CHUNNILAL R. JAIN, MUMBAI V. IOT 23(2)(2), MUMBAI

ITA 2740/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84354 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-11-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 23-04-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V K BORA
• Assessee Lawyers: DEVENDRA H JAIN
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUM BAI , , BEFORE SHRI SANJAY ARORA, AM AND SHRI AMIT SHUKLA, JM ./ I.T.A. NO. 2740/MUM/2012 ( / ASSESSMENT YEAR: 2008-09) CHUNNILAL R. JAIN PROP. OF RISHABH JEWELLERS, SHOP NO. 4, BOKDE BUILDING, STATION ROAD, MULUND (W), MUMBAI-400 080 / VS. INCOME TAX OFFICER-23(2)(2), ROOM NO. 203, PRATYAKSHAKAR BHAVAN, BKC, BANDRA (E), MUMBAI-400 051 ! ./' ./PAN/GIR NO. ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) !# & ' / APPELLANT BY : SHRI DEVENDRA H. JAIN $%!# & ' / RESPONDENT BY : SHRI V. K. BORA () * & + / DATE OF HEARING : 13.11.2014 ,-. & + / DATE OF PRONOUNCEMENT : 26.11.2014 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-11, MUMBAI (CIT(A) FOR SH ORT) DATED 24.01.2012, DISMISSING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S .143(3) R/W S. 147 OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMEN T YEAR (A.Y.) 2008-09 VIDE ORDER DATED 13.12.2010. 2. THE ONLY ISSUE ARISING IN THIS APPEAL IS THE MAI NTAINABILITY IN LAW OF THE ADDITION IN THE SUM OF RS.8,86,344/- ON ACCOUNT OF UNEXPLAINED JEWELLERY WITH THE ASSESSEE. 2 ITA NO. 2740/MUM/2012 (A.Y. 2008-09) CHUNNILAL R. JAIN VS. ITO 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E, A JEWELER, WAS SUBJECT TO SURVEY ACTION U/S.133A AT ITS BUSINESS PREMISES ON 03.03.2 009. THE ASSESSEE, AS PER ITS PAST PRACTICE, I.E., WHEN THE GOLD CONTROL ACT WAS IN FO RCE, MAINTAINS SEPARATE STOCK REGISTERS FOR GOLD BARS AND GOLD ORNAMENTS, CHRISTENED G-11 AND G-12 RESPECTIVELY. WHILE THE CLOSING BALANCE (OF GOLD ORNAMENTS) IN G-12 REGISTE R AS AT 31.03.2008 WAS AT 9814.62 GRAMS , THE G-12 REGISTER FOR THE FOLLOWING YEAR BORE AN OPENING BALANCE (I.E., AS ON 01.04.2008) OF 10,771.32 GRAMS . THERE WAS, THUS, AN UNEXPLAINED INCREASE OF 956.7 0 GRAMS IN THE ASSESSEES RECORDS. DURING THE ASSESSMENT P ROCEEDINGS, INITIATED VIDE NOTICE U/S.148 DATED 04.11.2009, THE ASSESSEE FURNISHED AN EXPLANATION VIDE LETTER DATED 28.10.2010. IT WAS EXPLAINED THAT BESIDES ACTING AS A JEWELER, IT ALSO CARRIED OUT THE WORK OF REPAIRS AND MAINTENANCE, ETC., WHICH WAS IN TRAD E PARLANCE CALLED GHAD-MOD KA KAM OR REMAKING. CUSTOMERS LEAVE THEIR JEWELLERY AT IT S PREMISES, AND COLLECT IT SUBSEQUENTLY, I.E., AFTER THE WORK IS CARRIED OUT, FOR WHICH THEY ARE CHARGED SEPARATELY, AND TOWARD WHICH THE LD. AUTHORIZED REPRESENTATIVE (AR) WOULD DURING HEARING TAKE US THROUGH THE PROFIT AND LOSS STATEMENT FOR THE FINANCIAL YEARS (F.YS.) 2006-07 AND 2007-08 (PB-II, PGS. 179- 180 ), BEARING CHARGES FOR REPAIR AND POLISHING WORK. T HE EXCESS JEWELLERY, IT WAS EXPLAINED, FELL UNDER THIS CATEGORY. THE DETAILS OF THE FIVE CUSTOMERS TO WHOM THIS JEWELLERY BELONGED, ALONG WITH THEIR CONFIRMATIONS, WAS ALSO FURNISHED DURING THE ASSESSMENT PROCEEDINGS. IN VIEW OF THE ASSESSING OF FICER (A.O.), THERE OUGHT TO HAVE BEEN, IN THAT CASE, RECEIPT OF JEWELLERY FROM THE C USTOMERS ON THE DEBIT SIDE, AS WELL AS, UPON RETURN THERETO AFTER REMAKING/CARRYING OUT THE JOB WORK, A N ENTRY ON THE ISSUE (CREDIT) OF THE G-12 REGISTER. NO SUCH ENTRIES, MUC H LESS THE NAMES OF THE CUSTOMERS, WERE FOUND IN THE REGISTER (REFER PARA 6 OF THE ASSESSME NT ORDER). THE ADDITION FOR THE VALUE OF THIS DIFFERENCE WAS ACCORDINGLY MADE. THE LD. CIT(A ), IN APPEAL, AGAIN FOUND THE ASSESSEES CONTENTION AS NOT TENABLE. THE ASSESSEE HAD NOT BEEN ABLE TO EXHIBIT THAT THE RECEIPT AND ISSUE OF JEWELLERY RECEIVED FROM THE CU STOMERS, I.E., FOR REPAIRS, WAS BEING RECORDED IN THE STOCK REGISTER. THE ASSESSEE HAD AL SO FAILED TO SHOW THAT THE PERSONS FROM WHOM THE JEWELLERY WAS STATED TO HAVE BEEN RECEIVED , WERE ITS CUSTOMERS (REFER PARAS 2.1 3 ITA NO. 2740/MUM/2012 (A.Y. 2008-09) CHUNNILAL R. JAIN VS. ITO & 2.2 OF THE IMPUGNED ORDER). THE ADDITION BEING CO NFIRMED THUS, THE ASSESSEE IS IN SECOND APPEAL. 4. BEFORE US, THE ASSESSEES CASE WAS THAT THE IMPU GNED JEWELLERY, HAVING BEEN RECEIVED AFTER THE CLOSING HOURS ON 31.03.2008, WAS THEREFORE OMITTED TO BE RECORDED IN THE G-12 REGISTER ON THAT DATE. HOWEVER, HAVING BEE N ALREADY RECEIVED ON 31.03.2008, THE QUANTITY STOOD ADDED, WHILE RECORDING THE OPENING B ALANCE OF THE JEWELLERY ON 01.04.2008. THE ASSESSEE HAD ALSO SUBMITTED THE REP AIRS/POLISHING INVOICES ISSUED TO THE CUSTOMERS FOR A RECEIPT (PB-I, PGS.17-21 ). THE REVENUES CHARGE THAT NO ENTRIES WERE MADE IN G-12 REGISTER IS MISCONCEIVED. IF THE ENTRI ES HAD BEEN MADE, THERE WOULD BE NO ISSUE AT ALL. IT IS ONLY AS THE ENTRIES WERE ADMITT EDLY OMITTED TO HAVE BEEN MADE, THAT THE ASSESSEE IS REQUIRED TO ESTABLISH THE SOURCE OF THE GOLD ORNAMENTS AS REFLECTED IN ITS STOCK REGISTER (ON THE OPENING DAY OF THE FOLLOWING YEAR) . THE ASSESSEE HAD, FURTHER, DULY FURNISHED THE NAMES AND ADDRESSES OF THE CUSTOMERS WHO HAD DEPOSITED THE ORNAMENTS WITH IT FOR JOB WORK, ALONG WITH THEIR PAN. THE REV ENUE DID NOT CARRY OUT ANY FURTHER ENQUIRY IN THE MATTER, WHICH ONLY WOULD ENABLE IT T O CONFIRM THE VALIDITY OR OTHERWISE OF THE ASSESSEES EXPLANATION, WHICH HAS BEEN CONSISTE NT THROUGHOUT, BEING FURNISHED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS ITSELF. TO WARD THIS, THE LD. AR PLACED RELIANCE ON THE DECISION IN THE CASE OF MUNNALAL MURLIDHAR VS. CIT [1971] 79 ITR 540 (ALL.), IN- AS-MUCH AS THERE WAS THEREBY A DENIAL OF OPPORTUNIT Y TO THE ASSESSEE TO PLACE OR ESTABLISH EVIDENCE. UPON BEING ASKED BY THE BENCH DURING HEAR ING TO EXHIBIT THE RECEIPT OF THE CHARGES FROM THESE CUSTOMERS SUBSEQUENTLY, I.E., UP ON EXECUTING THE REPAIRS, HE STATED THAT THESE WERE, BEING FOR POLISHING, NOMINAL (I.E., RS. 465), AND RECEIVED, AS PER PRACTICE, ON 31.03.2008 ITSELF. FURTHER, WITH REGARD TO THE ENTR Y/S ON THE ISSUE SIDE OF G-12 REGISTER (FOR F.Y. 2008-09) ON THEIR RETURN TO THE CUSTOMERS , THE SAME CANNOT BE EXHIBITED AS THE SAID REGISTER STOOD IMPOUNDED AT THE TIME OF SURVEY , AND HAD NOT BEEN RECEIVED BACK SINCE. TOWARD THIS, HE WOULD DRAW OUR ATTENTION TO, FIRSTLY, THE INVENTORY OF THE DOCUMENTS IMPOUNDED, WHICH INCLUDED G-11 AND G-12 REGISTERS F OR F.Y. 2008-09 (AT SR. NOS. 3 & 4 ITA NO. 2740/MUM/2012 (A.Y. 2008-09) CHUNNILAL R. JAIN VS. ITO 4/PB-II, PGS. 13 & 14) AS WELL AS THE LETTER DATED 03.11.2014 FROM THE A.O. CLARIFYING THAT THE RELEVANT REGISTER WAS NOT IN HIS POSSESSION (PB -II, PG. 20). THE LD. DEPARTMENTAL REPRESENTATIVE (DR), ON THE OT HER HAND, WOULD SUBMIT THAT THE ASSESSEE HAD NOT REBUTTED THE DEFINITE FINDINGS OF FACT ISSUED BY THE AUTHORITIES BELOW, SO THAT NO CASE FOR INTERFERENCE IS MADE OUT. 5. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE ASSESSEES CASE IS THAT IT IS IN RESPECT OF THE RELEVANT GOODS, ONLY A BAILEE (AND NOT THE OWNER). THERE HAS BEEN, TO ITS DETRIMENT, LACK OF PROPER ENQUIRY BY THE REVENUE, DESPITE IT HAVING FURNISHED THE PARTICULARS OF THE DEPOSITOR-CUSTOMERS DURING THE ASSESSMENT PROCEEDINGS. AND, FINALLY, OF BEING ESTO PPED FROM PRODUCING THE EVIDENCE IN- AS-MUCH AS THE RELEVANT REGISTER IS NOT WITH THE RE VENUE, SO THAT IT STANDS PREJUDICED. THE REVENUES CASE, ON THE OTHER HAND, IS THAT THE ASSE SSEE HAS NOT BEEN ABLE TO SATISFACTORILY EXPLAIN THE ADMITTED EXCESS STOCK WITH IT, I.E., WI TH REFERENCE TO THE BOOK STOCK AS ON 31.03.2008, IN-AS-MUCH AS THE OPENING STOCK AS ON 0 1.04.2008 IS AT AN EXCESS. IN OUR CLEAR VIEW, IT IS NOT THE REVENUES, BUT THE ASSESSEES CASE WHICH IS MISCONCEIVED; RATHER, STANDS DISPROVED FROM ITS OWN RECORDS. TO BEGIN WITH, THE GENESIS OF ITS EXPLANATION: THAT FIVE CUSTOMERS LANDED AT I TS PREMISES AFTER THE CLOSING HOURS OF 31.03.2008, AND HANDED OVER THE IMPUGNED JEWELLERY, IS WHOLLY UNCONVINCING; MORE SO, GIVEN THE NATURE AND VALUE OF THE GOODS. WHY WOULD THEY DO SO ? THERE IS NO EXPLANATION FOR THE URGENCY IN DEPOSITING THE GOODS ON THEIR PA RT, AS WELL AS IN ACCEPTING THE SAME BY THE ASSESSEE, BEING ADMITTEDLY AFTER THE CLOSING HO URS, SO THAT THEY COULD NOT AWAIT BEING RECEIPTED THE FOLLOWING DAY. THIS BECOMES ALL THE M ORE SO, GIVEN THE TRIVIAL NATURE OF THE WORK FOR WHICH THE GOODS WERE BEING DEPOSITED. THE DEPOSITORS HAVE, IN FACT, AS OBSERVED BY THE LD. CIT(A), NOT EVEN BEEN SHOWN TO BE THE AS SESSEES CUSTOMERS. RATHER, GIVEN THAT THESE WERE DULY WEIGHED AND RECEIPTED, COULD IT AT ALL BE SAID THAT THEY WERE DELIVERED AFTER THE CLOSING HOURS? AND, SURPRISINGLY, AS EXPL AINED TO US BY THE LD. AR, EVEN CHARGES RECEIVED IN CASH IMMEDIATELY. THE DESCRIPTION ON TH E INVOICE IS SKETCHY AND WOULD NOT ENABLE THE IDENTIFICATION OF THE GOODS. IN FACT, TH E SAID INVOICE/S CANNOT BE SAID TO BE A 5 ITA NO. 2740/MUM/2012 (A.Y. 2008-09) CHUNNILAL R. JAIN VS. ITO RECEIPT OR EVEN IOU, SO THAT IT MAY ENABLE THE CUST OMER TO CLAIM BACK THE GOODS SUBSEQUENTLY. THEN, AGAIN, WHY THE RECEIPTS WERE NOT ENTERED IN T HE G-12 REGISTER, EITHER ON 31.03.2008 OR ON 01.04.2008 ? THERE IS NO EXPLANATION FOR NOT DOING SO. NOT ONL Y ARE THESE GOODS NOT ENTERED IN 31.03.2008, BUT ALSO NOT ON 01.04.2008. IF SOME GOODS HAD BEEN RECEIVED AFTER THE BOOK KEEPER HAD LEFT FOR TH E DAY, THEY WOULD ONLY STAND TO BE ENTERED IN THE RECORDS/REGISTER ON THE FOLLOWING DA Y. IT IS NOBODYS CASE THAT THE STOCK REGISTER IS MAINTAINED ON A REAL TIME BASIS. THE STOCK REGISTER, THUS, DOES NOT BEAR ANY REFERENCE TO THE ALLEGED RECEIPTS . THEN, AGAIN, CASH IS SURPRISINGLY STATED TO HAVE BEEN RECEIVED ON 31.03.2008 ITSELF AS IF THE ASSESSEE DID NOT HAVE THE CONFIDENCE THAT THE CUSTOMERS WOULD GO BACK TO COLLECT THEIR JEWELLERY! THE ASSESSEE HAS ALSO NOWHERE SHOWN THAT THE CHARGES WERE ENTERED IN ITS ACCOUNTS ON 31 .03.2008. IN FACT, A PERUSAL OF THE STOCK REGISTER (G-12) FOR THE RELEVANT YEAR DURING HEARIN G (PB-II, PGS. 21-178 ) REVEALED NOT A SINGLE INSTANCE OF RECEIPT OF GOODS FOR JOB WORK, I .E., DURING THE WHOLE YEAR. THE LD. AR WOULD EXPLAIN THIS TO BE ONLY INCIDENTAL; REPAIRS/P OLISHING BEING ONLY AN ANCILLARY ACTIVITY, SO THAT SUCH TRANSACTIONS ARE FEW AND FAR IN BETWEEN AND, THEREFORE, IT WAS COINCIDENTAL THAT THE GOODS WERE RECEIVED THERE-FOR DURING THE YEAR ONLY ON (THE LATE HOURS OF) 31.03.2008, THE LAST DAY OF THE YEAR. HE CONVEN IENTLY FORGETS OR OMITS THAT THIS IS IN COMPLETE CONTRADICTION WITH THE ASSESSEES OWN ACCO UNTS, WHICH REFLECT REPAIRS AND POLISHING CHARGES FOR THE YEAR AT RS.81,325/- . GIVEN THE NOMINALITY OF THE CHARGES, THIS WOULD TRANSLATE INTO HUNDREDS (IF NOT THOUSANDS) OF TRANSACTIONS. IN FACT, THIS IS PRECISELY WHAT THE LD. CIT(A) OBSERVES WHEN HE STATES THAT TH E ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH A REGULAR PRACTICE OF RECORDING RECEIPT O F JEWELLERY ON JOB WORK BASIS IN HIS STOCK REGISTER. THIS FACT ALSO GETS DEMONSTRATED DU RING SURVEY PROCEEDINGS, WHEN THE DIFFERENCE IN PHYSICAL AND BOOK STOCK WAS FOUND, WH ICH IS EXPLAINED AS ON ACCOUNT OF JEWELLERY RECEIVED FROM CUSTOMERS FOR REPAIRS/POLIS HING (REFER STATEMENT OF FACTS BEFORE THE LD. CIT(A) IN FORM 35). IF SUCH JEWELLERY WERE TO BE RECORDED IN THE STOCK REGISTER, THERE IS NO QUESTION OF ANY DIFFERENCE BETWEEN THE BOOK AND PHYSICAL STOCK. AS SUCH, WHILE THE ASSESSEE, AS ITS FINANCIAL BOOKS REVEAL, DOES RECEIVE JEWELLERY FROM CUSTOMERS 6 ITA NO. 2740/MUM/2012 (A.Y. 2008-09) CHUNNILAL R. JAIN VS. ITO ON JOB WORK BASIS, THE SAME IS NOT ENTERED IN THE S TOCK RECORD/S. THIS IS ALSO THE CONCURRENT FINDING OF THE AUTHORITIES BELOW; THE A. O. ALSO OBSERVING ABSENCE OF ENTRIES ON THE RECEIPT AND ISSUE OF THE STOCK REGISTER (G-12). THE ASSESSEES, THEREFORE, SEEKING TO EXPLAIN THE ADMITTED BALANCE IN ITS STOCK REGISTER WITH REFERENCE TO THE RECEIPT OF ORNAMENT FROM CUSTOMERS, IS WITHOUT ANY BASIS. FURTHER ON, THE ASSESSEE FAILING TO CORRELATE ITS S TOCK RECORD WITH THE RECEIPT FROM (OR ISSUE TO) CUSTOMERS, THE NON-ENQUIRY BY THE REV ENUE THEREWITH WOULD BE TO NO CONSEQUENCE. LIKEWISE, THE NON-PRODUCTION OF THE ST OCK REGISTER FOR THE FOLLOWING YEAR, WHICH IS ATTRIBUTED TO THE REVENUE, WOULD BE TO NO AVAIL. WHY, EVEN AS OBSERVED DURING HEARING, THE ASSESSEE HAS NEITHER BEFORE THE ASSESS ING OR THE FIRST APPELLATE AUTHORITY CONTENDED OF, NOR EVEN SHOWN TO HAVE MADE AN APPLIC ATION TO THE REVENUE FOR, PRODUCTION OF THE SAME TO ENABLE VERIFICATION OF THE ENTRIES R ELATING TO THE RETURN OF ORNAMENTS BACK TO THE CUSTOMERS . THIS, DESPITE THE A.O. ISSUING A DEFINITE FINDING OF THERE BEING NO ENTRIES ON THE RECEIPT AND ISSUE SIDE OF THE STOCK REGISTER. WE HAVE IN FACT, IN AGREEMENT WITH THAT BY THE AUTHORITIES BELOW, ISSUED A CLEAR FINDING OF THE JOB WORK JEWELLERY BEING NOT RECORDED IN THE STOCK REGISTERS . THE RELIANCE ON THE DECISION IN MUNNALAL MURLIDHAR (SUPRA) WOULD THEREFORE BE OF NO ASSISTANCE. THERE IS THOUGH NO QUARREL ON PRINCIPLE, AND IT GOES WITHOUT SAYING THAT ABSENCE OF ENQUIRY BY T HE A.O., IN THE FACE OF SOME VALID OR CORROBORATIVE EVIDENCE LED BY THE ASSESSEE, WOULD O NLY BE TO THE REVENUES OWN PERIL OR DETRIMENT. THE ISSUE BOILS DOWN TO THE APPLICABILIT Y OF THE PRINCIPLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. IN THE FACTS OF THAT CAS E, THE ASSESSEES REQUEST, WHICH WAS IGNORED, WAS TO THE ASSESSING AUTHORITY. THE DECISI ON IN RAM KUMAR JALAN VS. CIT [1976] 105 ITR 331 (BOM), ALSO RELIED UPON BY THE ASSESSEE , IN FACT, FAVOURS THE REVENUE. THE HONBLE HIGH COURT IN THAT CASE, WHILE APPROVING TH E PRINCIPLES LAID DOWN IN MUNNALAL MURLIDHAR (SUPRA), FOUND THEM TO BE INAPPLICABLE TO THE CASE AT HAND, HOLDING THAT THERE WAS NO CASE FOR ISSUE OF FRESH SUMMONS BY THE A.O., AS REQUESTED FOR BY THE ASSESSEE. NO CASE, LIKEWISE, FOR AN ENQUIRY BY THE A.O. WITH THE CUSTOMERS STANDS MADE OUT IN THE PRESENT CASE. 7 ITA NO. 2740/MUM/2012 (A.Y. 2008-09) CHUNNILAL R. JAIN VS. ITO IN VIEW OF THE FOREGOING, WE HAVE NO HESITATION IN UPHOLDING THE IMPUGNED ORDER. WE DECIDE ACCORDINGLY. 6. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSE D. /. 0 (1 2/ & / & 34 ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 26, 2014 SD/- SD/- (AMIT SHUKLA) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER 5* MUMBAI; 6( DATED : 26.11.2014 ).(../ ROSHANI , SR. PS !' # $%&' (!'% / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. 9): ; $(<1 , + <1. , 5* / DR, ITAT, MUMBAI 6. ; >2 ? * / GUARD FILE !' / BY ORDER, )/* + (DY./ASSTT. REGISTRAR) , 5* / ITAT, MUMBAI