ASSISTANT COMMISSIONER OF INCOME TAX, CHANDIGARH vs. SARAF THE JEWELLERS, PUNJAB

1

IN THE INCOME TAX APPELLATE TRIBUNAL
“B” BENCH, CHANDIGARH

PHYSICAL HEARING

BEFORE HON’BLE SHRI RAJPAL YADAV, VICE PRESIDENT AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM

Assessee by : Sh. Sudhir Sehgal (Advocate) and Sh. Sahil Ratra
(Advocate) – Ld. ARs
Revenue by : Sh. Abhishek Pal Garg (CIT) & Dr. Ranjit Kaur (Addl.
CIT) – Ld. DRs

सुनवाईकीतारीख/Date of Hearing
:
12.02.2026
घोषणाकीतारीख /Date of Pronouncement
:
12.03.2026
आदेश / O R D E R
Per Bench

(e) Notwithstanding to the above said ground of appeal, Ld. CIT(A) has failed to appreciate that no compliance with Section 65B of the Indian Evidence Act in respect of digital data on the basis of which, certain uncalled for addition have been made and also at best for the sake of argument, it is stated that only appropriate net profit ratio could be applied on such alleged suppression of receipts, rather than confirming the entire addition of Rs.15,70,95,000/-.
2.That the Ld. CIT(A) has erred in making the addition of Rs.3,18,91,668/- on account of alleged unexplained expenditure on the construction of SCOs/DSS, disregarding the fact that no incriminating evidence was found during the course of assessment proceedings of any amount spent on the construction over and above the amount as per regular books of accounts.
3.(a) That the reference to DVO for valuation of the SCOs/DSS is illegal, arbitrary and against the settled law by the juri ictional Chandigarh bench of the ITAT that if no incriminating evidence is found in respect of the amount spent on the construction of SCOs /
DSS, the reference to DVO was illegal and thus, the addition by the Assessing Officer on the basis of valuation report as confirmed by the CIT(A) is contrary to the settled law as per binding judgment of ‘Khanna Infrabuild Pvt. Ltd. vs. DCIT reported in [2024] 110 ITR (Trib.) 161
(Chd.) wherein number of other judgments have been cited and followed.
(b)
That the CIT(A) was duty bound to follow the judgment of juri ictional bench of ITAT and thus, the addition as confirmed by him is not proper.
4. Notwithstanding the above ground of appeal, the adoption of CPWD rates by the DVO is contrary to the judgment of Punjab & Haryana High Court in the case of Sh. Rajesh Mahajan, in which, it has been held that CPWD rates are higher by 30% and the benefit of 15% is to be for self-supervision and thus, the addition has been made u/s 69C r.w. Section 115BBE of the difference of the alleged cost of construction is not sustainable.

recovered during above action coupled with loose sheets and welcome letters, made allegation of receipt of cash against sale of units by the assessee.
2.3 The complete details of 126 units as sold by the assessee during FYs
2018-19 to 2020-21 at Mohali Citi Center and the prices declared by the assessee in the regular books was tabulated and compared with prices mentioned in the seized documents and difference was computed. The statement of one Shri Santokh Singh, as recorded by investigation wing, was referred to support the allegation of receipt of on-money. In the above background, Ld. AO tabulated variation in 41 sale instances and the suppression of sales was quantified for AYs 2019-20 to 2021-22. The suppression for this year worked out to be Rs.1570.95 Lacs. Though the assessee raised various objections including the averment that the welcome letter was nothing but roughly drafted letters only showing higher values to make better negotiations with the customers and strike good bargains with the customers, all these objections stood rejected by Ld. AO.
Finally, this amount was added as undisclosed income of the assessee.
2.4 The Ld. AO, thereafter, went on to extrapolate similar findings for the remaining units also. The addition of Rs.1570.95 Lacs covered 41 sale instances. The assessee had sold 126 units in the three years and similar estimation was to be made for remaining 85 sale instances also. The market price of the SCOs was searched in the public domain website i.e.,
99acres.com and average price per square yards was worked out at Rs.1,35,000/- (approx.). The same was applied to remaining 85 unitsas well and sale suppression was worked out for all the three years for these units.

The sale suppression for this year worked out to be Rs.957.05 Lacs which was further added to assessee’s income.
2.5 The third addition as made by Ld. AO was for Rs.318.91 Lacs. The same was on the allegation that the assessee made unaccounted construction at Mohali Citi Centre. This addition stem from the fact that the assessee claimed to have sold the plots only whereas construction was outsourced to external entities namely M/s DS Construction Co. and M/s
DCS Structure Company.
In this regard, statement of Shri Roshan Singh (GM) was recorded who stated that he was coordinating all the overall monitoring and construction related work including coordination with engineers and Architects and he reported to Shri Anil Goyal. He stated that they were selling complete
SCOs. At the time of selling, the buyer was asked to issue cheques in favor of these construction companies and an agreement was signed between the customers and these construction companies for construction. Shri Anil
Goyal stated that no written agreement was signed between STJ and these construction companies. However, Ld. AO observed that all the design, approvals and plans of the projects were finalized and decided by the STJ group and there was no role of the customers in it. Secondly, no liberty was available to customer with regard to customization or exercise any user specific choices as the design of all the SCOs and showrooms was required to conform to larger plan of the project which had already been decided by the STJ group. Therefore, the agreement between the buyer and construction companies was clever arrangement by STJ group to bring down the cost of the showrooms and SCOs to enable billing at reduced price to evade GST.
To support the same, Ld. AO referred to the statement of Shri Santokh
Singh who stated that he purchased fully constructed DSS from the assessee. The payment was made in two parts i.e., one in the name of the assessee and the other in the name of M/s DCS Structure Company. At the time of booking, construction was already completed which would show that the agreement between the construction companies and customers was a clever arrangement by the assessee group so as to evade stamp duty and GST.
For external validation, reply of Jasmeen Kaur Varaich (in response to summons issued by the investigation wing) was also referred to by Ld. AO.
As per her reply, an agreement was signed between her and the assessee in which it was agreed that the assessee would get the work completed from M/s DS Construction Co. The copy of the agreement has been extracted at para 2.4 of the assessment order.
On the basis of these facts, Ld. AO alleged that constructed units were sold at much higher rates than the declared sale in the regular books and the difference was received in cash by the assessee. During assessment proceedings, the assessee stated that 29 units were constructed by it from two construction companies viz. M/s DS Construction and M/s DSC construction. The construction expenses were booked in the regular books of accounts. However, the case was referred by Ld. AO to DVO for valuation of the construction cost as declared by the assessee in the regular books of accounts. The report of DVO was received on 01-07-2022

who valued the construction cost at much higher figures than the recorded value. On the basis of the same, Ld. AO made allegation of unaccounted expenditure by the assessee. The assessee objected to valuation on the ground that CPWD rates were used instead of PWD rates. The Ld. AO rejected the same on the ground that valuation was done as per CBDT guidelines. The estimated difference was summarized as under: -
Declared Cost
Cost as per base of 2012
DVO estimation
Difference
Rs.1,38,59,554/-
Rs.1,24,86,085/-
Rs.4,09,97,200/-
Rs.2,85,11,175/-

After rejecting assessee’s objection to valuation, the amount of Rs.285.11
Lacs was added to the income of the assessee as unexplained expenditure u/s 69C. One unit had not been declared as constructed unit by the assessee to DVO. The construction of the same was estimated at Rs.33.80
Lacs which was further added to the income of the assessee.
2.6 The fourth addition as made by Ld. AO stem from the allegation that the assessee reflected higher Gross Profit (GP) in jewellery business during this year. Upon perusal of financials of Jewellery segment, Ld. AO observed that GP Rate as declared by the assessee in this year was 40.02%
whereas GP rate in earlier year AY 2019-20 was 11.84%. The assessee attributed higher GP rate to wide fluctuation in gold prices during the year. It was stated that the assessee maintained complete books of accounts and supporting documents and therefore, no adverse view was to be taken on this account.
The Ld. AO, finding minor discrepancies in the sales bills (i.e., some sales bills were unsigned, some bills were not having customer’s identification, most of the bills were less than Rs.1 Lacs etc.), Ld. AO alleged that the GP rate as declared by the assessee was not verifiable. The assessee was having another sister concern M/s KLG Jewellers which was closely related to functioning of the group. Any enhancement of GP rate due to sharp jump in gold prices would have a similar impact on both the firms since the two firms were closely inter-related. The percentage increase in GP rate of M/s
KLG Jewellers for AYs 2020-21 & 2021-22 was 2.77% & 31% respectively.
Assuming / applying similar growth rates to the GP rate of the assessee,
Ld. AO proceeded to compute excess profit as declared by the assessee in jewellery business. The same was quantified at Rs.1525.03 Lacs for AY
2020-21 and Rs.1443.53 Lacs for AY 2021-22. The assessee objected to the same on the ground that M/s KLG Jewellers was franchise of Tanishq which charges a profit before supplying the stock to the assessee. The assessee is able to make purchases at a lower cost from the market. The income declared in the regular books of account could not be treated as income from undisclosed sources.
However, Ld. AO compared the GP rates of two other entities viz. Shyam
Jewellers and Kalyan Jewellers who declared profits of 11.62% and 5.36%
respectively in AY 2020-21 and profit of 11.19% and 4.93% respectively in AY 2021-22. Finally, the assessee’s submissions were rejected and alleged excess income as shown by the assessee was added as unexplained cash credit u/s 68 r.w.s. 115BBE of the Act.
2.7 The fifth addition was addition of difference in stock at jewellery showrooms. The assessee had two showrooms viz., 45, NAC Manimajra,
Chandigarh and another showroom at Sector 17, Chandigarh. The stock was valued during search. The difference in net stock was computed at 10

made addition of Rs.20.59 Lacs. The excess stock at Sec.17 branch was valued at Rs.129.35 Lacs which was fully added to the income of the assessee.
2.8 The last of the addition was on account of excess cash found from the premises of the assessee. The cash found at SCO 45, NAC, Manimajra was Rs.103.81 Lacs which was added to assessee’s income u/s 69A for want of an acceptable explanation from the assessee.
2.9 Finally, the assessment was framed on 28-12-2022 which was subjected to assessee’s challenge in first appeal.
Appellate Proceedings
3.1 The assessee, by way of detailed written submissions, assailed the assumption of juri iction on legal grounds and also challenged quantum additions on merits. The Ld. CIT(A), after due consideration thereof as well as material on record, upheld the addition of alleged on-money for Rs.1570.95 Lacs but deleted addition of Rs.957.05 Lacs which was made on the basis of extrapolation. The same form subject matter of cross- appeals before us.
3.2 On the issue of third addition of Rs.318.91 Lacs which represent difference in DVO valuation and recorded values and alleged sale of one unit, Ld. CIT(A) endorsed the view of Ld. AO that the assessee was not merely selling plots but delivering completed or semi-completed units. The submissions that the two construction companies were independent contractors as engaged by the buyers was not convincing. The prices were artificially split between the assessee and these so-called contractors. The assessee did not furnish any independent valuation to demonstrate that the 12

DVO’s valuation was erroneous. Finally, the addition was confirmed against which the assessee is in further appeal before us.
3.3 On the fourth issue of alleged higher GP in jewellery business, it was noted by Ld. CIT(A) that the assessee was running two retail showrooms selling gold and diamond jewellery. The assessee’s books of accounts were duly audited and quantitative stock records of all items were maintained.
The purchases were through verifiable banking channels. No discrepancy was found in the purchase vouchers or stock records. Therefore, the book results could not be discarded unless there was clear evidence of suppression of sales which was not the case. M/s KLG Jewellers was exclusive franchisee of Tanishq and was bound to sell branded products at fixed prices as determined by franchisor. Its margin structure, cost profile and pricing policy is entirely different from that of an independent jewellery entity like the assessee who sells its own design and competes on prices in the open market. The department had verified the franchise status of M/s
KLG Jewellers during the course of search itself. Therefore, M/s KLG
Jewellers could not be said to be an independent retailer. Accordingly, the allegation of Ld. AO had no foundation. Further, there was no unexplained cash credit in terms of Sec.68. The provisions would be attracted only when a credit entry is found in the books of the assessee and the assessee is unable to explain its nature and source. The receipts under consideration were recorded sales proceeds. Their nature was known and their source was the trading activity of the assessee. Therefore, this addition was deleted against which the revenue is in further appeal before us.

assessee already offered additional income for profit element on net shortage of stock. The disclosure adequately covers the income element.
The double taxation could not be permitted. The Hon’ble Madras High Court in the case of KSM Guruswami Nadar & Sons (19 Taxman 533) recognized that stock discrepancies at different locations belonging to the same assessee could be netted. The other decisions of Tribunal also support the grant of telescoping benefit to the assessee. Therefore, the estimated GP addition of Rs.20.59 Lacs as made by Ld. AO was deleted.
Consequently, by applying similar logic, the addition of Rs.129.35 Lacs for excess stock was also deleted. Aggrieved, the revenue is in further appeal before us.
3.8 On the issue of cash found for Rs.103.81 Lacs which was treated as unexplained money u/s 69A, the assessee contended that this cash represent proceeds of unrecorded jewellery sales which had already led to shortage of stock and since gross profit on such shortage has been offered to tax, no separate addition is called for. However, Ld. CIT(A) noted that the statement given at the time of search that the cash belonged to the assessee group was abandoned and during assessment proceedings, it was claimed that the cash was generated out of unrecorded sales of the assessee. Such a shift in stand was without any evidence and raise serious doubts about the credibility of the explanation. When different versions are given at different stages, the burden would be on assessee to prove that the cash was indeed generated from sale of jewellery. No reconciliation statement, no customers’ records and no books were produced to establish any nexus. The presumption of Sec.132 (4A) and Sec. 292C would apply and therefore the benefit of telescoping could not be granted to the assessee. Moreover, the assessee offered additional income of Rs.30.36
Lacs only which merely represent gross profit margin embedded insales and cannot explain the entire sale proceeds found in cash form. The seized cash represent total receipts of an unrecorded activity whether it was property dealing or jewellery business. In the absence of any clear and consistent explanation supported by records, the only conclusion would be that the assessee had failed to discharge the burden u/s 69A and therefore, the addition was confirmed against which the assessee is in further appeal before us.
Our findings and Adjudication
4. The first two issues viz. receipt of alleged on-money on sale of units and addition on the basis of extrapolation has been adjudicated by us in cross-appeals for AY 2019-20 (supra) as under: -
4. We find that the assessee-firm came into existence on 10-03-2016. From the written submissions of Ld. AR, it emerges the assessee had entered into real estate business in February, 2018 and it enrolled for bid before statutory authority GMADA. The assessee was accorded permission by GMADA for construction of commercial site measuring 28348.87
Square meters in Block-F, Aero City, SAS Nagar, Mohali vide allotment letter dated 08-02-
2018. The assessee paid 15% of the initial amount and the remaining 85% of consideration was to be paid in 12 half- monthly installments with interest of 9%. Any delay in payment would attract higher interest rate of 14%. The delay could be condoned for maximum period of 3
years from due date and in case of breach of conditions of allotment letter, 10% of total price plus interest due till date would be forfeited and the site or building would be liable to be resumed. These facts are borne out of allotment letter as issued by GMADA to the assessee which has been placed in the paper-book. It could also be seen that this was the first real estate project for the assessee and there was huge burden on the assessee to make payment to GMADA within stipulated time. At the same time, the project had to be completed well within time and the assessee was to sell DSSs / SCOs within the shortest possible of time on the basis of negotiation keeping in mind that substantial amount of payment that was to be made to GMADA besides constructing the site. The assessee majorly gave the contract for construction of SCOs / DSS to third-parties to speedily construct major portion so as to attract the customers and sell the same. In order to arrange funds, the assessee adopted various marketing and sales strategies for the speedy sale of SCOs / DSSs and the assessee would negotiate with prospective buyers depending upon their willingness and financial capacity for 17

purchasing a particular size and location of SCOs / DSSs. In such circumstances, difference prices were quoted to different customers depending upon marketing conditions and urgency and margin for negotiation so as to maximize sales. The same explain variation of sale prices amongst customers for various units. To collect higher advances from customers, the assessee apparently prepared welcome letters for individual SCOs / DSSs which were displayed at business premises so that the visiting customers could see that substantial advanced had already been received from other buyers thereby enhancing the confidence in the project. As per assessee, these letters were roughly drafted letters indicating higher amount of booking to build up confidence amongst customers regarding the demand of the project and so as to facilitate negotiations. These letters were used only as a marketing tool to demonstrate demand for SCOs / DSSs and to support negotiations. A sample copies of these welcome letters have already been extracted in the assessment order. Upon perusal of the same, it could be seen that there is no signature either of the assessee or of the customer and only certain rate and amount received has been mentioned. Pertinently, there is no mention of any cash component in the deal. The letter merely states the customer’s name, unit number, rate and payment received. The same has not been acknowledged by any of the parties to the transaction. The same are not in the nature of any agreement, allotment letter, receipt or any legally enforceable document. No corroborative evidences such as cash receipt, bank trail, agreement to sale or confirmation from buyer has been brought on record to substantiate the allegation of receipts of on-money. The payment so received as per welcome letters matches with assessee’s regular books of accounts and the payments have been received through normal banking channels only. There is no mention of the fact in the welcome letter that the remaining consideration would be paid in cash and no such cash is shown to have exchanged between the parties. The findings of Ld. CIT(A) that post-search investigations, the buyers’
statements were recorded wherein the purchaser admitted to paying a portion of the consideration in cash over and above the registered value, is factually incorrect. Nothing of that sort could be borne out of assessment order. Even if presuming that such statement was ever recorded, the same was never confronted to the assessee and the same, at the most, would be third-parties’ statements. Unless the same are confronted to the assessee or the assessee is afforded opportunity of cross-examination of the so called buyers’ as alleged by Ld. CIT(A), the same, on standalone basis, could not be relied upon to make the impugned additions in the hands of the assessee since the same would be violative of principles of natural justice. It is another fact that no such statement has otherwise been referred to by Ld. AO in the assessment order nor such a fact of recording of statements have been demonstrated before us. Therefore, these findings of Ld. CIT(A) could not be accepted. The only statement as referred to by Ld. AO is the statement of Shri Santokh Singh which, in fact, favors the case of the assessee that the consideration was mentioned in the welcome letter do not representation actual sale consideration for the assessee.
5. Proceeding further, the statement of Shri Santokh Singh (who purchased one of the units) as recorded by the department, would assume much significance. The relevant questions put to him and his answers thereto has already been extracted at preceding para
2.8. Upon perusal of the same, it could be observed that the welcome letter of Shri Santok
Singh mentioned a rate of Rs.119 Lacs with receipt of Rs.11 Lacs through cheque on 19-11-
2019. However, a perusal of his reply would show that the amount mentioned in the welcome letter is much higher than the actual sale consideration as admitted by him. He has categorically stated that the price quoted to him was only Rs.115 Lacs and no brochure was shown to him. Shri Santokh Singh confirmed that DSS-99 was purchased by him for Rs.73

Lacs only after negotiations and only that much of payment was made by him to the assessee.
Initially, he was quoted a price of Rs.1.15 Crores but he was able to arrange funds only up to 70-80 Lakh. He had returned home without making a deal and thereafter, he was invited to the office of the assessee wherein the deal was finalized by Shri Anil Goyal for Rs.73 Lacs only for sale of plot and another Rs.11.2 Lakh was to be paid towards construction component.
Therefore, the whole case of Ld. AO that the welcome letters represent actual sale consideration by the assessee fall flat on the ground. On these facts, the argument that these welcome letters were merely a marketing and negotiation tool to create perception of demand and booking momentum amongst new customers in view of heavy financial burden of GMADA installment and development commitments is to be accepted. The same would also explain sale of units by the assessee at varied rates. It is not the case of the revenue that any of the unit was sold at a consideration which is less than the stamp duty value. The final price has been arrived by the assessee on case-to-case basis depending upon commercial negotiations and considering the immediate funds requirements. Further, none of the buyers is shown to have admitted paying higher sale consideration to the assessee than the recorded sales price.
There is no corroboration of allegation of Ld. AO.
6. It could further be seen that the digital loose excel sheets which have been considered by Ld. AO are undated, unsigned bearing no details of receipt of alleged on-money by the assessee.These loose excel sheets have no corroboration with any other material on record.
Similar is the case with whatsapp chats as relied upon by Ld. AO to fortify its allegation. The same are bereft of any third-party corroboration. It is trite law that no addition could be made merely on the basis of presumption, assumptions, conjectures or surmises. Pertinently, no enquiries have been made by Ld. AO from any of these buyers (except recording of statement of Shri Santokh Singh) to corroborate the allegations neither any such incriminating statement is borne out of the orders of lower authorities. It is settled law that no addition could be made merely on the basis of loose papers unless the same is corroborated by cogent evidences. It could be seen that no evidence of excess cash or unexplained investment by the assessee has been found during search proceedings since the only addition made is addition of alleged unaccounted sales. Therefore, the addition made by Ld. AO merely on the basis of welcome letters and loose sheets is misconceived and unjustified. The allegation that the units were sold at much higher price do not have any foundation.
7. Considering the facts and circumstances of the case and in the light of our findings, it is to be concluded that the allegation of Ld. AO remains unsubstantiated. We find substantial merits in the argument of Ld. AR and therefore, we delete the impugned addition of Rs.810.75
Lacs as made by Ld. AO and confirmed by Ld. CIT(A). The assessee succeeds in corresponding grounds of appeal. This being so, the addition of Rs.350.16 Lacs would also not survive since no incriminating material, in that respect, has been found from the assessee. The addition is merely an extrapolation by Ld. AO on the basis of probable market prices as gathered from portal 99acres.com. As rightly observed by Ld. CIT(A), such an approach by Ld.
AO is legally impermissible in the absence of any seized material or independent evidences.
The Ld. AO has merely presumed that all the other sales suffered similar suppression and applied market rate to compute actual consideration. The rates have been applied mechanically whereas no buyer was examined. No incriminating document was available for these units. The presumption of Ld. AO was speculative and contrary to the principle that additions in search cases must be based on cogent material. The extrapolation was flawed in methodology. The Ld. AO effectively replaced the assessee’s declared turnover for 85 units with an artificial figure without rejecting the books u/s 145(3). The absence of any direct evidence for the alleged suppression of sales in these sales instances render the addition unsustainable. The rates displayed on the property portal was not authenticated record of concluded transactions. These rates are posted by brokers, sellers or other users to advertise asking prices. There is no certainty that these rates correspond to actual deals and the rates are sensitive to range of variable including location, frontage, floor level, view, stage of construction, urgency of sale and buyer’s negotiation strength etc. The assessee’s books were not rejected u/s 145(3). No attempt was made to obtain comparable sale deeds for similar units sold during the year and no reference was made to Department’s valuation cell for technical opinion on market rates. There was no corroboration of such extrapolation. Therefore, the addition has rightly been deleted by Ld. CIT(A). In the result, the revenue’s appeal stands dismissed.

Facts being pari-materia the same, taking the same view, we delete impugned addition of Rs.1570.95 Lacs as made by Ld. AO and confirmed by Ld. CIT(A). The assessee succeeds in its corresponding grounds of appeal. The action of Ld. CIT(A) in deleting the addition of Rs.957.05 Lacs stand confirmed. The corresponding grounds as raised by the revenue stand dismissed.
5. The next issue is addition of alleged unaccounted expenditure for Rs.318.91 Lacs. The same has been adjudicated by us in cross-appeals for AY 2020-21 (supra) as under: -
5. The next issue is addition of alleged unaccounted expenditure for Rs.259.49 Lacs. The same has been made by Ld. AO by making a reference to DVO who has estimated the expenditure at much higher figures than the construction cost as reflected by the assessee in its regular books of accounts. From the facts, it clearly emerges that no incriminating evidence has been found during search which would indicate incurrence of unaccounted expenditure by the assessee. In the absence of such incriminating material, the reference to DVO itself would be illegal, arbitrary and bad-in-law. The facts of the present case would show that Ld. AO do not have any cogent material with him to support the allegation of unaccounted expenditure by the assessee in this year. In such a case, the reference u/s 142A could not be held to be a valid one and such a reference could not be held to be justified on the facts of the case. This proposition find support from the decision of Chandigarh Tribunal in the case of Khanna
Infrabuild Pvt. Ltd. [2024; 110 ITR (Trib.) 161 dated 12-10-2023]. The bench, while referring to the decision of Hon’ble Apex Court in the case of Abhisar Buildwell Pvt. Ltd. (149
Taxmann.com 399), observed that report of the DVO is purely based on estimation basis. The assessee raised various objections to the same including the objection that the rates of construction were taken as per CPWD rates as against PWD rates which have difference of at least 25%. Reference was made to the decision of Ahmedabad Tribunal in the case of CIT vs.

Jayantilal T. Jariwala (IT (SS) No.65/Ahd/2009 dated 28-10-2015). It was finally held by the bench that the reference to DVO was not valid and the consequential addition purely on the basis of estimated report of DVO could not be sustained. This case law duly supports the case of the assessee. The case of the assessee is further supported by the fact that DVO has applied CPWD rates as against PWD rates which have difference of at least 25%. Further, the benefit of self-supervision has also not been granted. This is against the settled position that local PWD rates are to be preferred over CPWD rates and CPWD rates are generally higher than local PWD rates (as per decision of Hon’ble Apex Court in Sunita Mansingha 393 ITR
121; the decision of Hon’ble Punjab & Haryana Court in the case of Rajesh Mahajan 50
Taxmann.com 206). In the case of Rajesh Mahajan (supra), it was observed by Hon’ble
Court that 15% of valuation could be allowed for personal supervision.
It is another fact that the assessee has engaged two contractors for construction of 29 units.
The payment to the two contractors form part of assessee’s regular books of accounts which is evident from copies of ledger extract of these two entities as placed on Page No. 98 to 100 of the paper books for this year. All the payments are through banking channels after deduction of applicable TDS. No independent enquiry is shown to have been carried out from the two contractors and there is no cogent material on record to indicate incurrence of unaccounted expenditure by the assessee. The assessee has maintained regular books of accounts which are duly audited as required under law. The books have not been rejected and no defect has been pointed out in the same. There is no iota of evidence which would reflect that the assessee indulged in out-of-books expenditure. It is trite law that no addition could be made merely on the basis of estimations or presumptions particularly in search cases.
Finally, considering the facts and circumstances of the case, we are of the considered opinion that the impugned addition, as sustained by Ld. CIT(A) in the impugned order, is unsustainable. By deleting the same, we allow corresponding grounds of assessee’s appeal.

Facts being pari-materia the same, taking the same view, we delete the impugned addition of Rs.318.91 Lacs and allow corresponding grounds of assessee’s appeal.
6. The issue of addition of higher GP in jewellery business has been adjudicated by us in cross-appeals for AY 2020-21 (supra) as under: -
6. The fourth issue that fall for our consideration is alleged higher profit in jewellery business. Strangely, this addition has been made by Ld. AO on the allegation that the assessee has declared higher GP in the jewellery business. The same is in complete disregard to the audited financial statements of the assessee. The excess profit allegedly shown by the assessee has been added u/s 68 as unexplained cash credit to tax the same at higher rates of Sec.115BBE. However, the excess profit is nothing but business receipts which already forms part of assessee’s regular books of accounts. To support the impugned addition, Ld. AO has compared the GP rate shown by assessee’ sister concern M/s KLG Jewellers, which, altogether has different business model. That entity is exclusive franchisee of Tanishq whereas the assessee is an independent seller. It has been assumed that percentage of growth in both the firms would be identical which conclusion is clearly fallacious one and devoid of any merits.

The Ld. CIT(A) has rightly appreciated the fact that the assessee’s books of accounts were duly audited and quantitative stock records of all the items were maintained. The purchases were through verifiable banking channels. No discrepancy was found in the purchase vouchers or stock records. Therefore, the book results could not be discarded unless there was clear evidence of suppression of sales which was not the case. M/s KLG Jewellers was exclusive franchisee of Tanishq and was bound to sell branded products at fixed prices as determined by franchisor. Its margin structure, cost profile and pricing policy would entirely be different from that of an independent jewellery entity like the assessee who sells its own design and competes on prices in the open market. Therefore, M/s KLG Jewellers could not be said to be an independent retailer. It has finally been concluded that the allegation of Ld.AO had no foundation. Further, the provisions of Sec.68 would be attracted only when a credit entry is found in the books of the assessee and the assessee is unable to explain its nature and source. The receipts under consideration were recorded sales proceeds. Their nature was known and their source was the trading activity of the assessee. Therefore, in our considered opinion, this addition has rightly been deleted by Ld. CIT(A). By endorsing the adjudication of Ld. CIT(A), we dismiss the corresponding grounds of revenue’s appeal. The revenue’s appeal stands dismissed.

Facts being pari-materia the same, taking the same view, we endorse the action of Ld. CIT(A) in deleting this addition. The corresponding grounds of revenue’s appeal stand dismissed.
7. The last issue pertains to shortage of stock, excess stock and cash found and seized. After going through the order of Ld. CIT(A), as enumerated by us in preceding paras 3.7 & 3.8, we find that all these issues have been clinched in correct perspective by Ld. CIT(A). The adjudication of Ld. CIT(A) find our concurrence and we endorse these findings. In the result, the corresponding grounds as raised by the assessee as well as the revenue stand dismissed.
8. In one of the grounds, the assessee has raised the issue of mechanical approval u/s 153D. This issue has also been dealt with by us in cross-appeals for AY 2020-21 (supra) as under: -
7. In one of the grounds, the assessee has raised the issue of mechanical approval u/s 153D. On the issue of approval u/s 153D, Ld. CIT(A), at paras 12.1 to 12.4 of the impugned order, noted that Ld. AO sent the draft assessment order along with assessment record to Addl. CIT and the requisite approval was accorded. The Ld. Addl. CIT duly considered the 22

issues involved in the draft assessment order and made the perusal of assessment record.
The allegation that the approval was mechanical approval had no basis. In Central charges, all search and seizure assessments are regularly supervised and monitored by the range heads.
The Addl. CIT as range head is actively involved in assessment of all such cases from beginning and at all stages of search and seizure assessment, the assessing officer discusses and seek his guidance. The CBDT Circular F.No.286/161/2006-IT (Inv. II) dated 22-12-2006
highlight the consultative approach between the Assessing Officer and the Range Head in search and seizure assessments. The range head as well as AO have followed the instructions
/ guidelines of the Board for the completion of search and seizure assessment and the assessment order was finalized by Ld. AO after obtaining approval u/s 153D from the Range
Head. The seized documents were part of the assessment records. The approval u/s 153D was accorded after due examination and verification by the Range Head. Therefore, the allegation of the assessee qua mechanical approval was without any basis. Further, the approval was in the nature of administrative power. The Range head do not examine or adjudicate upon rights and obligations of the assessee but only consider whether AO has fulfilled the requirement of Sec.153A or not. Reference was made to the decision of Hon’ble
Karnataka High Court in the case of Rishabchand Bhansali (267 ITR 577) to support the conclusion. In the given facts of the case, it could be said that Addl. CIT had applied his mind on the issues involved and accorded the requisite approval in accordance with the provisions of Act. Such approval could not be said to be mechanical one or without application of mind.
8. The aforesaid factual matrix as brought on record could not be controverted before us.
The issue of approval as taken by Ld. AO from Addl. CIT, in our considered opinion, has adequately been dealt with by Ld. CIT(A) in the impugned order and we concur with the same.
This adjudication does not warrant any interference on our part. The correspond grounds of assessee’s appeal stand dismissed. No other grounds have been urged in assessee’s appeal.

Facts being pari-materia the same, taking the same view, we endorse the adjudication of Ld. CIT(A) and dismiss assessee’s corresponding grounds of appeal.
Conclusion
9. The assessee’s appeal ITA No.1232/Chandi/2025 stand partly allowed. The revenue’s appeal ITA No.1594/Chandi/2025 stand dismissed.
Order pronounced on 12th March, 2026. - - (RAJPAL YADAV) (MANOJ KUMAR AGGARWAL)
VICE PRESIDENT ACCOUNTANT MEMBER

Dated: 12.03.2026

आदेश की Ůितिलिप अŤेिषत /Copy of the Order forwarded to :
1. अपीलाथŎ/Appellant
2. ŮȑथŎ/Respondent
3. आयकरआयुƅ/CIT
4. िवभागीयŮितिनिध/DR
5. गाडŊफाईल/GF