TaxTMI 
TaxTMI 
2022 (7) TMI 550
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....style of M/s JP jewelers. There was a survey at the business premises of the assessee dated 12th to 14th October, 2009 wherein the assessee has made a disclosure of - 3,05,35,145.00 on account of difference found in the items of inventories and cash balance as on the date of survey. The impugned income was disclosed in the income tax return which was accepted by the revenue in the assessment framed under section 143(3) of the Act vide order dated 22 March 2013. 4. Subsequently, the learned CIT called for the assessment records and observed certain defects in the assessment framed under section 143(3) of the Act which are enumerator below: A. Difference in the quantity of inventories shown as on 1 April 2009 viz a viz 31 March 2009 for 21590.402 gram of 22 karat gold. As on the date of survey, the manual stock register was found and inventorised at S. No. 2 of Annexure B wherein the quantity of 22 karat of gold was recorded as 158715.06 as on 1 April 2009 whereas the quantity recorded in the regular books of accounts/ audited financial statement as on 31 March 2009 was 137125.089 grams of 22 karat gold leading to a difference in the quantity for 21590.402 grams of gold. The impug....
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.... was Rs.1510/- per gms; accordingly cost of gold content in 22 Ct gold ornaments is worked out to Rs.2,98,81,116/-. Needless to say that there is cost towards the ornaments making charges from gold which was Rs.1,09,13,374/- the gross hem labour expenses as given by the assessee, during the revisionary proceedings, for 66773.676 gms of 22 ct gold (closing balance + sales - opening balance) during the relevant period. Thus total cost of 31590.402 gms of 22 Ct gold ornaments is to be assessed at Rs.34,96,350/- (Rs.161.94 per gms). Under the circumstances, the Assessing Officer is directed to make an addition of Rs.1,43,09,724/- on account of unaccounted excess golg ornaments recorded in opening stock as on 01/04/2009. The assessee has not only concealed but also furnished inaccurate particulars of his income, appropriate penalty proceedings are also be initiated for the same. B. As on the date of survey, the difference between the physical quantity of gold stock of different purity and the quantity of the books of accounts were found which was valued at - 3,05,35,145.00 as per the rate of the gold according to its purity. However, the learned CIT was of the view that gold ornaments....
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....tems of gold ornaments of different purity cannot be interchanged with other items. Thus, according to the learned CIT, the basis adopted by the assessee for valuing the closing stock based on average cost is not proper and is not in consonance with the accounting standard issued by the ICA I. Accordingly, the learned CIT set aside the issue to the file of the AO for fresh verification by observing as under: During the revision proceedings, the assessee was asked to provide necessary information enabling this office to value the closing stock as per clause 14 of AS2. However, he did not produce any information in this regard. Therefore the matter is restored to the file of Assessing Officer, who will assessee the value of gold ornaments in closing stock as per clause 14 of AS2, after giving reasonable opportunity to the assessee and will finish the proceedings within two months of the receipt of this order. The assessee shall extend all necessary co-operation as per requirement of the Assessing Officer so as to facilitate the proceedings in the time limit given. In case, the assessee fails to do so, the Assessing Officer will complete the proceedings on the basis of evidences ava....
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....0,05,389/- Short term capital gain : Rs.81,94,611/- Thus the assessee would be liable to income tax on STCG of Rs.81,94,611/-. The Assessing Officer did not verify this aspect at all, therefore, the order passed by him is held to be erroneous and prejudicial to the interest of the revenue. He is directed to add this sum to total assessed income, charge the tax as per law and initiate the penal proceedings u/s.271(1)(c) of the Act. F. The learned CIT on examination of the assessment records found that the assessee has shown income from the running of windmill which was used to generate the power amounting to - 43,79,129.00 in addition to the guarantee claim of - 5,14,356.00. The assessee against such income has claimed only direct expenses i.e. operational and maintenance expenses of - 7,73,201.00 only. As such, the assessee has shown net profit from such activity for - 40,10,342.00 only which was claimed as exempted under section 80-IA of the Act. However, the ld. CIT found that 1 There was no separate book of account maintained by the assessee with respect to the windmill business. 2 Against the income of windmill, the assessee has claimed only the direct expenses withou....
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....ed by the AO under section 143(3) of the Act is erroneous insofar prejudicial to the interest of revenue for the reasons as discussed above and therefore, the same needs to be revised the manner as discussed above. 5. Being aggrieved by the order of the learned CIT, the assessee is in appeal before us. 6. The learned AR before us filed a paper book running from pages 1 to 150 and contended that the learned CIT under section 263 has directed to make the additions of various items which have been duly discussed in his order with respect to certain additions except one i.e. valuation of the inventories as per accounting standard which was set aside to the AO for fresh verification. However, the direction has been given by the learned CIT for making the addition without considering the facts available on record. 6.1 As per the learned AR, there were filed various documents and contentions were also raised by the assessee before the ld. CIT with proper explanation which were supported based on the documentary evidence. But the learned CIT has directed the AO to make the addition without the necessary verification. Thus, it was prayed by the learned AR that instead of directing to the....
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....es to tax the income arising on the conversion of capital asset as stock in trade in the year in which such stock is sold out. Thus, it was requested paid by the learned AR to provide the direction to the AO to work out income on conversion of such capital asset into stock in trade in which it is sold. 6.8 The learned AR with respect to windmill business contended that the assessee is maintaining separate books of accounts and there was no expense attributable to windmill business has been diverted to the business of the jewellery as alleged by the learned CIT under section 263 of the Act. 7. On the contrary, the learned DR before us did not object if the issues raised by the ld. CIT under section 263 of the Act are restored back for fresh adjudication to the AO as per the provisions of law. 8. We have heard the rival contentions of both the parties and perused the materials available on record. In the present case, the assessment order passed by the AO under the provisions of section 143(3) of the Act was held as erroneous insofar prejudicial to the interest of Revenue by the learned CIT on various reasons. All the allegations/reasons based on which the learned CIT has held the....
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....same has been duly adjusted and the same is not in dispute. Likewise, there was no whisper in the order of the ld. CIT to the effect that such stock was sold in the open market without recording the same in the books of accounts. Accordingly, we hold that such difference, in the stock in the case on hand, based on papers cannot be subject to further addition in the hands of the assessee in the absence of tangible materials. Thus, to our understanding, the addition as made by the learned CIT is not warranted in the given facts and circumstances until and unless it is supported by the some corroborative evidences. As such the income does not depend on the piece of paper, rather it should be based on the tangible materials in the given facts and circumstances. 8.3 Be that as it may be, the assessee in the given facts and circumstances has tried to explain the difference in the quantity of stock as discussed above by producing the agreements in support of his contention that he has borrowed gold loan from the relatives which was recorded in the stock register for the purpose of the quantity and without recording the same in the financial statements. This contention, of the assessee wa....
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....bour charges added by the learned CIT in the unaccounted stock. 8.5 For example, if it is assumed that there was 100 grams of gold ornaments found as unaccounted and the same has been valued at -1 lakh only which represents the market value. In other words, labour charges were not included in such valuation. Now the assessee will incorporate -1 lakh in the books of accounts. Out of 100 grams of gold, if the assessee makes of sale of 20 grams of gold in the year under consideration, then the assessee will naturally claim lesser expenses against the sale of 20 grams of gold which would result higher income to the assessee. 8.6 Likewise, the remaining 80 gram of gold will be shown in the books of accounts which will certainly be at the lesser value as it was not inclusive of labour charges. But such closing stock will become the opening stock of the next year, which will reflect greater profit if such stock is sold. However, these facts have not been verified by the learned CIT while directing the AO to make the addition for Rs. 23,59,988.00 representing the labour charges/making charges attributable to such unaccounted stock. 8.7 Furthermore, we also note that there is no directio....
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....of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.] 8.11 At the time of survey, the physical stock of the wristwatches were found which was not accounted in the books of accounts. Even the assessee has not recorded the same in the financial statement prepared as on 31.3.2010. As such, the assessee has neither shown the watches in the inventory nor in the schedule of fixed assets. Thus it was noted by the learned CIT that the assessee has been sold in the open market. The assessee has not explained the source of investment in such watches. Therefore, the addition was sustained along with the profit in the hands of the assessee. The finding of the learned CIT has not been controverted by the learned AR for the assessee based on the documentary evidence. There is no force in the argument of the assessee that it does not deal into the business of the wristwatches. Assuming, the contention of the learned AR is to be true, then also the assessee is under the obligation to explain source of inv....