TaxTMI 
TaxTMI 
TaxTMI 
2016 (7) TMI 189
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....t 20 years. The system of accounting was mercantile and the valuation method of closing stock was "Average Cost" on LIFO basis which was followed consistently by the assessee ever since inception of his business. That on 24.03.2009 survey under section 133A was conducted by the I. T. Department, but no excess gold was detected on physical verification, nor there was any disclosure made on the spot by the assessee Mr. Samar Kumar Sen. No regular Books of Accounts like Cash Book, Ledger, Journal, Stock Book, Karigar A/c. Book etc. were impounded save and except Identification Marks were affixed on Karigar Maal Joma Book-SJE-18, Karigar A/c Book-SJE-19, Purchase Memo (Old Broken Ornaments, Standard Bar & Stone Purchase) Book No.1-SJE-20, Book No.2-SJE-21, One Flat File (small) containing Gold Received from Karigars-SJE-22, One small Flat File containing Gold Issue to Karigars-SJE-23, and Loose Sheets containing Purchase Memos from various Parties with serially marked (Page from 1 to 101)-SJE-27 by the I.T. Department. Only SJE-24, 25 and 26 were impounded which consisted two small hard bound daily cash books and one Item wise stock Register. The Learned AO tabulated the summary of st....
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....on to ascertain the correctness and veracity of the claim of the assessee and the assessee deliberately produced the same on the last date of the calendar year so as to ensure that independent verification of purchases and sales, which were claimed to have been wrongly entered in the accounts, is not made. Accordingly, the ld. AO brought the sum of Rs. 1,24,61,915/- to tax and added to the total income of the assessee. 2.2. Before the ld. CITA , the assessee stated that the reconciliation statement assailing the negative stock was duly filed before the department immediately after the survey stating that there is a positive stock of 819 .49 grams and also before the ld. AO on 5.12.2011. Only the supporting evidences in respect of the same were filed before the ld. AO on 30.12.2011 as desired by the ld. AO. It was also stated that the assessee had not taken any adjournment on a single occasion and all the details were filed before the ld. AO as and when called for. The supporting evidences were admittedly called for by the ld. AO only on 30.12.11 which were duly filed before him. Hence, it was argued that it is highly unfair on the part of the ld. AO to state that the assessee had ....
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.... items also O.G. Or. 22Ct (A) 8290.77 Gr 1039.29 86,16,504.24 O.G. Or. 22Ct (S) 1358.360 Gr 1168.18 1586807.67 Solid Bar 24 Ct 4810.940 Gr 1214.98 5845218.35 The Ld. A. O. was well aware about the nature of these items. In question no. 17 in the statement he has asked following question: "Summary of stock as on 20.03.2009 reflect closing balance of Gold Bar (24 Carats) at Rs. 58,45,218/ - (4811 gm) and stock of Old Gold at Rs. 1,02,03,312/- (9649gms) , whereas We have found no gold bar in your shop and value of Gold Bar found in your shop was Rs. 2,32,203/- only. How do you explain this?" The assessee replied to this question as "The closing stock of gold bar and old gold include the opening stock and new purchases as well. The Gold Bar and old gold issued to the Karigars for making new gold ornaments have not been posted/ adjusted in the accounting system." These items were obviously manufactured as New 22 Ct. jewellery and against this massive quantity and value sales of Rs. 10,94,878 has been shown against manufactured Jewellery. 2.2.1. The assessee also gave the break-up of sales as appearing in the computerized profit and loss account for the period 1.4....
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....s: Sales not entered in accounts 96.44 16950.37 Add: Excess Sales entered in account 2327.67 Add: Purchase not entered by mistake 526.50 19804.54 Add: Jewellery obtained from Gold and other 12848.29 broken jewellery 32652.83 Less: Making loss 159.99 32492.84 Less: Sent to following karigars for polishing and petty repairs Jayanta Das 809.88 Tarak Roy 1836.46 Tanuj Basak 1681.10 Lacchiram Pincha 39.60 4367.04 Closing Stock 28125.95 Less: Lying with Karigars Undelivered 953.65 27172.15 Physical stock 27074.66 Difference 97.49 (b) From the above explanation it is very clear that there is only nominal difference of 97.49 gm between the book stock and physical stock taken. 2.2.4. The ld. CITA observed that the reconciliation statement was submitted before the ld. AO on 16.4.2009 immediately after survey and thereafter during assessment proceedings on 5.12.2011 and the supporting bills and evidences for the same as called for by the ld. AO were filed on 30.12.2011. He observed that the ld. AO had completely ignored the reconciliation statement and had only done cherry picking while analyzin....
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....atement been properly considered, it only results in positive stock and hence there is no case for making any addition. He also argued that the stock summary found on the date of survey admittedly comprises of 22 Ct new gold ornaments, gold bars, etc. No discrepancy was found with regard to the stocks found in respect of other items by the ld. AO which is also prepared by the same team of officials. It is quite likely that the books and stock records could not be updated till the date of survey and the same would contain some posting errors, omission and commission errors etc. That is the precise purpose of undergoing audit of an entity wherein these errors would get rectified. Admittedly, the assessee could not explain the discrepancy of negative stock in respect of New Gold 22 Ct readymade ornaments on the date of survey and accordingly stated that the discrepancies pointed out by the survey team is right with a rider that there might be some posting errors , omission and commission errors . He argued that the reconciliation statement duly brought out the items of errors and the assessee had only positive stock subject to irreconciliable difference of 97.49 grams for which additi....
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....wered u/s 133A to administer oath. Reliance is placed in this regard on the following decisions:- Paul Mathew & Sons vs CIT reported in (2003) 263 ITR 101 (Ker) Sec 133A of the Act does not empower any ITO to examine any person on oath . Thus the statement elicited during the survey operation has no evidentiary value. CIT vs S Khader Khan Son reported in (2008) 300 ITR 157 (Mad) "An admission is an extremely important piece of evidence , but it cannot be said that it is conclusive and it is open to the person , who made it, to show it has incorrectly been made and the person, making the statement should be given proper opportunity to show that it does not show the correct state of facts." This judgment of Hon'ble Madras High Court was approved by the Hon'ble Supreme Court in Civil Appeal Nos. 13224 of 2008 & 6747 of 2012 dated 20.9.2012 wherein it was held that :- "Heard Counsel on both the sides. Leave granted. The civil appeal filed by the department pertains to Assessment Year 2001-02. In view of the concurrent findings of fact, this civil appeal is dismissed. " 2.5.1. We find that the assessee had duly filed the reconciliation statement immediately after the sur....
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.... authorities did not point out anything contrary that how reconciliation done by assessee was incorrect, impugned addition made by authorities below was to be deleted - Held, yes." 2.5.2. In view of the aforesaid findings and respectfully following the judicial precedents relied upon hereinabove, we find no infirmity in the order of the ld. CITA in this regard and accordingly the ground no. 1 raised by the revenue is dismissed. 3. The next issue to be decided in this appeal is as to whether the ld. CITA is justified in deleting the addition made towards concealed profit in the facts and circumstances of the case. 3.1. The brief facts of this issue is that pursuant to the survey, the survey team prepared a profit and loss account as on the date of survey. The survey team found that the profit and loss account as on 20.3.2009 was available in the accounts maintained in the computerized system wherein the net profit was shown at Rs. 46,26,796/-. The survey team arrived at the profit as on the date of survey at Rs. 2,48,71,438/- by taking into account the stocks lying with karigars and the stock of gold found in the shop duly valued by the registered valuer. The net profit worked o....
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....3,77,712/- should not be disturbed. It was further argued that the ld. AO after conducting hearings on various dates and after calling for various details from the books of accounts from time to time as could be evident from the order sheet entries, strangely resorted to rejection of books of accounts and net profit declared by the assessee. The assessee produced the trading results for the period from 1.4.08 to 23.3.09 and for the period from 24.3.09 to 31.3.09 separately and stated that it had actually earned a profit of Rs. 1,10,54,018/- for the period upto 23.3.09 and had incurred loss of Rs. 18,86,200/- for the remaining 8 days as all the adjustment entries for conversion in case of new manufactured gold ornaments of 22 Ct from 24 Ct standard gold bar, refining loss / melting loss, making loss /wastage, karigars payment, depreciation , etc were incorporated in the books of accounts in the year end. Accordingly, the assessee had reported a net profit of Rs. 91,67,818/- for the whole year. The assessee had produced the entire books of accounts as called for by the ld. AO from time to time and nothing prevented the ld. AO to check the details of debits and credits of second part ....
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....rnaments of 22 Ct from 24 Ct standard gold bar, refining loss / melting loss, making loss /wastage, karigars payment, depreciation , etc were incorporated in the books of accounts in the year end. We also find that the method of accounting regularly employed for valuation of stock by adopting Average Cost Price (LIFO method) which is one of the recognized method for valuing stock and which has been consistently followed by the assessee for several years has been discarded without giving any reason by the ld. AO and the valuation of stock of gold was done at market price thereby increasing the profit of the assessee notionally which is without any basis or reasoning. The closing stock as per audited accounts was Rs. 3,25,27,574/- upto the date of survey, whereas the valuation done by the department at market price was worked out at Rs. 4,01,84,320/-. This has resulted in excess valuation of closing stock at Rs. 76,56,746/- thereby notionally increasing the profit of the assessee. It is well settled that though the principle of res judicata does not apply to income tax proceedings, the principle of consistency cannot be given a go by when there is no change in facts and circumstances....
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....epancies of the ld. AO in his computation. Hence we find no infirmity in the order of the ld. CITA in this regard and accordingly the ground no.2 raised by the revenue is dismissed. 4. The last ground to be decided in this appeal is as to whether an addition in the sum of Rs. 3,51,916/- towards unexplained investment in purchase of flat could be made in the facts and circumstances of the case. 4.1. The brief facts of this issue is that that during the course of survey, a loose sheet was found wherein the details of investment made in purchase of flat at Puri were recorded at Rs. 28,42,938/-. The ld. AO found that the assessee had duly disclosed this purchase of flat in his books at Rs. 31,94,854/- and made an addition of Rs. 3,51,916/- towards the difference as unexplained income. Before the ld. CITA, the assessee argued that the assessee had already disclosed a higher figure in his audited accounts and while this is so, based on a loose sheet which is only a scribbled paper, how an addition could be made in the hands of the assessee as unexplained difference. Accordingly, the ld. CITA deleted this addition. Aggrieved, the revenue is in appeal before us on the following ground:- ....