RAJESH KUMAR AGARWAL HUF,MUZAFFARPUR vs. AC/DCIT CENT CIR MZF, MUZAFFARPUR

ITA 302/PAT/2025Status: DisposedITAT Patna18 February 2026AY 2021-2219 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the order of the CIT(A) in dismissing the Revenue's appeals for AYs 2020-21, 2022-23, and 2023-24. Regarding the addition of Rs. 7,33,57,570/- (undisclosed business income from sale of Raj Niwas Pan Masala), the Tribunal noted that the CIT(A) had allowed the assessee's appeal. The CIT(A) found that the turnover in question pertaining to grain items was fully disclosed in audited financial statements, supported by comprehensive documentation and banking channels, and that the AO's approach of rejecting sales while accepting purchases was flawed, leading to double taxation. The Tribunal agreed with the CIT(A)'s reasoning that the addition was not sustainable. For the addition of Rs. 8,96,750/- (bogus commission income), the Tribunal found that the assessee had credited this income in the P&L account, offered it to tax, and provided supporting evidence. No adverse material was found during the search, and the books were audited. Therefore, the Tribunal upheld the CIT(A)'s deletion of this addition. The Tribunal also dismissed the assessee's appeal for AY 2021-22 concerning the addition of Rs. 36,32,782/- on account of stamp value and actual property value, finding that the addition was rightly made by the AO and sustained by the CIT(A).

What were the facts?

The appeals by the Revenue and the assessee, Rajesh Kumar Agarwal, HUF, concern assessment years 2020-21, 2021-22, 2022-23, and 2023-24. The primary dispute in ITA No. 289/PAT/2025 for AY 2020-21 involves the deletion by the CIT(A) of an addition of Rs. 7,33,57,570/- made by the Assessing Officer (AO). The AO had treated this amount as undisclosed business income from the sale of Raj Niwas Pan Masala, based on a search and seizure action on 03.08.2022. The AO's view was that the food grain business of M/s Maa Annapurna Enterprises was a paper arrangement to channel unaccounted income from the pan masala business. The CIT(A) also deleted an addition of Rs. 8,96,750/- made by the AO on account of bogus commission income. For AY 2021-22, the assessee's appeal concerns the addition of Rs. 36,32,782/- on account of stamp value and actual value of a property purchased.

What were the issues?

1. Whether, on the facts and in law, the CIT(A) erred in deleting the addition of Rs. 7,33,57,570/- being undisclosed business income from the sale of Raj Niwas Pan Masala, as made by the AO under Section 147. 2. Whether, on the facts and in law, the CIT(A) erred in deleting the addition of Rs. 8,96,750/- being bogus commission income, as made by the AO. 3. Whether, on the facts and in law, the CIT(A) erred in dismissing the assessee's appeal concerning the addition of Rs. 36,32,782/- made by the AO on account of stamp value and actual value of the property purchased for AY 2021-22. Assessee's Contentions (implied from CIT(A)'s order and Tribunal's findings): - The turnover of M/s Maa Annapurna Enterprises (food grain business) was fully disclosed in audited financial statements, supported by purchase and sales ledgers, invoices, cash book, and bank book, and transactions were through banking channels. - The AO selectively accepted purchases but rejected corresponding sales, treating them as unaccounted income from pan masala business, which amounts to taxing the same income twice. - The commission income was earned from normal business activities, offered to tax, supported by agreements, bank statements, and receipts. No adverse material was found during the search. Revenue's Contentions (implied from AO's actions and grounds of appeal): - M/s Maa Annapurna Enterprises was a paper company used to accommodate unaccounted income from Raj Niwas Pan Masala business. - No stock of food grains or books of account were found during the search. - Statements from associates indicated M/s Maa Annapurna Enterprises was a paper entity. - The AO relied on statements recorded under Section 132(4), WhatsApp chats, and coupon-based documents.

Which sections of the Income-tax Act were involved?

Section 147,Section 142(2A),Section 132(4)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “PATNA” BENCH, PATNA

Before: SHRI DUVVURU RL REDDY, VP & SHRI RAJESH KUMAR, AM

For Appellant: Shri Siddarth Agarwal, AR
For Respondent: Shri Md. AH Chowdhary, DR
Hearing: 27.11.2025Pronounced: 18.02.2026

Per Rajesh Kumar, AM:

These are appeals preferred by the assessee and Revenue against the orders of the Commissioner of Income-tax (Appeals), Patna-3, (hereinafter referred to as the “Ld. CIT(A)”] all even dated 28.04.20

The order continues below.

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