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2019 (1) TMI 687 - AT - Income TaxAddition of unexplained jewellery on the basis of notings made on loose papers - description of items found at the time of search did not match with the items declared in Wealth-tax returns/VDIS - Held that:- So long as the total gold jewellery in weight found at the time of search matches with the earlier declarations made by the assessee in his Wealth-tax returns and VDIS, there can be no question of making any addition simply on the ground that the description of items in the list declared under Wealth-tax returns/VDIS is different from those actually found. If such is a position, then an inference has to be drawn that the items initially declared in Wealth-tax returns/VDIS were converted into the items of jewellery found at the time of search. A contrary stand can be taken only if the authorities demonstrate that the jewellery items given in the Wealth-tax returns/VDIS were over and above the items of gold jewellery disputed. We are confronted with a situation in which total jewellery found at the time of search as per the panchnamas tallies with the gold jewellery declarations by the assessee and his family members in Wealth-tax returns/VDIS, save and except the additional income offered by the assessee in his return for the A.Y. 2006-07. In such a scenario, there can be no question of making any addition in respect of gold jewellery. Addition on protective basis - assessee claimed that out of total marriage expenses, a sum of ₹ 17,50,000/- was borne by Mr. Om Prakash Agarwal, Jalgaon, father of Trupti Agarwal, the daughter-in-law of the assessee - addition confirmed as assessee could not furnish any details/evidence of said expenses having been incurred by Mr. Om Prakash Agarwal - Held that:- In the assessment completed u/s.153C on 30-12-2008 in the hands of Om Prakash Agarwal, a copy of which has been placed on record, the AO accepted that sum of ₹ 17,50,000/- was withdrawn by Mr. Om Prakash Agarwal from his bank account, which was given to the assessee as his share of marriage expenses. Since the explanation of Mr. Om Prakash Agarwal has been accepted in his assessment completed u/s.153C, there can be no rationale in sustaining the addition of ₹ 17,50,000/- on protective basis in the hands of the assessee. We, therefore, order to delete the addition. Treatment to sale proceeds received on sale of shares - 'Income from other sources’ - Held that:- PIL is a penny stock company and the assessee obtained only accommodation entries in the garb of short term gain from transfer of shares of PIL, for which an appropriate addition has rightly been made and upheld by the authorities below. We, therefore, countenance the impugned order on this score. Addition on account of commission paid by the assessee for arranging deal of sale of shares of PIL - Held that:- As the transactions of purchase and sale of shares of PIL were only accommodation entries provided by the brokers. Such accommodation entries are obviously provided against certain commission. Considering the entirety of facts and circumstances of the instant case, we are of the considered opinion that it would be just and fair if the rate of commission is restricted to 2% as against 6% upheld in the first appeal. Disallowance of interest - assessee diverted interest bearing borrowed funds for non-business purposes without charging any interest - Held that:- As AR claimed that some of the advances were given during the course of business, which were in the nature of sundry debtors and not advances. Since such details were not before the authorities below, in our considered opinion, it would be in the fitness of things if the impugned order on this score is set-aside and the matter is restored to the file of AO. We order accordingly and direct him to examine the assessee’s claim of having charged interest in respect of certain advances included in the table drawn and thereafter proceed to calculate the amount of interest not allowable as per law. Addition u/s 68 - held that:- As the assessee failed to prove the capacity of the donors and also the genuineness of the transactions, not only before the authorities below but the Tribunal as well. Under the given circumstances, we do not find any reason to deviate from the impugned order. Addition on account of excess stock and additional excess stock - Held that:- It is seen that stock of ₹ 20,18,702/- was found at the time of survey which figure was calculated by reducing the amount of gross profit @ 23.45% from the tag price. As against this, the value of stock as per books of account was only ₹ 17,30,760/-. Since excess stock was found at the time of survey, the addition to that extent was required to be made. The contention of the assessee that higher gross profit was declared and such excess stock was shown in terms of the higher gross profit cannot be countenanced as the excess stock is required to be separately disclosed as income. We, therefore, approve the addition of ₹ 2,87,944/-. 42. As regards the remaining addition of ₹ 1,17,466/-, we hold that the same cannot be sustained because it represents nothing but difference in the tag price of excess stock as reduced by the cost price of such excess stock. It goes without saying that an addition can be made only for the amount of costs incurred on producing the stock and not the potential profit included in the tag price. We, therefore, sustain the addition of ₹ 2,87,944/- and delete the addition of ₹ 1,17,466/-.
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