TaxTMI 
TaxTMI 
TaxTMI 
2016 (11) TMI 1239
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....premises at Laxmi Road, Gold jewellery weighing 14032.700 gms valued at Rs. 70,11,529/-, Diamond jewellery valued at Rs. 18,95,786/-, Silver articles weighing 22.781 kg valued at Rs. 1,76,553/-,Gems valued at Rs. 8,33,683/-, Sunglasses valued at Rs. 1,97,415/-, Uktamal valued at Rs. 8,913/- and Perfumes and Cosmetics etc valued at Rs. 65,699/- were seized from the business premises at Laxmi Road, Pune. Further, Gold and Diamond jewellery valued at Rs. 69,61,684/-, Silver articles weighing 100 Kgs valued at Rs. 7,75,000/- and cash of Rs. 9,51,101/- were seized from the residence of the Director Shri F.N. Ranka. 3. During the course of search large number of books of account and other documents in the form of loose sheets etc were seized from the residential and business premises of the assessee. In response to notice u/s.158BC the assessee filed the return of income on 30-09-2003 declaring undisclosed income at Rs. 1,50,00,000/-. The AO issued notice u/s.143(2) and 142(1) along with a questionnaire asking the assessee to explain as to how the assets found during the course of search has been accounted for and as to how the transactions noted in the seized books and documents have b....
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.... Gems found during the search and hence, no addition was required to be made on that account. b. Without prejudice, the registered valuer Shri Parag Gadgil had valued the excess stock at Rs. 2,21,783/- and the same should have been accepted instead of taking the average of the two market values determined by two different valuers. c. When there are two valuation reports, if no apparent error / discrepancy is found, the lower of the valuation ought to have been accepted instead of taking the average of two market values. d. The stock had to be considered at cost for determining the excess and as the same was taken by the valuer at market value, the excess was not correctly determined and therefore, no addition was required on this account. e. The defects in the valuation report of Shri Uttam Jain, who has given his valuation report on arbitrary basis without giving any basis required for valuation of Gems. f. The valuation report of Shri Uttam Jain, relied upon by the Department has not given any details about the weight of stone, gold imbedded therein, gross and net weight of the ornament in which gems are studded. 3. The learned CIT(A) erred in sustaining the addition of Rs.....
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....f estimation - and extrapolation and it need not have been restricted only to the evidences found during the search. b. Even, when there were no incriminating evidences found for some year, (F.Y. 1997-98) the addition could be sustained on the basis of incriminating evidences for other years. c. The estimation of unaccounted sales at such high figures was justified even though, the incriminating evidences indicated very small amounts of unaccounted purchases for example, for F.Y. 2000-01 and F.Y. 1996-97. 5.3] The learned CIT(A) failed to appreciate that a. The addition on account of unaccounted transactions had to be restricted only to the extent of the incriminating evidences found during the search. b. Without prejudice assuming without admitting that the extrapolation of sales was justified, it could not be made to such a high level as made by him for the block period. 6. The learned CIT(A) erred in confirming the addition of initial investment in the unaccounted stock of Rs. 7,44,133/- (page 146 to 152 of the CIT(A) order). 7. The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal." Grounds by Revenue : "1. The order of the Commi....
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.... 25-11-2002. During the course of search the valuation was done at Rs. 36,00,256/-. The assessee was also asked during the course of search to explain as to how the Gems have been accounted for. The assessee reconciled such gems as under: Total valuation as per inventory Rs.3600256 Less : Cost of goods taken on approval and anamat Rs.501220 Rs.3099036 Less : GP 20% +5% bargain Rs.774759 Rs.2324777 Less : Value of gold (taken in gold stock) Rs.847308 Physical Stock of Gems Rs.1476969 Less : Valuation as per books Rs.643286 Excess Rs.833683 Thus, the excess stock of Rs. 8,33,683/- was computed. However, the assessee disputed the valuation made by Shri Uttam Jain, the valuer appointed by the department on the ground that the valuation done by him is based on estimate basis and the stock of stones included the goods purchased in earlier years which is at much lesser price. The assessee got a valuation report from another Valuer Shri Parag Gadgil on 06-11-2002 and a copy of the same was submitted to the DDIT (investigation) on 25-11-2002. As per the valuation done by Shri Parag Gadgil the reconciliation was as under : Valuation of precious gems....
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.... block assessment the valuation difference should not constitute undisclosed income. He accordingly submitted that addition, if any, can be made on the basis of the report of Shri Parag Gadgil and excess stock as per his report being Rs. 2,21,783/- the addition should be restricted to Rs. 2,21,783/-. 14. The Ld. Departmental Representative on the other heavily relied on the order of the CIT(A). 15. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the decision cited before us. We find during the course of search valuation of Gems and Jewellery was done at Rs. 36,00,256/-. After considering the book value of such gems, the difference was determined at Rs. 8,33,683/- which was added by the AO to the total undisclosed income of the assessee u/s.69A of the I.T. Act. We find the assessee during the course of search itself has challenged the determination of such excess stock found on the basis of the report of the departmental valuer namely Shri Uttam Jain and filed the valuation report from a registered valuer Shri Parag Gadgil according to which the differ....
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....nder deemed seizure. Similarly, stock of watches valued at Rs. 3,93,843/- was also found. After considering the inventory prepared at the time of search, the gross profit margin, bargain etc. thereon the discrepancy on account of sun glasses was determined at Rs. 1,97,415/-, Uktamal at Rs. 8,913/-, perfumes and cosmetics at Rs. 65,699/- and watches at Rs. 8,526/- was determined. The total of these 4 items comes to Rs. 2,80,553/- which was added by the AO as undisclosed income for the block period u/s.69A of the I.T. Act, the details of which are as under : Sr.No. Description Value as per inventory Rs. Value as per books of accounts Rs. Difference Rs. 1 Sunglasses 13,09,211/- 11,11,796/- 1,97,415/- 2 Uktamal 7,41,030/- 7,32,117/- 8,913/- 3 Perfumed and cosmetics 3,12,608/- 2,46,909/- 65,699/- 4 Watches 3,93,843/- 3,85,317/- 8,526/- 2,80,553/- 20. Before CIT(A) the assessee challenged the above addition on the ground that the AO has erred in disregarding the necessary evidences and explanations given at the time of assessment. It was submitted that the department while valuing the above items has reduced....
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.... for the assessee, however, the plea to allow 25% reduction for bargaining appears to be very high whereas the 7% allowed by the revenue appears to be slightly low. Considering the totality of the facts of the case, we direct the AO to allow 15% reduction on account of bargain as against 7% considered by him which has been upheld by the CIT(A). The AO is directed to recompute the addition accordingly. Ground raised by the assessee is accordingly partly allowed. 26. Ground of appeal No.4 by the assessee relates to addition of unaccounted stock of Rs. 79,34,244/- made by the AO and upheld by the CIT(A). 27. Facts of the case, in brief, are that during the course of search certain items were found in the basement of the residential premises of Shri F.N. Ranka, Director of the assessee company. The total diamonds found were 97.93 karat out of which 40.78 karat were declared by the assessee in Wealth Tax return which was accepted by the AO. However, for the balance diamond of 57.15 karat the AO held that they were unexplained and valued the same at Rs. 27,73,230/-. During the course of assessment proceedings on being questioned by the AO, it was explained by the assessee that diamond ....
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.... the gold and diamond jewellery found at the residence in general separately then the same which were subsequently found in an underground strong room detected almost after 36 hours of initiation of search at the residential premise. While making the addition of Rs. 27,73,230, the Assessing Officer has stated that jewellery worth Rs. 49,93,634 was found from the basement(not the underground strong room) and bedroom of Smt. Shashikala F. Ranka, as per panchanama dated 25.10.2002. Out of this, jewellery valued at Rs. 21,48,777 was seized on the same date and the remaining was inventorised as found but not seized. The reconciliation and explanation in respect of jewellery found but not seized out of the total jewellery of Rs. 49,93,634, referred to above, were submitted by the appellant before the Assessing Officer during the course of assessment and it was found by the Assessing Officer that the total diamond included in the entire jewellery was 97.93 ct. (total found, seized and not seized both). Out of this the Assessing Officer found that diamond worth 40.78 ct were already declared in the Wealth tax returns and therefore, the excess was determined at 57.15 ct. This excess compris....
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....ment recorded during search on 26.10.2002 has stated that gold bar pieces of 1168 gms belonged to his late' son Shri Shreepal Ranka, which is evidenced by the RBI certificate also seized in search. However, no finding has been given by the Assessing Officer in respect of the above claim. It was further noted in the assessment order that Mr. Ranka had stated in his statement on oath that other items are possessed traditionally and it is not clear whether investment in them are taxed or not. The Assessing Officer has noted in para 38 that the appellant was given an opportunity to explain the aforesaid jewellery and silver articles of Rs. 51,61,014 during assessment and reconciliation vis-a-vis wealth tax returns were filed. As it was found by the Assessing Officer that the benefit of jewellery declared in the wealth tax returns have already been given, further benefit was not available. Another claim made by the appellant that item no. 51 (diamond neckless set with earings of the value of Rs. 1,10,000) and item no. 52 (diamond necklace set with earrings of the value of Rs. 3,31,000) were also received on Jangad from Ranka Jewellers, Karve Road, was also found to be not acceptable....
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.... of Panchanama dated 26.10.2002, of the value of Rs. 1,10,000 and Rs. 3,31,000 respectively are appearing in the Jangad, which was verified during the course of audit of Ranka. Jewellers, Karve Road and it was found that this Jangad is accounted for in the regular books of accounts of M/s Ranka Jewellers, Karve Road. In view of the above, the auditor has opined that the explanation of the appellant for these items is acceptable. He has computed the unexplained items on this basis. Though the reasons given by the Assessing Officer for not accepting the Jangad as genuine has some force' of acceptability but the same gets fully reversed on the finding that the impugned Jangad was found to be recorded in the regular books of accounts. Furthermore, the Assessing Officer cannot blow hot and cold in respect of the same transaction, If he has accepted the issue of jewellery in the hands of Ranka Jewellers, Karve Road on the same Jangad, he cannot deny the benefit of receipt of the jewellery in the hands of appellant when the impugned Jangad clearly shows that it has been issued in the name of Smt. Shashikala F. Ranka and the descriptions are the same. Therefore, the Assessing Officer i....
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....he books of accounts was 1,41,945.785 gms while the stock found was 1,36,279.54 gms. Thus, there was a shortage of stock of 5,666.240 gms valued at Rs. 29,18,113/-. The assessee requested that the shortage in the shop noticed during the search is because of some stock kept at the residence and the set off should be given. Similarly, in diamonds also, there was a shortage of stock of 100 cts worth Rs. 19.80 lakhs (page 52 and 53 of asst. order). The set off of this shortage should be considered against the excess of stock found at the residence. 33. He submitted that the AO and the CIT(A) have taxed the excess stock at residence in the hands of the assessee company. Thus, when they accept that the stock at the residence belonged to the company, the set off of the same against the shortage at the shop should have been given. The CIT(A) on page 109 has not allowed the same. His reasoning is that shortages are there because of the unaccounted sales carried out by the assessee regularly. However, he has not appreciated that for the unaccounted sales, separate addition is made by the AO and therefore, this reasoning has no bearing on the issue. He submitted that the set off of the short....
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....cheme 1998 was filed. It is also the submission of the Ld. counsel for the assessee that stock as per books of account was 141945.785 grams while stock found was 1,36,279.54 grams. Thus, there was shortage of stock of 5,666.240 grams. Thus shortage according to the Ld. Counsel for the assessee is because some stock was kept at the residence and therefore set off should be given. Similarly, for the shortage of diamond of 100 karat worth Rs. 19.80 lakhs set off should be given against the excess stock found at the residence. Therefore, when excess stock at residence has been taxed in the assessee company, set off of the same against the shortage of stock should have been given. 39. So far as the relief sought by the assessee on account of gold bar of 1,168 grams is concerned we find the Ld. Counsel for the assessee has filed a certificate issued by RBI under Gold Bond Scheme 1998 for 1,168 grams vide the gold bond 1998 Certificate Nos. BYPSPN000682 and BYPSPN000683 for 584 grams each. Since the Ld. Counsel for the assessee has substantiated the purchased under the gold bond scheme 1998 for 1,168 grams, therefore, we direct the AO to allow the benefit of 1,168 grams from the unaccoun....
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.... period from 01-04-2002 to 24-10-2002, i.e. the date of search unaccounted purchases were found. Thereafter, for the period 21-08-2002 to 24-09-2002 (28 days) loose papers in the form of day to day cash book containing the unaccounted transactions for each day were found. The AO estimated the unaccounted sales for the entire period from 01-04-2002 to 24-10-2002 at Rs. 12,22,95,618/- on the basis of the unaccounted turnover for the period of 28 days as per loose papers found in the form of cash book for the period from 21-08-2002 to 24-09-2002/-. He estimated the profit rate @13% and determined the undisclosed income at Rs. 1,58,98,430/-. Adopting the same yard stick of the period mentioned above he went on estimating the unaccounted turnover for the financial years 1996-97 to 2001-02 and calculated the undisclosed income for each of these years at the rate of GP disclosed in the returns for those respective years. The details of such computation determining the undisclosed profit of Rs. 1,01,14,255/- for the financial years 1996-97 to 2001-02 are as under : Sr. No. F.Y. Disclosed Turnover Rate at which undisclosed turnover computed Undisclosed Turnover Gross Profit rate Prof....
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....as per the seized papers instead of presuming that the unaccounted turnover for the period was in the same proportion as the unaccounted turnover for the period 21-08-2002 to 24-09-2002. It was accordingly argued that addition on account of unaccounted profit for the period 01-04-2002 to 24-10-2002 at the most can be only on the unaccounted purchases found during that period. 45. The assessee further submitted that the AO is not justified in estimating the income for the balance period solely on the basis of loose papers found for 28 days. There is no reason for the AO to ignore the other evidence found for the balance period in the form of purchases which clearly indicate that the unaccounted transactions for the balance period were not in the same yardstick. There are no clinching evidences in the form of seized papers indicating actual purchases for the balance period and therefore to apply the same yardstick by the AO is totally unjustified. Relying on various decisions it was argued that the seized documents should be taken as a whole and the department cannot ignore certain documents which are in favour of the assessee. It was argued that in the instant case there was enough....
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.... their old jewellery for repairs or remaking. It was submitted that certain papers also indicate that the assessee has given gold for remaking the ornaments to the goldsmith and has received ornaments back from them and has only given the Mazuri, i.e. labour charges. Therefore, considerable deduction should be given for the unaccounted purchases of Rs. 72,12,505/- determined by the auditor. 47. However, the Ld.CIT(A) was not satisfied with the arguments advanced by the assessee. So far as the argument of the assessee that AO cannot resort to estimation in a block assessment is concerned, the Ld.CIT(A) relying on various decisions rejected the same on the ground that when there is evidence of evasion whether small or large the AO can very well estimate the income of the assessee for the block period. So far as the issue of extrapolation is concerned he also upheld the action of the AO in view of the evidence showing unaccounted purchases and sales for a part of the period. He, however found certain inaccuracies in the method adopted by the AO for computing the undisclosed income for the block period. He, therefore, accordingly directed the AO to compute the undisclosed income at Rs....
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....specific evidences found in that particular year. In other words, the main objection of the appellant can be seen to disregard the evidences found in the form of jama kharcha pana of 28 days to the remaining period of F.Y. 2'002-03 as well as other financial years of the block period. The arguments of the appellant look incorrect. Undoubtedly, the evidence giving complete picture of evasion has been found for 28 days only but the other evidences found for the entire block period clearly shows that the same practice has been followed from the first year of the block to the last year of the block. 12.3.2 In view of the discussions made above, the only objection which can be examined relates to quantification of undisclosed income of the block period. It can be seen from the materials available on record i.e. various documents, slips, papers seized from the premise of the appellant as well as the evidences of the trusted employees (also covered in the search), that the appellant was engaged in the evasion of income as described above for the entire period of the block. The seized documents were given to the auditor for special audit u/s 142(2A). The special auditor in his report ....
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....e years. Along with above he has also considered the unaccounted expenses for arriving at the final figure of unaccounted income of different years. The finding of the special auditor. for aforesaid financial years can be seen from Annexure 1 of the special audit report. From the same it can be seen that the auditor has computed following income or loss for the different assessment years. Sl.No. Financial Year Unaccounted purchase (in Rs.) Income/loss (in Rs.) 1 1996-97 14,759 2,48,229 2 1997-98 0 0 3 1998-99 14,03,149 2,31,225 4 1999-2000 76,04,023 5,16,233 5 2000-01 7,095 (-)12,04,814 6 2001-02 72,12,505 5,36,554 The Assessing Officer has followed the computation made by the auditor in FY 2002-03 in the assessment order but has not accepted the approach adopted by the auditor for the remaining years while completing the assessment. He, apparently was of the opinion that the evidences available on record especially jama kharch panas, clearly shows that the appellant has been concealing transactions, which, is most comprehensively available for 28 days and for the other period of the entire block the evidences only confirm about the carrying on ....
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....ey cannot be considered to give the complete picture of evasion. At the most it can represent that the evasion cannot be less than the figures appearing in those papers in respective years. However, any material brought on record which can merit consideration for applying a principle of computation of undisclosed income has to be given due attention. It has already been held that the objection *of the appellant in respect of no computation of undisclosed income for the entire block period is not acceptable but the objections if any, which are valid and can show that the computation made by the Assessing Officer requires to be reexamined, can be considered. In view of the above, the objections made by the appellant on account of computation of undisclosed income are being considered in following paragraphs. 12.3.3. In respect of computation of unaccounted transactions made by the auditor as well as the Assessing Officer, for the FY 2002-03 at Rs. 12,22,95,618, the appellant has claimed that the jama kharch panas are for the period of 21/8/2002 to 24/09/2002, which is the period when certain auspicious occasions like Ganapati festival, Raksha Bhandan, Ramzan and Padushan etc fall an....
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.... method becomes more proximate to the figure of unaccounted purchases found, the undisclosed income for the FY 2002-03 is directed to be adopted, at Rs. 1,03,53,679 subject to verification of different figures supplied by the appellant during appeal. The Assessing Officer is directed to verify these figures while giving the appeal effect. 12.3.4 As regards the addition made for the balance years, I have already held that the A.O. was justified' in estimating the' undisclosed income for all the years i.e. FY 1996-97 to FY 2001-02, in the manner done by him. It has also been held that the evidences found in respect unaccounted purchases and unaccounted expenses are not complete. Therefore the Assessing Officer has a right to taken into account other evidences found during search which gives a more comprehensive view of the concealment. In view of the above, the approach adopted by the Assessing Officer to compute the undisclosed transactions as a percentage of total disclosed turnover is upheld. For the same reason the finding of the auditor given for estimating the undisclosed sales on the basis of undisclosed purchases only without any extrapolation has to be held as myopi....
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....ent order for justifying the rates adopted by him for different years for computing the undisclosed transactions, however he can be seen to have very correctly applied the rates in a decending order by substantially reducing it from the actual percentage of unaccounted transactions appearing in jama kharch panas. Though he has correctly kept the rate minimum in FY 1996-97 and has gradually increased it upto FY 2001-02 but since he has not considered about the disturbance of business due to renovation in FY 2001-02 and the smaller size in earlier years, and most importantly the amount of purchases available in different years, the rates adopted can be seen to be giving slightly higher figures of unaccounted transactions and unaccounted income vis-a-vis figures of unaccounted purchases found in different years. In my considered opinion a rational balance has to be drawn between different parameters available on the issue for arriving at the most appropriate amount of undisclosed transaction and profit. So -far as the gross profit rate applied by the Assessing Officer in different years are concerned, it is held that the same is reasonable and correct as it has been taken from appella....
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....f sales made by the AO if the GP adopted by the AO is deducted the balance amount would be purchases which is more than the unaccounted purchases found during the course of search. Therefore, this estimation theory adopted by the AO is violating principle of section 132(4A) and it is also illogical. He submitted that the assessee has submitted that the sales for the 28 days period were higher because of festival seasons like Raksha Bandan, Ganesh Festival, Paryushan, Ramzan etc. Therefore, the same basis cannot be adopted for the entire period. On this ground also the estimation made by the AO is not justified. He submitted that the assessee during the course of assessment proceedings as well as before CIT(A) has clarified that in all these unaccounted purchases of Rs. 5,27,44,980/- entries of Rs. 88,90,715/- pertains to goods received for approval, gold given to goldsmith and ornaments taken from them etc. Therefore, the unaccounted purchases were actually Rs. 4,38,54,265/- and GP of 13% on sales is equal to GP of 14.94% of purchases. Therefore, profit should be estimated at 14.94% on Rs. 4,38,84,265/- which comes to Rs. 65,61,620/- as against the profit of Rs. 1,58,98,430/- deter....
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....Y. 1997-1998 at 7.5% for F.Y. 1998-1999 at 10% for F.Y. 1999-2000 at 15% for 2000-01 and at 25% for F.Y. 2001-02. We find based on the arguments advanced by the assessee the Ld.CIT(A) while upholding the action of the AO in proceeding for estimation of the unaccounted turnover for the block period, however, has given some consequential relief on account of undisclosed turnover. He however upheld the GP rate adopted by the AO. The detailed reasoning given by the CIT(A) while deciding this issue has already been reproduced in the preceding paragraphs. The order of the CIT(A) is quite exhaustive and deals with each and every aspect of the arguments advanced by the Ld. Counsel for the assessee. In our opinion, the order of the CIT(A) is a reasoned one under the facts and circumstances of the case. Therefore, we do not find any infirmity in the same. Ground raised by the assessee on this issue is accordingly dismissed. 52. In ground of appeal No.6 the assessee has challenged the order of the CIT(A) in confirming the addition of initial investment in unaccounted stock at Rs. 2,44,133/-. 53. Facts of the case, in brief, are that the AO in the assessment order held that since the assesse....
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.... the appellant was having a working capital investment on the disclosed turnover ranging from 0.06% to 0.61 % the Assessing Officer suggested that the initial investment should be considered as peak of 2001-02 at Rs. 11,30,52,344. The report of the Assessing Officer was given to the appellant and a submission in rebuttal can be seen to have been filed by the appellant vide his letter dated 26.2.2007. In this letter, the appellant has vehemently objected to the finding of initial investment made in the report u/s 250(4) at Rs. 11,30,52,344 in F. Y. 2001-02 against the computation of Rs. 7,44,133 made in the original assessment. The appellant pointed out that the report of the Assessing Officer is misdirected. As per appellant, the Assessing Officer was asked to compute the initial investment in the unaccounted business, however he has computed the peak investment in an arbitrary manner for F.Y. 2001-02. The basis adopted by the Assessing Officer to treat 53% of the unaccounted turnover as initial investment in F.Y. 2001-02 on the basis of the observation that the appellant is having a very high , working capital vis-a-vis disclosed turnover, was claimed to be incorrect. It was also ....
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.... has clearly shown that though the appellant was engaged in carrying out unaccounted transactions regularly but the same has been carried out regularly from the same business premise. Therefore, the stock found at the business premise on the date of the search has to be accepted as the total stock found during search. Since the same has been found to be more or less matching with the stock recorded in the books, the finding of the Assessing Officer for huge unaccounted initial investment is arbitrary. Ground No. 2 of the appellant relates to unaccounted stock of gold jewellery added by the Assessing Officer at Rs. 66,73,715 by rejecting the purchases claimed to have been made from H Kumar Gems International, Ahmedabad and Mr. O.N. Ranka. On this basis the Assessing Officer has given the finding that the stock of jewellery found during search is excess by 13,189.160 gms valued at Rs. 66,73,715. This addition of the Assessing Officer could not be upheld in the facts and circumstances of the case and it has been held that the aforesaid evidences of purchases were correct and after considering it the computation of shortage of jewellery of 5,666.240gms was upheld. While doing so, this ....
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.... the initial year on the basis of loose papers found for few days has been correctly appreciated by the Ld. CIT(A) to arrive at the addition of Rs. 10 lakhs by considering the investment requirement being of sales of 10 to 15 days and the GP of 12.5%. Therefore, it can be seen that the above finding of the Assessing Officer has even the backing of the, Hon'ble ITAT in another group case and therefore, the addition is sustained. For similar reason, the report submitted by the Assessing Officer for higher estimation has also not been accepted. Therefore, Ground No. 10 is dismissed." 55.1 Aggrieved with such order of the CIT(A) the assessee is in appeal before us. 56. The Ld. Counsel for the assessee reiterated the same submissions as made before the CIT(A). 57. The Ld. Departmental Representative on the other hand referring to the order of the CIT(A) submitted that the Ld.CIT(A) has given a detailed reasoning. Further, he has also relied on the order of the Tribunal in sister concern of the assessee where similar addition on account of initial investment has been upheld. Therefore, this ground raised by the assessee should be dismissed. 58. We have considered the rival argume....
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....eceipt of 4990.150 gms of ornaments from his brother Shri Omprakash N. Ranka. He observed that Shri Omprakash N. Ranka has also claimed that jewellery weighing 4990.150 gms was purchased by him from M/s. H. Kumar Gems International and sold to the assessee. He observed that M/s. H.Kumar Gems International is a Ahmedabad based concern and the proprietor of this concern is Shri Hitesh Kumar (HUF). All the 3 concerns of the Ranka group have regular transactions of purchase from this party. The regular transactions made with this party are recorded in the regular books of account of the group. During the course of search documents were seized from the Ranka group which shows that besides the regular transactions the group was indulged in making unaccounted transactions with M/s. H. Kumar Gems International at large scale and such transactions were not recorded in the books of account. Evidences were also found that interest was paid by the assessee to M/s. H. Kumar Gems International when there was delay in making the payments. Such transactions of purchase and payment of interest were not recorded in the books of account. He, therefore, was of the opinion that the claim of the Ranka g....
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....ir individual capacities. 63. He noted that in respect of claim of the assessee regarding purchase of 13865.250 gms ornaments from M/s H. Kumar Gems International, the statement of director Shri Fatechand N. Ranka was recorded on 28-10-2002. The AO also referred to the statement of Shri Anil P. Ranka recorded on 10-12-2002 and statement of Shri Omprakash N. Ranka recorded on 29-10-2002. He further noted that a survey action u/s.133A of the Act was conducted in the case of M/s. H. Kumar Gems International at Ahmedabad during which the statement of Shri Hitendra Gundecha, proprietor of M/s. H. Kumar Gems International in his capacity as Karta of HUF was recorded. He is also the Managing Director of M/s. H. Kumar Gems International. He had stated that on 22-10-2002 he has sold jewellery worth Rs. 72,05,093/- to M/s. Ranka Jewellers Pvt. Ltd. and Jewellery of Rs. 25,97,703/- was sold on 22-10-2002 to Shri Omprakash Ranka and jewellery amounting to Rs. 82,76,370/- was sold to Shri Anil Pukhraj Ranka on 19-10-2002. After considering the statement of the above parties the AO came to the conclusion that the statements given by them were not true and were totally concocted. The claim of th....
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.... of the assessee for the block period by observing as under : "24. As mentioned earlier, that the assessee company was also making purchases from M/s H. Kumar Gems International, which were recorded in the books of accounts. The account of M/s. H. Kumar Gems International in the books of assessee was examined from F.Y. 1997-98 onwards. In F.Y. 1998-99 it was observed that most of the time payment was made in advance and receipt of gold was on subsequent dates. Similar was the situation in F.Y. 1999-2000. There were few transactions in this year where the gold was received earlier and payment was made after 2-3 days. The transactions for F.Y. 2000-01 were same as in F.Y. 1999-2000. The maximum credit was for 15 days in few transactions. It is to be mentioned that till 31/3/2002 there was no outstanding payment. As on 31/3/2002, there was outstanding balance of Rs. 72,05,693/- which was on account of alleged purchases vide invoice dt. 22/10/2002. The payment of this amount was started from 12/4/02 i.e. after a gap of almost 6 months and the total payment was made by 3/12/03 i.e. after a gap of over a year. 'The schedule of payment made by Shri Omprakash Ranka and M/s Ranka Jewel....
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....ver, the assessee's contention is not accepted in view of discussion in earlier paras and addition of Rs. 66,73,715/- is made to the undisclosed income of the block period." 65. Before CIT(A) it was submitted that the search took place in the case of the assessee on 24-10-2002. During the search the bill was found in the assessee's premises wherein gold jewellery weighing 13865.20 gms was found to have been purchased from M/s. H. Kumar Gems International, Ahmedabad. It was submitted that the above purchases were not recorded in the books as on the date of search since the books were written upto 21-10-2002 whereas the goods as per this bill were received after that date but before the search. On being asked to identify the stock received as per this bill the assessee had done the same. It was submitted that Shri Omprakash Ranka, and Shri Anil Ranka in their individual capacity had also purchased gold jewellery weighing 4990.150 gms and 16050.00 gms respectively from M/s. H. Kumar Gems International. The fact of purchase of jewellery from M/s. H. Kumar Gems International was recorded by Shri Omprakash Ranka in his books of account which was seized during the search and in respect o....
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.... of the department has accepted the sale of jewellery as a genuine sale, there is no reason to doubt the purchases made by the assessee. Further, the special auditor in his report has also accepted the purchases from M/s. H. Kumar Gems International as genuine. It was argued that during the survey at M/s. H. Kumar Gems International, Ahmedabad, Mr. Pragnesh Sukhadia, an employee and Shri Hitendra Gundecha, the owner were examined and their statements were also recorded during which they have accepted that sales have been effected to M/s. Ranka Jewellers Pvt. Ltd., Shri Anil Ranka and Shri Omprakash Ranka. 67. As regards the allegation of the AO that there were some overwriting on the bill issued to M/s. Ranka Jewellers Pvt. Ltd. it was submitted that the assessee fails to understand as to how the bill becomes bogus one. The assessee had received the bill in the same condition and therefore there is no reason to hold that the assessee had fabricated the document. Further, the AO himself has accepted that the date of the bill is changed from 12-10-2002 to 22-10-2002 which clearly indicates that the goods were received by the assessee. It was argued that even if the contention of the....
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...., the seized documents and invoices etc. which have been considered and examined. It can be noted from the discussions available in the assessment order that the Assessing Officer for making the aforesaid addition of Rs. 66,73,715 for excess stock of gold ornaments found during search has not accepted the explanation given by the appellant in respect of certain purchases claimed to have been made from H. Kumar Gems International, Ahmedabad and also from Shri Omprakash Ranka, who inturn was also found to have purchased the gold ornaments from the same H. Kumar Gems International, Ahmedabad. The claim of the appellant was that the bills of these purchases dated 22.10.2002 and 23.10.2002 respectively, had remained to be entered into the books/ computer, whereas the stock was already available in the business premise. It was submitted in this respect that Mr. F.K.Ranka in his preliminary statement recorded for the first time at the business premise on 26/10/2002 has pointed out clearly that the books were recorded upto 21/10/2002 and the same is required to be further updated. It has been also stated that this fact of the matter that the books were written upto 21/10/2002 has remained ....
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....ion found in the books of H. Kumar found during survey at Ahmedabad on 29/10/2002. Though the bill was found and seized from business premise of the appellant, but the suspicion raised by the Authorized Officer while recording the statement u/s 132(4) of Shri. F.K.Ranka, has also been considered for holding the bill as bogus and implanted. The relevant extracts of the statements have been incorporated in the body of the block assessment order, which has already been quoted above. The Assessing Officer has also pointed out the contradictory facts emanating from various statements, more particularly of appellant group persons and that of Mr.Hitesh Kumar and his employees, who have affirmed the sale through impugned vouchers to the appellant, Shri. Anil Ranka and Shri. O.N. Ranka and these contradictions have been used to arrive at the inference that the claim of the purchase through these impugned bills are not genuine and therefore, no credit can be given for the availability of the gold stock as per books by adding the amounts appearing in these bills. To strengthen the above, the Assessing Officer has also red to various other circumstantial facts viz. failure of director to expla....
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....ted by the Assessing Officer without any reservations in the scrutiny assessment and therefore the purchase in the hands of the appellant for the same transaction cannot be denied. The appellant has also relied upon various decisions of the Hon'ble ITAT reported on page no. 4907 of Chaturvedi & Pithisaria page no. 4907 and decision of Hon'ble ITAT in the case of Ghanshyambhai Thakkar 56 TTJ 460 in support of its contention that the statement has to be taken as a whole and A.O. is not justified in ignoring certain answers which were in favour of the assessee. In this respect, it has been pointed out by the AR that the Assessing Officer has quoted only specific question and answers from the statement recorded, which were suiting his prejudiced finding. It has also been stated that the Special Auditor, in his audit report has also treated these purchases as genuine to arrive at the finding after reconciliation that there is no excess stock of gold jewellery at the business premise. I have considered the inventory reconciliation of gold stock made by the auditor, which is appearing in Annexure B-1 of his report and in this report he has arrived at the shortage of 5,666.240 gms ....
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.... of gold jewellery found during search vis-a-vis the books of account. It has been claimed that the Assessing Officer has ignored the purchases made through these bills directly from H. Kumar and also from Shri.O.N. Ranka, for determining the aforesaid addition as excess stock. On careful consideration of material available on record, it is noted that though the Authorized Officer, during the course of search has raised suspicion about coming into the premise of the impugned bills, while recording the statement of Shri. F.N.Ranka on 28/10/2002, but there is no evidence available or found which can substantiate the said suspicion. Circumstantial facts cannot negate the fact that the premise was under the control of the search party from 24.10.2002 onwards. Undisputedly the bills of purchase by the appellant of gold ornaments from H.Kumar was found from the drawer of the Director on 28/10/2002 and therefore unless there are evidences available which can show that the same was planted unscrupulously, it will be difficult in law to hold the same. It is further noted from the copies of the punchnamas prepared for the search of the business premise that the first search apparently took p....
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....the appellant's premise as well as in the books of the seller and similar other contradictions including the date of invoice being on the date of arrival in Pune by Hitesh Kumar, raises some suspicion but that alone cannot be held to be strong enough to deny other facts which are much stronger and are in favour of the appellant. Similarly other discrepancies pointed' out by the Assessing Officer, in respect of 'different statements are also of circumstantial in nature for which various explanations have been given and in the facts available, it is neither possible to accept them or reject them and therefore they have to be ignored or treated as explained as the balance of overall evidences, more particularly the direct evidences are in favour of the appellant. Since the bills were found and seized during the course of the search itself, it cannot be ignored unless it is established that the bill was only an accommodation entry to inflate the purchases. This is a case where overwhelming evidences are available to suggest that part of the sales and the purchases have been kepi outside the books of accounts and therefore in the backdrop of the same, it is not possible to a....
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....above, even if this bill is not accepted the excess stock remains explained. Furthermore, it is also a fact that the M/s H.Kumar Gems International was acceptedly having regular business transactions with the appellant for the last many years and is name even appears in the documents found on the basis of which income from unaccounted transactions have been computed by the Assessing Officer in this assessment order. This concern has been found registered for sales tax and the invoices seized indicate charging of sales tax.. Nothing adverse in respect of this payment of sales tax on impugned bills, is available on record. The claim made by the appellant that this is not an ordinary assessment but an assessment consequent upon the search, where no scope exists for any presumption or assumption, also cannot be ignored. The argument made by the learned A. R. that the statement recorded during the proceedings has to be read in whole and therefore the A.O. was not justified in ignoring certain answers which were in favour of the appellant, is also correct in law. It is significant to be noted that all the concerned persons whose statements have been relied upon by the A.O., to highlight ....
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....r up the undisclosed income declared in the return at Rs. 1,50,00,000. There is no other discussion available in the assessment order on this issue. Therefore it is apparent that the declaration of cash of Rs. 90,00,000 is not based on any finding of the search. Though. the act of declaring cash at native place of Rs. 90,00,000 without any such finding in search is intriguing, but for the limited purpose of the issue in hand, it indirectly lends support to their claim that an assessee who is declaring so much, of cash without any finding of evidence would probably not resort to implanting of bills, as has been suspected by the Assessing Officer. It is also noteworthy that after accepting the claim of the impugned bills as part of the purchase also the stock does not tally completely. As per appellant's own computation the gold ornaments found during search is short by 5666.240 gms. It is an accepted fact that the appellant was engaged in concealing the transactions and income, for which the Assessing Officer has made the computation separately on income approach but the relevant issue is that the said activity has been carried out from the same premise. No separate books of acc....
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....ground raised by the revenue be allowed. 73. The Ld. Counsel for the assessee on the other hand heavily relied on the order of the CIT(A). He submitted that on the date of search, i.e. 24-10-2002 the shop was sealed and the shop was opened on the evening of 26-10-2002. Referring to the answer of Shri F.N. Ranka to Question No.5 in the statement recorded u/s.132(4) on 28-10-2002 he submitted that the authorized officer had specifically asked as to whether there are any goods/articles in the shop for which the purchase bills have not been received. Referring to the answer he submitted that Shri F.N. Ranka in his statement had categorically stated that they have received the goods and the bill of M/s. H. Kumar Gems International is not fed in the computer but is in the drawer. He submitted that if the contention of the Ld. Departmental Representative that the bill was subsequently inserted in the drawer, then why no action has been taken against the officers of the department present during the search. He submitted that when M/s. H. Kumar Gems International had admitted to have sold the goods to the assessee and the various other family members in his statement recorded during the co....
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....t about the bill only on 28-10-2002 whereas the search was carried out on 24- 10-2002, i.e. 4 days after the initial search that the bill of M/s. H. Kumar Gems International was not debited in the book prior to the search. Further according to the AO the payment was made after a few months which do not prove the genuineness of the transaction. We find the CIT(A) accepted the genuineness of the bill on the ground that the bill issued by M/s. H. Kumar Gems International to the assessee was found in the assessee's premises. Shri Anil Ranka and Shri Omprakash Ranka had also purchased jewellery from the said party which were duly recorded in their books before the date of search. Therefore, the AO should not have disbelieved the bill issued to M/s. Ranka Jewellers Pvt. Ltd. i.e., the assessee. Further, M/s. H. Kumar Gems International had accepted that the jewellery was sold to the assessee and the sale was found recorded in his books of account. M/s. H. Kumar Gems International has given their confirmation. M/s. H. Kumar Gems International is a registered dealer in State and Central Sales Tax Act and the sales tax on this transaction has been paid by M/s. H. Kumar Gems International wh....
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....above silver has been accounted for in the books. It was explained by Shri F.N. Ranka, Director of the assessee company that as per inventory taken by the department, the gross weight of 36,14,108 gms include the weight of the plastic bags and plastic boxes. It was submitted that the plastic bags and plastic boxes were weighing 1,14,400 gms. Thus the net weight of the silver articles was 35,00,108 gms. It was further explained that one company namely M/s.Syngenta of 1170/27, Revenue Colony, Shivajinagar, Pune has placed order for silver coins for 93500 gms. The order was ready on 10-10-2002 against which the sale bill was made on 10-10-1002 vide Bill No.S/4755. An amount of Rs. 7,84,627/- was received by cheque No.936588 on 18-10- 2002 for which receipt was issued vide No.231 dated 18-10-2002 on the same day, i.e. 18-10-2002. The letter was given to the said company stating the fact that even though the payment has been received, however, the delivery is yet to be taken by the company. Since the programme was postponed, it was requested by the company to keep the coins and they will take when the programme is fixed. It was submitted that these coins have been inventorised by the de....
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.... articles that the registered valuers have weighed the silver articles along with plastic bags and boxes, in which they were kept and the weight of such containers was taken at 114400 gms on estimate basis. As per appellant it should have been more. On this basis it was explained that the net weight is 35,00,108 gms. The Assessing Officer has further noted in para 26 of the assessment order that Mr. F.N. Ranka has further explained in the said statement that silver coins weighing 93,500 gms were sold to M/s. Syngenta of Pune and the delivery of the same was yet to be taken. Therefore the appellant requested to remove these items. The claim for exclusion of silver coins was accepted by the Assessing Officer, however, the claim for higher relied for containers was not accepted. Therefore, the excess of silver articles of 22,780.57 gms computed after removing 93,500 gms of silver coins but taking the weight of plastic container at 114400, as determined by the departmental valuer was taken by the Assessing Officer as undisclosed asset u/s.69A @ Rs. 7750 per kg of silver (Rs.1,76,553). The claim of the appellant that this excess should be treated as explained as an objection was raised ....
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....jection about the weight of plastic bags were taken during the pendency of the search on 25/11/2002, before the search was finally concluded and therefore it ought to have been verified as the search premise was still under the control of search party. As the aforesaid objection of the appellant, having been found correct by the Special Auditor and raised properly at the relevant point of time, have remained unattended by the search party as well as the Assessing Officer, the explanation given by the appellant has remained uncontroverted and therefore has to be accepted in the facts of the case and in the law. An addition cannot be sustained in the absence of facts and materials which can show that the same has been done in a fair manner. Ground No.3 therefore is allowed." 81. Aggrieved with such order of the CIT(A) the revenue is in appeal before us. 82. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We find during the course of search silver stock of 36,14,108 gms was found. The AO asked the assessee to explain as to how these silver articles are appearing in the books of....
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....valuation holds good if there are no unaccounted purchases and sales. However, during the course of search, evidences were found that the assesses, of Ranka Group were indulged in making unaccounted purchases and sales. If the unaccounted purchases are also taken into consideration for the purpose of determining the average price the average price is increased in comparison to the average price determined by the assessee for the purpose of valuation of closing stock shown in the books. Thus, the assesses of this group has undervalued the stock as per books of account. 86. During the course of assessment proceeding the fact of the under valuation was brought to the knowledge of the assessee and he was asked to explain as to why the value of the closing stock as per books should not be enhanced and it should be treated that stock was sold on FIFO method. In response to the same it was submitted by the assessee that average cost method is regularly being followed and accepted by the department. The method of valuation is already disclosed to the department in the regular returns and hence the issue is out of the purview of chapter XIV B. It was further contended that both the opening....
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.... were duly considered and in my considered opinion, the addition made by the Assessing Officer cannot be upheld as the above issue has been decided in favour of the assessee by my Learned Predecessor in the case of Ranka Jewellers, Raviwar Peth, Pune as claimed by the appellant in their submission quoted above. Furthermore, it is noted that the aforesaid finding of the CIT(A) has been upheld by the I TAT, Pune in ITA No. 801/PN/2006 by the ITAT 'A' Bench in their order dated 6.6.2011. As it is not in dispute that the facts and circumstances of this addition is similar to the facts and circumstances of the addition made in the case of Ranka Jewellers, Raviwar Peth, the aforesaid decisions has to be followed. In view of the above, this ground of appeal is treated as allowed. 90. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 91. After hearing both the sides, we do not find any infirmity in the order of the CIT(A). We find addition on identical ground was made in the case of Shri Vastupal Ranka, Proprietor of M/s. Ranka Jewellers by the AO which was deleted by the CIT(A). On appeal by the Revenue the Tribunal vide ITA No.1376/PN/2013 order dated ....
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....have accepted such average cost method followed by the assessees. Considering these submissions learned CIT(A), in our view has rightly come to the conclusion that there was no reason to reject the method of valuation of stock and the addition made was thus not justified. We also find substance in the observations of the Learned CIT(A) on the issue that undisclosed income has to be worked out on the basis of seized papers and since in the present case no such incriminating evidence was found regarding method of valuation of stock as the A.O. tried to adopt, the Learned CIT(A) was justified in deleting the addition made on this account. The first Appellate order in this regard is thus upheld. Ground no.3 is accordingly rejected." 4.1 Respectfully following the decision of the Coordinate Bench of the Tribunal in the case of the sister concern under identical circumstances and in absence of any contrary material brought to our notice we find no infirmity in the order of Ld.CIT(A) deleting the addition. We accordingly uphold the order of the CIT(A) on this issue. The ground raised by the Revenue is therefore dismissed." 92. Since identical ground has been decided by the Tribunal in t....