TaxTMI 
TaxTMI 
2025 (12) TMI 1217
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.... Income Tax Act, 1961 dated 29.03.2016, passed by the Assistant Commissioner of Income Tax, Circle-Satna, was illegal and bad in law. 3. That the additions so made and confirmed by CIT(A)-1, Jabalpur being contrary to the provisions of law and facts may kindly be deleted in full. 4. That as on the fact and in position of law, the learned CIT(A)-1, Jabalpur was not justified in confirming the A.O. who made an addition of Rs. 54,58,702/-on account of excess stock of gold jewellery found at the time of survey. The addition was without basis, arbitrary, vague and not sustainable in law, hence liable to be deleted. 5. That as on the fact and in position of law, the learned CIT(A) had erred in not appreciating the fact that the gold jewellery to the extent of Rs. 54,58,702/-being claimed as excess stock was pertaining to customers who left for Ally remodeling or repairing. That the appellant had produced books of account, quantitative stock register, bills/vouchers/invoices along with diaries and receipt books of jewellery kept for remodeling or repairing but the addition was made on conjectures and surmises ignoring the fact that the diaries and receipt books ....
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....in addition to that Rs. 10,37,544/- incurred on renovation which was disclosed in the books of accounts. 12. That as on the fact and in position of law, the learned CIT(A) had erred in not appreciating the fact that the appellant had submitted complete bills and vouchers pertaining to investment on shop which were duly recorded in books of accounts. The Ld. A.O. had neither pointed out any specific defects with regard to these expenditures nor rejected books of accounts. 13 That as on the fact and in position of the law, the Ld. CIT(A)-1, Jabalpur was not justified in confirming the A.O. who made an addition of Rs. 23,67,243/- by applying GP ratio on sale of surrender stock of Rs. 59,77,887/-. The addition was based on pure guess work, concocts and contrived being excessive, unwarranted and unsustainable in law. 14. That the Appellant craves leave to add, amend, alter, vary and/or withdraw any or all the above grounds of Appeal." 2. The facts of the case are that the assessee is the proprietor of M/s Mahan Jewellers and engaged in the trading of land, diamonds, gold and silver jewellery. He filed his return of income for the assessment year under consi....
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....later found some bills pertaining to stock of silver jewellery that had remained to be posted in the books as his books were not updated up till the date of survey. Since, he was unaware about the fact, he had offered the same for surrender, but later upon realization of the correct position he was seeking to withdraw the same. The assessee submitted that the surrender that had been made on the date of survey had only been made as the assessee was not in a position to reconcile and compute the alleged undisclosed income and, therefore, he admitted to the findings of the Department. But subsequently when he found that nothing emerged from the records that could suggest that he had undisclosed income, the surrender which was a mistake, was being withdrawn. 3. However, learned AO did not accept this retraction by the assessee. He noted that cash books has been updated up to 29.05.2012 and extract of the cash book had been taken on the date of survey, (counter signed by the assessee) which showed the balance of only Rs. 50,120/- therefore, it could not be accepted that cash which had been withdrawn from the bank a couple of days earlier was available and could explain the excess cas....
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....,52,430/-. With regard to undisclosed investment in shop, it was undisputed that the assessee had purchased shop for Rs. 22.00 lakhs on 21.02.2011. The Department had referred the matter to the valuer to evaluate the cost of construction of the property as on 30.05.2012. The valuer had valued the same at Rs. 29,60,000/-, but there was certain inconsistency in the valuation report. The assessee listed this inconsistency in reply to the AO as under: 1. Shops and stairs pertaining the ground floor had already been built up, as evident from registry and therefore, assessee had not made any investment on construction of shops and stairs at ground floor. 2. Construction of DASSA had been made prior to purchase of shop and was evident from the registry. 3. Costs of shop, locker and stair on first floor had already been built up as evident from the registry. 4. Cost of shop w/c and stairs of second floor had been built up as evident from registry. 5. Cost of shop of third floor had already been built up as evident from registry. 6. Cost of furniture and fixtures has been estimated Rs. 14,00,000/- whereas assessee had only incurred of Rs....
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....ince these take some time there must have been some amount of old jewellery available with the assessee on the date of survey. But none was found. He further noted that customers' old jewellery was given to Karigars for remodeling at their own houses and it was not done at the shop. Thus, there was no question of this old jewellery being included in the stock valued by the valuer even if the assessee's claim were to be accepted. The inventory prepared by the valuer consisted of finished jewellery only and this demonstrated that the entire jewellery as reported by the valuer was the assessee's own jewellery. He further noted that the assessee had failed to explain the difference in the stock of jewellery and had not said anything about customers' old jewellery. Therefore, rejecting this submission of the assessee, he made an addition of Rs. 54,58,702/- on account of unaccounted gold jewellery. 6. With regard to excess cash found at the time of survey, the AO found that all the expenses made had been entered into the cash book but the withdrawals from the bank had not which was suggestive of the fact that the books were incomplete and incorrect. Therefore, he could not accept the ....
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....served, during the course of survey, the assessee had voluntarily admitted undisclosed income of Rs. 89,29,817/- on account of excess stock of gold, silver, cash and investment in the shop. The assessee had been asked to explain and verify after going through the regular books of account, but he failed to do so. He observed that during the course of the assessment proceeding, the AO had given a further discount of Rs. 5.00 lacs on account of cost of old building of the shop and therefore, it was evident that he had been granted every opportunity to explain his case. But since he had not been to do so, therefore, the additions were sustainable. The learned CIT(A) referred to Section 110 of the Evidence Act that when the assessee was found in possession of something, the same was assumed to belong to him unless proved otherwise. Furthermore, he pointed out that when the assessee has made a statement of facts, he could not have any grievance if he was taxed in accordance with that statement. If the assessee wishes to correct the statement, then it was open to him to show the evidences to retract the statement. But in fact, no such evidence has been furnished, which showed that he had ....
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.... not appreciating the fact that gold jewellery to the extent of Rs. 54,58,702/-being claimed as excess stock. pertains to the customer who had left the same for remodeling and repairing. The assessee had produced books of account, quantitative stock register bills, job register bills/vouchers/invoices along with diaries and receipt book kept for remodeling of repairing but the addition was still made, ignoring the fact that diaries and receipt books pertaining to jewellery kept for remodeling and repairing had been found and acknowledged during the survey and nowhere had its genuineness being questioned nor was there any allegation that the same was bogus. Furthermore, learned CIT(A) had omitted to consider these facts that there was no evidentiary value of statement recorded u/s. 133A of the Act because Section 133A does not empower any income tax authority to examine any person under oath. Reference was invited to decision of the Hon'ble High Court of Kerala in the case of and 'Paul Mathews & Sons vs. CIT' (2003) 263 ITR 101 (Kerala) wherein the Hon'ble High Court had held that the statement recorded u/s.133A of the Act was not given any evidentiary value for the reason that the ....
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....stock to the survey team and therefore, on the basis of this alleged excess stock, the survey officials had extracted a surrender. However, subsequently the assessee with the help of his accountants and counsels made in-depth analysis of his records and he discovered that this alleged excess stock in fact belonged to his customers and had been received by him for remodeling and repairing. It was in this context that the retraction has been made. It was submitted that during the course of survey, the order book for remodeling and repair of gold jewellery was also found and verified by the Department. A copy of the said order book was filed by the assessee as part on pages 1 to 37 of the second paper book filed by the assessee on 15.03.2021. It was pointed out that the said register of repairing and remodeling has been signed by the assessee and the inspector of the Department on 30.05.2012 during the course of the survey, on the first and last pages. Thus, the genuineness of the claim that jewellery was being received for repairing and remodeling could not be doubted and in fact no question has been raised in this regard. The learned AR also drew our attention to receipt vouchers fi....
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....ion to page 58 of paper book filed on 12.03.2021 which demonstrated that a sum of Rs. 11,50,000/- had been withdrawn in three instalments on 24.05.2012, 26.05.2012 and 29.05.2012. The learned AR submitted that the fact of cash availability with the assessee could not therefore doubted in view of this bank statement. However, only because the Accountant had omitted to enter the cash withdrawn from the bank, an impression of excess cash had been created and since the assessee was unable to explain it at the time, he had surrendered the alleged excess cash balance. However, on going through the books that were redrawn, it was discovered that in fact there was no excess cash because the actual balance as per the cash book was not Rs. 50,120/- but Rs. 10,26,845/- and it was in this context that the surrender had been withdrawn. The learned AR pointed out that had the cash not being withdrawn from the bank, then it could have been alleged that it was unavailable, but the fact of entries in the bank clearly demonstrated that the assessee had the cash in hand and the learned AO had failed to controvert this by showing that the cash had already been entered into cash book or been expended e....
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....e the entire cost of purchase and renovation already stood recorded in his books. Furthermore, it was submitted by the ARs that purchase had taken place in the A.Y. 2011-12 and the renovation had taken place in the AY 2012-13. So even otherwise, there was no reason to bring any amount to tax in the present assessment year. Therefore, he prayed that the addition in this regard may kindly be deleted. 13. Finally coming to addition of Rs. 23,67,243/-, it was submitted that there was no reason to assume that the assessee had sold any part of the gold and silver jewellery/items outside of the books of account and therefore, there could not be any basis for making an addition on account of suppressed sales or on account of suppressed gross profit on this alleged excess stock. The learned AR, therefore, prayed that the same may kindly be deleted. 14. On the other hand, Shri N.M. Prasad, learned Sr. DR-1, arguing on behalf of Department submitted that on the date of survey, the assessee had been confronted with all the facts and he had voluntarily made a surrender of the amounts on account of unexplained stock of gold jewellery, excess cash found on the date of survey, unexplained st....
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....ating the gross profit on such sales at Rs. 23,67,243/-. It was, therefore, prayed that the AO order did not require any interference and may be confirmed. 15. We have duly considered the facts and circumstances of the case and the arguments rendered by both the parties. We observe that it is now established law that a statement given by assessee u/s. 133A does not have any evidentiary value in itself, as it is not statement under oath, and it is not a statement which the authorized office is empowered to take under oath. However, it may have some evidentiary value if it is backed up by credible material evidences. Therefore, it cannot be become the sole basis for making an addition in the hands of an assessee if there are material evidences to show that the statement made may not be correct. It is in this context that we must consider the case of the assessee. During the course of survey, a valuation was done of the jewellery in the premises of the assessee and an excess stock of Rs. 54,58,202/- was found, which the assessee could not immediately explain. Therefore, the assessee surrendered the amount. However, it is also true that during the course of the survey, the old jewel....
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....f excess cash, we find that neither the AO nor the learned CIT(A) has been able to controvert the evidence submitted by the assessee that just prior to the survey conducted on the assessee's premises a sum of Rs. 11,50,000/- in total was withdrawn by the assessee from the bank in three instalments and the same had not been entered into the cash book of the assessee. Neither have they come up with any finding to show that the said cash was spent elsewhere. In the circumstances, there are good reasons to believe the assessee that the alleged excess cash was only on account of the fact that the withdrawals from the bank have not been entered into the cash book while they remained at the premises and if the same are taken into account, there is in fact no excess cash. Therefore, after considering the same, we deem it fit to delete the addition of Rs. 9,52,430/- made on this account and Ground Nos. 6 and 7 of the appeal are accordingly allowed. 17. With regard to the addition of Rs. 5,19,185/- on account of excess stock of silver found at the time of survey, we note that the purchase vouchers relating to the silver were found during the course of survey and the AO has not verified wh....