SHRI RAVI HALDIA, Jaipur V. DCIT, Jaipur

ITA 14/JPR/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54299 (ITAT-JAIPUR)
• Duration Of Justice: 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 20-10-2011
• Assessment Year: 2008-2009
• Appeal Filed On: 05-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUBHASH CHANDRA
• Assessee Lawyers: NEERAJ BORAD; M L BORAD MANISH BORAD
• Keywords: Unexplained investment; Gift; Search and seizure; Loose papers; Document seized; Principle of natural justice; Additional evidence; Reasonable cause; Fair market value; Valuation report; Retraction
• Section: 143(3); 133A; 145; 132

Judgement Text

1 ITA 14(6)-11 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH A JAIPUR. ( BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ) ITA NOS. 14, 13, 12 & 718/JP/2011 ASSTT. YEAR : 2008-09, 07-08, 05-06 & 03-04 SHRI RAVI HALDIA, VS. THE DCIT, CENTRAL C-18, JYOTI MARG, BAPU NAGAR, CIRCLE-3, JAIPUR. JAIPUR. ITA NOS. 99 & 98/JP/2011 ASSTT. YEARS : 2008-09 & 07-08. THE DCIT, CENTRAL CIRCLE-3, VS. SHRI RAVI HALDIA , JAIPUR. JAIPUR. (APPELLANTS) (RESPONDENTS) ASSESSEE BY : S/SHRI M.L. BORAD, MANISH BORAD & NEERAJ BORAD. DEPARTMENT BY : SHRI SUBHASH CHANDRA DATE OF HEARING : 20.10.2011 DATE OF PRONOUNCEMENT : 19.12.2011. ORDER DATED : 19/12/2011. PER BENCH : THESE ARE SIX APPEALS BY ASSESSEE AND DEPARTMENT R ELATING TO ASSESSMENT YEAR 2003-04, 2005-06, 2007-08 AND 2008-09. IN THESE AP PEALS, THE DEPARTMENTAL APPEALS ARE FOR ASSESSMENT YEARS 2008-09 AND 2007-08. OTHER AP PEALS ARE BY THE ASSESSEE. 2. LEADING ASSESSMENT ORDER IS FOR ASSESSMENT YEAR 2008-09. THEREFORE, IT WAS REQUESTED THAT THE APPEAL RELATING TO ASSESSMENT YE AR 2008-09 BE TAKEN FIRST. ACCORDINGLY 2 APPEAL FOR ASSESSMENT YEAR 2008-09 WAS HEARD FIRST AND, THEREFORE, WE ARE TAKING UP APPEAL FOR ASSESSMENT YEAR 2008-09 FIRST. 3. IN ASSESSEES APPEAL FIRST GROUND RELATES TO SUS TAINING THE ACTION OF SURVEY UNDER SECTION 133A AND SEARCH UNDER SECTION 132(1) OF THE IT ACT AND THEREBY MAINTAINING THE ASSESSMENT ORDER PASSED BY AO UNDER SECTION 143(3) READ WITH SECTION 153B WAS NOT PRESSED. THEREFORE, THE SAME IS DISMISSED AS NOT P RESSED. 4. GROUND NO. 2 RELATES TO SUSTAINING THE ADDITION OF RS. 2,76,200/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN GOLD JEWELLERY. 5. IN DEPARTMENTAL APPEAL, THE DEPARTMENT THROUGH G ROUND NO. 5 IS ALSO OBJECTING IN DELETING THE ADDITION OF RS. 6,83,760/- OUT OF TOTA L ADDITION MADE BY AO AT RS. 9,59,960/-. SINCE BOTH THE GROUNDS I.E. GROUND OF THE ASSESSEE AND GROUND OF THE DEPARTMENT ARE INTER- LINKED, THEREFORE, THEY ARE BEING DISPOSED OFF TOGE THER. 6. THE BRIEF FACTS DISCUSSED BY LD. CIT (A) IN HIS ORDER IN PARA 3 AT PAGE 3 IN THIS REGARD ARE AS UNDER :- BRIEFLY STATED THE FACTS ARE THAT THE GOLD JEWEL LERY 3295.860 GMS WAS FOUND VALUING RS.27,70,309/-, OUT OF THE ABOVE A.O. TREATED GOLD JEWELLERY OF 275 GMS OF SHAKUNTALA HALDIYA, 830 GMS OF MAMTA HALDIA AND 1037 GMS OF DEEPALI HALDIYA, TOTAL VALUE BEING RS.18,10, 349/- BEING EXPLAINED AND DIFFERENCE OF RS.9,59,960/- WAS ADDED AS UNEXPL AINED INVESTMENT IN THE GOLD JEWELLERY. 7. DETAILED SUBMISSIONS WERE FILED BEFORE LD. CIT ( A) WHICH HAS BEEN TABULATED IN THE ORDER OF LD. CIT (A) IN PARA 3.1 AT PAGES 3 AND 4 ARE AS UNDER :- 3 3.1. BEFORE ME FOLLOWING SUBMISSION WAS MADE IN RELATION TO ABOVE GROUNDS OF APPEAL NO.2 AND 3 THE FACTUAL POSITION IS THAT THE ASSESSEE RAVI HALDIA LIVES WIT H HIS PARENTS AND FAMILY OF YOUNGER BROTHER DINESH HALDIYA. IN TOTAL THERE W ERE 10 MEMBERS IN THE FAMILY AS ON THE DATE OF SEARCH I.E. 19.4.2007 [6 M AJOR AND 4 MINOR CHILDREN]. EVEN THE ASSESSEES FATHER ARE EIGHT BRO THERS AND ALL ARE WELL SETTLED IN JAIPUR AND MOST OF THEM LIVING IN JAIPUR AND SOME OF ASSESSEE COUSINS ARE LIVING ABROAD FOR LAST MANY YEARS. IN O THER WORDS ASSESSEES FAMILY IS QUITE BIG AND ALL THE MEETING ON VARIOUS RELIGIOUS, SOCIAL AND CEREMONIAL OCCASIONS AND THEREFORE ONE CANNOT DENY THE EXCHANGE OF GIFTS IN CASH OR KIND INCLUDING JEWELLERY ITEMS. IT IS PR ACTICALLY IMPOSSIBLE TO ASK FOR THE COPY OF BILL FROM THE DONOR FOR THE GIF T OF JEWELLARY GIVEN BY HIM ON AUSPICIOUS OCCASIONS. AS ON THE DATE OF SEAR CH GOLD JEWELLARY WORTH RS.2770309/- WEIGHING 3295.860 GMS WAS FOUND AT THE ASSESSEES PREMISES. HERE WE WOULD LIKE TO MENTION THAT ASSESS EE ALONG WITH HIS BROTHER DINESH OWNED AND POSSESSED NET WORTH VALUED AT COST PRICE OF AROUND 10 CRORES AND TILL THE DATE OF SEARCH HAD PA ID INCOME TAX OF APPROXIMATE AMOUNT OF 2.8 CRORES. EVEN THE COMBINED DRAWINGS MADE FOR LAST 10 AYS WAS AROUND 1.20 CRORES. HOWEVER THIS N ET WORTH DOES NOT INCLUDE THE JEWELLARY GIFTED TO LADIES AND GENTS AT THE TIME OF THEIR MARRIAGES AND FORMED PART OF PERSONAL BELONGINGS AN D WERE STATUTORILY NOT REQUIRED TO BE SHOWN IN THEIR BALANCE SHEET AND INC OME TAX RETURNS. THE WORKING OF GOLD JEWELLERY FOUND AT THE TIME OF SEAR CH AND ACTION TAKEN BY ASSESSING OFFICER IS AS UNDER: JEWELLERY FOUND AT THE TIME OF SEARCH 3295.860 GMS RS.2770309/- LESS: JEWELLERY EXPLAINED AND ACCEPTED BY ASSESSING OFFICER: SHAKUNTALA HALDIA(MOTHER) 275.00 GMS RS.254925/ - MAMTA HALDIA (WIFE) 830.00 GMS RS.817342/- DEEPALI HALDIA(BROTHERS WIFE) 1073.00 GMS RS.73 8082/- ------------------------------------ ---------- 2178.000 GMS RS.1810349/- ------------------------------------ ---------- 4 LESS: 1. JEWELLERY PURCHASED BY RAVI HALDIA ON 31.10.02 FROM JK MOSUM JEWELLERS VIDE BILL NO.1434 AND CHQ NO. 563313 FOR RS.290610 OF APPROX 736.86 GMS 736.86 GMS RS.619336/- LESS: 2. JEWELLARY RECEIVED BY SURAJ NARAYAN (FATHER OF ASSESSEE), RAVI AND BROTHER DINESH AT THE TIME OF THEIR MARRIAGE & OTHER CEREMONIAL OCCASIONS FROM FAMILY MEMBERS AND WIFE SIDE IN LIFE TIME. 120.00 GMS RS.118170/- LESS:3 JEWELLERY PURCHASED BY RAVI, DINESH, MAMTA, DEEPALI, SHAKUNTALA AND DEBITED TO CAPITAL ACCOUNT AND PETTY JEWELLERY OF MINOR CHILDREN 261.00 GMS RS. 222454/- ------------------------------------------- BALANCE UNEXPLAINED JEWELLERY NIL NIL 8. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING T HE MATERIAL ON RECORD, THE LD. CIT (A) FOUND THAT ASSESSEE IS ELIGIBLE FOR RELIEF OF R S. 6,83,760/-. ACCORDINGLY HE ALLOWED THIS GROUND OF THE ASSESSEE IN PART BY SUSTAINING A N ADDITION OF RS. 2,76,200/- OUT OF TOTAL ADDITION OF RS. 9,59,960/-. FINDINGS OF LD. CIT (A ) HAVE BEEN RECORDED IN PARA 3.2 AT PAGE 5 ARE AS UNDER :- 3.2 IT IS SEEN THAT AS REGARDS CLAIM OF JEWELLE RY PURCHASED BY THE APPELLANT FROM J.K. MASUN JEWELLER, AS APPELLAN T HAS GIVEN DETAILS OF BILL NO. AS WELL AS PAYMENT WHICH HAS BE EN MADE BY CHEQUE AMOUNTING TO RS.2,90,610/-, THIS CLAIM IS AC CEPTABLE. HOWEVER, CONSIDERING THE RATE OF 22 CT OF GOLD IN T HE RELEVANT PERIOD AND AT THE TIME OF SEARCH, THE VALUE OF THE GOLD ORNAMENT AS ON THE DATE OF SEARCH WAS ARRIVED AT RS.5,65,590/- BY THE A.R. OF THE APPELLANT (ON BEING ASKED BY THE UNDERSIGNED) A ND ACCORDINGLY THIS AMOUNT IS DEDUCTED INSTEAD OF RS.6,19,336/- CL AIMED BY THE APPELLANT. FURTHER CLAIM OF THE JEWELLERY RECEIVED BY APPELLANT 5 FATHER, APPELLANT HIMSELF AND HIS BROTHER FROM VARI OUS CEREMONIAL OCCASIONS TOTALING 120 GMS VALUING RS.1,18,170/- IS ALSO ACCEPTABLE, CONSIDERING THE CUSTOMS IN THE HINDU FA MILY. HOWEVER, THIRD CLAIM OF THE JEWELLERY STATED TO BE PURCHASED AND DEBITED IN THE P&L ACCOUNT IS NOT ACCEPTED AS NO EVIDENCE OF P URCHASE OR EVIDENCE AND DETAILS OF WITHDRAWAL FROM THE CAPITAL ACCOUNT FOR THE PURPOSE OF PURCHASE OF JEWELLERY HAVE BEEN FURNISHE D BY THE APPELLANT EITHER BEFORE THE A.O. OR EVEN BEFORE THE UNDERSIGNED. THUS THE APPELLANT WILL GET RELIEF OF RS.6,83,760/- . 9. NOW BOTH ARE IN APPEAL AGAINST DELETION AND SUST ENANCE OF ADDITION HERE BEFORE THE TRIBUNAL. 10. AFTER HEARING RIVAL SUBMISSIONS AND CONSIDERING THE MATERIAL ON RECORD, WE FIND NO INFIRMITY IN THE FINDING OF LD. CIT (A). THE LD . CIT (A) HAS GIVEN A FINDING OF FACT. WHERE ASSESSEE FILED EVIDENCES, THE LD. CIT (A) HAS GIVEN RELIEF AND WHERE ASSESSEE FAILED TO LEAD ANY EVIDENCE IN SUPPORT OF HIS CASE, THE LD . CIT (A) HAS CONFIRMED THE ADDITION. THEREFORE, WE SEE NO REASON TO INTERFERE WITH THE F INDING OF LD. CIT (A). ACCORDINGLY WE CONFIRM THE ORDER OF LD. CIT (A) ON THIS ISSUE. TH E GROUNDS OF BOTH THE PARTIES I.E. ASSESSEE AND DEPARTMENT ARE DISMISSED. 11. GROUND NOS. 3 & 4 IN APPEAL OF ASSESSEE IS AGAI NST SUSTAINING THE ADDITION OF RS. 3,50,12,643/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN EXCESS STOCK FOUND DURING THE COURSE OF SEARCH. 12. THE DEPARTMENT THROUGH GROUND NOS. 1 TO 4 HAS O BJECTED IN DELETING THE ADDITION OF RS. 3,54,24,417/- OUT OF TOTAL ADDITION OF RS. 7 ,04,37,063/- BY GIVING A CREDIT OF GP RAGE OF 30% AGAINST THE CREDIT GIVEN BY AO AT 11% W HICH WAS GIVEN ON THE BASIS OF GP SHOWN BY ASSESSEE. 13. SINCE THESE GROUNDS IN THE APPEAL OF THE DEPART MENT AND THE GROUNDS IN THE APPEAL OF THE ASSESSEE ARE INTER-LINKED, THEREFORE, THEY A RE BEING DISPOSED OFF TOGETHER. 6 14. BRIEFLY, THE FACTS HAVE BEEN DISCUSSED BY LD. C IT (A) IN PARA 4.1 TO 4.4 AT PAGES 5 TO 8 OF HIS ORDER ARE AS UNDER :- 4.1 DURING THE COURSE OF SEARCH, STOCK OF SEMI P RECIOUS AND PRECIOUS STONES WERE FOUND AT THE DIFFERENT PREMISE S OF THE APPELLANT GROUP, WHICH WAS INVENTORISED AND BOTH VA LUED BY THE REGISTERED VALUER. THE DETAILS OF STOCK FOUND AT VA RIOUS PREMISES ARE NOTED BY THE A.O. ON PAGE 6 OF THE ASSESSMENT O RDER, WHICH IS AS BELOW : (I) C-18, BAPU NAGAR RESIDENCE RS. 1,02,600 /- (II) HALDIA BHAWAN OFFICE RS.12,14,72,143/- (III) CHOURA RASTA OFFICE RS. 7,22,44,657/- (IV) LOCKET NO.203 IN CHORDIA SAFE DEPOSIT VAULTS RS. 1,51,722/- (V) LOCKET NO.1022 IN BIRANI SAFE DEPOSIT VAULTS RS. 35,254/- (VI) LOCKET NO.1026 IN BIRANI SAFE DEPOSIT VALUTS RS. 1,24,250/- ----------------------- TOTAL RS.19,41,30,676/- ----------------------- THE APPELLANT IN HIS STATEMENT RECORDED AT HIS CHAU RA RASTA OFFICE ON 20.4.07 ADMITTED THAT STOCK OF ALL THE CO NCERNED HAVE BEEN KEPT MIXED AND IT IS NOT POSSIBLE TO IDENTIFY THE STOCK OF EACH CONCERNS SEPARATELY. THIS POSITION WAS ALSO NOTICED DURING THE COURSE OF SEARCH. 4.2 REGARDING THE BOOK POSITION OF THE STOCK, IT WA S NOTICED AND WAS ALSO ADMITTED THAT NO BOOKS OF ACCO UNTS HAVE BEEN WRITTEN/MAINTAINED OR EVEN STARTED SO FAR FOR F.Y. 2006-07 AND F.Y. 2007-08. ACCORDINGLY, ON THE BASIS OF CLOSING STOCK OF F.Y. 2005- 06 AND SUBSEQUENT PURCHASE AND SALES MADE/SHOWN DUR ING F.Y. 2006-07 AND 2007-08 THE STOCK OF VARIOUS CONCERNS A S ON THE DATE OF SEARCH WAS WORKED OUT AS BELOW: (I) M/S. R.H. EXPORTS RS.5,01,94,222/- (II) M/S. D.H. EXPORTS RS.2,42,81,620/- (III) M/S. VIDHI GEMS RS.1,25,20,131/- (IV) M/S. RIDHI SIDHI INTERNATIONAL RS. 50,96,985 /- --------------------- TOTAL RS.9,20,92,958/- -------------------- 7 4.3 THUS EXCESS STOCK OF RS.10,20,37,718/- OF THE GROUP WAS FOUND AND THE APPELLANT SHRI RAVI HALDIA IN HIS STA TEMENT RECORDED ON 22.4.07 HAS ADMITTED THE EXCESS STOCK POSITION A ND SURRENDERED THE SAME FOR TAXATION. THIS STATEMENT OF SHRI RAVI HALDIA WAS ALSO AGREED UPON BY SHRI DINESH HALDIA AND SMT. MAMTA H ALDIA AND SMT. DEEPALI HALDIA. DURING THE COURSE OF ASSESSMEN T PROCEEDING, THE APPELLANT OBJECTED TO THE VALUATION OF THE STOC K OF PRECIOUS AND SEMI PRECIOUS STONE DONE AT THE TIME OF SEARCH AND ALSO POINTED OUT CERTAIN TOTALING ERROR. THE A.O. HAS RECTIFIED THE TOTALING ERROR. AS REGARDS CLAIM OF OVER VALUATION IS CONCERNED, THE A .O. HAS DEALT WITH THE ISSUE FROM PAGE 8 TO PAGE 14 OF THE ASSESS MENT ORDER. THE A.O. HAS REFERRED TO THE STATEMENT OF THE APPELLANT RECORDED ON 20.4.07 WHEREIN THE EXCESS STOCK IN F.Y. 2004-05 WA S ALSO NOTICED, WHICH WAS ADMITTED BY THE APPELLANT. THE A.O. FURTH ER REFERRED AND REPRODUCED THE RELEVANT EXTRACT OF THE STATEMENT DA TED 224.07 ON PAGE 9 AND 10 OF THE ASSESSMENT ORDER. THE A.O. HAS MENTIONED THAT THE VALUATION OF THE STOCK WAS DONE BY THE REG ISTERED VALUER. THE APPELLANT HIMSELF HAS ADMITTED TO HAVE SEEN THE DETAILS MENTIONED IN THE VALUATION SHEET AND AGREED WITH TH E QUANTITY, QUALITY AND THE VALUE AND HAVE ADMITTED THE STOCK F OUND AT HALDIA BHAWAN, BEING OF RS.,12,14,72,143/-[IN ANSWER TO QU ESTION NO.3]. FURTHER IN ANSWER TO QUESTION NO.4 HE HAS ADMITTED THE VALUE OF CLOSING STOCK AT CHAURA RASTA OFFICE SO DONE BY THE REGISTERED VALUER AT RS.7,22,44,657/- A.O. HAS DEALT WITH THE OBJECTION OF THE APPELLANT BY MENTIONING THAT : I) THE VALUATION WAS MADE IN THE PRESENCE OF ASSESS EE AND HIS STAFF MEMBERS IN TERMS OF QUALITY, QUANTITY AND VAL UE AND ASSESSEE AND HIS EMPLOYEE HAD PUT THEIR SIGNATURE ON THE VAL UATION SHEET CERTIFYING ITS CORRECTNESS. II) LATER ON IN THE STATEMENT RECORDED ON 22.7.07 A LSO, THE ASSESSEE AGREED AND ADMITTED ABOUT THE VALUATION OF HIS STOCK SO DONE BY THE SEPARATE VALUER. III) THE ALLEGED OVER VALUATION IS NOT SUPPORTED BY THE DETAILS OF THE CONTENDED PURCHASE MADE BY THE APPELLANT I.E. B ILL NO., DATE, COPIES OF BILL ETC. IV) THE GEMS AND STONES ARE OF DIFFERENT VARIETY SI ZE, COLOUR AND QUALITY ETC AND NATURALLY THE PRICES OF THESE I TEMS WOULD BE DIFFERENT IN RESPECT OF EACH AND EVERY ITEM. 8 V) THE A.O. GIVE EXAMPLE OF THE VARYING AND HIGH RA TE OF PURCHASE OF TURMOLIN ROUGH, SAPPHIRE ROUGH AND EMER ALD ROUGH AT THE RATE OF RS.45,000/-, RS.15,000/- AND RS.1,75,00 0/-PER KG. FROM M/S. ESDIRE INTERNATIONAL JAIPUR VIDE BILL NO.48 DA TED 1.5.04. 4.4 ACCORDINGLY, A.O. REJECTED THE CLAIM OF ALLEGED OVER VALUATION BY THE REGISTERED VALUER AND AFTER GIVING CREDIT OF TOTALING MISTAKE, THE VALUE OF THE PHYSICAL STOCK FOUND WAS HELD AT RS.18,64,44,294/-, OUT OF WHICH G.P., AT THE RATE O F 11% WAS DEDUCTED TO ARRIVE AT THE COST PRICE OF THE STOCK A T RS.16,59,35,425/-. AS THE TOTAL STOCK AS PER BOOKS OF THE WHOLE GROUP WAS RS.9,20,92,958/-, EXCESS OF RS.7,38,42,46 7/- WAS ADDED AS UNEXPLAINED INVESTMENT IN THE HANDS OF SH. RAVI HALDIA ON SUBSTANTIVE BASIS. AS THE STOCK OF OTHER THREE FIRM S WAS ALSO MIXED UP AND TOTAL POSITION OF THE GROUP WAS DETERMINED. THE A.O. ADDED THE PROPORTIONATE EXCESS STOCK IN THE HANDS OF OTHE R THREE CASES NAMELY SH. DINESH HALDIA, SMT. DEEPALI HALDIA, SMT. MAMTA HALDIA AS PER TABLE GIVEN ON PAGE 15 OF THE ORDER W HICH IS AS BELOW: S.NO. NAME OF THE ASSESSEE AMOUNT OF STOCK AMOUNT OF ADDITION 1 D.H. EXPORT, PROP. SHRI DINESH HALDIA RS.2,42,81,620/- RS.1,94,70,518/- 2 M/S. RIDHI SIDHI INTERNATIONAL PROP. SMT. DEEPALI HALDIA RS.50,96,985/- RS. 40,87,000/- 3 M/S. VIDHI GEMS, PROP. SMT. MAMTA HALDIA RS.1,25,20,131/- RS.1,00,39,000/- 15. DETAILED SUBMISSIONS FILED BEFORE LD. CIT (A) H AVE BEEN TABULATED IN HIS ORDER IN PARA 4.5 AT PAGES 8 TO 13 ARE AS UNDER :- 4.5. THE LD. A.R. OF THE APPELLANT HAS MADE FOLLO WING SUBMISSIONS BEFORE THE UNDERSIGNED. AT THE TIME OF SEARCH OPERATIONS WHEN I.T. OFFICIA LS COULD NOT BRING ON RECORD A SINGLE INSTANCE OF UNDISCLOSE D INVESTMENT IN IMMOVEABLE PROPERTIES JEWELLERY, SHARES AND SECURIT IES AND OTHER BUSINESSES, THE ONLY OPTION LEFT WITH THE DEPARTMEN TAL AUTHORITIES TO MAKE THE SEARCH A SUCCESS WAS TO OVERVALUE THE STOC K IN HAND AND THIS IMPOSSIBLE GOAL WAS ACHIEVED BY THEM WITH THE CONNIVANCE 9 AND SUPPORT OF APPROVED VALUER. SOME SUCH INSTANCES OF ADOPTION OF UNREALISTIC RATES OF STOCK IN HAND TAKEN BY THE VALUER KAMAL KUMAR KASLIWAL AND CONSEQUENTLY BY THE AO ARE DULY EXPLAINED IN THE ANNEXURE NO.1 TO THIS LETTER. 2. IT IS FURTHER SUBMITTED THAT YOUR HONOUR WILL F IND FROM THE PERUSAL OF THE VALUATION REPORT THAT MR KAMAL KUMAR KASLIWAL HAS EVEN VALUED A VERY LOW QUALITY OF TOURMALINE ROUGH IN NAME OF TOURMALINE ROUGH REJECTION (WHICH HARDLY HAS ANY VA LUE IN THE MARKET) HAS BEEN VALUED AT AROUND 3.5 CRORES. FOLLO WING ARE THE FEW INSTANCES WHICH SHOWS THAT THE DEPARTMENTAL AUT HORITIES PRESSURIZED THE APPROVED VALUER TO ADOPT IMAGINARY AND WHIMSICAL RATES FOR EXCESS VALUATION OF STOCK BY VALUER MR KA MAL KUMAR KASLIWAL UNDER DIRECT SUPERVISION OF I.T. DEPARTMEN T OFFICERS. KINDLY REFER TO ANNEXURE J & J1. A. CITRINE ROUGH (ANN.J1) BOOK STOCK 17 KG @ 11586/- PER KG. RS. 196963/- (THIS STOCK IS OF RIDHI SIDHI INTERNATION (SISTER CONCERN) IT IS PURCHASED FROM M/S.S.P. JEWELLERS VIDE BILL NO.10 DT. 15.5.2004 ) DEPTT. VALUATION 16.8 KG @ 800000/- PER KG RS. 13 440000/- --------------------- OVER VALUATION DONE RS.13243037/- REMARKS: IN THE INTERNATIONAL MARKET THE RATES HAVE NEVER GONE BEYOND RS.20,000/- PER KG. FOR THE BEST QUALITY OF ROUGH EVER PRODUCED. B. OPEL ROUGH (ANNEXURE-J ITEM 38, 39) BOOK STOCK 6.370 KG @ 3685/- PER KG RS. 23473/- DEPTT. VALUATION 6.370 KG @ 1161695/- RS. 7400000/ - PER KG. ------------------- OVER VALUATION DONE RS.7376527/- ------------------ 10 C. OPEL ROUGH BOOK STOCK 125 KG @ 3685/- PER KG. RS. 460625/- (BOTH THESE STOCKS ARE OF R.H. EXPORTS (PROP. RAVI HALDIA) GOODS PURCHASED @ 3695/- PER KG VIDE BILL NO. 181 DT.5.5.2004 OF LAXMI JEWELLERS AND GOODS PURCHASED @ 3675/- PER KG VIDE BILL NO.58 DT.11.4.2004 OF RAJ SHREE GEMS) DEPTT VALUATION 125 KG @ 43289/- PER KG. RS. 54108 50/- ---------------------- OVER VALUATION DONE RS. 4950225/- ---------------------- D. OPEL FINISHED BOOK STOCK 4200 GMS @ 135/- PER GM RS. 567000/- DEPTT VALUATION 4200 GMS @ 900/- PER GM RS. 3780000 /- ---------------------- OVER VALUATION DONE RS. 3213000/- ---------------------- E. TOURMALINE ROUGH REJECTION ANNEXURE J PG. 15 257.560 KG. @ 5620/- PER KG RS. 567000/- ANNEXURE J PG. 16 965.688 KG @ 7723/- PER KG RS. 7460950/- ANNEXURE J PG. 17 1009.730 KG @ 24769/- PER KG RS. 24992853/- GOODS PURCHASED IN D.H. EXPORTS (ASSESSEES GROUP C ONCERN) FROM FOLLOWING PARTIES: BILL NO.08/2004-05 DT. 7.6.2004 OF GIRISH DIAM @ 46 25/- PER KG. BILL NO.18/2004-05 DT. 20.5.2004 OF GIRISH DIAM @ 4 750/- PER KG. BILL NO.17/2004-05 DT. 20.5.2004 OF ABHAY INTERNATI ONAL @ 7750 BILL NO.06/2004-05 DT. 7.6.2004 OF ABHAY INTERNATIO NAL @ 4600 11 GOODS PURCHASED IN VIDHI GEMS (ASSESSEES GROUP CON CERN ) FROM FOLLOWING : BILL NO.487 DT. 13.10.2004 OF PRAKASH CHAND & SONS HUF @ 385 BILL NO.488 DT. 13.10.2004 OF PRAKASH CHAND & SONS HUF @ 175 1. FURTHER MORE SOME OTHER EXAMPLES OF OVERVALUATIO N OF STOCK IS ENUMERATED AS UNDER: A) . AS PER ANNEXURE J-1 PAGE NO.1, S.NO. 1, ONE L OT OF CITRINE ROUGH OF 17.265 KG HAS BEEN VALUED @ RS.7,78,453/- PER KG AT RS.1,34,40,000/- AND ON THE VERY SAME PAGE AT S.NO. 17 FINISHED STOCK OF CITRINE BEADS OF 0.950 KG HAS BEEN VALUED AT RS.47,368/- PER KG. IT IS NEEDLESS TO MENTION HERE THAT YIELD O F FINISHED GOODS FROM THIS ROUGH IS APPROXIMATELY 20% OF THE TOTAL Q UANTITY OF ROUGH PUT TO MANUFACTURING AND AS SUCH THE RATE OF ROUGH SHOULD BE LESS THAN 1/5 TH OF THE RATE OF FINISHED GOODS I.E. IT SHOULD BE AR OUND 9474/- PER KG. AS AGAINST THE RATE OF RS.9474/- PER KG, THE VALUER HAS TAKEN THE RATE OF RS.7,78,453/- PER KG AND AS P ER OUR BOOKS OF ACCOUNTS THE COST PRICE PAID BY US IS RS.11586/- PE R KG [HIGHER THAN THE VALUATION DONE AT S.NO.17]. IT SEEMS THAT WHILE MAKING THE VALUATION OF ITEM AT S.NO.1 THE AUTHORIZED VALUE HA S INADVERTENTLY PUT THE VALUE OF 1,34,40,000/- AT THE PLACE OF CORR ECT VALUE OF 1,34,400/- AND JUST DUE TO WRONGLY ADDING OF TWO ZE ROS IN THE VALUE, THE VALUATION HAS INCREASED BY 1,33,05,600/- . B) TOURMALINE ROUGH REJECTION HAS BEEN VALUED AT VE RY HIGH RATES IN THE LAST SEVEN SHEETS OF THE VALUATION REP ORT AT ANNEXURE- J1. IT IS VERY WELL EVIDENT THAT IN THIS ANNEXURE J -1 AT S.NO.2 TO S.NO.10 THE AVERAGE RATE OF STOCK IS TAKEN IN THE R ANGE OF RS.1500- 2000 PER KG WHERE AS IN THE LAST TWO PAGES OF THIS ANNEXURE THE AVERAGE RATE TAKEN FOR THE SAME TYPE OF GOODS I.E. TOURMALINE ROUGH REJECTION IS TAKEN IN THE RANGE OF RS.28000 PER KG TO RS.35000/- PER KG I.E. ALMOST ABOUT 20 TIMES OF THE RATES TAKEN BY THE SAME VALUER. THIS CLEARLY SHOWS THE INTENTION OF THE VALUER TO V ALUE THE STOCK AT HIGHER PRICE. THIS SINGLE INSTANCE OF INCREASE IN R ATES IN TOURMALINE ROUGH REJECTION HAS INCREASED THE VALUATION BY AROU ND 2.50 CRORES. WE ARE TO FURTHER MENTION THAT VALUER IS HIMSELF WR ITING TOURMALINE ROUGH REJECTION [WHICH MEANS THE BYE PRO DUCT OF THE MANUFACTURING PROCESS OF TOURMALINE ROUGH TO TOURMA LINE FINISHED GOODS] AND THIS STOCK HAS HARDLY ANY VALUE IN THE M ARKET. SO MUCH SO THIS STOCK WAS KEPT IN BIG BARDANAS IN OPEN SPAC E OUTSIDE MAIN BUILDING WHICH WAS OPENLY ACCESSIBLE TO THE STAFF A T HALDIA HOUSE. WE ARE TO FURTHER MENTION THAT MAIN OFFICE OF THE A SSESSEE WAS RUNNING AT CHAURA RASTA AND ONLY FEW STAFF WERE WOR KING AS HALDIA 12 HOUSE. NORMALLY A PRUDENT BUSINESSMAN WILL NOT KEEP VALUABLE STOCK IN OPEN PLACE AND OUT OF HIS CONTROL AREA. C) ABOVE ARE THE ONLY TWO EXAMPLES OF OVERVALUATION . THERE ARE MANY SUCH INSTANCES IN THE COMPLETE LIST OF STO CK WHICH RUNS IN ALMOST 34 PAGES. D) SOME OF THE DISCREPANCIES WERE ALSO BROUGHT INT O NOTICE OF THE AO AS WELL AS OTHER HIGHER AUTHORITIES DURING A SSESSMENT PROCEEDINGS WHICH ARE ENCLOSED HEREWITH FOR YOUR KI ND PERUSAL AND CONSIDERATION. E) THE ASSESSEE HAS KEPT AND MAINTAINED FULL RECORD IN TERMS OF WEIGHT OF THE ROUGH PURCHASED, ROUGH PUT TO MANU FACTURING, FINISHED GOODS MANUFACTURED OUT OF MANUFACTURING OP ERATIONS, WASTAGE OCCURRED DURING MANUFACTURING, YIELD, LABOU R CHARGES PAID TO VARIOUS KARIGARS AND ALL THIS RECORD WAS PRODUCE D BEFORE THE A.O. MORE THAN ONCE. F) THAT THE ASSESSEE HAS KEPT AND MAINTAINED INDIVI DUAL TRADING AND MANUFACTURING ACCOUNTS OF DIFFERENT PRE CIOUS AND SEMI PRECIOUS STONES IN TERMS OF WEIGHT IN CTS WITH QUAN TITATIVE DETAILS OF MANUFACTURING AND TRADING ACTIVITIES OF DIFFEREN T COMMODITIES. 2. THAT BASIS ADOPTED BY THE APPROVED VALUER AS WE LL AS THE LEARNED A.O. OF VALUATION OF STOCK IS TO VALUE THE STOCK AT FAIR MARKET VALUE AS ON THE DATE OF SEARCH ON 20.4.2007 IT IS UNJUSTIFIED AND NOT ACCORDING TO THE METHOD OF VALUATION OF STO CK REGULARLY FOLLOWED BY THE ASSESSEE. AS THE METHOD OF VALUATIO N OF STOCK BEING FOLLOWED BY THE ASSESSEE IS AT COST OR MARKET VALUE, WHICHEVER IS LOWER THE VALUE OF STOCK TAKEN BY THE LEARNED A.O. AT FAIR MARKET VALUE IS ERRONEOUS AND IN THE ALTERNATI VE VERY EXCESSIVE. THE LEARNED A.O. SHOULD HAVE VALUED THE STOCK AT CO ST OR MARKET PRICE WHICHEVER IS LOW AND TO SUPPORT THIS SUBMISSI ON THE ASSESSEE CRAVES LEAVE TO REFER TO AND RELY ON THE FOLLOWING JUDGMENTS: A) THAT THE QUESTION WHETHER THE CLOSING STOCK COUL D BE VALUED AT COST PRICE OR MARKET PRICE WAS CONCLUSIVELY SETT LED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SA KTHI TRADING CO. VS. CIT [2001] 250 ITR 871(SC): IN THIS CASE THE HONBLE SUPREME COURT HELD THAT IT IS ESTABLISHED RULE OF C OMMERCIAL PRACTICE ACCOUNTANCY THAT WHERE THERE IS NO DISCONT INUATION OF BUSINESS, THE STOCK IS TO BE VALUED AT COST OR MARK ET PRICE, WHICHEVER IS LOW. 13 B) THE DEPARTMENT IS NOT ENTITLED BY PUTTING ON TH E STOCK THE MARKET VALUE WHERE IT EXCEED COST, TO BRING IN AND CHARGE THE UNREALIZED NOTIONAL PROFIT: M/S. CHAINRUP SAMPATLAL VS. CIT 24 ITR 481,485(SC) AND CIT VS. CHARI & RAM 17ITR 1,7 C) THAT THE BASIS ON WHICH STOCK IN HAND IS VALUED IS PART OF THE METHOD OF ACCOUNTING: RAM SWARUP VS. CIT 25 ITR 17,25(II) TRIVENI VS. CIT 167 ITR 742 D) THE COST HAS BEEN DEFINED AS EITHER THE ACTUAL C OST OF THE STOCK OR THE AVERAGE COST OF THE STOCK PURCHASED: M INISTER OF NATIONAL REVENUE VS. ANACONDA 30 ITR 84 (PC) AND CONCORDIA VS. CIT 22 ITR 344. E) IF THERE IS NO DEMAND IN LOCAL OR FOREIGN MARKET S FOR CERTAIN GOODS THE ASSESSEE MAY BE JUSTIFIED IN VALUING THEM AT NIL: MOHAMMED ADAM VS. CIT 56ITR 360 AND INDIA MOTOR PARTS VS. CIT 60 ITR 531 . F) IN A.L.A. FIRM VS. CIT [1991] 189 ITR 285 HONBL E SUPREME COURT HELD THAT ON NO PRINCIPLE CAN ONE JUS TIFY THE VALUATION OF CLOSING STOCK AT A MARKET VALUE HIGHER THAN COST AS THAT WILL RESULT IN THE TAXATION OF NOTIONAL PROFIT WHIC H THE ASSESSEE HAS NOT REALIZED. 3. THAT VALUATION OF CLOSING STOCK SHOWN BY THE AS SESSEE IN ITS BOOKS OF ACCOUNTS FOR THE FINANCIAL YEARS ENDED ON 31.3.2007 AS WELL AS 31.3.2008 HAS BEEN DULY ACCEPTED BY THE COM MERCIAL TAXES DEPARTMENT OF THE STATE OF RAJASTHAN AND THIS IS BINDING ON THE INCOME TAX AUTHORITIES TO ACCEPT THE VALUATION OF STOCK ON BOOK VALUE. 4. THAT THE ASSESSEE IS ENCLOSING HEREWITH THE DET AILED CHART OF ALL THE FOUR CONCERNS OF THE ASSESSEE GROUP DEALING IN GEMS AND STONES GIVING THE FIGURES OF STOCK IN HAND AS ON TH E DATE OF SEARCH AND STOCK FOUND AT THE TIME OF SEARCH IN TERMS OF W EIGHT AND ALSO THE DIFFERENCE, IF ANY, BETWEEN THE TWO. FROM THIS CHART YOUR HONOUR WILL FIND THAT THERE IS A LITTLE VARIATION I N TERMS OF QUANTITY. IT CLEARLY SUGGESTS THAT THE AGGREGATE EXCESS STOCK OF THE ENTIRE GROUP CASES WORKED OUT BY THE A.O. AT RS.7,07,91,57 8/- IS ON ACCOUNT OF NOT IN DIFFERENCE IN QUANTITY BUT ON ACC OUNT OF ADOPTION 14 OF HIGHER RATE OF VALUE AS COMPARED TO THE PURCHASE D VALUE IN THE HANDS OF THE ASSESSEE. 5. THAT THE LEARNED AO HAS UNIVERSALLY APPLIED GP RATE OF 30% AS AGAINST DECLARED GP RATES OF AVERAGE 12% IN ASSESSMENT YEAR 05-06, 06-07 AND 07-08 WHILE MAKING TRADING AD DITIONS. IT IS SUBMITTED THAT WHILE WORKING OUT THE VALUE OF EXCES S STOCK THE LEARNED AO SHOULD HAVE GIVEN DEDUCTION OF 30% INSTE AD OF DEDUCTION OF 11% ALLOWED BY THE A.O. IT IS SUBMITTE D THAT EITHER THE GOP RATE OF 11% OR THE HIGHER RATE DECLARED BY THE ASSESSEE AND GROUP CASES SHOULD BE TAKEN INTO CONSIDERATION WHILE WORKING TRADING RESULTS OR IF IN ANY CASE OR FOR ANY REASON THE GP RATE OF 30% IS UPHELD THEN THE JUSTICE REQUIRES THAT DEDUCT ION OF 30% SHOULD ALSO BE ALLOWED FROM THE FAIR MARKET RATE AD OPTED BY THE APPROVED VALUER WHILE VALUING THE ALLEGED EXCESS ST OCK. 6. THAT WHILE MAKING ADDITION OF ALLEGED EXCESS ST OCK OF RS.7,07,91,578/- THE LEARNED A.O. HAS PLACED RELIAN CE ON REVOKED/RETRACTED STATEMENT OF SURRENDER MADE BY RA VI HALDIA ON 22.4.2007. THE ASSESSEES RESPECTFUL SUBMISSION IN THIS REGARD ARE AS UNDER: A. THE SURRENDER OF EXCESS STOCK WAS OBTAINED BY I NCOME TAX AUTHORITIES FROM RAVI HALDIA IN EARLY ODD HOURS[ARO UND 2 A.M. OF 22.4.2007] OF 22.4.2007 AND IT WAS NOT VOLUNTARY BU T OBTAINED UNDER COERCION, PRESSURE, UNDUE INFLUENCE AND MIS-R EPRESENTATION OF FACTS AND LAW AND AS SUCH IT SHOULD NOT BE RELIE D UPON. RELIANCE IS PLACED ON PAGE 34 OF NOV 2009 ISSUED OF JOURNAL OF GEM & JEWELLERY INDUSTRIES (COPY ENCLOSED). B. THE INVOLUNTARY SURRENDER WAS FURTHER REVOKED/RE TRACTED BY THE ASSESSEE SHRI RAVI HALDIA BY FILING A LETTER OF REVOCATION ACCOMPANIED WITH AN AFFIDAVIT FILED WITH THE ASSESS ING OFFICER ON 9.2.2009 [COPY OF REVOCATION LETTER AND AFFIDAVIT E NCLOSED HEREWITH]. C. THE ASSESSEE CRAVES LEAVE TO REFER TO AND RELY ON THE JUDGMENT OF SMT. RANJANA BEN MANSUKHLAL SHAH VS. AC IT [2004] 83 TTJ RAJKOT 369 WHEREIN IT WAS HELD THAT ADDITION MADE ONLY ON THE BASIS OF DISCLOSURE STATEMENT WHICH IS SUBSEQUE NTLY RETRACTED NORMALLY SHOULD NOT BE CONFIRMED IN THE ABSENCE OF CORROBORATION. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE RETR ACTED FROM THE SURRENDER MADE BY HIM UNDER DURESS OF THE DEPARTMEN TAL OFFICERS DURING SEARCH. IN THE COURSE OF ASSESSMENT PROCEEDI NGS THE A.O. COULD NOT COLLECT A SINGLE EVIDENCE AGAINST THE ASS ESSEE WHICH COULD CORROBORATE THE EXCESS STOCK FOR WHICH SURREN DER WAS 15 OBTAINED IN THE COURSE OF SEARCH. AS SUCH NO ADDITI ON OF ALLEGED EXCESS STOCK SHOULD BE UPHELD. IN THIS REGARD ASSES SEE CRAVES LEAVE TO RELY ON FOLLOWING JUDGEMENTS: PULLANGODE RUBBER PRODUCE COMPANY LIMITED V/S STATE OF KERELA AND ANOTHER REPORTED IN 91ITR 18. ACIT V/S. SUNIL KUMAR JAIN (ITAT JPR BENCH) REPORTE D IN XXXVII TAX WORLD PG. 20 CIT V/S. DHARMENDRA SHARMA (RAJ HIGH COURT) REPORTE D IN XXXIX TAX WORLD PG. 58. D. THAT IT IS HIGHLY INCORRECT AND FAR FROM TRUTH THAT SHRI DINESH HALDIA [BROTHER OF A], SMT. MAMTA HALDIA W /O. ASSESSEE AND SMT. DEEPALI HALDIA [WIFE OF ASSESSEES BROTHER ] EVER AGREED WITH THE SURRENDER MADE BY ASSESSEE SHRI RAVI HALDI A. THE ALLEGED SURRENDER OF RAVI HALDIA WAS OF HIS OWN AND IT NO W AY RELATED TO OTHER FAMILY MEMBERS. NEITHER SHRI DINESH HALDIA NO R SMT. MAMTA NOR SMT. DEEPALI MADE ANY SURRENDER NOR EVER AGREED WITH THE SURRENDER OF RAVI. 16. AFTER CONSIDERING THE SUBMISSIONS, THE LD. CIT (A) GAVE HIS FINDING IN PARA 4.6 TO 4.13 AT PAGES 13 TO 18 OF HIS ORDER ARE AS UNDER :- 4.6 I HAVE CONSIDERED THE SUBMISSION OF A.R. AN D HAVE PERUSED THE ASSESSMENT ORDER AND RELEVANT RECORD. THE MAIN ARGUMENT OF THE APPELLANT IS REGARDING ALLEGED OVER VALUATION O F THE STOCK BY THE APPROVED VALUER. FIRSTLY IT IS MENTIONED THAT THE A PPROVED VALUER IS AN EXPERIENCED PERSONS AND HAS BEEN VALUING THE GEM S AND JEWELLERY OVER THE YEARS. NO SUCH INSTANCE OF ALLEG ED OVER VALUATION BY THE APPROVED VALUER AS COME TO THE NOT ICE OR HAS BEEN BROUGHT ON RECORD BY THE A.R. OF THE APPELLANT. WIT HOUT PREJUDICE TO ABOVE, IT IS SEEN THAT THE STATEMENT OF THE APPE LLANT WAS RECORDED DURING THE COURSE OF SEARCH AND THIS QUESTION OF VA LUATION WAS SPECIFICALLY PUT TO HIM IN QUESTION NO.3 HE WAS ASK ED ABOUT THE VALUATION OF THE STOCK KEPT AT HALDIA BHAWAN OFFICE AND IN QUESTION NO.4 HE WAS ASKED ABOUT THE VALUATION OF S TOCK KEPT IN THE CHAURA RASTA OFFICE WHERE THE STATEMENT AT THAT TIM E WAS RECORDED. HE HAS UNEQUIVOCALLY ACCEPTED THE VALUATION AND HE HAS FURTHER ADMITTED THAT VALUATION WAS DONE IN HIS OWN PRESENC E. THE RELEVANT EXTRACT OF STATEMENT IS REPRODUCED BELOW: 16 IZ-3- VKIDS MDR LHKH QEKSZA DS GFYN;K HKOU ESA J[KS STOCK DK EWY;KADU DKKZ }KJK CKJG DJKSM+ PKSNG YK[K CGKJ GTKJ ,D LKS FR;KY HL :- VKADK X;K GSAA D;K VKI BLLS LGER GSAA M- ;G STOCK GEKJH FOFHKUU QEKSZA DK FEFJR STOCK GS FTLDK VALUATION ESJH MIFLFKFR ESA VKSJ ESJS DEZPKFJ;KSA DH MIFLFKFR ESA FD;K X;KA VALUATION SHEET DK ESAUS DETAIL ESA NS[K FY;K GS BLESA YH XBZ QUANTITY, QUALITY RFKK VALUE LS ESA LGER GWA ESA ;G LOHDKJ DJRK GW FD ;G STOCK 12, 14, 72, 143/- :- DK GS ( CKJG DJKSM+ PKSNG YK[K CGKJ GTKJ ,D LKS RS;KFYL EK= ) IZ-4- VKIDS PKSM+K JKLRK FLFKR DK;KZY; FTLESA GE CS BS GS] ESA VKIDKS LHKH QEKSZA DS LVKWD DK EWY;KADU] JFTLVMZ EWY;KADUDKKZ }KJK DQ Y EWY;KADU 7]22]44]657@& :I;S FD;K X;KA D;K VKI BLLS LGER GSA M- GK ESA LVKD DS DHER ,OA OTU LS RFKK IK, X, DQY L VKWD 7]22]44]657@& DS EWY;KADU LS IW.KZR% LURQ'V GW] D; KSAFD ;G ESJH LO;.A DH MIFLFKFR ESA FD;K X;K GSA 4.7. LATER ON IN QUESTION NO. 5 HE WAS ASKED EX PLANATION ABOUT THE TOTAL STOCK PHYSICALLY FOUND, FOR WHICH HE ADMI TTED THAT CONSIDERING THE PHYSICAL STOCK OF RS. 19,41,30,676/ - AND BOOK STOCK OF RS. 9,20,00,000/- THERE IS EXCESS STOCK OF RS. 10 CRORE 21 LAKH AND SAME WAS ADMITTED TO BE ACQUIRED OUT OF UNDISCLOSED SOURCES AND HE OFFERED IT FOR TAXATION. THE RELEVANT QUESTION AND ANSWER 5 ARE REPRODUCED BELOW:- IZ-5- VKIDS FOFHKUU IFJLJKSA LS IK, X, LVKWD DH FMV SY FUEU IZDKJ LS GSA%& 1- PKSM+K JKLRK FLFKR VKWFQL :- 7]22]44]657@& 2- GFYN;K HKOU FLFKR VKWFQL :- 12]14]72]143@& 3- PKSJFM;K LSQ FMIKFV ESA YKDJ UA- 203 :- 1]51]772 @& 4- FCJKUH LSQ FMIKFTV OKYV YKDJ UA- 1022 :- 35]254@ & 5- FCJKUH LSQ FMIKFTV OKYV YKDJ UA- 1026 :- 1]24]25 0@& 6- LH&18] T;KSFR EKXZ CKIW UXJ (FUOKL) :- 1]02]600@ & DQY 19]41]30]676@& 17 TCFD VKIUS ,OA VKIDS VDKMUVSUV DS }KJK 20&04&2007 D KS BL FNUKAD RD FUDKYK LVKD UKS DJKSM+ CHL YK[K :I;S GSA BLLS ;G LI 'V FD VKIDS ;GKA DQY DJHCU 10 DJKSM+ 21 YK[K :- DK LVKD VF/KD IK;K X;K G SA BLDS CKJS ESA VKIDK D;K DGUK GSA M- ESA ;G LOHDKJ DJRK GW FD ESJS ;GKA DQY 10 DJKSM+ 21 YK[K :- DK LVKD VF/KD IK;K X;K GSA VF/KD IK;K LVKWD DK ESJS IKL LI' VHDJ.K UGHA GSA RFKK ;G GEKJH PKJKSA QEKSZ ;KUH R.H. EXPORT, D.H. EXPORT, RIDHI SIDHI GEMS, VIDHI GEMS DK V?KKSF'KR LVKWD GS TKS BU PKJKSA QEKSZA DH V?KK SF'KR VK; LS VFTZR FD;K X;K GSA BL V?KKSF'KR LVKWD ESA OG LVKWD MSM DJ KSM DK HKH 'KKFEY GS TKS ESAUS DY LJS.MJ FD;K FKKA GEKJS ;GKA IK, X, V?KKSF'KR LVK WD DK EWY; NL DJKSM+ BDDHL YK[K TKS PKJKSA QEKSZA DH V?KKSF'KR VK; LS VF TZR FD;K X;K GS IJ FU;EKUQLKJ VK;DJ PQDK NSAXS RFKK D;KSAFD VK;DJ PQDK US DH ?KKS'K.KK GE LOSPNK LS DJ JGS GS BLFY, GE FOHKKX LS IZKFKZUK DJSAXS FD GE IJ VSDL PKSJH DH ,OA VK; NQIKUS DH DKSBZ ISUYVH UGHA YXKBZ TK,A ;G ?KKSF'KR VK; GEUS GEKJH PKJKSA QEKSZA DS TOKGKJKR BR;KFN DS V?KKSF'KR [KJHN CSPKU LS VFTZR D H GSA 4.8 FROM THE PERUSAL OF THE AFORESAID ANSWERS GIVEN BY THE APPELLANT, IT CAN NOT BE SAID THAT THERE WAS COERCI ON OR PRESSURE ON HIM. FURTHER, THE FACT OF EXCESS STOCK AND THE UNAC COUNTED PURCHASES MADE BY THE APPELLANT WAS EARLIER ALSO AD MITTED BUT THE APPELLANT IN HIS STATEMENT RECORDED ON 20.04.07 ON 20.04.07 HE WAS CONFRONTED WITH THE NOTING IN THE DIARY PAGE WHEREI N HE ADMITTED TO HAVE MADE PURCHASE OF RS. 10.41 CRORE IN CASH WH ICH WAS NOT RECORDED IN THE BOOKS OF ACCOUNTS AND IN TURN HE HA S OBTAINED BILL FOR THE PURCHASES SHOWN IN F.Y. 2004-05 TO THE EXTE NT OF RS. 8.50 CRORE. THUS INVESTMENT IN EXCESS STOCK WAS EARLIER ALSO ADMITTED ON 20.04.07 AND SAME WAS ALSO BASED ON THE JOTTINGS IN THE DIARY. THUS THE CLAIM OF THE APPELLANT THE STATEMENT DATED 22.0 4.07 ADMITTING UNEXPLAINED INVESTMENT IN EXCESS STOCK WAS UNDER DU RESS IS LACKING ANY MERIT AND IS LIABLE TO BE REJECTED. 4.9 THE FACT THAT THE APPELLANT GROUP IS ENGAGED IN UNACCOUNTED PURCHASES AND SALES AND THEREBY EXCESS STOCK BEING FOUND, IS 18 FURTHER PROVED FROM THE PERUSAL OF THE STATEMENT OF THE APPELLANT, WHEN HE WAS CONFRONTED WITH VARIOUS DOCUMENT SEIZED DURING THE COURSE OF SEARCH, WHICH IS AS BELOW: IZ-6- ESA VKIDKS VKIDS O;KOLKF;D IZFR'BKU ESA IK, X , YWT ISIJ VUSDLJ ,,&1 FTLESA IST 113 GS FN[KK JGK GW BUGSA NS[KDJ C RK,SA FD ;S VKIDH YS[K IQFLRDKVKSA ESA DGKA IJ NTZ GSAA M- ESAUS VUSDLJ ,,&1 NS[K FY;K GS BLESA TKS DKXTKR G SA MULS GEKJS IFJOKJ DS O;KOLKF;D IZFR'BKUKSA LS LCA/KH EKY DH [KJHN] FC H DKJHXJ LS DJK, X, DKE DK FOFHKUU FNUKAD DKS MIYC/K LVKWD RFKK [KPKSZA DS FCY GSAA BUESA LHKH DK LR;KIU YS[K IQFLRDKVKSA LS DJKUK LAHKO UGHA GSA BU DKXTKSA ESA DQN ISIJ IJ YS[K IQFLRDKVKSA ESA NTZ FD, FCUK HKH [KJHN FCH RFKK EK Y DH CUKBZ LCA/KH DKXTKR GSA BL IZDKJ DS DKXTKRKSA LS VFTZR V?KKSF'KR VK; GE KJS FOFHKUU QEKSZA DS LVKD ESA FOFU;KSFTR DH GQBZ GSA FTLESA VK;DJ DS FY, LEFIZR D J PQDK GW TKS JKF'K NL DJKSM+ BDDHL YK[K :I;S GSA IZ-7- ESA VKIDKS VUSDLJ ,,&2] ,,&3] ,,&4] ,,&5 ,OA ,,&6 FN[KK JGK GWA BUGSA NS[KDJ CRK, FD BUESA NTZ O;OGKJKSA DKS YS[K I QLRDKSA ESA FDL IZDKJ LS N'KKZ;K X;K GS RFKK BUDH D;K IZD`FR GSA M- VUSDLJ ,,&2 ESA VU& FJDKSZMSM FCH LS LCAF/KR O;O GKJ] VUSDLJ ,,&3 ESA HKH VUFJDKSMSZM FCH] VUSDLJ,,&4 ESA MIYC/K LVK D] VUSDLJ ,,&5 ESA HKH MIYC/K LVKWD ,OA VUSDLJJ ,,&6 ESA GSA RFKK LVKWD DS CKCR FY[KH XBZ TKUDKJH YS[K IQLRDKSA ESA NTZ LVKWD LS ESY UGHA [KKRH GSA M IJKSDR LAYXUDKSA ESA NTZ [KJHN FCH RFKK LVKWD DS VURJ LS VFTZR V?KKSF'KR VK; ESA GH LOHDKJ DJ PWDK GWA FTLDH JKF'K NL DJKSM+ BDDHL YK[K :I;S GSA ;G JKF'K MLDK GH HKKX GS] BLDS VYKOK EQ>S ;G HKH DGUK GS FD GEKJS ;GKA TKS VU; CGH [KKRS] MK;FJ;KA] DKXTKR BR;KFN IK, X, GS VKSJ MUESA GEKJS O;OLK; DH DKSBZ V ?KKSF'KR VK; DH ?KKS'K.KK ESA 'KKFEY GS D;KSAFD GEUS VC RD TKS V?KKSF'KR YSUNSU F D;K GS VKT DH RKJH[K ESA MLDK USV FJTYV GEKJS ;GK IK;K X;K MIJKSDR V?KKSF'KR LVKWD GH GS] FTLS GEUS VSDL NSUS DS FY, LJS.MJ DJ FN;K GSA ( EMPHASIS SUPPLIED) 4.10 FROM THE AFORESAID STATEMENT IT IS EVIDENT THA T THE PURCHASE AND SALES SHOWN IN THE VARIOUS LOOSE PAPERS ARE NOT RECORDED IN THE BOOKS OF ACCOUNTS AND THE STOCK POSITION RECORDED I N ANN.AA-4, AA-5 AND AA-6 IS ALSO NOT MATCHING WITH THE STOCK S HOWN IN THE BOOKS OF ACCOUNT. IN VIEW OF THESE FACTS THE APPELL ANT HIMSELF ADMITTED THAT INCOME SO EARNED AS REFLECTED IN THES E LOOSE PAPERS AND STOCK DIFFERENCE REFLECTED IN THESE LOOSE PAPER S IS COVERED 19 WITHIN THE DISCLOSURE OF EXCESS STOCK OF RS.10 CROR E 21 LAKH MADE BY HIM. 4.11 THUS THE CLAIM OF OVER VALUATION SO MADE BY TH E A.R. OF THE APPELLANT HAS BEEN RIGHTLY REJECTED BY THE A.O. IN VIEW OF THE FACTS MENTIONED BY THE A.O. IN THE ASSESSMENT ORDER AND F URTHER FACTS AND DETAILS DISCUSSED IN THE EARLIER PARAGRAPHS BY THE UNDERSIGNED. 4.12 THOUGH THE CLAIM OF OVER VALUATION HAS ALREAD Y BEEN REJECTED BUT EVEN THEN IT IS SEEN THAT THE APPELLAN T IS TRYING TO JUSTIFY THE RATE OF `CITRINE ROUGH BY SUPPORTING H IS CLAIM FROM BILL NO. M/S. S.P. JEWELLERS DATED 15.5.04. THE `OPAL RO UGH IS BEING JUSTIFIED BY PURCHASE BILL DATED 5.5.04 AND 11.4.04 OF M/S. LAXMI JEWELLERS AND M/S. RAJSHREE GEMS. SIMILARLY TURMOLI N ROUGH HAS BEEN TRIED TO JUSTIFY BY PURCHASE BILLS DATED 20.5. 04 AND 7.6.04 OF M/S. GIRISH DIAM AND M/S. ABHAYA INTERNATIONAL. FIR STLY THERE IS NO EVIDENCE THAT GOODS PURCHASED AS BACK AS IN APRI L, MAY AND JUNE, 2004 HAS STILL REMAINED WITH THE APPELLANT IN APRIL, 2007 AT THE TIME OF SEARCH, MORE PARTICULARLY WHEN APPELLAN T HIMSELF HAS ADMITTED TO BE ENGAGED IN UNACCOUNTED PURCHASE AND SALES OF GOODS AND SAME IS ALSO REFLECTED IN THE SEIZED DOCU MENTS. SECONDLY, THE APPELLANT IN HIS STATEMENT RECORDED O N 20.4.07 HAS VERY CATEGORICALLY ADMITTED PARTICULARLY IN RELATIO N TO PURCHASE MADE IN F.Y. 2004-05 THAT THE PURCHASES WERE MADE I N CASH AND BILLS WERE OBTAINED FROM SOME OTHER PARTIES AND OBV IOUSLY THESE BILLS ARE BOGUS/UNVERIFIABLE. ACCORDINGLY, THE RELI ANCE PLACED BY THE APPELLANT ON THESE BILLS FOR SUPPORTING HIS CLA IM OF ALLEGED OVER VALUATION OF THE STOCK BY THE APPROVED VALUER, IS T OTALLY MISPLACED. 4.13 ANOTHER ARGUMENT OF THE APPELLANT THAT THE DIS CLOSURE MERELY BASED ON STATEMENT WHICH IS SUBSEQUENTLY RET RACTED, NORMALLY SHOULD NOT BE CONFIRMED IN ABSENCE OF CORR OBORATION, HAS BEEN CONSIDERED BY ME. FIRSTLY IN THE INSTANT CASE, THE ADDITION HAS NOT BEEN MADE ONLY ON THE BASIS OF STATEMENT OF THE APPELLANT. IN FACT THE VALUATION OF THE PHYSICAL STOCK GOT DONE B Y THE APPROVED VALUER AND THEN AFTER COMPARISON WITH THE BOOK STOC K, THE EXCESS PHYSICAL STOCK WAS FOUND WHICH HAS BEEN MADE AS A B ASIS FOR ADDITION OF UNACCOUNTED STOCK. SECONDLY THE FACT OF UNACCOUNTED STOCK BEING AVAILABLE WITH THE APPELLANT GROUP WAS ALSO ADMITTED ON 20.4.07 BY THE APPELLANT AND ON THAT DATE, NO AL LEGATION OF COERCION OR UNDUE PRESSURE HAS BEEN MADE BY THE APP ELLANT. THIRDLY THE LOOSE PAPERS AND DOCUMENTS ITSELF INDIC ATE UNACCOUNTED PURCHASES AND SALES MADE BY THE APPELLANT GROUP. FO URTHLY THE APPELLANT HAS COMPLETELY FAILED TO IMMEDIATELY RETR ACT HIS STATEMENT, IF HE WAS OF THE FIRM BELIEF THAT HIS ST ATEMENT WAS UNDER COERCION. FIFTHLY THE APPELLANT HAS COMPLETELY FAIL ED TO DISPUTE THE 20 VALUATION EITHER DURING THE COURSE OF SEARCH OR IMM EDIATELY THEREAFTER. THE APPELLANT AS WELL AS HIS LD. A.R. C OULD HAVE IMMEDIATELY FILED THEIR OBJECTION TO THE VALUATION AND AFFIDAVIT OR OTHER DOCUMENT IN SUPPORT OF RETRACTION OF THE STAT EMENT GIVEN DURING THE COURSE OF SEARCH. THE APPELLANT REMAINED SILENT FOR THE REASONS BEST KNOWN TO HIM. THEREAFTER THE RETURN OF INCOME WAS FILED IN RESPONSE TO NOTICE U/S.153A WITHOUT DECLAR ING THE COMPLETE INVESTMENT IN EXCESS STOCK FOUND DURING THE COURSE OF SEARCH WHICH WAS ALSO ADMITTED DURING THE COURSE OF SEARCH. IT W AS ONLY WHEN THE A.O. CONFRONTED THE APPELLANT AND ISSUED SHOW C AUSE NOTICE THAT APPELLANT CAME UP WITH THE REPLY OF ALLEGED OV ER VALUATION OF THE STOCK. THOUGH THE APPELLANT CLAIMED TO HAVE GIV EN RETRACTION LETTER IN FEBRUARY, 2009, BUT SAME IS NOT BORNE OUT FROM RECORD AVAILABLE WITH THIS OFFICE. EVEN THEN, THIS LETTER HAS BEEN FILED AS LATE AS MORE THAN 21 MONTHS AFTER THE SEARCH. ALL T HESE FACTS AND CIRCUMSTANCES ARE GOING AGAINST THE APPELLANT AND F ORCE ME TO LEAD TO THE CONCLUSION THAT THESE CONTENTIONS ARE AFTERT HOUGHT AND ACCORDINGLY HAVE BEEN RIGHTLY REJECTED BY THE A.O. 17. THESE FINDINGS OF LD. CIT (A) ARE IN RESPECT TO EXCESS STOCK FOUND DURING THE COURSE OF SEARCH. THE LD. CIT (A) HAS CONFIRMED TH E ACTION OF THE AO. HOWEVER, THE LD. CIT (A) HAS ALLOWED RELIEF ON ACCOUNT OF GP RATE CR EDITED @ 30% AS AGAINST 11% ALLOWED BY THE AO. IN THIS REGARD, THE LD. CIT (A) HAS DIS CUSSED THE ISSUE IN PARA 6 AND 6.2 AT PAGES 21 TO 23 ARE AS UNDER :- 6. NOW COMING TO THE ISSUE OF DETERMINING THE C OST PRICE OF THE STOCK FROM THE MARKET PRICE/VALUE TAKEN BY THE APPROVED VALUER, THE APPELLANT HAS CLAIMED THAT THE A.O. HAS HELD THE G.P. @ 30% AND ACCORDINGLY SAME G.P. SHOULD BE APPLIED WHI LE WORKING OUT THE COST OF STOCK FOUND DURING THE COURSE OF SE ARCH. THE UNDERSIGNED HAS UPHELD THE G.P. RATE OF 30% IN THE CASE OF APPELLANT IN A.Y. 2005-06 AND A.Y. 2007-08 AND ALSO IN THE PRESENT APPEAL ORDER IN A.Y. 2008-09 (THE APPEAL OF A.Y. 2006-07 IS NOT YET DECIDED, BUT THE A.O. HAS APPLIED THE G. P. RATE OF 30%). CONSIDERING THE FACT THAT G.P. @ 30% HAS BEEN TAKEN BY THE A.O. NOT ONLY IN THE CASE OF APPELLANT BUT IN THE CASE O F OTHER ASSESSEES OF THIS GROUP, FOR ALL THE YEARS UNDER ASSESSMENT U /S.153A ON THE BASIS OF HONBLE ITAT DECISION IN THE CASE OF APPEL LANT SH. RAVI HALDIA AND HIS BROTHER SH. DINESH HALDIA IN THE REG ULAR ASSESSMENT 21 FOR A.Y. 2004-05 AND THE UNDERSIGNED HAS UPHELD THE SAME ON THE BASIS AFORESAID DECISION OF THE HONBLE ITAT AND FU RTHER NOTICING THAT FACTS REVEALED AFTER THE SEARCH ARE MAKING THE CASE OF THE APPELLANT AND OTHER MEMBERS OF THE GROUP MORE ADVER SE ON THIS ISSUE, FOR THE YEARS FOR WHICH APPEALS HAVE BEEN DE CIDED. IT WAS FAIRLY ADMITTED BY THE A.R. OF THE APPELLANT THAT F ACTS OF THE CASE OF OTHER YEARS OF THE APPELLANT AND OTHER GROUP MEMBER S ARE MORE OR LESS SAME, FOR WHICH APPEALS ARE YET TO BE DECIDED. CONSIDERING THESE FACTS, IT WILL BE APPROPRIATE TO TAKE THE G.P . @ 30% WHILE WORKING OUT THE COST PRICE OF THE STOCK, INSTEAD OF 11% TAKEN BY THE A.O. IT IS TO PUT ON RECORD THAT IF BY ANY CHANCE, G.P. RATE SO UPHELD BY THE UNDERSIGNED IS REDUCED BY HIGHER JUDI CIAL AUTHORITIES, THEN SAME REDUCED G.P. RATE HAS TO BE TAKEN INSTEAD OF 30%, WHILE WORKING OUT THE COST. THE EXCESS STOCK IS REWORKED OUT AS UNDER: STOCK FOUND DURING SEARCH AFTER CORRECTING TOTALING MISTAKE RS.18,64,44,297/- (AS TAKEN BY A.O.) LESS: G.P. @ 30% AS DISCUSSED ABOVE RS. 5,59,33,88 9/- ------------------------ RS.13,05,11,008/- LESS: STOCK AS PER BOOKS OF ALL THE FIRMS (AS TAKEN BY A.O.) RS. 9,20,92,958/- DIFFERENCE RS. 3,84,18,050/- LESS: CASH PURCHASES OFFERED BY SH. RAVI HALDIA, SH. DINESH HALDIA (AS TAKEN BY A.O.) RS. 34,05,407/- EXCESS STOCK RS.3,50,12,643/- 6.1 IN VIEW OF THE FACTS AND CIRCUMSTANCES AND THE LEGAL POSITION ON THE ISSUE UNDER CONSIDERATION THE ADDIT ION ON ACCOUNT OF EXCESS STOCK FOUND DURING THE COURSE OF SEARCH I S UPHELD TO THE EXTENT OF RS.3,50,12,643/- AND REMAINING AMOUNT OF ADDITION ON THIS ISSUE IS DELETED. 6.2 ACCORDINGLY PROTECTIVE ADDITION IN THE CASE OF OTHER THREE PROPRIETARY CONCERNS WILL ALSO GET MODIFIED AND TAK EN ON THE BASIS OF EXCESS STOCK OF RS.3,84,18,050/- (AS PER THE BAS IS TAKEN BY THE A.O.). 22 S.NO. NAME OF ASSESSEE AMOUNT OF STOCK AMOUNT OF ADDITION 1. M/S. D.H. EXPORT, PROP. SH. DINESH HALDIA RS.2,42,81,620/- RS.1,01,29,466/- 2 M/S.RIDHI SIDHI INTERNATIONAL, PROP. SMT. DEEPALI HALDIA RS. 50,96,985/- RS.21,26,288/- 3 M/S. VIDHI GEMS PROP. SMT. MAMTA HALDIA RS.1,25,20,131/- RS.52,22,973/- AS SH. DINESH HALDIA HAS ALREADY OFFERED RS.3,54,51 8/- AS EXCESS STOCK, THE BALANCE AMOUNT OF RS.97,74,948/- IS HELD TO BE CONFIRMED ON PROTECTIVE BASIS IN THE CASE OF SH. DI NESH HALDIA. IN THE CASE OF SMT. DEEPALI HALDIA AND SMT. MAMTA HALD IA, THE AFORESAID AMOUNT MENTIONED IN COLUMN NO.4 ARE HELD TO BE CONFIRMED ON PROTECTIVE BASIS. 18. AGAINST THE FINDING ABOUT REJECTION OF CONTENTI ON OF THE ASSESSEE IN RESPECT TO STOCK, THE ASSESSEE IS IN APPEAL AND AGAINST RELIEF ALLOWED @ 30% GP AS AGAINST 11% THE DEPARTMENT IS IN APPEAL. 19. THE LD. COUNSEL OF THE ASSESSEE INVITED ATTENTI ON TO VARIOUS COPIES OF WRITTEN SUBMISSIONS FILED DURING THE COURSE OF HEARING OF A PPEALS. 20. THE LD. COUNSEL ALSO FILED APPLICATION FOR ADMI TTING AN ADDITIONAL EVIDENCE WHICH IS A CERTIFICATE RECEIVED FROM ONE SHRI V.K. KANKAR IA, GOVERNMENT APPROVED VALUER BY WHICH IT HAS BEEN STATED THAT VALUE OF CITRINE ROUG H PRECIOUS STONE VARIES FROM RS. 5,000/- TO RS. 50,000/- PER KG IN THE NATIONAL AS W ELL AS INTERNATIONAL MARKET AND IT NEVER EXCEEDED THE LIMIT OF RS. 50,000/- PER KG TILL DATE . THIS CERTIFICATE IS DATED 12.8.2011. THE LD. COUNSEL OF THE ASSESSEE REQUESTED THAT TO M EET THE ENDS OF JUSTICE, THIS CERTIFICATE SHOULD BE ADMITTED AS IT HAS A BEARING ON THE FACTS OF THE CASE. RELIANCE HAS BEEN PLACED ON VARIOUS CASES IN THIS RESPECT I.E. IN CASE OF HU KUM CHAND, 63 ITR 232, IN CASE OF NEW INDIA ASSOCIATION, 31 ITR 844 AND IN CASE OF M/S. U TTAM CONSTRUCTION CO., 156 ITR 459. 23 RELIANCE HAS ALSO BEEN PLACED IN CASE OF CIT VS. MU KTA METAL WORKS, 336 ITR 555 (P&H). 21. ON THE OTHER HAND, THE LD. CIT D/R HAS STATED T HAT ADMITTING OF ADDITIONAL EVIDENCE CAN BE CONSIDERED ON MERIT. 22. AFTER CONSIDERING THE SUBMISSIONS, WE FIND THAT THE CERTIFICATE OBTAINED FROM GOVERNMENT APPROVED VALUER IS NOTHING BUT IT IS A S UPPORTING EVIDENCE, THEREFORE, THE SAME IS ADMITTED. 22.1. ON MERIT, THE LD. COUNSEL OF THE ASSESSEE EXP LAINED THE WRITTEN SUBMISSIONS PLACED ON RECORD. IT WAS VEHEMENTLY ARGUED THAT THOUGH THE ASSESSEE HAD ADMITTED DURING THE COURSE OF SEARCH BUT ACTUALLY HE WAS UNDER MENTAL S TRESS AND, THEREFORE, COULD NOT ANALYZE THE FACTUM OF THE CASE, AND THEREFORE, HE AGREED TH AT IF THERE IS ANY EXCESS STOCK THAT WILL BE SURRENDERED. IT WAS EXPLAINED THAT THERE IS NO EXCESS STOCK AT ALL. THE STOCKS OF ALL THE FOUR CONCERNS WERE MIXED UP AND THIS FACT HAS BEEN ADMITTED BY SEARCH PARTY ALSO. IN SUPPORT OF THIS CONTENTION, THE LD. COUNSEL OF THE ASSESSEE STATED THAT THE SUBSTANTIVE ADDITION ON THE BASIS OF ENTIRE STOCK RELATING TO R AVI HALDIA GROUP HAS BEEN ADDED IN THE HANDS OF SHRI RAVI HALDIA I.E. ASSESSEE AND PROTECT IVE ADDITION HAS BEEN MADE IN CASE OF OTHER ASSESSEES, WHOSE STOCK WAS ALSO LYING WITH TH E STOCK OF SHRI RAVI HALDIA AND THIS FACT IS UNDISPUTED FACT. IT WAS FURTHER SUBMITTED THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE COMPLETED UPTO ASSESSMENT YEAR 2006-07. RETU RN ON THE BASIS OF AUDITED BOOKS WAS FILED IN TIME. THE CLOSING STOCK WAS MENTIONED IN THE BALANCE SHEET OF ASSESSMENT YEAR 2006-07. THEREAFTER, WHATEVER THE STOCK HAS B EEN PURCHASED, THAT IS ADDED IN THE STOCK AND WHATEVER THE STOCK HAS BEEN SOLD, THAT HA S BEEN REDUCED FROM THE STOCK AND A COMPILATION HAS BEEN MADE AND AS PER COMPILATION MA DE FOR ASSESSMENT YEAR 2008-09, 24 THERE IS NO DIFFERENCE BETWEEN THE STOCK FOUND AT T HE PREMISES OF THE ASSESSEE GROUP AND AS PER COMPILED STOCK. THEREFORE, THERE IS NO REAS ON TO SUSPECT THE STOCK SHOWN BY ASSESSEE. THE DEPARTMENTAL AUTHORITIES WITH THE CO NNIVANCE OF DEPARTMENTAL VALUER SHRI KASLIWAL HAS VALUED THE STOCK AS PER THEIR WILL/CHO ICE. NO ASSETS OF ANY KIND OVER AND ABOVE SHOWN IN THE BOOKS OF ACCOUNT HAS BEEN FOUND, NEITHER CASH EXCESS WAS FOUND NOR JEWELLERY WAS FOUND WHERE IT CAN BE SAID THAT ASSES SEE HAS INVESTED ANY UNDISCLOSED INCOME. NO MOVEABLE OR IMMOVEABLE PROPERTIES WERE FOUND WHERE IT CAN BE SAID THAT ASSESSEE HAS INVESTED ITS UNDISCLOSED INCOME. WHEN NO OTHER ASSETS WERE FOUND, THEN ONLY COURSE LEFT WITH THE DEPARTMENT TO ENHANCE THE VALUE OF STOCK FOUND DURING THE COURSE OF SEARCH. IT WAS FURTHER EXPLAINED THAT TH OUGH ASSESSEE HAD ADMITTED THAT EXCESS STOCK WILL BE OFFERED FOR TAXATION BUT THAT SHOULD BE CORROBORATED WITH EVIDENCE. DEPARTMENTS CASE IS THAT THEY HAVE GOT VALUED THE STOCK FROM REGISTERED VALUER AND, THEREFORE, VALUE OF THAT STOCK HAS TO BE TAKEN AND NOT THE VALUE OF STOCK SHOWN IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. ASSESSEE IS MAIN TAINING CONSISTENT APPROACH IN RESPECT OF THE VALUATION OF STOCK I.E. ON THE BASIS OF PURC HASE PRICE OR MARKET PRICE WHICHEVER IS LOWER. ALL THE ITEMS FOUND DURING THE COURSE OF SE ARCH ARE THE SAME ITEMS WHICH ARE SHOWN IN THE BOOKS OF ACCOUNT PREPARED UPTO 31.3.20 06. A SMALL QUANTITY OF STOCK HAS BEEN PURCHASED BY THE ASSESSEE AFTER 31.3.2006 AND THAT HAS ALSO BEEN SHOWN AND THE PURCHASE VOUCHERS ARE AVAILABLE. THEREFORE, THIS I S NOT A CASE THAT ANY STOCK FOUND DURING THE COURSE OF SEARCH WAS OVER AND ABOVE THE STOCK R ECORDED IN THE BOOKS OF ACCOUNT. PRINCIPLES OF NATURAL JUSTICE HAS TO BE APPLIED IN THIS CASE AND, THEREFORE, WHATEVER THE STOCK VALUE HAS BEEN SHOWN BY THE ASSESSEE THAT SHO ULD BE ACCEPTED. THE AO AS WELL AS LD. CIT (A) ARE MERELY PLACING RELIANCE ON THE STAT EMENT RECORDED DURING THE COURSE OF 25 SEARCH AND ON THE BASIS OF VALUATION PREPARED BY TH EIR VALUER. NO DOUBT, THE ASSESSEE HAS RETRACTED AFTER 21 MONTHS OF THE DATE OF SEARCH. T HERE IS A REASONABLE CAUSE FOR RETRACTING AFTER SUCH A LONG GAP THAT ASSESSEE WAS UNDER MENTA L PRESSURE AND HE WAS ALMOST NOT OUT OF HIS HOUSE FOR ONE YEAR. HE WAS SO DISTRESSED TH AT HE WAS READY TO COMMIT SUICIDE. AFTER THE EFFORTS OF THE FAMILY MEMBERS AND OTHER R ELATIVES, THE ASSESSEE CAME OUT FROM THE TRAUMA AND TOOK THE HELP FROM HIS STAFF AS WELL AS HIS LEGAL ADVISOR AND THEN PREPARED AN INVENTORY. COPY OF THE STATEMENT AS WELL AS INV ENTORY WERE OBTAINED FROM THE DEPARTMENT AFTER 21 MONTHS AND ON THE BASIS OF THAT INVENTORY, THE STOCK WAS RECONCILED AND IT WAS FOUND THAT THERE IS NO DIFFERENCE IN STO CK AS, AS PER BOOKS OF ACCOUNT AS THE SAME ITEMS HAVE BEEN RECORDED. IT WAS FURTHER SUBM ITTED THAT IT IS WORTH MENTIONING THAT THERE IS NO DIFFERENCE IN THE ITEMS AS WELL AS IN T HE WEIGHT OF THE ITEMS. THEREFORE, THE VALUATION ADOPTED BY THE VALUER CANNOT BE TAKEN FOR MAKING ANY ADDITION TREATING THE SAME AS UNDISCLOSED INCOME. ALL THE STOCKS WHICH C ONTAIN THE SAME ITEMS HAVE ALREADY BEEN RECORDED IN THE BOOKS OF ACCOUNT. IT WAS FURT HER SUBMITTED THAT THE VALUER HAS ADOPTED DIFFERENT APPROACH FOR VALUING SAME ITEMS. SOMEWHERE SOME RATES HAVE BEEN TAKEN AND SOMEWHERE VERY HIGH RATES HAVE BEEN TAKEN FOR THE SAME ITEMS. REASONS ARE NOT KNOWN OR ARE KNOWN TO THE LD. VALUER ONLY. FUR THER, RELIANCE WAS PLACED ON THE WRITTEN SUBMISSIONS AND VARIOUS CASE LAWS MENTIONED THEREIN. 23. ON THE OTHER HAND, THE LD. CIT D/R STRONGLY PLA CED RELIANCE ON THE ORDER OF LD. CIT (A). IT WAS FURTHER EXPLAINED THAT THE INVENTO RY OF STOCK WAS PREPARED WITH THE HELP OF THE STAFF OF THE ASSESSEE AND, THEREAFTER THE VA LUATION OF STOCK WAS OBTAINED FROM THE GOVERNMENT APPROVED VALUER. THE VALUATION OF STOC K HAS BEEN TAKEN ON THE BASIS OF DESCRIPTION OF ITEMS /STOCK FOUND DURING THE COURSE OF SEARCH. IT WAS FURTHER SUBMITTED 26 THAT WHATEVER THE STOCK WAS SHOWN IN THE BOOKS OF A CCOUNT, THAT HAS ALREADY BEEN REDUCED BY AO AND THE EXCESS STOCK AFTER REDUCING THE STOCK SHOWN IN THE BOOKS OF ACCOUNT HAS BEEN ADDED ONLY IN THE INCOME OF THE ASSESSEE. REG ARDING EXCESS STOCK, NO EXPLANATION WAS OFFERED AT THE TIME OF SEARCH OR AT THE TIME OF ASSESSMENT. IN THE STATEMENT, THE ASSESSEE HAS CATEGORICALLY ADMITTED THAT RS. 10 CRO RE TO RS. 10.25 CRORE WAS HIS UNDISCLOSED INVESTMENT IN THE GROUP CONCERN. THE L D. CIT (A) HAS ALSO EXAMINED THE CASE MINUTELY WHICH IS LIABLE TO BE CONFIRMED. 23.1. REGARDING THE BENEFIT OF 30% GP RATE ALLOWED BY LD. CIT (A), IT WAS SUBMITTED THAT NO BASIS HAS BEEN ASSIGNED BY LD. CIT (A). TH E AO HAS ALLOWED THE BENEFIT OF 11% GP AS DECLARED BY THE ASSESSEE IN REGULAR BUSINESS. 24. ON A QUERY FROM THE BENCH THAT IF THE ITEMS ARE SAME AS PER BOOKS OF ACCOUNT AND AS FOUND DURING THE COURSE OF SEARCH THEN HOW THE A DDITION HAS BEEN MADE, IT WAS SUBMITTED THAT IF ITEMS ARE SAME THEN OF COURSE NO ADDITION CAN BE MADE BUT IT IS A FACT THAT EXCESS STOCK WAS FOUND AT THE TIME OF SEARCH A ND WHATEVER THE STOCK HAS BEEN SHOWN IN THE BOOKS OF ACCOUNT THAT HAS ALREADY BEEN FAIRL Y REDUCED BY AO. THE LD. CIT (A) HAS ALREADY EXAMINED THIS ASPECT AND THEN CONFIRMED THE ACTION OF THE AO. 25. WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THEM CAREFULLY. WE HAVE ALSO PERUSED THE ORDERS OF THE AO AND LD. CIT (A) AND TH E WRITTEN SUBMISSIONS AND OTHER DETAILS IN RESPECT TO THE STOCK FOUND AND IN RESPEC T TO STOCK SHOWN BY ASSESSEE AS ON 31.3.2006 AS WELL AS ON 30.3.2007 AND THEREAFTER UP TO THE DATE FOR WHICH THE RETURN HAS BEEN FILED FOR ASSESSMENT YEAR 2008-09. AFTER GOI NG THROUGH ALL THESE DETAILS AND PERUSING OTHER MATERIAL, WE FIND THAT AO HAS MADE A DDITION ON THE BASIS OF VALUATION MADE BY THE DEPARTMENTAL VALUER SHRI KASLIWAL. THE ASSESSEE HAS TRIED TIME AND AGAIN 27 THAT ITEMS OF STOCK FOUND DURING THE COURSE OF SEAR CH ARE THE SAME ITEMS AS RECORDED IN BOOKS OF ACCOUNT AS ON 31.3.2007 AND ALSO AS ON 31. 3.2008. THIS ASPECT HAS NOT BEEN TAKEN INTO CONSIDERATION EITHER OF THE AUTHORITIES I.E. LD. AO OR LD. CIT (A). IT HAS ALSO BEEN STATED TIME AND AGAIN THAT WEIGHT OF THE ITEMS AND QUALITY OF THE ITEMS RECORDED IN THE BOOKS OF ACCOUNT ARE SAME AS FOUND DURING THE C OURSE OF SEARCH AS THERE IS NO MAJOR DIFFERENCE IN THE WEIGHT OF THE STOCK. ONLY A MINO R DIFFERENCE IS THERE AND THAT CAN HAPPEN WHILE TAKING THE WEIGHT OF THE STOCK BY THE SEARCH PARTY. THIS ASPECT HAS ALSO NOT BEEN TAKEN INTO CONSIDERATION EITHER BY AO OR BY LD . CIT (A). THE LD. CIT (APPEALS) HAS MENTIONED IN HIS ORDER AT PAGES 16 AND 17 THAT STOC K FOUND RECORDED IN ANNEXURE AA-4, AA-5 AND AA-6 ARE NOT MATCHING WITH THE STOCK SHOWN IN THE BOOKS OF ACCOUNT. HOW IT IS NOT MATCHING HAS NOT BEEN EXPLAINED BY LD. CIT ( A) WHILE DISPOSING THIS GROUND. THE AO AS WELL AS LD. CIT (A) HAS BASED MAINLY ON THE S TATEMENT OF THE ASSESSEE RECORDED DURING THE ODD HOURS AT THE TIME OF SEARCH. STATEM ENT WAS RECORDED AT 2.00 A.M. ON 22.4.2007 WHEN THE SURRENDER OF STOCK WAS OBTAINED. AT THE TIME OF ASSESSMENT AS WELL AS AT THE TIME OF APPEAL STAGE BEFORE LD. CIT (A) I T HAS BEEN ARGUED TIME AND AGAIN THAT AT THE TIME OF TAKING STATEMENT THE ASSESSEE WAS NOT I N SOUND STATE OF MIND AND HE GAVE THE STATEMENT JUST TO GET RID OF FROM THE DEPARTMENTAL ENQUIRY. THOUGH IT HAS BEEN STATED THAT THE VOLUNTARY OFFER WAS OBTAINED UNDER COERCION, PR ESSURE, UNDUE HARASSMENT AND MIS- REPRESENTATION OF FACTS. IT MAY BE TRUE OR IT MAY NOT BE TRUE BUT THE FACT REMAINS THAT THERE SHOULD BE A DIFFERENCE OF ITEMS AND WEIGHT RECORDED IN THE BOOKS OF ACCOUNT AND FOUND DURING THE COURSE OF SEARCH. AS STATED ABOVE, THE AO AS WELL AS THE LD. CIT (A) WENT ON TO REJECT THE CONTENTION OF THE ASSESSEE MERELY BAS ED ON THE STATEMENT OF THE ASSESSEE RECORDED AND VALUATION MADE BY THE DEPARTMENTAL VAL UER SHRI KASLIWAL. THE AUDITED 28 BOOKS OF ACCOUNT UPTO 31.3.2006 WERE AVAILABLE AND THIS IS ADMITTED FACT. AS PER BOOKS OF ACCOUNT AUDITED UPTO 31.3.2006, THE STOCK OF RS . 8 CRORE OR SO SHOWN IN THE BOOKS OF ACCOUNT. RETURN FOR ASSESSMENT YEAR 2006-07 WAS FIL ED IN TIME BEFORE THE SEARCH. IN CASE OF SHRI RAVI HALDIA, THE RETURN WAS FILED ON 31 ST OCTOBER, 2006 VIDE RECEIPT NO.2100000423. THE STOCK OF RS. 4.80 CRORE OR ODD HAS BEEN SHOWN IN THE HANDS OF SHRI RAVI HALDIA. ACCOUNTS WERE AUDITED, COPY OF ACCOUN TS ALONG WITH ITEMS OF STOCK AS WELL AS VALUATION OF STOCK IS PLACED IN THE PAPER BOOK A T PAGES 52 TO 53. COPY OF WRITTEN RECEIPT IS PLACED AT PAGE 38. SIMILARLY IN CASE OF OTHER ASSESSEE I.E. SHRI D. HALDIA, THE RETURN WAS FILED ON 31 ST OCTOBER, 2006 AND ALONG WITH THE RETURN AUDITED AC COUNTS ALONG WITH STATEMENT OF STOCK INVENTORY AND VALUATION WER E ENCLOSED. COPIES OF ALL THESE ARE PLACED ON RECORD. IF STOCK OF ALL THESE CONCERNS A RE TAKEN INTO ACCOUNT THAT COMES TO RS. 8 CRORE OR ODD. EVEN ITEMS OF STOCK HAVE BEEN MENTIO N IN THE STOCK INVENTORY PREPARED BY THE AUDITOR WHILE AUDITING THE BOOKS OF ACCOUNT. COPIES OF THE SAME WERE FILED ALONG WITH THE RETURN. THEREAFTER THE ASSESSEE PREPARED I TS INVENTORY OF STOCK BY TAKING THE OPENING STOCK AS ON 1.4.2006 + PURCHASE (-) SALES A ND THEREAFTER THE STOCK WAS PREPARED AS ON 31.3.2007. IN SIMILAR MANNER THE STOCK INVENTOR Y WAS PREPARED AS ON 31.3.2008. COPIES OF THE SAME WERE FILED BEFORE AO AND LD. CIT (A) AND ALSO HERE BEFORE THE TRIBUNAL. THE AO HIMSELF HAS ADMITTED THAT AS PER BOOKS OF ACCOUNT THE CLOSING STOCK WAS OF RS. 9.20 CRORE OR ODD. THE DETAILS OF STOCK OF ALL THE FIRMS HAVE BEEN SHOWN AT PAGE 6 OF THE ORDER OF LD. CIT (A). TOTAL VALUE OF STOCK ADOPTED BY THE VALUER HAS ALSO BEEN MENTIONED IN THE ORDER OF LD. CIT (A) AT PAGE 14. TOTAL VALUATION OF STOCK TAKEN BY THE VALUER OF THE DEPARTMENT WAS AT RS. 19.41 CRORE . THEREAFTER, AO REDUCED THE STOCK 29 SHOWN AS PER BOOKS OF ACCOUNT AT RS. 9.20 CRORE AND AFTER ALLOWING 11% CREDIT ON ACCOUNT OF GP, THE ADDITION HAS BEEN MADE AT RS. 7.38 CRORE OR ODD. 25.1. WE HAVE SEEN THE ORDERS OF THE AO AS WELL AS OF LD. CIT (A) MINUTELY AND FOUND NOWHERE THAT THEY HAVE COMPARED THE ITEMS AS RECORD ED IN THE BOOKS OF ACCOUNT OR AS PER INVENTORY PREPARED BY THE SEARCH PARTY. IF THIS EX ERCISE WOULD HAVE DONE, THEN IT COULD BE SEEN THAT THERE IS NO DIFFERENCE IN THE ITEMS OF TH E STOCKS FOUND DURING THE COURSE OF SEARCH AND ITEMS RECORDED IN THE BOOKS OF ACCOUNT. AS REQUIRED BY THE BENCH, THE ASSESSEE HAS PREPARED A LIST OF ITEMS AS PER BOOKS OF ACCOUNT AND LIST OF ITEMS AS PREPARED BY THE SEARCH PARTY WHICH IS TABULATED HERE AS UNDE R :- RAVI HALDIA GROUP CASE STOCK VARIATION SUMMARY AS ON 22/4/07 AS PER BOOKS OF ACCOUNT AS PER VALUATION OFFICER NAME OF ITEM WEIGHT IN GMS VALUE NAME OF ITEM WEIGHT IN GMS VALUE RS. RS. AQUAMARIN ROUGH 237757 787632 AQUAMARIN ROUGH 85978 2629975 AQUAMARIN SEMI FINISH 4005 50063 AQUAMARIN SEMI FINISH 3965 277550 AMETHYST CUT 193 56937 AMETHYST CUT 500 62500 AMETHYST ROUGH 20750 52913 AMETHYST ROUGH 574040 9980900 CAT'S EYE 2300 402500 CAT'S EYE 2300 230000 CITRINE CUT 450 37500 CITRINE CUT 450 45000 CITRINE ROUGH 17003 196964 CITRINE ROUGH 16800 13440000 EMERALD CUT 21760 5913215 EMERALD CUT 19685 9306375 EMERALD ROUGH 1090 190750 EMERALD ROUGH 1750 13125 GARNET ROUGH 546218 2434882 GARNET ROUGH 191360 5432850 GOLD 500 310000 GOLD 60 52142 OPAL ROUGH 815460 4423015 OPAL ROUGH 812940 12863050 OPAL FINISH 4200 567000 OPAL FINISH 4401 3933140 OPAL GHAT 6010 24040 OPAL GHAT 5344 44295 RUBY,SHAPHAIR ROUGH 73161 1461664 RUBY,SHAPHAIR ROUGH 73404 496481 RUBY,SHAPHAIR FINISH 9526 1553603 RUBY,SHAPHAIR FINISH 8200 809500 SILVER 4000 43000 SILVER 3080 105653 TANZENITE FINISH 45777 27160857 TANZENITE FINISH 46077 12347125 TANZENITE ROUGH 984714 11863332 TANZENITE ROUGH 989714 37913031 30 TURMALINE FINISH 13918 9527995 TURMALINE FINISH 13848 8059056 TURMALINE ROUGH 14134164 38213793 TURMALINE ROUGH 14794610 63557699 TURMALINE GHAT 6220 37320 TURMALINE GHAT 6220 1853500 MIX SEMI PRECIOUS ROUGH 136900 131140 MIX SEMI PRECIOUS ROUGH 127895 2867100 ROUGH TALL OF TOURMALINE/OTHERS 170520 72300 ROUGH TALL OF TOURMALINE/OTHERS 0 GOODS FOUND IN LOCKER AT BIRANI SAFE GOODS FOUND IN LOCKER AT BIRANI SAFE 124250 TOTAL 17256596 105512415 TOTAL 17782621 186444297 26. AFTER GOING THROUGH THE ABOVE CHART, IT IS SEEN THA T TOTAL WEIGHT IN GRAMS AS PER BOOKS OF ACCOUNT IS 1,72,56,596 GRAMS VALUED AT RS. 10,55,12,415/- AND TOTAL WEIGHT AS PER VALUATION OFFICERS REPORT IS 1,77,82,621 GRAMS VALUED AT RS. 18,64,44,297/-. THERE IS A MINOR DIFFERENCE OF 5 LACS GRAMS WHICH IS EQUA L TO ABOUT 500 KG. MOST OF THE ITEMS ARE ROUGH ITEMS. FOR EXAMPLE, AQUAMARIN ROUGH I.E. ITEM NO. 1 OF THE CHART, THE WEIGHT AS PER BOOKS OF ACCOUNT IS 2,37,757 GRAMS WHEREAS W EIGHT AS PER VALUERS REPORT IS 85,978 GRAMS. THOUGH THIS ITEM HAS BEEN FOUND SHOR T, HOWEVER, AS THE STOCK WAS MIXED UP, PROPER VALUATION COULD NOT BE DONE. FOR EXAMPL E, IN CASE OF TURMALINE ROUGH, THE TOTAL WEIGHT AS PER BOOKS OF ACCOUNT IS 1,41,34,164 GRAMS AND AS PER VALUERS REPORT THE WEIGHT IS 1,47,94,610 GRAMS. WEIGHT OF THIS ITEM I S MORE BY 5 LAC GRAMS OR ODD. IN AQUAMARIN ROUGH, THERE IS A SHORTAGE AND IN TURMALI NE ROUGH THERE IS EXCESS. SIMILARLY THERE IS A SMALL DIFFERENCE IN OTHER ITEMS OTHERWIS E THE WEIGHT IS ALMOST SIMILAR. THE TOTAL WEIGHT SHOWN IN THE ABOVE CHART IS AS ON 31.3.2007. AS ON 31.3.2006 THE VALUE OF CLOSING STOCK AS PER BOOKS OF ACCOUNT WAS RS. 9.20 CRORES W HICH HAS BEEN REDUCED BY THE AO WHILE CALCULATING UNDISCLOSED INVESTMENT IN THE STO CK. THE SEARCH WAS CONDUCTED ON 20.4.2007 WHICH IS ALMOST AT THE BEGINNING OF THE Y EAR AND ON THAT DATE THE DEPARTMENTAL 31 VALUER HAS GIVEN HIS VALUATION OF RS. 19.41 CRORES AND AS ON 31.3.2007 THE VALUATION AS PER VALUER IS RS. 18.64 CRORES. 26.1. IT IS FURTHER SEEN THAT ON ACCOUNT OF EXCESS STOCK OF 5 LAC GRAMS WHICH IS EQUIVALENT TO 500 KG OF ROUGH GEMS, AND ON THIS ACC OUNT THE ASSESSEE HAS SURRENDERED RS. 34 LACS OR ODD ON ACCOUNT OF CASH PURCHASES. FOR T HE SAKE OF CLARIFICATION, THE ASSESSEE HAS SURRENDERED EXCESS STOCK OF 1220 KG VALUING AT RS. 34.05 LACS. THIS DETAIL HAS BEEN GIVEN IN THE PAPER BOOK IN RESPECT TO VALUATION OF EXCESS AND SHORT STOCK AND STOCK SURRENDERED, AT PAGE 2 OF THE PAPER BOOK FILED ON 1 9 TH OCTOBER, 2011 DURING THE COURSE OF APPELLATE PROCEEDINGS. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, IT IS SEEN THAT THERE WAS NO DIFFERENCE AS PER BOOKS OF ACCOUNT AND AS PER ST OCK FOUND DURING THE COURSE OF SEARCH. WHATEVER THE DIFFERENCE WAS THERE, THE ASSESSEE HAS ALREADY SURRENDERED AND THE AO HAS ACCEPTED THE SAME ALSO, WHICH IS CLEARLY MENTIONED IN THE ORDER OF AO. THEREFORE, IN OUR VIEW, THE VALUATION MADE BY THE VALUER IS NOT CORRE CT. IT IS FURTHER SEEN THAT THE VALUE OF RS. 10.55 CRORES SHOWN AS PER BOOKS OF ACCOUNT WHER EAS THE DEPARTMENTAL VALUER IS TAKING THE VALUE OF SAME GOODS AT RS. 19.41 CRORES, FOR THE REASONS BEST KNOWN TO THE VALUER. 27. IT IS SETTLED POSITION OF LAW THAT IF ANY ASSE SSEE MAINTAINS REGULAR METHOD OF ACCOUNTING FOR THE PURPOSE OF VALUING THE CLOSING S TOCK ON THE BASIS OF PURCHASE PRICE OR COST PRICE WHICHEVER IS LOWER HAS TO BE ADOPTED. T HE ASSESSEE HAS TIME AND AGAIN SUBMITTED BEFORE THE AO AS WELL AS BEFORE LD. CIT ( A) THAT CONSISTENT METHOD OF ACCOUNTING HAS BEEN FOLLOWED BY THE ASSESSEE I.E. P URCHASE PRICE OR COST PRICE WHICHEVER IS LOWER. THEREFORE, IN OUR VIEW, THOUGH THE RETRAC TION MADE AFTER SUCH A LONG PERIOD, MAY NOT BE WITH CLEAN HANDS, BUT IT HAS TO BE SEEN WHET HER THE RETRACTION IS CORROBORATED WITH 32 THE EVIDENCE OR NOT. IF THIS ASPECT IS TAKEN INTO C ONSIDERATION, THEN IT WILL BEEN SEEN THAT WHATEVER THE ITEMS WERE FOUND, THEY WERE ALMOST THE SAME ITEMS AS RECORDED IN THE BOOKS OF ACCOUNT. THEREFORE, THERE SHOULD NOT BE ANY VAL UATION AT ALL AT THE TIME OF SEARCH AS ALMOST ALL THE ITEMS WERE THE SAME AS RECORDED IN T HE BOOKS OF ACCOUNT. IF THERE IS ANY DIFFERENCE IN ITEMS AND DIFFERENCE IN WEIGHT, THEN ONLY VALUATION OF THOSE ITEMS SHOULD HAVE DONE. THE LD. CIT (A) HAS MENTIONED SOMEWHERE IN HIS ORDER THAT A DIARY WAS FOUND AND SOME NOTING WAS THERE IN REGARD TO UNACCOUNTED PURCHASE AND SALES. IN THIS RESPECT WE WOULD LIKE TO MENTION HERE THAT THE ADDITION HAS NOT BEEN MADE ON THE BASIS OF DIARY BUT ADDITION HAS BEEN MADE ON THE BASIS OF VALUATIO N OF STOCK DONE BY THE DEPARTMENTAL VALUER SHRI KASLIWAL. IT IS ALSO A MATTER OF FACT THAT NO INFERENCE WAS DRAWN ON ACCOUNT OF DIARY OR ON ACCOUNT OF STATEMENT BUT THE ADDITION H AS BEEN MADE ON THE BASIS OF VALUATION OF STOCK. IN OUR CONSIDERED VIEW, WHATEVER THE VAL UATION HAS BEEN SHOWN BY THE ASSESSEE HAS TO BE ACCEPTED IF THE ITEMS ARE SAME. THE VALU ATION OF STOCK WILL BE TAKEN AT THE TIME OF SALE OF THOSE ITEMS. AS AND WHEN THE STOCK FOUN D DURING THE COURSE OF SEARCH IS SOLD, THEN WHATEVER THE PROFIT OR LOSS IS THERE, THAT HAS TO BE ACCOUNTED FOR. OTHERWISE, IT WILL TANTAMOUNT TO DOUBLE ADDITION. ONCE AT THE TIME OF ASSESSMENT OF THE YEAR UNDER CONSIDERATION AND IMMEDIATELY AT THE TIME OF SALE O F THAT VERY ITEMS SOLD AFTER 31.3.2008. AS STATED ABOVE, THE ITEMS FOUND RECORDED IN THE BO OKS OF ACCOUNT AND THE ITEMS FOUND DURING THE COURSE OF SEARCH ARE ALMOST THE SAME. T HE DIFFERENCE IS ONLY ON ACCOUNT OF VALUATION. IT IS SEEN THAT THE DEPARTMENTAL VALUER SHRI KASLIWAL HAS ADOPTED A DIFFERENT YARDSTICK BY TAKING VALUATION OF THE SAME ITEM AT D IFFERENT RATES, FOR THE REASONS BEST KNOWN TO HIM. 33 27.1. FOR EXAMPLE, THE VALUATION OF CITRINE ROUGH R ECORDED IN ANNEXURE J-1 PAGE 1 AND ITEM NO. 1 WHICH IS A LOT OF CITRINE ROUGH HAS BEEN VALUED @ RS. 7.78 LACS PER KG. TOTAL QUANTITY OF CITRINE ROUGH WAS FOUND AT 17.2 KG AND IN THIS WAY THE VALUATION HAS BEEN MADE AT RS. 1.34 CRORE OR ODD. THIS ITEM WAS PURCH ASED BY THE ASSESSEE AT THE AVERAGE RATE OF RS. 11,586/- PER KG. IN SUPPORT OF THE CON TENTION OF THE ASSESSEE, THE ASSESSEE HAS SHOWN PURCHASE BILL OF M/S. S.P. JEWELLERS, NAHARGA RH ROAD, JAIPUR BEARING BILL NO. 10 DATED 5.5.2004. THE LD. CIT (A) HAS NOT ACCEPTED T HE CONTENTION OF THE ASSESSEE THAT SAME STOCK WAS AVAILABLE WITH THE ASSESSEE. HOWEVER, WE ARE SURPRISED THAT WHY LD. CIT (A) HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE AS PURCHASE BILL IS THERE AND THE SAME STOCK IS COMING FORWARD FROM ASSESSMENT YEAR 2005-0 6 TILL THE DATE OF SEARCH. IT IS A MATTER OF FACT THAT THE ABOVE BILL WAS FOUND DURING THE COURSE OF SEARCH AND PART OF SEARCH MATERIAL WHICH HAS BEEN ANNEXED AS ANNEXURE AA 41 PAGE 18. IT IS FURTHER SEEN THAT THE VALUER ON THE SAME PAGE AT SL. NO. 17 HAS VALUED TH E FINISHED GOODS OF CITRINE AT RS. 1 LAC PER KG. THE WEIGHT OF THE ITEM FOUND WAS 450 GRA MS AND @ RS. 1 LAC PER KG THE VALUE HAS BEEN ADOPTED AT RS. 45,000/-. IT IS AMPLY PROV ED THAT THE BASIS OF VALUATION AT THE END OF VALUATION OFFICER IS NOT CORRECT. AT ONE STAGE HE IS TAKING THE VALUE OF CITRINE ROUGH WHICHIS MENTIONED AT ITEM NO. 1 OF ANNEXURE J-1 PAG E 1 @ RS. 7.78 LACS PER KG AND TOTAL VALUATION HAS BEEN DONE AT RS. 1.34 CRORES OR ODD W HEREAS ON THE SAME PAGE AS MENTIONED ABOVE FOR ITEM NO. 17 HE HAS TAKEN THE VALUE OF RS. 1 LAC PER KG OF FINISHED GOODS. THEREFORE, IT CAN BE EASILY SAID THAT THERE WAS NO RATIONAL BASIS FOR MAKING THE VALUATION AS HE HAS ADOPTED DIFFERENT YARDSTICK FOR ADOPTING THE VALUE OF SAME ITEM AT DIFFERENT RATES. 34 27.2. SIMILARLY, WE NOTED THAT AT PAGE 2 OF HIS VAL UATION REPORT THE VALUER HAS TAKEN THE VALUE OF FIRE OPEL ROUGH WEIGHING 4.7 KG AND M ENTIONED AT ITEM NO. 38 OF ANNEXURE-J PAGE 2 AT RS. 47 LACS BY TAKING THE VALU E @ RS. 10 LAC PER KG AND ON THE SAME VERY PAGE AT ITEM NO. 39 HE TOOK THE VALUE @ RS. 20 LACS PER KG OF THE SAME ITEM. THIS ITEM WAS VALUED BY ANOTHER DEPARTMENTAL VALUER I.E. SHRI PURNENDRA KANKARIA, LYING IN THE LOCKER NO. 122 WITH BIRANI SAFE DEPOSIT. THE W EIGHT OF FIRE OPEL ROUGH IS 5.159 KG WAS FOUND AND THE SAME WAS VALUED AT RS. 25,795/- B Y TAKING RATE OF RS. 5000/- PER KG. IN FACT, THIS ITEM HAS BEEN PURCHASED BY ASSESSEE F ROM M/S. LAXMI JEWELLERS, JAIPUR VIDE BILL NO. 181 DATED 5.5.2004 ANNEXURE A-8 OF THE DEP ARTMENT PREPARED DURING THE COURSE OF SEARCH. THIS ITEM WAS PURCHASED @ RS. 3695/- PE R KG. FROM THIS EXAMPLE IT IS AMPLY PROVED THAT THERE IS NO BASIS OF VALUER FOR ADOPTIN G THE HIGHER VALUE. WHATEVER SUITS TO HIM, THE VALUE HAS BEEN ADOPTED BY HIM. HE HAS NOT TAKEN INTO CONSIDERATION THE FACTUAL ASPECTS THAT IF THE VALUATION IS NOT MADE AT CORREC T RATE, THEN THERE WILL BE HUGE DIFFERENCE AND THE ASSESSEE WILL SUFFER IRREPARABLE LOSS WHICH HAS BEEN DONE IN THIS CASE. AS PER BOOKS OF ACCOUNT AS ON 31.3.2006 THE TOTAL VALUE OF THE STOCK WAS RS. 9.20 CRORE WHEREAS THE VALUE ADOPTED OF THE SAME STOCK AS ON 20.4.2007 AT RS. 19.41 CRORE. ONCE THE ASSESSEE IS HAVING THE SAME ITEM IN HIS STOCK, THEN THERE IS NO QUESTION OF MAKING ANOTHER VALUATION. VALUATION IS MADE WHEN THERE IS ANY UND ISCLOSED ITEM AND AS EXPLAINED EARLIER, THERE IS NO UNEXPLAINED ITEM AS ALMOST ALL THE ITEM S ARE RECORDED IN THE BOOKS OF ACCOUNT AND WHATEVER THE EXCESS STOCK WAS FOUND, THAT HAVE BEEN SURRENDERED AND HAS BEEN ACCEPTED BY THE AO ALSO. HOWEVER, THE AO MADE THE ADDITION ON THE BASIS OF VALUATION REPORT AND ON THE BASIS OF STATEMENT OF THE ASSESSE E RECORDED DURING THE COURSE OF SEARCH. THE AO HAS NOT TRIED TO COMPARE THE ITEMS AS PER ST OCK AND THE ITEMS AS FOUND DURING THE 35 COURSE OF SEARCH. IF THIS EXERCISE COULD HAVE BEEN DONE, THEN THERE WOULD NOT HAVE BEEN ANY ADDITION. // 27.3. THEREFORE, WE ARE NOT ABLE TO UNDERSTAND WHY THE DVO HAS TAKEN A DIFFERENT VALUE OF SAME ITEM. 27.4. AS PER CERTIFICATE ISSUED BY ONE SHRI V.K. KA NKARIA, GOVERNMENT APPROVED VALUER, IT HAS BEEN CERTIFIED THAT RATE OF ROUGH SE MI PRECIOUS STONE OF CITRINE VARIES FROM RS. 5,000/- TO RS. 50,000/- PER KG AND IT NEVER EXC EEDS IN LOCAL MARKET OR IN INTERNATIONAL MARKET FROM RS. 50,000/- PER KG. HOWEVER, IT IS SE EN THAT THE DVO HAS TAKEN THIS VALUE AT RS. 70,000/- PER KG, RS. 1,00,000/- PER KG ETC. ETC. AS SHOWN ABOVE. 27.5. IT IS FURTHER SEEN THAT ASSESSEE HAS MAINTAIN ED COMPLETE LIST OF PURCHASE VOUCHERS. HOWEVER, THE LD. CIT (A) HAS DOUBTED THE SAME BECAU SE OF THE REASON THAT SOME OF THE PURCHASES ARE SHOWN IN ASSESSMENT YEAR 2004-05, AND IT IS NOT POSSIBLE THAT SAME STOCK IS KEPT TILL DATE. ALL THE BOOKS OF ACCOUNT ARE MAINT AINED BY ASSESSEE. WHATEVER THE PURCHASES HAVE BEEN MADE, THEY HAVE BEEN ENTERED IN THE BOOKS OF ACCOUNT AND WHATEVER THE SALE HAS BEEN EFFECTED THAT HAS BEEN REDUCED. T HEREFORE, IT IS EASILY VERIFIABLE THAT WHICH ITEM HAS COME FROM WHICH YEAR AND IF SAME ITE M IS COMING FROM ASSESSMENT YEAR 2004-05 THEN THERE IS NO QUESTION OF DOUBTING THE S AME. SINCE ALL THE PURCHASE VOUCHERS ARE AVAILABLE WITH THE ASSESSEE THEN IT IS EASILY V ERIFIABLE THE ITEMS RECORDED IN THE BOOKS OF ACCOUNT OR FOUND DURING THE COURSE OF SEARCH. T HIS EXERCISE HAS ALSO NOT BEEN DONE EITHER BY AO OR BY LD. CIT (A). AS STATED EARLIER, THE AO AS WELL AS LD. CIT (A) HAS GONE TO CONSIDER THE STATEMENT OF THE ASSESSEE AND THE V ALUATION ADOPTED BY THE VALUER. THEY HAVE NOT TRIED TO ASCERTAIN THE FACTUAL ASPECTS. 36 27.6. THE CHARGING SECTION UNDER THE I.T. ACT WHICH PROVIDES THAT ONLY REAL INCOME IS TO BE TAXED. IF BY ANY REASON A STATEMENT HAS BEEN GI VEN THEN CORROBORATIVE EVIDENCE HAS TO BE TAKEN INTO CONSIDERATION. WHATEVER, THE ITEMS WE RE FOUND THEY WERE THE ITEMS WHICH WERE RECORDED IN THE BOOKS OF ACCOUNT ONLY. A MINO R DIFFERENCE IS THERE AND THAT IS POSSIBLE BECAUSE OF HUGE STOCK WAS FOUND AND THE ST OCK TAKING WAS DONE HURRIEDLY BY THE SEARCH PARTY AND, THEREFORE, IT IS QUITE POSSIBLE T HAT A SMALL DIFFERENCE IN QUANTITY OF STOCK IS FOUND DURING THE COURSE OF SEARCH. 27.7. RELIANCE HAS BEEN PLACED ON VARIOUS CASE LAWS AND WE HAVE SEEN THE RATIOS OF SOME OF THE DECISIONS AND FOUND THAT THEY ARE IN SU PPORT OF THE CASE OF THE ASSESSEE. IN ALL THESE CASES IT HAS BEEN STATED THAT IF STATEMENT IS TAKEN DURING THE COURSE OF SEARCH AND THE SAME IS NOT CORROBORATED WITH THE EVIDENCE, THEN RE TRACTION SHOULD BE ADMITTED. 27.8. IN THE PRESENT CASE, NO DOUBT, ASSESSEE HAS A DMITTED THAT THERE MAY BE AN UNDISCLOSED INVESTMENT OF RS. 10.41 CRORE, BUT IT I S NOT CORROBORATED WITH THE EVIDENCE. WHATEVER THE ITEMS ARE FOUND DURING THE COURSE OF S EARCH THAT ARE ALMOST TALLIED WITH THE BOOKS OF ACCOUNT. A CHART OF THE SAME HAS BEEN TAB ULATED SOMEWHERE ABOVE IN THIS ORDER. THEREFORE, IN OUR CONSIDERED VIEW, THERE WAS NO REA SON TO MAKE ADDITION ON THE BASIS OF VALUATION OF STOCK BECAUSE VALUATION OF STOCK HAS T O BE TAKEN AT THE TIME OF SALE OF THOSE VERY ITEMS. WHATEVER PURCHASES HAS BEEN MADE BY THE ASSESSEE THEY HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNT AND AS PER CONSISTENT METHO D OF ACCOUNTING OF VALUING OF STOCK IS ON THE BASIS OF PURCHASE PRICE OR COST PRICE WHICHE VER IS LOWER. 28. IN SIMILAR CIRCUMSTANCES IN CASES OF PANDEY GRO UP, THIS VERY BENCH HAS TAKEN A VIEW THAT NO ADDITION SHOULD BE MADE ON THE BASIS O F VALUATION OF STOCK AS THERE WAS NO DIFFERENCE IN STOCK. THE OPERATIVE PARA OF THE O RDER OF THE TRIBUNAL IN THE CASE OF SHRI 37 PUSHPENDRA PANDEY DECIDED IN ITA NO. 994/JP/2010 DA TED 4.4.2011 IS REPRODUCED HERE AS UNDER :- 19. WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDER ED THEM CAREFULLY. WE HAVE ALSO PERUSED THE MATERIAL ON WH ICH OUR ATTENTION WAS DRAWN BY THE RESPECTIVE PARTIES INCLUDING WRITT EN SUBMISSIONS FILED ON BEHALF OF BOTH THE PARTIES. 20. FIRST, WE WOULD LIKE TO DEAL WITH THE OBJECTION RAISED BY LD. CIT D/R THAT ASSESSEE HAS USED DEROGATORY LANGUAGE DURI NG THE ASSESSMENT PROCEEDINGS WHILE HE RETRACTED FROM THE STATEMENT G IVEN AT THE TIME OF SEARCH RECORDED UNDER SECTION 132(4). WE HAVE SEEN THE WRITTEN SUBMISSIONS AS WELL AS THE EXPLANATION FILED BEFORE AO AND BEFORE LD. CIT (A) AND FOUND THAT THOUGH ASSESSEE HAS MENTIONE D THAT THEY WERE DICTATED TO SIGN THE STATEMENT AND OTHER PAPERS WHE N THE ASSESSEE WAS UNDER MENTAL DEPRESSION AND UNDER FATIGUE ON ACCOUN T OF CONTINUED SEARCH FOR 48 HOURS AND HAS SIGNED THE PAPERS. WE NOTED THAT BEYOND THIS, ON OTHER ADVERSE COMMENTS AGAINST THE DEPARTM ENT HAVE BEEN USED. WHATEVER GRIEVANCE THE ASSESSEE HAS, HE HAS R IGHT TO PUT IT EITHER BEFORE THE CONCERNED AUTHORITY OR BEFORE APPELLATE AUTHORITY. SIMULTANEOUSLY, WE ARE ALSO OF THE VIEW THAT NO DER OGATORY LANGUAGE SHOULD BE USED OR IF USED, IT SHOULD BE STRICTLY AV OIDED AS BY USING DEROGATORY LANGUAGE NO USEFUL PURPOSE WOULD BE SERV ED. IF ANY DEROGATORY LANGUAGE IS USED EITHER BEFORE AO OR BEF ORE LD. CIT (A), THAT WILL BE TREATED AS WITHDRAWN AS LD. COUNSEL FO R THE ASSESSEE HAS FAIRLY ADDED THAT THERE IS NO INTENTION OF THE ASSE SSEE TO USE ANY DEROGATORY LANGUAGE AGAINST THE DEPARTMENT OR TO MA LIGN THE REPUTATION OF THE DEPARTMENT. THE LD. COUNSEL OF THE ASSESSEE HAS FAIRLY ACCEPTED THAT HE WILL NOT USE ANY SUCH WORD AGAINST THE DEPA RTMENT ON BEHALF OF THE ASSESSEE. WITH THIS OBSERVATION THE OBJECTION OF THE DEPARTMENT IS DISPOSED OFF AS ABOVE. 38 21. NOW WE WILL TAKE UP THE ISSUE WHETHER THERE WAS ANY RETRACTION OR NOT. NO DOUBT, THE ASSESSEE HAS SIGNED THE VAL UATION STATEMENT/INVENTORY PREPARED BY SEARCH PARTY ALONG WITH THE WITNESSES. HOWEVER, IT IS A MATTER OF FACT THAT NO COPY OF STA TEMENT OR THE COPY OF INVENTORY PREPARED BY THE SEARCH PARTY WAS GIVEN TO THE ASSESSEE ON THE DATE OF SEARCH. THEREAFTER, ASSESSEE IMMEDIATELY W RITTEN TO THE CONCERNED DEPARTMENTAL AUTHORITIES FOR PROVIDING TH E COPY OF STATEMENT AS WELL AS COPY OF INVENTORY PREPARED AS IT IS REQU IREMENT OF LAW ALSO TO PROVIDE THE COPY. AFTER 8 TO 10 MONTHS COPY OF INVENTORY ALONG WITH STATEMENT WAS PROVIDED TO THE ASSESSEE. IMMED IATELY THEREAFTER THE ASSESSEE RECONCILED THE VALUATION OF THE STOCK NOTED BY THE DEPARTMENT WHICH IS SIGNED BY THE ASSESSEE ALSO AND AS PER RECONCILIATION IT WAS FOUND THAT UNDISCLOSED STOCK IS TO THE EXTENT OF RS. 94 LACS OR ODD IN TOTAL. THEREFORE, THEY DECLA RED THIS RS. 94 LACS STOCK IN ITS HAND I.E. IN CASE OF ASSESSEE AND IN C ASE OF HIS BROTHER IN A PROPORTIONATE OF RS. 30 LACS AND RS. 64,11,980/-. REMAINING STOCK OUT OF TOTAL UNDISCLOSED STOCK NOTED BY THE AO AT RS. 3 .81 CRORES WAS NOT SHOWN FOR THE REASON THAT THERE WAS NO EXCESS STOCK IN FACT. THIS EXPLANATION WAS FILED BEFORE THE AO. HOWEVER, THE S AME HAS NOT BEEN ACCEPTED FOR THE REASON THAT THERE WAS NO COERCIVE ACTION AGAINST THE ASSESSEE NEITHER THERE WAS ANY UNDUE PRESSURE ON AS SESSEE AND ASSESSEE HAS VOLUNTARILY ADMITTED THE EXCESS STOCK OF RS. 3. 81 CRORES. 22. WE FURTHER NOTED THAT AS PER RECONCILIATION, TH E STOCK WAS TO THE TUNE OF RS. 1,22,35,185/- WHEREAS THE SEARCH PARTY HAS RECORDED THE STOCK AS PER BOOKS ON THE DATE OF SEARCH AT RS. 1,0 0,05,748/-. THE RECONCILIATION WAS ALSO NOT ACCEPTED EITHER BY AO O R BY LD. CIT (A). 23. IN OUR CONSIDERED VIEW THE FINDINGS OF LD. CIT (A) TO THIS ASPECT IS CORRECT THAT THIS IS NOT FULLY RETRACTION BUT PARTIAL RETRACTION. THE LD. CIT (A) HAS GIVEN A FINDING THAT THE DEPART MENTAL AUTHORITIES WERE SUPPOSED TO SUPPLY THE COPY OF STATEMENT AND I NVENTORY PREPARED ON THE DATE OF SEARCH TO THE ASSESSEE OR TO THE PE RSON CONCERNED. 39 HOWEVER, IT WAS PROVIDED AFTER 8-10 MONTHS. THIS IS ALSO A MATTER OF FACT THAT AFTER CONTINUING SEARCH FOR 48 HOURS ANY PERSON MAY FEEL UNSTABLE OR HE MAY COME UNDER DEPRESSION, AND THERE FORE BECAUSE OF THIS REASON EVERY PERSON TRY TO GET RID OF SUCH TYP E OF SITUATION BY SIGNING THE STATEMENT OR PANCHNAMA. 24. IT IS ALSO A MATTER OF FACT THAT IN CASE OF SHR I SANJAY PANDEY IN WHOSE PREMISES ALSO THE SEARCH WAS CONDUCTED, SIMIL ARLY INVENTORY OF STOCK WAS PREPARED IN THE SAME MANNER. HOWEVER, NO VALUATION HAS BEEN RECORDED IN CASE OF SANJAY PANDEY. IN CASE SAN JAY PANDEY ALSO THE COPY OF INVENTORY WAS PREPARED AND GIVEN TO THE ASSESSEE AFTER 8- 10 MONTHS AND IN CASE OF ASSESSEE THE INVENTORY PRE PARED BY A DIFFERENT HAND AND VALUATION MENTIONED IN ANOTHER COLUMN I.E. IN ROUND FIGURE IN OTHER HAND AND THAT TOO WITH A LEAD PENCIL. THESE ARE CERTAIN THINGS WHICH FORCED TO DRAW INFERENCE THAT THE VALUATION M AY HAVING BEEN NOTED AFTER COMPLETING THE INVENTORY OF THE ITEMS W ITH SIZE. 25. IT IS ALSO WORTH MENTIONING TO NOTE THAT FOR A SPECIFIC SIZE THERE ARE 5 ITEMS AND IN ALL 5 ITEMS THE VALUE MENTIONE D IS OF A DIFFERENT VALUE. THE REASON BY AO AS WELL AS BY LD. CIT (A) H AS GIVEN THAT THESE ITEMS MAY BE OF A DIFFERENT MATERIAL, DIFFERENT QUA LITY OR DIFFERENT COLOUR USED FOR PAINTINGS ETC. IN OUR CONSIDERED V IEW, THE AO AND LD. CIT (A) HAS PRESUMED THAT THESE ITEMS MAY BE OF DIF FERENT RAW MATERIAL AND DIFFERENT MANUFACTURING STYLES AND DIF FERENT COLOUR OF PAINTINGS BUT ALL THESE ITEMS ARE VERIFIABLE FROM T HE STOCK ITSELF. THE ASSESSEE TIME AND AGAIN HAS STATED THAT THESE ITEMS ARE OF SAME SIZE, SAME MATERIAL AND SAME DESCRIPTION I.E. COLOUR PAIN TINGS ETC. THEREFORE, BEFORE BRUSHING ASIDE THE CONTENTION OF THE ASSESSEE, THERE SHOULD HAVE BEEN SOME MATERIAL WITH THE DEPARTMENT FOR NOT ACCEPTING THE EXPLANATION. 26. IT IS FURTHER SEEN THAT VARIOUS ITEMS ARE OLD ONE AND VERIFIABLE. THE LD. CIT (A) HAS GIVEN RELIEF TO THE EXTENT WHIC H IN HIS VIEW THE ITEMS ARE TALLIED IN SIZE AND SHAPE AS PER BOOKS OF ACCOUNT. HOWEVER, 40 HE HAS NOT GIVEN BENEFIT OF OTHER ITEMS AS THERE IS SMALL VARIATION IN SIZES OF THE ITEMS. THE SEARCH WAS CONTINUED FOR 48 HOURS AND INVENTORIES WERE PREPARED IN ROUTINE MANNER AND IT IS QUITE POSSIBLE THAT RAIDING PARTY MAY HAVE COMMITTED ERROR IN NOT ING THE SIZES OF THE OLD MOORTIES. VARIATION IS OF 1, 1 AND ASSESSE E HAS GIVEN EXPLANATION FOR DIFFERENCE IN SIZES. ASSESSEE HAS G IVEN THE EXAMPLE OF RAM DARBAR. IN RAM DARBAR, HEIGHT OF MAIN IDOL I .E. SHRI RAM IS 28 SIZE, IDOL OF SITA JI AND LAXMAN JI ALWAYS REMAINS LITTLE SMALL IN SIZE AND SHRI HANUMAN JI REMAINS ON A MORE SMA LLER IN SIZE. HOWEVER, THE DEPARTMENTAL AUTHORITIES HAS TAKEN 28 SIZE FOR ALL THE IDOLS. IN FACT, THE SIZE OF ALL THE FOUR IDOLS NEV ER REMAINS SAME. THEREFORE, THE SAME SIZE SHOULD NOT BE TAKEN BY THE DEPARTMENT. LIKEWISE, THERE ARE DIFFERENCES IN ALL THE REMAININ G MOORTIES, THE EXPLANATION OF WHICH HAS NOT BEEN ACCEPTED BY LD. C IT (A). 27. THE A.O. AND THE LD. CIT (A) HAVE ALSO NOT TAKE N INTO CONSIDERATION THE OLD STOCK DECLARED UNDER VDIS FOR THE REASON THAT OLD STOCK CANNOT BE LEFT FOR SUCH A LONG PERIOD I.E . FOR 10 YEARS. IN OUR CONSIDERED VIEW THIS PRESUMPTION OF THE DEPARTMENT IS ALSO NOT CORRECT AS IN LINE OF BUSINESS OF MOORTIES, IT IS NOT NECES SARY THAT THE MOORTY MANUFACTURED WILL BE SOLD IMMEDIATELY THEREAFTER OR NEXT YEAR. THERE ARE MANY INSTANCES THAT ONE MOORTI MANUFACTURED AT A PARTICULAR TIME COULD NOT BE SOLD EVEN AFTER 20 YEARS. IN SUCH TYPE OF BUSINESS ONE HAS TO KEEP ALL TYPES OF STOCK FOR SHOWING TO THE CUSTO MERS THAT HOW MANY TYPES OF MOORTIES ARE MANUFACTURED AND ALSO THE DIF FERENT RAW MATERIALS USED. THEREFORE, WITHOUT ANY SOLID REASON FOR NOT ACCEPTING THE EXPLANATION OF THE ASSESSEE REGARDING CLOSING S TOCK OF EARLIER IS NOT JUSTIFIED. 28. IT IS ALSO A MATTER OF FACT THAT ASSESSEE HAS D ECLARED HIS STOCK EACH YEAR MENTIONING EACH ITEM IN THE CLOSING STOCK INVENTORY. THEREFORE, THESE ITEMS CAN EASILY BE VERIFIED WITH THE OLD STOCK. MERELY FOR THE REASONS THAT THEY ARE NOT OF THE SAM E SIZE AS THERE ARE 41 DIFFERENCES IN SIZE I.E. 1, 1 , 2 ETC. THE DI FFERENCES IN NOTING THE SIZES HAS TO BE HAPPENED AS THE SEARCH WAS CONTINUI NG FOR 48 HOURS AND SEARCH PARTY CAN COMMIT ERROR IN NOT WRITING THE EX ACT SIZES. ITEMS FOUND WERE IN THOUSANDS IN NUMBERS. 29. THE DEPARTMENTAL AUTHORITIES I.E. THE AO AS WEL L AS LD. CIT (A) HAS MENTIONED THAT THERE WAS NO EVIDENCE OF COERCIO N OR PRESSURE AS NOTHING HAS BEEN MENTIONED IN THE PANCHNAMA. AGAIN WE ARE NOT SATISFIED WITH THE OBSERVATIONS OF THE AO AS WELL A S OF THE LD. CIT (A) AS IN PANCHNAMA THESE THINGS CANNOT BE MENTIONED TH AT THE STATEMENT HAS BEEN RECORDED UNDER PRESSURE. THE PREPARING PA RTY OF THE PANCHNAMAS ARE THE DEPARTMENTAL AUTHORITY, THEREFOR E, CERTAINLY THEY CAN NOT MENTION THIS THING THAT STATEMENT IS RECORD ED UNDER PRESSURE. ONLY CIRCUMSTANTIAL EVIDENCE HAS TO BE TAKEN INTO C ONSIDERATION AND CIRCUMSTANCES OF THE CASE SHOWS THAT SINCE SEARCH W AS CONTINUED FOR 48 HOURS, THEREFORE, THERE MAY BE CHANCES TO COMMIT ER ROR IN NOTING THE RIGHT SIZE OF EACH AND EVERY MOORTI. INVENTORY IS PREPARED IS SO MANY PAGES AND THOUSANDS OF ITEMS WERE FOUND, AND, THERE FORE, IT CAN BE SAID THAT THE MISTAKE CAN HAPPEN. 30. WE FURTHER FIND THAT IF THE VALUATION OF SURREN DERED ITEMS ON THE BASIS OF STATEMENT OF THE ASSESSEE IS TAKEN, THEN I T WILL TANTAMOUNT TO DOUBLE ADDITION I.E. ONCE THE VALUE TAKEN BY DEPART MENT AT THE TIME OF SEARCH IS ASSESSED TO TAX AND THEREAFTER THE ASSESS EE SOLD THESE VERY ITEMS AND HAS TAKEN THE VALUE AS PER BOOKS OF ACCOU NT AND AS PER THEIR RECONCILIATION CHART AND ON THE SALE VALUE THE ASSE SSEE HAS PAID TAX. FOR EXAMPLE, FOR ONE ITEM THE ASSESSEE HAS DECLARED THE VALUE OF RS. 3000/- , THE SEARCH PARTY HAS NOTED THIS VALUE AT RS. 9,00 0/-. IT MEANS THE DEPARTMENT HAS CHARGED TAX ON RS. 6,000/- PROFIT ON THE BASIS OF STATEMENT GIVEN BY THE ASSESSEE DURING THE COURSE O F SEARCH. THEREAFTER THE SAME ITEM HAS BEEN SOLD BY THE ASSES SEE FOR RS. 6,000/- AND AFTER REDUCING THE COST I.E. RS. 3,000/- ACCEPT ED BY THE ASSESSEE ON RS. 3,000/- THE ASSESSEE HAS PAID AGAIN. THE AO H AS NOT TAKEN THE 42 VALUE ADOPTED BY HIM AS THE VALUE OF CLOSING STOCK ON ACCOUNT OF VALUATION ACCEPTED BY THE ASSESSEE AT THE TIME OF S EARCH. IN THAT CASE THE VALUE SHOULD HAVE BEEN TAKEN AS OPENING VALUATI ON OF THE CLOSING STOCK OF EARLIER YEAR AND THEREAFTER THE AO SHOULD HAVE MADE ADJUSTMENT OF THE PROFIT ON ACCOUNT OF SALE OF THAT VERY ITEM WHICH HE HAS NOT DONE. 31. COPIES OF ASSESSMENT ORDERS FOR 2009-10 WHICH I S SUBSEQUENT YEAR IS PLACED ON RECORD. THE ASSESSMENT HAS BEEN COMPLETED UNDER SECTION 143(3) ON 3.3.2011. WHATEVER THE STOCK HAS BEEN SHOWN BY THE ASSESSEE THAT HAS BEEN ACCEPTED. AS PER STATEMENT O F THE ASSESSEE, THE ASSESSEE HAS SHOWN THE STOCK ON THE BASIS OF RECONC ILIATION CHART AFTER OBTAINING THE COPY OF INVENTORY FROM THE DEPARTMENT AL AUTHORITIES. THEREFORE, IF THE CONTENTIONS OF THE AO AS WELL AS OF LD. CIT (A) AND THE LD. D/R ARE ACCEPTED, THEN AS STATED ABOVE, THE ADDITION MADE BY AO WILL TANTAMOUNT TO DOUBLE ADDITION. 32. EVEN AND OTHERWISE, AS STATED ABOVE, THERE WILL BE NO IMPACT ON THE REVENUE IF THE STOCK VALUATION DECLARED BY ASSE SSEE WHICH IS ON THE BASIS OF OLD STOCK AND THE STOCK SURRENDERED DURING THE YEAR UNDER CONSIDERATION ON ACCOUNT OF UNEXPLAINED INVESTMENT BECAUSE WHATEVER THE SALE CONSIDERATION WILL BE RECEIVED ON ACCOUNT OF SALE OF THIS STOCK THAT HAS TO BE OFFERED FOR TAXATION. 33. THE ASSESSEE HAS FURNISHED DETAILS OF OLD STOCK SOLD BEFORE SEARCH AS WELL AS AFTER SEARCH AND IF THESE SALE IN STANCES ARE TAKEN INTO CONSIDERATION, THEN NO DIFFERENCE IS COMING OUT IN THE STOCK ESTIMATED BY THE ASSESSEE OR RECONCILED BY THE ASSESSEE. FOR SAKE OF CLARIFICATION THE CHART PREPARED BY THE ASSESSEE AND FURNISHED DU RING THE COURSE OF HEARING IS ENCLOSED WITH THIS ORDER AS PART OF THE ORDER. 34. WE FURTHER NOTED THAT EVEN THE HUMAN ERROR COMM ITTED BY ASSESSEE HAS BEEN ADMITTED BY DEPARTMENT IN PART AS THE AO HIMSELF HAD ADMITTED THE MISTAKE OF ABOUT RS. 37 LACS OR OD D ON ACCOUNT OF DIFFERENCE/CALCULATION IN VALUATION AS WELL AS ABOU T RS. 4 LACS OF STOCK 43 WHICH PERTAINS TO OTHER PARTY. THE LD. CIT (A) HAS ACCEPTED THE ERROR TO THE EXTENT OF RS. 35 LACS OR ODD AS HE HAS DELETED THE ADDITION. THOUGH THE DEPARTMENT HAS CHALLENGED THE DELETION OF ADDIT ION MADE BY LD. CIT (A), HOWEVER, THE LD. CIT D/R HAS ALSO ACCEPTED THA T LD. CIT (A) HAS EXAMINED THE ISSUE MINUTELY AND, THEREFORE, SHE STA TED THAT AT LEAST THE ORDER OF LD. CIT (A) IS LIABLE TO BE SUSTAINED. FR OM THESE FACTS, IT IS CLEARLY PROVED THAT THERE WAS AN ERROR IN TAKING TH E CORRECT VALUATION OF STOCK SURRENDERED BY THE ASSESSEE OR FOUND BY THE D EPARTMENT. 34.1. THERE IS ANOTHER DISCREPANCY I.E. AS PER RECO NCILED BOOKS OF ACCOUNT THE STOCK IS ABOUT RS. 1.22 CORES WHEREAS T HE DEPARTMENTAL AUTHORITIES HAVE TAKEN THE STOCK AT RS. 1 CRORE OR ODD FOUND RECORDED IN THE BOOKS OF ACCOUNT AS ON DATE OF SEARCH. UNDISPUT EDLY, THE BOOKS OF ACCOUNT WERE INCOMPLETE. HOWEVER, COMPLETE SALE VO UCHERS AND OTHER EXPENSES VOUCHERS ON ACCOUNT OF MANUFACTURING ETC. WERE FOUND AND SEIZED. AFTER GETTING THE COPIES OF SEIZED MATERIA L, THE ASSESSEE RECONCILED ITS BOOKS OF ACCOUNT AND PREPARED A FAIR AND CORRECT CHART OF UNDISCLOSED ITEMS AND AS WELL AS, AS PER BOOKS OF A CCOUNT. ONCE THE BOOKS OF ARE COMPLETED ON THE BASIS OF SEIZED MATER IAL FOUND, THEN IN OUR CONSIDERED VIEW, THE AO SHOULD HAVE ACCEPTED TH E STOCK AS PER RECONCILED BOOKS OF ACCOUNT. IT IS ALSO A MATTER OF FACT THAT THERE IS NO DIFFERENCE IN ITEMS FOUND AT THE TIME OF SEARCH. O NLY DIFFERENCE IS OF VALUATION AND THE REASON FOR DIFFERENCE IN VALUATIO N WE HAVE DISCUSSED IN THE ABOVE SO MANY PARAS AS THIS MAY BE ON ACCOUN T OF HUMAN ERROR. IT IS ALSO POSSIBLE THAT DUE TO HUMAN ERROR THE DEP ARTMENT HAS NOTED HIGHER VALUATION THOUGH IT MAY BE A BONAFIDE MISTAK E ON THE PART OF DEPARTMENT ALSO. HOWEVER, ONCE THE ASSESSEE IS ABLE TO FILE A FAIR AND CORRECT VALUATION CHART, THEN IN OUR CONSIDERED VIE W THAT SHOULD HAVE BEEN CONSIDERED. IN VIEW OF THE ABOVE FACTS AND CI RCUMSTANCES, IT IS HELD THAT THIS IS NOT A CASE OF TOTAL RETRACTION BU T IT IS A CASE OF PARTIAL RETRACTION THAT TOO ON ACCOUNT OF VALUATION ONLY. 44 34.2. EVEN OTHERWISE, WE ARE OF THE VIEW THAT VALUA TION OF STOCK FOUND WHETHER IT IS EXCESS STOCK OR RECORDED STOCK HAS TO BE VALUED ON THE BASIS OF PURCHASE PRICE OR MARKET PRICE WHICHEV ER IS LESS. THIS IS AN ADMITTED FACT THAT VALUE HAS TO BE ADOPTED ON TH E BASIS OF MARKET PRICE OR SALE PRICE WHICHEVER IS LOW. NO DOUBT, TH ERE WAS NO VALUATION AVAILABLE OF THE EXCESS STOCK FOUND, HOWEVER, THE V ALUE OF SIMILAR STOCK WHICH WERE RECORDED IN THE BOOKS OF ACCOUNT W AS AVAILABLE. SALE INSTANCES BEFORE SEARCH WERE AVAILABLE. THE SALE IN STANCES WERE GIVEN TO THE AO AS WELL AS TO THE LD. CIT (A) AFTER SEARC H PERIOD AND IT WAS ASCERTAINABLE THAT ON THE BASIS OF THOSE PRICES THE VALUE OF STOCK CAN BE ARRIVED AT. IF FIGURE OF POST SEARCH SALE IS TAKEN , THEN GROSS PROFIT EARNED ON THESE ITEMS SHOULD BE REDUCED WHILE VALUI NG THE EXCESS STOCK FOUND DURING THE COURSE OF SEARCH. THIS METH OD HAS NOT BEEN ADOPTED BY THE AO. HOWEVER, THE LD. CIT (A) HAS ADO PTED THIS METHOD IN PART AS HE HAS DELETED CERTAIN ADDITIONS BY REDU CING THE GROSS PROFIT FROM THE EXCESS STOCK FOUND. IN OUR CONSIDERED VIE W, AO AS WELL AS LD. CIT (A) SHOULD HAVE BEEN TAKEN THIS ASPECT INTO CONSIDERATION AND THEN THE FAIR VALUATION SHOULD HAVE BEEN ADOPTED. THE ASSESSEE HAS GIVEN EXAMPLES OF SALES MADE BEFORE SEARCH AND POST SEARCH. COPIES OF THOSE VALUATIONS HAVE BEEN ANNEXED WITH THIS ORD ER. FROM THOSE EXAMPLES OF SALES I.E. BEFORE SEARCH AND POST SEARC H, IT IS CLEARLY ESTABLISHED THAT THE VALUATION MENTIONED IN THE STO CK INVENTORY BY THE DEPARTMENTAL AUTHORITIES WITH LEAD PENCIL WAS NOT C ORRECT. IN VIEW OF THESE FACTS AND CIRCUMSTANCES WE ARE OF THE VIEW TH AT THE VALUATION DECLARED BY THE ASSESSEE OF EXCESS STOCK OF RS. 94, 00,000/- OR ODD SHOULD HAVE BEEN ACCEPTED. 35. VARIOUS CASE LAWS HAVE BEEN RELIED UPON BY BOTH THE PARTIES I.E. ON BEHALF OF THE ASSESSEE AS WELL AS BY DEPARTMENT. WE HAVE GONE THROUGH THOSE CASES AND FOUND THAT IN ALL THOSE CAS ES NOWHERE IT IS STATED THAT RETRACTION IS NOT ALLOWABLE. RETRACTIO N IS ALLOWABLE, HOWEVER, THERE SHOULD BE SOME CORROBORATIVE EVIDENC E. IN THE PRESENT 45 CASE THERE IS CORROBORATIVE EVIDENCE. THE AO HAS A DMITTED THE MISTAKE ABOUT RS. 43 LACS OR ODD IN VALUATION OF STOCK, LD. CIT (A) HAS ALSO ACCEPTED THE MISTAKE OF RS. 35 LACS OR ODD IN VALUA TION DIFFERENCE. 36. FEW CASES ON WHICH RELIANCE HAS BEEN PLACED BY THE DEPARTMENT AND ASSESSEE ARE DISCUSSED HERE AS UNDER :- 37. IN CASE OF HOTEL KIRAN VS. ACIT, 82 ITD 453, IT HAS BEEN HELD THAT STATEMENT MADE UNDER SECTION 132(4) HAS GREAT EVIDENTIARY VALUE AND IS BINDING ON THE PERSON WHO MAKES IT. IF IN TH E COURSE OF SEARCH THE ASSESSEE MAKES SUCH ADMISSION, HE DEBARS THE AU THORIZED OFFICER FROM MAKING FURTHER INVESTIGATION. 37.1. THERE IS NO DISPUTE REGARDING THE RATIO OF TH E ABOVE DECISION. HOWEVER, THE SAME IS NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE AS THE ASSESSEE IS NOT RETRACTING FULLY BUT ONLY CHALL ENGING VALUATION. COPY OF STOCK INVENTORY WAS NOT PROVIDED TO THE ASS ESSEE. AS AND WHEN THE SAME WAS PROVIDED, THE SAME WAS RECONCILED AND ACCORDINGLY SURRENDER WAS MODIFIED. THIS IS NOT A CASE OF THE DEPARTMENT THAT DEPARTMENT WAS BARRED FOR MAKING ANY FURTHER ENQUIR Y. ALL THE DETAILS WERE AVAILABLE WITH THE DEPARTMENT AND THEY ARE VER IFIABLE. 38. IN CASE OF VIDEO MASTER VS. JT.CIT, 83 ITD 102 (MUMBAI), IT HAS BEEN HELD THAT WHEN RETRACTION OF STATEMENT MAD E UNDER SECTION 132(4) WAS SOUGHT TO BE MADE AFTER A GAP OF ONE MON TH OF RECORDING THE STATEMENT IT WAS IMMATERIAL AS IT COULD NOT BE SAID THAT DS STATEMENT UNDER SECTION 132(4) WAS RECORDED UNDER D URESS. 38.1. THIS CASE IS ALSO NOT IN SUPPORT OF THE DEPAR TMENT AS WE HAVE NOT APPROVED THE CONTENTION OF THE ASSESSEE THAT ST ATEMENT WAS RECORDED UNDER PRESSURE. ONLY ISSUE INVOLVED HERE IS TO CONSIDER THE EXPLANATION FILED ON BEHALF OF THE ASSESSEE. 39. IN CASE OF DR. S.C. GUPTA VS. CIT, 248 ITR 782 (ALL.), IN WHICH IT HAS BEEN HELD THAT WHEN A STATEMENT MADE UNDER S URVEY VOLUNTARILY BY THE ASSESSEE IT COULD FORM THE BASIS OF ASSESSME NT. THE MERE FACT THAT THE ASSESSEE RETRACTED THE STATEMENT COULD NOT MAKE THE STATEMENT 46 UNACCEPTABLE. THE BURDEN LAY ON THE ASSESSEE TO ES TABLISH THAT THE ADMISSION MADE IN THE STATEMENT AT THE TIME OF SURV EY WAS WRONG. 39.1. THE RATIO OF THIS DECISION SUPPORTS THE CASE OF THE ASSESSEE AND NOT THE CASE OF THE DEPARTMENT ON WHICH RELIANCE HA S BEEN PLACED BY LD. CIT D/R THROUGH HER WRITTEN SUBMISSION. 40. THE FACTS OF THE CASE ARE SUCH THAT AT THE TIME OF STATEMENT RECORDED UNDER SECTION 132(4) THE ASSESSEE WAS NOT IN A STABLE STATE OF MIND AS HE WAS UNDER DEPRESSION. THE SEARCH WAS CO NTINUED FOR 48 HOURS AND SIGNATURE ON THE PANCHNAMA WAS TAKEN AT A BOUT MIDNIGHT. THE ASSESSEE FILED EXPLANATION WITH EVIDENCE THAT T HE VALUE MENTIONED IN THE INVENTORY OF STOCK IS NOT CORRECT. COPY OF THE SAME WAS NOT PROVIDED TO THE ASSESSEE, WHICH WAS PROVIDED AFTER 8-10 MONTHS AND IMMEDIATELY THEREAFTER THE ASSESSEE RECONCILED ITS STOCK AND FILED EXPLANATION ACCORDINGLY. 41. WE HAVE ALSO SEEN OTHER CASES RELIED ON BY LD. CIT D/R AND FOUND THAT SIMILARLY THEY ARE NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE, RATHER THEY SUPPORTS THE CASE OF THE ASSESSEE AS ALMOST EACH AND EVERY COURT INCLUDING THE HONBLE SUPREME COURT HAS HELD THAT RETRACTION IS PERMISSIBLE, HOWEVER, THERE SHOULD BE A VALID EXPLANATION WITH CORROBORATIVE EVIDENCE. ASSESSEE HAS FILED CO RROBORATIVE EVIDENCE ALONG WITH HIS EXPLANATION. THEREFORE, IN OUR CONSIDERED VIEW, ALL THE CASE LAWS RELIED ON BY LD. CIT D/R EI THER ARE NOT IN FAVOUR OF THE DEPARTMENT OR ARE IN SUPPORT OF THE CASE OF THE ASSESSEE. 42. THE ASSESSEE HAS ALSO PLACED RELIANCE ON VARIOU S CASE LAWS I.E. IN CASE OF CIT VS. DHARMENDRA SHARMA DECIDED IN DB APPEAL IT NO. 16/2008 DATED 14.12.2008 (RAJASTHAN HIGH COURT), IN CASE OF VIJAY BUILDERS VS. ACIT DECIDED IN ITA NO. 640/JP/2007 DA TED 20.3.2008 (JPR), IN CASE OF CIT VS. RAMDAS MOTOR TRANSPORT, 2 38 ITR 178, IN CASE OF DCIT VS. PRATAP SINGH RAJENDRA CHOMOLA & CO ., 19 DTR 182 (P&H), IN CASE OF KAILASHBEN MANHARLAL CHOKSHI VS. CIT, 14 DTR 257 47 (GUJ.) AND IN CASE OF JAIN TRADING CO. VS. ITO, 17 SOT 574 (MUMBAI) AND IN CASE OF CIT VS. BHANWARLAL MURWATIA (RAJ.HC) . 43. WE HAVE SEEN THE RATIO OF THESE CASES. IN THESE CASES IT IS HELD THAT RETRACTION FROM THE STATEMENT RECORDED UNDER S ECTION 132(4) IS ALLOWABLE, HOWEVER, THERE SHOULD BE SOME REASONED E XPLANATION WITH CORROBORATIVE EVIDENCE. WE HAVE DISCUSSED THE ISSU E IN DETAIL ON MERIT AND HAVE HELD THAT THERE WAS A REASONED EXPLANATION ALONG WITH THE CORROBORATIVE EVIDENCE. THEREFORE, IN VIEW OF THES E FACTS AND CIRCUMSTANCES AND IN VIEW OF VARIOUS CASE LAWS DISC USSED ABOVE, WE ARE OF THE CONSIDERED VIEW THAT VALUATION OF STOCK DISCLOSED BY THE ASSESSEE IS LIABLE TO BE ACCEPTED AS THERE WILL BE NO IMPACT ON THE REVENUE BECAUSE WHATEVER THE SALE CONSIDERATION OF THE STOCK FOUND DURING THE COURSE OF SEARCH, THE SAME WILL BE OFFER ED FOR TAXATION IN THE YEAR IN WHICH IT WAS SOLD. ACCORDINGLY THESE GROUN DS OF THE ASSESSEE ON ACCOUNT OF VALUATION OF STOCK IN THE OPENING STO CK AND IN THE QUANTITY OF THE EXCESS STOCK DECLARED BY THE ASSESS EE ARE ALLOWED. FOR THE SAKE OF CLARIFICATION, WE HAVE DIRECTED TO ACCE PT COMPLETED BOOKS AND AS PER COMPLETED BOOKS THERE IS A DIFFERENCE ON ACCOUNT OF UNDER STATEMENT OF STOCK AT RS. 11,03,430/- WHICH IS ALSO LIABLE TO BE ACCEPTED. ACCORDINGLY WE DIRECT THE AO TO ALLOW FU RTHER RELIEF OF RS. 45,76,380/- IN TOTAL TO THE ASSESSEE ON ACCOUNT OF VALUATION OF STOCK AND DIFFERENCE AS PER COMPLETED BOOKS OF ACCOUNT AN D ON THE BASIS OF STOCK FOUND RECORDED ON THE DATE OF SEARCH. WE ORD ER ACCORDINGLY. 29. SIMILAR VIEW HAS BEEN EXPRESSED BY THE TRIBUNAL IN CASE OF M/S. AKASH GEMS PVT. LTD. DECIDED IN ITA NO. 235 & 432/JP/2011 VIDE ORDE R DATED 10.6.2011 WHEREIN IT WAS HELD AS UNDER :- 48 12. WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDER ED THEM CAREFULLY. `WE HAVE ALSO PERUSED THE MATERIAL ON WHICH OUR ATT ENTION HAS BEEN DRAWN BY THE RESPECTIVE PARTY INCLUDING THE ORDER OF AO A ND LD. CIT (A). FIRST ISSUE IN THE APPEAL OF THE ASSESSEE IS IN RESPECT T O SUSTAINING THE ADDITION OF RS. 5,45,50,000/- ON ACCOUNT OF EXCESS STOCK FOU ND AT PANO-KA-DARIBA. 12.1. AS STATED ABOVE, THE SEARCHES AT THE RESIDENT IAL PREMISES AS WELL AS BUSINESS PREMISES OF THE ASSESSEE WERE CONDUCTED UN DER SECTION 132 ON 23.8.2007 WHICH CONTINUED UPTO THE DATE 27.08.2007. SIMULTANEOUSLY SURVEY UNDER SECTION 133A WAS ALSO CONDUCTED. ULTI MATELY THE STOCKS ADMITTED BY THE ASSESSEE IN THE STATEMENT RECORDED ON 27.8.2007 IN WHICH HE ADMITTED THAT STOCK FOUND AT 14, VISHNUPURI, JAG ATPURA ROAD, JAIPUR WAS RS. 6.67 CRORES, STOCKS FOUND AT 696, PANO-KA-D ARIBA WAS RS. 4,00,00,000/- AND STOCKS AT 14A, VISHNUPURI, JAGAT PURA ROAD, JAIPUR WAS RS. 0.06 CRORES TOTALING TO RS. 10.73 CRORES. IN R ESPECT TO STOCK AT 14, VISHNUPURI AND 14A, VISHNUPURI, THERE IS NO DISPUTE WITH THE DEPARTMENT. THE DISPUTE IN RESPECT OF STOCK FOUND AT PANO-KA-DA RIBA FOR WHICH THE ASSESSEE HAS STATED THIS STOCK IS BEARING COST OF R S. 4,00,00,000/- PURCHASED LAST SO MANY YEARS BACK. THE STATEMENT O F THE ASSESSEE WAS ALSO RECORDED ON 23.8.2007AND ON THIS DATE ALSO THE ASSE SSEE HAS ADMITTED THAT STOCK FOUND AT PANO-KA-DARIBA WAS PURCHASED IN THE PAST AND THE STOCK FOUND AT PANO-KA-DARIBA CONTAINS ROUGH STOCK WHICH WAS PURCHASED FROM THE MARKET ON A VERY LOWER RATE. HOWEVER, HE HAS A DMITTED THE COST OF THIS STOCK AT AROUND RS., 4,00,00,000/-. THE DEPARTMENT GOT VALUED THIS STOCK AT RS. 9,45,50,000/-. 13. AFTER REDUCING THE STOCK AS PER BOOKS OF CCOUNT AT RS.5.14 CRORES, THE REMAINING STOCK WAS ARRIVED AT RS. 5.59 CRORES. THE ASSESSEE HAS SHOWN G.P. RATE OF 20% IN ITS REGULAR TRANSACTION R ECORDED IN THE BOOKS OF ACCOUNT AND ON THE BASIS OF THE TRADING RESULT, THE ASSESSEE REDUCED 20% OF PROFIT FROM STOCK OF RS. 6.67 CRORES AND 0.60 CRORE S FOUND AT 14, VISHNUPURI AND 14A, VISHNUPURI. THE ABOVE STATED V ALUATION WAS MADE BY THE DEPARTMENTAL APPROVED VALUER. REVALUATION O N ACCOUNT OF THIS STOCK 49 WAS ALSO DONE AND IN REVALUATION THERE WAS A MARGIN AL DIFFERENCE AND ULTIMATELY THE VALUER HAS VALUED THE STOCK OF 14, V ISHNUPURI AT RS. 6.67 CRORES AND STOCK OF 14A, VISHNUPURI AT RS. 0.06 CR ORES. ACCORDINGLY THE ASSESSEE REDUCED THE G.P. RATE @ 20% WHICH RESULTED IN A REDUCTION OF RS. 1.38 CRORES. 13.1. AFTER REDUCING THIS AMOUNT ON ACCOUNT OF GROS S PROFIT, THE REMAINING RS. 4.21 CRORES WAS SHOWN BY THE ASSESSEE IN ITS RETURN AS ADDITIONAL INCOME ON ACCOUNT OF COST OF STOCK UNDER VALUED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. HOWEVER, THE AO AS EXPLAI NED IN EARLIER PARAS DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AS IN HIS VIEW THE VALUATION OF STOCK FOUND AT PANO-KA-DARIBA WAS RS. 9,45,50,000/- . THEREFORE, HE TOOK THE VALUE OF THIS AMOUNT INSTEAD OF AMOUNT OF RS. 4 ,00,00,000/- SHOWN BY THE ASSESSEE. THE EXPLANATION OF THE ASSESSEE WAS NOT ACCEPTED INSPITE OF THE FACT THAT ORIGINAL PURCHASE VOUCHERS WERE PRODU CED BEFORE THE AO TO SUBSTANTIATE ITS CLAIM THAT THE STOCK WAS OLD AND W AS RECORDED IN THE BOOKS OF ACCOUNT AS WELL AS STOCK REGISTER MAINTAINED WHI CH WAS SEIZED BY THE SEARCH PARTY. THE AO HAS OBSERVED THAT VALUATION WA S MADE BY THE DEPARTMENTAL VALUER AND IN RESPECT TO OTHER TWO PRE MISES REVALUATION WAS ALSO MADE AND ONLY MINOR DIFFERENCE WAS FOUND WHICH WAS ACCEPTED BY THE ASSESSEE HIMSELF. THEREFORE, HE REJECTED THE E XPLANATION OF THE ASSESSEE AND MADE AN ADDITION OF RS. 5,45,50,000/- WHICH HAS BEEN CONFIRMED BY THE LD. CIT (A). AFTER EXAMINING ALL THE RECORDS AND SUBMISSIONS IT IS SEEN THAT DURING THE SEARCH PERIO D AND ON THE VERY 1 ST DAY OF THE SEARCH THE STATEMENT OF THE ASSESSEE WAS REC ORDED AND HE HAS CLEARLY STATED THAT THE STOCK FOUND AT PANO-KA-DARIBA IS PA RT OF BOOKS OF ACCOUNT. HOWEVER, THE COST OF THE SAME IS ABOUT RS. 4,00,00, 000/- WHICH HE WILL SURRENDER AS HE HAS NOT SHOWN THE IN THE BOOKS OF A CCOUNT. THIS STAND WAS TAKEN ON DAY ONE OF THE SEARCH. THEREAFTER VALUATI ON OF STOCK WAS DONE WHICH WAS ARRIVED AT RS. 5,45,50,000/- BY THE VALUE R. THE DATE OF VALUATION HAS BEEN MENTIONED BY THE VALUER ON 23.8.2007. IT MEANS THE VALUE OF THE ABOVE STOCK WAS VALUED AS ON THE DATE 23.8.2007, WH EREAS THE ASSESSEE HAS 50 CATEGORICALLY STATED THAT THERE IS A VAST DIFFERENC E IN THE VALUATION WHICH IS NOT ACCEPTABLE TO HIM. THE STATEMENT WAS AGAIN RECO RDED ON27.8.2007 AND ON THIS DATE ALSO HE HAS CATEGORICALLY STATED THAT THE VALUATION MADE BY THE VALUER IS NOT ACCEPTABLE TO HIM AS THERE IS A VAST DIFFERENCE AND AT THAT POINT OF TIME HE ADMITTED THAT THE STOCK OF RS. 4,0 0,00,000/- WILL BE OFFERED FOR TAXATION AS THE COST OF THE SAME IS RS. 4,00,00,000/- AND AS PER RECORD AVAILABLE. THEREAFTER NO INVESTIGATION WAS DONE BY THE SEARCH PARTY NEITHER REVALUATION WAS DONE ON ACCOUNT OF STOCK FO UND AT PANO-KA-DARIBA WHEREAS REVALUATION WAS DONE IN RESPECT OF STOCK FO UND AT OTHER TWO PLACES. THEREFORE, THIS IS A CASE OF STRONG PRESUMP TION THAT THE DEPARTMENT HAS AGREED WITH THE EXPLANATION OF THE ASSESSEE THA T THE COST OF STOCK WAS OF RS. 4,00,00,000/- AND HE IS READY TO SURRENDER T HE SAME. THE ASSESSEE HAS SURRENDERED ALSO THE VALUATION OF THIS STOCK BY DECLARING A EXTRA INCOME OF RS. 4.21 CRORES ON ACCOUNT OF EXCESS STOC K. THE PURCHASE VOUCHERS OF THE ITEMS FOUND AT PANO-KA-DARIBA ARE P LACED ON RECORD. THEY ARE MATCHING WITH THE ENTRIES IN THE STOCK REGISTER AND STOCK REGISTER WAS SEIZED BY THE SEARCH PARTY. THEREFORE, THERE CANNO T BE ANY DOUBT THAT THE STOCK WAS OLD AND WAS PART OF THE BOOKS OF ACCOUNT. THOUGH THE VALUATION OF THIS STOCK HAS BEEN SHOWN AT RS. 11,00,000/- OR ODD IN THE BOOKS OF ACCOUNT WHEREAS THE ASSESSEE HAS ADMITTED THAT THE COST OF STOCK WAS RS. 4,00,00,000/- AND RS. 4,00,00,000/- HAVE BEEN SURRE NDERED ALSO. THEREFORE, IN OUR CONSIDERED VIEW THE AO SHOULD HAV E TAKEN INTO CONSIDERATION THIS EXPLANATION AND THIS ASPECT OF T HE CASE AND THEN SHOULD HAVE TAKEN A REASONABLE VIEW IN RESPECT OF THE VALU ATION OF CLOSING STOCK. HOWEVER, THE SAME HAS NOT BEEN DONE BY THE AO NOR L D. CIT (A) HAS TAKEN THE COGNIZANCE OF THIS ASPECT. ALL THE PURCHASE VO UCHERS ALONG WITH DETAILED WRITTEN SUBMISSIONS WERE FILED BEFORE LD. CIT (A). THE COPY OF STOCK REGISTER SEIZED BY THE DEPARTMENT WAS ALSO FI LED BEFORE LD. CIT (A). HOWEVER, LD. CIT (A) WAS ALSO IN AGREEMENT WITH THE AOS FINDING AS IN HIS VIEW THE ASSESSEE COULD NOT SUBSTANTIATE ITS CL AIM TO PROVE THAT THE COST 51 OF STOCK FOUND AT PANO-KA-DARIBA WAS OF RS. 4,00,00 ,000/-. ACCORDINGLY HE HAS CONFIRMED THE ORDER OF AO IN THIS RESPECT. 14. THE VITAL FACT, WHICH THE LD. CIT (A) COULD NOT CONSIDER IS THAT EVEN VALUATION DONE BY THE VALUER IS NOT CORRECTLY DONE. FROM THE COPY OF THE ITEMS FOUND AT PANO-KA-DARIBA AND SAME ITEMS FOUND AT BASEMENT AND GROUND FLOOR OF 14, VISHNUPURI AND 14A, VISHNUPURI, IT IS SEEN THAT THE VALUER HAS TAKEN A DIFFERENT VALUE OF THE SAME ITEM S FOUND AT THREE PLACES. FOR EXAMPLE, ONE ITEM AMETHYST ROUGH WAS FOUND A T BASEMENT OF VISHNUPURI AND RATE OF THIS ITEM HAS BEEN TAKEN BY THE VALUER AT RS. 550/- PER KG. THIS ITEM WAS ALSO FOUND AT GROUND FLOOR OF VISHNUPURI AND RATE HAS BEEN TAKEN AT RS. 3,000/- PER KG. SAME ITEM WAS FOUND AT PANO-KA- DARIBA AND HERE RATE HAS BEEN TAKEN AT RS.8,000/- P ER KG. THE ITEM IS SAME. HOWEVER, THERE IS A VAST DIFFERENCE IN RATE FOR THE REASON KNOWN TO THE VALUER ONLY. IT HAS BEEN CATEGORICALLY STATED BY T HE LD. COUNSEL OF THE ASSESSEE THAT THESE ITEMS ARE THE SAME. HOWEVER, TH EY HAVE BEEN CALCULATED ON A DIFFERENT RATE. THE REQUEST OF THE ASSESSEE WAS NOT ACCEPTED TO MAKE THE REVALUATION OF THE STOCK FOUND AT PANO-KA-DARIBA. SIMILAR EXAMPLE OF VARIOUS OTHER ITEMS FOUND AT THR EE PLACES DIFFERENT VALUE HAS BEEN TAKEN BY THE VALUER. A COPY SHOWING THE SAME ITEMS FOUND AT THREE DIFFERENT PLACES HAS BEEN FILED BY THE LD. COUNSEL WHICH HAS BEEN COMPILED WITH THE STOCK REGISTER AS COPY OF THE STO CK REGISTER IS ALSO ENCLOSED ALONG WITH THE CHART, AND AFTER GOING THRO UGH THIS CHART AND STOCK REGISTER ENTRIES, IT IS CLEARLY ESTABLISHED THAT TH E VALUER HAS ADOPTED A DIFFERENT YARDSTICK FOR VALUING THE SAME ITEM FOUND AT THREE DIFFERENT PLACES. THE STOCK FOUND AT BASEMENT OF VISHNUPURI I S VALUED ON A VERY LOWER RATE THAN STOCK FOUND AT GROUND FLOOR OF VISH NUPURI WHERE THE VALUE HAS BEEN ADOPTED ON SOME HIGHER PRICES WHEREAS THE STOCK OF SAME ITEM FOUND AT PANO-KA-DARIBA HAS BEEN VALUED ON A VERY H IGH PRICE. THE DIFFERENCE IS ABOUT RS. 5,000/- TO RS. 6,000/- AND NO REASON WHATSOEVER HAS BEEN ASSIGNED BY THE VALUER THAT WHY THIS DIFFERENC E IS THERE WHEREAS THE SAME ITEMS WERE FOUND. FOR THE SAKE OF CLARIFICATI ON, WE ARE ENCLOSING 52 HEREWITH THIS CHART ALONG WITH CHART SHOWING DETAIL S OF ENTRIES IN THE STOCK REGISTER OF GOODS LYING AT PANO-KA-DARIBA DURING TH E COURSE OF SEARCH AS ANNEXURE A AND ANNEXURE-B. 15. THERE IS ONE MORE POINT TO BE CONSIDERED THAT T HE VALUER HAS SHOWN THE TOTAL WEIGHT OF AMETHYST ROUGH FOUND AT PANO-KA -DARIBA AT 8550 KG AND THIS HAS BEEN ARRIVED AT BY THE VALUER AS UNDER :- 171 BAGS X 50 KG = 8,550 KG. IT MEANS THAT EACH BAG OF THIS ITEM CONTAINS 50 KG WEIGHT. THIS IS NOT POSSIBLE. THE ACTUAL WEIGHT CANNOT BE 50 KG OF EACH BAG. THERE MUST BE SOME DIFFERENCE. IT MEANS THE STOCK HAS NOT BEEN CO UNTED PROPERLY AND, THEREFORE, TOTAL EXACT WEIGHT HAS NOT BEEN NOTED BY THE VALUER. THIS COULD HAVE BEEN VERIFIED FROM THE STOCK REGISTER WHERE WE IGHT IS MENTIONED OF EACH ITEM WHICH IS SUPPORTED BY PURCHASE VOUCHERS. THEREFORE, THIS CREATES A DOUBT THAT FAIR VALUATION HAS NOT BEEN DONE BY TH E VALUER. 15.1. IT IS FURTHER NOTICED THAT THE CONTENTION OF THE ASSESSEE THAT THE COST OF STOCK FOUND AT PANO-KA-DARIBA WAS NOT MORE THEN RS. 4,00,00,000/- AND THIS CONTENTION OF THE ASSESSEE HAS NOT BEEN FOUND INCORRECT. ONLY IN SUPPORT OF THE CONTENTION OF THE DEPARTMENT IS VALU ATION REPORT WHEREAS AS EXPLAINED ABOVE THE VALUERS REPORT IS DEFECTIVE ON VARIOUS COUNTS. THEREFORE, EITHER DEPARTMENT SHOULD HAVE ACCEPTED T HE OFFER OF THE ASSESSEE OR SHOULD HAVE REVALUED THE STOCK. THERE I S A STRONG PRESUMPTION IN FAVOUR OF THE ASSESSEE THAT DEPARTMENT ITSELF WA S NOT GOING FURTHER FOR MAKING REVALUATION OR EXAMINING THE ISSUE AS THEY F OUND THAT ASSESSEE HAS OFFERED TO SURRENDER RS. 4,00,00,000/- AS COST OF S TOCK FOUND AT PANCHNAMA. EVEN AND OTHERWISE THIS IS A FACTUAL AS PECT THAT COST OF THE MATERIAL HAS TO BE TAKEN, AS ASSESSEE IS VALUING IT S STOCK ON THE BASIS OF PURCHASE PRICE OR MARKET PRICE WHICHEVER IS LOWER. THE ACCOUNTS OF THE ASSESSEE ARE AUDITED. IT IS ALSO A MATTER OF FACT T HAT AS AND WHEN THE STOCK IS SOLD THE SALE VALUE WILL BE TAKEN INTO ACCOUNT AND IF ASSESSEE HAS SHOWN 53 LOWER COST THEN THE PROFIT WILL BE MORE AND THE SAM E SHALL BE OFFERED FOR TAXATION AS THE PROFIT HAS TO BE SHOWN ONLY AFTER S ALE AND NOT BEFORE. THEREFORE, IT IS NOT A CASE OF THE DEPARTMENT THAT IF THE VALUATION ADOPTED BY THE DEPARTMENTAL VALUER WHICH IS AS PER MARKET R ATE IS NOT ACCEPTED THEN THERE WILL BE A LOSS TO THE REVENUE. IT IS ALSO A MATTER OF FACT THAT THE VALUATION DONE BY THE DEPARTMENT IS ON THE BASIS OF MARKET PRICE AND NOT ON THE BASIS OF COST PRICE. THIS IS EVIDENT FROM T HE VALUATION REPORT AS IN THE REPORT IT IS MENTIONED THAT THE DATE OF VALUATI ON IS 23.8.2007. THEREFORE, IT IS CLEAR THAT THE VALUER HAS ADOPTED MARKET RATE. IT IS ALSO A MATTER OF COMMON KNOWLEDGE THAT VALUATION DONE BY T HE DEPARTMENTAL VALUER OR ANY OTHER VALUER HAS TO BE MADE ON THE BA SIS OF MARKET PRICE AND IF THE PRICE HAS TO BE DETERMINED ON THE BASIS OF C OST PRICE THEN THE DATE OF VALUATION HAS TO BE MADE IN THE VALUATION REPORT BY MENTIONING THAT THIS IS THE DATE FOR THE PURPOSE OF COST PRICE WHICH IS NOT MENTIONED IN THE VALUERS REPORT AND THE DATE OF VALUATION IS MENTIO NED AS 23.8.2007 ASSTATED ABOVE. WE HAVE ALSO GONE THROUGH THE COPY OF PURCHASE BILLS WHICH ARE PLACED IN THE COMPILATION AND AS PER THE SE PURCHASE BILLS THE MATERIAL FOUND AT PANO-KA-DARIBA WAS PURCHASED FROM ASSESSMENT YEAR 1996-97 TO 2003-04. THEREFORE, THERE IS NO DOUBT TH AT THE STOCK WAS PURCHASED IN THE PAST WHICH HAS BEEN RECORDED IN TH E BOOKS OF ACCOUNT ALSO. 16. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CA SE OF AMAR KUMARI SURANA, 226 ITR 344 HAS HELD THAT MERELY ON THE BAS IS OF VALUATION REPORT ADDITION CANNOT BE MADE AND ASSESSEE SHOULD BE GIVE N OPPORTUNITY TO EXPLAIN AS TO WHY NOT THE SAME SHOULD BE TAKEN AS T HE BASIS OF DETERMINING COST OF INVESTMENT AND IF THE ASSESSEE HAS DISPUTED THE SAME, INFERENCE SHOULD BE DRAWN AFTER CONSIDERING THE OBJECTION RAI SED BY THE ASSESSEE. 17. IN THE PRESENT CASE THE ASSESSEE HIMSELF HAS RA ISED THE OBJECTION DURING THE SEARCH PROCEEDINGS ITSELF. HOWEVER, NO REVALUATION WAS DONE. THEREFORE, IN OUR CONSIDERED VIEW THE ADDITION MADE ON THE BASIS OF 54 VALUATION REPORT WAS NOT JUSTIFIED AND, THEREFORE, THE LD. CIT (A) WAS ALSO NOT JUSTIFIED TO CONFIRM THE ACTION OF THE AO. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE DELETE THE ADDITION OF RS. 5,45,5 0,000/-. 30. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AN D IN VIEW OF THE CONSISTENT APPROACH OF THE TRIBUNAL, WE ARE OF THE VIEW THAT A DDITION MADE AND SUSTAINED ON THE BASIS OF EXCESS VALUATION IS NOT JUSTIFIED AS THERE IS NO DIFFERENCE IN ITEMS, WEIGHT DISCLOSED IN THE BOOKS OF ACCOUNT AND FOUND DURING THE COURSE OF SEARCH. WHATEVER A SMALL DIFFERENCE WAS THERE, ON THIS ACCOUNT THE ASS ESSEE HIMSELF HAS SURRENDERED A SUM OF RS. 34,00,000/- OR ODD ON ACCOUNT OF CASH PURCHASES BY SHRI RAVI HALDIA AND SHRI DINESH HALDIA. THEREFORE, IN OUR VIEW, NO FURTHER ADDITI ON IS REQUIRED. ACCORDINGLY, THE REMAINING ENTIRE ADDITION IS DELETED. 31. GROUND NO. 5 IS AN ALTERNATIVE GROUND TO GROUND NOS. 3 & 4. GROUND NOS. 3 & 4 HAS ALREADY BEEN ALLOWED BY US IN FAVOUR OF ASSESSE E HEREIN ABOVE. THEREFORE, THIS GROUND DOES NOT REQUIRE ANY ADJUDICATION. 32. GROUND NO. 6 IS REGARDING NOT SETTING OFF/DEDUC TING SIMULTANEOUS TRADING ADDITIONS MADE AND SUSTAINED IN CASE OF ASSESSEE HI MSELF, HIS BROTHER ETC. 33. THIS IS ALSO AN ALTERNATIVE GROUND TO GROUND NO S. 3 & 4. GROUND NOS. 3 & 4 HAS ALREADY BEEN ALLOWED IN FAVOUR OF THE ASSESSEE, THE REFORE, THIS GROUND DOES NOT REQUIRE ANY ADJUDICATION UPON. 34. GROUND NO. 7 IS AGAINST SUSTAINING APPLICATION OF PROVISIONS OF SECTION 145(3). 35. THIS IS A CASE OF SEARCH AND VARIOUS DISCREPANC IES WERE FOUND. BOOKS OF ACCOUNT WERE NOT COMPLETE. THEREFORE, THE AO AND LD. CIT ( A) WAS JUSTIFIED IN INVOKING 55 PROVISIONS OF SECTION 145(3). ACCORDINGLY WE UPHOL D THE APPLICATION OF PROVISIONS OF SECTION 145(3) OF THE ACT. THIS GROUND OF THE ASSE SSEE FAILS. 36. GROUND NO. 8 IS AGAINST SUSTAINING THE APPLICAT ION OF GP RATE @ 30% ON THE BASIS OF ORDER OF TRIBUNAL IN CASE OF ASSESSEE FOR THE AS SESSMENT YEAR 2004-05 AND THEREBY SUSTAINING TRADING ADDITION OF RS. 2,33,218/-. 37. BRIEF FACTS IN THIS REGARD ARE DISCUSSED IN THE ORDER OF LD. CIT (A) IN PARA 5.1 TO 5.2 AT PAGES 19 TO 21, ARE AS UNDER :- 5.1 BRIEFLY STATED THE FACTS THAT THE A.O. NOTICE D THAT THE APPELLANT IS DERIVING INCOME FROM PROCESSING AND TR ADING OF GEM STONES UNDER THE NAME AND STYLE OF M/S. RH EXPORTS. APART FROM IT, THE APPELLANT IS ALSO TRADING IN COMMODITIES THROUG H COMMODITY EXCHANGE UNDER THE NAME AND STYLE OF M/S. RAGHAV TR ADING COMPANY SINCE 2003-04 AND SHARE RELATED BUSINESS IN M/S. RAVI HALDIA SINCE 2004-05. THE A.O. HAS GIVEN THE CHART FOR PURCHASE, SALE, N.P., G.P. RELATED TO ALL THE THREE BUSINESS IN THE ASSESSMENT ORDER, OUT OF WHICH DETAILS OF GEM STONE BUSINESS F OR A.Y. 2005-06 ONWARD ARE EXTRACTED BELOW: A.Y. SALES PURCHASE STOCK G.P. G.P.% NET PROFI T 05-06 19132770/- 42740333/- 36301125/- 2172925/- 11 .36% 9987110/- 06-07 142135/- 11159105/- 48001224/- 23879/- 16.80% (-)1430019 07-08 3644240/- 13541232/- 58606809/- 401922/- 11.0 2% (-)776631 08-09 1299794/- 3095168/- 60558903/- 156720/- 12.06 % 19,16,671/- THE A.O. NOTED THAT THE PURCHASES OF GEM STONES HAV E BEEN MADE IN CASH AND THE COMPLETE DETAILS OF SELLER VIZ FULL NAME AND COMPLETE ADDRESS IS NOT AVAILABLE. THE A.O. VIDE HI S LETTER DATED 17.11.09 ASKED THE APPELLANT TO PRODUCE THE PURCHAS E BILLS AS WELL AS CONFIRMATIONS FROM THE SELLER PARTICULARLY IN RE SPECT OF PURCHASES IN CASH AS WELL AS PURCHASES FROM UNREGISTERED DEAL ER (URD) AND WAS ALSO ASKED TO SHOW CAUSE THAT IN THE CASE OF FA ILURE WHY SHOULD NOT THE ADDITION BE MADE FOR THESE UNVERIFIABLE PUR CHASES, BUT THE APPELLANT FAILED TO FILE CONFIRMATIONS. THE APPELLA NT EVEN FAILED TO GIVE COMPLETE ADDRESS AND THE PRESENT WHEREABOUTS O F THOSE PERSONS FROM WHOM THE APPELLANT HAS SHOWN PURCHASES . THE A.O. ALSO NOTICED THAT THESE CASH PURCHASES HAVE BEEN MA DE BY SHOWING PAYMENT BELOW RS.20,000/- AND MANY A TIMES PAYMENT TO SINGLE PARTY HAVE BEEN SHOWN REPEATEDLY AND CONTINUOUSLY O N DAY TO DAY 56 BASIS FOR 3-4-5 DAYS WITH A VIEW TO AVOID APPLICABI LITY OF SECTION 40A(3). IN RESPECT OF SOME OTHER CASH PURCHASES, TH E PAYMENTS TO THOSE SMALL SELLERS HAVE BEEN SHOWN TO HAVE BEEN MA DE AFTER A LONG GAP OF 6 TO 24 MONTHS. A.O. OBSERVED THAT IT IS UNB ELIEVABLE THAT THESE SMALL PARTIES WOULD WAIT FOR THE PAYMENT TO B E MADE AFTER A LONG GAP OF 6 TO 24 MONTHS. SIMILAR IS THE POSITION IN RESPECT OF UNREGISTERED DEALERS. IN VIEW OF THESE FACTS, THE A .O. REJECTED THE TRADING RESULTS OF THE APPELLANT AND INVOKED THE PR OVISION OF SECTION 145(3). THE A.O. DISALLOWED THE CASH PURCHASE AND P URCHASES FROM URD, AS THESE REMAINED UNVERIFIABLE AMOUNTING TO RS .15,903/-, RS.36,41,232/- AND RS.44,279/- IN A.Y. 2005-06, 200 7-08 AND A.Y. 2008-09. 5.2 THE A.O. FURTHER NOTICED THAT THE APPELLANT HA S MADE PURCHASES FROM M/S. A.S. EXPORTS, M/S. CREATIVE INT ERNATIONAL, M/S. D.J. IMPEX, M/S. GAURAV EXPORTS, M/S. GIRISH D IAM, M/S. KOMAL ENTERPRISES, M/S. M.V. GEMS INTERNATIONAL, M/ S. RAHUL EXPORTS, M/S. S.V. ENTERPRISES IN VARIOUS YEARS. HO WEVER IN THE APPELLANTS OWN CASE AND IN THE CASE OF HIS BROTHER SHRI DINESH HALDIA IN REGULAR ASSESSMENT PROCEEDINGS IN A.Y. 20 04-05 PURCHASES FROM THESE PARTIES WERE HELD TO BE BOGUS/ UNVERIFIABLE BY THE A.O. AND SAME WAS CONFIRMED BY THE HONBLE ITAT IN ITA NO.320-321/JP/08 VIDE ORDER DATED 31.7.08 AND CONSI DERING THE PECULIARITY OF THE FACTS THAT HEAVY PURCHASES HAVE BEEN SHOWN FROM THESE PARTIES WHICH ARE UNVERIFIABLE, THE HONBLE I TAT HAS UPHELD THE GROSS PROFIT RATE OF 30% IN THE APPELLANTS OWN CASE AND IN THE CASE OF HIS BROTHER SH. DINESH HALDIA. THE A.O. ACC ORDINGLY APPLIED THE G.P. RATE OF 30% AFTER REJECTING BOOKS RESULTS IN THE CASE OF APPELLANT AND MADE THE TRADING ADDITION OF RS.35,66,906/-, RS.18,761/-, RS.6,91,350/- AND RS.2,33,218/- RESPEC TIVELY IN A.Y. 2005-06, 2006-07, 2007-08 AND 2008-09. OUT OF THE A FORESAID TWO ADDITION/DISALLOWANCE I.E. DISALLOWANCES OUT OF THE PURCHASE AND TRADING ADDITION, THE A.O. HAS ADDED ONLY ONE I TM ON SUBSTANTIVE BASIS, WHICHEVER IS HIGHER IN PARTICULA R ASSESSMENT YEAR AND OTHER ITEM WAS CONSIDERED ON PROTECTIVE BASIS. IN A.Y. 2008- 09, AS THE APPELLANT HAS ALREADY OFFERED CASH PURCH ASE AMOUNTING TO RS.30,50,889/- REMAINING CASH PURCHASES AMOUNTIN G TO RS.44,279/- HAS BEEN HELD DISALLOWABLE BY THE A.O. AS THE TRADING ADDITION IS MORE THAN THE DISALLOWANCE OF UNVERIFIA BLE PURCHASE OF RS.44,279/-, THE TRADING ADDITION WAS ADDED ON SUBS TANTIVE BASIS AND DISALLOWANCE ON ACCOUNT OF UNVERIFIABLE/BOGUS P URCHASES WAS NOT SEPARATELY ADDED AND WAS TAKEN ON PROTECTIVE BA SIS. 57 38. THE LD. CIT (A) CONFIRMED THE ACTION OF THE AO BY RECORDING HIS FINDING IN PARA 5.3 TO 5.5 OF HIS ORDER ARE AS UNDER :- 5.3 THE APPELLANT HAS FURNISHED SUBMISSIONS FOR THE PRESENT APPEAL ON THE SIMILAR BASIS AND ON SIMILAR ACCOUNT, AS FURNISHED IN APPEAL FOR A.Y. 2005-06. IN VIEW OF THE DETAILED DI SCUSSION MADE IN THE APPEAL FOR A.Y. 2005-06 IN THE CASE OF APPEL LANT IN APPEAL NO.525/09-10 ORDER DATED 18.11.10, THE ACTION OF TH E A.O. IN REJECTING THE BOOK RESULT AND APPLYING THE PROVISIO NS OF THE SECTION 145(3) AND THEREAFTER G.P. RATE OF 30% IS UPHELD FO R THE YEAR UNDER CONSIDERATION ALSO, WHICH LEADS TO CONFIRMATION OF ADDITION OF RS.2,33,218/-. 5.4 AS REGARDS DISALLOWANCE OUT OF THE PURCHASE IS CONCERNED, THE UNDERSIGNED HAS HELD THAT SUCH DISALLOWANCE IS ALSO TO BE MADE FROM THE PURCHASES SHOWN TO BE MADE FROM REGISTERED DEALERS FROM WHOM PURCHASES WERE FOUND UNVERIFIABLE IN REGULAR A SSESSMENT PROCEEDINGS FOR A.Y. 2004-05, CONSIDERING THE FACTS NOTICED DURING THAT ASSESSMENT PROCEEDINGS AND NOW FURTHER FACTS N OTICED DURING THE SEARCH AND SEIZURE ACTION, WHICH HAS BEEN DISCU SSED IN THE APPEAL ORDER FOR AY 2005-06 DATED 18.11.10. OUT OF THE TOTAL CASH PURCHASE AND PURCHASE FROM UNVERIFIABLE REGISTERED DEALERS, THE APPELLANT HAS ALREADY SURRENDERED RS.30,55,889/-. O UT OF THE REMAINING CASH PURCHASE OF RS.44,279/-, THE 25% IS HELD DISALLOWABLE WHICH COMES TO RS.11,070/-. ACCORDINGL Y, DISALLOWANCE OUT OF PURCHASE IS UPHELD TO THE EXTEN T OF RS.11,070/- PROTECTIVELY. 5.5 AS DISALLOWANCE OUT OF THE PURCHASES HELD JUSTI FIED IN THE ABOVE PARAGRAPHS IS RS.11,070/- AND SAME IS LESS TH AN THE TRADING ADDITION OF RS.2,33,218/- SO CONFIRMED, FINALLY ADD ITION OF RS.2,33,218/- SO MADE BY THE A.O. IS CONFIRMED. 39. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT ASSESSEE DESERVES TO SUCCEED IN THIS GROUND IN PART. 40. THE AO AND LD. CIT (A) MADE AND SUSTAINED ADDIT IONS ON THE BASIS OF GP RATE APPLIED BY TRIBUNAL FOR ASSESSMENT YEAR 2004-405 AT 30%. THIS RATE WAS APPLIED BY TRIBUNAL AGAINST GP RATE SHOWN BY ASSESSEE AT 27% A S STATED BY LD. A/R. IT IS SEEN THAT 58 FROM ASSESSMENT YEARS 2005-06 TO 08-09 THE ASSESSEE HAS SHOWN GP RANGING FROM 11% TO 16.80%. IN ASSESSMENT YEAR 2008-09 ASSESSEE HAS SHO WN 16.06%, IN ASSESSMENT YEAR 2006-07 ASSESSEE HAS SHOWN GP RATE AT 16.80%. THE BOOKS OF ACCOUNTS WERE COMPLETE UPTO ASSESSMENT YEAR 2006-07 AND THEREAFTER THE BOO KS OF ACCOUNT WERE PREPARED AFTER SEARCH. TAKING INTO CONSIDERATION ALL ASPECTS, WE ARE OF THE VIEW THAT IF A GP RATE OF 18% IS APPLIED, THEN IT WILL MEET THE ENDS OF JUSTICE. THE AO IS DIRECTED TO RE-COMPUTE THE TRADING ADDITION TAKING THE GP RATE AT 18% INSTEAD OF 30%. THE GROUND IS PARTLY ALLOWED. 41. GROUND NO. 9 IS AGAINST CONFIRMING THE PURCHASE S MADE BY ASSESSEE FROM UNREGISTERED DEALERS OF RS. 44,279/- IN CASH AS BOG US BEING UNVERIFIED, UNEXPLAINED AND THEREBY CONFIRMING AN ADDITION OF RS. 11,070/- BEIN G 25% OF UNVERIFIABLE/UNEXPLAINED PURCHASES. 42. THIS ISSUE SHOULD BE DECIDED IN FAVOUR OF THE A SSESSEE FOR THE SIMPLE REASON THAT THE JAIPUR BENCHES OF THE TRIBUNAL ARE TAKING A CON SISTENT VIEW THAT WHERE CERTAIN PURCHASES REMAINED UNVERIFIED, THE PAST HISTORY OF THE CASE SHOULD BE TAKEN INTO CONSIDERATION. WE HAVE ALREADY SUSTAINED A TRADING ADDITION BY DIRECTING TO APPLY GP RATE AT 18%. THE ADDITION MADE ON ACCOUNT OF UNVERIFIAB LE PURCHASES IS LESS THEN TRADING ADDITION. THEREFORE, WE HOLD THAT ADDITION MADE BY AO AND SUSTAINED BY LD. CIT (A) WAS NOT JUSTIFIED. ACCORDINGLY THIS GROUND OF THE ASSE SSEE IS ALLOWED. 43. NEXT GROUND NO. 10 IS AGAINST SUSTAINING ADDITI ON IN RESPECT OF INTEREST ACCRUED ON KVP AND FDR TAKEN BY ASSESSEE IN THE NAME OF HIS MO THER SMT. SHAKUNTALA DEVI. 44. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE ORDERS OF THE AUTHORITIES BELOW, WE SET ASIDE THIS ISSUE TO THE FILE OF AO TO EXAMINE THE SAME AFRESH. IT HAS BEEN STATED THAT THE INTEREST ACCRUED ON KVP AND FDR HAS ALREADY BEEN SHOWN IN THE 59 RESPECTIVE HANDS IN WHOSE NAME KVP AND FDR IS TAKEN . IF THIS FACT IS CORRECT, THEN THERE SHOULD NOT BE ANY ADDITION. SINCE FACTS ARE NOT CO MING FROM THE ORDERS OF THE AUTHORITIES BELOW OR WRITTEN SUBMISSIONS, THEREFORE, WE SET ASI DE THIS ISSUE TO THE FILE OF AO TO EXAMINE AFRESH AFTER AFFORDING A REASONABLE OPPORTU NITY OF BEING HEARD TO THE ASSESSEE. 45. GROUND NO. 11 IS AGAINST SUSTAINING DISALLOWANC E OF RS. 10,230/- BEING 10% OF SOME OF THE EXPENSES. 46. THIS IS A MEAGER DISALLOWANCE. THEREFORE, WE AR E NOT INCLINED TO INTERFERE WITH THE FINDINGS OF AO AND LD. CIT (A). ACCORDINGLY THIS G ROUND OF THE ASSESSEE IS REJECTED. 47. NOW WE WILL TAKE UP THE REMAINING GROUND IN THE APPEAL OF THE DEPARTMENT. 48. GROUND NO. 6 IS AGAINST DELETING THE ADDITION O F RS. 10,250/- MADE ON ACCOUNT OF EXPENSES. 49. THIS GROUND WE HAVE ALREADY DISPOSED OFF WHILE DECIDING GROUND NO. 11 OF ASSESSEE. WE HAVE SUSTAINED 10% EXPENSES SUSTAINED BY LD. CIT (A). IN FACT, THE AO DISALLOWED 20% OF THE EXPENSES, THE LD. CIT (A) HAS RESTRICTED IT TO 10% AND WE HAVE CONFIRMED THE ORDER OF LD. CIT (A) IN THIS RESPECT. THEREFORE, FOR THIS REASON, THE GROUND OF THE DEPARTMENT IS DISMISSED. 50. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND APPEAL OF THE DEPARTMENT IS DISMISSED. 51. NOW WE WILL TAKE THE APPEAL FOR ASSESSMENT YEAR 2007-08 IN CASE OF ASSESSEE AND DEPARTMENT. 52. GROUND NO. 1 IS SIMILAR TO THE GROUND NO. 1 FOR ASSESSMENT YEAR 2008-09 AND THE SAME WAS NOT PRESSED. THEREFORE, THE SAME IS DISMIS SED AS NOT PRESSED. 60 53. GROUND NO. 2 IS AGAINST REJECTING THE ASSESSEE S EXPLANATION THAT ASSESSEE HAS ALREADY SURRENDERED RS. 2,00,000/- IN ASSESSMENT YE AR 2008-09 TOWARDS POSSIBLE INTEREST WHICH ACCRUED /AROSE ON SURRENDER OF KVP/FDR. 54. THIS ISSUE WE HAVE RESTORED TO THE FILE OF AO W HILE DISPOSING THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2008-09. THEREFORE, TH IS GROUND IS ALSO RESTORED TO THE FILE OF AO TO EXAMINE THIS ISSUE AFRESH. 55. GROUND NO. 3 IS AGAINST SUSTAINING APPLICATION OF PROVISIONS OF SECTION 145(3). 56. THIS ISSUE WAS ALSO DECIDED IN THE APPEAL FOR A SSESSMENT YEAR 2008-09 AND WE HAVE REJECTED THE GROUND OF THE ASSESSEE. ON THE S AME REASONING, THIS GROUND OF THE ASSESSEE IS REJECTED HERE ALSO. 57. GROUND NO. 4 IS AGAINST SUSTAINING THE TRADING ADDITION OF RS. 6,91,350/- ON ACCOUNT OF ALLEGED INFLATED PURCHASES. 58. SIMILAR ISSUE WAS ALSO INVOLVED IN THE ASSESSME NT YEAR 2008-09. THE AO APPLIED 30% GP AND THE LD. CIT (A) CONFIRMED THE SAME. WE HAVE DIRECTED THE AO TO APPLY GP RATE AT 18%. HERE ALSO WE ARE OF THE VIEW THAT IF A GP RATE OF 18% IS APPLIED, THAT WILL MEET THE ENDS OF JUSTICE. ACCORDINGLY, WE DIRECT T HE AO TO RECALCULATE THE TRADING ADDITION BY TAKING THE GP AT 18% AGAINST 11.20% SHO WN BY ASSESSEE AND AGAINST 30% APPLIED BY THE AO ORIGINALLY ON THE DECLARED SALES. 59. NEXT ISSUE IS AGAINST MAKING ADDITION @ 25% OF UNVERIFIABLE/URD PURCHASES. 60. SIMILAR ISSUE WAS INVOLVED IN EARLIER YEAR ALSO WHERE WE HAVE DIRECTED THE AO TO APPLY GP RATE AT 18% WHICH IS HIGHER AGAINST THE GP RATE SHOWN BY ASSESSEE AT 11.20%. WE HAVE ALSO OBSERVED THAT THE JAIPUR BENCHES OF TH E TRIBUNAL ARE TAKING A CONSISTENT VIEW THAT WHERE CERTAIN PURCHASES REMAINED UNVERIFI ED/UNEXPLAINED, THEN THE ADDITION IS 61 TO BE MADE ON THE BASIS OF PAST HISTORY AND NOT @ 2 5% OF UNVERIFIABLE PURCHASES. ACCORDINGLY, THIS GROUND OF THE ASSESSEE IS ALLOWED AS WE HAVE ALREADY SUSTAINED A HIGHER GP RATE. 61. GROUND NO. 6 IS AGAINST ENHANCEMENT OF INCOME O F RS. 1,06,250/- TO THE TOTAL INCOME OF THE ASSESSEE BY WAY OF DISALLOWANCE TO TH E EXTENT OF 25% OF ALLEGED UNVERIFIABLE PURCHASES OF RS. 4,25,000/-. 62. IN FACT, NO ADDITION WAS MADE BY THE AO. HOWEVE R, THE LD. CIT (A) FOUND THAT THERE ARE UNVERIFIABLE PURCHASES OF RS. 4,25,000/-. THEREFORE, HE DISALLOWED @ 25% OF THE SAME AND MADE AN ADDITION OF RS. 1,06,250/-. 63. SIMILAR ISSUE WE HAVE ALREADY DECIDED WHILE DEC IDING GROUND NO. 4 WHERE WE HAVE HELD THAT WE HAVE ALREADY APPLIED A HIGHER GP RATE AGAINST GP RATE SHOWN BY ASSESSEE. THEREFORE, NO SEPARATE ADDITION IS REQUIR ED ON ACCOUNT OF UNVERIFIABLE PURCHASES. THEREFORE, THIS GROUND OF THE ASSESSEE IS ALSO ALLOWED BY DELETING THE ADDITION OF RS. 1,06,250/- SUSTAINED BY LD. CIT (A). 64. LAST GROUND IS AGAINST SUSTAINING THE DISALLOWA NCE OF RS. 15,506/- BEING 10% OF EXPENSES. 65. WE FIND THAT LD. CIT (A) HAS REASONABLY SUSTAIN ED THE ADDITION @ 10% AGAINST 20% DISALLOWED BY THE AO. THEREFORE, WE SEE NO REA SON TO INTERFERE WITH THE FINDING OF LD. CIT (A). ACCORDINGLY, THIS GROUND OF THE ASSES SEE IS DISMISSED. 66. NOW WE WILL TAKE UP THE APPEAL OF THE DEPARTMEN T. 67. ALL THE GROUNDS RELATE TO DELETING ADDITION OF RS. 26,24,674/- BY THE LD. CIT (A) OUT OF TOTAL ADDITION OF RS. 36,41,232/- WHICH WAS MADE BY THE AO ON ACCOUNT OF CASH PURCHASES. 62 68. THIS ISSUE WE HAVE ALREADY DISPOSED OFF WHILE D ISPOSING THE GROUND OF THE ASSESSEE AGAINST ADDITION SUSTAINED BY LD. CIT (A). AO MADE ADDITION ON ACCOUNT OF CASH PURCHASES, LD. CIT (A) REDUCED THE ADDITION BY OBSE RVING THAT 25% SHOULD BE DISALLOWED. WE HAVE ALREADY HELD THAT ADDITION @ 25% OF UNVERIF IABLE PURCHASES IS NOT JUSTIFIED AS ADDITION SHOULD BE MADE ON THE BASIS OF PAST HISTOR Y OF THE CASE. WE HAVE TAKEN INTO CONSIDERATION PAST HISTORY OF THE CASE. THE ASSESS EE HAS SHOWN GP RATE RANGING FROM 11% TO 16% FROM ASSESSMENT YEAR 2005-06 TO 08-09. WE H AVE SUSTAINED TRADING ADDITION BY DIRECTING THE AO TO APPLY GP RATE AT 18% WHICH IS M UCH HIGHER AGAINST GP RATE SHOWN BY ASSESSEE AT 11.2% FOR THE YEAR UNDER CONSIDERATION. ACCORDINGLY THESE GROUNDS OF THE DEPARTMENT ARE REJECTED. 69. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND APPEAL OF THE DEPARTMENT IS DISMISSED. 70. NOW WE WILL TAKE THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2005-06. 71. GROUND NO. 1 IS SIMILAR TO GROUND NO. 1 IN ASSE SSMENT YEAR 2008-09, WHICH WAS NOT PRESSED. THEREFORE, ON THE SAME REASONING THIS GROUND OF THE ASSESSEE IS REJECTED. 72. GROUND NO. 2 RELATES TO REJECTING THE EXPLANATI ON IN REGARD TO SURRENDER OF RS. 2,00,000/- IN ASSESSMENT YEAR 2008-09 TOWARDS POSSI BLE INTEREST WHICH ACCRUED/AROSE ON SURRENDER OF KVP/FDR IN THE PREVIOUS YEAR. 73. WE HAVE ALREADY DISPOSED OFF SIMILAR GROUND AND RESTORED THE MATTER TO THE FILE OF AO TO DECIDE THE SAME AFRESH. FOR THE SAME REASONI NG THIS GROUND OF THE ASSESSEE IS ALSO RESTORED TO THE FILE OF AO FOR DECIDING AFRESH. 74. GROUND NO. 3 IS AGAINST UPHOLDING APPLICATION O F PROVISIONS OF SECTION 145(3). 63 75. WE HAVE ALREADY UPHELD THE ACTION OF THE LD. CI T (A) WHILE DISPOSING THE APPEAL FOR ASSESSMENT YEAR 2008-09 AND 2007-08. THEREFORE , FOR THE SAME REASONING, THIS GROUND OF THE ASSESSEE IS ALSO REJECTED. 76. GROUND NO. 4 IS AGAINST SUSTAINING TRADING ADDI TION OF RS. 35,66,906/ BY APPLYING A HIGHER GP RATE OF 30% AGAINST GP RATE OF 11.60% O N THE SALES OF RS. 1.91 CRORE OR ODD. 77. SIMILAR ISSUE WAS INVOLVED IN THE APPEAL FOR AS SESSMENT YEARS 2008-09 AND 07-08. WE HAVE DIRECTED TO APPLY GP RATE OF 18% IN THESE A SSESSMENT YEARS I.E. 2008-09 AND 2007-08 FOR THE REASON THAT BOOKS OF ACCOUNT WERE N OT COMPLETE FOR THE ASSESSMENT YEARS 2007-08 AND 08-09 AS AT THE TIME OF SEARCH THE BOOK S OF ACCOUNT WERE COMPLETE UPTO ASSESSMENT YEAR 2006-07. FOR THE YEAR UNDER CONSID ERATION THE BOOKS WERE THERE AND THE ACCOUNTS WERE AUDITED. HOWEVER, THERE ARE CERTAIN D ISCREPANCIES AND WE HAVE ALREADY UPHELD THE APPLICATION OF PROVISIONS OF SECTION 145 (3). 77.1. THEREFORE, WE ARE OF THE VIEW THAT FOR THE YE AR UNDER CONSIDERATION IF GP RATE AT 15% IS APPLIED AGAINST GP RATE SHOWN BY ASSESSEE AT 11.60% AND AGAINST GP RATE OF 30% APPLIED BY THE AO AND LD. CIT (A), THEN IT WILL MEE T THE ENDS OF JUSTICE. WE ORDER ACCORDINGLY. 78. GROUND NO. 5 AND 6 ARE AGAINST APPLYING 25% OF CASH AND URD PURCHASES AND ENHANCEMENT ON ACCOUNT OF UNVERIFIABLE PURCHASES FR OM SOME OF REGISTERED DEALERS AND THEREBY MAKING ADDITION @ 25%. 79. SIMILAR ISSUES WERE INVOLVED IN ASSESSMENT YEAR 2007-08. WE HAVE ALREADY DISPOSED OFF THESE GROUNDS AND HAVE ALLOWED THE ISS UE IN FAVOUR OF THE ASSESSEE. FOR THE SAME REASONING, THESE GROUNDS OF THE ASSESSEE ARE A LLOWED FOR THE YEAR UNDER CONSIDERATION ALSO. 64 80. REMAINING GROUND NO. 7 IS AGAINST CONFIRMING DI SALLOWANCE OF EXPENSES AT RS. 46,579/- BEING 10% OF EXPENSES. 81. SIMILAR ISSUE HAS BEEN DECIDED IN EARLIER YEARS . ON THE SAME REASONING, THIS GROUND OF THE ASSESSEE IS REJECTED FOR THE YEAR UND ER CONSIDERATION ALSO. 82. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 83. NOW WE WILL TAKE UP APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2003-04. 84. GROUND NOS. 1 & 2 ARE AGAINST SUSTAINING ADDITI ON OF RS. 7,800/- MADE BY AO ON ACCOUNT OF UNEXPLAINED INCOME OF INTEREST ACCRUED/A ROSE ON SURRENDER OF KVP/FDR AND ON ACCOUNT OF SURRENDER OF RS. 2,00,000/- IN ASSESS MENT YEAR 2008-09. 85. WE HAVE ALREADY RESTORED SIMILAR ISSUE TO THE F ILE OF AO WHILE DISPOSING THE GROUND FOR OTHER YEARS APPEALS. ON THE SAME REASO NING, THESE GROUNDS ARE ALSO RESTORED TO THE FILE OF AO. 86. GROUND NO. 3 AGAINST SUSTAINING ADDITION OF RS. 3,56,483/- OUT OF TOTAL ADDITION OF RS. 6,27,734/- (COST OF CONSTRUCTION DETERMINED BY THE DEPARTMENTAL VALUER). 87. BRIEF FACTS OF THE CASE ARE RECORDED IN PARA 4. 1 IN THE ORDER OF LD. CIT (A) AT PAGE 3 ARE AS UNDER :- 4.1 BRIEF FACTS ON THIS ISSUE ARE THAT THE APPEL LANT ALONGWITH THIS MOTHER PURCHASE A HOUSE SITUATED AT C-18, JYO TI MARG, BAPU NAGAR AND MADE CERTAIN CONSTRUCTION OVER IT IN THE PERIOD RELEVANT TO A.Y 2002-03. A.O MADE REFERENCE TO THE DVO U/S 1 42 A(1) OF I.T. ACT TO ELUCIDATE THE COST OF CONSTRUCTION. THE DVO DETERMINED THE COST OF CONSTRUCTION OF THE PROPERTY AT RS.1,54 ,06,975/- AS AGAINST RS. 1,41,66,192/- DECLARED BY THE APPELLANT . A.O. THEREFORE ADDED THE DIFFERENCE IN THE COST OF LAND OF RS.5,3 0,125/- AND FOR COST OF CONSTRUCTION OF RS.82,024/- IN A.Y 2002-03 AND RS.6,27,734/- FOR COST OF CONSTRUCTION IN A.Y 2003- 04. 65 88. THE SUBMISSIONS MADE BEFORE LD. CIT (APPEALS) ARE MENTIONED IN PARA 4.2 & 4.3 AT PAGES 3 & 4 OF HIS ORDER ARE AS UNDER :- 4.2 BEFORE ME, IT WAS SUBMITTED THAT AT THE TIME OF PURCHASE OF HOUSE, ITS OWNER WAS LIVING IN THIS HOUSE WITH HIS FAMILY. AFTER PURCHASE, THE APPELLANT ALONGWITH HIS MOTHER CARRIE D OUT REPAIRING, RENOVATION, ALTERATION, ADDITION AND FINISHING AND FURNISHING WORK AND TOTAL EXPENDITURE OF RS. 5,70,792/- AND RS. 59, 19,651/- WAS INCURRED IN A.Y 2002-03 AND 2003-04 RESPECTIVELY, W HICH IS RECORDED IN THE BOOKS OF ACCOUNTS. THE APPELLANT HA S MAINTAINED PROPER RECORD. ALL THE ENTRIES ARE FULLY SUPPORTED BY BILL AND VOUCHERS. ACCORDINGLY, THE ESTIMATED MADE BY DVO CA NNOT PREVAIL OVER THE CONSTRUCTION EXPENSES SHOWN BY THE APPELLA NT. 4.3 ALTERNATIVELY, IT WAS SUBMITTED THAT VARIATION IS AROUND 10%. FURTHER, THE A.R HAS SUBMITTED THE CHART OF DI SCREPANCY AND OVERVALUATION SO MADE BY THE A.O. AND STATED THAT T HERE DISCREPANCIES WERE NOT CONSIDERED BY THE A.O. IT WA S POINTED OUT THAT (I) GROUND FLOOR COFFER TYPE CEILING VARANDA ( SR. NO.7 ON PAGE 35 OF VALUATION REPORT) VALUED AT RS. 86,080/-, (II ) FF COVERED BALCONY (SR. NO. 4 PAGE 34) VALUED AT RS.67,788/-, (III) SERVANT BLOCK VALUED AT RS. 1,43,534/-, (IV) RCC OVER HEAD TANK ON TERRACE VALUED AT RS. 50,000/- (SR. NO.56 ON PAGE 47) WERE ALREADY AVAILABLE/EXCISING IN THE HOUSE PURCHASED FROM THE PREVIOUS OWNER AND APPELLANT DID NOT INCUR THE EXPENDITURE ON CONS TRUCTION OF THESE ITEMS. IT WAS ALSO SUBMITTED THAT CUPBOARDS AND WAR DROBES SO PREPARED WAS ALREADY EXISTING AND APPELLANT UTILIZ ED THE WOOD OF EXISTING WARDROBE AND GAVE IT A NEW LOOK. SOME OF T HE EXPENDITURE HAS BEEN TAKEN ON HIGHER SIDE. ACCORDINGLY, IT WAS REQUESTED TO DELETED THE ADDITION. 89. AFTER CONSIDERING THE SUBMISSIONS, THE LD. CIT (A) ALLOWED PART RELIEF BY OBSERVING THE FOLLOWING FINDING :- 4.4 I HAVE CONSIDERED THE SUBMISSION OF ID. A.R AND HAVE PERUSED THE MATERIAL ON RECORD. THE A.O. HAS CLEAR LY MENTIONED IN THE ORDER THAT THE APPELLANT DID NOT FURNISHED/PROD UCED VOUCHERS FOR CONSTRUCTION EXPENSES AND EVEN CONSTRUCTION ACC OUNT DETAILS WERE NOT FILED. THOUGH THE A.R HAS ARGUED THAT CONS TRUCTION 66 ACCOUNT DETAILS ARE AVAILABLE IN THE LEDGER ACCOUNT , THE COPY OF WHICH IS FILED BEFORE ME, BUT IT REMAINS A FACT THA T ALL THE VOUCHER ETC WERE NOT FURNISHED/PRODUCED BEFORE THE A.O. AND ACCORDINGLY, A.O. WAS JUSTIFIED IN REFERRING THE MATTER TO THE D VO. VARIOUS ARGUMENTS DO TAKEN BY THE APPELLANT IN THIS REGARDS IS REJECTED. 4.5 NOW COMING TO THE SPECIFIC DEFECTS POINTED OUT, FROM PERUSAL OF THE MAP OF THE THEN HOUSE AVAILABLE ALON GWITH THE COPY OF SALE DEED, I AGREE WITH THE ARGUMENT OF THE APPE LLANT THAT GROUND FLOOR, CEILING VARANDA, COVERED BALCONIES, SERVANT BLOCK WERE ALREADY EXISTING ALONGWITH THE RCC OVERHEAD TANK ON THE TERRACE. THESE ITEMS TOTALS UP TO RS.3,47,402/-. HOWEVER, I DO NOT AGREE WITH THE ARGUMENT OF THE APPELLANT THAT NOTHING WAS SPENT ON THESE CONSTRUCTION/ ITEMS. ALL THESE CONSTRUCTION HAVE AL SO BEEN RENOVATED AND REPAIRED AND GIVEN A FRESH LOOK, REQU IRING EXPENDITURE TO BE INCURRED, WHICH IS ESTIMATED AT R S.50,000/-. THUS THE TOTAL CONSTRUCTION COST IS REDUCED BY RS. 2,97, 402/-. THE OTHER ARGUMENT OF THE WOOD OF THE EXISTING WARDROBE CLAIM ED TO BE UTILIZED FOR NEW CUPBOARD/WARDROBE IS NOTHING BUT A EYE WASH, AS IT IS A COMMON FACT THAT THE EARLIER WOOD OF THE EXIST ING WARDROBE CANNOT BE TAKEN OUT IN INTACT MANNER SO MUCH SO THA T SAME CAN BE UTILIZED FOR CONSTRUCTION OF NEW WARDROBE/CUPBOARDS . THE OTHER ARGUMENT OF EXCESSIVE RATE TAKEN BY THE DVO OF SOME OF THE ITEMS SPECIFIED BY THE A.R IS ALSO REJECTED IN ABSENCE OF ANY SPECIFIC EVIDENCE BEING FURNISHED BY THE A.R. EITHER BEFORE A.O. OR EVEN BEFORE THE UNDERSIGNED. THUS THE APPELLANT WILL GET RELIEF OF RS. 2,97,402/- IN THE TOTAL COST OF CONSTRUCTION WHICH IS BEING DIVIDED IN THE RATIO OF COST OF CONSTRUCTION SHOWN BY THE A PPELLANT, WHICH COMES TO RS.26,151/- AND RS. 2,71,251/- RESPECTIVEL Y IN A.Y 2002- 03 AND A.Y 2003-04. BALANCE ADDITION OF RS. 56,773/ - AND RS. 3,56,483/- IS HEREBY CONFIRMED RESPECTIVELY IN A.Y 2002-03 AND A.Y 2003-04. 90. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE PURCHASE PRICE AND THE EXPENSES ARE RECORD ED IN THE BOOKS OF ACCOUNT. THEREAFTER ON THE BASIS OF DVOS REPORT, AN ADDITION OF RS. 6, 00,000/- OR ODD WAS MADE. SINCE ALL THE EXPENSES AND PURCHASE PRICE RECORDED IN THE BOO KS OF ACCOUNT AND THERE IS POSSIBILITY OF DIFFERENCE IN VALUATION OF A MEAGER AMOUNT OF RS . 6,00,000/- OR ODD, THEREFORE, WE HOLD THAT AO AND LD. CIT (A) WERE NOT JUSTIFIED IN MAKIN G THE ADDITION AND SUSTAINING THE 67 ADDITION IN PART. ACCORDINGLY, THE ENTIRE ADDITION IS DELETED. THIS GROUND OF THE ASSESSEE IS ALLOWED. 91. REMAINING GROUND IS AGAINST SUSTAINING AN ADDIT ION OF RS. 20,370/- BEING 10% OF THE EXPENSES. 92. SIMILAR GROUND WE HAVE ALREADY DISPOSED OFF WHI LE DECIDING THE GROUND FOR EARLIER YEARS AND WE HAVE DELETED THE SAME. ON THE SAME RE ASONING, THIS GROUND OF THE ASSESSEE IS ALSO REJECTED. 93. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 94. IN SUMMARY, APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED AND APPEALS OF THE DEPARTMENT ARE DISMISSED. 95. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 19 .12.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR, D/ COPY FORWARDED TO :- SHRI RAVI HALDIA, JAIPUR. THE DCIT, CENTRAL CIRCLE-3, JAIPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 14(6)/JP/2011) BY ORDER, AR ITAT JAIPUR. 68