TaxTMI 
TaxTMI 
2018 (10) TMI 1024
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....holding the stock of Gold Bar of 736 gms. alleged to have not been found physically though recorded in the books, as un-accounted sale in as much as that the sale there of was duly accounted for in the books. 2. He has erred in law and on facts in upholding G.P. addition of Rs. 2,48,927/- in respect of Gold bar of 736 gms. not found at the time of survey resulting into double addition. 3. He has erred in law and on facts in upholding the Gold bar of 736 gms. as shortage without appreciating the fact that as per assessee it was duly available at the time of survey and the sales thereof were duly recorded in books. 4. He has erred in law and on facts in upholding addition of Rs. 1,66,47,490/- as un-accounted stock in gold ornaments without considering the facts, the evidence adduced by the appellant , reconciling the book stock and the physical stock taken during survey proceeding. 5. He has erred in law and on facts by not accepting the contention of the assessee that the approval vouchers dated 11/10/2011 bearing no. 132 & 133 recording gold ornaments weighing 2981.650 gms. and 3230.100 gms. were cancelled and no such ornaments were taken on tour. 6. He has erred in law a....
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....ewels and 21107.580 gms. Gold ornaments of Navinchandra Shantilal Soni Jewellers. Whereas books stock of both the concerns is 34666.562 gms. Gold ornaments, 736 24 carat gold bar, and 8641.070 grms. Gold ornaments .Please explain the difference of book stock and physical stock. Answer: In my absence, the goods have been sold and bills are pending to be made which at present I am not aware which will be reported shortly. Question-23 For this , you can call for your staff or sons and furnish the details Answer : At this time my sale staff is not present and I have come from outstation then also I will give the details of difference shortly and of there is any mistake, I will correct the same and if any tax liability is there, I will pay." 4.1 The assessee during the assessment proceedings explained that the gold bar weighting 700 gms were purchased from Shyam Bullion dated 11-10-2011 and 12-10-2011. The remaining 36 gms of gold bar was carried forward from the previous balance. Further, the gold bars were given to the labors for the preparation of the ornaments. Thus, during the survey operation, the gold bar as discussed above was very much available with the assessee. The as....
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....essee also submitted that these gold bars were sent to the laborers for converting them into gold ornaments. 5.2 In the letter dated 25-03-2015, the assessee submitted that the purchase of gold bars was duly accounted in the books of accounts. Subsequently, it was converted from raw form to ornaments, which was also recorded in the books of the assessee. The ornaments converted from such gold bars were also sold to the parties and the same was recorded in the books of accounts. Thus, further addition of gold bars weighing 736 gms will lead to double addition. 5.3 The assessee also submitted that 400 gms of gold bars were issued for conversion into the ornaments to the laborers vide dated 05-11-2011 and 500 gms were issued dated 23-10-2011. The assessee further submitted that the ornaments after conversion of gold bars were received by him vide receipt voucher dated 14-11-2011 and 26-10-2011. The assessee also submitted that all the issue/receipt vouchers of gold bar and ornaments were produced to the AO during the assessment proceedings but the AO has not considered the same. 5.4 The assessee also challenged the GP rate i.e. 12.62% which was applied by the AO for determining the....
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....ated 11-10-2011 & 12-10-2011. Copies of the invoices are placed on pages 49 & 50 of the PB. 8.2 We also note that the assessee was maintaining stock ledger of gold bars which is placed on pages 46-48 of the PB in part pertaining to the month of October to December, 2011. On perusal of the same, it was noticed that the purchase of the gold bars was duly recorded in the stock register. Similarly when it was issued to the laborers for the purpose of conversion was duly recorded. We also note that the copies of the issuing vouchers for converting the gold bars into the ornaments and receipt vouchers of the converted ornaments are placed on pages 51-54 of the PB. 8.3 We also note that the assessee has claimed to have sold such ornaments converted from gold bars which are placed from pages 55-57 of the PB. On perusal of the sale invoices placed on page 56 of the PB, we note that the gold bar was converted into lagdi ornaments. 8.4 From the above, we note that all the details of the laborers who converted gold bar into ornaments were available with the AO during the assessment proceedings but no enquiry was conducted to verify the veracity of the statement/details furnished by the asse....
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....aterial or information found in the course of survey proceeding could not be a basis for making any addition in the block assessment, vide decision of this court in T. C (A) No. 2620 of 2006 (between CIT v. S. Ajit Kumar [2008] 300 ITR 152 (Mad.); (v) Finally, the word "may" used in section 133A(3)(iii) of the Act, viz., "record the statement of any person which may be useful for, or relevant to, any proceeding under this Act", as already extracted above, makes it clear that the materials collected and the statement recorded during the survey under section 133A are not conclusive piece of evidence by itself. For all these reasons, particularly, when the Commissioner and the Tribunal followed the circular of the Central Board of Direct Taxes dated March 10, 2003, extracted above, for arriving at the conclusion that the materials collected and the statement, obtained under section 133A would notautomatically bind upon the assesses we do not see any reason to interfere with the order of the Tribunal." 8.9 From the above, it is clear that the statement recorded u/s 133A of the act has no evidentiary value. Therefore, no addition can be made on the basis of statement. Therefore, we....
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....uthorities below. 8.10 Hence, the ground of appeal of the assessee is allowed. 9. The next issue raised by the assessee in ground no. 4 to 9 & 11 is that Ld CIT(A) erred in confirming the disallowance of Rs. 1,66,47,490/- on account of unaccounted stock in gold ornaments. 10. During the survey operation, various documents were seized containing travelling/approval vouchers, which were marked as annexure-A6. As per these documents, it was noticed that the assessee has sent goods for approval without making any sale. On these approval vouchers, the name of the staff of the assessee was recorded. The assessee claimed to have sent the goods for display for marketing in the exhibition which was received back after the finishing of the concerned events. As such, there was no entry recorded in the books of accounts for sending the goods on approval. The assessee during the assessment proceedings filed the reconciliation statement of the closing stock as per the books of vis-à-vis physical closing stock, which is extracted as under: "Reconciliation of stock of N.S. Jewels Total physical stock of both the concerns as per annexure B1 and B2 is Physical Stock found as per annexur....
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.... was not admitted by the assessee that the items of ornaments were sent for the purpose of exhibition. 11.5 The assessee alternatively submitted that at most the AO can levy the tax on unaccounted stock @9.95% being the rate of net profit shown in the books of accounts. The assessee in respect of his claim relied on the judgment of Hon'ble Gujarat High Court in the case of CIT vs. President Industries reported in 258 ITR 654. 11.6 However, the Ld CIT(A) disregarded the contention of the assessee and confirmed the order of AO by observing as under: "4.4. During the appellate proceedings, the appellant has contended that the books of accounts of the assessee are audited. Sales and purchase are fully vouched and the books of accounts have been accepted by the AO. It is further contended that during the course of survey no physical stock of ornaments mentioned in approval voucher No.132 and 133 and no incriminating documents showing unaccounted purchases and unaccounted sales were found. The appellant has also contended that the two approval vouchers on the basis of which the addition has been made were in the name of the assessee and it will be in the knowledge of the assessee as ....
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....Thus the grounds of/ appeal are dismissed." 11.7 Being aggrieved by the order of Ld CIT(A) assessee is in appeal before us. 12. The Ld AR before us reiterated the submissions as made before the Ld CIT(A). The Ld AR before us also alternatively claimed that the net profit can be levied on account of unaccounted stock. 13. On the other hand, the Ld DR vehemently supported the order of authorities below. 14. We have heard the rival contentions and perused the materials available on record. In the instant case, the issue relates whether the unaccounted stock as observed by the AO during the survey operation represents the unaccounted income of the assessee. As such, there was a survey operation on the premises of the assessee where difference in the quantity of stock was observed by the survey team, which was added to the total income of the assessee as unaccounted income. However, we note that none of the lower authorities has pointed out any defect in the purchase or sales shown in the books of accounts. Thus, we note that the purchase and sales has been duly accepted by the lower authorities which were disclosed in the audited financial statement. 14.1 Thus, we find forces in t....
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....sed by the assessee in this appeal: "1. The learned CIT(A) has erred in law and on facts in upholding disallowance of Rs. 3,000/- out of telephone expenses and Rs. 25,000/- out of travelling expenses without appreciating the facts of the assessee and ignoring the fact that books of accounts are Audited as per the Income Tax Act and no personal expenses has been debited. 2. He has erred in law and on facts in upholding addition of Rs. 84,79,547/- in respect of ornaments taken on approval voucher as un-explained investment in gold ornaments without considering the facts , the affidavit of the sales man for said approval voucher adduced by the appellant reconciling the book stock and the physical stock during survey proceeding. 3. He has erred in law and on facts in upholding computation of excess stock of 3,164.010 gms. as against excess stock of 58.71 gms. arrived at by the assessee. 4. He has erred in law and on facts in not properly appreciating and considering the various submissions with supporting evidence made by the assessee , which included affidavit of the person explaining the gold ornaments taken on approval voucher under dispute and thereby erroneously upholding ....
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...., a stock of gold ornaments as per books of accounts was found 10329.990 gms but physically it was found only 742.300 gms. 19.2 During the survey operations, certain vouchers were found numbering 9, 10 & 13 which were seized. As per these vouchers, gold ornaments weighing 12751.700 gms were sent out for approvals. Thus, the goods sent for approval were added to the physical stock available at the time of survey which worked out at 13494.000 gms (physical stock 742.300 + goods sent on approval 12751.700). 19.3 Thus, physical excess stock of gold ornaments was worked out at 3164.414 gms (physical stock 13494 - books of account stock 10329.990). The value of excess stock was worked out at Rs. 84,79,547/- (3164.414 @2680/gms). 19.4 The assessee in his statement recorded at the time of survey vide question no.25 submitted that the stock represented in voucher no 9 and 10 were sent out on approval having total weight of 9436.400 gms. Thus, the stock represented in voucher no.13 of 3105.300 gms of gold was very much included in the book of stock as shown on the date of survey i.e. 10329.990 gms. The assessee also claimed that the ornaments represented in voucher no.13 were not sent out....
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....te mentioned on voucher No. 13 is 13th October, 2011. According to us this goods is in addition to goods of voucher No.9 and 10. If you have any evidence from which it can be proved that the goods in voucher No.9 & 10 includes goods of voucher No. 13 then produce the evidence. Reply : The date on voucher No. 13 has been wrongly stated. I did not have any extra stock. We don't maintain item-wise stock. For this reason, no details thereof can be produced." From the above, it is seen that the appellant has specifically said that they don't maintain item-wise stock and he is not able to furnish any details regarding the stock. Under these circumstances it cannot be said that the onus as contended by the appellant is discharged by the assessee. When the onus is not discharged by the assessee it is not for the department to make further inquiries. Affidavit in isolation is not sufficient to prove the contention of the appellant. The appellant failed to substantiate the contention with required details. In the absence of supporting evidences and details, it cannot be said that stock as per approval voucher No. 13 is part and partial of book stock. Considering this the AO h....
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....he Act. However, the AO disregarded the contentions of the assessee after taking a note of his observation as discussed above. Accordingly, the AO worked out the gross profit on the turnover @5% which works out to Rs. 53,50,730/- against the GP declared by the assessee for Rs. 34,39,460/. 24.4 Therefore, the AO added the difference amount of Rs. 19,11,270/- (53,50,730 - 34,39,460) to the total income of the assessee. 25. Aggrieved, assessee preferred an appeal to Ld CIT(A). The assessee before the Ld CIT(A) submitted that the assessee is maintaining its books of accounts as per the methods regularly employed since 1991. The assessee further submitted that his accounts have been scrutinized by the income tax Department which was duly accepted. 25.1 The allegation of the AO that the stock register was not maintained by the assessee is totally wrong. It is because the stock register was seized during the survey operation and same is lying with the AO. 25.2 There was no basis for adopting the gross profit rate @5% without pointing out any defect in the books of accounts of the assessee. 25.3 There was no evidence/material found during the survey operation suggesting that the asse....