M/s Milan Jewellers, Bhuj V. The Assistant Commissioner of Income Tax, Central Circle-2, RAJKOT-GUJARAT

ITA 918/RJT/2009

• Counselvise Citation: 91824914 RSA 2009
• Duration Of Justice: 1 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 30-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 23-07-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JM SAHAY
• Assessee Lawyers: J C RANPURA
• Keywords: Unexplained investment; Set aside
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI N.R.S. GANESA N (JM) ITA NO 916/RJT/2009 - AY 2006-07 ITA NO 917/RJT/2009 - AY 2006-07 M/S KESHAVLAL JETHALAL & CO VS ACIT, CENT.CIR.2 OPP JILLA PANCHAYA RAJKOT BHUJ PAN :AAHFK2133M (APPELLANT) (RESPONDENT) ITA NO 918/RJT/2009 - AY 2006-07 ITA NO 919/RJT/2009 - AY 2006-07 M/S MILAN JEWELLERS VS ACIT, CENT.CIR.2 OPP JILLA PANCHAYA RAJKOT BHUJ PAN :AAHFM8691E (APPELLANT) (RESPONDENT) APPELLANTS BY: SHRI JC RANPURA RESPONDENT BY: SHRI JM SAHAY O R D E R PER N.R.S. GANESAN, JM THESE FOUR APPEALS FILED BY TWO DIFFERENT ASSESSEE S, TWO EACH, ARE DIRECTED AGAINST THE FOUR INDEPENDENT ORDERS, ALL D ATED 07-01-2009 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-IV, AHM EDABAD FOR THE ASSESSMENT YEAR 2006-07. ITA NOS.917 & 918/RJT/200 9 ARE AGAINST THE ORDER OF CIT(A) CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT PROCEEDINGS. ITAS NO.916 & 919/RJT/ 2009 ARE FILED AGAINST THE ORDER OF CIT(A) CONFIRMING THE LEVY OF PENALTY U/S 271(1)(C) OF ITA NOS.916 & 917/RJT/2009 ITA NOS.918 & 919/RJT/2009 2 THE ACT. SINCE COMMON ISSUES ARE INVOLVED, WE HEAR D ALL THE APPEALS TOGETHER AND ARE BEING DISPOSED OFF BY THIS COMMON ORDER. 2. LET US FIRST TAKE THE QUANTUM APPEALS FILED BY T HE ASSESSEES IN ITA NOS 917 & 918/RJT/2009. THE FACTS ARE AKIN TO BOTH THE CASES. 3. SHRI JC RANPURA, THE LEARNED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THERE WAS A SEARCH IN THE BUSINESS P REMISES OF THE ASSESSEE ON 29-12-2005. ACCORDING TO THE LD.REPRES ENTATIVE, THE ASSESSEES ARE ENGAGED IN THE BUSINESS OF MAKING GOL D AND SILVER ORNAMENTS AND SALE OF THE SAME. ACCORDING TO THE L D.REPRESENTATIVE, BOTH THE ASSESSEE FIRMS ARE OPERATING FROM THE SAME PREM ISES. DURING THE COURSE OF SEARCH OPERATION, THE REVENUE AUTHORITIES FOUND CASH OF RS.27,19,450 OUT OF WHICH RS. 25,85,000 WAS SEIZED. THE LD.REPRESENTATIVE FURTHER SUBMITTED THAT THE REVENU E AUTHORITIES HAVE ALSO FOUND STOCK OF 267.157 KGS OF SILVER AND 3929 GMS O F GOLD JEWELLERY AS AGAINST STOCK RECORDED IN THE BOOKS OF ACCOUNT AT 1 89.262 KGS OF SILVER AND 258.292 GMS OF GOLD. ACCORDING TO THE LD.REPRESENT ATIVE, THE ASSESSEE HAS DISCLOSED RS.12,85,000 TOWARDS UNEXPLAINED CASH AND RS.17,70,000 TOWARDS INVESTMENT IN GOLD STOCK IN THE CASE OF MIL AN JEWELLERS. SIMILARLY, IN THE CASE OF KESHAVLAL JETHALAL & CO THE ASSESSEE HAS DISCLOSED RS.12,85,000 ON ACCOUNT OF UNEXPLAINED CASH AND RS. 5,70,000 TOWARDS INVESTMENT IN STOCK OF SILVER. 4. THE LD.REPRESENTATIVE FURTHER SUBMITTED THAT THE REVENUE AUTHORITIES VALUED THE STOCK OF GOLD FOUND DURING THE COURSE OF SEARCH OPERATION AT RS.21,87,669. HOWEVER, THE ASSESSEE HAS DISCLOSED THE VALUE OF STOCK ONLY AT RS.17,70,000. THEREFORE, THE ASSESSING OFF ICER MADE ADDITION OF RS.4,17,669 TOWARDS UNEXPLAINED INVESTMENT IN THE G OLD IN THE CASE OF ITA NOS.916 & 917/RJT/2009 ITA NOS.918 & 919/RJT/2009 3 MILAN JEWELLERS. IN RESPECT OF KESHAVLAL, JETHALAL & CO THE ASSESSEE DISCLOSED RS.12,85,000 TOWARDS THE CASH FOUND. THE ASSESSING OFFICER FOUND THAT THERE WAS A DIFFERENCE OF RS.14,853 IN T HE CASH FOUND AND DISCLOSED BY THE ASSESSEE AND THEREFORE, ADDITION O F RS.7,427 EACH IN THE HANDS OF BOTH THE ASSESSEES WAS MADE. ACCORDING TO THE LD.REPRESENTATIVE, THE DIFFERENCE OF RS.4,17,669 IN RESPECT OF THE GOLD AROSE BECAUSE OF MIXING ELEMENT OF 229.411 GMS WHICH WAS MADE BY THE KARIGARS WHILE MAKING THE ORNAMENTS FROM THE FINE G OLD. ACCORDING TO THE LEARNED REPRESENTATIVE, IN THE PROCESS OF MAKING GO LD ORNAMENTS WHICH ARE GENERALLY OF 85% PURITY, THE KARIGARS MIX SOME META L WITH FINE GOLD FOR FLEXIBILITY. ACCORDING TO THE LD.REPRESENTATIVE, T HE ASSESSEE HAS NOT SOLD ANY FINE / RAW GOLD TO ANYONE. ALL GOLDS WERE CONV ERTED INTO ORNAMENTS AND WHAT WAS SOLD WAS ONLY THE ORNAMENTS. ACCORDIN G TO THE LD.REPRESENTATIVE, UNLESS AND UNTIL METALS ARE MIXE D WITH FINE GOLD, ORNAMENTS CANNOT BE MADE OUT OF THE PURE GOLD. THE REFORE, FOR THE PURPOSE OF FLEXIBILITY OF THE PURE GOLD IN ORDER TO MAKE THE ORNAMENTS AS DESIRED, THE KARIGARS HAVE TO NECESSARILY MIX OTHER METALS. THEREFORE, ACCORDING TO THE LD.REPRESENTATIVE, THE DIFFERENCE OF RS.4,17,669 HAS ARISEN. THE LD.REPRESENTATIVE FURTHER SUBMITTED TH AT THERE WAS A DIFFERENCE OF RS.1,54,000 ON ACCOUNT OF PURCHASE OF 200 GMS OF GOLD FROM GOPINATH JEWELLERS, AHMEDABAD. ACCORDING TO THE LD.REPRESEN TATIVE, THE ASSESSEE HAS PAID THE PURCHASE PRICE BY DEMAND DRAFT THROUGH BANKING CHANNEL. ACCORDING TO THE LD.REPRESENTATIVE, NORMALLY FOR PU RCHASE OF GOLD, THE PURCHASE PRICE HAS TO BE SENT IN ADVANCE AND DELIVE RY OF THE GOLD WILL BE GIVEN ON A LATER DATE. ACCORDINGLY, A DRAFT DATED 14-12-2005 WAS SENT TO SHRI GOPINATH JEWELLERS, AHMEDABAD. THE GOLD FROM GOPINATH JEWELLERS HAS JUST RECEIVED AND IT REMAINED TO BE TAKEN INTO CONSIDERATION IN THE ACCOUNTS. IN THE MEAN TIME, THERE WAS A SEARCH. T HE ASSESSEE HAS RECEIVED THE PURCHASE BILL DATED 21-12-2005. THE C OPY OF THE PAYING-IN- ITA NOS.916 & 917/RJT/2009 ITA NOS.918 & 919/RJT/2009 4 SLIP FOR TAKING THE BANK DRAFT AND THE COPY OF THE INVOICE DATED 21-12-2005 ARE FILED BY THE ASSESSEE AT PAGES 2 & 3 OF THE PAP ER BOOK. THEREFORE, THIS DIFFERENCE OF RS.1,54,000 IS ONLY ON ACCOUNT OF REC ENT PURCHASE OF THE GOLD WHICH HAS TO BE CONSIDERED SINCE THE PAYMENT WAS MA DE THROUGH BANKING CHANNELS. THEREFORE, ACCORDING TO THE LD.REPRESENT ATIVE, THERE WAS NO DIFFERENCE IN THE STOCK AT ALL. 5. THE LD.REPRESENTATIVE FURTHER SUBMITTED THAT EXC ESS STOCK OF SILVER IN THE CASE OF KESHAVLAL JETHALAL & CO WAS VALUED AT R S.6,90,189. HOWEVER, THE ASSESSEE DISCLOSED RS.5,70,000. THEREFORE, THE ASSESSING OFFICER MADE ADDITION OF RS.1,20,189 TOWARDS UNEXPLAINED PU RCHASE OF SILVER. ACCORDING TO THE LD.REPRESENTATIVE, THE DIFFERENCE IN SILVER WAS ALSO DUE TO MIXING ELEMENT WITH PURE SILVER WHILE MAKING SILVER ORNAMENTS. ACCORDING TO THE LD.REPRESENTATIVE 15% OF MIXING ELEMENT HAS TO BE ADDED WITH PURE SILVER IN ORDER TO MAKE SILVER ORNAMENTS. ACCORDIN G TO THE LD.REPRESENTATIVE, THE KARIGARS, WHO MANUFACTURE TH E SILVER ORNAMENTS MIX THE MIXING ELEMENT WITH PURE SILVER. ACCORDING TO THE LD.REPRESENTATIVE, THE ASSESSEE IS NOT SELLING ANY RAW SILVER TO ANYONE. WHAT WAS SOLD WAS ONLY SILVER ORNAMENTS. 6. ON THE CONTRARY, SHRI JM SAHAY, THE LD.DR SUBMIT TED THAT ADMITTEDLY THERE WAS A SEARCH IN THE PREMISES OF THE ASSESSEE WHERE BOTH THE ASSESSEES ARE CARRYING ON THE BUSINESS. THE ASSESS EE, KESHAVLAL, JETHALAL & CO CARRIES ON THE BUSINESS IN SILVER ORN AMENTS WHEREAS THE ASSESSEE, M/S MILAN JEWELLERS CARRIES ON THE BUSINE SS OF GOLD JEWELLERY. DURING THE COURSE OF SEARCH OPERATION THE REVENUE A UTHORITIES FOUND PHYSICAL DIFFERENCE IN STOCK WITH THE STOCK RECORDE D IN THE BOOKS. THE EXPLANATION OF THE ASSESSEE THAT THE DIFFERENCE IN GOLD AND SILVER WAS DUE TO THE MIXING ELEMENT IS NOT CORRECT. ACCORDING TO THE LD.DR EVEN THOUGH ITA NOS.916 & 917/RJT/2009 ITA NOS.918 & 919/RJT/2009 5 SOME ELEMENTS ARE REQUIRED TO BE MIXED WITH PURE GO LD, STILL THERE CANNOT BE ANY DIFFERENCE IN STOCK AS HELD BY THE ASSESSEE. THEREFORE, THERE IS NO JUSTIFICATION IN THE EXPLANATION OF THE ASSESSEE. REFERRING TO THE DIFFERENCE OF RS.1,54,000 OF RAW GOLD, THE LD.DR SUBMITTED THA T THE EXPLANATION IS AN AFTERTHOUGHT. THE ASSESSEE ADMITTEDLY HAS NOT TAKE N INTO ACCOUNT THE RAW GOLD PURCHASED TO THE EXTENT OF RS.1,54,000. SINCE THERE WAS SEARCH IN THE PREMISES OF THE ASSESSEE THE ASSESSEE MIGHT HAV E ARRANGED FOR A PURCHASE BILL IN ORDER TO LEGITIMIZE THE GOLD FOUND IN THE PREMISES OF THE ASSESSEE. ACCORDING TO THE LD.DR MERELY BECAUSE TH E PURCHASE PRICE WAS PAID THROUGH BANK DRAFT, IT DOES NOT MAKE THE PURCH ASE ACCOUNT. REFERRING TO THE DIFFERENCE IN THE CASH FOUND AND AS DISCLOSE D BY THE ASSESSEE, ACCORDING TO THE LDE.REPRESENTATIVE, BOTH THE ASSES SEES HAVE DISCLOSED THE CASH TO THE EXTENT OF RS.!2,85,000. THEREFORE, THE RE WAS A DIFFERENCE OF RS.14,853. SINCE CASH WAS FOUND AND IT WAS NOT DIS CLOSED BY BOTH THE ASSESSEES TO THE EXTENT OF RS.14,853 THE ASSESSING OFFICER MADE ADDITION EQUALLY IN THE HANDS OF BOTH THE ASSESSEE TO THE EX TENT OF RS.7,427. THEREFORE, THE CIT(A) HAS RIGHTLY CONFIRMED THE ADD ITION MADE BY THE ASSESSING OFFICER. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND HAVE ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ADM ITTEDLY, BOTH THE ASSESSEES ARE DOING BUSINESS FROM THE SAME PREMISES AND THERE WAS A SEARCH OPERATION ON 29-12-2005. IT IS ALSO NOT IN DISPUTE THAT THE REVENUE AUTHORITIES FOUND DIFFERENCE IN GOLD AND SILVER JEW ELLEY WHEN COMPARED TO GOLD AND SILVER RECORDED IN THE BOOKS OF ACCOUNT. M/S MILAN JEWELLERS IS IN THE BUSINESS OF GOLD ORNAMENTS AND KESHAVLAL JETHAL AL & CO IS IN THE BUSINESS OF SILVER ORNAMENTS. THE REVENUE AUTHORIT IES HAVE FOUND DIFFERENCE OF RS.4,17,769 IN THE VALUE OF GOLD JEWE LLERY IN THE CASE OF MILAN JEWELLERS. IN THE CASE OF KESHAVLAL JETHALAL & CO THE DIFFERENCE OF SILVER ITA NOS.916 & 917/RJT/2009 ITA NOS.918 & 919/RJT/2009 6 JEWELLERY WAS FOUND TO THE EXTENT OF RS.1,20,189. THE MAIN CONTENTION OF THE ASSESSEES IS THAT THEY ARE NOT SELLING THE RAW GOLD / SILVER. THE DIFFERENCE WAS DUE TO MIXING ELEMENT WITH RAW GOLD AND RAW SILVER FOR THE PURPOSE OF MAKING ORNAMENTS. IT IS COMMON KNOWLEDG E THAT GOLD ORNAMENTS CANNOT BE MADE BY USING RAW GOLD / SILVER . IN ORDER TO MAKE THE GOLD AND SILVER FLEXIBLE SO AS TO MAKE THE ORNAMENT S IN THE DESIGN AS DESIRED, ONE HAS TO MIX SOME ELEMENT WITH PURE GOLD / SILVER. ONCE SUCH A MIXING ELEMENT IS ADDED WITH SILVER / GOLD THE WEIG HT WILL NATURALLY INCREASE AND THE STOCK POSITION WILL AUTOMATICALLY GO UP. I N THIS CASE THE GOLD AS FOUND IN THE STOCK IS 258.292 GMS. HOWEVER, THE GO LD JEWELLERY FOUND WAS 3.929 KGS. THE ASSESSEE, AFTER TAKING INTO CONSIDE RATION OF THE VALUE OF MIXING ELEMENT DECLARED THE COST AT RS.17,70,000. HOWEVER, THE ASSESSING OFFICER VALUED THE SAME AT RS.21,87,669 W ITHOUT MAKING ANY DEDUCTION FOR THE ELEMENT MIXED WITH PURE GOLD / SI LVER. IT IS ALSO A COMMON KNOWLEDGE THAT THE MIXING ELEMENT WILL ALWA YS COST VERY NOMINAL, THEREFORE, IT HAS TO BE TAKEN INTO CONSIDERATION WH ILE VALUING GOLD / SILVER ORNAMENTS. THEREFORE, THE CONTENTION OF THE ASSESS EE THAT THE DIFFERENCE WAS DUE TO MIXING ELEMENT IS FOUND TO BE REASONABLE . THEREFORE, IN OUR OPINION, THE ADDITION OF RS.4,17,669 IN THE CASE OF MILAN JEWELLERS AND RS.1,20,189 IN THE CASE OF KESHAVLAL, JETHALAL & CO IS NOT JUSTIFIED AT ALL. FOR THE AFORESAID REASONS, WE ARE UNABLE TO UPHOLD THE ORDER OF LOWER AUTHORITIES. ACCORDINGLY, THE SAME IS SET ASIDE AN D THE ADDITION OF RS.4,70,669 IN THE CASE OF MILAN JEWELLERS AND RS.1 ,20,189 IN THE HANDS OF KESHAVLAL, JETHALAL & CO IS DELETED. 8. SIMILARLY, THE ADDITION OF RS.1,54,000 AS PURCHA SE OF GOLD FROM GOPINATH JEWELLERS, THE MATERIAL AVAILABLE ON RECOR D SHOWS THAT THE ASSESSEE PURCHASED THE GOLD AND THE PAYMENT WAS MAD E IN ADVANCE BY DEMAND DRAFT. WHEN THE PAYMENT WAS MADE IN ADVANCE BY DEMAND DRAFT ITA NOS.916 & 917/RJT/2009 ITA NOS.918 & 919/RJT/2009 7 AND GOLD WAS RECEIVED SUBSEQUENTLY, IN OUR OPINION, NO ADDITION COULD BE MADE. WHEN THE PAYMENT WAS MADE IN ADVANCE, WE FIN D NO REASON TO DOUBT THE PURCHASES MADE BY THE ASSESSEE. ACCORDIN GLY, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF RS.1, 54,000 ALSO. 9. NOW COMING TO ADDITION OF RS.7,427 IN THE HANDS OF EACH ASSESSEE, ADMITTEDLY, THE REVENUE AUTHORITIES FOUND RS.25,19, 450 OUT OF WHICH RS.25,85,000 WAS SEIZED. THE CASH BALANCE AS PER T HE BOOKS OF MILAN JEWELLERS IS RS.1,35,794. HOWEVER, IN THE CASE OF KESHAVLAL, JETHALAL & CO IT IS (-) RS.1,197. THE EXCESS CASH FOUND WAS R S.25,84,853. EACH ASSESSEE DISCLOSED RS.12,85,000 IN THEIR RESPECTIVE HANDS. THEREFORE, THE BALANCE OF RS.14,853 NEEDS TO BE EXPLAINED. IN THE ABSENCE OF ANY EXPLANATION WITH REGARD TO THE BALANCE OF RS.14,853 , IN OUR OPINION, IT HAS BEEN RIGHTLY ADDED AS UNDISCLOSED INCOME IN THE HAN DS OF BOTH THE ASSESSEES EQUALLY. THEREFORE, THE ADDITION OF RS.7 ,427 EACH IN THE HANDS OF BOTH THE ASSESSEES ARE CONFIRMED. 10. NOW COMING TO ITA NOS 916 & 919/RJT/2009 AGAINS T THE ORDERS OF CIT(A) CONFIRMING THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT, THE ASSESSING OFFICER LEVIED PENALTY ON THE GROUND THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME. IN THE COURSE OF QUANTUM ADDITION WE FOUND THAT THE DIFFERENCE IN STOCK WAS FOUND DUE TO MIXING UP OF MIXING ELEMENT WITH THE GOLD / SILVER. ONCE TAKEN INTO CO NSIDERATION THE MIXING ELEMENT ADDED WITH GOLD / SILVER WE MAY NOT BE ABLE TO SAY THAT THE ASSESSEES HAVE FURNISHED ANY INACCURATE PARTICULARS . THE OTHER INCOME DISCLOSED IN THE RETURN CANNOT BE A BASIS FOR LEVY OF PENALTY. THEREFORE, IN OUR OPINION, LEVY OF PENALTY IN SUCH CIRCUMSTANCE M AY NOT BE WARRANTED. AS REGARDS THE CASH DIFFERENCE OF RS.7,427 EACH THI S IS A PETTY AMOUNT. THIS DIFFERENCE MAY BE BECAUSE OF SOME ACCOUNTING E RROR. THOUGH THE ITA NOS.916 & 917/RJT/2009 ITA NOS.918 & 919/RJT/2009 8 SAID DIFFERENCE OF RS.7,427 WAS ADDED TO THE TOTAL INCOME, WE MAY NOT BE ABLE TO SAY THAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS. IN VIEW OF THE ABOVE, IN OUR OPINION, LEVY OF PENALTY IS NOT J USTIFIED. ACCORDINGLY, PENALTY LEVIED BY LOWER AUTHORITIES ARE DELETED. 11. IN THE RESULT, ALL THE APPEALS FILED BY THE ASS ESSEE IN ITA NO.917 & 918/RJT/2009 ARE PARTLY ALLOWED AND APPEALS IN ITAS NO.916 & 919/RJT/2009 ARE ALLOWED.. ORDER PRONOUNCED IN THE OPEN COURT ON 17-06-2011. SD/- SD/- (A.L. GEHLOT) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER RAJKOT, DT : 17 TH JUNE, 2011 PK/- COPY TO: 1. ASSESSEE 2. REVENUE 3. THE CIT(A)-IV, AHMEDABAD 4. THE CIT, CENTRAL-II. AHMEDABAD 5. THE DR, I.T.A.T., RAJKOT (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT