Smt. Bimla Narang vs Deputy Commissioner Of Income Tax Central Circle Karnal

PER SATBEER SINGH GODARA, JM

These three assessees namely, Smt. Bimla Narang, Shri Rakesh Narang & M/s Zewraat have filed their respective as many appeals ITA Nos. 213, 214 & 215/Del/2026; all for assessment year 2017-18, against the Commissioner of Income Tax (Appeals)-3 (in short, the “CIT(A)”), Gurgaon separate orders, dated 11.11.2025, passed in case Nos. CIT(A), Gurgaon-3/10211/2018-19, CIT(A), Gurgaon-3/10212/2018-19 & CIT(A), Gurgaon-3/10216/2018-19, involving proceedings u/s 143(3) r.w.s. 153B(1)(b); respectively.

Heard all three assessee’s as well as department at length. Case files perused.

We advert to the basic relevant facts first of all. The assessees/appellants M/s. Zevraat, a partnership firm, engaged in sale purchase of gold, silver, and utensil items, had two partners namely, Rakesh Narang (appellant in ITA No. 214/Del/2026 herein) and Mukesh Narang to the extent of 50% share each. The third assessee/appellant before us, Smt. Bimla Narang happens to be the legal representative of Shri Satpal Narang/ father of the aforesaid two partners. This partnership firm appears to have carrying out its business activities from Plot No. 29C, Model Town Govind Puri Road, Yamuna Nagar. And that its partner(s) are also stated to be living on first floor of the said business premises. There is further no quarrel between the parties that the learned departmental authorities had carried out the search in issue in the assessee’s business and it’s partner’s residential premises on 21.12.2016. It was no furtherance to the said search action that the learned Assessing Officer framed his all three assessments in the assessees’ cases on 13.12.2018 inter alia adding unsecured loans of Rs. 57.50 lakhs, difference in sales recorded in regular books viz-a-viz the retrieved data to the tune of Rs. 8,48,42,018/-, shortage in stock of Rs. 6,96,14,518/- and unexplained/undisclosed income based on the seized documents of Rs. 22.71 lakhs; respectively. M/s Zevraat filed its appeal before the learned CIT(A) wherein he has inter-alia restricted the aforesaid unsecured loans addition to the extent of Rs. 5 lakhs, upheld second and third additions and further granted relief of Rs. 10,62,500/- and partly affirmed the addition based on seized documents to the tune of Rs. 1,08,500/-; respectively.

Coming to the individual assessees herein, we notice that both the learned lower authorities have added unexplained jewellery investments u/s 69 of the Act totaling to Rs. 93.68 lakhs in Shri Rakesh Narang’s case and that amounting to Rs. 3,12,22,409/- in Shri Sant Kumar Narang’s hands; represented by his legal representative/ widow Smt. Bimla Narang along with cash found/seized of Rs. 2.54 lakhs, respectively.

It is in this factual backdrop that all these three assessees have filed their respective appeals before the tribunal.

We now proceed to deal with M/s Zevraat/ partnership firm’s appeal ITA No. 215/Del/2026 for the sake of convenience and brevity. The first and foremost addition made and sustained in his hands all along is that of Rs. 5 lakhs representing unsecured loans coming from Shri Joginder Singh. Learned CIT(DR) could hardly dispute that the assessee had filed his confirmation, books of accounts/ledgers, both the parties’ bank statements, income tax returns and computation which further followed his response to the Assessing Officer u/s 133(6) of the Act as well duly supporting its case all along. We are of the considered view in this factual backdrop that the impugned section 68 addition of unsecured loans received on 05.12.2016 in two tranches of Rs. 2 lakhs and Rs. 3 lakhs; respectively does not deserve to be sustained. The same stands deleted in very terms therefore.

Next comes the second issue of difference in sales as per the assessee’s regular books and the alleged retrieved data/duplicate ones amounting to Rs. 8,48,42,018/- made in both the learned lower authorities’ assessment and lower appellate discussion. We notice from a perusal of a case records that the assessee had declared total sales of Rs. 17.03 (crores) out of which the corresponding figure of Rs. 8,55,55,791/- stood accepted by the learned Assessing Officer himself resulting balance addition in issue before us. It is in this factual backdrop that we sought to know the assessee total sales in the relevant previous year. We are informed that it had claimed cash deposits/cash sales amounting to Rs. 13,85,70,000/- whereas the department’s stand is that the same reads a figure of Rs. 14,02,70,000/- as per learned lower authorities’ respective detailed discussion. Learned counsel further claims that assessee had recorded total sales of Rs. 17,03,97,809/- as on 08.11.2016 as well as in its books. The fact, remains that this last figure turns out to be much more than the retrieved one forming subject matter of our apt adjudication. This is also coupled with the fact that the learned lower authorities have already accepted the minimum figure of Rs. 17.03 (Crores) whilst granting benefit of Rs. 8.55 Crores. This is thus an instance wherein the assessee deserves to be given telescoping benefit of its regular business sales already declared in books as against the addition amount based on incomplete retrieved data making it a clear cut case of double addition. We thus find merit in the assessee’s instant second substantive ground to delete the impugned addition of Rs. 8,48,42,018/- made in its hands in very terms.

The third issue between parties herein is that of alleged shortage of stock amounting to Rs. 6,96,14,518/-. Learned CIT(DR) seeks to buttress the point that the departmental authorities herein had found the assessee’s stock figures in its books amounting to Rs.11,61,25,237/- against that verified of Rs. 4,65,10,719/- resulting in the differential amount in issue. We wish to make it clear that the assessee’s purchases from recognized institutions such MMTC etc., are nowhere in dispute. We are of the considered view in this factual backdrop that in case such a deficiency in actual stock is found, it is an instance of clandestine sales wherein only the profit element could be added than the entire stock itself wherein no benefit of cost and regular business expenditure is given. Learned counsel submits that the assessee has duly declared its profit element @ 6.06% as well amounting to Rs. 33,29,703/- which has gone undisputed from the revenue side all along. We thus restrict the impugned shortage in stock addition of Rs. 6,96,14,518/- to the extent of Rs. 33,29,703/- @ 6.06 GP only to be followed by necessary computation as per law.

Learned counsel representing assessee does not press for the assessee’s fourth substantive ground regarding the addition amount of Rs. 10,08,500/- (supra) based on the specific seized material. Upheld accordingly.

This partnership firm M/s Zevraat’s appeal in ITA No. 215/Del/2026 is partly accepted.

We now advert to the twin individual assessees Smt. Bimal Devi and Shri Rakesh Narang appeals 213 & 214/Del/2026. There is hardly any dispute that this former appellant represents her late husband Shri. Satpal Narang who also subjected to search action at his residential premises on the first floor of the firm’s premises (supra). And also that the learned departmental authorities found seven gold bars of 1 kg each out of which six of them had admittedly been released after due verification since it was proved to their satisfaction that they formed part of the partnership firm’s stock in trade. The impugned addition of unexplained investment in gold made u/s 69 of the Act is stated to be pertaining to only the remaining one gold bar only. Mr. Sehgal’s case in this factual backdrop is that both the learned lower authorities have neither granted the assessee benefit of the CBDT’s landmark benevolent circular No. 1916 dated 11.05.1994 viz-a-viz all the family members but also her stand all along explaining source of the impugned remaining investments as per the supportive purchase invoices has nowhere been considered. And that the learned Assessing Officer’s remand report found nothing adverse against him/her. The Revenue admittedly appears to have added the entire value of seven gold bars in the assessee’s hand despite the fact that the learned departmental authorities had not seized six gold bars during the course of search. We thus delete the impugned addition of Rs. 3,12,22,409/- to the extent of six gold bars in entirety in these facts and circumstances. So far as the seventh gold bar is concerned, we direct the learned Assessing Officer to allow the assessee’s explanation to the extent he/she has filed corresponding purchase bills/invoices as well as in light of the CBDT’s aforesaid benevolent circular. Necessary computation shall thereafter follow as per law.

Coming to the second addition of cash amounting to Rs. 2,53,890/-, Mr. Sehgal does not wish to press for the same keeping in mind smallness thereof. Upheld accordingly. Smt. Bimla Narang’s case ITA No. 213/Del/2026 is partly accepted in above terms.

We now come to Shri Rakesh Narang’s appeal ITA No. 214/Del/2026 wherein he is aggrieved against both the learned lower authorities’ respective assessment and lower appellate findings making unexplained investments in jewellery addition(s) of Rs. 12.50 lakhs and Rs. 81.18 lakhs regarding ornaments found from SBI and PNB lockers during search. Mr. Sehgal has filed the assessee’s family tree of ten members including himself, wife, sons etc. His case therefore is that the learned lower authorities have nowhere granted benefit of the aforesaid circular (supra). This is indeed coupled with the fact that Smt. Alka Narang/assessee’s wife had explained before the learned departmental authorities that total jewellery of 596.040 grams was the firm’s stock in trade which had been duly released as well. We thus accept the assessee’s case to the very extent at this stage and direct the learned Assessing Officer to grant her the benefit of the CBDT’s aforesaid circular and the corresponding purchase bills/invoices as well as the released jewellery submitted all along, to be followed by his necessary computation as per law. This third assessee’s appeal ITA No. 214/Del/2026 is partly accepted.

We make it clear before parting that the learned Assessing Officer shall frame his consequential computation in all these three assessee’s hands under “normal” provisions going by S.M.I.L.E Microfinance Limited Vs. The ACIT CC-1 in W.P.(MD) No.2078 of 2020 & W.M.P. (MD) No. 1742 of 2020 having settled the issue that section 115BBE of the Act is applicable for the transactions on or after 01.04.2017 only.

These three assessees’ appeals ITA Nos. 213 to 215/Del/2026 are partly allowed in above terms. A copy of this common order be placed in the respective case files.