DCIT- CC - 8(2), MUMBAI V. JHAVERILAL P. DEDHIA, MUMBAI

ITA 3969/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1940 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Appeal Filed On: 03-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JASINTA ZIMIK UASHANI
• Assessee Lawyers: A K GHOSH
• Keywords: Loose papers; Document seized; Valuation report; Retraction; Documents seized
• Section: 40A(3); 143(3); 153A; 73; 13; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO.3968/M/2019 ASSESSMENT YEAR: 2012-13 ITA NO.3969/M/2019 ASSESSMENT YEAR: 2013-14 ITA NO.3970/M/2019 ASSESSMENT YEAR: 2014-15 ITA NO.3971/M/2019 ASSESSMENT YEAR: 2015-16 ITA NO.3972/M/2019 ASSESSMENT YEAR: 2016-17 DCIT, CC-8(2), ROOM NO.658, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 VS. SHRI JHAVERILAL P. DEDHIA, SHOP NO.3-4, GROUND FLOOR, 19, SANGEET SAGAR BLDG., LAXMI NARAYAN LANE, MATUNGA (CENTRAL), MUMBAI 400 019 PAN: AABPD1400C (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI A.K. GHOSH, A.R. REVENUE BY : SHRI JASINTA ZIMIK UASHANI, D.R. DATE OF HEARING : 14.01.2021 DATE OF PRONOUNCEMENT : 06.04.2021 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE ABOVE TITLED APPEALS HAVE BEEN PREFERRED BY THE ASSESSEE AGAINST THE SEPARATE ORDERS OF EVEN DATED 28.03.2019 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREIN AFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EARS 2012-13, 2013-14, 2014-15, 2015-16 & 2016-17. ITA NO.3968/M/2019 & ORS SHRI JHAVERILAL P. DEDHIA 2 2. SINCE THE ISSUES RAISED IN ALL THE APPEALS ARE C OMMON, THE GROUNDS OF APPEAL BY THE REVENUE ARE TAKEN FROM ITA NO.3968/M/2019 A.Y. 2012-13 WHICH ARE REPRODUCED AS UNDER: (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN ACCEPTING ALL THE FIGURES MENTIONED IN SEI ZED LOOSE PAPERS FROM A-11 TO A- 21 OF RS.72,21,05,180/- AS UNACCOUNTED PURCHASE OF ASSESSEE IGNORING THE FACT THAT DURING REMAND PROCEEDINGS, ASSESSEE COLD NOT PRODUC E THE NAMES & ADDRESSES OF SUPPLIERS, KARIGARS, CUSTOMERS ETC. BEFORE THE ASSE SSING OFFICER. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DECIDING THE UNACCOUNTED PROFIT OF RS. 13, 44,424/- @ 21.24% ON THE AMOUNT OF RS. 63,29,681/-, IGNORING THE FACT THAT R S. 63,29,681/- IS UNACCOUNTED PROFIT ITSELF, SINCE LD. CIT(A) HIMSELF DEDUCTED TH E UNACCOUNTED PURCHASE HELD BY HIM FROM A-11 TO A-21 FROM UNACCOUNTED SALES MENTIO NED IN ASSESSMENT ORDER. (III) ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) ERRED IN ACCEPTING THE CONTENTION OF ASSESSEE THAT FIGURE IN A-11 TO A-21 ARE UNACCOUNTED PURCHASES IGNORING THE PROVISIONS OF SE CTION 40A(3) OF THE IT. ACT. 1961. 3. THE FACTS IN BRIEF ARE THAT THERE WAS A SEARCH A CTION UNDER SECTION 132 OF THE ACT ON 03.12.2015 AT THE BUSINES S/RESIDENTIAL PREMISES OF DEDHIA JEWELLERS GROUP IN WHICH CERTAIN INCRIMINATING MATERIALS/DOCUMENTS WERE FOUND. THE ASSESSEE BEING PROPRIETOR OF DEDHIA JEWELLERS, WAS NATURALLY COVERED IN THE SEARCH. CONSEQUENTLY, THE AO ISSUED NOTICES U/S 153A OF THE ACT TO THE ASSESSEE FOR SIX ASSESSMENT YEARS 2010-1 1 TO 2015-16 ON 27.09.2016 INCLUDING THE ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSEE, IN COMPLIANCE, FILED T HE RETURN OF INCOME ON 07.10.2016 DECLARING A TOTAL INCOME OF RS.3,17,67,850/-. THE AO FINALLY FRAMED THE ASSES SMENT ORDER U/S 153A R.W.S 143(3) OF THE ACT DATED 28.12.2017 WHEREIN, HE MADE THE ADDITION ON ACCOUNT OF UNACCOUNTED SALES O F RS. 1,80,23,935/-. PERTINENT TO MENTION THAT ADDITION O N ACCOUNT OF UNACCOUNTED SALES IN THE VARIOUS YEARS COVERED UNDE R SEARCH WERE MADE AGGREGATING TO RS. 149,62,14,314/- BASED ON SEIZED MATERIALS/EVIDENCES FOUND DURING THE COURSE OF SEA RCH WHICH ITA NO.3968/M/2019 & ORS SHRI JHAVERILAL P. DEDHIA 3 WERE MARKED AS ANNEXURE A-1 TO A-26 IN AY 20010-11 TO AY 2016-17 BY THE AO AS AGAINST UNACCOUNTED SALES DE TERMINED BY THE SEARCH PARTY OF RS. 2,33,33,14,390/-. THE D ETAILS OF BOTH THE ESTIMATES BY AO AS WELL AS SEARCH TEAM ARE GIV EN AS UNDER: ESTIMATION OF UNACCOUNTED SALES BY THE AO AY UNACCOUNTED SALES 2010-11 71,29,865 2011-12 5,13,573 2012-13 1,80,23,935 2013-14 10,27,12,417 2014-15 24,26,44,371 2015-16 53,36,32,236 2016-17 59,15,57,917 TOTAL 1,49,62,14,314 ESTIMATION OF UNACCOUNTED SALES BY THE SEARCH TEA M AY UNACCOUNTED SALES 2009-10 3,21,87,359 2010-11 71,29,865 2011-12 25,70,880 2012-13 3,75,99,399 2013-14 12,09,71,952 2014-15 44,75,77,628 2015-16 88,17,44,471 2016-17 80,35,32,836 TOTAL 233,33,14,390 4. AGGRIEVED BY THE APPELLATE ORDERS, THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD CIT(A). DURING A PPELLATE PROCEEDINGS THE LD CIT(A) DIRECTED THE AO CLARIFY AS TO HOW THE CONSOLIDATED FIGURE OF RS. 149,62,14,314/- FOR THE SIX YEARS WAS ARRIVED AT AS AGAINST THE AMOUNT QUANTIFIED BY INVE STIGATION WING AT RS. 233,33,14,390/-. IN RESPONSE TO CIT(A) S DIRECTION, THE AO SUBMITTED THE REMAND REPORT, WHEREIN, HE PR OVIDED SOME COMMENTS WHICH ARE EXTRACTED BY THE LD CIT(A) IN THE APPELLATE ORDER. THE LD CIT(A) CONFRONTED THE REMA ND REPORT TO ITA NO.3968/M/2019 & ORS SHRI JHAVERILAL P. DEDHIA 4 THE ASSESSEE AND ASSESSEE FILED HIS REJOINDER. AFT ER TAKING INTO CONSIDERATION THE REMAND REPORT AND REJOINDER OF TH E ASSESSEE, THE ADDITION MADE BY THE AO IN THE ASSESSMENT ORDER OF RS. 149,62,14,314/- WAS REVISED TO RS. 121,71,83,798/- BY REDUCING THE ADDITION BY RS. 27,90,30,516/-.THE BEAK UP OF T OTAL UNACCOUNTED SALES DETERMINED BY LD CIT(A) IS AS UN DER:- SR. NO. AY A1 TO A6 WHATSA PP A11 TO A21 A22 - A27 DEFICIT IN STOCK TOTAL 1 2010- 11 - - - 7,129,86 5 - 7,129,865 2 2011- 12 - - - 513,573 - 513,573 3 2012- 13 - 4,272,37 3 11,694,2 54 2,057,30 8 - 18,023,935 4 2013- 14 - 130,000 52,827,5 49 4,351,67 8 - 57,309,227 5 2014- 15 - 4,300,00 0 87,616,9 34 62,966,3 74 - 154,883,30 8 6 2015- 16 18,784,7 27 800,000 191,102, 111 285,372, 507 - 496,059,34 5 7 2016- 17 71,414,3 49 1,325,00 0 99,833,8 16 199,431, 851 111,259,52 9 483,264,54 5 TOTAL 90,199,0 76 10,827,3 73 443,074, 664 561,823, 156 111,259,52 9 1,217,183, 798 5. FINALLY , LD.CIT(A), AFTER CONSIDERING THE WRITT EN SUBMISSIONS AND REJOINDER TO REMAND REPORT FILED BY ASSESSEE AN D REMAND REPORT SUBMITTED BY ASSESSING OFFICER, HAS PASSED T HE APPELLATE ORDER ALLOWING PARTIAL RELIEF. ITA NO.3968/M/2019 & ORS SHRI JHAVERILAL P. DEDHIA 5 6. THE LD AR SUBMITTED AT THE OUTSET THAT THE ASSES SEE FILED APPEAL BEFORE TRIBUNAL IN ITA NO 3652 TO 3658/MUM/2 019 FOR AY 2010-11 TO 2016-17 CHALLENGING THE QUANTIFICATIO N OF ALLEGED UNACCOUNTED SALES AT RS. 66,28,49,605/- MADE BY CIT (A). THE DEPARTMENT HAS ALSO FILED APPEALS FOR AY 2012-13 TO 2016-17 CHALLENGING THE PARTIAL RELIEF ALLOWED BY THE LD CI T(A) TO THE ASSESSEE ON ACCOUNT DELETION OF STOCK DEFICIT , QUA NTIFICATION OF UNACCOUNTED SALES AND APPLICATION OF GP TO THE SAID UNACCOUNTED SALES. THE LD AR SUBMITTED THAT THE ISS UES CHALLENGED IN THE REVENUES APPEAL ARE SAME AS RAIS ED BY THE ASSESSEE IN HIS APPEAL. THE LD AR FURTHER SUBMITTED BEFORE THE BENCH THAT THE APPEALS FILED BY THE ASSESSEE HAVE B EEN DECIDED AND DISPOSED OFF BY THE COORDINATE BENCH VIDE ORDER DATED 31.07.2020 IN ITA NO. 3652/MUM/2019 AND OTHERS AY 2 010-11 TO 2016-17 WHEREAS THE APPEALS OF THE REVENUE REMA INED PENDING WHICH ARE LISTED FOR HEARING TODAY. THE LD AR FILED COPY OF THE COORDINATE BENCH DECISION BEFORE THE BENCH. THE LD AR SUBMITTED THAT THE ISSUES RAISED IN CROSS APPEALS A RE COMMON AS THE ASSESSEE HAS CHALLENGED THE PART SUSTAINING OF ADDITIONS WHEREAS THE REVENUE HAS CHALLENGED THE PART DELET ION OF ADDITIONS BY LD CIT(A). THE LD AR ARGUED THAT TH E ISSUES IN THE REVENUE APPEALS HAVE ALREADY BEEN ADJUDICATED BY TH E COORDINATE BENCH AND ARE COVERED BY THE ORDER PASS ED BY SAID ORDER. THE LD. AR THEREFORE PRAYED THAT THE APPEALS OF THE REVENUE ARE INFRUCTUOUS AND MAY BE DISMISSED. THE LD. DR FAIRLY CONCEDED THAT THE CROSS APPEALS OF THE ASSES SEE HAVE ALREADY BEEN DISPOSED OFF HAVING THE SAME ISSUES HO WEVER STRESSED THAT THE ISSUES MAY BE DECIDED AFRESH. THE LD DR RELIED ON THE ORDER OF LD. AO. ITA NO.3968/M/2019 & ORS SHRI JHAVERILAL P. DEDHIA 6 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS ON RECORDS INCLUDING THE DECISIONS OF TH E COORDINATE BENCH OF THE TRIBUNAL DATED 31.07.2020 IN ITA NO. 3652/MUM/2019 AND OTHERS AY 2010-11 TO 2016-17 WHER EBY THE CROSS APPEALS OF THE ASSESSEE WERE DECIDED AND DISPOSED OFF. AFTER PERUSAL OF THE ORDER WE FIND THAT THE ISSUES RAISED BY THE REVENUE IN ITS APPEALS ARE ALREADY ADJUDICATED BY T HE TRIBUNAL AS STATED HEREINABOVE. CONSEQUENTLY THE APPEALS OF THE REVENUE REQUIRED NO ADJUDICATION AND ARE DISPOSED OFF ACCOR DINGLY. 8. THE FIRST ISSUE RAISED BY THE REVENUE IN GROUND NO. 1 & 3 IS AGAINST THE ORDER OF CIT(A) DELETING THE ADDITION BY CONSIDERING THE AMOUNTS APPEARING ON SEIZED MATERIAL AS PURCHAS ES. WE NOTE THAT LD CIT(A) HAS DELETED THE ADDITION BY CO NSIDERING THE AMOUNTS APPEARING IN THE SEIZED MATERIAL AS PURCHAS ES WHICH HAS BEEN DECIDED BY THE TRIBUNAL UPHOLDING THE ORDE R OF LD CIT(A) AND IS COVERED IN PARAS 20 TO 24 OF THE IMP UGNED ITAT ORDER AND IS REPRODUCED AS UNDER: 20. AS REGARDS, EXCLUSION OF A SUM OF RS. 72,21,05 ,180/- ON ACCOUNT OF CLAIM OF PURCHASES, WE FIND THAT THE ID. CIT(A) HAD RECORDED CATEGORICAL FINDINGS WHILE EXCLUDING THE AMOUNT OF PURCHASES AS PER WHICH THE ID AO HAS FAILED TO OFFER ANY COMMENTS ON CLAIM OF THE ASSESSEE THAT DATA CONTAIN ED IN ANNEXURE A11 TO A21 IS PURCHASES. THE SAID FINDINGS IS BASED ON THE OBSER VATIONS OF THE AO IN HIS REMAND REPORT, WHERE HE HAD STATED THAT ON THE SEIZED PAGE S WORDS RETURN, ESTIMATE, ESTIMATE ON APPROVAL ETC. ARE MENTIONED AND THESE SEIZED MATERIAL DOESNT MENTION THE NAME OF CUSTOMERS/VENDORS, THEIR ADDRES S, PHONE NUMBERS ETC. THE ID. CIT(A) FURTHER OBSERVED THAT THE AO HAS FINAL LY CONCLUDED IN THE REMAND REPORT THAT IN THE ABSENCE OF CORROBORATIVE EVIDENCE, IT I S NOT POSSIBLE TO REACH AT ANY CONCLUSIVE FINDINGS THAT WHETHER THESE ENTRIES REPR ESENTS UNACCOUNTED SALES OR UNACCOUNTED PURCHASES AND THUS, THE AO STATED THAT CLAIM OF APPELLANT MAY BE DECIDED ON MERITS BASED ON THE FACTS OF THE CASE AN D SEIZED DOCUMENTS. THEREAFTER, THE CIT(A) HAS INDEPENDENTLY ANALYZED THIS ISSUE AN D EXAMINED EXPLANATION GIVEN BY APPELLANT AND HE ALSO STATED THAT THE AO HAS FAI LED TO REBUT THESE EXPLANATIONS GIVEN BY APPELLANT. THE CIT(A) FURTHER REFERRED T O THE STATEMENT OF JAYESH WAGHELA, ACCOUNTANT OF DEDHIA JEWELLERS, WHEREIN, H E HAS EXPLAINED THAT THE ENTRIES MENTIONED IN THE ANNEXURE A11 TO A21 REPRE SENTS THE JEWELLERY RECEIVED ITA NO.3968/M/2019 & ORS SHRI JHAVERILAL P. DEDHIA 7 FROM KARIGAR (ENTERED IN MANUAL REGISTER)'. THUS, THE CIT(A) STATED THAT ON THE BASIS OF THIS PARTICULAR COMMENT GIVEN BY THE JAYES H WAGHELA, THESE ENTRIES EMANATING FROM ANNEXURE A11 TO A21 CANNOT BE TREATE D AS UNACCOUNTED SALES. FURTHER, THE CIT(A) HAS ANALYSED EACH ANNEXURE A11 TO A21 ON SAMPLE BASIS TO UNDERSTAND THE NATURE OF TRANSACTION TO VERIFY THE CLAIM OF APPELLANT THAT THESE ENTRIES REPRESENT UNACCOUNTED PURCHASES. THUS, THE LD. CIT(A) IN PARA 30.2 OF HIS APPELLATE ORDER HAS HELD THAT THE UNACCOUNTED ENTRI ES CONTAINED IN ANNEXURE A11 TO A21 RELATES TO UNACCOUNTED PURCHASES AND ACCORDI NGLY EXCLUDED THE SAME FROM UNACCOUNTED SALES QUANTIFIED BY THE AO. THE ABOVE S AID FINDING OF THE ID. CIT(A) GOES UNCHALLENGED BY THE REVENUE AND BECOME FINAL. WE, THEREFORE, CONCURRED WITH FINDINGS OF THE LD. CIT(A) FOR EXCLUSION OF A SUM OF RS.72,21,05,180/- ON ACCOUNT OF CLAIM OF PURCHASES. 21. AS REGARDS, FINAL UNACCOUNTED SALES QUANTIFI ED BY THE ID. CIT(A), OF RS.66,28,49,605/-, WHICH IS ON THE BASIS OF ANNEXUR E A1 TO A6, ANNEXURE A22 TO A26 AND WHATSAPP MESSAGE. LET US FIRST DEAL WITH SALES AS PER ANNEXURE A1 TO A6, BEING EXCEL-SHEETS FOUND DURING THE COURSE OF SEARCH, WHICH CONTAIN UNACCOUNTED SALES OF FIVE MONTHS AS ADMITTED BY THE ASSESSEE. THE INVESTIGATION WING HAS QUANTIFIED TOTAL UNACCOUNTED SALES ON THE BASIS OF ANNEXURE A1 TO A6 AT RS.27,66,83,204/- FOR THE PERIOD OF FIVE MONTHS, WH ICH HAS BEEN SUBSEQUENTLY RECOMPUTED BY THE AO AT RS. 9,01,99,076/- FOR TWO A SSESSMENT YEARS, I.E. A.Y. 2015- 16 AND 2016-17 AT THE TIME OF ASSESSMENT. DURING ASSESSMENT PROCEEDINGS, THE SAID WORKING HAS BEEN ARRIVED AT AFTER CONSIDERING VARIOUS AVERMENTS MADE BY THE ASSESSEE IN LIGHT OF DUPLICATE ENTRIES, SALES ACCOU NTED IN REGULAR BOOKS OF ACCOUNT AND AMOUNT RECEIVED THROUGH BANKS. EVEN DURING APPE LLATE PROCEEDINGS, THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCES TO PROVE T HAT UNACCOUNTED SALES WORKED OUT BY THE AO OF RS.9,01,99,076/- ON THE BASIS OF A NNEXURE A1 TO A6 IS RECORDED IN BOOKS OF ACCOUNTS FOR BOTH ASSESSMENT YEARS. EVEN B EFORE US, THE ASSESSEE COULD NOT PRODUCE ANY DETAILS TO PROVE THAT SAID UNACCOUN TED SALE IS RECORDED IN BOOKS OF ACCOUNT. ALTHOUGH, ASSESSEE MADE A GENERAL STATEMEN TS IN LIGHT OF RETRACTION STATEMENTS, THE SAME CANNOT BE CONSIDERED AS CONCLU SIVE EVIDENCES TO DELETE UNACCOUNTED SALES COMPUTED BY THE AO AND WHICH IS S UPPORTED BY INCRIMINATING MATERIALS FOUND DURING COURSE OF SEARCH AND FURTHER CONFIRMED BY THE ASSESSEE AND HIS STAFF. WE, THEREFORE CONFIRM UNA CCOUNTED SALES COMPUTED BY THE AO AND CONFIRMED BY THE ID. CIT(A) AT RS. 9,01,99 ,076/- FOR AY 2015-16 AND 2016-17 ON THE BASIS OF ANNEXURE A1 TO A6. 22. IN SOFARAS UNACCOUNTED SALES COMPUTED ON T HE BASIS OF WHATSAPP MESSAGE AT RS.1,08,27,373/-, ALTHOUGH THE AO AND THE ID. CIT(A), COMPUTED UNACCOUNTED SALES ON THE BASIS OF WHATSAPP MESSAGES, BUT NO REASONS HAVE BEEN GIVEN TO COME TO THE CONCLUSION THAT CONTENTS OF WHATSAPP ME SSAGE IS IN FACT UNACCOUNTED SALES NOT RECORDED IN REGULAR BOOKS OF ACCOUNT. ON THE OTHER HAND, THE ASSESSEE HAS EXPLAINED THAT DETAILS OF SALES FOUND IN WHATSAPP M ESSAGE IS EITHER ACCOUNTED IN REGULAR BOOKS OF ACCOUNT OR IT PERTAINS TO ROUGH ES TIMATE OF JEWELLERY SENT TO CUSTOMERS ON APPROVAL (JANGAD). THE ASSESSEE HAD ALSO FILED RECONCILIATION STATEMENT EXPLAINING CONTENTS OF MESSAGE FOUND IN W HATSAPP AND SALES RECORDED IN REGULAR BOOKS OF ACCOUNT OR DATA MAINTAINED IN PEN DRIVE ON ACCOUNT OF JANGAD. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE A O AS WELL AS THE ID. CIT(A) WERE ERRED IN CONSIDERING DETAILS OF WHATSAPP MES SAGE AS UNACCOUNTED SALES AND ITA NO.3968/M/2019 & ORS SHRI JHAVERILAL P. DEDHIA 8 HENCE, WE DIRECT THE AO TO DELETE UNACC OUNTED SALES COMPUTED ON THE BASIS OF WHATSAPP MESSAGE. 23. AS REGARDS UNACCOUNTED SALES COMPUTED ON THE B ASIS OF ANNEXURE A22 TO A26, BEING DATA STORED IN PEN DRIVE, THE ASSESSEE H AS CHALLENGED SAID FINDINGS ON THE GROUND THAT DATA CONTAINED IN ANNEXURE A22 TO A 26 IS NOTING BUT STOCK SENT ON APPROVAL TO CUSTOMERS(JANGAD) WHICH CANNOT BE CONSI DERED AS SALES. THE AO HAS QUANTIFIED UNACCOUNTED SALES AT RS.56,18,23,156/- O N THE BASIS OF ANNEXURE A22 TO A26 (JANGAD) FOR ALL ASSESSMENT YEARS COVERED UNDER SEARCH. BUT, WHILE ARRIVING AT ABOVE FIGURE, HE HAD NOT CONSIDERED REC ONCILIATION SUBMITTED BY THE ASSESSEE EXPLAINING DATA CONTAIN IN JANGAD AND SALE S RECORDED IN BOOKS. WE HAVE GONE THROUGH FACTS, FINDINGS OF THE LD. AO AND VARI OUS EVIDENCES FILED BY THE ASSESSEE AND WE FIND THAT ADDITION MADE ON ACCOUNT OF DATA FOUND IN PENDRIVES (A22 TO A27) ARE NOT UNACCOUNTED SALES BUT ARE ACTU ALLY DETAILS OF 'JANGAD' I.E., GOODS GIVEN ON APPROVAL TO CUSTOMERS. THE NAME OF E XCEL FILE ITSELF IS 'J-DET' WHICH MEANS 'JANGAD DETAILS' AND HENCE, THE GOODS GIVEN O N APPROVAL TO CUSTOMERS CANNOT BE CONSIDERED AS UNACCOUNTED SALES. FURTHER, THE AP PELLANT HAS ALSO PROVIDED THE DETAILS OF SALES RECORDED IN THE REGULAR BOOKS OUT OF J-DETAILS (JANGAD) FOUND IN THE SEIZED PENDRIVES, WHICH IS PLACED AT PAGE NOS.325 T O 328 OF THE PAPER BOOK. THUS, IT CAN BE SEEN FROM ABOVE THAT THE APPELLANT HAS QUANT IFIED THE STOCK GIVEN ON JANGAD AND ALSO RECONCILED THE STOCK AS PER BOOKS. BUT, TH E AO HAS MADE THE ADDITION IN RESPECT OF JANGAD DETAILS FOUND IN SEIZED PEN DRIVE S AS AO NOTED THAT THESE ARE NOT ACCOUNTED IN THE BOOKS OF ASSESSEE WITHOUT REBUTTIN G CLAIM OF ASSESSEE ON JANGAD. UNDER THESE FACTS, WE ARE UNABLE TO SUBSCRIBE TO TH E FINDINGS OF THE AO AS WELL AS THE ID. CIT(A) THAT JANGAD DETAILS FOUND IN PEN DRI VE AS UNACCOUNTED SALES. ACCORDINGLY, UNACCOUNTED SALES COMPUTED ON THE BASI S OF JANGAD AT RS. 56,18,23,156/- IS REJECTED. HOWEVER, AS REGARDS, ST OCK SHORTAGE FOUND DURING COURSE OF SEARCH, ALTHOUGH THE ASSESSEE CLAIMS TO HAVE REC ONCILED STOCK SHORTAGE WITH REFERENCE TO ANNEXURE A22 TO A26, BUT FACT REMAINS THAT, THE ASSESSEE FAILED TO EXPLAIN WITH EVIDENCES AS TO HOW AND WHEN STOCK SEN T ON APPROVAL TO CUSTOMERS WAS RETURNED AND HOW THE SAME HAS BEEN ACCOUNTED IN REGULAR BOOKS OF ACCOUNTS. FURTHER, THE ASSESSEE HAS ADMITTED STOCK SHORTAGE, BUT FAILED TO GIVE PARTY WISE DETAILS AS TO WHOM GOODS ARE SENT ON APPROVAL. THE ASSESSEE HAD ALSO, FAILED TO FURNISH DETAILS OF GOODS RETURNED FROM C USTOMERS OR SALES ACCOUNTED IN BOOKS. WE, THEREFORE, ARE OF THE CONSIDERED VIEW TH AT STOCK SHORTAGE FOUND DURING COURSE OF SEARCH AND CLAIMED BY THE ASSESSEE AS JAN GAD IS NOTHING BUT UNACCOUNTED SALES WHICH IS NOT RECORDED IN REGULAR BOOKS OF ACCOUNTS OF THE ASSESSEE. HENCE, WE DIRECT THE AO TO CONSIDER S TOCK SHORTAGE AS UNACCOUNTED SALES FOR THE AY 2016-17. THUS, OUT O F TOTAL UNACCOUNTED SALES COMPUTED BY THE ID. CIT(A) OF RS. 66,28,49, 605/-, WE CONFIR M UNACCOUNTED SALES OF RS. 9,01,99,076 BEING UNACCOUNTED SALES AS PER ANNEXURE AL TO A6 AND UNACCOUNTED SALES ON ACCOUNT OF STOCK SHORTAGE OF RS. 11,12,59, 529/-, AND IN TOTAL A SUM OF RS.20,14,58,605/-. THE BALANCE AMOUNT OF RS.46,13,9 1,000 BEING UNACCOUNTED SALES WORKED OUT ON THE BASIS OF JANGAD' IS DELETED. 9. SINCE THE ISSUE RAISED BY THE REVENUE HAS BEEN D ECIDED BY THE COORDINATE BENCH IN THE ABOVE PARAS, THE GROUND NO. 1 & 3 BECOME INFRUCTUOUS AND ARE DISMISSED. ITA NO.3968/M/2019 & ORS SHRI JHAVERILAL P. DEDHIA 9 10. THE SECOND ISSUE RAISED BY THE REVENUE IN GROUN D NO. 2 IS AGAINST THE ORDER OF CIT(A) ESTIMATING THE PROFIT @ 21.24% INSTEAD OF 100% ADDITION MADE BY THE AO. WE NOTE TH AT THIS ISSUE PERTAINING TO ESTIMATING GROSS PROFIT @ 21.24 % ON FINAL UNACCOUNTED SALES DETERMINED BY THE CIT(A) IS COVER ED BY THE ORDER OF THE TRIBUNAL DATED 31.07.2020 IN PARA 24 & 25, WHEREIN, THE HONBLE ITAT HAS DIRECTED THE AO TO ES TIMATE PROFIT AT 3% OF FINAL UNACCOUNTED SALES CONFIRMED BY BENCH IN ITS SAID ORDER. THE RELEVANT PARAS ARE EXTRACTED BELOW: 24. COMING TO PROFIT RATE ADOPTED BY THE ID. CIT(A ) ON UNACCOUNTED SALES. THE ID. CIT(A) HAS APPLIED ASSESSEE OWN GROSS PROFIT DE CLARED FOR EARLIER YEARS AND HAS ESTIMATED 21.24% GROSS PROFIT ON UNACCOUNTED SALES FOR ALL ASSESSMENT YEARS. IN ADDITION TO GROSS PROFIT, HE HAD ALSO ESTIMATED INI TIAL INVESTMENT REQUIRED FOR BUSINESS AND ACCORDINGLY, HAD TAKEN 21% ON FIRST YE AR SALES TO ARRIVE AT TOTAL ADDITION TOWARDS UNACCOUNTED SALES. BUT, THE QUESTI ON THAT NEEDS TO BE CONSIDERED IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE IS WHETHER THE ID. CIT(A) IS RIGHT IN ESTIMATING PROFIT ON UNACCOUNTED SALES AND IF SO, T HEN WHAT IS APPROPRIATE RATE OF PROFIT THAT NEEDS TO BE APPLIED IN THE GIVEN FACTS OF THE CASE. IN SO FAR AS ESTIMATION OF PROFIT ON UNACCOUNTED SALES, IT IS WELL SETTLED PRINCIPLES OF LAW THAT WHEN UNACCOUNTED SALES IS FOUND, THEN ONLY PROFIT ELEMEN T EMBODIED IN SUCH SALES NEEDS TO BE ESTIMATED, BUT NOW WHOLE UNACCOUNTED SALES. T HIS IS BECAUSE, WHEN THERE IS UNACCOUNTED SALES, THERE MUST BE CORRESPONDING UNACCOUNTED PURCHASES AND OTHER OVERHEAD EXPENSES. IN THIS CASE, ON PERUSAL O F FACTS AVAILABLE ON RECORD WE FIND THAT THE AO HAD EXPRESSED HIS INABILITY TO FIN D OUT CORRECT AMOUNT OF UNACCOUNTED SALES WHICH IS EVIDENT FROM THE FACT OF ARRIVING AT DIFFERENT SALES FIGURE AT DIFFERENT POINT OF TIME. FURTHER, THE ASSESSEE C LAIMS UNACCOUNTED PURCHASE WHICH WAS RECORDED IN SEIZED INCRIMINATING MATERIAL S MARKED AS ANNEXURE A11 TO A21 AND THIS CLAIM HAS NOT BEEN REFUTED BY THE AO. IN FACT, THE ID. CIT(A) HAS ACCEPTED CLAIM OF ASSESSEE TOWARDS UNACCOUNTED P URCHASES. FURTHER, AS PER SEIZED MATERIAL IF THERE IS UNACCOUNTED PURCHASE AN D UNACCOUNTED SALES, THEN ADDITION ON ACCOUNT UNACCOUNTED SALES IGNORING UNAC COUNTED PURCHASES IS INCORRECT. THEREFORE, WE ARE OF THE CONSIDERED VIE W THAT THE LD. CIT(A) WAS RIGHT IN ESTIMATING PROFIT ON UNACCOUNTED SALES. 25. HAVING SAID SO, LET US EXAMINE THE RATE OF PROF IT ADOPTED BY THE ID. CIT(A). THE ID. CIT(A) HAS ADOPTED 21.24% GROSS PROFIT ON UNCOU NTED SALES AND SUCH RATE IS BASED ON AVERAGE GROSS PROFIT DECLARED BY THE ASSES SEE IN EARLIER FINANCIAL YEAR. AS WE HAVE NOTED IN EARLIER PARAGRAPH, WHEN DOCUMENTS FOUND DURING SEARCH INDICATES BOTH UNACCOUNTED SALES AND UNACCOUNTED PURCHASES AN D OTHER OVERHEAD EXPENDITURE, THEN GROSS PROFIT CANNOT BE A GOOD YAR DSTIC FOR ESTIMATION OF INCOME. THEREFORE, TO THIS EXTENT, WE DO NOT CONCUR WITH FI NDINGS OF THE ID. CIT(A). FURTHER, IF GROSS PROFIT CANNOT BE ADOPTED FOR ESTIMATION OF IN COME, THEN OBVIOUSLY, IT CAN BE ITA NO.3968/M/2019 & ORS SHRI JHAVERILAL P. DEDHIA 10 NET PROFIT THAT CAN BE USED AS GOOD YARDSTICK FOR E STIMATION OF INCOME. IF, NET PROFIT IS A GOOD INDICATOR FOR ESTIMATION, THEN THERE ARE TWO METHODS TO FIND OUT CORRECT RATE OF PROFIT, VIZ, ASSESSEE OWN RATE OF PROFIT OR SOME COMPARABLE CASES OF SIMILAR NATURE OF BUSINESS. IN THIS CASE, ASSESSEE OWN PRO FIT RATE CANNOT BE CONSIDERED AS GOOD INDICATOR OF PROFIT LEVEL IN THIS LINE OF BUS INESS, BECAUSE, THE BOOKS OF ACCOUNTS OF ASSESSEE ARE NOT RELIABLE, WHICH IS EVI DENT FROM THE FACT THAT THE ASSESSEE IS IN THE HABIT OF NOT ACCOUNTING COMPLETE TRANSACTIONS IN BOOKS OF ACCOUNTS. IF ASSESSEE PROFIT RATE IS NOT A GOOD YAR DSTIC, THEN IT SHOULD BE ANY OTHER COMPARABLE CASES OF SIMILAR BUSINESS. FURTHER, THER E IS NO UNIFORM METHOD OR YRADSTIC FOR ESTIMATION OF INCOME. IT DEPENDS UPON FACTS AND NATURE OF BUSINESS CARRIED OUT BY THE ASSESSEE. IN THIS CASE, THE ASSE SSEE IS IN THE BUSINESS OF TRADING IN DIAMOND AND GOLD JEWELLERY. THE RATE OF PROFIT IN T HIS KIND OF BUSINESS IS VERY LOW AND IT VARIES FROM 2% TO 5% DEPENDING UPON VOLUME O F BUSINESS CARRIED BY THE ASSESSEE. FURTHER, VARIOUS COURTS AND TRIBUNALS HAV E CONSIDERED FACTS AND NATURE OF BUSINESS OF JEWELLERY TRADING AND DEPENDING UPON FA CTS OF EACH CASE, HAS ESTIMATED PROFIT RANGING FROM 2% TO 5% ON TOTAL SALES. WE, TH EREFORE, CONSIDERING NATURE OF BUSINESS OF THE ASSESSEE, ARE OF THE CONSIDERED VIE W THAT 3% NET PROFIT ON TOTAL UNACCOUNTED SALES IS FAIR AND REASONABLE AND HENCE, WE DIRECT THE ID. AO TO ESTIMATE 3% NET PROFIT ON TOTAL UNACCOUNTED SALES C ONFIRMED BY US FOR ASSESSMENT YEARS 2015-16 TO AY 2016-17. 11. ACCORDINGLY, THE GROUND NO. 2 IN THE REVENUE AP PEAL BECOMES INFRUCTUOUS AND IS DISMISSED. 12. THE ISSUE RAISED IN GROUND NO. 1 & 3 IN ITA NO. ITA NO. 3969 TO 3972/MUM/2019 IS IDENTICAL TO ONE AS DECIDE D BY US IN GROUND NO. 1 & 3 IN ITA NO. 3968/MUM/2019 AY 2012- 13(SUPRA). THEREFORE OUR DECISION IN ITA NO. ITA NO . 3968/MUM/2019 AY 2012-13 WOULD, MUTATIS MUTANDIS, A PPLY TO GROUND NO. 1 & 3 IN ALL THESE APPEALS AS WELL. C ONSEQUENTLY THE GROUND 1 & 3 IN ALL THE ABOVE APPEALS OF THE RE VENUE ARE DISMISSED. 13. THE ISSUE RAISED IN GROUND NO.4 IN ITA NO. 3972/MUM/2019 IS AGAINST THE CIT(A)S ACTION IN DEL ETING THE ADDITION ON ACCOUNT OF STOCK DEFICIT OF RS. 11,12,5 9,529/- ON ACCOUNT OF STOCK DEFICIT BY IGNORING THE FACT THAT PURCHASES WERE ALREADY RECORDED IN THE BOOKS OF ACCOUNTS AND CORRE SPONDING ITA NO.3968/M/2019 & ORS SHRI JHAVERILAL P. DEDHIA 11 SALES WERE NOT RECORDED THEREBY SUPPRESSING THE INC OME TO THAT EXTENT. 14. AFTER PERUSAL OF THE ORDER OF THE COORDINATE BE NCH DATED 31.07.2010, WE NOTE THAT THE ISSUE PERTAINING TO DELETION OF ADDITION BY CIT(A) ON ACCOUNT OF STOCK DEFICIT IS C OVERED BY THE ITAT ORDER IN PARA 19 WHICH IS EXTRACTED BELOW: 19. COMING TO UNACCOUNTED SALES DETERMINED BY THE ID. CIT(A). THE LD. CIT(A) HAS ARRIVED AT TOTAL UNACCOUNTED SALES FOR AY 2 010-11 TO AY 2016-17 AT RS.66,28,49,605/-. THE SAID AMOUNT HAS BEEN ARRIVE D AT AFTER ALLOWING DEDUCTIONS OF RS.11,12,59,529/- TOWARDS STOCK SHORTAGE AND RS. 72,21,05,180/- TOWARDS PURCHASES CLAIMED ON THE BASIS OF ANNEXURE A11 TO A 21 FOUND DURING COURSE OF SEARCH. WE HAVE GONE THROUGH REASONS GIVEN BY T HE ID. CIT(A) TO ALLOW DEDUCTIONS TOWARDS STOCK SHORTAGE AND FOUND THA T THERE IS NO REASON TO FIND FAULT WITH REASONS GIVEN FOR DELETING ADDITIONS MADE ON A CCOUNT OF STOCK SHORTAGE, BECAUSE STOCK DIFFERENCE IS ON ACCOUNT OF MAJOR STO CK WAS GIVEN TO CUSTOMERS ON 'JANGAD' AND THE APPELLANT HAD SUBMITTED RECONCILIATION FOR THE SAME. FURTHER, THE CIT(A) NOTED THAT THE SAID STOCK IS AL READY CONSIDERED WHILE MAKING ADDITION ON THE BASIS OF PEN DRIVE MARKE D AS ANNEXURE A26 BEING JANGAD A STATEMENT MAINTAINED FOR MOVEMENT OF STOCK GIVEN TO CUSTOMERS ON APPROVAL BASIS. THUS, IN OUR VIEW ONCE IT HAS BEEN ADDED AS UNACCOUNTED SALES AS RECORDED IN PEN DRIVE (JANGAD) AND HAD BEEN TAXED BY AO, THE TA XATION OF THE SAME STOCK AGAIN HAS RESULTED INTO DOUBLE ADDITION. THE ASSESSEE HAD ALSO, FURNISHED ALL EVIDENCES TO PROVE DATA CONTAINED IN PEN DIRVES IN ON ACCOUNT OF JANGAD. TO PROVE ITS CLAIM, THE ASSESSEE HAD PROVIDED THE DETA ILS OF SALES RECORDED IN THE BOOKS OUT OF J-DETAILS (JANGAD) FOUND IN THE SEIZED PENDR IVES, WHICH IS PLACED AT PAGE NOS. 325 TO 328 OF THE PAPER BOOK. THUS, IT CAN BE SEEN FROM ABOVE THAT THE APPELLANT HAS QUANTIFIED THE STOCK GIVEN ON JANGAD AND ALSO R ECONCILED THE STOCK AS PER BOOKS WITH STOCK AS PER VALUATION REPORT EXCEPT THE MEAGE R DIFFERENCE OF 166.720 GMS IN GOLD AND 12.890 CTS IN DIAMOND WHICH IS NEGLIGIBLE DIFFERENCE CONSIDERING THE OVERALL QUANTITY WEIGHED AND VALUE. THE ABOVE SAID FINDINGS OF THE ID. CIT(A) GOES UNCHALLENGED BY THE REVENUE AND BECOME F INAL. THEREFORE, WE ARE OF THE VIEW THAT THE REVENUE HAS FAILED TO CONTROVERT THE FINDINGS OF THE ID. CIT(A) THAT STOCK SHORTAGE IS NOTHING BUT JANGAD WHICH IS GIVEN TO CUSTOMERS ON APPROVAL BASIS AND IS ALSO PART OF ANNEXURE A22 TO A26 AND HAS BEEN INCLUDED IN UNACCOUNTED SALES QUANTIFIED ON THE BASIS OF ANNEXURE A26, CONSEQUENTLY NO SEPARATE ADDITION IS REQUIRED ON ACCOUNT OF STOCK SHORTAGE. CONSEQUENTLY, THE GROUND NO. 4 BECOMES INFRUCTUOUS AND IS DISMISSED. ITA NO.3968/M/2019 & ORS SHRI JHAVERILAL P. DEDHIA 12 15. IN THE RESULT, ALL THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 06.04.2021. SD/- SD/- ( AMARJIT SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 06.04.2021. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.