S. 37(1) : Business expenditure-Salary paid to staff/ spouse and professional fees-Disallowance is restricted to 30%.[S. 40(a)(ia),143(3)]
The AO disallowed the salary paid to spouse of the employees. The CIT(A) restricted the disallowances to 30 % of gross receipts. The Tribunal afformed the order of the CIT(A). (ITA Nos. 4147 to 4153 & 4585 to 4593/Mum/2024 dt. 3-7-2025) (AY 2016–17 to 2022–23)
J. Kumar Infraprojects Ltd. v. DCIT (Mum) (Trib)

S. 69A : Unexplained money-Alleged unaccounted cash sales from Scrap and Piling business-Addition of gross receipts is not justified-Applying an average profit rate of 8.56% on such cash receipts is held to be reasonable-Order of CIT(A) is affirmed. [S. 115BBE]
During the course of assessment, the AO made an addition under section 69A aggregating to ₹1,03,27,743 on account of unaccounted income from cash sales of scrap (₹25,79,334) and piling business (₹77,48,409), allegedly based on statements recorded during the course of search and materials seized. The assessee contended that even if such transactions were undertaken, the correct approach would be to estimate the income component and not treat the entire cash receipt as undisclosed income, especially when expenses related to such business activity had already been booked in the regular books. The CIT(A) restricted the addition by estimating income at 8.56% of the gross receipts (based on average profit before tax margin), resulting in reduced additions of ₹2,20,791 (for scrap) and ₹6,63,264 (for piling). The issue before the Tribunal was , whether cash receipts from alleged unaccounted business activity (scrap sale and piling) can be added in full under section 69A, or whether only the income component, estimated on a reasonable profit margin, should be taxed. On appeal the Tribunal agreed with the assessee’s contention and upheld the CIT(A)’s approach. The Tribunal held that the business of scrap sale and piling formed part of the assessee’s regular operations. Even if cash transactions were undertaken outside the books, the income component needed to be determined on an estimate, not the entire turnover. The AO failed to establish that the entire cash receipts were pure income or profit, especially in absence of evidence that related expenses were not incurred or were also outside the books. The assessee’s regular books already accounted for corresponding expenses, which the AO did not dispute. The Tribunal held that applying an average profit rate of 8.56% on such cash receipts was a reasonable method to determine taxable income in the absence of exact details. Accordingly the Tribunal held that additions under section 69A must be restricted to estimated profit margins on unaccounted turnover. Addition of gross receipts is not justified. Order of CIT(A) upheld.(ITA Nos. 4147 to 4153 & 4585 to 4593/Mum/2024 dt. 3-7-2025) (AY 2016–17 to 2022–23)
J. Kumar Infraprojects Ltd. v. DCIT (Mum) (Trib)

S. 69A : Unexplained money-Alleged investment of unaccounted cash receipts in immoveable properties-The Tribunal held that without tangible evidence of investment, addition under section 69A on account of alleged purchase of immovable property is not justified. Addition deleted.
The Assessing Officer alleged that the assessee had utilized unaccounted cash receipts (from scrap sales and piling activities) for investment in immovable properties. The AO relied on statements recorded during the search, internal correspondence, and summary sheets seized from the premises. Based on this, a sum of ₹1.03 crore was added under section 69A as unexplained investment. The assessee rebutted this by submitting that,there was no direct evidence of cash investment in any identified immovable property.The documents were unsigned, unauthenticated, and contained projected figures. No immovable property was found to be registered in the name of the assessee or its partners using such unaccounted cash. The issue before the Tribunal was ,whether mere suspicion of investment in immovable properties based on unsigned internal documents and uncorroborated statements is sufficient to invoke section 69A and make an addition for unexplained investment.
The Tribunal held that the addition under section 69A was not sustainable in the absence of cogent and corroborative evidence. The following points were emphasised, No immovable property was found or identified by the Department which could be attributed to the alleged unaccounted income. The AO failed to establish the actual flow of funds from the business into any asset or transaction. The seized documents were not supported by entries in any books of accounts or third-party confirmations. Mere projections, proposals, or internal assessments of fund requirements for property purchases cannot constitute evidence of actual investment. The Tribunal also noted that the income component from the cash receipts (scrap and piling) had already been offered to tax on an estimated basis (8.56%). Therefore, taxing the same amount again as unexplained investment would amount to double addition. The Tribunal held that without tangible evidence of investment, addition under section 69A on account of alleged purchase of immovable property is not justified. Addition deleted. (ITA Nos. 4147 to 4153 & 4585 to 4593/Mum/2024 dt. 03-07-2025) (AY. 2016–17 to 2022–23)
J. Kumar Infraprojects Ltd. v. DCIT (Mum)(Trib)

S. 69C : Unexplained expenditure-Alleged out of books Murrum expenses-Where cash expenditure relates to business operations and its incurrence is not disputed, addition under section 69C cannot be made for the entire amount-Estimation of profit element is justified. Addition restricted to 5% of such expenses. [S. 132]
Pursuant to search proceedings, the Assessing Officer noted from trial balances and loose sheets that certain site-wise murrum expenses (earth work filling material) were incurred in cash outside the regular books of accounts. The AO made a total addition of ₹6,42,71,657 under section 69C, holding that the entire expenditure was unaccounted and unexplained. The assessee submitted that the murrum expenses were part of routine site-level working, that corresponding income was offered to tax, and that even if not fully recorded in the regular books, the expenses were incurred wholly and exclusively for business purposes. The CIT(A), agreeing partially with the assessee, deleted the full addition and estimated income at 5% of the murrum expenses, treating that as income embedded in the alleged out-of-books expenditure. The issue before the Tribunal was, whether the entire out-of-books expenditure (murrum expenses) can be added under section 69C as unexplained expenditure, or whether only a reasonable profit element should be brought to tax when the source and business purpose are not in doubt. On appeal the Tribunal held that the AO was not justified in treating the entire amount of cash murrum expenses as unexplained under section 69C. Key observations were, the murrum expenses were incurred during execution of civil contracts at specific project sites and were not in the nature of capital or personal expenses. The Department failed to show that the said cash expenditure was diverted for any purpose other than business. The AO relied merely on trial balances and loose papers seized, without corroborating the actual nature or quantum of cash outflows. Section 69C allows addition only when the source of expenditure is unexplained, not merely because it is outside the books. The Tribunal upheld the CIT(A)’s estimate of 5% of the alleged cash expenditure as reasonable in the context of the nature of business and cash-intensive operations. It also agreed with the finding that a contractor cannot be denied deduction for business expenditure merely because of procedural lapses in accounting. The Tribunal held that where cash expenditure relates to business operations and its incurrence is not disputed, addition under section 69C cannot be made for the entire amount. Estimation of profit element is justified. Addition restricted to 5% of such expenses. (ITA Nos. 4147 to 4153 & 4585 to 4593/Mum/2024 dt. 3-07-2025) (AY. 2016-17 to 2022-23)
J. Kumar Infraprojects Ltd. v. DCIT (Mum)(Trib)

S. 69C : Unexplained expenditure-Alleged bogus purchases-Estimate of 12% of alleged bogus expenses are affirmed-Pr. CIT v. Kanak Impex (India) Ltd (2025) 474 ITR 175 / 172 Taxman.com 283 (Bom)(HC) distinguished. [S. 37(1)]
The AO has disallowed 100% of alleged bogus expenses. On appeal the CIT(A) restricted the disallowance at 12% of the alleged bogus expenses. On appeal by the Revenue and the assessee, the Tribunal affirmed the order of the CIT(A) estimating the disallowance at 12% of alleged bogus expenditure. The Tribunal distinguished the ratio in Pr. CIT v. Kanak Impex (India) Ltd. Pr. CIT v. Kanak Impex (India) Ltd (2025) 474 ITR 175 / 172 Taxman.com 283 (Bom)(HC). (ITA Nos. 4147 to 4153 & 4585 to 4593/Mum/2024 dt. 3-07-2025) (AY. 2016-17 to 2022-23)
J. Kumar Infraprojects Ltd. v. DCIT (Mum)(Trib)

S. 151 : Reassessment-Sanction for issue of notice –Shall be signed-Validity of reassessment-As per the CBDT Notification dated 31.03.2021, reassessment proceedings initiated prior to 01.04.2021 were to be governed under the old regime, and all functions were to be performed by the Jurisdictional AO-Sanction and jurisdiction is bad-Order of reassessment is quashed Unsigned sanction-Order is quashed and set aside. [S. 120, 147, 148 ,149, 282A(1) R.127A(1)]
The Assessing Officer issued notice under section 148 of the Act on the basis of alleged unaccounted cash receipts. The assessee challenged the very foundation of the reassessment proceedings, arguing that the mandatory sanction under section 151 of the Act as required before issuance of notice under section 148 was neither manually signed nor digitally signed by the competent authority. The sanction sheet merely contained the name and designation of the Principal Commissioner of Income-tax (PCIT), without any signature, initials, or DSC. The assessee heavily on the Allahabad High Court decision in Vikas Gupta v. UOI (2022) 448 ITR 1 (All)(HC), which held that unsigned approvals do not fulfil the mandatory requirement of “authentication” under section 282A(1). The issue before the Tribunal was whether reassessment proceedings initiated under section 147/148 are valid when the mandatory approval under section 151 is unsigned — i.e., neither manually nor digitally signed, and whether such approval satisfies the legal test of authentication under section 282A of the Income-tax Act.

The Tribunal, after extensively examining the provisions of sections 151 and 282A, held that , the Authentication under section 282A(1) is not a mere procedural formality, it is a statutory mandate. An unsigned approval cannot be considered valid, whether issued in paper form or electronic form. A notice or document must bear a valid manual or digital signature to be held as “signed”. The approval obtained in the case was admittedly not signed by the PCIT, either physically or electronically. The Tribunal distinguished the contrary view expressed by the Chhattisgarh High Court in Bharat Krishi Kendra v. UOI (2022) 444 ITR 584, noting that it was a single-judge decision and did not deal with section 282A(1) in detail. The Tribunal followed the ratio of Vikas Gupta (All)(HC) and Daujee Abhushan Bhandar v. UOI (2022) (All)(HC), as both were Division Bench rulings specifically interpreting section 282A(1). The Tribunal further relied on the Supreme Court decision in CIT v. Vegetable Products Ltd. (1973) 88 ITR 192 (SC), which laid down that where two views are possible on a provision, the view favourable to the assessee must be adopted.
Accordingly, the Tribunal held that the unsigned sanction was invalid, and since valid prior approval is a jurisdictional condition under section 151, the entire reassessment proceedings were bad in law therefore
reassessment proceedings initiated on the basis of such approval are without jurisdiction and hence quashed. (ITA Nos. 4147 to 4153 & 4585 to 4593/Mum/2024, dt 03-07-2025) (AY. 2016–17)
J. Kumar Infraprojects Ltd. v. DCIT (Mum)(Trib)

S. 151A : Faceless assessment of income escaping assessment-Reassessment issued by Jurisdictional AO instead of FAO-Order is held to be valid on the presumption that the operation of Jurisdictional High Court in Hexaware Technologies Ltd. v. ACIT(2024) 464 ITR 430 (Bom)(HC) is stayed by the Honourable Supreme Court. [S. 148, 151,Art. 136]
The assessee challenged the validity of the reassessment proceedings for AY 2016–17 on the ground that the notice under section 148 was issued by the Jurisdictional Assessing Officer (JAO), whereas under section 151A and CBDT Notification No. 18/2022 dated 29.03.2022, reassessment notices post-01.04.2021 were to be issued only by the Faceless Assessing Officer (FAO). The assessee relied heavily on the decision of the Bombay High Court in Hexaware Technologies Ltd. v. ACIT, (2024) 464 ITR 430 (Bom)(HC)) which quashed reassessment notices issued by the JAO on identical grounds. The issue before the Tribunal was , whether reassessment notice issued by JAO post-01.04.2021 is without jurisdiction in light of the mandate under section 151A and CBDT notification requiring reassessment to be conducted through the FAO. The Tribunal noted the assessee’s reliance on the Bombay High Court ruling in Hexaware Technologies Ltd. However, it also recorded that the operation of the said High Court judgment had been stayed by the Hon’ble Supreme Court. In view of the Supreme Court stay, the Tribunal declined to follow the said precedent as binding, distinguishing it from ordinary jurisdictional rulings. The Tribunal held that once the judgment relied on by the assessee is stayed by the Apex Court, the principle of judicial discipline does not oblige the Tribunal to apply it. Consequently, the Tribunal did not accept the argument that the issuance of notice by the JAO rendered the proceedings void or without jurisdiction. Thus, this issue was decided against the assessee, and the reassessment proceedings were held to be valid despite the procedural objection. Reassessment notice issued by JAO not invalid where High Court judgment holding it so has been stayed by the Supreme Court. (ITA Nos. 4147 to 4153 & 4585 to 4593/Mum/2024 dt 03-07-2025) (AY 2016–17 to 2022–23)
J. Kumar Infraprojects Ltd. v. DCIT (Mum)(Trib)
Editorial : The Tribunal erroneously observed that the Judgement of the Jurisdictional High Court in Hexaware Technologies Ltd. v. ACIT(2024)162 taxmann.com 225/ 464 ITR 430 (Bom)(HC) is stayed by the Honourable Supreme Court. Refer, Dada Pharma LLP v. Dy. CIT (Mad)(HC) www.itatonline.org, Gaishen Enterprise LLP v. ACIT (Bom)(HC) www.itatonline.org. Chennai ITAT issues Circular requesting the Bar and Departmental Representatives to identify appeals covered by Madras HC ruling in TVS credit Services Ltd v. DCIT, following Bombay High Court Judgement in Haxaware for consolidating hearing, www.itatonline.org.

[Coram : Hon’ble Shri Sandeep Gosain, JM & Shri Prabhash Shankar, AM]