TaxTMI 
TaxTMI 
2012 (10) TMI 151
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....e in contravention to the Rule 46A of the LT. Rule, 1962. 3. The Ld. CIT (A) has erred in law and on facts, in deleting the addition Rs.13,685/- made by the A.O. on account of interest received on pawning. 4. The Ld. CIT (A) has erred in law and on facts, in deleting Addition of Rs.1,56,405/- made by the A.O. on account of Jaydad Brindawan. 5. The Ld. CIT (A) has erred in law and on facts, in deleting Addition of Rs.4,79,445/- made by the A.O. on account of "Narottam Das Sharma Amanat khata I". 6. The Ld. CIT (A) has erred in law and on facts, in deleting Addition of Rs.4,14,460/- made by the A.O. on account of "Narottam Das Sharma Amanat khata 2". 7. The Ld. CIT (A) has erred in law and on facts, in deleting Addition of Rs.3,27,632/- made by the A.O. in the name of Collector Babu Gupta. 8. The Ld. CIT (A) has erred in law and on facts, in deleting Addition of Rs.30,000/- made by the A.O. on account of difference between salary certificates and the salary account. 9. The Ld. CIT (A) has erred in law and on facts, in deleting Addition of Rs.1,00,000/- made by the A.O. on account of marriage of daughter of Shri Brij Mohan Sharma. 10. The Ld. CIT (A) has erred ....
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....ut the pawning business of the assessee. The A.O., under the circumstances, noted that he has no alternate except to reject the books of account as per the provisions under section 145(3) of the Act. After rejecting the books of account, the A.O. examined the pawing business and noted that the assessee did not carry over year to year the net result of his pawning details, therefore year-wise details of amount of advance to different parties were not available. The assessee expressed his inability in furnishing the year wise details of pawning/advance amount because no details were carried over year to year. The assessee explained before the A.O. that the advance of pawning is entered in Pawning Bahi since so many years. Thus, it was not easily possible to sort out the year wise details of advance money. The opening and closing is shown on the basis of original payment received during the year. The interest on amount was charged at the rate of 21% per annum. It was further explained by the assessee that when persons concerned came to take his valuables pawned, then old advances are sorted out from old Bahi and details are tallied and amounts including interest are recovered. The A.O....
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.... in this account. The A.O. noted that the assessee did not furnish satisfactory explanation. The assessee has failed to explain the status of this account, who is the operator of this account, who is the real claimant of this account, the interest of Rs.39,946/- has been credited in whose hands and in whose hands this interest has been assessed to tax. In absence of satisfactory explanation, the A.O. made the addition of Rs.4,79,445/- treating the same as bogus/benami liability. Addition of Rs.4,14,460/- on account of Narottam Das Sharma Amanat Khata No.1 7. In this account, opening balance was Rs.3,70,054/- and during the year interest of Rs.44,406/- was credited as on 31.03.2007. Closing balance as on 31.03.2007 was Rs.4,14,416/-. The A.O. asked the assessee to explain the status of this account it was explained by the assessee that Shri Narottam Das Sharma was his father who died so many years ago and this Amanat Khata was crated. In absence of satisfactory explanation, the A.O. made addition of Rs.4,14,460/-. Addition of Rs.3,27,632/- on account of Collector Babu Gupta. 8. The A.O. noticed that there was outstanding liability of Rs.3,27,632/- in the name of Collect....
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....-. The assessee manufactured 22 carat gold jewellery by 24 carat weight of 1-205-710 (1-105-235/22 x 24). Thus the assessee converted 24 carat Gold into 22 carat and the difference by this conversion comes to 0-100-475 (22 carat Gold jewellery manufactured 1-205-710 less by 1-105-235 as the assessee disclosed the sale). The value of excess gold jewelry out of books comes to 0- 100-475 of Rs.1,05,877/- (the value is taken average sell rate 1164664/ 1-105-235 x 0-100-475) the difference as above. Thus the value of excess gold jewellery out of books comes to Rs.1,05,877/-, which is added in the total income of the assessee." Rs.70,113/- Excess Silver Ornament 12. The A.O. also examined the silver bullion account. The assessee did not submit any account of manufacturing as required by the A.O. It was submitted by the assessee that there was no manufacturing in the year hence no labour charges debited. Ornaments were sold from old stock. The A.O. examined the "Silver Nirman Khata" and observed as under :- (Page no.10) "The assessee in "Silver nirman khata" shown that the assessee has purchased pure silver (bullion)- 33-794-000 (Kg.- Gm.- mg.) for Rs.6,10,688/- and opening balan....
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....ount of Silver ornaments, but the assessee did not furnish the same. As per order sheet entry dated 30.12.2009, the assessee was required to explain the payment of labour charges which have not been shown in the Silver nirman khata. The assessee explained that the labour charges are paid by the customers. Since the assessee has not furnished any manufacturing account covering all the expenses which are necessarily incurred in the course of manufacturing of ornaments, it was noticed that the expense of Rs.5,540/- as labour charge of manufacturing of Silver ornaments was debited, the assessee was required to produce these bills on which this labour charges have been shown. As per bill dated 31.3.2007, which relates to Silver ornaments nirman reflects that 215.500 gm. silver ornaments prepared and labor charges are Rs.128/-. Thus the average of per gram comes to Rs.0.60 per gram. The assessee has got manufactured wt. of silver ornaments 23-028-300 (kg.- gm.- mg.). The labour @Rs.0.60 per gram comes to Rs.13,816/- (23-028-300 x 0.60). The assessee has shown Rs.5,540/- in the chandi nirman khata as majduri of ornaments. Thus this amount is reduced. Thus amount of labour, which has not b....
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....,79,445/- & Narottam Das Amanat Khata No.2 - Rs.4,14,360/- : The nature of the deposits in both these loans a/c are identical, coming from past 20 years. These have also been accepted by A.O. in assessment for 2006-07, u/s 143(3) as per photo copy B/Sheet after making enquiry, investigation and satisfaction. The fresh deposit was in this both a/c are supported with the complete evidences of investments made in U.T.I. in earlier year, which have been filed. An opportunity of being heard before adding the amounts was also not granted, as per Court's Citation referred by the A.R. It is thus held that the A.O. is in error to add back these amounts, duly evidenced from proved source and to disallow interest paid thereon. The additions in both the above a/c and interest disallowed are hereby deleted. 5.5 Collector Babu Rs.3,27,632/-: Like aforementioned loan a/cs, this is also an old a/c. The fact that the A.O. during the course of the assessment proceedings, for the assessment year 2006-07 u/s 143(3) enquired about this loan a/c, is proved from the copy of the Order Sheet for 2006-07 and reply dt. 28.03.08 of the assessee. It is sent that A.O., after being satisfied, accepte....
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....-clause (J) for "Unavailable and exceptional circumstances", after the recent amendments. The appellant's counsel has failed to refer to any specific clause U/R 6DD, can be held to be favourably applicable in appellant's case. I find that these cash payment are not covered by any of the sub-clauses of R 6DD, and, hence, I hold that the addition for Rs.11,055/- on a/c of purchases for Rs.55,528/- is covered u/s 40A(3) and consequently addition Rs.11,055/- is upheld. 5.10 Gold Nirman Khata - Rs.1,05,877/- & Silver Nirman Khata - Rs.70,113/-: Addition in both the above a/c are on identical reasoning. I find that the A.O. has worked out extra profits by following a unique system, not based on workable and practicable formula. In fact, as the appellant has pointed out purity in Gold and Silver items varies from item to item and their "Make". The A.O. has not established any defect and deficiency or placed any adverse evidence in the appellant's business system. The A.O. is not supposed to guide the Assessee regarding the manner and system for carrying on business. Also the system of valuing closing stock cannot be disturbed, when the assessee is following same pattern year a....
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....erest after rejecting the books of account. The CIT(A) observed that the assessee maintained a proper pawning register. The CIT(A) did not agree with the A.O. that it is necessary to carry forward each of these pawn account at the end of the year. The CIT(A) deleted the addition without appreciating the case made out by the A.O. 17. In respect of Jaydad Brindawan account, the assessee told a different story before the A.O. and the CIT(A) simply accepted the assessee's submission and deleted the addition. The CIT(A) noted that fresh deposit in this account is duly covered by debit entries made for investment in U.T.I. and leaves no scope for addition, whereas, before the A.O. it was submitted by the assessee that this is very old account left by the Grand father in his name for miscellaneous purchase. The assessee did not furnish any reply in respect of credit entry of Rs.1,39,565/- even though specific query was made by the A.O. 18. Similar is the position in respect of Narottam Das Amanat Khata No.1 & 2. The assessee has taken different stands before the A.O. and before the CIT(A). Before the A.O. it was submitted that the Narottam Das Sharma was assessee's father who expire....
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....,05,877/- & Silver Nirman Khata - Rs.70,113/-: Addition in both the above a/c are on identical reasoning. I find that the A.O. has worked out extra profits by following a unique system, not based on workable and practicable formula. In fact, as the appellant has pointed out purity in Gold and Silver items varies from item to item and their "Make". The A.O. has not established any defect and deficiency or placed any adverse evidence in the appellant's business system. The A.O. is not supposed to guide the Assessee regarding the manner and system for carrying on business. Also the system of valuing closing stock cannot be disturbed, when the assessee is following same pattern year after year and account books have always been accepted in assessment u/s 143(1) or 143(3) of the I/Tax Act '61, and therefore, addition in both the a/c does not stand fit in the eye of law and deserve deletion. Both the additions are deleted." 22. We noticed that the A.O. before making the addition made some quantity calculation which is evident from the facts reproduced above from the Assessing Officer's. The CIT(A) simply accepted the assessee's contention that without examining the facts that how t....
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....or Babu Gupta has died long back. 26. Similar is the position in respect of Gold & Silver Nirman Khata. In absence of complete finding of facts, these issues cannot be decided at this stage. The order of CIT(A) is in contravention to rule 46A as is considered in various explanations and discussions above without providing opportunity of hearing to the A.O. We, therefore, find it appropriate to send back this matter to the file of CIT(A) with the direction to decide the issues afresh in accordance with law after verifying and recording complete facts by a speaking order. C.O. No.30/Agr/2012 by the assessee 27. The assessee has raised two grounds in his Cross Objection which are addition confirmed by the CIT(A) Rs.11.055/- under section 40A(3) and additions of Rs.8.276/- and Rs.14,460/- on account of wages in silver and gold accounts. 28. After hearing the ld. Representatives of the parties, in respect of payment under section 40A(3) we notice that the assessee has made cash purchases and before the A.O. it was submitted that these payments were covered by the provisions of Rule 6DDJ as the payments were made on Diwali festival. The A.O. noted that when the payment was ma....