Jigarkumar Navinchandra Soni, Ahmedabad V. The Asstt. Commissioner of Income Tax, Circel-5(2), Ahmedabad

ITA 511/AHD/2017

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 3921 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 01-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: PF JAIN
• Keywords: Rejection of books of accounts; Unexplained investment; Income from undisclosed sources; Corroborative evidences; Block assessment
• Section: 133A; 234B; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI WASEEM AHMED, ACCOUNTANT MEMBER) ./ I.T.A. NO. 511/AHD/2017 ( / ASSESSMENT YEAR : 2012-13) JIGARKUMAR NAVINCHANDRA SONI, PROP. OF M/S. N.S. JEWELS, 9, KAMAL COMPLEX, C.G. ROAD, AHMEDABAD. / VS. ACIT, CIRCLE 5(2), AHMEDABAD. ./ ./ PAN/GIR NO. : ANKPS 9216 K ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO. 528/AHD/2017 ( / ASSESSMENT YEAR : 2012-13) DEEPAKBHAI PRIYAVADAN DESAI, PROP. OF JAYDEEP JEWELLERS, F-1, NITYANAND APARTMENT, OPP. LG HOSPITAL, AHMEDABAD 380 008 / VS. ITO, WARD 5(2)(2), AHMEDABAD. ./ ./ PAN/GIR NO. : AAUPD 3766 E ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI P. F. JAIN, A.R. / RESPONDENT BY : SHRI MUDIT NAGPAL, SR.D.R. / DATE OF HEARING 31/07/2018 / DATE OF PRONOUNCEMENT 03/10/2018 !' / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEALS HAVE BEEN FILED AT THE INSTAN CE OF THE DIFFERENT ASSESSEE AGAINST THE SEPARATE ORDERS OF THE COMMISSIONER OF ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 2 - INCOME TAX(APPEAL)-5, AHMEDABAD [CIT(A) IN SHORT] V IDE APPEAL NO.CIT(A)-5/ACIT CIR.5(2)/19/2015-16 & CIT(A)-5/ITO WD.5(2)(2)/20/2015-16 DATED 03-01-2017 ARISING IN T HE MATTER OF ASSESSMENT ORDER PASSED UNDER S.143(3) OF THE INCOM E TAX ACT, 1961(HERE-IN-AFTER REFERRED TO AS 'THE ACT') DATED 27.03.2015 RELEVANT TO ASSESSMENT YEAR (AY) 2012-13. FIRST WE TAKE UP THE APPEAL OF THE ASSESSEE IN ITA NO. 511/AHD/2017 PERTAINING TO THE A.Y. 2012-13: 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE A RE AS UNDER:- 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FAC TS IN UPHOLDING THE STOCK OF GOLD BAR OF 736 GMS. ALLEGED TO HAVE N OT BEEN FOUND PHYSICALLY THOUGH RECORDED IN THE BOOKS, AS UN-ACCO UNTED SALE IN AS MUCH AS THAT THE SALE THERE OF WAS DULY ACCOUNTE D FOR IN THE BOOKS. 2. HE HAS ERRED IN LAW AND ON FACTS IN UPHOLDING G .P. ADDITION OF RS.2,48,927/- IN RESPECT OF GOLD BAR OF 736 GMS. NO T FOUND AT THE TIME OF SURVEY RESULTING INTO DOUBLE ADDITION. 3. HE HAS ERRED IN LAW AND ON FACTS IN UPHOLDING T HE GOLD BAR OF 736 GMS. AS SHORTAGE WITHOUT APPRECIATING THE FACT THAT AS PER ASSESSEE IT WAS DULY AVAILABLE AT THE TIME OF SURVE Y AND THE SALES THEREOF WERE DULY RECORDED IN BOOKS. 4. HE HAS ERRED IN LAW AND ON FACTS IN UPHOLDING A DDITION OF RS. 1,66,47,490/- AS UN-ACCOUNTED STOCK IN GOLD ORNAMEN TS WITHOUT CONSIDERING THE FACTS, THE EVIDENCE ADDUCED BY THE APPELLANT , RECONCILING THE BOOK STOCK AND THE PHYSICAL STOCK T AKEN DURING SURVEY PROCEEDING. 5. HE HAS ERRED IN LAW AND ON FACTS BY NOT ACCEPTI NG THE CONTENTION OF THE ASSESSEE THAT THE APPROVAL VOUCHERS DATED 11 /10/2011 BEARING NO. 132 & 133 RECORDING GOLD ORNAMENTS WEIG HING ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 3 - 2981.650 GMS. AND 3230.100 GMS. WERE CANCELLED AND NO SUCH ORNAMENTS WERE TAKEN ON TOUR. 6. HE HAS ERRED IN LAW AND ON FACTS IN NOT ACCEPTI NG THE CONTENTION OF THE ASSESSEE THAT DURING TRAVELLING GOLD ORNAMEN TS MENTIONED IN APPROVAL VOUCHERS DATED 11/10/2011 BEARING NO. 1 34, 135, 138 ALONE WERE TAKEN. 7. HE HAS ERRED IN LAW AND ON FACTS IN NOT APPRECI ATING THE CONTENTION OF THE ASSESSEE THAT IN THE STATEMENTS R ECORDED DURING PRE AND POST SURVEY PROCEEDINGS NO QUESTIONS REGARD ING APPROVAL VOUCHER NO. 132 & 133 WERE ASKED BY THE IN VESTIGATION WING THEREBY ACCEPTING AND CONVINCED THAT THE ORNAM ENTS MENTIONED IN THE SAID APPROVAL VOUCHERS WERE NOT TA KEN DURING TRAVELLING. 8. CONSIDERING THE TOTALITY OF FACTS READ WITH STA TEMENTS RECORDED NO ADDITION AS UN-ACCOUNTED STOCK OF RS. 1,66,47,49 0/- IN RESPECT OF GOLD ORNAMENTS MENTIONED IN APPROVAL VOUCHERS NO . 132 & 133 DATED 11/10/2011 OUGHT TO HAVE BEEN MADE. 9. THE LEARNED CIT HAS ERRED IN LAW AND ON FACTS I N NOT APPRECIATING AND ACCEPTING THE ALTERNATIVE CONTENTI ON OF THE ASSESSEE THAT WITHOUT PREJUDICE TO THE GROUND OF NO DEFICIT IN THE STOCK ONLY NET PROFIT ON THE VALUE OF ALLEGED DEFIC IT OF STOCK OUGHT TO HAVE BEEN TREATED AS INCOME AS HELD BY THE GUJAR AT HIGH COURT IN THE CASE OF PRESIDENT INDUSTRIES AND NOT T HE ENTIRE AMOUNT AS INCOME OF THE APPELLANT. 10. ON THE FACTS NO INTEREST U/S. 234B OF RS. 20,29,188 /- OUGHT TO HAVE BEEN LEVIED. 11. ON THE FACTS NO SUCH ADDITIONS OUGHT TO HAVE BEEN MADE AND THE RETURN INCOME OF RS. 1,66,43,014/- OUGHT TO HAVE BE EN ACCEPTED. 12. THE APPELLANT CRAVES LEAVE, TO ADD / TO ALTER AND / OR MODIFY ANY GROUND OF APPEAL 3. THE FIRST ISSUE RAISED BY THE ASSESSEE IN GROUND NO.1, 2 AND 3 IS THAT LD CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF R S. 2,48,927/- ON ACCOUNT OF DIFFERENCE IN PHYSICAL STOCK VIS--VIS B OOKS OF ACCOUNTS. ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 4 - 4. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND ENGAGED IN THE MANUFACTURING AND TRADING IN GOLD OR NAMENTS. THERE WAS A SURVEY CONDUCTED AT THE PREMISES OF THE ASSES SEE ON 13 TH OCTOBER, 2011. AT THE TIME OF SURVEY, IT WAS NOTICED THAT TH ERE WAS GOLD BAR WEIGHING 736 GMS IN THE BOOKS OF ACCOUNTS. HOWEVER, THE SAME WAS NOT FOUND PHYSICALLY DURING THE COURSE OF SURVEY OPERAT ION. AT THE TIME OF SURVEY, STATEMENT U/S 133A OF THE ACT WAS RECORDED. THE RELEVANT QUESTIONS AND ANSWERS RECORDED DURING THE SURVEY AR E REPRODUCED AS UNDER: QUESTION-22 TO-DAY DURING SURVEY, STOCK HAS BEEN COUNTED PHYSI CALLY WHICH IS 12878.950 GMS. OF N.S.JEWELS AND 21107.580 GMS. GOLD ORNAMENTS OF NAVINCHANDRA SHANTILAL SONI JEWELLERS. WHEREAS BOOKS STOCK OF BOTH THE CONCERNS IS 34666.562 GMS. GOLD O RNAMENTS, 736 24 CARAT GOLD BAR, AND 8641.070 GRMS. GOLD ORNAMENTS . PLEASE EXPLAIN THE DIFFERENCE OF BOOK STOCK AND PHYSICAL STOCK. ANSWER: IN MY ABSENCE, THE GOODS HAVE BEEN SOLD AND BILLS ARE PENDING TO BE MADE WHICH AT PRESENT I AM NOT AWARE WHICH WI LL BE REPORTED SHORTLY. QUESTION-23 FOR THIS , YOU CAN CALL FOR YOUR STAFF OR SONS AN D FURNISH THE DETAILS ANSWER : AT THIS TIME MY SALE STAFF IS NOT PRESENT AND I HAVE COME FROM OUTSTATION THEN ALSO I WILL GIVE THE DETAILS OF DIF FERENCE SHORTLY AND OF THERE IS ANY MISTAKE, I WILL CORRECT THE SAME AND I F ANY TAX LIABILITY IS THERE, I WILL PAY. 4.1 THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS EXPLAINED THAT THE GOLD BAR WEIGHTING 700 GMS WERE PURCHASED FROM SHYA M BULLION DATED 11-10-2011 AND 12-10-2011. THE REMAINING 36 GMS OF GOLD BAR WAS ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 5 - CARRIED FORWARD FROM THE PREVIOUS BALANCE. FURTHER, THE GOLD BARS WERE GIVEN TO THE LABORS FOR THE PREPARATION OF THE ORNA MENTS. THUS, DURING THE SURVEY OPERATION, THE GOLD BAR AS DISCUSSED ABOVE W AS VERY MUCH AVAILABLE WITH THE ASSESSEE. THE ASSESSEE IN SUPPOR T OF HIS CLAIM ALSO PRODUCED THE INVOICES FOR THE PURCHASE AND THE DETA ILS OF THE ORNAMENTS WHICH WERE SUBSEQUENTLY SOLD TO THE PARTIES. 4.2 HOWEVER, THE AO DISREGARDED THE CONTENTION OF T HE ASSESSEE BY OBSERVING AS UNDER: I. THE ASSESSEE DURING THE COURSE OF SURVEY OPERATION FAILED TO GIVE ANY SATISFACTORY EXPLANATION FOR THE MISMATCH OF GOLD BAR FOUND IN THE BOOKS OF ACCOUNTS VIS--VIS FOUND PHYS ICALLY FROM THE PREMISES. II. DURING THE SURVEY OPERATION THE QUESTIONS WERE RAIS ED TO THE ASSESSEE ABOUT THE MISMATCH OF GOLD BAR IN THE BOOK S OF ACCOUNTS VIS--VIS PHYSICAL STOCK. NO SUCH DETAILS WERE FURNISHED IN THE ANSWER IN RESPONSE TO THE QUESTION NO.22 OF THE STATEMENT. THE ASSESSEE HAS JUST GIVEN A VAGUE REPL Y AT THE TIME OF SURVEY BY STATING THAT THE SALE OF 736 GMS MIGHT HAVE SOLD WHICH HAS NOT BEEN RECORDED TILL THE DATE OF SURVEY . III. THE ASSESSEE DURING THE SURVEY SUBMITTED THAT THE G OLD BAR MIGHT HAVE SOLD BY HIS STAFF WHICH HAS NOT BEEN REC ORDED IN THE BOOKS. WHEREAS, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS SUBMITTED THAT THESE GOLD BARS WERE SE NT TO THE LABORS FOR THE MANUFACTURING OF ORNAMENTS. THUS, TH ERE WAS MISMATCH BETWEEN THE STATEMENTS GIVEN BY THE ASSESS EE. THEREFORE, NO HEED CAN BE GIVEN TO THE CONTENTION O F THE ASSESSEE. ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 6 - 4.3 IN VIEW OF ABOVE, THE AO TREATED THE DIFFERENCE IN THE QUANTITY OF GOLD BAR AS UNDISCLOSED INCOME OF THE ASSESSEE AND ADDED A SUM OF RS. 2,48,927/- BY OBSERVING AS UNDER: SR. NO. PARTICULARS CALCULATION AMOUNT (RS.) A VALUE OF 736 GMS GOLD BAR AS TAKEN FROM THE BILLS OF GOLD BARS PREVALENT DURING THAT YEAR (2680 PER GMS) 736*2680 1972480 B GROSS PROFIT OF THE A.Y. 12-13 12.62% C ADDITION OF G.P. ON COL.NO. A 1972480*12.62% 248927 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD CI T(A). THE ASSESSEE BEFORE THE LD CIT(A) SUBMITTED THAT THE DI FFERENCE IN THE QUANTITY OF GOLD BARS WEIGHING 736 GMS WAS DULY EXP LAINED BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS VIDE LETTER DA TED 16-03-2015 & 25-03-2015. 5.1 AS PER THE LETTER DATED 16-03-2015, THE ASSESSE E SUBMITTED THAT THE GOLD BARS WEIGHING 700 GMS WERE PURCHASED FROM SHYA M BULLION ON 11- 10-2011 & 12-10-2011 AND FILED THE COPIES OF THE IN VOICES IN SUPPORT OF HIS CLAIM. SIMILARLY, THE ASSESSEE SUBMITTED THAT T HE GOLD BARS WEIGHING 36 GMS WERE CARRIED FORWARD FROM THE EARLIER PERIOD . THE ASSESSEE ALSO SUBMITTED THAT THESE GOLD BARS WERE SENT TO THE LAB ORERS FOR CONVERTING THEM INTO GOLD ORNAMENTS. ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 7 - 5.2 IN THE LETTER DATED 25-03-2015, THE ASSESSEE SU BMITTED THAT THE PURCHASE OF GOLD BARS WAS DULY ACCOUNTED IN THE BOO KS OF ACCOUNTS. SUBSEQUENTLY, IT WAS CONVERTED FROM RAW FORM TO ORN AMENTS, WHICH WAS ALSO RECORDED IN THE BOOKS OF THE ASSESSEE. THE ORN AMENTS CONVERTED FROM SUCH GOLD BARS WERE ALSO SOLD TO THE PARTIES AND TH E SAME WAS RECORDED IN THE BOOKS OF ACCOUNTS. THUS, FURTHER ADDITION OF GO LD BARS WEIGHING 736 GMS WILL LEAD TO DOUBLE ADDITION. 5.3 THE ASSESSEE ALSO SUBMITTED THAT 400 GMS OF GOL D BARS WERE ISSUED FOR CONVERSION INTO THE ORNAMENTS TO THE LABORERS V IDE DATED 05-11-2011 AND 500 GMS WERE ISSUED DATED 23-10-2011. THE ASSES SEE FURTHER SUBMITTED THAT THE ORNAMENTS AFTER CONVERSION OF GO LD BARS WERE RECEIVED BY HIM VIDE RECEIPT VOUCHER DATED 14-11-2011 AND 26 -10-2011. THE ASSESSEE ALSO SUBMITTED THAT ALL THE ISSUE/RECEIPT VOUCHERS OF GOLD BAR AND ORNAMENTS WERE PRODUCED TO THE AO DURING THE ASSESS MENT PROCEEDINGS BUT THE AO HAS NOT CONSIDERED THE SAME. 5.4 THE ASSESSEE ALSO CHALLENGED THE GP RATE I.E. 1 2.62% WHICH WAS APPLIED BY THE AO FOR DETERMINING THE UNDISCLOSED I NCOME OF THE ASSESSEE. AS SUCH THE CORRECT RATE OF GP WHICH CAN BE APPLIED IN THE CASE ON HAND COMES TO 3.11% OF THE SALES. HOWEVER, THE LD CIT(A) AFTER CONSIDERED THE SUBMISS ION OF THE ASSESSEE CONFIRMED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER: ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 8 - 3.5. THE FACTS OF THE CASE AND THE SUBMISSIONS AR E CONSIDERED. THE CASE OF THE AO IS BASED ON THE FACT THAT THE GOLD B AR WEIGHING 736 GRAMS WERE NOT PHYSICALLY AVAILABLE DURING THE COUR SE OF SURVEY. THE APPELLANT HAS FAILED TO FURNISH EXPLANATION IN THIS REGARD DURING THE COURSE OF SURVEY AS WELL AS DURING THE COURSE OF AS SESSMENT PROCEEDINGS. THE APPELLANT'S CASE IS MAINLY BASED O N THE ARGUMENT THAT THE GOLD BAR GRAMS WERE PURCHASED AND CONVERTED INT O GOLD ORNAMENTS AND SOLD AFTERWARDS AND DULY ACCOUNTED FOR IN THE B OOKS OF ACCOUNT. IN THIS REGARD, THE APPELLANT HAS FURNISHED PURCHASE I NVOICES BEFORE THE AO. THE FACT IS THAT THE AO HAS NEVER DOUBTED THE P URCHASE OF THE SAID GOLD BAR. AT THE TIME OF SURVEY, THESE GOLD BARS WE RE NOT PHYSICALLY AVAILABLE AT THE PREMISES AND AT THAT TIME NOTHING WAS EXPLAINED BY THE APPELLANT, ONLY ON THE BASIS OF PURCHASE INVOICES I T CANNOT BE ACCEPTED THAT THESE GOLD BARS WERE PHYSICALLY AVAILABLE AT T HE TIME OF SURVEY. CONSIDERING THIS THE AO'S DECISION TO TREAT THEM AS UNACCOUNTED SALE AND MADE G.P. ADDITION IS FOUND TO BE JUSTIFIED AND THE SAME IS CONFIRMED. THUS THE GROUNDS OF APPEAL ARE DISMISSED . 5.5 BEING AGGRIEVED BY THE ORDER OF LD CIT(A) ASSES SEE IS IN APPEAL BEFORE US. 6. THE LD AR BEFORE US FILED A PAPER BOOK WHICH IS RUNNING FROM PAGES 1-80 AND REITERATED THE SUBMISSIONS AS MADE B EFORE THE LD CIT(A). 7. ON THE OTHER HAND, LD DR RELIED ON THE ORDER OF AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE PRECEDING DISCUSSION, WE NOTE THAT ADDITION HAS BEEN MADE BY THE AO ON THE STATEMENT GIVEN BY T HE ASSESSEE DURING THE COURSE OF SURVEY OPERATION. AS SUCH DURING THE SURVEY OPERATION THE CLOSING STOCK OF GOLD BARS WAS SHOWN AS PER BOOKS 7 36 GMS WHEREAS, ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 9 - THERE WAS NOT FOUND ANY PHYSICAL STOCK OF GOLD BAR. THEREFORE, THE DIFFERENCE WAS TREATED AS UNDISCLOSED CLOSING STOCK AND ACCORDINGLY, THE GROSS PROFIT RATE WAS APPLIED TO DETERMINE THE INCO ME ON SUCH UNDISCLOSED STOCK. 8.1 HOWEVER, WE NOTE THAT THE ASSESSEE HAS CLAIMED THAT THE GOLD BARS WERE PURCHASED FROM SHYAM BULLION DATED 11-10-2011 & 12-10-2011. COPIES OF THE INVOICES ARE PLACED ON PAGES 49 & 50 OF THE PB. 8.2 WE ALSO NOTE THAT THE ASSESSEE WAS MAINTAINING STOCK LEDGER OF GOLD BARS WHICH IS PLACED ON PAGES 46-48 OF THE PB IN PART PERTAINING TO THE MONTH OF OCTOBER TO DECEMBER, 2011. ON PERUSAL OF THE SAME, IT WAS NOTICED THAT THE PURCHASE OF THE GOLD BARS WAS DULY RECORDED IN THE STOCK REGISTER. SIMILARLY WHEN IT WAS ISSUED TO THE LABOR ERS FOR THE PURPOSE OF CONVERSION WAS DULY RECORDED. WE ALSO NOTE THAT THE COPIES OF THE ISSUING VOUCHERS FOR CONVERTING THE GOLD BARS INTO THE ORNA MENTS AND RECEIPT VOUCHERS OF THE CONVERTED ORNAMENTS ARE PLACED ON P AGES 51-54 OF THE PB. 8.3 WE ALSO NOTE THAT THE ASSESSEE HAS CLAIMED TO H AVE SOLD SUCH ORNAMENTS CONVERTED FROM GOLD BARS WHICH ARE PLACED FROM PAGES 55-57 OF THE PB. ON PERUSAL OF THE SALE INVOICES PLACED O N PAGE 56 OF THE PB, WE NOTE THAT THE GOLD BAR WAS CONVERTED INTO LAGDI ORNAMENTS. ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 10 - 8.4 FROM THE ABOVE, WE NOTE THAT ALL THE DETAILS OF THE LABORERS WHO CONVERTED GOLD BAR INTO ORNAMENTS WERE AVAILABLE WI TH THE AO DURING THE ASSESSMENT PROCEEDINGS BUT NO ENQUIRY WAS CONDUCTED TO VERIFY THE VERACITY OF THE STATEMENT/DETAILS FURNISHED BY THE ASSESSEE. 8.5 WE ALSO NOTE THAT THE AO HAS JUST RECORDED IN T HE ORDER THAT EXPLANATION FURNISHED BY THE ASSESSEE WAS NOT SATIS FACTORY BUT NO REASON WAS ADDUCED BY THE AO. 8.6 WE ALSO NOTE THAT THE ASSESSEE HAS NOT ADMITTED ANYTHING IN HIS STATEMENT FURNISHED DURING THE SURVEY OPERATION ABO UT THE GOLD BAR WHICH IS NOT RECORDED IN THE BOOKS OF ACCOUNTS. 8.7 WE ALSO NOTE THAT THE AO HAS ALLEGED THAT THERE WAS CONTRARY STATEMENT GIVEN BY THE ASSESSEE DURING THE SURVEY O PERATION VIS--VIS DURING THE ASSESSMENT PROCEEDINGS. BUT IN OUR CONS IDERED VIEW THE CONTRARY CANNOT LEAD TO MAKE ANY ADDITION WITHOUT B RINGING ANY MATERIAL ON RECORD FOR THE DIFFERENCE IN THE QUANTITY OF STO CK. 8.8 WE ALSO NOTE THAT THE STATEMENT HAS BEEN RECORD ED U/S 133A OF THE ACT WHICH HAS NO EVIDENTIARY VALUE AS HELD BY THE H ONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. S. KHADER KHAN SON REP ORTED IN 300 ITR 157 WHEREIN, IT WAS HELD AS UNDER: FROM THE FOREGOING DISCUSSION, THE FOLLOWING PRINC IPLES CAN BE CULLED OUT: ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 11 - (I) AN ADMISSION IS AN EXTREMELY IMPORTANT PIECE OF EVI DENCE BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE AND IT IS OPEN TO THE PERSON WHO MADE THE ADMISSION TO SHOW THAT IT IS INCORRECT AND THAT THE ASSESSEE SHOULD BE GIVEN A PROPER OPPORTUNITY TO SHOW THAT THE BOOKS OF ACCOUNT DO NOT CORRECTLY DISCLOSE THE CORR ECT STATE OF FACTS, VIDE DECISION OF THE APEX COURT IN PULKNGODE RUBBER PRODUCE CO. LTD. V. STATE OF KERALA [1973] 91 ITR 1 8 ; (II) IN CONTRADISTINCTION TO THE POWER UNDER SECTION 133 A, SECTION 132(4) OF THE INCOME- TAX ACT ENABLES THE AUTHORISED OFFICER TO EXAMINE A PERSON ON OATH AND ANY STATEMENT MADE BY SUCH PERSON DURING SUCH EXAMINATION CAN ALSO BE USED IN EVIDENC E UNDER THE INCOME-TAX ACT. ON THE OTHER HAND, WHATEVER STATEMENT IS RECORDED UNDER SECTION 133A OF THE INCOME- TAX ACT IS NOT GIVEN ANY EVIDENTIARY VALUE OBVIOUSLY FOR THE REASON THAT THE OFFICER IS NOT AUTHORISED TO ADMINISTER OATH AND TO TAKE ANY S WORN STATEMENT WHICH ALONE HAS EVIDENTIARY VALUE AS CONTEMPLATED U NDER LAW, VIDE PAUL MATHEWS AND SONS V. CIT [2003] 263 I TR 101 (KER.) ; (III) THE EXPRESSION 'SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE WITH THE ASSESSING OFFICER' CONTAINED IN SECTION 158BB OF THE INCOME- TAX ACT, 1961, WOULD INCLUDE THE MATERIALS GATHERED DURING THE SURVEY OPERATION UNDER SECTION 133A, VID E CIT V. G. K. SENNIAPPAN [2006] 284 ITR 220 (MAD.) ; (IV) THE MATERIAL OR INFORMATION FOUND IN THE COURSE OF SURVEY PROCEEDING COULD NOT BE A BASIS FOR MAKING ANY ADDI TION IN THE BLOCK ASSESSMENT, VIDE DECISION OF THIS COURT IN T. C (A) NO. 2620 OF 2006 (BETWEEN CIT V. S. AJIT KUMAR [2008] 300 IT R 152 (MAD.) ; (V) FINALLY, THE WORD 'MAY' USED IN SECTION 133A(3)(III ) OF THE ACT, VIZ., 'RECORD THE STATEMENT OF ANY PERSON WHICH MAY BE USEFUL FOR , OR RELEVANT TO, ANY PROCEEDING UNDER THIS ACT', AS ALREADY EXTRACTED ABOVE, MAKES IT CLEAR THAT THE MATERIALS COLLECTED AND THE STATEMENT RECORDED DURING THE SURVEY UNDER SECTION 133A ARE NOT CONCLUSIVE PIECE OF EVIDENCE BY ITSELF. FOR ALL THESE REASONS, PARTICULARLY, WHEN THE COMMI SSIONER AND THE TRIBUNAL FOLLOWED THE CIRCULAR OF THE CENTRAL BOARD OF DIRECT TAXES ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 12 - DATED MARCH 10, 2003, EXTRACTED ABOVE, FOR ARRIVING AT THE CONCLUSION THAT THE MATERIALS COLLECTED AND THE STATEMENT, OBT AINED UNDER SECTION 133A WOULD NOTAUTOMATICALLY BIND UPON THE ASSESSES WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE TRIBUNAL. 8.9 FROM THE ABOVE, IT IS CLEAR THAT THE STATEMENT RECORDED U/S 133A OF THE ACT HAS NO EVIDENTIARY VALUE. THEREFORE, NO ADD ITION CAN BE MADE ON THE BASIS OF STATEMENT. THEREFORE, WE DO NOT TAKE A NY SHELTER FROM THE STATEMENT U/S 133A FOR DECIDING THE ISSUE ON HAND. WE ALSO NOTE THAT IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE, THE ADDITI ON CANNOT STAND MERELY ON THE BASIS OF STATEMENT RECORDED DURING SU RVEY PROCEEDINGS. IN THIS REGARD, WE FIND THAT CBDT HAS ISSUED VIDE INST RUCTION ISSUED VIDE F. NO. 286/98/2013-IT(INV.II) DATED 18 TH OF DECEMBER 2014 WHICH READS AS UNDER:- INSTANCES/COMPLAINTS OF UNDUE INFLUENCE/COERCION HA VE COME TO NOTICE OF THE CBDT THAT SOME ASSESSEES WERE COERCED TO ADM IT UNDISCLOSED INCOME DURING SEARCHES/SURVEYS CONDUCTED BY THE DEP ARTMENT. IT IS ALSO SEEN THAT MANY SUCH ADMISSIONS ARE RETRACTED I N THE SUBSEQUENT PROCEEDINGS SINCE THE SAME ARE NOT BACKED BY CREDIB LE EVIDENCE. SUCH ACTIONS DEFEAT THE VERY PURPOSE OF SEARCH/SURVEY OP ERATIONS AS THEY FAIL TO BRING THE UNDISCLOSED INCOME TO TAX IN A SUSTAIN ABLE MANNER LEAVE ALONE LEVY OF PENALTY OR LAUNCHING OF PROSECUTION. FURTHER, SUCH ACTIONS SHOW THE DEPARTMENT AS A WHOLE AND OFFICERS CONCERN ED IN POOR LIGHT. 2. I AM FURTHER DIRECTED TO INVITE YOUR ATTENTION T O THE INSTRUCTIONS/GUIDELINES ISSUED BY CBDT FROM TIME TO TIME, AS REFERRED ABOVE, THROUGH WHICH THE BOARDS HAS EMPHASIZED UPON THE NEED TO FOCUS ON GATHERING EVIDENCES DURING SEARCH/SURVEY A ND TO STRICTLY AVOID OBTAINING ADMISSION OF UNDISCLOSED INCOME UNDER COERCION/UNDUE INFLUENCE. 3. IN VIEW OF THE ABOVE, WHILE REITERATING THE AFOR ESAID GUIDELINES OF THE BOARD, I AM DIRECTED TO CONVEY THAT ANY INSTANCE OF UNDUE INFLUENCE/COERCION IN THE RECORDING OF THE STATEMEN T DURING SEARCH/SURVEY/OTHER PROCEEDING UNDER THE IT ACT, 19 61 AND/OR ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 13 - RECORDING A DISCLOSURE OF UNDISCLOSED INCOME UNDER UNDUE PRESSURE/COERCION SHALL BE VIEWED BY THE BOARD ADVE RSELY. FROM THE ABOVE CIRCULAR IT IS AMPLY CLEAR THAT THE CBDT HAS EMPHASIZED TO ITS OFFICERS TO FOCUS ON GATHERING EVIDENCES DUR ING SEARCH/SURVEY OPERATIONS AND STRICTLY DIRECTED TO AVOID OBTAINING ADMISSION OF UNDISCLOSED INCOME UNDER COERCION/ UNDUE INFLUENCE. KEEPING IN VIEW THE GUIDELINES ISSUED BY THE CBDT FROM TIME TO TIME REGARDING THE STATEMENTS OBTAINED DURING SEARCH AND SURVEY OPERAT ION, IT IS UNDISPUTEDLY CLEAR THAT THE LOWER AUTHORITIES HAVE NOT COLLECTED ANY OTHER EVIDENCE TO PROVE THE IMPUGNED UNDER VALUATION OF S TOCK OTHER THAN THE STATEMENT. IN VIEW OF ABOVE, WE DISAGREE WITH THE FINDINGS OF LOWER AUTHORITIES. ACCORDINGLY WE REVERSE THE ORDER OF AUTHORITIES BEL OW. 8.10 HENCE, THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED . 9. THE NEXT ISSUE RAISED BY THE ASSESSEE IN GROUND NO. 4 TO 9 & 11 IS THAT LD CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 1,66,47,490/- ON ACCOUNT OF UNACCOUNTED STOCK IN GOLD ORNAMENTS. 10. DURING THE SURVEY OPERATION, VARIOUS DOCUMENTS WERE SEIZED CONTAINING TRAVELLING/APPROVAL VOUCHERS, WHICH WERE MARKED AS ANNEXURE-A6. AS PER THESE DOCUMENTS, IT WAS NOTICED THAT THE ASSESSEE ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 14 - HAS SENT GOODS FOR APPROVAL WITHOUT MAKING ANY SALE . ON THESE APPROVAL VOUCHERS, THE NAME OF THE STAFF OF THE ASSESSEE WAS RECORDED. THE ASSESSEE CLAIMED TO HAVE SENT THE GOODS FOR DISPLAY FOR MARKETING IN THE EXHIBITION WHICH WAS RECEIVED BACK AFTER THE FINISH ING OF THE CONCERNED EVENTS. AS SUCH, THERE WAS NO ENTRY RECORDED IN THE BOOKS OF ACCOUNTS FOR SENDING THE GOODS ON APPROVAL. THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS FILED THE RECONCILIATION STATEMENT OF T HE CLOSING STOCK AS PER THE BOOKS OF VIS--VIS PHYSICAL CLOSING STOCK, WHIC H IS EXTRACTED AS UNDER: RECONCILIATION OF STOCK OF N.S. JEWELS TOTAL PHYSICAL STOCK OF BOTH THE CONCERNS AS PER AN NEXURE B1 AND B2 IS PHYSICAL STOCK FOUND AS PER ANNEXURE B1 12878.950 GRM PHYSICAL STOCK FOUND AS PER ANNEXURE B2 21107.580 GRM TOTAL PHYSICAL STOCK FOUND 33986.530 GRM ADD: STOCK ON APPROVAL TAKEN AT EXHIBITION BY THE ASSESSEE AT CHENNAI 7837.460 GRM ADD: SALES BEFORE SURVEY BUT ACCOUNTED FOR 1483. 642 GRM 43307.632 GRM BOOK STOCK AS ON SURVEY BOOK STOCK AS PER SONI NAVINCHANDRA SHANTILAL 86 41.070 GRM BOOK STOCK AS PER N.S. JEWELS 34666.562 GRM TOTAL STOCK 43307.632 GRM 10.1 HOWEVER, THE AO FOUND THAT THE ASSESSEE HAS NO T ADDED FOLLOWING VOUCHERS IN THE RECONCILIATION STATEMENT OF CLOSING STOCK, EXTRACTED BELOW: BUT, THE ASSESSEE HAS NOT ADDED FOLLOWING VOUCHERS IN HIS CALCULATION OF STOCK: VOUCHER NO. 132 DTD. 11/10/2011 2981.60 GMS. VOUCHER NO. 133 DTD. 11/10/2011 3230.100 GMS. TOTAL OF THESE THREE 6211.750 GMS. ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 15 - 10.2 ON QUESTION BY THE AO, THE ASSESSEE SUBMITTED THAT THE ITEMS REPRESENTED IN THE ABOVE VOUCHERS WERE NOT TAKEN/ S ENT ON APPROVAL. THEREFORE, THESE ITEMS WERE VERY MUCH AVAILABLE IN THE PHYSICAL STOCK. THEREFORE, THE SAME WAS NOT TAKEN INTO CONSIDERATIO N IN THE RECONCILIATION STATEMENT OF THE CLOSING STOCK. 10.3 HOWEVER, THE AO DISREGARDED THE CONTENTION OF THE ASSESSEE ON THE GROUND THAT THE APPROVAL VOUCHERS ARE REPRESENTING THE ITEMS OF ORNAMENTS SENT FOR DISPLAY/ ON APPROVAL BASIS. THER EFORE THE SAME SHOULD HAVE BEEN ADDED IN THE RECONCILIATION STATEMENT OF THE CLOSING STOCK. ACCORDINGLY, THE AO ADDED THE DIFFERENCE IN THE CLO SING STOCK OF QUANTITY FOR 6211.750 GMS AS UNDISCLOSED STOCK AND ADDED A S UM OF RS. 1,66,47,490/- TO THE TOTAL INCOME OF THE ASSESSEE. 11. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD C IT(A). THE ASSESSEE BEFORE THE LD CIT(A) SUBMITTED THAT THE BO OKS OF ACCOUNTS WERE AUDITED AND NO DEFECT WAS POINTED OUT BY THE AO IN RESPECT OF PURCHASE AND SALES OF THE ORNAMENTS. 11.1 THERE WAS NO DOCUMENT INCRIMINATING IN NATURE REPRESENTING UNACCOUNTED PURCHASE AND SALES FOUND DURING THE COU RSE OF SURVEY. 11.2 DURING THE SURVEY OPERATION, THE ABOVE VOUCHER S WERE FOUND BUT THE ASSESSEE KNOWS THE FACT THAT NO GOODS FOR APPRO VAL/DISPLAY WAS SENT ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 16 - AGAINST SUCH VOUCHERS. THEREFORE, THE ARGUMENT/PLEA OF THE ASSESSEE SHOULD HAVE BEEN ACCEPTED BY THE AO. 11.3 THERE WAS ALSO NO MATERIAL WITH THE AO SUGGEST ING THAT THE ASSESSEE HAS TAKEN THE STOCK REPRESENTED IN VOUCHER NO. 132 / 133 FOR EXHIBITION. 11.4 EVEN DURING THE COURSE OF SURVEY, IT WAS NOT A DMITTED BY THE ASSESSEE THAT THE ITEMS OF ORNAMENTS WERE SENT FOR THE PURPOSE OF EXHIBITION. 11.5 THE ASSESSEE ALTERNATIVELY SUBMITTED THAT AT M OST THE AO CAN LEVY THE TAX ON UNACCOUNTED STOCK @9.95% BEING THE RATE OF NET PROFIT SHOWN IN THE BOOKS OF ACCOUNTS. THE ASSESSEE IN RESPECT O F HIS CLAIM RELIED ON THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE C ASE OF CIT VS. PRESIDENT INDUSTRIES REPORTED IN 258 ITR 654. 11.6 HOWEVER, THE LD CIT(A) DISREGARDED THE CONTENT ION OF THE ASSESSEE AND CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER: 4.4. DURING THE APPELLATE PROCEEDINGS, THE APPELLA NT HAS CONTENDED THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE AUDI TED. SALES AND PURCHASE ARE FULLY VOUCHED AND THE BOOKS OF ACCOUNT S HAVE BEEN ACCEPTED BY THE AO. IT IS FURTHER CONTENDED THAT DU RING THE COURSE OF SURVEY NO PHYSICAL STOCK OF ORNAMENTS MENTIONED IN APPROVAL VOUCHER NO.132 AND 133 AND NO INCRIMINATING DOCUMENTS SHOWI NG UNACCOUNTED PURCHASES AND UNACCOUNTED SALES WERE FOUND. THE APP ELLANT HAS ALSO CONTENDED THAT THE TWO APPROVAL VOUCHERS ON THE BAS IS OF WHICH THE ADDITION HAS BEEN MADE WERE IN THE NAME OF THE ASSE SSEE AND IT WILL BE ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 17 - IN THE KNOWLEDGE OF THE ASSESSEE AS TO WHETHER THE SAID ORNAMENTS WERE TAKEN OR NOT TAKEN FOR DISPLAY IN THE EXHIBITION TO BE HELD AT CHENNAI AND WHEN HE HAS EXPLAINED THAT THE SAID ORNAMENTS N OT TAKEN TO CHENNAI THE EXPLANATION SHOULD HAVE BEEN ACCEPTED. IT IS FURTHER CONTENDED THAT EXCEPT APPROVAL VOUCHER THERE IS NO OTHER CORROBORATIVE EVIDENCE IN SUPPORT OF CONCLUSION O THAT THE SAID O RNAMENTS WERE TAKEN TO CHENNAI. THE APPELLANT HAS ALTERNATIVELY CONTEND ED THAT ONLY NET PROFIT ON THE AMOUNT OF DEFICIT OF STOCK TO BE TREA TED AS SALES NOT RECORDED IN THE BOOKS ALONE CAN BE MADE AND THE ENT IRE AMOUNT CANNOT BE TREATED AS INCOME OF THE ASSESSEE. IN THIS REGAR D THE APPELLANT HAS RELIED UPON THE DECISION OF GUJARAT HIGH COURT IN T HE CASE OF PRESIDENT INDUSTRIES. 4.5. THE FACTS OF THE CASE AND THE SUBMISSIONS ARE CONSIDERED. THE AO HAS MADE THE ADDITION ON THE GROUND THAT THE ASSESS EE HAS NOT INCLUDED STOCK AS PER THE APPROVAL VOUCHER NO.132 AND 133 IN HIS CALCULATION OF STOCK. DURING THE COURSE OF SURVEY, 5 APPROVAL VOUC HERS WERE FOUND WHICH DID NOT HAVE ANY RECEIVED STAMP ON IT. THIS S HOWS THAT THIS STOCK SENT ON APPROVAL AND STILL LYING WITH PARTIES AS TR ANSACTION WAS NOT COMPLETED. DURING THE COURSE OF SURVEY IT IS CLEARL Y STATED BY THE ASSESSEE THAT MARKING RECEIVED ON APPROVAL VOUCHER DENOTE RECEIPTS OF THESE GOODS BACK. IN THE RECONCILIATION OF STOCK FU RNISHED BY THE ASSESSEE OUT OF THESE 5 APPROVAL VOUCHERS 2 APPROVA L VOUCHERS NO. 132 AND 133 HAVE NOT BEEN ADDED IN THE CALCULATION OF S TOCK. THE ONLY - EXPLANATION FURNISHED BY THE APPELLANT IS THAT STOC K OF THESE TWO APPROVAL VOUCHERS TAKEN TO CHENNAI. IT IS ALSO IMPO RTANT TO MENTION THAT IN THE STATEMENT RECORDED DURING THE COURSE OF SURV EY THE APPELLANT HAS STATED THAT GOLD ORNAMENTS ON I APPROVAL VOUCHERS TAKEN AT EXHIBITION AT CHENNAI WERE OF VOUCHERS NO.135, 138 AND 134 ONL Y. THE APPELLANT HAS NOWHERE STATED THAT GOLD ORNAMENTS AS PER APPRO VAL VOUCHER NO. 132 AND 133 WERE NOT TAKEN TO OTHER PARTIES FOR APP ROVAL. IN THE ABSENCE OF ANY OTHER EVIDENCE OTHER THAN THE EXPLAN ATION THAT THIS STOCK WAS NOT TAKEN OUT FOR EXHIBITION IT CANNOT BE AC CEPTED THAT THIS STOCK WAS INCLUDED IN THE STOCK FOUND AT THE PREMISE S. THE ALTERNATIVE CONTENTION OF THE APPELLANT IS ALSO NOT ACCEPTABLE AS THE ASSESSEE HAS FILED TO FURNISH DETAILS REGARDING THE UNACCOUNTED STOCK. ACCORDINGLY THE ADDITION MADE BY THE AO IS JUSTIFIED AND THE SA ME IS CONFIRMED. THUS THE GROUNDS OF/ APPEAL ARE DISMISSED. ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 18 - 11.7 BEING AGGRIEVED BY THE ORDER OF LD CIT(A) ASSE SSEE IS IN APPEAL BEFORE US. 12. THE LD AR BEFORE US REITERATED THE SUBMISSIONS AS MADE BEFORE THE LD CIT(A). THE LD AR BEFORE US ALSO ALTERNATIVELY C LAIMED THAT THE NET PROFIT CAN BE LEVIED ON ACCOUNT OF UNACCOUNTED STOC K. 13. ON THE OTHER HAND, THE LD DR VEHEMENTLY SUPPORT ED THE ORDER OF AUTHORITIES BELOW. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ISSUE RELATES WHETHER THE UNACCOUNTED STOCK AS OBSERVED BY THE AO DURING THE SURVEY OPERATION REPRESENTS THE UNACCOUNTED INCOME OF THE ASSESSEE. AS SUCH, THERE WAS A SURVEY OPERATION ON THE PREMISES OF THE ASSESSEE WH ERE DIFFERENCE IN THE QUANTITY OF STOCK WAS OBSERVED BY THE SURVEY TEAM, WHICH WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE AS UNACCOUNTED INC OME. HOWEVER, WE NOTE THAT NONE OF THE LOWER AUTHORITIES HAS POINTED OUT ANY DEFECT IN THE PURCHASE OR SALES SHOWN IN THE BOOKS OF ACCOUNTS. T HUS, WE NOTE THAT THE PURCHASE AND SALES HAS BEEN DULY ACCEPTED BY THE LO WER AUTHORITIES WHICH WERE DISCLOSED IN THE AUDITED FINANCIAL STATEMENT. 14.1 THUS, WE FIND FORCES IN THE ALTERNATE CONTENTI ON OF THE ASSESSEE THAT AT THE MOST THE NET PROFIT CAN BE ADDED TO THE TOTA L INCOME OF THE ASSESSEE ON ACCOUNT OF MISMATCH IN THE STOCK OF GOLD ORNAMEN T. ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 19 - 14.2 IN THIS CONNECTION, WE FIND SUPPORT AND GUIDAN CE FROM THE JUDGMENT OF GUJARAT HIGH COURT IN THE CASE OF PRESIDENT INDUSTRIES (SUPRA) WHERE IN IT WAS HELD AS UNDER: 3. HAVING PERUSED THE ASSESSMENT ORDER MADE BY THE ASSESSING OFFICER, THE ORDER MADE BY THE COMMISSIONER (APPEAL S) AND THE TRIBUNAL, WE ARE SATISFIED THAT THE TRIBUNAL WAS JU STIFIED IN REJECTING THE APPLICATION UNDER SECTION 256(1). IT CANNOT BE A MA TTER OF AN ARGUMENT THAT THE AMOUNT OF SALES BY ITSELF CANNOT REPRESENT THE INCOME OF THE ASSESSEE WHO HAS NOT DISCLOSED THE SALES. THE SALES ONLY REPRESENT THE PRICE RECEIVED BY THE SELLER OF THE GOODS FOR THE A CQUISITION OF WHICH IT HAS ALREADY INCURRED THE COST. IT IS THE REALISATIO N OF EXCESS OVER THE COST INCURRED THAT ONLY FORMS PART OF THE PROFIT INCLUDE D IN THE CONSIDERATION OF SALES. THEREFORE, UNLESS THERE IS A FINDING TO T HE EFFECT THAT INVESTMENT BY WAY OF INCURRING COST IN ACQUIRING GOODS WHICH H AVE BEEN SOLD HAS BEEN MADE BY THE ASSESSEE AND THAT HAS ALSO NOT BEE N DISCLOSED, THE QUESTION, WHETHER ENTIRE SUM OF UNDISCLOSED SALE PR OCEEDS CAN BE TREATED AS INCOME OF THE RELEVANT ASSESSMENT YEAR A NSWERS BY ITSELF IN THE NEGATIVE. THE RECORD GOES TO SHOW THAT THERE IS NO FINDING NOR ANY MATERIAL HAS BEEN REFERRED TO ABOUT THE SUPPRESSION OF INVESTMENT IN ACQUIRING THE GOODS WHICH HAVE BEEN FOUND SUBJECT O F UNDISCLOSED SALES. 14.3 IN VIEW OF ABOVE, WE HOLD THAT THERE WAS NO DI SCREPANCY POINTED OUT BY THE LOWER AUTHORITY IN THE PURCHASE/SALES OF THE GOLD ORNAMENTS REPORTED IN THE AUDITED FINANCIAL STATEMENT. THEREF ORE, IN SUCH CIRCUMSTANCES THE AMOUNT OF NET PROFIT CAN BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF DIFFERENCE IN THE STO CK OF GOLD ORNAMENTS. IN THIS REGARD, WE NOTE THAT THE ASSESSEE HAS SHOWN ITS NET PROFIT IN ITS BOOKS OF ACCOUNTS @9.95%. THUS, WE DIRECT THE AO TO MAKE THE ADDITION ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 20 - OF THE NET PROFIT AMOUNTING TO RS.16,67,895/- TO TH E TOTAL INCOME OF THE ASSESSEE. THUS, THE GROUND OF APPEAL OF THE ASSESSE E IS PARTLY ALLOWED . 15. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO . 511/AHD/2017 IS PARTLY ALLOWED. NOW WE TAKE UP ASSESSEES APPEAL IN ITA NO.528/AHD/ 2017 PERTAINING TO THE ASSESSMENT YEAR 2012-13: 16. FOLLOWING GROUNDS RAISED BY THE ASSESSEE IN THI S APPEAL: 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING DISALLOWANCE OF RS.3,000/- OUT OF TELEPHO NE EXPENSES AND RS.25,000/- OUT OF TRAVELLING EXPENSES WITHOUT APPRECIATING THE FACTS OF THE ASSESSEE AND IGNORING THE FACT THA T BOOKS OF ACCOUNTS ARE AUDITED AS PER THE INCOME TAX ACT AND NO PERSONAL EXPENSES HAS BEEN DEBITED. 2. HE HAS ERRED IN LAW AND ON FACTS IN UPHOLDING A DDITION OF RS.84,79,547/- IN RESPECT OF ORNAMENTS TAKEN ON APP ROVAL VOUCHER AS UN-EXPLAINED INVESTMENT IN GOLD ORNAMENT S WITHOUT CONSIDERING THE FACTS , THE AFFIDAVIT OF THE SALES MAN FOR SAID APPROVAL VOUCHER ADDUCED BY THE APPELLANT RECONCILI NG THE BOOK STOCK AND THE PHYSICAL STOCK DURING SURVEY PROCEEDI NG. 3. HE HAS ERRED IN LAW AND ON FACTS IN UPHOLDING C OMPUTATION OF EXCESS STOCK OF 3,164.010 GMS. AS AGAINST EXCESS ST OCK OF 58.71 GMS. ARRIVED AT BY THE ASSESSEE. 4. HE HAS ERRED IN LAW AND ON FACTS IN NOT PROPERL Y APPRECIATING AND CONSIDERING THE VARIOUS SUBMISSIONS WITH SUPPOR TING EVIDENCE MADE BY THE ASSESSEE , WHICH INCLUDED AFFI DAVIT OF THE PERSON EXPLAINING THE GOLD ORNAMENTS TAKEN ON APPRO VAL VOUCHER UNDER DISPUTE AND THEREBY ERRONEOUSLY UPHOLDING EXC ESS STOCK AT 3,164.010 GMS. ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 21 - 5. HE HAS ERRED IN LAW AND ON FACTS IN UPHOLDING T HE REJECTION OF BOOK RESULT MADE BY AO INVOKING THE PROVISION OF SE CTION 145 OF THE IT. ACT BY CONFIRMING ERRONEOUS OBSERVATIONS LI KE, INADVERTENT MISTAKE IN THE AUDIT REPORT, THE WORD D UPLICATE USED ON SALE BILL, NON MAINTENANCE OF DAY-TO-DAY STOCK D ETAILS ETC. MADE BY THE AO AND NOT CONSIDERING THE FACTS THAT T HE CASE RELIED UPON BY THE AO WERE NOT APPLICABLE TO THE FACTS OF THE ASSESSEE. 6. HE HAS ERRED IN LAW AND ON FACTS IN UPHOLDING E STIMATION OF G.P. @ 5% AND CONSEQUENT G.P. ADDITION OF RS. 19,11,2707 - WITHOUT APPRECIATING THE FACTS OF THE ASSESSEE IN ITS PROPE R PERSPECTIVE AND THE SUBMISSION MADE IN AS MUCH AS THAT THERE WA S NO JUSTIFICATION FOR GP ADDITION. 7. HE HAS ERRED IN LAW AND ON FACTS IN UPHOLDING A DDITION OF GROSS PROFIT & UNEXPLAINED INVESTMENT IN GOLD ORNAMENTS S UBMITTED TO BE MADE, OUT OF SUSPICION, PRESUMPTION AND ASSUMPTI ON. 8. THE LEARNED CIT HAS ERRED IN LAW AND ON FACTS I N NOT APPRECIATING AND ACCEPTING THE ALTERNATIVE CONTENTI ON OF THE ASSESSEE THAT WITHOUT PREJUDICE TO THE GROUND OF NO UNEXPLAINED INVESTMENT IN THE STOCK ONLY NET PROFIT ON THE VALU E OF ALLEGED EXCESS STOCK OUGHT TO HAVE BEEN TREATED AS INCOME A S HELD BY THE GUJARAT HIGH COURT IN THE CASE OF PRESIDENT INDUSTR IES AND NOT THE ENTIRE AMOUNT AS INCOME OF THE APPELLANT AS DON E BY THE AO. 9. ON THE FACTS NO INTEREST U/S.234B OUGHT TO HAVE BEEN LEVIED. 10. ON THE FACTS NO SUCH ADDITIONS OUGHT TO HAV E BEEN MADE AND THE RETURN INCOME OUGHT TO HAVE BEEN ACCEPTED. 11. THE APPELLANT CRAVES LEAVE, TO ADD / TO ALTER AND /OR MODIFY ANY GROUND OF APPEAL. 17. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE BEFORE US SUBMITTED THAT HE HAS BEEN INSTRUCTED NOT TO PRESS GROUND NO. 1 DUE TO SMALLNESS OF AMOUNT. THEREFORE, SAME IS DISMISSED AS NOT PRESSED . 18. THE SECOND ISSUE RAISED BY THE ASSESSEE IN GROU ND NO.2 TO 4 IS THAT LD CIT(A) ERRED IN CONFIRMING THE ORDER OF AO BY SU STAINING THE ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 22 - DISALLOWANCE OF RS.84,79,547/- ON ACCOUNT OF UN-EXP LAINED INVESTMENT IN GOLD ORNAMENTS. 19. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A N INDIVIDUAL AND ENGAGED IN THE BUSINESS OF WHOLESALE TRADING IN GOL D ORNAMENTS UNDER THE NAME AND STYLE OF M/S JAYDEEP JEWELLERS. 19.1 A SURVEY OPERATION U/S 133A OF THE ACT WAS CAR RIED OUT AT THE PREMISES OF THE ASSESSEE DATED 13-10-2011. DURING T HE SURVEY OPERATION, A STOCK OF GOLD ORNAMENTS AS PER BOOKS OF ACCOUNTS WAS FOUND 10329.990 GMS BUT PHYSICALLY IT WAS FOUND ONLY 742.300 GMS. 19.2 DURING THE SURVEY OPERATIONS, CERTAIN VOUCHERS WERE FOUND NUMBERING 9, 10 & 13 WHICH WERE SEIZED. AS PER THES E VOUCHERS, GOLD ORNAMENTS WEIGHING 12751.700 GMS WERE SENT OUT FOR APPROVALS. THUS, THE GOODS SENT FOR APPROVAL WERE ADDED TO THE PHYSI CAL STOCK AVAILABLE AT THE TIME OF SURVEY WHICH WORKED OUT AT 13494.000 GM S (PHYSICAL STOCK 742.300 + GOODS SENT ON APPROVAL 12751.700). 19.3 THUS, PHYSICAL EXCESS STOCK OF GOLD ORNAMENTS WAS WORKED OUT AT 3164.414 GMS (PHYSICAL STOCK 13494 BOOKS OF ACCOU NT STOCK 10329.990). THE VALUE OF EXCESS STOCK WAS WORKED OU T AT RS.84,79,547/- (3164.414 @2680/GMS). ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 23 - 19.4 THE ASSESSEE IN HIS STATEMENT RECORDED AT THE TIME OF SURVEY VIDE QUESTION NO.25 SUBMITTED THAT THE STOCK REPRESENTED IN VOUCHER NO 9 AND 10 WERE SENT OUT ON APPROVAL HAVING TOTAL WEIGHT OF 9436.400 GMS. THUS, THE STOCK REPRESENTED IN VOUCHER NO.13 OF 3105.300 GMS OF GOLD WAS VERY MUCH INCLUDED IN THE BOOK OF STOCK AS SHOWN ON THE DATE OF SURVEY I.E. 10329.990 GMS. THE ASSESSEE ALSO CLAIMED THAT THE O RNAMENTS REPRESENTED IN VOUCHER NO.13 WERE NOT SENT OUT FOR APPROVAL THEREFORE, THE SAME SHOULD BE TREATED AS PART OF THE BOOK STOCK. 19.5 IN VIEW OF ABOVE, THE ASSESSEE SUBMITTED THAT THE EXCESS STOCK OF 58.7 GMS CAN BE SUBJECT TO TAX @2680/GRAM AGGREGATI NG TO RS.1,57,430/- ONLY. 19.6 HOWEVER, THE AO DISREGARDED THE CONTENTION OF THE ASSESSEE AND TREATED THE DIFFERENCE OF 3164.414 GMS AS UNEXPLAIN ED STOCK VALUED AT RS. 84,79,547/- AND ADDED TO THE TOTAL INCOME OF THE AS SESSEE. 20. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD C IT(A). THE ASSESSEE BEFORE THE LD CIT(A) SUBMITTED THAT IN THE STATEMENT RECORDED ON THE DATE OF SURVEY AND ON THE SUBSEQUENT DATE IT WAS DULY COMMUNICATED THAT THE STOCK REPRESENTED IN VOUCHER NO. 13 WAS INCLUDED IN THE BOOKS OF STOCK AS SHOWN ON THE DATE OF SURVE Y. THEREFORE, THE SAME CANNOT BE TREATED AS UNEXPLAINED. THE ASSESSEE ALTE RNATIVELY ALSO SUBMITTED THAT THE PURCHASES AND SALES HAVE NOT BEE N DOUBTED BY THE AO, THEREFORE AT THE MOST THE AMOUNT OF NET PROFIT ON S UCH UNDISCLOSED ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 24 - INVESTMENT IN THE STOCK CAN BE APPLIED. THE ASSESSE E IN SUPPORT OF HIS CLAIM RELIED ON THE ORDER OF HONBLE GUJARAT HIGH C OURT IN THE CASE OF CIT VS. PRESIDENT INDUSTRIES REPORTED IN 258 ITR 65 4. HOWEVER, THE LD CIT(A) DISREGARDED THE CONTENTION O F THE ASSESSEE AND CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER: 4.5. THE FACTS OF THE CASE AND THE SUBMISSIONS AR E CONSIDERED. THE AO HAS MADE ADDITION OF EXCESS STOCK FOUND DURING T HE COURSE OF SURVEY. THE MAIN CONTENTION OF THE APPELLANT IS THA T THERE IS NO EXCESS STOCK FOUND DURING THE COURSE OF SURVEY AND THE STO CK AS PER APPROVAL VOUCHER NO. 13 IS PART AND PARTIAL OF BOOK STOCK AN D WRONGLY TREATED BY THE AO AS UNACCOUNTED STOCK. TO SUBSTANTIATE HIS CL AIM THE APPELLANT HAS FURNISHING AFFIDAVIT OF SHRI BHADRESH S. SATWAR A IN WHOSE NAME THE APPROVAL VOUCHER WAS ISSUED. THUS THE MAIN DISPUTE REGARDING THE EXCESS STOCK ARISES DUE TO APPROVAL VOUCHER NO.13 T HE APPELLANT HAS FURNISHED AFFIDAVIT AND OTHER THAN THIS NO OTHER DE TAILS OR EVIDENCES WERE FURNISHED DURING THE COURSE OF ASSESSMENT PROC EEDING AS WELL AS APPELLATE PROCEEDINGS. IN THE STATEMENT RECORDED U/ S.131 OF THE ACT OF THE ASSESSEE ON 28.11.2011, THE ASSESSEE WAS SPECIF ICALLY ASKED ABOUT THE VOUCHER NO. 13 AS UNDER QUESTION NO.27, 'QUESTION NO.27 : HAVE YOU GOT ANY EVIDENCE FROM WH ICH IT CAN BE PROVED THAT THE GOODS OF VOUCHER NO.13 INCLUDED IN THE GOODS OF VOUCHER NO.9 & 10 BECAUSE THE DATE MENTIONED ON VOUCHER NO. 13 IS 13 TH OCTOBER, 2011. ACCORDING TO US THIS GOODS IS IN ADDITION TO GOODS OF VOUCHER NO.9 AND 10. IF YOU HA VE ANY EVIDENCE FROM WHICH IT CAN BE PROVED THAT THE GOODS IN VOUCHER NO.9 & 10 INCLUDES GOODS OF VOUCHER NO. 13 THEN PRO DUCE THE EVIDENCE. REPLY : THE DATE ON VOUCHER NO. 13 HAS BEEN WRONGLY STATED. I DID NOT HAVE ANY EXTRA STOCK. WE DON'T MAINTAIN ITE M-WISE STOCK. FOR THIS REASON, NO DETAILS THEREOF CAN BE PRODUCED .' FROM THE ABOVE, IT IS SEEN THAT THE APPELLANT HAS S PECIFICALLY SAID THAT THEY DON'T MAINTAIN ITEM-WISE STOCK AND HE IS NOT ABLE TO FURNISH ANY DETAILS REGARDING THE STOCK. UNDER THESE CIRCUMS TANCES IT CANNOT BE ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 25 - SAID THAT THE ONUS AS CONTENDED BY THE APPELLANT IS DISCHARGED BY THE ASSESSEE. WHEN THE ONUS IS NOT DISCHARGED BY THE ASSESSEE IT IS NOT FOR THE DEPARTMENT TO MAKE FURTHER INQUIRIES. AFFIDA VIT IN ISOLATION IS NOT SUFFICIENT TO PROVE THE CONTENTION OF THE APPELLANT . THE APPELLANT FAILED TO SUBSTANTIATE THE CONTENTION WITH REQUIRED DETAIL S. IN THE ABSENCE OF SUPPORTING EVIDENCES AND DETAILS, IT CANNOT BE SA ID THAT STOCK AS PER APPROVAL VOUCHER NO. 13 IS PART AND PARTIAL OF BOOK STOCK. CONSIDERING THIS THE AO HAS RIGHTLY TREATED THE SAM E AS UNACCOUNTED STOCK. THE ALTERNATIVE CONTENTION OF THE APPEL LANT IS ALSO NOT ACCEPTABLE AS THE ASSESSEE HAS FILED TO FURNISH DET AILS REGARDING THE UNACCOUNTED STOCK. ACCORDINGLY THE ADDITION MADE BY THE AO H JUSTIFIED AND THE SAME IS CONFIRMED. THUS THE GROUN DS OF APPEAL ARE DISMISSED. 20.1 BEING AGGRIEVED BY THE ORDER OF LD CIT(A) ASSE SSEE IS IN SECOND APPEAL BEFORE US. 21. BOTH THE PARTIES BEFORE US SUBMITTED THAT WHATS OEVER VIEW WILL BE TAKEN IN ITA NO.511/AHD/2017 WILL BE APPLIED TO THE CASE ON HAND. 22. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE FACTS OF THE CASE ARE NOT DISPUTED. WE ARE INCLINED NOT TO REPEAT THE SAME FOR THE SAKE OF BRE VITY AND CONVENIENCE. 22.1 WE HAVE ALREADY DECIDED THE IDENTICAL ISSUE RA ISED IN ITA NO.511/AHD/2017 VIDE PARA NO 13 IN THIS ORDER, WHER EIN, WE DIRECT THE AO TO APPLY THE NET PROFIT RATIO ON ACCOUNT OF UNDI SCLOSED INVESTMENT IN THE STOCK. ACCORDINGLY, THE AO IS DIRECTED TO APPLY THE NET PROFIT RATE ON ACCOUNT OF UNDISCLOSED INVESTMENT IN THE STOCK. THU S THE GROUND OF APPEAL OF THE ASSESSEE PARTLY ALLOWED . ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 26 - 23. THE NEXT ISSUE RAISED BY THE ASSESSEE IN GROUND NO.5 TO 8 IS THAT LD CIT(A) ERRED IN UPHOLDING THE REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT AND ESTIMATING THE GP@ 5% AND MAKING THE ADDITION OF RS.19,11,270/- 24. THE AO DURING THE ASSESSMENT PROCEEDINGS OBSERV ED AS UNDER: I. AS PER TAX AUDIT REPORT U/S 44AB IN COLUMN 28(A) THE ASSESSEE IS NOT ENGAGED IN TRADING ACTIVITY AND COLUMN 28(B) SH OWS THAT THE ASSESSEE IS ENGAGED IN THE MANUFACTURING ACTIVITY. II. THE CLAUSE 9B OF THE TAX AUDIT REPORT SHOWS THA T THE ASSESSEE HAS NOT MAINTAINED ANY STOCK REGISTER. III. THE GROSS PROFIT OF THE ASSESSEE HAS REDUCED T O 3.21% FROM THE LAST 2 YEARS. IN THE LAST 2 YEARS GROSS PROFIT DECLARED BY THE ASSESSEE WAS 4.74% AND 5.04%. 24.1 IN VIEW OF ABOVE OBSERVATION, THE AO PROPOSED TO REJECT THE BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT BY ISSUING A SHOW -CAUSE NOTICE TO THE ASSESSEE. 24.2 THE ASSESSEE IN COMPLIANCE TO IT SUBMITTED THA T HE HAS BEEN MAINTAINING HIS BOOKS OF ACCOUNTS ON MERCANTILE BAS IS FOR THE LAST SEVERAL YEARS AND THE SAME WERE ACCEPTED BY THE REVENUE. ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 27 - 24.3 THE BOOKS OF ACCOUNTS WERE DULY AUDITED U/S 44 AB OF THE ACT. THEREFORE IT WAS SUBMITTED BY THE ASSESSEE THAT BOO KS OF ACCOUNTS SHOULD NOT BE REJECTED U/S 145(3) OF THE ACT. HOWEVER, THE AO DISREGARDED THE CONTENTIONS OF THE ASSESSEE AFTER TAKING A NOTE OF HIS OBSERVATION AS DISCUSSED ABOVE. ACCOR DINGLY, THE AO WORKED OUT THE GROSS PROFIT ON THE TURNOVER @5% WHI CH WORKS OUT TO RS.53,50,730/- AGAINST THE GP DECLARED BY THE ASSES SEE FOR RS.34,39,460/. 24.4 THEREFORE, THE AO ADDED THE DIFFERENCE AMOUNT OF RS.19,11,270/- (53,50,730 34,39,460) TO THE TOTAL INCOME OF THE ASSESSEE. 25. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD C IT(A). THE ASSESSEE BEFORE THE LD CIT(A) SUBMITTED THAT THE AS SESSEE IS MAINTAINING ITS BOOKS OF ACCOUNTS AS PER THE METHODS REGULARLY EMPLOYED SINCE 1991. THE ASSESSEE FURTHER SUBMITTED THAT HIS ACCOUNTS HA VE BEEN SCRUTINIZED BY THE INCOME TAX DEPARTMENT WHICH WAS DULY ACCEPTED. 25.1 THE ALLEGATION OF THE AO THAT THE STOCK REGIST ER WAS NOT MAINTAINED BY THE ASSESSEE IS TOTALLY WRONG. IT IS BECAUSE THE STOCK REGISTER WAS SEIZED DURING THE SURVEY OPERATION AND SAME IS LYIN G WITH THE AO. 25.2 THERE WAS NO BASIS FOR ADOPTING THE GROSS PROF IT RATE @5% WITHOUT POINTING OUT ANY DEFECT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 28 - 25.3 THERE WAS NO EVIDENCE/MATERIAL FOUND DURING TH E SURVEY OPERATION SUGGESTING THAT THE ASSESSEE HAS MADE ANY PURCHASE OR SALES OUTSIDE THE BOOKS OF ACCOUNTS. HOWEVER, THE LD CIT(A) DISREGARDED THE CONTENTION O F THE ASSESSEE AND CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER: 5.5. THE FACTS OF THE CASE AND THE SUBMISSIONS ARE CONSIDERED. IN PARA-6 OF THE ASSESSMENT ORDER, THE AO HAS DISCUSS ED THIS ISSUE IN DETAIL. THE AO HAS STATED ALL T DEFICIENCIES IN TH E BOOKS OF ACCOUNT REGARDING STOCK MAINTAINED BY THE ASSESSEE AND THE BASIS OF THAT THE AO HAS REJECTED THE BOOK RESULTS U/S.145 OF THE ACT. I N THE STATEMENT RECORDED ON 28.11.2011 THE ASSESSEE HAS SPECIFICALL Y STATED WHILE REPLYING TO QUESTION NO.27 THAT HE IS NOT MAINTAINI NG ITEM-WISE STOCK. CONSIDERING ALL THESE, I AM OF OPINION THAT THE AO HAS RIGHTLY REJECTED THE BOOK RESULTS U/S.145 OF THE ACT AND RIGHTLY EST IMATED THE G.P. AT 5%. ACCORDINGLY THE ADDITION MADE BY THE AO IS CONFIRME D. 25.4 BEING AGGRIEVED BY THE ORDER OF LD CIT(A) ASSE SSEE IS IN APPEAL BEFORE US. 26. THE LD AR BEFORE US REITERATED THE SUBMISSION A S MADE BEFORE THE LD CIT(A), WHEREAS, THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF LOWER AUTHORITIES. 27. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE PRESENT CASE, BOOKS OF ACCOUNTS OF THE ASSESSEE WERE REJECTED DUE TO THE FOLLOWING REASONS: I. THERE WAS MISMATCH IN THE INFORMATION RECORDED IN T HE TAX AUDIT REPORT. ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 29 - II. THE ASSESSEE WAS NOT MAINTAINING ANY STOCK REGISTER . III. THE GROSS PROFIT OF THE ASSESSEE HAS REDUCED IN COM PARISON TO THE EARLIER YEARS. FROM THE PRECEDING DISCUSSION, WE NOTE THAT THE STO CK REGISTER WAS DULY MAINTAINED BY THE ASSESSEE AS THE AO HAS WORKED OUT THE DIFFERENCE BETWEEN THE PHYSICAL STOCK AND BOOK STOCK AT THE TI ME OF SURVEY. THEREFORE, THE ALLEGATION OF THE AO THAT THE ASSESS EE IS NOT MAINTAINING ANY STOCK REGISTER IS CONTRARY TO THE FACTS AVAILAB LE ON RECORD. WE ALSO NOTE THAT THE SALES AND PURCHASES HAVE BEEN DULY AC CEPTED BY THE LOWER AUTHORITIES AND THERE WAS NO WHISPER EITHER LESS RE PORTING/ UNDER REPORTING OF PURCHASE AND SALES. THEREFORE, IN OUR CONSIDERED VIEW BOOKS OF ACCOUNTS CANNOT BE REJECTED. SIMILARLY, THE NET /GROSS PROFIT DECLARED BY THE ASSESSEE WAS DULY SUPPORTED ON THE BASIS OF AUD ITED FINANCIAL STATEMENTS IN RESPECT OF WHICH NO DEFECT WAS POINTE D OUT. 27.1 WE ALSO NOTE THAT THE CASE LAW RELIED BY THE A O DURING THE ASSESSMENT PROCEEDINGS ARE FACTUALLY DIFFERENT FROM THE PRESENT CASE. 27.2 IN THE CASE OF S. N. NAMASIVAYAM CHETTIAR REPO RTED IN 38 ITR 579, THE HONBLE APEX COURT CONFIRM THE REJECTION OF THE BOOKS OF ACCOUNTS DUE TO THE FACT THAT THE STOCK REGISTER WAS NOT MAI NTAINED BY THE ASSESSEE. HOWEVER, IN THE CASE BEFORE US WE NOTE THAT THE STO CK REGISTER WAS DULY MAINTAINED. THEREFORE WE ARE RELUCTANT TO PLACE ANY RELIANCE IN THE CASE OF S.N. NAMASIVAYAM CHETTIAR (SUPRA) . ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 30 - 27.3 SIMILARLY, THE CASE LAW RELIED BY THE AO IN TH E CASE OF BRITISH PAINTS INDIA LTD. REPORTED IN 188 ITR 44, THE HONB LE APEX COURT UPHELD THE REJECTION OF THE BOOKS OF ACCOUNTS ON THE GROUN D THAT THE VALUATION OF CLOSING STOCK OF FINISHED GOODS AND UNDER PROCESSED WERE VALUED WITHOUT INCLUDING THE OVERHEAD COST. HOWEVER, IN THE CASE B EFORE US THERE IS NO SUCH ALLEGATION FRAMED AGAINST THE ASSESSEE. THEREF ORE, WE ARE RELUCTANT TO PLACE OUR RELIANCE IN THE CASE OF BRITISH PAINTS INDIA LTD. (SUPRA) . 27.4 SIMILARLY, THE OTHER CASE RELIED BY THE AO IN ASSESSMENT ORDER ARE NOT APPLICABLE TO THE PRESENT FACTS OF THE CASE. IN VIEW OF ABOVE, WE ARE INCLINED TO HOLD THAT IN THE GIVEN FACTS AND CIRCUM STANCES THE BOOKS OF ACCOUNTS OF THE ASSESSEE CANNOT BE REJECTED. THEREF ORE, THE ADDITION BY THE AO AND SUBSEQUENTLY CONFIRMED BY THE LD CIT(A) ON ESTIMATED BASIS IS DELETED. 27.5 WE ALSO NOTE THAT THE AO IN THE INSTANT CASE H AS MADE THE ADDITION ON ACCOUNT OF DIFFERENCE IN THE STOCK OF GOLD ORNAM ENTS AS WELL AS BY ESTIMATING THE PROFIT @5% AFTER REJECTING THE BOOKS OF ACCOUNTS. IN OUR CONSIDERED VIEW ONCE, THE BOOKS OF ACCOUNTS HAVE BE EN REJECTED THEN NO ADDITION CAN BE MADE BY DISALLOWING THE EXPENSES UN DER/ OVER REPORTING OF SALES, PURCHASES ETC. THUS, THE TAXABLE INCOME W ILL BE DETERMINED ON THE BASIS OF REASONABLE ESTIMATE. IN THIS REGARD, W E FIND SUPPORT AND GUIDANCE FROM THE JUDGMENT OF HONBLE ANDHRA PRADES H HIGH COURT REPORTED IN 232 ITR 776, 177 TAXMAN 58 & 301 ITR 17 1. HOWEVER, IN THE CASE BEFORE US WE HAVE REVERSED THE ORDER OF AU THORITIES BELOW FOR ITA NOS.511 & 528/AHD/2017 A. Y. 2012-13 - 31 - REJECTING THE BOOKS OF ACCOUNTS. THEREFORE, THE GRO UND OF APPEAL OF THE ASSESSEE IS ALLOWED . 28. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE PARTLY ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 03/10/2018 SD/- SD/- (RAJPAL YADAV) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 03/10/2018 PRITI YADAV, SR.PS !' #$% &% /COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. '() * / CONCERNED CIT 4. * ( ) / THE CIT(A)-5, AHMEDABAD. 5. %+ , ##() , () / DR, ITAT, 6. , -. / / GUARD FILE. !' / BY ORDER , TRUE COPY 0 / 1 (DY./ASSTT.REGISTRAR) () , 12! ' ! / ITAT, AHMEDABAD