ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1, JAIPUR V. M/S S.K. JEWELLERS, JAIPUR

ITA 645/JPR/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3573 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 8 month(s) 24 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 29-04-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 04-08-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VARINDRA MEHTACIT
• Assessee Lawyers: MANISH AGARWAL CA DHK
• Keywords: Rejection of books of accounts; Unexplained investment; Unexplained expenditure; Search and seizure; Loose papers; Question of law; Surrender of tenancy right; Set aside; Capital Gains
• Section: 69C; 143(3); 133A; 69B; 69A; 131; 68; 69; 145; 56; 132; 139

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,OA JH FOE FLAG ;K NO ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA-@ ITA NO. 645/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2013-14. THE ACIT, CIRCLE-1, JAIPUR. CUKE VS. M/S. S.K. JEWELLERS, KAMLA NEHRU SCHOOL KI GALI, HALDIYON KA RASTA, JOHARI BAZAR, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. ABKFS 2694 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI VARINDRA MEHTA(CIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MANISH AGARWAL (CA) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 17.04.2018. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 19/06/2018. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 31 ST MAY, 2017 OF LD. CIT (A)-4, JAIPUR FOR THE ASSESSMENT YEAR 2013-14. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS :- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT (A) WAS VERIFIED THE CLAIM OF THE ASSESSEE OF D ECLARATION OF NP AT RS. 4,57,08,453/- ON ACCOUNT OF FALL IN THE M ARKET RATE OF GOLD BEFORE DELETING THE ADDITION OF RS. 57,90,076/ - IN VIEW OF THE PRESCRIBED COST FORMULAS AS PER THE AS-2 MANDAT ED BY SECTION 145(2) TO BE FOLLOWED BY THE ASSESSEE. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT (A) WAS RIGHT IN DELETING THE ADDITION OF RS. 5 7,90,076/- IN VIEW OF THE FACT THIS AMOUNT FORMED PART OF THE VAL UE OF EXCESS STOCK FOUND AS ON DATE OF SURVEY AND HENCE IS THE U NEXPLAINED 2 ITA NO. 645/JP/2017 M/S. S.K. JEWELLERS, JAIPUR. INVESTMENT OF THE ASSESSEE U/S 69, LIABLE TO BE TAK ED U/S 115BBE OF THE ACT. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT (A) WAS RIGHT IN DELETING THE TRADING ADDITION OF RS. 55,662/- THE APPELLANT CRAVE, LEAVE OR RESERVES THE RIGHT TO AMEND MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEA L AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. THE GROUND NOS. 1 & 2 ARE REGARDING ADDITION OF RS. 57,90,076/- MADE BY THE AO ON ACCOUNT OF UNEXPLAINED INVESTMENT UNDER SECTION 69 BEING EXCESS STOCK FOUND DURING THE SURVEY/SEARCH. 2. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN TH E BUSINESS OF MANUFACTURING AND TRADING OF JEWELLERY. A SEARCH AND SEIZURE OPE RATION UNDER SECTION 132 OF THE IT ACT WAS CARRIED OUT AT THE PREMISES OF HARSH GROUP, OF WHICH THE ASSESSEE IS ONE OF THE MEMBER, ALONG WITH THE SURVEY UNDER SECTION 133 A CARRIED OUT IN THE BUSINESS PREMISES OF THE ASSESSEE. DURING THE COURSE OF SUR VEY AND SEIZURE OPERATION, CERTAIN LOOSE PAPERS WERE FOUND. THE STATEMENT OF T HE PARTNER OF THE ASSESSEE FIRM WAS RECORDED UNDER SECTION 133A ON 23 RD JANUARY, 2013 AND THEREAFTER THE STATEMENT OF THE SAME PARTNER OF THE ASSESSEE FIRM WAS RECORDED UNDER SECTION 131 OF THE IT ACT ON 1 ST MARCH, 2013. SINCE THERE WAS A SEARCH AND SEIZURE ACTION UNDER SECTION132 OF THE ACT IN CASE OF ASSESSEE GROUP, TH EREFORE, THE AO HAS FRAMED THE ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 1 53B(1)(B) OF THE ACT. THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 4,57,14,000/-. HOWEVER, THE AO HAS FRAMED THE ASSESSMENT AT THE TO TAL INCOME OF RS. 5,24,89,450/- BY MAKING THE ADDITIONS AS UNDER :- 3 ITA NO. 645/JP/2017 M/S. S.K. JEWELLERS, JAIPUR. S.NO. ADDITION/DISALLOWANCE AMOUNT 1. DISALLOWANCE OF TELESCOPING OF EXCESS STOCK WITH EXCESS CASH, UNRECORDED PURCHASES/SALES 9,29,713.00 2. ADDITION U/S 69 R.W.S. 115BBE ON ACCOUNT OF EXCESS STOCK FOUND 57,90,076.00 3. TRADING ADDITION 55,662.00 TOTAL 67,75,450.00 THE DISPUTE IN GROUND NOS. 1 & 2 OF THE REVENUES A PPEAL IS REGARDING THE ADDITION MADE UNDER SECTION 139 READ WITH SECTION 115BBE ON ACCOUNT OF EXCESS STOCK OF RS. 57,90,076/-. THE LD. CIT (A) DELETED THE SAID ADDI TION MADE BY THE AO BY ACCEPTING THE CLAIM OF THE ASSESSEE THAT THE PRICE OF GOLD AS ON 31 ST MARCH, 2013 WAS MUCH LESS THAN THE PRICE AT THE TIME OF VALUATION DONE D URING SURVEY. 3. BEFORE US, THE LD. D/R HAS SUBMITTED THAT IT IS NOT A SIMPLE CASE OF STATEMENT RECORDED UNDER SECTION 133A BUT A STATEMENT UNDER S ECTION 131 OF THE IT ACT WAS RECORDED SUBSEQUENTLY ON 1 ST MARCH, 2013 WHEREIN THE ASSESSEE HAS AFFIRMED THE EXCESS STOCK FOUND DURING THE SURVEY AND VALUE OF T HE SAID STOCK AS TAKEN AT THE TIME OF SURVEY. THEREFORE, THERE WAS NO WHISPER AB OUT THE REDUCTION OF MARKET PRICE OF GOLD DURING THE INTERVENING PERIOD FROM JA NUARY TO MARCH WHEN THE STATEMENT OF THE ASSESSEE WAS RECORDED UNDER SECTIO N 131 OF THE ACT. FURTHER, THE EXCESS STOCK FOUND DURING THE SURVEY AND SEARCH WAS NOT IN DISPUTE SO FAR AS THE QUANTITY OF THE GOLD WAS FOUND AT THE PREMISES OF T HE ASSESSEE. THE VALUATION AS ON THE DATE OF SURVEY WAS ALSO NOT IN DISPUTE. HOWEVE R, THE ASSESSEE HAS CLAIMED THE REDUCTION OF MARKET PRICE OF GOLD AS ON 31 ST MARCH, 2013 AND, THEREFORE, CLAIMED THE DEDUCTION AGAINST SAID AMOUNT OF VALUE TO THE EXTEN T OF RS. 57,90,076/- WITHOUT BRINGING ON RECORD ANY MATERIAL TO SHOW THAT THE SA ME STOCK WHICH WAS FOUND AT THE 4 ITA NO. 645/JP/2017 M/S. S.K. JEWELLERS, JAIPUR. TIME OF SURVEY REMAINED UNSOLD TILL 31 ST MARCH, 2013. THUS THE LD. D/R HAS CONTENDED THAT THE LD. CIT (A) WITHOUT EXAMINING TH E RELEVANT MATERIAL HAS ACCEPTED THE CONTENTION OF THE ASSESSEE AND FURTHER WITHOUT TAKING INTO CONSIDERATION THE PROVISIONS OF SECTION 115BBE OF THE ACT. HE HAS RE LIED UPON THE ORDER OF THE A.O. 3.1. ON THE OTHER HAND, THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT SUB-SECTION (2) OF SECTION 115BBE HAS BEEN AMENDED WITH EFFECT FROM 1.4.2017 AND, THEREFORE, THE SAID AMENDED PROVISO TO SECTION 115BBE IS NOT A PPLICABLE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. HE HAS FURTHER CONTENDED THAT THE ASSESSEE HAS DULY HONOURED THE SURRENDER DURING THE COURSE OF SURVEY. HOWEVER, DUE TO THE PREVAILING PRICE OF GOLD FALLEN DOWN AS ON 31 ST MARCH, 2013 TO RS. 2130.67 PER GRAM AS AGAINST THE PRICE WHICH WAS TAKEN AT THE TIME OF VALUATION OF THE STOCK DURING THE COURSE OF SURVEY AT RS. 2308.31 PER GRAM, THE ASSESSEE HAS VA LUED THE STOCK BY CONSIDERING THE PREVAILING PRICE AS ON 31 ST MARCH, 2013. THE AO HAS NOT DISPUTED THE PREVAILI NG PRICE AS ON 31 ST MARCH, 2013 AND, THEREFORE, THE ADDITION MADE BY T HE AO BY CONSIDERING THE PRICE OF GOLD AS ON THE DATE OF SUR VEY IS NOT JUSTIFIED. HE HAS FURTHER CONTENDED THAT AS SOON AS THE EXCESS STOCK WAS INTR ODUCED IN THE BOOKS OF ACCOUNTS IT BECOMES PART OF THE REGULAR STOCK-IN-TRADE AND, THEREFORE, THE VALUATION OF THAT STOCK AS ON 31 ST MARCH, 2013 HAS TO BE TAKEN AT THE PREVAILING PRIC E WHICH WAS DONE BY THE ASSESSEE. THE PROVISIONS OF SECTION 115BBE( 2) ARE APPLICABLE ONLY FOR THE ASSESSMENT YEAR 2017-18 AND NOT FOR THE YEAR UNDER CONSIDERATION. HENCE THE RELIANCE PLACED BY THE AO ON SUB-SECTION (2) OF SEC TION 115BBE IS MISCONCEIVED. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE FO LLOWING DECISIONS :- 5 ITA NO. 645/JP/2017 M/S. S.K. JEWELLERS, JAIPUR. ACIT VS. SANJAY BAIRATHI GEMS LTD. IN ITA NO. 157/JP/2017 ( JAIPUR TRIB.) M/S. PITAMBER COMMODITY FUTURES PVT. LTD. VS. ACI T IN ITA NO. 863/JP/2017 (JAIPUR TRIB.) CIT VS. SHILPA DYEING & PRINTING MILLS (P) LTD. 219 TAXMAN 279 (GUJ. HC) 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. AS FAR AS THE EXCESS STOCK FOUND DURING TH E SURVEY, THE ASSESSEE HAS NOT DISPUTED THE QUANTITY OF EXCESS STOCK AND THE ONLY DISPUTE IS REGARDING THE AMOUNT SURRENDERED ON ACCOUNT OF EXCESS STOCK DURING THE S URVEY AS WELL AS IN THE STATEMENT RECORDED UNDER SECTION 131 OF THE ACT IN POST SURVEY ENQUIRY ON 1 ST MARCH, 2013 WHICH WAS NOT OFFERED TO TAX IN THE RET URN OF INCOME FILED BY THE ASSESSEE. THE AO FOUND THAT THE ASSESSEE HAS CLAIM ED DEDUCTION OF RS. 57,90,076/- FROM UNDISCLOSED INVESTMENT IN STOCK OF RS. 5,14,98 ,529/-. THE ASSESSEE HAS EXPLAINED THE CLAIM OF DEDUCTION AND REDUCTION IN T HE AMOUNT OF UNDISCLOSED INVESTMENT IN THE STOCK DUE TO THE REDUCTION OF THE PREVAILING PRICE OF GOLD AS ON 31 ST MARCH, 2013 IN COMPARISON TO THE PREVAILING PRICE O F GOLD AS ON 23 RD JANUARY, 2013 WHEN THE VALUATION OF EXCESS STOCK WAS DONE AT THE TIME OF SURVEY. THE AO HAS PLACED RELIANCE ON THE PROVISIONS OF SECTION 115BBE AND CONSEQUENTLY TAXED THE ENTIRE AMOUNT OF UNEXPLAINED INVESTMENT @ 30%. HOW EVER, THE ASSESSEE DISPUTED THE APPLICATION OF SAID PROVISION ON THE GROUND THA T THE PROVISIONS OF SECTION 115BBE WAS INTRODUCED BY FINANCE BILL 2016 WITH EFFECT FRO M 1.4.2017 AND, THEREFORE, THE SAID PROVISIONS AND AMENDMENT WILL TAKE EFFECT FROM 1.4.2017 AND NOT PRIOR TO THAT. IN SUPPORT OF HIS CONTENTION, THE ASSESSEE HAS RELI ED UPON THE DECISIONS OF THIS 6 ITA NO. 645/JP/2017 M/S. S.K. JEWELLERS, JAIPUR. TRIBUNAL AS WELL AS THE DECISION OF HONBLE GUJARAT HIGH COURT. WE NOTE THAT THIS TRIBUNAL IN THE CASE OF ACIT VS. SANJAY BAIRATHI GE MS LIMITED (SUPRA) AS WELL AS IN CASE OF M/S. PITAMBER COMMODITY FUTURES PVT. LTD. ( SUPRA) HAS TAKEN A VIEW THAT THE AMENDED PROVISIONS OF SECTION 155BBE ARE NOT APPLIC ABLE PRIOR TO THE ASSESSMENT YEAR 2017-18. IN CASE OF M/S. PITAMBER COMMODITY F UTURES PVT. LTD. VS. ACIT (SUPRA), THE TRIBUNAL HAS HELD IN PARA 6 TO 8 AS UN DER :- 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE AMOUNT OF RS 36,00,000 OF UNDISCLOSED INVESTMENT WHICH HAS BEEN SURRENDERED DURING THE COURSE OF SEARCH HAS BEEN OFFERED TO TAX SUBSEQUENTLY WHILE FILING THE RETURN OF INCOME. IT IS ALSO NOT DISPUT ED THAT THE ASSESSEE HAS INCURRED BUSINESS LOSS OF RS 767,768 DURING THE YEAR UNDER CONSIDERATION. ONLY LIMITED DISPUTE RELATES TO WHE THER THE AMOUNT SO SURRENDERED DURING THE COURSE OF SEARCH CAN BE SET OFF AGAINST BUSINESS LOSS FOR THE YEAR UNDER CONSIDERATION. IN CASE OF ACIT CC-2 VS. SANJAY BAIRATHI GEMS LTD (SUPRA) , SPEAKING THROUGH ONE OF US, WE HAD AN OCCASION TO EXAMINE A SIMILAR ISSUE AND THER EIN, WE HAVE ALSO REFERRED TO THE VARIOUS AUTHORITIES WHICH HAVE BEEN RELIED UPON BY THE AO AND THE LD CIT(A) IN THE INSTANT CASE. IT WOULD THEREFORE BE RELEVANT TO REFER TO THE FINDINGS IN THE SAID DECIS ION WHICH ARE REPRODUCED HEREIN: 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD, THE FACTUAL MATRIX AND VARIOUS DECISIONS RELIED UPON BY BOTH THE PARTIES. THE ASSESSING OFFICER HA S BROUGHT TO TAX, UNDISCLOSED INVESTMENT IN EXCESS STOCK OF STONES, G OLD & JEWELLERY FOUND AND SURRENDERED DURING THE COURSE OF SEARCH P ROCEEDINGS WHICH HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNTS OF T HE ASSESSEE, UNDER THE PROVISIONS OF SECTION 69B READ WITH SECTION 115 BBE OF THE ACT. FURTHER, THE ASSESSING OFFICER HAS NOT ALLOWED THE SET OFF OF BUSINESS 7 ITA NO. 645/JP/2017 M/S. S.K. JEWELLERS, JAIPUR. LOSS OF RS 86,96,733 AGAINST THE SAID INCOME OF RS 2,31,41,217 WHICH HAS BEEN BROUGHT TO TAX UNDER SECTION 69B READ WITH SECTION 115BBE OF THE ACT. THE ASSESSING OFFICER HAS HOWEVER ALLOW ED THE CARRY FORWARD OF SAID BUSINESS LOSS TO BE SET OFF IN THE SUBSEQUENT ASSESSMENT YEARS. THE FACT THAT THE BUSINESS LOSS HAS BEEN INCURRED DURING THE YEAR IS THUS NOT IN DISPUTE. THE LIMITE D DISPUTE RELATES TO SET OFF OF SAID BUSINESS LOSS AGAINST THE INCOME WH ICH HAS BEEN BROUGHT TO TAX UNDER SECTION 69B READ WITH SECTION 115BBE OF THE ACT. 8. FIRSTLY, REGARDING THE CONTENTION OF THE LD CIT DR THAT THE PROVISIONS OF SECTION 115BBE COMES UNDER CHAPTER-XII PROVIDING FOR DETERMINATION OF RATE OF TAX IN CERTAIN SPECIAL CAS ES AND ACCORDINGLY, IT RELATES TO QUANTIFICATION OF THE AMOUNT OF TAX AND NOT TO THE COMPUTATION OF TOTAL INCOME AND THEREFORE, THE AMEN DMENT BROUGHT IN BY THE FINANCE ACT 2016 WOULD NOT AFFECT THE COMPUT ATION OF TOTAL INCOME. IT WAS ACCORDINGLY CONTENDED THAT THE BUSIN ESS LOSSES IN THE INSTANT CASE CANNOT THEREFORE BE ALLOWED SET OFF AG AINST THE AMOUNT BROUGHT TO TAX UNDER SECTION 69B IN TERMS OF UNDISC LOSED INVESTMENT IN STOCK OF STONES, GOLD AND JEWELLERY. 9. IT IS NOTED THAT BY THE FINANCE ACT, 2016, AN AM ENDMENT HAS BEEN BROUGHT-IN IN SECTION 115BBE(2) WHEREIN IT HAS BEEN PROVIDED THAT NOTWITHSTANDING ANYTHING CONTAINED IN THIS ACT, NO SET OFF OF ANY LOSS SHALL BE ALLOWED TO THE ASSESSEE UNDER ANY PROVISIO N OF THIS ACT IN COMPUTING HIS INCOME AS REFERRED TO CLAUSE (A) OF S UBSECTION (1) OF THE ACT. IF WE WERE TO ACCEPT THE CONTENTIONS OF THE LD CIT(DR), THE QUESTION THAT ARISES IS WOULD THAT INTERPRETATION R ENDER SUB-SECTION (2) OTIOSE AND WHAT WAS THE NECESSITY FOR BRINGING IN T HE SUBJECT AMENDMENT. THE INTENT OF THE LEGISLATURE HAS BEEN PROVIDED IN THE MEMORANDUM EXPLAINING THE SAID AMENDMENT WHICH READ S AS UNDER: CURRENTLY, THERE IS UNCERTAINTY ON THE ISSUE OF SE T-OFF OF LOSSES AGAINST INCOME REFERRED IN SECTION 115BBE OF THE AC T. THE MATTER HAS BEEN CARRIED TO JUDICIAL FORUMS AND COUR TS IN SOME CASES HAS TAKEN A VIEW THAT LOSSES SHALL NOT BE ALL OWED TO BE SET-OFF AGAINST INCOME REFERRED TO IN SECTION 115BB E. HOWEVER, THE CURRENT LANGUAGE OF SECTION 115BBE OF THE ACT D OES NOT CONVEY THE DESIRED INTENTION AND AS A RESULT THE MA TTER IS LITIGATED. IN ORDER TO AVOID UNNECESSARY LITIGATION , IT IS PROPOSED TO AMEND THE PROVISIONS OF THE SUB-SECTION (2) OF S ECTION 115BBE TO EXPRESSLY PROVIDE THAT NO SET OFF OF ANY LOSS SHALL BE ALLOWABLE IN RESPECT OF INCOME UNDER THE SECTIONS 6 8 OR SECTION 69 OR SECTION 69A OR SECTION 69B OR SECTION 69C OR SECTION 69D. 8 ITA NO. 645/JP/2017 M/S. S.K. JEWELLERS, JAIPUR. 10. IN LIGHT OF ABOVE, GIVEN THE FACT THAT THE AO H AS INVOKED THE PROVISIONS OF SECTION 11BBE IN THE INSTANT CASE, TH E PROVISIONS OF SUB- SECTION (2) TO SECTION 11BBE ARE EQUALLY APPLICABLE . THE AMENDMENT BROUGHT IN BY THE FINANCE ACT, 2016 WHEREBY SET OFF OF LOSSES AGAINST INCOME REFERRED TO IN SECTION 69B HAS BEEN DENIED I S STATED CLEARLY TO BE EFFECTIVE FROM 1 APRIL 2017 AND WILL ACCORDINGLY , APPLY TO ASSESSMENT YEAR 2017-18 ONWARDS. ACCORDINGLY, FOR THE YEAR UNDER CONSIDERATION, THERE IS NO RESTRICTION TO SET OFF O F BUSINESS LOSSES AGAINST INCOME BROUGHT TO TAX UNDER SECTION 69B OF THE ACT. 11. FURTHER, THE MATTER COULD BE LOOKED AT FROM ANO THER PERSPECTIVE. THE PROVISIONS RELATING TO SET OFF OF LOSSES ARE CO NTAINED IN CHAPTER-VI RELATING TO AGGREGATION OF INCOME AND SET OFF OF LO SSES. WHENEVER LEGISLATURE DESIRES TO RESTRICT SET-OFF OF LOSS OR ALLOWANCE OF LOSS, IN A PARTICULAR MANNER, USUALLY, THE PROVISIONS ARE MADE IN CHAPTER-VI SUCH AS NON-ALLOWANCE OF BUSINESS LOSS AGAINST SALARY IN COME AS PROVIDED IN SECTION 71(2A), AND TREATMENT OF SHORT-TERM OR LON G-TERM CAPITAL LOSSES. THERE IS NO SPECIFIC PROVISION WHICH RESTR ICT SET OFF OF BUSINESS LOSSES AGAINST INCOME BROUGHT TO TAX UNDER SECTION 69B. INTERESTINGLY, BOTH SECTION 69B AND SECTION 71 FALLS UNDER THE SAM E CHAPTER VI. IN THE ABSENCE OF ANY PROVISIONS IN SECTION 71 FALLING UNDER CHAPTER-VI WHICH RESTRICT SUCH SET OFF, IN THE INSTANT CASE, S ET OFF OF BUSINESS LOSSES AGAINST INCOME BROUGHT TO TAX UNDER SECTION 69B CANNOT BE DENIED. 12. NOW, WE REFER TO VARIOUS JUDICIAL PRONOUNCEMENT S QUOTED BY BOTH THE PARTIES. WE FIND THAT THE DECISION OF HONBLE G UJARAT HIGH IN CASE OF FAKIR MOHMED HAJIHASAN (SUPRA) AND SUBSEQUENT DECIS ION OF THE HONBLE MADRAS HIGH COURT IN CASE OF CHENSING VENTU RES (SUPRA) ARE TWO EARLIEST DECISIONS ON THE SUBJECT WHERE THE HON BLE COURTS HAVE TAKEN A DIVERGENT VIEW IN THE MATTER. AS PER THE D ECISION OF HONBLE GUJARAT HIGH COURT, THE ADDITION ON ACCOUNT OF UNEX PLAINED INVESTMENT WOULD BE CONSIDERED AS TOTAL INCOME OF THE PREVIOUS YEAR WITHOUT ALLOWING SET-OFF OF BUSINESS LOSS. AS PER MADRAS H IGH COURTS DECISION, THE ADDITION WOULD BE SET-OFF AGAINST THE BUSINESS LOSS AND THE BALANCE ADDITION, IF ANY, WOULD FORM PART OF THE TOTAL INCO ME AND ATTRACT TAX. 13. IT IS NOTICED THAT THE HONBLE GUJARAT HIGH COU RT IN CASE OF CIT VS SHILPA DYEING & PRINTING MILLS (P) LTD (SUPRA) HAD AN OCCASION TO CONSIDER AN IDENTICAL ISSUE WHERE THE SAID DIVERGEN T VIEW HAS BEEN RECONCILED. IN THAT DECISION, THE HONBLE HIGH COU RT HAS CONSIDERED ITS EARLIER DECISION RENDERED IN CASE OF FAKIR MOHMED H AJIHASAN (SUPRA) AS EXPLAINED IN ANOTHER DECISION IN CASE OF RADHE DEVE LOPERS INDIA LTD (SUPRA) AND ALSO THE DECISION OF MADRAS HIGH COURT IN CASE OF CHENSING 9 ITA NO. 645/JP/2017 M/S. S.K. JEWELLERS, JAIPUR. VENTURES (SUPRA). IT WOULD THEREFORE TO RELEVANT T O REFER TO THE FACTS AND THE LEGAL PROPOSITION LAID DOWN BY THE HONBLE GUJARAT HIGH COURT DECISION IN CASE OF SHILPA DYEING & PRINTING MILLS (P) LTD. FACTS OF THE CASE BRIEF FACTS ARE THAT, THE RESPONDENT-ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF DYING AND PRINTING. DURING THE COUR SE OF SCRUTINY FOR THE ASSESSMENT YEAR 2008-09, THE ASSESSING OFFICER NOTICED THAT IN A SURVEY ACTION CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE, IT HAD DECLARED A SUM OF RS. 100.98 LACS (ROUNDED OFF) ON ACCOUNT OF EXCESS STOCK. IN THE RETURN, THE ASSESSEE HAD SUGGE STED CURRENT YEAR'S LOSS AGAINST SUCH INCOME. ASSESSING OFFICER HOLDING A BELIEF THAT INCOME FROM UNLISTED SOURCE WOULD NOT FALL UNDER AN Y OF THE HEADS OF THE INCOME, THE SAME HAS TO BE TAXED SEPARATELY, TH E CURRENT LOSSES CANNOT BE SET OFF AGAINST SUCH INCOME. FINDINGS AND LEGAL PROPOSITION 8. WE, HOWEVER, FIND THAT SECTION 71 OF THE ACT PERMI TS AN ASSESSEE TO SET OFF LOSS OTHER THAN THAT OF CAPITAL GAINS AG AINST INCOME FROM OTHER HEAD. THIS VERY ISSUE CAME-UP FOR CONSIDERATI ON BEFORE THE MADRAS HIGH COURT IN CASE OF CHENSING VENTURES (SUP RA). THE DIVISION BENCH OF THE COURT CONSIDERED THE ISSUE IN FOLLOWIN G MANNER: '6. HEARD COUNSEL. THE ASSESSING OFFICER HAS NOT GI VEN ANY REASON WHATSOEVER TO DENY THE SET OFF OF THE BUSINE SS LOSS AGAINST THE INCOME DECLARED UNDER THE HEAD & 'OTHER SOURCES'. SECTION 71 DEALS WITH SET OFF OF LOSS AGAINST INCOM E UNDER ANY OTHER HEAD. AFTER SETTING OFF LOSSES AGAINST THE IN COME UNDER THE SAME HEAD, IF THE NET RESULT IS STILL A LOSS, THE A SSESSEE CAN SET OFF THE SAID LOSS UNDER SECTION 71 OF THE ACT AGAIN ST INCOME OF THE SAME YEAR UNDER ANY OTHER HEAD, EXCEPT FOR LOSS ES WHICH ARISE UNDER THE HEAD 'CAPITAL GAINS'. THE INCOME TA X IS ONLY ONE TAX AND LEVIED ON THE SUM TOTAL OF THE INCOME CLASS IFIED AND CHARGEABLE UNDER THE VARIOUS HEADS. SECTION 14 HAS CLASSIFIED THE DIFFERENT HEADS OF INCOME AND INCOME UNDER EACH HEAD IS SEPARATELY COMPUTED. INCOME WHICH IS COMPUTED IN AC CORDANCE WITH LAW IS ONE INCOME AND IT IS NOT A COLLECTION O F DISTINCT TAX LEVIED SEPARATELY ON EACH HEAD OF INCOME AND IT IS NOT AN AGGREGATE OF VARIOUS TAXES COMPUTED WITH REFERENCE TO EACH OF THE DIFFERENT SOURCES SEPARATELY. THERE IS ONLY ONE ASSESSMENT AND THE SAME IS MADE AFTER THE TOTAL INCOME HAS BEE N ASCERTAINED. THE ASSESSEE IS SUBJECT TO INCOME-TAX ON HIS TOTAL INCOME THOUGH HIS INCOME UNDER EACH HEAD MAY BE WEL L BELOW 10 ITA NO. 645/JP/2017 M/S. S.K. JEWELLERS, JAIPUR. THE TAXABLE LIMIT. HENCE THE LOSS SUSTAINED IN ANY YEAR UNDER ANY HEADS OF INCOME WILL HAVE TO BE SET OFF AGAINST INCOME UNDER ANY OTHER HEAD. IN THIS CASE, THE ASSESSING O FFICER MADE ADDITION OF RS.28,50,000/- AS UNDISCLOSED INCOME UN DER SECTION 69 OF THE ACT. ONCE THE LOSS IS DETERMINED, THE SAM E SHOULD BE SET OFF AGAINST THE INCOME DETERMINED UNDER ANY OTH ER HEAD OF INCOME. IN THE ASSESSMENT, NO REASONS WERE GIVEN BY THE ASSESSING OFFICER TO DENY THE BENEFIT OF SECTION 71 OF THE ACT. THE BENEFIT PROVIDED UNDER SECTION 71 OF THE ACT CA NNOT BE DENIED AND THE LEARNED STANDING COUNSEL APPEARING F OR THE REVENUE IS ALSO UNABLE TO EXPLAIN OR GIVE REASONS W HY THE ASSESSEE IS NOT ENTITLED TO THE BENEFIT OF SECTION 71 OF THE ACT. THE REASONS GIVEN BY THE TRIBUNAL ARE BASED ON VALI D MATERIALS AND EVIDENCE AND THE SAME IS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 71OF THE ACT. WE FIND NO ERROR OR LEGAL INFIRMITY IN THE IMPUGNED ORDER.' 9. WE MAY FURTHER NOTICE THAT THE DECISION IN CASE OF FAKIR MOHMED HAJI HASAN (SUPRA) CAME-UP FOR CONSIDERATION IN CAS E OF RADHE DEVELOPERS INCIA LTD. (SUPRA),IT WAS OBSERVED AS UN DER: 'THE DECISIONS OF THIS COURT IN THE CASE OF FAKIR M OHMED HAJI HASAN (SUPRA) AND KRISHNA TEXTILES (SUPRA) ARE NEIT HER RELEVANT NOR GERMANE TO THE ISSUE CONSIDERING THE FACT THAT IN NONE OF THE DECISIONS THE LEGISLATIVE SCHEME EMANATING FROM CONJOINT READING OF PROVISIONS OF SECTIONS 14 & 56 OF THE AC T HAVE BEEN CONSIDERED. THE APEX COURT IN THE CASE OF D.P. SAND U BROS.CHEMBUR P. LTD.,(SUPRA) HAS DEALT WITH THIS VE RY ISSUE WHILE DECIDING THE TREATMENT TO BE GIVEN TO A TRANSACTION OF SURRENDER OF TENANCY RIGHT. THE EARLIER DECISIONS OF THE APEX COURT COMMENCING FROM CASE OF UNITED COMMERCIAL BANK LTD. V. CIT [1957] 32 ITR 688 (SC) HAVE BEEN CONSIDERED BY THE APEX COURT AND, HENCE, IT IS NOT NECESSARY TO REPEAT THE SAME. SUFFICE IT TO STATE THAT THE ACT DOES NOT ENVISAGE TAXING A NY INCOME UNDER ANY HEAD NOT SPECIFIED IN SECTION 14 OF THE A CT. IN THE CIRCUMSTANCES, THERE IS NO QUESTION OF TRYING TO RE AD ANY CONFLICT IN THE TWO JUDGMENTS OF THIS COURT AS SUBMITTED BY THE LEARNED COUNSEL FOR THE REVENUE.' 10. IN OUR OPINION, THE STATUTORY PROVISIONS CONTAINED IN SECTION 71 WAS APPLICABLE IN THE PRESENT CASE. BY APPLYING THE DECISION IN CASE OF FAKIR MOHMED HAJI HASAN (SUPRA) AS EXPLAINED IN CAS E OF RADHE DEVELOPERS INCIA LTD. (SUPRA), THE SAME CANNOT BE D ECLINED. IN THE RESULT, NO QUESTION OF LAW ARISES. TAX APPEAL IS, T HEREFORE, DISMISSED. 11 ITA NO. 645/JP/2017 M/S. S.K. JEWELLERS, JAIPUR. 14. IT IS ALSO NOTED THAT IN LATEST DECISION OF HO NBLE GUJARAT HIGH COURT IN CASE OF KRISHNAMEGH YARN INDUSTRIES (SUPRA ) WHICH HAS BEEN BROUGHT TO OUR ATTENTION BY THE LD CIT DR TO SUPPOR T HIS CONTENTIONS REGARDING APPLICABILITY OF SECTION 69B, THE EARLIER DECISION IN CASE OF SHILPA DYEING AND PRINTING MILLS HAS BEEN FOLLOWED FOR SETTING OFF OF LOSSES UNDER SECTION 71 AGAINST SUCH INCOME. THE R ELEVANT FINDINGS OF HONBLE HIGH COURT ARE AS UNDER: 8. WE HAVE LEARNED ADVOCATES FOR THE RESPECTIVE PARTIE S. PERUSED THE ORDERS OF THE CIT (APPEALS) AS WELL AS THE ITAT. IT IS AN UNDISPUTED FACT THAT DURING SCRUTINY, THE ASS ESSEE HIMSELF HAS DISCLOSED THE FACT THAT IN HIS BOOKS OF ACCOUNT , HE HAD SHOWN LESS STOCK TO THE TUNE OF RS.10,06,987/-. IT IS ALSO AN ADMITTED FACT THAT WHEN THE PHYSICAL STOCK WAS EXAM INED BY THE AUTHORITY, THE VALUE OF THE SAID STOCK WAS RS. 13,3 3,485/-, HOWEVER, AS PER THE BOOKS OF ACCOUNT, THE VALUE OF STOCK WAS TO THE TUNE OF RS.3,26,498/- I.E. AMOUNT TO THE TUNE O F RS.10,06,987/- WAS NOT RECORDED IN THE BOOKS OF ACC OUNT. HOWEVER, IT IS ADMITTED BY THE ASSESSEE HIMSELF THA T HE HAS NOT COMPLETELY DISCLOSED THE STOCK IN THE BOOKS OF ACCO UNT. NOW, CONSIDERING THE PROVISO OF SECTION 69(B) OF THE ACT , WE ARE OF THE OPINION THAT THE ASSESSEE HAD NOT FULLY DISCLOS ED THE STOCKS IN THE BOOKS OF ACCOUNT AND THEREFORE, THE ASSESSIN G OFFICER AS WELL AS THE CIT (APPEALS) HAVE RIGHTLY OBSERVED THA T THE CASE OF THE ASSESSEE WOULD FALL UNDER THE PROVISO OF SECTIO N 69(B) OF THE ACT. WE ARE ALSO OF THE OPINION THAT THE SUBMISSIONS MAD E BY THE LEARNED ADVOCATE IS THAT THE CASE WOULD FALL UNDER THE PROV ISO OF SECTION 69(C) OF THE ACT DOES NOT APPLY TO THE FACTS OF THE PRESE NT CASE. IT IS NOT THE CASE OF THE REVENUE THAT THERE IS AN UNEXPLAINED EX PENDITURE, WHICH WOULD COVER UNDER THE PROVISO OF THIS ACT AND THERE FORE, THE ASSESSEE WOULD NOT BE ENTITLED FOR THE SET OFF UNDER THE PRO VISO OF SECTION 71 OF THE ACT. AS FAR AS APPLICABILITY OF THE CASE OF SHI LPA DYEING & PRINTING MILLS (P.) LTD. (SUPRA) IS CONCERNED, THE SAME WOUL D BE APPLICABLE SINCE THE COURT HAD HELD THAT THE AMOUNT OF EXCESS STOCK WOULD FALL UNDER THE DEFINITION OF INCOME AS PER SECTION 14 OF THE A CT AND THEREFORE, THE ASSESSEE WOULD BE ENTITLED FOR THE SET OFF UNDER PR OVISO OF SECTION 71 OF THE ACT. AS FAR AS THE CASE OF ATTAR SINGH GURMU KH SINGH (SUPRA) IS CONCERNED, THE SAME WOULD NOT BE APPLICABLE IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE SINCE IT IS NOT THE CASE THAT THERE WAS UNEXPLAINED EXPENDITURE MADE BY THE ASSESSEE. 12 ITA NO. 645/JP/2017 M/S. S.K. JEWELLERS, JAIPUR. 9. THEREFORE, WE ARE OF THE OPINION THAT THE CIT (APPE ALS) AS WELL AS THE ITAT HAVE COMMITTED ERROR IN REFUSING GIVING SE T OFF TO THE ASSESSEE UNDER SECTION 71 OF THE ACT AND ACCORDINGL Y, WE ALLOW THESE APPEALS BY SETTING ASIDE THE ORDER DATED 28.02.2005 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL (THE ITAT) AND ORDER DATED 07.07.2014 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) AHMEDABAD [THE CIT (APPEALS)]. 15. IN LIGHT OF ABOVE, WE ARE OF THE VIEW THAT THE ASSESSEE DESERVE TO SUCCEED IN THE SUBJECT APPEAL AND WILL BE ELIGIBLE FOR SET OFF BUSINESS LOSS OF RS 86,96,733 AGAINST THE INCOME OF RS 2,31, 41,217 WHICH HAS BEEN BROUGHT TO TAX UNDER SECTION 69B READ WITH SEC TION 115BBE OF THE ACT. IN THE RESULT, GROUNDS TAKEN BY REVENUE ARE DI SMISSED. 7. WE ALSO REFER TO THE DECISION OF THE COORDINATE BENCH IN THE CASE OF ACIT CC-2, VS. M/S GIRDHAR ASSOCIATES (SUPR A) WHEREIN IT WAS HELD AS UNDER: 3.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE CIRCULA R NO. 3/2017 DATED 20 TH JAN. 2017 ISSUED BY THE CBDT, MINISTRY OF FINANCE, NEW DELHI. IT IS NOT IMPERATIVE TO REPEAT THE FACT S OF THE CASE AS IT IS FOUND THAT THE ISSUE IN QUESTION IS COVERE D BY THE CIRCULAR NO. 3/2017 DATED 20-01-2017 ISSUED BY THE CBDT, MINISTRY OF FINANCE, NEW DELHI RELATING TO THE ISSU E OF SECTION 115BBE OF THE ACT AND THIS SECTION IS OPERATIVE FRO M THE ASSESSMENT YEAR 2017-18 AND NOT RELATED TO THE ISSU E PRIOR TO IT. HENCE, THE APPLICATION OF SECTION 115BBE OF THE ACT APPLIED BY THE AO ON THE ASSESSEE IS NOT APPLICABLE IN THE PRE SENT FACTS AND CIRCUMSTANCES OF THE CASE. IN VIEW OF THE ABOVE DE LIBERATIONS, THE GROUND NO. 2 OF THE REVENUE IS DISMISSED. 8. IN LIGHT OF ABOVE DISCUSSIONS, IT IS CLEAR THAT THE AMENDMENT BROUGHT IN SECTION 115BBE WHEREIN NO SET OFF OF LOSSES AGAI NST SURRENDERED INCOME BROUGHT TO TAX IS PROSPECTIVE IN NATURE AND DOESNT APPLY FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THE DECIS IONS RELIED UPON BY THE REVENUE HAVE ALSO BEEN EXAMINED AND DOESNT SUPPORT ITS CASE. FOR THE YEAR UNDER CONSIDERATION, THERE IS NO BAR F OR SET OFF OF CURRENT YEAR BUSINESS LOSS U/S 71 AGAINST INCOME BROUGHT TO TAX UNDER THE 13 ITA NO. 645/JP/2017 M/S. S.K. JEWELLERS, JAIPUR. HEAD INCOME FROM OTHER SOURCES. WE ARE THEREFORE OF THE VIEW THAT THE ASSESSEE WILL BE ELIGIBLE FOR SET OFF OF CURREN T YEAR BUSINESS LOSS OF RS 767,768 AGAINST THE UNDISCLOSED INVESTMENT OF RS 36,00,000 TOWARDS PURCHASE OF PLOT OF LAND WHICH HAS BEEN SUR RENDERED DURING THE COURSE OF SEARCH, AND SUBSEQUENTLY OFFERED AND BROUGHT TO TAX UNDER SECTION 69 READ WITH SECTION 115BBE OF THE AC T. IN THE RESULT, SOLE GROUND TAKEN BY THE ASSESSEE IS ALLOWED. THEREFORE, SO FAR AS THE APPLICABILITY OF AMENDED P ROVISIONS OF SECTION 115BBE OF THE ACT IS CONCERNED, THE SAME IS APPLICABLE WITH EFFEC T FROM 1.4.2017 AND NOT PRIOR TO THAT. HOWEVER, THE QUESTION ARISES WHETHER THE ENT IRE STOCK WHICH WAS FOUND EXCESS AT THE TIME OF SURVEY REMAINED AS UNSOLD TILL 31 ST MARCH, 2013 SO THAT THE ASSESSEE CAN TAKE THE BENEFIT OF REDUCTION IN THE PREVAILING PRICE OF GOLD AGAINST THE SURRENDERED INCOME ON ACCOUNT OF UNEXPLAINED INVEST MENT IN THE STOCK. SINCE THIS ISSUE WAS NOT CONSIDERED BY THE AUTHORITIES BELOW A S THE AO DISALLOWED THE CLAIM OF THE ASSESSEE BY PLACING RELIANCE ON THE PROVISIONS OF SECTION115BBE AND THE LD. CIT (A) HAS ACCEPTED THE PREVAILING PRICE OF GOLD AS ON 31 ST MARCH, 2013 WITHOUT VERIFYING THE ACTUAL DETAILS OF THE REMAINING STOCK OUT OF THE EXCESS STOCK FOUND AT THE TIME OF SURVEY, THEREFORE, THIS FACTUAL ASPECT OF THE MATTER IS REQUIRED TO BE VERIFIED AND EXAMINED BY CONSIDERING ALL THE RELEVA NT DETAILS AT THE LEVEL OF THE AO. ACCORDINGLY, WE SET ASIDE THIS ISSUE FOR LIMITED PU RPOSES OF VERIFICATION AND EXAMINATION OF THE QUANTITY OF STOCK WHICH WAS REMA INED UNSOLD AS ON 31 ST MARCH, 2013 OUT OF THE TOTAL EXCESS STOCK FOUND AT THE TIM E OF SURVEY. GROUND NO. 3 IS REGARDING THE TRADING ADDITION OF R S. 55,662/- WAS DELETED BY THE LD. CIT (A). 14 ITA NO. 645/JP/2017 M/S. S.K. JEWELLERS, JAIPUR. 5. WE HAVE HEARD THE LD. D/R AS WELL AS THE LD. A/R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE AO REJECTED THE BOOKS OF A CCOUNTS OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE IT ACT ON THE GROUND THAT EXCESS STOCK WAS FOUND DURING THE COURSE OF SEARCH AND SUR VEY. THE AO THEN APPLIED THE NET PROFIT RATE OF 0.63% ON THE TURNOVER DECLARED B Y THE ASSESSEE RESULTING IN TRADING ADDITION OF RS. 55,662/-. THE ASSESSEE CHA LLENGED THE ACTION OF THE AO BEFORE THE LD. CIT (A) AND CONTENDED THAT THE AO HA S NOT POINTED OUT ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNTS AND, THEREFORE, THE PROVISIONS OF SECTION 145(3) INVOKED BY THE AO IS NOT JUSTIFIED. THE LD. CIT (A ) HAS ACCEPTED THE CONTENTION OF THE ASSESSEE IN PARA 3.3.2 AS UNDER :- 3.3.2. I HAVE DULY CONSIDERED ASSESSEES SUBMISSI ON AND CAREFULLY GONE THROUGH THE ASSESSMENT ORDER. HERE A O HAS MADE A TRADING ADDITION OF RS. 55,662/- BY APPLYING N.P. R ATE @ 0.63% TO THE TOTAL INCOME DECLARED. IT IS SUBMITTED THAT AO HAS NOT POINTED OUT ANY DEFICIENCY IN THE A/CS /BOOKS ALTHOUGH SECTION 145 (3) OF THE ACT HAS BEEN INVOKED FOR REJECTING BOOKS OF A/CS. FURTHER, INTEREST PAID ON PARTNERS CAPITAL AND REMUNERATION PAID TO PARTNERS ARE WELL WITHIN THE PRESCRIBED LIMIT, THEREFORE, NO FURTHER TRADING ADD ITION IS REQUIRED. IN VIEW OF THESE FACTS, ADDITION MADE OF RS. 55,662 /- IS HEREBY DELETED. ASSESSEES APPEAL IN GR NO. 3 STAN DS ALLOWED. IT APPEARS THAT THE LD. CIT (A) HAS NOT ANALYZED TH E ISSUE WITH THOROUGH PROCESS WITH THE FACTS BUT SIMPLY ACCEPTED THE SUBMISSIONS OF TH E ASSESSEE. THE LD. A/R OF THE ASSESSEE HAS REITERATED THE CONTENTION THAT EXCEPT THE EXCESS STOCK, NO FURTHER 15 ITA NO. 645/JP/2017 M/S. S.K. JEWELLERS, JAIPUR. DEFECT OR DEFICIENCY WAS FOUND IN THE BOOKS OF ACCO UNTS TO WARRANT INVOCATION OF PROVISIONS OF SECTION 145(3). WHEREAS THE LD. D/R H AS SUPPORTED THE ACTION OF THE AO AND SUBMITTED THAT WHEN THE ASSESSEE HAS NOT DIS PUTED THE EXCESS STOCK AT THE TIME OF SURVEY BEYOND THE BOOKS OF ACCOUNTS OF THE ASSESSEE, IT WOULD NOT SHOW THE TRUE AND FAIR AFFAIRS OF THE ASSESSEE. 6. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD, WE NOTE THAT THE EXCESS STOCK OF RS. 5,24,8 9,450/- FOUND AT THE TIME OF SURVEY ITSELF SPEAKS IN VOLUMES ABOUT THE CORRECTNE SS OF THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THEREFORE, THIS ITSELF IS A SUFFICIE NT GROUND FOR INVOKING THE PROVISIONS OF SECTION 145(3) AND REJECTING THE BOOK RESULTS OF THE ASSESSEE. HENCE WE FIND THAT THE AO WAS JUSTIFIED IN REJECTING THE BOOKS OF ACCO UNT AND ACCORDINGLY WE SET ASIDE THE ORDER OF THE LD. CIT (A) AND UPHELD THE ORDER O F THE AO TO THE EXTENT OF REJECTION OF BOOKS OF ACCOUNTS. AS REGARDS THE ESTIMATION OF INCOME OF THE ASSESSEE, ONCE THE BOOK RESULTS OF THE ASSESSEE WERE REJECTED, THE ONL Y OPTION LEFT WITH THE AO TO ESTIMATE THE INCOME BY APPLYING A REASONABLE AND PR OPER BASIS. IT IS SETTLED PROPOSITION OF LAW THAT THE PAST HISTORY OF THE ASS ESSEES GP OR NP RATE WHICH HAS BEEN ACCEPTED OR HAS ATTAINED THE FINALITY CAN BE A BASIS FOR ESTIMATION OF INCOME FOR THE YEAR UNDER CONSIDERATION. THEREFORE, THE AO HAS NOT APPLIED THE AVERAGE OF PAST HISTORY OF THE ASSESSEES DECLARED NP BUT HAS CONSI DERED ONLY THE NP DECLARED BY THE ASSESSEE FOR THE IMMEDIATELY PRECEDING YEAR. SINCE WE HAVE ALREADY SET ASIDE THE ISSUE INVOLVED IN GROUND NOS. 1 & 2 OF THE REVENUE S APPEAL, ACCORDINGLY THIS ISSUE FOR ESTIMATION OF INCOME BY APPLYING A REASONABLE A ND PROPER BASIS IS SET ASIDE TO 16 ITA NO. 645/JP/2017 M/S. S.K. JEWELLERS, JAIPUR. THE RECORD OF THE AO. NEEDLESS TO SAY, THE ASSESSEE BE GIVEN A PROPER OPPORTUNITY OF HEARING. 7. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY A LLOWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 19/06/2 018. SD/- SD/- ( FOE FLAG ;KNO ) ( FOT; IKY JKWO (VIKRAM SINGH YADAV ) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 19/06/2018. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- THE ACIT, CENTRAL CIRCLE-1, JAIPU R. 2. THE RESPONDENT M/S. S.K. JEWELLERS, JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 645/JP/2017) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 17 ITA NO. 645/JP/2017 M/S. S.K. JEWELLERS, JAIPUR.