TaxTMI 
TaxTMI 
2026 (9) TMI 1954
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.... stock register, as on the date of search. 3. The Appellant reserves the right to add, to alter or to amend the grounds of appeal." 2. Briefly, the facts of the case are that the assessee company is engaged in the business of manufacturing and export of rough and polished diamonds and trading in Commodity Derivatives. The return of income for AY 2012-13 was filed on 29.11.2012, declaring total income of Rs. 57,41,72,566/-. Thereafter, a search and seizure action was carried out u/s 132 of the Act on 25.08.2011 at the residence of the Directors and business premises of Assessee Company. Consequent to search, the case was selected for scrutiny by issue of notice u/s 143(2) of the Income-tax Act, 1961. The assessment was completed u/s. 143(3) of the Act on 31.03.2015 assessing the total income at Rs. 62,33,98,342/- and the amount of Rs. 1,24,78,900/- on account of Diamond stock discrepancy was added by the AO to the total income of the assessee. During the course of search carried out at the office of assessee company on 25.08.2011, the total stock as per book was 307486.89 carats whereas the total physical stock found from various premises was 292461.95 carats. Before the....
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....Ld.CIT(A) held that the A.O. has worked out the average value of diamonds at Rs. 23.149.80 per carats Thus, only the addition in respect of un-reconciled stock of 60.11 carats @ Rs. 23,149.80/- amounting to Rs. 13,91,534/- was upheld and confirmed and the balance addition of Rs. 1,10,87,366/- was deleted by the Ld.CIT(A). 4. The assessee thereafter carried the matter in appeal before the Tribunal and in ground no.1, has challenged the upholding of addition of Rs. 13,91,534/- on account of alleged shortage discrepancy of 60.11 carats of cut and polished diamonds between physical stock and book stock. The Coordinate Bench did not find any infirmity in the order of Ld. CIT(A) and upheld the same. 5. Thereafter, a fresh show-cause was issued to the assessee u/s 274 r/w 271AAA. The submissions filed by the assessee were considered but not found acceptable to the AO. The AO referred to the findings of the ld CIT(A) and the Coordinate Bench in the quantum proceedings. It was further stated by the AO that the onus is on the assessee to substantiate its claim with adequate supporting evidences and to prove that the additions which have been made are not part of his income or the same ....
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....re, it cannot be said that the assessee had proper explanation to offer regarding the difference in stock. Further, the amount on which the penalty has been imposed was not an ad-hoc addition, since it was based upon the average rate of polished diamonds as recorded in the books of account of the assessee for the year under consideration and the assessee has not furnished any evidence to showcase that the average rate worked out by the AO was incorrect or to say excessive. Thus, the value of undisclosed stock of polished diamonds relates directly to the "undisclosed income" unearthed during the course of search. In such facts and circumstances, it was held that the AO was justified in imposition of penalty u/s 271AAA. 7. Against the said order and findings of the ld CIT(A), the assessee is in appeal before us. 8. During the course of hearing, the ld. AR reiterated the submissions made before the lower authorities. It was submitted that the assessee is engaged in the business of cutting and polishing rough diamonds and export of cut and polished diamonds. In accordance with the trade practice and accepted by the Department over a period of time, the assessee maintains complete....
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....ost of litigation, the assessee has accepted the disallowance. It was submitted that any income to be subject to penalty u/s. 271AAA of the Act should be an 'undisclosed income', as defined in Explanation (a) to the said section, which is defined as under: "undisclosed income" means - (i) any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has - (A) not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year; or (B) otherwise not been disclosed to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner before the date of search; or (ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year ....
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....mitted that physically stock was found less as compared to stock recorded in the books of accounts and therefore, it cannot be termed as stock not recorded in the books of accounts on the date of search and therefore, on this ground itself, the addition so made, deserves to be deleted. 11. The ld. DR has been heard, who has relied on the order passed by the Assessing Officer. It was submitted that the additions have been confirmed by the Coordinate Bench in the quantum proceedings, wherein the Coordinate Bench has confirmed the findings of the ld. CIT(A), wherein he has stated that the assessee has given certain general reply that due to weighing errors such as calibration, human error due to handling of large quantity. However, no documentary evidence has been produced by the assessee to support the contention and in view of the same, the AO worked out the average value of diamonds at Rs. 23,149.80/- per carat and the addition of Rs. 13,91,534/- was made in respect of unrecorded stock of 60.11 carats and it was further submitted that it is clearly a case of a transaction which is represented by jewellery or other valuable article and income in respect of which has not been reco....