TMI Blog2013 (2) TMI 504X X X X Extracts X X X X X X X X Extracts X X X X ..... because there was no excess stock and that the approved valuer has not correctly ascertained the net weight of gold ornaments valued by him – Case of Prakash Motwani Vs. ITO [2009 (6) TMI 650 - ITAT AGRA] is relevant here – Against the revenue. - I.T.A No. 543/(Kol) of 2011 - - - Dated:- 16-1-2012 - Sri N.Vijayakumaran Sri C. D. Rao, JJ. For the Appellant: Shri D.J.Mehta For the Respondent: Shri S.S.Gupta ORDER Per Shri C.D.Rao, AM The above appeal filed by the Revenue is directed against the order of ld. C.I.T.(A)-XII Kolkata dated 20.01.2011 pertaining to assessment year 2006-07. 2. The only ground raised by the Revenue reads as under :- 1. The ld.CIT(A)- had erred in deleting the addition of Rs.46,59,300/- on account of Value of Closing Stock by ignoring facts of the case and relied upon the submission of the assessee only. 3. The brief facts of this issue are that while doing the scrutiny assessment AO has added an amount of Rs.46,59,300/- under the head under valuation of stock by observing that a survey under section 133A of the Act was conducted in this case on 28.09.2005 and as such in terms of Action Plan the case was s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns filed by assessee which was forwarded to AO for the Remand Report and after considering the Remand Report as well as the reply of assessee on the Remand Report he analysed the facts of the same in para nos. 5.1. to 5.3 restricted the disallowance to Rs.58,800/- by observing as under : 6. I have considered the submission of the appellant and perused the assessment order. I have also gone through the valuation report of the approved valuer, the submissions made before the A.O. during the post-survey proceedings and assessment proceedings and the statement recorded as on the date of survey and during postsurvey proceedings. The appellant is engaged in the business of manufacturing and sale of gold jewellery, diamond jewellery and silver articles etc. In its case the survey action u/s. 133A of the Act was conducted on 28-09-2005. During the course of survey various books of accounts, stock records and other documents were impounded as evident from the inventory prepared at the time of survev. Besides, the physical stock of all the gold ornaments, diamond ornaments and silver articles etc. was also taken and valued by the approved valuer. On perusal of valuation report prepared by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 240.056 gms. as determined by the A.O on the date of survey. The appellant also explained before the A.O. that the net weight determined by the approved valuer is not correct because he has not valued each and every item of the stock separately but mixed several items of the ornaments and weighment was taken in lots. Under the circumstances, he has not correctly considered the caratage of gold and weight of threads, stones, lac, meena and other items which are studded with the ornaments. It was submitted before the A.O. that on perusal of valuation done by the valuer it may be observed that at most of the places the difference in gross weight and net weight was ranging from 2 to 12 gms. It means, that according to him, there was hardly any variation in the gross and net weight, which is not correct, It was also explained before the A.O. that the appellant firm has meticulously maintained the record of stock of the ornaments being the costly item in the registers termed as GS-11 and GS-12 and the turn over and the stock on the basis of both registers was also accepted by the another government department i.e. the Sales department and no discrepancy in the appellant s records was fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of jewellery business, the each and every item of the ornaments at the jewelers shop/showroom bears a tag having gross weight of ornaments, weight of other items like stone, dori and lac etc. and also have the net weight of the gold. At the time of sale, the customer make the payment of gold at its net weight along with cost of stones etc. and the making charges. If, it is considered that in the books of accounts i.e. stock records the appellant has correctly recorded the gross weight but has undervalued the net gold content, it means, that at the time of sale the appellant would get lesser price from the customer which is totally an absurd proposition. If the A.O. has accepted the quantity of purchase of gold as recorded in the appellant s books of accounts, I am of the opinion that there would no reason that the gross weight of the gold ornaments would be as per the books of accounts of the appellant and that the net weight would be under determined or under valued in the stock records. It is a matter of record that the valuer has not valued each and every item of ornaments with their gross and net weight and the valuation was made in lots. Even, he has not mentioned in the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s explanation that in respect of query about inventory of stock and its valuation, assessee-firm was asked whether a technical person was involved for the purpose. In this context the answer is negative with statement that as per past practice, the physical stock as on 31.03.2005 has been taken by the partners of the firm with the help of its employees. Thus the assessee-firm has accepted itself with verifying the purity and net weight contents of gold in the gold ornaments without engaging technical expert worked the net weight through naked eye. On the other hand assessee-firm has tried to proof fallacious the valuation of valuer s report. Hence the explanation of the assessee is not tenable. A sum of Rs.46,59,300/- is added back to the total income of the assessee-firm as undisclosed stock. However, the ld. CIT(A) has analysed the facts of the case as relied on by the ld. Counsel for assessee in paras 5.1. to 5.3 which are as under :- 5.1. It was contended by the appellant that an amount of Rs. 46,59,300/- has been added by the A0 on account of excess closing stock as per books vis- vis physical stock as on 28-09-2005 ascertained at 7,240.056 gms. being difference in net wei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the gold jeweliery by the appellant and has valued all the jewellery/ornaments accumulated at one place in a lot. The stock of gold ornaments ascertained on the date of survey was of different items, varieties, sizes, designs and makes which were kept at separate counters duly tagged showing gross weight and net weight, were all accumulated at one place and the valuation thereof.was made in lot. It is beyond human comprehension to identify, differentiate and ascertained carat-wise and exact net weight content of gold in the gold jewellery at a given point of time. The valuation and ascertainment of net weight contents of gold in the gold jewellery is purely dependent on the personal judgment of the valuer and it is a matter of common knowledge that there would be difference in the valuation and ascertainment of net weight contents of gold in the gold jewellery ;if same jewellery is valued by two different valuers. The purity and net weight contents of gold in the gold ornaments can only be determined on the basis of clinical examination in the authorized laboratory or testing on an instrument and not through naked eyes. The items of gold jewellery contents certain quantities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of entries of new gold ornaments purchased and also received from karigars after manufacturing of ornaments these are entered in the receipt column of the stock register and the entries in respect of sale are entered in the issue column of the stock register terms as GS-12. The balance of 22-carat gold ornaments is ascertained from the closing balance column of the said register. Further, when gold ornaments are received from karigars offer manufacturing, both the gross weight and net weight contents of gold in the said jewellery are tagged to the same and a receipt vouchers is issued to the karigars acknowledging he receipt of the same and stating the gross and net weight therein, Similarly, when the new gold ornaments are sold to the customers a cash memo stating the gross and net weight is prepared and issued to the customers. The entries in the GS-12 register are based on these receipts, cash memo duly verified and confirmed by the karigars/customers respectively. Thus, in both the registers, namely, GS-11 and GS-12; both the gross weight and net weight of gold contents are being duly recorded by the appellant. All these documents and stock registers were produced before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecords as well as the method of valuation of closing stock as employed by the appellant firm have been duly accepted by the concerned sales tax authorities after duly satisfying themselves of the correctness of these records. But, the A.O. only relied on the report of the approved valuer and worked out an excess stock at 7,240.056 gms. which is in contrary to the true facts of the case and without any basis whatsoever. It was further contended by the appellant that the excess closing stock of 7,240.056 gms. as on the date of survey has been incorrectly ascertained on the basis of figures as per the stock records in GS- 1 I and GS-12 which were not upto date in respect of all the entries as on the date of survey. The gross weight of the stock as on the date of survey as per books of accounts was 22,805.045 gms. and the net weight was 14,679.145 gms. As per the valuer s report the gross weight was 22,896.410 gms. and the net weight was ascertained at 20,267.050 gms. Thus, there was difference of 91.365 gms. in gross weight and difference of 5,587.905 gms. as per the stock records of the appellant vis- -vis the valuers report. However, the A.O. considered excess stock at 7,240.056 gms ..... X X X X Extracts X X X X X X X X Extracts X X X X
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