DCIT CC-23, New Delhi V. Kawaljeet Singh Chadha, New Delhi

ITA 2501/DEL/2008

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9857 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2009
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 25-08-2009
• Assessment Year: 2006-2007
• Appeal Filed On: 11-07-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH `D : NEW DELHI) BEFORE SHRI D.R. SINGH, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.2501/DEL./2008 (ASSESSMENT YEAR : 2006-07) DCIT, CENTRAL CIR.23, VS. SHRI KANWALJEET SINGH CH ADHA, NEW DELHI. H-1, RAJOURI GARDEN, NEW DELHI. (PAN/GIR NO.AADPC4713H) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANJEEV JAIN, CA. REVENUE BY : SMT. KAVITA BHATNAGAR, CIT(DR) ORDER PER A.K. GARODIA: AM THIS IS A REVENUE APPEAL DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-23, NEW DELHI. DATED 10.4.2008 FOR ASSESSMENT YEAR 2004-05. 2. GROUND NO.1OF THE APPEAL READS AS UNDER: WHETHER ON THE FATS AND CIRCUMSTANCES OF THE CASE, THE COMMISSIONER OF INCOME- TAX (APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.15,24,291 MADE ON ACCOUNT OF DIFFERENCE IN VALUE OF GOLD ORNAMENTS FOUND IN E XCESS AT THE TIME OF SEARCH. 3. BRIEFLY STATED, THE FACTS ARE THAT SEARCH WAS CA RRIED OUT IN THE CASE OF THE ASSESSEE ON 20.1.2006 AND THE REGISTERED GOVERNMENT VALUER P REPARED AN INVENTORY OF STOCK. AS PER REPORT OF THE THE REGISTERED VALUER, TOTAL GOLD JEWELERY WEIGHING 27,176.850 GMS. AND 153.75 CARAT OF DIAMOND WAS INVENTORIED. IT IS NOTE D BY THE ASSESSING OFFICER ON PAGE 3 OF THE ASSESSMENT ORDER THAT AS PER THE BOOKS OF TH E ASSESSEE, TOTAL STOCK OF GOLD JEWELERY AND DIAMOND AS ON 20.1.2006 WAS AS UNDER: (A) NET WEIGHT OF GOLD JEWELERY OF (22 CT.) - 12,05 2.930 GMS. (B) NEW WEIGHT OF GOLD JEWELERY (18 CT.) - 184.260 GMS. (C) DIAMOND - 53.180 CARAT I.T.A. NO.2501/DEL./2008 (A.Y. : 2006-07) 2 4. THE ASSESSING OFFICER NOTED THAT EXCESS GOLD JEW ELERY FOUND WAS 14939.660 GMS.. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN THE DIFFERENCE. SOME DIFFERENCE WAS POINTED OUT BY THE LD.AR OF THE ASSE SSEE AND FINALLY THE ASSESSING OFFICER HAS NOTED THAT THERE WAS NET DIFFERENCE OF 13908.91 0 GMS. THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESSEE HAS SURRENDERED A SUM OF RS .93,25,160 ON ACCOUNT OF DISCREPANCY IN THE STOCK OF GOLD ORNAMENTS OF 22 CT. IT WAS AL SO SUBMITTED BEFORE THE ASSESSING OFFICER THAT WHILE SURRENDERING THE AMOUNT OF RS.93 25160, THE ASSESSEE HAS TAKEN THE WEIGHT OF EXCESS GOLD JEWELRY FOUND AT 15,077.060 G MS. AS AGAINST THE ACTUAL DIFFERENCE OF 13908.910 GMS. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE SURRENDERED EXTRA QUANTITY OF 1168.15 GMS. THE ASSESSING OFFICER HA S VALUED THIS EXTRA GOLD JEWELRY @ RS.719.60 GMS AND MADE AN ADDITION OF RS.8,40,600 O N ACCOUNT OF 1168.150 GMS. OF UNACCOUNTED GOLD BEING THE DIFFERENCE OF 15077.060 GMS. 13908.910 GMS. A FURTHER ADDITION OF RS.6,83,691 WAS MADE BY THE ASSESSING O FFICER ON THE BASIS OF RATE DIFFERENCE. AS PER THE ASSESSING OFFICER, IF GOLD JEWELRY OF 13908.910 GMS. IS TO BE VALUED AT RS.719.60 PER GM., THE VALUE COMES TO RS. 1,00,08,851, BUT THE ASSESSEE HAS SURRENDERED A SUM OF RS.93,25,160 AND HENCE THE ASS ESSING OFFICER MADE ADDITION OF THE DIFFERENCE AMOUNT OF RS.6,86,391. THE TOTAL ADDITI ON MADE BY THE ASSESSING OFFICER IS AT RS.1524291. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) AND THE COMMI SSIONER OF INCOME-TAX (APPEALS) HAS DELETED THAT ADDITION ON THE BASIS OF THE QUANT ITY OF 15077.060 GMS. DECLARED BY THE ASSESSEE AS CORRECT QUANTITY. REGARDING THE VALUAT ION RATE, IT IS HELD BY THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT THE ASSESSEE HAD ADOP TED THE VALUATION @ 618.50 PER GMS. ON THE BASIS OF ACTUAL COST OF THE ASSESSEE AND NO T ON THE BASIS OF MARKET VALUE AS HAS BEEN DONE BY THE ASSESSING OFFICER. IT IS ALSO NOT ED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT THE ASSESSEE HAD BEEN CONSISTENTLY FOLLOWING THIS METHOD OF VALUING ITS STOCK AT COST. IT IS FURTHER NOTED BY THE COMMISSI ONER OF INCOME-TAX (APPEALS) THAT IF AVERAGE G.P. OF 25% IS REDUCED FROM THE SALE PRICE OF 785 PER GM., THE COST OF JEWELRY SOLD WOULD WORK OUT TO RS.588.75 PER GM. AS AGAINST WHICH, THE ASSESSEE HAD VALUED THE STOCK AT RS.618.50 PER GM. AND HENCE, THERE WAS NO UNDER-VALUATION OF THE SURRENDERED STOCK. NOW, THE REVENUE IS IN APPEAL BEFORE US. I.T.A. NO.2501/DEL./2008 (A.Y. : 2006-07) 3 5. LD.DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS THE LD.LD.AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE COMMISSIONE R OF INCOME-TAX (APPEALS). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTH ORITIES BELOW. WE FIND THAT THE DISPUTE IS WHETHER THE SURRENDERED STOCK OF 15077.0 60 GMS. OF GOLD JEWELRY SHOULD BE VALUED AT RS.785 PER GM. AS HAS BEEN DONE BY THE GO VERNMENT VALUER OR IT SHOULD BE VALUED AT RS.618.50 PER GM. AS HAS BEEN VALUED BY T HE ASSESSEE. WE FIND THAT IT IS NOTED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT TH E SALE PRICE OF GOLD JEWELRY WAS RS.785 PER GM. AROUND THE DATE OF SEARCH AS PER THE BILLS. IT IS ALSO NOTED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT AVERAGE G .P. PERCENTAGE WAS AROUND 25% AND IF THIS 25% OF G.P IS REDUCED FROM THE SALE PRICE O F 785 PER GM., THE COST OF JEWELRY WORKS OUT TO RS.588.75 PER GM. AGAINST WHICH, THE ASSESSE E HAS VALUED THE COST OF EXCESS JEWELRY AT RS.618.50 PER GM. LD.LD.DR OF THE REVEN UE COULD NOT POINT OUT ANY DEFECT IN THIS WORKING OF COMMISSIONER OF INCOME-TAX (APPEALS ) AND UNDER THESE FACTS, WE FIND NO REASON TO INTERFERE IN THE ORDER OF THE COMMISSIONE R OF INCOME-TAX (APPEALS) ON THIS ISSUE. WE, THEREFORE, UPHOLD THE SAME. THIS GROUN D OF THE REVENUE IS REJECTED. 7. GROUND NO.2 OF THE APPEALS READS AS UNDER: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN DELETING THE ADDI TION OF RS.1,34,850 MADE ON ACCOUNT OF DIFFERENCE IN VALUE OF DIAMONDS FOUND AN D SURRENDERED AT THE TIME OF SEARCH. 8. BRIEFLY STATED, THE FACTS ARE THAT IT IS NOTED B Y THE ASSESSING OFFICER ON PAGE 4 OF THE ASSESSMENT ORDER THAT THERE IS A DIFFERENCE OF 100.57 CT. IN THE QUANTITY OF DIAMOND. IT IS FURTHER NOTED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS SURRENDERED A SUM OF RS.3.68 LAKH ON ACCOUNT OF DISCREPANCY IN THE STOCK OF DIAMOND WEIGHING 92 CT. IT IS FURTHER NOTED THAT THE VALUATION OF THE SURRENDERED STOCK OF DIAMOND WAS MADE AT RS.4000 PER CT. THE ASSESSING OFFICER HAS FURTHER NOTED TH AT THE OPENING STOCK OF DIAMOND AS ON 1.4.2005 WAS VALUED @ RS.4467 PER CT. AND PURCHASE DURING THE YEAR WAS @ 6089 PER CT. THE ASSESSING OFFICER ADOPTED THE VALUATION RATE OF RS.5,000 PER CT. AFTER WORKING OUT THE AVERAGE RATE OF RS.5300 PER GM. ON THE BASIS OF RAT E OF OPENING STOCK AND COST OF PURCHASE I.T.A. NO.2501/DEL./2008 (A.Y. : 2006-07) 4 DURING THE YEAR. HE MADE AN ADDITION OF RS.92,000 ON ACCOUNT OF UNDER VALUATION OF DIAMOND SURRENDERED TO THE EXTENT OF 92 CT. AND MAD E FURTHER ADDITION OF RS.42,850 ON ACCOUNT OF 8.57 CT. OF DIAMOND OF SHORT SURRENDERED BY THE ASSESSEE AND TOTAL ADDITION MADE WAS RS.1,34,850. BEING AGGRIEVED, THE ASSESSE E CARRIED THE MATTER IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS). THE COMM ISSIONER OF INCOME-TAX (APPEALS) HAS DELETED BOTH THESE ADDITIONS. REGARDING THE QU ANTITY OF DIFFERENCE OF 8.57 CT., IT IS HELD BY THE COMMISSIONER OF INCOME-TAX (APPEALS) TH AT THERE IS A TOTALING MISTAKE ON PAGE IV OF THE STOCK INVENTORY PREPARED AT THE TIME OF SEARCH WHERE THE WEIGHT OF DIAMOND HAS WRONGLY BEEN TOTALED AT 153.75 CT. WHER EAS IT SHOULD BE 145.19 CT. IN VIEW OF THIS MISTAKE, HE DELETED THE ADDITION MADE BY TH E ASSESSING OFFICER OF RS.42,850 ON ACCOUNT OF VARIATION IN THE QUANTITY OF DIAMOND. R EGARDING ADDITION OF RS.92,000 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNDER VALUT ION OF DIAMOND SURRENDERED BY THE ASSESSEE, IT WAS HELD BY THE COMMISSIONER OF INCOME -TAX (APPEALS) THAT IF THE G.P. IS REDUCED FROM THE AVERAGE PRICE, THE ADDITION MADE B Y THE ASSESSING OFFICER CANNOT BE SUSTAINED. NOW, THE REVENUE IS IN APPEAL BEFORE US . 9. LD.DR OF THE REVENUE SUPPORTED THE ASSESSMENT OR DER. REGARDING THE DELETION OF ADDITION OF RS.92,000 ON ACCOUNT OF UNDER VALUATION OF DIAMOND SURRENDERED BY THE ASSESSEE, IT WAS SUBMITTED THAT RATE OF RS.5,000 PE R CT. WAS WORKED OUT BY THE ASSESSING OFFICER ON THE BASIS OF OPENING STOCK PRICE AND PUR CHASE PRICE AND NOT ON THE BASIS OF SALE PRICE AND HENCE THERE IS NO QUESTION OF REDUCING AN Y GROSS PROFIT FROM THE SAME. LD.AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE COMMISSI ONER OF INCOME-TAX (APPEALS). 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND THAT THERE ARE TWO TYPES OF ADDITIONS MADE BY THE ASSESSING OFFICER. THE ADDIT ION OF RS.42,850 WAS MADE BY THE ASSESSING OFFICER ON THE BASIS THAT EXCESS DIAMOND IS OF 100.57 CT., WHEREAS THE ASSESSEE HAS SURRENDERED ONLY 92 CT. OF DIAMOND. IN THIS RE GARD, WE FIND THAT IT IS NOTED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT THERE WAS A TOTALING MISTAKE IN THE STOCK INVENTORY PREPARED AT THE TIME OF SEARCH. IN VIEW OF THIS FACT, WE FIND NO REASON TO INTERFERE IN THE ORDER OF THE COMMISSIONER OF INCOM E-TAX (APPEALS) ON THIS ASPECT. REGARDING DELETION OF RS.92,000 ON ACCOUNT OF UNDER VALUATION OF DIAMOND SURRENDERED BY THE ASSESSEE OF 92 CT., WE FIND THAT THE ASSESSI NG OFFICER HAS ADOPTED THE RATE OF I.T.A. NO.2501/DEL./2008 (A.Y. : 2006-07) 5 DIAMONDS AS PER THE OPENING STOCK OF DIAMOND AS ON 1.4.2005 AND PURCHASE RATE OF DIAMOND DURING THE YEAR. THE AVERAGE OF BOTH HAS B EEN WORKED OUT BY THE ASSESSING OFFICER AT RS.5300 PER CT. AS AGAINST THE SAME, THE ASSESSING OFFICER ADOPTED THE RATE OF 5000 PER CT. WHEREAS RS.4000 PER CT. IS THE RATE AD OPTED BY THE ASSESSEE. THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS DELETED TH IS ADDITION ON THE BASIS THAT GROSS PROFIT HAS TO BE REDUCED FROM AVERAGE RATE OF RS.53 00 PER CT. WORKED OUT BY THE ASSESSING OFFICER. WE ARE NOT IN AGREEMENT WITH THE COMMISSI ONER OF INCOME-TAX (APPEALS) ON THIS ISSUE BECAUSE AVERAGE RATES OF RS.5300 PER CT. HAS BEEN WORKED OUT ON THE BASIS OF OPENING STOCK OF DIAMOND AND PURCHASE OF DIAMOND DU RING THE YEAR AND NOT ON THE BASIS OF SELLING PRICE OF DIAMOND. THE GROSS PROFIT HAS TO BE REDUCED IF WE ADOPT THE SELLING PRICE, BUT NOT FROM PURCHASE PRICE AND HENCE ON THI S ASPECT OF THE MATTER, WE REVERSE THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) A ND UPHOLD THE ORDER OF THE ASSESSING OFFICER AND THE ADDITION OF RS.92,000 IS CONFIRMED. THIS GROUND OF THE REVENUE IS PARTLY ALLOWED. 11. GROUND NO.3 OF THE APPEAL READS AS UNDER: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN DELETING THE ADDI TION OF RS.1,10,000 MADE ON ACCOUNT OF HOUSEHOLD EXPENSES. 12. BRIEFLY STATED, THE FACTS ARE THAT IT WAS STATE D BY THE ASSESSEE BEFORE THE ASSESSING OFFICER THAT THE ASSESSEE HAS WITHDRAWN A SUM OF RS .90,000 FOR HOUSEHOLD EXPENSES OF THE FAMILY WHICH CONSISTED OF 5 ADULT MEMBERS INCLUDING HIS SPOUSE AND THREE CHILDREN. THE ASSESSING OFFICER WAS OF THE VIEW THAT HOUSEHOLD EX PENSES IS TO BE ESTIMATED AT RS.2 LAKH AND HE MADE ADDITION OF THE BALANCE OF RS.1,10,000. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE COMMISSIONE R OF INCOME-TAX (APPEALS). THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS DELETED TH IS ADDITION ON THE BASIS THAT THE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER ON ESTIMATED BASIS WITHOUT BRINGING ANY MATERIAL ON RECORD TO SUPPORT THAT ANY EXTRA EXPENS ES WAS INCURRED BY THE ASSESSEE OVER AND ABOVE, WHAT WAS SHOWN BY HIM. HE DELETED THIS ADDITION AND NOW THE REVENUE IS IN APPEAL BEFORE US. I.T.A. NO.2501/DEL./2008 (A.Y. : 2006-07) 6 13. LD.DR OF THE REVENUE SUPPORTED THE ASSESSMENT O RDER WHEREAS THE LD.AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS). 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BEL OW. WE FIND THAT THE ADDITION WAS MADE BY THE ASSESSING OFFICER ON ESTIMATED BASIS WI THOUT BRINGING ANY MATERIAL ON RECORD TO SUPPORT THAT ANY EXTRA EXPENDITURE WAS IN CURRED BY THE ASSESSEE. CONSIDERING THESE FACTS, WE FIND NO REASON TO INTERFERE IN THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AND, HENCE WE UPHOLD THE SAME. THIS GROU ND OF THE REVENUE IS REJECTED. 15. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED. 16. ORDER PRONOUNCED IN OPEN COURT ON 28/08/2009. (D.R. SINGH) (A.K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: AUG. 28, 2009. *SKB* COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A)-III, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. AR/ITAT