TaxTMI 
TaxTMI 
2025 (7) TMI 1380
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the case and in law, ld. CIT(A) erred in deleting the addition made on account of unexplained stock transfer valued at Rs. 98,92,329/-. 3. Since, the facts relating to the dispute raised in the grounds are overlapping, the discussion on facts would be common for both the grounds. 4. Briefly stated, the assessee (since deceased) was a resident individual. For the assessment year under dispute, the assessee had filed his return of income on 26.09.2014, declaring total income of Rs. 1,84,70,510/-. Basically, the assessee carried out business in manufacture and sale of gold jewellery through his proprietary concern, M/s. Ramesh Zaveri & Co., having its office at 13/15 Rangwala Building, 1st Floor, Shop No.1, Dhanji Street, Mumbai. The assessee had also a branch situated at Nayasarak, Cuttack, Odisha. 5. As the factual matrix reveals, on 10.04.2014, the Air Intelligence Unit ('AIU' for short) of the department situated at Mumbai domestic airport, intercepted a person named Shri Yashwant Ganpat Rao Gujjar, who was carrying about 11912.400 gms of gold ornaments. On being questioned, the concerned person stated that the jewellery belongs to M/s. Ramesh Zaveri & Co. and it was be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m Cuttack branch to Mumbai HO on 31.03.2014. Based on such statement, the A.O. called upon the assessee to explain why the alleged return of gold ornaments of 27 kgs. to Mumbai HO should not be rejected and the amount should not be treated as the sale made at Cuttack branch and profits be estimated. In response to the show cause notice, the assessee filed a detailed reply, denying the allegations of the A.O. However, the A.O. did not find merit in the submissions of the assessee. Relying upon the CCTV footage of 31.03.2014, taken from branch office, the A.O. extrapolated the alleged sale figures to 310 working days spread over the previous year. Thereafter, he estimated the average sale per invoice at 20.354 gms and average number of sales on particular day at 50. By applying the rate of Rs. 2307.05 per gm., he determined the total sales turnover for the previous year at Rs. 72,78,44,283/-. Thereafter, applying the gross profit rate of 13.64% reported at Cuttack branch, he determined the profit on undisclosed sales at Rs. 9,92,77,960/- and proposed the said amount for addition. 7. Proceeding further, relying upon the statement of Shri Yashwant Ganpat Rao Gujjar, the A.O. held th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....He observed, even the A.O. while estimating the sales turnover has not examined any of the customers, nor has considered the seasonal fluctuation in business, the impact of holidays and the nature of customer behavior in jewellery trade. He further observed that the estimation of the gross profit at 13.64% is high and excessive, compared to the gross profit rate of 2.79% for the business as a whole. 10. Insofar as rejection of books of accounts maintained for Cuttack branch, learned First Appellate Authority observed that without pointing out any specific defects in the books of account, the A.O. could not have rejected them and made huge additions simply based on couple of statements and a single day CCTV footage. He observed, even the average rate of gold adopted for estimating the sales turnover is not at all acceptable as the rate of gold does not remain static for the entire year. He further noted that in course of survey, except some small discrepancy found with regard to cash-in-hand, no other incriminating material or discrepancy was noticed with regard to either sales or even stock. He observed, when the transfer of stock of 27 kgs. of gold ornaments from Cuttack to Mum....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gold jewellery from the Mumbai HO to the branch office of the assessee at Cuttack. In fact, in the statement recorded by AIU at Bhuvaneshwar Airport on 10.04.2014, on which date Shri Yashwant Ganpat Rao Gujjar was again carrying gold jewellery from Mumbai HO to Cuttack branch office, Shri Yashwant Ganpat Rao Gujjar was specifically questioned by the AIU in this regard and he admitted that he carries jewellery from Mumbai HO to Cuttack branch office. A reading of the assessment order, would further reveal that based on the statement recorded from Shri Yashwant Ganpat Rao Gujjar on 10.04.2014, further enquiry was made by the department by conducting a survey at the Cuttack branch. In course of survey, some negligent discrepancy relating to cash-in-hand, no other incriminating material relating either to underreporting of sales or discrepancy in stock was found. However, at the time of survey, the department took in its possession CCTV footages from 31.03.2014 to 10.04.2014. On examination of the CCTV footages, it was found by the department that on 31.03.2014, 106 number of persons visited the shop premises at Cuttack. Based on such analysis, the A.O. concluded that on 31.03.2014, 10....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s and the rate taken by the A.O., is purely on guess work. On examination of the cash book, sales register and other documentary evidences placed in the paper book, it can simply be concluded that sales effected both at the Mumbai HO and Cuttack branch office have been duly reflected in the books of account, as there is no specific defect or discrepancy in the entries pointed out by the A.O. 16. In fact, in the appellate proceedings, learned First Appellate Authority has also verified all the documentary evidences and concluded that in absence of any defect/discrepancy in the books of account, they cannot be rejected and simply based on the CCTV footage of a single day, sales turnover cannot be estimated by extrapolating the figures. More so, when the A.O. has not made any enquiry to either ascertain or demonstrate that the alleged 106 sales transactions, actually reflected the sales effected by the Cuttack branch office. Keeping in view the factual position emerging on record, we do not find any infirmity in the decision of learned First Appellate Authority in deleting the addition of Rs. 9,92,77,960/-as such sales suppression is merely based on conjecture and surmises without ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat the assessee has reconciled the stock transfer from Mumbai to Cuttack and again from Cuttack to Mumbai, not only invoice-wise but through statutory declaration Form F. Even the stock transfer has been duly recorded in the books of account maintained both for Cuttack branch office and Mumbai HO. 19. Notably, though, the A.O. has rejected the books of account of Cuttack branch office, however, he accepted the books of account of Mumbai HO, which has duly recorded the receipt of 27233 grms. of gold ornaments received from Cuttack branch office through stock transfer. Thus, in our view, the A.O. cannot breath hot and cold at the same time as the transactions are two sides of the same coin. As rightly observed by the learned First Appellate Authority, merely relying upon the statement of Shri Yashwant Ganpat Rao Gujjar, who is not at all trustworthy as he has taken contradicting stand time and again, it cannot be inferred that the claim of stock transfer from Cuttack branch office to Mumbai HO, is false. More so, when the stock transfer both from Mumbai to Cuttack and again from Cuttack to Mumbai is supported by statutory declaration Form F issued by the Sales Tax Department of b....