TaxTMI 
TaxTMI 
2018 (4) TMI 735
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.... oath during the search and denied having received/ kept any jewellery for such purpose. 3. That the ld CIT(A) has erred in ignoring the facts that the assessee was not maintaining stock register as no books of account was found during the course of search proceedings and estimate arrived by Departmental valuation Officer was correct and as per law. 4 (a) The order of ld CIT(Appeals) is erroneous and not tenable in law on facts." 3. The assessee has raised the following grounds of appeal in cross objection:- "1. The ld CIT(A) on the facts of the case and in law has rightly deleted the addition of Rs. 15101389/- as undisclosed investment in stocks and the same should be upheld. 2. that the ld CIT(A) has rightly deleted the addition of Rs. 1.51 crores made in AY 2013-14 as the value of stock submitted by the appellant was in line with the amount determined by the department valuer. 3. that the ld CIT(A) correctly appreciated that the appellant's valuation of stock was arrived at using the value of stock declared in the return for Assessment Year 2011-12, purchase/ sales supported by invoices and goods received/ sent on approval supporte....
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....ock register, reconciliation cannot be accepted. Therefore, as the valuation of the jewellery made by the govt valuer of Rs. 37877297/- was compared with the actual stock as on 31.03.2012 of Rs. 22775908/-. The addition of Rs. 15101389/- was made as undisclosed investment. Consequently, the assessment order u/s 143(3) of the Act was passed on 27.03.2015 at total income of Rs. 15135417/-. The assessee aggrieved with the order of the ld AO preferred appeal before the ld CIT(A). The ld CIT(A) dealt with this issue at para No. 9 of her order as under:- "AY 2013-14 The main substantive Ground is "That the AO has erred in law and facts while making the addition of Rs. 1,51,01,389/-, on account of difference in valuation of stock on the date of search, due to different valuation approach adopted by department." 9. BACKGROUND AND FACTS OF THE CASE ARE AS UNDER: In addition to the background and facts as stated in respect of AY 2011- 12 in para 5 above, the AO has alleged that the value of stock as on 12.04.2012(the date of search) as estimated by the departmental Valuer was Rs. 3,78,77,297/-. As against this, the value of stock as per books of accounts was Rs. 2,27,75,908/-. Th....
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....ong with her return that was filed 28.09.2011 whereas the search has taken place on 12.04.2012. Though the Trial balance as on 31.03.2012 was not ready on the date of search on 12.04.2012, the appellant's ARs had furnished to the DDI (Inv) vide there letter dated 14.06.2012 the complete details of purchases supported by purchase bills, details of goods received on approval supported by requisite voucher of third parties, complete details of sales as supported by sale invoices and goods sent on approval as supported by requisite voucher in favour of third parties. It is a common trade practice in jewelry trade that expensive items are received or sent on "approval basis". Once the customer approves the item the jeweler issues the purchase/ sale invoices. Copy of ARs letter to DDI (Inv) dated 14.06.2012 was filed before the AO vide ARs letter on 20.03.2015 along with all the details and reconciliations between jewelry physically found during search with jewelry available as per books of accounts. The reconciliation submitted by the appellant before the Investigation wing was as under:- Particulars Gross Weight Net Weight Dia Weight Stock in Trade(Bill wise) 6,....
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....rough the assessment order passed u/s 143(3) r.w.s. 153A of the Act. I have also examined the submissions of the ARs with respect to the assessment records that were requisitioned. There is only one issue in this ground and that is relating to the difference in valuation of closing stock as on 12.04.2012 which was the date of Search. 12.1 The value as estimated by the departmental Valuer was Rs. 3,78,77,297/- whereas the value as declared by the appellant was Rs. 2,27,75,908/-. The difference of Rs. 1,51,01,389/- was taxed as undisclosed investment in stock made by the appellant in asst year 2013- 14. The appellant had explained the reasons for this difference to be that the value of stock as estimated by the departmental Valuer was on the basis of gold rate prevailing as on 12.04.2012 whereas the appellant had valued his stock at cost on the basis of rate of gold as prevailing on the date of purchase of respective item. The appellant had furnished to the DDI (Inv) vide their letter dated 14.06.2012 the complete details of purchases supported by purchase bills, details of goods received on approval supported by requisite voucher of third parties, complete details of sales as ....
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....2.2015, allowing full relief of the additions made by the Ld. Assessing Officer. The issue involved in the appeal before your Honour is laid out as below: ISSUE: DIFFERENCE IN VALUATION OF STOCK OF JEWELLARY OF Rs. 1,51,01,389/- * Grd 1 to 4 of Departmental Appeal * Grdl to 5 of Assessee's Cross Objection Facts of the case on the above ground: Before going on to the submission of the said ground it would be relevant to lay in details the facts of the said ground. 1. The Assessee had started its business of jewellery designing and trading in October 2010. The business is conducted from Boutique setup in the office premises of Father of the Assesse. Sh. Pramod Jain, though in residential area. As a part of business, items of jewellery were received on approval basis for sale and also the item of jewellery were taken by customers on approval basis (after payment of lump sum amount). When jewellery items were sent on approval basis, an estimate was prepared and sent along with jewellery. When the sale doesn't get materialise, the amount received from the customers were returned back after deduction of certain perce....
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....rn 472.300 458.491 39.50 Sent on Approval 249.449 235.984 18.14 Total 5288.883 4337.920 358.15 Item Received on Approval 2066.668 1567.976 94.52 Grand Total 7355.551 5905.896 452.67 3.1. However the as per the Valuation Report, the following were the weight of jewellery: * Gross Weight 7361.487 gms * Net Weight 5902.838 gms * Dia Weight 449.91 gms 3.2. As per the reconciliation prepared and submitted by the Assessee, there was insignificant difference between jewellery physically found during search with jewellery available as per books of accounts. This insignificant difference can arise due to the fact that the valuation report is an estimate made by the valuer whereas the quantity and weight as per books of accounts is supported by invoices and vouchers. 4. The Assessee had also submitted before the Ld. AO the reconciliation of stock position as on 12.04.2012 on the basis of actual purchase and sale bills, goods received on approval and goods sent on approval. Also a copy of ITR filed for AY 2011-12 on 28.09.2011 was submitted along with Balance Sheet ....
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.... AO rejected the contention of the Assessee on the basis of the following observation:- "Here, it is pertinent to mention that during the search proceedings, Ms.Preeti Jain, Proprietor of M/s Jewels by Preeti in her preliminary statement, has stated that neither she has kept nor received any valuable items, documents etc with somebody else. The relevant part of her statement dated 12.04.2012 is reproduced below: In view of the above facts, it may be concluded that her submission regarding jewellery sent for approval and received on approval is nothing but the after- thought and documents submitted in support of goods received on approval and sent for approval are not reliable and cannot be accepted. " 6.1. In this regard it is submitted that the Ld. AO has misinterpreted the statement of assessee by correlating the same with the business stock of the assesse, part and parcel of which is under movement for approval of sale. It is to be noted that the assessee has not kept any valuables with any other person for the purpose of safe custody. Goods sent on approval are for the purpose of effecting sale and not with the purpose of keeping the stock with custom....