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Income Tax Appellate Tribunal, DELHI BENCH: A NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI NAVEEN CHANDRA
Assessment Year: 2016-17 Vs. Sh. Pawan Kumar Agarwal, ITO, Ward-17(1), A-4/2, Rana Pratap Bagh, New Delhi New Delhi PAN: ADUPA9815A (Appellant) (Respondent) Assessee by Sh. Satish Agarwal, CA Ms. Anju Sharma, CA Department by Sh. Jitender Singh, CIT(DR) Date of hearing 20.08.2025 Date of pronouncement 22.09.2025 ORDER PER SATBEER SINGH GODARA, JM These assessee’s and Revenue’s cross appeals and arise against the Commissioner of Income Tax (Appeals)-29 [in short, the “CIT(A)”], New Delhi’s order dated 19.10.2023 passed in case No. CIT(A), Delhi-12 10347/2017-18, involving proceedings under section 143(3) r.w.s. 153A of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). Heard both the parties at length. Case files perused.
2. This assessee’s appeal pleads the following substantive grounds: 1) That the order of the Learned Commissioner of Income Tax (Appeals)- 29, is arbitrary, biased and bad in law and facts of the case in so far as it confirms the additions made by the Assessing Officer. 2) That the Learned Commissioner of Income Tax (Appeals) has grossly erred in confirming the additions of Rs. 1.50 crores under section 69A as income from un-disclosed sources being the amount kept in the safe custody of Sh. Vinod on incorrect appreciation of the explanation offered by the assessee which addition is not sustainable in law and facts of the case. 3) That the Learned Commissioner of Income Tax has grossly erred in holding that the addition of Rs. 1.27 Crores made by the Assessing Officer for unexplained stock since belonged to M/s. HP and Sons be considered in the hands of M/s. H P and Sons ignoring the requisite documentary evidences filed explaining the availability of stock with M/s. H P and Sons after having deleted the substantive addition in the hands of the assessee. 4) That the Learned Commissioner of Income Tax has grossly erred in directing the department to examine on substantive basis the addition of Rs. 1,54,48,608/-made under section 69A r.w.s. 115BBE for the stock of 6 kg gold in the hands of M/s. HP and Sons after deleting the same in the hands of the appellant ignoring requisite documentary evidences filed in support of the claim of the stock found from the seized premises belonging to M/s. HP and Sons which was also operating from the same premises at the time of search.
The Revenue’s cross appeal 1. That the order of the Ld. CIT(A) is factually incorrect in deleting the addition made by the AO of Rs.3,32,00,000/- on a/c of unexplained cash found from the assessee office premises and he could not furnish the relevant details and supporting documents is support of his claim. During the course of search proceedings as well as assessment proceeding, assessee could not produce the five persons from whom the cash was received.
2. That the Ld. CIT(A) has erred in deleting the addition made on unaccounted stock in the form of 6 Kg gold valued of Rs. 1,54,48,608/- found from the assessee premises and they could not explain the source of purchases of such Gold stock.
3. That the Ld. CIT(A) has erred in deleting the addition made on a/c of Hedging loss of Rs. 22,48,580/-, Hedging loss is speculative in nature and it is not allowed to set off against the non-speculative profit.
That the Ld. CIT(A) has erred in deleting the addition made on a/c of GP rate taken 0.39%.
4. We now advert to the basic relevant facts the assessee herein Mr. Pawan Kumar Agarwal happens to be the proprietor of M/s. Supreme Gold engaged in gold and silver bullion trading. He had declared loss of Rs.3,24,35,766/- in his return filed on 17.10.2016 which stood processed. The department thereafter conducted a survey at his business premises on 20th July, 2015 wherein it allegedly found a partnership in the name and style of M/s. H P & Sons having partners Sh. Harsh Aggarwal and Sh. Pulkit Aggarwal (assessee’s sons) carrying out its business activity at his premises. It also appears to have found/seized cash of Rs.4,78,50,000/- along with the other alleged incriminating material. This made the 3 | P a g e learned departmental authorities to convert the foregoing survey to a search action which finally culminated in section 143(3) assessment framed in the assessee’s case on 31.12.2017 inter alia adding the cash seized of Rs.4,78,50,000/-; GP addition of Rs.33,14,59,946/- and disallowance of hedging loss of Rs.22,48,580/- in question. Learned CIT(A) on the other hand has granted part relief to the assessee which leaves both these parties aggrieved who have filed their respective cross appeals before the tribunal.
It is in this factual backdrop that we first of all advert to the learned CIT(A)’s detailed discussion partly upholding the Assessing Officer’s action adding the above cash seized of Rs.7,78,50,000/- reading as under: “Findings: 3.4 From the facts of the case it is seen that a cash of Rs. 4,78,50,000/-was found at the premises of M/S Supreme Gold during the course of search. During the course of search, the statements of employees of appellant, Sh. Pintoo Dubey, Sh. Halash Yadav and also the Appellant were recorded. In his statement, the employee Sh. Pintoo Dubey stated the cash at Rs. 1.50 Cr to be received from Sh. Vinod as an advance while the remaining cash was stated to be received from four parties from the sale of gold. However the date of sale and quantative sold is not clear from statement. Another employee, Sh. Halash Yadav in his statement confirmed that he brought the cash of Rs. 1.50 Cr from Sh. Vinod. 3.4.1 The statement on oath of the appellant was also recorded during the course of search. When questioned about the source of cash, appellant had stated on oath that out of the total cash found at Rs. 4,78,50,000/ on the date of search, i.e 20.07.2015, the cash of Rs. 1.50 Cr. was a part of sale proceeds of retail sale of gold by M/s HP 4 | P a g e & Sons in Jaipur branch. As per his version, this amount of Rs. 1.50 Cr was given to Sh. Vinod by him to hand over the amount at his shop as that time his shop was closed. Appellant has further stated that Rs. 1.25 Cr. was out of sale proceeds of M/s HP & Sons and pertained to the cash-in-hand of M/s HP and sons. Further, Rs. 2.015 Cr. was cash in hand of his own concern M/s Supreme Gold. 3.5 The same stand was maintained during the course of assessment and appellate proceedings by the appellant in respect of the cash found during the search. In support of his claims, he has submitted a copy of the cash book and stock register of M/s HP and Sons and of his own concern M/s Supreme Gold. The explanation provided by the appellant for the total cash found is summarized as under: S.No. Explanation of cash found Amount (in INR) 1. Cash in hand of INR 2.77 crores of M/s. 2.77 Cr. H.P. and Sons, partnership firm constituted by two sons of the Appellant.
Received from Mr. Vinod to whom the (1.50 Cr.) Appellant handed over the cash in morning on 20.07.2015 while going to Jaipur for delivery at Appellants premise to be deposited in bank account of M/s. H.P and Sons. The same was generated via sales made by M/s. H.P and Sons on 17.07.2015. b. Sale proceeds of cash sale of bullion (1.27 Cr.) amounting to INR 1,25,49,093/- inclusive of VAT on the date of search i.e. 20-07-2015 and brought forward cash in hand as per cash book.
2. Out of sale proceeds of cash sale of 2.015 Cr. bullion by proprietorship concern of the Appellant on 17.07.2015. The aforesaid sum was a part of the Cash-in-Hand. Total 4.78 Cr. 3.6 Thus out of the total cash found at 4.78 Cr. found during the course of search/survey, appellant has claimed that Rs. 2.015 Cr. is generated out of the sale proceeds in cash made by its concern M/s Supreme Gold till 17.07.2015. Appellant has contended that its statements were recorded on the date of survey/search and it had explained the source of cash found at premise as under:
6 | P a g e 3.7 During the course of appellate proceedings, the appellant had submitted a copy of cash book in support of the cash in hand indicating that the closing cash in hand as on 17.07.2015 was 2,11,30,357/-. Appellant had also provided a quantitative tally of the stock in his concern M/s Supreme Gold. From the perusal of stock register, it is seen that on 15.07.2015, a purchase of 22,000 gms. of gold has been made, further, on 17.07.2015, purchase of 15,000 gms. of gold has been made. Appellant has submitted a copy of invoices dated 15.07.2015 and 17.07.2015 raised by HHEC and copy of delivery challans dated 15.07.2015 and 17.07.2015 in support of his claim which were forwarded to AO for examination under Rule 46A. This amount of purchase also seems to tally with the details gathered during the survey as observed from the statement of appellant recorded during the course of survey as under:
3.8 The purchase of 37 Kg. of gold by the appellant seems to be established. From the quantitative details of stock submitted in appellate proceedings, it is seen that the entire stock of gold was sold between 15.07.2015 and 17.07.2015. This seems to be aligned with the Question No. 25 in the statement recorded above. 3.9 It was further contested by the appellant that VAT is being charged on all the sales. Appellant has also contested that around 90% of the purchases are made from HHEC and other Government Agencies and thus the element of bogus purchases/inflated purchases is majorly ruled out. Thus appellant has claimed that the cash found on 20.07.2015 was cash-in-hand generated out of the sale proceeds of this stock of gold. 3.10 I have perused the facts of the case and the above submissions of the appellant and the remand report by the AO thereon. Since the purchases are from a verifiable source and are backed by delivery 7 | P a g e challans, they cannot be disregarded. During the course of survey this stock of 37 Kgs. Gold purchased was not physically found, indicating thereby that it was already sold. In the statement recorded during survey and afterwards also, the appellant has claimed the source of cash of Rs. 2.05 Cr found during survey to be the cash-in-hand from sale proceeds of his concern. No comments have been given in the assessment order on this contention of the appellant. Thus the source of Rs. 2.05 Cr. out of total cash of Rs. 4.78 Cr. being cash sales of the appellant seems to be believable as cash in hand generated from sale proceeds of appellant concern. 3.11 Appellant has further claimed that Rs. 1.27 Cr. was the cash-in- hand of the concern M/s HP & Sons, 303/1185, Kucha Mahajani, Chandni Chowk, Delhi, which is a partnership concern of Sh. Harsh agarwal and Sh. Pulkit agarwal (both are sons of Sh. Pawan Kumar Agarwal). A copy of stock register and sales ledger and audited balance sheet of M/s HP and sons has also been submitted by the appellant in support of the same. In the assessment order, AO has noted on Pg. 1 that M/s HP & Sons which is also carrying out of business activity from the same premise is a concern of Sh. Harsh Agarwal and Sh. Pulkit Agarwal, both being sons of Sh. Pawan Kumar Agarwal. The relevant extract from page 1 of the assessment order is reproduced as under:
3.12 Since M/s HP & Sons is a separate assessable entity, carrying out its business at the same premises and since ownership of this cash has been claimed by it. the explanation regarding the source of this cash and consequent addition, has to be examined in the hands of HP and Sons since it has been found to be operating from same premises. No evidence or observation contrary to the statement of the appellant regarding ownership of cash with M/s HP & Sons has been brought on records during the course of assessment proceedings and remand proceedings. Therefore, the addition of cash on a substantive basis can only be made in the hands of M/s HP & Sons after considering the explanation offered by it and not in the hands of the appellant. The addition made at Rs. 1.27 Cr. in the hands of appellant is accordingly not sustainable and is deleted
8 | P a g e 3.13 Regarding the remaining cash of 1.50 Cr, appellant has claimed it to be generated from sales of Jaipur branch of M/s HP and sons and was handed over to Sh. Vinod for safe custody. During the course of assessment proceedings, or even during the remand and appellate proceedings, no evidences were filed in support of this contention. Sh. Vinod has not been produced for examination or his particulars revealed for verification by AO. Under these circumstances the explanation regarding cash of 1.50 Cr is not convincing and acceptable. Accordingly, addition made a Rs. 1.50 Cr. u/s 69A being income earned from undisclosed sources by the appellant, is hereby confirmed out of the total addition made on account of unexplained cash.
We next notice that the assessee herein has raised its three substantive grounds seeking to reverse section 69A addition of Rs. 1.5 crores representing the amount allegedly kept in the safe custody of Sh. Vinod, unexplained stock of Rs.1.27 crores which has been directed to be subsequently added in the hands of M/s HP & Sons and the last addition of Rs.1,54,48,608/- in issue also directed to be taxed in M/s. HP & Sons’ hands respectively.
The Revenue’s former twin substantive grounds on the other hand also raise the very issue that the CIT(A) has erred in law and on facts in deleting the unexplained cash addition of Rs. 3,32,00,000/- and alleged unaccounted stock representing 6 kg gold of Rs.1,54,48,608/- respectively.
Now come the assessee’s first and foremost substantive ground seeking to delete the addition amount of Rs.1.5 crores
9 | P a g e added under section 69A of the Act. After having vehemently argued for quite some time against both the lower authorities’ respective findings, learned counsel could hardly rebut the clinching factual position emerging from the case records that the impugned sum represent the assessee’s business sales in gold and silver bullion trading etc. which could neither be treated as duly explained nor be added in entirety as per the Revenue’s stand, as the case may be. We wish to emphasize here that both the learned lower authorities have discussed the entire overwhelming supportive material at length to reject the assessee’s explanation seeking to delete the impugned addition in principle. The fact also remains that the impugned entire addition could not be added as unexplained once it is prima facie found to be part of the assessee’s business turnover though neither reconciled nor successfully verified before both the learned lower authorities. We therefore deem it appropriate in this factual backdrop that a lumpsum GP addition @ 10%; coming to Rs.15 lakhs only, would be just and proper with a rider that the same shall not be treated as a precedent. The assessee gets relief of Rs.1.35 crores in other words. Necessary computation shall follow as per law.
Coming to the assessee’s latter twin substantive grounds of unexplained stock and 6 kg. gold involving Rs.1.27 crores and Rs.1,54,48,608/-; respectively, learned counsel could hardly dispute that the CIT(A) herein has very fairly directed the same to be assessed in the name of M/s. HP & Sons (supra). Meaning thereby, that the assessee herein Sh. Pawan Kumar Agarwal has already been granted relief on both these issues in the CIT(A)’s lower appellate findings. That being the case, we find no merit in the assessee’s instant latter twin substantive grounds which are rejected in very terms. This assessee’s appeal is partly allowed.
Next comes the Revenue’s former twin substantive grounds seeking to revive unexplained cash or Rs.3.32 crores and 6 kg gold value of Rs.1,54,58,608/-; respectively. Learned CIT(DR) could hardly dispute that the CIT(A)’s above extracted detailed discussion has already considered the entire relevant facts whilst accepting the assessee’s explanation of having filed entire detailed evidence regarding purchase of 37 Kg gold as emanating from the case records. This is indeed coupled with the fact that he has further directed the Assessing Officer to assess M/s. HP & Sons qua the 11 | P a g e remaining sums of Rs.1.27 crores wherein the department could hardly be treated as an aggrieved against the said findings. The very factual position continues for the second issue herein of Rs.1,54,48,608/- as well which has also been directed to be assessed in the hands of M/s. HP & Sons. We thus reject the Revenue’s instant former twin substantive grounds in very terms therefore.
The outcome would be hardly any different in the Revenue’s third/last substantive ground seeking to revive hedging loss of Rs.22,48,580/- made in the course of assessment and deleted in the lower appellate discussion. This is for the precise reason that even the learned Assessing Officer’s remand report filed in the lower appellate proceedings has taken on record the assessee’s supportive evidence including the relevant contract notes etc. thereby proving the above loss as a not speculative transaction under section 43(5) of the Act. That being the case, we hereby reject the Revenue’s instant third substantive ground as well in very terms. No other ground or argument has been pressed before us.