DCIT, New Delhi V. M/s. Arora Jewellers Pvt. Ltd., New Delhi

ITA 3188/DEL/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6828 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 26-07-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 13-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI JAIN
• Assessee Lawyers: SUMANGALA SAXENA
• Keywords: Search and seizure
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : A : NEW DELHI BEFORE SHRI R.S. SYAL, AM & MS SUCHITRA KAMBLE, JM ITA NO.3188/DEL/2011 ASSESSMENT YEAR : 2006-07 DCIT, CENTRAL CIRCLE-12, ARA CENTRE, JHANDEWALAN EXTENSION, NEW DELHI. VS. ARORA JEWELLERS PVT. LTD., L-9, VIJAY CHOWK, LAXMI NAGAR, DELHI. PAN: AAECA2119B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJIV SAXENA, ADVOCATE & MS SUMANGALA SAXENA, ADVOCATE DEPARTMENT BY : SHRI RAVI JAIN, CIT, DR DATE OF HEARING : 26.07.2016 DATE OF PRONOUNCEMENT : 28.07.2016 ORDER PER R.S. SYAL, AM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER PASSED BY THE CIT(A) ON 31.3.2011 IN RELATION TO TH E ASSESSMENT YEAR 2006-07. ITA NO.3188/DEL/2011 2 2. THE FIRST ISSUE IS AGAINST THE DELETION OF ADDIT ION OF RS.8,21,433/- 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT A SEARCH AND SEIZURE OPERATION U/S 132 OF THE ACT WAS CARRIED OUT ON 9.1 2.2005 AT THE BUSINESS PREMISES OF THE ASSESSEE. RETURN FOR THE INSTANT YE AR WAS FILED ON 28.11.2006 DECLARING LOSS OF RS.4,33,236. DURING THE COURSE OF SEARCH, ON 9.12.2005, CASH OF RS.8,21,435/- WAS FOUND, OUT OF WHICH A SUM OF RS.8 LAC WAS SEIZED. THE ASSESSEE WAS CALLED UPON TO EXPLAIN THE SOURCE OF CASH FOUND AMOUNTING TO RS.8,21,435/- ALONG WITH THE COMPLETE DETAILS WITH DOCUMENTARY EVIDENCE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSEE FURNISHED ITS REPLY VIDE LETTER DATED 12.12.2007 EXPLAINING ITS POSITION. THE AO MADE AD DITION FOR RS.8,21,435/- BY NOTICING THAT THE ASSESSEE DID NOT PRODUCE THE BOOKS OF ACCOUNT AT THE TIME OF SEARCH TO JUSTIFY THE AVAILA BILITY OF THE AFORESAID CASH AS PER CASH BOOK. THE LD. CIT(A) GOT CONVINCE D WITH THE ASSESSEES SUBMISSIONS AND ORDERED FOR THE DELETION OF ADDITIO N. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE PRODU CED ITS BOOKS OF ITA NO.3188/DEL/2011 3 ACCOUNT BEFORE THE AO DURING THE COURSE OF ASSESSME NT PROCEEDINGS. SUCH BOOKS OF ACCOUNT INDICATED CASH BALANCE OF RS. 8,21,435/- ON THE DATE OF SEARCH. THE AO MADE THE ADDITION DISREGARD ING BOOKS OF ACCOUNT PLACED BEFORE HIM ON THE PREMISE THAT NO BO OKS OF ACCOUNT WERE FOUND AT THE TIME OF SEARCH. WE ARE UNABLE TO APPR ECIATE THIS VIEW POINT OF THE AO. AS THE ASSESSEE PRODUCED BOOKS OF ACCOU NT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT BECAME THE DUTY OF TH E AO TO EXAMINE SUCH BOOKS OF ACCOUNT AND SHOW HOW THESE WERE NOT A CCEPTABLE. IT IS OBSERVED THAT THE AO HAS RECORDED A FINDING IN THE ASSESSMENT ORDER THAT THE BOOKS OF ACCOUNT WERE PRODUCED AND EXAMINED BY HIM. IN VIEW OF THE FACT THAT THE CASH BOOK OF THE ASSESSEE HAD CAS H BALANCE OF RS.8,21,435/- EQUAL TO THE AMOUNT FOUND AT THE TIME OF SEARCH, WE COUNTENANCE THE OPINION OF THE LD. CIT(A) IN DELETI NG THIS ADDITION. THIS GROUND IS NOT ALLOWED. 5. THE NEXT GROUND IS AGAINST THE DELETION OF ADDIT ION OF RS.92,01,488/- MADE ON ACCOUNT OF UNEXPLAINED STOCK OF GOLD JEWELLERY FOUND DURING THE COURSE OF SEARCH. GOLD ORNAMENTS WORTH ITA NO.3188/DEL/2011 4 RS.92,01,486/- WERE FOUND AT THE TIME OF SEARCH. T HE ASSESSEE PRODUCED BOOKS OF ACCOUNT BEFORE THE AO TO SHOW AVAILABLE ST OCK OF GOLD JEWELLERY AT THIS LEVEL. THIS WAS DONE BY WORKING OUT THE VALUE OF STOCK ON THE BASIS OF TRADING ACCOUNT PREPARED FROM 1.4.2 005 TO 9.12.2005 AND APPLYING THE AVERAGE GP RATE OF 22.50% FOR THE LAST THREE YEARS. THE AO MADE ADDITION FOR RS.92,01,488/- ON THE GROUND THAT NO BOOKS OF ACCOUNT WERE FOUND DURING THE COURSE OF SEARCH. THE LD. CI T(A) DELETED THE ADDITION. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE AO MADE ADDITI ON SIMPLY ON THE GROUND THAT THE BOOKS OF ACCOUNT WERE NOT FOUND AT THE TIME OF SEARCH. HE, HOWEVER, IGNORED THE BOOKS OF ACCOUNT FILED BEF ORE HIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSEE WOR KED OUT THE VALUE OF STOCK OF GOLD JEWELLERY BY APPLYING AVERAGE GP RATE OF 22.50% FOR THE LAST THREE YEARS ON THE BASIS OF TRADING ACCOUNT PR EPARED BY ADOPTING THE FIGURES OF OPENING STOCK, CLOSING STOCK, PURCHASE A ND SALE. THE AO DID NOT DISPUTE THE CORRECTNESS OF THESE ITEMS. IN OUR CONSIDERED OPINION, NO ITA NO.3188/DEL/2011 5 FAULT CAN BE FOUND IN THE ORDER OF THE LD. CIT(A) I N DELETING THIS ADDITION. WE, THEREFORE, UPHOLD THE SAME. THIS GROUND FAILS. 7. THE NEXT GROUND IS AGAINST THE DELETION OF ADDIT ION OF RS.1,70,300/- MADE ON ACCOUNT OF UNEXPLAINED STOCK OF SILVER ORNA MENTS FOUND DURING THE COURSE OF SEARCH. HERE AGAIN, THE AO DID NOT A CCEPT THE AVAILABILITY OF STOCK OF SILVER ORNAMENTS OF 13.100 KGS. ON THE GROUND THAT THE BOOKS OF ACCOUNT WERE NOT FOUND AT THE TIME OF SEARCH. T HE LD. CIT(A) DELETED THE ADDITION. FOLLOWING THE REASONING GIVEN ABOVE FOR UPHOLDING THE DELETION OF ADDITION IN RESPECT OF GOLD JEWELLERY, WE APPROVE THE VIEW TAKEN BY THE LD. CIT(A) IN DELETING THE ADDITION OF RS.1,70,300/- ON ACCOUNT OF STOCK OF SILVER ORNAMENTS. 8. THE LAST GROUND IS AGAINST THE DELETION OF DISAL LOWANCE OF RS.2 LAC MADE BY THE AO OUT OF EXPENSES. THE AO MADE AD HOC DISALLOWANCE OF EXPENSES AT RS.2 LAC, WHICH WAS DELETED BY THE LD. CIT(A). 9. HAVING REGARD TO THE FACTS, WE FIND THAT THE AO HAS NOT POINTED OUT ANY SPECIFIC DISCREPANCY IN RESPECT OF THE EXPENSES INCURRED BY THE ASSESSEE. UNDER SUCH CIRCUMSTANCES, THERE CAN BE N O AD HOC ITA NO.3188/DEL/2011 6 DISALLOWANCE OF EXPENSES. WE APPROVE THE VIEW TAKE N BY THE LD. CIT(A) IN DELETING THIS DISALLOWANCE. 10. IN THE RESULT, THE APPEAL IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 28.07.201 6. SD/- SD/- [SUCHITRA KAMBLE] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 28 TH JULY, 2016. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.