Shri Jayantilal J.Soni, HUF, Ahmedabad V. The Income tax Officer, Ward-3(2), Ahmedabad

ITA 3223/AHD/2010

• Counselvise Citation: 322320514 RSA 2010
• Duration Of Justice: 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 04-10-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 06-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR JAYANT JHAVERI SR D R
• Assessee Lawyers: M G PATEL
• Keywords: Unexplained investment; Gift; Income from undisclosed sources; Retraction
• Section: 69B

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD .., !'# $ $ $ $ %% % &, ' ( # BEFORE SHRI G.D.AGARWAL, VICE-PRESIDENT (AZ) AND SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER $./ I.T.A. NO.3223/AHD/2010 ( * * * * / / / / ASSESSMENT YEAR : 2007-08) JAYANTILAL JIVANLAL SONI HUF PROP. M/S.CHAMUNDA JEWELLERS 1,2,3, PARISEEMA ANNEXE CG ROAD, AHMEDABAD / VS. THE INCOME TAX OFFICER WARD-3(2) AHMEDABAD '+ (, $./- $./ PAN/GIR NO. : AAAHJ 8579 D ( +. / // / APPELLANT ) .. ( /0+. / RESPONDENT ) +. 1 ( / APPELLANT BY : SHRI M.G.PATEL, A.R. /0+. 2 1 ( / RESPONDENT BY : DR.JAYANT JHAVERI SR. D.R. % 3 2 &, / / / / DATE OF HEARING : 04/10/2011 45* 2 &, / DATE OF PRONOUNCEMENT : 14.10.11 (6 / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WH ICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-XVI , AHMEDABAD DATED 08/11/2010 PASSED FOR ASSESSMENT YEAR 2007-08 . GROUNDS RAISED BY THE ASSESSEE ARE HEREBY DECIDED AS FOLLOWS: 2. GROUND NO.1 READS AS UNDER:- ITA NO. 3223/AHD/2010 JAYANTILAL JIVANLAL SONI HUF VS. ITO ASST.YEAR 2007-08 - 2 - 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )-XVI, AHMEDABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE BY CONFIRMING THE ADDITION OF RS.35,39,200/- IN RESPECT OF EXCESS STOCK WORKED OUT DURING THE SURVEY PROCEEDIN GS. 2.1. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDI NG ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT DATED 24/12/2009 WERE THAT THE APPELLANT IN THE CAPACITY OF HUF IS A PROPRIETOR OF M/S.CHAMUNDA JEWELLERS. THE APPELLANT IS IN THE BUSINESS OF MANUFACTURING AND TRADING OF GOLD AND SILVER ORNAMENTS, ETC. A SURVEY WAS CON DUCTED ON 19/01/2007. AT THE TIME OF SURVEY THE ALLEGED DISC REPANCY IN THE STOCK OF GOLD, GOLD ORNAMENT AND DIAMOND ORNAMENT WAS NOTICE D AND IN THAT REGARD A STATEMENT OF SHRI NIRAV J. SONI, A CO-PART NER, SON OF THE KARTA WAS RECORDED AND RELEVANT QUESTION WAS REPRODUCED I N THE ASSESSMENT ORDER AS FOLLOWS: QUE. 11. TODAY DURING THE COURSE OF SURVEY PROCE EDINGS THE PHYSICAL STOCK TAKEN IN AS PER ANNEXURE S PAGE 1- 7 PAGES, AND IN COMPARISON OF THE BOOK STOCK AS PER ANSWER 4 IS AS UNDER: ORNAMENTS OF 22 CARAT GOLD 3036 GRM. EXCESS ORNAMENTS OF 18 CARAT GOLD 107 GRM. EXCESS DIAMOND ORNAMENTS 38 CARAT (EXCESS STOCK VALUING RS.35,29,200/- IS FOUND WHAT IS YOUR EXPLANATION RE GARDING THIS DISCREPANCY. ANS.11. I AGREE WITH THE PHYSICAL STOCK AS PER ANNE XURE S PAGES 1 TO 7. THE EXCESS OF PHYSICAL STOCK FOUND I S A FACT AND WE AGREE TO PAY THE TAXES ON THIS AMOUNT OVER AND ABOV E THE REGULAR INCOME EARNED DURING THIS CURRENT YEAR. ITA NO. 3223/AHD/2010 JAYANTILAL JIVANLAL SONI HUF VS. ITO ASST.YEAR 2007-08 - 3 - 2.2. ON ACCOUNT OF THE SAID STATEMENT, DURING THE C OURSE OF SURVEY PROCEEDINGS, AN ADDITIONAL UNACCOUNTED INCOME OF RS. 40 LACS WAS STATED TO BE VOLUNTARILY OFFERED FOR TAXATION. IT HAS ALSO BEEN NOTED BY THE AO THAT A TAX OF RS.15 LACS HAS ALSO BEEN PAID VIDE THREE CHEQUES OF RS.5 LACS EACH DUE TO THE DETECTION OF THE SAID DIS CREPANCY. HOWEVER, THAT OFFER WAS LATER ON RETRACTED. A RETURN OF INC OME FOR A.Y. 2007-08 WAS FILED ON 31/10/2007 DECLARING AN INCOME OF RS.3 8,57,100/-. IT HAS ALSO BEEN NOTED BY THE AO THAT THE SAID RETRACTION WAS MADE BY FILING AN AFFIDAVIT ON 12/06/2007. IN THE SAID AFFIDAVIT, IT WAS ASSERTED THAT SHRI NIRAJ J. SONI WAS NOT CONVERSANT WITH THE BUSINESS AND THAT HE WAS COMPELLED FOR THE SAID DISCLOSURE OF RS.40 LACS AND THAT THE STOCK HAD BEEN RECONCILED AND THERE WAS NO DIFFERENCE IN STOC K. NEVERTHELESS, IT WAS NOTED BY THE AO THAT AN INVENTORY OF STOCK OF GOLD AND JEWELLERY WORTH RS.3,47,36,543/- WAS MADE, HOWEVER, THE VALUE OF T HE STOCK AS RECORDED IN THE BOOKS OF ACCOUNT WAS AT RS.3,12,07,343/-. O N THE BASIS OF THE SAID DISCREPANCY, DIFFERENCE OF EXCESS STOCK OF RS.35,29 ,200/- WAS DETECTED AND SUBJECTED TO THE IMPUGNED ADDITION. IN THE ASS ESSMENT ORDER, THERE WAS A REFERENCE OF MAINTENANCE OF TWO STOCK REGISTE RS; ONE WAS FOUND TO BE MANUAL STOCK REGISTER AND THE OTHER WAS COMPUTERISED STOCK REGISTER. FROM THE FOLLOWING SHOW CAUSE NOTICE IT APPEARS TH AT A RECONCILIATION WAS OFFERED BY THE ASSESSEE BUT A QU ERY WAS RAISED:- I) STOCK OF 481.90 WAS PERTAINING TO SOME CUSTOM ERS WHICH WAS RECEIVED FOR REPAIRS BUT NOT ENTERED IN THE COM PUTERIZED BOOKS OF ACCOUNTS. ITA NO. 3223/AHD/2010 JAYANTILAL JIVANLAL SONI HUF VS. ITO ASST.YEAR 2007-08 - 4 - II) PHYSICAL STOCK 841.17 GRM. IS TAKEN IN THE INVE NTORY BY THE I.T. OFFICERS BUT NOT CREDITED IN THE COMPUTERIZED REGISTER, REASONS FOR NON CREDIT FROM THE SAME LACKS CLARITY AND DOES NOT EXPLAIN THE VARIATION. III) STOCK PURCHASED FROM DESIGNED JEWELERS VIDE THEIR BILL DTD. 8.12.2006 HAS BEEN PHYSICALLY INVENTORISED BY AUTHO RISED OFFICERS, BUT BY MISTAKE DELETED FROM THE STOCK REG ISTERS. KINDLY EXPLAIN WHAT DOES THIS IMPLY AND ODES THIS M ISTAKE EXPLAIN THE VARIATION OF STOCK? CAN SUCH A MISTAKE BE ACCEPTED AS BONAFIDE? IV) STOCK RECEIVED FROM TWO LABOURERS TOTALLY WEI GHING 1214.670 GMS. WAS INVENTORISED, BUT INWARD VOUCHERS WERE LYING WITH SHRI BHARATBHAI SONI WHO WAS INCIDENTALL Y ADMITTED IN THE HOSPITAL. DOES IT MEAN THAT THE VO UCHERS WERE AT BHARATBHAIS RESIDENCE OR WITH HIM IN THE H OSPITAL. THE ABOVE REASONS ARE CONTRARY TO THE FACTS AS RECO RDED ON THE DAY OF SURVEY THE REASONS GIVEN FOR THE VARIATI ON OF STOCK IS AMBIGUOUS AND AN AFTER THOUGHT BY WHICH YOU ARE TRYING TO CONCEAL THE UNACCOUNTED INVESTMENT MADE IN THE E XCESS STOCK FOUND BY THE AUTHORIZED OFFICERS ON THE DAY O F SURVEY. YOU ARE AGAIN REMINDED OF THE FACT THAT FROM THE AB OVE FOUR BILLS/VOUCHERS NOT A SINGLE BILL/VOUCHER WAS FOUND ON THE DAY OF SURVEY. YOU ARE THEREFORE, REQUESTED TO SHOW CA USE AS TO WHY THE AMOUNT OF RS.35,29,200/- SHOULD NOT BE CONS IDERED AS UNEXPLAINED INVESTMENT AND ALSO DEEMED CONCEALED INCOME FOR THE RELEVANT YEAR AND ADDED TO THE TOTAL INCOME. 2.3. THE AO WAS NOT CONVINCED AND NOTED THAT THE F OUR BILLS/VOUCHERS WERE NOT ENTERED IN THE COMPUTERISED STOCK REGISTE R. THE AO HAS ALSO MENTIONED THAT MR.NIRAJ J.SONI WAS VERY MUCH CONVER SANT WITH THE BUSINESS. FINALLY, THE SAID AMOUNT WAS HELD AS UNE XPLAINED INVESTMENT ITA NO. 3223/AHD/2010 JAYANTILAL JIVANLAL SONI HUF VS. ITO ASST.YEAR 2007-08 - 5 - AND TAXED BY INVOKING THE PROVISIONS OF SECTION 69B OF THE IT ACT. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHO RITY. 3. WHILE AFFIRMING THE ACTION OF THE AO, THE L D.CIT(A) HAS REITERATED THAT IF THE ALLEGATION OF THE ASSESSEE W AS THAT THE SAID STATEMENT WAS RECORDED UNDER PRESSURE, THEN WHY IT WAS RETRAC TED AFTER THE LAPSE OF FIVE MONTHS. HE HAS ALSO COMMENTED THAT IF THE STOC K WAS DULY RECONCILED, THEN WHY THE ASSESSEE DID NOT GET BACK TO THE AO IMMEDIATELY AFTER THE SURVEY WITHIN A REASONABLE TIME OF FEW DA YS. AS PER CIT(A), IF SOME OF THE STOCK PERTAINED TO FEW CUSTOMERS, THEN THE ASSESSEE WAS UNDER OBLIGATION TO PRODUCE THOSE CUSTOMERS FOR CRO SS-EXAMINATION. LIKEWISE, IF THE BILL DATED 08/12/2006 WAS NOTICED WHILE SUBMITTING RECONCILIATION OF THE STOCK, THEN THE SAME SHOULD H AVE BEEN KNOWN TO THE ASSESSEE WITHIN A FEW DAYS FROM THE DATE OF SURVEY. SIMILARLY, IF THE STOCK RECEIVED FROM THE LABOURERS WEIGHING 1214.67 0 GRAMS, THEN THAT SHOULD BE IN THE KNOWLEDGE OF THE ASSESSEE MOREOVER IT WAS NOT COMMUNICATED TO AO WITHIN A REASONABLE TIME. AS PE R LD.CIT(A), ONCE THE ASSESSEE HAS PAID TAX ON THE DISCLOSED AMOUNT M EANS THAT THE ASSESSEE IN FACT HAD ACCEPTED THE DISCREPANCY IN THE STOCK. BY ASSIGNING THESE REASONS, AOS ACTION WAS AFFIRMED. NOW THE ASSESSE E IS FURTHER IN APPEAL. 4. FROM THE SIDE OF THE ASSESSEE, LD.AR MR.M.G.PATE L APPEARED AND PLEADED THAT THE REVENUE AUTHORITIES HAVE NOT PROPE RLY UNDERSTOOD THE RECONCILIATION OF THE STOCK. IN HIS OPINION, HAD T HE RECONCILIATION WAS UNDERSTOOD BY THE AO THERE SHOULD NOT HAVE BEEN ANY ADDITION AT ALL. HE HAS ALSO PLEADED THAT THE ASSESSEE WAS FACING DI FFICULTY BECAUSE OF THE ITA NO. 3223/AHD/2010 JAYANTILAL JIVANLAL SONI HUF VS. ITO ASST.YEAR 2007-08 - 6 - ILL-HEALTH OF THE KARTA OF HUF WHO WAS HOSPITALIZE D AND AS THE BAD LUCK WOULD HAVE IT, ULTIMATELY EXPIRED. THE STOCK POSITI ON AS PER THE EXPLANATION FURNISHED BY THE LD.AR IN THE BOOKS OF ACCOUNT OF M/S.CHAMUNDA JEWELLERS WAS STATED TO BE AS UNDER: SILVER ORNAMENTS .. 158.067 KILOGRAMS SILVER BULLION .. 6.583 KILOGRAMS DIAMOND ORNAMENTS .. 3130.125(GOLD) 306.580(CARAT) GOLD RANI PATTI .. 54.300 GRAMS GOLD BULLION .. 114.952. GRAMS GOLD ORNAMENTS .. 24144.661 GRAMS 22 (CARAT) GOLD ORNAMENTS .. 476.100 GRAMS 18 (CARAT) 4.1. AS AGAINST THAT, THE INVENTORY OF STOCK MADE D URING SURVEY HAD RECORDED THE FOLLOWING DISCREPANCY:- Q.11. TO-DAY, DURING SURVEY, INVENTORY OF STOCK O F M/S.CHAMUNDA JEWELLERS HAS BEEN MADE WHICH IS GIVEN IN ANNEXURE SJ PAGE NO.1 TO 7 AND ON COMPARING THE S AME WITH THE STOCK SHOWN IN THE BOOKS AND AS ANSWERED BY YOU IN ANSWER 4 ABOVE, THERE IS DIFFERENCE IN 22 CARAT, 18 CARAT AN D DIAMOND ORNAMENTS AS UNDER: 22 CARAT GOLD ORNAMENTS .. 3036 GM. EXTRA 18 CARAT GOLD ORNAMENTS .. 107 GM. ETRA DIAMOND ORNAMENTS .. 38 CARAT SHOWN EXTRA COST OF WHICH IS A.11. PRESENTLY, MY ELDER BROTHER SHRI BHARATBHAI SONI, WHO IS HANDLING THIS IS ADMITTED TO HOSPITAL. HOWEVER, FR OM THE STOCK SHOWN IN THE LIST ANNEXURE S PAGE 1 TO 7 AND THE ST OCK ACCORDING ITA NO. 3223/AHD/2010 JAYANTILAL JIVANLAL SONI HUF VS. ITO ASST.YEAR 2007-08 - 7 - TO BOOKS, IT IS BELIEVED THAT THIS DIFFERENCE IS TH ERE AND I AGREE TO PAY THE TAX ON THE SAME. 4.2. IT WAS STATED THAT THE MAIN PERSON HANDLING TH E BUSINESS, HAVING THE KNOWLEDGE OF THE BUSINESS, WAS HOSPITALIZED AT THE TIME OF SURVEY. DUE TO HIS ABSENCE THAT DISCREPANCY COULD NOT BE EXPLAI NED THEN AND THERE AT THE TIME OF SURVEY. LD.AR HAS ALSO STATED THAT SOME OF THE BILLS/VOUCHERS WERE KEPT BY HIM WHICH WERE RELEVANT TO EXPLAIN THE EXCESS STOCK FOUND AT THE TIME OF SURVEY. LD.ARS NEXT PLANK OF ARGUM ENT WAS THAT THE STOCK WAS FULLY EXPLAINABLE HOWEVER THAT WAS NOT APPRECIA TED BY THE REVENUE AUTHORITIES AND IN THIS REGARD HE HAS DRAWN OUR ATT ENTION ON AN EXPLANATION DATED 02/07/2007 STATED TO BE FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDINGS; RELEVANT PORTION REPRODUCED BELOW:- 3. ON RESUMPTION BY SHRI BHARATBHAI J.SONI ON DUT Y, THE DIFFERENCE BETWEEN THE BOOK STOCK AND PHYSICAL STOC K ON THE DAY OF SURVEY HAS BEEN RECONCILED AS UNDER: GRAMS PHYSICAL STOCK OF GOLD ORNAMENTS TAKEN BY THE OFFICERS OF INCOME TAX ON THE DATE OF SURVEY I.E. . 28496.200 LESS : STOCK RECEIVED FROM THE CUSTOMERS FOR REPAIRING NOT BELONGING TO ASSESSEE AND INCLUDED IN THE INVENTORY PREPARED BY OFFICERS. 481.940 ------------ PHYSICAL STOCK BELONGING TO ASSESSEE FOUND ON 19/1/2007 2814.260 ====== STOCK AS PER COMPUTERIZED STOCK REGISTER OF THE ASSESSEE ON THE DATE OF SURVEY ITA NO. 3223/AHD/2010 JAYANTILAL JIVANLAL SONI HUF VS. ITO ASST.YEAR 2007-08 - 8 - I.E. 19 TH JANUARY, 2007 . 24144.66 ADD : (1) OWN STOCK BACK FROM THE HALL-MARKING WHICH HAS BEEN INCLUDED IN THE PHYSICAL STOCK TAKEN BY THE OFFICER BUT NOT CREDITED IN COMPUTERIZED STOCK REGISTER 834.760 (2) IN STOCK REGISTER MAINTAINED ON COMPUTER BY MISTAKE STOCK PURCHASED FROM DESIGNER JEWELS VIDE THEIR BILL DATED 18/12/006 WAS DELETED THOUGH THE SAME HAS BEEN DULY ENTERED IN THE STOCK REGISTER MANUALLY MAINTAINED. (COPY OF BILL OF DESIGNER JEWELS AND MANUAL STOCK REGISTER ARE ENCLOSED) 1821.330 (3) ON THE DATE OF SURVEY, IN ABSENCE OF VOUCHERS, BEING LYING WITH SHRI BHARATBHAI IN RESPECT OF GOLD RECEIVED BACK FROM KARIGARS VIZ. SHRI JAYSUKHBHAI AND SHRI NARESHBHAI NOT ENTERED IN STOCK REGISTER SHRI JAYSUKH 511.900 SHRI NARESHBHAI 702.770 1214.670 3870.760 ------------- ------------ COPIES OF A/CS OF THE ABOVE KARIGARS FROM THE BOOKS OF THE ASSESSEE AND FROM THE BOOKS OF KARIGARS ARE ENCLOSED. ------------ PHYSICAL STOCK 28015.421 ====== ITA NO. 3223/AHD/2010 JAYANTILAL JIVANLAL SONI HUF VS. ITO ASST.YEAR 2007-08 - 9 - PHYSICAL STOCK . 28015.421 GRAMS PHYSICAL STOCK AS PER INVENTORY PREPARED BY OFFICER 28014.260 GRAMS ----------------------- DIFFERENCE .. 1.161 GRAMS 4.3. SO THE ATTEMPT OF THE LD.AR WAS TO DRAW OUR A TTENTION ON THE CORRESPONDING ENTRIES MADE BY THOSE PARTIES IN THEI R RESPECTIVE ACCOUNTS. LD.AR HAS ALSO REFERRED FEW BANK STATEMENTS IN SUPP ORT OF THE PAYMENTS MADE. HE HAS CITED FEW CASE LAWS FOR THE LEGAL PROP OSITION THAT A STATEMENT RECORDED AT THE TIME OF SURVEY U/S.133A O F THE ACT HAS NO EVIDENTIARY VALUE. 1. PAUL MATHEWS AND SONS VS. CIT 263 ITR 101 (KER.) 2. ABHI DEVELOPERS VS. ITO (2007) 12 SOT 444 (AHD.) 3. KAILASHBEN MANHARLAL CHOKSHI VS. CIT 328 ITR 411 (GUJ.) 4. CIT VS. CENTRAL MALL 332 ITR 320 (P&H) 4.4. FURTHER, IN SUPPORT OF THE RETRACTION, LD.AR H AS ALSO CITED FEW CASE LAWS AS FOLLOWS:- 1. CIT VS. S.KHADER KHAN SON 300 ITR 157 (MAD.) 2. JAIN TRADING CO. VS. ITO (2007) 17 SOT 574 (MUM.) 3. DCIT VS. PRAMUKH BUILDERS 112 ITD 179 (AHD.) ITA NO. 3223/AHD/2010 JAYANTILAL JIVANLAL SONI HUF VS. ITO ASST.YEAR 2007-08 - 10 - 5. ON THE OTHER HAND, FROM THE SIDE OF THE REVENUE, LD.DR DR.JAYANT JHAVERI HAS SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. HE HAS ARGUED THAT THE ENTIRE EXPLANATION WAS NOTHING BUT AN AFTE R-THOUGHT. THE EVIDENCES NOW PLACED WERE NEVER PLACED BEFORE THE A O. A DISCREPANCY IN THE STOCK WAS UNEARTHED IN THE COURSE OF SURVEY AND BASED UPON THAT DETECTION THE ASSESSEE HAD OFFERED RS.40 LACS BUT L ATER ON FAILED TO HONOUR HIS OWN OFFER. EVEN THE RETRACTION THROUGH AN AFF IDAVIT WAS MADE AFTER A LAPSE OF 5 MONTHS. UNDER THESE CIRCUMSTANCES, LD.D R HAS PLEADED, THE EVIDENCES AND THE EXPLANATION DESERVE TO BE IGNORED AND THE ASSESSMENT ORDER TO BE AFFIRMED. 6. WE HAVE HEARD BOTH THE SIDES AT SOME LEN GTH. WE HAVE ALSO PERUSED THE ORDERS OF THE AUTHORITIES BELOW IN THE LIGHT OF THE COMPILATION FILED. DURING THE COURSE OF HEARING, IT WAS PLEADE D THAT THE STATEMENT OF ONE SHRI NIRAJ KUMAR J.SONI SON OF THE PROPRIETOR JAYANTIBHAI SONI (HUF) WAS RECORDED DUE TO THE FACT THAT THE SAID PR OPRIETOR WAS ADMITTED IN A HOSPITAL. THIS FACT WAS TOLD TO THE SURVEY PA RTY VIDE ANSWER NO.2 OF THE STATEMENT DATED 19/01/2007. THEREFORE, IT WAS VEHEMENTLY ARGUED THAT THE MAIN PERSON, WHO HAPPENED TO BE HANDLING T HE BUSINESS, WAS NOT AVAILABLE, THEREFORE THE CORRECT POSITION OF THE S TOCK COULD NOT BE EXPLAINED PROPERLY AT THAT VERY TIME OF SURVEY. RA THER, IT HAS BEEN ARGUED THAT THE PROPRIETORS SON WAS NOT IN A POSITION TO HANDLE THE QUESTIONS OF THE SURVEY PARTY. LATER ON, WHEN THE EVIDENCES WER E COLLECTED AND THE CORRESPONDING ENTRIES WERE FOUND RECORDED IN THE AC COUNTS OF THE RESPECTIVE PARTIES, ALSO DULY SUPPORTED BY THE BANK TRANSACTIONS, THEN A RETRACTION THROUGH AN AFFIDAVIT WAS MADE. AS WELL A S, THOSE ENTRIES WERE ALSO EXPLAINED TO THE AO. ITA NO. 3223/AHD/2010 JAYANTILAL JIVANLAL SONI HUF VS. ITO ASST.YEAR 2007-08 - 11 - 6.1. BEFORE US, IT HAS ALSO BEEN TRIED TO DEMONSTRA TE THAT THERE WAS NO EXCESS STOCK OF DIAMOND. ON PAGE NO.60 OF THE P APER BOOK, CONTAINING THE SAID STATEMENT, VIDE QUESTION NO.4 I T WAS POINTED OUT THAT DURING THE COURSE OF SURVEY, STOCK POSITION IN THE BOOKS OF ACCOUNTS OF M/S.CHAMUNDA JEWELLERS WERE RECORDED AN D THE POSITION OF THE DIAMOND ORNAMENTS WERE FOUND TO BE CONTAINING 306.580 CARAT. AS AGAINST THAT, ON PAGE NO.69 OF THE PAPER BOOK A S PER VALUERS REPORT THE DIAMOND ORNAMENTS WHICH WER E DETECTED BY THE REVENUE DEPARTMENT WERE 268.06 CARAT ONLY. THEREFORE THE VEHEMENT CONTENTION OF THE ASSESSEES COUNSEL IS TH AT THERE WAS NO EXCESS OF STOCK OF DIAMOND ORNAMENTS WHICH WAS FOUND AT THE TIME OF SURVEY BUT IT WAS LESSER THAN THE STOCK REC ORDED IN THE BOOKS OF ACCOUNT. IN OUR OPINION, THIS FACT SHOULD HAVE BEEN BROUGHT TO THE NOTICE OF THE REVENUE DEPARTMENT AT THE STAGE OF AS SESSMENT PROCEEDINGS. NOW THE TOTALITY OF THE CIRCUMSTANCES DEMANDS TO VERIFY THE CORRECTNESS OF THE STOCK OF DIAMOND ORN AMENTS, ONE FROM THE SURVEY RECORDS OF THE REVENUE, AND THE OTH ER, FROM THE BOOKS OF ACCOUNT OF THE ASSESSEE. THIS CAN ONLY BE DONE BY THE AO. THEREFORE, WE DEEM IT PROPER TO REFER THIS ISSUE BA CK TO AO FOR DE NOVO CONSIDERATION, NEEDLESS TO SAY, AFTER PROVIDING A REASONABLE OPPORTUNITY OF HEARING. 6.2. IT HAS BEEN INFORMED THAT WHEN THE PROPRIETOR OF THE CONCERN HAD RESUMED THE BUSINESS ACTIVITY, THEN THE DISCREP ANCY BETWEEN THE STOCK AS PER BOOKS OF ACCOUNT AND THE STOCK FOUND A T THE TIME OF ITA NO. 3223/AHD/2010 JAYANTILAL JIVANLAL SONI HUF VS. ITO ASST.YEAR 2007-08 - 12 - SURVEY WAS RECONCILED. PHYSICAL STOCK OF GOLD ORNAMENTS TAKEN BY THE OFFICERS ON THE DATE OF SURVEY WAS 28,496 OUT O F WHICH IT WAS EXPLAINED THAT 481.950 WAS THE STOCK RECEIVED FROM THE CUSTOMERS FOR REPAIRING. THIS FACT WAS ACCEPTED BY THE AO. HOWEVER, NOW BEFORE US IT WAS DEMONSTRATED THAT IN RESPECT OF 18 21.320 THE EXPLANATION WAS THAT THE SAME WAS PURCHASED FROM D ESIGNER JEWELERS VIDE BILLS DATED 18/12/2006. IT WAS A MI STAKE WHILE RECORDING THE POSITION OF STOCK IN THE COMPUTERIZE D STOCK REGISTER. LD.AR HAS STATED THAT THE SAME WAS ALREADY ENTERED IN THE MANUAL STOCK REGISTER. UNDISPUTEDLY, THE SAID MANUAL STO CK REGISTER WAS DULY FOUND AT THE TIME OF SURVEY. IN THIS REGARD, WE MAY LIKE TO POINT OUT THAT EVEN THIS FACT WHETHER THE MANUAL ST OCK REGISTER WAS FOUND AT THE TIME OF SURVEY HAS TO BE VERIFIED BY T HE AO THROUGH THE RECORDS OF THE REVENUE DEPARTMENT RETAINED IN THE C OURSE THE SURVEY OPERATION. THE A.O. IS THEREFORE DIRECTED TO VERIFY THE BOTH THE ASPECTS THAT WHETHER THE ALLEGED PURCHASES WERE ACT UALLY MADE BEFORE THE SURVEY AND THAT WHETHER IT WAS ALSO RECO RDED IN THE ASSESSEES BOOKS OF ACCOUNTS. LD.AR HAS ALSO STATED THAT SOME STOCK OF ORNAMENT WAS MEANT FOR HALL-MARKING WHICH WAS RECEIVED BACK AND THAT EVIDENCE WAS VERY MUCH ON RECORD. THROUGH THAT EVIDENCE, LD. AR WANTED TO EXPLAIN THAT THERE WAS NO VARIATION IN THE STOCK AS RECORDED IN THE BOOKS OF ACCOUNTS. IN RESPECT OF THE PURCHASE OF JE WELLERY FROM DESIGNER JEWELLERS, THE EXPLANATION OF THE ASSESSEE WAS THE PAYMENTS WERE MADE THROUGH BANKING CHANNEL AND THOSE PAYMENT S HAVE DULY ITA NO. 3223/AHD/2010 JAYANTILAL JIVANLAL SONI HUF VS. ITO ASST.YEAR 2007-08 - 13 - BEEN REFLECTED IN A BANK ACCOUNT. LD.AR HAS THEREFO RE STATED THAT THE BANK STATEMENT OF NUTAN NAGARIK SAHAKARI BANK LTD. IS THE EVIDENCE TO PROVE THAT THE STOCK WAS VERY MUCH AVAILABLE WIT H THE ASSESSEE, HOWEVER, DUE TO THE NON-AVAILABILITY OF THE PROPRIE TOR THE REQUIRED EXPLANATION WITH EVIDENCES COULD NOT BE PRODUCED. EVEN THIS FACT ABOUT THE PAYMENT THROUGH BANKING CHANNEL HAS TO BE VERIFIED BY THE AO. LD.AR HAS ALSO INFORMED THAT AS PER THE STOCK REGISTER VIDE RECEIPT NO.139 OF 18/12/2006 THERE WAS A PURCHASE ACCOUNT OF GOLD ORNAMENTS THROUGH WHICH 1821.330 GRAMS GOLD WAS PURCHASED. BUT THAT FACT WAS ALSO NOT PROPERLY EXPLAINED. LD.A R HAS VEHEMENTLY STATED THAT THE MANUAL STOCK REGISTER WA S PRESENT AT THE TIME OF SURVEY BECAUSE ONE OF THE PAGE OF THE MANUA L STOCK REGISTER WAS DULY STAMPED BY AN INSPECTOR OF INCOME TAX, CIR CLE-3 AHMEDABAD. IN SHORT, THE EFFORTS OF THE ASSESSEE I N THE APPELLATE PROCEEDINGS IS THAT THE VITAL EVIDENCES, WHICH WERE VERY MUCH AVAILABLE AT THE TIME OF SURVEY, WERE NOT CONSIDERE D BY THE REVENUE DEPARTMENT. ONLY DUE TO NON-COGNIZANCE OF THOSE REC ORDS/ EVIDENCES IT WAS ALLEGED THAT AN EXCESS STOCK WAS U NEARTHED. THE EMPHASIS BEFORE US IS THAT HAD THE PROPRIETOR OF TH E CONCERN WAS AVAILABLE, THEN THERE WAS NO POSSIBILITY OF NON-SAT ISFACTION OF THE REVENUE DEPARTMENT SPECIALLY WHEN THE EVIDENCES WER E ALREADY IN EXISTENCE. IT HAS BEEN STRESSED UPON THAT NO NEW EV IDENCE WAS PLACED THEREFORE, IT WAS ALL THE MORE NECESSARY TO REVERT THE ISSUE BACK TO THE AO TO RE-EXAMINE ALL THOSE EVIDENCES TO VERIFY THE VERACITY OF THE SAID CLAIM. IN VIEW OF THIS AND CON SIDERING THE ITA NO. 3223/AHD/2010 JAYANTILAL JIVANLAL SONI HUF VS. ITO ASST.YEAR 2007-08 - 14 - ENTIRETY OF THE CIRCUMSTANCES OF THE CASE, SPECIALL Y WHEN CERTAIN DOCUMENTS AND EVIDENCES ARE REQUIRED TO BE INVESTIG ATED AFRESH, WE DEEM IT NECESSARY TO RESTORE THE ISSUE BACK TO THE STAGE OF THE AO FOR DE NOVO ADJUDICATION. GROUND NO.1 OF THE ASSESSEE IS THEREFORE ALLOWED BUT FOR STATISTICAL PURPOSES . 7. GROUND NO.2 READS AS UNDER: 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XV I, AHMEDABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE BY CONFIRMING THE ADDITION OF RS.4,59,392/- IN RESPECT OF LABOUR CHARGES EXPENSES FOR EXCESS STOCK WORKED OUT DURING THE SURVEY PROCEEDINGS. 7.1. AT THE OUTSET, IT HAS BEEN INFORMED THAT THIS GROUND IS CONNECTED WITH GROUND NO.1 IN THE SENSE THAT THE DISCLOSURE OF RS.40 LACS WAS ALLEGEDLY INCLUDED SUPPRESSED LABOUR CHARGES, BUT A S PER AO AN AMOUNT OF RS.4,59,392/- WAS THE LABOUR CHARGES IN RESPECT OF THE EXCESS STOCK WORKED OUT BY HIM. HE HAS THEREFORE TAXED THE LABO UR CHARGES SEPARATELY. THE SAID ADDITION WAS CHALLENGED AND LD.CIT(A) HAS CONFIRMED THE SAME. SINCE THE ADDITION IN RESPECT OF EXCESS STOCK HAS N OW BEEN RESTORED BACK FOR DE NOVO CONSIDERATION THEREFORE THIS GROUND IN CONSEQUENCE THEREOF IS TO BE DECIDED AFRESH ACCORDINGLY, HENCE TO BE TREAT ED AS ALLOWED ONLY FOR STATISTICAL PURPOSE. 8. GROUND NO.3 READS AS UNDER: 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XV I, AHMEDABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE BY ITA NO. 3223/AHD/2010 JAYANTILAL JIVANLAL SONI HUF VS. ITO ASST.YEAR 2007-08 - 15 - CONFIRMING THE ESTIMATED AD-HOC DISALLOWANCE OF RS.11,00,000/- OUT OF SALES PROMOTION EXPENSES. 8.1. ASSESSEE HAS CLAIMED AN EXPENDITURE OF RS.24,2 8,780/- TOWARDS SALES PROMOTION. IT WAS ALSO NOTICED THAT EXPENDI TURE IN THE LAST YEAR WAS RS.11,44,972/-. IT WAS EXPLAINED THAT GIFT ARTICLE S WERE PURCHASED FOR DISTRIBUTION TO PROMOTE THE SALES. THE AO HAS NOT ACCEPTED THE SAID EXPLANATION. WHEN THE MATTER REACHED BEFORE THE FI RST APPELLATE AUTHORITY, LD.CIT(A) HAS CONFIRMED THE ACTION OF TH E AO ON THE GROUND THAT SINCE THE BOOKS OF ACCOUNT WERE NOT RELIABLE T HEREFORE IT WAS NOT CLEAR WHETHER THOSE GIFTS WERE AT ALL DISTRIBUTABLE OR NO T. 9. WE HAVE HEARD BOTH THE SIDES. IT IS EXPLAINED THAT GIFT POUCHES WERE PURCHASED TO KEEP THE GOLD ARTICLES FOR DISTRI BUTION TO CUSTOMERS. THE GIFT PURCHASES WERE DISTRIBUTED TO CUSTOMERS ALONG WITH THE SALE OF GOLD ARTICLES. IT HAS ALSO BEEN EXPLAI NED THAT THE GIFT ARTICLES WERE PURCHASED FROM REGISTERED DEALERS AND THE PAYM ENTS WERE MADE THROUGH CHEQUES. LD.AR HAS PLACED ON RECORD THE ACCOUNT OF GIFT MATERIAL PURCHASED TO DEMONSTRATE THAT FOR PURCHAS E OF GIFT MATERIAL OTHER EXPENSES, SUCH AS OCTROI AND FREIGHT, ETC. H AVE ALSO BEEN INCURRED AND THE ENTIRE EXPENDITURE IS FULLY VOUCHED THEREFO RE ALLOWABLE. ON CAREFUL EXAMINATION OF THIS ACCOUNT, IT IS EVIDENT THAT GIFT MATERIAL WAS PURCHASED FROM MAHAVIR TRADING CO. JALANDHAR, RUSHA BH ENTERPRISE MUMBAI, RANBIR TRADING COMPANY JALANDHAR, ETC. FUL L DETAILS OF THE PURCHASES AND THE PAYMENTS ARE ON RECORD. GIFT AR TICLES WERE FOUND TO BE LADIES HAND PURSE, PEN HOLDERS, PLASTIC BAGS, LEATH ER PASSPORT HOLDER CARDS WITH COMPARTMENTS, SPECTACLE CASES, JUTE BAGS, JEW ELLERY BOX, ETC. BY THE VERY NATURE OF THESE ARTICLES, IT HAD CLEARLY INDIC ATED THAT THOSE WERE ITA NO. 3223/AHD/2010 JAYANTILAL JIVANLAL SONI HUF VS. ITO ASST.YEAR 2007-08 - 16 - MEANT FOR DISTRIBUTION TO CUSTOMERS TO PROMOTE THE SALES. LD.AR HAS ALSO EXPLAINED THAT IT IS CUSTOMARY TO HANDOVER THE GOLD ARTICLES IN A POUCH TO THE CUSTOMERS. WE THEREFORE HOLD THAT THE EXPENDITU RE WAS BUSINESS RELATED, HENCE ALLOWABLE. IN THE RESULT WE HEREBY R EVERSE THE FINDINGS OF THE AUTHORITIES BELOW AND DIRECT TO ALLOW THE EXPEN DITURE. THIS GROUND IS ALLOWED. 10. GROUND NO.4 READS AS UNDER: 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XV I, AHMEDABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE BY CONFIRMING THE ESTIMATED ADHOC DISALLOWANCE OF RS.3,50,000/- OUT OF STATIONERY EXPENSES . 10.1. THE OBSERVATION OF THE AO WAS THAT AGAINST TH E TOTAL TURNOVER OF RS.5.94 CRORES ASSESSEE HAS CLAIMED STATIONERY EXPE NSES OF RS.42,078/- LAST YEAR, HOWEVER, DURING THE CURRENT YEAR ALMOST ON SIMILAR TURNOVER STATIONERY EXPENSES WERE RS.4.40 LACS. THE ASSESSE E HAS EXPLAINED THAT THE STATIONERY WAS PURCHASED FROM REGISTERED DEALERS. AO WAS NOT CONVINCED AND AD HOC DISALLOWANCE OF RS.3.5 LACS W AS MADE. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHO RITY WHO HAS AFFIRMED THE ACTION OF THE AO. 11. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, WE ARE OF THE VIEW THAT THE ASSESSEE HAS MAINTAINED PROPER ACCOUNT OF STATIONERY AND PRINTING EXPENSES AS PLACED ON PAGE NO.135 OF THE PAPER BOOK . STATIONERY WAS PURCHASED FROM REGISTERED SALES TAX SUPPLIERS AND M OST OF THE AMOUNT WAS PAID THROUGH BANK. THOUGH THIS FACT HAS ALSO NOT B EEN DENIED THAT SOME OF THE PAYMENTS WERE MADE IN CASH, HOWEVER, SUPPORT ING BILLS WITH ITA NO. 3223/AHD/2010 JAYANTILAL JIVANLAL SONI HUF VS. ITO ASST.YEAR 2007-08 - 17 - REQUISITE DETAILS WERE STATED TO BE VERY MUCH ON RE CORD AND THOSE WERE NOT DOUBTED BY THE AO. THOSE BILLS AND INVOICES ARE ALSO PART OF THE PAPER BOOK. LD.AR HAS DEMONSTRATED THAT WRITING PAD, ENVE LOPS, COMPUTER FLOPPY, ETC. WERE PURCHASED FOR THE PURPOSE OF THE BUSINESS. SINCE THE AO HAS NOT FOUND ANY DEFECT IN THE SAID ACCOUNT OR THE EVIDENCES PLACED IN SUPPORT OF THE STATIONERY PURCHASED; THEREFORE I N OUR OPINION THERE WAS NO OCCASION TO MAKE AN ADHOC DISALLOWANCE. WE HERE BY DIRECT TO DELETE THE SAME. THIS GROUND IS ALLOWED. 12. GROUND NO.5 READS AS UNDER: 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XV I, AHMEDABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE BY CONFIRMING THE ADDITION OF RS.15,408/- IN RESPECT OF EXCESS CASH ALLEGED TO BE WORKED OUT DURING THE SURVEY PROCEEDI NGS. 12.1. THIS GROUND HAS NOT BEEN SERIOUSLY PRESSE D BEFORE US, THEREFORE THE SAME IS DISMISSED AS SUCH. 13. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 14.10. 2011. SD/- SD/- ( G.D. AGARWAL ) ( MUKUL KR. SHRAWAT ) VICE PRESIDENT (AZ) JUDICIAL ME MBER AHMEDABAD; DATED 14 /10 /2011 7.. , . ../ T.C. NAIR, SR. PS ITA NO. 3223/AHD/2010 JAYANTILAL JIVANLAL SONI HUF VS. ITO ASST.YEAR 2007-08 - 18 - (6 2 /&8 (8*& (6 2 /&8 (8*& (6 2 /&8 (8*& (6 2 /&8 (8*&/ COPY OF THE ORDER FORWARDED TO : 1. +. / THE APPELLANT 2. /0+. / THE RESPONDENT. 3. $$ & %9 / CONCERNED CIT 4. %9() / THE CIT(A)-XVI, AHMEDABAD 5. 8<= /& , , / DR, ITAT, AHMEDABAD 6. = >3 / GUARD FILE. (6 % (6 % (6 % (6 % / BY ORDER, 08& /& //TRUE COPY// ! !! !/ // / $ $ $ $ ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION.. 04/10/2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 05/10/2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 14.10.11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 14.10.11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER