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Judgment
PER S. RIFAUR RAHMAN, AM :
These appeals are filed by the assessee against the order of Learned Commissioner of Income Tax (Appeals), Delhi – 23 [“Ld. CIT(A)”, for short] dated 23.07.2025 for the Assessment Years 2021-22, 2022-23 and 2024-25.
Since the issues are common and the appeals are connected, hence the same are heard together and being disposed off by this common order. For the sake of brevity, we are taking the facts from the Assessment Year 2021-22 as most of the grounds are common.
The assessee has taken the following grounds of appeal in A Y 2021-22 :-
"1.On the facts and circumstances of the case and in law, the notice u/s 148 issued in this case is bad-in-law, illegal, without jurisdiction and barred by limitation and, therefore, the said notice u/s 148 along: with assessment order passed on the foundation of such notice are liable to be quashed and CIT(A) erred in not holding so.
2.On the facts and circumstances of the case and in law, the reassessment proceedings initiated are contrary to the provisions of law including the specific provisions of section 147 to section 151 of Income Tax Act, 1961 and therefore, the reassessment proceeding initiated along with assessment order passed are liable to be quashed and CIT(A) erred in not holding so.
3.On the facts and circumstances of the case and in law, the order passed by the learned assessing officer and the addition made therein is bad-in-law and CIT(A) erred in not holding so.
4.On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the addition made by the Ld. Assessing Officer to the extent of Rs.31,70,000/- on account of alleged unexplained money u/s 69A of the Act.
5.On the facts and circumstances of the case and in law, the assessment order passed by the assessing officer is contrary to the provisions of section 148B of the Income Tax Act. 1961."
First we take up Ground No.4 of grounds of appeal and brief facts of the case are, the assessee filed his return of income for AY 2021-22 under section 139 (1) of the Income-tax Act, 1961 (for short 'the Act') declaring total Income of Rs.60,61,870/- on 08.02.2022. A search and seizure operation under Section 132 of the Act was carried out in the case of M/s. Pilot Industries Ltd. and others on 30.05.2023. A notice u/s 148 of the Act was issued to the assessee on 21.03.2024 and return of income was filed by the assessee u/s 148 of the Act on 27.03.2024 declaring total income of Rs.60,61,870/-.
During search and seizure operation in case of M/s. Pilot Industries Pvt. Ltd., the residence of Sh. Sandeep Aggarwal (Director of M/s. Pilot Industries Pvt. Ltd.) was also covered. The WhatsApp chat of Shri Sandeep Aggarwal and Smt. Jaishree Aggarwal (wife), several suspicious transactions and chats showing bulk purchase of gold-jewelry in cash were noticed. Based on these chats, the AO identified five transactions totaling to Rs.82,10,000/- made in cash during the F.Y. 2020-21 for jewellery purchases from various parties, including Sachin Modi, Tapan Maychh, and Deepak as under :-
Date Amount (Rs.) Purchases from 26.06.2020 13.95,000 Sachin Modi 20.07.2020 16,50,000 Tapan Maychh 20.07.2020 28,80,000 Unidentified 02.11.2020 19,25,000 Tapan Maychh
A show-cause notice was issued to the assessee and in response to show cause notice on 23.01.2025, the assessee was not able to provide even single positive evidence that the transactions were cancelled. In view of the above, the amount ofRs.82,10,0001- in cash during the year for purchase of jewelry, hence, it was treated as unexplained transaction. The AO assessed the total income at Rs.1,42,71,8701- u/s. 143(3) of the Income Tax Act, 1961 by making addition ofRs.82,10,000/- for unexplained transaction u/s.69A of the Act.
Aggrieved by the assessment order, assessee preferred an appeal before the ld. CIT (A) and filed detailed submissions. After considering the written submissions of the ld. AR of the assessee, ld. CIT (A) observed that the claim of the assessee that no jewelry was purchased and no cash payment was made is not fully correct. He further observed that in some of the WhatsApp chats referred by the Assessing Officer, there is clear mention of cash payments. Although in some of the WhatsApp chats, cash payment has apparently not been made and to that extent the claim of the assessee that there were only proposal can be admitted. Further, he observed that on the analysis and perusal of the WhatsApp chat, payments made by the assessee to Sachin Modi, Tapan Maychh and Tapan Maychh for Rs.l3,95,000, Rs.16,50,000/- and Rs.1,25,000/- respectively totaling to Rs.31,70,000/-. Accordingly, out of the total addition of Rs.82,l 0,000/-, addition of Rs.31,70,000/- was confirmed and balance addition of Rs. 50,40,000/- is directed at being deleted and hence, partly allowed the appeal.
Aggrieved, assessee is in appeal before us.
At the time of hearing, ld. AR of the assessee submitted that the addition of alleged jewelry purchased has been made u/s 69A of the Act. The addition has been made on the basis of some WhatsApp chat. The AO has observed that during the course of search, mobile phone of the assessee and his wife Jaishree Aggarwal were checked and screen shots of these chats were taken. He submitted that according to the AO, as per these chats, the assessee has purchased jewelry/gold in cash and the AO accordingly made the addition under section 69A of the Act. It is submitted that the additions made by the AO and confirmed by the CIT(A) are factually erroneous. He further submitted that:
The assessee neither purchased any such alleged jewelry/ gold nor made any payment. If the assessee had purchased any such jewelry/ gold, some estimate/ invoice/ bill would have been found during the course of search. The fact that no such estimate/ bill/ invoice was found clearly establishes that no such jewelry/ gold was purchased as alleged by the AO.
During the course of search, the jewellery/ gold found at the time of search have been found to be fully reconciled and disclosed. No item of jewellery/ gold found at the time of search have been found to be undisclosed.
No seizure of any jewelry/ gold was made at the time of search.
In the statement recorded of the assessee by the investigation wing during the course of search, it was duly explained and stated by the assessee that no such transaction of purchase of jewelry/ gold and payment took place.
In response to the enquiries made by the investigation wing from the alleged jewelers, all the persons denied having undertaken any sale transaction with the appellant.
He submitted that the above facts clearly establish that the addition made by the AO is without any evidence. The addition made is only based upon suspicion and irrelevant consideration.
Further to above, it is submitted that the AO has grossly erred in making addition under section 69A of the Act. 'There is no applicability of provision of section 69 A of the Act and brought to our attention the provision of section 69A which is reproduced as under: -
[Unexplained money, etc.
69 A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.]
He submitted that from the bare perusal of aforesaid provisions, it is evident that for applicability of provision of section 69A of the Act, the first requirement is that the assessee must be found to be owner of any money, bullion, jewelry or other valuable articles. He further submitted that in the present case, the assessee has not been found to be owner of any such alleged jewelry or cash for which the addition has been made and no such alleged jewelry or cash has been found during the course of search. It is submitted that the AO has not even recorded any satisfaction/ observation that the assessee is the owner of any such alleged jewelry/ cash.
Ld. AR further submitted that the provisions of section 69A contain deeming fiction whereby certain unexplained money, bullion, jewelry etc. is deemed to be the income of the assessee. However, the provision of section 69A does not provide for deeming of ownership. In this regard, he relied on the following case laws :-
CIT Vs. Mother India Refrigeration Industries, [155 ITR 711 SC] [1985]
He further submitted that Hon'ble Apex Court in the case of DN Singh Vs CIT has held that section 69A cannot be applied by merely having possession of goods without any legal ownership. In the present case of the assessee, the facts are even stronger as the appellant has not even been found in possession of amount of Rs.2,50,00,000- for which the addition has been made. He further relied on the decisions which are reproduced below :-
Mangilal Agarwal V s. Assistant Commissioner of Income-tax [2007] 163 Taxman 399 (Rajasthan) High Court of Rajasthan
Naresh Bhavanji Chheda Vs. ACIT, Central Circle - 6(1), ITAT Mumbai
DCIT Central Circle-25, New Delhi Vs. Yograj Arora, ITAT Delhi
ACIT Vs Jotindra Steel & Tubes Ltd [2022] 139 taxmann.com 157 in the ITAT Delhi
DCIT, Central Circle-03, Delhi Vs. Smt. Kushal Singh, ITAT Delhi
Further to above, it is submitted that addition cannot be made merely on the basis of WhatsApp chat as there has been no compliance to the CBDT Manual providing instruction with regard to collection of digital evidences and in this regard, he relied on the following decisions :-
M/s LSL Tools (P) Ltd Vs. ACIT, Central Circle-I, Faridabad, ITAT Delhi;
Arti Garg, Naresh Arora Vs. DCIT, Central Circle 31, Delhi, 2026 (1) TMI 883 - ITAT Delhi
Shri Anil Kumar Gupta Vs. ACIT, Central Circle 30, New Delhi, 2025 (1) TMI 614 - ITAT Delhi
RituTuli Vs. DCIT, Central Circle-8, New Delhi, 2025 (1) TMI 170 -ITAT Delhi
In view of his above submissions, ld. AR pleaded that the addition may be deleted.
On the other hand, ld. DR of the Revenue brought to our notice detailed findings of AO and further submitted that Ld CIT(A) had already given substantial relief to the assessee. He relied on the detailed findings of lower authorities.
Considered the rival submissions and material placed on record. We observed that certain WhatsApp chats were noticed in the mobiles phones of the assessee and his wife. Based on the above chats, the AO came to the conclusion that the assessee had purchased the jewelry from above mentioned three jewelers. It is fact on record that the investigation wing had completed the search and not found any excess jewelry, which was not accounted by the assessee. They have not even discussed about the excess or shortage of the jewelry by the assessee. Merely on the basis of the Whatsapp chat, they came to the conclusion that the assessee must have purchased the same in cash. There is not corroborative evidence in the possession of the AO to even proceed to making the addition. Based on the same reasons, the Ld CIT(A) had also sustained the partial addition.
On careful consideration, there is not excess jewelry or any material at the possession of the lower authorities to sustain the addition in the present case. Even there is no evidence of making any payment or any invoice at the possession of the authorities below. As brought to our notice, all the jewelry and Gold were reconciled and disclosed, there is no trace of the jewelry alleged to have purchased by the assessee matching to the WhatsApp chats were found with the assessee. It clearly shows that it is only suspicion and the addition was also made uls 69. The issue raised by the assessee is also that the AO cannot make addition invoking the provisions of section 69 when the AO does not have any jewelry or any material to show that the assessee had in fact purchased or in his possession any excess stock. In absence of any physical or any material to indicate that the assessee is not only owner but also in possession of the same. In absence of any physical or any material to indicate that the assessee is the owner of the jewelry, the provisions of the section 69 is not applicable. Since it is deeming provision, without there being any material or evidence, the addition cannot be made as held in the case of Mother India Refrigeration Industries(supra) and all other decision of various courts. Further we observed that the assessee also raised issue on the applicability of provisions of the digital evidences and relied on decision of coordinate benches. Since, we already held that the AO does not have any material to make addition uls 69, we are not inclined to discuss the other issues at this stage. Hence, the ground raised by the assessee in this regard is allowed.
The other grounds taken by the assessee are not pressed, hence, accordingly dismissed as not pressed.
In the result, the appeal filed by the assessee for AY 2021-22 is partly allowed.
Since the facts in A Y s 2021-22are exactly similar to Assessment Years 2022-23 & 2024-25, our above findings in A Y 2021-22 are applicable mutatis mutandis in Assessment Years 2022-23 & 2024-25. Accordingly, the aforesaid issues in A Y s 2022-22& 2024-25 are also partly allowed.
Further the assessee has raised another ground in AY 2024-25 against addition on account of cash of Rs.1,65,303/- found at the time of search, which was not pressed at the time of hearing, hence the same is dismissed as not pressed.
In the result, the appeal filed by the assessee for AY s 2021-22, 2022-23 and AY 2024-25 are partly allowed.