DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOTA, KOTA V. SH. VINOD KUMAR JAIN, KOTA

ITA 717/JPR/2025

AI Insights

The case involves an appeal by the Department against the order of the ld. CIT(A), Udaipur -2, which allowed the normal rate of tax instead of the tax rate under section 115BBE on unexplained excess stock and unsecured loans treated as business income. The Department argued that the CIT(A) erred in treating unexplained investments and excess stock as business income without appreciating that these should be taxed under section 69B and section 115BBE of the Act. The CIT(A)'s decision was based on the assessee's inclusion of these amounts in his total income and payment of taxes at normal rates, which the Department contested, leading to this appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 784798 (ITAT-JAIPUR)
• Duration Of Justice: 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2025
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2018-2019
• Appeal Filed On: 30-04-2025
• Other Referred Cases: Pr. CIT vs. Bajarang Traders, Shri Ramnarayan Birta vs. ITO, Ayushi Builders & Developers vs. DCIT, Sooraj Leathers vs. ITO, CIT vs. Usha Stud Agrt Farms Ltd, Kim Pharma Pvt. Ltd. vs. CIT, CIT vs. Prakash Chand Lunia, Gopal S. Pandith vs. DCIT, Heritage Beverages vs. PCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANITA RINES H; TREATING
• Keywords: Business income; Opportunity of being heard; Unexplained cash credit; Unexplained investment; Search and seizure; Deemed to accrue or arise in india
• Section: 142(1); 153A; 68; 69C; 139

Judgement Text

"vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa a Jh xxu Xkks;y ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI GAGAN GOYAL, AM vk;dj vihy la-@ITA No. 717/JP/2025 fu/kZkj.k o\"kZ@Assessment Year : 2018-19 The DCIT Central Circle Kota cuke Vs. Shri Vinod Kumar Jain C/o M/s. Manak Chand Kailash Chand Chauth Mata Bazar, Kota- 324 007 LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAWPJ9898D vihykFkhZ@Appellant izR;FkhZ@Respondent jktLo dh vksjls@Revenue by: Mrs. Anita Rinesh, JCIT-DR fu/kZkfjrh dh vksjls@Assesseeby : None lquokbZ dh rkjh[k@Date of Hearing : 20/08/2025 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement: 10 /11/2025 vkns'k@ORDER PER: DR. S. SEETHALAKSHMI, J.M. The Department has filed an appeal against the order of the ld. CIT(A), Udaipur -2 dated 24-02-2025 raising therein following grounds of appeal. ‘’1. Whether on facts and in circumstances of the case, the CIT(A) is justified in allowing normal rate of tax instead of tax rate u/s 115BBE on unexplained excess neck of Rs. 1,11,09,407 found during the search treating it as business income without appreciating the facts that the sssessee has failed to explain the source of investment in unexplained unaccounted excess stock of Rs. 1,11,09,407/- and therefore, the source of investment in such excess neck remained unexplained which is more than enough to treat it as unexplained and unaccounted investment u/s 69B of the Act and addition should be made u/s 69B of the Art, not as business income and tax should be charged as per provision of section 115BBE of the Act? Printed from counselvise.com 2 ITA NO. 717/JP2025 DCIT, CENTRAL CIRCLE, KOTA VS SHRI VINOD KUMAR JAIN, KOTA 2. Whether on facts and in circumstances of the case, the CIT(A) is justified is allowing normal rate of tax instead of tax rate u/s 115BBE on unexplained excess stock of Rs. 1,11,09,407 found during the search treating it as business income without appreciating the facts that the unexplained/unaccounted excess stock of Rs. 1,11,09,407/- was found during the search and the assessee has accepted this excess stock as unexplained and unaccounted investment during statement recorded u/s 132(4) of the Act and included it in his total income in the ITR filed after search proceedings and by including unexplained excess stock in the ITR in total income cannot change the nature of unexplained investment u/s 69B of the Act as business income? 3. Whether on facts and in circumstances of the case, the CIT(A) is justified in allowing normal rate of tax instead of tax rate u/s 115BBE on excess stock of Rs. 1,11,09,407/- found during the search treating it as business income without appreciating the facts that it was the unexplained/unaccounted stock found during the search and therefore, the AO has rightly made the addition of Rs. 1,11,09,407/- u/s 69B of the Act treating it as unexplained investment and charged the tax u/s 115BBE and thus, the CIT(A) hat erred in holding this unaccounted/unexplained excess stock as business stock/income and holding that tax is to be charged as per normal tax provisions? 4. Whether on facts and in circumstances of the case, the CTT(A) is justified is allowing normal rate of tax instead of tax rate u/s 115BBE by treating the written off unsecured lean of Rs. 10,00,000/- as business income being cessation of liability without appreciating the facts that the assessee has failed to explain the entries of unsecured loan of Rs. 11,00,000/- (Rs 10,00,000/- offered for tax and Rs. 1,00,000/- not offered for tax) and failed to provide the identity and detail of the loan providers and genuineness of the unsecured loans and therefore, he surrendered the unexplained unsecured loan of Rs. 11,00,000/- for taxation and therefore same should be taxed u/s 68 of the Act as unexplained credit and tax should be charged as per provision of section 115BBE of the Act? 5. Whether on facts and in circumstances of the case, the CIT(A) is justified in allowing normal rate of tax instead of tax rate u/s 115BBE by treating the written off unsecured loan of Rs. 10,00,000/- as business income being cessation of liability without appreciating the facts that assessce had himself admitted is reply to Q.No. 30 of statement recorded u/s 132(4) of the Act that he was not in position to provide identity and details of loan providers and genuineness of these transactions and therefore, he had voluntary surrendered unexplained unsecured loan of Rs. 11,00,000 for the AY 2018-19 in addition to his regular income and therefore, same should be taxed u/s 68 of the Act as unexplained credit and tax should be charged as per provision of section 115BBE of the Act? 6. Whether on facts and in circumstances of the case, the CIT(A) is justified in allowing normal rate of tax instead of tax rate u/s 115BBE by treating the written off unsecured loan of Rs. 10,00,000/- as business income being cessation of Printed from counselvise.com 3 ITA NO. 717/JP2025 DCIT, CENTRAL CIRCLE, KOTA VS SHRI VINOD KUMAR JAIN, KOTA liability without appreciating the facts that this amount of loan of Rs. 10,00,000/- was unexplained loan and as per proviso to the section 68, the satisfactory explanation regarding identity of the persons in whose names such credit entries are recorded is necessary requirements and if it is considered by the assessee as cessation of liability, even the requirements of explanation regarding identity of creditors and genuineness of unsecured loan is still required and since the unsecured loan of Rs. 11,00,000/-was unexplained as the assessee failed to prove the identity of creditors and genuineness of the entries and no explanation was furnished by the assessee regarding identity of creditors and genuineness of unsecured loan and therefore, it was the unexplained credit to route the unaccounted money of the assessee himself and therefore, same should be taxed u/s 68 of the Act and tax should be charged as per provision of section 1158BE of the Act? 7. Whether on facts and in circumstances of the case, the CIT(A) is justified in deleting the addition of Rs. 1,00,000/- made on account of unexplained credit u/s 68 of the Act in form of unsecured loan without appreciating the facts that the nature of amount of Rs. 1,00,000/-recorded in name of Juggi Bhaiya was unexplained credit in form of unsecured loan and out an advance in relation to later supply of goods and it was recorded with total unsecured loan of Rs.11,00,000/- and the assessee failed to explain the entries of unsecured loan of Rs. 11,00,000 (including Rs. 1,00,000/-) and failed to provide the detail of the loan providers and genuineness of the unsecured loans and surrendered the unexplained amount of unsecured lows of Rs. 11,00,000/- which includes above Rs. 1,00,000/-and therefore unsecured loan of Rs.1,00,000 was added u/s 68 treating as unexplained credit and tax charged u/s 115BBE as Rs.10.00 lakh was already included in ITR by the assessee? 8. Whether in facts and in circumstances of the case, the CIT(A) is Justified in deleting the addition of Rs. 1,00,000/- made on account of unexplained credit u/s 68 of the Act in form of unsecured loan without appreciating the facts that assessee has failed to produce evidences in respect of detail of items booked by Juggi Bhaiya and its rate at the time of giving advance of Rs. 1,00,000/-, as the supply of goods was claimed as made on 01.02.2019 after the search it cannot be supposed that advance for later supply was given without any detail of items and without fixing or rate and further, no evidence have been furnished by the assesee related to actual time of claim advance of Rs.1,00,000/-, no such submission was made during statement received u/s 132(4) of the Act and only affidavit and bill were furnished during statement are only afterthought arrangement without any basis and therefore, same are not acceptable? 9. Whether on facts and in circumstances of the case, the CTT(A) is justified in deleting the addition of Rs. 81,20,788/- made on account of investment in re- making of jewellery u/s 69B of the Act by accepting reply of the assessee that this included in excess stock found during search proceedings without appreciating Printed from counselvise.com 4 ITA NO. 717/JP2025 DCIT, CENTRAL CIRCLE, KOTA VS SHRI VINOD KUMAR JAIN, KOTA the facts that during statement recorded u/s 132(4) of the Act, in reply to Q.No.28, assessee submitted that he was not aware about the detail of the persons from whom gold weighing 2498.704 gs was received for remaking, detail of quantity and value of gold received from each person, method of keeping this gold to distinct it for each persons and therefore, he surrendered the amount of Rs. 81,20,785/- as unexplained investment in gold jewellery weighted 2498.407 @ of 32,500/-per 10 gm for the FY 2017-18 in addition to his regular income and therefore, considering the same and failure of the assessee during assessment proceedings to explain source of investment in gold for remaking addition of Rs. 81,20,788/- was made u/s 698 of the Act as unexplained investment? 10. Whether on facts and in circumstances of the case, the CIT(A) is justified in deleting the addition of Rs. 81,20,788/- made on account of investment in re- making of jewellery as 69B of the Act by accepting reply of the assessee that this in included in excess stock found during search proceedings without appreciating the facts that during search proceedings, the assesses has accepted unexplained investment of Rs. 81,20,788/- in remaking of jewellery and surrendered for tax in addition to his regular income and during assessment proceedings, he did not furnish any details regarding particulars of items and specification which can prove that it has been included in the excess stock found during search and not required to be taxed again and therefore, AO has rightly made addition u/s 69B of the Act treating it as unexplained Investment? 11. Whether on facts and in circumstances of the case, the CIT(A) is justified in deleting the addition of Rs. 81,20,788/- made on account of investment in re- making of jewellery by accepting reply of the assessee that this is included in excess stock found during search proceedings without appreciating the facts that the quantity of the gold 2498.704 gms was taken from the books of accounts found during the search proceedings on 18.04.2018 and further, during assessment proceedings, the assessee furnished ledger accounts of remaking gold showing NIL quantity as on 31.03.2018 which is contrary to ledger found on 18.04.2018 and therefore, the other ledger furnished during the assessment proceedings is the ledger made under afterthought arrangements which is different from the true ledger found during the search? 12. Whether on facts and in circumstances of the case, the CIT(A) is justified in deleting the addition of Rs. 81,20,788/- made on acount of investment in rmaking of jewellery by holding that the income from physical stock is already considered for taxation, any other addition for the same source leads to double taxation of the same without appreciating the facts that the assesse did not femise details about particulars of items and specification of items which can prove that it has been included in the excess physical stock found during the search and has already been taxed in the hands of the assessee and therefore, CIT(A) has erred in allowing telescoping benefits of Rs.. 81,20,788/- against excess stock of Rs. 1,11,09,407/- found during search proceedings? Printed from counselvise.com 5 ITA NO. 717/JP2025 DCIT, CENTRAL CIRCLE, KOTA VS SHRI VINOD KUMAR JAIN, KOTA 2.1 During the course of hearing, none appeared on behalf of the assessee in spite of sending notice to the last known address of the assessee. Hence, the Bench proceeded to decide the appeal ex-parte based on the materials available on record. 3.1 Brief facts as per assessment order are that the assessee Shri Vinod Kumar Jain C/o M/s. Manak Chand Kailash Chand, Chauth Bazar, Kota is an individual. The assessee derives income from trading of gold and silver jewellery, rental and interest income. A search and seizure operation u/s 132(1) of the Act was carried out on 18-04-2018 at the various premises of ‘’Manak Chand Kailash Chand Saraf Group, Kota’’ to which the assessee belongs. Cash jewellery and other document found and seized from some person residence and business premises. The case of the assessee is also covered under search proceeding. Consequent to search action, the case of the assessee was centralized to Central Circle-Kota by the Pr. CIT, Kota. In this case, notice u/s 153A of the Act was issued to the assessee by the AO on 4-01-2019 and the same was served upon the assesee. The assesssee filed his return of income u/s 153A on 02-04-2019 declaring total income of Rs. 1,55,71,740/- and agriculture income of Rs.80,000/- which is the same as declared in income tax return filed u/s 139 of the Income Tax Act, on 30-03-2019.The AO noted that there is no difference between ITR filed u/s 153A and 139 of the Act. The notices u/s 143(2) of the Act were issued to the assessee on 02-09-20189 and 18-02-2020 and served through ITBA. Further notice u/s 142(1) of the Act was Printed from counselvise.com 6 ITA NO. 717/JP2025 DCIT, CENTRAL CIRCLE, KOTA VS SHRI VINOD KUMAR JAIN, KOTA issued by the AO on 18-02-2020 alongwith questionnaire which was served on the assessee. Thus assessment order u/s 153A of the Act was passed by the AO at assessed income of Rs.2,55,73,180/- on 31-05-2021 after making addition of Rs.17,80,650/- on account of unexplained creditor, addition of Rs.1,00,000/- on account of unexplained unsecured loans and addition of Rs.81,20,788/- on account of unexplained investment in re-making of jewellery (Gold). 3.2 It is also noted from the assessment order at page 4 & 5 that the AO did not find the reply of the assessee acceptable with regard to income offered and included in total income of Rs.1,11,09,407/- on account of Excess Stock found during the search proceedings and considered it as unexplained /unaccounted stock as per provisions of Section 69B of the Act and thus charged the tax on this offered amount as per provisions of Section 115BBE of the Act. From the assessment order, it is noted that the AO made the following additions in the hands of the assessee as mentioned at pages 7 to 19 of the assessment order. Unexplained Credits u/s 68 of the Act Rs.17,80,650/- Unexplained Unsecured Loan Rs. 1,00,000/- Relating to Juggi Bhaiya Unexplained investment in remaking of Rs.81,20,788/- Jewellery (Gold) 3.3 In first appeal, the ld. CIT(A) has allowed the following additions by observing as under:- Printed from counselvise.com 7 ITA NO. 717/JP2025 DCIT, CENTRAL CIRCLE, KOTA VS SHRI VINOD KUMAR JAIN, KOTA Undisclosed income of Rs. 1,11,09,407 4.3 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 AO noted that during the search proceedings, it comes to the notice that Shvi Vinod Kumar Jain is proprietor of M/s. RV Jewellers, Kota. During search proceedings, physical stock available at the shop was inventorised and stock of Rs 2,36,19,448/- was found. The assessee was asked vide Q No.27 that as per the trial balance/Trading account of the proprietor's firm closing stock as on 16.04.2018 was Rs 1,18,47,532/- and as per departmental valuer valuation of closing stock carne to Rs 2,36,19,448/-. Thus, there was a difference of stock came to Rs. 1,17,71,916/- (2,36,19,448 -Rs 1,18,47,532/-), which was found excess and the assessed had offered such unexplained stock for the year 2018-19 in addition to his regular course of income The assessee had included undisclosed income of Rs. 1,11,09,407 out of Rs 1, 17, 71, 916/-in AY 2018-19 and balance of Rs. 6,62,509/- in the AY 2019-20 account of unexplained / unaccounted excess stock in his total income in ITR tied for the relevant years The AO held that the unexplained/unaccounted excess stock is covered u/s 69B of IT Act, therefore, the tax should be charged on this offered income as per provision of section 115BBE Act, but the assessee had paid taxes at normal rates thereon treated as Business Income. Therefore, Income offered and included in total income of the assessee of Rs. 1,11,09,407/-on account of excess stock found during the search proceedings is considered as unexplained/unaccounted stock as per provision of section 69B of the IT Act, therefore, the tax is charged on this offered Income as per provision of section 115BBE. The appellant argued that the physical stock found during the search was duly accounted for as part of regular business income. The stock difference was attributable to the incorrect GP rate applied during the search, and the actual GP Rate for the year was much higher. The stock was declared in the returns for AY Printed from counselvise.com 8 ITA NO. 717/JP2025 DCIT, CENTRAL CIRCLE, KOTA VS SHRI VINOD KUMAR JAIN, KOTA 2018-19 and AY 2019-20, and appropriate taxes were paid at normal rates. No undisclosed or unaccounted for purchases, sales were found during the search. The deeming provisions of secton 69B are not applicable in the absence of unexplained investments and taxing the income under section 115BBE is unjustified. I have considered fact of the case. The assessee had paid taxes at normal rates on the excess stock found. The assessee treated it Business Income. The AO considered excess stock as unexplained unaccounted stock as per provision of section 69B of the IT Act. Therefore, only issue of dispute is the tax charged on this offered income as per provision of section 115BBE The assessee has relied upon various decisions on the issues Hon'ble High Court of Rajasthan in the case of Pr. CIT. Alwar Va Bajarang Traders (DB Appeal No. 258/2017 dated 12.09.2017) considered similar issue wherein the Hon'ble High Court has confirmed the view of the Tribunal which is reproduced as under:- \"Having said that the next issue that arises for consideration is whether the amount surrendered by way of investment in the unrecorded stock of nice 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 foodgrams, rice and oil seeds, 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 clearly identifiable and related to the regular business stock of the assesane. The decision of the Co-ordinate Bench in case of Shri Ramnarayan Birta (supra) supports the case of the assessee in this regard. Therefore, the investment in the excess stuck has to be brought to tax under the head business income\" and not under the head income from other sources\" Applying the proposition of law laid down in the judicial pronouncements as discussed above, the surrender made on account of excess stock has to be brought to tax under the head business income\" Accordingly the addition u/s 69B is not found to be justified. Therefore, section 115BBE of the Act 1961 is not found to be applicable. The amount of excess stock is to be added as business income of the assessee. The assessee already declared the excess stock as business stock as business income. Therefore, the taxation should be as per normal provisions of Income Tax Act and not u/s 115BBE of the Income Tax Act Printed from counselvise.com 9 ITA NO. 717/JP2025 DCIT, CENTRAL CIRCLE, KOTA VS SHRI VINOD KUMAR JAIN, KOTA This ground of appeal is treated as allowed.’’ Cessation of Liability of Rs.10,00,000/- in the books of accounts 5.3 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 AO noted that in the balance sheet as on 31.03.2018, it was noticed, that assessee had shown unsecured loan of Rs. 11,00,000/-. Assessee stated during search that loan was taken for business purpose and he was not in position to provide details of loaners. The assessee himself admitted in reply to Q.No. 30. that he was unable to give details/genuineness of such loaners and he had voluntary surrendered amount of Rs. 11,00,000/- for the A.Y. 2018-19 in addition to his regular source of income. The assessee had included income of Rs. 10,00,000/- out of total offered Income of Rs. 11,00,000/- in his total income in ITR filed for the A.Y. 2010-19 on account of cessation of liability treated as Business Income and paid taxes at normal rate thereon, As the unexplained unsecured loans are covered u/s 68 of IT Ac therefore, the tax should be charged on this offered income as per provision of section 115BBE Act, but the assessee had paid taxes at normal rates thereon treated as Business Income. The income offered and included in total income of the assessee of Rs 10,00,000/- on account of cessation of Liability is considered as unexplained credits as per provision of section 68 of the IT Act, therefore, the tax is charged on this offered income as per provision of section 115BBE. The appellant argued that certain credit entries amounting to Rs.11,00,000/- were noted in the appellant’s books of accounts. These entries pertain to advances taken from various individuals (details available at page 15 of ld. CIT(A)’s order).. Printed from counselvise.com 10 ITA NO. 717/JP2025 DCIT, CENTRAL CIRCLE, KOTA VS SHRI VINOD KUMAR JAIN, KOTA The appellant clarified during search and in subsequent submissions that except for the entry of Juggi Bhaiya (Rs.1,00,000., all other entries relate to advances taken prior to 01-04-2013 and the balances were consistently shown in the financial statements filed for preceding assessment years. The advance received from Juggi Bhaiya was received on 13-12-2017 against a jewellery order that was delayed due to the search proceedings but was subsequently delivered on 01-02- 2019, with a proper sale bill issued. To resolve the matter and ensure compliance, the appellant agreed to write off the balances as cessation of liability, including the entry of Juggi Bhaiya. At the time of finalizing the accounts for AY 2018-19, the appellant retained the balance of Rs.1,00,000/- for Juggi Bhaiya, considering the transaction was completed with proper documentation. The assessee voluntarily wrote off the remaining Rs.10,00,000/- as cessation of liability, disclosing it in the capital account. The arguments of the appellant are considered. The liabilities pertain to loans/ advances received prior to 01-04-2013 and are not fresh credits for AY 2018-19. The appellant has voluntarily written off thee amounts, disclosed them in the accounts, and paid tax at normal rates. The issue in dispute is whether addition made by the AO is sustainable. Section 68 reads as under:- (Section available at page 15 & 16 of ld. CIT(A)’s order).. As per section 68 the sum should be credited in the books of an assessee for any previous year. Hence, the addition u/s 68 can be made in the year when the sum is credited for the first time. Here the credit was found to be prior to 01.04.2013. Hence addition made u/s 68 is not found to be sustainable. This view is fortified by the decision of the Hon'ble Delhi High Court in the case of CIT v. Usha Stud Agrt Farms Ltd (2009) 183 Taxman 277(2008) 301 ITR 334, where it was held as under- When the credit balance in the accounts of the assessee did not pertain to the year under consideration, the Assessing Officer was not justified in making the addition u/s 68 of the Act and no fault could be found with the order of the Tribunal endorsing the decision of the Commissioner (Appeal).’’ The ITAT, Chennai Bench in the case of Sooraj Leathers v ITO [IT Appeal No. 305 (Mad) of 2016] had considered an identical issue and after considering relevant facts held as under:- Printed from counselvise.com 11 ITA NO. 717/JP2025 DCIT, CENTRAL CIRCLE, KOTA VS SHRI VINOD KUMAR JAIN, KOTA If the liabilities are old, no credit has been made in so far as those credits in the books of accounts in the assessment year under consideration, Sec .68 cannot be applied ….’’ The facts of the case are similar in the case of the assessee. Therefore, the addition made u/s 68 is not found to be sustainable as the amount was credited in earlier years and not in the year under assessment. The assessee has voluntarily included this amount as cessation of liability and offered it as business income pertaining to current year because the assessee could not provide details of creditors. The same is found to be acceptable on the facts of the case. The addition made by the AD u/s 68 is therefore not found to be sustainable. This ground of appeal is treated as allowed.’’ Addition of Rs.1,00,000/- ‘’7.3 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 AO noted that the assessee himself admitted during search that he wits unable to give details/genuineness of such loaners and he had voluntary surrendered amount of Rs 11,00,000/- for the AY 2018-19 in addition to his regular source of Income The assessee had included the income of Rs 10 Lakhs in his total income in return filed for the AY 2018-19 out of total unsecured loans of Rs. 11.00 Lakhs Further, for the remaining Rs 1.0 lakh, the assessee submitted that the payment of Rs. 1.0 lakh from Juggi Bhaiya was received way back for supply of goods which was due. Therefore, when it came to notice, the assessee provided goods worth Rs 1 Lac to Juggi Bhaiya on 01.02.2019 vide voucher no. 250. The claim of the assessee is not found satisfactory by the AO as the assessee had supplied the goods on 01.02.2019 almost ten months Printed from counselvise.com 12 ITA NO. 717/JP2025 DCIT, CENTRAL CIRCLE, KOTA VS SHRI VINOD KUMAR JAIN, KOTA after the date of search This is an afterthought of the assessee to save from taxation. The assessee himself had admitted this fact during the search that he was unable to give details/genuineness of the loaners. Further, the assessee has not produced any details and relevant documents regarding amount of Rs. 1.0 lakh received from Juggi Bhaiya on account of way back for supply of goods which was due as claimed by assessee. Therefore, the amount of Rs 1.0 lac is added to the total income of the assessee treated as unexplained credit u/s 68 of the IT Act and tax is charged as per provisions of section 11588E of the IT Act. The appellant argued that the confirmation, PAN and ledger account of Juggy Bhaiya C/o Daljeet Taiyar were duly filed by the appellant through a written submission dated 26-12-2021. The sale invoice (Invoice No. RJV/250) dated 01- 02-2019, evidencing that the 1,00,000/- advance was received through banking channels on 13-12-2017 for the sale of jewellery also furnished. Ayushi Builders & Developers vs DCIT, Central Circle-2, Jodhpur, 151 ITD 712, it was held that assessee had disclosed advances in its return and produced relevant documents and said advances were adjusted against sales made subsequently, said advances could not be considered as undisclosed income of assessee. The appellant has relied upon the decision of ITAT, Jodhpur in the case of Ayushi Builders & Developers vs vs DCIT, Central Circle-2, Jodhpur, 151 ITD 712. In this case, it was held that assessee had disclosed advances in its return and produced relevant documents and said advances were adjusted against sales made subsequently, said advances could not be considered as undisclosed income of assessee. The facts of the case are considered. The AO made addition u/s 68 of the income Tax act. The assessee in the present case has furnished evidences to establish identity, genuineness and purpose of the transaction The AO made addition because assessee supplied the goods almost ten months after the date of search. Late supply of goods is not normal but late supply of goods cannot be a basis for making addition as long as the source of the credit is explained It is true that the assessee himself admitted that he was unable to give details during search. However, if on verification of books of accounts the assessee is able to explain the transaction, the same cannot be rejected unless the evidences furnished by the assessee are proved to be not genuine. In Printed from counselvise.com 13 ITA NO. 717/JP2025 DCIT, CENTRAL CIRCLE, KOTA VS SHRI VINOD KUMAR JAIN, KOTA the present case the assesses has furnished evidence with regard to identity, and genuineness of transaction. The creditors PAN no. is also furnished by the assessee. In these facts, the addition made by the AO u/s 68 is not found to be sustainable and deleted This ground of appeal is treated as allowed.’’ Addition of Rs.81,20,788/- on account of investment in re-making of jewellery (Gold). 8.3 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 AO noted that during the search proceedings, on going through the books of accounts, it was found that assessee had shown remaking gold weighted 2498.704 gm The assessee was asked vide Q.No.28 to provide customers details from whom such gold for re-making jewellery were obtained. In reply to No.28 stated that such gold was received from various customers between the month of June-2017 to Oct. 2017 for re-making and he also stated that he was not aware about the customers details, to whom gold for remaking jewellery were pertaining. The assessee himself admitted in reply to Q.No. 28 that he was unable to give details of such customers and he had voluntary surrendered amount of Rs. 81,20,788/- against unexplained gold jewellery weighted 2498.407 @ of 32,500 per 10 gm for the FY 2017-18 in addition to his regular source of income During assessment proceedings, the assessee submitted that these gold items were received from customers from June 2017 to Oct 2017 for remaking of jewellenes and the assessee was not aware of this fact at the time of search. Further assessee has submitted copy of ledger account of re-making golf as on 21.03.2018 and details of various customers. Printed from counselvise.com 14 ITA NO. 717/JP2025 DCIT, CENTRAL CIRCLE, KOTA VS SHRI VINOD KUMAR JAIN, KOTA The assessee's submission is not found satisfactory as the assesse is in this business for a long time and he must be aware of this practice of re-making of jewellery. Further, on perusal of copy of ledger account of re-making gold which was found during search proceedings, the assessee had shown total inwards jewellery of 2498.704 gm, outward Jewellery as NIL and balance jewellery of 2498. 704 gm as on 31.03.2018. Further, during the assessment proceedings, the assessee has submitted again copy of ledger account of re-making gold and shown total inward jewellery of 2498.704 gm outward jewellery of 2498.704 gm and balance jewellery as Nil as on 31.03.2018 which is quite different from ledger account found during search proceedings. Thus, it is distinct clear that the assessee has produced two different ledger account of re-making gold jewellery for the F.V. 2017-18, It proves that assessee made another ledger account and it is simply afterthought of the sssessee to save from fax liability Considering the above facts, the reply submitted by the assessee is not found tenable and therefore, income offered on account of investment in re-making of jewellery (Gold) of Rs. 81,20,788 is added to the total income of the assessee as per provision of section 68 of the IT Act and tax is charged as per provisions of section 11588E of the IT Act The appellant stated that due to the prolonged hours of questioning the appellant agreed to surrender Rs.81,20,788/- calculated by valuing the gold at Rs.32,500 per 10 gms.It is explained that this gold was received from five individuals for preparing jewellery: Neha Nichiwal, Bindu Mehta, Shreya Mehta, Urmila Mehta and Veena Mehta. It is stated that the gold was returned by these individuals in the form of jewellery for F.Y. 2018-19, as evidenced by Ledger Accounts of remaking gold showing receipts from these individuals. Purchase Invoices of the gold purchased by these individuals in F.Y. 2016-17 (under VAT), containing their complete addresses. Confirmation letters and affidavits submitted by these individuals. The appellant clarified that the alleged that the ledger accounts submitted during the assessment proceeding was different from the one found during the search. It is stated that this conclusion was based on a misunderstanding. - Ledger found during the search- A summary of the jewellery stock, where gold received customers was recorded under “Re-making Gold’’ and was Printed from counselvise.com 15 ITA NO. 717/JP2025 DCIT, CENTRAL CIRCLE, KOTA VS SHRI VINOD KUMAR JAIN, KOTA transferred from Remaking Gold Ledger to the Jewelery Stock ledger using ‘Stock General Vouchersssssss.’’ - Ledger submitted during assessment: A detailed ledger of re-making gold transactions showing the names of customers, date of receipts, and corresponding voucher and transfer entry to gold jewellery ledger through stock transfer vouchers. - Both ledgers are valid, accurate and consistent, serving different purposes in the accounting system. The AO’s comparison of these two distinct ledgers is misplaced. It is stated that during the search, the physical stock of gold jewelry was inventorised and the profitof the firm was computed based on this stock, which included the gold received for re-making purposes. The appellant declared this profit in the returns of income for AYs 2018-19 and 2019-20. Adding the value of gold received for re-making under section 68 results in double taxation, as the same is taxed twice. First as part of the firm’s profit and Second, as unexplained income of the appellant. The appellant stated that Section 8 applies the cash credits for which the assessee failed to explain the nature and source. In the present case, the appellant has provided details of the gold received (2498.704 gms), Names and address and confirmation of the five individuals from whom the gold was received, Purchase Invoices of the gold, proving its origin, Affidavits from these individuals affirming the transaction and sale invoice for returning of gold to these persons The appellant also argued with respect to Telescoping Principles. It is that the income from physical stock is already considered for taxation, any addition for the same source under section 68 leads to double taxation, violating the principle telescoping. The appelant has relied uponn the decision in the case of Uday . Tashankar DCIT (88 taxmann .com 408) where it was held that income offered during the search should be telescoped against additions under sections like 68 or 69C to prevent double taxation. The appellant has relied upon the decision in the case of Gopal S. Pandith DCIT (74 taman.com 273) and PCIT vs. Heritage Beverages (166 taxmann.com 217) in support of arguments of telescopic benefit. The facts of the case are considered. The AO while making considered the fact that the assessee voluntary surrendered this amount in addition to his regular source of income. Another reason noted by the AO is that the assessee has produced two different ledger account of re-making gold jewellery for the FY 2017 -18 Printed from counselvise.com 16 ITA NO. 717/JP2025 DCIT, CENTRAL CIRCLE, KOTA VS SHRI VINOD KUMAR JAIN, KOTA The assessee voluntarily surrendered this amount in addition to his regular source of income during the search proceedings. The identity of persons from whom the gold was taken for remaking was not disclosed during search proceedings Hence, the explanation given later can be treated as an afterthought. However, the arguments of the appellant are found to be acceptable that same amount which has been taxed in the form of profit included as excess stock found during the search cannot be taxed again as this gold was included in the physical stock taken during survey. No evidence brought on record that this gold was not included in the inventory of stock prepared. Therefore, it is held that the income from physical stuck is already considered for taxation, any other addition for the same source leads to double taxation of the same amount. The arguments of the appellant with regard to telescopic benefit of telescoping are found to be as per established jurisprudence as held in the decisions relied upon by the appellant. With regard to two different ledger accounts, the assessee has provided explanation which is as per the accounting. Hence, no adverse view is taken only because of this reason. In view of above discussion, the addition made by the AO on account of investment in re-making of jewellery (Gold) of Rs. 81.20.788/- is not found to be sustainable and deleted. This ground of appeal is treated as allowed.’’ 3.4 During the course of hearing, the ld.DR supported the order of the AO and submitted that the Department was not provided adequate opportunity of being heard and further submitted that the ld. CIT(A) has decided the above grounds of appeal in fvour of the assessee only based on the written submission filed by the assessee, however, the assessee was not present to argue the case before him. He Printed from counselvise.com 17 ITA NO. 717/JP2025 DCIT, CENTRAL CIRCLE, KOTA VS SHRI VINOD KUMAR JAIN, KOTA further submitted that the assessee failed to explain the source of investment in unexplained /unaccounted excess stockof Rs.1,11,09,407/- and this excess stock was found during the course of search treating it as business income. Further the assessee failed to explain the entries of unsecured loan of Rs.11.00 lacs (Rs.10.00 lacs offered for tax and Rs.1.00 lac not offered for tax) and failed to provide the identity and detail of the loan providers and genuineness of the unsecured loan and also submitted that the assessee has failed to produce evidences in respect of details of items booked by Shri Juggi Bhaiya and its rate at the time of giving advances of Rs.1.00 lacs. The ld.DR further submitted that with regard to the addition of Rs.81,20,788/- on account of investment in remaking of jewellery u/s 69B for which the assessee did not furnish details of about particulars of items and specifications of items which can prove that it has been included in the excess physical stock found during search. Thus the ld. DR submitted that the assessee did not produce the documents before him as to the addition made above. Hence, the ld.DR submitted that the issue be restored to the file of the ld. CIT(A) for afresh consideration but by providing reasonable opportunity of being heard to the Department. To support the arguments, the ld. DR relied upon following case laws. Judgments Applying Section 115BBE on Excess Stock – In Favour of Revenue This document summarizes key judicial precedents where courts have upheld the application of Section 115BBE of the Income Tax Act, 1961 in cases where excess stock was discovered during search or survey operations. The following decisions favored the Revenue by treating Printed from counselvise.com 18 ITA NO. 717/JP2025 DCIT, CENTRAL CIRCLE, KOTA VS SHRI VINOD KUMAR JAIN, KOTA such stock as unexplained investment under Sections 69/69B and thereby taxing the same at penal rates under Section 115BBE. S. No. Case Title Forum Citation / Date Ratio Decidendi 1 SVS Oil Mills vs. ACIT Madras High Court [2019] 101 taxmann.com 319 (Madras) Excess stock treated as undisclosed investment under Section 69B. Section 115BBE upheld despite clerical error in section reference. 2 Prem Lata Pandya vs. DCIT ITAT Jaipur ITA No. 343/JP/2023 (AY 2019–20) Excess stock and cash found during search; addition under Sections 69A/69B sustained and taxed under Section 115BBE. 3 Uma Maheshwara Rao Chinni vs. ACIT ITAT Cochin ITA No. 118/Coch/2023 Unexplained cash offered as income from other sources; held taxable under Section 69A and subject to 115BBE. 4 Kim Pharma Pvt. Ltd. vs. CIT Punjab & Haryana High Court [2013] 216 Taxman 153 (P&H) Surrendered amount in survey treated as deemed income under Section 69; no business income deduction allowed. 5 CIT vs. Prakash Chand Lunia Supreme Court [2023] SLP (C) No. 027809/2022 Supreme Court upheld strict tax treatment of unexplained income; loss from illegal source not allowable, affirming 115BBE implications. 3.5 We have heard the ld. DR and perused the materials available on record. In this case, none appeared on behalf of the assessee at the time of hearing of the appeal raised by the Department and not submitted any documentary evidences/ written submission by the assessee as to the grounds of appeal raised before us. In view of the above facts and circumstances of the case, it is not required to repeat the facts of the case and the Bench feels that one more chance should be given to the Department to argue the case before the ld. CIT(A) afresh. Hence, we are of the view that lis between the parties has to be decided on merits so that nobody’s rights could be scuttled down without providing opportunity of being heard to the Printed from counselvise.com 19 ITA NO. 717/JP2025 DCIT, CENTRAL CIRCLE, KOTA VS SHRI VINOD KUMAR JAIN, KOTA Department. Hence, the matter is restored to the file of the ld CIT(A) to decide it afresh by providing one more opportunity of hearing to the Department. Thus the appeal of the Department is allowed for statistical purposes. 3.6 Before parting, we may make it clear that our decision to restore the matter back to the file of the ld. CIT(A) shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be adjudicated by ld. CIT(A) independently in accordance with law. 4.0 In the result, the appeal of the Department is allowed for statistical purposes Order pronounced in the open court on 10 /11/2025. Sd/- Sd/- ¼ xxu Xkks;y ½ ¼MkWa-,l-lhrky{eh½ (GAGAN GOYAL) (Dr. S. Seethalakshmi) ys[kk lnL; @Accountant Member U;kf;dlnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 10/11/2025 *Mishra vkns'k dh izfrfyfivxzsf’kr@Copy of the order forwarded to: 1. The Appellant- DCIT, Central Circle, Kota 2. izR;FkhZ@ The Respondent- Shri Vinod Kumar Jain, Kota 3. vk;djvk;qDr@ The ld CIT 4. foHkkxh; izfrfuf/k] vk;djvihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 5. xkMZQkbZy@ Guard File (ITA No. 717/JP/2025) vkns'kkuqlkj@ By order, lgk;diathdkj@Asstt. Registrar Printed from counselvise.com "