TaxTMI 
TaxTMI 
2020 (9) TMI 761
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....out on 17.12.2014 at the business premises of the 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 exc....
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.... gems and designer jewellery and handicrafts and its main clientele is rich Indian and international tourists. 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 p....
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....red U/s 132(4)/131 in the return of income filed by the assessee. Reliance was placed by the ld. CIT-DR on the following 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 authori....
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....f accounts while completing the same after search and thus there remained no difference in the cash physically found and as per books of accounts as on the date of search, therefore, no adverse inference could 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 u....
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....by any documentary evidence. 14. In this regard, the CBDT has clarified by clarification dated 10/03/2003 (No. 286/2/2003-Income Tax) that while recording statement during the course of search and seizure and survey 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 Jeweller....
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....014) whereas in accordance with the specified norms and accounting standards, the stock recorded in the books is at the cost price and or market value whichever is lower and since cost price is lower, same has been recorded at cost price in the books. 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 app....
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....e to estimation of the valuation of the physical stock so done by the approved valuer. The AO has not accepted the argument of the Ld. A/R merely on the ground that the partner of the firm in his statement recorded at the time of search has admitted and surrendered the excess 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 an....
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....tock instead of surplus as is determined by the AO 9.7 This view was also taken by the Hon'ble ITAT in assessee's own case in A.Y. 1987-88, wherein similar issue of valuation of physical stock found during the search conducted was decided by holding that deduction of gross profit embedded in the market value of the physical stock should be given, 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....
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....stances we find it difficult to uphold the sustained addition even. The addition sustained by the learned CIT(A) therefore deserved to be deleted. However, as detailed at page 69 and shown in the chart supplied to us during the course of argument at the most addition of Rs. 24,476/- only, as declared by the assessee may be and is hereby sustained. We think, we are fortified in 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 ....
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....rder of the ld. CIT(A), the revenue is in further appeal before the ITAT. The ld. CIT DR has very vehemently argued to the affect that statement of partner of the firm Shri Anup Bohra recorded during the course of search u/s 132(4) wherein he has accepted the amount of Rs. 6,14,97,858/- as excess stock cannot be brushed aside and is having full evidentiary value and therefore the retraction so made by the assessee should not be 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 valu....
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....e AO for not allowing deduction of GP embedded in the estimated market value, is devoid of any merit. 22. The ld. CIT-DR relied on the decision of the Hon'ble Supreme Court in the case of Video Master Vs. JCIT (2016) 66 Taxmann.com 361 (SC), in which various loose sheets / papers and unrecorded vouchers were found at the premises of the assessee during the course of search and the surrender made in the statement of the assessee was 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 re....