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Facts
The assessee, a partnership firm, was subject to search action, leading to additions by the AO for unaccounted receipts and unexplained investment in stock. The CIT(A) confirmed the addition for unaccounted receipts but deleted additions related to stock and estimated gross profit. The appeals by both the assessee and the revenue were before the ITAT.
Held
The Tribunal held that the addition for unaccounted receipts was not sustainable as a co-ordinate bench had ruled similarly. Furthermore, relying on decisions related to Zen Industries Pvt. Ltd. and Mayank Ashokbhai Khatri, the Tribunal deleted the additions related to unexplained investment in stock and estimated gross profit, as the loose sheets were not reliable evidence and the income was accepted in the hands of another partner.
Key Issues
Sustainment of additions for unaccounted receipts, unexplained stock investment, and estimated gross profit, and the validity of evidence used for these additions.
Sections Cited
132, 143(3), 143(1), 69A, 69
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Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH
Before: DR. BRR Kumar & Shri T. R. Senthil Kumar
Date of hearing : 18-03-2026 Date of pronouncement : 07-04-2026 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
These cross appeals are filed by the Assessee and Revenue as against the appellate order dated 26-02-2025 passed by the & 938/Ahd/2025 A.Y. 2022-23 Page No 2 Sojas Corporation vs. ACIT Commissioner of Income Tax (Appeals)-11, Ahmedabad arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2022-23.
Brief facts of the case is that the assessee is a Partnership Firm engaged in the business of wholesale trading of Tobacco Products, filed its Return of Income for the Asst. Year 2022-23 on 19-10-2022 declaring total income of Rs.11,53,100/-. The return was processed u/s. 143(1) of the Act. A search action u/s. 132 of the Act carried out in the case of MHS Group on 16-11-2021. During the search action, the office premises of the assessee was also covered u/s. 132 of the Act. Therefore the assessment was selected in compulsory scrutiny and during the assessment proceedings made addition of (a) Unaccounted receipt u/s. 69A of the Act of Rs.16,74,600/-.
(b) Unaccounted unexplained investment in stock u/s. 69 of the Act of Rs.10,659/- on substantive basis and Rs.7,83,841/- on protective basis.
(c) estimated the gross profit on protective basis of Rs.2,03,27,537/-.
Thus the Ld. A.O. assessed the total income as Rs.2,39,49,737/- and demanded tax thereon.
Aggrieved against the assessment order, assessee filed an appeal before Ld. CIT(A) who has confirmed the addition of Rs.16,74,600/- calculated by the A.O. as suppression of sales @ Rs. 300 per cartoon was justified and accordingly upheld the addition.
& 938/Ahd/2025 A.Y. 2022-23 Page No 3 Sojas Corporation vs. ACIT 3.1. Regarding addition of alleged undisclosed purchases made by the assessee emerged from the fact that M/s. Zen Industries Pvt. Ltd. had already sold the materials to the assessee and the entire sales in the hands of the Zen Industries Pvt. Ltd. stands deleted by Ld. CIT(A). Therefore corresponding purchases in the hands of the assessee are also deleted thereby the addition of Rs.7,94,500/- (Rs.10,659/- on substantive basis and Rs.7,83,841/- on protective basis) made on account of unaccounted/unexplained investment in stock u/s. 69 of the Act and Rs.2,03,27,537/- made on account of estimation of gross profit were also deleted by Ld. CIT(A).
Aggrieved against the appellate order, the assessee is in appeal before us in raising the following Grounds of Appeal:
1. On the facts and circumstances of the case and in law, the Order so passed by the Ld. AO is bad in law, illegal, invalid as passed without assuming a valid jurisdiction and also that of the Ld. CIT(A) inasmuch as that the relevant ground of appeals no. 1 & 2 as raised before him are summarily dismissed without narrating the grounds of decision, besides committing factual error of having not considered the arguments made in person by the authorized representative by observing as having not represented by the AR at all, as such having being passed arbitrarily.
2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has further erred in dismissing the legal grounds no.1 & 2 of the appeal filed before him challenging the impugned assessment order so passed by the A.O. being in violation of set procedure of law and thus being void ab initio.
3. On the facts and circumstances of the case and in law, the Ld. CIT(A) has further erred in denying justice, without any justification and thereby further erred in sustaining addition of Rs. 16,74,000/- representing unexplained receipt u/s. 69A of the Act so made by the A.O.
1) "In the facts and on the circumstances of the case, Ld. CIT(A) erred in deleting the addition of Rs.10,659/- on substantive basis & Rs.7,83,841/- on protective basis on account of unaccounted/unexplained investment in stock holding that entire sales in the hands of M/s. Zen Industries Pvt Ltd stands deleted, therefore the corresponding purchases in the hands of the appellant also are deleted." 2) "The Ld.CIT(A) has erred in deleting the Addition of Rs.2,03,27,537/- on account of Estimation of Gross profit on unaccounted purchase ignoring the seized documents and statement recorded during search/post-search proceedings." 3) "The Revenue craves leave to add/alter/armed and/or substitute any or all of the grounds of appeal."
5. Heard rival submissions and perused the materials available on record. Ld. Counsel for the assessee submitted that the assessee is not pressing Ground No. 1 & 2. Recording the same, Ground No. 1 & 2 are hereby dismissed.
6. The remaining sole ground is sustaining the addition of Rs.16,74,600/- representing unexplained receipt u/s. 69A of the Act. This issue is also covered in favour of the assessee vide Co-ordinate Bench decision in to 681/Ahd/2025 and rectification order dated 02-12-2025 passed in M.A. Nos. 64 to 66/Ahd/2025, wherein it is held as follows:
“…. 6.2. We have considered the rival submissions and perused the materials available on record. The assessee Late Shri Faridmiya Hussainmiya Shaikh died on 06-05-2021 and his wife is impleaded as the Legal Heir. After the death of the assessee, the Proprietorship Firm M/s. Sojas Corporation was reconstituted on 07-05-2021 consisting of two Partners namely Mohammed Anas Shaikh and Mohammed Asad Shaikh having 50% shares each. Thus the so called Daily Sales Report (DSR) dated 27-08-2021 and the statement recorded u/s. 132(4) one Shri Wasim Shaikh on 16-11-2021 cannot be the basis for making addition in the hands of the assessee. It is undisputed fact that Mohammed Anas Shaikh for the Asst. Year 2022-23 for the period & 938/Ahd/2025 A.Y. 2022-23 Page No 5 Sojas Corporation vs. ACIT beginning from 07 05-2021 to 21-11-2021 (i.e. till the date of search) has offered additional business income of Rs.27,19,604/- disclosed in his Return of income as his own income as pocketed by him only and the remaining amount is correctly credited and accounted for in the books of account of M/s. Sojas Corporation, being the new Partnership Firm. This income was accepted and assessed in the hands of Mohammed Anas Shaikh vide assessment order dated 08-02-2024 passed by ACIT Central Circle-1(1), Ahmedabad which is available at Page Nos. 158 to 171 of the Paper Book. Therefore the assessing officer is not correct making addition in the hands of the assessee and also without rejecting the books of accounts. Therefore the additions made u/s. 69A of the Act of Rs.37,29,300/-; Rs.29,99,100/- and Rs.5,60,400/- relating to the asst. years 2020-21 to 2022-23 are liable to be deleted. 6.3. Further in the case of Shri Mustufamiya Hussainmiya Shaikh namely another related person of MHS Group The Ld. CIT(A) deleted similar addition. As against Ld. CIT(A) deleting the addition, Revenue filed further appeal before this Tribunal in & 1889/Ahd/2024. The Co-ordinate Bench of this Tribunal vide order dated 30-04-2025 confirmed the deletion made by the Ld. CIT(A) by observing as follows: “…..
We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the statement of Shri Mayank Ashokbhai Khatri was not confronted to the assessee while recording the assessee’s statement by the Assessing Officer. Further the assessee during the assessment proceedings produced copy of ledger account from where the assessee demonstrated that the assessee has regular transactions of purchases from Zen Group and all the transactions of sales and purchase have been duly 7. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the statement of Shri Mayank Ashokbhai Khatri was not confronted to the assessee while recording the assessee’s statement by the Assessing Officer. Further the assessee during the assessment proceedings produced copy of ledger account from where the assessee demonstrated that the assessee has regular transactions of purchases from Zen Group and all the transactions of sales and purchase have been duly Mayank Khatri which was not even verifiable from the evidences produced by the Assessee. The Assessing Officer has not established the nexus of cash sale to the Zen Group to the assessee concern. The CIT(A) in para 4.4 categorically mentioned that there was no evidence related to unrecorded payment made in cash to Zen Group of concern which was found during the course of search action. Besides this, neither the purchase party i.e. the assessee or his family members nor the seller party i.e. Shri Rashminbhai M. Majithia, Director of M/s Zen Tobacco Pvt. Ltd. & M/s Zen Industries Pvt. Ltd. had admitted in the statement recorded during the course of search action or post search action that the said seized page no. 156 to 159 was related to the assessee or his group concern regarding unaccounted purchase of tobacco or other products. Therefore, the CIT(A) as rightly held that the addition made on account of initial investment in unaccounted stock and estimation of GP does not survive. There is no need to interfere with the findings of & 938/Ahd/2025 A.Y. 2022-23 Page No 6 Sojas Corporation vs. ACIT for A.Y. 2020-21 filed by the Revenue is dismissed. 6.4. Respectfully following the Co-ordinate Bench decision, the addition made in the hands of the assessee is hereby deleted and Ground No. 3 raised by the assessee is allowed. “ 3.1. Thus the common order dated 23-07-2025 is modified to the extent Para 6 to 6.4 as above and the Miscellaneous Applications filed by the assessee are hereby allowed.
6.1. It is undisputed fact that the so called daily sales report statement of Wasim Shaikh cannot be the basis for making addition in the hands of the assessee firm, however one of the Partner namely Mohammed Anas Shaikh for the Asst. Year 2022-23 has offered additional business income in his Return of Income which was accepted by passing assessment order dated 08-02-2024. Therefore the addition of Rs.16,74,600/- made in the hands of the assessee firm is liable to be deleted.
In the result, the appeal filed by the Assessee in is partly allowed.
Regarding Revenue’s appeal, Ground No. 1 the addition of Rs.7,94,500/- both on substantive and protective basis and Ground No. 2 namely estimation of gross profit of unaccounted purchase of Rs.2,03,27,537/-. These issues are also covered against the Revenue by the Co-ordinate Bench decision vide order dated 16-03-2026 in to 891/Ahd/2025 in the case of DCIT vs. M/s. Zen Industries Pvt. Ltd., wherein the addition was deleted by observing as follows: “….
It is also brought on record that Shri Mayank Ashokbhai Khatri, from whose possession the impugned loose sheets were found, subsequently appeared before the Assessing Officer in response to summons during the assessment proceedings and his statement under section 131 was recorded wherein he categorically stated that the & 938/Ahd/2025 A.Y. 2022-23 Page No 7 Sojas Corporation vs. ACIT transactions recorded on pages 156 to 159 represented his own personal financial dealings. He even executed a duly notarised affidavit affirming the same and clarifying that those papers did not belong to Zen Group or to the MHS Group concerns. The Assessing Officer, in the assessment framed in the case of Shri Mayank Khatri for the relevant year, has accepted this position and has taxed the income arising with reference to those papers in Mayank's own hands under section 143(3). In such a factual background, it is difficult to sustain the inference that the same loose sheets simultaneously represent unaccounted sale transactions of Zen Group to the MHS Group entities.
Moreover, the Assessing Officer, in making the impugned addition has simply adopted the figures from the loose sheets as unaccounted sales without bringing on record any corroborative material such as transport documents, delivery challans, confirmations, unrecorded cash receipts, or any discrepancy in stock or production vis-à-vis the regular books. The regular books of account of the assessee are audited. Apart from the loose sheets, no specific defect or discrepancy in the maintenance of these books has been pointed out. We, therefore, are in agreement with the reasoning and conclusion given by the Ld. CIT(A) that the seized loose sheets, in the facts of this case, do not constitute reliable evidence of unaccounted sales by the assessee. The rejection of books of account solely on that basis is not sustainable. The impugned addition made by estimating gross profit at 15 per cent on alleged unaccounted sales is therefore without legal and factual foundation. We accordingly uphold the order of the Ld. CIT(A) deleting the addition of Rs. 3,85,22,432/- and dismiss the ground raised by the Revenue.
In the result, the appeal of the Revenue is dismissed.”
8.1. Respectfully following the decision of the Co-ordinate Bench, Ground Nos. 1 & 2 raised by the Revenue are hereby dismissed.
In the result, the appeal filed by the Revenue in Ahd-2025 is hereby dismissed.