Shri Vinodrai Bhaichandbhai Parekh, RAJKOT-GUJARAT V. The Income Tax Officer, Ward. 5(1), RAJKOT-GUJARAT

ITA 173/RJT/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50078 (ITAT-RAJKOT)
• Duration Of Justice: 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 22-07-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 04-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MK SINGH
• Assessee Lawyers: DM RINDANI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH SMC, RAJKOT BEFORE SHRI N.R.S. GANESAN (JM) I.T.A. NO.173/RJT/2011 (ASSESSMENT YEAR 2004-05) SHRI VINODRAI BHAICHANDBHAI PAREKH VS THE ITO, WD.5 (1) PROP M/S VINOD SILVER MART RAJKOT MINA GALI, SONI BAZAR RAJKOT PAN : ACGPP7524E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI D.M. RINDANI RESPONDENT BY: SHRI M.K. SINGH O R D E R THIS APPEAL OF THE ASSESEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)-XXI, AHMEDABAD DATED 09-03-2011 FOR THE ASSE SSMENT YEAR 2004-05. 2. THE FIRST ISSUE ARISES FOR CONSIDERATION IS ADDI TION OF RS.35,192 WHEREAS THE OTHER ISSUE PERTAINS TO DELETION OF ADDITION OF RS.15,897 BEING EXCESS CASH FOUND DURING THE COURSE OF SURVEY. 3. SHRI RM RINDANI, THE LD.REPRESENTATIVE FOR THE A SSESSEE SUBMITTED THAT ADDITION OF RS. 35,192 WAS MADE ON ACCOUNT OF UNACC OUNTED SALES / SHORTFALLS FOUND DURING THE COURSE OF SURVEY OPERATION ACCOR DING TO THE LD.REPRESENTATIVE, THE DIFFERENCE IN STOCK WAS PRIMARILY BECAUSE OF DI FFERENCE IN PURITY WHICH WAS TAKEN AT HIGHER SIDE BY THE REVENUE AUTHORITIES DUR ING THE COURSE OF SURVEY OPERATION. ACCORDING TO THE LD.REPRESENTATIVE, DUR ING THE COURSE OF SURVEY OPERATION, THE REVENUE AUTHORITIES FOUND CASH OF RS . 35,512; HOWEVER, ASSESSEE ITA NO.173/RJT/2011 2 STATED THAT THE CASH AS ON 06-02-2004 AS PER CASH B OOK WAS RS.37,322. BUT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OF FICER NOTICED THAT THE CASH BALANCE AS PER CASH BOOK AS ON 06-02-2004 WAS ONLY RS.19,615 AND, THUS, THERE WAS A DIFFERENCE OF RS.15,897 WHEN COMPARED THE CAS H FOUND DURING THE COURSE OF SURVEY WITH THE BOOKS OF ACCOUNT PRODUCED. ACCOR DING TO THE LD.REPRESENTATIVE, THE CASH DIFFERENCE ACTUALLY FOUND WAS ONLY RS.1,81 0. THE ASSESSING OFFICER, HOWEVER, HELD THAT THOUGH THE CASH DIFFERENCE WORKE D OUT AT RS.1,810 AT THE TIME OF SURVEY WAS WORKED OUT IN THE ABSENCE OF ANY COMP ARABLE FIGURE AVAILABLE AS PER THE CASH BOOK AS ON 06-02-2004. THE EXPLANATIO N OF THE ASSESSEE WAS THEREFORE REJECTED BY THE ASSESSING OFFICER ON THE GROUND THAT IT WAS ONLY A GUESS WORK. THEREFORE, THE ASSESSING OFFICER MADE ADDITI ON OF RS. 15,897 TOWARDS EXCESS CASH FOUND AT THE TIME OF SURVEY ACTION IN A DDITION TO THE VALUE OF SHORTAGE FOUND IN THE STOCK OF SILVER ORNAMENTS AMO UNTING TO RS.35,192. THE CIT(A) UPHELD BOTH THE ADDITIONS. THE LD.REPRESENTA TIVE FURTHER SUBMITTED THAT THE DIFFERENCE IN STOCK WAS DUE TO IMPURITY; AND EVEN IF THAT WAS NOT CONSIDERED, THE DIFFERENCE MIGHT HAVE OCCURRED DUE TO SALE. THEREF ORE, THAT CASH MUST HAVE BEEN AVAILABLE WITH THE ASSESSEE WHICH NEEDS TO BE TELESCOPED. ACCORDING TO THE LD.REPRESENTATIVE, AT THE BEST, THE ADDITION OF PROFIT ELEMENT WHICH WAS EMBEDDED IN THE DEFICIENCY / SHORTFALL IN STOCK CAN ONLY BE CONSIDERED. THEREFORE, THERE IS NO SCOPE FOR MAKING ANY ADDITIO N EITHER AS DEFICIENCY IN THE STOCK OR SHORTAGE OF CASH FOUND AT THE TIME OF SURV EY. ON THE CONTRARY, SHRI MK SINGH, THE LD.REPRESENTATIVE FOR THE REVENUE SUBMIT TED THAT HE IS PLACING RELIANCE ON THE ORDER OF THE CIT(A). ITA NO.173/RJT/2011 3 4. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE ALSO PERUSED THE MATERIAL PLACED BEFORE ME. ADMITTEDLY, THERE WAS A SURVEY OPERATION IN THE PREMISES OF THE ASSESSEE ON 06-02-2004. THE REVENU E AUTHORITIES FOUND A DIFFERENCE OF 8379 GMS OF SILVER ORNAMENTS. THE AS SESSEE EXPLAINED THAT THE VARIATION WAS DUE TO DIFFERENCE IN PURITY OF SILVER . THEREFORE, THE ASSESSING OFFICER FOUND THAT THE VALUE OF 8379 GMS OF SILVER WAS UNAC COUNTED INCOME OF THE ASSESSEE. THE CONTENTION OF THE ASSESSEE BEFORE TH IS TRIBUNAL IS THAT THE VARIATION WAS DUE TO IMPURITY IN THE SILVER. EVEN IF THERE IS A VARIATION, THE PROFIT ELEMENT EMBEDDED IN THE VALUE OF THE STOCK HAS ONLY TO BE ADDED AS PROFIT. THE LD.REPRESENTATIVE HAS ALSO CONTENDED THAT THE EXCES S CASH FOUND DURING THE COURSE OF SURVEY OPERATION HAS TO BE TELESCOPED AND ULTIMATELY NO ADDITION NEEDS TO BE MADE. 5. AS SUBMITTED BY THE LD.REPRESENTATIVE FOR THE AS SESSEE, THE CASH FOUND DURING THE COURSE OF SURVEY ACTION MIGHT HAVE BEEN GENERATED ON SALE OF THE GOODS FOUND SHORT DURING THE COURSE OF SURVEY OR IT MIGHT HAVE BEEN FROM THE SAVINGS OF THE ASSESSEE. WHATEVER IT MAY BE, WHEN THERE IS A SHORTAGE OF THE STOCK IT IS TO BE PRESUMED THAT THE CASH FOUND DURI NG THE COURSE OF SURVEY OPERATION WAS GENERATED ON SALE OF SUCH STOCK FOUND SHORT. THEREFORE, THE CASH FOUND DURING THE COURSE OF SURVEY OPERATION NEEDS T O BE TELESCOPED. ADMITTEDLY, THE CASH FOUND WAS RS. 35,512 AND THE CASH AS PER C ASH BOOK AS ON THE DATE OF SURVEY WAS ONLY RS.19,615 AND THUS THERE WAS EXCESS CASH OF RS. 15,897 FOUND DURING THE COURSE OF SURVEY. THEREFORE, THIS SUM O F RS.15,897 HAS TO BE ITA NO.173/RJT/2011 4 TELESCOPED WITH THE DEFICIENCY OF STOCK FOUND AT RS .35,192 AND THUS WHAT REMAINS IS ONLY RS.19,295. ADMITTEDLY, SOME KIND O F DISCOUNT HAS TO BE GIVEN FOR THE ELEMENTS BEING ADDED WHILE CONVERTING SILVER IN TO SILVERY JEWELLERY. FOR THE PURPOSE OF FLEXIBILITY, NORMALLY, ONE HAS TO ADD SO ME OTHER ELEMENTS TO THE PURE SILVER. FROM THE MATERIAL AVAILABLE ON RECORD, NO DISCOUNT APPEARS TO HAVE BEEN GIVEN FOR THE IMPURITY OR THE ELEMENT WHICH IS ADDE D TO THE PURE SILVER. IF SUCH A DISCOUNT IS ALLOWED, IN THE OPINION OF THIS TRIBUNA L, NO DEFICIENCY IN STOCK WOULD BE FOUND. THEREFORE, BY TAKING INTO CONSIDERATION OF THE IMPURITY IN THE SILVER JEWELLERY AND GIVING DUE CREDIT TO THE ELEMENT WHIC H IS USED FOR MAKING SILVER JEWELLERY, IN THE OPINION OF THIS TRIBUNAL, THERE C ANNOT BE ANY ADDITION TOWARDS DEFICIENCY OF STOCK BY RS. 19,295. 6. IN VIEW OF THE ABOVE DISCUSSION, THIS TRIBUNAL I S OF THE OPINION THAT THE ADDITIONS MADE BY THE LOWER AUTHORITY ARE NOT JUSTI FIED. ACCORDINGLY, THE ADDITIONS ARE DELETED. 5. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON THIS 22 ND DAY OF JULY, 2011. SD/- (N.R.S. GANESAN) JUDICIAL MEMBER RAJKOT, DT : 22 ND JULY, 2011 PK/- ITA NO.173/RJT/2011 5 COPY TO: 1. ASSESSEE 2. REVENUE 3. THE CIT(A)-XXI, AHMEDABAD 4. THE CIT-III, RAJKOT 5. THE DR, I.T.A.T., RAJKOT (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT