TMI Blog2021 (11) TMI 405X X X X Extracts X X X X X X X X Extracts X X X X ..... aluation of the jewellery to the total income of the appellant. The addition made by the Ld. AO on account of excess stock found during the course of search those cannot be set to be justified in view of the observation made hereinabove and, thus, the deletion of addition made by the Ld. CIT(A) is according to us is just and proper so as to warrant interference. Hence, the grounds of appeal preferred by Revenue is found to be devoid of any merit and, thus, dismissed. Chargeability of tax as per normal rates instead of amended provisions of section 115BBE of the act applicable w.e.f. 01/04/2017 relevant to AY 2017-18 - appellant has challenged the chargeability of tax @ 77.25% by invoking the amended provision of Section 115BBE of the Act on account of additional income declared at the time of search, survey and also the addition made by the AO - HELD THAT:- Since the search in the case of the appellant was carried out before the amendment the addition ought to have been made in terms of the prevailing provision and therefore, the addition made by the AO invoking Section 115BBE provision of which came into force only on 01.04.2017 is not sustainable. Therefore, the order passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 133A was carried out on the business premises of the assessee on 15.11.2016 which was concluded on 19.11.2016. During the course of survey additional income to the tune of ₹ 1,20,02,793/- was declared by the assessee on account of excess stock. While filing the income tax return on 07.11.2017 the valuation of difference in quantity of stock was calculated at 10,14,95,122/- which was duly incorporated in the books of accounts and shown separately in the Profit and Loss for the year ended on 31.03.2017. In the said return income of ₹ 1,20,02,793/- was also offered by the assessee company. In fact, the assessee company on 07.11.2017 declared the total income at ₹ 28,56,20,940/- including additional income surrendered of ₹ 10,14,95,122/- and ₹ 1,20,02,793/- during the course of search and survey proceeding respectively. The AO calculated the difference in the valuation of stock to the tune of ₹ 24,17,74,248/- at the time of search and upon allowing the credit of additional income so offered at the time of search of ₹ 10,10,00,000/-, difference of the same was calculated of ₹ 14,07,74,248/- and added the same to the total inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in the books of account and there remains no difference and the surrender made by the assessee is excessive on the facts and is therefore not acceptable. Surprisingly, the assessee has claimed to have declared ₹ 10.14 Crore on account of excess investment in stock without authentic basis and disputing the quantitative difference whereas, the nature of business is dealing in the rates of gold, which fluctuate everyday and putting question mark on the valuation report of the valuer, who deals in technical matters with respect to valuation of gold and is accepted in all the cases referred by the department. Another interesting facts noticed is that the assessee has accepted the valuation report on the date of survey and accordingly made surrender of ₹ 1.20 Crore on the basis of difference in value as well as in quantity worked out in the valuation report. 6.6. In view of the above, the contention raised by the assessee is not acceptable and the difference of ₹ 25,37,77,041/- (difference of ₹ 24,17,74,248/- during the search and ₹ 1,20,02,793/- during the survey) is treated as investment in excess stock on the date of search surv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.61% 884 1 371567381 55 29 76895 15855 16 116 55 29 76 895 Cl. Stock as on 28.09.2016 as per Books of A/C 818590486 1032539221 Physical Stock as per DVO Reports 1060364733 1060364733 Excess Stock -24 1774247 -27825512 Less: Stock Surrendered Short/ Excess Surrendered 101495122 -140279125 101495122 73669610 1.10] That if the books stock in term of quantity as on the date of search was calculated as per the rates as adopted by the DVO, in that case also the valuation of book stock would increase from ₹ 81,85,90,485/- to ₹ 99,75,79,091/- . The valuation as calculated by the Departmental valuation officer in his report was of ₹ 1,06,03,64,733/- and accordingly the difference in the valuation of stock calculated comes to ₹ 6,27,85,642/- only as against additional income of ₹ 10,14,95, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 321.659 44122 DVOs 14192137 LOOSE STONE 187.832 STUDDED STONE 18978.668 STONE MALA 6870.580 ALLOY 3830.945 Watches+ Pen etc. DVOs 99632649 Book Stock as per DVO Rates 287322.044 997579091 Physical Stock as per DVO 1060364733 Excess Stock Found in Search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 6 of the assessment order]. The assessing officer then allowed credit of additional income as already accepted by the appellant to the tune of ₹ 10,10,00,000/- [correct amount actually offered was of ₹ 10,14,95,122/-] and balance amount of ₹ 14,07,74,248/- [₹ 24,17,74,248/- minus ₹ 10,10,00,000] was added to the total income of the appellant. The appellant during the course of assessment proceedings as well as during the course of appellate proceedings has claimed that there was no difference in the quantity which supported the above I addition made by the assessing officer. The addition was made by the assessing officer merely on account of difference in valuation of jewellery as actually found and as shown in the books of accounts. The DVO adopted the market price of gold as on the date of .search i.e. 28.09.2016, whereas average cost of jewellery was considered by the appellant in its books of accounts. The addition made by the assessing officer represented the difference in the valuation of jewellery i.e. difference of cost and market price as on the date of search. If the version of the assessing officer is accepted, in that case, entire jewell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016, whereas jewellery was shown at cost in the books of accounts which was carried forward from year to year. Hon'ble Delhi Bench of ITAT in the case of Neha Jewellers P Limited [Appeal No ITA No 371/ Del/ 2010 dt 26-06-2015 had approved the order of the Ld CIT[A] and held that [Refer last four line of Para 24 on Page No. 18 of the order]: For the purpose of making addition on account of undisclosed stock, first the quantity I weight of such undisclosed stock has to be determined and then market value of this undisclosed stock is to be added as income. Accordingly, ground No 2 of the appeal of the Revenue is rejected In the case of appellant, difference in the quantity was duly offered by the appellant as its income and the addition made by the assessing officer on account of difference in valuation of jewellery comparing the market price as per the report of DVO with the cost as shown in the books of accounts was not justified. The AO has simply converted stock from cost to market price calculated at the rate adopted by the DVO which in any case is not justifiable. If the rates adopted by the DVO are applied-to opening balance the picture which emerges out is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closed stock has to be determined on the date of search. We also concurred with the contention of the assessee that the basis for making the addition will be difference in the weight of stock as per books of account as on the date of search and the weight of the stock found at the time of the search. 20. Thus, the issue raised in the appeal preferred by the Revenue is as to whether the Learned CIT(Appeals) was justified in computing the undisclosed stock in the manner stated in its order. 21. It is an admitted fact the computation of undisclosed stock has been done by the Assessing Officer on the basis of value only without determining the undisclosed weight of the gold and jewellery. Further the Assessing Officer has taken the opening stock as on 01.04.2005 as against the stock as on 09.12.2005. This approach of the Assessing Officer, in our view, in computing the excess stock as on the date of the search is not correct. The methodology adopted by the assessee, in our opinion, is the correct procedure to determine the unexplained stock on the date of search. In this regard, we note from the page No. 104 of the paper book filed on behalf of the assessee that the weigh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , either in the assessment order or in the remand report. The purchases recorded in the books of account are the disclosed/accounted purchases. Similarly, sales recorded in the books of account are the disclosed/recorded sales in the books of account. It is not the case of the Assessing Officer that assessee had manipulated the books of account after the search. On the contrary, we note that in the remand report, the fact that the reconciliation was supported by the regular books of account which were found at the time of search, has not been controverted. Further, the department was having the seized computer whereby data for the purchases and sales for the period of five years ending on 08.12.2005 was also there. In view of the above facts, the methodology adopted by the Assessing Officer in computing the undisclosed stock was not correct. As against this, the methodology adopted by the Learned CIT(Appeals) for computing the weight of undisclosed stock is the correct methodology. 24. The learned CIT(DR) during the course of hearing contended that the Assessing Officer's computation be upheld but could not point out any reason to differ with the methodology adopted by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hargeability of tax @ 77.25% by invoking the amended provision of Section 115BBE of the Act on account of additional income declared at the time of search, survey and also the addition made by the AO. 12. The case of the assessee is this that the amendment in Section 115BBE came into force only on 15.12.2016 whereas the search was conducted on 21.09.2016 and the assessee has paid tax @ 30%. The provision of Section 115BBE of the Act tax prior to the amendment reads as follows: 115BBE. (1) Where the total income of an respondent assessee includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, the income-tax payable shall be the aggregate of - (a) the amount of income-tax calculated on income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D , at the rate of thirty per cent; and (b) the amount of income-tax with which the respondent assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (a). 13. The second amendment came into force w.e.f. 15.12.2016 whereas the Income Tax Act Search and Survey ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quiring such bullion, Jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the respondent assessee for any source of income, and the respondent assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the respondent assessee for such financial year. 2.3] That provision of section 69B of the Act though invoked in the case of the above respondent assessee. However, the excess Jewellery as found was part of stock in trade of the respondent assessee company and not found as Investment as envisage in the provision of section 69B of the Income Tax act. That provision of section 68 to 69D are residuary sections and the same is applied only where the amount was not taxed under any specific chapter. In the present case in hand, the respondent assessee company is engaged in the business of Jewellery. The difference in the quantity of stock was during the normal business activities of the respondent assessee company. The excess Jewellery as found was part of its stock in trade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence or material to establish that the assessee was involved in any other activities or having any other source of income. While deleting the addition made by the Ld. AO the Ld. CIT(A) observed as follows: First of all let me discuss whether the provisions of section 115BBE are applicable to this case or not. The provision of disallowance of any loss with the income as computed under clause (a) of sub section (1) of section 115BBE came into force w.e.f 01.04.2017. Hon'ble Supreme court in the case of CIT vs Vatika Township Pvt Ltd (2014) 24 ITJ 532 (SC); (2014) 271 CTR 1: (2014) 227 Taxmann 121 has held that An amendment made to the taxing statute can be said to be intended to remove 'hardships' only of the assessee, not of the department-on the contrary, imposing a retrospective levy on the assessee would have caused undue hardship. Hon'ble ITAT Indore in the case of Priyadharshani Construction vs ITO (2012) 19 ITJ 276 (Trib- Indore) has held that Substantive law shall be understood to be applicable prospectively unless made specifically retrospective. Thus, it is settled position of law that provision of section 115BBE of the Act is clearly no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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