Ms. Preeti Jain, New Delhi V. ACIT, New Delhi

CO 154/DEL/2016

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3571 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s) 29 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 20-02-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 21-04-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Keywords: Valuation report; Assessment record
• Section: 143(3); 153A; 132

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B : NEW DELHI BEFORE SHRI BHAVNESH SAINI , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 1124/DEL/201 6 (ASSESSMENT YEAR: 2013 - 14 ) ACIT, CENTRAL CIRCLE - 17, ROOM NO. 101, 1 ST FLOOR, HALL NO. 01, ARA CENTRE, E - 2, JHANDEWALAN, NEW DELHI VS. PREETI JAIN, 198, VASANT ENCLAVE, RAO TULA RAM MARG, NEW DELHI PAN:AEUPL9904Q (APPELLANT) (RESPONDENT) CO NO. 154/DEL/2016 (IN ITA NO. 1124/DEL/2015) (ASSESSMENT YEAR: 2013 - 14) PREETI JAIN, 198, VASANT ENCLAVE, RAO TULA RAM MARG, NEW DELHI PAN:AEUPL9904Q VS. ACIT, CENTRAL CIRCLE - 17, ROOM NO. 101, 1 ST FLOOR, HALL NO. 01, ARA CENTRE, E - 2, JHANDEWALAN, NEW DELHI (APPELLANT) (RESPONDENT) REVENUE BY : MS. ASHIMA NEB, SR. DR ASSESSEE BY: SHRI SAJJAN KUMAR TULSIYAN, CA MS. NISHA RACHH, CA SHRI KARAN KUMRA, CA DATE OF HEARING 29/11 / 2017 DATE OF PRONOUNCEMENT 2 0 / 0 2 / 201 8 O R D E R PER PRASHANT MAHARISHI , A. M. 1. TH IS IS AN APPEAL FILED BY THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT(A) - 27, NEW DELHI DATED 04.12.2015 FOR THE AY 2013 - 14. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THE LD COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON THE FACTS IN DELETING THE AD DITION OF RS. 15101389/ - ON ACCOUNT OF DIFFERENCE IN VALUATION OF STOCK UNDER THE HEAD UNDISCLOSED INVESTMENT IN STOCK MADE BY M/S. JEWELS BY PREETI. ACIT VS. PREETI JAIN, ITA NO. 1124/DEL/2015 & CO NO. 154/DEL/2016 (ASSESSMENT YEAR: 2013 - 14) 2. THAT THE LD CIT(A) HAS ERRED IN GIVING ASSESSEE RELIEF ON ACCOUNT OF JEWELLERY RECEIVED ON APPROVAL WIT HOUT APPRECIATING THE FACT THE ASSESSEE HAS GIVEN STATEMENT ON OATH DURING THE SEARCH AND DENIED HAVING RECEIVED/ KEPT ANY JEWELLERY FOR SUCH PURPOSE. 3. THAT THE LD CIT(A) HAS ERRED IN IGNORING THE FACTS THAT THE ASSESSEE WAS NOT MAINTAINING STOCK REGIST ER AS NO BOOKS OF ACCOUNT WAS FOUND DURING THE COURSE OF SEARCH PROCEEDINGS AND ESTIMATE ARRIVED BY DEPARTMENTAL VALUATION OFFICER WAS CORRECT AND AS PER LAW. 4 (A) THE ORDER OF LD CIT(APPEALS) IS ERRONEOUS AND NOT TENABLE IN LAW ON FACTS. 3. THE ASSESSEE H AS RAISED THE FOLLOWING GROUNDS OF APPEAL IN CROSS OBJECTION: - 1. THE LD CIT(A) ON THE FACTS OF THE CASE AND IN LAW HAS RIGHTLY DELETED THE ADDITION OF RS. 15101389/ - AS UNDISCLOSED INVESTMENT IN STOCKS AND THE SAME SHOULD BE UPHELD. 2. THAT THE LD CIT(A ) HAS RIGHTLY DELETED THE ADDITION OF RS. 1.51 CRORES MADE IN AY 2013 - 14 AS THE VALUE OF STOCK SUBMITTED BY THE APPELLANT WAS IN LINE WITH THE AMOUNT DETERMINED BY THE DEPARTMENT VALUER. 3. THAT THE LD CIT(A) CORRECTLY APPRECIATED THAT THE APPELLANTS VAL UATION OF STOCK WAS ARRIVED AT USING THE VALUE OF STOCK DECLARED IN THE RETURN FOR ASSESSMENT YEAR 2011 - 12, PURCHASE/ SALES SUPPORTED BY INVOICES AND GOODS RECEIVED/ SENT ON APPROVAL SUPPORTED BY APPROVAL VOUCHERS, AND THAT THE APPELLANT HAD SUBMITTED COMP LETE DOCUMENTARY EVIDENCE TO THE DDI(INVESTIGATION) VIDE LETTER DATED 14.06.2012. 4. THAT THE LD CIT(A) CORRECTLY APPRECIATED THAT THE APPELLANTS HAD VALUED STOCK AT COST ON THE BASIS OF GOLD RATE PREVAILING ON THE DATE OF PURCHASE OF RESPECTIVE ITEMS, WHEREAS THE DEPARTMENT VALUE HAD VALUED THE ITEMS AT GOLD RATES PREVAILING ON 12.04.2012. 5. THAT THE LD CIT(A) HAD RIGHTLY DELETED THE ADDITION MADE BY THE LD AO ON ACCOUNT OF UNDISCLOSED INVESTMENT IN STOCK, AS THE SAME WAS MADE WITHOUT ANY CREDIBLE OR C OGENT OBJECTIONS AGAINST THE VALUATION AND EXPLANATION SUBMITTED BY THE APPELLANT. 4. THE BRIEF FACTS OF THE CASE IS THAT ASSESSEE IS AN INDIVIDUAL. SHE IS RUNNING A PROPRIETARY CONCERN IN THE NAME AND STYLE OF JEWEL BY PREETI. THE BUSINESS WAS STARTED I N OCTOBER 2010 OF PURCHASE AND SALE OF JEWELLERY AND ACCESSORIES. SHE ALSO UNDERTAKES SERVICES OF ORGANIZING EVENTS FOR DESIGN AND PROMOTION OF THE JEWELLERY ON COMMISSION BASIS. THE SEARCH AND SURVEY U/S 132 WERE CONDUCTED ON 12.04.2012 IN ONE OF THE GROU P OF WHICH ASSESSEE IS A MEMBER. THE ASSESSEE FILED HER RETURN OF INCOME ON ACIT VS. PREETI JAIN, ITA NO. 1124/DEL/2015 & CO NO. 154/DEL/2016 (ASSESSMENT YEAR: 2013 - 14) 17.03.2015 AT RS. 3,34,028/ - . AS THE RETURN WAS PENDING AS ON THAT DATE OF SEARCH THE ASSESSMENT WAS CARRIED OUT. 5. DURING THE COURSE OF SEARCH , JEWELLERY VALUED AT RS. 37877297/ - WAS FOUND AND THE AO NOTED THAT BOOKS OF ACCOUNTS WERE NOT AVAILABLE AT THE BUSINESS PREMISES. THEREFORE, ABOVE JEWELLERY WAS SEIZED. THE STATEMENT OF THE ASSESSEE WAS RECORDED ON 12.04.2012 WHEREIN, IT WAS ALSO MENTIONED THAT SHE DOES NOT MAINTAIN STOCK REGISTER. FURTHER, IN THE POST SEARCH PROCEEDINGS , SHE SUBMITTED RECONCILIATION OF STOCK ALONG WITH THE PURCHASE AND SALE BILLS AND APPROVAL NOTES. SHE ALSO SUPPORTED IT BY THE INCOME TAX RETURNS AND BALANCE SHEET AND PROFIT AND LOSS ACCOUNT. SHE FURTHER S HOWED THAT AS ON 31.03.2011 SHE HAD THE STOCK OF RS. 23585908/ - . SHE FURTHER STATED THAT ACCORDING TO THE RECONCILIATION SHE HAD A CLOSING STOCK AS AT 31.03.2012 OF RS. 22775908/ - . SHE FURTHER SHOWED THE DETAILS OF JEWELLERY RECEIVED ON APPROVAL BASIS AND SENT ON APPROVAL BASIS SUBMITTING THE VOUCHERS FOR THE SAME. THEREFORE, IT WAS SUBMITTED THAT THERE IS NO DIFFERENCE IN THE STOCK. 6. THE LD ASSESSING OFFICER STATED THAT AS DURING THE SEARCH SHE DID NOT PRODUCE THE BOOKS OF ACCOUNT AND DOES NOT MAINTAIN THE STOCK REGISTER , RECONCILIATION CANNOT BE ACCEPTED. THEREFORE, AS THE VALUATION OF THE JEWELLERY MADE BY THE GOVT VALUER OF RS. 37877297/ - WAS COMPARED WITH THE ACTUAL STOCK AS ON 31.03.2012 OF RS. 22775908/ - . THE ADDITION OF RS. 15101389/ - WAS MADE AS UND ISCLOSED INVESTMENT. CONSEQUENTLY, THE ASSESSMENT ORDER U/S 143(3) OF THE ACT WAS PASSED ON 27.03.2015 AT TOTAL INCOME OF RS. 15135417/ - . THE ASSESSEE AGGRIEVED WITH THE ORDER OF THE LD AO PREFERRED APPEAL BEFORE THE LD CIT(A). THE LD CIT(A) DEALT WITH TH IS ISSUE AT PARA NO. 9 OF HER ORDER AS UNDER: - AY 2013 - 14 THE MAIN SUBSTANTIVE GROUND IS THAT THE AO HAS ERRED IN LAW AND FACTS WHILE MAKING THE ADDITION OF RS. 1,51,01,389/ - , ON ACCOUNT OF DIFFERENCE IN VALUATION OF STOCK ON THE DATE OF SEARCH, DUE TO DIFFERENT VALUATION APPROACH ADOPTED BY DEPARTMENT. 9. BACKGROUND AND FACTS OF THE CASE ARE AS UNDER: IN ADDITION TO THE BACKGROUND AND FACTS AS STATED IN RESPECT OF AY 2011 - 12 IN PARA 5 ABOVE, THE AO HAS ALLEGED THAT THE VALUE OF STOCK AS ON ACIT VS. PREETI JAIN, ITA NO. 1124/DEL/2015 & CO NO. 154/DEL/2016 (ASSESSMENT YEAR: 2013 - 14) 12.04.2012(T HE DATE OF SEARCH) AS ESTIMATED BY THE DEPARTMENTAL VALUER WAS RS.3,78,77,297/ - . AS AGAINST THIS, THE VALUE OF STOCK AS PER BOOKS OF ACCOUNTS WAS RS.2,27,75,908/ - . THE AO HAD CONSIDERED THE DIFFERENCE BETWEEN RS.3,78,77,297/ AND RS.2,27,75,908/ - = RS. 1,51 ,01,389/ - AS UNDISCLOSED INVESTMENT IN STOCK MADE BY THE APPELLANT IN ASST YEAR 2013 - 14. 10. FINDINGS OF THE ASSESSING OFFICER IT WAS GATHERED DURING THE SEARCH THAT NO BOOKS OF ACCOUNTS OF M/S JEWEL BY PREETI WERE AVAILABLE AT THAT BUSINESS PREMISE. THE A PPELLANT HAD STATED THAT I DO NOT REMEMBER WHERE THE BOOKS OF ACCOUNTS HAVE BEEN KEPT. DURING POST SEARCH PROCEEDINGS, MS. PREETI JAIN HAS SUBMITTED THE RECONCILIATION OF STOCK POSITION OF M/S JEWELS BY PREETI AS ON 12.04.2012 ON THE BASIS OF PURCHASE AND SALE BILLS, GOODS ON APPROVAL RECEIVED AND GOODS ON APPROVAL SENT. SHE HAS ALSO SUBMITTED COPY OF ITR FILED ON 28.09.2011 FOR ASST YEAR 2011 - 12, BALANCE SHEET AND PROFIT & LOSS ACCOUNT WHEREIN CLOSING STOCK AS ON 31.03.2011 OF M/S JEWELS BY PREETI HAS BEEN REFLECTED AS RS.2,35,85,908/ - . THE VALUE OF CLOSING STOCK A ON 31.03.2011 AND 31.03.2012 HAS BEEN ARRIVED AS UNDER: - OPENING STOCK - NIL ADD PURCHASE DURING F.Y. 2010 - 11 RS.2,41,90,431 LESS COST OF SALES OF RS.7,07,048 RS.6,04,523 CLOSING STOCK AS ON 31.03.211 RS.2,35,85,908 OPENING STOCK AS ON 01.04.2011 RS.2,35,85,908 ADD PURCHASE DURING THE F.Y. 2011 - 12 NIL LESS PURCHASE RETURN DURING F.Y. 2011 - 12 RS.3,90,000 LESS SALES DURING F.Y. 2011 - 12 RS.4,20,000 CLOSING STOCK AS ON 31.03.2012 RS. 2,27,75,908 THE APPELLANT HAD FURNISHED DOCUMENTARY EVIDENCE SUCH AS VOUCHERS SUPPORTING HER CONTENTION THAT SHE WAS RECEIVING GOODS ON APPROVAL AS WELL AS ISSUING GOODS ON APPROVAL. THE AO HAS REJECTED HER CONTENTION AS AN AFTER THOUGHT AND HAS ALLEGED THAT DOCUMENTS SUBMITTED IN SUPPORT OF GOODS RECEIVED ON APPROVAL AND SENT FOR APPROVAL ARE NOT RELIABLE AND CANNOT BE ACCEPTED. THE ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 153A OF THE ACT CONSIDERING THE DIFFERENCE BETWEEN RS.3,78,77,297/ - AND RS.2,2 7,75,908/ - RS. 1,51,01,389/ - AS UNDISCLOSED INVESTMENT IN STOCK MADE BY THE APPELLANT IN ASST YEAR 2013 - 14. 11. SUBMISSION OF THE APPELLANT THE APPELLANT HAS SUBMITTED THAT SHE HAD STARTED THE BUSINESS IN FINANCIAL YEAR 2010 - 11 AND HAD SUBMITTED COPY OF HE R ITR FILED ON 28.09.2011 FOR AY 2011 - 12. THE APPELLANT HAD SUBMITTED HER BALANCE SHEET, PROFIT 8S LOSS ACCOUNT AND POSITION OF STOCK AS ON 31.03.2011 WHICH WAS ALREADY ACIT VS. PREETI JAIN, ITA NO. 1124/DEL/2015 & CO NO. 154/DEL/2016 (ASSESSMENT YEAR: 2013 - 14) DECLARED TO THE DEPARTMENT ALONG WITH HER RETURN THAT WAS FILED 28.09.2011 WHEREAS THE SEARCH HAS TAKEN PLACE ON 12.04.2012. THOUGH THE TRIAL BALANCE AS ON 31.03.2012 WAS NOT READY ON THE DATE OF SEARCH ON 12.04.2012, THE APPELLANTS ARS HAD FURNISHED TO THE DDI (INV) VIDE THERE LETTER DATED 14.06.2012 THE COMPLETE DETAILS OF PURCHASES SUPPO RTED BY PURCHASE BILLS, DETAILS OF GOODS RECEIVED ON APPROVAL SUPPORTED BY REQUISITE VOUCHER OF THIRD PARTIES, COMPLETE DETAILS OF SALES AS SUPPORTED BY SALE INVOICES AND GOODS SENT ON APPROVAL AS SUPPORTED BY REQUISITE VOUCHER IN FAVOUR OF THIRD PARTIES. IT IS A COMMON TRADE PRACTICE IN JEWELRY TRADE THAT EXPENSIVE ITEMS ARE RECEIVED OR SENT ON APPROVAL BASIS. ONCE THE CUSTOMER APPROVES THE ITEM THE JEWELER ISSUES THE PURCHASE/ SALE INVOICES. COPY OF ARS LETTER TO DDI (INV) DATED 14.06.2012 WAS FILED BEF ORE THE AO VIDE ARS LETTER ON 20.03.2015 ALONG WITH ALL THE DETAILS AND RECONCILIATIONS BETWEEN JEWELRY PHYSICALLY FOUND DURING SEARCH WITH JEWELRY AVAILABLE AS PER BOOKS OF ACCOUNTS. THE RECONCILIATION SUBMITTED BY THE APPELLANT BEFORE THE INVESTIGATION W ING WAS AS UNDER: - PARTICULARS GROSS WEIGHT NET WEIGHT DIA WEIGHT STOCK IN TRADE(BILL WISE) 6,208.140 5,200.242 434.71 SALES 197.508 167.847 18.92 PURCHASE RETURN 472.300 458.491 39.50 SENT ON APPROVAL 249.449 235.984 18.14 TOTAL 5,288.883 4,337.920 358.15 ITEM RECEIVED ON APPROVAL 2,066.668 1,567.976 94.52 GRAND TOTAL 7,355.551 5,905.896 452.67 TOTAL AS PER VALUATION REPORT DATED 12.04.2012 7,361.49 5,902.84, 449.91 AS PER THE RECONCILIATION PREPARED AND SUBMITTED BY THE APPELLANT THERE WAS INSIGNIFICANT DIFFERENCE BETWEEN JEWELRY PHYSICALLY FOUND DURING SEARCH WITH JEWELRY AVAILABLE AS PER BOONS ACCOUNTS. THIS INSIGNIFICANT DIFFERENCE CAN ARISE DUE TO THE FACT THAT THE ' N REPORT IS AN ESTIMATE MADE BY THE VALUER WHEREAS THE QUANTITY AND W EIGH: AS PER BOOKS OF ACCOUNTS IS SUPPORTED BY INVOICES AND VOUCHERS. THEREFORE, THE PRIMARY GROUSE OF THE APPELLANT IS THAT THE AO HAS ERRONEOUSLY CONSIDERED THE VALUE OF STOCK AS ESTIMATED BY THE DEPARTMENTAL VALUER ON THE BASIS OF GOLD RATE PREVAILING A S ON 12.04.2012 THE APPELLANT HAD VALUED HIS STOCK AT COST ON THE BASIS OF RATE OF GOLD AS PREVAILING ON THE DATE OF PURCHASE OF RESPECTIVE ITEM. THE RIGHT COURSE OF ACTION WOULD HAVE BEEN FOR THE AO TO COMPARE THE NET WEIGHT OF STOCK AS ESTIMATED BY THE V ALUER WITH THE NET DIFFERENCE IN THE WEIGHT OF GOLD AND DIAMONDS AS ESTIMATED BY THE VALUER WITH WEIGHT OF GOLD AND DIAMONDS AS AVAILABLE AS PER BOOKS OF ACCOUNTS AND RECORDS MAINTAINED BY THE APPELLANT, THE AO SHOULD HAVE CONSIDERED THE WEIGHT RATHER THAN THE VALUE/ RATE OF GOLD AND DIAMONDS. ACIT VS. PREETI JAIN, ITA NO. 1124/DEL/2015 & CO NO. 154/DEL/2016 (ASSESSMENT YEAR: 2013 - 14) THE ARS HAVE FURTHER SUBMITTED THE AO HAS NOT ALLEGED THAT APPELLANTS - EMISSION REGARDING THE RECEIPT AND ISSUE OF JEWELRY WAS BOGUS OR WAS NOT SUPPORTED BY INCONTROVERTIBLE EVIDENCE. THE AO HAS MERELY ALLEGED THAT THE APPELLANTS CONTENTION WAS AN AFTERTHOUGHT. THE AO HAS NO WHERE ALLEGED THAT PROPER BOOKS OF ACCOUNTS WERE NOT MAINTAINED ON DAY TO DAY BASIS OR THAT THE BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLANT WERE NOT RELIABLE. IT WAS FOR THIS REASON THAT THE ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 153A. THUS THE AO HAD ERRED IN MAKING THE ADDITION CONSIDERING THE DIFFERENCE BETWEEN RS.3,78,77,297/ - AND RS.2,27,75,908/ - = RS. 1,51,01,389/ - AS UNDISCLOSED INVESTMENT IN STOCK MADE BY THE APPELLANT IN ASST YEA R 2013 - 14. FINDING 12. I HAVE CONSIDERED THE WRITTEN SUBMISSIONS OF THE APPELLANT AND HAVE GONE THROUGH THE ASSESSMENT ORDER PASSED U/S 143(3) R.W.S. 153A OF THE ACT. I HAVE ALSO EXAMINED THE SUBMISSIONS OF THE ARS WITH RESPECT TO THE ASSESSMENT RECORDS THAT WERE REQUISITIONED. THERE IS ONLY ONE ISSUE IN THIS GROUND AND THAT IS RELATING TO THE DIFFERENCE IN VALUATION OF CLOSING STOCK AS ON 12.04.2012 WHICH WAS THE DATE OF SEARCH. 12.1 THE VALUE AS ESTIMATED BY THE DEPARTMENTAL VALUER WAS RS.3,78,77,297/ - WHEREAS THE VALUE AS DECLARED BY THE APPELLANT WAS RS.2,27,75,908/ - . THE DIFFERENCE OF RS. 1,51,01,389/ - WAS TAXED AS UNDISCLOSED INVESTMENT IN STOCK MADE BY THE APPELLANT IN ASST YEAR 2013 - 14. THE APPELLANT HAD EXPLAINED THE REASONS FOR THIS DIFFERENCE TO BE THAT THE VALUE OF STOCK AS ESTIMATED BY THE DEPARTMENTAL VALUER WAS ON THE BASIS OF GOLD RATE PREVAILING AS ON 12.04.2012 WHEREAS THE APPELLANT HAD VALUED HIS STOCK AT COST ON THE BASIS OF RATE OF GOLD AS PREVAILING ON THE DATE OF PURCHASE OF RESPECTIV E ITEM. THE APPELLANT HAD FURNISHED TO THE DDI (INV) VIDE THEIR LETTER DATED 14.06.2012 THE COMPLETE DETAILS OF PURCHASES SUPPORTED BY PURCHASE BILLS, DETAILS OF GOODS RECEIVED ON APPROVAL SUPPORTED BY REQUISITE VOUCHER OF THIRD PARTIES, COMPLETE DETAILS O F SALES AS SUPPORTED BY SALE INVOICES AND GOODS SENT ON APPROVAL AS SUPPORTED BY REQUISITE VOUCHERS IN FAVOUR OF THIRD PARTIES. IT INDEED IS A COMMON TRADE PRACTICE IN JEWELRY TRADE THAT EXPENSIVE ITEMS ARE RECEIVED OR SENT ON APPROVAL BASIS. 12.2 COPY OF ARS LETTER TO DDI (INV) DATED 14.06.2012 WAS FILED BEFORE THE AO VIDE ARS LETTER ON 20.03.2015 ALONG WITH ALL THE DETAILS AND RECONCILIATIONS BETWEEN JEWELRY PHYSICALLY FOUND DURING SEARCH WITH JEWELRY AVAILABLE AS PER BOOKS OF ACCOUNTS. THERE IS INSIGN IFICANT DIFFERENCE IN THE NET WEIGHT OF GOLD AND DIAMONDS THAT CAN ARISE DUE TO THE FACT THAT THE VALUATION REPORT IS AN ESTIMATE MADE BY THE VALUER ACIT VS. PREETI JAIN, ITA NO. 1124/DEL/2015 & CO NO. 154/DEL/2016 (ASSESSMENT YEAR: 2013 - 14) WHEREAS THE QUANTITY AND WEIGHT AS PER BOOKS OF ACCOUNTS IS SUPPORTED BY INVOICES AND VOUCHERS. 12.3 THE AO HAS MERELY ALLEGED THAT THE APPELLANTS CONTENTION REGARDING THE RECEIPT AND ISSUE OF JEWELRY ON APPROVAL BASIS WAS AN AFTERTHOUGHT. THE AO HAS NOT FOUND ANY ERROR/DISCREPANCY IN APPELLANTS SUBMISSION REGARDING THE RECEIPT AND ISSUE OF JEWELRY THAT WA S SUPPORTED BY VOUCHERS AND OTHER EVIDENCE. THE WEIGHT OF CLOSING STOCK OF GOLD AND DIAMOND JEWELRY HAS BEEN ARRIVED AT BY THE APPELLANT ON THE BASIS OF CLOSING STOCK AS DECLARED BY HER IN HER ITR FOR AY 2011 - 12 FILED ON 28.09.2011 THAT WAS PRIOR TO THE DA TE OF SEARCH OF 12.04.2012. THE APPELLANT HAS INCREASED THIS FIGURE BY PURCHASES SUPPORTED BY INVOICES AND GOODS RECEIVED ON APPROVAL AS SUPPORTED BY APPROVAL VOUCHERS AND HAD DECREASED THIS FIGURE BY SALES THAT WERE SUPPORTED BY SALES INVOICES AND GOODS S ENT ON APPROVAL THAT WERE SUPPORTED BY APPROVAL VOUCHERS. THE WEIGHT OF GOLD AND DIAMONDS JEWELRY SO ARRIVED AT IS IN AGREEMENT WITH THE WEIGHT OF GOLD AND DIAMOND JEWE L LERY AS ESTIMATED BY THE DEPARTMENTAL VALUER. 7. THEREFORE, REVENUE AGGRIEVED WITH THE OR DER OF THE LD CIT(A) HAS PREFERRED APPEAL BEFORE US. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION, HOWEVER, SAME IS SUPPORTIVE IN NATURE. 8. THE LD DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDER OF THE LD AO. 9. THE LD AUTHORISED REPRESENTATIVE SUB MITTED HIS WRITTEN SUBMISSION AS UNDER: - THE PRESENT SUBMISSION FOR THE A.Y 2013 - 14 IS BEING MADE BEFORE YOUR HONOURS PURSUANT TO THE DEPARTMENTAL APPEAL AND ALSO THE ASSESSEES CROSS OBJECTION FILED BEFORE YOUR HONOURS AGAINST THE APPELLATE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX [CIT(A)] FOR THE A.Y. 2013 - 14 DATED 04.12.2015, ALLOWING FULL RELIEF OF THE ADDITIONS MADE BY THE LD. ASSESSING OFFICER. THE ISSUE INVOLVED IN THE APPEAL BEFORE YOUR HONOUR IS LAID OUT AS BELOW: ISSUE: DIFFERENCE IN V ALUATION OF STOCK OF JEWELLARY OF RS.1,51,01,389/ - GRD 1 TO 4 OF DEPARTMENTAL APPEAL GRDL TO 5 OF ASSESSEES CROSS OBJECTION FACTS OF THE CASE ON THE ABOVE GROUND: BEFORE GOING ON TO THE SUBMISSION OF THE SAID GROUND IT WOULD BE RELEVANT TO LAY IN DE TAILS THE FACTS OF THE SAID GROUND. 1. THE ASSESSEE HAD STARTED ITS BUSINESS OF JEWELLERY DESIGNING AND TRADING IN OCTOBER 2010. THE BUSINESS IS CONDUCTED FROM ACIT VS. PREETI JAIN, ITA NO. 1124/DEL/2015 & CO NO. 154/DEL/2016 (ASSESSMENT YEAR: 2013 - 14) BOUTIQUE SETUP IN THE OFFICE PREMISES OF FATHER OF THE ASSESSE. SH. PRAMOD JAIN, THOUGH IN RESI DENTIAL AREA. AS A PART OF BUSINESS, ITEMS OF JEWELLERY WERE RECEIVED ON APPROVAL BASIS FOR SALE AND ALSO THE ITEM OF JEWELLERY WERE TAKEN BY CUSTOMERS ON APPROVAL BASIS (AFTER PAYMENT OF LUMP SUM AMOUNT). WHEN JEWELLERY ITEMS WERE SENT ON APPROVAL BASIS, AN ESTIMATE WAS PREPARED AND SENT ALONG WITH JEWELLERY. WHEN THE SALE DOESNT GET MATERIALISE, THE AMOUNT RECEIVED FROM THE CUSTOMERS WERE RETURNED BACK AFTER DEDUCTION OF CERTAIN PERCENTAGE. THE AMOUNT DEDUCTED WAS INCLUDED IN TOTAL INCOME AND OFFERED FOR TAXATION. 2. THE SEARCH & SEIZURE AND SURVEY OPERATION WERE CONDUCTED ON ASSESSEE ON 12.04.2012 ALONG WITH OTHER CASES OF ARYAN SAINIK GROUP AT VARIOUS RESIDENTIAL AND BUSINESS PREMISES. 3. THE ASSESSEE FILED RETURN OF INCOME FOR AY 2013 - 14 ON 17.03.2015 DECLARING INCOME OF RS.3,34,028/ - . 4. THE LD. AO PASSED ASSESSMENT ORDER U/S 143(3) OF THE ACT ON 27.03.2015. IN THE ASSESSMENT ORDER, THE LD. AO HAD ALLEGED THAT THE VALUE OF STOCK AS ON 12.04.2012 (I.E. ON THE DATE OF SEARCH) AS ESTIMATED BY THE DEPARTMENT VALUER WAS RS.3,78,77,297/ - . AS AGAINST THIS, THE VALUE OF STOCK AS PER BOOKS OF ACCOUNTS WAS RS.2,27,75,908/ - . THEREFORE AO CONSIDERED THE DIFFERENCE OF RS.1,51,01,389/ - AS UNDISCLOSED INVESTMENT IN STOCK IN AY 2013 - 14. 5. APPEAL WAS PREFERRED BY THE ASSESSEE AGAINST THE SAID ASSESSMENT ORDER BEFORE CIT(A) WHEREIN THE LD. CIT(A), VIDE APPELLATE ORDER DATED 04.12.2015, DELETED THE ADDITION MADE BY THE LD. AO. SUBMISSION 1. THE ALLEGATION OF THE DEPARTMENT THAT RS. 1,51,01,389/ - SHOULD BE ADDED ON ACCOUNT OF DIFFERENCE IN VALUATION OF STOCK UNDER THE HEAD UNDISCLOSED INVESTMENT IN STOCK IS NOT CORRECT. 2. WITH RESPECT TO THE ABOVE, IT IS SUBMITTED THAT THE DIFFERENCE IN VALUE OF STOCK I.E. RS. 1,51,01,389/ - [RS.3,78,77,297 - RS.2,27,75,908] IS D IFFERENCE ON ACCOUNT OF VALUATION OF JEWELLERY. THE VALUATION OF RS.3,78,77,297/ - HAS BEEN ARRIVED AT ON THE BASIS OF PREVAILING MARKET PRICE OF GOLD, DIAMOND AND PRECIOUS STONES AND AFTER INCLUDING THE JEWELLERY RECEIVED ON APPROVAL BASIS AND EXCLUDING TH E JEWELLERY SENT ON APPROVAL BASIS AS EVIDENT FROM EXPLANATION GIVEN BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 3. THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS FILED A LETTER DATED 20.03.2015 BEFORE THE LD. AO WITH WHICH A CO PY OF LETTER TO DDI (INV) DATED 14.06.2012 WAS FILED ALONG WITH ALL THE DETAILS AND RECONCILIATIONS BETWEEN JEWELLARY PHYSICALLY FOUND DURING SEARCH WITH JEWELLERY AVAILABLE AS PER BOOKS OF ACCOUNTS. THE RECONCILIATION AS SUBMITTED BY THE ASSESSEE BEFORE T HE INVESTIGATION WING WAS AS UNDER: ACIT VS. PREETI JAIN, ITA NO. 1124/DEL/2015 & CO NO. 154/DEL/2016 (ASSESSMENT YEAR: 2013 - 14) PARTICULARS GROSS WEIGHT NET WEIGHT DIA WEIGHT STOCK IN TRADE (BILL WISE) 6208.140 5200.242 434.71 SALES 197.508 167.847 18.92 PURCHASE RETURN 472.300 458.491 39.50 SENT ON APPROVAL 249.449 235.984 18.14 TOTAL 5288.883 4337.920 358.15 ITEM RECEIVED ON APPROVAL 2066.668 1567.976 94.52 GRAND TOTAL 7355.551 5905.896 452.67 3.1. HOWEVER THE AS PER THE VALUATION REPORT, THE FOLLOWING WERE THE WEIGHT OF JEWELLERY: GROSS WEIGHT 7361.487 GMS NET WEIGHT 5902.838 GMS DIA WEIGHT 449.91 GMS 3.2. AS PER THE RECONCILIATION PREPARED AND SUBMITTED BY THE ASSESSEE, THERE WAS INSIGNIFICANT DIFFERENCE BETWEEN JEWELLERY PHYSICALLY FOUND DURING SEARCH WITH JEWELLERY AVAILABLE AS PER BOOKS OF ACCOUNTS. THIS INSIGNIFICANT DIFFERENCE CAN ARISE DUE TO THE FAC T THAT THE VALUATION REPORT IS AN ESTIMATE MADE BY THE VALUER WHEREAS THE QUANTITY AND WEIGHT AS PER BOOKS OF ACCOUNTS IS SUPPORTED BY INVOICES AND VOUCHERS. 4. THE ASSESSEE HAD ALSO SUBMITTED BEFORE THE LD. AO THE RECONCILIATION OF STOCK POSITION AS ON 12 .04.2012 ON THE BASIS OF ACTUAL PURCHASE AND SALE BILLS, GOODS RECEIVED ON APPROVAL AND GOODS SENT ON APPROVAL. ALSO A COPY OF ITR FILED FOR AY 2011 - 12 ON 28.09.2011 WAS SUBMITTED ALONG WITH BALANCE SHEET AND PROFIT & LOSS WHEREIN CLOSING STOCK AS ON 31.03 .2011 WAS REFLECTED AS RS.2,35,85,908/ - . (COPY OF SAID DOCUMENTS ARE ATTACHED IN PAGES OF THE PAPER BOOK. THE VALUE OF CLOSING STOCK AS ON 31.03.2011 AND 31.03.2012 HAS BEEN ARRIVED AS UNDER: - OPENING STOCK NIL ADD: PURCHASE DURING FY 2010 - 11 RS.2,41, 90,431 LESS: COST OF SALES OF RS.7,07,048 RS.6,04,523 CLOSING STOCK AS ON 31.03.2011 RS. 23585908 OPENING STOCK AS ON 01.04.2011 RS. 23585908 PURCHASE DURING THE FY 2011 - 12 NIL LESS: PURCHASE RETURN DURING FY 2011 - 12 RS.3,90,000 LESS: SALE DURING FY 2011 - 12 RS.4,20,000 CLOSING STOCK AS ON 31.03.2012 RS.2,27,75,908 4.1. AS EVIDENT FROM ABOVE, IN ARRIVING AT THE STOCK OF JEWELLERY AS ON 31.03.2012, GOODS RECEIVED ON APPROVAL IS NOT ADDED ALSO GOODS ACIT VS. PREETI JAIN, ITA NO. 1124/DEL/2015 & CO NO. 154/DEL/2016 (ASSESSMENT YEAR: 2013 - 14) SENT ON APPROVAL HAS NOT B EEN DEDUCTED AS ACTUAL PURCHASE AND SALE WERE NOT EFFECTED. 4.2. WITH RESPECT TO THE ABOVE, THE ASSESSEE WOULD LIKE TO SUBMIT THAT THE GROUND NO.3 RAISED BY THE DEPARTMENT THAT THE ASSESSEE WAS NOT MAINTAINING STOCK REGISTER IS OF NO RELEVANCE. THE ACCOUN TS OF THE ASSESSEE ARE AUDITED AND AS PER THE AUDITED ACCOUNTS AS ON 31.03.2011, VALUE OF CLOSING STOCK WAS RS.2,35,85,908/ - . FURTHER TO THIS PURCHASES MADE DURING THE YEAR WERE ADDED AND SALES WERE DEDUCTED. THEREFORE NON MAINTENANCE OF STOCK REGISTER HAS NO BEARING ON THE EXPLANATION FURNISHED BY THE ASSESSEE EXPLAINING THE NATURE OF STOCK FOUND AT THE TIME OF SEARCH. 5. THUS THE ASSESSEE WOULD LIKE TO STATE THAT THE LD. AO HAS ERRONEOUSLY CONSIDERED THE VALUE OF STOCK AS ESTIMATED BY THE DEPARTMENT VALUE R ON THE BASIS OF GOLD RATE PREVAILING AS ON 12.04.2012 WHEREAS THE ASSESSEE HAD VALUED HIS STOCK AT COST ON THE BASIS OF RATE OF GOLD AS PREVAILING ON THE DATE OF PURCHASE OF RESPECTIVE ITEM. ALSO IN ARRIVING AT THE STOCK OF JEWELLERY AS ON 31.03.2012, GO ODS RECEIVED ON APPROVAL IS NOT ADDED ALSO GOODS SENT ON APPROVAL IS NOT DEDUCTED AS ACTUAL PURCHASE AND SALE WERE NOT MADE. THE RIGHT COURSE OF ACTION WOULD HAVE BEEN FOR THE AO TO COMPARE THE NET WEIGHT OF STOCK AS ESTIMATED BY THE VALUER WITH THE NET WE IGHT AS AVAILABLE AS PER BOOKS OF ACCOUNTS. THERE WAS NO SIGNIFICANT DIFFERENCE IN THE WEIGHT OF GOLD AND DIAMOND AS ESTIMATED BY THE VALUER WITH THE WEIGHT OF GOLD AND DIAMOND AS AVAILABLE AS PER BOOKS OF ACCOUNTS. 6. HOWEVER THE LD. AO REJECTED THE CONTE NTION OF THE ASSESSEE ON THE BASIS OF THE FOLLOWING OBSERVATION: - HERE, IT IS PERTINENT TO MENTION THAT DURING THE SEARCH PROCEEDINGS, MS.PREETI JAIN, PROPRIETOR OF M/S JEWELS BY PREETI IN HER PRELIMINARY STATEMENT, HAS STATED THAT NEITHER SHE HAS KEPT NO R RECEIVED ANY VALUABLE ITEMS, DOCUMENTS ETC WITH SOMEBODY ELSE. THE RELEVANT PART OF HER STATEMENT DATED 12.04.2012 IS REPRODUCED BELOW: IN VIEW OF THE ABOVE FACTS, IT MAY BE CONCLUDED THAT HER SUBMISSION REGARDING JEWELLERY SENT FOR APPROVAL AND RECEIVED ON APPROVAL IS NOTHING BUT THE AFTER - THOUGHT AND DOCUMENTS SUBMITTED IN SUPPORT OF GOODS RECEIVED ON APPROVAL AND SENT FOR APPROVAL ARE NOT RELIABLE AND CANNOT BE ACCEPTED. 6.1. IN THIS REGARD IT IS SUBMITTED THAT THE LD. AO HAS MISINTERPRETED THE STAT EMENT OF ASSESSEE BY CORRELATING THE SAME WITH THE BUSINESS STOCK OF THE ASSESSE, PART AND PARCEL OF WHICH IS UNDER MOVEMENT FOR APPROVAL OF SALE. IT IS TO BE NOTED THAT THE ASSESSEE HAS NOT KEPT ANY VALUABLES WITH ANY OTHER PERSON FOR THE PURPOSE OF SAFE CUSTODY. GOODS SENT ON APPROVAL ARE FOR THE PURPOSE OF EFFECTING SALE AND NOT WITH THE PURPOSE OF KEEPING THE ACIT VS. PREETI JAIN, ITA NO. 1124/DEL/2015 & CO NO. 154/DEL/2016 (ASSESSMENT YEAR: 2013 - 14) STOCK WITH CUSTOMERS. NO PRUDENT PERSON KEEPS HIS/HER STOCK WITH CUSTOMER FOR SAFE KEEPING. AS THE ASSESSEE IS RUNNING A JEWELLERY BUSINESS, WHERE JEWELLERY IS PREPARED/ MODIFIED AS PER THE REQUIREMENT OF THE CUSTOMERS, SENDING GOODS FOR APPROVAL IS A NORMAL COURSE OF BUSINESS ACTIVITY, ALSO FOLLOWED BY OTHER PERSONS IN THE INDUSTRY BUT IT DOES NOT MEAN THAT THE ASSESSEE HAD KEPT CERTAIN VALUABLES W ITH OTHER PERSON. WITH THIS THE GROUND NO. 2 RAISED BY THE DEPARTMENT THAT THE LD. CTT(A) HAS ERRED IN GIVING ASSESSEE RELIEF ON ACCOUNT OF JEWELLERY RECEIVED ON APPROVAL WITHOUT APPRECIATING THE FACT THE ASSESSEE HAS GIVEN STATEMENT ON OATH DURING THE SE ARCH AND DENIED HAVING RECEIVED/ KEPT ANY JEWELLERY FOR SUCH PURPOSES GET ANSWERED. APART FROM THIS THE LD. AO DID NOT SPECIFY - ANY OTHER GOOD RE ASON AS TO WHY THE EVIDENCES PRODUCED BY THE ASSESSEE IN RELATION TO VALUE OF STOCK AS ON 31.03.2012 CANNOT BE ACCEPTED. BASED ON THE ABOVE DETAILED SUBMISSION OF THE ASSESSEE, IT IS HUMBLY PRAYED BEFORE YOUR H:NOURS TO KINDLY UPHOLD THE ORDER OF THE LD. CIT(A) AND DISMISS THE DEPARTMENTAL APPEAL AND ALSO ALLOW RELIEF AS PRAYED FOR ON THE CROSS OBJECTIONS OF THE ASSESSEE. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND ALSO PERUSED THE ORDERS OF THE LOWER AUTHORITIES. ADMITTEDLY ASSESSEE IS CARRYING ON THE BUSINESS OF JEWELLERY BUT ON THE DATE OF SEARCH THE BOOKS OF ACCOUNT OR STOCK REGISTER WAS NOT PRODUCED. THE ASSESSEE IN POST SEARCH ENQUIRY HAS SUBMITTED THE RECONCILIATION OF STOCK BY PRODUCING THE COPIES OF THE BILL OF PURCHASE AND SALE AS WELL AS THE APPROVAL NOTES FOR THE GOODS SENT AND RECEIVED ON APPROVAL. THE ASSESSEE FURTHER SUBMITTED THE D ETAILS BEFORE THE DDI STATING THAT THERE IS NO DIFFERENCE IN THE QUANTITY OF THE JEWELLERY. IT IS FURTHER SUBMITTED THAT VALUATION IS AT COST AND THE TOTAL QUANTITATIVE DETAILS OF PURCHASE AND SALES AND RECEIPT AND ISSUE ON APPROVAL IS SUPPORTED BY PROPER DOCUMENTARY EVIDENCES. THE ASSESSEE HAS ALSO SUBMITTED THE QUANTITATIVE DETAILS WHICH COULD NOT BE SHOWN TO BE CONCOCTED. NO DEFECT COULD BE POINTED OUT IN SUCH QUANTITY DETAILS. FURTHER, THE DETAILS OF JEWELLERY RECORDED ON APPROVAL AND SENT ON APPROVAL I S SUPPORTED BY THE DOCUMENTS PRODUCED BEFORE THE LD AO. THE LD AO DID NOT FIND ANY DISCREPANCY IN THOSE DETAILS. FURTHER, THE VALUATION OF JEWELLERY MADE BY THE ASSESSEE ON COST BASIS WAS ALSO NOT DISPUTED CONTRARILY THE COST OF THE JEWELLERY WAS SUPPORTED WITH THE BILLS SHOWING ACIT VS. PREETI JAIN, ITA NO. 1124/DEL/2015 & CO NO. 154/DEL/2016 (ASSESSMENT YEAR: 2013 - 14) RATES OF PURCHASES. MERELY NON MAINTENANCE OF STOCK REGISTER BY THE ASSESSEE CANNOT RESULT INTO ADDITION UNLESS THE LD AO SHOWS WITH CONCLUSIVE EVIDENCE THAT QUANTITATIVE DETAILS SUBMITTED BY THE ASSESSEE IS INCORRECT. ADMITTEDLY TH E ASSESSEE HAS PRODUCED THE BOOKS OF ACCOUNT BEFORE THE LD AO AND DDI, NO DEFECTS WERE POINTED OUT THEREIN. THEREFORE, MERELY BECAUSE BOOKS WERE NOT PRODUCED AT THE TIME OF SEARCH, SUCH ADDITION CANNOT BE MADE. THUS, WE DO NOT FIND ANY INFIRMITY IN THE ORD ER OF THE LD CIT(A)( IN DELETING THE IMPUGNED ADDITION OF RS. 1510389/ - MADE BY THE LD AO AS UNDISCLOSED INVESTMENT. IN VIEW OF THIS GROUND NO. 1 TO 3 OF THE APPEAL OF THE REVENUE ARE DISMISSED. 11. HENCE , APPEAL OF REVENUE IS DISMISSED. 12. AS THE CO OF THE AS SESSEE IS SUPPORTIVE TO THE ORDER OF THE LD CIT(A), WHICH HAS BEEN CONFIRMED BY US , IT IS ALLOWED. 13. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED AND CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. 14. ORDER PRONOUNCED IN THE OPEN COURT ON 20/ 0 2 / 2018 . - SD/ - - SD/ - ( B HAVNESH SAINI ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 20/ 0 2 / 2018 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI