M/s G.R.S Jewellers, Kanpur V. The Asstt. Commissioner of Income Tax (C.C-VI), Kanpur

ITA 526/LKW/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4638 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 09-02-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 12-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Document seized; Documents seized

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.526/LKW/2014 ASSESSMENT YEAR:2007 08 ACIT CENTRAL CIRCLE VI, NOW ACIT CC 2, KANPUR VS M/S G. R. S. JEWELLERS, 59/44, BIRHANA ROAD, KANPUR. PAN:AAGFG3143A (RESPONDENT) (APPELLANT) SHRI P. K. KAPOOR, C.A. APPELLANT BY SHRI AMIT NIGAM, D. R. RESPONDENT BY 0 3 /02/2016 DATE OF HEARING 17/03/2016 DATE OF PRONOUNCEMENT O R D E R PER A. K. GARODIA, A.M. THIS IS ASSESSEES APPEAL DIRECTED AGAINST THE OR DER PASSED BY LEARNED CIT(A) I, KANPUR DATED 24/03/2014 FOR THE ASSESSME NT YEAR 2007 08. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED AS RAISE D AS MANY AS 11 GROUNDS BUT ALL THE GRIEVANCES OF THE ASSESSEE ARE AVAILABLE IN GROUND NO. 2. THERE ARE 9 ITEMS OF ADDITIONS CONFIRMED BY CIT (A) AS PER GROUND NO.2 AND WE WILL EXAMINE AND DECIDED THESE NINE ITEMS ON E BY ONE OR TOGETHER WHERE THE ITEMS OF ADDITION ARE CONNECTED. 3. THE FIRST ADDITION IS OF RS. 14,45,680/- AND THE SECOND ADDITION IS OF RS. 551,212/-. BOTH THESE ARE CONNECTED AND HENCE, ARE BEING DECIDED TOGETHER. LEARNED A. R. OF THE ASSESSEE SUBMITTED T HAT THE RECONCILIATION WAS SUBMITTED BEFORE CIT (A) ALSO AND IT IS AVAILAB LE ON PAGES 93 TO 94 OF THE PAPER BOOK. LEARNED D. R. OF THE REVENUE SUPPOR TED THE ORDERS OF THE AUTHORITIES BELOW. 2 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT IN PARA 9.2.4 & 9.2.5 OF HIS ORDER, LEARNED CIT (A) THAT RECONCIL IATION IS ON THE BASIS OF SOME RECEIPT AND ISSUE VOUCHERS WHICH WERE NEITHER FOUND IN SEARCH NOR SEIZED. BASED ON THIS, HE CONCLUDED THAT THIS APPEA RS TO BE A COVER UP EXERCISE INDULGED IN BY THE LEGAL BRAINS OF THE ASS ESSEE. WE ARE OF THE CONSIDERED OPINION THAT INSTEAD OF BRUSHING ASIDE T HE RECONCILIATION ON THE BASIS OF THESE GENERAL REMARKS, THE SAME SHOULD BE EXAMINED AND IF IT IS REASONABLE, IT SHOULD BE ACCEPTED. HENCE, WE REPROD UCE THE RECONCILIATION FROM PAGES 93 TO 94 OF THE PAPER BOOK.:- DATE PARTICUL ARS WEIGHT DIAMOND (IN CARATS) WEIGHT GOLD (IN GMS.) WEIGHT DIAMOND (IN CARATS) WEIGHT GOLD (IN GMS) 01/04/2006 OPENING STOCK 677.44 3754.095 LESS:SALE 12/04/2006 C.M.NO.21 0.15 0.650 04/05/2006 C.M.NO.57 2.08 5.344 14/07/2006 C.M.NO.198 0.81 7.200 02/08/2006 C.M.NO.229 0.33 4.59 16/10/2006 C.M.NO.366 0.43 6.200 3.80 23.984 673.64 3730.111 ISSUED FOR REMAKING OF DIAMOND JEWELLERY NOT FOUND RECORDED IN STOCK REGISTER 27/09/2006 RAJESH SONI (I.V.NO.1) 36.50 80.900 29/09/2006 GIRDHARI LAL SONIIV NO.2) 29.50 73.330 03/10/2006 SURESH SONI(IV NO.3) 28.60 67.550 04/10/2006 RAJESH SONI (I.V.NO.4) 22.12 57.130 116.72 278.910 556.92 3541.201 ADD:RECD. AFTER CONVERSION AGAINST ISSUE OF GOLD JEWELLERY, DIAMOND JEWELLERY & GOLD BULLION NOT RECORDED IN STOCK REGISTER 30/09/2006 RAJESH SONI (I.V.NO.4) 36.50 278.4 03/10/2006 GIRDHARI LAL SONIIV NO.5) 29.50 455.43 07/10/2006 SURESH SONI(IV NO.9) 28.60 323.15 07/10/2006 RAJESH SONI(R.V.NO.10) 22.12 243.35 116.72 1300.330 ADD:RECD. FROM PARTNERS FOR DISPLAY ON THE OCCASION OF DHANTERAS JEEVAN KUMAR AGARWAL 03/10/2006 R.V.NO.6 33.59 296.15 03/10/2006 RAJEEV AGARWAL R.V.NO.7 19.97 217.46 03/10/2006 SANJEEV AGARWAL R.V.NO.8 16.31 162.63 69.87 676.240 17/10/2006 OPENING STOCK 743.51 5427.771 PHYSICAL STOCK AS PER PANCHNAMA DETAILS OF SOURCE OF DIAMOND JEWELLERY RECEIVED ON CONVERSION. ISSUED FROM DIAMOND JEWELLERY 743.51 5427.773 27/09/2006 RAJESH SONI (I.V.NO.1) 36.50 80.900 29/09/2006 GIRDHARI LAL SONI(I.V.NO.2 29.50 73.330 03/10/2006 SURESH SONI (I.V.NO.3) 28.60 67.550 04/10/2006 RAJESH SONI (I.V.NO.4) 22.12 57.130 116.72 278.910 ISSUED FROM GOLD JEWELLERY 27/09/2006 RAJESH SONI(I.V.NO.1) 0.00 197.500 3 29/09/2006 GIRDHARI LAL SONI(IVNO2) 0.00 272.100 03/10/2006 SURESH SONI (I.V.NO.3) 0.00 255.600 04/10/2006 RAJESH SONI (I.V.NO.4) 0.00 186.200 0.00 910.420 29/09/2006 95.730 GRAMS GOLD BULLION 24 CARAT HELD IN OPENING STOCK AS AT 01/04/2006 ISSUED FOR CONVERSION INTO 22 CARAT DIAMOND STUDDED JEWELLERY VIDE I.V.NO.02. QUANTITY ADJUSTED FOR WEIGHT GAIN DUE TO REDUCTION IN PURITY. 0.00 111.000 116.72 1300.330 DETAILS OF GOLD JEWELLERY 22 CT AS AT 17/10/2006 01/10/2006 OPENING STOCK (AS PER SEIZED DOCUMENTS) 29520.570 11/10/2006 ADD:PURCHASE 630.500 630.500 30150.070 LESS:SALE 01/10/2006 TO 16/10/2006 15/10/2006 277.750 16/10/2006 5.600 283.350 17/10/2006 OPENING STOCK (AS PER BOOKS SHOULD BE 29866.720 PHYSICAL STOCK AS PER PANACHNAMA 28956.300 DIFFERENCE 910.420 DETAILS OF DIFFERENCE: ISSUE FOR CONVERSION INTO DIAMOND STUDDED JEWELLERY NOT RECORDED IN FOUND STOCK REGISTER AND FOUND 27/09/2006 RAJESH SONI(I.V.NO.1) 197.500 29/09/2006 GIRDHARI LAL SONI (I.V.NO.2) 272.100 03/10/2006 SURESH SONI (I.V.NO.3) 255.600 04/10/2006 RAJESH SONI (I.V.NO.4) 186.220 910.420 5. FROM THE ABOVE RECONCILIATION, IT IS SEEN THAT T HERE IS NO DISPUTE ABOUT THE OPENING STOCK AS ON 01.04.2006 OF DIAMOND AND G OLD AND SALE THEREOF IN APRIL TO OCTOBER 2006 BEING ONLY 5 IN NOS. REGAR DING THE QUANTITY OF 116.72 CTS. DIAMOND AND 278.910 GMS. GOLD, SHOWN AS ISSUED TO KARIGARS AND RECEIVED BACK FROM THEM ALSO, THERE CANNOT BE A NY DISPUTE BECAUSE IT DOES NOT AFFECT THE STOCK POSITION AS PER BOOKS ON THE DATE OF SEARCH. THEN THERE IS A CLAIM OF RECEIPT FROM PARTNERS FOR DISPL AY ON THE OCCASION OF DHANTERAS WHICH IS BEING DISPUTED BY THE CIT (A) ON THIS BASIS THAT IN 8 DAYS, 9 RECEIPT VOUCHERS ARE PREPARED BUT BEFORE TH AT, IN 180 DAYS, ONLY 3 VOUCHERS WERE PREPARED. WE FEEL THAT THIS LOOKS SLI GHTLY UNNATURAL BUT THE CLAIM CANNOT BE REJECTED ON THIS BASIS ALONE. THIS IS NOT DISPUTED THAT THE PARTNERS WERE NOT HAVING THIS QUANTITY OF DIAMONDS AND GOLD. THIS IS ALSO NOT UNREASONABLE THAT ON THE OCCASION OF DHANTERAS WHEN MAXIMUM CUSTOMERS VISIT JEWELLERY SHOPS WHETHER THEY PURCHA SE OR NOT, JEWELLERY SHOPS ALSO TRY TO KEEP MAXIMUM ITEMS ON DISPLAY AND FOR THAT, IF SOME 4 PERSONAL JEWELLERY OF PARTNERS WAS ALSO BROUGHT INT O THE SHOP FOR DISPLAY AS CLAIMED, IT IS NOT IMPOSSIBLE OR UNREASONABLE. HENC E, WE FEEL THAT IN THE FACTS OF THE PRESENT CASE, THIS CLAIM DESERVES TO B E ACCEPTED. AFTER THIS, DIAMOND QUANTITY GETS RECONCILED. IN GOLD QUANTITY, AS PER THE RECONCILIATION,. THERE ARE TWO MORE CLAIMS. FIRST C LAIM IS ABOUT 910.420 GRAMS BEING ISSUE FROM GOLD JEWELLERY AS CLAIMED. T HIS CLAIM IS SUPPORTED BY THIS FACT THAT WHILE COMPARING GOLD JEWELLERY AS PE R BOOKS AND AS FOUND IN COURSE OF SEARCH, GOLD JEWELLERY WAS FOUND SHORT BY THE SAME QUANTITY AS NOTED BY CIT (A) ON PAGE 29 OF HIS ORDER WHILE DECI DING THE NEXT ISSUE IN RESPECT OF ADDITION OF RS. 1665,667/- MADE BY THE A .O. FOR SHORTAGE IN GOLD JEWELLERY. HENCE, WE FEEL THAT IN THE FACTS OF THE PRESENT CASE, THIS CLAIM ALSO DESERVES TO BE ACCEPTED. THE LAST ITEM OF DISP UTE IS ABOUT 111 GMS OF GOLD. IN THIS REGARD, THIS IS THE EXPLANATION OF TH E ASSESSEE THAT AS PER BALANCE SHEET OF THE ASSESSEE AS ON 31.03.2006 AVAI LABLE ON PAGE 102 OF THE PAPER BOOK, THERE WAS CLOSING STOCK OF GOLD BUL LION 22 CTS. OF 95.730 GMS AND THE SAME WAS USED FOR GOLD JEWELLERY STUDDE D WITH DIAMONDS AND THEREFORE, THOSE GOLD BULLION WERE NOT FOUND IN SEA RCH. IT IS ALSO CLAIMED THAT SINCE THE GOLD JEWELLERY STUDDED WITH DIAMONDS IS OF LESSER CTS., THE QUANTITY OF THAT INCREASED TO 111 GMS. WE FEEL THAT IN THE FACTS OF THE PRESENT CASE, THIS CLAIM ALSO DESERVES TO BE ACCEPT ED. IN THIS MANNER, WE FIND THAT THE ENTIRE QUANTITY OF GOLD JEWELLERY STU DDED WITH DIAMONDS STANDS RECONCILED AND THEREFORE, NO ADDITION IS JUSTIFIED ON THIS ACCOUNT. WE DELETE THE SAME. 6. NOW, WE TAKE UP THE THIRD ADDITION OF RS. 165,66 7/-. IN THIS REGARD, WE FIND THAT THE SHORTAGE IN GOLD JEWELLERY GETS EX PLAINED BY THE CLAIM THAT THIS MUCH GOLD JEWELLERY WAS USED IN GOLD JEWELLERY STUDDED WITH DIAMONDS AND WE HAVE ACCEPTED THE SAME WHILE DECIDING THE TH AT ISSUE IN THE ABOVE PARA AND AS A CONSEQUENCE, THE ADDITION MADE ON ACC OUNT OF THE SHORTAGE IN GOLD JEWELLERY HAS TO BE DELETED. WE DELETE THE SAME. 5 7. NOW, WE TAKE UP THE FOURTH ADDITION OF RS. 731,9 51/-. IN THIS REGARD, IT IS NOTED BY CIT (A) ON PAGE 20 OF HIS ORDER THAT THE EXPLANATION OF THE ASSESSEE ABOUT NOTING IN THE LOOSE PAPER IS THIS TH AT IT DEPICTED THE POSITION OF STOCK ON THE DATE MENTIONED (AS PER STOCK REGIST ER) AND THE CASH BALANCE AVAILABLE WITH THE CASHIER. THIS CLAIM OF THE ASSES SEE WAS REJECTED ON THIS BASIS THAT THE CASH BALANCE AS PER CASH BOOK OF THE RELEVANT DATE WAS A BIT HIGHER. IN THIS REGARD, IT WAS CONTENDED BY THE LEA RNED AR OF THE ASSESSEE BEFORE US THAT THE CASH AVAILABLE WITH THE CASHIER WAS NOTED IN THE LOOSE PAPER AND THE BALANCE CASH WAS WITH THE PARTNERS AN D THEREFORE, NO ADVERSE INFERENCE CAN BE DRAWN ON THIS BASIS PARTICULARLY W HEN STOCK QUANTITY IS EXACTLY TALLYING. HE DRAWN OUR ATTENTION TO PAGE 62 AND 63 OF THE PAPER BOOK AND POINTED OUT THAT AS NOTED IN THE LOOSE PAP ER, THE STOCK ON 25.09.2006 WAS 29,605.640 GMS AS IN LOOSE PAPER OF WHICH THE SCANNED COPY IS AVAILABLE ON PAGE 10 OF THE ASSESSMENT ORDE R. HE ALSO EXPLAINED THAT ANOTHER LOOSE PAPER IS AVAILABLE ON PAGE 11 OF THE ASSESSMENT ORDER AND IN THIS, STOCK AS ON 11.10.2006 IS SHOWN AS 29,957.870 GMS AND ON 12.10.2006 IS SHOWN AS 29,934.970 GMS. AS IN STOCK REGISTER AVAILABLE ON PAGE 63 OF THE PAPER BOOK. IN OUR CONSIDERED OPINIO N, WHEN THE QUANTITY OF STOCK NOTED ON THE SAME LOOSE PAPER IS TALLYING WIT H STOCK REGISTER, THEN THE OTHER NOTING ON SAME PAGE ALLEGED TO BE SALE IN RS. LOOKS FARFETCHED AS COMPARED TO THE CLAIM OF THE ASSESSEE THAT IT IS CA SH LYING WITH THE CASHIER WHICH GETS SUPPORTED BY THE CASH BOOK SHOWING HIGHE R CASH BALANCE AND DIFFERENCE EXPLAINED AS CASH LYING WITH PARTNERS. U NDER THESE FACTS, WE DELETE THIS ADDITION ALSO. 8. NOW, WE TAKE UP THE FIFTH ADDITION OF RS. 152,21 5/- AND SIXTH ADDITION OF RS. 41,731/-. IN THIS REGARD, THE LEARNED AR OF THE ASSESSEE FAIRLY CONCEDED THAT AFTER ADJUSTING THE EXCESS STOCK FOUN D OF 5959 GMS OF PAYAL AGAINST SHORT STOCK FOUND OF SILVER UTENSILS OF 174 96 GMS, FOR NET SHORT STOCK OF SILVER ITEMS OF 11,537 GMS, GP ADDITION MAY BE C ONFIRMED. HE ALSO 6 SUBMITTED THAT BOTH THESE ITEMS ARE OF SILVER AND H ENCE THE ASSESSEE IS MAINTAINING COMBINED STOCK REGISTER. WE FEEL THAT I N THE FACTS OF THE PRESENT CASE, THIS PROPOSITION IS REASONABLE AND THEREFORE, DESERVES TO BE ACCEPTED. THE VALUE OF SALE IS DETERMINED @ RS. 8700/- PER KG . AND GP RATE AS PER BOOKS IS 11.42%. BY THE SAME YARDSTICK, UNACCOUNTED SALE COMES TO RS. 387,472/- AND GP @ 11.42% COMES TO RS. 44,249/-. WE CONFIRM THE ADDITION TO THE EXTENT OF RS. 44,349/- OUT OF THESE TWO ADDITIONS OF RS. 152,215/- AND RS. 41,731/-. 9. NOW, WE TAKE UP THE SEVENTH ADDITION OF RS.25,39 5/-. IN THIS REGARD, IT WAS SUBMITTED BY THE LEARNED AR OF THE ASSESSEE THAT FOUR ITEMS FOUND SHORT IS THE LAST TWO ITEMS (4PCS.) AS PER BILL OF DDAMAS REPRODUCED BY CIT (A) ON PAGE 27 OF HIS ORDER. HE POINTED OUT THAT TH E VALUE OF THESE FOUR PCS AS PER THIS BILL IS ONLY RS. 688/- AND GP RATE ON T HIS ITEM IS 25% AND THEREFORE, MAXIMUM ADDITION WHICH CAN BE MADE ON TH IS ACCOUNT IS RS. 172/- BEING 25 % OF RS. 688/-. WE FIND FORCE IN THE SE SUBMISSIONS OF THE LEARNED AR OF THE ASSESSEE AND HENCE, WE CONFIRM TH E ADDITION TO THE EXTENT OF RS. 172/- OUT OF THE ADDITION OF RS.25,395/-. 10. NOW, WE TAKE UP THE EIGHTH ADDITION OF RS.70,00 0/-. IN THIS REGARD, IT WAS SUBMITTED BY THE LEARNED AR OF THE ASSESSEE THA T THE QUANTITY OF GOLD BULLION OF 95.730 GMS AS PER BALANCE SHEET AS ON 3. 03.2006 AVAILABLE ON PAGE 102 OF THE PAPER BOOK WAS USED FOR MAKING GOLD JEWELLERY STUDDED WITH DIAMONDS. THE A.O. ON PAGE 14 OF THE ASSESSMEN T ORDER SAYS THAT THE GROSS PROFIT AND THE COST OF GOLD SHOWN UTILIZED AN D INTRODUCED IN THE BOOKS IS ADOPTED AT RS. 70,000/-. HE SUBMITTED THAT THIS ADDITION IS NOT JUSTIFIED. WE FIND FORCE IN THE SUBMISSIONS OF THE LEARNED AR OF THE ASSESSEE BECAUSE WHEN THE STOCK OF GOLD BULLION IS AVAILABLE IN THE BALANCE SHEET OF THE ASSESSEE AS ON 31.03.2006, THE COST AND GO OF THIS GOLD CANNOT BE ADDED. THIS ADDITION IS DELETED. 7 11. NOW, WE TAKE UP THE NINTH AND LAST ADDITION OF RS.9,100/-. IN THIS REGARD, IT WAS SUBMITTED BY THE LEARNED AR OF THE A SSESSEE BEFORE CIT (A) AS NOTED BY HIM ON PAGE 32 OF HIS ORDER THAT THESE ARE THE STONES FOR WHICH, THERE IS NO PURCHASE VALUE FOR THE REASON THAT VERY OFTEN, REPRESENTATIVES OF SUPPLIERS OF IMITATION JEWELLERY AND STONES VISIT T HE SHOP OF THE ASSESSEE AND THEY LEAVE SAMPLES FOR SALE. THIS CONTENTION WAS RE JECTED BY CIT (A) BY SAYING THAT THE ASSESSEE DID NOT PRODUCE ANY EVIDEN CE THAT ANY PERSON HAS LEFT THE PRECIOUS STONES BUT THIS IS ADMITTED POSIT ION THAT THE DISPUTE IS NOT IN RESPECT OF PRECIOUS STONES, WHICH ARE COSTLY. H ENCE, WE FEEL THAT THE CONTENTION OF THE ASSESSEE SHOULD BE ACCEPTED IN TH E FACTS OF THE PRESENT CASE. THIS ADDITION IS ALSO DELETED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE STAND S PARTLY ALLOWED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GAROD IA ) JUDICIAL MEMBER ACCOUNTANT MEMB ER DATED:17 TH MARCH, 2016 *SINGH COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR