ACIT CIR 3, KALYAN V. SHANTILAL MOHANLAL JAIN, DOMBIVALI

ITA 4906/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9725 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 25-07-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARZO GARADIA
• Assessee Lawyers: N A KULKARNIAR
• Section: 43B

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -BBENCH MUMBAI , . . , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND C. N. PRASAD,JUDICIAL MEMBER ./I.T.A./4906/MUM/2016, /ASSESSMENT YEAR: 2011-12 ACIT-CIRCLE-3 2 ND FLOOR, RANI MANSION, KALYAN MURBAD NEAR SBI KALIAN, KALYAN(W)-421 301 VS. SHRI SHANTILAL MOHANLAL JAIN PROP. M/S. RAKESH JEWELLERS KETAN APT. PHADKE ROAD, DOMBIVILI EAST MUMBAI-421 301. PAN:AARPJ 3584 B ( /APPELLANT) ( / RESPONDENT) C.O.NO.199/MUM/2016 ARISING OUT OF ./I.T.A./4906/MUM/2016, /ASSESSMENT YEAR: 2011-12 SHRI SHANTILAL MOHANLAL JAIN PROP. M/S. RAKESH JEWELLERS,KALYAN. VS. ACIT-CIRCLE-3 KALYAN. ( /APPELLANT) ( / RESPONDENT) / REVENUE BY: SMT. ARZO GARADIA- DR /ASSESSEE BY: SHRI N.A. KULKARNI-AR / DATE OF HEARING: 16/05/2017 / DATE OF PRONOUNCEMENT: 31/07/2017 , / PER RAJENDRA A.M. - CHALLENGING THE ORDER DATED 12/05/2016 OF THE CIT( A)- 3,NASIK,CAMP OFFICE THANE,THE ASSESSING OFFICER (AO) HAS FILED PRESENT APPEAL.CRO SS OBJECTION (CO) HAS BEEN FILED BY THE ASSESSEE.ASSESSEE IS A JEWELER AND IS ENGAGED IN TH E BUSINESS OF SELLING GOLD AND SILVER ORNAMENTS.HE FILED HIS RETURN OF INCOME ON 30/09/20 11,DECLARING INCOME OF RS.54.68 LAKHS. THE ASSESSING OFFICER (AO)COMPLETED THE ASSESSMENT, U/S.143(3) OF THE ACT ,ON 18/03/2014 DETERMINING TOTAL INCOME AT RS.1.80 CRORES. 2. FIRST EFFECTIVE GROUND OF APPEAL IS ABOUT DELETING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF WEIGHT GAIN CONSEQUENT TO CONVERSION OF 24 CARATS GOLD TO ORNAMENTS OF 22 CARATS /18 CARATS. DURING THE ASSESSMENT PROCEEDING,THE AO OBSERVED THAT THE ASSESSEE HAD PURCHASED STANDARD GOLD OF 24 CARATS,THAT HE HAD SO LD ORNAMENTS OF 22 AND 18 CARATS, THAT HE HAD CLAIMED EXPENDITURE ON ACCOUNT OF LABOUR CHARGE S AND MAKING CHARGES,THAT HE HAD NOT SHOWN ANY WEIGHT GAIN WHICH WAS 21%(APPROX.) ON CON VERSION FROM 24 CARATS TO 22 CARATS/18 CARATS.HE DIRECTED THE ASSESSEE TO FILE AN EXPLANAT ION IN THAT REGARD. AFTER CONSIDERING THE REPLY OF THE ASSESSEE ,DTD.14/3/2014,THE AO HELD TH AT THE ASSESSEE HAD PURCHASED STANDARD GOLD OF 26,223 GMS.,THAT HE CONVERTED THE SAME INTO ORNAMENTS OF 22 CARAT AND 18CARAT 4906/M/16+(C.O.)(11-12) SHANTILAL MOHANLAL JAIN 2 ORNAMENTS, THAT WEIGHT ADDED OR GAINED ON ACCOUNT OF ALLOYS AND MIXING WAS DISCLOSED ONLY OF 1025.54 GMS.(3.92%), THAT HE HAD ALSO PURCHASED 23 CARAT GOLD WEIGHING 5052.190 GMS. AND HAD USED IT IN MANUFACTURING PROCESS OF ORNAMEN TS, THAT HE HAD NOT SHOWN ANY WEIGHT GAIN ON THOSE PURCHASES, THAT THE ASSESSEE HAD FIL ED A FEW SALE BILLS INDICATING THAT ORNAMENTS WERE BEING MADE IN 23 CARAT GOLD WHICH WAS HIGHLY I MPROBABLE, THAT IT WAS STANDARD TRADE PRACTICE THAT EVERY 100 GM OF GOLD ORNAMENTS OF 22 CARATS PURITY (OTHER THAN SOLID BANGLES) INCLUDED IMPURITIES ON ACCOUNT OF ALLOYS AND SOLDER ING AT 17.33% RESULTING INTO STANDARD GOLD CONTENT OF 82.67% APPROXIMATELY,THAT THE IMPURITY O F 17.33% COMPRISED OF ALLOY @8.33% , ON ACCOUNT OF CONVERSION OF 24 CARAT GOLD INTO 22 C ARAT GOLD,THAT FURTHER 9% ALLOYS ON ACCOUNT OF SOLDERING MADE OF COPPER, SILVER, ETC.HE MADE A REFERENCE TO THE READY-RECKNOR AND HELD THAT THERE WOULD BE GAIN OF 21% AND STANDARD GOLD W HILE MANUFACTURING THE GOLD ORNAMENTS OF 22 CARATS PURITY,THAT THE ASSESSEE HAD SHOWN WE IGHT GAIN OF ONLY 3.92% ON THE 24CARAT GOLD AS AGAINST EXPECTED WEIGHT GAIN OF 21%. HE FUR THER MENTIONED THAT THE ASSESSEE WAS ASKED TO PRODUCE GS-11 AND GS-12 REGISTER WITH ALL SUPPORTING BILLS AND VOUCHERS AS WELL AS QUANTITATIVE DETAILS OF STANDARD GOLD,ORNAMENT GOLD ,GOLD PURCHASED AND SOLD, THAT THE ASSESSEE HAD NOT FURNISHED ANY DETAILS WITH REGARD TO ACTUAL CONVERSION RECORDS MAINTAINED.BY APPLY - ING THE AVERAGE SALE PRICE OF THE ASSESSEE AT RS.1 ,971 PER GM., THE AO WORKED OUT VALUE OF SUPPRESSED SALES AT RS.1.09 CRORES. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA)AND MADE ELABORATE SUBMISS IONS.VIDE ORDER SHEET ENTRY DATED 1/4/ 2016,THE FAA DIRECTED THE ASSESSEE TO RECONCILE THE FIGURES OF ALLEGED WEIGHT GAIN.THE ASSESSEE PRODUCED STOCK REGISTER PURCHASE BILLS, A ND SALE BILLS AND STATED THAT THE WORKING OF AO SUFFERED FROM SEVERAL SERIOUS DEFECTS. AFTER CON SIDERING THE AVAILABLE MATERIAL,THE FAA HELD THAT THE AO HAD ADOPTED ADHOC AND CRUDE METHOD FOR MAKING THE ADDITION WITHOUT VERIFYING THE BOOKS OF ACCOUNTS, THAT THE ASSESSEE HAD MAINTAINED DETAILED BILL WISE RECORD ON HOW THE 24 CARATS GOLD WAS CONVERTED INTO JEWELLERY ,THAT HE WAS DEALING ONLY WITH KDM JEWELLERY, THAT THE SALE BILLS MENTIONED THE PURITY IN EACH JEWELLERY ITEM SOLD BY HIM, THAT THE ASSESSEE HAD SHOWN WEIGHT GAIN OF 1026 GMS.,THAT I T WAS ABOUT 4%, THAT HE WAS SELLING 23 CARATS GOLD JEWELLERY, GOLD COINS ( 24 CARATS )AND VALA WHICH WAS MORE THAN 23 CARATS, THAT THE STOCK REGISTER CLEARLY MENTIONED THE WEIGHT GAI N WHEN DIFFERENT TYPE OF JEWELRY WAS SENT FOR MANUFACTURING,THAT THE AO SHOULD HAVE EXAMINED THE SOLDERING BY SILVER AND KDM WAS TOTALLY DIFFERENT,THAT THE ADDITION MADE BY THE AO WAS NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE.FINALLY,HE DELETED THE ADDITION MADE BY AO . 4906/M/16+(C.O.)(11-12) SHANTILAL MOHANLAL JAIN 3 4. BEFORE US,THE DEPARTMENTAL REPRESENTATIVE(DR)STATED THAT THE MATTER SHOULD BE RESTORED BACK TO THE AO,THAT THE FAA HAD DECIDED THE ISSUE C ONSIDERING THE NEW MATERIAL,THAT THERE WAS NO EVIDENCE THAT ORNAMENTS SOLD WERE HAVING PUR ITY OF 23 CARATS.THE AUTHORISED REPRESE -NTATIVE(AR)SUBMITTED THAT ALL THE PAPERS WERE FURN ISHED DURING THE ASSESSMENT PROCEEDINGS. 5. WE FIND THAT THE BASIC ISSUE IS OF THE PURITY OF OR NAMENTS ON CONVERSION OF GOLD (24 CARAT PURITY) INTO DIFFERENT ITEMS OF JEWELLERY. IT IS A FACT THAT THERE WOULD BE WEIGHT GAIN IF THE PURE GOLD IS CONVERTED WITH THE HELP OF ALLOYS.IN THE CA SE UNDER CONSIDERATION,AS PER THE AO,THE ASSESSEE HAD SHOWN WEIGHT GAIN OF ONLY 3.92% ON TH E 24 CARAT GOLD. THE AO HAD DIRECTED THE ASSESSEE TO PRODUCE GS-11 AND GS-12 REGISTERS ALON G WITH ALL SUPPORTING BILLS AND VOUCHERS FOR VERIFICATION.THE AO HAD GIVEN A SPECIFIC FINDIN G OF FACT THAT THE ASSESSEE HAD NOT FILED DETAILS WITH REGARD TO ACTUAL CONVERSION RECORDS.TH E FAA HAS HELD THAT WEIGHT GAIN WAS ABOUT 4%,THAT THE ASSESSEE HAD BEEN SELLING 23 CARAT JE WELLERY/GOLD COINS, THAT IT HAD NOT SOLD JEWELLERY OF 22 GOLD CARAT, THAT THE ASSESSEE WAS USING KDM FOR SOLDERING.HE HAS ALSO MADE A REFERENCE OF THE STOCK REGISTER PRODUCED BEFORE H IM.IN OUR OPINION,HE SHOULD HAVE CALLED FOR REMAND REPORT FROM THE AO BEFORE HOLDING THAT MOST OF THE ITEMS OF JEWELLERY SOLD BY THE ASSESSEE WERE OF 23 CARAT.IN THESE CIRCUMSTANCES, I N OUR OPINION MATTER NEEDS FURTHER VERIFICA TION.THEREFORE, IN THE INTEREST OF JUSTICE,WE ARE RESTORING BACK THE ISSUE TO THE FILE OF AO FOR FRESH ADJUDICATION.HE IS DIRECTED TO VERIFY QUANTIT Y OF JEWELLERY ITEMS MANUFACTURED/SOLD AND PURITY OF CARATS OF ALL THE ITEMS SOLD BY THE ASSES SEE DURING THE YEAR UNDER CONSIDERATION. HE HAS TO KEEP IN MIND THAT IF IN THE EARLIER YEARS TH E ASSESSEE HAD FOLLOWED THE SAME METHOD OF ACCOUNTING AND DEPARTMENT HAD NOT CHALLENGED THE O RDERS OF FAA IN APPROVING THE METHOD OF ACCOUNTING,HE SHOULD NOT DISTURB THE CLOSING STOCK OF THE ASSESSEE WITHOUT GIVING REASONS. THE ASSESSEE IS DIRECTED TO FILE DETAILS OF MANUFACTUR ED/SOLD GOODS AND THE PURITY OF CARATS OF SUCH ITEMS.IN SHORT,MATTER IS RESTORED TO THE FILE OF AO FOR LIMITED VERIFICATION OF FACTS.FIRST GROUND OF APPEAL (GOA 1.1. AND 1.2) IS DECIDED IN FAVOUR O F THE AO,IN PART. 6. SECOND GROUND OF APPEAL IS ABOUT DELETING DISALLOW ANCE OF INTEREST MADE BY THE AO . DURING THE ASSESSMENT PROCEEDINGS,THE AO HAD HELD T HAT THERE WAS NO ACTUAL PAYMENT IN VIEW OF EXPLANATION 3 OF SECTION 43B (D)(E)OF THE ACT. 7. DURING THE APPELLATE PROCEEDINGS, THE FAA DELETED T HE ADDITION RELYING UPON THE CERTIFICATE ISSUED BY THE BANK DTD.18/2/2015.THE DR STATED THAT THE FAA HAD ADMITTED THE ADDITIONAL 4906/M/16+(C.O.)(11-12) SHANTILAL MOHANLAL JAIN 4 EVIDENCE AND HAD NOT CONFRONTED THE AO.WE FIND THAT THE CERTIFICATE ISSUED BY BANK WAS NOT FURNISHED BEFORE AO DURING THE ASSESSMENT PROCEEDIN GS,THAT FAA HAD RELIED UPON THE SAID CERTIFICATE TO DELETE THE ADDITION,THAT HE DID NOT CALL FOR A REMAND REPORT.IN OUR OPINION,IT IS A VIOLATION OF INCOME TAX RULE,1962 (RULES).THEREFORE , WE ARE RESTORING THE ISSUE TO THE FILE OF THE AO WHO WOULD DECIDE THE ISSUE AFTER CONSIDERING LETTER OF THE BANK AND AFFORDING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE.S ECOND GROUND OF APPEAL IS ALSO DECIDED IN FAVOUR OF THE AO,IN PART. C.O.NO.199/MUM/2016 IN HIS CO THE ASSESSEE HAS SUPPORTED THE ORDER OF T HE FAA.AS WE HAVE RESTORED BACK THE MATTER TO THE FILE OF AO FOR FRESH ADJUDICATION SO, WE TREAT THE CO AS INFRUCTUOUS. AS A RESULT,APPEAL OF THE AO IS PARTLY ALLOWED AND C.O. OF THE ASSESSEE BECOMES INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JULY,2017. 31 , 2017 SD/- SD/- ( . . / C.N.PRASAD ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 31.07.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.