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2013 (1) TMI 38 - ITAT MUMBAISearch u/s 132(1) - Assessee firm carried on the business of diamond – During search found stock of nearly 70,000 carats of cut and polished diamonds and Indian currency of over Rs. 27 lakhs Additional evidence – Rule 46A - Assessee had retracted from the original statements - Filing of additional evidence after 30 months of the date of seizure – AO argued that it was an afterthought - able to build a concocted story to avoid tax incidence – Held that:- CIT(A) admitted the additional evidence only after coming to a conclusion that the interpretation of the seized document goes to the root of the issue and from the remand report. In the remand proceedings, it was the AO, who was satisfied that the stock of diamonds found from the assessee was actually the “jangad stock” and not the trading stock and belonging to Shree Meena International and the conclusion of the three layered investigation conducted by the AO was, “nothing adverse is noticed”. Hence admit additional evidence Interpretation of a noting in document - Initially the interpretation was given that this represented own trade of diamonds - later on it was retracted that it was the jhangad stock - Shown the impugned amount as liability - Jhangad stock, till the stock is approved, this stock remains with the adahtia till, either it is sold or returned - Held that:- The assessee was an adatiya and the notings found on the seized document, relied upon by the department, clearly indicate that they pertained to janghads given to an adahtiya (assessee herein), and does not, pertain to independent diamond trading of the assessee. Therefore, endorse and agree with the findings arrived at by the CIT(A). In favour of assessee Unaccounted sale – Whether addition can be made on presumption basis in case search & seizure - AO picked up the accounted figure of sale in each of the concerned year - Applied the 75% proportion thereon - Arrived at the figure of unaccounted sale figure – Held that:- The addition is on presumptions and really not based on facts. Since it is a case pertaining to search and seizure operation, the addition should have been made on material found and not on “inferential presumption”. In favour of assessee Addition on the basis of initial capital in the undisclosed business – Held that:- There is no other business of the assessee except for adahtiya business and if we go in accordance with the statement of Mr. Bharat Kakadiya taken on 26-05-2005, that he had become the partner in the assessee firm in 1994-95. Therefore, question of initial capital in assessment year 2000-01 cannot be accepted. In favour of assessee Disallowance of labour charges – AO called for confirmation - Notice u/s 131 - Excessive payments of labour charges - Assessee had paid Rs. 200 per carat whereas the market is Rs. 25 or Rs. 30 per carat – Labour did not respond query – Held that:- Assessee submits complete details in the form of confirmations and copies of account of all four job workers, to whom payments were made through banking channels and even TAS has been deducted. We have noted that the addition made and sustained are not on sound footing, because either the entire amount should have been sustained or none at all, but once, the entire job work charges paid to one person out of four is accepted, then both the issues of excessiveness and non-genuineness fail. In favour of assessee
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