M/s Prathibha Jewellery House , Bangalore V. Deputy Commissioner of Income TAx Central Circle-1(4), Bangalore

ITA 2536/BANG/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3189 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 29-11-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: FARHAT HUSSAIN QURESHI
• Assessee Lawyers: V SRINIVASAN
• Keywords: Bogus purchase; Business income; Rectification of order; Document seized; Principle of natural justice; Rule of consistency; Cost of acquisition; Documents seized
• Section: 143(3); 153A; 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER A ND SHRI LALIET KUMAR, JUDICIAL MEMBER ITA NOS. 2534 TO 2539/BANG/2017 ASSESSMENT YEAR S : 2005 - 06 TO 2010 - 11 M/S. PRATHIBHA JEWELLERY HOUSE, #1/1, RAJA RAM MOHAN ROY ROAD, RICHMOND CIRCLE, BANGALORE 560 025. PAN: AABFP1771G VS. THE DCIT, CENTRAL CIRCLE 1 [4], BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI V. SRINIVASAN, ADVOCATE RESPONDENT BY : SHRI FARHAT HUSSAIN QURESHI, CIT (DR) DATE OF HEARING : 21. 0 5 .2018 DATE OF PRONOUNCEMENT : 17. 0 8 .2018 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER ALL THESE 6 APPEALS ARE FILED BY THE ASSESSEE WHICH ARE DIRECTED AGAINST THE ORDER OF LD. CIT (A)-11, BANGALORE DATED 11.02.2015 FOR ASSESSMENT YEARS 2005-06 TO 2010-11. ALL THESE APPEALS WERE HEARD T OGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAK E OF CONVENIENCE. 2. THE GROUNDS RAISED IN ALL THE YEARS ARE IDENTICA L AND THERE IS ONLY ONE DIFFERENCE IN THE GROUNDS I.E. REGARDING THE AMOUNT IN VARIOUS YEARS. HENCE, WE REPRODUCE GROUNDS FROM ASSESSMENT YEAR 2005-06 IN I TA NO. 2534/BANG/2017. THE SAME ARE AS UNDER :- 1. THE LEARNED CIT [A] OUGHT TO HAVE APPRECIATED TH AT THE ORDER OF THE LEARNED A.O. PASSED U/S. 153A RWS 143[3] DATED 31/03/2013 AND LATER AS STOOD MODIFIED AND MERGED WITH THE ORDER U /S.154 OF THE ACT, DATED 25/09/2013 IN SO FAR AS IT IS AGAINST THE APP ELLANT IS OPPOSED TO LAW, EQUITY, WEIGHT OF EVIDENCE, PROBABILITIES, AND ACCORDINGLY OUGHT TO HAVE ALLOWED THE APPEAL OF THE APPELLANT. 2. THE LEARNED CIT[A] OUGHT TO HAVE APPRECIATED THA T IN THE ABSENCE ITA NOS. 2534 TO 2539/BANG/2017 PAGE 2 OF 51 OF THE DISCOVERY OF ANY UNDISCLOSED INCOME OR ASSET BASED ON ANY INCRIMINATING SEIZED MATERIALS RELEVANT FOR THE ASS ESSMENT YEAR UNDER APPEAL FOUND AND SEIZED DURING THE COURSE OF SEARCH , THE NOTICE ISSUED U/S.153A WAS BAD IN LAW AS THE IMPUGNED ASSESSMENT IS ESSENTIALLY ON ACCOUNT OF CHANGE OF THE OPINION AS TO THE PRINCIPL E OF VALUATION OF THE CLOSING STOCK AND NOT ON ANY FALSIFICATION OF MATER IAL FACTS OR UNDERSTATEMENT IN THE QUANTITY OF CLOSING STOCK FOR TAKING RECOURSE TO THE ASSESSMENT PROCEEDINGS U/S. 153A OF THE ACT AND ACCORDINGLY, THE LEARNED CIT[A] OUGHT TO HAVE ANNULLED THE ASSESSMEN T MADE U/S.153A OF THE ACT OR AT LEAST DELETED THE ADDITION OF RS. 3,02,97,477/- MADE IN RESPECT OF THE VALUATION OF STOCK AT THE END OF THE YEAR, INSTEAD OF UPHOLDING THE SAME ERRONEOUSLY. 2.1 THE LEARNED CIT[A] OUGHT TO HAVE APPRECIATED TH AT THERE WAS AN EARLIER ASSESSMENT U/S.143[3] OF THE ACT, FOR THE A SSESSMENT YEAR 2005-06 AND THE VARIATION IN THE CLOSING STOCK MADE IN THE SAID ASSESSMENT PROCEEDINGS CAME TO BE DELETED BY THE HO N'BLE ITAT AND THEREFORE, THE ASSESSMENT ORDER PASSED EARLIER U/S. 143[3] OF THE ACT AND HAD REACHED FINALITY, AND HENCE, THE SAID ASSES SMENT DID NOT ABATE ON ACCOUNT OF THE SEARCH AND IN THE ABSENCE OF ANY RELEVANT INCRIMINATING SEIZED MATERIALS RELEVANT FOR THE ASS ESSMENT YEAR UNDER APPEAL, THE ADDITION MADE IN RESPECT OF THE VALUATI ON OF CLOSING STOCK OUGHT TO HAVE BEEN DELETED FOLLOWING THE DECISION O F THE HON'BLE ITAT, SPECIAL BENCH, IN ALL CARGO GLOBAL LOGISTICS LIMITE D REPORTED IN 74 DTR 89, AFFIRMED BY THE HON'BLE HIGH COURT OF BOMBAY IN 374 ITR 645 AND HENCE, THE ASSESSMENT ORD ER PASSED OUGHT TO HAVE BEEN ANNULLED HAVING REGARD TO THE RATIO OF CATENA OF DECISIONS AND IN PARTICULAR THE FOLLOWING DECISIONS OF THE HON'BLE HIGH COURT OF BOMBAY, GUJARAT, RAJASTHAN, KARNATAKA AND CALCUTTA : (1) ALL CARGO GLOBAL LOGISTICS LIMITED REPORTED IN 74 DTR 89 [SB] AND LATER CONFIRMED BY THE HON'BLE HIGH COURT OF BOMBAY IN 374 ITR 645 [BOM] (2) CONTINENTAL WAREHOUSING CORPN. [NHAVA SHEVA] LTD., REPORTED IN 374 ITR 645 (BOM) (3) CIT V. SINHGAD TECHNICAL EDUCATION SOCIETY REPORTED IN 378 ITR 84 (BORN] AFFIRMED BY THE HON'B LE SUPREME COURT IN 397 ITR 344 (SC) (4) CIT V. KABUL CHAWLA REPORTED IN 380 ITR 573 (DEL) (5) MS. LATHA JAIN REPORTED IN 384 ITR 543 (DEL) (6) IBC KNOWLEDGE PARK LIMITED REPORTED IN 385 ITR 346 [KAR]; (7) CIT V. GURINDER SINGH BAWA REPORTED IN 386 ITR 483 [BORN] (8) DESAI CONSTRUCTION P. LTD., REPORTED IN 387 ITR 552 [GUJ] (9) SAUMYA CONSTRUCTIONS PVT. LTD. REPORTED IN 387 ITR 529 (GUJ) (10) ARIHANT ALUMINIUM CORPN. V. ACIT REPORTED IN 388 ITR 450 [KAR] ITA NOS. 2534 TO 2539/BANG/2017 PAGE 3 OF 51 (11) MEETA GUTGUTIA PROP. M/S. FERNS 'N' PETALS REPORTED IN 395 ITR 526 (DEL) (12) DIPAK JASHVANTLAL PANCHAL REPORTED IN 397 ITR 153 (GUJ) (13) PRINCIPAL CIT V. SALSAR STOCK BROKING LTD., IN GA NO.1929/2016 DATED 24/08/2016; (14) LANCY CONSTRUCTIONS REPORTED IN 237 TAXMAN 728 [KAR] (15) JAI STEEL [INDIA] LTD., V ACIT REPORTED IN 1 ITR-OL 371 [RAJ] 3. WITHOUT PREJUDICE TO THE ABOVE, SINCE THE APPELL ANT WAS NOT HEARD BEFORE THE JOINT COMMISSIONER, BEFORE HE ACCORDED A PPROVAL U/S.158D, THE SAME WAS IN GROSS VIOLATION OF THE PR INCIPLES OF NATURAL JUSTICE, WHICH HAD TO BE READ INTO THE PROVISIONS O F SECTION 158D OF THE ACT, AS THE ORDER INVOLVED VISITING OF SERIOUS CIVIL CONSEQUENCES AND NOT MERE AN ADMINISTRATIVE ACTION AT ALL AND TH US, THE ASSESSMENT ORDER PASSED WAS IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE AND ILLEGAL AND CONSEQUENTLY, THE INITIAL ASSESSMENT OR DER BEFORE AND AFTER MERGER WITH THE RECTIFICATION ORDER REQUIRES TO BE CANCELLED. 4. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT[ A] FAILED TO APPRECIATE THE FACT THAT THE APPELLANT HAS MAINTAIN ED REGULAR STOCK ACCOUNT OF VARIOUS ORNAMENTS ON THE COMPUTER WHICH HAD BEEN TALLIED TO 100% IN TERMS OF WEIGHT AND THE APPELLANT HAD VA LUED THE CLOSING STOCK ON THE BASIS OF THE INVENTORIES PREPARED AND PRESERVED FOR EACH YEAR WHICH WERE SEIZED DURING THE COURSE OF SEARCH AND INVENTORIES RECORDED THE EXISTENCE OF VARIOUS ORNAMENTS AND THE IR WEIGHT AND THEIR HISTORICAL COST OR MARKET VALUE, WHICHEVER WA S LOWER AND THE INVENTORY BOOKS HAD BEEN SEIZED BY THE DEPARTMENT D URING THE COURSE OF SEARCH AND HAVING REGARD TO THE PROVISIONS OF SE CTION 292C OF THE ACT, ESPECIALLY, SUB-CLAUSE [1] AND [2], THE PRESUM PTION THAT THE RECORDINGS ENTRIES, ETC., IN SUCH BOOKS OF ACCOUNTS AND DOCUMENTS WERE TRUE AND WHICH APPLIED EVEN TO THE DESCRIPTION OF THE GOODS, WEIGHT AND RATE ALSO AND THE LEGAL AND STATUTORY PR ESUMPTION WAS THAT THEY WERE TRUE, HAD NOT DISPROVED OR EVEN ATTEMPTED TO BE DISPROVED WITH ANY COGENT EVIDENCE TO REBUT THE LEGAL PRESUMP TION U/S.292C OF THE ACT, AND THEREFORE, DEHORS THE PRINCIPLES OR HY POTHESIS ABOUT THE PRINCIPLES OF VALUATION, WHAT WAS THE SUBJECT MATTE R AND THE RELEVANT ISSUE FOR ADJUDICATION WAS NOT ABOUT THE VERY EXIST ENCE OF THE OBJECT OF VALUATION AND SUSTAINING THE ADDITION BY CIT[A] IS CONTRARY TO LEGAL EVIDENCE AND PRESUMPTION AND CONTRARY TO THE SEIZED MATERIAL AND CONSEQUENTLY REQUIRE TO BE DELETED STRAIGHTAWAY, AS THE LEARNED CIT[A] HAS MISDIRECTED IN LAW IN CONSIDERING THE IS SUE WHICH WAS NOT GERMANE. 5. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT[ A] HAS SERIOUSLY ERRED FIRSTLY THAT THE APPELLANT HAS NOT ESTABLISHE D THAT IT WAS FOLLOWING LIFO SYSTEM OF VALUATION AND SECONDLY FUR THER ERRED THAT FOLLOWING SUCH LIFO SYSTEM IS NOT A ACCEPTED METHOD OF VALUATION OF ITA NOS. 2534 TO 2539/BANG/2017 PAGE 4 OF 51 STOCK OVERLOOKING THE FACT THAT APPELLANT'S VALUATI ON WAS ON THE EXISTENTIAL AND EXPERIENTIAL, EXISTENCE OF THE ASSE TS IN THE INVENTORY AND IS NOT ON ANY ISSUE ABOUT HYPOTHESIS OR ABOUT T HE PRINCIPLES TO BE FOLLOWED IN THE MATTER OF VALUATION. 5.1 THE LEARNED CIT[A] FAILED TO APPRECIATE THAT TH E APPELLANT HAD DEMONSTRATED BEFORE HER WITH COGENT EVIDENCE THAT T HE STOCK AS PER THE INVENTORIES MATCHED WITH THE STOCK EVEN TAKEN ERRON EOUSLY BY THE PERSONS WHO WERE NOT ACCUSTOMED TO TAKE THE STOCK A ND POINTED OUT THE MISTAKES AND THE LEARNED CIT[A] HAS NOT EVEN AD VERTED TO THE VOLUMINOUS EVIDENCE PLACED AND DISMISSED THE CONTEN TION WITHOUT ANY SPEAKING ORDER WHATSOEVER AND THEREFORE, THE FINDIN G OF THE LEARNED CIT[A] IS EGREGIOUS ON SUSTAINING OF THE ADDITIONS ON THE GROUND OF UNDERVALUATION OF THE CLOSING STOCK, WHICH WAS AS P ER THE INVENTORIES, WHICH WAS SEIZED DURING THE COURSE OF SEARCH BY THE DEPARTMENT AND CONSEQUENTLY, THE ADDITION MADE ON THIS COUNT REQUI RES TO BE DELETED. 6. THE LEARNED CIT[A] IS NOT JUSTIFIED IN SUSTAININ G AN ADDITION OF RS.4,32,239/- AS PROFIT EARNED ON THE ALLEGED UNACC OUNTED SALES, WHICH INFERENCE WAS MADE WITHOUT APPRECIATING THAT THE MOVEMENT OF STOCKS IN THE STOCK LOGS OF THE GENERAL SOFTWARE CA LLED CADMIUM WITH WHICH THE APPELLANT WAS RECORDING NOT ONLY THE FINA NCIAL TRANSACTIONS BUT ALSO THE DAY-TO-DAY STOCK MOVEMENT FOR PURPOSES OF CONTROLLING THE STOCK IN VARIOUS COUNTERS WHERE THE STOCKS ARE DISP LAYED AS SALES NOT ACCOUNTED IN THE FINANCIAL LOGS THEREBY THEY WERE U NACCOUNTED SALES WARRANTING ADDITION TO BE MADE BY WAY OF GP INCLUDI NG THEREIN. 6.1 THE LEARNED CIT [A] FAILED TO APPRECIATE THE SO FTWARE USED BY THE APPELLANT WAS OF THE GENERAL SHELF SOFTWARE AND NOT A CUSTOMIZED SOFTWARE DESIGNED FOR THE APPELLANT TO FACILITATE S UCH PROCEDURE AND THE FINDING IS THEREFORE PERVERSE. 6.2 THE LEARNED CIT [A] ERRED IN SUSTAINING THE ADD ITION MADE BY THE A.O. THAT ALL THE PLUS KEY TRANSACTIONS ARE SALES M ADE OUTSIDE THE BOOKS EVEN THOUGH THE APPELLANT HAS DEMONSTRATED TH AT ALL THE ENTRIES MADE THEREIN WERE NOT SALES AND REMOVAL OF ITEM FOR POLISHING, RE- TAGGING, ETC., WHICH HAVE NOT BEEN DISPUTED BY THE A.O. IN THE REMAND REPORT AND CONSEQUENTLY, THE FINDING IS THEREFORE P ERVERSE. 6.3 THE INFERENCE DRAWN BY THE CIT [A] IS CONTRARY TO EVIDENCE AND PURELY ON SUSPICION AND SURMISE, AND WITHOUT EVEN N OT GRANTING AN OPPORTUNITY TO CROSS-EXAMINE THE PERSON WHO SOLD TH E SOFTWARE WITH REFERENCE TO SOME STATEMENTS, WHICH WERE NOT PROPER LY APPRECIATED BY THE A.O. AND THUS, THE INFERENCE DRAWN WAS IN VIOLA TION OF THE PRINCIPLES OF NATURAL JUSTICE OF NOT GRANTING CROSS -EXAMINATION TO PROVE TO THE HILT AND ACCORDINGLY, THE FINDING IS V ITIATED AND ADDITION MADE REQUIRES TO BE DELETED. 6.4 THE LEARNED CIT[A] FAILED TO APPRECIATE THAT TH E EXTENT OF JEWELLERY WHICH IS ALLEGED TO HAVE BEEN SOLD OUTSID E THE BOOKS WAS OF ITA NOS. 2534 TO 2539/BANG/2017 PAGE 5 OF 51 SUCH HUGE QUANTITY, THERE WERE NOT ENOUGH PURCHASES TO MATCH SUCH SALES AND ALL THE PURCHASES OF THE APPELLANT ARE AC COUNTED IN THE BOOKS AND THERE WAS STOCK TALLY, WHICH PROVES CONCL USIVELY THAT THE ALLEGED SALES ONLY PROVED THE EXISTENCE OF MOVEMENT OF THE GOODS FROM THE COUNTERS AND NOT BY SALES AND THE CONSEQUENTIAL FINDING CONFIRMED BY THE LEARNED CIT[A] IS PERVERSE AND REQUIRES TO B E DELETED. 7. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED A.O. WAS NOT JUSTIFIED IN NOT TELESCOPING THE ADDITIONS MADE ABOVE WITH THE O THER ADDITIONS MADE IN THE ASSESSMENT. 8. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER BE FORE THE HON'BLE DG/CCIT, THE LEARNED A.O. OUGHT TO HAVE GIVEN CREDI T TO THE ADVANCE- TAX PAID, TDS, 140-A AND TAXES PAID ON COMPLETION O F THE SCRUTINY ASSESSMENTS EARLIER WHILE COMPUTING THE TAX PAYABLE FOR THE ASSESSMENT MADE U/S.153A AND CALCULATING THE INTERE ST LEVIABLE, IF ANY U/S.234A, 234B AND 234C OF THE ACT. 9. THE LEARNED A.O. OUGHT TO HAVE TAKEN THE ADVANCE -TAX AND TAXES PAID U/S.140A OF THE ACT, AT THE TIME OF FILING THE RETURN OF INCOME AND OUGHT TO HAVE CALCULATED THE INTEREST IF ANY, LEVIA BLE U/S.234A, 234B AND 234C OF THE ACT, FOR THE PERIOD FROM THE EXPIRY OF THE PERIOD ON WHICH THE RETURN WAS TO BE FILED IN RESPONSE TO THE NOTICE U/S.153A OF THE ACT, TILL THE DATE OF FILING THE RETURN AND ASS ESSMENT IS COMPLETED. 10. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URG ED AT THE TIME OF HEARING OF THE APPEAL, YOUR APPELLANT HUMBLY PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED AND THE APPELLA NT MAY BE AWARDED COSTS IN PROSECUTING THE APPEAL AND ALSO OR DER FOR THE REFUND OF THE INSTITUTION FEES AS PART OF THE COSTS. 3. THE AMOUNT IN DISPUTE IN THESE 6 YEARS ALONG WIT H NEXT YEAR IS NOTED HEREIN BELOW. SL.NO. ASSESSMENT YEAR REVALUATION OF CLOSING STOCK ESTIMATED PROFIT ON UNACCOUNTED SALES TOTAL 1. 2005 - 06 3 , 02 , 97 , 477 4 , 32 , 239 3 , 07 , 29 , 716 2. 2006 - 07 2 , 79 , 96 , 558 7 , 28 , 837 2 , 87 , 25 , 395 3. 2007 - 08 4 , 58 , 03 , 457 1 , 80 , 058 4 , 59 , 83 , 515 4. 2008 - 09 2 , 64 , 61 , 562 2 , 38 , 630 2 , 67 , 00 , 192 5. 2009 - 10 4 , 59 , 19 , 693 71 , 023 4 , 59 , 90 , 716 6. 2010 - 11 4 , 33 , 72 , 512 83 , 53 , 007 5 , 17 , 25 , 519 7. 2011 - 12 4 , 32 , 00 , 485 33 , 10 , 541 4 , 65 , 11 , 026 TOTAL 26 , 30 , 51 , 744 1 , 33 , 14 , 335 27 , 63 , 66 , 079 4. THESE APPEALS ARE IN SECOND ROUND. ORIGINALLY T HE APPELLATE ORDER WAS PASSED BY CIT (A) ON 28.02.2014 AGAINST WHICH THE ASSESSEE CARRIED THE MATTER IN ITA NOS. 2534 TO 2539/BANG/2017 PAGE 6 OF 51 APPEAL BEFORE THE TRIBUNAL AND THE TRIBUNAL IN ITS ORDER DATED 21.11.2014 IN ITA NOS. 579 TO 585/BANG/2014 RESTORED THE MATTER BACK TO THE FILE OF CIT (A) FOR FRESH DECISION WITH REGARD TO ADDITIONAL GROUNDS OF APPEAL RELATING TO VALIDITY OF JURISDICTION U/S. 153A AS WELL AS THE EXISTENCE OF CONDITIONS FOR ISSUANCE OF SEARCH WARRANT U/S. 132A OF IT ACT. IT IS ALSO NOT ED BY CIT (A) IN ITS IMPUGNED ORDER THAT THE ISSUE ON MERIT OF THE ADDITION WAS N OT DECIDED BY THE TRIBUNAL AND THEREFORE, IN THE SECOND ROUND, THE ONLY ISSUE OPEN TO CIT (A) WAS REGARDING VALIDITY OF JURISDICTION U/S. 153A OF IT ACT. THIS ASPECT OF THE MATTER HAS BEEN DECIDED BY LD. CIT(A) AS PER THE IMPUGNED ORDER DATED 11.02.2015 AND IT WAS HELD THAT THE PROCEEDINGS U/S. 153A HAVE BEEN VALIDLY INITIATED IN THE PRESENT CASE AND NOW THESE APPEALS ARE FILED BY THE ASSESSEE BEFORE THE TRIBUNAL IN WHICH THE ASSESSEE HAS RAISED THE GROUN DS IN RESPECT OF THE MERIT OF THE ADDITIONS ALONG WITH TECHNICAL GROUNDS BUT IN C OURSE OF HEARING BEFORE US, ARGUMENTS WERE MADE ONLY ON THE MERIT OF THE ADDITI ONS AND HENCE, WE INFER THAT THE GROUNDS RAISED IN THE GROUNDS OF APPEAL IN RESPECT OF TECHNICAL OBJECTIONS ARE NOT PRESSED AND THEREFORE, THESE TEC HNICAL GROUNDS ARE REJECTED AS NOT PRESSED AND WE DECIDE THE MERIT OF TWO ADDIT IONS IN EACH YEAR I.E. 1) ADDITION ON ACCOUNT OF VALUATION OF CLOSING STOCK A ND 2) ADDITION ON ACCOUNT OF ALLEGED PROFIT EARNED ON ALLEGED UNACCOUNTED SALES. 5. THE LD. AR OF ASSESSEE SUBMITTED THAT GROUND NOS . 1 AND 10 ARE GENERAL. REGARDING GROUND NO. 3, HE SUBMITTED THAT THIS GROU ND IS NOT PRESSED. REGARDING GROUND NO. 7, HE SUBMITTED THAT AS PER TH IS GROUND, THE REQUEST IS REGARDING TELESCOPING BENEFIT AND THEREFORE, IF THE ADDITION ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE, THEN THIS GROUND WILL BECOM E INFRUCTUOUS. REGARDING GROUND NO. 8, HE SUBMITTED THAT ISSUE RAISED IN THI S GROUND IS REGARDING INTEREST WHICH IS CONSEQUENTIAL. HE SUBMITTED THAT THE ISSU ES TO BE DECIDED ARE ONLY 2 AS PER GROUND NO. 2.1, 4, 5 AND 5.1 REGARDING VALU ATION OF CLOSING STOCK AT THE YEAR END AND THE SECOND ISSUE IS ABOUT ADDITION MAD E BY THE AO OF ALLEGED PROFIT ON ALLEGED UNACCOUNTED SALES. THIS ISSUE IS RAISED IN GROUND NOS. 6,6.1,6.2,6.3 AND 6.4. IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT THE AO HAS PROCEEDED ON THIS BASIS THAT THE ASSESSEE IS FOLLOW ING LAST IN FIRST OUT (LIFO) METHOD OF VALUING OF CLOSING STOCK AND THEREFORE, T HE INVENTORY OF OLD JEWELLERY ITA NOS. 2534 TO 2539/BANG/2017 PAGE 7 OF 51 WAS VALUED BY ADOPTING OLD RATES BUT THE ASSESSEE I S NOT FOLLOWING LIFO METHOD OF VALUING CLOSING STOCK AND DESPITE ITS SUB MISSION THAT THE ASSESSEE IS FOLLOWING THE METHOD OF VALUING CLOSING STOCK BY VA LUING SPECIFIC ITEM AT ITS SPECIFIC COST OF ACQUISITION. HE DRAWN OUR ATTENTI ON TO LETTER DATED 23.03.2013 SUBMITTED BY ASSESSEE BEFORE THE AO AND REPRODUCED BY THE AO IN PARA 4.4 OF ASSESSMENT ORDER OF ASSESSMENT YEAR 2005-06. HE PO INTED OUT THAT IT WAS CATEGORICALLY STATED BY ASSESSEE BEFORE THE AO THAT THE ASSESSEE IS HAVING OWN SYSTEM OF ACCOUNTING FOR THE LAST 60 YEARS CONS ISTENTLY WHICH WAS NOT QUESTIONED BY THE DEPARTMENT IN ANY EARLIER YEAR AN D IT IS ALSO SUBMITTED BEFORE THE AO THAT THE ENTIRE PURCHASE AND SALE OF ASSESSE E ARE VERIFIABLE ALTHOUGH THE TRANSACTIONS ARE HUGE AND THE ASSESSEE HAS ALSO MAINTAINED INVENTORY BOOKS FOR THE FINANCIAL YEARS SHOWING THE METHOD OF VALUATION OF CLOSING STOCK. IT IS ALSO POINTED OUT THAT IT IS THE SUBMISSION BE FORE THE AO THAT THE ASSORTED ORNAMENTS VALUED AT RS. 4.35 CRORES OF 1,40,000 GRA MS NET WEIGHT AS ON 31.03.2005. THE SAME HAS EXISTED ON 31.03.2004 ALS O. IT IS ALSO SUBMITTED THAT IN FACT, THESE STOCKS DATE BACK TO 31.03.1998 AND THE ASSESSEE COULD NOT SALE THESE ITEMS BECAUSE THEY HAVE BECOME OUT MODEL ED AND OUT OF FASHION AND PARTICULARLY IT IS SHUNNED BY YOUNGSTERS. HE P OINTED OUT THAT IT IS ALSO SUBMITTED BEFORE THE AO THAT ONLY OLD UNSOLD ITEMS IS NOT MAKING THE ASSESSEE BECAUSE THE ASSESSEE HAS SUFFICIENT CREDIT WORTHINE SS IN THE MARKET AND THE ASSESSEE IS KEEPING OLD STOCKS ON SENTIMENTAL GROUN DS. ALTHOUGH THE SAME CAN BE SOLD AT THE MARKET PRICE WHICH IS RELATIVELY HIGH. THE LD. AR OF ASSESSEE SUBMITTED THAT THE COPY OF INVENTORY OF CLOSING STO CK AS ON 31.03.2005 FOUND DURING THE COURSE OF SEARCH BUT NOT SEIZED IS AVAIL ABLE ON PAGE NOS. 576 TO 581 OF PAPER BOOK AND IT WAS POINTED OUT THAT TOTAL VAL UE OF CLOSING STOCK HAS BEEN WORKED OUT AT RS. 9,66,18,830/- ON PAGE NO. 581 OF PAPER BOOK. THEREAFTER, HE SUBMITTED THAT SIMILAR INVENTORY FOR THE YEAR ENDIN G AS ON 31.03.2006 IS AVAILABLE ON PAGES 582 TO 588 OF PAPER BOOK. THERE AFTER, HE SUBMITTED THAT THERE WAS EARLIER SEARCH CARRIED ON 16.11.1990 AND THE COPY OF INVENTORY OF CLOSING STOCK AS ON 31.03.1985 FOUND DURING THE COU RSE OF THIS SEARCH AND SEIZED IS AVAILABLE ON PAGES 648 TO 655 OF PAPER BO OK. THEREAFTER, HE SUBMITTED THAT ON PAGES 696 TO 698 OF PAPER BOOK IS THE COPY OF ENQUIRY LETTER ISSUED BY THE AO ON 31.07.1991 IN RESPECT OF ASSESS MENT YEAR 1989-1990 AND ITA NOS. 2534 TO 2539/BANG/2017 PAGE 8 OF 51 POINTED OUT THAT IN THIS ENQUIRY LETTER, ENQUIRY NO . 14 IS IN RESPECT OF VALUATION OF CLOSING STOCK AND THE AO ASKED THE ASSESSEE TO FURN ISH ITEM-WISE DETAILS OF OPENING STOCK AND CLOSING STOCK AND ALSO TO INDICAT E THE METHOD OF VALUING CLOSING STOCK. THEREAFTER, HE SUBMITTED THAT REPLY TO THIS LETTER IS AVAILABLE IN LETTER DATED 10.09.1991 AVAILABLE ON PAGES 706 TO 7 08 OF PAPER BOOK AND POINTED OUT THAT IN THIS REPLY, IT WAS SUBMITTED TH AT THE STOCK IS VALUED AT ITS COST. AGAIN HE DRAWN OUR ATTENTION TO PAPER BOOK PAGE NOS . 711 AND 712 AND POINTED OUT THAT YEAR-WISE DETAILS WERE GIVEN IN RESPECT OF OPENING STOCK, STOCK INCLUDED IN OPENING STOCK, CLOSING STOCK, STOCK INCLUDED IN CLOSING STOCK, SALES OUT OF HISTORICAL STOCK AND SALES OUT OF REMAINING OPENING STOCK AND THEREAFTER, TOTAL SALES OUT OF TOTAL OPENING STOCK FOR THE YEAR ENDIN G 31.03.1988, 31.03.1989 AND 31.03.1990 FOR GOLD JEWELLERY, DIAMONDS AND PRECIOU S STONES. THEREAFTER HE SUBMITTED THAT THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 1989-1990 IS AVAILABLE IN PAPER BOOK PAGES 714 TO 724 OF PAPER B OOK AND SUBMITTED THAT AS AGAINST RETURN OF INCOME OF RS. 9,34,074/-, THE INC OME WAS ASSESSED AT RS. 10,85,940/- WITHOUT MAKING ANY ADDITION IN RESPECT OF UNDER VALUATION OF CLOSING STOCK. THEREAFTER HE SUBMITTED THAT COPY OF ASSESS MENT ORDER FOR ASSESSMENT YEAR 1990-91 DATED 26.08.1992 IS AVAILABLE ON PAGES 730 TO 740 OF PAPER BOOK. IN THIS YEAR ALSO, THERE IS NO ADDITION ON A CCOUNT OF UNDER VALUATION OF CLOSING STOCK AND AS AGAINST RETURNED INCOME OF RS. 10,90,971/-, THE INCOME WAS ASSESSED AT RS. 15,35,346/- AND ALTHOUGH SOME A DDITION WAS MADE BUT NO ADDITION ON ACCOUNT OF UNDER VALUATION OF CLOSING S TOCK. THEREAFTER HE SUBMITTED THE COPY OF ASSESSMENT ORDER FOR ASSESSME NT YEAR 1991-92 IS AVAILABLE ON PAGES 752 TO 755 OF PAPER BOOK AND IN THIS YEAR ALSO, THERE IS NO ADDITION ON ACCOUNT OF UNDER VALUATION OF CLOSING S TOCK ALTHOUGH ADDITION WAS MADE OF RS. 21,92,294/- IN RESPECT OF THIS ALLEGAT ION THAT SOME STOCK WAS FOUND WHICH WAS CLAIMED TO BE OF A JOINT VENTURE OF THE THREE PARTNERS BUT THAT STAND WAS NOT ACCEPTED AND ADDITION WAS MADE BUT ST ILL NO ADDITION WAS MADE IN RESPECT OF UNDER VALUATION OF CLOSING STOCK. TH EREAFTER HE SUBMITTED THAT THE COPY OF REASSESSMENT ORDER PASSED FOR ASSESSMENT YE AR 2012-13 ON 30.11.2016 IS AVAILABLE ON PAGES 1026 TO 1032 OF PA PER BOOK AND AS PER THE SAME, THERE WAS AN ADDITION OF RS. 30,84,779/- ON A CCOUNT OF ALLEGED BOGUS PURCHASES EXPENDITURE DISALLOWED BUT THERE IS NO AD DITION ON ACCOUNT OF ANY ITA NOS. 2534 TO 2539/BANG/2017 PAGE 9 OF 51 ALLEGED UNDER VALUATION OF CLOSING STOCK. HE SUBMI TTED THAT NEITHER IN THE PRECEDING YEARS NOR IN THE SUCCEEDING YEAR, ANY ADD ITION WAS MADE ON ACCOUNT OF UNDER VALUATION OF CLOSING STOCK ALTHOUGH THE ME THOD OF VALUING THE CLOSING STOCK IS THE SAME IN THOSE YEARS ALSO AS IN THE PRE SENT YEARS. HE SUBMITTED THAT UNDER THESE FACTS, THE ADDITION MADE BY THE AO ON ACCOUNT OF ALLEGED UNDER VALUATION OF CLOSING STOCK IS NOT JUSTIFIED A ND THE SAME SHOULD BE DELETED. HE ALSO SUBMITTED SYNOPSIS IN RESPECT OF BOTH ADDIT IONS AND THE SAME IS REPRODUCED HEREIN BELOW FOR READY REFERENCE.:- BRIEF SYNOPSIS AND WRITTEN SUBMISSIONS THE APPELLANT BEGS TO SUBMIT THE FOLLOWING BRIEF SY NOPSIS AND LIST OF DATES FOR THE KIND CONSIDERATION AND GRACIOUS FAVOURABLE ORDERS OF THE HON'BLE BENCH AS UNDER:- 1. THE APPELLANT IS A PARTNERSHIP FIRM ENGAGED IN T HE BUSINESS OF TRADING IN BULLION AND RETAIL SALE OF JEWELLERY. THERE WAS A SEARCH CONDUC TED IN THE PREMISES OF THE APPELLANT ON 02/09/2010. PURSUANT TO THE SEARCH THE ASSESSMENT PROCEEDINGS WERE TAKEN UP U/S.153A OF THE ACT, FOR THE ASSESSMENT YE ARS 2005-06 TO 2010-11 AND THE REGULAR ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT Y EAR 2011-12 WAS ALSO TAKEN UP. IN THESE ASSESSMENTS, THE LEARNED A.O. HAS MADE CER TAIN ADDITIONS, WHICH ARE COMMON FOR ALL THE YEARS UNDER APPEAL AND THE SAME ARE TABULATED AS UNDER :- ASST. YEAR ADDITION MADE IN RESPECT OF REVALUATION OF CLOSING STOCK ADDITION OF THE ALLEGED GROSS PROFITS ON SALES OUTSIDE THE BOOKS EXCESS STOCK FOUND AT THE TIME OF SEARCH TOTAL ADDITION MADE FOR THE YEAR 2005 - 06 3,02,97,477 4,32,239 -- 3,07,29,716 2006 - 07 2,79,96,558 7,22,837 -- 2,87,19,395 2007 - 08 4,58,03,457 1,80,058 -- 4,59,83,515 2008 - 09 2,64,61,562 2,38,630 -- 2,67,00,192 2009 - 10 4,66,70,902 71,023 -- 4,67,41,925 2010 - 11 4,44,70,999 83,53,007 -- 5,28,24,006 2011 - 12 6,89,45,603 33,10,541 2,58,26,638* 9,80,82,782 TOTAL 29,06,46,558 1,33,14,335 2,58,26,638 32,97,81,531 * INCLUDES RS. 12,18,163/- ADDED AS GROSS PROFIT ON ALLEGED SALES OUTSIDE BOOKS 2. BRIEFLY, THE FOLLOWING TABULATION GIVES THE BACK GROUND OF THE SEARCH ACTION, THE ASSESSMENT AS WELL AS APPELLATE PROCEEDINGS LEADING TO THE PRESENT APPEALS BEFORE THE HONBLE BENCH: DATE PARTICULARS REMARKS / REFERENCE 02/09/2010 SEARCH ACTION WAS CONDUCTED IN THE BUSINESS PREMISES OF APPELLANT U/S. ITA NOS. 2534 TO 2539/BANG/2017 PAGE 10 OF 51 132 OF THE ACT. DURING THE COURSE OF SEARCH, THERE WAS NO EXCESS CASH FOUND OR FOR THAT MATTER ANY EXCESS JEWELLERY OR OTHER VALUABLES FOUND AND SEIZED 08/08/2011 NOTICE U/S.153A OF THE ACT WAS ISSUED FOR THE ASSESSMENT YEAR 2005-06 TO 2010-11 CALLING FOR THE RETURNS OF INCOME TO BE FILED. SEE PAGES 327 TO 331 OF THE PAPER BOOK NO.II 31/10/2011 RETURNS OF INCOME FILED IN RESPONSE TO THE ABOVE NOTICE U/S.153A OF THE ACT FOR THE ASSESSMENT YEARS 2005-06 TO 2010- 11 REPORTING THE VERY SAME INCOME THAT WAS SHOWN EARLIER. NO ADDITIONAL INCOME WAS ADMITTED BY THE APPELLANT PURSUANT TO THE SEARCH. SEE PAGES 334 TO 429 OF THE PAPER BOOK NO.II 31/03/2013 ASSESSMENTS WERE FRAMED U/S. 153A RWS 143[3] OF THE ACT FOR THE ASSESSMENT YEARS 2005-06 TO 2010- 11. ASSESSMENT WAS ALSO FRAMED FOR THE ASSESSMENT YEAR 2011-12 U/S. 143[3] OF THE ACT. 28/02/2014 COMMON ORDER PASSED BY THE LEARNED CIT [APPEALS] IN RESPECT OF THE APPEALS FILED AGAINST THE ASSESSMENT ORDERS PASSED U/S. 153A/143[3] UPHOLDING THE SUBSTANTIAL ADDITIONS MADE IN THE ASSESSMENT ORDERS PASSED FOR ALL THE YEARS. SEE PAGES 994 TO 982 OF THE PAPER BOOK NO.V 21/11/2014 COMMON ORDER OF THE HON'BLE ITAT IN ITA 579 TO 585/BANG/2014 RESTORING THE MATTER TO THE FILE OF THE LEARNED CIT [APPEALS] TO DECIDE ON THE VALIDITY OF THE ASSESSMENT BASED ON THE GROUND RAISED THAT THE SEARCH ACTION WAS INVALID. SEE PAGES 983 TO 986 OF THE PAPER BOOK NO.V 23/01/2015 ORDER PASSED BY THE HON'BLE ITAT IN MP NO. 1/BANG/2015 RECALLING THE ORDER IN SO FAR AS AY 2011-12 IS CONCERNED SINCE THERE WAS NO GROUND CHALLENGING THE SEARCH ACTION FOR THE SAID ASSESSMENT YEAR. SEE PAGES 987 TO 989 OF THE PAPER BOOK NO.V ITA NOS. 2534 TO 2539/BANG/2017 PAGE 11 OF 51 THE SAID APPEAL IN ITA NO. 585/BANG/2014 IS POSTED FOR HEARING AS A PART OF THIS BATCH OF APPEALS. 11/02/2015 IMPUGNED COMMON ORDER OF THE LEARNED CIT [APPEALS] DISPOSING OFF THE APPEALS RESTORED BY THE HON'BLE ITAT HOLDING THAT THE SEARCH ACTION WAS VALID AND THAT THE SAME CANNOT BE ADJUDICATED BY THE LEARNED CIT [APPEALS] AND WAS NOT MAINTAINABLE. THE ISSUES ON MERITS WERE NOT DECIDED BY THE LEARNED CIT [APPEALS]. THESE IMPUGNED ORDERS OF THE LEARNED CIT [APPEALS] ARE NOW CHALLENGED IN THE APPEALS FILED IN ITA NO. 2534-2539/BANG/2017 AND POSTED AS A PART OF THIS BATCH. 07/11/2017 ORDERS OF THE HON'BLE HIGH COURT OF KARNATAKA IN WP NOS. 24646-24651 THAT WAS FILED BY THE APPELLANT CHALLENGING THE ORDER OF THE LEARNED CIT [APPEALS] DATED 11/02/2015 INITIALLY BEFORE THE HON'BLE HIGH COURT ON THE GROUND THAT THE LEARNED CIT HAD FAILED TO FOLLOW AND ABIDE BY THE DIRECTIONS OF THE HON'BLE ITAT IN THE ORDER DATED 21/11/2014. THE HON'BLE HIGH COURT DISMISSED THE WRIT PETITION ON THE GROUND OF ALTERNATE REMEDY WHILE GIVING LIBERTY TO FILE APPEALS BEFORE THE HON'BLE ITAT WITHIN 30 DAYS FROM THE DATE OF THE ORDER HOLDING THAT OBJECTIONS FOR LIMITATION NEED NOT BE RAISED. SEE PAGES 990 TO 1004 OF THE PAPER BOOK NO.V 3. IN THE BACKDROP OF THE ABOVE FACTUAL MATRIX, THE APPELLANT HAS INSTITUTED THE APPEALS IN ITA NOS. 2534 TO 2539/BANG/2017 FOR THE ASSESSMENT YEAR S 2005-06 TO 2010-11 CHALLENGING THE ADDITIONS SUSTAINED BY THE LEARNED CIT [APPEALS] IN THE APPELLATE ORDER DATED 28/02/2014, WHICH HAVE NOT BEEN DISTURBED OR RE-ADJUDICATED IN THE IMPUGNED ORDER DATED 11/02/2015 FOR THE ASSESSMENT YEARS 2005-06 TO 201011. IN FACT THE LEARNED CIT [APPEALS] HAS OBSERVED IN PARA 2 OF THE APPELLATE ORDER DATED 11/02/2015 THAT THE OTHER GROUNDS OF APPEAL RAISED BY THE APPELLANT WITH REGARD TO THE MERITS OF THE ADDITION S WERE NOT ADJUDICATED BY THE HON'BLE ITAT IN THE ORDER DATED 21/11/2014 RESTORING THE MATTER BACK TO THE LEARNED CIT [APPEALS]. HENCE, NO FRESH FINDINGS HAVE BEEN GIVEN BY THE LEARNED CI T IN THE APPELLATE ORDER DATED 11/02/2015 FOR THE ASSESSMENT YEARS 2005-06 TO 2010-11. 3.1 AT THIS STAGE. IT MAY BE MENTIONED HERE THAT TH E APPELLANT HAD CHALLENGED THE ORDER OF THE LEARNED CIT [APPEALS] DATED 11/02/2015 BY FILING WR IT PETITIONS FOR EACH OF THESE YEARS BEFORE THE HON'BLE HIGH COURT OF KARNATAKA CONTENDING THAT THE LEARNED CIT [APPEALS] WAS NOT CORRECT IN REFUSING TO ADJUDICATE THE GROUND RELATI NG TO THE VALIDITY OF SEARCH BASED ON THE DIRECTIONS OF THE HON'BLE ITAT IN THE ORDER DATED 2 1/11/2014. IT WAS CONTENDED THAT THE LEARNED CIT [APPEALS] WAS NOT CORRECT IN OBSERVING THAT THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF C.RAMAIAH REDDY REPORTED IN 339 ITR 210 COULD NOT BE FOLLOWED IN LIGHT OF THE REJECTION OF THE SLP BY THE HON'BLE SUPREME COURT IN THE CASE OF TRILOK SINGH DHILLON ON A SIMILAR ISSUE WHERE THE H ON'BLE CHATTISGARH HIGH COURT HAS DECIDED THE ISSUE IN FAVOR OF THE REVENUE. HOWEVER, THE APPELLANT WAS NOT SUCCESSFUL IN THE ITA NOS. 2534 TO 2539/BANG/2017 PAGE 12 OF 51 AFORESAID WRIT PETITIONS FILED AS THE HON'BLE HIGH COURT OBSERVED THAT THE APPELLANT WAS NOT CORRECT IN FILING THE WRIT PETITIONS IN LIGHT OF TH E ALTERNATE REMEDY AVAILABLE OF FILING AN APPEAL BEFORE THE HON'BLE ITAT IN THE ORDER PASSED IN THE W.P NOS.24646 TO 24651 DATED 07/11/2017. IT HAS ALSO, INTER-ALIA, BEEN OBSERVED THAT THE IMPUGNED ORDER OF THE LEARNED CIT [APPEALS] DATED 11/2/2015 CANNOT BE FAULTED ON THE GROUND RELATING TO THE VALIDITY OF THE SEARCH AND HENCE, IN LIGHT OF THESE OBSERVATIONS OF THE HON'BLE HIGH COURT, THE APPELLANT HAS NOT RAISED ANY GROUNDS IN THESE APPEALS RELATING TO THE VALIDITY OF THE SEARCH AND ALL THE GROUNDS RAISED ARE ONLY ON MERITS OF THE ADDITIONS MADE. THE GROUND WISE GROUPING OF THE ISSUES INVOLVED FOR VARIOUS YEARS ARE AS UNDER:- SL.NO ISSUE ASST YEARS 2005 - 06 TO 2010-11 GROUND NO. ASST YEAR 2011 - 12 GROUND NO. 1. VALUATION OF CLOSING STOCK 2,2.1,4,5 AND 5.1 3,4 AND 5 2. GROSS PROFIT ON SALES OUTSIDE BOOKS 6, 6.1, 6.2, 6.3 AND 6.4 6, 6.1, 6.2, 6.3 AND 6.4 3. VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE 3 -- 4. TELESCOPING 7 7 5. ALLEGED EXCESS STOCK FOUND AT THE TIME OF SEARCH -- 6.5 6. INTEREST U/S 234-A, 234-B AND 234 - C OF THE ACT 8 AND 9 8 AND 9 7. GENERAL 1 AND 10 1, 2 AND 10 ISSUE 1: VALUATION OF CLOSING STOCK: 4.1 THE APPELLANT IS IN BUSINESS FOR OVER 60 YEARS AND HAS CERTAIN OLD AND OUT-MODELED ORNAMENTS THAT REMAINED UNSOLD [HEREINAFTER REFERRE D TO AS 'HISTORICAL STOCK']. THESE HISTORICAL STOCK HELD BY THE APPELLANT FOR SEVERAL YEARS HAS BEEN :VALUED AT COST CONSISTENTLY BY THE APPELLANT FOR SEVERAL DECADES. THE SAID METH OD OF VALUING THE STOCK OF THESE ITEMS HAS BEEN ACCEPTED IN THE PAST BY THE DEPARTMENT AND THE RE WAS NO MATERIAL FOUND IN COURSE OF THE PRESENT SEARCH CONDUCTED ON 02/09/2010 TO SHOW THAT THE AFORESAID METHOD FOLLOWED BY THE APPELLANT WAS ERRONEOUS. 4.2 THE APPELLANT WAS SEARCHED FOR THE FIRST TIME O N 06/11/1990 AND THE INVENTORY OF CLOSING STOCK DRAWN AT THE END OF EACH OF THE YEARS ENDED 3 1/03/1986, 31/03/1987, 31/03/1988, 31/03/1989 AND 31/03/1990 WERE FOUND AND SEIZED. TH ESE SEIZED INVENTORIES FOR ALL THESE YEARS ARE PLACED AT PAGES 656 TO 689 OF PAPER BOOK NO.III. THE APPELLANT HAS A SYSTEM OF RECORDING THE VALUE OF THE INVENTORIES AFTER PHYSIC AL INSPECTION OF THE CLOSING STOCK AT THE YEAR-END IN THE FOLLOWING MANNER: AMOUNT ITEM DESCRIPTION RATE GROSS WEIGHT NET WEIGH T 4.3 IT IS SUBMITTED THAT THE FIGURE RECORDED UNDER THE COLUMN 'AMOUNT' IS ARRIVED AT BY ITA NOS. 2534 TO 2539/BANG/2017 PAGE 13 OF 51 MULTIPLYING THE FIGURE IN THE COLUMN 'RATE' BY THE 'NET WEIGHT' OF THE ORNAMENTS AND THIS IS THE CONSISTENT SYSTEM FOLLOWED BY THE APPELLANT FOR EVALUATING THE CLOSING STOCK AT THE END OF THE YEAR FOR SEVERAL DECADES. THE APPELLANT HAS DET AILED RECORDS OF THE YEAR-END STOCK FOR EACH OF THE AFORESAID ASSESSMENT YEARS AND HAS MAIN TAINED RECORDS TO SUBSTANTIATE THE PHYSICAL STOCK TAKEN AND THE VALUATION THEREOF, WHI CH WAS EVEN FOUND IN COURSE OF THE SEARCH CONDUCTED ON 06/11/1990. 4.4 AFTER THE AFORESAID SEARCH CONDUCTED ON 06/11/1 990, ASSESSMENT PROCEEDINGS WERE TAKEN UP BY THE ASSESSING OFFICER FOR ASSESSMENT YEARS 19 89-90 TO 1991-92. IN COURSE OF THESE ASSESSMENT PROCEEDINGS, THE LEARNED A.O. RAISED A Q UERY ABOUT THE METHOD OF VALUATION OF CLOSING STOCK BY LETTER DATED 31/07/1991 [PLACED AT PAGE 696 OF THE PAPER BOOK NO.IV]. QUESTION NO.14 OF THE SAID LETTER REQUIRED THE APPE LLANT TO EXPLAIN THE METHOD OF VALUATION OF STOCK. ANOTHER ENQUIRY WAS ALSO MADE BY THE A.O. BY LETTER DATED 28/08/1991 [PLACED AT PAGE 705 OF THE PAPER BOOK NO.IV]. 4.5 THE APPELLANT FURNISHED HIS EXPLANATION VIDE LE TTER DATED 30/09/1991 [PLACED AT PAGE 699 TO 702 OF THE PAPER BOOK NO.IV] AND RELIED UPON THE EXPLANATION GIVEN VIDE LETTER DATED 10/09/1991 & 23/09/1991. THE APPELLANT HAD REPLIED VIDE LETTER DATED 10/09/1991 [PLACED AT PAGE 706 & 707 OF THE PAPER BOOK NO.IV] INDICATING THAT THE CLOSING STOCK WAS VALUED AT COST. THEREAFTER, THE APPELLANT SUBMITTED A REPLY D ATED 23/09/1991 [PLEASE SEE PAGE 711 AND 712 OF THE PAPER BOOK NO.IV] IN WHICH A DETAILED RE CONCILIATION OF THE OPENING AND CLOSING STOCK, WHICH INCLUDED HISTORICAL STOCK THAT WAS VAL UED AT COST OF RS. 10 ONWARDS WAS ALSO FURNISHED. IN OTHER WORDS, THE METHOD OF STOCK VALU ATION BASED ON THE INVENTORY BOOKS SEIZED IN COURSE OF SEARCH ON 06/11/1990 SHOWING COST OF O RNAMENTS RANGING FROM RS.10 ONWARDS WAS EXAMINED IN THESE ASSESSMENT PROCEEDINGS PURSUA NT TO THE SEARCH ON 06/11/1990. 4.6 AFTER EXAMINING THE AFORESAID ISSUE, THE ASSESS MENT ORDER FOR THE ASSESSMENT YEAR 1989- 90 WAS PASSED U/S.143(3) DATED 23/03/1992 [PLACED A T PAGES 714 TO 724 OF THE PAPER BOOK NO.IV] IN WHICH NO ADDITION WAS MADE TOWARDS VALUAT ION OF CLOSING STOCK ON THE BASIS OF THE METHOD OF VALUATION ADOPTED BY THE APPELLANT. 4.7 SIMILAR DETAILS WERE CALLED FOR THE ASSESSMENT YEARS 1990-91 AND 1991-92 AND THEREAFTER ASSESSMENT ORDERS WERE PASSED FOR THE ASSESSMENT YE ARS 1990-91 & 1991-92 AS WELL. IT IS RELEVANT TO MENTION HERE THAT THERE WAS AN ADDITION MADE FOR ASSESSMENT YEAR 1991-92 FOR EXCESS STOCK FOUND AT T HE TIME OF SEARCH ON 06/11/1990 AND THIS WAS VALUED AT CERTAIN RATES. HOWEVER, WHAT IS IMPOR TANT TO EMPHASIZE HERE IS THAT THE METHOD OF STOCK VALUATION FOLLOWED BY THE APPELLANT IN RES PECT OF THE HISTORICAL STOCK WAS NOT DISTURBED IN THESE ASSESSMENT PROCEEDINGS FOR THE A SSESSMENT YEARS 1989-90 TO 1991-92 THAT WERE FRAMED AFTER THE SEARCH ACTION WAS CONDUCTED O N 06/11/1990. THE RELEVANT CORRESPONDENCE IN COURSE OF THE ASSESSMENT PROCEEDI NGS AND ASSESSMENT ORDERS FOR THESE 2 ASSESSMENT YEARS 1990-91 AND 1991-92 ARE PLACED AT PAGES 725 TO 755 OF THE PAPER BOOK NO.IV. 4.8 TURNING TO THE PRESENT SEARCH CONDUCTED IN THE PREMISES OF THE APPELLANT ON 02/09/2010, IT IS SUBMITTED THAT SIMILAR PHYSICAL INVENTORY OF CLOSING STOCK DRAWN ON 31/03/2007, 31/03/2008, 31/03/2009 AND 31/03/2010 BEING THE END OF THESE ACCOUNTING YEARS WERE FOUND AND SEIZED. THESE SEIZED INVENTORY OF THE STOCK BOO KS ARE PLACED AT PAGES 589 TO 599 [31/03/2007], 600 TO 610 [31/03/2008], 611 TO 623 [ 31/03/2008], 624 TO 635 [31/03/2009], 636 TO 647 [31/03/2010] OF THE PAPER BOOK NO.III. T HE APPELLANT HAS ALSO PLACED THE SIMILAR ITA NOS. 2534 TO 2539/BANG/2017 PAGE 14 OF 51 INVENTORY OF CLOSING STOCK DRAWN ON 31/03/2005 AND 31/03/2006, WHICH WERE NOT SEIZED DURING THE COURSE OF SEARCH IN THE PAPER BOOK AT PA GES 576 TO 581 [31/03/2005] AND 582 TO 588 [31/03/2006] OF THE PAPER BOOK NO.III. IN ALL T HESE INVENTORIES DRAWN AT THE END OF EACH YEAR, THE APPELLANT HAS FOLLOWED THE SIMILAR METHOD OF DRAWING UP THE INVENTORY AND WORKING OUT THE VALUE OF THE SAME AFTER PHYSICAL INSPECTION THAT HAS BEEN FOLLOWED FOR THE PAST 60 YEARS. 4.9 IT CAN BE SEEN FROM THE ABOVE CLOSING STOCK FOR THE YEAR ENDED 31/03/2005, THE APPELLANT HAD VALUED 22 CT. ORNAMENTS THAT INCLUDES CERTAIN H ISTORICAL JEWELLERY AT RATES STARTING FROM RS.10 TO RS.550 PER GRAM. THE A.O. IN PAGE [3] OF T HE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2005-06 HAS GIVEN A BREAK-UP OF THE DIFFERENT QUANTITIES OF JEWELLERY HELD BY THE APPELLANT AND THE DIFFERENT RATES ADOPTED FOR VALUA TION OF THE SAME. FURTHERMORE, IN PAGE [15] OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEA R2005-06, THE A.O. HAS TABULATED THE FIGURES AND BREAK UP OF CLOSING STOCK FOR ALL THE A SSESSMENT YEARS 2005-06 TO 2011-12. IT CAN BE SEEN THERE FROM THAT THE APPELLANT HAS HELD THE FOLLOWING HISTORICAL GOLD ORNAMENTS AND HAS VALUED THE RATES SET-OPPOSITE THE SAID ITEMS FO R ALL THE 7 YEARS UNDER APPEAL AND THE SAID QUANTITY HAS NOT BEEN SOLD OR DISTURBED DURING ANY OF THESE YEARS UNDER APPEAL:- DESCRIPTION RATE [RS.] QUANTITY AMOUNT 22 CARAT GOLD ORNAMENTS PER GRAM GROSS NET RS. PLAIN GOLD, MANGALAM, TOP JUMKI, CHAIN ETC. 10 3990.430 3986.640 39866.400 . PLAIN GOLD SETS, GOLD NECKLACES, HARA SETS, GOLD ASSORTED FANCY BANGLES 15 4006.450 4002.350 60035.250 FANCY GOLD BEAD BANGLES, PLAIN BANGALES, CHAINS 30 5833.000 5965.500 178965.000 TOPS PENDENTS, DC BALLS, DC CHAINS, ASSORTED GOLD SETS 60 5699.650 5600.00 336000.000 ASSORTED TOPS AND PENDENTS, PLAIN GOLD KADAS OF CLIFF TYPES 100 3945.000 3945.000 394500.000 JUMKAS, BALLS, FINGER RIGHTS, CARD TOPS ET DROPS, BABY BRACELETS 180 4026.000 3146.000 566280.000 STONE SETS A HARA SETS, STONE & BB BANGLES, GOLD BANGLES BEADS CHAINS 200 3708.200 2332.000 466400.000 STONE BANGLES, STONE ET PEARL SET, JUMKAS, HALF SETS IT STONE SETS 240 2312.000 1005.000 241200.000 ASSORTED ORNAMENTS 300 157671.530 145000.000 43500000.000 PLAIN GOLD KADAS, GOLD IDOLS, PENDENTS 450 8371.494 7536.050 3391222.500 ASSORTED HARAS, NECKLACES 485 10000.000 10000.00 4850000.000 TOTAL 209563.754 192518.540 54024469.150 ITA NOS. 2534 TO 2539/BANG/2017 PAGE 15 OF 51 4.10 IT IS SUBMITTED THAT AS ON 31/03/2005, THE APP ELLANT HELD 2,33,333.640 GRAMS OF 22 CT. GOLD ORNAMENTS, WHICH WAS VALUED AT RS.7,51,69,328. 19. OUT OF THE SAID ORNAMENTS THAT WERE VALUED AT DIFFERENT RATES FROM RS.10 TO RS.550 PER GRAM, THE A.O. TOOK THE VIEW THAT THE APPELLANT HAD NOT VALUED THE CLOSING STOCK BY APPLY ING A PROPER METHOD SINCE, THE APPELLANT APPEARS TO HAVE FOLLOWED THE LAST IN FIRST OUT [LIF O] METHOD. IN SUPPORT OF THE SAID VIEW, THE A.O. MAINLY RELIED UPON THREE FACTORS I.E., FIRSTLY, THE MONTH WISE PURCHASES AND SALES F OR APRIL, 2004 WOULD SHOW THAT THE SALES WERE MORE THAN THE PURCHASES FOR APRIL, 2004 AND HE NCE, THERE WERE SALE OUT OF OPENING STOCK TO THE EXTENT OF 8,197.900 GRAMS [PLEASE SEE PARA [ 4.7] AT PAGE [9] OF THE ASSESSMENT ORDER]. THE SECOND FACTOR RELIED UPON BY THE A.O. IS THE SE IZED DOCUMENTS A/SNS/1 PAGES 26 AND 28 WHERE ONE OF THE PARTNERS OF THE APPELLANT FIRM HAD WRITTEN IN HIS OWN HANDWRITING THAT THE OLD JEWELLERY ON 01/04/2009 WAS 3842.388 GRAMS, WHI CH SEIZED DOCUMENTS HAVE BEEN SCANNED AT PAGES 10 AND 11 OF THE ASSESSMENT ORDER. THIRDLY, THE A.O. TOOK THE VIEW THAT THE APPELLANT HAS ONLY GIVEN GENERAL DESCRIPTION OF THE ORNAMENTS IN THE PURCHASE AND SALE INVOICES AND IT WAS NOT POSSIBLE TO SPECIFICALLY ID ENTIFY THE GOLD JEWELLERY TO ACCEPT THAT THE SAME HISTORICAL ORNAMENTS WERE STILL AVAILABLE WITH THE APPELLANT. BASED ON THESE THREE FACTORS THE A.O. CONCLUDED THAT THE APPELLANT'S CLA IM OF HAVING HISTORICAL OUT MODELED JEWELLERY CANNOT BE ACCEPTED AND THEREFORE, HE ADOP TED THE AVERAGE RBI RATES PREVAILING DURING EACH OF THE RELEVANT FINANCIAL YEARS AND MUL TIPLIED THE QUANTITY OF CLOSING STOCK BY SUCH AVERAGE RATE WORKED OUT BY HIM AND THE ADDITIO N HAS BEEN WORKED OUT IN PARA [5.3 AND 5.4] ON PAGE 22 OF THE ASSESSMENT ORDER FOR THE ASS ESSMENT YEAR 2005-06. SIMILAR VIEW AND DISCUSSION IS ALSO MENTIONED IN THE ORDERS PASSED F OR THE OTHER ASSESSMENT YEARS AS WELL. 4.11 IT IS SUBMITTED THAT THE APPELLANT HAS FURNISH ED DETAILED ARGUMENTS BEFORE THE LEARNED CIT [APPEALS] IN THE WRITTEN SUBMISSION FILED, WHIC H HAS BEEN PLACED AT 756 OF THE PAPER BOOK NO.IV AND THE RELEVANT SUBMISSION OF THE APPEL LANT AT PARA [8] ONWARDS FROM PAGES 778 TO 792. IT IS SUBMITTED THAT THE LEARNED CIT [APPEA LS] HAS UPHELD THE ADDITION IN THE COMMON APPELLATE ORDER DATED 28/02/2014 ON THE GROUND THAT THE APPELLANT HAD FOLLOWED LIFO METHOD AND THAT THE SAME WAS NOT AN ACCEPTED METHOD OF VALUING CLOSING STOCK. THE LEARNED CIT [APPEALS] HAS ALSO HELD THAT THE APPELLANT HAS NOT PROVED THE EXISTENCE OF HISTORICAL JEWELLERY AS THE PHYSICAL INVENTORY DRAWN AT THE EN D OF EACH YEAR COULD NOT BE MATCHED WITH THE PHYSICAL STOCK TAKEN AT THE TIME OF SEARCH. THE COMMON APPELLATE ORDER OF THE LEARNED CIT [APPEALS] DATED 28/02/2014 IS PLACED AT PAGES 9 44 OF THE PAPER BOOK NO.V AND ALSO AVAILABLE IN THE APPEAL MEMO FOR THE ASSESSMENT YEA R 2011-12 [ITA NO. 585/BANG/2014]. 4.12 THE FINDINGS OF THE LEARNED CIT [APPEALS], ARE ERRONEOUS IN THE SENSE THAT THE LEARNED CIT [APPEALS] WENT ON TO HOLD THAT THE APPELLANT HA S CLAIMED THAT IT HAS FOLLOWED THE LIFO SYSTEM, WHICH IS NOT THE CASE AT ALL. THE APPELLANT NEVER CLAIMED TO HAVE ADOPTED THE LIFO METHOD OF STOCK VALUATION AT ALL AND THE APPELLANT MERELY POINTED OUT THAT THE ITEMS IN STOCK THAT REMAINED UNSOLD WERE VALUED AT COST AND HAS SU BSTANTIATED THE SAME BASED ON THE INVENTORIES MAINTAINED IN NORMAL COURSE OF BUSINESS , WHICH HAS ALSO BEEN FOUND AND SEIZED NOT ONLY IN COURSE OF SEARCH CONDUCTED ON 02/09/201 0 BUT ALSO IN THE EARLIER SEARCH CONDUCTED ON 06/11/1990. HOWEVER, IT IS TRUE THAT T HE APPELLANT'S AUDITOR HAS MENTIONED IN THE AUDIT REPORT FOR THE ASSESSMENT YEAR 2010-11 TH AT THE COST OF STOCK WAS ASCERTAINED ON LIFO METHOD, WHICH HAS BEEN EXTRACTED IN THE APPELL ATE ORDER AT PARA 11.13. 4.13 NOTHING TURNS MUCH ON THE AFORESAID VIEW OF TH E APPELLANT'S AUDITOR FOR ASSESSMENT YEAR 2010-11, WHICH IS NOT THE CLAIM OF THE APPELLANT BE FORE THE LEARNED A.O. AND CIT [APPEALS]. ITA NOS. 2534 TO 2539/BANG/2017 PAGE 16 OF 51 IT MAY BE MENTIONED HERE THAT THE APPELLANT'S VERY SAME TAX AUDITOR HAS GIVEN THE METHOD OF STOCK VALUATION IN FORM 3CD FOR ALL YEARS INCLUDING AY 2010-11 IN THE PAPER BOOK.NO.1, WHICH CAN BE SEEN AT PAGE 23 OF PAPER BOOK NO.I [AS SESSMENT YEAR 2005-06], PAGE 46 OF PAPER BOOK NO.I [ASSESSMENT YEAR 200607], PAGE 66 O F PAPER BOOK NO.I [ASSESSMENT YEAR 2007-08], PAGE 86 OF PAPER BOOK NO.I [ASSESSMENT YE AR 2008-09], PAGE 134 OF PAPER BOOK NO.I [ASSESSMENT YEAR 2009-10], PAGE NO.151 OF PAPE R BOOK NO.I [ASSESSMENT YEAR 2010- 11] PAGE 190 OF PAPER BOOK NO.I [ASSESSMENT YEAR 20 1 1-12]. WHEREIN THE METHOD OF STOCK VALUATION HAS BEEN REPORTED AS 'COST OR NET REALIZA BLE VALUE, WHICHEVER IS LESS'. FURTHERMORE, THERE IS NO SUCH QUALIFICATION BY THE VERY SAME AUDITOR FOR THE EARLIER ASSESSMENT YEARS IN THE AUDIT REPORT AND AT ANY RAT E, THESE VIEWS OF THE APPELLANT'S AUDITOR ARE NOT ACCEPTED BY THE APPELLANT AND NO SUCH SUBMI SSION THAT LIFO WAS FOLLOWED HAS BEEN MADE BY THE APPELLANT. 4.14 BE THAT AS IT MAY, THE APPELLANT IS SETTING OU T THE CONTENTIONS IN SUPPORT OF THE STAND THAT WAS TAKEN. BEFORE THE AUTHORITIES BELOW ON THE ISSU E OF VALUATION OF CLOSING STOCK AT THE YEAR- END, WHICH ARE BEING REITERATED BEFORE THE HON'BLE BENCH: (A) THE APPELLANT HAS FOLLOWED A CONSISTENT SYSTEM OF VALUING INVENTORY SINCE INCEPTION FOR MORE THAN 6 DECADES AND THE SYSTEM OF STOCK VALUATI ON FOLLOWED BY THE APPELLANT HAS BEEN ACCEPTED IN THE PAST AND HENCE, THE PRINCIPLE OF CO NSISTENCY APPLIES. (B) THE SEIZED INVENTORY OF CLOSING STOCK DRAWN ON 31/03/2007 TO 31/03/2011 SUPPORTS THE VALUATION OF THE CLOSING STOCKS DISCLOSED BY THE AP PELLANT AND SUCH SEIZED DOCUMENTS ARE PRESUMED TO BE CORRECT U/S.292C OF THE INCOME-TAX A CT, 1961 AND IT HAS NOT BEEN FOUND THAT THESE INVENTORIES MAINTAINED BY THE APPELLANT WAS W RONG AND COULD NOT BE RELIED UPON; (C) THE APPELLANT HAS ALSO MADE EFFORTS TO IDENTIFY CERTAIN SPECIFIC ITEMS IN THE CLOSING STOCK AS ON 31/03/2010 WITH THE DEPARTMENTAL INVENTORY AN D HAS FURNISHED A DETAILED ANNEXURE BEFORE THE LEARNED CIT [APPEALS] THAT WAS ALSO SENT TO THE LEARNED A.O. FOR RENDERING A REMAND REPORT, WHICH IS PLACED AT PAGES 806 TO 813 OF THE PAPER BOOK NO.IV. (D) THE AFORESAID EXERCISE CARRIED OUT BY THE APPEL LANT HAS BEEN UNREASONABLY REJECTED BY THE A.O. AND UPHELD BY THE LEARNED CIT [APPEALS] ON THE GROUND THAT THE APPELLANT HAS SIMPLY TRIED TO MATCH THE ITEMS WITHOUT APPRECIATING THAT THERE ARE A LARGE NUMBER OF ITEMS OF JEWELLERY HELD BY THE APPELLANT AND IT WAS A CUMBER SOME EXERCISE AND DESPITE THAT THE APPELLANT HAD SHOWN SUBSTANTIALLY THAT MANY OF THE ITEMS MATCHED AS PER THE PHYSICAL INVENTORY DRAWN AT THE TIME OF SEARCH. (E) THAT EVEN IN COURSE OF THE SEARCH CONDUCTED EAR LIER ON 06/11/1990, SIMILAR INVENTORY OF CLOSING STOCK DRAWN FOR THE YEAR ENDED 31/03/1986 T O 31/03/1991 WERE FOUND AND SEIZED AND THE STOCK VALUATION BASED ON THE INVENTORIES SO MAI NTAINED BY THE APPELLANT AT THE END OF EACH YEAR WAS ACCEPTED BY THE DEPARTMENT. (F) THE APPELLANT HAS NOW ANALYZED THE PHYSICAL STO CK AS PER THE INVENTORY DRAWN ON 31/03/1986 AND 31/03/1991, BEING THE LAST YEAR OF T HE ASSESSMENT AFTER THE SEARCH ON 06/11/1990, WHICH ARE PLACED IN THE PAPER BOOK AT P AGE 656 TO 661 AND PAGES 690 TO 695 OF PAPER BOOK NO.III, RESPECTIVELY TO ESTABLISH THAT T HE VERY SAME STOCK FOUND AT THE TIME OF THE SEARCH ON 06/11/1990 CONTINUES TO REMAIN WITH THE A PPELLANT ON 31/03/2005. (G) THE APPELLANT HAS BEEN ABLE TO MATCH THE EXTENT OF STOCK AS PER THE INVENTORY VALUATION ON ITA NOS. 2534 TO 2539/BANG/2017 PAGE 17 OF 51 31/03/2005 [WHICH IS THE SAME IN RESPECT OF HISTORI CAL STOCK FOR ALL THE YEARS UNDER APPEAL] WITH THE EXTENT OF STOCK AVAILABLE AS PER THE PHYSI CAL INVENTORY DRAWN ON 31/03/1986 AND 31/03/1990. THERE IS A MINOR VARIATION IN THE DESCR IPTION OF THE ORNAMENTS IN THESE INVENTORIES WHICH IS ON ACCOUNT OF BUNCHING THEM IN DIFFERENT WAYS IN DIFFERENT YEARS. THE RELEVANT TABULATION OF THE CLOSING STOCK AS PER THE INVENTORIES DRAWN ON 31/03/1986, 31/03/1990 AND 31/03/2005 ARE ENCLOSED HEREWITH AS ANNEXURE-1A, 1B & 1C. (H) FROM THE ABOVE CHART [ANNEXURE-1A, IB & IC], TH E TOTAL QUANTITY OF THE HISTORICAL STOCK AS PER THE SEIZED INVENTORY AS AT 31/03/1986, 31/03/19 90 AND THE TOTAL QUANTITY OF THE SAME STOCK IN THE INVENTORY DRAWN ON 31/03/2005 HAS BEEN SET-O UT IN ANNEXURE-2. THIS BRINGS OUT THAT THE HISTORICAL JEWELLERY IN RESPECT OF VARIOUS ITEM S THAT ARE VALUED AT RS.10 TO RS. 240 ONWARDS WERE AVAILABLE IN THE INVENTORY AS EARLY AS 31/03/1986. RECONCILIATION WITH REGARD TO THE DIFFERENT CATEGORIZATION BETWEEN THE 2 INVEN TORIES I.E., 31/03/1986 & 31/03/2005 IS ENCLOSED AS ANNEXURE-3. (I) IT CAN BE SEEN THERE FROM AND SAFELY CONCLUDED THAT THE APPELLANT HAS RETAINED THESE HISTORICAL ORNAMENTS THAT WERE FOUND AT THE TIME OF SEARCH ON 06/11/1990, WHICH CONTINUES TO REMAIN WITH THE APPELLANT AS ON 31/03/2005. (J) FURTHER THERE WAS NO MATERIAL FOUND IN COURSE O F SEARCH TO CONCLUDE THAT THE INVENTORY OF PHYSICAL STOCK DRAWN AT THE END OF EAC H YEAR THAT WAS SO FOUND AND SEIZED WAS UNRELIABLE OR THAT THE APPELLANT HAS SOLD AWAY THE HISTORICAL STOCK AND THE SAME WAS NOT AVAILABLE WITH THE APPELLANT DURING THESE YEARS UND ER APPEAL TO REJECT THE CLAIM OF THE APPELLANT. (K) THE APPELLANT IS NOT FOLLOWING THE LIFO METHOD OF VALUATION AS ERRONEOUSLY HELD BY THE LEARNED A.O. AND LEARNED CIT [APPEALS] BUT T HE SPECIFIC ITEMS SOLD IS CAPABLE OF VERIFICATION HAVING REGARD TO THE STOCK RECORDS MAI NTAINED BY THE APPELLANT, WHICH ARE ALSO SEIZED AND HENCE, THE A.O. AND CIT [APPEALS] ARE NO T JUSTIFIED IN PRESUMING THAT THE APPELLANT FOLLOWED LIFO SYSTEM MERELY ON ACCOUNT OF AN ERRONEOUS OBSERVATION MADE BY THE AUDITOR FOR ONLY ONE ASSESSMENT YEAR 2010-11 WHEN T HERE IS NO SUCH OBSERVATIONS FOR ANY OF THE EARLIER YEARS BY THE VERY SAME AUDITOR. (L) THE A.O'S FINDING THAT THERE WERE SALES TO THE EXTENT OF 8197 GMS. FOR THE MONTH OF APRIL, 2004 OUT OF OPENING STOCK DOES NOT SHOW THAT THE IN VENTORY OF THE APPELLANT WAS NOT RELIABLE SINCE, THE SAID SALES OF 8197 GRAMS FOR THE MONTH O F APRIL, 2004 WERE OUT OF THE STOCK VALUED AT RS.520 PER GRAM AND NOT OUT OF THE HISTORICAL ST OCK AND THE APPELLANT HAS TABULATED THE STOCK VALUED AT DIFFERENT RATES TO SHOW THAT WAS SO LD IN APRIL 2004 WAS FROM OUT OF 10 KGS. VALUED AT RS.520 PER GRAM [PAGES 785 AND 786 OF THE PAPER BOOK NO.IV]. (M) THE SEIZED MATERIALS A/SNS/1 RELIED UPON BY THE A.O. SHOWING OLD GOLD OF 3842.388 GRAMS ON 01/04/2009 HAS BEEN EXPLAINED BY THE APPEL LANT BY LETTER DATED 22/03/2013, WHICH IS EXTRACTED ON PAGE [12] OF THE ASSESSMENT ORDER F OR THE ASSESSMENT YEAR 2005-06. THE OLD ORNAMENTS MENTIONED IN THESE SEIZED MATERIAL ARE ON LY REFERRING TO THOSE ORNAMENTS THAT HAVE BEEN PURCHASED FROM CUSTOMERS DURING THE YEAR AND I T DOES NOT REFER TO THE HISTORICAL STOCK HELD BY THE APPELLANT. IN FACT, NO RELIANCE HAS BEE N PLACED ON THE SEIZED MATERIAL A/SNS/1 PAGES 26 AND 28 TO MAKE ANY ADDITION BASED ON THE P ROFIT SHOWN THEREIN, WHICH IS NOTHING BUT A WORKING MADE BY ADOPTING THE MARKET VALUE OF GOLD AND NOT BY VALUING THE CLOSING STOCK AS PER THE ACCEPTED ACCOUNTING PRINCIPLES AND HENCE, N OTHING TURNS MUCH ON THE SAID NOTINGS ITA NOS. 2534 TO 2539/BANG/2017 PAGE 18 OF 51 MADE. (N) IT IS ALSO RELEVANT TO POINT OUT THAT THE CLOSI NG STOCK OF THE APPELLANT AS ON 31/03/2005 WAS 2,33,334 GRAMS AND OUT OF THAT THE EXTENT OF JEWELL ERY THAT WAS VALUED ON HISTORICAL COST BASIS AT RS.240 AND LESS PER GRAM WAS ABOUT 29,982.490 GR AMS AND THAT THE HISTORICAL STOCK HELD BY THE APPELLANT CONSTITUTED ONLY A FRACTION OF THE ENTIRE STOCK HELD, AS FOLLOWS : 10 RS. -- 3986.640 GMS 15 RS. -- 4002.350 GMS 30 RS. -- 5965.500 GMS 60RS. -- 5600.000 GMS 100RS. -- 3945.000 GMS 180RS. -- 3146.000 GMS 200RS. -- 2332.000 GMS 240RS. -- 1005.000 GMS ------------------------- 29982.490 G MS ------------------------------ (O) IN OTHER WORDS, ONLY 30 KGS. OUT OF 233 KGS. OF CLOSING STOCK REPRESENTS OLD AND OUT MODELED ITEMS THAT REMAINED IN STOCK CONTINUOUSLY F OR SEVERAL DECADES AND THEREFORE, THE SAME HAVE BEEN VALUED AT THEIR RESPECTIVE COST OF A CQUISITION FOR SEVERAL YEARS, WHICH CLAIM HAS BEEN DISBELIEVED ON THE MERE FACT THAT THE DESC RIPTION OF THE ITEMS HELD BY THE APPELLANT ARE GENERAL IN NATURE AND IT CANNOT BE CONCLUDED TH AT THE SAME WAS AVAILABLE WITH THE APPELLANT. (P) THIS VIEW OF THE LEARNED A.0./CIT [APPEALS] IS UNSUSTAINABLE SINCE THE APPELLANT HAS ESTABLISHED THAT THE ITEMS OF ORNAMENTS UNSOLD FROM DECADES CONTINUES TO REMAIN IN STOCK WITH DOCUMENTARY EVIDENCE IN THE SHAPE OF CONTEMPOR ANEOUS PHYSICAL STOCK INVENTORIES DRAWN AT THE END OF EACH YEAR, THE VERACITY OF WHIC H HAS NOT BEEN IMPEACHED AT ALL. (Q) THAT APART, THE A.O. HAS MERELY VARIED THE METH OD OF VALUING CLOSING STOCK IN THESE ASSESSMENTS FRAMED FOR THE ASSESSMENT YEARS 2005-06 AND 2011-12. THE APPELLANT HAS FOLLOWED THE SIMILAR SYSTEM OF VALUING CLOSING STOC K EVEN AFTER 31/03/2011 AND NO ADDITION HAS BEEN MADE IN THE ASSESSMENT ORDER PASSED U/S.14 3[3] RWS 147 DATED 30/11/2016 FOR THE ASSESSMENT YEAR 2012-13, WHICH IS PLACED AT PAGES 1 026 TO 1032 OF THE PAPER BOOK NO.V. SIMILAR ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 20 13-14 IS ALSO PLACED AT PAGES 1033 TO 1055 OF THE PAPER BOOK NO.V. 4.15 IN VIEW OF THE ABOVE, THE ADDITION MADE TOWARD S VALUATION OF CLOSING STOCK FOR EACH OF THE YEARS BY ADOPTING THE AVERAGE PRICE PUBLISHED B Y RBI AND REJECTING THE CLAIM OF THE APPELLANT WITH REGARD TO THE VALUATION BASED ON COS T IN RESPECT OF HISTORICAL ORNAMENTS HELD BY THE APPELLANT FOR SEVERAL DECADES IS TOTALLY UNJ USTIFIED AND CONTRARY TO THE DOCUMENTARY EVIDENCE AND FINDINGS OF THE SEARCHES CONDUCTED ON 06/11/1990 AS WELL AS 02/09/2010. FURTHERMORE, THE A.O. IS NOT JUSTIFIED IN MAKING TH E AFORESAID ADDITION IN THESE PROCEEDINGS U/S.153A OF THE ACT, ESPECIALLY WHEN THE VALUATION OF CLOSING STOCK WAS ACCEPTED IN THE SCRUTINY ASSESSMENT FOR THE ASSESSMENT YEAR 2005-06 PLACED AT PAGE 34 OF THE PAPER BOOK NO.L. HENCE, THE ADDITIONS MADE FOR THE ASSESSMENT YEARS 2005-06 TO 2011-12 ON THIS SCORE DESERVES TO BE DELETED ON BOTH FACTS AS WELL AS LAW . IT IS PRAYED ACCORDINGLY. ITA NOS. 2534 TO 2539/BANG/2017 PAGE 19 OF 51 ISSUE 2: GROSS PROFIT ON ALLEGED SUPPRESSED SALES: 5.1 THE APPELLANT USES THE SOFTWARE CALLED 'CADMIUM ' SINCE 2003 FOR PURPOSES OF RECORDING FINANCIAL TRANSACTIONS AND ALSO AS A DAY-TO-DAY STO CK BOOK FOR PURPOSES OF CONTROLLING THE STOCKS IN VARIOUS COUNTERS WHERE THE STOCKS ARE DIS PLAYED FOR SALE. THIS SOFTWARE WAS DEVELOPED BY ONE M/S. JILABA SOFTWARE SERVICES PVT. LTD., CHENNAI AND THE SOFTWARE IS AN OFF THE SHELF GENERAL SOFTWARE USED BY JEWELLERS IN GEN ERAL AND IT IS NOT ANY SPECIAL CUSTOMIZED SOFTWARE SPECIFICALLY DESIGNED FOR THE APPELLANT. T HE APPELLANT IS NOT AWARE OF THE INTERNAL WORKING OF THE SOFTWARE OR SCIENCE BEHIND THE GENER ATION OF THE VARIOUS FINANCIAL AND STOCK LOGS AND THE MANNER OF WORKING OF THE SOFTWARE AS T HE APPELLANT'S STAFF HAVE MERELY BEEN TRAINED TO USE THE SOFTWARE FOR THE FUNCTIONS OF RE CORDING THE DAY TO DAY FINANCIAL TRANSACTIONS AND MOVEMENT OF STOCK FROM THE COUNTERS BY WAY OF E FFECTIVE CONTROL OF THEIR MOVEMENTS FOR THE PURPOSE OF BUSINESS BY WAY OF INTERNAL CONTROL. 5.2 AS SUBMITTED, THE SOFTWARE RECORDS FINANCIAL TR ANSACTIONS AND MOVEMENT OF STOCKS FROM VARIOUS COUNTERS WHERE THEY ARE DISPLAYED EITHER ON ACCOUNT OF SALE OR OTHERWISE LIKE TAKING THE STOCKS OUT FOR HALLMARKING, REPAIRS, POLISHING, RETAGGING FOR UPDATING THE PRICES ETC. THUS, THE STOCK RECORDS ARE MAINTAINED ON DAY-TO-DAY BASI S IN THE COMPUTER AND AT THE END OF THE DAY, THE STOCK IN THE COUNTERS ARE COMPARED WITH TH E RELEVANT COUNTER STOCK SHOWN IN THE COMPUTER TO DETECT AND CONTROL ANY PILFERAGE OF THE SAME BY THE PERSONNEL MANAGING THE SALES COUNTERS. 5.3 IN THE COURSE OF SEARCH, THE HARD DISK CONTAINI NG THE DATA OF BOTH FINANCIAL AND STOCK MAINTAINED BY THE APPELLANT IN THE AFORESAID SOFTWA RE CAME TO BE SEIZED AND THE SAME WAS ANALYZED IN GREAT DEPTH. THE LEARNED DDIT [INV.], W HO SEIZED THE HARD DISK OF THE COMPUTER DURING THE COURSE OF SEARCH VIEWED THE DATA DIRECTL Y AND FOUND SEVERAL LOG-TABLES THAT WERE MAINTAINED IN THE SOFTWARE. WITH REFERENCE TO 4 STO CK LOGS IN THE SYSTEMS VIZ., [1] HOMEREC LOG; [2] NON-TAGGED LOG; [3] TAGGED LOG AND [4] TAG STONE LOG, HE MADE FURTHER ENQUIRIES BASED ON THE PRESENCE OF CERTAIN ENTRIES IN THE COL UMN 'WOTAX' IN THESE LOGS THAT WILL BE ADVERTED TO IN THE LATER PART OF THESE SUBMISSIONS. 5.4 HOWEVER, BEFORE THAT, IT IS RELEVANT HERE TO EX PLAIN ABOUT THE TWO KEYS PROVIDED AND USED TO RECORD TRANSACTIONS IN THE SOFTWARE. THE FIRST K EY IS THE * [STAR] KEY AND THE SECOND KEY IS THE + [PLUS] KEY. THE STAR KEY IS USED TO RECORD FI NANCIAL TRANSACTIONS ENTAILING REMOVAL OF THE STOCKS FROM VARIOUS COUNTERS BY WAY OF SALE. THE + [PLUS] KEY PROVIDED IN THE SOFTWARE IS USED TO RECORD THE REMOVAL OF THE GOODS FROM THE CO UNTERS OTHERWISE THAN BY WAY OF SALE AND ALSO FOR RECORDING NON-TAXABLE SALES LIKE VAT EXEMP TED SALES. IRRESPECTIVE OF THE KEY USED, THE STOCK LOGS ARE UPDATED IN THE SOFTWARE. 5.5 COMING BACK TO THE 4 LOGS TABLES REFERRED TO AB OVE, THE LEARNED DDIT NOTICED THAT THERE WAS A COLUMN 'WOTAX' AND IT HAD CERTAIN VALUES AND WHEREVER, THE VALUE WAS 'Y', THERE WERE ENTRIES IN THE STOCK LOG BUT NOT IN THE CORRES PONDING FINANCIAL SALES LOG OF THE DATABASE. HENCE, THE DDIT EXAMINED ONE MR. VENKATESH VAIDYAN ATHAN [HEREINAFTER REFERRED TO AS THE 'WITNESS'] VICE PRESIDENT OF THE SOFTWARE SU PPLIER COMPANY INITIALLY ON 16/09/2010 BEHIND THE BACK OF THE APPELLANT AND HIS STATEMENT RECORDED IS PLACED AT PAGES NOS.567 AND 568 OF THE PAPER BOOKNO.III. LATER HE WAS FURTHER E XAMINED ON 06/10/2010 ONCE AGAIN BEHIND THE BACK OF THE APPELLANT AND A STATEMENT WA S RECORDED, WHICH IS PLACED AT PAGES NO.569 TO 574 OF PAPER BOOK NO.III. 5.6 IN ANSWER TO Q.NO.7 [PAGE 570 OF PAPER BOOK NO. III], HE STATED THAT THE SOFTWARE PACKAGE ITA NOS. 2534 TO 2539/BANG/2017 PAGE 20 OF 51 DEVELOPED BY THEM WAS SUPPLIED AND USED BY THE APPE LLANT SINCE 2003. THERE WAS A MAJOR UPDATE DONE ABOUT 8 MONTHS BACK [HE WAS EXAMINED IN OCTOBER, 2010 AND THE UPDATING MUST BE IN FEBRUARY, 2010]. THIS UPDATE INVOLVED REPLACE MENT OF STAR [*] KEY AND PLUS [+] KEY BY 'END' KEY TO COMPLETE SALES SINCE THE SOFTWARE NOW ALLOWED 0 RATE OF TAX TO BE RECORDED AND THERE WAS NO NEED TO HAVE A DIFFERENT METHOD TO REC ORD NON-TAXABLE SALES. THE STOCK LOG TABLES GENERATED BY THE DATABASE IN THE HARD DISK U NDER THE NAME OF 'HOMEREC', 'TAGGED', 'NON-TAGGED' AND 'TAGSTONE' FOR VARIOUS YEARS WERE SHOWN TO THE WITNESS BY THE DDIT AND HE WAS ASKED TO EXPLAIN THE SAME, WHICH HE EXPLAINED I N ANSWER TO Q.NO.8 [PAGE 570-571 OF PAPER BOOK NO.III]. BRIEFLY, THE EXPLANATION IN AFO RESAID 4 LOGS 'HOMEREC', 'TAGGED', 'NON- TAGGED' AND 'TAGSTONE' AS EXPLAINED BY THE WITNESS CAN BE SUMMARIZED AS UNDER: [A] 'TAGGED' LOG: THIS LOG CONTAINS THE SEVERAL COLUMN CONTAINING DE TAILS OF THE ITEMS THAT ARE TRANSACTED BASED ON INDIVIDUAL TAGS. THE ' TAGGED' TABLE CONTAINS ONLY THE METAL DETAILS CONTAINED IN EACH OF THE TAGGED ITEM AND VA RIOUS COLUMNS RECORD DETAILS LIKE THE DATE OF WHICH THE ITEM WAS TAGGED, THE DATE ON WHICH IT WAS REMOVED AND THE REFERENCE NUMBER WHEN SOLD OR REMOVED FROM THE COUNTER ETC. THERE WA S A COLUMN 'WOTAX' CAN HAVE 4 VALUES AND THEY ARE Y, N, NULL OR BLANK. IF THE VALUE WAS Y, THE PARTICULAR ITEM HAS BEEN REMOVED FROM THE COUNTER FOR SALE OR ANY OTHER REASON WITHO UT COLLECTING TAX THEREON. IF THE VALUE WAS N OR BLANK, THE ITEM WAS REMOVED FROM THE COUNTER A FTER COLLECTING TAX. THE VALUE NULL MEANT THAT THE ITEM WAS NOT SOLD AND HAS NOT BEEN REMOVED FROM THE COUNTER. [B] 'TAGSTONE' LOG: THIS LOG CONTAINS ONLY THE STONE DETAILS OF TAGGED ORNAMENTS THAT ARE REFLECTED IN THE 'TAGGED' LOG ABOVE. THIS LOG CONTA INS THE SAME TAG NUMBER THAT IS ASSIGNED IN THE 'TAGGED' LOG. THE RELATIONSHIP BETWEEN THE 'TAG GED' LOG AT [A] ABOVE AND 'TAGSTONE' LOG IS THAT IN RESPECT OF ANY GIVEN ORNAMENT THAT CONTA IN STONES EMBEDDED, THE DATA WOULD BE REFLECTED IN BOTH LOGS. THE 'WOTAX' COLUMN IN THIS LOG WOULD ALSO HAVE THE SAME MEANING AS IN THE EARLIER LOG. [C] 'NON-TAGGED' LOG: SMALL ITEMS LIKE CLUSTERS OF HOOKS, GUNDUS, COINS ETC., HAVING VERY LOW WEIGHT ARE NOT GIVEN SPECIFIC INDIVIDUAL TAGS B UT GIVEN TO THE COUNTER IN LOTS OR CLUSTERS. THUS, EACH ONE OF THEM IN THE CLUSTERS OR LOTS DOES NOT HAVE INDIVIDUAL TAG AND INDIVIDUAL TAG NUMBERS. ANY REMOVAL OF ANY INDIVIDUAL ITEM FROM TH IS CLUSTER BY WAY OF SALE, THE SALE VALUE WOULD BE FOUND RECORDED NOT ONLY IN THIS SPECIFIC S TOCK LOG BUT ALSO IN THE FINANCIAL LOG OF THE SALES. WHENEVER THEY ARE NOT RECORDED IT MEANS THEY WERE REMOVED NOT BY SALE. SUCH TRANSACTIONS ARE ALSO CAPTURED IN THIS LOG. THE 'WO TAX' COLUMN IN THIS LOG WOULD ALSO HAVE THE SAME MEANING AS IN THE EARLIER LOG. [D] 'HOMEREC' LOG: A TAG IS ATTACHED TO EVERY ITEM DISPLAYED IN THE C OUNTERS. IT CONTAINS THE DETAILS LIKE THE PRODUCT CODE, THE WEIGHT (GROS S & NET) WHICH CAN BE READ BY THE SCANNER. HOWEVER, WHEN A PRODUCT IS SOLD WITHOUT GIVING THE TAG NUMBER THE DATA IS CAPTURED IN THIS LOG. SIMILARLY, IN CASE OF REMOVABLE OF ANY ORNAMEN TS FROM THE COUNTER WHERE THE TAGS ARE MISSING, DEFACED OR WHEN THE SCANNER COULD NOT READ THE SAID TAGS ALSO, THE DATA IS CAPTURED IN THIS STOCK TABLE OR LOG. THE 'WOTAX' COLUMN IN T HIS LOG WOULD ALSO HAVE THE SAME MEANING AS IN THE EARLIER LOG. 5.7 WHEN THE LEARNED DDIT REQUESTED THE WITNESS TO EXPLAIN THE ENTRIES IN EACH OF THE AFORESAID 4 STOCK LOGS GENERATED, WHERE THE COLUMN 'WOTAX' = Y WAS FOUND IN LIGHT OF THE STATEMENT THAT THE 'WOTAX' COLUMN IN THESE TOGS CAN HAVE 4 POSSIBLE VALUES AND THEY ARE 'Y', 'N', 'NULL' OR 'BLANK'. IF THE VALUE IS 'Y', THE PA RTICULAR ITEM HAS BEEN REMOVED FROM THE COUNTER ON ACCOUNT OF SALE OR ON ACCOUNT OF ANY OTH ER REASON WITHOUT COLLECTING TAX THEREON. ITA NOS. 2534 TO 2539/BANG/2017 PAGE 21 OF 51 IF THE VALUE IS 'NULL', IT MEANS THE ITEM HAS NOT B EEN REMOVED FROM THE COUNTER. IF THE VALUE IS 'N' OR 'BLANK', IT MEANS THE ITEM HAS BEEN SOLD AFT ER COLLECTING THE TAX. HE WAS ASKED WHY THE TRANSACTIONS RECORDED AND PRESERVED IN THE 'TAGGED' TABLES WHERE 'WOTAX'=Y WERE NOT RECORDED IN THE SALES LOG. HE STATED IN ANSWER TO Q .NO.9 [PAGE 571 OF PAPER BOOK NO.III], Q.NO.10 [PAGE 572 OF PAPER BOOK NO.III], Q.NO.11 [P AGE 572 OF PAPER BOOK NO.III] AND Q.NO.12 [PAGE 572 OF PAPER BOOK NO.III], THAT THE R ECORDS IN THESE 4 DIFFERENT LOGS COULD HAVE BEEN DELETED. HOWEVER, HE ALSO CATEGORICALLY M AINTAINED THAT THE SOFTWARE PACKAGE DID NOT ALLOW THE DELETION OF THE TRANSACTIONS RECORDED IN THE COLUMN 'WOTAX', WHERE THE VALUE WAS 'N' FROM THE SALES LOG. 5.8 WHILE ON THIS POINT IT IS TO BE NOTED THAT IF T HE TRANSACTIONS RECORDED IN THESE 4 STOCK LOGS WHERE THE GOODS ARE TAKEN OUT FROM THE COUNTERS ARE REALLY SALES, THEN, THEY WOULD BE FOUND RECORDED IN THE FINANCIAL SALES LOG SIMULTANEOUSLY AND THEY COULD NOT BE DELETED BY THE APPELLANT. WHEN AN ITEM IS REMOVED FROM THE COUNTER OTHERWISE THAN BY WAY OF SALES ALSO, THE TRANSACTION IS RECORDED IN THE 4 STOCK LOGS. IT IS OBVIOUS THAT TRANSACTIONS FOUND RECORDED IN THESE LOG TABLES THAT WERE NOT SALES WERE NOT GETTI NG RECORDED IN THE FINANCIAL LOG TABLE OF SALES WHICH WOULD HAVE BEEN THE CASE IF THOSE TRANS ACTIONS WERE REALLY SALES. THE OBVIOUS CONCLUSION THEREFORE IS, THE TRANSACTIONS RECORDED IN THE STOCK LOGS WHERE 'WOTAX=Y' ARE NOT SALES BUT ENTRIES THAT WERE PASSED FOR REMOVAL OF T HE ITEMS FROM THE COUNTERS FOR ANY OTHER REASONS OTHER THAN BY WAY OF SALES AND THIS WAS EST ABLISHED BY THE APPELLANT BEFORE THE LEARNED DDIT AS WELL, WHICH WILL BE ADVERTED TO, A LITTLE LATER. 5.9 BE THAT AS IT MAY, THE WITNESS WAS AGAIN EXAMIN ED ON 07/10/2010 BEHIND THE BACK OF THE APPELLANT AND THE STATEMENT RECORDED FROM HIM IS PL ACED AT PAGE NO.574 575 OF THE PAPER BOOK NO.III, WHEREIN HE HAS CLARIFIED THAT, THE 'D- REF NUMBER' IS A UNIQUE NUMBER GENERATED BY THE SYSTEM FOR EACH TRANSACTION WHETHER IT IS SA LES, PURCHASE, ISSUE FOR INSPECTION OR OTHER ISSUE AND SUCH D-REF NUMBER IS GENERATED IN CHRONOL OGICAL SEQUENCE. THE WITNESS STATED THAT HE HAD MODIFIED THE SOFTWARE TO GENERATE LOG T ABLE IN RESPECT OF DELETED RECORDS OF THE PARENT TRANSACTION TABLE TO GET STORED IN THE STOCK TABLES AND THAT THE MODIFICATION WAS DONE IN ORDER TO GENERATE AN AUDIT TRAIL IN THE CASE OF DELETION OR MANIPULATION OF THE DATA SINCE THE SOFTWARE DID NOT ALLOW FOR GENERATION OF LOG TABLE PRIOR TO THE FINANCIAL YEAR 2008-09 AND EARLIER AND THE DELETED RECORDS WOULD NOT GET STORE D. FURTHER, HE CLARIFIED ON 06/10/2010 IN ANSWER TO Q.NO.15 THAT DATA GETS DELETED FROM ALL T RANSACTIONS ONLY UNDER TWO CIRCUMSTANCES VIZ., [1] WHEN DATA FROM THE TABLE IS MIGRATED TO T HE BACKUP DATA BASE, AND [2] IF DATA IS DELETED DIRECTLY FROM THE DATABASE USING QUERY LANG UAGE. HE ALSO CATEGORICALLY SAID THAT THE SOFTWARE DID NOT ALLOW THE DELETION OF RECORDS IN A NY OTHER WAY. THIS ANSWER HAS NOT BEEN PROPERLY APPRECIATED SINCE THE APPELLANT COULD NEVE R HAVE KNOWN THE QUERY LANGUAGE AT ALL. 5.10 BASED ON THE ABOVE, THE AUTHORITIES BELOW CONC LUDED THAT THE TWO KEYS WERE INSTALLED IN THE COMPUTER WITH A DESIGN TO GIVE THE USER THE CHO ICE TO ENTER TRANSACTIONS DIFFERENTLY DEPENDING WHETHER IT IS TO BE REFLECTED IN ITS BOOK S OR NOT. ACCORDING TO THE LEARNED A.O. AND CIT [APPEALS], THE ENTIRE QUANTITY OF STOCK SHOWN I N THE 4 LOGS 'HOMEREC', 'TAGGED', NON- TAPED' AND 'TAGSTONE', WHERE THE COLUMN 'WOTAX'=Y W AS THE QUANTITY OF JEWELLERY THAT WAS SOLD BY THE APPELLANT OUTSIDE THE BOOKS OF ACCOUNTS SIMPLY BECAUSE THE CORRESPONDING ENTRIES WERE NOT REFLECTED AND RECORDED IN THE FINANCIAL LO GS OF THE SOFTWARE. THE AUTHORITIES BELOW REJECTED THE DETAILED EXPLANATION FURNISHED BY THE APPELLANT WHILE TAXING THE GROSS PROFIT ON SUCH ALLEGED SALES, WHICH HAS BEEN ADDED AS SUPPRES SED INCOME FOR SEVERAL YEARS AS DEPICTED IN ANNEXURE-1, PLACED AT PAGES 798 TO 799 OF PAPER BOOK NO.IV. NEEDLESS TO SUBMIT THAT, DURING THE SEARCH NO TRACE OF ANY EVIDENCE WAS DETE CTED WITH DOCUMENTARY PROOF TO PROVE THAT THE APPELLANT WAS INDULGING IN UNACCOUNTED SAL ES OUTSIDE THE BOOKS OF ACCOUNTS. ITA NOS. 2534 TO 2539/BANG/2017 PAGE 22 OF 51 5.11 BEFORE GOING INTO THE MERITS OF THE AFORESAID ADDITION MADE, IT IS FIRSTLY SUBMITTED THAT ALL THE ABOVE 3 STATEMENTS OF THE WITNESS WERE RECORDED BEHIND THE BACK OF THE APPELLANT. THERE WAS NO WITNESS ALSO PRESENT AT THE TIME OF RECORDIN G THE STATEMENTS AND HENCE, IT CANNOT BE RELIED UPON AT ALL. ABOVE ALL THE WITNESS WHOSE STA TEMENT WAS RELIED UPON TO DRAW ADVERSE CONCLUSIONS AND INFERENCES THAT THERE WERE SALES OM ITTED TO BE RECORDED WAS NOT TENDERED AND ALLOWED TO BE CROSS-EXAMINED. THEREFORE, THE STATEM ENTS COULD NOT BE RELIED UPON FOR DRAWING ANY ADVERSE INFERENCE AGAINST THE APPELLANT AND THE REFORE, THE FINDINGS ARRIVED AT IS IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE AND REQUIRES TO BE SET ASIDE. RELIANCE IS PLACED ON THE DECISIONS OF THE HON'BLE SUPREME COURT IN TH E CASE OF KISHINCHAND CHELLARAM V CIT REPORTED IN 125 ITR 713, DAKESHWARI COTTON MI LLS REPORTED IN 26 ITR 775, SURAJMAL MOHA & CO., REPORTED IN 26 ITR 1 AND THE D ECISION OF THE HON'BLE ITAT, SPECIAL BENCH IN THE CASE OF COLONISERS REPORTED IN 41 ITD 57 AND THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES REPORTED IN 127 DTR 241. 5.12 COMING TO MERITS, IT IS FIRSTLY SUBMITTED THAT THE MERELY BECAUSE THE COLUMN 'WOTAX' IS NOTED WITH THE ALPHABET 'Y', IT DOES NOT MEAN THAT THESE ARE SALES MADE BY THE APPELLANT OUTSIDE THE BOOKS OF ACCOUNTS, WHICH CONCLUSIONS DR AWN BY THE AUTHORITIES BELOW ARE ERRONEOUS. IN THE ASSESSMENT ORDER FOR THE ASSESSME NT YEAR 2005-06 AT PAGES 36 TO 60 ANNEXED THERETO, THE DETAILS OF THE ENTRIES FOUND I N THE NON-TAGGED LOG FOR THE ASSESSMENT YEAR 2005-06 WHERE THE COLUMN 'WOTAX' =Y, IS SET-OUT. TH E EXTENT OF QUANTITIES REMOVED ARE RECORDED IN 5`H COLUMN AND THESE ARE MORE OFTEN THA N NOT, LESS THAN ONE GRAM LIKE .59, .10, .80, ETC., WHICH COULD NOT BE THE WEIGHT OF ANY ORN AMENTS BUT MERE THE EXTENT OF WIRE WHICH IS REMOVED AND GIVEN TO THE SMITHS FOR PURPOSES OF SOL DERING, ETC., AND NOT A SALE. THE VALUE IS ALSO NOT SHOWN WHICH WOULD BE THE CASE IF THEY ARE SALES AND THE COMPUTER CANNOT SELECTIVELY ERASE THE VALUE COLUMN IN THE STOCK LOG. SIMILARLY, IN PAGE [62] OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2005-06, THE DETAILS OF THE ENT RIES IN 'HOMEREC' LOG IS ALSO GIVEN. HERE ALSO NO VALUE IS SHOWN AND THE TRANSACTION IS SHOWN AS 'C' OR 'NULL' WHICH MEANS THEY WERE NOT REMOVED AT ALL BY SALE. IT IS SUBMITTED TH AT THE AFORESAID ENTRIES PERTAIN TO THE ORNAMENTS WHICH ARE TAKEN TO THE CHEST OR SAFE IN T HE BACK OFFICE FROM THE DISPLAYED COUNTERS MANNED BY THE SALES PERSONS RECORDED IN THE STOCK L OGS IN THE COMPUTER. THEREFORE HAVING REGARD TO THE SELF-EVIDENT ENTRIES RECORDED IN THE 4 STOCK LOGS IN THE COMPUTER HARD DISK, IT WILL BE PERVERSE TO CONCLUDE THESE ARE SUPPRESSED S ALES ON THE BASIS OF THE ENTRY IN THE COLUMN 'WOTAX'=Y. 5.13 PROPERLY ANALYZED AND APPRECIATED, WHAT IS FOU ND RECORDED IN THE 4 STOCK LOGS UNDER THE COLUMN 'WOTAX'=Y CAN ONLY LEAD TO THE FOLLOWING CON CLUSIONS: [A] REMOVAL OF THE ITEMS FROM THE COUNTERS ARE RECO RDED IN THE 4 STOCK LOGS IN THE COMPUTER HARD DISK; [B] WHEN THESE ARE REMOVED FROM THE COUNTERS FOR AN Y OTHER REASON OTHER THAN SALES, THEY ARE RECORDED UNDER WOTAX AS 'Y' IN THE 4 LOGS; [C] IF THEY WERE SATES, THEY WOULD FIND A PLACE IN THE FINANCIAL SALES LOG OF THE DATA BASE AND IT IS IMPOSSIBLE TO DELETE THEM ESPECIALLY SELECTIVELY BY REMOVING THE VALUE NOTED IN THESE 4 LOGS; [D] SINCE THESE ENTRIES IMPUGNED IN THESE 4 LOGS AR E NOT FINDING A PLACE IN THE FINANCIAL SALES ITA NOS. 2534 TO 2539/BANG/2017 PAGE 23 OF 51 LOG BUT FINDING A PLACE IN THE RESPECTIVE DATA STOC K LOGS UNDER THE COLUMN 'WOTAX'=Y, THE REMOVAL IS OTHERWISE THAN BY SALES AND NOT BY SALES . [E] FROM THE ENCLOSURE OF NON-TAGGED ITEMS PLACED I N PAGES [36] TO [60] OF THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2005-06, THERE ARE INNUME RABLE ENTRIES OF REMOVAL FROM NON- TAGGED STOCK ITEMS. MANY OF THE QUANTITIES ARE ALL LESS THAN 1 GM. WHICH COULD NOT BE ANY WEIGHT OF ANY ORNAMENTS AND THEY ARE MERELY REMOVAL OF SMALL QUANTITY OF GOLD WIRE GIVEN TO SMITHS FOR PURPOSES OF SOLDERING, ETC. [F] IT IS VERY UNREASONABLE TO CONCLUDE THAT ORNAME NTS REMOVED FROM THE COUNTERS ARE BY WAY OF SALES ONLY AND THERE WILL BE NO REMOVAL OF ORNAM ENTS DONE FOR PURPOSE OTHER THAN SALES LIKE REPAIRS, HALLMARKING, POLISHING, APPROVAL WHIC H HAVE BEEN PROVED BY THE APPELLANT WITH DOCUMENTARY RECORDS. [G] FROM THE 'HOMEREC' LOG, WHICH IS PLACED AT PAGE NOS.61 AND 62, IT CAN BE SEEN THAT IN THE 3RD COLUMN IT WAS CLEARLY SHOWN THAT THE STOCK WAS MOVED TO THE BACK OFFICE AND FURTHER, IT WAS ALSO RECORDED IN THE BILL STATUS AS 'C' OR ' NULL' WHICH MEANS IT WAS NOT BY WAY OF SALE. [H] THERE IS ABSOLUTELY NO BASIS OR MATERIAL TO HOL D THAT THE USE OF THE STAR KEY AND THE PLUS KEYS WAS TO RECORD TRANSACTIONS DEPENDING ON WHETHE R THE SAME WAS REQUIRED TO BE ACCOUNTED OR NOT, ESPECIALLY SINCE, NO SUCH STATEME NT HAS BEEN MADE BY THE WITNESS SRI VENKATESH VAIDYANATHAN, AT ALL. 5.14 IT IS SUBMITTED THAT IN COURSE OF THE POST SEA RCH APPRAISAL PROCEEDINGS AS WELL AS IN COURSE OF THE ASSESSMENT PROCEEDINGS, AFTER CAREFUL EXAMINATION OF THE ABOVE LOGS THE APPELLANT HAS EXPLAINED AND DEMONSTRATED THAT THE E NTRIES IN THESE STOCK LOGS UNDER THE COLUMN 'WOTAX'.Y WERE MERE INTERNAL MOVEMENTS OF ST OCKS AND THEY DID NOT CONSTITUTE SALES. THE FIRST EXPLANATION OF THE APPELLANT WAS GIVEN TO THE LEARNED DDIT BY LETTER DATED 12/11/2010, WHICH IS PLACED AT PAGE NOS.221 TO 300 OF THE PAPER BOOK NO. II. IN THIS REPLY, THE APPELLANT ENCLOSED VOLUMINOUS RECORDS FROM HALL MARKING REGISTER AND OTHER RECORDS MAINTAINED TO RECORD THE MOVEMENT OF THE STOCK IN R ESPECT OF CERTAIN LOG TABLES FOR CERTAIN YEARS. THE SECOND EXPLANATION OF THE APPELLANT WAS ALSO GIVEN TO THE LEARNED DDIT BY LETTER DATED 22/11/2010, WHICH IS PLACED AT PAGE NOS.301 T O 321 OF PAPER BOOK NO.II IN RESPECT OF THE BALANCE RECORDS. THEREAFTER, IN COURSE OF ASSES SMENT PROCEEDINGS, THE APPELLANT HAS ONCE AGAIN GIVEN THE ABOVE EXPLANATION AND HAS EVEN PROV ED THE SAME TO THE HILT VIDE LETTER DATED 21/01/2013, WHICH IS PLACED AT PAGE NOS.444 TO 488 OF THE PAPER BOOKNO.III AND ANOTHER LETTER DATED 29/01/2013, WHICH IS PLACED AT PAGES N OS. 489 TO 501 OF THE PAPER BOOK NO.III. IT HAS BEEN PROVED WITH REFERENCE TO EACH ONE OF THE E NTRIES NUMBERING 1794 ENTRIES IN THESE LOGS THAT THESE ENTRIES PERTAINED TO THE FOLLOWING: [A] 611 ENTRIES WERE FOR REMOVED AND REPLACED AFTER RET AGGING; [B] 561 ENTRIES WERE REMOVED TO SAFE AS DAMAGED; [C] 258 ENTRIES WERE REMOVED TO EXCHANGE FOR SUPPLIERS; [D] 149 ENTRIES OF TAGGED STONES WERE REMOVED FROM COUN TER AND GIVEN TO THE GOLDSMITH FOR MAKING ORNAMENTS, [E] 56 ENTRIES WERE REMOVED FOR SALE AND IS SUPPORTED B Y SALE BILLS. [F] 50 ENTRIES WERE REMOVED FOR COMPLIMENTARY ITEMS LIK E CLEANING LIQUID, [G] 41 ENTRIES WERE REMOVED FOR THE REMOVAL OF STONES, [H] 39 ENTRIES REPRESENT PURCHASE RETURNS SUPPORTED BY BILLS; [I] 18 ENTRIES WERE REMOVED FOR ISSUING THE SAME TO THE SMITHS FOR MODIFICATION - ENTERED IN OUR STOCK REGISTERS; AND ITA NOS. 2534 TO 2539/BANG/2017 PAGE 24 OF 51 [J] 11 ENTRIES WERE REMOVED FOR STRINGING. 5.15 IT IS SUBMITTED THAT THE AFORESAID ENTRIES WER E EXPLAINED BY THE APPELLANT AND SUBSTANTIATED WITH OTHER CONTEMPORANEOUS RECORDS LI KE THE HALLMARKING REGISTER, REPAIR REGISTER, POLISH REGISTER, PLUS VIEW AND MINUS VIEW FROM THE COMPUTER, SUPPLIER CODES, PRODUCT CODES ETC., WHICH ARE ALSO PART OF THE SEIZ ED MATERIALS THEMSELVES. THUS, THE APPELLANT WAS ABLE TO PROVE THE CLAIM CONCLUSIVELY THAT THESE WERE REMOVAL OF STOCKS FROM THE COUNTERS AS APPEARING IN THE STOCK LOGS WERE FOR VARIOUS PUR POSES OTHER THAN SALES AND PROVED THEM TO THE HILT AND BEYOND ANY SHADOW OF DOUBT THAT THESE REMOVALS WERE DULY RECORDED IN OTHER CONTEMPORANEOUS RECORDS AS WELL. MORE THAN 1000 PAG ES OF EVIDENCE WERE FILED BEFORE THE LEARNED A.O. WHICH WAS ALSO PRODUCED BEFORE THE LEA RNED CIT [APPEALS]. THIS WAS POSSIBLE BECAUSE OF THE FACT THAT EACH ENTRY IN THESE STOCK LOGS HAD THE PRODUCT CODE AND SUPPLIER CODES ETC., FROM WHICH THE APPELLANT COULD TRACE AN D IDENTIFY THE STOCK AND ITS ACTUAL MOVEMENT FROM THE COUNTER FOR VARIOUS PURPOSES. FIN ALLY, THE APPELLANT HAD ALSO DEMONSTRATED BEFORE THE LEARNED A.O. AND CIT [APPEA LS] THAT THE ENTRIES MADE IN THE 4 STOCK LOGS UNDER THE COLUMN 'WOTAX'=Y DID NOT RESULT IN T HE REMOVAL OF STOCKS FROM THE GS-12 REGISTER, WHICH IS THE STATUTORY STOCK REGISTER MAI NTAINED BY THE APPELLANT CONTINUOUSLY FROM 1963 ITSELF. NO FAULT IS FOUND BY THE LEARNED A.O. AND CIT [APPEALS] ON THESE SUBMISSIONS AND EVIDENCE TENDERED BY THE APPELLANT. 5.16 WITH A VIEW TO PROVIDING A SIMPLE EXAMPLE OF T HE KIND OF EXPLANATION GIVEN BY 'HE APPELLANT, ONE PARTICULAR TRANSACTION OF THE ITEM R EMOVED FROM THE COUNTER FOR RE-TAGGING DUE TO CHANGE IN PRICES IS TAKEN. THE SAID EXAMPLE IS G IVEN TO ESTABLISH THE VERACITY OF THE EXPLANATION TENDERED IS AS FOLLOWS : [A] DIAMOND NECKLACE WITH WEIGHT 79.490 GMS. WITH 5 3.48 CARAT DIAMONDS BORE A TAG NO.116-C-779 AND THE SAME IS SHOWN IN THE TAG LOG F OR THE FINANCIAL YEAR 2010-11. THIS IS CONSIDERED TO BE A REMOVAL OF THE STOCK FROM COUNTE R AND IS SUSPECTED-AS SALES. [B] SIMILARLY, THE SAME ENTRY ALSO FIGURES IN THE ' TAGGED STONE LOG' BEARING THE SAME TAG NUMBER IN LIGHT OF THE RELATIONSHIP BETWEEN THE TAG GED LOG' AND 'TAGGED STONE LOG', EXPLAINED EARLIER THAT THESE LOGS ARE COMPLIMENTARY TO EACH O THER. [C] THE DATE ON WHICH THE ENTRY IS FOUND IN BOTH TH E LOGS IS 27/07/2010. [D] AFTER THE REMOVAL OF THE OLD TAG 116-C-779 THE SAID ORNAMENT WAS GIVEN A FRESH TAG NO. 116-C-1305 WHICH HAS COME INTO THE COUNTER ON THE S AME DAY I.E., 27/07/2010 WITH THE GROSS WEIGHT OF 79.490 GMS. OF GOLD AND 53.48 CARATS OF D IAMONDS, WITH THE REVISED PRICES. [E] THE ABOVE ENTRY REFLECTED IN THE 'RECEIPT VIEW' OF THE COUNTER IS PLACED AT PAGE 800 OF PAPER BOOK NO.IV AND THIS CAN BE VERIFIED FROM THE SEIZED HARD DISK AVAILABLE WITH THE DEPARTMENT. 5.17 ANOTHER EXAMPLE RELATES TO DIAMOND EAR RINGS H AVING A GROSS WEIGHT OF 14.990 GMS. OF GOLD AND 9.89 CARAT DIAMOND BEARING TAG NO. 118-C-5 584. THE SAID ITEM WAS ALSO REMOVED ON 27/07/2010 AND FIGURES IN THE 'TAGGED LOG' AND ' TAGGED STONE LOG' FOR THE FINANCIAL YEAR 2010-11. THE SAID ITEM WAS RE-TAGGED AND GIVEN TO T HE COUNTER WITH THE FRESH TAG NO. I 18-C- 5809 AND THE SAME IS FOUND REFLECTED IN THE 'RECEIP T VIEW' OF THE COUNTER, PLACED AT PAGE 801 OF PAPER BOOK NO.IV AND THIS CAN ALSO BE VERIFIED F ROM THE SEIZED HARD DISK AVAILABLE WITH THE DEPARTMENT. ITA NOS. 2534 TO 2539/BANG/2017 PAGE 25 OF 51 5.18 THE THIRD EXAMPLE RELATES TO A DIAMOND RING WI TH 4.940 GMS. OF GOLD HAVING 0.87 CARAT DIAMOND BEARING TAG NO. 117-A-344 AND IS SHOWN IN T HE 'TAGGED LOG' AND 'TAGGED STONE LOG' AS REMOVED ON 03/08/2010. AFTER RETAGGING AS NO. 11 7-C-3409 IT WAS ONCE AGAIN ISSUED TO THE COUNTER ON THE SAME DAY I.E., 03/08/2010 AND TH E SAME IS REFLECTED IN THE 'RECEIPT VIEW' OF THE COUNTER PLACED AT PAGE 802 OF PAPER BOOK NO.IV AND THIS CAN ALSO BE VERIFIED FROM THE SEIZED HARD DISK AVAILABLE WITH THE DEPARTMENT. 5.19 THUS, IT WAS CONCLUSIVELY DEMONSTRATED BY THE APPELLANT TO THE LEARNED A.O. IN COURSE OF THE ASSESSMENT PROCEEDINGS THAT THE ENTRIES MADE IN THE STOCK LOGS 'HOMEREC', 'TAGGED', 'NON-TAGED' AND 'TAGSTONE' UNDER THE COLUMN 'WOTAX' =Y WERE MERE REMOVAL OF THE STOCKS OTHERWISE BY SALES. REJECTING THE EXPLANATION, WHIC H WAS SUBSTANTIATED BY THE APPELLANT WITH EVIDENCE UNREASONABLY, THEY HAVE BEEN TREATED AS UN ACCOUNTED SALES AND ADDITION HAS BEEN MADE IN RESPECT OF GROSS PROFIT EARNED THEREON, WHI CH IS ARBITRARY AND UNWARRANTED ON THE FACTS OF THE APPELLANT'S CASE. 5.20 IT IS SUBMITTED THAT THESE ADDITIONS MADE FOR THE VARIOUS YEARS ARE PURELY ON SUSPICION AND SURMISE AND THERE IS ABSOLUTELY NO MATERIAL OR RECORDS TO COME TO THE CONCLUSION THAT THE APPELLANT HAS MADE SALES OUTSIDE THE BOOKS OF ACCOU NTS IN RESPECT OF THE ENTRIES IN THE STOCK LOGS 'HOMEREC', 'TAGGED', 'NON-TAGGED' AND 'TAGSTON E' UNDER THE COLUMN 'WOTAX'=Y. ON THE CONTRARY, THE APPELLANT HAS BEEN ABLE TO PROVE ITS EXPLANATION THAT THESE ARE MERE REMOVAL OF GOODS OTHERWISE THAN BY WAY OF SALES. IF THESE W ERE TO BE SALES, THERE MUST HAVE BEEN SOME ASSET WHICH SHOULD HAVE BEEN FOUND REPRESENTING EIT HER THE SALE PROCEEDS OR THE INCOME SUSPECTED TO HAVE BEEN EARNED OUT OF SUCH SUPPRESSE D SALES, WHICH DID NOT EXIST. FURTHERMORE, IF THESE WERE SALES, THE STOCK TALLY A T THE END OF EACH YEAR WOULD NOT TALLY AT ALL, WHICH IS ALSO NOT THE CASE IN THE CASE. OF THE APPE LLANT. THEREFORE, THE ADDITION MADE ON THIS COUNT IS TOTALLY WITHOUT JUSTIFICATION AND THEREFOR E, THE SAME REQUIRES TO BE DELETED IN FULL. IT IS PRAYED ACCORDINGLY. 5.21 WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT ALSO WISHES TO HIGHLIGHT THAT THE THERE ARE SEVERAL QUANTIFICATION ERRORS MADE BY THE AUTHORITI ES BELOW IN ARRIVING AT THE AMOUNTS REPRESENTING THE ALLEGED SALES OUTSIDE THE BOOKS OF ACCOUNTS. IT IS SUBMITTED THAT THE AUTHORITIES HAVE ERRED IN ASSUMING THAT ALL ENTRIES IN THE 4 LOG TABLES PERTAINED TO 22 CARAT GOLD ORNAMENTS ONLY AND ON THIS BASIS PROCEEDING TO AGGREGATE THESE ENTRIES AND MULTIPLY THEM BY THE RBI AVERAGE RATE TO ARRIVE AT THE GROSS VALUE OF THE SO CALLED UNACCOUNTED SALES FOR EACH YEAR. THEY OUGHT TO HAVE APPRECIATED THAT THERE APPEARED A PRODUCT CODE AGAINST EACH OF THE ENTRIES IN ALL THESE 4 LOGS AND THESE P RODUCT CODES REVEALED THE NATURE OF THE ARTICLES WHETHER IT IS 22 CARAT GOLD ORNAMENT OR 18 CARAT GOLD ORNAMENT OR SILVER ARTICLES, STONES, DIAMONDS, PLATINUM, ETC. ON A CLOSE EXAMINA TION OF THESE ENTRIES WITH RESPECT TO THE PRODUCT CODES, IT IS SUBMITTED THAT THEY CONTAINED 22 CARAT, 18 CARAT GOLD ORNAMENT, SILVER, ETC. THESE WERE CATEGORIZED AND MADE AVAILABLE TO T HE LEARNED A.O., WITH A REQUEST FOR RECTIFICATION AFTER THE ASSESSMENT ORDERS WERE PASS ED, WHICH WAS REFUSED. WHEN THE SAME WAS ALSO URGED BEFORE THE LEARNED CIT [APPEALS], NO OBS ERVATIONS THEREON HAVE BEEN MADE ON THIS ASPECT OF THE MATTER THAT WAS URGED BY THE APP ELLANT. THE LEARNED CIT[A] HAS UPHELD THE ADDITION IN PARA 12.8 TO 12.11 OF THE ORDER DATED 2 8/11/2014 [PAGE 979 & 980 OF PAPER BOOK NO. V]. 5.22 ON THIS ASPECT OF THE MATTER, IT IS SUBMITTED THAT AS FAR AS THE ASSESSMENT YEAR 2005-06 IS CONCERNED, IT IS GLARINGLY FROM THE ENTRIES IN 'NON -TAGGED' LOG THAT IT CONTAINS ENTRIES PERTAINING TO THE F.Y. 2003-04, WHICH IS BEYOND THE PERIOD OF ASSESSMENT. THIS CAN BE SEEN FROM THE TABLE ENCLOSED TO THE ASSESSMENT AT PAGE N OS.36 TO 41 THAT SI.NO.1 TO SI.NO.245 AT ITA NOS. 2534 TO 2539/BANG/2017 PAGE 26 OF 51 PAGE NO.41 TOTALING TO 1773.401 GMS PERTAINS TO TRA NSACTIONS FOR THE FINANCIAL YEAR 2003-04 AND HENCE, THE SAME DESERVES TO BE REDUCED FROM THE FIGURE OF 5841.691 ADOPTED, WHICH SHOULD HAVE BEEN 4041.290 GMS ONLY [5841.691 MINUS 1773.401]. EVEN THIS FIGURE INCLUDES SILVER ITEMS TO THE EXTENT OF 1974.790 GMS., WHICH LEAVES THE 22 CARAT GOLD ITEMS OF 2066.500 GMS. ONLY [4041.290 - 1974.790]. WITHOUT PREJUDICE TO THE CONTENTION THAT THE ENTIRE ADDITION DESERVES TO BE DELETED, IT IS SUBMITTED THAT THE CO MPUTATION MADE HAS ALSO TO BE AMENDED BY ADOPTING 2066.500 GMS. IN PLACE OF 5814.691 GMS., A S ADOPTED BY THE LEARNED A.O. SIMILARLY, IN THE CASE OF 'HOMEREC' LOG, THE LEARNED A.O. HAS TAKEN THE ENTIRE FIGURE OF 882.150 GMS AND HAS NOT NOTICED THAT IT INCLUDES 548.490 GMS. OF SI LVER AND HENCE, ONLY 330.00 OF 22 CARAT ORNAMENTS HAS TO BE CONSIDERED. 5.23 THE AFORESAID ERROR POINTED OUT BY THE APPELLA NT HAS OCCURRED IN ALL THE YEARS UNDER APPEAL AND THE APPELLANT'S REQUEST FOR RECTIFICATIO N HAS BEEN REJECTED BY THE LEARNED A.O. THE APPELLANT HAS SET-OUT THE ACTUAL QUANTITIES OF 22 C ARAT GOLD AS PER THE 4 LOGS FOR THE VARIOUS ASSESSMENT YEARS UNDER APPEAL AT PAGE 803 OF PAPER BOOK NO.IV WHICH ALONE REQUIRES TO BE CONSIDERED AS THE ALLEGED SALES MADE OUTSIDE THE BO OKS OF ACCOUNTS EVEN IN EXTREME CASE, WHICH, AT THE RISK OF REPETITION, IT IS SUBMITTED A RE CHALLENGED BY THE APPELLANT. THE APPELLANT IS ONLY POINTING OUT THE ERRORS COMMITTED BY THE LE ARNED A.O. IN THE COMPUTATION OF THE ADDITION AND DOES NOT MEAN THAT THE APPELLANT IS CO NSENTING TO THE ADDITION OF THE 2066 + 330 GMS. ITA NOS. 2534 TO 2539/BANG/2017 PAGE 27 OF 51 ITA NOS. 2534 TO 2539/BANG/2017 PAGE 28 OF 51 ITA NOS. 2534 TO 2539/BANG/2017 PAGE 29 OF 51 ITA NOS. 2534 TO 2539/BANG/2017 PAGE 30 OF 51 ITA NOS. 2534 TO 2539/BANG/2017 PAGE 31 OF 51 ITA NOS. 2534 TO 2539/BANG/2017 PAGE 32 OF 51 ITA NOS. 2534 TO 2539/BANG/2017 PAGE 33 OF 51 ITA NOS. 2534 TO 2539/BANG/2017 PAGE 34 OF 51 ITA NOS. 2534 TO 2539/BANG/2017 PAGE 35 OF 51 ITA NOS. 2534 TO 2539/BANG/2017 PAGE 36 OF 51 ITA NOS. 2534 TO 2539/BANG/2017 PAGE 37 OF 51 6. AS AGAINST THIS, THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. THE LD. DR OF REVENUE SUBMITTED THAT THE EARLIER OR DER PASSED BY CIT(A) ON 28.02.2014 IS AVAILABLE ON PAGES 944 TO 982 OF PAPE R BOOK AND IN PARTICULAR, OUR ATTENTION WAS DRAWN TO PARAS 11.5 AND 11.13 TO 11.14 OF THIS ORDER OF CIT(A). IT WAS POINTED OUT BY LD. DR OF REVENUE TH AT IN PARA 11.5 OF ITS ORDER, THE LD. CIT(A) HAS POINTED OUT THAT 5 QUESTIONS ARE RELEVANT WHICH ARE TO BE ANSWERED AND AS PER PARA NOS. 11.13 AND 11.14, IT I S A FINDING GIVEN BY LD. CIT(A) THAT AS PER THE AUDITORS REPORT, AUDITORS H AVE REPORTED THAT THE BASIS OF CLOSING STOCK HAS BEEN ASCERTAINED AS PER LAST IN F IRST OUT (LIFO) METHOD AND THE SAME IS NOT IN CONFORMITY WITH THE ACCOUNTING S TANDARDS AS-2. IT IS ALSO POINTED OUT THAT IT IS ALSO NOTED BY CIT(A) IN PARA 11.14 OF ITS ORDER THAT THE APPROVED VALUER HAD CATEGORICALLY STATED THAT IT IS NOT POSSIBLE TO IDENTIFY THE AGE OF OLD ORNAMENTAL JEWELLERY. HE ALSO POINTED O UT THAT IN THE SAME PARA 11.14, THIS FINDING IS ALSO GIVEN BY CIT(A) THAT TH E VALUE OF ENTIRE 22 CT JEWELLERY INCLUDING THE UNACCOUNTED 22 CT JEWELLERY FOUND IN 1990 WAS VALUED AT RS. 270/- PER GRAM AND THE ASSESSEE DID NOT FURNISH THE OLD JEWELLERY DETAILS OR OBJECTED TO THE VALUATION OF ANY OF THE OLD JEWELLE RY AT RS. 270/- PER GRAM. HENCE, IN THE PRESENT PROCEEDINGS, NO ITEM OF OLD J EWELLERY CAN BE VALUED AT PRICE LESS THAN RS. 270/- PER GRAM. 7. IN THE REJOINDER, IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT THE ASSESSEE CAN CORRELATE THE SALE INVOICES WITH THE PURCHASE INVOI CES. HE SUBMITTED THAT AS PER PURCHASE INVOICE NO. 7 DATED 22.05.2004, PURCHA SE OF 67.150 GRAMS HAVE ITA NOS. 2534 TO 2539/BANG/2017 PAGE 38 OF 51 BEEN SOLD AS PER FOUR SALE INVOICES AND THE CONCERN ED SALE INVOICES ARE INVOICE NO. 65 DATED 28.07.2004 OF 20.12 GRAMS, INVOICE NO. 3245 DATED 19.08.2004 OF 9.87 GRAMS, INVOICE NO. 3898 DATED 11.09.2004 OF 35 .74 GRAMS AND INVOICE NO. 4330 DATED 02.10.2004 OF 1.42 GRAMS. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT AS PER THE IMPUGNED ORDER OF CIT(A), IT WAS ASKED BY THE TRIBUNAL AS PE R ITS EARLIER ORDER DATED 21.11.2014 THAT HE HAS TO ONLY DECIDE THE ADDITIONA L GROUNDS OF APPEAL RELATING TO THE VALIDITY OF THE JURISDICTION U/S. 153A AS WE LL THE EXISTENCE OF CONDITIONS FOR ISSUANCE OF WARRANT U/S. 132A OF IT ACT AND THE ISS UE ON MERIT IN RESPECT OF ADDITION MADE BY THE AO ALLEGING UNDER VALUATION OF CLOSING STOCK AS DECIDED BY CIT(A) AS PER ITS EARLIER ORDER DATED 28.02.2014 COPY OF WHICH IS AVAILABLE ON PAGES 944 TO 982 OF PAPER BOOK WAS NOT COMMENTED UPON BY THE TRIBUNAL AND LIBERTY WAS GIVEN TO THE ASSESSEE THAT IF THE A SSESSEE DOES NOT SUCCEED ON TECHNICAL ISSUE THAN THE ASSESSEE CAN RAISE THE ISS UE ON MERIT ALSO IN THE FRESH APPEAL TO BE FILED AGAINST THE APPEAL EFFECT ORDER TO BE PASSED BY CIT (A) AS PER THE DIRECTION IN THE SAID TRIBUNAL ORDER. THERE FORE, THE ISSUE ON MERIT RAISED BY THE ASSESSEE IN THESE APPEALS ALTHOUGH AGAINST T HE DECISION OF THE EARLIER ORDER OF CIT (A) BUT HAVE TO BE DECIDED IN PRESENT APPEALS. THE QUANTITY DETAILS OF CLOSING STOCK OF 22 CT ORNAMENTAL JEWELLERY IS R EPRODUCED BY CIT(A) ON PAGE NO. 8 OF ITS ORDER I.E. PAGE NO. 951 OF THE PAPER B OOK WHICH IS REPRODUCED HEREIN BELOW FOR READY REFERENCE. QUANTITATIVE DETAILS OF CLOSING STOCK OF 22 CT ORNA MENTAL JEWELLERY IS GIVEN BELOW AS PER THE INVENTORY OF STOCK FILED BY THE ASSESSEE DURING THE SCRUTINY PROCEEDINGS. RATE PER GRAMS WEIGHT IN GMS. AY 2004-05 AY 2005-06 AY 2006-07 AY 2007-08 AY 2008- 09* AY 2009-10 AY 2010-11 AY 2011-12 10 3986.64 3986.64 3986.64 3986.64 3986.64 3986.64 3986.64 3986.64 15 4002.35 4002.35 4002.35 4002.35 4002.35 4002.35 4002.35 4002.35 30 5965.5 5965.5 5965.5 5965.5 5965:5 5965.5 5965.5 5965.5 60 5600 5600 5600 5600 5600 5600 5600 5600 100 3945 3945 3945 3945 3945 3945 3945 3945 180 3146 3146 3146 3146 3146 3146 3146 3146 200 2332 2332 2332 2332 2332 2332 2332 2332 ITA NOS. 2534 TO 2539/BANG/2017 PAGE 39 OF 51 240 1005 1005 1005 1005 1005 1005 1005 1005 300 145000 145000 145000 145000 145000 145000 145000 145000 450 7536.05 7536.05 7536.05 7536.05 7536.05 7536.05 7536.05 7536.05 475 816.32 0 485 10000 10000 10000 10000 10000 10000 10000 10000 505 0 28965.51 26137.65 26137.65 26137.65 26137.65 21554.5 21554.5 520 10000 0 0 550 16137.75 11849.59 43970.61 43970.61 29620. 39 11849.600 600 1900.1 1900.1 1900.1 650 5987.839 12093.409 11276.41 7999 8000 8000 700 0 3618.24 760 0 2733.501 8789.76 6056.259 6056.459 6056.459 800 1227.968 1080 3842.388 1200 2000 3083 899.675 1300 6000 1400 6250 1500 4240 1600 3092.803 219473 233334 270514 282972 271470 250403 231212 248611 9. FROM THE ABOVE TABLE REPRODUCED FROM THE ORDER O F CIT (A), IT IS SEEN THAT THE VARIOUS QUANTITIES WERE VALUED AT VARIOUS RATES RAN GING FROM RS. 10/- PER GRAM TO RS. 1600/- PER GRAM. IT IS ALSO SEEN THAT THE Q UANTITY OF JEWELLERY VALUED AT RS. 10/- PER GRAM TO RS. 450/- PER GRAM IS IDENTICA L IN ALL THESE YEARS I.E. ASSESSMENT YEARS 2004-05 TO 2011-12. AS PER THE AN NEXURE 2 OF THE WRITTEN SUBMISSIONS FILED BY THE LEARNED AR OF THE ASSESSEE AS REPRODUCED ABOVE, THE QUANTITY AS ON 31.03.1990 AND 31.03.2005 IN RESPECT OF VARIOUS ITEMS OF JEWELLERY VALUED @ RS. 10/- PER GRAM TO RS. 450/- P ER GRAM HAD REMAINED SAME AND FOR VALUATION @ RS. 475/- PER GRAM TO RS. 550/- PER GRAM IT HAS GONE DOWN ON THE LATER DATE AND FOR VALUATION AT A HIGHE R RATE, THERE WAS NO STOCK AS ON 31.03.2004. THE JEWELLERY VALUED AT RS. 475/- PE R GRAM IS SHOWN AT 816.32 GRAMS FOR ASSESSMENT YEAR 2004-05 AND THE SAME IS S HOWN AS NIL FOR THE LATER YEARS AND SIMILARLY THE JEWELLERY VALUED AT RS. 520 /- PER GRAM IS ALSO SHOWN ONLY IN ASSESSMENT YEAR 2004-05 TO THE EXTENT OF 10 000 GRAMS AND IN ALL THE ITA NOS. 2534 TO 2539/BANG/2017 PAGE 40 OF 51 LATER YEARS, IT IS SHOWN AS NIL. THE JEWELLERY VAL UED AT RS. 550/- PER GRAM IS SHOWN AS 16137.75 GRAMS FOR ASSESSMENT YEAR 2004-05 AND IT HAS REGULARLY GONE DOWN FROM ASSESSMENT YEAR 2005-06 TO 2009-10 A ND IN ASSESSMENT YEAR 2010-11, IT HAS BEEN SHOWN AS NIL. AS AGAINST SUCH VALUATION OF JEWELLERY OF 22 CT DONE BY THE ASSESSEE AT SPECIFIC RATE, CLA IMED TO BE PURCHASE COST, THE AO HAS STATED IN PARA 5.2 OF ASSESSMENT ORDER THAT OPENING STOCK OF 22 CT ORNAMENT AS ON 01.04.2004 WAS 2,19,472.610 GRAMS WH ICH WAS VALUED AT RS. 6,84,87,983.65/- AND THE AO HAS WORKED OUT THE AVER AGE RATE FOR SUCH VALUATION OF ASSESSEE AT RS. 312 PER GRAM. THEREAF TER IN PARA 5.3 OF ASSESSMENT ORDER, THE AO HAS CONSIDERED OPENING STO CK QUANTITY AND VALUE ALONG WITH THE PURCHASE QUANTITY AND VALUE AND CLOS ING STOCK QUANTITY AND VALUE AS PER THE ASSESSEE AND THEN HE HAS ADOPTED T HE AVERAGE COST OF OPENING STOCK ON THE PURCHASES WORKED OUT BY HIM AT RS. 452 PER GRAM AND AT THAT PRICE, HE HAS VALUED THE GIVEN CLOSING STOCK A S ON 31.03.2005. IT MEANS THE AO HAS ALSO ACCEPTED THE VALUE OF OPENING STOCK WORKED OUT BY ASSESSEE ON 01.04.2004 AT RS. 6,84,87,983/-. THE AO IS ALSO CONSIDERING SUCH OPENING STOCK QUANTITY VALUE TO WORK OUT THE AVERAGE PRICE OF RS. 452/- PER GRAM AND THIS GOES TO SHOW THAT THIS IS NOT THE CASE OF THE AO THAT THE CLOSING STOCK DOES NOT HAVE ANY QUANTITY OF OPENING STOCK BECAUSE HAD IT BEEN THE CASE OF AO THAT THE CLOSING STOCK AS ON 31.03.2005 DOES NOT INCLUDE ANY JEWELLERY ITEM OUT OF OPENING STOCK AS ON 31.03.2004, THEN THE AO SHOULD HAVE ADOPTED PURCHASE VALUE IN THE PRESENT YEAR OF RS. 562/- PER GRAM FOR VALUING THE CLOSING STOCK ON 31.03.2005. IT IS ALSO WORTHWHILE THAT AS PER THE VALUATION ADOPTED BY ASSESSEE, SOME QUANTITY IS VALUED BY THE ASSESSEE A T RS. 520/- PER GRAM I.E. 10000 GRAMS AND SOME QUANTITY OF 16137.75 GRAMS HAV E BEEN VALUED AT RS. 550/- PER GRAM WHEREAS THE AO IS VALUING THE ENTIRE 22 CT JEWELLERY AT RS. 452/- PER GRAM. THE VARIOUS REASONS GIVEN BY THE AO FOR NOT ACCEPTING THE VALUATION DONE BY THE ASSESSEE ARE SUMMARIZED BY AO ON PAGES 20 AND 21 OF THE ASSESSMENT ORDER WHICH IS REPRODUCED HEREIN BELOW. TO SUMMARISE 1. THE ASSESSEE HAD NEITHER PROVED NOR SUBSTANTIATE D ITS CLAIM THAT THE 22 CT GOLD ORNAMENTS NEED TO BE VALUED BY ADOPTING DIFFERENT RATES AND THAT IT WAS FOLLOWING LIFO METHOD FOR VALUATION OF CLOSING STOCK. 2. IN RESPECT OF URD PURCHASE OF OLD ORNAMENTS FROM THE CUSTOMERS, ITA NOS. 2534 TO 2539/BANG/2017 PAGE 41 OF 51 THE ASSESSEE WAS IMMEDIATELY CONVERTING IT INTO NEW ORNAMENTS WHICH SHOW THAT THE ASSESSEE DOES NOT KEEP OBSOLETE AND O UT DATED ITEMS IN ITS SHOP. 3. THE PURCHASE AND SALE INVOICES DO NOT GIVE THE D ETAILED DESCRIPTION OF THE 22 CT. GOLD ORNAMENTS AND THEREFORE IT IS NO T POSSIBLE TO KNOW WHICH ITEM WAS SOLD FIRST. 4. GOLD ORNAMENTS DO NOT HAVE ANY UNIQUE IDENTIFICA TION TO DIFFERENTIATE FROM ONE ANOTHER. FOR EXAMPLE, THE AS SESSEE WAS PURCHASING, MANUFACTURING AND SELLING BANGLES. IT C AN NOT BE IDENTIFIED WHETHER THE BANGLES SOLD WERE OUT OF ANC IENT STOCK, OLD STOCK OR NEW STOCK TO ESTABLISH THAT LAST IN WAS FIRST OU T. 5. THE DATE OF MANUFACTURING OF THE GOLD ORNAMENTS CANNOT BE KNOWN FROM THE STOCK AVAILABLE WITH THE ASSESSEE. IT IS A CONTINUES PROCESS WHERE THE ASSESSEE PURCHASES AND SELLS THE GOLD ORN AMENTS AND THE ITEMS LIKE BANGLES, CHAINS NECKLACES ETC GETS REPLA CED BY PURCHASES. 6. THE NUMBER OF ITEMS OF GOLD ORNAMENTS MAINTAINED BY THE ASSESSEE WAS SO NUMEROUS THAT IT IS NOT POSSIBLE TO IDENTIFY ITEM BY ITEM TO ESTABLISH THAT LAST IN WAS FIRST SOLD OUT. 7. THE MONTH WISE ANALYSIS OF PURCHASES AND SALES I NDICATE THAT OLDER STOCK WAS BEING SOLD AND IT WAS NOT IN THE ORDER OF LAST IN FIRST OUT. 8. THE SEIZED DOCUMENTS MARKED AS A/SNS/1 AT PAGES 26 & 28 INDICATE THAT THE ASSESSEE DOES NOT HAVE ANCIENT JEWELLERY. 9. THE ASSESSEE HAS NO CONTROL ON JEWELLERY TO SAY THAT LIFO METHOD IS BEING FOLLOWED. THE ASSSESSEE HAD TO DISPLAY ALL TH E ORNAMENTS AND THE CUSTOMER CHOOSES AS PER THEIR DESIRE AND NOT THE JE WELLERY THAT HAS COME LAST 10. THE ASSESSEE WAS ADOPTING THE DIFFERENT RATES O F RS 10 PER GRAM TO RS 550 PER GRAM UNDER THE GUISE OF FOLLOWING LIFO M ETHOD. BY ADOPTING THE RATES PREVAILING FROM 1980 ONWARDS TO 22 CT ORNAMENTAL JEWELLERY, THE ASSESSEE WAS REDUCING ITS NET INCOME . 11. FOR ALL THE REASONS MENTIONED ABOVE, THE ACCOUN TS MAINTAINED IN RESPECT OF VALUATION OF INVENTORIES IN RESPECT OF 2 2 CT. GOLD ORNAMENTS IS NOT TO THE SATISFACTION OF THE UNDERSIGNED TO AR RIVE AT THE INCOME CHARGEABLE UNDER THE HEAD PROFITS & GAINS OF BUSIN ESS OR PROFESSION. 12. FINALLY, THE METHOD CONTINUOUSLY FOLLOWED BY TH E ASSESSEE ON THE ENTIRE STOCK IS NOT DISTURBED. THE FIFO METHOD OF V ALUATION OF INVENTORIES IS ALSO NOT ADOPTED. IT IS ONLY IN RESP ECT OF 22 CT GOLD ORNAMENTS, THE ASSESSEE HAS NOT DECLARED THE REAL I NCOME AND THEREFORE THE AVERAGE COST METHOD IS APPLIED SINCE THE ASSESSEE ADOPTED DECADES OLD RATE UNDER THE PRETEXT OF LIFO METHOD OF ITA NOS. 2534 TO 2539/BANG/2017 PAGE 42 OF 51 VALUATION OF STOCK. 13. THEREFORE, IN VIEW OF THE ABOVE, THE AVERAGE CO ST PRICE METHOD FOR VALUATION OF CLOSING STOCK OF INVENTORY OF 22 CT GO LD ORNAMENTS IS ADOPTED. 10. WE FIRST NOTE THE CLAIM OF THE ASSESSEE AND THE OBJECTIONS RAISED BY THE AO ALONG WITH THE MAIN REASONS OF SUCH OBJECTIONS AND THEN EXAMINE THE MERIT OF SUCH OBJECTIONS. WE FIND THAT THE CASE OF THE ASSES SEE IS THIS THAT THE ASSESSEE IS NOT VALUING THE CLOSING STOCK UNDER LIFO METHOD AS STATED BY THE AUDITORS IN ONE TAX AUDIT REPORT IN FORM 3CB FOR A. Y. 2011 - 12 AND AS ALLEGED BY THE AO & CIT (A). THE STAND OF THE ASSESSEE IS THIS THAT T HE CLOSING STOCK IS VALUED AT THE COST OF EACH ITEM AT ITS SPECIFIC COST OF ACQUI SITION AND IN DOING SO, THE ASSESSEE HAS VALUED SOME ITEMS OF STOCK AT A VALUE OF RS. 10/- PER GRAM TO RS. 550/- PER GRAM IN A. Y. 2005 06. AS AGAINST THIS, THE AO HAS VALUED THE ENTIRE CLOSING STOCK AS ON 31.03.2005 FOR A. Y. 200 5 006 AT RS. 10,54,66,805/- FOR 2,33,333.640 GRAMS @ RS. 452 PER GRAM. 11. THE VARIOUS REASONS GIVEN BY THE AO IN ASSESSME NT ORDER FOR NOT ACCEPTING THE VALUATION METHOD ADOPTED BY ASSESSEE ARE BASED ON S USPICION ONLY ABOUT THE METHOD ADOPTED BY ASSESSEE BUT IT DOES NOT SHOW THA T THE METHOD ADOPTED BY ASSESSEE IS NOT AN ACCEPTABLE METHOD BECAUSE IF THE STOCK ITEM CAN BE IDENTIFIED AS AN ITEM PURCHASED IN A PARTICULAR YEA R AT A PARTICULAR COST AND THE SAME IS VALUED AT THAT COST THEN THERE IS NO FAULT OR INFIRMITY IN SUCH METHOD OF VALUATION OF CLOSING STOCK. THESE OBJECTIONS OF TH E AO HAVE TO BE EXAMINED IN THE LIGHT OF VARIOUS ASSESSMENT ORDERS PASSED BY TH E AO FOR EARLIER AND SUBSEQUENT YEARS. COPY OF ASSESSMENT ORDER PASSED BY THE AO U/S. 143(3) ON 26.08.1992 FOR ASSESSMENT YEAR 1990-91 IS AVAILABLE ON PAGES 730 TO 740 OF PAPER BOOK AND SIMILARLY, THE ASSESSMENT ORDER PASS ED BY THE AO U/S. 143(3) R.W.S. 132 DATED 25.03.1994 FOR ASSESSMENT YEAR 199 1-92 IS AVAILABLE ON PAGES 748 TO 755 OF PAPER BOOK. WHEN WE EXAMINE TH ESE TWO ASSESSMENT ORDERS, WE FIND THAT THESE ASSESSMENT ORDERS ARE AL SO AFTER A SEARCH CONDUCTED BY THE DEPARTMENT ON 06.11.1990 AND THERE IS NO ADD ITION MADE IN THESE TWO ASSESSMENT YEARS REGARDING ANY ALLEGATION OF UNDER VALUATION OF CLOSING STOCK. THIS IS THE CLAIM OF THE ASSESSEE THAT SINCE LAST 6 0 YEARS, THE ASSESSEE HAS ITA NOS. 2534 TO 2539/BANG/2017 PAGE 43 OF 51 BEEN FOLLOWING THE SAME METHOD OF VALUATION OF CLOS ING STOCK CONSISTENTLY. THE LD. DR OF REVENUE COULD NOT SHOW THAT THIS CONTENTI ON OF ASSESSEE IS NOT CORRECT. HENCE IT IS APPARENT THAT THE METHOD OF V ALUATION OF CLOSING STOCK BEING CONSISTENTLY FOLLOWED BY ASSESSEE HAS BEEN ACCEPTED BY DEPARTMENT ALSO IN THE EARLIER YEARS AS PER SCRUTINY ASSESSMENT ORDERS PAS SED BY THE DEPARTMENT. SIMILARLY THE COPY OF ASSESSMENT ORDER FOR A LATER YEAR I.E. ASSESSMENT YEAR 2012-13 DATED 30.11.2016 IS AVAILABLE ON PAGES 1026 TO 1032 OF PAPER BOOK. EVEN IN THIS YEAR ALSO, IN THIS ASSESSMENT ORDER PA SSED BY THE AO U/S. 143(3), THERE IS NO ADDITION MADE ON ACCOUNT OF ANY UNDER V ALUATION OF CLOSING STOCK AND THIS IS NOT THE CASE OF THE LD. DR OF REVENUE T HAT IN THIS YEAR I.E. ASSESSMENT YEAR 2012-13, THE METHOD ADOPTED BY ASSE SSEE IS NOT THE SAME METHOD CONSISTENTLY FOLLOWED BY ASSESSEE FOR LAST 6 0 YEARS. IN OUR CONSIDERED OPINION, EVEN IF THERE ARE CERTAIN SHORTCOMINGS IN THE METHOD OF VALUATION OF CLOSING STOCK ADOPTED BY ASSESSEE BUT SINCE THE SAM E METHOD OF VALUATION OF CLOSING STOCK OF ASSESSEE WAS ACCEPTED BY DEPARTMEN T IN EARLIER YEARS AND ALSO ACCEPTED BY DEPARTMENT IN LATER YEAR, AS PER T HE RULE OF CONSISTENCY, NO ADDITION CAN BE MADE BY ADOPTING A DIFFERENT METHOD BY SUBSTITUTING A DIFFERENT METHOD OF VALUATION OF CLOSING STOCK IN PLACE OF A METHOD OF VALUATION OF CLOSING STOCK ADOPTED BY ASSESSEE CONSISTENTLY AND ACCEPTED BY DEPARTMENT ALSO CONSISTENTLY AND WHICH IS NOT SHOWN TO BE DEFECTIVE APART FROM SOME ALLEGATIONS THAT THERE ARE CERTAIN SHORTCOMINGS BEING PRACTICAL DIFFICULTIES IN FOLLOWING THE METHOD IN VALUING THE CLOSING STOCK AS PER THE METH OD ADOPTED BY ASSESSEE AS PER VARIOUS OBJECTIONS OF THE AO REPRODUCED ABOVE A ND NOTED FROM THE ASSESSMENT ORDER. IN SUMMARY, THE MAIN REASONS GIVE N BY THE AO ARE THREE. FIRST SUCH REASON IS THIS THAT IN THE MONTH OF APRI L , 2004, SALES QUANTITY IS MORE THAN PURCHASE QUANTITY AND HENCE, AS PER THE AO, TH ERE WAS SALE OF 8197.900 GRAMS IN APRIL 2004 OUT OF OPENING STOCK AS PER PAR A 4.7 ON PAGE 9 OF THE ASSESSMENT ORDER. THE SECOND REASON GIVEN BY THE AO IS BASED ON COPY OF SEIZED DOCUMENTS SCANNED AND REPRODUCED ON PAGES 11 & 12 OF THE ASSESSMENT ORDER AND THIS OBJECTION IS THIS THAT ON THESE PAGES, ONE OF THE PARTNERS OF THE ASSESSEE FIRM HAS NOTED IN HIS OWN HAND WRITING THAT THE OLD JEWELLERY AS ON 01.04.2009 WAS 3842.388 GRAMS. AS P ER THE THIRD MAIN REASON GIVEN BY THE AO, HE STATES THAT THE ASSESSEE HAS GI VEN ONLY GENERAL DESCRIPTION ITA NOS. 2534 TO 2539/BANG/2017 PAGE 44 OF 51 OF THE ORNAMENTS IN PURCHASE AND SALES INVOICES AND THEREFORE, IT WAS NOT POSSIBLE TO SPECIFICALLY IDENTIFY THE GOLD JEWELLER Y TO ACCEPT THAT THE SAME HISTORICAL ORNAMENTS WERE STILL AVAILABLE WITH THE ASSESSEE. REGARDING THE FIRST OBJECTION, WE FIND THAT THERE IS NO MERIT IN THE SA ME BECAUSE, IT IS NOT THE CASE OF THE ASSESSEE THAT AFTER APRIL 2004, THERE IS NO SALE OUT OF OPENING STOCK AS ON 01.04.2004. AS PER THIS OBJECTION, IN APRIL 2004 , THERE IS SOME SALE MINIMUM 8197.900 GRAMS OUT OF OPENING STOCK. IN FACT, AS PE R THE CHART APPEARING ON PAGE NO. 4 OF THE ASSESSMENT ORDER FOR A. Y. 2005 06, OUT OF 10,000 GRAMS BEING OPENING STOCK AS ON 01.04.2004 VALUED @ RS. 5 20 PER GRAM, THE CLOSING STOCK AS ON 31.03.2005 IS NIL WHICH MEANS THAT AS P ER THE ASSESSEE, THIS MUCH JEWELLERY OUT OF OPENING STOCK AS ON 01.04.2004 WAS SOLD OUT IN F. Y. 2004 05. HENCE, WE HOLD THAT THERE IS NO MERIT IN THIS O BJECTION. ABOUT THE SECOND OBJECTION, WE FIND THAT THE EXPLANATION OF THE ASSE SSEE IN THIS REGARD IS NOTED BY THE AO IN PARA 4.9 ON PAGE 12 OF THE ASSESSMENT ORD ER FOR A. Y. 2005 06 AND AS PER THE SAME, THIS IS THE EXPLANATION OF THE ASS ESSEE THAT THE OLD JEWELLERY MENTIONED ON PAGE 26 REPRODUCED ON PAGE 11 OF THE A SSESSMENT ORDER IS ABOUT BROKEN ITEMS PURCHASED AS URD PURCHASES AND I T IS NOT ABOUT ANCIENT JEWELLERY. THIS EXPLANATION WAS BRUSHED ASIDE BY TH E AO BY SAYING THAT THE RELEVANT SEIZED PAPER DOES NOT CONTAIN ANY DETAILS OF OLD STOCK AND ON THIS BASIS, THE AO CAME TO THE CONCLUSION THAT THE ASSES SEE DOES NOT HAVE THE SO CALLED ANCIENT ORNAMENTS STATED TO BE LYING FROM 31 .03.1998 ONWARDS. IN OUR CONSIDERED OPINION, IN THE FACTS OF THE PRESENT CAS E, WHERE THE ASSESSEE IS HAVING MORE THAN 2.30 LACS GRAMS OF 22 CT. GOLD JEW ELLERY ON 31.03.2005 AS NOTED ON PAGE 3 OF THE ASSESSMENT ORDER, THE EXPLAN ATION OF THE ASSESSEE APPEARS TO BE REASONABLE AND IT CANNOT BE OUT RIGHT LY REJECTED AS HAS BEEN DONE BY THE AO. IF THE AO WAS HAVING ANY DOUBT ABOU T IT, HE COULD HAVE EXAMINED THE CONCERNED PARTNER IN THIS REGARD BUT H E HAS CHOSEN NOT TO DO SO. HENCE, WE HOLD THAT THIS OBJECTION OF THE AO IS ALS O NOT VALID TO DRAW ADVERSE INFERENCE AGAINST THE ASSESSEE. ABOUT THE THIRD SUC H OBJECTION, IT IS SUBMITTED BEFORE US THAT AS PER ANNEXURE 6 TO SYNOPSIS & WR ITTEN SUBMISSIONS FILED BEFORE CIT (A), COPY AVAILABLE ON PAGES 804 TO 813 OF THE PAPER BOOK, THE ASSESSEE HAS MADE EFFORTS TO IDENTIFY CERTAIN ITEMS OF JEWELLERY AS PER ASSESSEES INVENTORY WITH INVENTORY TAKEN AT THE TI ME OF SEARCH AND AS PER THE ITA NOS. 2534 TO 2539/BANG/2017 PAGE 45 OF 51 SAME, WE FIND THAT IN MOST OF THOSE ITEMS, THE DESC RIPTION AND GROSS WEIGHT IS EITHER TALLYING EXACTLY OR IS VERY CLOSE. WE ARE CO NCERNED WITH VALUATION OF STOCK AND NOT ABOUT PURCHASE AND SALE TALLYING. IF THE CL OSING STOCK ITEM IS IDENTIFIABLE AS SHOWN BY THE ASSESSEE ON THESE PAGES, IT CANNOT BE SAID THAT THE METHOD OF VALUATION OF CLOSING STOCK FOLLOWED BY THE ASSESSEE BY VALUING THE STOCK ITEM AT THE ACTUAL COST OF THAT ITEM IS DEFECTIVE AND NOT A CCEPTABLE. THIS IS AT THE BEST ONE SHORTCOMING IN THE METHOD ADOPTED BY THE ASSESS EE BECAUSE THE ASSESSEE IS NOT ABLE TO SHOW ANY DOCUMENTARY EVIDEN CE ABOUT IDENTIFYING THE ANCIENT JEWELLERY AND SUCH IDENTIFICATION IS DEPEND ENT ON THE PARTNERS AND/OR JEWELLERY EXPERTS EMPLOYED BY THE ASSESSEE. BUT SUC H SHORTCOMING CANNOT BE A BASIS TO REJECT THE METHOD OF VALUATION OF CLOSING STOCK CONSISTENTLY FOLLOWED BY THE ASSESSEE AND ACCEPTED BY THE DEPARTMENT. 12. NOW WE CONSIDER AND EXAMINE THE OBSERVATION OF CIT(A) IN PARA NO. 11.13 OF ITS ORDER DATED 28.02.2014, AVAILABLE ON PAGE NO. 9 62 OF PAPER BOOK WHEREIN IT IS STATED BY CIT(A) THAT AS PER TAX AUDIT REPORT IN FORM 3CB DATED 30.09.2010 FOR ASSESSMENT YEAR 2010-11 AND SIMILARLY FOR OTHER ASSESSMENT YEARS, IT IS REPORTED BY THE AUDITORS THAT THE COST IS ASCERTAIN ED ON LAST IN FIRST OUT (LIFO) METHOD AND IT IS ON THE SAME BASIS AS IN THE PRECED ING PREVIOUS YEARS BUT THE SAME IS NOT IN CONFORMITY WITH ACCOUNTING STANDARDS AS-2. AS AGAINST THIS OBSERVATION OF THE AUDITORS IN THE TAX AUDIT REPORT FOR AY 2010 11, , THIS IS THE CLAIM OF THE ASSESSEE THAT THE ASSESSEE IS NOT FOLLOWING LIFO METHOD BUT THE ASSESSEE IS FOLLOWING THE METHOD OF VALUING STO CK ON THE BASIS OF THE SPECIFIC COST OF THE ITEM AVAILABLE IN THE CLOSING STOCK. WE FIND THAT LEARNED DR OF THE REVENUE HAS SUBMITTED ON 24.05.2018 COPY OF FORM NO. 3CB FOR ASSESSMENT YEARS 2005 06 TO 2011 12 AND COPY OF FORM 3CB FOR THE YEAR ENDED AS ON 31.03.2005 IS AVAILABLE ON PAGE 15 OF T HE PAPER BOOK ALSO.. WE FIND THAT IN A. Y. 2005 06, THERE IS NO SUCH OBSE RVATION OF THE AUDITORS THAT THE ASSESSEE IS FOLLOWING LIFO METHOD FOR VALUING CLOSI NG STOCK. IT IS STATED BY THE AUDITORS IN THIS YEAR THAT INVENTORIES ARE TAKEN AS CERTIFIED BY THE PARTNERS AND VALUATION IS ON THE SAME BASIS AS IN THE PRECEDING YEARS BUT THE SAME IS NOT IN CONFORMITY WITH AS 2. IN A. Y. 2006 07 ALSO, TH E OBSERVATION OF AUDITORS IS IDENTICAL TO A. Y. 2005 06. HENCE IT IS SEEN THAT THIS OBSERVATION OF CIT (A) IS ITA NOS. 2534 TO 2539/BANG/2017 PAGE 46 OF 51 NOT CORRECT THAT IN ALL YEARS, IT IS SATED BY THE A UDITORS THAT THE STOCK IS VALUED ON LIFO BASIS. IN A. Y. 2008 09, IT IS STATED BY THE AUDITORS THAT THERE IS NO OBSERVATION ABOUT ANY DISCREPANCIES OR INCONSTANCIE S. AS PER FORM 3CB FOR THE PRECEDING YEAR ENDED AS ON 31.03.2009 FOR A. Y. 2009 10 ALSO AVAILABLE ON PAGE 105 OF THE PAPER BOOK, THERE IS NO ADVERSE COMMENT. FORM 3CB FOR A. Y. 2010 11 IS AVAILABLE ON PAGE 147 OF THE PAPER BOOK AND IN THIS YEAR, THE AUDITORS HAS STATED THAT VALUATION OF INVENTORY IS ON COST OR NET REALIZABLE VALUE WHICHEVER IS LOWER AND COST IS ASCERTAINED ON LIFO METHOD. IT IS ALSO STATED THERE THAT THE SAME IS ON THE SAME BASIS AS IN THE PRECEDING PREVIOUS YEAR BUT AS PER FORM 3CB FOR THE PRECEDING YEAR ENDED AS ON 31.03.2009 FOR A. Y. 2009 10 AVAILABLE ON PAGE 105 OF THE PAPER BOOK, THERE IS NO SUCH ADVERSE COMMENT OF THE AUDITORS AND IN VIEW OF THIS COMMENT OF THE AUDITORS IN FORM 3CB FOR A. Y. 2010 11 ON PAGE 147 THAT VALUATIO N IS ON THE SAME BASIS AS IN THE PRECEDING YEAR, THE STATEMENT OF THE AUDITORS B ECOME CONTRADICTORY & CONFLICTING TO EACH OTHER BECAUSE IN ONE LINE, THE AUDITORS SAY IN AY 2010 11 THAT THE VALUATION IS AS PER LIFO METHOD AND IN THE NEXT LINE, IT IS SAID THAT THE VALUATION IS ON THE SAME BASIS AS IN THE PRECEDING YEAR AND IN THE PRECEDING YEARS FORM 3CB AVAILABLE ON PAGE 105, THERE IS NO ADVERSE COMMENT. THIS IS ALSO SETTLED LAW THAT THE COMMENTS OF THE AUDITORS ARE NOT FINAL AND BINDING PARTICULARLY IF THE SAME IS NOT SUPPORTED BY EVIDEN CE. ON THE BASIS OF SUCH A CONTRADICTORY & CONFLICTING STATEMENT/ OBSERVATION OF THE AUDITORS, THE METHOD OF VALUATION OF CLOSING STOCK CONSISTENTLY ADOPTED BY THE ASSESSEE AND ACCEPTED BY THE DEPARTMENT IN EARLIER AND LATER YEARS CANNOT BE DISCARDED. 13. WE ALSO EXAMINE THE VERACITY OF THIS OBSERVATIO N OF CIT (A) IN PARA 13.14 OF HIS ORDER DATED 28.02.2014 THAT THIS IS A FINDING OF TH E AO THAT THE ENTIRE 22 CT. JEWELLERY INCLUDING THE UNACCOUNTED 22 CT. JEWELLER Y FOUND IN SEARCH CONDUCTED IN 1990 WAS VALUED AT RS. 270/- PER GRAM AND THE AS SESSEE DID NOT FURNISH THE OLD JEWELLERY DETAILS OR OBJECTED TO THE VALUATION OF THIS OLD JEWELLERY AT RS. 270/- PER GRAM. WE FIND THAT THE ASSESSMENT ORDER DATED 2 6.08.1992 FOR A. Y. 1990 91 IS AVAILABLE ON PAGES 730 TO 740 OF THE PAPER BO OK. IN THIS YEAR, THERE IS NO ADDITION IN RESPECT OF ANY UNDER VALUATION OF STOCK OR IN RESPECT OF ANY UNACCOUNTED 22 CT JEWELLERY FOUND IN SEARCH CARRIED OUT IN 1990. SIMILARLY. THE ITA NOS. 2534 TO 2539/BANG/2017 PAGE 47 OF 51 ASSESSMENT ORDER FOR A. Y. 1991 92 IS AVAILABLE O N PAGES 752 TO 754 OF THE PAPER BOOK. IN THIS YEAR ALSO, THERE IS NO ADDITION ON ACCOUNT OF ANY ALLEGED UNDER VALUATION OF CLOSING STOCK. AN ADDITION OF RS . 21,92,924/- IS MADE IN THIS YEAR BUT THIS ADDITION IS IN RESPECT OF GOLD INGOTS OF 24 CARRATS WEIGHING 2583 GRAMS AND GOLD ORNAMENTS OF 5409.43 GRAMS GROSS WEI GHT WITH NET WEIGHT OF 4955.380 GRAMS. TOTAL NET WEIGHT OF GOLD INGOTS AND GOLD ORNAMENTS WAS WORKED OUT AT 7538.380 GRAMS AND IT WAS HELD TO BE EXCESS STOCK FOUND IN SEARCH AND ALTHOUGH SOME EXPLANATION WAS GIVEN BY T HE ASSESSEE THAT THIS IS BELONGING TO A JOINT VENTURE BUT THAT EXPLANATION W AS NOT ACCEPTED AND ADDITION WAS MADE OF RS. 21,92/294/- BY VALUING SUCH EXCESS GOLD INGOTS AND GOLD ORNAMENTS OF 7538.380 GRAMS AND THIS RATE WORKS OUT TO RS. 291/- PER GRAM. BASED ON THIS ADDITION IN RESPECT OF SOME EXCESS IN GOT AND GOLD ORNAMENTS FOUND IN SEARCH IN 1990, IT CANNOT BE SAID OR ALLEG ED THAT THE ASSESSEE IS NOT HAVING ANY ANCIENT JEWELLERY PARTICULARLY WHEN NO A DDITION IS MADE IN THAT YEAR BY ALLEGING THAT THERE IS ANY UNDER VALUATION OF ST OCK IN SPITE OF THE ASSESSEES CLAIM THAT IN THAT YEAR ALSO, THE ANCIENT JEWELLERY WAS THERE AND IT WAS VALUED AT OLD RATES RANGING BETWEEN RS. 10 PER GRAM TO RS. 24 0/- PER GRAM AND IT IS NOT ESTABLISHED BY THE REVENUE THAT THIS STAND OF THE A SSESSEE IS INCORRECT. HENCE, WE FIND THAT THIS OBSERVATION OF THE AO AND CIT (A) IS NOT ACCEPTABLE. 14. IN THE LIGHT OF ABOVE ANALYSIS AND IN THE LIGHT OF THIS FACT THAT AS PER THE ASSESSMENT ORDERS FOR EARLIER YEARS AND LATER YEARS I.E. ASSESSMENT YEARS 2012-13 AND 2013-14 AVAILABLE ON PAGES 1026 TO 1032 AND 1056 TO 1059 OF PAPER BOOK RESPECTIVELY, NO ADDITION HAS BEEN MADE BY THE AO BY MAKING AN ALLEGATION THAT THERE IS ANY UNDER VALUATION OF CLO SING STOCK, IT IS SEEN THAT THE AO IS ALSO ACCEPTING THE VALUATION METHOD ADOPTED B Y ASSESSEE IN EARLIER YEARS AND LATER YEARS AND THEREFORE, IN VIEW OF OUR ANALY SIS ABOUT THE AOS MAIN OBJECTIONS, WE HOLD THAT IN VIEW OF THE PRINCIPLE O F CONSISTENCY, THE ADDITION MADE BY THE AO IN THE PRESENT YEARS IS NOT JUSTIFIE D AND THEREFORE, THE SAME IS NOT SUSTAINABLE AND WE DELETE THE SAME. THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE IN ALL THESE YEARS. 15. THE NEXT ISSUE TO BE DECIDED IS REGARDING THE A DDITION MADE BY THE AO IN VARIOUS YEARS BY ALLEGING THAT THERE IS SOME UNACCO UNTED SALES AND THIS ITA NOS. 2534 TO 2539/BANG/2017 PAGE 48 OF 51 ADDITION IS MADE BY THE AO TO THE EXTENT OF GROSS P ROFIT ON SUCH ALLEGED UNACCOUNTED SALES. IN THIS REGARD, THE WRITTEN SUB MISSIONS OF LD. AR OF ASSESSEE IS ALREADY REPRODUCED ABOVE AND AS PER THE ASSESSMENT ORDER ALSO, THE DDIT EXAMINED ONE MR. VENKATESH VAIDYANATHAN, V ICE PRESIDENT OF THE SOFTWARE SUPPLIER COMPANY INITIALLY ON 16.09.2010 A ND LATER ON 06.10.2010 AND THEREAFTER AGAIN ON 07/10/2010. THE ENTIRE ADDITIO N ON THE BASIS OF ALLEGED UNACCOUNTED SALES IS BASED ON THESE THREE STATEMENT S OF THIS WITNESS MR. VENKATESH VAIDYANATHAN, VICE PRESIDENT OF THE SOFTW ARE SUPPLIER COMPANY. AS PER PARA 5.11 OF THE WRITTEN SUBMISSIONS REPRODUCED ABOVE, THIS IS THE CLAIM OF THE ASSESSEE THAT ALL THESE THREE STATEMENTS OF THE WITNESS WERE RECORDED BEHIND THE BACK OF THE ASSESSEE AND THERE WAS NO WI TNESS PRESENT AT THE TIME OF RECORDING THE STATEMENT AND THEREFORE, THIS STAT EMENT CANNOT BE RELIED UPON AT ALL. IT IS ALSO SUBMITTED THAT NO OPPORTUNITY W AS PROVIDED TO THE ASSESSEE TO CROSS EXAMINE THIS WITNESS ON THE BASIS OF WHOSE ST ATEMENT, ADVERSE INFERENCE WERE DRAWN AGAINST THE ASSESSEE. IT IS SUBMITTED I N THE SAME PARA THAT FOR THIS REASON, THESE STATEMENTS CANNOT BE RELIED UPON FOR DRAWING ANY ADVERSE INFERENCE AGAINST THE ASSESSEE AND IN SUPPORT OF TH IS CONTENTION, RELIANCE HAS BEEN PLACED ON JUDGMENTS OF HONBLE APEX COURT REND ERED IN THE CASE OF KISHINCHAND CHELLARAM V CIT AS REPORTED IN 125 ITR 713 AND IN THE CASE OF DAKESHWARI COTTON MILLS AS REPORTED IN 26 I TR 775 AND ALSO IN THE CASE OF SURAJMAL MOHA & CO., AS REPORTED IN 26 ITR 1. RELIANCE HAS ALSO BEEN PLACED ON ONE TRIBUNAL ORDER OF SPECIAL B ENCH RENDERED IN THE CASE OF COLONISERS VS. ACIT AS REPORTED IN 41 ITD 57 AND ON ANOTHER JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF ANDAM AN TIMBER INDUSTRIES REPORTED IN 127 DTR 241. WE FIND THAT I N THE CASE OF ANDAMAN TIMBER INDUSTRIES (SUPRA), IT WAS HELD BY HONBLE A PEX COURT THAT NOT ALLOWING THE ASSESSEE TO CROSS EXAMINE THE WITNESS BY THE ADJUDICATING AUTHORITY THOUGH THE STATEMENTS OF THOSE WITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE OR DER NULLITY INASMUCH AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUST ICE. SIMILARLY IN THE CASE OF KISHINCHAND CHELLARAM V CIT (SUPRA) ALSO, IT WAS HE LD BY HONBLE APEX COURT THAT IF THE COPY OF LETTER ADDRESSED TO BANK MANAGER IS NOT SUPPLIED TO THE ASSESSEE, IT COULD NOT BE USED AGAINST ASSESSEE AND SINCE MANAGER WAS ALSO ITA NOS. 2534 TO 2539/BANG/2017 PAGE 49 OF 51 NOT EXAMINED BY DEPARTMENT THAT THE AMOUNT BELONGED TO ASSESSEE. SIMILARLY IN THE CASE OF COLONISERS VS. ACIT (SUPRA), IT WAS HELD BY SPECIAL BENCH OF THE TRIBUNAL THAT THE RULES OF NATURAL JUSTICE OPER ATE AS IMPLIED MANDATORY REQUIREMENT, NON-OBSERVANCE OF WHICH AMOUNTS TO ARB ITRARINESS AND DISCRIMINATION. IT WAS ALSO HELD THAT THE PRINCIPL ES OF NATURAL JUSTICE HAVE BEEN ELEVATED TO THE STATUS OF FUNDAMENTAL RIGHTS GUARAN TEED IN THE CONSTITUTION OF INDIA. IT IS ALSO HELD THAT A QUASI-JUDICIAL OR AD MINISTRATIVE DECISION RENDERED OR AN ORDER MADE IN VIOLATION OF THE RULE OF AUDI ALTE RAM PARTERN IS NULL AND VOID AND THE ORDER MADE IN SUCH A CASE CAN BE STRUCK DOW N AS INVALID ON THAT SCORE ALONE. AS PER THE ORDER OF AUTHORITIES BELOW, IT I S NOT COMING OUT THAT AN OPPORTUNITY WAS GIVEN BY THE DEPARTMENT TO THE ASSE SSEE TO CROSS EXAMINE MR. VENKATESH VAIDYANATHAN, THE VICE PRESIDENT OF M/S. JILABA SOFTWARE SERVICES PVT. LTD., ON THE BASIS OF WHOSE STATEMENT, ADVERSE INFERENCE WAS DRAWN AGAINST THE ASSESSEE. HENCE AS PER THESE JUDICIAL PRONOUNCEMENTS NOTED ABOVE, THE ADDITION MADE BY THE AO ON THE BASIS OF THESE THREE STATEMENTS CANNOT BE SUSTAINED BECAUSE OF VIOLATION OF RULES O F NATURAL JUSTICE. 16. MOREOVER IN PARA 6.6 OF THE ASSESSMENT ORDER FO R ASSESSMENT YEAR 2005-06, IT IS NOTED BY THE AO THAT THE SAID WITNESS MR. VENKAT ESH VAIDYANATHAN HAS STATED THAT THE ITEMS WERE REMOVED FROM COUNTER EIT HER FOR SALE OR ON ACCOUNT OF ANY OTHER REASON WITHOUT COLLECTING TAX THEREON. IN THE SAME PARA, IT IS ALSO NOTED BY THE AO THAT THE ASSESSEE HAS GIVEN VARIOUS REASONS FOR REMOVAL OF TAG OR TAGGED ITEMS AND THE ASSESSEE ALSO CONTENDED THAT THE RECORDS DO NOT PERTAIN TO SALES AND INSTEAD, THEY PERTAIN TO ITEMS ISSUED FOR REPAIR OR HALLMARKING. BUT THIS EXPLANATION OF THE ASSESSEE WAS REJECTED BY THE AO BY STATING THAT THE SUBMISSION MADE BY ASSESSEE CANNOT BE ACCEPTED AS DEFINITE EVIDENCE. IN THIS REGARD. IT IS A SUBMISSION OF TH E LD. AR OF ASSESSEE IN PARA 5.14 OF WRITTEN SUBMISSIONS AS REPRODUCED ABOVE THA T AS PER THE REPLY DATED 12/11/2010 AVAILABLE ON PAGES 221 TO 300 OF THE PAP ER BOOK NO. II, THE ASSESSEE ENCLOSED VOLUMINOUS RECORDS FROM HALLMARKI NG REGISTER AND OTHER RECORDS MAINTAINED TO RECORD THE MOVEMENT OF THE ST OCK IN RESPECT OF CERTAIN LOG TABLES FOR THESE YEARS. AS PER PARA 5.14 OF TH E WRITTEN SUBMISSIONS REPRODUCED ABOVE, IT IS EXPLAINED BY THE ASSESSEE T HAT 1794 ENTRIES ARE ITA NOS. 2534 TO 2539/BANG/2017 PAGE 50 OF 51 EXPLAINED AND IT HAS BEEN ESTABLISHED THAT THESE EN TRIES PERTAIN TO EITHER REMOVAL AND REPLACEMENT AFTER RETAGGING, REMOVAL TO SAFE AS DAMAGED, REMOVAL FOR EXCHANGE FOR SUPPLIERS ETC. SOME SPECI FIC EXAMPLES ARE ALSO GIVEN IN PARA 5.16 OF WRITTEN SUBMISSIONS REPRODUCED ABOV E AS PER WHICH DIAMOND NECKLACE WITH WEIGHT 79.490 GRAMS WITH 53.48 CARAT DIAMOND BEARING TAG NO. 116-C-779 WAS CONSIDERED AS UNACCOUNTED SALES BUT T HE SAME ITEM WAS GIVEN THE NEW TAG NO. 116-C-1305 AND THIS HAS COME INTO T HE COUNTER ON THE SAME DATE I.E. 27.07.2010 WITH THE GROSS WEIGHT OF 79.49 0 GRAMS OF GOLD AND 53.48 CARATS OF DIAMONDS WITH THE REVISED PRICES. HE ALS O EXPLAINED THAT THE ABOVE ENTRY REFLECTED IN THE 'RECEIPT VIEW' OF THE COUNTE R WHICH IS PLACED AT PAGE 800 OF PAPER BOOK. TWO MORE EXAMPLES ARE GIVEN REGARDI NG TAG NO. 118-C-5584 REPLACED BY 118-C-5809 AND TAG NO. 117-A-344 REPLAC ED BY TAG NO. 117-C- 3409. SINCE THE AO HAS ALSO NOTED IN PARA 6.6 OF T HE ASSESSMENT ORDER THAT AS PER THE STATEMENT OF THE WITNESS MR. VENKATESH VAID YANATHAN, THE ITEMS WERE REMOVED FROM COUNTER EITHER FOR SALE OR ON ACCOUNT OF ANY OTHER REASON, IT COMES OUT THAT THE REMOVAL IS NOT DEFINITELY ON ACC OUNT OF SALE EVEN AS PER THE STATEMENT OF THE WITNESS MR. VENKATESH VAIDYANATHAN . REMOVAL FROM COUNTER CAN BE FOR OTHER REASONS AND IT IS ESTABLISHED BY T HE ASSESSEE AT LEAST IN RESPECT OF 1794 ENTRIES AS PER WRITTEN SUBMISSIONS IN WHICH NO DEFECT COULD BE POINTED OUT BY THE LEARNED DR OF THE REVENUE. CONS IDERING ALL THESE FACTS AND THE LEGAL POSITION THAT BEFORE DRAWING ANY ADVERSE INFERENCE AGAINST THE ASSESSEE ON THE BASIS OF STATEMENT OF A WITNESS WIT HOUT PROVIDING OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE THE WITNESS, THE A DDITION MADE IS NOT SUSTAINABLE, WE HOLD THAT THIS ADDITION MADE BY THE AO IS ALSO NOT JUSTIFIED AND THEREFORE, WE DELETE THE SAME. THIS ISSUE IS ALSO DECIDED IN FAVOUR OF THE ASSESSEE. AS PER ABOVE DISCUSSION, WE HAVE FOUND T HAT IN RESPECT OF BOTH THE ISSUES ON MERIT, THE ASSESSEE SUCCEEDS AND THEREFOR E, THE REMAINING GROUNDS IN RESPECT OF BENEFIT OF TELESCOPING ETC. DO NOT CA LL FOR ANY ADJUDICATION. ITA NOS. 2534 TO 2539/BANG/2017 PAGE 51 OF 51 17. IN THE RESULT, ALL THESE SIX APPEALS OF ASSESSE E IN ITA NOS. 2534 TO 2539/BANG/2017 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DA TE MENTIONED ON THE CAPTION PAGE. SD/- SD/- (LALIET KUMAR) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 17 TH AUGUST, 2018. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.