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Date of Hearing 07.05.2025 Date of Pronouncement 03.07.2025 PER BENCH: The present appeals have been filed by the assessee as well as revenue challenging the impugned order 24.06.2024 passed u/s 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre, (NFAC) Delhi / CIT(A), Mumbai for the assessment years 2019-20 to 2022-23.
2 J Kumar Madanlal Gupta The above titled cross appeals have been preferred against the order dated 24.06.2024 of the Commissioner of Income Tax (Appeals) – 53, Mumbai [hereinafter referred to as CIT(A)] relevant to assessment years 2019-20, 2020-21, 2021-22 and 2022-23
First of all we take up assessee’s appeal No. 4112/Mum/2024 and revenues appeal No. 4584/Mum/2024 as both the appeals pertains to same assessment year i.e A.Y 2016-17 and are against the order of Ld. CIT(A).
1. For this year, the Assessee has raised the following grounds of appeal:
1. On facts and circumstances of the case and law on the subject, the learned assessing officer erred in making addition of Rs.31,46,560/- on account of bogus purchase. The learned CIT(A) erred in confirming addition of Rs. 27,74,197/- against addition of Rs.31,46,460/-, on estimate basis without correct appreciation of the facts of the case and law on the subject. In view of the facts and circumstances of the case and law on the subject, the addition be deleted.
2.On facts and circumstances of the case and law on the subject, the learned assessing officer erred in making addition of Rs.7,93,000/- in respect of personal nature of expenses noted in cash diary as unexplained expenditure u/s 69C of the Income Tax Act. The learned CIT(A) erred in upholding the action of the ld.AO by confirming the additions of Rs.7,93,000/- without correct appreciation of the facts of the case and law on the subject. In view of the facts and circumstances of the case and law on the subject, the addition be deleted.
3. The appellant craves leave to add, amend, alter or delete any ground of appeal on or before the date of hearing.”
The Department has raised the following grounds of appeal:
"1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in restricting/deleting the addition/disallowance of Rs.31,46,560/-in respect of bogus purchase made by the AO to Rs.27,74,197/- by restricting 100% disallowance made by the AO to 12.5%, ignoring the facts and circumstances of the case established by the Assessing Officer.
3 J Kumar Madanlal Gupta 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in appreciating the ration laid down by the Hon'ble apex court in the case of N.K Protein (2017) 84 taxmann.com 195 (SC)/[2017] 250 Taxman 22 (SC), 2017-TIOL-23- SC-IT while finalizing the order in the case of assessee wherein 100% of the bogus purchases were held liable to be added in the hands of the assessee.
3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in restricting/deleting the addition/disallowance of Rs. 24,84,55,000/ in respect of unexplained money as per the Cash Diary, made by the AO u/s 69A of the Act to Rs.30,00,000/- ignoring the facts and circumstances of the case established by the Assessing Officer.
4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in providing relief on the issue of unexplained money as per the Cash Diary, by observing that AO has not proved otherwise and the amounts written against such code words cannot be brought to tax ignoring the facts and circumstances of the case established by the Assessing Officer that the diary maintained by the assessee is for unaccounted cash generation and out of books expenses and the AO has given the telescoping benefits to the assessee to the extent of generation of scrap sale and bogus purchase entries mentioned in the diary. Therefore, it was established the entries mentioned in the diary were not brought to tax.
5. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in providing relief on the issue of unexplained money as per the Cash Diary, by observing that entries relating to HO, NG, KG, 3 No, etc. relate to movement of cash between the head office and residence of Shri Nalin Gupta, Shri Kamal Gupta ignoring the facts and circumstances of the case established by the Assessing Officer that the assessee did not submit reconciliation of cash diary and correlation with cash in hand and entries corresponding to HO and there is no evidence of bringing and sending back cash to HO.
6. Whether on the facts and circumstances of the case and in law the Ld. CITTA) erred in providing relief on the issue of unexplained money as per the Cash Diary by observing that once O' and 'N' are accepted as opening balance figures and cannot be brought to tax
4 J Kumar Madanlal Gupta in cash receipt ignoring the facts anal circumstances of the cose established by the Assessing Officer that whenever working, established that "O' and 'N' are carry forward entries, relief already been given to assessee in assessment and where page wise working does not established O' and 'N' are carry forward, the same should be treated as fresh receipts and brought to tax as if working does establish ‘O' and 'N’ as carry forward, the same cannot be treated as carry forward.
7 Whether on the facts and circumstances of the case and in law the Ld. CITI(A) erred in providing relief on the issue of unexplained money as per the Cash Diary by ignoring the facts and circumstances of the case established by the Assessing Officer that various corroborate evidences found w.r.t bogus purchase, scrap sale in coat and out of books murum expenses and mentioned in dairy.
8. The appellant craves leave to add, delete, modify the grounds of appeal before or at the time of hearing."
The Assessee has raised the following additional grounds of appeal vide letter dated 26.03.2025 filed with registry on 28.03.2025:
“1. The Ld. AO erred in issuing a Notice under section 148 of the Act in violation of section 151A of the Act read with CBDT Notification 18 of 2022 dated March 29, 2022 as the same has to be issued by Faceless Assessing Officer.
2. The Ld. AO erred in issuing a Notice u/s.148 of the Act without having a valid DIN as per CBDT Circular 19 of 2019 dated August 14, 2019 in the sanction obtained under section 151 of the Act.
The Appellant craves to leave to add, amend, alter or delete any or all the above grounds of appeal.”
In respect of the additional grounds of appeal of the Assessee, the Ld. Department Representative (Ld. DR in short) did not objected to the admissibility of the same. The additional grounds of appeal being legal grounds for which no new or documents facts are required and hence, the same are admitted for adjudication following the decision of the Hon’ble Supreme Court in the case of National
5 J Kumar Madanlal Gupta Thermal Power Co. Ltd. v. CIT 229 ITR 383 (SC) wherein it is held that where question of law is concerned, additional grounds on legal issued can be raised at any state of hearing.
We first deal with the additional grounds of appeal raised by the Assessee. During the course of hearing, both the Assessee as well as the Department has relied upon the arguments made and written submission filed in the case of M/s. J Kumar Infraprojects Ltd. including the rejoinders filed by Assessee against the written submission filed by the Department in that case since similar additional grounds of appeal were also raised in that case. Since the additional grounds of appeal goes to the root of the matter, we deem fit first to adjudicate the legal issues raised by the Assessee.
The first legal issue raised in the additional grounds of appeal of the Assessee challenges the validity of notice issued u/s.148 of the Act by jurisdictional Assessing Officer (JAO) and not by Faceless Assessing Officer (FAO) as per the provisions of section 151A of the Act read with CBDT notification 18 of 2022 dated March 29, 2022. The Assessee in the paper book filed for AY 2019-20 has enclosed the copy of notice issued u/s.148 of the Act dated 31.03.2023 (page 28 of the paper book) which show that the notice u/s.148 of the Act is issued by jurisdictional AO i.e. Central Circle 5(1), Mumbai.
This legal issue is adjudicated in the case of M/s. J Kumar Infraprojects Ltd. in the order passed for AY 2016-17 in wherein after considering the detailed arguments advanced by both the Assessee and the Department including submission of the Department and submissions and rejoinders filed by the Assessee, this additional grounds of appeal was dismissed therein. The relevant finding given in that case is reproduced as under:
“27. We have considered the rival contentions and also considered the submission filed by the Assessee and Ld. DR as also the rejoinders filed by the Assessee. The contention of the Assessee that notice u/s.148 of the Act should be issued by FAO and not by JAO is not acceptable for more than one reason. Firstly, there was search and seizure action carried out u/s.132 of the Act
6 J Kumar Madanlal Gupta in the case of Assessee on 11.10.2022 and in pursuance to the same, the case of the Assessee was centralised vide order no. CCIT (C-2/Centralisation/J Kumar Grp/2022-23) dated 27.12.2022 and there is no dispute in respect of the same. The CBDT has issued instruction i.e. CBDT Order F. No. 187/3/2020-ITA-1 dated 06.09.2021 (copy of which is placed on record) clearly and explicitly excludes cases assigned to Central Charge from the ambit of faceless assessment u/s.144B of the Act.
The decisions relied upon by the Assessee of the Hon’ble Bombay High Court in the case of Hexaware and others, supra, were not relating to search and seizure cases being centralised and being outside the ambit of faceless assessment u/s.144B of the Act. Moreover, the later decision of the Hon’ble Bombay High Court in the case of J D Printers Pvt. Ltd. v. ITO (2024) 468 ITR 178 (Bom) has not followed the decision in the case of Hexaware, supra, in view of the subject matter as to whether the notice u/s.148 of the Act to be issued by JAO or FAO being stayed by Hon’ble Supreme Court in the case of Hexaware, supra, and thus stayed the proceedings arising from notice issued u/s.148 of the Act instead of quashing the same. Thus, the decision of the Hon’ble Bombay High Court in the case of Hexaware, supra, being stayed by Hon’ble Supreme Court,the notice issued by JAO in the present case is held to be valid and not quashed. The Ld. DR has also placed reliance on various other High Court decisions wherein after considering the decision in the case of Hexaware, supra, the Courts have taken the view that notice issued u/s.148 of the Act by JAO and sent to faceless regime was in due compliance of the provisions of the scheme.
Another reason for not following the decision of Hexaware, supra, is that in the present case, search and seizure action was carried out u/s.132 of the Act and the cases were centralised. The case of the Assessee falls in 7 J Kumar Madanlal Gupta Explanation 2 to section 148 of the Act whereas the case of Hexaware, supra, falls in Explanation 1 to section 148 of the Act. In respect of this, decision relied by the Ld. DR of Hon’ble Gujarat High Court in the case of Talati and Talati LLP v. ACIT [2024] 469 ITR 643 (Guj) applies wherein in para 27 of the said order, distinction is drawn between notice u/s.148 of the Act issued under Explanation 1 and Explanation 2 to section 148 of the Act.
30. In the light of the above, we hold that the notice u/s.148 of the Act issued by JAO could not be treated as invalid and the said notice is correctly issued by JAO considering the entire gamut of the case and the provisions of the Act and the faceless regime. This additional ground of the Assessee is thus dismissed.”
In view of the above and following the view taken in the case of J Kumar Infraprojects Ltd., this additional grounds of appeal of the Assessee is hereby dismissed.
The second additional grounds of appeal raised by the Assessee relates to issue of notice u/s.148 of the Act by taking incorrect sanction u/s.151 of the Act which does not contain a valid Document Indexation Number (DIN), which is in violation of CBDT circular no.19 of 2019 dated 14.08.2019. The Assessee in the paper book filed for AY 2019-20 has enclosed the copy of notice issued u/s.148 of the Act dated 31.03.2023 (page 28 of the paper book) and copy of approval accorded u/s.151 of the Act dated 31.03.2023 (pages 24 to 27) seeking approval of appropriate authority for issue of notice u/s.148 of the Act.
This legal issue is adjudicated in the case of M/s. J Kumar Infraprojects Ltd. in the order passed for AY 2019-20 in wherein after considering the detailed arguments advanced by both the Assessee and the Department including submission of the Department and submissions and rejoinders filed by the Assessee, this additional grounds of appeal was dismissed therein. The relevant finding given in that case is reproduced as under:
8 J Kumar Madanlal Gupta
“148. We have considered the rival contentions and has gone through the submission filed by the Assessee and the Ld. DR. It is undisputed fact that on the approval accorded u/s.151 of the Act by the appropriate authority there is no mention of DIN and no DIN is generated and this approval is issued in paper form and not electronic form……
We have considered the rival submissions and the legal contentions raised. It is not in dispute that there is no DIN mentioned in the approval sanctioned u/s.151 of the Act. The Assessee has contended that not obtaining DIN for issue of approval makes the approval invalid and therefore the consequential proceedings i.e. notice issued u/s.148 of the Act and reassessment order passed thereto are bad in law and liable to be quashed. The Ld. DR on the other hand has contended that issuing approval u/s.151 of the Act is internal communication and thus, not mandatory to obtain DIN for such internal communications.
We has also considered the decisions relied upon by the Assessee and the Ld. DR on this issue and there are contradictory decisions of High Courts on this issue. At the same time, we are aware of the decision of the Hon’ble Delhi High Court in the case of CIT (IT) v. Brandix Mauritius Holdings Ltd. (2023) 456 ITR 34 (Del) wherein it is held that assessment order passed by the AO did not bear DIN and there was nothing on record to show any exceptional circumstances as mentioned in 2019, Circular No.19 of 2019 dated 14.08.2019 reported in (2019) 416 ITR 140 (St.) and this decision is stayed by the Hon’ble Supreme Court in CIT v. Brandix Mauritius Holding Ltd. (2024) 297 Taxman 228 (SC).
We have also gone through the CBDT Circular no.19 of 2019 dated 14.08.2019 and in para 1 and 2 of the said circular, it is stated that where communication is to be made to the Assessee, the same required proper audit trail and therefore necessity for generating DIN. The approval
9 J Kumar Madanlal Gupta u/s.151 of the Act is not directly communicated to the Assessee but the same is given to the AO for issue of notice u/s.148 of the Act and thus, it is internal communication and is given to the Assessee where the Assessee demand the same. This is not the case where notice u/s.148 of the Act or any assessment or other order is passed in absence of valid DIN. Also, as per provisions of sec.282A(1) of the Act, the paper form notice or other document gets validated and authenticated once the same is duly signed by that authority. It is undisputed fact that the approval sanctioned u/s.151 of the Act is duly signed and is thus valid document. The AO has issued notice u/s.148 of the Act in pursuance thereto and this notice clearly bears valid DIN. We are also of the view that by not obtaining and mentioning DIN on the approval sanctioned u/s.151 of the Act can be said to be irregularity but that does not make the same illegal. In view of the same, this legal grounds of the Assessee is dismissed.”
In view of the above and following our view taken in the case of J Kumar Infraprojects Ltd., this additional grounds of appeal raised by the Assessee is hereby dismissed.
Now we take up the grounds of appeal filed by the Assessee and Department before us. The Assessee as well as Department is in appeal against the part relief / full relief given by Ld. CIT(A) as per his order passed.
First of all we take up cross appeals of Assessee and Department on the issue of bogus purchases disallowance made. Grounds of appeal no.1 of Assessee appeal and Grounds of appeal nos. 1 and 2 of the Department appeal in respect of disallowance made by AO of Rs.31,46,560/- u/s.37(1) of the Act on account of alleged bogus purchases made at 100% / 12.50% (as per table below), whereby the Ld. CIT(A) has restricted from 100% disallowance at 12.50% and confirmed the disallowance made in respect of parties @12.50% made by AO. The following table gives party-wise details as to the disallowance made by AO and restricted / confirmed by CIT(A): Sr. Name of the Amount Disallowance % Disallowance Confirmed No Party by AO Disallowed confirmed by by CIT(A) CIT(A)
10 J Kumar Madanlal Gupta 1 Kavita Enterprises 4,16,482 4,16,482 100% 44,119 12.50% 2 Rishabh 91,27,803 11,40,975 12.50% 11,40,975 12.50% Enterprises 3 GG Engineering 76,28,086 9,53,511 12.50% 9,53,511 12.50% 4 Jain Colour Roof 50,84,740 6,35,592 12.50% 6,35,592 12.50% Ind. Total 2,22,57,111 31,46,560 27,74,197
The Assessee is in appeal claiming deletion of the disallowance confirmed by CIT(A) of Rs.27,74,197/- whereas the department is in appeal in respect of relief granted by Ld. CIT(A) of Rs.3,72,363/- by restricting disallowance at 12.50% in respect of disallowance made at 100% by AO in respect of party at sr. no.1 in the above table i.e. Kavita Enterprises.
In respect of the disallowance out of purchases as alleged bogus purchases, the AO has made disallowance of 100% in respect of the party i.e Kavita Enterprises and 12.50% in respect of the other 3 parties as stated in the above table. The Assessee contended that he has furnished all the relevant documentary evidences which were in his power and possession in support of the purchases made i.e purchase invoices, E-way bills, purchase order, ledger, bank statement of Assessee showing payment made, etc. and no discrepancy has been pointed out in the same by the AO. It is further observed that the AO in its assessment order in para 3, 2.5 and 2.6 at pages 4 to 6 has stated that this party was also covered under search action u/s.132 of the Act, however no incriminating material or evidence is stated to be found and / or relied in the assessment order, except for statement recorded of Shri Paras Vora, husband of proprietor of Kavita Enterprises KavitaVora, however the AO has not furnished the copy of statement and also not granted opportunity of cross-examine Shri Paras Vora, inspite of specific request made before him by the assessee. Further, in para 3 at page 5 of the assessment order, the AO has relied upon statement of Shri Paras Vora and that purchases made by Kavita Enterprises from certain parties stated therein from whom the Assessee has made direct purchases, however, AO failed to appreciate that purchases made from those parties referred therein were substantiated before the AO, which is accepted by AO in para 2.6 (d) at pages 7 & 8 of the order and reproduced as under:
11 J Kumar Madanlal Gupta “(d) The submission of assessee has been considered and it is observed that the assessee hassubstantiated the purchase details for aforementioned parties and some cases part details are filed.However, because of reasons mentioned in SCN notice for these parties, there is element of doubtregarding genuineness of all the parties and doubt regarding actual movement of goods in somecases. And hence, possibility of overbilling cannot be ruled out. Considering the all these points andrelying on the submissions of the assessee, 12.5% of the expenses booked for Rishabh Enterprises(Proprietor RishabhTambe), G.G. Engineering, Jain Color Roof amounting to i.e. Rs.27,30,079/-12.5% of Rs. /- (exclusive of GST) hereby disallowed u/s.37(1) of the Act.”
The Ld. CIT(A) gave part relief by restricting 100% disallowance made in case of Kavita Enterprises to 12.50% and sustaining the disallowance at 12.50% in respect of the other parties placing reliance on the findings given in the order passed in case of M/s. J Kumar Infraprojects Ltd.
The Ld. DR placed reliance on the findings given in the assessment order and pleaded that AO has correctly made entire disallowance of purchase in the case of Kavita Enterprises and the Ld. CIT(A) was not justified in restricting the 100% disallowance at 12.50%. Emphasis was made on the search action carried out against this party and it was found that the purchases made by this party from various concerns from whom Assessee also purchased was found to be bogus. Ld. DR further replied upon the decision of the Hon’ble Supreme Court in case of N.K. Protein [2017] 250 Taxman 22 (SC) and Hon’ble Bombay High Court in case of Pr. CIT v. KanakImpex (India) Ltd.in of 2021, order dated 03.03.2025 (copy of which was handed over during hearing) in support of disallowance made at 100% by the AO. Hence, the Ld. DR pleaded to restore the order of the AO and confirm disallowance @100%.
In respect of the parties at sr. nos. 1 to 3 in the above table, identical issues were raised in the appeal filed in case of J Kumar Infraprojects Ltd. for AY 2019-20 in (Assessee appeal in that case) and ITA No.4589/Mum/2024
12 J Kumar Madanlal Gupta (Department appeal in that case). The findings given in respect of the above parties in that case is reproduced as under: In respect of Kavita Enterprises: “173 (B) (III) We have considered the rival submission and gone through the records and find that the identity of the party Kavita Enterprises is not in dispute and although search action is carried out at Assessee premises as well as premises of Kavita Enterprises, no evidence or material is brought on record conclusively proving that the purchase made from this party is bogus. The AO has relied upon statement of Shri Paras Vora and observed that purchases made from various parties directly by Assessee were also made by Kavita Enterprises from those parties and since, bogus purchases are made by Kavita Enterprises the sale of same to the Assessee is also bogus. However copy of the statement of Shri Paras Vora is not furnished to the Assessee nor opportunity to cross-examine him given and therefore merely placing reliance on statements to hold that Assessee made bogus purchase from Kavita Enterprises cannot be accepted and no reliance can be placed on the statement of Shri Paras Vora once cross- examination is not given as held by Hon’ble Supreme Court in the case of Andman Timber Industries vs. CCE – [2015] 62 taxmann.com 3 (SC), (2016) 15 SCC 785 (SC) as well as other decisions in the case of CIT v. Odeon Builders P. Ltd. 418 ITR 315 and by Hon’ble High Court of Rajasthan in the case of CIT vs. SunitaDhadda&Ors. (2018) 406 ITR 0220 (Raj.) – holding that no addition can be made / sustained where cross examination is not allowed by the department. We further fail to understand as to why the AO has not made any addition in any of the other years once the AO alleged that purchases from this party was bogus and not only this, the AO has himself accepted part of the purchases made by the Assessee in the impugned year as genuine and no reason for the same is seen in the assessment order. This proves that the AO has himself accepted purchases from this party as genuine and there is no reason to doubt the rest of the purchases made by the Assessee. Further, we find that the purchases made from various parties directly by the Assessee, which are allegedly stated to have 13 J Kumar Madanlal Gupta made bogus sale to Kavita Enterprises, has been substantiated by the Assessee before the AO as admitted by the AO in the assessment order in para 19 of the order at pages 151 and 152 and estimated disallowance is made by AO on the ground of over invoicing and doubts regarding actual purchase and movement of goods. The relevant para 19 of the order is reproduced above.
Once the AO has himself accepted that the direct purchases made from these parties are substantiated by the Assessee and made disallowance on estimated basis @12.50% on grounds of over invoicing, etc., the AO has contradicted his stand for making 100% disallowance in respect of purchase made from Kavita Enterprises by holding that this party made bogus purchases from the very same concerns in respect of which Assessee has substantiated its purchases. Hence, we do not agree with the view of the AO more particularly when the AO has accepted part of the purchases from this party during the year as genuine and has not made any disallowance in any of the other years even though the Assessee has been making regular purchase from this party. Even in the earlier search on the Assessee in the year 2016, no material or evidence was found alleging any bogus purchase from this party as seen from the order of the ITAT for earlier year. The Ld. CIT(A) has restricted the disallowance of purchases made from this party @12.50%. However, we do not agree with the reason given by the Ld. CIT(A) in para 52.4 at page 152 of the order to restrict the disallowance @12.50%. The decisions relied upon by the Ld. DR in the case of N.K. Protein, supra, and KanakImpex, supra, are already held to be not applicable to the facts of the Assessee case as discussed hereinabove. Hence, in absence of any incriminating material or evidence found in respect of this party proving any bogus purchases made, more particularly when search action is carried out at the business premises of Assessee as well as Kavita Enterprises as also AO himself accepting purchase from this party in all other year and part purchase in this year as genuine, in our view, no disallowance is called for and thus, we held that the AO was not justified in making 100% disallowance of purchase made from Kavita Enterprises and Ld. CIT(A) was not justified in 14 J Kumar Madanlal Gupta restricting the same to 12.50% and thus, direct to delete the entire disallowance made in respect of this party.”
In respect of other 2 parties at sr. no. 2 & 3 of above table: “173 (D) – iii. We have considered the rival submission and the orders passed by AO and CIT(A) in respect of these parties and since the facts are identical and similar to that of AY 2018-19 in respect of purchases made from M/s. Divya Enterprises and this party also exist in the list of all the other parties for this year as tabulated hereinabove, we follow our decision given in AY 2018-19 and confirm the estimated disallowance made at 12.50% in respect of all these parties.”
In AY 2018-19, the finding given in the case of M/s. J Kumar Infraprojects Ltd. in appeal of the Assessee therein in in respect of issue of bogus purchases estimated addition made by AO at 12.50% and confirmed by Ld. CIT(A) is reproduced as under:
“130. We have gone through the assessment order as also the finding given by the CIT(A) after exhaustively dealing with the issue. The Assessee reiterated the contentions put forth before the AO and CIT(A) that it has filed all the relevant documentary evidences in support of the purchase made and substantiated the purchases made from this party and this fact is also acknowledged by the AO in the assessment order and therefore no disallowance be made. The Assessee also placed reliance on the decision of the ITAT order passed in its own case in respect of the earlier search period i.e. in to 3453/Mum/2019, Bench ‘F’, order dated 22.02.2021 wherein the AO had made 100% disallowance alleging bogus purchases on ground that SOP was not followed and bills of purchase were received by head office directly and CIT(A) restricted the disallowance @15%, however, the ITAT deleted the entire addition.
The Ld. DR pleaded that the estimated disallowance made by the AO applying rate of 12.50% was reasonable in the light of the evidences found and discussed in the body of 15 J Kumar Madanlal Gupta the assessment order and relied on the findings of the assessment order.
In this year, the purchases made from M/s. Divya Enterprises was treated as bogus purchase based on various evidences found in the course of search action, however, in response to the show cause notice of the AO, the finding given by the AO in the order that on the basis of evidences found, the purchase made from this party cannot be accepted as genuine and possibility of over invoicing cannot be ruled out and made disallowance by estimating the same @12.50%. Having considered the overall facts of the case and in the light of the order of the AO and Ld. CIT(A), we do not find any merit in the contentions of the Assessee in respect of purchase made from M/s. Divya Enterprises. The Ld. CIT(A) has also distinguished the ITAT decision in the Assessee own case passed in reference to issue of bogus purchase addition made pursuance to earlier search action in the case of the Assessee carried out on 30.08.2016 wherein the ITAT gave complete relief to the Assessee. However, we have given due consideration to the ITAT order in the case of the Assessee and although we agree with the finding given in the decision of the ITAT order in Assessee own case to the effect that claim of the Assessee cannot be rejected primarily on the ground that SOPs have not been followed and that the Assessee being fairly big company having various sites and therefore the contentions of the AO that it has not followed SOPs in the matter of purchase of materials without bringing any concrete/substantive evidences to corroborate bogus purchases on record and thus, the same cannot be sustained. However, the facts in the present case and the addition is not made solely on the basis of not following SOPs. Thus, the Ld. CIT(A) has correctly brought out the distinction in the order passed in para 36.7 at page 96 of the order and we agree with the same. The facts in that year before the ITAT were entirely different than in the present year. Hence, we are inclined to agree with the findings of the Ld. CIT(A) and confirm the estimated disallowance made @12.50% in respect of purchase made from M/s. Divya Enterprises. Thus, the disallowance made of Rs.14,59,735/- by the AO u/s.37(1) of the Act and confirmed by the Ld. CIT(A) is hereby sustained.”
16 J Kumar Madanlal Gupta 19. In view of the above and considering the facts of the case of the Assessee being identical to that of M/s. J Kumar Infraprojects Ltd., the 100% disallowance made in respect of the party Kavita Enterprises by the AO and restricted to 12.50% by Ld. CIT(A) is directed to be deleted in entirety thereby no disallowance to be made. In respect of the other 2 parties, the estimated disallowance at 12.50% made by AO and confirmed by Ld. CIT(A) is hereby sustained.
In respect of party Jain Colour Roof Ind., the Ld. AO has estimated disallowance at 12.50% and the same is confirmed by the Ld. CIT(A). The facts relating to this party is similar to that of the parties listed at sr. nos. 2 and 3 of the above table. The findings given in respect of the 2 parties i.e. Rishabh Enterprises and G G Engineering apply in respect of this party also. Hence, the estimated disallowance at 12.50% made by AO and confirmed by Ld. CIT(A) is hereby sustained.
In view of the above, we summarise the finding given hereinabove in the table as under: Sr. Name of the Amount Disallowance % Disallowance Confirmed No Party by AO Disallowed confirmed by by this order this order as held above 1 Kavita Enterprises 4,16,482 4,16,482 100% Nil 0 2 Rishabh 91,27,803 11,40,975 12.50% 11,40,975 12.50% Enterprises 3 GG Engineering 76,28,086 9,53,511 12.50% 9,53,511 12.50% 4 Jain Colour Roof 50,84,740 6,35,592 12.50% 6,35,592 12.50% Ind. Total 2,22,57,111 31,46,560 27,30,078
In the result, the appeal of the Assessee in respect of Grounds of appeal 1 is partly allowed and the grounds of appeal 1 and 2 of the department is dismissed.
Grounds of appeal no.2 of Assessee appeal relates to challenging the addition made of Rs.7,93,000/- towards unexplained expenditure u/s.69C of the Act based upon the noting made in the diary found and seized during the course of search action.
From the facts in respect of this issue is that during the course of search action at the residence of Shri Nalin Gupta, a black colour Luxor diary was found and seized as Annexure A-1 of Annexure A of 17 J Kumar Madanlal Gupta the Panchnama dated 15.10.2022. The explanation in respect of the noting in the diary was sought in the statements recorded of Shri Nalin Gupta and thereafter Shri Jagdishkumar Gupta to whom the diary belonged. The AO found certain noting in the diary in the payment side in the name of family members of the Assessee herein i.e. Smt. Shalini Gupta, Shri Nalin Gupta and Smt. Kusum Gupta and in their assessment proceedings, they were asked to explain the noting in the said diary. In their submissions made, it was contended without prejudice that there are sufficient drawings to cover the expenses noted in the diary and if any deficit arises, the same be considered in the hands of Shri Jagdishkumar Gupta, i.e. the Assessee herein.
The AO in the course of assessment proceedings of the Assessee, show caused as to why the noting of expenses of all the family members relating to the impugned year in the diary aggregate to Rs.13.93 lakhs be not added in the hands of the Assessee. The AO accepted the without prejudice contention of the Assessee in respect of total amount of drawings shown in the hands of all the family members aggregating to Rs.6 lakhs and thus, restricted the addition to Rs.7.93 lakhs u/s.69C of the Act. The Ld. CIT(A) after considering the submissions of the Assessee, confirmed the addition made by AO of Rs.7.93 lakhs u/s.69C of the Act.
The Assessee reiterated the contentions made before the AO and CIT(A) whereas the Ld. DR placed reliance on the order of the AO and CIT(A). We have gone through the orders of the lower authorities and have also considered the noting in the diary on which reliance is placed for making the addition. The Ld. CIT(A) has considered the issue in detail and in para 9 at page 26 of the order, held as under: “9. I have considered the facts of the case. It is now not disputed by the appellantthat this diary contains records of cash transactions. It is also not disputed that thefigures represented therein are in Rs. Lakhs. The diary is maintained by Shri JagdishGupta and according to the appellant various persons have made entries at theinstructions of Shri Jagdish Gupta. However, the appellant has disputed with respectto the quantum of addition made by AO relying on the said diary. According to theappellant, no addition lies. In the said diary, the AO has identified certain expenses asrelating to unaccounted cash expenses which pertain to the appellant.
18 J Kumar Madanlal Gupta Although theAO has given a show cause for Rs. 13.93 lakhs, eventually he accepted part of theexplanation of the appellant and confined the addition to Rs. 7.93 lakhs. A verydetailed discussion has been made on this diary while adjudicating the case of J.Kumar Infra Project Ltd. which are on-going simultaneously. It is obvious that the AOhas restricted himself to certain specific personal expenses the source of which couldnot be satisfactorily explained. The appellant is a distinct person as per the IT Actcompared to the corporate entity. Hence, the addition made by the AO is confirmedu/s 69C of the Act.”
After having heard, the counsels for both the parties at length and after Having considered the findings given by the Ld. CIT(A) in the order passed, we do not find any infirmity in the findings of the Ld. CIT(A) and hence, confirm the order of the Ld. CIT(A). This grounds of appeal of the Assessee is thus dismissed.
28. In the department appeal, Grounds of appeal nos.3 to 7 relates to challenging the addition made by the AO of Rs.24.85 cr. on Protective Basis as unexplained money u/s.69A of the Act on the basis of black colour Luxor diary found and seized from the residence of Shri Nalin Gupta. The AO made substantive addition in the order passed in the case of M/s. J Kumar Infraprojects Ltd. wherein the AO has deliberated the issue in detail. The Ld. CIT(A) has deleted the addition in the hands of the Assessee by referring to detailed order passed in the case of M/s. J Kumar Infraprojects Ltd. wherein the issue is dealt on merits. Wherein, the Ld. CIT(A) held that having considered the substantive addition in the case of M/s. J Kumar Infraprojects Ltd. on merits, there is no reason to sustain the protective addition made in the hands of the Assessee.
29. Both the Assessee and the Ld. DR confirmed that the issue raised herein is the identical and same as already taken in the case of M/s. J Kumar Infraprojects Ltd. wherein substantive addition is made. The Assessee contended that having dealt the issue on merits in the case of M/s. J Kumar Infraprojects Ltd. and Assessee having not contended that noting in the diary does not relate to the Company M/s. J Kumar Infraprojects Ltd., the protective addition made in the 19 J Kumar Madanlal Gupta hands of the Assessee is rightly deleted by Ld. CIT(A). Whereas the Ld. DR placed reliance on the order of the AO.
We have heard the counsels for both the parties at length and noticed that and this very issue is raised by the Department in the appeal filed in case of M/s. J Kumar Infraprojects Ltd., wherein we have dealt with this issue in detail on the merits of the case. The relevant part of the findings given in the case of M/s. J Kumar Infraprojects Ltd. is reproduced hereunder-
“165. We have gone through the assessment order, CIT(A) order, arguments advanced by the Assessee and Ld. DR. The undisputed facts of the case is that a black colour Luxor diary was found and seized in the course of search action carried out at the residence of Shri Nalin Gupta whereby in the statement recorded u/s.132(4) of the Act, Shri Nalin Gupta has stated that the diary contains receipts and payment of business transaction and contains accounted as well as unaccounted transactions and the said diary belonged and maintained by his father Shri Jagdishkumar Gupta. This statement of Shri Nalin Gupta was confronted with Shri Jagdishkumar Gupta during search action and in the statement recorded of Shri Jagdishkumar Gupta, few noting in the diary was explained mainly noting relating to scrap sale and admitted the same as cash received on sale of scrap at various sites. However, in the statement recorded u/s.132(4) of the Act, explanation was neither sought nor given in respect of all the noting of the diary. Further, majority of the amount noted in respect of sale of scrap was corroborated with other material seized in respect of sale of scrap in cash and thus, the AO did not make addition in respect of such entries in order to avoid double addition. In our view, addition cannot be simply based upon the statement recorded u/s.132(4) of the Act and in any case, there is no disclosure made in the statement recorded and in fact, Shri Nalin Gupta has stated that part of noting in the diary is accounted and part unaccounted, however the accounted and unaccounted noting were not identified during the course of search action.
We now address the explanation given by the Assessee in respect of various noting in the diary and the first amongst them is 20 J Kumar Madanlal Gupta relating to the abbreviations ‘O’ and ‘N’. The explanation given that the same is balance amount noted and carried forward in the pages of the diary is not disputed by the lower authorities and in fact, the AO has also given part relief in respect of the same. However, we do not agree with the view of the AO for rejecting part of the noting in respect of these abbreviations where the balances does not match and the reason for the same is also given by the Assessee that the mismatch may have occurred due to totalling error or missing page/s in the diary, etc. since the diary is not continuous like regular cash book and in fact on many pages of the diary, the balance are either not carried forward or not noted. It was also brought to our notice that the mismatch in the balance carried forward is rectified in few occasions in subsequent part of the diary and instances of the same were given in the submission filed before the Ld. CIT(A) and reproduced by CIT(A) at page 112 of the order and the relevant part of the same is reproduced herein below for the sake of brevity:
“42. The Appellant further submits that in few cases, the mismatch in figures of balance carried over gets duly corrected in the subsequent page/s of the diary itself and thus, on some occasion, the calculation error found in the diary is corrected by the person making the noting and thereby carrying forward the correct figure thereafter. This itself proves beyond any doubt that these figures of balances noted, even though there is mismatch at few places, the same are ‘balances’ only and not separate noting of any unaccounted cash income. Example of the calculation error mismatch corrected in the diary itself can be seen from the chart tabulated in the assessment order as shown hereunder-
Example 1: Diary Date Particulars ‘O’ Difference page Amount 119 02.04.2019 Opening 256 -19.85 Balance 117 05.04.2019 Opening 271.50 19.60 Balance Net -0.25 difference
21 J Kumar Madanlal Gupta In this case, the mismatch in the diary gets corrected and the net difference is of meagre amount and can be considered as rounding off difference.
Example 2: Diary Date Particulars ‘O’ Difference page Amount 115 11.04.2019 Opening 158 -27.50 Balance 114 16.04.2019 Opening 198.50 27.50 Balance Net 0.00 difference
In this case, the mismatch in the diary gets corrected and the net difference is NIL amount.
43. The Appellant submits that from the above illustrations, it is proved beyond any doubt that the mismatch is NOT and CANNOT be construed as separate and independent unaccounted cash income. The Appellant further submits that from the chart tabulated in the assessment order, in most of the cases, there is NO mismatch in the balance carried over as noted against abbreviation ‘N’, which also proves that abbreviation ‘O’ and ‘N’ are balances carried over from page/s to page/s of the diary and thus, cannot be treated and considered as unaccounted cash income.”
In view of the above, we have no hesitation in holding that the figures noted against the abbreviations ‘O’ and ‘N’ to be depicting balances and carried forward in the diary wherever noted. The AO was not correct in rejecting this explanation partly and the Ld. CIT(A) has rightly allowed the entire amount noted against these abbreviations as not unexplained money in para 49.3 and 49.4 of his order at page 116 and thus, the order of the Ld. CIT(A) is confirmed in respect of the same.
The next contention is in respect of noting in the diary against the abbreviations ‘HO’, ‘KG’, ‘NG’, 3 No., etc. and during the course of search action, in the statement of Shri Nalin Gupta, these abbreviations are explained to be depicting Head Office for 22 J Kumar Madanlal Gupta HO, Kamal Gupta for KG, Nalin Gupta for NG. It is further explained during the course of assessment proceedings, that the ‘3 No.’ abbreviation is used to refer the residence of the Chairman at Road no.3, JVPD, Vile Parle West. We have considered the explanation of the Assessee that cash and gold of Assessee Company was kept at residence of Chairman / Directors for safe keeping and therefore there was movement of cash from office to residence and vice versa and the diary was maintained mainly to keep track of the same and this was done due to theft at the business premises of the Assessee for which FIR was also filed. The fact of theft at business premises is not disputed by the AO and it cannot be disputed since FIR filed is placed on record. We have also noted that during the course of search action, part of the gold was kept in the lockers pertaining to the Chairman / Directors and their close relative staying with them as also cash of the Assesse Company was explained to be found at their residence. Therefore, the explanation of the Assessee that noting against abbreviations ‘HO’, ‘KG’, ‘NG’, etc. are nothing but movement of cash between office and residence and vice versa and not unexplained money is plausible explanation considering the facts and circumstances of the case. This view of ours gets further fortified for the reason that noting in the nature of unaccounted cash income is noted specifically as scrap sale, etc., which is not disputed by the Assessee as relating to sale of scrap in cash and for which other corroborative evidences are also found. However, the AO has not brought on record anything to show that noting against abbreviations ‘HO’, ‘NG’, ‘KG’, etc. depicts unexplained income or unaccounted cash more so when HO refers to Head Office and how can there be unaccounted cash income received from head office and similarly from Nalin Gupta and Kamal Gupta as also from Road no.3. The Assessee has also shown instances whereby the noting in the diary proves the movement of cash and such instances are also taken into account by the CIT(A) in the order passed in para 49.5 at pages 116 and 117. We have also noted that the cash in hand balance of the Assessee Company as per the regular books of account is higher at any given point of time as compared to the diary balances and this fact supported with cash book was submitted to the AO and the AO has nowhere disputed the same. Having accepted that the 23 J Kumar Madanlal Gupta cash in hand as per regular books of account is higher than that recorded in the diary, further fortifies the view taken by us. We are therefore in agreement with the finding of the Ld. CIT(A) as given in para 49.5 of the order in respect to this contention of the Assessee and uphold the same.
Apart from the above, we now deal with addition confirmed by the Ld. CIT(A) on other issues for each of the year in appeal:
a. For the AY 2019-20, the Ld. CIT(A) has confirmed addition of Rs.30 lakhs in respect of two noting in the diary at pages 133 and 131 whereby only figure 15 is mentioned at both the pages without any narration. The Assessee has explained these two noting as relating to movement of cash from office to residence and vice versa. The Ld. CIT(A) has not accepted this explanation with the remark that no valid explanation is given for this receipt. We are not in agreement with the finding of the Ld. CIT(A) on this issue. Once it is found and undisputed fact that no narration whatsoever is mentioned against the noting and only figures are mentioned as 15 at both the places, it cannot be presumed that the same is unaccounted cash receipt of the Assessee. Addition cannot be made merely on assumption and presumption. We find that when all the noting in the diary for this year are either balances or movement of cash from office to residence and vice versa, there is no reason to deviate from this view already taken by us. As per the legal maxim ‘paripassu’, the noting without any narration can be placed with equal footing with the noting having abbreviations ‘HO’, etc. and thus, this explanation of the Assessee is found acceptable. The Assessee also argued that such noting can be termed as rough noting / dumb noting since there is no narration mentioned and the diary was written by various personnel. This explanation of the Assessee also cannot be rejected since where there is no narration, either the same is rough noting or it can be placed with equal footing as per the other noting. Hence, on both these reasoning, we are of the view that the addition sustained of Rs.30 lakhs for AY 2019-20 in respect of this 24 J Kumar Madanlal Gupta two figures of 15 is also deleted and to this extent the order of the Ld. CIT(A) is reversed.
Hence, for this AY 2019-20, on the issue of unexplained money addition u/s.69A of the Act, the Assessee appeal is allowed and that of the department is dismissed. b. For AY 2020-21, the Ld. CIT(A) has confirmed the addition of Rs.7 lakhs in respect of noting made on page 55 of the diary dated 02.03.2020 with the narration ‘Nagpur’. In this case, we are in agreement with the finding of the Ld. CIT(A) that no proper explanation is given in respect of this noting. The explanation of the Assessee to consider this noting also as relating to movement of cash from residence to office cannot be accepted. When specific narration is stated in the diary, it is for the Assessee to give convincing explanation for the same. Hence, we confirm the order of the Ld. CIT(A) on this issue.
Hence, for AY 2020-21, on the issue of addition of unexplained money u/s.69A of the Act, the appeal of the Assessee as well as of the Department is dismissed. c. For AY 2021-22, as stated hereinabove, this assessment order was passed first as the same was pending as on the date of search action and hence, no proper explanation was given by Assessee and the AO completed the assessment due to limitation issue. Though the AO has considered the evidences found in course of search action in the order passed, however, the Assessee could not file proper explanation to the AO, which however was filed before CIT(A) [for which remand report was called for by CIT(A)] and also before AO for other years. In this year, the addition confirmed by the Ld. CIT(A) as per the tabulated chart is dealt with as under: i. In respect of noting on page 50 of the diary dated 21.08.2020, the narration given is ‘A Rathi JK Software’ with figure of 35 i.e. Rs.35 lakhs. As per the finding given in AY 2020-21 in respect of noting on 25 J Kumar Madanlal Gupta diary page 55 with narration ‘Nagpur’, on the same reasoning we uphold the finding of the Ld. CIT(A) in respect of this noting and thereby confirm the addition of Rs.35 lakhs; ii. The next four noting addition confirmed by Ld. CIT(A) as per the table on page 118 of the order is in respect of noting with the narration ‘scrap’ in all the noting such as HO scrap, HO Tyre scrap, scrap Ghodbunder, etc. and all these noting figures total to Rs.37 lakhs. The Assessee has explained that the same is amount received at head office in lumpsum from the balance remaining out of sale of scrap at various sites and are thus part of the overall gross receipt of sale of scrap in cash. The Ld. CIT(A) has remarked that although the same is from sale of scrap, however do not form part of scrap receipts added by AO separately. We are not in agreement to the finding given by Ld. CIT(A). This is for the reason that similar sale of scrap noting is found in the diary at various places falling in the year relevant to AY 2022-23 and for that year, the total of sale of scrap noting in the diary worked out to Rs.9.36 cr. and the AO has himself given full relief of the same to avoid double addition on the ground that the same is forming part of the overall addition made on account of sale of scrap added separately. Since the AO has accepted that the noting in the diary relating to scrap sale receipt is part of the overall addition made separately in respect of sale of scrap in cash, we do not find any justification to sustain this addition. We also accept the explanation of the Assessee that there is no scrap sold at head office and lumpsum balance amount remaining at various sites and not utilised are send back to office and the same is noted in the diary. In view of the same, we delete the addition of Rs.37 lakhs and reverse the order of the Ld. CIT(A) to this extent.
26 J Kumar Madanlal Gupta Hence, for AY 2021-22, on the issue of addition of unexplained money u/s.69A of the Act, the appeal of the Assessee is partly allowed and that of the department is dismissed.
Hence, for this AY 2021-22, on the issue of unexplained money addition u/s.69A of the Act, the Assessee appeal is allowed and that of the department is dismissed. d. For AY 2022-23, the Ld. CIT(A) has though pointed out two noting in the diary at pages 13 and 10 with the narration NashikBunglow and the amount noted as 3.50 and 52 respectively i.e. total Rs.55.50 lakhs, it was contended before the Ld. CIT(A) that bungalow owned by Shri Jagdishkumar Gupta was sold by him and cash received on sale was noted in the diary and thus, the addition of this amount cannot be made in the hands of the Assessee Company as not relating to the Assessee. The Ld. CIT(A) has remarked the addition in respect of on-money on sale of bungalow is confirmed in the hands of Shri Jagdishkumar Gupta and therefore deleted in the hands of the Assessee. We concur with the finding of the Ld. CIT(A) on this issue and it is well settled principle of taxation that income has to be added in the hands of the person to whom it relates and not any person. It is admitted position that bungalow in Nashik belonging to Shri Jagdishkumar Gupta was sold and capital gains on the sale of the same was also disclosed in the return of income filed by Shri Jagdishkumar Gupta for AY 2022-23. Hence, the on-money receipt on sale of the bungalow also has to be taxed in his hands. The order of the Ld. CIT(A) is confirmed.
Hence, for the AY 2022-23, on the issue of addition of unexplained money u/s.69A of the Act, the appeal of the Department is dismissed.
The issue of addition of unexplained money u/s.69A of the Act is decided in accordance of the above for each of the year in 27 J Kumar Madanlal Gupta appeal and for the impugned year, appeal of the Assessee on this issue is allowed whereas that of department is dismissed.”
Since the issue in the present appeal of the department is already dealt with on merits in the case of M/s. J Kumar Infraprojects Ltd. Therefore, in view of the findings given in the case of M/s. J Kumar Infraprojects Ltd., there is no merit whatsoever for making the same addition on protective basis in the case of the Assessee. The protective addition made is directed to be deleted. These grounds of appeal of the department are dismissed.
In the result, for AY 2019-20, the appeal of the Assessee is partly allowed and that of the department is dismissed.
Now we take up revenue Appeal in A.Y 2020-21 33. In this year, the Department has filed appeal. The grounds of appeal in the department appeal reproduced as under:
"1. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) erred in restricting/deleting the addition/disallowance of Rs. 84,94,00,000/-in respect of unexplained money as per the Cash Diary, made by the AO u/s 691 of the Act to Rs.7,00,000/- ignoring the facts and circumstances of the case established by the Assessing Officer.
2. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) erred in providing relief on the issue of unexplained money as per the Cash Diary, by observing that AO has not proved otherwise and the amounts written against such code words cannot be brought to tax ignoring the facts and circumstances of the case established by the Assessing Officer that the diary maintained by the assessee is for unaccounted cash generation and out of books expenses and the AO has given the telescoping benefits to the assessee to the extent of generation of scrap sale and bogus purchase entries mentioned in the diary. Therefore, it was established the entries mentioned in the diary were not brought to tax.
28 J Kumar Madanlal Gupta 3. Whether on the facts and circumstances of the case and in law, the Led. CIT(A) erred in providing relief on the issue of unexplained money as per the Cash Diary, by observing that entries relating to HO, NG, KG, 3 No, etc. relate to movement of cash between the head office and residence of Shri Nalin Gupta, Shri Kamal Gupta ignoring the facts and circumstances of the case established by the Assessing Officer that the assessee did not submit reconciliation of cash diary and correlation with cash in hand and entries corresponding to HO and there is no evidence of bringing and sending back cash to HO.
4. Whether on the facts and circumstances of the case and in law, the Ld. CITIA) erred in providing relief, on the issue of unexplained money as per the Cash Diary, by observing that face "O' and 'N' are accepted as opening balance figures and cannot be brought to tax a cash receipt ignoring the facts and circumstances of the case established by the Assessing Officer that whenever working established that 'O' and 'N' are carry forward entries, relief already been given to assessee in assessment and where page wise working does not established 'O' and 'N' are carry forward, the same should be treated as fresh receipts and brought to tax as if working does establish O' and 'N' as carry forward, the same cannot be treated as carry forward.
5. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in providing relief on the issue of unexplained money as per the Cash Diary, by ignoring the facts and circumstances of the case established by the Assessing Officer that various corroborate evidences found wrt bogus purchase, scrap sale in cash and out of books murrum expenses and mentioned in dairy.
6. The appellant craves leave to add, delete, modify the grounds of appeal before or at the time of hearing."
Though the Assessee has not filed any appeal, However has filed additional grounds of appeal vide letter dated 26.03.2025. The additional grounds of the Assessee read as under:
“1. The Ld. AO erred in issuing a Notice under section 148 of the Act in violation of section 151A of the Act read with CBDT
29 J Kumar Madanlal Gupta Notification 18 of 2022 dated March 29, 2022 as the same has to be issued by Faceless Assessing Officer.
2. The Ld. AO erred in issuing a Notice u/s.148 of the Act without having a valid DIN as per CBDT Circular 19 of 2019 dated August 14, 2019 in the sanction obtained under section 151 of the Act.
The Appellant craves to leave to add, amend, alter or delete any or all the above grounds of appeal.”
In respect of the additional grounds of appeal of the Assessee, the Ld. Department Representative (Ld. DR in short) did not objected to the admissibility of the same. The additional grounds of appeal being legal grounds for which no new facts were required and hence, the same were admitted for adjudication following the decision of the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT 229 ITR 383 (SC) wherein it is held that where question of law is concerned, additional grounds on legal issued can be raised at any time.
Both the above additional grounds of appeal raised in this year are identical and same as that raised in AY 2019-20. Even the facts for this year in respect of the additional grounds of appeal are same as that of AY 2019-20. Therefore in view of our findings given in the case of Assessee in AY 2019-20, these additional grounds raised by the Assessee are hereby dismissed.
We now take up the grounds of appeal in the department appeal. All the grounds of the department appeal relates to challenging the addition made by AO of Rs.80.94 cr. on Protective basis in respect of noting in black colour Luxor diary found at the residential premises of Shri Nalin Gupta and deleted by Ld. CIT(A). The grounds of appeal are identical to that taken in the case of Assessee in AY 2019-20. Therefore In view of the detailed discussion in the order passed in the case of Assessee for AY 2019-20, these grounds of appeal of the department are hereby dismissed.
30 J Kumar Madanlal Gupta 38. In the result, for AY 2020-21, the additional grounds raised by the Assessee are dismissed and the appeal of the department also stands dismissed.
Now we take up assessee’s appeal No. 4111/Mum/2024 and revenues appeal No. 4582/Mum/2024 as both the appeals pertains to same assessment year i.e A.Y 2021-22 and are against the order of Ld. CIT(A) ...........
For this year, the Assessee has raised the following grounds of appeal:
“1. On facts and circumstances of the case and law on the subject, the learned assessing officer erred in making addition of Rs.27,000/- as unexplained expenditure u/s 69C of the Income Tax Act. The learned CIT(A) erred in upholding the action of the ld. AO by confirming the additions of Rs.27,000/- without correct appreciation of the facts of the case and law on the subject. In view of the facts and circumstances of the case and law on the subject, the addition be deleted.
2. The appellant craves leave to add, amend, alter or delete any ground of appeal on or before the date of hearing.”
The Department has also raised the following grounds of appeal-
"1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in restricting/deleting the addition/disallowance of Rs. 51,75,24,000/ in respect of unexplained money as per the Cash Diary, made by the AO u/s 69A of the Act to Rs. 72,00,000/- ignoring the facts and circumstances of the case established by the Assessing Officer.
2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in providing relief on the issue of unexplained money as per the Cash Diary, by observing that AO has not proved otherwise and the amounts written against such code words cannot be brought to tax ignoring the facts and circumstances of the case established by the Assessing Officer that the diary maintained by the assessee is for unaccounted cash generation and out of books expenses and the AO has given the telescoping
31 J Kumar Madanlal Gupta benefits to the assessee to the extent of generation of scrap sale and bogus purchase entries mentioned in the diary. Therefore, it was established the entries mentioned in the diary were not brought to tax.
3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in providing relief on the issue of unexplained money as per the Cash Diary, by observing that entries relating to HO, NG, KG, 3 No, etc. relate to movement of cash between the head office and residence of Shri Nalin Gupta, Shri Kamal Gupta ignoring the facts and circumstances of the case established by the Assessing Officer that the assessee did not submit reconciliation of cash diary and correlation with cash in hand and entries corresponding to HO and there is no evidence of bringing and sending back cash to HO.
4. Whether on the facts and circumstances of the case and in law the Ld. CITTA) erred in providing relief on the issue of unexplained money as per the Cash Diary by observing that once O' and 'N' are accepted as opening balance figures and cannot be brought to tax in cash receipt ignoring the facts anal circumstances of the case established by the Assessing Officer that whenever working, established that "O' and 'N' are carry forward entries, relief already been given to assessee in assessment and where page wise working does not established O' and 'N' are carry forward, the same should be treated as fresh receipts and brought to tax as if working does establish ‘O' and 'N’ as carry forward, the same cannot be treated as carry forward.
5. Whether on the facts and circumstances of the case and in law the Ld. CITI(A) erred in providing relief on the issue of unexplained money as per the Cash Diary by ignoring the facts and circumstances of the case established by the Assessing Officer that various corroborate evidences found w.r.t bogus purchase, scrap sale in coat and out of books murum expenses and mentioned in dairy.
6. Whether on the facts and circumstances of the case and in law the Ld. CITI(A) erred in deleting addition made by AO for Rs. 70,20,000/- u/s 69A of the Act ignoring the facts and circumstances of the case established by the Assessing Officer that various corroborate evidences found w.r.t unexplained investment in gold in cash.
32 J Kumar Madanlal Gupta
7. The appellant craves leave to add, delete, modify the grounds of appeal before or at the time of hearing.”
The Assessee has raised the following additional grounds of appeal vide letter dated 26.03.2025.
“1. The Ld. AO erred in issuing a Notice under section 148 of the Act in violation of section 151A of the Act read with CBDT Notification 18 of 2022 dated March 29, 2022 as the same has to be issued by Faceless Assessing Officer.
2. The Ld. AO erred in issuing a Notice u/s.148 of the Act without having a valid DIN as per CBDT Circular 19 of 2019 dated August 14, 2019 in the sanction obtained under section 151 of the Act.
The Appellant craves to leave to add, amend, alter or delete any or all the above grounds of appeal.”
In respect of the additional grounds of appeal of the Assessee, the Ld. Department Representative (Ld. DR in short) did not objected to the admissibility of the same. The additional grounds of appeal being legal grounds for which no new facts were required and hence, the same were admitted for adjudication following the decision of the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT 229 ITR 383 (SC) wherein it is held that where question of law is concerned, additional grounds on legal issued can be raised at any stage of hearing.
Both the above additional grounds of appeal raised in this year are identical and same as that raised in AY 2019-20. Even the facts for this year in respect of the additional grounds of appeal are same as that of AY 2019-20.Therefore in view of our findings given in the case of Assessee in AY 2019-20, these additional grounds raised by the Assessee are hereby dismissed.
Now we take up the grounds of appeal raised in the Assessee appeal and Department appeal.
33 J Kumar Madanlal Gupta 45. Grounds of appeal no. 1 of Assessee appeal relates to challenging the addition made of Rs.27,000/- towards unexplained expenditure u/s.69C of the Act based upon the noting made in the diary found and seized during the course of search action.
Since this issue is identical to the grounds of appeal no.2 raised by the Assessee in AY 2019-20. Therefore in view of our discussion made and finding given in the order passed in case of Assessee for AY 2019-20, this ground of appeal of the Assessee is dismissed.
Grounds of appeal nos. 1 to 5 of the department appeal relates to challenging the addition made by AO of Rs.51.76 cr. on Protective basis in respect of noting in black colour Luxor diary found at the residential premises of Shri Nalin Gupta and deleted by Ld. CIT(A). Since the grounds of appeal are identical to that taken in the case of Assessee in AY 2019-20. Therefore in view of our detailed discussion in the order passed in the case of Assessee for AY 2019-20, these grounds of appeal of the department are hereby dismissed.
Grounds of appeal no. 6 of the department appeal relates to challenging the addition made by AO of Rs.70,20,000/- u/s.69A of the Act towards unexplained investment in gold based upon certain whatsapp chat between Assessee and one Suresh Poddar.
49. In this regard, we noticed that the AO in the assessment order has reproduced whatsapp chat found in the mobile of the Assessee. Two whatsapp chats are referred by the AO, which are sent by Shri Suresh Poddar (Prop. of Poddar Gems). As per the heading of the whatsapp chats, it is stated as ‘Guptaji Estimate’ and thereafter chart is drawn whereby date, name of family member of the Assessee is stated, purchase party name is stated, total amount, GST, net amount is stated and on right side of this chart, reference is made to date and description of item wherein ‘gold’ and ‘cash’ is stated (in the second whatsapp chat, on right side only ‘cash’ is stated) and amount. At the bottom of the chart, total amount is aggregated on left side and thereafter, reduced the amount aggregated on right side and balance amount is ascertained and from which commission amount is reduced. After going through the same the AO has inferred that the amount stated against the word ‘cash’ on the right side of both the whatsapp chat [45,20,000 (+) 25,00,000 = 70,20,000] is towards
34 J Kumar Madanlal Gupta purchase of gold from Suresh Poddar and this being unexplained and not recorded in the books of account of any of the family members, the same is added in the hands of the Assessee as per without prejudice submission filed in family members cases before AO in respect of any deficiency being considered in the hands of the Assessee.
However, the Ld. CIT(A) deleted the addition made thereby considering the entire facts of the case and more particularly that M/s. Poddar Gems i.e. Prop. Suresh Poddar only deals in diamonds and not Gold and this facts is confirmed by Shri Suresh Poddar in reply filed in response to notice issued u/s.133(6) of the Act.
Now, before us, the Assessee contended that the chart referred to in the whatsapp chat is sent by Suresh Poddar and thus prepared by Suresh Poddar and not the Assessee herein or any of his family members. It was contended that Assessee or his family members have purchased diamonds from Suresh Poddar i.e. Poddar Gems and also from Krishna Enterprise and there is no gold purchased and neither any gold is given to Suresh Poddar nor any cash is paid to him as reference made on right side of the chart. The Assessee contended that the gross amount on the left side of the chart towards purchase of diamonds is paid via banking channel by the respective family members and for which reliance was placed on the invoices issued by Poddar Gems / Krishna Enterprise, ledger account in respective family members books of account and their bank statement highlighting the payments made wherein the name of the party is also mentioned in the bank statement. These documents were filed before the AO and also before Ld. CIT(A) and is part of the paper book filed before us at pages 72 to 111. Assessee further contended that AO issued notice u/s.133(6) of the Act to Shri Suresh Poddar and he responded to the notice issued and filed letter giving explanation supported with documentary evidences such as his balance sheet, profit and loss account including that of Poddar Gems, bank statements highlighting amounts received towards sale of diamonds, ledger account in his books of account and invoices. It was thus contended that having paid the gross amount via banking channel, the chart showing reduction of amounts mentioned on right side in respect of gold and cash has no relevance. Lastly, it was contended that the whatsapp chat nowhere
35 J Kumar Madanlal Gupta show that any gold is purchased in cash from Shri Suresh Poddar as inferred by the AO.
On the contrary Ld. DR relied upon the order of the AO and contended that the AO has rightly made addition in respect of cash noting in the whatsapp chat towards purchase of gold, which was not recorded in the books of account of the respective family members.
We have heard, the counsels for both the parties, perused the documents placed on record and also the orders passed by the lower authorities and the documentary evidences relied upon before us. It is an undisputed fact that 2 whatsapp message is sent by Suresh Poddar to the Assessee, which was found from the mobile of the Assessee. As per the whatsapp chat, which is in the form of tabulated chart, details of diamonds purchased by family members of the Assessee was given with date and amount including GST as seen on the left side of the chart. The total of the same is also clearly reflected in the chart. On the right side of the said chart, (in first whatsapp chat referred by AO), gold and cash is mentioned with amount i.e. cash mentioned with amount of 45,20,000/- and in the second whatsapp chat referred by AO, on right side, on cash is mentioned with amount of 25,00,000/-. In both these whatsapp chat charts, the left side aggregate amount is reduced from the total amount mentioned on right side of the chart and thereafter balance pending amount is mentioned. The AO has inferred that the cash amount mentioned in the right side of both these charts are gold purchased in cash from Shri Suresh Poddar and the AO thus made addition of Rs.70,20,000/- [45,20,000 (+) 25,00,000] u/s.69A of the Act as unexplained investment in gold holding that the gold purchased in cash is not reflected in the books of account of the respective family members.
We are not in agreement with the inference drawn by the AO for making addition of Rs.70,20,000/- as unexplained investment in gold. Nowhere in the whatsapp chat, is there any mention of gold purchased in cash from Suresh Poddar. In fact, it is also undisputed fact that Suresh Poddar including his prop. concernPoddar Gems only deals in diamonds and not in gold. This is also confirmed by response given to AO by Shri Suresh Poddar in response to summons issued u/s.133(6) of the Act wherein he has categorically stated that he only deals in 36 J Kumar Madanlal Gupta diamonds and not in gold and filed supporting documentary evidences to this effect, which is not controverted by the AO or the Ld. DR before us. Secondly, it is also undisputed fact as supported by various documentary evidences that the entire amount towards purchase of diamonds from Poddar Gems and Krishna Enterprise by various family members is paid via banking channel and recorded in the books of account of the family members and this fact is not disputed by AO also for obvious reason that the payment for the same is made via banking channel and duly reflected in the books of account of the respective family members. Once the payment is made towards purchase of diamonds via banking channel, the chart showing deduction of amount mentioned on the right side from the aggregate amount of diamond purchase is clearly wrong and there cannot be any pending payment towards purchase of diamonds. Thus, it cannot also be inferred that payment against purchase of diamonds is made in cash / gold since if that was the case, then entire payment for purchase of diamonds would not be made via banking channel and all these transactions relate to the financial year 2020-21 i.e. much before the date of search action on 11.10.2022.
In view of the above, there is nothing to show or prove that Assessee or his family members have purchased gold from Shri Suresh Poddar in cash and thereby the inference drawn by AO and allegation made regarding unexplained investment in gold is not supported by any incriminating material or evidence and neither corroborated with any other evidence more particularly, no such excess gold is found in course of search action as held by Ld. CIT(A) and this finding was not controverted by Ld. DR. There is no merit in the addition made by the AO of Rs.70,20,000/- and thus, the order of the Ld. CIT(A) is confirmed. The grounds of appeal of the department is dismissed.
In the result, for AY 2021-22, the appeal of the Assessee and the appeal of the department is dismissed.
Now we take up assessee’s appeal No. 4110/Mum/2024 and revenues appeal No. 4581/Mum/2024 as both the appeals pertains to same assessment year i.e A.Y 2022-23 and are against the order of Ld. CIT(A) ...........
37 J Kumar Madanlal Gupta
For this year, the Assessee has raised the following grounds of appeal:
“1. On facts and circumstances of the case and law on the subject, the learned assessing officer erred in making addition of Rs.1,50,00,000/- considering unsecured loan as unexplained Income u/s 69A r.w.s 115BBE of the Income Tax Act, 1961. The learned CIT(A) erred in upholding the action of the ld. AO by confirming the additions of Rs. 1,50,00,000/- without correct appreciation of the facts of the case and law on the subject. In view of the facts and circumstances of the case and law on the subject, the addition be deleted.
2. On facts and circumstances of the case and law on the subject, the learned assessing officer erred in making addition of Rs.10,15,000/- as unexplained expenditure u/s 69C of the Income Tax Act. The learned CIT(A) erred in upholding the action of the ld. AO by confirming the additions of Rs. 10,15,000/- without correct appreciation of the facts of the case and law on the subject. In view of the facts and circumstances of the case and law on the subject, the addition be deleted.
3. On facts and circumstances of the case and law on the subject, the learned assessing officer erred in making addition of Rs. 59,82,00,000/- of noting in cash diary as unexplained Investment u/s 69A of the Income Tax Act. The learned CIT(A) erred in confirming additions of Rs.55,50,000/- without correct appreciation of facts of the case and law on the subject. In view of the facts and circumstances of the case and law on the subject, the addition be deleted.
4. The appellant craves leave to add, amend, alter or delete any ground of appeal on or before the date of hearing.”
The department has raised the following grounds of appeal:
"1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in restricting/deleting the addition/disallowance of Rs. 59,82,00,000/ in respect of unexplained money as per the Cash Diary, made by the AO u/s 38 J Kumar Madanlal Gupta 69A of the Act ignoring the facts and circumstances of the case established by the Assessing Officer.
2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in providing relief on the issue of unexplained money as per the Cash Diary, by observing that AO has not proved otherwise and the amounts written against such code words cannot be brought to tax ignoring the facts and circumstances of the case established by the Assessing Officer that the diary maintained by the assessee is for unaccounted cash generation and out of books expenses and the AO has given the telescoping benefits to the assessee to the extent of generation of scrap sale and bogus purchase entries mentioned in the diary. Therefore, it was established the entries mentioned in the diary were not brought to tax.
3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in providing relief on the issue of unexplained money as per the Cash Diary, by observing that entries relating to HO, NG, KG, 3 No, etc. relate to movement of cash between the head office and residence of Shri Nalin Gupta, Shri Kamal Gupta ignoring the facts and circumstances of the case established by the Assessing Officer that the assessee did not submit reconciliation of cash diary and correlation with cash in hand and entries corresponding to HO and there is no evidence of bringing and sending back cash to HO.
4. Whether on the facts and circumstances of the case and in law the Ld. CITTA) erred in providing relief on the issue of unexplained money as per the Cash Diary by observing that once O' and 'N' are accepted as opening balance figures and cannot be brought to tax in cash receipt ignoring the facts anal circumstances of the case established by the Assessing Officer that whenever working, established that "O' and 'N' are carry forward entries, relief already been given to assessee in assessment and where page wise working does not established O' and 'N' are carry forward, the same should be treated as fresh receipts and brought to tax as if working does establish ‘O' and 'N’ as carry forward, the same cannot be treated as carry forward.
5. Whether on the facts and circumstances of the case and in law the Ld. CITI(A) erred in providing relief on the issue of unexplained money as per the Cash Diary by ignoring the facts and 39 J Kumar Madanlal Gupta circumstances of the case established by the Assessing Officer that various corroborate evidences found w.r.t bogus purchase, scrap sale in coat and out of books murum expenses and mentioned in dairy.
6. Whether on the facts and circumstances of the case and in law the Ld. CITI(A) erred in deleting addition made by AO for Rs.13,16,00,000/- u/s 69A of the Act ignoring the facts and circumstances of the case established by the Assessing Officer that various corroborate evidences found w.r.t unexplained investment in gold in cash.
7. The appellant craves leave to add, delete, modify the grounds of appealbefore or at the time of hearing.”
As there are no common grounds of appeal in the appeals filed by the Assessee and Department, therefore we first deal with the grounds of appeal of the Assessee.
Grounds of appeal
no.1 of the Assessee relates to challenging the addition confirmed of Rs.1.50 cr. u/s.69A of the Act. The facts in respect of this ground in brief are that during the course of search action at the residence of Shri Nalin Gupta, a loose sheet was found in a plastic envelop and the same was seized as page number 1 of loose paper bundle (Annexure A8) and this page is reproduced in the assessment order at page
3. As per the loose page found and seized, the AO observed that total amount of Rs.6 cr. is received by Assessee and family members from Sumitradevi Chaudhary in lieu of cash given by Assessee and family members. In the light of the seized material, the AO made addition of Rs.1.50 cr. in the hands of the Assessee u/s.69A of the Act and separate additions were made in other family members cases.
61. Before the Ld. CIT(A), the Assessee filed detailed submission and explanation, however, after considering the same, the Ld. CIT(A) confirmed the addition made by the AO observing that as per the seized material itself, this was accommodation entry and while placing reliance on the statement recorded of Shri Nalin Gupta during the course of search action and the retraction Affidavit of Shri Nalin Gupta did not clearly and specifically referred to this seized paper.
40 J Kumar Madanlal Gupta 62. Before us, the Assessee filed additional evidences (in the shape of letters exchanged between Assessee and family members with Sumitradevi Chaudhary and termination of MOU entered earlier – vide paper book no.3 consisting of 7 pages), vide application dated 02.04.2025 with the request for admission of the same under rule 29 of ITAT Rules, 1962 and relied upon the decision of Hon’ble Supreme Court in the case of Tek Ram v. CIT 357 ITR 133 (SC). It was contended that the additional evidences now filed have direct bearing on the issue at hand and requested that the same be admitted and the matter be restored back to the file of the AO for de novo adjudication of the issue by duly considering the additional evidence now filed. The Assessee contended that the amount received from Sumitradevi Chaudhary was genuine amount and not accommodation entry and was towards the advance amount received for sale of land for which MOU was duly entered and the same was also found during the course of search action. Sumitradevi Chaudhary also filed Affidavit before the AO stating therein that the amount was paid as advance for purchase of land from Assessee and various other family members, however, the same is not construed properly and the lower authorities have merely made the addition based upon the seized loose paper. The additional evidence now filed including the letters exchanged and termination of MOU entered earlier for sale of land and part amount repaid by Assessee duly highlighted by way of bank statement and since all these have happened after the passing of the order by Ld. CIT(A), these evidences could not be filed either before the AO or the CIT(A). Hence, it was prayed that the additional evidences have bearing on the issue and the same may be admitted and matter restored to AO for fresh adjudication.
The Ld. DR on the other hand vehemently objected to the admission of additional evidences filed and also filed detailed written submission objecting to the admission of the additional evidence. The crux of the objection of the Ld. DR for admitting the additional evidence is that the same is merely after thought;no explanation given as to why the same could not be produced earlier; how the same were critical to the case; no failure of natural justice; sufficient opportunity given during assessment and CIT(A) proceedings; documents are self- serving; etc. and reliance placed on various decisions referred to in the written submission. The Assessee in response to the submission of Ld.
41 J Kumar Madanlal Gupta DR filed rejoinder wherein certain decisions are relied upon in support of the contentions made before us and also distinguishing the case laws relied upon by Ld. AR.
We shall first of all deal with the issue of admissibility of additional evidence. We have given due consideration to the oral arguments and written submission made by the Ld. DR and the contention of the Assessee for admission of additional evidence including the rejoinder filed against submission of DR. The additional evidence filed by the Assessee in the shape of letters communicatedby Assessee and family members with Sumitradevi Chaudhary and vice versa wherein earlier MOU entered between them dated 07.12.2021 is referred in respect of sale of land and advance amount paid aggregating to Rs.6 cr. to family members including Assessee. The letters communicated between them are dated 06.01.2025 by Assessee and family members to Sumitradevi Chaudhary in respect of balance consideration of Rs.44 cr. to be paid and which was responded by Sumitradevi Chaudhary vide letter dated 10.01.2025 showing her inability to pay the same and requesting to not forfeit the advance amount paid of Rs.6 cr. Further letter from Assessee and family members dated 20.01.2025 to Sumitradevi Chaudhary for terminating the MOU entered dated 07.12.2021 and refund of advance amount in a period of about 7 months and first amount paid of Rs.5 lakhs by Assessee and subsequent payments made aggregating to Rs.70 lakhs till the date of hearing highlighted by filing bank statement separately. The contention of the Assessee is that all these events have taken place after the orders were passed by lower authorities and thus, these evidences could not be filed earlier being subsequent events. However, the copy of MOU dated 07.12.2021 and explanation of the Assessee that the amount was received as advance for sale of land was furnished before the lower authorities duly supported by Affidavit of Sumitradevi Chaudhary and thus, it cannot be said that these additional evidences are after thought or does not have any bearing on the issue at hand.
After having considered the entire facts and circumstances of the case, we are of the considered view that the additional evidences filed have bearing on the issue at hand. These additional evidences could not be filed before lower authorities for the obvious reason that the 42 J Kumar Madanlal Gupta letters communicated and the repayment of advance happened only after the orders were passed by the lower authorities. It is not in dispute that MOU dated 07.12.2021 was filed before the lower authorities including Affidavit of Sumitradevi Chaudhary and explanation furnished. It is seen that the AO has not examined Sumitradevi Chaudhary inspite of Affidavit filed by her and the lower authorities have simply relied upon the seized document for making the addition.
Be that as it may, we see no harm in restoring the issue back to the file of the AO for fresh adjudication with the direction to the AO to take into consideration the additional evidences now filed as also the other documentary evidences already on record and further documents that may be required or filed by the Assessee or required by the AO in respect of the matter in dispute. The AO shall deal with the issue afresh after providing due opportunity to the Assessee and the AO is at liberty to call and examine any person that he may deem fit in the matter. We have refrained from making any observation on the merits of the case and the entire issue is kept open to be decided afresh by the AO as per the directions given hereinabove. Thus it is ordered accordingly.
As we have admitted the additional evidence filed and restored the issue before the AO for de novo adjudication in terms of directions given hereinabove, therefore no decision is being given on merits of the issue. The issue is thus set aside to the file of the AO and this ground of appeal of the Assessee is allowed for statistical purposes.
Grounds of appeal no.2 of Assessee appeal relates to challenging the addition made of Rs.10,15,000/- towards unexplained expenditure u/s.69C of the Act based upon the noting made in the diary found and seized during the course of search action.
Since this issue is identical to the grounds of appeal no.2 raised by the Assessee in AY 2019-20. In view of the discussion made and finding given in the order passed in case of Assessee for AY 2019-20, this ground of appeal of the Assessee is dismissed.
43 J Kumar Madanlal Gupta 70. Grounds of appeal no.3 of the Assessee appeal relates to challenging the addition confirmed of Rs.55,50,000/- based upon the noting in the diary.
71. The AO made protective addition of Rs.59.82 cr. in the hands of the Assessee and substantive addition in the case of M/s. J Kumar Infraprojects Ltd. While adjudicating the appeal in the case of M/s. J Kumar Infraprojects Ltd., it was found that two noting in the diary at pages 13 and 10 with narration Nashik Bungalow with figures noted as 3.50 and 52 respectively totalling to Rs.55.50 lakhs was held to be cash received on sale of Bungalow at Nashik by the Assessee. It was also seen that the Assessee in the return of income had duly shown long term capital gains on sale of Nashik Bungalow without including cash element of Rs.55.50 lakhs noted in the diary. In the case of M/s. J Kumar Infraprojects Ltd., it was held that this amount of Rs.55.50 lakhs be taxed in the hands of present Assessee as part of sale consideration of Nashik Bungalow and the long term capital gains computed accordingly. The Ld. CIT(A) confirmed addition of Rs.55.50 lakhs in the hands of the Assessee on this very ground.
In view of the above, the addition confirmed by the Ld. CIT(A) of Rs.55.50 lakhs in the hands of the Assessee is hereby sustained with the direction to the AO to re-compute the long term capital gains on sale of Nashik Bungalow by including the amount of Rs.55.50 lakhs as part of sale consideration and thereby give consequential effect. The AO is directed to compute tax on this amount as per provisions of long term capital gains and provisions of sec.69A of the Act is not applicable since this being on-money received and thus, part of sale consideration of Nashik Bungalow. Consequently this ground of appeal of the Assessee stands partly allowed.
Now we take up the department grounds of appeal Ground nos. 1 to 5 all the grounds relates to addition made by AO of Rs.59.82 cr. on Protective basis in respect of noting in black colour Luxor diary found at the residential premises of Shri Nalin Gupta and partly deleted by Ld. CIT(A) by confirming addition of Rs.55.50 lakhs on substantive basis.
44 J Kumar Madanlal Gupta 74. Since the grounds of appeal are identical to that taken in the case of Assessee in AY 2019-20. Therefore in view of our detailed discussion in the order passed in the case of Assessee for AY 2019-20, these grounds of appeal of the department are hereby dismissed.
Grounds of appeal
no.6 of department appeal relates to challenging the addition made by AO of Rs.13,16,00,000/- u/s.69A of the Act towards unexplained investment in gold in cash, which has been deleted by the Ld. CIT(A). The facts of the case in respect of this issue has been elaborated by the AO in the assessment order in para 6 from pages 2 to 11. As per the AO, there are whatsapp chat between Assessee and Shri Suresh Poddar whereby Shri Suresh Poddar has sent photos of gold bars i.e. whatsapp chat dated 27.07.2021 wherein 7 gold bars photos are sent and in whatsapp chat dated 28.07.2021 3 gold bars photos are sent. The AO has stated that out of these 10 gold bars, one gold bar was found during the course of search action and noting in the black colour Luxor diary is found in the name of Shri Suresh Poddar on various dates as per chart drawn by AO on page 9 of the order, which total to Rs.1316.50. The AO has presumed that Assessee had purchased all 10 gold bars as per whatsapp chat and since only one gold bar was found during search, the rest 9 gold bars must have been sold out. The AO thus held that as per the noting in the diary, the total amount of Rs.13.16 cr. is paid in cash for purchase of gold bars from Shri Suresh Poddar and thus, added the same u/s.69A of the Act as unexplained investment in gold.
76. On appeal Ld. CIT(A) deleted the addition made by the AO on the ground that protective addition need not be made in the hands of the Assessee when substantive addition made in the case of M/s. J Kumar Infraprojects Ltd. has been dealt with extensively and substantial relief after examining the noting in the diary.
Now before us, the Ld. DR placed reliance on the order passed by the AO and relied upon the findings arrived at by the AO by going through the relevant pages of the assessment order. The Ld. DR
45 J Kumar Madanlal Gupta further contended that the noting in the diary as well as the whatsapp chat corroborated with each other and thus, proved that the Assessee has made unexplained investment in gold and thus, the AO has rightly made addition of Rs.13.16 cr. u/s.69A of the Act as unexplained investment in gold.
On the contrary the Assessee contended that detailed submission and explanation was furnished to the CIT(A), which is reproduced by the Ld. CIT(A) in the order passed. In respect of gold bullion whatsapp chat photos sent by Shri Suresh Poddar, Assessee contended that Shri Suresh Poddar does not deal in gold but deals only in diamonds and this fact was established during assessment proceedings wherein the AO issued notice u/s.133(6) of the Act to Shri Suresh Poddar and he responded with supporting evidences that he only deals in diamonds. With respect to the whatsapp chat, Assessee argued that Shri Suresh Poddar being known to the Assessee and family members and they have been purchasing diamonds from him and is trustworthy, whenever the Assessee or his family members or the Company M/s. J Kumar Infraprojects Ltd. desire to purchase gold bullion, they contact Shri Suresh Poddar who has his office at opera house, which is close to zaveri bazar, bullion market and at the request of the Assessee, he sends photos of gold bullion with quotation and seller name and bank details and this fact proves that the gold bullion is sold by third party and not Shri Suresh Poddar. Assessee contended that whatsapp chat referred by AO in para 2.1 on page 3 of assessment order, the gold bars shown therein are duly purchased by M/s. J Kumar Infraprojects Ltd. from the seller Mateshwari Jewellers as per the details stated in the whatsapp chat itself and the payment for the same is made via banking channel by M/s. J Kumar Infraprojects Ltd. and duly recorded in books of account of the said company and no discrepancy is pointed out by AO in respect of the same. In respect of whatsapp chat showing photos of gold bars (total 10 gold bars photos of 1 kg each) at pages 4 to 7 of the assessment order and out of which one gold bar was found during search action, the Assessee contended that M/s. J Kumar Infraprojects Ltd. had purchased 5 kg gold from Rajendrashuri Bullions on 30.06.2021 and out of the same, 1 gold bar of 1 kg was not to the satisfaction of the company and thus, the same was given back and Shri Suresh Poddar
46 J Kumar Madanlal Gupta was requested to send photos of 1 kg gold bars at his convenience so as to exchange the 1 kg gold bar. Shri Suresh Poddar sent photo of 7 gold bars on 27.07.2021 and still not satisfied, Shri Suresh Poddar sent photos of 3 gold bars on 28.07.2021 and out of this 1 gold bar of 1 kg was selected and exchanged with the earlier one purchased by M/s. J Kumar Infraprojects Ltd. and no excess gold bars were found in the course of search action, which proves that no gold bars were purchased in cash as presumed by AO and in respect of this, the AO further presumed that no excess was found since other gold bars must have been sold. In respect of noting in the diary in the name of Shri Suresh Poddar, the Assessee contended that noting in the diary related to business cash of M/s. J Kumar Infraprojects Ltd. sent from residence to office and vice versa on few occasion when Shri Suresh Poddar visited office / residence as Shri Suresh Poddar is known and trusted person and this explanation is duly accepted by Ld. CIT(A) also while considering the additions made relating to the diary. It was also pointed out that noting in the name of Shri Suresh Poddar is also found on the receipt side of the diary i.e. on page 11 of diary with amount of Rs.1.64 cr. and this noting is ignored by AO. Lastly, the Assessee further contended that nowhere in the diary noting it is stated gold bar or gold purchase and only name of Shri Suresh Poddar is noted and the noting in the diary are much prior to gold bar photos sent by Shri Suresh Poddar via whatsapp chat, which defies logic of the AO. It was thus pleaded that the Ld. CIT(A) had rightly deleted the protective addition of Rs.13.16 cr. made by the AO.
We have heard the counsels for both the parties, perused the material on record and also the whatsapp chat found in the mobile of the Assessee. We have already held in the case of Assessee in the appeal of department for AY 2021-22 that Shri Suresh Poddar does not deal in gold bullion and only deals in diamonds. Thus, the allegation of the AO that Shri Suresh Poddar has sold gold bars to the Assessee in cash is contrary to the facts of the case. In fact, Shri Suresh Poddar himself confirmed in response to notice issued u/s.133(6) of the Act that he does not deal in gold bullion and deals only in diamonds.In respect of the gold bar photos sent by Shri Suresh Poddar via whatsapp chat to the Assessee, it is seen that total 10 gold bars photos of 1 kg each were sent to the Assessee on 27.07.2021 and 47 J Kumar Madanlal Gupta 28.07.2021 and out of this only 1 gold bar of 1 kg was found in the course of search action and there is no other evidence found in search action or otherwise to presume that all 10 gold bars were purchased and out of which 9 gold bars were sold as assumed and presumed by AO. No corroborative evidence is found in this regard and neither the AO has made any addition in respect of any profit earned on sale of 9 gold bars as presumed by AO. With respect to 1 gold bar of 1 kg found during search action, the explanation of the Assessee is plausible that out of 5 kg gold bars purchased by M/s. J Kumar Infraprojects Ltd., one kg gold bar was not to the satisfaction and thus was sought to be exchanged for which Shri Suresh Poddar sent photos of 10 gold bars of 1 kg each. This explanation is also plausible explanation since no excess gold bar was found in search action as compared to gold bars recorded in the books of account of Assessee / family members / M/s. J Kumar Infraprojects Ltd. and neither any evidence is found of any gold bars being sold in cash. For this reason, we are of the considered view that the presumption of the AO that gold bars are purchased in cash from Shri Suresh Poddar is found not tenable.Having held that neither any gold bars are purchased from Shri Suresh Poddar in cash nor any excess gold bars found during the course of search action, the noting in the dairy in the name of Shri Suresh Poddar – both receipts and payment side of the diary, could not be equated with the purchase of gold bar in cash, as assumed and presumed by AO, without bringing any corroborative evidence in this regard. Further, the AO has only considered the payment side noting and ignored noting in the name of Shri Suresh Poddar on receipt side of the diary and considering the noting in the diary at both sides of the diary, the explanation of the Assessee that these noting were related to the business cash of M/s. J Kumar Infraprojects Ltd. and sent via Shri Suresh Poddar from residence to office and vice versa is already accepted in the case of M/s. J Kumar Infraprojects Ltd. where substantive addition was made and protective addition made in case of Assessee and both these additions are deleted. The Ld. CIT(A) has also given finding that these noting are duly examined and considered on merit in the case of M/s. J Kumar Infraprojects Ltd. and additions confirmed in case of M/s. J Kumar Infraprojects Ltd. in respect of certain noting in the diary that was not explained satisfactorily. Considering the totality of the facts and circumstances of the case, the protective addition of Rs.13.16 cr. is rightly deleted by Ld. CIT(A) and 48 J Kumar Madanlal Gupta the order of the Ld. CIT(A) is hereby confirmed. The grounds of appeal of the department is dismissed.
In view of the above, for AY 2022-23, the Appeal of the Assessee is partly allowed and that of the department is dismissed.
Order pronounced in the open court on 03.07.2025.
Sd/- Sd/- (PRABHASH SHANKAR) (SANDEEP GOSAIN) (ACCOUNTANT MEMER) JUDICIAL MEMBER Mumbai, Dated 03/07/2025 KRK, PS आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��थ� / The Respondent. 2. संबंिधत आयकर आयु� / The CIT(A) 3. आयकर आयु�(अपील) / Concerned CIT 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, मु�बई / DR, ITAT, Mumbai 5. गाड� फाईल / Guard file. 6. आदेशानुसार/ BY ORDER, स�ािपत �ित //True Copy//
उप/सहायक पंजीकार ( Asst. Registrar) आयकर अपीलीय अिधकरण, मु�बई मु�बई / ITAT, Mumbai मु�बई मु�बई