Neha Jewellers Pvt. Ltd., Delhi V. ACIT, New Delhi

ITA 3711/DEL/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91270 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2015
• Appeal Filed By: Assessee
• Bench Allotted: F
• Next Hearing Date: 01-06-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 04-08-2010
• Court: TRIBUNAL
• Department Lawyers: VIVEK WODEK
• Keywords: Income from undisclosed sources; Search and seizure; Valuation report; Revised return
• Section: 143(3); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F NEW DELHI) BEFORE SHRI I.C. SUDHIR AND SHRI J.S. REDDY ITA NO. 3711/DEL/2010 ASSESSMENT YEAR: 2006-07 NEHA JEWELLERS PVT. LTD., VS. ASSISTANT CIT, 1170-KUCHA MAHAJANI, CENTRAL CIRCLE-12, CHANDNI CHOWK, NEW DELHI. (PAN: AAACN7129G) (APPELLANT) (RESPONDENT) ITA NO. 4018/DEL/2010 ASSESSMENT YEAR: 2006-07 DEPUTY CIT, VS. NEHA JEWELLERS PVT. LTD., CENTRAL CIRCLE-12, 1170-KUCHA MAHAJANI, NEW DELHI. CHANDNI CHOWK, (PAN: AAACN7129G) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI VED JAIN , CA RESPONDENT BY: SHRI VIVEK WODEK AR, CIT(DR) DATE OF HEARING : 01.06.2015 DATE OF PRONOUNCEMENT: 26 :06.2015 ORDER PER I.C. SUDHIR: JUDICIAL MEMBER THESE ARE THE CROSS APPEALS AGAINST THE COMMON FIR ST APPELLATE ORDER. 2. THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER ON THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LD. CIT(A) IS NOT CORRECT IN L AW AND FACTS. 2 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, LEA RNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING TH E ADDITION OF RS.3,12,88,397/- ON ACCOUNT OF UNEXPLAI NED INVESTMENT (IN TERMS OF EXCESS STOCK OF JEWELLERY) WITHOUT APPRECIATING THE ISSUE RAISED IN REMAND REPORT OF T HE A.O. 3. THE ASSESSEE ON THE OTHER HAND HAS IMPUGNED FIRS T APPELLATE ORDER ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. COMMISSIONER OF INCOME TAX (APPEALS), WAS NOT JUSTI FIED IN DISMISSING LEGAL GROUND OF THE ASSESSEE THAT THE O RDER PASSED BY THE A.O. U/S 153A WAS WITHOUT JURISDICTION SINCE , THERE WAS NO SPECIFIC AUTHORIZATION U/S 132 OF THE I.T. ACT I N THE NAME OF THE ASSESSEE AND HENCE IN VIEW OF THE DECISION OF A LLAHABAD HIGH COURT IN THE CASE OF CIT VS. VANDANA SHARMA IN ITA NO. 2 OF 2009 THE ORDER OF THE A.O. IS VOID AB INITIO. 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE LD . COMMISSIONER OF INCOME TAX (APPEALS), HAS ERRED IN CONFIRMING ADDITION OF RS.1,65,26,469/- TOWARDS VAL UE OF EXCESS STOCK OF GOLD ORNAMENTS AND JEWELLERY. 3. LD. COMMISSIONER OF INCOME TAX (APPEALS), WAS NO T JUSTIFIED IN ACCEPTING THE VALUATION REPORT OF DEPA RTMENT VALUATION OFFICER AS SOLE BASIS FOR VALUATION OF ST OCK OF GOLD ORNAMENTS AND JEWELLERY, AND FAILED TO APPRECIATE T HE ANOMALIES POINTED OUT IN THE VALUATION REPORT OF DV O, BY THE 3 APPELLANT BEFORE THE ASSESSING OFFICER AND DURING A PPELLATE PROCEEDINGS. 4. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE LD . COMMISSIONER OF INCOME TAX (APPEALS), WAS NOT JUSTI FIED IN REJECTING THE VALUATION REPORT OF INDEPENDENT REGIS TERED VALUER, ON VALUATION OF STOCK-IN TRADE ON THE DATE OF SEARC H AT RS.11,72,88,275/-, SUBMITTED BY THE ASSESSEE DURING ASSESSMENT AND APPELLATE PROCEEDINGS. 5. LD. COMMISSIONER OF INCOME TAX (APPEALS), WAS NO T JUSTIFIED IN REJECTING APPELLANTS EXPLANATION REGA RDING CONTRIBUTION OF 18548.448 GRAMS OF GOLD ORNAMENTS I N THE STOCK-IN-TRADE BY MR. SANJEEV KUMAR AGARWAL, DIRECT OR OF THE APPELLATE COMPANY, DURING VARIOUS YEARS, SOURCED FR OM ADDITIONAL INCOME OFFERED FOR TAXATION BY HIM. 4. HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY T HE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW, MATERIAL AVAILA BLE ON RECORD AND THE DECISIONS RELIED UPON. 5. THE FACTS IN BRIEF ARE THAT THE BUSINESS PREMISE S OF THE ASSESSEE AND RESIDENTIAL PREMISES OF ITS DIRECTOR SHRI SANJIV KU MAR AGGARWAL WAS SUBJECTED TO SEARCH AND SEIZURE OPERATION UNDER SEC . 132 OF THE INCOME-TAX ACT, 1961 ON 9.12.2005. THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 29.11.2006 DECLARING INCOME OF RS.5,85,119 WHICH WA S LATTER ON REVISED TO 4 THE INCOME OF RS.1,78,65,526. THE REVISED INCOME IN CLUDED RS.1,65,73,947 TOWARDS VALUE OF EXCESS STOCK AND RS.7,06,460 TOWAR DS EXCESS CASH FOUND DURING SEARCH. THE ASSESSEE IS ENGAGED IN THE BUSIN ESS OF MANUFACTURING AND TRADING OF GOLD ORNAMENTS AND JEWELLERY. DURING THE COURSE OF SEARCH AT BUSINESS PREMISES, THE STOCK IN TRADE OF GOLD ORNAM ENTS, JEWELLERY AND DIAMONDS WAS FOUND AND WAS VALUED BY A CERTIFIED VA LUER AT RS.13,93,13,844. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE ALONG WITH REVISED RETURN OF INCOME, THE ASSESSING OFFICE R ADDED AN AMOUNT OF RS.4,78,14,866 TOWARDS VALUE OF EXCESS STOCK WITH O BSERVATION THAT DURING THE COURSE OF SEARCH AND SEIZURE OPERATION AT THE B USINESS PREMISES, STOCK OF GOLD OF 1,52,577.210 GRAMS WAS FOUND AND ALSO STOCK OF JEWELLERY (GOLD + DIAMOND) OF 6,230.45 CARATS FOUND WHICH WERE TOGETH ER VALUED AT RS.13,93,13,844 BY THE REGISTERED VALUER. AFTER CON SIDERING THE SUBMISSIONS AND EXPLANATION OFFERED BY THE ASSESSEE AND ADDITIO NAL INCOME OF RS.1,65,73,947 OFFERED IN THE REVISED RETURN IN RES PECT OF UNDISCLOSED STOCK FOR ASSESSMENT YEAR 2006-07 AND RS.50,00,000 FOR AS SESSMENT YEAR 2005-06, THE ASSESSING OFFICER COMPUTED VALUE OF UNEXPLAINED STOCK AT RS.4,78,14,866 AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. BESIDES THIS, THE ASSESSING OFFICER ALSO ADDED RS.4,01,020 IN RESPECT OF UNEXPLAINED CASH AND RS.50,000 IN RESPECT OF DISALLOWANCE OUT O F VARIOUS EXPENSES. 5 CONSEQUENTLY, THE ASSESSING OFFICER ASSESSED INCOME OF ASSESSEE AT RS.6,61,41,410. 6. AGAINST THE ABOVE ACTION OF THE ASSESSING OFFICE R, THE ASSESSEE PREFERRED FIRST APPEAL QUESTIONING THE COMPUTATION DONE BY THE ASSESSING OFFICER. IT WAS CONTENDED THAT THE ASSESSING OFFICE R HAS WRONGLY COMPARED THE STOCK AS PER BOOKS OF ACCOUNT AS ON 01.40.2005 AND AS ON THE DATE OF SEARCH I.E. 09.12.2005. THE ASSESSING OFFICER HAS C ONSIDERED ABSOLUTE VALUE TO FIND OUT THE EXCESS STOCK INSTEAD OF FIRST DETER MINING THE QUANTITY OF THE EXCESS STOCK AND THEN APPLYING THE RATE ON THE DATE OF THE SEARCH ON SUCH QUANTITY. IT WAS FURTHER CONTENDED THE DIFFERENCE I N THE QUANTITY AS PER BOOKS AND THE ACTUAL QUANTITY OF GOLD ORNAMENTS COMES TO 31,184.862 GRAMS. OUT OF THIS, 18,548.448 GRAMS IS THE WEIGHT OF THE GOLD ORNAMENTS CONTRIBUTED BY SHRI SANJIV KUMAR AGGARWAL, THE DIRECTOR IN WHOSE H ANDS THE ADDITIONAL INCOME HAS BEEN OFFERED AS PER THE STATEMENT FILED BY HIM. THE LEARNED CIT(APPEALS) CALLED FOR THE REMAND REPORT FROM THE ASSESSING OFFICER AND AFTER CONSIDERING THE REMAND REPORT, HE HAS ACCEPTE D THE CONTENTION OF THE ASSESSEE THAT ASSESSING OFFICER WAS INCORRECT IN VA LUING THE ENTIRE STOCK BOTH DISCLOSED AND UNDISCLOSED AT MARKET VALUE AND THEN DEDUCTING THE STOCK AS ON 01.04.2005 AT BOOK VALUE FOR MAKING THE ADDITION. T HE LEARNED 6 CIT(APPEALS) HELD THAT THE DIFFERENCE IN THE QUANTI TY OF THE GOLD ORNAMENTS AS PER THE BOOKS AND AS PHYSICALLY FOUND COMES TO 3 2,184.862 GRAMS AND THE VALUE OF THE SAME ON THE DATE OF SEARCH COMES TO RS .3,31,00,417. 7. THE LEARNED CIT(APPEALS), HOWEVER, DID NOT ALLOW THE DEDUCTION OF 18,548.448 GRAMS OF GOLD CLAIMED TO HAVE BEEN CONTR IBUTED BY ITS DIRECTOR, SHRI SANJIV KUMAR AGGARWAL. ON THIS BASIS THE LEAR NED CIT(APPEALS) HELD THAT THE VALUE OF UNDISCLOSED STOCK AS ON THE DATE OF SEARCH COMES TO RS.3,31,00,417. AFTER DEDUCTING THE ADDITIONAL INCO ME OFFERED BY THE ASSESSEE FOR THIS YEAR AT RS.1,65,73,948, THE LEARN ED CIT(APPEALS) CONFIRMED THE BALANCE AMOUNT OF RS.1,65,26,469 AS A GAINST RS.4,78,14,866 MADE BY THE ASSESSING OFFICER. 8. THE LEARNED CIT(APPEALS) HAS THUS GIVEN A PARTIA L RELIEF OF RS.3,12,88,397, WHICH HAS BEEN QUESTIONED BY THE RE VENUE IN ITS APPEAL AND THE ASSESSEE IS IN APPEAL IN RESPECT OF THE ADDITIO N OF RS.1,65,26,469 UPHELD BY THE LEARNED CIT(APPEALS) BY NOT GIVING DEDUCTION IN RESPECT OF THE GOLD ORNAMENTS CONTRIBUTED BY ITS DIRECTOR SHRI SANJIV K UMAR AGGARWAL. 7 9. IN THE APPEAL OF THE REVENUE, GROUND NO.1 IS GEN ERAL IN NATURE, HENCE, IT DOES NOT NEED INDEPENDENT ADJUDICATION. 10. GROUND NO.2 IS REGARDING DELETION OF ADDITION O F RS.3,12,88,397. IN ASSESSEES APPEAL, IS GENERAL IN NATURE. GROUND NO. 1 IS REGARDING VALIDITY OF JURISDICTION ACQUIRED BY THE ASSESSING OFFICER UNDE R SEC. 153A OF THE ACT, WHICH HAS NOT BEEN PRESSED BY THE LEARNED AR DURING THE COURSE OF HEARING. THE SAID GROUND IS REJECTED AS SUCH. THE GROUND NO. 2 IS GENERAL IN NATURE. GROUND NOS. 3 AND 4 OF THE APPEAL OF THE ASSESSEE A RE REGARDING VALUATION OF UNDISCLOSED STOCK AS ON THE DATE OF SEARCH AND GROU ND NO. 5 THEREOF IS REGARDING CONTRIBUTION OF JEWELLERY BY ITS DIRECTOR OVER THE YEARS IN THE STOCK IN TRADE OF THE ASSESSEE COMPANY SOURCED FROM HIS U NDISCLOSED INCOME DECLARED BY HIM. 11. WE THUS FIND THAT THE ISSUES INVOLVED IN THE AB OVE CROSS APPEALS ARE SAME. 12. IN SUPPORT OF THE GROUND NO.2 RAISED IN THE APP EAL PREFERRED BY THE REVENUE, THE LEARNED CIT(DR) HAS BASICALLY PLACED R ELIANCE ON THE ASSESSMENT ORDER. HE CONTENDED THAT DURING THE COUR SE OF SEARCH, INVENTORY 8 OF STOCK OF GOLD AND JEWELLERY FOUND WAS PREPARED A ND THE VALUATION OF THE SAME WAS DONE BY AN APPROVED VALUER. THE TOTAL VALU E AS PER THIS VALUATION WAS RS.13,93,13,844. THE ASSESSING OFFICER AFTER TA KING INTO CONSIDERATION THE OPENING STOCK AS ON 01.04.2005 OF RS.6,99,25,03 1 AND ALSO THE STOCK/UNDISCLOSED INCOME OFFERED BY THE ASSESSEE FO R TAXATION IN THE EARLIER YEARS OF RS.2,15,73,947 HAS CORRECTLY COMPUTED THE UNEXPLAINED STOCK AT RS.4,78,14,866 AND THE LEARNED CIT(APPEALS) WAS NOT JUSTIFIED IN REDUCING THIS AMOUNT TO RS.1,65,26.269. HE SUBMITTED THAT VA LUATION OF JEWELLERY IS THE CORE ISSUE IN THE PRESENT APPEAL. 13. ON THE OTHER HAND, THE LEARNED AR TRIED TO JUST IFY THE RELIEF GIVEN BY THE LEARNED CIT(APPEALS). TO THIS EXTENT, HE PLA CED RELIANCE ON THE FIRST APPELLATE ORDER. HE REITERATED THAT COMPUTATION OF EXCESS STOCK DONE BY THE ASSESSING OFFICER WAS INCORRECT. HE HAD COMPUTED TH E DIFFERENCE AS ON 09.12.2005 AND AS SUCH HE WAS NOT CORRECT IN TAKING THE STOCK AS PER BOOKS OF ACCOUNTS AS ON 01.04.2005. THE ASSESSING OFFICER SH OULD HAVE TAKEN THE STOCK AS PER BOOKS OF ACCOUNT AS ON 09.12.2005. HE CONTENDED FURTHER THAT THE WHOLE COMPUTATION DONE BY THE ASSESSING OFFICER ON THE BASIS OF ABSOLUTE VALUE WITHOUT TAKING INTO CONSIDERATION TH E WEIGHT IS INCORRECT. FOR THE PURPOSE OF DETERMINATION OF THE EXCESS STOCK, T HE ASSESSING OFFICER SHOULD HAVE FIRST DETERMINED THE WEIGHT OF THE STOC K PHYSICALLY FOUND AND 9 FROM THERE IT WAS NEEDED TO DEDUCT THE WEIGHT OF ST OCK AS PER BOOKS OF ACCOUNT AS ON THE DATE OF SEARCH. IN SUPPORT, HE PL ACED RELIANCE ON THE DECISION OF CHANDIGARH BENCH OF THE ITAT IN THE CAS E OF TALWAR SONS JEWELLER VS. ACIT- ITA NO. 1313 TO 1317/CHD/2010 DA TED 30.9.2013. 14. IN SUPPORT OF GROUND NOS. 3 AND 4 OF THE APPEAL OF THE ASSESSEE, THE LEARNED AR CONTENDED THAT THE VALUATION DONE BY THE VALUER ON THE DATE OF SEARCH WAS ALSO INCORRECT. HE INVITED OUR ATTENTION TO THE LETTER DATED 10.12.2005 I.E. THE DATE IMMEDIATELY AFTER THE DATE OF SEARCH, FILED WITH THE ADDITIONAL DIRECTOR OF INCOME-TAX (INV.). IN THIS L ETTER, IT WAS POINTED OUT THAT THE STOCK STATING AND THE VALUATION ON THE DAT E OF SEARCH WAS DONE CURSORILY. FURTHER IN THE CASE OF KUNDAN JEWELLERY & STUDDED GOLD ORNAMENTS, THE NET WEIGHT OF THE GOLD WAS OVER STAT ED AS NO DEDUCTION FOR WEIGHT OF STONES, BEADS AND GLASSES ETC. HAS BEEN G IVEN. IT WAS FURTHER SUBMITTED THAT THE VALUATION OF THE DIAMOND JEWELLE RY HAS BEEN CARRIED OUT BY AN UNAUTHORIZED PERSON, MR. VIKRAM MEHTA. ALL TH ESE ISSUES WERE RAISED BY THE ASSESSEE AT THE TIME OF SEARCH ON 09.12.2005 AND ALSO FOLLOWED UP WITH A LETTER ON 10.12.2005 I.E. THE VERY NEXT DAY WITH A VALUATION REPORT DONE BY AN APPROVED VALUER HIGHLIGHTING THE MAJOR D IFFERENCES IN SOME OF THE ITEMS TO DEMONSTRATE THAT THE VALUATION DONE ON THE DATE OF SEARCH WAS NOT CORRECT. THE LEARNED AR SUBMITTED THAT THESE IS SUES WERE ALSO RAISED 10 DURING THE COURSE OF ASSESSMENT BEFORE THE ASSESSIN G OFFICER AND BEFORE THE LEARNED CIT(APPEALS) BUT BOTH HAVE REJECTED THE CON TENTION OF THE ASSESSEE IN THIS REGARD. 15. IN SUPPORT OF GROUND NO.5 OF THE APPEAL OF THE ASSESSEE, THE LEARNED AR CONTENDED THAT THE LEARNED CIT(APPEALS) WAS NOT JUSTIFIED IN NOT ALLOWING CREDIT TO THE EXTENT OF 18,548.448 GRAMS B EING THE JEWELLERY ACQUIRED OUT OF THE UNDISCLOSED INCOME OFFERED AND TAXED IN THE NAME OF ITS DIRECTOR, SHRI SANJIV KUMAR AGGARWAL. IN THIS REGAR D, HE INVITED OUR ATTENTION TO THE CONTENTS OF PAGE NOS. 66 TO 88 OF THE PAPER BOOK, WHEREIN THE BALANCE SHEET FOR EACH OF THE YEARS OF SHRI SAN JIV KUMAR AGGARWAL SHOWING THE UNDISCLOSED INCOME OFFERED FOR TAXATION AND THE JEWELLERY ACQUIRED HAS BEEN STATED. IT WAS FURTHER SUBMITTED THAT THE LEARNED CIT(APPEALS) WAS NOT CORRECT IN NOT ALLOWING THE CR EDIT OF THE SAME BY MAKING A CASUAL REMARKS TO THE FACTS THAT THE ARGUM ENTS CANNOT BE ACCEPTED AS NO CONCRETE EVIDENCES HAVE BEEN FILED BY THE ASS ESSEE. THE LEARNED AR SUBMITTED THAT THE REMARKS GIVEN BY THE LEARNED CIT (APPEALS) ARE GENERAL. SHRI SANJIV KUMAR AGGARWAL HAD ALSO FILED AN AFFIDA VIT STATING THAT THE STOCK IN TRADE OF NEHA JEWELLERY PVT. LTD. I.E. THE ASSES SEE, INCLUDES GOLD ORNAMENTS ACQUIRED OUT OF THE INCOME EARNED BY MR. SANJIV KUMAR 11 AGGARWAL. HE SUBMITTED FURTHER THAT SHRI SANJIV KUM AR AGGARWAL IS THE PROMOTER DIRECTOR AND MANAGING THE AFFAIRS OF THE A SSESSEE COMPANY. THE LEARNED AR SUBMITTED THAT THE EXPLANATION GIVEN BY SHRI AGGARWAL AND THE ASSESSEE WAS A LOGICAL EXPLANATION AND THERE WAS NO THING ADVERSE TO REJECT THE SAME. THE LEARNED AR SUBMITTED THAT THE EXPLANA TION OF SHRI AGGARWAL HAS BEEN ACCEPTED BY THE ASSESSING OFFICER HIMSELF SUBSEQUENTLY IN THE ASSESSMENT ORDER PASSED UNDER SEC. 143(3) OF THE AC T IN THE ASSESSMENT YEAR 2008-09 OF THE ASSESSEE COMPANY. 16. THE LEARNED CIT(DR) ON THE OTHER HAND SUBMITTED THAT VALUATION ON THE DATE OF SEARCH WAS CARRIED OUT BY AN APPROVED V ALUER AND AS SUCH THE SAME CANNOT BE IGNORED. THE LETTER THOUGH FILED ON THE NEXT DATE OF SEARCH WAS AN AFTERTHOUGHT AND THAT CANNOT BE TAKEN INTO C ONSIDERATION. AS REGARDS, GROUND NO.5 (ASSESSEE) REGARDING CREDIT OF JEWELLER Y ACQUIRED OUT OF UNDISCLOSED INCOME OFFERED BY ITS DIRECTOR SHRI SAN JIV KUMAR AGGARWAL, THE LEARNED CIT(DR) CONTENDED THAT THE EXPLANATION GIVE N BY THE ASSESSEE CANNOT BE ACCEPTED IN THE ABSENCE OF ANY DIRECT EVI DENCE BEING PRODUCED BY IT DESPITE THE FACT THAT ITS DIRECTOR, SHRI SANJIV KUMAR AGGARWAL HAD OFFERED UNDISCLOSED INCOME AND WHICH HAS BEEN ASSESSED IN H IS HANDS. THE CREDIT OF 12 THE SAME CANNOT BE GIVEN TO THE ASSESSEE IN ABSENCE OF ANY CONCRETE EVIDENCE AS RIGHTY OBSERVED BY THE LEARNED CIT(APPEALS). 17. CONSIDERING THE ABOVE SUBMISSION, WE FIND THAT N THE DATE OF THE SEARCH PHYSICAL INVENTORY OF THE STOCK OF BOARD AND JEWELLERY WAS PREPARED AND VALUED AT RS.13,93,13,844. THE ASSESSEE COMPUTE D AN AMOUNT OF RS.2,15,73,947 AS THE VALUE OF THE UNDISCLOSED STOC K AS UNDER: GOLD JEWELLERY KGS. GMS. MGS. I. WEIGHT OF GOLD JEWELLERY AS PER REPORT OF DEPARTMENTAL REGISTERED VALUER 152 577 210 II. LESS: WEIGHT OF GOLD JEWELLERY AS PER STOCK REGISTER/ BOOKS OF ACCOUNTS SEIZED BY THE DEPARTMENT AS ON 8.12.2005 110 140 345 III. BALANCE OF THE UNACCOUNTED GOLD JEWELLERY 42 436 865 IV. LESS: WEIGHT OF GOLD JEWELLERY CONTRIBUTED BY SHRISANJEEV KUMAR AGGARWAL IN THE STOCK OF NEHAJEWELLERS PVT. LTD. OUT OF HIS UNACCOUNTED INCOMES OF RS. 1,32,23,820 FROM THE PURCHASE AND SALE OF PROPERTIES FOR THE ASSESSMENT YEARS 2000-2001 TO 2006-2007 WHICH HAD BEEN SURRENDERED AND HAD BEEN ACCEPTED BY THE ASSESSING OFFICER 18 548 417 V. WEIGHT OF GOLD AND DIAMOND JEWELLERY WHICH HAD BEEN SURRENDERED BY THE APPELLANT FOR THE ASSESSMENT YEARS 2005-2006 AND 2006-2007 23 888 448 III. THE VALUE OF UNACCOUNTED WEIGHT OF GOLD AND DIAMOND JEWELLERY OF RS. 1,42,21,800 WHICH HAD BEEN SURRENDERED BY THE APPELLANT BY APPLYING THE AVERAGE COST OF RS. (RS.) 1,42,21,800 13 595.34 PER GM. B. LOOSE DIAONDS AND DIAMOND JEWELLERY: WEIGHT OF LOOSE DIAMONDS ON 9.12.2005 AS PER REPORT OF THE DEPARTMENTAL REGISTERED VALUER 5504.60 CT. LESS: WEIGHT OF LOOSE DIAMONDS AS PER BOOKS/STOCK REGISTER SEIZED BY DEPARTMENT AS ON 8.12.2005 3794.53 CT. WEIGHT OF UNACCOUNTED WEIGHT OF LOOSE DIAMONDS: 1710.07 CT. THE VALUE OF UNACCOUNTED WEIGHT OF LOOSE DIAMONDS OF RS.70,27,417 BY APPLYING THE AVERAGE COST OF RS. 4109.09 PER CT. 70,27,417 C VALUE OF UNACCOUNTED STONES AS PER DEPARTMENTAL VALUER 3,24,730 D. TOTAL VALUE OF UNACCOUNTED GOLD AND DIAMOND JEWELLERY, LOOSE DIAMONDS AND STONES, WHICH HAD BEEN SURRENDERED BY THE APPELLANT FOR THE ASSESSMENT YEARS 2005-2006 AND 2006-2007 2,15,73,947 18. BASED ON THE ABOVE RECONCILIATION, THE ASSESSEE OFFERED A SUM OF RS.50 LACS AS ADDITIONAL INCOME IN THE YEAR 2005-06 AND B ALANCE RS.1,65,73,947 IN THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER ACCEPTED THE ADDITIONAL INCOME OF RS. 50 LACS IN THE ASSESSMENT YEAR 2005-0 6. HOWEVER, IN THE YEAR UNDER CONSIDERATION,THE ASSESSING OFFICER WAS OF TH E VIEW THAT THERE IS A GAP OF RS.4,78,14,866 OVER AND ABOVE THE INCOME OF RS.1 ,65,73,947 OFFERED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. THIS GAP WAS WORKED OUT BY THE ASSESSING OFFICER ON THE BASIS OF THE VALUE OF THE INVENTORY AS ON THE DATE OF 14 SEARCH AND AFTER DEDUCTING THE VALUE OF THE INVENTO RY AS PER BOOKS OF ACCOUNT AS ON 01.04.2005. 19. THE LEARNED CIT(APPEALS) AFTER EXAMINING THE FA CTS OF THE CASE, HELD THAT THE METHODOLOGY ADOPTED BY THE ASSESSING OFFIC ER IN COMPUTING THE UNEXPLAINED STOCK IS NOT CORRECT. HE AGREED WITH TH E CONTENTION OF THE ASSESSEE THAT FIRST WEIGHT OF UNDISCLOSED STOCK HAS TO BE DETERMINED ON THE DATE OF SEARCH. WE ALSO CONCURRED WITH THE CONTENTI ON OF THE ASSESSEE THAT THE BASIS FOR MAKING THE ADDITION WILL BE DIFFERENC E IN THE WEIGHT OF STOCK AS PER BOOKS OF ACCOUNT AS ON THE DATE OF SEARCH AND T HE WEIGHT OF THE STOCK FOUND AT THE TIME OF THE SEARCH. 20. THUS, THE ISSUE RAISED IN THE APPEAL PREFERRED BY THE REVENUE IS AS TO WHETHER THE LEARNED CIT(APPEALS) WAS JUSTIFIED IN C OMPUTING THE UNDISCLOSED STOCK IN THE MANNER STATED IN ITS ORDER . 21. IT IS AN ADMITTED FACT THE COMPUTATION OF UNDIS CLOSED STOCK HAS BEEN DONE BY THE ASSESSING OFFICER ON THE BASIS OF VALUE ONLY WITHOUT DETERMINING THE UNDISCLOSED WEIGHT OF THE GOLD AND JEWELLERY. FURTHER THE ASSESSING OFFICER HAS TAKEN THE OPENING STOCK AS ON 01.04.2005 AS AGAINST THE STOCK AS ON 09.12.2005. THIS APPROACH OF THE AS SESSING OFFICER, IN OUR VIEW, IN COMPUTING THE EXCESS STOCK AS ON THE DATE OF THE SEARCH IS NOT 15 CORRECT. THE METHODOLOGY ADOPTED BY THE ASSESSEE, I N OUR OPINION, IS THE CORRECT PROCEDURE TO DETERMINE THE UNEXPLAINED STOC K ON THE DATE OF SEARCH. IN THIS REGARD, WE NOTE FROM THE PAGE NO. 104 OF TH E PAPER BOOK FILED ON BEHALF OF THE ASSESSEE THAT THE WEIGHT OF THE STOCK AS PER BOOKS OF ACCOUNT HAS BEEN COMPUTED BY TAKING INTO ACCOUNT THE QUANTI TY OF THE STOCK AS ON 01.04.2005 AND THEN ADDING THE WEIGHT OF THE PURCHA SES MADE FROM 01.04.2005 TO 08.12.2005 AND DEDUCTING THE QUANTITY OF THE SALES FROM 01.04.2005 TO 08.04.2005. THE DIFFERENCE IN THE WEI GHT OF THE STOCK PHYSICALLY FOUND AND THE WEIGHT OF STOCK AS PER BOO KS OF ACCOUNT WORKED OUT IN THE MANNER STATED HEREINABOVE HAS BEEN TAKEN AS WEIGHT OF UNDISCLOSED STOCK. THIS UNEXPLAINED WEIGHT OF STOCK HAS THEN BE EN VALUED BY APPLYING MARKET RATE. THE ASSESSING OFFICER INSTEAD OF FOLLO WING THIS METHODOLOGY HAS STRAIGHT AWAY GONE TO THE VALUE OF THE STOCK PH YSICALLY FOUND ON THE DATE OF SEARCH AND THERE FROM HE HAS DEDUCTED THE VALUE OF THE STOCK THAT TOO AS ON 01.04.2005, NOT AS ON THE DATE OF SEARCH. THUS, THE ASSESSING OFFICER HAS COMMITTED TWO MISTAKES. ONE IN NOT ASCERTAINING THE UNEXPLAINED QUANTITY OF STOCK AND TWO IN TAKING THE STOCK AS PER BOOKS OF A CCOUNT AS ON 01.04.2005 AS AGAINST AS ON 09.12.2005. 22. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E LEARNED CIT(APPEALS) HAS ALSO CALLED FOR THE REMAND REPORT FROM THE ASSESSING 16 OFFICER. IN HIS REMAND REPORT, THE ASSESSING OFFICE R HAS ALSO NOT POINTED OUT ANY SPECIFIC ERROR OR DEFECT IN THE COMPUTATION OF THE EXCESS STOCK. AS REGARDS THE STOCK TO BE TAKEN AS ON THE DATE OF THE SEARCH AS AGAINST TAKEN BY THE ASSESSING OFFICER AS ON 01.04.2005, THE EXPLANA TION OF THE ASSESSING OFFICER IN THE REMAND REPORT WAS THAT IN VIEW OF TH E UNACCOUNTED SALES AND PURCHASES, HE WAS JUSTIFIED IN TAKING THE STOCK AS ON 01.04.2005. WE ARE OF THE VIEW THAT THIS CONTENTION OF THE ASSESSING OFFI CER IS NOT SUSTAINABLE AND THIS CANNOT BE THE REASONING FOR TAKING INTO CONSID ERATION THE STOCK AS ON 01.04.2005 AS PER BOOKS OF ACCOUNT AS AGAINST THE S TOCK AS ON THE DATE OF THE SEARCH AS PER BOOKS OF ACCOUNT. WHAT IS TO BE FOUND OUT ON THE DATE OF SEARCH IS THE STOCK AS PER BOOKS OF ACCOUNT. WHILE FINDING OUT THE STOCK ON THE DATE OF SEARCH I.E. ON 09.12.2005, THE PURCHASES AND SAL ES MADE AND RECORDED IN THE BOOKS OF ACCOUNT DURING THE PERIOD 01.04.2005 T O 09.12.2005 HAVE TO BE TAKEN INTO CONSIDERATION. 23. ON HAVING GONE THROUGH THE PAPER BOOK, WE NOTE THAT THE ASSESSEE HAD SUBMITTED COMPLETE DETAILS OF PURCHASES AND SALES I N QUANTITY AND VALUE AND NO DISCREPANCY OR ERROR HAS BEEN POINTED OUT BY THE ASSESSING OFFICER, EITHER IN THE ASSESSMENT ORDER OR IN THE REMAND REPORT. TH E PURCHASES RECORDED IN THE BOOKS OF ACCOUNT ARE THE DISCLOSED/ACCOUNTED PU RCHASES. SIMILARLY, SALES 17 RECORDED IN THE BOOKS OF ACCOUNT ARE THE DISCLOSED/ RECORDED SALES IN THE BOOKS OF ACCOUNT. IT IS NOT THE CASE OF THE ASSESSI NG OFFICER THAT ASSESSEE HAD MANIPULATED THE BOOKS OF ACCOUNT AFTER THE SEARCH. ON THE CONTRARY, WE NOTE THAT IN THE REMAND REPORT, THE FACT THAT THE RECONC ILIATION WAS SUPPORTED BY THE REGULAR BOOKS OF ACCOUNT WHICH WERE FOUND AT TH E TIME OF SEARCH, HAS NOT BEEN CONTROVERTED. FURTHER, THE DEPARTMENT WAS HAVI NG THE SEIZED COMPUTER WHEREBY DATA FOR THE PURCHASES AND SALES FOR THE PE RIOD OF FIVE YEARS ENDING ON 08.12.2005 WAS ALSO THERE. IN VIEW OF THE ABOVE FACTS, THE METHODOLOGY ADOPTED BY THE ASSESSING OFFICER IN COMPUTING THE U NDISCLOSED STOCK WAS NOT CORRECT. AS AGAINST THIS, THE METHODOLOGY ADOPT ED BY THE LEARNED CIT(APPEALS) FOR COMPUTING THE WEIGHT OF UNDISCLOSE D STOCK IS THE CORRECT METHODOLOGY. 24. THE LEARNED CIT(DR) DURING THE COURSE OF HEARIN G CONTENDED THAT THE ASSESSING OFFICERS COMPUTATION BE UPHELD BUT COULD NOT POINT OUT ANY REASON TO DIFFER WITH THE METHODOLOGY ADOPTED BY TH E LEARNED CIT(APPEALS). ACCORDINGLY, SO FAR AS THE REVENUES APPEAL IS CONC ERNED, WE ARE OF THE VIEW THAT THE METHODOLOGY ADOPTED BY THE LEARNED CIT(APP EALS) IS CORRECT FOR DETERMINING THE VALUE OF THE UNDISCLOSED STOCK AND THE COMPUTATION DONE BY THE ASSESSING OFFICER TO DETERMINE THE VALUE OF UND ISCLOSED STOCK IS NOT 18 CORRECT ONE. FOR THE PURPOSE OF MAKING ADDITION ON ACCOUNT OF UNDISCLOSED STOCK, FIRST THE QUANTITY/WEIGHT OF SUCH UNDISCLOSE D STOCK HAS TO BE DETERMINED AND THEN MARKET VALUE OF THIS UNDISCLOSE D STOCK IS TO BE ADDED AS INCOME. ACCORDINGLY, GROUND NO.2 OF THE APPEAL OF T HE REVENUE IS REJECTED. 25. COMING TO THE ASSESSEES APPEAL, GROUND NOS. 3 AND 4 ARE REGARDING THE VALUATION DONE BY THE APPROVED VALUER AS ON THE DATE OF SEARCH. THE LEARNED AR IN THIS REGARD HAS RELIED UPON THE LETTE R DATED 10.12.2005 FILED WITH THE ADDL. DIRECTOR OF INCOME-TAX (INV.) AND TH E REPORT OF THE APPROVED VALUER SUBMITTED ALONG WITH THAT. ON GOING THROUGH THIS LETTER AND ALSO THE DISCREPANCY POINTED OUT BY THE LEARNED AR IN THE TW O VALUATIONS, THERE APPEARS TO BE SOME DIFFERENCES IN THE VALUATION CAR RIED OUT ON THE DATE OF SEARCH. THE LEARNED CIT(APPEALS) HAS CONSIDERED THI S ISSUE AND HAS HELD THAT THE DEPARTMENTAL VALUER HAD PROPERLY CONSIDERE D THE QUANTITY, RATE OF GOLD JEWELLERY AND OTHER PRECIOUS STONES AT THE TIM E OF THE SEARCH OPERATION AND VALUED IT ACCORDINGLY. ON THE BASIS OF THESE FI NDINGS, HE HAS REJECTED THE CONTENTION OF THE ASSESSEE REGARDING THE DEFECTS IN THE VALUATION. CONSIDERING THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE AND THE FACT THAT THIS VALUATION WAS DONE ON THE DATE OF SEARCH, WHEN STOCK WAS PHYS ICALLY EXAMINED, WE DO NOT SEE ANY REASON TO DEVIATE WITH THE FINDINGS GIV EN BY THE LEARNED 19 CIT(APPEALS) ON THIS ISSUE. IN RESULT, GROUND NOS. 3 AND 4 OF THE ASSESSEES APPEAL ARE REJECTED. 26. AS REGARDS GROUND NO. 5 OF THE ASSESSEE APPEAL IS CONCERNED, UNDISPUTEDLY SEARCH WAS CARRIED OUT ON THE ASSESSEE S COMPANY AS WELL AS MR. SANJIV KUMAR AGGARWAL. DURING THE COURSE OF THE ASSESSMENT, THE ASSESSEE COMPANY AS WELL AS MR. SANJIV KUMAR AGGARW AL HAD OFFERED UNDISCLOSED INCOME FOR TAXATION. THE CREDIT OF THE UNDISCLOSED INCOME OFFERED BY THE ASSESSEE COMPANY IN THE PRECEDING AS SESSMENT YEAR 2005-06 OF RS.5 LACS AND RS.1,65,75,948 FOR THE YEAR UNDER CONSIDERATION HAS BEEN ALLOWED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. THE CREDIT OF THE INCOME OFFERED BY ITS DIRECTOR MR. SANJIV KUMAR AGG ARWAL HAS NOT BEEN ALLOWED DESPITE THE FACT THAT SUCH INCOME OFFERED H AS BEEN ASSESSED IN HIS HANDS AND DETAILS WERE FILED (PAGE NOS. 63 TO 88 OF THE PAPER BOOK) ALONG WITH COMPUTATION OF INCOME DURING THE COURSE OF ASS ESSMENT AS WELL AS BEFORE THE LEARNED CIT(APPEALS). AFFIDAVIT WAS ALSO FILED BY MR. SANJIV KUMAR AGGARWAL IN SUPPORT THEREOF BEFORE THE ASSESS ING OFFICER. THE LEARNED CIT(APPEALS) HAS NOT ACCEPTED THE EXPLANATI ON GIVEN BY THE ASSESSEE WITH THIS OBSERVATION THAT THE SAME CANONT BE ACCEPTED AS NO CONCRETE EVIDENCE WAS BE FILED BY THE ASSESSEE. WE ARE OF THE VIEW THAT THE 20 LEARNED CIT(APPEALS) WAS NOT JUSTIFIED IN REJECTING THE EXPLANATION OFFERED BY THE ASSESSEE. THE SEARCH HAS TAKEN PLACE ON BOTH I.E. ASSESSEE COMPANY AND ITS DIRECTOR MR. SANJIV KUMAR AGGARWAL. UNDISCL OSED INCOME HAS BEEN OFFERED IN THE HANDS OF THE ASSESSEE COMPANY AS WE LL AS MR. SANJIV KUAMR AGGARWAL. THE INCOME SO OFFERED HAVE BEEN ASSESSED IN THE HANDS OF MR. SANJIV KUMAR AGGARWAL AND THE ASSESSEE COMPANY. THE INCOME SO OFFERED HAVING BEEN ASSESSED, THERE WAS NO REASON FOR NOT A CCEPTING THE FURTHER EXPLANATION THAT THE INCOME SO EARNED HAS BEEN UTIL IZED FOR PURCHASE OF JEWELLERY. THOUGH THE ASSESSEE AND MR. SANJIV KUMAR AGGARWAL ARE TWO DIFFERENCE ASSESSEES BUT THE FACT THAT MR. SANJIV K UMAR AGGARWAL IS THE MAIN WORKING AND PROMOTER DIRECTOR OF THIS COMPANY, CANNOT BE IGONROED. NO MATERIAL OR EVIDENCE HAS BEEN FOUND TO CONTRADIC T THE EXPLANATION GIVEN BY THE ASSESSEE COMPANY AS WELL AS MR. SANJIV KUMAR AGGARWAL. THE EXPLANATION IS SUPPORTED BY AFFIDAVIT. IN THE ABSEN CE OF ANYTHING CONTRARY, THE EXPLANATION OFFERED BY THE ASSESSEE COMPANY, BE ING PLAUSIBLE EXPLANATION, THE SAME OUGHT TO HAVE BEEN ACCEPTED. ACCORDINGLY, WE HOLD THAT THE LEARNED CIT(APPEALS) WAS NOT JUSTIFIED IN REJECTING THE ASSESSEES EXPLANATION. 21 27. OUR ABOVE VIEW IS ALSO SUPPORTED FROM THE FACT THAT SUBSEQUENTLY THE ASSESSING OFFICER HIMSELF IN THE ASSESSMENT ORDER F OR THE ASSESSMENT YEAR 2008-09 IN ASSESSEES OWN CASE HAS ACCEPTED THIS EX PLANATION. THE RELEVANT FINDING RECORDED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2008-09 ARE BEING REPRODUCED HEREUNDER: DURING THE YEAR, ASSESSEE COMPANY HAS ALLOTTED 7500 00 NEW EQUITY SHARES OF RS. 10/- EACH FULLY PAID UP AT AR FOR RS.75,00,000/- TO MR. SANJEEV KUMAR AGGARWAL. THE SOURCE OF THE SAME HAS BEEN EXPLAINED BY THE ASSESSEE TO BE OUT OF MR. SANJEEV KUMAR AGGARWA LS SALE PROCEEDS/VALUE OF GOLD ORNAMENTS/JEWELLERY WEIGHING 18548.448 GRAMS INVESTED IN ASSESSEE COMPANY, WHICH ASSET WERE ACQU IRED BY THE ALLOTTEE IN EARLIER YEARS OUT OF HIS INCOME DECLARED DURING EAR LIER ASSESSMENT YEARS 2000-01 TO 2006-07 AND DISCLOSED IN HIS RETURNS FIL ED DURING THE ASSESSMENT PROCEEDINGS U/S 153A WHICH ARE ALREADY O N RECORD. THE EXPLANATION OF THE ASSESSEE IS ACCEPTED. 28. AS SUCH, WE ARE OF THE VIEW THAT THE LEARNED CI T(APPEALS) WAS NOT CORRECT IN NOT GIVING CREDIT OF THE JEWELLERY ACQUI RED OUT OF THE INCOME OFFERED BY MR. SANJIV KUMAR AGGARWAL AND WE THUS DI RECT THE ASSESSING OFFICER TO ALLOW CREDIT OF THE JEWELLERY TO THE EXT ENT OF 18,548.448 GRAMS CONTRIBUTED BY ITS DIRECTOR MR. SANJIV KUMAR AGGARW AL WHILE COMPUTING THE VALUATION OF THE UNDISCLOSED STOCK AS ON THE DATE O F THE SEARCH. GROUND NO. 5 IS ACCORDINGLY ALLOWED. 22 29. IN RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED AND THAT OF THE ASSESSEE IS PARTLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 26 .06.20 15 SD/- SD/- ( J.S. REDDY ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 26/06/2015 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR 23 DATE DRAFT DICTATED ON COMPUTER 24.06.2015 DRAFT PLACED BEFORE AUTHOR 24.06.2015 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 24.06.2015 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 26.06.20 15 APPROVED DRAFT COMES TO THE SR.PS/PS 31.06.2015 KEPT FOR PRONOUNCEMENT ON 26.06.2015 FILE SENT TO THE BENCH CLERK 31.06.2015 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.