M/s. Narayandas Laxmandas & Co., V. Addl. CIT,

ITA 1662/PUN/2011

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0855 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 19-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 26-12-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DHEERAJ KUMAR JAIN
• Assessee Lawyers: SUDHAKAR KULKARNI; S V DESHPANDE
• Keywords: Gross profit estimation; Unexplained investment
• Section: 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E , , !'!! # , $ % BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 1661/PN/2011 $& ' !(' / ASSESSMENT YEAR : 2007-08 M/S. NARAYANDAS LAXMANDAS & SONS, 6, SADASHIV PETH, SATARA PAN : AAAFN7609L ....... / APPELLANT )& / V/S. ADDL. COMMISSIONER OF INCOME TAX, SATARA RANGE, SATARA / RESPONDENT / ITA NO. 11/PN/2012 $& ' !(' / ASSESSMENT YEAR : 2007-08 DY. COMMISSIONER OF INCOME TAX, SATARA CIRCLE, SATARA ....... / APPELLANT )& / V/S. NARAYANDAS LAXMANDAS & SONS, 6, SADASHIV PETH, SATARA PAN : AAAFN7609L / RESPONDENT / ITA NO. 1662/PN/2011 $& ' !(' / ASSESSMENT YEAR : 2007-08 M/S. NARAYANDAS LAXMANDAS & CO., 183, SADASHIV PETH, SATARA PAN : AAAFN7608M ....... / APPELLANT )& / V/S. ADDL. COMMISSIONER OF INCOME TAX, SATARA RANGE, SATARA / RESPONDENT 2 ITA NOS. 1661 & 1662/PN/2011 AND 11 & 01/PN/2012, A.Y. 2007-08 / ITA NO. 01/PN/2012 $& ' !(' / ASSESSMENT YEAR : 2007-08 INCOME TAX OFFICER, WARD 2, SATARA ....... / APPELLANT )& / V/S. M/S. NARAYANDAS LAXMANDAS & CO., 183, SADASHIV PETH, SATARA PAN : AAAFN7608M / RESPONDENT ASSESSEE BY : SHRI S.V. DESHPANDE & SHRI SUDHAKAR KULKARNI REVENUE BY : SHRI DHEERAJ KUMAR JAIN / DATE OF HEARING : 14-10-2015 / DATE OF PRONOUNCEMENT : 30-11-2015 * / ORDER PER VIKAS AWASTHY, JM : ITA NO. 1661/PN/2011 BY THE ASSESSEE AND ITA NO. 11/P N/2012 BY THE DEPARTMENT ARE DIRECTED AGAINST THE ORDER OF CO MMISSIONER OF INCOME TAX (APPEALS)-III, PUNE DATED 25-01-2011 FOR THE ASSESSMENT YEAR 2007-08. ITA NO. 1662/PN/2011 BY THE ASSESSEE A ND ITA NO. 01/PN/2012 BY THE DEPARTMENT ARE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-III, PUNE DATED 25-01-2011 FOR T HE ASSESSMENT YEAR 2007-08. IN ALL THE FOUR APPEALS SINCE ISSUES RAISED ARE SIMILAR, THESE APPEALS ARE TAKEN UP TOGETHER FOR ADJUDICATION. 2. THE ASSESSEES ARE ENGAGED IN MANUFACTURING AND TRA DING OF GOLD AND SILVER ORNAMENTS. A SURVEY ACTION WAS CARRIED OUT A T THE BUSINESS 3 ITA NOS. 1661 & 1662/PN/2011 AND 11 & 01/PN/2012, A.Y. 2007-08 PREMISES OF THE ASSESSEES ON 30-11-2006. DURING THE CO URSE OF SURVEY PROCEEDINGS, THE ASSESSEE IN ITA NO. 1661/PN/2011 (I.E. NA RAYANDAS LAXMANDAS & SONS) DECLARED AN ADDITIONAL INCOME OF RS.1,01,2 9,045/- WITH THE FOLLOWING BREAKUP: I. EXCESS STOCK RS.81,02,634/- II. EXCESS CASH RS.10,26,411/- III. UNEXPLAINED INVESTMENT IN BUILDING RS.10,00,000/- TOTAL RS.1,01,29,045/- 3. THE ASSESSEE IN ITA NO. 1662/PN/2011 (I.E. NARAYANDAS LAXMANDAS & CO.) DECLARED AN ADDITIONAL INCOME OF RS.61,57,559 /- DURING SURVEY WITH THE FOLLOWING BREAKUP: I. EXCESS STOCK OF GOLD RS.30,88,406/- II. EXCESS STOCK OF SILVER RS.26,51,027/- III. EXCESS CASH RS.4,18,126/- TOTAL RS.61,57,559/- 4. THE ASSESSEE NARAYANDAS LAXMANDAS & SONS FILED ITS R ETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 27-10-2007 DECLARING TOTAL INCOME OF RS.1,37,52,218/- INCLUDING THE ADDITIONAL INCOME DECLARED DURING SURVEY PROCEEDINGS. THE BREAKUP OF TURN OVER AND GROSS PROFIT UPTO THE DATE OF SURVEY AND AFTER SURVEY D ISCLOSED BY THE ASSESSEE IS AS UNDER: TURNOVER AND G.P. UPTO THE DATE OF SURVEY PERIOD TURNOVER G.P. EXCLUDING ADDITIONAL INCOME G.P.% EXCLUDING ADDITIONAL INCOME G.P. INCLUDING ADDITIONAL INCOME G.P. INCLUDING ADDITIONAL INCOME 1/4/2006 TO 30/11/2006 3,74,35,507 51,28,664 13.70% 1,52,57,709 40.75% 4 ITA NOS. 1661 & 1662/PN/2011 AND 11 & 01/PN/2012, A.Y. 2007-08 TURNOVER AND G.P. AFTER SURVEY PERIOD TURNOVER G.P. G.P. % 01/12/2006 TO 31/3/2007 1,59,06,138 14,26,484 9% 5. THE ASSESSEE NARAYANDAS LAXMANDAS & CO. FILED ITS RET URN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 30-10-2007 DECLARING TOTAL INCOME OF RS.65,90,496/- INCLUDING ADDITIONAL INCOME DECLA RED DURING SURVEY PROCEEDINGS. THE BREAKUP OF TURNOVER AND GROSS PROFIT UPTO THE DATE OF SURVEY AND AFTER SURVEY DISCLOSED BY THE AFORESAID ASSESSEE IS AS UNDER: GOLD TURNOVER AND G.P. UPTO THE DATE OF SURVEY PERIOD TURNOVER G.P. EXCLUDING ADDITIONAL INCOME G.P.% EXCLUDING ADDITIONAL INCOME G.P. INCLUDING ADDITIONAL INCOME G.P. INCLUDING ADDITIONAL INCOME 1/4/2006 TO 30/11/2006 7,31,256 1,28,875 17.62% 32,17,281 439.96% GOLD TURNOVER AND G.P. AFTER SURVEY PERIOD TURNOVER G.P. G.P. % 01/12/2006 TO 31/3/2007 2,84,812 45,287 15.9% SILVER TURNOVER AND G.P. UPTO THE DATE OF SURVEY PERIOD TURNOVER G.P. EXCLUDING ADDITIONAL INCOME G.P.% EXCLUDING ADDITIONAL INCOME G.P. INCLUDING ADDITIONAL INCOME G.P. INCLUDING ADDITIONAL INCOME 1/4/2006 TO 30/11/2006 21,68,674 7,90,412 36.45% 34,41,439 158.68% 5 ITA NOS. 1661 & 1662/PN/2011 AND 11 & 01/PN/2012, A.Y. 2007-08 SILVER TURNOVER AND G.P. AFTER SURVEY PERIOD TURNOVER G.P. G.P. % 01/12/2006 TO 31/3/2007 21,83,836 2,62,833 12.04% 6. THE ASSESSING OFFICER DURING THE COURSE OF SCRUTINY ASS ESSMENT HELD THAT THE GROSS PROFIT DECLARED BY THE ASSESSEES DU RING POST SURVEY PERIOD IS LOW. THE ASSESSEES HAVE SUPPRESSED THE INCOME DURING POST SURVEY PERIOD. SINCE, THE ASSESSEES HAVE INDULGED IN SUPP RESSION OF SALES DURING PRE SURVEY AS WELL AS POST SURVEY PERIOD TH E BOOKS OF ACCOUNT OF THE ASSESSEES ARE NOT RELIABLE AND HENCE, REJECTED THE SAME. IN THE CASE OF NARAYANDAS LAXMANDAS & SONS THE ASSES SING OFFICER MADE ADDITION OF RS.61,39,888/- ON ACCOUNT OF LOW GROS S PROFIT DURING POST SURVEY PERIOD. IN ADDITION TO THE ABOVE THE ASSESSING OFFICER MADE ADDITION OF RS.3,16,458/- ON ACCOUNT OF DEFICIT ST OCK OF GOLD ORNAMENTS. IN THE CASE OF NARAYANDAS LAXMANDAS & CO. THE ASSESSING OFFICER MADE ADDITION FOR THE SIMILAR REASONS ON ACCOUNT OF LOW GRO SS PROFIT DURING POST SURVEY PERIOD RS.32,01,243/-. IN ADDITION TO T HE ABOVE THE ASSESSING OFFICER ALSO MADE DISALLOWANCE OF RS.24,000/- ON ACC OUNT OF REMUNERATION PAID TO PARTNERS. AGGRIEVED BY THE ASSESSMENT ORDER IN THEIR RESPECTIVE C ASES BOTH THE ASSESSEES FILED APPEALS BEFORE THE COMMISSIONER OF INCO ME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE SEP ARATE ORDERS OF THE EVEN DATE DISMISSED THE CONTENTIONS OF THE ASSESSEES WITH REGARD TO OVER VALUATION OF STOCK AS ON THE DATE OF SUR VEY AND ON REJECTION OF THE BOOKS OF ACCOUNT BY THE ASSESSING OFFICER. HOWEVER , THE 6 ITA NOS. 1661 & 1662/PN/2011 AND 11 & 01/PN/2012, A.Y. 2007-08 COMMISSIONER OF INCOME TAX (APPEALS) REJECTED THE ACTION O F ASSESSING OFFICER IN ESTIMATING THE INCOME OF THE ASSESSEES ON THE BA SIS OF NUMBER OF DAYS IN THE POST SURVEY PERIOD BY ADOPTING TH E GROSS PROFIT DECLARED BY THE ASSESSEE DURING THE PRE-SURVEY PERIOD. IN THE CASE OF NARAYANDAS LAXMANDAS & SONS, THE COMM ISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION OF RS.47,44,624/- ON ACCOUNT OF LOW GROSS PROFIT DURING POST SURVEY PERIOD AND UPHELD ADDITION TO THE TUNE OF RS.13,95,365/- ONLY. IN RESPECT OF STOCK ADDITION THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED TH E ADDITION TO THE EXTENT OF RS.2,73,103/- AND SUSTAINED THE ADDITION ON ACCOUNT OF STOCK DEFICIT TO THE TUNE OF RS.43,354/- ONLY. IN THE CASE OF NARAYANDAS LAXMANDAS & CO., THE COMMISS IONER OF INCOME TAX (APPEALS) DELETED THE ADDITION ON ACCOUNT OF LOW GROSS PROFIT DURING POST SURVEY PERIOD TO THE TUNE OF RS.26,42,42 5/- AND SUSTAINED THE ADDITION OF RS.5,58,818/-. IN RESPECT OF REM UNERATION PAID TO PARTNERS, THE COMMISSIONER OF INCOME TAX (APPEALS ) DELETED THE ENTIRE ADDITION OF RS.24,000/-. AGAINST THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS), BOTH THE ASSESSEES AND THE REVENUE ARE IN APPEAL BEFO RE THE TRIBUNAL. THE ASSESSEES ARE IN APPEAL AGAINST THE PART ADDITIONS SUSTAINED AND THE REVENUE IS IN APPEAL AGAINST THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE ADDITIONS. 7. SHRI S.V. DESHPANDE AND SHRI SUDHAKAR KULKARNI APPEARING ON BEHALF OF THE ASSESSEES SUBMITTED THAT THE ASSESSEES WE RE MAINTAINING PROPER STOCK REGISTER. THE FINDINGS OF THE AUTHORITIES BELO W THAT THE 7 ITA NOS. 1661 & 1662/PN/2011 AND 11 & 01/PN/2012, A.Y. 2007-08 ASSESSEES HAVE NOT MAINTAINING PROPER STOCK REGISTER AR E PERVERSE. THE ASSESSEE VALUED THE STOCK IN THE NORMAL COURSE OF BUSINE SS AT MARKET PRICE OR SALE PRICE, WHICHEVER IS LESS. THE STOCK DECLARED DURING SURVEY WAS VALUED AT MARKET PRICE. THE ASSESSING OFFICER REJECTE D THE BOOKS OF ACCOUNT WITHOUT POINTING ANY DEFECT AND THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ALSO FAILED TO APPRECIATE THAT THE BOOKS OF ACCOUNT WERE PROPERLY MAINTAINED BY THE ASSESSEE. THE AUTHORIT IES BELOW HAVE FURTHER FAILED TO APPRECIATE THE FACT THAT TRADING ACCOUNT CANNOT BE PREPARED ON THE BASIS OF ESTIMATION FOR THE PART OF THE YEAR. THE PROVISIONS OF SECTION 145(3) CANNOT BE APPLIED IN RESPECT O F THE ACCOUNTS PREPARED FOR ANY PART OF THE YEAR. THE ASS ESSEE HAD PREPARED TWO TRADING ACCOUNTS ON THE ASKING OF THE ASSESSING OFFICE R. THE ASSESSING OFFICER HAS NOT BEEN ABLE TO SHOW A SINGLE INSTAN CE OF DEFECT IN THE STOCK REGISTER. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS ERRED IN COMING TO THE CONCLUSION THAT THERE WAS DEFICIENCY IN THE STOCK OF GOLD. THERE IS NO CO-RELATION BETWEEN THE STOCK OF NEW ORNAMENTS AND OLD ORNAMENTS. THE ASSESSEE HAD DECLARE D CORRECT VALUE OF ALL STOCKS. IN THE RETURN OF INCOME THE ASSESSEE HAD DISCLOSED THE ENTIRE ADDITIONAL INCOME ADMITTED DURING SURVEY. NO GR OSS PROFIT ADDITION CAN BE MADE BY DRAWING TWO TRADING ACCOUNTS. I N SUPPORT OF HIS SUBMISSIONS, THE LD. AR PLACED RELIANCE ON THE DECISION OF NAGPUR BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. DILIP BORHTERS REPORTED AS 87 TTJ 583 (ITAT NAGPUR). 8. ON THE OTHER HAND SHRI DHEERAJ KUMAR JAIN REPRESENT ING THE DEPARTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF THE ASS ESSING OFFICER. THE LD. DR SUBMITTED THAT THE ASSESSEE HAD ADMITTED THE FACT THAT DURING BUSINESS THE ASSESSEE WAS NOT RECORDING SALES. T HE TENTATIVE 8 ITA NOS. 1661 & 1662/PN/2011 AND 11 & 01/PN/2012, A.Y. 2007-08 TRADING ACCOUNT WAS PREPARED BECAUSE THE ASSESSEE WA S NOT MAINTAINING STOCK REGISTERS PROPERLY. THE ONLY STOCK RE GISTER FOUND AT THE TIME OF SURVEY WAS IN RESPECT OF NEW ORNAMENTS. THE RE WAS NO DATA WITH REGARD TO OLD ORNAMENTS OR STANDARD GOLD BAR. AT THE TIME OF SURVEY THE STATEMENTS WERE RECORDED FROM WHICH IT WAS CLEARLY EVIDENT THAT APART FROM NEW ORNAMENTS THERE WAS SOME STOCK O F OLD ORNAMENTS AS WELL. THE LD. DR FURTHER SUBMITTED THAT THE GROSS PROFIT BEFORE SURVEY WAS HIGHER AS COMPARED TO GROSS PROFIT POST SUR VEY. NO REASON WHATSOEVER HAS BEEN GIVEN BY THE ASSESSEE FOR DRASTIC REDUCTION IN GROSS PROFIT. THE SUBMISSION OF THE LD. AR OF THE ASSESSEE THAT STOCK FOUND DURING SURVEY WAS OVERVALUED IS WITHOUT ANY BASIS. THE VALUATION OF STOCK WAS DONE BY A REGISTERED VALUER IN THE PRESENCE OF THE ASSESSEE AND ITS AUTHORIZED REPRESENTATIVE, NO OBJE CTIONS WERE EVER RAISED BY THE ASSESSEE EITHER DURING SURVEY OR SUBSEQU ENTLY. THE PARTNERS OF THE ASSESSEE FIRM TIME AND AGAIN CONFIRMED THA T INVENTORY OF THE STOCK IS CORRECTLY DRAWN AND THE DESCRIPTION, QUA NTITY, GROSS WEIGHT, NET WEIGHT AND VALUATION OF ORNAMENT WAS CORRECTL Y MADE. THE ASSESSEE HAS ADMITTED THE FACT THAT THERE WERE SALES O UTSIDE THE BOOKS OF ACCOUNT. ACCORDINGLY, THE ASSESSING OFFICER REJECTED TH E BOOKS OF ACCOUNT. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS UPH ELD THE FINDINGS OF ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOU NT. THE LD. DR FURTHER SUBMITTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE ADDITION ON ACCOUNT OF LOW GROSS PROFIT DURING POST SURVEY IN RESPECT OF BOTH THE ASSESSEES, AS WELL AS DEFICIT IN STOCK OF GOLD ORNAMENTS IN THE CASE OF NARAYANDAS LAXMANDA S & SONS. THE LD. DR VEHEMENTLY PRAYED FOR RESTORING THE FINDINGS OF THE ASSESSING OFFICER. 9 ITA NOS. 1661 & 1662/PN/2011 AND 11 & 01/PN/2012, A.Y. 2007-08 9. THE LD. AR CONTROVERTING THE SUBMISSIONS OF THE LD. DR SU BMITTED THAT THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF AC COUNT WITHOUT SPECIFYING ANY SINGLE INSTANCE OF DEFECT. THE LD. AR REFERRE D TO PAGE 74 OF THE PAPER BOOK TO SHOW THAT THE ASSESSEE HAD FURNIS HED ALL THE STATEMENTS INCLUDING STOCK STATEMENTS BEFORE THE ASSESS ING OFFICER. THE ASSESSEE HAD ALSO PLACED BEFORE THE ASSESSING OFFICER BILLS AND INVOICES. HOWEVER, THE ASSESSING OFFICER COULD NOT POINT OUT ANY ERROR IN THE SAME. THE LD. AR STRONGLY OBJECTED TO THE OBSER VATIONS OF THE ASSESSING OFFICER WHEREIN THE ASSESSING OFFICER HAS RECORDED THAT, THE ASSESSEE HAS ADMITTED THAT IT IS HABITUALLY, REGULARLY AND SYSTEMATICALLY SUPPRESSING THE INCOME FOR YEARS TOGETHER. THE LD. AR S UBMITTED THAT THESE OBSERVATIONS OF THE ASSESSING OFFICER ARE INCORRECT. THE LATER DATED 04-12-2009 WHICH IS REFERRED BY THE ASSESSING OFFIC ER IN HIS ORDER IS PLACED AT PAGE 80 OF THE PAPER BOOK. NO SUCH ADMISSION HAS BEEN MADE BY THE ASSESSEE OR ANY OF THE PARTNERS OF T HE ASSESSEE. THE LD. AR PRAYED FOR DISMISSING THE APPEALS OF THE REVENUE AND FOR MODIFYING THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) BY DELETING THE ADDITIONS SUSTAINED. 10. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. AFTER HEARING THE SUBMISSIONS AND EXAMINING THE GROUNDS RAISED IN THE APPEALS FILED BY THE ASSESSEES AND THE REVENUE THE FOLLOWIN G ISSUES EMERGE BEFORE US: I. WHETHER THE ACTION OF AUTHORITIES BELOW IN REJECTING THE B OOKS OF ACCOUNT AND STOCK REGISTER MAINTAINED BY THE ASSESSEE IS JUSTIFIED? 10 ITA NOS. 1661 & 1662/PN/2011 AND 11 & 01/PN/2012, A.Y. 2007-08 II. WHETHER THE ADDITIONS DELETED/SUSTAINED BY THE COMMISSION ER OF INCOME TAX (APPEALS) ON ACCOUNT OF LOW GROSS PROFIT DURING THE POST SURVEY PERIOD IS JUSTIFIED? III. WHETHER THE ADDITIONS SUSTAINED/DELETED BY THE COMMISSION ER OF INCOME TAX (APPEALS) ON ACCOUNT OF STOCK DEFICIT AS FOUND D URING COURSE OF SURVEY OPERATIONS IS JUSTIFIED? IV. WHETHER THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN DELETING ADDITION OF RS.24,000/- MADE ON ACCOUNT OF DISALLOWANCE OF REMUNERATION TO PARTNERS? 11. THE ADDITIONS MADE BY THE ASSESSING OFFICER IN CASE OF BOTH THE ASSESSEES AND THE RELIEF GRANTED BY THE COMMISSIONER OF I NCOME TAX (APPEALS) TO BOTH THE ASSESSEES ARE TABULATED HERE-IN-BELOW: ITA NO. GROUNDS FOR MAKING ADDITION ADDITION/DISALLOWANCE MADE BY AO DELETED BY CIT(A) SUSTAINED BY CIT(A) 1661/PN/2011 AND 11/PN/2012 LOW GROSS PROFIT DURING POST SURVEY PERIOD RS.61,39,888/- RS.47,44,624/- RS.13,95,364/- -DO- DEFICIT IN STOCK OF GOLD ORNAMENTS RS.3,16,458/- RS.2,73,103/- RS.43,354/- 1662/PN/2011 AND 01/PN/2012 LOW GROSS PROFIT DURING POST SURVEY PERIOD RS.32,01,243/- RS.26,42,425/- RS.5,58,818/- 01/PN/2012 REMUNERATION PAID TO PARTNERS RS.24,000/- RS.24,000/- NIL 12. THE COMMISSIONER OF INCOME TAX (APPEALS) WHILE UPHOLDING THE FINDINGS OF ASSESSING OFFICER REJECTING THE BOOKS OF ACCOUNT U/S. 145(3) OF THE ACT HAS GIVEN DETAILED REASONS. DURING THE COURSE OF SURVEY, STATEMENTS OF PARTNERS OF THE ASSESSEE FIRM WERE RECORD ED WHO ADMITTED THAT THERE HAD BEEN GENERATION OF INCOME OUTSIDE THE BO OKS OF ACCOUNT 11 ITA NOS. 1661 & 1662/PN/2011 AND 11 & 01/PN/2012, A.Y. 2007-08 AND IS REFLECTED IN THE FORM OF EXCESS STOCK AND EXCESS C ASH. DURING THE COURSE OF SURVEY AND ASSESSMENT PROCEEDINGS THE A SSESSING OFFICER OBSERVED THAT THE ASSESSEE WAS NOT MAINTAINING PROPER STOCK REGISTERS. THE ASSESSEE HAD REFERRED TO THE STOCK REGISTER OF OLD ORNAMENTS AND STANDARD GOLD BAR, WHEREAS NO STOCK REGISTER FOR THE AFO RESAID ITEMS WAS EVER PRODUCED BEFORE THE AUTHORITIES CONCERNED AT ANY STAGE. THE ONLY REGISTER WHICH WAS FOUND WAS WITH RESPECT TO THE N EW GOLD ORNAMENTS. IN THE ABSENCE OF STOCK REGISTERS, THE ASSE SSING OFFICER WAS CONSTRAINED TO PREPARE TENTATIVE TRADING ACCOUNT AT TH E TIME OF SURVEY TO ARRIVE AT STOCK POSITION AS ON THE DATE OF SURVEY. TH E FACT THAT EXCESS STOCK WAS QUANTIFIED ON THE BASIS OF SUCH TENTATIVE TRADIN G ACCOUNT PREPARED AT THE TIME OF SURVEY WAS ACCEPTED BY THE PA RTNERS OF THE ASSESSEE. SINCE, NO OBJECTIONS WHATSOEVER WAS RAISED FRO M ANY QUARTERS THIS IN ITSELF SHOWS THAT THE STOCK REGISTERS WE RE NOT PROPERLY MAINTAINED BY THE ASSESSEE FOR ALL ITEMS OF GOLD AND GOLD JE WELLERY. THE COMMISSIONER OF INCOME TAX (APPEALS) IN HIS ORDER HAS GIVEN A CATEGORIC FINDING THAT THE ASSESSEE HAD PURCHASED GOLD O RNAMENTS BY CASH AND AGAINST SELF MADE VOUCHERS WITH INCOMPLETE ADDRE SS OF THE CUSTOMERS. SUCH DOCUMENTS PRODUCED BY THE ASSESSEE WERE NOT AMENABLE FOR INDEPENDENT VERIFICATION. THE ADMISSION OF THE A SSESSEES DURING THE SURVEY AND ASSESSMENT PROCEEDINGS THAT EXC ESS STOCK REPRESENTS ACCUMULATION OF PROFITS EARNED OVER THE PERIOD OF TIME WITHOUT THE DETAILS OF ACQUISITION OF EXCESS STOCK YEAR WISE FURTHER GIVE STRENGTH TO THE FINDINGS OF THE AUTHORITIES BELOW THAT THE BOOKS OF ACCOUNT WERE NOT PROPERLY MAINTAINED BY THE ASSESSEE. 13. THE CONTENTION OF THE LD. AR OF THE ASSESSEE IS THAT NO DISCREPANCIES WERE FOUND IN THE BOOKS OF ACCOUNT, VOUCHER S, BILLS OR 12 ITA NOS. 1661 & 1662/PN/2011 AND 11 & 01/PN/2012, A.Y. 2007-08 STOCK REGISTER MAINTAINED BY THE ASSESSEE. ANOTHER CON TENTION OF THE LD. AR IS THAT BOOKS OF ACCOUNT CANNOT BE REJECTED FOR P ART OF THE YEAR UNDER THE PROVISIONS OF SECTION 145(3). SIMILAR SUBMISSIONS W ERE MADE BY THE ASSESSEE BEFORE THE COMMISSIONER OF INCOME TAX (A PPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) REJECTED THE SAME AN D HELD THAT THE BOOKS OF ACCOUNT WERE REJECTED BY THE ASSESSING O FFICER FOR THE WHOLE OF THE YEAR. SURVEY ACTION WAS TAKEN IN THE MIDDLE OF THE YEAR AND IN THE ABSENCE OF PROPER STOCK REGISTERS, TENTATIVE TRADING ACCOUNTS WERE DRAWN TO ARRIVE AT THE CORRECT BOOK VALUE OF STOC K AS ON THE DATE OF SURVEY. THE BOOKS OF ACCOUNT PREPARED BY THE ASSESSE E DID NOT DEPICT THE TRUE AND CORRECT PICTURE OF THE ASSESSEES BUSINESS . THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER TAKING INTO CONSID ERATION THE TOTALITY OF THE FACTS AND CIRCUMSTANCES UPHELD THE AC TION OF ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE LD. AR HAS NOT BROUGHT ANYTHING ON RECORD BEFORE US TO SHOW THAT THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) ARE ERRO NEOUS. THE LD. AR HAS MERELY REITERATED THE SUBMISSIONS MADE B Y THE ASSESSEE BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). ACCORDIN GLY, WE HOLD THAT THE AUTHORITIES BELOW WERE JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT AND STOCK REGISTER MAINTAINED BY THE ASSESSEE. 14. THE NEXT ISSUE IN APPEALS BEFORE US IS, WHETHER THE COMMISSIONER OF INCOME TAX (APPEALS) HAS COMMITTED ERROR IN DELETING/SUSTAINING THE ADDITIONS ON ACCOUNT OF LOW GROSS P ROFIT DURING THE POST SURVEY PERIOD. THE ASSESSING OFFICER AFTER REJE CTING THE BOOKS OF ACCOUNT, ESTIMATED THE INCOME OF THE ASSESSEES FOR POS T SURVEY PERIOD BY ADOPTING THE GROSS PROFIT DECLARED BY THE ASSE SSEES DURING THE PRE-SURVEY PERIOD INCLUDING THE ADDITIONAL INCOME DECLARED A T THE TIME 13 ITA NOS. 1661 & 1662/PN/2011 AND 11 & 01/PN/2012, A.Y. 2007-08 OF SURVEY AND EXTRAPOLATING THE SAME FOR THE POST SURVE Y PERIOD. THE COMMISSIONER OF INCOME TAX (APPEALS) REJECTED THE METHOD ADOPTED BY THE ASSESSING OFFICER FOR ESTIMATING THE PROFITS OF THE ASSES SEES FOR THE POST SURVEY PERIOD. 15. IN THE CASE OF NARAYANDAS LAXMANDAS & SONS (ITA N OS. 1661/PN/2011 AND 11/PN/2012) TO DETERMINE THE PROFITS O F THE ASSESSEE FOR THE POST SURVEY PERIOD THE COMMISSIONER OF INCOME TAX (APPEALS) ADOPTED THE GROSS PROFIT RATIO 17.74% IN THE IMMED IATE PRECEDING YEAR. THE ASSESSEE HAD DECLARED NORMAL GROSS PROFIT OF 13.70% (EXCLUDING ADDITIONAL INCOME) FOR PRE-SURVEY PERIOD. TH E COMMISSIONER OF INCOME TAX (APPEALS) ADOPTED 17.74% GROSS PROFIT FOR THE POST SURVEY PERIOD AND DETERMINED THE POST SURVEY TURNOVER AT RS.28,21,748/-. THE COMMISSIONER OF INCOME TAX (APPEALS) FUR THER OBSERVED THAT THE DIFFERENTIAL GROSS PROFIT PERCENTAGE OF 4.04% I.E. 17.74% 13.70%, WOULD COVER OMISSIONS OR COMMISSIONS ON TH E PART OF THE ASSESSEE IN DISCLOSING BUSINESS PROFITS TRULY AND CORR ECTLY FOR THE POST SURVEY PERIOD. IN THE CASE OF NARAYANDAS LAXMANDAS & CO. (ITA NOS. 1662/PN/2011 AND 01/PN/2012) THE COMMISSIONER OF INCOME TAX (APPEALS) WHILE COMPUTING GROSS PROFIT ON GOLD, ADOPTED GROS S PROFIT PERCENTAGE OF 17.62% WHICH IS THE GROSS PROFIT RATE DECLAR ED BY THE ASSESSEE FOR THE PRE-SURVEY PERIOD (EXCLUDING ADDITIONAL INC OME). IN RESPECT OF SILVER ORNAMENTS THE COMMISSIONER OF INCOME TA X (APPEALS) ADOPTED AVERAGE GROSS PROFIT RATE DECLARED BY THE ASSE SSEE FOR THE LAST FOUR YEARS I.E. 37.40%. IN OUR CONSIDERED VIEW THE GROSS PROFIT PERCENTAGE ADOPTED BY THE COMMISSIONER OF INCOME TAX (A PPEALS) FOR MAKING ADDITION ON ACCOUNT OF POST SURVEY PERIOD IS JUST AND 14 ITA NOS. 1661 & 1662/PN/2011 AND 11 & 01/PN/2012, A.Y. 2007-08 REASONABLE IN CASE OF BOTH THE ASSESSEES. WE DO NOT F IND ANY REASON TO INTERFERE WITH THE SAME. 16. THE NEXT ISSUE IN THE APPEALS (ITA NOS. 1661/PN/2011 AND 11/PN/2012) RELATE TO THE ADDITION SUSTAINED/DELETED BY T HE COMMISSIONER OF INCOME TAX (APPEALS) ON ACCOUNT OF STOCK DEFICIT FOUND DURING THE COURSE OF SURVEY OPERATION. THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE DEFICIT AROSE BECAUSE OF TRANSFER OF S TOCK FROM OLD ORNAMENTS ACCOUNT TO NEW ORNAMENTS ACCOUNT. DURING T HE SURVEY THERE WAS DEFICIT OF GOLD STOCK TO THE EXTENT OF 340.277 GRAMS. ACCORDING TO THE ASSESSING OFFICER THE DEFICIT RESULTED DUE TO SALE OF GOLD OUTSIDE THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER M ADE ADDITION EQUIVALENT TO THE SALE VALUE OF THE DEFICIT STOCK OF GOLD. B EFORE THE COMMISSIONER OF INCOME TAX (APPEALS) THE ASSESSEE FURNISHED EXTRACTS OF THE COMPUTERIZED STOCK REGISTER TO SUBSTANTIATE ITS C LAIM. THE COMMISSIONER OF INCOME TAX (APPEALS) REJECTED THE CONTENT IONS OF THE ASSESSEE ON THE GROUND THAT NO SUCH CLAIM WAS MADE DU RING THE SURVEY OPERATIONS AND NO STOCK REGISTER IN RESPECT OF OLD ORNAM ENTS WAS FOUND DURING THE SURVEY. THE COMMISSIONER OF INCOME TAX (APPE ALS) RESTRICTED THE ADDITION TO THE EXTENT OF RS.43,354/- BY APPLYING GROSS PROFIT OF 13.70% (PRE-SURVEY PERIOD) ON THE UNRECORDED TUR NOVER OF RS.3,16,458/-. WE ARE OF THE CONSIDERED VIEW THAT THE ACT ION OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN MAKING ADDITION ON A CCOUNT OF DEFICIT IN STOCK BY APPLYING THE GROSS PROFIT RATIO IS REA SONABLE AND JUSTIFIED. THE LD. AR OF THE ASSESSEE HAS NOT BEEN ABLE TO CONTROVERT THE FINDINGS OF THE FIRST APPELLATE AUTHORITY. ACCORDINGLY, THIS GR OUND OF APPEAL OF THE ASSESSEE, AS WELL AS REVENUE IS DISMISSED. 15 ITA NOS. 1661 & 1662/PN/2011 AND 11 & 01/PN/2012, A.Y. 2007-08 17. THE SECOND ISSUE RAISED IN THE APPEAL OF THE REVEN UE I.E. ITA NO. 01/PN/2012 IS WITH RESPECT TO DELETING OF ADDITION RS.24,00 0/- ON ACCOUNT OF DISALLOWANCE OF REMUNERATION PAID TO PARTNERS. THE ASSESSING OFFICER MADE DISALLOWANCE OF RS.24,000/- IN RESPECT OF REMUNERATION PAID TO THE PARTNERS. THE ASSESSING OFFICER HELD THAT AS PER THE DEED OF PARTNERSHIP, EACH PARTNER IS TO GET RS. 4,000/- PER MONTH. THUS, THE TOTAL REMUNERATION PAYABLE TO BOTH THE PARTNERS IS RS.96,000/- PER ANNUM. WHEREAS, THE REMUNERATION CLAIMED IS RS.1,20,000/- PER ANNUM. THE ASSESSING OFFICER, ACCORDINGLY , MADE DISALLOWANCE OF RS.24,000/- ON ACCOUNT OF EXCESS CLAIM OF REMUNERATION. BEFORE THE COMMISSIONER OF INCOME TAX (APPE ALS) THE ASSESSEE EXPLAINED THAT A REVISED PARTNERSHIP DEED WAS EXECUTED ON 31-03-2006. ACCORDING TO THE REVISED PARTNERSHIP DEED THE TOTAL REMUNERATION PAYABLE TO WORKING PARTNERS W.E.F. 01-04-2006 IS RS.1,20,000/- PER ANNUM. HOWEVER, THE REVISED PARTNERSHIP DEED COULD NOT BE FILED ALONG WITH THE RETURN OF INCOME DUE TO MANDATORY E- FILING OF THE RETURN. THE COMMISSIONER OF INCOME TAX (APPEALS ) AFTER CONSIDERING THE REVISED PARTNERSHIP DEED AND THE FACTS OF THE CASE DELETED THE DISALLOWANCE OF REMUNERATION RS.24,000/- MADE B Y THE ASSESSING OFFICER. THE LD. DR HAS NOT BEEN ABLE TO SHOW AN Y INFIRMITY IN THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN DELET ING THE AFORESAID DISALLOWANCE. 18. THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE HIS DETAILE D ORDER AFTER ANALYZING THE FACTS OF THE CASE AND DOCUMENTS ON RECORD HAS GRANTED RELIEF TO THE ASSESSEE. WE CONCUR WITH THE FINDIN GS OF THE COMMISSIONER OF INCOME TAX (APPEALS). FOR THE SAKE OF BRE VITY WE ARE NOT REPRODUCING THE SAME IN VIEW OF THE DECISION OF THE H ON'BLE 16 ITA NOS. 1661 & 1662/PN/2011 AND 11 & 01/PN/2012, A.Y. 2007-08 SUPREME COURT OF INDIA IN THE CASE OF CIT VS. K.Y. PILLIAH AN D SONS REPORTED AS 63 ITR 411 (SC) AND THE DECISION OF HON'BLE D ELHI HIGH COURT IN THE CASE OF CIT VS. GLOBAL VENTADGE P. LTD. REPO RTED AS 354 ITR 21 (DELHI). NEITHER THE LD. AR OF THE ASSESSEE NOR TH E LD. DR COULD CONTROVERT THE WELL REASONED FINDINGS OF COMMISSIONER OF INC OME TAX (APPEALS). WE DO NOT FIND ANY INFIRMITY IN THE REASONED AND D ETAILED ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 19. IN THE RESULT, THE APPEALS OF THE ASSESSEES AND BO TH THE APPEALS BY THE REVENUE ARE DISMISSED BEING DEVOID OF MERIT. ORDER PRONOUNCED ON MONDAY, THE 30 TH DAY OF NOVEMBER, 2015. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 30 TH NOVEMBER, 2015 RK *+,$-.'/'(- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-III, PUNE 4. ' / THE CIT-III, PUNE 5. !*+ %%,- , ,- , . /01 , / DR, ITAT, A BENCH, PUNE. 6. + 2 34 / GUARD FILE. // ! % // TRUE COPY// #5 / BY ORDER, %6 ,1 / PRIVATE SECRETARY, ,- , / ITAT, PUNE