ACIT, Tiruppur V. M/s. CIBI Diamonds India Pvt. Ltd., Tiruppur

ITA 3189/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3997 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-07-2017
• Assessment Year: 2013-2014
• Appeal Filed On: 21-11-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R RAJESWARI
• Assessee Lawyers: G BASKAR

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: CHENNAI , ! . , ' BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER , AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.3189/MDS/2016 /ASSESSMENT YEAR: 2013-14 THE ASST. COMMISSIONER OF INCOME- TAX, CIRCLE-2, TIRUPUR. VS. M/S.CIBI DIAMONDS INDIA- PVT. LTD., NO.23, PARK ROAD, TIRUPUR-641 604. [PAN: AADCC 7194 F] ( & /APPELLANT) ( '(& /RESPONDENT) & ) / APPELLANT BY : SMT. R. RAJESWARI, JCIT '(& ) /RESPONDENT BY : SHRI G.BASKAR, ADV. ) /DATE OF HEARING : 12.07.2017 ) /DATE OF PRONOUNCEMENT : 12.07.2017 / O R D E R PER GEORGE MATHAN , JUDICIAL MEMBER : ITA NO.3189/MDS/2016 IS AN APPEAL FILED BY THE REV ENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-3 , COIMBATORE, IN ITA NO.91/16-17 DATED 22.09.2016 FOR THE AY 2013-14. ITA NO.3189/MDS/2016 :- 2 -: 2. SMT. R. RAJESWARI, JCIT REPRESENTED ON BEHALF OF THE REVENUE AND SHRI G. BASKAR, ADV., REPRESENTED ON BEHALF OF THE ASSESSEE. 3. IN VIEW OF THE REVENUE APPEAL, THE REVENUE HAS R AISED THE FOLLOWING GROUNDS: I) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) IS JUSTIFIED IN ARBITRARILY ADOPTING A GROSS PROFIT RA TIO AND THEREBY ESTIMATING THE CLOSING STOCK? II) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) IS JUSTIFIED IN OMITTING TO CONSIDER THE FACT THAT THE ASSESSEE COULD NOT GIVE VALID REASONS FOR ADOPTING THE METHOD OF VALUATION OF OLD GOLD AT RS.1,000/- PER GRAM? III) FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, THE ORDER OF THE LD.CIT(A) MAY BE CANCELLED AND THAT OF ASSESSING OFFICER RESTORED. 4. IT WAS SUBMITTED BY THE LD.DR THAT THE ASSESSEE IS DOING THE BUSINESS OF JEWELLERY RETAILING. THERE WAS A SURVE Y ON THE ASSESSEES PREMISES ON 11.07.2012. IN THE COURSE OF THE SURVE Y, IT WAS NOTICED THAT THE STOCK AS ON THE DATE OF SURVEY AS PER THE BOOKS WERE ESTIMATED AT RS.5,57,78,951/-. THE STOCK INVENTORY PHYSICALLY M ADE SHOWED AN INVENTORY OF RS.6,99,95,458/-. STATEMENTS WERE ALSO RECORDED FROM THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY. IT WAS A SUBMISSION THAT WHEN FILING THE RETURNS, THE ASSESSEE HAD DISCLOSED THE DIFFERENCE BETWEEN THE STOCK AS PER THE BOOKS AND THE PHYSICAL INVENTO RY TO THE EXTENT OF RS.1,42,16,507/- IN ITS RETURN. THE AO NOTICED THA T IN THE COURSE OF THE SURVEY WHILE VALUING THE TOTAL OF THE EXCESS STOCK OF THE GOLD OF 36,907.56 GRAMS, THE SAME HAD BEEN DIVIDED INTO TWO PARTS NAM ELY OLD GOLD AND NEW GOLD. THE OLD GOLD REPRESENTING NEARLY 62% OF THE EXCESS GOLD WHICH WAS VALUED AT RS.1,000/- PER GRAM AND THE NEW GOLD BEIN G 38% HAD BEEN ITA NO.3189/MDS/2016 :- 3 -: VALUED BY ADOPTING THE RATE OF RS.2,700/- PER GRAM. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO ON WHAT BASIS THE EXCESS STO CK OF GOLD JEWELLERY WAS DIVIDED INTO OLD GOLD AND NEW GOLD. AS THE ASS ESSEE WAS UNABLE TO GIVE ANY JUSTIFIABLE REASON, THE AO HAD ADOPTED THE RATE OF RS.2,700/- IN RESPECT OF THE ENTIRE EXCESS GOLD FOUND. IT WAS A SUBMISSION THAT ON APPEAL THE LD.CIT(A) HAD ON THE GROUND THAT ON ACCO UNT OF THE ADDITION, THE GROSS PROFIT OF THE ASSESSEE REACHES A VERY HIG H LEVEL OF 48.41% HAD AFTER CONSIDERING THE GP OF THE ASSESSEE FOR THE IM MEDIATELY SUCCEEDING YEARS, AS ALSO ON THE GROUND THAT THE VALUATION HAS NOT BEEN DONE BY REGISTERED VALUER, ESTIMATED THE GP OF THE ASSESSEE AT 20% AND CONSEQUENTLY REDUCED THE ADDITION MADE BY THE AO. IT WAS SUBMITTED BY THE LD.DR THAT THE ADDITION MADE WAS NOT ON ACCOUNT OF GP BUT IT WAS ON ACCOUNT OF THE UNDISCLOSED STOCK AND CONSEQUENTLY T HE ORDERS OF THE LD.CIT(A) WAS LIABLE TO BE REVERSED. 5. IN REPLY, LD.AR SUBMITTED THAT IN THE COURSE OF THE SURVEY, IN THE STATEMENT RECORDED, THE ASSESSEE HAD PROVED TO THE SURVEY TEAM IN RESPECT OF THE OLD GOLD JEWELLERY AND NEW GOLD JEWE LLERY AND THAT IS WHY THE DIFFERENCE OF RS.1,42,16,507/- HAD BEEN ARRIVED AT IN THE COURSE OF THE SURVEY ITSELF. IT WAS A SUBMISSION THAT IN RESPONS E TO THE QUESTION NO.16 RECORDED IN THE COURSE OF THE SURVEY, THE DETAILS W ERE ALL AVAILABLE. IT WAS ALSO A SUBMISSION THAT IN QUESTION NO.20, THE SURVE Y TEAM HAD ALSO ACCEPTED THE DISCLOSURE OF RS.1,42,16,507/-. IT WA S A SUBMISSION THAT THE ADDITION MADE BY THE LD.CIT(A) BY ESTIMATING THE IN COME OF THE ASSESSEE ITA NO.3189/MDS/2016 :- 4 -: WAS LIABLE TO BE DELETED AND AS THE ASSESSEE HAS AL READY ACCEPTED AND COMPLIED WITH HIS DISCLOSURE OF RS.1,42,16,507/- WH EN FILING ITS RETURN NO FURTHER ADDITIONS WAS LIABLE TO BE MADE. HE PLACED RELIANCE UPON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT O F MADRAS IN THE CASE OF SMT. S. VIJAYA LAKSHMI TO SUPPORT HIS CONTENTION TH AT WHEN THE FACTS REQUIRED FOR EXAMINING THE CLAIM WERE BEFORE THE TR IBUNAL, THE ENDS OF THE JUSTICE JUSTIFIED THE TRIBUNAL TO GRANT THE RELIEF TO THE ASSESSEE EVEN IN THE ABSENCE OF SPECIFIC APPEAL OR CROSS-APPEAL ESPECIAL LY IF THE FACTS AVAILABLE ON RECORD PERMIT THE GRANT OF SUCH RELIEF AND SUCH RELIEF IN FACT HAD BEEN SOUGHT BY THE ASSESSEE BEFORE THE ASSESSING AUTHORI TY. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERU SAL OF THE ASSESSMENT ORDER SHOWS THAT THE AO HAS MADE ADDITIO N BY VALUING THE UNEXPLAINED STOCK OF GOLD JEWELLERY IN THE COURSE O F THE SURVEY. THIS IS NOT A CASE ON ESTIMATION OF GP. ON THIS GROUND, TH E ORDER OF THE LD.CIT(A) IN ESTIMATING THE GP OF THE ASSESSEE THAT TOO WITHOUT REJECTING THE ASSESSEES BOOKS OF ACCOUNTS IS LIABLE TO BE RE VERSED AND WE DO SO. HOWEVER, ON THE REVERSAL OF THE ORDER OF THE LD.CI T(A), WE COME TO THE PREDICAMENT. THIS HAS TURNED OUT TO A PECULIAR CASE WHEREIN A REVENUE APPEAL RELIEF BECOMES ALLOWABLE TO THE ASSE SSEE. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE AO HAS PARTLY A CCEPTED THE SURVEY REPORT AND PARTLY DIVERTED FROM THE SAME. A PERUSA L OF THE STATEMENT RECORDED IN THE COURSE OF THE SURVEY SHOWS THAT THE SURVEY TEAM HAS ITA NO.3189/MDS/2016 :- 5 -: EXAMINED THE GOLD JEWELLERY FOUND REPRESENTING THE EXCESS JEWELLERY ALSO AND HAS ACCEPTED THE CLAIM OF THE ASSESSEE THAT PAR T OF THE JEWELLERY IS OLD JEWELLERY AND HAD CONSEQUENTLY VALUED 62% OF THE EX CESS JEWELLERY AT RS.1,000/- PER GRAM ACCEPTING THE SAME AS OLD JEWEL LERY AND 38% AT RS.2,700/- ON THE GROUND THAT THE SAME WAS NEW JEWE LLERY. THIS HAS RESULTED IN A DIFFERENCE OF RS.1,42,16,507/- WHICH HAS BEEN SPECIFICALLY ACCEDED TO BY THE ASSESSEE. ON THE SPECIFIC QUESTIO N OF THE SURVEY TEAM MORE SO, THE DY. COMMISSIONER OF INCOME TAX, CIRCLE -1, TIRUPUR, IN QUESTION NO.20, IN THE STATEMENT RECORDED FROM THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY RECORDED U/S.131 ON 11.07.2012 . THE SURVEY TEAM HAVING VERIFIED THE JEWELLERY AND HAVING THE DEMARC ATED THE OLD JEWELLERY AND NEW JEWELLERY AND HAVING VALUED THE SAME AT RS. 1,000/- PER GRAM AND RS.2,700/- PER GRAM SEPARATELY TO ARRIVE AT THE VALUE OF THE EXCESS STOCK, IT IS NOT OPEN TO THE AO TO ASK THE ASSESSEE TO SUBSTANTIATE THE METHODOLOGY FOR THE ADOPTION, MORE SO, ESPECIALLY A FTER NEARLY FOUR YEARS FROM THE SURVEY. ONCE PHYSICAL EXAMINATION HAS BEE N DONE BY THE SURVEY TEAM AND IT HAS BEEN RECORDED IN THE SWORN STATEMEN T IN THE COURSE OF THE SURVEY, THOUGH SUCH A STATEMENT IS A REBUTTABLE STA TEMENT IN RESPECT OF THE ASSESSEE, IN RESPECT OF THE DEPARTMENT WHICH RE CORDS SUCH STATEMENT, THE SAME WOULD HAVE BEEN CONSIDERED AS HAVING SUBST ANTIAL EVIDENCING VALUE. THIS BEING SO, WE ARE OF THE VIEW THAT THE ADDITION MADE BY THE AO BY ADOPTING THE RATE RS.2,700/- PER GRAM IN RESPECT OF THE ENTIRE QUANTITY OF EXCESS GOLD JEWELLERY FOUND IS HELD TO BE ERRONE OUS AND THE AO DIRECTED TO ADOPT THE VALUE AS HAS BEEN RECORDED BY THE SURV EY TEAM IN THE COURSE ITA NO.3189/MDS/2016 :- 6 -: OF THE SURVEY, IN THE COURSE OF THE STATEMENT RECOR DED ON 11.07.2012 FROM SHRI P. CIBI CHAKARAVARTHI U/S.131 IN THE COUR SE OF THE SURVEY. THIS DECISION OF OURS THOUGH IS ALLOWING THE REVENUE APP EAL IN RESPECT OF THE GROUNDS, ADMITTEDLY, GIVE RELIEF TO THE ASSESSEE IN RESPECT OF THE ADDITION MADE. THIS VIEW OF OURS DRAWS SUPPORT FROM THE DEC ISION OF THE HONBLE JURISDICTIONAL HIGH COURT OF MADRAS SMT. S.VIJAYA L AKSHMI REFERRED TO SUPRA. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON JULY 12, 201 7, AT CHENNAI. SD/- SD/- ( . ) ( A. MOHAN ALANKAMONY ) ! /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) ! /JUDICIAL MEMBER /CHENNAI, 1 /DATED: JULY 12, 2017. TLN ) '23 43 /COPY TO: 1. & /APPELLANT 4. 5 /CIT 2. '(& /RESPONDENT 5. 3 ' /DR 3. 5 ( ) /CIT(A) 6. /GF