TaxTMI 
TaxTMI 
2022 (2) TMI 607
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....nveyance and vehicle expenses on ad-hoc basis. The appellant prays that the said disal lowance may please be deleted. Ground No. 3 On the facts and circumstance of the case and in law, the Hon'ble CIT(A) erred in confirming the stand of Ld. AO in making an addition of Rs. 7,72,53,517/- u/s 69A of the Act by treating difference between book stock and physical stock of diamond, gold, platinum and color stone as out of book sale. The appellant prays that the said addition may please be deleted. Ground NO. 4 On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the stand of the AO in making an addition of Rs. 5,90,010/- u/s 69B of the Act by treating difference between physical stock and book stock of pearls as unexplained investment. The appellant prays that the said addition may be deleted. The Appellant craves leave to add to, alter any/ or amend the foregoing grounds of appeal. 2. The Brief facts of the case are that, the assessee company is engaged in the business of manufacturing of diamond studded Gold and Platinum jewellery. A search and seizure operations was conducted u/s 132 of the Act on the ass....
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....ck clearly indicates that asses see is indulged in out of books sales. The submission made by the assessee has been considered. The difference because of calculation mistake has been rectified. As far as the availability of stock in hand on the basis of seized paper is concerned, the same is verified from the seized papers/documents. To the extent the same is found verifiable is being given effect in the table below. However, the assessee's submission in respect of all the other papers which were not found at the time of search is being denied. Whatever the assessee has explained at the time of search and the papers have been produced on the day of search have already been given effect to. The position of a stock as on the date of search was given by the assessee itself. However, during the course of assessment proceedings the assessee proposed some adjustments in the stock on the date of the search on the basis of some fresh evidences. Since these evidences were not produced at the time of search, the same- are not acceptable. 3. Further, the A. O. tried to reconcile the difference of stock of the precious metals and made the final adjustment of stock and value as under: ....
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....and relied on the orders of the Lower authorities. 6. We heard the rival submissions and perused the material available on record. The Ld. AR submiited that the CIT(A) has erred in sustaining the additions without considering the assesses business activities and commercial expediency. The ground of appeal no1&2 are in respect to adhoc disallowance @ 15% of (i) conveyance and vehicle expenses and (ii) miscellaneous expenses by the AO. We considering the turnover, nature of business operations and activities are of the opinion that such addition is without identifying the particular transaction and also the assessee could not substantiate the claims with the proper evidence and are not verifiable. We find the addition made by the A. O. @ 15% is on higher side and restrict the addition to the extent of 5% and this percentage is applicable for this assessment year only. Accordingly,we restrict the addition to the extent of 5% of the expenses discussed and modify the Ld. CIT(A) order sustaining the addition @ 5% and partly allow the grounds of appeal of the assessee. 7. On the ground of appeal no 4 & 5, The Ld. AR submitted that the assessee has furnished the details in respect of....
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....e AO is excessive and gross profit embedded only has to be taxed. The Ld. AR submissions are realistic considering the factual aspects and the documents filed. We find on similar and identical issues the Hon'ble Tribunal in assessee's group case M/s Uni Design Jewellery Pvt Ltd Vs DCIT in ITA No 2578/Mum/2018 for the A. Y 2012-13 has dealt on disallowance under section 69A and 69B of the Act at page 8 Para 9 to 13 of the order, which is read as under: 9. In grounds no. 2 and 3, the assessee has challenged the additions/disallowances made of RsRs. 3,70,237 and ` Rs. 4,49,017, under section 69A and 69B of the Act respectively. 10. Brief facts are, during the search and seizure operation in the business premises of the assessee, stock of diamond, gold, platinum, silver and palladium was found physically and were valued through a Government approved valuer. On the basis of such valuation certain discrepancies were found in the physical stock and stock as per books as on the date of search and seizure operation. In the course of assessment proceedings, the Assessing Off icer called upon the assessee to reconcile the aforesaid difference. In response to the query raised....
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....en the physical stock and the stock as per books of account with valid reasoning. Therefore, to that extent, the facts are established. However, we find merit in the alternative plea of the assessee for restricting the addition to the gross prof it. The Assessing Off icer is directed to compute the disallowance accordingly. Grounds are partly allowed. 8. In the present case, the A. O. has treated the book stock and physical stock of the precious metals as out of book sale and no enquiry was made by the AO. Similarly with respect to the pearls, the AO has made the addition as excess stock and was confirmed by the CIT(A) by treating the difference between the book stock and physical stock of the pearls as unexplained investment in the course of stock valuation. We find on the similar dispute issues, the Hon'ble Tribunal in assessee's group case of Mahendra Brothers Exports Pvt Ltd Vs DCIT in ITA No. 127 to 130/Mum/2021 at Para 11 & 12 has observed as under 11. The first issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in confirming the addition of Rs. 11,63,054/- made u/s. 69A of the Act in respect of difference between book stock and physi....
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....he shortage quantity of 48. 94 carats and made an addition of Rs. 11,63,054/- as sales made out of books and added the same u/s. 69A of the Act. This action of the ld. AO was upheld by the ld. CIT(A). We find that admittedly there was only a shortage of stock of 48. 94 carats found at the time of search i. e. physical stock was less by 48. 94 carats. This goes to prove that assessee could have made sales out of books. Hence, only the prof it element embedded on the said sale could be brought to tax. The argument of the ld. AO could be accepted when there is excess stock found physically either at the time of search / survey wherein the purchases of excess physical stock found need to be explained. In the instant case, since, there was only shortage of physical stock to the extent of 48. 94 carats, we hold that only prof it element embedded in said sale transaction could be brought to tax. In this regard we find that the ld. AR placed reliance on the Co-ordinate Bench decision of this Tribunal in the case of sister concern of the assessee in UNI Design Jewellery Pvt. Ltd. , vs DCIT, Central Circle-9 in ITA No. 2578/Mum/2018 dated 30/12/2019 for A. Y. 2012-13, wherein this Tribunal h....