TMI Blog2016 (1) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... pers - 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 same to the customers and on sale the payment is made thereafter to the gold smiths. This will be apparent from the seized paper MS-5 wherein the payment for small items of jewellery is made to such gold smiths. The assessee has already admitted the sale of jewellery amounting to ₹ 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 ₹ 10,57,336/-, which is much less than the outgoing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee, the assessee had excess stock of jewellery recorded in its books 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(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:- The AO has not disputed the said receipts and has accepted the assessee's stand that the assessee has received the remaking charges of old jewellery given for remaking by the customers. It is of common knowledge that such remaking takes a month or two and in between such jewellery remains with the assessee. We have also gone through the reconciliation submitted on which the AO has relied on the while making addition of ₹ 797234 vide para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t ) 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 manufacturing and trading of jewellery. A survey u/s 133A of the Act was carried out by revenue on the business premises of the assessee on 12.09.2006. During the course of survey certain registers, loose bunch of documents were found and inventorised as MS1 to MS 20. During the course of survey no books of account were made available to the survey party of the department. 3. The first issue in this appeal of revenue is against the order of CIT(A) deleting the addition of ₹ 12,88,301/- made by AO on 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 MS-20 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cash book and ledger for the relevant year was produced before the AO along with detailed statement showing 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 assessment order. In respect of one of the vouchers at serial no. 223, the amount in voucher was ₹ 8,500/- and not ₹ 85,000/-. In respect of the remaining vouchers for ₹ 1,40,402/- it was submitted that no entry could be found in the cash book for the assessment year in question as well as in earlier years but the assessee has admitted sales outside the books to the extent of ₹ 16,89,000/-. It was submitted that the AO has estimated profit of ₹ 2,48,048/- on such sales which is not disputed. The AO, therefore, in the process has allowed unrecorded expenses of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the books of account. We find that a survey was conducted at the business premises of the assessee on 12.9.2006. During the course of survey various papers, registers, documents and loose bunches of sheets were inventorised and impounded by the AO. In the course of assessment proceedings the AO called for certain clarifications and explanations and the same were complied with. The assessee before the AO produced the cash book and ledger for the relevant year. A copy of the ledger account of labour payments cash book 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 been entered in the regular cash book except some payments aggregating ₹ 1,40,402/-. All the payments were duly entered into in the regular books of accounts except the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 because there was no date on the vouchers but specific amount was found debited in the earlier year's cash book and there was no evidence to suggest that these expenses related to this year, the addition was not justified Hence, we confirm the order of CIT(A) deleting this addition. 7. With regard to the disallowance of certain expenses from the impounded papers amounting to ₹ 10,71,399/- (Rs. 5,25,431+ 5,148+ 1,30,651+ 2,55,705), that the same have been correlated by the assessee in the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeds of ₹ 16,89,000/-. Moreover I find the description in MS-5 is Ring, Jhumka, Necklace etc and in MS-12 (unrecorded sales) also the description is Ring, Jhumka, Chain, etc. which proves that the unrecorded sales were of the unrecorded purchases, therefore, both cannot be added. Since the unrecorded purchase has already been dealt with in preceding para, no addition 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 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 same to the customers and on sale the payment is made thereafter to the gold smiths. This wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppreciated 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 of page 11, 10, 22, 23 and other pages as detailed by the assessee. It is also observed from the assessee's audited accounts that the manufacturing, purchase and sale of silver ornaments etc. were much more than what is recorded in the impounded papers. In view of the above facts I do not find the addition made by the AO to be justified. Therefore, the addition of ₹ 7,45,959/- is deleted. This ground is, hence, allowed. Aggrieved against the order of CIT(A), revenue came in second appeal 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal 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 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 we confirm the same. 15. The next issue in this appeal of revenue is against the order of CIT(A) deleting the addition made by AO on account of unexplained investment made in excess stock at ₹ 7,97,234/-. For this, revenue has raised following ground no.4: Ground No. 4. That Ld. CIT(A) has erred in law as well as facts in deleting addition of ₹ 7,97,234/- which was made as excess stock considered as unexplained investment. 16. Brief facts leading to the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llery. The AO found that as per the books of accounts and records of the assessee the stock of the jewellery and silver ornaments were higher than the stock found in course 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 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 purchase recorded as claimed by the assessee is not accepted and the same was added back as excess stock. But we find that the assessee reconciled the excess stock with that the books of account and the reconciliation submitted by the assessee, the assessee had excess stock of jewellery recorded in its books of account as compared to the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing any addition as stated by the AO. I also find from the replies sent by customers that there is no denial of purchase made from the assessee. The stereotyped letters sent by 5 persons were as under: This is to inform you that I had a transaction with M. Sirkar and Sons during the period 1.4.2006 to 31.3.2007. I could not find the document regarding the transaction due to the long time period in which the transaction was made. Due to this reason I am unable to produce the documents after such a long time. I hereby confirm that there was a transaction with M. Sirkar Sons during 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, Salt Lake City. Kolkata 700064 for A.Y 2007-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above notice I like to inform you that I am a housewife and I do not have any taxable income and I do not have PAN Card also. The earning member of our family is my husband Sri Ahindra Chandra Saha, retired professor of Calcutta University whose PAN No.AKKPS2299B. As regards the transactions with M/s. 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 faithfully, Sd/- ( AMITA SAHA ) Encl : As above. The AO has mentioned in the assessment order that none of the customers admitted to have deposited gold with the assessee. But from the notice u/s 133(6), it appears that the AO did not raise any query in such notices with regard to the deposit of gold, if any, by the customers. From the perusal of the notices U/S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee 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 investment. Moreover, the assessee claimed that he had received 83.414 grams of gold from customers on the basis of ₹ 50/- per gram as making charges as per Valuer's report. On the basis of Valuer's report on making charges, the weight of the gold arrived is ₹ 4I,70,785/- divided by ₹ 50/- as making charges, The weight of gold 83.414 grams is the assumption of the assessee but not on the basis of the impounded documents but addition was made on the basis of impounded documents 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 ultima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y AO on account of difference in valuation treating the same as unexplained investment. For this, revenue has raised following ground no.6: Ground No. 6. That Ld. CIT(A) has erred in law as 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 difference as undisclosed investment. Aggrieved, assessee preferred appeal before CIT(A). 25. The CIT(A) deleted the addition by observing in para 12 of his order. The relevant portion of para 12 reads as under: I have considered the assessment order, submissions made by the assessee, the remand report and rejoinder to the remand report and the relevant papers filed before me. I find that in page -34 of annexure MS-4 bulk quantity of stones is mentioned but there is no mention of any qualit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year is 21.20%. Therefore, even as per the valuer the cost price of this stone will come to 3085146/- which is the value of 3050. 98 grams which comes to about ₹ 1000 per grams. It is also a fact that the value of the stones purchased (2578.50gms) was also about ₹ 1000 per gm. as per seized documents MS4 Page-34. Therefore the cost of the stones found tallied with the cost determined by the DVO which comes to more or less the same. It is also a fact that from the quantity statement with the total stones purchased during the year was 315.704 gms + 2578.59 gms + 53.601 + 133.379 gms the total of this comes to more than the stones found in the course of survey. It may here be mentioned that even the CBDT in its Press Note dated 11.5.94 has directed even that even in search and seizure relating to house hold jewellery not to treat the jewellery as unexplained if the weight of the jewellery found tallies with the weight disclosed by the assessee. It has 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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