ZEVAR MEHAL REGD,NIT FARIDABAD V. INCOME TAX OFFICER WARD2(3) FARIDABAD, FARIDABAD

ITA 2632/DEL/2024

AI Insights

The case involves M/s. Zewar Mehal, a partnership firm engaged in the trading and manufacturing of jewelry, which faced scrutiny under the Income Tax Act, 1961 for the assessment year 2019-20. A survey under Section 133A revealed a discrepancy in the stock of gold and silver, leading to a voluntary disclosure of Rs.1,20,11,840 by the assessee. The Ld. AO added this amount under Section 69A, which was upheld by the Ld. CIT(A). The assessee contested the valuation method used, arguing it was based on market rates rather than the cost or lower market price as per accounting standards. The Tribunal found merit in the assessee's arguments and restored the matter to the Ld. AO for re-evaluation.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 396971 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2019-2020
• Laws Referred To: Income-Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY N.C. ROY
• Assessee Lawyers: RAKESH GUPTA; SOMIL
• Keywords: Set aside; Corroborative evidences; Valuation report
• Section: 143(3); 142(1); 133A

Judgement Text

" INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “E”: NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI VIMAL KUMAR, JUDICIAL MEMBER ITA No. 2632/DEL/2024 Assessment Year: 2019-20 M/s. Zewar Mehal (Regd.), Shop Nos. 8 -9, Complex 1 & 2 Chowk, NIT Faridabad Haryana PIN 121001 PAN No. AAAFZ2492B Vs. Income Tax Officer, Ward 2(3), Faridabad (Appellant) (Respondent) O R D E R PER VIMAL KUMAR, JUDICIAL MEMBER: The appeal filed by the appellant/assessee is against order dated 10.05.2024 of the Learned Commissioner of Income- Tax(Appeals)National Faceless Appeal Centre(NFAC), Delhi (hereinafter referred as ‘Ld. CIT(A)’) under Section 250 of the Income-Tax Act, 1961 (hereinafter referred as “the Act”) arising out of assessment order dated 13.09.2021 under Section 143(3) Assessee by: Dr. Rakesh Gupta, Shri Somil Agarwal and Shri Shery Jain, Advocates Department by: Shri Chaudhary N.C. Roy, Sr. DR Date of Hearing: 19.05.2025 Date of pronouncement: 28.05.2025 ITA No.2632/Del/2024 2 of the Act by the National Faceless Appeal Centre(NFAC) (hereinafter referred as “Ld. AO”) for assessment year 2019-20. 2. Brief facts of the case are that assessee filed original return of income on 30.10.2010 declaring total income of Rs.16,92,860/- and claimed refund of Rs.30,26,400/- for assessment year 2019-20. The assessee revised his return on 20.01.2020 declaring total income of Rs.17,18,790/- and claimed refund of Rs.30,17,900/-. Assessee partnership firm is engaged in business of trading and manufacturing of jewellery of gold, silver and diamonds. A survey action under Section 133A of the Act was conducted on business premises of the assessee at Shop Nos. 8 & 9, Crown Complex, 1-2, NIT, Faridabad on 21.02.2019. During survey action, difference in stock of gold and silver of Rs.1,20,11,840/- was found. Difference in stock was confronted to Shri Devendra Garg, partner of the Firm but he failed to give any satisfactory explanation. The assessee firm made voluntary disclosure of Rs.1,20,11,840/- on account of difference in stock. The assessee case was selected for scrutiny. Notice under Section 143(2) and section 142(1) of the Act with questionnaire were issued through E-Assessment Portal. The assessee uploaded its submissions online. The assessee was asked vide notice dated ITA No.2632/Del/2024 3 12.08.2021 to explain the reason of not declaring additional income of Rs.1,20,11,840/- along with supporting evidence. Assessee submitted reply vide letter dated 03.09.2021. On completion of proceedings, Ld. AO vide order dated 13.09.2021 made addition of Rs.1,20,11,840/- under Section 69A of the Act. Against order dated 13.09.2021, appellant/assessee preferred appeal before Ld. CIT(A) which was dismissed vide order dated 10.05.2024. 3. Being aggrieved, appellant/assessee preferred present appeal. 4. Learned Authorised Representative for the appellant/assessee, submitted that the valuation report prepared by the Government Approved Valuer, Sh. Bharat Bhusan Bhalla (PB 22-26) stated that he has valued the stock of the appellant as per the market rate prevalent as on the date of survey. So, there has a crept a basic fallacy in arriving at the valuation of the stock found on the date of survey. This was also submitted by the assessee to Ld. AO vide letter dated 03.08.2021 (PB 147) and before Ld. CIT(A) (PB 187-188). Therefore, if gross profit rate of 15.87% (PB 6 & 19) is reduced from the value of stock worked out by the Government Approved Valuer in his valuation report ITA No.2632/Del/2024 4 prepared by him on the date of survey, a further relief of Rs. 1,40,65,191/- would be admissible to the assessee which may please be allowed and the impugned addition of Rs. 1,20,11,840/- made by Ld. AO may please be deleted. 5. Learned Authorised Representative for the Revenue relied on orders of Departmental Authorities. 6. From examination of record, in light of aforesaid rival contentions, it is crystal clear that Government Approved Valuer in report at pages 20 to 26 of the papers books mentioned total value of jewellery as Rs.10,26,92,740/- whereas as per books of accounts minus the stock was to the tune of Rs.9,06,80,900/-. The difference of value of stock and the stock as per organized stock comes to Rs.1,20,11,840/- which has been added by Ld. AO through the impugned order dated 13.09.2021. Ld. CIT(A) vide order dated 10.05.2024 upheld the order of the Ld. AO. 6.1 Appellant/assessee in letter dated 03.08.2021, page no.147 of papers books before the Ld. AO submitted that the method of valuation as per accounting standard issued by ICAI i.e. the cost to market price whichever is lower. Similarly, in written submission made by appellant/assessee before the Ld. CIT(A) at ITA No.2632/Del/2024 5 page nos. 187 and 188 mentioned that the valuation report prepared by the Government Approved Valuer Shri Bharat Bhushan Bhalla that he has valued the stock of the appellant as per the market rate prevalent on the date of survey. So, there has crept a basic fallacy in arriving at the valuation of the stocks found on the date of survey. 6.2 Copy of audited balance sheet/ profit and loss account and tax audit report for the year ended on 31.03.2019 at page no.19 mentions gross profit turnover at 15.87%. Therefore, if gross profit rate of 15.87% is reduced from the market value of stocks worked out by the Government Approved Valuer in his valuation report prepared by him on the date of survey, a further relief of Rs.1,40,65,191/- would be admissible to the assessee. 6.3 In view of above material facts apparent on record, passing of impugned orders dated 13.09.2021 by Ld. AO and 10.05.2024 by Ld. CIT(A) being not just, fair, reasonable and legal are set aside. In the interest of substantial justice, the matter is restored to the file of the Ld. AO for fresh adjudication of the matter in accordance with law afresh for affording fair opportunity of hearing to appellant/assessee. ITA No.2632/Del/2024 6 7. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 28/05/2025. Sd/- Sd/- ( SHAMIM YAHYA ) (VIMAL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 28/05/2025 Mohan Lal Copy forwarded to - 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "