considered. There is no doubt that the assessee has not filed any objection to the proposed addition. The only claim made by the assessee is that the addition may be adjusted telescopically with the other addition on account of income or withdrawal from account of Shri Radha Mohan Totala. Considering the facts of the case including the acceptance by the assessee during search proceedings as well as present proceedings, it is hereby held that the assessee has made payment of Rs. 44,00,000/- to contractor Shri Vikram Pratap Sharma towards construction / investment in house property. The same is therefore assessed as unexplained investment u/s 69 of the I.T. Act,1961 in the hands of the assessee to be taxed u/s 115BBE of the I.T. Act, 1961. Penalty proceedings u/s 271AAC(1) of the I.T. Act, 1961 is initiated herewith. The claim of the assessee for adjusting the same against other income cannot be accepted here because of the fact that no such day to day cash flow statement has been furnished by the assessee in support of his claim.” The quantum is thus admitted, and the claim of set off was refused for the same single reason, the want of a day to day cash flow statement. The answer is the one already given. The payments were made between December 2020 and March 2021. By then, as the AO’s own peak table shows, more than Rs 6 crore of the money that the AO has assessed through the peak had come back to the assessee from RMT, while all the payments added for the assessment year 2021-22 together come to Rs 72,06,001. The unaccounted profit from the business of stoles, which we sustain in principle in paragraph 44 of this order, for this very year, is a further source. A separate addition for the residence would tax the same money twice. The addition is deleted.

“10. In view of the well settled principle of law that when income is estimated and while assessing the same and rejecting the books of accounts, it would not be appropriate to rely on the books of accounts for any addition other than estimate made by AO.

Assessment year 2022-23 45. Having condoned the delay before the learned CIT(A), we set aside his order for the assessment year 2022-23 and restore the appeal to his file with a direction to admit it and decide every ground on merits by a speaking order in terms of section 250(6) of the Act, after affording the assessee a reasonable opportunity of being heard. The additions aggregating Rs 14,71,57,055 have never been examined by any appellate authority, and we express no opinion on their merits; all contentions of both parties are left open. We only direct that, in dealing with the grounds relating to the sum of Rs 3,93,750, which arises from the same seized foreign currency notes, and to the estimate of profit, the learned CIT(A) shall also consider the findings recorded in this order on that material, so that the same documents are not read differently in different years.

We further direct that, in examining the claim recorded at paragraph 7.5 of the assessment order for the assessment year 2013-14, that Rs 8,77,00,000 received back from RMT forms part of the excess stock of Rs 10,93,32,119, the learned CIT(A) shall bear in mind that this order has treated the money received back from RMT as the source of the payments to Shri Divyank Jain and Shri Godhaji and of the investment in the residence for the assessment years 2015-16 to 2021-22, aggregating Rs 1,32,18,094 after excluding the duplicated value of gold. The same money cannot explain two outgoings. To the extent of that sum, the money received back from RMT shall not again be accepted as the source of the stock found at the time of search.

Section 115BBE, total income, penalty and general grounds 46. The grounds on section 115BBE of the Act are consequential. For the assessment years 2013-14, 2016-17, 2017-18 and 2018-19 the additions under section 69A of the Act survive, in figures yet to be re-worked, and section 115BBE of the Act shall apply only to the additions as finally sustained. For the other years, every addition made under sections 69, 69A and 69C of the Act has been deleted; the AO shall apply section 115BBE of the Act only to a sum sustained by this order which was brought to tax under any of sections 68 to 69D of the Act, and to no part of what stands deleted.

A.Y. Additions deleted (Rs) Other directions Result Additions sustained (Rs) ITA No. 2012-13 Nil Allowed All additions Delay before the (27,90,592) CIT(A) condoned. 268/JPR/2026 Reassessment quashed as barred by limitation A.Y. Additions deleted (Rs) Other directions Result Additions sustained (Rs) ITA No. 2013-14 Peak Interest expenditure Jurisdiction upheld. Partly 22,04,728 allowed 270/JPR/2026 6,44,38,563, Peak to be re-worked, subject to re- Commission 3,200 capped at the sum working added 2015-16 Interest 49,93,527 Jurisdiction upheld Interest Partly 22,32,679 allowed 272/JPR/2026 Commission 1,600 Shri Divyank Jain 1,98,530 2016-17 Interest 18,46,961 Peak Jurisdiction upheld. Partly allowed 274/JPR/2026 3,54,03,273, Commission 2,000 Peak to be re-worked, subject to re- capped at the sum Shri Divyank Jain working added 54,167 2017-18 Interest 45,96,425 Peak 21,65,654, Jurisdiction upheld. Partly allowed 271/JPR/2026 subject to re- Peak to be re-worked, Shri Divyank Jain working 1,44,598 capped at the sum added 2018-19 Interest 23,23,938 Peak Jurisdiction and Partly allowed 3,34,57,785, rejection of books 269/JPR/2026 Commission 1,650 subject to re- upheld. Peak to be re- Shri Divyank Jain working worked, capped at the 1,36,951 sum added Estimate of profit 3,88,490 2019-20 Nil Commission 14,150 Jurisdiction and Partly allowed 275/JPR/2026 rejection of books Shri Divyank Jain upheld 8,40,503 Foreign currency 1,65,900 Estimate of profit 83,744 2020-21 Nil Interest expenditure Jurisdiction and Partly 6,31,750 allowed 277/JPR/2026 rejection of books upheld Shri Godhaji 43,60,000 Shri Divyank Jain 22,14,651 Foreign currency 38,880 Estimate of profit 2,03,928 A.Y. Additions deleted (Rs) Other directions Result Additions sustained (Rs) ITA No. 2021-22 Interest 8,28,653 Estimate of Rejection of books Partly profit 1,31,250 allowed 276/JPR/2026 Residence 44,00,000 upheld. AO to work out the stole profit of Stole profit Shri Godhaji 25,00,000 FY 2020-21 20,11,665, to the Shri Divyank Jain extent it accrued 3,06,001 in FY 2020-21 Section 40A(3) 1,20,000 2022-23 Not examined Not examined Delay condoned. Allowed for 273/JPR/2026 Restored to the statistical purposes CIT(A) for decision on merits, with a direction against double use of money received back from RMT

Order pronounced in the open court on 29-10-2026

Sd/- Sd/- (T.R. SENTHIL KUMAR) (PRAKASH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated 29/10/2026 *Ganesh Kr., Sr. PS आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 54