Shri Shailesh Chandulal Kadecha, JAMNAGAR V. The Deputy Commissioner Of Income Tax, Central Circle 3,

ITA 1231/RJT/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60066 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 14-12-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 20-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: YOGEH PANDE

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT. BEFORE SHRI T. K. SHARMA (JM) AND SHRI A. L. GEHL OT AM). ITA NO. 1231/RJT/2010 (ASSESSMENT YEAR 2005-06) SHRI SHAILESH CHANDULAL KADECHA, VS. THE DY. C.I.T., CHANDI BAZAR BUNGLOW,JAMNAGAR. CENTRAL CIRCLE-3, S URAT. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI YOGEH PANDE, D. R. ASSESSEE BY : SHRI J. C. RANPURA, C.A... DATE PF HEARING : 14-12-2011. DATE OF PRONOUNCEMENT : 06-01-2012. O R D E R. PER A. L. GEHLOT (A.M.) : THIS APPEAL BY ASSESSEE IS FILED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-II, A HMEDABAD, DATED 06-09- 2010 FOR ASSESSMENT YEAR 2005-06. 2. THE GROUNDS RAISED BY ASSESSEE IN HIS APPEAL ARE REPRODUCED AS UNDER:- (1) THE GROUNDS OF APPEAL MENTIONED HEREUNDER ARE W ITHOUT PREJUDICE TO ONE ANOTHER. (2) INITIATION OF ACTION U/S.147 OF THE INCOME-TAX ACT,1961 [ACT] AND ISSUE OF NOTICE U/S.148 OF THE ACT WAS INVALID, ILL EGAL AND BAD IN LAW AND THE ASSESSMENT BASED ON ILLEGAL AND INVALID INI TIATION IS BAD IN LAW AND VOID-AB-INITIO AND MAY KINDLY BE QUASHED. (3) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS )-II, AHMEDABAD [HEREINAFTER REFERRED TO AS THE CIT(A)] ERRED ON FA CTS AS ALSO IN LAW IN CONFIRMING THE PROTECTIVE ADDITION OF RS.4,88,27 1/- MADE ON ACCOUNT OF GOLD JEWELLERY SEIZED DURING THE COURSE OF SEARCH. THE ADDITION MAY KINDLY BE DELETED. ITA 1231-RJT-2010 A.Y. 2005-06 2 (4) YOUR HONORS APPELLANT CRAVES LEAVE TO ADD, AME ND, ALTER, OR WITHDRAW ANY OF MORE GROUNDS OF APPEAL ON OR BEFORE THE HEARING OF APPEAL.. 3. THE LD. A.R. SUBMITTED THAT THE GROUND NOS.1 A ND 4 ARE GENERAL IN NATURE, GROUND NO.2 IS NOT PRESSED. THEREFORE, THESE GROUND S ARE DISMISSED. THE EFFECTIVE GROUND IS IN RESPECT OF PROTECTIVE ADDITI ON OF RS.4,88,271/- MADE ON ACCOUNT OF GOLD JEWELLERY SEIZED DURING THE COURSE OF SEARCH. 4. THE BRIEF FACTS OF THE CASE ARE THAT A SEARCH U/ S.132 OF THE ACT WAS CARRIED ON A MINI BUS NO. MH 04-S 1298 BELONGING TO M/S. PA TEL AMBALAL HARGOVANDAS & CO. AT MUMBAI RAILWAY STATION ON 21-07-2004. DUR ING THE COURSE OF SEARCH, IT WAS FOUND THAT THE BUS WAS CARRYING THE CASH AND PA RCELS BELONGING TO VARIOUS ANGADIAS. IT WAS NOTICE THAT APART FROM THE PERSON S WHO WERE INSIDE THE MINI BUS, THERE WERE NUMBER OF PERSONS WHO WERE ESCORTIN G THIS MINI BUS IN DIFFERENT VEHICLES. THE AUTHORIZED OFFICERS HAVE EFFECTED TH E SEIZURE AFTER ALLOWING SUFFICIENT TIME TO ESTABLISH OWNERSHIP OF THE CONTE NTS OR TO PROVE THE SOURCE OF INVESTMENT IN THE ASSETS FOUND DURING THE SEARCH. S OME OF VALUABLES BELONGING TO THE ASSESSEE WHICH WERE FOUND AT THE TIME OF SEA RCH AND SAME WERE SEIZED. THEREFORE, NOTICE U/S.153C OF THE ACT WAS ISSUE AND SERVED ON THE ASSESSEE. A NOTICE U/S.148 WAS ALSO ISSUED ON 29-11-2006. DURI NG THE COURSE OF SEARCH, ONE PACKET CONTAINING GOLD JEWELLERY WEIGHING 839.4 GRA MS AND VALUED AT RS.4,88,271/- WAS FOUND. THE SAID PACKET WAS SENT BY ONE M/S. BHASKARBHAI & BROTHERS OF MUMBAI TO M/S. SHAILESHKUMAR & BROTHERS , SHOP NO.5, CHANDI BAZAR, JAMNAGAR. SHRI RASIKBHAI N. DHOLAKIA APPEAR ED TO CLAIM THE CONTENT OF THE PACKET. A STATEMENT OF RASIKBHAI N. DHOLAKIA W AS RECORDED U/S.131 OF THE ACT ON 27-07-2004. MR. DHOLAKIA WAS UNABLE TO PROD UCE ANY EVIDENCE REGARDING CONVERSION OF GOLD TO CHAIN AND DID NOT PRODUCE ANY BOOKS OF ACCOUNTS. THEREFORE, ENTIRE GOLD JEWELLERY WAS SIZED. MR. RA SIKBHAI DHOLAKIA IN HIS STATEMENT RECORDED U/S.131 DATED 27-07-2004 WHILE R EPLYING QUESTION NO.3 STATED THAT THEY ARE FOUR BROTHERS VIZ. BHASKARBHAI , RASIKBHAI, BHOGIBHAI AND HITESHBHAI. ALL ARE IN THE BUSINESS OF MAKING GOLD ORNAMENTS IN INDIVIDUAL ITA 1231-RJT-2010 A.Y. 2005-06 3 CAPACITY. BUT CONSIDERING THE NAME OF ELDER BROTHER , PUBLICALLY THEY ARE KNOWN AS BHASKARBHAI & BROTHERS WHEREAS, THERE IS NO CONCERN IN THE NAME OF M/S. BHASKARBHAI & BROTHERS. IN REPLY TO QUESTION NO.4, IT IS STATED THAT THE PACKET CONTAINS GOLD CHAINS WHICH BELONG TO SHAILESHKUMAR & BROTHERS OF JAMNAGAR. SHRI SHAILESHKUMAR HAD ISSUED 834.9 GRAMS GOLD TO S HRI R. N. DHOLAKIA. THIS GOLD WAS EXCHANGED TO GOLD CHAIN IN SAME WEIGHT IN MUMBAI AND BEING SENT BACK TO SHAILESHKUMAR & BROTHERS, JAMNAGAR. IN REP LY TO QUESTION NO.5, MR. DHOLAKIA FURNISHED A COPY OF VOUCHER DATED 11-07-20 04 OF SHAILESHKUMAR CHANDULAL & BROTHERS FOR ISSUE OF GOLD WEIGHING 839 .4 GRAM IN FAVOUR OF R.N. DHOLAKIA. BEFORE THE AO., THE ASSESSEE SUBMITTED TH AT GOLD BARS WEIGHING 839.4 GRAMS VALUED AT RS.4,88,271/- WERE PURCHASED FROM N IKUNJKUMAR AND THE SAME GOLD BAR WAS SENT FOR PROCESSING AT MUMBAI WHERE GO OD QUALITY CHAINS WERE BEING MADE BY THE BHASKARBHAI & BROTHRS KNOWN POPUL ARLY. THE GOLD WAS SENT TO THEM AND THE LETTER OF ISSUE WAS ALSO SHOWN AT THE TIME OF MAKING DECLARATION AND FILING THE AFFIDAVIT BEFORE THE AO. SHRI BHASK ARBHAI & BROTHERS, I.E. R.N. DHOLAKIA HAS ALSO CONFIRMED THE MAKING OF GOLD CHAI N FROM THE GOLD BARS. THE GOLD CHAIN FOUND AT THE TIME OF SEARCH IS NOTHING B UT THE SAID GOLD IS CONVERTED IN GOLD IN THE NAME AND STYLE OF CHAIN WHICH WAS SENT FOR MAKING CHAIN AND THE SAID GOLD WAS REFLECTED IN THE BALANCE SHEET AS STOCK OF GOLD. THE AO DID NOT ACCEPT THE ASSESSEES CONTENTION ON THE GROUND THAT THE AS SESSEE IS IN BUSINESS OF SWARNAKAR INVOLVED IN MAKING OF GOLD JEWELLERY AND RECEIVING THE JOB CHARGES. THE AO GIVEN THE DETAILS OF JOB CHARGES DECLARED BY THE ASSESSEE FROM AY 1998- 99 TO 2004-05 AT PAGE-7 OF HIS ORDER. THE AO FURTH ER NOTICED THAT IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE SHOWN PURCHASE OF JEWELLERY TO THE EXTENT OF RS.8,62,835/- WHICH INCLUDES THE PURCHASE OF RAW GO LD TO THE EXTENT OF 839.4 GRAMS VALUED RS.4,71,966/- THE ASSESSEE IN SUPPORT OF PURCHASES SHOWN PURCHASE AND SALE BILLS. IT HAS BEEN ALSO EXPLAINE D BY THE ASSESSEE BEFORE THE AO THAT THE PURCHASE OF RAW GOLD WAS MADE FROM NIKU NJ H. KADECHA, JAMNAGAR. SHRI NIKUNJ KADECHA IS COUSIN OF THE ASSESSEE. THE AO NOTICED THAT THE SAID PERSON NIKUNJ DID NOT INVOLVE IN TRADING OF RAW GOL D AND THAT GOLD OF WEIGHING 839.4 GRAMS SHOWN SOLD TO THE ASSESSEE WITHOUT ANY PAYMENT. THEREFORE, THE ITA 1231-RJT-2010 A.Y. 2005-06 4 AO WAS OF THE VIEW THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE PURCHASE. THE ASSESSEE HAS ALSO PRODUCED EVIDENCE REGARDING SENDING OF RAW GOLD FOR GETTING IT CONVERTED INTO JEWELLERY. A REC EIPT FROM P. MAGANLAL & SONS FOR SENDING THAT GOLD, INSURANCE OF RS.10,000/- WAS TAK EN. THE AO WAS OF THE VIEW THAT WHEN THE TRANSACTIONS ARE GENUINE AND THE GOOD S ARE VALUED AT RS.4,88,271/-, THERE IS NO REASON FOR TAKING ANY IN SURANCE OF RS.10,000/- ONLY. IT HAS BEEN ALSO NOTED BY THE AO THAT NO EVIDENCE REGA RDING SENDING OF RAW GOLD FROM JAMNAGAR TO MUMBAI WAS FOUND DURING THE SEARCH . IF THE ASSESSEE HIMSELF IS INVOLVING IN MAKING IN MAKING JEWELLERY, THERE I S NO REASON FOR SENDING RAW GOLD TO MUMBAI. THE AO DID NOT RELY ON BOOKS OF AC COUNTS WHICH WAS PRODUCED IN SUPPORT OF GENUINE PURCHASE WITH THE OBSERVATION THAT THE BOOKS OF ACCOUNTS WAS WRITTEN AT A STRETCH BY HAND OF USING SINGLE PE N. THE AO FURTHER NOTICED THAT THERE IS NO FIRM NAMELY SHAILESHKUMAR & SONS AS WRI TTEN ON THE SLIP THAT THE JEWELLERY WAS TRANSFERRED FROM MUMBAI TO JAMNAGAR. IN THE LIGHT OF VARIOUS REASONS DISCUSSED ABOVE, THE AO DID NOT ACCEPT THE CLAIM OF THE ASSESSEE THAT JEWELLERY HAS BEEN SHOWN IN REGULAR BOOKS OF ACCOUN TS. THE AO MADE THE ADDITION OF RS.4,88,271/- IN THE HANDS OF THE ASSES SEE BECAUSE THE ASSESSEE HAS MADE THE CLAIM OF OWNERSHIP OF THE SAID GOLD JE WELLERY. 5. THE CIT(A) CONFIRMED THE ORDER OF THE AO ON THE GROUND THAT NO EVIDENCE WAS FOUND FOR SENDING GOLD TO MUMBAI AT THE TIME OF SEARCH. THERE IS NO REASON FOR SENDING GOLD TO MUMBAI FOR MAKING JEWELLERY. N O BOOKS OF ACCOUNTS OF BHASKARBHAI & BROTHERS AND SHAILESHKUMAR & BROTHERS WERE PRODUCED AT THE TIME OF SEARCH. THE CLAIM OF PURCHASE OF GOLD BY A SSESSEE FROM NIKUNJ HARIKISHANDAS WAS ALSO NOT PRODUCED. THE SUBSTANTI VE ASSESSMENT MADE IN CASE OF M/S. P. MAGANLAL & SONS WHEREIN THE CIT(A) DELETED THE ADDITION VIDE HIS ORDER DATED 25-02-2008 ON THE GROUND THAT M/S. P. M AGANLAL & SONS IS ONLY ANGADIA AND THE OWNERSHIP HAS BEEN ACCEPTED BY SHRI SHAILESHKUMAR. 6. THE LD. A.R. SUBMITTED THAT THE ASSESSEE IS ASSE SSED TO TAX AND MAINTAINS REGULAR BOOKS OF ACCOUNTS. THE RETURN OF INCOME WA S FILED REGULARLY. IN THE BOOKS ITA 1231-RJT-2010 A.Y. 2005-06 5 OF ACCOUNTS, THE ASSESSEE HAS SHOWN OPENING STOCK O F GOLD355.796 GRAMS AND PURCHASES DURING THE YEAR 1553.350 GRAMS. OUT OF T HE STOCK, THE ASSESSEE SENT 839.400 GRAMS GOLD TO RASIKBHAI N. DHOLAKIA OF VADG ADI OF MUMBAI FOR MAKING GOLD CHAINS VIDE VOUCHER DATED 11-07-2004. IN TURN ON PACKET DULY MADE GOLD CHAIN WEIGHING 839.400 GRAMS WERE RND SENT THROUGH ANGADIA P. MAGANLAL & CO. VIDE RECEIPT NO.1712 DATED 21-07-2004 FOR DELIV ERING THE SAME TO THE ASSESSEE. THE LD. A.R. SUBMITTED THAT A STATEMENT OF RND WAS RECORDED U/S.131 ON 27-07-2004 WHEREIN HE ADMITTED TO HAVE SENT THE GOLD CHAIN AFTER CONVERTING THE RAW GOLD RECEIVED FROM THE ASSESSEE VIDE VOUCHE R DATED 11-07-2004. THE ASSESSEE ALSO SWORN BY THE FACTS IN A DECLARATION D ATED 11-08-2004 WHICH WAS FURNISHED BEFORE THE INVESTIGATING WING AND ALSO TO THE AO. THE LD. A.R. SUBMITTED THAT THE AO WHILE DOUBTING THE PURCHASE F ROM NH HAS TOTALLY IGNORED THE FACT THAT NH IS DOING THE GOLD BUSINESS AND ASS ESSED TO TAX. THE ASSESSEE FILED COPIES OF TRADING ACCOUNTS OF NIKUNJ HARKISHA NDAS WHICH SHOWS SUFFICIENT GOLD OF LAST TWO YEARS AS PER THE ACCOUNT OF NH, T HE STOCK WAS SUFFIEIENT AND THE AO DID NOT BROUGHT ANY MATERIAL ON RECORD TO THE CO NTRARY NOR HE HAS MADE ANY INQUIRY IN THE MATTER. THE DISPATCH OF GOLD FOR MA KING CHAIN WAS SUPPORTED BY VOUCHER AND RECEIPT AND THE CLAIM IS ALSO SUPPORTED BY THE ANGADIA. THE LD. A.R. SUBMITTED THAT THE ASSESSEE HAS FURNISHED VARIOUS D ETAILS AND DOCUMENTS IN SUPPORT OF THE FACT THAT THE ASSESSEE HAS SENT GOLD FOR MAKING CHAIN TO RND AND THE SAME WAS RETURNED THROUGH ANGADIA. THE LD. A.R . DREW OUT ATTENTION OF VARIOUS PAGES OF PAPER BOOK WHERE COPIES OF PROFIT AND LOSS ACCOUNT OF NIKUNJ HARKISHANDAS KADECHA ALONG WITH COPIES OF RETURN FI LED BEFORE US ETC. HAVE BEEN PLACED WHICH ARE AT PAGE NO.15 TO 26 OF ASSESSEES PAPER BOOK. 7. THE LD. D.R. ON THE OTHER HAND, RELIED UPON THE ORDER OF CIT(A) AND SUBMITTED THAT THE ASSESSEE HAS FAILED TO PROVE THE SOURCE OF THE GOLD. THEREFORE, THE CIT(A) HAS RIGHTLY CONFIRMED THE ADDITION. 8. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES, RECORD PERUSED. ITA 1231-RJT-2010 A.Y. 2005-06 6 THE ADMITTED FACTS OF THE CASE ARE THAT DURING THE COURSE OF SEARCH, A PACKET OF GOLD CHAIN WEIGHING 839.4 GRAMS VALUED AT RS.4,88,2 71/- WAS FOUND. THE SAID GOLD PACKET BELONGS TO THE ASSESSEE SHRI SHAILESH C . KADECHA THE EXPLANATION OF THE ASSESSEE THAT THE ASSESSEE HAS PURCHASED THI S GOLD FROM NIKUNJ HARKISHANDAS KADECHA AND IN SUPPORT OF THE FACT, C OPIES OF PROFIT AND LOSS ACCOUNT AND BALANCE SHEET OF SHRI NIKUNJ HARKISHAND AS KADECHA FOR THE YEAR ENDED 31-03-2003, 2004 AND 2005 HAS BEEN FURNISHED. THESE WERE FURNISHED BEFORE THE AO OF WHICH COPY HAS BEEN PLACED IN THE PAPER BOOK. FROM THESE PROFIT AND LOSS ACCOUNTS AND FINANCIAL STATEMENT, I T IS CLEAR THAT SHRI NIKUNJ HARKISHANDAS WAS HAVING SUFFICIENT STOCK OF GOLD AT THE TIME WHEN THE ASSESSEE PURCHASED THE SAID GOLD FROM NIKUNJ HARKISHANDAS KA DECHA. THE OBJECTION OF THE REVENUE IS THAT SHRI NIKUNJ HARKISHANDAS KADECH A FAILED TO EXPLAIN THE SOURCE OF PURCHASES OF GOLD BY HIM. THIS CONTENTIO N OF THE REVENUE IS NOT ACCEPTABLE AS THE ASSESSEE HAS ESTABLISHED THAT HE HAS PURCHASED THE GOLD FROM SHRI NIKUJ HARKISHANDAS KADECHA WHO IS ASSESSED TO TAX. MERELY SELLER FAILED TO EXPLAIN THE SOURCE OF HIS PURCHASES, THE ADDITION O N THAT ACCOUNT CANNOT BE MADE IN THE HANDS OF THE PURCHASER ON THE GROUND THAT TH E SELLER HAS FAILED TO EXPLAIN THE SOURCE OF THAT GOODS PARTICULARLY WHEN SELLER I S ASSESSED TO TAX. THE IMPUGNED GOLD HAS BEEN SHOWN BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS REGULARLY MAINTAINED BY HIM. THE ASSESSEE IS FILING RETURN OF HIS INCOME REGULARLY. THE GOLD WAS SENT TO MUMBAI FOR PROCESSING INTO CHA IN AND OTHERS OUT OF THE BOOKS OF ACCOUNTS OF THE ASSESSEE VIDE VOUCHER DATE D 11-07-2004. THE CHAIN I.E. GOLD ORNAMENTS WEIGHING 839.4 GRAMS WERE SEIZE D AND SEARCHED WHEN THE SAID GOLD ORNAMENTS WERE RETURNED BY THE MUMBAI PAR TY AND IN RESPECT OF IT, A RECEIPT NO.1712 DATED 21-07-2004 IS PRODUCED BY THE ASSESSEE IN SUPPORT OF THOSE FACTS. THE CIRCUMSTANCES OF THE TRANSACTION H AS EXPLAINED BY THE CONCERNED PERSON RASIKBHAI DHOLAKIA IN HIS STATEMEN T RECORDED U/S.131 OF THE ACT. ON 27-07-2004. IN THE STATEMENT, WHILE REPLYI NG VARIOUS QUESTION, IT IS CLEARLY STATED THAT THE SAID PACKET CONTAINS GOLD C HAIN BELONG TO M/S. SHAILESHKUMAR & BROTHERS AND M/S. SHAILESHKUMAR& BR OTHERS HAD ISSUED 839.4 GRAMS GOLD TO SHRI R.N. DHOLAKIA. THIS GOLD WAS EX CHANGED TO GOLD CHAIN OF ITA 1231-RJT-2010 A.Y. 2005-06 7 SAME WEIGHT IN MUMBAI AND BEING SENT BACK TO SHAILE SHKUMAR & BROTHERS, JAMNAGAR. THE ASSESSEE HAS SUBMITTED THAT THIS GOL D WAS SENT OUT OF HIS BOOKS OF ACCOUNTS. WE NOTICED THAT IN THE CASE UNDER CON SIDERATION, THE ASSESSEE HAS FURNISHED SUFFICIENT MATERIAL AND EXPLANATION IN SU PPORT OF THE FACT THAT THE RAW GOLD SENT BY THE ASSESSEE TO MUMBAI FOR CONVERTING INTO JEWELLERY I.E. CHAIN WAS SENDING BACK TO THE ASSESSEE AND MEANWHILE, THERE W AS A SEARCH AND SAME GOLD JEWELLERY WAS FOUND. WHEN THE ASSESSEE HAS EX PLAINED THE SOURCE OF SUCH GOLD CHAIN FOUND AT THE TIME OF SEARCH SUPPORTED BY BOOKS OF ACCOUNT, WE ARE OF THE CONSIDERED VIEW THAT THE ADDITION CANNOT BE MAD E MERELY ON ASSUMPTION OR PRESUMPTION OR ON THE BASIS OF SOME TECHNICAL GROUN D THAT THE ASSESSEE WAS DOING ONLY JOB WORK, WHEREAS THE ASSESSEE IS ABLE T O PROVE THE SUFFICIENT STOCK IN THE BOOKS OF ACCOUNTS. AS STATED ABOVE THAT THE AD DITION CANNOT BE MADE IN THE HANDS OF THE ASSESSEE IF THE SUPPLIERS FAIL TO PROV E HIS PURCHASES. IN THE LIGHT OF THE ABOVE DISCUSSION, WE DELETE THE ADDITION OF RS. 4,88,271/-. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 06-01-2012. SD/- SD/- ( T. K. SHARMA ), ( A. L. GEHLOT ), JUDICIAL MEMBER. ACCOUNTANT MEMBER. RAJKOT. DATED: 06-01-2012. NVA/ COPY TO:- 1.SHRI SHAILESH CHANDULAL KADECHA, JAMNAGAR.. 2.THE DY. C.I.T., CENTRAL CIRCLE-3, SURAT. 3.THE C.I.T.(A)-II, RAJKOT. 4.THE C.I.T., RAJKOT. 5.THE D.R., ITAT, RAJKOT. TRUE COPY. BY ORDER, ASSTT. REGISTRAR, ITAT,RAJKOT.