ITAT Jaipur Upholds Deletion of Rs. 5,21,64,013 Additions: Unsecured Loans and CBIC Import Data Mismatch Examined
Overview of the Dispute
The Income Tax Appellate Tribunal, Jaipur Bench, in ITO Vs Nihal Khandelwal (ITA No. 384/JPR/2026), dismissed the appeal preferred by the Revenue, thereby confirming the order of the National Faceless Appeal Centre (NFAC), Delhi, which had deleted additions totalling Rs. 5,21,64,013 for assessment year 2022-23. The additions had been made under Section 69A of the Income Tax Act, 1961, on account of alleged unexplained money, and under Section 69C on account of alleged unexplained import expenditure.
The Bench, comprising Judicial Member Kuldip Singh and Accountant Member Prakash, found no illegality or perversity in the appellate findings and declined to interfere.
Background and Assessee Profile
The assessee, Nihal Khandelwal, operated a gemstones and jewellery trading business under the trade name M/s KGS Gems. His return of income for assessment year 2022-23 came under scrutiny after export-import data reflected high-value imports. The Assessing Officer (AO) undertook an inquiry into the genuineness of purchases and the sources deployed to fund them.
Two distinct issues emerged during the assessment:
- Unsecured loans received from related parties — the AO questioned the creditworthiness of the lenders and made an addition of Rs. 1,82,63,955 under
Section 69A. - Discrepancy between recorded purchases and CBIC import data — the AO observed that imports appearing in the CBIC data stood at Rs. 5,21,64,013, while the assessee had recorded purchases of only Rs. 1,82,63,955, resulting in an alleged difference of Rs. 3,39,00,058, which was added under
Section 69C.
The assessment was framed under Section 143(3) read with Section 144B of the Income Tax Act, 1961.
First Addition: Unexplained Money Under Section 69A
Nature of the Transactions
The assessee had received funds from three concerns connected to his family:
- M/s Chantaburi Ruby Jewels Expo — a proprietary concern of the assessee's brother — from which Rs. 19,00,000 was received on different dates.
- M/s Jai Paplaj Mata Exports — a proprietary concern of the HUF of the assessee's father (Girraj Khandelwal HUF) — from which Rs. 71,00,000 was received.
- M/s Shree Gordhan Gems — a proprietary concern of the assessee's mother (Sangeeta Khandelwal) — from which Rs. 86,51,119 was received.
The AO's principal objection was that the declared incomes of these three parties — Rs. 12,02,000, Rs. 15,89,890 and Rs. 13,01,685 respectively — were disproportionate to the sums advanced, and that creditworthiness had therefore not been established. The AO acknowledged identity and genuineness of transactions but denied the creditworthiness aspect.
What the Assessee Placed on Record
The assessee furnished copies of:
- Income-tax return acknowledgements of all three parties
- Computation of total income
- Bank statements
- Confirmation of accounts
- Explanation of each credit entry appearing in the bank accounts of the parties
CIT(A) Findings on Ledger Analysis
The CIT(A), NFAC, Delhi, examined the ledger accounts of all three parties in detail.
M/s Chantaburi Ruby Jewels Expo: The ledger revealed that this party was a debtor in the assessee's books, with an opening debit balance of Rs. 7,87,000 and a closing debit balance of Rs. 54,37,000. The receipt of Rs. 19,00,000 represented settlement of amounts the assessee had himself advanced to this party. The CIT(A) observed that there were nearly two dozen debit and credit transactions during the financial year and that the AO had selectively picked certain entries. No suspicious cash deposits preceding the transfers were identified.