Arvindbhai Jewellers Pvt.Ltd., Ahmedabad V. The Dy.CIT.,Circle-1, Ahmedabad

ITA 1572/AHD/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5988 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 05-04-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 16-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH MEENA
• Keywords: Income from undisclosed sources
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 1572 & 1624/AHD/2012 (ASSESSMENT YEAR: 2007-08) ARVINDBHAI JEWELLERS PVT. LTD. ARVIND HOUSE, OPP: LAL BUNGLOWS C.G. ROAD, AHMEDABAD-380 009 THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-1, AHMEDABAD V/S V/S THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-1, AHMEDABAD ARVINDBHAI JEWELLERS PVT. LTD. ARVIND HOUSE, OPP: LAL BUNGLOWS C.G. ROAD, AHMEDABAD-380 009 (APPELLANT) (RESPONDENT) PAN: AAECA9595R APPELLANT BY : SHRI DHIREN SHAH, AR RESPONDENT BY : SHRI RAJESH MEENA, SR. D.R. ( )/ ORDER DATE OF HEARING : 05 -04-201 7 DATE OF PRONOUNCEMENT : 24 -04-2017 ITA NOS . 15 72 & 1624/AHD/2012 . A.Y. 2007-0 8 2 PER N.K. BILLAIYA, ACCOUNTANT MEMBER 1. ITA NO. 1624 & 1572/AHD/2012 ARE CROSS APPEALS BY T HE REVENUE AND THE ASSESSEE DIRECTED AGAINST THE VERY SAME ORDER OF TH E LD. CIT(A)-6, AHMEDABAD DATED 15.05.2012 PERTAINING TO A.Y. 2007- 08. 2. BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE DISP OSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVIT Y. 3. THE COMMON GRIEVANCE IN THESE APPEALS RELATE TO THE ADDITION OF RS. 90 LACS MADE BY THE A.O. AS UNDISCLOSED INCOME OF THE ASSES SEE ON THE BASIS OF DISCLOSURE MADE BY THE ASSESSEE DURING THE SURVEY P ROCEEDINGS CONDUCTED AT THE PREMISES OF THE ASSESSEE. 4. THE FIRST APPELLATE AUTHORITY RESTRICTED THE ADDITI ON MADE ON ACCOUNT OF UNACCOUNTED INCOME TO RS. 20,48,087/- AGAINST WHICH THE REVENUE IS IN APPEAL AND THE ASSESSEE IS IN APPEAL AGAINST THE AD DITION CONFIRMED BY THE LD. CIT(A). 5. AS THE FACTS OF THE IMPUGNED GROUND ARE COMMON. THE COMMON GROUND IS DISPOSED AS UNDER. 6. A SURVEY U/S. 133A OF THE ACT WAS CONDUCTED AT THE PREMISES OF ARVINDBHAI JEWELLERS ON 13.10.2006. DURING THE COURSE OF THE S URVEY PROCEEDINGS, THE PHYSICAL STOCK OF THE ASSESSEE WAS VERIFIED WITH TH E BOOK STOCK. STATEMENT ITA NOS . 15 72 & 1624/AHD/2012 . A.Y. 2007-0 8 3 OF SHRI DHARMANEDRA A CHOKSHI, MANAGING DIRECTOR OF THE ASSESSEE COMPANY, WAS RECORDED WHEREIN IN RESPONSE TO THE SP ECIFIC QUESTIONS RELATING TO THE VARIOUS DISCREPANCIES FOUND DURING THE COURSE OF THE SURVEY PROCEEDINGS HE DISCLOSED RS. 90 LACS AS THE UNACCOU NTED INCOME OF THE ASSESSEE. 7. A SUMMARY OF THE DISCREPANCIES FOUND DURING THE COU RSE OF SURVEY AND THE DISCLOSURE MADE BY THE MANAGING DIRECTOR IS AS UNDE R:- ITEM AS PER BOOKS (KG) FOUND (KG) DIFFERENCE (KG) DISCLOSURE GOLD BULLION (KG) 8.878 5.554 -3.324 855000 18 CARAT GOLD ORNAMENT (KG) 6.333 6.972 0.639 421476 22 CARAT GOLD ORNAMENT (KG) 130.35 136.98 6.63 5668650 DIAMOND (CARAT) , 583.87 591.67 7.8 156000 AS AGAINST UNACCOUNTED SALES 1898874 TOTAL 9000000 8. HOWEVER, WHILE SCRUTINIZING THE RETURN OF INCOME FI LED BY THE ASSESSEE COMPANY, THE A.O. NOTICED THAT THE ASSESSEE HAS NOT OFFERED THE AMOUNT DISCLOSED IN ITS RETURN OF INCOME. THE A.O. FURTHER FOUND THAT THE ASSESSEE ITA NOS . 15 72 & 1624/AHD/2012 . A.Y. 2007-0 8 4 HAS ALSO NOT RETRACTED FROM THE STATEMENT MADE BY T HE M.D. DURING THE SURVEY PROCEEDINGS. 9. THE ASSESSEE WAS ASKED TO JUSTIFY ITS STAND. IN ITS REPLY, THE ASSESSEE STRONGLY CONTENDED THAT THERE WAS NO DISCREPANCY IN THE PHYSICAL STOCK AND THE BOOK STOCK AND WHATEVER DIFFERENCE WAS NOTICED WAS ON ACCOUNT OF WRONG APPRECIATION OF FACTS. THE ASSESSEE ALSO POI NTED OUT THAT BECAUSE OF THE WRONG APPRECIATION OF THE FACTS, THE M.D. WAS N OT IN A POSITION TO RE- CONCILE THE DIFFERENCE AT THE TIME OF SURVEY AND IN ADVERTENTLY OFFERED RS. 90 LACS AS THE UNACCOUNTED INCOME. IN SUPPORT, THE ASS ESSEE FILED DETAILED RE- CONCILIATION STATEMENT BEFORE THE A.O AND POINTED O UT THAT THE FACTUAL DETAILS CAN BE VERIFIED FROM THE IMPOUNDED DOCUMENT S/BOOKS OF ACCOUNTS. IT WAS PLEADED THAT SINCE THE DISCREPANCY STANDS RE CONCILED THERE REMAINS NO OCCASION FOR MAKING ANY ADDITION ON ACCOUNT OF U NACCOUNTED INCOME. THE DETAILED SUBMISSION OF THE ASSESSEE DID NOT FIN D ANY FAVOUR WITH THE A.O. WHO WAS OF THE FIRM BELIEF THAT THE STATEMENT OF THE MANAGING DIRECTOR IS CONCLUSIVE SINCE IT WAS BASED ON SPECIF IC DISCREPANCY FOUND DURING THE SURVEY. THE A.O. ACCORDINGLY MADE THE AD DITION OF RS. 90 LACS. 10. THE ASSESSEE ASSAILED THE ASSESSMENT BEFORE THE LD. CIT(A) AND ONCE AGAIN FILED THE RECONCILIATION STATEMENT CLAIMING THAT TH E REGISTERED VALUER HAD PREPARED THE INVENTORY WHICH INCLUDED ALL QUALITIES OF THE GOLD I.E. 24 CARAT GOLD JEWELLERY, 22 CARAT GOLD AND 18 CARAT GOLD. I T WAS BROUGHT TO THE NOTICE OF THE LD. CIT(A) THAT EXCESS STOCK OF 22 & 18 CARA T OF GOLD ORNAMENTS WAS FOUND DURING THE SURVEY PROCEEDINGS WITH A SHORTAGE IN 24 CARAT OF GOLD ITA NOS . 15 72 & 1624/AHD/2012 . A.Y. 2007-0 8 5 ORNAMENTS. IT WAS FURTHER POINTED OUT THAT INVENTOR Y CONSISTING OF 24 CARAT PURITY WERE WRONGLY INCLUDED IN 22 CARAT JEWELLERY RESULTING IN EXCESS STOCK OF 22 CARAT AND SHORTAGE OF STOCK IN 24 CARATS. IT WAS FURTHER POINTED OUT THAT WEIGHT OF MANI, MOTI ETC. WERE NOT REDUCED FRO M PHYSICAL STOCK OF GOLD JEWELLERY FOUND WHILE COMPARING WITH THE BOOK STOCK . 11. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS QUA THE RECONCILIATION STATEMENT, THE LD. CIT(A)FOUND THAT THE TOTAL AMOUN T OF DISCREPANCY IN VARIOUS ITEMS OF JEWELLERY COMES TO RS. 15,28,255/- . THE LD. CIT(A) FURTHER OBSERVED THAT INSOFAR AS THE UNACCOUNTED SALES IS C ONCERNED, ONLY GROSS PROFIT CAN BE ADDED AND NOT THE SALES VALUE IN THE CASE OF TRADER LIKE ASSESSEE. THE LD. CIT(A) ACCORDINGLY ESTIMATED THE PROFIT OF UNACCOUNTED SALES @ 18% AND COMPUTED THE PROFIT AT RS. 5,19,832 /-. THE LD. CIT(A) RESTRICTED THE ADDITION TO RS. 20,48,087/- AS AGAIN ST RS. 90 LACS MADE BY THE A.O. 12. BEFORE US, THE LD. D.R. STRONGLY RELIED UPON THE FI NDINGS OF THE A.O. IT IS THE SAY OF THE LD. LD. D.R. THAT THE ASSESSEE WAS GIVEN SUFFICIENT OPPORTUNITY TO FURNISH THE RECONCILIATION OF THE STOCK PHYSICAL FO UND WITH THE BOOK STOCK AND AFTER AVAILING THE OPPORTUNITY, THE M.D. HAS OF FERED RS.90 LACS AS UNACCOUNTED INCOME. THEREFORE, THE FINDINGS OF THE LD. CIT(A) IS ERRONEOUS. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE REITER ATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. IT IS SAY OF THE LD. COUNSEL THAT ONCE THE STOCK STANDS RECONCILED, THERE REMAINS NO ROOM FOR MAKING ANY ADDITION AND, THEREFORE, THE ENTIRE ADDITION SHOULD BE DELETED. ITA NOS . 15 72 & 1624/AHD/2012 . A.Y. 2007-0 8 6 13. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE RIV AL CONTENTIONS AND HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BEL OW. IT IS TRUE THAT THE M.D. HAD MADE A DISCLOSURE OF RS. 90 LACS DURING TH E SURVEY PROCEEDINGS. IT IS EQUALLY TRUE THAT THE DISCLOSURE MADE BY THE ASS ESSEE HAS TO BE BACKED BY UNACCOUNTED ITEMS/UNEXPLAINED ITEMS FOUND DURING THE SURVEY PROCEEDINGS. 14. WE HAVE CAREFULLY PERUSED THE RELEVANT DOCUMENTARY EVIDENCES BROUGHT ON RECORD BEFORE US IN THE FORM A PAPER BOOK IN THE LI GHT OF RULE 18(6) OF THE ITAT RULES. 15. THE FACTS EMANATING FROM THE IMPOUNDED MATERIALS AN D THE BOOKS OF ACCOUNTS SHOW THAT THERE WAS A MIXTURE IN THE QUANT ITIES OF DIFFERENT PURITIES OF GOLD ORNAMENTS. THERE WAS EXCESS STOCK OF 22 AND 18 CARAT OF GOLD ORNAMENTS WITH A SHORTAGE OF 24 CARAT OF GOLD ORNAMENTS. WE FIND THAT PHYSICAL INVENTORY CONSISTING OF 24 CARAT PURI TY WITH TOTAL WEIGHT OF 3541 GMS. WERE WRONGLY INCLUDED IN 22 CARAT JEWELLE RY STOCK RESULTING IN EXCESS STOCK OF 22 CARAT OF GOLD ORNAMENTS AND SHOR TAGE OF STOCK IN 24 CARATS OF GOLD ORNAMENTS. THE PHYSICAL STOCK FOUND WAS 24 CARAT GOLD 5.554 KG 22 CARAT GOLD 136.98 KG 18 CARAT GOLD 6.972 KG TOTAL 148.624 KG ITA NOS . 15 72 & 1624/AHD/2012 . A.Y. 2007-0 8 7 16. THE NET WEIGHT OF GOLD JEWELLERY (EXCLUDING MANI, M OTI ETC) AS PER REGISTERED VALUERS REPORT IS 144.926 KG. THIS SHOW S THAT THE REVENUE AUTHORITIES HAVE COMPARED GROSS WEIGHT OF PHYSICAL STOCK WITH BOOK STOCKS WHICH IS NET OF MANI AND MOTI THE EXCESS STOCK STAN DS EXPLAINED. IF THE WEIGHT OF MANI AND MOTI IS REDUCED. WE FURTHER FIN D THAT THE STOCK OF PURE GOLD OF 100 GRAM REMAINED TO BE INCLUDED SINCE IT W AS SHOWN SEPARATELY IN THE BOOKS WHICH WILL INCREASE THE BOOK STOCK BY 100 GRAM AT 8.978 KG. THE DISCREPANCY IN PHYSICAL AND BOOK STOCK AFTER CONSID ERING THE AFORE-STATED FACTUAL MATRIX STANDS AS UNDER:- ITEM AS PER BOOKS (KG) FOUND (KG) DIFFERENCE (KG) * RATE (PERL0GMS) AMOUNT OF DISCREPANCY (RS) GOLD BULLION (KG) 8.978 9.081 .103*9050 93215 18 CARAT GOLD ORNAMENT (KG) 6.333 6.972 0.639 * 6600 421476 22 CARAT GOLD ORNAMENT (KG) 130.095 131.098 1 .003 * 8550 857565 DIAMOND (CARAT) 583.87 591.67 7.8 1 56000 17. THE TOTAL DISCREPANCY IN THE LIGHT OF THE AFOREMENT IONED CHART COMES TO RS. 15,28,255/-. 18. WE ARE INCLINED `TO AGREE WITH THE FINDINGS OF THE FIRST APPELLATE AUTHORITY THAT THE ENTIRE SALES MADE OUTSIDE THE BOOKS CANNOT BE ADDED BUT ONLY THE ITA NOS . 15 72 & 1624/AHD/2012 . A.Y. 2007-0 8 8 PROFIT ELEMENT IN SUCH SALES IS TO BE CONSIDERED AS UNACCOUNTED INCOME OF THE ASSESSEE. THE FIRST APPELLATE AUTHORITY HAS TAK EN THE PROFIT MARGIN OF 18% WITH SEEMS TO BE VERY REASONABLE IN THIS LINE O F BUSINESS. THEREFORE, NO INTERFERENCE IS CALLED FOR. 19. CONSIDERING THE FACTS IN TOTALITY IN THE LIGHT OF T HE FACTUAL MATRIX DISCUSSED HEREINABOVE, WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE FINDINGS OF THE LD. CIT(A). THE ADDITION OF RS. 20,48,087/- STANDS CONF IRMED. WITH THIS, BOTH THE APPEALS BY THE REVENUE AND THE ASSESSEE ON THIS POINT ARE DISMISSED. 20. THE SECOND GRIEVANCE OF THE ASSESSEE RELATES TO THE ADDITION OF RS. 2,80,881/. 21. ON THE BASIS OF CERTAIN DOCUMENTS IMPOUNDED AS PER ANNEXURE-A1 DURING THE SURVEY PROCEEDINGS, THE ASSESSEE WAS ASKED TO F URNISH THE DETAILS CONTAINED IN THE SAID IMPOUNDED DOCUMENTS. ON RECE IVING NO PLAUSIBLE REPLY, THE ASSESSEE WAS ASKED TO SHOW CUASE WHY RS. 2,80,881/- BE NOT ADDED TO THE INCOME OF THE ASSESSEE. AGAIN ON RECEI VING NO PLAUSIBLE REPLY, THE A.O. MADE THE ADDITION OF RS. 2,80,881/-. 22. BEFORE THE LD. CIT(A), THE ASSESSEE STATED THAT THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION THAT THE SAID IMPOUNDED PA GES ARE DEBIT MEMOS AND NOT SALES AFFECTED BY THE ASSESSEE. IT WAS ONCE AGAIN CONTENDED THAT IF THE ENTRIES FOUND IN THE IMPOUNDED DOCUMENTS ARE CO NSIDERED AS UNACCOUNTED SALES THEN THE ENTIRE AMOUNT CANNOT BE ADDED TO THE INCOME ITA NOS . 15 72 & 1624/AHD/2012 . A.Y. 2007-0 8 9 OF THE ASSESSEE BUT ONLY PROFIT MARGIN SHOULD BE AD DED. THIS EXPLANATION OF THE ASSESSEE DID NOT FIND ANY FAVOUR WITH THE LD. C IT(A) WHO CONFIRMED THE ADDITION OF RS. 2,80,881/-. 23. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE VEHEMEN TLY STATED THAT EVEN IF THE AMOUNT IS TREATED AS SALES ONLY THE PROFIT ELEM ENT SHOULD BE ADDED. 24. PER CONTRA, THE LD. D.R. STRONGLY SUPPORTED THE FIN DINGS OF THE REVENUE AUTHORITIES. 25. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORI TIES BELOW QUA THE ISSUE. THE EXPLANATION OF THE ASSESSEE THAT THE DEB IT NOTES WERE ISSUED BECAUSE IN THIS LINE OF BUSINESS SOMETIMES THE SALE S ARE MADE ON APPROVAL BASIS. THEREFORE, THE IMPOUNDED DOCUMENTS CONTAINED ENTRIES OF SALES ON APPROVAL BASIS. HOWEVER, WE DO NOT FIND SUPPORTIVE EVIDENCE ON RECORD WHICH COULD SUBSTANTIATE THE CLAIM OF THE ASSESSEE, BUT AT THE SAME TIME, WE DO NOT FIND ANY MERIT IN TAKING THE ENTIRE SALES AS PROFIT OF THE ASSESSEE. AS MENTIONED ELSEWHERE, WE HAVE ACCEPTED THE PROFIT MARGIN @ 18% ON THE SALES, THEREFORE, IN OUR CONSIDERED OPINION, PR OFIT @ 18% OF THE UNACCOUNTED SALES OF RS. 2,80,881/- SHOULD BE TAKEN . WE, ACCORDINGLY DIRECT THE A.O. TO RESTRICT THE ADDITION @ 18% OF RS. 2,80 ,881/-. THIS GROUND IN ASSESSEES APPEAL IS PARTLY ALLOWED. ITA NOS . 15 72 & 1624/AHD/2012 . A.Y. 2007-0 8 10 26. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED AND THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 24 - 04- 20 17 SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 24/04/2017 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD