Ajay Shantilal Lalwani, HUF, Jalgaon V. Joint Commissioner of Income-tax,

ITA 717/PUN/2015

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0707 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 22-10-2018
• Assessment Year: 2010-2011
• Appeal Filed On: 18-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJEEV GHEI
• Keywords: Rule of consistency; Cost of acquisition; Difference of opinion; Corroborative evidences; Change of opinion
• Section: 271(1)(c); 142(1); 40(a)(ia); 133(6); 69; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E , , . ! , ' , # BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKARA RAO, AM $ / ITA NO.717/PUN/2015 % & & / ASSESSMENT YEAR : 2010-11 AJAY SHANTILAL LALWANI HUF C/O. M/S. MAHAVEER JEWELLERY HOUSE, YASHODEEP 117, NAVI PETH, JALGAON-425 001 PAN : AACHA7082C .... / APPELLANT '% / V/S. THE JOINT COMMISSIONER OF INCOME TAX, RANGE-1, JALGAON. / RESPONDENT ASSESSEE BY : SHRI NARESH KUMAR REVENUE BY : SHRI SANJEEV GHEI / DATE OF HEARING : 22.10.2018 / DATE OF PRONOUNCEMENT : 28.11.2018 ( / ORDER PER D. KARUNAKARA RAO, AM: THIS IS THE APPEAL FILED BY ASSESSEE AGAINST THE ORDER OF CIT(A)-2, NASHIK DATED 12.03.2015 FOR THE ASSESSMENT YEAR 2010-11. 2. BRIEFLY STATED RELEVANT FACTS INCLUDE THAT THE ASSESSEE IS AN HUF AND THE PROPRIETOR OF M/S. MAHAVEER JWELLARY HOUSE, JALGAON. AS SESSEE IS 2 ITA NO.717/PUN/2015 A.Y. 2010-11 ENGAGED IN THE BUSINESS OF GOLD, SILVER AND DIAMONDS. THERE WAS SURVEY ACTION ON 24.09.2009 U/S.133A OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) IN THIS CASE. THIS ACTION RESULT ED IN THE DISCOVERY OF CERTAIN VALUATION OF CLOSING STOCK. ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME AT RS.96,38,859/-FOR THIS ASSESSMENT YEAR. 3. DURING SCRUTINY ASSESSMENT PROCEEDINGS U/S.143(3) OF TH E ACT, THE ASSESSING OFFICER DETERMINED THE ASSESSED INCOME OF THE AS SESSEE AT RS.3,49,61,900/- AGAINST THE RETURN OF INCOME RS.96,38,859/- . THE ASSESSING OFFICER MADE VARIOUS ADDITIONS IN THE ASSESSMENT AND GIST OF THE SAME AS GIVEN IN HIS ORDER IS EXTRACTED AS UNDER: TOTAL INCOME AS PER RETURN 96,38,859/- ADD: ADDITIONS AS DISCUSSED ABOVE, ON A/C OF UNSECURED LOANS OF M/S. MAHAVEER GREEN GOLD & OTHERS AS PER PARA 5. 82,79,700/- ON A/C OF SALARY PAID, AS PER PARA 6 13,35,000 /- ON A/C OF VALUATION OF DIAMOND PARA 7 6,22,170/- ON A/C OF SILVER STOCK AS PER PARA 8 8,69,800/- ON A/C OF LOSS DUE TO THEFT PARA 9 6,99,636/- ON A/C OF VALUATION STOCK OF GOLD ORNAMENTS 91.6 PARA 10 1,86,486/ - ON A/C OF VALUATION OF CLOSING STOCK PARA 11 1,07, 27,204/- ON A/C OF VISHWAMANGAL BOGRAM YATRA EXP. AS PER PARA 12 40,285/- REG. ESTIMATION OF GP AS PER PARA 13 25,00,000/- ON A/C OF GDS GOLD PARA 14 62,760/- ______________________ 2,53,23,041/ - TOTAL INCOME 3,49,61,900/- FROM THE ABOVE, IT IS EVIDENT THAT THE ASSESSING OFFICER MADE VARIOUS ADDITIONS. APART FROM OTHERS, THE ADDITION ON ACCOUNT OF UNSECURED LOANS OF RS.82,79,700/- (RS.38,79,570/- + RS.44,00,130/-) AND THE ADD ITION ON ACCOUNT OF VALUATION OF CLOSING STOCK OF RS.1,07,27,204/- ARE MAJOR ONES . 3 ITA NO.717/PUN/2015 A.Y. 2010-11 4. AGGRIEVED WITH THE ASSESSMENT ORDER, ASSESSEE FILED APP EAL BEFORE THE CIT(A) BY RAISING 17 GROUNDS. DURING THE PROCEEDINGS BEFORE FIRST APPELLATE AUTHORITY, ASSESSEE MADE VARIOUS SUBMISSIONS AND THE SAM E ARE EXTRACTED IN THE IMPUGNED ORDER AS THE NEED DEMANDS. EVENTUALLY, THE CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 5. AGGRIEVED WITH THE DECISION OF CIT(A), ASSESSEE FILED THE PR ESENT APPEAL BY RAISING FOLLOWING GROUNDS. REVENUE DID NOT FILE ANY APPEAL. 1.1 THE LD CIT (A) ERRED ON FACTS AND IN LAW IN CON FIRMING THE ACTION OF THE LD AO IN TAKING UP THE CASE OF THE APPELLANT FO R SCRUTINY BY ISSUANCE OF NOTICE U/S.143(2) OF THE IT ACT. THE NOTICE U/S. 143(2) HAD BEEN ISSUED BY THE LD AO IN CONTRAVENTION OF THE THEN EXISTING INSTRUCTIONS OF THE CBDT. HENCE, THE NOTICE ISSUED U/S.143(2) IS ILLEGA L AND NEEDS TO BE QUASHED. 1.2 THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CON FIRMING THE ASSESSMENT ORDER PASSED BY THE LD. AO. THE ENTIRE A SSESSMENT ORDER PASSED BY THE LD. AO IN THE CASE OF THE APPELLANT I S VOID AB-INITIO AND OUGHT TO HAVE BEEN CANCELLED. 1.3 THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CON FIRMING THE ADDITION OF RS.38,79,570/- ON ACCOUNT OF LOAN RAISED BY THE APP ELLANT FROM M/S. MAHAVEER GREEN GOLD. 1.4 THE LD CIT(A) ERRED ON FACTS AND IN LAW IN CONF IRMING THE ADDITION OF RS.5,86,680/- OUT OF THE ADDITION OF RS.6,22,170/- MADE BY THE LD AO ON ACCOUNT OF DIFFERENCE IN VALUATION OF THE DIAMONDS. 1.5 THE LD CIT(A) ERRED ON FACTS AND IN LAW IN CON FIRMING THE ADDITION OF RS.6,71,485/- OUT OF THE TOTAL ADDITION MADE OF RS. 8,69,800/- BY THE LD AO ON ACCOUNT OF ALLEGED SUPPRESSION OF SILVER STOC K. 1.6 THE LD.CIT(A) ERRED ON FACTS AND IN LAW IN CONF IRMING THE DISALLOWANCE OF RS. 6,99,363/- ON ACCOUNT OF THEFT OF THE SILVER STOCK. 1.7 THE LD CIT(A) ERRED ON FACTS AND IN LAW IN CON FIRMING THE ADDITION OF RS.1,07,27,204/- ON ACCOUNT OF ALLEGED DIFFERENCE I N THE VALUATION OF CLOSING STOCK OF GOLD. 1.8 THE LD CIT(A) ERRED ON FACTS AND IN LAW IN CONF IRMING DISALLOWING OF INTEREST OF RS.59,652/- OUT OF TOTAL INTEREST OF RS .62,760/- PAID ON GOLD DEPOSITS. 1.9 THE APPELLANT CRAVES TO ADD, ALTER, AMEND OR DE LETE ANY OF THE ABOVE GROUNDS OF APPEAL ANY TIME BEFORE OR AT THE TIME OF HEARING. 4 ITA NO.717/PUN/2015 A.Y. 2010-11 6. BEFORE US, AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SUBMITTED GROUND NO. 1.5 RELATING TO CONFIRMING OF THE ADDITION OF RS.6,71,485/- O N ACCOUNT OF ALLEGED SUPPRESSION OF SILVER STOCK IS NOT PRESSED. ACCORDIN GLY, AFTER HEARING LD. COUNSELS FOR BOTH THE PARTIES, THE GROUND NO. 1.5 RAISED IN APPEAL BY ASSESSEE IS DISMISSED AS NOT PRESSED . 7. SIMILARLY, LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THA T GROUND NO. 1.8 IS ALSO NOT PRESSED IN VIEW OF THE SMALLNESS OF THE ADD ITION. ASSESSEE CONTESTED THE DECISION OF INVOKING THE PROVISION OF SECTION 40(A)(IA) OF THE ACT, IN RESPECT OF THE INTEREST PAYMENTS MADE WITHOUT MAKING OF DISALLOWANCE OF TDS ON GOLD DEPOSITS. THE ASSESSING OFFICER DISALLOWED THE INT EREST OF RS.59,652/- OUT OF TOTAL INTEREST OF RS.62,760/- PAID ON GO LD DEPOSITS. ACCORDINGLY, AFTER HEARING THE PARTIES, GROUND NO. 1.8 RAISED IN APPEAL BY ASSESSEE IS ALSO DISMISSED AS NOT PRESSED . WE SHALL NOW TAKE UP THE REST OF THE GROUNDS FOR DETA ILED ADJUDICATION IN THE FOLLOWING PARAGRAPHS. A. GROUND NO. 1.1 & 1.2 - ISSUE OF NOTICE U/S.143(2 ) OF THE ACT. 8. GROUND NO. 1.1 RELATES TO THE ISSUE OF NOTICE U/S.143(2) OF THE ACT. THE ASSESSEE CLAIMS IN THE GROUND THAT THE SAID NOTICE WAS IS SUED IN CONTRAVENTION OF THE THEN EXISTING INSTRUCTION OF CBDT. AS PER THE ASSESSEE, THE SAID NOTICE IS ILLEGAL AND THE SAME NEEDS TO BE QUASHED. 9. BEFORE US, LD. COUNSEL FOR THE ASSESSEE INFORMED THE TRIB UNAL STATING THAT THE ISSUE OF VALIDITY OF NOTICE U/S.143(2) OF THE ACT WAS ALREADY THE SUBJECT MATTER OF LITIGATION BEFORE THE HON'BLE BOMBAY HIGH COURT BY WAY OF WRIT PETITION NO. 630 OF 2013 DATED 10.05.2013. THE HON'BLE HIGH COURT 5 ITA NO.717/PUN/2015 A.Y. 2010-11 DISMISSED THE SAID WRIT PETITION AND DECIDED THE ISSUE AGAINST THE ASS ESSEE. IN THIS REGARD, LD. COUNSEL FOR THE ASSESSEE BROUGHT OUR AT TENTION TO THE COPY OF THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT AND THE SAME IS PLACED AT PAGE 48 OF THE PAPER BOOK. BRINGING OUR ATTENTION TO THE CONTENTS OF PARA 22 OF THE JUDGMENT AT PAGE 58 OF THE PAPER BOOK, LD. COUNS EL FOR THE ASSESSEE FAIRLY SUBMITTED THAT THIS ISSUE STANDS DECIDED AGAINST TH E ASSESSEE. HOWEVER, WITH DUE REGARD FOR THE SAID JUDGMENT, LD. COUNSEL ARGUE D RELYING ON THE RATIO LAID DOWN IN THE CASE OF UCO BANK VS. CIT REPORTED AS 237 ITR 889 (SC) ON ONE SIDE AND THE CIT(A)S ORDER IN THE CASE OF ASSESSEES SISTER CONCERN WHERE THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE O N SIMILAR FACTS, LD. AR PRAYED FOR CONSIDERING THE ABOVE MENTIONED JUDGMENT/O RDER AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 10. ON THE OTHER HAND, LD. DR FOR THE REVENUE READ OUT THE CONTENTS OF SAID PARAGRAPHS (PARA 22) OF THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT (SUPRA.) AND SUBMITTED THAT THE CBDT INSTRUCTIONS WERE DU LY FOLLOWED BY THE ASSESSING OFFICER IN THE MATTERS RELATING TO ISSUE OF NOTIC E U/S.143(2) OF THE ACT. IN THIS CASE, ASSESSING OFFICER OBTAINED REQUISITE APPRO VAL AND THEREFORE, THERE IS NO CONTRAVENTION OF LAW/INSTRUCTION IN FOLLOWING THE SAID INSTRUCTION OF CBDT. 11. ON HEARING BOTH THE PARTIES ON THIS LIMITED ISSUE, WE FIND THE CONTENTS OF PARA 22 OF THE JUDGMENT OF THE HON'BLE BOMBAY HIGH CO URT ARE RELEVANT FOR EXTRACTION AND THE SAME READS AS UNDER: 22. THE POSITION IS THAT THE RELEVANT GUIDELINES RE LIED ON SHOW THAT THE ASSESSING OFFICER UNDER CLAUSE (G) THEREOF IS EMPOW ERED TO SELECT A PARTICULAR CASE FOR SCRUTINY ASSESSMENT RESPONDENT NO.1 WHO THEN WAS ASSESSING OFFICER AFTER RECORDING REASONS FOR SELECTION OF PE TITIONERS CASE SOUGHT APPROVAL OF RESPONDENT NO. 2 WHO WAS THEN THE APPRO VING AUTHORITY AND HAD APPROVED THE SELECTION. SUBSEQUENTLY, PURSUANT TO PROVISIONS OF IT ACT, THE CASE WAS ASSIGNED TO RESPONDENT NO. 2 FOR ASSES SMENT. REQUISITE 6 ITA NO.717/PUN/2015 A.Y. 2010-11 PROCEDURE BEFORE ISSUING NOTICES UNDER SECTION 143( 2) AND 142(1) OF THE IT ACT APPEARS TO HAVE BEEN FOLLOWED. FROM THE ABOVE, IT IS EVIDENT THAT THE HON'BLE HIGH COUR T ALREADY CONSIDERED REQUISITE FACT AND HELD THAT THE ASSESSING OFFICE R DULY COMPLIED WITH THE REQUISITE PROCEDURE IN THE MANNER RELATING TO ISS UE OF NOTICE U/S.143(2) OF THE ACT AND U/S.142(1) OF THE ACT. FURTHER, IT IS ALSO FACT THAT WRIT PETITION FILED BY ASSESSEE STANDS DISMISSED BY THE HON 'BLE HIGH COURT. THEREFORE, GROUND NO. 1.1 AND 1.2 RAISED BY THE ASSESSEE ARE D ISMISSED . B. GROUND NO. 1.3- ADDITION OF RS.38,79,570/- 12. GROUND NO. 1.3 RELATES TO THE ADDITION OF RS.38,79,570/- ON ACCOUNT OF LOAN RAISED BY THE ASSESSEE FROM M/S. MAHAVEER GREEN G OLD ( MGG). THE ASSESSEE RECEIVED OTHER LOANS TOO AMOUNTING TO RS.44,00, 130/- FROM FOUR CREDITORS I.E. (I) RS.25,00,000/- ON ACCOUNT OF LOAN RAISED FROM M/S. SWASTIK GEMS, SURAT, (II) RS.18,00,000/- ON ACCOUNT LOAN RAISED FROM M /S. GYAN EXPORTS, SURAT, (III) RS.8,130/- ON ACCOUNT OF DIFFERENCE IN THE ACCOUNT OF MULTI MEDIA FEATURES PVT. LTD. AND (IV) RS.92,000/- ON ACCOU NT OF INTEREST PAID TO M/S. BACKBONE CONSTRUCTION. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER IN VOKED THE PROVISIONS OF SECTION 133(6) OF THE ACT TO VERIFY THE GENUIN ENESS OF SAID LOANS. ON OBSERVING THE ASSESSEES FAILURE TO DISCHARGE OF ONUS BY THE ASSESSEE, THESE AMOUNTS WERE ADDED AS INCOME OF THE ASSESSEE. TH E SAID UNSECURED LOAN AND THE INTEREST ACCRUED THEREON I.E. (RS.38,79,570/- + RS.44,00,130/-), AMOUNTING TO RS.82,79,700/-, WAS ADDED TO THE INCOME OF TH E ASSESSEE. THE ASSESSING OFFICER DISCUSSED THIS ISSUE VIDE PARA 5 AND ITS SUB PARAS OF THE 7 ITA NO.717/PUN/2015 A.Y. 2010-11 ASSESSMENT ORDER. LOANS FROM M/S. MGG WAS SCRUTINIZED TH OROUGHLY BY THE ASSESSING OFFICER. 12.1 IN THIS CONNECTION, THE ASSESSING OFFICER RECORDED STA TEMENT U/S.131 OF THE ACT OF SHRI ARVIND RAMESHCHANDRA KALE, PROPRIETOR OF M AHARASHTRA KRUSHI SEVA KENDRA, WHO SOLD SEEDS TO M/S. MAHAVEER GRE EN GOLD. EARLIER, MGG CONFIRMED THE LOAN AND STATED THAT THE LOANS WERE G IVEN OUT OF ITS AGRICULTURAL INCOME. M/S. MAHAVEER GREEN GOLD CONFIRMED THE FACT OF GIVING LOANS TO THE ASSESSEE BY FILING A CONFIRMATION LETTER AND SU BMITTED THE AGRICULTURAL STATUS OF THE ASSESSEE FOR VARIOUS YEARS. MGG GAVE LOANS IN THE PAST TOO TO THE ASSESSEE AND THE SAID LOAN TRANSACTION S WERE ACCEPTED BY THE ASSESSING OFFICER IN EARLIER ASSESSMENT YEAR. THE DETAILS ARE AVAILABLE IN PARA 5.2 OF THE ASSESSMENT ORDER. IT IS THE SUBMISSION OF THE A SSESSEE AS WELL AS MGG, THE CREDITOR THAT THE LOANS WERE GIVEN TO THE ASSE SSEE OUT OF AGRICULTURAL INCOME OF MGG. THE ASSESSEE FURTHER MENTIONED THAT MR. & MRS. LALWANI ARE THE PARTNERS OF M/S. MAHAVEER GREEN GOLD IN THEIR INDIVIDUAL CAPACITY. THE ASSESSING OFFICER ENLISTED THE LAND HOLDING OF TH E M/S. MAHAVEER GREEN GOLD AND MENTIONED THE SAID LANDS WERE T AKEN ON LEASE BY M/S. MAHAVEER GREEN GOLD FROM 39 FARMERS. RELEVANT DETAILS ARE DISCUSSED IN PARA 5.3 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER EX AMINED THIS ISSUE AT LENGTH IN PARA 5.10 TO 5.17 OF THE ASSESSMENT ORDER. E VENTUALLY, THE ASSESSING OFFICER HELD THAT M/S. MAHAVEER GREEN GOLD OBTA INED BOGUS BILLS FROM M/S. MAHARASHTRA KRUSHI DEVA KENDRA AND MANIPULATED HIS AGRICULTURAL INCOME BY CREATING BOGUS BILLS AND BOGUS NOTIN GS MADE IN 7/12 EXTRACTS FROM THE REVENUE RECORDS. FURTHER, THE ASSESS ING OFFICER RELIED ON THE REPORT OF HIS INSPECTOR WHO GAVE REPORT AGAINST TH E ASSESSEE. THE CONTENTS OF PARA 5.11 AND 5.12 ARE RELEVANT AND THE SAME ARE REPRODUCED HERE IN BELOW: 8 ITA NO.717/PUN/2015 A.Y. 2010-11 5.11 AS CAN BE SEEN FROM THE INSPECTORS REPORT, TH E STATEMENT OF THE PERSONS WHO HAVE ISSUED BILLS STATING THEREIN THAT EVEN THOUGH THERE ARE NO ACTUAL PURCHASES , DUPLICATE BILLS HAVE BEEN ISSUED INSERTING THE NAME OF THE ASSESSEE I N THE DUPLICATE BILLS . FURTHER , THE GENUINENESS OF TRANSACTION IS TOTALLY UNPROVED FOR THE FACT THAT THE EVIDENCE BY WAY OF STATEMENT RECORDED ON OATH, INSPECTOR ' S REPORT ETC . FURTHER, THE ASSESSEE HAS RELIED UPON THE CASE OF GOLDEN REMEDIES PVT. LTD . VS . ITA IS NOT AT ALL APPLICABLE TO THE FACTS OF THE CASE . IN THE CASE OF ASSESSEE , THE OTHER PERSON HAD CLEARLY SUBM I TTED THAT DUPLICATE BILLS HAVE BEEN ISSUED INSERTING THE NAME OF THE ASSESSEE IN THE BILL THAT TOO IN DUPLICATE BILLS EVEN THOUGH AC TUALLY THERE ARE NO PURCHASES . FURTHER , THE EXISTENCE OF THE PERSON FROM WHOM PURCHASES HAV E BEEN PROVED BEYOND DOUBT SHOWING THAT THE SAID FIRM HAVE ALREADY BEEN CLOSED SINCE LAST 8 TO 10 YEARS AND LICENSE HAVE BE EN CANCELLED. WITHOUT ANY PROPER AUTHENTICATION , NO PERSON CAN SALE ANY VALID GOODS. 5.12 FROM THE ABOVE, IT IS CRYSTAL CLEAR THAT M/S. MAHAVEER GREEN GOLD HAS OBTAINED BOGUS BILLS FROM M/S. MAHARASHTRA KRISHI S EVA KENDRA AND HAS TRIED TO MANIPULATE HIS AGRICULTURAL INCOME BY CREA TING BOGUS BILLS AS WELL AS BOGUS NOTINGS MADE IN 7/12 EXTRACTS. IN VIEW OF THE FULL PROOF DOCUMENTARY EVIDENCE, I HAVE NO HESITATION TO HOLD THAT M/S. MA HAVEER GREEN GOLD HAS NOT EARNED ANY AGRICULTURAL INCOME BUT HAS ONLY USE D THE MONEY OF SHRI AJAY SHANTILAL LALWANI HUF AND HAS TRIED TO ROUTE T HROUGH LEGITIMATE CHANNELS. THE UNSECURED LOAN, THEREFORE, HELD IN TH E NAME OF M/S.MAHAVEER GREEN GOLD IS NOTHING BUT THE UNACCOUNTED CASH /INV ESTMENT EARNED WHICH IS HEREBY ADDED U/S.68 AND ADDED BACK TO THE TOTAL INCOME. THUS AN AMOUNT OF RS.38,79,570/- I.E. UNSECURED LOANS ACCEP TED DURING THE YEAR IS HEREBY ADDED TO THE TOTAL INCOME OF THE ASSESSEE. P ENALTY PROCEEDINGS U/S.271(1)(C) ARE SEPARATELY INITIATED. AO IS FURTH ER DIRECTED TO TAKE NECESSARY ACTION IN THE EARLIER YEARS ALSO IN THE C ASE OF THE ASSESSEE, AS WELL AS TO TAKE NECESSARY ACTION IN THE CASE OF M/S . MAHAVEER GREEN GOLD AND M/S. SHREE KRISHI SEVA KENDRA FOR THE YEAR UNDE R CONSIDERATION AND ALSO FOR THE EARLIER YEARS ALSO. 13. THE FACTS REGARDING OTHER LOANS OF RS.44,00,130/- : ASSESSEES SUBMISSION REGARDING OTHER LOANS INVOLVING M/S. SWASTIK GEMS , SURAT AND M/S. GYAN EXPORTS, SURAT ETC. WERE NOT ACCEPTED BY THE ASSESSING OFFICER TOO. ACCORDINGLY, ASSESSING OFFICER MADE ADDITION OF RS.44,00,130/- . PARA 5.16 OF THE ASSESSMENT ORDER IS RELEVANT IN THIS REGARD AND THE SAME IS EXTRACTED AS UNDER: 5.16. SINCE THE ASSESSEE COULD NOT OFFER ANY PLAUSI BLE EXPLANATION WITH REGARD TO THE LETTERS ISSUED U/S.133(6) AND THE ONU S ON THE ASSESSEE TO PROVE THE SAME HAVE NOT BEEN PROVED, I HEREBY ADD T HE SAME I.E. RS.25,00,000+18,00,000+ 8,130+ 92,000 = 44,00,130 T O THE TOTAL INCOME OF THE ASSESSEE . THUS, THE ASSESSING OFFICER MADE ADDITION OF RS.82,79,700 ON ACCOUNT OF UNSECURED LOANS. 9 ITA NO.717/PUN/2015 A.Y. 2010-11 14. IN THE FIRST APPELLATE PROCEEDINGS, FIRST APPELLATE AUTH ORITY GRANTED RELIEF ON ACCOUNT OF ADDITION OF RS.44,00,130/-. THERE IS NO LITIGATION ON THIS RELIEF. THE FIRST APPELLATE AUTHORITY CONFIRMED THE ADDITION OF RS.38,79,570/-. THE CIT(A) DEALT WITH THIS ISSUE VIDE PARA 9.1 OF HIS ORDER. THE CIT(A) NOTICED THAT ASSESSEE RECEIVED TOTAL LOAN AMOUNTING TO RS.77,10,5 70/- FROM MGG WHICH INCLUDES THE LOAN TAKEN IN EARLIER YEARS TOO FROM MGG . AGRICULTURAL INCOME IS THE COMMON SOURCE OF INCOME FOR THE M/S.MAHAVE ER GREEN GOLD TO GIVE THE SAID LOANS TO THE ASSESSEE. REACTING TO THE LAN D HOLDING OF THE ASSESSEE, THE CIT(A) ALSO DISCUSSED THE FACT THAT THE ASS ESSEE-FIRM DID NOT HAVE ENOUGH AGRICULTURAL LAND AND THEREFORE, IT HAD TAKEN AGRICULTURAL LANDS ON LEASE FROM 39 FARMERS FOR PAYING THE RENT OF RS.1,500/- PER ACRE PER ANNUM. IN PARA 9.2, CIT(A) HELD THAT THE LANDS WERE ACTU ALLY NOT CULTIVATED WHICH IS REFLECTED FROM THE CONTENTS AVAILABLE ON 7/12 EXTR ACT FURNISHED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER. FURTHER, CIT(A ) EXPRESSED THE DOUBTS ABOUT THE FACTS RELATING TRANSPORTATION OF AGRICULT URAL PRODUCTS BY THE SAID FIRM FOR SALES AND FOR EARNING OF THE INCOME FROM M/S. M AHARASHTRA KRISHI SEVA KENDRA, JALGAON. THE CIT(A) ALSO DISCUSSED THE A DVERSE STATEMENT GIVEN BY THE PROPRIETOR OF M/S. MAHARASHTRA KRUSHI SEVA KENDRA ABOUT BOGUS NATURE OF BILLS AS WELL AS SALE OF SEEDS BY THE SAID KENDRA TO THE ASSESSEE FOR CULTIVATION. THE CIT(A) ALSO NOTED THAT ASSESSING OFFICER MADE ENQUIRIES THROUGH HIS INSPECTOR OF INCOME TAX WHO REPORTED IN HIS ENQUIRY REPORT THAT THE SAID PARTY SHREE KRISHI SEVA KENDRA WAS NOT FOUND A T THE ADDRESS GIVEN. HE ALSO REPORTED THE CANCELLATION OF LICENSE LONG BACK. EVE NTUALLY, THE CIT(A) HELD IN PARA 9.4 OF HIS ORDER THAT M/S. MAHAVEER GREEN GO LD AND ITS AGRICULTURAL ACTIVITIES ARE NOT GENUINE. THE CONTENTS OF T HE PARA 9.4 ARE EXTRACTED AS FOLLOWS: 9.4 IN MY CONSIDERED VIEW, THE AO HAD MADE OUT A C ASE AGAINST THE APPELLANT. THERE IS NO GENUINE AGRICULTURAL ACTIVIT IES CARRIED OUT BY M/S. MAHAVEER GREEN GOLD AND AS SUCH, THERE IS NO AGRICU LTURAL INCOME AS 10 ITA NO.717/PUN/2015 A.Y. 2010-11 CLAIMED BY THE APPELLANT. DURING THE YEAR, THE APPE LLANT HAS ACCEPTED A SUM OF RS.38,79,570/- AS UNSECURED LOAN FROM THE SA ID FIRM. THE AO HAS ADDED THE SAID AMOUNT U/S.68 OF THE ACT AS THE APPE LLANTS EXPLANATION IS FOUND TO BE UNSATISFACTORY. AFTER CONSIDERING TH E FACTS OF THE CASE, THE SAID ADDITION IS CONFIRMED. 15. AGGRIEVED WITH THE SAID ADVERSE DECISION OF CIT(A), ASSES SEE RAISED GROUND NO.1.3 BEFORE THE TRIBUNAL WHICH HAS ALREADY BEEN EXTRACT ED ABOVE. 16. BEFORE US, LD. COUNSEL FOR THE ASSESSEE NARRATED THE ABOVE FACTS AND SUBMITTED THAT ADDITION MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A) IS NOT JUSTIFIED. HE FURTHER MENTIONED THAT THIS IS A CASE WHERE THE ASSESSEE AND CREDITORS CONFIRMED THE CORRECTNESS OF THE TRANSACTION OF LOAN. IN SUCH CIRCUMSTANCES, ENQUIRY OF THE ASSESSING OFFICER BEC OMES CASE OF SOURCE OF SOURCE. RELYING ON THE VARIOUS BINDING JUDGME NT, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER TRAVELLE D INTO THE PROHIBITED ZONE OF SOURCE OF THE SOURCE WHERE SOURCES ARE ESTA BLISHED CONSISTENTLY BY THE ASSESSEE IN THE ASSESSMENT OVER THE YEARS. FURTHE R, LD. AR MENTIONED THAT THESE LOANS ARE NOT TAKEN FIRST TIME FROM MGG IN THIS YEAR. SIMILAR LOANS WERE TAKEN IN THE PAST AND SOURCE WERE REMAINED THE S AME. THE ASSESSING OFFICER ACCEPTED THE SAID CLAIMS IN THE PAST AND THEREFORE, MAKING ADDITION IN THIS YEAR UNDER CONSIDERATION IS UNSUSTAINABLE IN LAW AS PE R SET RULE OF CONSISTENCY. 17. ON THE OTHER HAND, LD. DR FOR THE REVENUE RELIED HEA VILY ON THE ORDER OF ASSESSING OFFICER AND CIT(A). FURTHER, LD. DR BROUGHT OUR ATTENTION NOT ONLY ON THE REPORT OF INCOME TAX INSPECTOR BUT ALSO T O THE STATEMENT OF SHRI ARVIND RAMESHCHANDRA KALE WHICH REVEALS THAT TRANSACTION OF TAKING LOAN FROM M/S. MAHAVEER GREEN GOLD IS BOGUS. 11 ITA NO.717/PUN/2015 A.Y. 2010-11 18. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. RELEVA NT FACTS NECESSARY FOR ADJUDICATING THIS ISSUE INCLUDE THAT THE ASSESSEE TOOK LOANS FROM MGG OF RS.38,79,570/- IN CONTINUATION OF THE EARLIER LOANS IN THE EAR LIER YEARS. THE SOURCES OF THE LOANS TAKEN IN CURRENT YEAR AS WELL AS P AST YEAR ARE THE AGRICULTURAL INCOME OF THE MGG. FURTHER, IT IS UNDISPUTED FAC T THAT ASSESSEE AND HIS WIFE ARE THE PARTNERS OF THE MGG IN INDIVIDUAL CAPAC ITY. FURTHER, SIMILAR LOANS TAKEN BY ASSESSEE IN THE PAST YEAR AND TH E SAME WERE ACCEPTED BY THE ASSESSING OFFICER WITHOUT MAKING ANY ADDITION. MGG T HE CREDITOR, NOT ONLY CONFIRMED THE GIVING LOANS TO THE ASSESSEE BUT ALSO CONFIRMED THE FACT OF BEING ASSESSED TO INCOME TAX REGULARLY. MGG INFORMED THE DEPARTMENT ABOUT THE MODUS-OPERANDI OF EARNING AND DECLARING THE AGRICULTUR AL INCOME IN ITS RETURN OF INCOME OVER THE YEARS. MODUS-OPERANDI INCLUDES LEASING THE LAND FROM MANY LANDLORDS, USING THE SAME FOR AGRICULTURAL PRODUC E FOR SELLING AND EARNING AGRICULTURAL INCOME. THIS MODUS-OPERANDI REMAINED U NDISTURBED BY THE REVENUE OVER THE YEARS. EFFORTS MADE BY THE ASSESS ING OFFICER FOR GENERATING ANY INCRIMINATING EVIDENCE IN THE MATTER OF TH E PURCHASE OF SEEDS FROM MAHARASHTRA KRUSHI SEVA KENDRA, QUESTIONING THE TRA NSPORTATION RELATED SERVICES LINKED TO THE SAID PURCHASE AND SALE OF A GRICULTURAL PRODUCE ETC. WERE NOT CONCLUSIVELY FRUITFUL. IN SUCH CIRCUMSTANCES, IN OUR VIEW, ASSESSEE DEMONSTRATE D THE SOURCES OF THE LOAN. THE ASSESSING OFFICER SHOULD HAVE MADE ADDITION, IF ANY, IN THE HANDS OF MGG IN CASE IF ANY INCRIMINATING EVIDENCE IS GATHER ED RELATING TO THE CLAIM OF AGRICULTURAL ACTIVITIES OF THE MGG. IN OUR VIEW, SO FAR AS ASSESSEE CONCERNED, ONUS IS RIGHTLY DISCHARGED BY THE ASSESSEE B Y GIVING ALL NECESSARY DETAILS ON THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF 12 ITA NO.717/PUN/2015 A.Y. 2010-11 TRANSACTION ETC. THEREFORE, THE ASSESSEE IS ELIGIBLE FOR RELIEF IN RESPECT OF LOANS RECEIVED FROM MGG TOO. 19. REGARDING THE ARGUMENT RELATING TO SOURCE OF SOURCE , IT IS A SETTLED PROPOSITION THAT THE ASSESSING OFFICER IS NOT ALLOWED TO TRA VEL IN THE ISSUE OF SOURCE OF SOURCE AS HELD BY CATENA OF JUDGMENTS. FURTHE R, WE EXAMINE THE ORDER OF CIT(A) AND CONTENTS OF PARA 9.4 ARE ALREADY EXTR ACTED ABOVE. THE CIT(A) DISMISSED THE REVENUES CONTENTION THAT NO GENUINE AGRICULTURAL ACTIVITIES WERE CARRIED OUT BY THE MGG. THEREFORE, FROM THE ABOVE POINT OF VIEW I.E. LACK OF CLEAR CUT INCRIMINATING EVIDENCE BOTH AGAINST THE ASSESSEE AS WELL AS MGG, THE PRINCIPLES OF CONSISTENCY ETC, WE ARE OF TH E OPINION THAT ORDER OF CIT(A) IS REQUIRED TO BE REVERSED ON THIS ADDITI ON. ACCORDINGLY, GROUND NO. 1.3 RAISED IN APPEAL BY ASSESSEE STANDS ALLOWED IN FAVOUR OF THE ASSESSEE. C. GROUND NO. 1.4 RELATES TO THE ADDITION OF RS.5,86,6 80/- 20. GROUND NO.1.4 RELATES TO CONFIRMING ADDITION OF RS.5,86,680/ - OUT OF GROSS ADDITION OF RS.6,22,170/- MADE ON ACCOUNT OF DIFFERENCE IN VALUATION OF THE DIAMONDS. RELEVANT FACTS INCLUDES ON THIS ISSUE THAT T HERE WAS SURVEY ACTION IN THIS CASE ON 24.09.2009. DURING THE SAID PROCEEDIN GS, ASSESSEE SUBMITTED THE DETAILS OF STOCK OF DIAMOND AND THE VALUE PE R CARAT. THE CLOSING STOCK AS ON THE DATE OF SURVEY IS 115.154 CARAT. AS PER THE DETAILS OF STOCK, RATE PER CARAT AND THE AMOUNT SUBMITTED BY THE ASSESSEE AT THE DAY OF SURVEY ACTION I.E. 24.09.2009, THE CLOSING STOCK AS ON 31 ST MARCH, 2010 WORKS OUT TO 85.97 CARAT. THE ASSESSEE OFFERED VALUATION OF SAID STOCK AT RS.19,16,940/-. THE DETAILS OF THE WORKING OF STOCK AND RATE S ARE REPRODUCED AS UNDER: 13 ITA NO.717/PUN/2015 A.Y. 2010-11 OPENING STOCK (CT) = 135.000 LESS: SALES = 19.846 CLOSING STOCK =115.154 CLOSING STOCK AT THE YEAR END, I.E. 31.03.2010 WA S UNDER: OPENING STOCK (CT) =115.154 LESS: SALES =29.184 CLOSING STOCK = 85.97 AS PER THE DETAILS OF STOCK, RATE PER CARAT AND THE AMOUNT SUBMITTED BY THE APPELLANT AT THE TIME OF SURVEY OPERATION AND A S PER THE STATEMENT GIVEN BY THE APPELLANT, THE VALUATION OF STOCK OF 8 5.97 (CT) SHOULD BE AS UNDER: PARTICULARS OF STOCK WEIGHT AMOUNT RATE (RS.) PURCHASE 2007-08 11.590 2,43,390/- 21,000/- UP TO 31/03/2007 74.380 16,73,550 /- 22,500/- 85.970 19,16,940/- FROM THE ABOVE, IT IS EVIDENT; THE DIAMOND PURCHASED IN F.Y.2007-08 WAS VALUED AS PER THE ASSESSEE AT RS.21,000/- PER CARA T WHEREAS, DIAMOND PRIOR TO F.Y.2007-08, WAS VALUED AT RS.22,500/-. THE ASSESS ING OFFICER MADE ADDITION BY OBSERVING AS UNDER: 7.6. IN VIEW OF THE ABOVE I HAVE NO HESITATION TO A DD THE DIFFERENCE AS WORKED OUT ABOVE I.E. RS.5,86,680/- TO THE TOTAL IN COME OF THE ASSESSEE. APART FROM THE ABOVE, THE DIAMOND SOLD OVER RS. 50, 380 HAS NOT BEEN MADE OUT OF OPENING STOCK AS THERE IS NO HIGHER RATE PUR CHASE IN OPENING STOCK OR PURCHASES MADE DURING THE YEAR. HENCE IT IS TAKEN A S OUTSIDE PURCHASE FROM BOOKS OF ACCOUNTS AND SINCE ITS SALE HAS BEEN TAKEN IN ACCOUNT IN TOTO, HENCE AN ADDITION U/S. 69 IS BEING MADE. HOWEVER, THE SAM E QUANTITY IS AVAILABLE WITH THE ASSESSEE OUT OF OPENING STOCK OF 1.69 CT @ RS.21,000, HENCE ITS VALUE AT RS.35,490 IS FURTHER ADDED TOWARDS SUPPRES SION OF CLOSING STOCK. THE SALE RATE OF DIAMOND GOES UPTO RS. 30,570 IS CO NSIDERED TO BE MADE OUT OF OPENING STOCK. HENCE TOTAL ADDITIONS ON THIS COU NT COMES TO RS.6,22,170/-. PENALTY PROCEEDINGS U/S.274 R.W.S. 271(1)(C) ARE SE PARATELY INITIATED. 21. DURING FIRST APPELLATE PROCEEDINGS, THE CIT(A) ANALYZED THIS ISSUE VIDE PARA 14.2 AND GAVE PART RELIEF TO THE ASSESSEE OF RS.35,49 0/- CONFIRMING THE BALANCE AMOUNT OF ADDITION RS.5,86,680/-. OTHERWISE, IN THE A SSESSMENT ASSESSING OFFICER MADE ADDITION OF RS.6,22,170/- ON THIS ACCOUNT. 14 ITA NO.717/PUN/2015 A.Y. 2010-11 22. BEFORE US, LD. COUNSEL FOR THE ASSESSEE FAIRLY SUBMITTED THAT THE RATES OF RS.21,000/- AND RS.22,500/- WERE SUPPLIED BY THE ASSESS EE DURING SURVEY ACTION. HOWEVER, THE SAME ARE THE MARKET RATES OF THAT PERIOD. FURTHER, LD. COUNSEL FOR THE ASSESSEE SUBMITTED FOR THE PURPOSE OF V ALUATION OF CLOSING STOCK, ONLY COST FIGURE SHOULD BE CONSIDERED. IF THE SAME IS APPLIED, THE ADDITION WILL BE EITHER NIL OR LESSOR THAN THE SUM OF RS.6,22,170/-. 23. ON THE OTHER HAND, LD. DR FOR THE REVENUE RELIED HEA VILY ON THE ORDER OF ASSESSING OFFICER AND CIT(A). LD. DR FOR THE REVENUE ARGUE D BY STATING THAT FIGURES OF RS.21,000/- AND RS.22,500/- GIVEN BY THE ASSESSE E CONSTITUTES PURCHASE PRICE ONLY AND NOT MARKET RATES. FURTHER, THE FACT THAT ASSESSEE FAILED TO SUBSTANTIATE THE ARGUMENTS EVIDENCING THE PAYM ENT REGARDING PURCHASE OF DIAMOND OF 85.970 CARAT WAS NOT EVIDENCED OT HERWISE. IN THE ABSENCE OF FURNISHING OF SUCH EVIDENCE, THE FIGURES FURNISHED BY ASSESSEE HELD TO BE CONSIDERED AS PURCHASE/ COST PRICE ONLY. 24. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE AND PE RUSED THE ORDER OF REVENUE AUTHORITIES IN GENERAL AND CONTENTS OF PARA 14.2 IN PARTICULAR. FOR THE SAKE OF COMPLETENESS, CONTENTS OF PARA 14.2 ARE EXTRACTED AS UN DER: 14.2 WHEREAS THE APPELLANT HAD VALUED AT RS.15,473/ - PER CARAT IN RESPECT OF THE OPENING STOCK OF 85.970 (CT) THEREBY VALUING THE STOCK AT RS.13,30,260/- AS AGAINST THE ABOVE VALUATION OF THE SAID STOCK AT RS.19,16,940/-. THE APPELLANT HAS SUBMITTED THAT' T HE VALUE ARRIVED AT THE TIME OF SURVEY IS TENTATIVE AND IS OPEN TO M ISTAKES. THIS EXPLANATION OF THE APPELLANT IS NOT REASONABLE. THE APPELLANT IS A JEWELLER HAVING MANY YEARS OF EXPERIENCE. THE VALUA TION OF DIAMOND IN INDIA IS STANDARDIZED. THE APPELLANT KNOWS THE V ALUE OF EACH DIAMOND AND THEREFORE, HE HAD GIVEN THE VALUATION O F THE DIAMONDS AT THE TIME OF SURVEY. THE DIAMONDS PURCHASED AFTER 31 /03/2007 ARE VALUED AT THE HIGHER RATE. THE LOWEST POSSIBLE VALU E OF DIAMONDS PURCHASED PRIOR TO 31/03/2007 IS RS.21,000/- PER CA RAT. THEREFORE, THE VALUE OF RS.15,473/- PER CARAT ADOPTED BY THE A PPELLANT IS WITHOUT ANY BASIS AND EVIDENCE. THEREFORE, THE ADDITION OF RS.5,86,680/- IS JUSTIFIED. THE AO HAS ALSO MADE AN ADDITION OF RS.3 5,490/- WITHOUT' BASIS AND THE SAME IS DELETED. THEREFORE, THE ADDIT ION OF RS.5,86,680/- IS CONFIRMED. THE APPELLANT GETS A RE LIEF OF RS.35,490/-. 15 ITA NO.717/PUN/2015 A.Y. 2010-11 FROM THE ABOVE, IT IS UNDISPUTED POSITION THAT THE FIGURE OF RS.21,000/- AND RS.22,500/-, AS THE CASE MAY BE, ARE THE FIGURES FURNIS HED BY ASSESSEE DURING SURVEY ACTION. IT IS THE SUBMISSION OF THE ASSESSEE DURING SURVEY ACTION THAT THESE FIGURES REPRESENT THE COST PRICE OF TH E DIAMONDS. NOW THE ASSESSEE ARGUES CONVENIENTLY THAT THE SAME CONSTITUTE S MARKET VALUES OF THE DIAMONDS, THE CLOSING STOCK. IN OUR VIEW, THE SAME CONST ITUTES CHANGE OF OPINION. WHEN THE ASSESSEE RAISED THIS NEW ARGUMENT, THE ONUS IS UPON THE ASSESSEE TO DEMONSTRATE WITH EVIDENCES THE FIGURES FURNIS HED BY HIM DURING SURVEY ACTION ARE THE MARKET VALUES. ASSESSEE NEEDS TO SUPPLY THE PURCHASE COST FIGURES WITH EVIDENCES. ASSESSEE FAILED TO DO SO EV EN BEFORE US. IN SUCH CIRCUMSTANCES, CONTRARY TO THE SUBMISSION MADE BY HIM DURING SURVEY ACTION, THESE NEW ARGUMENTS BECOME SELF SERVING SUBMISSION S ONLY. IT BECOMES A CASE OF AN AFTER-THOUGHT. THEREFORE, WE FIND TH E ORDER OF CIT(A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENC E ON THIS ISSUE. THUS, GROUND NO.1.4 RAISED IN APPEAL BY ASSESSEE IS DISMI SSED. D . GROUND NO. 1.6 RELATES TO DISALLOWANCE OF RS.6,9 9,363/- 25. GROUND NO.1.6 RELATES TO THE CONFIRMING THE DISALLOWANCE OF RS.6,99,363/- ON ACCOUNT OF THEFT OF THE SILVER STOCK OF TH E ASSESSEE. RELEVANT FACTS INCLUDES THAT THE ASSESSEE REPORTED THEFT OF SILVER STOCK AND FILED FIR WITH POLICE AUTHORITIES. HOWEVER, THE ASSESSEE DID NOT FUR NISH ANY EVIDENCE ABOUT ACTION TAKEN REPORT ON THE SAID FIR. THE ASSESSIN G OFFICER DOUBTED THE ASSESSEES CLAIM OF THEFT AND CONSEQUENTLY, ASSESSING OFFIC ER REJECTED THE CLAIM OF RS.6,99,363/-. THE ASSESSING OFFICER DISCUSSED THIS ISS UE VIDE PARA 9 OF ASSESSMENT ORDER AND THE SAME IS EXTRACTED AS UNDER: 9. CLAIM OF LOSS DUE TO THEFT : DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A SSESSEE FILED ONLY A COPY OF FIR AND NO FINAL REPORT FOR THE THEFT HAS B EEN FURNISHED AND 16 ITA NO.717/PUN/2015 A.Y. 2010-11 HENCE, THE CLAIM OF LOSS IS NOT DETERMINED. HENCE C LAIM OF LOSS IS DISALLOWED AND AN ADDITION OF RS.6,99,363/- TO THE TOTAL INCOME. HOWEVER, THE ASSESSEE CAN CLAIM IT IN THE YEAR IN W HICH IT IS DETERMINED BY THE PROPER AUTHORITY. 26. DURING FIRST APPELLATE PROCEEDINGS, NO EVIDENCE HAS BE EN FILED BY THE ASSESSEE SUBSTANTIATING GENUINENESS OF THE FIR. IN THE IMPUGNED ORDER, CIT(A) COMMENTED THAT THE SAME IS A STAGE-MANAGED ONE. THUS, CIT(A) CONFIRMED THE DISALLOWANCE OF RS.6,99,363/-. AGGRIEVED WITH THE SAME, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 27. BEFORE US, LD. COUNSEL FOR THE ASSESSEE EXPLAINING THE ABOVE FACTS O F THE THEFT, BROUGHT OUR ATTENTION TO THE CONTENTS OF FIR DAT ED 28.05.2009 PLACED AT PAGES 137 TO 141 OF THE PAPER BOOK AND MENTIONED THAT IT IS NOT A CASE OF STAGE MANAGED THEFT. FURTHER, LD.A.R. STATED THAT THE A SSESSEE HAS NO REASON TO RESORT TO THE SAME. HE ALSO REPORTED NON-RETURN O F THE STOLEN GOODS BY THE POLICE. 28. ON THE OTHER HAND, LD. DR FOR THE REVENUE MENTIONED THAT THE EVENT OF THEFT IS STAGE MANAGED ONE. HOWEVER, HE RELIED HEAVILY ON THE ORDER OF ASSESSING OFFICER AND CIT(A). 29. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE OF OCCU RRENCE OF THEFT OF SILVER ITEMS. WE FIND, IN PRINCIPLE, THE FIR IS FILED BY THE ASSESS EE REPORTING THE EVENT OF THEFT OCCURRED ON 28.05.2009. THIS EVENT FALLS WITHIN THE ASSESSMENT YEAR UNDER CONSIDERATION. CONSIDERING THE ARG UMENTS ADVANCED BY BOTH THE PARTIES, WE FIND THAT THE ASSESSEE HAS FILED C OPY OF THE FIR TO PROVE THAT THE FACT OF OCCURRENCE OF THEFT, ASSESSING OFFICE R DID NOT ESTABLISH THAT IS A STAGE MANAGED EVENT. IT IS NOT THE CASE OF TH E ASSESSING OFFICER THAT THE STOLEN GOODS ARE RETURNED SAFELY BY THE POLICE. THE ONUS IS UPON THE 17 ITA NO.717/PUN/2015 A.Y. 2010-11 ASSESSING OFFICER TO DEMONSTRATE THE MALA-FIDE IN FILING FIR. ASSESSING OFFICER FAILED TO DO SO. IN THIS CASE, ASSESSING OFFICER MERELY DISMISS ED THE CLAIM OF REPORTING OF THE EVENT TO THE POLICE AUTHORITIES. THE FIR CONSTITUTES AN EXTRACT FROM THE RECORDS OF THE POLICE, GOVERNMENT OF MAHARASHTRA AND THE SAME SHOULD BE ACCEPTED AS GENUINE. OTHERWISE, THERE IS NO EVID ENCE ON THE CONTRARY FROM THE ASSESSING OFFICERS SIDE. THEREFORE, WE ARE OF THE OPINION THAT DISALLOWANCE, MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE CI T(A), IS UNSUSTAINABLE IN LAW. ACCORDINGLY, GROUND NO. 1.6 RAISED BY THE ASSESSEE IS ALLOWED . E. GROUND NO. 1.7 RELATES TO ADDITION OF RS.1,07,27,20 4/- 30. GROUND NO. 1.7 RELATES TO ADDITION OF RS.1,07,27,204/- ON ACCOUNT OF ALLEGED DIFFERENCE IN THE VALUATION OF CLOSING STOCK OF GOLD. 31. DURING ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER, ON THE ISSUE OF VALUATION OF GOLD, FOLLOWED THE PRINCIPLE OF FIFO AND VALUED TH E CLOSING STOCK AT RS.6,05,30,845/- AGAINST THE ASSESSEES VALUATION FIGURE OF RS.4,98,03,641/-. THE DIFFERENCE WORKS OUT TO RS.1,07,27,204/-. THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 145(3) OF T HE ACT AND ADDED THE SAID AMOUNT TO THE TOTAL INCOME RETURNED BY THE ASSESSEE. THE FACTS ABOUT EXCESS STOCK, RATES OF GOLD AND OTHER DETAILS ARE DISCUSSED IN PARA 11.5 TO 11.9 OF THE ASSESSMENT ORDER. FOR THE SAKE OF COMPLETENESS, THE SAID PARAGRAPHS ARE EXTRACTED AS UNDER: 11.5 THE RATE OF PURE GOLD AS ON 31/3/2008, 31/03/2 009 AND 31/3/2010, AS PER READY RECKONER IS AS UNDER: 31/3/2008 RS.12,125/- 31/3/2009 RS.15,105/- 31/3/2010 RS.16,320/- WHEREAS ABOVE DETAILS SHOWS THE VALUATION OF RATE O F GOLD AS ON 31/3/2010 HAVE BEEN SHOWN LESS THAN THE RATE AS ON 31/3/2009 WHICH IS 18 ITA NO.717/PUN/2015 A.Y. 2010-11 NOT CORRECT AS ON 31/3/2009 THE RATE FOR PURCHASES SHOWN IN F.Y. 2008-09 HAS BEEN TAKEN AT 1276.82 PER GRAM AND FOR OLD STOC K OF F.Y. 2007-08 HAS BEEN SHOWN AT 1081.66 PER GRAM AND AS ON 31/3/2010 IT HAS BEEN REDUCED TO 1027.96 PER GRAM AND 940.35 PER GRA M. 11.6. NOW COMING TO THE ASSESSEE'S SUBMISSION AT TH E FIRST INSTANCE, THE ASSESSEE HAS GIVEN THE DETAILS OF STOCK ITEMS I.E. GOLD IN DIAMOND ORNAMENTS, GOLD MODE, GOLD ORNAMENTS 94, GOLD PURE, AND SO ON. BUT WHILE EXPLAINING THE DETAILS OF VALUATION OF OPENIN G STOCK OF GOLD AS ON 1/4/2009 OF ALL ITEMS OF GOLD, THE ASSESSEE HAS NOT SHOWN IT EM WISE AS SHOWN IN DETAILS OF STOCK ITEMS. ON GOING THROUGH T HE ALL ITEMS OF GOLD AS ON 1/4/2009, THE ASSESSEE HAS SHOWN STOCK OF GOLD OF 36484.53BIFURCATING AS OUT OF OPENING STOCK AS ON 1/4/2008 AT 12,791.53 AND BALANCE OF 23693 AS PURCHASES IN F.Y. 2008-09. THIS MEANS THAT THE ASSESSEE, SINCE ADOPTED FIFO METHOD, THE ASSESSEE I S HAVING STOCK OF GOLD AS ON 1/4/2008 AT 12,791.53 GRAMS. NOW COMING TO THE DETAILS OF CLOSING STOCK OF GOLD AS ON 31/3/2010, THE ASSESSEE HAS SHOWN STOCK OF GOLD AS ON3 1/3/2010 AT NET WEIGHT OF 35,962.68 GRAMS. BUT WHILE BIFURCATING SUCH NET WEIGHT, THE ASSESSEE HAS TRIED TO MISLEAD BY STATING HEREIN THAT OUT OF STOCK OF GOLD 35962.68 GRAMS, TH E BREAK UP IS AS UNDER STOCK BEING PURCHASED IN F.Y. 2007-08 8446.23 OUT OF OPENING STOCK OF 1.4.2007 7409.34 PURCHASES DURING THE YEAR 20107.11 11.7 FROM THE ABOVE DETAILS AS ON 31/03/2010, THE ASSESSEE IS NOW RELYING ON THE FACT THAT HE WAS HAVING THE STOCK BE FORE 1/4/2007 OF 7409.34 GRAMS WHILE SUBMITTING THE DETAILS FOR THE YEAR UNDER CONSIDERATION, WHEREAS WHILE SUBMITTING THE DETAILS FOR THE F.Y.2009-10, THE SAID OPENING STOCK AS ON 1/4/2007 WAS NOT AT AL L APPEARING I.E. TO SAY AS ON 1/4/2008 IT HAS SHOWN 12791.53. THUS ON O NE HAND IT CAN BE SAID THAT THE ASSESSEE IS HAVING GOLD STOCK AS ON 1 /4/2009 AT 15,855.57 GRAMS. THUS HERE ALSO THERE IS A DIFFEREN CE. 11.8. THE ASSESSEE HAS NOT MAINTAINED ITEM TO ITEM W EIGHT WISE PURITY WISE STOCK DETAILS OF ORNAMENTS OR OTHER ITEMS AND THUS IT IS NOT POSSIBLE TO VERIFY THAT WHICH ITEM OF PARTICULAR YEAR HAS BE EN SOLD AND DURING THE COURSE OF SURVEY THE ASSESSEE HAS DISCLOSED LAST YE AR PURCHASE OF 12575.5 GRAMS FOR A VALE OF RS. 1,60,32,031 HAVING A RATE OF 1274.86 PER GRAM BESIDES CURRENT YEAR PURCHASE AND THEN WHY IN CLOSING STOCK AS ON 31/3/2010 ITS VALUE HAS BEEN TAKEN AT 1274.86 PER GRAND AND RS.940.35 PER GRAM BY THE ASSESSEE. THE RATE OF GOL D HAS INCREASED FROM 24/9/2009 TO 31/3/2010. THUS JUST TO REDUCE THE INC OME AND AVOID TO PAY TAXES, THE ASSESSEE HAS DELIBERATELY UNDERVALUE D ITS CLOSING STOCK. 11.9 FROM THE ABOVE, IT CAN BE EASILY INFERRED AND HELD WITHOUT ANY HESITATION THAT THE ASSESSEE IS VALUING THE STOCK A S PER HIS OWN WILL AND WHIM WITHOUT HAVING ANY BASE AND WITHOUT ANY PROPER SUPPORTING EVIDENCES I.E. BOOKS OF ACCOUNTS. THUS, I HAVE NO HESITATION TO HOLD THAT THE CLOSING STOCK AS SHOWN BY THE ASSESSEE IS TO BE VALUED ON THE BASIS OF PURCHASE VALUE OF CURRENT YEAR, AS OLD STOCK HAS ALREADY BEEN SOLD OUT. THUS I HEREBY VALUE THE CLOSING STOCK OF THE A SSESSEE AT RS.5,98,26,435/- ( 35962.68 X 1663.57 ) + LABOUR CH ARGES I.E. RS.7,04,410 = 6,05,30,845 NO WHEREAS THE ASSESSEE H AS SHOWN CLOSING STOCK AT RS. 4,98,03,641/-. THUS, THE DIFFERENCE OF RS. 1,07,27,204/- ( 6,05,30,845 - 4,98,03,641 ) IS HEREBY ADDED TO THE TOTAL INCOME OF THE ASSESSEE, BY APPLYING THE PROVISIONS OF SECTION 145 (3) OF THE I.T.ACT , 1961. 19 ITA NO.717/PUN/2015 A.Y. 2010-11 32. DURING FIRST APPELLATE PROCEEDINGS BEFORE THE CIT(A), ASS ESSEE SUBMITTED THAT, BARRING THE STOCK OF GOLD ORNAMENTS-94 , THE METHOD OF ACCOUNTING OF GOLD WAS CONSISTENTLY FOLLOWED ON THE SETTLE D PRINCIPLE OF FIFO. ONLY WITH REFERENCE TO VALUATION OF THE SAID STOCK OF GO LD ORNAMENTS-94, THE ASSESSEE CHANGED THE METHOD OF ACCOUNTING AND THE REFORE, THERE IS DIFFERENCE IN VALUE OF CLOSING STOCK VALUATION. THE CIT(A) CONSID ERED THE FACTS OF THE CASE AND CONFIRMED THE ADDITION MADE BY THE ASSE SSING OFFICER AS PER DISCUSSION GIVEN IN PARA 18.1 AND 18.2 OF HIS ORDER. THUS, T HE AO AND CIT(A) DID NOT ALLOW THE CHANGE IN THE METHOD OF VALUATION. 33. BEFORE US, REFERRING TO THE ASSESSING OFFICERS DECISION AS DISCUSSED IN PARA 11.9 EXTRACTED ABOVE, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT VALUATION OF CLOSING STOCK OF GOLD AT RS.1663.57/- PER GRAM IS NOT PROPER AND IS COMPLETELY A CASE OF ADHOCISM. FURTHER, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT CLOSING STOCK VALUATION OF GOLD ORNAMENT- 94 IS ONLY DISTURBED IN THIS YEAR BY THE ASSESSEE. FURTHER, REFERRING TO THE OPENING STOCK BALANCE FIGURE IN T HE NEXT ASSESSMENT YEAR, LD. AR SUBMITTED THAT THIS CHANGE IN ME THOD QUA THE GOLD ORNAMENT-94 IS FOLLOWED CONSISTENTLY IN THE SUBSEQUENT ASSESSMENT YEARS TOO. FURTHER, LD.AR SUBMITTED THAT THE ASSESSING OFFICER IN THE NEXT ASSESSMENT YEAR DID NOT GRANT CONSEQUENTIAL BENEFIT IN T HE OPENING STOCK VALUATION OF THE SUBSEQUENT ASSESSMENT YEAR. THIS FAILURE OF AO IS PATENTLY WRONG ON FACTS. THIS ARGUMENT IS RAISED BY LD. AR WITHO UT PREJUDICE TO THE DEMAND FOR ACCEPTING THE CHANGED MODE OF VALUATION. THERE FORE, LD. COUNSEL SUBMITTED FOR DELETION OF ENTIRE ADDITION OF RS.1,07,27,204/-. FU RTHER, ON THIS ISSUE, ALTERNATIVE ARGUMENT ADVANCED BY THE LD. COUNSEL FOR THE ASSESSEE TO GRANT CONSEQUENTIAL BENEFIT TO THE OPENING STOCK IN THE N EXT ASSESSMENT YEAR. 20 ITA NO.717/PUN/2015 A.Y. 2010-11 THEN, LD. AR IS FAIR IN ADMITTING THAT THE ASSESSEE ALTERED THE METHOD OF ACCOUNT QUA THE GOLD ORNAMENT-94 WHICH HAD THE EFFECT OF PROFIT REDUCTION OF RS.1,07,27,204/- IN REAL TERMS. 34. ON THE OTHER HAND, LD. DR FOR THE REVENUE PLACED RELIA NCE ON THE ORDER OF ASSESSING OFFICER AND CIT(A). RELYING ON VARIOUS JUDGMENT S, LD. DR SUBMITTED THAT THE DECISION OF THE ASSESSEE IN GOING FOR T HE CHANGE IN METHOD OF VALUATION OF STOCK HAS THE DIRECT EFFECT ON THE PROFIT O F THE YEAR OF THE ASSESSEE. THEREFORE, AO/CIT(A) ARE JUSTIFIED IN REJECTING TH E CLAIM OF THE ASSESSEE. 35. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE AND PE RUSED THE ORDER OF REVENUE AUTHORITIES IN GENERAL AND CONTENTS OF PARA 18.1 AND 18.2 OF THE ORDER OF CIT(A) IN PARTICULAR. FOR THE SAKE OF COMPLETENESS, THE SAME ARE EXTRACTED AS UNDER: 18.1 FROM THE ABOVE FACTS, THE AO HAS MADE FOLLOWI NG OBSERVATIONS:- 1) WHILE VALUING THE OPENING STOCK AT RS. 4,44,81,3 90/-, THE AO HAS CONSIDERED GOLD PURCHASED IN F.Y. 2008-09 AT 23,636 GRAMS AND STOCK OF GOLD OUT OF OPENING STOCK AS ON 01/04/2008 AT 12791 .53 GRAMS. 2) WHILE VALUING THE CLOSING STOCK AT RS.4,98,03,64 1/-, THE AO HAS CONSIDERED CLOSING STOCK OF 8446.23 GRAMS + 7409.34 GRAMS = 15855.34 GRAMS AS PURCHASED BEFORE 01/04/2007 TO 01/04/2008. 3) IN VIEW OF THE ABOVE TWO OBSERVATIONS, THE AO HA S NOTICED THAT WHEN IN OPENING STOCK THE STOCK ACQUIRED BEFORE 01/04/20 08 WAS 12791.53 GRAMS, THE SAME CANNOT BE 158 5 5. 3 4 GRAMS IN CLOSING STOCK. THIS MISTAKE POINTED OUT BY THE A .O. IN THE V ALUATION OF CLOSING STOCK IS AN APPARENT MISTAKE OF THE APPELLANT. 4) THE A.O. HAS FURTHER NOTED THAT AS THE APPELLANT HAS FOLLOWED FIFO METHOD AND HAS AFFECTED HUGE SALE DURING THE Y EAR HAVING THE COST OF GOLD SOLD AT RS. 9.57 CRORES, THERE CANNOT BE ANY OPENING STOCK BALANCE. THE ABOVE CONTENTION OF THE AO IS AL SO FOUND TO BE LOGICAL AND ACCEPTABLE. THE APPELLANT HAS ALSO NOT FILED ANY CON V INCING SUBMISSION OR QUANTITATI V E DETAILED STOCK RECORD PROVING THAT THE ITEMS IN OPENING STOCK HAVE NOT B E EN SOLD IN THE Y EAR UNDER APPEAL AND THE SAME ARE I NCLUDED IN CLOSING STOCK AND ACCORDINGL Y THE CLOSING STOCK HAS BEEN ARRI V ED AT. IN V IEW OF THE ABO V E FACTS, I AM OF THE CONSIDERED V IEW THAT THE AO IS JUSTIFIED IN V ALUING THE CLOSING STOCK OF GOLD AT RS. 1663.57 / - PER GRAM I.E. V ALUE OF PURCHASE OF GOLD DURING THE Y EAR UNDER APPEAL. THE AO IS THEREFORE JUSTIFIED IN ARRI V ING AT THE V ALUE OF THE CLOSING STOCK AS UNDER:- 21 ITA NO.717/PUN/2015 A.Y. 2010-11 GOLD WEIGHT 35962.68 GRAMS X RS.1663.57 = RS.5,98,2 6,435/- ADD : LABOUR CHARGES = RS.7,04,410/- TOTAL VALUE OF CLOSING STOCK = RS.6 ,05,30,845/- 18.2 THE ADDITION OF RS.1,07,27,204/- (RS.6,05,30,8 45/- - RS.4,98,03,641/- ON ACCOUNT UNDERVALUATION OF CLOSI NG STOCK OF GOLD IS THEREFORE CONFIRMED. FROM THE ABOVE, IT IS THE FINDING OF THE ASSESSING OFFICER THA T THE QUANTIFICATION OF THE CLOSING STOCK OF 15855.34 GRAMS IS NOT CORRECT. AS SESSING OFFICER ALSO FOUND MISTAKES IN MATTERS RELATING TO FIFO ADOP TED BY THE ASSESSEE. THEREFORE, CIT(A) CONFIRMED THE ASSESSING OFFICERS CALCULATIONS LEADING TO THE ADDITION OF RS.1,07,27,204/-. WE HAVE ALSO CON SIDERED THE ALTERNATIVE ARGUMENT OF THE LD. AR REGARDING THE NECESSA RY CORRECTIONS TO BE MADE TO THE OPENING STOCK BALANCE FIGURE IN THE NEXT ASSESSMENT YE AR. ON HEARING BOTH THE PARTIES AND ON PERUSAL OF THE ORDE RS OF THE AO/CIT(A), WE FIND THAT ALL IS NOT WELL WITH THE WAY THE ASS ESSEE MAINTAINED THE CLOSING STOCK ACCOUNT QUA ITS VALUATION. FOR THE FIRST TIME BEFORE US, LD. AR CAME UP WITH THE EXPLANATION THAT THE STOCK OF GOLD ORNAMENT-94 AND THE CHANGE IN ITS VALUATION IN THE YEAR UNDER CONSIDERATIO N ARE THE CAUSE OF THE DISCREPANCIES IN VALUATION NOTED BY THE AO/CIT(A). FUR THER, IT IS THE ALTERNATE ARGUMENTS OF THE LD. AR THAT THE ASSESSEE SH ALL BE CONTENT IF THE CONSEQUENTIAL BENEFIT IS GRANTED ADJUSTING THE OPENING STO CK IN THE SUBSEQUENT ASSESSMENT YEARS. IN THAT CASE, LD. AR SHALL NOT PRESS FOR ACCEPTING THE EARLIER ARGUMENTS IN FAVOUR OF DELETION OF T HE ADDITION OF RS.1,07,27,204/-. ON CONSIDERING ALL THE ABOVE, WE ARE OF THE OPINION THAT THERE IS MERIT IN THE SAID ALTERNATIVE SUBMISSION MADE BY THE LD. COUNSEL FOR THE ASSESSEE REGARDING THE GRANT OF CONSEQUENTIAL B ENEFIT WITH RESPECT TO ADJUSTMENT TO THE OPENING STOCK IN NEXT ASSESSMENT YE AR. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO CONSIDER THE SAME AFTER HE ARING THE ASSESSEE 22 ITA NO.717/PUN/2015 A.Y. 2010-11 AND ALLOW CONSEQUENTIAL BENEFIT AS PER THE LAW, IF ANY, IN THE NEXT ASSESSMENT YEAR. HENCE, WE ALLOW THE ALTERNATIVE SUBMISSION OF THE ASSE SSEE AS MENTIONED ABOVE. CONSIDERING THIS RELIEF, WE ARE OF THE VIEW THAT THE OTHER ARGUMENTS MADE BY THE LD. AR STAND DISMISSED AS ACADEM IC. ACCORDINGLY, GROUND NO.1.7 RAISED IN APPEAL BY THE ASSESSEE IS P ARTLY ALLOWED. 36. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 28 TH DAY OF NOVEMBER, 2018. SD/- SD/- ( / SUSHMA CHOWLA ) ( . ! / D. KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; !' / DATED : 28 TH NOVEMBER, 2018. SB ()*+,-.-+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEAL)-2, NASHIK. 4. THE PR. CIT-2, NASHIK. 5. %&' () , * () , +,- , / DR, ITAT, A BENCH, PUNE. 6. './ 01 / GUARD FILE. // TRUE COPY // * 2 / BY ORDER, 3 (- /PRIVATE SECRETARY * () , / ITAT, PUNE.