SATYA NARAYAN GARG,MAIN ROAD INDUSTRIAL AREA KISHANGARH vs. ITO WARD -1 KISHANGARH , KHODA GANESH ROAD KISHANGARH

IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, “SMC” BENCH, JAIPUR BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI KULDIP SINGH, JUDICIAL MEMBER ITA No.508/JPR/2026 (Assessment Year:2022-23)

Satya Narayan Garg Vs. ITO Main Road Industrial Area Ward 1 Kishangarh Kishangarh �थायीलेखासं./जीआइआरसं./PAN/GIR No:AAZPG3185D Appellant .. Respondent Appellant by : Sh. Sanjay Kumar, ITP & Sh. C.M. Agarwal, CA Respondent by : Mrs. Arti Rawat, JCIT Date of Hearing 11.08.2026 Date of Pronouncement 06.11.2026 O R D E R Per Annapurna Gupta, AM:- The present appeal has been filed by the assessee against the order passed by the National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as “Ld. CIT(A)”), dated 28.02.2026 under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). 2. The grounds raised by the assessee read as under:-

P a g e | 2 ITA No.508/JPR/2026 Satya Narayan Garg 1. On the facts and circumstances of the case and in law Ld CIT(A) NFAC has erred in confirming the additions of Rs11,52,588/ made by the Ld AO Assessment Unit u/s 69C of the Income Tax Act 1961, on account of alleged unexplained purchases made from Yashika Group. 2. On the facts and circumstances of the case and in law, order of the Ld CIT(A) NFAC confirming the additions u/s 69C is absolutely arbitrary, contrary to the provisions of law and against the principles of natural justice and therefore liable to be quashed. 3. On the facts and circumstances of the case LdAssessing Officer erred grossly in law in making addition of alleged unexplained purchases and Ld CIT(A) in confirming the same despite concurrently recording that income of the appellant is chargeable to tax u/s 44AD of the Act and hence no addition ofany business expenditure can be legally made. 4. On the facts and circumstances of the case and in law, Ld Assessing officer and Ld CIT(A) grossly erred in disregarding the fact that no expenditure cansimultaneously be recorded as well as unrecorded. 4.1 On the facts and circumstances of the case and in law, Ld Assessing Officer as well as Ld CIT(A) grossly erred in treating the amount remaining outstanding at the end of the year as unexplained expenditure without enquiring into the subsequent payment or non-payment of the same. The appellant craves leave to add, amend or withdraw any of the grounds of the appeal during the course appellate proceedings. All the grounds of appeal are independent and without prejudice to each other. 3. The solitary issue in the present appeal pertains to the addition made to the income of the assessee u/s 69C of the Act on account of unexplained purchases made by the assessee from Yashika Group amounting to Rs.11,52,588/-. 4. The case of the Revenue is that search action conducted on the Yashika Group u/s 132 of the Act revealed that the Yashika Group resorted to underbilling of invoices and collected the under invoiced amount in cash from the different parties to whom goods were sold by it. The assessee was also found to have been so underbilled by M/s Yashika

P a g e | 3 ITA No.508/JPR/2026 Satya Narayan Garg Group to the extent of Rs.11,52,588/- and the allegation of the Revenue therefore is that the assessee paid the said amount in cash from undisclosed sources. 5. We have heard both the parties. We have gone through the orders of the authorities below. We do not find any logic or reasoning in the addition made to the income of the assessee u/s 69C of the Act on account of unexplained purchases in its business amounting to Rs.11,52,588/-. The reason being that in the facts of the present case the assessee was not required as per law to explain source of expenditure of purchases incurred in cash or otherwise, at all since he hadfiled return of income declaring profits on presumptive basis at the rate prescribed under Section 44AD of the Act. This fact finds mention in the order of the Ld. CIT(A) at page 13 wherein the written submissions of the assessee before the Ld. CIT(A) are reproduced which include the fact contended by the assessee, that he was a small businessman and had declared income u/s 44AD of the Act under presumptive basis at the rate of 8% of turnover. This fact has remained uncontroverted by the Ld. CIT(A). 6. At para 9 of his order, containing the adjudication of the issue before him, the Ld.CIT(A) has referred to the contention raised by the assessee of the applicability of Section 44AD of the Act but thereafter , we find, has not dealt with the specific contention of the assessee that having filed return of income u/s 44AD of the Act on presumptive basis and as per the said Section the assessee being not obligated to maintain any books of accounts to support his income, no disallowance of direct expenses incurred for earning the income was allowable.

P a g e | 4 ITA No.508/JPR/2026 Satya Narayan Garg 7. We find that the assessee had referred to several decisions of the Hon’ble High Courts and ITAT Benches in support of its contention that where return of income is filed on presumptive basis u/s 44AD of the Act, no addition u/s 68, 69 or 69A could be made. The relevant contention of the assessee in this regard are as under:- ….. There is no dispute that the expenditure alleged by the Ld Assessing Officer in only in respect of Business activity of the appellant. There is no denying the fact that appellant has made purchases from M/S Yashika Group. Entire purchases made from Yashika group forms part of the Business activity of the appellant. Entire turnover of the year has been offered to tax under presumptive taxation @8% of the turnover u/s 44AD of the Income Tax Act. Ld Assessing Officer has not disputed the claim of the appellant of declaring income under the statutory provisions of section 44AD of the Income Tax Act. Under presumptive taxation when no Books of accounts are required to be maintained, the allegation of the Ld Assessing Officer that appellant has made unaccounted purchases is contrary to the statutory mandate. Ld Assessing Officer has not alleged that alleged purchases have not been made in the regular business of the appellant. Once, entire turnover of the Business carried on by the appellant has religiously been offered to tax u/s 44AD of the Income Tax Act, Ld Assessing Officer cannot turn around to say that purchase made by the appellant are unrecorded. …… 8. And the decisions relied in support of his contention are as under:- …. Hon'ble High Court of Punjab & Haryana in CIT v/s Surinder Pal Anand, Surinder Pal Anand, [20111242 CTR 0061 (P&H HC) held that once income has been declared u/s 44AD, no addition u/s 68 in respect of cash deposit in Bank can be made unless it is shown that such cash deposit had no nexus with the gross receipts. Hon'ble 'TAT Jaipur Bench in Om Kamani ACIT, [20211 Tax Pub (DO 841 (Jp. Trib.) held that having regard to provisions of s. 44AD, which is overriding, it is not possible for the Revenue to argue that profit computed as per the section is not profit computed "in accordance with provisions of this Act" or that the legislature was unaware of provision of ss. 68, 69, 269SS, 269T, 140(3) etc, in the enactment of s. 44AD. Thus, reading entire scheme of the Act one has to hold that profit computed as per s. 44AD of the Act by application of flat rate in one recognized method of computation of total income or part of total income. Hon'ble ITAT Jaipur Bench in Virender Kumar v/s ITO, ITA no. 11WJp./2019, order dated 10.032021 held that Once under the special provision, exemption from maintaining of books

P a g e | 5 ITA No.508/JPR/2026 Satya Narayan Garg of account has been provided and presumptive tax @8% of the gross receipt itself is the basis for determining the taxable income, the assessee was not under obligation to explain individual entry of cash deposit in the bank unless such entry had not nexus with the gross receipts.

Hon'ble ITAT Mumbai Bench in Dinesh Kumar Verma VIS ITO, [2021] TaxPub (DT) 63 (Mum. Trib) held that maintaining books of account is since quo non for making addition under section 68. section 44AD does not obligate assessee to maintain books, provision of section 68 could not be invoked where assessee had filed return of income under provisions of section 44AD without maintaining books of account

Hyderabad Bench of the Hon'ble 'TAT in Kadigari Narasimha Reddy v/s ITO, ITA no.581/Hyd./2013, order dated 30.11.2015 held that the first condition is that assessee should maintain the books of account. In the present case assessee estimates the income and hence, there is no need to maintain books of account. It falls in the first condition itself.

Delhi Bench of the Hon'ble Tribunal in Pradeep Jain VIS ITO, ITA no.80011Del.12018, order dated 0406.2019 held that since assessee is involved in small business activity and filed return of income under presumptive provisions under section 44AD of the I. T. Act, there was no justification to consider the sales of assessee to be bogus or to make addition of cash in hand as per details submitted by the assessee because A.O-did not bring any sufficient evidence on record to justify the addition.

Bangalore Bench of the Hon'ble Tribunal in Kokkame Prabhakara v/s ITO, ITA no. 1239/Bang/2019, order dated] 11.09.2020 observed that the similar issue also came for consideration before Cochin bench of the tribunal in case of Thomos Eapen in ITA No 451/Coch/2019 wherein it has been held that since scheme of presumptive taxation has been found in order to avoid long drawn cases of assessment in cases of small traders or in cases of those businesses where incomes are almost static quantum of all businesses. Assessing officer could have made addition under section 69A once he had carved out case out of glitches of provisions of section 44AD -In view of above decision once assessment of assessee was completed under section 44AD, there cannot be any application of section 68/69A. Being so court direct the AO to delete the addition made by the AO and confirmed by the CIT (A). …. 9. In the light of the above, it is amply clear that since the assessee had filed return of income u/s 44AD of the Act, it was not required to maintain any books of accounts. Income being offered to tax on presumptive basis, there cannot be said to be any claim of expenditure by

P a g e | 6 ITA No.508/JPR/2026 Satya Narayan Garg the assessee more particularly any claim requiring justification from the assessee. 10. In the light of the above, we hold that the disallowance of purchases to the tune of Rs.11,52,588/- made in the case of the assessee as being out of unexplained sources is not justified in law. The addition made to the income of the assessee as a consequence is directed to be deleted. 11. In effect, the appeal of the assessee stands allowed. Order pronounced in the Open Court on 06.11.2026

Sd/- Sd/- (Kuldip Singh) (Annapurna Gupta) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated 06.11.2026 Mittali, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT

By Order, Asst. Registrar/Sr. PS ITAT, Jaipur Mittali Digitally signed by: Mittali DN: CN = Mittali email = mittaligupta34671@gmail .com C = IN O = Personal Date: 2026.11.06 13:04: 18 +05'30'