M/s Sardar Jewellers, Ludhiana V. DCIT, Ludhiana

ITA 359/CHANDI/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80915 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 29-09-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 23-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained investment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 359/CHD/2012 ASSESSMENT YEAR: 2006-07 M/S SARDAR JEWELLERS, V THE DCIT, CLOCK TOWER, CIRCLE II, CHAURA BAZAR, LUDHIANA. LUDHIANA. PAN: ABDFS3357G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI HARI OM AROR A RESPONDENT BY : SHRI MAHAVIR SINGH DATE OF HEARING : 29.09.2014 DATE OF PRONOUNCEMENT : 30.09.2014 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LD. CIT(APPEALS)-II LUDHIANA DATED 09.01.2012 FOR ASSES SMENT YEAR 2006-07, CHALLENGING THE ADDITION OF RS. 8,01,647/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN GOLD PURCHASED OUTSIDE THE BOOKS OF ACCOUNT. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSING OFFICER PERUSED FROM THE SALE BILLS THAT APART FROM WEIGHT OF JEWELLERY, ASSESSEE ALSO CHARGED FOR WEIGHT OF POLISH IN IT. THE ASSESSING OFFICER WORKED OUT TOTAL GOLD OF 1145.21 GMS. SOLD BY THE ASSESSEE IN THE SHAPE OF POLISH. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHERE PURCHASES OF THIS GOLD WAS ACCO UNTED FOR IN THE BOOKS OF ACCOUNT AND WHY THIS GOLD BE NOT TREAT ED AS 2 PURCHASED OUTSIDE THE BOOKS OF ACCOUNT AND ADDITION BE NOT MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT ON THIS A CCOUNT. THE ASSESSEE REPLIED AND SUBMITTED BEFORE LD. CIT(A PPEALS) THAT AMOUNT AGAINST THE SAID QUANTITY HAS BEEN CHARGED F ROM THE CUSTOMERS AGAINST WASTAGE FOR MAKING JEWELLERY, REC EIPTS AGAINST WHICH HAVE BEEN DULY INCLUDED IN THE FIGURE S OF THE SALES. THIS QUANTITY HAS BEEN SIMPLY MENTIONED ON THE BILL ALONGWITH WEIGHT OF ORNAMENT SOLD FOR THE PURPOSE O F CHARGING FROM THE CUSTOMERS. IT WAS FURTHER CLARIFIED THAT THE SAID POLISH DOES NOT REFLECT THE SALES ITSELF. THEREFOR E, IT IS NOT PURCHASED OUTSIDE THE BOOKS OF ACCOUNT. THE ASSESS ING OFFICER, HOWEVER DID NOT ACCEPT CONTENTION OF THE ASSESSEE A ND MADE THE ADDITION ON ACCOUNT OF THE GOLD SOLD TO THE CUSTOME RS FOR WHICH NO CORRESPONDING PURCHASES OF POLISH HAVE BEEN SHOW N. 3. THE ADDITION WAS CHALLENGED BEFORE THE LD. CIT(A PPEALS) AND THE ASSESSEE PRODUCED COMPLETE DETAILS OF SALES , QUANTITY, PURCHASES ETC. AND CONTENDED THAT NO DEFECTS HAVE B EEN FOUND IN THE BOOKS OF ACCOUNT MAINTAINED BY ASSESSEE. IT WAS FURTHER SUBMITTED THAT POLISH CHARGED DO NOT REFLECT THE SA LE OF GOLD, HOWEVER, THE QUANTITY UNDER THE HEAD POLISH MENTI ONED IN THE BILL IS A KIND OF MAKING CHARGES WHICH HAS BEEN CHA RGED FROM THE CUSTOMER AND THIS FACT IS APPARENT FROM THE SAL ES BILL. THE ASSESSING OFFICER IN HIS COMMENTS BEFORE LD. CIT(AP PEALS) STATED THAT THE WASTAGE FOR MAKING JEWELLERY SHOULD NOT BE ACCEPTED BECAUSE BOOKS OF ACCOUNT DID NOT SHOW A NY SUCH THING. THE LD. CIT(APPEALS) SUSTAINED ADDITION AND DISMISSED THE APPEAL OF THE ASSESSEE. HIS FINDINGS IN PARA 4 OF 3 THE IMPUGNED ORDER ARE REPRODUCED AS UNDER : I HAVE GONE THROUGH THE CONTENTION OF THE APPELLANT'S COUNSEL AND ALSO PERUSED HIS SUBMISSION PLACED ON RECORD. I HAVE ALSO PERUSED COMMENTS OF THE LD. AO IN THIS REGARD. AFTER CONSIDERING ALL THESE AND TOTALITY OF THE FACTS AND CIRCUMSTANCES, I AM OF THE VIEW THAT ONE THING IS ADMITTED IN THIS CASE THAT THE SOLD HAS BEEN SOLD IN THE SHAPE OF POLISH BY ME APPELLANT AS HE NOT FURNISHED ANY EXPLANATION/ EVIDENCE/DOCUMENTARY PROOF TO EXPLAIN THAT THESE ARE ACTUALLY CHARGES MADE TO THE CUSTOMERS. FURTHER, 1 AM FULLY AGREED WITH THE AO'S OBSERVATION THAT NO CUSTOMER WILL PAY FOR THE GOLD WHICH HAS NOT BEEN SOLD TO HIM AND ALSO THE APPELLANT FAILED TO GIVE ANY REPLY AGAINST THE CONTENTIONS RAISED BY THE AO VIDE HIS COUNTER COMMENTS ON HIS WRITTEN SUBMISSIONS. THEREFORE, KEEPING IN VIEW THE ABOVE, THE ADDITION MADE BY THE AO ON ACCOUNT OF UNEXPLAINED INVESTMENT IN PURCHASE OF 1145.21 GM OF GOLD OUTSIDE THE BOOKS OF ACCOUNTS IS HEREBY CONFIRMED AND APPELLANT'S RELEVANT GROUNDS OF APPEAL ARE DISMISSED ACCORDINGLY. 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND MATERIA L ON RECORD. THE ASSESSING OFFICER FOUND THAT ASSESSEE HAS SOLD GOLD AS POLISH FOR WHICH NO CORRESPONDING PURCHASES HAVE BEEN SHOWN. THE ASSESSEE, HOWEVER SUBMITTED BEFORE LD. C IT(APPEALS) THAT THE POLISH CHARGES DID NOT REFLECT THE SALE OF GOLD AND FURTHER EXPLAINED THAT UNDER THE HEAD POLISH MENT IONED IN THE BILLS, IT IS MAKING CHARGES. THE SUBMISSION OF T HE ASSESSEE IS WHOLLY INCORRECT BECAUSE THE COPIES OF BILLS WHICH ARE FURNISHED IN THE PAPER BOOK CLEARLY FIND MENTION THAT THE ASS ESSEE CHARGED FOR THE VALUE OF THE SALE OF GOLD IN THE NA ME OF POLISH ALSO. THUS, THE ASSESSEE ALLEGEDLY CHARGED RATE OF GOLD SOLD IN THE NAME OF POLISH. THEREFORE, THERE IS NO QUESTIO N OF TAKING A CONTRARY STAND AS AGAINST THE DETAILS MENTIONED IN THE SALE BILLS. IT IS NOWHERE MENTIONED IN THE SALE BILLS T HAT IN FACT IT 4 WAS MAKING CHARGES CHARGED BY THE ASSESSEE. WE M AY ALSO NOTE HERE THAT DURING THE COURSE OF ARGUMENTS, WE H AVE ASKED LD. COUNSEL FOR THE ASSESSEE TO EXPLAIN AS TO WHICH MATERIAL IS USED FOR POLISHING THE GOLD JEWELLERY AND WHETHER A NY GOLD ITEM IS USED FOR POLISHING THE GOLD ORNAMENTS. HOWEVER, LD. COUNSEL FOR THE ASSESSEE WAS NOT ABLE TO DEMONSTRATE AS TO WHICH ITEM IS USED FOR POLISHING GOLD ORNAMENTS/JEWELLERY. TH IS FACT, ITSELF WOULD SUGGEST THAT WHEN NO PURCHASES OF POLISH HAVE BEEN SHOWN IN THE BOOKS OF ACCOUNT, CERTAINLY THE POLISH IN WHATEVER ACCOUNT/NAME MAY BE AS HAVE BEEN USED BY ASSESSEE F OR POLISHING THE GOLD ORNAMENTS, SOME PURCHASES OF OTH ER ITEMS OF CHEMICAL ETC. WOULD HAVE BEEN MADE OUTSIDE THE BOOK S OF ACCOUNT WHICH HAVE NOT BEEN ENTERED INTO THE BOOKS BY THE ASSESSEE. IT IS A COMMON KNOWLEDGE THAT FOR POLISH ING THE GOLD ORNAMENTS, GOLD ITEMS CANNOT BE USED. THEREFORE, T HERE APPEARS SOME MIS-DESCRIPTION IN THE SALES BILLS OF THE ASSESSEE. NO DETAILS OF MAKING CHARGES ARE ALSO MENTIONED IN THE SALES BILLS. THEREFORE, IT IS CLEAR THAT ASSESSEE HAS NO T COME WITH SPECIFIC REPLY BEFORE THE AUTHORITIES BELOW AND HAV E SOMETHING CONCEALED BEFORE THE AUTHORITIES BELOW WITH REGARD TO CHARGING FROM THE CUSTOMER IN THE NAME OF POLISH. THE TOTAL ITY OF THE FACTS AND CIRCUMSTANCES WOULD CLEARLY REVEAL THAT T HE BOOKS OF ACCOUNT OF THE ASSESSEE WERE NOT WHOLLY RELIABLE. IT IS ALSO WELL SETTLED LAW THAT THE ENTIRE SALES WOULD NOT BE THE PROFIT OF THE ASSESSEE. ONLY PROFIT IS TO BE TAXED. THE TAX AUDI T REPORT OF THE ASSESSEE REVEALED THAT ASSESSEE HAS SHOWN GROSS PROFIT RATE OF 5.95% WHICH IS VERY LOW. THE ASSESSEE HAS ALSO SHOWN MEAGER INCOME IN THE RETURN OF INCOME AT RS. 5,09,4 90/-. 5 THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS AN D CIRCUMSTANCES, IT WOULD BE REASONABLE AND APPROPRIA TE TO SUSTAIN PART ADDITION IN THIS CASE INSTEAD OF SUSTA INING ENTIRE ADDITION OF RS. 8,01,647/-. IN VIEW OF THE ABOVE D ISCUSSION, IT WOULD BE REASONABLE AND APPROPRIATE TO SUSTAIN THE ADDITION OF RS. 3 LACS AS AGAINST THE ADDITION OF RS. 8,01,647/ -. THE AUTHORITIES BELOW SHALL RESTRICT THE ADDITION TO RS . 3 LACS IN ALL. REST OF THE AMOUNT WOULD STAND DELETED. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER,2014. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30 TH SEPTEMBER,2014. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH