Official Judicial Order
Verbatim JudgmentPER: RATHOD KAMLESH JAYANTBHAI, AM By way of present appeal the assessee - appellant challenges the order of the Commissioner of Income Tax (Appeals), Jaipur -4 dated 31/07/2025 [here in after ld. CIT(A)] for assessment year 2019-20. The said order of the ld. CIT(A) arises as against the order dated 15.04.2021 passed under section 143(3) of the Income Tax Act, 1961 by ACIT, Central Circle-
02, Jaipur [ for short AO].
Sunil Kumar Gattani vs. ACIT
2. In this appeal, the assessee has raised following grounds: -
1. On the facts and in the circumstances of the case and in law, ld. CIT(A) has grossly erred in confirming the action of ld. AO in observing that "A search and seizure actionu/s 132 of the Income Tax Act, 1961 ("the Act") was carried out by the Income Tax Department on the members of the Oswal Soap Group on 06-09-2018 of which assessee is one of the members." Appellant prays that such observation of ld.AO is contrary to the facts and deserves to be ignored and excluded.
2. On the facts and in the circumstances of the case and in law, ld. CIT(A) has grossly erred in confirming the action of ld. AO in making addition of Rs.
1,56,15,565/- on account of cash found during the course of search (from business and residential premises of the assessee) u/s 69A of the Income Tax Act,1961 arbitrarily.
2.1 That, ld. CIT(A) further erred in confirming the action of ld. AO in making addition of Rs.1,56,15,565/- u/s 69A by brushing aside the submission made and facts on record that the cash found basically represented additional income of assessee from Finance brokerage (i.e. income from routine business income) as admitted by assessee in statements recordedu/s 132(4) itself.
2.2 On the facts and in the circumstances of the case and in law, ld. CIT(A) has grossly erred in confirming the action of ld. AO in invoking the provisions of section 115BBE in respect of Cash found during the course of search by making additionu/s 69A. Appellant prays that cash found during the course of search represents accumulated business income and does not amount to undisclosed money in terms of section 69A, thus provisions of section 115BBE are not applicable.
3 On the facts and in the circumstances of the case and in law, ld. CIT(A) has grossly erred in confirming the action of ld. AO in making addition of Rs.99,29,064/- on account of jewellery found during the course of searchu/s 69 of the Income Tax Act, arbitrarily.
3.1 That, ld. CIT(A) further erred in confirming the action of ld. AO in making addition on account of Jewellery found during the course of search, by grossly ignoring the submission made and evidences adduced that assessee had already declared such jewellery in VDIS 1997.
Sunil Kumar Gattani vs. ACIT 3.2 That, ld. CIT(A) has further erred in confirming the action of ld. AO in making addition of Rs.99,29,064/- by grossly ignoring the fact that soon after the completion of search, assessee had filed retraction in respect of surrender obtained from him on account of jewellery alongwith documentary evidences. Moreover, no query whatsoever was made from assessee in this regard, in post search statements recordedu/s 131. Appellant prays that jewellery found during the course of search is fully explained and acquired by assessee out of disclosed sources of income and thus consequent addition deserves to be deleted.
4. On the facts and in the circumstances of the case and in law, ld. CIT(A) has grossly erred in confirming the action of ld. AO in invoking the provisions of section 115BBE in respect of addition made on account of jewellery found during the course of search, arbitrarily.
5. On the facts and in the circumstances of the case and in law, ld. CIT(A) has erred in confirming the action of ld. AO in making addition of Rs.1069/- in the hands of assessee by solely relying upon some stray documents found and seized from the premises of third party, entries wherein were recorded in the absence of assessee, and also on statements of third parties recorded behind the back of assessee, Appellant prays that no liability can be fastened upon the assessee on the basis of such information recorded in documents found at third party premises, thus the impugned Assessment Order passed in the backdrop of such illegality deserves to be quashed and the consequent addition be deleted.
5.1. On the facts and in the circumstances of the case and in law, ld. CIT(A) has erred in confirming the action of ld. AO in making addition in the hands of assessee without even allowing the opportunity of cross examination of such third parties. Appellant prays that such action of ld. CIT(A) as well as ld. AO is against the principles of natural justice and consequent order deserves to be quashed.
5.2 That, ld. CIT(A) has further erred in confirming the action of ld. AO in in making addition of Rs.1069/- in the hands of assessee on presumption that assessee has rotated the funds of M/s Uttam Chand Deshraj and by further presuming that assessee might have received commission on funds so rotated. Appellant prays that assessee was engaged in the genuine business of finance broking, income from which is duly recorded in books of accounts and addition made by ld. AO on assumptions and presumptions deserves to be deleted.
Sunil Kumar Gattani vs. ACIT 5.3 That, ld. CIT(A) has erred in confirming the action of ld. AO in computing alleged undisclosed brokerage even on the principal amount of loan given/received back by M/s Uttam Chand group. Appellant prays that it is a common practice that brokerage is always paid by borrower as a percentage of interest paid and not on the principal amount of loan and therefore notional brokerage computed by ld.AO in not in accordance with law and practice.
5.4 That, ld. CIT(A) has erred in confirming the action of ld. AO in making addition of Rs.1069/- on Notional basis, when no such income was actually received by assessee. Appellant prays that such action of ld. CIT(A) is against the principle of taxation that only "Real Income" can be taxed and therefore addition made deserves to be deleted.
6. That the appellant craves the right to add, delete, amend or abandon any of the grounds of appeal either before or at the time of hearing of appeal.
2.1 The assessee vide application dated 08.10.2025 also filed a prayer to admit the additional grounds of appeal which reads as under : -
7. On the facts and in the circumstances of the case and in law, order passed by ld.AOu/s 143(3), is bad in law, being passed without following the relevant provisions of the Income Tax Act, Circulars, Notifications etc. issued by CBDT from time to time.
7.1. That, assessment proceedings have been completed without issuance of noticeu/s 143(2), which is sine qua non for assuming valid jurisdiction by ld.AO, it is therefore prayed that assessment order so passed is void ab initio.
7.2. That, approval granted by ld. JCITu/s 153D is mechanical one and without application of mind and therefore assessment order so passed is bad in law and deserves to be quashed.
The assessee submitted that these grounds are legal grounds of appeal, which goes to the root of the matter and considering the decision of the Apex Court in the case of NTPC the same are admitted.
Sunil Kumar Gattani vs. ACIT
3. Succinctly, the fact as culled out from the records is that a search and seizure actionu/s 132 of the Income Tax Act, 1961 ("the Act") was carried out by the Income Tax Department on the members of the Oswal Soap Group on 06-09-2018 of which assessee is one of the members. The jurisdiction over the case was assigned to Central Circle 2, Jaipur by the Pr. Commissioner of Income Tax, Jaipur-II, Jaipur by means of an orderu/s 127 of the Act dated 23.05.2019. The assessee filed a return of income for the year under consideration declaring a total income at Rs.86,54,370/- on 29.09.2020. Statutory notice as required under the law were issued and served upon the assessee. Information and details pertaining to the case of the assessee relevant to assessment of his income were called foru/s 142(1) of the Act by means of a questionnaire and/or Order Sheet Entries wherever deemed fit. Ld. AO verified the information so furnished examined on a test-check basis and placed on record. The assessee primarily derives his income from Business and Other sources. During the course of search proceedings at 14, Keshav Nagar, Civil Lines, Jaipur cash of Rs.33,65,565/- was found and cash of Rs.33,00,000/- was seized.
During the course of the search operation, statements of Shri Sunil Gattani were recorded. During the course of search proceeding, Shri Sunil Gattani was unable to produce any documentary evidences in support of cash Sunil Kumar Gattani vs. ACIT found of Rs. 33,65,565/- from his residence. In his statement in reply to Q.No. 6. Shri Sunil Gattani has accepted Rs. 33,00,000/- as his undisclosed income and Rs. 65,565/- his saving. He has also surrendered Rs. 33,00,000/- for the current financial year 2018-19 as his undisclosed income. While search proceedings at business premises of assessee at 947, Mishra Bhawan, Chaura Rasta, Jaipur, cash of Rs. 1,22.50,000/- was found and cash of Rs. 1,22,50,000/-seized. The assessee could not explain the source of this cash found of Rs. 1,22.50,000/-. Thus, while in assessment proceeding the assessee was asked to furnish the source of cash of Rs.1,56,15,565/- (12250000 plus 33,65,565/-) and to get the same verified from his regular books of accounts along with corroborative documentary evidence and was also asked to show cause why this amount of Rs.1,56,15,565/- should not be considered as his undisclosed income for the year under consideration. The assessee vide his submission dated 11.03.2021 submitted that out of that amount of Rs. 65,565/- to be considered as the savings of the family over a period of time and balance amount of Rs. 1,55,00,000/- was offered as income from finance brokerage income business of the assessee and the same was offered as income for A. Y. 2019-20. Ld. AO considered the submission of the assessee and noted that the assessee has himself offered majority of cash found from his Sunil Kumar Gattani vs. ACIT residence and business premises i.e. Rs.1,55,50,000/- and accepted the same as his income from brokerage business. Though no evidence has been brought on record to substantiate the fact that the cash was actually generated from his unaccounted business. Ld. AO also noted that no proof regarding Rs.65,565/- belonging to saving of his family members has been furnished by the assessee. Therefore, the assessee is merely trying to cover his undisclosed income in garb of brokerage income to avoid penal provisions. As assessee has himself accepted cash found of Rs.1,55,50,000/- as his undisclosed income and he has not furnished any proof regarding source of balance Rs. 65,565/-. An amount of Rs.1,56,15,565/- was to the total income of the assesseeu/s 69A of the Act.
While search operation at the residence of assessee Gold Jewellery of net weight 3956.540 gm (value- Rs. 1,54,56,694/-) and Silver items of net weight 23064 gm (value- Rs. 7,27,845/-) was found from his residence.
As the assessee was unable to explain the source of jewellery found from his residence with documentary evidences. Moreover, the bills which are the part of the seized documents as per annexure AS exhibit 1 page no. 45 to 57 do not match with the jewellery found from his residence. Hence, the credit of the same was not allowed during the course of search Sunil Kumar Gattani vs. ACIT proceedings and excess jewellery amounting to Rs. 99,29,064/- was seized during the course of search proceedings considering investment from undisclosed income. Shri Sunil Gattani has also surrendered the undisclosed income of Rs. 83,92,594/- as investment in jewellery for the current financial year i.e. 2018-19 during the course of search proceedings.
During the post search investigation, Shri Sunil Gattani could not produce any documentary evidence in support of excess jewellery seized.
Therefore, during the course of assessment proceedings the assessee was asked to produce source of excess jewellery found at his residential premises which the assessee could not. Therefore, ld. AO noted that since the investment was not recorded in the books of the assessee, it clearly falls under the provisions of section 69A of the Act as the assessee has not offered any explanation to the satisfaction of AO even after providing many opportunities of being heard. Therefore, an amount of Rs. 99,29,064/- was being added to the total income of the assesseeu/s. 69A of the Act, being the undisclosed investment from the unknown sources for the year under consideration.
Ld. AO also added a sum of Rs. 1069/- as income of commission on cash loan routed through himu/s 69 of the Act.
Sunil Kumar Gattani vs. ACIT
4. Aggrieved from the order of Assessing Officer, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below:
4.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-
The fact of the case is that a search and seizure actionu/s 132 of the Income Tax Act, 1961 was carried out in the case of Oswal Group on 06.09.2018. A search was also carried out at the residential and business premises of appellant. During search in the case of Uttam Chand Deshraj, certaining incriminating documents relating to loan advanced by him through finance brokers were found and the appellant is one of them. In view of same, the appellant's contention has no merit, hence rejected.
Accordingly, this ground of appeal is dismissed.
5.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-
The fact of the case is that a search and seizure action under section 132 of the Income Tax Act, 1961 was carried out in the case of Oswal Soap Group on
06.09.2018.
During search action at 14, Keshav Nagar, Civil Lines, Jaipur, the residence of the appellant, cash of Rs. 33,65,565/- was found cash of Rs.33,00,000/- was seized. The appellant was unable to produce documentary evidence in support of cash found and vide reply to Q.No 6, the appellant categorically accepted that Rs. 33,00,000/- was his undisclosed income at Rs.65,565/- is his savings. The appellant surrendered Rs. 33,00,000/- as his undisclosed income for the year under consideration.
Sunil Kumar Gattani vs. ACIT Further, the cash of Rs.1,22,50,000/- was also found during search action at business premise of appellant at 947, Mishra Bhawan, Chaura Rasta, Jaipur and the same was seized as the appellant could not explain the source of this cash found.
During assessment proceedings, the appellant was asked to furnish the source of cash found during search of Rs.1,56,15,565/- (Rs. 1,22.50,000/- Rs.33.65,565/-) The appellant stated that source of the cash found was from brokerage income not offered for tax. The appellant offered additional income of Rs 1,56,15,565/- for taxation for A.Y. 2019-20 as his business income from finance brokerage activity.
The Id AO concluded that appellant himself had accepted cash found of Rs. 1,55,50,000/- as his undisclosed income and he has not furnished any proof regarding source of balance amount of Rs.65.565/-, an amount of Rs.1,56.15,565/-was added to the total income of the appellant.
During appellate proceedings, the appellant contended that appellant was in the process of filing the petition before the Hon'ble Settlement Commission but due to announcement of the closure of the Settlement by Hon'ble Finance Minister appellant could not file petition before Settlement Commission. No additional income was offered by the appellant in the return of income filed in response to noticeu/s 153A for A.Y. 2013-14 to 2018-19 oru/s 139 for A.Y. 2019-20. The appellant alleged that in the spirit to settle the issue and to buy the peace of mind and to avoid the protracted litigation and also with the intention of honouring the admission made of additional income in the statements recordedu/s 132(4) during the course of search, which could not be disclosed in the return of Income filed for various assessment years. assessee offered additional income through letter during assessment proceedings.
The appellant further contended that the Id. AO added entire cash of Rs. 1,56,15,565/- including cash of Rs.65,565/- not seized during search as against Rs. 1,55,50,000/- and that the source of cash seized of Rs. 1,55,50,000/- was stated from brokerage income however, the Id. AO invoked provisions of section 115BBE though the source thereof was duly explained in statements recorded itself.
The appellant also contended that Id.AO has unwarrantedly turned down the explanation of assessee regarding cash found being from finance brokerage business (as stated in statements recorded us 132(4)], without bringing any Sunil Kumar Gattani vs. ACIT evidence to the contrary. Appellant had very categorically stated that cash found was out of his undisclosed income earned from business activity of finance brokerage and surrendered entire amount of cash found and seized, as his undisclosed income of current year, ie. F.Y. 2018-19 and agreed to pay taxes on the same Ld. AO without bringing any contrary material on record and merely on his own assumptions, has treated the additional income as unexplained and invoked provisions of section 115BBE on such additional income though it is a fact on record that the assessee is engaged in the finance brokerage business for past many years and cash found from assessee was also out of such undisclosed "Business Income".
I have gone through the facts of the case, observation of Id. AO and the submission filed by the appellant. On perusal of the statement recorded during search actionu/s 132(4) of the Income Tax Act, 1961, it is noted that appellant could not explain the source of the cash found of Rs.33,65,565/- with cogent documentary evidence. The appellant merely stated that cash found of Rs 65,565/- is his savings. However, no substantiating document were found and further with respect to balance amount of Rs.33,00,000/-, the appellant could not explain the source of cash found with documentary evidence. As the appellant could not explain the source of cash found, he offered the amount of Rs. 33,00,000/- for taxation and categorically admitted that this amount of Rs. 33,00,000/- was in addition to his regular income for the year under consideration. Further, the appellant merely submitted that said cash of Rs. 33,00,000/- was his undisclosed commission income from finance brokerage and the same is not accounted. However, not a single evidence was furnished by the appellant to prove the nexus between cash found with his finance brokerage commission.
Further, the appellant also could not explain the source of cash found of Rs.1.22.00,000/- found from his business premises and offered the same for taxation as his additional undisclosed income from finance brokerage commission and also stated that he will not claim any deduction/exemption on this undisclosed income. However, the appellant simply stated that the said cash found is related to his undisclosed commission income received in cash without proving the nexus of cash found with his commission income with cogent documentary evidence.
The appellant was required to prove with evidence from whom the cash was received towards his undisclosed commission income to substantiate his claim that the cash found was from his undisclosed commission income from finance brokerage. The appellant has also categorically admitted that he does not maintain any books of such commission received in cash. Further, the appellant Sunil Kumar Gattani vs. ACIT has also not offered the income surrendered during search in this return of income in proceedingsu/s 153A but the same was offered during the assessment proceedings. Therefore, in absence of any cogent and substantiating documentary evidence to prove that the cash found pertain to his commission income, Id. AO has rightly added the said cash under section 69A of the Income Tax Act, and invoke the provision of 115BBE of the Income Tax Act, 1961. Accordingly, this ground of appeal is dismissed.
6.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-
The fact of the ground is that a search and seizure action under section 132 of the Income Tax Act, 1961 was carried out in the case of Oswal Soap group on 06.09.2018.
During the course of search action at the residence of appellant, gold jewellery of net weight 3956.540 Grams (value Rs. 1,54,56,694/-) and silver item of net weight 23064 Grams (value Rs.7,27,845/-) was found. However, the appellant was unable to explain the source of jewellery with documentary evidence. Some bills were also found which were seized as Annexure AS Exhibit 1, Page 45 to 57. However, these bills did not match with jewellery found during search. Hence, credit of same was not given to appellant and jewellery valued Rs.99,29,064/- was seized considering the same as investment from undisclosed sources. The appellant surrendered undisclosed income of Rs.83,92,594/- as investment in jewellery for current year i.e. Α.Υ. 2018-19 During assessment proceedings, the appellant was asked to produce the source of excess jewellery found during search. In reply, the appellant stated that appellant and his wife acquired certain gold jewellery from time to time out of their disclosed sources and also stated that bills of purchase were available in seized documents. The appellant also stated that declaration of gold &jewellery was also made under VDIS Scheme, 1997 by Smt. Kavita Gattani, the wife of appellant.
The appellant stated that gold jewellery of net weight 2366.04 grams were declared as per VDIS Scheme, 1997, Wealth Tax Return and Valuation report Sunil Kumar Gattani vs. ACIT dated 16.06.1999 and gold jewellery of net weight 534.773 grams were purchased between 2007 to 2014 as per bills available.
The appellant also claimed that after conclusion of search he reconciled the total jewellery found and as declared/purchased from time to time. On this basis the appellant claimed holding of Jewellery in his hand and in his wife hands as under:
Sunil Kumar Gattani vs. ACIT Thus, the appellant claimed that gold jewellery of net weight 3958.993 grams was declared.
Similarly, the appellant also claimed that Smt. Kavita Gattani, the wife of appellant had declared silver items of 22.600 Kg in VDIS Scheme, 1997.
However, the reply furnished by the appellant was not found acceptable by the Id. AO as appellant himself accepted and surrendered excess jewellery found during the course of search and that during assessment proceedings, appellant's denial to have any such undisclosed investment with the help of statistical data was just an attempt to cover his undisclosed investment. The Id. AO also noted that during search action, the appellant was in possession of declaration under VDIS Scheme, 1997 but the appellant did not utter anything about the same at that time. Accordingly, Id. AO made addition of Rs. 99,29,064/- on account of undisclosed investmentu/s 69A.
Sunil Kumar Gattani vs. ACIT During appellate proceedings, the appellant reiterated the same reply as submitted during assessment proceeings and contended that jewellery was acquired from disclosed sources and that the bills of which were found and seized during search and are available in seized document, the payment for which were made by appellant and his family members out of their regular bank accounts. The appellant with this contention furnished reconciliation of jewellery as under:
Sunil Kumar Gattani vs. ACIT In view of above, the appellant claim that gold jewellery at 4,324.50 gms (Gross Wt.) was declared which almost tally with gold jewellery found during the course of search and there is difference of only 644.85 gram which the appellant claimed to be duly explained looking into family status of the appellant and CBDT Instruction dated 11.05.1994 In view of above, the appellant contended that jewellery found deserves to be accepted Further, wirt. silver articles of 23.064 Kg found during search, the appellant claimed silver articles of 22.600 Kg were declared in VDIS 97 and silver articles were approximately same as was declared earlier, so the silver articles found was claimed as fully explained. The appellant submitted that statements were recorded in charged atmosphere and VDIS 1997 being 21 years old scheme, appellant could not recollect such facts spontaneously.
I have gone through the facts of the case, observations of Id. AO and submission filed by the appellant.
It is noted that appellant in his statement recorded during search vide reply to Q. No.8 stated that he is furnishing copy of balance sheet of his wife Smt. Kavita Gattani dated 31.10.1993 and copy of valuation report dated 16.06.1999 which were annexurized as page 40 to 44 of Exhibit-1 of Annexure AS and copy of bills of purchase of jewellery were annexurized as page No. 45 to 57 of Exhibit-1 of Annexure AS.
Further, vide Q. No.9, the appellant was asked that jewellery found was not matching with the jewellery shown in valuation report dated 16.06.1999 furnished by the appellant (jewellery as on 31.03.1998) and after exempting jewellery of 875 Sunil Kumar Gattani vs. ACIT gms, remaining jewellery is being seized. In reply the appellant submitted that he has no objection if remaining jewellery is seized after giving exemption of 875 gms.
The appellant further stated in this statement that most of the jewellery as mentioned in this valuation report dated 16.06.1999 furnished were melted and remanufactured and that appellant will submit of documentary evidence of the same later.
Thus, it is noted that bills claimed by the appellant were available at the time of search and also available in seized document was examined by the search party but did not match with the jewellery found during search. Further, the jewellery found also did not match with jewellery declared as per valuation report dated 16.06.1999. The appellant furnished copy of some jewellery bills. However, the jewellery items mentioned in these bills were not found to match with jewellery items appearing in valuation report Further, during assessment proceedings and also in the appellate proceedings, the appellant did not furnish the documentary evidence of jewellery melted or remanufactured as stated vide reply to Q. No.9.
The appellant has also contended that jewellery of net weight 2366.04 grams was declared in VDIS Scheme, 1997. However, during the search proceedings.no such claim was made by appellant in his statements recorded. The initial statements recorded during the course of the search proceedings reflect and bring on record the actual initial version of the assessee giving broad contours of the actual position vis-a-vis the memory lane and practical reality. Nowhere during the search proceedings, any such claim was made or any such evidence found. During the course of the appellate proceedings pending before me, the appellant has relied on jewellery declared on account of VDIS declaration by Smt. Kavita Gattani and jewellery purchased. Now this situation has to be seen in a holistic position. For the total jewellery found of 3956.540 gms and silver articles of 23.064 Kg. the appellant is giving explanation of 2366.04 gms (Gross wt. 2539.61 gms) on account of VDIS and the appellant forgot to mention the same in his statements due to charged atmosphere during search. So, I find that this explanation of the appellant for the unexplained jewellery is too far stretched and cannot be accepted.
Sunil Kumar Gattani vs. ACIT Further, though the appellant furnished the valuation report date 16.06.1999 however, no such jewellery declared in this valuation report was found during search it can clearly be inferred that she was not holding this jewellery anymore.
I find that nowhere during the proceedings there is a mention of any evidence with respect to the above claim to have been found during the search proceedings. If the documents were lying with the appellant and so was the position w.r.t. the jewellery found, the appellant would have immediately brought the same to the knowledge of the search team and would have mentioned in his statement. I find it rather surprising that for the total jewellery found in the search proceedings, Smt. Kavita Gattani and the appellant did not mention the VDIS fact and the consequent explanation in the statements.
Moreover, the claim is not supported further by any Wealth Tax Return of Mrs. Kavita Gattani that she was holding this jewellery. Wealth tax returns would have become due on this but no such evidence/document has been given by the appellant in support of this claim. So, this justification does not merit consideration for explanation of unexplained jewellery. From the bills produced during course of search proceedings, the jewellery of 875 gms was considered explained and was exempted by search team from seizure considering the bills produced by appellant during search In the light of the above factual matrix and discussion thereon, I find that this ground of appeal is devoid of merit and cannot be upheld. This ground of appeal is rejected.
Accordingly, the grounds of appeal No. 4.1 to 5 are dismissed.
7.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-
In this ground of appeal the appellant has contested application of section 115BBE of the Act. This ground is consequential in nature. In the adjudication of earlier ground of appeal, the applicability of section 69A has been upheld. Accordingly section 115BBE is applicable on that issue.
Sunil Kumar Gattani vs. ACIT Accordingly this ground of appeal is dismissed.
Ground Nos. 7 to 8.3
8.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-
The fact of the case is that during search in the case of Oswal Soap group, during the course of search proceedings, cash book was found and on the basis of same, it was found that Shri Meghraj Uttam Chand had rotated its undisclosed cash through Sh. Sunil Gattani. During search and post search investigations, Shri Ajay Jain had also clarified the involvement of Shri Sunil Gattani in such activities. The Id. AO noted that appellant had rotated a total amount of Rs.97,320/- during the year under consideration. The Id. AO computed commission for these transactions i.e. 10 paise/per hundred Rupees which worked out to Rs.1069/- Accordingly, the same was added to the total income of the appellant.
During appellate proceedings, the appellate has contested addition of incomeu/s 69 of the Income Tax Act. The appellant further contended that he was engaged in the genuine business of finance broking, income from which is duly recorded in books of accounts and addition has been made by Id. AO on the basis of documents found in search in the case of Oswal Soap Group. The appellant denied the same The appellant inter alia contended that Id. AO had computed alleged undisclosed brokerage even on the principal amount of loan given as well as received back.
The appellant also contended that it is a common practice that brokerage is always paid by borrower as a percentage of interest paid and not on the principal amount of loan.
I have gone through the facts of the case, observation of Id. AO and the submission filed by appellant. During search action in the case of Shri Uttam Chand Jain, cash books were found containing entries related to rotation of undisclosed cash through finance broker Sh. Sunil Gattani. Further, during search proceedings, various documents were seized from the residential premises of Monica Jain, Sanjay Jain, Ajay Jain. A note book was found wherein details of cash loans given to various persons were mentioned. The rotation of undisclosed Sunil Kumar Gattani vs. ACIT cash through Shri Sunil Gattani was admitted by Sh. Ajay Jain. Further during assessment proceedings, the appellant himself stated that only the reasonable amount of commission/brokerage can be determined as income. Further, the appellant during the course of search in his case has admitted of receiving brokerage in cash. Further, the appellant himself had admitted that he had been involved in the business of finance brokerage and used to receive brokerage @ 0.1% on the funds rotated through him. Further, the appellant has not furnished any cogent documentary evidence that brokerage in received on interest and not on principal amount. Thus, on the basis of circumstantial evidence, it is established that appellant is involved in rotation of unaccounted cash of Sh. Uttam Chand Jain and received brokerage and the same is not accounted for by the appellant in his books.
Considering the factual matrix of the case, the contention of the appellant is not found acceptable hence rejected.
Accordingly, this ground of appeal is dismissed.
9.2 The ground is general in nature. The grounds are pre-mature as these are against mere initiation of penalty proceedings. Penalty proceedings are independent proceedings and the appellant is required to make his submissions before the appropriate authority during the penalty proceedings. Accordingly, the ground of appeal raised by the appellant on this issue ispremature at this stage and is accordingly dismissed.
10.1 The appellant has not added or altered any of the above mentioned grounds of appeal. Accordingly such mention by the appellant in its ground is treated as general in nature, not needing any specific adjudication and is accordingly treated as disposed off.
11. In the result, the appeal of the appellant is dismissed."
5. Feeling dissatisfied with the above order of the ld. CIT(A) the assessee preferred the present appeal before this tribunal on the ground as Sunil Kumar Gattani vs. ACIT reiterated herein para 2 above. In support of the various grounds raised by the assessee, ld. AR of the assessee, has filed the following written submissions:
Brief facts of the case are that assessee in an individual, deriving remuneration and profit from partnership firm M/s P N & Company (engaged in the business of finance on brokerage basis), wherein he is acting as a partner. Beside this, assessee also has interest income under the head income from other sources. During the year under consideration a search & seizure action was carriedu/s 132 of the Act on 06.09.2018 at the premises of assessee. On the same date, search was conducted in the case of 'Oswal Soap Group' of which, M/s Uttamchand Deshraj and Ajay Jain were the key persons. During the course of search at M/s Uttamchand Deshraj, certain cash books/excel sheets were stated to have been found, containing details of rotation of his undisclosed cash. Since, name of broker mentioned in such cash books is "Gattani Ji" it was presumed by ld.AO that money mentioned in such cash book was rotated by assessee.
Further, on the basis of some "note book" stated to have been found from the residential premise of Shri Ajay Jain, Monika Jain & Sanjay Jain (who are also unknown to assessee) during the course of search (which were inventorised as Exhibit 8), wherein details of cash loans is noted, it was alleged that loans to parties mentioned on page 5 to 6 of such "note book" i.e. 'Exhibit 8'were also given through assessee (though it is not mentioned if the parties shown in such sheet are lenders or borrowers). On the basis of such documents found from the premises of third party, ld.AO presumed that assessee had rotated total sum of Rs 97,320/- during the year under consideration and computed brokerage of Rs. 1069/- in respect of such rotation, which was treated as undisclosed commission received by assessee and thus same was addedu/s 69 of the Income Tax Act. Apart from this, addition to the tune of Rs.1,56,15,565/- was madeu/s 69A by alleging cash found during the course of search as unexplained money and further addition to the tune of Rs.99,29,064/- was made on account of jewellery found during search as unexplainedu/s 69A. Also, provisions of section 115BBE were invoked in respect of additions so made.
Aggrieved of the assessment order passed and the additions so made, assessee has preferred an appeal before ld. CIT(A) wherein ld. CIT(A) dismiss the appeal of the assessee without considering the submission made and evidence adduced before him.
Present appeal has been filed by assessee against order so passed by ld. CIT(A). However, while filing appeal memo, legal grounds of appeal challenging the validity of assessment could not be raised inadvertently, which are raised now as additional grounds of appeal no. 7 to 7.2, which read as under:
Sunil Kumar Gattani vs. ACIT Since, these additional grounds go to the root of assessment itself, being legal in nature and, the same are dealt with prior to submission on grounds of appeal no. 1 to 6.
With this background, ground-wise submission is made as under:
Additional Grounds of Appeal No. 7 to 7.2:
In these grounds of appeal, assessee has challenged the validity of assessment order passedu/s 143(3), without complying with the legal framework provided under the Income Tax Act.
In ground of appeal No.7.1, assessee has challenged the validity of assessment order for non issuance of noticeu/s 143(2), whereas, In ground of appeal No.7.2, assessee has challenged the validity of assessment order due to approval grantedu/s 153D by ld. JCIT being mechanical in nature and without application of mind.
Brief facts pertaining to this ground of appeal is that though window on portal shows some tab of 143(2), (no notice is ever issued) however there is no attachment available for download under the "notices" tab, under "noticeu/s 143(2)",. It is thus clear that noticeu/s 143(2) was not issued prior to completion of assessment. At this juncture, provisions of section 143(2) are reproduced for the sake of ready reference:
Assessment.
143........
(2) Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer or the prescribed income-tax authority, as the case may be, if, considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer any evidence on which the assessee may rely in support of the return:
Provided that no notice under this sub-section shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished.
From perusal of above, it is evident that issuance as well as valid service of noticeu/s 143(2) is prerequisite for completing assessmentu/s 143(3) of the Income Tax Act, which has not been done in the present case. Hon'ble Supreme Court in Asst. CIT v. Hotel Blue Moon held that the requirement to issue notice under section 143(2) is mandatory. It is not "a procedural irregularity and the same is not curable and, therefore, the requirement of notice under section 143(2) cannot be dispensed with". Apart from this, many other courts have consistently held that noticeu/s 143(2) is not a procedural requirement and is Sunil Kumar Gattani vs. ACIT mandatory and completion of assessment without issue of noticeu/s 143(2) is fatal to the assessment. In this regard, reliance is placed on:
[2010] 188 Taxman 113 (SC) (APB 130 - 135) Assistant Commissioner of Income-tax v. Hotel Blue Moon Section 158BC, read with section 143(2), of the Income-tax Act, 1961- Block assessment in search cases - Procedure for- Whether for determination of undisclosed income for a block period under provisions of section 158BC, provisions of section 142 and sub-sections (2)and (3) of section 143 are applicable and no assessment can be made without issuing notice under section 143(2) - Held, yes - Whether, therefore, where Assessing Officer, for any reason, repudiates return filed by assessee in response to notice under section 158BC(a), he must necessarily issue a notice under section 143(2) within time prescribed in proviso to section 143(2) - Held, yes [2018] 96 taxmann.com 659 (Rajasthan) (APB 136 - 143) Principal Commissioner of Income-tax v. Kamla Devi Sharma Section 143 read with section 148, of the Income-tax Act, 1961 - Assessment - Issue of notice- Assessee purchased land and paid amount in cash - Notice under section 148 was issued and thereafter assessment was made by Assessing Officer and amount paid for purchase of agricultural land was treated as unexplained investment - Assessee challenged assessment order on ground that no notice under section 143(2) was issued to assessee before passing assessment order - Tribunal set aside assessment order on ground that issue of notice under section 143(2) in reassessment proceedings, prior to finalizing re- assessment order, cannot be condoned by referring to Section 292BB and was fatal to order of re assessment -Whether Tribunal was correct in its approach - Held, yes [Paras 5 and 6] [In favour of assessee] [2025] 175 taxmann.com 910 (Punjab & Haryana) (APB 136 - 143) Aggarwal Engineering Co. v. Assistant Commissioner of Income Tax Section 143(2) of the Income-tax Act, 1961 - Assessment - Issue of notice (Validity of assessment order) - Assessee filed its return of income on 21-10- 1997 - Assessing Officer passed an assessment order on 27-8-1999 under section 143(3) making addition to the assessee's income - Assessee raised a plea that since no notice under section 143(2) was served upon it within a period of 12 months from end of month in which return was furnished and, thus, entire proceedings were liable to be quashed - Whether it was apparent from observations in assessment that notice under section 143(2) was not issued/served before stipulated date - Held, yes - Whether, therefore, impugned assessment order was to be set aside - Held, yes [Paras 14 and 15] [In favour of assessee] Sunil Kumar Gattani vs. ACIT It is therefore submitted that assessment completed without issuing/serving noticeu/s 143(2) is not in accordance with law and order so passed deserves to be set aside.
It is further submitted that from perusal of approval granted by ld. Joint Commissioner Central Range, Jaipuru/s 153D, it is evident that such approval has also been granted in mechanical manner for all the 7 years, without even discussing contents of draft assessment order. Your honours would appreciate that it is now settled position of law that separate separate approval needs to be granted for each assessment year, by superior authority in terms of section 153D. In this regard, reliance is placed on:
[2024] 163 taxmann.com 118 (SC) ACIT v. Serajuddin and Co. Section 153D, read with section 153A, of the Income-tax Act, 1961 - Search and seizure -Prior Approval Necessary for Assessment (Scope of) - Assessment years 2003-04 to 2009-10- High Court held that requirement of prior approval of superior officer before an order of assessment or reassessment is passed pursuant to a search operation is a mandatory requirement of section 153D and that such approval is not meant to be given mechanically and while elaborate reasons need not be given, but there has to be some indication that approving authority has examined draft orders and finds that it meets requirement of law - High Court further held that where assessment orders passed in case of assessee were totally silent about Assessing Officer having written to Additional Commissioner seeking his approval or of Additional Commissioner having granted such approval, Tribunal was correct in holding that such approval was granted mechanically without application of mind by Additional Commissioner resulting in vitiating assessment orders themselves - Whether SLP filed against said decision of High Court was to be dismissed - Held, yes [Para 2] [In favour of assessee] 2024 163 taxmann.com 9 (Delhi) Principal Commissioner of Income-tax v. Shiv Kumar Nayyar Section 153D of the Income-tax Act, 1961 - Search and Seizure - Prior approval necessary for assessment (Approval) - Assessment year 2015-16 - Whether grant of approval under section153D cannot be merely a ritualistic formality or rubber stamping by authority, rather it must reflect an appropriate application of mind - Held, yes - During search and seizure operation conducted upon assessee, Assessing Officer passed an order under section 127 leading to centralization of case of assessee followed by issuance of notice under section 153A -Pursuant to same, Assessing Officer passed a scrutiny assessment order under section153A read with section 143(3) making certain additions - Whether since order of approval under section 153D for relevant assessment year was granted by Addl. Commissioner for 43cases on a single day without perusing draft assessment orders at all and without an independent application of mind, impugned assessment order was rightly declared to be illegal by Tribunal - Held, yes [Paras 15 and 17] [In favour of assessee] Sunil Kumar Gattani vs. ACIT [2025] 178 taxmann.com 360 (Delhi - Trib.) (TM) Dheeraj Chaudhary v. Assistant Commissioner of Income-tax Section 153D, read with section 153A, of the Income-tax Act, 1961 - Search and seizure -Prior approval necessary for assessment (Scope of provision) - Assessment years 2009-10to 2014-15 - During search conducted on K group, some incriminating documents relating to assessee were claimed to have been found and seized - Consequent thereto, notice under section 153A was issued to assessee - Assessing Officer sought prior approval undersection 153D from Additional Commissioner by forwarding draft assessment order - After obtaining approval, Assessing Officer passed assessments under section 153A read with section 143(3) and made additions - Assessee challenged validity of approval under section153D as mechanical - It was noted that for all relevant assessment years, only one approval was granted by Additional Commissioner - It was also noted that Assessing Officer while sending draft assessment orders had not enclosed any assessment folder, assessment material, search material seized from assessee's premises and other related material including replies filed by assessee qua additions made by Assessing Officer - Whether before granting approval, Additional Commissioner must have before him material on basis whereof an opinion in this behalf had been formed by Assessing Officer and approval must reflect application of mind to facts of case - Held, yes - Whether furthermore, once such approval was granted, it must be in writing and filed in relevant folder indicating above after making due entry in order sheet - Held, yes
- Whether since procedure was not at all followed as was evident from proposal sent by Assessing Officer, approval granted was mechanical in manner and without application of mind by approving authority i.e., by Additional Commissioner - Held, yes - Whether thus, impugned assessment orders were to be quashed- Held, yes [Paras 21, 22 and 23][In favour of assessee] In view of above, it is submitted that approval grantedu/s 153D is mechanical in nature as the same does not discuss any material considered/views in respect of Draft Assessment order and again has been commonly given for A.Y.2013-14 to 2019-20 and therefore assessment order passed by ld. AO for the year under consideration i.e. A.Y. 2019 - 20 is void ab initio and deserves to be quashed. Grounds of Appeal No.1:
In these grounds of appeal, assessee has challenged the action of ld. CIT(A) in confirming the observation of ld.AO that assessee is one of the members of Oswal Soap Group.
To begin with, kind attention of your goodself is invited to Para 1 of Assessment order at Page 1, wherein it is stated that assessee belongs to 'Oswal Soap Group'. Relevant para is reproduced as under for ready reference-- "1 A search and seizure actionu/s 132 of the Income Tax Act, 1961 ("the Act") was carried out by the Income Tax Department on the members of the Sunil Kumar Gattani vs. ACIT Oswal Soap Group on 06-09-2018 of which assessee is one of the members".
From perusal of above, it is evident that assessment proceedings have been completed on incorrect appreciation of facts that assessee is one of the member of the 'Oswal Soap group'. However, assessee has no relation with any of the members of the group. It is a matter of fact that an independent search was conducted at assessee's residential/business premises and the same was not connected with Oswal Soap Group in any manner. Thereafter, ld. CIT(A) as well as ld. AO on the basis of statements of some third parties recorded during the course of search conducted on them confirmed that assessee belong to Oswal Group. It is thus submitted that observations of ld. CIT(A) as well as ld. AO that assessee belongs to Oswal Soap Group are contrary to the facts and deserve to be ignored and excluded.
Grounds of Appeal No. 2 to 2.2:
In these grounds of appeal, assessee has challenged the action of ld. CIT(A) in confirming the addition of Rs.1,56,15,565/- u/s 69A made by ld. AO on account of cash found during search, which basically represented undisclosed income of assessee for preceding years from finance brokerage and has also challenged the invocation of provisions of section 115BBE in respect of addition so made. Since, all the grounds of appeal are interconnected, the same are canvassed together for the sake of convenience.
Facts pertaining to the grounds of appeal are that during the course of search at assessee's premises on 06.09.2018, various loose papers and documents were found and seized, besides the seizure of valuables including cash was made. Details of cash so seized is tabulated as under:
Premises Assets/loose papers Found Assets seized
Shri Sunil Gattani Cash as per Annexure CF-1 Dated Rs.1,22,50,000/-
6.9.2018 - Rs. 1,22,50,000/-(seized as
Address: 947, Mishra Bhavan, Chaura Annx. CS-1 Rs. 1,22,50,000/-) Rasta, Jaipur Shri Sunil Gattani Cash as per Annexure CF-1 Dated Rs.33,00,000/-
06.09.2018 - Rs. 33,65,565/- (seized as Address: 14, Keshav Nagar, Civil Annx. CS-1 Rs. 33,00,000/-) lines, Jaipur Total Rs.1,55,50,000/-
The assessee, in his statement recordedu/s 132(4) dated 06.09.2018 with reference to the cash found in search at the business premises, stated that he is Sunil Kumar Gattani vs. ACIT also engaged in the business of finance brokerage in his personal capacity. The modus operandi of earning the brokerage in the finance activity is that the person who has the availability of finance or the person who needs the finance approaches the assessee to provide his services to lend his money in the market / to arrange the funds from the market. The brokerage is received by the assessee from the person who needs the finance i.e. the borrower. The brokerage is received when the borrower pays the interest amount to the lender. All the payment i.e the principal, interest and brokerage is paid in cash. As per the prevalent practice in the market, interest is paid for two months in advance. The rate of brokerage is Rs. 100 per lakh of amount advanced. These facts were duly explained by assessee in statements recordedu/s 132(4) dt. 6.9.2018, which reads as under:
iz'u%& 8- Jheku th vkt vkids mijksDr ifjlj ij vk;dj vf/kfu;e dh /kkjk 133A ds rgr losZ (Survey) dh dk;Zokgh dh xbZ] ftlds nkSjku dqy uxnh :Ik;s yxHkx ,d djksM+ ckbZl yk[k ipkl gtkj ¼1]22]50]000@&½ ik, x;s ftudk L=ksr Li"V ugh gks ikus ds dkj.k losZ dks vk;dj vf/kfu;e dh /kkjk 132 ds rgr lpZ ,oa lhtj (Search & Seizure) esa rCnhy dj fn;k x;kA bl lac/a k eas vki mijksDr dS'k dk L=ksr Li"V djsA mRrj%&8- Jheku th mi;qZDr fo"k; esa eSa dguk pkgwWxk fd esjs ;gkWa ij Search ,oa Seizure ¼tLrh ,oa ryk'kh½ dh dk;Zokgh esa tks uxnh feyh gS mldk L=ksr Li"V djus esa eSa vleFkZ gWwA Jheku th ;s uxnh eq>ls lacfa /kr gS rFkk ;g uxnh eSa tks yksu nsus ,oa ysus esa nykyh dk dk;Z djrk gWw mlesa dHkh dHkkj deh'ku ds vfrfjDr uxnh Hkh ys ysrk gWwA lkFk bl ckjs esa eSa dguk pkgwWx a k fd nykyh esa deh'ku Hkh uxn esa gh feyrk gSA mlh uxnh dks eSa esjs bl ifjlj& IInd Floor 947, feJk Hkou] pkSMk jkLrk] t;iqj esa j[k nsrk FkkA ;g ogh uxnh gSA bl uxnh dk eSua s dgh Hkh Disclosed ugh fd;k gS ,oa Jheku th blds ckjs esa eSa dguk pkgWx w k fd ;g esjh v?kksf"kr vk; gS ftls eSua s dgh Hkh Disclose ugh fd;k gSA Jheku th eSa dguk pkgWx w k fd esjs bl ifjlj ij tks :Ik;s ,d djksM+ ckbZl yk[k ipkl gtkj :Ik;s ¼1]22]50]000@&½ dks eSa viuh v?kksf"kr vk; ekurs gq, djkjksi.k gsrq lefiZr djrk gWAw bl ij tks Hkh dj ns; gksxk og eSa pkyw o"kZ 2018&2019 vFkkZr~ fu/kkZj.k o"kZ 2019&2020 esa djkjksi.k gsrq lefiZr djrs gq, dj ns nwx a kA Jheku th bl ckjs esa eSa dguk pkgwWxa k fd bl v?kksf"kr vk; :Ik;s ,d djksM+ ckbZl yk[k ipkl gtkj ¼1]22]50]000@&½ ij fdlh izdkj dk Deduction/ Exemption Claim ugh d:Wx a kA iz'u%& 9- Jheku th iz'u la[;k 8 ds tokc esa vkius crk;k fd vki dqN ikfVZ;ksa ds fy, uxn m/kkj dk ysu&nsu dh nykyh djrs gS ,oa mudk deh'ku uxn esa izkIr Sunil Kumar Gattani vs. ACIT djrs gS d`Ik;k crk, ;g deh'ku fdruk gksrk gS ,oa mu ikfVZ;ksa dks Hkh Identify djs ftudk dk;Z vki djrs gSAa mRrj%&9- Jheku th bl fo"k; esa eSa dguk pkgWx w k fd ikfVZ;ksa ds uke eq>s ;kn ugh gS ,oa bldk EkS dksbZ fyf[kr fglkc&fdrkc ugh j[krk gwWA ;gkWa eSa ;g Hkh dguk pkgWxw k fd ;g nykyh dk dk;Z esa O;fDrxr djrk gWw uk fd fdlh Firm ;k Company esAa blds dksbZ Books Hkh Maintain ugh djrk gWAw dsoy ;knnkLr ds vk/kkj ij ;kn j[krk gwW blfy, bu ikfVZ;ksa ds uke irs eq>s ;kn ugh gSa ,o eSa vHkh buds uke irs miyC/k ugh djk ldrkA Jheku th eq>s ,d yk[k :Ik;s ij 100 :Ik;s deh'ku izkIr gksrk gSA bl uxnh ds ysu&nsu ij 80 iSls ls 90 iSls rd izfrekg C;kt yxrk gSAa Further in statements recordedu/s 132(4) dt. 7.9.2018 with reference to the cash found at the residence again reiterated that the source of cash found is his undisclosed income out of the saving and finance brokerage. Relevant extracts of such statements are as under:
iz'u%&6- vkids fuokl LFkku 14] ds'ko uxj] flfoy ykbZUl] t;iqj esa fnukad 06- 09-2018 dks izkjEHk dh xbZ vk;dj vf/kfu;e dh /kkjk 132 ds rgr ryk'kh ,oa tCrh dh dk;ZokbZ ds nkSjku vkids fuokl LFkku ds izFke ry fLFkr vkids 'k;u d{k ls dqy :Ik;s 33]65]565@& dh uxn jkf'k ik;h xbZ gS ftls Annexure-CF ds :Ik esa lwphc) fd;k x;k gS d`Ik;k crk;s fd udn jkf'k dqy :Ik;s 33]65]565@& fdlls lacfa /kr gS ,oa bldk L=ksr D;k gS\a mRRkj%&6- Jheku esjs fuokl LFkku 14] ds'ko uxj] flfoy ykbZUl] t;iqj ds izFke ry fLFkr esjs 'k;u d{k ls tks udn jkf'k :Ik;s 33]65]565@& ikbZ xbZ gS og eq>ls gh lacfa /kr gS bl udn jkf'k ds L=ksr ds :Ik esa EkS ;g crkuk pkgWwrk gWw bl uxn jkf'k esa ls 65]565@& esjh cpr dh vk; gS ,oa 'ks"k jkf'k :Ik;s 33]00]000@& esjh pkyw forh; o"kZ dh v?kksf"kr L=ksrksa ls vftZr dh gqbZ vk; gS ftls eSa LosPNk ls pkyw forh; o"kZ 2018&19 esa esjh fu;fer vk; ds vykok :Ik;s 33 yk[k dks esjh Lo;a dh v?kksf"kr vk; ds :Ik esa Lohdkj djrs gq, djkjksi.k gsrq lefiZr djrk gWAw bl v?kksf"kr vk; :Ik;s 33 yk[k ij fu;ekuqlkj tks Hkh dj gksxk eSa mls pqdkus ds fy, pouc) gWAw eSa ;gkWa ij iqu% Jheku ls fuosnu djuk pkgrk gWw esjh ;g v?kksf"kr vk; :Ik;s 33 yk[k esjh pkyw forh; o"kZ 2018&2019 dh fu;fer vk; ds vykok gS ftl ij eSa fu;ekuqlkj dj pqdk nwx a kA iz'u%&7- d`Ik;k crk;sa fd D;ksa u vkids fuokl LFkku ls ikbZ xbZ udn jkf'k :Ik;s 33]65]565@& esa ls :Ik;s 33 yk[k dks ftldk L=ksr vkius v?kksf"kr L=ksarksa ls vk; ekurs gq, dj gsrq lefiZr fd;k gS mls tCr dj fy;k tk;sA Sunil Kumar Gattani vs. ACIT mRrj%& ;fn esjs fuokl LFkku ls izkIr udn jkf'k :Ik;s 33]65]565@& esa ls esjs cpr dh vk; :Ik;s 65]565@& dks NksM+rs g,q 'ks"k jkf'k :Ik;s 33 yk[k dks foHkkx }kjk tCr fd;k tkrk gS rks eq>s blesa dksbZ vkifr ugh gSA eSa ;gkWa ij Jheku ls fuosnu djuk pkgrk gww fd essjs }kjk lefiZr pkyw for o"kZ 2018&2019 dh v?kksf"kr vk; :Ik;s 33 yk[k ij fu;ekuqlkj cuus okys vk;dj dk lek;kstu bl tCr jkf'k esa ls dj fy;k tk;A eSa ;gkWa Jheku ls ;g Hkh dguk pkgrk gWw fd esjh pkyw fofr; o"kZ dh v?kksf"kr vk; :Ik;s 33 yk[k esjs }kjk dh tkus okyh Finance Brokerage ds O;olk; esa udn esa izkIr gksus okyh deh'ku dh vk; gS ftldk dksbZ ys[kk&tks[kk esjs ikl miyC/k ugh gSAa Accordingly the assessee offered cash amounting to Rs. 1,55,50,000/-
(122,50,000 + 33,00,000) as his undisclosed income earned out of the finance brokerage.
Basically, assesse was in the process of filing the petition before the Hon'ble Settlement Commission where he was going to offer the income of Rs. 1,55,50,000/- as brokerage income earned for various assessment years from finance brokerage activity carried out in his individual name and therefore, no additional income was offered in the return of income filed in response to noticeu/s 153A for A.Y. 2013-14 to 2018-19 oru/s 139 for A.Y. 2019-20. Since, the Hon'ble Finance Minister in her Budget Speech on 01.02.2021 for 2021-22 announced the closure of the Settlement Commission and further provided that no fresh application could be accepted by the Settlement Commission on and from 01.02.2021, therefore, the filing of petition before the Settlement Commission was beyond control and became impossible. Accordingly, in the spirit to settle the issue and to buy the peace of mind and to avoid the protracted litigation and also with the intention of honouring the admission made of additional income in the statements recordedu/s 132(4) during the course of search, which could not be disclosed in the return of Income filed for various assessment years, assessee offered additional income through letter during assessment proceedings.
As stated above, during the course of search at the business and residential premises of the assessee, total cash of Rs. 1,56,15,656/- was found, out of which Rs. 1,55,50,000/- was seized and balance being the personal savings of the assessee and his family members was not seized. Further, the source of the above cash of Rs. 1,55,50,000/- was stated as from the brokerage income not offered for tax. However, ld.AO added entire cash found, including cash not seized, i.e. Rs.65,565/- and also invoked provisions of section 115BBE in respect of cash seized though the source thereof was duly explained by assessee in statements recorded itself.
In this regard, as stated above, it is reiterated that during the course of search, in statements of assessee recordedu/s 132(4) dated 06.09.2018 and 07.09.2018 (reproduced above), assessee very categorically stated that cash found was out of his undisclosed income earned from business activity of finance brokerage and Sunil Kumar Gattani vs. ACIT surrendered entire amount of cash found and seized, as his undisclosed income of current year, i.e. F.Y. 2018-19 and agreed to pay taxes on the same and no further interrogation was made by authorized officer in respect of such response of the assessee while recording the statements of the assessee. However, such income was not declared while filing Return of Income in circumstances mentioned above. However during the course of assessment proceedings, assessee vide letter dated 11.03.2021 (APB 57 - 66) explained that additional income offered by assessee was earned from finance brokerage business and cash seized by the department may be appropriated towards tax liability arising on such undisclosed income offered by assessee. It is submitted that the Ld. AO without bringing any contrary material on record and merely on his own assumptions, has treated the additional income as unexplained and invoked provisions of section 115BBE on such additional income though it is a fact on record that the assessee is engaged in the finance brokerage business for past many years and cash found from assessee was also out of such undisclosed "Business Income".
Your goodself would appreciate that provisions of section 115BBE are applicable only if total income of assessee includes any income referred to under any of the sections 68, 69, 69A, 69B, 69C or 69D. In the instant case, assessee has duly explained source of cash found as out of his business income which was not recorded in regular books of accounts. Therefore, there is no reason to tax the additional income offered under section 69 and in turn provisions of section 115BBE are not applicable.
It is pertinent to note here that the statementsu/s 132(4) are recorded by administering oath which is presumed to be carrying truth in view of the provisions of section 181 and section 193 of the Indian Penal Code which provide for imprisonment if a false statement is given. Therefore, there is a considerable importance of statements recordedu/s 132(4) during search and seizure operations. Section 132(4) of Income-tax Act permits the authorized officer to record a statement on oath during the course of a search. Such statement recorded carries significant evidentiary value and is binding on a person who makes it, unless retracted with cogent evidence at the earliest point of time. In fact, in view of specific provisions of section 132(4), such statements can be used by the Assessing Officer in the course of assessment proceedings as corroborative evidence along with documentary evidence relating to the material found during the course of search and seizure.
It is submitted that ld.AO has unwarrantedly turned down the explanation of assessee regarding cash found being from finance brokerage business [as stated in statements recorded us 132(4)], without bringing any evidence to the contrary. In this regard, it is submitted that for the deeming provisions of section 69 of the Income Tax Act, 1961 to come into play, there has to be a clear finding as to either the assessee has not furnished any explanation about the nature and source of the investments or the explanation so offered is not found satisfactory. Therefore, the foundational requirement before invoking the deeming provisions Sunil Kumar Gattani vs. ACIT of section 68 to 69D is that if the assessee furnishes the explanation regarding nature and source of such investment, reasonability of the explanation so offered by the assessee has to be seen, keeping into account the facts and circumstances of the relevant case and Ld AO has to bring on record as to our explanation given by assesse is not satisfactory. Relevant few case laws on the issue are as under.
Hon'ble Rajasthan High Court in the case of PCIT vs Bajrang Traders in D.B. ITA No. 258/2017 affirmed the view taken by Hon'ble ITAT. Relevant findings of Hon'ble ITAT are as under:
2.10. We have heard the rival contentions and perused the material available on record. During the course of survey, the assessee has surrendered an amount of Rs.
70,04,814/- towards investment in stock of rice which had not been recorded in the books of accounts. Subsequently, in the books of accounts, the assessee has incorporated this transaction by debiting the purchase account and crediting the income from undisclosed sources. In the annual accounts, the purchases of Rs. 70,04,814/- were finally reflected as part of total purchases amounting to Rs. 33,47,19,658/- in the profit and loss account and the same also found included as part of the closing stock amount to Rs. 1,94,42,569/- in the profit/loss account since the said stock of rice was not sold out. In addition to the purchase and the closing stock, the amount of RS. 70,04,814/- also found credited in the profit and loss account as income from undisclosed sources. The net effect of this double entry accounting treatment is that firstly the unrecorded stock of rice has been brought on the books and now forms part of the recorded stock which can be subsequently sold out and the profit/loss therefrom would be subject to tax as any other normal business transaction. Secondly, the unrecorded investment which has gone in purchase of such unrecorded stock of rice has been recorded in the books of accounts and offered to tax by crediting the said amount in the profit and loss account. Had this investment been made out of known source, there was no necessity for assessee to credit the profit/loss account and offer the same to tax. Accordingly, we do not see any infirmity in assessee's bringing such transaction in its books of accounts and the accounting treatment thereof so as to regularize its books of accounts. In fact, the same provides a credible base for Revenue to bring to tax subsequent profit/loss on sale of such stock of rice in future.
2.11. Having said that, the next issue that arises for consideration is whether the amount surrendered by way of investment in the unrecorded stock of rice has to be brought to tax under the head "business income" or "income from other sources". In the present case, the assessee is dealing in sale of foodgrains, rice and oil seeds, and the excess stock which has been found during the course of survey is stock of rice. Therefore, the investment in procurement of such stock of rice is clearly identifiable and related to the regular business stock of the assessee. The decision of the Co-ordinate Bench in case of Shri Ramnarayan Birla (supra) supports the case of the assessee in this regard. Therefore, the investment in the excess stock has to be brought to tax under the head "business income" and not under the head income from other sources".
In the result, ground No. 1 of the assessee is allowed."
Hon'ble Jodhpur bench of ITAT in the case of Shri Lovish Singhal vs ITO i4n 143/Jodh/2018 has held as under:
Sunil Kumar Gattani vs. ACIT Surrender of income during survey - to be treated as Business income or taxableu/s 69 - AO made the additionsu/s 69 while calculating the tax rate as per provisions of Section 115BBE - Held that:- As per decision in the case of Bajrang Traders [2017 RAJASTHAN HIGH COURT] as observed that the Hon'ble High Court in respect of excess stock found during the course of survey and surrender made thereof was found to be taxable under the head 'business and profession'. Similarly in respect of excess cash found out of sale of goods in which the assessee was dealing was also found to be taxable as business income. Applying the proposition of law laid down in the judicial pronouncements as discussed above, I hold that the lower authorities were not justified in taxing the surrender made on account of excess stock and excess cash found U/s 69. Thus, there is no justification for taxing such income U/s 115BBE of the Act.
Hon'ble Amritsar bench of ITAT in the case of Tejpal Singh v. Assistant/Deputy Commissioner of Income-tax [2024] in 158 taxmann.com 679 dated 06.12.2023 under identical circumstances has held as under:
Section 28(i) , read with sections 69A, 115BBE and 133A, of the Income-tax Act, 1961 -Business income - Chargeable as (Excess Stock) - Assessment year 2018-19 - The assessee was a trader of medicines and other allied product - A survey was conducted under section133A at premises of assessee - During survey proceedings, statement of assessee was recorded - Assessee surrendered certain amount out of which certain amount was related to excess stock found during survey and certain amount was related to excess cash found from business premises of assessee - In books, assessee declared lesser cash on date ofsurvey - Assessing Officer added difference in cash found during survey to total income under section 69A and tax was levied on said amount under section 115BBE(2) - It was noted that during statement recorded in survey, assessee declared that entire amount of excess cash was generated from undisclosed sale of medicine - Whether since revenue was unable to show any other sources related to excess cash, source of excess cash was from business and thus, application of section 115BBE was bad in law - Held, yes - Whether, thus, assessee was to be assessed under normal rate of tax - Held, yes [Para 6.1] [In favour of assessee] Hon'ble Chandigarh bench of ITAT in the case of M/s Veer Enterprises [2024] 158 taxmann.com 655 (Chandigarh - Trib.) in decision dated 23.01.2024 under identical circumstances has held as under:
Section 69A, read with sections 69B and 28(i), of the Income-tax Act, 1961 - Unexplained money (Amount disclosed at survey) - Assessment year 2019-20 - During course of survey under section 133A, assessee surrendered excess stock, cash and receivables, stating that same was to be taxed as business income - Assessing Officer, however, treated said surrendered amount as unexplained investment under sections 69A and 69B and charged same to tax as per provisions of section 115BBE - Whether since during survey proceedings, Sunil Kumar Gattani vs. ACIT assesse was confronted not only with discrepancies found but also with nature and source thereof and it had emerged that source of income of assessee was from its business operations, income surrendered by assessee during survey could not be brought to tax under deeming provisions of section 69A and 69B and same had been rightly offered to tax by assessee under head of business income - Held, yes [Paras 29 and 30] [In favour of assessee] Hon'ble Chandigarh bench of ITAT in the case of Shri Krishan Kumar v. Deputy Commissioner of Income-tax [2024] 162 taxmann.com 518 (Chandigarh - Trib.) in decision dated 04.01.2024 under identical circumstances has held as under:
Section 28(i), read with sections 69A,69and 115BBE, of the Income-tax Act, 1961
- Business income - Chargeable as (Amount disclosed at survey) - Assessment year 2019-20 - During course of survey under section 133A, assessee surrendered excess stock and excess cash found stating that same was to be taxed as business income - Assessing Officer, however, treated said surrendered amount as unexplained investment under sections 69A and 69B and charged same to tax as per provisions of section 115BBE - Whether since during survey proceedings, assessee was confronted not only with discrepancies found but also with nature and source thereof and it had emerged that source of income of assessee was from its business operations, income surrendered by assessee during survey and cash found could not be brought to tax under deeming provisions of sections 69 and 69A and same had been rightly offered to tax by assessee under head 'business income' - Held , yes [Paras 30and 33] [In favour of assessee] Hon'ble Chandigarh bench of ITAT in the case of Parmod Singla v. ACIT [2023] 154 taxmann.com 347 (Chandigarh - Trib.) [24-07-2023] in decision dated 24.07.2023 under identical circumstances has held as under:
Section 69, read with sections 69A, 115BBE, 133A and 28(i), of the Income-tax Act, 1961 Unexplained investments (Applicability of provision) - Assessment year 2017-18 - A survey was conducted in business premises of assessee during which assessee surrendered certain amount towards unaccounted advances, stock and cash in hand - Said amount was offered in return of income at rate of 30 per cent but Assessing Officer held that as per provisions of section 115BBE read with sections 69 and 69A, amount so surrendered was taxable of rate of 60 per cent - Whether mere fact that survey/search proceedings have been initiated at business premises of assessee doesn't mandate Assessing officer to automatically invoke deeming provisions of sections 69 and 69A; before invoking deeming provisions, he has to call for explanation of assessee and only where explanation so offered is not found satisfactory, he can proceed and invoke deeming provisions - Held, yes -Whether since assessee had been confronted with not just discrepancy so found during course of survey but nature and source of income surrendered during course of survey proceedings and it was clearly emerging that source of such income was from his business operations, income so surrendered could not be brought to tax under deeming provisions of sections Sunil Kumar Gattani vs. ACIT 69 and 69A and same had been rightly offered to tax under head "business income"- Held, yes [Paras 32 and 33] [In favour of assessee] Hon'ble Chandigarh Bench in case of Sham Jewellers v. Dy. CIT [IT Appeal No. 375 (Chd.) of 2022, dated 22-8-2022] has held as under: "10.17 Ground Nos. 8 & 9 challenge the action of the lower authorities in applying the provisions of section 115BBE and thereby charging tax at the rate of 60%. The main thrust of the arguments of the Ld. AR has been that all the additions made or sustained relate only to the business income of the Assessee and that nowhere in the assessment order has it been alleged that some other source of income had been detected which gave rise to additional income. It is seen that during the course of assessment proceedings, the various explanations submitted by the Assessee have duly mentioned that the surrendered income was derived from the business. A perusal of the assessment order would also show that nowhere in the body of the assessment order, the AO has even contradicted this explanation of the Assessee. The AO has not brought on record any iota of evidence to demonstrate that the Assessee had any other source of income except income from business and, therefore, it is our considered view that deeming such income under the provisions of sections 68 or 69 would not hold good. In our view, in such a situation, the AO could not have legally and validly resorted to taxing the income of the Assessee at the rate of 60% in terms of provisions of section 115BBE of the Act."
Hon'ble Chennai bench of ITAT in its decision dated 20.4.2023 in the case of M/s Overseas Leathers vs DCIT in ITA No.962/Chny/2022 has held as under:
16. In this view of the matter and considering facts and circumstances of the case and also by following the case laws discussed herein above, we are of the considered view that when the assessee has explained source for excess stock found during the course of survey, is out of income generated from current year business and explanation offered by the assessee is plausible explanation, then income offered towards excess stock cannot be treated as unexplained investmentu/s. 69B of the Act, and also provisions of section 115BBE of the Act.
The AO and the Ld. CIT(A) without appreciating relevant facts assessed additional income offered towards excess stock as unexplained investmentu/s. 69B of the Act and levied taxu/s. 115BBE of the Act. Thus, we set aside the order passed by the ld. CIT(A) and direct the AO to assess additional income offered towards excess stock found during the course of survey under the head profits and gains of business and profession as considered by the assessee. [2024] 163 taxmann.com 666 (Bangalore - Trib.) ITO v. Ramachandra Setty & Sons Section 28(i) , read with sections 69B and 115BBE , of the Income-tax Act, 1961
- Business income - Chargeable as (Excess stock) - Assessment year 2017-18 - Assessee was in jewellery business - During search under section 132(4), it had admitted excess stock found in business and residential premises of assessee as business income and offered same for taxation by bringing same to P&L account Sunil Kumar Gattani vs. ACIT of assessee - Assessing Officer, however, treated stock of jewellery found as undisclosed investment under section 69B and levied tax undersection 115BBE - Whether since assessee had explained that source was from business activities and except stock difference no other investment with any other asset was found, this unexplained excess stock surrendered as business income was to be assessed as business income and not as unexplained investment under section 69B read with section11BBE - Held, yes [Para 18.2] [In favour of assessee] Further ld. CIT(A) without considering the submission made, statements recorded and case laws relied upon by assessee, arbitrarily held that cash found does not pertains to undisclosed commission income which is offered for taxation by assessee. It is also relevant to state that once the assessee explained the source of the cash and same is source is already taxed by the ld. AO than without bring any corroborative evidence on record and again making addition of Rs.1,56,15,565/- u/s 69A on account cash found during search would tantamount to double addition of Income, which is against the principle of natural justice. In view of above, it is submitted that additional income surrendered by assessee during search has been rightly offered under the head "Business Income" and action of ld.AO in taxing additional incomeu/s 69A and invoking the provisions of section 115BBE is not in accordance with law.
Grounds of Appeal No. 3 to 3.2:
In these grounds of appeal, assessee has challenged the action of ld. CIT(A) in confirming the addition of Rs.99,29,064/- u/s 69 of the Income Tax Act made by ld. AO on account of jewellery found during the course of search. Brief facts pertaining to the grounds of appeal are that during the course of search at assessee's premises, certain jewellery was found and seized, details of which is as under:
Particulars Gold Diamond Total Value
Anx. Gross Wt. (in Net Wt. (in Wt.
Value (Rs.) Value (Rs.)
gms) gms) (in cts.)
JF -1 Gold 2,350.26 1,775.69 60,23,012/- 13.50 1,99,550/- 62,22,562/-
JF-2 Gold 2,619.09 2,180.85 62,50,132/- 125.78 29,84,000/- 92,34,132/-
Total 4,969.35 3,956.54 1,22,73,144/- 139.28 31,83,550/- 1,54,56,694/-
SF Silver 23,064.00 23,064.00 7,27,845/- 7,27,845/-
Total 1,61,84,539/-
Sunil Kumar Gattani vs. ACIT
From perusal of above, it is apparent that in search, total gold jewellery worth 3956.540 gms. (net) and silver articles of 23.064 Kg. was found. The total jewellery so found was valued at Rs. 1,61,84,539/- (i.e. Rs. 1,54,56,694/- Gold Jewellery & Rs. 7,27,845/- Silver Jewellery), out of which jewellery of Rs. 99,29,064/- was seized by the department. During the course of search, in statements of assessee as recordedu/s 132(4) on 7.9.2018, certain queries were raised from assessee w.r.t. jewellery so found, which are as under:
iz'u%&8- vkids fuokl LFkku ij ryk'kh ,oa tCrh dh dk;Zokgh ds nkSjku HkkSfrd ryk'kh esa izFke ry fLFkr vkids 'k;u d{k esa lksus ,oa pkWna h ds vkHkw"k.k vkfn ik;s x;s gS ftldk foHkkxh; ewY;kadudrkZ }kjk vkids ,oa nks Lora= xokgksa dh mifLFkr esa ewY;kadu djk;k x;k gSAa foHkkxh; ewY;kadu drkZ }kjk lksus ds vkHkw"k.k vkfn dk dqy ewY;kadu 'kq) otu (Net Weight) 3956-540 xzke ewY;& 1]54]56]694@& :Ik;s ,oa pknh ds crZu] flDds] bR;kfn dk dqy otu 23064 xzke ewY;& 7]27]845@& :Ik;s ewY;kadu fd;k x;k gSa ftls Annexure-JF ds :Ik esa lwphc) fd;k x;k gSA d`Ik;k bl Annexure JF dks ns[kdj crk;s D;k vki bl Valuation ls lger gS ;fn gkWa rks bu leLr ik;s x;s lksus ,oa pkaWnh ds vkHkw"k.k bR;kfn dh [kjhn dk L=ksr crk;sA iz'u%&8- th] gkWa eSua s Annexure-JF dks vPNh rjg ls ns[k fy;k gS eSa foHkkx ds Registered Vaguer }kjk fd;s x;s Valuation ls iw.kZr% lger gWw ;g Valuation esjh ,oa nks Lora= xokgksa dh mifLFkfr esa fy;k x;k gSA esjs fuokl LFkku ls izkIr pkWna h ds crZuksa ds L=ksr ds :Ik esa eq>s ;g dguk gS fd dqN pkanh ds crZu eq>s iq'rSuh :Ik ls feys Fks ,oa dqN gesa fofHkUu lekjksg ,oa voljksa ij esjs fj'rsnkjksa ,oa feyusokyksa ls migkj Lo:Ik izkIr gqvk gSA pkWna h ds flDdksa ,oa flYyh dh [kjhn dk L=ksr esjs ikl vHkh miyC/k ugh gS ;g eSa foHkkx esa ckn esa izLrqr dj nwx a kA lksus ds vkHkw"k.k vkfn ds L=ksr ds lac/a k esa eq>s ;g dguk gS fd eq>s ,oa esjh iRuh dks gekjs fookg ds volj ij dqN lksus ds vkHkw"k.k esjh iRuh ds ihgj okyks ls migkj Lo:Ik feys Fks ftlds lac/a k esa esjh iRuh Jherh dfork xVkuh dh fnukad 31-10-1993 ds Balance Sheet dh dkWih ,oa fnukad 16-06-1999 ds Valuation Report dh dkWih izLrqr dj jgk gWw ftls vkids }kjk Annexure-AS ds Exhibit-1 ds i`"B la[;k 40 ls 44 ds :Ik esa lwphc) dj tCr fd;k x;k gSA dqN lksus dh ToSyjh ds vkHkw"k.k vkfn eSua s esjh iRuh dh vk; ls [kjhns gS ftuds lk{; ds :Ik esa [kjhn ds fcy dh dkWfi;kWa vkidks izLrqr dj jgk gWw ftls vki }kjk Annexure AS Exhibit-1 ds i`"B la[;k 45 ls 57 rd es lwPkhc) dj tCr fd;k x;k gSA 'ks"k ToSyjh dh [kjhn ds lac/a k esa esjs ikl dksbZ nLrkosth lk{; miyC/k ugh gSAa Sunil Kumar Gattani vs. ACIT Thus, during the course of search itself assessee clarified that:
- Some of the Silver utensils were inherited and some were received as gifts from time to time
- Some Gold ornaments were received by his wife on the occasion of their marriage and in support of this fact copy of balance sheet of his wife Smt. Kavita Gattani as well as valuation report dated 16.06.1999 is finding place as part of seized documents. (which was marked as Annexure AS Exhibit 1 pages 40 to 44)
- Some of the jewellery was purchased by assessee and for which, copies of certain bills were furnished (which were marked as Annexure AS Exhibit 1 pages 45 to 57) Thereafter, search officials recorded statement Question No.9, which reads as under:
Ikz'u%&9-vkids }kjk izLrqr fnukad 16-06-1999 (Jewellery as on 31.03.1998) dh Valuation Report dk feyku ikbZ xbZ ToSyfj;ksa ls djus ij dksbZ Hkh Item dk feyku ik;h xbZ ToSyjh ls ugh gks jgk gS vr% bl lac/a k esa vkidksa fdlh izdkj dh NqV ugh nh tk jgh gSA vki }kjk Lo;a dh fu;fer vk; ls [kjhnh xbZ ToSyjh ds lac/a k esa tks Bills izLrqr fd;s x;s gSa muds vuqlkj vkidks yxHkx 875-00 xzke dh NqV nsus ds i'pkr 'ks"k ToSyjh dks foHkkx }kjk tCr fd;k tk jgk gS bl ckjsa esa vkidks D;k dguk gSAa mRrj%& ;fn foHkkx }kjk eq>s esjs }kjk izLrqr fcyksa ds vuqlkj 875-00 xzke ToSyjh dh NqV nsus ds Ik'pkr~ ;fn 'ks"k ToSyjh tCr dh tkrh gS rks eq>s blesa dksbZ vkifRr ugh gSA ;gkWa eSa ;g Hkh dguk pkgrk gWw fd esjs }kjk fnukad 16-06-1999 dh tks Valuation Report izLrqr dh xbZ gS muesa ls vf/kdka'k ToSyjh iqjkuh gks tkus ds otg ls rqM+okdj ubZ cukbZ xbZ gS ftlds lac/a k esa izekf.kd nLrkosth lk{; eSa foHkkx esa ckn esa izLrqr dj nwx a kA From perusal of above, it is evident that search officials queried that since itemised jewellery found did not match with the jewellery mentioned in the Valuation report dated 16.06.1999 (jewellery as on 31.03.1998), jewellery except weighing 875 gms., which was purchased by assessee was proposed to be seized. In response to the same, it was clarified by assessee that some of the jewellery being very old, was exchanged/ melted and remanufactured, however departmental authorities without considering the submission, obtained surrender from his assessee w.r.t. balance jewellery. Your goodself would appreciate that assessee had duly explained source of jewellery as well as reason for difference in itemwise breakup, still surrender was obtained from him. Soon after search, after obtaining copies of statements recorded, upon realizing that statements were not recorded in the manner and sense in which the same were given, assessee furnished detailed affidavit dated 22.10.2018 (APB 45-48) before DDIT, Investigation-2, Jaipur, whereby statements givenu/s 132(4) w.r.t. jewellery were retracted. It was also explained by assesse that since statements Sunil Kumar Gattani vs. ACIT were recorded in charged atmosphere, assessee being on medication for some neurological issue, could not properly appreciate certain queries and clarified in the affiant that source of entire jewellery found in search was explained. Assesse furnished following documents with retraction affidavits:
1. Prescription of Neuro psychiatrist showing assessee being on medication for some mental health issue (APB 49);
2. Details of total jewellery found and seized/not seized (APB 50-52)
3. Vouchers of conversion of jewellery on sample basis (APB 53-56) Thereafter, in post search proceedings, statements of assessee were again recordedu/s 131 on 21.01.2019 (APB 38-42), whereby various queries were raised, however there was no query whatsoever with regards to affidavit filed by assessee before Investigation Wing. However, while completing the assessment, ld. AO has made addition on account of entire jewellery seized of Rs.99,29,064/-
for the reason that itemized description of jewellery found did not match with bills/valuation report dated 16.06.1999 submitted by assessee. Also, adverse inference was drawn as assessee had surrendered jewellery worth Rs.83,92,594/- in statements recorded and for the reason that fact of declaration of jewellery under VDIS 1997 was not mentioned in statements recordedu/s 132(4).
With this background, source of entire jewellery is explained as under:
As stated above also, assessee and his wife had acquired certain gold jewellery from time to time out of their disclosed sources, copy of certain bills were also found and seized by the department during the course of search and are available in the seized documents. The payments for these bills were made by the assessee and his family members and were made out of the regular bank accounts and this fact is also found mentioned in the bills itself which are available in the seized material. Details of which are tabulated in Annexure A and Annexure Band same are reproduced as under for ready reference:-
Shri Sunil Kumar Gattani Seized Paper S. Gross Name Bill No. APB No Weight Exhibit Page No. Sunil Kumar Gattani vs. ACIT 646.78 Smt. Kavita Gattani (Assessee's wife) Seized Paper Bill Gross S. No Name APB No. Weight Exhibit Page No. Nemi Chand Bamalwa & Sons 546.61 It is further submitted that, Bills/Invoices of jewellery as mentioned in above table are already seized during the course of search from the possession of assessee.
Relevant Exhibits and Page No. as listed during search are already mentioned in aforesaid table.
Thus, the gold jewellery declared at 4,324.50 gms (Gross Wt.) almost tally with gold jewellery found during the course of search and there is difference of only 644.85 gram which is very nominal looking into family statute of assessee. Even if, family status of assessee is ignored than also excess Gold Jewellery of 644.85 grams duly explained as CBDT vide instructions dated 11.05.1994 according to which till 800 Gms. of jewellery will be considered explained. Further with regard to the silver articles found during the course of search weighing around 23.064 Kgs. valued at Rs. 7,27,845/- , it is submitted that Smt. Kavita Gattani, wife of the assessee has declared silver articles of 22.600 Kg. in VDIS 97. Copy of VDIS, 1997 is at APB 67 - 70. Since the silver articles found are approximately same as were declared earlier, the silver articles found is fully explained.
Sunil Kumar Gattani vs. ACIT Thereafter, forced surrender of Rs. 83,92,594/- was obtained from assessee while recording of statementsu/s 132(4) on 07.9.2018 at the residential premises at 14, Keshav Nagar, Civil Lines, Jaipur on account of jewellery which was alleged as found in excess of the declared jewellery. However, as stated above, after conclusion of the search, assessee obtained the copies of statements recorded and also the copies of all the loose papers found and seized during the course of search from the possession of the assessee at his residence and business premises. On receipts of the copies, assessee reconciled the total jewellery found and as declared / purchased from time to time by himself and by his wife Smt. Kavita Gattani out of the declared sources. Accordingly vide letter dt. 02.10.2018 addressed to the Dy. Director of Investigation-2, Jaipur assessee filed a reconciliation statement supported by an affidavit and evidences for purchases, declaration under VDIS, bills for re-making of jewellery, jewellery declared in earlier search carried out at the residence in the year 1992, jewellery declared in the returns of wealth filed. The copies of the bills and valuation report are also seized from the residence of the assessee. As per the reconciliation chart total jewellery as found and declared is in parity. The reconciliation of the jewellery is as under:
(A) Holding of Mrs. Kavita Gattani S.No. Particulars Gross Weight in APB Grams
1. As per VDIS-97, Wealth Tax Return and valuation 2,539.61 67 - 70 reports dated 16.06.1999
2. Jewellery purchased between 2007 to 2014, as per 546.61 71 - 83 bills available. (Bills wise Sheet marked as Annexure A) Total (A) 3,086.22 (B) Holding of Mr. Sunil Gattani S.No. Period of Holding Assets Gross Weight in Remark Grams
1. As per Search conducted in Financial Year 1992-93 591.50 71 - 83 (APB)
2. Jewellery purchased between 2012 to 2017, as per 646.78 36 - 39 bills available (Bills wise Sheet marked as Annexure B) (WS) Total (B) 1,238.28 Sunil Kumar Gattani vs. ACIT Total Jewellery owned by Mr. Sunil Gattani and Mrs. Kavita Gattani (A) Jewellery owned by Mrs. Kavita Gattani 3,086.22 (B) Jewellery owned by Mr. Sunil Gattani 1,238.28 Grand Total 4,324.50 Thus, the gold jewellery declared at 4,324.50 gms (Gross Wt.). almost tally with gold jewellery found during the course of search and there is difference of only 644.85 gram which is duly explained looking into family statute of assessee.
Even if, family status of assessee is ignored than also excess Gold Jewellery of 644.85 grams duly explained as CBDT vide instructions dated 11.05.1994 looking to the social status and also the ceremonial receipts of jewellery has specified the 500 gms. gold jewellery in the case of married lady, 250 gm. in case of unmarried lady and 100 gm. in case of male member as explained. In this regard it is submitted that assessee's family comprises of four members inclusive of 3 male members & 1 married lady and as per the CBDT instructions dated 11.05.1994, the total jewellery which could be held as explained in addition to the jewellery purchased through proper invoices would be as under:
Gold Jewellery 100 × 3 = 300 [male members]
500 × 1 = 500 [married female members]
Total 800 gms.
This view of the CBDT has been approved by the Hon'ble Karnataka High Court in the case of Pati Devi Vs. ITO reported in 240 ITR 727. The Hon'ble Rajasthan High Court has also taken the view that no addition could be made to the extent of the jewellery covered by the above stated instructions issued by CBDT in this regard in the case of CIT Vs. Kailash Chand Sharma reported in 146 Taxman 376 more particularly when no wealth tax returns were filed, the observations of the Hon'ble Court are as under:
"Section 69 of the Income Tax Act, 1961 - Unexplained investments - Block assessment period 1988-89 to 1998-99 - During search and seizure operation conducted at residential premises of assessee, Assessing Officer found jewellery in possession of assessee and his family members - Assessing Officer after allowing credit of jewellery declared by ladies in their respective wealth - tax returns had taxed remaining jewellery as unexplained jewellery in hands of assessee and added its value as unexplained investment - On appeal, Commissioner (Appeals) after giving benefit of CBDT instructions dated 11.05.1994 held that assessee and his family members were entitled to further Sunil Kumar Gattani vs. ACIT exemption of gold jewellery - He further held that remaining jewellery were undisclosed investment and addition to that extent was retained as income from undisclosed sources - On further appeal, assessee contended that two ladies had been wealth tax assessees up to assessment year 1985-86 only and had declared the jewellery and ornaments up to that time in their wealth tax return and later on they received some gold ornaments on occasion of marriage of brother of wife of assessee and some were partly acquired out of both ladies were assessed to wealth tax much prior to block period and they were not assessed to wealth tax at time of search and in view of status of assessee and his family members and in view of CBDT instruction No. 1916 dated 11.05.1994, deleted the addition - Whether Tribunal was justified - Held, Yes."
Further reliance is placed on the following decision:
Vibhu Aggarwal vs. Deputy Commissioner of Income-tax, CC-06, New Delhi [2018] 93 taxmann.com 275 (Delhi - Trib.)/[2018] 170 ITD 580 (Delhi - Trib.)[04- 05-2018] Section 69A of the Income-tax Act, 1961 - Unexplained moneys (Jewellery) - Assessment year 2011-12 - During search at assessee's residential premises, Jewellery of 2531.5 gms. was found - Assessing Officer had given assessee benefit of 950 gms. on account of wife and two children and balance was added as unexplained investment under section 69A - Assessee belonged to a wealthy family where gifting of jewellery possessed by each of family members was customary and jewellery was gifted to assessee and his wife by their parents and grandparents and other relatives at time of their marriage, and also on several occasions after that, such as birth of their two children, marriage anniversaries, etc. - Whether in view of Instruction No. 1916, dated 11-5-1994, excess jewellery found in case of assessee, was very nominal, and was very much reasonable and, thus, keeping in mind high status and more customary practices addition was to be deleted - Held, yes [Para 6.1][In favour of assessee] 117 taxmann.com 90 N. Roja v. ACIT, Central Circle-1 (Cuttack - Trib.) Section 69A, read with section 132, of the Income-tax Act, 1961 - Unexplained moneys (Jewellery ) - Assessment Years 2010-11 to 2014-15 & 2016-17 - CBDT Instruction No. 1916, dated 11-5-1996 stipulates quantity of jewellery found during search which would generally be held by family members of an assessee belonging to an ordinary Hindu household - Whether unless Revenue shows anything to contrary, it can safely be presumed that source to extent of jewellery stated in said instruction stands explained - Held, yes - Gold jewellery of 2417.290 grams was found and seized during search - 1650 grams belonging to different family members stood explained by Instruction No.1916 - Further, Assessing Officer himself had mentioned in assessment order that assessee had explained sources of 682 grams of gold jewellery - However, with regard to remaining 85.29 grams, no corroborative evidence had been filed by assessee -
Whether addition of value of 85.29 grams was to be made - Held, yes [Para 43] Sunil Kumar Gattani vs. ACIT [Partly in favour of assessee] 45 DTR 290 CIT Vs. Ratanlal Vyaparilal Jain (Guj.) Search and seizure - Block assessment - Computation of undisclosed income - Seizure of Jewellery - Instruction No. 1916, dt. 11th May, 1992 which lays down guidelines for seizure of jewellery and ornaments in the course of search takes into account the quantity of jewellery which would generally be held by the family members of an assessee - Though the said circular has been issued for the purpose of laying down guidelines for seizure of jewellery, unless anything contrary is shown, it can be safely presumed that the source to the extent of the jewellery stated in the circular stands explained - Hence, Tribunal committed no legal error in treating the extent of jewellery specified in the said circular to be a reasonable quantity and in deleting addition on that basis. Thus after claiming deduction on account of the jewellery purchases through proper invoices and the benefit of the CBDT instructions as stated above, the jewellery found at various places deserves to be accepted. Silver Articles During the course of search total silver articles of 23.064 Kgs. valued at Rs. 7,27,845/- was found. As against this Smt. Kavita Gattani, wife of the assessee has declared silver articles of 22.600 Kg. in VDIS 97. Copy of valuation report and certificate is at APB 45-47. Since the silver articles found are approximately same as were declared earlier, the silver articles found is fully explained. It is further submitted that statements were recorded in charged atmosphere and VDIS 1997 being 21 years old scheme, assessee could not recollect such facts spontaneously, however fact remains that due taxes were paid by assessee in respect of jewellery declared in VDIS. Declaration under VDIS is part of record of Income Tax Department and same can not be burnished aside, merely because assesse could not tell these facts under the charged atmosphere during search. Your goodself would further appreciate that assessee has duly explained source of entire jewellery found during the course of search, however ld.AO has disregarded the same in a very casual manner. Also, it is settled judicial position that so far there is no dispute with regard to weight of jewellery found during search and that disclosed in wealth tax returns, or in earlier searches, or in VDIS etc., no addition can be made solely sue to mismatch in itemized description of jewellery. In this regard, reliance is placed on:
Mr. Hemraj K. Jethani V/s Dy. Commissioner of Income Tax
16. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that the assessee has explained that his wife Smt.Nirmala Hemraj Jethani has disclosed the diamond jewellery 339.800 Grm. valued at Rs.6,53,340/- under VDIS and by filing wealth Sunil Kumar Gattani vs. ACIT tax return as mentioned in the table reproduced in paragraph 14 of this order. In support the assessee has filed copy of VDIS disclosure along with the certificate and copy of wealth tax return of Smt. Nirmala Hemraj Jethani. It was not accepted by the AO on the ground that the jewellery disclosed under VDIS does not match with the jewellery found at the time of search. Merely because the jewellery disclosed under VDIS did not match with the jewellery found at the time of search does not mean that the jewellery found at the time of search is unexplained jewellery inasmuch as it is not the case of the Revenue that the jewellery which was disclosed by the assessee's wife under VDIS and in the return of wealth tax was over and above found at the time of search. Since no other jewellery was found during the course of search and keeping in view that the AO has accepted the gold jewellery in toto and diamond jewellery valued at Rs.40,000/- we are of the view that the addition of the remaining amount of diamond jewellery of Rs.3,80,374/- is not sustainable and accordingly.
ITA Nos.1648 /PUN/15 Rajkumar B. Agarwal Vs. DCIT, Central Circle-1(2), Pune Para 4.3 The Revenue authorities have jettisoned the assessee's contention by holding that one-to-one match of the description of jewellery items is essential to claim credit against the declarations made in Wealth-tax returns/VDIS. In our considered opinion, this view point has no legal legs to stand on. So long as the total gold jewellery in weight found at the time of search matches with the earlier declarations made by the assesse in his Wealth-tax returns and VDIS, there can be no question of making any addition simply on the ground that the description of items in the list declared under Wealth-tax returns/VDIS is different from those actually found. If such is a position, then an inference has to be drawn that the items initially declared in Wealth-tax returns/VDIS were converted into the items of jewellery found at the time of search. A contrary stand can be taken only if the authorities demonstrate that the jewellery items given in the Wealth-tax returns/VDIS were over and above the items of gold jewellery disputed. We are confronted with a situation in which total jewellery found at the time of search as per the panchnamas tallies with the gold jewellery declarations by the assessee and his family members in Wealth-tax returns/VDIS, save and except the additional income offered by the assessee in his return for the A.Y. 2006-07. In such a scenario, there can be no question of making any addition in respect of gold jewellery by holding that description of items found at the time of search did not match with the items declared in Wealth-tax returns/VDIS when there is no overall difference in the weight of jewellery. We, therefore, order to delete the additions of Rs.17,10,000/- and Rs.5 lakhs. The corresponding grounds are, therefore, allowed.
I.T.A.No.357/Mds/2016 The Dy. Commissioner of Income-tax Vs Smt. Shanmugapriya Para 5 Sunil Kumar Gattani vs. ACIT The Assessing Officer rejected this claim of the assessee on the ground that the item of jewellery mentioned in the VDIS does not match with the inventory of the jewellery seized during the course of search operation. This Tribunal is of the considered opinion that fashion in jewellery is changing day by day and it is the practice of every lady to change the pattern of jewellery in accordance with the latest trend. Therefore, what is to be seen is whether the quantum of jewellery declared matches with the jewellery found during the course of search operation. Therefore, this Tribunal is of the considered opinion that when the assessee's mother-in-law Late Smt. Prema declared 3650 gms of gold jewellery under VDIS, the Assessing Officer is expected to give credit to the jewellery to the extent of 3650 gms. In other words, the jewellery declared by the assessee's mother-in law Late Smt. Prema is very much available at the residence of the assessee. Therefore, this Tribunal is of the considered opinion that the CIT(A) has rightly directed the Assessing Officer to give credit to the jewellery declared under the VDIS by the assessee's mother-in law Late Smt. Prema. Therefore, this Tribunal do not find any reason to interfere with the order of the CIT(A) and accordingly the same is confirmed.
180 DTR (Del) (Trib) 274 Krishan Kumar Modi Vs ACIT, Central Circle - 2, New Delhi Para 8.11 & 8.12 8.11 We have carefully considered the rival submissions and the relevant material and ratio of the orders and judgment relied by both the parties, at the very outset, we note that undisputedly the quantum of jewellery declared in the wealth tax returns of the assessee and his family members was much higher than the jewellery found during the course of search. CBDT Instruction dated 11- 5-1994 provides that no seizure should be made in the search for the jewellery held by the ladies at 500 gms, girls at 250 gms and males at 100 gms each. Though the Instruction speaks of not seizing the same, the extended meaning of the same shows the intention that the jewellery is to be treated as explained one and is not to be treated as unexplained for the purpose of Income-tax Act. This instruction came to be considered by several Benches all over India in which it has been held that it would be relevant for the purposes of making addition as well. The Hon'ble Rajasthan High Court in the case CIT v. Kailash Chand Sharma 147 Taxman 376 has upheld this view. When this instruction is applied to the facts of the case, we observe that the possession of gold jewellery of 38,748.28gms, which is far less than declared jewellery of 46,634.842 gms it cannot be held to be unexplained.
8.12 Further, in so far as the allegation of mismatch of description of jewellery, we are of the view that it is well-known fact that Indian ladies keep changing design of jewellery from time to time. Further, the said fact was also stated by the assessee's wife during the course of statement recorded during the course of search and evidence in support of such remaking/conversion was also filed before the assessing officer, which was not all considered. Having in mind Sunil Kumar Gattani vs. ACIT detailed explanation rendered by the assessee we are inclined to treat the entire jewellery found with assessee as fully explained.
Further ld. CIT(A), while rejecting the claim of assessee by stating that since no evidence of jewellery melted and remanufactured were provided, thus explanation provided by the assessee is far stretched. Further since assessee during the course of search does not mention about VDIS scheme, thus same is also not maintainable neither at assessment nor at appellate stage. In this regard it is submitted that ld. CIT(A) failed to considered the assessee letter dated 22.10.2018 (APB 43 - 56), wherein statement recorded during the course of search were retracted along with affidavit and other supporting, wherein assessee furnished the detailed affidavit (APB 45 - 48) before the ld. DDIT Investigation - 2 not only providing the details of VDIS Schemen but also mentioning about the conversion of gold jewellery with the necessary supportings which were never refutted by ld. CIT(A) as well as ld. AO. Thus the observation of ld. CIT(A) while deciding the appeal are misplaced and therefore additions related to jewellery deserves to be deleted Ground of Appeal No. 4:
In this ground of appeal, assessee has challenged the action of ld. CIT(A) in confirming the applicability of provisions of section 115BBE in respect of jewellery found during the course of search.
In this regard, it is submitted that jewellery found during search, for which addition has been confirmed by ld. CIT(A) by alleging the same unexplained, is actually fully explained in view of submission made above. It is therefore submitted that this ground of appeal is consequential in nature, therefore no separate submission is made in this regard.
Ground of Appeal No. 5 to 5.4:
In these grounds of appeal, assessee has challenged the action of ld. CIT(A) in confirming addition of Rs.1069/- made by ld. AOu/s 69 on the basis of certain stray documents found during the course of search at the premises of some third party.
Brief facts pertaining to the grounds of appeal as stated above are that aforesaid addition has been made by ld.AO on presumption that assessee has rotated the funds of M/s Uttam Chand Deshraj and by further presuming that assessee might have received commission on funds so rotated.
In this regard, at the outset it is submitted that ld.AO has made addition on account of brokerage incomeu/s 69, whereas title of section 69 reads "Unexplained Investments". From perusal of section 69, it is evident that the provisions of this section are applicable when assessee makes certain investments which are not recorded in the books of accounts, if any maintained by assessee for any source of income, and the assessee does not offer any Sunil Kumar Gattani vs. ACIT explanation about the nature and source of investment or explanation offered by him is not found to be satisfactory. Since, in the instant case, there is no allegation regarding any investment made by assessee in the immediately preceding Assessment Year, provisions of section 69 are not applicable and have been wrongly invoked by ld.AO.
It is further submitted that assessee was engaged in the genuine business of finance broking, income from which is duly recorded in books of accounts. In fact, whatever documents were found during search in the case of assessee, the same were also duly explained by assessee and no adverse inference was drawn by ld.AO in respect of any single document. However, as stated above, addition has been made by ld. AO by solely and heavily relying upon documents found in search in the case of Oswal Soap Group, which is not connected with assessee in any manner.
Without prejudice, it is further submitted that ld.AO has computed alleged undisclosed brokerage even on the principal amount of loan given as well as received back as mentioned in seized data relied upon by ld. AO. Further, your honours would appreciate that it is a common practice that brokerage is always paid by borrower as a percentage of interest paid and not on the principal amount of loan and therefore notional brokerage computed by ld.AO in not in accordance with law. It is submitted that ld.AO has computed brokerage on his own theories and without the practice going on in market.
Without prejudice to above, It is further submitted that the documents relied upon by ld.AO did not find any mention regarding payment of brokerage and thus ld.AO made addition of Rs.59,432/- completely on Notional basis, whereas no such income was actually received by assessee. Your goodself would appreciate that such action of ld.AO is against the principle of taxation, according to which only "Real Income" can be taxed.
Hon'ble ITAT, Mumbai, Special Bench in the case of GTC Industries vs., ACIT 164 ITD 1 (SB) has observed as under :
"46. "Ultimately the entire case of Revenue hinges upon the presumption that assessee is bound to have some large share in so called secret money in the form of premium and its circulation. However, this presumption or suspicion how strong it may appear to be true but needs to be corroborated by some evidence to establish a link that GTC actually had some kind of a share in such secret money, It is quite a trite law that suspicion howsoever strong may be but cannot be the basis of addition except for some material evidence record. The theory of preponderance of probability is applied to weigh the evidences of either side and draw a conclusion in favour of a party which has more favorable factors in his side. The conclusions have to be drawn on the basis of certain admitted facts and materials and not on the basis of presumptions of facts that might go against the assessee. Once nothing has been proved against the assessee with aid of any direct material especially when various rounds of investigations have been carried out then nothing can be implicated against assessee."
Sunil Kumar Gattani vs. ACIT It is further submitted that ld. CIT(A) confirm the addition made by ld.AO solely on presumption basis that unaccounted cash of Shri Ajay Jain has been routed thorough assessee, without bringing any corroborative evidence on record and solely relying on the statement of Shri Ajay Jain. In this regard it is firstly submitted that assessee only admitted a fact that he has been engaged in the business of genuine finance brokerage and earned brokerage on fund rotated through him and same being duly recorded in the books of accounts. However, it does not mean that assessee has rotated the unaccounted funds of Shri Ajay Jain as alleged by the ld. CIT(A).
It is further submitted that addition has been made in the hands of assessee solely on the basis of documents found and seized during the course of search at Shri Uttam Chand Jain and statement of Shri Ajay Jain, than since the assessee had no connection with the said person, an opportunity to cross examination of such person on whose statement heavy reliance is placed by ld. AO as well as by ld. CIT(A), which has not been allowed in the present case and thus against the principle of natural justice. In this regard reliance is placed on the following decisions -
Hon'ble Apex court in the case of CCE Vs. Andaman Timber Industries, (324) ELT 641 has that:
"6. According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross- examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them.
7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the Sunil Kumar Gattani vs. ACIT goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above."
Hon'ble Apex Court in the case of CIT vs Odeon Builders Pvt. Ltd. in Civil Appeal No. 9604-9605 of 2018 has held as under:
S. 68/69 Bogus Purchases: Disallowance cannot be made solely on third party information without subjecting it to further scrutiny. The assessee has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return. The AO has also not provided a copy of the statements to the assessee, thus denying it opportunity of cross examination. In view of above, it is submitted that addition of Rs. 1,069/- as confirmed by ld. CIT(A) solely on presumption basis and deserves to be deleted.
6. In addition to the above written submission, the ld. AR appearing on behalf of the assessee also submitted that ;
In continuation to our earlier submission filed before Hon'ble Bench on the last date of hearing and in reference to Report of ld. AO dated 15.10.2025 following facts are submitted as under--
• Non Issuance of Noticeu/s 143(2) of the Act Ld. AO in his report dated 15.10.2025 has stated that assessment orderu/s 143(3) of the Act has been passed after following the relevant provisions of the Act and further it is stated that noticeu/s 143(2) of the Act was issued on 05.11.2020. In this regard, it is submitted that although Ld. AO has claimed to have issued notice under section 143(2) of the Income-tax Act, 1961, in the absence of any attachment available on Income Tax Portal, there is no evidence of valid issuance/service of notice and proceedings completed without such notice are not in accordance with law and deserves to be quashed.
• No Independent Application of Mind by ld. AO In this regard, it is submitted that in response to contention raised by assessee regarding approval granted by ld. JCITu/s 153D of the Act being mechanical one, ld. AO in his report dated 15.10.2025 has submitted--
"Approvalu/s 153D of I.T. Act was accorded by the JCIT, Central Range, Jaipur dated 13.04.2021. The Approval is not only mechanical one, it was accorded Sunil Kumar Gattani vs. ACIT after discussion with the A.O. time to time during the assessment proceedings and verification and examination of material available on record, seized materials, appraised report etc."
From perusal of aforesaid para, it is evident that ld. AO has passed impugned order from time to time after discussion held with Ld. JCIT, which clearly shows absence of application of independent mind by the Ld. AO. It is submitted that the power of ld.AO under the Act is quasi-judicial in nature, requiring independent evaluation of facts, evidence, and submissions, however in present case, ld. AO acted mechanically on the dictates of a superior officer as is evident from above, which is not in accordance with law. Your honours would appreciate section 153D requires that assessing officer passes draft assessment order after due application of mind in respect of seized papers and other facts on record and thereafter such draft assessment order alongwith relevant records is forwarded to superior authority to seek approval. If such superior authority, in view of records relied upon by ld.AO, is satisfied with conclusions drawn by ld.AO, approval is granted. In other words, power of making assessment is vested independently with assessing officer and role of superior authority commences only after completion of assessment and preparation of draft assessment order. In other words, intervention of superior authority during assessment proceedings itself vitiates the order as it offends the principle of independent quasi-judicial decision- making.
In this regard further reliance is placed on the following judicial pronouncements--
Commissioner of Income-tax, Shimla vs. Greenworld Corporation [2009] 181 Taxman 111 (SC)/[2009] 314 ITR 81 (SC)/[2009] 224 CTR 113 (SC)[06-05-2009] Section 124, read with section 119, of the Income-tax Act, 1961 - Assessing Officer - Jurisdiction of - Whether when a statute provides for different hierarchies providing for forums in relation to passing of an order as also appellate or original order, by no stretch of imagination a higher authority can interfere with independence which is basic feature of any statutory scheme involving adjudicatory process - Held, yes - Whether though while making order of assessment Assessing Officer shall be bound by statutory circulars issued by CBDT, yet it cannot be said that assessing authority, exercising quasi-judicial function keeping in view scheme contained in Act, would lose its independence to pass an independent order of assessment and even merits of decision in assessment proceedings shall be discussed and shall be rendered at instance of higher authority - Held, yes - Whether, therefore, where Assessing Officer passed an order of assessment at instance of higher authority, it would be illegal - Held, yes Hon'ble Supreme Court in Orient Paper Mills Ltd. v. Union of India (1970) 3 SCC 76 , held thus :
Sunil Kumar Gattani vs. ACIT
5. According to the learned Attorney-General the assessment proceedings are not of a quasi-judicial nature nor is the Assessing authority a quasi judicial authority. We are unable to agree. It is apparent from the judgment referred to above and numerous other decisions of this Court delivered in respect of various taxation laws that the Assessing authorities exercise quasi-judicial functions and they have duty cast on them to act in a judicial and independent manner. If their judgment is controlled by the directions given by the Collector it cannot be said to be their independent judgment in any sense of the word. An appeal then to the Collector becomes an empty formality. In the previous decision of this Court mentioned above the appeal and the revision had been rejected by the Collector and the Central Government on the ground that a direction had been issued by the Central Board of Revenue to the effect that the paper in question be treated as belonging to a particular classification. This Court entertained no doubt that the direction given by the Board was invalid and it vitiated the proceedings before the Collector as well as the Government. Similarly in the present appeal the direction given by the Collector was invalid and the proceedings before the Deputy Superintendent or the Assistant Collector were vitiated. This position obtains in all the appeals although the type and quality of paper are different. The Central Government merely affirmed the order made by the Collector in each case and did not give any independent reasons for upholding the levy of duty made in accordance with the directions of the Collector.
Deputy Commissioner of Income-tax vs. Surendra Kumar Jain [2024] 164 taxmann.com 575 (Chhattisgarh) [18-07-2024] Section 68, read with section 147, of the Income-tax Act, 1961 - Cash credit (Reassessment) - Assessment years 1988-89 to 1992-93 - Assessee was a director of a company - Search and seizure operations were carried out by CBI at residential premises of one JKJ, who was an employee of said company - During such search operation, certain documents were found apart from Indian currency of certain amount and foreign currency - Photocopies of seized documents were handed over by CBI to Income Tax Department for enquiries and investigation - Subsequently, remaining seized documents were handed over by CBI to DIT (Inv.) which was in response to warrant of authorisation issued by DIT (Inv.) under section 132A - On basis of such documents, Assessing Officer issued notice under section 148 to assessee - Accordingly, reassessment order was passed making addition under section 68 - It was noted that Assessing Officer was taking instructions on each and every hearing and dictates was clearly given to him - Even questionnaire was prepared on instruction of his superiors and same was even sent to Delhi for confirmation - In a letter addressed by Assessing Officer to DDIT(Inv.), Assessing Officer had clearly written that though he had drafted skeleton of order, but he want guidance of higher authorities - Whether therefore, it was quite evident that Assessing Officer had passed order for reassessment under influence of his superiors - Held, yes - Whether therefore, impugned reassessment order was not sustainable , particularly when reassessment started at dictation of higher authorities and thereafter ,during Sunil Kumar Gattani vs. ACIT reassessment process continuous instructions were imparted - Held, yes [Paras 58, 63, 64 , 65 and 77] [In favour of assessee] Similarly, in the assessee case also, as has been stated in report dated 15.10.2025, ld.AO had time to time discussion with the ld. JCIT during the course of assessment proceedings itself, thus the ld. AO has not applied independent mind while passing the assessment order, thus order so passed is bad in law and deserves to be quashed,
7. To support the contention so raised in the written submission reliance was placed on the following evidence / records :
S. PAGE
PARTICULARS
No. NOS.
Copy of Acknowledgement and computation of return of income filedu/s 139 01 - 05
1. of Income Tax Act, 1961 for the AY 2019-20.
Copy of Panchnama & Valuation report at the time of Search 06 - 17
2. Copy of Statement recorded on 06.09.2018. 07.09.2018 & 21.01.2019 18 - 42
3. during the course of search .
Copy of letter dated 22.10.2018 containing retracting statement recorded 43 - 56
4. during the search.
Copy of reply dated 11.03.2021 57 - 66
5.
Copy of declaration made under VDIS scheme 1997 by Smt. Kavita Gattani 67 - 70
6. (Wife of assessee).
Copy of Bill of Jewellery purchased between 2012-2017. 71 - 83
7. Copy of Assessment order passed in the case of assessee for A.Y. 1992-93. 84 - 88
8. Copy of reply dated 15.01.2025 filed before ld. CIT(A) 89 - 116
9. Copy of reply dated 20.01.2025 filed before ld. CIT(A) 117 - 118
10. Copy of reply dated 05.06.2025 filed before ld. CIT(A) 119 - 121
11. Sunil Kumar Gattani vs. ACIT
8. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the assessee that the ld. AO did not issue the statutory notice as requiredu/s. 143(2) of the Act and therefore, the consequential order passed is bad in law. Merely showing in online TAB without attaching the statutory notice as required the order cannot be passed against the assessee. To support this view he relied upon the decision of the Apex Court in the case of Hotel Blue Mooon(Supra) and Rajasthan High Court in the case of Kamla Devi Sharma(Supra). As regards the approval accorded as per provision of section 153D of the Act it was granted mechanically and was thereby the consequential order does not survive. To drive home to this contention he relied upon the decision of the Apex Court in the case of Serajudding and Co. (Supra) and other decision cited in the written submission.
9. Per contra, the ld. DR drawn our attention to AO 's report which has been read and relied upon. The same is extracted herein below for the sake brevity of the facts:
Sunil Kumar Gattani vs. ACIT Sunil Kumar Gattani vs. ACIT As regards the contention of the assessee ld. DR also placed on record the screen shot werein the status of the delievery of the notice shows as delivered and therefore, rebutted to the contention of the ld. AR of the assessee.
On being confronted to the ld. DR about the contention that email screen shot does not shows that there was an attachment of the notice or not and on that she relied upon the screen shot submitted as above. As regards the contention of the ld. AR of the assessee about the approvalu/s. 153D under the Act she submitted a detailed letter of the ld. AO dated 15.10.2025 wherein the ld. AO reported that the ld. Addl./JCIT after having detailed deliberation and going through the records has accorded the approval to Sunil Kumar Gattani vs. ACIT the case and therefore, that grounds is not maintainable as supported by the letter of the AO on the issue.
10. In the rejoinder the ld. AR of the assessee even in the report of the AO he did not dispute that the attachment on the tab shows that the notice was attached to that tab or not. As regards the 153D he merely submitted that the approval was granted after discussion with the AO from time to time but no evidence whatsoever was submitted.
11. We have heard the rival contentions and perused the material placed on record. The bench noted that in this appeal though the assessee has raised various grounds on the merits of the dispute as well as on the technical glitches remain the order passed and disputed in this appeal. We take note that vide ground no. 7.1 the assessee challenges the assessment order was passed without issuing the statutory notice as required u/s.
143(2) and thereby the consequential order passed lacs jurisdiction and vide ground no. 7.2 the assessee challenged the approval granted u/s.
153D in this case being mechanical the consequential order passed also lacs jurisdiction. Since both these issues go into the root of the dispute, we take it first to decide.
Sunil Kumar Gattani vs. ACIT 11.1 The brief facts related to the dispute are that a search and seizure actionu/s 132 of the Act was carried out by the Income Tax Department on the members of the Oswal Soap Group on 06-09-2018 of which assessee is one of the members. The assessee filed a return of income for the year under consideration declaring a total income at Rs.86,54,370/- on 29.09.2020. After submitting the return by the assessee ld. AO alleged to have issued the notice vide screen shot of delivery status of the notice show delivery status for date and time as "05/11/2020 11:06.17 AM".
Whereas in the report of the ld. AO placed on record wherein the notice signed by the ld. AO show the date and time as "November, 05,2020 11:07 AM. Thus, when the email sent to the assessee there was no attachment is confirmed as the ld. AO digitally singed that notice only after the email sent and the ld. AO has not tried to delivery the same again this shows that the email sent to the alleged notice has no attachment to the notice and therefore, in the absence of this fact being not counter by the ld. DR we accept the contention of the ld. DR that in this case statutory notice as requiredu/s. 143(2) was not issued and communicated to the assessee.
Merely the ld. AO kept it in file does not believed that the same was served to the assessee and therefore, we are of the considered view that in this case the statutory notice as required was not served. Thus on this issue Sunil Kumar Gattani vs. ACIT assessee relied on the decision of the Apex Court in the case of ACIT Vs. Hotel Blue Moon [ 188 Taxman 113 (SC) ]. The court on this issue held as follows ;
16. The case of the revenue is that the expression 'so far as may be apply' indicates that it is not expected to follow the provisions of section 142, sub- sections (2) and (3) of section 143 strictly for the purpose of block assessments. We do not agree with the submissions of the learned counsel for the revenue, since we do not see any reason to restrict the scope and meaning of the expression 'so far as may be apply'. In our view, where the Assessing Officer in repudiation of the return filed under section 158BC(a) proceeds to make an enquiry, he has necessarily to follow the provisions of section 142, sub-sections (2) and (3) of section 143.
Respectfully following that binding precedent we hold that the order passed by the ld. AO lacs jurisdiction and thereby the same is quashed and we considered the additional ground no. 7.1 raised by the assessee.
11.2 The second legal issue raised by the assessee is that the approval granted by ld. JCIT, Central Range Jaipuru/s 153D is mechanical one and without application of mind and therefore assessment order so passed is bad in law and deserves to be quashed. Before we deal with this issue it would be appropriate to reiterate the approval accorded in this case by the ld. JCIT, Central Range, Jaipur herein below;
Sunil Kumar Gattani vs. ACIT Sunil Kumar Gattani vs. ACIT As is evident from the above approval so granted that the same was granted as per section 153D of the Act in the present case was granted by a consolidated letter covering multiple assessment years.
The approval does not disclose any reference to the seized material, the appraisal report, or the draft assessment orders, nor does it contain any reasoning to demonstrate application of mind by the approving authority and therefore, the way the approval was granted was not proper. This view was serviced as legal precedent of the Hon'ble Supreme Court in ACIT vs. Serajuddin & Co. [2024] 163 taxmann.com 118 (SC) wherein the Apex Court held that approvalu/s 153D is a mandatory safeguard and cannot be granted mechanically. Further, in PCIT vs. Anuj Bansal [2024] 165 taxmann.com 3 (SC), Hon'ble Supreme Court upheld the finding that absence of application of mind by the approving authority renders the approval invalid. It has also been held by the Hon'ble Allahabad High Court in PCIT vs. Sapna Gupta [2023] 147 taxmann.com 288 (All HC), that approval must be granted separately for each assessment year. Hon'ble Delhi High Court in PCIT vs. MDLR Hotels (P) Ltd [2024] 166 taxmann.com 327 (Del HC) and in PCIT vs. Shiv Kumar Nayyar [2024] 163 taxmann.com 9 (Del HC) quashed approvals granted in bulk for multiple assessments without application of mind. These judgments Sunil Kumar Gattani vs. ACIT reinforce the principle that approval under Section 153D is not a mere administrative ritual but a substantive safeguard, which must be exercised judiciously for each assessment year independently. That view was also consistently followed by the various benches of the ITAT for which reference was made to the decision of ITAT Delhi Benches in Harish Bajaj vs. DCIT, ITA No. 2218 to 2223/Del/2023 and Wave Industries Pvt. Ltd.
vs. DCIT ITA 5241/Del/2015, ITAT Pune in Santosh Subhashappa Mukta vs. DCIT, ITA 18,19 & 20/PUN/2021, where assessments framed on the basis of mechanical approvalsu/s 153D were held to be invalid and quashed.
Since the facts of the case on hand and the facts of the case laws as cited herein above being similar on being consistent with the legal precedent of the case laws of the Hon'ble Supreme Court, the Hon'ble High Courts, and consistently applied by the coordinate benches of the Tribunal, we hold that the approval grantedu/s 153D in the present case was accorded in a mechanical and consolidated manner, without due application of mind and without separate consideration of each assessment year. Such approval being invalid, the consequential assessment orders framed for Assessment Years 2019-20 cannot be sustained in law and is Sunil Kumar Gattani vs. ACIT therefore quashed. In the result ground no. 7.2 raised by the assessee is allowed.
Since we have considered the two technical grounds raised by the assessee other grounds raised by the assessee become academic and are not required to be decided.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 13/11/2025.
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(Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai)
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fnukad@Dated:- 13/11/2025
*Ganesh Kumar, Sr. PS
vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:
1. The Appellant- Sunil Kumar Gattani, Gangori Bazar
2. izR;FkhZ@ The Respondent- ACIT, Central Circle-02, Jaipur
3. vk;dj vk;qDr@ The ld CIT
4. vk;dj vk;qDr¼vihy½@The ld CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No. 1142/JP/2025) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar