TaxTMI 
TaxTMI 
2026 (6) TMI 1383
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....alue under head Income from house Property and a substantive addition of Rs. 13,49,00,000/-, related to Mr. Nirmal Kumar Jain prop. of M/s. Jain Bullion stating that the transaction of M/s. Jain Bullion have been done on behalf of the assessee for the reason of cash deposited during demonetization period. 3. The assessee Shri Sushil Kumar Chauhan is running a proprietary concern M/s. S L Payal wherein the assessee carried on the business of silver bullion and ornaments business. The AO during the course of assessment proceedings has observed that M/s. Jain Bullion proprietary concern of Mr. Nirmal Kumar Jain (person who was also searched alongwith the assessee) is a concern which is controlled by Mr Sushil Chauhan, the assessee and has also observed that the business of M/s. Jain Bullion belongs to the assessee. The AO has rejected the books of accounts of M/s. Jain Bullion and has estimated the gross profit by taking the highest GP rate of AY 2016-17 at 1.43% to the turnover of the year under consideration i.e. 2017-18, and has estimated the GP at Rs. 6,91,239/-. Thereafter the AO has held that the cash deposited during demonetization period by Jain Bullion in their bank accoun....
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....e AO held the cash deposit as unexplained money within the meaning of section 68 of the Act and taxed it in the hands of the assessee, and has upheld the rejection of books of accounts and estimation of gross profit. It was held by the CIT(A) that several deficiencies and inconsistencies in quantitative details were noted, and the declared profit rate was abnormally low as compared to past trends and market condition, hence the rejection was upheld. 7. With regard to the addition of notional annual letting value of Rs. 16,28,608/- made by the AO, the Ld. CIT(A) in her order has stated that since the assessee had not furnished any evidence for NIL rent or vacancy allowance in respect of the house properties, the annual letting value determined by the AO was reasonable. 8. Aggrieved with the above order, the assessee is in appeal before us raising following grounds:- 1. That the Ld. CIT(A)-4, Kanpur has erred in law and on facts to complete the proceedings ex-parte without providing the proper opportunity to the appellant which is against the principle of natural justice. 2. That the Ld. AO has erred in law and on facts in completing the assessment u/s 143(3) ....
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....use property without considering the provisions governed u/s 23 of the Act. 12. That the Ld. CIT(A)-4, Kanpur has erred in law and on facts to uphold the impugned addition made by the Ld. AO for deemed rent in case of vacant property @ 7% of the invested value. 13. That the Ld. CIT(A)-4, Kanpur has erred in law and on facts to uphold the impugned order passed by the Ld. AO after computing the deduction u/s 24 of the Act in respect of some properties only. 14. That the Ld. Authorities has erred in law and on facts in completing the proceedings in hasty manner without complying with the requirement of law and without taking proper approval. 15. That the Ld. Authorities has erred in law and on facts in charging interest of Rs. 4,48,75,913/- under section 234B and Rs. 4,01,280/- u/s 234C of the I.T Act 1961 without mentioning the same in the assessment order. 16. That the order is bad in law and against the facts of the case. 17. That any other relief or reliefs deemed fit in the facts and circumstance of the case may be granted." 9. At the time of hearing, ld. AR of the assessee submitted that the assessee Sushil Kumar Chauhan i....
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....nce he was promoted to do the work of trading in silver bullion, he (Nirmal Jain) established a proprietary firm in the name of M/s. Jain Bullion and Sushil Chauhan promoted him by giving him silver bullion on credit, at times, so that he could establish himself and after selling the bullion he used to deposit the amount in the proprietorship's (Jain Bullion) bank account and used to make the payments to the firms of Sushil Chauhan namely M/s. Shivam Traders and M/s S L Payal, from where bullion was purchased on credit. To safeguard his financial interest, the assessee Sushil Chauhan was giving material to him on credit, and for security reasons got his name also as authorised signatory in only one bank account namely with Axis Bank account in the name of M/s Jain Bullions, because at times Mr Nirmal Jain used to be out of station, thus when the amount used to get credit to Jain Bullion Axis bank account Sushil Chauhan used to draw a cheque in favour of his firm under his signatures at times, which were also found during the course of search proceedings. We would also like to add here that many cheques have been issued under the signatures of Mr Nirmal Jain as have also been impoun....
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....re found on Main Server of Sushil Chauhan, in this connection we would like to state that as Mr. Nirmal Jain, had closed his proprietary firm M/s. Jain Bullion on 31st March 2017 (copy of intimation given to VAT Department is being enclosed to justify and prove the same) and as has been stated by Mr Nirmal Jain during the course of statement under section 132(4) at the time of search proceedings on 19th July 2018, that Mr Rahul used to do his part time accounts who was also working for Mr Sushil Chauhan and after closure of his proprietary firm M/s. Jain Bullion, he had disposed of its assets and thus the accounts data was with Mr Rahul who was working for Mr Sushil Chauhan and that is the precise reason that accounts data was on the computers at the office of M/s. Sushil Chauhan. The shop of M/s. Jain Bullion was at 119-C/12-A Chaubey Ji ka Phatak, Kinari Bazar, Agra which is in close vicinity to the shop of Mr Sushil Chauhan at 119-C/13-B Chaubey Ji ka Phatak, Kinari Bazaar, Agra, and since the business had closed of M/s. Jain Bullion as on the date of search i.e. 19- 7-2018, hence it's part time accountant Mr Rahul took that account data and kept it on the computer system at....
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....ber 8, 9 and 10, nowhere Sri Sushil Chauhan has stated that M/s. Jain Bullion belonged to him or he had any stake in the said concern, he has always maintained and stated that M/s Jain Bullion was a proprietary concern of Mr Nirmal Jain. With regard to blank signed cheques of Sri Nirmal Jain found from his residence, it has already been stated above, and we would again like to reiterate that as a prudent businessman to safeguard his financial dealings and stake of M/s Shivam Traders who used to supply silver bullion to M/s. Jain Bullion, they used to take blank signed cheques from Mr Nirmal Jain, this being a common trade practice, so that as and when adequate credit bank balance is there in the account of Jain Bullion, those cheques could be presented for payment, as many times Mr Nirmal Jain used to be out of station for business purposes. Since trade of silver bullion is very fast rotating, hence the payment has to be realized at the earliest as the trade is done on very meagre margins. Thus, as a prudent businessman Mr Sushil Chauhan had taken some blank cheques of Mr Nirmal Jain proprietor of Jain Bullion to safeguard his financial interest in the dealings of M/s. Shivam Trade....
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.... During the demonetization period from 9-11-2016 to 31-12-2016, M/s. Jain Bullion has deposited cash of Rs. 13,14,00,000/- in its bank account, from the availability of cash as available from regular sales made by the concern, in the year under consideration. To substantiate the cash availability, we are submitting herewith month wise cash flow for the F.Y. 2015-16 and 2016-17 for your honour's kind consideration. JAIN BULLION MONTH WISE CASH FLOW F.Y 2015-16 MONTH OPENING CASH IN HAND CASH SALE CASH W/D CASH DEPOSITED IN BANK CASH EXPENSE CLOSING CASH IN HAND APRIL 50,000 - - - 19,436 30,564 MAY 30,564 39,01,647 - 30,00,000 49,177 8,83,034 JUNE 8,83,034 2,91,43,532 - 2,11,00,000 93,314 88,33,252 JULY 88,33,252 4,44,95,991 - 2,45,00,000 33,761 2,87,95,482 AUGUST 2,87,95,482 4,17,29,354 - 7,05,00,000 17,818 7,018 SEPTEMBER 7,018 2,15,52,777 - 2,05,00,000 1,11,673 9,48,122 OCTOBER 9,48,122 1,23,46,818 - 1,15,00,000 4,73,520 13,21,420 NOVEMBER 13,21,420 6,98,70,614 - 6,50,00,000 1,00,467 60,91....
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....6 and F.Y. 2016-17 with breakup of cash of the period commencing 1st April to 8th November and 9th November to 31st December. Cash Deposit in Bank 1.1 (a) Total cash deposit in Bank in F.Y. 2015-16 34,06,00,000 (b) Total cash deposit in Bank from 01.04.2015 to 08.11.2015 15,11,00,000 (c) Total cash deposit in Bank from 09.11.2015 to 31.12.2015 17,15,00,000 1.2 (a) Total cash deposit in Bank in F.Y. 2016-17 16,98,00,000 (b) Total cash deposit in Bank from 01.04.2016 to 08.11.2016 3,64,00,000 (c) Total cash deposit in Bank from 09.11.2016 to 31.12.2016 13,14,00,000 1.3 (a) Percentage decrease between 1.1(a) and 1.2(a) 50.15 (b) Percentage decrease between 1.1(b) and 1.2(b) 75.90 (c) Percentage decrease between 1.1(c) and 1.2(c) 23.40 Cash sales in the F.Y. 2015-16 and F.Y. 2016-17 with breakup of sales from 1st April to 8th November. Cash Sales 2.1 (a) Total cash sales in F.Y. 2015-16 34,17,19,143 (b) Total cash sales from 01.04.2015 to 08.11.2015 15,31,70,119 2.2 (a) Total cash sales in F.Y. 2016-17 17,19,88,492 (b) Total cash sales from 01.04.2016....
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....t more time is consumed to effect the sale, however, the fact is that many jobs go simultaneously and simultaneously the customers are being dealt with, hence the calculation of time provided by your honour is totally based on conjunctures and surmises, whereas we've actually done the sales which has been accepted by the VAT Department and they have assessed the VAT returns for the said period of demonetisation. Jain Bullion has regularly sold their goods in the previous years also which was duly accepted by the Government Authority i.e. Sales Tax Department, duly assessed the sales on which sales tax was duly paid (copy of order is enclosed herewith), hence, there is no question about the non-genuineness of transactions as all the dues taxes i.e. VAT on Sales, Income Tax on profits, etc have been paid. Your honour has based the time calculation only on human probabilities and have ignored the market dynamics and the trade which is being done throughout the industry in the entire country, where the sales have always been accepted by the VAT Department as well as by the Income Tax Department all throughout, in assessments and in assessment of other traders also. Further....
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....en the fact as to how the silver was acquired by them, and how the sales were affected by them, everyone in univocal terms have accepted and confirmed the transactions done before demonetization period. Thus, when each and every person from whom purchases were done have in their statements under section 132(4) have confirmed and clarified in the strongest terms that they have sold the silver bullion before demonetization period to M/s. Jain Bullion, then how without any credible evidence and iota of doubt, just on surmises and conjunctures the Department can say that the sales were effected actually after start of demonetisation. The onus is on your honour to prove that what has been said in the statements and evidences produced and gathered by the department, are false and the case of the department can be proved with solid and credible evidences. So, the purchases of silver bullion done by the assessee are genuine and needs to be accepted. Any allegation which has been alleged on the assessee has to be corroborated with credible evidence, which the department has failed to put forth before the assessee. (c) In the show cause notice at page 9, your honour have tabulated t....
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....silver bullion have duly declared the same in their income tax returns, have paid due and proper taxes on the transactions, filed their ITR's much before search proceedings, have realised the market price of silver then prevailing in their bank account, made gains on sale of silver bullion, invested the amount so realised in bank FDR's or elsewhere, thus, none appeared to have made any kind of a distress sale. (f) In the show cause notice your honour has required us to explain as to why delivery of bullion was done prior to realization of consideration which is contrary to the trade business of bullion business, in this regard we would most humbly submit before your honour, that Jain Bullion has bought silver bullion from unregistered persons with whom he was not doing regular bullion trade. These people who had declared the bullion under the IDS 2016 scheme, which has been duly accepted by the Income Tax Department as their true disclosure, hence, after verifying the facts the assessee bought silver bullion from these people, so as to ascertain that it was genuine silver bullion, which had a genuine source also, hence, payment was done to these people after the delivery o....
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....no anomaly can be established from the said transactions of purchase of silver bullion from the IDS declarants who have all along confirmed the transactions with Jain Bullion, and have paid the due taxes, Jain Bullion have also paid the due taxes on the said transactions in the form VAT for which assessments have also been framed by the VAT Department accepting the said transactions as genuine and complete, in the hands of M/s Jain Bullion. (i) In the showcause notice your honour has pointed out to an alleged anomaly that the weight as per the valuation reports submitted at the time of IDS declaration were the same as have been mentioned in the purchase bills by M/s. Jain Bullion, in this regard we would most humbly submit that the bullion was delivered at the shop of Jain Bullion at Chaubey Ji ka phatak, Kinari Bazaar, Agra, by the said sellers and the purchases done by Jain Bullion whereon the delivery of the said silver bullion duly supported by the valuation report issued by government approved valuer, valuing and certifying the purity of silver, weight of silver declared by each one of the IDS declarants. Since, as a prudent businessman we were looking for genuine sou....
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.... at shop Chaubey Ji ka Phatak, Kinari Bazaar, Agra, all of the purchasers have confirmed to have received the payment through banking channels either by cheque or by RTGS transfer, hence, to state that the purchases of silver bullion were not genuine, would be unlawful, as the departments is basing its contentions only on conjunctures and surmises without there being any evidence in support of their contention. (k) In the show cause notice your honour has further stated that the IDS declarant have paid short term capital gain of around 8% to 10% and have further showcaused as to why certain percentage of Commission in a range of 15% to 20% be held to be paid Jain Bullion as commission to build up stock prior to demonetisation. In this regard, it is humbly submitted that we have amply and adequately, point by point rebutted your alleged allegations of unaccounted money being routed to the accounts of M/s. Jain bullion. We have established that Jain Bullion has bought silver bullion from the IDS declarants in above paragraphs, we have also categorically stated that there is no evidence with the Department not to treat the purchases as genuine or pre-dated, thus the transacti....
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....summarily rejected by the AO. The Ld. AR also pointed out to the audit report, audited financial statements and the tax audit report of the assessee where in the description of cash in hand and the specified bank notes held by the assessee on 8 November 2016 has been specifically mentioned. The cash in hand as on 8-11-2016 was Rs. 13,48,95,596/-, he has also stated that since the purchases have been duly accepted, hence the sales cannot be rejected or faulted upon as the quantitative details and the stock records have been duly maintained by the assessee and have been produced before the AO during the assessment proceedings. Therefore, it was argued that the books of accounts should not have been rejected by the AO and the addition for estimating the gross profit and the cash deposit during demonetisation period of Rs.12.97 crores was unwarranted for. 12. During the course of the hearing before us, a brief synopsis has been submitted by the Ld AR discussing the issues as under : "Ground number 3 to 9 before your honours are with regard to the addition of Rs 6,91,239/- for estimated G. P. @ 1.43% and Rs. 13,49,00,000/- as unexplained cash credit u/s 68 on substantive bas....
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....rest in one account of Axis Bank Sushil Chauhan was the Co-Signatory. The other accounts were solely operated by Nirmal Jain -Axis Bank account number 7839 Account closed on 8th July 2016 and cheques mentioned at AO page 6-7 are for AY 2016-17, during the AY 17-18 turnover through this bank account was only Rs. 28,000/-. Hence it has no relevance in AY 17-18, to say that the business was controlled by Sushil Chauhan. -Axis Bank account number 7668 Minuscule transactions were carried out in this account -PNB account number 0042 Major transactions done through this bank account where only signatory was Mr Nirmal Kumar Jain AO page 4-5 -IndusInd Bank account number 7761 Some transactions done through this bank account where only signatory was Mr Nirmal Kumar Jain 3. Books of accounts of Jain Bullion found at the shop of Sushil Chauhan The ex-accountant of Nirmal Jain i.e. Mr Rahul was also accountant for Sushil Chauhan, hence after closure of Jain Bullion on 31-03-2017 the accounts data was kept by the accountant on the computers of Sushil Chauhan without his knowledge. Since the business of Jain Bullion was clos....
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....on record as it is now well settled that if the profits shown by the assessee in his return are not accepted, it is for the taxing authorities to prove that the assessee made more profits." No addition can be made in the trading results without any material on record and without pointing out any defect, either in the method of accounting of the assessee, or in the books of account maintained by the assessee. It has been so held, inter-alia, in the following cases: - J.A. Trivedi Brothers vs. CIT, 158 ITR 705 (MP) - CIT vs. Modi Enterprises, 2 DTR 47 (Raj.) - CIT vs. Realest Builders & Services Ltd., 307 ITR 202 (SC) - Aluminium Industries (P) Ltd. vs. CIT, 80 Taxman 184 (Gau). - Malani Ramjivan Jagannath vs. ACIT, 207 CTR (Raj.) 19 - Madnani Construction Corporation (P.) Ltd. v. CIT [2008] 296 ITR 45 (Gau. - Pyarelal Mittal v. Asstt. CIT [2007] 291 ITR 214 (Gau.) - CIT Karnal v. Om Overseas, [2008] 173 Taxman 185 (P&H) the High Court has overturned any rejection of the books, bereft of justification and pinpointing the deficiencies in the audited books of accounts. 3. With regard to the Ld. AO....
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....o say that this was a clinching piece of evidence would be irrelevant. We would also like to mention that no undeclared silver was found from the premises of the IDS declarant nor from Sushil Chauhan's place, then if the silver was not genuinely sold then where was it has not been addressed by the Ld. AO. M/s Jain Bullion had adequate cash in hand of Rs. 13,49,00,919/- as of 08-11-2016, out which Rs. 13.14 cr was deposited during demonetization period by Jain bullion. 4. Further during the course of the assessment proceedings, the appellant had submitted the following details before the Ld. AO to prove the cash sales effected by them. - VAT Return for FY 2016-17 - VAT Order for FY 2016-17 - Quantitative Monthly Stock Summary - Cash flow statements for AY 2016-17, 2017-18 - Copy of Purchase invoices All these documents are being annexed as part of paper book before your honour. 5. The appellant places reliance of the following case laws where similar kind of additions have been deleted. a. In DCIT vs SPR Jewels Pvt. Ltd. In ITA no 2723/Del/2024 (Del ITAT) dated 30-9-2025, b. The Hon'ble ITA....
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.... the search assessments took place in the case of Mr Nirmal Kumar Jain proprietor of Jain Bullion, the assessment was completed at the returned income wherein he was carrying on the trading in silver bullion and the AO had accepted the same, then how in the year under consideration for the same set of transactions the assessee is considered a benamidar for Nirmal Kumar Jain, wherein consistent established business of Nirmal Kumar Jain was there. It was also argued that Nirmal Kumar Jain in his statements stated that when the search took place on 19-07-2018, he was working for Sushil Chauhan, whereas in the impugned assessment year 2017-18, he was running his proprietary concern of Jain Bullion. The VAT assessments also were made in the name of Jain Bullion by the VAT authorities and the bank accounts in the impugned year were operated by Mr Nirmal Kumar Jain and not by Mr Sushil Chauhan as was alleged by the AO in the assessment proceedings, and as has been pointed out in the synopsis submitted during the course of the hearing before us. Thus, the Ld. AR contended that considering the transactions of Jain bullion to be that of Sushil Kumar Chauhan, without establishing that he was ....
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....l-fledged business of silver manufacturing and trading of silver payals in his own proprietary concern. The Ld AR had submitted at the time of hearing before us that in the statements of Nirmal Kumar Jain taken during the course of search proceedings on 19-7-2018, wherein he had stated that he was running a proprietary concern in the name of Jain Bullion in the impugned assessment year and it was stated by him that he was at present i.e. on 19/7/2018 working for SL Payal. Even the bank accounts which were mentioned by the AO in the assessment order, it was seen that they were being managed and controlled solely by Nirmal Kumar Jain for the transactions carried in the assessment year 2017-18, the business premises of Jain Bullion was also covered under survey proceedings which establishes that it was a different entity in the impugned assessment year which had closed its business on 31st March 2017. Having adduced the necessary evidences and the facts on record, we are inclined to hold that M/s. Jain Bullion was a proprietary concern of Nirmal Kumar Jain in the year under consideration, as has been considered and held by the AO in the preceding assessment years, and that the transac....
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....ses made from the IDS declarant have all been held to be genuine purchases for the reason that in the appellate proceedings of those IDS declarants held to be genuine. Once when the sales were proved to be genuine, the corresponding purchases have to be treated as genuine, there is no occasion for the AO to disbelieve the sales made, when the quantitative details of the sales, purchases have all been submitted before the AO wherein he has not found any fault or deviation. Even in the VAT returns filed and the VAT assessment order for the impugned year, the VAT authorities have accepted the sales, purchases of Jain Bullion. The assessee submitted the quantitative monthly stock summary, cash flow statements and the purchase vouchers along with the sales Ledger to prove the purchases and the sales made wherein the AO has not found any fault and the AO simply rejected the detailed submissions of the assessee as the AO did not unearth any inconsistencies or discrepancies in details submitted for the transaction of Jain Bullion. The AO simply proceeded to reject the details summarily without any reasoned order. Accordingly, we observe that the AO failed to bring out the basis for the add....
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....hat the ld. CIT (A) rightly deleted the addition made by the AO on account of unexplained cash credits which is totally baseless and not substantiated. Accordingly, we are inclined to uphold the order of the ld. CIT (A) who has passed a speaking order. Hence, the Revenue's grounds are hereby deleted." - The Hon'ble ITAT, Mumbai, in the case of DCIT vs. Kundan Jewellers Pvt. Ltd., in ITA No. 1035/Mum/2022 dated.- May 29, 2023. - ITO Vs Manasa Medicals (ITAT Bangalore) ITA No. 552/Bang/2022 Dated: 31/10/2022. - The ITAT Delhi Bench in Fine Gujaranwala Jewellers vs. Incometax Officer [2023] 151 taxmann.com 340 (Delhi - Trib.) - The ITAT Amritsar Bench in Balwinder Kumar vs. Income-tax Officer [2023] 151 taxmann.com 338 (Amritsar - Trib.) - The Hon'ble HIGH COURT OF DELHI in PCIT v. Agson Global (P.) Ltd[2022] 134 taxmann.com 256 (Delhi) - THE ITAT MUMBAI BENCH 'SMC' R. S. Diamonds India (P.) Ltd. v. ACIT [2022] 145 taxmann.com 545 (Mumbai - Trib.) - The ITAT Jaipur Bench in Mahesh Kumar Gupta v. ACIT [2023] 151 taxmann.com 339 (Jaipur - Trib.) - The ITAT Chandigarh Bench in Smt. Charu Aggarwal v. DCIT [202....