DCIT, CHENNAI V. Saravana Selvarathinam Retail (P) Ltd., CHENNAI

ITA 359/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8793 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 21-06-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 16-02-2016
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: K M MOHANDASS
• Keywords: Unexplained expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . . . , . !' , # $ % [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.2235/MDS/2015 / ASSESSMENT YEAR : 2012-13 M/S SARAVANA SELVARATHNAM RETAIL PVT. LTD NO.14, RANGANATHAN STREET T. NAGAR, CHENNNAI 600 017 VS. THE ASSTT. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE IV(2) CHENNAI [PAN AAKCS 2680 M] ( &' / APPELLANT) ( ()&' /RESPONDENT) ./ I.T.A.NO.359/MDS/2016 / ASSESSMENT YEAR : 2012-13 THE D Y. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE 1(2) CHENNAI VS. M/S SARAVANA SELVARATHNAM RETAIL PVT. LTD NO.14, RANGANATHAN STREET T. NAGAR, CHENNNAI 600 017 ( &' / APPELLANT) ( ()&' /RESPONDENT) ASSESSEE BY : SHRI K.M. MOHANDASS, CA DEPARTMENT BY : SHRI SUPRIYO PAL, JCIT / DATE OF HEARING : 21 - 0 6 - 2016 / DATE OF PRONOUNCEMENT : 05 - 08 - 2016 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER BOTH THE APPEAL OF THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX ITA NO.2235/15 & 359/16 :- 2 -: (APPEALS)-18, CHENNAI, DATED 23.9.2015 AND PERTAINS TO ASSESSMENT YEAR 2012-13. THEREFORE, WE HEARD THEM TOGETHER AN D DISPOSING OF THE SAME BY THIS COMMON ORDER. 2. LET US FIRST TAKE UP ASSESSEES APPEAL I.T.A.NO. 2235/MDS/2015. 3. THE FIRST GROUND OF APPEAL IS WITH REGARD TO THE VA LUATION OF THE EXCESS STOCK OF GOLD JEWELLERY. 4. SHRI K.M. MOHANDASS, LD. REPRESENTATIVE FOR THE AS SESSEE SUBMITTED THAT THE ASSESSEE VALUED THE EXCESS STOC K OF GOLD JEWELLERY AT ` 20,489/- PER GRAM. HOWEVER, THE ASSESSING OFFICE R ADOPTED THE RATE OF ` 20,498/- PER GM. THE LD. REPRESENTATIVE SUBMITTE D THAT THE CIT(A), HOWEVER, ADOPTED THE MARKET RATE OF GOLD WH ICH WAS PREVAILING AS ON 19.8.2011 SUBSEQUENT TO THE DATE OF SEARCH. ACCORDING TO THE LD. REPRESENTATIVE, THE DATE OF SEARCH WAS 18.8.20 11, THEREFORE, FOR THE PURPOSE OF VALUING THE EXCESS STOCK OF GOLD JEW ELLERY FOUND DURING THE COURSE OF SEARCH OPERATION, THE MARKET RATE OF GOLD WHICH WAS PREVAILING AS ON 18.8.2011 HAS TO BE TAKEN INTO CON SIDERATION. THEREFORE, THE CIT(A) IS NOT CORRECT IN CONFIRMING THE RATE ADOPTED BY THE ASSESSING OFFICER. 5. REFERRING TO THE GOLD RATE HISTORY WHICH WAS SAID T O BE DOWNLOADED FROM THE WEBSITE, THE COPY OF WHICH IS A VAILABLE ON RECORD, ITA NO.2235/15 & 359/16 :- 3 -: THE LD. REPRESENTATIVE SUBMITTED THAT AS ON 18.8.20 11, 24 CT. PER GM GOLD WAS ` 2664/ PER GM. THE STANDARD ORNAMENTAL GOLD OF 22 CT WAS ONLY ` 2477/-. THE ASSESSEE HAS CLAIMED ONLY ` 2489/- PER GM WHICH IS MORE THAN THE MARKET RATE OF GOLD ON THE DATE OF SEARCH. THE CIT(A), HOWEVER, ADOPTED THE RATE OF ` 2498/- PER GM WHICH IS THE RATE PREVAILING AS ON 19.8.2011. THEREFORE, ACCORD ING TO THE LD. REPRESENTATIVE, THE RATE ADOPTED BY THE CIT(A) IS N OT JUSTIFIED. 6. ON THE CONTRARY, SHRI SUPRIYO PAL, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE SEARCH WAS CONDUC TED ON 18.8.2011 AND THE VALUATION WAS DONE ON 19.8.2011. THEREFORE , THE VALUATION OFFICER ADOPTED THE VALUE OF JEWELLERY BY TAKING IN TO CONSIDERATION THE RATE PREVAILING AS ON 19.8.2011 AND HENCE, THE CIT( A) HAS RIGHTLY CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICE R. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE VALUATION OF THE JEWELLERY FOUND DURING THE COURSE OF SEARCH OPERATI ON HAS TO BE VALUED ON THE DATE OF SEARCH OPERATION. ON 18.8.2011, THE STANDARD ORNAMENTAL GOLD VALUE WAS ` 2477/- WHICH IS NOT IN DISPUTE. THE ASSESSEE ADOPTED ` 2,489/- PER GM WHICH IS MORE THAN THE PREVAILING MARKET RATE AS ON 18.8.2011. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE VALUE OF THE GOLD JEWELLERY HAS TO BE ASCERTAINED ON ITA NO.2235/15 & 359/16 :- 4 -: THE DATE OF SEARCH AND DEFINITELY NOT SUBSEQUENT TO THAT. THEREFORE, THE CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ADDIT ION MADE BY THE ASSESSING OFFICER. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO ADOPT THE RATE OF ` 2,489/- PER GM AS CLAIMED BY THE ASSESSEE. 8. THE NEXT GROUND OF APPEAL IS WITH REGARD TO ADDITIO N TOWARDS OF SHORTAGE OF SILVER AND DIAMOND ARTICLE. 9. SHRI K.M.MOHANDASS, THE LD. REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER MADE ADDITION OF VALUE OF ENTIRE SHORTAGE OF SILVER AND DIAMOND ARTICLE. ACCORDING TO THE LD. REPRESENTATIVE, IF AT ALL ANY ADDITION COULD BE MAD E ONLY IN RESPECT OF THE GROSS PROFIT MARGIN AND NOT ON THE VALUE OF THE SHORTAGE OF STOCK. THE LD. REPRESENTATIVE PLACED HIS RELIANCE ON THE D ECISION OF THE MUMBAI BENCH OF THIS TRIBUNAL IN PRANSHUKHLAL & SON S JEWELLERS VS ACIT, 116 TTJ 197. 10. ON THE CONTRARY, SHRI SUPRIYO PAL, LD. DR SUBMITTED THAT THE EXPENDITURE RELATING TO SALE OF DEFICIENT STOCK WAS ALREADY DEBITED TO THE TRADING ACCOUNT, THEREFORE, NO FURTHER EXPENDIT URE COULD BE ALLOWED. HENCE, THE ENTIRE COST OF THE DEFICIENT S TOCK HAS TO BE TAKEN INTO CONSIDERATION. ITA NO.2235/15 & 359/16 :- 5 -: 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. TH E ASSESSEE ADMITTED THE DEFICIENT STOCK. THE ASSESSING OFFICER ESTIMAT ED THE COST OF SHORTAGE OF STOCK IN SILVER AND DIAMOND TO THE EXTE NT OF ` 1,01,26,827/-. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHEN THERE IS DEFICIENT STOCK OR SHORTAGE OF STOCK, THE PRESUMPTION IS THAT THE ASSESSEE HAS SOLD THE SAME OUTSIDE THE BOOKS O F ACCOUNT. WHEN THE ASSESSEE SOLD THE STOCK OUTSIDE THE BOOKS OF A CCOUNT, THE COST OF INVESTMENT MADE IN THE SILVER AND DIAMOND WHICH WAS SOLD OUTSIDE THE BOOKS OF ACCOUNT HAS TO BE ALLOWED. THEREFORE, AS RIGHTLY SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, ONLY THE PROFI T ELEMENT EMBEDDED ON SUCH SALE HAS TO BE TAKEN INTO CONSIDERATION. I N OTHER WORDS, ONLY THE NET PROFIT EARNED BY THE ASSESSEE ON SALE OF S ILVER AND DIAMOND HAS TO BE TAKEN INTO CONSIDERATION. SINCE THE ASS ESSEE CLAIMS THAT GROSS PROFIT HAS TO BE ADDED, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER SHALL TAKE THE GROSS PR OFIT ON SALE OF DIAMOND AND SILVER WHICH WAS FOUND TO BE DEFICIENT DURING THE COURSE OF SEARCH OPERATION. ACCORDINGLY THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO TAKE ONLY THE GROSS PROFIT ON SALE OF SHORTAGE OF STOCK ON SILVER AND DIAMOND WHICH WAS FOUND DURING THE COURSE OF SEARCH OPERATION. ITA NO.2235/15 & 359/16 :- 6 -: 12. NOW, COMING TO THE REVENUES APPEAL I.T.A.NO. 359/MDS/2016, SHRI SUPRIYO PAL, LD. DR SUBMITTED TH AT THE ONLY ISSUE ARISES FOR CONSIDERATION IS ADDITION OF ` 48,85,086/- TOWARDS DEFICIENT CASH FOUND DURING THE COURSE OF SEARCH OPERATION. 13. DURING THE COURSE OF SEARCH OPERATION, THE REVENUE AUTHORITIES FOUND SHORTAGE OF ` 48,85,086/- IN THE RESIDENTIAL PREMISES OF SHRI SARAVANAN ARUL. THE LD. DR SUBMITTED THAT THE CASH AVAILABILITY AS PER THE BOOKS OF ACCOUNT AS ON 18.8.2011 WAS ` 4,12,81,350/-. HOWEVER, ON PHYSICAL EXAMINATION, THE ACTUAL CASH F OUND WAS ` 3,63,96,264/-, THEREFORE, THE ASSESSING OFFICER FOU ND THAT THE BALANCE OF ` 48,85,086/- WAS UNEXPLAINED EXPENDITURE ON THE PA RT OF THE ASSESSEE ACCORDINGLY, THE SAME WAS BROUGHT TO TAXA TION. HOWEVER, THE CIT(A) FOUND THAT THE ASSESSING OFFICER HAS NOT ESTABLISHED THAT THE ASSESSEE INCURRED THE EXPENDITURE. ACCORDING TO THE LD. DR, WHEN THERE IS SHORTAGE OF CASH, IT IS FOR THE ASSESSEE TO EXPLAIN. WHEN THE ASSESSEE COULD NOT EXPLAIN THE SHORTAGE OF CASH, TH E PRESUMPTION IS THAT THE ASSESSEE HAS SPENT THE SAME OUTSIDE THE B OOKS OF ACCOUNT. THEREFORE, THE CIT(A) IS NOT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE. 14. ON THE CONTRARY, SHRI K.M.MOHANDASS, LD. REPRESENTA TIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE EXPLAIN ED BEFORE THE ITA NO.2235/15 & 359/16 :- 7 -: ASSESSING OFFICER THAT THE SHORTAGE OF CASH WAS DUE TO UNACCOUNTED PURCHASES OF GOLD JEWELLERY , THEREFORE, THE SAME W AS OFFERED FOR TAXATION. THE ASSESSEE HAS ALSO EXPLAINED THAT ` 48,85,086/- WAS DUE TO UNACCOUNTED PURCHASE OF GOLD JEWELLERY. THE AS SESSEE HAS OFFERED THE EXCESS GOLD JEWELLERY TO THE EXTENT OF ` 17,89,66,890/- WHICH WAS FULLY SUBJECTED TO TAX. WHEN THE EXCESS JEWELLERY WAS OFFERED FOR TAXATION, THE CIT(A) HAS FOUND THAT THERE CANNOT BE ANY PRESUMPTION THAT THE SHORTAGE OF CASH WAS SPENT BY THE ASSESSE E OUTSIDE THE BOOKS OF ACCOUNT. ACCORDING TO THE LD. REPRESENTAT IVE, THE CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. AD MITTEDLY, THE REVENUE AUTHORITIES FOUND SHORTAGE OF CASH OF ` 48,85,086/- DURING THE COURSE OF SEARCH OPERATION. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS OFFERED ` 17,89,66,890/- TOWARDS EXCESS JEWELLERY FOUND DURING THE COURSE OF SEARCH OPERATION. THE CLAIM O F THE ASSESSEE IS THAT THE SUM OF ` 48,85,086/- WAS UTILIZED FOR PURCHASE OF UNACCOUNT ED GOLD JEWELLERY. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT IN THE ABSENCE OF ANY OTHER MATERIAL, THE CLAI M OF THE ASSESSEE THAT THE SUM OF ` 48,85,086/- WAS USED FOR PURCHASE OF GOLD JEWELLER Y, ITA NO.2235/15 & 359/16 :- 8 -: CANNOT BE DOUBTED. THIS TRIBUNAL DO NOT FIND ANY R EASON TO INTERFERE WITH THE ORDER OF THE CIT(A) AND ACCORDINGLY, THE S AME IS CONFIRMED. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLO WED AND THAT OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH AUGUST, 2016, AT CHENNAI. SD/- SD/- ( . !' ) (A. MOHAN ALANKAMONY) # / ACCOUNTANT MEMBER ( . . . ) ) (N.R.S. GANESAN) / JUDICIAL MEMBER / CHENNAI ! / DATED: 5 TH AUGUST, 2016 RD !' # $% &% / COPY TO: 1 . '( / APPELLANT 4. ) / CIT 2. #*'( / RESPONDENT 5. %+, # - / DR 3. ) () / CIT(A) 6. ,/ 0 / GF