ITO WARD-47(1), NEW DELHI V. SURENDER KAPOOR, NEW DELHI

ITA 274/DEL/2023

AI Insights

The case involves an appeal by the Income Tax Officer (ITO), Ward-47(1), New Delhi against Surender Kapoor concerning the assessment year 2017-18. The primary issues in the appeal were the additions made by the AO under section 68 of the Income Tax Act, 1961, related to alleged undisclosed income through cash deposits during the demonetization period, and the revaluation of closing stock which led to an addition to the returned income. The CIT(A) had deleted these additions, which the Revenue challenged in the Tribunal. The Tribunal found that the CIT(A) had correctly assessed the situation, noting the lack of proper examination by the AO and the incorrect application of stock valuation methods.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 633046 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH GUPTA
• Assessee Lawyers: AKASH OJHA; MAYANK PATAWARI
• Section: 143(3); 68

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: G : NEW DELHI BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.274/Del/2023 Assessment Year: 2017-18 ITO, Ward-47(1), New Delhi. Vs Surender Kapoor, 1588, Dariba Kalan, Chandni Chowk, New Delhi – 110 006. PAN: AALPK6721B (Appellant) (Respondent) Assessee by : Shri Akash Ojha, Advocate & Shri Mayank Patawari, Advocate Revenue by : Shri Manish Gupta, Sr. DR Date of Hearing : 03.06.2025 Date of Pronouncement : 13.06.2025 ORDER PER ANUBHAV SHARMA, JM: This appeal is preferred by the Revenue against the order dated 12.09.2022 of the Ld. Commissioner of Income-tax (Appeals), NFAC, Delhi (hereinafter referred to as the Ld. First Appellate Authority or ‘the Ld. FAA’, for short) in Appeals No.CIT(A), Delhi-18/10430/2019-20 arising out of the appeal before it against the order dated 12.12.2019 passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the ITO, ward 47(2), Delhi (hereinafter referred to as the Ld. AO). ITA No.274/Del/2023 2 2. Heard and perused the records. Though ld. DR has defended the assessment order and substantiated arguments on the grounds raised, however, on appreciating the material on record and submissions we find that first addition u/s 68 of the Act was made on account of cash deposits made during the demonetization period, AO has alleged that the Assessee has booked concocted cash sale to adjust his undisclosed income and the sales disclosed by the Assessee was denied by presuming that the Assessee has made out of books sales and on that basis AO rejected the books of the Assessee. Ld. CIT(A) observed that the addition of INR 1,02,35,000 would not sustain as the AO has made the casual remark in the assessment and proper examination and analyses was not done for the documents and evidences placed on record by the Assessee. 3. We find that assessee submitted the complete details of sales along with PAN, address of buyers, Bank statement depicting purchases, party-wise details of purchase, stock details etc.. AO himself admitted that the appellant had sufficient stock. Ld. CIT(A) thus rightly concluded that when assessee was having sufficient stock so could have sold the same and by submitting all the documents established that such sales were made by him during 1st week of Nov’2016, should not have been doubted. Especially when no discrepancy was pointed by AO in purchases & opening stock. Hence, once the purchases are ITA No.274/Del/2023 3 accepted, the corresponding sales could not be questioned. The findings of CIT(A) need no interference. 4. Second addition was made on account of undervaluation of closing stock. AO has re-valued closing stock of assessee. The closing stock was revalued to the tune of INR 3,16,36,633 and differential value from the value of stock reported by the assessee was added to the returned income. The Ld. CIT-(A) while deleting the addition had observed that the AO had not worked out correctly the difference in the valuation of stock for the purpose of addition and in the interest of justice confirmed the addition of 5% of INR 1,74,50,004/- i.e. INR 8,72,500/-. 5. We find that no discrepancy in quantity of stock of gold and diamond was found by AO. Value of gold and diamond jewellery as calculated by the AO relying on average purchase rate / last purchase rate was not in accordance with the method of valuing the stock, since there is a method for such valuation under prescribed in “ICDS-II Valuation of Inventories”. AO did not mention why method of valuation is adopted by appellant incorrect and which was consistently followed in earlier years. Ld. CIT(A) also observed that appellant was not granted with reasonable opportunity to explain the difference. Ld.AR has submitted that job work was done on 24K gold to 22KT gold along with other alloys to make Kundan jewellery which involved wax with a weight up to 25-40% of total value which could be varied similarly, thus, the assessee has ITA No.274/Del/2023 4 itself reduced the weight of stone from 18KT gold stock while doing the valuation. Then, Ld. CIT(A) has observed that assessee had reduced the value of diamond without any proper justification and also based on the quantity of gold lying with the Kundan jewellers, accordingly confirmed 5 % of such difference on account of under valuation. Assessee has not challenged the same. However, the fact that without giving assessee an opportunity to explain the reasons for revaluation the addition was made and that being the major ground to give benefit by the Ld. CIT(A), needs no interference. 6. Thus the grounds raised by revenue have no substance and accordingly the appeal of revenue is dismissed. Order pronounced in the open court on 13.06.2025. Sd/- Sd/- (MANISH AGARWAL) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 13th June, 2025. dk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi "