M/S R C JEWELLERS PVT LTD,NEW DELHI vs. DCIT, CC-32 NEW DELHI, NEW DELHI

Asstt. Year: 2018-19 M/s R C Jewellers Pvt. Ltd., Vs DCIT, C/o Anil Jain DD & Co., 611, Surya Central Circle-32, Kiran Building, 19, K. G. Marg, New Delhi-110055 New Delhi-110001 (APPELLANT) (RESPONDENT) PAN No. AACCR7113A Assessee by : Sh. Anil Jain, CA & Sh. Aslam, CA Revenue by : Sh. Mahesh Kumar, CIT-DR Date of Hearing: 03.11.2025 Date of Pronouncement: 03.11.2025 ORDER

Per Satbeer Singh Godara, Judicial Member:

3. The assessee pleads the following substantive grounds in the instant appeal: “1. That on the facts and circumstances of the case and the provision of law, that the Ld. CIT(A) has failed to appreciate the facts that the impugned assessment order passed u/s 143(3) of the Income Tax Act is illegal, bad in law and without jurisdiction and time barred.

2. That on the facts and circumstances of the case and the provision of law, that the Ld. CIT(A) has failed to appreciate the fact that the impugned assessment order passed is illegal and bad in law as no valid approval under section 153D has been obtained before passing the assessment order and thus assessment made requires to be quashed.

3. That on the facts and circumstances of the case and the provision of law, that the Ld. CIT(A) has failed to appreciate the facts that the impugned assessment order passed u/s 143(3) in pursuance of satisfaction note recorded on 26.12.2019 on the basis of information received from the ACIT Central Circle (2) Rajkot is illegal and bad in law as in the assessment order no addition has been made on the issues on the basis of which proceeding u/s 153C has been initiated.

4. That on the facts and circumstances of the case and the provision of law, that the Ld. CIT(A) has failed to appreciate the facts that the Ld AO has erred in making the additions on the basis of the documents impounded during the course of the survey proceeding at the premises of the assesse disregarding the fact that the present assessment proceeding has been initiated in pursuance of satisfaction note recorded by the then DCIT circle 20(2) on 26.12.2019 on the basis of information received from the ACIT Central Circle (2) Rajkot.

5. That on the facts and circumstances of the case and the provision of law, that the Ld. CIT(A) has failed to appreciate the facts that the impugned assessment order passed is in violation of the principle of natural justice and without giving adequate time and opportunity to the assessee to represent his case, and even no effective show cause notice has been issued before passing the assessment order and thus, the assessment order passed is bad in the eyes of law and liable to be quashed.

6. That on the facts and circumstances of the case and the provision of law, that the Ld. CIT(A) has erred in sustaining the addition of Rs. 1,13,10,447/- by arbitrarily adopting the GP @ 6.56% on the alleged unaccounted sales of Rs. 17,24,15,347/- of gold and diamond jewellery.

7. That on the facts and circumstances of the case and the provision of law, that the Ld. CIT(A) has erred in sustaining the addition of Rs. 26,53,327/- by arbitrarily adopting the GP @ 6.56% on the alleged unaccounted R C Jewellers Pvt. Ltd. sales/unaccounted receipts found in digital data impounded.

8. That on the facts and circumstances of the case and the provision of law, that the Ld. CIT(A) has erred in sustaining the addition of Rs. 59,040/- on the alleged unaccounted cash sales of Rs 9,00,000/- by adopting GP @ 6.56%.

9. That on the facts and circumstances of the case and the provision of law, that the Ld. CIT(A) has erred in sustaining the addition of Rs. 14,432/- by arbitrarily adopting the GP @ 6.56% on the alleged cash sale proceeds of Rs 2,20,000/-.

10. That on the facts and circumstances of the case and the provision of law, that the Ld. CIT(A) has failed to appreciate the facts that the learned AO has erred in forming an incorrect opinion without confronting the same and in using the same adversely without providing the reasonable opportunity of defending, which inaction of the AO makes the assessment proceedings and consequential assessment order as null and void.

11. That on the facts and the circumstances of the case the Ld. CIT(A) has failed to appreciate the facts that the Ld. AO has erred in initiating the penalty proceedings u/s 270A of the Income Tax Act, 1961.

12. That on the facts and the circumstances of the case the Ld. CIT(A) has failed to appreciate that the learned assessing officer has erred in charging interest u/s 234A, 234B and 234C is illegal and without prejudice it is excessive.”

4. We next note with the able assistance coming from both the parties that the learned CIT(A) detailed lower appellate discussion partly upholding Assessing Officer’s action in issue; reads as under: “7. I have examined the facts of the case and considered the order passed by the AO and written submissions filed by the appellant during the course of appellate proceedings. The grounds of appeal raised by the appellant are decided as under:

8. Ground nos. 1, 3, 4, 5, 10 and 13 are general in nature and the appellant did not make any specific submission with respect to these grounds. Accordingly these are dismissed.

9. Ground no.2: In this ground the appellant has challenged the validity of assessment completed under section 153A of the Act stating that the same is in violation of mandatory provision of section 153D of the Act. The appellant in its written submissions has submitted that the approval granted under section 153D by the Addl. CIT is mechanical in nature and without application of mind. 9.1 The contention of the appellant has been examined. The AO has mentioned in the assessment order that it was passed with the prior approval of the Joint CIT under section 153D of the Act. It is observed that the appellant has not been able to point out any specific defect in the approval granted under section 153D of the Act. The appellant did not put up any valid argument or evidence to support this ground of appeal

. Further, on perusal of the provisions section 153D of the Act, it can be noticed that the Addl. CIT/ Jt. CIT need not to grant approval under section 153D reducing his satisfaction under any specific language, form or style so as to reflect application of mind. I find that the allegation by the appellant in this regard is baseless and meritless. Hence this ground of appeal is hereby dismissed.

10. Ground no.6: This ground pertains to the determination of undisclosed income on the unaccounted sales of Rs. 17,24,15,347/- based on various images/design found during the survey. The assessing officer has worked out income of Rs. 2,06,89,840/- by adopting the GP ratio of 12%. Now it is the contention of the appellant that the assessing officer has not rejected the books of accounts inspite of the fact that the appellant has filed his complete books of accounts along with stock details before the assessing officer. Accordingly the appellant is of the view that when books of accounts has not been rejected, there cannot be any trading addition. 10.1 Without prejudice the appellant has also submitted that the assessing officer has not rejected the books of accounts inspite of the fact that the appellant has filed his complete books of accounts along with stock details before the assessing officer. Accordingly the appellant is of the R C Jewellers Pvt. Ltd. view that when books of accounts has not been rejected, there cannot be any trading addition. 10.2 I have considered the submission of the assessee and the facts on record. I have also verified page no. 12 of the assessment order wherein during the course of the survey proceeding Sh. Arun Kumar Soni director at that time was confronted with various annexures impounded and he duly explained that these annexures contain the photograph of jewellery for which the client placed order for buying jewellery and with regard to where about of these jewelleries it was stated by him that these jewelleries either delivered to the client as per their order on the date of the delivery or else it is part of our stock either at the showroom or at the manufacturing site of the factory. However such orders have not been supported by sale vouchers or any such substantial evidence. Further, it is neither possible that such bulk customer orders have not been executed nor reasonable to understand why the jewellery manufacturer or seller is in possession of so many orders/designs which are actually not executed through date of order and due date of delivery is mentioned on majority of the designs themselves. Also no details of placement and cancellation of order had been provided by the appellant during the course of the assessment proceeding. But the appellant submitted that there was no difference in the quantity of the stock shown in the books of the assessee and the quantity taken by the valuer. Although the appellant has submitted that the books of accounts has not been rejected by the AO. In the present situation even if the books of accounts are rejected by the AO in that scenario also the AO is duty bound to make a fair and reasonable estimate of income based on material on record. He cannot make addition in arbitrarily manner and he should estimate the net income on the alleged unaccounted sales by considering the past history of the assessee. And in the present case GP ratio of the current year as per the audited books of accounts comes to 6.56% and of the preceding year is 6.37% (as per page no. 29 of the paper book submitted by the appellant). And the average GP ratio comes to 6.47%. So the adoption of GP ratio @ 12% on the alleged unaccounted sales is unjustified. Accordingly in the case of rejection of books of accounts addition on the alleged unaccounted sales should have been made @ 6.56% which is higher of the average GP ratio of the two years. For this proposition I am taking support of the below mentioned two judgments:-

R C Jewellers Pvt. Ltd. a. Bathinda Truck Operator Union vs. ITO, 158 Taxman 148, passed by Hon’ble ITAT Amritsar Bench b. CIT vs. Laxmi Naraian Badridas, 5 ITR 170 , Privy Council 10.3 Thus I am of the view that for the unaccounted sales of Rs. 17,24,15,347-/- based on various images/designs found during the course of the survey, GP @ 6.56% as discussed above should have been applied on the unaccounted sales of Rs. 17,24,15,347/-. Accordingly by adopting the GP ratio of 6.56% the undisclosed income on the above said unaccounted sales works out to Rs.1,13,10,447/-. Thus addition of Rs. 1,13,10,447/- is sustained and the addition of Rs. 93,79,393/- is deleted. Thus this ground of appeal is partly allowed.

11. Ground no.7: This ground also pertains to the determination of undisclosed income on the unaccounted sales of Rs. 4,04,47,052/- based on unaccounted receipts and income found in the digital data analysis. On this unaccounted sales, the assessing officer has worked out income of Rs.48,53,646/- by adopting the GP ratio of 12%. Now it is the contention of the appellant that these are rough estimates of jewellery items for customers and no such financial transaction took place. But the appellant has not submitted any detail that how the unaccounted receipts found in the digital data analysis is rough estimate. So this contention of the appellant is rejected. 11.1 Without prejudice the appellant has also submitted that the assessing officer has not rejected the books of accounts inspite of the fact that the appellant has filed his complete books of accounts along with stock details before the assessing officer. Accordingly the appellant is of the view that when books of accounts has not been rejected, there cannot be any trading addition. 11.2 I have considered the submission of the assessee and the facts on record. In the present situation even if the books of accounts are rejected by the AO in that scenario also the AO is duty bound to make a fair and reasonable estimate of income based on material on record. He cannot make a addition in arbitrarily manner and he should estimate the net income on the alleged unaccounted sales by considering the past history of the assessee. And in the present case GP ratio of the current year as per the audited books of accounts comes to 6.56% and of the preceding year is 6.37% (as per page no. 29 of the paper book submitted by the appellant). And the R C Jewellers Pvt. Ltd. average GP ratio comes to 6.44%. So the adoption of GP ratio @ 12% on the alleged unaccounted sales is unjustified. Accordingly in the case of rejection of books of accounts addition on the alleged unaccounted sales should have been made @ 6.56% which is higher of the average GP ratio of the two years. Thus addition of Rs. 26,53,327/- is sustained and the addition of Rs. 22,00,319/- is deleted. Thus this ground of appeal is partly allowed.

12. Ground no.8: On the observation of page 11, a document titled rough estimate found from the premises 2719 Bank street Karol Bagh Delhi during survey proceeding u/s 133A, the assessing officer has observed that cash of Rs. 9,00,000/- has been received towards some unaccounted cash sales. And on this basis the assessing officer has made addition of Rs. 9,00,000/- as unaccounted cash sales. 12.1 Now with regard to the above said addition of Rs. 9,00,000/- the appellant has submitted that this is a rough estimate of the jewellery items for customers and no such financial transaction took place. Even on the sheet itself rough estimate has been mentioned. So there is no justification for making any addition. 12.2 I have considered the submission of the assessee and the facts on record. I am of the considered view that on the above said unaccounted cash sales of Rs. 9,00,000/- undisclosed income should be determined by adopting GP ratio @ 6.56% as determined in ground of appeal no. 6 and 7 instead of making the addition of entire amount of unaccounted sales. Accordingly by adopting GP ratio 6.56% the undisclosed income on this cash sales of Rs. 9,00,000/- works out to Rs. 59,040/-. Thus addition of Rs. 59,040/- is sustained and the addition of Rs. 8,40,960/- is deleted. Thus this ground of appeal is partly allowed.

13. Ground no.9: On the basis of loose sheet annexed as page 12 of annexure A-8 amounting to Rs. 2,20,000/- Noida. On the basis of this loose sheet the assessing officer has taken a view that this cash also pertains to the unaccounted cash sales. And on this basis the assessing officer has made addition of Rs. 2,20,000/- as income of the appellant. 13.1 Now with regard to above the appellant has submitted that this is rough estimate of jewellery items for R C Jewellers Pvt. Ltd. customers and no such financial transaction took place. So there is no justification for making any addition. 13.2 I have considered the submission of the assessee and the facts on record. I am of the considered view that on the above said unaccounted cash sales of Rs. 2,20,000/- undisclosed income should be determined by adopting GP ratio @ 6.56% as determined in ground of appeal no. 6 and 7 instead of making the addition of entire amount of unaccounted sales. Accordingly by adopting GP ratio 6.56% the undisclosed income on this cash sales of Rs. 2,20,000/- works out to Rs. 14,432/-.Thus addition of Rs. 14,432/- is sustained and the addition of Rs. 2,05,568/- is deleted.” 4.1 This is what leaves the assessee aggrieved.

5. Mr. Jain’s first and foremost substantive argument in this factual backdrop is that the learned Assessing Officer has erred in law and on facts in framing a “regular” assessment u/s 143(3) than that u/s 153C of the Act since it was a “search” case. He further highlights the fact that the assessee had filed it’s original return on 30.10.2018 declaring income of Rs.99,93,740/- which stood processed u/s 143(1) of the Act. Learned counsel refers to the case records indicating the Assessing Officer to have recorded his section 153C satisfaction as well dated 03.09.2019 emanating from the instant appeal file. His case accordingly is that once the learned Assessing Officer had recorded section 153C satisfaction on 03.09.2019 which nowhere included the impugned assessment year 2018-

6. The Revenue on the other hand takes us to page 26 of the assessment order indicating the impugned assessment as framed u/s 143(3) r.w.s. 153A r.w.s. 153C of the Act assessing the assessee’s income at Rs.3,66,57,226 (rounded off to Rs.3,66,57,230/-).

7. Further, in all pending assessment proceedings, where notices were issued manually, prior to issuance of this Circular, the Income-tax authorities shall identify such cases and shall upload the notices in these cases on the Systems by 31th October, 2019.”

R C Jewellers Pvt. Ltd. compliance in various notices to be issued “to the assessee or any other person” only. Learned counsel could hardly dispute that the above section 153D approval had been issued not to the assessee or any other person but to the Assessing Officer. So far as the other clinching expression used in the circular “or any other person” is concerned, we are afraid that the Assessing Officer is nowhere covered in the statutory definition of a person prescribed in section 2(31) of the Act in (i) to (vii) r.w. Explanation thereto which includes an individual, an HUF, a company............ Case law Brandix Mauritius Holdings Ltd. (supra) appears to have dealt with an issue of absence of DIN on an assessment than that involving section 153D approval. We further note that the assessee has quoted various other judicial precedents (supra) which are no more found to be binding precedents since having not considered the foregoing stipulation of “to the assessee or any other person” in light of section 2(31) of the Act. Learned CIT-DR also refers to Commissioner Vs. Dilip Kumar & Co. (2018) 9 SCC 1 (SC) (FB) and para 21(d) in CIT Vs. Thane Electricity Supply Ltd. (1994) 206 ITR 727 (Bom.) that we ought to adopt stricter interpretation and even an hon’ble non-jurisdictional high court decision carries a persuasive effect only.