ACIT, Jaipur V. ROYAL JEWELLERS, Jaipur

ITA 438/JPR/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54084 (ITAT-JAIPUR)
• Duration Of Justice: 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 10-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S L PODDAR
• Keywords: Unexplained expenditure; Income from undisclosed sources; Reasonable cause; Retraction
• Section: 133A; 2

Judgement Text

1 ITA 438(2)-11 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH A JAIPUR BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ITA NO. 438/JP/2011 ASSTT. YEAR : 2008-09. THE ACIT, CIRCLE-1, VS. M/S. ROYAL JEWELLERS, JAIPUR. 1756, TELIPARA, CHAURA RASTA, SMS HIGHWAY, JAIPUR. (APPELLANT) (RESPONDENT) C.O. NO. 62/JP/2011 ( ARISING OUT OF ITA NO 438/JP/2011 ) ASSTT. YEAR : 2008-09. M/S. ROYAL JEWELLERS, VS. THE ACIT, CIRCLE-1, JAIPUR. JAIPUR. (CROSS OBJECTOR) (RESPONDENT) APPELLANT BY : SHRI SUNIL MATHUR RESPONDENT BY : SHRI S.L. PODDAR ORDER DATE OF ORDER : 05/08/2011. PER BENCH : THIS IS AN APPEAL BY DEPARTMENT AND CROSS OBJECTIO N BY ASSESSEE AGAINST THE ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 2008-09. 2. FIRST GROUND RELATES TO DELETING THE ADDITION OF RS. 2,21,32,995/- MADE BY AO AS THE SURRENDER WAS ADMITTED BY THE ASSESSEE DURING S URVEY BUT AFTER THAT RETRACTED THE SAME. 3. THE BRIEF FACTS OF THE CASE THE ASSESSEE DEALS I N JEWELLERY, BULLION, PRECIOUS AND SEMI PRECIOUS STONES. A SURVEY U/S 133A WAS CONDUCT ED ON THE PREMISES OF THE ASSESSEE 2 ON 21 ST AND 22 ND JAN 2008. VIDE LETTER DT.1/2/08 SURRENDER OF RS. 5 00 LACS ALREADY MADE WAS ENHANCED TO RS. 700 LACS AND THE BREAK UP OF TH E SURRENDER GIVEN IS AS UNDER EXCESS STOCK OF GOLD JEWELLERY RS. 41080515/- UNACCOUNTED DEBTORS RS. 3777500/- UNACCOUNTED SALES RS.25141985/- TOTAL RS.70000000/- 3.1. FURTHER IN THE MONTH OF APRIL THE FIGURES WERE REVISED AND UNACCOUNTED DEBTORS WERE INCREASED TO RS.7555000/- BUT UNACCOUNTED SALE S CORRESPONDINGLY REDUCED TO RS.21364485/-. THE TOTAL SURRENDER REMAINED SAME AT RS.7 CR. THE AO HAS MADE OBSERVATION IN THE ASSESSMENT ORDER THAT EXCESS CAS H OF RS.768510/- WAS ALSO SURRENDERED DURING THE SURVEY. HOWEVER BY FILING THE RETURN OF INCOME ONLY RS.48635515/- WAS SURRENDERED WHICH INCLUDES UNACCOUNTED DEBTORS AND EXCESS STOCK OF JEWELLERY AS SURRENDERED. HOWEVER NO INCOME WAS SHOWN IN RETURN OF INCOME ON ACCOUNT OF UNACCOUNTED SALES AND EXCESS CASH FOUND. THE AO THE REFORE, MADE ADDITION OF RS.22132995/- WHICH INCLUDES LESS SURRENDER OF RS.2 1364485/- (UNACCOUNTED SALES) AND RS.768510 (EXCESS CASH). THE AO HAS HELD THAT THE S URRENDER MADE WAS VOLUNTARY AND THEREFORE ASSESSEE WAS SUPPOSED TO FILE RETURN OF I NCOME SHOWING UNACCOUNTED INCOME OF RS.700 LACS. 3.2. ON NOT OFFERING UNACCOUNTED SALES OF RS.213644 85/- IT WAS EXPLAINED BY THE AR THAT UNACCOUNTED SALE TRANSACTIONS REFLECTING IN TH E PAPERS FOUND AND PROFIT THEREON PLUS RECOVERY FROM THE SQUARED UP DEBTORS WERE CONVERTED INTO THE STOCKS. THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE AO ON THE GROU ND THAT THERE WAS NO EVIDENCE TO 3 PROVE THAT THE PROFIT ON UNACCOUNTED SALES WAS INVE STED IN THE SURRENDERED UNACCOUNTED STOCK. NO CASH FLOW STATEMENT WAS FILED AND THUS TH E ONUS CAST UPON THE ASSESSEE WAS NOT DISCHARGED. THE AO RELIED UPON THE CASE LAWS AND AL SO THE FINING IN FIRST APPEAL IN A Y 07-08 WHEREIN THIS PLEA OF THE ASSESSEE WAS REJECTE D IN THE CASE OF M/S GARG JEWELLERS, THE ASSESSEE'S SISTER CONCERN. THE RETRACTION MADE BY THE ASSESSEE WAS CONSIDERED AN AFTERTHOUGHT AND THE AO RELYING 0N VARIOUS CASE LAW S SUPPORTED HIS-ACTION MAKING ADDITION ON THE BASIS OF SURRENDER MADE BY THE ASSE SSEE. 4. IT WAS CONTENDED BEFORE LD. CIT (A) THAT THE INI TIALLY SURRENDER WAS MADE FOR RS.5 CR. AND THE FINAL UNDISCLOSED INCOME SHOWN IN THE R ETURN OF RS.4.86 CR. COMES IN THE VICINITY OF FIRST SURRENDER AMOUNT. SUBSEQUENTLY TH E ASSESEE WAS MADE TO INCREASE THE SURRENDER. THE UNDISCLOSED INCOME OF RS.486355 16/- WAS DISCLOSED CONSIDERING THE FACT THAT UNDISCLOSED SALES DID NOT REQUIRE A SEPARATE S URRENDER BECAUSE THE UNDISCLOSED SALES STOOD COVERED EITHER IN THE DEBTORS OR IN THE UNDIS CLOSED STOCKS. IN VIEW OF THIS THE SURRENDER MADE BY THE ASSESSEE IS TRUE, FULL AND CO MPLETE. THUS IN REALITY THERE IS NO RETRACTION. IN THE STATEMENT OF SH. MANOJ KHANDELWA L, PARTNER NOWHERE ANY DISCLOSURE WAS MADE AND HE HAS REPEATED IN HIS STATEMENT THAT IN THE ABSENCE OF REGULAR BOOKS HE WAS UNABLE TO COMMIT ANYTHING. ONLY AFTER COMPLETIO N OF SURVEY THE SURRENDER WAS MADE THROUGH LETTERS. THERE WAS NO NEED TO SURRENDER UND ISCLOSED SALES AS THE SAME IS COVERED BY SURRENDER OF UNDISCLOSED STOCK AND UNDISCLOSED D EBTORS. THE AO IS NOT CORRECT IN NOT APPRECIATING THE SUBMISSION OF THE AR. ON THE OTHER HAND THE CASE LAWS RELIED UPON BY HIM ARE NOT RELEVANT AS THE DECISION ILL THE CASE O F MEGHRAJ JAIN VS. UOI AND SURJEET SINGH CHHABRA VS. UOI CONFESSION WAS MADE AND THE C ASES RELATE TO FERA AND CUSTOMS ACT RESPECTIVELY. IN THE ASSESSEE'S CASE THERE WAS NO CONFESSION. IN THE CASE OF KAMAL 4 MOTORS VS. CIT 180 CTR 166 (RAJ) TELESCOPING OF CAS H CREDIT WAS NOT ALLOWED AGAINST TRADING ADDITION AS THE ASSESSEE DID NOT ADMIT THAT CASH CREDITS WERE PART OF HIS BLACK MONEY. 5. IT IS NOT THE CASE OF THE AO THAT THE UNDISCLOSE D STOCKS WERE NOT FOUND OUT OF PROFITS AND REALIZATION OF UNDISCLOSED SALES. UNACC OUNTED BUSINESS HAS TO BE CONSIDERED HOLISTICALLY AND NOT IN PIECE MEALS I.E. SALES, STO CK, CASH AND DEBTORS EACH CONSIDERING INDIVIDUALLY. THE SURRENDER OF UNDISCLOSED STOCK OF RS. 4.10 CR. IS ENOUGH FOR ROTATING SALES OF RS.16 CR. WHEREAS THE UNACCOUNTED SALES IN QUESTION ARE ONLY RS.2.L3 CR. AND THEREFORE, SAME IS SQUARELY COVERED BY THE STOCK DE CLARED. IN HIS FURTHER SUBMISSION IT WAS STATED BY THE AR THAT THE ADDITION MADE BY THE AO I S NOTHING BUT DIFFERENCE BETWEEN SURRENDERED INCOME OFRS.7 CR. AND INCOME OFFERED IN RETURN OF INCOME. THIS FIGURE WAS ARRIVED AT BY THE DEPARTMENT AND NO DOCUMENTS WERE PROVIDED TO ASSESSEE TO CONFIRM THIS FIGURE OF UNACCOUNTED SALES. 6. THE AO WAS NOT JUSTIFIED IN MAKING ADDITION OF R S. 768510/- WITHOUT BRINGING ANY MATERIAL ON RECORD THAT THE SAME WAS EXCESS CAS H OR UNACCOUNTED CASH. THIS WAS THE CASH FOUND AT THE TIME OF SURVEY WHICH WAS OUT OF S ALE OF LAST 5-6 DAYS. THUS THE CASH WAS EXPLAINED AT THE TIME OF SURVEY AND SAME WAS FULLY ACCOUNTED FOR. THE ASSESSEE HAS FURNISHED AUDITED ACCOUNTS U/S 44AB AND NO DISCREPA NCY IN CASH WAS NOTICED. THE ADDITION MADE BY THE AO OF RS.768510/- IS NOT JUSTI FIED. 7. AFTER CONSIDERING THE CONTENTION OF THE ASSESSEE AND THE ORDER OF AO, THE LD. CIT (A) GAVE FOLLOWING FINDING :- SO FAR AS ADDITION OF RS. 7685101- IS CONCERNED NO SUCH SURRENDER IS NOTICED FROM ANY OF THE LETTERS WRITTE N BY THE APPELLANT FOR MAKING SURRENDER. FROM THE STATEMENT OF PARTNER RECORDED AT 5 THE TIME OF SURVEY ALSO DOES NOT APPEAR THAT ANY SU RRENDER WAS MADE ON ACCOUNT OF ANY EXCESS CASH FOUND. ON THE CO NTRARY IT WAS STATED THAT THIS IS NOTHING BUT CASH SALES MADE DUR ING LAST COUPLE OF DAYS. NO ADDITION OF RS.768510/- IS JUSTIFIED AS NE ITHER IT IS BASED ON SURRENDER MADE BY THE APPELLANT NOR STATEMENT GI VEN BY THE PARTNER NOR ANY RECORDING OF THE SURVEY PARTY TO TH AT EFFECT. THE APPELLANT HAS NOT DENIED THE FACT OF UNACCOUNTE D SALES AND THEREFORE ADMITTEDLY THERE ARE UNACCOUNTED SALE S RELATED TO THE YEAR UNDER CONSIDERATION AS APPEARING FROM THE PAPE RS IMPOUNDED DURING THE COURSE OF SURVEY. WHEN ENTRIES HAVE BEEN TREATED AS SALES, ONLY PROFIT ON THESE UNACCOUNTED SALES SHOUL D BE TAXED. THE DECLARED G.P. RATE OF THE YEAR UNDER, CONSIDERATION IS 24.73% AND THEREFORE, PROFIT ON THIS SALES CAN BE ESTIMATED BY APPLYING G.P. RATE OF 25%. THE HONBLE ITAT IN ASSESSMENT YEAR 2007-08 IN THE CASE OF SH. JITENDRA KUMAR P/O GARG JEWELLERS, WHIC H IS A SISTER CONCERN OF THE APPELLANT UNDER SIMILAR FACTS AND CI RCUMSTANCES HAS UPHELD APPLICATION OF G.P. RATE ON UNACCOUNTED SALE S. THERE APPEARS FORCE IN THE ARGUMENT OF THE AR THAT THE PROFIT ON UNDISCLOSED SALES IN BUSINESS IS ONLY REI NVESTED IN THE STOCK AND THEREFORE UNACCOUNTED STOCK FOUND AT THE TIME OF SURVEY IS ACCUMULATION OF SUCH PROFIT ON SALES ONLY. AS TH E UNDISCLOSED STOCK FOUND AT THE TIME OF SURVEY HAS BEEN SURRENDE RED AND ACCORDINGLY SHOWN IN THE RETURN OF INCOME AND THIS HAS NOT BEEN DISPUTED BY THE APPELLANT, NO SEPARATE ADDITION ON ACCOUNT OF ESTIMATED PROFIT ON UNACCOUNTED SALES IS JUSTIFIED. THE ESTIMATED PROFIT OF UNDISCLOSED SALES AT THE DECLARED G.P. RA TE IS MUCH LESS THAN THE UNACCOUNTED STOCK OF RSA.1O CR. DECLARED B Y THE APPELLANT AND THEREFORE, NO SEPARATE ADDITION ON ACCOUNT OF U NACCOUNTED SALES IS JUSTIFIED. THE ENTIRE ADDITION OF RS.21364 485/- ON ACCOUNT OF UNACCOUNTED SALES IS THEREFORE DELETED. FOR THIS ADDITION THE AO 6 HAS NO MATERIAL WITH HIM EXCEPT THE SURRENDER MADE BY THE APPELLANT. WHEN UNACCOUNTED SALES HAVE BEEN TAXED S EPARATELY, THERE IS NO JUSTIFICATION FOR THIS ADDITION WHICH I S NOTHING BUT DIFFERENCE OF THE SURRENDER MADE AT THE TIME OF SUR VEY AND SURRENDER OFFERED IN RETURN OF INCOME. WITH THIS TH E ENTIRE ADDITION OF RS.22132995/- STANDS DELETED. 8. THE LD. D/R FIRSTLY PLACED RELIANCE ON THE ORDER OF AO. IT WAS FURTHER SUBMITTED THAT SUBSEQUENT TO THE SURVEY, VIDE LETTER DATED 1. 2.2008 THE ASSESSEE IN ADDITION TO SURRENDER OF RS. 500 LACS ALREADY SURRENDERED DURIN G THE COURSE OF SURVEY, THE ASSESSEE SURRENDERED FURTHER AMOUNT OF RS. 200 LACS AS UNDIS CLOSED INCOME WHICH CONSISTED OF RS.300 LACS AS UNEXPLAINED STOCK FOUND DURING THE C OURSE OF SURVEY AND RS. 400 LACS ON ACCOUNT OF DEBTORS AND DISCREPANCIES. THIS REVISED SURRENDER WAS GIVEN VIDE LETTER DATED 7.3.2008. IT WAS FURTHER SUBMITTED THAT VIDE LETTE R DATED 16.4.2008 THE ASSESSEE AGAIN REVISED THE SURRENDER ON ACCOUNT OF EXCESS STOCK, O N ACCOUNT OF UNDISCLOSED INVESTMENT IN FORM OF UNACCOUNTED DEBTORS AND UNACCOUNTED SALES A ND OTHER ENTITIES OF RS. 4,10,80,515/-, RS. 75,55,000/- AND RS. 2,13,64,485/ - RESPECTIVELY TOTALING TO RS. 7,00,00,000/-. AN ADDITION OF EXCESS CASH WAS ALSO SURRENDERED DURING THE COURSE OF SURVEY AT RS. 7,68,510/-. ACCORDINGLY, THE LD. CIT (A) STATED THAT THE ASSESSEE WAS NOT SURE ITSELF THAT WHAT IS THE CORRECT POSITION OF SU RRENDER ON ACCOUNT OF UNACCOUNTED JEWELLERY, STOCKS OR DEBTORS ETC. THEREFORE, THE AO WAS CORRECT IN MAKING THE IMPUGNED ADDITION. THE LD. CIT (A) HAS ALSO FAIRLY STATED T HAT THOUGH THE FACTS ARE SIMILAR AS IN CASE OF JITENDRA KUMAR AGARWAL DISCUSSED AT THE TIME OF ARGUING THE APPEAL OF JITENDRA KUMAR AGARWAL BUT THE DIFFERENCE IN THE FACTS IN THAT CAS E AND THIS CASE IS THAT ASSESSEE IS MAKING REVISED SURRENDER FROM TIME TO TIME. 7 9. IN REPLY, THE LD. COUNSEL OF THE ASSESSEE STATED THAT THERE WAS A REASONABLE CAUSE IN REVISING THE SURRENDER STATEMENT FROM TIME TO TIME. THE ASSESSEE WAS PRESSING THE DEPARTMENT TO SUPPLY THE COPIES COLLECTED DURING TH E COURSE OF SURVEY SO THAT TRUE PICTURE OF UNACCOUNTED STOCK, DEBTORS ETC. CAN BE DRAWN. T HE DEPARTMENT HAS NOT SUPPLIED ALL THE MATERIAL IN ONE GO AS IT WAS SUPPLYING FROM TIME TO TIME AND, THEREFORE, ASSESSEE WAS REVISING ITS SURRENDER FROM TIME TO TIME. IT WAS F URTHER SUBMITTED THAT IT IS PERTINENT TO NOTE THAT INITIALLY THE ASSESSEE HAS DISCLOSED UNAC COUNTED MONEY OF RS. 5 CRORES WHEREAS THE ASSESSEE HAS LATER ON ENHANCED THE UNACCOUNTED MONEY TO RS. 7 CRORES. THIS IS NOT A CASE OF RETRACTION BUT THE CASE OF APPRECIATION OF TRUE FACT OF THE CASE AND THESE FACTS HAVE BEEN APPRECIATED BY LD. CIT (A) CORRECTLY. THEREFO RE, THE ORDER OF LD. CIT (A) DOES NOT SUFFER FROM ANY INFIRMITY. 10. AFTER CONSIDERING THE ORDERS OF AUTHORITIES BEL OW AND THE SUBMISSIONS OF THE ASSESSEE, WE FIND NO INFIRMITY IN THE FINDING OF LD . CIT (A). THE LD. CIT (A) HAS NOTED THE FACT THAT ESTIMATED PROFIT ON UNDISCLOSED SALES AT THE DECLARED G.P. RATE IS MUCH LESS THAN THE ACCOUNTED STOCK OF RS. 4.1 CRORES DECLARED BY THE ASSESSEE AND, THEREFORE, NO SEPARATE ADDITION ON ACCOUNT OF UNACCOUNTED SALE IS JUSTIFIED. THE ENTIRE ADDITION OF RS. 2.13 CRORES OR ODD ON ACCOUNT OF UNACCOUNTED SALES WAS ALREADY EMBEDDED IN THE UNACCOUNTED STOCK SURRENDERED BY THE ASSESSEE. THE REFORE, WE HAVE NO HESITATION IN CONFIRMING THE ORDER OF LD. CIT (A) IN THIS REGARD. IT IS SEEN THAT THE REVISED SURRENDER WAS MORE THAN THE ORIGINAL SURRENDER MADE BY THE AS SESSEE AND WHICH WAS BASED ON THE MATERIAL GATHERED FROM THE AO FROM TIME TO TIME WHI CH WAS COLLECTED BY THE SURVEY PARTY DURING THE SURVEY. THEREFORE, THE CONTENTION OF THE LD. D/R THAT THE ASSESSEE WAS NOT SURE THAT HOW MUCH INCOME HAS TO BE SURRENDERED AS ASSES SEE AFTER APPRECIATING THE MATERIAL 8 GATHERED BY THE SURVEY PARTY HAS DISCLOSED MORE INC OME. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE SEE NO UNREASONABLESS IN THE ORDE R OF LD. CIT (A) AND CONFIRM THE SAME. 11. NEXT ISSUE IS RELATED TO DELETING THE ADDITION OF RS. 5,43,25,448/- MADE BY THE AO ON ACCOUNT OF UNACCOUNTED SALES RECORDED IN ANNEXUR E A-24 AND 25. 12. THE BRIEF FACTS OF THE CASE ARE THAT THE AO HAS OBSERVED THAT THE UNACCOUNTED SALES AS PER ANNEXURE A-24 DECLARED BY THE ASSESSEE IS RS .36654687/-. THE AO ON THE OTHER HAND HAS FOUND THAT THE TOTAL OF ANNEXURE A-24 COME S TO RS.52950270/- AND AS PER ANNEXURE A-25 UNACCOUNTED SALES COMES TO RS.1375178 /'. A SHOW CAUSE NOTICE WAS ISSUED AND IN REPLY TO THE SHOW CAUSE NOTICE, THE S AME ARGUMENT WAS PLACED THAT NO SEPARATE ADDITION OF UNACCOUNTED SALES SHOULD REMAI N AS THE UNACCOUNTED STOCK AND DEBTORS ARE ALREADY SURRENDERED. THE AO HOWEVER, DI D NOT ACCEPT THE CONTENTION OF THE AR ON THE GROUND THAT THERE WAS NO EVIDENCE THAT TH E UNACCOUNTED SALES WERE MADE OUT OF THE ACCOUNTED PURCHASE. THAT THERE IS NO CORRELATIO N BETWEEN THE UNACCOUNTED SALES AND ACCOUNTED STOCK AS NO STOCK REGISTER WAS MAINTAINED AND NO PURCHASE BILLS WERE FOUND DURING SURVEY. AS THE PURCHASES WERE UNACCOUNTED TH E AO WAS OF THE VIEW THAT NO DEDUCTION CAN BE GIVEN FOR UNACCOUNTED EXPENDITURE ON UNRECORDED SALES BY APPLYING G.P. RATE. THE AO THEREFORE, MADE ADDITION OF ENTIRE UNA CCOUNTED SALES OFRS.54325448/-. 13. IT WAS CONTENDED BEFORE LD. CIT (A) THAT THE AD DITION MADE BY THE AO ON ACCOUNT OF UNDISCLOSED SALES IS TANTAMOUNT TO DOUBLE TAXATI ON AS THE ASSESSEE HAS ALREADY SURRENDERED THE SAME INCOME IN THE FORM OF EXCESS S TOCK END EXCESS DEBTORS FOR THE SAME ASSESSMENT YEAR. 9 14. AFTER CONSIDERING SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, THE LD. CIT (A) GAVE THE FOLLOWING FINDING :- CONTENTION OF THE AR IS CONSIDERED. THERE IS NOT HING FROM RECORD WHICH SHOW THAT THE' UNACCOUNTED SALES COMES TO RS.529502 70/- AS PER ANNEXURE A-24.' THE AR HAS ALSO NOT GIVEN ANY BASIS FOR CONSIDERING UNACCOUNTED SALES AT RS.36654687/-. THUS THE DIFFERENCE IN THE UNACCOUNT ED SALES SHOWN BY THE APPELLANT AND CONSIDERED BY THE AO FOR ADDITION REM AINS TO BE EXPLAINED. AS HELD IN THE EARLIER GROUND OF APPEAL ON UNACCOUNTED SALE S ONLY G.P. CAN BE ESTIMATED. THE FIRST ADDITION DISCUSSED IN GROUND OF APPEAL NO .1 WAS MADE BY THE AO ON ACCOUNT OF THE DIFFERENCE IN THE SURRENDER MADE AT THE TIME OF SURVEY AND UNACCOUNTED INCOME SHOWN IN THE RETURN OF INCOME. F URTHER SIMILAR ADDITION HAS BEEN MADE ON THE BASIS OF THE ENTRIES APPEARING IN THE IMPOUNDED PAPERS. THIS APPROACH OF THE AO CANNOT BE APPRECIATED. WHEN THE EXCESS STOCK FOUND AT THE TIME OF SURVEY WAS ALREADY OFFERED AND SHOWN IN THE RETURN OF INCOME ALONG WITH THE DEBTORS FOUND UNACCOUNTED, TWO ADDITIONS ON ACC OUNT OF UNDISCLOSED SALES FIRST MADE ON THE BASIS OF DIFFERENCE IN DISCLOSURE AND S ECOND TIME BASED ON THE IMPOUNDED MATERIAL IS NOT JUSTIFIED. FURTHER AS HEL D IN GROUND OF APPEAL NO.1 PROFIT ON UNACCOUNTED SALES ONLY CAN BE ADDED TO TH E TOTAL INCOME. HOWEVER IN THE PRESENT CASE WHEN WHATEVER UNACCOUNTED STOCK FOUND WAS ALREADY SHOWN IN THE RETURN OF INCOME NO FURTHER ADDITION ON ACCOUNT OF UNACCOUNTED -SALES IS JUSTIFIED. IT CAN BE HELD THAT THE PROFIT EARNED ON UNACCOUNTE D SALES ONLY HAS BEEN INVESTED IN UNACCOUNTED STOCK. DOUBLE ADDITION - ONCE ON THE BASIS OF INCOME ON UNACCOUNTED SALES AND SECOND TIME ON THE BASIS OF I NVESTMENT IN UNACCOUNTED STOCK IS NOT JUSTIFIED. THE ADDITION OF RS.54325448 /- MADE BY THE AO IS NOT JUSTIFIED AND THE SAME IS HEREBY DELETED. 15. THE LD. D/R HAS PLACED RELIANCE ON THE ORDER OF AO. 16. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSES SEE PLACED RELIANCE ON THE ORDER OF LD. CIT (A). 10 17. AFTER CONSIDERING THE ORDERS OF THE AO AND LD. CIT (A), WE FIND NO INFIRMITY IN THE FINDING OF LD. CIT (A). THE LD. CIT (A) HAS HE LD THAT ONLY GROSS PROFIT CAN BE ASSESSED ON THE UNDISCLOSED SALES AND NOT THE ENTIRE SALE AM OUNT. THIS ISSUE WAS INVOLVED IN THE CASE OF JITENDRA KUMAR AGARWAL ALSO AND THE TRIBUNA L HAS TAKEN A VIEW THAT ON UNACCOUNTED SALES THE PROFIT RATE CAN BE TAXED AND NOT THE UNACCOUNTED SALES. THE APPEAL IN CASE OF JITENDRA KUMAR AGARWAL WAS DECIDED IN IT A NO. 639/JP/2010 AND OTHERS BY ORDER DATED 30.12.2010. THE FINDING OF LD. CIT (A) IN OUR CONSIDERED VIEW IS IN LINE WITH THE ORDER OF TRIBUNAL DECIDED IN THE CASE OF JITEND RA KUMAR AGARWAL WHICH IS A GROUP CASE OF ASSESSEE. THEREFORE, WITHOUT GOING INTO DET AIL FURTHER, WE CONFIRM THE FINDING OF LD. CIT (A) WHICH REMAINED UNCONTROVERTED ALSO. 18. THERE IS NO OTHER GROUND IN THE APPEAL OF THE D EPARTMENT. 19. NOW WE WILL TAKE UP THE ISSUE RAISED IN THE CRO SS OBJECTION FILED BY ASSESSEE. 20. THE ASSESSEE IS OBJECTING IN CONFIRMING THE DIS ALLOWANCE OF SALARY PAID TO PARTNER OF RS. 5,51,284/-. 21. THE AO MADE THE IMPUGNED ADDITION BY OBSERVING THAT SMT. POOJA AGARWAL 50% PARTNER OF THE FIRM WAS NOT PERFORMING ANY OFFICE R ELATED RESPONSIBILITY AND, THEREFORE, REMUNERATION WAS ADDED TO THE INCOME OF THE ASSESSE E. 22. IT WAS SUBMITTED BEFORE LD. CIT (A) THAT THE AD DITION MADE BY AO WAS ONLY ON THE BASIS OF STATEMENT OF THE PARTNER RECORDED DURING S URVEY. AS PER SUPPLEMENTARY PARTNERSHIP DEED EXECUTED ON 30.12.2002 BOTH THE PA RTNERS ARE WORKING PARTNERS AND, THEREFORE, SALARY PAID TO SMT. POOJA AGARWAL IS TO BE ALLOWED. HOWEVER, LD. CIT (A) WAS NOT SATISFIED WITH THE CONTENTION OF THE ASSESSEE. ACCORDINGLY, HE CONFIRMED THE DISALLOWANCE. 11 23. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE ARE OF THE VIEW THAT THIS ISSUE SHOULD GO BACK TO THE FILE OF AO TO DECIDE AFRESH AFTER TAKING INTO CONSIDERATION THE PAST HISTORY OF THE CASE. IT WAS SUBMITTED THAT A SUPPLEMENTARY DEED WAS EXECUTED ON 30.12.2002 BY WHICH BOTH PARTNERS W ERE SHOWN AS WORKING PARTNERS. BOTH THE PARTNERS WERE PAID SALARY AFTER 30.12.2002 . WHETHER THE SALARY AMOUNT PAID IN SUBSEQUENT PERIOD FROM THE DATE 30.12.2002 IS ALLOW ED OR NOT, THIS FACT HAS NOT BEEN BROUGHT ON RECORD, THEREFORE, WE ARE OF THE VIEW TH AT TO MEET THE ENDS OF JUSTICE THE AO SHOULD TAKE INTO CONSIDERATION THE PAST HISTORY AND THEN DECIDE THE ISSUE AFRESH. 24. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISM ISSED AND THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 25. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 05 .08.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR, D/- COPY FORWARDED TO :- THE ACIT, CIRCLE-1, JAIPUR. M/S. ROYAL JEWELLERS, JAIPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 438/JP/2011) BY ORDER, AR ITAT JAIPUR.