TaxTMI 
TaxTMI 
2026 (5) TMI 1134
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....erning the penalty levied by the AO u/s. 270A(9)(e) of the Income Tax Act, 1961 (hereinafter referred to as the "Act"), based on the addition (estimated G.P addition) pursuant to assessment made u/s. 153C of the Act. 4. First, we will deal with ITA No.2837 to 2841/Chny/2025 i.e. appeals preferred by individual-assessee. Both sides agree that facts and the issue involved are identical in all appeals. Hence, we take up the appeal for AY 2021-22, which decision will apply mutatis mutandis for other appeals. Before adverting to the grounds raised by the assessee, we first consider it fit to cull out the basic facts in the case by referring to the facts for AY 2021-22. The assessee an individual, proprietor of M/s V Chetty Radhakrishna Chetty Craft is engaged in the business of manufacturing of gold jewellery, silver articles and diamond jewellery. The assessee filed his return of income for AY 2021-22 on 24.02.2022 declaring a total income of Rs. 8,34,50,250/-. A search u/s. 132 of the Act was conducted on 10.11.2020 in the case of M/s Mohanlal Jewellers Chennal Pvt Ltd (in short 'MJPL') and other related persons. During the course of the search, certain electronic records including....
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.... as M/s V Chetty Radhakrishna Chetty Jewel Craft-Firm bearing PAN No. AASFV3954G which was incorporated on 31.10.2019 but commenced business on 01.10.2020 [i.e.assessee-Firm-ITA Nos.2836/Chny/2025]. Thus, the business of the proprietary concern of the assessee (M/s V Chetty Radhakrishna Chetty Jewel Craft) was taken over by the Firm on 01.10.2020. Thereafter, the AO verified the transaction recorded in the "J-Pack" ledger pertaining to A.Y.2021-22 made with MJPL recorded in the books of the assessee till 01.10.2020. The AO is noted to have analyzed the seized material and thereafter quantified the unaccounted transactions conducted by the assessee during the period from 01.04.2020 to 01.10.2020 at Rs. 45,48,740/- on which he applied gross profit rate of 13.53% and made addition of Rs. 6,15,445/-. The assessee is noted to have not preferred any appeal before the Ld.CIT(A) and remitted tax pursuant to the assessment order passed by the AO dated 31.03.2023 u/s. 153C of the Act. Thereafter, the AO is noted to have issued notice u/s. 270A of the Act proposing to levy penalty qua the unaccounted income estimated by the AO by notice dated 31.03.2023 alleging underreporting of income in co....
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.... book at Page No.1 to 27 and also the "J-Pack" ledger qua the Firm which is kept at Page No.28 to 29, basis AO has quantified the purported unaccounted transaction allegedly conducted by the assessee on which he applied gross profit and made the addition while passing the quantum order u/s. 153C order for the captioned assessment years. Drawing our attention to the ledger extract of "VCRC" in the books of MJPL as per the "J-Pack" software for the F.Y.2020-21 relevant to A.Y.2021-22 placed at Page No.26 of the paper-book, he pointed out inter-alia the following discrepancy for AY 2021-22, which is noted as under:- ASSESSMENT YEAR: 2021-22 Tr. Code Details Receipt Issued Gross Touch Net Wt Amount Gross Touch Net Wt Amount 18/05 RATE PURCHASE 1000.000 100.00 1000.000 42000.00 11/09 RATE PURCHASE 0.020 14,850 2.970 150.74 (a) In the transaction dated 18.05.2020, the contents of the said entry suggests that 1000.000 gms of gold (1000.000 gms net) have been given by the assessee to MJPL only for Rs. 42,000/- [should have been at least ....
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....20 gms which is miniscule when compared to other entries. Also, the appellant being a wholesale manufacturer of gold jewellery would not have purchased or sold such miniscule quantity of jewellery. It may further be noted that the touch % (Purity of gold) is stated as 100% which is not possible in the jewellery business. (b) In the transaction dated 27.04.2016, the touch % (Purity of gold) is stated as 100% which is not possible in the jewellery business. The maximum possible touch for bullion is 99.5 to 99.9%. (c) In the transaction dated 10.05.2016, the contents of the said entry suggests that 526.320 gms of gold (500 gms net) have been given by the appellant to MJPL only for Rs. 15,175/- [should have been at least Rs. 14,38,750, i.e., [(500 /10) * 28,775] which is impossible since the gold rates for 10 gms gold were as follows: ● 24 Carat gold rate as on 31.03.2017 - Rs. 28,775 per 10 gms (Source: V.G.Mehta's Income Tax Ready Reckoner - Enclosed separately) ● 22 Carat gold rate as on 31.03.2017 - Rs. 26,377 per 10 gms ● 18 Carat gold rate as on 31.03.2017 - Rs. 21,581 per 10 gms (d) Considering the above gol....
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....h is impossible since the gold rates for 10 gms gold were as follows: ● 24 Carat gold rate as on 31.03.2018 - Rs. 30,830 per 10 gms (Source: V.G.Mehta's Income Tax Ready Reckoner - Enclosed separately) ● 22 Carat gold rate as on 31.03.2018 - Rs. 28,260 per 10 gms ● 18 Carat gold rate as on 31.03.2018 - Rs. 23,125 per 10 gms Considering the above gold prices, one may note that there is no correlation between the quantity and the amount mentioned in entry dated 07.09.2017, making such entry undependable. 10. Likewise, the Ld.AR invited our attention to page no.1 of Paper Book, wherein the ledger "VCRC" extracted from the JPACK software reflecting transactions for the assessment year 2019-20 are found placed, he pointed out inter-alia the following discrepancy for AY 2019-20, which are noted as under: - ASSESSMENT YEAR: 2019-20 Tr. Code Details Receipt Issued Gross Touch Net Wt Amount Gross Touch Net Wt Amount 09/12 RATE PURCHASE METAL NIL 24.470 128.16 31.360 1019.20 17/12 RATE PURCHASE 2083.330 96.00 2000.000 &nb....
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....r Rs. 21,950/- [should have been at least Rs. 21,58,650, i.e., [(500 /10) *43,173] which is impossible since the gold rates for 10 gms gold were as follows: ● 24 Carat gold rate as on 31.03.2020 - Rs. 43,173 per 10 gms (Source: V.G.Mehta's Income Tax Ready Reckoner - Enclosed separately) ● 22 Carat gold rate as on 31.03.2020 - Rs. 39,575 per 10 gms ● 18 Carat gold rate as on 31.03.2020 - Rs. 32,380 per 10 gms Considering the above gold prices, one may note that there is no correlation between the quantity and the amount mentioned in entry dated 27.02.2020, making such entry undependable. V CHETTY RADHAKRISHNA CHETTY JEWEL CRAFT [FIRM] - ITA NO.: 2836 / CHNY / 2025 12. Likewise, the Ld.AR invited our attention to page no.1 of Paper Book, wherein the ledger "VCRC" extracted from the JPACK software reflecting transactions for the assessment year 2021-22 are found placed, he pointed out inter-alia the following discrepancy for AY 2021-22, which are noted as under: - ASSESSMENT YEAR: 2021-22 Tr. Code Details Receipt Issued Gross Touch Net Wt Amount Gross Touch Net Wt Amount 23/10 RAT....
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....cepted the GP addition made on account of unaccounted purchases from MJPL and having not declared the income from such transaction, the assessee is liable to penalty u/s. 270A and hence, the AO levied penalty u/s. 270A which has been rightly confirmed by the Ld.CIT(A) which action does not call for any interference from our part. 15. Heard both parties and perused the material placed before us. We note that, a search action was conducted on the premises of the MJPL, in the course of it a pen drive was found which contained accounts maintained in "J-Pack" software. The facts available on record shows that MJPL had admitted that the accounts maintained in its software contained both their unaccounted and accounted transactions and also offered additional income across several years with reference to the details and ledgers found therefrom. It is further observed that "J-Pack" software also contained ledgers of the parties with whom MJPL inter alia had unaccounted transactions and one of the ledgers was titled "VCRC". It is seen that Shri Rejendra Kothari from whose possession this Pen-drive was found had explained the modus operandi for recording unaccounted transactions in these ....
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.... filed relevant evidence like bills/invoices, books of account and payments made through banking channel. However, the AO didn't accept the denial of unaccounted purchases because out of the gold issued weighing 6669.01 gms as per J-Pack ledger, only gold weighing 5649.81 gms was accounted in the books of the assessee, hence according to AO, balance gold 1019.2 gms needs to be treated as unaccounted purchases. Failure of the assessee to reconcile the unmatched entries, and failure to prove that it didn't carry out unaccounted transaction with MJPL, were the reasons given to reject the assessee's denial of carrying out any unaccounted transaction with MJPL. We do not agree with the reasoning given by the AO for fastening the liability as well as the penalty for the following reasons. 17. We agree with the Ld.AR that, the assessee cannot be expected to prove a negative. Instead, the onus lay on the Revenue to substantiate the unmatched entries with some independent tangible material, if they were seeking to use the same against the assessee. According to us, the entries found in "J-Pack" application software which was seized from the premises of MJPL, could have been explained by ....
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...., he referred to certain contra entries, which suggest that when Shri Kothari identified the entries which were wrongly posted to the name of the assessee, he would pass a contra entry to transfer it to the correct head, which this Tribunal in identical facts and circumstances noted in Lalitha Jewelry Case [ITA Nos.675 to 680/Chny/2025 dt.12.06.2025]. We agree with the Ld AR that these unmatched entries could also be a case of incorrect accounting, mistaken identity or that the entries of some other customers were wrongly posted to these accounts. 19. Moreover, the Ld AR for assessee has pointed out the glaring discrepancies in the ledger of the MJPL ["J-Pack"] which is not again discussed for the sake of brevity. Having noted the discrepancies, we are of the view that the ledger maintained by MJPL using J-Pack software is riddled with inaccuracies and hence it is unsafe to either fasten liability or levy penalty on the assessee. According to us, ordinarily any unmatched entries with the books of 3rd party raises a suspicion against the assessee, then AO to enquire and bring corroborative evidence against assessee, especially when assessee has denied such transaction. However, t....
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....e impugned penalty order flows from the assessment order dated 31.03.2023 passed by AO u/s. 153C r.w.s.143(3) of the Act was itself void ab-initio [refer the decision of the Hon'ble Madras High Court in the case of Hari Govind v. ACIT [2025] 180 taxmann.com 197 (Madras) as it is against the provisions of sub-section (3) of Section 153C of the Act]. Accordingly, where the foundation/assessment-order itself was 'null' in the eyes of law, the action initiating penalty would be 'null' in the eyes of law. When such principle is applied in this case, the statutory notice dated 13.03.2023 by the AO initiating penalty u/s. 270A of the Act is wholly without jurisdiction and was issued without authority, non-est in eyes of law. 23. The Ld.Counsel explained the legal issue by pointing out that in this case, 'Satisfaction Note' (before issuance of notice u/s. 153C of the Act) was dated 13.03.2023, and hence, the date of initiation of search (for the purpose of section 153C of the Act) would be the date on which the materials/books of accounts, etc., are handed over to the JAO of the assessee/other-person; and then such a date would be considered as the date of initiation of search for the a....