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Facts
During a search and seizure operation, various additions were made to the assessee's income, including those on account of bogus sales, undisclosed cash, and excess stock. The assessee appealed these additions, and the CIT(A) partly allowed the appeal. The assessee then filed an appeal before the Tribunal.
Held
The Tribunal partly allowed the appeal. The addition of INR 50 Lakhs for bogus sales was upheld. However, additions for cash found during the search (INR 7,82,050/-), unexplained income from cash at residence (INR 1,38,000/-), excess stock of gold jewellery (partly allowed), excess stock of silver ornaments (INR 82,000/-), and lottery income (INR 18,16,000/-) were either deleted or partly allowed.
Key Issues
Whether the sales made to M/s Shiva Trading Company were genuine, whether cash found and stock differences were properly explained, and whether lottery income was sufficiently supported by declared income.
Sections Cited
132, 250, 143(3), 133(6), 131, 46A, 68, 147, 148, 69A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI “E” BENCH: NEW DELHI
Before: SHRI SUDHIR KUMAR & SHRI MANISH AGARWAL
Year : 2017-18] Man Mohan Agarwal, vs DCIT/ACIT, 1/8, Shri Laxmi Lok, New Central Circle, Mohanpuri, Sarrafa Bazar, Ghaziabad. Meerut, U.P-250002. PAN-ACAPA1883B APPELLANT RESPONDENT Appellant by Shri Shiv Kumar Gupta, CA Respondent by Shri Mukesh Jha, CIT DR Date of Hearing 03.07.2025 Date of Pronouncement 30.09.2025 ORDER PER MANISH AGARWAL, AM :
The present appeal is filed by assessee against the order dated 12.02.2024 passed by Ld. Commissioner of Income Tax (A)-3, Noida [“Ld. CIT(A)”] in Appeal No. CIT(A), Kanpur-4/10437/2018-19 u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 19.12.2018 passed u/s 143(3) of the Act pertaining to assessment year 2017-18.
Brief facts of the case are that assessee is an individual and engaged in the business of wholesale and retail trading of jewellery and bullion. A search and seizure operation u/s 132 of the Act was conducted on 18.01.2017 at the business and residential premises of Rahul Choudhary and others which includes the assessee and a search was carried out on premises also. The return of income was filed by the assessee on 06.09.2017, declaring income at INR 17,75,840/-. The case of the assessee was taken up for scrutiny and after considering the submissions of the assessee, various additions were made on account of bogus sales, undisclosed cash, jewellery stock etc. The income was finally computed by the AO vide assessment order dated 19.12.2018 u/.s 143(3) of the Act at INR 1,36,66,409/-.
Against this order, assessee preferred an appeal before Ld. CIT(A), who after considering the submissions, vide impugned order dated 12.02.2024, partly allowed the appeal of the assessee.
4. Aggrieved by the order of Ld. CIT(A), assessee preferred appeal before the Tribunal by taking following grounds of appeal:- 1. “That Ld. AO and Hon'ble CIT(A) has erred in facts and circumstances by adding Rs.
50. Lacs on account of bogus sales which was received through banking channels just on the basis of statement of third person while the assessee as a vigilant shopkeeper, taken all necessary steps which are necessary to make the sales. As per the statement of Mr. Rahul Chaudhary he used to provide fake bills to provide accommodation entries taken from various parties on commission basis, therefore all purchases made by M/S Shiva Trading Co are treated fake. Which is illegal and uncalled for, hence additions of Rs
50. Lacs are baseless and deserved to be deleted.
2. That Ld. AO and Hon'ble CIT(A) erred in law by making an addition of Rs. 7,82,050 on account of cash found at the time of search at the shop of the assessee by ignoring all evidences and affidavit of Mr. Mayur Agarwal, whose cash was kept at his assessee's shop for safe custody. Therefore, addition made without verifying evidence on record hence it deserves to be deleted.
3. That Ld. AO and Hon'ble CIT(A) has erred in law by adding Rs 1,38,000 treating it as unexplained income on account of cash found at the residence of the assessee during the search. Also Ld. AO as well as Hon'ble CIT (A) have ignored affidavits filed by family members of the assessee to whom the cash was belonged. Moreover, some of assessee was assessed by Ld. AO himself. Therefore, such addition deserved to be deleted.
The Ld. AO and Hon'ble CIT(A) erred in law by making an addition of Rs 30,91,145 on account of difference in stock without considering the evidence on record filed and without summoning or cross - examining u/s 133(6)/ 131 to whom this stock of jewellery belong to, hence this addition is bad in law and Illegal and therefore deserved to be deleted.
5. The Ld. AO and Hon'ble CIT(A) erred in law by making an addition of Rs 82,000 on account of difference in stock without considering the evidence on record filed and without summoning or cross - examining u/s 133(6)/ 131 assessee's son who is the proprietor of jewellery shop and who used to keep his stock at his father's shop, this addition is bad in law and Illegal and therefore deserved to be deleted.
6. The Ld. AO and Hon'ble CIT(A) erred in law by making an addition of Rs 18,00,000 on account of unaccounted income being lottery income recorded in different years. However, AO has added the money received in the respective years under consideration and not considered income declared under Income Declaration Scheme 2016. Hence additions made by the Ld. AO and Hon'ble CIT(A) is against the law and deserved to be deleted.
That the appellant reserves his right to raise any additional grounds, evidences and case laws at the time of hearing read with rule 46A of Income Tax Act.”
5. Ground of appeal
No. 1 raised by the assessee is with respect to the addition of INR
50. Lakhs made by treating sale to one M/s Shiva Trading Company against as bogus which was received on two occasions i.e. INR 14.00 Lakhs on 15.11.2016 and INR 36.00 Lakhs on 18.11.2016.
During the course of Investigation, Shri Rahul Choudhary in his statement recorded on oath had admitted that he controlled and managed M/s Shiva Trading Company instead of its proprietor namely Shri Pankaj Kumar and the firm was used to issue fake bills of expenses.
7. Before us, Ld. AR submits that the assessee has made sales to M/s Shiva trading Company in terms of bill dated 30.11.2016 issued for 1587.210 gram of bullion. Ld. AR further submits that sales so made are duly recorded in the books of accounts of the assessee and sale was made out of the stock available with the assessee. He submits that it was not the allegation of the Department that goods were sold without availability of stock. He further submits that such sales were delay declared in VAT return filed. Merely because, Shri Rahul Choudhary stated in his statement that the said party is controlled and managed by him, the AO made the addition by ignoring the fact that Shri Rahul Choudhary has stated in his statement that the firm was used to issue fake bills of expenses and not of purchase. Ld. AR submits that assessee requested for cross-examination of Shri Rahul Choudhary which was not allowed to the assessee. He stated that the assessee has already disclosed the profits on this sale made and by alleging the sales as bogus addition was made which is the double addition of this amount. He, therefore, prayed for the deletion of the addition.
Ld.AR for the assessee also filed a detailed written submission on this issue which is available at pages 3 to 54 of the Paper Book wherein all these facts alongwith various judgements referred by the assessee with respect to cross-examination and further with regard to the statements recorded behind the back of the assessee. He thus, requested for the deletion of the addition made by the AO on this account.
On the other hand, Ld. Sr. DR for the Revenue vehemently supported the orders of the lower authorities and submits that once it is established that firm was found bogus the sales made to the said firm and the payment received thereon is also bogus and this fact is duly established by AO after making independent and relevant inquiries. He further submits that assessee has failed to justify as to how the goods have been delivered to the buyer, Shri Shiva Trading Company and this clearly established that the sales disclosed is not genuine sales. He thus, prayed for the confirmation of the addition so made.
Heard the contentions of both the parties and perused the material available on record. From the fact it appears that AO has made the addition of INR 50 Lakhs by treating the sale made to M/s Shri Shiva Trading Company as bogus on the basis of statement recorded of Shri Rahul Choudhary u/s 132(4) wherein he has accepted that he was controlling and managing the firm namely M/s Shri Shiva Trading Company propr. Shri Pankaj Kumar to provide accommodation entries of expenses after charging commission ranging from 01 to 03 %. It is also seen that the assessee since beginning requested for the cross-examination of Shri Rahul Choudhary which was never provided to assessee. Claim of the assessee is that assessee has made sales in due course and the purchases and sales as recorded in the books of accounts and accepted by the AO and trading results were not doubted. The assessee has duly paid CST/VAT on the said sales and necessary detailed were filed before the lower authorities. The sales have been made out of the stock available with the assessee and the availability of the stock was also not doubted by the AO. It is further seen that in the statement of Shri Rahul Choudhary, he has accepted that he had issued certain bills for commission however, it is clear that all the bills were issued on commission for providing accommodation entries. It is the claim of the assessee that once the purchases have been accepted and trading results is not doubted, no addition could be made towards sale by treating the same as bogus. It is an accepted fact that there were certain inquiries carried out with respect to the cash deposited in the bank accounts of M/s Shri Shiva Trading Company during the period of demonetization and during the examination, this fact is came to the surface that this firm was used for issuing bogus bills to various parties and to accommodate them for utilizing their unaccounted demonetized currency. The Revenue alleged that assessee has given its unaccounted SBN to Shri Rahul Choudhary who in turn transferred the amounts in bank accounts of the assessee though M/s Shiva Trading Company as sales consideration and later against this, sale bill was issued in the name of M/s Shiva Trading Company to square the transactions. We further seen that Shiva Trading Company is situated at Delhi and bill is made for the sale under CST Act since the assessee is at Meerut and it is an inter- state sales taken place in this transaction. It is not the claim of the assessee that goods have been received by the proprietor or authorized person or buyer i.e. Shiva Trading Company i.e. premises of the assessee rather as observed above, the transaction under was carried out as CGST sales i.e. inter-state sales therefore, it is the duty of the assessee to establish as to how the goods were transported from Delhi to Meerut. These facts have not been brought on record by the assessee. It is further seen that though the AO has not doubted the trading results declared yet doubts have been created once the Revenue has been able to establish the sales made to a particular party as bogus. Under these circumstances and in our considered view, sales as claimed by the assessee of INR 50 Lakhs to M/s. Shiva Trading Company cannot be held as genuine sales.
As observed above, AO has not doubted purchase and other details, therefore in the event, making bogus sales, assessee had tried to incorporate its unrecorded money in its books of accounts. Ld.CIT(A) while confirming the additions made, has made the following observations:-
“In the light of the above submissions and documents filed by the AR during the course of appellate proceedings and findings of the AO in the assessment order, the various grounds of appeal
are adjudicated as under: 5.1 Ground of Appeal No.
1. In this ground, the AR has contested the addition of Rs. 50,00,000/- made on account of alleged bogus sales made to Shiva Trading Co. on the basis of statement of Mr. Rahul Chaudhary. The AR has further stated that the statement of Sh. Rahul Chaudhary was not confronted to the assessee. Also, the AR has contested that the opportunity of cross-examination was not provided. During the appellate proceedings, the statement of Sh. Rahul Chaudhary was Man Mohan Aggarwal, Assessment Year 2017-18 Appeal No. CIT(A), Kanpur- 4/10437/2018-19 obtained from the AO and the copy of the same was provided to the appellant in interest of natural justice. In this case, addition was made by the AD on account of Rs. 50 lacs received from M/s. Shiva Trading Co. The assessee claims that the said credit is on account of normal sale of the business and the same has been entered in the books of accounts. On the other hand, the AO has reported that during the course of search on the premises of Shiva Trading Co., it was noticed that it is a bogus firm and only an entry provider. The AO further reported that the firm is not controlled by the proprietor i.e. Sh. Pankaj Kumar but is under control of Sh. Rahul Chaudhary whose premise was also covered under search. As per the assessment order, Sh. Rahul Chaudhary admitted in his statement that Shiva Trading Co. engaged in issuance of fake bills and the said work has been done by charging a commission of 1.5% to 2.5%. The said fact is clearly visible in the statement recorded of Sh. Rahul Chaudhary vide question no. 21 of his statement wherein, he has acknowledged that Shiva Trading Co. has issued bogus bills. Further, the AO mentioned that the cash amount of Rs. 4,18,15,000/- was deposited in the bank account No. 0519010100000772 of M/s Shiva Trading Company in the J & K Bank during the period of demonetization in F.Y. 2016-17 and money was transferred to various beneficiaries through RTGS, the assessee being one of them. Further, as per AO, the assessee in his statement recorded had admitted that he does not know M/s Shiva Trading Company and that one unknown person came to his shop for delivery of bullion gold to Shiva Trading Company. Also, as per AO, it is pertinent to mention that before demonetization, the assessee had not made any sale to M/s Shiva Trading Company. During the appellate proceedings, the AR was directed to furnish the details of mode of transport/courier of the alleged bullion sent to Shiva Trading Company. No reply for the same was furnished by the appellant. In case, there is a genuine sale, then the parties to whom the sales have been made should be identifiable, a genuine business concern should be there, someone who can confirm the said transactions and provide complete details regarding the identity and genuineness of the transactions. In the present case, the transactions in the bank account of Shiva Trading Company clearly point out to the fact that it is an entry operator, a fact which has been confirmed by Sh. Rahul Chaudhary in his statement. Also, the appellant could not furnish the mode of transport of bullion to Shiva Trading Company from the appellant. There is plethora of evidence to suggest that the transactions of the assessee concern are bogus in nature. In above scenario, the credits received by the assessee company cannot be considered as a dedition account of sale of goods, but a credit in the books of accounts which is unexplained and shall be liable to attract the provisions of Section 68. Judicial Pronouncements The Hon'ble Supreme Court of India in case of J.M.J. Essential Oil Company vs. Commissioner of Income-tax reported at [2023] 148 taxmann.com 448 (SC) [SLP dismissed against impugned order of High Court has held as under: "Where assessee-company had falled to establish genuineness of unaccounted income found in garb of cash sales in its accounts during scrutiny assessment and there was sufficient material on record to show that cash sales were fabricated, Tribunal could not have deleted additions and penalty levied under section 271(1)(c) on mere ground that sales tax authorities had accepted books of account and VAT was paid on such cash sales." Also, in a case exactly similar to the case of the assessee, the Hon'ble High Court of Gujarat in the case of Priya Blue Industries (P.) Ltd. vs. Assistant Commissioner of Income-tax reported at [2021] 130 taxmann.com 492 (Gujarat) on the issue of reopening of case u/s 148 on accommodation entries has held as under: Section 68, read with sections 147 and 148, of the Income-tax Act, 1961 Cash credit (Accommodation entries) Assessment year 2012- 13 Pursuant to scrutiny assessment Assessing Officer sought to reopen assessment in case of assessee on count that assessee was beneficiary of accommodation entries from company 'H' Assessee challenged impugned notice mainly on ground that jurisdictional facts were not established. as assessee had received amount of Rs. 1.06 crores from 'H' against sales made to said party and such sales was duly credited to its books of account and hence, revenue could not have assumed jurisdiction and reopened assessment However, it was found that exercise of reopening had been made only after due inquiries and recording of statements of concerned persons, and on having found prima facie material, impugned notice had been issued to assessee - Further, during investigation, due opportunity was given to 'H' to prove genuineness of its business transactions, however, it failed to furnish requisite documents Whether therefore, where Assessing Officer had reason to believe that income chargeable to tax had escaped assessment and basis for formation of such belief were several inquiries and investigation by Investigation Wing that there had been escapement of income of assessee from assessment because of his failure to disclose fully and truly nil material facts, reopening of assessment was justified Held, yes (Paras 6.1 and 6.3 to 6.8] [In favour of revenue) The above judgment of the Hon'ble High Court of Gujarat has been confirmed by the Hon'ble Supreme Court as the SLP stands dismissed in Priya Blue Industries (P.) Ltd. vs. Assistant Commissioner of Income-tax reported at [2022] 138 taxmann.com 69. It has also been held by the Hon'ble Supreme Court in the case of CIT vs. P. Mohanakala [2007] 161 Taxman 169 (SC) in para 14 as under: "That a bare reading of section 68 suggests that there has to be credit of amounts in the books maintained by an assessees, such credit has to be of a sum during the previous year, and the assessees offer no explanation about the nature and source of such credit found in the books; or the explanation offered by the assessees in the opinion of the Assessing Officer is not satisfactory, it is only then the sum so credited may be charged to income-tax as the income of the assessees of that previous year. The expression "the assessees offer no explanation" means where the assessees offer no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessees. It is true the opinion of the Assassing Officer for not accepting the explanation offered by the assessees as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on record The opinion of the Assessing Officer is required to be formed objectively with reference to the material available on record. Application of mind is the sine qua non for forming the opinion." Cross Examination The AR has contested that the cross-examination of the persons whose statements were recorded by the Department was not allowed to the appellant. It is not a compulsive requirement to allow cross- examination of the persons whose statements have been recorded against the assessee. The Hon'ble Supreme Court in the case of R. L. Traders vs. Income- tax Officer, Ward 47(1) reported at [2018] 100 taxmann.com 332 (SC) has held as under: "Where High Court upheld Tribunal's order rejecting assessee's application for rectification of order on ground that while making addition under section 68, assessee was not given an opportunity to cross examine person who allegedly gave accommodation entries, SLP filed against decision of High Court was to be dismissed" Further, the Ld. ITAT Bombay Bench E in the case of GTC Industries Ltd. vs. Assistant Commissioner of Income-tax reported at [1998] 65 ITD 380 (BOM), has held as under: -Whether right to cross-examine witness who made adverse report is an invariable attribute of requirement of dictum audi alteram partem Held, no- Whether where statements of witnesses were only secondary and of subordinate material used to buttress main matter connected with amount of additions, it had to be held that there was no denial of principles of natural justice if witnesses were not allowed to be cross-examined by assessee - Held, yes Further, it has been held by the Ld. Mumbai Tribunal Bench in the case of Soman Sun Citi v JCIT dated 23.10.2017 as under:- "The right of cross examination is not absolute. No prejudice is caused to the assessee by non-granting of cross examination if the assessee has not discharged the primary onus. The fact that purchase bills are produced and payment is made through banking channel is not sufficient if the other evidence is lacking" Further, the Hon'ble Supreme Court in the case of K. L. Tripathi vs. State Bank of India And Others in case reported at 1984 AIR 273 has held as under: "Therefore, in our opinion, in the manner in which the investigation was carried out as a result of which action has been taken against him cannot be condemned as bad being in violation of the principles of natural justice. Had he, however, denied any of the facts or had questioned the credibility of the persons who had given Minformation against him, then different considerations would have applied and in those circumstances, refusal to give an opportunity to cross-examine the persons giving information against him or to lead evidence on his own part to rebut the facts would have been necessary and denial of such opportunity would have been fatal. But such is not the case here as we have mentioned hereinbefore. It is true that all actions against a party which involve penal or adverse consequences must be in accordance with the principles of natural justice but whether any particular principle of natural justice would be applicable to a particular situation or the question whether there has been any infraction of the application of that principle, has to be judged, in the light of facts and circumstances of each particular case. The basic requirement is that there must be fair play in action and the decision must be arrived at in a just and objective manner with regard to the relevance of the materials and reasons. We must reiterate again that the rules of natural justice are flexible and cannot be put on any rigid formula. In order to sustain a complaint of violation of principles of natural justice on the ground of absence of opportunity of cross-examination, it has to be established that prejudice has been caused to the appellant by the procedure followed. See in this connection the observations of this Court in the case of Jankinath Sarangi v. State of Orissa. Hidayatullah, C.J., observed there at page 394 of the report "there is no doubt that if the principles of natural justice are violated and there is a gross case this Court would interfere by striking down the order of dismissal; but there are cases and cases. We have to look to what actual prejudice has been caused to a person by the supposed denial to him of a particular right." Judged by this principle, in the background of the facts and circumstances mentioned before, we are of the opinion that there has been no real prejudice caused by infraction of any particular rule of natural justice of which appellant before us complained in this case. See in this connection observations of this Court in the case of Union of India & Anr v. P.K Roy &Ors. where this Court reiterated that "the doctrine of natural justice cannot be imprisoned within the strait-jacket of a rigid formula and its application depends upon the nature of the jurisdiction conferred on the administrative authority, upon the character of the rights of the persons affected, the scheme and policy of the statute and other relevant circumstances disclosed in a particular case" See also in this connection the observations of Hidayatullah, C.J., in the case of Channabasappa Basappa Happali v. State of Mysore. In our opinion, in the background of facts and circumstances of this case, the nature of investigation conducted in which the appellant was associated, there has been no infraction of that principle. In the premises, for the reasons aforesaid, there has been in the facts and circumstances of the case, no infraction of any principle of natural justice by the absence of a formal opportunity of cross-examination Neither cross examination nor the opportunity to lead evidence by the delinquent is an integral part of all quasi- judicial adjudications." In view of the above discussion and judicial pronouncements quoted above, it is clear that the assessee has not been able to justify the identity, genuineness and credibility of the party i.e. Shiva Trading Company regarding the alleged sales made by the assessee company. The said credits cannot be accepted as credits on account of sales but credits in the books of account which are unexplained u/s 68. Accord this ground of appeal is dismissed.”
Since the assessee has re-iterated the same arguments as were made before Ld.CIT(A) who has considered each and every arguments of the assessee and thereafter, confirmed the addition made by the AO. Before us, no new / fresh argument is taken and thus looking to the facts of case, we find no infirmity in the order of Ld.CIT(A) accordingly, the addition of INR 50 Lakhs is hereby upheld. Ground of appeal No.1 raised by the assessee is accordingly, dismissed.
Ground of appeal No.2 is with respect to the addition of INR 7,82,050/- made on account of cash found during the course of search as excess.
Heard the contentions of both the parties and perused the material available on record. During the course of search carried out, total cash of INR 49,88,050/- was found at the shop of the assessee as against which the case of INR 2,05,306/- was available as per books of accounts. The assessee deposited INR 40 Lakhs under PMGKY (“Pradhan Mantri Garib Kalyan Yojana”) scheme and claimed that the remaining amount of INR 7,82,050/- [INR 49,88,050/- (-) INR 40,00,000/- (-) INR 2,05,306/-] as pertaining to M/s. J.S. Jewellers firm of the proprietorship of the son of the assessee, Shri Mayur Agarwal and in support of the same an affidavit of Shri Mayur Agarwal was also filed. It was the claim of the assessee that this cash was of M/s. J.S. Jewellers and once this fact is admitted by Shri Mayur Agarwal in his affidavit, no addition is required to be made. After considering the submissions and affidavit of Shri Mayur Agarwal, we find that the AO has disbelieved the affidavit solely for the reason that it was submitted that after few months of search, this fact was never disclosed. After considering the facts, we find force in the arguments of Ld.AR that assessee has already offered the excess cash of INR 40 Lakhs under PMGKY scheme and confirmatory affidavit of the son of the assessee who claimed the said cash as belong to him. Under these circumstances, we hereby direct the AO to delete the addition of INR 7,82,050/-. Ground of appeal No.2 filed by the assessee is accordingly, allowed.
Ground of appeal No.3 raised by the assessee of INR 1,38,000/- is with regard to the action of AO in treating the cash found as unexplained income.
Heard the contentions of both the parties and perused the material available on record. Assessee’s claim was that cash belong to various family members i.e. his mother, wife and daughter in law was found at the residence and their assessments were completed by the same AO and no adverse inference was taken with respect to such cash in their hands though they have shown this cash as their cash in hand. All of them have filed an affidavit duly confirming on oath the fact that the said cash was their cash in hand. It is also a matter of fact that this cash was found from the residence of the assessee where all the family members were residing and Revenue has not stated how much cash was found from the possession of each individual. It is further seen that this cash of INR 1,38,000/- in currency notes of INR 2,000/- which was issued after demonetization. A search was carried out on 18.01.2017 i.e. after the demonetization therefore, the available with the cash of the family members in new currency cannot be doubted. Accordingly, we hereby delete addition of INR 1,38,000/-. Ground of appeal No.3 raised by the assessee is accordingly, allowed.
Ground of appeal No.4 is with respect to the addition of INR 30,91,145/- made on account of excess stock of gold jewellery.
Brief facts leading to this ground is that during the course of search, total stock of gold bullion and jewellery was found and inventoried according to which 19401.16 Gram of gold jewellery and bullion was found which was valued at INR 4,37,84,830/- by the registered valuer at the time of search. As per the assessee books of accounts, stock of gold/bullion as on the date of search was of 18,031.463 gms and the difference of 1369.697 gms is held as excess stock and addition of Rs. 30,91,145/- is made for the same.
Before us, Ld.AR submits that this excess stock contained 913.16 gram of jewellery of M/s. J.S. Jewellers, a proprietary firm of assessee’s son and balance difference of 456.56 gram is on account of approximation. He submits that the assessee has maintained daily stock register and stock was duly recorded. During the course of search, the weight was taken by the registered valuer wherein weight related to impurity and other material were included in the total weight of jewellery found which fact has not been considered by the AO and addition was made. He further submits that assessee’s son is doing jewellery business under the name and style of M/s. J.S. Jewellers and at the end of the day, he used to keep majority of stock in the locker at father’s shop for safety purposes. As per ld. AR, AO has made no inquiry in the case of Shri Mayur Agarwal and made the addition by holding the excess stock as related to the assessee. He further submits that Shri Mayur Agarwal has filed an affidavit duly confirming these facts and his assessment was also completed by the same AO where this stock is assessed as claimed to be belonging to Shri Mayur Agarwal and thus, the necessary credit for the same should be given out of the total stock found with the assessee at the time of search. He, therefore, prayed for the deletion of the addition made.
On the other hand, Ld. Sr. DR for the Revenue submits that the AO has considered all the aspects and claims of the assessee and thereafter, held the stock found as excess as unexplained. He further submits that the assessee during the course of search has denied the fact of having stock of any other person at his business premises and based on such admission only of the assessee, claim that the stock pertain to his son were lying with the assessee was denied. He thus submits that the addition made deserves to be upheld.
Heard the contentions of both the parties and perused the material available on record. During the course of search, the stock available at the business premises of the assessee was quantified and valued by the approved valuer who quantified the net weight of the total stock of 19401.16 Grams which includes fine bullion of 1500 Grams. As per the books of accounts of the assessee, the total stock available was of 18.03146 Gram which comprises of 17031.481 Gram of gold jewellery and 1000 Gram of bullion. The assessee claimed that 913.16 Gram jewellery related to M/s. J.S. Jewellers, proprietorship firm of Shri Mayur Agarwal. An affidavit of Shri Mayur Agarwal confirming these facts was also filed. It is further seen that AO has not made any enquiry from Shri Mayur Agarwal though his case was also before the same AO. The financial statements of M/s. J.S. Jewellers were also filed before us according to which he has made total sale of INR 1.51 crores during the year and disclosed the stock of INR 40 Lakhs in the Balance Sheet. Looking to these facts and material available on record, we find that since the assessee has locker in his shop therefore, it is quite normal that the son of the assessee kept his stock in the said locker for the safe custody. Accordingly, we hereby allow credit of 913.160 Gram jewellery as related to Shri Mayur Agarwal and direct the AO to delete this addition to this extent.
Now coming to the remaining balance of 456.537 Gram, the approved valuer in its report has allowed the concession of the impurity etc. from the gross weight and only net weight quantity is taken by the AO for computing excess the stock therefore, the claim of the assessee of approximation cannot be accepted. It is further seen that as per the stock inventory prepared by registered valuer at the time of search which is reproduced at page 7 of the assessment order, fine gold was available at 1500.000 Gram with the assessee. As against which as per stock summary as on the date of search as per books of accounts of assessee which is reproduced at page 8 of the assessment order, assessee has stock of “bullion gold” of 1,000.000 Gram therefore, there was an excess stock of 500 Gram of bullion gold which is very close to the remaining quantity of 456.537 Gram found in excess with the assessee. Therefore, we uphold the addition to this extent. Ground of appeal No.4 raised by the assessee is accordingly, partly allowed.
Ground of appeal No.5 raised by the assessee is with respect to the addition of INR 82,000/- made on account of excess stock of silver ornaments found during the course of search.
Heard the contentions of both the parties and perused the material available on record. The total stock of silver and silver article was found at of 62144 Gram (net weight) as against which as per the books of accounts, the net weight of 58685.990 Gram was available in the books of accounts. Accordingly, AO has made the addition of differential stock of 3428 Gram as excess and unexplained. From the perusal of inventory sheet prepared at the time of search by the registered valuer, as reproduced at page 9 of the assessment order, Silver bullion of 14110 Gram was available with the assessee as on the date of search as against which silver bullion of 13,851.450 gms was available in the books of accounts. Besides this, silver article of 48004.000 Gram was physically available as against stock of 44834.50 Gram. The assessee’s claim was that silver article of 4000 Gram related to Shri Mayur Agarwal i.e. the son of the assessee was also available. Looking to the overall facts and circumstances of the case, we find that assessee has been able to explain the difference as pertaining to his son for which the AO has made no inquiry. In view of these facts, we hereby direct the AO delete the addition of INR 82,000/-. Ground of appeal No.5 raised by the assessee is accordingly, allowed.
Ground of appeal No.6 is with respect to the addition of INR 18.00 Lakhs made on account of loose paper found during the course of search titled as “LP-1” at page 55 containing the details of the amount contributed by the assessee towards the monthly lottery which was held as unexplained investment by the AO u/s 69A of the Act.
26. Before us, Ld.AR submits that this paper contained the details of monthly contribution made by the assessee and the details of each lottery when it is started and for how many months, it will go with monthly contribution. As per the assessee, the amounts were invested out of income declared under IDS-2016 where total income of INR 1,22,64,529/- was disclosed for AY 2016-17. Besides this, the assessee further made declaration under PMGKY of INR 40 Lakhs and therefore, investment made of INR 18.60 Lakhs in the year under appeal is duly supported by such additional income declared and thus, no further addition is required to be made. He therefore, prayed that sufficient income was disclosed therefore, the addition made be deleted. In support, necessary copies of declaration made under PMGKY scheme and IDS-2016 were also filed which are available in the Paper Book.
27. On the other hand, Ld. Sr.DR supports the order of the lower authorities and submits that assessee has failed to establish the nexus of income declared between IDS 2016 and PMGKY with the entries found noted in the loose papers which clearly suggests that assessee has given the amounts found noted in the said paper as loan out of his unexplained/undisclosed income and therefore, addition has rightly been made by the lower authorities. He thus, prayed for the confirmation of the same.
28. Heard the contentions of both the parties and perused the material available on record. From the perusal of the facts, it is seen that assessee has made declaration under IDS-2016 of INR 1,22,64,529/- wherein income of INR 25.00 Lakhs each was declared for AYs 2012-13 to 2015-16 totaling to Rs. 1.00 crores and INR 22,64,529/- was declared for year 2016-17. As per the certification in Form No.4, this amount is shown as an additional income declared. Further from the perusal of the form filed under PMGKY as available in page 235, it is seen that assessee has declared cash of INR 40 Lakhs out of which INR 10 Lakhs were deposited in FDR and tax was paid as per the scheme. The claim of the assessee is that these amounts were the immediate source of the amounts appearing in page 55 of Annexure LP-1. From the perusal of the entries contained in the said loose paper, we find that INR 1.50 Lakh was paid on 05.11.2014 for 15 months, INR 3 Lakhs paid on 05.01.2015 for 12 months, INR 1.50 Lakhs was paid on 10.09.2014 for 15 months, INR 9 Lakhs was paid on 25.06.2015 for 12 months and INR 60,000/- on 20.02.2015 for 12 months. The year under appeal before us is AY 2017-18 relevant to 2016-17 and from none of the entries appearing on the said page was falling under the previous year relevant to year under appeal therefore, the same cannot be treated as the loans given by the assessee during the year under appeal. With respect to the observations of the AO that these amounts are the lottery receipt, even it is considered that these are lottery, receipts we find that except INR 9 Lakhs given on 25.06.2015 for a period of 12 months, none of the other amount was matured in the year under appeal and were matured in preceding years. Further, the assessee has already made the disclosure of cash of INR 40 Lakhs in PMGKY which was not alleged as applied somewhere else by the AO therefore, it could be safely presumed that the receipt of INR 9 Lakhs at the time of completion of the lottery as received during the year is part of the amount as already disclosed under PMGKY. Accordingly, in view of these facts and in our considered opinion, the assessee has been able to substantiate the amounts noted in the paper out of the income decaled under PMKGY and IDS-2016 and accordingly, addition of INR 18,16,000/- is hereby, deleted.
Ground of appeal No.7 raised by the assessee is general in nature, needs no separate adjudication hence, dismissed.
In the result, appeal of the assessee is partly allowed.
Order pronounced in the open Court on 30.09.2025.