TaxTMI 
TaxTMI 
2020 (9) TMI 761
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....he assessee situated at M.I. Road, Jaipur and its sales outlet at Hotel Rambagh Palace, Jaipur. Besides this, simultaneously the search at the residential premises of its partners and other key persons of the group was also carried out. During the course of search, loose papers and cash were found and seized and the entire stock available at both the business premises was valued by the departmental valuer at market price as on the date of search. Statements of the partners and key persons were also recorded and a surrender towards the alleged excess cash and stock was obtained in the statements recorded of one of the partner Shri Anup Bohra. 4. The assessee filed its return of income for the year under appeal on 16.09.2015 declaring total income at Rs. 9,97,510/- and the assessment was completed at total income of Rs. 6,50,52,710/- by making additions of Rs. 33,57,059/- towards alleged excess cash and Rs. 6,14,97,858/- towards alleged excess stock. Against such order, assessee preferred appeal before the ld. CIT(A) who vide order 12.12.2018 has deleted the addition made on account of excess stock. However, addition on account of excess cash was upheld by the ld. CIT(A). Against th....
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....ts. The AO then alleged that most of the sales made is in cash and not recorded in the book of accounts. It is true that assessee is engaged in manufacturing and trading of designer jewellery and its customers mainly comprises of foreign tourists however, neither the product is as such that the same could be sold at a hefty price since it is made of precious metal (gold and silver) whose price is governed by the international market and the extraordinary price cannot be asked for the precious stone embedded therein since the customer though coming from the international market but most of them are dealing in the same goods and having deep knowledge about the quality and tentative prevailing rate of such type of precious stones. Further the allegation that most of the sales is in cash which was not recorded in books of accounts is wrong and based on no evidence found as a result of search or brought on record at any stage of proceedings. Most of the sale of the assessee is to foreign tourists where they preferred to make the payment through credit cards and in case of cash payments the same is to be taken in convertible foreign exchange for which the preparation of bill and filing ....
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....owing judicial pronouncements in support of the above contention. (i) Video Master Vs JCIT (2016) 66 taxmann.com 361 (SC) (ii) Banna Lal Jat Construction P Ltd. Vs ACIT in ITA No. 720/JP/2017 vide order dated 29/12/2017 (iii) PCIT Vs Shri Roshan Lal Sancheti in DB ITA No. 47/2018 dated 30/10/2018 (iv) Bhagirath Aggarwal Vs CIT (2013) taxmann.com 274 (Del) (v) CIT Vs O Abdul Razak (2012) 20 taxmann.com 48 (Ker). (vi) CIT Vs Lekh Raj Dhunna (2012) 20 taxmann.com 554 (P&H) (vii) Thiru S. Shyam Kumar Vs ACIT (2018) 99 taxmann.com 39 (Mad.) (viii) CIT Vs M.S. Aggarwal (2018) 93 taxmann.com 247 (Delhi). (ix) Ravindra Kr. Verma Vs CIT (2013) 30 taxmann.com 367 (All) (x) T. Lakhamshi Ladha & Co. Vs CIT (2016) 73 taxmann.com 117 (Bom) (xi) Manmohan Singh Vig Vs DCIT (2006) 6 SOT 18 (Mum). 8. On the other hand, the ld AR has reiterated the contentions raised before the ld. CIT(A). 9. We have considered the rival contentions and carefully gone through the orders of the authorities below. We had also deliberated on the judicial pronouncements referred by the lower authorities in their respective orders as well as cited by the ld. AR and ld. DR during the course of heari....
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....ld be drawn. It is settled proposition of law that assessee should be allowed to complete its books of accounts upto the date of search. In this regard reliance is placed on the decision of the ITAT Ahmedabad Bench reported in 107 Taxman 85 in the case of V.M. Thakkar Vs. ACIT wherein it has been held that "It is incumbent upon Authorised officer during search or during assessment to allow the assessee to complete his books till date of search". 12. Furthermore, we found that as on the date of search i.e. on 17.12.2014, the cash as per books was taken by the search team at Rs. 12,99,938/- was actually the closing cash balance of 15.12.2014 (i.e. the date upto which the books were written and completed). Perhaps the partner Shri Anup Bohra was not aware of the fact that the books of account were written up to 15.12.2014 and his aversion made in the statement recorded during the course of search are based on the printouts of cash as per books completed till 15.12.2014 and not up to immediate preceding day of search i.e. 16.12.2014. The copy of printouts of such cash book which was forming part of the seized recorded is marked as Annexure A-1 pages 4-20 wherein the cash balance of Rs....
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....urvey operations no attempt should be made to obtain confession as to the undisclosed income. Thus, the additions based on the alleged surrender obtained during the course of search are in contravention to the circular and instruction of the CBDT and therefore the same deserves to be deleted. 15. From the record, we also found that one major fact was ignored by the AO as well as by ld. CIT(A) that the sale of Rs. 33,57,039/- was duly recorded in the books of accounts and after inclusion of the same in total sales, cash balance, profits and stocks were derived which were accepted by both the authorities without any doubts. Thus, further addition by alleging the same as excess cash tantamount to taxation of an income twice. One in the shape of sales and profits embedded therein and again by making addition by alleging the same as unexplained excess cash. For this purpose, reliance may be placed on the following judicial pronouncements: (i) CIT v. Kailash Jewellery House ITA No. 613/2010 (Delhi High Court) dt. 09.04.2010 (ii) CIT v. Jaora flour and Foods Pvt. Ltd. (MP) (2012) 344 ITR 294 (iii) CIT v. Vishal Exports Overseas Ltd., Tax Appeal No. 2471 of 2009 Gujarat High Court d....
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....s. It is relevant to state that there is no dispute in quantity measured by the departmental valuer. It was thus contended that since the stock found at the time of search was valued at prevailing market value and to compare the stock as per books of accounts which had always been recorded on cost price, the profit element embedded in value estimated by DVO to bring both the values in parity and make them comparable and thereafter the AO is required to find out any excess or any shortage of stock. It was also found that after giving effect to the cash sales made on 16.12.2014, entry of which were remained to be made in the books as on the date of search and further reducing the profit element from the gross value determined by departmental valuer, the total value of stock found as on the date of search was equal to the value of stock recorded in the books of the assessee and therefore no addition is warranted. However, the AO without appreciating the same and simply for the reason that one of the partners had admitted the same as unexplained in the statement recorded during the search, had made the addition. When all these facts alongwith the same evidences which were submitted bef....
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....stock. 9.4 Accordingly in the return of income so filed by the appellant, no additional income was offered on the impugned excess stock and a note to this effect was also made in audited financial results. The Ld. A/R has also given the working of G.P. rate of last four preceding years other than the current year in order to fortify his argument about the G.P. rate in the current year being in the same range as that in earlier years. Moreover the Ld. A/R has also furnished raw material wise working of last six years in order to support his argument that the value so taken by the approved valuer has to be the market value and cannot be the cost price. 9.5 In this connection it may be pointed out that said difference in value of stock in trade as per books of accounts and as per valuation report of registered valuer as on the date of search i.e. 17,12_2014. The AO has not held that there was any difference in quantity of stock as per Valuation report and as per books of accounts. The said stock in trade was of studded jewellery of gems stones, for which registered valuer adopts the value of studded stones on estimated basis at market value. Whereas the value as per books of accou....
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....copy of which was placed before me. In the order no. ITA /1529/JP/91 and ITA/JP/ 1617 dated 10/04/1995 the Hon'ble ITAT Jaipur has held as under: 7. We hear the Id. Counsel for the parties at sufficient length. Whereas the Id. Counsel for the assessee mainly urged that the cost of the stock had been correctly estimated in the books and there was no justification at all for arriving at the cost of the stock by making the tag prices, which were in fact the asking price, as basis and supported his reasoning with Tribunal's approach in ACIT vs. Bhandari Jewellers (1994) Tax World 292 Sec. 1), the Id. D/R vehemently argued that in view of the statement of Sri Heera Lal employee the tag prices represented Singapore Dollars on verifiable Indian currency by a multiplier of 5.7 and therefore the AO was justified in valuing all the stock by the rates mentioned on the tag 8. It is evident in the present case that the articles found either at the shop in the Ram bagh Palace Hotel or at the main show room at M.I. Road, Jaipur were valued by the two methods vis, on the basis or the prices mentioned the tags tied with the articles or by the estimate made by the approved value. The dif....
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....our view, by the approach adopted by the Tribunal in M/s Bhandari Jewellers case (Supra) relied upon by Mr. N.C. Dhadda. Ground relating to this point in assessee's appeal are, therefore, partly allowed but in Revenue's appeal dismissed. 9.8 Accordingly I am of the considered opinion that AO should have considered the deduction of Gross Profit embedded in the valuation of physical stock so done. The meager difference of stock which is about 1.15% of the total valuation arrived at by the DVO may be ignored which may bound to occur on account of estimation while valuing fair market value of the precious and semi precious stones embedded in the jewellery. Further in my view even if addition is somehow made on account of said valuation of stock and sustained in assessment than credit of the same has to be allowed in year end while computing profit at year end which has not been allowed and as assessing officer accepted declared closing stock as on 31.3.2015 in books of accounts the addition of difference in value as on 17.12.2014 will get set off. The assessee carried forward the closing stock of this year end as declared in books of accounts as opening stock for next year.....
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.... accepted. In this regard we observe that the search started in the early hours of 17.12.2014 and was carried on for a period of around 45 hours and was concluded in the late hours of 18.12.2014 and rather in the morning of 19.12.2014. During this time, statement of Shri Anup Bohra was recorded many times in bits and pieces and he was naturally under tremendous pressure, and he was satisfied about the inventory of physical stock so prepared in so far as quantity of the items are concerned but he is not a person well versed with the accounting principles, he accepted the working of the excess stock so done by the search team in good faith and without going deep into the accounting principles that from the market value of stock so estimated by the approved valuer, the Gross Profit embedded in it is to be reduced for arriving at the cost price for proper and fair comparison with the stock as per books of accounts. There is no retraction from the side of the assesse inasmuch as that the assessee has not retracted or disputed the inventory of the physical stock in quantitative term and has also not disputed the estimated market value of the various items. It is only the calculation part....
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....corroborated from the entries found in the seized material. Accordingly, Hon'ble Court came to the conclusion that no substantial question of law arises against the finding of the tribunal that statement could be used as evidence. However, the facts of instant case of the assessee are quite different as no corroborative evidence by way of unaccounted purchases or unaccounted sales or excess stock was found in the seized material. Accordingly, the aforesaid case-law is not at all applicable in the instant case of the assessee. 23. The ld. CIT-DR also relied on the decision in the case of Bannalal Jat Construction P. Ltd. Vs. JCIT of ITAT Jaipur wherein the surrender made in the statement u/s 132(4) on 10.10.2014 about the excess cash found at the residence. Later on, about more than one and half month afterwards another statement u/s 131 was recorded on 04.12.2014 wherein also the assessee maintained his earlier stand. Therefore, the ITAT rejected the contention of the assessee that earlier surrender made during the course of search was under pressure. Moreover, the ITAT has also observed that in response to question No. 11, the assessee has submitted that considering the various d....