M/S. LALITHA JEWELLERY MART LTD.,CHENNAI vs. DCIT, CENTRAL CIRCLE-1(4), CHENNAI

आदेश / O R D E R PER ABY T. VARKEY, JM:

Years [in short 'AYs'] 2016 2016-17 to 2021-22. Since several issues involved . Since several issues involved are common, all the appeals for all the assessment years were heard are common, all the appeals for all the assessment years were heard are common, all the appeals for all the assessment years were heard together. Both the parties also argued them together raising similar ther. Both the parties also argued them together raising similar ther. Both the parties also argued them together raising similar arguments on these issues. Accordingly, for the sake of convenience and arguments on these issues. Accordingly, for the sake of convenience and arguments on these issues. Accordingly, for the sake of convenience and brevity, we dispose all the appeals by this consolidated order. brevity, we dispose all the appeals by this consolidated order. brevity, we dispose all the appeals by this consolidated order.

Asst Year Asst Year Returned income 2016 2016-17 ₹96,37,10,370/- 2017 2017-18 ₹52,41,64,040/- 2018 2018-19 ₹134,29,66,360/- 2019 2019-20 ₹139,74,81,200/- 2020 2020-21 ₹188,82,39,920/- 2021 2021-22 ₹286,51,12,790/-

143(1) / 143(3) of the Act (scru e Act (scrutiny assessment) for AYs 2016 tiny assessment) for AYs 2016-17 to 2019-20 stood completed stood completed and were not pending before Assessing Officer were not pending before Assessing Officer (AO) on the date of search, therefore, assessments (AO) on the date of search, therefore, assessments of those years did not of those years did not abate consequent to the search on abate consequent to the search on 04-03-2021. As far as assessments for . As far as assessments for AYs 2020-21 & 2021-22 22 are concerned, it was undisputed that these were are concerned, it was undisputed that these were abated assessments. Consequent to the search, notices u/s 153A was Consequent to the search, notices u/s 153A was Consequent to the search, notices u/s 153A was issued and the assessments were completed on 27 issued and the assessments were completed on 27-12-2022 for all the 2022 for all the captioned years before us. Against these assessments, the assessee had us. Against these assessments, the assessee had filed several Writ- petitions before the Hon’ble Madras High Court, all of petitions before the Hon’ble Madras High Court, all of petitions before the Hon’ble Madras High Court, all of which, were disposed off by a common order dated 11 which, were disposed off by a common order dated 11-11 11-2022 setting aside all the impugned assessment orders with a direction to com aside all the impugned assessment orders with a direction to com aside all the impugned assessment orders with a direction to complete the assessment de-novo after hearing the assessee. Consequently, the after hearing the assessee. Consequently, the after hearing the assessee. Consequently, the assessments were taken up afresh and the assessments were taken up afresh and the assessment orders u/s 153A / orders u/s 153A / 143(3) all dated 31-03- -2023 was passed by the AO. The summary of the The summary of the additions/disallowances in Rupees made by additions/disallowances in Rupees made by the AO which are in dispute in the AO which are in dispute in the appeals for AYs 2016 2016-17 to 2021-22 are as follows:- to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 4 ::

Sl Issue 16 16-17 17-18 18-19 19-20 20-21 21-22 No.

1. Addition on a/c of cash withdrawals by MD found in ‘MD 1,30,59,974 1,30,59,974 1,81,04,999 2,02,45,191 3,04,26,937 3,04,26,937 1,95,31,356 87,66,675 Sheet’ in emails of Mr. Stanley 2. Addition of unexplained cash credit based on material seized - 6,85,00,000 35,14,00,000 33,46,24,250 33,46,24,250 19,51,00,000 - at third party, Shri Anbuchezhiyan 3. Addition of profit element on the cash transactions with M/s - 81,05,050 1,10,28,230 1,62,93,623 1,62,93,623 1,07,67,376 58,63,415 Mohanlal Jewellers Pvt Ltd 4. Addition made on account of cash deposited during - 54,11,66,350 - - - - demonetization 5. Addition made on a/c of cash investment made with M/s - - 15,30,00,000 12,00,00,000 12,00,00,000 - - Bhoomi & Building Pvt Ltd 6. Disallowance of excess wastage shown on conversion of existing - - - 5,11,18,986 5,11,18,986 36,19,83,792 27,58,29,025 own gold ornaments into gold 7. Disallowance of excess wastage shown on conversion of old gold - - - - 62,99,36,957 42,81,19,429 ornaments brought from parties into gold 8. Addition made on account of unaccounted interest paid to - - - - 13,52,07,096 45,74,07,096 parties 9. Disallowance of excess labour charges paid to Asita Jewellery - - - - 16,33,38,625 6,86,75,232 Manufacturing Pvt Ltd 10. Addition made on account of - - - - - 10,42,97,645 valuation of closing stock

“12. MD sheet in stanley’s “12. MD sheet in stanley’s mail :-

On verification of the email attachment downloaded from Stanley’s mail, On verification of the email attachment downloaded from Stanley’s mail, On verification of the email attachment downloaded from Stanley’s mail, a sheet named “ac” was found. On verification of the data contained in a sheet named “ac” was found. On verification of the data contained in a sheet named “ac” was found. On verification of the data contained in the sheet, it was noticed that there were details of cash transactions the sheet, it was noticed that there were details of cash transactions the sheet, it was noticed that there were details of cash transactions carried out. The printouts of such ac shee carried out. The printouts of such ac sheets are given as Annexure 11to Annexure 11to this report. Summary of the cash receipts is given below: this report. Summary of the cash receipts is given below:

Month wise breakup of MD ac Month wise breakup of MD ac transactions FY FY Month Amount FY 15 FY 15-16 Apr-15 2,71,600 FY 15 FY 15-16 May-15 26,22,100 FY 15 FY 15-16 Jun-15 6,11,450 FY 15 FY 15-16 Jul-15 3,83,330 FY 15 15-16 Aug-15 - FY 15 FY 15-16 Sep-15 3,73,220 FY 15 FY 15-16 Oct-15 8,66,150 FY 15 FY 15-16 Nov-15 5,44,650 FY 15 FY 15-16 Dec-15 42,22,241 FY 15 FY 15-16 Jan-16 4,58,454 FY 15 FY 15-16 Feb-16 20,333 FY 15 FY 15-16 Mar-16 26,86,355 FY 16 FY 16-17 Apr-16 3,33,185 FY 16 FY 16-17 May-16 9,96,020 FY 16 16-17 Jun-16 4,24,810 FY 16 FY 16-17 Jul-16 4,14,530 FY 16 FY 16-17 Aug-16 53,61,906 FY 16 FY 16-17 Sep-16 6,96,965 FY 16 FY 16-17 Oct-16 2,58,430 FY 16 FY 16-17 Nov-16 6,03,160 to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 6 ::

FY 16 FY 16-17 Dec-16 - FY 16 FY 16-17 Jan-17 50,88,895 FY 16 FY 16-17 Feb-17 17,71,360 FY 16 FY 16-17 Mar-17 21,55,738 FY 17 17-18 Arp-17 3,82,720 FY 17 FY 17-18 May-17 3,42,130 FY 17 FY 17-18 Jun-17 7,67,695 FY 17 FY 17-18 Jul-17 17,23,965 FY 17 FY 17-18 Aug-17 10,83,914 FY 17 FY 17-18 Sep-17 31,50,442 FY 17 FY 17-18 Oct-17 25,55,949 FY 17 FY 17-18 Nov-17 4,82,370 FY 17 FY 17-18 Dec-17 7,46,510 FY 17 FY 17-18 Jan-18 23,08,281 FY 17 FY 17-18 Feb-18 54,56,331 FY 17 FY 17-18 Mar-18 12,44,884 FY 18 FY 18-19 Arp-18 14,11,641 FY 18 FY 18-19 May-18 7,98,688 FY 18 FY 18-19 Jun-18 31,59,488 FY 18 FY 18-19 Jul-18 13,00,205 FY 18 FY 18-19 Aug-18 51,74,563 FY 18 FY 18-19 Sep-18 6,46,087 FY 18 FY 18-19 Oct-18 17,69,270 FY 18 18-19 Nov-18 22,60,915 FY 18 FY 18-19 Dec-18 3,86,000 FY 18 FY 18-19 Jan-19 34,49,695 FY 18 FY 18-19 Feb-19 92,00,385 FY 18 FY 18-19 Mar-19 8,70,000 FY 19 FY 19-20 Arp-19 9,71,465 FY 19 FY 19-20 May-19 - FY 19 FY 19-20 Jun-19 6,14,629 FY 19 FY 19-20 Jul-19 7,67,184 FY 19 FY 19-20 Aug-19 6,16,950 FY 19 19-20 Sep-19 15,20,174 FY 19 FY 19-20 Oct-19 7,25,118 FY 19 FY 19-20 Nov-19 FY 19 FY 19-20 Dec-19 13,69,981 FY 19 FY 19-20 Jan-20 1,83,855 FY 19 FY 19-20 Feb-20 7,12,000 FY 19 FY 19-20 Mar-20 1,20,50,000

10,13,68,457 to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 7 ::

Year-Wise summary

Period Period AY Amount FY 15 FY 15-16 2016-17 1,30,59,974 FY 16 FY 16-17 2017-18 1,81,04,999 FY 17 FY 17-18 2018-19 2,02,45,191 FY 18 FY 18-19 2019-20 3,04,26,937 FY 19 FY 19-20 2020-21 1,95,31,356 10,13,68,457

12.1. As per the summary of sheet, they have received as sum of Rs. As per the summary of sheet, they have received as sum of Rs. As per the summary of sheet, they have received as sum of Rs. 10,13,68,457/-from various operations from various operations which were not recorded in the which were not recorded in the books of account. Since the books of account. Since the above income has escaped assessment. above income has escaped assessment. Please show cause as to why an amount of Please show cause as to why an amount of Rs. 10,13,68,457/ Rs. 10,13,68,457/- should not be taxed for the assessment years mentioned above. be taxed for the assessment years mentioned above.”

4.1 According to the AO therefore, According to the AO therefore, the assessee had received following the assessee had received following cash receipts aggregating to Rs.10,13,68,457/ cash receipts aggregating to Rs.10,13,68,457/- from various operations from various operations which were not recorded in the books of accounts, whose year wise which were not recorded in the books of accounts, whose year wise which were not recorded in the books of accounts, whose year wise summary was also set out in the above notice. summary was also set out in the above notice. The AO thus required the The AO thus required the assessee to explain as to why the said cash receipts should not be taxed explain as to why the said cash receipts should not be taxed explain as to why the said cash receipts should not be taxed as assessee’s unexplained income. In response, the assessee furnished as assessee’s unexplained income. In response, the assessee furnished as assessee’s unexplained income. In response, the assessee furnished their replies vide letters dated 27 their replies vide letters dated 27-01-2023 and 02-02-2023. The assessee 2023. The assessee pointed out that, the inference drawn by the AO was pointed out that, the inference drawn by the AO was misplaced and his misplaced and his observations didn’t emanate from the contents of this sheet. The assessee t emanate from the contents of this sheet. The assessee t emanate from the contents of this sheet. The assessee explained that, this alleged sheet was neither a cash receipt nor was explained that, this alleged sheet was neither a cash receipt nor was explained that, this alleged sheet was neither a cash receipt nor was there any mention of cash in this entire excel sheet. It was explained there any mention of cash in this entire excel sheet. It was explained there any mention of cash in this entire excel sheet. It was explained that, this excel sheet was merely a chart containing the value of the left was merely a chart containing the value of the left was merely a chart containing the value of the left over articles or metals extracted upon conversion of old gold ornaments over articles or metals extracted upon conversion of old gold ornaments over articles or metals extracted upon conversion of old gold ornaments which were under the supervision of Mr. Stanley. According to the which were under the supervision of Mr. Stanley. According to the which were under the supervision of Mr. Stanley. According to the to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. assessee, this chart was maintained by Mr. Stanley to inform the M assessee, this chart was maintained by Mr. Stanley to inform the M assessee, this chart was maintained by Mr. Stanley to inform the MD regarding the value of left over items like silver, copper, etc. obtained regarding the value of left over items like silver, copper, etc. obtained regarding the value of left over items like silver, copper, etc. obtained from the old gold stock. For this, the assessee referred to the answers from the old gold stock. For this, the assessee referred to the answers from the old gold stock. For this, the assessee referred to the answers given by Mr. Stanley in his statement to Question Nos. 11 & 12 posed to given by Mr. Stanley in his statement to Question Nos. 11 & 12 posed to given by Mr. Stanley in his statement to Question Nos. 11 & 12 posed to him in the course of search, wherein him in the course of search, wherein he had stated that, he was looking he had stated that, he was looking after the purchase of old gold processing and general machineries and after the purchase of old gold processing and general machineries and after the purchase of old gold processing and general machineries and other purchases and that, he would individually check and tally the other purchases and that, he would individually check and tally the other purchases and that, he would individually check and tally the weight, remove the stones, wax and melt it and would also obtain test weight, remove the stones, wax and melt it and would also obtain test weight, remove the stones, wax and melt it and would also obtain test reports and then send the melted gold to the refinery for processing into then send the melted gold to the refinery for processing into then send the melted gold to the refinery for processing into fine gold. The assessee accordingly submitted that, when the said excel fine gold. The assessee accordingly submitted that, when the said excel fine gold. The assessee accordingly submitted that, when the said excel sheet did not contain any particulars of sales or mention of cash receipts sheet did not contain any particulars of sales or mention of cash receipts sheet did not contain any particulars of sales or mention of cash receipts or any other material which would suggest that or any other material which would suggest that these items were sold these items were sold outside the books, it was unjustified for the AO to infer that the article outside the books, it was unjustified for the AO to infer that the article outside the books, it was unjustified for the AO to infer that the article values maintained by the supervisor represented unaccounted cash values maintained by the supervisor represented unaccounted cash values maintained by the supervisor represented unaccounted cash receipts. The assessee further submitted that, these articles / left over receipts. The assessee further submitted that, these articles / left over receipts. The assessee further submitted that, these articles / left over items were never withdrawn nor converted into cash but was handed over hdrawn nor converted into cash but was handed over hdrawn nor converted into cash but was handed over for re-use in manufacture of new gold ornaments. The assessee pointed use in manufacture of new gold ornaments. The assessee pointed use in manufacture of new gold ornaments. The assessee pointed out that, there was no corroborative material or evidence found in the out that, there was no corroborative material or evidence found in the out that, there was no corroborative material or evidence found in the course of search which would suggest that these articles were co course of search which would suggest that these articles were co course of search which would suggest that these articles were converted into cash and that the money was withdrawn by the Managing Director of into cash and that the money was withdrawn by the Managing Director of into cash and that the money was withdrawn by the Managing Director of the assessee company. After taking into account these submissions of the the assessee company. After taking into account these submissions of the the assessee company. After taking into account these submissions of the assessee, the AO observed that, the onus was on the assessee to assessee, the AO observed that, the onus was on the assessee to assessee, the AO observed that, the onus was on the assessee to to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. substantiate their claim with documentar substantiate their claim with documentary evidence that this excel sheet y evidence that this excel sheet only provided values of the articles and did not relate to cash receipts. only provided values of the articles and did not relate to cash receipts. only provided values of the articles and did not relate to cash receipts.

The AO held that as the assessee was unable to bring any such credible The AO held that as the assessee was unable to bring any such credible The AO held that as the assessee was unable to bring any such credible acceptable evidences to support their claim, the AO proceeded to make acceptable evidences to support their claim, the AO proceeded to make acceptable evidences to support their claim, the AO proceeded to make the addition on account of unaccounted income of Rs.1,30,59,974/ tion on account of unaccounted income of Rs.1,30,59,974/ tion on account of unaccounted income of Rs.1,30,59,974/- in the relevant year, as mentioned in the show cause notice. relevant year, as mentioned in the show cause notice.

Aggrieved by the action of the AO, the assessee preferred an appeal Aggrieved by the action of the AO, the assessee preferred an appeal Aggrieved by the action of the AO, the assessee preferred an appeal 4.2 before the Ld. CIT(A). On appeal, the Ld. CIT(A) is noted to hav before the Ld. CIT(A). On appeal, the Ld. CIT(A) is noted to hav before the Ld. CIT(A). On appeal, the Ld. CIT(A) is noted to have upheld the action of the AO by relying upon the statement of Mr. Stanley wherein the action of the AO by relying upon the statement of Mr. Stanley wherein the action of the AO by relying upon the statement of Mr. Stanley wherein he had stated that, the details of these articles mentioned in the excel he had stated that, the details of these articles mentioned in the excel he had stated that, the details of these articles mentioned in the excel sheet are not reflected in the tally accounts. The relevant findings of the sheet are not reflected in the tally accounts. The relevant findings of the sheet are not reflected in the tally accounts. The relevant findings of the Ld. CIT(A) is as under:

“8.4 I have perused the assessment order and the submissions I have perused the assessment order and the submissions I have perused the assessment order and the submissions made by the appellant. The printout of the e made by the appellant. The printout of the e-mail is taken form Stanly mail is taken form Stanly mail with name MD Sheet. When questioned during search proceedings, it mail with name MD Sheet. When questioned during search proceedings, it mail with name MD Sheet. When questioned during search proceedings, it was explained by Sri Stanley that he deals with old was explained by Sri Stanley that he deals with old fold melting: in the fold melting: in the process of melting, he recovers stones, other valuable metals like silver, process of melting, he recovers stones, other valuable metals like silver, process of melting, he recovers stones, other valuable metals like silver, copper (other than gold), etc. As per the appellant since they are (other than gold), etc. As per the appellant since they are (other than gold), etc. As per the appellant since they are engaged in manufacture of gold jewellery, the other metals recovered engaged in manufacture of gold jewellery, the other metals recovered engaged in manufacture of gold jewellery, the other metals recovered form melting of old gold form melting of old gold was sent for re-use and are part of stock, and use and are part of stock, and the data pertains to these transactions and nowhere it was made out that the data pertains to these transactions and nowhere it was made out that the data pertains to these transactions and nowhere it was made out that the amounts mentioned in the seized material are cash or that these the amounts mentioned in the seized material are cash or that these the amounts mentioned in the seized material are cash or that these metals were converted into cash and handed over to MD. metals were converted into cash and handed over to MD.

8.5 However, However, as could be seen from the reply of Sri Stanley in as could be seen from the reply of Sri Stanley in response to Q.No.5, it was clearly averred that these sheets contain sale response to Q.No.5, it was clearly averred that these sheets contain sale response to Q.No.5, it was clearly averred that these sheets contain sale of customers left over items and that these details are not reflected in of customers left over items and that these details are not reflected in of customers left over items and that these details are not reflected in tally accounts, meaning thereby that the sale of left over tally accounts, meaning thereby that the sale of left over items / dust are items / dust are not recorded in the books of account. Then the person managing and not recorded in the books of account. Then the person managing and not recorded in the books of account. Then the person managing and entering the data had clearly spelt that the items entered in the said data entering the data had clearly spelt that the items entered in the said data entering the data had clearly spelt that the items entered in the said data are sold and not recorded in the books, there can be no other go but to are sold and not recorded in the books, there can be no other go but to are sold and not recorded in the books, there can be no other go but to to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. treat the amounts as ap treat the amounts as appearing in the said data as unaccounted business pearing in the said data as unaccounted business income and accordingly the addition made by the AO is confirmed. income and accordingly the addition made by the AO is confirmed. income and accordingly the addition made by the AO is confirmed. Accordingly, this ground of the appeal is dismissed.” Accordingly, this ground of the appeal is dismissed.”

Aggrieved by the order of Aggrieved by the order of the Ld. CIT(A), the assessee is is now in appeal before us.

4.3 Assailing the action of the Ld. CIT(A), the Assailing the action of the Ld. CIT(A), the Ld. AR/Ld. Ld. Counsel of the assessee, Shri D. Anand Anand pointed out that, the basis of the impugned pointed out that, the basis of the impugned addition was the print- -out of an email allegedly sent by Mr. Stanley to out of an email allegedly sent by Mr. Stanley to himself. Relying on the attached excel sheet in that e himself. Relying on the attached excel sheet in that e-mail, the AO had mail, the AO had assumed that, the values reflected in the excel sheet represented c assumed that, the values reflected in the excel sheet represented c assumed that, the values reflected in the excel sheet represented cash withdrawals by the Managing Director. The Ld. AR took us through the withdrawals by the Managing Director. The Ld. AR took us through the withdrawals by the Managing Director. The Ld. AR took us through the said sheet and showed us that, it did said sheet and showed us that, it didn’t constitute a statement of cash t constitute a statement of cash receipts nor was there any reference to suggest that it pertained to cash receipts nor was there any reference to suggest that it pertained to cash receipts nor was there any reference to suggest that it pertained to cash transactions. The Ld. AR instead show transactions. The Ld. AR instead showed us that, the entries in this excel ed us that, the entries in this excel sheet comprised of items other than gold such as silver, copper, and sheet comprised of items other than gold such as silver, copper, and sheet comprised of items other than gold such as silver, copper, and similar by-products which are recoverable during the melting of old gold products which are recoverable during the melting of old gold products which are recoverable during the melting of old gold ornaments. He pointed out that, Mr. Stanley would record the ornaments. He pointed out that, Mr. Stanley would record the ornaments. He pointed out that, Mr. Stanley would record the approximate value of these items in the excel sheet. The assessee argued ue of these items in the excel sheet. The assessee argued ue of these items in the excel sheet. The assessee argued that there was no mention of any cash sales, or cash withdrawals on this that there was no mention of any cash sales, or cash withdrawals on this that there was no mention of any cash sales, or cash withdrawals on this excel sheet, and that the inference drawn by the AO was based solely on excel sheet, and that the inference drawn by the AO was based solely on excel sheet, and that the inference drawn by the AO was based solely on his subjective notions. The Ld. AR explained that Mr. his subjective notions. The Ld. AR explained that Mr. Stanley was an Stanley was an assistant general manager in the company who was in assistant general manager in the company who was in-charge of purchase charge of purchase of old gold processing and general machineries and other purchases. of old gold processing and general machineries and other purchases. of old gold processing and general machineries and other purchases. to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 11 ::

According to him therefore, being the supervisor of the old gold According to him therefore, being the supervisor of the old gold According to him therefore, being the supervisor of the old gold processing, it was understandable th processing, it was understandable that Mr. Stanley would maintain an at Mr. Stanley would maintain an internal control sheet of the articles and materials recovered during the internal control sheet of the articles and materials recovered during the internal control sheet of the articles and materials recovered during the process of melting of old gold ornaments and thereafter deployed for re process of melting of old gold ornaments and thereafter deployed for re process of melting of old gold ornaments and thereafter deployed for re- use in manufacture of new gold ornaments. The Ld. AR explained that, he use in manufacture of new gold ornaments. The Ld. AR explained that, he use in manufacture of new gold ornaments. The Ld. AR explained that, he would estimate the value of such recoverable items, which was being estimate the value of such recoverable items, which was being estimate the value of such recoverable items, which was being recorded by Mr. Stanley in this excel sheet for the control & knowledge of recorded by Mr. Stanley in this excel sheet for the control & knowledge of recorded by Mr. Stanley in this excel sheet for the control & knowledge of the management of the company. the management of the company.

4.4 Upon query from the Bench, as to how were these notings inferred Upon query from the Bench, as to how were these notings inferred Upon query from the Bench, as to how were these notings inferred by the AO to be cash withdrawals by the Managing Director, the Ld. AR ash withdrawals by the Managing Director, the Ld. AR ash withdrawals by the Managing Director, the Ld. AR Shri Anand pointed out that, the title of this excel sheet was ‘MD Sheet’ pointed out that, the title of this excel sheet was ‘MD Sheet’ pointed out that, the title of this excel sheet was ‘MD Sheet’ and based on this titular reference, the AO had and based on this titular reference, the AO had assumed that the sumed that the Managing Director was withdrawing cash generated from these arti Managing Director was withdrawing cash generated from these arti Managing Director was withdrawing cash generated from these articles and materials recovered during the process of melting of old gold and materials recovered during the process of melting of old gold and materials recovered during the process of melting of old gold ornaments. The Ld. AR thus submitted that, this entire inference of the ornaments. The Ld. AR thus submitted that, this entire inference of the ornaments. The Ld. AR thus submitted that, this entire inference of the AO was based on his own figment of imagination, which was not backed AO was based on his own figment of imagination, which was not backed AO was based on his own figment of imagination, which was not backed by any corroborative material or tangible ev by any corroborative material or tangible evidence.

Shri Anand further pointed out that, in the entire search action, not further pointed out that, in the entire search action, not further pointed out that, in the entire search action, not 4.5 even a single instance of any cash sale of such left over articles was found even a single instance of any cash sale of such left over articles was found even a single instance of any cash sale of such left over articles was found by the Investigating Authorities. He also stressed on the fact that, even by the Investigating Authorities. He also stressed on the fact that, even by the Investigating Authorities. He also stressed on the fact that, even the excel sheet didn’t contain any such noting or reference which would contain any such noting or reference which would contain any such noting or reference which would to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. indicate that these materials were sold in cash. The Ld. AR submitted that indicate that these materials were sold in cash. The Ld. AR submitted that indicate that these materials were sold in cash. The Ld. AR submitted that the assessee has all along explained that these recoverable wastage of the assessee has all along explained that these recoverable wastage of the assessee has all along explained that these recoverable wastage of metals other than gold was being utilized in the regular cou metals other than gold was being utilized in the regular cou metals other than gold was being utilized in the regular course of manufacturing operations under the instructions of the Managing Director. manufacturing operations under the instructions of the Managing Director. manufacturing operations under the instructions of the Managing Director.

The Ld. AR therefore submitted that the impugned addition made by the The Ld. AR therefore submitted that the impugned addition made by the The Ld. AR therefore submitted that the impugned addition made by the AO solely on assumptions without any tangible corroborative material was AO solely on assumptions without any tangible corroborative material was AO solely on assumptions without any tangible corroborative material was unjustified and ought to be dele unjustified and ought to be deleted.

4.6 Per contra, the Ld. CIT, DR Per contra, the Ld. CIT, DR Shri Shiva Srinivas supported the orders supported the orders of the lower authorities. He submitted that the assessee was not able to of the lower authorities. He submitted that the assessee was not able to of the lower authorities. He submitted that the assessee was not able to demonstrate with evidence that the notings in the excel sheet was only an demonstrate with evidence that the notings in the excel sheet was only an demonstrate with evidence that the notings in the excel sheet was only an internal control record and no internal control record and not cash receipts. He further submitted that t cash receipts. He further submitted that Mr. Stanley had admitted in his statement that these values of Mr. Stanley had admitted in his statement that these values of Mr. Stanley had admitted in his statement that these values of recoverable alloys were not reflected in the tally accounts, which recoverable alloys were not reflected in the tally accounts, which recoverable alloys were not reflected in the tally accounts, which according to him, clearly suggested that these items were unaccounted according to him, clearly suggested that these items were unaccounted according to him, clearly suggested that these items were unaccounted for. He accordingly urged that the order of the Ld. CIT(A) be upheld. dingly urged that the order of the Ld. CIT(A) be upheld. dingly urged that the order of the Ld. CIT(A) be upheld.

4.7 The Ld. AR Shri Anand Shri Anand, in his rejoinder, submitted that the assessee submitted that the assessee cannot be expected to prove a negative. He first submitted that, the cannot be expected to prove a negative. He first submitted that, the cannot be expected to prove a negative. He first submitted that, the notings in the excel sheet only contained the names of t notings in the excel sheet only contained the names of t notings in the excel sheet only contained the names of the metals and their corresponding values. He pointed out that this excel sheet their corresponding values. He pointed out that this excel sheet their corresponding values. He pointed out that this excel sheet considered on a stand considered on a stand-alone basis didn’t suggest at all that it was a t suggest at all that it was a statement of unaccounted cash receipts. According to him, it was the statement of unaccounted cash receipts. According to him, it was the statement of unaccounted cash receipts. According to him, it was the to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 13 ::

Revenue’s case that the notings on thi Revenue’s case that the notings on this sheet suggested cash receipts, s sheet suggested cash receipts, though there was no such reference therein and therefore, it was for the though there was no such reference therein and therefore, it was for the though there was no such reference therein and therefore, it was for the Revenue to bring on record, corroborative Revenue to bring on record, corroborative material to substantiate their to substantiate their case that these notings represented unexplained income of the assessee, case that these notings represented unexplained income of the assessee, case that these notings represented unexplained income of the assessee, which in his view, the Revenue had failed to do. The Ld. AR in his view, the Revenue had failed to do. The Ld. AR in his view, the Revenue had failed to do. The Ld. AR further submitted that, ordinarily, cash sales are made in values of tens (10’s) submitted that, ordinarily, cash sales are made in values of tens (10’s) submitted that, ordinarily, cash sales are made in values of tens (10’s) and hundreds (100’s), whereas, the values mentioned in the excel sheet and hundreds (100’s), whereas, the values mentioned in the excel sheet and hundreds (100’s), whereas, the values mentioned in the excel sheet was down to a rupee and paise and that it was imp was down to a rupee and paise and that it was improbable that cash sales robable that cash sales would have been made in such a manner and therefore, any prudent would have been made in such a manner and therefore, any prudent would have been made in such a manner and therefore, any prudent person would have inferred these notings to be an approximation of the person would have inferred these notings to be an approximation of the person would have inferred these notings to be an approximation of the estimated values of these articles. He further pointed out that, there was estimated values of these articles. He further pointed out that, there was estimated values of these articles. He further pointed out that, there was no name or details of any purchaser or mention of any cash receipt on any purchaser or mention of any cash receipt on any purchaser or mention of any cash receipt on this sheet and thus, it was unjustified to infer this excel sheet to be a this sheet and thus, it was unjustified to infer this excel sheet to be a this sheet and thus, it was unjustified to infer this excel sheet to be a statement of cash receipts. statement of cash receipts.

4.8 Shri Anand, thereafter took us through the statement of Mr. Stanley thereafter took us through the statement of Mr. Stanley thereafter took us through the statement of Mr. Stanley and particularly, his answer to and particularly, his answer to Question No.5, and pointed out that there Question No.5, and pointed out that there was no mention of any cash receipt therein. He explained to us that his was no mention of any cash receipt therein. He explained to us that his was no mention of any cash receipt therein. He explained to us that his statement was based on mistaken understanding of fact and was statement was based on mistaken understanding of fact and was statement was based on mistaken understanding of fact and was therefore, not reliable, which we shall discuss in the ensuing paragraphs. therefore, not reliable, which we shall discuss in the ensuing paragraphs. therefore, not reliable, which we shall discuss in the ensuing paragraphs.

The Ld. AR submitted that, the contemporaneous facts available on record d. AR submitted that, the contemporaneous facts available on record d. AR submitted that, the contemporaneous facts available on record in fact negated this statement of Mr. Stanley. It was explained that, these in fact negated this statement of Mr. Stanley. It was explained that, these in fact negated this statement of Mr. Stanley. It was explained that, these left over articles were reused in the new gold ornaments manufacturing left over articles were reused in the new gold ornaments manufacturing left over articles were reused in the new gold ornaments manufacturing to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. process and it is for this reason that th process and it is for this reason that their details were not separately eir details were not separately reflected in the tally accounts, as they formed part of the consolidated reflected in the tally accounts, as they formed part of the consolidated reflected in the tally accounts, as they formed part of the consolidated inventory value. It was submitted that the entire process of melting and inventory value. It was submitted that the entire process of melting and inventory value. It was submitted that the entire process of melting and converting the old gold into bullion as well as the deployment of these converting the old gold into bullion as well as the deployment of these converting the old gold into bullion as well as the deployment of these recoverable wastage of metals other than gold was evident from the stock rable wastage of metals other than gold was evident from the stock rable wastage of metals other than gold was evident from the stock registers and the books of accounts, which was seized in the course of registers and the books of accounts, which was seized in the course of registers and the books of accounts, which was seized in the course of search. The Ld. AR also pointed out that, even in the course of search, search. The Ld. AR also pointed out that, even in the course of search, search. The Ld. AR also pointed out that, even in the course of search, there was no discrepancy found in the quantita there was no discrepancy found in the quantitative details of the tive details of the inventory maintained in the books of accounts, inventory maintained in the books of accounts, vis-a-vis vis the physical inventory found in the course of search, which according to him, inventory found in the course of search, which according to him, inventory found in the course of search, which according to him, corroborated the assessee’s case that these recoverable metals and alloys corroborated the assessee’s case that these recoverable metals and alloys corroborated the assessee’s case that these recoverable metals and alloys were part of the books of a were part of the books of accounts and it had not been diverted or sold ccounts and it had not been diverted or sold outside the books. The Ld. AR thus submitted that the impugned addition outside the books. The Ld. AR thus submitted that the impugned addition outside the books. The Ld. AR thus submitted that the impugned addition was not tenable and liable to be deleted. was not tenable and liable to be deleted.

4.9 We have heard both the parties and perused the material placed We have heard both the parties and perused the material placed We have heard both the parties and perused the material placed before us. From the facts as before us. From the facts as discussed above, it is noted that, the discussed above, it is noted that, the impugned addition has been based on an excel sheet titled ‘MD Sheet’ impugned addition has been based on an excel sheet titled ‘MD Sheet’ impugned addition has been based on an excel sheet titled ‘MD Sheet’ found in the email of Mr. Stanley, which was sent by him to himself. It is found in the email of Mr. Stanley, which was sent by him to himself. It is found in the email of Mr. Stanley, which was sent by him to himself. It is observed that Mr. Stanley is an assistant general manager in the observed that Mr. Stanley is an assistant general manager in the observed that Mr. Stanley is an assistant general manager in the company who was in charge of old gold processing and general who was in charge of old gold processing and general who was in charge of old gold processing and general machineries and other purchases. The relevant answers given by him in machineries and other purchases. The relevant answers given by him in machineries and other purchases. The relevant answers given by him in to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. his statement u/s 132(4) of the Act dated 06 his statement u/s 132(4) of the Act dated 06-03-2021, is noted to be as 2021, is noted to be as follows:-

“Q.11 Please Furnish details of your job profile at Please Furnish details of your job profile at M/s Lalithaa M/s Lalithaa Jewellery Mart Private Limited. Jewellery Mart Private Limited.

A.11 Sir, I joined M/s Lalithaa Jewellery Mart Private Limited as Sir, I joined M/s Lalithaa Jewellery Mart Private Limited as Sir, I joined M/s Lalithaa Jewellery Mart Private Limited as Assistant General Manager (General Operations) in the year of 2013. I Assistant General Manager (General Operations) in the year of 2013. I Assistant General Manager (General Operations) in the year of 2013. I am drawing a monthly salary of Rs. 1,05,000/ am drawing a monthly salary of Rs. 1,05,000/-. I look after the . I look after the purchase of old gold processing and general machineries and other f old gold processing and general machineries and other f old gold processing and general machineries and other purchases.

Q.12 Please elaborate old gold processing as mentioned by Please elaborate old gold processing as mentioned by Please elaborate old gold processing as mentioned by you in A.no.11. you in A.no.11.

Sir, we received old gold ornaments from our branches / showrooms. Sir, we received old gold ornaments from our branches / showrooms. Sir, we received old gold ornaments from our branches / showrooms. We open the packets individually check and tall We open the packets individually check and tally the weight, remove the y the weight, remove the stones, wax and melt it. We cut a small piece for test report and send stones, wax and melt it. We cut a small piece for test report and send stones, wax and melt it. We cut a small piece for test report and send the melted gold to the refinery where it will be processed for refining the melted gold to the refinery where it will be processed for refining the melted gold to the refinery where it will be processed for refining and get back us fine gold. and get back us fine gold.”

4.10 We thus observe that Mr. Stanley was supervising the en We thus observe that Mr. Stanley was supervising the en We thus observe that Mr. Stanley was supervising the entire process involving purchase of old gold ornaments, getting them melted at process involving purchase of old gold ornaments, getting them melted at process involving purchase of old gold ornaments, getting them melted at the gold smiths which would lead to generation of gold and other articles the gold smiths which would lead to generation of gold and other articles the gold smiths which would lead to generation of gold and other articles & metals such as silver, copper etc. He would also supervise the & metals such as silver, copper etc. He would also supervise the & metals such as silver, copper etc. He would also supervise the processing of such gold into fine gold processing of such gold into fine gold / jewellery and also re / jewellery and also re-use the other articles & metals in the manufacturing process of new gold ornaments. articles & metals in the manufacturing process of new gold ornaments. articles & metals in the manufacturing process of new gold ornaments.

Having regard to his job Having regard to his job-profile, we agree with the assessee that Mr. profile, we agree with the assessee that Mr. Stanley was expected to maintain the internal records of the process Stanley was expected to maintain the internal records of the process Stanley was expected to maintain the internal records of the process involving conversion of old gold ornaments into raw gold and other conversion of old gold ornaments into raw gold and other conversion of old gold ornaments into raw gold and other articles / metals for control purposes. articles / metals for control purposes. to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 16 ::

4.11 In view of the above, we first examine the contents of the excel In view of the above, we first examine the contents of the excel In view of the above, we first examine the contents of the excel sheet which was found from his email attachment. Reading of this excel sheet which was found from his email attachment. Reading of this excel sheet which was found from his email attachment. Reading of this excel sheet reveals that, it only contains the names of the metals / articles at, it only contains the names of the metals / articles at, it only contains the names of the metals / articles which are recovered in the process of melting the old gold ornaments and which are recovered in the process of melting the old gold ornaments and which are recovered in the process of melting the old gold ornaments and certain values / amounts are mentioned against the same. The Ld. AR has certain values / amounts are mentioned against the same. The Ld. AR has certain values / amounts are mentioned against the same. The Ld. AR has rightly pointed out that, there is no mention of any sa rightly pointed out that, there is no mention of any sale or cash or receipt le or cash or receipt against these items. Considered on a stand against these items. Considered on a stand-alone basis, this excel sheet alone basis, this excel sheet cannot be said to be contain anything incriminating and it did cannot be said to be contain anything incriminating and it did cannot be said to be contain anything incriminating and it didn’t suggest details of sale of metals details of sale of metals/articles outside the books of accounts. Prima articles outside the books of accounts. Prima facie therefore, the case made out by the lower authorities does , the case made out by the lower authorities does , the case made out by the lower authorities doesn’t appear to emanate from the contents of this excel sheet. We are in agreement to emanate from the contents of this excel sheet. We are in agreement to emanate from the contents of this excel sheet. We are in agreement with the Ld. AR that, it would be imprudent to read anything new or with the Ld. AR that, it would be imprudent to read anything new or with the Ld. AR that, it would be imprudent to read anything new or import additional context into these notings, which otherw import additional context into these notings, which otherw import additional context into these notings, which otherwise is not mentioned therein. Instead, the notings are to be considered as found & mentioned therein. Instead, the notings are to be considered as found & mentioned therein. Instead, the notings are to be considered as found & seized in the course of search. As noted above, these notings are bereft of seized in the course of search. As noted above, these notings are bereft of seized in the course of search. As noted above, these notings are bereft of any details or material which would lead any ordinary man of prudence to any details or material which would lead any ordinary man of prudence to any details or material which would lead any ordinary man of prudence to infer that they containe infer that they contained details of cash withdrawals by the Managing d details of cash withdrawals by the Managing Director from sale of articles Director from sale of articles/metals. There is no mention of the name of metals. There is no mention of the name of buyer, details of sales etc. and thus this excel sheet, according to us, buyer, details of sales etc. and thus this excel sheet, according to us, buyer, details of sales etc. and thus this excel sheet, according to us, cannot be said to be a statement of cash receipts. cannot be said to be a statement of cash receipts.

4.12 The Ld. AR also pointed out to us the fact that, this attachment was . AR also pointed out to us the fact that, this attachment was . AR also pointed out to us the fact that, this attachment was sent by Mr. Stanley to himself and not to any other person, accountant or sent by Mr. Stanley to himself and not to any other person, accountant or sent by Mr. Stanley to himself and not to any other person, accountant or to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. the Managing Director, which could have otherwise suggested that, it the Managing Director, which could have otherwise suggested that, it the Managing Director, which could have otherwise suggested that, it contained details of certain transactions, which w contained details of certain transactions, which was being communicated as being communicated to someone else. There is merit in his plea that, the fact that he had to someone else. There is merit in his plea that, the fact that he had to someone else. There is merit in his plea that, the fact that he had emailed this sheet to himself supports the assessee’s explanation that, it emailed this sheet to himself supports the assessee’s explanation that, it emailed this sheet to himself supports the assessee’s explanation that, it was only an internal record which he was maintaining for his own internal was only an internal record which he was maintaining for his own internal was only an internal record which he was maintaining for his own internal control purposes in the course of discharging his responsibility of being es in the course of discharging his responsibility of being es in the course of discharging his responsibility of being the supervisor of this entire old gold processing. the supervisor of this entire old gold processing.

4.13 It is noted that, though the contents of the above excel sheet on It is noted that, though the contents of the above excel sheet on It is noted that, though the contents of the above excel sheet on stand-alone basis was insufficient to incriminate the assessee of being alone basis was insufficient to incriminate the assessee of being alone basis was insufficient to incriminate the assessee of being involved in any unaccounted transactions, we observe that the case of the nvolved in any unaccounted transactions, we observe that the case of the nvolved in any unaccounted transactions, we observe that the case of the lower authorities mainly hinges on the answer given to Q No.5 by Mr. lower authorities mainly hinges on the answer given to Q No.5 by Mr. lower authorities mainly hinges on the answer given to Q No.5 by Mr. Stanley in his statement u/s 131 of the Act dated 30 Stanley in his statement u/s 131 of the Act dated 30-07-2021, which read 2021, which read as under:-

“Q.5 In the monthly excel shee Q.5 In the monthly excel sheets, there are worksheets named “ac”. In ts, there are worksheets named “ac”. In these sheets of MD, a/c as per the “ac” sheet for the month of these sheets of MD, a/c as per the “ac” sheet for the month of these sheets of MD, a/c as per the “ac” sheet for the month of December 2019 (given as Annexure 3 of this statement). Please go December 2019 (given as Annexure 3 of this statement). Please go December 2019 (given as Annexure 3 of this statement). Please go through the print out and explain the transactions noted these sheets. through the print out and explain the transactions noted these sheets. through the print out and explain the transactions noted these sheets.

A.5 I have gone t A.5 I have gone through the sheets shown to me. In these sheets, the hrough the sheets shown to me. In these sheets, the sales of customers left over items, dust etcs. Are entered. These details sales of customers left over items, dust etcs. Are entered. These details sales of customers left over items, dust etcs. Are entered. These details will not reflect in tally accounts. will not reflect in tally accounts.”

4.14 Reading of the question put to him and his answer to the same, at Reading of the question put to him and his answer to the same, at Reading of the question put to him and his answer to the same, at first blush, shows that, Shri Stanley had suggested that, these otherwise t, Shri Stanley had suggested that, these otherwise t, Shri Stanley had suggested that, these otherwise bald notings found on this excel sheet, denoted sales of these items which bald notings found on this excel sheet, denoted sales of these items which bald notings found on this excel sheet, denoted sales of these items which was not reflected in the tally accounts. It was this statement u/s 131 of was not reflected in the tally accounts. It was this statement u/s 131 of was not reflected in the tally accounts. It was this statement u/s 131 of to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. the Act, which led to the impugned addition in the matt the Act, which led to the impugned addition in the matt the Act, which led to the impugned addition in the matters of the assessee.

4.15 The Ld. AR however pointed out that, apart from giving a The Ld. AR however pointed out that, apart from giving a The Ld. AR however pointed out that, apart from giving a general statement that the notings found in excel sheet denoted sales and were statement that the notings found in excel sheet denoted sales and were statement that the notings found in excel sheet denoted sales and were not reflected in tally accounts, not reflected in tally accounts, the statement of Mr. Stanley Stanley didn’t contain a whisper of any specific details viz., the manner in which these articles / cific details viz., the manner in which these articles / cific details viz., the manner in which these articles / metals were diverted, to whom were they sold, details of the same, metals were diverted, to whom were they sold, details of the same, metals were diverted, to whom were they sold, details of the same, manner of cash receipts and modus of cash withdrawals made by manner of cash receipts and modus of cash withdrawals made by manner of cash receipts and modus of cash withdrawals made by Managing Director etc., particularly when even the excel sheet, as Managing Director etc., particularly when even the excel sheet, as Managing Director etc., particularly when even the excel sheet, as discussed above, was bald and bereft of the same. discussed above, was bald and bereft of the same. Taking us through the Taking us through the statement, the Ld. AR submitted that statement, the Ld. AR submitted that, his answer was only a general averment which had no basis whatso averment which had no basis whatsoever. Per se, the statement the statement, according to the Ld. AR, was hollow and therefore cannot be used to draw according to the Ld. AR, was hollow and therefore cannot be used to draw according to the Ld. AR, was hollow and therefore cannot be used to draw adverse inference in any manner against the assessee, particularly in the adverse inference in any manner against the assessee, particularly in the adverse inference in any manner against the assessee, particularly in the absence of any evidence or material to corroborat absence of any evidence or material to corroborate his empty e his empty averment.

Therefore, according to the Ld. AR, S Therefore, according to the Ld. AR, Shri Stanley's statement was bald and 's statement was bald and bereft of any factual basis and so it deserves to be ignored and no weight bereft of any factual basis and so it deserves to be ignored and no weight bereft of any factual basis and so it deserves to be ignored and no weight be given to it.

4.16 It was also brought to our notice that, the above answer was not It was also brought to our notice that, the above answer was not It was also brought to our notice that, the above answer was not given in his statement(s) u/s 132(4) of the Act dated 06 given in his statement(s) u/s 132(4) of the Act dated 06- -03-2021 & 07- 03-2021, copies of which are placed at Pages 961 to 974 of Paper Book. 2021, copies of which are placed at Pages 961 to 974 of Paper Book. 2021, copies of which are placed at Pages 961 to 974 of Paper Book. to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 19 ::

Instead, it was recorded in his statement given u/s 131 of the Act on 30 Instead, it was recorded in his statement given u/s 131 of the Act on 30 Instead, it was recorded in his statement given u/s 131 of the Act on 30- 07-2021, copy of which is found available at Pages 975 to 978 of Paper 2021, copy of which is found available at Pages 975 to 978 of Paper 2021, copy of which is found available at Pages 975 to 978 of Paper Book. Having taken note of th Book. Having taken note of this fact, we agree with the assessee that, the is fact, we agree with the assessee that, the evidentiary value of the statement of Shri Stanley recorded u/s 131 of the evidentiary value of the statement of Shri Stanley recorded u/s 131 of the evidentiary value of the statement of Shri Stanley recorded u/s 131 of the Act cannot be equated with his statement(s) u/s 132(4) of the Act and it Act cannot be equated with his statement(s) u/s 132(4) of the Act and it Act cannot be equated with his statement(s) u/s 132(4) of the Act and it stands on a lower pedestal than the statement(s) recorded u/s stands on a lower pedestal than the statement(s) recorded u/s stands on a lower pedestal than the statement(s) recorded u/s 132(4) of the Act, as the statutory presumption available u/s 132(4) is not the Act, as the statutory presumption available u/s 132(4) is not the Act, as the statutory presumption available u/s 132(4) is not applicable to a statement u/s 131 of the Act. Accordingly, we hold that applicable to a statement u/s 131 of the Act. Accordingly, we hold that applicable to a statement u/s 131 of the Act. Accordingly, we hold that this statement of Mr. Stanley recorded u/s 131 of the Act alone cannot be this statement of Mr. Stanley recorded u/s 131 of the Act alone cannot be this statement of Mr. Stanley recorded u/s 131 of the Act alone cannot be said to carry evidentiary value. A said to carry evidentiary value. According to us, such a ccording to us, such a statement recorded u/s. 131 of the Act recorded u/s. 131 of the Act can be said to be valid and be used for the be used for the purpose of assessment, only if it is supported by corroborative supported by corroborative material.

4.17 Under section 131 of the Act, the income tax authority is Under section 131 of the Act, the income tax authority is Under section 131 of the Act, the income tax authority is empowered to examine examine any person on oath. Section 131 of the Act on oath. Section 131 of the Act confers power to the income tax authority to record the statement in the confers power to the income tax authority to record the statement in the confers power to the income tax authority to record the statement in the course of proceedings before them. The power vested u/s. 131(1) is only course of proceedings before them. The power vested u/s. 131(1) is only course of proceedings before them. The power vested u/s. 131(1) is only to make enquiries and investigation and to make enquiries and investigation and is not meant to obta obtain voluntary disclosure or surrender of concealed income. As per section 31 of the disclosure or surrender of concealed income. As per section 31 of the disclosure or surrender of concealed income. As per section 31 of the Indian Evidence Act, 1878, admissions are not conclusively proved as Indian Evidence Act, 1878, admissions are not conclusively proved as Indian Evidence Act, 1878, admissions are not conclusively proved as against admitted proof. In the absence of rebuttable conclusion, against admitted proof. In the absence of rebuttable conclusion, against admitted proof. In the absence of rebuttable conclusion, admission bind the maker when these are admission bind the maker when these are not rebuttable or retracted. It not rebuttable or retracted. It was held by the Hon’ble Hon’ble Supreme Court in the case of Supreme Court in the case of Pullengode to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 20 ::

Rubber Produce Co. Ltd. v. State of Kerala (91 ITR 18) that an Rubber Produce Co. Ltd. v. State of Kerala (91 ITR 18) Rubber Produce Co. Ltd. v. State of Kerala (91 ITR 18) admission is an extremely important piece of evidence but it cannot be admission is an extremely important piece of evidence but it cannot be admission is an extremely important piece of evidence but it cannot be said that it is conclusive and the maker can show that it was incorrect. In e and the maker can show that it was incorrect. In e and the maker can show that it was incorrect. In the case of Satinder Kumar (HUF) v. CIT [1977] 106 ITR 64 (HP) Satinder Kumar (HUF) v. CIT [1977] 106 ITR 64 (HP) Satinder Kumar (HUF) v. CIT [1977] 106 ITR 64 (HP), the High Court has held that the admission made by an assessee held that the admission made by an assessee held that the admission made by an assessee constitute a relevant piece of evidence but if the assessee contends that constitute a relevant piece of evidence but if the assessee contends that constitute a relevant piece of evidence but if the assessee contends that in making the admission, he had proceeded on aking the admission, he had proceeded on a mistaken understanding a mistaken understanding or on misconception of facts or untrue facts, such admission cannot be misconception of facts or untrue facts, such admission cannot be misconception of facts or untrue facts, such admission cannot be relied upon without considering the aforesaid contention. relied upon without considering the aforesaid contention.

4.18 We are therefore therefore of the view that the statement recorde of the view that the statement recorded u/s. 131 cannot be independently used for making any addition in the hands of the cannot be independently used for making any addition in the hands of the cannot be independently used for making any addition in the hands of the assessee and the said statement cannot, in our view, be the sole basis for assessee and the said statement cannot, in our view, be the sole basis for assessee and the said statement cannot, in our view, be the sole basis for making any addition and making any addition and it must be independently corroborated by must be independently corroborated by evidences. It is also open to th open to the assessee to show the circumstances in e assessee to show the circumstances in which such statement was was recorded, if under threat or coercion or based , if under threat or coercion or based on mistake of fact.

4.19 In light of the above legal understanding, we now proceed to In light of the above legal understanding, we now proceed to In light of the above legal understanding, we now proceed to examine the veracity of the statement of Shri Stanley examine the veracity of the statement of Shri Stanley in the facts and in the facts and circumstance of this case circumstance of this case. Accordingly, for the reasons discussed above . Accordingly, for the reasons discussed above and in the given facts of the case before us, it was for the Revenue and and in the given facts of the case before us, it was for the Revenue and and in the given facts of the case before us, it was for the Revenue and not the assessee to corroborate the statement u/s 131 of the Act, with not the assessee to corroborate the statement u/s 131 of the Act, with not the assessee to corroborate the statement u/s 131 of the Act, with to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. other independent tang other independent tangible and corroborative material. We however find ible and corroborative material. We however find the same to be lacking in the present case. Rather, the assessee is noted the same to be lacking in the present case. Rather, the assessee is noted the same to be lacking in the present case. Rather, the assessee is noted to have all along been denying this statement and disputing its to have all along been denying this statement and disputing its to have all along been denying this statement and disputing its correctness by bringing on record facts & correctness by bringing on record facts & supporting to prove the contrary.

4.20 From the answers given by Shri Stanley to his Q Nos. 11 & 12 of From the answers given by Shri Stanley to his Q Nos. 11 & 12 of From the answers given by Shri Stanley to his Q Nos. 11 & 12 of the statement u/s 132(4) of the Act dated 06 the statement u/s 132(4) of the Act dated 06-03-2021, it is observed 2021, it is observed that, Mr. Stanley had explained in detail his job that, Mr. Stanley had explained in detail his job-profile which was only to profile which was only to supervise and manage the old gold supervise and manage the old gold processing. Perusal of both his processing. Perusal of both his statements recorded u/s 132(4) of the Act dated 06 statements recorded u/s 132(4) of the Act dated 06-03-2021 & 07 2021 & 07-03- 2021 shows that he was thoroughly investigated and examined on the 2021 shows that he was thoroughly investigated and examined on the 2021 shows that he was thoroughly investigated and examined on the various aspects of purchases, processing of old gold, purification process, various aspects of purchases, processing of old gold, purification process, various aspects of purchases, processing of old gold, purification process, purity of gold, testing reports etc. It is observed that, during the course of , testing reports etc. It is observed that, during the course of , testing reports etc. It is observed that, during the course of search, at no point of time was Shri Stanley examined on the accounting search, at no point of time was Shri Stanley examined on the accounting search, at no point of time was Shri Stanley examined on the accounting & finance aspects of the business of the assessee. The tone and tenor of & finance aspects of the business of the assessee. The tone and tenor of & finance aspects of the business of the assessee. The tone and tenor of questioning during the course of search u/s 13 questioning during the course of search u/s 132(4) of the Act thus is 2(4) of the Act thus is noted to suggest that Shri Stanley was involved in the purchase and gold noted to suggest that Shri Stanley was involved in the purchase and gold noted to suggest that Shri Stanley was involved in the purchase and gold processing operations and that he was not in charge of the accounts & processing operations and that he was not in charge of the accounts & processing operations and that he was not in charge of the accounts & finance of the assessee. This is noted to be corroborated by his finance of the assessee. This is noted to be corroborated by his finance of the assessee. This is noted to be corroborated by his subsequent answers to Q subsequent answers to Q Nos. 6 & 7 in his same statement u/s 131 of the Nos. 6 & 7 in his same statement u/s 131 of the Act wherein he had stated that, the accounts section is separate and he is Act wherein he had stated that, the accounts section is separate and he is Act wherein he had stated that, the accounts section is separate and he is not aware as to the manner in which account entries are made. We thus not aware as to the manner in which account entries are made. We thus not aware as to the manner in which account entries are made. We thus to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. find merit in the Ld. AR’s submission that, being a person with find merit in the Ld. AR’s submission that, being a person with find merit in the Ld. AR’s submission that, being a person with no finance or accounts background, Shri Stanley was not equipped to understand the or accounts background, Shri Stanley was not equipped to understand the or accounts background, Shri Stanley was not equipped to understand the system of accounting followed by the assessee and therefore it was system of accounting followed by the assessee and therefore it was system of accounting followed by the assessee and therefore it was unusual for him to answer the notings found noted in the excel sheet with unusual for him to answer the notings found noted in the excel sheet with unusual for him to answer the notings found noted in the excel sheet with the tally accounts.

4.21 The Ld. AR has submitted that, his statement was based on d. AR has submitted that, his statement was based on d. AR has submitted that, his statement was based on incorrect understanding of the relevant facts. To substantiate the same, incorrect understanding of the relevant facts. To substantiate the same, incorrect understanding of the relevant facts. To substantiate the same, the Ld. AR brought to our notice that, under the system of accounting the Ld. AR brought to our notice that, under the system of accounting the Ld. AR brought to our notice that, under the system of accounting followed by the assessee, only the gold bullion is accounted followed by the assessee, only the gold bullion is accounted followed by the assessee, only the gold bullion is accounted for separately and that the finished stock of jewellery is reflected in a consolidated and that the finished stock of jewellery is reflected in a consolidated and that the finished stock of jewellery is reflected in a consolidated manner by way of ‘gold jewellery’. Explaining to us the modus of manner by way of ‘gold jewellery’. Explaining to us the modus of manner by way of ‘gold jewellery’. Explaining to us the modus of assessee’s jewellery business, the Ld. AR submitted that, the left over assessee’s jewellery business, the Ld. AR submitted that, the left over assessee’s jewellery business, the Ld. AR submitted that, the left over articles recovered during the p articles recovered during the process of melting of old gold ornaments rocess of melting of old gold ornaments being of comparatively lesser / minimal value and having being re being of comparatively lesser / minimal value and having being re being of comparatively lesser / minimal value and having being re-used in the manufacturing process of new gold ornaments is not separately the manufacturing process of new gold ornaments is not separately the manufacturing process of new gold ornaments is not separately recorded, at any stage, in the tally accounts but the same forms part of recorded, at any stage, in the tally accounts but the same forms part of recorded, at any stage, in the tally accounts but the same forms part of the consolidated entry passed for the inventory movement. It was consolidated entry passed for the inventory movement. It was consolidated entry passed for the inventory movement. It was therefore explained to us that, since Mr. Stanley was not aware about the therefore explained to us that, since Mr. Stanley was not aware about the therefore explained to us that, since Mr. Stanley was not aware about the manner of accounting and that he was only aware there was no separate manner of accounting and that he was only aware there was no separate manner of accounting and that he was only aware there was no separate heads/accounts maintained for the left over articl heads/accounts maintained for the left over articles recovered during the es recovered during the process of melting of old gold ornaments, he had on mistaken process of melting of old gold ornaments, he had on mistaken process of melting of old gold ornaments, he had on mistaken understanding of fact stated that, understanding of fact stated that, they are not reflected in the tally they are not reflected in the tally to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. accounts, whereas the contemporaneous fact remains that, it formed part , whereas the contemporaneous fact remains that, it formed part , whereas the contemporaneous fact remains that, it formed part of the inventory recorded un of the inventory recorded under the head ‘old gold’ and ‘gold jewellery’ in der the head ‘old gold’ and ‘gold jewellery’ in the books of accounts.

4.22 In support of the above, the Ld. AR brought to our notice the details In support of the above, the Ld. AR brought to our notice the details In support of the above, the Ld. AR brought to our notice the details of the purchases, stock inventory movement etc. which was placed on of the purchases, stock inventory movement etc. which was placed on of the purchases, stock inventory movement etc. which was placed on record to show that the entire process of record to show that the entire process of purchase of old gold ornaments, purchase of old gold ornaments, melting, movement of gold and other articles melting, movement of gold and other articles/metals and their metals and their corresponding value and subsequent re corresponding value and subsequent re-use in manufacturing process was use in manufacturing process was recorded in the books of accounts. We accordingly note that the metals / recorded in the books of accounts. We accordingly note that the metals / recorded in the books of accounts. We accordingly note that the metals / articles which are recovered in the process of melting the old gold e recovered in the process of melting the old gold e recovered in the process of melting the old gold ornaments formed part of the books of accounts and there was nothing ornaments formed part of the books of accounts and there was nothing ornaments formed part of the books of accounts and there was nothing on record nor was anything found in the course of search which would on record nor was anything found in the course of search which would on record nor was anything found in the course of search which would corroborate the AO’s case or the statement of Shri Stanley that suc corroborate the AO’s case or the statement of Shri Stanley that suc corroborate the AO’s case or the statement of Shri Stanley that such metals / articles were diverted or sold outside the books of accounts. metals / articles were diverted or sold outside the books of accounts. metals / articles were diverted or sold outside the books of accounts.

4.23 The Ld. AR had also taken us through the The Ld. AR had also taken us through the relevant details and relevant details and supporting submitted for all the years in which this impugned issue was submitted for all the years in which this impugned issue was submitted for all the years in which this impugned issue was involved. Having perused the same, we discu involved. Having perused the same, we discuss the details provided for ss the details provided for the relevant AY 2016-17 as a sample instance, as the same details and 17 as a sample instance, as the same details and 17 as a sample instance, as the same details and modus operandi is found to be provided for the subsequent years as well. is found to be provided for the subsequent years as well. is found to be provided for the subsequent years as well.

From Page 754 of the Paper Book, it is noted that, the assessee had From Page 754 of the Paper Book, it is noted that, the assessee had From Page 754 of the Paper Book, it is noted that, the assessee had purchased old gold ornaments having value of Rs.1243.37 crores, out of d ornaments having value of Rs.1243.37 crores, out of d ornaments having value of Rs.1243.37 crores, out of to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. which old gold ornaments weighing 42,00,351 gms which old gold ornaments weighing 42,00,351 gms. was sent for melting was sent for melting whose value was Rs.980.99 crores. The details of stock movement shows whose value was Rs.980.99 crores. The details of stock movement shows whose value was Rs.980.99 crores. The details of stock movement shows that, the bullion generated from melting was recorded in the b that, the bullion generated from melting was recorded in the b that, the bullion generated from melting was recorded in the books of accounts at the same value of Rs.980.99 crores and all the items were accounts at the same value of Rs.980.99 crores and all the items were accounts at the same value of Rs.980.99 crores and all the items were then sent back to the goldsmith for purification into gold bullion and/or then sent back to the goldsmith for purification into gold bullion and/or then sent back to the goldsmith for purification into gold bullion and/or manufacture of new items of gold ornaments including the other manufacture of new items of gold ornaments including the other manufacture of new items of gold ornaments including the other articles/metals obtained during the melti articles/metals obtained during the melting process. The stock movement ng process. The stock movement from purchase of old gold ornaments to melting process to the gold smith from purchase of old gold ornaments to melting process to the gold smith from purchase of old gold ornaments to melting process to the gold smith and then for manufacture of new gold ornaments along with their values and then for manufacture of new gold ornaments along with their values and then for manufacture of new gold ornaments along with their values are noted to be corroborated by the amounts reflected in the audited are noted to be corroborated by the amounts reflected in the audited are noted to be corroborated by the amounts reflected in the audited financials as well as tax audit report for AY 2016 s well as tax audit report for AY 2016-17, which has been 17, which has been placed at Pages 756 to 758 and 792 of the Paper Book respectively. These placed at Pages 756 to 758 and 792 of the Paper Book respectively. These placed at Pages 756 to 758 and 792 of the Paper Book respectively. These material contemporaneous facts, according to us, thus negates the material contemporaneous facts, according to us, thus negates the material contemporaneous facts, according to us, thus negates the statement of Shri Stanley that these articles / metals statement of Shri Stanley that these articles / metals inte inter alia were not reflected in the books of accounts. reflected in the books of accounts.

4.24 It is also noted that noted that, the Revenue was unable to bring on record any the Revenue was unable to bring on record any post-search enquiries conducted by the Investigating authorities search enquiries conducted by the Investigating authorities search enquiries conducted by the Investigating authorities in which any tangible material or corroborative evidence was brou any tangible material or corroborative evidence was brought on record to ght on record to show that the notings found in excel sheet, in light of the statement of show that the notings found in excel sheet, in light of the statement of show that the notings found in excel sheet, in light of the statement of Shri Stanley, contained details of unaccounted sales of these leftover Shri Stanley, contained details of unaccounted sales of these leftover Shri Stanley, contained details of unaccounted sales of these leftover articles / metals. It is also not a case that, the Revenue found any other articles / metals. It is also not a case that, the Revenue found any other articles / metals. It is also not a case that, the Revenue found any other evidence or details of cash sales of these items from any of the locations of cash sales of these items from any of the locations of cash sales of these items from any of the locations to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. or at the factory premises etc. during the course of search which would or at the factory premises etc. during the course of search which would or at the factory premises etc. during the course of search which would support their case that these items were diverted outside the books of support their case that these items were diverted outside the books of support their case that these items were diverted outside the books of accounts. There is also force in the assessee’s contention accounts. There is also force in the assessee’s contention that, the values that, the values noted in the excel sheet were down to the rupee/paise and that it is noted in the excel sheet were down to the rupee/paise and that it is noted in the excel sheet were down to the rupee/paise and that it is against the normal human probabilities today that the assessee would against the normal human probabilities today that the assessee would against the normal human probabilities today that the assessee would have made all the cash sales in last rupee/paise. Hence, this aspect have made all the cash sales in last rupee/paise. Hence, this aspect have made all the cash sales in last rupee/paise. Hence, this aspect further dilutes the correctness further dilutes the correctness of the statement of Shri Stanley. of the statement of Shri Stanley.

4.25 We also take note of the fact that, during the course of search, the We also take note of the fact that, during the course of search, the We also take note of the fact that, during the course of search, the Investigating authorities had taken physical stock of the gold, gold Investigating authorities had taken physical stock of the gold, gold Investigating authorities had taken physical stock of the gold, gold jewellery and other items/articles which was reconciled with the stock jewellery and other items/articles which was reconciled with the stock jewellery and other items/articles which was reconciled with the stock appearing in the books of accounts and that there was no discrepancy ng in the books of accounts and that there was no discrepancy ng in the books of accounts and that there was no discrepancy found whatsoever. We are in agreement with the assessee that, had the found whatsoever. We are in agreement with the assessee that, had the found whatsoever. We are in agreement with the assessee that, had the articles / metals been diverted or sold outside the books, then the articles / metals been diverted or sold outside the books, then the articles / metals been diverted or sold outside the books, then the physical stock would have been lesser than what was refl physical stock would have been lesser than what was refl physical stock would have been lesser than what was reflected in the books of accounts. This was however not the case. According to us, this books of accounts. This was however not the case. According to us, this books of accounts. This was however not the case. According to us, this material fact further corroborates the assessee’s case and disproves the material fact further corroborates the assessee’s case and disproves the material fact further corroborates the assessee’s case and disproves the correctness of the statement given by Shri Stanley. correctness of the statement given by Shri Stanley.

4.26 In light of the above explanation & In light of the above explanation & relevant facts brought on record facts brought on record by the assessee, we find that, find that, not only was the excel sheet bald and not only was the excel sheet bald and unreliable but even the statement of Mr. Stanley unreliable but even the statement of Mr. Stanley considered on considered on its own did not in itself inspire confidence to justify the did not in itself inspire confidence to justify the addition made by the AO addition made by the AO to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. u/s 68 of the Act, for the reason that not only were there apparent factual he Act, for the reason that not only were there apparent factual he Act, for the reason that not only were there apparent factual inconsistencies with the facts available on record but also the averment stencies with the facts available on record but also the averment stencies with the facts available on record but also the averment made by him was general in nature, which did by him was general in nature, which didn’t divulge t divulge any specific details regarding the sales the sales/diversion of the articles/metals obtained metals obtained during the melting process of old gold ornaments. Hence, i during the melting process of old gold ornaments. Hence, i during the melting process of old gold ornaments. Hence, in the absence of any material to substantiate the statement l to substantiate the statement given by Shri given by Shri Stanley u/s 131 of the Act, in our view, the same cannot be used against the , in our view, the same cannot be used against the , in our view, the same cannot be used against the assessee. As rightly pointed out by ointed out by Ld. AR, in our view, the assessee is R, in our view, the assessee is being asked to prove a negative fact, being asked to prove a negative fact, which is an impossible task and is s an impossible task and is an unreasonable demand and goes against the fair procedure to be an unreasonable demand and goes against the fair procedure to be an unreasonable demand and goes against the fair procedure to be followed by the State against assessee followed by the State against assessee.

4.27 Hence, for the detaile e, for the detailed reasons, discussed in the preceding d reasons, discussed in the preceding paragraphs, we are of the view that paragraphs, we are of the view that neither the contents of the excel neither the contents of the excel sheet nor the statement of Shri Stanley sheet nor the statement of Shri Stanley supported the case of the the case of the Assessing Officer as it was not backed by any independent & as it was not backed by any independent & as it was not backed by any independent & corroborative material. We accordingly set aside the order of the lower We accordingly set aside the order of the lower authorities on this issue and direct the AO to delete the impugned authorities on this issue and direct the AO to delete the impugned authorities on this issue and direct the AO to delete the impugned addition. Hence, Ground Nos. 4 to 8 Ground Nos. 4 to 8 stands allowed.

4.28 Since on merits, we have decided the issue in favour of the Since on merits, we have decided the issue in favour of the Since on merits, we have decided the issue in favour of the assessee, the Ground N Ground Nos.1 to 3 raised challenging the legal validity of raised challenging the legal validity of the impugned order passed u/s 153A of the Act for want of any the impugned order passed u/s 153A of the Act for want of any the impugned order passed u/s 153A of the Act for want of any to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. incriminating material found in the course of search has been rendered incriminating material found in the course of search has been rendered incriminating material found in the course of search has been rendered infructuous and is therefore not being separately adjudicated upon. infructuous and is therefore not being separately adjudicated upon. infructuous and is therefore not being separately adjudicated upon. for AY 2017 No.676/Chny/2025 for AY 2017-18.

Ground Nos. 1 to 3 are noted to be general in nature which are are noted to be general in nature which are 6. Ground Nos. 1 to 3 noted to be subsumed in the subsequent grounds taken separately in noted to be subsumed in the subsequent grounds taken separately in noted to be subsumed in the subsequent grounds taken separately in relation to each of the addition/disallowance impugned in this appeal. to each of the addition/disallowance impugned in this appeal. to each of the addition/disallowance impugned in this appeal.

Accordingly, these grounds are being dismissed as not being separately Accordingly, these grounds are being dismissed as not being separately Accordingly, these grounds are being dismissed as not being separately adjudicated upon.

7.1 Following our reasons and conclusions recorded while Following our reasons and conclusions recorded while Following our reasons and conclusions recorded while deciding Ground Nos. 4 to 8 of a of assessee’s appeal in A.Y. 2016-17, we hold that the , we hold that the addition of Rs.1,81,04,999 1,81,04,999/- is untenable on facts and in law. We and in law. We to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. therefore allow the Ground Nos. therefore allow the Ground Nos. 4 to 8 raised by the assessee an raised by the assessee and direct the AO to delete the impugned addition to delete the impugned addition made in AY 2017-18 18.

8. Ground Nos. 9 to 13 Ground Nos. 9 to 13 of the assessee’s appeal for AY 2017 of the assessee’s appeal for AY 2017-18 relates to the addition of Rs.6,85,00,000/ relates to the addition of Rs.6,85,00,000/- made on account of made on account of unaccounted repayment of loan to Shr unaccounted repayment of loan to Shri Anbuchezhiyan [in short ‘Anbu’]. i Anbuchezhiyan [in short ‘Anbu’].

The facts relating to this issue are that, a search action u/s 132 of the Act The facts relating to this issue are that, a search action u/s 132 of the Act The facts relating to this issue are that, a search action u/s 132 of the Act was conducted upon Shri Anbu on 05 was conducted upon Shri Anbu on 05-02-2020, wherein several 2020, wherein several documents, diaries and notebooks were found and seized. The AO has documents, diaries and notebooks were found and seized. The AO has documents, diaries and notebooks were found and seized. The AO has observed that, these material hese material inter alia contained details relating to contained details relating to several unaccounted cash transactions between Shri Anbu and the several unaccounted cash transactions between Shri Anbu and the several unaccounted cash transactions between Shri Anbu and the assessee. The AO further observed that, immovable property deeds of assessee. The AO further observed that, immovable property deeds of assessee. The AO further observed that, immovable property deeds of Shri Kiran Kumar, Managing Director of the assessee, promissory notes Shri Kiran Kumar, Managing Director of the assessee, promissory notes Shri Kiran Kumar, Managing Director of the assessee, promissory notes, blank cheques, etc. was found in control of the associates of Shri Anbu, blank cheques, etc. was found in control of the associates of Shri Anbu, blank cheques, etc. was found in control of the associates of Shri Anbu, which according to the AO, was a collateral given by the assessee for the which according to the AO, was a collateral given by the assessee for the which according to the AO, was a collateral given by the assessee for the money lent by Shri Anbu to them in cash. These material seized from Shri money lent by Shri Anbu to them in cash. These material seized from Shri money lent by Shri Anbu to them in cash. These material seized from Shri Anbu was provided to the assessee Anbu was provided to the assessee by way of Annexure- -7 to the show cause notice. This material, according to the AO, unambiguously revealed cause notice. This material, according to the AO, unambiguously revealed cause notice. This material, according to the AO, unambiguously revealed that, there were cash loans accepted and repaid by the assessee. that, there were cash loans accepted and repaid by the assessee. that, there were cash loans accepted and repaid by the assessee.

8.1 The AO further observed that, in the course of search upon the The AO further observed that, in the course of search upon the The AO further observed that, in the course of search upon the assessee, a number of r of SQL databases were unearthed from a server, databases were unearthed from a server, which was marked as ANN/VSP/LJMPL/ED/S. Upon analysis of the which was marked as ANN/VSP/LJMPL/ED/S. Upon analysis of the which was marked as ANN/VSP/LJMPL/ED/S. Upon analysis of the to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. database ‘atp201920’, a table named ‘closetbcls’ was found, which database ‘atp201920’, a table named ‘closetbcls’ was found, which database ‘atp201920’, a table named ‘closetbcls’ was found, which according to the AO, was a trial balance as on 31.05.2019, and it according to the AO, was a trial balance as on 31.05.2019, and it according to the AO, was a trial balance as on 31.05.2019, and it contained details of loan accepted by the assessee from Anbu aggregating ils of loan accepted by the assessee from Anbu aggregating ils of loan accepted by the assessee from Anbu aggregating to Rs.125 crores as on 31 to Rs.125 crores as on 31-03-2019 and further credits from 01 2019 and further credits from 01-04-2019 to 31-05-2019 was Rs.10 crores. Also, there was a debit/repayment of 2019 was Rs.10 crores. Also, there was a debit/repayment of 2019 was Rs.10 crores. Also, there was a debit/repayment of Rs.1 crore. The AO further referred to certain entries whi Rs.1 crore. The AO further referred to certain entries which were detected ch were detected in the table named ‘voucher log’ which also contained the name of Anbu. in the table named ‘voucher log’ which also contained the name of Anbu. in the table named ‘voucher log’ which also contained the name of Anbu.

The relevant notings found in these electronic data has been set out in The relevant notings found in these electronic data has been set out in The relevant notings found in these electronic data has been set out in Pages 43 to 48 of the assessment order for AY 2017 Pages 43 to 48 of the assessment order for AY 2017-18.

8.2 The AO further observed that, in t The AO further observed that, in the post search enquiries, he post search enquiries, explanation was sought from the assessee for these entries found on the explanation was sought from the assessee for these entries found on the explanation was sought from the assessee for these entries found on the database, to which, no explanation was given. It was further noted that, database, to which, no explanation was given. It was further noted that, database, to which, no explanation was given. It was further noted that, a resolution passed by the Board of Directors of the assessee which a resolution passed by the Board of Directors of the assessee which a resolution passed by the Board of Directors of the assessee which confirmed the acceptance of loan of Rs.50 crores before the date of ceptance of loan of Rs.50 crores before the date of ceptance of loan of Rs.50 crores before the date of resolution. The AO was of the view that, this resolution proved that the resolution. The AO was of the view that, this resolution proved that the resolution. The AO was of the view that, this resolution proved that the assessee had availed cash loan to the extent of Rs.100 crores as on 23 assessee had availed cash loan to the extent of Rs.100 crores as on 23 assessee had availed cash loan to the extent of Rs.100 crores as on 23- 02-2018. Further, the AO also took cognizance of a cash rece 2018. Further, the AO also took cognizance of a cash rece 2018. Further, the AO also took cognizance of a cash receipt dated 04- 12-2018 found from the premises of Shri Anbu, which according to him, 2018 found from the premises of Shri Anbu, which according to him, 2018 found from the premises of Shri Anbu, which according to him, showed that Shri Kiran Kumar had confirmed receipt of Rs. 5 crores as showed that Shri Kiran Kumar had confirmed receipt of Rs. 5 crores as showed that Shri Kiran Kumar had confirmed receipt of Rs. 5 crores as RTGS and Rs.10 crores as cash loan. The AO thus observed that, the RTGS and Rs.10 crores as cash loan. The AO thus observed that, the RTGS and Rs.10 crores as cash loan. The AO thus observed that, the verification of the seized material verification of the seized material found from the assessee’s premises and found from the assessee’s premises and Shri Anbu showed that the assessee had accepted cash loans. Shri Anbu showed that the assessee had accepted cash loans. Shri Anbu showed that the assessee had accepted cash loans. to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 30 ::

The AO further found that, the seized material of Shri Anbu The AO further found that, the seized material of Shri Anbu The AO further found that, the seized material of Shri Anbu inter 8.3 alia also contained the date also contained the date-wise cash receipt of Rs.94.96 crores from the wise cash receipt of Rs.94.96 crores from the assessee from 15-06-2016 to 04 2016 to 04-02-2020. After analyzing all these 2020. After analyzing all these details, the AO summarized the cash payments made by the assessee details, the AO summarized the cash payments made by the assessee details, the AO summarized the cash payments made by the assessee upon repayment of loans to Shri Anbu as follows: upon repayment of loans to Shri Anbu as follows:

Cash receipts by Shri Financial Year Financial Year Anbuchezhiyan from Lalitha 2016- -17 68500000 2017- -18 351400000 2018- -19 334624250 2019- -20 195100000 Total Total 949624250 The AO accordingly show caused the assessee to explain these cash The AO accordingly show caused the assessee to explain these cash The AO accordingly show caused the assessee to explain these cash payments which were not reflected in the books of the assessee and payments which were not reflected in the books of the assessee and payments which were not reflected in the books of the assessee and proposed to add the above sum by way of unexplained expenditure u/s proposed to add the above sum by way of unexplained expenditure u/s proposed to add the above sum by way of unexplained expenditure u/s 69C of the Act.

The assessee is noted to have furn The assessee is noted to have furnished their response vide letter ished their response vide letter 8.4 dated 02-02-2023. The assessee had first explained that, the purported 2023. The assessee had first explained that, the purported 2023. The assessee had first explained that, the purported data which was extracted from the database seized from their premises data which was extracted from the database seized from their premises data which was extracted from the database seized from their premises was incorrect, corrupted and contained malware. For was incorrect, corrupted and contained malware. For buttressing buttressing this, the assessee showed that the data in the purported trial balance was mixed showed that the data in the purported trial balance was mixed showed that the data in the purported trial balance was mixed up as it contained numerous accounts which though duly reflected in the up as it contained numerous accounts which though duly reflected in the up as it contained numerous accounts which though duly reflected in the books of other companies, firms and individuals of the assessee group books of other companies, firms and individuals of the assessee group books of other companies, firms and individuals of the assessee group had shifted from one account to another and was app had shifted from one account to another and was appearing in the name earing in the name of the assessee. The assessee also demonstrated on sample basis that, of the assessee. The assessee also demonstrated on sample basis that, of the assessee. The assessee also demonstrated on sample basis that, to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. the details found mentioned in the data software against the name of the the details found mentioned in the data software against the name of the the details found mentioned in the data software against the name of the assessee company actually related to its sister concern and / or individual assessee company actually related to its sister concern and / or individual assessee company actually related to its sister concern and / or individual / family members of the directors which were conducted through banking f the directors which were conducted through banking f the directors which were conducted through banking channel and were not cash transactions. The assessee therefore channel and were not cash transactions. The assessee therefore channel and were not cash transactions. The assessee therefore submitted that, it was incorrectly being assumed by the AO that, all these submitted that, it was incorrectly being assumed by the AO that, all these submitted that, it was incorrectly being assumed by the AO that, all these data entries were unaccounted and represented cash transactions. data entries were unaccounted and represented cash transactions. data entries were unaccounted and represented cash transactions.

According to the assessee, due to the AO’s reliance on this corrupted According to the assessee, due to the AO’s reliance on this corrupted According to the assessee, due to the AO’s reliance on this corrupted data, the purported reconciliation issues arose. To prove their case, the data, the purported reconciliation issues arose. To prove their case, the data, the purported reconciliation issues arose. To prove their case, the assessee pointed out that, the amount of debit as per their corrupted assessee pointed out that, the amount of debit as per their corrupted assessee pointed out that, the amount of debit as per their corrupted database was only Rs.1 crore whereas the a database was only Rs.1 crore whereas the amount found mentioned in mount found mentioned in the seized material of Shri Anbu was Rs.94.96 crores. The assessee the seized material of Shri Anbu was Rs.94.96 crores. The assessee the seized material of Shri Anbu was Rs.94.96 crores. The assessee further showed that the data entries in the seized electronic device also further showed that the data entries in the seized electronic device also further showed that the data entries in the seized electronic device also did not reconcile with the material seized from the premises of Shri Anbu. did not reconcile with the material seized from the premises of Shri Anbu. did not reconcile with the material seized from the premises of Shri Anbu.

It was further shown that, if these data entries are assumed to be correct, shown that, if these data entries are assumed to be correct, shown that, if these data entries are assumed to be correct, it would suggest that the transaction value was nearly Rs.1000 crores, it would suggest that the transaction value was nearly Rs.1000 crores, it would suggest that the transaction value was nearly Rs.1000 crores, whereas in the search operations, no corresponding unaccounted asset or whereas in the search operations, no corresponding unaccounted asset or whereas in the search operations, no corresponding unaccounted asset or investment or expenditure was found to corroborate s investment or expenditure was found to corroborate s investment or expenditure was found to corroborate such entries.

According to the assessee therefore, the contents of the alleged corrupted According to the assessee therefore, the contents of the alleged corrupted According to the assessee therefore, the contents of the alleged corrupted data was not reliable.

8.5 As far as the documents and material found from the premises of As far as the documents and material found from the premises of As far as the documents and material found from the premises of Shri Anbu was concerned, the assessee submitted that these material Shri Anbu was concerned, the assessee submitted that these material Shri Anbu was concerned, the assessee submitted that these material found from third party premises was inadmissible evidence, since it was om third party premises was inadmissible evidence, since it was om third party premises was inadmissible evidence, since it was to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. not backed by any corroborative material or evidence or any adverse not backed by any corroborative material or evidence or any adverse not backed by any corroborative material or evidence or any adverse statement of the person from whose possession it was found. The statement of the person from whose possession it was found. The statement of the person from whose possession it was found. The assessee further showed that, the documents which were found assessee further showed that, the documents which were found assessee further showed that, the documents which were found inter alia reflected transactions either between the assessee and / or its Managing reflected transactions either between the assessee and / or its Managing reflected transactions either between the assessee and / or its Managing Director with Shri Anbu and that the borrowings were duly reflected in the Director with Shri Anbu and that the borrowings were duly reflected in the Director with Shri Anbu and that the borrowings were duly reflected in the regular books of accounts and the financials of the respective entities. In regular books of accounts and the financials of the respective entities. In regular books of accounts and the financials of the respective entities. In so far as the un-reconciled sums contained in the seized material of Shri onciled sums contained in the seized material of Shri onciled sums contained in the seized material of Shri Anbu was concerned, it was submitted that, the assessee could not be Anbu was concerned, it was submitted that, the assessee could not be Anbu was concerned, it was submitted that, the assessee could not be expected to reconcile the notings which were maintained by a third party. expected to reconcile the notings which were maintained by a third party. expected to reconcile the notings which were maintained by a third party.

After considering the submissions of the assessee, the AO After considering the submissions of the assessee, the AO After considering the submissions of the assessee, the AO observed that the arguments were too facile to be accepted. The AO held that the the arguments were too facile to be accepted. The AO held that the the arguments were too facile to be accepted. The AO held that the submissions of the assessee did not address the specific point raised in submissions of the assessee did not address the specific point raised in submissions of the assessee did not address the specific point raised in the show cause. Relying on the seized material found from the premises the show cause. Relying on the seized material found from the premises the show cause. Relying on the seized material found from the premises of Shri Anbu, the AO inferred t of Shri Anbu, the AO inferred that, the assessee had made cash payments hat, the assessee had made cash payments towards repayment of cash loans out of their unaccounted income to Shri towards repayment of cash loans out of their unaccounted income to Shri towards repayment of cash loans out of their unaccounted income to Shri Anbu which aggregated to Rs.94.96 crores. The AO accordingly added Anbu which aggregated to Rs.94.96 crores. The AO accordingly added Anbu which aggregated to Rs.94.96 crores. The AO accordingly added sum of Rs.6,85,00,000/ sum of Rs.6,85,00,000/- as mentioned in the year wise summary set out as mentioned in the year wise summary set out in the show cause notice to the total income of the assessee for the show cause notice to the total income of the assessee for the show cause notice to the total income of the assessee for the relevant AY 2017-18. Aggrieved by the order of the AO, the assessee 18. Aggrieved by the order of the AO, the assessee 18. Aggrieved by the order of the AO, the assessee preferred an appeal before the Ld. CIT(A). preferred an appeal before the Ld. CIT(A). to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 33 ::

On appeal, the assessee challenged the addition both on legal On appeal, the assessee challenged the addition both on legal On appeal, the assessee challenged the addition both on legal 8.6 grounds and merits. The assessee also furnished the details of loans its. The assessee also furnished the details of loans its. The assessee also furnished the details of loans which the assessee group had availed from Shri Anbu and it was claimed which the assessee group had availed from Shri Anbu and it was claimed which the assessee group had availed from Shri Anbu and it was claimed that these loan transactions were conducted through banking channel and that these loan transactions were conducted through banking channel and that these loan transactions were conducted through banking channel and were recorded in the books of accounts. The Ld. CIT(A) is n were recorded in the books of accounts. The Ld. CIT(A) is n were recorded in the books of accounts. The Ld. CIT(A) is noted to have called for a remand report based on the submissions of the assessee. called for a remand report based on the submissions of the assessee. called for a remand report based on the submissions of the assessee.

After considering the counter submissions of the assessee, the Ld. CIT(A) After considering the counter submissions of the assessee, the Ld. CIT(A) After considering the counter submissions of the assessee, the Ld. CIT(A) first rejected the legal plea of the assessee that, the impugned addition first rejected the legal plea of the assessee that, the impugned addition first rejected the legal plea of the assessee that, the impugned addition could not have been made i could not have been made in the assessment u/s 153A of the Act, as it n the assessment u/s 153A of the Act, as it was based on incriminating material found in the premises of third party, was based on incriminating material found in the premises of third party, was based on incriminating material found in the premises of third party, i.e. Shri Anbu. According to the Ld. CIT(A), the impugned addition had a i.e. Shri Anbu. According to the Ld. CIT(A), the impugned addition had a i.e. Shri Anbu. According to the Ld. CIT(A), the impugned addition had a reference to the seized material found from the assessee’s premis reference to the seized material found from the assessee’s premis reference to the seized material found from the assessee’s premises and was not solely based on third party material. On merits, the Ld. CIT(A) was not solely based on third party material. On merits, the Ld. CIT(A) was not solely based on third party material. On merits, the Ld. CIT(A) observed that, the seized material found from the premises of the observed that, the seized material found from the premises of the observed that, the seized material found from the premises of the assessee, evidenced that the assessee accepted huge loans from Shri assessee, evidenced that the assessee accepted huge loans from Shri assessee, evidenced that the assessee accepted huge loans from Shri Anbu and the net credit balance as on 31.05 Anbu and the net credit balance as on 31.05.2019 was Rs.134 crores. The .2019 was Rs.134 crores. The entries in the ‘voucher log’ was noted to contain the name of Shri Anbu entries in the ‘voucher log’ was noted to contain the name of Shri Anbu entries in the ‘voucher log’ was noted to contain the name of Shri Anbu and therefore, the Ld. CIT(A) held that the assessee indeed had loan and therefore, the Ld. CIT(A) held that the assessee indeed had loan and therefore, the Ld. CIT(A) held that the assessee indeed had loan transactions with Shri Anbu. Thereafter, the Ld. CIT(A) observed that, the Anbu. Thereafter, the Ld. CIT(A) observed that, the Anbu. Thereafter, the Ld. CIT(A) observed that, the repayment data which was found from the premises of Shri Anbu, showed ata which was found from the premises of Shri Anbu, showed ata which was found from the premises of Shri Anbu, showed that the amounts were repaid in cash. The Ld. CIT(A) held that, the that the amounts were repaid in cash. The Ld. CIT(A) held that, the that the amounts were repaid in cash. The Ld. CIT(A) held that, the repayment data was credible because one particular repayment entry of repayment data was credible because one particular repayment entry of repayment data was credible because one particular repayment entry of to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 34 ::

Rs.1 crore made on 31 Rs.1 crore made on 31-05-2019 in the database of the assess 2019 in the database of the assessee tallied with the repayment data found from the premises of Shri Anbu. Based on with the repayment data found from the premises of Shri Anbu. Based on with the repayment data found from the premises of Shri Anbu. Based on this co-relation, the Ld. CIT(A) upheld the AO’s observation that the relation, the Ld. CIT(A) upheld the AO’s observation that the relation, the Ld. CIT(A) upheld the AO’s observation that the assessee had taken loan of Rs.134 crores as on 31 assessee had taken loan of Rs.134 crores as on 31-03-2019 which was 2019 which was repaid in cash, as the repayment dat repaid in cash, as the repayment data found in the premises of Shri Anbu a found in the premises of Shri Anbu were not appearing in the books of the assessee. The Ld. CIT(A) thus were not appearing in the books of the assessee. The Ld. CIT(A) thus were not appearing in the books of the assessee. The Ld. CIT(A) thus concluded that the source of repayment was unexplained sources of the concluded that the source of repayment was unexplained sources of the concluded that the source of repayment was unexplained sources of the assessee and accordingly confirmed the addition. It is further observed assessee and accordingly confirmed the addition. It is further observed assessee and accordingly confirmed the addition. It is further observed that, though, the Ld. CIT(A) took note of the order of the Settlement ough, the Ld. CIT(A) took note of the order of the Settlement ough, the Ld. CIT(A) took note of the order of the Settlement Commission passed in the matters of Shri Anbu wherein these cash Commission passed in the matters of Shri Anbu wherein these cash Commission passed in the matters of Shri Anbu wherein these cash repayment notings of Rs.94.96 crores was held to be unreliable, but held repayment notings of Rs.94.96 crores was held to be unreliable, but held repayment notings of Rs.94.96 crores was held to be unreliable, but held that the findings rendered by the Settlement Commission that the findings rendered by the Settlement Commission that the findings rendered by the Settlement Commission in the matters of Shri Anbu could not be relied upon by the assessee. Being aggrieved by of Shri Anbu could not be relied upon by the assessee. Being aggrieved by of Shri Anbu could not be relied upon by the assessee. Being aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before us. the order of the Ld. CIT(A), the assessee is now in appeal before us. the order of the Ld. CIT(A), the assessee is now in appeal before us.

8.7 At the time of hearing, the Ld. AR At the time of hearing, the Ld. AR, Shri Anand first pointed out that, first pointed out that, the impugned addition of Rs.6,85,00,000/ of Rs.6,85,00,000/- was solely based on the date was solely based on the date- wise entries found in the material seized from the premises of Shri Anbu. wise entries found in the material seized from the premises of Shri Anbu. wise entries found in the material seized from the premises of Shri Anbu.

He submitted that, though the data entries in the seized material of the He submitted that, though the data entries in the seized material of the He submitted that, though the data entries in the seized material of the assessee was referred to by the AO to justify the admissibi assessee was referred to by the AO to justify the admissibi assessee was referred to by the AO to justify the admissibility of the entries found in the material seized from the premises of Shri Anbu by entries found in the material seized from the premises of Shri Anbu by entries found in the material seized from the premises of Shri Anbu by way of evidence, but the AO did not ultimately rely upon the material way of evidence, but the AO did not ultimately rely upon the material way of evidence, but the AO did not ultimately rely upon the material seized from the premises of the assessee for making the impugned seized from the premises of the assessee for making the impugned seized from the premises of the assessee for making the impugned to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. addition. This according to him, showe addition. This according to him, showed that, the AO himself doubted the d that, the AO himself doubted the credibility and reliability of the electronic data found in the database credibility and reliability of the electronic data found in the database credibility and reliability of the electronic data found in the database seized from the premises of the assessee. seized from the premises of the assessee.

8.8 The Ld. AR submitted that, the data entries found from the The Ld. AR submitted that, the data entries found from the The Ld. AR submitted that, the data entries found from the assessee’s premises suggested that, the ass assessee’s premises suggested that, the assessee had availed loan(s) essee had availed loan(s) aggregating to Rs.134 crores. He showed us that, there was no mention aggregating to Rs.134 crores. He showed us that, there was no mention aggregating to Rs.134 crores. He showed us that, there was no mention of ‘cash’ in these entries and that, the AO had simply of ‘cash’ in these entries and that, the AO had simply as assumed these entries to be in cash because the same was not found recorded in the entries to be in cash because the same was not found recorded in the entries to be in cash because the same was not found recorded in the regular books of the assessee company. The Ld. AR showed us that, these ssessee company. The Ld. AR showed us that, these ssessee company. The Ld. AR showed us that, these entries inter alia comprised of different loans availed by other assessee comprised of different loans availed by other assessee comprised of different loans availed by other assessee’s of the group, which were wrongly appearing in the name of the assessee, of the group, which were wrongly appearing in the name of the assessee, of the group, which were wrongly appearing in the name of the assessee, in the database, due to corruption in the database, due to corruption/malware in the system. malware in the system. The assessee brought to our attention that, actually the loans availed by their group brought to our attention that, actually the loans availed by their group brought to our attention that, actually the loans availed by their group from Shri Anbu was Rs.114.70 crores and not Rs.134 crores as found in from Shri Anbu was Rs.114.70 crores and not Rs.134 crores as found in from Shri Anbu was Rs.114.70 crores and not Rs.134 crores as found in the corrupted database, and that all these loans were received through the corrupted database, and that all these loans were received through the corrupted database, and that all these loans were received through banking channel and not cash. banking channel and not cash. The assessee further showed us that, The assessee further showed us that, correspondingly repayment of loans to the extent of Rs.50.67 crores had correspondingly repayment of loans to the extent of Rs.50.67 crores had correspondingly repayment of loans to the extent of Rs.50.67 crores had been made and not Rs.1 crore as found mentioned in the corrupted been made and not Rs.1 crore as found mentioned in the corrupted been made and not Rs.1 crore as found mentioned in the corrupted database and that, the balance was outstanding and duly reflected in the database and that, the balance was outstanding and duly reflected in the database and that, the balance was outstanding and duly reflected in the respective books of accounts of the other assessees of the group. The Ld. ve books of accounts of the other assessees of the group. The Ld. ve books of accounts of the other assessees of the group. The Ld.

AR thus submitted that, the loan transactions with Shri Anbu was AR thus submitted that, the loan transactions with Shri Anbu was AR thus submitted that, the loan transactions with Shri Anbu was transacted through proper banking channel and that there was no transacted through proper banking channel and that there was no transacted through proper banking channel and that there was no to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. element of cash involved, and more particularly, the transact element of cash involved, and more particularly, the transact element of cash involved, and more particularly, the transactions were majorly with Shri Kiran/MD; Shri Kiran/MD; and thus under no circumstances, any and thus under no circumstances, any inference could have been drawn in the hands of the assessee company. inference could have been drawn in the hands of the assessee company. inference could have been drawn in the hands of the assessee company.

8.9 To support the above submission, To support the above submission, Shri Anand further showed us further showed us that, the AO had conveniently ignored other material which was found that, the AO had conveniently ignored other material which was found that, the AO had conveniently ignored other material which was found and seized from the premises of Shri Anbu, which according to him, and seized from the premises of Shri Anbu, which according to him, and seized from the premises of Shri Anbu, which according to him, showed that the assessee company itself had not accepted or repaid any showed that the assessee company itself had not accepted or repaid any showed that the assessee company itself had not accepted or repaid any unaccounted cash loan from Shr unaccounted cash loan from Shri Anbu. The Ld. AR brought to our notice i Anbu. The Ld. AR brought to our notice that, it was Shri Kiran and not the assessee itself, who had availed loan(s) and not the assessee itself, who had availed loan(s) and not the assessee itself, who had availed loan(s) from Shri Anbu and that such loan(s) was accounted in the books of from Shri Anbu and that such loan(s) was accounted in the books of from Shri Anbu and that such loan(s) was accounted in the books of Shri Kiran/Managing Director and other group concerns. He took us throu Managing Director and other group concerns. He took us throu Managing Director and other group concerns. He took us through Pages 15 to 23 of the Paper Book, which comprised of a sale agreement Pages 15 to 23 of the Paper Book, which comprised of a sale agreement Pages 15 to 23 of the Paper Book, which comprised of a sale agreement between Shri Kiran/Managing Director and Shri Anbu to show that, the Managing Director and Shri Anbu to show that, the Managing Director and Shri Anbu to show that, the Managing Director had placed his own immovable property as a collateral Managing Director had placed his own immovable property as a collateral Managing Director had placed his own immovable property as a collateral for the loan availed by him in his individ for the loan availed by him in his individual capacity. Next, he brought to ual capacity. Next, he brought to our notice, the letters issued by the Managing Director in his individual our notice, the letters issued by the Managing Director in his individual our notice, the letters issued by the Managing Director in his individual capacity to Shri Anbu confirming the receipt of loan, which were placed at capacity to Shri Anbu confirming the receipt of loan, which were placed at capacity to Shri Anbu confirming the receipt of loan, which were placed at Pages 24 to 29 of the Paper Book. The Ld. AR thereafter narrated the Pages 24 to 29 of the Paper Book. The Ld. AR thereafter narrated the Pages 24 to 29 of the Paper Book. The Ld. AR thereafter narrated the year wise details of the loans availed by the Managing Director in his wise details of the loans availed by the Managing Director in his wise details of the loans availed by the Managing Director in his individual capacity and his proprietorship concern M/s A.K. Exports from individual capacity and his proprietorship concern M/s A.K. Exports from individual capacity and his proprietorship concern M/s A.K. Exports from M/s Gopuram Films, the proprietorship concern of Shri Anbu, details of M/s Gopuram Films, the proprietorship concern of Shri Anbu, details of M/s Gopuram Films, the proprietorship concern of Shri Anbu, details of which were placed at Pages 1658 to 1668 of th Pages 1658 to 1668 of the Paper Book e Paper Book. According to to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. the assessee therefore, the loan transactions were majorly between Shri the assessee therefore, the loan transactions were majorly between Shri the assessee therefore, the loan transactions were majorly between Shri Anbu and Shri Kiran/ Managing Director and that the AO had wrongly Managing Director and that the AO had wrongly Managing Director and that the AO had wrongly inferred the purported notings found from the premises of Shri Anbu in inferred the purported notings found from the premises of Shri Anbu in inferred the purported notings found from the premises of Shri Anbu in the hands of the assessee company. sessee company.

8.10 According to Ld. AR, the AO, having taken According to Ld. AR, the AO, having taken note of the above, did of the above, didn’t make any addition based on these unreliable data entries found in make any addition based on these unreliable data entries found in make any addition based on these unreliable data entries found in corrupted database from the premises of the assessee and remained corrupted database from the premises of the assessee and remained corrupted database from the premises of the assessee and remained conspicuously silent on these aspe conspicuously silent on these aspects. He pointed out that, if the data cts. He pointed out that, if the data entries in the database was to be taken as sacrosanct, then the cash debit entries in the database was to be taken as sacrosanct, then the cash debit entries in the database was to be taken as sacrosanct, then the cash debit / repayment to Shri Anbu was only Rs.1 crore and not Rs.94.96 crores, as / repayment to Shri Anbu was only Rs.1 crore and not Rs.94.96 crores, as / repayment to Shri Anbu was only Rs.1 crore and not Rs.94.96 crores, as added by the AO, by relying upon the data found in the material seized added by the AO, by relying upon the data found in the material seized added by the AO, by relying upon the data found in the material seized from the premises of Shri Anbu. According to him, none of these seized from the premises of Shri Anbu. According to him, none of these seized from the premises of Shri Anbu. According to him, none of these seized material were not reliable, as the contemporaneous facts showed that material were not reliable, as the contemporaneous facts showed that material were not reliable, as the contemporaneous facts showed that repayments were made through banking channel which was actually to repayments were made through banking channel which was actually to repayments were made through banking channel which was actually to the tune of Rs.50.67 crores and that the outstan the tune of Rs.50.67 crores and that the outstanding balance was ding balance was reflected and recognized as due to Shri Anbu in the books of accounts. reflected and recognized as due to Shri Anbu in the books of accounts. reflected and recognized as due to Shri Anbu in the books of accounts.

8.11 Coming back to the premise of the impugned addition viz., the Coming back to the premise of the impugned addition viz., the Coming back to the premise of the impugned addition viz., the material seized from the premises of Shri Anbu, the Ld. AR argued that material seized from the premises of Shri Anbu, the Ld. AR argued that material seized from the premises of Shri Anbu, the Ld. AR argued that such third party material whi such third party material which comprised of notings found on loose ch comprised of notings found on loose sheets / diaries was not admissible as evidence against the assessee. The sheets / diaries was not admissible as evidence against the assessee. The sheets / diaries was not admissible as evidence against the assessee. The Ld. AR, relying upon Section 34 of the Indian Evidence Act, 1872 relying upon Section 34 of the Indian Evidence Act, 1872 relying upon Section 34 of the Indian Evidence Act, 1872, to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. submitted that, the entries in the books of accounts found, even if submitted that, the entries in the books of accounts found, even if submitted that, the entries in the books of accounts found, even if regularly kept, are not sufficient by themselves to charge any person with kept, are not sufficient by themselves to charge any person with kept, are not sufficient by themselves to charge any person with liability. He also relied upon the decisions of the Hon’ble Supreme Court in liability. He also relied upon the decisions of the Hon’ble Supreme Court in liability. He also relied upon the decisions of the Hon’ble Supreme Court in the cases of Hon’ble Supreme Court in the case of Hon’ble Supreme Court in the case of V.C. Shukla [1998] 3 C. Shukla [1998] 3 SCC 410 and Common Cause (A Registered Soc Common Cause (A Registered Society) Vs Union of iety) Vs Union of India (394 ITR 220) wherein it was held that loose sheets or diaries held that loose sheets or diaries India (394 ITR 220) found in third party premises containing mention of names of third person found in third party premises containing mention of names of third person found in third party premises containing mention of names of third person cannot be treated as admissible evidence qua such third person. cannot be treated as admissible evidence qua such third person. cannot be treated as admissible evidence qua such third person. The Ld.

AR further showed us that, even Shri Anbu, from whose possession these hat, even Shri Anbu, from whose possession these hat, even Shri Anbu, from whose possession these notings were found had denied any cash transactions with the assessee, notings were found had denied any cash transactions with the assessee, notings were found had denied any cash transactions with the assessee, in his statement recorded u/s 132(4) of the Act. According to him in his statement recorded u/s 132(4) of the Act. According to him in his statement recorded u/s 132(4) of the Act. According to him therefore, when the searched person himself did not corroborate the therefore, when the searched person himself did not corroborate the therefore, when the searched person himself did not corroborate the notings found in the loose sheets seized from his premises, it was tings found in the loose sheets seized from his premises, it was tings found in the loose sheets seized from his premises, it was unjustified for the AO of the assessee to use the same against the unjustified for the AO of the assessee to use the same against the unjustified for the AO of the assessee to use the same against the assessee, without bringing on record any clinching evidence or material to assessee, without bringing on record any clinching evidence or material to assessee, without bringing on record any clinching evidence or material to support such an inference. support such an inference.

8.12 The Ld. Counsel Counsel Shri Anand further further submitted submitted that, that, the the contemporaneous facts on record showed that the repayments were made contemporaneous facts on record showed that the repayments were made contemporaneous facts on record showed that the repayments were made in cheque, which aggregated to almost Rs.50.67 crores and that the in cheque, which aggregated to almost Rs.50.67 crores and that the in cheque, which aggregated to almost Rs.50.67 crores and that the balance outstanding was also recorded in the books of accounts and in balance outstanding was also recorded in the books of accounts and in balance outstanding was also recorded in the books of accounts and in that view of the matter, these admitted facts contradicted the purported f the matter, these admitted facts contradicted the purported f the matter, these admitted facts contradicted the purported unreliable notings found in the premises of Shri Anbu, which in AO’s view unreliable notings found in the premises of Shri Anbu, which in AO’s view unreliable notings found in the premises of Shri Anbu, which in AO’s view to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. suggested cash repayments of loan. The Ld. AR for the assessee suggested cash repayments of loan. The Ld. AR for the assessee suggested cash repayments of loan. The Ld. AR for the assessee submitted that Shri Anbu had approached submitted that Shri Anbu had approached the Interim Board the Interim Board for Settlement (in short the ‘IBS’) Settlement (in short the ‘IBS’) and settled the issues by order and settled the issues by order dated 27- 12-2023. According to the Ld.AR, before the IBS, . According to the Ld.AR, before the IBS, Shri Anbu had denied Shri Anbu had denied the contents of these seized material and had categorically stated that he the contents of these seized material and had categorically stated that he the contents of these seized material and had categorically stated that he had not advanced any loan in cash nor did he receive any repayment in had not advanced any loan in cash nor did he receive any repayment in had not advanced any loan in cash nor did he receive any repayment in cash from the assessee. cash from the assessee. according to him, Shri Anbu had given detailed , Shri Anbu had given detailed submissions on this aspect, for which, comments was sought by the IBS s aspect, for which, comments was sought by the IBS s aspect, for which, comments was sought by the IBS from the PCIT u/s 245D(3) of the Act, who had submitted his verification from the PCIT u/s 245D(3) of the Act, who had submitted his verification from the PCIT u/s 245D(3) of the Act, who had submitted his verification report(s) and Shri Anbu in his rejoinder ha Shri Anbu in his rejoinder had rebutted the comments of the rebutted the comments of the PCIT. According to the Ld. AR, the IBS after considering he Ld. AR, the IBS after considering the submissions the submissions of Shri Anbu accepted his claim that, these notings were unreliable and of Shri Anbu accepted his claim that, these notings were unreliable and of Shri Anbu accepted his claim that, these notings were unreliable and that the loans were advanced through proper banking channel and not in that the loans were advanced through proper banking channel and not in that the loans were advanced through proper banking channel and not in cash. The Ld. AR accordingly submitted that, when the notings found in cash. The Ld. AR accordingly submitted that, when the notings found in cash. The Ld. AR accordingly submitted that, when the notings found in the material seized from t the material seized from the premises of Shri Anbu had been found to be he premises of Shri Anbu had been found to be unreliable by the IBS in their order dated 27 unreliable by the IBS in their order dated 27-12-2023 which had attained 2023 which had attained finality; then as a corollary, the impugned addition made on the basis of finality; then as a corollary, the impugned addition made on the basis of finality; then as a corollary, the impugned addition made on the basis of unreliable notings was also untenable and liable to be deleted. unreliable notings was also untenable and liable to be deleted. unreliable notings was also untenable and liable to be deleted.

8.13 Per contra, the Ld. CIT, DR vehemently supported the order of the Per contra, the Ld. CIT, DR vehemently supported the order of the Per contra, the Ld. CIT, DR vehemently supported the order of the lower authorities. He submitted that, the entries found in the documents lower authorities. He submitted that, the entries found in the documents lower authorities. He submitted that, the entries found in the documents seized from the premises of Shri Anbu depicted cash receipts from the seized from the premises of Shri Anbu depicted cash receipts from the seized from the premises of Shri Anbu depicted cash receipts from the assessee and therefore, according to him assessee and therefore, according to him, the impugned addition was , the impugned addition was to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. rightly made by the AO. He submitted that though the Settlement rightly made by the AO. He submitted that though the Settlement rightly made by the AO. He submitted that though the Settlement Commission in the matters of Shri Anbu had not made any addition on Commission in the matters of Shri Anbu had not made any addition on Commission in the matters of Shri Anbu had not made any addition on the basis of these notings, but according to him, the findings of the IBS in the basis of these notings, but according to him, the findings of the IBS in the basis of these notings, but according to him, the findings of the IBS in the matters of Shri Anbu was only binding upon the applicant, i.e. Shri Anbu was only binding upon the applicant, i.e. Shri Anbu was only binding upon the applicant, i.e. Shri Anbu and that these findings could not be taken into account for Anbu and that these findings could not be taken into account for Anbu and that these findings could not be taken into account for adjudicating the impugned issue in the matters of the assessee. adjudicating the impugned issue in the matters of the assessee. adjudicating the impugned issue in the matters of the assessee.

8.14 We have heard both the parties and perused the material placed on We have heard both the parties and perused the material placed on We have heard both the parties and perused the material placed on our record. Upon taking note of the facts as discussed above, the dispute r record. Upon taking note of the facts as discussed above, the dispute r record. Upon taking note of the facts as discussed above, the dispute before us relates to the addition of Rs.6,85,00,000/ before us relates to the addition of Rs.6,85,00,000/- made in the relevant made in the relevant AY 2016-17 on the basis of the notings found in the loose sheets seized in 17 on the basis of the notings found in the loose sheets seized in 17 on the basis of the notings found in the loose sheets seized in the course of an unrelated search the course of an unrelated search conducted upon a third party, Shri Anbu conducted upon a third party, Shri Anbu on 05-02-2020, much prior to the search conducted upon the assessee. 2020, much prior to the search conducted upon the assessee. 2020, much prior to the search conducted upon the assessee.

According to the lower authorities, the notings found in the loose sheets According to the lower authorities, the notings found in the loose sheets According to the lower authorities, the notings found in the loose sheets seized from the premises of Shri Anbu were in the name of the assessee seized from the premises of Shri Anbu were in the name of the assessee seized from the premises of Shri Anbu were in the name of the assessee i.e. ‘Lalitha’ and there was mention of ‘cash’ also in these notings. The AO e. ‘Lalitha’ and there was mention of ‘cash’ also in these notings. The AO e. ‘Lalitha’ and there was mention of ‘cash’ also in these notings. The AO observed that, these notings suggested that the assessee had repaid observed that, these notings suggested that the assessee had repaid observed that, these notings suggested that the assessee had repaid loans to the extent of Rs.94.96 crores in cash to Shri Anbu, which in his loans to the extent of Rs.94.96 crores in cash to Shri Anbu, which in his loans to the extent of Rs.94.96 crores in cash to Shri Anbu, which in his opinion, was paid out of assessee’s une opinion, was paid out of assessee’s unexplained sources and thus he xplained sources and thus he added the said sum across the years u/s 69C of the Act. It was pointed added the said sum across the years u/s 69C of the Act. It was pointed added the said sum across the years u/s 69C of the Act. It was pointed out to us by the Revenue that, only to justify the veracity of the third out to us by the Revenue that, only to justify the veracity of the third out to us by the Revenue that, only to justify the veracity of the third party notings, the AO had referred to the entries found in a database of party notings, the AO had referred to the entries found in a database of party notings, the AO had referred to the entries found in a database of the assessee. to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 41 ::

8.15 Having considered the gamut of facts placed before us, according to Having considered the gamut of facts placed before us, according to Having considered the gamut of facts placed before us, according to us, the first issue which is required to be answered is the admissibility us, the first issue which is required to be answered is the admissibility us, the first issue which is required to be answered is the admissibility and reliability of the notings found in loose sheets / diaries seized from a and reliability of the notings found in loose sheets / diaries seized from a and reliability of the notings found in loose sheets / diaries seized from a third party premises i.e. S third party premises i.e. Shri Anbu, in the income-tax assessment of the tax assessment of the assessee, in light of the facts placed before us. It is observed that, the assessee, in light of the facts placed before us. It is observed that, the assessee, in light of the facts placed before us. It is observed that, the notings found in the assessee’s name in the loose sheets seized from the notings found in the assessee’s name in the loose sheets seized from the notings found in the assessee’s name in the loose sheets seized from the premises of Shri Anbu had been confronted to Shri Anbu at the premises of Shri Anbu had been confronted to Shri Anbu at the premises of Shri Anbu had been confronted to Shri Anbu at the time of search and his statement was recorded u/s 132(4) of the Act, extracts of search and his statement was recorded u/s 132(4) of the Act, extracts of search and his statement was recorded u/s 132(4) of the Act, extracts of which has been placed at which has been placed at Pages 1678 to 1680 of Paper Book of Paper Book, whose relevant portion is reproduced hereunder: relevant portion is reproduced hereunder:-

“Q.34. During the course of search proceedings in your case in Q.34. During the course of search proceedings in your case in Q.34. During the course of search proceedings in your case in theresidence esidence esidence of of of Shri Shri Shri Kathiravan, Kathiravan, Kathiravan, many many many original original original property property property documents relating to M/s Lalitha Jewellery Mart Pvt Ltd and Its documents relating to M/s Lalitha Jewellery Mart Pvt Ltd and Its documents relating to M/s Lalitha Jewellery Mart Pvt Ltd and Its related parties were seized. A sworn statement was recorded related parties were seized. A sworn statement was recorded related parties were seized. A sworn statement was recorded from Shri Kathiravan and it is shown to you now. In his reply to from Shri Kathiravan and it is shown to you now. In his reply to from Shri Kathiravan and it is shown to you now. In his reply to question nos 6 question nos 6 & 7 he had stated that the property documents & 7 he had stated that the property documents kept in four boxes which are seized vide ANN/BMD/CK/B&D/8 1 kept in four boxes which are seized vide ANN/BMD/CK/B&D/8 1 kept in four boxes which are seized vide ANN/BMD/CK/B&D/8 1 to 96 are the ones pledged with you. Please explain why those to 96 are the ones pledged with you. Please explain why those to 96 are the ones pledged with you. Please explain why those documents were kept in the custody of Shri Kathiravan ? documents were kept in the custody of Shri Kathiravan ? documents were kept in the custody of Shri Kathiravan ?

Ans. Sir I advanced loan to Mr. Ans. Sir I advanced loan to Mr. Kiran Kumar, Director of M/s Lalitha Kiran Kumar, Director of M/s Lalitha Jewellery Mart Pvt Ltd. For that he promised to pledge the property Jewellery Mart Pvt Ltd. For that he promised to pledge the property Jewellery Mart Pvt Ltd. For that he promised to pledge the property documents which was already in the custody of Shri Kathiravan for legal documents which was already in the custody of Shri Kathiravan for legal documents which was already in the custody of Shri Kathiravan for legal opinion who is my friend. So I asked Shri Kathiravan to keep those opinion who is my friend. So I asked Shri Kathiravan to keep those opinion who is my friend. So I asked Shri Kathiravan to keep those property in his safe custody only. his safe custody only.

Q.35. Please furnish the details of loans given to M/s Lalitha Q.35. Please furnish the details of loans given to M/s Lalitha Q.35. Please furnish the details of loans given to M/s Lalitha JewelleryMart Pvt Ltd and its related parties both in cash and via JewelleryMart Pvt Ltd and its related parties both in cash and via JewelleryMart Pvt Ltd and its related parties both in cash and via Banking channel.What is the outstanding loan amount of M/s Banking channel.What is the outstanding loan amount of M/s Banking channel.What is the outstanding loan amount of M/s Lalitha Jewellery Mart PvtLtd and its relat Lalitha Jewellery Mart PvtLtd and its related parties ?

Ans. Sir I gave loans to M/s Lalitha Jewellery only in accounts. Right now Ans. Sir I gave loans to M/s Lalitha Jewellery only in accounts. Right now Ans. Sir I gave loans to M/s Lalitha Jewellery only in accounts. Right now I don’t remember the exact details. I will furnish the details in two days I don’t remember the exact details. I will furnish the details in two days I don’t remember the exact details. I will furnish the details in two days time.” to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 42 ::

8.16 It is noted that the person from whose possession and control these It is noted that the person from whose possession and control these It is noted that the person from whose possession and control these loose sheets were found had denied having any cash transactions with the were found had denied having any cash transactions with the were found had denied having any cash transactions with the assessee and had instead averred that all the transactions were recorded assessee and had instead averred that all the transactions were recorded assessee and had instead averred that all the transactions were recorded in the books of accounts and had sought time to provide the same. We in the books of accounts and had sought time to provide the same. We in the books of accounts and had sought time to provide the same. We thus note that, it is not a case where the third perso thus note that, it is not a case where the third perso thus note that, it is not a case where the third person from whose possession the impugned material was found had incriminated the possession the impugned material was found had incriminated the possession the impugned material was found had incriminated the assessee in any manner. We find that, there is also no material brought assessee in any manner. We find that, there is also no material brought assessee in any manner. We find that, there is also no material brought on record which shows that the Revenue had unearthed any other on record which shows that the Revenue had unearthed any other on record which shows that the Revenue had unearthed any other independent tangible material or evidence in independent tangible material or evidence in the course of search upon the course of search upon Shri Anbu, which would corroborate these notings found in the loose Shri Anbu, which would corroborate these notings found in the loose Shri Anbu, which would corroborate these notings found in the loose sheets seized from his premises. I sheets seized from his premises. It is necessary to keep in mind that t is necessary to keep in mind that, the presumption u/s 132(4A) of the Act regarding the contents of seized presumption u/s 132(4A) of the Act regarding the contents of seized presumption u/s 132(4A) of the Act regarding the contents of seized material is only against the gainst the searched person and not to any searched person and not to any other third party, which is the assessee in the present case. Reason being that, if any party, which is the assessee in the present case. Reason being that, if any party, which is the assessee in the present case. Reason being that, if any notings found in the seized material at third party premises is presumed s found in the seized material at third party premises is presumed s found in the seized material at third party premises is presumed to pertain to third party third party, at its face value, then any person for that matter y person for that matter can mention anyone's name in any loose paper / diary at their sweet will can mention anyone's name in any loose paper / diary at their sweet will can mention anyone's name in any loose paper / diary at their sweet will and that can be used to implicate such other person for no fault of the and that can be used to implicate such other person for no fault of the and that can be used to implicate such other person for no fault of the latter. Accordingly, an entry made in a diary or notebook by a third latter. Accordingly, an entry made in a diary or notebook by a third latter. Accordingly, an entry made in a diary or notebook by a third person with scant details cannot be used to fasten tax liability on the details cannot be used to fasten tax liability on the details cannot be used to fasten tax liability on the person, person whose name appears therein, in the absence of person, person whose name appears therein, in the absence of person, person whose name appears therein, in the absence of corroborative evidence. to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 43 ::

8.17 For this, we gainfully refer to the decision of the Hon’ble Supreme For this, we gainfully refer to the decision of the Hon’ble Supreme For this, we gainfully refer to the decision of the Hon’ble Supreme Court in the case of V.C. Shukla (supra) V.C. Shukla (supra) wherein, as to erein, as to the evidentiary value of entries in the books of value of entries in the books of account, it was held that such statement that such statement shall not alone be sufficient evidence shall not alone be sufficient evidence to charge any person with liability, to charge any person with liability, even if they are relevant and even if they are relevant and admissible. It has been held even then been held even then independent evidence is necessary as to ent evidence is necessary as to trustworthiness of those entries trustworthiness of those entries which is a requirement to fasten which is a requirement to fasten the liability.

8.18 The Hon'ble Supreme Court in case of The Hon'ble Supreme Court in case of Common Cause (A Common Cause (A registered society) & Ors Vs. UOI (supra) registered society) & Ors Vs. UOI (supra) following following the judgment rendered in case of V.C. Shukla (supra) V.C. Shukla (supra) has explained that, e has explained that, entries in loose papers/sheets are irrelevant and not admissible under loose papers/sheets are irrelevant and not admissible under loose papers/sheets are irrelevant and not admissible under Section 34 of the Evidence Act. It was held that, e It was held that, entries in books of account are not by ntries in books of account are not by themselves sufficient to charge themselves sufficient to charge any person with liability, the reason being liability, the reason being that a man cannot be allowed that a man cannot be allowed to make evidence for himself by what he to make evidence for himself by what he chooses to write in his own chooses to write in his own books behind the back of the parties. There books behind the back of the parties. There must be independent evidence of the transaction to which the entries evidence of the transaction to which the entries evidence of the transaction to which the entries relate and in absence of nce of such evidence no relief can be given to such evidence no relief can be given to the party who relies upon such entries to support his claim against another entries to support his claim against another entries to support his claim against another. The Hon’ble Apex Court further held that, e Hon’ble Apex Court further held that, even if books of account are ven if books of account are regularly kept in the ordinary course of regularly kept in the ordinary course of business, the entrie business, the entries therein shall not alone be sufficient evidence to not alone be sufficient evidence to charge any person with liability. It is charge any person with liability. It is not enough merely to prove that the not enough merely to prove that the books have been regularly kept in books have been regularly kept in to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. the course of business and the entries the course of business and the entries therein are correct therein are correct. It is further incumbent upon the person relying upon erson relying upon those entries to prove that the those entries to prove that they were in accordance with facts. were in accordance with facts.

8.19 We also gainfully refer to the decision of Hon’ble Supreme Court in We also gainfully refer to the decision of Hon’ble Supreme Court in We also gainfully refer to the decision of Hon’ble Supreme Court in the case of CIT Vs. P.V. CIT Vs. P.V. Kalayanasundaram (294 ITR 49) Kalayanasundaram (294 ITR 49) wherein at Para 5, it was observed that, Para 5, it was observed that, the notings on the loose pieces of paper notings on the loose pieces of paper may be a cause for suspicion but the same cannot be relied upon, unless may be a cause for suspicion but the same cannot be relied upon, unless may be a cause for suspicion but the same cannot be relied upon, unless there is corroboration by corresponding entry in there is corroboration by corresponding entry in regular accounts of both regular accounts of both the parties to the transaction. the parties to the transaction.

8.20 Having taken note of the above posit Having taken note of the above position of law, we now again revert ion of law, we now again revert back to the facts of the present case. It is observed that, later on, during back to the facts of the present case. It is observed that, later on, during back to the facts of the present case. It is observed that, later on, during the course of search upon the assessee, the Investigating Officer had also the course of search upon the assessee, the Investigating Officer had also the course of search upon the assessee, the Investigating Officer had also confronted the Managing Director of the assessee, Shri Kiran Kumar confronted the Managing Director of the assessee, Shri Kiran Kumar confronted the Managing Director of the assessee, Shri Kiran Kumar regarding these notings found in the material seized from the premises of ding these notings found in the material seized from the premises of ding these notings found in the material seized from the premises of Shri Anbu, who is also found to have denied having any cash dealings Shri Anbu, who is also found to have denied having any cash dealings Shri Anbu, who is also found to have denied having any cash dealings with him and had clearly averred that the loan transactions were forming with him and had clearly averred that the loan transactions were forming with him and had clearly averred that the loan transactions were forming part of the books of accounts. The relevant p part of the books of accounts. The relevant portion of his statement is set ortion of his statement is set out hereunder:-

“Q.20 I am showing you certain promissory notes, agreements, I am showing you certain promissory notes, agreements, I am showing you certain promissory notes, agreements, blank cheques and other supporting evidences containing your blank cheques and other supporting evidences containing your blank cheques and other supporting evidences containing your signature seized from Shri.Anbuchezhiyan (Gopuram Films) signature seized from Shri.Anbuchezhiyan (Gopuram Films) signature seized from Shri.Anbuchezhiyan (Gopuram Films) during the course of search during the course of search u/s.132 of the IT Act,1961. On u/s.132 of the IT Act,1961. On verification of the details as per the books of account maintained verification of the details as per the books of account maintained verification of the details as per the books of account maintained by Shri.Anbuch by Shri.Anbuchezhiyan, you have accepted cash loan amounting zhiyan, you have accepted cash loan amounting to Rs.64,15,05,800 and repaid a sum of Rs.94,96,24,250/. Please to Rs.64,15,05,800 and repaid a sum of Rs.94,96,24,250/. Please to Rs.64,15,05,800 and repaid a sum of Rs.94,96,24,250/. Please to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. go through the papers which is an go through the papers which is annexed to this statement as nexed to this statement as annexure 1 and annexure 2, and identify the documents. annexure 1 and annexure 2, and identify the documents. annexure 1 and annexure 2, and identify the documents. A.20 I have neither taken any cash loan from Mr Anbu Chezhiyan I have neither taken any cash loan from Mr Anbu Chezhiyan I have neither taken any cash loan from Mr Anbu Chezhiyan nor paid any cash to Mr Anbuchezhiyan for the same. Only the loan which nor paid any cash to Mr Anbuchezhiyan for the same. Only the loan which nor paid any cash to Mr Anbuchezhiyan for the same. Only the loan which were shown in my books are the actual were shown in my books are the actual loans and for the corresponding loans and for the corresponding payments TDS were deducted accordingly. The promissory notes / blank payments TDS were deducted accordingly. The promissory notes / blank payments TDS were deducted accordingly. The promissory notes / blank cheque/ papers were signed and given while taking those accounted cheque/ papers were signed and given while taking those accounted cheque/ papers were signed and given while taking those accounted loans.” 8.21 The AO however is noted to have doubted the above statement of The AO however is noted to have doubted the above statement of The AO however is noted to have doubted the above statement of Shri Kiran Kumar because of electronic data later on found in a database umar because of electronic data later on found in a database umar because of electronic data later on found in a database in the post search enquiries which inter alia contained entries of in the post search enquiries which inter alia contained entries of in the post search enquiries which inter alia contained entries of transactions with Shri Anbu. The AO is found to have transactions with Shri Anbu. The AO is found to have as assumed these entries to be cash transactions because there was mention of entries to be cash transactions because there was mention of entries to be cash transactions because there was mention of ‘cash’ in the material seized from the premises of Shri Anbu and correspondingly these material seized from the premises of Shri Anbu and correspondingly these material seized from the premises of Shri Anbu and correspondingly these entries were not traceable in the regular books of the assessee company. entries were not traceable in the regular books of the assessee company. entries were not traceable in the regular books of the assessee company.

Having gone through the contents of the database, it is noted that, there Having gone through the contents of the database, it is noted that, there Having gone through the contents of the database, it is noted that, there were entries of amount were entries of amounts credited / debited in the name of Shri Anbu but s credited / debited in the name of Shri Anbu but there is no mention of ‘cash’ therein. The assessee has shown to us that, there is no mention of ‘cash’ therein. The assessee has shown to us that, there is no mention of ‘cash’ therein. The assessee has shown to us that, the entries found in the database in the name of the assessee company the entries found in the database in the name of the assessee company the entries found in the database in the name of the assessee company was factually inconsistent as the dates and amounts found ment was factually inconsistent as the dates and amounts found ment was factually inconsistent as the dates and amounts found mentioned therein did not relate to the assessee company but to other assessees of therein did not relate to the assessee company but to other assessees of therein did not relate to the assessee company but to other assessees of their group. The assessee is found to have backed their contention with their group. The assessee is found to have backed their contention with their group. The assessee is found to have backed their contention with relevant evidences viz., they had provided the details of loans availed relevant evidences viz., they had provided the details of loans availed relevant evidences viz., they had provided the details of loans availed from Shri Anbu, which aggregated from Shri Anbu, which aggregated to Rs.114.70 crores, all of which were to Rs.114.70 crores, all of which were obtained through banking channel and was recorded in books of accounts. obtained through banking channel and was recorded in books of accounts. obtained through banking channel and was recorded in books of accounts.

It is observed that, these loans were majorly availed by It is observed that, these loans were majorly availed by It is observed that, these loans were majorly availed by Shri Kiran to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 46 ::

Kumar/Managing Director himself and not the assessee. Also, repayments Managing Director himself and not the assessee. Also, repayments Managing Director himself and not the assessee. Also, repayments of Rs.50.67 crores was made, which was also through banking channel 50.67 crores was made, which was also through banking channel 50.67 crores was made, which was also through banking channel and the balance outstanding was recognized as due and payable to Shri and the balance outstanding was recognized as due and payable to Shri and the balance outstanding was recognized as due and payable to Shri Anbu in the books of accounts. The relevant summary details are found Anbu in the books of accounts. The relevant summary details are found Anbu in the books of accounts. The relevant summary details are found placed at Pages 1656 of Paper Book. We thus find merit . We thus find merit in the plea of the assessee that the AO had wrongly assumed these entries found in the assessee that the AO had wrongly assumed these entries found in the assessee that the AO had wrongly assumed these entries found in database to be unaccounted cash transactions because it was not found database to be unaccounted cash transactions because it was not found database to be unaccounted cash transactions because it was not found recorded in the books of the assessee company. Rather, the reason for recorded in the books of the assessee company. Rather, the reason for recorded in the books of the assessee company. Rather, the reason for the same was that these related the same was that these related to and was recorded in books of other was recorded in books of other assessees of the group assessees of the group. According to us therefore, not only was the . According to us therefore, not only was the inference drawn by the AO was misplaced but these entries inference drawn by the AO was misplaced but these entries inference drawn by the AO was misplaced but these entries per se found in assessee’s name in the database was evidently unreliable, as it in assessee’s name in the database was evidently unreliable, as it in assessee’s name in the database was evidently unreliable, as it suffered from factual inaccuracies in as much as several entries pertained m factual inaccuracies in as much as several entries pertained m factual inaccuracies in as much as several entries pertained to other assessees of the group. The Ld. CIT, DR for the Revenue was to other assessees of the group. The Ld. CIT, DR for the Revenue was to other assessees of the group. The Ld. CIT, DR for the Revenue was also unable to factually controvert the same. also unable to factually controvert the same.

8.22 Our above view is further supported by the conspicuous silence on Our above view is further supported by the conspicuous silence on Our above view is further supported by the conspicuous silence on these contemporaneous facts in the orders of the lower authorities, which contemporaneous facts in the orders of the lower authorities, which contemporaneous facts in the orders of the lower authorities, which according to us, shows that the lower authorities had also tacitly according to us, shows that the lower authorities had also tacitly according to us, shows that the lower authorities had also tacitly acknowledged that the entries found in the database was not reliable. Had acknowledged that the entries found in the database was not reliable. Had acknowledged that the entries found in the database was not reliable. Had that not been the case, then the purported entr that not been the case, then the purported entries which ran into several ies which ran into several thousand crores and did not reconcile with the books of the assessee thousand crores and did not reconcile with the books of the assessee thousand crores and did not reconcile with the books of the assessee to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. company (since it was recorded in books of other assessees of the group) (since it was recorded in books of other assessees of the group), (since it was recorded in books of other assessees of the group) would otherwise been viewed adversely. would otherwise been viewed adversely.

8.23 It is also noted that, the loans found me It is also noted that, the loans found mentioned in the database ntioned in the database were mostly availed by were mostly availed by Shri Kiran Kumar who happens to be Shri Kiran Kumar who happens to be Managing Director of the assessee from Shri Anbu in his individual capacity and Director of the assessee from Shri Anbu in his individual capacity and Director of the assessee from Shri Anbu in his individual capacity and were found recorded in his personal books of accounts. Hence, these were found recorded in his personal books of accounts. Hence, these were found recorded in his personal books of accounts. Hence, these loans are not availed by t not availed by the assessee. Also, the collaterals, promissory he assessee. Also, the collaterals, promissory notes, receipts etc. found from the premises of Shri Anbu, which are notes, receipts etc. found from the premises of Shri Anbu, which are notes, receipts etc. found from the premises of Shri Anbu, which are placed at Pages 15 to 28, 30 to 32 15 to 28, 30 to 32 of Paper Book, are found to have , are found to have been executed by the Shri Kiran Kumar Shri Kiran Kumar in his individual capacity, which in his individual capacity, which further lends credence to the assessee’s case that, under any further lends credence to the assessee’s case that, under any further lends credence to the assessee’s case that, under any circumstance, these loan entries cannot be said to relate or pertain to it. circumstance, these loan entries cannot be said to relate or pertain to it. circumstance, these loan entries cannot be said to relate or pertain to it.

8.24 For the reasons discussed in the aforesaid therefore, we are of the For the reasons discussed in the aforesaid therefore, we are of the For the reasons discussed in the aforesaid therefore, we are of the considered view that, the AO’s assumption th considered view that, the AO’s assumption that, the entries found in the at, the entries found in the database seized from the premises of the assessee represented cash database seized from the premises of the assessee represented cash database seized from the premises of the assessee represented cash transactions was factually inaccurate and also the contents of the said transactions was factually inaccurate and also the contents of the said transactions was factually inaccurate and also the contents of the said database is held to be unreliable. Hence, the database could not have database is held to be unreliable. Hence, the database could not have database is held to be unreliable. Hence, the database could not have been used for undertaking any valid co rtaking any valid co-relation with the material seized relation with the material seized from the premises of Shri Anbu. from the premises of Shri Anbu.

8.25 In light of the above discussed facts, we thus note that, In light of the above discussed facts, we thus note that, In light of the above discussed facts, we thus note that, the assessee had provided relevant evidences that the loan transactions and assessee had provided relevant evidences that the loan transactions and assessee had provided relevant evidences that the loan transactions and to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. repayments with Shri Anbu were repayments with Shri Anbu were in cheque and not cash and therefore in cheque and not cash and therefore the statement of the Managing Director recorded u/s 132(4) of the Act is the statement of the Managing Director recorded u/s 132(4) of the Act is the statement of the Managing Director recorded u/s 132(4) of the Act is found to be backed by tangible material and evidence. found to be backed by tangible material and evidence.

8.26 Having taken note of the above, we now come back to the material Having taken note of the above, we now come back to the material Having taken note of the above, we now come back to the material seized from the prem seized from the premises of Shri Anbu, basis which, the impugned ises of Shri Anbu, basis which, the impugned addition has been made. As noted above, the impugned loose sheets were addition has been made. As noted above, the impugned loose sheets were addition has been made. As noted above, the impugned loose sheets were found and seized from the possession of Shri Anbu and that there was no found and seized from the possession of Shri Anbu and that there was no found and seized from the possession of Shri Anbu and that there was no other tangible independent material found which would corroborate th other tangible independent material found which would corroborate th other tangible independent material found which would corroborate these notings. These loose sheets were maintained by Shri Anbu and it is notings. These loose sheets were maintained by Shri Anbu and it is notings. These loose sheets were maintained by Shri Anbu and it is observed that there was no signature or acknowledgment of the assessee there was no signature or acknowledgment of the assessee there was no signature or acknowledgment of the assessee on these loose sheets. According to us therefore, the contents of these on these loose sheets. According to us therefore, the contents of these on these loose sheets. According to us therefore, the contents of these loose sheets were within the exclusive kno loose sheets were within the exclusive knowledge of Shri Anbu and that wledge of Shri Anbu and that only he could have explained these notings. In our considered view only he could have explained these notings. In our considered view only he could have explained these notings. In our considered view therefore, the assessee cannot be expected to explain these third party therefore, the assessee cannot be expected to explain these third party therefore, the assessee cannot be expected to explain these third party notings, particularly when the assessee has brought on record evidence to notings, particularly when the assessee has brought on record evidence to notings, particularly when the assessee has brought on record evidence to prove the contrary. As noted earlier, Shri Anbu had denied that these rary. As noted earlier, Shri Anbu had denied that these rary. As noted earlier, Shri Anbu had denied that these were cash notings but had averred that the transactions with the were cash notings but had averred that the transactions with the were cash notings but had averred that the transactions with the assessee were recorded in regular books of accounts. In this background, assessee were recorded in regular books of accounts. In this background, assessee were recorded in regular books of accounts. In this background, if AO of the assessee still wanted to rely on these third part if AO of the assessee still wanted to rely on these third part if AO of the assessee still wanted to rely on these third party notings as relevant evidence against the assessee, then the onus was on the AO to relevant evidence against the assessee, then the onus was on the AO to relevant evidence against the assessee, then the onus was on the AO to substantiate the veracity of the same by corroborating these notings with substantiate the veracity of the same by corroborating these notings with substantiate the veracity of the same by corroborating these notings with some independent tangible material, or by confronting Shri Anbu with the some independent tangible material, or by confronting Shri Anbu with the some independent tangible material, or by confronting Shri Anbu with the to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. same, seeking explanation same, seeking explanation from him and then affording the assessee to from him and then affording the assessee to cross-examine him. We however note that, the AO had miserably failed to examine him. We however note that, the AO had miserably failed to examine him. We however note that, the AO had miserably failed to do so. Rather, the AO is noted to have simply treated these third party do so. Rather, the AO is noted to have simply treated these third party do so. Rather, the AO is noted to have simply treated these third party notings to be gospel truth and added the same in the hands of the notings to be gospel truth and added the same in the hands of the notings to be gospel truth and added the same in the hands of the assessee. Having regard to the ssessee. Having regard to the ratio decidendi laid down in the above laid down in the above decisions (supra), which is found to be applicable in the facts of the decisions (supra), which is found to be applicable in the facts of the decisions (supra), which is found to be applicable in the facts of the present case, we hold such action of the AO to be unsustainable. Instead, present case, we hold such action of the AO to be unsustainable. Instead, present case, we hold such action of the AO to be unsustainable. Instead, for the above discussed reasons, we are of for the above discussed reasons, we are of the considered view that, the the considered view that, the notings found in loose sheets seized from the premises of third party, Shri notings found in loose sheets seized from the premises of third party, Shri notings found in loose sheets seized from the premises of third party, Shri Anbu was not reliable and admissible for making addition in the hands of Anbu was not reliable and admissible for making addition in the hands of Anbu was not reliable and admissible for making addition in the hands of the assessee, due to lack of any corroborative material or evidence. the assessee, due to lack of any corroborative material or evidence. the assessee, due to lack of any corroborative material or evidence.

8.27 We further find that the case of the assessee is fully supported by We further find that the case of the assessee is fully supported by We further find that the case of the assessee is fully supported by the findings rendered in the assessment of Shri Anbu. It is observed that, the findings rendered in the assessment of Shri Anbu. It is observed that, the findings rendered in the assessment of Shri Anbu. It is observed that, post search, Shri Anbu had approached the Interim Board of Settlement post search, Shri Anbu had approached the Interim Board of Settlement post search, Shri Anbu had approached the Interim Board of Settlement (‘IBS’) wherein he offered additional incom (‘IBS’) wherein he offered additional income and sought immunity from e and sought immunity from penalty and prosecution. It is observed that, before the IBS, Shri Anbu penalty and prosecution. It is observed that, before the IBS, Shri Anbu penalty and prosecution. It is observed that, before the IBS, Shri Anbu had inter alia stood by his statement recorded u/s 132(4) of the Act and had inter alia stood by his statement recorded u/s 132(4) of the Act and had inter alia stood by his statement recorded u/s 132(4) of the Act and had denied having any cash loan transactions with the assessee and had denied having any cash loan transactions with the assessee and had denied having any cash loan transactions with the assessee and accordingly did not offer any additional income in relation to the ot offer any additional income in relation to the ot offer any additional income in relation to the impugned notings of Rs.94.96 crores. The IBS is noted to have called for impugned notings of Rs.94.96 crores. The IBS is noted to have called for impugned notings of Rs.94.96 crores. The IBS is noted to have called for verification report from the Department and thereafter after analyzing the verification report from the Department and thereafter after analyzing the verification report from the Department and thereafter after analyzing the same, these notings were held to be unreliable and no addi same, these notings were held to be unreliable and no addi same, these notings were held to be unreliable and no addition was made to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. in the hands of Shri Anbu for the relevant year. Instead, the IBS took in the hands of Shri Anbu for the relevant year. Instead, the IBS took in the hands of Shri Anbu for the relevant year. Instead, the IBS took cognizance of two other notings cognizance of two other notings/material of Rs.10 crores each dated material of Rs.10 crores each dated 03.12.2018 & 04.12.2018 which was claimed to represent additional 03.12.2018 & 04.12.2018 which was claimed to represent additional 03.12.2018 & 04.12.2018 which was claimed to represent additional income of Shri Anbu. Though Shri Anbu income of Shri Anbu. Though Shri Anbu is noted to have denied it but is noted to have denied it but finally admitted as his own income in AY 2019 finally admitted as his own income in AY 2019-20 to settle the matters. 20 to settle the matters.

This order of IBS thus reveals that, the impugned notings of Rs.94.96 This order of IBS thus reveals that, the impugned notings of Rs.94.96 This order of IBS thus reveals that, the impugned notings of Rs.94.96 crores which were found in the possession and control of Shri Anbu and crores which were found in the possession and control of Shri Anbu and crores which were found in the possession and control of Shri Anbu and seized from his premises, has been held to be unreliable and dumb in his his premises, has been held to be unreliable and dumb in his his premises, has been held to be unreliable and dumb in his own income-tax assessment finalized by IBS, which has attained finality tax assessment finalized by IBS, which has attained finality tax assessment finalized by IBS, which has attained finality as well. Also, the only addition of Rs.20 crores made by IBS in the hands as well. Also, the only addition of Rs.20 crores made by IBS in the hands as well. Also, the only addition of Rs.20 crores made by IBS in the hands of Shri Anbu, did not relate to the relevant AY of Shri Anbu, did not relate to the relevant AY before us. In light of the before us. In light of the foregoing, we find merit in the Ld. AR’s submissions that, the findings foregoing, we find merit in the Ld. AR’s submissions that, the findings foregoing, we find merit in the Ld. AR’s submissions that, the findings rendered by the lower authorities are in direct conflict with the order of rendered by the lower authorities are in direct conflict with the order of rendered by the lower authorities are in direct conflict with the order of the IBS, which has attained finality and is binding. In our considered view the IBS, which has attained finality and is binding. In our considered view the IBS, which has attained finality and is binding. In our considered view therefore, as the impugned notings has been found to be unreliable in the ore, as the impugned notings has been found to be unreliable in the ore, as the impugned notings has been found to be unreliable in the income-tax assessment of the searched person itself from whose tax assessment of the searched person itself from whose tax assessment of the searched person itself from whose possession it was seized, then as a natural corollary, these notings cannot possession it was seized, then as a natural corollary, these notings cannot possession it was seized, then as a natural corollary, these notings cannot be relied upon as relevant evidence to make the i be relied upon as relevant evidence to make the impugned addition in the mpugned addition in the hands of a third party viz., the assessee, in the present case. hands of a third party viz., the assessee, in the present case. hands of a third party viz., the assessee, in the present case.

8.28 For the elaborate reasons discussed above, and more For the elaborate reasons discussed above, and more For the elaborate reasons discussed above, and more particularly having regard to the statements of Shri Anbu & the Managing Director of having regard to the statements of Shri Anbu & the Managing Director of having regard to the statements of Shri Anbu & the Managing Director of the assessee and also the the assessee and also the IBS’s order passed in the matters of Shri A IBS’s order passed in the matters of Shri Anbu, to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. we hold that the impugned addition on account of alleged repayment of we hold that the impugned addition on account of alleged repayment of we hold that the impugned addition on account of alleged repayment of cash loans was untenable both on facts and in law and is accordingly cash loans was untenable both on facts and in law and is accordingly cash loans was untenable both on facts and in law and is accordingly directed to be deleted. These grounds are therefore allowed. directed to be deleted. These grounds are therefore allowed. directed to be deleted. These grounds are therefore allowed.

9. Ground Nos. 14 to 20 nd Nos. 14 to 20 raised by the assessee are against the raised by the assessee are against the addition of Rs.54,11,66,350/ addition of Rs.54,11,66,350/- made by the AO on account of cash made by the AO on account of cash deposited during the demonetization period, holding it to be unexplained deposited during the demonetization period, holding it to be unexplained deposited during the demonetization period, holding it to be unexplained cash credit u/s 68 of the Act. Briefly stated, the facts of th cash credit u/s 68 of the Act. Briefly stated, the facts of the case are that, e case are that, the AO in his show cause notice dated 13 the AO in his show cause notice dated 13-01-2023 had required the 2023 had required the assessee to explain the non assessee to explain the non-assessability of the cash deposits of assessability of the cash deposits of Rs.61,48,21,500/- made during the demonetization period of November, made during the demonetization period of November, made during the demonetization period of November, 2016. The assessee is noted to have fu 2016. The assessee is noted to have furnished their explanation vide rnished their explanation vide letter dated 02-02-2023. It was submitted that, the assessee is engaged 2023. It was submitted that, the assessee is engaged 2023. It was submitted that, the assessee is engaged in the business of wholesale cum retail trading of jewellery items with in the business of wholesale cum retail trading of jewellery items with in the business of wholesale cum retail trading of jewellery items with their branches & showrooms situated at prime location across South India their branches & showrooms situated at prime location across South India their branches & showrooms situated at prime location across South India and having regard to the nature of trade, cash sales is a common ng regard to the nature of trade, cash sales is a common ng regard to the nature of trade, cash sales is a common phenomenon. The assessee is noted to have submitted the details of cash phenomenon. The assessee is noted to have submitted the details of cash phenomenon. The assessee is noted to have submitted the details of cash sales made during the month of demonetization, ledgers, cash book, sales made during the month of demonetization, ledgers, cash book, sales made during the month of demonetization, ledgers, cash book, stock registers and bank statements to substantiate the sour stock registers and bank statements to substantiate the sour stock registers and bank statements to substantiate the source of cash deposited.

9.1 The assessee also furnished a comparative chart giving the month The assessee also furnished a comparative chart giving the month The assessee also furnished a comparative chart giving the month wise details of the cash sales for FY 2014 wise details of the cash sales for FY 2014-15, 2015-16 and 2016 16 and 2016-17. The to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. assessee submitted that, though, their total sales had increased from assessee submitted that, though, their total sales had increased from assessee submitted that, though, their total sales had increased from Rs.5860.85 crores in FY 2015 Y 2015-16 to Rs.6055.70 crores in FY 2016 16 to Rs.6055.70 crores in FY 2016-17, but their aggregate cash sales made during the relevant FY 2016 their aggregate cash sales made during the relevant FY 2016 their aggregate cash sales made during the relevant FY 2016-17 was lower than the earlier year. According to the assessee therefore, the cash lower than the earlier year. According to the assessee therefore, the cash lower than the earlier year. According to the assessee therefore, the cash deposits during demonetization period should not be viewed adver deposits during demonetization period should not be viewed adver deposits during demonetization period should not be viewed adversely.

The assessee observed that, in the original assessment, which had The assessee observed that, in the original assessment, which had The assessee observed that, in the original assessment, which had 9.2 since been set aside, the main allegation of the AO was that the cash since been set aside, the main allegation of the AO was that the cash since been set aside, the main allegation of the AO was that the cash sales on the date of demonetization, i.e. 08 sales on the date of demonetization, i.e. 08-11-2016 was unusually high 2016 was unusually high amounting to Rs.62,32,80,025/ amounting to Rs.62,32,80,025/- and for this reason, the subsequent cash r this reason, the subsequent cash deposits during the demonetization period was being doubted. To this, the deposits during the demonetization period was being doubted. To this, the deposits during the demonetization period was being doubted. To this, the assessee explained that, on the eventful day of demonetization, it is well assessee explained that, on the eventful day of demonetization, it is well assessee explained that, on the eventful day of demonetization, it is well known and documented in public domain that, there was a huge rush in known and documented in public domain that, there was a huge rush in known and documented in public domain that, there was a huge rush in all the jewellery showrooms on the date of demonetization and that all the jewellery showrooms on the date of demonetization and that all the jewellery showrooms on the date of demonetization and that all the jewellery showrooms were open up the jewellery showrooms were open up to midnight to cater to their to midnight to cater to their customers who wanted to spend their demonetized currency which was customers who wanted to spend their demonetized currency which was customers who wanted to spend their demonetized currency which was only valid on that date, and that all these jewellery only valid on that date, and that all these jewellery showrooms had showrooms had reported record sales on that date. Likewise reported record sales on that date. Likewise, there was a huge rush , there was a huge rush across all their several showrooms located across three states and that across all their several showrooms located across three states and that across all their several showrooms located across three states and that the aggregate sales made across all these showrooms the aggregate sales made across all these showrooms were supported by were supported by sales invoices. The assessee thu sales invoices. The assessee thus explained that, this unusual hike in cash s explained that, this unusual hike in cash sales on the date of demonetization should not be viewed adversely. The sales on the date of demonetization should not be viewed adversely. The sales on the date of demonetization should not be viewed adversely. The assessee further submitted that, though the figure of sales on the date of assessee further submitted that, though the figure of sales on the date of assessee further submitted that, though the figure of sales on the date of to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. demonetization may at first glance look substantial to any normal demonetization may at first glance look substantial to any normal demonetization may at first glance look substantial to any normal person but the assessee showed that the sales made on this date was only seven but the assessee showed that the sales made on this date was only seven but the assessee showed that the sales made on this date was only seven percent (7%) of their gold ornament stock and that, this value percent (7%) of their gold ornament stock and that, this value percent (7%) of their gold ornament stock and that, this value corroborated with their regular sales during festive season. The assessee corroborated with their regular sales during festive season. The assessee corroborated with their regular sales during festive season. The assessee also submitted the month also submitted the month-wise and branch-wise stock details to show that wise stock details to show that all the showrooms had sufficient inventory to justify these sales. It was all the showrooms had sufficient inventory to justify these sales. It was all the showrooms had sufficient inventory to justify these sales. It was submitted that, all the purchases were accounted for and the sales were submitted that, all the purchases were accounted for and the sales were submitted that, all the purchases were accounted for and the sales were also credited in the P&L Account and that no discrepancy in the stock also credited in the P&L Account and that no discrepancy in the stock also credited in the P&L Account and that no discrepancy in the stock details was found in the course of search. All these facts considered s was found in the course of search. All these facts considered s was found in the course of search. All these facts considered cumulatively, according to the assessee proved the genuineness of the cumulatively, according to the assessee proved the genuineness of the cumulatively, according to the assessee proved the genuineness of the sales.

The assessee further submitted that, if these cash deposits were not The assessee further submitted that, if these cash deposits were not The assessee further submitted that, if these cash deposits were not 9.3 backed by these sales, then the question backed by these sales, then the question which was to be answered was which was to be answered was from where, was such huge cash otherwise sourced. It was contended from where, was such huge cash otherwise sourced. It was contended from where, was such huge cash otherwise sourced. It was contended that the Revenue was unable to bring on record any other source out of that the Revenue was unable to bring on record any other source out of that the Revenue was unable to bring on record any other source out of which, such cash could have possibly been deposited by the assessee, in which, such cash could have possibly been deposited by the assessee, in which, such cash could have possibly been deposited by the assessee, in spite of having conducted intrusive search action u/s 132 of the Act. The onducted intrusive search action u/s 132 of the Act. The onducted intrusive search action u/s 132 of the Act. The assessee further submitted that, if these cash sales on 08 assessee further submitted that, if these cash sales on 08 assessee further submitted that, if these cash sales on 08-11-2016 was being doubted to be bogus, then as a corollary, at the time of search, the being doubted to be bogus, then as a corollary, at the time of search, the being doubted to be bogus, then as a corollary, at the time of search, the physical inventory ought to have been higher than the physical inventory ought to have been higher than the closing inventory closing inventory as per books, which was not the case and instead the inventory physically as per books, which was not the case and instead the inventory physically as per books, which was not the case and instead the inventory physically found and as per books found and as per books stood fully reconciled. The assessee further fully reconciled. The assessee further to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. submitted that even the inventory details, purchases and sales found in submitted that even the inventory details, purchases and sales found in submitted that even the inventory details, purchases and sales found in the books of accounts d the books of accounts during the course of search was not doubted by the uring the course of search was not doubted by the Revenue. These material facts, according to the assessee, supported the Revenue. These material facts, according to the assessee, supported the Revenue. These material facts, according to the assessee, supported the genuineness of the sales made on the date of demonetization. genuineness of the sales made on the date of demonetization. genuineness of the sales made on the date of demonetization.

9.4 The assessee further submitted several comparative charts relating The assessee further submitted several comparative charts relating The assessee further submitted several comparative charts relating to month-wise, period-wise cash deposited by them in FY 2016 wise cash deposited by them in FY 2016 wise cash deposited by them in FY 2016-17 and FY 2015-16 to justify the cash deposited during demonetization period. The 16 to justify the cash deposited during demonetization period. The 16 to justify the cash deposited during demonetization period. The assessee also submitted that, the AO was proceeding on the wrong assessee also submitted that, the AO was proceeding on the wrong assessee also submitted that, the AO was proceeding on the wrong presumption that the cash sales ought to be consi presumption that the cash sales ought to be consistent across all the stent across all the months. The assessee pointed out that, in their line of trade, cash sales months. The assessee pointed out that, in their line of trade, cash sales months. The assessee pointed out that, in their line of trade, cash sales during festive periods are substantially higher than cash sales on any during festive periods are substantially higher than cash sales on any during festive periods are substantially higher than cash sales on any ordinary days and therefore, it would be imprudent to conduct average ordinary days and therefore, it would be imprudent to conduct average ordinary days and therefore, it would be imprudent to conduct average analysis across all twelve months, to correlate the cash sales made on the twelve months, to correlate the cash sales made on the twelve months, to correlate the cash sales made on the date of demonetization. With these explanation, documents and details, date of demonetization. With these explanation, documents and details, date of demonetization. With these explanation, documents and details, the assessee contended that the source of cash deposit during the assessee contended that the source of cash deposit during the assessee contended that the source of cash deposit during demonetization stood justified. demonetization stood justified.

9.5 The AO, however, was of the vie The AO, however, was of the view that it was humanely impossible w that it was humanely impossible for the assessee to have achieved such huge sales on the date of for the assessee to have achieved such huge sales on the date of for the assessee to have achieved such huge sales on the date of demonetization. The reasoning given by the AO is as follows: demonetization. The reasoning given by the AO is as follows: demonetization. The reasoning given by the AO is as follows: to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 55 ::

5) It is of significance highlight herein the following: It is of significance highlight herein the following: a) In a highly sensitive and incentive driven industry viz the In a highly sensitive and incentive driven industry viz the In a highly sensitive and incentive driven industry viz the jewellery industry the bills do carry the employee code of the personnel who had industry the bills do carry the employee code of the personnel who had industry the bills do carry the employee code of the personnel who had handled that particular sales invoice. that particular sales invoice. b) On such an eventful day of On such an eventful day of demonetization on 08/11/2016 when the on 08/11/2016 when the assessee contend that there had been huge rush and sale effected assessee contend that there had been huge rush and sale effected assessee contend that there had been huge rush and sale effected after the announcement of the after the announcement of the demonetization by the by the Hon’ble Prime Minister of India at 8:15 pm on 08/11/2016, the missing entry of the Minister of India at 8:15 pm on 08/11/2016, the missing entry of the Minister of India at 8:15 pm on 08/11/2016, the missing entry of the employee code in the invoices ra employee code in the invoices raises more queries regarding the ises more queries regarding the ipsofacto nature of the transactions per se. ipsofacto nature of the transactions per se. c) In this context it is to be stated that the speech of the In this context it is to be stated that the speech of the In this context it is to be stated that the speech of the Hon’ble Prime Minister was for 1 hour 2 Minutes and 43 seconds. The announcement Minister was for 1 hour 2 Minutes and 43 seconds. The announcement Minister was for 1 hour 2 Minutes and 43 seconds. The announcement demonetization was made at the 46th minute of his speech that is at on demonetization minute of his speech that is at about 9 PM and was concluded around 9:20 PM about 9 PM and was concluded around 9:20 PM. d) It was announced that the specified bank notes (SBNs) will cease to be It was announced that the specified bank notes (SBNs) will cease to be It was announced that the specified bank notes (SBNs) will cease to be legal tender from midnight of 08/11/2016, the intervening time legal tender from midnight of 08/11/2016, the intervening time legal tender from midnight of 08/11/2016, the intervening time between the end of speech and the deadline o between the end of speech and the deadline of midnight was about f midnight was about 160 minutes. e) The assessee’s shop timing are between 9.30 AM to 8.30 PM and the The assessee’s shop timing are between 9.30 AM to 8.30 PM and the The assessee’s shop timing are between 9.30 AM to 8.30 PM and the Corporate office timings were 9.30 AM to 9 PM (as found in the orporate office timings were 9.30 AM to 9 PM (as found in the orporate office timings were 9.30 AM to 9 PM (as found in the internet). f) The assessee must have definitely downed the shutters as per regular The assessee must have definitely downed the shutters as per regular The assessee must have definitely downed the shutters as per regular shop timings on 08/11/2016 even before the PM’s announcement on s on 08/11/2016 even before the PM’s announcement on s on 08/11/2016 even before the PM’s announcement on demonetization demonetization was in the air. g) It is unlikely that uniform crowd has thronged all the branches in It is unlikely that uniform crowd has thronged all the branches in It is unlikely that uniform crowd has thronged all the branches in tandem and that the assessee has accommodated with brisk business tandem and that the assessee has accommodated with brisk business tandem and that the assessee has accommodated with brisk business at the end of the day. at the end of the day. h) The branches s The branches spread across 3 states are supervised by the employees pread across 3 states are supervised by the employees and a major decision of making sales against demonetized currency and a major decision of making sales against demonetized currency and a major decision of making sales against demonetized currency could have not been possible in a jiffy. could have not been possible in a jiffy. i) It is highly unlikely that the assessee’s customers were cash ready It is highly unlikely that the assessee’s customers were cash ready It is highly unlikely that the assessee’s customers were cash ready awaiting demonetization an awaiting demonetization announcement and reached the assessee’s nouncement and reached the assessee’s shops in no time with hoards of demonetized currency and that the shops in no time with hoards of demonetized currency and that the shops in no time with hoards of demonetized currency and that the assessee was willing to give away gold assessee was willing to give away gold jewellery in crores in such a ewellery in crores in such a short duration of about 3 hours, accepting the SBNs whose future was short duration of about 3 hours, accepting the SBNs whose future was short duration of about 3 hours, accepting the SBNs whose future was totally uncertain at the dawn of the following day ain at the dawn of the following day to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. j) As started the invoices which do not carry the employee code As started the invoices which do not carry the employee code As started the invoices which do not carry the employee code especially in respect of the transactions which in such cases relate to especially in respect of the transactions which in such cases relate to especially in respect of the transactions which in such cases relate to bring more than the value of Rs. 1 Lakh does not carry the stamp bring more than the value of Rs. 1 Lakh does not carry the stamp bring more than the value of Rs. 1 Lakh does not carry the stamp genuineness as no em genuineness as no employer would venture into taking the risk of ployer would venture into taking the risk of effecting sale even to a lesser value / lesser quantity of effecting sale even to a lesser value / lesser quantity of effecting sale even to a lesser value / lesser quantity of jewellery for obvious reason obvious reason k) It is hard to accept that the assessee could have allowed the billing of It is hard to accept that the assessee could have allowed the billing of It is hard to accept that the assessee could have allowed the billing of such high value of more than Rs. 1 Lakh without such high value of more than Rs. 1 Lakh without such high value of more than Rs. 1 Lakh without carrying the employee code. employee code. l) It is also noted that the assessee in its software as made the entry as It is also noted that the assessee in its software as made the entry as It is also noted that the assessee in its software as made the entry as being relating to sale of gold being relating to sale of gold jewellery even though the respective bills ewellery even though the respective bills specify the particulars of items sold. In this connection it is to be specify the particulars of items sold. In this connection it is to be specify the particulars of items sold. In this connection it is to be stated that other invoices which were sold on 08/11/2016 carrying the other invoices which were sold on 08/11/2016 carrying the other invoices which were sold on 08/11/2016 carrying the employee code have been entered in the software with the particulars employee code have been entered in the software with the particulars employee code have been entered in the software with the particulars of the item of j jewellery sold. m) The list of such of those invoices which do not carry the employee code The list of such of those invoices which do not carry the employee code The list of such of those invoices which do not carry the employee code have been collated in respect of each of the branches of the assessee been collated in respect of each of the branches of the assessee been collated in respect of each of the branches of the assessee and enclosed as annexures to this order. The total amount in respect and enclosed as annexures to this order. The total amount in respect and enclosed as annexures to this order. The total amount in respect of all the branches put together which do not carry the employee code of all the branches put together which do not carry the employee code of all the branches put together which do not carry the employee code comes to Rs.504324974/ Rs.504324974/- n) The assessee did not p The assessee did not produced copies of the invoices relating to the roduced copies of the invoices relating to the sales made on 08/11/2016 in respect of each of the branches and the sales made on 08/11/2016 in respect of each of the branches and the sales made on 08/11/2016 in respect of each of the branches and the same have been enclosed as annexures to this order. The total amount same have been enclosed as annexures to this order. The total amount same have been enclosed as annexures to this order. The total amount in respect of all the branches put together for which the assessee has in respect of all the branches put together for which the assessee has in respect of all the branches put together for which the assessee has not produced the copies of the invoices works out to ot produced the copies of the invoices works out to Rs.36841376/ Rs.36841376/- o) The assessee could not have had the facility and proficiency to verify The assessee could not have had the facility and proficiency to verify The assessee could not have had the facility and proficiency to verify the genuineness of the SBNs, the counting of the same, the man the genuineness of the SBNs, the counting of the same, the man the genuineness of the SBNs, the counting of the same, the man power for the said exercise, manpower to attend to the power for the said exercise, manpower to attend to the power for the said exercise, manpower to attend to the customers, weighing, billing packing etc., in such a short span of time. At any weighing, billing packing etc., in such a short span of time. At any weighing, billing packing etc., in such a short span of time. At any given point of time and date, a gold given point of time and date, a gold jewellery purchase will normally ewellery purchase will normally take 30 to 45 minutes for a customer to conclude a transaction. The take 30 to 45 minutes for a customer to conclude a transaction. The take 30 to 45 minutes for a customer to conclude a transaction. The volume of sales claimed by the assesse volume of sales claimed by the assessee should have covered e should have covered thousands of customers in each of outlets, which is nothing but thousands of customers in each of outlets, which is nothing but thousands of customers in each of outlets, which is nothing but impossible.”

9.6 With these observations, the AO held that, the cash sales to the With these observations, the AO held that, the cash sales to the With these observations, the AO held that, the cash sales to the extent of Rs.50,43,24,974/ extent of Rs.50,43,24,974/- was not genuine since the invoices did not was not genuine since the invoices did not carry employee code and that invoices to the tune of Rs.3,68,41,376/ de and that invoices to the tune of Rs.3,68,41,376/ de and that invoices to the tune of Rs.3,68,41,376/- could not be produced by the assessee. Accordingly, out of the total cash could not be produced by the assessee. Accordingly, out of the total cash could not be produced by the assessee. Accordingly, out of the total cash to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. deposited during demonetization, the cash sales of Rs.54,11,66,350/ deposited during demonetization, the cash sales of Rs.54,11,66,350/ deposited during demonetization, the cash sales of Rs.54,11,66,350/- [Rs.50,43,24,974 (+) Rs.3,68,41,376/ [Rs.50,43,24,974 (+) Rs.3,68,41,376/-] which was stated to h ] which was stated to have been the source of cash deposit was treated as unexplained cash credit u/s 68 the source of cash deposit was treated as unexplained cash credit u/s 68 the source of cash deposit was treated as unexplained cash credit u/s 68 of the Act.

9.7 Aggrieved by the order of the AO, the assessee agitated this issue Aggrieved by the order of the AO, the assessee agitated this issue Aggrieved by the order of the AO, the assessee agitated this issue in appeal before the Ld. CIT(A), who confirmed the order of the AO in appeal before the Ld. CIT(A), who confirmed the order of the AO in appeal before the Ld. CIT(A), who confirmed the order of the AO treating the impugned s treating the impugned sum as unexplained cash credit u/s 68 of the Act. um as unexplained cash credit u/s 68 of the Act.

The The The Ld. Ld. Ld. CIT(A) CIT(A) CIT(A) however however however held held held that, that, that, since since since the the the cash cash cash sales sales sales of of of Rs.54,11,66,350/- was treated as unexplained cash credit u/s 68 of the was treated as unexplained cash credit u/s 68 of the was treated as unexplained cash credit u/s 68 of the Act, he directed the AO to reduce the total sales by this amount and Act, he directed the AO to reduce the total sales by this amount and Act, he directed the AO to reduce the total sales by this amount and recomputed the profit on the remaining sales accordingly. Being d the profit on the remaining sales accordingly. Being d the profit on the remaining sales accordingly. Being aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before us.

9.8 Assailing the action of the lower authorities, the Ld. Assailing the action of the lower authorities, the Ld. Counsel Counsel for the assessee, Shri Anand contended that the re contended that the reasoning given by them to asoning given by them to justify the impugned addition was based on surmises and conjectures and justify the impugned addition was based on surmises and conjectures and justify the impugned addition was based on surmises and conjectures and that none of these reasons were decisive enough to make this addition. that none of these reasons were decisive enough to make this addition. that none of these reasons were decisive enough to make this addition.

The assessee submitted that their books of accounts were subjected to The assessee submitted that their books of accounts were subjected to The assessee submitted that their books of accounts were subjected to regular internal audit, tax audit and statutory audit, and that the AO did udit, tax audit and statutory audit, and that the AO did udit, tax audit and statutory audit, and that the AO did not reject the books of accounts by invoking Section 145(3) of the Act nor not reject the books of accounts by invoking Section 145(3) of the Act nor not reject the books of accounts by invoking Section 145(3) of the Act nor did he record any adverse finding in relation to the corresponding did he record any adverse finding in relation to the corresponding did he record any adverse finding in relation to the corresponding to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. purchases and the closing stock, and thus it was unjustif purchases and the closing stock, and thus it was unjustified on the AO’s ied on the AO’s part to dispute the correctness of the cash sales made on the date of part to dispute the correctness of the cash sales made on the date of part to dispute the correctness of the cash sales made on the date of demonetization. The assessee contended that, the fact that there was no demonetization. The assessee contended that, the fact that there was no demonetization. The assessee contended that, the fact that there was no rejection or books of accounts u/s 145(3) of the Act led to a presumption rejection or books of accounts u/s 145(3) of the Act led to a presumption rejection or books of accounts u/s 145(3) of the Act led to a presumption that the entries recorde that the entries recorded in the books were correct. The Ld. AR submitted d in the books were correct. The Ld. AR submitted that, if the source of cash deposit out of the accounted cash sales, was that, if the source of cash deposit out of the accounted cash sales, was that, if the source of cash deposit out of the accounted cash sales, was being disputed, then the corresponding purchases, closing inventory, etc. being disputed, then the corresponding purchases, closing inventory, etc. being disputed, then the corresponding purchases, closing inventory, etc. would also have to be disturbed or doubted upon. According would also have to be disturbed or doubted upon. According would also have to be disturbed or doubted upon. According to the assessee, the fact that the AO did not dispute these aspects lends assessee, the fact that the AO did not dispute these aspects lends assessee, the fact that the AO did not dispute these aspects lends credence to their case that the source of cash deposits was indeed the credence to their case that the source of cash deposits was indeed the credence to their case that the source of cash deposits was indeed the accounted cash sales.

The assessee further submitted that, if the source was not the The assessee further submitted that, if the source was not the The assessee further submitted that, if the source was not the 9.9 accounted cash sales, then it would necessarily follow that excess stock accounted cash sales, then it would necessarily follow that excess stock accounted cash sales, then it would necessarily follow that excess stock ought to have been found at the time of search. However, it is an ought to have been found at the time of search. However, it is an ought to have been found at the time of search. However, it is an admitted position that no excess stock was found and t admitted position that no excess stock was found and that this material hat this material contemporaneous fact corroborated the assessee’s contention that the contemporaneous fact corroborated the assessee’s contention that the contemporaneous fact corroborated the assessee’s contention that the cash sales was indeed made out of their existing stock and that the same cash sales was indeed made out of their existing stock and that the same cash sales was indeed made out of their existing stock and that the same was genuine. The assessee further submitted that, the AO was unable to was genuine. The assessee further submitted that, the AO was unable to was genuine. The assessee further submitted that, the AO was unable to point out any defect or i point out any defect or infirmity in the quantitative stock records nfirmity in the quantitative stock records maintained by them at their respective show rooms. Taking us through maintained by them at their respective show rooms. Taking us through maintained by them at their respective show rooms. Taking us through the inventory register, details of cash sales, etc. the Ld. AR pointed out the inventory register, details of cash sales, etc. the Ld. AR pointed out the inventory register, details of cash sales, etc. the Ld. AR pointed out that, each of these showrooms had sufficient stock in their books to that, each of these showrooms had sufficient stock in their books to that, each of these showrooms had sufficient stock in their books to to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. justify the cash sales on the date of demonetization and that the sales justify the cash sales on the date of demonetization and that the sales justify the cash sales on the date of demonetization and that the sales were not even seven percent (7%) of the stock value available on that were not even seven percent (7%) of the stock value available on that were not even seven percent (7%) of the stock value available on that date. The assessee further submitted that, all these sales was subjected date. The assessee further submitted that, all these sales was subjected date. The assessee further submitted that, all these sales was subjected to levy of VAT and that the company had d to levy of VAT and that the company had discharged the VAT liability on ischarged the VAT liability on such sales and had filed VAT returns as well. It was pointed out that even such sales and had filed VAT returns as well. It was pointed out that even such sales and had filed VAT returns as well. It was pointed out that even the VAT authorities did not dispute the genuineness of the cash sales and the VAT authorities did not dispute the genuineness of the cash sales and the VAT authorities did not dispute the genuineness of the cash sales and accepted the same. The Ld. AR took us through the relevant VAT returns, accepted the same. The Ld. AR took us through the relevant VAT returns, accepted the same. The Ld. AR took us through the relevant VAT returns, sales summaries and the comparative analysis of the cash sales for the es summaries and the comparative analysis of the cash sales for the es summaries and the comparative analysis of the cash sales for the relevant year with the preceding years, which, according to him relevant year with the preceding years, which, according to him relevant year with the preceding years, which, according to him demonstrated that the cash sales was not abnormal. The assessee also demonstrated that the cash sales was not abnormal. The assessee also demonstrated that the cash sales was not abnormal. The assessee also submitted that, the cash sales were duly recorded in th submitted that, the cash sales were duly recorded in th submitted that, the cash sales were duly recorded in the books of accounts and offered to tax in the return of income and in that view of the accounts and offered to tax in the return of income and in that view of the accounts and offered to tax in the return of income and in that view of the matter, the impugned addition was unjustified. The assessee argued that matter, the impugned addition was unjustified. The assessee argued that matter, the impugned addition was unjustified. The assessee argued that the AO had not brought on record any cogent material or independent the AO had not brought on record any cogent material or independent the AO had not brought on record any cogent material or independent evidence which would suggest evidence which would suggest that these cash sales were fictitious. The that these cash sales were fictitious. The Ld.AR argued that, the AO had also not pointed out any other probable Ld.AR argued that, the AO had also not pointed out any other probable Ld.AR argued that, the AO had also not pointed out any other probable source out of which such huge cash deposits would have been made, if source out of which such huge cash deposits would have been made, if source out of which such huge cash deposits would have been made, if not these cash sales. Taking us through the observations made by the AO not these cash sales. Taking us through the observations made by the AO not these cash sales. Taking us through the observations made by the AO in the impugned order, the Ld. AR showed us that, his entire line of the impugned order, the Ld. AR showed us that, his entire line of the impugned order, the Ld. AR showed us that, his entire line of reasoning was based on conjectures and statistical improbability. reasoning was based on conjectures and statistical improbability. reasoning was based on conjectures and statistical improbability. to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 60 ::

9.10 The Ld. AR brought to our notice that, the main premise for The Ld. AR brought to our notice that, the main premise for The Ld. AR brought to our notice that, the main premise for disputing the genuineness of the cash sales was that the disputing the genuineness of the cash sales was that the bills issued on that date did not contain employee code. The Ld. AR pointed out that the that date did not contain employee code. The Ld. AR pointed out that the that date did not contain employee code. The Ld. AR pointed out that the absence of employee codes was not any substantive irregularity which absence of employee codes was not any substantive irregularity which absence of employee codes was not any substantive irregularity which would render these sales invoices to be fundamentally improper. Overall would render these sales invoices to be fundamentally improper. Overall would render these sales invoices to be fundamentally improper. Overall therefore, the assessee h therefore, the assessee has contended that the impugned addition lacked as contended that the impugned addition lacked any factual or legal basis and thus, the Ld. AR prayed that the same be any factual or legal basis and thus, the Ld. AR prayed that the same be any factual or legal basis and thus, the Ld. AR prayed that the same be deleted.

9.11 Per contra, the Ld. CIT, DR appearing for the Revenue supported Per contra, the Ld. CIT, DR appearing for the Revenue supported Per contra, the Ld. CIT, DR appearing for the Revenue supported the order of the lower authorities. According to him, the the order of the lower authorities. According to him, the the order of the lower authorities. According to him, the fact that the employee codes were not mentioned on these invoices suggested that employee codes were not mentioned on these invoices suggested that employee codes were not mentioned on these invoices suggested that these items were claimed to have been sold without the help of the these items were claimed to have been sold without the help of the these items were claimed to have been sold without the help of the employees, which in his view, was impossible. He submitted that the employees, which in his view, was impossible. He submitted that the employees, which in his view, was impossible. He submitted that the reason given by the assessee for the non reason given by the assessee for the non-mention of employee code on mention of employee code on the date of demonetization was general and vague. Also, some of the the date of demonetization was general and vague. Also, some of the the date of demonetization was general and vague. Also, some of the invoices were not produced for verification. He thus urged that the orders invoices were not produced for verification. He thus urged that the orders invoices were not produced for verification. He thus urged that the orders of the lower authorities should not be interfered with. of the lower authorities should not be interfered with.

9.12 We have heard both the We have heard both the parties and gone through the material parties and gone through the material placed before us. It is noted that, the AO had made addition of placed before us. It is noted that, the AO had made addition of placed before us. It is noted that, the AO had made addition of Rs.54,11,66,350/-on account of cash deposited on account of cash deposited during demonetization during demonetization period, claimed to be out of the sales , claimed to be out of the sales of Rs.62.32 crores made on the of Rs.62.32 crores made on the to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. date of demonetization, ization, which were accounted for in the regular books of which were accounted for in the regular books of accounts for the relevant year. The lower authorities are noted to have for the relevant year. The lower authorities are noted to have for the relevant year. The lower authorities are noted to have reservations regarding the magnitude of sales made within four hours reservations regarding the magnitude of sales made within four hours reservations regarding the magnitude of sales made within four hours across all the branches of the assessee on the date of de across all the branches of the assessee on the date of de across all the branches of the assessee on the date of demonetization.

Their primary reason for doubting the genuineness of the sales was the Their primary reason for doubting the genuineness of the sales was the Their primary reason for doubting the genuineness of the sales was the absence of mention of employee code on the sales invoices issued on date absence of mention of employee code on the sales invoices issued on date absence of mention of employee code on the sales invoices issued on date of demonetization, which were otherwise found mentioned on the sale of demonetization, which were otherwise found mentioned on the sale of demonetization, which were otherwise found mentioned on the sale invoices issued on other dates invoices issued on other dates.

9.13 From the facts placed before us, it is noted that, the assessee is in From the facts placed before us, it is noted that, the assessee is in From the facts placed before us, it is noted that, the assessee is in the business of manufacture & sale of gold jewellery and ornaments, the business of manufacture & sale of gold jewellery and ornaments, the business of manufacture & sale of gold jewellery and ornaments, having retail outlets across twelve different cities/towns located in three having retail outlets across twelve different cities/towns located in three having retail outlets across twelve different cities/towns located in three different Southern States during t different Southern States during the relevant year. The assessee has he relevant year. The assessee has demonstrated before us that, the sales reported on the date of demonstrated before us that, the sales reported on the date of demonstrated before us that, the sales reported on the date of demonetization was supported by sales invoices and duly entered into demonetization was supported by sales invoices and duly entered into demonetization was supported by sales invoices and duly entered into their ‘Jibala’ software used for maintaining their regular books of their ‘Jibala’ software used for maintaining their regular books of their ‘Jibala’ software used for maintaining their regular books of accounts. The assessee e had also furnished their stock register had also furnished their stock register and no discrepancy was found in the quantitat discrepancy was found in the quantitative tally therein. It is observed ive tally therein. It is observed that, the quantity of sales reported on the date of demonetization was not that, the quantity of sales reported on the date of demonetization was not that, the quantity of sales reported on the date of demonetization was not even seven percentage (7%) of the inventory available with t even seven percentage (7%) of the inventory available with t even seven percentage (7%) of the inventory available with the assessee, whose details as noted by us, is as follows: whose details as noted by us, is as follows:- to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 62 ::

Sales as on 08.11.2016 % of Closing stock as Closing stock as Gold Branches Qty Value on 07.11.2016 on 07.11.2016 stock sale T.Nagar Panagal 45,791.83 14,30,31,978 3,18,903.68 3,18,903.68 14% Park Madurai 22,631.33 7,06,84,900 2,57,627.05 2,57,627.05 9% Trichy 9,038.35 2,88,20,856 2,19,896.16 2,19,896.16 4% Pondy 21,910.32 6,68,02,425 1,93,540.78 1,93,540.78 11% Kumbakonam 3,453.43 1,05,70,143 1,60,632.72 1,60,632.72 2% Bangalore 8,559.97 2,64,08,771 3,72,307.08 3,72,307.08 2% Ramnad 7,147.28 2,23,69,509 1,13,598.84 1,13,598.84 6% Coimbatore 6,955.01 2,16,23,627 2,20,390.88 2,20,390.88 3% Tirupati 24,090.89 7,37,96,386 1,54,586.89 1,54,586.89 16% Anna Nagar 2,630.46 81,19,595 83,029.95 83,029.95 3% Purasaiwalkam 10,021.30 3,07,48,023 99,896.06 99,896.06 10% Vizhag 39,217.49 12,22,22,886 3,61,309.06 3,61,309.06 11% Bus [Sale on 338.69 10,19,486 30,780.65 30,780.65 1% Wheel] Total 2,01,786.34 62,62,18,585 25,86,544.80 25,86,544.80 7% 9.14 We thus observe that We thus observe that the sales shown by the assessee the sales shown by the assessee was duly supported by the inventory available in stock supported by the inventory available in stock, and that and that the quantity relating to the said sales was reduced in the stock register from the relating to the said sales was reduced in the stock register from the relating to the said sales was reduced in the stock register from the opening stock as well as purchases made during the year under opening stock as well as purchases made during the year under opening stock as well as purchases made during the year under consideration and thereafter the closing inventory has been reported and thereafter the closing inventory has been reported and thereafter the closing inventory has been reported. We note that, during the course of searc note that, during the course of search conducted on 04 h conducted on 04-03-2021, no discrepancy in respect of cash or stock was found. discrepancy in respect of cash or stock was found. This material fact This material fact corroborates the genuineness of the impugned sales recorded on the date corroborates the genuineness of the impugned sales recorded on the date corroborates the genuineness of the impugned sales recorded on the date of demonetization, as otherwise excess stock would have been found or of demonetization, as otherwise excess stock would have been found or of demonetization, as otherwise excess stock would have been found or discrepancy in cash balance would have been noted. The Ld. CIT, DR also cash balance would have been noted. The Ld. CIT, DR also cash balance would have been noted. The Ld. CIT, DR also to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. could not controvert this factual aspect that, the intrusive search action could not controvert this factual aspect that, the intrusive search action could not controvert this factual aspect that, the intrusive search action did not reveal any discrepancy in stock register, closing inventory, cash did not reveal any discrepancy in stock register, closing inventory, cash did not reveal any discrepancy in stock register, closing inventory, cash balance etc.

9.15 It is also noted that, t It is also noted that, the assessee was also filing regular returns essee was also filing regular returns with the VAT Department with the VAT Department, copies of which are placed at Pages 1572 to Pages 1572 to Book, and in in those those VAT VAT Returns Returns also also, no 1592 1592 of of Paper Paper Book difference/defect was pointed out which clearly shows that the stock difference/defect was pointed out which clearly shows that the stock difference/defect was pointed out which clearly shows that the stock available with the assessee in the form of opening stock and purchases available with the assessee in the form of opening stock and purchases available with the assessee in the form of opening stock and purchases has been accepted by the Department as well as the VAT Department. has been accepted by the Department as well as the VAT Department. has been accepted by the Department as well as the VAT Department. It is also noted that, the sales made on the is also noted that, the sales made on the date of demonetization has been date of demonetization has been declared in the VAT returns and taxes have also been discharged by the declared in the VAT returns and taxes have also been discharged by the declared in the VAT returns and taxes have also been discharged by the assessee. In our considered considered opinion therefore, the cash deposited during therefore, the cash deposited during demonetization is found to be prima facie substantiated by the demonetization is found to be prima facie substantiated by the demonetization is found to be prima facie substantiated by the amount received by the assessee from the customer y the assessee from the customers after selling the after selling the goods/jewellery out of the accepted stock (opening stock and purchases) goods/jewellery out of the accepted stock (opening stock and purchases) goods/jewellery out of the accepted stock (opening stock and purchases).

9.16 It is noted that the Revenue also did not reject the audited books of It is noted that the Revenue also did not reject the audited books of It is noted that the Revenue also did not reject the audited books of accounts of the assessee nor did they invoke Section 14 accounts of the assessee nor did they invoke Section 145(3) of the Act. 5(3) of the Act.

The AO had also not disputed the book results of the assessee. The AO had also not disputed the book results of the assessee. The AO had also not disputed the book results of the assessee.

Accordingly, the opening stock, purchases & closing inventory are found Accordingly, the opening stock, purchases & closing inventory are found Accordingly, the opening stock, purchases & closing inventory are found to be have been accepted by the Revenue, which is also corroborated by to be have been accepted by the Revenue, which is also corroborated by to be have been accepted by the Revenue, which is also corroborated by the fact that, no discrepancy the the fact that, no discrepancy therein or in physical stock was found in the rein or in physical stock was found in the to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. course of search. According to us, i course of search. According to us, if the AO was not satisfied with the f the AO was not satisfied with the details & values of the sales recognized and the financial results reported sales recognized and the financial results reported sales recognized and the financial results reported by the assessee, then the correct & proper course would have been by the assessee, then the correct & proper course would have been by the assessee, then the correct & proper course would have been to reject the books of accounts u/s 145(3) eject the books of accounts u/s 145(3) and then frame assessment u/s and then frame assessment u/s 144 of the Act.

9.17 Moreover, once the sales had already been accepted and assessed Moreover, once the sales had already been accepted and assessed Moreover, once the sales had already been accepted and assessed to tax and the book results were not rejected, the same sales could not to tax and the book results were not rejected, the same sales could not to tax and the book results were not rejected, the same sales could not have been legally again have been legally again added separately by way of unexplained cash added separately by way of unexplained cash credit u/s 68 of the Act. credit u/s 68 of the Act. We find that later on, the Ld. CIT(A) had taken the Ld. CIT(A) had taken note of this apparent fallacy in the action of the AO, and thereafter note of this apparent fallacy in the action of the AO, and thereafter note of this apparent fallacy in the action of the AO, and thereafter directed the AO to exclude the amount added u/s 68 directed the AO to exclude the amount added u/s 68 of the Act of the Act from the figure of sales and re-compute the normal profits assessable to tax. compute the normal profits assessable to tax. compute the normal profits assessable to tax.

9.18 According to us, the above action of the Ld. CIT(A) also suffered According to us, the above action of the Ld. CIT(A) also suffered According to us, the above action of the Ld. CIT(A) also suffered from inconsistencies. If the Ld. CIT(A) was of the view that, the cash from inconsistencies. If the Ld. CIT(A) was of the view that, the cash from inconsistencies. If the Ld. CIT(A) was of the view that, the cash deposited during demonetization was not ou deposited during demonetization was not out of the cash sales made on t of the cash sales made on date of demonetization, then question would arise as to where was the date of demonetization, then question would arise as to where was the date of demonetization, then question would arise as to where was the inventory which was reduced due to such sales then diverted or used for. inventory which was reduced due to such sales then diverted or used for. inventory which was reduced due to such sales then diverted or used for.

Reason being, the Ld. CIT(A) had not disputed the closing inventory as on Reason being, the Ld. CIT(A) had not disputed the closing inventory as on Reason being, the Ld. CIT(A) had not disputed the closing inventory as on 31-03-2017. The Revenue has The Revenue has not brought any material on record which ought any material on record which would otherwise show that that, the said inventory was sold outside the books said inventory was sold outside the books or that the amount received by the assessee by selling amount received by the assessee by selling amount received by the assessee by selling the the the to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. jewellery/goods out of the opening stock and the purchases jewellery/goods out of the opening stock and the purchases jewellery/goods out of the opening stock and the purchases, was otherwise utilized elsewhere and not deposit utilized elsewhere and not deposited in the bank a e bank account. We also find force in the Ld. AR’s contention that, if the source of cash also find force in the Ld. AR’s contention that, if the source of cash also find force in the Ld. AR’s contention that, if the source of cash deposits was not the cash sales, then the Revenue was required to bring deposits was not the cash sales, then the Revenue was required to bring deposits was not the cash sales, then the Revenue was required to bring on record some material or evidence to show on record some material or evidence to show as to wherefrom did the as to wherefrom did the assessee generate such magnitude of cash which it deposited in the bank assessee generate such magnitude of cash which it deposited in the bank assessee generate such magnitude of cash which it deposited in the bank account during the demonetization period. account during the demonetization period.

9.19 In the instant case the opening stock, purchases and the closing In the instant case the opening stock, purchases and the closing In the instant case the opening stock, purchases and the closing stock has not been doubted, no inflated purchas stock has not been doubted, no inflated purchases were found or es were found or suppressed sales were noticed during the course of search suppressed sales were noticed during the course of search suppressed sales were noticed during the course of search conducted on 04-03-2021. It is also not the case that the assessee has not been It is also not the case that the assessee has not been It is also not the case that the assessee has not been making cash sales regularly or that the cash sales shown on the date of making cash sales regularly or that the cash sales shown on the date of making cash sales regularly or that the cash sales shown on the date of demonetization is inconsisten demonetization is inconsistent with the cash sales reported in earlier t with the cash sales reported in earlier period(s) or that there is any unusual deviation in gross profit margin due period(s) or that there is any unusual deviation in gross profit margin due period(s) or that there is any unusual deviation in gross profit margin due to the impugned sales in dispute. From an analysis of the audited to the impugned sales in dispute. From an analysis of the audited to the impugned sales in dispute. From an analysis of the audited financials for the relevant FY 2016 financials for the relevant FY 2016-17 and the past two years, the detai 17 and the past two years, the details of turnover reported by the assessee is noted to be as follows: of turnover reported by the assessee is noted to be as follows: of turnover reported by the assessee is noted to be as follows:-

FY FY Total Sales (in Rs) 2014 2014-15 66,81,91,87,159 2015 2015-16 58,60,85,54,533 2016 2016-17 60,55,70,08,603 to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 66 ::

9.20 It is observed that the above sales of the assessee have not been It is observed that the above sales of the assessee have not been It is observed that the above sales of the assessee have not been disputed by the Revenue. We thus note that, the magnitude of sales Revenue. We thus note that, the magnitude of sales Revenue. We thus note that, the magnitude of sales made on the date of demonetization though appears to be high on stand made on the date of demonetization though appears to be high on stand made on the date of demonetization though appears to be high on stand- alone basis, but having regard to the size & turnover of the assessee alone basis, but having regard to the size & turnover of the assessee alone basis, but having regard to the size & turnover of the assessee company and its branches / outlets, the same is found to be only company and its branches / outlets, the same is found to be only company and its branches / outlets, the same is found to be only 1% of the total turnover. The assessee is also found to have furnished the the total turnover. The assessee is also found to have furnished the the total turnover. The assessee is also found to have furnished the month-wise details of the turnover recorded in the books of accounts for wise details of the turnover recorded in the books of accounts for wise details of the turnover recorded in the books of accounts for the relevant AY 2016-17 and the preceding two years, which is observed 17 and the preceding two years, which is observed 17 and the preceding two years, which is observed to be as follows:-

Particulars FY 2014-15 15 FY 2015-16 FY 2016-17 (Rs.) (Rs.) % (Rs. (Rs.) % Growth Growt h April 4,60,31,66,608 4,60,31,66,608 4,82,91,75,208 5% 2,97,31,79,505 2,97,31,79,505 -38% May 6,47,96,92,387 6,47,96,92,387 4,77,82,70,374 -26% 5,33,61,25,260 5,33,61,25,260 12% June 4,74,90,84,237 4,74,90,84,237 4,86,80,11,927 3% 3,40,04,33,205 3,40,04,33,205 -30% July 3,63,87,41,663 3,63,87,41,663 8,27,85,07,605 128% 4,16,48,66,146 4,16,48,66,146 -50% August 4,16,53,59,596 4,16,53,59,596 8,61,87,24,771 107% 6,91,47,83,813 6,91,47,83,813 -20% Sept. 3,63,84,66,016 3,63,84,66,016 3,40,70,02,565 -6% 4,35,83,62,759 4,35,83,62,759 28% October 5,17,86,49,465 5,17,86,49,465 3,58,65,99,170 -31% 5,86,29,76,536 5,86,29,76,536 63% November 6,87,31,46,787 6,87,31,46,787 5,46,76,53,148 -20% 4,47,27,03,802 4,47,27,03,802 -18% December 7,93,62,29,133 7,93,62,29,133 4,23,35,82,004 -47% 3,53,23,94,202 3,53,23,94,202 -17% January 7,17,57,57,556 7,17,57,57,556 4,03,54,92,268 -44% 5,21,57,98,993 5,21,57,98,993 29% February 4,91,95,36,084 4,91,95,36,084 3,84,04,90,074 -22% 6,02,24,32,402 6,02,24,32,402 57% March 7,46,13,57,629 7,46,13,57,629 2,66,50,45,418 -64% 8,30,29,51,981 8,30,29,51,981 212% Grand total 66,81,91,87,159 66,81,91,87,159 58,60,85,54,533 13,86,80,74,540 13,86,80,74,540 to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 67 ::

9.21 From the above it is noted that the sales reported in the months of From the above it is noted that the sales reported in the months of From the above it is noted that the sales reported in the months of October 2016 & November 2016 was in October 2016 & November 2016 was in fact comparatively lower than the fact comparatively lower than the preceding two years. Accordingly, we find that, there was no unusual hike preceding two years. Accordingly, we find that, there was no unusual hike preceding two years. Accordingly, we find that, there was no unusual hike noted in the sales from the past sales pattern of the assessee. noted in the sales from the past sales pattern of the assessee. noted in the sales from the past sales pattern of the assessee.

9.22 The assessee is also noted to have provided the details of cash & The assessee is also noted to have provided the details of cash & The assessee is also noted to have provided the details of cash & non-cash sales made in relevant AY 2016 les made in relevant AY 2016-17 and the preceding AY 2015 17 and the preceding AY 2015- 16 to demonstrate that even the value of cash sales reported during the 16 to demonstrate that even the value of cash sales reported during the 16 to demonstrate that even the value of cash sales reported during the month of November 2016 i.e. the period of demonetization, was month of November 2016 i.e. the period of demonetization, was month of November 2016 i.e. the period of demonetization, was comparable to the earlier year and that there was no unusual sur comparable to the earlier year and that there was no unusual sur comparable to the earlier year and that there was no unusual surge of sales reported during the demonetization period. The relevant details sales reported during the demonetization period. The relevant details sales reported during the demonetization period. The relevant details taken note of by us, is as follows: taken note of by us, is as follows:-

“Total sales vs Cash Sales FY 2014-15

Month Total sales Cash sales April 4,60,31,66,608 1,34,50,69,968 May 6,47,96,92,387 2,10,45,60,894 June 4,74,90,84,237 1,81,66,50,310 July 3,63,87,41,663 1,33,49,19,422 August 4,16,53,59,596 1,71,67,13,701 September September 3,63,84,66,016 1,83,89,88,988 October 5,17,86,49,465 1,8364,41,549 November November 6,87,31,46,787 2,47,49,80,939 December December 7,93,622,29,133 1,41,21,04,020 January 7,17,57,57,556 1,30,13,06,999 February 4,91,95,36,084 1,22,79,02,153 March 7,46,13,57,629 2,13,64,09,868 Total 66,88,91,87,161 20,54,60,48,811 to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 68 ::

FY 2015-16

Month Total sales Cash sales April 4,60,31,66,608 1,34,50,69,968 May 6,47,96,92,387 2,10,45,60,894 June 4,74,90,84,237 1,81,66,50,310 July 3,63,87,41,663 1,33,49,19,422 August 4,16,53,59,596 1,71,67,13,701 September September 3,63,84,66,016 1,83,89,88,988 October 5,17,86,49,465 1,8364,41,549 November November 6,87,31,46,787 2,47,49,80,939 December December 7,93,622,29,133 1,41,21,04,020 January 7,17,57,57,556 1,30,13,06,999 February 4,91,95,36,084 1,22,79,02,153 March 7,46,13,57,629 2,13,64,09,868 Total 66,88,91,87,161 20,54,60,48,811

FY 2016-17

Month Total sales Cash sales April 4,60,31,66,608 1,34,50,69,968 May 6,47,96,92,387 2,10,45,60,894 June 4,74,90,84,237 1,81,66,50,310 July 3,63,87,41,663 1,33,49,19,422 August 4,16,53,59,596 1,71,67,13,701 September September 3,63,84,66,016 1,83,89,88,988 October 5,17,86,49,465 1,8364,41,549 November November 6,87,31,46,787 2,47,49,80,939 December December 7,93,622,29,133 1,41,21,04,020 January 7,17,57,57,556 1,30,13,06,999 February 4,91,95,36,084 1,22,79,02,153 March 7,46,13,57,629 2,13,64,09,868 Total 66,88,91,87,161 20,54,60,48,811 9.23 So it is not a case that in the month of So it is not a case that in the month of November 2016 only the cash sales were more. cash sales were more. Instead, it is noted that, the assessee has been Instead, it is noted that, the assessee has been making cash sales regularly and that in comparison to the period making cash sales regularly and that in comparison to the period making cash sales regularly and that in comparison to the period November 2015, the cash sales for the period November 20 November 2015, the cash sales for the period November 20 November 2015, the cash sales for the period November 2016 was lower.

These comparative patterns and analysis provided by the assessee are These comparative patterns and analysis provided by the assessee are These comparative patterns and analysis provided by the assessee are thus found to prima facie support their case that that cash sales and its thus found to prima facie support their case that that cash sales and its thus found to prima facie support their case that that cash sales and its to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. magnitude was a common phenomenon in their line of trade and was magnitude was a common phenomenon in their line of trade and was magnitude was a common phenomenon in their line of trade and was generated in the regular course of generated in the regular course of their business, without any unusual their business, without any unusual deviation.

9.24 It is also noticed that the GP rate shown by the assessee for the It is also noticed that the GP rate shown by the assessee for the It is also noticed that the GP rate shown by the assessee for the year under consideration was year under consideration was 6.08% which was comparable with the % which was comparable with the preceding AY 2016-17 at 17 at 5.71%. Hence, these contemporaneous facts . Hence, these contemporaneous facts shows that, it was also not the case that that, it was also not the case that the cash sales made the cash sales made by the assessee assessee during during the the pre pre-demonetization period resulted resulted in in any extraordinary increase increase in the G.P. rate, instead the gross profit margins , instead the gross profit margins were consistent with only a gradual increase were consistent with only a gradual increase.

9.25 In light of the facts taken note above, we observe that, In light of the facts taken note above, we observe that, In light of the facts taken note above, we observe that, the opening stock, purchases & sales and closing stock, declared by the assessee has stock, purchases & sales and closing stock, declared by the assessee has stock, purchases & sales and closing stock, declared by the assessee has not been doubted, the sales were made by the assessee out of the not been doubted, the sales were made by the assessee out of the not been doubted, the sales were made by the assessee out of the opening stock and purchases and the resultant clo opening stock and purchases and the resultant closing stock has been ing stock has been accepted. The sales were also subjected to levy of VAT and the same has were also subjected to levy of VAT and the same has were also subjected to levy of VAT and the same has not been disturbed by the sales tax/VAT Department. The comparative The comparative year-wise, month-wise sales pattern, gross profit margins etc. are also wise sales pattern, gross profit margins etc. are also wise sales pattern, gross profit margins etc. are also found to be justifiable with no major deviation in trend. Also with no major deviation in trend. Also with no major deviation in trend. Also there was no difference / discrepancy in stock or cash balance found / discrepancy in stock or cash balance found at the time of search and, therefore, the sales made by the assesse , therefore, the sales made by the assessee out of the existing e out of the existing stock is found to sufficient sufficiently explain the deposit of cash explain the deposit of cash (obtained from to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. realization of the sales) in the bank account realization of the sales) in the bank account. On these facts, in our . On these facts, in our considered opinion, the lower authorities were unjustified in treating the considered opinion, the lower authorities were unjustified in treating the considered opinion, the lower authorities were unjustified in treating the impugned sales as undisclosed income of the assessee. as undisclosed income of the assessee.

9.26 In this regard, we rely on the decisi In this regard, we rely on the decision of the Hon’ble Delhi High on of the Hon’ble Delhi High Court in the case of Pr. CIT v. Agson Global (P.) Ltd. (441 ITR 550) Pr. CIT v. Agson Global (P.) Ltd. (441 ITR 550) Pr. CIT v. Agson Global (P.) Ltd. (441 ITR 550) wherein on similar facts and circumstances, the Hon’ble High Court wherein on similar facts and circumstances, the Hon’ble High Court wherein on similar facts and circumstances, the Hon’ble High Court upheld the findings of this Tribunal that, upheld the findings of this Tribunal that, when the stock was available in when the stock was available in the form of opening & purchases ing & purchases, then it was unjustified to unjustified to hold that the sales made by the assessee were not out of the available stock and sales made by the assessee were not out of the available stock and sales made by the assessee were not out of the available stock and the same could not have been treated as unexplained. could not have been treated as unexplained. The relevant findings The relevant findings of the Hon’ble High Court found relevant to the present of the Hon’ble High Court found relevant to the present case, are noted as case, are noted as under:-

“16.5 It is in this background that the Tribunal examined the merits of 16.5 It is in this background that the Tribunal examined the merits of 16.5 It is in this background that the Tribunal examined the merits of the case put up by both sides. In this context, the Tribunal analysed the the case put up by both sides. In this context, the Tribunal analysed the the case put up by both sides. In this context, the Tribunal analysed the data pertaining to cash sales and cash deposits made in the financial data pertaining to cash sales and cash deposits made in the financial data pertaining to cash sales and cash deposits made in the financial year in issue i.e., FY 2016 i.e., FY 2016-2017 (relevant AY 2017-2018), as against 2018), as against FYs 2014-2015 and 2015 2015 and 2015-2016. The analysis made by the Tribunal 2016. The analysis made by the Tribunal showed that, in the three financial years, the total cash deposits more or showed that, in the three financial years, the total cash deposits more or showed that, in the three financial years, the total cash deposits more or less corresponded with the cash sales…. less corresponded with the cash sales….

16.6 Besides this, the 16.6 Besides this, the Tribunal also noted the increase in sales between Tribunal also noted the increase in sales between FYs 2014-2015, 2015 2015, 2015-2016 and 2016-2017, both in absolute and 2017, both in absolute and percentage terms. Insofar as the increase in sales between FYs 2014 percentage terms. Insofar as the increase in sales between FYs 2014 percentage terms. Insofar as the increase in sales between FYs 2014- 2015 and 2015- -2016 was concerned, it was found that in absolute 2016 was concerned, it was found that in absolute terms, sales had increased by Rs. 175.08 crores, which, in percentage had increased by Rs. 175.08 crores, which, in percentage had increased by Rs. 175.08 crores, which, in percentage terms amounted to an increase of 73.74%. Likewise, the cash sales terms amounted to an increase of 73.74%. Likewise, the cash sales terms amounted to an increase of 73.74%. Likewise, the cash sales between FYs 2015 between FYs 2015-2016 and 2016-2017 had increased in absolute terms 2017 had increased in absolute terms by Rs. 221.34 crores, but, in percentage terms, the increase was by Rs. 221.34 crores, but, in percentage terms, the increase was by Rs. 221.34 crores, but, in percentage terms, the increase was only 53.66 %. Based on these figures, the Tribunal concluded that, in the 53.66 %. Based on these figures, the Tribunal concluded that, in the 53.66 %. Based on these figures, the Tribunal concluded that, in the year in which demonetization kicked in i.e., F.Y. 2016 year in which demonetization kicked in i.e., F.Y. 2016 year in which demonetization kicked in i.e., F.Y. 2016-2017, the increase in sales in percentage terms was less than the earlier year. The increase in sales in percentage terms was less than the earlier year. The increase in sales in percentage terms was less than the earlier year. The to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 71 ::

Tribunal, thus, held that it could not be Tribunal, thus, held that it could not be said that the assessee had said that the assessee had booked non-existing sales in its books post demonetization. existing sales in its books post demonetization.

16.7 Similarly, the Tribunal examined the cash sales figures for 16.7 Similarly, the Tribunal examined the cash sales figures for 16.7 Similarly, the Tribunal examined the cash sales figures for November of the following three years to see if there were any November of the following three years to see if there were any November of the following three years to see if there were any anomalies. The Tribunal noticed that the anomalies. The Tribunal noticed that the cash sales made in November cash sales made in November 2014, was Rs. 16.49 crores; whereas in November 2015, cash sales 2014, was Rs. 16.49 crores; whereas in November 2015, cash sales 2014, was Rs. 16.49 crores; whereas in November 2015, cash sales made was Rs. 45.18 crores, while in November 2016, cash sales made was Rs. 45.18 crores, while in November 2016, cash sales made was Rs. 45.18 crores, while in November 2016, cash sales recorded a slight increase i.e. was Rs. 47.43 crores. The Tribunal noticed recorded a slight increase i.e. was Rs. 47.43 crores. The Tribunal noticed recorded a slight increase i.e. was Rs. 47.43 crores. The Tribunal noticed that there was a substanti that there was a substantial jump in sales in November 2015 over al jump in sales in November 2015 over November 2014. In absolute terms, the increase was Rs. 28.69 crores, November 2014. In absolute terms, the increase was Rs. 28.69 crores, November 2014. In absolute terms, the increase was Rs. 28.69 crores, which, in percentage terms, amounted to 173.98%, whereas when which, in percentage terms, amounted to 173.98%, whereas when which, in percentage terms, amounted to 173.98%, whereas when November 2015 cash sales figure was compared with November 2016 November 2015 cash sales figure was compared with November 2016 November 2015 cash sales figure was compared with November 2016 cash sales figure, the cash sales figure, the increase was merely Rs. 2.55 crores, which, in increase was merely Rs. 2.55 crores, which, in percentage terms, amounted to an increase of 5.64%. According to the percentage terms, amounted to an increase of 5.64%. According to the percentage terms, amounted to an increase of 5.64%. According to the Tribunal, this again was an indicator that the assessee had not booked Tribunal, this again was an indicator that the assessee had not booked Tribunal, this again was an indicator that the assessee had not booked non-existing sales in November 2016 by showing cash deposits against existing sales in November 2016 by showing cash deposits against existing sales in November 2016 by showing cash deposits against them.

16.8 In the same vein, the Tribunal picked up the figures of cash sales 16.8 In the same vein, the Tribunal picked up the figures of cash sales 16.8 In the same vein, the Tribunal picked up the figures of cash sales made in December 2014, which was Rs. 22.26 crores, December 2015, made in December 2014, which was Rs. 22.26 crores, December 2015, made in December 2014, which was Rs. 22.26 crores, December 2015, which was Rs. 97.35 crores and December 2016, which was Rs. 69.83 which was Rs. 97.35 crores and December 2016, which was Rs. 69.83 which was Rs. 97.35 crores and December 2016, which was Rs. 69.83 crores. The comparison made showed that the c crores. The comparison made showed that the cash sales in December ash sales in December 2015, as compared to December 2014, in absolute terms, increased by 2015, as compared to December 2014, in absolute terms, increased by 2015, as compared to December 2014, in absolute terms, increased by Rs. 75.09 crores, whereas when figures of cash sales of December 2015 Rs. 75.09 crores, whereas when figures of cash sales of December 2015 Rs. 75.09 crores, whereas when figures of cash sales of December 2015 was compared with December 2016, it showed a dip of Rs. 27.52 crores. was compared with December 2016, it showed a dip of Rs. 27.52 crores. was compared with December 2016, it showed a dip of Rs. 27.52 crores. In percentage terms, the i In percentage terms, the increase in sales between December 2014 and ncrease in sales between December 2014 and December 2015 was 337.33%, whereas, in December 2016, cash sales December 2015 was 337.33%, whereas, in December 2016, cash sales December 2015 was 337.33%, whereas, in December 2016, cash sales decreased by 28.27%. This again demonstrated, according to the decreased by 28.27%. This again demonstrated, according to the decreased by 28.27%. This again demonstrated, according to the Tribunal, that assessee had not attempted to book cash sales that had Tribunal, that assessee had not attempted to book cash sales that had Tribunal, that assessee had not attempted to book cash sales that had not taken place, as alleged by the revenue. , as alleged by the revenue.

16.9 In sum, it was the Tribunal's assessment of the material placed on 16.9 In sum, it was the Tribunal's assessment of the material placed on 16.9 In sum, it was the Tribunal's assessment of the material placed on record that cash deposits made by the assessee with its bankers, as record that cash deposits made by the assessee with its bankers, as record that cash deposits made by the assessee with its bankers, as noticed above, more or less compared with the cash sale transactions noticed above, more or less compared with the cash sale transactions noticed above, more or less compared with the cash sale transactions entered into by it entered into by it with its customers. The Tribunal's view was that given with its customers. The Tribunal's view was that given the fact that there was no allegation made by the revenue that the the fact that there was no allegation made by the revenue that the the fact that there was no allegation made by the revenue that the assessee had backdated its entries to enhance its cash sale figures, one assessee had backdated its entries to enhance its cash sale figures, one assessee had backdated its entries to enhance its cash sale figures, one could only conclude that there was a growth in the assessee' could only conclude that there was a growth in the assessee' could only conclude that there was a growth in the assessee's business.

fact that part of the stock was available at the assessee's godown at fact that part of the stock was available at the assessee's godown at fact that part of the stock was available at the assessee's godown at Sonipat, Haryana… ana…

17.1 The Tribunal also seems to have accepted the explanation that the 17.1 The Tribunal also seems to have accepted the explanation that the 17.1 The Tribunal also seems to have accepted the explanation that the gross profit ratio for the AY in issue i.e., AY 2017 gross profit ratio for the AY in issue i.e., AY 2017-2018 (relevant 2018 (relevant F.Y.2016-2017) was in line with the earlier years. In this context, the 2017) was in line with the earlier years. In this context, the 2017) was in line with the earlier years. In this context, the Tribunal took note of the fact that, at Tribunal took note of the fact that, at the time when the search and the time when the search and seizure action had taken place, the data had not been finalized as seizure action had taken place, the data had not been finalized as seizure action had taken place, the data had not been finalized as adjustments towards depreciation, interest and provisions for expenses adjustments towards depreciation, interest and provisions for expenses adjustments towards depreciation, interest and provisions for expenses could be made only after the end of the relevant financial year. could be made only after the end of the relevant financial year. could be made only after the end of the relevant financial year.

17.2 Besides this, the T 17.2 Besides this, the Tribunal also appears to have accepted the ribunal also appears to have accepted the explanation given by the assessee that the purported misalignment of explanation given by the assessee that the purported misalignment of explanation given by the assessee that the purported misalignment of the gross profit ratio occurred, as unaudited data of the year in issue the gross profit ratio occurred, as unaudited data of the year in issue the gross profit ratio occurred, as unaudited data of the year in issue was compared with the audited data of the previous years. It is in this was compared with the audited data of the previous years. It is in this was compared with the audited data of the previous years. It is in this context that the Tribunal took note of the gross profit percentage of AYs ontext that the Tribunal took note of the gross profit percentage of AYs ontext that the Tribunal took note of the gross profit percentage of AYs 2015-2016 (6.14%), 2016 2016 (6.14%), 2016-2017 (4.19%) and 2017-2018 (5.85%), as 2018 (5.85%), as also the respective net profit ratio for the very same years, which, also the respective net profit ratio for the very same years, which, also the respective net profit ratio for the very same years, which, according to the assessee, were 0.72% 0.81% and 1.3 according to the assessee, were 0.72% 0.81% and 1.35% respectively. 5% respectively. The sense that the Tribunal derived from the data presented to it, which The sense that the Tribunal derived from the data presented to it, which The sense that the Tribunal derived from the data presented to it, which was based on documentary evidence, was that there was no substantial was based on documentary evidence, was that there was no substantial was based on documentary evidence, was that there was no substantial variation in either the gross profit or net profit in the relevant year i.e., variation in either the gross profit or net profit in the relevant year i.e., variation in either the gross profit or net profit in the relevant year i.e., A.Y. 2017-2018, as 2018, as compared to the previous years.

17.3 Furthermore, based on details furnished by the assessee for the AY 17.3 Furthermore, based on details furnished by the assessee for the AY 17.3 Furthermore, based on details furnished by the assessee for the AY 2017-2018 concerning its closing stock, list of debtors, details of 2018 concerning its closing stock, list of debtors, details of 2018 concerning its closing stock, list of debtors, details of purchases and sales made, list of creditors, copies of bank statements purchases and sales made, list of creditors, copies of bank statements purchases and sales made, list of creditors, copies of bank statements and books of accounts accounts—the Tribunal concluded that it was not a case the Tribunal concluded that it was not a case where it could be said that the assessee had purchased or sold goods to where it could be said that the assessee had purchased or sold goods to where it could be said that the assessee had purchased or sold goods to unidentified parties. unidentified parties.

….

17.6 Having regard to the extensive material which has been examined 17.6 Having regard to the extensive material which has been examined 17.6 Having regard to the extensive material which has been examined by the Tribunal, in particular, the by the Tribunal, in particular, the trend of cash sales and corresponding trend of cash sales and corresponding cash deposited by the assessee with earlier years, we are of the view cash deposited by the assessee with earlier years, we are of the view cash deposited by the assessee with earlier years, we are of the view that there was nothing placed on record that there was nothing placed on record—which could have persuaded which could have persuaded the Tribunal to conclude that the assessee had, in fact, earned the Tribunal to conclude that the assessee had, in fact, earned the Tribunal to conclude that the assessee had, in fact, earned unaccounted inco unaccounted income i.e., made cash deposits which were not me i.e., made cash deposits which were not represented by cash sales. Therefore, in our opinion, the Tribunal represented by cash sales. Therefore, in our opinion, the Tribunal represented by cash sales. Therefore, in our opinion, the Tribunal correctly found in favour of the assessee and deleted the addition made correctly found in favour of the assessee and deleted the addition made correctly found in favour of the assessee and deleted the addition made by CIT(A) of Rs. 73.13 crores, under section 68 of the Act. by CIT(A) of Rs. 73.13 crores, under section 68 of the Act.”

9.27 Similarly the Hon'ble Patna High Court in the case of Similarly the Hon'ble Patna High Court in the case of Similarly the Hon'ble Patna High Court in the case of Lakshmi Rice Mills (97 ITR 258) held as under: held as under: to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 73 ::

"It is a fundamental principle governing the taxation of any undisclosed "It is a fundamental principle governing the taxation of any undisclosed "It is a fundamental principle governing the taxation of any undisclosed income or secreted profits that the income or the profits as such must income or secreted profits that the income or the profits as such must income or secreted profits that the income or the profits as such must find sufficient explanation at the hands of the assessee. If the balance at ient explanation at the hands of the assessee. If the balance at ient explanation at the hands of the assessee. If the balance at hand on the relevant date is sufficient to cover the value of the high hand on the relevant date is sufficient to cover the value of the high hand on the relevant date is sufficient to cover the value of the high denomination notes subsequently denomination notes subsequently demonetized and even more, in the and even more, in the absence of any finding that the books of account of th absence of any finding that the books of account of the assessee were e assessee were not genuine, the source of income is well disclosed and it cannot amount not genuine, the source of income is well disclosed and it cannot amount not genuine, the source of income is well disclosed and it cannot amount to any secreted profits within the meaning of the law. What has to be to any secreted profits within the meaning of the law. What has to be to any secreted profits within the meaning of the law. What has to be disclosed and established is the source of the 'i disclosed and established is the source of the 'income or the receipt of come or the receipt of money, not the source of money, not the source of the receipt of the high denomination notes the receipt of the high denomination notes which were legal tender at the relevant time." which were legal tender at the relevant time."

9.28 We now proceed to address the reasons given by the lower We now proceed to address the reasons given by the lower We now proceed to address the reasons given by the lower authorities to justify the impugned addition. The first reason was that, in authorities to justify the impugned addition. The first reason was that, in authorities to justify the impugned addition. The first reason was that, in AO’s opinion, it was not po AO’s opinion, it was not possible to achieve such huge sales on the date ssible to achieve such huge sales on the date of demonetization for which he has undertaken certain hypothetical of demonetization for which he has undertaken certain hypothetical of demonetization for which he has undertaken certain hypothetical statistical analysis. The AO is noted to have observed that, the assessee statistical analysis. The AO is noted to have observed that, the assessee statistical analysis. The AO is noted to have observed that, the assessee would have actually already put down their shutters, by the time would have actually already put down their shutters, by the time would have actually already put down their shutters, by the time demonetization was announced at 8PM and thus could not have achieved netization was announced at 8PM and thus could not have achieved netization was announced at 8PM and thus could not have achieved such sales. Alternatively, the AO observed that, it could not have been such sales. Alternatively, the AO observed that, it could not have been such sales. Alternatively, the AO observed that, it could not have been possible to achieve such sales in only four hours. The Ld. AR has rightly possible to achieve such sales in only four hours. The Ld. AR has rightly possible to achieve such sales in only four hours. The Ld. AR has rightly pointed out that, these observations are mere pointed out that, these observations are mere conjecture and surmise. It conjecture and surmise. It has been rightly submitted by the assessee that, the announcement of has been rightly submitted by the assessee that, the announcement of has been rightly submitted by the assessee that, the announcement of demonetization was in itself demonetization was in itself an unusual and surprising event whose fallout an unusual and surprising event whose fallout inter alia led to unimaginable rush across all retail aginable rush across all retail jewellery showrooms jewellery showrooms across India as the Indian diaspora wanted to use their currencies which ia as the Indian diaspora wanted to use their currencies which ia as the Indian diaspora wanted to use their currencies which would stand demonetized from the end of the date for buying valuable would stand demonetized from the end of the date for buying valuable would stand demonetized from the end of the date for buying valuable article / thing. In fact, several news article were also published on the article / thing. In fact, several news article were also published on the article / thing. In fact, several news article were also published on the to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. next date wherein the record sales achieved by jew next date wherein the record sales achieved by jewellery showrooms on ellery showrooms on the date of demonetization was reported. Hence, the increased sales the date of demonetization was reported. Hence, the increased sales the date of demonetization was reported. Hence, the increased sales reported on the date of demonetization in comparison to other dates reported on the date of demonetization in comparison to other dates reported on the date of demonetization in comparison to other dates cannot be viewed adversely. Also, the sales made by the assessee were cannot be viewed adversely. Also, the sales made by the assessee were cannot be viewed adversely. Also, the sales made by the assessee were achieved across its twelve bra achieved across its twelve branches plus a bus on the wheel, whose nches plus a bus on the wheel, whose details have been provided. All the sales are noted to be supported by details have been provided. All the sales are noted to be supported by details have been provided. All the sales are noted to be supported by valid tax invoices and the assessee also had sufficient inventory balance valid tax invoices and the assessee also had sufficient inventory balance valid tax invoices and the assessee also had sufficient inventory balance to justify the same. According to us therefore, the subjective conjectures to justify the same. According to us therefore, the subjective conjectures to justify the same. According to us therefore, the subjective conjectures drawn by the AO, without any corroborative evidence or material, to drawn by the AO, without any corroborative evidence or material, to drawn by the AO, without any corroborative evidence or material, to dispute the correctness of the sales made on the date of demonetization, dispute the correctness of the sales made on the date of demonetization, dispute the correctness of the sales made on the date of demonetization, was unjustified.

9.29 The next reason given by the lower authorities was that, the The next reason given by the lower authorities was that, the The next reason given by the lower authorities was that, the employee code was not mentione employee code was not mentioned on the sales invoices issued on the d on the sales invoices issued on the date of demonetization. We agree with the assessee that, there is no law date of demonetization. We agree with the assessee that, there is no law date of demonetization. We agree with the assessee that, there is no law which requires the assessee to mandatorily mention employee code on which requires the assessee to mandatorily mention employee code on which requires the assessee to mandatorily mention employee code on their invoices. Hence, the absence of the same on the invoices cannot be their invoices. Hence, the absence of the same on the invoices cannot be their invoices. Hence, the absence of the same on the invoices cannot be decisive enough to treat the sales as unexplained cash credits. The Ld. AR sive enough to treat the sales as unexplained cash credits. The Ld. AR sive enough to treat the sales as unexplained cash credits. The Ld. AR had explained to us the rationale behind the mention of the employee had explained to us the rationale behind the mention of the employee had explained to us the rationale behind the mention of the employee code on their invoices. The Ld. AR submitted that, this practice assisted code on their invoices. The Ld. AR submitted that, this practice assisted code on their invoices. The Ld. AR submitted that, this practice assisted the assessee in identifying the meritoriou the assessee in identifying the meritorious employees at the individual s employees at the individual showrooms who were outperforming and generating more sales. It was showrooms who were outperforming and generating more sales. It was showrooms who were outperforming and generating more sales. It was also done to identify and incentivize the sales employees based on their also done to identify and incentivize the sales employees based on their also done to identify and incentivize the sales employees based on their to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. sales performance, whose details have been provided at Page 1608 of the sales performance, whose details have been provided at Page 1608 of the sales performance, whose details have been provided at Page 1608 of the Paper book. He however submitted that, on the date of demonetization, however submitted that, on the date of demonetization, however submitted that, on the date of demonetization, apprehending the huge rush & sales in the showrooms and that multiple apprehending the huge rush & sales in the showrooms and that multiple apprehending the huge rush & sales in the showrooms and that multiple customers would be handled by the workforce, the assessee had customers would be handled by the workforce, the assessee had customers would be handled by the workforce, the assessee had immediately taken a strategic call to suspend their incentive system immediately taken a strategic call to suspend their incentive system immediately taken a strategic call to suspend their incentive system for that night, to avoid any confusion or misunderstanding amongst that night, to avoid any confusion or misunderstanding amongst that night, to avoid any confusion or misunderstanding amongst employees, and that the employees would concentrate solely on making employees, and that the employees would concentrate solely on making employees, and that the employees would concentrate solely on making the sales and also assist their co the sales and also assist their co-workers, free from any bias that their workers, free from any bias that their incentive would get hampered. He further expl incentive would get hampered. He further explained that, the sales on the ained that, the sales on the date of demonetization was not due to any sales efforts of the employees date of demonetization was not due to any sales efforts of the employees date of demonetization was not due to any sales efforts of the employees but as a consequence of the extraordinary event. Hence, the assessee but as a consequence of the extraordinary event. Hence, the assessee but as a consequence of the extraordinary event. Hence, the assessee had opted not to incentivize their employees for the sales made on this had opted not to incentivize their employees for the sales made on this had opted not to incentivize their employees for the sales made on this date. He further explained that, due to the huge rush at all these her explained that, due to the huge rush at all these her explained that, due to the huge rush at all these showrooms, the employee tagging was also avoided to save on time in showrooms, the employee tagging was also avoided to save on time in showrooms, the employee tagging was also avoided to save on time in the billing process. According to the Ld. AR, this procedural deviation in the billing process. According to the Ld. AR, this procedural deviation in the billing process. According to the Ld. AR, this procedural deviation in the billing system cannot be viewed adversely, that too in the billing system cannot be viewed adversely, that too in the billing system cannot be viewed adversely, that too in ignorance of the other substantive compliance with the accounting and tax laws. In our the other substantive compliance with the accounting and tax laws. In our the other substantive compliance with the accounting and tax laws. In our considered view, this explanation given by the assessee was justifiable. considered view, this explanation given by the assessee was justifiable. considered view, this explanation given by the assessee was justifiable.

9.30 Another reason given by the Revenue was that, all the invoices Another reason given by the Revenue was that, all the invoices Another reason given by the Revenue was that, all the invoices were not produced for verif were not produced for verification. It is noted that, the assessee had ication. It is noted that, the assessee had furnished voluminous invoices which aggregated to 93% of the sales and furnished voluminous invoices which aggregated to 93% of the sales and furnished voluminous invoices which aggregated to 93% of the sales and that, in value terms, only 6.8% could not be furnished. The Ld. AR had that, in value terms, only 6.8% could not be furnished. The Ld. AR had that, in value terms, only 6.8% could not be furnished. The Ld. AR had to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. explained that, their non explained that, their non-availability was due to the huge quantum of availability was due to the huge quantum of sales made on that date and therefore, some of these invoices were not sales made on that date and therefore, some of these invoices were not sales made on that date and therefore, some of these invoices were not readily traceable. The Ld. AR further submitted that, pursuant to the readily traceable. The Ld. AR further submitted that, pursuant to the readily traceable. The Ld. AR further submitted that, pursuant to the search action at all their premises, certain physical records were search action at all their premises, certain physical records were search action at all their premises, certain physical records were misplaced / missing and thus some of these invoi misplaced / missing and thus some of these invoices could not be found. ces could not be found.

He however pointed out that, all the sales had been accounted for in the He however pointed out that, all the sales had been accounted for in the He however pointed out that, all the sales had been accounted for in the books of accounts and also the ‘Jilbala’ software, which was found and books of accounts and also the ‘Jilbala’ software, which was found and books of accounts and also the ‘Jilbala’ software, which was found and seized on the date of search and therefore, its genuineness should not be seized on the date of search and therefore, its genuineness should not be seized on the date of search and therefore, its genuineness should not be doubted. It is also noted that, the entire sales were reported in the VAT also noted that, the entire sales were reported in the VAT also noted that, the entire sales were reported in the VAT returns and the VAT liability thereupon was also paid by the assessee, returns and the VAT liability thereupon was also paid by the assessee, returns and the VAT liability thereupon was also paid by the assessee, which according to us, supported the genuineness of these sales. Having which according to us, supported the genuineness of these sales. Having which according to us, supported the genuineness of these sales. Having regard to the foregoing reasons, overall facts and th regard to the foregoing reasons, overall facts and that more than 93% of at more than 93% of the invoices were produced and verified, in our considered view, the non the invoices were produced and verified, in our considered view, the non the invoices were produced and verified, in our considered view, the non- production of few of these invoices should not be adversely looked upon. production of few of these invoices should not be adversely looked upon. production of few of these invoices should not be adversely looked upon.

9.31 We find that identical issue identical issue was involved in the decision rendered by was involved in the decision rendered by the coordinate Bench of the ITAT Bench of the ITAT, Visakhapatnam in the case of Visakhapatnam in the case of ACIT Vs Hirapanna Jewellers ( Hirapanna Jewellers (189 ITD 608) wherein it was held as under: held as under:

“7. We have heard both the parties and perused the material placed on 7. We have heard both the parties and perused the material placed on 7. We have heard both the parties and perused the material placed on record. In the instant case, the assessee has admitted the receipt record. In the instant case, the assessee has admitted the receipt record. In the instant case, the assessee has admitted the receipts as sales and offered for taxation. The assessing officer made the addition sales and offered for taxation. The assessing officer made the addition sales and offered for taxation. The assessing officer made the addition u/s 68 as unexplained cash credit of the same amount which was u/s 68 as unexplained cash credit of the same amount which was u/s 68 as unexplained cash credit of the same amount which was accounted in the books as sales. In this regard, it is worthwhile to look accounted in the books as sales. In this regard, it is worthwhile to look accounted in the books as sales. In this regard, it is worthwhile to look into section 68 which reads as under: into section 68 which reads as under: to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 77 ::

From the perusal of section 68, the sum found credited in the books of From the perusal of section 68, the sum found credited in the books of From the perusal of section 68, the sum found credited in the books of accounts for which the assessee offers no explanation, the said sum is accounts for which the assessee offers no explanation, the said sum is accounts for which the assessee offers no explanation, the said sum is deemed to be income of the assessee. In the instant case the assessee eemed to be income of the assessee. In the instant case the assessee eemed to be income of the assessee. In the instant case the assessee had explained the source as sales, produced the sale bills and admitted had explained the source as sales, produced the sale bills and admitted had explained the source as sales, produced the sale bills and admitted the same as revenue receipt. The assessee is engaged in the jewellery the same as revenue receipt. The assessee is engaged in the jewellery the same as revenue receipt. The assessee is engaged in the jewellery business and maintaining the regular stock re business and maintaining the regular stock registers. Both the DDTT gisters. Both the DDTT (Inv.) and the AO have conducted the surveys on different dates, (Inv.) and the AO have conducted the surveys on different dates, (Inv.) and the AO have conducted the surveys on different dates, independently and no difference was found in the stock register or the independently and no difference was found in the stock register or the independently and no difference was found in the stock register or the stocks of the assessee. stocks of the assessee.

Purchases, sales and the Stock are interlinked and inseparable. Every Purchases, sales and the Stock are interlinked and inseparable. Every Purchases, sales and the Stock are interlinked and inseparable. Every purchase increases the stock and every sale decreases the stock. To chase increases the stock and every sale decreases the stock. To chase increases the stock and every sale decreases the stock. To disbelieve the sales either the assessee should not have the sufficient disbelieve the sales either the assessee should not have the sufficient disbelieve the sales either the assessee should not have the sufficient stocks in their possession or there must be defects in the stock stocks in their possession or there must be defects in the stock stocks in their possession or there must be defects in the stock registers/stocks. Once there is no defect in the purch registers/stocks. Once there is no defect in the purchases and sales and ases and sales and the same are matching with inflow and the outflow of stock, there is no the same are matching with inflow and the outflow of stock, there is no the same are matching with inflow and the outflow of stock, there is no reason to disbelieve the sales. The assessing officer accepted the sales reason to disbelieve the sales. The assessing officer accepted the sales reason to disbelieve the sales. The assessing officer accepted the sales and the stocks. He has not disturbed the closing stock which has direct and the stocks. He has not disturbed the closing stock which has direct and the stocks. He has not disturbed the closing stock which has direct nexus with the sales nexus with the sales. The movement of stock is directly linked to the . The movement of stock is directly linked to the purchase and the sales. Audit report u/s 44AB, the financial statements purchase and the sales. Audit report u/s 44AB, the financial statements purchase and the sales. Audit report u/s 44AB, the financial statements furnished in paper book clearly shows the reduction of stock position furnished in paper book clearly shows the reduction of stock position furnished in paper book clearly shows the reduction of stock position and matching with the sales which goes to say that the cash gene and matching with the sales which goes to say that the cash gene and matching with the sales which goes to say that the cash generated represent the sales. The assessee has furnished the trading account, P& represent the sales. The assessee has furnished the trading account, P& represent the sales. The assessee has furnished the trading account, P& L account in page No. 7 of paper book and we observe that the L account in page No. 7 of paper book and we observe that the L account in page No. 7 of paper book and we observe that the reduction of stock is matching with the corresponding sales and the reduction of stock is matching with the corresponding sales and the reduction of stock is matching with the corresponding sales and the assessee has not declared the exorbitant profits assessee has not declared the exorbitant profits. Though certain . Though certain suspicious features were noticed by the AO as well as the DDIT (Inv.), suspicious features were noticed by the AO as well as the DDIT (Inv.), suspicious features were noticed by the AO as well as the DDIT (Inv.), both the authorities did not find any defects in the books of accounts both the authorities did not find any defects in the books of accounts both the authorities did not find any defects in the books of accounts and trading account, P&L account and the financial statements and failed and trading account, P&L account and the financial statements and failed and trading account, P&L account and the financial statements and failed to disprove the conditio to disprove the condition of the assessee. Suspicion however strong it n of the assessee. Suspicion however strong it may be, it should not be decided against the assessee without may be, it should not be decided against the assessee without may be, it should not be decided against the assessee without disproving the sales with tangible evidence. disproving the sales with tangible evidence.

7.2 In the instant case the assessee has established the sales with the 7.2 In the instant case the assessee has established the sales with the 7.2 In the instant case the assessee has established the sales with the bills and representing outgo o bills and representing outgo of stocks. The sales were duly accounted for f stocks. The sales were duly accounted for in the books of accounts and there were no abnormal profits. In spite of in the books of accounts and there were no abnormal profits. In spite of in the books of accounts and there were no abnormal profits. In spite of conducting the survey the AO did not find any defects in sales and the conducting the survey the AO did not find any defects in sales and the conducting the survey the AO did not find any defects in sales and the stock. Therefore we do not find any reason to suspect the sales mere stock. Therefore we do not find any reason to suspect the sales mere stock. Therefore we do not find any reason to suspect the sales merely because of some routine observation of suspicious nature such as because of some routine observation of suspicious nature such as because of some routine observation of suspicious nature such as to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. making sales of 270 bills in the span of 4 hours, non availability of KYC making sales of 270 bills in the span of 4 hours, non availability of KYC making sales of 270 bills in the span of 4 hours, non availability of KYC documents for sales, non writing of tag of the jewellery to the sale bills, documents for sales, non writing of tag of the jewellery to the sale bills, documents for sales, non writing of tag of the jewellery to the sale bills, non-availability of CCTV footage for h availability of CCTV footage for huge rush of public etc. The uge rush of public etc. The contention of the assessee that due to demonetization, the public contention of the assessee that due to demonetization, the public contention of the assessee that due to demonetization, the public became panic and the cash available with them in old denomination became panic and the cash available with them in old denomination became panic and the cash available with them in old denomination notes becomes illegal from 9 notes becomes illegal from 9-11-2016 and made the investment in 2016 and made the investment in jewellery, thereby thronged the jewellery, thereby thronged the jewellery shops appear to be reasonable jewellery shops appear to be reasonable and supported by the newspaper clippings such as The Tribune, The and supported by the newspaper clippings such as The Tribune, The and supported by the newspaper clippings such as The Tribune, The Hindu etc. It is observed from the newspaper clippings that there was Hindu etc. It is observed from the newspaper clippings that there was Hindu etc. It is observed from the newspaper clippings that there was undue rush in various jewellery shops immediately after announcement undue rush in various jewellery shops immediately after announcement undue rush in various jewellery shops immediately after announcement of demonetization through the country. zation through the country.

Hence, we are of the view that the impugned addition made by the AO Hence, we are of the view that the impugned addition made by the AO Hence, we are of the view that the impugned addition made by the AO and sustained by the Ld. CIT(A) was not justified, accordingly the same and sustained by the Ld. CIT(A) was not justified, accordingly the same and sustained by the Ld. CIT(A) was not justified, accordingly the same is deleted.”

9.32 In the present case also In the present case also, the assessee maintained the proper books the assessee maintained the proper books of account in regular course of business which were duly audited by the account in regular course of business which were duly audited by the account in regular course of business which were duly audited by the independent Chartered Accountant under section 44AB of the Act, independent Chartered Accountant under section 44AB of the Act, independent Chartered Accountant under section 44AB of the Act, and the same has not been rejected by the lower authorities. A same has not been rejected by the lower authorities. A same has not been rejected by the lower authorities. All the sales & purchases and stocks were recorded in the book purchases and stocks were recorded in the books of account which had s of account which had not been doubted by the AO. The sales shown by the assessee had been not been doubted by the AO. The sales shown by the assessee had been not been doubted by the AO. The sales shown by the assessee had been accepted by VAT/ Sales accepted by VAT/ Sales Tax Department. The book results s shown by the assessee are found to be on are found to be on the same lines as the preceding years. T s as the preceding years. The cash sales made by the cash sales made by the assessee had been credited in the books of assessee had been credited in the books of account and reduction in account and reduction in the stock has not been doubted. E Even during the course of search, neither course of search, neither any excess nor shortage of stock was found in excess nor shortage of stock was found in the stock register maintained by the assessee. intained by the assessee. So, respectfully foll So, respectfully following the decisions (supra), we are of the view that the impugned addition , we are of the view that the impugned addition , we are of the view that the impugned addition to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. made by the AO and sustained by the Ld. CIT(A) was not justified, made by the AO and sustained by the Ld. CIT(A) was not justified, made by the AO and sustained by the Ld. CIT(A) was not justified, accordingly the same is deleted. accordingly the same is deleted. These grounds are therefore allowed. These grounds are therefore allowed.

10. We now come to We now come to Ground Nos. 21 to 27 of the appeal for e appeal for AY 2017-18 which relates to the addition of profit element confirmed by the which relates to the addition of profit element confirmed by the which relates to the addition of profit element confirmed by the Ld. CIT(A) on the un- -reconciled purchases made from M/s. onciled purchases made from M/s. Mohanlal Jewellers Pvt. Ltd. [in short ‘MJPL’]. The facts concerning this issue are [in short ‘MJPL’]. The facts concerning this issue are [in short ‘MJPL’]. The facts concerning this issue are that, a search action was that, a search action was conducted upon M/s MJPL in the course of conducted upon M/s MJPL in the course of which, a ‘Jpack’ application software was found and seized, which which, a ‘Jpack’ application software was found and seized, which which, a ‘Jpack’ application software was found and seized, which according to the AO comprised of the entries of transactions with the according to the AO comprised of the entries of transactions with the according to the AO comprised of the entries of transactions with the assessee. The AO is noted to have tabulated the said data at Pages 24 to assessee. The AO is noted to have tabulated the said data at Pages 24 to assessee. The AO is noted to have tabulated the said data at Pages 24 to 35 of the impugned order, which in his view, represented unaccounted the impugned order, which in his view, represented unaccounted the impugned order, which in his view, represented unaccounted cash and bullion transactions with the assessee during the FYs 2016 cash and bullion transactions with the assessee during the FYs 2016 cash and bullion transactions with the assessee during the FYs 2016-17 to 2020-21. According to AO, Shri Rajendra Kothari of MJPL who was 21. According to AO, Shri Rajendra Kothari of MJPL who was 21. According to AO, Shri Rajendra Kothari of MJPL who was maintaining these entries in the software had admitted maintaining these entries in the software had admitted that, they were that, they were unaccounted for and that the amount shown in the ledgers are actually in unaccounted for and that the amount shown in the ledgers are actually in unaccounted for and that the amount shown in the ledgers are actually in 100s. The AO accordingly summarized the year 100s. The AO accordingly summarized the year-wise details of wise details of unaccounted cash and bullion transactions found in the ‘Jpack unaccounted cash and bullion transactions found in the ‘Jpack unaccounted cash and bullion transactions found in the ‘Jpack’ application software seized from the premis m the premises of MJPL, which are noted to be as es of MJPL, which are noted to be as follows:

Period Cash receipt Metal receipt Total Total FY 2016-17 25,23,29,410 25,92,66,014 51,15,95,424 51,15,95,424 FY 2017-18 20,05,15,460 78,79,30,445 98,84,45,905 98,84,45,905 FY 2028-19 3,84,16,450 27,71,61,862 31,55,78,312 31,55,78,312 FY 2019-20 11,15,45,854 32,60,76,699 43,76,22,553 43,76,22,553 to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 80 ::

10.1 The AO was of the view that, the above amounts were not reflected The AO was of the view that, the above amounts were not reflected The AO was of the view that, the above amounts were not reflected in the books of accounts of the assessee. The AO further observed that, in the books of accounts of the assessee. The AO further observed that, in the books of accounts of the assessee. The AO further observed that, the Managing Director of the assessee in his sworn statement had denied the Managing Director of the assessee in his sworn statement had denied the Managing Director of the assessee in his sworn statement had denied having any unaccounted transactions with MJPL. According to the AO, aving any unaccounted transactions with MJPL. According to the AO, aving any unaccounted transactions with MJPL. According to the AO, however, the trial balance dated 31 however, the trial balance dated 31-05-2019 unearthed from the 2019 unearthed from the ‘closetbcls’ table of SQL SQL database namely ‘atp1920’ found from asses database namely ‘atp1920’ found from assessee’s premises revealed that, there was a credit balance o premises revealed that, there was a credit balance of Rs. 9 crores f Rs. 9 crores outstanding against Mr outstanding against Mr.S.Khatri who was the Managing Director of Khatri who was the Managing Director of Mohanlal Jewellers. The AO observed that, this noting co Mohanlal Jewellers. The AO observed that, this noting co-related with the related with the ledger of MJPL and therefore, held that the electronic data seized from the ledger of MJPL and therefore, held that the electronic data seized from the ledger of MJPL and therefore, held that the electronic data seized from the premises of MJPL contained premises of MJPL contained actual unaccounted transactions carried out actual unaccounted transactions carried out by the assessee. With these observations, the AO show caused the by the assessee. With these observations, the AO show caused the by the assessee. With these observations, the AO show caused the assessee to explain as to why the amount as tabulated above should not assessee to explain as to why the amount as tabulated above should not assessee to explain as to why the amount as tabulated above should not be treated as its unexplained expenditure. be treated as its unexplained expenditure.

10.2 The assessee vide their rep The assessee vide their reply dated 02-02-2023 is noted to have 2023 is noted to have denied any unaccounted transactions with MJPL. The assesse denied any unaccounted transactions with MJPL. The assesse denied any unaccounted transactions with MJPL. The assessee also disputed the reliability and admissibility of the material seized from a disputed the reliability and admissibility of the material seized from a disputed the reliability and admissibility of the material seized from a third party premises. The assessee submitted that, the search action had third party premises. The assessee submitted that, the search action had third party premises. The assessee submitted that, the search action had not revealed any discrepancy in physical stock or cash or any aled any discrepancy in physical stock or cash or any aled any discrepancy in physical stock or cash or any unaccounted transactions carried out with MJPL and therefore it was unaccounted transactions carried out with MJPL and therefore it was unaccounted transactions carried out with MJPL and therefore it was contended that, the third party material being relied upon, was contended that, the third party material being relied upon, was contended that, the third party material being relied upon, was uncorroborated and unsubstantiated. The assessee pointed out that, uncorroborated and unsubstantiated. The assessee pointed out that, uncorroborated and unsubstantiated. The assessee pointed out that, to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. according to the show cause, the assessee had made unaccounted ording to the show cause, the assessee had made unaccounted ording to the show cause, the assessee had made unaccounted purchases equivalent to 613 kgs which was not a small purchases equivalent to 613 kgs which was not a small purchases equivalent to 613 kgs which was not a small quantity and therefore, the search action ought to have revealed any corresponding the search action ought to have revealed any corresponding the search action ought to have revealed any corresponding unaccounted stock or investment or unaccounted sales or cas unaccounted stock or investment or unaccounted sales or cas unaccounted stock or investment or unaccounted sales or cash balance, which was not the case. The assesse which was not the case. The assessee further submitted the details of the further submitted the details of the transactions actually carried out with MJPL, which were recorded in their transactions actually carried out with MJPL, which were recorded in their transactions actually carried out with MJPL, which were recorded in their books of accounts. The assessee submitted that, it had no control over books of accounts. The assessee submitted that, it had no control over books of accounts. The assessee submitted that, it had no control over the manner in which MJPL p the manner in which MJPL passes entries in their ‘Jpack’ application and asses entries in their ‘Jpack’ application and thus they could not be expected to explain the notings found in the thus they could not be expected to explain the notings found in the thus they could not be expected to explain the notings found in the premises of MJPL. The assessee further contended that, the entries in the premises of MJPL. The assessee further contended that, the entries in the premises of MJPL. The assessee further contended that, the entries in the ledgers were under the name ‘Lalitha’, ‘Lalitha P’ and ‘Bazulla’ an ledgers were under the name ‘Lalitha’, ‘Lalitha P’ and ‘Bazulla’ an ledgers were under the name ‘Lalitha’, ‘Lalitha P’ and ‘Bazulla’ and that there was no direct evidence to show that the notings in these names there was no direct evidence to show that the notings in these names there was no direct evidence to show that the notings in these names pertained to the assessee. The assessee also pointed out that, the name pertained to the assessee. The assessee also pointed out that, the name pertained to the assessee. The assessee also pointed out that, the name ‘Lalitha’ is very common and in absence of there being any independent ‘Lalitha’ is very common and in absence of there being any independent ‘Lalitha’ is very common and in absence of there being any independent material corroborating that the entri material corroborating that the entries found in the ledger of MJPL related es found in the ledger of MJPL related to the assessee, the assumption drawn by the AO in the show cause to the assessee, the assumption drawn by the AO in the show cause to the assessee, the assumption drawn by the AO in the show cause notice was unjustified and bad in law. notice was unjustified and bad in law.

10.3 The AO however is noted to have rejected the above submissions of The AO however is noted to have rejected the above submissions of The AO however is noted to have rejected the above submissions of assessee. According to the AO, the ledge assessee. According to the AO, the ledgers found in the software rs found in the software maintained at the premises of MJPL contained transactions conducted with maintained at the premises of MJPL contained transactions conducted with maintained at the premises of MJPL contained transactions conducted with the assessee. For arriving at this conclusion, the AO is found to have the assessee. For arriving at this conclusion, the AO is found to have the assessee. For arriving at this conclusion, the AO is found to have relied on the statement of Shri Rajendra Kothari, who had stated that the relied on the statement of Shri Rajendra Kothari, who had stated that the relied on the statement of Shri Rajendra Kothari, who had stated that the to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. names ‘Lalitha’, ‘Lalitha P’ and ‘Bazulla’ were maintained for recording the a’, ‘Lalitha P’ and ‘Bazulla’ were maintained for recording the a’, ‘Lalitha P’ and ‘Bazulla’ were maintained for recording the transactions of the assessee. The AO accordingly added the unaccounted transactions of the assessee. The AO accordingly added the unaccounted transactions of the assessee. The AO accordingly added the unaccounted cash and bullion transactions of Rs. 283,63,59,247/ cash and bullion transactions of Rs. 283,63,59,247/- across AYs 2017 across AYs 2017-18 to 2021-22 [ Rs.51,15,95,424/ 22 [ Rs.51,15,95,424/- in AY 2017-18] by way of unexplained way of unexplained expenditure in the hands of the assessee. Aggrieved by the action of the expenditure in the hands of the assessee. Aggrieved by the action of the expenditure in the hands of the assessee. Aggrieved by the action of the AO, the assessee preferred an appeal before the Ld. CIT(A). AO, the assessee preferred an appeal before the Ld. CIT(A). AO, the assessee preferred an appeal before the Ld. CIT(A).

10.4 On appeal, the Ld.CIT(A) after taking note of the submissions of the On appeal, the Ld.CIT(A) after taking note of the submissions of the On appeal, the Ld.CIT(A) after taking note of the submissions of the assessee, found that the assessee, found that the ledgers and reconciliations of the assessee ledgers and reconciliations of the assessee showed that there were several matching entries with the data found in showed that there were several matching entries with the data found in showed that there were several matching entries with the data found in the ‘Jpack’ application of MJPL. The Ld. CIT(A) observing that, the AO had the ‘Jpack’ application of MJPL. The Ld. CIT(A) observing that, the AO had the ‘Jpack’ application of MJPL. The Ld. CIT(A) observing that, the AO had not given any credence to the reconciliation, had accordingly call not given any credence to the reconciliation, had accordingly call not given any credence to the reconciliation, had accordingly called for a remand report from the AO on this issue. After tallying the details remand report from the AO on this issue. After tallying the details remand report from the AO on this issue. After tallying the details provided by the assessee, the AO in his remand report is noted to have provided by the assessee, the AO in his remand report is noted to have provided by the assessee, the AO in his remand report is noted to have accepted that, out of the total addition of Rs. 283,63,59,247/ accepted that, out of the total addition of Rs. 283,63,59,247/ accepted that, out of the total addition of Rs. 283,63,59,247/- made across AYs 2017-18 to 2021 18 to 2021-22 on this impugned issue, the assessee has mpugned issue, the assessee has reconciled amount to the extent of Rs.214,51,60,793/ reconciled amount to the extent of Rs.214,51,60,793/- with their books of with their books of accounts and that the balance of Rs.69,11,98,454/ accounts and that the balance of Rs.69,11,98,454/- was not appearing in was not appearing in the books of accounts. The relevant portion of the remand report is noted the books of accounts. The relevant portion of the remand report is noted the books of accounts. The relevant portion of the remand report is noted to be as follows:

“The CIT(A) vide his letter dated 01.10.24 stated that the appellant The CIT(A) vide his letter dated 01.10.24 stated that the appellant The CIT(A) vide his letter dated 01.10.24 stated that the appellant claims all transactions are claims all transactions are reflected in the books of accounts in respect of in the books of accounts in respect of Mohanlal Jewellers and there are no unaccounted transactions and Mohanlal Jewellers and there are no unaccounted transactions and Mohanlal Jewellers and there are no unaccounted transactions and requested the AO to submit the report on this issue. During the remand requested the AO to submit the report on this issue. During the remand requested the AO to submit the report on this issue. During the remand to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. proceeding, the assessee has claimed that amount of Rs.214,51,60,793/ proceeding, the assessee has claimed that amount of Rs.214,51,60,793/ proceeding, the assessee has claimed that amount of Rs.214,51,60,793/- crores out of the total addition of Rs. 283,63,59,247/ t of the total addition of Rs. 283,63,59,247/- crores for the AY crores for the AY 2017-18 to 2021 18 to 2021-22, is accounted for in the books of accounts of the 22, is accounted for in the books of accounts of the assessee and a difference of Rs. 69,11 assessee and a difference of Rs. 69,11,98,454/- is not appearing in the is not appearing in the books of accounts. The assessee has submitted the books of accounts. The assessee has submitted the books of accounts. The assessee has submitted the supporting documents such as copy of bill/invoice, ledger copy of Mohanlal Jewellers documents such as copy of bill/invoice, ledger copy of Mohanlal Jewellers documents such as copy of bill/invoice, ledger copy of Mohanlal Jewellers in the books of assessee, ledger copy of assessee in books of Mohanlal in the books of assessee, ledger copy of assessee in books of Mohanlal in the books of assessee, ledger copy of assessee in books of Mohanlal Jewellers, copy of GST/VAT credit application, copy of gold stock register, Jewellers, copy of GST/VAT credit application, copy of gold stock register, Jewellers, copy of GST/VAT credit application, copy of gold stock register, as well as bank account as well as bank account statements in support of its claim.

Additionally, this office has obtained the ledger account of Mohanlal Additionally, this office has obtained the ledger account of Mohanlal Additionally, this office has obtained the ledger account of Mohanlal Ledgers and compared the entries to that of ledger account of Lalithaa Ledgers and compared the entries to that of ledger account of Lalithaa Ledgers and compared the entries to that of ledger account of Lalithaa jewellers.Further, the entries in J urther, the entries in J-pack software was traced back to the pack software was traced back to the ledger and supporting documents submitted were verified on sample and supporting documents submitted were verified on sample and supporting documents submitted were verified on sample basis and is found to be correct. So it is requested that the CIT(A) may basis and is found to be correct. So it is requested that the CIT(A) may basis and is found to be correct. So it is requested that the CIT(A) may consider in on merits. consider in on merits.”

10.5 In the rejoinder to the above remand report, the assessee is noted In the rejoinder to the above remand report, the assessee is noted In the rejoinder to the above remand report, the assessee is noted to to have have pointed pointed out out that, that, t there here were were contra contra entries entries also also of of Rs.8,32,98,385/- which were appearing on both the sides of the receipts which were appearing on both the sides of the receipts which were appearing on both the sides of the receipts & payment entries in the ‘Jpack’ software of MJPL, which also was & payment entries in the ‘Jpack’ software of MJPL, which also was & payment entries in the ‘Jpack’ software of MJPL, which also was required to be ignored. As far as the balanced unreconciled sum of required to be ignored. As far as the balanced unreconciled sum of required to be ignored. As far as the balanced unreconciled sum of Rs.60,79,00,069/- [Rs.69,11,98,454 [Rs.69,11,98,454 - Rs.8,32,98,385] was concerned, it Rs.8,32,98,385] was concerned, it was reiterated that, these entries found in third party documents on a was reiterated that, these entries found in third party documents on a was reiterated that, these entries found in third party documents on a standalone basis could not be presumed to be true qua the assessee, standalone basis could not be presumed to be true qua the assessee, standalone basis could not be presumed to be true qua the assessee, without there being any independent material to corroborate the without there being any independent material to corroborate the without there being any independent material to corroborate the same.

The assessee alternatively argued that, at the most only the Gross Profit The assessee alternatively argued that, at the most only the Gross Profit The assessee alternatively argued that, at the most only the Gross Profit element of this unreconciled sum ought to be added. The Ld. CIT(A) after element of this unreconciled sum ought to be added. The Ld. CIT(A) after element of this unreconciled sum ought to be added. The Ld. CIT(A) after considering the submissions of the appellate and the remand report held considering the submissions of the appellate and the remand report held considering the submissions of the appellate and the remand report held that, the unreconciled sums, af that, the unreconciled sums, after tallying the entries in the assessee’s ter tallying the entries in the assessee’s to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. books of accounts with the material seized from the premises of MJPL, books of accounts with the material seized from the premises of MJPL, books of accounts with the material seized from the premises of MJPL, was Rs.69,11,98,454/- whose details were tabulated as follows: whose details were tabulated as follows:

Balance Entries as per Jpack Application Entries as per Jpack Application Entries reconciled with books Entries reconciled with books Unmatched Software Software FY entries Cash (Rs.) Metal (Rs.) Cash(Rs.) Metal (Rs.) 2016-17 25,23,29,410 25,92,66,014 22,33,93,054 15,48,95,630 15,48,95,630 13,33,06,740 2017-18 20,05,15,460 78,79,30,445 14,02,96,191 69,97,21,313 69,97,21,313 14,84,28,401 2018-19 3,84,16,450 27,71,61,862 40,50,000 9,85,39,770 9,85,39,770 21,29,88,542 2019-20 11,15,45,854 32,50,76,699 7,78,06,175 22,72,13,225 22,72,13,225 13,26,03,153 2020-21 16,43,27,195 41,87,89,858 15,27,55,195 36,64,90,240 36,64,90,240 6,38,71,618 Total 76,71,34,369 2,06,92,24,878 59,83,00,615 1,54,68,60,178 1,54,68,60,178 69,11,98,454 10.6 The CIT(A) observed that, the above remaining unreconciled sum The CIT(A) observed that, the above remaining unreconciled sum The CIT(A) observed that, the above remaining unreconciled sum could not be treated as an unexplained investment in purchases because could not be treated as an unexplained investment in purchases because could not be treated as an unexplained investment in purchases because no excess stock was found during the course of search. Instead, no excess stock was found during the course of search. Instead, no excess stock was found during the course of search. Instead, according to the CIT(A), it was a case where certain entri according to the CIT(A), it was a case where certain entri according to the CIT(A), it was a case where certain entries of running account transactions were left unmatched. The CIT(A) is noted to have account transactions were left unmatched. The CIT(A) is noted to have account transactions were left unmatched. The CIT(A) is noted to have held that, in such a scenario, only the gross profit element could be held that, in such a scenario, only the gross profit element could be held that, in such a scenario, only the gross profit element could be added. Taking note of the fact that, the assessee had admitted a gross added. Taking note of the fact that, the assessee had admitted a gross added. Taking note of the fact that, the assessee had admitted a gross profit rate of 6.08% for the re profit rate of 6.08% for the relevant year, the Ld. CIT(A) worked out the levant year, the Ld. CIT(A) worked out the addition for the relevant AY 2017 addition for the relevant AY 2017-18 at Rs.81,05,050/- [Rs.13,33,06,740 [Rs.13,33,06,740 * 6.08%] and deleted the balance addition made by the AO. Aggrieved by * 6.08%] and deleted the balance addition made by the AO. Aggrieved by * 6.08%] and deleted the balance addition made by the AO. Aggrieved by this order of the Ld. CIT(A), the assessee is now in appeal before us. this order of the Ld. CIT(A), the assessee is now in appeal before us. this order of the Ld. CIT(A), the assessee is now in appeal before us.

10.7 The Ld. AR appearing for the assessee submitted that, the The Ld. AR appearing for the assessee submitted that, the The Ld. AR appearing for the assessee submitted that, the impugned addition made by the lower authorities was based solely on impugned addition made by the lower authorities was based solely on impugned addition made by the lower authorities was based solely on third party material and that, no incriminating material was found in the third party material and that, no incriminating material was found in the third party material and that, no incriminating material was found in the course of search conducted upon the assessee. Acc course of search conducted upon the assessee. According to him, ording to him, to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. therefore, in absence of any incriminating material found during the therefore, in absence of any incriminating material found during the therefore, in absence of any incriminating material found during the search at the assessee premises, no addition could have been legally search at the assessee premises, no addition could have been legally search at the assessee premises, no addition could have been legally made in the unabated assessments u/s 153A of the Act on the basis of made in the unabated assessments u/s 153A of the Act on the basis of made in the unabated assessments u/s 153A of the Act on the basis of such third party information. such third party information.

10.8 The Ld. AR further submitted that, there is no evidence brought on The Ld. AR further submitted that, there is no evidence brought on The Ld. AR further submitted that, there is no evidence brought on record by the Revenue to show that the residual unmatched entries record by the Revenue to show that the residual unmatched entries record by the Revenue to show that the residual unmatched entries pertained to the assessee. It was contended that, the assessee has no pertained to the assessee. It was contended that, the assessee has no pertained to the assessee. It was contended that, the assessee has no control over the manner in which MJPL is passing en control over the manner in which MJPL is passing entries in its books of tries in its books of accounts and as to whether entries pertaining to some other persons has accounts and as to whether entries pertaining to some other persons has accounts and as to whether entries pertaining to some other persons has been either mistakenly or deliberately reflected in assessee’s name. It been either mistakenly or deliberately reflected in assessee’s name. It been either mistakenly or deliberately reflected in assessee’s name. It was also submitted that, the unmatched entries were recorded in was also submitted that, the unmatched entries were recorded in was also submitted that, the unmatched entries were recorded in common generic names and t common generic names and that there was no direct evidence to show hat there was no direct evidence to show any nexus of these entries with the assessee. The Ld. AR contended that, any nexus of these entries with the assessee. The Ld. AR contended that, any nexus of these entries with the assessee. The Ld. AR contended that, the burden of proof was on the department to conclusively prove that the the burden of proof was on the department to conclusively prove that the the burden of proof was on the department to conclusively prove that the unmatched entries found in the ledger of MJPL was related to the unmatched entries found in the ledger of MJPL was related to the unmatched entries found in the ledger of MJPL was related to the assessee and that, mere entries in the ledger, without any other ssee and that, mere entries in the ledger, without any other ssee and that, mere entries in the ledger, without any other independent evidence, was not reliable. The Ld. AR further submitted that independent evidence, was not reliable. The Ld. AR further submitted that independent evidence, was not reliable. The Ld. AR further submitted that no opportunity to cross examine Shri Kothari of MJPL was also afforded to no opportunity to cross examine Shri Kothari of MJPL was also afforded to no opportunity to cross examine Shri Kothari of MJPL was also afforded to the assessee. Agitating the merits of the impug the assessee. Agitating the merits of the impugned addition, the Ld. AR ned addition, the Ld. AR has relied upon the following decisions: has relied upon the following decisions: to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 86 ::

- Pepsi Foods Pvt. Ltd. v. ACIT (2014) 367 ITR 112 (Del HC) Pepsi Foods Pvt. Ltd. v. ACIT (2014) 367 ITR 112 (Del HC) Pepsi Foods Pvt. Ltd. v. ACIT (2014) 367 ITR 112 (Del HC)

- CIT v. Ved Prakash Choudhary [2011] 218 CTR 99 (Del HC) CIT v. Ved Prakash Choudhary [2011] 218 CTR 99 (Del HC) CIT v. Ved Prakash Choudhary [2011] 218 CTR 99 (Del HC)

- Mahendra Lalka v. DCIT (IT Mahendra Lalka v. DCIT (ITA No. 172/Lkw/2023)

- B.S. Yediyurappa v. ACIT B.S. Yediyurappa v. ACIT (ITA No. 14/Bang/2019)

- Anand Jaikumar Jain v. ACIT Anand Jaikumar Jain v. ACIT (ITA Nos. 3820-3823/Mum/2019) 3823/Mum/2019)

- S. K. Gupta v. DCIT (2005) 2 SOT 457 (ITAT Del) S. K. Gupta v. DCIT (2005) 2 SOT 457 (ITAT Del)

10.9 It was further submitted by the assessee that, the search action It was further submitted by the assessee that, the search action It was further submitted by the assessee that, the search action conducted upon the assessee did not reveal any unaccounted conducted upon the assessee did not reveal any unaccounted conducted upon the assessee did not reveal any unaccounted transactions with MJPL and even the physical stock found reconciled with the stock with MJPL and even the physical stock found reconciled with the stock with MJPL and even the physical stock found reconciled with the stock appearing in the books of accounts, which according to Ld. AR, appearing in the books of accounts, which according to Ld. AR, appearing in the books of accounts, which according to Ld. AR, corroborated the assessee’s case that, it had not made any unaccounted corroborated the assessee’s case that, it had not made any unaccounted corroborated the assessee’s case that, it had not made any unaccounted purchases from MJPL. Per contra, the L purchases from MJPL. Per contra, the Ld. CIT, DR appearing for the d. CIT, DR appearing for the Revenue supported the order of the lower authorities. Revenue supported the order of the lower authorities.

10.10 We have heard both the parties and perused the material We have heard both the parties and perused the material We have heard both the parties and perused the material placed before us. From the facts on record, it is observed that, the placed before us. From the facts on record, it is observed that, the placed before us. From the facts on record, it is observed that, the assessee is engaged in the business of man assessee is engaged in the business of manufacture and marketing of ufacture and marketing of gold jewellery. In the course of its business, the assessee regularly gold jewellery. In the course of its business, the assessee regularly gold jewellery. In the course of its business, the assessee regularly purchases bullion, gold and precious metals from M/s MJPL. According to purchases bullion, gold and precious metals from M/s MJPL. According to purchases bullion, gold and precious metals from M/s MJPL. According to the assessee, all the transactions with MJPL are recorded in their books of the assessee, all the transactions with MJPL are recorded in their books of the assessee, all the transactions with MJPL are recorded in their books of accounts, which were supported by relevant purchase invoices, bank ich were supported by relevant purchase invoices, bank ich were supported by relevant purchase invoices, bank statements, ledger etc. It is observed that, a search action u/s 132 of the statements, ledger etc. It is observed that, a search action u/s 132 of the statements, ledger etc. It is observed that, a search action u/s 132 of the to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 87 ::

Act was conducted upon M/s MJPL in the course of which, electronic data Act was conducted upon M/s MJPL in the course of which, electronic data Act was conducted upon M/s MJPL in the course of which, electronic data maintained in one ‘Jpack’ application software was fo maintained in one ‘Jpack’ application software was found. The search und. The search team observed that, the said software contained three separate accounts team observed that, the said software contained three separate accounts team observed that, the said software contained three separate accounts in the names of ‘Lalitha’, ‘Lalitha P’ and ‘Bazulla’ which contained details in the names of ‘Lalitha’, ‘Lalitha P’ and ‘Bazulla’ which contained details in the names of ‘Lalitha’, ‘Lalitha P’ and ‘Bazulla’ which contained details of issue of metal and receipts of metal/ cash. According to the search of issue of metal and receipts of metal/ cash. According to the search of issue of metal and receipts of metal/ cash. According to the search team of the MJPL, this ‘Jpack’ application software was being maintained is ‘Jpack’ application software was being maintained is ‘Jpack’ application software was being maintained by Shri Rajendra Kothari, who in his statement had submitted that, these by Shri Rajendra Kothari, who in his statement had submitted that, these by Shri Rajendra Kothari, who in his statement had submitted that, these entries represented unaccounted transactions with the assessee. We find entries represented unaccounted transactions with the assessee. We find entries represented unaccounted transactions with the assessee. We find that, later on in the course of search, the Managing Direc that, later on in the course of search, the Managing Direc that, later on in the course of search, the Managing Director of the assessee was confronted with these material seized from the premises of was confronted with these material seized from the premises of was confronted with these material seized from the premises of MJPL, to which he is noted to have averred that he would reconcile and MJPL, to which he is noted to have averred that he would reconcile and MJPL, to which he is noted to have averred that he would reconcile and explain these notings in a week’s time. The relevant portion of his explain these notings in a week’s time. The relevant portion of his explain these notings in a week’s time. The relevant portion of his statement is reproduced below, for statement is reproduced below, for the sake of convenience : the sake of convenience :-

“Q. 22 I am showing you various ledgers of Lalitha Jewelery Mart I am showing you various ledgers of Lalitha Jewelery Mart I am showing you various ledgers of Lalitha Jewelery Mart Private Limited in the actuals books of M/s Mohan Lal Jewellers Private Private Limited in the actuals books of M/s Mohan Lal Jewellers Private Private Limited in the actuals books of M/s Mohan Lal Jewellers Private Limited during the course of search u/s 132 of the IT Act, 1961 on M/S Limited during the course of search u/s 132 of the IT Act, 1961 on M/S Limited during the course of search u/s 132 of the IT Act, 1961 on M/S Mohan Lal Jewellers, Mohan Lal Jewellers, on verification it was noticed that you have involved on verification it was noticed that you have involved in large scale unaccounted transactions with M/s. Mohn Lal Jewellers in large scale unaccounted transactions with M/s. Mohn Lal Jewellers in large scale unaccounted transactions with M/s. Mohn Lal Jewellers Private Limited. On cross examination of the actual ledgers seized from Private Limited. On cross examination of the actual ledgers seized from Private Limited. On cross examination of the actual ledgers seized from M/s. Mohan Lal Jewellers with the tally accounts maintained M/s. Mohan Lal Jewellers with the tally accounts maintained M/s. Mohan Lal Jewellers with the tally accounts maintained by you, it was noticed that most of the entries are not matching with the entries as was noticed that most of the entries are not matching with the entries as was noticed that most of the entries are not matching with the entries as per tally accounts. Please go through the ledgers which are annexed to per tally accounts. Please go through the ledgers which are annexed to per tally accounts. Please go through the ledgers which are annexed to this statement as annexure 6, annexure 7, annexure 8 and offer your this statement as annexure 6, annexure 7, annexure 8 and offer your this statement as annexure 6, annexure 7, annexure 8 and offer your comments.

A.22 Sir, I request th Sir, I request the copy of the mentioned ledgers be given to e copy of the mentioned ledgers be given to me. I will reconcile the same with my records and explain the same in a me. I will reconcile the same with my records and explain the same in a me. I will reconcile the same with my records and explain the same in a week’s time.” to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 88 ::

In the course of assessment, the assessee is noted to have In the course of assessment, the assessee is noted to have In the course of assessment, the assessee is noted to have 10.11 unequivocally denied having engaged in any unaccounted transa unequivocally denied having engaged in any unaccounted transa unequivocally denied having engaged in any unaccounted transactions with MJPL. The assessee had objected to the contents of the entries found MJPL. The assessee had objected to the contents of the entries found MJPL. The assessee had objected to the contents of the entries found in ‘Jpack’ application software of MJPL and had submitted that, they in ‘Jpack’ application software of MJPL and had submitted that, they in ‘Jpack’ application software of MJPL and had submitted that, they cannot be expected to explain or reconcile the contents of entries cannot be expected to explain or reconcile the contents of entries cannot be expected to explain or reconcile the contents of entries maintained by third party. The assessee maintained by third party. The assessee is noted to have reiterated that, is noted to have reiterated that, all their transactions with MJPL are in the books of accounts and had all their transactions with MJPL are in the books of accounts and had all their transactions with MJPL are in the books of accounts and had furnished the relevant details along with account confirmations before the furnished the relevant details along with account confirmations before the furnished the relevant details along with account confirmations before the AO as well. The AO is however found to have simply relied on the entries AO as well. The AO is however found to have simply relied on the entries AO as well. The AO is however found to have simply relied on the entries found in ‘Jpack’ application software and held it to represent unaccounted nd in ‘Jpack’ application software and held it to represent unaccounted nd in ‘Jpack’ application software and held it to represent unaccounted cash & bullion transactions of the assessee. We find that this action of the cash & bullion transactions of the assessee. We find that this action of the cash & bullion transactions of the assessee. We find that this action of the AO was influenced by the statement of Shri Rajendra Kothari, who had AO was influenced by the statement of Shri Rajendra Kothari, who had AO was influenced by the statement of Shri Rajendra Kothari, who had admitted these entries to be unaccount admitted these entries to be unaccounted for.

10.12 Having gone through the material placed before us, we find Having gone through the material placed before us, we find Having gone through the material placed before us, we find the action of the lower authorities to be riddled with inconsistencies and the action of the lower authorities to be riddled with inconsistencies and the action of the lower authorities to be riddled with inconsistencies and factual inaccuracies. As noted above, the case of the AO was that, the factual inaccuracies. As noted above, the case of the AO was that, the factual inaccuracies. As noted above, the case of the AO was that, the entries found in ‘Jpack’ application entries found in ‘Jpack’ application software represented unaccounted software represented unaccounted cash & bullion transactions aggregating to Rs.225.32 crores. We however cash & bullion transactions aggregating to Rs.225.32 crores. We however cash & bullion transactions aggregating to Rs.225.32 crores. We however find that there was no independent corroborative material brought on find that there was no independent corroborative material brought on find that there was no independent corroborative material brought on record by the AO to substantiate such an allegation. Rather, the AO is record by the AO to substantiate such an allegation. Rather, the AO is record by the AO to substantiate such an allegation. Rather, the AO is found to have presumed these entries to be unaccounted, in light of the ave presumed these entries to be unaccounted, in light of the ave presumed these entries to be unaccounted, in light of the purported statement of Shri Kothari. It is not in dispute, in the present purported statement of Shri Kothari. It is not in dispute, in the present purported statement of Shri Kothari. It is not in dispute, in the present to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. facts before us that, the search action conducted upon the assessee did facts before us that, the search action conducted upon the assessee did facts before us that, the search action conducted upon the assessee did not lead to unearthing of any such unaccounted t not lead to unearthing of any such unaccounted transactions with MJPL, ransactions with MJPL, or discrepancy in physical stock or cash balance etc. There is prima facie or discrepancy in physical stock or cash balance etc. There is prima facie or discrepancy in physical stock or cash balance etc. There is prima facie merit in the submission of the assessee that, had it been involved in such merit in the submission of the assessee that, had it been involved in such merit in the submission of the assessee that, had it been involved in such huge scale unaccounted cash & bullion transactions with MJPL running huge scale unaccounted cash & bullion transactions with MJPL running huge scale unaccounted cash & bullion transactions with MJPL running into several hundred crores on such regular basis then at least some undred crores on such regular basis then at least some undred crores on such regular basis then at least some incriminating material or unaccounted asset would have been unearthed incriminating material or unaccounted asset would have been unearthed incriminating material or unaccounted asset would have been unearthed in their search which would have corroborated the case of the AO. in their search which would have corroborated the case of the AO. in their search which would have corroborated the case of the AO.

However, we note that, there was no such incriminating material o However, we note that, there was no such incriminating material o However, we note that, there was no such incriminating material or unaccounted asset found in the course of their search. In light of these unaccounted asset found in the course of their search. In light of these unaccounted asset found in the course of their search. In light of these material facts, the observations rendered by the AO that these entries material facts, the observations rendered by the AO that these entries material facts, the observations rendered by the AO that these entries represented unaccounted transactions of the assessee, according to us, represented unaccounted transactions of the assessee, according to us, represented unaccounted transactions of the assessee, according to us, was to be taken with a pinch of salt an was to be taken with a pinch of salt and cannot be simply accepted at its d cannot be simply accepted at its face value. The AO having dual role of an investigator and adjudicator face value. The AO having dual role of an investigator and adjudicator face value. The AO having dual role of an investigator and adjudicator was thus required to probe further to unearth the true facts and belly his was thus required to probe further to unearth the true facts and belly his was thus required to probe further to unearth the true facts and belly his suspicion. However, Ld. AO has failed to do so in the present case. However, Ld. AO has failed to do so in the present case. However, Ld. AO has failed to do so in the present case.

10.13 We agree with the Ld. AR that, the assessee cannot be We agree with the Ld. AR that, the assessee cannot be We agree with the Ld. AR that, the assessee cannot be expected to prove a negative. Instead, the onus lay on the Revenue to expected to prove a negative. Instead, the onus lay on the Revenue to expected to prove a negative. Instead, the onus lay on the Revenue to substantiate these entries with some independent tangible material, if substantiate these entries with some independent tangible material, if substantiate these entries with some independent tangible material, if they were seeking to use the same against the assessee. Acco they were seeking to use the same against the assessee. Acco they were seeking to use the same against the assessee. According to us also, the entries found in ‘Jpack’ application software which was seized also, the entries found in ‘Jpack’ application software which was seized also, the entries found in ‘Jpack’ application software which was seized from the premises of MJPL, could have been explained by MJPL alone. The from the premises of MJPL, could have been explained by MJPL alone. The from the premises of MJPL, could have been explained by MJPL alone. The to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. case of the Revenue is that, Shri Kothari of MJPL had claimed these case of the Revenue is that, Shri Kothari of MJPL had claimed these case of the Revenue is that, Shri Kothari of MJPL had claimed these entries to be unaccounted for, entries to be unaccounted for, and thus it was rightly added in the hands and thus it was rightly added in the hands of the assessee. On the other hand, the Ld. AR has submitted that, the of the assessee. On the other hand, the Ld. AR has submitted that, the of the assessee. On the other hand, the Ld. AR has submitted that, the statement given by Shri Kothari would have been in the context of the statement given by Shri Kothari would have been in the context of the statement given by Shri Kothari would have been in the context of the books of accounts of MJPL and not the assessee. The Ld. AR submitted books of accounts of MJPL and not the assessee. The Ld. AR submitted books of accounts of MJPL and not the assessee. The Ld. AR submitted that, Shri Kothari who was an employee of MJPL could not have possibly t, Shri Kothari who was an employee of MJPL could not have possibly t, Shri Kothari who was an employee of MJPL could not have possibly known as to whether the assessee had accounted or not, these known as to whether the assessee had accounted or not, these known as to whether the assessee had accounted or not, these transactions in their books of accounts. He corroborated his submission by transactions in their books of accounts. He corroborated his submission by transactions in their books of accounts. He corroborated his submission by showing that majority of these entries were recorded showing that majority of these entries were recorded in the books of in the books of accounts of the assessee. We also note that, no opportunity to cross accounts of the assessee. We also note that, no opportunity to cross accounts of the assessee. We also note that, no opportunity to cross examine Shri Kothari was given to the assessee. We thus find force in the examine Shri Kothari was given to the assessee. We thus find force in the examine Shri Kothari was given to the assessee. We thus find force in the Ld. AR’s plea that, the statement of Shri Kothari was being interpreted by Ld. AR’s plea that, the statement of Shri Kothari was being interpreted by Ld. AR’s plea that, the statement of Shri Kothari was being interpreted by the Revenue out of co the Revenue out of context, which we shall discuss in the ensuing ntext, which we shall discuss in the ensuing paragraphs.

10.14 As already held earlier, the presumption set out in Section As already held earlier, the presumption set out in Section As already held earlier, the presumption set out in Section 132(4) and 132(4A) of the Act is only against the searched person. 132(4) and 132(4A) of the Act is only against the searched person. 132(4) and 132(4A) of the Act is only against the searched person.

Hence, the contents of the material seized from the possession of Hence, the contents of the material seized from the possession of Hence, the contents of the material seized from the possession of MJPL viz., entries in ‘Jpack’ application software seized from MJPL, can be viz., entries in ‘Jpack’ application software seized from MJPL, can be viz., entries in ‘Jpack’ application software seized from MJPL, can be presumed to be true only qua MJPL. Likewise, the statement of Shri presumed to be true only qua MJPL. Likewise, the statement of Shri presumed to be true only qua MJPL. Likewise, the statement of Shri Kothari recorded on the basis of material found in his possession can be Kothari recorded on the basis of material found in his possession can be Kothari recorded on the basis of material found in his possession can be used as valid evidence in the income used as valid evidence in the income-tax proceedings of MJPL. The said x proceedings of MJPL. The said presumption cannot be extended to the assessee, unless the assessee presumption cannot be extended to the assessee, unless the assessee presumption cannot be extended to the assessee, unless the assessee to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. was afforded an opportunity to cross was afforded an opportunity to cross-examine him. It is well settled in law examine him. It is well settled in law that, such third party material or statement cannot be treated as a that, such third party material or statement cannot be treated as a that, such third party material or statement cannot be treated as a conclusive proof against an assessee, unless there is other corroborative roof against an assessee, unless there is other corroborative roof against an assessee, unless there is other corroborative material linking the same to the assessee. material linking the same to the assessee.

10.15 In this regard, we gainfully refer to the decision of the Hon’ble In this regard, we gainfully refer to the decision of the Hon’ble In this regard, we gainfully refer to the decision of the Hon’ble ITAT, Mumbai in the case of ITAT, Mumbai in the case of Anand Jaikumar Jain v. ACIT (supra) Anand Jaikumar Jain v. ACIT (supra). In the decided case, entries were found in the data found and seized from d case, entries were found in the data found and seized from d case, entries were found in the data found and seized from the premises of Dalmia Group, which according to AO, contained the the premises of Dalmia Group, which according to AO, contained the the premises of Dalmia Group, which according to AO, contained the details of transactions conducted with the assessee. The key employees of details of transactions conducted with the assessee. The key employees of details of transactions conducted with the assessee. The key employees of the Dalmia Group had averred that these entries were u the Dalmia Group had averred that these entries were unaccounted for. naccounted for.

On the basis of these third party material & statement, the AO made On the basis of these third party material & statement, the AO made On the basis of these third party material & statement, the AO made addition in the hands of the assessee. On appeal, the Tribunal observed addition in the hands of the assessee. On appeal, the Tribunal observed addition in the hands of the assessee. On appeal, the Tribunal observed that, these entries were not substantiated with any clinching evidence or that, these entries were not substantiated with any clinching evidence or that, these entries were not substantiated with any clinching evidence or corroborative material and corroborative material and that the assessee had shown that the that the assessee had shown that the employees of Dalmia Group maintaining these entries were not aware employees of Dalmia Group maintaining these entries were not aware employees of Dalmia Group maintaining these entries were not aware about the correct import of the transaction. It was thus held that, only about the correct import of the transaction. It was thus held that, only about the correct import of the transaction. It was thus held that, only because two cheque entries on these seized pages matched with the because two cheque entries on these seized pages matched with the because two cheque entries on these seized pages matched with the books of the assessee did not ipso facto mean that other entries on these assessee did not ipso facto mean that other entries on these assessee did not ipso facto mean that other entries on these pages represented unaccounted transactions. The Tribunal is noted to pages represented unaccounted transactions. The Tribunal is noted to pages represented unaccounted transactions. The Tribunal is noted to have accordingly deleted the addition. have accordingly deleted the addition. to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 92 ::

Gainful reference is also made to another decision of the Gainful reference is also made to another decision of the Gainful reference is also made to another decision of the 10.16 coordinate bench of th coordinate bench of this Tribunal at Mumbai in the case of is Tribunal at Mumbai in the case of Naren Premchand Nagda v ITO (ITA No. 3265/Mum/2015) Premchand Nagda v ITO (ITA No. 3265/Mum/2015) Premchand Nagda v ITO (ITA No. 3265/Mum/2015). In this case also, a search was conducted at the premises of builder. The statement of search was conducted at the premises of builder. The statement of search was conducted at the premises of builder. The statement of key person of the group was recorded who stated that the assessee had key person of the group was recorded who stated that the assessee had key person of the group was recorded who stated that the assessee had paid cash to the group. When the statement of the key person was put to to the group. When the statement of the key person was put to to the group. When the statement of the key person was put to the assessee, he denied of making any payment in cash. However, the the assessee, he denied of making any payment in cash. However, the the assessee, he denied of making any payment in cash. However, the department made addition by relying on the statement of key person of department made addition by relying on the statement of key person of department made addition by relying on the statement of key person of the group. This Tribunal relying on series of judicial Tribunal relying on series of judicial pronouncements held pronouncements held that in absence of any evidence found against the assessee, no addition that in absence of any evidence found against the assessee, no addition that in absence of any evidence found against the assessee, no addition can be made on the basis of documents found from the premises of third can be made on the basis of documents found from the premises of third can be made on the basis of documents found from the premises of third party and the statements recorded during the course of search conducted party and the statements recorded during the course of search conducted party and the statements recorded during the course of search conducted in third party premises.

10.17 We also refer to the decision of the Hon’ble ITAT, Lucknow in We also refer to the decision of the Hon’ble ITAT, Lucknow in We also refer to the decision of the Hon’ble ITAT, Lucknow in the case of Mahendra Lalka Vs ITO (supra) Mahendra Lalka Vs ITO (supra). In the decided case, a . In the decided case, a search action was conducted upon one SSS Group, in the course of which, search action was conducted upon one SSS Group, in the course of which, search action was conducted upon one SSS Group, in the course of which, a ledger copy of the assessee was found which a ledger copy of the assessee was found which according to AO contained according to AO contained several entries, some of which, matched with the cheque entries in the several entries, some of which, matched with the cheque entries in the several entries, some of which, matched with the cheque entries in the books of the assessee. Based on the statement of Mr. Patel of SSS Group, books of the assessee. Based on the statement of Mr. Patel of SSS Group, books of the assessee. Based on the statement of Mr. Patel of SSS Group, the AO held that the unmatched entries represented unaccounted the AO held that the unmatched entries represented unaccounted the AO held that the unmatched entries represented unaccounted transactions of the assessee and added the same to the total income. On essee and added the same to the total income. On essee and added the same to the total income. On appeal, this Tribunal observed that, the assessee had denied the contents appeal, this Tribunal observed that, the assessee had denied the contents appeal, this Tribunal observed that, the assessee had denied the contents to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. of the ledger at all stages and therefore it was incumbent upon the lower of the ledger at all stages and therefore it was incumbent upon the lower of the ledger at all stages and therefore it was incumbent upon the lower authorities to have investigated further to bring out the c authorities to have investigated further to bring out the c authorities to have investigated further to bring out the correct facts. It was noted that, there was no clinching evidence brought on record to was noted that, there was no clinching evidence brought on record to was noted that, there was no clinching evidence brought on record to support the ledger entries and also the assessee was not given an support the ledger entries and also the assessee was not given an support the ledger entries and also the assessee was not given an opportunity to cross examine Mr. Patel. The Tribunal is according noted to opportunity to cross examine Mr. Patel. The Tribunal is according noted to opportunity to cross examine Mr. Patel. The Tribunal is according noted to have deleted the addition, by have deleted the addition, by observing as under:-

“7. It is very much evident in the face of such specific denial by the 7. It is very much evident in the face of such specific denial by the 7. It is very much evident in the face of such specific denial by the assessee not only before the Assessing Officer but before the first assessee not only before the Assessing Officer but before the first assessee not only before the Assessing Officer but before the first appellate authority, no further inquiry or investigation was made by appellate authority, no further inquiry or investigation was made by appellate authority, no further inquiry or investigation was made by them to rebut the them to rebut the contention of the assessee. No further corroborative contention of the assessee. No further corroborative evidence has been brought on record to establish that the entries in the evidence has been brought on record to establish that the entries in the evidence has been brought on record to establish that the entries in the ledger copy seized from a third party are genuine and correct. ledger copy seized from a third party are genuine and correct. ledger copy seized from a third party are genuine and correct. Surprisingly, no statement has been recorded from the third party f Surprisingly, no statement has been recorded from the third party f Surprisingly, no statement has been recorded from the third party from whom the incriminating material was seized with regard to the entries in whom the incriminating material was seized with regard to the entries in whom the incriminating material was seized with regard to the entries in the ledger copy. There is nothing on record to suggest that the third the ledger copy. There is nothing on record to suggest that the third the ledger copy. There is nothing on record to suggest that the third party from whom the ledger copy was seized admitted of having party from whom the ledger copy was seized admitted of having party from whom the ledger copy was seized admitted of having received the cash payment from the assessee. Th received the cash payment from the assessee. This is so because neither is is so because neither the Assessing Officer nor learned CIT(A) have referred to any such the Assessing Officer nor learned CIT(A) have referred to any such the Assessing Officer nor learned CIT(A) have referred to any such statement or admission by Shri Viral K. Patel with reference to the statement or admission by Shri Viral K. Patel with reference to the statement or admission by Shri Viral K. Patel with reference to the seized material. Even, assessee's repeated request to cross examine seized material. Even, assessee's repeated request to cross examine seized material. Even, assessee's repeated request to cross examine Shri Viral K. Patal have bee Shri Viral K. Patal have been cold shouldered by the Department n cold shouldered by the Department Authorities. Thus, as facts on record stand, except the ledger account Authorities. Thus, as facts on record stand, except the ledger account Authorities. Thus, as facts on record stand, except the ledger account stated to have been seized from the computer of Shri Viral K. Patel, no stated to have been seized from the computer of Shri Viral K. Patel, no stated to have been seized from the computer of Shri Viral K. Patel, no other corroborative material has been brought on record by the other corroborative material has been brought on record by the other corroborative material has been brought on record by the Departmental Authorities to establish that the entries appearing in the uthorities to establish that the entries appearing in the uthorities to establish that the entries appearing in the ledger copy are genuine and the assessee had actually made the cash ledger copy are genuine and the assessee had actually made the cash ledger copy are genuine and the assessee had actually made the cash payment. Merely because the payments made by cheque appearing in payment. Merely because the payments made by cheque appearing in payment. Merely because the payments made by cheque appearing in the ledger copy and actually made by the assessee tallied, it can the ledger copy and actually made by the assessee tallied, it can the ledger copy and actually made by the assessee tallied, it cannot lead to the conclusion that the assessee has also made the cash payments. to the conclusion that the assessee has also made the cash payments. to the conclusion that the assessee has also made the cash payments. More so, when from the very beginning the assessee has vehemently More so, when from the very beginning the assessee has vehemently More so, when from the very beginning the assessee has vehemently denied of having made the cash payments. Thus, in my considered denied of having made the cash payments. Thus, in my considered denied of having made the cash payments. Thus, in my considered opinion, in absence of any clinching evidence to opinion, in absence of any clinching evidence to show that the assessee show that the assessee had made the cash payments, the addition of so called cash payment of had made the cash payments, the addition of so called cash payment of had made the cash payments, the addition of so called cash payment of Rs.17 lacs could not have been made. Accordingly, the addition made, Rs.17 lacs could not have been made. Accordingly, the addition made, Rs.17 lacs could not have been made. Accordingly, the addition made, being wholly unsustainable, I direct the Assessing Officer to delete the being wholly unsustainable, I direct the Assessing Officer to delete the being wholly unsustainable, I direct the Assessing Officer to delete the same.” to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 94 ::

In light of the above decisions (supra), we thus agree with the In light of the above decisions (supra), we thus agree with the In light of the above decisions (supra), we thus agree with the 10.18 assessee that the contents of the contents of the ‘Jpack’ software, which was was unilaterally maintained by a third party cannot be by a third party cannot be straightway used adversely against straightway used adversely against the assessee, without any corroborative material evidence. rial evidence. The Ld. AR pointed out to us that, though the impugned entries were not found from pointed out to us that, though the impugned entries were not found from pointed out to us that, though the impugned entries were not found from the premises of the assessee and therefore the premises of the assessee and therefore, the assessee had no the assessee had no knowledge about it, but still the assessee had undertaken the exercise of knowledge about it, but still the assessee had undertaken the exercise of knowledge about it, but still the assessee had undertaken the exercise of attempting to reconcile the same with their books of accounts. It is an ile the same with their books of accounts. It is an ile the same with their books of accounts. It is an admitted factual position before us that, the assessee was able to admitted factual position before us that, the assessee was able to admitted factual position before us that, the assessee was able to reconcile entries to the tune of reconcile entries to the tune of Rs.214,51,60,793/- out of the total entries out of the total entries of Rs. 283,63,59,247/- - found in the ‘Jpack’ application soft found in the ‘Jpack’ application software. This reconciliation is noted to have been accepted by the lower authorities. We reconciliation is noted to have been accepted by the lower authorities. We reconciliation is noted to have been accepted by the lower authorities. We particularly observe that, all the receipts in these entries in ‘Jpack’ particularly observe that, all the receipts in these entries in ‘Jpack’ particularly observe that, all the receipts in these entries in ‘Jpack’ application software were mentioned under the nomenclature ‘Cash’. This application software were mentioned under the nomenclature ‘Cash’. This application software were mentioned under the nomenclature ‘Cash’. This use of nomenclature ‘Cash’ use of nomenclature ‘Cash’ had originally led the AO to believe that they had originally led the AO to believe that they all were cash transactions. The assessee has however demonstrated with all were cash transactions. The assessee has however demonstrated with all were cash transactions. The assessee has however demonstrated with evidences that, actually these entries inter alia represented payments evidences that, actually these entries inter alia represented payments evidences that, actually these entries inter alia represented payments made in cheque through proper banking channel. The AO is also note made in cheque through proper banking channel. The AO is also note made in cheque through proper banking channel. The AO is also noted to have accepted this submission in the remand proceedings. For this have accepted this submission in the remand proceedings. For this have accepted this submission in the remand proceedings. For this reason, the alleged unaccounted cash transactions which matched with reason, the alleged unaccounted cash transactions which matched with reason, the alleged unaccounted cash transactions which matched with the cheque transactions were omitted by the AO from the unreconciled the cheque transactions were omitted by the AO from the unreconciled the cheque transactions were omitted by the AO from the unreconciled sums. It is observed that, for AY 2017 sums. It is observed that, for AY 2017-18 the alleged unaccounted cash lleged unaccounted cash to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. transactions, after deducting the matching cheque transactions, was transactions, after deducting the matching cheque transactions, was transactions, after deducting the matching cheque transactions, was reduced by the AO from Rs.25.23 crores to Rs.2.9 crores. For AY 2018 reduced by the AO from Rs.25.23 crores to Rs.2.9 crores. For AY 2018 reduced by the AO from Rs.25.23 crores to Rs.2.9 crores. For AY 2018-19 it was reduced from Rs.20.05 crores to Rs.6.03 crores and so on for AYs it was reduced from Rs.20.05 crores to Rs.6.03 crores and so on for AYs it was reduced from Rs.20.05 crores to Rs.6.03 crores and so on for AYs 2019-20 to 2021-22, in the remand report. This reconciliation exercise in the remand report. This reconciliation exercise in the remand report. This reconciliation exercise conducted by the assessee and accepted by the lower authorities conducted by the assessee and accepted by the lower authorities conducted by the assessee and accepted by the lower authorities therefore dispels the AO’s initial allegation that all these entries were therefore dispels the AO’s initial allegation that all these entries were therefore dispels the AO’s initial allegation that all these entries were unaccounted in the books of the assessee. According to us, this lat unaccounted in the books of the assessee. According to us, this lat unaccounted in the books of the assessee. According to us, this later development in the appellate proceedings, corroborated the assessee’s development in the appellate proceedings, corroborated the assessee’s development in the appellate proceedings, corroborated the assessee’s submission that, the statement of Shri Rajendra Kothari was not reliable submission that, the statement of Shri Rajendra Kothari was not reliable submission that, the statement of Shri Rajendra Kothari was not reliable qua the assessee and that his averment that all these entries were not qua the assessee and that his averment that all these entries were not qua the assessee and that his averment that all these entries were not accounted for, was being mistakenly pre accounted for, was being mistakenly presumed to be referring to the sumed to be referring to the regular books of the assessee. These facts, according to us, shows that regular books of the assessee. These facts, according to us, shows that regular books of the assessee. These facts, according to us, shows that the entries in the ‘Jpack’ application software were factually inconsistent the entries in the ‘Jpack’ application software were factually inconsistent the entries in the ‘Jpack’ application software were factually inconsistent in as much as the actual cheque payments by the assessee were being in as much as the actual cheque payments by the assessee were being in as much as the actual cheque payments by the assessee were being erroneously recorded as cash receipts by MJPL. recorded as cash receipts by MJPL.

10.19 The Ld. AR thereafter had rightly identified and showed us The Ld. AR thereafter had rightly identified and showed us The Ld. AR thereafter had rightly identified and showed us that, entries to the extent of Rs.8.32 crores made in the ‘Jpack’ that, entries to the extent of Rs.8.32 crores made in the ‘Jpack’ that, entries to the extent of Rs.8.32 crores made in the ‘Jpack’ application software were evidently contra entries. For instance, there application software were evidently contra entries. For instance, there application software were evidently contra entries. For instance, there was an ‘issued’ entry of ‘Metal Issue’ of 18905.000 gms on 27/12 and entry of ‘Metal Issue’ of 18905.000 gms on 27/12 and entry of ‘Metal Issue’ of 18905.000 gms on 27/12 and there was a corresponding contra ‘receipt’ entry of ‘Metal Issue’ of there was a corresponding contra ‘receipt’ entry of ‘Metal Issue’ of there was a corresponding contra ‘receipt’ entry of ‘Metal Issue’ of 18905.000 gms on 28/12. Though these contra entries were pointed out 18905.000 gms on 28/12. Though these contra entries were pointed out 18905.000 gms on 28/12. Though these contra entries were pointed out by the assessee to the lower authorities, but they are noted to h by the assessee to the lower authorities, but they are noted to h by the assessee to the lower authorities, but they are noted to have to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. wrongly refrained from taking cognizance of the same. According to us, wrongly refrained from taking cognizance of the same. According to us, wrongly refrained from taking cognizance of the same. According to us, these bald contra entries further cements the assessee’s contention that, these bald contra entries further cements the assessee’s contention that, these bald contra entries further cements the assessee’s contention that, the nature and content of these entries were not reliable and are fraught the nature and content of these entries were not reliable and are fraught the nature and content of these entries were not reliable and are fraught with mistakes and infirmities. with mistakes and infirmities.

10.20 In so far as the unmatched entries are concerned, the In so far as the unmatched entries are concerned, the In so far as the unmatched entries are concerned, the assessee has contended that, these could have been mistakenly entered assessee has contended that, these could have been mistakenly entered assessee has contended that, these could have been mistakenly entered by Shri Rajendra Kothari in the software under the name of the assessee. by Shri Rajendra Kothari in the software under the name of the assessee. by Shri Rajendra Kothari in the software under the name of the assessee.

To support his contention, he referred to the above con To support his contention, he referred to the above contra entries, which tra entries, which in his view, suggested that, when Shri Kothari identified the entries which in his view, suggested that, when Shri Kothari identified the entries which in his view, suggested that, when Shri Kothari identified the entries which were wrongly posted to the name of the assessee, he would pass a contra were wrongly posted to the name of the assessee, he would pass a contra were wrongly posted to the name of the assessee, he would pass a contra entry to transfer it to the correct head. According to Ld. AR therefore, entry to transfer it to the correct head. According to Ld. AR therefore, entry to transfer it to the correct head. According to Ld. AR therefore, these unmatched entries could also be a case of incorrect accounting, entries could also be a case of incorrect accounting, entries could also be a case of incorrect accounting, mistaken identity or that the entries of some other customers were mistaken identity or that the entries of some other customers were mistaken identity or that the entries of some other customers were wrongly posted to these accounts. The Ld. AR pointed out that, the name wrongly posted to these accounts. The Ld. AR pointed out that, the name wrongly posted to these accounts. The Ld. AR pointed out that, the name ‘Lalitha’ is commonly used by jewellery businesses and persons ‘Lalitha’ is commonly used by jewellery businesses and persons ‘Lalitha’ is commonly used by jewellery businesses and persons in the Southern States and thus there is a possibility that a transaction with Southern States and thus there is a possibility that a transaction with Southern States and thus there is a possibility that a transaction with some other entity or customer whose name may also include reference of some other entity or customer whose name may also include reference of some other entity or customer whose name may also include reference of ‘Lalitha’ has been mistakenly entered by the third party in the name of ‘Lalitha’ has been mistakenly entered by the third party in the name of ‘Lalitha’ has been mistakenly entered by the third party in the name of the assessee. According to us, ord the assessee. According to us, ordinarily any unmatched entries with the inarily any unmatched entries with the books of third party raises a suspicion against the assessee, but in the books of third party raises a suspicion against the assessee, but in the books of third party raises a suspicion against the assessee, but in the peculiar facts of the present case, and having regard to infirmities and peculiar facts of the present case, and having regard to infirmities and peculiar facts of the present case, and having regard to infirmities and inconsistencies pointed out in the entries maintained by the third part inconsistencies pointed out in the entries maintained by the third part inconsistencies pointed out in the entries maintained by the third party in to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. their application software, as discussed above, there is merit in the case their application software, as discussed above, there is merit in the case their application software, as discussed above, there is merit in the case of the assessee that the remaining unmatched entries may not relate or of the assessee that the remaining unmatched entries may not relate or of the assessee that the remaining unmatched entries may not relate or pertain to it.

10.21 It is noted that even the Ld. CIT(A) in his appellate order had It is noted that even the Ld. CIT(A) in his appellate order had It is noted that even the Ld. CIT(A) in his appellate order had acknowledged that the impugned issue the impugned issue did not involve instance of direct did not involve instance of direct unaccounted investment in stock, but rather, unaccounted investment in stock, but rather, it was a complex factual a complex factual matrix wherein certain entries in the running account extracted from the matrix wherein certain entries in the running account extracted from the matrix wherein certain entries in the running account extracted from the seized material of M/s MJPL of M/s MJPL matched with the assessee’s boo assessee’s books of account and the balance remained unmatched. and the balance remained unmatched. This tacit acknowledgment by Ld. This tacit acknowledgment by Ld. CIT(A) shows that, even the appellate authority was not sure about the CIT(A) shows that, even the appellate authority was not sure about the CIT(A) shows that, even the appellate authority was not sure about the reliability of the entries found in Jpack application software and for this reliability of the entries found in Jpack application software and for this reliability of the entries found in Jpack application software and for this reason the unreconciled su reason the unreconciled sum was not treated as unaccounted investment m was not treated as unaccounted investment in stock.

10.22 The Ld. AR further corroborated the case of the assessee by The Ld. AR further corroborated the case of the assessee by The Ld. AR further corroborated the case of the assessee by bringing to our notice the confirmation of accounts which were signed and bringing to our notice the confirmation of accounts which were signed and bringing to our notice the confirmation of accounts which were signed and acknowledged by MJPL. We note that, the MJPL had confirmed the acknowledged by MJPL. We note that, the MJPL had confirmed the acknowledged by MJPL. We note that, the MJPL had confirmed the transactions which were recorded in the books of assessee as well as the transactions which were recorded in the books of assessee as well as the transactions which were recorded in the books of assessee as well as the outstanding closing balances for each of the years in question and that outstanding closing balances for each of the years in question and that outstanding closing balances for each of the years in question and that there was no mention or reference to these unmatched entries. We find there was no mention or reference to these unmatched entries. We find there was no mention or reference to these unmatched entries. We find that the lower authorities have also not that the lower authorities have also not disputed the correctness of these disputed the correctness of these third party confirmations. In our considered view, once the assessee had third party confirmations. In our considered view, once the assessee had third party confirmations. In our considered view, once the assessee had to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. provided these confirmations, then the reliability and admissibility of provided these confirmations, then the reliability and admissibility of provided these confirmations, then the reliability and admissibility of these unmatched entries was in serious doubt. these unmatched entries was in serious doubt.

10.23 It is settled in law th settled in law that suspicion however strong at suspicion however strong it may be, cannot take the place of proof or evidence as held by the Supreme Court cannot take the place of proof or evidence as held by the Supreme Court cannot take the place of proof or evidence as held by the Supreme Court in Uma Charan Shaw & Bros. Vs CIT (37 ITR 271) Uma Charan Shaw & Bros. Vs CIT (37 ITR 271). Any Any addition(s) to income must be based on cogent, cred income must be based on cogent, credible, and corroborated evidence. In ible, and corroborated evidence. In the present case before us, we find that the addition impugned was present case before us, we find that the addition impugned was present case before us, we find that the addition impugned was initially made on the basis of initially made on the basis of unverified, unilateral data maintained by a maintained by a third party. The entries made therein do not bear the endorsement third party. The entries made therein do not bear the endorsement third party. The entries made therein do not bear the endorsement or acknowledgment of the assessee. Hence, such entri of the assessee. Hence, such entries are not conclusive es are not conclusive proof against the assessee, proof against the assessee, without independent corroboration. without independent corroboration. As noted above, the assessee had not only dispelled the AO’s case that, all the above, the assessee had not only dispelled the AO’s case that, all the above, the assessee had not only dispelled the AO’s case that, all the entries in the Jpack application software were unaccounted for, but entries in the Jpack application software were unaccounted for, but entries in the Jpack application software were unaccounted for, but instead also showed tha instead also showed that majority of it reconciled with their books of t majority of it reconciled with their books of accounts. The assessee also showed that, the use of nomenclature ‘cash’ accounts. The assessee also showed that, the use of nomenclature ‘cash’ accounts. The assessee also showed that, the use of nomenclature ‘cash’ in this software was factually misplaced and, also there were several in this software was factually misplaced and, also there were several in this software was factually misplaced and, also there were several contra entries in the software. These facts also rendered the stat contra entries in the software. These facts also rendered the stat contra entries in the software. These facts also rendered the statement of Shri Rajendra Kothari to be unreliable as being based on mistake of fact Shri Rajendra Kothari to be unreliable as being based on mistake of fact Shri Rajendra Kothari to be unreliable as being based on mistake of fact qua the assessee. Further, even the search action conducted upon the qua the assessee. Further, even the search action conducted upon the qua the assessee. Further, even the search action conducted upon the assessee did not reveal any discrepancy in stock or cash or any assessee did not reveal any discrepancy in stock or cash or any assessee did not reveal any discrepancy in stock or cash or any unaccounted transactions with MJPL. In li unaccounted transactions with MJPL. In light of these facts and ght of these facts and circumstantial evidences, coupled with the confirmations provided by circumstantial evidences, coupled with the confirmations provided by circumstantial evidences, coupled with the confirmations provided by to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 99 ::

MJPL, we are of the considered view, on the given facts before us that, MJPL, we are of the considered view, on the given facts before us that, MJPL, we are of the considered view, on the given facts before us that, the onus was on the Revenue to corroborate their case that the the onus was on the Revenue to corroborate their case that the the onus was on the Revenue to corroborate their case that the unmatched entries represented unmatched entries represented unaccounted transactions of the assessee unaccounted transactions of the assessee and not the other way round. We find that, instead of doing so, the lower and not the other way round. We find that, instead of doing so, the lower and not the other way round. We find that, instead of doing so, the lower authorities sat back with folded hands, waited for the assessee to exhaust authorities sat back with folded hands, waited for the assessee to exhaust authorities sat back with folded hands, waited for the assessee to exhaust their evidences and explanations, and then simply rejected the sa their evidences and explanations, and then simply rejected the sa their evidences and explanations, and then simply rejected the same, without bringing on record any clinching evidence in support of their case. without bringing on record any clinching evidence in support of their case. without bringing on record any clinching evidence in support of their case.

This action of the lower authorities cannot be countenanced. This action of the lower authorities cannot be countenanced. This action of the lower authorities cannot be countenanced.

10.24 According to us, once the assessee had brought on record According to us, once the assessee had brought on record According to us, once the assessee had brought on record evidences and material which disproved the contents evidences and material which disproved the contents of entries in the of entries in the Jpack application software and also the statement of Shri Kothari, then Jpack application software and also the statement of Shri Kothari, then Jpack application software and also the statement of Shri Kothari, then not only the AO ought to have examined Shri Kothari to test the veracity not only the AO ought to have examined Shri Kothari to test the veracity not only the AO ought to have examined Shri Kothari to test the veracity of his original statement but he also ought to have confronted Shri of his original statement but he also ought to have confronted Shri of his original statement but he also ought to have confronted Shri Kothari of M/s MJPL to a Kothari of M/s MJPL to ascertain the true content and nature of the scertain the true content and nature of the unmatched entries. Also, an opportunity should have been given to the unmatched entries. Also, an opportunity should have been given to the unmatched entries. Also, an opportunity should have been given to the assessee to cross-examine Mr. Kothari, particularly when the assessee at examine Mr. Kothari, particularly when the assessee at examine Mr. Kothari, particularly when the assessee at all times had denied having any unaccounted transactions with MJPL an all times had denied having any unaccounted transactions with MJPL an all times had denied having any unaccounted transactions with MJPL and even MJPL had submitted their confirmation of accounts. In our even MJPL had submitted their confirmation of accounts. In our even MJPL had submitted their confirmation of accounts. In our considered view, on the given facts, the doctrine of t considered view, on the given facts, the doctrine of the frui he fruit of the poisonous tree would apply, as once the assessee has shown that the poisonous tree would apply, as once the assessee has shown that the poisonous tree would apply, as once the assessee has shown that the contents of third party material, as originally alleg contents of third party material, as originally alleged to be completely ed to be completely unaccounted, was factually incorrect, then other contents of the same unaccounted, was factually incorrect, then other contents of the same unaccounted, was factually incorrect, then other contents of the same to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. material also stands rendered as unreliable, without there being any material also stands rendered as unreliable, without there being any material also stands rendered as unreliable, without there being any independent corroborative material in relation thereto. independent corroborative material in relation thereto.

10.25 For the above reasons, factual defi For the above reasons, factual deficiencies in third party ciencies in third party material, as discussed above, and having regard to the ratio laid down in material, as discussed above, and having regard to the ratio laid down in material, as discussed above, and having regard to the ratio laid down in the decisions (supra), we hold that the remaining unmatched entries the decisions (supra), we hold that the remaining unmatched entries the decisions (supra), we hold that the remaining unmatched entries found in the Jpack application software of M/s MJPL could not be relied found in the Jpack application software of M/s MJPL could not be relied found in the Jpack application software of M/s MJPL could not be relied upon in the matters of the assessee, and therefore the s of the assessee, and therefore the impugned addition impugned addition partially sustained by the partially sustained by the Ld. CIT(A) by applying gross profit rate on gross profit rate on unmatched entries is held to be untenable. The AO is accordingly directed unmatched entries is held to be untenable. The AO is accordingly directed unmatched entries is held to be untenable. The AO is accordingly directed to delete the same. These grounds are therefore allowed. to delete the same. These grounds are therefore allowed. for AY 2018 No.677/Chny/2025 for AY 2018-19.

We now take up the assessee’s appeal in We now take up the assessee’s appeal in 11. 677/Chny/2025 for AY 2018-19.

Accordingly, these grounds are being dismissed as not being separately Accordingly, these grounds are being dismissed as not being separately Accordingly, these grounds are being dismissed as not being separately adjudicated upon.

Ground No. 4 to 8 of the appeal relates to the of the appeal relates to the addition of 13. Ground No. 4 to 8 Rs.2,02,45,191/- made by way of unaccounted cash receipts found noted made by way of unaccounted cash receipts found noted made by way of unaccounted cash receipts found noted to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. in the mail attachment of Mr. Stanley. in the mail attachment of Mr. Stanley. After considering the rival After considering the rival submissions, it is observed that, excep submissions, it is observed that, except variation in figures, the reasoning variation in figures, the reasoning adopted both by the AO & Ld. CIT(A) to justify this addition AO & Ld. CIT(A) to justify this addition AO & Ld. CIT(A) to justify this addition is verbatim same as in AY 2016-17. .

13.1 Following our conclusions drawn while conclusions drawn while deciding Ground Nos. deciding Ground Nos. 4 to 8 of assessee’s appeal in A.Y. 2016 ssessee’s appeal in A.Y. 2016-17, we hold that the the addition of Rs.2,02,45,191/- is untenable on facts untenable on facts and in law. We therefore allow the and in law. We therefore allow the Ground Nos. 4 to 8 raised by the assessee an raised by the assessee and direct the AO the AO to delete the impugned addition made made in AY 2018-19.

9 to 13 of assessee’s appeal in A.Y. 2017 ssessee’s appeal in A.Y. 2017-18, we hold that the impugned hold that the impugned addition addition addition on on on account account account of of of alleged alleged alleged repayment repayment repayment of of of cash cash cash loans loans loans was was was unsustainable. We thus allow these grounds and direct the AO to delete unsustainable. We thus allow these grounds and direct the AO to delete unsustainable. We thus allow these grounds and direct the AO to delete the impugned addition made in AY 2018 the impugned addition made in AY 2018-19. to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 102 ::

Ground Nos. 14 to 18 raised by the assessee are against the raised by the assessee are against the 15. Ground Nos. 14 to 18 addition of Rs.15,30,00,000/ 30,00,000/- made by way of unexplained cash made by way of unexplained cash expenditure paid to M/s Bhoomi and Buildings Private Limited [in short expenditure paid to M/s Bhoomi and Buildings Private Limited [in short expenditure paid to M/s Bhoomi and Buildings Private Limited [in short ‘BBPL’] u/s 69C of the Act. Briefly stated, the facts relating to this issue ‘BBPL’] u/s 69C of the Act. Briefly stated, the facts relating to this issue ‘BBPL’] u/s 69C of the Act. Briefly stated, the facts relating to this issue are that, a search u/s 132 of the Act was conducted in the case are that, a search u/s 132 of the Act was conducted in the case are that, a search u/s 132 of the Act was conducted in the case of BBPL in which tally data was found and seized. From the ledgers extracted from which tally data was found and seized. From the ledgers extracted from which tally data was found and seized. From the ledgers extracted from tally data, it was observed that, there was a ledger titled ‘Lalitha Jwel tally data, it was observed that, there was a ledger titled ‘Lalitha Jwel tally data, it was observed that, there was a ledger titled ‘Lalitha Jwel-T Nagar Inv’ which contained several entries of cash receipts with the Nagar Inv’ which contained several entries of cash receipts with the Nagar Inv’ which contained several entries of cash receipts with the narrations indicating that th narrations indicating that the cash totaling to Rs.27.30 crores was e cash totaling to Rs.27.30 crores was received from either ‘Lalitha Jewellery’ or ‘Kiran Anna’. Based on this received from either ‘Lalitha Jewellery’ or ‘Kiran Anna’. Based on this received from either ‘Lalitha Jewellery’ or ‘Kiran Anna’. Based on this ledger, it was inferred that these notings related to the assessee, M/s ledger, it was inferred that these notings related to the assessee, M/s ledger, it was inferred that these notings related to the assessee, M/s Lalithaa Jewellery Mart Private Limited and that it had made cash Lalithaa Jewellery Mart Private Limited and that it had made cash Lalithaa Jewellery Mart Private Limited and that it had made cash payment of Rs.27.30 crores towards T Nagar Investment. The AO is noted of Rs.27.30 crores towards T Nagar Investment. The AO is noted of Rs.27.30 crores towards T Nagar Investment. The AO is noted to have verified the books of accounts of the assessee to check whether to have verified the books of accounts of the assessee to check whether to have verified the books of accounts of the assessee to check whether these payments are reflected therein and found that this cash payment these payments are reflected therein and found that this cash payment these payments are reflected therein and found that this cash payment was not reflected. The AO accordingly required the was not reflected. The AO accordingly required the assessee to explain as assessee to explain as to why the impugned sum should not be treated as unexplained to why the impugned sum should not be treated as unexplained to why the impugned sum should not be treated as unexplained investment u/s 69C of the Act. The assessee is noted to have furnished investment u/s 69C of the Act. The assessee is noted to have furnished investment u/s 69C of the Act. The assessee is noted to have furnished several replies to this notice vide letters dated 27 several replies to this notice vide letters dated 27-01-2023, 02 2023, 02-02-2023, 07-02-2023 and 24-03 03-2023 wherein he denied having made wherein he denied having made any such transactions with M/s.BBPL. It was also pointed out by the Ld. AR who BBPL. It was also pointed out by the Ld. AR who BBPL. It was also pointed out by the Ld. AR who was appearing for the assessee that BBPL had retracted from their was appearing for the assessee that BBPL had retracted from their was appearing for the assessee that BBPL had retracted from their to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. statement with regard to the tally data found from their premises. It was statement with regard to the tally data found from their premises. It was statement with regard to the tally data found from their premises. It was therefore submitted that, the third party notings were unreliable and also re submitted that, the third party notings were unreliable and also re submitted that, the third party notings were unreliable and also in absence of any signature or acknowledgement by the assessee, the in absence of any signature or acknowledgement by the assessee, the in absence of any signature or acknowledgement by the assessee, the assessee cannot be expected to explain such notings. The assessee assessee cannot be expected to explain such notings. The assessee assessee cannot be expected to explain such notings. The assessee accordingly contended that without there being any cog accordingly contended that without there being any cogent nexus and any ent nexus and any corroborative material between these notings and the assessee, the corroborative material between these notings and the assessee, the corroborative material between these notings and the assessee, the proposed addition u/s 69 of the Act was unwarranted. The AO is noted to proposed addition u/s 69 of the Act was unwarranted. The AO is noted to proposed addition u/s 69 of the Act was unwarranted. The AO is noted to have acknowledged the retraction(s) filed by BBPL in relation to their tally have acknowledged the retraction(s) filed by BBPL in relation to their tally have acknowledged the retraction(s) filed by BBPL in relation to their tally data but rejected the data but rejected the same by observing that their retraction was an same by observing that their retraction was an after-thought. The AO further held that, the fact that the entries found in thought. The AO further held that, the fact that the entries found in thought. The AO further held that, the fact that the entries found in the tally data of BBPL was not reflected in the books of the assessee was the tally data of BBPL was not reflected in the books of the assessee was the tally data of BBPL was not reflected in the books of the assessee was sufficient to justify the impugned addition. The AO is ther sufficient to justify the impugned addition. The AO is ther sufficient to justify the impugned addition. The AO is therefore noted to have added sum of Rs.15,30,00,000/ have added sum of Rs.15,30,00,000/- by way of unexplained cash by way of unexplained cash expenditure u/s 69C of the Act. The assessee carried this matter in appeal expenditure u/s 69C of the Act. The assessee carried this matter in appeal expenditure u/s 69C of the Act. The assessee carried this matter in appeal before the Ld. CIT(A) who is noted to have confirmed the order of the AO. before the Ld. CIT(A) who is noted to have confirmed the order of the AO. before the Ld. CIT(A) who is noted to have confirmed the order of the AO.

Being aggrieved by the order Being aggrieved by the order of the lower authorities, the assessee is now of the lower authorities, the assessee is now in appeal before us.

15.1 Assailing the action of the lower authorities, the Ld. AR Assailing the action of the lower authorities, the Ld. AR Assailing the action of the lower authorities, the Ld. AR Shri Anand contended that, it is a well settled jurisprudence that, the entries found in contended that, it is a well settled jurisprudence that, the entries found in contended that, it is a well settled jurisprudence that, the entries found in third party ledger by itself cannot third party ledger by itself cannot be treated as conclusive proof to justify be treated as conclusive proof to justify addition in the hands of the assessee without there being any addition in the hands of the assessee without there being any addition in the hands of the assessee without there being any corroborative material to support the same. He submitted that, the corroborative material to support the same. He submitted that, the corroborative material to support the same. He submitted that, the to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. impugned addition was solely based on the entries found in a ledger impugned addition was solely based on the entries found in a ledger impugned addition was solely based on the entries found in a ledger extracted from tally data seized in the course of search conducted at a lly data seized in the course of search conducted at a lly data seized in the course of search conducted at a third party, M/s BBPL. He pointed out that, based on the entries found third party, M/s BBPL. He pointed out that, based on the entries found third party, M/s BBPL. He pointed out that, based on the entries found therein, the Revenue’s case was that, the assessee had made payment of therein, the Revenue’s case was that, the assessee had made payment of therein, the Revenue’s case was that, the assessee had made payment of Rs.27.30 crores towards investment in a property at T Nagar Rs.27.30 crores towards investment in a property at T Nagar Rs.27.30 crores towards investment in a property at T Nagar. The Ld. AR brought to our notice that, the assessee had not undertaken any brought to our notice that, the assessee had not undertaken any brought to our notice that, the assessee had not undertaken any transaction with BBPL and it had not acquired any property from the said transaction with BBPL and it had not acquired any property from the said transaction with BBPL and it had not acquired any property from the said builder. He pointed out the search action also did not reveal any such builder. He pointed out the search action also did not reveal any such builder. He pointed out the search action also did not reveal any such unaccounted investment or property unaccounted investment or property acquisition by the assessee. He acquisition by the assessee. He pointed out that, the notings related to the period 2018 and 2019 and pointed out that, the notings related to the period 2018 and 2019 and pointed out that, the notings related to the period 2018 and 2019 and that the search action was conducted in March, 2021 and therefore, had that the search action was conducted in March, 2021 and therefore, had that the search action was conducted in March, 2021 and therefore, had the assessee made any such investment with BBPL to the tune of the assessee made any such investment with BBPL to the tune of the assessee made any such investment with BBPL to the tune of Rs.27.30 crores, some evidence or document or agreement with the e evidence or document or agreement with the e evidence or document or agreement with the builder would have been there, which was not the case. The Ld. AR builder would have been there, which was not the case. The Ld. AR builder would have been there, which was not the case. The Ld. AR explained that, it is against the normal practice followed in real estate explained that, it is against the normal practice followed in real estate explained that, it is against the normal practice followed in real estate dealings and would be impractical to assume that, a person would have dealings and would be impractical to assume that, a person would have dealings and would be impractical to assume that, a person would have invested in a property with a builder and paid cash component without nvested in a property with a builder and paid cash component without nvested in a property with a builder and paid cash component without even paying a single amount by cheque or by entering into a valid even paying a single amount by cheque or by entering into a valid even paying a single amount by cheque or by entering into a valid agreement for sale to safeguard their interests in the investment. agreement for sale to safeguard their interests in the investment. agreement for sale to safeguard their interests in the investment.

15.2 The Ld. AR also submitted that, it was not in di The Ld. AR also submitted that, it was not in dispute that, BBPL had spute that, BBPL had also denied the contents of this tally data and had filed a retraction with also denied the contents of this tally data and had filed a retraction with also denied the contents of this tally data and had filed a retraction with the income-tax authorities. He argued that, the findings rendered by the tax authorities. He argued that, the findings rendered by the tax authorities. He argued that, the findings rendered by the to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 105 ::

Ld. CIT(A) that, their retraction was not tenable could have been relevant Ld. CIT(A) that, their retraction was not tenable could have been relevant Ld. CIT(A) that, their retraction was not tenable could have been relevant qua the income-tax assessment of BBPL. The assessee has claimed that, tax assessment of BBPL. The assessee has claimed that, tax assessment of BBPL. The assessee has claimed that, the presumption u/s 132(4), 132(4A) & 292C are only available against the presumption u/s 132(4), 132(4A) & 292C are only available against the presumption u/s 132(4), 132(4A) & 292C are only available against the searched person and that the Ld. CIT(A) had erred in extending the the searched person and that the Ld. CIT(A) had erred in extending the the searched person and that the Ld. CIT(A) had erred in extending the said presumption to the assessee as well. He submitted t said presumption to the assessee as well. He submitted t said presumption to the assessee as well. He submitted that, if the notings found in the tally data of BBPL was being sought to be linked to notings found in the tally data of BBPL was being sought to be linked to notings found in the tally data of BBPL was being sought to be linked to the assessee, then the onus was on the Revenue to bring on record, other the assessee, then the onus was on the Revenue to bring on record, other the assessee, then the onus was on the Revenue to bring on record, other independent material to back the same. The Ld. AR accordingly contended independent material to back the same. The Ld. AR accordingly contended independent material to back the same. The Ld. AR accordingly contended that the impugned addition that the impugned addition made by the lower authorities was made by the lower authorities was unsustainable.

15.3 It was further submitted that the impugned AYs 2018 It was further submitted that the impugned AYs 2018 It was further submitted that the impugned AYs 2018-19 and 2019- 20 in which this addition has been made were unabated assessments. The 20 in which this addition has been made were unabated assessments. The 20 in which this addition has been made were unabated assessments. The Ld. AR claimed that there was no incriminating material found in Ld. AR claimed that there was no incriminating material found in Ld. AR claimed that there was no incriminating material found in the course of search conducted upon the assessee and that the addition was course of search conducted upon the assessee and that the addition was course of search conducted upon the assessee and that the addition was made solely by relying on the seized material found at the premises of made solely by relying on the seized material found at the premises of made solely by relying on the seized material found at the premises of BBPL. According to him therefore, having regard to the principle laid down BBPL. According to him therefore, having regard to the principle laid down BBPL. According to him therefore, having regard to the principle laid down that the Hon’ble Supreme Court in t that the Hon’ble Supreme Court in the case of Pr.CIT Vs Abhisar Pr.CIT Vs Abhisar Buildwell Pvt Ltd (454 ITR 212), the impugned addition made in the , the impugned addition made in the Buildwell Pvt Ltd (454 ITR 212) unabated AYs was legally unsustainable due to the absence of any unabated AYs was legally unsustainable due to the absence of any unabated AYs was legally unsustainable due to the absence of any incriminating material found in the course of search at the assessee’s incriminating material found in the course of search at the assessee’s incriminating material found in the course of search at the assessee’s premises. to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 106 ::

15.4 The Ld. CIT, DR appearing for the Revenue, on the other hand, CIT, DR appearing for the Revenue, on the other hand, CIT, DR appearing for the Revenue, on the other hand, vehemently supported the order of the lower authorities. Taking us vehemently supported the order of the lower authorities. Taking us vehemently supported the order of the lower authorities. Taking us through the order of the Ld. CIT(A), he pointed out that the Managing through the order of the Ld. CIT(A), he pointed out that the Managing through the order of the Ld. CIT(A), he pointed out that the Managing Director of the assessee had undertaken certain loan transactions Director of the assessee had undertaken certain loan transactions Director of the assessee had undertaken certain loan transactions with BBPL around the same period which according to him, indicated that the BBPL around the same period which according to him, indicated that the BBPL around the same period which according to him, indicated that the assessee knew BBPL and thus contended that the entries found in the assessee knew BBPL and thus contended that the entries found in the assessee knew BBPL and thus contended that the entries found in the tally data related to the assessee. He further argued that, the fact that tally data related to the assessee. He further argued that, the fact that tally data related to the assessee. He further argued that, the fact that the entries found in the tally data o the entries found in the tally data of BBPL was missing in the books of f BBPL was missing in the books of accounts of the assessee, incriminated the assessee of being involved in accounts of the assessee, incriminated the assessee of being involved in accounts of the assessee, incriminated the assessee of being involved in making unaccounted cash payments. According to him, the entries in the making unaccounted cash payments. According to him, the entries in the making unaccounted cash payments. According to him, the entries in the tally account were unambiguously clear that the assessee had made cash tally account were unambiguously clear that the assessee had made cash tally account were unambiguously clear that the assessee had made cash payments to BBPL. He accordingly urged us not to interfere with the order ts to BBPL. He accordingly urged us not to interfere with the order ts to BBPL. He accordingly urged us not to interfere with the order of the lower authorities. of the lower authorities.

15.5 Heard both the parties. Heard both the parties. The facts on record shows that certain The facts on record shows that certain material was seized from the premises of BBPL which inter alia included a material was seized from the premises of BBPL which inter alia included a material was seized from the premises of BBPL which inter alia included a ledger extracted from the tally titled ‘Lalitha Jwel om the tally titled ‘Lalitha Jwel-T Nagar Inv’. The T Nagar Inv’. The narrations in this ledger suggested that cash was received by BBPL from narrations in this ledger suggested that cash was received by BBPL from narrations in this ledger suggested that cash was received by BBPL from ‘Lalitha’ or ‘Kiran Anna’ towards their project at T Nagar. Careful analysis ‘Lalitha’ or ‘Kiran Anna’ towards their project at T Nagar. Careful analysis ‘Lalitha’ or ‘Kiran Anna’ towards their project at T Nagar. Careful analysis of the entries suggest that all of them were purported of the entries suggest that all of them were purported of the entries suggest that all of them were purported cash receipts towards the property. According to the AO, the key person of BBPL in his towards the property. According to the AO, the key person of BBPL in his towards the property. According to the AO, the key person of BBPL in his initial statement had also accepted these notings to be cash receipts initial statement had also accepted these notings to be cash receipts initial statement had also accepted these notings to be cash receipts towards their project. Armed with these third party material, the AO is towards their project. Armed with these third party material, the AO is towards their project. Armed with these third party material, the AO is to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. found to have made the impu found to have made the impugned addition by way of unaccounted cash gned addition by way of unaccounted cash paid by the assessee to BBPL. Before us, as well as the lower authorities, paid by the assessee to BBPL. Before us, as well as the lower authorities, paid by the assessee to BBPL. Before us, as well as the lower authorities, the assessee is noted to have unequivocally denied the contents of this the assessee is noted to have unequivocally denied the contents of this the assessee is noted to have unequivocally denied the contents of this ledger and has also refuted the allegation levelled by the AO that t ledger and has also refuted the allegation levelled by the AO that t ledger and has also refuted the allegation levelled by the AO that the assessee had paid cash in relation to certain property transactions. assessee had paid cash in relation to certain property transactions. assessee had paid cash in relation to certain property transactions.

15.6 Having perused the contents of this ledger, at first blush, it appears Having perused the contents of this ledger, at first blush, it appears Having perused the contents of this ledger, at first blush, it appears that the assessee or his managing director has paid cash towards certain that the assessee or his managing director has paid cash towards certain that the assessee or his managing director has paid cash towards certain investment at T Nagar. However, wh investment at T Nagar. However, what is apparent may not always be at is apparent may not always be real. Upon dwelling into the contemporaneous facts brought on record by real. Upon dwelling into the contemporaneous facts brought on record by real. Upon dwelling into the contemporaneous facts brought on record by the assessee, an opposite picture is found to emerge. The assessee has the assessee, an opposite picture is found to emerge. The assessee has the assessee, an opposite picture is found to emerge. The assessee has brought to our notice that, at no material time, did it acquire any property brought to our notice that, at no material time, did it acquire any property brought to our notice that, at no material time, did it acquire any property or make any investment with BBPL. It is noticed that the search was make any investment with BBPL. It is noticed that the search was make any investment with BBPL. It is noticed that the search was conducted upon the assessee in the year 2021, i.e. more than two years conducted upon the assessee in the year 2021, i.e. more than two years conducted upon the assessee in the year 2021, i.e. more than two years after the date of the first entry in this ledger and the assessment was after the date of the first entry in this ledger and the assessment was after the date of the first entry in this ledger and the assessment was completed in the year 2023. The Revenue however completed in the year 2023. The Revenue however has not brought on has not brought on record any evidence or detail regarding the purported property or record any evidence or detail regarding the purported property or record any evidence or detail regarding the purported property or investment which has been made by the assessee with BBPL. The investment which has been made by the assessee with BBPL. The investment which has been made by the assessee with BBPL. The Revenue has also not been able to provide the details of property or Revenue has also not been able to provide the details of property or Revenue has also not been able to provide the details of property or investment, if any, found in the course investment, if any, found in the course of search at BBPL, towards which, of search at BBPL, towards which, such on-monies were paid. In absence of these basi monies were paid. In absence of these basic details, such as details, such as name of project, exact location of property, copy of agreement, booking name of project, exact location of property, copy of agreement, booking name of project, exact location of property, copy of agreement, booking details, etc., a doubt is cast upon the veracity of these entries found in details, etc., a doubt is cast upon the veracity of these entries found in details, etc., a doubt is cast upon the veracity of these entries found in to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. the ledger seized from the third party premises. When the assessee is not dger seized from the third party premises. When the assessee is not dger seized from the third party premises. When the assessee is not shown to have actually purchased any property from BBPL or is found to shown to have actually purchased any property from BBPL or is found to shown to have actually purchased any property from BBPL or is found to be in possession of any property developed by BBPL, then, the case built be in possession of any property developed by BBPL, then, the case built be in possession of any property developed by BBPL, then, the case built by the Revenue that the assessee had made ca by the Revenue that the assessee had made cash payments to BBPL in sh payments to BBPL in connection therewith, fails. connection therewith, fails.

15.7 The Ld. AR also pointed out to us that BBPL was neither related nor The Ld. AR also pointed out to us that BBPL was neither related nor The Ld. AR also pointed out to us that BBPL was neither related nor a group entity of the assessee. Instead, it was an independent and a group entity of the assessee. Instead, it was an independent and a group entity of the assessee. Instead, it was an independent and unrelated real estate company. He submitted that, ordinarily, a unrelated real estate company. He submitted that, ordinarily, a unrelated real estate company. He submitted that, ordinarily, any booking by a customer in any project undertaken by a real estate developer would by a customer in any project undertaken by a real estate developer would by a customer in any project undertaken by a real estate developer would necessarily be evidenced by some form of MOU or agreement or an necessarily be evidenced by some form of MOU or agreement or an necessarily be evidenced by some form of MOU or agreement or an allotment letter, etc. Also, ordinarily, at least some amount would have allotment letter, etc. Also, ordinarily, at least some amount would have allotment letter, etc. Also, ordinarily, at least some amount would have been paid by cheque to the builder been paid by cheque to the builder towards such property. It is highly towards such property. It is highly unlikely that any customer, would pay such huge sums of monies to a real unlikely that any customer, would pay such huge sums of monies to a real unlikely that any customer, would pay such huge sums of monies to a real estate developer towards purchase of any property or investment without estate developer towards purchase of any property or investment without estate developer towards purchase of any property or investment without there being any unregistered or registered agreement or at there being any unregistered or registered agreement or at there being any unregistered or registered agreement or at least some portion of the aggrieved consideration paid through cheque so as to on of the aggrieved consideration paid through cheque so as to on of the aggrieved consideration paid through cheque so as to establish right to specific performance qua such property or investment. establish right to specific performance qua such property or investment. establish right to specific performance qua such property or investment.

We find this explanation of the assessee to be reasonable. We find this explanation of the assessee to be reasonable.

15.8 For the above reasons, in our considered opinion, the a For the above reasons, in our considered opinion, the a For the above reasons, in our considered opinion, the assessee’s denial with regard to the contents of the entries found in the ledger seized denial with regard to the contents of the entries found in the ledger seized denial with regard to the contents of the entries found in the ledger seized from the premises of BBPL is found to be justifiable. It is noticed that from the premises of BBPL is found to be justifiable. It is noticed that from the premises of BBPL is found to be justifiable. It is noticed that to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. these material aspects were pointed out by the assessee before the lower these material aspects were pointed out by the assessee before the lower these material aspects were pointed out by the assessee before the lower authorities as well but the Revenue has failed to bring on record any the Revenue has failed to bring on record any contrary material or evidence to disprove the case made out by the contrary material or evidence to disprove the case made out by the contrary material or evidence to disprove the case made out by the assessee. According to us, when the AO, came in possession of the assessee. According to us, when the AO, came in possession of the assessee. According to us, when the AO, came in possession of the impugned third party material, but the assessee had denied its contents impugned third party material, but the assessee had denied its contents impugned third party material, but the assessee had denied its contents and also shown that it had not acquired any property from BBPL, then the also shown that it had not acquired any property from BBPL, then the also shown that it had not acquired any property from BBPL, then the AO ought to have probed further, cross examined BBPL and brought on AO ought to have probed further, cross examined BBPL and brought on AO ought to have probed further, cross examined BBPL and brought on record some tangible material which would justify the veracity of the record some tangible material which would justify the veracity of the record some tangible material which would justify the veracity of the entries found in the impugned ledger. We find tha entries found in the impugned ledger. We find that the AO however failed t the AO however failed to do so. Instead, the AO is noted to have acknowledged that, even the to do so. Instead, the AO is noted to have acknowledged that, even the to do so. Instead, the AO is noted to have acknowledged that, even the key person of BBPL had retracted from his original statement and had key person of BBPL had retracted from his original statement and had key person of BBPL had retracted from his original statement and had furnished a retraction affidavit, before his AO. In our considered opinion, furnished a retraction affidavit, before his AO. In our considered opinion, furnished a retraction affidavit, before his AO. In our considered opinion, the AO could not have simply brushed aside this retraction affidavit by have simply brushed aside this retraction affidavit by have simply brushed aside this retraction affidavit by alleging it to be an after alleging it to be an after-thought, but should have cross examined the thought, but should have cross examined the third person upon receipt of such retraction so as to unearth the correct third person upon receipt of such retraction so as to unearth the correct third person upon receipt of such retraction so as to unearth the correct state of affairs. Having not done so, we are unable to state of affairs. Having not done so, we are unable to countenance the countenance the findings of the lower authorities rejecting this retraction affidavit, findings of the lower authorities rejecting this retraction affidavit, findings of the lower authorities rejecting this retraction affidavit, particularly, in light of the above discussed aspects brought on record by particularly, in light of the above discussed aspects brought on record by particularly, in light of the above discussed aspects brought on record by the assessee.

15.9 The lower authorities are noted to have stressed on the loans taken The lower authorities are noted to have stressed on the loans taken The lower authorities are noted to have stressed on the loans taken by the Managing Director of the assessee, Shri Kiran Kumar to justify the by the Managing Director of the assessee, Shri Kiran Kumar to justify the by the Managing Director of the assessee, Shri Kiran Kumar to justify the veracity of the entries found in this ledger. We find their action to be veracity of the entries found in this ledger. We find their action to be veracity of the entries found in this ledger. We find their action to be to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. factually misplaced. Firstly, it is obser factually misplaced. Firstly, it is observed from the material placed on ved from the material placed on record that, Shri Kiran Kumar had received loans from the BBPL group record that, Shri Kiran Kumar had received loans from the BBPL group record that, Shri Kiran Kumar had received loans from the BBPL group through banking channel on which, he serviced the interest and later on, through banking channel on which, he serviced the interest and later on, through banking channel on which, he serviced the interest and later on, repaid the loan as well. This loan availed by Shri Kiran Kumar is therefore repaid the loan as well. This loan availed by Shri Kiran Kumar is therefore repaid the loan as well. This loan availed by Shri Kiran Kumar is therefore noted to be recorded in the regular books of accounts. It is observed that to be recorded in the regular books of accounts. It is observed that to be recorded in the regular books of accounts. It is observed that neither, the transaction involving receipt of loan or repayment of this loan neither, the transaction involving receipt of loan or repayment of this loan neither, the transaction involving receipt of loan or repayment of this loan is found to appear in the impugned purported ledger. Rather, as noted is found to appear in the impugned purported ledger. Rather, as noted is found to appear in the impugned purported ledger. Rather, as noted earlier, all the entries in this ledger earlier, all the entries in this ledger are only cash receipts and there are are only cash receipts and there are no cheque notings found therein, which would have otherwise lend no cheque notings found therein, which would have otherwise lend no cheque notings found therein, which would have otherwise lend credence to the cash notings against the assessee. Hence, in our opinion, credence to the cash notings against the assessee. Hence, in our opinion, credence to the cash notings against the assessee. Hence, in our opinion, nothing much turns on the fact that the managing director of the nothing much turns on the fact that the managing director of the nothing much turns on the fact that the managing director of the assessee knew BBPL and had availed regular business loan from them. BPL and had availed regular business loan from them. BPL and had availed regular business loan from them.

It is true that section 132(4A) read with section 292C of the It is true that section 132(4A) read with section 292C of the It is true that section 132(4A) read with section 292C of the 15.10 Act, raises a presumption that that the contents of books of account and Act, raises a presumption that that the contents of books of account and Act, raises a presumption that that the contents of books of account and other documents seized during the course of search is true. B other documents seized during the course of search is true. B other documents seized during the course of search is true. But it should be kept in mind that this presumption is only qua the person who is be kept in mind that this presumption is only qua the person who is be kept in mind that this presumption is only qua the person who is searched and/or from whose possession the books of account and searched and/or from whose possession the books of account and searched and/or from whose possession the books of account and documents are found and none else. Moreover this presumption is documents are found and none else. Moreover this presumption is documents are found and none else. Moreover this presumption is rebuttable. In the given facts of the case, sinc rebuttable. In the given facts of the case, since the documents in question e the documents in question was not found or impounded from the assessee's premises but in the was not found or impounded from the assessee's premises but in the was not found or impounded from the assessee's premises but in the course of search conducted against a third party, the presumption set out course of search conducted against a third party, the presumption set out course of search conducted against a third party, the presumption set out in Section 132(4A) / 292C of the Act does not apply to the assessee. The in Section 132(4A) / 292C of the Act does not apply to the assessee. The in Section 132(4A) / 292C of the Act does not apply to the assessee. The to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. assessee, therefore, is legally entitled to an opportunity of examining efore, is legally entitled to an opportunity of examining efore, is legally entitled to an opportunity of examining these documents, which were admittedly not impounded from its these documents, which were admittedly not impounded from its these documents, which were admittedly not impounded from its premises, and can seek cross examination of the third party from whose premises, and can seek cross examination of the third party from whose premises, and can seek cross examination of the third party from whose possession such document was found and furnish its rebuttals and possession such document was found and furnish its rebuttals and possession such document was found and furnish its rebuttals and defense with cogent evidence. with cogent evidence.

As discussed above, the assessee has been able to furnish As discussed above, the assessee has been able to furnish As discussed above, the assessee has been able to furnish 15.11 reasonable explanation rebutting the veracity of the entries found in this reasonable explanation rebutting the veracity of the entries found in this reasonable explanation rebutting the veracity of the entries found in this ledger and has made out a case that it may not pertain to it. Also, the ledger and has made out a case that it may not pertain to it. Also, the ledger and has made out a case that it may not pertain to it. Also, the third party has retracted from his original statement and neither did the retracted from his original statement and neither did the retracted from his original statement and neither did the AO cross examine him or provide the assessee an opportunity to cross AO cross examine him or provide the assessee an opportunity to cross AO cross examine him or provide the assessee an opportunity to cross- examine him. Apart from extracting the entries found in the third party examine him. Apart from extracting the entries found in the third party examine him. Apart from extracting the entries found in the third party ledger, we note that the AO did not bring any material o ledger, we note that the AO did not bring any material o ledger, we note that the AO did not bring any material on record which could lead to conclusion that the assessee had paid these on could lead to conclusion that the assessee had paid these on could lead to conclusion that the assessee had paid these on-monies towards any project of BBPL. towards any project of BBPL.

15.12 In the given facts, as discussed above, and particularly having In the given facts, as discussed above, and particularly having In the given facts, as discussed above, and particularly having regard to the fact that the assessee had not actually purchased any regard to the fact that the assessee had not actually purchased any regard to the fact that the assessee had not actually purchased any property from BBPL, if the Revenue’s assumption ty from BBPL, if the Revenue’s assumption that, the notings found the notings found in the BBPL’s ledger pertained to cash receipts from the assessee for T BBPL’s ledger pertained to cash receipts from the assessee for T BBPL’s ledger pertained to cash receipts from the assessee for T Nagar investment, is taken at its face value, then any person for that , is taken at its face value, then any person for that , is taken at its face value, then any person for that matter can mention anyone’s name in any matter can mention anyone’s name in any ledger at his sweet will and at his sweet will and implicate such other person for no fault of the latter implicate such other person for no fault of the latter, when admittedly , when admittedly to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. such person did not actually transact with the former such person did not actually transact with the former. In this regard, we In this regard, we gainfully again refer to gainfully again refer to the judgment rendered by the Hon’ble Delhi High the judgment rendered by the Hon’ble Delhi High Court in the case of CIT vs Sant Lal (supra) CIT vs Sant Lal (supra) wherein it was held that, wherein it was held that, no addition can be made in the hands of an assessee on the basis of no addition can be made in the hands of an assessee on the basis of no addition can be made in the hands of an assessee on the basis of amounts found mentioned against his name in amounts found mentioned against his name in any diary any diary or document seized from third party, third party, without their being any corroborative evi corroborative evidence to substantiate that it pertained to the assessee. substantiate that it pertained to the assessee. We also rely, in this regard, We also rely, in this regard, on the decisions (supra) discussed at Paras 10.15 to 10.17 earlier. on the decisions (supra) discussed at Paras 10.15 to 10.17 earlier. on the decisions (supra) discussed at Paras 10.15 to 10.17 earlier.

15.13 Hence, for the above reasons, we accordingly hold that the Hence, for the above reasons, we accordingly hold that the Hence, for the above reasons, we accordingly hold that the impugned addition of Rs.15,30,00,00 impugned addition of Rs.15,30,00,000/- made by the AO in the relevant made by the AO in the relevant year on the basis of uncorroborated and retracted third party documents, year on the basis of uncorroborated and retracted third party documents, year on the basis of uncorroborated and retracted third party documents, without any independent corroborative material, was unsustainable and without any independent corroborative material, was unsustainable and without any independent corroborative material, was unsustainable and therefore the same is directed to be deleted. These grounds are therefore the same is directed to be deleted. These grounds are therefore the same is directed to be deleted. These grounds are accordingly allowed.

Ground Nos. 21 to 27 21 to 27 of assessee’s appeal in A.Y. 2017 ssessee’s appeal in A.Y. 2017-18, we accordingly hold that, the entries found in the material seized from the , the entries found in the material seized from the , the entries found in the material seized from the premises was unreliable and therefore the addition of gross profit of premises was unreliable and therefore the addition of gross profit of premises was unreliable and therefore the addition of gross profit of Rs.1,10,28,230/- made on account of unmatched entries between the made on account of unmatched entries between the made on account of unmatched entries between the assessee’s books and the data seized from the premises of MJPL is held to assessee’s books and the data seized from the premises of MJPL is held to assessee’s books and the data seized from the premises of MJPL is held to unjustified both on facts on facts and in law. We therefore allow the and in law. We therefore allow these grounds and direct the AO to delete the impugned addition to delete the impugned addition made in AY in AY 2018-19. for AY 2019 No.678/Chny/2025 for AY 2019-20.

17. We now take up the assessee’s appeal in We now take up the assessee’s appeal in 678/Chny/2025 for AY 2019-20.

Ground No. 4 to 8of the appeal relates to the of the appeal relates to the addition of 19. Ground No. 4 to 8 Rs.3,04,26,937/- made by way of unaccounted cash receipts found noted made by way of unaccounted cash receipts found noted made by way of unaccounted cash receipts found noted in the mail attachment of Mr. Stanley. attachment of Mr. Stanley. After considering the rival After considering the rival submissions, it is observed that, except submissions, it is observed that, except variation in figures, the reasoning variation in figures, the reasoning adopted both by the AO & Ld. CIT(A) to justify this addition AO & Ld. CIT(A) to justify this addition AO & Ld. CIT(A) to justify this addition is verbatim same as in AY 2016-17. .

19.1 Following our reasons a Following our reasons and conclusions drawn while deciding Ground deciding Ground Nos. 4 to 8 of assessee’s appeal in A.Y. 2016 ssessee’s appeal in A.Y. 2016-17, we hold that the , we hold that the to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. addition of Rs.3,04,26,937 3,04,26,937/- is untenable on facts and in law. We and in law. We therefore allow the Ground Nos. therefore allow the Ground Nos. 4 to 8 raised by the assessee an raised by the assessee and direct the AO to delete the impugned addition to delete the impugned addition made in AY 2019-20 20.

20. Ground Nos. 9 to to 13 raised in the appeal are against the addition raised in the appeal are against the addition of Rs.33,46,24,250/- made by way of unaccounted repayment of cash made by way of unaccounted repayment of cash made by way of unaccounted repayment of cash loans to Shri Anbu u/s 68 of the Act. I loans to Shri Anbu u/s 68 of the Act. It is observed that, except t is observed that, except variation in figures, the reasoning adopted both by the in figures, the reasoning adopted both by the AO & Ld. CIT(A) to justify AO & Ld. CIT(A) to justify this addition was the same as earlier AY 2017 this addition was the same as earlier AY 2017-18. Even the arguments 18. Even the arguments put forth by the both parties was common. The only additional fact in the put forth by the both parties was common. The only additional fact in the put forth by the both parties was common. The only additional fact in the impugned AY is that, for AY 20 impugned AY is that, for AY 2019-20, the IBS in their order in the matters 20, the IBS in their order in the matters of Shri Anbu had identified two notings aggregating to Rs.20 crores to be of Shri Anbu had identified two notings aggregating to Rs.20 crores to be of Shri Anbu had identified two notings aggregating to Rs.20 crores to be unaccounted for. As noted earlier, these two notings were ultimately unaccounted for. As noted earlier, these two notings were ultimately unaccounted for. As noted earlier, these two notings were ultimately owned up by Shri Anbu as his own undisclosed income and therefore, i owned up by Shri Anbu as his own undisclosed income and therefore, i owned up by Shri Anbu as his own undisclosed income and therefore, in our considered view, the said finding of the IBS does not have any our considered view, the said finding of the IBS does not have any our considered view, the said finding of the IBS does not have any bearing on the case of the assessee. Instead, it reinforces the assessee’s bearing on the case of the assessee. Instead, it reinforces the assessee’s bearing on the case of the assessee. Instead, it reinforces the assessee’s case that, the notings found from the premises of Shri Anbu did not case that, the notings found from the premises of Shri Anbu did not case that, the notings found from the premises of Shri Anbu did not reflected their unaccounted transactions. Th reflected their unaccounted transactions. Thus, following our reasons and ollowing our reasons and conclusions recorded while conclusions recorded while deciding Ground Nos. 9 to 13 9 to 13 of assessee’s appeal in A.Y. 2017-18, we , we hold that the impugned addition on account of hold that the impugned addition on account of alleged repayment of cash loans was unsustainable. We thus allow these alleged repayment of cash loans was unsustainable. We thus allow these alleged repayment of cash loans was unsustainable. We thus allow these grounds and direct the AO to delete the impugned addition made in AY direct the AO to delete the impugned addition made in AY direct the AO to delete the impugned addition made in AY 2019-20.

to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 115 ::

Ground Nos. 15 to 18 are noted to be against the addition of are noted to be against the addition of 21. Ground Nos. 15 to 18 Rs.12,00,00,000/- by way of unaccounted cash expenditure u/s 69C of by way of unaccounted cash expenditure u/s 69C of by way of unaccounted cash expenditure u/s 69C of the Act on basis of the tally entries found in the premi the Act on basis of the tally entries found in the premises of BBPL. I ses of BBPL. It is observed that, except variation in figures, the reasoning adopted both by variation in figures, the reasoning adopted both by variation in figures, the reasoning adopted both by the AO & Ld. CIT(A) to justify this addition was the same as earlier AY AO & Ld. CIT(A) to justify this addition was the same as earlier AY AO & Ld. CIT(A) to justify this addition was the same as earlier AY 2018-19. Even the arguments put forth by the both parties was common.

19. Even the arguments put forth by the both parties was common.

19. Even the arguments put forth by the both parties was common.

Thus, following our reasons and conclusions recorded while easons and conclusions recorded while easons and conclusions recorded while deciding Ground Nos. 15 to 18 of a of assessee’s appeal in A.Y. 2018-19 19, we hold that the impugned addition on account of alleged unaccounted cash the impugned addition on account of alleged unaccounted cash the impugned addition on account of alleged unaccounted cash expenditure was unjustified and thus direct the AO to delete the expenditure was unjustified and thus direct the AO to delete the expenditure was unjustified and thus direct the AO to delete the impugned addition made in AY 2019 dition made in AY 2019-20. These grounds are accordingly 20. These grounds are accordingly allowed.

Ground Nos. 19 to 23 raised by the assessee relate to the raised by the assessee relate to the 22. Ground Nos. 19 to 23 addition partially confirmed by the Ld. CIT(A) on account of excess addition partially confirmed by the Ld. CIT(A) on account of excess addition partially confirmed by the Ld. CIT(A) on account of excess wastage loss claimed upon conversion of old gold ornaments wastage loss claimed upon conversion of old gold ornaments wastage loss claimed upon conversion of old gold ornaments into new gold. The facts as noted are that, the AO had observed that the assessee gold. The facts as noted are that, the AO had observed that the assessee gold. The facts as noted are that, the AO had observed that the assessee had converted its old / new gold ornaments back into fine gold. The AO had converted its old / new gold ornaments back into fine gold. The AO had converted its old / new gold ornaments back into fine gold. The AO observed that the assessee had claimed wastage on such conversion observed that the assessee had claimed wastage on such conversion observed that the assessee had claimed wastage on such conversion which, in his view was excessive. Acc which, in his view was excessive. According to the AO, the gold ording to the AO, the gold ornaments in the assessee’s inventory ought to have been of 91.6% ornaments in the assessee’s inventory ought to have been of 91.6% ornaments in the assessee’s inventory ought to have been of 91.6% purity as per the Government Gold Standard Regulations. The AO noted purity as per the Government Gold Standard Regulations. The AO noted purity as per the Government Gold Standard Regulations. The AO noted that the assessee was doing purity checking in the stage of making these that the assessee was doing purity checking in the stage of making these that the assessee was doing purity checking in the stage of making these to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. ornaments and these o ornaments and these ornaments were also hallmarked as 91.6% purity. rnaments were also hallmarked as 91.6% purity.

In this background, the AO was of the view that the loss on conversion of In this background, the AO was of the view that the loss on conversion of In this background, the AO was of the view that the loss on conversion of these ornaments to fine gold should only be 8.4% [100% ( these ornaments to fine gold should only be 8.4% [100% ( these ornaments to fine gold should only be 8.4% [100% (-) 91.6%]. For this, the AO relied upon the data obtained from the Jilaba Appli this, the AO relied upon the data obtained from the Jilaba Appli this, the AO relied upon the data obtained from the Jilaba Application of all the branches and the sample test check which was done on 02 all the branches and the sample test check which was done on 02 all the branches and the sample test check which was done on 02-11- 2020 at the time of operation of the PO, whose working was provided to 2020 at the time of operation of the PO, whose working was provided to 2020 at the time of operation of the PO, whose working was provided to the assessee. The AO noted that the sample test check revealed that the the assessee. The AO noted that the sample test check revealed that the the assessee. The AO noted that the sample test check revealed that the stone weight percentage was only 1% stone weight percentage was only 1% of the gross weight and therefore of the gross weight and therefore total weight loss upon conversion would be 9.4% [8.4% + 1%]. With total weight loss upon conversion would be 9.4% [8.4% + 1%]. With total weight loss upon conversion would be 9.4% [8.4% + 1%]. With these observations, the AO is noted to have computed the value of these observations, the AO is noted to have computed the value of these observations, the AO is noted to have computed the value of wastage which ought to have been incurred on conversion of gold wastage which ought to have been incurred on conversion of gold wastage which ought to have been incurred on conversion of gold ornaments to pure gold and ornaments to pure gold and having regard to the wastage claimed by the having regard to the wastage claimed by the assessee, he worked out the excess wastage loss in the following manner: assessee, he worked out the excess wastage loss in the following manner: assessee, he worked out the excess wastage loss in the following manner:

FY Gross Wastage Wastage Actual Excess Excess Average Average Amount weight as per as per wastage wastage loss rate rate new to assessee assessee allowed claimed claimed old working working in weight % 2018-19 702400 14.40 40% 9.40% 5.00% 35093.85 2736 2736 96016783 22.1 The AO is accordingly noted to have show caused the assessee to The AO is accordingly noted to have show caused the assessee to The AO is accordingly noted to have show caused the assessee to explain as to why such excess wastage claimed in the books should not explain as to why such excess wastage claimed in the books should not explain as to why such excess wastage claimed in the books should not be brought to tax. The assessee is noted to have furnished detailed be brought to tax. The assessee is noted to have furnished detailed be brought to tax. The assessee is noted to have furnished detailed objections before the AO. It was objections before the AO. It was inter alia contended that the AO had that the AO had proceeded on the mistaken assumption that the gold ornaments were proceeded on the mistaken assumption that the gold ornaments were proceeded on the mistaken assumption that the gold ornaments were to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. mandatorily required to be of 91.6% purity. The assessee explained that mandatorily required to be of 91.6% purity. The assessee explained that mandatorily required to be of 91.6% purity. The assessee explained that the mandatory hallmarking of purity of 91.6% was notified only on 16 the mandatory hallmarking of purity of 91.6% was notified only on 16 the mandatory hallmarking of purity of 91.6% was notified only on 16-06- 2021 and therefore, the same w 2021 and therefore, the same was not applicable to the gold jewellery as not applicable to the gold jewellery manufactured prior to this press release. The assessee further explained manufactured prior to this press release. The assessee further explained manufactured prior to this press release. The assessee further explained that the gold ornaments which were being converted into new gold was that the gold ornaments which were being converted into new gold was that the gold ornaments which were being converted into new gold was their stock lying unsold for more than 10 years or those stock which were their stock lying unsold for more than 10 years or those stock which were their stock lying unsold for more than 10 years or those stock which were out of fashion and therefore, due to the changes in the customers’ taste out of fashion and therefore, due to the changes in the customers’ taste out of fashion and therefore, due to the changes in the customers’ taste and fashion, these items were being melted. According to the assessee and fashion, these items were being melted. According to the assessee and fashion, these items were being melted. According to the assessee therefore, the assumption being made that the gold purity of these therefore, the assumption being made that the gold purity of these therefore, the assumption being made that the gold purity of these ornaments ought to be 91.6% was factually inco ornaments ought to be 91.6% was factually incorrect. It was further rrect. It was further pointed out that the AO’s assumption that the stone weight would be 1% pointed out that the AO’s assumption that the stone weight would be 1% pointed out that the AO’s assumption that the stone weight would be 1% was also erroneous. The assessee was also erroneous. The assessee inter alia explained through the sample explained through the sample test check conducted on 02 test check conducted on 02-11-2020 to show that the stone weight at 2020 to show that the stone weight at several of its branches were as high as 6%. It was further submitted that s were as high as 6%. It was further submitted that s were as high as 6%. It was further submitted that the stone weight depended upon the types of jewellery and therefore the the stone weight depended upon the types of jewellery and therefore the the stone weight depended upon the types of jewellery and therefore the application of a single arbitrary rate of 1% was unwarranted. The application of a single arbitrary rate of 1% was unwarranted. The application of a single arbitrary rate of 1% was unwarranted. The assessee further explained that there are various items which have assessee further explained that there are various items which have assessee further explained that there are various items which have meenakari or kundan work and it is commonly known that such items meenakari or kundan work and it is commonly known that such items meenakari or kundan work and it is commonly known that such items have low purity due to the meenakari / kundan work done upon them. It have low purity due to the meenakari / kundan work done upon them. It have low purity due to the meenakari / kundan work done upon them. It was further submitted that even the wastage rate of the assessee of was further submitted that even the wastage rate of the assessee of was further submitted that even the wastage rate of the assessee of 14.14%, adopted by the AO was incorrect and that it 14.14%, adopted by the AO was incorrect and that it 14.14%, adopted by the AO was incorrect and that it was actually 12.16%, for which working was also provided by the assessee. 12.16%, for which working was also provided by the assessee. 12.16%, for which working was also provided by the assessee. to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 118 ::

22.2 The assessee further submitted that there was no wastage loss The assessee further submitted that there was no wastage loss The assessee further submitted that there was no wastage loss separately claimed in the books of accounts and that the value of the old separately claimed in the books of accounts and that the value of the old separately claimed in the books of accounts and that the value of the old gold ornaments so converted was equival gold ornaments so converted was equivalently assigned to the fine gold ently assigned to the fine gold and thus there was no separate debit or deduction claimed in the and thus there was no separate debit or deduction claimed in the and thus there was no separate debit or deduction claimed in the accounts. According to the assessee therefore, in absence of any claim of accounts. According to the assessee therefore, in absence of any claim of accounts. According to the assessee therefore, in absence of any claim of wastage, there was no question of any such disallowance. The assessee wastage, there was no question of any such disallowance. The assessee wastage, there was no question of any such disallowance. The assessee also contended that the search action did that the search action didn’t reveal any discrepancy in the t reveal any discrepancy in the stock of gold ornaments or fine gold and therefore, according to the stock of gold ornaments or fine gold and therefore, according to the stock of gold ornaments or fine gold and therefore, according to the assessee, if the wastage shown in the books were excessive then higher assessee, if the wastage shown in the books were excessive then higher assessee, if the wastage shown in the books were excessive then higher quantities of stock would have been physically found at quantities of stock would have been physically found at the time of the the time of the search, which was not the case. search, which was not the case.

22.3 The AO is noted to have rejected the submissions furnished by the The AO is noted to have rejected the submissions furnished by the The AO is noted to have rejected the submissions furnished by the assessee. According to the AO, the narration of the entries found in tally assessee. According to the AO, the narration of the entries found in tally assessee. According to the AO, the narration of the entries found in tally was ‘new gold ornaments’ transferred to old gold and thus rej was ‘new gold ornaments’ transferred to old gold and thus rej was ‘new gold ornaments’ transferred to old gold and thus rejected the assessee’s plea that the aging stock had been converted into fine gold. assessee’s plea that the aging stock had been converted into fine gold. assessee’s plea that the aging stock had been converted into fine gold.

The AO reiterated that the sample test check only revealed average stone The AO reiterated that the sample test check only revealed average stone The AO reiterated that the sample test check only revealed average stone weight of 1% and therefore, having regard to the hallmark purity weight of 1% and therefore, having regard to the hallmark purity weight of 1% and therefore, having regard to the hallmark purity standard of 91.6%, the AO concluded standard of 91.6%, the AO concluded that the wastage would not have that the wastage would not have exceeded 9.4%, as stated in his show cause notice. The AO accordingly is exceeded 9.4%, as stated in his show cause notice. The AO accordingly is exceeded 9.4%, as stated in his show cause notice. The AO accordingly is noted to have added the excess wastage loss as computed in the show noted to have added the excess wastage loss as computed in the show noted to have added the excess wastage loss as computed in the show cause notice, tabulated above, to the income of the assessee. Aggrieved cause notice, tabulated above, to the income of the assessee. Aggrieved cause notice, tabulated above, to the income of the assessee. Aggrieved to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. by the order of the AO, the assessee preferred appeal before the Ld. r of the AO, the assessee preferred appeal before the Ld. r of the AO, the assessee preferred appeal before the Ld. CIT(A).

22.4 On appeal, the Ld. CIT(A) is noted to have increased the allowable On appeal, the Ld. CIT(A) is noted to have increased the allowable On appeal, the Ld. CIT(A) is noted to have increased the allowable wastage rate from 9.4% as computed by the AO to 9.5%. The CIT(A) wastage rate from 9.4% as computed by the AO to 9.5%. The CIT(A) wastage rate from 9.4% as computed by the AO to 9.5%. The CIT(A) further observed that the correct rate of wastage of further observed that the correct rate of wastage of the assessee was the assessee was 12.16% and not 14.14% and accordingly directed the AO to verify and 12.16% and not 14.14% and accordingly directed the AO to verify and 12.16% and not 14.14% and accordingly directed the AO to verify and consider the correct rate and recomputed the excess wastage loss after consider the correct rate and recomputed the excess wastage loss after consider the correct rate and recomputed the excess wastage loss after allowing wastage rate of 9.5%. allowing wastage rate of 9.5%. Still not satisfied by this action action of the Ld. CIT(A), the assessee is now in appeal before us. s now in appeal before us.

22.5 Heard both the parties. It is noted that, the assessee is engaged in Heard both the parties. It is noted that, the assessee is engaged in Heard both the parties. It is noted that, the assessee is engaged in the business of manufacture and sale of gold jewellery through its retail the business of manufacture and sale of gold jewellery through its retail the business of manufacture and sale of gold jewellery through its retail showrooms spread across Southern States. In the course of its business, showrooms spread across Southern States. In the course of its business, showrooms spread across Southern States. In the course of its business, the assessee is found to be regularly undertaking the conversion of age ssee is found to be regularly undertaking the conversion of age ssee is found to be regularly undertaking the conversion of age- old, outdated or out-of of-fashion gold jewellery into fine gold for the fashion gold jewellery into fine gold for the purposes of crafting new jewellery in contemporary designs. This process purposes of crafting new jewellery in contemporary designs. This process purposes of crafting new jewellery in contemporary designs. This process is noted to involve melting the old gold ornament is noted to involve melting the old gold ornaments to extract the pure s to extract the pure gold. It is not in dispute between the parties that this melting process gold. It is not in dispute between the parties that this melting process gold. It is not in dispute between the parties that this melting process would result in wastage loss in as much as the quantity & weight of pure would result in wastage loss in as much as the quantity & weight of pure would result in wastage loss in as much as the quantity & weight of pure gold extracted would be lower due to the impurities in the old gold gold extracted would be lower due to the impurities in the old gold gold extracted would be lower due to the impurities in the old gold ornaments and also the weightage would be influenced by the other he weightage would be influenced by the other he weightage would be influenced by the other stones, non-precious metals etc. which was earlier used in their making precious metals etc. which was earlier used in their making precious metals etc. which was earlier used in their making to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. process. The limited dispute before us relates to the reasonable quantum process. The limited dispute before us relates to the reasonable quantum process. The limited dispute before us relates to the reasonable quantum of wastage loss in this entire process. The assessee is noted to of wastage loss in this entire process. The assessee is noted to of wastage loss in this entire process. The assessee is noted to have reported conversion losses of reported conversion losses of 12.16% in AY 2019-20, 15.36% in AY 20 , 15.36% in AY 2020- 21 and 15.17% in AY 202 and 15.17% in AY 2021-22. On the other hand, as noted above, the . On the other hand, as noted above, the case of the Revenue is that, the gold ornaments have purity of 91.6% and case of the Revenue is that, the gold ornaments have purity of 91.6% and case of the Revenue is that, the gold ornaments have purity of 91.6% and that weight of stones ought to be 1% and that weight of stones ought to be 1% and thus overall, the wastage thus overall, the wastage should not be more than 9.4%, which was increased to 9.5% by the Ld. should not be more than 9.4%, which was increased to 9.5% by the Ld. should not be more than 9.4%, which was increased to 9.5% by the Ld.

CIT(A).

22.6 On examination of the facts and circumstances of the case, we find On examination of the facts and circumstances of the case, we find On examination of the facts and circumstances of the case, we find that the impugned finding of the lower authorities is not emanating from that the impugned finding of the lower authorities is not emanating from that the impugned finding of the lower authorities is not emanating from any incriminating material unearthed in the course of search or any riminating material unearthed in the course of search or any riminating material unearthed in the course of search or any unaccounted asset found in the unaccounted asset found in the unaccounted asset found in the search. Rather, the impugned search. Rather, the impugned search. Rather, the impugned disallowance is based on the own subjective opinion of the AO. According disallowance is based on the own subjective opinion of the AO. According disallowance is based on the own subjective opinion of the AO. According to us, an addition cannot be made on the basis of surmises and to us, an addition cannot be made on the basis of surmises and to us, an addition cannot be made on the basis of surmises and conjectures. A suspicion however strong it may be, has to be supported conjectures. A suspicion however strong it may be, has to be supported conjectures. A suspicion however strong it may be, has to be supported by relevant material. We however find that no material . We however find that no material leave alone any leave alone any evidence to substantiate their basis for alleging that excessive wastage to substantiate their basis for alleging that excessive wastage to substantiate their basis for alleging that excessive wastage loss upon conversion had been claimed by the assessee. We particularly loss upon conversion had been claimed by the assessee. We particularly loss upon conversion had been claimed by the assessee. We particularly take note of the fact that, take note of the fact that, even during the course of the search, no even during the course of the search, no discrepancy with regard to the stock of discrepancy with regard to the stock of fine gold and gold jewellery d gold jewellery was found. Besides, none of ne of the purchases or sales have been doubted by the the purchases or sales have been doubted by the lower authorities. The books of accounts have been audited with complete The books of accounts have been audited with complete The books of accounts have been audited with complete to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. quantitative tally for purchase and sale of quantitative tally for purchase and sale of gold and gold jewellery gold and gold jewellery and no defects were found by the und by the Revenue. The Ld. AR has taken us through the The Ld. AR has taken us through the complete quantitative and value details of the inventory movement complete quantitative and value details of the inventory movement complete quantitative and value details of the inventory movement throughout these years, which were placed at throughout these years, which were placed at Pages 753 to 940 753 to 940 of Paper Book. It was also brought to our notice that the Revenue has . It was also brought to our notice that the Revenue has . It was also brought to our notice that the Revenue has completed the regular assessment u/s. eted the regular assessment u/s.143(3) of the Act 143(3) of the Act dated 31.03.2025 for the subsequent for the subsequent AY 2023-24 wherein also similar wherein also similar conversion loss was incurred upon melting of old gold ornaments and no conversion loss was incurred upon melting of old gold ornaments and no conversion loss was incurred upon melting of old gold ornaments and no adverse inference has been drawn in that assessment. The Revenue adverse inference has been drawn in that assessment. The Revenue adverse inference has been drawn in that assessment. The Revenue has also not been able to controvert these facts. In our considered view also not been able to controvert these facts. In our considered view also not been able to controvert these facts. In our considered view therefore, the impugned therefore, the impugned action of the lower authorities is found to be lower authorities is found to be based only on assumption and suspicion, which has no merit. only on assumption and suspicion, which has no merit. only on assumption and suspicion, which has no merit.

22.7 It is noted that the impugned disallowance It is noted that the impugned disallowance was a consequence of was a consequence of AO’s assumption that, all the old gold jewellery items which were melted, AO’s assumption that, all the old gold jewellery items which were melted, AO’s assumption that, all the old gold jewellery items which were melted, ought to have yielded 91.6% of pure gold. We find this assumption ought to have yielded 91.6% of pure gold. We find this assumption ought to have yielded 91.6% of pure gold. We find this assumption was superficial. As rightly pointed out by the assessee, the Revenue had failed . As rightly pointed out by the assessee, the Revenue had failed . As rightly pointed out by the assessee, the Revenue had failed to account for the inherent variations in the the inherent variations in the assessee’s assessee’s manufacturing practices. The Ld. AR explained to us that, the Ld. AR explained to us that, the term “22 carat” is an term “22 carat” is an industry convention and does not uniformly represent the actual purity of industry convention and does not uniformly represent the actual purity of industry convention and does not uniformly represent the actual purity of all ornaments, which can vary based on design intricacy, all ornaments, which can vary based on design intricacy, all ornaments, which can vary based on design intricacy, workmanship, and durability requirements. and durability requirements. We also agree with the assessee that, all We also agree with the assessee that, all gold ornaments are different and unique and some may require gold ornaments are different and unique and some may require gold ornaments are different and unique and some may require more to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. intricate designs which which necessitate the use of additional alloys to provide necessitate the use of additional alloys to provide structural integrity and wear structural integrity and wear ability, resulting in lower purity. ability, resulting in lower purity. The Ld. AR has also rightly explained that has also rightly explained that, in cases involving jewellery embedded , in cases involving jewellery embedded with precious or semi-precious stones, additional alloys are used to secure precious stones, additional alloys are used to secure precious stones, additional alloys are used to secure the stones in place, as pure gold alone lacks the strength fo the stones in place, as pure gold alone lacks the strength fo the stones in place, as pure gold alone lacks the strength for securing the same. These practical aspects thus necessitates These practical aspects thus necessitates reduction of tion of the actual gold content in a jewellery piece to in a jewellery piece to below the presumed 91.6% standard. below the presumed 91.6% standard.

It is noted that, the search team had also found It is noted that, the search team had also found any such any such instances wherein the conversion of old gold ornaments into fine gold resulted in wherein the conversion of old gold ornaments into fine gold resulted in wherein the conversion of old gold ornaments into fine gold resulted in yield of as low as 84.56%, which was put to question to Shri Stanley. The yield of as low as 84.56%, which was put to question to Shri Stanley. The yield of as low as 84.56%, which was put to question to Shri Stanley. The relevant Question and answer, taken note of by us is as follows: relevant Question and answer, taken note of by us is as follows: relevant Question and answer, taken note of by us is as follows:-

“Q 26Please refer to your answer “Q 26Please refer to your answer to the last question. The % of fine gold to the last question. The % of fine gold received is as low as 84.56% on certain dates. Please explain such huge received is as low as 84.56% on certain dates. Please explain such huge received is as low as 84.56% on certain dates. Please explain such huge variation in the % of the fine gold obtained from the old gold when the variation in the % of the fine gold obtained from the old gold when the variation in the % of the fine gold obtained from the old gold when the old gold is of 91.6% purity. old gold is of 91.6% purity.

A The purity of the fine gold obtained fro The purity of the fine gold obtained from refining of old gold depends m refining of old gold depends on the quality (purity) lity (purity) of the old gold received from the customers. The of the old gold received from the customers. The % of fine gold obtained out of old gold is less whenever the quality % of fine gold obtained out of old gold is less whenever the quality % of fine gold obtained out of old gold is less whenever the quality (purity) of old gold received is low. Th (purity) of old gold received is low. The value of old gold is also done value of old gold is also done according to the purity of the old gold received.” to the purity of the old gold received.”

22.8 It is also observed that, even the Ld. CIT(A) has tacitly It is also observed that, even the Ld. CIT(A) has tacitly It is also observed that, even the Ld. CIT(A) has tacitly acknowledged this fact at Para 7.4 of his acknowledged this fact at Para 7.4 of his impugned appellate order where appellate order where he also observed that the AO had he also observed that the AO had erred on facts by proceeding on facts by proceeding on a rigid presumption of BIS-certified purity at 91.6% across all categories of gold certified purity at 91.6% across all categories of gold certified purity at 91.6% across all categories of gold ornaments. The Ld. CIT(A) CIT(A) is also noted to have rightly rejected such a is also noted to have rightly rejected such a to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. generalized approach of the AO by of the AO by overlooking critical variables such as critical variables such as the actual purity of individual items, th the actual purity of individual items, the presence of intricate design e presence of intricate design features, and the existence of embedded non features, and the existence of embedded non-metallic elements, including metallic elements, including precious and semi-precious stones precious stones. The Ld. CIT(A) is also noted to have Ld. CIT(A) is also noted to have accepted that the extent of melting loss is not uniform but varies with the accepted that the extent of melting loss is not uniform but varies with the accepted that the extent of melting loss is not uniform but varies with the nature and type of ornaments subjected to conversion. Notwithstanding re and type of ornaments subjected to conversion. Notwithstanding re and type of ornaments subjected to conversion. Notwithstanding this clear recognition of the factual and technical nuances involved, this clear recognition of the factual and technical nuances involved, this clear recognition of the factual and technical nuances involved, the Ld. CIT(A) is found to have failed to translate such findings into his final Ld. CIT(A) is found to have failed to translate such findings into his final Ld. CIT(A) is found to have failed to translate such findings into his final adjudication wherein he essentially con adjudication wherein he essentially confirmed the action of AO by allowing firmed the action of AO by allowing only marginal relief of 0.1% to the overall disallowance. According to us, only marginal relief of 0.1% to the overall disallowance. According to us, only marginal relief of 0.1% to the overall disallowance. According to us, such action of the Ld. CIT(A) cannot be countenanced. For the reasons such action of the Ld. CIT(A) cannot be countenanced. For the reasons such action of the Ld. CIT(A) cannot be countenanced. For the reasons discussed in the foregoing, we accordingly hold that, the Revenue’s discussed in the foregoing, we accordingly hold that, the Revenue’s discussed in the foregoing, we accordingly hold that, the Revenue’s assumption that the purity of fine gold extracted from the old gold ion that the purity of fine gold extracted from the old gold ion that the purity of fine gold extracted from the old gold ornaments ought to compulsorily be 91.6% / 91.7% is held to be ornaments ought to compulsorily be 91.6% / 91.7% is held to be ornaments ought to compulsorily be 91.6% / 91.7% is held to be unacceptable and divorced from the unacceptable and divorced from the commercial and material realities commercial and material realities.

22.9 We next take up the finding rendered We next take up the finding rendered by the lower author the lower authorities holding that the stone content in old gold ornaments would only be 1%, holding that the stone content in old gold ornaments would only be 1%, holding that the stone content in old gold ornaments would only be 1%, which was based on a sample test conducted on 02 which was based on a sample test conducted on 02-11 11-2020, whose details we find are placed at Page 978 of the Pape details we find are placed at Page 978 of the Paper-book. This sample test book. This sample test is found to have been applied across all is found to have been applied across all jewellery items which were jewellery items which were melted during the relevant year as well as the subsequent years. melted during the relevant year as well as the subsequent years. melted during the relevant year as well as the subsequent years.

According to us, such According to us, such sampling done to ascertain the conversion / done to ascertain the conversion / to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. wastage loss was unscientific a unscientific as it failed to account for the varying to account for the varying designs and styles of jewellery, which directly affect designs and styles of jewellery, which directly affect the the stone weight.

Also, the sample test size is found to be very small compared to the Also, the sample test size is found to be very small compared to the Also, the sample test size is found to be very small compared to the overall inventory size of the assessee and thus overall inventory size of the assessee and thus, the extrapolation extrapolation exercise of the Revenue is held to be untenable. Rather according to us, it is enue is held to be untenable. Rather according to us, it is enue is held to be untenable. Rather according to us, it is leading to an inaccurate conclusion leading to an inaccurate conclusion.

The Ld. AR explained to us with invoices of gold jewellery The Ld. AR explained to us with invoices of gold jewellery The Ld. AR explained to us with invoices of gold jewellery 22.10 items, which were placed at items, which were placed at Pages 982 to 1316 of Paper Book of Paper Book that, the assessee was inter inter alia dealing in specialized jewellery such as ed jewellery such as Kundan Kundan Kundan and and and Meenakari, Meenakari, Meenakari, which which which involve involve involve substantial substantial substantial non non non-metallic embellishments and therefore these items would and therefore these items would yield lower fine gold yield lower fine gold upon melting. He pointed out to us that, this factor was also overlooked He pointed out to us that, this factor was also overlooked He pointed out to us that, this factor was also overlooked by the lower authorities. He also showed us that, the sample test done on r authorities. He also showed us that, the sample test done on r authorities. He also showed us that, the sample test done on 02-11-2020 only majorly contained 2020 only majorly contained plain gold ornaments plain gold ornaments and not the other specialized jewellery ed jewellery or jewellery embedded with stone items. To or jewellery embedded with stone items. To support his case, the Ld. AR took us through an analysi support his case, the Ld. AR took us through an analysis of the sample s of the sample test size taken by the Revenue on 02 test size taken by the Revenue on 02-11-2020, which is found is found placed at Page 980 of the paper book. He showed us that, if the Page 980 of the paper book. He showed us that, if the plain gold items plain gold items are excluded, then the average weight of stones and non the average weight of stones and non the average weight of stones and non-metallic components constituted approximat components constituted approximately 6% of the total weight ely 6% of the total weight, with stone component going as high as 13% in the sample size of Marathahalli component going as high as 13% in the sample size of Marathahalli component going as high as 13% in the sample size of Marathahalli to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. branch. Having considered these branch. Having considered these relevant facts, we find merit in , we find merit in contention put forth by the assessee. put forth by the assessee.

22.11 We find that the assessee has also corrobo We find that the assessee has also corroborated their above rated their above contention by bringing on record sample purchase and sale invoices contention by bringing on record sample purchase and sale invoices contention by bringing on record sample purchase and sale invoices pertaining to stone-studded gold jewellery studded gold jewellery, whose copies are found are found placed at Pages 982 to 1316 of the Paper Book. P of the Paper Book. Perusal of these invoices erusal of these invoices reveal that the presence of non that the presence of non-metallic components, particularly stones and metallic components, particularly stones and embellishments, constitutes a substantial portion of the gross weight of embellishments, constitutes a substantial portion of the gross weight of embellishments, constitutes a substantial portion of the gross weight of such jewellery, which on average is found to be 6% , which on average is found to be 6% , which on average is found to be 6%. These contemporaneous data is found to contradict the findings of the lower contemporaneous data is found to contradict the findings of the lower contemporaneous data is found to contradict the findings of the lower authorities that the proportion of stone weight the proportion of stone weight in jewelleries would only in jewelleries would only be 1%.

Overall therefore, we find that, the assessee has sufficiently Overall therefore, we find that, the assessee has sufficiently Overall therefore, we find that, the assessee has sufficiently 22.12 demonstrated before us that, demonstrated before us that, the conversion loss of 9.5% estimated by the conversion loss of 9.5% estimated by the Ld. CIT(A) was unjustified and based only on surmises. The assessee, the Ld. CIT(A) was unjustified and based only on surmises. The assessee, the Ld. CIT(A) was unjustified and based only on surmises. The assessee, on the other hand, has placed before us on the other hand, has placed before us verifiable records to show that, it to show that, it had not exaggerated the quantum of melting loss not exaggerated the quantum of melting loss. Further, as noted . Further, as noted above, the intrusive search action also did above, the intrusive search action also didn’t reveal any such t reveal any such substantial variation in stock which would justify the impugned disallowance; rather it which would justify the impugned disallowance; rather it which would justify the impugned disallowance; rather it corroborates the assessee’s case that the disallowance was corroborates the assessee’s case that the disallowance was corroborates the assessee’s case that the disallowance was speculative and not backed by any evidence. by any evidence. Moreover, no such disallowance has oreover, no such disallowance has to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. even been considered by the even been considered by the AO in the subsequent AYs 2022 AO in the subsequent AYs 2022-23 & 2023-

Ground Nos. 24 to 30 raised in this appeal are noted to be raised in this appeal are noted to be 23. Ground Nos. 24 to 30 relating to the Ld. CIT(A)’s action of taxing the gross profit element of Ld. CIT(A)’s action of taxing the gross profit element of Ld. CIT(A)’s action of taxing the gross profit element of Rs.1,62,93,623/- in relation to the unmatched transactions with MJPL. lation to the unmatched transactions with MJPL. lation to the unmatched transactions with MJPL. It is noted that, except variation in figures, the reasoning adopted both by variation in figures, the reasoning adopted both by variation in figures, the reasoning adopted both by the AO & Ld. CIT(A) to justify this addition AO & Ld. CIT(A) to justify this addition is verbatim same as in AY s verbatim same as in AY 2017-18. Both the parties also argued this impugned issue wh Both the parties also argued this impugned issue wh Both the parties also argued this impugned issue which is involved across AYs 2017 involved across AYs 2017-18 to 2021-22 together. 22 together. Following our conclusions recorded while conclusions recorded while deciding Ground Nos. 21 to 27 21 to 27 of assessee’s appeal in A.Y. 2017-18, we , we accordingly hold that, the entries found in the , the entries found in the material seized from the premises was unreliable and therefore the material seized from the premises was unreliable and therefore the material seized from the premises was unreliable and therefore the addition of gross profit of Rs.1,62,93,623/ addition of gross profit of Rs.1,62,93,623/- made on account of made on account of unmatched entries between the assessee’s books and the data seized unmatched entries between the assessee’s books and the data seized unmatched entries between the assessee’s books and the data seized from the premises of MJPL is he from the premises of MJPL is held to unjustified on facts and in law. We and in law. We therefore allow these grounds grounds and direct the AO to delete the impugned to delete the impugned addition made in AY 2019 in AY 2019-20. to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. for AY 2020 No.679/Chny/2025 for AY 2020-21.

24. We now take up the assessee’s appeal in We now take up the assessee’s appeal in No.679/Chny/2021 for AY 2020-21.

Therefore, these grounds are therefore dismissed. se grounds are therefore dismissed.

Ground Nos. 20 to 26 are against the Ld. CIT(A)’s action of against the Ld. CIT(A)’s action of 29. Ground Nos. 20 to 26 confirming the addition made by the AO on account of excess wastage confirming the addition made by the AO on account of excess wastage confirming the addition made by the AO on account of excess wastage loss upon conversion of old gold ornaments purchased from customers loss upon conversion of old gold ornaments purchased from customers loss upon conversion of old gold ornaments purchased from customers to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. into fine gold. Briefly stated, the assessee is engaged in the business of into fine gold. Briefly stated, the assessee is engaged in the business of into fine gold. Briefly stated, the assessee is engaged in the business of marketing and sale of gold jewellery through its retail showrooms. The and sale of gold jewellery through its retail showrooms. The and sale of gold jewellery through its retail showrooms. The assessee, through its branches, purchases old gold from customers, who assessee, through its branches, purchases old gold from customers, who assessee, through its branches, purchases old gold from customers, who either receive money or purchase new jewellery in lieu of the old gold either receive money or purchase new jewellery in lieu of the old gold either receive money or purchase new jewellery in lieu of the old gold jewellery exchanged. The value of such old gold jewe jewellery exchanged. The value of such old gold jewellery is noted to be llery is noted to be assessed by the respective manager of each branch, who records the assessed by the respective manager of each branch, who records the assessed by the respective manager of each branch, who records the same in their billing software application and later on the same is same in their billing software application and later on the same is same in their billing software application and later on the same is consolidated & reflected in their tally accounts. According to the Revenue, consolidated & reflected in their tally accounts. According to the Revenue, consolidated & reflected in their tally accounts. According to the Revenue, the search action reveal the search action revealed that, these old gold ornaments purchased from ed that, these old gold ornaments purchased from customers are thereafter sent to the corporate office, where they are customers are thereafter sent to the corporate office, where they are customers are thereafter sent to the corporate office, where they are checked; stones, wax, beads and enamel are removed and, then the checked; stones, wax, beads and enamel are removed and, then the checked; stones, wax, beads and enamel are removed and, then the same is melted to first obtain ‘kachha gold’ which is then refined into same is melted to first obtain ‘kachha gold’ which is then refined into same is melted to first obtain ‘kachha gold’ which is then refined into fine gold. In the course of search, it was gathered that, Mr Stanley is in gold. In the course of search, it was gathered that, Mr Stanley is in gold. In the course of search, it was gathered that, Mr Stanley is in- charge of melting this old gold jewellery received in the branches and that charge of melting this old gold jewellery received in the branches and that charge of melting this old gold jewellery received in the branches and that he would maintain quantity wise details of the old and fine gold received he would maintain quantity wise details of the old and fine gold received he would maintain quantity wise details of the old and fine gold received before and after the refining p before and after the refining process. During the course of search, several rocess. During the course of search, several excel sheets were found from the e excel sheets were found from the e-mail of Mr. Stanley which he kept for Stanley which he kept for his control purposes. Upon verification of these sheets, it was noted that, his control purposes. Upon verification of these sheets, it was noted that, his control purposes. Upon verification of these sheets, it was noted that, there were date wise details of old gold received from differe there were date wise details of old gold received from differe there were date wise details of old gold received from different branches, including the stone weight, melting loss, net weight and pure weight including the stone weight, melting loss, net weight and pure weight including the stone weight, melting loss, net weight and pure weight received from the old gold purchased at various branches. The AO is received from the old gold purchased at various branches. The AO is received from the old gold purchased at various branches. The AO is noted to have prepared the summary of month wise old gold sheets from noted to have prepared the summary of month wise old gold sheets from noted to have prepared the summary of month wise old gold sheets from to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. these email attachments, which has b these email attachments, which has been set out at Page 6 of the een set out at Page 6 of the assessment order. Thereafter the AO has worked out the year assessment order. Thereafter the AO has worked out the year assessment order. Thereafter the AO has worked out the year-wise summary of wastage as per the email attachment, which is noted to be as summary of wastage as per the email attachment, which is noted to be as summary of wastage as per the email attachment, which is noted to be as under:

Period Rec Wt. Stock Gross Stone Mlt.Loss Nt.Wt. Pure Gold Pure Gold Wastage (Gross to Pure)

FY 73,68,938 1,02,836 72,66,102 25,872 20,557 72,19,673 63,62,349 63,62,349 12% 18-19 FY 68,49,438 1,11,086 67,38,352 36,526 17,111 66,83,285 59,03,808 59,03,808 12% 19-20 29.1 The AO observed that, the actual wastage as per email attachment The AO observed that, the actual wastage as per email attachment The AO observed that, the actual wastage as per email attachment for FYs 2019-20 & 2020 2020-21 was only 12% whereas the assessee had 21 was only 12% whereas the assessee had claimed wastage of 13.36% and 15.17% in the books for FYs 2019 claimed wastage of 13.36% and 15.17% in the books for FYs 2019 claimed wastage of 13.36% and 15.17% in the books for FYs 2019-20 & 2020-21 respectively. The AO accordingly is noted to have worked out the 21 respectively. The AO accordingly is noted to have worked out the 21 respectively. The AO accordingly is noted to have worked out the excess wastage claimed as per accounts at Rs.62,99,36,957/ excess wastage claimed as per accounts at Rs.62,99,36,957/ excess wastage claimed as per accounts at Rs.62,99,36,957/-. When asked to explain the same, the assessee is noted to have furnished a ked to explain the same, the assessee is noted to have furnished a ked to explain the same, the assessee is noted to have furnished a detailed response, which the AO has extensively extracted at Pages 7 to detailed response, which the AO has extensively extracted at Pages 7 to detailed response, which the AO has extensively extracted at Pages 7 to 14 of the assessment order. The objections raised by the assessee 14 of the assessment order. The objections raised by the assessee 14 of the assessment order. The objections raised by the assessee inter alia were that, the inference was being drawn were that, the inference was being drawn by comparing partial data by comparing partial data of some branches and therefore without the complete purchase and of some branches and therefore without the complete purchase and of some branches and therefore without the complete purchase and melting data, the allegation of excess wastage was unjustified. The melting data, the allegation of excess wastage was unjustified. The melting data, the allegation of excess wastage was unjustified. The assessee showed that, in the same excel sheets, the melting loss for FYs assessee showed that, in the same excel sheets, the melting loss for FYs assessee showed that, in the same excel sheets, the melting loss for FYs to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 131 ::

2015-16 to 2018-19 work 19 worked out in the range of 12.44% to 13.35% ed out in the range of 12.44% to 13.35% whereas the actual loss based on the complete data across all the whereas the actual loss based on the complete data across all the whereas the actual loss based on the complete data across all the branches as per books was in the range of 10.28% to 12.16%. It was branches as per books was in the range of 10.28% to 12.16%. It was branches as per books was in the range of 10.28% to 12.16%. It was submitted that the increase in wastage in comparison to earlier years was submitted that the increase in wastage in comparison to earlier years was submitted that the increase in wastage in comparison to earlier years was because the assessee had opened new branches at several locations he assessee had opened new branches at several locations he assessee had opened new branches at several locations during FYs 2019-20 & 2020 20 & 2020-21 which were in mofussil mofussil area where exchanged old gold jewellery were melted and manufactured by local exchanged old gold jewellery were melted and manufactured by local exchanged old gold jewellery were melted and manufactured by local goldsmith and therefore not only the purity content of the old gold goldsmith and therefore not only the purity content of the old gold goldsmith and therefore not only the purity content of the old gold jewellery in these locations were comparatively lower but also since the jewellery in these locations were comparatively lower but also since the jewellery in these locations were comparatively lower but also since the melting was done locally, it yielded melting was done locally, it yielded higher melting loss. The AO however, higher melting loss. The AO however, is noted to have rejected the submissions of the assessee. According to is noted to have rejected the submissions of the assessee. According to is noted to have rejected the submissions of the assessee. According to the AO, it was Mr. Stanley alone, who was in charge of the old gold Stanley alone, who was in charge of the old gold Stanley alone, who was in charge of the old gold processing and that the data maintained by him was complete and thus processing and that the data maintained by him was complete and thus processing and that the data maintained by him was complete and thus the wastage loss worked out by him in the excel sheets represented the ge loss worked out by him in the excel sheets represented the ge loss worked out by him in the excel sheets represented the actual state of affairs. The AO also rejected the assessee’s submission actual state of affairs. The AO also rejected the assessee’s submission actual state of affairs. The AO also rejected the assessee’s submission that, certain old gold ornaments at certain locations were being melted that, certain old gold ornaments at certain locations were being melted that, certain old gold ornaments at certain locations were being melted locally and that according to him, this entire exe locally and that according to him, this entire exercise was centralized at rcise was centralized at the corporate office under the supervision of Mr the corporate office under the supervision of Mr. Stanley. The AO is noted Stanley. The AO is noted to have referred to the statements of Shri Somasundaram and Shri to have referred to the statements of Shri Somasundaram and Shri to have referred to the statements of Shri Somasundaram and Shri Shanmughanathan in support of his observations. The AO further Shanmughanathan in support of his observations. The AO further Shanmughanathan in support of his observations. The AO further observed that, the assessee observed that, the assessee has not been able to supplement their has not been able to supplement their objections with credible data. With these observations, the AO is noted to objections with credible data. With these observations, the AO is noted to objections with credible data. With these observations, the AO is noted to to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. have added excess wastage loss of Rs.62,99,36,957/ have added excess wastage loss of Rs.62,99,36,957/- as computed in his as computed in his show cause notice. Aggrieved by the order of the AO, the assessee is show cause notice. Aggrieved by the order of the AO, the assessee is show cause notice. Aggrieved by the order of the AO, the assessee is noted to have preferred appeal before the Ld. CIT(A) who is noted to ed to have preferred appeal before the Ld. CIT(A) who is noted to ed to have preferred appeal before the Ld. CIT(A) who is noted to have confirmed the order of the AO by holding as under: have confirmed the order of the AO by holding as under:

“12.4 I have perused the assessment order, submissions of the I have perused the assessment order, submissions of the I have perused the assessment order, submissions of the appellant and the additional submissions made. As is the practice, the appellant and the additional submissions made. As is the practice, the appellant and the additional submissions made. As is the practice, the appellant accepts old gold from customers, determine the value of the appellant accepts old gold from customers, determine the value of the appellant accepts old gold from customers, determine the value of the same depending on their purity and reduces the same from the final bill same depending on their purity and reduces the same from the final bill same depending on their purity and reduces the same from the final bill towards new purchases. All the said old gold so purchased was sent to towards new purchases. All the said old gold so purchased was sent to towards new purchases. All the said old gold so purchased was sent to Head Office for conversion into pure gold, a Head Office for conversion into pure gold, and this item of stock nd this item of stock considered and maintained by Sri Stanley in his e considered and maintained by Sri Stanley in his e-mail sheets is mail sheets is different from own gold / non different from own gold / non-moving stock also converted into pure moving stock also converted into pure gold. The total old gold purchased from customers is sent for melting, gold. The total old gold purchased from customers is sent for melting, gold. The total old gold purchased from customers is sent for melting, wherein such old gold contains wherein such old gold contains some physical impurities, apart from some physical impurities, apart from weight of semi-precious stones. The loss on such stone weight was precious stones. The loss on such stone weight was precious stones. The loss on such stone weight was considered at 1% while determining the new gold conversion damage considered at 1% while determining the new gold conversion damage considered at 1% while determining the new gold conversion damage loss, in para 7 above. Apart from this, the purity loss from 22ct to 24ct loss, in para 7 above. Apart from this, the purity loss from 22ct to 24ct loss, in para 7 above. Apart from this, the purity loss from 22ct to 24ct was obvious at 8.4%. Since the gold is old and is not manufactured by at 8.4%. Since the gold is old and is not manufactured by at 8.4%. Since the gold is old and is not manufactured by the appellant and was purchased from customers, particularly from new the appellant and was purchased from customers, particularly from new the appellant and was purchased from customers, particularly from new branches established during the year in moffusil stations, another rate of branches established during the year in moffusil stations, another rate of branches established during the year in moffusil stations, another rate of 2% damage loss on purity is allowed. As a whole, the 2% damage loss on purity is allowed. As a whole, the percentage of percentage of damage loss appearing in the Stanely Sheet at 12.38% is close to the damage loss appearing in the Stanely Sheet at 12.38% is close to the damage loss appearing in the Stanely Sheet at 12.38% is close to the reasonable standard of damage loss (8.4% on purity + 1% on stone reasonable standard of damage loss (8.4% on purity + 1% on stone reasonable standard of damage loss (8.4% on purity + 1% on stone weight loss + another 2% on old gold purchases from customers, weight loss + another 2% on old gold purchases from customers, weight loss + another 2% on old gold purchases from customers, totalling to 11.4%), against the claim made b totalling to 11.4%), against the claim made by the appellant at 15.36%. y the appellant at 15.36%. When the damage loss claimed is apparently high, the claim of the When the damage loss claimed is apparently high, the claim of the When the damage loss claimed is apparently high, the claim of the appellant that only a portion of the seized material was adopted for appellant that only a portion of the seized material was adopted for appellant that only a portion of the seized material was adopted for making the addition, is not tenable. Therefore, no interference is made making the addition, is not tenable. Therefore, no interference is made making the addition, is not tenable. Therefore, no interference is made with the addition made with the addition made by the AO on this count and the excess damage by the AO on this count and the excess damage loss of 2.98% disallowed by the Assessing Officer is confirmed. loss of 2.98% disallowed by the Assessing Officer is confirmed. loss of 2.98% disallowed by the Assessing Officer is confirmed.

29.2 Heard both the parties. It is noticed that, the AO for making this Heard both the parties. It is noticed that, the AO for making this Heard both the parties. It is noticed that, the AO for making this impugned addition has placed exclusive reliance on the excel sheet impugned addition has placed exclusive reliance on the excel sheet impugned addition has placed exclusive reliance on the excel sheet retrieved from the e-mail of Mr. Stanley, basis which he has alleged that mail of Mr. Stanley, basis which he has alleged that mail of Mr. Stanley, basis which he has alleged that the assessee has claimed excess melting loss in the assessee has claimed excess melting loss in relation to conversion of relation to conversion of old gold ornaments purchased from customers into fine gold to the extent old gold ornaments purchased from customers into fine gold to the extent old gold ornaments purchased from customers into fine gold to the extent to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. of 2.98% and 2.75% in FYs 2019 of 2.98% and 2.75% in FYs 2019-20 & 2020-21 respectively. The 21 respectively. The assessee is noted to have disputed the veracity of this excel sheet and the assessee is noted to have disputed the veracity of this excel sheet and the assessee is noted to have disputed the veracity of this excel sheet and the reliance placed by the lower authorities on the same. According to the the lower authorities on the same. According to the the lower authorities on the same. According to the assessee, this sheet was prepared by Mr. Stanley for his internal records assessee, this sheet was prepared by Mr. Stanley for his internal records assessee, this sheet was prepared by Mr. Stanley for his internal records and not for any statutory or accounting or financial reporting purposes and not for any statutory or accounting or financial reporting purposes and not for any statutory or accounting or financial reporting purposes and that the notings in this excel sheet was incomplete an and that the notings in this excel sheet was incomplete an and that the notings in this excel sheet was incomplete and unreliable.

Before dwelling into the facts, it is necessary to remind ourselves that, Before dwelling into the facts, it is necessary to remind ourselves that, Before dwelling into the facts, it is necessary to remind ourselves that, Section 132(4A) of the Act provides that, where any documents is found Section 132(4A) of the Act provides that, where any documents is found Section 132(4A) of the Act provides that, where any documents is found in the possession or control of any person in the course of search, it may in the possession or control of any person in the course of search, it may in the possession or control of any person in the course of search, it may be presumed that such be presumed that such document belongs to such person and the document belongs to such person and the contents of such document is true. It is settled in law that, this contents of such document is true. It is settled in law that, this contents of such document is true. It is settled in law that, this presumption set out in Section 132(4A) of the Act is rebuttable and the presumption set out in Section 132(4A) of the Act is rebuttable and the presumption set out in Section 132(4A) of the Act is rebuttable and the onus lays on the assessee to substantiate the same with cogent evidence. onus lays on the assessee to substantiate the same with cogent evidence. onus lays on the assessee to substantiate the same with cogent evidence.

29.3 In the case before us, the impugned excel sheet was found from the In the case before us, the impugned excel sheet was found from the In the case before us, the impugned excel sheet was found from the e-mail of Mr. Stanley and therefore it is first necessary to examine the mail of Mr. Stanley and therefore it is first necessary to examine the mail of Mr. Stanley and therefore it is first necessary to examine the answers, if any, given by Mr. Stanley in connection with this document. It answers, if any, given by Mr. Stanley in connection with this document. It answers, if any, given by Mr. Stanley in connection with this document. It is observed that, in his statements whi is observed that, in his statements which were recorded u/s 132(4) of the ch were recorded u/s 132(4) of the Act, no specific question was raised in this context. Rather, Mr. Stanley is Act, no specific question was raised in this context. Rather, Mr. Stanley is Act, no specific question was raised in this context. Rather, Mr. Stanley is noted to have been confronted with this document in the post search noted to have been confronted with this document in the post search noted to have been confronted with this document in the post search enquiries and the relevant portion of his statement recorded u/s 131 of enquiries and the relevant portion of his statement recorded u/s 131 of enquiries and the relevant portion of his statement recorded u/s 131 of the Act dated 30-07-2021 is observed to be as follows: 2021 is observed to be as follows:- to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 134 ::

“Q.2 Q.2 Q.2 On On On verification verification verification of of of the the the email email email account account account used used used by by by (Stanley (Stanley (Stanley 2701@ouflook.com), month wise excel sheets named OG, Purity, Fine 2701@ouflook.com), month wise excel sheets named OG, Purity, Fine 2701@ouflook.com), month wise excel sheets named OG, Purity, Fine and silver were found and downloaded. I am showing you the printouts and silver were found and downloaded. I am showing you the printouts and silver were found and downloaded. I am showing you the printouts of OG-Dec-19 taken from the email attachment (given as Annexure 1 of 19 taken from the email attachment (given as Annexure 1 of 19 taken from the email attachment (given as Annexure 1 of this statement). Please go through these sheets and offer your this statement). Please go through these sheets and offer your this statement). Please go through these sheets and offer your explanation regarding the nature of entries in these sheets. explanation regarding the nature of entries in these sheets.

A.2 I have gone through the print outs shown to me. These are the print A.2 I have gone through the print outs shown to me. These are the print A.2 I have gone through the print outs shown to me. These are the print outs of monthly old gold sheets prepared under my supervision. Smt. uts of monthly old gold sheets prepared under my supervision. Smt. uts of monthly old gold sheets prepared under my supervision. Smt. Lakshmi is assisting me in preparing these sheets. In the excel sheets, Lakshmi is assisting me in preparing these sheets. In the excel sheets, Lakshmi is assisting me in preparing these sheets. In the excel sheets, there will be separate work sheets for all the branches of M/s. Lalithaa there will be separate work sheets for all the branches of M/s. Lalithaa there will be separate work sheets for all the branches of M/s. Lalithaa Jewellery Mart Private Limited. In these she Jewellery Mart Private Limited. In these sheets, the date wise details of ets, the date wise details of old gold received from branches are entered. The date shown in the old gold received from branches are entered. The date shown in the old gold received from branches are entered. The date shown in the sheets are the dates on which the branches received the old gold. The sheets are the dates on which the branches received the old gold. The sheets are the dates on which the branches received the old gold. The column computer weight and the value column are entered as per the column computer weight and the value column are entered as per the column computer weight and the value column are entered as per the computer print outs gi computer print outs given by Shri. Somu. In the column "stock", the ven by Shri. Somu. In the column "stock", the details of ornaments which were not melted are entered and reduced details of ornaments which were not melted are entered and reduced details of ornaments which were not melted are entered and reduced from the gross weight. The details of stone weight, melting loss, Net from the gross weight. The details of stone weight, melting loss, Net from the gross weight. The details of stone weight, melting loss, Net weight of the ornaments, purity and the pure gold weight are also weight of the ornaments, purity and the pure gold weight are also weight of the ornaments, purity and the pure gold weight are also recorded in these sheets. The purity is entered as per the details of d in these sheets. The purity is entered as per the details of d in these sheets. The purity is entered as per the details of testing report received and the weight of pure gold is worked out as per testing report received and the weight of pure gold is worked out as per testing report received and the weight of pure gold is worked out as per the purity sheets. the purity sheets.”

29.4 Though the Ld. CIT, DR has placed reliance on the above statement Though the Ld. CIT, DR has placed reliance on the above statement Though the Ld. CIT, DR has placed reliance on the above statement to support the order of the l to support the order of the lower authorities, but on careful reading of his ower authorities, but on careful reading of his answer, we find that there is nothing incriminating contained therein answer, we find that there is nothing incriminating contained therein answer, we find that there is nothing incriminating contained therein which would suggest that the assessee had claimed excessive wastage which would suggest that the assessee had claimed excessive wastage which would suggest that the assessee had claimed excessive wastage loss in the books of accounts in comparison to what was actually incur loss in the books of accounts in comparison to what was actually incur loss in the books of accounts in comparison to what was actually incurred.

Mr. Stanley is noted to have simply stated that these sheets were Mr. Stanley is noted to have simply stated that these sheets were Mr. Stanley is noted to have simply stated that these sheets were prepared by Smt. Lakshmi under his supervision and it contained date prepared by Smt. Lakshmi under his supervision and it contained date prepared by Smt. Lakshmi under his supervision and it contained date- wise details of old gold received by them from branches and the details of wise details of old gold received by them from branches and the details of wise details of old gold received by them from branches and the details of gross weight, stone weight, melting loss, gross weight, stone weight, melting loss, net weight, purity and pure gold net weight, purity and pure gold weight, which was based on testing reports and purity sheets. According weight, which was based on testing reports and purity sheets. According weight, which was based on testing reports and purity sheets. According to us, this answer does not appear to suggest that what was being noted to us, this answer does not appear to suggest that what was being noted to us, this answer does not appear to suggest that what was being noted to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. in this excel sheet was sacrosanct and complete in this excel sheet was sacrosanct and complete for the detailed detailed reasons given in para infra. Moreover Moreover, the answer only contained the observations only contained the observations inferred by the supervisor Mr. Stanley from the testing reports concerning inferred by the supervisor Mr. Stanley from the testing reports concerning inferred by the supervisor Mr. Stanley from the testing reports concerning melting of old gold ornaments into fine gold. There is force in the Ld. AR’s melting of old gold ornaments into fine gold. There is force in the Ld. AR’s melting of old gold ornaments into fine gold. There is force in the Ld. AR’s submission that, it is not necessar submission that, it is not necessary that the testing reports basis which y that the testing reports basis which these notings were made were final or that it did not contain these notings were made were final or that it did not contain these notings were made were final or that it did not contain error/mistakes or that there may have been some divergence between error/mistakes or that there may have been some divergence between error/mistakes or that there may have been some divergence between the physical receipt vis the physical receipt vis-à-vis the testing reports. The answer of Mr. vis the testing reports. The answer of Mr.

Stanley does indeed suggest that these sheets were being maintained by ed suggest that these sheets were being maintained by ed suggest that these sheets were being maintained by a supervisor for his internal control over the old gold ornaments allotted a supervisor for his internal control over the old gold ornaments allotted a supervisor for his internal control over the old gold ornaments allotted to him for melting and it is not necessary that his observations in this to him for melting and it is not necessary that his observations in this to him for melting and it is not necessary that his observations in this excel sheet would reflect the true and complete pictur excel sheet would reflect the true and complete picture of the actual e of the actual wastage loss, for the reasons noted infra. , for the reasons noted infra.

29.5 Be that as it may, in order to unearth the correct facts concerning Be that as it may, in order to unearth the correct facts concerning Be that as it may, in order to unearth the correct facts concerning this impugned issue, it is relevant to also examine the contents of this this impugned issue, it is relevant to also examine the contents of this this impugned issue, it is relevant to also examine the contents of this excel sheet vis-à-vis the books of accounts. The Ld vis the books of accounts. The Ld. AR has placed before . AR has placed before us the summary details of the quantity of old gold reported on this excel us the summary details of the quantity of old gold reported on this excel us the summary details of the quantity of old gold reported on this excel sheet, the wastage loss shown therein in comparison to the books of sheet, the wastage loss shown therein in comparison to the books of sheet, the wastage loss shown therein in comparison to the books of accounts. After analyzing the same, we have tabulated the relevant accounts. After analyzing the same, we have tabulated the relevant accounts. After analyzing the same, we have tabulated the relevant details as under:- to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 136 ::

As per assessee’s books As per assessee’s books As per Stanley’s excel sheet ’s excel sheet AY Quantity of old Quantity of old % of Quantity of old gold Quantity of old gold % of gold processed gold processed wastage processed wastage 2016-17 53,08,308 53,08,308 10.28% 49,47,678 13% 2017-18 62,42,376 62,42,376 10.97% 57,63,016 13% 2018-19 72,57,086 72,57,086 10.66% 76,91,090 13% 2019-20 73,51,516 73,51,516 12.16% 72,66,102 12% 2020-21 82,42,942 82,42,942 15.36% 67,68,351 12% 2021-22 46,90,639 46,90,639 15.17% 38,47,077 12% 29.6 From the above, it is first observed that, the quantities of old gold From the above, it is first observed that, the quantities of old gold From the above, it is first observed that, the quantities of old gold ornaments processed under the supervision of Mr. Stanley and the total ornaments processed under the supervision of Mr. Stanley and the total ornaments processed under the supervision of Mr. Stanley and the total quantity of old gold ornaments processed as per the books of accounts quantity of old gold ornaments processed as per the books of accounts quantity of old gold ornaments processed as per the books of accounts were materially different. It is observed tha were materially different. It is observed that, the total quantity of old gold t, the total quantity of old gold processed as per the books was much higher than the quantity of gold processed as per the books was much higher than the quantity of gold processed as per the books was much higher than the quantity of gold being supervised by Mr. Stanley, as is evident from the table above. We being supervised by Mr. Stanley, as is evident from the table above. We being supervised by Mr. Stanley, as is evident from the table above. We thus find force in the submission of the assessee that this excel sheet was thus find force in the submission of the assessee that this excel sheet was thus find force in the submission of the assessee that this excel sheet was incomplete and thus could not have been taken as a justifiable basis to plete and thus could not have been taken as a justifiable basis to plete and thus could not have been taken as a justifiable basis to undertake valid comparison with the wastage shown in the books of undertake valid comparison with the wastage shown in the books of undertake valid comparison with the wastage shown in the books of accounts. This particular contemporaneous fact also lends credence to the accounts. This particular contemporaneous fact also lends credence to the accounts. This particular contemporaneous fact also lends credence to the assessee’s submissions that the AO had acted unde assessee’s submissions that the AO had acted unde assessee’s submissions that the AO had acted under the wrong assumption that processing of the entire old gold ornaments was being assumption that processing of the entire old gold ornaments was being assumption that processing of the entire old gold ornaments was being to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. solely supervised by Mr. Stanley. The Ld. AR solely supervised by Mr. Stanley. The Ld. AR Shri Anand Shri Anand also took us through the details of the new showrooms which were opened by the through the details of the new showrooms which were opened by the through the details of the new showrooms which were opened by the assessee during the impugned AYs 2020 assessee during the impugned AYs 2020-21 & 2021-22 and it is observed 22 and it is observed that these new showrooms were located in that these new showrooms were located in mofussil areas. It was explained to us that, transporting the old gold ornaments exchanged at explained to us that, transporting the old gold ornaments exchanged at explained to us that, transporting the old gold ornaments exchanged at these showrooms at all times to the corporate office was not practically these showrooms at all times to the corporate office was not practically these showrooms at all times to the corporate office was not practically feasible and thus, commonly, the manager would get these old gold , commonly, the manager would get these old gold , commonly, the manager would get these old gold ornaments melted and/or processed locally through the local goldsmiths. ornaments melted and/or processed locally through the local goldsmiths. ornaments melted and/or processed locally through the local goldsmiths.

Having regard to the apparent difference in the quantities appearing in Having regard to the apparent difference in the quantities appearing in Having regard to the apparent difference in the quantities appearing in the excel sheet of Mr. Stanley and the quantities processed as the excel sheet of Mr. Stanley and the quantities processed as the excel sheet of Mr. Stanley and the quantities processed as per the books of accounts, the explanation of the assessee that the excel sheet of books of accounts, the explanation of the assessee that the excel sheet of books of accounts, the explanation of the assessee that the excel sheet of Mr. Stanley was incomplete, is found to have merit. Mr. Stanley was incomplete, is found to have merit.

29.7 It is also observed that, the difference in wastage loss between the It is also observed that, the difference in wastage loss between the It is also observed that, the difference in wastage loss between the sheets maintained by Mr. Stanley and the books sheets maintained by Mr. Stanley and the books of accounts, was not only of accounts, was not only in the impugned AYs 2020 in the impugned AYs 2020-21 and 2021-22, but also in the earlier AYs 22, but also in the earlier AYs 2016-17 to 2019-20. The analysis undertaken in the above table reveals 20. The analysis undertaken in the above table reveals 20. The analysis undertaken in the above table reveals that the data maintained by Mr. Stanley for AYs 2016 that the data maintained by Mr. Stanley for AYs 2016-17 to 2019 17 to 2019-20 showed materially higher wastage loss than what was actually incurred by er wastage loss than what was actually incurred by er wastage loss than what was actually incurred by the assessee in those years. We find that, this material fact has not been the assessee in those years. We find that, this material fact has not been the assessee in those years. We find that, this material fact has not been disputed by the Revenue and for that reason, the Revenue is found to disputed by the Revenue and for that reason, the Revenue is found to disputed by the Revenue and for that reason, the Revenue is found to have not made any addition on this impugned issue in any of t have not made any addition on this impugned issue in any of t have not made any addition on this impugned issue in any of the AYs 2016-17 to 2019-20. If the contents of this sheet is to be treated as 20. If the contents of this sheet is to be treated as 20. If the contents of this sheet is to be treated as to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. sacrosanct, then it would appear that the assessee has reported lower sacrosanct, then it would appear that the assessee has reported lower sacrosanct, then it would appear that the assessee has reported lower wastage losses and thereby declared higher notional taxable profits in AYs wastage losses and thereby declared higher notional taxable profits in AYs wastage losses and thereby declared higher notional taxable profits in AYs 2016-17 to 2019-20. We find such a 20. We find such a proposition to be unlikely and proposition to be unlikely and illogical. In that view of the matter, this data concerning illogical. In that view of the matter, this data concerning AYs 2016 AYs 2016-17 to 2019-20 found in this excel sheet, in light of the wastage shown in the 20 found in this excel sheet, in light of the wastage shown in the 20 found in this excel sheet, in light of the wastage shown in the books, raises serious doubt on the veracity on the same. However, if the books, raises serious doubt on the veracity on the same. However, if the books, raises serious doubt on the veracity on the same. However, if the case made out by the AO is taken at its face value, then the AO ought to made out by the AO is taken at its face value, then the AO ought to made out by the AO is taken at its face value, then the AO ought to have reduced the profits by the excess wastage loss reported in the books have reduced the profits by the excess wastage loss reported in the books have reduced the profits by the excess wastage loss reported in the books by the assessee in those AYs 2016 by the assessee in those AYs 2016-17 to 2019-20. The AO however did 20. The AO however did not do so. We find this approach of the AO to not do so. We find this approach of the AO to be inherently flawed and his be inherently flawed and his selective reliance on portions of the excel sheet which suited his purpose selective reliance on portions of the excel sheet which suited his purpose selective reliance on portions of the excel sheet which suited his purpose to make selective additions in specific years, was unjustified and uncalled to make selective additions in specific years, was unjustified and uncalled to make selective additions in specific years, was unjustified and uncalled for. According to us, this self for. According to us, this self-contradicting action of the AO discredited contradicting action of the AO discredited the veracity of this excel sheet and we thus hold the notings on this excel the veracity of this excel sheet and we thus hold the notings on this excel the veracity of this excel sheet and we thus hold the notings on this excel sheet to be unreliable.

29.8 Further, as noted from the above table, the wastage loss as per Further, as noted from the above table, the wastage loss as per Further, as noted from the above table, the wastage loss as per books incurred in AYs 2020 books incurred in AYs 2020-21 & 2021-22 was higher than the earlier 22 was higher than the earlier years. The Ld. AR explained to us the reasons for the same. It was years. The Ld. AR explained to us the reasons for the same. It was years. The Ld. AR explained to us the reasons for the same. It was explained that, these new showrooms being in explained that, these new showrooms being in mofussil areas, the quality areas, the quality of old gold ornaments exchanged by customers was comparatively lower of old gold ornaments exchanged by customers was comparatively lower of old gold ornaments exchanged by customers was comparatively lower than the quality of old gold ornaments exchanged at the showrooms uality of old gold ornaments exchanged at the showrooms uality of old gold ornaments exchanged at the showrooms located in metro cities. The Ld. AR further submitted that, due to the located in metro cities. The Ld. AR further submitted that, due to the located in metro cities. The Ld. AR further submitted that, due to the to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 139 ::

COVID-19 scenario, which prevailed during this period, it was found to be 19 scenario, which prevailed during this period, it was found to be 19 scenario, which prevailed during this period, it was found to be practical to get the old gold ornaments processed local practical to get the old gold ornaments processed local practical to get the old gold ornaments processed locally rather than moving them inter-state or inter towns / cities. However, the assessee state or inter towns / cities. However, the assessee state or inter towns / cities. However, the assessee was required to make do with the lower quality of processing undertaken was required to make do with the lower quality of processing undertaken was required to make do with the lower quality of processing undertaken by local goldsmiths, which yielded higher wastage loss. To further by local goldsmiths, which yielded higher wastage loss. To further by local goldsmiths, which yielded higher wastage loss. To further corroborate his submission that corroborate his submission that the higher wastage loss in the impugned the higher wastage loss in the impugned AYs had genuinely occurred, the Ld. AR also brought to our notice that, AYs had genuinely occurred, the Ld. AR also brought to our notice that, AYs had genuinely occurred, the Ld. AR also brought to our notice that, the search action which was conducted across all the showrooms of the the search action which was conducted across all the showrooms of the the search action which was conducted across all the showrooms of the assessee as well as their corporate office, did not result in unearthing assessee as well as their corporate office, did not result in unearthing assessee as well as their corporate office, did not result in unearthing of any excess stock of gold or any discrepancy in the inventory as per books any excess stock of gold or any discrepancy in the inventory as per books any excess stock of gold or any discrepancy in the inventory as per books vis-à-vis the physical stock. The Revenue also was unable to unearth any vis the physical stock. The Revenue also was unable to unearth any vis the physical stock. The Revenue also was unable to unearth any instance of suppressed sales made by the assessee. This material fact, instance of suppressed sales made by the assessee. This material fact, instance of suppressed sales made by the assessee. This material fact, according to the Ld. AR, supported according to the Ld. AR, supported the assessee’s case that, the wastage the assessee’s case that, the wastage loss reflected in the books of accounts was accurate. Having regard to the loss reflected in the books of accounts was accurate. Having regard to the loss reflected in the books of accounts was accurate. Having regard to the foregoing submissions & surrounding circumstances put to our notice by foregoing submissions & surrounding circumstances put to our notice by foregoing submissions & surrounding circumstances put to our notice by the assessee, their explanation regarding the veracity of the higher the assessee, their explanation regarding the veracity of the higher the assessee, their explanation regarding the veracity of the higher wastage loss shown in the impugned AYs 2020 tage loss shown in the impugned AYs 2020-21 and 2021 21 and 2021-22 in comparison to earlier years, on the given facts before us, is also found to comparison to earlier years, on the given facts before us, is also found to comparison to earlier years, on the given facts before us, is also found to be plausible.

29.9 In view of the above, we find that the assessee has been able to In view of the above, we find that the assessee has been able to In view of the above, we find that the assessee has been able to sufficiently demonstrate that the co sufficiently demonstrate that the contents of the excel sheet found from ntents of the excel sheet found from the possession of Mr. Stanley was incomplete and unreliable. In our the possession of Mr. Stanley was incomplete and unreliable. In our the possession of Mr. Stanley was incomplete and unreliable. In our to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. considered view therefore, the impugned addition made by the AO on considered view therefore, the impugned addition made by the AO on considered view therefore, the impugned addition made by the AO on account of excess wastage loss on the basis of such unreliable document, account of excess wastage loss on the basis of such unreliable document, account of excess wastage loss on the basis of such unreliable document, was unjustified. The AO is accordingly directed to delete the impugned fied. The AO is accordingly directed to delete the impugned fied. The AO is accordingly directed to delete the impugned addition of Rs.62,99,36,957/ addition of Rs.62,99,36,957/- and hence, we allow these grounds of the and hence, we allow these grounds of the assessee.

Ground Nos. 27 to 33 raised in this appeal are noted to be raised in this appeal are noted to be 30. Ground Nos. 27 to 33 relating to the Ld. CIT(A)’s action of taxing the g Ld. CIT(A)’s action of taxing the gross profit element of ross profit element of Rs.1,07,67,376/- in relation to the unmatched transactions with MJPL. in relation to the unmatched transactions with MJPL. in relation to the unmatched transactions with MJPL. It is noted that, except variation in figures, the reasoning adopted both by variation in figures, the reasoning adopted both by variation in figures, the reasoning adopted both by the AO & Ld. CIT(A) to justify this addition AO & Ld. CIT(A) to justify this addition is verbatim same as in AY s verbatim same as in AY 2017-18. Both the parties also argued this impugned issue which is he parties also argued this impugned issue which is he parties also argued this impugned issue which is involved across AYs 2017 involved across AYs 2017-18 to 2021-22 together. Following our reasons Following our reasons and conclusions recorded in while and conclusions recorded in while deciding Ground Nos. deciding Ground Nos. 21 to 27 of assessee’s appeal in A.Y. 2017 ssessee’s appeal in A.Y. 2017-18, we accordingly hold that hold that, the entries found in the material seized from the premises was unreliable and found in the material seized from the premises was unreliable and found in the material seized from the premises was unreliable and therefore the impugned addition of gross profit made on account of therefore the impugned addition of gross profit made on account of therefore the impugned addition of gross profit made on account of unmatched entries between the assessee’s books and the data seized unmatched entries between the assessee’s books and the data seized unmatched entries between the assessee’s books and the data seized from the premises of MJPL is held to unjustified from the premises of MJPL is held to unjustified on facts and in law. We and in law. We therefore allow these grounds grounds and direct the AO to delete the impugned to delete the impugned addition made in AY 2020 in AY 2020-21. to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 141 ::

Ground Nos. 34 to 36 are noted to be against the action of Ld. are noted to be against the action of Ld.

Briefly stated, the facts as noted that, in the course of search, a server Briefly stated, the facts as noted that, in the course of search, a server Briefly stated, the facts as noted that, in the course of search, a server was seized from which a sheet, stated to be trial balance as on 31 was seized from which a sheet, stated to be trial balance as on 31 was seized from which a sheet, stated to be trial balance as on 31-05- 2019, named ‘closetbcls’ was found 2019, named ‘closetbcls’ was found in ‘atp1920’ database. The AO in ‘atp1920’ database. The AO observed that, as per this trial balance, there was an outstanding loan of observed that, as per this trial balance, there was an outstanding loan of observed that, as per this trial balance, there was an outstanding loan of Rs.210.66 crores received by the assessee from various parties as on 31 Rs.210.66 crores received by the assessee from various parties as on 31 Rs.210.66 crores received by the assessee from various parties as on 31- 05-2019. Against these loans, rates of interest was mentioned. The AO 2019. Against these loans, rates of interest was mentioned. The AO 2019. Against these loans, rates of interest was mentioned. The AO accordingly worked out the interest paid on such loans in FYs 2019 gly worked out the interest paid on such loans in FYs 2019 gly worked out the interest paid on such loans in FYs 2019-20 & 2020-21, at Rs.13,52,07,096/ 21, at Rs.13,52,07,096/- and Rs.45,74,07,096/- and proposed to and proposed to add the same by way of unexplained expenditure u/s 69C of the Act in his add the same by way of unexplained expenditure u/s 69C of the Act in his add the same by way of unexplained expenditure u/s 69C of the Act in his show cause notice issued for AYs 2020 show cause notice issued for AYs 2020-21 & 2021-22 respectively. The respectively. The assessee, in response is noted to have submitted that, the AO was under assessee, in response is noted to have submitted that, the AO was under assessee, in response is noted to have submitted that, the AO was under the mistaken impression that the impugned sheet was a trial balance and the mistaken impression that the impugned sheet was a trial balance and the mistaken impression that the impugned sheet was a trial balance and instead it was data extracted from a corrupted software in which the loans instead it was data extracted from a corrupted software in which the loans instead it was data extracted from a corrupted software in which the loans taken by other persons of the assessee group had been mixed up and was ons of the assessee group had been mixed up and was ons of the assessee group had been mixed up and was being erroneously reflected in the name of the assessee, which led the AO being erroneously reflected in the name of the assessee, which led the AO being erroneously reflected in the name of the assessee, which led the AO to erroneously believe that these are unaccounted loans of the assessee. to erroneously believe that these are unaccounted loans of the assessee. to erroneously believe that these are unaccounted loans of the assessee.

The assessee then pointed out that, there was no details The assessee then pointed out that, there was no details The assessee then pointed out that, there was no details of any interest paid during FYs 2019-20 & 2020 20 & 2020-21 found in these sheets and instead the 21 found in these sheets and instead the AO had acted on an assumption that because interest rates are AO had acted on an assumption that because interest rates are AO had acted on an assumption that because interest rates are to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. mentioned against these loans, the interest would have actually been paid mentioned against these loans, the interest would have actually been paid mentioned against these loans, the interest would have actually been paid by the assessee. The assessee su by the assessee. The assessee submitted that, this assumption was based bmitted that, this assumption was based on surmise, without any evidence and therefore urged that no such on surmise, without any evidence and therefore urged that no such on surmise, without any evidence and therefore urged that no such addition be made. The AO however, is found to have rejected these addition be made. The AO however, is found to have rejected these addition be made. The AO however, is found to have rejected these submissions and added the impugned sum by way of unexplained submissions and added the impugned sum by way of unexplained submissions and added the impugned sum by way of unexplained expenditure u/s 69C of the Act.

31.1 Aggrieved by the order of the AO, the assessee carried the matter Aggrieved by the order of the AO, the assessee carried the matter Aggrieved by the order of the AO, the assessee carried the matter in appeal. On appeal, the Ld. CIT(A) though acknowledged that, there in appeal. On appeal, the Ld. CIT(A) though acknowledged that, there in appeal. On appeal, the Ld. CIT(A) though acknowledged that, there was no material showing actual payments in these years but according to was no material showing actual payments in these years but according to was no material showing actual payments in these years but according to the Ld. CIT(A), the fact that, the the Ld. CIT(A), the fact that, the loan carried interest and that the rate of loan carried interest and that the rate of interest was found mentioned would necessarily mean that the assessee interest was found mentioned would necessarily mean that the assessee interest was found mentioned would necessarily mean that the assessee had paid interest. The Ld. CIT(A) thus confirmed the addition made by the had paid interest. The Ld. CIT(A) thus confirmed the addition made by the had paid interest. The Ld. CIT(A) thus confirmed the addition made by the AO. Being aggrieved by the order of the Ld. CIT(A), the assessee is AO. Being aggrieved by the order of the Ld. CIT(A), the assessee is AO. Being aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before us.

31.2 At the time of hearing, the Ld. AR for the assessee had reiterated At the time of hearing, the Ld. AR for the assessee had reiterated At the time of hearing, the Ld. AR for the assessee had reiterated the submission made before the lower authorities, which was also placed the submission made before the lower authorities, which was also placed the submission made before the lower authorities, which was also placed on our records. Per contra, the Ld. CIT DR supported the action of the on our records. Per contra, the Ld. CIT DR supported the action of the on our records. Per contra, the Ld. CIT DR supported the action of the lower authorities.

31.3 Having gone through t Having gone through the submissions of both the parties and upon he submissions of both the parties and upon examination of the facts & circumstances of the case, it is noticed that, examination of the facts & circumstances of the case, it is noticed that, examination of the facts & circumstances of the case, it is noticed that, the impugned addition is based on a sheet titled ‘closetbcls’ which was the impugned addition is based on a sheet titled ‘closetbcls’ which was the impugned addition is based on a sheet titled ‘closetbcls’ which was to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. extracted from an SQL SQL database found during the course of search. database found during the course of search. Upon going through the same, it is noted that, this sheet reflected amount(s) / going through the same, it is noted that, this sheet reflected amount(s) / going through the same, it is noted that, this sheet reflected amount(s) / balance(s) of several parties as on 31 balance(s) of several parties as on 31-03-2019 and 31- -05-2019. It is observed that, the names of these parties were mentioned with a certain observed that, the names of these parties were mentioned with a certain observed that, the names of these parties were mentioned with a certain percentage in their title(s). For i percentage in their title(s). For instance, there was account name ‘Viji nstance, there was account name ‘Viji Akka A/c 12%’ whose balance as on 31 Akka A/c 12%’ whose balance as on 31-05-2019 was Rs.35,00,000/ 2019 was Rs.35,00,000/-.

Similarly, there was an account ‘SC Bothra A/c Similarly, there was an account ‘SC Bothra A/c – 15%’ whose balance was 15%’ whose balance was Rs.5,00,000/-. We find that, in the like manner, several other accounts . We find that, in the like manner, several other accounts . We find that, in the like manner, several other accounts were there, whose balances aggregated to Rs.210.66 crores. Reading of e, whose balances aggregated to Rs.210.66 crores. Reading of e, whose balances aggregated to Rs.210.66 crores. Reading of this sheet prima facie does not bring out the nature of these amount(s) or this sheet prima facie does not bring out the nature of these amount(s) or this sheet prima facie does not bring out the nature of these amount(s) or balance(s). It is also noticed that, there are twenty balance(s). It is also noticed that, there are twenty-nine (29) line items, nine (29) line items, out of which, in twenty four (24) line items out of which, in twenty four (24) line items, there is no mention of the , there is no mention of the word ‘cash’ or ‘loan’ or ‘interest’. In five (5) instances, it is observed that, word ‘cash’ or ‘loan’ or ‘interest’. In five (5) instances, it is observed that, word ‘cash’ or ‘loan’ or ‘interest’. In five (5) instances, it is observed that, the word ‘loan’ is appearing in the name of the account but there is no the word ‘loan’ is appearing in the name of the account but there is no the word ‘loan’ is appearing in the name of the account but there is no suggestion that these loans are unaccounted for. Simply put, the entries suggestion that these loans are unaccounted for. Simply put, the entries suggestion that these loans are unaccounted for. Simply put, the entries are noted to be names of parties with percentages mentioned against it re noted to be names of parties with percentages mentioned against it re noted to be names of parties with percentages mentioned against it and corresponding balances. Hence, if this sheet is considered on stand and corresponding balances. Hence, if this sheet is considered on stand and corresponding balances. Hence, if this sheet is considered on stand- alone basis, there are only several names of parties and amounts alone basis, there are only several names of parties and amounts alone basis, there are only several names of parties and amounts mentioned corresponding to it, but there is no in mentioned corresponding to it, but there is no indication that these reflect dication that these reflect any unaccounted loan transactions of the assessee. any unaccounted loan transactions of the assessee.

31.4 It is noticed that, the AO first assumed that, these account balances It is noticed that, the AO first assumed that, these account balances It is noticed that, the AO first assumed that, these account balances reflected loans availed by the assessee. The second assumption drawn by reflected loans availed by the assessee. The second assumption drawn by reflected loans availed by the assessee. The second assumption drawn by to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. the AO was that, the percenta the AO was that, the percentages mentioned therein were rates of ges mentioned therein were rates of interests on these loans. The third assumption was that, all these loans interests on these loans. The third assumption was that, all these loans interests on these loans. The third assumption was that, all these loans were unaccounted for and the fourth assumption was that, these loans were unaccounted for and the fourth assumption was that, these loans were unaccounted for and the fourth assumption was that, these loans would have continued through the next two years and that, the assessee would have continued through the next two years and that, the assessee would have continued through the next two years and that, the assessee had actually paid the interest on the same, at the rates mentioned beside ually paid the interest on the same, at the rates mentioned beside ually paid the interest on the same, at the rates mentioned beside the names of the account(s). With these assumptions, the AO is noted to the names of the account(s). With these assumptions, the AO is noted to the names of the account(s). With these assumptions, the AO is noted to have made the impugned addition. We find that, the Ld. CIT(A) is noted have made the impugned addition. We find that, the Ld. CIT(A) is noted have made the impugned addition. We find that, the Ld. CIT(A) is noted to have acknowledged these assumptions made by to have acknowledged these assumptions made by the AO for making the the AO for making the impugned addition, which according to the Ld. CIT(A), was the only impugned addition, which according to the Ld. CIT(A), was the only impugned addition, which according to the Ld. CIT(A), was the only possible conclusion, without anything contrary being brought on record by possible conclusion, without anything contrary being brought on record by possible conclusion, without anything contrary being brought on record by the assessee.

31.5 In light of the above, we find it fit to first examine the veracity of In light of the above, we find it fit to first examine the veracity of In light of the above, we find it fit to first examine the veracity of these assumptions made by the AO. From the above narrated facts, it is hese assumptions made by the AO. From the above narrated facts, it is hese assumptions made by the AO. From the above narrated facts, it is observed that, the sheet(s) in question were dated 31 observed that, the sheet(s) in question were dated 31-03- -2019 & 31-05- 2019, which according to the Revenue, were trial balances of the 2019, which according to the Revenue, were trial balances of the 2019, which according to the Revenue, were trial balances of the assessee. According to AO, these trial balances assessee. According to AO, these trial balances inter alia er alia contained account balances, which he assumed to be loans availed by the assessee account balances, which he assumed to be loans availed by the assessee account balances, which he assumed to be loans availed by the assessee and next he assumed the percentages mentioned to be rates of interest and next he assumed the percentages mentioned to be rates of interest and next he assumed the percentages mentioned to be rates of interest on such loans. We find that both these assumptions to be plausible. The on such loans. We find that both these assumptions to be plausible. The on such loans. We find that both these assumptions to be plausible. The fact that certain percent fact that certain percentages are mentioned against these names and that ages are mentioned against these names and that five (5) names have mention of the word ‘loan’ in them, does appear to five (5) names have mention of the word ‘loan’ in them, does appear to five (5) names have mention of the word ‘loan’ in them, does appear to suggest that these may be loans, but it only gives rise to suspicion and suggest that these may be loans, but it only gives rise to suspicion and suggest that these may be loans, but it only gives rise to suspicion and to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. there was no evidence brought on record to show that these entri there was no evidence brought on record to show that these entri there was no evidence brought on record to show that these entries were unaccounted loans availed by the assessee. W unaccounted loans availed by the assessee. When the assessee has hen the assessee has contested the veracity of the contents of the impugned document, we contested the veracity of the contents of the impugned document, we contested the veracity of the contents of the impugned document, we note that the AO was not able to bring on record the exact details of the the AO was not able to bring on record the exact details of the the AO was not able to bring on record the exact details of the lenders from whom, according to him, the lenders from whom, according to him, the assessee had availed these assessee had availed these loans. The Revenue has not filed before us any document or material to he Revenue has not filed before us any document or material to he Revenue has not filed before us any document or material to show that, in fact cash loan loans were taken and interest payment was made. taken and interest payment was made.

The persons to whom allegedly interest was paid, their details and The persons to whom allegedly interest was paid, their details and The persons to whom allegedly interest was paid, their details and particulars were also not ascertained, verified and examined not ascertained, verified and examined not ascertained, verified and examined. Hence, it could have been alleged that these entries may have been loan(s) and could have been alleged that these entries may have been loan(s) and could have been alleged that these entries may have been loan(s) and, which could have been a cause for further verification and investigation, which could have been a cause for further verification and investigation, which could have been a cause for further verification and investigation, but mere suspicion alone alone cannot be a ground to hold that cannot be a ground to hold that these loans were taken in cash on which interest was also paid were taken in cash on which interest was also paid.

31.6 The third assumption made by the AO was that, all these loans were The third assumption made by the AO was that, all these loans were The third assumption made by the AO was that, all these loans were unaccounted for. It is noticed that, when the AO had confronted this data unaccounted for. It is noticed that, when the AO had confronted this data unaccounted for. It is noticed that, when the AO had confronted this data to the assessee, the latter had first denied th to the assessee, the latter had first denied the same by submitting that e same by submitting that the data was corrupted and suffered from malware and hence unreliable. the data was corrupted and suffered from malware and hence unreliable. the data was corrupted and suffered from malware and hence unreliable.

According to the assessee, the data contained in this sheet had been According to the assessee, the data contained in this sheet had been According to the assessee, the data contained in this sheet had been mixed-up due to malware and thus did not reflect the true & correct up due to malware and thus did not reflect the true & correct up due to malware and thus did not reflect the true & correct details. We are conscious of the presumption set out in Section 132(4A) ous of the presumption set out in Section 132(4A) ous of the presumption set out in Section 132(4A) of the Act that the contents of any material seized from the possession of of the Act that the contents of any material seized from the possession of of the Act that the contents of any material seized from the possession of the assessee is presumed to be true qua the assessee. It is however also the assessee is presumed to be true qua the assessee. It is however also the assessee is presumed to be true qua the assessee. It is however also to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. well settled in law that this presumption is not absolute well settled in law that this presumption is not absolute but is rebuttable. but is rebuttable.

As already noted earlier, the contents of the sheet did not per se suggest As already noted earlier, the contents of the sheet did not per se suggest As already noted earlier, the contents of the sheet did not per se suggest that these entries were unaccounted for. Rather, this was an assumption that these entries were unaccounted for. Rather, this was an assumption that these entries were unaccounted for. Rather, this was an assumption made by the AO. We find that the assessee has rebutted this assumption made by the AO. We find that the assessee has rebutted this assumption made by the AO. We find that the assessee has rebutted this assumption with ample evidence. The assessee is noted to have shown that, many of . The assessee is noted to have shown that, many of . The assessee is noted to have shown that, many of these parties were those who had advanced monies to these parties were those who had advanced monies to these parties were those who had advanced monies to Shri Kiran Kumar/Managing Director in his individual capacity and not the assessee. Managing Director in his individual capacity and not the assessee. Managing Director in his individual capacity and not the assessee.

The assessee also showed that, majority of these account(s) was assessee also showed that, majority of these account(s) was assessee also showed that, majority of these account(s) was reflected in the books of accounts of other assessees belonging to the Lalitha in the books of accounts of other assessees belonging to the Lalitha in the books of accounts of other assessees belonging to the Lalitha Group.

31.7 The Ld. AR first brought to our notice that the single largest account The Ld. AR first brought to our notice that the single largest account The Ld. AR first brought to our notice that the single largest account value related to ‘Anbu’ account, which, for the reasons already discussed, value related to ‘Anbu’ account, which, for the reasons already discussed, value related to ‘Anbu’ account, which, for the reasons already discussed, while deciding Ground No. 9 to 13 in Paras 8.14 to 8.28 above, has been while deciding Ground No. 9 to 13 in Paras 8.14 to 8.28 above, has been while deciding Ground No. 9 to 13 in Paras 8.14 to 8.28 above, has been held to be unreliable. We have already held to be unreliable. We have already taken note of the fact that the taken note of the fact that the loans which was obtained from Anbu was through banking channel and loans which was obtained from Anbu was through banking channel and loans which was obtained from Anbu was through banking channel and duly recorded in the books of accounts and that there was no element of duly recorded in the books of accounts and that there was no element of duly recorded in the books of accounts and that there was no element of cash loans involved. This was also corroborated by the order of the IBS cash loans involved. This was also corroborated by the order of the IBS cash loans involved. This was also corroborated by the order of the IBS passed in the matters of Anbu, which we have already elaborately e matters of Anbu, which we have already elaborately e matters of Anbu, which we have already elaborately discussed in the preceding paragraphs. Having regard to the same, we discussed in the preceding paragraphs. Having regard to the same, we discussed in the preceding paragraphs. Having regard to the same, we find force in the contention of the assessee that the entries found in this find force in the contention of the assessee that the entries found in this find force in the contention of the assessee that the entries found in this database and the inference drawn by the AO was unreliable. database and the inference drawn by the AO was unreliable. database and the inference drawn by the AO was unreliable. Hence, having regard to our findings rendered while deciding Ground No. 9 to 13 having regard to our findings rendered while deciding Ground No. 9 to 13 having regard to our findings rendered while deciding Ground No. 9 to 13 to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. for AY 2017-18 above, when the assessee had not availed any cash loans 18 above, when the assessee had not availed any cash loans 18 above, when the assessee had not availed any cash loans from Shri Anbu, the question of paying unaccounted cash interest of from Shri Anbu, the question of paying unaccounted cash interest of from Shri Anbu, the question of paying unaccounted cash interest of Rs.32.16 crores does not arise at a Rs.32.16 crores does not arise at all. Hence, out of the total addition of ll. Hence, out of the total addition of Rs.59.26 crores made on account of unaccounted interest payment to Rs.59.26 crores made on account of unaccounted interest payment to Rs.59.26 crores made on account of unaccounted interest payment to parties, amount to the extent of Rs.32.16 crores, for the aforesaid parties, amount to the extent of Rs.32.16 crores, for the aforesaid parties, amount to the extent of Rs.32.16 crores, for the aforesaid reasons, is held to be ex reasons, is held to be ex-facie unsustainable.

31.8 The Ld. AR thereafter brough The Ld. AR thereafter brought to our notice the purported account t to our notice the purported account balance of Rs.9 crores appearing in the name of ‘Suresh Katri’. He balance of Rs.9 crores appearing in the name of ‘Suresh Katri’. He balance of Rs.9 crores appearing in the name of ‘Suresh Katri’. He explained to us that Mr. Suresh Katri was the director of MJPL, from explained to us that Mr. Suresh Katri was the director of MJPL, from explained to us that Mr. Suresh Katri was the director of MJPL, from whom the assessee would regularly purchase gold items and that the whom the assessee would regularly purchase gold items and that the whom the assessee would regularly purchase gold items and that the assessee has already demonstrated that it had a running account with ready demonstrated that it had a running account with ready demonstrated that it had a running account with MJPL duly recorded in the books of accounts and therefore, neither could MJPL duly recorded in the books of accounts and therefore, neither could MJPL duly recorded in the books of accounts and therefore, neither could such balance be alleged as loan or to be unaccounted for. While deciding such balance be alleged as loan or to be unaccounted for. While deciding such balance be alleged as loan or to be unaccounted for. While deciding Ground Nos. 21 to 27 for AY 2017 Ground Nos. 21 to 27 for AY 2017-18, we have already hel 18, we have already held that the transactions with MJPL comprised of regular purchases which were duly transactions with MJPL comprised of regular purchases which were duly transactions with MJPL comprised of regular purchases which were duly recorded in the books and that there was no unaccounted cash or bullion recorded in the books and that there was no unaccounted cash or bullion recorded in the books and that there was no unaccounted cash or bullion transactions with this supplier. Accordingly, we find it to be unsafe to transactions with this supplier. Accordingly, we find it to be unsafe to transactions with this supplier. Accordingly, we find it to be unsafe to simply assume that all these e simply assume that all these entries represented interest bearing cash ntries represented interest bearing cash loan(s) of the assessee. loan(s) of the assessee.

31.9 Having gone through the above details, we thus note that, this Having gone through the above details, we thus note that, this Having gone through the above details, we thus note that, this assumption being made by the AO that all these notings were assumption being made by the AO that all these notings were assumption being made by the AO that all these notings were to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. unaccounted loan(s) is held to be factually erroneous. Also, unaccounted loan(s) is held to be factually erroneous. Also, unaccounted loan(s) is held to be factually erroneous. Also, the assertion of the assessee that, the entries in this database was corrupted or mixed of the assessee that, the entries in this database was corrupted or mixed of the assessee that, the entries in this database was corrupted or mixed- up is found to be plausible, in light of the above discussed facts. Having up is found to be plausible, in light of the above discussed facts. Having up is found to be plausible, in light of the above discussed facts. Having regard to the foregoing, in our considered opinion, if the Revenue did regard to the foregoing, in our considered opinion, if the Revenue did regard to the foregoing, in our considered opinion, if the Revenue didn’t believe this claim of the assessee to be correct, then the onus lay on the of the assessee to be correct, then the onus lay on the of the assessee to be correct, then the onus lay on the Revenue to prove that the entries in the database was genuine and that Revenue to prove that the entries in the database was genuine and that Revenue to prove that the entries in the database was genuine and that these notings represented unaccounted cash loan(s) taken by the these notings represented unaccounted cash loan(s) taken by the these notings represented unaccounted cash loan(s) taken by the assessee on which unexplained interest was paid in the subsequent assessee on which unexplained interest was paid in the subsequent assessee on which unexplained interest was paid in the subsequent year(s). It is however observed that, in year(s). It is however observed that, in spite of the assessee showing that spite of the assessee showing that most of these loans were accounted in the books of accounts, the AO most of these loans were accounted in the books of accounts, the AO most of these loans were accounted in the books of accounts, the AO didn’t make any attempt to reconcile the facts or summon the assessee t make any attempt to reconcile the facts or summon the assessee t make any attempt to reconcile the facts or summon the assessee and enquire regarding the exact nature & and enquire regarding the exact nature & source of these loan(s) or source of these loan(s) or identify the unaccounted loans. identify the unaccounted loans.

31.10 It is also material to mention at this juncture that, the search It is also material to mention at this juncture that, the search It is also material to mention at this juncture that, the search action also did not reveal any such unaccounted cash or asset or action also did not reveal any such unaccounted cash or asset or action also did not reveal any such unaccounted cash or asset or investment which would justify such huge quantum of unaccoun investment which would justify such huge quantum of unaccoun investment which would justify such huge quantum of unaccounted loans in excess of Rs.200 crores as alleged to have been availed by the in excess of Rs.200 crores as alleged to have been availed by the in excess of Rs.200 crores as alleged to have been availed by the assessee. There is also no source identified out of which the assessee assessee. There is also no source identified out of which the assessee assessee. There is also no source identified out of which the assessee could have possibly paid unexplained interest running into crores each could have possibly paid unexplained interest running into crores each could have possibly paid unexplained interest running into crores each year. According to us therefore, in ab year. According to us therefore, in absence of there being any sence of there being any corroborative material to show that these account entries represented corroborative material to show that these account entries represented corroborative material to show that these account entries represented to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. unexplained loan transactions of the assessee, this particular assumption unexplained loan transactions of the assessee, this particular assumption unexplained loan transactions of the assessee, this particular assumption made by the AO holding so, is held to be unjustified. made by the AO holding so, is held to be unjustified.

31.11 We agree with the Ld. AR We agree with the Ld. AR Shri Anand that, if the AO was that, if the AO was of the opinion that, these accounts represented unaccounted borrowings, the opinion that, these accounts represented unaccounted borrowings, the opinion that, these accounts represented unaccounted borrowings, then the AO was required to bring on record the details of the lender(s) then the AO was required to bring on record the details of the lender(s) then the AO was required to bring on record the details of the lender(s) from whom these unaccounted cash loans were availed or to whom was from whom these unaccounted cash loans were availed or to whom was from whom these unaccounted cash loans were availed or to whom was the impugned interest paid. In any loan transaction, there is a lender and nterest paid. In any loan transaction, there is a lender and nterest paid. In any loan transaction, there is a lender and a borrower. The AO is noted to have assumed from these entries that, the a borrower. The AO is noted to have assumed from these entries that, the a borrower. The AO is noted to have assumed from these entries that, the assessee had borrowed these amounts in cash. Hence, as a corollary, the assessee had borrowed these amounts in cash. Hence, as a corollary, the assessee had borrowed these amounts in cash. Hence, as a corollary, the name(s) mentioned in these accounts ought to be th name(s) mentioned in these accounts ought to be that of lender(s). In at of lender(s). In that case, the AO ought to have unearthed the details of the lenders, that case, the AO ought to have unearthed the details of the lenders, that case, the AO ought to have unearthed the details of the lenders, confronted them regarding these loans and should have brought some confronted them regarding these loans and should have brought some confronted them regarding these loans and should have brought some material on record to evidence to show that, these loans were obtained in material on record to evidence to show that, these loans were obtained in material on record to evidence to show that, these loans were obtained in cash and that the assesse cash and that the assessee did subsequently pay them interest on these e did subsequently pay them interest on these loan(s), particularly when the assessee had asserted that these loans loan(s), particularly when the assessee had asserted that these loans loan(s), particularly when the assessee had asserted that these loans were forming part of the books of accounts. However, no such effort or were forming part of the books of accounts. However, no such effort or were forming part of the books of accounts. However, no such effort or attempt is found to have been made by the AO. Rather, we find that in attempt is found to have been made by the AO. Rather, we find that in attempt is found to have been made by the AO. Rather, we find that in two instances of Shri Anbu and Shri Katri, it is the assessee which has two instances of Shri Anbu and Shri Katri, it is the assessee which has two instances of Shri Anbu and Shri Katri, it is the assessee which has been able to prove the contrary. been able to prove the contrary.

31.12 For the above reasons, in our considered view, the AO had not For the above reasons, in our considered view, the AO had not For the above reasons, in our considered view, the AO had not corroborated this third assumption with some corroborated this third assumption with some relevant material/ relevant material/evidence, to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. and therefore it was unsafe for the AO to assume that these account efore it was unsafe for the AO to assume that these account efore it was unsafe for the AO to assume that these account balances represented unaccounted loan transactions of the assessee. balances represented unaccounted loan transactions of the assessee. balances represented unaccounted loan transactions of the assessee.

31.13 We now take up the last assumption made by the AO which We now take up the last assumption made by the AO which We now take up the last assumption made by the AO which was that, the assessee would have actually paid interest on these was that, the assessee would have actually paid interest on these was that, the assessee would have actually paid interest on these loans in cash, in FYs 2019-20 & 2020 20 & 2020-21. As noted in the foregoing, the so 21. As noted in the foregoing, the so-called trial balances were dated 31 trial balances were dated 31-03-2019 & 31-05-2019. A trial balance is 2019. A trial balance is understood to contain all understood to contain all debits and credits which include all business include all business transactions for a company over transactions for a company over a certain period, including the sum of a certain period, including the sum of such accounts as assets, expenses, liabilities, and revenues such accounts as assets, expenses, liabilities, and revenues such accounts as assets, expenses, liabilities, and revenues. Accordingly, if the details of loans are found mentioned in trial balance, then the if the details of loans are found mentioned in trial balance, then the if the details of loans are found mentioned in trial balance, then the corresponding expenses of interest payments would also be there in the corresponding expenses of interest payments would also be there in the corresponding expenses of interest payments would also be there in the same trial balance. The Ld. AR same trial balance. The Ld. AR Shri Anand has rightly pointed out that, if has rightly pointed out that, if these loans were actually received and were unaccounted for, and that these loans were actually received and were unaccounted for, and that these loans were actually received and were unaccounted for, and that cash interest was being paid out of the books, then the same trial balance cash interest was being paid out of the books, then the same trial balance cash interest was being paid out of the books, then the same trial balance which was unearthed by the Revenue, which was unearthed by the Revenue, would also contain the details of would also contain the details of cash interest paid on such loans as on 31 cash interest paid on such loans as on 31-03-2019 and/or 31 2019 and/or 31-05-2019.

He pointed out that, there was no such detail or evidence found in this He pointed out that, there was no such detail or evidence found in this He pointed out that, there was no such detail or evidence found in this two sheets extracted by the Revenue. When enquired from the Ld. CIT, two sheets extracted by the Revenue. When enquired from the Ld. CIT, two sheets extracted by the Revenue. When enquired from the Ld. CIT, DR, even he was unable to show us any details of cash interest paid in was unable to show us any details of cash interest paid in was unable to show us any details of cash interest paid in the account(s) of expenses(s) in this so the account(s) of expenses(s) in this so-called trial balance(s) extracted called trial balance(s) extracted from the database. This from the database. This averment of the assessee is found to be further of the assessee is found to be further corroborated by the fact that, no addition on acc corroborated by the fact that, no addition on account of unexplained ount of unexplained to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. interest payment was made in the AY 2019 interest payment was made in the AY 2019-20 to which one of the 20 to which one of the sheet(s) dated 31-03 03-2019 pertained to. Moreover, it has been 2019 pertained to. Moreover, it has been acknowledged by the lower authorities that there is no direct evidence of acknowledged by the lower authorities that there is no direct evidence of acknowledged by the lower authorities that there is no direct evidence of cash interest payment for FYs 2019 cash interest payment for FYs 2019-20 & 2020-21 and that the same has 21 and that the same has been assumed from the entries in these sheets dated 31 been assumed from the entries in these sheets dated 31- -05-2019 & 31- 03-2019.

In view of the above, we thus note that, when the purported In view of the above, we thus note that, when the purported In view of the above, we thus note that, when the purported 31.14 trial balance(s) dated 31 trial balance(s) dated 31-03-2019 relied upon by the AO itself did not 2019 relied upon by the AO itself did not contain any details of interest paid for the relevant year any details of interest paid for the relevant year-ending for which ending for which they related to, and there was also no indication or evidence that the they related to, and there was also no indication or evidence that the they related to, and there was also no indication or evidence that the assessee had paid interest in subsequent years, then it was unsafe to assessee had paid interest in subsequent years, then it was unsafe to assessee had paid interest in subsequent years, then it was unsafe to assume that the assessee had actually paid inte assume that the assessee had actually paid interest in cash to the lenders rest in cash to the lenders in the subsequent years to justify the impugned addition. in the subsequent years to justify the impugned addition.

31.15 It is well settled that the Revenue authorities cannot base its It is well settled that the Revenue authorities cannot base its It is well settled that the Revenue authorities cannot base its findings on suspicions, conjunctures or surmises nor should it act on no findings on suspicions, conjunctures or surmises nor should it act on no findings on suspicions, conjunctures or surmises nor should it act on no evidence at all or on vag evidence at all or on vague considerations partly on evidence and ue considerations partly on evidence and partly on suspicion, conjectures or surmises. ctures or surmises. In the case before us, In the case before us, the Revenue has not been able to demonstrate any material except demonstrate any material except unverified sheets unverified sheets extracted from database, which does not contain any reference o extracted from database, which does not contain any reference o extracted from database, which does not contain any reference or details of cash interest payments not only for the years impugned before us but of cash interest payments not only for the years impugned before us but of cash interest payments not only for the years impugned before us but also the relevant year to which this sheet pertains to also the relevant year to which this sheet pertains to. According to us, According to us, to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. mere mention of loan(s) on this trial balance without any proof of mere mention of loan(s) on this trial balance without any proof of mere mention of loan(s) on this trial balance without any proof of payment of interest is not a good not a good evidence and do not raise any estoppel evidence and do not raise any estoppel against the assessee. Also, the presumption u/s 132(4A) of the Act does Also, the presumption u/s 132(4A) of the Act does Also, the presumption u/s 132(4A) of the Act does not come to the rescue of the Revenue for the reason that the contents of not come to the rescue of the Revenue for the reason that the contents of not come to the rescue of the Revenue for the reason that the contents of the document considered on stand the document considered on stand-alone basis does not suggest any alone basis does not suggest any payment of interest on loan. Accordingly, no presumption could have nt of interest on loan. Accordingly, no presumption could have nt of interest on loan. Accordingly, no presumption could have been validly raised by the AO in this regard. Rather, we find been validly raised by the AO in this regard. Rather, we find been validly raised by the AO in this regard. Rather, we find that the addition made by the AO is in the realm of speculation without any basis addition made by the AO is in the realm of speculation without any basis addition made by the AO is in the realm of speculation without any basis whatsoever.

31.16 It is noticed that the impugned It is noticed that the impugned addition was based on an addition was based on an extrapolation done by the AO. Since the loans were found to be extrapolation done by the AO. Since the loans were found to be extrapolation done by the AO. Since the loans were found to be outstanding as on 31- -03-2019 & 31-05-2019, the AO assumed that 2019, the AO assumed that assessee ought to have paid interest on such loans for the next two years assessee ought to have paid interest on such loans for the next two years assessee ought to have paid interest on such loans for the next two years and thus extrapolated the inte and thus extrapolated the interest rates to arrive at the quantum of rest rates to arrive at the quantum of unexplained interest payment. According to us, this extrapolation unexplained interest payment. According to us, this extrapolation unexplained interest payment. According to us, this extrapolation assumption has no valid basis. Unless there was any material or evidence assumption has no valid basis. Unless there was any material or evidence assumption has no valid basis. Unless there was any material or evidence unearthed or any trial balance found in the course of search, which would unearthed or any trial balance found in the course of search, which would unearthed or any trial balance found in the course of search, which would show that the assessee had actually paid the impugned interest during that the assessee had actually paid the impugned interest during that the assessee had actually paid the impugned interest during the relevant periods FY 2019 the relevant periods FY 2019-20 & 2020-21, this particular extrapolation 21, this particular extrapolation made by the AO cannot be countenanced. The Ld. AR also brought to our made by the AO cannot be countenanced. The Ld. AR also brought to our made by the AO cannot be countenanced. The Ld. AR also brought to our notice the assessment order passed in assessee’ notice the assessment order passed in assessee’s own case for s own case for subsequent AY 2022-23 u/s 143(3) of the Act wherein no such addition on 23 u/s 143(3) of the Act wherein no such addition on 23 u/s 143(3) of the Act wherein no such addition on to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. account of unexplained interest payment was made. We agree with the account of unexplained interest payment was made. We agree with the account of unexplained interest payment was made. We agree with the assessee that, going by the AO’s assumption, the interest ought to have assessee that, going by the AO’s assumption, the interest ought to have assessee that, going by the AO’s assumption, the interest ought to have been paid in AY 2022-23 also 23 also, but the AO didn’t make any such addition t make any such addition in that year. This contemporaneous fact lends credence to the assessee’s in that year. This contemporaneous fact lends credence to the assessee’s in that year. This contemporaneous fact lends credence to the assessee’s case that, the AO himself was not sure regarding the extent of his case that, the AO himself was not sure regarding the extent of his case that, the AO himself was not sure regarding the extent of his assumption and extrapolation exercise. It is not a case that, the AO found assumption and extrapolation exercise. It is not a case that, the AO found assumption and extrapolation exercise. It is not a case that, the AO found any material which suggested that these loans had been repaid by AY any material which suggested that these loans had been repaid by AY any material which suggested that these loans had been repaid by AY 2021-22 and therefore in terms of his own logic, the interest payment 22 and therefore in terms of his own logic, the interest payment 22 and therefore in terms of his own logic, the interest payment ought to be extrapolated to AY 2022 ought to be extrapolated to AY 2022-23 and so on as well. Not only that, 23 and so on as well. Not only that, if such assumption is held to be tenable, th if such assumption is held to be tenable, then additions could also be en additions could also be made in the years prior to this trial balance. According to us, such made in the years prior to this trial balance. According to us, such made in the years prior to this trial balance. According to us, such extrapolation exercise cannot be validated as the same is far extrapolation exercise cannot be validated as the same is far extrapolation exercise cannot be validated as the same is far-fetched, unreasonable and without any sanction of law. unreasonable and without any sanction of law.

31.17 In this regard, we refer to the deci In this regard, we refer to the decision of the sion of the Hon'ble Apex Court in Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 laying down principles regarding estimation that while making assessment regarding estimation that while making assessment regarding estimation that while making assessment under Section 23(3) of the I der Section 23(3) of the Income Tax Act 1922. The Hon’ble Apex Court Act 1922. The Hon’ble Apex Court held that, the ITO is not fettered by technical rules of evidence and the ITO is not fettered by technical rules of evidence and the ITO is not fettered by technical rules of evidence and pleadings, and he is entitled to act on material which may not be pleadings, and he is entitled to act on material which may not be pleadings, and he is entitled to act on material which may not be accepted as evidence in a Court of law, but accepted as evidence in a Court of law, but at the same time, at the same time, he is not entitled to make a pure guess and make an assessment witho entitled to make a pure guess and make an assessment witho entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more to any evidence or any material at all. There must be something more to any evidence or any material at all. There must be something more to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. than bare suspicion to support assessment under section n to support assessment under section n to support assessment under section 23(3) of the 1922 Act. The Hon'ble A Hon'ble Apex Court on facts of the case held that both ITO pex Court on facts of the case held that both ITO and Tribunal in estimating the G and Tribunal in estimating the GP rate on sales of the assessee didn’ e assessee didn’t act on any material but acted on pure guess and suspicion and therefore it on any material but acted on pure guess and suspicion and therefore it on any material but acted on pure guess and suspicion and therefore it was a fit case for the exercise of the power was a fit case for the exercise of the power of the Supreme Court under of the Supreme Court under Article 136 of the Constitution of India. 136 of the Constitution of India.

We find the reliance p We find the reliance placed by the assessee on the decision of laced by the assessee on the decision of 31.18 Hon’ble Delhi High Court in the case of Hon’ble Delhi High Court in the case of CIT Vs Home Developers Pvt CIT Vs Home Developers Pvt Ltd (229 Taxman 254) Ltd (229 Taxman 254) to be of relevance. In the decided case also, the to be of relevance. In the decided case also, the search action had unearthed certain details, which according to AO, was search action had unearthed certain details, which according to AO, was search action had unearthed certain details, which according to AO, was the details loans availed for purchase of property in cash. The AO is noted etails loans availed for purchase of property in cash. The AO is noted etails loans availed for purchase of property in cash. The AO is noted to have assumed that the assessee would have paid interest on such to have assumed that the assessee would have paid interest on such to have assumed that the assessee would have paid interest on such loans and thus made addition on account of unexplained expenditure u/s loans and thus made addition on account of unexplained expenditure u/s loans and thus made addition on account of unexplained expenditure u/s 69C of the Act. On appeal, this Tribunal noted 69C of the Act. On appeal, this Tribunal noted that the AO had assumed that the AO had assumed the entries found to be that of the entries found to be that of receipt of loan, and he also assumed that and he also assumed that the assessee has repaid the loan along the assessee has repaid the loan along with the interest and he presumed with the interest and he presumed the rate of interest to be 20%. the rate of interest to be 20%. Deleting the addition made on these Deleting the addition made on these assumptions, the Tribunal held as under: Tribunal held as under:-

“…We find that the Assessing Officer has considered the entries at the “…We find that the Assessing Officer has considered the entries at the “…We find that the Assessing Officer has considered the entries at the left hand side of the paper which is totaled to 22,40,000/ left hand side of the paper which is totaled to 22,40,000/-. On this loose . On this loose paper, only one name Paliwal is written and there are dates and paper, only one name Paliwal is written and there are dates and paper, only one name Paliwal is written and there are dates and amounts without any n amounts without any narration. The total of amounts is 22,40,000/ arration. The total of amounts is 22,40,000/-. It is the inference of the Assessing Officer that the assessee is making the is the inference of the Assessing Officer that the assessee is making the is the inference of the Assessing Officer that the assessee is making the entries ignoring '00'/'000' (2/3 zeros). It seems that in 22,40,000/ entries ignoring '00'/'000' (2/3 zeros). It seems that in 22,40,000/ entries ignoring '00'/'000' (2/3 zeros). It seems that in 22,40,000/-, he to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. increased '00' (2 zeros) and made it 22,40,00,000/ increased '00' (2 zeros) and made it 22,40,00,000/-. As pe . As per the Assessing Officer, the entry is for receipt of loan, though in the loose Assessing Officer, the entry is for receipt of loan, though in the loose Assessing Officer, the entry is for receipt of loan, though in the loose paper there is no such narration except date and amount. The Assessing paper there is no such narration except date and amount. The Assessing paper there is no such narration except date and amount. The Assessing Officer further presumes that the assessee has repaid the loan along Officer further presumes that the assessee has repaid the loan along Officer further presumes that the assessee has repaid the loan along with the interest and he presumed the with the interest and he presumed the rate of interest to be 20%. He rate of interest to be 20%. He made the addition in respect of such alleged repayment of loan with made the addition in respect of such alleged repayment of loan with made the addition in respect of such alleged repayment of loan with interest. The learned CIT(A) has deleted the addition with regard to interest. The learned CIT(A) has deleted the addition with regard to interest. The learned CIT(A) has deleted the addition with regard to repayment of loan on the ground that since loan amount itself was repayment of loan on the ground that since loan amount itself was repayment of loan on the ground that since loan amount itself was available with the as available with the assessee out of which this repayment was made, he sessee out of which this repayment was made, he reduced the interest. Thus, the addition is partly sustained by him. reduced the interest. Thus, the addition is partly sustained by him. reduced the interest. Thus, the addition is partly sustained by him. However, after considering the entire facts and arguments of both the However, after considering the entire facts and arguments of both the However, after considering the entire facts and arguments of both the sides, we find that the entire addition is based upon the presumption sides, we find that the entire addition is based upon the presumption sides, we find that the entire addition is based upon the presumption of the Assessing Officer. On the loose papers, there is noting of dates and the Assessing Officer. On the loose papers, there is noting of dates and the Assessing Officer. On the loose papers, there is noting of dates and amounts without any narration. The total of such amount is 22,40,000/ amounts without any narration. The total of such amount is 22,40,000/ amounts without any narration. The total of such amount is 22,40,000/- . The first presumption by the Assessing Officer is that it is not . The first presumption by the Assessing Officer is that it is not . The first presumption by the Assessing Officer is that it is not 22,40,000/- but 22,40,00,000/ but 22,40,00,000/-.The second presumption is that the presumption is that the noting is relating to loan taken by the assessee. The third presumption noting is relating to loan taken by the assessee. The third presumption noting is relating to loan taken by the assessee. The third presumption is that the loan was repaid during the accounting year relevant to the is that the loan was repaid during the accounting year relevant to the is that the loan was repaid during the accounting year relevant to the assessment year under consideration. The fourth presumption is that assessment year under consideration. The fourth presumption is that assessment year under consideration. The fourth presumption is that the repayment of the the repayment of the loan was along with interest at the rate of 20%. loan was along with interest at the rate of 20%. On these series of presumptions, he not only made huge additions On these series of presumptions, he not only made huge additions On these series of presumptions, he not only made huge additions running into crores of Rupees but also levied penalties under Sections running into crores of Rupees but also levied penalties under Sections running into crores of Rupees but also levied penalties under Sections 271D & 271E. His finding is neither based upon the noting on the loose 271D & 271E. His finding is neither based upon the noting on the loose 271D & 271E. His finding is neither based upon the noting on the loose papers nor any corroborative evidence brought on record during the papers nor any corroborative evidence brought on record during the papers nor any corroborative evidence brought on record during the course of assessment proceedings. On the other hand, material available course of assessment proceedings. On the other hand, material available course of assessment proceedings. On the other hand, material available on record is contrary, i.e., (i) the papers were found from Shri Yogesh on record is contrary, i.e., (i) the papers were found from Shri Yogesh on record is contrary, i.e., (i) the papers were found from Shri Yogesh Gupta and not the assessee, (ii) statement of Gupta and not the assessee, (ii) statement of Shri Yogesh Gupta was Shri Yogesh Gupta was recorded in which he stated that these were unaccounted transactions, recorded in which he stated that these were unaccounted transactions, recorded in which he stated that these were unaccounted transactions, (iii) he surrendered the income from such unaccounted transactions in (iii) he surrendered the income from such unaccounted transactions in (iii) he surrendered the income from such unaccounted transactions in his hands as well as in the hands of group concern, (iv) the income from his hands as well as in the hands of group concern, (iv) the income from his hands as well as in the hands of group concern, (iv) the income from unaccounted transact unaccounted transactions as surrendered by Shri Yogesh Gupta and all ions as surrendered by Shri Yogesh Gupta and all the group concerns has been accepted by the Revenue. In view of these the group concerns has been accepted by the Revenue. In view of these the group concerns has been accepted by the Revenue. In view of these facts, if Revenue wanted to take the view that the noting on the loose facts, if Revenue wanted to take the view that the noting on the loose facts, if Revenue wanted to take the view that the noting on the loose papers is with regard to loan taken by the assessee, then the burd papers is with regard to loan taken by the assessee, then the burd papers is with regard to loan taken by the assessee, then the burden was upon the Revenue to establish so. However, the Assessing Officer was upon the Revenue to establish so. However, the Assessing Officer was upon the Revenue to establish so. However, the Assessing Officer did nothing except to make series of presumptions and then made the did nothing except to make series of presumptions and then made the did nothing except to make series of presumptions and then made the addition and levied the penalty on the basis of his presumptions…. addition and levied the penalty on the basis of his presumptions…. addition and levied the penalty on the basis of his presumptions….

….In these years also, at the most, it can be the In these years also, at the most, it can be the doubt of the Assessing doubt of the Assessing Officer that unaccounted transactions are in the nature of the loan Officer that unaccounted transactions are in the nature of the loan Officer that unaccounted transactions are in the nature of the loan taken. However, the doubt or suspicion of the Assessing Officer is not taken. However, the doubt or suspicion of the Assessing Officer is not taken. However, the doubt or suspicion of the Assessing Officer is not enough to hold that the assessee had taken loan/deposit in cash. enough to hold that the assessee had taken loan/deposit in cash. enough to hold that the assessee had taken loan/deposit in cash. Moreover, in the years under Moreover, in the years under appeal, the Assessing Officer made further appeal, the Assessing Officer made further presumptions that there was repayment of loan in cash though there is presumptions that there was repayment of loan in cash though there is presumptions that there was repayment of loan in cash though there is no such noting on the loose paper. In our opinion, the finding of the no such noting on the loose paper. In our opinion, the finding of the no such noting on the loose paper. In our opinion, the finding of the ITAT as well as Hon'ble Jurisdictional High Court in AY 2000 ITAT as well as Hon'ble Jurisdictional High Court in AY 2000 ITAT as well as Hon'ble Jurisdictional High Court in AY 2000-01 to 2003- to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 156 ::

04 would be squarely applicable to the years under appeal. We further 04 would be squarely applicable to the years under appeal. We further 04 would be squarely applicable to the years under appeal. We further hold that when it is not established that the assessee had taken loan or hold that when it is not established that the assessee had taken loan or hold that when it is not established that the assessee had taken loan or deposit, the question of further presumption that such loan or deposit deposit, the question of further presumption that such loan or deposit deposit, the question of further presumption that such loan or deposit was repaid during the year under considera was repaid during the year under consideration was without any basis or tion was without any basis or material on record. material on record.

On appeal by the Revenue, the Hon’ble High Court observed On appeal by the Revenue, the Hon’ble High Court observed On appeal by the Revenue, the Hon’ble High Court observed 31.19 that neither was there any statement of the key person of the assessee that neither was there any statement of the key person of the assessee that neither was there any statement of the key person of the assessee admitting to any unaccounted loan transactions nor was there any detail admitting to any unaccounted loan transactions nor was there any detail admitting to any unaccounted loan transactions nor was there any details or particulars of person from whom loan was availed or any material to or particulars of person from whom loan was availed or any material to or particulars of person from whom loan was availed or any material to corroborate such an assumption. The Hon’ble High Court is noted to have corroborate such an assumption. The Hon’ble High Court is noted to have corroborate such an assumption. The Hon’ble High Court is noted to have upheld the order of this Tribunal by holding as under : upheld the order of this Tribunal by holding as under :-

“7. The Tribunal has also referred to the statement of “7. The Tribunal has also referred to the statement of Yogesh Gupta, Yogesh Gupta, which was recorded during the course of search and it was observed which was recorded during the course of search and it was observed which was recorded during the course of search and it was observed that Yogesh Gupta had never accepted or agreed that there were any that Yogesh Gupta had never accepted or agreed that there were any that Yogesh Gupta had never accepted or agreed that there were any loan transaction in cash or there was payment of interest. It is loan transaction in cash or there was payment of interest. It is loan transaction in cash or there was payment of interest. It is noticeable that even in the assessment ord noticeable that even in the assessment order, the reply quoted by the er, the reply quoted by the Assessing Officer refers to real estate transactions and advances/loans Assessing Officer refers to real estate transactions and advances/loans Assessing Officer refers to real estate transactions and advances/loans received against certain commitments for purchase of properties. The received against certain commitments for purchase of properties. The received against certain commitments for purchase of properties. The Tribunal noticing the statement made by Yogesh Gupta on oath during Tribunal noticing the statement made by Yogesh Gupta on oath during Tribunal noticing the statement made by Yogesh Gupta on oath during the course of searc the course of search came to the conclusion that the findings of the h came to the conclusion that the findings of the Assessing Officer that there were loan transactions in cash and interest Assessing Officer that there were loan transactions in cash and interest Assessing Officer that there were loan transactions in cash and interest was paid in cash was merely an assumption. Even on the quantum, the was paid in cash was merely an assumption. Even on the quantum, the was paid in cash was merely an assumption. Even on the quantum, the addition made was on mere assumption. addition made was on mere assumption.

cannot be a ground to hold that loan/deposits were received in cash. cannot be a ground to hold that loan/deposits were received in cash. cannot be a ground to hold that loan/deposits were received in cash. The findings of the Tribunal were not perverse. The findings of the Tribunal were not perverse.

31.20 The above decision is found to be applicable in the facts The above decision is found to be applicable in the facts The above decision is found to be applicable in the facts present before us. The AO has not brought on record any material to us. The AO has not brought on record any material to us. The AO has not brought on record any material to show that these entries were cash loans or the persons from whom these show that these entries were cash loans or the persons from whom these show that these entries were cash loans or the persons from whom these loans were availed or details of interest payment. Even the assessee loans were availed or details of interest payment. Even the assessee loans were availed or details of interest payment. Even the assessee never accepted or agreed that these were cash loans on which it never accepted or agreed that these were cash loans on which it never accepted or agreed that these were cash loans on which it paid interest in the years impugned before us. Rather, the case of the Revenue interest in the years impugned before us. Rather, the case of the Revenue interest in the years impugned before us. Rather, the case of the Revenue solely hinges on assumptions drawn from these entries, which may have solely hinges on assumptions drawn from these entries, which may have solely hinges on assumptions drawn from these entries, which may have given rise to suspicion but according to us, such suspicion alone was given rise to suspicion but according to us, such suspicion alone was given rise to suspicion but according to us, such suspicion alone was clearly not sufficient to justify th clearly not sufficient to justify the impugned addition, without there being e impugned addition, without there being any independent fact or evidence or material linking the same. any independent fact or evidence or material linking the same. any independent fact or evidence or material linking the same.

31.21 In this regard, we also gainfully refer to the following In this regard, we also gainfully refer to the following In this regard, we also gainfully refer to the following observations of the Hon’ble Bombay High Court in the case of observations of the Hon’ble Bombay High Court in the case of observations of the Hon’ble Bombay High Court in the case of CIT Vs C.J.

Shah & Co. (248 ITR 350) ITR 350) wherein on somewhat similar facts and wherein on somewhat similar facts and circumstances, the assumption drawn by the AO on the basis of material circumstances, the assumption drawn by the AO on the basis of material circumstances, the assumption drawn by the AO on the basis of material to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. seized in course of search and the extrapolation exercise carried out was seized in course of search and the extrapolation exercise carried out was seized in course of search and the extrapolation exercise carried out was held to be unjustified.

"3. It is well-settled that in cases wh settled that in cases where material is detected after search ere material is detected after search and seizure operations are carried out, the Assessing Officer is required and seizure operations are carried out, the Assessing Officer is required and seizure operations are carried out, the Assessing Officer is required to determine the undisclosed income. In such cases additions are to determine the undisclosed income. In such cases additions are to determine the undisclosed income. In such cases additions are generally based on estimates. In matters of estimation some amount of generally based on estimates. In matters of estimation some amount of generally based on estimates. In matters of estimation some amount of latitude is required to be shown to the Assessing Officer, particularly is required to be shown to the Assessing Officer, particularly is required to be shown to the Assessing Officer, particularly when relevant documents are not forthcoming. However, it does not when relevant documents are not forthcoming. However, it does not when relevant documents are not forthcoming. However, it does not mean that the Assessing Officer can arrive at any figure without any mean that the Assessing Officer can arrive at any figure without any mean that the Assessing Officer can arrive at any figure without any basis by adopting an arbitrary method of calculation. In t basis by adopting an arbitrary method of calculation. In t basis by adopting an arbitrary method of calculation. In the present matter, A3, A4 and A6 nowhere records the turnover of the assessee as matter, A3, A4 and A6 nowhere records the turnover of the assessee as matter, A3, A4 and A6 nowhere records the turnover of the assessee as found by the Tribunal and yet on the wrong basis of the incoming and found by the Tribunal and yet on the wrong basis of the incoming and found by the Tribunal and yet on the wrong basis of the incoming and outgoing cash transactions, the Assessing Officer has arrived at the outgoing cash transactions, the Assessing Officer has arrived at the outgoing cash transactions, the Assessing Officer has arrived at the turnover. Moreover, the peak investme turnover. Moreover, the peak investment was Rs. 40,14,806 for three nt was Rs. 40,14,806 for three months. However, there is no material seized to justify any figure to be months. However, there is no material seized to justify any figure to be months. However, there is no material seized to justify any figure to be included for a period earlier to the said period of three months. In the included for a period earlier to the said period of three months. In the included for a period earlier to the said period of three months. In the circumstances, the Tribunal has recorded a finding of fact and has held circumstances, the Tribunal has recorded a finding of fact and has held circumstances, the Tribunal has recorded a finding of fact and has held that the addition of Rs. 3.40 crores was totally unjustified. The entire e addition of Rs. 3.40 crores was totally unjustified. The entire e addition of Rs. 3.40 crores was totally unjustified. The entire finding of the Tribunal is based on the facts. No substantial question of finding of the Tribunal is based on the facts. No substantial question of finding of the Tribunal is based on the facts. No substantial question of law arises. Hence, the appeal is dismissed." law arises. Hence, the appeal is dismissed."

We also refer to the decision of the coordinate bench of this We also refer to the decision of the coordinate bench of this We also refer to the decision of the coordinate bench of this 31.22 Tribunal at Ahemdabad in the case of bunal at Ahemdabad in the case of Savaliya Buildcon v. DCIT (ITA Savaliya Buildcon v. DCIT (ITA No. 401 & 3188/Ahd/2014) dated 30 No. 401 & 3188/Ahd/2014) dated 30-4-2019 wherein the issue was wherein the issue was whether the AO was justified in making extrapolation exercise estimating whether the AO was justified in making extrapolation exercise estimating whether the AO was justified in making extrapolation exercise estimating on-monies on receipt of sale of all the flats on the ba monies on receipt of sale of all the flats on the basis of statements of sis of statements of two purchases admitting to payment of on two purchases admitting to payment of on-monies. Answering the monies. Answering the question in favour of the assessee, the Tribunal held that it was a question in favour of the assessee, the Tribunal held that it was a question in favour of the assessee, the Tribunal held that it was a misplaced suspicion based only on surmises without any proof and thus misplaced suspicion based only on surmises without any proof and thus misplaced suspicion based only on surmises without any proof and thus deleted the extrapolated addition, deleted the extrapolated addition, by observing as under:- to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 159 ::

“8.2 The statement of two purchasers is the bedrock for additions in 8.2 The statement of two purchasers is the bedrock for additions in 8.2 The statement of two purchasers is the bedrock for additions in controversy. It is an admitted position that the statements of two controversy. It is an admitted position that the statements of two controversy. It is an admitted position that the statements of two purchasers allegedly claiming to have paid cash money of Rs. 14.10 purchasers allegedly claiming to have paid cash money of Rs. 14.10 purchasers allegedly claiming to have paid cash money of Rs. 14.10 Lakhs in aggregate, were ob Lakhs in aggregate, were obtained behind the back of the assessee. The tained behind the back of the assessee. The copy of the statement was not provided to the assessee at all. The cross copy of the statement was not provided to the assessee at all. The cross copy of the statement was not provided to the assessee at all. The cross examination of the purchasers were also not provided by the Revenue examination of the purchasers were also not provided by the Revenue examination of the purchasers were also not provided by the Revenue authorities despite several requests made by the assessee. Such authorities despite several requests made by the assessee. Such authorities despite several requests made by the assessee. Such overwhelming facts remain unrebutted on behalf of the Revenue. This lming facts remain unrebutted on behalf of the Revenue. This lming facts remain unrebutted on behalf of the Revenue. This being so, the action of the AO in placing reliance upon statement of third being so, the action of the AO in placing reliance upon statement of third being so, the action of the AO in placing reliance upon statement of third party to crucify the assessee is clearly in negation of overriding party to crucify the assessee is clearly in negation of overriding party to crucify the assessee is clearly in negation of overriding principles of natural justice which is supposed to be principles of natural justice which is supposed to be guiding factor in an guiding factor in an adjudication process. Needless to say, the appropriate opportunity to an adjudication process. Needless to say, the appropriate opportunity to an adjudication process. Needless to say, the appropriate opportunity to an affected party is not a gift but an absolute and salutary right which affected party is not a gift but an absolute and salutary right which affected party is not a gift but an absolute and salutary right which cannot be simply bypassed. The infringement of basic principles of cannot be simply bypassed. The infringement of basic principles of cannot be simply bypassed. The infringement of basic principles of natural justice has thus natural justice has thus vitiated the order of the AO to the core. The vitiated the order of the AO to the core. The legitimate expectation of the assessee to seek cross examination of a legitimate expectation of the assessee to seek cross examination of a legitimate expectation of the assessee to seek cross examination of a person making adverse comments against the assessee to enable it to person making adverse comments against the assessee to enable it to person making adverse comments against the assessee to enable it to traverse the assertions cannot be shunned in sub traverse the assertions cannot be shunned in sub-version of judicial version of judicial propriety while weighing an issue. The right to fair hearing is a opriety while weighing an issue. The right to fair hearing is a opriety while weighing an issue. The right to fair hearing is a guaranteed right. Every person affected by the statement of third party guaranteed right. Every person affected by the statement of third party guaranteed right. Every person affected by the statement of third party has indispensible right to know the evidence used against him. The AO has indispensible right to know the evidence used against him. The AO has indispensible right to know the evidence used against him. The AO as well as the CIT (A) has violated this cardinal as well as the CIT (A) has violated this cardinal principle as squarely principle as squarely underscored in Kishanchand Chellaram v. CIT 125 ITR 713 (SC) and underscored in Kishanchand Chellaram v. CIT 125 ITR 713 (SC) and underscored in Kishanchand Chellaram v. CIT 125 ITR 713 (SC) and host of other decisions. Apart from a bald statement of third party host of other decisions. Apart from a bald statement of third party host of other decisions. Apart from a bald statement of third party loaded against the assessee which was never confronted, the Revenue loaded against the assessee which was never confronted, the Revenue loaded against the assessee which was never confronted, the Revenue has not adduced any material whic has not adduced any material which could expose the falsehood in the h could expose the falsehood in the records of the assessee despite drastic action of search. Therefore, we records of the assessee despite drastic action of search. Therefore, we records of the assessee despite drastic action of search. Therefore, we are unable to subscribe to the view taken by the AO for exercise of the are unable to subscribe to the view taken by the AO for exercise of the are unable to subscribe to the view taken by the AO for exercise of the power in a manner most beneficial to the Revenue and consequently power in a manner most beneficial to the Revenue and consequently power in a manner most beneficial to the Revenue and consequently most adverse to the assessee in total disregard of fairness in its action. se to the assessee in total disregard of fairness in its action. se to the assessee in total disregard of fairness in its action. From its submissions before lower authorities, the assessee has clearly From its submissions before lower authorities, the assessee has clearly From its submissions before lower authorities, the assessee has clearly demonstrated that it has repeatedly asked for cross examination of the demonstrated that it has repeatedly asked for cross examination of the demonstrated that it has repeatedly asked for cross examination of the witnesses against him. The department was thus d witnesses against him. The department was thus duty bound to produce uty bound to produce its witness for cross examination more particularly when no other its witness for cross examination more particularly when no other its witness for cross examination more particularly when no other tangible material is shown to be available to implicate the assessee. In tangible material is shown to be available to implicate the assessee. In tangible material is shown to be available to implicate the assessee. In the absence of any corroborating evidence and in the absence of cross the absence of any corroborating evidence and in the absence of cross the absence of any corroborating evidence and in the absence of cross examination offered, the s examination offered, the statement of third party cannot be taken tatement of third party cannot be taken cognizance of, as it will apparently lead to miscarriage of justice. cognizance of, as it will apparently lead to miscarriage of justice. cognizance of, as it will apparently lead to miscarriage of justice. Therefore, we find total justification in the action of the CIT (A) in Therefore, we find total justification in the action of the CIT (A) in Therefore, we find total justification in the action of the CIT (A) in directing the AO to delete the estimated additions towards unaccounted directing the AO to delete the estimated additions towards unaccounted directing the AO to delete the estimated additions towards unaccounted receipt in respect of flats sold on the basis of some unverified and bald pt in respect of flats sold on the basis of some unverified and bald pt in respect of flats sold on the basis of some unverified and bald statement. Once such statements of the purchasers are taken out of statement. Once such statements of the purchasers are taken out of statement. Once such statements of the purchasers are taken out of reckoning, the edifice of estimated additions towards sale of residential reckoning, the edifice of estimated additions towards sale of residential reckoning, the edifice of estimated additions towards sale of residential flats would crumble down. flats would crumble down. to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 160 ::

8.3 Besides, estimated cash receipts on estimated cash receipts on-money of sale of all flats money of sale of all flats merely on the basis of statement of two purchasers without any tangible merely on the basis of statement of two purchasers without any tangible merely on the basis of statement of two purchasers without any tangible corroboration clearly falls in the realm of conjunctures and surmises. It corroboration clearly falls in the realm of conjunctures and surmises. It corroboration clearly falls in the realm of conjunctures and surmises. It is obvious that driven by misplaced suspicion, the AO ha is obvious that driven by misplaced suspicion, the AO has presumed the s presumed the presence of on-money in respect of each of the residential flat sold. The money in respect of each of the residential flat sold. The money in respect of each of the residential flat sold. The action of the AO is a mere ipse dixit which is not objectively justifiable action of the AO is a mere ipse dixit which is not objectively justifiable action of the AO is a mere ipse dixit which is not objectively justifiable by some inculpatory evidence. It is only elementary to say that by some inculpatory evidence. It is only elementary to say that by some inculpatory evidence. It is only elementary to say that estimation of unaccounted mo estimation of unaccounted money cannot be made only on the basis of ney cannot be made only on the basis of contemplation. The order of the AO in making additions of Rs. 3.28 contemplation. The order of the AO in making additions of Rs. 3.28 contemplation. The order of the AO in making additions of Rs. 3.28 Crores is thus clearly arbitrary and unsustainable in law. It is well settled Crores is thus clearly arbitrary and unsustainable in law. It is well settled Crores is thus clearly arbitrary and unsustainable in law. It is well settled that the Revenue authorities cannot base its findings on suspicions, that the Revenue authorities cannot base its findings on suspicions, that the Revenue authorities cannot base its findings on suspicions, conjunctures or surmises nor should it act on no evidence at all or on njunctures or surmises nor should it act on no evidence at all or on njunctures or surmises nor should it act on no evidence at all or on vague considerations partly on evidence and partly on suspicion, vague considerations partly on evidence and partly on suspicion, vague considerations partly on evidence and partly on suspicion, conjunctures or surmises. The Revenue could not demonstrate any conjunctures or surmises. The Revenue could not demonstrate any conjunctures or surmises. The Revenue could not demonstrate any material except unsupported statements of two persons. Suc material except unsupported statements of two persons. Suc material except unsupported statements of two persons. Such unverified statements without any proof towards its assertions are not a good statements without any proof towards its assertions are not a good statements without any proof towards its assertions are not a good evidence and do not raise any estoppel against the assessee. Therefore, evidence and do not raise any estoppel against the assessee. Therefore, evidence and do not raise any estoppel against the assessee. Therefore, the addition made by the AO is in the realm of speculation without any the addition made by the AO is in the realm of speculation without any the addition made by the AO is in the realm of speculation without any basis whatsoever. Hence, we decli basis whatsoever. Hence, we decline to interfere with the order of the ne to interfere with the order of the CIT (A) in so far as appeal of the Revenue is concerned." CIT (A) in so far as appeal of the Revenue is concerned."

31.23 In light of the decisions (supra) and having regard to the In light of the decisions (supra) and having regard to the In light of the decisions (supra) and having regard to the reasons set out above, we accordingly hold that, the impugned addition reasons set out above, we accordingly hold that, the impugned addition reasons set out above, we accordingly hold that, the impugned addition had been made solely on unverifiable and unsubstantiated assumptions had been made solely on unverifiable and unsubstantiated assumptions had been made solely on unverifiable and unsubstantiated assumptions without any proof or evidence regarding actual payment of without any proof or evidence regarding actual payment of without any proof or evidence regarding actual payment of interest to parties and thus the same is held to be unsustainable. We thus allow parties and thus the same is held to be unsustainable. We thus allow parties and thus the same is held to be unsustainable. We thus allow these grounds of the assessee and direct the AO to delete the impugned these grounds of the assessee and direct the AO to delete the impugned these grounds of the assessee and direct the AO to delete the impugned addition.

During the course of search During the course of search upon the assessee, a consequential search upon the assessee, a consequential search was conducted at the premises of the premises of M/s AJMPL wherefrom the quantitative AJMPL wherefrom the quantitative data pertaining to receipt of metal and issue of ornaments data pertaining to receipt of metal and issue of ornaments data pertaining to receipt of metal and issue of ornaments was found in their Anicalans (Jiliba software) Anicalans (Jiliba software). Upon comparison with the quantitative . Upon comparison with the quantitative data found from the assessee’s premises, data found from the assessee’s premises, it was noticed that it was noticed that in FY 2019- 20, AJMPL had recorded receipt of JMPL had recorded receipt of 9456869.000 grams of fine gold (gross ms of fine gold (gross weight) from the assessee for processing, whereas the entries in the weight) from the assessee for processing, whereas the entries in the weight) from the assessee for processing, whereas the entries in the books of the assessee showed that they had issued books of the assessee showed that they had issued 5473001.128 5473001.128 grams of fine gold (gross weight) to AJMPL. Likewise, in F of fine gold (gross weight) to AJMPL. Likewise, in FY 2020- -21, the entries in Anicalans (Jiliba software) Anicalans (Jiliba software) suggested that AJMPL had received suggested that AJMPL had received 36,92,429.808 grams of fine gold (gross weight) from 36,92,429.808 grams of fine gold (gross weight) from the assessee, as the assessee, as opposed to 51,70,588.071 grams of fine gold (pure weight) 51,70,588.071 grams of fine gold (pure weight) 51,70,588.071 grams of fine gold (pure weight) shown in the books of the assessee to ha books of the assessee to have been issued to AJMPL for FY 2020 ve been issued to AJMPL for FY 2020-21. The total mismatch found for the two financial years is tabulated as under: total mismatch found for the two financial years is tabulated as under: total mismatch found for the two financial years is tabulated as under:

Issued as per as per Receipt as per Anicalans F.Y Difference Difference assessee’s tally tally software of AJMPL 2019-20 5473001.128 gms 5473001.128 gms 9456869.000 gms (-) 3983868.872 gms 3983868.872 gms 2020-21 5170588.071 gms gms 3692429.808 gms 1478158.263 gms 1478158.263 gms 32.1 Based on the above Based on the above mismatch, the AO inferred that AJMPL had mismatch, the AO inferred that AJMPL had actually manufactured lesser weight of gold ornaments for the assessee actually manufactured lesser weight of gold ornaments for the assessee actually manufactured lesser weight of gold ornaments for the assessee as opposed to the metal shown to have been is as opposed to the metal shown to have been issued by the assessee sued by the assessee and therefore the assessee had paid excess manufacturing charges to AJMPL therefore the assessee had paid excess manufacturing charges to AJMPL therefore the assessee had paid excess manufacturing charges to AJMPL. to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 162 ::

The AO accordingly worked out the excess payments made to AJMPL for The AO accordingly worked out the excess payments made to AJMPL for The AO accordingly worked out the excess payments made to AJMPL for AYs 2020-21 & 2021-22 at Rs.2,39,03,214/ 22 at Rs.2,39,03,214/- [3983868.872 3983868.872 X Rs.6/gm] & Rs.1,69,39,693/- [147815 1478158.263 X Rs.6/gm] respectively which he added X Rs.6/gm] respectively which he added u/s 69C of the Act. The AO thereafter assumed that, the assessee would u/s 69C of the Act. The AO thereafter assumed that, the assessee would u/s 69C of the Act. The AO thereafter assumed that, the assessee would have actually got this remaining gold, which was not actually issued to have actually got this remaining gold, which was not actually issued to have actually got this remaining gold, which was not actually issued to AJMPL, manufactured from other labour/karigars to whom making AJMPL, manufactured from other labour/karigars to whom making AJMPL, manufactured from other labour/karigars to whom making charges would have been paid separately outside the books. The AO is s would have been paid separately outside the books. The AO is s would have been paid separately outside the books. The AO is noted to have worked out the average making charges at Rs.35 per gram, noted to have worked out the average making charges at Rs.35 per gram, noted to have worked out the average making charges at Rs.35 per gram, and thus he accordingly made further addition of unaccounted and thus he accordingly made further addition of unaccounted and thus he accordingly made further addition of unaccounted expenditure for labour charges at Rs.13,94,35,411/ expenditure for labour charges at Rs.13,94,35,411/- [3983868. 3983868.872 X Rs.35/gm] & Rs.5,17,35,539/ Rs.35/gm] & Rs.5,17,35,539/- [1478158.263 X Rs.35/gm] in AYs 2020 X Rs.35/gm] in AYs 2020- 21 & 2021-22 respectively. 22 respectively. The relevant observations made by the AO are relevant observations made by the AO are noted as under:-

“10.2) The entire facts relating to the gamut of transactions of the 10.2) The entire facts relating to the gamut of transactions of the 10.2) The entire facts relating to the gamut of transactions of the assessee with M/s Asita Jewellery Manufacturing Pvt Ltd has been assessee with M/s Asita Jewellery Manufacturing Pvt Ltd has been assessee with M/s Asita Jewellery Manufacturing Pvt Ltd has been delineated as part of the show cause notice issued to the assessee. As delineated as part of the show cause notice issued to the assessee. As delineated as part of the show cause notice issued to the assessee. As mentioned in the show cause notice there exists disc mentioned in the show cause notice there exists discrepancy between repancy between the actual weight of gold received and issued by M/s Asita Jewellery the actual weight of gold received and issued by M/s Asita Jewellery the actual weight of gold received and issued by M/s Asita Jewellery Manufacturing Pvt Ltd as per Anicalan Software and the weight Manufacturing Pvt Ltd as per Anicalan Software and the weight Manufacturing Pvt Ltd as per Anicalan Software and the weight accounted in the tally account. The fact that the assessee company has accounted in the tally account. The fact that the assessee company has accounted in the tally account. The fact that the assessee company has issued less fine gold to M/s Asita Jew issued less fine gold to M/s Asita Jewellery Manufacturing Pvt Ltd proves ellery Manufacturing Pvt Ltd proves that the assessee had issued fine gold to other karigars/ vendors for that the assessee had issued fine gold to other karigars/ vendors for that the assessee had issued fine gold to other karigars/ vendors for making gold ornaments or purchase of gold ornaments and the products making gold ornaments or purchase of gold ornaments and the products making gold ornaments or purchase of gold ornaments and the products thus received from the said karigars/vendors other than M/s Asita thus received from the said karigars/vendors other than M/s Asita thus received from the said karigars/vendors other than M/s Asita Jewellery Manufacturing Pvt Ltd were showed as ornaments received acturing Pvt Ltd were showed as ornaments received acturing Pvt Ltd were showed as ornaments received from M/s Asita Jewellery Manufacturing Pvt Ltd. Further, the submission from M/s Asita Jewellery Manufacturing Pvt Ltd. Further, the submission from M/s Asita Jewellery Manufacturing Pvt Ltd. Further, the submission of the assessee to the show cause issued that reliance has been placed of the assessee to the show cause issued that reliance has been placed of the assessee to the show cause issued that reliance has been placed on the statement recorded from some of the employees cannot be on the statement recorded from some of the employees cannot be on the statement recorded from some of the employees cannot be relied upon, is to say the least untenable for the reason that the replies elicited upon, is to say the least untenable for the reason that the replies elicited upon, is to say the least untenable for the reason that the replies elicited have been solely based on the actual findings observed based on the have been solely based on the actual findings observed based on the have been solely based on the actual findings observed based on the to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. analysis of the software used by the entity M/s Asita Jewellery analysis of the software used by the entity M/s Asita Jewellery analysis of the software used by the entity M/s Asita Jewellery Manufacturing Pvt Ltd during the course Manufacturing Pvt Ltd during the course of the search proceedings. It is of the search proceedings. It is to be stated herein that the submission of the assessee in this regard to be stated herein that the submission of the assessee in this regard to be stated herein that the submission of the assessee in this regard has not been put forth as to be mannered and factual inaccuracies as has not been put forth as to be mannered and factual inaccuracies as has not been put forth as to be mannered and factual inaccuracies as such. It is obvious that the assessee has not done so and a mere denial such. It is obvious that the assessee has not done so and a mere denial such. It is obvious that the assessee has not done so and a mere denial without supportive documents and evidences would not stand the test of pportive documents and evidences would not stand the test of pportive documents and evidences would not stand the test of scrutiny. Hence the reply of the assessee is not acceptable. scrutiny. Hence the reply of the assessee is not acceptable.

10.3) In the light of the facts stated in the show 10.3) In the light of the facts stated in the show-cause notice issued and cause notice issued and based on the discussions made herein, the manufacturing cha based on the discussions made herein, the manufacturing cha based on the discussions made herein, the manufacturing charges paid by the assessee to M/s Asita Jewellery Manufacturing Pvt Ltd in respect by the assessee to M/s Asita Jewellery Manufacturing Pvt Ltd in respect by the assessee to M/s Asita Jewellery Manufacturing Pvt Ltd in respect of the excess weight of metal receipts shown in the tally accounts of of the excess weight of metal receipts shown in the tally accounts of of the excess weight of metal receipts shown in the tally accounts of 3983868.872 gms for the financial year 2019 3983868.872 gms for the financial year 2019-20 is worked out at 20 is worked out at Rs.2,39,03,214/- - (i.e. 3983868.872 x Rs.6 - The workings for the The workings for the adoption of rate of Rs.6/ adoption of rate of Rs.6/- is furnished herein below)

10.4) As discussed in the show 10.4) As discussed in the show-cause notice the assessee has received cause notice the assessee has received gold ornaments from Karigars/vendors other than M/s Asita Jewellery gold ornaments from Karigars/vendors other than M/s Asita Jewellery gold ornaments from Karigars/vendors other than M/s Asita Jewellery Manufacturing Private Limited and showe Manufacturing Private Limited and showed them as having been d them as having been received from M/s Asita Jewellery Manufacturing Private Limited. It is received from M/s Asita Jewellery Manufacturing Private Limited. It is received from M/s Asita Jewellery Manufacturing Private Limited. It is therefore that the element of payments embedded in respect of the therefore that the element of payments embedded in respect of the therefore that the element of payments embedded in respect of the transaction to the other vendors/karigars for getting the new gold transaction to the other vendors/karigars for getting the new gold transaction to the other vendors/karigars for getting the new gold ornaments required to be worke ornaments required to be worked out. The same is being by reckoning d out. The same is being by reckoning the average manufacturing cost of new gold ornaments charged by the average manufacturing cost of new gold ornaments charged by the average manufacturing cost of new gold ornaments charged by other manufacturers and apply the same on the above excess weights other manufacturers and apply the same on the above excess weights other manufacturers and apply the same on the above excess weights and treating the cost as unexplained expenditure by the assessee. The and treating the cost as unexplained expenditure by the assessee. The and treating the cost as unexplained expenditure by the assessee. The details brought o details brought on record in this regard show that the Average rate n record in this regard show that the Average rate works out to Rs.35. Adopting the same, the unexplained expenditure works out to Rs.35. Adopting the same, the unexplained expenditure works out to Rs.35. Adopting the same, the unexplained expenditure under section 69C of the Act works out to Rs.13,94,35,411/ under section 69C of the Act works out to Rs.13,94,35,411/ under section 69C of the Act works out to Rs.13,94,35,411/- (i.e. 3983868.872 x Rs.35 3983868.872 x Rs.35 - The workings for the adoption of rate of Rs. 35/ The workings for the adoption of rate of Rs. 35/ - which is as below). which is as below).

……

10.5) Since the submissions of the assessee are found to be not 10.5) Since the submissions of the assessee are found to be not 10.5) Since the submissions of the assessee are found to be not substantiated and corroborated with credible acceptable evidences, the substantiated and corroborated with credible acceptable evidences, the substantiated and corroborated with credible acceptable evidences, the assessment is proceeded to be completed on the lines proposed in the assessment is proceeded to be completed on the lines proposed in the assessment is proceeded to be completed on the lines proposed in the show-cause notice and for th cause notice and for the discussions made herein. Accordingly, a e discussions made herein. Accordingly, a sum of Rs.2,39,03,214/ sum of Rs.2,39,03,214/- and Rs.13,94,35,411/- (Rs.16,33,38,625/ (Rs.16,33,38,625/-) is brought to tax as income which has escaped the assessment on account brought to tax as income which has escaped the assessment on account brought to tax as income which has escaped the assessment on account of the same having been not recorded in the books of accounts of the of the same having been not recorded in the books of accounts of the of the same having been not recorded in the books of accounts of the assessee for this assessment year. e for this assessment year.” to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 164 ::

32.2 Being aggrieved by the above order of the AO, the assessee carried Being aggrieved by the above order of the AO, the assessee carried Being aggrieved by the above order of the AO, the assessee carried the matter in appeal before the Ld. CIT(A) who confirmed the same. Now the matter in appeal before the Ld. CIT(A) who confirmed the same. Now the matter in appeal before the Ld. CIT(A) who confirmed the same. Now the assessee is in appeal before us. the assessee is in appeal before us.

32.3 The Ld. AR Shri Anand Shri Anand submitted that, the impugned addition was submitted that, the impugned addition was made on incorrect understanding of facts and that the same was fraught made on incorrect understanding of facts and that the same was fraught made on incorrect understanding of facts and that the same was fraught with infirmities and inconsistencies. He pointed that the basis of the with infirmities and inconsistencies. He pointed that the basis of the with infirmities and inconsistencies. He pointed that the basis of the addition was the details of quantitative entries found in the addition was the details of quantitative entries found in the addition was the details of quantitative entries found in the Anicalans (Jiliba software) maintained by AJMPL. He submitted that, the entries maintained by AJMPL. He submitted that, the entries maintained by AJMPL. He submitted that, the entries maintained in this Anicalans Anicalans software was incomplete as the same had software was incomplete as the same had been newly introduced by AJMPL in their systems which was only for their been newly introduced by AJMPL in their systems which was only for their been newly introduced by AJMPL in their systems which was only for their internal control of certain sections of pro internal control of certain sections of production. He brought to our notice duction. He brought to our notice that this Anicalans software was introduced by AJMPL only during software was introduced by AJMPL only during software was introduced by AJMPL only during the onset of COVID-19 pandemic as part of internal administrative 19 pandemic as part of internal administrative 19 pandemic as part of internal administrative experimentation, but since it suffered from , but since it suffered from operational disruptions operational disruptions during COVID, its use was kept kept limited and was not meant for accounting & and was not meant for accounting & financial reporting purposes. financial reporting purposes. He explained that AJMPL had ordinarily been He explained that AJMPL had ordinarily been maintaining the details of receipt & issue of gold and their quantitative maintaining the details of receipt & issue of gold and their quantitative maintaining the details of receipt & issue of gold and their quantitative figures in their regular tally system as well, which was figures in their regular tally system as well, which was also found in the also found in the course of the same search and that, the quantitative entries found in their course of the same search and that, the quantitative entries found in their course of the same search and that, the quantitative entries found in their tally system fully reconciled with the details found from the premises of tally system fully reconciled with the details found from the premises of tally system fully reconciled with the details found from the premises of the assessee. He accordingly contended that, the entries found in the the assessee. He accordingly contended that, the entries found in the the assessee. He accordingly contended that, the entries found in the Anicalans (Jiliba software) software) was not reliable, particularly when AJMPL had particularly when AJMPL had to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. itself denied its contents and had reconciled the entries as per the books itself denied its contents and had reconciled the entries as per the books itself denied its contents and had reconciled the entries as per the books of the assessee with their books of accounts maintained in tally system of the assessee with their books of accounts maintained in tally system of the assessee with their books of accounts maintained in tally system and that there was no mismatch found and that there was no mismatch found.

32.4 Shri Anand further pointed out that, when AJMPL themselves had further pointed out that, when AJMPL themselves had further pointed out that, when AJMPL themselves had disputed the correctness of the entries made in disputed the correctness of the entries made in Anicalans (Jiliba software) Anicalans (Jiliba software) and had provided their stock registers and tally accounts to prove it, then and had provided their stock registers and tally accounts to prove it, then and had provided their stock registers and tally accounts to prove it, then the onus lay on the Revenue to cross the onus lay on the Revenue to cross-examine AJMPL examine AJMPL and provide necessary corroborative evidence to prove their claim that labour charges necessary corroborative evidence to prove their claim that labour charges necessary corroborative evidence to prove their claim that labour charges paid to AJMPL was excessive. He further submitted that, the search action paid to AJMPL was excessive. He further submitted that, the search action paid to AJMPL was excessive. He further submitted that, the search action conducted upon the assessee also did not reveal any discrepancy in the conducted upon the assessee also did not reveal any discrepancy in the conducted upon the assessee also did not reveal any discrepancy in the stock movement register, stock movement register, inventory register etc. or any unaccounted inventory register etc. or any unaccounted payment of labour charges. The assessee thus contended that payment of labour charges. The assessee thus contended that payment of labour charges. The assessee thus contended that the reliance on unverified internal software (Anigalan) data, without reliance on unverified internal software (Anigalan) data, without reliance on unverified internal software (Anigalan) data, without corroboration or cross corroboration or cross-examination, violates the principles of natural examination, violates the principles of natural justice and cannot be the basis for addition cannot be the basis for addition.

32.5 Shri Anand further submitted that the disallowance of charges paid further submitted that the disallowance of charges paid further submitted that the disallowance of charges paid to AJMPL u/s 69C of the Act was also legally untenable. He pointed out to AJMPL u/s 69C of the Act was also legally untenable. He pointed out to AJMPL u/s 69C of the Act was also legally untenable. He pointed out that, the expenses were duly recorded in the books of accounts, paid that, the expenses were duly recorded in the books of accounts, paid that, the expenses were duly recorded in the books of accounts, paid through banking channel after deducting TDS and payment of GST. He anking channel after deducting TDS and payment of GST. He anking channel after deducting TDS and payment of GST. He also showed that AJMPL had paid taxes at the normal rates on such also showed that AJMPL had paid taxes at the normal rates on such also showed that AJMPL had paid taxes at the normal rates on such income. He accordingly argued that, there was no element of unexplained income. He accordingly argued that, there was no element of unexplained income. He accordingly argued that, there was no element of unexplained to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. expenditure which was not found recorded in the books of acc expenditure which was not found recorded in the books of acc expenditure which was not found recorded in the books of accounts to invoke rigors of Section 69C of the Act. According to him, the alleged invoke rigors of Section 69C of the Act. According to him, the alleged invoke rigors of Section 69C of the Act. According to him, the alleged excess payment could not therefore have been legally disallowed u/s 69C excess payment could not therefore have been legally disallowed u/s 69C excess payment could not therefore have been legally disallowed u/s 69C of the Act. With regard to the further addition on account of unexplained of the Act. With regard to the further addition on account of unexplained of the Act. With regard to the further addition on account of unexplained labour charges paid to other labour charges paid to other karigars, he submitted that, this addition was karigars, he submitted that, this addition was based purely on surmises and conjectures and thus deserves to be based purely on surmises and conjectures and thus deserves to be based purely on surmises and conjectures and thus deserves to be deleted.

32.6 Per contra, the Ld. CIT, DR vehemently supported the action of the Per contra, the Ld. CIT, DR vehemently supported the action of the Per contra, the Ld. CIT, DR vehemently supported the action of the lower authorities. The Ld. DR contended that, the data found i lower authorities. The Ld. DR contended that, the data found i lower authorities. The Ld. DR contended that, the data found in Anicalans (Jiliba software) at at at the the the premises premises premises of of of AJMPL AJMPL AJMPL clearly clearly clearly evidenced evidenced evidenced inconsistencies in the quantities of metal actually processed by AJMPL on inconsistencies in the quantities of metal actually processed by AJMPL on inconsistencies in the quantities of metal actually processed by AJMPL on behalf of the assessee and thus the AO had rightly made addition on behalf of the assessee and thus the AO had rightly made addition on behalf of the assessee and thus the AO had rightly made addition on account of excess labour charges paid by account of excess labour charges paid by the assessee.

32.7 Heard both the parties. Before we advert to the impugned issue, we Heard both the parties. Before we advert to the impugned issue, we Heard both the parties. Before we advert to the impugned issue, we find it relevant to put the facts in proper context. The assessee is noted to find it relevant to put the facts in proper context. The assessee is noted to find it relevant to put the facts in proper context. The assessee is noted to be engaged in the business of marketing & sale of gold jewellery. The be engaged in the business of marketing & sale of gold jewellery. The be engaged in the business of marketing & sale of gold jewellery. The assessee follows a systematic and documented process in manufacture of stematic and documented process in manufacture of stematic and documented process in manufacture of gold ornaments. The assessee is noted to procure gold bullion from gold ornaments. The assessee is noted to procure gold bullion from gold ornaments. The assessee is noted to procure gold bullion from bullion dealers or receives gold from melting old gold jewellery, which is bullion dealers or receives gold from melting old gold jewellery, which is bullion dealers or receives gold from melting old gold jewellery, which is sent for manufacture to job workers including AJMPL. The assessee has sent for manufacture to job workers including AJMPL. The assessee has sent for manufacture to job workers including AJMPL. The assessee has placed the copy of the contract entered int placed the copy of the contract entered into with AJMPL at o with AJMPL at Pages 1317 to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. of Paper Book. It is observed that, the details of gold bullion . It is observed that, the details of gold bullion to 1319 of Paper Book purchased, movement of gold issued for manufacture etc. are not in purchased, movement of gold issued for manufacture etc. are not in purchased, movement of gold issued for manufacture etc. are not in dispute. It is noticed that, the gold issued to AJMPL is only for dispute. It is noticed that, the gold issued to AJMPL is only for dispute. It is noticed that, the gold issued to AJMPL is only for mixing of alloys for which the job worker charges paid was Rs.6/gram. The details ch the job worker charges paid was Rs.6/gram. The details ch the job worker charges paid was Rs.6/gram. The details of the gold issued to AJMPL, out of the stock available with the assessee, of the gold issued to AJMPL, out of the stock available with the assessee, of the gold issued to AJMPL, out of the stock available with the assessee, are found placed at Pages of the Paper Book. The said Pages 1320 to 1340 of the Paper Book gold is then issued to other job is then issued to other job-workers for further processing, mainly to cessing, mainly to M/s Bhavya Jewellers, who manufactures gold ornaments and then finally M/s Bhavya Jewellers, who manufactures gold ornaments and then finally M/s Bhavya Jewellers, who manufactures gold ornaments and then finally the finished product is received back by the assessee. The assessee is the finished product is received back by the assessee. The assessee is the finished product is received back by the assessee. The assessee is noted to be maintaining the complete stock movement from their noted to be maintaining the complete stock movement from their noted to be maintaining the complete stock movement from their premises to the job worker/s and premises to the job worker/s and then the final receipt of gold jewellery, then the final receipt of gold jewellery, which forms part of their inventory and is sold through their showrooms which forms part of their inventory and is sold through their showrooms which forms part of their inventory and is sold through their showrooms located across Southern states. It is observed that, the stock registers, located across Southern states. It is observed that, the stock registers, located across Southern states. It is observed that, the stock registers, inventory movement, purchases, corresponding sales, closing invento inventory movement, purchases, corresponding sales, closing invento inventory movement, purchases, corresponding sales, closing inventory etc. maintained by the assessee have not been disputed by the AO and no etc. maintained by the assessee have not been disputed by the AO and no etc. maintained by the assessee have not been disputed by the AO and no discrepancy therein was found in the course of search. discrepancy therein was found in the course of search. discrepancy therein was found in the course of search. Based on the stamped, signed and accepted challans, the job stamped, signed and accepted challans, the job-worker then raises worker then raises invoices on the assessee for completed and deli invoices on the assessee for completed and delivered job work which the vered job work which the assessee company duly records in its books of account through its Profit & company duly records in its books of account through its Profit & company duly records in its books of account through its Profit & Loss Account. Once the invoices are recorded in books, the expense and Loss Account. Once the invoices are recorded in books, the expense and Loss Account. Once the invoices are recorded in books, the expense and liability entries get captured by the system which is followed by payment liability entries get captured by the system which is followed by payment liability entries get captured by the system which is followed by payment to the job worker as and when due. as and when due. The assessee is found to have paid The assessee is found to have paid to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. the job-work charges through banking channel after deducting applicable work charges through banking channel after deducting applicable work charges through banking channel after deducting applicable TDS. AJMPL is noted to have charged GST on all their invoices which was TDS. AJMPL is noted to have charged GST on all their invoices which was TDS. AJMPL is noted to have charged GST on all their invoices which was also duly discharged by the assessee. also duly discharged by the assessee.

32.8 We therefore observe that the job ore observe that the job-work charges paid to AJMPL is work charges paid to AJMPL is duly supported by material evidences, as discussed above. It is also not duly supported by material evidences, as discussed above. It is also not duly supported by material evidences, as discussed above. It is also not the Revenue’s case that AJMPL is a bogus or shell entity or that it is not the Revenue’s case that AJMPL is a bogus or shell entity or that it is not the Revenue’s case that AJMPL is a bogus or shell entity or that it is not actually carrying out job work for the assessee. The actually carrying out job work for the assessee. The dispute in the present dispute in the present case relates to the quantum of job carried out by AJMPL for the assessee. case relates to the quantum of job carried out by AJMPL for the assessee. case relates to the quantum of job carried out by AJMPL for the assessee.

According to the Revenue, though the books of assessee shows that According to the Revenue, though the books of assessee shows that According to the Revenue, though the books of assessee shows that 5473001.128 gms. & 5170588.071 gms & 5170588.071 gms. quantity of gold was issued to quantity of gold was issued to AJMPL for processing in FY AJMPL for processing in FYs 2019-20 & 2020-21, but the entries found in 21, but the entries found in Anicalans (Jiliba software) Anicalans (Jiliba software) of AJMPL shows that 9456869.000 gms & of AJMPL shows that 9456869.000 gms & 3692429.808 gms. quantity of gold was quantity of gold was received by the AJMPL for by the AJMPL for processing. This mismatch is noted to have been viewed adversely by the processing. This mismatch is noted to have been viewed adversely by the processing. This mismatch is noted to have been viewed adversely by the Revenue. The AO is noted to have first held that, the labour charges to The AO is noted to have first held that, the labour charges to The AO is noted to have first held that, the labour charges to AJMPL paid qua this mismatched quantity represented AJMPL paid qua this mismatched quantity represented AJMPL paid qua this mismatched quantity represented unexplained expenditure and secondly, this mismatched quantity would have been expenditure and secondly, this mismatched quantity would have been expenditure and secondly, this mismatched quantity would have been separately processed outside the books, which would have resu separately processed outside the books, which would have resu separately processed outside the books, which would have resulted in incurrence of further labour charges paid to outside karigars. incurrence of further labour charges paid to outside karigars. incurrence of further labour charges paid to outside karigars.

32.9 It is therefore noticed that, the foundation of the impugned addition It is therefore noticed that, the foundation of the impugned addition It is therefore noticed that, the foundation of the impugned addition was the entries found in was the entries found in Anicalans (Jiliba) software, whose veracity has ) software, whose veracity has to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. been objected to by the assessee. As been objected to by the assessee. As observed above, the assessee has observed above, the assessee has been maintaining the complete stock movement from their premises to been maintaining the complete stock movement from their premises to been maintaining the complete stock movement from their premises to the job worker/s and then the final receipt of gold jewellery, which was the job worker/s and then the final receipt of gold jewellery, which was the job worker/s and then the final receipt of gold jewellery, which was found & seized during the course of search, and there is no discrepancy found & seized during the course of search, and there is no discrepancy found & seized during the course of search, and there is no discrepancy pointed out by the Revenue therein. We also note that, AJMPL has also ut by the Revenue therein. We also note that, AJMPL has also ut by the Revenue therein. We also note that, AJMPL has also provided their complete stock movement maintained in their tally provided their complete stock movement maintained in their tally provided their complete stock movement maintained in their tally accounts system along with confirmations, which are found placed at accounts system along with confirmations, which are found placed at accounts system along with confirmations, which are found placed at Pages 1341 to 1375 of Paper Book, and the same is noted to ful , and the same is noted to fully reconcile with the stock movement recorded in the books of the assessee. reconcile with the stock movement recorded in the books of the assessee. reconcile with the stock movement recorded in the books of the assessee.

These contemporaneous evidences thus shows that AJMPL itself has These contemporaneous evidences thus shows that AJMPL itself has These contemporaneous evidences thus shows that AJMPL itself has disputed the veracity of the entries found in the disputed the veracity of the entries found in the Anicalans (Jiliba Anicalans (Jiliba) software from their premises. The Revenue has software from their premises. The Revenue has not brought on record any not brought on record any statement of the key persons of AJMPL in which they have admitted to the statement of the key persons of AJMPL in which they have admitted to the statement of the key persons of AJMPL in which they have admitted to the correctness of the entries maintained in the correctness of the entries maintained in the Anicalans Anicalans software.

Accordingly, in our considered view, the onus lay on the Revenue to Accordingly, in our considered view, the onus lay on the Revenue to Accordingly, in our considered view, the onus lay on the Revenue to substantiate the veracit substantiate the veracity of the entries found in Anicalans Anicalans software from the premises of AJMPL with some independent tangible material, the premises of AJMPL with some independent tangible material, the premises of AJMPL with some independent tangible material, particularly when the contemporaneous entries found in their tally system particularly when the contemporaneous entries found in their tally system particularly when the contemporaneous entries found in their tally system in the course of same search suggested the contrary, and which in in the course of same search suggested the contrary, and which in in the course of same search suggested the contrary, and which in fact reconciled with the books of the assessee. reconciled with the books of the assessee.

32.10 The impugned issue can be looked at from another angle as The impugned issue can be looked at from another angle as The impugned issue can be looked at from another angle as well. If the entries found in well. If the entries found in Anicalans software is to be assumed to be software is to be assumed to be to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. true, then there are several questions which begs answer. In such a case true, then there are several questions which begs answer. In such a case true, then there are several questions which begs answer. In such a case, the first question which arises is that, if the gold issued to AJMPL for the first question which arises is that, if the gold issued to AJMPL for the first question which arises is that, if the gold issued to AJMPL for processing was actually lower, then to whom was the remaining excess processing was actually lower, then to whom was the remaining excess processing was actually lower, then to whom was the remaining excess gold issued. We find that, the Revenue has not brought on record any gold issued. We find that, the Revenue has not brought on record any gold issued. We find that, the Revenue has not brought on record any material or evidence which would show that material or evidence which would show that the assessee was actually the assessee was actually getting the gold processed outside the books from some other jeweller / getting the gold processed outside the books from some other jeweller / getting the gold processed outside the books from some other jeweller / karigar. It is also not the case of the Revenue that the alleged gold which karigar. It is also not the case of the Revenue that the alleged gold which karigar. It is also not the case of the Revenue that the alleged gold which was being processed outside the books, and not from AJMPL, was out of was being processed outside the books, and not from AJMPL, was out of was being processed outside the books, and not from AJMPL, was out of any unaccounted purchases. Hence, as per the AO’s logic, the gold lying ted purchases. Hence, as per the AO’s logic, the gold lying ted purchases. Hence, as per the AO’s logic, the gold lying in regular stock of the assessee, which though shown to have been issued in regular stock of the assessee, which though shown to have been issued in regular stock of the assessee, which though shown to have been issued to AJMPL in their books, was actually not issued to AJMPL but processed to AJMPL in their books, was actually not issued to AJMPL but processed to AJMPL in their books, was actually not issued to AJMPL but processed through other karigars. This allegation, according through other karigars. This allegation, according to us, is not supported to us, is not supported by any direct evidence and is rather dispelled by the inventory by any direct evidence and is rather dispelled by the inventory by any direct evidence and is rather dispelled by the inventory movement, delivery challans etc. maintained by the assessee. movement, delivery challans etc. maintained by the assessee. movement, delivery challans etc. maintained by the assessee.

32.11 The next question which begs an answer The next question which begs an answer is, was there any rationale for the assessee to get its regul rationale for the assessee to get its regular gold surreptitiously processed ar gold surreptitiously processed outside the books, as admittedly the inventory of gold so issued for outside the books, as admittedly the inventory of gold so issued for outside the books, as admittedly the inventory of gold so issued for processing formed part of their books. At the cost of repetition, it is not processing formed part of their books. At the cost of repetition, it is not processing formed part of their books. At the cost of repetition, it is not the Revenue’s case that the mismatched entries represented unaccounted the Revenue’s case that the mismatched entries represented unaccounted the Revenue’s case that the mismatched entries represented unaccounted gold of the assessee. The Revenue has not disputed the stock register, f the assessee. The Revenue has not disputed the stock register, f the assessee. The Revenue has not disputed the stock register, inventory movement etc. inventory movement etc. of the assessee nor any addition on account of of the assessee nor any addition on account of unexplained purchases have been made. Hence, it is unclear as to why unexplained purchases have been made. Hence, it is unclear as to why unexplained purchases have been made. Hence, it is unclear as to why to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. the assessee would pay labour charges outside the b the assessee would pay labour charges outside the books for processing ooks for processing their regular gold bullion, when the purchases, inventory itself, its their regular gold bullion, when the purchases, inventory itself, its their regular gold bullion, when the purchases, inventory itself, its movement and corresponding sales, all are recorded in the books of movement and corresponding sales, all are recorded in the books of movement and corresponding sales, all are recorded in the books of accounts.

32.12 The Ld. AR The Ld. AR Shri Anand also pointed out that, AJMPL was also pointed out that, AJMPL was charging competitive price f charging competitive price for the job work done by them in comparison or the job work done by them in comparison to other labour/karigars. The AO himself is noted to have worked out the to other labour/karigars. The AO himself is noted to have worked out the to other labour/karigars. The AO himself is noted to have worked out the average making charges at Rs.35/gm and also noted that AJMPL charges average making charges at Rs.35/gm and also noted that AJMPL charges average making charges at Rs.35/gm and also noted that AJMPL charges Rs.6/gm. Accordingly, we are unable to fathom as to why would the Rs.6/gm. Accordingly, we are unable to fathom as to why would the Rs.6/gm. Accordingly, we are unable to fathom as to why would the assessee pay Rs.35/gm outside the books to get the gold processed from see pay Rs.35/gm outside the books to get the gold processed from see pay Rs.35/gm outside the books to get the gold processed from unknown local karigars, when AJMPL, who is an established and reputed unknown local karigars, when AJMPL, who is an established and reputed unknown local karigars, when AJMPL, who is an established and reputed job-worker, charges only Rs.6/gm from the assessee. worker, charges only Rs.6/gm from the assessee.

We further find that the Revenue has also not brought on We further find that the Revenue has also not brought on We further find that the Revenue has also not brought on 32.13 record the details or identity of the so d the details or identity of the so-called karigars who had processed called karigars who had processed this mismatched quantities and to whom were the labour charges running this mismatched quantities and to whom were the labour charges running this mismatched quantities and to whom were the labour charges running into several crores paid. If the mismatch in entries gave rise to suspicion into several crores paid. If the mismatch in entries gave rise to suspicion into several crores paid. If the mismatch in entries gave rise to suspicion in the mind of the AO, then he was requ in the mind of the AO, then he was required to further probe and ired to further probe and investigate the same and gather investigate the same and gather some cogent evidence evidence against the assessee. Rather, the AO is noted to have straightaway made the assessee. Rather, the AO is noted to have straightaway made the assessee. Rather, the AO is noted to have straightaway made the impugned addition, driven by misplaced suspicion, driven by misplaced suspicion, that the assessee had that the assessee had to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. incurred excess labour charge incurred excess labour charges only on the basis of contemplation. only on the basis of contemplation. Such action of the AO cannot be countenanced. action of the AO cannot be countenanced.

32.14 There is yet another interesting aspect. On perusal of the There is yet another interesting aspect. On perusal of the There is yet another interesting aspect. On perusal of the facts set out above and the material ut above and the material seized in the course of search, in the course of search, it is evidently discernible that discernible that, the payments to AJMPL was subjected to payments to AJMPL was subjected to GST of 18% of the invoice invoice value. Further, from the financials of AJMPL, Further, from the financials of AJMPL, available at Pages 1481 to 1514 1481 to 1514 of Paper Book, it is noted that, this , it is noted that, this job worker was also filing filing its tax returns and paying due income taxes on tax returns and paying due income taxes on their income. If the allegation of the AO is assumed to be true, then it the allegation of the AO is assumed to be true, then it the allegation of the AO is assumed to be true, then it was a case where the assessee would pay excess labour charges to AJMPL was a case where the assessee would pay excess labour charges to AJMPL was a case where the assessee would pay excess labour charges to AJMPL and receive back the same in cash. For this, the assessee was incurring and receive back the same in cash. For this, the assessee was incurring and receive back the same in cash. For this, the assessee was incurring GST of 18% and the payee was discharging GST of 18% and the payee was discharging additional income income-tax of 33% on the excess payments, and further in order to get the mismatched on the excess payments, and further in order to get the mismatched on the excess payments, and further in order to get the mismatched quantities job-worked from other karigars, the assessee was paying a worked from other karigars, the assessee was paying a worked from other karigars, the assessee was paying a higher rate than what AJMPL charges higher rate than what AJMPL charges. This foregoing analogy analogy will not appeal to any prudent pers appeal to any prudent person. Hence, in our considered opinion, the Hence, in our considered opinion, the allegation of the Revenue that, the assessee paid excess labour charges allegation of the Revenue that, the assessee paid excess labour charges allegation of the Revenue that, the assessee paid excess labour charges to AJMPL is found to be against human probabilities, to AJMPL is found to be against human probabilities, having no rationale having no rationale basis.

32.15 It is also not clear It is also not clear to us as to why would AJMPL, in the as to why would AJMPL, in the first place, agree to receive higher labour charges from the assessee place, agree to receive higher labour charges from the assessee place, agree to receive higher labour charges from the assessee and pay to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. equivalent amount back in cash equivalent amount back in cash. It is not in dispute that . It is not in dispute that, the assessee and AJMPL are independent entities and AJMPL are independent entities and further, AJMPL is noted to be a urther, AJMPL is noted to be a reputed and full-fledged company e fledged company engaged in the business of manufacture ngaged in the business of manufacture of gold jewellery items. of gold jewellery items. Hence, by receiving higher labour charges than gher labour charges than what is actually due to it, AJMPL is actually due to it, AJMPL is essentially paying higher PF/ESI for paying higher PF/ESI for their labour, and also additional income additional income-tax on such higher receipt tax on such higher receipts etc.

According to us therefore therefore, there is no benefit for AJMPL for assisting the , there is no benefit for AJMPL for assisting the assessee in doing so. Hence, assessee in doing so. Hence, this aspect also reinforces the this aspect also reinforces the case of the assessee that the assumption drawn by the AO to make the assumption drawn by the AO to make the assumption drawn by the AO to make the impugned addition on account of unexplained labou addition on account of unexplained labour charges was fraught with r charges was fraught with infirmities.

Further, the non Further, the non-application of mind by the AO and his application of mind by the AO and his 32.16 misplaced suspicion is also found to be corroborated by his wrong misplaced suspicion is also found to be corroborated by his wrong misplaced suspicion is also found to be corroborated by his wrong assumption of facts, particularly, for the relevant AY 2020 assumption of facts, particularly, for the relevant AY 2020 assumption of facts, particularly, for the relevant AY 2020-21. It is noticed that the entries in the ntries in the Anicalans software showed that, higher software showed that, higher quantity of 9456869.000 gms quantity of 9456869.000 gms. was processed by AJMPL, whereas only was processed by AJMPL, whereas only 5473001.128 gms. was shown to have been issued by the assessee. was shown to have been issued by the assessee. was shown to have been issued by the assessee.

Hence, as per the AO’s analogy, the assessee had not issued lower Hence, as per the AO’s analogy, the assessee had not issued lower Hence, as per the AO’s analogy, the assessee had not issued lower quantity but higher quantity of gold to AJMPL for processing. Hence, going y but higher quantity of gold to AJMPL for processing. Hence, going y but higher quantity of gold to AJMPL for processing. Hence, going by his logic, the labour charges paid to AJMPL was not excessive but on by his logic, the labour charges paid to AJMPL was not excessive but on by his logic, the labour charges paid to AJMPL was not excessive but on the contrary it was lower than the commensurate value. Likewise, it could the contrary it was lower than the commensurate value. Likewise, it could the contrary it was lower than the commensurate value. Likewise, it could also not be a case that the mismatched qua also not be a case that the mismatched quantity was processed through ntity was processed through to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. other karigars. Rather, as per the software, AJMPL had processed higher other karigars. Rather, as per the software, AJMPL had processed higher other karigars. Rather, as per the software, AJMPL had processed higher quantity than what was shown in the assessee’s books for lower quantity than what was shown in the assessee’s books for lower quantity than what was shown in the assessee’s books for lower consideration. If that be so, then firstly, the disallowance on account of consideration. If that be so, then firstly, the disallowance on account of consideration. If that be so, then firstly, the disallowance on account of excess labour charges paid to AJMPL amounting to Rs.2,39,03,214/ ges paid to AJMPL amounting to Rs.2,39,03,214/ ges paid to AJMPL amounting to Rs.2,39,03,214/- for AY 2020-21 was clearly erroneous and based on mistaken understanding 21 was clearly erroneous and based on mistaken understanding 21 was clearly erroneous and based on mistaken understanding of fact. Likewise, the addition of Rs.13,94,35,411/ of fact. Likewise, the addition of Rs.13,94,35,411/- on account of labour on account of labour charges paid to outside karigars was also untenable, as exces charges paid to outside karigars was also untenable, as exces charges paid to outside karigars was also untenable, as excess and not lower quantity was issued and processed by AJMPL itself. We thus find lower quantity was issued and processed by AJMPL itself. We thus find lower quantity was issued and processed by AJMPL itself. We thus find that, that, that, the the the lower lower lower authorities authorities authorities had had had completely completely completely misunderstood misunderstood misunderstood and and and misinterpreted the facts and acted on non misinterpreted the facts and acted on non-application of mind. This also application of mind. This also shows that the impugned addi shows that the impugned addition was made with a mindset to frame high mindset to frame high pitched assessment, in gross ignorance of the relevant facts available on pitched assessment, in gross ignorance of the relevant facts available on pitched assessment, in gross ignorance of the relevant facts available on record.

32.17 The above analysis raised another question that if higher The above analysis raised another question that if higher The above analysis raised another question that if higher quantities was actually issued to AJMPL in AY 2020 quantities was actually issued to AJMPL in AY 2020-21 than what was 21 than what was shown in the books of accounts, then wherefrom did the assessee receive books of accounts, then wherefrom did the assessee receive books of accounts, then wherefrom did the assessee receive the differential quantity of gold bullion. There is no case made out by the the differential quantity of gold bullion. There is no case made out by the the differential quantity of gold bullion. There is no case made out by the Revenue that the assessee had indulged in unaccounted purchases or that Revenue that the assessee had indulged in unaccounted purchases or that Revenue that the assessee had indulged in unaccounted purchases or that there was any excess physical gold found in the c there was any excess physical gold found in the course of search or that ourse of search or that this excess quantity was otherwise sold outside the books of accounts. this excess quantity was otherwise sold outside the books of accounts. this excess quantity was otherwise sold outside the books of accounts.

Undisputedly, the books of the assessee has not been rejected and the Undisputedly, the books of the assessee has not been rejected and the Undisputedly, the books of the assessee has not been rejected and the quantitative details and inventory movement along with the opening quantitative details and inventory movement along with the opening quantitative details and inventory movement along with the opening to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. balance, purchases, sale balance, purchases, sales and closing balance have been accepted by the s and closing balance have been accepted by the AO. All these factors thus lends credence to the assessee’s case that the AO. All these factors thus lends credence to the assessee’s case that the AO. All these factors thus lends credence to the assessee’s case that the entries found in Anicalans Anicalans software was not reliable.

32.18 Lastly, we note that, AJMPL had also unequivocally denied the Lastly, we note that, AJMPL had also unequivocally denied the Lastly, we note that, AJMPL had also unequivocally denied the contents of their Anicalans Anicalans software. It is observed from the details of software. It is observed from the details of expenses incurred by AJMPL that this software was installed during the expenses incurred by AJMPL that this software was installed during the expenses incurred by AJMPL that this software was installed during the relevant FY 2019-20 and by the end of the year, there was onset of 20 and by the end of the year, there was onset of 20 and by the end of the year, there was onset of COVID-19 and that this software was in trial stage. It 19 and that this software was in trial stage. It 19 and that this software was in trial stage. It was further explained that, this software was maintained in respect of certain sections explained that, this software was maintained in respect of certain sections explained that, this software was maintained in respect of certain sections of job-work performed within their premises and not the entire work performed within their premises and not the entire work performed within their premises and not the entire manufacturing process and hence, it could not be used for statutory and manufacturing process and hence, it could not be used for statutory and manufacturing process and hence, it could not be used for statutory and financial reporting purposes. We financial reporting purposes. We have already taken note of the fact that, have already taken note of the fact that, AJMPL was maintaining the quantity movement of receipt & issue of gold AJMPL was maintaining the quantity movement of receipt & issue of gold AJMPL was maintaining the quantity movement of receipt & issue of gold in their tally system as well, which was also seized in the course of search in their tally system as well, which was also seized in the course of search in their tally system as well, which was also seized in the course of search and the same reconciles with the books of the assessee. There is and the same reconciles with the books of the assessee. There is and the same reconciles with the books of the assessee. There is therefore force in the submission of the assessee that, the Revenue has herefore force in the submission of the assessee that, the Revenue has herefore force in the submission of the assessee that, the Revenue has not brought on record any material to show as to why the entries found in not brought on record any material to show as to why the entries found in not brought on record any material to show as to why the entries found in tally during the course of search at AJMPL’s premises was to be rejected, tally during the course of search at AJMPL’s premises was to be rejected, tally during the course of search at AJMPL’s premises was to be rejected, in contrast to the entries found in in contrast to the entries found in Anicalans software. Moreover, the software. Moreover, the impugned entries being third party material, the onus lay on the Revenue impugned entries being third party material, the onus lay on the Revenue impugned entries being third party material, the onus lay on the Revenue to corroborate the same with some independent material, particularly in to corroborate the same with some independent material, particularly in to corroborate the same with some independent material, particularly in light of the above discussed evidences and factors brought on record by light of the above discussed evidences and factors brought on record by light of the above discussed evidences and factors brought on record by to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. the assessee rebutting the same. It is noticed that the assessee has been sessee rebutting the same. It is noticed that the assessee has been sessee rebutting the same. It is noticed that the assessee has been able to dispel the allegation of the Revenue with sufficient evidences and able to dispel the allegation of the Revenue with sufficient evidences and able to dispel the allegation of the Revenue with sufficient evidences and therefore we find that it was unsafe to rely on the entries found in therefore we find that it was unsafe to rely on the entries found in therefore we find that it was unsafe to rely on the entries found in Anicalans software.

32.19 We have already h We have already held in the preceding paragraphs earlier, eld in the preceding paragraphs earlier, that the presumption set out in Section 132(4A) of the Act is only against the presumption set out in Section 132(4A) of the Act is only against the presumption set out in Section 132(4A) of the Act is only against the searched person. Hence, the contents of the material seized from the the searched person. Hence, the contents of the material seized from the the searched person. Hence, the contents of the material seized from the possession of AJMPL AJMPL viz., entries in Anicalans software software could have presumed to be true only qua presumed to be true only qua AJMPL. The said presumption cannot be PL. The said presumption cannot be extended to the assessee extended to the assessee, unless there is other corroborative material there is other corroborative material brought on record linking the same to the assessee. linking the same to the assessee. From the facts From the facts discussed above, we are of the considered view tha discussed above, we are of the considered view that, the entries in the t, the entries in the Anicalans software are unreliable and that the assessee has been able to are unreliable and that the assessee has been able to are unreliable and that the assessee has been able to demonstrate that there was no unaccounted labour charges paid, in this demonstrate that there was no unaccounted labour charges paid, in this demonstrate that there was no unaccounted labour charges paid, in this regard. Moreover, the searched person from whose possession these regard. Moreover, the searched person from whose possession these regard. Moreover, the searched person from whose possession these entries were found has a entries were found has also submitted contemporaneous evidences to lso submitted contemporaneous evidences to show that the entries actually reconciled fully with the assessee. show that the entries actually reconciled fully with the assessee. show that the entries actually reconciled fully with the assessee.

Hence, in light of the above discussions, we accordingly hold Hence, in light of the above discussions, we accordingly hold Hence, in light of the above discussions, we accordingly hold 32.20 that the impugned addition made on account of unaccounted transactions that the impugned addition made on account of unaccounted transactions that the impugned addition made on account of unaccounted transactions with AJMPL was unsustainable both on facts and in law and therefore the AJMPL was unsustainable both on facts and in law and therefore the AJMPL was unsustainable both on facts and in law and therefore the AO is directed to delete the same. These grounds are therefore allowed. AO is directed to delete the same. These grounds are therefore allowed. AO is directed to delete the same. These grounds are therefore allowed. to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. for AY 2021-22.

Following our conclusion drawn in A.Y. Following our conclusion drawn in A.Y. 2020-21, we allow this ground of allow this ground of the assessee.

The sole grievance raised in The sole grievance raised in Ground Nos. 21 to 28 Ground Nos. 21 to 28 by the 38. assessee relates to the addition to the extent of Rs.10,42,97,645/ assessee relates to the addition to the extent of Rs.10,42,97,645/ assessee relates to the addition to the extent of Rs.10,42,97,645/- retained by the Ld. CIT(A) on account of valuation of the closing stock as retained by the Ld. CIT(A) on account of valuation of the closing stock as retained by the Ld. CIT(A) on account of valuation of the closing stock as on 31-03-2021. Briefly noted, the AO in the assessment order had 2021. Briefly noted, the AO in the assessment order had 2021. Briefly noted, the AO in the assessment order had to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. observed that, the assessee had valued t observed that, the assessee had valued the closing stock at a value which he closing stock at a value which was lower than the opening stock value or purchase value, which was lower than the opening stock value or purchase value, which was lower than the opening stock value or purchase value, which according to him was done by distorting the values of stock transfers according to him was done by distorting the values of stock transfers according to him was done by distorting the values of stock transfers between the branches to reduce the actual cost. The AO accordingly between the branches to reduce the actual cost. The AO accordingly between the branches to reduce the actual cost. The AO accordingly questioned the basis of valuation followed by the assessee. The AO in his of valuation followed by the assessee. The AO in his of valuation followed by the assessee. The AO in his show cause elaborated the manner in which the assessee ought to have show cause elaborated the manner in which the assessee ought to have show cause elaborated the manner in which the assessee ought to have valued the closing stock. The AO accordingly worked out the weighted valued the closing stock. The AO accordingly worked out the weighted valued the closing stock. The AO accordingly worked out the weighted average cost (‘WAC’) which should have been adopted by the assess average cost (‘WAC’) which should have been adopted by the assess average cost (‘WAC’) which should have been adopted by the assessee for valuing the closing stock and found that the rates actually adopted by the valuing the closing stock and found that the rates actually adopted by the valuing the closing stock and found that the rates actually adopted by the assessee for valuation in the financials was lower. The comparative details assessee for valuation in the financials was lower. The comparative details assessee for valuation in the financials was lower. The comparative details as discernable from the assessment order is noted to be as follows: as discernable from the assessment order is noted to be as follows: as discernable from the assessment order is noted to be as follows:

Stock As per Assessee’s Financ As per Assessee’s Financials WAC as computed by AO WAC as computed by AO Difference Qty Rate Rate Amount Rate Amount Amount Gold 39,21,271 4,150 4,150 16,27,37,89,116 4,376 17,15,79,43,292 17,15,79,43,292 88,41,54,176 Ornaments Stock with 9,33,319 4,110 4,110 3,83,59,40,657 4,331 4,04,20,57,775 4,04,20,57,775 20,61,17,118 Gold Smith Bullion 37,401 4,440 4,440 16,60,59,201 4,896 18,31,27,430 1,70,68,229 Old Gold 1,09,237 4,110 4,110 44,98,64,354 4,331 47,30,88,616 2,41,24,262 Total 50,01,228 20,72,47,53,327 21,85,62,17,113 21,85,62,17,113 1,13,14,63,786 38.1 The AO is noted to have accordingly reworked the value of closing The AO is noted to have accordingly reworked the value of closing The AO is noted to have accordingly reworked the value of closing stock on the above WAC and thereafter show caused the assessee as to stock on the above WAC and thereafter show caused the assessee as to stock on the above WAC and thereafter show caused the assessee as to why addition of Rs.100,26,91,458/ why addition of Rs.100,26,91,458/- being the net variation upon the being the net variation upon the restatement of opening & closing stock should not be restatement of opening & closing stock should not be made in AY 2021 made in AY 2021-

the show cause. The assessee also demonstrated that, the stock transfers sessee also demonstrated that, the stock transfers sessee also demonstrated that, the stock transfers between the branches were at the weighted average cost and that there between the branches were at the weighted average cost and that there between the branches were at the weighted average cost and that there was no distortion in the value of transfers whatsoever. The assessee also was no distortion in the value of transfers whatsoever. The assessee also was no distortion in the value of transfers whatsoever. The assessee also showed that, the weighted average cost of the closing invento showed that, the weighted average cost of the closing invento showed that, the weighted average cost of the closing inventory as per books was higher than the value of opening stock & purchases value and books was higher than the value of opening stock & purchases value and books was higher than the value of opening stock & purchases value and therefore the initial premise stated by the AO for doubting the correctness therefore the initial premise stated by the AO for doubting the correctness therefore the initial premise stated by the AO for doubting the correctness of valuation was also incorrect. The assessee further is noted to have of valuation was also incorrect. The assessee further is noted to have of valuation was also incorrect. The assessee further is noted to have submitted that, the closing submitted that, the closing inventory was valued at the weighted average inventory was valued at the weighted average cost or Net Realizable Value, whichever is lower, in accordance with cost or Net Realizable Value, whichever is lower, in accordance with cost or Net Realizable Value, whichever is lower, in accordance with Accounting Standard–2, issued by the Institute of Chartered Accountants 2, issued by the Institute of Chartered Accountants 2, issued by the Institute of Chartered Accountants of India and also the ICDS of India and also the ICDS – II notified by the CBDT. It is noticed th II notified by the CBDT. It is noticed that the assessee had placed on record, the details of NRV ascertained as on 31 assessee had placed on record, the details of NRV ascertained as on 31 assessee had placed on record, the details of NRV ascertained as on 31- 03-2021 which was lower than the weighted average cost. The assessee 2021 which was lower than the weighted average cost. The assessee 2021 which was lower than the weighted average cost. The assessee accordingly submitted that, the closing stock as on 31 accordingly submitted that, the closing stock as on 31-03- -2021 had been valued at NRV and in that view of the valued at NRV and in that view of the matter, there was no defect in the matter, there was no defect in the valuation of closing stock and thus no addition on this ground was valuation of closing stock and thus no addition on this ground was valuation of closing stock and thus no addition on this ground was warranted. The AO however, is noted to have rejected the submissions of warranted. The AO however, is noted to have rejected the submissions of warranted. The AO however, is noted to have rejected the submissions of the assessee and made the addition on account of valuation of closing the assessee and made the addition on account of valuation of closing the assessee and made the addition on account of valuation of closing stock as set out in the show cause notice. Aggrieved by the order of the t out in the show cause notice. Aggrieved by the order of the t out in the show cause notice. Aggrieved by the order of the AO, the assessee is noted to have preferred an appeal before the Ld. AO, the assessee is noted to have preferred an appeal before the Ld. AO, the assessee is noted to have preferred an appeal before the Ld.

CIT(A). to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 181 ::

38.2 The Ld. CIT(A) is noted to have analyzed the submissions of the The Ld. CIT(A) is noted to have analyzed the submissions of the The Ld. CIT(A) is noted to have analyzed the submissions of the assessee in light of the observations made by t assessee in light of the observations made by the AO while issuing the he AO while issuing the show cause, and found that several of the observations made therein was show cause, and found that several of the observations made therein was show cause, and found that several of the observations made therein was factually erroneous and the method of valuation adopted by the AO was factually erroneous and the method of valuation adopted by the AO was factually erroneous and the method of valuation adopted by the AO was defective. The Ld. CIT(A) is noted to have principally held that, the defective. The Ld. CIT(A) is noted to have principally held that, the defective. The Ld. CIT(A) is noted to have principally held that, the fundamental flaw in the AO’s valuation exercise was that he had simply the AO’s valuation exercise was that he had simply the AO’s valuation exercise was that he had simply valued the closing stock at the WAC; instead of the well accepted valued the closing stock at the WAC; instead of the well accepted valued the closing stock at the WAC; instead of the well accepted valuation principle of WAC or NRV, whichever is lower. The Ld. CIT(A) valuation principle of WAC or NRV, whichever is lower. The Ld. CIT(A) valuation principle of WAC or NRV, whichever is lower. The Ld. CIT(A) observed that, both the net realizable value of gold bullion and gold observed that, both the net realizable value of gold bullion and gold observed that, both the net realizable value of gold bullion and gold ornaments was lower than the weighted average cost as appearing in the ornaments was lower than the weighted average cost as appearing in the ornaments was lower than the weighted average cost as appearing in the books and thus the closing inventory was to be valued at NRV and not the books and thus the closing inventory was to be valued at NRV and not the books and thus the closing inventory was to be valued at NRV and not the WAC, as done by the AO. The Ld. CIT(A) thus rejected the valuation WAC, as done by the AO. The Ld. CIT(A) thus rejected the valuation WAC, as done by the AO. The Ld. CIT(A) thus rejected the valuation exercise undertaken by the AO holding it to exercise undertaken by the AO holding it to be in violation of the accepted be in violation of the accepted valuation principles laid down in AS valuation principles laid down in AS – 2 issued by ICAI as well as ICDS 2 issued by ICAI as well as ICDS – II notified by CBDT.

38.3 The Ld. CIT(A) thereafter himself is noted to have re The Ld. CIT(A) thereafter himself is noted to have re The Ld. CIT(A) thereafter himself is noted to have re-examined the manner of valuation of closing stock. In respect of the v manner of valuation of closing stock. In respect of the value of old gold / alue of old gold / stock with the goldsmith and gold ornaments, which the AO had valued at stock with the goldsmith and gold ornaments, which the AO had valued at stock with the goldsmith and gold ornaments, which the AO had valued at the WAC of Rs.4,331/- - and Rs.4,376/- respectively, the Ld. CIT(A) is respectively, the Ld. CIT(A) is found to have observed that, the NRV as on 31 found to have observed that, the NRV as on 31-03-2021 was actually 2021 was actually lower than the WAC. According lower than the WAC. According to the Ld. CIT(A), the NRV as per market to the Ld. CIT(A), the NRV as per market rate for 22k gold was Rs.4,162/ rate for 22k gold was Rs.4,162/- as opposed to the NRV of Rs.4,110/ as opposed to the NRV of Rs.4,110/- to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. estimated by the assessee, and therefore he adopted the rate of estimated by the assessee, and therefore he adopted the rate of estimated by the assessee, and therefore he adopted the rate of Rs.4,162/- to value the gold ornaments as on 31.03.2021. Even in to value the gold ornaments as on 31.03.2021. Even in to value the gold ornaments as on 31.03.2021. Even in respect of the closing balance of gold bullion, Ld. CIT(A) noted that, the losing balance of gold bullion, Ld. CIT(A) noted that, the losing balance of gold bullion, Ld. CIT(A) noted that, the WAC of bullion as per books of Rs.4,896/ WAC of bullion as per books of Rs.4,896/- was higher than the NRV. The was higher than the NRV. The Ld. CIT(A) was of the considered view that, the correct NRV was the Ld. CIT(A) was of the considered view that, the correct NRV was the Ld. CIT(A) was of the considered view that, the correct NRV was the market rate for 24k gold as appearing in public domain was market rate for 24k gold as appearing in public domain was market rate for 24k gold as appearing in public domain was Rs.4,521/- and not the NRV of Rs.4,440/ and not the NRV of Rs.4,440/- estimated by the assessee. The Ld. CIT(A) estimated by the assessee. The Ld. CIT(A) is found to have accordingly re is found to have accordingly re-worked the calculation of all items of the worked the calculation of all items of the gold as under:-

Item of Qty NRV NRV Rate Value as per Value as Value as per Difference gold adopted in Financials NRV Financials Gold 3921271 4162 4162 4150 16273274650 16320329902 16320329902 4,70,55,252 Ornament Stock with 933319 4162 4162 4110 3835941090 3884473678 3884473678 4,85,32,588 Goldsmith Bullion 37401 4521 4521 4440 166060440 169089921 169089921 30,29,481 Old gold 109237 4162 4162 4110 448964070 454644394 454644394 56,80,324 20724240250 20828537895 20828537895 10,42,97,645 38.4 In light of the above calculation, the Ld. CIT(A) upheld the addition In light of the above calculation, the Ld. CIT(A) upheld the addition In light of the above calculation, the Ld. CIT(A) upheld the addition on on on account account account of of of valuation valuation valuation of of of closing closing closing stock stock stock to to to the the the extent extent extent of of of Rs.10,42,97,645/- and deleted the balance addition made by the AO in and deleted the balance addition made by the AO in and deleted the balance addition made by the AO in this regard. It is noted that, the Revenue has not disputed this regard. It is noted that, the Revenue has not disputed this regard. It is noted that, the Revenue has not disputed the above action of the Ld. CIT(A) to the extent of the addition deleted by him. The action of the Ld. CIT(A) to the extent of the addition deleted by him. The action of the Ld. CIT(A) to the extent of the addition deleted by him. The assessee however, being aggrieved by the addition retained by the Ld. assessee however, being aggrieved by the addition retained by the Ld. assessee however, being aggrieved by the addition retained by the Ld.

CIT(A), is in appeal before us. CIT(A), is in appeal before us. to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 183 ::

38.5 Heard both the parties. It is settled that, the recognized met Heard both the parties. It is settled that, the recognized met Heard both the parties. It is settled that, the recognized method adopted for valuation of inventory is the lower of Cost or Net Realizable adopted for valuation of inventory is the lower of Cost or Net Realizable adopted for valuation of inventory is the lower of Cost or Net Realizable Value. We find that the CBDT in the Income Computation and Disclosure Value. We find that the CBDT in the Income Computation and Disclosure Value. We find that the CBDT in the Income Computation and Disclosure Standards – II has notified the manner of valuation of inventories, whose II has notified the manner of valuation of inventories, whose II has notified the manner of valuation of inventories, whose scope and manner of measurement is scope and manner of measurement is noted to be as under: noted to be as under:-

“Scope

(a) Work-in-progress arising under 'construction contract' including progress arising under 'construction contract' including progress arising under 'construction contract' including directly related service contract which is dealt directly related service contract which is dealt with by the Income with by the Income Computation and Disclosure Standard on construction contracts; Computation and Disclosure Standard on construction contracts; Computation and Disclosure Standard on construction contracts;

(b) Work-in-progress which is dealt with by other Income Computation progress which is dealt with by other Income Computation progress which is dealt with by other Income Computation and Disclosure Standard; and Disclosure Standard;

(c) Shares, debentures and other financial instruments held as stock Shares, debentures and other financial instruments held as stock Shares, debentures and other financial instruments held as stock-in- trade which are dealt with by the Income Computation and Disclosure ich are dealt with by the Income Computation and Disclosure ich are dealt with by the Income Computation and Disclosure Standard on securities; Standard on securities;

(d) Producers' inventories of livestock, agriculture and forest products, Producers' inventories of livestock, agriculture and forest products, Producers' inventories of livestock, agriculture and forest products, mineral oils, ores and gases to the extent that they are measured at net mineral oils, ores and gases to the extent that they are measured at net mineral oils, ores and gases to the extent that they are measured at net realisable value;

(e) Machinery spares, which can be used only in connection with a hinery spares, which can be used only in connection with a hinery spares, which can be used only in connection with a tangible fixed asset and their use is expected to be irregular, shall be tangible fixed asset and their use is expected to be irregular, shall be tangible fixed asset and their use is expected to be irregular, shall be dealt with in accordance with the Income Computation and Disclosure dealt with in accordance with the Income Computation and Disclosure dealt with in accordance with the Income Computation and Disclosure Standard on tangible fixed assets. Standard on tangible fixed assets.

Measurement

3. Inventories shall be valued at cost, or net realisable value, ories shall be valued at cost, or net realisable value, ories shall be valued at cost, or net realisable value, whichever is lower. whichever is lower.”

to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 184 ::

38.6 We also take note of decision of Hon’ble We also take note of decision of Hon’ble Supreme Court Supreme Court in the case of Investment Ltd. v. CIT (77 ITR 533) Investment Ltd. v. CIT (77 ITR 533) wherein it was held that, wherein it was held that, principle of valuing closing stock at valuing closing stock at cost or market value, whichever is t or market value, whichever is lower; is a recognized and acceptable method of valuation. Same view is ; is a recognized and acceptable method of valuation. Same view is ; is a recognized and acceptable method of valuation. Same view is noted to have been expressed by the Hon’ble Apex Court in the cases of noted to have been expressed by the Hon’ble Apex Court in the cases of noted to have been expressed by the Hon’ble Apex Court in the cases of Paints India Ltd. (188 ITR 44) and United CIT v. British Paints India Ltd. (188 ITR 44) Paints India Ltd. (188 ITR 44)

Commercial Bank Vs CIT (240 ITR 355). Commercial Bank Vs CIT ( 38.7 Hence, in light of the above decisions (supra), and more particularly Hence, in light of the above decisions (supra), and more particularly Hence, in light of the above decisions (supra), and more particularly the ICDS-II which is applicable in the impugned AY, we find that, it was II which is applicable in the impugned AY, we find that, it was II which is applicable in the impugned AY, we find that, it was open to the assessee to value its closing inventory open to the assessee to value its closing inventory at the cost or at the cost or net realizable value, whichever is lower. ever is lower.

38.8 The above legal principle is not being disputed by the parties. The above legal principle is not being disputed by the parties. The above legal principle is not being disputed by the parties.

Rather, the narrow issue in dispute is with regard to the “ Rather, the narrow issue in dispute is with regard to the “ Rather, the narrow issue in dispute is with regard to the “net realizable value” to be adopted for the purposes of valuation of the closing ” to be adopted for the purposes of valuation of the closing ” to be adopted for the purposes of valuation of the closing inventory. It is observed that, inventory. It is observed that, the CBDT has also broadly set out the the CBDT has also broadly set out the parameters to be adopted for ascertaining the net realizable value, which parameters to be adopted for ascertaining the net realizable value, which parameters to be adopted for ascertaining the net realizable value, which is as under:-

“Net Realisable Value Net Realisable Value

be grouped together and written down to net realisable value on an together and written down to net realisable value on an together and written down to net realisable value on an aggregate basis.

38.9 From the above, it is observed that, the NRV has been based on the From the above, it is observed that, the NRV has been based on the From the above, it is observed that, the NRV has been based on the most reliable evidence available at the time of valuation and that such most reliable evidence available at the time of valuation and that such most reliable evidence available at the time of valuation and that such estimation should be be taken into account the purpose for which the taken into account the purpose for which the inventory is held, fluctuations directly relating to events occurring after ld, fluctuations directly relating to events occurring after ld, fluctuations directly relating to events occurring after end of year to the extent which confirms the conditions existing at the end of year to the extent which confirms the conditions existing at the end of year to the extent which confirms the conditions existing at the year-end.

38.10 Having taken note of the above, we now revert back to the Having taken note of the above, we now revert back to the Having taken note of the above, we now revert back to the facts of the present case. We first take up the facts of the present case. We first take up the manner of ascertaining the manner of ascertaining the NRV for gold ornaments. The Ld. AR brought to our notice that, the NRV for gold ornaments. The Ld. AR brought to our notice that, the NRV for gold ornaments. The Ld. AR brought to our notice that, the assessee had estimated the assessee had estimated the NRV based on prevailing market prices NRV based on prevailing market prices with reference to the average rate of Rs.4,110/ reference to the average rate of Rs.4,110/- actually realiz actually realized as on 31st March. The Ld. AR took us through the took us through the relevant documentation for relevant documentation for the actual realizations made on that date at their showrooms, details of which made on that date at their showrooms, details of which made on that date at their showrooms, details of which are found at Pages 1644 to 1652 of the Paper Pages 1644 to 1652 of the Paper book. The Ld. CIT(A), The Ld. CIT(A), on the other hand, is noted to have simply adopted the rate being on the other hand, is noted to have simply adopted the rate being on the other hand, is noted to have simply adopted the rate being to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. displayed for gold on the website of The Jewellers and Diamonds Trade displayed for gold on the website of The Jewellers and Diamonds Trade displayed for gold on the website of The Jewellers and Diamonds Trade Association – Madras as on 31 Madras as on 31-03-2021 to be reference rate for 22k gold 2021 to be reference rate for 22k gold and accordingly estimated NRV of and accordingly estimated NRV of the gold ornaments. Having gone the gold ornaments. Having gone through these details, we find the estimation exercise undertaken by the through these details, we find the estimation exercise undertaken by the through these details, we find the estimation exercise undertaken by the assessee to be more appropriate and reli to be more appropriate and reliable as that of the Ld. CIT(A) for able as that of the Ld. CIT(A) for the reason that the assessee had dealt in similar items of gold ornaments that the assessee had dealt in similar items of gold ornaments that the assessee had dealt in similar items of gold ornaments n the closing day i.e. 31st March and there are contemporaneous on the closing day i.e. 31 March and there are contemporaneous evidences available in form of sale invoices, which shows that the basic evidences available in form of sale invoices, which shows that the basic evidences available in form of sale invoices, which shows that the basic selling rate of the assessee’s manufactured gold ornaments as on 31st selling rate of the assessee’s manufactured gold ornaments as on 31 selling rate of the assessee’s manufactured gold ornaments as on 31 March 2021 was Rs.4,110/ March 2021 was Rs.4,110/-. In our considered view, the basis adopted by , the basis adopted by the assessee was justifiable as it was based on reliable evidences. Also, the assessee was justifiable as it was based on reliable evidences. Also, the assessee was justifiable as it was based on reliable evidences. Also, the assessee’s methodology is found to be supported by one of the the assessee’s methodology is found to be supported by one of the the assessee’s methodology is found to be supported by one of the techniques notified in ICDS techniques notified in ICDS-II wherein it has been stated that, in retail II wherein it has been stated that, in retail setups, the cost of the inventory can also be the inventory can also be determined by reducing from determined by reducing from the saleable value of the inventory, the appropriate percentage gross value of the inventory, the appropriate percentage gross value of the inventory, the appropriate percentage gross margin. For the aforesaid reasons, we accordingly hold that, the addition . For the aforesaid reasons, we accordingly hold that, the addition . For the aforesaid reasons, we accordingly hold that, the addition made by the Ld. CIT(A) on account of upward estimation of made by the Ld. CIT(A) on account of upward estimation of made by the Ld. CIT(A) on account of upward estimation of NRV of old gold, stock lying with gold smith and gold ornaments was unjustified. gold, stock lying with gold smith and gold ornaments was unjustified. gold, stock lying with gold smith and gold ornaments was unjustified.

38.11 We now come to the issue regarding the most appropriate We now come to the issue regarding the most appropriate We now come to the issue regarding the most appropriate manner for estimating the NRV of the gold bullion. The Ld. AR, on the manner for estimating the NRV of the gold bullion. The Ld. AR, on the manner for estimating the NRV of the gold bullion. The Ld. AR, on the other hand, has brought to our notice tha other hand, has brought to our notice that the official rate notified by the t the official rate notified by the to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. Government as on 31st March 2021, viz., Gold 10 gms 999 Gold 10 gms 999 was valued at Rs.44,190/-. Accordingly, the NRV per gm works out to Rs.4419/ . Accordingly, the NRV per gm works out to Rs.4419/ . Accordingly, the NRV per gm works out to Rs.4419/-. Having regard to the aforesaid value, we are of the considered view that, the rate regard to the aforesaid value, we are of the considered view that, the rate regard to the aforesaid value, we are of the considered view that, the rate of Rs.4,440/- estimated by the assessee to be NRV of their gold bullion estimated by the assessee to be NRV of their gold bullion estimated by the assessee to be NRV of their gold bullion was conservative and commensurate with the official government rate. was conservative and commensurate with the official government rate. was conservative and commensurate with the official government rate.

Hence, we hold that the valuation of the closing inventory of gold bullion Hence, we hold that the valuation of the closing inventory of gold bullion Hence, we hold that the valuation of the closing inventory of gold bullion as undertaken by the assessee being reason as undertaken by the assessee being reasonable did not warrant any able did not warrant any interference and that the Ld. CIT(A) had in fact overstated the inventory interference and that the Ld. CIT(A) had in fact overstated the inventory interference and that the Ld. CIT(A) had in fact overstated the inventory valuation and in that view of the matter, the impugned addition made in valuation and in that view of the matter, the impugned addition made in valuation and in that view of the matter, the impugned addition made in relation thereto, is held to be unsustainable. relation thereto, is held to be unsustainable.

38.12 At this juncture, it is also r At this juncture, it is also relevant to take note of the findings elevant to take note of the findings rendered by the Hon’ble Apex Court rendered by the Hon’ble Apex Court in the case of Chainrup Sampatram Chainrup Sampatram v. CIT (24 ITR 481) wherein it was held that, the valuation of the valuation of closing v. CIT (24 ITR 481) stock should not be treated as a source of profits. stock should not be treated as a source of profits. The Court observed The Court observed that the valuation of closing stock is based on the ‘principle of aluation of closing stock is based on the ‘principle of aluation of closing stock is based on the ‘principle of balancing’ merely to cancel the charge of the goods unsold during the year merely to cancel the charge of the goods unsold during the year merely to cancel the charge of the goods unsold during the year. The Hon’ble Supreme Court in its judg Hon’ble Supreme Court in its judgment opined that “it is a misconception “it is a misconception to think that any profit that “arises out of to think that any profit that “arises out of the valuation of the closing the valuation of the closing stock” and thesitus of its arising or accrual is where the valuation is and thesitus of its arising or accrual is where the valuation is and thesitus of its arising or accrual is where the valuation is made. The valuation of unsold stock at the close of valuation of unsold stock at the close of an accounting period an accounting period is a necessary part of the process of determining the trading results of is a necessary part of the process of determining the trading results of is a necessary part of the process of determining the trading results of to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. that period, and can in nosense be regarded as the od, and can in nosense be regarded as the “source” of such “source” of such profits.”This position of law was reaffirmed by the Hon’ble Supreme Court This position of law was reaffirmed by the Hon’ble Supreme Court This position of law was reaffirmed by the Hon’ble Supreme Court in the case of CIT v. Dynavision Ltd (348 ITR 380) Dynavision Ltd (348 ITR 380).

38.13 It It It is is is observed observed observed that, that, that, the the the closing closing closing inventory inventory inventory of of of Rs.20,72,47,53,327/- as per the financials for the year as per the financials for the year- -ending 31-03- 2021 was the opening stock for 01 2021 was the opening stock for 01-04-2021 and thus any alteration in 2021 and thus any alteration in valuation of closing stock would stand subsumed in the valuation of the valuation of closing stock would stand subsumed in the valuation of the valuation of closing stock would stand subsumed in the valuation of the opening stock for the succeeding year and thus overall this entire exercise opening stock for the succeeding year and thus overall this entire exercise opening stock for the succeeding year and thus overall this entire exercise would be tax-neutral. It is noted that, the income neutral. It is noted that, the income-tax assessment for the tax assessment for the subsequent AY 2022-23 has been 23 has been processed u/s.143(1) of the Act, in ) of the Act, in which the AO has not disturbed the valu which the AO has not disturbed the valuation of opening stock and has ation of opening stock and has also not reduced the taxable profits by the equivalent sum, which he also not reduced the taxable profits by the equivalent sum, which he also not reduced the taxable profits by the equivalent sum, which he added in the impugned AY before us. Accordingly, when the AO’s added in the impugned AY before us. Accordingly, when the AO’s added in the impugned AY before us. Accordingly, when the AO’s successor did not find any infirmity in the value of opening stock as on successor did not find any infirmity in the value of opening stock as on successor did not find any infirmity in the value of opening stock as on 01-04-2021, the action of doubting the correctness of valuation of the on of doubting the correctness of valuation of the on of doubting the correctness of valuation of the same stock as on 31-03 03-2021 is contradictory and erroneous. It is also 2021 is contradictory and erroneous. It is also not in dispute that, the method adopted by the assessee for valuation of not in dispute that, the method adopted by the assessee for valuation of not in dispute that, the method adopted by the assessee for valuation of its closing stock was consistent in the subsequent year as we its closing stock was consistent in the subsequent year as we its closing stock was consistent in the subsequent year as well and the Revenue has not disputed the valuation of closing stock as on 31 Revenue has not disputed the valuation of closing stock as on 31 Revenue has not disputed the valuation of closing stock as on 31-03- 2022. Likewise, it has been brought to our attention that even the 2022. Likewise, it has been brought to our attention that even the 2022. Likewise, it has been brought to our attention that even the income-tax assessment for the next AY 2023 tax assessment for the next AY 2023-24 has been completed u/s 24 has been completed u/s to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. :: 189 ::

143(3) on 30-03-2025 and in this assessme 2025 and in this assessment also the values of opening nt also the values of opening and closing stock have been accepted and that no alteration to their and closing stock have been accepted and that no alteration to their and closing stock have been accepted and that no alteration to their valuations were made. These facts strengthens the case of the assessee valuations were made. These facts strengthens the case of the assessee valuations were made. These facts strengthens the case of the assessee that, the method of valuation adopted by them, which was being that, the method of valuation adopted by them, which was being that, the method of valuation adopted by them, which was being consistently followed, was appropriate and reasonable and thus should was appropriate and reasonable and thus should was appropriate and reasonable and thus should not be tinkered with without reasonable cause without reasonable cause.

38.14 For the above reasons, we accordingly direct the AO to delete For the above reasons, we accordingly direct the AO to delete For the above reasons, we accordingly direct the AO to delete the addition of Rs.10,42,97,645/ the addition of Rs.10,42,97,645/- sustained by the Ld. CIT(A) in relation sustained by the Ld. CIT(A) in relation to valuation of closing stock. These grounds are thus allowed. sing stock. These grounds are thus allowed. sing stock. These grounds are thus allowed.

Ground Nos. 36 to 38 raised in this appeal are found to be against raised in this appeal are found to be against 40. Ground Nos. 36 to 38 the addition of Rs.45,74,07,096/ the addition of Rs.45,74,07,096/- on account of unaccounted interest on account of unaccounted interest payments made to various parties. It is observed that, identical impugned payments made to various parties. It is observed that, identical impugned payments made to various parties. It is observed that, identical impugned issue was involved in the preceding AY 2020 issue was involved in the preceding AY 2020-21 and that the findings 1 and that the findings rendered by the lower authorities was verbatim same. Even the rendered by the lower authorities was verbatim same. Even the rendered by the lower authorities was verbatim same. Even the submissions of both the parties before us was the same. Hence, following submissions of both the parties before us was the same. Hence, following submissions of both the parties before us was the same. Hence, following our decision rendered while deciding Ground Nos. 34 to 36 of AY 2020 our decision rendered while deciding Ground Nos. 34 to 36 of AY 2020 our decision rendered while deciding Ground Nos. 34 to 36 of AY 2020-21, we accordingly hold the we accordingly hold the impugned addition of unaccounted interest impugned addition of unaccounted interest payments to be untenable and thus is directed to be deleted. These payments to be untenable and thus is directed to be deleted. These payments to be untenable and thus is directed to be deleted. These grounds are accordingly allowed. grounds are accordingly allowed.

Ground Nos. 39 to 43 are noted to be relating to the addition are noted to be relating to the addition 41. Ground Nos. 39 to 43 made by way of unaccounted labour charges of Rs made by way of unaccounted labour charges of Rs.6,86,75,232/ .6,86,75,232/- in relation to transactions with M/s AJMPL. Both the parties have agreed relation to transactions with M/s AJMPL. Both the parties have agreed relation to transactions with M/s AJMPL. Both the parties have agreed that, the issue involved in this ground is identical to the Ground Nos. 37 that, the issue involved in this ground is identical to the Ground Nos. 37 that, the issue involved in this ground is identical to the Ground Nos. 37 to 41 involved in the appeal for the preceding AY 2020 to 41 involved in the appeal for the preceding AY 2020-21. We also note 21. We also note that, the observations & findings rendered by the lower authorities and s & findings rendered by the lower authorities and s & findings rendered by the lower authorities and also the submissions of both the parties, except for variation of figures, also the submissions of both the parties, except for variation of figures, also the submissions of both the parties, except for variation of figures, to 675 to 680/Chny/2025 (AYs 2016 16-17 to 2021-22) M/s. Lalithaa Jewellery Mart Ltd. M/s. Lalithaa Jewellery Mart Ltd. was the same. Following our decision rendered while deciding Ground was the same. Following our decision rendered while deciding Ground was the same. Following our decision rendered while deciding Ground Nos. 37 to 41 in AY 2020 Nos. 37 to 41 in AY 2020-21, we direct the AO to delete the im 21, we direct the AO to delete the impugned addition as well. These grounds thus stands allowed. addition as well. These grounds thus stands allowed.