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ITO & Anr Versus Mehra Jewel Palace Pvt. Ltd. & Anr

2015 (3) TMI 1020 - ITAT DELHI

Addition on undisclosed profit - Held that:- A.O. has based his findings on the basis of surmises and conjectures and that too without commenting upon the explanations of assessee. Moreover, in the present year, we find that assessee has not earned any income from lease which fact is verifiable from paper book page 8 where a copy of P & L account is placed and where there is nil other income as compared to earlier year income of ₹ 10,02,511/-. Therefore, facts in the present year are disti .....

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P. Ltd. consisted out of opening stock and jewellery received on approval basis from Mehrasons Jewellers (P) Ltd.. The assessee had field copy of stock ledger as well as sale tax assessment order for the year under consideration. We find that findings of Ld. CIT(A) are based upon verification of facts and evidences and, therefore, he had rightly deleted the addition.- Decided in favour of assessee. - I.T.A. No. 2011/Del/2011, I.T.A.No. 2313/Del/2011 - Dated:- 25-3-2015 - Shri G. C. Gupta And Sh .....

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and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of ₹ 19,99,840/- made on account of undisclosed stock. iii) The Ld. CIT(A) ignored the finding recorded by the A.O. and the fact that the Ld. CIT(A) relied on the evidences/documents which were not produced before the A.O. I.T.A. No. 2313/Del/2011 (Assessee s appeal):- i) The assessment made is bad in law and in facts. ii) The Ld. CIT(A) willfully and wrongly added a sum of ₹ 4,57,340/ .....

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also and therefore, he rejected trading results and applied GP rate of 15% and made the addition of difference between such GP and declared G.P. Ld. A.R. submitted that in earlier years, the assessee had earned commission/rental income from leased properties of assessee and it was the allegation of A.O. that such income has been set off against losses managed by assessee by making purchases from related parties whereas in the year under consideration, no such income was earned by the assessee a .....

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bmitted that in the present year such comparison was filed with the A.O. Ld. A.R. invited our attention to page 29 and specifically to page 30 to 33 of the paper book and submitted that in response to a specific query from the A.O., the assessee had filed details regarding purchase rates from M/s. Mehra Jewel Pvt. Ltd. and market rates and, therefore, it was submitted that in the present year, the comparison between market rate and purchase rates were furnished to A.O. and, there was no differen .....

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es-judicata does not apply to income tax proceedings and every year has to be looked into separately. 2. Ld. D.R. on the other hand argued that the A.O. has given clear cut findings and in this respect, last para of assessment order was read and therefore he argued that the order of Ld. CIT(A) should be upheld or in the alternative, it could be set aside to Ld. CIT(A) as done in earlier years. Ld. A.R. in his rejoinder submitted that none of the augments taken by him has been rebutted by Ld. D.R .....

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as decided the issue in favour of the assessee and he heavily placed reliance on the order of Ld. CIT(A). 5. We have hard rival parties and have gone through the material placed on record. We first take up appeal filed by assessee. We find that similar issue arose in Assessment Year 2000-01 and 2001-02 and the Tribunal vide its order dated 07.02.2014 had remitted back the issue to the office of Ld. CIT(A) to carry out verification of purchase rates from related parties with the market rates. How .....

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y is reproduced below: 2. In the earlier years, the department has disallowed trading loss on the ground that it has been set off against the commission income, to which the assessee company strongly disagrees. However, such a situation is not there in the current year and in the succeeding years as there has been a trading profit in the current year which is apparent from the gross profit and is continuing in the succeeding years as well. There are no sales with sister concerns in the current y .....

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Lid., it is stated as under: We are enclosing the market rate for the dates required. DATE-: Particulars Purchase Rate/Gms Market Rate/Gms 12.082002 Recd. 22Ct Gold Jew 011 App. From Mehrasons Jew. P.Ld. Rs.480/- 22.10.2002 Purchased 22ct Gold Jew from Mehrasons Jew. PLtd Rs.477/- Rs.477/- 10 12.2002 Purchased New 22c1. Gold Ornaments from Mehrasons Jewellers Pvt. Ltd. (Rs.489/- +S.64/- value addition) Rs.553/- Rs.489/- It would be seen that the purchases and sale of the above acquired stock ha .....

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had filed sufficient explanations regarding alleged payments covered by Section 40A(2b) of the Act. However, the A.O. without commenting upon the explanations of assessee, made the addition by holding as under: The assessee has quoted the rate of gold on the date of sales and purchase by the determining date of purchase and sales through accommodation entries was in the hand of the company and determined the date of sale in case of M/s. Barkha Exports Ltd. just earn the loss. The explanation of .....

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allowed and the same has been even confirmed by appellate authority in respect of its own case for the earlier Assessment Year. Accordingly, it has been observed the assessee following similar practice to earned losses as to set off its other business income earned from retail trading activities from other parties, by showing purchases from M/s. Mehrasons Jewellers Pvt. Ltd. at the inflated prices which attracted the provision of Section 40A(2b) of the I. T. Act, 1961. Therefore, the trading res .....

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dd: Undisclosed trading profit as discussed above 4,57,340/- (ii) Undisclosed stocks, as discussed above 19,99,840/- 24.57.180/- Total income ₹ 23,64,212 Penalty proceedings u/s 271(1)(c) of the I. T. Act, 1961 have been initiated as the company has deliberately set off its speculative losses against income form house property and has concealed the facts. Assessed at ₹ 23,64,212/-. Issue necessary forms. Cahrge interst u/s 234B of the I. T. Act, 1961. 7. We find that A.O. has based h .....

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documentary evidences with respect to gold rates and in this year there is no lease income. The addition sustained by Ld. CIT(A) is not based upon facts. 8. In view of above, appeal filed by assessee is allowed. 9. Now, coming to the appeal filed by Revenue, we find that the assessee had filed complete details before Ld. CIT(A) regarding discrepancy pointed out by A.O. In this respect, para 4.1 to para 4.8 of Ld. CIT(A) s order which relate to submissions of assessee and findings of Ld. CIT(A) a .....

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on misconceived facts when he made an addition of ₹ 19,99,840/- on account of undisclosed stock alleging that neither any evidence was produced for 5043gms of gold jewellery taken on approval from M/s Mehrasons Jewellers (P) Ltd. on 12-8-2002 nor for the purchase of 3195.720gms of 22ct. gold from the said concern on 22-10-2002. It has been alleged that no bills were produced for the purchases so made, stating that the said purchased were un-vouched and have been acquired from undisclosed .....

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e order was passed mechanically in an arbitrary manner by completely ignoring the detailed reply of the appellant as reproduced below:- "It has been noted that the company received goods on approval weighing 5043.72 grms on 12-8-02 from M/s Mehrasons Jewellers (P) Ltd. and out of the said goods, the company sold 58.71gms. M/s Swam Gems Pvt. Ltd. on 10-10-02. It has been alleged that on the date (10-10-2002) the company was not having any stock. The allegation is totally misplaced as the fac .....

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gms (Confirmation from Mehrasons Jewellers (P) Ltd. is enclosed) 10-10-2002 Sold to Swam Gems (P) Ltd. (Copy of sale bill enclosed) The company's stock register has been examined in details and the receipt of the stock by the company has been noted. Evidently, there is no short fall in stock and the company has stock on the date on which it was sold. The allegation that the company has sold 5871.76 gms of 22ct. gold to M/s Swam Gems (P) Ltd. without any stock is baseless. It has been noted t .....

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has been noted by the department and that the said goods were received from Mehrasons Jewellers (P) Ltd. has been noted by the Department. There is therefore no basis to conclude that he said purchases were from undisclosed sources. A confirmed copy of the stock ledger, issue voucher and sale bill of M/s Mehrasons Jewellers (P) Ltd. is enclosed for your perusal. The practice of receiving goods on consignment is an established trade practice and was explained in through details during the said h .....

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Mehrasons Jewellers (P) Ltd. on approval is fully explained and is verifiable form he following documents: i) Receipt voucher of Mehrasons Jewellers (P) Ltd. and the corresponding issue voucher of Ms. Mehrasons Jewellers (P) Ltd. and duly confirmed stock ledgers of the parties. ii) The purchase of 3195.72gms gold from M/s Mehrasons Jewellers (P) Ltd. is explained from the corresponding sale bill issued by it, the purchase voucher of Mehra Jewel Palace (P) Ltd., the stock records of both the com .....

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s on consignment is an established trade practice. Even today, the company receives gold on consignment from the Bank of Nova Scotia. The company does sell the said gold received on consignment and purchases the said gold at a later date. 4.6 The appellant argued that the Id. AO has erred in concluding that the stock sold to M/s Swarn Gems (P) Ltd. was in excess by 30.52gms of 22ct. gold. It was submitted that the goods sold on 10-10-2002 were out of the stock which was fully accounted for and t .....

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addition of ₹ 19,99,8401- on account of undisclosed stock. The above was done by the AO on the basis of the following alleged discrepancies in the accounts of the appellant:- (i) Unaccounted stock of 3195.72gms, valuing at ₹ 15,22,500/- was sold on 10-10-2002 to one M/s Swarn Gems (P) Ltd. (ii) The goods sold to the aforesaid party were in excess of 30.52gms 4.7.1 The appellant as per its submission has explained that jewellery weighing to 5871.76gms was sold to M/s Swarn Gems (P) Lt .....

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(P) Ltd. (ii) Copy of approval/issue voucher of MIs Mehrasons Jewellers (P) Ltd. dated 12-8-02, of goods sent on approval and corresponding goods receipt voucher of M/s Mehra Jewel Palace (P) Ltd. (iii) Copy of sales bill of MIs Mehrasons Jewellers (P) Ltd. dt. 22-10-2002 and corresponding purchase bill of MIs Mehra Jewel Palace (P) Ltd. alongwith corresponding STI Form of Sales Tax Department. " (iv) Confirmed copy of stock account of Mehrasons Jewellers (P) Ltd. in respect of 22ct Gold. ( .....

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ve perused copies of various documentary evidences filed by the appellant in support of the purchase of goods from MIs Mehrasons Jewellers (P) Ltd. and sale of goods to M/s Swarn Gems (P) Ltd. All the said documents support the contention of appellant that there is no unaccounted sale of stock as alleged by the Ld. AO. It has been submitted by the appellant that all these documents were produced during the assessment proceedings; however, the Id. AO did not take any cognizance of the same. Furth .....

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