AI Insights
This case involves M/s. Banaras Swarn Kala Kendra Pvt. Ltd., which faced additions to its income tax assessment for the assessment year 2011-12, following a search and seizure operation under Section 132 of the Income-tax Act, 1961. The additions were made on account of excess stock valued at Rs. 8,06,04,299 and a subsequent addition of Rs. 4,85,19,062 based on quantitative differences in stock. The Tribunal initially deleted the addition of Rs. 5,41,62,611 but later recalled this decision for a fresh hearing, acknowledging the need for a detailed examination of the discrepancies and the basis of the additions made by the Assessing Officer.
Appeal Details
Counselvise Citation
[2022] 140 COUNSELVISE.COM (IT) 108286 (ITAT-NA)
Assessee PAN
Bench
Appeal Number
CRN Number
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
04-01-2021
Appeal Filed By
Assessee
Order Result
PartlyAllowedAllowed
Bench Allotted
Varanasi
Next Hearing Date
24-08-2022
Assessment Year
2011-2012
Appeal Filed On
05-09-2021
Judgement Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL CIRCUIT BENCH, VARANASI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd., CK-65/70A, Bari Piari, Varanasi-221002, U.P. v. The Assistant Commissioner of Income Tax, Central Circle, Aaykar Bhawan, M A Road, Varanasi-221002, U.P. PAN:AACCB1623M (Appellant) (Respondent) Assesseeby: Shri A.K. Pandey, Advocate Revenue by: Shri Neeraj Kumar, CIT DR Date of hearing: 25.08.2022 Date of pronouncement: 21.11.2022 O R D E R PER SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER: This appeal, filed by assessee, being ITA No.4/VNS/2019 for assessment year 2011-12, is directed against the appellate order dated 14.08.2018 passed by learned Commissioner of Income Tax(Appeals), Varanasi(hereinafter called "the CIT(A)”) in Appeal No. 10565/CIT(A)/VNS/ 2016-17, for assessment year (ay): 2011-12, the appellate proceedings had arisen before Learned CIT(A) from assessment order dated 31.03.2013 passed by learned Assessing Officer (hereinafter called “the AO”) under Section 153A r.w.s. 143(3) of the Income-tax Act, 1961 (hereinafter called “the Act”). 2. The grounds of appeal raised by assessee in memo of appeal filed with Income Tax Appellate Tribunal, Varanasi (hereinafter called “the tribunal”), reads as under: ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 2 1. Because on the facts and in circumstances of the case the Ld. CIT(A) has erred for sustaining the addition of Rs.5,41,62,611/- on account of value of excess stock. 2. Because on the facts and in circumstances of the case the Ld. CIT(A) has erred for sustaining the addition of Rs.7,75,054/- again on account excess stock addition. 3. Because on the facts and in circumstances of the case the Ld. CIT(A) has erred for sustaining the disallowances of bad debts amounting to Rs.1,85,572/- 4. Because on the facts and in circumstances of the case the order passed by the authority below is bad in law, invalid, arbitrary nature, against the principle of natural justice and equity.” 3. This appeal was first heard by Division Bench of tribunal on 3rd December, 2020 and order was pronounced by tribunal on 5th January, 2021 wherein tribunal partly allowed the appeal of the assessee, wherein tribunal confirmed the addition to the tune of Rs. 7,75,054/- while addition to the tune of Rs. 5,41,62,611/- stood deleted by tribunal. The tribunal held that both the additions were related to difference in stock and are double addition. So far as addition on account of disallowance of bad debts amounting to Rs. 1,85,572/- is concerned, the tribunal dismissed the ground raised by asessee as not being pressed. The order of the tribunal dated 05.01.2021 is reproduced hereunder: “4. We have heard the rival parties and have gone through the material placed on record. We find that a search & seizure operation u/s 132 of the Act was conducted in the business premises of the assessee wherein the inventory of physical stock was prepared through a registered valuer. The registered valuer arrived at a value of Rs.21,29,37,802/- and in quantitative terms, the inventory as per the valuer was Rs.137830.590 gms. The Assessing Officer on the basis of value of opening stock purchases and sales arrived at a difference of Rs.8,06,04,299/ and made the addition accordingly. While making the addition, the Assessing Officer took the value of opening stock as on 01/04/2010 wherein the purchases were added for the period 01/04/2010 to 17/01/2011 and from therein the Assessing Officer reduced the sales made during the period i.e. the date of search and thereafter arrived at physical stock value of Rs.13,23,33,503/- and hence made the addition of difference. However, while ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 3 making the addition he subtracted sales instead of subtracting the cost of sales. Besides making the above addition the Assessing Officer again made an addition of Rs.4,85,19,062/- on the basis of difference in quantity found at the time of search and quantity as per the books of account. The Assessing Officer arrived at a difference of 31511.909 gms for which the addition to the extent of Rs.4,85,19,062/- was made. The learned CIT(A) obtained the remand report of the Assessing Officer who vide remand report dated 15/05/2017 commented on the two additions as under; "Sub.: Remand report in the case of M/s. Banaras Swam Kala Kendra Pvt. Ltd. (PAN-AACCB1623M) for A.Y. 2011-12- Kindly refer to your office letter F.No.CIT(A)/VNS/ Comment/ 2016-17/752 dated 24/03/2017 on the above subject. 2. Issue wise comments are as under: Issue No.1: Addition on account of undisclosed stock of Rs.8,06,04,299/-: 2.1 In the submission assessee has objected calculation of stock as well as differences worked out by the AO Rs.8,12,87,513/-. As per registered valuer, value of the ornaments (as per panchanama) are as under: (i) From page 1 to III value Rs.17,40,85,192/- weight 112486.400 Gm. purity 75% gold. (ii) Page IV value Rs.1,27,66,610/- weight 8344.190 gm. purity 75% gold. (iii) Page V value Rs.2,60,86,000/- weight 17000 gm and pokhraj 380ct Rs.76,000/-. Total value of stock Rs.21,29,37,802/- After deducting value of opening stock as per trial balance as on 17/01/2011 of Rs. 13,16,50,289/-, Assessing Officer proposed addition of Rs.8,12,87,513/-. During the course of assessment proceedings assessee was failed to explain the said differences, then after A.O. worked out value of undisclosed stock of Rs.8,06,04,299/- as under: (A)Value of opening stock as on 01.04.2010 as per page 26 Of LP-11 Rs.13,16,50,289/- (B)Add: Purchases made between 01.04.2010 to 17.01.2011 as per page 25 of LP 11 Rs. 10,49,06,788/- (C)Sub: Sales made between 01.04.2010 to 17.01.2011 as per page 25 of LP 11 Rs. 12,96,12,239/- ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 4 (D)Add: Purchases made between 18.01.2011 to 20.01.2011 (i.e. (date of search) (as Annexure LP-4 of the seized material):31,183.6Kg x 2053 (rate per gram) x 0.75 (75% purity) Rs.4,80,14,948/- (E)Sub: Sales made between 18.01.2011 to 20.01.2011 (i.e., date of search) (as per LP-19 of seized material) 11252.66 Kg x 2053 (rate per gram) x 0.75 (75% purity) Rs 1,73,26,283/- Working of the undisclosed stock: (i)Physical stock as per book- (A)+(B)-(C)+(D)-(E)- Rs.13,23,33,503/- (ii)Physical stock found during the course of the search Rs.21,29,37,802/- ----------------------- Resultant undisclosed stack (ii)-(i) Rs. 8,06,04,299/- 2.2 During the appeal proceedings, assessee has tried to reconcile the stock and filed reconciliation statement of the weight of the jewellery without valuation. During the remand report, assessee was required to substantiate the value of stock. In compliance assessee has filed detail of pending stock, purchases and sales and also worked out value of stock as on date of search amounting to Rs. 19,49,18,715.17 against valued by the valuer amounting to Rs.21,29,37,802.00. Accordingly valuation of excess stock Rs.1,80,19,086.83. 2.3. During the course of remand proceedings, Shri O.P. Tulsyan, FCA and Shri Navin Singh, Advocate alongwith Shri Manoj Gupta, Accountant of the assessee company appeared, filed details and discussed the same. 2.4 I have perused thoroughly details available on record, loose papers seized during the search proceedings and worked out value of excess stock as per detail below: Particulars Amount Opening Stock as on 1/4/2010 (page 26 of LP-11) 13,16,50,289 Add: Purchase as per AO 10,49,06,788 Less: Purchases doubled entered 18,26,030 Page 55 & 56 and 35 & 36 of LP-18 (journal voucher dated 17.01.2011 and 1.1.2011 and page 22 & 23 LP-1 (stock register) 10,30,80,758 -------------------- 23,47,31,047 Less: Sales upto 17/01/2011 13,10,42,719.55 Sales of 18/01/2011 4,23,226.25 Page 23 of LP 1 / hard disc sale of 18/01/2011 Sale of 19/01/2011 page 19-44 of LP-15 4,71,016.40 13,19,36,962.20 Less: G.P. @ 19.19 as per 2,53,18,703.00 10,66,18.259 ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 5 Audit report for the year Cost of sales 10,66,18,259.20 Add: Purchase during 18/01/11 to 19/01/11 {31,183.6 gm x 2053 (rate per gram) x 0.75 (75% purity) as taken by A.O. in asst order and assessee has not disputed for weight 31183.6 gm. During remand report, for valuation of stock assessee has taken value for the same weight of Rs.6,3589,905/- @2039-/ per gram on the gross weight which should be valued on net weight i.e., 75%. Assessee has adopted Rate Rs. 2039/- per gm without any base in these circumstances, valuation of rate taken by registered valuer of Rs. 2053/- per gm (as per panchanama) is genuine and being adopted. 4,80,14,948 Less: Pure gold issued to Karigar / sales as shown by the assessee company 1,73,52,545 Total Value of stock as on 20.1.2011 as per books 15,87,75,191 Loss: Value of stock worked out by the registered valuer on date of search 21,29,37,802 Difference (Excess Stock) 5,41,62,611 In view of fact as discussed above investment in stock of Rs. 5,41,62,611/- is still unexplained which is based on documentary evidences. Issue No.2: Addition on account of excess stock of Rs.4,85,19,062/-: 2.5 During the course of search proceeding conducted on 20.02.2011 as per inventory and valuation made by the Regd. Valuer stock of gold ornament were found weighing 1377830.590 gm against stock as per sock register LP-1 (Page 23) 10618.681 gm and differences in stock found 31511.909 gm. After considering purity of gold in gold ornament of 75% worked at net weight of gold 23633.93 and valued @2053 per gram as taken by Registered valuer on the date of search and proposed addition of Rs.4,85,19,062/-. 2.6 In compliance, the assessee company reconciled the stock and found differences 503.345 gm. but failed to substantiate the same with documentary evidences. Therefore, the Assessing Officer rejected submission of the assessee company and made addition of Rs.4,85,19,062/- on account of excess stock found during the course of search proceedings. 2.7 During the remand proceedings, Shri O.P. Tulsyan, FCA, Shri Navin, Singh, Advocate along with Accountant Shri Manoj Kumar Gupta, attended the proceedings, furnished reconciliation of stock working out differences of ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 6 Rs.1,80,19,086.83 in place of addition made of Rs.4,85,19,062/-. In its submission, assessee company has stated that A.O. has taken stock of gold ornaments weighing 106318.681 gms. as per LP-1 page 23, which was updated stock of gold ornament only on 18/01/2011 whereas on physical verification stock found on 20/01/2011 i.e. on the date of search, Entry of transaction of purchase and sale of 18/01/2011 and 19/01/2011 has to be considered and final stock has to be arrived only after posting the purchase and sale transaction executed on 18/01/11 & 19/01/11. In the remand proceedings, assessee company has also stated that stock of gold diamond jewellery, old gold and pure gold for which separate ledger has been maintained and available with the Department, have not been considered in taking total stock. Assessee company has also filed reconciliation of stock referring page number of concerned LOOSE PAPERS seized by the Department during the search proceedings. 2.8 I have perused thoroughly submission of the assessee company, details available on record, loose papers seized during the search proceedings and worked out value of excess stock as per detail below: Description Weight (in gm.) As per LP-1 (page 23) it is only stock of gold ornament 106318.680 Less: Sales of 200 gms. ornament sold on 17.1.2011 as shown in page No. 63 of LP-4 and the same is not considered in Page 23 of LP-1 above 200,000 106118.680 Add: (i)Diamond jewellery as per Stock Register (LP-14 page 20) which was not considered as stock in assessment order 254.695 (ii) Pure gold & old gold as per stock register (as available in seized hard disc) 967.620 (iii) Purchase of gold ornament as per bill dated 18.01.2011 of M/s. Haryana Jewellers Pvt. Ltd. Delhi seized as page 2 of LP-19 1112.320 (iv) Received gold jewelers through challan dated 18.1.2011 from M/s. Siddi Jewellers Pvt. Ltd. Delhi (seized as page 3 of LP-19) 30071.280 Total 138524.595 Less(i) Gold ornament sold on 19/01/2011 (as per page 19- 44 of LP-15) 218.830 (ii) Purchase of gold jewellery bill dated 28.11.2010 of M/s. Haryana Jewellery Pvt. Ltd. which is entered in stock register on two dates i.e. on 01.01.2011 and 17/01/2011 (page 22 &23 and 55 & 56 of LOOSE PAPERS-1) 978.540 ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 7 Total Stock as per reconciliation 137327.225 Stock as on 20.1.2011 inventoried by registered valuer 137830.590 Purity of gold & 75% 503.365 Value of pure gold (377.523 x 2053) as taken by valuer on the date of search i.e. 20.1.2011 Rs.7,75,054/- 5. Learned CIT(A), on the basis of remand report, upheld the addition to the extent of Rs.5,41,62,611/- and further confirmed the addition of Rs. 7,75,054/ without realizing that Assessing Officer had made double addition one on the basis of difference in quantitative details and one on the basis of difference in value of purchase, sales and opening stock etc. The admitted fact is that the Assessing Officer during remand proceedings had accepted the difference to be only to the extent of 503.365 gms. which is apparent from the remand report reproduced above. Therefore, the addition could only have been sustained upto the value of this difference which comes out of Rs.7,75,054/- Therefore, the other addition based on the basis of value should not have been made or sustained as the addition could have been made only due to the difference in physical and quantitative record as per books. The authorities below have erred in making the same addition of difference on the basis of figure appearing in the books of account which is not justified. Therefore, the addition sustained by learned CIT(A) to the extent of Rs.5,41,62,611/- is deleted as this is a double addition of the same difference and in view of the above ground No. 1 of the appeal is allowed. 6. Nothing was argued in relation to ground No. 2 & 3 therefore, these grounds are dismissed as not pressed.” 4. Thereafter, Revenue filed M.A. with tribunal which was listed as MA. No. 03/VNS/2021 seeking recall of the appellate order dated 5th January, 2021 , as in view of Revenue there was a mistake apparent from the record in the said appellate order passed by tribunal , wherein addition to the tune of Rs. 5.41 crores were erroneously deleted by tribunal. The MA filed by Revenue reads as under: “Before the ITAT, Allahabad in the case of Banaras Swarn Kala Kendra Pvt. ltd. In ITA No. 04/VNS/2019 dated 05.01.2021 Respected Sir, ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 8 Subject: Miscellaneous application in the case of Banaras Swarn Kala Kendra Pvt. Ltd PAN AACCB1623M for A.Y. 2011-12-Regarding In this case assessment u/s 153A rw.s. 143(3) of the IT Act was completed at total income of Rs.13,89,44,970/- against returned income of Rs. 1,35,11,140/- The A.O. has made two additions against excess stock in the assessment order. First an amount of Rs.8.06 Cr on the basis of adjustments as per LP.s (as a clear entry of closing stock was not available) which was later reduced to Rs.5.41 Cr as per remand report submitted during appellate proceeding by the Ld. C.I.T. (Appeal). Second addition to Rs.4.85 Crores was made on account of excess stock w.r.t. stock register etc, which was reduced to Rs.7.75 Lakh by the CIT (Appeal) as per submission made by the A.O. in the remand report that only Rs.7.75 lakh is liable to be sustained as per the seized records. It is apparent that the excess stock has been considered for addition for two times first from trial balance and LPs as mentioned above and second time on the basis of weight of gold ornaments as per print out of stock register. Therefore it is evident that Rs.7.75 Lakh is part of addition of Rs 5.41 Cr, resulting in double addition. Hon'ble ITAT while discussing the merit of addition of Rs 7.75 Lacs did not appreciate that even if Rs 7.75 Lacs was also included in another addition of Rs 5.41 Crore then also higher of the two was required to be confirmed or otherwise ITAT should have given a specific finding on merit as to how and why the addition of Rs.5.41 Crore as reduced by Rs 7.75 Lacs was not sustainable. In absence of any specific finding, it does give rise to apparent mistake in the order of ITAT as non-adjudication with specific findings on any item of addition either fully or partly, shall give rise to apparent mistake. This requires reconsideration more so in view of the fact that the Ld. CIT (A) has confirmed the addition of Rs 5.41 Crores, PRAYER It is therefore prayed that the order dated 05/01/2021 may kindly be recalled as there is a mistake apparent from record as submitted above and afresh order may be passed on merit considering the fact of the case. Therefore, in my humble view Hon'ble ITAT has passed the order without considering all the facts and circumstances of the case. As this is a mistake apparent from record, miscellaneous application may be filed before Hon'ble ITAT. Sd/- (Arvind Mohan Bhatnagar) Asstt. Commissioner of Income Tax” ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 9 Central Circle, Varanasi 5. The tribunal heard the aforesaid Revenue’s M.A. , and allowed the MA vide order dated 26.04.2022 by recalling the appellate order dated 5th January, 2021 in ITA No. 04/Vns/2019 for assessment year 2011-12 , and directed for fresh hearing before Division Bench, by holding as under: “This Miscellaneous Application(MA)bearing MA No. 03/VNS./2021 arising out of ITA no. 04/VNS/2019 for assessment year(ay) 2011-12 , has been filed by Revenue on the grounds that there is a mistake apparent from record with in the purview of Section 254(2) of the Income-tax Act, 1961(hereinafter called “the Act”) in the appellate order dated 05th January, 2021 passed by Income Tax Appellate Tribunal, Varanasi Circuit Bench, Varanasi ( hereinafter called “the tribunal”) , in ITA No. 04/VNS/2019, for ay: 2011-12 , in the case of M/s Benaras Swarn Kala Kendra Private Limited v. ACIT, Central Circle, Varanasi, U.P. , and hence this appellate order dated 05.01.2021 passed by tribunal is liable to be recalled u/s 254(2) of the 1961 Act. The main grievance of the Revenue in this MA is that the tribunal , while passing appellate order dated 05.01.2021, has committed a mistake apparent from record , while deleting additions to the tune of Rs. 5,41,62,611/- which was earlier upheld by ld. CIT(A), towards excess stock based on value of stock, the addition having being made on the basis of seized material , while tribunal sustained the additions of Rs. 7,75,054/- as was earlier confirmed by ld. CIT(A), which addition was also made based on the stock and material seized during the search operations, based on reconciliation of quantitative stock. The Revenue is aggrieved that tribunal mistook that there is a double addition , and deleted the aforesaid addition of Rs. 5,41,62,611/- which was upheld by ld. CIT(A) based on remand report submitted by the AO. It is averred in the MA filed by the Revenue that even if addition of Rs. 7.75 lacs was also included in another addition of Rs. 5.41 crores as both additions concerns itself with stock/inventory, then also higher of the two additions were required to be confirmed by tribunal , or otherwise the tribunal should have given a specific finding on merit as to how and why the addition of Rs. 5.41 crore as reduced by Rs. 7.75 lacs was not sustainable . It is ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 10 averred in MA filed by Revenue that in the absence of any specific finding , it does give rise to apparent mistake from record in the order of the tribunal , as non- adjudication with specific findings on any item of addition either fully or partly, shall give rise to apparent mistake from record amenable to be recalled under Section 254(2) of the 1961 Act. The Revenue has made prayers for recall of the appellate order , dated 05.01.2021 , passed by tribunal in ITA no. 04/VNS/2019, for ay: 2019(sic. 2011-12). 2. We have heard both the rival parties in Open Court hearings on 22.04.2022 wherein arguments were advanced by both the parties to support their contentions on merits as well whether the prayers made by Revenue in MA are within the limited scope of Section 254(2) of the 1961 Act. We have considered rival contentions and perused the material on record. At the outset, we hold that there is a mistake apparent from record in the appellate order dated 05.01.2021 passed by tribunal in ITA no. 04/VNS/2019, for ay: 2019-20 (sic. 2011-12) , and hence this order needs to be recalled within the mandate of Section 254(2) of the 1961 Act, for fresh hearing before the Division Bench, for the reasons cited hereafter. Before, we proceed further , it is very important to understand the entire factual matrix, background of the case as well nature and character of additions made , which are subject matter of this MA , although both the additions emanates from differential in inventory of the assessee. The inventory/ stock of the assessee, consists mainly of gold ornaments and other jewellery items, as the assessee is engaged in the retail business of gold and silver ornaments. The brief facts of the case are that there was a search and seizure operations conducted by Revenue against the assessee at Varanasi, its sister concerns and residential premises of partners, directors and proprietors of the group, u/s 132 of the 1961 Act, on 20.01.2011(DOS). During search operations conducted by Revenue u/s 132 of the 1961 Act, documents, cash, jewellery etc. were found and seized.Theassessee company is engaged in the retail business of gold and silver ornaments. There was a seizure of documents marked as Annexure LP-4 from the business premises of the assessee. At page 24-30 of Annexure LP-4, there was a Trial Balance of the assessee company , for the period ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 11 01.04.2010 to 17.01.2011 have been shown as per print out of the assessee’s Computer. This Annexure LP-4 was sealed by Revenue during the course of search and seizure operations. On page 26/Annexure LP-4, under the head Current Assets - opening stock has been shown at Rs. 13,16,50,289/- as on 17.01.2011 . The stock of the assessee company was inventoried by Revenue vide Panchnama dated 21.01.2011 , and valuation by Registered valuer of Jewellery was done valuing the total inventory of Jewellery at Rs. 21,29,37,802/- . The Opening Stock as reflected in seized Annexure was Rs. 13,16,50,289/- , while the actual stock found during the search was Rs. 21,29,37,802/- . The assessee has not disputed , either the opening stock as on 01.04.2010 of Rs. 13,16,50,289/- , nor have disputed the valuation of stock held as on 20.01.2011(DOS) of Rs. 21,29,37,802/- . The assessee tried to explain the difference before the AO with reconciliation chart of closing balance of the physical stock as at 17.01.2011 , (till this date the assessee claimed that stock register was written), with the physical stock taken by Revenue on the date of search i.e. 20.01.2011 , and the assessee claimed that there is only a difference of 503.365gms. in the physical stock vis-à-vis stock as is reflected in the stock register(after taking effect of transactions for 18/19.01.2011). The AO referred to several inconsistencies as well alleged that the assessee is misleading the department ,and then proceeded to made the addition of Rs. 8,06,04,289/- in the hands of the assessee towards undisclosed stock, based on the differential in the valuation of stock as is worked out by the AO starting with opening stock in valuation terms as is reflected in seized Annexure LP-4, as on 01.04.2010 and then adjusting for purchase /sale of stock, from 01.04.2010 to 17.01.2011(as is reflected in seized material) and further adjusting for transaction for 18/19.01.2011. While making this addition, the AO started with the balance as is appearing in the seized material LP-4 (which was trial balance from 01.04.2010 to 17.01.2011), as opening stock as on 01.04.2010 of Rs. 13,16,50,289/- and then went on to add purchases for the year till 20.01.2011(purchases till 17.01.2011 were reflected in seized material LP-11 with further adjustment for transactions for 18/19.01.2011), deduct sales till 20.1.2011(sales till 17.01.2011 were reflected in seized material LP-11 with further adjustment for transactions for 18/19.01.2011), and the remaining figure was ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 12 arrived at Rs. 13,23,33,503/- which as per AO was the closing stock as at 20.01.2011 as per books of accounts maintained by the assessee( chart is reproduced by AO in assessment order/page 8) , while the actual stock found was Rs. 21,29,37,802/- on the date of search on 20.01.2011, which led to the additions to the tune of Rs. 8,06,04,299/- made by the AO , towards undisclosed stock, vide assessment order dated 31.03.2011 passed by the AO u/s 153A read with Section 143(3) of the 1961 Act. 2.2 The AO further observed that the Director of the assessee company has declared the undisclosed stock of Rs. 1,50,00,000/- on the basis of difference between Annexure LP-1 at page 23 seized from the premises of the assessee, and inventory of stock prepared on the date of search i.e 20.01.2011. The AO observed that the difference of the stock worked out as per page 23 of LP-1 and inventory was as under: (i) Gold Ornaments as per inventory 137830.590 gms. (ii) Gold Ornaments as per LP-1(page 23) 106318.681 gms. --------------------- Difference between (i) and (ii) 31511.909 gms. --------------------- The AO observed that difference in stock is 31511.909 gms. of jewellery , and if purity of gold in gold ornament is considered to be 75% as mentioned by approved valuer, the value of jewellery comes to Rs. 4,85,19,062/- . The AO observed that no regular books of accounts were produced by the assessee , during the course of search operations as well the assessee did not produced books of accounts, vouchers etc. during the course of assessment proceedings. The assessee again tried to reconcile the stock and submitted that there is a difference of 503.365 gms. in reconciliation (reconciliation chart reproduced by AO at page 4 of the assessment order, but AO was of the view that the assessee is not able to substantiate its contentions, which led AO to make additions to the income of the assessee, to the ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 13 tune of Rs. 4,85,19,062/-, vide assessment order dated 31.03.2011 passed by the AO u/s 153A read with Section 143(3) of the 1961 Act . 3. The assessee being aggrieved filed first appeal with ld. CIT(A). The assessee reiterated that the difference in quantitative stock between stock recorded in stock register maintained by assessee, and physical stock found during search, was merely 503.365 gms., as on the date of search on 20.01.2011. The assessee submitted reconciliation chart before ld. CIT(A), which is reproduced in page 4-5 of appellate order passed by ld. CIT(A). The submissions filed by assessee were forwarded by ld. CIT(A) to the AO for his comments. The remand report filed by AO is reproduced by ld. CIT(A) in its appellate order at page 7-8. The AO in remand proceedings observed that the assessee is trying to reconcile the stock with weight of jewellery only , and not reconciling the value of stock. The AO based on the details of record, loose papers seized, worked out excess stock of Rs. 5,41,62,611/- in its remand report by taking opening stock value as at 01.04.2010 as appearing in trial balance from 01.04.2010 to 17.01.2011, being Annexure LP-4 and then added purchases till 20.01.2011 and deducted cost of sales(as against sales in the assessment order) and compared it with the physical stock found during search, as against excess stock of Rs. 8.06,04,299/- worked out by the AO in assessment order. The ld. CIT(A) asked for fresh remand report from AO, as there was a change of AO. The AO in second remand report reiterated the stand taken by the AO in the first remand report. The ld. CIT(A) forwarded this remand report to the assessee for rebuttal, but the assessee did not made any fresh comments and reiterated its earlier stand. The ld. CIT(A) upheld the additions to the tune of Rs. 5,41,62,611/- towards excess stock, vide appellate order dated 14.08.2018(Appeal No. 10565/CIT(A)/VNS/2016-17). 3.2 Now, coming to the second addition as was made by AO towards excess stock of Rs. 4,85,19,062/- , being difference between stock as is reflected in seized material LP-1 / page 23 and the physical stock found during search on 20.01.2011 , as under: (i) Gold Ornaments as per inventory 137830.590 gms. (ii) Gold Ornaments as per LP-1(page 23) 106318.681 gms. ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 14 ------------------- Difference between (i) and (ii) 31511.909 gms. The assessee submitted reconciliation chart before the ld. CIT(A) , of the quantities of stock. The assessee submitted that stock register was posted upto 17.01.2011 and the assessee made adjustments for transactions from 18/19.01.2011, for sale and purchase of gold in quantitative term during this period , and arrived at final stock of 137327.225 gms, while actual physical inventory of stock was 137830.590 gms as on the date of search on 20.01.2011 , leading to a difference of 503.365 gms. The ld. CIT(A) called for remand report from AO , and the ld. AO submitted in its remand report a reconciliation chart , accepting that difference in stock is to the tune of 503.365 gms. Since, there was a change of AO, the ld. CIT(A) called for second remand report. The AO in its second remand report reiterated the stand taken by AO in the first remand report. The ld. CIT(A) forwarded remand report to the assessee for rebuttal, and the assessee reiterated its earlier stand. The ld. CIT(A) based on remand report accepted that there is a difference of merely 503.365 gms in stock of gold ornaments in quantitative terms, and when adjusted for purity, led to additions to the tune of Rs. 7,75,074/- being upheld by ld. CIT(A) , vide appellate order dated 14.08.2018(Appeal No. 10565/CIT(A)/VNS/2016-17), as against addition of Rs. 4,85,19,062/- made by the AO in the assessment order. 4. Before we proceed further, it is important to note/observe that both the additions were although were on account of inventory, but their nature , character and mandate significantly differs, the first addition was on based on accounts of the assessee for the period 01.04.2010 to 20.01.2011(DOS), wherein based on the opening stock (on 01.04.2010) as reflected in trial balance from 01.04.2010 to 17.01.2011(seized material LP-4) which was adjusted purchases and sale for the period 01.04.2010 to 20.01.2011, the closing stock being worked out as per accounts of Rs. 15,87,75,191 as at 20.01.2011 , which was then compared with the actual physical stock of Rs. 21,29,37,802/- found during the course of search operations on 20.01.2011 , and the difference of Rs. 5,41,62,611/- was upheld /sustained by ld. ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 15 CIT(A), which was purportedly undisclosed investment in stock made by the assessee being in the nature of unexplained investment in stock out of accounts as the physical stock was found much in excess of the stock worked out on the basis of accounts attracting rigors of Section 69 of the 1961 Act, while addition of Rs. 7,75,054/- was purportedly upheld by ld. CIT(A) based on account of difference between the quantitative stock found recorded in stock register(seized material) which was written upto 17.01.2011 which was then adjusted for transactions for 18/19.01.2011, and then compared with the physical stock found during the course of search operations on 20.01.2011, and finally arriving at difference of only 503.365 gms. leading to the sustenance of addition of Rs. 7,75,054/- being upheld/sustained by ld. CIT(A), but the fact remains that nature , character and mandate of both the additions are different, as the first addition concerns with differential in the value of stock considering the opening stock as at 01.04.2010 which was adjusted for purchases and sales for the period 01.04.2010 to 20.01.2010, to arrive at closing stock as at 20.01.2011 , as per accounts of the assessee and then comparing it with physical stock as at 20.01.2011, while the second addition is on account of stock in quantitative terms as recorded in seized material being stock register written upto 17.04.2011(sic. 17.01.2011) which is further adjusted for transactions for purchase/sale for 18/19.01.2011 , and then comparing it with the physical stock as on 20.01.2011(DOS). Thus, it could be seen that nature, character and mandate of both the additions are different. First addition concerns itself with and take cognizance of the entire period from 01.04.2010 to 20.01.2011 of opening stock , transactions for sale/purchase during the said period, to arrive at closing stock as at 20.01.2011 as per accounts of the assessee , and then comparing with the physical stock as on 20.01.2011, while second addition take cognizance of stock in quantitative terms found mentioned in seized material being stock register on 17.01.2011 and then comparing with physical stock found on the date of search on 20.01.2011, after adjusting for entries for 18.01.2011 to 19.01.2011. Thus, It became essential and important for the assessee to have reconciled/cross verified the entries as are recorded in the seized stock register from beginning of the financial year 2010-11 i.e. 01.04.2010 till 17.01.2011,( as stock register was written upto ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 16 17.01.2011 ) with further adjustment for transactions for 18/19.01.2011, with the corresponding quantities of opening stock, purchases /sales during the period from 01.04.2010 till 17.01.2011 with further adjustment for transactions for 18/19.01.2011, in conformity with the seized Annexure LP-4 and purchase/sale as are recorded in the accounts (vide seized material LP-11/page 25). This exercise of cross verifying /reconciling the stock in quantitative terms with the corresponding quantitative stock as on 01.04.2010 ( LP-4) and corresponding quantitative stock of purchase/sale for the entire period 01.04.2010 till 20.1.2011(DOS) , was never done by the assessee, but rather the assessee is again and again reiterating that stock as per stock register seized is tallying with the physical stock on the date of search, except for difference of 503.365 gms. .The assessee never produced books of accounts and other details/vouchers before the authorities below. Thus, until the authenticity of seized stock register and its reconciliation of stock as is claimed to be recorded in this register , for the whole period 01.04.2010 till 17.01.2011( seized stock register was written upto 17.01.2011) with further adjustment for transactions for 18/19.01.2011, is not done with the quantitative stock held as on 01.04.2010 and purchase/sale in quantitative terms for the period 01.04.2010 until 20.01.2011, the assessee cannot be relieved of both the additions towards inventory , as were confirmed/sustained by ld. CIT(A), because there is every possibility that the stock was purchased out of accounts attracting rigors of Section 69, until the assessee comes out with cogent explanations . The tribunal vide appellate order dated 05.01.2021 , sustained the addition on account of difference in quantity of stock to the tune of 503.365 gms i.e. Rs. 7,75,054/- , while deleting the addition of Rs. 5,41,62,611/- being excess stock based on value of stock. The tribunal in its part misdirected itself and committed a mistake apparent from record that there is a double addition on account of difference in quantity as well on account of difference in value, completely misdirecting itself and ignoring the vital fact that nature , character and mandate of both the additions differ significantly, as outlined above in this order, which is a mistake apparent from records , amenable to correction u/s254(2) of the 1961 Act. The tribunal also misdirected itself and committed mistake apparent from record by observing that the AO during remand proceedings ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 17 has accepted the difference to be only to the extent of 503.365 gms , while completely ignoring that ld. AO has in the remand proceedings, on the first issue of differential in the value of stock, accepted that the additions on account of difference in value are sustainable to the tune of Rs. 5,41,62,611/- as detailed in its remand report as against the addition of Rs. 8,06,04,299/- made by the AO in the assessment order, which addition of Rs. 5,41,62,611/- was sustained by ld. CIT(A) , and the tribunal misdirected itself by holding that the AO in remand proceedings have confirmed that only additions to the tune of Rs. 7,75,054/- was sustainable and holding that double additions on account of inventory was made by the authorities below and tribunal proceeded to grant relief to the assessee by deleting addition of Rs. 5,41,62,611/- and sustaining addition of Rs. 7,75,054/- completely ignoring the fact that the AO in its remand proceedings have commented for confirming both the additions to tune of Rs. 5,41,62,611/- and Rs. 7,75,054/- although both the additions were based on differential in inventory but the nature, character and mandate of both the additions significantly differed as highlighted by us in this order, which is a mistake apparent from record committed by tribunal. Thus , based on our findings above, we are of the considered view , that there is a mistake apparent from record in the appellate order dated 05.01.2021 passed by tribunal in ITA no. 04/VNS/2019 for ay: 2011-12 which is covered u/s 254(2) of the 1961 Act , and hence the said appellate order dated 05.01.2021 needs to be recalled for fresh hearing before the Division Bench of the tribunal. Hence, we direct that the appellate order dated 05.01.2021 in ITA No. 04/VNS/2019 for ay: 2011-12 be recalled and placed before the Division Bench of the tribunal, for fresh hearing, on 12.05.2022 . The Registry is directed to accordingly issue fresh notice to both the parties for fresh hearing before the Division Bench, on 12th May, 2022. We order accordingly. 2. In the result, M.A. No. 03/VNS/2021 arising out of ITA no. 04/VNS/2019, for ay: 2011-12 ,filed by Revenue is allowed.” 6.That is how we are now seized of this appeal to adjudicate afresh after hearing both the parties, on merits in accordance with law. The brief facts of the case are that Search and Seizure operations were carried out by Revenue ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 18 under Section 132 of the Act in the business premises of M/s. Banaras Swarn Kala Kendra Pvt. Ltd., Varanasi , its sisters concern and residential premises of partners, directors and proprietors of the group on 20.01.20211. During the course of search, documents, cash, jewellery etc., as per Annexures to the various Panchanamas drawn, were found and seized. Thereafter, the case of the assessee was centralized with the ACIT, Central Circle, Varanasi(AO). Statuary notice u/s 142(1) dated 31.01.2012 was issued by AO , and the assessee filed return on income on 05.07.2012, showing total income of Rs. 1,35,11,140/- . The AO issued notice u/s 143(2) dated 06.09.2012 which was claimed by AO to have been duly served. The AO issued notices u/s 142(1) from time to time, but the assessee did not complied with said notices. SCN u/s 271(1)(b) dated 10.12.2012 was also issued, thereafter , non compliance notice was also issued on 17.1.2013, but the assessee did not comply. Thereafter, notice u/s 144 was issued by AO on 07.02.2013 , for compliance on 15.02.2013. The assessee filed details in response to queries raised by AO. The assessee is a company and engaged in the retail of business and gold and silver ornaments. 6b. The AO observed from the seized documents LP-4 Page No. 24 to 30 of the assessee company for the period 01.04.2010 to 17.01.2011 are printout of the assessee’s computer. This document was seized during the course of search and seizure operations on Page No. 26 under the head current assets opening stock was shown at Rs. 13,16,50,289/- as on 17 th January, 2011 and however, during the course of search and seizure operations stock of the assessee company inventoried as per annexure (from page i to v) of Page panchnama dated 21 st January, 2011 and valued by the registered valuer of jewellery whereas under: ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 19 (i)From page 1 to III value Rs. 17,40,85,192/-weight 112486.400 Gm. purity 75% gold (ii) Page IV value Rs. 1,27,66,610/- weight 8344.190 gm. purity 75% gold. (iii) Page V value Rs. 2,60,86,000/- weight 17000gm and purkhraj 380ct. Rs. 76,000/- Total Value of Stock Rs. 21,29,37,802/- 6c. Thus, the AO observed that there is difference of Rs. 8,12,87,513/- in stock of the assessee company as on 20 th January, 2011 and the assessee was asked by AO to explain the unexplained closing stock to the tune of Rs. 8,12,87,513/- as to whether the same is reflected in books of account alongwith documentary evidences. The assessee made following submissions before the AO as under: “As regards Page 24 to 30 of Annexure LP-4, seized from the business premises of BSKK Pvt. Ltd, at Godowlia, Varanasi, your goodself will appreciate and for the reconciliation of the total value of stock as inventoried by the Department and the valuation made by the Registered Valuer amounts to Rs.21,29,37,802/-, with the statement of stock maintained by the assessee fallowing points are to be considered :- a) The trial balance taken into consideration is for the period 01.04.2010 to 17.01.2011. b) The Department has considered opening balance of 01.04.2010 amounting to Rs.13,16,50,289.00 as the closing balance of 17.01.2011 amounting the same amount i.e. Rs.13.16.50,289.00. c)As per the software of tally, trial balance not shows closing balance till feeding of the same. It means if closing balance is not feeded the trial balance will take opening balance as the closing balance. In proof and support of the same once again trial balance for the period 01.04.2010 to 17.01.2011 is annexed herewith. ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 20 d) In view of the above points it is clear that Department has grossly mistaken and compared the physical stock taken at the time of raid on 20.01.2011 with opening stock of 01.04.2010. e) Therefore, the question of addition as unexplained income in the hands of the assessee company is totally unjustified and uncalled for. f) Without going to the merit of the valuation of the stock amounting to Rs 21,29,37,802/-as taken by the Department assesses herewith reconcile the samewith the help of following reconciliation statement- Further, for the satisfaction of your goodself we are enclosing herewith a chart showing the closing balance as on 18.01.2001 (the date upto which the stock register has been posted) and found of the Computer of the Company the details of which has been taken by the department and also the reconciliation of the stock, with the physical stock taken by the approved valuer and from the perusal of which it is clear that there is minor difference of 503.365 gms in the physical stock and stock as per stock register of the company. As the difference in weight which may be due to taking the weight of thread/moti etc. on assumption basis so there is no room to draw adverse inference. Detailed reconciliation of stock is as follows> RECONCILIATION STATEMENT OF STOCK (Qty. in gm.) A. Closing Stock as on 18.01.2011: 1. Gold Ornaments 106118.680 2. Diamond Jewellery 254.695 3. Old Gold 967.620 4. Pure gold 180.290 5. Stock of pure gold issued to M/s. V.M. jewelers, Mumbai on dated 27.12.2010 vide issue Slip No. 14 2000.00 6. Stock of gold send for ornaments Making to M/s. Purvi Jewellers ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 21 Mumbai on dated 31.12.10 vide Issue Slip No. 15 7575.000 117396.285 Add: 1. Gold ornaments received from Haryana Jewellery Pvt. Ltd. New Delhi Bill dated 18.1.2011 Bill Seized by the Department 1112.020 2. Gold Ornaments received from Siddh Jewellers Pvt. Ltd. New Delhi Being challan dt. 18.1.2011 received on 19.1.2011 seized by the Deptt. 30071.280 31183.600 148579.885 Less: 1. Gold ornaments sold on 19.1.2011 218.830 2. Bill of Haryana Jewellers Pvt. Ltd. Dt. 28.12.2010 entered two times 01.01.2011 and 17.1.2011 978.540 3. Pure gold issued to karigar On 19.1.2011 480.290 4. Gold ornaments recevied from Purvi Jewellers Mumbai was lying at Delhi Office 7575.000 5. Stock of pure gold entered by M/s. V.M. Jewelers Mumbai and address was not correct and the same Was lying at Delhi office 2000.00 11252.660 137327.225 Stock as per physical verification On the date of search 137830.590 Difference(Excess) 503.365 Note: It is very much pertinent to be noted that all the supporting documents to explain the reconciliation statement are with the Department, taken by the Department at the time of search and seizure on 20.01.2011.” 6d. The AO observed from the said seized Annexure LP-4 page No. 24 to 30 seized from the business premises of the assessee at Godowlia, Varanasi that , inter-alia, it contains trail balance of the assessee company from 01.04.2010 to 17.01.2011 , and on Page No. 26 under the head current Assets opening stock have been shown at Rs. 13,16,50,289/- as on 17 th January, 2011 , while the physical stock of jewellery as on the date of search as inventoried as per ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 22 Panchanama dated 21 st January, 2011 and valued by Registered Valuer was total Rs. 21,29,37,802/- , as under: (i)From page 1 to III value Rs. 17,40,85,192/-weight 112486.400 Gm. purity 75% gold (ii) Page IV value Rs. 1,27,66,610/- weight 8344.190 gm. purity 75% gold. (iii) Page V value Rs. 2,60,86,000/- weight 17000gm and purkhraj 380ct. Rs. 76,000/- --------------------------------------------------- Total Value of Stock Rs. 21,29,37,802/- ----------------------------------------------------- 6e. The AO observed that the assessee is claiming that there is difference of excess stock of gold weighing 503.365 gms., valuation of which comes to Rs. 10,33,408/- (503.365 x 2053 per gram)(rate of gold as on the date of search). The AO observed after considering the reply of the assessee that the stock of Rs. 13,16,50,289/- as is represented in the seized material page 26 of LP-11, was infact stock of the assessee as at 01.04.2010 i.e. opening stock the financial year 2010-11 and not the closing stock as on 17.01.2011 and the submission of the assessee to that extent is correct. The AO observed that the content of reconciliation chart are not supported by any documentary evidences , while seized material disprove the claim of the assessee. The AO also observed that the assessee has misrepresented department by writing a note that all the supporting documents to explain the reconciliation statement are with the department taken by department during the time of search and seizure operations on 20 th January, 2011. The AO also observed that contention of the assessee that some stock of gold were issued to Karigars and some bills were lying at Delhi office , is factually wrong. The AO observed that no register of gold issued to Karigars were found during the search and no such register was produced even during the assessment proceedings. The AO ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 23 prepared reconciliation statement wherein he took opening stock as per seized material, purchases made till the date of search and subtracted sales made till the date of search (as per seized material ), as under: “18. Thus, the working of closing stock as on the date of the search is as under: (A) Value of opening stock as on 01.04.2010 as per page 26 of LP (as already scanned above) ---------- Rs.13,16,50,289/- (B) Add: Purchases made between 01.04.2010 to 17.01.2011 Rs. 10,49,06,788/- as per page 25 of LP 11 (copy as scanned below) (C) Sub: Sales made between 01.04.2010 to 17.01.2011 as Rs. 12,96,12,239/- per page 25 of LP 11 (copy as scanned below) (D) Add: Purchases made between 18.01.2011 to 20.01.2011 (i.e. date of search) (as Annexure LP-4 of the seized material): 31,183.6 Kg x 2053 (rate per gram) x 0.75 (75% purity)= Rs. 4,80,14,948/- (E) Sub: Sales made between 18.01.2011 to 20.01.2011 (i.e. date of search) (as per LP-19 of seized material) 11252.66 Kg x 2053 (rate per gram) x 0.75 (75% purity)= Rs. 1,73,26,283/- Working of the undisclosed stock: (i) Physical stock as per book (A)+(B)-(C)+(D)-(E)= Rs. 13,23,33,503/- (ii) Physical stock found during the course of the search= Rs.21,29,37,802/- Resultant undisclosed stock (ii)-(i) Rs. 8,06,04,299/- In the light of the detailed discussions made hereinabove, addition of Rs. 8,06,04,299/- is being made as undisclosed stock in the hands of assessee’s income. Penalty proceedings u/s 271AAA is being initiated separately on this point. (Addition of Rs. 8,06,04,299/-) That is how the addition of Rs. 8,06,04,299/- was made by the AO, which was the first addition made by the AO , w.r.t. differential in value of stock based on seized material vis-à-vis stock found on the date of search(20.01.2011), wherein the AO has arrived at stock by considering opening stock as on 01.04.2010 + purchases ( upto DOS) –sales(upto DOS) (all as reflected in seized material ) and arriving at closing stock as on 20.1.2011(DOS) and ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 24 comparing with stock found during search on 20.01.2011, the assessee being unable to reconcile the same with books of accounts(opening stock + purchases-sales(until DOS) as reflected in books of account) maintained by it for the year under consideration. 6f. The second addition based on stock was made by AO considering stock as reflected in stock register( stock register was maintained until 17.1.2011) seized during search on 20.01.2011 and adjusting for transactions of purchase/sale for 18/19.01.2011 to arrive at stock as on 20.01.2011, and then comparing with stock found during search on the DOS i.e. 20.01.2011. The AO observed that the Director of the assessee company has declared undisclosed stock to the tune of Rs. 1,50,00,000/- on the basis of difference between LP-1 at page 23 seized from business premises of assessee and inventory of stock prepared on DOS by registered valuer. The difference was as under: Gold ornaments as per inventory 137830.590 gm. Gold ornaments as per LP-1(page 23) 106318.681 gm. Difference between (i) and (ii) 31511.909 The AO observed that so far as there is difference of 31511.909 gm. of jewellery , if purity of gold is considered at 75% as mentioned by approved valuer , value of gold jewellery will be Rs. 4,85,19,062/- as per rate of gold as mentioned by approved valuer of Rs. 20,530/- per 10 Gm. The AO also observed that no regular books of accounts were found during the course of search or were produced during the course of search and seizure operation. The assessee was asked to explain the said differential , and the assessee submitted as under: “(4) As regards the version of your goodself that the directors of the company misguided and misdirected himself by declaring the undisclosed stock of only of Rs 1,50,00,000/- of the basis ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 25 of difference between Annexure LP-1 of page 23 seized from the Banaras Alankar Kendra Godowlia, Varanasi. From the perusal of the letter dated 28.02.2011 written to ADIT (Inv.) Sri Anil Kumar Jaiswal has mentioned in para-14 that the matter considered in detail there remains no occasion for surrendering of any additional income. This has also been clarified while explaining the Point No. 14 regarding the surrendering of income. From the perusal of the which re-conclusion of stock explained above in para no. 35 your goodself will kindly understand that while taking the quantity of gold ornaments and purchase of jewellery on 27.12.2010 and 21.12.2010 has also not been considered The quantity of diamond jewellery, gold stock of old gold stock of pure gold has not been considered. The copy of which is enclosed herewith. Apart from the above stock the stock of pure gold issued to M/s. V.M. Jewellers, Mumbai on 27.12.2010 vide issue slip no. 14 has not been added. Apart from the Gold ornaments received from M/s. Haryana Jewellers Pvt. Ltd., Delhi and Siddha Jewellers Pvt. Ltd. Delhi received on 18.01.2011 whose bills and challans has also been seized by the Department has not been considered in the closing stock because the stock has been received on 18.01.2011 before one day of the search and due to leave of Computer operator on 18.01.2011 the entry could not be made in the stock register. Apart from the above addition some deletions has also be done such as gold ornament sold on 19.01.2011 bill of Haryana Jewellers Pvt. Ltd. dated 28.12.2010 entered two times one on 01.01.2011 and another on 17.01.2011. Pure gold issued to Karigars on 19.01.2011 Gold Ornaments received from Purvi Jewellers and V.M. Jewellers Pvt. Ltd. has also not been accounted for in the Books of the Account of the assessee company. From the perusal of reconciliation statement given above your goodself will kindly observe that in total handling of 137830.590 gm. Geld there is a difference of 503.365 gm. This is about 0.3% which is negligible and may be due to difference in method of valuation.” The AO rejected the contention of the assessee and observed that the assessee has nothing concrete to submit, and hence addition of Rs. 4,85,19,062/-was made by the AO. ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 26 6g. There was, inter-alia, another addition of Rs. 1,85,572/- made by the AO w.r.t. disallowance of claim of bad debts, and which travelled upto tribunal. But, howver, the said addition was upheld by tribunal in the first round vide appellate order dated 05.01.2021 , as the ground thereof raised by assessee in memo of appeal filed with tribunal was not pressed. In the M.A. filed by Revenue, there was no grievance raised by Revenue w.r.t. this addition, and thus , this addition of Rs. 1,85,572/- w.r.t. disallowance of claim of bad debts reached finality. 7. The assessee being aggrieved filed first appeal before Ld. CIT(A) and assessee submitted before CIT(A) that there was no excess stock found during the course of search and infact quantitative term, the excess difference of 503.365 grms was found , and the assessee submitted a reconciliation chart showing the closing balance as on 18 th January, 2011( the date upto which the stock register was posted when the search took place on 20.01.11) and found in the computer hard disc of the company which is available in search records seized at LP-1, Page 23 , the details of which has been taken by department, and also the reconciliation of stock with the physical stock taken by the approve valuer and submitted that there is only minor difference of 503.365 gms. in the physical stock and stock as per stock register of the company. The assessee explained that this minor difference in weight which may be due to taking weight of moti, thread , glasses etc and submitted there is no scope of taking adverse view, the reconciliation chart is reproduced hereunder: RECONCILIATION STATEEMNT OF STOCK (Qty. in gms) Sr. No. Particulars Qty (in gms.) Page Nos. as Index A) Closing Stock as on 18.01.2011 ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 27 1 Gold Ornaments 106118.680 11 2 Diamond Jewellery Gold 254.695 12-13 3 Old Gold 967.620 14 4 Pure gold 480.290 14 5 Stock of Pure gold issued to M/s. V.M. Jewelers, Mumbai on dated 27.12.2010 vide issue Slip no. 16 2000.000 16 6 Stock of gold send for ornament making to M/s. Purvi Jewellers Mumbai on dated 31.12.2010 vide issue slip no. 15 7575.000 117396.285 17-18 Add:- 1 Gold ornaments received from Haryana jewellery Pvt. Ltd. new Delhi, Bill dated 18.01.2011 Bill Seized by the Department 1112.320 20-21 2 Gold ornaments received from Siddh Jewellers Pvt.Ltd. New Delhi being challans dt. 18.01.2011 received on 19.01.2011 seized by the Deptt. 30071.280 31183.600 22-23 148579.835 Less:- 1 Gold ornaments sold on 19.1.2011 218.830 24-50 2 Bill of Haryana Jewellers Pvt. Ltd. dt. 28.12.2010 entered two times 01.01.2011 and 17.01.2011 978.540 77 3 Pure gold issued to karigar Shashi Kala Devi on 19.1.2011 480.290 79 4 Gold ornaments with Karigar Purvi Jewelers, Mumbai 7575.000 17-18 5 Stock of pure gold with karigar M/s. V.M. Jewellers, Mumbai 2000.000 11252.660 16 137327.225 Stock as per Physical verification on the date of Search 137832.590 Difference (Excess): 503.365 ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 28 The assessee submitted that these details were duly submitted during post search proceedings and despite details submissions of bills, vouchers and documents in support of reconciliation statement as well documents seized by department, the addition was made by the AO without considering the same. It was claimed by assessee before ld. CIT(A) that there is a minor difference of 503.365 gms , which is 0.3% of the stock handled by the assessee. The assessee also submitted that after considering the variation in rate of gold adopted by the AO, the difference comes to only Rs. 7,77,670/- and thus, the prayer were made by assessee to delete the addition of Rs. 8,06,04,299 made by the AO. The Ld. CIT(A) forwarded the submissions of the assessee to AO for his comments/remand report , and AO submitted remand report , the relevant portion are as under: “Issue No. 1: Addition on account of undisclosed stock of Rs.8,06,04,299/-: 2.1 In the submission assessee has objected calculation of stock as well as differences worked out by the AO Rs.8,12,87,513/-. As per registered valuer, value of the ornaments (as per panchanama) are as under: (i) From page 1 to III value Rs.17,40,85,192/- weight 112486.400 Gm. purity 75% gold. (ii) Page IV value Rs. 1,27,66,610/-weight 8344.190 gm. purity 75% gold. (iii) Page V value Rs. 2,60,86,000/- weight 17000gm and pokhraj 380ct Rs.76,000/. Total value of stock Rs.21,29,37,802/- After deducting value of opening stock as per trial balance as on 17/01/2011 of Rs.13,16,50,289/-, A.O. proposed addition of Rs.8,12,87,513/-. During the course of assessment proceedings assessee was failed to explain the said differences, then after A.O. worked out value of undisclosed stock of Rs.8,06,04,299/- as under: (A) Value of opening stock as on 01.04.2010 as per page 26 of LP-11 Rs. 13,16,50,289/- (B)Add: Purchases made between 01.04.2010 to 17.01.2011 as per page 25 of LP 11 Rs.10,49,06,788/- (C)Sub: Sales made between 01.04.2010 to 17.01.2011 as per page 25 of LP 11 Rs. 12,96,12,239/- ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 29 (D) Add: Purchases made between 18.01.2011 to 20.01.2011 (i.e. date of search) (as Annexure LP-4 of the seized material): 31,183.6 Kg x 2053 (rate per gram) x 0.75 (75% purity) =Rs. 4,80,14,948/ (E) Sub: Sales made between 18.01.2011 to 20.01.2011 (i.e. date of search) (as per LP-19 of seized material) 11252.66 Kg x 2053 (rate per gram) x 0.75 (75% purity)= Rs. 1,73,26,283/- Working of the undisclosed stock: (i) Physical stock as per book- (A)+(B)-(C)+(D)-(E)- Rs. 13,23,33,503/- (ii) Physical stock found during the course of the search-Rs. 21,29,37,802/- Resultant undisclosed stock (ii)-(i) Rs. 8,06,04,299/- 2.2. During the appeal proceedings, assessee has tried to reconcile the stock and filed reconciliation statement of the weight of the jewellery without valuation. During the remand report, assessee was required to substantiate the value of stock. In compliance assessee has filed detail of opening stock, purchases and sales and also worked out value of stock as on date of search amounting to Rs.19.49,18,715.17 against valued by the valuer amounting to Rs.21,29,37,802.00, accordingly valuation of excess stock Rs. 1,80, 19,086.83. 2.3. During the course of remand proceedings, Shri O.P.Tulsyan, FCA and Shri Navin Singh. Advocate alongwith Shri Manoj Gupta, Accountant of the assessee company appeared, filed details and discussed the same. 2.4 I have perused thoroughly details available on record, loose papers seized during the search proceedings and worked out value of excess stock as per detail below: Particulars Amounts Opening Stock as on 1.4.2010( page 26 of LP-11) 13,16,50,289 Add: Purchase as per AO 10,49,06,788 Less: Purchases doubled entered 18,26,030 Page 55 & 56 and 35 & 36 of LP 18 (journel voucher dated 17.1.2011 and 1.1.2011 and page 22 & 23 LP-1(stock register) 10,30,80,758 ------------------- 23,47,31,047 Loss: Sales upto 17.1.2011 13,10,42,719.55 Sales of 18.1.2011 4,23,226.25 (Page 23 of LP-1 / hard disc sale of 18.1.2011) Sale of 19.1.2011 page 19-44 of LP-15 4,71,016.40 -------------------- 13,19,36,962.20 Less: G.P. @ 19.19 as per 2,53,18,703.00 Audit report for the year ------------------------ Cost of sales 10,66,18,259.20 10,66,18.259 Add: Purchase during 18/01/11 to 19/01/11 (31,183.6 gm x 2053 (rate per gram) x 0.75 (75% purity) as taken by A.O. in asstt. order and assessee has not disputed for weight 31183.6 gm. During remand report, for valuation of stock assessee 4,80,14,948 ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 30 has taken value for the same weight of Rs.6,3589,905/- @2039/- per gram on the gross weight which should be valued on net weight i.e, 75%. Assessee has adopted Rs. 2039 per gm without any base.In these circumstances , valuation of rate taken by registered value of Rs. 2053/- per gm (as per pnachanama) is genuine and being adopted. Less: Pure gold issued to karigar / sales as shown by the assessee company 1,73,52,545 Total Value of stock as on 20.1.2011 as per books 15,87,75,191 Loss: Value of stock worked out by the registered value on date of search 21,29,37,802 Difference (Excess Stock) 5,41,62,611 In view of fact as discussed above investment in stock of Rs. 5,41,62,611/- is still unexplained which is based on documentary evidences. The learned CIT(A) observed from remand report submitted by AO , that AO has come out with the difference of Rs. 5,41,62,611/-which is liable to be sustained as per seized records as against the addition of Rs. 8,06,04,299/- made by the AO in its assessment order. The learned CIT(A) again asked for comments/remand report from AO as there was a change in AO incumbent. The AO submitted the second remand report in which the AO again reiterated computation of value of excess stock as per first remand report dated 15.05.2017. The second remand report was also forwarded by ld. CIT(A) to the assessee for its comments , and the assessee submitted copy of earlier submissions with no fresh material. The ld. CIT(A) confirmed the addition of Rs. 5,41,62,611/- , by holding as as under: “10. I have considered the submissions of the appellant and have also gone through the relevant record. It is seen that the total jewelery found at the time of search was valued by the valuer at Rs. 21,29,37,802/-. The jewelery has been valued and inventorised as per panchnama during the course of search. The correctness regarding weight and value of jewlellery found during the course of search has not been challenged by the appellant till date with any substantive material. Accordingly, the same is taken at correct. The calculation of excess stock on the basis of seized material has done by the A.O. in his remand report, as under: ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 31 2.4 I have perused thoroughly details available on record, loose papers seized during the search proceedings and worked out value of excess stock as per detail below: Particulars Amounts Opening Stock as on 1.4.2010( page 26 of LP-11) 13,16,50,289 Add: Purchase as per AO 10,49,06,788 Less: Purchases doubled entered 18,26,030 Page 55 & 56 and 35 & 36 of LP 18 (journel voucher dated 17.1.2011 and 1.1.2011 and page 22 & 23 LP-1(stock register) 10,30,80,758 ------------------- 23,47,31,047 Loss: Sales upto 17.1.2011 13,10,42,719.55 Sales of 18.1.2011 4,23,226.25 (Page 23 of LP-1 / hard disc sale of 18.1.2011) Sale of 19.1.2011 page 19-44 of LP-15 4,71,016.40 -------------------- 13,19,36,962.20 Less: G.P. @ 19.19 as per 2,53,18,703.00 Audit report for the year ------------------------ Cost of sales 10,66,18,259.20 10,66,18.259 Add: Purchase during 18/01/11 to 19/01/11 (31,183.6 gm x 2053 (rate per gram) x 0.75 (75% purity) as taken by A.O. in asstt. order and assessee has not disputed for weight 31183.6 gm. During remand report, for valuation of stock assessee has taken value for the same weight of Rs.6,3589,905/- @2039/- per gram on the gross weight which should be valued on net weight i.e, 75%. Assessee has adopted Rs. 2039 per gm without any base.In these circumstances , valuation of rate taken by registered value of Rs. 2053/- per gm (as per pnachanama) is genuine and being adopted. 4,80,14,948 Less: Pure gold issued to karigar / sales as shown by the assessee company 1,73,52,545 Total Value of stock as on 20.1.2011 as per books 15,87,75,191 Loss: Value of stock worked out by the registered value on date of search 21,29,37,802 Difference (Excess Stock) 5,41,62,611 It is seen that in this calculation, the A.O. has given the benefit of purchases made during the year, including that of purchases double entered, cost of sales as per the G.P. shown in the audited report and other material found during the course of search. During the course of hearing of appeal, the appellant has not been able to bring any material on record to show that calculation of excess stock on the basis of seized record as submitted by the A.O. in his remand report is not correct. Accordingly, the value of excess stock is taken as per the remand report submitted by the A.O. as discussed above, at Rs. 5,41,62,611/-. Since the ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 32 addition on account of excess stock was made of Rs. 8,06,04,299/-, the appellant gets a relief of Rs. 2,64,41,688 (8,06,04,299- 5,41,62,611). The addition on account of excess stock is sustained to the extent of Rs. 5,41,62,611/-. As mentioned in the assessment order, the assessee company has declared undisclosed stock of RS. 1,50,00,000/- only and the excess stock has been calculated at amount higher than this, no separate addition on this account is called for.” Thus, as could be seen the ld. CIT(A) confirmed the addition towards value of excess stock found during search , to the tune of Rs. 5,41,62,611/- , and since the assessee has itself surrendered undisclosed stock of Rs. 1,50,00,000/- but the excess stock so worked out was higher than surrendered stock, no separate addition of Rs. 1,50,00,000/- was made by either AO or by ld. CIT(A). So far as the addition of Rs. 4,85,19,062/- made by AO on account of purity of stock being gold ornaments being 75% and based on seized material LP-1 page 23 , as under: Gold ornaments as per inventory 137830.590 gm. Gold ornaments as per LP-1(page 23) 106318.681 gm. Difference between (i) and (ii) 31511.909 The assessee reiterated before ld. CIT(A) that there is only a difference of 503.365gms, the learned CIT(A) sought for the comments of the AO on the submissions made by assessee before ld. CIT(A), and the AO submitted his comments as under: “2.5 During the course of search proceeding conducted on 20.02.2011 us per inventory and valuation made by the Regd. Valuer stock of gold ornament were found weighing 137830.590 gm against stock as per sock register LP-1 (Page 23) 106118.681 gm and differences in stock found 31511.909 gm. After considering purity of gold in gold ornament of 75% worked out net weight of gold 23633.93 and valued @2053 per gram as taken by Registered valuer on the date of search and proposed addition of Rs.4,85,19,062/-. ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 33 2.6 In compliance, the assessee company reconcile the stock and found differences 503.365 gm. but failed to substantiate the same with documentary evidences. Therefore, A.O. rejected submission of the assessee company and made addition of Rs.4,85,19,062/- on account of excess stock found during the course of search proceedings. 2.7 During the remand proceedings, Shri O.P. Tulsyan, FCA, Shri Navin Kumar Singh, Advocate alongwith Accountant Shri Manoj Kumar Gupta, attended the proceedings furnished reconciliation of stock working out differences of Rs.1,80,19,086.83 in place of addition made of Rs.4,85,19,062/- In its submission, assessee company has stated that A.O. has taken stock of gold ornaments weighing 106318.681 gms. as per LP-1 page 23, which was updated stock of gold ornament only on 18/01/2011 whereas on physical verification stock found on 20/01/2011 i.e. on the date of search. Entry of transaction of purchase and sale of 18/01/2011 and 19/01/2011 has to be considered and final stock has to be arrived only after posting the purchase and sale transaction executed on 18/01/11 & 19/01/11. In the remand proceedings, assessee company has also stated that stock of gold diamond jewellery. old gold and pure gold for which separate ledger has been maintained and available with the Department, have not been considered in taking total stock. Assessee company has also filed reconciliation of stock referring page number of concerned LP seized by the Department during the search proceedings. 2.8 1 have perused thoroughly submission of the assessee company, details available on record, loose papers seized during the search proceedings and worked out value of excess stock as per detail below: Description Weight (in gm.) As per LP-1 (page 23) it is only stock of gold ornament 106318.680 Less: Sales of 200 gms. ornament sold on 17/01/2011 as shown in page No. 63 of LP-4 and the same is not considered in Page 23 of LP-1 above 200,000 106118.680 Add: (i)Diamond jewellery as per Stock Register (LP-14 page 20) which was not considered as stock in assessment order 254.695 (ii) Pure gold & old gold as per stock register (as available in seized hard disc) 967.620 (iii) Purchase of gold ornament as per bill dated 18/01/2011 of M/s. Haryana Jewellers Pvt. Ltd. Delhi seized as page 2 of LP-19 1112.320 (iv) Received gold jewelers through challan dated 18/01/2011 from M/s. Siddh Jewellers Pvt. Ltd. Delhi (seized as page 3 of LP-19) 30071.280 Total 138524.595 Less(i) gold ornament sold on 19/01/2011 (as per page 19-44 of LP-15) 218.830 ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 34 (ii) Purchase of gold jewellery bill dated 28/12/2010 of M/s. Haryana Jewellery Pvt. Ltd. which is entered in stock register on two dates i.e. on 01/0/.2011 and 17/01/2011 (page 22 &23 and 55 & 56 of LP-1) 978.540 Total Stock as per reconciliation 137327.225 Stock as on 20/01/2011 inventoried by Registered Valuer 137830.590 Difference (Excess stock) 503.365 Purity of gold @ 75% 377.523 Value of pure gold (377.523 x 2053) as taken by valuer on the date of search i.e. 20/01/2011 Rs.7,75,054/- In view of the fact as discussed above on account of excess stock, addition of Rs. 7,75,054/- is based on documentary evidences. Thus, in the remand report, the AO has submitted that the addition on this account of Rs. 4,85,19,062/- as was made in assessment order, the addition to the extent of Rs. 7,75,054/- is only liable to be sustained as per seized record. Since , there was change in AO incumbent, the Ld. CIT(A) again asked for remand report/comments from AO and the AO again reiterated the same as was submitted in the first remand report. The copy of second remand report was also forwarded to the assessee who also reiterated its earlier submissions and no fresh material was submitted by the assesse before ld. CIT(A). The ld. CIT(A) confirmed the addition of Rs. 7,75,054/- , by holding as under: “16. I have considered the facts of the case and have gone through the assessment order, written submission of the appellant as well as remand report. Since the A.O. has submitted his remand report that addition on this account is to be sustained at Rs. 7,75,054/- and the assessee has not been able to bring any material on record to dispute the working, the addition made by the A.O. is sustained to this extent. As addition on this account of Rs. 4,85,19,062/- has been made in the assessment order, the appellant gets a relief of Rs. 4,77,44,008/- (48519062-775054). 8. Aggrieved the assessee filed second appeal before the tribunal , and as enumerated above in this order in details in the preceding para’s , the appellate order was passed by tribunal , dated 5 th January, 2021 in ITA no. 04/VNS/2019 in first round upholding additions with respect to stock ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 35 differential to the tune of Rs. 7,75,074/- while deleting addition to the tune of Rs. 5,41,62,611/- , holding these additions as double addition. The Revenue filed MA which was listed as MA no. 03/VNS/2021 , and the said MA was allowed by tribunal vide orders dated 26.04.2022, and the appellate order dated 05.01.2021 passed by tribunal was recalled for fresh hearing . The order dated 05.01.2021 passed by tribunal in first round as well MA order dated 26.04.2022 passed by tribunal, are reproduced in preceding para’s of this order, and are not repeated again. 9. The learned counsel for the assessee Shri Anand Kumar Pandey, Advocate drew our attention to written submissions filed before tribunal and reiterated that there is only difference of 503.36gm in stock as on date of search , and there is no other difference in the stock . The written submissions filed by the assessee are reproduced hereunder: ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 36 ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 37 ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 38 ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 39 ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 40 9b. On the other hand, the Ld. CIT DR submitted before Division Bench that there are two different issues in this appeal before tribunal , and both concerns itself with excess stock found during search. It was submitted by ld. CIT-DR that assessee is trader of Gold/Diamond. It was submitted that Remand Report was called by ld. CIT(A) from the AO and the AO has given due benefit of GP to arrive at figure of stock/stock value, while other figures of opening stock as at 01.04.2020 , purchases and sales uptil date of search(20.01.2011) and closing stock as on 20.1.2011(DOS), was taken from seized documents found during the search. It was submitted that excess stock was found during the search. It was submitted by ld. CIT-DR that department is reasonable and whatever relief was allowable to the assessee were granted by ld. CIT(A). It was submitted that complete working is given by AO in its remand report submitted to ld. CIT(A) which the assessee is not able to controvert , and prayers were made that addition of Rs. 5,41,62,611/- as was upheld by learned CIT(A) be confirmed . It was submitted that stock found during search was valued by registered valuer. It was submitted that differential in stock so far as the second addition is concerned , was with respect to quantitative differential between stock found during search in quantitative terms and stock in quantitative term as recorded in stock register( which were adjusted for 18/19.01.2011 as stock register was written upto 17.01.2011) , and addition of Rs. 7.75Lac was rightly confirmed by learned CIT(A) . The prayers were made to confirm the appellate order passed by ld. CIT(A) 9c. In rejoinder , the ld. Counsel for the assessee submitted that GP was estimated by AO to arrive at cost of sales and AO erred in estimating such GP. ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 41 The ld. Counsel reiterated his working in written submissions to contend that no addition can be sustained. 10. We have considered rival contentions and perused the material on record. The assessee is engaged in the retail business of gold and silver ornaments. There was a search and seizure operations conducted by Revenue u/s 132 of the 1961 Act , in the business premises of the assessee, its sister concerns and residential premises of partners, directors and proprietor of the group on 20.01.2011 During search and seizure operations , documents, jewellery etc as per various Panchanama drawn , were found/seized by Revenue. Thereafter, the case of the assessee was centralized with the ACIT, Central Circle, Varanasi(AO). Statuary notice u/s 142(1) dated 31.01.2012 was issued by AO , and the assessee filed return on income on 05.07.2012, showing total income of Rs. 1,35,11,140/- . The AO issued notice u/s 143(2) dated 06.09.2012 which was claimed by AO to have been duly served. The AO issued notices u/s 142(1) from time to time, but the assessee did not complied with said notices. SCN u/s 271(1)(b) dated 10.12.2012 was also issued, thereafter , non compliance notice was also issued on 17.1.2013, but the assessee did not comply. Thereafter, notice u/s 144 was issued by AO on 07.02.2013 , for compliance on 15.02.2013. The assessee filed details in response to queries raised by AO. We have already enumerated in the preceding para’s of this order that appeal of the assessee was decided by tribunal vide appellate order dated 05 th January, 2021 , which order was later recalled by tribunal vide order dated 25 th April, 2022 in MA filed by Revenue. We are not repeating the same once again. In nutshell, now we are called upon to adjudicate additions as were finally upheld by ld. CIT(A) , both owing to differential in stock , firstly an addition of Rs. 5,41,62,611/- on account of differential in value of stock , ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 42 based on opening stock as on 01.04.2010 is reflected in seized material which is adjusted to purchases made until the date of search as is reflected in seized material and further adjusted with sales as reflected in seized material ( sales further adjusted by estimated G.P. based on G.P. ratio of 19.19% as per audited accounts to arrive at ‘cost of sales’) , with the value of stock found as on the date of search(DOS 20.01.2011) which was valued by Registered valuers on date of search , and secondly an addition of Rs. 7,75,074/- based on differential in quantitative stock as reflected in stock register( which was written upto 17.01.2011 when search took place on 20.01.2011 and was further adjusted by incorporating transaction in stock on 18/19.01.2011) seized during search on 20.01.2011, and with quantitative stock as was found during search on 20.01.2011. Before proceeding, further it is pertinent to mention that the assessee itself surrendered stock of Rs. 1,50,00,000/- as undisclosed excess stock during search on 20.01.2011 , but however no separate additions were made by lower authorities of the surrendered amount as the addition made by authorities below based on differential in stock was much higher than Rs. 1,50,00,000/-. The entire issue is factual in nature . It is pertinent to mention that the assessee did not produce regular books of accounts during search and seizure proceedings , as well assessment proceedings. The AO initially made addition of Rs. 8,06,04,299/- vide assessment order, based on differential in value of stock, based on opening stock as on 01.04.2010 is reflected in seized material(LP-4 Page 24 to 30) which is adjusted to purchases made until the date of search(20.1.2011) as is reflected in seized material and further adjusted with sales as reflected in seized material , with the value of stock found as on the date of search(DOS 20.01.2011) which was valued by Registered valuers during search ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 43 proceedings. The AO during remand proceedings as directed by ld. CIT(A) to give comments on the assessee’s submission , considered and allowed the benefit of gross profit embedded in the sales value(sales as is reflected in seized material) for the period from 01.04.2010 until date of search on 20.01.2011 based on G.P.ratio of 19.19% as declared by assessee itself as per audited accounts for the year under consideration , and observed that the G.P. embedded in sales value is to be excluded to arrive at cost of sales which is to be reduced from opening stock as on 01.04.2010(as reflected in seized material) and purchases made by assessee from 01.04.2010 to the DOS i.e. 20.01.2011(as is reflected in seized material), to arrive at stock on the date of search as per books of accounts, which was then compared with the stock found during search operations which was valued by Registered valuer during search proceedings. The necessary adjustments were made to arrive at the comparative figures of stock as per seized material vis-à-vis actual stock found during the search on 20.01.2011. The working of the AO as submitted to ld. CIT(A) during remand proceedings , are as under: Particulars Amounts Opening Stock as on 1.4.2010( page 26 of LP-11) 13,16,50,289 Add: Purchase as per AO 10,49,06,788 Less: Purchases doubled entered 18,26,030 Page 55 & 56 and 35 & 36 of LP 18 (journal voucher dated 17.1.2011 and 1.1.2011 and page 22 & 23 LP-1(stock register) 10,30,80,758 ------------------- 23,47,31,047 Loss: Sales upto 17.1.2011 13,10,42,719.55 Sales of 18.1.2011 4,23,226.25 (Page 23 of LP-1 / hard disc sale of 18.1.2011) Sale of 19.1.2011 page 19-44 of LP-15 4,71,016.40 -------------------- 13,19,36,962.20 Less: G.P. @ 19.19 as per 2,53,18,703.00 Audit report for the year ------------------------ Cost of sales 10,66,18,259.20 10,66,18.259 Add: Purchase during 18/01/11 to 19/01/11 4,80,14,948 ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 44 (31,183.6 gm x 2053 (rate per gram) x 0.75 (75% purity) as taken by A.O. in asstt. order and assessee has not disputed for weight 31183.6 gm. During remand report, for valuation of stock assessee has taken value for the same weight of Rs.6,3589,905/- @2039/- per gram on the gross weight which should be valued on net weight i.e, 75%. Assessee has adopted Rs. 2039 per gm without any base.In these circumstances , valuation of rate taken by registered value of Rs. 2053/- per gm (as per pnachanama) is genuine and being adopted. Less: Pure gold issued to karigar / sales as shown by the assessee company 1,73,52,545 Total Value of stock as on 20.1.2011 as per books 15,87,75,191 Loss: Value of stock worked out by the registered value on date of search 21,29,37,802 Difference (Excess Stock) 5,41,62,611 The ld. CIT(A) confronted the remand report submitted by AO to the assessee, and the assessee instead of explaining the same submitted that there was difference of 503.365 gms in the quantitative stock as is reflected in stock register(which was written upto 17.01.2011 and further adjusted by including quantitative transaction for 18/19.01.2011) and quantitative stock as was found during search. The working of differential of 503.365 gms in the stock , as was relied upon by assessee is as under: Description Weight (in gm.) As per LP-1 (page 23) it is only stock of gold ornament 106318.680 Less: Sales of 200 gms. ornament sold on 17/01/2011 as shown in page No. 63 of LP-4 and the same is not considered in Page 23 of LP-1 above 200,000 106118.680 Add: (i)Diamond jewellery as per Stock Register (LP-14 page 20) which was not considered as stock in assessment order 254.695 (ii) Pure gold & old gold as per stock register (as available in seized hard disc) 967.620 (iii) Purchase of gold ornament as per bill dated 18/01/2011 of M/s. Haryana Jewellers Pvt. Ltd. Delhi seized as page 2 of LP-19 1112.320 (iv) Received gold jewelers through challan dated 18/01/2011 from M/s. Siddh Jewellers Pvt. Ltd. Delhi (seized as page 3 of LP-19) 30071.280 Total 138524.595 Less(i) gold ornament sold on 19/01/2011 (as per page 19-44 of LP-15) 218.830 (ii) Purchase of gold jewellery bill dated 28/12/2010 of M/s. Haryana Jewellery Pvt. Ltd. which is entered in stock register on two dates i.e. on 01/0/.2011 and 17/01/2011 (page 22 &23 and 55 & 56 of LP-1) 978.540 ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 45 Total Stock as per reconciliation 137327.225 Stock as on 20/01/2011 inventoried by Registered Valuer 137830.590 Difference (Excess stock) 503.365 Purity of gold @ 75% 377.523 Value of pure gold (377.523 x 2053) as taken by valuer on the date of search i.e. 20/01/2011 Rs.7,75,054/- In view of the fact as discussed above on account of excess stock, addition of Rs. 7,75,054/- is based on documentary evidences. Infact, the above chart was submitted by AO in remand proceedings to ld. CIT(A) with respect to second addition of Rs. 7,75,054/- sustained by ld. CIT(A) on account of differential in quantitative stock as per stock register seized by Revenue (duly adjusted to arrive at stock on 20.01.2011 as per stock register, as stock register was written upto 17.1.2011) with the actual quantitative stock found during search on 20.01.2011. Rather, the assessee was required to reconciled the value of the stock as is reflected in seized material viz. opening stock as on 01.04.2010 , purchases upto 20.1.2011(DOS)(as reflected in seized material ) and adjusted with cost of sales upto DOS i.e. 20.01.2011(sales as reflected in seized material which was adjusted for G.P. ratio of 19.19% as declared by assessee in audited accounts) , with its regular books of accounts to demonstrate that all transactions as are recorded in these seized material duly tallies with the regular books of accounts maintained by the assessee, and no stock is undisclosed or sold/purchased out of books. Further, the assessee was also required to reconcile the stock recorded in the seized stock register (adjusted for transaction of 18/19.1.2011 as it was written upto 17.1.2011) with the actual stock found during search on 20.1.2011. The nature mandate and character of both the additions are different , although both pertain to the additions on account of undisclosed stock. The assessee did not produce regular books of accounts during search proceedings nor were they produced during ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 46 assessment proceedings. It is also not emanating from record that the assessee ever produced regular books of accounts before ld. CIT(A) as well the AO during remand proceedings. Once the incriminating material is found during search, the onus is very heavy on the assessee to demonstrate that transactions recorded therein are duly recorded in regular books of accounts, and no transaction is an undisclosed transaction entered by assessee out of books leading to escapement of income . We have also observed that the AO on its part erred in remand proceedings while computing differential in value of stock as per seized material( opening stock + purchases – sale(adjusted to cost of sales) uptil DOS i.e. 20.1.2011 ) vis-à-vis closing stock as valued by registered valuer on the date of search i.e. 20.01.2011 , wherein the AO considered the value of stock as valued by Registered Value on the date of search , while bringing to tax the aforesaid differential in value rather the AO ought to have considered the actual cost of acquisition of such unsold stock held by the assessee on the date of search provided the said stock is proved by assessee to be recorded in the regular books of accounts maintained by the assessee for which onus is entirely on the assessee , however if the stock is not found to be recorded in the regular books of accounts maintained by the assessee and is found to be an undisclosed stock out of undisclosed sources, then provisions of Section 69 will apply. The Gold and Silver are highly volatile/fluctuating metals and their prices vary with time. By valuing the stock as on the date of search at the value prevailing on the date of search, the AO has also brought to tax unrealized gains on such stock held by the assessee on the date of search. For Example , the following were the rates of Gold/Silver on 31.03.2010 and 31.03.2011, which will reflect the fluctuation/ volatility in the rates of Gold/Silver : ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 47 Date Gold rates(Standard 24 carats) ( per 10 gms) In Rs. Silver rates (9960 touch) ( per 1 kg.) In Rs. 31.03.2010 16320 27,255 20.01.2011( rate adopted by registered valuer) 20530 31.03.2011 20,775 56,900 Thus, the increased valuation embedded in the unsold stock(so far as recorded in books) held on the date of search viz. 20.01.2011 is to be excluded , otherwise unrealized gains will also get taxed, and the AO is required to exclude the same as the same will get taxed when the such items get sold, which will lead to double taxation , unless malafide is found on the part of assessee in manipulating the costs of acquisition also. The onus on the part of the assessee is very heavy to reconcile the said movement of stock from 01.04.2010 viz. opening stock, purchases and sales until DOS as recorded in the material found during search , both in quantitative terms as well value terms , with such stock as are recorded in the regular books of accounts, and then also comparing with stock found during search . Merely stating that stock register which was seized by Revenue on DOS i.e. on 20.01.2011 was written upto 17.01.2011 and when stock is so adjusted by taking cognizance of transactions for 18/19.01.2011 , the adjusted stock as is reflected in quantitative terms in stock register is tallying with the stock found during the search on 20.01.2011 in quantitative terms and there is merely a difference of 503.365 gms is not sufficient to discharge assessee from its onus/burden to ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 48 explain the difference in value terms as is culled out by AO from the seized material(chart reproduced above), as it is not uncommon that transactions out of books are also entered by tax-payers to evade taxes. Thus, now it is for the assessee to come forward and explain the differential with cogent evidences as well with books of accounts maintained by it to explain that no transaction was undertaken out of regular books of accounts maintained by assessee and no income has been concealed from revenue which has escaped taxation. The ld. Counsel for the assessee has tried to explain the difference in the written submission’s submitted before tribunal, but we are afraid that he misdirected himself by arriving at figure of cost of sales of Rs. 5,24,55,648/- by taking GP of Rs. 7,94,81,134/- against sale of Rs. 13,19,36,962/- for the period 01.04.2010 to 20.01.2011 , and then arriving at stock as per books as on date of search to be tune of Rs. 21,29,37,802/- , and then comparing it with stock as was found during search as was valued by registered valuer to the tune of Rs. 21,29,37,802/- , and then claiming that there was no difference in the valuation of stock as per seized material vis-à-vis stock found during search, ignoring the fact that G.P. of Rs. 7,94,81,314/- ( from 01.04.2010 to 20.1.2011) as he is claiming to be earned on sales of Rs. 13,19,36,962/- ( from 01.04.2010 to 20.1.2011) was never offered for taxation by the assessee, or else the assessee should come forward and pay dues tax on this G.P. of Rs. 7,94,81,314/- ( after adjusting for G.P. ( 01.04.2010 to 20.1.2011) having already suffered taxation) as submitted in the written submissions filed by ld. Counsel for the assesse before tribunal.. Thus, in the interest of justice , we are of the considered view , that the entire matter concerning additions on account of differential in stock both value wise(Rs. 5,41,62,611/- ) as well addition based on differential in quantitative (Rs. 7,75,074/- ) need to be ITA No. 4/VNS/2019 Assessment Year: 2011-12 M/s. Banaras Swarn Kala Kendra Pvt. Ltd v. ACIT, Central Circle, Varanasi 49 restored to the file of AO for denovo adjudication . Needless to say that the AO shall give proper and adequate opportunity to the assessee in set aside remand proceedings. We order accordingly. 11. Thus, the appeal filed by assessee in ITA no. 4/Vns/2019 for ay: 2011- 12 is allowed for statistical purposes. Order pronounced on 21.11.2022 at Allahabad, U.P, in accordance with Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 Sd/- Sd/- [VIJAY PAL RAO] [RAMIT KOCHAR] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 21/11/2022 Place: Allahabad/Varanasi, U.P. KD Azmi Copy forwarded to: 1. Appellant –M/s. Banaras Swarn Kala Kendra Pvt. Ltd, CK-65/70A, Bari Piari, Varanasi-, 221001, U.P. 2. Respondent –The Asst. Commissioner of Income Tax, Central Circle, Varanasi, U.P. 3. The ld. Sr.DR, ITAT, Varanasi, U.P. 4. The ld. CIT, Varanasi,U.P. 5. The CIT(A), Varanasi, U.P. 6. The Guard File. Sr. P.S.
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