DCIT, Chandigarh V. M/s Talwar Jewellery House, Chandigarh

ITA 480/CHANDI/2013

AI Insights

The case involves two appeals by the Revenue against the orders of the Ld. CIT(A) pertaining to the assessment year 2010-11. The appeals were related to the additions made on account of unexplained investment in stock, excess stock of gold, and foreign travel expenses. The primary contention revolved around the method of valuation of excess stock and the lack of specific evidence linking foreign travel expenses to personal rather than business purposes. The Tribunal found that the CIT(A) had correctly applied the law and facts in deleting the additions made by the Assessing Officer.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135501 (ITAT-CHANDIGARH)
• Duration Of Justice: 10 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 13-06-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 01-05-2013
• Other Referred Cases: Bachittar Singh Vs CIT & others, Pullangode Rubber & Produce Co. Ltd Vs State of Kerala & others, ACIT Vs. M/s Sunder Jewellers, M/s Sham Jewellers Vs. DCIT, Talwarsons Jewellers
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Search and seizure; Corroborative evidences; Valuation report; Retraction
• Section: 154; 142(1); 69B; 22

Judgement Text

आयकर अपीलीय अिधकरण,च᭛डीगढ़ ᭠यायपीठ “बी” , च᭛डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH ᮰ी आकाश दीप जैन, उपा᭟यᭃ एवं ᮰ी िवᮓम ᳲसह यादव, लेखा सद᭭य BEFORE: SHRI. AAKASH DEEP JAIN, VP & SHRI. VIKRAM SINGH YADAV, AM आयकर अपील सं./ ITA NO. 480/Chd/2013 िनधाᭅरण वषᭅ / Assessment Year : 2010-11 The DCIT Central Circle-II, Chandigarh बनाम M/s Talwar Jewellery House # SCF 13, Sector 22-D, Chandigarh ᭭थायी लेखा सं./PAN NO: AAAFT6433E अपीलाथᱮ/Appellant ᮧ᭜यथᱮ/Respondent आयकर अपील सं./ ITA NO. 481/Chd/2013 िनधाᭅरण वषᭅ / Assessment Year : 2010-11 The DCIT Central Circle-II, Chandigarh बनाम M/s Talwar Jewellers SCO 09-10, Sector-22D Chandigarh ̾थायी लेखा सं./PAN NO: AAAFT6570C अपीलाथᱮ/Appellant ᮧ᭜यथᱮ/Respondent िनधाᭅᳯरती कᳱ ओर से/Assessee by : Shri Tejmohan Singh, Advocate राज᭭व कᳱ ओर से/ Revenue by : Shri Sarabjeet Singh, CIT DR सुनवाई कᳱ तारीख/Date of Hearing : 14/06/2023 उदघोषणा कᳱ तारीख/Date of Pronouncement : 08/09/2023 आदेश/Order PER VIKRAM SINGH YADAV, A.M. : These are two appeals filed by the Revenue against the respective orders of the Ld. CIT(Central), Gurgaon dt. 25/02/2013 & 22/02/2013 pertaining to Assessment Year 2010-11. 2. In ITA No. 480/Chd/2013, the Revenue has raised the following grounds of appeal: (i) “ Whether on the facts and in the circumstances of the case the Ld. CIT(A) has erred in law as well as facts by deleting the addition of Rs. 2,10,52,627/- on account of unexplained investment in stock u/s 69B when the same was no objected to by the assessee in course of search” (ii) “ Whether on the facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting the additions on account of excess stock(gold) by accepting the arguments of method of valuation while similar method of valuation of stock (diamond) is accepted by the assessee” (iii) “Whether on the facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting the addition made on account of expenses incurred on 2 foreign trips when the assessee has failed to establish the nexus between foreign trips and business expediency” (iv) “That the appellant craves to add, delete or modify any of the grounds of appeal before or at the time of hearing.” 3. Briefly the facts of the case are that a search and seizure operation under section 132(1) was carried out at the business and residential premises of the Talwar Group of cases including the assessee on 24/07/2009. Thereafter, notice under section 142(1) was issued. In response the assessee filed its return of income declaring total income of Rs. 5,73,10,560/-. 4. During the course of assessment proceedings, the AO issued a show cause dt. 26/09/2011 wherein the AO refers to the statement of the Partner of the assessee firm recorded during the course of search under section 132(4) wherein he has surrendered a sum of Rs. 4.16 Crores on behalf of the assessee firm. The AO further refers to the return of income filed by the assessee wherein the assessee has shown a sum of Rs. 4,15,59,809/- in its P&L Account under the head “income surrendered” and has also debited a sum of Rs. 53,29,872/- in P&L Account thereby offering a net sum of Rs. 3,62,29,937/- instead of Rs. 4,15,59,809/- and the assessee was asked to show cause and submit its explanation regarding the retraction so made by not offering the whole of income surrendered during the course of search. In response, the assessee filed its submission which were considered but not found acceptable to the AO and the AO has gone ahead and made an addition of a sum of Rs. 2,10,52,627/- being the difference of stock which remained unreconciled and unexplained. 5. The assessee carried the matter in appeal before the Ld. CIT(A) and submissions made before the AO were reiterated which were considered by the Ld. CIT(A) and it was held that the assessee has not disputed the quantity of excess stock of Gold & Diamond found and it is only manner of valuation of excess stock which has been challenged and thereafter the AO was directed to 3 re-compute the value of the stock found of Gold & Diamond by applying the regularly followed method of the valuation of the closing stock. 6. Against the said findings and the directions of the Ld. CIT(A), the Revenue is in appeal before us. 7. During the course of hearing, the Ld. CIT DR refers to the findings of the AO which are contained in para 4.2 of the assessment order and the contents thereof reads as under. “4.2 The submission filed by the assessee has been perused. It is also pertinent to note that the methodology adopted to arrive at the excess stock was based on the preparation of Trading A/c on the details furnished by the assessee firm and arriving at the closing stock and comparing them with the closing stock inventorised by the Department Valuer was done in the presence of parties, witness and authorized officers and the same was duly accepted and for acceptance signature of all were obtained. As per the above methodology adopted, the total stock of gold and diamond jewellery found and inventorized of M/s Talwar Jewelley House was as follows- a) 22 carat gold jewellery Rs. 7,17,93,279/- b) Diamond Jewellery Rs. 2,70,82,033/- During the course of search proceeding, the assessee had stated that all its stocks were not lying at the business premises. The relevant extracts of the statement of Sh. Sandeep Talwar, the partner of the assessee firm recorded u/s 132(4) in course of search operation are reproduced below- "Q.9 Please categorically specify as whether any stock of your firm is placed at some other place than this shop. Also specify as whether the stock jewellery items as available at this business premises belongs entirely to this firm? Ans. Yes, approximately 5 Kg of gold jewellery has been given for refining and 6 kg (Approx) given on approval to some NRI customers and approximately 500 gms of gold jewellery at home. The 5 kg stock as stated above is with Parminder Singh (goldsmith) at 3590, 23/D Chandigarh. Regarding 6 kgs I can give the names of the above said NRI customers but I will not be able to give their addresses. Yes, I certify that all stock of jewellery item available at the business premises belong entirely to this firm. Q.26 As per stock ledger summary as on 24.07.2009 the stock of 22 ct. gold jewellery including 22 et gold old jewellery in 69008.8 gms (gross weight) on physical verification of 22 et gold jewellery found at your premises and valued by registered valuer in your in presence as well as on the presence of two independent witness was found to be 53776.535 gms (grams weight). Please explain the discrepancy. Ans 5 kgs of 22 ct gold jewellery has gone for refining to Sh. Parminder Singh, R/o 3590 Sector-23/D, Chandigarh 6 kgs of 22 ct gold jewellery has been given of 4 approval to some NRI customers. About 500 gms of 22 ct gold jewellery is kept at home. In addition 4260.700 gms 22 ct gold jewellery has been given on approval to TANIA JEWELLERS Both No. 33 Sector-22/D, Chandigarh delivered on 21" July 2009 and not reduced from my stock ledger." The statement of Sh. Rama Kant Verma, proprietor of Taniya Jewellers was recorded on 08.09.2009 and a part thereof is reproduced as under: "Q. Please state the details of your business transections with M/s Talwar Jewellery House in the last 3 years. A. We have started new dealing with Talwar Jewellery House. First transaction was hold on 21-07-09 and second transaction held on 5-9-09. We have only two transactions with Talwar Jewellery House. Q. Please furnish the detail of transaction with Talwar Jewellery House along with copy of stock register and relevant vouchers/bills? A. I am furnishing herewith copy of stock register, whereas vouchers and bills are produced herewith for your verification. Q. Please explain in detail transaction undertaken by you on 21-07-09 with M/s Talwar Jewellery House? A. Mr. Sandeep Talwar had approached us for starting wholesale trading of his jewellery. On 21-07-09, he gave us a supply of 4260.700 gms of gold jewellery on approval basis. This was the first supply on approval basis. Out of this jewellery weighting 835.350 gms was finally purchased by us on 4-9-09 and the balance of 3425.350 gms jewellery was returned to M/s Talwar Jewellery House on 4-9-2009," During the course of assessment proceeding, the assessee has submitted that the following stocks of 22 carat gold jewellery were lying outside the business premises of the assessee- a) Lying with customers 6,000.000 gms b) Lying with Tanya Jewellers 4,260.700 gms c) Lying with Goldsmith for washing 5,000.00 gms d) Lying at home 500.00 gms 15,760.700 gms The value of 15,760.700 gms of gold jewellery as on the date of search @ Rs. 1380/- per gram comes to Rs 2,17,49,786/- Therefore, the value of stock found at the business premises as well as lying outside the business premises as follows:- FOUND AT THE BUSINESS PREMISES a) 22 carat gold jewellery (as per valuation report) Rs.6, 64, 95,509/- b) Diamond Jewellery (-do) Rs. 6,79,12,601/- OUTSIDE THE BUSINESS PREMISES c) 22 carat gold jewellery Rs. 2,17,49,766/- TOTAL Rs. 15,61,57,876/- 5 The value of stock based on the trading account was Rs. 9,88,75,312/- as per the following details. a) 22 carat gold jewellery Rs. 7,17,93,279/- b) Diamond Jewellery Rs. 2,70,82,033/- TOTAL Rs. 9,88,75,312/- Hence, the excess stock of Rs. 5,72,82,564/- (15,61,57,876-9,88,75,312) found in course of search operation remained unreconciled. However, the assessee has surrendered an amount of Rs. 3,62,29,937/- in return of income. Therefore, the difference of stock of Rs. 2,10,52,627/- (5,65,91,590-3,62,29,937) still remains unreconciled and unexplained.” 8. It was further submitted that in the instant case, the partner of the assessee firm has given statement on oath u/s 132(4) on 24.07.2009 where he has surrendered a sum of Rs. 4.16 crores on account of excess stock found. The assessee firm has retracted from the disclosure made u/s 132(4) at the time of filling of return on 31.01.2011 i.e. after a gap of more than one year. The statements of Sh. Sandeep Talwar, the partner of the assessee firm was taken u/s 132(4) in presence of the 'Panchas" and the authorized officers. The assessee firm had not raised any objection to the disclosure made by itself for such a long period. In view of the above facts and relying on the reasons discussed above and the judgment of the Hon'ble Punjab & Haryana High Court in the case of Bachittar Singh Vs CIT & others, the retraction made by the assessee is not acceptable. It was accordingly submitted that excess stock of Rs. 2,10,52,627/- found in course of search operation which the assessee has failed to reconcile, was treated as unexplained investment u/s 69B and added back in the hands of the assessee firm for F.Y. 2009-10 relevant to A.Y. 2010-11. It was submitted that the ld CIT(A) has not appreciated the same in correct perspective and hence, the Revenue is in appeal against the order of the ld CIT(A). 9. Per contra, the Ld. AR submitted that a search action was carried out on the business premises on 24.07.2009. During search proceedings, the assessee was asked to compile the Trading Account and to calculate the closing stock on GP basis by taking same Gross Profit rate as was in FY 2007-08. The Trading 6 Account was drawn and Diamond Jewellery on the basis of GP rate in FY 2007- 08 worked out to Rs 2,70,82,033- The value of Diamond Jewellery as per valuation report of the Valuer appointed by the Department worked out to Rs 6,79,52,601. Thus, a surrender of Rs.4,08,70,568/ - calculated as under was obtained from the assessee: A. Value of Diamond Jewellery as per Valuer’s Report Rs. 6,79,52,601/- B. Less Value of Diamond Jewellery as per Books of Rs. 2,70,82,033/- Accounts on the basis of GP Rate for FY 2007-08 ----------------------- C= (A-B) Amount of Surrender Rs. 4,08,70,568 10. It was submitted that the above figures are appearing on Page 2 of the assessment order wherein extract of Question 28 from the statement recorded of Sh. Sandeep Talwar Partner is reproduced. It was submitted that the assessee surrendered Rs.4,08,70,568/- at the time of search but at the time of drawing of final accounts, it came to light that closing stock as per method consistently applied for evaluating stock as on 24.07.2009 was Rs.3,24,11,905/- and not Rs.2,70,82,033/-(calculated by applying GP rate for FY 2007-08 under instructions of search party). During the course of assessment proceedings, complete working of the stock value as per Books of Accounts was furnished alongwith reply dt 07.12.2011. Copy of the reply is placed in the Paper Book at Pages 34- 38. The working of diamond stock of Rs.2,70,82,033/-as per GP rate is placed at Page 51 of the Paper Book which also stands reproduced in the assessment order at Page 4. The working in respect of Diamond Stock of Rs.3,24,1 l,905/-(Rs. 1,55,28,792.25 + Rs.1,68,83,113.09) as per books of accounts is placed in the Paper Book at Page 52. It was submitted that the printouts and soft copy of Books of Accounts was with the department as these were taken at the time of search. Thus, the assessee has recorded the stock of diamond jewellery in its books of accounts at Rs 3,24,11,905/- as on the date of search on the basis of regularly followed method of accounting which stands accepted in the earlier 7 years whereas the value of stock for the purpose of calculating the surrender amount applying GP rate method has been taken at Rs 2,70,82,033/-. 11. It was submitted that there cannot be two valuations of the same stock on the same date for the purpose of surrender. The assessee has been consistently following the method for evaluating stock as on 31.03.2008, 31.03.2009 and as on 31.03.2010 also. Even for earlier years, the same method was used for arriving at value of stock. No infirmity was found in method of evaluating stock in any of the years which were assessed u/s 153(l)(b) of the Income Tax Act. The value of stock as on 31.03.2009 or as on 31.03.2010 was not disturbed. Thus, the value of Diamond Stock as on 24.07.2009 was taken as per Books and only surplus value was adopted for surrender. It is because of this reason that the assessee had made adjustment of Rs. 53,29,872- (Rs 3,24,11,905 - Rs 2,70,82,033) in value of stock while declaring the surrendered income in Profit and Loss Account. Thus, there was no retraction from the statement recorded at the time of search as the quantity arrived by the search party has not been challenged. It is only the accepted method of valuation for arriving at the closing stock as on date of search which was applied which has led to the difference of surrendered amount. 12. It was further submitted that during the course of search, there was excess stock of gold weighing 528.43 gms as computed by the search party and accepted by the assessee. This fact emerges from question 27 of the statement of Sh. Sandeep Talwar Partner of the assessee firm which has been reproduced in the assessment order at Page 2. This was computed after considering and accepting the stock as per books of accounts and stock found in shop and stock lying with various parties. The assessee had given details and statements were recorded of the persons with whom certain stock was lying which stand accepted. The value of Gold Jewellery which is available in the books of account has to be taken at Average Cost or Market Price whichever is less and 8 only excess Gold Jewellery i.e 528.43 gms in the instant case found has to be valued at market price as on the date of search. The assessee firm has already declared an income of Rs.7,29,240/- towards the excess stock of gold. 13. Regarding Value of Gold Stock, it was submitted that the search party found that stock as per Books was 69008.8 gms which is appearing in the statement of the Partner Sh. Sandeep Talwar at Page 9 of the Paper Book whereas physical stock as per Valuer's Report was 69537.23 gms (53776.535gms + 15760.700gms being stock lying outside the business premises). The Search party asked the assessee to explain the difference. The difference of 528.43 Gms in weight of Gold Jewellery was offered for surrender and the same was accepted by the Search Party. However, the assessing officer has calculated the value of the entire stock of gold jewellery weighing 69537.23 gms at Rs 8,82,45,275/- (Rs.6,64,95,509/- + Rs.2,17,49,766/-) as per assessment order at Page 11. It has already been explained that on the instructions of search team, the assessee had drawn Trading Account as on 24.07.2009 i.e date of search by arriving at value of stock on GP rate basis by applying the GP rate for the FY- 2007-08(31.03.2008). Thus Assessing officer after reducing value of stock of Rs.7,17,93,279/, arrived at by applying GP rate, added a sum of Rs. 1,64,51,996/ (Rs.8,82,45,275/ - Rs.7,17,93,279/-) to the returned income on account of 22 carat gold stock. The Assessing officer ignored the fact that Market price cannot be applied to the stock duly recorded in books of accounts and accepted by the Search party. The Assessee had consistently been applying the same method for arriving at the value of Closing stock at the end of the financial year. This method of valuation has not been controverted, challenged or disputed by the Assessing officer in assessment of income of any Assessment Year prior to the year under consideration. All the years covered under the search assessment were assessed u/s 153(l)(c) rw 143(3)/147 of the Income Tax Act. The Assessing officer has accepted the method of average cost of stock as at the end of each financial year. Further in this case surrender was offered for the excess 9 quantity of stock i.e. 528.43 gms of Gold Jewellery and the surrender was accepted by the search party after verifying the same from Books of Accounts and statement of various parties. The Assessing officer has ignored the factual position and has made his own assumptions while making additions to the returned income. The quantity of stock available in the books of accounts as well as outside the books on the date of search i.e 24.07.2009 stands accepted by the search party and even by the Assessing Officer. The addition made to the returned income is contrary to the settled legal position that the value of Gold Jewellery which is available in the books of account has to be taken at Average Cost or Market Price whichever is less and only excess Gold Jewellery i.e 528.43 gms in the instant case found has to be valued at market price as on the date of search. 14. It was submitted that the Ld. CIT has rightly appreciated the contention so advanced by the assessee and drawn our reference to the findings of the Ld. CIT which are contained at para 5.2 of the impugned order which reads as under: 5.2. I have carefully considered the assessee's submissions and the impugned order. It is undisputed that the assessee made a surrender of Rs. 4.16 crores as additional income on account of stock, both gold and diamonds, in the statement recorded u/s 132(4). The value of stock found in the course of search had been determined Rs. 15,61,57,876/-. The trading account prepared on the date of search showed stock in trade of Rs. 9,88,75,312/-. The assessee has not disputed the quantity of excess stock of gold and diamonds found. It is only the manner of valuation of the excess stock which has been challenged. This, as contended by the assessee should have been evaluated at the cost average or market price whichever is less being the method of valuation regularly followed by the assessee and not at market price as was done by the valuers. This argument of the assessee is found acceptable as two methods of valuation cannot be adopted for reckoning the difference in the value of stock, especially when the method of accounting consistently followed by the assessee as well as the books of accounts are not in dispute. The details are elucidated here. The Surrender details made by the assessee: Difference in value of diamond jewellery Rs. 4,08,30,568/- Difference in value of gold stock 528 gms Rs. 7,29,240/- Total : Rs. 4,15,59,808/- 10 Rounded off Rs. 4,16,00,000/- The value of gold jewellery in physical sock of gold jewellery in shop and with other parties and stock quantity as per books of accounts is hereunder: i) Physical quantity as per valuation report 53,77,6.53 gms ii) Add stock with other parties 15,760.00 gms Total physical stock (Gold Jewellery) 69,536.53 gms Less stock as per books of accounts 69,008.05 gms Excess stock found by shop (Gold Jewellery) 528.48 gms Value of excess stock Rs. 7,29,240/- In this back drop the following emerges:  In cas of gold jewellery the market value of difference in physical quantity of stock and stock as per books of account i.e. market value of 528.48 gms of gold jewellery requires to have been added. The same i.e Rs. 7,29,240/- being the value of 528.48 gms has been surrendered and accepted.  However the valuer had not taken into consideration the 15,760 gms lying outside the business premises. This has been considered by the AO in para 4.2 and had worked out the value @ Rs. 1380/- per gm. Amounting to Rs. 2,17,49,768/-. There is no indication in the statements under oath or otherwise that the same had been accepted by the search parties. Hence the action of the AO in including the same is correct. In respect of valuation of diamond jewellery, it is the plea of the assessee that the value of closing stock as on date of search should be on the same basis as has been adopted in all other cases and should not be arrived on GP rate basis. More so, when the assessee is maintaining proper books of account and the same has been accepted. In the final analysis, the AO is therefore directed to recompute the value of the stock found of gold and diamonds by applying the regularly followed method of valuation of the closing stock i.e. cost average or market whichever is lower. Consequently the difference if any arising will be adjusted against the surrender and excess surrender if any will have to be therefore deleted. Hence to this limited extent this ground of appeal is set aside. The assessee partly succeeds here. 15. It was further submitted that the assessee moved an application u/s 154 before the CIT(A) after passing of the impugned order to rectify a factual error in respect of 22ct Gold Jewellery weighing 15760.70 gms which was rectified and our reference was drawn to the order passed by the Ld. CIT(A) under section 154/155 dt. 08/04/2013 where the Ld. CIT has carried out the necessary rectification and the findings therein read as under: 11 “I have considered the submissions of the assessee and the impugned order. The claim of the assessee is found to be prima-facie in order. The 22 ct Gold Jewellery Stock weighing 15760.70 gms not lying with the assessee had been explained by assessee during search proceedings and accepted as such by the search party. This amount has been considered while arriving at the excess quantity of 548.43 gms of 22ct gold jewellery found with the assessee as explained above and which was already surrendered by the assessee at its market value. The same stock i.e 22ct Gold Jewellery weighing 15760.70 gms cannot be therefore considered again for making addition. In other words, the stock of Gold Jewellery duly recorded in the books of account has been accepted by the search party and also by the AO. He has not found any mistake in the books of accounts and method of valuation of the assessee. The addition on account of Market Value of 15760.70 gms amounting to Rs.2.17.49.768/- require to be accordingly deleted. Thus as the mistake is apparent from record, the Appellate Order passed on 25.02.2013 stands rectified to that extent.” 16. Further reliance was placed on the Coordinate Chandigarh Bench decisions in case of ACIT Vs. M/s Sunder Jewellers in ITA No. 454/Chd/2019, M/s Sham Jewellers Vs. DCIT in ITA No. 375/Chd/2022, Talwarsons Jewellers in ITA No. 1313 to 1317/Chd/2012. 17. It was accordingly submitted that there is no infirminity in the order so passed by the ld CIT(A) and the appeal of the Revenue therefore be dismissed. 18. We have heard the rival contentions and purused the material available on record. As we have noted in para 4 supra, during the course of assessment proceedings, the AO issued a show cause wherein he refers to the statement of the Partner of the assessee firm recorded during the course of search under section 132(4) wherein a sum of Rs. 4.16 Crores was surrendered on behalf of the assessee firm. The AO further refers to the return of income filed by the assessee wherein the assessee has shown a sum of Rs. 4,15,59,809/- in his P&L Account under the head “income surrendered” and has also debited a sum of Rs. 53,29,872/- in P&L Account thereby surrendering a net sum of Rs. 3,62,29,937/- instead of Rs. 4,15,59,809/- . In other words, the limited issue relates to the amount of Rs 53,29,872/- which was surrendered during the course of search 12 which was not included and offered to tax while filing the return of income and what is the explanation so offered by the assessee. 19. It was explained by the assessee that the said difference has arisen on account of valuation of diamond jewellery as per books of accounts which has been worked out at the time of search and at the time of drawing up the final accounts. It was submitted that at the time of search, the value as per books of accounts was worked out based on gross profit ratio for the previous financial year 2007-08 which was determined at Rs 2,70,82,033/- whereas where the value as per regularly followed method of accounting which is lower of cost or market value is applied, the value comes to Rs 3,24,11,905/- . It was therefore submitted that difference between Rs 3,24,11,905/- and Rs 2,70,82,033/- which comes to Rs 53,29,872/- was accordingly adjusted by passing an adjustment debit entry in the profit/loss account whereas whole of the surrendered income was credited to the profit/loss account at Rs 4,15,59,809/-. It has been submitted that the assessee is regularly following the said method of valuation of stock in the earlier years and which has been accepted. 20. The ld CIT(A), unlike the AO has accepted, the said explanation of the assessee and has held that the assessee has not disputed the quantity of excess stock and it is only the manner of valuation of excess stock which has been challenged. It has been further held by the ld CIT(A) that two methods of valuation cannot be adopted for reckoning the difference in the value of stock especially where the method of accounting has been consistently followed by the assessee and also the fact that the books of accounts are not in dispute. The ld CIT(A) has accordingly directed the AO to recompute the value of stock by applying the regularly followed method of valuation of closing stock, i.e, average cost or market value whichever is lower. Nothing has been brought on record or pointed out during the course of hearing in terms of any infirminity in the said findings of the ld CIT(A). 13 21. We have gone the statement of the partner of the assessee firm recorded u/s 132(4), the nature and amount of surrender made in terms of statement so recorded, subsequent amount offered to tax in the return of income and other material available on record and find that there is no dispute regarding the quantity of excess stock which has been found and surrendered during the course of search and the difference between the amount surrendered and offered to tax has arisen on account of valuation of excess stock of diamond jewellery. The assessee has explained the basis of valuation of excess stock at the time of search as per gross profit ratio and as per regularly followed method of accounting which has been regularly followed and accepted by the Revenue for the earlier years and in the year under consideration. We find the explanation so offered as acceptable as where the books of accounts are maintained following a regular method of accounting of valuing the stock on a regular basis which is a well recognized basis of accounting in terms of lower of cost or market value and the relevant data and figures are available on record, there is no basis to impute the value of the stock by applying the gross profit ratio. We therefore donot find any infirminity in the findings of the ld CIT(A) and the same is hereby confirmed and the grounds of appeal taken by the Revenue are dismissed. 22. In Ground No. 3, the Revenue has challenged the findings of the Ld. CIT(A) in deleting the addition on account of Foreign Travelling Expenses and the relevant findings which are under challenge read as under: “6.3 I have considered the assessee's submission and the impugned order. During the year, the assessee firm has incurred as sum of Rs. 3,43,350/- on foreign Travelling out of total debit of Rs.7,63,605/-. As an explanation to the nature and purpose of these visits, it was stated to be for business development and that in earlier years such expenses were allowed by the department. On the other hand the AO has held that details of expenditure incurred on foreign travel submitted did not give particulars of countries visited, the persons concerned and that the nexus between the expediency of business and these trips had not been established. Moreover nothing specific nor were any material found in the course of search as to suggest which particular trip(s) were personal in nature. Be that as it may, I find that the addition has been made without any supporting evidence. 14 In this backdrop I am incline to hold that there is no justification in making adhoc disallowance to the extent of 50% of the foreign travel expenses without pointing out any instance of personal expenditure. In view of the discussion above, I am unable to confirm the action of the AO. The assessee succeeds in this ground of appeal.” 23. We have heard the rival contentions and purused the material available on record. The ld CIT(A) has deleted the addition holding that there is no justification in making adhoc disallowance to the extent of 50% of the foreign travel expenses without pointing out any instance of personal expenditure by the AO. We therefore do not find any infirmity in the findings of the ld CIT(A) where he has deleted the adhoc additions so made by the AO. In the result, the ground of appeal taken by the Revenue is dismissed. 24. In ITA No. 481/CHD/2013, the Revenue has taken the following grounds of appeal: (i) "Whether on the facts and in the circumstances of the case the Ld. CIT (A) has erred in law as well as facts by deleting the addition of Rs.2,28,86,399/- on account of unexplained investment in stock u/s 69B when the same was not objected to by the assessee in course of search" (ii) "Whether on the facts and in the circumstances of the case the Ld.CIT (A) has erred in deleting the additions on account of excess stock (gold) by accepting the arguments of method of valuation while similar method of valuation of stock (diamond) is accepted by the assessee" (iii) "Whether on the facts and in the circumstances of the case the Ld. CIT (A) has erred in deleting the addition made on account of expenses of expenses incurred on foreign trips when the assessee has failed to establish the nexus between foreign trips and business expediency" (iv) That the appellant craves to add, delete or modify any of the grounds of appeal before or at the time of hearing. 25. The relevant findings of the ld CIT(A) which are under challenge are as under: 5.2 I have carefully considered the assessee submission and the impugned order. It is undisputed that the assessee made a surrender of Rs. 5.60 crores as additional income on account of stock in the statement recorded u/s 132(4). The value of stock found in the course of search had been determined Rs. 28,71,35,401/-. The trading account prepared on the date of search showed stock in trade of Rs. 21,81,37,212/-. The assessee has not disputed the quantity of excess stock of gold and diamonds found. The valuation of the diamonds found 15 has not been challenged by the assessee either. It is only the manner of valuation of the excess stock of gold which has been challenged. The excess stock of gold jewelry was to the tune of 17474.6 gms. This, as contended by the assessee should have been evaluated at the cost average or market price whichever is less being the method of valuation regularly followed by the assessee and not at market price as was done by the valuers. While drawing up the trading account on the date of search the valuation of stock was prepared by applying average cost or market price whichever is less in respect of gold jewelry and average cost for diamond. This argument of the assessee is found acceptable as two methods of valuation cannot be adopted for reckoning the difference in the value of stock, especially when the method of accounting consistently followed by the assessee as well as the books of accounts are not in dispute. From the copy of the computation chart explaining the difference of the gold quantity in the books and as per the valuation report which was also submitted during the assessment proceedings, the stock on date of search was 114470.40 gms as against 96993.78 gms as per the books. The resultant excess stock worked out to 17476.62 gms. The valuation of this excess had been done at market rate. The ensuing amount was Rs. 28.71,35,402/-, as against the value in the books of Rs. 21,81,37,212/-. Therefore by adopting two separate methods of valuation, the difference in the value of the excess stock of gold came to Rs. 5,60,99,604/-. However if the regular method of valuation for gold i.e. the cost average or market price whichever is lower, is applied, the difference in the value of the excess stock worked out to Rs.3,32,13,205/- only. This was the amount assessee offered as additional income in its return, which the AO did not accept relying on the statement recorded u/s 132(4) and had included the difference in the valuation so as to reach the surrendered figure of Rs. 5.6 crores. Needless to say, the excess stock found in the course of search has to be necessarily valued at cost/ average cost and not on the market value in the absence of any adverse finding in the method of valuation followed by the assessee. Therefore applying the average cost to the excess gold found the value worked out to Rs. 3,32,13,205/- which has been duly declared by the assessee in his return. Consequently the difference in value which arose due to adopting a different method of valuation by the valuers is directed to be deleted. The validity and sanctity of the statement recorded u/s 132(4) as espoused by the AO is not in question, but here it is a case where the assessee has shown that the facts on the basis of admission so made were incorrect, as held in Pullangode Rubber & Produce Co. Ltd Vs. State of Kerala & others 91 ITR 18 (SC). Hence I accept the argument of the assessee and accordingly direct the deletion of the addition made by the AO on this account. The assessee succeeds in this ground of appeal. 6.3 I have considered the assessee's submission and the impugned order. During the year, the assessee firm has incurred as sum of Rs. 3,43,350/- on foreign Travelling out of total debit of Rs.7,63,605/-. As an explanation to the nature and purpose of these visits, it was stated to be for business development and that in earlier years such expenses were allowed by the department. On the other hand the AO has held that details of expenditure incurred on foreign travel submitted did not give particulars of countries visited, the persons concerned and that the nexus between the expediency of business and these trips had not been established. Moreover nothing specific nor were any material found in the course of search as to suggest which particular trip(s) were personal in nature. It has also 16 been stated by the assessee that the addition on this account in its case for AY 2001-02 had been deleted by the CIT(A). Copy of the order was furnished. Be that as it may, I find that the addition has been made without any supporting evidence. Insofar as the linkage between foreign travel and business expediency is concerned, I don't think we can sit in the arm chair of the business man to decide. In this backdrop I am inclined to hold that there is no justification in making adhoc disallowance to the extent of 50% of the foreign travel expenses without pointing out any instance of personal expenditure. In view of the discussion above, I am unable to confirm the action of the AO. The assesee succeeds in this ground of appeal. 26. Both the parties fairly submitted that facts and circumstances of the case are exactly identical and contentions raised in ITA No. 480/CHD/2013 may be considered. Therefore, taking into considerations the submissions made by both the parties, our findings and directions contained in ITA No. 480/CHD/2013 shall apply mutatis mutandis to this matter as well. The findings of the ld CIT(A) are confirmed and the grounds of appeals taken by the Revenue are accordingly dismissed. 27. In the result, both the appeal of the Revenue are dismissed. Order pronounced in the open Court on 08/09/2023. Sd/- Sd/- आकाश दीप जैन िवᮓम ᳲसह यादव (AAKASH DEEP JAIN) ( VIKRAM SINGH YADAV) उपा᭟यᭃ / VICE PRESIDENT लेखा सद᭭य/ ACCOUNTANT MEMBER AG Date: 08/09/2023 आदेश कᳱ ᮧितिलिप अᮕेिषत/ Copy of the order forwarded to : 1. अपीलाथᱮ/ The Appellant 2. ᮧ᭜यथᱮ/ The Respondent 3. आयकर आयुᲦ/ CIT 4. आयकर आयुᲦ (अपील)/ The CIT(A) 5. िवभागीय ᮧितिनिध, आयकर अपीलीय आिधकरण, च᭛डीगढ़/ DR, ITAT, CHANDIGARH 6. गाडᭅ फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar