TaxTMI 
TaxTMI 
2011 (12) TMI 675
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....143(3) read with section 153B was not pressed. Therefore, the same is dismissed as not pressed. 4. Ground No. 2 relates to sustaining the addition of Rs. 2,76,200/- on account of unexplained investment in Gold Jewellery. 5. In departmental appeal, the department through Ground No. 5 is also objecting in deleting the addition of Rs. 6,83,760/- out of total addition made by AO at Rs. 9,59,960/-. Since both the grounds i.e. ground of the assessee and ground of the department are interlinked, therefore, they are being disposed off together. 6. The brief facts discussed by ld. CIT (A) in his order in para 3 at page 3 in this regard are as under :- "Briefly stated the facts are that the gold Jewellery 3295.860 gms was found valuing Rs. 27,70,309/-, out of the above A.O. treated gold Jewellery of 275 gms of Shakuntala Haldiya, 830 gms of Mamta Haldia and 1037 gms of Deepali Haldiya, total value being Rs. 18,10,349/- being explained and difference of Rs. 9,59,960/- was added as unexplained investment in the gold Jewellery." 7. Detailed submissions were filed before ld. CIT (A) which has been tabulated in the order of ld. CIT (A) in para 3.1 at pages 3 and 4 are as unde....
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....and wife side in life time. 120.00 gms Rs.118170/- Less:3 Jewellery purchased by Ravi, Dinesh, Mamta, Deepali, Shakuntala and debited to capital account and petty jewellery of minor children 261.00 gms Rs.222454/- Balance unexplained Jewellery NIL NIL" 8. After considering the submissions and perusing the material on record, the ld. CIT (A) found that assessee is eligible for relief of Rs. 6,83,760/-. Accordingly he allowed this ground of the assessee in part by sustaining an addition of Rs. 2,76,200/- out of total addition of Rs. 9,59,960/-. Findings of ld. CIT (A) have been recorded in para 3.2 at page 5 are as under :- "3.2 It is seen that as regards claim of Jewellery purchased by the appellant from J.K. Masun Jeweller, as appellant has given details of bill no. as well as payment which has been made by cheque amounting to Rs. 2,90,610/-, this claim is acceptable. However, considering the rate of 22 ct of gold in the relevant period and at the time of search, the value of the gold ornament as on the date of search was arrived at Rs. 5,65,590/- by the A.R. of the appellant (on being asked by the undersigned) and accordingly this amount is dedu....
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....e 6 of the assessment order, which is as below : (i) C-18, Bapu Nagar residence Rs. 1,02,600/- (ii) Haldia Bhawan Office Rs.12,14,72,143/- (iii) Choura Rasta Office Rs. 7,22,44,657/- (iv) Locket No.203 in ChordiaSafe deposit Vaults Rs. 1,51,722/- (v) Locket No.1022 in Birani Safe deposit Vaults Rs. 35,254/- (vi) Locket No.1026 in Birani Safe Deposit Valuts Rs. 1,24,250/- TOTAL Rs.19,41,30,676/- The appellant in his statement recorded at his Chaura Rasta office on 20.4.07 admitted that stock of all the concerned have been kept mixed and it is not possible to identify the stock of each concerns separately. This position was also noticed during the course of search. 4.2 Regarding the book position of the stock, it was noticed and was also admitted that no books of accounts have been written/maintained or even started so far for F.Y. 2006-07 and F.Y. 2007-08. Accordingly, on the basis of closing stock of F.Y. 200506 and subsequent purchase and sales made/shown during F.Y. 2006-07 and 2007-08 the stock of various concerns as on the date of search was worked out as below: (i) M/s. R.H. Exports ....
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....and stones are of different variety size, colour and quality etc and naturally the prices of these items would be different in respect of each and every item. v) The A.O. give example of the varying and high rate of purchase of turmolin rough, sapphire rough and emerald rough at the rate of Rs. 45,000/-, Rs. 15,000/- and Rs. 1,75,000/-per kg. from M/s. Esdire International Jaipur vide bill No.48 dated 1.5.04. 4.4 Accordingly, A.O. rejected the claim of alleged over valuation by the registered valuer and after giving credit of totaling mistake, the value of the physical stock found was held at Rs. 18,64,44,294/-, out of which G.P., at the rate of 11% was deducted to arrive at the cost price of the stock at Rs. 16,59,35,425/-. As the total stock as per books of the whole group was Rs. 9,20,92,958/-, excess of Rs. 7,38,42,467/- was added as unexplained investment in the hands of Sh. Ravi Haldia on substantive basis. As the stock of other three firms was also mixed up and total position of the group was determined. The A.O. added the proportionate excess stock in the hands of other three cases namely Sh. Dinesh Haldia, Smt. Deepali Haldia, Smt. Mamta Haldia as per tab....
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.... Kg @ 3685/- per kg Rs. 23473/- Deptt. Valuation 6.370 Kg @ 1161695/- Per Kg. Rs. 7400000/- Over Valuation done Rs.7376527/- c. Opel Rough Book Stock 125 Kg @ 3685/- per Kg. Rs. 460625/- (Both these stocks are of R.H. Exports (Prop. Ravi Haldia) Goods purchased @ 3695/- per kg vide bill no. 181 Dt.5.5.2004 of Laxmi Jewellers and goods Purchased @ 3675/- per kg vide Bill No.58 Dt.11.4.2004 of Raj Shree Gems) Deptt Valuation 125 Kg @ 43289/- per Kg. Rs. 5410850/- Over Valuation done Rs. 4950225/- d. Opel Finished Book Stock 4200 gms @ 135/- per gm Rs. 567000/- Deptt Valuation 4200 gms @ 900/- per gm Rs. 3780000/- Over Valuation done Rs. 3213000/- e. Tourmaline Rough Rejection Annexure J Pg. 15 257.560 Kg. @ 5620/- per kg Rs. 567000/- Annexure J Pg. 16 965.688 kg @ 7723/-per kg Rs. 7460950/- Annexure J Pg. 17 1009.730 kg @ 24769/-per kg Rs. 24992853/- Goods purchased in D.H. Exports (Assessee's group concern) from following parties: Bill No.08/2004-05 dt. 7.6.2004 of Girish Diam @ 4625/- per kg. Bill No.18/2004-05 dt. 20.5.2004 o....
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.... of the manufacturing process of tourmaline rough to tourmaline finished goods] and this stock has hardly any value in the market. So much so this stock was kept in big bardanas in open space outside main building which was openly accessible to the staff at Haldia House. We are to further mention that main office of the assessee was running at Chaura Rasta and only few staff were working as Haldia House. Normally a prudent businessman will not keep valuable stock in open place and out of his control area. c) Above are the only two examples of overvaluation. There are many such instances in the complete list of stock which runs in almost 34 pages. d) Some of the discrepancies were also brought into notice of the AO as well as other higher authorities during assessment proceedings which are enclosed herewith for your kind perusal and consideration. e) The assessee has kept and maintained full record in terms of weight of the rough purchased, rough put to manufacturing, finished goods manufactured out of manufacturing operations, wastage occurred during manufacturing, yield, labour charges paid to various karigars and all this record was produced before the ....
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.... on no principle can one justify the valuation of closing stock at a market value higher than cost as that will result in the taxation of notional profit which the assessee has not realized. 3. That valuation of closing stock shown by the assessee in its books of accounts for the financial years ended on 31.3.2007 as well as 31.3.2008 has been duly accepted by the Commercial Taxes Department of the State of Rajasthan and this is binding on the income tax authorities to accept the valuation of stock on book value. 4. That the assessee is enclosing herewith the detailed chart of all the four concerns of the assessee group dealing in gems and stones giving the figures of stock in hand as on the date of search and stock found at the time of search in terms of weight and also the difference, if any, between the two. From this chart your honour will find that there is a little variation in terms of quantity. It clearly suggests that the aggregate excess stock of the entire group cases worked out by the A.O. at Rs. 7,07,91,578/- is on account of not in difference in quantity but on account of adoption of higher rate of value as compared to the purchased value in the hand....
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....e of search. As such no addition of alleged excess stock should be upheld. In this regard assessee craves leave to rely on following judgements: Pullangode rubber produce Company Limited v/s State of Kerela and another reported in 91ITR 18. ACIT v/s. Sunil Kumar Jain (ITAT Jpr bench) reported in XXXVII Tax World Pg. 20 CIT v/s. Dharmendra Sharma (Raj High Court) reported in XXXIX Tax World Pg. 58. d. That it is highly incorrect and far from truth that Shri Dinesh Haldia [brother of "A"], Smt. Mamta Haldia W/o. Assessee and Smt. Deepali Haldia [wife of assessee's brother] ever agreed with the surrender made by assessee Shri Ravi Haldia. The alleged surrender of Ravi Haldia was of his own and it no way related to other family members. Neither Shri Dinesh Haldia nor Smt. Mamta nor Smt. Deepali made any surrender nor ever agreed with the surrender of Ravi." 16. After considering the submissions, the ld. CIT (A) gave his finding in para 4.6 to 4.13 at pages 13 to 18 of his order are as under :- "4.6 I have considered the submission of A.R. and have perused the assessment order and relevant record. The main argument of the appellant is rega....
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....from the perusal of the statement of the appellant, when he was confronted with various document seized during the course of search, which is as below: 4.10 From the aforesaid statement it is evident that the purchase and sales shown in the various loose papers are not recorded in the books of accounts and the stock position recorded in Ann.AA-4, AA-5 and AA-6 is also not matching with the stock shown in the books of account. In view of these facts the appellant himself admitted that income so earned as reflected in these loose papers and stock difference reflected in these loose papers is covered within the disclosure of excess stock of Rs. 10 crore 21 lakh made by him. 4.11 Thus the claim of over valuation so made by the A.R. of the appellant has been rightly rejected by the A.O. in view of the facts mentioned by the A.O. in the assessment order and further facts and details discussed in the earlier paragraphs by the undersigned. 4.12 Though the claim of over valuation has already been rejected but even then it is seen that the appellant is trying to justify the rate of 'citrine rough' by supporting his claim from bill No. M/s. S.P. Jewellers dated 15.5....
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....atement given during the course of search. The appellant remained silent for the reasons best known to him. Thereafter the return of income was filed in response to notice u/s.153A without declaring the complete investment in excess stock found during the course of search which was also admitted during the course of search. It was only when the A.O. confronted the appellant and issued show cause notice that appellant came up with the reply of alleged over valuation of the stock. Though the appellant claimed to have given retraction letter in February, 2009, but same is not borne out from record available with this office. Even then, this letter has been filed as late as more than 21 months after the search. All these facts and circumstances are going against the appellant and force me to lead to the conclusion that these contentions are afterthought and accordingly have been rightly rejected by the A.O." 17. These findings of ld. CIT (A) are in respect to excess stock found during the course of search. The ld. CIT (A) has confirmed the action of the AO. However, the ld. CIT (A) has allowed relief on account of GP rate credited @ 30% as against 11% allowed by the AO. In this rega....
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.... the facts and circumstances and the legal position on the issue under consideration the addition on account of excess stock found during the course of search is upheld to the extent of Rs. 3,50,12,643/- and remaining amount of addition on this issue is deleted. 6.2 Accordingly protective addition in the case of other three proprietary concerns will also get modified and taken on the basis of excess stock of Rs. 3,84,18,050/- (as per the basis taken by the A.O.). S.NO. Name of assessee Amount of stock Amount of addition 1. M/s. D.H. Export, Prop. Sh. Dinesh Haldia Rs.2,42,81,620/- Rs.1,01,29,466/- 2 M/s.Ridhi Sidhi International, Prop. Smt. Deepali Haldia Rs. 50,96,985/- Rs.21,26,288/- 3 M/s. Vidhi Gems Prop. Smt. Mamta Haldia Rs.1,25,20,131/- Rs.52,22,973/- As Sh. Dinesh Haldia has already offered Rs. 3,54,518/- as excess stock, the balance amount of Rs. 97,74,948/- is held to be confirmed on protective basis in the case of Sh. Dinesh Haldia. In the case of Smt. Deepali Haldia and Smt. Mamta Haldia, the aforesaid amount mentioned in column No.4 are held to be confirmed on protective basis." 18. Against the findin....
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....nd this fact is undisputed fact. It was further submitted that the books of account of the assessee were completed upto assessment year 2006-07. Return on the basis of audited books was filed in time. The closing stock was mentioned in the Balance Sheet of assessment year 2006-07. Thereafter, whatever the stock has been purchased, that is added in the stock and whatever the stock has been sold, that has been reduced from the stock and a compilation has been made and as per compilation made for assessment year 2008-09, there is no difference between the stock found at the premises of the assessee group and as per compiled stock. Therefore, there is no reason to suspect the stock shown by assessee. The departmental authorities with the connivance of departmental valuer Shri Kasliwal has valued the stock as per their will/choice. No assets of any kind over and above shown in the books of account has been found, neither cash excess was found nor jewellery was found where it can be said that assessee has invested any undisclosed income. No moveable or immoveable properties were found where it can be said that assessee has invested its undisclosed income. When no other assets were found,....
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....s which contain the same items have already been recorded in the books of account. It was further submitted that the valuer has adopted different approach for valuing same items. Somewhere some rates have been taken and somewhere very high rates have been taken for the same items. Reasons are not known or are known to the ld. Valuer only. Further, reliance was placed on the written submissions and various case laws mentioned therein. 23. On the other hand, the ld. CIT D/R strongly placed reliance on the order of ld. CIT (A). It was further explained that the inventory of stock was prepared with the help of the staff of the assessee and, thereafter the valuation of stock was obtained from the Government approved valuer. The valuation of stock has been taken on the basis of description of items/stock found during the course of search. It was further submitted that whatever the stock was shown in the books of account, that has already been reduced by AO and the excess stock after reducing the stock shown in the books of account has been added only in the income of the assessee. Regarding excess stock, no explanation was offered at the time of search or at the time of assessment. In....
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....books of account. How it is not matching has not been explained by ld. CIT (A) while disposing this ground. The AO as well as ld. CIT (A) has based mainly on the statement of the assessee recorded during the odd hours at the time of search. Statement was recorded at 2.00 A.M. on 22.4.2007 when the surrender of stock was obtained. At the time of assessment as well as at the time of appeal stage before ld. CIT (A) it has been argued time and again that at the time of taking statement the assessee was not in sound state of mind and he gave the statement just to get rid of from the departmental enquiry. Though it has been stated that the voluntary offer was obtained under coercion, pressure, undue harassment and misrepresentation of facts. It may be true or it may not be true but the fact remains that there should be a difference of items and weight recorded in the books of account and found during the course of search. As stated above, the AO as well as the ld. CIT (A) went on to reject the contention of the assessee merely based on the statement of the assessee recorded and valuation made by the departmental valuer Shri Kasliwal. The audited books of account upto 31.3.2006 were avail....
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.... books of account. As required by the Bench, the assessee has prepared a list of items as per books of account and list of items as prepared by the search party which is tabulated here as under :- RAVI HALDIA GROUP CASE STOCK VARIATION SUMMARY AS ON 22/4/07 AS PER BOOKS OF ACCOUNT AS PER VALUATION OFFICER NAME OF ITEM Weight in gms Value NAME OF ITEM Weight in gms Value Rs. Rs. Aquamarin Rough 237757 787632 Aquamarin Rough 85978 2629975 Aquamarin Semi Finish 4005 50063 Aquamarin Semi Finish 3965 277550 Amethyst Cut 193 56937 Amethyst Cut 500 62500 Amethyst Rough 20750 52913 Amethyst Rough 574040 9980900 Cat's Eye 2300 402500 Cat's Eye 2300 230000 Citrine Cut 450 37500 Citrine Cut 450 45000 Citrine Rough 17003 196964 Citrine Rough 16800 13440000 Emerald Cut 21760 5913215 Emerald Cut 19685 9306375 Emerald Rough 1090 190750 Emerald Rough 1750 13125 Garnet Rough 546218 2434882 Garnet Rough 191360 5432850 Gold 500 3100....
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.... was Rs. 9.20 crores which has been reduced by the AO while calculating undisclosed investment in the stock. The search was conducted on 20.4.2007 which is almost at the beginning of the year and on that date the Departmental Valuer has given his valuation of Rs. 19.41 crores and as on 31.3.2007 the valuation as per valuer is Rs. 18.64 crores. 26.1. It is further seen that on account of excess stock of 5 lac grams which is equivalent to 500 kg of rough gems, and on this account the assessee has surrendered Rs. 34 lacs or odd on account of cash purchases. For the sake of clarification, the assessee has surrendered excess stock of 1220 kg valuing at Rs. 34.05 lacs. This detail has been given in the paper book in respect to valuation of excess and short stock and stock surrendered, at page 2 of the paper book filed on 19^th October, 2011 during the course of appellate proceedings. In view of these facts and circumstances, it is seen that there was no difference as per books of account and as per stock found during the course of search. Whatever the difference was there, the assessee has already surrendered and the AO has accepted the same also, which is clearly mentioned in the ord....
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.... 31.3.2008. As stated above, the items found recorded in the books of account and the items found during the course of search are almost the same. The difference is only on account of valuation. It is seen that the departmental valuer Shri Kasliwal has adopted a different yardstick by taking valuation of the same item at different rates, for the reasons best known to him. 27.1. For example, the valuation of Citrine Rough recorded in Annexure J-1 page 1 and item no. 1 which is a lot of Citrine Rough has been valued @ Rs. 7.78 lacs per kg. Total quantity of Citrine rough was found at 17.2 kg and in this way the valuation has been made at Rs. 1.34 crore or odd. This item was purchased by the assessee at the average rate of Rs. 11,586/- per kg. In support of the contention of the assessee, the assessee has shown purchase bill of M/s. S.P. Jewellers, Nahargarh Road, Jaipur bearing Bill no. 10 dated 5.5.2004. The ld. CIT (A) has not accepted the contention of the assessee that same stock was available with the assessee. However, we are surprised that why ld. CIT (A) has not accepted the explanation of the assessee as purchase Bill is there and the same stock is coming forward from ass....
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.... Rs. 19.41 crore. Once the assessee is having the same item in his stock, then there is no question of making another valuation. Valuation is made when there is any undisclosed item and as explained earlier, there is no unexplained item as almost all the items are recorded in the books of account and whatever the excess stock was found, that have been surrendered and has been accepted by the AO also. However, the AO made the addition on the basis of Valuation Report and on the basis of statement of the assessee recorded during the course of search. The AO has not tried to compare the items as per stock and the items as found during the course of search. If this exercise could have been done, then there would not have been any addition. 27.3. Therefore, we are not able to understand why the DVO has taken a different value of same item. 27.4. As per certificate issued by one Shri V.K. Kankaria, Government Approved Valuer, it has been certified that rate of rough semi precious stone of Citrine varies from Rs. 5,000/- to Rs. 50,000/- per kg and it never exceeds in local market or in international market from Rs. 50,000/- per kg. However, it is seen that the DVO has taken this val....
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....ame has been tabulated somewhere above in this order. Therefore, in our considered view, there was no reason to make addition on the basis of valuation of stock because valuation of stock has to be taken at the time of sale of those very items. Whatever purchases has been made by the assessee they have been recorded in the books of account and as per consistent method of accounting of valuing of stock is on the basis of purchase price or cost price whichever is lower. 28. In similar circumstances in cases of Pandey Group, this very Bench has taken a view that no addition should be made on the basis of valuation of stock as there was no difference in stock. The operative para of the order of the Tribunal in the case of Shri Pushpendra Pandey decided in ITA No. 994/JP/2010 dated 4.4.2011 is reproduced here as under :- "19. We have heard rival submissions and considered them carefully. We have also perused the material on which our attention was drawn by the respective parties including written submissions filed on behalf of both the parties. 20. First, we would like to deal with the objection raised by ld. CIT D/R that assessee has used derogatory language during....
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....nd in case of his brother in a proportionate of Rs. 30 lacs and Rs. 64,11,980/-. Remaining stock out of total undisclosed stock noted by the AO at Rs. 3.81 crores was not shown for the reason that there was no excess stock in fact. This explanation was filed before the AO. However, the same has not been accepted for the reason that there was no coercive action against the assessee neither there was any undue pressure on assessee and assessee has voluntarily admitted the excess stock of Rs. 3.81 crores. 22. We further noted that as per reconciliation, the stock was to the tune of Rs. 1,22,35,185/- whereas the search party has recorded the stock as per books on the date of search at Rs. 1,00,05,748/-. The reconciliation was also not accepted either by AO or by ld. CIT (A). 23. In our considered view the findings of ld. CIT (A) to this aspect is correct that this is not fully retraction but partial retraction. The ld. CIT (A) has given a finding that the departmental authorities were supposed to supply the copy of statement and inventory prepared on the date of search to the assessee or to the person concerned. However, it was provided after 8-10 months. This is also....
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....given the example of "Ram Darbar". In Ram Darbar, height of main idol i.e. "Shri Ram" is 28" size, idol of "Sita ji" and "Laxman ji" always remains little small in size and "Shri Hanuman ji" remains on a more smaller in size. However, the departmental authorities has taken 28" size for all the idols. In fact, the size of all the four idols never remains same. Therefore, the same size should not be taken by the department. Likewise, there are differences in all the remaining moorties, the explanation of which has not been accepted by ld. CIT (A). 27. The A.O. and the ld. CIT (A) have also not taken into consideration the old stock declared under VDIS for the reason that old stock cannot be left for such a long period i.e. for 10 years. In our considered view this presumption of the department is also not correct as in line of business of moorties, it is not necessary that the moorty manufactured will be sold immediately thereafter or next year. There are many instances that one moorti manufactured at a particular time could not be sold even after 20 years. In such type of business one has to keep all types of stock for showing to the customers that how many types of moortie....
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....d by the assessee for Rs. 6,000/- and after reducing the cost i.e. Rs. 3,000/- accepted by the assessee on Rs. 3,000/- the assessee has paid again. The AO has not taken the value adopted by him as the value of closing stock on account of valuation accepted by the assessee at the time of search. In that case the value should have been taken as opening valuation of the closing stock of earlier year and thereafter the AO should have made adjustment of the profit on account of sale of that very item which he has not done. 31. Copies of assessment orders for 2009-10 which is subsequent year is placed on record. The assessment has been completed under section 143(3) on 3.3.2011. Whatever the stock has been shown by the assessee that has been accepted. As per statement of the assessee, the assessee has shown the stock on the basis of reconciliation chart after obtaining the copy of inventory from the departmental authorities. Therefore, if the contentions of the AO as well as of ld. CIT (A) and the ld. D/R are accepted, then as stated above, the addition made by AO will tantamount to double addition. 32. Even and otherwise, as stated above, there will be no impact on the....
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....here is no difference in items found at the time of search. Only difference is of valuation and the reason for difference in valuation we have discussed in the above so many paras as this may be on account of human error. It is also possible that due to human error the department has noted higher valuation though it may be a bonafide mistake on the part of department also. However, once the assessee is able to file a fair and correct valuation chart, then in our considered view that should have been considered. In view of the above facts and circumstances, it is held that this is not a case of total retraction but it is a case of partial retraction that too on account of valuation only. 34.2. Even otherwise, we are of the view that valuation of stock found whether it is excess stock or recorded stock has to be valued on the basis of purchase price or market price whichever is less. This is an admitted fact that value has to be adopted on the basis of market price or sale price whichever is low. No doubt, there was no valuation available of the excess stock found, however, the value of similar stock which were recorded in the books of account was available. Sale instances b....
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....essee is not retracting fully but only challenging valuation. Copy of stock inventory was not provided to the assessee. As and when the same was provided, the same was reconciled and accordingly surrender was modified. This is not a case of the department that department was barred for making any further enquiry. All the details were available with the department and they are verifiable. 38. In case of Video Master vs. Jt.CIT, 83 ITD 102 (Mumbai), it has been held that when retraction of statement made under section 132(4) was sought to be made after a gap of one month of recording the statement it was immaterial as it could not be said that D's statement under section 132(4) was recorded under duress. 38.1. This case is also not in support of the department as we have not approved the contention of the assessee that statement was recorded under pressure. Only issue involved here is to consider the explanation filed on behalf of the assessee. 39. In case of Dr. S.C. Gupta vs. CIT, 248 ITR 782 (All.), in which it has been held that when a statement made under survey voluntarily by the assessee it could form the basis of assessment. The mere fact that the a....
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....ce. We have discussed the issue in detail on merit and have held that there was a reasoned explanation along with the corroborative evidence. Therefore, in view of these facts and circumstances and in view of various case laws discussed above, we are of the considered view that valuation of stock disclosed by the assessee is liable to be accepted as there will be no impact on the revenue because whatever the sale consideration of the stock found during the course of search, the same will be offered for taxation in the year in which it was sold. Accordingly these grounds of the assessee on account of valuation of stock in the opening stock and in the quantity of the excess stock declared by the assessee are allowed. For the sake of clarification, we have directed to accept completed books and as per completed books there is a difference on account of under statement of stock at Rs. 11,03,430/- which is also liable to be accepted. Accordingly we direct the AO to allow further relief of Rs. 45,76,380/- in total to the assessee on account of valuation of stock and difference as per completed books of account and on the basis of stock found recorded on the date of search. We order accor....
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....done and in revaluation there was a marginal difference and ultimately the valuer has valued the stock of 14, Vishnupuri at Rs. 6.67 crores and stock of 14A, Vishnupuri at Rs. 0.06 crores. Accordingly the assessee reduced the g.p. rate @ 20% which resulted in a reduction of Rs. 1.38 crores. 13.1. After reducing this amount on account of gross profit, the remaining Rs. 4.21 crores was shown by the assessee in its return as additional income on account of cost of stock undervalued by the assessee in its books of account. However, the AO as explained in earlier paras did not accept the contention of the assessee as in his view the valuation of stock found at Pano-ka-Dariba was Rs. 9,45,50,000/-. Therefore, he took the value of this amount instead of amount of Rs. 4,00,00,000/- shown by the assessee. The explanation of the assessee was not accepted inspite of the fact that original purchase vouchers were produced before the AO to substantiate its claim that the stock was old and was recorded in the books of account as well as stock register maintained which was seized by the search party. The AO has observed that valuation was made by the departmental valuer and in respect to ....
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....tted that the cost of stock was Rs. 4,00,00,000/- and Rs. 4,00,00,000/- have been surrendered also. Therefore, in our considered view the AO should have taken into consideration this explanation and this aspect of the case and then should have taken a reasonable view in respect of the valuation of closing stock. However, the same has not been done by the AO nor ld. CIT (A) has taken the cognizance of this aspect. All the purchase vouchers along with detailed written submissions were filed before ld. CIT (A). The copy of stock register seized by the department was also filed before ld. CIT (A). However, ld. CIT (A) was also in agreement with the AO's finding as in his view the assessee could not substantiate its claim to prove that the cost of stock found at Pano-ka-Dariba was of Rs. 4,00,00,000/-. Accordingly he has confirmed the order of AO in this respect. 14. The vital fact, which the ld. CIT (A) could not consider is that even valuation done by the valuer is not correctly done. From the copy of the items found at Pano-ka-Dariba and same items found at basement and ground floor of 14, Vishnupuri and 14A, Vishnupuri, it is seen that the valuer has taken a different value....
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....erefore, total exact weight has not been noted by the valuer. This could have been verified from the stock register where weight is mentioned of each item which is supported by purchase vouchers. Therefore, this creates a doubt that fair valuation has not been done by the valuer. 15.1. It is further noticed that the contention of the assessee that the cost of stock found at Pano-ka-Dariba was not more then Rs. 4,00,00,000/- and this contention of the assessee has not been found incorrect. Only in support of the contention of the department is valuation report whereas as explained above the valuer's report is defective on various counts. Therefore, either department should have accepted the offer of the assessee or should have revalued the stock. There is a strong presumption in favour of the assessee that department itself was not going further for making revaluation or examining the issue as they found that assessee has offered to surrender Rs. 4,00,00,000/- as cost of stock found at Panchnama. Even and otherwise this is a factual aspect that cost of the material has to be taken, as assessee is valuing its stock on the basis of purchase price or market price whichever is ....
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.... of the AO. In view of these facts and circumstances, we delete the addition of Rs. 5,45,50,000/-." 30. In view of the above facts and circumstances and in view of the consistent approach of the Tribunal, we are of the view that addition made and sustained on the basis of excess valuation is not justified as there is no difference in items, weight disclosed in the books of account and found during the course of search. Whatever a small difference was there, on this account the assessee himself has surrendered a sum of Rs. 34,00,000/- or odd on account of cash purchases by Shri Ravi Haldia and Shri Dinesh Haldia. Therefore, in our view, no further addition is required. Accordingly, the remaining entire addition is deleted. 31. Ground No. 5 is an alternative ground to Ground Nos. 3 & 4. Ground Nos. 3 & 4 has already been allowed by us in favour of assessee herein above. Therefore, this ground does not require any adjudication. 32. Ground No. 6 is regarding not setting off/deducting simultaneous trading additions made and sustained in case of assessee himself, his brother etc. 33. This is also an alternative ground to Ground Nos. 3 & 4. Ground Nos. 3 & 4 has already been a....
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.... the appellant failed to file confirmations. The appellant even failed to give complete address and the present whereabouts of those persons from whom the appellant has shown purchases. The A.O. also noticed that these cash purchases have been made by showing payment below Rs. 20,000/- and many a times payment to single party have been shown repeatedly and continuously on day to day basis for 3-4-5 days with a view to avoid applicability of section 40A(3). In respect of some other cash purchases, the payments to those small sellers have been shown to have been made after a long gap of 6 to 24 months. A.O. observed that it is unbelievable that these small parties would wait for the payment to be made after a long gap of 6 to 24 months. Similar is the position in respect of unregistered dealers. In view of these facts, the A.O. rejected the trading results of the appellant and invoked the provision of section 145(3). The A.O. disallowed the cash purchase and purchases from URD, as these remained unverifiable amounting to Rs. 15,903/-, Rs. 36,41,232/- and Rs. 44,279/- in A.Y. 2005-06, 2007-08 and A.Y. 2008-09. 5.2 The A.O. further noticed that the appellant has made purchases....
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....nfirmation of addition of Rs. 2,33,218/-. 5.4 As regards disallowance out of the purchase is concerned, the undersigned has held that such disallowance is also to be made from the purchases shown to be made from registered dealers from whom purchases were found unverifiable in regular assessment proceedings for A.Y. 2004-05, considering the facts noticed during that assessment proceedings and now further facts noticed during the search and seizure action, which has been discussed in the appeal order for AY 2005-06 dated 18.11.10. Out of the total cash purchase and purchase from unverifiable registered dealers, the appellant has already surrendered Rs. 30,55,889/-. Out of the remaining cash purchase of Rs. 44,279/-, the 25% is held disallowable which comes to Rs. 11,070/-. Accordingly, disallowance out of purchase is upheld to the extent of Rs. 11,070/- protectively. 5.5 As disallowance out of the purchases held justified in the above paragraphs is Rs. 11,070/- and same is less than the trading addition of Rs. 2,33,218/- so confirmed, finally addition of Rs. 2,33,218/- so made by the A.O. is confirmed." 39. After considering the submissions and perusing the mate....
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....ssions, therefore, we set aside this issue to the file of AO to examine afresh after affording a reasonable opportunity of being heard to the assessee. 45. Ground No. 11 is against sustaining disallowance of Rs. 10,230/- being 10% of some of the expenses. 46. This is a meager disallowance. Therefore, we are not inclined to interfere with the findings of AO and ld. CIT (A). Accordingly this ground of the assessee is rejected. 47. Now we will take up the remaining ground in the appeal of the department. 48. Ground No. 6 is against deleting the addition of Rs. 10,250/- made on account of expenses. 49. This ground we have already disposed off while deciding ground no. 11 of assessee. We have sustained 10% expenses sustained by ld. CIT (A). In fact, the AO disallowed 20% of the expenses, the ld. CIT (A) has restricted it to 10% and we have confirmed the order of ld. CIT (A) in this respect. Therefore, for this reason, the ground of the department is dismissed. 50. In the result, appeal of the assessee is partly allowed and appeal of the department is dismissed. 51. Now we will take the appeal for assessment year 2007-08 in case of assessee and department. 52. Gro....
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....s. 4,25,000/-. Therefore, he disallowed @ 25% of the same and made an addition of Rs. 1,06,250/-. 63. Similar issue we have already decided while deciding ground no. 4 where we have held that we have already applied a higher GP rate against GP rate shown by assessee. Therefore, no separate addition is required on account of unverifiable purchases. Therefore, this ground of the assessee is also allowed by deleting the addition of Rs. 1,06,250/- sustained by ld. CIT (A). 64. Last ground is against sustaining the disallowance of Rs. 15,506/- being 10% of expenses. 65. We find that ld. CIT (A) has reasonably sustained the addition @ 10% against 20% disallowed by the AO. Therefore, we see no reason to interfere with the finding of ld. CIT (A). Accordingly, this ground of the assessee is dismissed. 66. Now we will take up the appeal of the department. 67. All the grounds relate to deleting addition of Rs. 26,24,674/- by the ld. CIT (A) out of total addition of Rs. 36,41,232/- which was made by the AO on account of cash purchases. 68. This issue we have already disposed off while disposing the ground of the assessee against addition sustained by ld. CIT (A). AO made addi....
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....re certain discrepancies and we have already upheld the application of provisions of section 145(3). 77.1. Therefore, we are of the view that for the year under consideration if GP rate at 15% is applied against GP rate shown by assessee at 11.60% and against GP rate of 30% applied by the AO and ld. CIT (A), then it will meet the ends of justice. We order accordingly. 78. Ground No. 5 and 6 are against applying 25% of cash and URD purchases and enhancement on account of unverifiable purchases from some of registered dealers and thereby making addition @ 25%. 79. Similar issues were involved in assessment year 2007-08. We have already disposed off these grounds and have allowed the issue in favour of the assessee. For the same reasoning, these grounds of the assessee are allowed for the year under consideration also. 80. Remaining ground no. 7 is against confirming disallowance of expenses at Rs. 46,579/- being 10% of expenses. 81. Similar issue has been decided in earlier years. On the same reasoning, this ground of the assessee is rejected for the year under consideration also. 82. In the result, appeal of the assessee is partly allowed. 83. Now we will take u....
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....onsidered by the A.O. it was pointed out that (i) ground floor coffer type ceiling Varanda (sr. no.7 on page 35 of valuation report) valued at Rs. 86,080/-, (ii) FF covered Balcony (sr. no. 4 page 34) valued at Rs. 67,788/-, (iii) Servant Block valued at Rs. 1,43,534/-, (iv) RCC over head tank on terrace valued at Rs. 50,000/- (sr. no.56 on page 47) were already available/excising in the house purchased from the previous owner and appellant did not incur the expenditure on construction of these items. It was also submitted that Cupboards and Wardrobes so prepared was already existing and appellant utilized the wood of existing wardrobe and gave it a new look. Some of the expenditure has been taken on higher side. Accordingly, it was requested to deleted the addition." 89. After considering the submissions, the ld. CIT (A) allowed part relief by observing the following finding :- "4.4 I have considered the submission of id. A.R and have perused the material on record. The A.O. has clearly mentioned in the order that the appellant did not furnished/produced vouchers for construction expenses and even construction account details were not filed. Though the A.R has argued t....
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....herefore, we hold that AO and ld. CIT (A) were not justified in making the addition and sustaining the addition in part. Accordingly, the entire addition is deleted. This ground of the assessee is allowed. 91. Remaining ground is against sustaining an addition of Rs. 20,370/- being 10% of the expenses. 92. Similar ground we have already disposed off while deciding the ground for earlier years and we have deleted the same. On the same reasoning, this ground of the assessee is also rejected. 93. In the result, appeal of the assessee is partly allowed. 94. In summary, appeals of the assessee are partly allowed and appeals of the department are dismissed. 95. The order is pronounced in the open court on 19.12.2011. ============= Document 1 पà¥à¤°. 3. आपके उकà¥à¤¤ सà¤à¥€ फरà¥à¤®à¥‹à¤‚ के हलà¥à¤¦à¤¿à¤¯à¤¾ à¤à¤µà¤¨ में रखे Stock का मूलà¥à¤¯à¤¾à¤‚कन करà¥à¤¤à¥à¤¤à¤¾ दà¥à¤µà¤¾à¤°à¤¾ बा....
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