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2016 (1) TMI 170 - ITAT KOLKATA

2016 (1) TMI 170 - ITAT KOLKATA - TMI - Disallowance of expenditure - AO repeated that since there was no date in the vouchers and the amount was not recorded in the current year's accounts the same was rightly added - Held that:- Firstly there was a totaling mistake of ₹ 76500/- (Rs. 8500/- taken as ₹ 85000/-), which is not disputed by the AO in the remand report. The AO has not disputed the claim of the assessee that out of the total of ₹ 12,11,301/- (after correcting the tot .....

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ddition was not justified - Decided in favour of assessee

Disallowance of certain expenses from the impounded papers - Held that:- The modus operand of the assessee’s business is that apart from its own sale of jewellery, the small gold smiths who also manufactures some jewellery on their own from the small portion of gold retained by them in course of labour work, also gives their jewellery for sale to the assessee. The assessee keeps the said jewellery in the show room and sales the .....

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as well as the labour charges were not accounted for, as mentioned above, which is not accounted for. AO himself has presumed outgoings for such sale (Rs.16,89,700- ₹ 2,40,048) at 14,41,652/-. The AO has found in the impounded papers the payment amounting to ₹ 10,57,336/-, which is much less than the outgoing estimated by the AO on such sales. Therefore these outgoings can be telescoped with the actual expenses accepted by department to have been incurred for achieving the undisclose .....

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of grams from the seized papers. We find that the payment to the labour is 23636.50 and the total weight of silver involved was 8753.63 grms and from accounts of the assessee that the total silver manufactured during the year was 26915.64 gms. and the labour charges for manufacturing silver was 2,87,010, 54,570/- and ₹ 8,555/-. Therefore the total silver manufactured during the year as well as the labour charges incurred was much more than what the AO found in the impounded papers. In fac .....

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er side Jewellery found than during the course of Survey. It is also mentioned earlier that during the course of Survey no cash book, ledger, account, etc. was found and the assessee stated that the same was lying with Accountant for Audit purpose. But she failed to disclose name of the Accountant during the course of deposition. It appears that this action of the assessee is intentional for the purpose of avoiding enquiry. As there was no book of accounts found during the course of survey, the .....

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found or pointed out in the said reconciliation then AO cannot make any addition on this account. If the books of account show higher figure of stock then what was found in the course of survey, such excess cannot be added as undisclosed investment. Accordingly, this addition has rightly been deleted by CIT(A) - Decided in favour of assessee

Addition made on account of customers’ gold lying in stock treating the same as unexplained investment - CIT(A) deleted addition - Held that:- T .....

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k discrepancy. The AO has accepted the gold ornaments belonging to customers at 13649 gms. Having accepted and relied on the said statement he cannot deny the said availability of gold while making another addition. He should have accepted his own finding as recorded in para 11, Page 14. The AO has also accepted the fact that some gold was lying with the job works for making or remaking. The AO cannot reject the explanation partly. Therefore, we are of the view that CIT(A) has rightly deleted th .....

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been shown by the assessee that the assessee had sufficient stock of the stones as on the date of survey and further there was direct evidences of the purchase of the stones vide MS-4 page-34. Hence the stones found in the inventory the weight of which was 3015.980 Gms is explained. For the sake of repetition, it is again mentioned that the DVO has taken the market value and not the cost price and there was evidence of purchase of 2578 gms immediately within one month before the date of survey a .....

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and D. Chatterjee, Advocates ORDER Per Shri Mahavir Singh, JM: This appeal by revenue is arising out of order of CIT(A)-XXXII, Kolkata in Appeal No. 112/CIT(A)-XXXII/09-10/Cir-50/Kol dated 20.01.2011. Assessment was framed by DCIT, Circle-50, Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) for AY 2007-08 vide its order dated 31.12.2009. 2. Brief but common facts relating to all the issues raised by revenue are that the assessee is engaged in the manufacturi .....

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account of unexplained expenditure found recorded in MS-3 impounded document. For this revenue has raised the following ground no.1:- Ground No.1: That Ld CIT(A) has erred in law as well as facts in deleting the addition of ₹ 12, 88, 301/- was made as unexplained expenditure on the basis of vouchers at MS- 3. 4. Briefly stated the facts of the case are that revenue during the course of survey found certain documents, loose papers, register etc., which were inventorised as annexure MS-l to .....

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thout any date. According to AO a sum of ₹ 12,88,301/- being labour expenses paid to labourers. The assessee explained that these are signed labour vouchers pertaining to F.Y. 2003-04, 2004-05 and 2005-06 and these vouchers were filed by accountant who did mischief by leaving the blank portion of the voucher, but according to him there is no discrepancy in the accounts. But, the A.O. has not accepted the explanation of the assessee and noted that these being undated vouchers and hence, he .....

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nd without any date, which were impounded marked as loose bunch annexure MS-3. From the impounded loose papers bunched as annexure MS-3 of the impounded material, the A.O. observed that out of 322 debit vouchers bunched therein, 136 vouchers were undated. According to the A.O. the undated vouchers were not found reflected in the books of account of the assessee for the relevant year and since the assessee could not substantiate that those undated vouchers were incorporated in the accounts of any .....

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owing the payment of exact amount mentioned in each of the voucher along with the relevant cash book page numbers and date of payment covering an amount of ₹ 10,71,399/-. A letter was filed on 27.4.2009 along with the list of 136 vouchers identified by the A.O. relating to the year under consideration wherein the payment of ₹ 10,71,399/- was reflected with dates and cash book page for this year. It was further submitted that the AO has made mistake while making the table in the asses .....

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hich is not disputed. The AO, therefore, in the process has allowed unrecorded expenses of ₹ 14,41,952/-(16,89,000 - 2,48,048). The said mount of ₹ 1,40,402/-, therefore, cannot be added since the amount was outgoing from above unrecorded sales. (1071399/- +140402/- + 76500/= 12883011-). The paper book submitted by the assessee was sent to the AO for his comments. The AO in the remand report reiterated the points mentioned in the assessment order. I have considered the assessment ord .....

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some of the expenses were related to the earlier year was also examined by the AO in the assessment for assessment year 2006-07 as is evident from the assessment order for the assessment year 2006-07 wherein also the cash book was examined. Even in his remand report the AO has not been able to point out any discrepancy in the assessee's submissions. The AO has also not disputed the mistake in respect of voucher number 223 pointed out by the assessee. In so far as the remaining sum of Rs. l .....

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es. The addition of Rs.l2,88,301/- is, therefore, deleted. Accordingly, this ground is allowed. Aggrieved, against the order of the C.I.T.(A), revenue is in second appeal before Tribunal. 6. We have heard rival contentions and gone through facts and circumstances of the case. Before us assessee contended that it is maintaining regular books of accounts including stock registers which was produced in the course of hearing of before A.O., but no defect has been pointed out in the books of account. .....

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was also produced. A statement prepared from the said ledger account is also filed. We found from the argument of assessee that the AO made a mistake while making tabulation in respect of one of the vouchers out of 136 vouchers. At SI page 223 the amount should be ₹ 8,500/- instead of ₹ 85,000/-. The total will thus come down to ₹ 12,11,301/- in place of ₹ 12,88,301/-. We find that the assessee before AO as well as before CIT(A) also claimed that all these vouchers have .....

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name and in respect of the same amount. Therefore the sum of ₹ 1071399/- is duly recorded in the books of accounts. We find that the AO has made the addition under misconception in respect to this amount ₹ 10,71,399/-. Even otherwise, the matter was referred to AO for remand report, who refused to go into the books of account and observed as under:- During the course of survey number of vouchers in respect of expenditure were impounded but without any date but the A.R could not subst .....

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e expenses are found not recorded in the books of A/c's it is treated as unexplained expenditure. ₹ 5,148/-: This is labour expenses which is not recorded in the books of A/c's. ₹ 1,30,651/-:- This is undisclosed payment on account of labour charges as the assessee failed to produce any evidence in this respect. ₹ 2,55,705/-:- As per impounded document marked MS-13 page 40 the expenditure was incurred for different gift items. As the expenditure are not found in the boo .....

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8377; 85000/-), which is not disputed by the AO in the remand report. The AO has not disputed the claim of the assessee that out of the total of ₹ 12,11,301/- (after correcting the totaling mistake) the vouchers for a sum of ₹ 10,71,599/- were duly recorded in the earlier year's books for which specified amount wise details were filed before the AO in course of assessment proceedings and have not been adversely commented by the AO even in the assessment order. Therefore simply be .....

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written submissions with the unrecorded sales of ₹ 16,89,700/- on which the Ld AO himself has estimated the profit of ₹ 2,40,048/- thereby allowing the expenses of ₹ 14,40,652/-. Such expenses in fact have been found in the course of survey being the above sum of ₹ 10,57,536/- as well as the sum of ₹ 1,40,402/- and given in para-10. The AO in the remand report has reiterated his views taken in the Asstt. Order and has not disputed the claim of the assessee correlat .....

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he following ground no.2:- Ground No.2: That Ld CIT(A) has erred in law as well as facts in deleting the addition of ₹ 5,25,431/-, ₹ 5148/-, ₹ 1,30,651/-, and ₹ 2,55,705/- aggregating in all ₹ 9,16,935/- which were made on the grounds that they are not the expenses in the books of accounts. 9. Brief facts are that the AO added back ₹ 5,25,430/- ₹ 5,148/- , ₹ 1,30,654/- and ₹ 2,55,705/- as unexplained expenses vide seized papers on the ground .....

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d expenditure of ₹ 5,25,4311-, ₹ 5,148/- ₹ 1,30,651/- and ₹ 2,55,705/- aggregating in all ₹ 9,16,935/-. From examination of the material impounded during the survey found that some of the documents contained notings about the expenses incurred by the assessee which as per annexure MS-5 were ₹ 5,25,430/-, as per annexure MS-6 ₹ 5,148/-, as per annexure MS-12 Rs.l ,30,651/- and as per annexure MS-13- ₹ 2,55,705/-. In view of my findings above, in the .....

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ion on that account can be made. In view of above, the addition of ₹ 9,16,935/- is deleted. Thus, this ground is allowed. Aggrieved, against the order of CIT(A), revenue came in second appeal before Tribunal. 11. We have heard rival submissions and gone through facts and circumstances of the case. The assessee is in the business of selling of jewellery. The modus operand of the assessee s business is that apart from its own sale of jewellery, the small gold smiths who also manufactures som .....

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o ₹ 16,89,700/- outside the books and on the said undisclosed sale the AO has already estimated net profit at 14.68%. We find from records that in course of survey the AO found that some of the purchased jewellery as well as the labour charges were not accounted for, as mentioned above, which is not accounted for. AO himself has presumed outgoings for such sale (Rs.16,89,700- ₹ 2,40,048) at 14,41,652/-. The AO has found in the impounded papers the payment amounting to ₹ 10,57,3 .....

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ised following ground no.3: Ground No. 3. That Ld. CIT(A) has erred in law as well as in facts in deleting addition of ₹ 7,45,959/- which was made as unexplained investment. 13. Brief facts leading to the above issue are that the AO during the course of assessment proceedings noticed from impounded document MS-10 that pages containing 9 -28 contained the details of silver jewellery/utensils manufactured by Karigars pertaining to this FY 2006-07 relevant to AY 2007-08. The AO brought out th .....

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ssions made by the assessee, the remand report and rejoinder to the remand report and the relevant papers filed before me. I examined the relevant impounded papers and found that the AO has not appreciated the facts correctly. The notings of the figures of 5280/-, 503/- 800/- 1200/- and 910/- on Page 9 of MS-10 clearly show that the same were on account of (Majuri) labour charges. Similarly, page 12 of the same annexure shows the calculation of labour charges, similar is the position in respect .....

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al before Tribunal. 14. We have heard rival contentions and gone through facts and circumstances of the case. Regarding expenditure of ₹ 7,45,959/- the AO during remand proceedings observed that on verification of impounded books of accounts as per ID Marks MS-10, it is seen from handwritten loose sheets from Page 10 to Page 23 that these pages are handwritten loose sheets. In these loose sheets there were some descriptions written in left side and in weight/grams written on the right side .....

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erms of weight nowhere it is written as labour charges except ₹ 605 as per Sl.No.24 and ₹ 100/- as per Sl.No.19 which is amount paid are clearly mentioned. In Page 9 of Ledger Page of Ajoy Singh it is written at the top of the page as 'Rupees'. Hence, it appears that the figures are 5280+503+800+ 1200+9l0 = ₹ 7693 are labour charges in terms of money instead of weight in grams. Hence, total weight comes to 40283.730 - 7693.000 = 32590.730 undisclosed investment which co .....

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see since there was no hooks of accounts were found in business premises during the course of survey operation and in spite of opportunity provided during the day of survey no books of accounts were produced. The contention of the assessee is based on his document/paper but the same was not found during the course of survey at the business premises. But we find that while making the tabulation in the assessment order, the AO has mixed up the amount in terms of money and the weight in terms of gr .....

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, 54,570/- and ₹ 8,555/-. Therefore the total silver manufactured during the year as well as the labour charges incurred was much more than what the AO found in the impounded papers. In fact the entire confusion has arisen because of the mistaken belief of recording the figures in terms the money as well as grams as if the same was weight of the silver dealt with. In view of the above facts and circumstances of the case, we are of the view that CIT(A) has rightly deleted this addition and .....

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ring the course of assessment proceedings noticed from the impounded documents MS-4 that there is excess stock in respect to 22 carats Gold, 18 carats gold and silver ornaments and the differential value is at ₹ 7,97,234/-. The AO brought out the difference in a chart which is reproduced from assessment order as under: Items Disclosed by Firm (in gram) Found by survey Team (In gram) Excess total (in gram) Values 22ct gold 20819.210 20409.030 410.180 Rs.3769955.42 @919/- per gm 20 ct gold 1 .....

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O deleted the addition by observing in para 10.3 as under: 10.3. I have considered the assessment order and the submissions of the A.R. as well as the remand report of the A.O. and the rejoinder of the A.R. I find myself in agreement with the A.R. that if there was higher figure of recorded stock than what was found in the course of survey such excess recorded in the books cannot be treated as undisclosed investment in the hands of the assessee. The addition of ₹ 7,97,234/- is, therefore, .....

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rse of survey. The AO, therefore, treated the excess found as per books of accounts as undisclosed investment. Even during remand proceedings the AO observed that the assessee disclosed higher side Jewellery found than during the course of Survey. It is also mentioned earlier that during the course of Survey no cash book, ledger, account, etc. was found and the assessee stated that the same was lying with Accountant for Audit purpose. But she failed to disclose name of the Accountant during the .....

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of account as compared to the physical stock found at the time of survey. We find that once the AO had accepted the stock as per books reconciled by the assessee. No deficiency or mistake is found or pointed out in the said reconciliation then AO cannot make any addition on this account. If the books of account show higher figure of stock then what was found in the course of survey, such excess cannot be added as undisclosed investment. Accordingly, this addition has rightly been deleted by CIT( .....

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t the AO during the course of assessment proceedings noticed from impounded document MS-20 that the claim of assessee regarding customers gold is not proved because many of the persons have denied giving any gold to assessee. Therefore, the AO treated the customers gold weighing at 5607.441 grams as undisclosed stock and thereby added the same as unexplained investment to the tune of ₹ 51,53,238/-. Aggrieved, assessee preferred appeal before CIT(A). 21. The CIT(A) after considering the sub .....

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e as under: "The AR was also given the details of replies received from different parties against verification letter issued to them. The AR submitted as he has already admitted the discrepancy to the extent of entries no further action is warranted" . The above noting was verified from the assessment records which were called for from the AO. In my opinion there is no such admission for making any addition as stated by the AO. I also find from the replies sent by customers that there .....

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g this period. I apologies for the missing document" The replies sent by Ms. Amita Saha, Sh. A.K. Prasad and Sh. A.K. Bhadra to the A.O. are also reproduced hereunder: Reply of Sh. A.K. Prasad "To D.C.I.T., Circle -50 Office of the Dy Commissioner of Income Tax, Circle - 50, 169, AJC Bose Road, Bamboovilla, Kolkata 700014. Dear Sirs, Ref: Your letter No. DCIT. Cir-50/Scrutiny/2009-10/Kol./1205 dtd 07.12.2009 Sub: Calling information U/S 133 (61 in case of Smt Maya Sirkar of AE-335, Sal .....

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ve purchased items in the range of ₹ 18,000 to 20,000 in the entire FY from this shop . Unfortunately, I am not able to locate the purchase bills and therefore am not in a position to furnish the documentary evidence in support of my submission, The lack of documents is deeply regretted. My PAN number is AAHPP2522K. Thanking you, Yours truly, Sd- A K Prasad CF-282, Salt Lake City Kolkata 700064. " Reply of Sh. A.K. Bhadra 23RD December, 2009 "The Deputy Commissioner of Income Tax .....

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e to gap of a long time, I am unable to recollect the exact position and to find out the papers. I confirm that I have no other financial transactions with the above Assessee or with her shop. My PAN No.is ACXPB9244Q. The inconvenience caused is regretted. Thanking you, Yours faithfully, Sd/- (Aloke Kumar Bhadra) " CF-98, Salt Lake City, Kolkata-700064 Reply of Ms. Amita Saha "The Deputy Commissioner of Income Tax Mrs.Anita Saha AD-17 /5 Salt Lake City Kolkata-700064. Circle-50 Bamboo .....

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M Sirkar & Sons I like to mention that a very few purchases were made by us from them during last 3/4 years on different dates the ornaments of small value approximately of ₹ 2000/- to ₹ 18000/-. At this distance of time I cannot recollect the exact amount and the date of purchases as relevant Cash Memos are not readily available with us. I prefer to enclose a Xerox copy of my Voter Card as proof of my Identity for your record. I hope this will serve your purpose. Yours faithfull .....

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o furnish the following information in writing in respect of the above mentioned assessee. 1. Details of transactions in cash or otherwise with the above mentioned assessee during the financial year 2006-07 (F.Y. 2007-08) with opening balance and closing balance. 2. Details of balance of cash or otherwise lying with the above mentioned assessee on 12.9.2006. 3. Detail of payment received/made during the financial year 2006-07. 4. Please furnish your P.A.No. Please furnish the documentary evidenc .....

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t the assessee has disclosed substantial receipts from job charges and such job charges are received every year. In assessment year 2006-07 such receipts were to the extent of ₹ 37,06,337/- Not only that, a separate register (marked annexure MS-20) was also found in the course of survey which proves that the assessee received gold for job working from customers. Furthermore, none of the customers have denied to have purchased ornaments from the assessee. I also find that the AO has partly .....

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prove that the excess gold belong to customers. Notices were issued but they denied having any transactions with the assessee which was clearly stated in Assessment order page No.16 and the same was informed to the assessee which it is appeared from order sheet dated 29.12.2009. But on the date of hearing the assessee did not claim any cross examination but to accept discrepancy. Hence, value of gold weighing 5607.441 grams of gold ( 22Ct.) for ₹ 51,53,238/- is added back as unexplained in .....

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ments after verification I examination from the customer's gold as claimed by the assessee. We find that the AO added back ₹ 5153238/- as the customers gold, which according to AO, was not proved as belong to customers. The AO issued notices to few of customers, some of them accepted having the transaction and some of them denied. The AO asked the assessee to explain the customer's gold and ultimately the AO concluded that the assessee admitted for the addition. We find that the as .....

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quired by which it meant that he did not want to cross examine the parties who has replied in the negative. But there still remained the parties who have confirmed having the transaction with the assessee during the year. Even if some of the parties did not accept but the fact could have been brought out from the records. We noted from the Audited Accounts filed with the return that the assessee has received making charges to the extent of ₹ 4170785/- which means that during the year the a .....

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submitted on which the AO has relied on the while making addition of ₹ 797234 vide para 11 of the assessment order while considering the stock discrepancy. The AO has accepted the gold ornaments belonging to customers at 13649 gms. Having accepted and relied on the said statement he cannot deny the said availability of gold while making another addition. He should have accepted his own finding as recorded in para 11, Page 14. The AO has also accepted the fact that some gold was lying with .....

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s well as facts in deleting addition of ₹ 39,16,154/- which was made as well as valuation report and unexplained investment. 24. Briefly stated facts are that the AO noticed from the page no. 34 of MS-4 and page no. 1 of Ms-19 as well as valuation report at Sl. No. 42 to 51 and 54 to 58 that there is a difference in term of quality, weight and value to the extent of ₹ 39,16,154/-. According to AO, as the assessee could not explain the difference nor could reconcile, he treated the di .....

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ones. Similar is the position in page-I of MS-19. The DVO has also calculated the market value of 3050.98 ct of stones at ₹ 39,16,154/-. If the gross profit embedded therein is reduced therefrom, the cost price of the stones found comes to about ₹ 1000 per ct and the cost price of the stones purchased vide pag34 of MS-4 also comes to about ₹ 1000 per ct. I also find from the audited accounts that the assessee had purchased more than 500 gms (equal to 2500cts) of stones during t .....

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llowed. Aggrieved, revenue is in second appeal before Tribunal. 26. We have heard rival submissions and gone through facts and circumstances of the case. We fond that the AO has added back ₹ 39,16,154/- on the basis of the valuation done by the DVO determining the market value of the stones as undisclosed investment. On being asked to explain, the assessee explained that the assessee had with him some opening stock of the stones as well as stones purchased during the year before the date o .....

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reconciled the difference. We have gone through Page-34 of MS-4 and find that certain bulk quantities are mentioned in the said page. There is no mention of any quantity of material. Similarly is the position in respect of page-I of MS-19. It is a fact that the DVO has calculated the market value of 3050.98 gm of stones at ₹ 3916154/-. The GP rate of the assessee during the year is 21.20%. Therefore, even as per the valuer the cost price of this stone will come to 3085146/- which is the v .....

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