Bangalore Refinery Pvt. Ltd., Bangalore V. DCIT, Bangalore

ITA 62/BANG/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57533 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 13-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUSAN THOMAS JOSE
• Assessee Lawyers: H N KHINCHA
• Keywords: Notional interest; Commercial expediency; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI N.K SAINI, ACCOUNTANT MEMBER AND SMT. GEORGE GEORGE K, JUDICIAL M EMBER ITA NO.62/BANG/2012 (ASST. YE AR - 2008-09) M/S BANGALORE REFINERY PVT. LTD., NO.6/1, PLOT NO.20-A, KIADB MAIN ROAD, 1 ST CROSS, 1 ST PHASE, PEENYA INDUSTRIAL AREA, BANGALORE-560 058. . APPELLANT PAN NO.AABCB 3755 H. VS. THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-11(2), BANGALORE. . RESPONDENT APPELLANT BY : SHRI H.N KHINCHA, C.A RESPONDENT BY : SMT. SUSAN THOMAS JOSE, JCIT DATE OF HEARING : 13-03-2012 DATE OF PRONOUNCEMENT : 21-03-2012 O R D E R PER SHRI N.K SAINI, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) I, BANGALOR E DATED 28.11.2011. 2. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS A PPEAL: 1. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE CIT(A) ERRED IN DISALLOWING INTEREST OF RS.2,07,407 /- THOUGH WORKED OUT ON THE AMOUNTS UTILIZED FOR THE PURCHASE OF FLATS FOR ITA NO.62/B/12 2 THE PURPOSE OF BUSINESS AND WITHOUT APPRECIATING T HE FACTS OF THE CASE. 2. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W, THE CIT(A) ERRED IN PARTLY CONFIRMING ADDITION OF RS.86 ,42,970/- ON ACCOUNT OF INFLATION OF PURCHASE THOUGH THERE WAS N O INFLATION OF PURCHASE AND THE ADDITIONS WERE MADE ONLY ON NOT APPRECIATING FULLY THE FACTS OF THE CASE. 3. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W, THE CIT(A) ERRED IN CONFIRMING PARTLY ADDITIONS OF RS.8 6,42,970/- ON ACCOUNT OF INFLATION OF PURCHASES WITHOUT CONSI DERING THE FACT THAT THIS WAS A NOTIONAL ENTRY TO SET OFF AGAI NST THE CLOSING STOCK AND/OR AGAINST RECOVERY OF GOLD/SILVER AND TH E APPELLANT HAD FULLY DECLARED INCOME AGAINST RECOVERY OF THE G OLD OF THE VERY SAME AMOUNT. 4. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W, THE CIT(A) HAS WRONGLY CONFIRM THE ADDITION OF RS.86,42 ,970/- WITHOUT APPRECIATING THE FACTS AND OR UNDERSTANDING ACCOUNTING ENTRIES PASSED IN BOOKS OF ACCOUNT AND RELYING ON E XTRANEOUS REASONS WHICH HAVE NOTHING TO DO WITH THE SUBJECT M ATTER. 3. GRIEVANCE OF THE ASSESSEE VIDE GROUND NO.1 RELAT ES TO THE DISALLOWANCE OF INTEREST AMOUNTING TO RS.2,07,407/- . 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED ITS RETURN OF INCOME ON 30/09/2008 DECLARING AN INCOME OF RS.3,17 ,26,830/-. SUBSEQUENTLY, THE RETURN WAS REVISED ON 11/11/2008 DECLARING AN INCOME OF RS.3,41,92,219/-. THE SAME WAS PROCESSED U/S 143(1 ) OF THE INCOME-TAX ACT 1961 (HEREIN AFTER REFEREED TO AN ACT, IN SHORT). SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF AS SESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE MADE THE FOLLOWING DEP OSITS FOR PURCHASE OF FLATS:- ITA NO.62/B/12 3 S.N NAME OF THE DEVELOPER AMOUNT DEPOSITED (RS.) 1. M/S SOBHA DEVELOPERS PVT. LTD., 3,00,000 2. M/S PEBBLE BAY DEVELOPERS PVT. LTD., 93,01,400 TOTAL 96,01,400 5. THE ABOVE DEPOSITS WERE MADE ON VARIOUS DATES A ND WERE OUTSTANDING AS ON 31.3.2000. THE AO OBSERVED THAT THE ASSESSEE S MAIN BUSINESS ACTIVITY WAS MANUFACTURING JEWELLERY AND TRADING IN GOLD, SI LVER BULLION AND ITS BY PRODUCTS, WHEREAS IT HAD MADE DEPOSITS FOR PURCHAS E OF FLATS AND HAD ALSO AVAILED LOAN TO THE TUNE OF RS.4,34,19,799/- AGAINS T WHICH IT HAD INCURRED INTEREST EXPENDITURE OF RS.32,15,579/-. THE AO ASK ED THE ASSESSEE TO EXPLAIN AS TO WHY THE INTEREST RELATABLE TO THE DEP OSITS MADE WITH THE ABOVE CITED BUILDERS FOR PURCHASE OF FLATS, WHICH WAS NOT RELATED TO ITS BUSINESS, SHOULD NOT BE DISALLOWED. THE REPLY OF THE ASSESSE E HAS BEEN MENTIONED BY THE AO AT PAGE NOS. 2 AND 3 OF THE ASSESSMENT ORDER DATED 24.12.2010 WHICH, IS REPRODUCED VERBATIM : 1. PURCHASE OF FLAT IN PEBBLE BAY : REASON: WE ARE IN THE FILED OF TRADING GOLD AND SILVER BULL ION AND MANUFACTURING PRECIOUS METAL SALTS. WE HAVE MA NY CUSTOMERS OUTSIDE BANGALORE WHO VISIT REGULARLY FOR THE BUSINESS PURPOSE. WE FELT IT IS NOT SAFE FOR OUR CUSTOMERS TO STAY IN HOTELS WITH GOLD, SILVER AND OTHER VALUABLES, WHEN THEY CO ME TO BANGALORE TO PURCHASE OR SELL GOLD TO US. OUR CUST OMERS ALSO SUGGESTED US TO PROVIDE SAFE PLACE FOR THEIR STAY. CONSIDERING THE ABOVE REASON, WE FOUND IT IS IN THE INTEREST OF OUR BUSINESS TO SERVE OUR CUSTOMERS TO PROVIDE THEM SAFE PLACE TO STAY. ITA NO.62/B/12 4 BECAUSE OF THE ABOVE REASON, WE DECIDED TO PURCHASE A FLAT TO MAINTAIN AS A GUEST HOUSE FOR OUR VALUED CU STOMERS, SUPPLIERS AND OTHER TRADE VISITORS. PLEASE NOTE THAT, THE PURPOSE OF BOOKING FLAT IS SO LELY FOR THE PURPOSE AND IN THE INTEREST OF BUSINESS. I T SHOULD BE NOTED HERE THAT, THE FLAT BOOKED IN PEEBLE BAY IS C ANCELLED IN MARCH, 2010 BECAUSE, WE CAME TO KNOW, THEY DONT AL LOW GUEST HOUSES TO RUN IN THE COMPLEX. WE ARE ENCLOSING HEREWITH THE COPY OF THE ACCOUNT OF PEEBLE BAY FOR THE PAYMENT MADE IN INSTALLMENTS. FOR THE ABOVE PURPOSE, WE BOOKED A FLAT WITH SOBHA DEVELOPERS BY PAYING RS.3,00,000/- EXPECTING DELAY IN PEEBLE BAY. SUBSEQUENTLY SOBHA DEVELOPERS FLAT WER E CANCELED IN THE NEXT FINANCIAL YEAR AND THE AMOUNT HAS BEEN RETURNED IN THE NEXT FINANCIAL YEAR. COPY OF THE A /C IS ENCLOSED 6. THE AO DID NOT FIND MERIT IN THE EXPLANATION OF THE ASSESSEE BY STATING THE FOLLOWING REASONS : 1. AS BROUGHT OUT ABOVE, THE ASSESSEES MAIN BUSINE SS ACTIVITY IS MANUFACTURING OF GOLD JEWELLERY ARTICLE S AND TRADING IN GOLD AND BULLION PRODUCTS. 2. IT COULD BE SEEN FROM THE FINANCIALS THAT THE ASSES SEE- COMPANY HAS BORROWED HUGE SUMS FROM VARIOUS FINANCI AL INSTITUTIONS TO THE EXTENT OF RS.4,34,19,799/-. 3. THE LOANS TAKEN HAVE NOT BEEN FULLY UTILIZED BY THE ASSESSEE- COMPANY FOR ITS BUSINESS ACTIVITY. 4. THE ASSESSEE, INSTEAD OF UTILIZING THE LOAN FOR WOR KING CAPITAL/BUSINESS HAS CHOSEN TO INVEST AS DEPOSIT FO R PURCHASE OF FLATS FROM VARIOUS BUILDERS. 5. THE EXPLANATION OF THE ASSESSEE THAT THE ASSESSEE-C OMPANY INTENDED TO BUY FLAT TO PROVIDE THEIR CUSTOMERS SAF E PLACE FOR THEIR STAY, IS NOT ACCEPTABLE FOR THE REASON THAT, IT IS FOR THE CUSTOMERS TO SAFEGUARD THEIR INTEREST WHENEVER THEY COME TO BANGALORE FOR PURCHASE OR TO TRADE WITH THE ASSESSE E- COMPANY. FURTHER, AT THE COST OF BORROWED FUNDS TH E ITA NO.62/B/12 5 ASSESSEE-COMPANY NEED NOT HAVE TO BUY A FLAT AND PR OVIDE SAFETY TO ITS CUSTOMERS. 6. THE SUBMISSION OF THE ASSESSEE THAT SOLELY FOR THE PURPOSE AND INTEREST OF THE BUSINESS IT HAD BOOKED FLAT TO SERVE THE CUSTOMER IS NOT ACCEPTED FOR THE REASON THAT TH E PURPOSE OF THE BUSINESS IS TO CARRY ON ITS BUSINESS ACTIVITY A ND NOT TO BUY FLAT AND PROVIDE SAFETY. 7. THE AO BY APPLYING INTEREST RATE OF 11.5% ON TH E ABOVE SAID DEPOSITS WORKED OUT THE INTEREST AT RS.6,29,719/-, THE SAME WAS TREATED AS NOT RELATED TO BUSINESS AND ACCORDINGLY DISALLOWED. 8. THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A) AND SUBMITTED THAT MOST OF THE REGISTERED DEALERS COME TO BANGALO RE CARRYING GOLD, SILVER, PALLADIUM AND OTHER PRECIOUS METALS AND STAY IN HOT ELS FOR SELLING THOSE TO THE ASSESSEE WHICH WAS RISKY AND NOT SAFE. THEREFOR E, THE ASSESSEE DECIDED TO PURCHASE TWO FLATS WHEREIN THOSE SELLERS WOULD STA Y TEMPORARILY WITH THE BULLIONS CARRIED BY THEM. THUS, THE FLATS WERE TO ACT AS GUEST HOUSE, AS THE DEPOSITS FOR PURCHASE OF THOSE FLATS WERE FOR THE B USINESS PURPOSES AND COMMERCIAL EXPEDIENCY, THEREFORE, THE INTEREST SHOU LD HAVE BEEN ALLOWED AS DEDUCTION. 9. THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMI SSIONS OF THE ASSESSEE OBSERVED THAT THE LOCATION OF THOSE FLATS WAS IN CR OWDED LOCALITY, IT WAS FAR AWAY FROM PEENYA. ACCORDING TO THE LEARNED CIT(A), THE ASSESSEE WOULD NOT HAVE LIKED ITSELF TO COMPLETE THE TRANSACTION I N THOSE ITSELF AND TAKE THE ITA NO.62/B/12 6 RISK OF CARRYING THOSE PRECIOUS METALS ON ITS OWN T O PEENYA. THEREFORE, THE ASSESSEE AND ITS DIRECTORS WANTED TO PURCHASE THOSE FLATS FOR THEIR PERSONAL USE UTILIZING THE FUNDS BORROWED BY THE ASSESSEE CO MPANY. HE FURTHER OBSERVED THAT DIRECTORS AS WELL AS THE SONS OF MD ALONG WITH THEIR FAMILIES RESIDE IN ONE PLACE VIZ., L-44, PALACE GARDEN APAR TMENTS, 23/24, PALACE CROSS ROAD, BANGALORE-20. THUS, IN ALL PROBABILITY, THE ABOVE TWO FLATS HAVE BEEN BOOKED FOR THE RESIDENCE OF THOSE DIRECTORS. A CCORDINGLY, ON THE PRINCIPLES OF PREPONDERANCE OF PROBABILITY THE DISA LLOWANCE WAS UPHELD. 10. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 11. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATE D THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE LOANS WERE BORROWED AND UTILIZED FOR THE BUSINESS PURPOSES ONL Y, THEREFORE, NO DISALLOWANCE WAS CALLED FOR. HE FURTHER SUBMITTED THAT THE FLATS BOOKED BY THE ASSESSEE WERE TO BE UTILIZED FOR THE BUSINESS P URPOSES ONLY, AS SUCH, IT WAS IN THE INTEREST OF BUSINESS AND FOR BUSINESS EX PEDIENCY TO PURCHASE THE FLATS BECAUSE THE CUSTOMERS OF THE ASSESSEE WERE FI NDING DIFFICULTY WHILE STAYING IN DIFFERENT HOTELS. THEREFORE, THE LEARNED CIT(A) WITHOUT CONSIDERING THE FACTS IN RIGHT PERSPECTIVE WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING THE IMPUGNED INTERE ST.. 12. IN HER RIVAL SUBMISSIONS, THE LEARNED DR STRONG LY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE ASSESSEE DIVERTED THE ITA NO.62/B/12 7 INTEREST BEARING FUNDS FOR PURCHASING THE FLATS AND THE AMOUNT BORROWED WAS NOT UTILIZED FOR BUSINESS PURPOSES. SHE, THEREFORE, SUBMITTED THAT THE INTEREST RELATING TO THE DEPOSITS FOR PURCHASING FLATS WAS OF CAPITAL IN NATURE, HENCE, IT WAS NOT ALLOWABLE AS REVENUE EXPENDITURE. IT WAS C ONTENDED THAT THE LEARNED CIT(A) WAS FULLY JUSTIFIED IN CONFIRMING THE ACTION OF THE AO. 13. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIALS AVAILABLE ON RECORD. IN THE PRESENT CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE DEPOSITED A SUM OF RS. 96,01,400/- WITH DEVELOPERS FOR PURCHASE OF THE FLATS. THE ASSESSEE WAS HAVING LOAN TO THE TUNE OF RS.43,419,799/- AGAINST WHICH IT HAD INCURR ED INTEREST EXPENDITURE OF RS.32,15,259/-. IT IS ALSO NOTICED FROM THE PAGE NO .4 OF THE ASSESSEES PAPER BOOK THAT THE ASSESSEE WAS HAVING FOLLOWING LOANS : KARNATAKA BANK LTD. O.D A/C 23,867,144.47 ICICI BANK HOME LOAN A/C 19,552,655.00 ------------------ 43,419,799.47 ------------------ 14. FROM THE ABOVE DETAILS, IT IS CLEAR THAT THE A SSESSEE WAS HAVING HOME LOAN OF RS.1,95,52,655/-, OUT OF WHICH DEPOSITS AMO UNTING TO RS.96,01,400/- WERE GIVEN FOR PURCHASE OF THE FLATS TO THAT EXTENT THE ASSESSEE UTILIZED THE HOME LOAN, THEREFORE, THE INTEREST ON THE ABOVE SAI D AMOUNT WAS NOT ALLOWABLE AND WAS TO BE CONSIDERED AS CAPITAL EXPEN DITURE BECAUSE THE ASSESSEE DID NOT OCCUPY THE FLATS WHICH WERE CLAIME D TO BE USED FOR THE ITA NO.62/B/12 8 BUSINESS PURPOSES. IN THE PRESENT CASE, THE AO HA D NOT QUANTIFIED THE EXACT AMOUNT OF INTEREST FOR THE AMOUNT UTILIZED FOR MAKI NG THE DEPOSITS AGAINST THE PURCHASE OF THE FLATS, HE SIMPLY WORKED OUT TH E NOTIONAL INTEREST BY APPLYING THE RATE OF INTEREST AT 11.5%. WE, THEREFO RE, DEEM IT APPROPRIATE TO SET ASIDE THIS ISSUE BACK TO THE FILE OF THE AO TO BE DECIDED AFRESH AFTER KEEPING IN VIEW OUR AFORESAID OBSERVATIONS I.E DIS ALLOWANCE OUT OF THE INTEREST IF ANY RELATING TO THE DEPOSITS MADE FOR P URCHASE OF THE FLATS OUT OF HOME LOAN TAKEN FROM I.C.I.C.I BANK IS TO BE MADE O NLY AFTER PROVING THE NEXUS. ACCORDINGLY THIS GROUND IS ALLOWED FOR STAT ISTICAL PURPOSES. 15. ANOTHER ISSUE RAISED BY THE ASSESSEE VIDE GROU NDS NO.2 TO 4 RELATES TO THE SUSTENANCE OF THE ADDITION OF RS.86,42,970/- MA DE BY THE AO ON ACCOUNT OF INFLATION OF PURCHASES. 16. THE BRIEF FACTS RELATING TO THIS ISSUE ARE THA T THE AO DURING THE ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE WA S CARRYING ON THE BUSINESS OF GOLD, SILVER, BULLION TRADING, PURIFICA TION OF GOLD & SILVER, MANUFACTURE OF GOLD COINS, GOLD JEWELLERY AND GOLD SALT ETC. HE FURTHER OBSERVED THAT IN THE AFORESAID PROCESS, THE ASSESSE E CLAIMED PROCESS LOSS (WASTAGE) FROM VARIOUS CUSTOMERS FOR WHOM THE JOB W ORK HAD BEEN CARRIED OUT AND ALSO EARNS GOLD AND SILVER OVER AND ABOVE T HE ACTUAL PROCESS LOSS (WASTAGE), SUCH WASTAGE HAS BEEN WORKED OUT BY THE ASSESSEE AND CREDITED TO THE TRADING ACCOUNT ALONG WITH CLOSING STOCK, AT TH E SAME TIME, THE VALUE OF ITA NO.62/B/12 9 SUCH GOLD EARNED HAD BEEN DEBITED TO THE TRADING AC COUNT AS COST OF GOLD ACQUIRED. THE AO ALSO OBSERVED THAT THOUGH THERE W ERE NO PURCHASES MADE BY THE ASSESSEE AND THAT THE GOLD AND SILVER EARNED IN EXCESS OF PROCESS LOSS HAS NO COST, BUT PURCHASE HAD BEEN INFLATED BY THE ASSESSEE BY ADDING THE GOLD/SILVER PURCHASE ACCOUNT. THE AO ASKED THE ASS ESSEE TO EXPLAIN AS TO WHY THE COST OF FREE GOLD EARNED IN THE PROCESS OF MANUFACTURING SHOULD NOT BE DISALLOWED FROM THE PURCHASE AND BROUGHT TO TAX . IN RESPONSE, THE ASSESSEE HAD GIVEN A REPLY ON 12/11/2010. THE RELE VANT PORTION OF WHICH HAD BEEN REPRODUCED BY THE AO AT PAGE NO.5 OF THE A SSESSMENT ORDER DATED 24.12.2010 AND READS AS UNDER:- 1. AS EXPLAINED TO YOU, IN OUR BUSINESS, WE PROCES S THE GOLD, SILVER IN MANUFACTURING GOLD COINS, JEWELLERY, SALT , ETC. WE ALSO DO THE SAME ON JOB WORK BASIS. 2. WE CLAIM PROCESS LOSS IN TERMS OF GOLD AND SILVE R FOR VARIOUS PROCESS FROM OUR CUSTOMERS. 3. SOME TIMES THE LOSS CLAIMED IS MORE THAN THE LOSS ACTUAL INCURRED AND THAT GENERATE EXTRA GOLD AND SILVER TO US. IT IS TERMED AS RECOVERED GOLD/SILVER ETC. 4. ON RECOVERY GOLD AND SILVER, THE VALUE OF RECOVERE D METAL AS ON THE DATE OF RECOVERY IS CREDITED TO P & L ACC OUNT AND DEBITED TO RESPECTIVE GOLD AND SILVER TRADING ACCOU NT. 5. THE QUANTITY OF RECOVERED GOLD AND SILVER IS ALSO E NTERED AS A RECEIPT IN STOCK BOOK. IN THE YEAR DURING 2007-0 8, 6621.70 GRAMS OF GOLD IS RECOVERED (VALUE RS.80,95,000/- ON 31.3.2008. THIS AMOUNT ALONG WITH THE OTHER RECOVERIES IS CRED ITED TO P & L ACCOUNT AND DEBITED TO RESPECTIVE TRADING ACCOUNT . THE CLOSING STOCK IN THE TRADING ACCOUNT INCLUDE THE QU ANTITY RECOVERED DURING THE YEAR. IT SHOULD BE NOTED HERE THAT, WE MAINTAIN QUANTITY ACCOUNT FOR THE GOLD AND SILVER T RADING ACCOUNT. ITA NO.62/B/12 10 YOU CAN IMAGINE AS UNDER : 1. GOLD IS RECOVERED 6621.70 GRAMS, VALUE RS.80,95,000 /- ON 31.3.2008 2. IT IS SOLD FOR RS.80,95,000/- (IMAGINARY SALE) 3. RS.80,95,000/- IS RECEIVED AND CREDITED TO P&L ACC OUNT. 4. WITH THE AMOUNT OF RS.80,95,000/-, 6621.70 GRAMS GO LD IS PURCHASED AND DEBITED TO GOLD TRADING ACCOUNT. THE ABOVE PROCEDURE WILL PROVE, VALUE OF RS.80,95,0 00/- ULTIMATELY GOES TO GOLD TRADING ACCOUNT VIA P & L A CCOUNT. IN OUR CASE, WE NEITHER SHOW THE SALE NOR THE PURCH ASE TO SIMPLIFY THE ACCOUNTING. THIS WILL PROVE THAT, THERE IS NEITHER ANY MISTAKE IN ACCOUNTING SYSTEM NOR EVASION OF INCOME. THE PROFIT ARRIVED I S CORRECT. IF GOLD RECOVERED IS REMOVED FROM THE PURCHASE SIDE OF GOLD TRADING ACCOUNT AND KEPT SEPARATELY IN BALANCE SHEE T, THE SAME QUANTITY WILL BE REDUCED FROM THE CLOSING STOCK OF THE GOLD AND THE PROFIT REMAINS NEARLY SAME. IT IS NOT GOING TO AFFECT THE PROFIT IN GOLD TRADING ACCOUNT. 17. THE AO DID NOT FIND MERIT IN THE ABOVE SUBMISS IONS OF THE ASSESSEE AND MADE THE ADDITION OF RS.96,03,300/- BY OBSERVIN G AT PAGE NO.6 OF THE ASSESSMENT ORDER DATED 24.12.2010 AS UNDER :- 1. IT IS SEEN FROM THE STATEMENTS FILED ALONG WIT H THE P & L ACCOUNT THAT THE ASSESSEE-COMPANY HAS MADE A TOTAL SALE OF RS.3,73,70,00,426/- AS ON 31.3.2008. 2. THE VALUE OF THE CLOSING STOCK INCLUDING THE GOLD/SILVER/PALLADIUM AND ETC., AS ON 31.3.2008 ST OOD AT RS.3,71,78,847/- WHICH IS SHOWN UNDER THE HEAD INVE NTORIES. 3. THE OPENING STOCK, RD PURCHASES, URD PURCHASES AND GOLD/SILVER/PALLADIUM ETC., HAS BEEN DEBITED UNDER THE HEAD EXPENDITURE BEING OPERATING, MANUFACTURING, ADMINIS TRATION, SELLING AND DISTRIBUTION EXPENSES AMOUNTING TO RS.3 ,72,33,63,484/- ITA NO.62/B/12 11 4. THE ABOVE SAID EXPENDITURE INCLUDES THE CONSUMPTION OF GOLD/SILVER/ PALLADIUM ETC. TO THE VALUE OF RS.3,69 ,31,90,825/-, THEREBY THE VALUE OF GOLD/SILVER/PALLADIUM RECOVERE D, AS WASTAGE IN THE PROCESS HAS BEEN ADDED TO ITS PURCHASES ACCOUNT . 5. THE VALUE OF SUCH GOLD/SILVER/PALLADIUM RECOVERED I N THE PROCESS FOR WHICH NO COST HAS BEEN INCURRED IS INCL UDED BY THE INFLATING THE PURCHASES WHICH WORKS OUT TO RS.96,03 ,300/-. 6.FOR EXAMPLE, IT IS CLEAR FROM THE PURCHASES ACCOU NT DEBITED THAT THOUGH ACTUALLY THERE IS NO COST INVOLVED TO THE GO LD RECOVERY OF 6621.700 GRAMS VALUED RS.80,95,000/- THE VALUE OF S UCH GOLD HAS BEEN ADDED IN THE PURCHASE ACCOUNT. IN THE LIGHT OF THE ABOVE, THE DIFFERENCE BETWEEN T HE CLOSING STOCK + SALES OF PURCHASES BEING THE GOLD RECOVERY IS TRE ATED AS INCOME AND BROUGHT TO TAX 18. THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A) AND SUBMISSIONS MADE BY THE ASSESSEE AS MENTIONED BY THE LEARNED CI T(A) IN PARA 9 OF THE IMPUGNED ORDER, ARE REPRODUCED VERBATIM AS UNDER : 9. THE AR ON THE OTHER HAND SUBMITTED THE FOLLOWIN G DURING APPELLATE STAGE 1. ASSESSEE HAS RECOVERED PRECIOUS METAL OF RS.96,03 ,300/- 2. THIS AMOUNT OF RS.96,03,300/- IS CREDIT IN THE P & L ACCOUNT. 3. AFTER CREDITING THE AMOUNT IN THE P & L ACCOUNT, TH E AMOUNT WITH QUANTITY OF PRECIOUS METAL IS DEBITED T O RESPECTIVE METAL ACCOUNT. ASSESSEE IS MAINTAINING THE QUANTIT ATIVE ACCOUNT AND DAY TO DAY STOCK BOOK. 4. THE LEARNED AO HAS TREATED THIS AMOUNT AS INFLATING THE PURCHASES BY NOTICING THE DEBIT IN THE RESPECTI VE METAL ACCOUNT. 5. IT SHOULD BE NOTED HERE THAT, THE ASSESSEE HAS RECOVERED GOLD, SILVER, PALLADIUM AND THE AMOUNT IS CREDITED IN TO P & L ACCOUNT. THE ASSESSEE IS ALSO DEALING IN THESE METALS AND HENCE THE ASSESSEE DEBITED THIS AMOUNT TO RESPE CTIVE METAL ACCOUNT. 6. IT SHOULD BE NOTED HERE THAT, THE AO HAS FAILED TO OBSERVE THAT THE AMOUNT OF RS.96,03,300/- HAS BEEN CREDITED IN THE PROFIT AND LOSS ITA NO.62/B/12 12 ACCOUNT. HE ASSUMED THAT, THE ABOVE AMOUNT IS ONLY DEBITED AND NOT CREDITED. BUT HIS ASSUMPTION IS WR ONG. 7. THE LEARNED AO HAS FAILED TO OBSERVE THAT, THE RS.96,03,300/- HAS TWO CREDIT ENTRIES AND ONE DEBIT ENTRY IN THE BOOKS. ONE CREDIT ENTRY IN PROFIT AND LOSS A/C AND ONE CREDIT ENTRY IN CLOSING STOCK AND ONE DEBIT ENTRY I N THE PURCHASE SIDE. ONE DEBIT ENTRY IN PURCHASE AND ONE CREDIT ENTRY IN CLOSING STOCK GET NULLIFIED AND ONE RECOVE RY ENTRY REMAINS IN THE CREDIT SIDE. THIS PROVES THAT, THER E IS NO INFLATION OF PURCHASE. AS PER THE ASST. ORDER AO H AS FAILED TO OBSERVE THAT, ONCE INCOME TAX PAID ON THE ASSETS (IN THIS CASE, RECOVERY OF GOLD), THEN SUCH VALUE BECOME THE COST OF THE ASSETS. 8. WE GIVE BELOW THE DETAILS OF ACCOUNT FILED WITH THE RETURN. GOLD BULLIONA/C (INCLUDING RECOVERED GOLD) PARTICULAR QTY (GMS) AMOUNT PARTICULAR QTY (GMS) AMOUNT O/STOCK 34638.87 32272827.35 BULLION SALE 3631810 3 652236153 R.D PURCHASE 3639067.31 3627415483.7 GOLD SALT 29123 30819576 U.R.D PURCHASE 5087.74 5110093 LESS RETURN 868 1088161 GOLD RECOVERY 6621.7 8095000 C/STOCK INCLUDING RECOVERED GOLD 25350.62 30858141 TOTAL 3685415.62 3672893404.05 TOTAL 3685415.62 3681967568 GROSS PROFIT 39932304.95 CLOSING INVENTORY LIST (INCLUDING RECOVERED QUANTITY) AS ENCLOSED WITH THE RETURN AS ON 31.03.2008 PARTICULARS QUANTITY AMOUNT (RS.) GOLD 25350.78 GMS 30858141 SILVER 229040 GMS 5613751 ITA NO.62/B/12 13 PALLADIUM 513.50 GMS 378120 TOTAL 36850012 TO PROVE THAT, THE PURCHASES ARE NOT INFLATED, WE GIVE BELOW THE RE- FABRICATED GOLD BULLION A/C EXCLUDING THE RECOVERED GOLD QUANTITY AND AMOUNT AND LOST OF INVENTORIES. PARTICULAR QTY (GMS) AMOUNT PARTICULAR QTY (GMS) AM OUNT O/STOCK 34638.87 32272827.35 BULLION SALE 3631810 3 652236153 R.D PURCHASE 3639067.31 3627415483.7 GOLD SALT 2912 3 30819576 U.R.D PURCHASE 5087.74 5110093 LESS RETURN 868 1088 161 TOTAL 3678793.92 3664798404.05 C/STOCK EXCLUDING RECOVERED GOLD 18728.92 22763141 TOTAL 3678793.92 3681967568 GROSS PROFIT 39932304.95 ABOVE BOTH THE A/CS SHOWS THE SAME GROSS PROFIT. THIS PROVES THAT, TRANSFERRING THE QUANTITY AND AMOUNT FROM GOLD RECO VERY A/C TO GOLD BULLION A/C INCREASES THE CLOSING STOCK WITH THE EQ UAL QUANTITY AND AMOUNT AND THE PROFIT REMAINS THE SAME. IF WE DONT INCLUDE THE RECOVERED GOLD IN THE GOLD BULLION A/C., THE INVENTORY WILL APPEAR AS UNDER : PARTICULARS QUANTITY AMOUNT (RS.) GOLD 18729.08 22763141 GOLD RECOVERY 6621.70 8095000 SILVER 173410 4288751 SILVER RECOVERY 55630 1325000 PALLADIUM 208 194820 PALLADIUM RECOVERY 305.5 183300 TOTAL 36850012 THE INVENTORY FILED WITH THE BALANCE SHEET AND RE- FABRICATED INVENTORY AS ABOVE SHOWS THE TOTAL QUANT ITY AND THE TOTAL AMOUNT OF GOLD, SILVER AND PALLADIUM REMAINS SAME. ITA NO.62/B/12 14 IF AS ON THE BALANCE SHEET DATE, THESE ITEMS WOULD NOT HAVE REMAINED IN THE CLOSING STOCK, IN THAT CASE, THERE WOULD HAVE BEEN ONLY ONE ENTRY OF RECOVERY OF GOLD/SILVER IN THE CR EDITS SIDE OF THE PROFIT AND LOSS ACCOUNT AND THERE WOULD NOT HAV E BEEN ANY AMOUNT IN PURCHASE ACCOUNT NOT IN CLOSING STOCK AND THE IMPACT WOULD HAVE BEEN SAME ON THE PROFIT AND LOSS ACCOUNT . FROM THE ABOVE FACTS, IT IS VERY CLEAR THAT, THE L EARNED AO BY MISTAKE HAS MADE AN ADDITIONS ON ACCOUNT OF NOTI ONAL PURCHASE WITH OUT CORRECTLY APPRECIATING THE ENTRIE S PASSED IN THE BOOKS OF ACCOUNTS. IT MAY BE STATED HERE THAT, THE INCOME IN RESPECT OF RS.96,03,300/- HAS BEEN DECLARED BY US B Y WAY OF RECOVERED GOLD/SILVER IS CORRECT. 19. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMIS SIONS OF THE ASSESSEE OBSERVED THAT THE VALUE OF ENTIRE RECOVERY HAD BEEN SHOWN AS INCOME BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT IN RECEIPT SIDE CORRECTLY BUT THE BENEFIT OF SUCH CREDIT WAS LOST WHEN THE SAME WAS ALSO MADE PART OF SCHEDULE 15 SHOWING CONSUMPTION OF SUCH RECOVERY. HE FURTHER OB SERVED THAT THE EXPLANATION OF THE ASSESSEE WAS THAT SUPPOSE A CUST OMER COMES WITH 15 GRAMS OF GOLD REQUESTS FOR A BULLION OF RECTANGULAR SHAPE OF SAME WEIGHT, THEN A FURTHER WEIGHT OF 4 GRAMS OF GOLD (IMAGINARY DEPENDING UPON THE SHAPE AND SIZE OF THE THING THE CUSTOMER WANTS THE ASSESSEE TO MANUFACTURE) NOT MONEY WORTH 4 GRAMS OF GOLD WAS ASKED FROM HIM. ACTUALLY SUCH WAS ALSO UTILIZED FOR MAKING SUCH BULLION BUT NORMALLY SUCH DID NOT GET CONSUMED IN FULL BUT IF THE CONSUMPTION GOT EXCEEDE D, THE CUSTOMER WAS INFORMED TO DEPOSIT FURTHER GOLD. IN OTHER WORDS, THE RECOVERY WAS SUCH THAT IT DID NOT RESULT IN LOSS AT ALL FOR THE ASSESSEE A ND IT WAS SUBMITTED THAT THE ITA NO.62/B/12 15 RECOVERY ALWAYS RESULTED IN PROFIT. THE LEARNED CI T(A) OBSERVED THAT THE ACCOUNTS OF SUCH RECOVERY WAS NOT KEPT SEPARATELY B Y THE ASSESSEE, HOWEVER, THE ANALYSES OF THE PROFIT & LOSS ACCOUNT AND ITS E NCLOSURES PROVED THAT THE VALUES CERTIFIED BY THE DIRECTORS TO THE AUDITORS W ERE ARBITRARY AND, THEREFORE, THE BOOK RESULT WAS NOT RELIABLE. THE L EARNED CIT(A) POINTED OUT THAT THE RECOVERIES WERE AS UNDER : GRAMS RS. GOLD 6621.70 80,95,000 PALLADIUM 3055.00 1,83,300/- SILVER 5563.00 13,25,000/- 62556.70 96,03,300/- 20. THE LEARNED CIT(A) ON THE BASIS OF THE ABOVE FI GURES WAS OF THE VIEW THAT THE RATE OF RECOVERY PER GRAM OF GOLD, PALLADI UM AND SILVER WERE AT RS.1,222/-, RS.24/-, RS0.60 PAISA RESPECTIVELY. HE ALSO OBSERVED THAT IN THE PRESENT YEAR, THE ASSESSEE HAD NOT PURCHASED PALLAD IUM BUT PURCHASED 3644155.50 GRAM OF GOLD AND 2595704 GRAMS OF SILVER FOR RS.3,63,25,25,576/- AND RS.4,87,55,630/- RESPECTIVE LY, THUS SHOWING THE RESPECTIVE RATE OF RS.996.60 AND RS.18.78 PER GRAMS . SIMILARLY, THE RATE OF RECOVERY OF PALLADIUM WAS RS.0.60 PAISA PER GRAM WH ILE THE VALUE OF OPENING STOCK WAS RS.0.40 PAISA PER GRAM. ACCORDIN GLY THE LEARNED CIT(A) WAS OF THE VIEW THAT IN ALL CASES THE RATE OF RECOV ERY WAS HIGHER, THUS, THE INTENTION WAS TO SHOW REDUCED PROFIT. THEREFORE, T HE ACCOUNTS WERE ITA NO.62/B/12 16 DEFECTIVE BECAUSE NO SEPARATE ACCOUNTS HAD BEEN KEP T FOR THE UTILIZATION OF OWN GOLDS I.E OPENING STOCK + PURCHASES IN ONE HAN D AND OTHERS GOLD I.E GOLD RECOVERED IN THE OTHERS. THE GOLD ETC RECOVER ED FROM OTHERS WERE MIXED UP WITH THE OPENING STOCK AND PURCHASES. THE LEARNED CIT(A) WAS OF THE VIEW THAT NO DOUBT THE ABOVE EXERCISE DID NOT E FFECT THE GROSS PROFIT BUT EFFECTS THE LOWERING OF THE NET PROFIT BECAUSE IMPR OPER CONSUMPTION AND EXPENDITURE FROM RECOVERY WAS SHOWN IN THE PROFIT A ND LOSS ACCOUNT (NOT TRADING ACCOUNT), THEREFORE, THE ACCOUNTING PROCEDU RE WAS DEFECTIVE. HE FURTHER OBSERVED THAT THE CLOSING STOCK HAD BEEN PU T BY THE ASSESSEE IN PLACE OF CONSUMPTION AND BIFURCATION OF CONSUMPTION INTO OWN GOLD AND OTHERS WAS NOT MAINTAINED AT ALL. HE ALSO POINTED OUT THA T IN THE WRITTEN SUBMISSION BEFORE HIM THE ASSESSEE HAD SHOWN RETURN OF GOLD WE IGHING 868 GRAMS VALUED AT RS.10,88,161/- BUT THE DETAILS WERE NOT K EPT I.E TO WHOM RETURNED, WHEN RETURNED, PURPOSE OF RETURN, WHETHER FROM OWN GOLD OR RECOVERED GOLD. HE ALSO OBSERVED THAT THE ASSESSEE WAS MAINLY ENGAG ED IN MANUFACTURE AND SALE OF GOLD BULLIONS FROM OWN GOLD MAINLY AND TO L ESSER EXTENT ON CLIENTS DEMAND BUT NO RECEIPTS WAS SHOWN FROM SUCH MAKING C HARGES AT ALL. THE LEARNED CIT(A) ALSO POINTED OUT THAT EVEN SCHEDULE 12 DID NOT REFLECT SUCH RECEIPT AND THAT THE BILLS WHICH REFLECT GOLD RECO VERY DID NOT SHOW THAT SUCH HAD BEEN CHARGED IN THE SHAPE OF GOLD/SILVER/PALLAD IUM. THE LEARNED CIT(A), HOWEVER, ESTIMATED THE LOSS AT 10% OF THE R ECOVERY I.E RS.9,60,330/- ITA NO.62/B/12 17 AND ALLOWED THE RELIEF FOR THE SAME. ACCORDINGLY AD DITION OF RS.86,42,970/- (96,03,300/- - RS.9,60,330/-) WAS CONFIRMED. 21. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 22. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. HE FURTHER SUBMITTED THAT THE ASSESSEE WAS RECEIVING CHARGES FROM THE CUSTOMERS FOR THE MANUFA CTURING OF THE JEWELLERY FROM THE OLD JEWELLERY. THE GOLD WAS RECOVERED FRO M THE ORNAMENTS ON ACCOUNT OF IMPURITY AND IN THAT PROCESS, THE ASSESS EE WAS EARNING SOME QUANTITY OF GOLD/SILVER AND PALLADIUM. THE QUANTITY RECOVERED WAS VALUED AND THE AMOUNT WAS CREDITED IN THE RECOVERING ACCOU NT AND AT THE SAME TIME, IT WAS DEBITED IN THE PURCHASE ACCOUNT BECAUSE THE QUANTITY RECOVERED INCREASED THE STOCK OF THE ASSESSEE FOR THAT REASON AND TO COMPLETE ACCOUNTING ENTRY, THE SAME AMOUNT WHICH WAS SHOWN A S RECOVERY WAS INCREASED IN THE PURCHASE. IT WAS FURTHER STATED TH AT WHENEVER THE QUANTITY RECOVERED WAS SOLD, IT WAS SHOWN AS SALE AND THE RE MAINING QUANTITY WAS SHOWN AS CLOSING STOCK IN THE BALANCE SHEET. IN SUP PORT OF THE ABOVE CONTENTION, THE LEARNED AR REFERRED TO PAGES NOS. 2 , 10, 14 AND 15 OF THE ASSESSEES COMPILATION. IT WAS CONTENDED THAT THE A O WITHOUT APPRECIATING THE FACTS MADE THE ARBITRARY ADDITION AND THE LEARN ED CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION MADE BY THE AO . ITA NO.62/B/12 18 23. IN HER RIVAL SUBMISSIONS, THE LEARNED DR STRONG LY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE ASSESSEE WITHOUT INCURRING ANY EXPENDITURE INCREASED THE VALUE OF TH E PURCHASE, THEREFORE, THE VALUE INCREASED IN THE PURCHASES ACCOUNT WAS ON ACC OUNT OF INFLATED PURCHASES AND THE AO RIGHTLY MADE THE ADDITION FOR THE AMOUNT WHICH WAS INCREASED BY THE ASSESSEE WITHOUT EXPENDING ANY CO ST FOR PURCHASE, THEREFORE, THE LEARNED CIT(A) WAS FULLY JUSTIFIED I N CONFIRMING THE ADDITION MADE BY THE AO. 24. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIALS AVAILABLE ON RECORD. IN THE PRESENT CASE, IT IS NOTICED THAT THE ASSESSEE WAS PROCESSING THE GOLD A ND SILVER JEWELLERY ON JOB WORK BASIS. FOR THE SAID PROCESS, THE ASSESSEE WAS RECEIVING ORNAMENTS FROM THE CUSTOMERS AND AFTER MELTING THE PRECIOUS METALS , THE ORNAMENTS WERE MANUFACTURED AND THE ASSESSEE GENERATED EXTRA GOLD, SILVER AND PALLADIUM, WHICH WAS TERMED AS RECOVERED GOLD, SILVER, PALLAD IUM. THE QUANTITY RECOVERED DURING THE PROCESSING WAS VALUED AND CRE DITED TO THE PROFIT AND LOSS ACCOUNT, AS IS CLEAR FROM PAGE NO. 15 OF THE A SSESSEES COMPILATION, WHICH IS THE COPY OF SCHEDULE 15 RELATING TO THE RE COVERIES. IN THE SAID SCHEDULE THE VARIOUS RECOVERIES ARE SHOWN AS UNDER :- ITA NO.62/B/12 19 --------------------------------------------------- ---------- ITEM QTY. (GMS) AMOUNT RS. -------------------------------------------------- ------------- GOLD RECOVERY 6,621.70 8,095,000.00 PALLADIUM RECOVERY 305.50 180,100.00 SILVER RECOVERY 55,630.00 1,325,000.00 -------------------------------- TOTAL 62,556.70 9 ,60,300.00 --------------------------------- 25. THUS, RECOVERIES OF GOLD, SILVER AND PALLADIUM AMOUNTING TO RS.96,03,300/- ARE SHOWN BY THE ASSESSEE AS INCOME IN THE PROFIT AND LOSS ACCOUNT, COPY OF WHICH IS AVAILABLE AT PAGE NO.2 O F THE ASSESSEES COMPILATION. FROM THE ABOVE DETAILS, IT IS CLEAR T HAT THE ASSESSEE RECOVERED 6,621.7 GRAMS GOLD, 305.5 GRAMS PALLADIUM AND 55,3 60 GRAMS SILVER. THE SAID QUANTITY WAS TAKEN INTO STOCK BY THE ASSESSEE, WHICH IS CLEAR FROM PAGE NO. 14 OF THE ASSESSEES COMPILATION. THE SAID PAG E DEPICTS THE CONSUMPTION OF RAW MATERIAL AS WELL AS SCHEDULE FORMING PART OF PROFIT AND LOSS ACCOUNT. SO IT CANNOT BE SAID THAT THE ASSESSEE INFLATED THE PURCHASES, RATHER THE QUANTITY, WHICH WAS RECOVERED BY THE ASSESSEE AND T AKEN INTO THE STOCK ACCOUNT, WAS QUANTIFIED & VALUED AND WHATEVER WAS S HOWN AS RECOVERED IN CREDIT SIDE OF THE PROFIT AND LOSS ACCOUNT WAS SHOW N AS PURCHASES, THUS THE SAID ENTRY WAS REVENUE NEUTRAL. IN THE PRESENT CASE , WHEN EVER THE ASSESSEE MADE THE SALE, THE SAME WAS REFLECTED IN THE SALES ACCOUNT WHICH INCREASED THE PROFIT OF THE ASSESSEE AND THE QUANTITY WHICH W AS NOT SOLD REMAINED IN THE STOCK OF THE ASSESSEE WHICH WAS REFLECTED AS CL OSING STOCK AND SHOWN IN ITA NO.62/B/12 20 THE BALANCE SHEET. THEREFORE, IT CAN SAFELY BE HEL D THAT THE AO WITHOUT APPRECIATING THE ACCOUNTING ENTRIES DONE BY THE ASS ESSEE ARBITRARILY CONSIDERED THE PURCHASES AS INFLATED AND MADE THE A DDITION. THE A.O HAD NOT APPRECIATED THIS FACT THAT WHATEVER WAS INCREAS ED IN THE PURCHASE ACCOUNT WAS NOT THE ACTUAL PURCHASE RATHER IT WAS QUANTITY RECOVERED BY THE ASSESSEE FROM THE CUSTOMERS DURING THE PROCESS OF THE GOLD, SILVER AND PALLADIUM JEWELLERY WHICH WAS CREDITED IN THE PROFIT & LOSS ACCOUNT AS RECOVERY. IN THE PRESENT CASE THE A.O HAD NOT DOUBTED THE QUANTI TY OF GOLD, SILVER AND PALLADIUM RECOVERED BUT CONSIDERED ITS VALUE WHICH WAS ALREADY SHOWN BY THE ASSESSEE IN THE PROFIT & LOSS ACCOUNT AS INFLAT ED PURCHASES. IN THAT VIEW OF THE MATTER, WE ARE OF THE VIEW THAT THE AO WAS N OT JUSTIFIED IN TREATING THE VALUE OF THE QUANTITY OF THE ORNAMENTS RECOVERED BY THE ASSESSEE FROM CUSTOMERS DURING THE COURSE OF PROCESSING AS INFLAT ED PURCHASES AND THE LEARNED CIT(A) WAS ALSO NOT JUSTIFIED IN TREATING T HE 10% OF THE SAID RECOVERY AS GENUINE AND THE REMAINING 90% AS NON GE NUINE. WE, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS AS DISCUSSED HEREIN ABOVE ARE OF THE VIEW THAT THE ADDITION SUSTAINED BY THE LEARNED CIT(A) W AS NOT JUSTIFIED, ACCORDINGLY THE SAME IS DELETED. 26. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.62/B/12 21 ORDER PRONOUNCED IN THE OPEN COURT ON 21ST MARCH, 2012. SD/- SD/- (GEORGE GEORGE K) (N.K SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER VMS. BANGALORE DATED : 21/03/2012 COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REGISTRAR, I TAT, BANGALORE.