Joint Commissioner of Income-tax(OSD) Circle -1, Jalgaon V. M/s. Rajmal Lakhichand, Jalgaon

ITA 62/PUN/2023

AI Insights

The case involves the Revenue's appeal against the CIT(A)'s decision to delete the addition made by the AO regarding low melting gains reported by the assessee, M/s. Rajmal Lakhichand, for the A.Y. 2017-18. The assessee, engaged in the business of manufacturing and trading of gold and silver ornaments, reported a significantly lower melting gain percentage in 2013-14 compared to previous years. The AO, not satisfied with the assessee's explanation for the lower percentage, made an addition to the assessee's income, which was later contested and deleted by the CIT(A) based on earlier ITAT decisions favoring the assessee. The Revenue's appeal to the ITAT challenged the CIT(A)'s decision, but the ITAT upheld the CIT(A)'s ruling, citing consistency with previous ITAT decisions and the absence of any defects in the assessee's records.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134324 (ITAT-PUNE)
• Duration Of Justice: 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-03-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 17-01-2023
• Other Referred Cases: ITA No.1702/PUN/2019, ITA No.532 & 663/PUN/2013, ITA No. 607/PUN/2013
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(2)

Judgement Text

आयकर अपीलीय अिधकरण “बी” Ɋायपीठ पुणेमŐ। IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “B” :: PUNE BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.62/PUN/2023 िनधाᭅरण वषᭅ / Assessment Year : 2017-18 The Joint Commissioner of Income Tax(OSD), Circle- 1, Jalgaon. Vs M/s. Rajmal Lakhichand, 169, Johari Bazar, Balaji Peth, Jalgaon – 425001. PAN: AACFR 8609 L Appellant / Assessee Respondent / Revenue Assessee by Shri Nikhil Pathak – AR Revenue by Shri M.G.Jasnani - DR Date of hearing 09/03/2023 Date of pronouncement 14/03/2023 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This appeal filed by the Revenue is directed against the order of ld.Commissioner of Income Tax[NFAC], Delhi, dated 24.11.2022 emanating from assessment order dated 21.12.2019 under section 143(3) of the I.T.Act, 1961 for the A.Y.2017-18. The Revenue has raised the following grounds of appeal: “1. On the facts and in the circumstances of the case , the Ld. CIT(A)-2, Nashik erred in deleting the addition on account of low Melting gains shown by the assessee compared to earlier financial years. 2. On the facts and in the circumstances of the case and in law, the order of the CIT(A), NFAC, be cancelled on the above issue and ITA No.62/PUN/2023 Rajmal Lakhichand [R] 2 that of the A.O. be restored. 3. The appellant craves leave to add, alter, modify, delete amend any of the grounds with prior permission of the Hon’ble CIT, as per the circumstances of the case.” 2. The brief facts of the case are that the assessee firm filed its original return of income electronically for the A.Y. 2017-18 on 25.10.2017 declaring total income of Rs.Nil. The assessee return was selected for complete scrutiny under CASS. A notice under section 143(2) was duly served upon the assessee on 20.08.2018. The Assessing Officer(AO) made an addition of Rs.3,26,20,982/- on account of melting gain in the assessment order. Aggrieved by the assessment order, the assessee filed appeal before the ld.CIT(A). The ld.CIT(A) allowed appeal of the assessee following ITAT Pune’s order for A.Y. 2009-10 in assessee’s own case. 3. Aggrieved by the order of ld.CIT(A), the Revenue has filed appeal before this Tribunal. 4. At the outset of hearing, ld.Authorised Representative(ld.AR) of the assessee submitted that this issue is already covered by the decision ITAT Pune Bench in assessee’s own case for A.Y.2014-15 in ITA No.1702/PUN/2019 as under : “2. Brief facts of the case are that the assessee is in the business of manufacturing of gold and silver ornaments and trading of ornaments. During the year, the Assessing Officer(AO) observed ITA No.62/PUN/2023 Rajmal Lakhichand [R] 3 that the assessee has shown melting gain at 0.59%. For earlier years, the melting gain was as under: On perusal of the books of account, it was noticed that the assessee has shown melting gain 0.59% as melting Gains. The comparison of the melting gains shown by the assessee for the last four financial years is tabulated as below: Financial Year Melting gain percentage 2010-11 9.07% 2011-12 8.53% 2012-13 6.83% 2013-14 0.59% 3. The AO asked the assessee to explain the reason for lower melting gain. However, the AO was not satisfied with the reply of the assessee. The AO in para 6 sub para 3 has held as under: “3. Further, it is true that the melting gain depends on the purity of old ornaments or gold given by the customers. However, the melting gain ratio shown by the assessee is less than its own melting gains shown for the previous years. 4. The average value of the melting gains in the market is around 4-6%. Therefore, considering the above reasons and the melting gains of AY 2013-14, the melting gains is adopted at 6%.” 4. Aggrieved by the addition, the assessee filed appeal before the ld.CIT(A). The ld.CIT(A) allowed this ground of the assessee. In para 8.3, the ld.CIT(A) has held as under: “8.3 In this regard, in appellant's own case, the Hon'ble ITAT, Pune in ITA No.532 & 663/PUN/2013 and ITA No. 607/PUN/2013 for assessment year 2009-10, dated 16/01/2015 has decided in favour of the appellant holding as under- ITA No.62/PUN/2023 Rajmal Lakhichand [R] 4 "8.38 we find force in the above argument of the Ld Counsel for the assessee. We have perused the month wise breakup of the melting gain declared by the assessee and fined that there is variation. We also find force in the argument of the Ld Counsel for the assessee that when assessee is maintaining the record showing the old ornaments issued for refining purpose on the weight basis, when there should have been no jurisdiction for rejecting the said record. The Ld (CIT(A) has mechanically approved the approach of the AO for holding that AO has correctly worked out the melting gain. We find that the AO has attached the chart to the assessment order being Annexure-3 for the period April 2008 to March 2009. We also find that AO has made break up for two periods i.e. 01.04.2008 and 28.11.2008 to 31.03.2009. How the period can be bifurcated for working out the yearly average is not known. We also find force in the contention of the Ld. Counsel for the assessee that when old ornaments are purchased from the third parties, the purity of the gold is determined by using Kasuati which is one stone. There is no other scientific method whereby it can be concluded that the gain estimated at the time of purchased of the old ornament (MOD) was perfect. Moreover, the assessee is consistently following the particular method and that method has never been questioned by the revenue. In our opinion, there is no justification to support the addition made by the AO and confirmed by the Ld. CIT(A) in respect of alleged suppression of the melting gain. We accordingly delete the said addition. In the result, respective grounds taken by the assessee are allowed. Respectfully following the decision of Hon'ble ITAT Pune, wherein the facts of the case are squarely applicable in the case of the appellant, Therefore, I am of the considered view ITA No.62/PUN/2023 Rajmal Lakhichand [R] 5 that the A.O. is not justified in making addition of Rs. 1,94,05,998/- on account low melting gain. Therefore, the addition of Rs.1,94,05,998/- made by the A.O. is deleted and the ground of appeal raised by the appellant is allowed.” 5. Aggrieved by the order of the ld.CIT(A), the Department has filed appeal before this Tribunal. The ld.Departmental Representative(ld.DR) for the Revenue vehemently relied on the order of the AO. The ld.Authorised Representative(ld.AR) for the assessee filed a paper book containing 166 pages. The ld.AR took us through the melting gain register which was at page no.47 of the paper book and explained that the assessee is properly maintaining melting gain / loss register. The ld.AR submitted that the AO has not pointed out any defect in the melting gain register or audited books of accounts. Therefore, the addition made by the AO was rightly deleted by the ld.CIT(A). 6. We have heard both the parities and perused the records. It is a fact that assessee purchases old ornaments. The purity depends on many factors. It is very difficult to generalise the purity. We have gone through the melting gain register which was submitted in the paper book. It is observed that assessee has maintained a proper register. The AO has not pointed out any defect in the said melting gain / loss register. The AO has also not pointed out any defect in the books of accounts maintained by the assessee. It is also a fact that the ITAT Pune Bench in assessee’s own case for earlier year has decided this issue in favour of assessee. Therefore, we are of the opinion that the ld.CIT(A) has rightly directed the AO to delete the addition following the ITAT Pune Bench’s decision for the A.Y. 2009-10, accordingly, grounds of appeal raised by the Revenue are dismissed. 7. In the result, appeal of the Revenue is dismissed.” ITA No.62/PUN/2023 Rajmal Lakhichand [R] 6 5. On the other hand, the ld.Departmental Representative(ld.DR) of the Revenue fairly accepted that the issue is covered in favour of the assessee. 6. We have heard both the parties and perused the records. No distinguishing facts raised by the ld.DR. The Revenue has not brought on record any facts to distinguish the ITAT order in assessee’s own case for earlier years. 6.1 In view of the above, we adopt the foregoing reasoning of assessee’s own case(supra) of ITAT Pune Bench for A.Y.2009-10, 2014-15, accordingly, grounds of appeal raised by the Revenue are dismissed. 7. In the result, appeal of the Revenue is Dismissed. Order pronounced in the open Court on 14 th March, 2023. Sd/- Sd/- (S.S.GODARA) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 14 th Mar, 2023/ SGR* आदेशकᳱᮧितिलिपअᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5. िवभागीयᮧितिनिध, आयकर अपीलीय अिधकरण, “बी” बᱶच, पुणे / DR, ITAT, “B” Bench, Pune. 6. गाडᭅफ़ाइल / Guard File. ITA No.62/PUN/2023 Rajmal Lakhichand [R] 7 आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune.