PALACE OF JEWELS,JAIPUR vs. DCIT CENTRAL CIRCLE 1, JAIPUR

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ITA 994/JPR/2026Status: DisposedITAT Jaipur27 October 2026AY 2019-208 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal condoned the delay of 351 days in filing the appeal, citing the principle of liberal construction of "sufficient cause" from Collector, Land Acquisition v. Mst. Katiji. The Tribunal allowed Ground No. 2, which challenged the ex parte disposal of the appeal by the CIT(A), holding that the assessee's case had not been heard on merits at the first appellate stage. The Tribunal noted that the CIT(A)'s order failed to comply with Section 250(6) of the Act, as it primarily relied on the AO's findings without examining factual issues like telescoping and the basis for profit estimation. The Tribunal also observed discrepancies in the assessment order regarding figures for excess cash and GP rates. Consequently, the Tribunal set aside the impugned order and restored the appeal to the CIT(A) for a fresh decision on all grounds, after affording the assessee a reasonable opportunity of being heard. The assessee was directed to cooperate and not seek adjournments without reasonable cause. The Tribunal explicitly stated that no opinion was expressed on the merits of the additions, and all contentions were left open. Grounds 3 to 8 were left open for adjudication by the CIT(A). Ground 1 was also left open, with liberty to the assessee to raise it before the CIT(A). Ground 9 was considered general.

What were the facts?

The assessee, Palace of Jewels, a partnership firm engaged in jewellery, filed an appeal before the ITAT against the order of the CIT(A) dated 28.02.2025. This order arose from an assessment order dated 29.09.2021 passed by the AO under section 143(3) for Assessment Year 2019-20. The appeal was filed with a delay of 351 days. The assessee attributed the delay to a medical emergency of its accountant and the late discovery of the CIT(A)'s order. The revenue opposed the condonation of delay due to its length. The AO had made additions totaling Rs. 2,08,12,422, including excess cash, excess stock, profit on unrecorded sales, and alleged loans, primarily relying on a partner's statement recorded during a survey under section 133A on 17.01.2019.

What were the issues?

1. Whether the assessment order passed under section 143(3) is bad in law for non-compliance with the Income Tax Act, 1961 (Assessee's Ground 1). The assessee argued that the assessment order was passed without complying with the legal framework. The revenue did not record specific arguments on this ground. 2. Whether the CIT(A) erred in deciding the appeal ex parte without providing adequate opportunity of being heard (Assessee's Ground 2). The assessee contended that the CIT(A) erred in deciding the appeal arbitrarily without adequate opportunity. The revenue argued that the assessee did not avail of the opportunities granted. 3. Whether the CIT(A) erred in confirming the addition of Rs. 43,586 made by the AO under section 69A on account of excess cash found during survey (Assessee's Ground 3). The assessee argued that the excess cash pertained to a proprietary concern of a partner. 4. Whether the CIT(A) erred in confirming the addition of Rs. 77,05,770 made by the AO under section 69B on account of excess stock found during survey (Assessee's Ground 4). The assessee argued that the investment in excess stock was out of profit earned on unrecorded sales. 5. Whether the CIT(A) erred in confirming the income estimated by the AO by applying a GP rate of 23% on alleged undisclosed sales of Rs. 2,24,48,112 (Assessee's Ground 5). The assessee argued that estimation should be based on NP rate, not GP rate. 6. Whether the CIT(A) erred in confirming the addition of Rs. 79,00,000 made by the AO under section 69 on account of alleged loans (Assessee's Ground 6). The assessee argued that statements recorded during survey do not have evidentiary value unless corroborated. 7. Whether the CIT(A) erred in not allowing telescoping benefit of additional income generated due to unrecorded sales against excess stock/unaccounted loans and also erred in adding both items separately (Assessee's Ground 7). The assessee also argued for telescoping with additional income declared by a third party. 8. Whether the CIT(A) erred in confirming the AO's action in invoking the provisions of Section 115BBE (Assessee's Ground 8). The revenue relied on the orders of the authorities below.

Which sections of the Income-tax Act were involved?

Section 133A,Section 143(3),Section 250,Section 250(6),Section 253(3),Section 69,Section 69A,Section 69B,Section 115BBE

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH, JAIPUR

Before: Shri Kuldip Singh & Shri Prakash

IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, JAIPUR (PHYSICAL HEARING) Before: Shri Kuldip Singh, Judicial Member And Shri Prakash, Accountant Member

ITA No: 994/JPR/2026 Assessment Years: 2019-20

Palace of Jewels DCIT, Plot No. C 3, Vaishali Central Circle-01, Circle, Vaishali Nagar, Vs Jaipur (Respondent) Jaipur PAN: AAUFP9213A (Appellant) Assessee Represented: Sh. Tarun Mittal, CA Revenue Represented: Ms. Namita Patel, JCIT Date of hearing : 28-09-2026 Date of pronouncement : 27-10-2026 आदेश/ORDER

PER : PRAKASH, ACCOUNTANT MEMBER:-

1.

This appeal by the Assessee is directed against the order of the learned Commissioner of Income Tax (Appeals)-4, Jaipur [hereinafter referred to as “the learned CIT(A)”] dated 28.02.2025 passed under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), arising out of the assessment order dated 29.09.2021 passed by the Deputy Commissioner of Income Tax, Central Circle-1, Jaipur (hereinafter referred to as “the AO”) under section 143(3) of the Act for the assessment year 2019-20.

ITA No. 994/JPR/2026 Palace of Jewels 2. There is a delay of 351 days in filing this appeal before us. The impugned order was passed and served on 28.02.2025. Under section 253(3) of the Act, the appeal was due on or before 30.04.2025, but it was filed on 16.04.2026. The assessee has filed an application dated 16.04.2026 seeking condonation of the delay accompanied by affidavits of the assessee firm and of its accountant. The explanation offered is that the impugned order, though uploaded on the e-filing portal, came to the notice of the accountant of the firm only in March 2026; that the accountant could not act on it owing to a medical emergency in the family; and that the lapse came to light only when the assessee met its counsel for year end compliance, after which the appeal was filed without further delay. The learned Authorised Representative (hereinafter referred to as “the learned AR”) prayed for condonation on these grounds. The learned Departmental Representative (hereinafter referred to as “the learned DR”) opposed the prayer, citing the length of the delay.

3.

We have considered the application. The delay is long and the assessee is not free from fault. Yet nothing on record suggests that the delay was deliberate or that the assessee stood to gain anything by it. The impugned order was passed without hearing the assessee, so its grievance against the additions has not yet been examined at the first appellate stage with its participation. The Hon’ble Supreme Court in Collector, Land Acquisition v. Mst. Katiji [1987] 167 ITR 471 (SC) has held that the expression “sufficient cause” deserves a liberal construction so as to advance substantial justice, and that where substantial justice and technical considerations are pitted against each other, the former deserves to be preferred. Applying this principle, we are satisfied that there was sufficient cause for the delay. Accordingly, the delay of 351 days is condoned and the appeal is admitted for hearing.

4.

The grounds of appeal raised by the Assessee before us in the memorandum of appeal in Form No. 36 read as under:

1.

On the facts and in the circumstances of the case and in law the assessment order passed u/s 143(3) of the Income Tax Act,1961 deserves to hold bad in

ITA No. 994/JPR/2026 Palace of Jewels law being passed without complying with the legal framework provided under the Income Tax Act,1961. 2. On the facts and in the circumstances of the case and in law, ld.CIT(A) has erred in deciding appeal ex parte, without providing adequate opportunity of being heard, arbitrarily. 3. On the facts and in the circumstances of the case and in law, ld. CIT(A) has grossly erred in confirming addition of Rs.43,586/- made by ld. AO u/s 69A of the Income Tax Act, arbitrarily. 3.1 That, ld. CIT(A) has further erred in sustaining addition of Rs.43,586/- made by ld. AO on account of excess cash found during survey, by brushing aside the factual position. Appellant prays that cash found in excess of that recorded in books of accounts, pertained to proprietary concern of Sh. Abhishek Baid, Partner of assessee firm, which fact was duly stated in grounds of appeal itself, it is therefore submitted that addition confirmed by ld.CIT(A) deserves to be deleted. 4. On the facts and in the circumstances of the case and in law, ld. CIT(A) has grossly erred in sustaining addition of Rs.77,05,770/- made by ld. AO u/s 69B of the Income Tax Act, arbitrarily. 4.1 That, ld. CIT(A) has further erred in sustaining addition of Rs.77,05,770/- made by ld. AO on account of excess stock found during the course of survey by brushing aside the fact that investment in excess stock was made out of profit earned on unrecorded sales, by stating that no documentary evidence was furnished in support of such contention. Appellant prays that profit earned on unrecorded sales is obviously the source for making investment in stock in absence of any evidence of investment of such income elsewhere, therefore addition confirmed made by ld. CIT(A) is not in accordance with law and deserves to be deleted. 5. That the ld. CIT(A) has grossly erred in confirming the income estimated by ld. AO, by erroneously applying the GP rate of 23% on the alleged undisclosed sales of Rs. 2,24,48,112/- arbitrarily, which is not in accordance with law and deserves to be deleted. 5.1 That the ld. CIT(A) has further erred in ignoring the fact that estimation of income is to be made by applying NP rate and not GP rate as various additional expenditures would obviously be incurred for earning such alleged income over and above recorded expenses. The addition of Rs.51,63,066/- sustained on the basis of GP rate therefore deserves to be deleted. 6. On the facts and in the circumstances of the case and in law, ld. CIT(A) has grossly erred in sustaining addition of Rs. 79,00,000/- u/s 69 made by ld. AO of the Income Tax Act, arbitrarily.

ITA No. 994/JPR/2026 Palace of Jewels 6.1 That, ld. CIT(A) has further erred in sustaining addition of Rs.79,00,000/- made by ld. AO solely on the basis of statements recorded during the course of survey. Appellant prays that statements recorded during survey do not have any evidentiary value unless corroborated with documentary evidences and therefore addition made solely on this basis uncorroborated by evidence is not in accordance with law and is not sustainable. 7. That the ld. CIT(A) has erred in not allowing telescoping benefit of additional income generated due to unrecorded sales against the alleged excess stock/unaccounted loans and further erred in adding both items separately more specifically when no evidence of utilization of additional income on account of sales elsewhere was established. 7.1 That the ld. CIT(A) has further erred in not allowing the benefit of telescoping and set off of the additional income declared by Shri Om Prakash Gupta, father of one of the partners Shri Rachit Agarwal, who claimed the application of such income in the acquisition of goods found in excess with assessee firm. 8. On the facts and in circumstances of the case ld. CIT(A) has grossly erred in confirming the action of ld. AO in invoking the provisions of Section 115BBE of the Act, arbitrarily. 9. That the appellant craves the right to add, delete, amend or abandon any of the grounds of appeal either before or at the time of hearing of appeal. 5. Briefly stated, the facts of the case are that the assessee is a partnership firm engaged in the manufacture and trading of jewellery. A search under section 132 of the Act was conducted on the Om Agarwal Group of Sawai Madhopur on 16.01.2019 and, simultaneously, a survey under section 133A of the Act was carried out at the business premises of the assessee on 17.01.2019. The assessee filed its return of income for the year on 30.07.2020. In the assessment completed under section 143(3) of the Act, the AO made the following additions:

Sl Addition Para of the Section Amount (Rs) . assessment order 1 Excess cash found in survey 4 69A r.w.s. 43,586 115BBE 2 Excess stock found in survey 5 69B r.w.s. 77,05,770 115BBE 3 Profit at GP rate of 23% on 6 Estimate 51,63,066

ITA No. 994/JPR/2026 Palace of Jewels unrecorded sales of Rs 2,24,48,112 noted in Exhibits 20 and 21 4 Loans recorded in Exhibit 10 7 69 r.w.s. 79,00,000 impounded in survey 115BBE Total 2,08,12,422

The AO relied mainly on the statement of Shri Abhishek Baid, a partner of the firm, recorded during the survey.

6.

The assessee filed an appeal before the learned CIT(A). The learned CIT(A) records that notices of hearing were issued on six occasions between 24.03.2022 and 21.02.2025. The assessee sought adjournments in January 2023, but filed no submission and did not respond to the later notices. Observing that the assessee was not keen to pursue the appeal, the learned CIT(A) proceeded to decide it on the material on record and dismissed every ground. The concluding finding, repeated with minor variation under each ground, reads as under (paragraph 5.1 of the impugned order):

“During the appellate proceedings, the appellant has not furnished any information/evidences to rebut the findings of the AO. It is specifically observed here that inspite of giving many opportunities of being heard to the appellant, as detailed above the appellant has chosen not to make any submissions or furnish any information to substantiate and plead the grounds of appeal. There is substantial evidence mentioned in the assessment order. Based on the material available on file and in absence of any new submission/ finding and any other material for which the appellant was provided so many opportunities, I do not find any infirmity in the action of the ld. AO. Accordingly, these Grounds of Appeal No. 1 and 1.1 are dismissed.” 7. Before us, the learned AR submitted that the learned CIT(A) decided the appeal ex parte without affording adequate opportunity of hearing, and that the issues of excess cash, excess stock, the rate of profit on unrecorded sales, the alleged loans and telescoping involve questions of fact which need examination of the impounded material and the evidence the assessee wishes to produce. The learned AR prayed that the matter be restored to the learned CIT(A) for a fresh decision.

ITA No. 994/JPR/2026 Palace of Jewels 8. The learned DR relied on the orders of the authorities below. It was submitted that the assessee did not avail itself of the several opportunities granted by the learned CIT(A) and that the additions rest on the admissions of the partner during the survey and on the impounded material.

9.

We have heard the learned AR and the learned DR, perused the material available on record and considered the orders of the authorities below. Ground no. 2, which assails the ex parte disposal of the appeal, goes to the root of the matter and is therefore taken up first.

10.

Section 250(6) of the Act requires the order of the CIT(A) to state the points for determination, the decision thereon and the reasons for the decision. A default by the appellant does not dispense with this duty; it only means that the appeal must be decided on the record as it stands. The impugned order reproduces the findings of the AO under each ground and dismisses the ground, chiefly because the assessee filed nothing in rebuttal. Several of the issues, however, turn on facts that have not been examined at the first appellate stage. The plea of telescoping depends on whether, and to what extent, the profit on unrecorded sales was available as a source for the excess stock and the loans, and on the claim that the additional income declared by Shri Om Prakash Gupta, father of the partner Shri Rachit Agarwal, was applied in acquiring the goods found in excess. The choice between a gross profit and a net profit rate depends on the nature of the business and on the expenses, if any, shown to have been incurred outside the books. In Form No. 35, the assessee had also indicated that additional evidence would be filed under Rule 46A of the Income Tax Rules, 1962. On the plea of telescoping, the learned CIT(A) observed at paragraph 9.1 of the impugned order:

“As per the facts noted in assessment order, it is not clear whether the appellant has submitted any submission during assessment proceedings.” However, paragraph 5.1 of the assessment order records that the assessee had specifically pleaded before the AO for telescoping of the margin on unrecorded sales against the excess stock. This shows that the claim did not receive the examination that section 250(6) of the Act contemplates. 6

ITA No. 994/JPR/2026 Palace of Jewels 11. We also notice two features of the assessment order. Paragraph 4 determines the excess cash at Rs 43,586, but the computation in paragraph 8 adds Rs 43,856, and the amount to be taxed under section 115BBE of the Act appears to have been worked out on that figure. Further, paragraph 2 records the GP rate declared for the year at 22.67%, whereas paragraph 6.2 refers to a declared rate of 22.87% while adopting 23%. We express no view on either aspect; they are noticed only so that the matter is considered on correct figures.

12.

At the same time, the assessee cannot escape blame. It sought adjournments before the learned CIT(A), then fell silent, and it has come before us after a long delay. The maxim audi alteram partem requires that no one be condemned unheard, and the assessee’s case on these additions has not yet been heard on merits at the first appellate stage. Having regard to the totality of the circumstances, we are of the view that the assessee deserves one more opportunity, subject to its full cooperation.

13.

Accordingly, the impugned order is set aside and the appeal is restored to the file of the learned CIT(A) for a fresh decision on all the grounds raised in Form No. 35, after affording the assessee a reasonable opportunity of being heard, by a speaking order in terms of section 250(6) of the Act. The assessee shall cooperate in the proceedings and shall not seek adjournments without reasonable cause. Any additional evidence filed shall be dealt with in accordance with law. We make it clear that we have not expressed any opinion on the merits of the additions, and all contentions of both parties are left open. Ground no. 2 is allowed for statistical purposes.

14.

In view of the restoration, grounds no. 3 to 8, which are directed against the additions, the denial of telescoping and the application of section 115BBE of the Act, do not call for adjudication at this stage and are left open. Ground no. 1 is couched in general terms and does not identify the provision said to have been breached. It is also left open, and the assessee is at liberty to raise it before the learned CIT(A), who shall deal with it in accordance with law. Ground no. 9 is general in nature and requires no adjudication. 7

ITA No. 994/JPR/2026 Palace of Jewels 15. In the result, the appeal filed by the Assessee is allowed for statistical purposes. Order pronounced in the open court on 27.10.2026

Sd/- Sd/- (KULDIP SINGH) (PRAKASH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated 27/10/2026 *Ganesh Kr., Sr. PS आदेशक���त�ल�पअ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue Ganesh Digitally signed by 3. Concerned CIT Ganesh Kumar 4. CIT (A) Kumar Date: 2026.11.02 5. DR, ITAT 10:39:24 +05'30' 6. Guard file. By order/आदेश से, सहायक पंजीकार आयकर अपील�य अ�धकरण, t;iqj

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