ACIT, Alwar V. KHANDELWAL JEWELLERS, Alwar

ITA 647/JPR/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5236 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 23-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G R PAREEK
• Assessee Lawyers: P C PARWAL CA DHK
• Keywords: Unexplained investment; Loose papers; Opportunity of being heard
• Section: 143(3); 133A; 69; 28; 139

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI T.R.MEENA, AM VK;DJ VIHY LA -@ ITA NO. 647/JP/2014 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2011-12 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2, ALWAR CUKE VS. M/S KHANDELWAL JEWELLERS, 11-12, TILAK MARKET, ALWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAEFK 7573 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA -@ ITA NO. 610/JP/2014 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2011-12 M/S KHANDELWAL JEWELLERS, 11-12, TILAK MARKET, ALWAR. CUKE VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2, ALWAR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAEFK 7573 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI G.R. PAREEK (JCIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 07/06/2016. MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 17/06/2016. VKNS'K@ ORDER PER T.R. MEENA, A.M. THESE ARE THE CROSS APPEALS ONE BY THE REVENUE AND A NOTHER BY THE ASSESSEE ARISING AGAINST THE ORDER DATED 30/07/ 2014 PASSED BY THE ITA NO. 647 & 610/JP/2014 ACIT VS. M/S KHANDELWAL JEWELLERS 2 LD. CIT(A), ALWAR FOR THE ASSESSMENT YEAR 2011-12 WHE REIN THE REVENUE AS WELL AS THE ASSESSEE HAVE RAISED FOLLOWING GROUNDS AS UNDER: GROUNDS OF REVENUES APPEAL 1. THAT THE CIT(A), ALWAR HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS. 40,47,335/- MADE BY A.O. ON ACCOUNT OF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY AND ADMITTED BY THE ASSESSEE AS ITS UNDISCLOSED INVESTMENT IN STOCK. 2. THAT THE CIT(A). ALWAR HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN HOLDING THAT THERE WAS NO JUSTIFICATION IN THE ACTION OF THE A.O. FOR MAKING ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT IN STOCK EVEN THOUGH SUCH AMOUNT WORKS OUT TO RS. 8,55,862/- (RS. 93,08,427-8452665) AS PE R PARA 4.13 OF THE ORDER OF LD CIT(A), ALWAR. GROUNDS OF ASSESSEES APPEAL 1. THAT THE CIT(A), HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE A.O. IN RESTRICTING TH E CLAIM OF REMUNERATION PAID TO THE PARTNERS AT RS. 13,65,321/- AS AGAINST RS. 64,36,813/- CLAIMED BY T HE ASSESSEE BY NOT CONSIDERING THE EXCESS STOCK OF RS. 84,52,665/- SURRENDERED IN SURVEY AS PART OF BOOK PROFIT FOR THE PURPOSE OF SECTION 40(B) AND THEREB Y CONFIRMING ADDITION OF RS. 50,71,492/-. 2. THAT THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE A.O. IN MAKING ADDITIO N OF RS. 1,69,161/- ON ACCOUNT OF ALLEGED UNEXPLAINED CASH FOUND DURING THE COURSE OF SURVEY IGNORING THA T ITA NO. 647 & 610/JP/2014 ACIT VS. M/S KHANDELWAL JEWELLERS 3 THE CASH FOUND IN SURVEY IS VERIFIABLE FROM THE CAS H AVAILABLE AS PER CASH BOOK. FIRSTLY WE TAKE REVENUES APPEAL . 2. THE ASSESSEE IS IN TRADING OF GOLD AND SILVER JEWE LLERY AND BULLION. RETURN FOR THE YEAR UNDER CONSIDERATION WAS FILED ON 29/09/2011 DECLARING TOTAL INCOME OF RS. 41,41,208/-. THE CASE WAS SCRUTINIZED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT ). THERE WAS A SURVEY U/S 133A OF THE ACT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 20/10/2010. THE LD ASSESSING OFFICER OBSERVED THAT D URING THE COURSE OF SURVEY PROCEEDINGS, AT THE PREMISES OF THE ASSESSEE , CERTAIN LOOSE PAPERS, NOTE BOOK AND OTHER DOCUMENTS WERE FOUND AND DOCUMENTS WERE INCRIMINATING IN NATURE AS CERTAIN OUT OF BOOKS TRANSACTIONS WERE RECORDED IN THESE PAPERS, NOTEBOOKS ETC. NO BOOKS O F ACCOUNT WERE FOUND AT THE PREMISES OF THE ASSESSEE. MOREOVER THE ASSESSEE HAD NOT PRODUCED BOOKS OF ACCOUNT BEFORE THE ASSESSING OFFI CER IN THE POST SURVEY PROCEEDINGS. IN SUCH CIRCUMSTANCES THE CREDI BILITY OF THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE AND THE SAME CANNOT BE ACCEPTABLE TO THE ASSESSING OFFICER. DURING THE COU RSE OF SURVEY PROCEEDINGS, THE STOCK OF SILVER AND GOLD WAS INVENT ORISED AND VALUED BY INDEPENDENT APPROVED VALUER. AT THE BUSINESS PRE MISES OF THE ITA NO. 647 & 610/JP/2014 ACIT VS. M/S KHANDELWAL JEWELLERS 4 ASSESSEE EXCESS STOCK OF GOLD AND SILVER WERE FOUND. THE QUANTITY OF EXCESS STOCK OF GOLD JEWELLERY FOUND DURING THE COUR SE OF SURVEY IS 13.814 KGS AND THE QUANTITY OF STOCK OF SILVER FOUN D AT THE TIME OF SURVEY WAS 75.305 KGS. SHRI HEM KUMAR PARTNER OF THE FIRM AND THE MAIN PERSON LOOKING AFTER THE AFFAIRS OF THE BUSINE SS HAD SURRENDERED THE VALUE OF EXCESS STOCK FOR TAXATION CONSIDERING IT AS HIS UNDISCLOSED INCOME. HE SURRENDERED 7.564 KGS OF GOLD AND 34.314 KGS OF SILVER AS EXCESS STOCK AND AGREED TO PAY TAX ON THE SURRENDER ED QUANTITY. HE VALUED THE EXCESS STOCK OF GOLD AT RS. 1,18,00,000/ - (@ 1560/- PER 10 GMS) AND EXCESS STOCK OF SILVER AT RS. 7,00,000 (@ 2 0400/- PER KG) AND THUS TOTAL SURRENDER WAS MADE AT RS. 1.25 CRORES BY THE ASSESSEE. ON VERIFICATION OF RETURN, IT WAS FOUND BY THE ASSESSIN G OFFICER THAT THE SURRENDER ADMITTED BY THE ASSESSEE HAS NOT BEEN RET URNED, THEREFORE, HE GAVE SHOW CAUSE NOTICE ON THIS ISSUE. THE ASSESSEE ALSO REPLIED VIDE LETTER DATED 13/2/2014, WHICH HAS BEEN REPRODUCED BY THE ASSESSING OFFICER ON PAGE NO. 3 OF THE ASSESSMENT ORDER. AFTE R CONSIDERING THE ASSESSEES REPLY, THE LD ASSESSING OFFICER HELD THA T SHRI NARESH KUMAR KHANDELWAL, PARTNER OF THE FIRM IN HIS STATEMENTS, W HILE REPLYING THE QUESTION NO. 5 STATED THAT HIS BROTHER AND SECOND P ARTNER OF THE FIRM SHRI HARISH KUMAR KHANDELWAL, WHO WAS ACKNOWLEDGED ABOU T THE BOOKS ITA NO. 647 & 610/JP/2014 ACIT VS. M/S KHANDELWAL JEWELLERS 5 OF ACCOUNT MAINTAINED. SHRI HARISH KUMAR KHANDELWAL STATED THAT BOOKS OF ACCOUNT WERE KEPT WITH THE ACCOUNTANT SHRI ALOK, B UT THE SAID ACCOUNTANT DENIED ANY KIND OF BOOKS OF ACCOUNT OF T HE ASSESSEE. IT IS CONCLUDED THAT DURING THE SURVEY, THE ASSESSEE HAD NOT MAINTAINED BOOKS OF ACCOUNT AND WAS FURNISHING RETURN ON ESTIMA TE BASIS. THE DISCLOSURE MADE BY THE ASSESSEE IN THE RETURN AT RS . 84,52,665/- AGAINST THE EXCESS STOCK FOUND AT RS. 1.25 CRORES D URING THE SURVEY PROCEEDINGS. THE LD ASSESSING OFFICER HELD THAT THIS DISCLOSURE WAS MADE BY ONE OF THE MAIN PARTNER NAMELY SHRI HARISH KUMAR KHANDELWAL AFTER EXAMINING THE RECORD AND LOOSE VOUCHERS FOUND DURING THE COURSE OF SURVEY. HE FURTHER RELIED ON THE DECISION OF HON BLE KERALA HIGH COURT IN THE CASE OF V.KUNHAMBU AND SONS VS CIT 219 ITR 2 35 TO 243 WHEREIN EXCESS STOCK FOUND DURING THE COURSE OF SEAR CH AND STATEMENTS MADE THEREIN CANNOT BE HELD MISTAKENABLY OF THE FAC T OR LAW AND THE STATEMENT BEING VOLUNTARY. HE FURTHER RELIED ON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF RAKESH M AHAJAN VS CIT 642 OF 2007 (TAXPERT) AND 214 CTR 218 WHEREIN IT HAS BEEN HELD THAT ADMISSIONS CONSTITUTE BEST PIECE OF EVIDENCE AGAINS T OWN INTEREST. HE FURTHER RELIED ON THE DECISION OF HON'BLE SUPREME C OURT IN THE CASE OF SURJEET SINGH CHHABRA VS UNION OF INDIA & ORS. IN S LP (C) NO. 14028 OF ITA NO. 647 & 610/JP/2014 ACIT VS. M/S KHANDELWAL JEWELLERS 6 1996 ORDER DATED 25/10/1996. AFTER CONSIDERING THE REPLY AND LEGAL POSITION OF STATEMENT, HE MADE ADDITION OF RS. 40,4 7,335/- IN THE INCOME OF THE ASSESSEE. 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A), WH O HAD DELETED THE ADDITION BY OBSERVING THAT THE APPELLANT HAD DECLAR ED EXCESS STOCK OF RS. 84,52,665/- IN THE RETURN OF INCOME AS AGAINST THE EXCESS STOCK OF RS. 95,25,927/-. FURTHER HE FOUND THAT THE VALUATIO N OF STOCK WAS MADE ON THE BASIS OF MARKET VALUE ON THE DATE OF SURVEY AS AGAINST THE COST PRICE ADOPTED BY THE ASSESSEE. HE FURTHER HELD THAT VALUATION STOCK DONE BY THE APPROVED VALUER ON THE DATE OF SURVEY T HAT THE GOLD ORNAMENTS HAD BEEN VALUED AT 80% AVERAGE PURITY BY TAKING THE RATE AS RS. 1560 PER GRM., AS AGAINST THE RATE OF PURE GOLD AT RS. 1950 PER GM. FOR THE SILVER ITEMS THE VALUATION HAS BEEN DON E AT RS. 20,400/- PER KG. BY TAKING 57% AVERAGE PURITY, AS AGAINST TH E RATE OF PURE SILVER OF RS. 35,500/- PER KG. HE FURTHER FOUND THAT THE A SSESSEE RECEIVED GOLD FROM THE CUSTOMERS AT 250 GMS VALUED AT RS. 2,14,50 0/- HAD NOT BEEN CONSIDERED BY THE ASSESSING OFFICER DURING THE COUR SE OF ASSESSMENT PROCEEDINGS. THE LD ASSESSING OFFICER HAD NOT GIVEN ANY ADVERSE FINDING ITA NO. 647 & 610/JP/2014 ACIT VS. M/S KHANDELWAL JEWELLERS 7 IN THE ASSESSMENT ORDER THAT QUANTITATIVE VALUE OF STOCK OF GOLD ORNAMENTS AND SILVER ORNAMENTS HAD BEEN RECONCILED WITH THE QUANTITY DISCLOSED IN THE BOOKS OF ACCOUNT. FURTHER IT IS WEL L ACCEPTED PRINCIPLE THAT STOCK HAS TO BE VALUED ON THE BASIS OF COST OR MARKET PRICE, WHICHEVER IS LESS. ACCORDINGLY, HE DELETED THE ADDIT ION. 4. NOW THE REVENUE IS IN APPEAL BEFORE US AND BOTH T HE GROUNDS RAISED BY THE REVENUE ARE AGAINST DELETING THE ADDI TION OF RS. 40,47,335/- MADE BY THE ASSESSING OFFICER AND DIFFE RENCE BETWEEN WORKING MADE BY THE LD CIT(A) AND DISCLOSURE MADE BY THE ASSESSEE AT RS. 8,55,862/-. THE LD DR HAS VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND ARGUED THAT THE ASSESSEE HAD ADMITTED DURING THE COURSE OF SURVEY THE EXCESS STOCK OF RS. 1.25 CRORE S. HE HAS DRAWN OUR ATTENTION ON PAPER BOOK SUBMITTED BY THE ASSESSEE P ARTICULARLY STATEMENT OF SHRI HARISH KUMAR KHANDELWAL DATED 20/1 0/2010, ANSWER TO QUESTION NO. 78 WHEREIN SHRI KHANDELWAL HAS ADMIT TED THAT BOOKS OF ACCOUNT HAD NOT BEEN WRITTEN UP TO 21/10/2010 WHATEVE R VALUATION MADE BY THE DEPARTMENT OF STOCK FOUND WAS ACCEPTABLE TO HIM AND TOTAL EXCESS STOCK WAS ADMITTED AT RS. 1.25 CRORES UNACCOU NTED. HE ALSO GAVE ADVANCE TAX OF RS. 13,75,000/- THROUGH THREE C HEQUES OF AXIX ITA NO. 647 & 610/JP/2014 ACIT VS. M/S KHANDELWAL JEWELLERS 8 BANK. HE HAS ALSO DRAWN THE HONBLE ITAT PUNE BENCH D ECISION ON STATEMENT RECORDED DURING THE COURSE OF SEARCH I.E. DECISION IN THE CASE OF HOTEL KIRAN VS. ASSISTANT COMMISSIONER OF INCOME-T AX [2002] 82 ITD 453 (ITAT[PUNE]) AND ARGUED THAT IT HA S EVIDENTIARY VALUE. THERE IS NO DIFFERENCE IN STATEMENT RECORDED U/S 133(A) AND 132(4) OF THE ACT, AS SUCH, THERE WAS NO COERCION AN D UNDUE INFLUENCE FROM THE DEPARTMENT. THERE WAS NO FORCE DISCLOSURE, T HEREFORE, HE PRAYED TO UPHOLD THE ORDER OF THE LD ASSESSING OFFI CER. 5. AT THE OUTSET, THE LD AR OF THE ASSESSEE HAS REI TERATED THE ARGUMENTS MADE BEFORE THE LD CIT(A). HE FURTHER SUB MITTED THAT IT IS A FACT ON RECORD THAT IN COURSE OF SURVEY, THE BOOKS OF ACCOUNTS WERE NOT FOUND. IN THE ABSENCE OF BOOKS, IT WAS NOT POSSIBLE TO DETERMINE THE EXACT QUANTITY OF STOCK. THEREFORE, THE ASSESSEE BY ASSUMING EXCESS STOCK OF GOLD ITEM AT 7.564 KGS AND SILVER ITEM AT 34.314 KGS OFFERED RS.1.25 CRORES FOR TAX. THE AO HAS MADE THE ADDITION ON THE BASIS OF THIS SURRENDER ONLY. HE IGNORED THAT EVEN THE CBDT I N INSTRUCTION NO. 286/2/2003-IT (INV.) DT. 10.03.2003 HAS OBSERVED THA T THERE ARE INSTANCES WHERE ASSESSEES ARE FORCED TO CONFESS THE UNDISCLOSED INCOME AND IT WAS ADVISED THAT IN SEARCH AND SURVEY THERE S HOULD BE FOCUS AND ITA NO. 647 & 610/JP/2014 ACIT VS. M/S KHANDELWAL JEWELLERS 9 CONCENTRATION ON COLLECTION OF EVIDENCES OF INCOME AND NO ATTEMPT SHOULD BE MADE TO OBTAIN CONFESSION OF UNDISCLOSED INCOME IN THE STATEMENT. IT IS FURTHER DIRECTED THAT AO SHOULD RE LY ON EVIDENCE/MATERIAL GATHERED DURING SURVEY OPERATION OR THEREAFTER WHILE FRAMING THE RELEVANT ASSESSMENT ORDER. THE FACT OF GETTING SURRENDER BY EXTRACTING PRESSURE ON ASSESSEES IS ALSO ACCEPTED B Y THE COURTS /TRIBUNALS IN VARIOUS CASES. FURTHER, SUPREME COURT IN CASE OF CIT VS. S. KHADER SON 352 ITR 480 HAS HELD THAT SECTION 133A DOES NOT EMPOWER ANY INCOME TAX AUTHORITY TO EXAMINE ANY PERS ON ON OATH AND THUS, ANY SUCH STATEMENT HAS NO EVIDENTIARY VALUE. THEREFORE, ANY ADMISSION MADE DURING SUCH STATEMENT CANNOT BY ITSE LF, BE MADE THE BASIS FOR ADDITION. HENCE, THE ADDITION MADE BY AO SOLELY ON THE BASIS OF SURRENDER MADE BY THE ASSESSEE IN SURVEY IS ILLE GAL AS SUCH STATEMENT HAS NO EVIDENTIARY VALUE. IN COURSE OF ASSESSMENT P ROCEEDINGS, THE ASSESSEE FURNISHED THE EXACT QUANTITY OF STOCK AS P ER THE BOOKS OF ACCOUNTS ON THE DATE OF SURVEY AND ITS VALUE AS PER THE BOOKS VIS--VIS THE QUANTITY OF STOCK AND ITS VALUATION DONE BY THE VALUER ON THE DATE OF SURVEY. ON THIS BASIS EXCESS STOCK OF GOLD ORNAMENT S WAS WORKED OUT AT 5313.252 GMS (5.313 KGS) AND THAT OF SILVER ORNAMEN TS WAS WORKED OUT AT 56801.054 GMS (56.801 KGS).THIS STOCK WAS VALUED AT RS.84,52,666/- ITA NO. 647 & 610/JP/2014 ACIT VS. M/S KHANDELWAL JEWELLERS 10 BY APPLYING THE AVERAGE RATE AS PER THE BOOKS OF AC COUNTS. THE AO HAS NOT FOUND ANY DEFECT IN THIS WORKING BUT STILL MADE THE ADDITION. THE LD. CIT(A), THEREFORE, AFTER APPRECIATING THE FACTS OF T HE CASE AND AS PER HIS DETAILED FINDINGS AT PARA 4.3 TO 4.13 OF THE ORDER AT PG 5-9 HAS RIGHTLY DELETED THE ADDITION. ONE OF THE GROUND OF THE DEPA RTMENT IS THAT AS PER PARA 4.13 OF THE ORDER OF THE CIT(A), THE EXCESS STO CK IS OF RS.93,08,427/- AND THEREFORE THE ADDITION OF RS.8,5 5,762/- (9308427- 8452666) SHOULD BE CONFIRMED. HOWEVER, IN RAISING TH IS GROUND IT IS IGNORED THAT AT THE TIME OF SURVEY THE STOCK IS VAL UED BY ASSUMING THE GOLD ORNAMENTS AT AVERAGE PURITY OF 80% AND SILVER ORNAMENTS AT AVERAGE PURITY OF 57%. AS AGAINST THIS THE ASSESSEE VALUED THE EXCESS STOCK AT AVERAGE COST. AS A RESULT THE SILVER ORNAM ENTS WHICH WAS VALUED AT THE TIME OF SURVEY AT THE RATE OF RS.20,4 00/- PER KG IS VALUED BY THE ASSESSEE AT THE RATE OF RS.24,310/- PER KG ( I.E. AT HIGHER RATE) AND THE GOLD ORNAMENTS WHICH WAS VALUED AT THE TIME O F SURVEY AT THE RATE OF RS.1,560/- PER GM IS VALUED BY THE ASSESSEE AT THE RATE OF RS.1,331/- PER GM. THEREFORE, CIT(A) AT PARA 4.14 HA S HELD THAT STOCK IS TO BE VALUED ON THE BASIS OF COST OR MARKET PRICE WH ICHEVER IS LESS AND THUS RIGHTLY DELETED THE ENTIRE ADDITION MADE BY AO . IN VIEW OF ABOVE, ITA NO. 647 & 610/JP/2014 ACIT VS. M/S KHANDELWAL JEWELLERS 11 THE ORDER OF LD. CIT(A) ON THIS ISSUE BE UPHELD BY D ISMISSING THE GROUND OF THE DEPARTMENT. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT IS UNDISPUTED FACT THAT THE BOOKS OF ACCOUNT WERE NOT FOUND DURING THE COURS E OF SURVEY AND THE ADMISSION WAS MADE BY THE PARTNER OF EXCESS STOC K OF RS. 1.25 CRORES FOR GOLD AND SILVER JEWELLERY BUT HE HAS NOT WRITTEN THIS DISCLOSURE IN THE RETURN ITSELF. THE LD ASSESSING OFFICER RAIS ED THIS ISSUE DURING THE ASSESSMENT PROCEEDINGS, WHICH WAS REPLIED BY THE ASS ESSEE BUT HE HAS NOT CONVINCED WITH THE ASSESSEES REPLY. AGAIN THIS ISSUE HAS BEEN CONSIDERED BY THE LD CIT(A) AND WHO FOUND THAT VALUAT ION OF JEWELLERY WAS MADE ON THE DATE OF SURVEY AT THE RATE PREVAILIN G OF SURVEY BUT AS PER ACCOUNTING POLICY IT HAS TO BE VALUED ON THE BA SIS OF COST PRICE OR MARKET PRICE WHICHEVER IS LESS, THEREFORE, THE ASSES SEE FURNISHED REVISED VALUATION ON THE BASIS OF AVERAGE PRICE OF THE GOLD AND SILVER JEWELLERY PURCHASED. THIS CALCULATION HAS BEEN CONSID ERED BY THE LD CIT(A) WHICH WAS FOUND JUSTIFIED TO HIM, ACCORDINGLY HE DELETED THE ADDITION. IT IS SETTLED LAW THAT STATEMENT RECORDED DURING THE COURSE OF SURVEY HAS NO EVIDENTIARY VALUE AS HELD BY THE HON' BLE SUPREME COURT ITA NO. 647 & 610/JP/2014 ACIT VS. M/S KHANDELWAL JEWELLERS 12 IN THE CASE OF COMMISSIONER OF INCOME-TAX VS. S. KH ADER KHAN SON [2013] 352 ITR 480 (SC). THE LD DR HAS NOT CONTR OVERTED THE FINDINGS GIVEN BY THE LD CIT(A) ON THE BASIS OF FACT , THEREFORE, WE DO NOT HAVE ANY REASON TO INTERVENE IN THE ORDER OF TH E LD CIT(A). ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD CIT(A) AND DISMISS THE REVENUES APPEAL ON GROUND NO. 1 AND 2. NOW WE TAKE ASSESSEES APPEAL. 7. THE ASSESSEES 1 ST GROUND OF APPEAL IS AGAINST NOT CONSIDERING THE EXCESS STOCK OF RS. 84,52,665/-, SURRENDERED IN SUR VEY AS PART OF BOOK PROFIT U/S 40(B) OF THE ACT. THE LD ASSESSING OFFICE R OBSERVED THAT THE ASSESSEE HAD DECLARED RS. 41,41,208/- IN THE RETURN . THE ASSESSEE HAD CLAIMED PAYMENT OF REMUNERATION TO THE PARTNER FROM THE EXCESS STOCK DECLARED DURING THE COURSE OF SURVEY AS PER PROVISI ONS OF SECTION 40(B)(V) OF THE ACT THAT THE REMUNERATION IS ALLOWAB LE TO THE WORKING PARTNER ONLY ON THE BOOK PROFIT OF THE BUSINESS WHE N IT IS AUTHORIZED IN THE PARTNERSHIP DEED. THE AMOUNT SURRENDERED IN SURV EY ON ACCOUNT OF EXCESS STOCK CANNOT BE SAID TO BE PART OF BOOK PROF IT. THE INTENT OF THE ASSESSEE FIRM WAS TO CONCEAL THE SAME, BUT IT WAS SUR RENDERED AS THE SURVEY OPERATION WAS CARRIED OUT AT THE PREMISES OF THE ASSESSEE FIRM. ITA NO. 647 & 610/JP/2014 ACIT VS. M/S KHANDELWAL JEWELLERS 13 AFTER PROVIDING THE REASONABLE OPPORTUNITY OF BEING HEARD, HE HELD THAT THE SURRENDER MADE DURING THE SURVEY IS NOT THE REG ULAR INCOME OF THE ASSESSEE FIRM ENTERED IN THE BOOKS OF THE ASSESSEE. RATHER IT WAS STOCK FOUND AT THE TIME OF SURVEY WHICH WAS OUT OF BOOKS. TH IS AMOUNT CANNOT BE SAID TO BE BOOK PROFIT AS THE SAME WAS NOT THE PART OF BOOK. THE SURRENDER WAS MADE BY THE PARTNER IN ADDITION TO REGULAR INCOME OF THE FIRM. THEREFORE, INCOME DISCLOSED DURING THE COU RSE OF SURVEY IS NOT THE PART OF BOOK PROFIT AND THE SALARY CLAIMED ON T HIS AMOUNT, HE HAD DISALLOWED. HE FURTHER RELIED HON'BLE SUPREME COURT DECISION IN THE CASE OF SURJEET SINGH CHHABRA VS UNION OF INDIA & ORS AN D MADE ADDITION OF RS. 50,71,492/-. 8. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A), WHO HAD CONFIRMED THE ADDITION BY OBSERVING THAT DEFINITION OF BOOK P ROFIT HAS BEEN PROVIDED IN EXPLANATION 3 OF SECTION 40(B)(I) OF TH E ACT, WHICH MEANS NET PROFIT HAS TO BE COMPUTED IN THE MANNER LAID DO WN IN CHAPTER (IV)(B) AS PER THIS CHAPTER, THE INCOME HAS TO BE COMPUTED U/S 28 TO 44DB OF THE ACT. IN THE PRESENT CASE, THE UNEXPLAIN ED INVESTMENT WAS FOUND IN THE STOCK AT THE TIME OF SURVEY OPERATION AND BY NO STRETCH OF IMAGINATION BE CONSIDERED TO HAVE BEEN RECORDED UND ER THIS PROVISION. ITA NO. 647 & 610/JP/2014 ACIT VS. M/S KHANDELWAL JEWELLERS 14 SINCE THE SURRENDER OF INCOME ON ACCOUNT OF EXCESS STOCK, DOES NOT FALL WITHIN THE PURVIEW OF ANY SECTION U/S 28 TO 44DB OF T HE ACT. THE UNEXPLAINED INVESTMENT IN STOCK IS SURRENDERED BY T HE APPELLANT U/S 69 OF THE ACT AND FALLS WITHIN THE AMBIT OF CHAPTER VI OF THE ACT, THEREFORE, HE HAD NOT ALLOWED REMUNERATION TO THE PARTNERS CLAI MED U/S 40(B)(V) OF THE ACT. THE ASSESSEES ARGUMENT THAT PARTNERS HA VE DECLARED REMUNERATION PAID TO THEM IN THE RETURN OF INCOME, THEREFORE, IT IS A DOUBLE TAXATION, WHICH WAS ALSO NOT FOUND CONVINCING TO HIM. HE HAD COMPARED THE PAST RETURNED INCOME OF THE PARTNERS A ND FOUND THAT BY CONSIDERING THE REMUNERATION PAID IN THE YEAR UNDER CONSIDERATION, THERE WAS AN INCREASE ABOUT 33 LACS AND EFFECTIVE TA X RATE AS A RESULT OF THIS HAVE COME DOWN TO AROUND 25% TO 26% AS AGAINST THE EFFECTIVE TAX RATE OF 33.9%. HE FURTHER HELD THAT VARIOUS COU RTS HAVE HELD THAT THERE IS NOTHING WRONG WITH ANY TOOLS ADOPTED BY TAX PAYER, WHICH IS AIMED AT REDUCTION OR OF MINIMIZATION OF TAX LIABIL ITY, BUT THE ONLY CAVEAT IS THAT IT SHOULD FALL WITHIN THE FOUR CORNERS OF LA W. THE ASSESSEES CASE IS NOT FALLEN IN THE FOUR CORNERS OF LAW, THEREFORE, HE UPHELD THE ADDITION. ITA NO. 647 & 610/JP/2014 ACIT VS. M/S KHANDELWAL JEWELLERS 15 9. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT IT MAY ALSO BE POINTED OUT THAT TO THE EXTENT REMUNERATION IS NOT ALLOWED IN ASSESSMENT OF THE FIRM, THE SAME CANT BE TAXED IN THE HANDS OF THE INDIVIDUAL PARTN ERS. SECTION 28(V) OF THE I.T. ACT, 1961 SPECIFICALLY DEALS WITH THIS PROPO SITION WHICH READS AS UNDER:- (V) ANY INTEREST, SALARY, BONUS, COMMISSION OR REMU NERATION, BY WHATEVER NAME CALLED, DUE TO, OR RECEIVED BY, A P ARTNER OF A FIRM FROM SUCH FIRM: PROVIDED THAT WHERE ANY INTEREST, SALARY, BONUS, COMMISSION OR REMUNERATION, BY WHATEVER NAME CALLED, OR ANY PART THEREOF HAS NOT BEEN ALLOWED TO BE DEDUCTED UNDER CLAUSE (B) OF SECTION 40, THE INCOME UNDER TH IS CLAUSE SHALL BE ADJUSTED TO THE EXTENT OF THE AMOUN T NOT SO ALLOWED TO BE DEDUCTED. IN THE PRESENT CASE, REMUNERATION TO PARTNERS CLAIM ED U/S 40(B) IN COMPUTATION OF THE INCOME OF THE FIRM HAS BEEN OFFE RED FOR TAX BY THE PARTNERS. THE AO EVEN AFTER MAKING THE DISALLOWANCE O F REMUNERATION IN THE ASSESSMENT OF THE FIRM HAS NOT EXCLUDED THE CORRESPONDING REMUNERATION FROM THE INCOME IN THE HANDS OF THE PA RTNERS. THUS, WHEN SUCH REMUNERATION IS TAXED BY THE DEPARTMENT IN THE HANDS OF THE PARTNERS, THE SAME CANT BE DISALLOWED IN THE ASSESS MENT OF THE ASSESSEE FIRM. THE LD. CIT(A) HAS NOT CORRECTLY INTE RPRETED THE ITA NO. 647 & 610/JP/2014 ACIT VS. M/S KHANDELWAL JEWELLERS 16 PROVISIONS OF SECTION 40(B)(V) AND THEREFORE HE HAS ERRED IN UPHOLDING THE ORDER OF AO IN NOT ALLOWING THE CLAIM OF REMUNER ATION WITH REFERENCE TO THE EXCESS STOCK OFFERED FOR TAX BY TH E ASSESSEE. IN VIEW OF ABOVE, THE AO BE DIRECTED TO DELETE THE DISALLOWANCE OF RS.50,71,492/- MADE BY HIM OUT OF THE REMUNERATION CLAIMED BY THE ASSESSEE U/S 40(B)(V). 10. AT THE OUTSET, THE LD DR HAS VEHEMENTLY SUPPORT ED THE ORDER OF THE LD CIT(A). 11. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT IS UNDISPUTED FACT THAT A SURVEY U/S 133A WAS CARRIED OUT ON 20/10/2010, WHICH MEANS PREVIOUS YEAR FOR A.Y. 2011-12 HAS NOT ENDED. THE EXCESS STOC K WAS FOUND BUT THE ASSESSEE RETURN WAS DUE TO FILE IN OCTOBER, 2011 U/S 139 OF THE ACT, WHICH WAS FILED ON 29/9/2011. THE ASSESSEES CASE WAS A UDITABLE AND COMPUTATION OF INCOME WAS SUBMITTED ALONGWITH THE RET URN. THE ASSESSEE CLAIMED REMUNERATION TO THE PARTNER ON THE BASIS OF BOOK PROFIT CALCULATED BY THE ASSESSEE U/S 40(B)(V) OF T HE ACT. AS PER EXPLANATION-3, THE BOOK PROFIT MEANS THE NET PROFIT AS SHOWN IN THE P&L ACCOUNT OF THE RELEVANT PREVIOUS YEAR COMPUTED IN T HE MANNER LAID ITA NO. 647 & 610/JP/2014 ACIT VS. M/S KHANDELWAL JEWELLERS 17 DOWN IN CHAPTER (IVD) SUBJECT TO SPECIFIED ADJUSTMEN TS. THE LD ASSESSING OFFICER CAN MAKE CERTAIN ADJUSTMENTS IN T HE BOOK PROFIT BUT CHANGE OF INCOME HELD IS SUBJECT TO BE EXAMINED BY THE APPELLATE AUTHORITY BUT AS THE FACTS OF THE CASE ARE THAT THE ASSESSEES BOOKS WERE NOT CLOSED ON THE DATE OF SURVEY AS SUCH. THE CO ORDINATE BENCH OF AHMADABAD ITAT IN THE CASE OF CHOKSHI HIRALAL MAGANL AL VS. DCIT (SUPRA) HAS CONSIDERED THIS ISSUE WHERE EXCESS STOC K DURING THE COURSE OF SURVEY U/S 133A WAS FOUND. THE LD ASSESSING OFFICE R CONSIDERED THIS DISCLOSURE U/S 69 OF THE ACT BUT THE COORDINATE BEN CH HELD THAT SINCE THE EXCESS STOCK IS A RESULT OF SUPPRESSION OF PROF IT FROM BUSINESS OVER THE YEARS AND HAS NOT BEEN KEPT IDENTIFIABLE SEPARA TELY BUT IT IS PART OF OVERALL PHYSICAL STOCK FOUND, PROVISIONS OF SECTION 69B CANNOT BE INVOKED AND ASSESSEE IS ENTITLED FOR HIGHER REMUNER ATION ON EXCESS STOCK DISCLOSED IN THE RETURN TO THE PARTNER U/S 40 (B) OF THE ACT. THE OTHER CASE LAWS RELIED BY THE ASSESSEE ARE ALSO SQU ARELY APPLICABLE, THEREFORE, WE REVERSE THE ORDER OF THE LD CIT(A) AND HELD THAT EXCESS STOCK FOUND DURING THE COURSE OF SURVEY IS INCOME F ROM BUSINESS AND PROFESSION AND CANNOT BE ASSESSED U/S 69 OF THE ACT . IT IS ALSO A FACT THAT U/S 28(V) OF THE ACT, THE INTEREST, SALARY, BO NUS, COMMISSION AND REMUNERATION IN THE NAME OF PARTNER IS ASSESSED TO TAX AS INCOME FROM ITA NO. 647 & 610/JP/2014 ACIT VS. M/S KHANDELWAL JEWELLERS 18 BUSINESS AND PROFESSION. THEREFORE, WE ALLOW THE ASSES SEES APPEAL ON THIS GROUND. 12. THE GROUND NO. 2 OF THE ASSESSEES APPEAL IS AGA INST CONFIRMING THE ADDITION OF RS. 1,69,161/- ON ACCOUNT OF UNEXPL AINED CASH FOUND DURING THE COURSE OF SURVEY. THE LD ASSESSING OFFICE R OBSERVED THAT DURING THE COURSE OF SURVEY, CASH OF RS. 1,19,161/- WAS FOUND AND DURING THE COURSE OF SURVEY, NO BOOKS OF ACCOUNT WAS FOUND AND ALSO FAILED TO PRODUCE THE BOOKS OF ACCOUNT AFTER SURVEY . THEREFORE, HE MADE ADDITION OF RS. 1,19,161/- (WRONGLY TAKEN FIGURE AT RS. 1,69,161), WHICH WAS CHALLENGED BEFORE THE LD CIT(A), WHO HAD CONFIRMED THE ADDITION BY OBSERVING AS UNDER:- 6.5 AFTER CONSIDERING THE MATERIAL PLACED ON RECOR D, I FIND NO JUSTIFICATION IN THE EXPLANATION GIVEN BY THE APPEL LANT AS NO EVIDENCE HAS BEEN PLACED ON RECORD IN THE COURSE OF APPELLATE PROCEEDINGS TO SUBSTANTIATE ITS CONTENTIO NS. THE APPELLANT HAS FAILED TO ADDUCE ANY EVIDENCE TO EXPL AIN WHETHER THE SAID CASH WAS RECORDED IN THE BOOKS OF ACCOUNTS. IN THE ABSENCE OF ANY SUCH EVIDENCE, I HO LD THAT CASH FOUND IN THE COURSE OF SURVEY IS UNEXPLAI NED AND ACCORDINGLY UPHOLD THE ADDITION OF RS. 1,69,161 /- MADE BY THE A.O. ITA NO. 647 & 610/JP/2014 ACIT VS. M/S KHANDELWAL JEWELLERS 19 12.1 NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT ACTUAL CASH FOUND DURIN G THE COURSE OF SURVEY WAS RS. 1,19,161/- NOT RS. 1,69,161/-, THEREF ORE, IT IS A FACTUAL MISTAKE. DURING THE COURSE OF SURVEY, BOOKS OF ACCO UNT WAS NOT FOUND AT THE BUSINESS PREMISES BUT KEPT WITH ACCOUNTANT BU T DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS PRODUCED THE BOOKS OF ACCOUNT. AS PER CASH BOOK, CASH BALANCE AS ON 20/10/2010 WAS RS. 1,57,046/-, THEREFORE, CASH WAS FOUND AS EXPL AINED BUT BOTH THE AUTHORITIES HAVE IGNORED THE EXPLANATION SUBMIT TED BY THE ASSESSEE. 12.2. AT THE OUTSET, THE LD DR HAS VEHEMENTLY SUPP ORTED THE ORDER OF THE ASSESSING OFFICER AS NO BOOKS OF ACCOU NT WAS FOUND AT THE BUSINESS PREMISES DURING THE COURSE OF SURVEY, WHICH WAS ALSO NOT PRODUCED BEFORE THE ASSESSING OFFICER AT THE TIME O F ASSESSMENT PROCEEDINGS, THEREFORE, THE SAME MAY BE CONFIRMED. 12.3 WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH TH E PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THIS I SSUE REQUIRED TO BE VERIFIED FROM THE CASH BOOK PREPARED AFTER DATE OF SURVEY BY THE ASSESSEE WITH REFERENCE TO ENTRIES MADE IN THE CASH BOOK AND ACCORDINGLY, WE SET ASIDE THIS ISSUE TO THE ASSESSIN G OFFICER AND DIRECT ITA NO. 647 & 610/JP/2014 ACIT VS. M/S KHANDELWAL JEWELLERS 20 TO VERIFY THE CASH AVAILABLE ON THE DATE OF SURVEY AND TAKE DECISION AS PER LAW. 13. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED A ND THE ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17/6/2016. SD/- SD/- DQYHKKJR VH-VKJ-EHUK (KUL BHARAT) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 17 TH JUNE, 2016 RANJAN* VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE ACIT, CIRCLE-2, ALWAR. 2. IZR;FKHZ @ THE RESPONDENT- M/S KHANDELWAL JEWELLERS, ALWAR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 647 & 610/JP/2014) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR