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TMI Blog2016 (12) TMI 557X X X X Extracts X X X X X X X X Extracts X X X X ..... department by recasting the trading account which is having direct impact on the opening stock as on 1.4.2007. The suppression of closing stock of 226.73 grams which was omitted by the appellant in arriving at the closing stock was duly accounted for the YE 31.3.2007 and the assessment for the A.Y.2007-08 was duly concluded. Accordingly, the AO has taken the opening stock as on 1.4.2007 at 25428.560 grams as against 25201.830 shown by the appellant . The A O noticed that the assessee has arrived at the value of opening stock as on 1.4.2007 at Rs. 438.29 per gram as against the value of Rs. 849.639 per gram determined by the department on the basis of the average cost method as on 31.3.2007. On the same basis, the closing stock as on 3 1.3.2008 was worked out by the assessee at Rs. 1,63,21,900/- on the net weight of Rs. 30242.50 grams at Rs. 539.700 per gram. The AO proposed to adopt the valuation of closing stock at average cost method for which the assessee objected . The AO did not accept its contention on the ground that the assessee has already accepted the average cost method of valuation of closing stock as on 31.3.2006. Accordingly, the AO worked out the average cost at Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consequently, the impugned addition made deserves to be deleted. 3. The learned CIT[A] is not justified in disallowing a sum of Rs. 4,18,908/- from out of the making charges on the ground that the vouchers produced are self vouchers and the complete details of the persons in those vouchers not there. She failed to appreciated the payments are made as is the practice by self-vouchers only and all the vouchers are verifiable and there is no ground to doubt the genuineness of the expenditure incurred as recorded in the books of accounts, there is no ground to disallow the same u/s. 69C of the Act, especially as they are recorded in the books and infact, the learned A.O. herself relied upon them while adopting the closing stock. 3.1 The disallowance is purely on suspicion and surmise, assumptions and presumptions and liable to be deleted and on erroneous appreciation of the leal provisions of Section 69C of the Act. 4. The learned authorities below are not justified in suggesting the appellant to accept the unwarranted disallowances while making the assessment. 5. Without prejudice to the right to seek waiver waiver with the Hon'ble CCIT/DG, the appellant denies itself liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the missing quantity which remains undisputed in so far as both the authorities accepted the same. Therefore, we do not find any inf irmity in the real gold content quantity which was to be valued in the closing stock in the missing quantity of physical stock as on 3103-2006. Rs. 18,68,711 therefore, does not figure anywhere near the computation, valuation, co- relation between the quantity of purchase and sale that could be considered for taxat ion in the impugned year itself as against market value of gold and not jewellery. In the light of the above, the addi t ion i s to be conf i rmed o the extent of Rs. 7,76,665 being the value adopted by the AO @ Rs. 538.599 per gram being the gold content in. the jewellery which quantity computed by the AO stands at 1442.01 grams. The profit on sale of this stock in the future would be income of that year, which profit cannot be taxed in the year itself for inconsistent valuation. Consequential levy of interest under section 234A & 234B is directed to be levied in accordance with the mandatory provisions of the Income Tax Act, 1961". And then observed as under in para 13 "In the face of the above, we have to take a look at the findin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordingly, the addition is confirmed". The assessee has not let in any material to dislodge the above findings and hence we dismiss this ground of appeal. 07. In the result, the assessee's appeal is partly allowed. Cross Objection 42/Bang/2012 - A. Y. 2007-08 filed by the assessee : 08. The facts of the case in brief are that The assessee is a partnership firm dealing in gold jewellery and silverware. It purchases standard gold and old gold ornaments, convert them into ornaments and sells them. 09. During the year, (i) the assessee had valued the closing stock of gold at Rs. 438.29 per gram. The AO on his part proposed to value the closing stock by applying an average cost of purchase at Rs. 837.20 per gram. For working out the average cost of purchase of gold, the AO valued the opening stock of 18382.87 grams @ Rs. 601.98 per gram, reworked the net profit at Rs. 78,90,381 and assessed it as against the admitted net loss of Rs. 7,28,244/-. (i i) The assessee paid making charges to various persons and claimed such expenditure. The AO verified the details from the appellant's books and found that it paid to 25 different persons at Rs. 31,10,253/-, out of this, Rs. 75,029/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom out of the making charges by invoking the provisions of section 40[a][ia] of the Act, which is inapplicable under the facts and in the circumstances of the cross-objector's case. 4. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the Cross-objector/respondent denies itself liable to be charged to interest u/s234-B of the Act, which under the facts and in the circumstances of the respondent/cross-objector's case deserves to be cancelled. 12. The Ld. AR relying on the order of the Hon'ble High Court of Karnataka in ITA Nos.149 and 144 to 148 of 2003, dt.17.02.2004 pleaded that CO has to be decided on merits . Para 9 of that order is extracted as under: "The cross-objections can be continued even if the appeals are withdrawn. The principle behind Order 41 Rule 22 of CPC clearly providing for the same, is applicable. In view of the above, these appeals are allowed and the order of the Tribunal dated 31-10- 2002 in Cross- objections 73-78/Bang/2001 (in ITA Nos.1859 to 1864/Bang/1992) is set aside and the matters are remitted to the Tribunal for hearing and disposal of Cross- objections No.73- 78/Bang/2001 filed by the appellant in accordance wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 31.3.2006." 14. Thus, the CIT(A) following this Tribunal order in the assessee's case in ay 2006-07 and adopting the consistent valuation method has decided this issue with which we do not find any infirmity and accordingly we dismiss the assessee's appeal ground no 2, supra. 15. With regard to the disallowances made u/s 40(a)(ia) , the relevant portion of the assessment order is extracted as under : "II. Making charges : (i) On perusal of the Trading account filed by the assessee, it is seen that an amount of Rs. 31,10,253 is debited to the trading account under the head "Making Charges". As the expenditure incurred on account of making charges falls under the purview of Section 194C of the Act, the assessee was asked to explain vide this office letter dated 21.12.2009 whether he has effected the TDS on the amount of Rs. 31,10,253/-. It was explained by the assessee vide its letter dated 23.12.2009 filed in this office on 24.12.2009 as under: "we submit that manufacture of gold ornaments is a very skilled job.We do not have any person to develop any newDesign. Every gold smith has his own specialization Like some are good at making bangles, some in making Of necklaces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich means ultimately the assessee pays to one single person and he in turn pays it to the other persons who finally gives the finishing touches to the ornament ultimately making it ready for sale. The ledger extract filed in this office also shows that the amount is paid to a single person as is listed above and the assessee cannot take a plea that it is paying to all the workers depending upon their work. It is assessees responsibility to deduct taxes on the amount wherever it exceeds Rs. 20000/- one time and Rs. 50,000/- in a year as per the provision of Sec. 194C. Hence, the above payments attracts the provisions of section 194C thereby the assessee should have deducted TDS wherever the amount has exceeded Rs. 20000/- or Rs. 50,000/-. He cannot discharge the duties of the main labourers by disbursing the wages to all the persons. The assessee is utilizing the above tool to camouflage that section 194C is inapplicable in his case. Therefore, assessee's contention is rejected on the ground that, though there is no written contract entered into between assessee and labourers, there is oral contract exists between the persons and the assessee. This is evident from the list re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the goldsmiths as salary. There is no works contract between the appellant and the goldsmiths and therefore, provisions of sec 194C are not applicable. 6.2 I am not inclined to agree with the appellant. As per the facts disclosed to the AO, the persons who were paid making charges were not employees of the appellant. The appellant has not furnished any details regarding the basis of the making charges paid to each of the 23 persons but it appears from the AO's observations that making charges were paid to each person according to the work completed by him. It is also mentioned in the assessment order that the 23 persons who were paid making charges were actually paid as lead persons for the work completed by their team. This lead person in turn paid to the other workers. But as far as the appellant is concerned, the payment is made to the lead person for the work done by himself or his team. Thus there is an implied contract between the appellant and such persons who have been paid the making charges. The provisions of sec 194C are clearly attracted. Even if we assume that the 23 persons who were paid making charges were employees of the appellant, then also in most of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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