AI Drafter 
TaxTMI 
TaxTMI 
2018 (6) TMI 223
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.... investment in jewellery. 4. On the facts and circumstances of the case the Ld. Commissioner of income Tax(A) has erred in law in deleting the addition of Rs. 54,27,849/- made by the AO on account of interest payment to Vijay Dixit Group. 5. The appellant craves leave to add, amend any/all the grounds of appeal before or during the course of hearing of the appeal. 2. The grounds raised in the Assessee's Cross Objetion read as under:- 1. On the facts and circumstances of the case, the order passed by the learned Commissioner of income Tax (Appeals) is bad both in the eye of law and on facts. 2. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the proceedings initiated under Section 153A against the appellant and the assessment framed under Section 143A/143(3) are in violation of the statutory conditions of the Act and the procedure prescribed under the law and as such the same is bad in the eye of law and liable to be quashed. 3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting ....
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....f Rs. 41,565/- on account of enhancement of the gross profit rate is concerned, we find that Ld. CIT(A) has deleted this addition on the basis of the findings recorded by him in the case of Mrs. Kumkum Kanodia for A.Y. 2008- 09. The addition in the case of Mrs. Kumkum Kanodia were deleted by the Ld. CIT(A) as per the order placed at Paper Book Pages 151 to 156 on the basis of the finding recorded by the Ld. CIT(A) in the case of group concern i.e. Vasudeva Jewellers Pvt. Ltd. for A.Y. 2005-06. The relevant findings of the Ld. CIT(A) in this order were to the following effects: "4.8.6 I have considered the submissions of the AR and the assessment order. The AO has made the addition on the ground that the GP rate declared by the assessee was at lower side and that the GP rate in the group cases are not constant and cannot be verified from the details filed by the assessee. He proceeds to make an addition in GP rate of 0.2% to cover up the possible leakage of revenue by the assessee during the year under consideration. Thus it is noted that the entire addition is an ad hoc addition without any specific empirical basis. How the AO has arrived at the GP rate of 0.2% is not asce....
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.... It involves following steps 1 Execution of sales a. Orders for purchase of commodity with MMTC and other reputed organization suppliers are placed upon receipt of enquiry by the customers. Such orders are delivered by the suppliers at prevailing rates of the commodity at the time of supplies. b. Upon receipt of the supplies and costs thereof it is ensured that the supplies be made at a rate so that at least minimum of the cost be recovered. c. Further, as per market tend prevalent in the trade it is the practice that the supplies are made at a rate on which the orders from customers are booked by them and not on the date of delivery. Thus considering the volatile nature of market where the prices are frequently fluctuating there is an obvious likely situation where the sales are recorded at a rate that may be lower and higher than the market rates. d. However, due precautions commensurate with the knowledge, expertise and experience of management is taken that even in adverse situations no sale be made at a price lower than costs however since the market is uncontrollable predictable even after taking due precautions the possibility....
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....e Quantitative tallies of purchases and sales made and record thereof is duly maintained which were even examined by investigating authorities and it is a matter of fact on record that no deviation thereof was found in a conclusive proof of not only the facts stated above but also the genuineness involved thereof. c. The cash sales so made is duly recorded in the books of accounts and cash thereof after meeting necessary expenses, recorded in books is deposited in bank accounts as and when required so after considering working capital requirements and other contingencies. As a consequential evidence reference is drawn to the fact that major amount received through cash sales was deposited in bank and duly shown in books of accounts which is an automatic acid test and proof of genuineness of facts involved. d. In this connection reference is also respectfully drawn to sales tax returns already filed, being yet again a proof of the fact that the assessee has fully paid the sales-tax on sales, which was liable to be debited in profit and loss account. In view of the facts stated above it is thus undoubtedly that all the sales executed by the company are not only duly....
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....learned CIT(A). The Assessing Officer has mentioned that the profit on sale of paintings is ranging between 100% to 1000%. However, on what basis he made such observation is best known to hi. The learned CIT (A) has recorded the finding that in assessee's own case, last year, the gross profit disclosed was 14.78% while the gross profit in the year under consideration was better. Further, the question of application of GP rate can arise only on the rejection of books of account as per Section 145(3). For rejection of books of account, the Assessing Officer has to record the finding that he is not satisfied about the correctness or completeness of the accounts of the assessee or the method of accounting provided under Section 145 (1) or Accounting Standards as notified under Section 145 (2) have not been followed by the assessee. In this case, the Assessing Officer has not recorded any such finding which may entitle him to reject the books of account and apply the gross profit rate. If the GP rate disclosed by the assessee is low in the opinion of the Assessing Officer, that entitles the Assessing Officer to probe deep into the accounts of the assessee but, that by itself, is not suf....
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....unt with purchase/sale details, ledger and day to day stock register with quantitative details, the same had been accepted by the AO. Therefore, the ad-hoc addition made by the AO, by applying the GP rate of 0.2% was not justified, particularly when no comparable case was brought on record wherein such a profit was earned. We, therefore, considering the totality of the facts as discussed hereinabove are of the view that the ld. CIT(A) rightly deleted the addition made by the AO by following his own order for the assessment year 2005- 06 in the case of M/s VasudevaJewellers Pvt. Ltd. (supra), against which an appeal was filed by the department before the ITAT in ITA No. 4245/Del/2014 which has been dismissed vide order dated 12.07.2016. In that view of the matter, we do not see any merit in this appeal of the department. 17. In another appeals of the department for the assessment years 2006-07 and 2007-08, similar issues are involved having identical facts, the only difference is there in the amount involved. Therefore, our findings given in former part of this order in respect of assessment year 2005-06 shall apply with the same force for the assessment years 2006-07 and 2....
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....aid invoice and explanation, the jewellery found was not seized but released. The AO has not appreciated the facts and explanation. The invoice produced before the AO was not a fabricated one. This very invoice was present before the authorized officer. The jewellery was also physically present before him on the day of search. And only after comparing the jewellery as per the invoice and as physically available the authorized officer had taken a decision not to seize the jewellery but released it. Had there been any iota of doubt about items not matching with the invoice, the authorized officer would have raised question then and there itself and he would not released the jewellery. In view of this, the view taken by the AO was unsustainable and also unreasonable. The AR also stated that the AO has ignored the fact that the diamond jewellery is normally studded in 14 carats gold and it is only under rare cases that the diamond studded jewellery would be made of 18 carats gold. 4.3.8 I note here that the question of jewellery being of 18 carats gold and not of 14 carats has arisen in the assessment order. There is no evidence of the AO raising such question to the appellant....
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.... 4.3.10 During the appeal proceedings, the AR also submitted that the jewellery found during the search proceedings cannot be added in the hands of the assessee, as at no point of time assessee has claimed ownership of the said jewellery. He explained that appellant is part of the family which has 6 persons, making the entire addition in the hands of the assessee was uncalled for. He submitted that the search was carried out on Mr. Rajesh Kumar Kanodia. It was based on his statement recorded during the search that the jewellery was released. At no point of time assessee's statement has been recorded. There was no search on the assessee. Even if any adverse inference has to be drawn, the same should be drawn against the persons in whose case search has taken place and in whose case jewellery has been found. The appellant is a lady and part of the household and in the absence of any material or evidence to demonstrate that she made the investment in the jewellery, the AO cannot assume that the jewellery pertains to her. 4.3.11 It is noted that the entire jewellery valued in hands of appellant has been held to be unexplained which cannot be true considering the financial stat....
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....l available on record and the Paper Book filed on behalf of the assessee. We find during the course of search at the premises of the assessee the hard disk was seized and documents bearing page no.1 to 9 were retrieved from the said hard disk which contained certain payments made to Vijay Dixit group in the firm of cheques, pay orders and in shape of cash, the total of which comes to Rs. 23,70,10,708/-. On being questioned by the Assessing Officer, the assessee made elaborate submissions and also filed reconciliation statement before the Assessing Officer. The assessee admitted to have certain business transaction with Vijay Dixit group of companies. While the Assessing Officer accepted the cheque payments and the pay orders found from the retrieveddocuments, the Assessing Officer held that the cash payments made to Vijay Dixit group amounting to Rs. 3,11,10,600/- is the cash paid by the assessee which is unexplained. Similarly, he calculated the interest paid at the rate of 3.3334% and made addition of Rs. 1,60,97,818/-. The Assessing Officer similarly made addition of Rs. 85,00,489/- being the overdraft obtained by the assessee as unexplained payment made to Shri Vijay Dixit grou....