Ganesh Kumar Sancheti vs Income Tax Officer

PER SUDHIR KUMAR, JM:

This assessee’s appeal for assessment year 2022-23, arises against the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre [in short, the “CIT(A)/NFAC”], Delhi’s DIN and order no. ITBA/NFAC/S/250/2025-26/1082444529(1), dated 10.11.2025 involving proceedings under section 143(3) r.w.s. 144B of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) solitary on the ground that Ld. CIT(A) erred in upholding the addition of Rs. 88,79,498/- on account of unaccounted sale under section 69A of the Act.

Brief facts of the case are that the assessee is engaged in the business of manufacturing and trading of readymade garments under the proprietorship concern M/s Rajesh Trading, filed his return of income for AY 2022-23 on 10.10.2022 declaring a total income of Rs. 7,27,430/-. The return was processed under section 143(1). The case was subsequently selected for scrutiny under CASS on the parameter “information in verification cases uploaded through CRIU”. During the course of assessment proceedings, information was received from the office of the Deputy Director of Income Tax (Investigation), Unit-5(1), New Delhi, pursuant to a searched conducted under section 132 on the JMJ Jain Group on 28.5.2022. From an Iphone seized during the search belonging to Shri Pramod Baid, Director of M/s Empire Apparels Pvt. Ltd., certain handwritten notes were found indicating unrecorded purchases made by that purchases from M/s Rajesh Trading. When those notes were reconciled with the accounting software of Empire Apparels Pvt. Ltd., it was noticed that purchases from M/s Rajesh Trading were understated by Rs. 88,79,498. Based on this information, a show cause notice was issued to the assessee proposing to treat the amount of Rs. 88,79,498 as unexplained money under section 69A of the Act. Further, in addition, the AO proposed disallowances of Rs. 16,865/- u/s. 43B (for non-submission of TDS challan) and Rs. 2034/- under section 32 (for want of supporting bill for fixed asset addition). The assessee filed replies dated 18.10.2023, 9.2.2024 and 18.3.2024; however, no satisfactory explanation or documentary proof regarding the alleged understatement of sales was furnished. The AO completed the assessment under section 143(3) r.w.s. 144B on 27.3.2024, determining total income at Rs. 96,25,827/-, making additions. Against the above action of the AO, assessee appealed before the Ld. CIT(A), who vide impugned order dated 10.11.2025 dismissed the appeal of the assessee.

That being the case, both the parties vehemently reiterate their respective stands against and in support of the impugned bogus sale disallowance. We note that assessee is engaged in the business of manufacturing and trading of readymade garments under the proprietorship concern M/s Rajesh Trading, filed his return of income for AY 2022-23 on 10.10.2022 declaring a total income of Rs. 7,27,430/-. It is undisputed that books of accounts of the assessee have been duly audited by a qualified Chartered Accountant under section 44AB of the Act and the Tax Audit Report has been filed alongwith the return of income. The Tax Auditor has verified all sales, purchases, ledgers and financial disclosures after examining the primary books of account and supporting records. In the absence of any adverse finding in the audit report, or any specific discrepancy pointed out in the regular books maintained and audited, the reliability and authenticity of the audited books cannot be fully disregarded. We find that neither the assessee has been able to properly explain the unaccounted sale nor the department could simply brush aside all the relevant evidences at one go. Be that as it may, the tribunal is of the considered view that in these peculiar facts, it is deemed appropriate in the larger interest of justice to restrict the disallowance to @5% of sales as against the entire unaccounted sales disallowed by the Assessing Officer. Necessary computation shall follow as per law. No other ground or argument has been pressed.

This assessee’s appeal is partly allowed in above terms.