DCIT, Ludhiana V. M/s Radhe Sham Jain Diamonds Jewellers Pvt. Ltd., Ludhiana

ITA 109/CHANDI/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9917 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 12-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S PHANI KISHORE
• Keywords: Gross profit estimation; Rejection of books of accounts; Unexplained investment; Business income; Depreciation; Rule of consistency; Tax effect; Set aside
• Section: 143(3); 153A; 234B; 69; 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH B , CHANDIGARH , !' # $ % &' , BEFORE: SHRI SANJAY GARG, JUDICIAL MEMBER AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO.109/CHD/2017 / ASSESSMENT YEAR : 2010-11 THE D.C.I.T, CENTRAL CIRCLE-III, LUDHIANA. M/S RADHE SHAM JAIN DIAMONDS JEWELLERS PVT. LTD., B-XIX, 549/1, COLLEGE ROAD, FOUNTAIN CHOWK, LUDHIANA. ./ PAN NO.AADCR8437J /APPELLANT / RESPONDENT C.O. NO.13/CHD/2018 IN ./ ITA NO.109/CHD/2018 / ASSESSMENT YEAR : 2010-11 M/S RADHE SHAM JAIN DIAMONDS JEWELLERS PVT. LTD., B-XIX, 549/1, COLLEGE ROAD, FOUNTAIN CHOWK, LUDHIANA. THE D.C.I.T, CENTRAL CIRCLE-III, LUDHIANA. ./ PAN NO.AADCR8437J /APPELLANT / RESPONDENT C.O. NO.14/CHD/2018 / ASSESSMENT YEAR : 2011-12 M/S RADHE SHAM JAIN DIAMONDS JEWELLERS PVT. LTD., B-XIX, 549/1, COLLEGE ROAD, FOUNTAIN CHOWK, LUDHIANA. THE D.C.I.T, CENTRAL CIRCLE-III, LUDHIANA. ./ PAN NO.AADCR8437J /APPELLANT / RESPONDENT ITA NOS.109 & 245/CHD/2017 CO NOS.13,14, &24/CHD/2017 A.YS. 2010-11 TO 2012-13 2 ./ ITA NO.245/CHD/2017 / ASSESSMENT YEAR : 2012-13 THE D.C.I.T, CENTRAL CIRCLE-III, LUDHIANA. M/S RADHE SHAM JAIN DIAMONDS JEWELLERS PVT. LTD., B-XIX, 549/1, COLLEGE ROAD, FOUNTAIN CHOWK, LUDHIANA. ./ PAN NO.AADCR8437J /APPELLANT / RESPONDENT C.O. NO.24/CHD/2018 IN ./ ITA NO.245/CHD/2018 / ASSESSMENT YEAR : 2012-13 M/S RADHE SHAM JAIN DIAMONDS JEWELLERS PVT. LTD., B-XIX, 549/1, COLLEGE ROAD, FOUNTAIN CHOWK, LUDHIANA. THE D.C.I.T, CENTRAL CIRCLE-III, LUDHIANA. ./ PAN NO.AADCR8437J /APPELLANT / RESPONDENT /ASSESSEE BY : SHRI RAJIV GUPTA, CA ! / REVENUE BY : SHRI G.S.PHANI KISHORE, CIT.DR ' # $ /DATE OF HEARING : 11.03.2019 %&'( $ /DATE OF PRONOUNCEMENT: 30.05.2019 /ORDER PER BENCH: ALL THE CAPTIONED APPEALS OF THE REVENUE AND THE CR OSS OBJECTION OF THE ASSESSEE RELATING TO THE SAME ASS ESSEE AND ARE AGAINST THE SEPARATE ORDERS PASSED BY THE COMMI SSIONER OF INCOME TAX (APPEALS)-5, LUDHIANA [(IN SHORT CIT(A) ] U/S 250(6) ITA NOS.109 & 245/CHD/2017 CO NOS.13,14, &24/CHD/2017 A.YS. 2010-11 TO 2012-13 3 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED T O AS ACT) DATED 7.10.2016, 7.10.2016 AND 30.11.2016, AND RELA TING TO ASSESSMENT YEARS 2010-11, 2011-12 AND 2012-13 RESPE CTIVELY. 2. WE SHALL FIRST BE TAKING UP THE APPEAL AND CROSS OBJECTION RELATING TO ASSESSMENT YEAR 2010-11. ITA NO.109/CHD/2018: A.Y 2010-11 3. BRIEF FACTS RELATING TO THE CASE ARE THAT THE AS SESSEE IS A PVT. LTD. COMPANY ENGAGED IN THE RETAIL AND WHOLESA LE JEWELLERY BUSINESS. A SEARCH U/S 132 OF THE I.T. ACT, 1961, W AS CONDUCTED AT THE PREMISES OF THE ASSESSEE ON 14.03. 2012. THEREAFTER IN PURSUANCE TO NOTICE ISSUED U/S 153A ( 1) OF THE ACT ,THE ASSESSEE FILED THE RETURN OF INCOME DECLAR ING INCOME OF RS. 2,86,380/-. SUBSEQUENTLY ASSESSMENT WAS MADE U /S 143(3) OF THE ACT. THE A.O. REJECTED THE BOOKS OF ACCOUNTS PRODUCED BY THE ASSESSEE UNDER SECTION 145(3) OF THE ACT, AND MADE AN ADDITION OF RS. 62,59,524/- ON ACCOUNT OF UNDERSTAT EMENT OF GROSS PROFIT RATE. THE A.O. ALSO MADE ADDITION OF R S. 95.270/- ON ACCOUNT OF DISALLOWANCE OF REPAIR CHARGES OF JEW ELLERY, DISALLOWED I/5TH OF DEPRECIATION CLAIMED ON CAR AND ALSO ADDED RS. 2,98,009/- ON ACCOUNT OF UNACCOUNTED SALES, U/S 69 OF THE ACT, TO THE TOTAL INCOME. THE MATTER WAS CARRIED IN APPEAL BEFORE THE CIT(A), WHO PARTLY ALLOWED THE ASSESSEE S APPEAL. ITA NOS.109 & 245/CHD/2017 CO NOS.13,14, &24/CHD/2017 A.YS. 2010-11 TO 2012-13 4 4. AGGRIEVED BY THE SAME, THE REVENUE HAS COME UP I N APPEAL BEFORE US AND ASSESSEE FILED CROSS OBJECTION. 5. WE SHALL FIRST TAKE UP REVENUES APPEAL IN ITA NO. 109/CHD/2017 . 6. GROUND NO.1 RAISED BY THE REVENUE READS AS UNDER : 1. THAT THE LD.CIT(A)-5, LUDHIANA HAS ERRED IN LA W AND ON FACTS IN DELETING THE ADDITION OF RS.62,59,524/- NO T APPRECIATING THE FACT THAT THE G.P. RATE SHOWN BY T HE ASSESSEE AT 1.68% IS VERY MUCH ON LOWER SIDE VIS-A- VIS PREVIOUS YEARS AND ALSO THAT OTHER TRADERS IN THE SIMILAR BUSINESS AND IN THE SAME AREA HAVE ALSO SHO WN G.P. RATE OF MORE THAN 5%. THE ASSESSEE FAILED TO P ROVIDE THE CARAT WISE DETAILS OF OPENING STOCK OF GOLD/DIA MOND JEWELLERY, PURCHASE/SALE OF GOLD JEWELLERY AND CLOS ING STOCK OF GOLD JEWELLERY/ PRODUCE STOCK REGISTER/SAL ES BILLS WITH COMPLETE NARRATION IN RESPECT OF SAME. 7. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE A SSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS U/S 145(3) A ND MADE ADDITION OF RS. 62,59,524/- ON ACCOUNT OF LOW GROSS PROFIT RATE. THE PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT TH E ASSESSING OFFICER HAD RECORDED THE FACT THAT THE ASSESSEE HAD SHOWN A GROSS PROFIT OF RS. 31,71,1187- ON A TURNOVER OF RS . 18,95,31,6667/-, GIVING GP RATE OF 1.68%. THE ASSES SING OFFICER MENTIONED THAT TO VERIFY THE SAME, THE ASSESSEE WAS REQUESTED TO FILE THE CARAT WISE DETAILS OF OPENING STOCK, P URCHASE/SALE OF JEWELLERY AND CLOSING STOCK. IN RESPONSE TO THE SAME THE ASSESSEE SUBMITTED THAT NO SUCH CARAT WISE DETAILS COULD BE MADE AVAILABLE AS THE BOOKS OF ACCOUNTS DID NOT CON TAIN SUCH ITA NOS.109 & 245/CHD/2017 CO NOS.13,14, &24/CHD/2017 A.YS. 2010-11 TO 2012-13 5 DETAILS. THE ASSESSING OFFICER ALSO HIGHLIGHTED THE FACT THAT ON SOME BILLS THE AMOUNT CHARGED WAS VERY LESS AS COMP ARED TO THE RATES OF 22 CARATS OF JEWELLERY. THE SAID ALLEG ATION WAS REPLIED TO BY THE ASSESSEE BY SUBMITTING THAT THE J EWELLERY SOLD COULD BE LESS THAN 22 CARATS WHICH WAS NOT ACCEPTED BY THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE H AD SOLD JEWELLERY OF 22 CARATS ONLY. THE ASSESSING OFFICER ON THE BASIS OF ABOVEMENTIONED OBSERVATIONS REJECTED THE BOOKS O F ACCOUNTS UNDER SECTION 145(3) OF THE ACT AND THEREAFTER EST IMATED GP RATE ON THE SALE OF JEWELLERY ITEM AT 6% AND ON THE SALE OF PURE GOLD AT 3% ,MAKING AN ADDITION OF RS.62,59,524/- O N ACCOUNT OF LOW GROSS PROFIT RATE SHOWN BY THE ASSESSEE. 8. THE LD.CIT(A) DECIDED BOTH THE ISSUES OF REJECTI ON OF BOOKS OF ACCOUNT AND ADDITION BY ESTIMATION OF GP RATE IN FAVOUR OF THE ASSESSEE ON FINDING THAT IDENTICAL ISSUE HAD BE EN DECIDED IN ASSESSMENT YEAR 2009-10 IN THE CASE OF THE ASSESSEE BY CIT(A). 9. BEFORE US AT THE OUTSET ITSELF, THE LD. COUNSEL FOR ASSESSEE POINTED OUT THAT THE ORDER PASSED BY THE LD.CIT(A) FOR ASSESSMENT YEAR 2009-10, FOLLOWING WHICH THE ISSUE HAD BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN THE IMPUGNED Y EAR , HAD BEEN UPHELD BY THE I.T.A.T. IN THE APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A). OUR ATTENTION WAS DRAWN TO THE ORDER PASSED BY THE I.T.A.T. FOR THE SAID YEAR IN I TA ITA NOS.109 & 245/CHD/2017 CO NOS.13,14, &24/CHD/2017 A.YS. 2010-11 TO 2012-13 6 NO.847/CHD/2014 DATED 13.1.2017 MORE SPECIFICALLY TO PARA 5(I) & 6 AS UNDER: 5(I) IN ASSESSMENT YEAR 2009-10, REVENUE HAS RAISED SIMILAR GROUND NO. 1 CHALLENGING THE DELETIO N OF ADDITION OF RS. 58,09,670/-. IT IS NOTED IN THE IMPUGNED ORDER THAT ASSESSING OFFICER HAS APPLIED GROSS PROFIT RATE @ 6% OF THE TOTAL SALES OF JEWELL ERY ITEMS AND GROSS PROFIT RATE OF 3% ON PURE GOLD SALE S WITHOUT RECORDING ANY BASIS TO ADOPT THE SAME AND WITHOUT CONFRONTING ASSESSEE WITH THE PROPOSED ADDITION OF COMPARATIVE GROSS PROFIT RATE. THE ASSESSING OFFICER MADE THIS ADDITION ON ACCOUNT OF LOW GROSS PROFIT RATE. THE LD. CIT(APPEALS) NOTED THAT IT IS A FACT THAT SAME ASSESSING OFFICER HAS ACCEPTED THE GROSS PROFIT RATE SHOWN BY THE ASSESSEE ON THE BASIS OF THE BOOKS OF ACCOUNT MAINTAINED BY HIM FOR ASSESSMENT YEAR 2008-09. THE FALL IN GROSS PROFIT RATE TO 1.58% DURING THE Y EAR UNDER CONSIDERATION IS ATTRIBUTABLE TO THE FACT OF INCREASING GOLD PRICE BECAUSE OF WHICH WEIGHTED AVERAGE COST OF PURCHASES ADOPTED BY THE ASSESSEE LEADS TO LOWER GP RATE. HOWEVER, THE METHOD OF ACCOUNTING IN THE EVENT OF FALL IN GOLD PRICE, IN A NY PARTICULAR YEAR WOULD LEAD TO NORMALLY HIGH GROSS PROFIT RATE AS WELL. THE LD. CIT(APPEALS), THEREFO RE, FOUND THAT IN THESE CIRCUMSTANCES, FAULT CANNOT BE FOUND WITH THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE AS FOR THE IMMEDIATE PRECEDING YEAR, THE GROSS PROFIT RATE HAS BEEN FOUND TO BE SATISFACTORI LY WORKED OUT BY THE ASSESSING OFFICER. IN ASSESSMENT YEAR 2008-09, ASSESSING OFFICER MADE ADDITION OF RS. 17,68,793/- ON ACCOUNT OF JEWELLERY MAKING CHARGES AND THIS ADDITION FOR THE YEAR UNDER CONSIDERATION HAS NOT BEEN MADE FOR NO REASONS SPECIFIED IN THE ASSESSMENT ORDER. THE ORDER OF THE ASSESSING OFFICER WAS, THEREFORE, ARBITRARY TO HOLD DIFFERENT VIEW IN TWO ASSESSMENT YEARS. ASSESSING OFFICER DISALLOWED THE AMOUNT BUT IN THIS YEAR ASSESSING OFFICER MADE ADDITION ON ACCOUNT OF LOW GROSS PROFIT RATE. THE REJECTION OF THE BOOKS OF ACCOUNT HAS NOT BEEN FOUND JUSTIFIED. THE LD. CIT(APPEALS), THEREFORE, FOUND THAT SINCE THIS ADDITION IS MADE WITHOUT GIVING OPPORTUNITY TO THE ASSESSEE, THEREFORE, SUCH ADDITION IS NOT WARRANTED AND ACCORDINGLY, DELETED THE ADDITION. ITA NOS.109 & 245/CHD/2017 CO NOS.13,14, &24/CHD/2017 A.YS. 2010-11 TO 2012-13 7 6. AFTER CONSIDERING RIVAL SUBMISSIONS, WE DO NOT FIND MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. THIS ADDITION IS MADE MERELY ON ACCOUNT OF LOW GP RATE. HOWEVER, THE LD. CIT(APPEALS) DID NOT JUSTIF Y THE REJECTION OF THE BOOKS OF ACCOUNT UNDER SECTION 145(3) OF THE INCOME TAX ACT ON WHICH NO SPECIFIC GROUND HAVE BEEN RAISED BY THE REVENUE. IN PRECEDING ASSESSMENT YEAR 2008-09, ON THE BASIS OF SAME METHOD OF ACCOUNTING, THE ASSESSING OFFICER ACCEPTED THE GP RATE DISCLOSED BY THE ASSESSEE, THEREFORE, ASSESSING OFFICER SHOULD FOLLOW RULE OF CONSISTENCY AND ON THE SAME METHOD OF ACCOUNTING, MERELY ON LOW GP RATE, SUCH ADDITION SHOULD NOT BE MADE. SINCE THE ASSESSEE MAINTAINED THE BOOKS OF ACCOUNT ON THE SAME ACCOUNTING METHOD AS OF THE PRECEDING ASSESSMENT YEAR AS WELL AS IN ASSESSMENT YEAR UNDER APPEAL, THEREFORE, THERE WAS NO BASIS FOR MAKING THE ADDITION AGAINST THE ADDITION PARTICULARLY WHEN NO SPECIFIC DEFECTS HAVE BEEN POINTED OUT IN MAINTENANCE OF THE BOOKS OF ACCOUNT AND THAT LD. CIT(APPEALS) DID NOT APPROVE REJECTION OF THE BOOKS OF ACCOUNT. IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(APPEALS) IN DELETING THE ADDITION. THIS GROUND OF APPEAL OF THE REVENUE IS ALSO DISMISSED. 10. THE LD. DR CONCEDED THAT IDENTICAL ISSUE HAD BE EN DECIDED IN FAVOUR OF THE ASSESSEE FOR ASSESSMENT YEAR 2009- 10 BY THE I.T.A.T., THOUGH HE HEAVILY RELIED UPON THE ORDER O F THE A.O. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AS ALSO THE ORDER O F THE I.T.A.T. PASSED IN THE CASE OF THE ASSESSEE FOR ASSESSMENT Y EAR 2009-10 REFERRED TO BEFORE US. ON GOING THROUGH THE ORDER O F THE I.T.A.T., WE FIND THAT IN ASSESSMENT YEAR 2009-10 A LSO THE BOOKS OF ACCOUNT OF THE ASSESSEE HAD BEEN REJECTED BY THE A.O. U/S 145(3) OF THE ACT FOR THE IDENTICAL REASON THAT THE CARAT WISE DETAILS OF THE JEWELLERY HAD NOT BEEN MAINTAIN ED BY THE ITA NOS.109 & 245/CHD/2017 CO NOS.13,14, &24/CHD/2017 A.YS. 2010-11 TO 2012-13 8 ASSESSEE AND APPLYING THE GP RATE OF 6% ON THE TOTA L SALES OF JEWELLERY ITEMS AND 3% ON PURE GOLD SOLD, THE PROFI T OF THE ASSESSEE HAD BEEN ESTIMATED BY THE A.O. THE CIT(A H AD SET ASIDE THE ORDER OF THE A.O. REJECTING THE BOOKS OF ACCOUNT FINDING NO SERIOUS DEFECT POINTED OUT BY THE A.O. C ONSIDERING THE FACT THAT OTHERWISE THE ASSESSEE HAD MAINTAINED COMPLETE QUANTITATIVE DETAILS IN RESPECT OF ALL ITEMS SOLD B Y IT I.E. PURE GOLD JEWELLERY AND DIAMOND ITEMS AND NOTING THAT IT WAS NOT FEASIBLE TO MAINTAIN CARAT WISE DETAIL. THE CIT(A) FURTHER HAD HELD THAT THE ESTIMATION OF GROSS PROFIT WAS ALSO W ITHOUT ANY BASIS AND THE ASSESSEE HAD EXPLAINED FALL IN GROSS PROFIT OF 1.58% AS BEING ATTRIBUTABLE TO THE FACT OF INCREASE IN GOLD PRICE. THE I.T.A.T., WE HAVE NOTED, UPHELD THE ORDE R OF THE CIT(A) ON FINDING THAT NO GROUND HAS BEEN RAISED BY THE REVENUE AGAINST REJECTION OF BOOKS OF ACCOUNT AND F URTHER THAT IN ASSESSMENT YEAR 2008-09 THE GP RATE DISCLOSED BY THE ASSESSEE HAD BEEN ACCEPTED AND, THEREFORE, FOLLOWIN G THE RULE OF CONSISTENCY, THE GP RATE OF THE IMPUGNED YEAR ALSO OUGHT TO BE ACCEPTED. THE ITAT HELD THAT REJECTION OF BOOKS MER ELY ON THE BASIS OF LOW GP RATE WAS NOT JUSTIFIED. THE FACTS IN THE PRESENT CASE, ADMITTEDLY, ARE IDEN TICAL TO THAT IN ASSESSMENT YEAR 2009-10 WITH THE BOOKS HAVING BE EN REJECTED ON ACCOUNT OF NON MAINTENANCE OF RECORD OF STOCK OF ITEMS SOLD CARAT WISE AND GP RATE OF 3% ON GOLD SO LD AND 6% OF ITA NOS.109 & 245/CHD/2017 CO NOS.13,14, &24/CHD/2017 A.YS. 2010-11 TO 2012-13 9 JEWELLERY ITEMS BEING ESTIMATED WITHOUT ANY BASIS. BEFORE US ALSO THE REVENUE HAS NOT RAISED ANY GROUND IN RELAT ION TO THE ISSUE OF REJECTION OF BOOKS OF ACCOUNTS. NO DISTING UISHING FACTS HAVE BEEN BROUGHT TO OUR NOTICE BY THE LD. DR. THE ISSUE THEREFORE ,WE HOLD IS SQUARELY COVERED BY THE ORDER OF THE I.T.A.T. IN THE PRECEDING YEAR, FOLLOWING WHICH WE UPHOLD THE ORDER OF THE CIT(A) DELETING THE ADDITION MADE OF RS.62,59,524/- BY ESTIMATING GP RATE . GROUND NO.1 RAISED BY THE REVENUE IS THEREFORE DISMISSED. 12. GROUND NO.2 RAISED BY THE REVENUE READS AS UNDE R: 2. THAT THE LD.CIT(A)-5, LUDHIANA HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.95,270/- ON AC COUNT OF REPAIR CHARGES, NOT APPRECIATING THE FACT THAT A S PER SALES BILLS OR BOOKS OF ACCOUNTS, THE ASSESSEE HAS NOT SHOWN THIS AMOUNT AS RECEIVED FROM THE CUSTOMERS WHICH ARE DIFFICULT TO BELIEVE BECAUSE NO PRUDENT BUSINESSMAN SHALL OMIT TO RECEIVE THE CHARGES FROM HIS CUSTOMERS WHICH HAS BEEN INCURRED BY HIM. 13. THE ISSUE IN THE ABOVE GROUND PERTAINS TO DISAL LOWANCE OF REPAIR CHARGES OF RS. 95,270/- ON OLD JEWELLERY WHI CH HAD BEEN DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND T HAT THESE DID NOT FIND MENTION IN THE SALES BILL. 14. THE LD.CIT(A) NOTED THAT THIS ISSUE WAS DECIDE D BY THE HIS PREDECESSOR IN FAVOUR OF THE ASSESSEE FOR A.Y. 2009 ; 10 ON FINDING THAT THE ASSESSING OFFICER HAD MADE THE ADD ITION SIMPLY ON THE GROUND THAT IMPUGNED REPAIR CHARGES DID NOT FIND MENTION IN THE SALES BILL AND HAD IGNORED THE BOO KS OF ITA NOS.109 & 245/CHD/2017 CO NOS.13,14, &24/CHD/2017 A.YS. 2010-11 TO 2012-13 10 ACCOUNTS WHEREIN AN ELABORATE SYSTEM OF JEWELLERY R ECEIVED ON REPAIR HAD BEEN CREATED SO AS TO ACCOUNT FOR THE JE WELLERY RECEIVED ON REPAIR AND SENT FOR REPAIR TO DIFFERENT PERSONS. THE CIT(A) NOTED THAT THE CHARGES SO RECEIVED HAD BEEN ACCOUNTED FOR AND ONLY CHARGES IN EXCESS PAID ON JEWELLERY SO LD BY THE ASSESSEE HAD BEEN CLAIMED AS AN EXPENSE. THESE CHAR GES WERE, THEREFORE, DIFFERENT FROM JEWELLERY MAKING CHARGES FOR WHICH THE ASSESSING OFFICER HAD MADE ADDITION IN THE ASSESSME NT YEAR 2008-09. THE ASSESSING OFFICER, HE NOTED, HAD THERE FORE CONSIDERED BOTH WITH THE SAME ARGUMENT. THE LD.CIT( A), FOLLOWING THE ORDER OF HIS PREDECESSOR DELETED THE ADDITION SO MADE ON FINDING THAT IDENTICAL ISSUE WAS DECIDED I N FAVOUR OF THE ASSESSEE BY THE CIT(A) IN ASSESSMENT YEAR 2009- 10. 15. BEFORE US AT THE OUTSET ITSELF, THE LD. COUNSEL FOR ASSESSEE POINTED OUT THAT THE ORDER PASSED BY THE LD.CIT(A) FOR ASSESSMENT YEAR 2009-10, FOLLOWING WHICH THE ISSUE HAD BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN THE IMPUGNED Y EAR, HAD BEEN UPHELD BY THE I.T.A.T. IN THE APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A). OUR ATTENTION WAS DRAWN TO THE ORDER PASSED BY THE I.T.A.T. FOR THE SAID YEAR IN I TA NO.847/CHD/2014 DATED 13.1.2017 MORE SPECIFICALLY T O PARA 8(II) & 9 AS UNDER: 8(II) IN ASSESSMENT YEAR 2009-10, REVENUE CHALLENGED THE DELETION OF ADDITION OF RS. 98,436/- . THIS ADDITION PERTAINS TO DISALLOWANCE OF REPAIR ITA NOS.109 & 245/CHD/2017 CO NOS.13,14, &24/CHD/2017 A.YS. 2010-11 TO 2012-13 11 CHARGES ON OLD JEWELLERY, WHICH HAVE BEEN DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND THAT THEY DO NOT FIND MENTION IN THE SALE BILLS. T HE LD. CIT(APPEALS) FOUND THAT THE CHARGES SO RECEIVED HAVE BEEN ACCOUNTED FOR AND ONLY CHARGES IN EXCESS PAID ON JEWELLERY SOLD BY THE ASSESSEE HAVE BEEN CLAIMED AS EXPENSES. THE LD. CIT(APPEALS) FOUND THAT ON THE SAME, HE HAS DELETED THE ADDITION IN ASSESSMENT YEAR 2008-09 AND ACCORDINGLY DELETED THE ADDITION. 9. AFTER CONSIDERING RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF REVENUE. THE ASSESSING OFFICER DID NOT POINT OUT ANY SPECIFI C DEFECT IN MAINTENANCE OF THE BOOKS OF ACCOUNT BY TH E ASSESSEE ON THIS ITEM. THE ASSESSEE HAS PROPERLY RECORDED THE NET AMOUNT OF REPAIR CHARGES OF BOTH THE COUNTS IN BOOKS OF ACCOUNT. THE LD. CIT(APPEALS) DELETED THE SIMILAR ADDITION IN ASSESSMENT YEAR 2008-09 AND WE HAVE CONFIRMED HIS FINDINGS. THIS GROUND OF APPEAL OF THE REVENUE IS, THEREFORE, IDENTICAL AS HAVE BEEN CONSIDERED IN ASSESSMENT YEAR 2008-09. THIS GROUND OF APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. 16. THE LD. DR CONCEDED THAT IDENTICAL ISSUE HAD BE EN DECIDED IN FAVOUR OF THE ASSESSEE FOR ASSESSMENT YEAR 2009- 10 BY THE I.T.A.T., THOUGH HE HEAVILY RELIED UPON THE ORDER O F THE A.O. 17. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE ORDER OF THE I.T.A.T. PASSED IN THE CASE OF THE ASS ESSEE FOR ASSESSMENT YEAR 2009-10 REFERRED TO BEFORE US AND F IND THAT IDENTICAL DISALLOWANCE OF REPAIR CHARGES PERTAINING TO JEWELLERY WAS DISALLOWED ON THE GROUND THAT THEY DID NOT FIND MENTION IN THE SALE BILLS. THE LD.CIT(A) IN THAT YEAR HAD DELE TED THE DISALLOWANCE ON NOTING THAT THESE CHARGES SO RECEIV ED HAD BEEN ACCOUNTED FOR AND ONLY CHARGES IN EXCESS PAID ON OL D JEWELLERY ITA NOS.109 & 245/CHD/2017 CO NOS.13,14, &24/CHD/2017 A.YS. 2010-11 TO 2012-13 12 HAD BEEN CLAIMED AS EXPENSES. THE I.T.A.T. UPHELD T HE ORDER OF THE CIT(A) NOTING THAT THE A.O. DID NOT POINT OUT A NY SPECIFIC DEFECT IN THE MAINTENANCE OF BOOKS OF ACCOUNT BY TH E ASSESSEE ON THIS ITEM AND THAT THE ASSESSEE HAS PROPERLY REC ORDED THE NET AMOUNT OF REPAIR CHARGES ON BOTH COUNTS IN ITS BOOKS OF ACCOUNT. SINCE THE ISSUE RAISED BEFORE US IS IDENTICAL TO TH AT IN ASSESSMENT YEAR 2009-10 RELATING TO DISALLOWANCE OF REPAIR CHARGES ON OLD JEWELLERY AND THE PLEADINGS OF THE ASSESSEE IN THIS REGARD ARE IDENTICAL TO THAT IN A.Y 2009-10 TH AT PROPER ACCOUNTING OF ALL CHARGES PAID AND RECOVERED FROM C USTOMERS ON ACCOUNT OF OLD JEWELLERY RECEIVED FOR REPAIRS HAD B EEN DONE, WHICH HAS REMAINED UNCONTROVERTED BEFORE US, AND FU RTHER SINCE THE LD. DR HAS NOT BROUGHT ANY DISTINGUISHING FACTS TO OUR NOTICE, THE DECISION RENDERED IN ASSESSMENT YEA R 2009-10 WILL APPLY TO THE PRESENT CASE ALSO, FOLLOWING WHIC H WE DELETE THE DISALLOWANCE OF REPAIR CHARGES AMOUNTING TO RS. 95,270/-. 18. GROUND OF APPEAL NO.2 RAISED BY THE REVENUE IS DISMISSED. 19. GROUND OF APPEAL NO.3 RAISED BY THE REVENUE REA DS AS UNDER: 3. THAT THE LD.CIT(A)-5, LUDHIANA HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE ADDITION OF RS.2,98,009/- TO RS.1,17,880/- ON ACCOUNT OF UNACCOUNTED SALES AS PE R SEIZED RECORD WITHOUT APPRECIATING THE FACT THAT 17 % G.P. ON THE SALES OF RS.2.98,009/- COMES OUT TO BE ITA NOS.109 & 245/CHD/2017 CO NOS.13,14, &24/CHD/2017 A.YS. 2010-11 TO 2012-13 13 RS.50,662/- AND REMAINING AMOUNT OF RS.2,47,347/- I S THE TOTAL UNDISCLOSED INVESTMENT IN THE UNACCOUNTED PURCHASES U/S 69. 20. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE A.O. MADE ADDITION OF RS. 2,98,009/- ON ACCOUNT OF PROFIT ON UNACCOUNTED SALES. THE A.O. MENTIONED THAT DURING THE SEARCH AT THE BUSINESS PREMISES OF THE ASSESSEE AND RESIDENTIAL P REMISES OF THE DIRECTORS, CERTAIN INCRIMINATING DOCUMENTS WERE FOUND AND SEIZED IN VARIOUS ANNEXURES LIKE A-05, A-06, A16 & A-25. THE A.O. FURTHER MENTIONED THAT ON VERIFICATION, IT WAS FOUND THAT SOME SALES RECORDED IN THE DOCUMENTS WERE ENTERED IN THE BOOKS OF ACCOUNTS BUT CERTAIN SALES AS PER DETAILS GIVEN IN THE ASSESSMENT ORDER WERE NOT FOUND ENTERED IN THE BOOK S OF ACCOUNTS. THE TOTAL OF SUCH UNACCOUNTED SALES CAME TO RS. 2,98,009/-.WHEN CONFRONTED, THE ASSESSEE STATED TH AT THESE WERE ROUGH CALCULATIONS AND ESTIMATES. THE REPLY OF THE ASSESSEE WAS NOT FOUND CONVINCING AND THE A.O. MADE ADDITION OF RS. 2,98,009/- SPLITTING THE AMOUNT AS ON ACCOUN T OF GROSS PROFIT THEREON ESTIMATED @ 17% OF SALES AMOUNTING TO RS. 50,662/- AND THE BALANCE BEING INVESTMENT FOR THE P URPOSE OF UNACCOUNTED SALES AT RS. 2,47,347/- . 21. THE LD.CIT(A) RESTRICTED THE ADDITION ON ACCOUN T OF GROSS PROFITS ON UNACCOUNTED SALES @ 6% AMOUNTING TO RS.1 7,880/-, WHILE ADDITION MADE ON ACCOUNT OF INVESTMENT MADE F OR THE PURPOSE OF UNACCOUNTED SALES WAS RESTRICTED TO RS.1 LAC HOLDING ITA NOS.109 & 245/CHD/2017 CO NOS.13,14, &24/CHD/2017 A.YS. 2010-11 TO 2012-13 14 1/3 RD OF THE TOTAL SALES TO BE PROPER ESTIMATE OF THE INVESTMENT MADE. ACCORDINGLY, THE ASSESSEE WAS GRAN TED A RELIEF OF RS.1,80,129/-, WHILE ADDITION OF RS.1,17,880/- W AS SUSTAINED. IT IS AGAINST THE ADDITION DELETED BY T HE CIT(A) THAT THE REVENUE HAS COME UP IN APPEAL BEFORE US. 22. AT THE OUTSET ITSELF, THE LD. COUNSEL FOR ASSES SEE POINTED OUT THAT THIS ISSUE HAD ALSO BEEN DEALT WITH BY THE I.T.A.T. IN THE CASE OF THE ASSESSEE IN ASSESSMENT YEAR 2009-10 IN THE CROSS OBJECTION FILED BY THE ASSESSEE IN C.O.NO.49/ CHD/2014 DATED 9.12.2016. IT WAS POINTED OUT THAT IN ASSESSM ENT YEAR 2009-10 THE LD.CIT(A) HAD UPHELD THE ENTIRE ADDITIO N MADE BY THE A.O. ON ACCOUNT OF UNACCOUNTED SALES DISCOVERED DURING SEARCH RELATING TO THE GROSS PROFIT AND UNACCOUNTED INVESTMENT MADE FOR THE SAME. IT WAS POINTED OUT THAT THE I.T. A.T. HAD UPHELD THE ADDITION MADE ON ACCOUNT OF GROSS PROFIT ON ACCOUNT OF UNACCOUNTED SALES, WHILE THE ADDITION MADE OF IN VESTMENT MADE THERETO HAD BEEN DELETED. OUR ATTENTION WAS DR AWN TO PARA NOS.5 TO 6.1 OF THE ORDER AS UNDER: 5. ON GROUND NO. 6, ASSESSEE CHALLENGED THE ORDER OF LD. CIT(APPEALS) IN MAINTAINING THE ADDITI ON OF RS. 1,63,950/- UNDER SECTION 69 OF THE INCOME TAX ACT. DURING THE COURSE OF SEARCH IN THE PREMISES OF THE ASSESSEE, CERTAIN INCRIMINATING DOCUMENTS WERE FOUND AND SEIZED. ONE OF THESE ANNEXURES IS ANNEXURE A-20 AS PER WHICH SOME SALES ARE ENTERED INTO THE BOOKS OF ACCOUNT WHICH HAVE BEEN VERIFIED DURING THE COURSE OF EXAMINATION OF THE BOOKS OF ACCOUNT AND SOME OF THE SALES ARE NOT ENTERED INTO BOOKS OF ACCOUNT WHICH ARE ITA NOS.109 & 245/CHD/2017 CO NOS.13,14, &24/CHD/2017 A.YS. 2010-11 TO 2012-13 15 TABULATED IN PARA 5 OF THE ASSESSMENT ORDER TOTALIN G TO RS. 1,63,950/-. THE SAME WERE CONSIDERED AS UNDISCLOSED SALES IN A SUM OF RS. 1,63,950/-. THE ASSESSING OFFICER DID NOT ACCEPT EXPLANATION OF THE ASSESSEE THAT THESE ARE CALCULATIONS ON ESTIMATE. THE SAME WERE, THEREFORE, TREATED AS UNACCOUNTED SALES OUT OF THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE ASSESSING OFFICER ALSO NOTED THAT FOR MAKING UNACCOUNTED SALES, ASSESSEE HAS TO MAKE INVESTMENT IN PURCHASES WHICH ARE ALSO UNDISCLOSED. THE GP RATE OF 17% WAS APPLIED AND TOTAL INVESTMENT IN PURCHASES WAS DETERMINED AT RS. 1,36,078/- AND BALANCE OF RS. 27,872/- WAS CONSIDERED AS BUSINESS INCOME OF THE ASSESSEE. THE LD. CIT(APPEALS) CONFIRMED THE ADDITION AND DISMISSED THIS GROUND OF APPEAL OF THE ASSESSEE. 6. AFTER CONSIDERING RIVAL SUBMISSIONS, WE ARE OF THE VIEW ADDITION ON ACCOUNT OF INVESTMENT IN A SUM OF RS. 1,36,078/- IS UNJUSTIFIED. DURING THE COURS E OF SEARCH, CERTAIN INCRIMINATING DOCUMENTS WERE FOUND SHOWING THAT CERTAIN SALES HAVE NOT BEEN ENTERED INTO THE BOOKS OF ACCOUNT OF THE ASSESSEE, THEREFORE, UNACCOUNTED SALES WERE FOUND IN A SUM OF RS. 1,63,950/-. THE TOTAL SALES COULD NOT BE TREAT ED AS PROFIT OF THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE ADMITTED THAT PROFIT RATE MAY BE APPLIED AGAINST THESE SALES WHICH ASSESSING OFFICER HAS APPLIED IN THIS CASE @ 17% AND TREATED RS. 27,872/- AS BUSINESS INCOME. THE ORDER OF AUTHORITIES BELOW TO THAT EXTENT IS, THEREFORE, CONFIRMED AND ADDITIO N OF RS. 27,872/- IS CONFIRMED. 6(I) HOWEVER, AS REGARDS THE ADDITION OF RS. 1,36,078/- ON ACCOUNT OF INVESTMENT IN PURCHASES, NO INCRIMINATING MATERIAL WAS FOUND TO MAKE THIS ADDITION. FURTHER, IT IS PRESUMPTION OF THE AUTHORITIES BELOW ONLY THAT FOR MAKING UNACCOUNTED SALES, THE ASSESSEE HAS MADE UNACCOUNTED INVESTMENTS IN THE PURCHASES. SINCE NO MATERIAL IS FOUND DURING THE COURSE OF SEARCH THAT ASSESSEE MADE ANY INVESTMENT IN PURCHASES, THEREFORE, ON MERE PRESUMPTION, SUCH ADDITION IS NOT WARRANTED. THE ORDERS OF AUTHORITIES BELOW TO THAT EXTENT ARE SET ASIDE AND WE DELETE THE ADDITION OF RS. 1,36,078/-. THIS GROUND OF CROSS OBJECTION IS PARTLY. ITA NOS.109 & 245/CHD/2017 CO NOS.13,14, &24/CHD/2017 A.YS. 2010-11 TO 2012-13 16 23. THE LD. DR CONCEDED THAT IDENTICAL ISSUE HAD BE EN DECIDED PARTLY IN FAVOUR OF THE ASSESSEE FOR ASSESSMENT YEA R 2009-10 BY THE I.T.A.T., THOUGH HE HEAVILY RELIED UPON THE ORD ER OF THE A.O. 24. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE GO NE THROUGH THE ORDER OF THE I.T.A.T. AND WE FIND THAT THE I.T.A.T. FOR ASSESSMENT YEAR 2009-10 HAD UPHELD ONLY ADDITIO N ON ACCOUNT OF GROSS PROFIT EARNED ON UNACCOUNTED SALES , DELETING THE ADDITION MADE ON ACCOUNT OF INVESTMENT THERETO, ON FINDING THAT NO INCRIMINATING MATERIAL WAS FOUND DURING SEA RCH TO MAKE THIS ADDITION. THE FACTS IN THE PRESENT CASE ARE IDENTICAL TO THAT IN ASSESSMENT YEAR 2009-10 AND THE LD. DR HAS NOT BRO UGHT TO OUR NOTICE ANY DISTINGUISHING FACTS. BUT AT THE SA ME TIME ,WE HAVE ALSO NOTED THAT THERE IS NO BASIS MENTIONED BY THE A.O FOR APPLYING GP RATE OF 17% ON THE UNACCOUNTED SALES. O N THE CONTRARY WE FIND THAT THE AO HAD APPLIED A GP RATE OF 6% ON JEWELLERY SOLD BY THE ASSESSEE AFTER REJECTING THE BOOKS OF THE ASSESSEE. THEREFORE WE DO NOT FIND ANY INFIRMITY I N THE ORDER PASSED BY THE CIT(A) RESTRICTING THE ADDITION MADE ON ACCOUNT OF PROFITS EARNED ON UNACCOUNTED SALES TO RS.17,880 /- APPLYING GP RATE OF 6%.FURTHER SINCE NO INCRIMINATING MATER IAL VIS A VIS INVESTMENT MADE IN UNACCOUNTED SALES WAS FOUND DURING SEARCH IN THE PRESENT CASE ALSO, THE DECISION OF TH E I.T.A.T. FOR ASSESSMENT YEAR 2009-10 WILL SQUARELY APPLY, FOLLOW ING WHICH ITA NOS.109 & 245/CHD/2017 CO NOS.13,14, &24/CHD/2017 A.YS. 2010-11 TO 2012-13 17 WE UPHOLD THE ORDER OF THE CIT(A) DELETING THE ADDI TION MADE ON ACCOUNT OF INVESTMENT IN UNACCOUNTED SALES TO THE E XTENT OF RS.1,47,347/-. IN EFFECT WE UPHOLD THE ORDER OF THE LD.CIT(A) DELETING THE ADDITION MADE ON ACCOUNT OF UNACCOUNTE D SALES OF RS.1,80,129/-. 25. THE GROUND NO.3 RAISED BY THE REVENUE IS THEREF ORE DISMISSED. 26. IN EFFECT THE APPEAL OF THE REVENUE IS DISMISSE D. 27. WE SHALL NOW TAKE UP C.O.NO.13/CHD/2017 FILED BY THE ASSESSEE. 28. THE ONLY GROUND RAISED BY THE ASSESSEE READS AS UNDER: 1. THAT THE LEARNED CIT(A)-5, LUDHIANA HAS ERRED B Y NOT DELETING THE ENTIRE AMOUNT OF ADDITION ON ACCOUNT O F DEEMED INVESTMENT FOR UNACCOUNTED SALES AND CONFIRM THE ADDITION AMOUNTING TO RS. 1,00,000/- AS INVESTMENT ON ESTIMATE BASIS, L/3 RD OF TOTAL UNACCOUNTED SALES, ALONG WITH GP AMOUNTING TO RS. 17880/- @ 6% ON UNACCOUNTED SAL ES WHICH WAS AGAINST THE LAW AS WELL AS AGAINST THE FA CTS OF THE CASE. 29. THE ASSESSEE IN THE ABOVE GROUND HAS CHALLENGED THE CONFIRMATION BY THE CIT(A) OF ADDITION MADE ON ACCO UNT OF INVESTMENT IN UNACCOUNTED SALES AMOUNTING TO RS.1 L AC. 30. WE HAVE DEALT WITH THIS ISSUE IN GROUND NO.3 OF REVENUES APPEAL IN ITA NO.109/CHD/2017, WE HAVE NOTED THAT T HE I.T.A.T. IN ASSESSMENT YEAR 2009-10 HAD DELETED THE ENTIRE ADDITION MADE ON ACCOUNT OF INVESTMENT MADE IN UNAC COUNTED ITA NOS.109 & 245/CHD/2017 CO NOS.13,14, &24/CHD/2017 A.YS. 2010-11 TO 2012-13 18 SALES HOLDING THAT THE SAME WAS NOT SUSTAINABLE IN THE ABSENCE OF ANY INCRIMINATING MATERIAL FOUND DURING SEARCH R ELATING TO THE SAME. SINCE IN THE IMPUGNED YEAR ALSO THERE IS NO MENTION OF ANY INCRIMINATING MATERIAL FOUND PERTAINING TO INVE STMENT MADE FOR THE PURPOSE OF SALE MADE OUTSIDE THE BOOKS OF THE ASSESSEE AND EVEN THE LD. DR HAS NOT BROUGHT TO OUR NOTICE ANY SUCH FACT, THE ORDER PASSED BY THE I.T.A.T. IN ASSE SSMENT YEAR 2009-10 WILL SQUARELY APPLY TO THE IMPUGNED ISSUE, FOLLOWING WHICH WE DELETE THE ADDITION UPHELD BY THE CIT(A) O F RS.1 LAC ON ACCOUNT OF INVESTMENT MADE IN UNACCOUNTED SALES. 31. GROUND NO.1 RAISED BY THE ASSESSEE IS ALLOWED. 32. IN EFFECT THE CROSS OBJECTION FILED BY THE ASSE SSEE IS ALLOWED. 33. WE SHALL NOW TAKE UP C.O.NO.14/CHD/2017 FILED BY THE ASSESSEE PERTAINING TO A.Y 2011-12. 34. AT THE OUTSET IT WAS POINTED OUT THAT THE APPEA L OF THE REVENUE FOR THE IMPUGNED YEAR IN ITA NO.110/CHD/201 7 WAS DISMISSED ON ACCOUNT OF THE TAX EFFECT INVOLVED BEI NG BELOW THAT PRESCRIBED BY THE CBDT CIRCULAR NO.3 OF 2018 DATED 11-07-18 FOR FILING APPEALS TO THE ITAT, VIDE ORDER DATED 21 -01-19. 35. GROUND NO.1 RAISED BY THE ASSESSEE READS AS U NDER: ITA NOS.109 & 245/CHD/2017 CO NOS.13,14, &24/CHD/2017 A.YS. 2010-11 TO 2012-13 19 1. THAT THE LEARNED CIT(A)-5, LUDHIANA HAS ERRED BY NO T DELETING THE ENTIRE AMOUNT OF ADDITION ON ACCOUNT O F DEEMED INVESTMENT FOR UNACCOUNTED SALES AND CONFIRM THE AD DITION AMOUNTING TO RS. 3,30,000/- AS INVESTMENT ON ESTIMA TE BASIS, L/3 RD OF TOTAL UNACCOUNTED SALES, ALONG WITH GP AMOUNTING TO RS. 53863/- @ 5.49% ON UNACCOUNTED SAL ES, WHICH WAS AGAINST THE LAW AS WELL AS AGAINST THE FA CTS OF THE CASE. 36. IT WAS COMMON GROUND THAT THE ISSUE RAISED IN THIS CROSS OBJECTION WAS IDENTICAL TO THAT RAISED BY THE ASSE SSEE IN ITS CROSS OBJECTION NO.13/CHD/2017 DEALT WITH US ABOVE . OUR FINDINGS GIVEN THEREIN AT PARA 30 OF OUR ORDER WIL L APPLY TO THIS GROUND WITH EQUAL FORCE FOLLOWING WHICH WE DELETE T HE ADDITION MADE OF RS.3,30,000/- ON ACCOUNT OF INVESTMENT IN UNACCOUNTED SALES. 37. IN EFFECT THE CROSS OBJECTION OF THE ASSESSEE I S ALLOWED. 38. WE SHALL NOW TAKE UP APPEAL OF THE REVENUE IN ITA NO.245/CHD/2017 PERTAINING TO A.Y 2012-13. 39. GROUND NO.1 RAISED BY THE REVENUE READS AS UNDE R: 1. THAT THE LD.CIT(A)-5, LUDHIANA HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.49,41,145/- NO T APPRECIATING THE FACT THAT THE G.P. RATE SHOWN BY T HE ASSESSEE AT 4.02% IS VERY MUCH ON LOWER SIDE VIS-A- VIS PREVIOUS YEARS AND ALSO THAT OTHER TRADERS IN THE S IMILAR BUSINESS AND IN THE SAME AREA HAVE ALSO SHOWN G.P. RATE OF MORE THAN 5,49%. THE ASSESSEE FAILED TO PROVIDE THE CARAT WISE DETAILS OF OPENING STOCK OF GOLD/DIAMOND JEWELLERY, PURCHASE/SALE OF GOLD JEWELLERY AND CLOS ING STOCK OF GOLD JEWELLERY/ PRODUCE STOCK REGISTER/SAL ES BILLS WITH COMPLETE NARRATION IN RESPECT OF SAME. 40. IT WAS COMMON GROUND THAT THE ISSUE RAISED IN THE ABOVE GROUND WAS IDENTICAL TO THAT RAISED IN GROUND NO.1 OF THE ITA NOS.109 & 245/CHD/2017 CO NOS.13,14, &24/CHD/2017 A.YS. 2010-11 TO 2012-13 20 REVENUES APPEAL IN ITA NO.109/CHD/2017 ABOVE. OUR DECISION RENDERED THEREIN AT PARA 11 OF OUR ORDER WILL APPL Y TO THIS GROUND WITH EQUAL FORCE FOLLOWING WHICH WE UPHOLD THE ORDER OF THE CIT(A) ON THE ISSUE AND DISMISS THE GROUND RAIS ED BY THE REVENUE. 41. GROUND NO.1 RAISED BY THE REVENUE IS DISMISSED. 42. GROUND NO.2 RAISED BY THE REVENUE READS AS UNDE R: 2. THAT THE LD.CIT(A)-5, LUDHIANA HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.92,190/- ON ACCOUNT OF REPAIR CHARGES, NOT APPRECIATING THE FACT THAT A S PER SALES BILLS OR BOOKS OF ACCOUNTS, THE ASSESSEE HAS NOT SHOWN THIS AMOUNT AS RECEIVED FROM THE CUSTOMERS WH ICH ARE DIFFICULT TO BELIEVE BECAUSE NO PRUDENT BUSINES SMAN SHALL OMIT TO RECEIVE THE CHARGES FROM HIS CUSTOMER S WHICH HAS BEEN INCURRED BY HIM. 43. IT WAS COMMON GROUND THAT THE ISSUE RAISED IN THE ABOVE GROUND WAS SIMILAR TO GROUND NO.2 RAISED BY THE RE VENUE IN ITA NO.109/CHD/2017 DEALT WITH BY US ABOVE. OUR DE CISION GIVEN THEREIN AT PARA 17 WILL APPLY TO THIS GROUND WITH EQUAL FORCE FOLLOWING WHICH WE UPHOLD THE ORDER OF THE LD .CIT(A0 DELETING THE DISALLOWANCE OF REPAIR CHARGES AMOUNTI NG TO RS.92,190/-. 44. GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED 45. GROUND NOS.3 RAISED BY THE REVENUE READ AS UND ER: 3. THAT THE LD.CLT(A)-5, LUDHIANA HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE ADDITION OF RS.14,11,09 3/- TO RS.5,55,030/- ON ACCOUNT OF UNACCOUNTED SALES AS PE R ITA NOS.109 & 245/CHD/2017 CO NOS.13,14, &24/CHD/2017 A.YS. 2010-11 TO 2012-13 21 SEIZED RECORD WITHOUT APPRECIATING THE FACT THAT 17 % G.P. ON THE SALES OF RS.14,11,093/- COMES OUT TO BE RS,2,39,886/- AND REMAINING AMOUNT OF RS.L1,71,207/ - IS THE TOTAL UNDISCLOSED INVESTMENT IN THE UNACCOUNTED PURCHASES U/S 69. 46. IT WAS COMMON GROUND THAT THE ISSUE RAISED IN THE ABOVE GROUND WAS SIMILAR TO GROUND NO.3 RAISED BY THE RE VENUE IN ITA NO.109/CHD/2017 DEALT WITH BY US ABOVE. OUR DE CISION GIVEN THEREIN AT PARA 24 WILL APPLY TO THIS GROUND WITH EQUAL FORCE FOLLOWING WHICH WE UPHOLD THE ORDER OF THE LD .CIT(A) RESTRICTING THE ADDITION MADE ON ACCOUNT OF GROSS PROFIT EARNED ON UNACCOUNTED SALES TO THE EXTENT OF RS.84 ,666/- @ 6% OF SALES. 47. GROUND NOS.3 RAISED BY THE REVENUE IS DISMISSE D. 48. GROUND NO.4 RAISED BY THE REVENUE READS AS UNDE R 4. THAT THE LD.CLT(A)-5, LUDHIANA HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE ADDITION OF RS.21,50,758/- MADE ON ACCOUNT OF G.P. ON DIFFERENCE IN STOCK SOLD OUT OF THE BOOKS TO RS.5,08,591/- IGNORING THE FACT THAT THE G.P. OF THE ASSESSEE HAS BEEN DETERMINED AT 17% AS IN EARLIER Y EARS FOR WHICH DEPARTMENTAL APPEALS ARE PENDING. 49. BRIEFLY STATED THERE WAS A SHORTAGE OF STOCK OF GOLD JEWELLERY FOUND DURING SEARCH AS COMPARED TO THAT R ECORDED IN THE BOOKS OF THE ASSESSEE WHICH WAS VALUED AT RS.1,26,51,520/-.TREATING THE SAME AS SALES MADE OU TSIDE THE BOOKS OF THE ASSESSEE ,THE AO MADE ADDITION OF GROS S PROFIT EARNED ON THE SAME ESTIMATING IT BY APPLYING A RATE OF 17% ON THE SALES SO TREATED. THE LD.CIT(A) FOUND THAT THE AO HAD ITA NOS.109 & 245/CHD/2017 CO NOS.13,14, &24/CHD/2017 A.YS. 2010-11 TO 2012-13 22 HIMSELF APPLIED A GP RATE OF 6% AFTER REJECTING THE BOOKS OF THE ASSESSEE, AS AGAINST 4.02% SHOWN BY THE ASSESSEE. T HE CIT(A) THEREFORE APPLIED GP RATE OF 4.02%,HAVING DISMISSED THE ACTION OF REJECTION OF BOOKS OF ACCOUNTS BY THE AO AND THU S RESTRICTED THE ADDITION TO RS.5,08,591/- 50. BEFORE US LD. DR WAS UNABLE TO CONTROVERT THE F ACTUAL FINDINGS OF THE LD.CIT(A) THAT THE GP RATE SHOWN BY THE ASSESSEE WAS 4.02% . FURTHER WE FIND THAT THE REVEN UE HAS NOT RAISED ANY GROUND AGAINST THE ACTION OF THE LD.CIT (A) SETTING ASIDE THE REJECTION OF BOOKS OF ACCOUNTS OF THE AS SESSEE. MOREOVER WE HAVE UPHELD THE ORDER OF THE LD.CIT(A) DELETING THE ADDITION MADE BY ESTIMATING GP @ 6% IN GROUND N O.1 RAISED IN THE PRESENT APPEAL AS ABOVE. IN NUTSHELL THE BOOKS OF THE ASSESSEE STAND ACCEPTED. WE THEREFORE DO NOT FI ND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A) ESTIMATING THE GROSS PROFIT ON SALES MADE OUTSIDE THE BOOKS BY APPLYING GP RATE OF 4.02% WHICH COMES TO RS.5,08,591/- 51. GROUND OF APPEAL NO.5 RAISED BY THE REVENUE IS THEREFORE DISMISSED. 52. GROUND NO.6 RAISED BY THE REVENUE READS AS UNDE R: 5. THAT THE LD.CLT(A)-5, LUDHIANA HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF INTEREST O F RS.L5,18,1827- U/S 36(I)(III) CALCULATED AT THE RAT E OF 12% ON TOTAL UNACCOUNTED SALES OF RS.L,26,51,520/- AS THE ASSESSEE HAS USED THE CASH OF UNACCOUNTED ITA NOS.109 & 245/CHD/2017 CO NOS.13,14, &24/CHD/2017 A.YS. 2010-11 TO 2012-13 23 SALE FOR PURPOSE OTHER THAN HIS ACCOUNTED BUSINESS AND PAID INTEREST TO BANK OF RS.29,49,436/- IN ACCOUNTED BUSINESS. 53. BRIEFLY STATED THE AO MENTIONED THAT THE ASSESS EE HAD USED CASH OF UNACCOUNTED SALES FOR PURPOSES OTHER T HAN BUSINESS AND ON THE OTHER HAND PAID INTEREST TO BAN K AMOUNTING TO RS.29,49,436/-.THEREFORE HE DISALLOWED INTEREST ON UNACCOUNTED SALES(RS.1,26,51,520/-) AT THE RATE OF 12% WHICH CAME TO RS.15,18,182/-. 54. THE LD.CIT(A) DELETED THE DISALLOWANCE HOLDING THAT FOR THE PURPOSE OF DISALLOWANCE IT HAS TO BE SHOWN THAT INT EREST BEARING FUNDS HAVE BEEN USED FOR NON BUSINESS PURPO SES. HE FURTHER NOTED THAT THERE WAS INCREASE IN STOCK OF D IAMOND AND SILVER AND ALSO UNACCOUNTED RECEIVABLES, WHICH HE H ELD SHOWED THE USAGE OF FUNDS FROM UNACCOUNTED SALES IN THE BU SINESS ITSELF. 55. BEFORE US LD. DR WAS UNABLE TO CONTROVERT THE F ACTUAL AS WELL AS LEGAL FINDINGS OF THE LD.CIT(A).IN VIEW OF THE SAME SINCE THERE IS AN UNCONTROVERTED FINDING OF FACT BY THE C IT(A) THAT THERE WAS INCREASE IN STOCK OF DIAMOND AND SILVER A ND ALSO UNACCOUNTED RECEIVABLES, WE CONCUR WITH THE LD.CIT( A) THAT THE IMPUGNED FUNDS WERE THEREFORE USED IN THE BUSINESS OF THE ASSESSEE ONLY. MOREOVER THE REVENUE HAS NOT BROUGHT ANYTHING ON RECORD EVEN BEFORE US SHOWING THE USER OF THE SA ID FUNDS FOR NON-BUSINESS PURPOSE. WE THEREFORE AGREE WITH THE L D.CIT(A) ITA NOS.109 & 245/CHD/2017 CO NOS.13,14, &24/CHD/2017 A.YS. 2010-11 TO 2012-13 24 THAT THERE WAS NO BASIS FOR MAKING ANY DISALLOWANCE OF INTEREST U/S 36(1)(III) IN THE AFORESAID FACTS AND CIRCUMSTA NCES. THE ORDER OF THE LD.CIT(A) ON THE IMPUGNED ISSUE IS THE REFORE UPHELD. 56. GROUND OF APPEAL NO.5. RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. 57. IN EFFECT THE APPEAL OF THE REVENUE IS DISMISSE D. 58. WE SHALL NOW TAKE UP C.O.NO.24/CHD/2017 FILED BY THE ASSESSEE. 59. GROUND NO.1 RAISED BY THE ASSESSEE READS AS UN DER: 1. THAT THE LEARNED CIT(A)-5, LUDHIANA HAS ERRED BY NO T DELETING THE ENTIRE AMOUNT OF ADDITION ON ACCOUNT O F DEEMED INVESTMENT FOR UNACCOUNTED SALES AND CONFIRM THE ADDITION AMOUNTING TO RS.4,70,364/- AS INVESTMENT O N ESTIMATE BASIS. L/3 RD OF TOTAL UNACCOUNTED SALES, ALONG WITH GP AMOUNTING TO RS.84,666/- @ 6% ON UNACCOUNTED SAL ES, WHICH WAS AGAINST THE LAW AS WELL AS AGAINST THE FA CTS OF THE CASE. 60. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT T HE ABOVE GROUND RAISED IN THIS CROSS OBJECTION IS SIMILAR TO GROUND NO.1 RAISED BY THE ASSESSEE IN C.O.NO.13/CHD/2017 .OUR F INDINGS GIVEN THEREIN AT PARA 30 WILL APPLY TO THIS GROUND WITH EQUAL FORCE FOLLOWING WHICH WE ALLOW THE GROUND RAISED BY THE ASSESSEE. 61. GROUND NO 2 AND 3 RELATES TO THE ISSUE OF ADDIT ION MADE ON ACCOUNT OF EXCESS STOCK OF DIAMOND AND SILVER FO UND DURING ITA NOS.109 & 245/CHD/2017 CO NOS.13,14, &24/CHD/2017 A.YS. 2010-11 TO 2012-13 25 SEARCH AND SINCE IDENTICAL ARGUMENTS WERE ADVANCED WITH RESPECT TO BOTH THE GROUND THEY WERE TAKEN UP TOGET HER FOR HEARING 62. THE GROUND NO 2 AND 3 READ AS UNDER: 2. THAT THE LEARNED CIT(A)-5, LUDHIANA HAS ERRED IN NOT DELETING THE ADDITION OF RS. 30,91,495/- AS MADE BY THE LD. A.O. ON ACCOUNT OF DISCREPANCY IN DIAMONDS. 3. THAT THE LEARNED CIT(A)-5, LUDHIANA HAS ERRED IN NOT DELETING THE ADDITION OF RS. 19,674/- AS MADE BY TH E LD. A.O. ON ACCOUNT OF DISCREPANCY IN SILVER. 63. AS MENTIONED ABOVE DURING SEARCH EXCESS STOCK O F DIAMOND AND EXCESS STOCK OF SILVER WAS FOUND VALUED AT RS. 30,91,495/- AND RS. 19,674/- RESPECTIVELY ,WHICH WA S ADDED TO THE INCOME OF THE ASSESSEE IN THE ABSENCE OF ANY EX PLANATION GIVEN FOR THE SAME. THE SAME WAS UPHELD BY THE LD. CIT(A). 64. BEFORE US, LD. COUNSEL FOR THE ASSESSEE CONTEND ED THAT HE HAD MADE A TOTAL SURRENDER OF RS. 1.75 CRORES AND T HEREFORE THERE WAS NO NEED OF ANY SEPARATE ADDITION. 65. LD. DR ON THE OTHER HAND DREW OUR ATTENTION TO THE BREAKUP OF SURRENDER MADE AS MENTIONED IN PARA 2 O F THE LD. CIT(A) ORDER AS UNDER: PARTICULARS AMOUNT (IN RS.) ON ACCOUNT OF RECEIVABLES 93,00,000/- ON ACCOUNT OF CASH OUT OF SALE NOT ENTERED IN THE BOOKS 61,00,000/- ON ACCOUNT OF STOCK OUT OF SALE NOT ENTERED INTO BOOKS 21,00,000/- ITA NOS.109 & 245/CHD/2017 CO NOS.13,14, &24/CHD/2017 A.YS. 2010-11 TO 2012-13 26 66. LD. DR THEREAFTER DREW OUR ATTENTION TO THE FIN DING OF THE LD. CIT(A) THAT NO SURRENDER WAS MADE ON ACCOUNT OF EXCESS STOCK OF DIAMOND OR SILVER FOUND DURING COURSE OF S EARCH AND THEREFORE CONTENDED THAT THE ARGUMENT OF LD. COUNSE L IN THIS REGARD MERITED NO CONCENTRATION. 67. WE HAVE HEARD THE RIVAL CONTENTION. ADMITTEDLY A SURRENDER OF RS. 21 LACS HAD BEEN MADE ON ACCOUNT O F STOCK OUT OF SALE NOT ENTERED IN THE BOOKS. THE EXCESS ST OCK FOUND, WE HOLD THEREFORE, TO THIS EXTENT IS TO BE ADJUSTED AGAINST THE SURRENDER SO MADE. SINCE THE REST OF THE SURRENDER MADE IS NOT IN RELATION TO EXCESS STOCK OF DIAMOND OR SILVER, N O BENEFIT OF THE SAME, WE HOLD, CAN BE GIVEN TO THE ASSESSEE. AC CORDINGLY WE DIRECT THAT THE ADDITION MADE OF RS. 30,91,495/- ON ACCOUNT OF EXCESS STOCK OF DIAMOND AND RS. 19,674/- ON ACCOUNT OF EXCESS STOCK OF SILVER FOUND DURING THE SEARCH, BE ADJUSTE D AGAINST THE SURRENDER OF RS. 21 LACS MADE BY THE ASSESSEE ON AC COUNT OF STOCK OUT OF SALE NOT ENTERED IN THE BOOKS. THE BAL ANCE ADDITION IS THEREFORE UPHELD. 68. GROUND OF APPEAL NO. 2 AND 3 ARE THEREFORE PART LY ALLOWED. GROUND NO. 4 READS AS UNDER: 4. THAT THE LEARNED CIT(A)-5, LUDHIANA HAS ERRED IN NOT ALLOWING RELIEF REGARDING CHARGING OF INTEREST U/S 234B AND 234C WITHOUT ALLOWING THE ADJUSTMENT OF SEIZED CASH AMOUNTING TO RS. 61,00,000/- AS ADVANCE TAX. ITA NOS.109 & 245/CHD/2017 CO NOS.13,14, &24/CHD/2017 A.YS. 2010-11 TO 2012-13 27 THE ABOVE GROUND IS REGARDING CHARGING OF INTEREST UNDER SECTION 234B AND 234 C WITHOUT ALLOWING ADJUSTMENT OF SEIZED CASH AMOUNTING TO RS. 61 LACS AS ADVANCED TAX. 69. THE FACTS RELEVANT TO THE ISSUE ARE THAT A SEAR CH WAS CONDUCTED AT THE PREMISES OF ASSESSEE ON 14/03/2012 . THE ASSESEE HAD SURRENDERED AN AMOUNT OF RS. 61 LACS ON ACCOUNT OF CASH. THE ASSESSEE HAD SUBMITTED ON 22/08/2012 A LETTER REQUESTING FOR TREATING THE SEIZED CASH AS ADVANCE TAX BUT EVEN AFTER THE COMPLETION OF ASSESSMENT PROCEEDING THE R EVENUE DID NOT ADJUST THE SEIZED CASH AS ADVANCE TAX. 70. THE LD. CIT(A) DISMISSED THE GROUND RAISED BY T HE ASSESSEE IN THIS REGARD BEFORE HIM, STATING THAT AS PER THE PROVISIONS OF SECTION 132B OF THE ACT, WHICH PROVID ED THE MANNER IN WHICH ASSETS SEIZED UNDER SECTION 132 OR REQUISITIONED UNDER SECTION 132A ARE TO BE DEALT WI TH AGAINST THE EXISTING LIABILITIES, ADVANCE TAX WAS NOT TO BE TREATED AS EXISTING LIABILITY. THE LD. CIT(A) REFERRED TO EXPL ANATION 2 TO SECTION 132B INSERTED BY FINANCE ACT 2013 ,STATING THAT THE SAID EXPLANATION CLARIFIED THAT THE ASSESSEE WAS NO T ENTITLED FOR ADJUSTMENT OF ADVANCE TAX PAYABLE OUT OF CASH SEIZE D. HE ACCORDINGLY DISMISSED THE GROUND RAISED BY THE ASSE SSEE. 71. BEFORE US, LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE EXPLANATION WAS INSERTED W.E.F 01-06- 2013 BY T HE FINANCE ITA NOS.109 & 245/CHD/2017 CO NOS.13,14, &24/CHD/2017 A.YS. 2010-11 TO 2012-13 28 ACT 2013, WHILE THE SEARCH TOOK PLACE IN 2012 AND T HE SAME DID NOT HAVE A RETROSPECTIVE APPLICATION. LD. COUNSEL R ELIED UPON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH CO URT IN THE CASE OF PCIT VS. SURINDER KUMAR KHINDRI REPORTED I N 297 CTR 109 IN THIS REGARD. COPY OF THE SAME WAS PLACED BEF ORE US. 72. LD. DR ON THE OTHER RELIED ON THE ORDER OF THE LD. CIT(A). 73. WE HAVE HEARD THE RIVAL CONTENTIONS. WE HAVE AL SO GONE THROUGH THE ORDER OF THE HONBLE JURISDICTIONAL HIG H COURT IN THE CASE OF SURINDER KUMAR KHINDERI(SUPRA). ON GOIN G THROUGH THE SAME WE FIND THAT IT HAS BEEN CATEGORICALLY HEL D IN THE SAID CASE THAT EXPLANATION 2 TO SECTION 132B , NOT INCLUDING ADVANCE TAX PAYABLE AS EXISTING LIABILITY FOR THE PURPOSE O F ADJUSTMENT OF SEIZED CASH AGAINST THE SAME AS PER THE PROVISIO N OF SECTION 132B OF THE ACT, WAS PROSPECTIVE IN NATURE I.E WAS EFFECTIVE FROM 01/06/2013 ONWARDS ONLY. SINCE SEARCH IN THE I MPUGNED CASE WAS CONDUCTED IN 2012, THE SAID EXPLANATION WI LL NOT BE APPLICABLE TO THE PRESENT CASE AND ACCORDINGLY THE SEIZED CASH OF RS. 61 LACS IS WE HOLD TO BE ALLOWED TO BE ADJUS TED AGAINST THE ADVANCE TAX LIABILITY. 74. GROUND OF APPEAL NO. 4 RAISED BY THE ASSESSEE I S ACCORDINGLY ALLOWED. 75. IN EFFECT THE C.O. OF THE ASSESSEE IS PARTLY AL LOWED. ITA NOS.109 & 245/CHD/2017 CO NOS.13,14, &24/CHD/2017 A.YS. 2010-11 TO 2012-13 29 76. IN THE RESULT, I) APPEAL OF THE REVENUE IN ITA NO. 109 & 245/CHD/2 017 ARE DISMISSED. II) CROSS OBJECTION OF THE ASSESSEE IN C.O. NO. 13,14/CHD/2017 ARE ALLOWED WHEREAS C.O. NO. 24/CHD/ 2017 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. # $ % &' (SANJAY GARG ) (ANNAPURNA GUPTA) / JUDICIAL MEMBER ( / ACCOUNTANT MEMBER *# /DATED: 30 TH MAY, 2019 * ' * &) *+ ,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ' - / CIT 4. ' - ( )/ THE CIT(A) 5. +./ 0 , $ 0 , 123/4 / DR, ITAT, CHANDIGARH 6. /3 5# / GUARD FILE &) ' / BY ORDER, ! / ASSISTANT REGISTRAR