TaxTMI 
TaxTMI 
2023 (11) TMI 1141
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....nt's case. 2.1 The learned CIT[A] ought to have appreciated that the stocks found in the deficit in the shops of the appellant, which is almost identical to the extent of stock found and seized in the residence of the appellant's Managing Director Sri R. Ramesh, did not warrant an inference that the appellant has made any such sales outside the books under the facts and in the circumstances of the appellant's case. 2.2 The learned CIT[A] ought to have appreciated that the appellant has established the practice for keeping the stocks of the shops in the residence of the Managing Director based on stock reports given to bankers much before the search and therefore, no inference of any deficit stock or sales made outside the books of accounts can be made under the facts of the case. 2.3 The learned CIT[A] ought to have appreciated that the stock found in the residence of the appellant's Managing Director bear the mark "RR" indicating that the same belonged to the appellant company and even the statement recorded from Sri. R. Ramesh at the time of search in his residence revealed that the stock found in his residence formed part of the stock i....
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.... this, the case of the assessee has been centralized to Central Circle-1(2) vide order of the CIT-IV, Bangalore dated 25.3.2014. Later, the case was transferred from Central Circle 1(2) to the ACIT Central Circle-1(1), Bangalore. The assessee e-filed the return on 28.2.2014 in response to notice issued u/s 153A of the Act for the assessment year 2013-14 declaring income of Rs. 5,89,84,460/- being income from business and other sources. 2.1 On 8^th Feb. 2013 the department had conducted search and seizure operation at the residence of the assessee company. The department also conducted search and seizure at the residence of Sri Ramesh Ramachandra Rao at No.98: Sathyanarayana Layout, 3^rd Stage, 4^th Block Basaveshwar Nagar. Bangalore As pointed out in the earlier paragraph that the department had also conducted search at the residential premises of Sri R. Ramesh, Managing Director of the company. the search party there had found the same quantity of gold ornaments in a wooden cupboard in the room of Mr. Ramesh. A statement of Sri Ramesh was also recorded u/s. 132(4) of the IT Act, at his residence and asked about the source of acquisition of the said jewellery / ornaments weighin....
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....u/s. 153C of the Act. for the assessment year 2003-04. 2. The learned A.O. is not justified in holding that the stocks found in the deficit in the shops, which is almost identical to the extent of stock found in the house warranting an inference that the stocks deficit have been sold outside the books when they were found corresponding extent of stock in the residence of Sri R. Ramesh, the Managing Director where they were seized as not belonging to-him as there was no warrant for initiating such proceedings personally u/s. 132(1) of the Act and no proceedings u/s. 153C was also taken on that count for the assessment year 2013-14 and only a regular assessment has been made contrary to the provisions of section 153C of the Act, which ought to have been invoked if the stock found did not belong to the assessee. 3. Without prejudice to the above, the alleged sale of the stock found in deficit is large enough to telescope the other additions made in the order and therefore, the other additions requires to be deleted y telescoping. 4. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the assessee denies itself liable to be charged to ....
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.... of the sale of gold ornaments at 80% of the gross weight as follows: Gross weight of deficit gold jewellery found - 40.01kgs. Net weight is worked out into - 30 kgs.(40.01 x 85%) The rate of gold jewellery as on 8.2.2013 - Rs. 2867/- per gm. Accordingly, the value of deficit stock works - Rs. 9,74,78,000/- 3.3 Accordingly, he computed the gross profit on this at Rs. 9,74,78,000/- at 6.4% of gross profit worked out the income at Rs. 62,77,583/-. Against this assessee is in appeal before us. 4. The ld. A.R. submitted that even assuming for argument's sake that the search was valid, there was no seizure of any material belonging to the assessee by way of any undisclosed asset or assets acquired by way of any undisclosed income even in the so-called search, which was illegal and therefore, there was no justification to invoke the provisions of section 153A and make....
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....learned A.O. unreasonably held that the jewellery was sold away and he had estimated certain amount as profit on the sale of jewellery. The A.O. unreasonably held the jewellery found in the residence of the Mr. R. Ramesh did not belong to the assessee but belonged to Mr. R. Ramesh, overlooking the following facts and circumstances viz., the search in the residential premises of Mr. R. Ramesh preceded the search in the shops of the assessee company. Even in the preliminary statement before the commencement of search, Mr. R. Ramesh had stated that the jewellery found in his house belonged to the assessee company, which he had brought home for several purposes like hallmarking, repairs, etc. At the time of commencement of the search, the search had not started in the shops of the assessee company. Regular stock books are maintained. It was enquired from the employees about the shortage of stock vis-à-vis the stock books of the company and the employees have categorically stated that the jewellery was taken by Mr. R. Ramesh from time to time and that the assessee should be asked about their whereabouts. During the course of search, the following books were found and were invento....
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....ock and quantity-wise is also indicated and the quantity of stock at MD's residence is also indicated. In other words, keeping the stock in the MD's residence, which are supported by the issue register, books, computer back-up, the hallmarking engraved on each one of the items go to prove conclusively that the stock belonged to the assessee and therefore the invocation of section 153C for the assessment years 2007-08 to 2012-13 and not invoking section 153C of the Act for the assessment year 2013-14 in the hands of Mr. R. Ramesh, if their satisfaction were to be genuine and which lacks bonafide and requires to be cancelled. 4.5 Furthermore he submitted that upon receipt of the remand report, the assessee has submitted the following in the rejoinder filed 29/12/2017:- "4. While meeting point no. 6 of the written submission, the learned A.O. had unfortunately stated that during the course of statement u/s 132(4) of the Act, taken from Sri R. Ramesh, at his residence, certain note books, which were inventorised in the shops showing the movement of goods from shop to residence the Managing Director, were not shown to the search party. At the time of giving statement....
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....at all the jewellery seized are with the department. The name "RR" is engraved on these jewellery consequents to hallmarking. The assessee submitted that the A.O. may examine the jewellery to find out whether the words "RR" is engraved on the jewellery or not, which would clinch the issue one way or other. That, the A.O. conveniently omitted to do and on the other hand has simply made sweeping counter allegations. Be it what it may, the stock found in deficit was in agreement with the stock found in the residence. On overall consideration of the matter, the presence of stock in the residence and contemporaneous statement made at the time of search by Sri R. Ramesh, Managing Director and the absence of the stock in the shops unmistakably point out what was found in the residence was the stock found in deficit in the shops. 4.7. He submitted that the learned A.O. has stated that the assessee could not correlate the stock found at the residence with the entries found in the stock register maintained by way of bar coding tags. The A.O. has not understood the difference between bar coding and hallmarking. Whenever new items of jewellery are purchased or sought to be purchased, the as....
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....gs. Gold jewellery. The contention of the ld. A.R. is that same amount of jewellery was found in the residence of Managing Director of assessee during the course of search action and the same was the stock taken from the shop by Managing Director for the purpose of safe custody. Further, the contention of the ld. A.R. is that this is a normal practice to keep the portion of the stock of jewellery in the Managing Director's house for security purpose and they are not usually making any entries in the stock register as the keeping of jewellery at shop and keeping of jewellery at residence of Managing Director is the same. Further, it was submitted before us that the search was took place on 8.2.2013. At that time also, the Managing Director has taken a plea that the stock found in his house was belonging to the present assessee. It is also brought to our notice that Chartered Accountants of M/s. B.N. Pai & Company vide their audit report dated 6.1.2013 itself submitted the details of stock and receivables to State Bank of India, SME Rajaji Nagar branch, Bangalore 560 044, inter-alia stated as follows: "CONDITION OF STORAGE: (a) ACCESSIBILITY: All its Branch cum Show Rooms ar....
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....vey action on 8.2.20123, there was excess silver articles to the tune of 1.801 kgs. And the ld. AO valued this stock at Rs. 1,05,359/- and brought to tax. 7.1 The ld. A.R. submitted in so far as the other addition made for the assessment year 2013-14 is concerned, he submitted that the learned A.O. is not justified in holding that there was excess quantity of silver items aggregating to 1.804 kg. which was erroneous in that, it was not properly weighed since it involved about 33,000 items of silverware items weighing about 1008 kgs. approximately and Infinitival point 01 gm. of weight in each one of the items of about 33,000 silverware in all aggregating to 1.804 kg. there could be an error contributing to an apparent excess of 1.804 kg. and therefore, there is no justification in presuming that there was excess stock of Rs. 63,82,942/- liable for assessment as unexplained in the hands of the assessee company and the same requires to be deleted. 7.2 Without prejudice to the above, he submitted that there is no justification to infer that there was any deficit of stock if the stock in the residence of Mr. R. Ramesh, Managing Director, is considered and on that count to hold th....
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....was recorded from one Sri Kumar Raj, Accountant of the assessee company, who gave explanation about the typed lose sheets. However, disbelieving the testimony of Sri Kumar Raj, the learned A.O. presumed that the figures appearing in the lose sheets represented unaccounted expenditure of the assessee company and invoked the provisions of section 69C of the Act, and brought the same to tax as income from undisclosed source. 10.3 He submitted that the whole addition of Rs. 2,33,21,157/- is based on loose slips found during the course of search in case of assessee. According to him, it is an excel sheet wherein the employees of the assessee for their own calculation purpose made various entries and it is nowhere related to the cash expenditure incurred by the assessee. As such, it was not entered in the assessee's books of accounts and when the employees prepared this computation contents for their own purpose, it was not within the knowledge of the assessee. As such, the assessee has not explained the contents therein. At the best, the authorities would have questioned the employees and their statement ought to have recorded and thereafter it must have been confronted to the assess....