TMI Blog1990 (1) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... present during the course of search and his statements were recorded during the course of search and whatever inferences had been drawn by the department, are mainly on the basis of information either given or not given by Shri Nem Prakash. It is alleged by the department that these silver ornaments weighing 46.300 kgs were discovered from an almirah concealed behind wooden panels. It is also alleged that initially Shri Nem Prakash denied knowledge of any hidden almirah, etc., and later on possession of the key of that almirah when it was discovered, yet later he himself supplied the key of that almirah, he denied knowledge about these ornaments. According to the department, since Shri Nem Prakash was looking after the entire business of the assessee, it could not be believed that Shri Nem Prakash did not know about these ornaments and hence whatever explanations were given by the assessee, were rejected. It was explained by the assessee that the assessee had received these ornaments on approval from Shri Hira Lal, prop. Of M/s Lodhi Lal Radha Govind (hereinafter referred to as LLRG) on 1st May 1984. Although Shri Heeralal confirmed having given these ornaments on approval to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 300 kgs. he explained that immediately after the discovery on 10th May, 1984, the authorities were informed that these ornaments were received from M/s LLRG. Immediately thereafter a survey was conducted at the premises of LLRG, i.e., on 11th May, 1984 and only 15.145 kgs. of silver ornaments were found there whereas even as per the IAC the stock with LLRG should have been atleast about 57.068 kgs. He submitted that the assessee had given confirmation from Shri Hiralal, Prop. of M/s. LLRG. A voucher regarding these 46.300 kgs. dated 1st May, 1984 was discovered by the authorities and was examined by them. Further Shri Hialal is an old existing income tax assessee and according to Shri Ranka, even his books indicated that he had given 46.300 kgs to the assessee on approval basis. He referred to page 17 of the paper book, which is a photo copy of books of LLRG dated 1st May, 1984, which indicate that they were given to the assessee for sale and this was found at LLRG premises on 11th May, 1984 and was seized by the department. Regarding the weight which could be available with LLRG and which is worked out by the IAC at 41.923 kgs. Shri Rank explained that this was worked out by apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulations of IAC, it is considered to be undisclosed investment. Shri Ranka filed coloured photographs of wooden panelling of the shop to show that the safe was not concealed as alleged by the department but it is the normal way of penalling the wall with wood. He further submitted with reference to observation of CIT(A) that these ornaments were kept separately by the assessee because he did not want to mix them with his own stocks as they had been received only for sale on approval basis. He submitted that Shri Nem Prakash was only an employee and even if he is assessee s uncle, he could not be expected to know everything which the assessee was doing and hence he did not know about this particular transaction of 46.300 kgs., of silver ornaments having been received on approval basis. He submitted that since they had been received just before the assessee left for Kishangarh from where he returned only on 18th May, 1984, they were not recorded in the books of accounts and this further showed that Shri New Prakash did not know about them. He submitted that the same was the position regarding the silver ornaments received from Navin Abhushan Bhandar about which also Shri Nem Praksh d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the stocks were not sufficient with Hiralal to send 46.300 kg. Silver ornaments to the assessee. He further explained that much importance could not be given to survey at Hiralal s place because that was on 11th May, 1984 whereas Nem Prakash had been questioned on 10th May, 1984 and hence they knew that they would be questioned and hence these explanations as are being given could have been made. The learned Depttl. Representative, however, could not explain why 24 hours were lost and survey was not done on 10th May, 1984 itself. Regarding the acceptance of silver ornaments explained to be from Navin Abhushan Bhandar, he explained that this was accepted because a letter dated 3rd May, 1984 was found during search whereas no such evidence was found in respect of silver ornaments from Hiralal. He submitted that no weight should be given to self serving affidavits in view of the decision reported as CIT vs. DURGA PRASAD MORE 1973 CTR (SC) 500 : (1971) 82 ITR 540 (SC) and argued that the addition should be confirmed on the basis of conduct of assessee and facts discussed in the orders of the lower authorities. 5. We have carefully considered the facts and circumstances of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been brought by the assessee from M/s LLRG. We find that in similar circumstances the explanation regarding silver ornaments having been received from Navin Abhushan Bhandar had been accepted by the department. The ITO has written in his order that 18 kgs. Of silver ornaments received from Navin Abhushan Bhandar on 3rd may, 1984 had been accepted because a letter dated 3rd May, 1984 from that party was found at the time of search although it is clear from the narration in the order of the ITO, that they were also not recorded in assessee s books of account. About this quantity of 46.300 kgs. Of silver, the departmental authorities admit that a survey was conducted at the premises of M/s LLRG but they do not know why it was doer on 11th May, 1984 and not simultaneously. If they failed to do it, they cannot be allowed to burden the assessee with this liability on the ground that between 10th and 11th May Shri Hiralal, Prop. Of M/s LLRG might have made fictitious entries in his books of accounts or between 4th May, 1984 and 11th May, 1984, he might have done so. In our opinion, in the face of a confirmation from Shri Hiralal, who is a regular assessee and in whose books of accounts th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al stage, the department had not accepted 2.900 kg. of gold ornaments which were seized out of 5.590 kg. Of gold ornaments found at the time of search. The dispute now remains only regarding the first three items mentioned above, namely, belonging to LLRG, returned from Nav Ratanmal and impurities in the form of copper. The IAC did not consider these items as explained but after making some allowance for impurities held that 2.239 kgs., of gold was not explained by the assessee in these ornaments and hence directed the impugned addition of Rs. 4,14,214 which gives an average of gold @ Rs. 1850 per ten grams. All these additions have been challenged by the assessee. (i) M/s Lodhilal Radha Govind: 0.663.25 kg. This is the same party from whom the assessee had received 46.300 kgs. of silver and which have been discussed in the preceding paragraphs and in respect of which the addition of Rs. 1,35,930 has been deleted by us. At the time of search, out of the gold ornaments found 663.25 gms. of gold ornaments were explained by Shri Nem Prakash as belonging to M/s LLRG. Moreover, a voucher indicating that they had been received from M/s LLRG was also discovered at the time of search a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atements of the assessee, Shri Shrikumar wherein he had confirmed the factum of this transaction. He further explained that department had returned these ornaments to the assessee on 20th April, 1989 and in turn, they were returned to Shri Hiralal on 15th June, 1989 and at that stage they have been shown entered in the Gold Control Register of Shri Hiralal. Again he explained that a gold voucher was prepared when these goods were returned to Shri Hiralal. He further referred to the fact that when the gold and silver belonging to Shri Hiralal, were seized by the Income-tax Department, Shri Hiralal had given a legal notice to the assessee. The assessee, thereafter entered into an agreement with him and later when these goods were returned to him, he acknowledged the receipt and cancelled those legal notices. He further explained that Shri Nem Prakash was aware of this transaction and hence at the time of search had told the IT authorities that gold ornaments to the extent of 663.25 gms. belonged to M/s LLRG. Dealing with the order of learned CIT(A), he explained that there was nothing to show that Shri Hiralal did not have sufficient stocks. As mentioned above, even after giving thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re sufficient stocks with Shri Hiralal for sending this quantity of gold ornaments to the assessee. In these circumstances, even if it can be suspected that the assessee took advantage of the suspension of search between 4th May, 1984, to 10th May, 1984, the suspicion cannot lead to the rejection of the explanation of the assessee, which is corroborated not only with the statement of assessee s uncle-cum-employee Shri Nem Prakash but even with documentary evidence in the from of gold control register of Shri Hiralal and hence we find no basis in sustaining any addition made on his ground. It is, therefore, directed to be deleted. (ii) Reg. Nav Ratanmai Soni: The next objection of the assessee is regarding 910.300 gms. of gold ornaments which were discovered during the course of search but which were not found recorded in assessee s books and hence their value has been added as unexplained investment. It was explained by the assessee that the assessee had received gross weight of 748.900 gms./net weight 737.200 gms. of old gold ornaments from one Shiv Kumar of Delhi on 1st March, 1989, for re-making of ornaments of new designs. The assessee had given them to Shri Navratanmal Son ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 only shows that this had been done only to explain the disparity. He further questioned why there was so much of difference between the gross weight of 464.900 gms. given to Shri Soni and 910 gms. Received back from him. He strongly argued that all this was manipulation and the assessee s explanation should not be accepted. 10. We have carefully considered the arguments from both the sides and have perused the orders of the authorities below. For this item also we hold that the addition made by the department is on the basis of suspicion. There is sufficient evidence in the form of statements of Shri Nav Ratanmal Soni, entries in Gold control Registers with Shri Soni and assessee s own registers, so also the statement of Shri Nem Prakash at the time of search that 910 gms. of gold was from other parties and hence taking into account the arguments of Shri Ranka, we hold that the assessee has been able to give a satisfactory explanation in respect of 910.3 gms., of gold ornaments and hence the addition made in respect of these items is also directed to be deleted. (iii) 26 Gold Bangles: Out of the gold ornaments found in possession of the assessee, the assessee explained that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the CIT(A). 11. The learned Depttl. Representative argued that it was anybody s guess whether the bangles seen by the Gold Control authorities on 29th May, 1984, were the same as were found at the time of search. He submitted that at the time of search Shri Nem Prakash did not explain any such things in spite of having been asked specifically on 10th May, 1984 vide Question Nos. 40 to 44 of the Authorised Officer. He submitted that the statement recorded at the time of search was primary evidence and carried much more weight than collected or given subsequently. He argued that there was nothing to prevent the assessee from changing the gold bangles with copper bangles covered with goldfoil between 10th May, 1984 and 29th May, 1984. 12. We have carefully considered the facts and circumstances in this regard. We find that Shri Nem Prakash had shown sufficient knowledge and had admitted sufficient awareness and knowledge about the business of the assessee. Even then at the time of search he did not give any indication that the 26 gold bangles weighing 997 gms. were only copper bangles covered the goldfoil. No such claim appears to have been made even during the course of proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the ITO shall consider these arguments while re-framing the assessment on this point and shall decide the issue after giving proper reasons. 14. The next objection of the assessee is regarding an addition of Rs. 5,000 on account of low withdrawals of the assessee. We agree with the lower authorities that in view of the various sources of income and extent of assessee s business and the explanation given by assessee s father that the assessee was not dependent on him, the withdrawals of Rs. 2,800 shown for personal expenses are two low and hence the addition of Rs. 5,000 made is very reasonable and is confirmed. 15. The next objection of the assessee is regarding an addition of Rs. 10,000 plus Rs. 5,000 made on account of two papers found during the course of search showing purchase of Nakashi Dibbi but against a bill of Rs. 13,512 in the rough paper, a bill of only Rs. 3,512 is prepared and in another case against bill of Rs. 7,715 on rough paper, Rs. 5,000 have been shown with respect to that parcha and only Rs. 2,715 are supposed to be billed Shri Ranka argued that this paper showed that the amount of Rs. 10,000 was due and was not paid and hence the addition could not be m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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