AI Drafter 
TaxTMI 
TaxTMI 
2025 (7) TMI 1292
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....ntral Circle -3(3), Chennai, has selected the Assessment for AY 2018-19 for Scrutiny since there was a Survey u/s 133A of the Income Tax Act on 31/01/2018. The Assessing Officer has passed Assessment Order u/s 143(3) of the Income Tax Act. 3. The Appellant had preferred Appeal before the Commissioner of Income Tax (Appeals) against the order passed by the Deputy Commissioner of Income Tax Central Circle 3(3), Chennai. The Commissioner of Income tax (Appeals) has not considered the various grounds raised against which the addition was made by the Assessing Officer. Hence the present appeal has been filed for cancellation of the addition made by the DCIT and to reduce the additional demand raised by the DCIT accordingly. The Appellant as soon as he received the Notice u/s 143(3) from the Assessing Officer on 17.06.2021, immediately responded and filed objections as under: i) The amount of additional income offered Rs. 3,33,59,760/- being value of gold and silver jewellery investments earned from business during the current financial year ending 31.03.2018 i.e. from the regular jewellery business and that the entire amount has been earned during the current ....
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.... 11,390.22 The assessing Officer has made additions without giving any physical hearing and without verifying the account books, records, audited accounts, various details including ledger books, bank accounts, stock books, GST records and various other relevant records has passed a tailor-made order based on his own show cause notice without going through the facts and response submitted by the appellant on 17.06.2021. The AO has erred in passing the Assessment Order on the following grounds: i. The addition of Rs. 2,75,97,598/- (6,09,57,358 less 3,33,59,760) pertaining to value of gold jewellery business stock earned from business during the current financial year ending 31.03.2018 i.e from the regular jewellery business. Since, the jewellery admitted forming part of business income being the stock of goods, acquired from the income from sale of goods pertaining to current year, from 01.04.2017 till 31.01.2018, the entire stock of goods was offered for assessment for calculation of GST in the Gst return filed for the month of February and March 2018. In the GST return submitted for the month of February / March 2018, the entire value of additio....
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....er gram is Rs.113.5/- The difference in valuation is due to the inclusion of lot of stone items which requires additional reduction as well as the stock of old gold jewellery regularly purchased or exchanged from customers. This aspect may kindly be considered. ⅲ. The method of valuation of gold ornaments including stone items has been adopted as detailed in below, rate of gold after all deductions being Rs. 2296/- per gram is justified and It is Correct. Moreover the valuation of the jewellery includes value of ornaments consists of stone items and lesser purity items as well as items of out of dated nature and also includes old jewellery purchased from customers with lesser purity level of around 80% only which is also mixed with new jewellery while preparing inventory by the department. Considering the nature of business and the risk involvement in the business, and the ratio of purity of jewellery varies with different types of items for different pattern of jewellery like stone items, 18 carat jewellery items, the average purity level is not more than 80%, items containing other metals, wax, due provisions were necessarily given to all these....
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....consider the appellants plea for fixing the value of gold jewellery considering all these factors for fixing the correct value of stock. Therefore, on the above grounds and on additional grounds that may be added at the time of hearing, your Appellant prays before your kind honour to delete the entire addition of Rs. 2,75,97,598/- towards value of difference due to not considering the various points raised in this appeal and kindly consider the appeal sympathetically and reduce the demand raised and render justice. Solemnly affirmed and declared on this day of 13th day of January 2025. 3. Grounds of appeal raised by the Revenue in ITA No.330/Chny/2025 is as under: 1. The order of the Id. Commissioner of I.T. (Appeals) is opposed to law and facts of the case. 2. The Ld. CIT(A) erred in deleting the addition made Rs. 6,09,57,358/- in respect of excess stock u/s 69B of the Income Tax Act and directing the same to be assessed as business income. 3. The Ld. CIT(A) ought to have considered that the assessee has not proved with any cogent evidence as to how the amount of Rs. 6,09,57,358/- was generated in its business. 4. The Ld.CIT....
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....rom the appellant. iv) The old gold was purchased through cash purchase and exchange of gold jewellery and all are valued at less than Rs. 10,000/- and duly reflected in the tally accounts which was available as on the date of survey and the AO has not considered the same while completing the assessment. v) The valuation of gold jewellery at the time of survey was done by adopting the rate of gold at Rs. 2800 per gm whereas the appellant has adopted the gold rate at Rs. 2296 per gm on the basis of accepted method of valuation of gold as provided in Income Tax Ready Reckoner by V G Metha. vi) The excess stock was added in the stock register and there was corresponding credit in the books of accounts. The excess stock found during the survey is mixed with business stock which has not been identified separately and therefore, the same is to be assessed as business income. vii) The AO has not brought on record any adverse material to justify that the appellant has been earning income from other than business income. viii) The entire stock was accumulated out of income from jewellery business as the business income was ploughed back into busi....
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....unted purchases which has become a source for the purchase for the unaccounted excess stock found during the survey. In the absence of any such evidence, it is submitted that the excess stock represents only unaccounted investments and not business income. Reliance in this regard is also placed on the decision of Hon'ble Madras High Court in the case of M/s.SVS Oil Mills vs. ACIT [2020] 113 taxman.com 388(Madras) wherein the Hon'ble High Court on similar facts in Para 8 held as under: "In our opinion, Section 69B providing for amounts of investments in Bullion, Jewellery or other valuable articles (including excess Stocks as well) would have been more appropriate Section to be indicated in the orders passed by the Authorities below rather than section 69CUnexplained Expenditure. Nonetheless, we are of the clear opinion that mentioning of wrong section would not upset the Additions made by the Assessing Authorities below in the present case. All these 5 provisions enumerated above have been enacted with a view to bring to tax the unexplained debit balances in the Balance Sheet of the Assessee either in the form of Unexplained Investments, Expenses or Stocks, etc., o....
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.... any details like list of Customers etc. Also, that the rate of Rs. 2,800/- adopted for valuing the excess stock on the date of survey was very much lower than the prevailing gold rate as on 31.01.2018 at Rs. 3,050/- per gram for 24K and Rs. 2,905/- for 22K gold. The AO proceeded to assess the amount of Rs. 6,09,57,358/- u/s. 69B of the Act as against the income towards additional stock offered by the assessee of Rs. 3,33,59,760/- as business income. On appeal before the ld.CIT(A) by the assessee, the ld.CIT(A) on perusal of survey records of the assessee called for from the AO noted from the statement recorded u/s. 133A of the Act from N.Sumathi Kumar, Kartha of the assessee that all the accounts are updated till 28.01.2018 and also that reconciliation of sales and purchases as on the date of survey i.e. 01.02.2018 was also made available. And that from such books of accounts prepared till 01.04.2018 the ld.CIT(A) observed that purchase of old gold to an extent of 4,850.636 grams valued at Rs. 3,24,48,417/- is already booked as per the books of accounts as on 29.01.2018 and the same has been taken into account while calculating the excess gold stock at the time of survey. The ld.C....
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....uments and submissions of the ld.DR, we found that the AO has not brought out any cogent material to state that the assessee had income from any other source other than the jewellery business. Hence, the decision of the ld.CIT(A) in concluding the excess stock found in the premises of the assessee at the time of survey along with the regular stock held has been rightly brought to tax under the head business income by reversing the AO's action of bringing the excess u/s. 69B of the Act. In the present facts and circumstances and the judicial precedents relied by the ld.CIT(A), we do not find any reason to interfere in the decision of the ld.CIT(A) to tax the excess stock found as income from business. In view of the above discussion, we are dismissing the appeal of the revenue. 17. On the grounds raised by the assessee against the order of the ld.CIT(A) in respect of the old jewellery gold stock, which was recorded separately purchased from the customer in cash for less than Rs. 10,000/- per customer and also the rate of Rs. 2,800/- per gram adopted for valuation of excess stock found, we note that on the date of survey the assessee had furnished the statement taken from the acco....