Surovi Mansion Jewellers Pvt Ltd, Kolkata V. I.T.O Wd - 12(1),kolkata, Kolkata

ITA 1754/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4994 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 04-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PINAKI MUKHERJEE J
• Assessee Lawyers: A K TIBRAWAL
• Section: 40A(3); 143(3); 194C; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI N.V.VASUSDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 1754 / KOL / 2013 ASSESSMENT YEAR :2009-10 SUROVI MANSION JEWELLERS PVT. LTD. 195/13B, RASH BEHARI AVENUE, KOLKATA-700 019 [ PAN NO.AAICS 3050P ] V/S . THE INCOME TAX OFFICER, WARD-12(1), 3, GOVT. PLACE, KOLKATA-700 001 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI A.K.TIBRAWAL, FCA /BY RESPONDENT SHRI PINAKI MUKHERJEE, JCIT-DR /DATE OF HEARING 16-03-2016 /DATE OF PRONOUNCEMENT 13-04-2016 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS)-XII, KOLKATA DATED 22.03.2013. ASSESSMENT WAS FRAMED BY ITO WARD-12(1), KOLKATA U/S 115WE(3) OF T HE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HI S ORDER DATED 30.12.2011 FOR ASSESSMENT YEAR 2009-10. 2. FIRST ISSUE RAISED BY ASSESSEE IS THAT LD. CIT(A ) ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER BY DISALLOWING A SUM OF 28,69,878/-. THE EFFECTIVE GROUND IS REPRODUCED BELOW:- 1) THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.28,69,879, MADE B Y THE ASSESSING OFFICER, ITA NO.1754/KOL/2013 A.Y. 2009-10 SUROVI MANSION JEWELLERS PVT LTD. V. ITO WD-12(1 ) KOL. P AGE 2 UNDER SECTION 40A(3) OF THE INCOME TAX ACT, 1961, W HEN ACTUAL CASH PAYMENTS NEVER EXCEEDED THE SUM OF RS.20,000 ON ANY DATE WHATSOEVER. 3. BRIEF FACTS AS CULLED OUT FROM THE RECORD ARE TH AT ASSESSEE IS A PRIVATE LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF MANU FACTURING AND RETAILING OF GOLD & SILVER ORNAMENTS AND PRECIOUS AND SEMI PR ECIOUS STONES. THE ASSESSEE FILED ITS RETURN OF INCOME ON 30-09-2009 D ECLARING TOTAL INCOME OF 2,13,930/- UNDER THE HEAD BUSINESS & PROFESSION. HOWEVER, AO FRAMED U/S 143(3) OF THE ACT BY ASSESSING THE INCOME OF ASSESS EE AT 34,40,850/-. IT WAS SUBMITTED THAT WHEN CUSTOMERS EXCHANGED THEI R OLD ORNAMENTS IN PLACE OF NEW ORNAMENTS THEN ASSESSEE ACCOUNTS FOR PURCHAS E AND SALE OF THE ORNAMENTS SIMULTANEOUSLY. THE DIFFERENCE BETWEEN PU RCHASE & SALE VALUE IS SETTLED EITHER BY CASH OR ACCOUNT PAYEE CHEQUE. IN SUCH A SITUATION, ASSESSEE ISSUED TWO INVOICES ONE FOR PURCHASE OF ORNAMENTS AND OTHER ONE FOR SALE OF ORNAMENTS. SIMILARLY, ASSESSEE RECORDS THE PAYMENT TRANSACTIONS AGAINST THE PURCHASE AND RECEIPT TRANSACTIONS AGAINST THE SALE OF ORNAMENTS IN THE CASH BOOK. HOWEVER, IN THE ACTUALITY THE TRANSACTION WIL L ONLY BE SETTLED WITH THE CUSTOMER AT THE AMOUNT OF THE DIFFERENCE ARISING BE TWEEN PURCHASE AND SALE VALUE OF ORNAMENTS. THE AO ON EXAMINING THE CASH BO OK FOUND THAT PAYMENT FOR OLD GOLD PURCHASE ACCOUNT EXCEEDS 20,000/- AND AS SUCH IT VIOLATES THE PROVISIONS OF SECTION 40A(3) OF THE ACT. THE PLEA O F THE ASSESSEE THAT THE TRANSACTION OF PURCHASE AND SALE OF THE ORNAMENTS S HOULD BE VERIFIED IN THE CONTEXT OF NET OF PURCHASE-SALES WAS DISREGARDED BY THE AO. DURING THE ASSESSMENT PROCEEDINGS, AO FOUND THAT THE ASSESSEE HAS MADE PURCHASE OF ORNAMENTS EXCEEDING THE PAYMENT OF 20,000/- WHICH AGGREGATES TO RS. 28,69,878/-. THE AO ALSO OBSERVED THAT SUCH TRANSAC TION IS ALSO NOT FALLING UNDER ANY OF THE EXCEPTION CATEGORY AS SPECIFIED IN RULE 6DD OF INCOME TAX RULES 1962 AND FINALLY DISALLOWED A SUM OF 28,69,878/- FOR THE VIOLATION OF THE PROVISIONS OF SECTION 40A(3) OF THE ACT AND ADDED T O THE TOTAL INCOME OF THE ASSESSEE. ITA NO.1754/KOL/2013 A.Y. 2009-10 SUROVI MANSION JEWELLERS PVT LTD. V. ITO WD-12(1 ) KOL. P AGE 3 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LEARN ED CIT(A) WHO CONFIRMED THE ACTION OF AO BY OBSERVING THAT THE AD DITIONS WAS MADE FOR THE VIOLATION OF SECTION 40A(3) OF THE ACT ON ACCOUNT O F THE PAYMENT FOR PURCHASE OF OLD ORNAMENTS EXCEEDING RS. 20,000/-. ACCORDINGL Y THE PLEA OF ASSESSEE WAS REJECTED THAT THE AFORESAID DISALLOWANCE RELATE S TO THE TRANSACTIONS OF PURCHASE OF OLD ORNAMENTS IN EXCHANGE OF NEW ORNAME NTS AND TRANSACTION OF PURCHASE OF OLD ORNAMENTS SHOULD BE VIEWED IN THE C ONTEXT OF NET FIGURE OF PURCHASE AND SALE. BEING AGGRIEVED BY THIS ORDER OF LD CIT(A) ASSESSEE IS IN SECOND APPEAL BEFORE US. 5. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PART IES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. BEFORE US LD. AR FIL ED A PAPER BOOK WHICH IS RUNNING FROM PAGE 1 TO 87 AND DREW OUR ATTENTION ON PAGES 1 & 2 OF THE PAPER BOOK WHERE THE DETAILS OF THE PARTIES TO WHOM NEW O RNAMENTS WERE SOLD IN EXCHANGE OF OLD ORNAMENTS ALONG WITH NET AMOUNT ADJ USTED WITH THE PARTIES. IN NONE OF THE CASE THE NET PAYMENT WAS EXCEEDING FOR THE PURCHASE OF THE OLD ORNAMENTS BEYOND 20,000/-. ALTHOUGH THE ASSESSEE ON SALE OF NEW ORNAMENTS IN EXCHANGE OF OLD ORNAMENTS WAS REFLECTI NG THE TRANSACTION AS INDEPENDENT PURCHASE AND SALE IN THE BOOKS OF ACCOU NTS BUT IN ACTUALITY THE PARTY ACCOUNT WAS ADJUSTED WITH THE NET AMOUNT. FOR EXAMPLE, MR. S. BHATTACHARJEE SOLD OLD GOLD TO THE ASSESSEE AND THE ASSESSEE ISSUED THE PURCHASE MEMO WHICH IS PLACED ON RECORD ON PAGE 3 O F THE PAPER BOOK. THE VALUE OF THE PURCHASE OF THE OLD GOLD WAS 20,890/- AND THE SAME WAS SHOWN AS PAYMENT TO THE PARTY IN THE CASH BOOK ON PAGE 45 OF THE PAPER BOOK. THE ASSESSEE SOLD NEW GOLD FOR RS. 20,725.00 TO THE AFO RESAID PARTY ON DATED 26/10/2008 VIDE SALE MEMO NO. 8CM/1547 WHICH IS PLA CED ON PAGE 4 OF THE PAPER BOOK. THE SAME SALE WAS SHOWN AS RECEIPT IN T HE CASH BOOK ON PAGE 42 OF THE PAPER BOOK. BUT IN ACTUALITY IN THE INSTA NT CASE ONLY THE DIFFERENCE AMOUNT OF RS.165.00 (SALE PRICE RS. 20,725/- PURCHA SE PRICE RS. 20,890/-) ITA NO.1754/KOL/2013 A.Y. 2009-10 SUROVI MANSION JEWELLERS PVT LTD. V. ITO WD-12(1 ) KOL. P AGE 4 WAS PAID TO THE AFORESAID PARTY. HOWEVER, IN THE CA SH BOOK BOTH PURCHASE & SALE WERE RECORDED AT THE FULL VALUE. THE ASSESSEE ALSO SUBMITTED THAT WHEREVER THE PAYMENT EXCEEDS 20,000 THEN THE PAYMENT WAS MADE BY WAY OF ACCOUNT PAYEE CHEQUE ONLY. BESIDES THE ABOVE, AS SESSEE FURTHER SUBMITTED THAT THE ABOVE PROCESS OF PAYMENTS ARE PERMITTED IN TERMS OF CLAUSE (D) OF RULE 6DD OF INCOME TAX RULES. ON THE OTHER HAND, LD. DR VEHEMENTLY SUPPORTED THE ORDER OF LOWER AUTHORITIES. 5.1 FROM THE AFORESAID DISCUSSION, WE FIND THAT THE AO HAS INVOKED THE PROVISIONS OF SECTION 40A(3) OF THE ACT ON THE GROU ND THAT ASSESSEE HAS MADE THE PAYMENT IN CASH EXCEEDING 20,000 FOR THE PURCHASE OF OLD ORNAMENTS AND THE SAME WAS CONFIRMED BY THE LD CIT(A). HOWEVE R, FROM THE FACTS OF THE CASE AND SUBMISSION OF THE ASSESSEE, WE FIND THAT I N NONE OF THE CASE THE PAYMENT IS EXCEEDING 20,000 FOR THE PURCHASE OF OLD ORNAMENTS. IN ALL TH E CASES WHERE THE ADDITION WAS MADE BY THE AO ON ACCO UNT OF DEEMED PAYMENT OF 20,000 ON THE PURCHASE OF OLD ORNAMENTS, THE ASSESS EE SOLD ORNAMENTS IN EXCHANGE THEREOF. AS A RESULT, THE NET PAYMENT WAS MADE THE PARTY FOR THE PURCHASE OF OLD ORNAMENTS. HOWEVER TH E ASSESSEE IN ITS BOOKS OF ACCOUNTS WAS SHOWING PURCHASE AND SALE IN FULL VALU E AND THE SAME WAS ALSO RECORDED AS PAYMENT FOR THE PURCHASE AND RECEIPT FO R THE SALE IN THE CASH BOOK. IN OUR CONSIDERED VIEW MERELY RECORDING THE C ONNECTED PURCHASE AND SALE TRANSACTIONS INDEPENDENTLY AND SEPARATELY INST EAD OF NET ADJUSTED AMOUNT IN THE CASH BOOK DOES NOT AMOUNT THE VIOLATI ON OF SECTION 40A(3) OF THE ACT. ON EXAMINATION OF RECORD OF THE NET AMOUNT OF PURCHASE AND SALE OF THE ORNAMENTS WE DID NOT FIND EVEN A SINGLE CASE WH ERE THE PAYMENT IS EXCEEDING 20,000. HOWEVER WE FIND THAT WHEREVER THE PAYMENT EXCEEDS FOR PURCHASE MORE THAN 20,000, IT HAS BEEN MADE THROUGH ACCOUNT PAYEE CHEQUE ONLY AS EVIDENT FROM THE SUBMISSION OF THE A SSESSEE WHICH IS PLACED ON PAGE NUMBER 1 AND 2 OF THE PAPER BOOK. THE LD DR ALSO FAILED TO BRING ANYTHING CORROBORATIVE EVIDENCE ON RECORD TO CONTRO VERT THE ARGUMENTS OF THE LD. AR. IN ADDITION TO THE ABOVE, WE ALSO FIND THAT AN EXCEPTION IN CLAUSE (D) TO ITA NO.1754/KOL/2013 A.Y. 2009-10 SUROVI MANSION JEWELLERS PVT LTD. V. ITO WD-12(1 ) KOL. P AGE 5 RULE 6DD OF INCOME TAX RULES 1962 HAS BEEN PROVIDED WHICH READS AS UNDER:- (D) WHERE THE PAYMENT IS MADE BY WAY OF ADJUSTMENT AGAINST THE AMOUNT OF ANY LIABILITY INCURRED BY THE PAYEE FOR A NY GOODS SUPPLIED OR SERVICES RENDERED BY THE ASSESSEE TO SUCH PAYEE. IN VIEW OF THE ABOVE, WE CONCLUDE THAT THE ASSESSEE HAS NOT VIOLATED PROVISIONS OF SECTION 40A(3) OF THE ACT ON ACCOUNT OF PAYMENT EXCEEDING FOR THE PURCHASE OF OLD ORNAMENTS EXCEEDING 20,000. ACCORDINGLY, WE REVERSE THE ORDERS OF LOWER AUTHORITIES AND THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 6. SECOND ISSUE RAISED BY ASSESSEE IN THIS APPEAL I S THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF AO BY DISALLOWING A SUM OF 2,53,243/- UNDER SECTION 40(A)(IA) OF THE ACT CONSIDERING THE MELTIN G LOSS INCURRED BY KARIGARS IS NOTHING BUT PAYMENT MADE TO KARIGARS WI THOUT DEDUCTING TDS. FOR THIS, ASSESSEE HAS RAISED EFFECTIVE GROUND AS UNDER:- 2) THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.2,53,243 MADE ARBITRARILY BY THE ASSESSING OFFICER UNDER SECTION 40(A)(IA) OF TH E INCOME TAX ACT, 1961 ON THE ALLEGED GROUND THAT THE MELTING LO SS INCURRED BY KARIGARS IS, ACTUALLY, AMOUNT PAID TO THEM WITHOUT DEDUCTING TAX AT SOURCE. 7. THE ASSESSEE HIRED THE SERVICES OF KARGARS FOR T HE MAKING OF ORNAMENTS. DURING THE YEAR, ASSESSEE IN SOME CASES RECEIVED THE LESSER WEIGHT OF GOLD FROM THE KARIGARS AND THOSE KARIGARS WERE EITHER PAID LESSER OR NO AMOUNT FOR THEIR SERVICES. ACCORDINGLY THE AO OPINED THAT THE PAYMENT TO THOSE KARIGARS HAS BEEN PAID IN THE FORM OF THE GOLD. THE ASSESSEE SUBMITTED THAT THE LESSER GOLD WAS RECEIVE D DUE TO LOSS OF GOLD IN MANUFACTURING PROCESS WHICH IS BOUND TO HAPPEN AND THE SAME LOSS IS ALSO RECOGNIZED IN FOREIGN TRADE POLICY TO THE EXTENT OF 3.5% AS WASTAGE. ACCORDINGLY, THE ASSESSEE SUBMITTED THE WORKING OF SUCH LOSS OF 906.880 GRAMS WITH RECONCILIATION BUT FAILED TO RECONCILE S UCH LOSS TO THE EXTENT OF ITA NO.1754/KOL/2013 A.Y. 2009-10 SUROVI MANSION JEWELLERS PVT LTD. V. ITO WD-12(1 ) KOL. P AGE 6 166.170 GRAMS. ACCORDINGLY THE AO OPINED THAT THE L OSS ON MAKING OF ORNAMENTS TO THE EXTENT OF 166.170 GRAMS REPRESENTS THE PAYMENTS TO KARIGARS IN THE FORM OF GOLD AS IT IS EXCESS GOLD L EFT WITH THEM IN LIEU OF MAKING CHARGES. THE AO FURTHER OPINED THAT THIS PAY MENT HAD BEEN MADE IN THE FORM OF GOLD WITHOUT DEDUCTING TDS UNDER SECTIO N 194C OF THE ACT. THEREFORE IT WAS DISALLOWED UNDER SECTION 40(A)(IA) OF THE ACT. ACCORDINGLY THE AO MADE AN ADDITION OF RS. 2,53,243.00 (166.170 X R S. 1524) TO THE TOTAL INCOME OF THE ASSESSEE. 8. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD. C IT(A) WHO CONFIRMED THE ACTION OF AO BY OBSERVING THAT THE LOSS TO THE EXTENT OF 3.5% WAS ACCEPTED IN TERMS OF FOREIGN TRADE POLICY AS MELTING AND MAN UFACTURING LOSS. THE LOSS MORE THAN 3.5% WAS DISALLOWED DUE TO NON-AVAILABILI TY OF RECONCILIATION STATEMENT. BEING AGGRIEVED BY THIS ORDER OF LD CIT(A) ASSESSEE IS IN SECOND APPEAL BEFORE US. 9. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. BEFORE US LD. AR SUBMITTED THAT AS PER THE UNDERSTANDING WITH THE KARIGARS IF THE LOSS IN THE COURSE OF MELTING AND M ANUFACTURING OF GOLD IS BEYOND THE SPECIFIED AGREED PERCENTAGE THEN THE VAL UE OF SUCH LOSS SHALL BE ADJUSTED FROM THE PAYMENT DUE TO KARIGARS. ACCORDIN GLY IN THE PRESENT CASE MORE LOSS WAS INCURRED BY THE KARIGARS THEREFO RE THE LESS OR NO PAYMENT WAS MADE AND IT IS NOT THE CASE THAT THE GO LD WAS LEFT WITH THE KARIGARS IN THE FORM OF PAYMENT. ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS OF AUTHORITIES BELOW. 10. FROM THE AFORESAID FACTS WE FIND THAT IN SOME C ASES LESS GOLD WAS RECEIVED BACK FROM KARIGARS ON ACCOUNT OF LOSS OF G OLD INCURRED DURING THE COURSE OF MELTING AND MANUFACTURING PROCESS. SUCH A LOSS WAS TREATED BY THE ITA NO.1754/KOL/2013 A.Y. 2009-10 SUROVI MANSION JEWELLERS PVT LTD. V. ITO WD-12(1 ) KOL. P AGE 7 AO AS PAYMENT TO THE KARIGARS IN THE FORM OF GOLD W ITHOUT TDS. HOWEVER THE LEARNED AR SUBMITTED THIS LOSS DOES NOT REPRESE NT THE PAYMENT TO THE KARIGARS IN THE FORM OF GOLD BUT IT IS ACTUAL LOSS AND THE DEDUCTION FOR SUCH ACCESS LOSS WAS ALSO MADE FROM THE PAYMENT OF THE K ARIGARS. NOW THE QUESTION BEFORE US IS WHETHER SUCH LOSS REPRESENTS THE PAYMENT TO THE KARIGARS OR IT IS ACTUAL LOSS. IN OUR CONSIDERED VI EW THAT THERE IS UNDOUBTEDLY LOSS OCCURRED IN THE COURSE OF MELTING AND MANUFACTURING PROCESS OF GOLD. THESE MELTING AND MANUFACTURING ACTIVITIES ARE CARRIED OUT BY THE KARIGARS WHO ARE PAID THE SERVICE CHARGES IN THE FO RM OF CASH AS PER THE MARKET PREVAILING SYSTEM. ACCORDINGLY WE OPINED THA T THE AFORESAID LOSS CANNOT BE TERMED AS PAYMENT TO KARIGARS. AS PER THE ORDER OF THE AO THE ASSESSEE DULY EXPLAINED THE LOSS OF GOLD INCURRED D URING THE COURSE OF MELTING AND MANUFACTURING PROCESS TO THE TUNE OF 906.880 GR AMS. SUCH A LOSS WAS NOT DOUBTED BY THE AO AT THE TIME OF ASSESSMENT BUT THE ADDITION FOR THE LOSS OF GOLD 166.170 GRAMS WAS MADE DUE TO NON-AVAILABILITY OF RECONCILIATION. IN OUR VIEW MERELY ASSESSEE FAILED TO PROVIDE THE RECONCIL IATION DOES NOT MEAN THAT THE PAYMENT HAS BEEN MADE IN THE FORM OF GOLD. THE AO SHOULD HAVE BROUGHT COGENT REASONS FOR TREATING THE LOSS OF GOLD AS PAY MENT TO THE KARIGARS. AS WE FIND THAT THE LOSS OF 906.880 GRAMS WAS DULY EXP LAINED WHICH SHOWS THAT THERE WAS THE SYSTEM OF MAKING THE PAYMENT IN CASH TO THE KARIGARS. ACCORDINGLY WE HELD THAT THE LESS GOLD RECEIVED FRO M THE KARIGARS CANNOT BE TERMED AS PAYMENT TO KARIGARS. THEREFORE WE HAVE NO HESITATION TO REVERSE THE ORDERS OF AUTHORITIES BELOW. HENCE THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 11. THIRD ISSUE RAISED BY ASSESSEE IN THIS APPEAL I S THAT THE LEARNED CIT(A) ERRED IN CONFIRMING THE ORDER OF AO BY MAKING ADDI TION OF RS.45,872/- ON ACCOUNT OF NON-PRODUCTION OF THE RECONCILIATION STA TEMENT OF THE GOLD DEPOSIT LYING WITH THE ASSESSEE. FOR THIS, ASSESSEE HAS RAI SED EFFECTIVE GROUND AS UNDER:-. ITA NO.1754/KOL/2013 A.Y. 2009-10 SUROVI MANSION JEWELLERS PVT LTD. V. ITO WD-12(1 ) KOL. P AGE 8 3) THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) ERRED IN CONFIRMING THE ADDITION OF RS.45,872 MADE BY THE ASSESSING OFFICER ON THE ALLEGED GROUND THAT THE ASSESSEE COU LD NOT RECONCILE AND FILE EVIDENCES IN RESPECT OF GOLD DEPOSITS LYIN G WITH THE ASSESSEE. 12. THE ASSESSEE HAS SHOWN GOLD DEPOSITS FROM CUSTO MERS FOR 2173.07 GRAMS. SOME OF THE GOLD ITEMS WERE LYING WITH THE A SSESSEE FOR MORE THAN 3 YEARS. AT THE TIME OF ASSESSMENT THE ASSESSEE FAILE D TO RECONCILE THE GOLD DEPOSIT FOR 30.100 GRAMS. ACCORDINGLY THE AO TREATE D THE VALUE OF SUCH UNEXPLAINED GOLD AS INCOME OF THE ASSESSEE. THE VAL UE OF SUCH GOLD WAS WORKED OUT RS.45872.00 (30.100 GRAMS X RS. 1524). T HE AO ACCORDINGLY MADE THE ADDITION OF RS. 45872.00 TO THE TOTAL INCO ME OF THE ASSESSEE. 13. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD C IT(A). THE ASSESSEE BEFORE THE LD. CIT(A) SUBMITTED THAT SUCH GOLD DEPO SIT DOES NOT RELATE TO THE YEAR UNDER APPEAL AND IT HAS NOT BEEN WRITTEN OFF I N THE BOOKS OF ACCOUNTS. THEREFORE THE PROVISIONS OF SECTION 41(1) OF THE AC T WILL NOT BE APPLIED IN THE INSTANT CASE. THE LEARNED CIT(A) DISREGARDED THE CL AIM OF THE ASSESSEE AND CONFIRMED THE ACTION OF AO BY OBSERVING AS UNDER:- 7. APPEAL ON GROUND NO. 4 IS AGAINST THE ADDITION OF RS.45872/- ON ACCOUNT OF GOLD DEPOSITS TO CUSTOMERS. DURING THE A SSESSMENT PROCEEDINGS WHILE EXAMINING THE CLOSING STOCK THE A O FOUND GOLD DEPOSIT FROM CUSTOMERS OF OVER 2 KG. THE AO ASKED THE ASSESSEE TO RECONCILE THE DEPOSITS AND EXCESS STOCK FOUND. THE AR SUBMITTED A RECONCILIATION STATEMENT BUT COULD NOT EITHER RECON CILE OR EXPLAIN GOLD OF 30.100 GRAMS. THUS, THE AO APPLIED RATE OF GOLD AT RS.1524 PER GRAM AND MADE AN ADDITION OF RS.45872/- FOR EXCESS UNEXP LAINED AND UN- RECONCILED GOLD FOUND. DURING THE APPELLATE PROCEED ING THE AR COULD NOT EXPLAIN OR CONTRADICT THE FINDING OF THE AO, THEREF ORE, ASSESSEES APPEAL ON GROUND NO. 4 IS DISMISSED. BEING AGGRIEVED BY THIS ORDER OF LD CIT(A) ASSESSEE IS IN SECOND APPEAL BEFORE US. ITA NO.1754/KOL/2013 A.Y. 2009-10 SUROVI MANSION JEWELLERS PVT LTD. V. ITO WD-12(1 ) KOL. P AGE 9 14. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. BEFORE US LD. AR SUBMITTED THAT GOLD WAS DE POSITED BY THE CUSTOMERS AND THE SAME HAS BEEN REFLECTED IN THE BOOKS OF ACC OUNTS AND NONE OF THE LIABILITY WITH REGARD TO THE GOLD DEPOSIT HAS BEEN WRITTEN OFF IN THE BOOKS. THEREFORE THE QUESTION OF TREATING THE UNEXPLAINED GOLD AS INCOME DOES NOT ARISE. ON THE OTHER HAND THE LD. DR RELIED ON THE O RDER OF AUTHORITIES BELOW. 15. FROM THE AFORESAID DISCUSSION, WE FIND THAT THE ASSESSEE AT THE TIME OF ASSESSMENT FRAMED BY THE AO THE ASSESSEE FAILED TO RECONCILE THE GOLD RECEIVED FROM THE CUSTOMERS TO THE TUNE OF 30.100 G RAMS THEREFORE THE SAME WAS TREATED AS INCOME. HOWEVER FROM THE SUBMISSION OF THE ASSESSEE WE FIND THAT THE LIABILITY TOWARDS THE DEPOSIT OF GOLD FROM THE CUSTOMERS WAS VERY MUCH REFLECTING IN THE BOOKS OF THE ASSESSEE FOR THE REL EVANT YEAR AND NO SUCH LIABILITY WAS WRITTEN BACK IN THE YEAR. NOW IT IS R EALLY CLEAR THAT A TRADING LIABILITY CAN BE TAXED ONLY IF IT IS WRITTEN OFF IN THE BOOKS OF ACCOUNTS. IN THE INSTANT CASE ALTHOUGH THE ASSESSEE FAILED TO GIVE THE RECON CILIATION BUT SUCH LIABILITY WAS NOT WRITTEN OFF IN THE BOOKS OF ACCOUNTS. ACCOR DINGLY IN OUR CONSIDERED VIEW THE AFORESAID LIABILITY CANNOT BE TERMED AS IN COME UNDER SECTION 41(1) OF THE ACT. ON CONTRARY LD. DR FAILED TO BRING ANYTHIN G ON RECORD TO CONTROVERT THE ARGUMENT OF THE ASSESSEE. SO THE LIABILITY TOWARDS THE DEPOSIT OF GOLD CANNOT BE TREATED AS INCOME OF THE ASSESSEE. HENCE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 16. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 13/ 04/2016 SD/- SD/- (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 13 / 04 /201 6 ITA NO.1754/KOL/2013 A.Y. 2009-10 SUROVI MANSION JEWELLERS PVT LTD. V. ITO WD-12(1 ) KOL. P AGE 10 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-SUROVI MANSION JEWELLERS PVT. LTD., 195/ 13B, RASH BEHARI AVN.KOL-19 2. /RESPONDENT-ITO WARD-12(1), 3 GOVT. PLACE, KOLKATA- 700 001 3. ) *+ , , - / CONCERNED CIT KOLKATA 4. , , -- / CIT (A) KOLKATA 5. 012 33*+, , *+ , / DR, ITAT, KOLKATA 6. 267 89 / GUARD FILE. BY ORDER/ , , /TRUE COPY/ / , *+ ,