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2016 (11) TMI 1239 - ITAT PUNE

2016 (11) TMI 1239 - ITAT PUNE - TMI - Addition on account of excess stock of Gems - Held that:- Admittedly, there are two valuation reports, one given by the valuer appointed by the department and the other one given by the valuer appointed by the assessee. The report of the valuer appointed by the assessee was given to the DDIT (Investigation) on 25-11-2002 which is after the search proceedings. We find there is no reason whatsoever has been given for either accepting or rejecting the said val .....

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restrict the addition to ₹ 2,21,783/-. - Decided partly in favour of assessee - Addition on account of the stock of sun glasses, Uktamal, perfumes, watches etc. - Held that:- The main grievance of the assessee is that 7% deduction given by the AO on account of bargain which has been upheld by the CIT(A) is very low since these are of fancy items and with the arrival of latest designs these items become obsolete and the assessee allows higher bargaining. It is also the submission of the .....

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by the CIT(A). The AO is directed to recompute the addition accordingly. - Addition of unaccounted stock - Held that:- No reason in the order of the CIT(A) that shortages are there because of the unaccounted sales carried out by the assessee regularly. Since he has not appreciated that for the unaccounted sales separate addition has been made by the AO, therefore, we find merit in the arguments advanced by the Ld. Counsel for the assessee that the reasoning given by the CIT(A) is devoid of .....

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₹ 4,72,834/- The AO is directed to verify the above and give consequential relief. - Addition on unaccounted purchase and sales - Held that:- On the basis of the unaccounted purchases and sales found for the period from 21-08-2002 to 24-09-2002 the AO estimated the sales for the entire period from 01-04-2002 to 24-10-2002 on the basis of the sales for 28 days at ₹ 12,22,95618/- and estimated the profit at 13% at ₹ 1,58,98,430/-. So far as the other years of the block perio .....

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owever upheld the GP rate adopted by the AO. The detailed reasoning given by the CIT(A) while deciding this issue has already been reproduced in the preceding paragraphs. The order of the CIT(A) is quite exhaustive and deals with each and every aspect of the arguments advanced by the Ld. Counsel for the assessee. In our opinion, the order of the CIT(A) is a reasoned one under the facts and circumstances of the case. Therefore, we do not find any infirmity in the same - Decided against assessee .....

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on on account of excess stock of gold - Held that:- We find the CIT(A) accepted the genuineness of the bill on the ground that the bill issued by M/s. H. Kumar Gems International to the assessee was found in the assessee’s premises. Shri Anil Ranka and Shri Omprakash Ranka had also purchased jewellery from the said party which were duly recorded in their books before the date of search. Therefore, the AO should not have disbelieved the bill issued to M/s. Ranka Jewellers Pvt. Ltd. i.e., the asse .....

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ccount. - Decided in favour of assessee - Adition on account of excess stock of silver when the valuation of the stock was done by a qualified Government valuer - Held that:- We find the Ld.CIT(A) considering the submission of the assessee that the weight of plastic bags have not been properly considered by the search party as well as the valuer accepted the contention of the assessee and deleted the addition which has already been reproduced in the preceding paragraph. We find the order of .....

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rn of the assessee which has been followed by the CIT(A) while deleting the addition made by the AO on this issue, therefore, in absence of any contrary material brought to our notice against the order of the Tribunal in the case of the sister concern of the assessee on identical issues we find no infirmity in the order of the CIT(A) deleting the addition. - Decided in favour of assessee - Agreement to working of the undisclosed turnover - Held that:- We find the Ld.CIT(A) in his order has .....

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stimation of turnover by the AO and the special auditor. This reasoned finding of the CIT(A) in our opinion does not call for any interference. Accordingly, the same is upheld - Decided in favour of assessee - ITA No.2188/PN/2012, ITA No.2189/PN/2012 - Dated:- 23-9-2016 - SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM For The Assessee : Shri S.U. Pathak For The Revenue : Shri A.K. Modi ORDER PER R.K.PANDA, AM : These are Cross appeals. The first one is filed by the Assessee and the second one fi .....

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ness premises and the residential premises of the Directors, i.e. entire Ranka Jewellers group along with some of their trusted employees and persons from whom the group makes purchase etc. During the course of search at the business premises at Laxmi Road, Gold jewellery weighing 14032.700 gms valued at ₹ 70,11,529/-, Diamond jewellery valued at ₹ 18,95,786/-, Silver articles weighing 22.781 kg valued at ₹ 1,76,553/-,Gems valued at ₹ 8,33,683/-, Sunglasses valued at S .....

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ets etc were seized from the residential and business premises of the assessee. In response to notice u/s.158BC the assessee filed the return of income on 30-09-2003 declaring undisclosed income at ₹ 1,50,00,000/-. The AO issued notice u/s.143(2) and 142(1) along with a questionnaire asking the assessee to explain as to how the assets found during the course of search has been accounted for and as to how the transactions noted in the seized books and documents have been accounted for in re .....

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O determined the total undisclosed income for the block period at ₹ 2,67,11,893/-. He also determined the undisclosed income for the block period on the basis of undisclosed turnover at ₹ 2,56,64,393/-. Since the undisclosed income as per the assets found is more than the income as per the undisclosed turnover he determined the undisclosed turnover for the block period at ₹ 2,67,11,893/-. 5. In appeal the Ld.CIT(A) gave part relief to the assessee. The bifurcation of individual .....

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to appreciate that: a. The asst. is barred by limitation as the search was prolonged unreasonably without justification. b. The seizure of Gold ornament and diamond ornament has been made out of stock which is not kept in the prohibitory order. c. The seizure of ornaments was made prior to reconciliation of stock and without giving proper opportunity to explain. d. The seizure of ornaments was made even though there was no excess in the stock. e. The prohibitory order was only for one room in wh .....

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stered valuer Shri Parag Gadgil had valued the excess stock at ₹ 2,21,783/- and the same should have been accepted instead of taking the average of the two market values determined by two different valuers. c. When there are two valuation reports, if no apparent error / discrepancy is found, the lower of the valuation ought to have been accepted instead of taking the average of two market values. d. The stock had to be considered at cost for determining the excess and as the same was taken .....

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are studded. 3. The learned CIT(A) erred in sustaining the addition of ₹ 2,80,553/- on account of the alleged excess stock of Sun Glasses, Uktamal, Perfumes, Watches, etc. (page No. 95 CIT(A)). 3.1 The learned CIT(A) failed to appreciate that a. The above additions were based on the valuation based on MRP rates as reduced by G.P. margin of 20% and bargain margin of 7% and hence, the valuation was approximate and vague. b. The learned CIT(A) failed to appreciate that there is a lot of barga .....

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the obsolete / slow moving stock. 4. The learned CIT(A) erred in directing the A.O. to verify the facts regarding the addition of alleged unaccounted stock of ₹ 79,34,244/-. (page No. 103 to 109 CIT(A)). 4.1 The learned CIT(A) was not justified in restoring the matter to the A.O. when he had no power under the law to set aside the matter to the A.O. 4.2 The learned CIT(A) was not justified in restoring the matter to the A.O. when he himself has accepted on page 108 of his order that the cl .....

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y to the period for which the evidences were found during the search. (Page 142 to 146 of CIT(A) order). 5.1 The learned CIT(A) accordingly, erred in sustaining the addition of Rs.l,03,53,679/- for the period 01.04.2002 to 24.10.2002 (Page 142 of CIT(A)) and addition of ₹ 76,90,694/- for the period F.Y. 1996 - 97 to 2001 - 02 (Page 146 CIT(A)). 5.2] The learned CIT(A) was not justified in holding that a. In a block asst. the addition could be made on the basis of estimation - and extrapola .....

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CIT(A) failed to appreciate that a. The addition on account of unaccounted transactions had to be restricted only to the extent of the incriminating evidences found during the search. b. Without prejudice assuming without admitting that the extrapolation of sales was justified, it could not be made to such a high level as made by him for the block period. 6. The learned CIT(A) erred in confirming the addition of initial investment in the unaccounted stock of ₹ 7,44,133/- (page 146 to 152 o .....

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record to conclude that the alleged purchases of gold was actually never received by the assessee. 3. The Commissioner of Income-tax (Appeals) has erred on facts and in law in deleting the addition of ₹ 1,76,553/- on account of excess stock of silver when the valuation of the stock was done by a qualified Government valuer. 4. The Commissioner of Income-tax (Appeals) has erred on facts and in law in arriving at his own figure of excess stock by applying the average method and granting a re .....

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ot agreeing to the working of the undisclosed turnover for the F.Y. 2002-03 given by the Assessing Officer and the Special Auditor on the basis of the seized documents and substituting it with his own working. 7. For this and other such grounds as may be urged at the time of the hearing, the order of the Commissioner of Income-tax (Appeals) may be vacated and that of the Assessing officer be restored. 8. The appellant craves leave to add, amend, alter or delete any of the above grounds of appeal .....

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ery valued at ₹ 8,33,651/- was seized as per Annexure C to the Panchanama dated 25-11-2002. During the course of search the valuation was done at ₹ 36,00,256/-. The assessee was also asked during the course of search to explain as to how the Gems have been accounted for. The assessee reconciled such gems as under: Total valuation as per inventory Rs.3600256 Less : Cost of goods taken on approval and anamat Rs.501220 Rs.3099036 Less : GP 20% +5% bargain Rs.774759 Rs.2324777 Less : Val .....

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ion report from another Valuer Shri Parag Gadgil on 06-11-2002 and a copy of the same was submitted to the DDIT (investigation) on 25-11-2002. As per the valuation done by Shri Parag Gadgil the reconciliation was as under : Valuation of precious gems Rs.11,83,425 (Excluding items on approval and Anamat and excluding the value of gold) Less : GP 20% +5% bargain Rs.2,88,356 Rs.8,65,069 Less : Valuation as per books Rs,6,43,286 Excess Rs.2,21,783 10. It was submitted by the assessee that if at all .....

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aluation done by the departmental valuer is more acceptable. However, the auditor has not given any finding about the acceptance or rejection of the second report which was also given by a registered valuer prepared during the period of search itself and was given to the Investigation Unit. There is no material available on record which can suggest why the difference was existing except by the argument made by the assessee in its submission that Shri Uttam Jain has not done valuation in detail a .....

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d. Counsel for the assessee strongly opposed the order of the CIT(A). He submitted that why the report of Shri Parag Gadgil should be accepted and that of Shri Uttam Jain should be rejected are already given before the CIT(A). The main reason for rejection of the valuation report submitted by the departmental valuer is that Shri Uttam Jain has not given the details of weight of the stones, purity of gold, gross/net weight etc. while the details are given in the report of Shri Parag Gadgil. 13. R .....

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the other heavily relied on the order of the CIT(A). 15. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the decision cited before us. We find during the course of search valuation of Gems and Jewellery was done at ₹ 36,00,256/-. After considering the book value of such gems, the difference was determined at ₹ 8,33,683/- which was added by the AO to the .....

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opined that the report of the departmental valuer is acceptable, had made addition of ₹ 8,33,683/-. However, the CIT(A) restricted the disallowance to ₹ 5,27,733/-being the average of the two reports. 16. It is the submission of the Ld. Counsel for the assessee that there is no justification for rejecting the valuation report given by Shri Uttam Jain, registered valuer appointed by the assessee whose report gives the details of weight of the stones, purity of gold, gross/net weight e .....

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e assessee. The report of the valuer appointed by the assessee was given to the DDIT (Investigation) on 25-11-2002 which is after the search proceedings. We find there is no reason whatsoever has been given for either accepting or rejecting the said valuation report. Since the valuation report given by Shri Parag Gadgil, the valuer appointed by the assessee, gives the details of weights of the stones, purity of gold, gross/net weight etc. whereas such details are not given in the report of the d .....

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77; 2,80,553/- on account of the stock of sun glasses, Uktamal, perfumes, watches etc. 19. Facts of the case, in brief, are that during the course of search sun glasses valued at ₹ 1,97,415/-, Uktamal valued at ₹ 8,913/-, perfumes and cosmetics valued at ₹ 65,699/- were put under deemed seizure. Similarly, stock of watches valued at ₹ 3,93,843/- was also found. After considering the inventory prepared at the time of search, the gross profit margin, bargain etc. thereon th .....

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- 11,11,796/- 1,97,415/- 2 Uktamal 7,41,030/- 7,32,117/- 8,913/- 3 Perfumed and cosmetics 3,12,608/- 2,46,909/- 65,699/- 4 Watches 3,93,843/- 3,85,317/- 8,526/- 2,80,553/- 20. Before CIT(A) the assessee challenged the above addition on the ground that the AO has erred in disregarding the necessary evidences and explanations given at the time of assessment. It was submitted that the department while valuing the above items has reduced 20% on account of gross profit and 7% on account of bargain fr .....

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mitted by the assessee that assessee gives substantial discount to VIP and privileged customers. No reduction on this account has been given by the AO. 21. However, the CIT(A) was not satisfied with the explanation given by the assessee and upheld the addition made by the AO on the ground that such addition is fair and reasonable. The various arguments made by the assessee according to him are based on assumptions and presumptions and therefore cannot be accepted. 22. Aggrieved with such order o .....

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it of 25% should be given for bargaining as against 7% allowed by the department. 24. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). 25. After hearing both the sides, we find the addition of ₹ 2,80,553/- was made by the AO on account of excess stock of sun glasses, Uktamal, perfumes and watches. The main grievance of the assessee is that 7% deduction given by the AO on account of bargain which has been upheld by the CIT(A) is very low since .....

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Considering the totality of the facts of the case, we direct the AO to allow 15% reduction on account of bargain as against 7% considered by him which has been upheld by the CIT(A). The AO is directed to recompute the addition accordingly. Ground raised by the assessee is accordingly partly allowed. 26. Ground of appeal No.4 by the assessee relates to addition of unaccounted stock of ₹ 79,34,244/- made by the AO and upheld by the CIT(A). 27. Facts of the case, in brief, are that during th .....

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as explained by the assessee that diamond bangles valued at ₹ 15,82,777/- and diamond necklace and rings valued at ₹ 4,41,000/- both totaling to ₹ 20,23,777/- were received from Shri Ranka Jewellers, Karve Road. 28. However, the AO did not accept the above contention of the assessee on the ground that in the course of search the assessee did not give any explanation about the receipt of the jewellery found though specifically asked. Further, in the course of search there was a .....

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premises of the Director which was valued at ₹ 51,61,014/-. In absence of any satisfactory explanation given by the assessee the AO added the above amount as unexplained investment in the hands of the assessee company. Thus the AO made addition of ₹ 79,34,244/- (i.e. ₹ 27,73,230 + ₹ 51,61,014). 30. In appeal the Ld.CIT(A) directed the AO to verify the contention of the assessee with certain remarks, the details of which are as under: 10.3 I have carefully considered the .....

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lant in Ground No. 6 under consideration relates to quantification of addition. The Assessing Officer, as discussed in the assessment order, relevant portion of which has already been quoted above in, para 10.1 above, has computed the addition of ₹ 79,34,244, whereas the appellant has contended in their submissions quoted at para 10.2 above that the entire addition requires to be deleted. From the perusal of the assessment order, it appears that the Assessing Officer has examined the gold .....

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lery valued at ₹ 21,48,777 was seized on the same date and the remaining was inventorised as found but not seized. The reconciliation and explanation in respect of jewellery found but not seized out of the total jewellery of ₹ 49,93,634, referred to above, were submitted by the appellant before the Assessing Officer during the course of assessment and it was found by the Assessing Officer that the total diamond included in the entire jewellery was 97.93 ct. (total found, seized and n .....

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hat whatever explained diamond was available in the hands of Mrs. Geeta Ranka in her Wealth tax return, were already considered in their hand and therefore, the claim was held to be not correct. In view of the above, the value of jewellery represented by the excess diamond found but not seized at Sr. No. 18, 19, 21, 24, 27, 28 and 30, having the total valuation of ₹ 6,24,453 were treated as unexplained in addition to the seizure of ₹ 21,48,777, made by Annexure C-1 of panchanarna dat .....

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gross weight 135 gms, net weight 127.35 gms, were received from Ranka Jewellers, Karve Road on Jangad was not accepted by the Assessing Officer on the ground that no such information or explanation was ever given during the course of search at any stage and therefore, this explanation and evidence being produced at the stage of assessment cannot be entertained. The Assessing Officer has given detailed reasoning for the same in para 36 of the assessment order and can be referred to for details. I .....

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was seized per panchanama dated 28.10.2002. It has been noted by the Assessing Officer in para 37, that Shri F.N. Ranka, in his statement recorded during search on 26.10.2002 has stated that gold bar pieces of 1168 gms belonged to his late' son Shri Shreepal Ranka, which is evidenced by the RBI certificate also seized in search. However, no finding has been given by the Assessing Officer in respect of the above claim. It was further noted in the assessment order that Mr. Ranka had stated in .....

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ven, further benefit was not available. Another claim made by the appellant that item no. 51 (diamond neckless set with earings of the value of ₹ 1,10,000) and item no. 52 (diamond necklace set with earrings of the value of ₹ 3,31,000) were also received on Jangad from Ranka Jewellers, Karve Road, was also found to be not acceptable by the Assessing Officer for the same reasons as discussed in para 36 of the assessment order while dealing with another similar claim for explanation of .....

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de explanations which have been quoted in para 10.2 of this order and can be referred to for details. The major issues raised by the appellant relates to denial of benefit for the jewellery claimed to have been received on Jangad from Ranka Jewellers, Karve Road of the value of ₹ 15,82,777 and ₹ 4,41,000, as described above. It is noted that the appellant has contended in this respect that the aforesaid claims were genuine. In support of the same the appellant produced the copy of Ja .....

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tended in their submission that the same Assessing Officer, while completing the assessment of Shri Vastupal Ranka, prop. Ranka Jewellers, Karve Road, has accepted the issuance of aforesaid items of jewellery in the reconciliation of stock found at their premise and therefore, as per the AR, the Assessing Officer cannot change his stand in this assessment relating to the same transaction. The copy of the assessment order has been placed on record. It is further noted that the Special Auditor in .....

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his Jangad is accounted for in the regular books of accounts of M/s Ranka Jewellers, Karve Road. In view of the above, the auditor has opined that the explanation of the appellant for these items is acceptable. He has computed the unexplained items on this basis. Though the reasons given by the Assessing Officer for not accepting the Jangad as genuine has some force' of acceptability but the same gets fully reversed on the finding that the impugned Jangad was found to be recorded in the regu .....

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hese facts once again and allow the benefit to the appellant in respect of jewellery appearing in the Jangad. Another objection of the appellant relates to gold bar of 1168 gms. The Assessing Officer has himself admitted in the assessment order that Shri F.N. Ranka, in his statement on oath during search has explained the same to have been purchased by his late son Shri Shreepal Ranka under gold bond scheme of 1998 and the documents were found and seized during search. The Assessing Officer has .....

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allow it if the facts described above are found to be correct. As regards the other claims made by the appellant, relating to telescopic benefit of shortage of gold and diamond etc., the same cannot be allowed in view of the discussions already made that the shortages are because of unaccounted sales carried out regularly and no benefit for the same car be granted. Remaining additions of the Assessing Officer are therefore, sustained subject to the above remarks. Ground No. 6 is therefore, treat .....

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of 1998. He submitted that the Ld.CIT(A) directed the AO to consider the evidences. Thereafter, the AO has given relief on account of stock received from Ranka Jewellers, Karve Road. So far as the gold bar of 1168 gms is concerned which belonged to late Shreepal Ranka, the AO has not given any finding. He submitted that on page 22 of CIT(A) s order the gold stock as per the books of accounts was 1,41,945.785 gms while the stock found was 1,36,279.54 gms. Thus, there was a shortage of stock of 5 .....

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stock at residence in the hands of the assessee company. Thus, when they accept that the stock at the residence belonged to the company, the set off of the same against the shortage at the shop should have been given. The CIT(A) on page 109 has not allowed the same. His reasoning is that shortages are there because of the unaccounted sales carried out by the assessee regularly. However, he has not appreciated that for the unaccounted sales, separate addition is made by the AO and therefore, this .....

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es to ₹ 4,72,834/-. He accordingly submitted that the addition should be restricted to ₹ 4,72,834/-. 35. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). 36. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We find the AO made addition of ₹ 27,73,230/- on account of diamonds found in the basement of the residential premises of .....

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n which the Ld.CIT(A) directed the AO to verify the benefit for the jewellery claimed to have been received at Jangad from M/s. Ranka Jewellers, Karve Road valued at ₹ 15,82,777/- and ₹ 4,41,000/- respectively. Similarly, he has also directed the AO to verify the purchase of gold bars of 1168 grams under the gold bond scheme 1998 by his Late Son Shri Shreepal Ranka. So far as the claim by the assessee relating to telescoping benefit of shortage of gold and diamond etc. he rejected th .....

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BI as per Gold Bond Scheme 1998 was filed. It is also the submission of the Ld. counsel for the assessee that stock as per books of account was 141945.785 grams while stock found was 1,36,279.54 grams. Thus, there was shortage of stock of 5,666.240 grams. Thus shortage according to the Ld. Counsel for the assessee is because some stock was kept at the residence and therefore set off should be given. Similarly, for the shortage of diamond of 100 karat worth ₹ 19.80 lakhs set off should be g .....

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83 for 584 grams each. Since the Ld. Counsel for the assessee has substantiated the purchased under the gold bond scheme 1998 for 1,168 grams, therefore, we direct the AO to allow the benefit of 1,168 grams from the unaccounted stock. 40. So far as the contention of the Ld. Counsel for the assessee that set off should be given from the shortage of stock of 5,666.24 grams out of the excess stock found we find some merit in the above contention of the Ld. Counsel for the assessee. It is an undispu .....

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r the unaccounted sales separate addition has been made by the AO, therefore, we find merit in the arguments advanced by the Ld. Counsel for the assessee that the reasoning given by the CIT(A) is devoid of merit. In view of the above, we set aside the order of the CIT(A) and direct the AO to give the set off of the shortage in gold and diamond stock found during the course of search to the extent of excess stock found. According to the Ld. Counsel for the assessee out of the addition of ₹ .....

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2002 and addition of ₹ 7,69,06,944/- for the period from 1996-97 to 2001-02. 42. Facts of the case, in brief, are that during the course of search certain loose papers showing unaccounted purchase and sales were found, the details of such unaccounted purchases and unaccounted turnover found for various years are as under : F.Y. Unaccounted purchases Rs. Unaccounted turnover Rs. 1996-1997 14,759/- 16,964/- 1997-1998 Nil - 1998-1999 14,03,149/- 16,12,815/- 1999-2000 76,04,023/- 87,40,256/- 2 .....

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n the basis of the unaccounted turnover for the period of 28 days as per loose papers found in the form of cash book for the period from 21-08-2002 to 24-09-2002/-. He estimated the profit rate @13% and determined the undisclosed income at ₹ 1,58,98,430/-. Adopting the same yard stick of the period mentioned above he went on estimating the unaccounted turnover for the financial years 1996-97 to 2001-02 and calculated the undisclosed income for each of these years at the rate of GP disclose .....

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15,39,473 10.85% 12,52,032 5 2000-2001 192705612 15% 2,89,05,842 9.73% 28,12,538 6 2001-2002 147422910 25% 3,68,55,727 11.13% 41,02,042 Total 1,01,14,255 44. Before CIT(A) it was submitted that during the search certain loose papers were found on the basis of which the AO presumed that there are unaccounted purchases/sales made by the assessee. However, there is no evidence found to indicate that the notings as per these papers were true, correct and genuine. The assessee submitted that in a blo .....

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tions for the period 21-08-2002 to 24-09-2002 was also found. However, the AO estimated the unaccounted sales for the period of 28 days and on a pro-rata basis adopted the same yardstick for estimating the unaccounted sales for the entire period from 01-04-2002 to 24-10-2002. It was submitted that evidences were found for the period 01-04-2002 to 24-10-2002 according to which the unaccounted purchases as per these papers amounted to ₹ 5,27,44,980/- only as per the report of the Special Aud .....

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the suppressed sales for the period on the basis of and in relation to the unaccounted purchases which are actually noticed as per the seized papers instead of presuming that the unaccounted turnover for the period was in the same proportion as the unaccounted turnover for the period 21-08-2002 to 24-09-2002. It was accordingly argued that addition on account of unaccounted profit for the period 01-04-2002 to 24-10-2002 at the most can be only on the unaccounted purchases found during that peri .....

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e period and therefore to apply the same yardstick by the AO is totally unjustified. Relying on various decisions it was argued that the seized documents should be taken as a whole and the department cannot ignore certain documents which are in favour of the assessee. It was argued that in the instant case there was enough evidence for the balance period to prove that the unaccounted transactions were not in the same magnitude, therefore, to apply the same ratio to the balance period is not corr .....

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e unaccounted turnover for the F.Y. 1996-97 to 2001-02 at the rate varying from 5% to 25% of the disclosed turnover for all these years. The actual evidence indicating unaccounted turnover for all these years has been found for such smaller amounts. Therefore, the AO is not justified in estimating the unaccounted turnover for all these years on the basis of the evidence found for the period 01-04-2002 to 24-10-2002 ignoring the fact that in the earlier years the evidences regarding the unaccount .....

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stimate by the AO. There is no basis/yardstick for estimation resorted to by the AO and therefore since the estimation arrived at by him is only on the basis of the diary for 28 days for the period 01-04-2002 to 24-10-2002, such estimation is not based on proper appreciation of facts and therefore deserves to be reduced. It was submitted that for A.Y. 2001-02 the auditor has determined the unaccounted purchases at ₹ 72,12,505/-. The seized papers indicating unaccounted purchases themselves .....

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fore, considerable deduction should be given for the unaccounted purchases of ₹ 72,12,505/- determined by the auditor. 47. However, the Ld.CIT(A) was not satisfied with the arguments advanced by the assessee. So far as the argument of the assessee that AO cannot resort to estimation in a block assessment is concerned, the Ld.CIT(A) relying on various decisions rejected the same on the ground that when there is evidence of evasion whether small or large the AO can very well estimate the inc .....

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bserving as under : 12.3.1 I have carefully considered the contention of the A.O. and the submissions of the appellant. First of all, the appellant has argued that the A.O. has resorted to estimation which is not permitted in block asst. In my opinion, the A.O. is justified in estimating the income of the appellant for the block period as the evidences of evasion, whether small or large have been found from the first year of the block period to the last year of the block period. From the materia .....

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tails of unexplained expenses of ₹ 73,950 was found in this year. Therefore for the reasons that evidence for unaccounted purchases relating to earlier as well as later years were found alongwith evidence of unaccounted expenditure FY .1997-98, the appellant as well as special auditor was incorrect in saying that no unaccounted sales should be computed for this year. The Assessing Officer for making the estimate of unaccounted turnover has relied on various judgements viz. H.M.Eusufali, M. .....

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the estimation must be fair and reasonable, having nexus to the evidences found. The appellant, as can be seen from the careful examination of their submissions, has also more or less interpreted these judgements in the similar manner but has tried to contend that either the estimation is not possible or should be strictly linked to the specific evidences found in that particular year. In other words, the main objection of the appellant can be seen to disregard the evidences found in the form o .....

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y objection which can be examined relates to quantification of undisclosed income of the block period. It can be seen from the materials available on record i.e. various documents, slips, papers seized from the premise of the appellant as well as the evidences of the trusted employees (also covered in the search), that the appellant was engaged in the evasion of income as described above for the entire period of the block. The seized documents were given to the auditor for special audit u/s 142( .....

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expenses etc. The jama kharch pana of 28 days were found to contain entire transactions of these dates. Therefore the auditors have found that these jama kharch panas contained accounted as well as unaccounted transactions and after comparing it with the regular books of accounts, the auditor have computed the total of gold sales appearing in these panas, along with unaccounted transactions to compute the total unaccounted gold sales at ₹ 1 ,47,26,793/- in Annexure 1.3 of the audit report .....

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with 172 working days of the period 2002-03 to arrive at the total turnover of unaccounted sales at ₹ 12,22,95,618. Profit from this unaccounted transaction has been computed by the auditor by applying the GP rate of 13% to arrive at the figure of ₹ 1,58,98,430. Against this the unaccounted expenses of ₹ 1,86,905 found in the seized document has been allowed to compute the net unaccounted income of this year at ₹ 1 ,57,11,525 in the audit report. After considering the abo .....

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has also considered the unaccounted expenses for arriving at the final figure of unaccounted income of different years. The finding of the special auditor. for aforesaid financial years can be seen from Annexure 1 of the special audit report. From the same it can be seen that the auditor has computed following income or loss for the different assessment years. Sl.No. Financial Year Unaccounted purchase (in Rs.) Income/loss (in Rs.) 1 1996-97 14,759 2,48,229 2 1997-98 0 0 3 1998-99 14,03,149 2,31 .....

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t comprehensively available for 28 days and for the other period of the entire block the evidences only confirm about the carrying on of this activity. Therefore, the Assessing Officer decided to take cue from the jama kharcha panas for other years also and for this reason he took the actual turnovers' declared' in different years as the basis and estimated the percentage of undisclosed turnover for computing the undisclosed turnover of respective years. From para 45 of the assessment or .....

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e expenses appearing in th1 seized documents, which were considered and allowed by the special auditor in computing the income of different years, in para 47 of the assessment order at ₹ 23,46,226. Similarly, the Assessing Officer has made separate addition of ₹ 7,44,133 as initial investment in the unaccounted business in para 48 of the assessment order. The appellant has objected to this approach of the Assessing Officer, but in my considered opinion the objection is not valid. It .....

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, it would be incorrect to say that the computation of undisclosed income should be restricted to those evidences only. This proposition has been upheld by different Courts also as relied by the Assessing Officer. Therefore the claim made by the appellant to peg the computation of undisclosed income to the evidences of undisclosed purchases only cannot be accepted. Furthermore, it is also important to point out that the nature of the documents seized, except the jama kharcha panas are in the nat .....

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sclosed income for the entire block period is not acceptable but the objections if any, which are valid and can show that the computation made by the Assessing Officer requires to be reexamined, can be considered. In view of the above, the objections made by the appellant on account of computation of undisclosed income are being considered in following paragraphs. 12.3.3. In respect of computation of unaccounted transactions made by the auditor as well as the Assessing Officer, for the FY 2002-0 .....

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ore by applying the figure of average unaccounted sales on the basis of peak period, the Assessing Officer as well as the auditor has computed the undisclosed transaction of the period 1/4/2002 to 24/10/2002 excessively. In support of their claim the appellant has submitted a chart for these 28 days in different financial years of the block period to show that the sales are varing from 10% to 17% of the total sales of the respective years, whereas the average sales should be in the vicinity of 8 .....

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ed transaction is 46.06% of the total transactions appearing in the jama kharch panas. Since the total working days has been taken 172 days and the figure of 28 days are actually available, the unaccounted transactions for the remaining 144 days have been computed from the disclosed transactions for those 144 days @46.06%. On this calculation the unaccounted transactions for 144 days comes to ₹ 5,97,35,095. By adding both the figures the total unaccounted transaction for the period 1/4/200 .....

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g in different months, the method discussed above was found to be more appropriate and just. In, view of the above" and also because the unaccounted transaction in this method becomes more proximate to the figure of unaccounted purchases found, the undisclosed income for the FY 2002-03 is directed to be adopted, at ₹ 1,03,53,679 subject to verification of different figures supplied by the appellant during appeal. The Assessing Officer is directed to verify these figures while giving t .....

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nsive view of the concealment. In view of the above, the approach adopted by the Assessing Officer to compute the undisclosed transactions as a percentage of total disclosed turnover is upheld. For the same reason the finding of the auditor given for estimating the undisclosed sales on the basis of undisclosed purchases only without any extrapolation has to be held as myopic. However, the materials brought on record by appellant that the business of FY 2001-02 remained affected due to massive re .....

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of the business, was also seen. During appeal, these arguments of the appellant were considered and discussed with the AR. It was asked, when the Assessing Officer has computed the undisclosed turnover on the basis of disclosed turnover, then how these factors can be considered to be relevant for adopting a lower figure. It was argued in this respect that the appellant had lesser capacity and drive to keep transactions outside books of accounts in the prerenovation phase. It was the case of the .....

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ferent years of block, was found to have some merit. In view of these facts which were clearly not taken into account by the Assessing Officer as per the discussions available in assessment order, the figures taken by the Assessing Officer for computing the undisclosed transaction based on disclosed transaction were decided to be examined. It is apparent that the shop size increased many folds after renovations and therefore the percentage of undisclosed income found in the jama kharch panas has .....

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it from the actual percentage of unaccounted transactions appearing in jama kharch panas. Though he has correctly kept the rate minimum in FY 1996-97 and has gradually increased it upto FY 2001-02 but since he has not considered about the disturbance of business due to renovation in FY 2001-02 and the smaller size in earlier years, and most importantly the amount of purchases available in different years, the rates adopted can be seen to be giving slightly higher figures of unaccounted transact .....

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inancial results. Therefore the undisclosed income for the different years are being computed in the same manner as was done by the Assessing Officer except for taking the, percentage rates of undisclosed turnover different from the figures taken by the Assessing Officer. In my opinion the percentage to be taken are 3% for 1996-97 and 1997-98 as against 5% taken by the Assessing Officer. In 1998-99 4% is taken against 7.5% of the Assessing Officer and for 1999-2000 and 2000-01 7% and 13% are tak .....

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1 1996-97 14,58,26,683 3% 44,64,800 5.3% 236634 14,759 2 1997-98 18,59,90,256 3% 55,79,707 4.85% 270615 Nil 3 1998-99 16,51,27,629 4% 66,05,105 8.9% 587854 14,03,149 4 1999-00 11,53,94,725 7% 80,77,630 10.85% 876422 76,04,023 5 2000-01 19,27,05,612 13% 2,50,51,729 9.73% 2437533 7,095 6 2001-02 14,74,22,910 20% 2,94,84,582 11.13% 3281633 72,12,505 7690694 12.3.5. Therefore, from the discussions made above, it is held that the undisclosed income of the appellant for F.Y.1996-97 to 2001-02 should .....

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order of the CIT(A). He submitted that during the course of search unaccounted purchases were fund for the entire period. Therefore, there is no reason to believe that the assessee has made some more purchases. He submitted that from the estimation of sales made by the AO if the GP adopted by the AO is deducted the balance amount would be purchases which is more than the unaccounted purchases found during the course of search. Therefore, this estimation theory adopted by the AO is violating pri .....

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e unaccounted purchases of ₹ 5,27,44,980/- entries of ₹ 88,90,715/- pertains to goods received for approval, gold given to goldsmith and ornaments taken from them etc. Therefore, the unaccounted purchases were actually ₹ 4,38,54,265/- and GP of 13% on sales is equal to GP of 14.94% of purchases. Therefore, profit should be estimated at 14.94% on ₹ 4,38,84,265/- which comes to ₹ 65,61,620/- as against the profit of ₹ 1,58,98,430/- determined by the AO which was .....

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sheets. Further, no papers were found for the entire period. Therefore, estimation has to be made. He submitted that during the year of search full records were found for 28 days. Therefore, it was fully justified on the part of the AO for extrapolation for the entire year. The Ld.CIT(A) has passed the order after considering the submission of the assessee that paper found for the period of 28 days was the peak period and therefore extrapolation of the same for the entire year is not correct. H .....

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decisions cited before us. We find during the course of search conducted in the business and residential premises of the assessee and its directors, certain papers for various years were found indicating the unaccounted purchases and sales. Based on the loose papers found the special auditor appointed by the department estimated the unaccounted sales, the details of which are already given at Para No.39 of this order. On the basis of the unaccounted purchases and sales found for the period from .....

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e find based on the arguments advanced by the assessee the Ld.CIT(A) while upholding the action of the AO in proceeding for estimation of the unaccounted turnover for the block period, however, has given some consequential relief on account of undisclosed turnover. He however upheld the GP rate adopted by the AO. The detailed reasoning given by the CIT(A) while deciding this issue has already been reproduced in the preceding paragraphs. The order of the CIT(A) is quite exhaustive and deals with .....

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the case, in brief, are that the AO in the assessment order held that since the assessee had carried out substantial turnover which was not recorded in the books of account, therefore, the same requires initial unaccounted money to carry out the unaccounted turnover. Considering the turnover of ₹ 74,41,334/- for F.Y. 1996-97 he estimated the initial investment at ₹ 7,44,133/- being 10% of such turnover in the first year, i.e., F.Y. 1996-1997. 54. Before CIT(A) the assessee submitted .....

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: 13.3 It is also noted from the materials available on record that on 16.01.2007, and order u/sec. 250(4) was passed and the Assessing Officer was directed to examine the purchases computed by the auditor in different years vis-a-vis the seized documents and to re-examine the computation of undisclosed investments in unaccounted purchases. The Assessing Officer has submitted the report vide his letter dated 13.2.2007 and in this letter it was submitted that the seized material found relates to .....

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ed a table showing yearwise unaccounted purchases, Number of days of unaccounted purchase and on that basis computed the annualized unaccounted transactions by treating the working days in a year as 300. He computed different figures of unaccounted turnover which is quite at variance to the figures computed by the Assessing Officer. in the assessment order. For example in F.Y. 2001-02, in his method the unaccounted turnover came to ₹ 21,33,06,310. On that basis and after considering the fa .....

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tment made in the report u/s 250(4) at ₹ 11,30,52,344 in F. Y. 2001-02 against the computation of ₹ 7,44,133 made in the original assessment. The appellant pointed out that the report of the Assessing Officer is misdirected. As per appellant, the Assessing Officer was asked to compute the initial investment in the unaccounted business, however he has computed the peak investment in an arbitrary manner for F.Y. 2001-02. The basis adopted by the Assessing Officer to treat 53% of the un .....

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mputation of initial investment than the once taken in the block assessment. The appellant has also contended that the seized documents itself suggests that most of the purchases are on credit for which even interest has been paid. It has also been stated that 50% of transaction cannot be treated as investment. It has further been stated that no unaccounted stock was found during search. I have carefully considered the discussions available on record along with the report of the Assessing Office .....

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undisclosed turnover was computed as 5% of disclosed turnover at ₹ 74,41,334. Therefore, in the absence of any other materials available on record, which can negate the earlier finding given in the assessment order that the unaccounted business continued from F.Y. 1996-97 in a regular manner and has gradually increased over the period, it cannot be held that an addition can be made on the basis of 53% of the unaccounted transaction computed in F.Y. 2001-02. Furthermore, the unaccounted tr .....

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have given the finding which has a relevant bearing on this issue. The search conducted at all the business premises and the residences has clearly shown that though the appellant was engaged in carrying out unaccounted transactions regularly but the same has been carried out regularly from the same business premise. Therefore, the stock found at the business premise on the date of the search has to be accepted as the total stock found during search. Since the same has been found to be more or l .....

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ss by 13,189.160 gms valued at ₹ 66,73,715. This addition of the Assessing Officer could not be upheld in the facts and circumstances of the case and it has been held that the aforesaid evidences of purchases were correct and after considering it the computation of shortage of jewellery of 5,666.240gms was upheld. While doing so, this issue was considered and after considering the fact that the appellant was maintaining its stock for unaccounted transactions together the shortage of stock .....

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percentage of stock vis-a-vis recorded transactions. In fact such a phenomenon is an indicator of concealment of transaction generally. For the discussions made above, I do not find any merit in either the report of the Assessing Officer for higher estimation of initial investment nor in the argument of the appellant for reducing the initial investment made by the Assessing Officer in the assessment order. It is also important to reiterate that in the case of another group' business concern .....

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er of the CIT(A) Pune, before the ITAT, Pune in ITA No. 820/PN/2006 and ITA No. 801/PN/2006 respectively. However, the aforesaid issue was only agitated by the appellant in their Ground No.3, wherein it was claimed that the Ld. CIT(A) erred in law and on facts in enhancing the undisclosed income to the extent of ₹ 10,00,000 on account of alleged initial investment for making the unaccounted sales. It is noted that the Hon'ble ITAT in their consolidated order dated 6.6.2011, has decided .....

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of 12.5%. Therefore, it can be seen that the above finding of the Assessing Officer has even the backing of the, Hon'ble ITAT in another group case and therefore, the addition is sustained. For similar reason, the report submitted by the Assessing Officer for higher estimation has also not been accepted. Therefore, Ground No. 10 is dismissed. 55.1 Aggrieved with such order of the CIT(A) the assessee is in appeal before us. 56. The Ld. Counsel for the assessee reiterated the same submissions .....

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of the AO and CIT(A) and the paper book filed on behalf of the assessee. We find the AO made addition of ₹ 7,44,133/- on account of initial investment in the undisclosed business of the assessee. The Ld.CIT(A) in an elaborate order on this issue has upheld this action of the AO. While doing so, he has also relied on the decision of the Tribunal in the case of M/s. Ranka Jewellers, Raviwar Peth, sister concern of the assessee where similar addition was made on account of initial investment .....

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e do not find any infirmity in the order of the CIT(A) on this issue. Accordingly, the ground raised by the assessee on this issue is dismissed. 59. Grounds of appeal No.1,7 and 8 by the revenue being general in nature are dismissed. 60. In ground of appeal No.2 the revenue has challenged the order of the CIT(A) in deleting addition of ₹ 66,73,715/- on account of excess stock of gold. 61. Facts of the case, in brief, are that the AO noted that during the course of search Gold jewellery wei .....

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assessee company Shri F.N. Ranka has worked out the shortage of stock at 3462.280 gms but at that time the comparison was made on the basis of gold ornaments only. The gold used in Gems, Diamonds etc. was not considered. He further noted that the assessee has shown receipt of gold ornaments weighing 13,865.250 gms from M/s. H. Kumar Gems International and receipt of 4990.150 gms of ornaments from his brother Shri Omprakash N. Ranka. He observed that Shri Omprakash N. Ranka has also claimed that .....

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seized from the Ranka group which shows that besides the regular transactions the group was indulged in making unaccounted transactions with M/s. H. Kumar Gems International at large scale and such transactions were not recorded in the books of account. Evidences were also found that interest was paid by the assessee to M/s. H. Kumar Gems International when there was delay in making the payments. Such transactions of purchase and payment of interest were not recorded in the books of account. He, .....

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rs Pvt. Ltd. Shri Anil P. Rank has claimed that he has sold his jewellery to M/s Ranka Jewellers, Raviwar Peth and Shri Om Prakash N. Ranka has claimed that he has sold the jewel1ery to M/s Ranka Jewellers Pvt. Ltd. Thus, the assessee, i.e. M/s Ranka Jewellers Pvt. Ltd. has tried to explain its gold stock found during the course of search by including the jewellery claimed to have been purchased from M/s. H. Kumar Gems International in its own name as well as in the name of Shri Omprakash N. Ran .....

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AO further thought worthwhile to mention that in the case of Shri Anil P.Ranka, M/s H. Kumar Gems International has prepared an issue voucher no 715 dated 19-10-2002, On this voucher, initially the description of goods was old gold jewellery, which was changed to 22 carats gold jewellery which is apparent from cutting. In the case of M/s Ranka Jewellers Pvt. Ltd., initially, on the invoice the date written was 12-10-2002, which was changed with black ink to 22-10-2002. Apparently, the date was .....

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at in respect of claim of the assessee regarding purchase of 13865.250 gms ornaments from M/s H. Kumar Gems International, the statement of director Shri Fatechand N. Ranka was recorded on 28-10-2002. The AO also referred to the statement of Shri Anil P. Ranka recorded on 10-12-2002 and statement of Shri Omprakash N. Ranka recorded on 29-10-2002. He further noted that a survey action u/s.133A of the Act was conducted in the case of M/s. H. Kumar Gems International at Ahmedabad during which the s .....

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r considering the statement of the above parties the AO came to the conclusion that the statements given by them were not true and were totally concocted. The claim of the assessee, i.e. Ranka group and statements by Shri Hiteshbhai, Shri Pragnesh P. Sukhadia according to the AO are only a make belief story as there were contradictions in the statements given by the above parties. He further noted that the bill obtained from M/s. H. Kumar Gems International, which was not entered in the computer .....

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12-10-2002. According to the AO there were certain discrepancies in the statements of Shri Pragnesh P. Sukhadi, vis-à-vis the statements given by Shri F.N. Ranka, Shri Anil Ranka and Shri Omprakash Ranka regarding the date of order and the date of receipt of the gold ornaments. Thus, he was of the opinion that the bills were accommodation bills. According to the AO the assessee informed the department about the bill only on 28-10-2002 while the search was carried on 24-10-2002. The AO dou .....

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of the jewellery required. The AO excluded the total stock as per the bills from the stock as per books and worked out the stock as per books at 123090.380 gms. Thus, there was excess stock found during search of 13189.160 gms which the AO valued at ₹ 66,73,715/- and made the addition. He, therefore rejected the concocted theory given by the various persons of the Ranka group that they have purchased gold from M/s. H. Kumar Gems International and have supplied the same to the assessee on d .....

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receipt of gold was on subsequent dates. Similar was the situation in F.Y. 1999-2000. There were few transactions in this year where the gold was received earlier and payment was made after 2-3 days. The transactions for F.Y. 2000-01 were same as in F.Y. 1999-2000. The maximum credit was for 15 days in few transactions. It is to be mentioned that till 31/3/2002 there was no outstanding payment. As on 31/3/2002, there was outstanding balance of ₹ 72,05,693/- which was on account of alleged .....

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a year for these alleged purchases dt 22/10/2002 is itself questionable. The reply of the assessee and Shri Ompraksh Ranka that terms of payments vary from transaction appears to correct because when there was actual transaction of purchase the payment was made in advance or after few days out there was no purchases as per invoice date 22/10/2002 and it was only bill entry, hence payment was made after a gap of one year. That is another question that in the case of unrecorded purchases from this .....

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chand Ranka on 22/10/2002. The story of receipt of ornaments from M/s H. Kumar Gems International by Ranka Group is a concocted story which has no legs to stand. Thus the explanation given by the assessee to explain the stock of gold ornaments and calculation of shortage of gold stock at 5666.240 gms is not accepted. In fact, there was excess stock of gold ornaments as on the date of search which is computed a under : Gold stock as per Inventory as per para 11 - 136279.540 gms Gold as per books .....

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osition of the stock was explained to the auditor as well as at the time of assessment proceeding. However, the assessee s contention is not accepted in view of discussion in earlier paras and addition of ₹ 66,73,715/- is made to the undisclosed income of the block period. 65. Before CIT(A) it was submitted that the search took place in the case of the assessee on 24-10-2002. During the search the bill was found in the assessee s premises wherein gold jewellery weighing 13865.20 gms was fo .....

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also purchased gold jewellery weighing 4990.150 gms and 16050.00 gms respectively from M/s. H. Kumar Gems International. The fact of purchase of jewellery from M/s. H. Kumar Gems International was recorded by Shri Omprakash Ranka in his books of account which was seized during the search and in respect of jewellery purchased by Shri Anil Ranka the jewellery was given on loan to M/s. Ranka Jewellers Pvt. Ltd. which was also recorded in the books of M/s. Ranka Jewellers Pvt. Ltd. prior to the sear .....

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y was conducted on the premises of M/s. H. Kumar Gems International on 29-10-2002 wherein Shri Hitendra Gundecha, proprietor of M/s. H. Kumar Gems International had accepted the sale of gold ornaments to the assessee, Shri Anil Ranka and Shri Omprakash Ranka. It was argued that the AO did not accept the bills issued by M/s. H. Kumar Gems International treating the same as accommodation bill and was fabricated as there was overwriting of the date on the bill. According to the AO date written on t .....

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have given to the assessee. Further, M/s. H. Kumar Gems International had accepted in their submission during the course of survey that jewellery was sold to the assessee and the sale was recorded in his books of account. Further, M/s. H. Kumar Gems International is a registered dealer under State and Central Sales Act and the sales tax on this transaction has been paid by them. Further, they are also regularly assessed to income tax and have disclosed the above transaction in their books of ac .....

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ey at M/s. H. Kumar Gems International, Ahmedabad, Mr. Pragnesh Sukhadia, an employee and Shri Hitendra Gundecha, the owner were examined and their statements were also recorded during which they have accepted that sales have been effected to M/s. Ranka Jewellers Pvt. Ltd., Shri Anil Ranka and Shri Omprakash Ranka. 67. As regards the allegation of the AO that there were some overwriting on the bill issued to M/s. Ranka Jewellers Pvt. Ltd. it was submitted that the assessee fails to understand as .....

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o M/s. H. Kumar Gems International was made after the search. Therefore, the goods were received before the search and if undisputedly the payment was made after the search no addition is possible in the hands of the assessee. 68. As regards the contention of the AO that the assessee did not specify the designs to justify that the bills were merely accommodation bill, it was submitted that the same is not correct at all. It was submitted that it is a regular practice to ask for the goods and the .....

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is-à-vis the statement of Shri Pragnesh Sukhadia, who was an employee of M/s. H. Kumar Gems International is concerned it was argued that when all the persons had accepted the transaction of sale of gold ornaments to the assessee and when the discrepancy in the statement of Shri Pragnesh Sukhadia was corrected by him in the same statement, the AO should have taken the statement as a whole and he is not justified in ignoring certain answers which was in favour of the assessee. It was furth .....

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erving as under : 6.3.1. I have carefully considered the facts of the case and the law as are apparent from the records. During the course of appeal, the submission made and the documents submitted from time to time were explained by the AR. The appellant also produced the copies of the panchanama, the seized documents and invoices etc. which have been considered and examined. It can be noted from the discussions available in the assessment order that the Assessing Officer for making the aforesa .....

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ectively, had remained to be entered into the books/ computer, whereas the stock was already available in the business premise. It was submitted in this respect that Mr. F.K.Ranka in his preliminary statement recorded for the first time at the business premise on 26/10/2002 has pointed out clearly that the books were recorded upto 21/10/2002 and the same is required to be further updated. It has been also stated that this fact of the matter that the books were written upto 21/10/2002 has remaine .....

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only given the details of the purchases made by the appellant company from M/s H. Kumar but also showed where the said bill was laying in the business premises. It has been further stated that the controversy raised by the Authorized Officer, suggesting implanting of the impugned bill was without any basis and was only due to his suspicion. It has been claimed that the appellant kept on explaining the facts properly and never accepted, as the same was not true, that any such implanting has taken .....

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ce, nothing adverse was claimed to have been found. The appellant is of the view that despite these positive findings, the Assessing Officer continued to rely on irrelevant facts by ignoring very relevant facts. It can be seen from the assessment order that the Assessing Officer, for not accepting the claim of the appellant for the purchases described above, has elaborately relied upon the statements of Shri. Anil Ranka, Shri. Omprakash Ranka, Shri. Fatechand Ranka, Shri. Hitesh Gadecha, proprie .....

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was found and seized from business premise of the appellant, but the suspicion raised by the Authorized Officer while recording the statement u/s 132(4) of Shri. F.K.Ranka, has also been considered for holding the bill as bogus and implanted. The relevant extracts of the statements have been incorporated in the body of the block assessment order, which has already been quoted above. The Assessing Officer has also pointed out the contradictory facts emanating from various statements, more partic .....

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Assessing Officer has also red to various other circumstantial facts viz. failure of director to explain tagging, identification, no evidence of placing order and design first such purchase by Shri O.N. Ranka, Shri Anil Ranka etc., delay in payments, non availability of tickets for journey by supplier, date of invoice on the date of arrival in Pune, etc., which are clear from the assessment order already quoted above for this addition. On the basis of these reasons the Assessing Officer has trea .....

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support of that appellant is relying upon the sale invoices, the issue vouchers which have been found and seized during the course of search and is part of the panchanama prepared during search. The argument of the appellant about the discrepancy noted in the statements of different persons relied upon by the Assessing Officer is that the minor slippages occurring in the statement here and there are due to mental stress which is so common while facing any interrogation from a Government authori .....

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in the case of Ahmedabad party (Appeal No. CIT(A) XIII/Jt. CIT(OSD)/Cir7/53/0506 dtd. 27.04.2006), in support of its above claim. It has been shown that the impugned sale has been accepted by the department as genuine in the hands of H.Kumar and therefore the same cannot be held to be not genuine in the hands of the appellant. Similarly, the assessment order of Shri O.N.Ranka has been relied to claim that the capital gains shown on the sale of impugned jewellery to the appellant company has been .....

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is not justified in ignoring certain answers which were in favour of the assessee. In this respect, it has been pointed out by the AR that the Assessing Officer has quoted only specific question and answers from the statement recorded, which were suiting his prejudiced finding. It has also been stated that the Special Auditor, in his audit report has also treated these purchases as genuine to arrive at the finding after reconciliation that there is no excess stock of gold jewellery at the busine .....

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g the course of search. This estimated unaccounted gold sales covers the shortage in gold stock". The Assessing Officer, apparently has not given any reason in his assessment order as to why he was not convinced with the finding of the Special Auditor on this issue. However, he has given detailed reasons for making the additions as is apparent from relevant portion quoted earlier in para 6.2. 6.3.2. On careful consideration of the materials available on record, it is noted that the appellan .....

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circumstantial facts for arriving at the finding that the impugned bills were bogus, but it is clear from some relevant objections raised by Authorised Representative that some relevant facts were ignored. The suspicion being raised can be seen from the statement of Mr. F.N. Ranka, wherein the Authorized Officer in the statement recorded on 28/10/2002, has asked questions saying that this bill was earlier not available in the drawer and therefore how the same came there. It has been claimed by t .....

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and as the same was existing in the normal course of business, the same has to be considered while evaluating the stock of gold jewellery found during search vis-a-vis the books of account. It has been claimed that the Assessing Officer has ignored the purchases made through these bills directly from H. Kumar and also from Shri.O.N. Ranka, for determining the aforesaid addition as excess stock. On careful consideration of material available on record, it is noted that though the Authorized Offic .....

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Director on 28/10/2002 and therefore unless there are evidences available which can show that the same was planted unscrupulously, it will be difficult in law to hold the same. It is further noted from the copies of the punchnamas prepared for the search of the business premise that the first search apparently took place on 24/10/2002. As per this panchnama the search commenced at 6.30 pm and was concluded at 6.45pm, without preparing any inventory or any material found or seized or recording o .....

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panchnama the statement of Shri. F.N. Ranka was recorded. Therefore from the perusal of the panchnama also, it has to be accepted that the business premise has remained in the control of the search party and there is no material available on record which can suggest that the prohibitory order served on the appellant u/s 132(3) was violated. If it is assumed that the suspicion of the Authorized Officer that somebody during the course of the search implanted these bills, then also the responsibili .....

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s temporary suspicion. Therefore it has to be accepted that the bill dated 22/10/2002 was found during search and was not recorded in books, as the books were admittedly written upto 21/10/2002 only. It is also noted that not much of discrepancy was found at the end of seller at Ahmedabad during survey conducted on 29/10/2002 except for some correction in their stock book. These discrepancy noted at the end of the seller were not found sufficient by the department to even reject the books of acc .....

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are much stronger and are in favour of the appellant. Similarly other discrepancies pointed' out by the Assessing Officer, in respect of 'different statements are also of circumstantial in nature for which various explanations have been given and in the facts available, it is neither possible to accept them or reject them and therefore they have to be ignored or treated as explained as the balance of overall evidences, more particularly the direct evidences are in favour of the appellant .....

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. Had it been found with conclusive evidences that the appellant obtained the same subsequent to the search to explain the excess stock found, as was attempted by the Assessing Officer, the matter could become acceptable. In the present case since the bill was found in the regular course of business during search itself, it cannot be assumed to be representing a bogus bill. Furthermore, this fact was not found at the end of seller also. The survey party could not find that the bills were bogus o .....

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gold stock at 13,189.160 gms to make addition of ₹ 66,73,715 @ ₹ 506 per gm. If the claim of the Assessing Officer is taken as correct that the appellant arranged for these two bogus bills on 28.10.2002 after the reconciliation was made during search, then it is not explainable why he will take two bills to arrive at a shortage of 5666.240 gms. In fact the one bill in appellant's own name for 13,865.250 gms would have satisfactorily explained the stock found. In this considerati .....

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own on the impugned sale in its return was accepted by the Assessing Officer, as well as the copy of the stock register etc seized during the search from the premise of Ranka Jewellers, Raviwar Peth, having details of purchase and sale recorded already before search, tilts the balance in favour of the appellant. As discussed above, even if this bill is not accepted the excess stock remains explained. Furthermore, it is also a fact that the M/s H.Kumar Gems International was acceptedly having reg .....

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not an ordinary assessment but an assessment consequent upon the search, where no scope exists for any presumption or assumption, also cannot be ignored. The argument made by the learned A. R. that the statement recorded during the proceedings has to be read in whole and therefore the A.O. was not justified in ignoring certain answers which were in favour of the appellant, is also correct in law. It is significant to be noted that all the concerned persons whose statements have been relied upon .....

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evidence which is direct and relevant on certain presumptions. He is duty bound to consider all the materials available on records and evaluate the same in a dispassionate manner to finally conclude the inference. Therefore, the appellant has been able to show that the Assessing Officer by ignoring certain facts available on record, viz. seizure of bills at the search premise, acceptance of the same on the first available occasion by the Director, entries of sale appearing in the books of Shri. .....

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the finding that the bills of purchase from Shri. O.N. Ranka and MIs H. Kumar Gems International are to be ignored while considering this explanation given by the appellant in respect of stock of gold jewellery found during search at the business premise of the appellant. It is also important to be noted from the table of computation given above, on the asset side approach as well as the income side approach, that the Assessing Officer has taken the excess cash on the asset side approach at  .....

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n at ₹ 1,50,00,000. There is no other discussion available in the assessment order on this issue. Therefore it is apparent that the declaration of cash of ₹ 90,00,000 is not based on any finding of the search. Though. the act of declaring cash at native place of ₹ 90,00,000 without any such finding in search is intriguing, but for the limited purpose of the issue in hand, it indirectly lends support to their claim that an assessee who is declaring so much, of cash without any f .....

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the computation separately on income approach but the relevant issue is that the said activity has been carried out from the same premise. No separate books of accounts or stock etc relating to this concealed transaction have been found. The material found clearly shows that the transactions were carried Gut together and part of it were not recorded in the disclosed books of account. Therefore, even if on the strength of overwriting, it is presumed that the impugned bill related to concealed pur .....

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h unduly late but this will not justify exclusion of these purchases. As already discussed, the overwhelming evidences were on record which over weighs the objections raised by the Assessing Officer. The Assessing Officer has given the finding by ignoring these relevant facts, mostly on placing reliance of circumstantial evidences. Though the circumstantial evidences are many and create a reasonable doubt but the same cannot overrule direct evidences. It is a trite law that preponderance of circ .....

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pto 21-10-2002. The major dispute is regarding the bill obtained from M/s. H. Kumar Gems International, Ahmedabad in a very suspicious manner. He submitted that on the date of search, the bill was not found whereas the same was found in the drawer on the very next day. Further, there was some over writing on the above bill. Therefore, the manner in which the bill was found raises suspicion. He submitted that the AO had given valid reasons for not accepting that bill. He accordingly submitted tha .....

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sked as to whether there are any goods/articles in the shop for which the purchase bills have not been received. Referring to the answer he submitted that Shri F.N. Ranka in his statement had categorically stated that they have received the goods and the bill of M/s. H. Kumar Gems International is not fed in the computer but is in the drawer. He submitted that if the contention of the Ld. Departmental Representative that the bill was subsequently inserted in the drawer, then why no action has be .....

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M/s. H. Kumar Gems International. He submitted that when one wing of the department has accepted sale of jewellery as a genuine sale, there is no reason to doubt the purchases made by the assessee. For the above proposition he relied on the decision of the Hon ble Supreme Court in the case of CIT Vs. Berger Paints India Ltd. reported in 266 ITR 99 and the decision of the Pune Bench of the Tribunal in the case of A.E. Lokhandwale reported in 35 ITD 50. Further, M/s. H. Kumar Gems International is .....

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made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the excess stock of 13189.160 gms of gold was determined by the AO on the basis of actual stock found and the stock as per books. The value of the above amount was ₹ 66,73,715/-. On being confronted by the AO it was submitted by the assessee that it has purchased gold jewellery weighing 13865.250 gms from .....

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nka, Shri Anil Ranka and Shri Omprakash Ranka regarding the date of order and date of receipt of the gold ornaments. Further, the assessee informed the department about the bill only on 28-10-2002 whereas the search was carried out on 24- 10-2002, i.e. 4 days after the initial search that the bill of M/s. H. Kumar Gems International was not debited in the book prior to the search. Further according to the AO the payment was made after a few months which do not prove the genuineness of the transa .....

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al had accepted that the jewellery was sold to the assessee and the sale was found recorded in his books of account. M/s. H. Kumar Gems International has given their confirmation. M/s. H. Kumar Gems International is a registered dealer in State and Central Sales Tax Act and the sales tax on this transaction has been paid by M/s. H. Kumar Gems International which are regularly assessed to tax and have disclosed the above transaction in their books of account. Further, assessment has been complete .....

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International as genuine. We find during the survey at M/s. H. Kumar Gems International, Ahmedabad Shri Pragnesh Sukhadia, an employee and Shri Hitendra Gundecha, the owner were examined and their statements were recorded. They have accepted that sales have been effected to M/s. Ranka Jewellers Pvt. Ltd., Shri Anil Ranka and Shri Omprakash Ranka. Further, the submission of the Ld. Counsel for the assessee that in A.Y. 2003-04 Shri Omprakash Ranka has shown the capital gains on transfer of these .....

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the ground raised by the revenue is dismissed. 76. Ground of appeal No.3 by the revenue reads as under : 3. The Commissioner of Income-tax (Appeals) has erred on facts and in law in deleting the addition of ₹ 1,76,553/- on account of excess stock of silver when the valuation of the stock was done by a qualified Government valuer. 77. Facts of the case, in brief, are that during the course of search at the business premises of the assessee at Laxmi Road, silver articles weighing 21,709 gms .....

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and plastic boxes. It was submitted that the plastic bags and plastic boxes were weighing 1,14,400 gms. Thus the net weight of the silver articles was 35,00,108 gms. It was further explained that one company namely M/s.Syngenta of 1170/27, Revenue Colony, Shivajinagar, Pune has placed order for silver coins for 93500 gms. The order was ready on 10-10-2002 against which the sale bill was made on 10-10-1002 vide Bill No.S/4755. An amount of ₹ 7,84,627/- was received by cheque No.936588 on 18 .....

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nventory. Accordingly the assessee reconciled the stock and it was submitted that the excess, if any is only 22780.570 gms. The assessee accordingly submitted that there is actually no excess stock. 78. However, the AO did not accept the above contention of the assessee. He noted that the approved valuer while valuing the silver items has given due credit for the weight of the plastic bags and boxes. This shows clear cut of excess silver articles which comes to 22,780.570 gms. Applying the rate .....

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plastic bags of around 22000 bags and thereby taking an adhoc weight of 5 gms per bag. Shri F.N Ranka in his statement recorded u/s.132(4) has pointed out certain discrepancies in the valuation made by Shri Uttam Jain and had pointed out that the weight of the plastic bags was not taken correctly. It was argued that if the average weight per bag is taken at 6 gms as against 5 gms adopted by Shri Uttain Jain there would be no excess stock at all. The inventory itself shows that there have been n .....

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ial available that silver stock of 36,14,109 gms was found during search, out of which silver article weighing 21,709 gms were placed under deemed seizure. As per the fats noted by the Assessing Officer in the assessment order, Shri F.N. Ranka, the Director of the appellant company was found to have stated u/s.132(4) on 25/11/2002, in respect of inventory of silver articles that the registered valuers have weighed the silver articles along with plastic bags and boxes, in which they were kept and .....

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ems. The claim for exclusion of silver coins was accepted by the Assessing Officer, however, the claim for higher relied for containers was not accepted. Therefore, the excess of silver articles of 22,780.57 gms computed after removing 93,500 gms of silver coins but taking the weight of plastic container at 114400, as determined by the departmental valuer was taken by the Assessing Officer as undisclosed asset u/s.69A @ ₹ 7750 per kg of silver (Rs.1,76,553). The claim of the appellant that .....

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disputed the same and has relied on the valuation report of the department wherein Mr. Uttam Jain was claimed to have estimated the weight of plastic bags at 114400 gms by taking the weight of 22,000 bags @ 5 gms per bag. It has been contended that Mr. Ranka in his statement given u/s. 132(4) during the search itself on 25/11/2002 has pointed out this .discrepancy but the department did not take the said seriously. It has been stated in this respect that if the weight of these bags is increased .....

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ained that in fact there is no excess. At many places weight of plastic box and bags are not deducted. Similarly, the weight of plastic bag is taken ad61 randum. The weight of plastic bags are not taken in actual. No proper deduction of plastic bags, plastic boxes is done. Hence, the excess of 22.281 has come. I have verified the explanation and list of plastic bags prepared by the valuer Shri Uttam Jain and found that weight of plastic bags and plastic bags of some items are not considered. How .....

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eight of plastic bags were taken during the pendency of the search on 25/11/2002, before the search was finally concluded and therefore it ought to have been verified as the search premise was still under the control of search party. As the aforesaid objection of the appellant, having been found correct by the Special Auditor and raised properly at the relevant point of time, have remained unattended by the search party as well as the Assessing Officer, the explanation given by the appellant has .....

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e. We find during the course of search silver stock of 36,14,108 gms was found. The AO asked the assessee to explain as to how these silver articles are appearing in the books of account. Although the assessee tried to reconcile the same, however, the AO noted that there is excess stock of 22780.570 gms. The submission of the assessee that there is no excess stock as at many places the weight of plastic bags and boxes are not deducted and in some cases the weight of plastic bags has been taken a .....

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reasoned one which does not call for any interference from our side. We therefore uphold the same and the ground raised by the revenue on this issue is dismissed. 83. Ground of appeal No.4 raised by the revenue has already been adjudicated while deciding ground of appeal of appeal No. 2 in assessee s appeal. Therefore, this ground is not being separately adjudicated. 84. Ground of appeal No.5 by the Revenue reads as under : 5. The Commissioner of Income-tax (Appeals) has erred on facts and in la .....

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rage system means that the assesses are taking the quantity and value of opening stock as well as purchases made during the year. In this quantity and value, the quantity and value of mixing i.e. copper and silver etc. is added and burning loss is reduced. From the value arrived in this manner, the opening stock and purchases is added and similarly the quantity is also added. The value is divided by the quantity to arrive at an average price. The quantity of the closing stock is multiplied by th .....

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for the purpose of valuation of closing stock shown in the books. Thus, the assesses of this group has undervalued the stock as per books of account. 86. During the course of assessment proceeding the fact of the under valuation was brought to the knowledge of the assessee and he was asked to explain as to why the value of the closing stock as per books should not be enhanced and it should be treated that stock was sold on FIFO method. In response to the same it was submitted by the assessee th .....

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wellers, sister concern of the assessee where similar additions were made. Rejecting the various explanations given by the assessee the AO made addition of ₹ 19,97,934/- by observing as under : 52. The contention of the assessee has been considered but for the reasons discussed above and example given, the contention of the assessee is not accepted. During the course of search at the business premises of Ranka Jewellers Pvt. Ltd. gold jewellery weighing 88627.28 gms was found and the total .....

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88. Before CIT(A) the assessee submitted as under which has been reproduced by the CIT(A) at para 14.2 of his order and which reads as under : The assessee has been following the average cost method for determining the valuation of the closing stock at the end of each year in the books. The avg. cost is determined on the basis of purchases made during the year and the value of the opening stock. The A. O. has applied FIFO method for valuing the closing stock. It is submitted that the assessee&# .....

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91]. Accordingly, the addition made be deleted. 89. Based on the arguments advanced by the assessee the Ld.CIT(A) deleted the addition by observing as under : 43. The facts of the case were duly considered and in my considered opinion, the addition made by the Assessing Officer cannot be upheld as the above issue has been decided in favour of the assessee by my Learned Predecessor in the case of Ranka Jewellers, Raviwar Peth, Pune as claimed by the appellant in their submission quoted above. Fur .....

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order of the CIT(A) the Revenue is in appeal before us. 91. After hearing both the sides, we do not find any infirmity in the order of the CIT(A). We find addition on identical ground was made in the case of Shri Vastupal Ranka, Proprietor of M/s. Ranka Jewellers by the AO which was deleted by the CIT(A). On appeal by the Revenue the Tribunal vide ITA No.1376/PN/2013 order dated 30-04-2014 for the block period 01-04-1996 to 24-10-2002 deleted the addition by observing as under : 4. After hearing .....

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ock in the books i.e. it takes average of opening stock and purchases during the year and values the closing stock at that rate. This method was being followed regularly and the same was being accepted by the department in the past. During the course of assessment proceedings, the A.O. held that the average cost method followed by the assessee is not correct and the assessee should have followed the FIFO method for valuing the stock. The A.O. was thus of the view that the closing stock should be .....

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the first Appellate order. He reiterated the submissions made before the first appellate authority. 32. Considering the above submissions we find that the addition made by the A.O. was objected by the assessee before the Learned CIT(A) with this contention, that there was no incriminating evidence found during the course search relating to stock value. Hence, the addition should not have been made in the block assessment. The assessee also clarified that average cost method is accepted method of .....

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k and the addition made was thus not justified. We also find substance in the observations of the Learned CIT(A) on the issue that undisclosed income has to be worked out on the basis of seized papers and since in the present case no such incriminating evidence was found regarding method of valuation of stock as the A.O. tried to adopt, the Learned CIT(A) was justified in deleting the addition made on this account. The first Appellate order in this regard is thus upheld. Ground no.3 is according .....

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the assessee which has been followed by the CIT(A) while deleting the addition made by the AO on this issue, therefore, in absence of any contrary material brought to our notice against the order of the Tribunal in the case of the sister concern of the assessee on identical issues we find no infirmity in the order of the CIT(A) deleting the addition. Accordingly, the same is upheld and the ground raised by the Revenue on this issue is dismissed. 93. Ground of appeal No.6 by the Revenue reads as .....

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