MAHESH KUMAR JAIN,HYDERABAD V. DCIT., CENTRAL CIRCLE - 3(3), HYDERABAD

ITA 813/HYD/2025

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Shri Mahesh Kumar Jain, the proprietor of M/s. Praveen Marketing, was subjected to a search and seizure operation which revealed unaccounted purchases from M/s. Balar Marketing. Following this, the Assessing Officer issued a notice under section 153C of the Income Tax Act, 1961, and added the unaccounted purchases to Jain's income. The CIT(A) confirmed these additions, leading Jain to appeal to the Tribunal. The Tribunal dismissed the appeal, supporting the CIT(A)'s decision on the grounds of insufficient evidence from Jain to explain the source of the unaccounted purchases and the denial of cross-examination was not considered a violation of natural justice as no specific request was made during the assessment proceedings.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 712928 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: C.RAJ KUMAR
• Keywords: Unexplained expenditure; Principle of natural justice; Search and seizure; Source of fund
• Section: 69C; 6

Judgement Text

" आयकर अपीलीय अधिकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘B’ Bench, Hyderabad श्री रविश सूद, न् याययक सदस् य एवं श्री मिुसूदन सावडिया, लेखा सदस् य क े समक्ष । BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI MADHUSUDAN SAWDIA, ACCOUNTANT MEMBER आ.अपी.सं /ITA No.813/Hyd/2025 (निर्धारण वर्ा/Assessment Year:2017-18) Shri Mahesh Kumar Jain, Hyderabad. PAN:AFHPM6964R Vs. Dy. Commissioner of Income Tax, Central Circle 3(3), Hyderabad. (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee by: Shri C.Raj Kumar, C.A. रधजस् व द्वधरध/Revenue by:: Dr. Sachin Kumar, SR-DR सुिवधई की तधरीख/Date of hearing: 28/07/2025 घोर्णध की तधरीख/Pronouncement: 01/08/2025 आदेश/ORDER PER MADHUSUDAN SAWDIA, A.M.: This appeal is filed by Shri Mahesh Kumar Jain (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), Hyderabad (“Ld. CIT(A)”), dated 24.04.2025 for the A.Y. 2017-18. 2. The assessee has raised the following grounds of appeal : Printed from counselvise.com ITA No.813/Hyd/2025 2 3. The brief facts of the case are that, the assessee is an individual and the proprietor of M/s. Praveen Marketing, engaged in wholesale and retail trade of electronic parts and equipments. The assessee filed his return of income under section 139(1) of the Income Tax Act, 1961 (“the Act”) for the assessment year 2017–18 on 31.10.2017, declaring total income of Rs.6,49,460/-. Subsequently, a search and seizure operation was conducted in the case of M/s. Balar Marketing Group of companies, Delhi, on 23.03.2021. During the course of the search, it was revealed that M/s. Praveen Marketing had made unaccounted purchases from M/s. Balar Marketing for A.Ys. 2017- 18, 2018-19 and 2019-20. Based on this information, the Learned Printed from counselvise.com ITA No.813/Hyd/2025 3 Assessing Officer (“Ld. AO”) issued notice under section 153C of the Act to the assessee. 3.1 For the year under consideration, it was found that the assessee had made unaccounted purchases aggregating to Rs.23,70,000/- from M/s. Balar Marketing. The Ld. AO treated the entire sum as undisclosed income and added it to the assessee’s income. The assessment was accordingly completed by the Ld. AO under section 153C of the Act on 28.02.2024, determining total income at Rs.30,19,460/-. 4. Aggrieved by the order of the Ld. AO, the assessee filed appeal before the Ld. CIT(A). During the appellate proceedings, the Ld. CIT(A) noted that during the year under consideration the assessee had made two unaccounted purchases of Rs.5,70,000/- on 25.07.2006 and Rs.18,00,000/- on 01.10.2006. The Ld. CIT(A) treated the purchase of Rs.5,70,000/- as unexplained expenditure under section 69C of the Act, citing failure of the assessee to explain the source of payment. In respect of the second transaction of Rs.18,00,000/-, the Ld. CIT(A) allowed telescoping benefit to the extent of Rs.5,70,000/- and treated the balance of Rs.12,30,000/- as unexplained expenditure. Printed from counselvise.com ITA No.813/Hyd/2025 4 Thus, the total addition under section 69C was computed at Rs.18,00,000/-. Additionally, by taking a three-year average gross profit (“GP”) rate of 6.85%, the Ld. CIT(A) estimated profit on total unaccounted purchases of Rs.23,70,000/- and made a further addition of Rs.1,62,345/- towards suppressed profit. Thus, the Ld. CIT(A) confirmed additions under two heads i.e. (i) Rs.18,00,000/- as unexplained expenditure under section 69C and (ii) Rs.1,62,345/- as suppressed gross profit. 5. Aggrieved by the order of Ld. CIT(A), the assessee is in appeal before the Tribunal. At the outset, the Learned Authorised Representative (Ld. AR) submitted that two principal issues are involved in the present appeal i.e. (a) Firstly, the Ld. AO failed to provide an opportunity of cross-examination of the third party, whose documents formed the basis of the addition and (b) Secondly, the addition of Rs.18,00,000/- as unexplained expenditure over and above the GP addition. Printed from counselvise.com ITA No.813/Hyd/2025 5 6. On the first issue, the Ld. AR submitted that the denial of cross- examination violated principles of natural justice and hence the assessment deserves to be quashed. 7. Per contra, the Learned Department Representative (“Ld. DR”) submitted that the assessee had not made any request for cross- examination during the course of assessment proceedings and hence cannot now raise this plea at appellate stage. Therefore, there is no infirmity in the action of the Ld. AO. 8. We have heard the rival submissions and perused the material available on record. As regards the first ground relating to denial of cross-examination, we find merit in the submissions of the Ld. DR. The assessee has failed to substantiate with any evidence that a specific request for cross-examination was made before the Ld. AO during the course of assessment proceedings. In the absence of such request, the assessee cannot now take the plea of violation of natural justice. Therefore, we find no infirmity in the assessment order on this count. Further, we also note that the assessee has not disputed the fact of having made unaccounted purchases from M/s. Balar Marketing. Thus, even on merits, the addition is supported by material found during search and is not denied by the assessee. Printed from counselvise.com ITA No.813/Hyd/2025 6 9. On the second issue, it was argued that once GP is estimated on total unaccounted purchases, there was no justification to again treat the amount of Rs.18,00,000/- as unexplained expenditure. The Ld. AR prayed that the addition under section 69C be deleted and only the GP addition be retained. 10. Per contra, regarding the addition of Rs.18,00,000/-, the Ld. DR submitted that the assessee failed to furnish any explanation or evidence regarding the source of funds used for making the unaccounted purchases. The Ld. CIT(A) had in fact granted benefit of telescoping for the earlier transaction and treated only the remaining amount as unexplained. Therefore, the order of the Ld. CIT(A) is reasonable and does not warrant any interference. 11. We have heard the rival submissions and perused the material available on record. As regards the second issue related to the addition of Rs.18,00,000/- as unexplained expenditure, we have gone through the order of Ld. CIT(A) wherein the Ld. CIT(A) has decided the issue at para no.6.4 of his order, which is to the following effect : Printed from counselvise.com ITA No.813/Hyd/2025 7 Printed from counselvise.com ITA No.813/Hyd/2025 8 11.1 On perusal of above, we find that the Ld. CIT(A) has examined the two unaccounted purchases i.e. Rs.5,70,000/- on 25.07.2006 and Rs.18 lakhs on 01.10.2006 and granted benefit of telescoping for Rs.5,70,000/- against the purchases of Rs.18 lakhs, while treating the balance amount of Rs.12,30,000/- as unexplained. Thereafter, the entire sum of Rs.18 lakhs was treated as unexplained expenditure under section 69C of the Act. We also found that the Ld. CIT(A) has also provided the benefit of telescoping to the unaccounted purchases of the assessee of Rs.7 lakhs for A.Y. 2018-19 and Rs.49,50,000/- for A.Y. 2019-20 and did not make any addition under section 69C of the Act for A.Y. 2018-19 and A.Y. 2019-2020 . Printed from counselvise.com ITA No.813/Hyd/2025 9 Further, we note that the assessee has failed to produce any credible evidence before the Ld. AO or the Ld. CIT(A) regarding the source of these payments. Accordingly, the treatment of Rs.18,00,000/- as unexplained expenditure is justified. We also find that the Ld. CIT(A) has independently estimated the GP on the total unaccounted purchases at 6.85% and made an addition of Rs.1,62,345/- towards suppressed profit. The two additions serve different purposes i.e. one addresses the unexplained nature of the expenditure, and the other quantifies the income element derived therefrom. Since telescoping benefit has already been granted, and the GP addition is on overall unaccounted turnover, we find the approach of the Ld. CIT(A) to be reasonable. In view of the above, we uphold the order of the Ld. CIT(A) and dismiss the appeal of the assessee in its entirety. 12. In the result, the appeal filed by the assessee is dismissed. Order pronounced in the open Court on 1st August, 2025. Sd/- Sd/- (RAVISH SOOD) (MADHUSUDAN SAWDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad. Dated: 01.08.2025. * Reddy gp Printed from counselvise.com ITA No.813/Hyd/2025 10 Copy of the Order forwarded to : 1. Shri Mahesh Kumar Jain, Shop No.40, 5-1-27, Navrang Complex, Near Troop Bazar, Hyderabad-500 095 2. DCIT, Central Circle 3(3), Hyderabad. 3. Pr.CIT (Central), Hyderabad. 4. DR, ITAT, Hyderabad. 5. Guard file. BY ORDER, Printed from counselvise.com "