Sonu Jain Vs ITO (ITAT Agra)
Section 44AD: ITAT Deletes ₹8 Lakh Addition Based on Missing Books and Purchase Details Where Turnover Was Accepted
Accepted Presumptive Income Central to Tribunal’s Decision
The Agra Bench of the Income Tax Appellate Tribunal (ITAT) has deleted an addition of ₹8 lakh under Section 69C read with Section 115BBE, holding that deficiencies concerning books of account and purchase documentation could not sustain the addition on the facts when the Revenue had accepted the assessee’s turnover and presumptive income under Section 44AD.
The dispute concerned cash paid through an intermediary for purchasing agricultural machinery parts. The Assessing Officer questioned the transaction because of missing GST and transportation particulars, along with the absence of stock records and cash books.
The Tribunal found these reasons insufficient in the circumstances and allowed the assessee’s appeal.
Case Details
The decision was delivered in Sonu Jain v. ITO, Ward (1)(1)(2), Agra, ITA No. 671/Agr/2026, concerning Assessment Year 2024-25.
The order was pronounced on 16 October 2026 by Judicial Member Sunil Kumar Singh and Accountant Member Brajesh Kumar Singh.
The assessee filed his return on 19 June 2024, declaring total income of ₹2,84,680, comprising income from business and other sources. He carried on the business of trading in old bearings, belts and other machinery parts related to agriculture.
His business income was declared under the presumptive taxation provisions of Section 44AD.
Search Information Leads to Scrutiny
The case was selected for scrutiny following information received from the Department’s Investigation Wing concerning an alleged unaccounted cash transaction of ₹8 lakh with Shri Rupesh Kumar Jain.
The information emerged during a search at Rupesh Kumar Jain’s premises in Agra on 31 October 2023.
During the search, Rupesh Kumar Jain stated that he was engaged in moving cash from one place to another for a small commission. He also stated that he dealt in silver.
The Assessing Officer issued statutory notices seeking an explanation from the assessee concerning the cash transaction.
Assessee Explains Payment as Purchase Consideration
In response, the assessee furnished his income tax return, computation of income, bank statement and purchase bills.
He explained that agricultural goods had been purchased from Delhi through Rupesh Kumar Jain and Bobby Jain during the relevant financial year.
According to the assessee, the ₹8 lakh cash payment was made to Rupesh Kumar Jain to facilitate purchases from other States for his trading business.
Copies of certain purchase bills provided through the intermediaries were also submitted during assessment.
The assessee’s position was that Rupesh Kumar Jain acted as a facilitator for procuring goods, and the payment formed part of the business transactions underlying the accepted turnover.
Assessing Officer Questions Bills and Missing Records
The Assessing Officer rejected the explanation, reasoning that the differing business activities of the assessee and Rupesh Kumar Jain indicated that the transaction could not be a regular business transaction.
He also treated the purchase bills as fictitious because they lacked GST particulars and transportation evidence, including goods transportation receipts and truck toll receipts.
The absence of a stock register showing receipt of the goods and a cash book recording the payment was also relied upon.
Consequently, the Assessing Officer added ₹8 lakh under Section 69C read with Section 115BBE. He separately estimated commission expenditure at 2%, making a further addition of ₹16,000.
CIT(A) Sustains ₹8 Lakh Addition
The CIT(A), NFAC, partly allowed the first appeal.
The estimated commission addition of ₹16,000 was deleted for lack of evidence. However, the ₹8 lakh addition was sustained.
Before the Tribunal, the assessee argued that he was a small trader whose sales had been accepted and whose income had been declared under Section 44AD.
He submitted that maintaining books of account was not required under the presumptive scheme applicable to his case. He relied on the Chandigarh Tribunal’s decision in Nand Lal Popli v. DCIT, dated 14 June 2016.
The Revenue supported the CIT(A)’s order.
Tribunal Finds Documentary Objections Insufficient
The Tribunal noted that the Revenue had not disturbed the assessee’s sales. His turnover and presumptive income computed at 8% had been accepted.
It observed that maintaining books of account was not mandated under Section 44AD in the circumstances before it.
The Tribunal also accepted the relevance of the explanation that Rupesh Kumar Jain was merely facilitating the procurement of goods. It considered an inquiry into the exact nature of the business relationship unnecessary for deciding the disputed addition.
Missing transportation or GST particulars on the bills could not, on these facts, justify the addition when the accepted presumptive business computation remained undisturbed.
Final Decision
Following the reasoning supported by Nand Lal Popli, the Tribunal held that the CIT(A)’s order sustaining the addition was unsustainable.
The ₹8 lakh addition was deleted, and the appeal was allowed.
The ruling rests on the combination of accepted turnover, accepted presumptive income and the particular grounds used to reject the purchase explanation. It does not declare that Section 44AD prevents examination of every independently established unexplained transaction.
Cases Discussed
- Nand Lal Popli v. DCIT, ITA No. 1161/Chd/2013, ITAT Chandigarh, 14.06.2016 (cited by assessee and followed by Tribunal).
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT AGRA
This appeal is directed against the impugned order dated 13.08.2026 passed in appeal No NFAC/2023-24/10564498 by the ld. Commissioner of Income Tax/ NFAC (Delhi) [(hereinafter referred to as the “CIT(A)] u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for the A.Y. 2024-25, wherein ld CIT(A) has partly allowed assessee’s appeal.
2(i). The brief facts state that assessee filed return of income on 19.06.2024 for A.Y. 2024-25, declaring total income of Rs. 2,84,680/-, which comprises income from business and other sources. The case was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS). On the basis of the information received from the investigation wing of the department that assessee had made unaccounted cash transaction of Rs. 8,00,000/- with Shri Rupesh Kumar Jain. This fact came to the knowledge of the investigation wing during the search action u/s 132(4) of the Act conducted on 31.10.2023 during F.Y. 2023- 24 at the premises of Shri Rupesh Kumar Jain, 22/312, Jain Bagichi, Motilal Nehru Road, Belangunj Agra.
(ii). Statutory notices u/s 143(2) and 142(1) of the Act were issued and served upon the assessee, seeking assessee’s explanation in respect of the aforesaid unaccounted cash transaction with Shri Rupesh Kumar Jain. The assessee furnished reply on 03.10.2025 alongwith ITR, computation of income, bank statement, purchase bills etc. Assessee stated that he purchased some agriculture goods in the F.Y. 2023-24 from Delhi through Shri Rupesh Kumar Jain and Bobby Jain on cash payment of money. Assessee paid cash of Rs. 8,00,000/- to Shri Rupesh Kumar Jain for purchase of agriculture goods from other States for assessee’s trading. The copies of some of the purchase bills provided by Shri Rupesh Kumar Jain and Bobby Jain were also submitted during the assessment proceedings. Shri Rupesh Kumar Jain in his statement recorded during search stated that he is involved in the business of cash transaction/ movement from one place to another and earned small commission from the said transfer of cash. Shri Rupesh Kumar Jain also stated that he was also engaged in the business of silver, whereas assessee Sonu Jain is engaged in the business of old bearing, belt and other machinery parts related to agriculture.
(iii). The assessing officer observed that the impugned transactions between the two cannot be regular business transactions, which are unaccounted and are out of assessee’s books. The assessing officer further treated the purchase bills submitted by assessee as fictitious on the ground that they were without GST, transportation details like transfer receipts of goods dispatched, tolls receipts of trucks as the said goods purchased from Delhi had to be transported to Agra. Assessing officer further observed that the assessee did not produce the stock register, reflecting entry of such agricultural goods, cash books reflecting entry of said cash payment to Rupesh Kumar Jain. The assessing officer thus added Rs. 8,00,000/- as assessee’s undisclosed/ unaccounted income u/s 69C r.w.s. 115BBE of the Act. Further, the assessing officer estimated 2% commission on acquiring accommodation entries amounting to Rs. 16,000/- (2% of 8,00,000/-) and added in the income of the assessee, vide assessment order dated 10.02.2026 passed u/s 143(3) r.w.s. 144B of the Act.
3. Aggrieved, assessee preferred an appeal before ld CIT(A), who partly allowed assessee’s appeal, confirming addition of Rs. 8,00,000/- as unaccounted cash u/s 69C r.w.s.115BBE of the Act, however, deleted the addition of Rs. 16,000/- being without evidence.
4. Aggrieved, assessee preferred this second appeal against the impugned order and raised following grounds:-
“1. Having regard to the facts and circumstances of the case the order passed under section 143(3) read with section 144(B) as well as order passed under section 250 are illegal, arbitrary and bad in law as the same have been passed without properly appreciating the facts of the case and facts and legal position of the case are totally based on assumption.
2. Having regard to the facts and circumstances of the case the addition of Rs.8,00,000/- lacs under the provisions of section 69C of the Income Tax Act for alleged expenditure without appreciating the fact that the Income from Business for the year under consideration was disclosed by the appellant under section 44Ad of the Income Tax Act, 1961.
3. Having regard to the facts and legal position and legality in the case of appellant the addition under section 69C is unsustainable.
…….”
5. Perused the records and heard ld representatives for the parties.
6. The main point for determination on the basis of the grounds raised under appeal, is as to whether ld CIT(A) has erred in confirming the addition of Rs. 8,00,000/- as unaccounted cash/ unexplained income u/s 69C r.w.s. 115BBE of the Act for want of bills, vouchers, details of purchases, cash books etc., ignoring the fact that the assessee disclosed the presumptive income for the year under consideration u/s 44AD of the Act?
7. Ld representative for the assessee has submitted that the assessee derived income from trading of agricultural machinery parts. The assessee is a small trader and the sales of assessee have been accepted by the Assessing Officer. The assessee is not required to maintain books of account as he opted us 44AD of the Act. Ld AR has referred order dated 14.06.2016 passed by ITAT Chandigarh in Nand Lal Popli v. The DCIT, in ITA No. 1161/Chd/2013 (A.Y. 2007-08) + 1 other, to support his argument.
8. Ld Sr DR has supported the impugned order.
9. We note that the assessing officer observed that Shri Rupesh Kumar Jain, in whose premises at Agra, a search action was conducted on 31.10.2023, also deals in the business of silver apart from the business of cash transactions/ movement from one place to another, earning commission thereon, whereas the business of the assessee is sale/purchase of old bearing, belt and other machinery parts related to agriculture. The assessing officer, therefore, held that the transaction between Shri Sonu Jain and Shri Rupesh Kumar Jain cannot be a regular business transaction, hence unaccounted and out of books.
10. The assessee is said to have derived income from trading of agricultural machinery parts during the year under consideration. The sales of the assessee have not been disturbed by the revenue. The presumptive income shown u/s 44AD of the Act has been accepted. The assessing officer has also accepted the turnover of assessee estimating income @ 8% on the presumptive rate.
11. According to assessee, Mr. Rupesh Kumar Jain was mere facilitator in providing goods to assessee on the payment of impugned cash of Rs. 8,00,000/-. To our mind, the requirement of exact nature of business between Rupesh Kumar Jain and the assessee is not necessary. Maintaining books of accounts is not the mandate of section 44AD of the Act. The observation of the assessing officer in respect of non mentioning of transportation/GST details on the bills etc. cannot be said to be the basis for making impugned addition when the presumptive income declared u/s 44AD and assessed @ 8%, has not been disturbed by the revenue. This view is supported by the decision of the coordinate Chandigarh bench of the tribunal in Nand Lal Popli (supra). The impugned order passed by ld CIT(A), confirming the assessment order in verbatim, is unsustainable in law. The aforesaid point is accordingly determined in positive in favour of the appellant assessee and against the revenue.
12. In the result, the appeal of the assessee is allowed.
