TMI Blog2011 (12) TMI 675X X X X Extracts X X X X X X X X Extracts X X X X ..... ismissed as not pressed. 4. Ground No. 2 relates to sustaining the addition of ₹ 2,76,200/- on account of unexplained investment in Gold Jewellery. 5. In departmental appeal, the department through Ground No. 5 is also objecting in deleting the addition of ₹ 6,83,760/- out of total addition made by AO at ₹ 9,59,960/-. Since both the grounds i.e. ground of the assessee and ground of the department are interlinked, therefore, they are being disposed off together. 6. The brief facts discussed by ld. CIT (A) in his order in para 3 at page 3 in this regard are as under :- Briefly stated the facts are that the gold Jewellery 3295.860 gms was found valuing ₹ 27,70,309/-, out of the above A.O. treated gold Jewellery of 275 gms of Shakuntala Haldiya, 830 gms of Mamta Haldia and 1037 gms of Deepali Haldiya, total value being ₹ 18,10,349/- being explained and difference of ₹ 9,59,960/- was added as unexplained investment in the gold Jewellery. 7. Detailed submissions were filed before ld. CIT (A) which has been tabulated in the order of ld. CIT (A) in para 3.1 at pages 3 and 4 are as under :- 3.1. Before me following submission was m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hq no.563313 for ₹ 290610 of approx. 736.86 gms 736.86 gms Rs.619336/- Less: 2. Jewellary received by Suraj Narayan (Father of assessee), Ravi and brother Dinesh at the time of their marriage other ceremonial occasions from family members and wife side in life time. 120.00 gms Rs.118170/- Less:3 Jewellery purchased by Ravi, Dinesh, Mamta, Deepali, Shakuntala and debited to capital account and petty jewellery of minor children 261.00 gms Rs.222454/- Balance unexplained Jewellery NIL NIL 8. After considering the submissions and perusing the material on record, the ld. CIT (A) found that assessee is eligible for relief of ₹ 6,83,760/-. Accordingly he allowed this ground of the assessee in part by sustaining an addition of ₹ 2,76,200/- out of total addition of ₹ 9,59,960/-. Findings of ld. CIT (A) have been recorded in para 3.2 at page 5 are as under :- 3.2 It is seen that as regards claim of Jewellery purchased by the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee are inter-linked, therefore, they are being disposed off together. 14. Briefly, the facts have been discussed by ld. CIT (A) in para 4.1 to 4.4 at pages 5 to 8 of his order are as under :- 4.1 During the course of search, stock of semi precious and precious stones were found at the different premises of the appellant group, which was inventorised and both valued by the registered valuer. The details of stock found at various premises are noted by the A.O. on page 6 of the assessment order, which is as below : (i) C-18, Bapu Nagar residence ₹ 1,02,600/- (ii) Haldia Bhawan Office Rs.12,14,72,143/- (iii) Choura Rasta Office ₹ 7,22,44,657/- (iv) Locket No.203 in ChordiaSafe deposit Vaults ₹ 1,51,722/- (v) Locket No.1022 in Birani Safe deposit Vaults ₹ 35,254/- (vi) Locket No.1026 in Birani Safe Depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned that the valuation of the stock was done by the registered valuer. The appellant himself has admitted to have seen the details mentioned in the valuation sheet and agreed with the quantity, quality and the value and have admitted the stock found at Haldia Bhawan, being of Rs.,12,14,72,143/-[in answer to question no.3]. Further in answer to question no.4 he has admitted the value of closing stock at Chaura Rasta Office so done by the registered valuer at ₹ 7,22,44,657/- A.O. has dealt with the objection of the appellant by mentioning that : i) The valuation was made in the presence of assessee and his staff members in terms of quality, quantity and value and assessee and his employee had put their signature on the valuation sheet certifying its correctness. ii) Later on in the statement recorded on 22.7.07 also, the assessee agreed and admitted about the valuation of his stock so done by the separate valuer. iii) The alleged over valuation is not supported by the details of the contended purchase made by the appellant i.e. bill no., date, copies of bill etc. iv) The gems and stones are of different variety size, colour and quality etc and natural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this impossible goal was achieved by them with the connivance and support of approved valuer. Some such instances of adoption of unrealistic rates of stock in hand taken by the valuer Kamal Kumar Kasliwal and consequently by the AO are duly explained in the Annexure No.1 to this letter. 2. It is further submitted that your honour will find from the perusal of the valuation report that Mr Kamal Kumar Kasliwal has even valued a very low quality of tourmaline rough in name of Tourmaline Rough Rejection (which hardly has any value in the market) has been valued at around 3.5 crores. Following are the few instances which shows that the departmental authorities pressurized the approved valuer to adopt imaginary and whimsical rates for excess valuation of stock by valuer Mr Kamal Kumar Kasliwal under direct supervision of I.T. Department officers. Kindly refer to annexure J J1. a. Citrine Rough (Ann.J1) Book Stock 17 Kg @ 11586/- per Kg. (This stock is of Ridhi Sidhi Internation (sister concern) it is purchased from M/s.S.P. Jewellers vide bill No.10 dt. 15.5.2004) ₹ 196963/- Deptt. Valuation 16.8 Kg @ 80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing : Bill No.487 dt. 13.10.2004 of Prakash Chand Sons HUF @ 385 Bill No.488 dt. 13.10.2004 of Prakash Chand Sons HUF @ 175 1. Further more some other examples of overvaluation of stock is enumerated as under: a) . As per Annexure J-1 Page no.1, S.No. 1, one lot of Citrine rough of 17.265 kg has been valued @ ₹ 7,78,453/- per kg at ₹ 1,34,40,000/- and on the very same page at S.No.17 finished stock of citrine beads of 0.950 kg has been valued at ₹ 47,368/- per kg. It is needless to mention here that yield of finished goods from this rough is approximately 20% of the total quantity of rough put to manufacturing and as such the rate of rough should be less than 1/5 th of the rate of finished goods i.e. it should be around 9474/- per kg. As against the rate of ₹ 9474/- per kg, the valuer has taken the rate of ₹ 7,78,453/- per kg and as per our books of accounts the cost price paid by us is ₹ 11586/- per kg [higher than the valuation done at S.No.17]. It seems that while making the valuation of item at S.No.1 the authorized value has inadvertently put the value of 1,34,40,000/- at the place of correct value of 1,34,400/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing activities of different commodities. 2. That basis adopted by the approved valuer as well as the learned A.O. of valuation of stock is to value the stock at fair market value as on the date of search on 20.4.2007 it is unjustified and not according to the method of valuation of stock regularly followed by the assessee. As the method of valuation of stock being followed by the assessee is at cost or market value, whichever is lower the value of stock taken by the learned A.O. at fair market value is erroneous and in the alternative very excessive. The learned A.O. should have valued the stock at cost or market price whichever is low and to support this submission the assessee craves leave to refer to and rely on the following judgments: a) That the question whether the closing stock could be valued at cost price or market price was conclusively settled by the decision of Hon ble Supreme Court in the case of Sakthi Trading Co. Vs. CIT [2001] 250 ITR 871(SC): In this case the Hon ble Supreme Court held that it is established rule of commercial practice accountancy that where there is no discontinuation of business, the stock is to be valued at cost or market price, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock the learned AO should have given deduction of 30% instead of deduction of 11% allowed by the A.O. It is submitted that either the GOP rate of 11% or the higher rate declared by the assessee and group cases should be taken into consideration while working trading results or if in any case or for any reason the GP rate of 30% is upheld then the justice requires that deduction of 30% should also be allowed from the fair market rate adopted by the approved valuer while valuing the alleged excess stock. 6. That while making addition of alleged excess stock of ₹ 7,07,91,578/- the learned A.O. has placed reliance on revoked/retracted statement of surrender made by Ravi Haldia on 22.4.2007. The assessee s respectful submission in this regard are as under: a. The surrender of excess stock was obtained by income tax authorities from Ravi Haldia in early odd hours[around 2 A.M. of 22.4.2007] of 22.4.2007 and it was not voluntary but obtained under coercion, pressure, undue influence and mis-representation of facts and law and as such it should not be relied upon. Reliance is placed on page 34 of Nov 2009 issued of journal of Gem Jewellery Industries (copy enclosed). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n brought on record by the A.R. of the appellant. Without prejudice to above, it is seen that the statement of the appellant was recorded during the course of search and this question of valuation was specifically put to him in question no.3 he was asked about the valuation of the stock kept at Haldia Bhawan Office and in question no.4 he was asked about the valuation of stock kept in the Chaura Rasta office where the statement at that time was recorded. He has unequivocally accepted the valuation and he has further admitted that valuation was done in his own presence. The relevant extract of statement is reproduced below: 4.7. Later on in question no. 5 he was asked explanation about the total stock physically found, for which he admitted that considering the physical stock of ₹ 19,41,30,676/- and book stock of ₹ 9,20,00,000/- there is excess stock of ₹ 10 crore 21 lakh and same was admitted to be acquired out of undisclosed sources and he offered it for taxation. The relevant question and answer 5 are reproduced below:- 4.8 From the perusal of the aforesaid answers given by the appellant, it can not be said that there was coercion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal. Firstly there is no evidence that goods purchased as back as in April, May and June, 2004 has still remained with the appellant in April, 2007 at the time of search, more particularly when appellant himself has admitted to be engaged in unaccounted purchase and sales of goods and same is also reflected in the seized documents. Secondly, the appellant in his statement recorded on 20.4.07 has very categorically admitted particularly in relation to purchase made in F.Y. 2004-05 that the purchases were made in cash and bills were obtained from some other parties and obviously these bills are bogus/unverifiable. Accordingly, the reliance placed by the appellant on these bills for supporting his claim of alleged over valuation of the stock by the approved valuer, is totally misplaced. 4.13 Another argument of the appellant that the disclosure merely based on statement which is subsequently retracted, normally should not be confirmed in absence of corroboration, has been considered by me. Firstly in the instant case, the addition has not been made only on the basis of statement of the appellant. In fact the valuation of the physical stock got done by the approved valuer and then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld the G.P. @ 30% and accordingly same G.P. should be applied while working out the cost of stock found during the course of search. The undersigned has upheld the G.P. rate of 30% in the case of appellant in A.Y. 2005-06 and A.Y. 2007-08 and also in the present appeal order in A.Y. 2008-09 (the appeal of A.Y. 2006-07 is not yet decided, but the A.O. has applied the G.P. rate of 30%). Considering the fact that G.P. @ 30% has been taken by the A.O. not only in the case of appellant but in the case of other assessee s of this group, for all the years under assessment u/s.153A on the basis of Hon ble ITAT decision in the case of appellant Sh. Ravi Haldia and his brother Sh. Dinesh Haldia in the regular assessment for A.Y. 2004-05 and the undersigned has upheld the same on the basis aforesaid decision of the Hon ble ITAT and further noticing that facts revealed after the search are making the case of the appellant and other members of the group more adverse on this issue, for the years for which appeals have been decided. It was fairly admitted by the A.R. of the appellant that facts of the case of other years of the appellant and other group members are more or less same, for which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess stock, the balance amount of ₹ 97,74,948/- is held to be confirmed on protective basis in the case of Sh. Dinesh Haldia. In the case of Smt. Deepali Haldia and Smt. Mamta Haldia, the aforesaid amount mentioned in column No.4 are held to be confirmed on protective basis. 18. Against the finding about rejection of contention of the assessee in respect to stock, the assessee is in appeal and against relief allowed @ 30% GP as against 11% the department is in appeal. 19. The ld. Counsel of the assessee invited attention to various copies of written submissions filed during the course of hearing of appeals. 20. The ld. Counsel also filed application for admitting an additional evidence which is a certificate received from one Shri V.K. Kankaria, Government Approved Valuer by which it has been stated that value of Citrine Rough precious stone varies from ₹ 5,000/- to ₹ 50,000/- per kg in the national as well as international market and it never exceeded the limit of ₹ 50,000/- per kg till date. This certificate is dated 12.8.2011. The ld. Counsel of the assessee requested that to meet the ends of justice, this certificate should be admitted as it ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in the books of account has been found, neither cash excess was found nor jewellery was found where it can be said that assessee has invested any undisclosed income. No moveable or immoveable properties were found where it can be said that assessee has invested its undisclosed income. When no other assets were found, then only course left with the department to enhance the value of stock found during the course of search. It was further explained that though assessee had admitted that excess stock will be offered for taxation but that should be corroborated with evidence. Department s case is that they have got valued the stock from registered valuer and, therefore, value of that stock has to be taken and not the value of stock shown in the books of account of the assessee. Assessee is maintaining consistent approach in respect of the valuation of stock i.e. on the basis of purchase price or market price whichever is lower. All the items found during the course of search are the same items which are shown in the books of account prepared upto 31.3.2006. A small quantity of stock has been purchased by the assessee after 31.3.2006 and that has also been shown and the purchase vouch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atever the stock was shown in the books of account, that has already been reduced by AO and the excess stock after reducing the stock shown in the books of account has been added only in the income of the assessee. Regarding excess stock, no explanation was offered at the time of search or at the time of assessment. In the statement, the assessee has categorically admitted that ₹ 10 crore to ₹ 10.25 crore was his undisclosed investment in the group concern. The ld. CIT (A) has also examined the case minutely which is liable to be confirmed. 23.1. Regarding the benefit of 30% GP rate allowed by ld. CIT (A), it was submitted that no basis has been assigned by ld. CIT (A). The AO has allowed the benefit of 11% GP as declared by the assessee in regular business. 24. On a query from the Bench that if the items are same as per books of account and as found during the course of search then how the addition has been made, it was submitted that if items are same then of course no addition can be made but it is a fact that excess stock was found at the time of search and whatever the stock has been shown in the books of account that has already been fairly reduced by AO. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e books of account and found during the course of search. As stated above, the AO as well as the ld. CIT (A) went on to reject the contention of the assessee merely based on the statement of the assessee recorded and valuation made by the departmental valuer Shri Kasliwal. The audited books of account upto 31.3.2006 were available and this is admitted fact. As per books of account audited upto 31.3.2006, the stock of ₹ 8 crore or so shown in the books of account. Return for assessment year 2006-07 was filed in time before the search. In case of Shri Ravi Haldia, the return was filed on 31 st October, 2006 vide Receipt No.2100000423. The stock of ₹ 4.80 crore or odd has been shown in the hands of Shri Ravi Haldia. Accounts were audited, copy of accounts along with items of stock as well as valuation of stock is placed in the paper book at pages 52 to 53. Copy of written receipt is placed at page 38. Similarly in case of other assessee i.e. Shri D. Haldia, the return was filed on 31 st October, 2006 and along with the return audited accounts along with statement of stock inventory and valuation were enclosed. Copies of all these are placed on record. If stock of all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Aquamarin Semi Finish 4005 50063 Aquamarin Semi Finish 3965 277550 Amethyst Cut 193 56937 Amethyst Cut 500 62500 Amethyst Rough 20750 52913 Amethyst Rough 574040 9980900 Cat's Eye 2300 402500 Cat's Eye 2300 230000 Citrine Cut 450 37500 Citrine Cut 450 45000 Citrine Rough 17003 196964 Citrine Rough 16800 13440000 Emerald Cut 21760 5913215 Emerald Cut 19685 9306375 Emerald Rough 1090 190750 Emerald Rough 1750 13125 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods found in locker at birani safe 124250 Total 17256596 105512415 Total 17782621 186444297 26. After going through the above chart, it is seen that total weight in grams as per books of account is 1,72,56,596 grams valued at ₹ 10,55,12,415/- and total weight as per Valuation Officer s report is 1,77,82,621 grams valued at ₹ 18,64,44,297/-. There is a minor difference of 5 lacs grams which is equal to about 500 kg. Most of the items are rough items. For example, Aquamarin Rough i.e. item no. 1 of the chart, the weight as per books of account is 2,37,757 grams whereas weight as per Valuer s report is 85,978 grams. Though this item has been found short, however, as the stock was mixed up, proper valuation could not be done. For example, in case of Turmaline Rough, the total weight as per books of account is 1,41,34,164 grams and as per Valuer s report the weight is 1,47,94,610 grams. Weight of this item is more by 5 lac grams or odd. In Aquamarin Rough, there is a short ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e evidence or not. If this aspect is taken into consideration, then it will been seen that whatever the items were found, they were almost the same items as recorded in the books of account. Therefore, there should not be any valuation at all at the time of search as almost all the items were the same as recorded in the books of account. If there is any difference in items and difference in weight, then only valuation of those items should have done. The ld. CIT (A) has mentioned somewhere in his order that a diary was found and some noting was there in regard to unaccounted purchase and sales. In this respect we would like to mention here that the addition has not been made on the basis of diary but addition has been made on the basis of valuation of stock done by the departmental valuer Shri Kasliwal. It is also a matter of fact that no inference was drawn on account of diary or on account of statement but the addition has been made on the basis of valuation of stock. In our considered view, whatever the valuation has been shown by the assessee has to be accepted if the items are same. The valuation of stock will be taken at the time of sale of those items. As and when the stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e easily said that there was no rational basis for making the valuation as he has adopted different yardstick for adopting the value of same item at different rates. 27.2. Similarly, we noted that at page 2 of his Valuation Report the Valuer has taken the value of Fire Opel Rough weighing 4.7 kg and mentioned at item no. 38 of Annexure-J page 2 at ₹ 47 lacs by taking the value @ ₹ 10 lac per kg and on the same very page at item no. 39 he took the value @ ₹ 20 lacs per kg of the same item. This item was valued by another Departmental Valuer i.e. Shri Purnendra Kankaria, lying in the locker no. 122 with Birani Safe Deposit. The weight of Fire Opel rough is 5.159 kg was found and the same was valued at ₹ 25,795/- by taking rate of ₹ 5000/- per kg. In fact, this item has been purchased by assessee from M/s. Laxmi Jewellers, Jaipur vide Bill No. 181 dated 5.5.2004 Annexure A-8 of the department prepared during the course of search. This item was purchased @ ₹ 3695/- per kg. From this example it is amply proved that there is no basis of valuer for adopting the higher value. Whatever suits to him, the value has been adopted by him. He has not taken i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sily verifiable the items recorded in the books of account or found during the course of search. This exercise has also not been done either by AO or by ld. CIT (A). As stated earlier, the AO as well as ld. CIT (A) has gone to consider the statement of the assessee and the valuation adopted by the valuer. They have not tried to ascertain the factual aspects. 27.6. The charging section under the I.T. Act which provides that only real income is to be taxed. If by any reason a statement has been given then corroborative evidence has to be taken into consideration. Whatever, the items were found they were the items which were recorded in the books of account only. A minor difference is there and that is possible because of huge stock was found and the stock taking was done hurriedly by the search party and, therefore, it is quite possible that a small difference in quantity of stock is found during the course of search. 27.7. Reliance has been placed on various case laws and we have seen the ratios of some of the decisions and found that they are in support of the case of the assessee. In all these cases it has been stated that if statement is taken during the course of search an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... using derogatory language no useful purpose would be served. If any derogatory language is used either before AO or before ld. CIT (A), that will be treated as withdrawn as ld. Counsel for the assessee has fairly added that there is no intention of the assessee to use any derogatory language against the department or to malign the reputation of the department. The ld. Counsel of the assessee has fairly accepted that he will not use any such word against the department on behalf of the assessee. With this observation the objection of the department is disposed off as above. 21. Now we will take up the issue whether there was any retraction or not. No doubt, the assessee has signed the valuation statement/inventory prepared by search party along with the witnesses. However, it is a matter of fact that no copy of statement or the copy of inventory prepared by the search party was given to the assessee on the date of search. Thereafter, assessee immediately written to the concerned departmental authorities for providing the copy of statement as well as copy of inventory prepared as it is requirement of law also to provide the copy. After 8 to 10 months copy of inventory along with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings which forced to draw inference that the valuation may having been noted after completing the inventory of the items with size. 25. It is also worth mentioning to note that for a specific size there are 5 items and in all 5 items the value mentioned is of a different value. The reason by AO as well as by ld. CIT (A) has given that these items may be of a different material, different quality or different colour used for paintings etc. In our considered view, the AO and ld. CIT (A) has presumed that these items may be of different raw material and different manufacturing styles and different colour of paintings but all these items are verifiable from the stock itself. The assessee time and again has stated that these items are of same size, same material and same description i.e. colour paintings etc. Therefore, before brushing aside the contention of the assessee, there should have been some material with the department for not accepting the explanation. 26. It is further seen that various items are old one and verifiable. The ld. CIT (A) has given relief to the extent which in his view the items are tallied in size and shape as per books of account. However, he has n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no evidence of coercion or pressure as nothing has been mentioned in the Panchnama. Again we are not satisfied with the observations of the AO as well as of the ld. CIT (A) as in Panchnama these things cannot be mentioned that the statement has been recorded under pressure. The preparing party of the Panchnamas are the departmental authority, therefore, certainly they can not mention this thing that statement is recorded under pressure. Only circumstantial evidence has to be taken into consideration and circumstances of the case shows that since search was continued for 48 hours, therefore, there may be chances to commit error in noting the right size of each and every moorti. Inventory is prepared is so many pages and thousands of items were found, and, therefore, it can be said that the mistake can happen. 30. We further find that if the valuation of surrendered items on the basis of statement of the assessee is taken, then it will tantamount to double addition i.e. once the value taken by department at the time of search is assessed to tax and thereafter the assessee sold these very items and has taken the value as per books of account and as per their reconciliation chart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment in part as the AO himself had admitted the mistake of about ₹ 37 lacs or odd on account of difference/calculation in valuation as well as about ₹ 4 lacs of stock which pertains to other party. The ld. CIT (A) has accepted the error to the extent of ₹ 35 lacs or odd as he has deleted the addition. Though the department has challenged the deletion of addition made by ld. CIT (A), however, the ld. CIT D/R has also accepted that ld. CIT (A) has examined the issue minutely and, therefore, she stated that at least the order of ld. CIT (A) is liable to be sustained. From these facts, it is clearly proved that there was an error in taking the correct valuation of stock surrendered by the assessee or found by the department. 34.1. There is another discrepancy i.e. as per reconciled books of account the stock is about ₹ 1.22 cores whereas the departmental authorities have taken the stock at ₹ 1 crore or odd found recorded in the books of account as on date of search. Undisputedly, the books of account were incomplete. However, complete sale vouchers and other expenses vouchers on account of manufacturing etc. were found and seized. After getting the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valuations have been annexed with this order. From those examples of sales i.e. before search and post search, it is clearly established that the valuation mentioned in the stock inventory by the departmental authorities with lead pencil was not correct. In view of these facts and circumstances we are of the view that the valuation declared by the assessee of excess stock of ₹ 94,00,000/- or odd should have been accepted. 35. Various case laws have been relied upon by both the parties i.e. on behalf of the assessee as well as by department. We have gone through those cases and found that in all those cases nowhere it is stated that retraction is not allowable. Retraction is allowable, however, there should be some corroborative evidence. In the present case there is corroborative evidence. The AO has admitted the mistake about ₹ 43 lacs or odd in valuation of stock, ld. CIT (A) has also accepted the mistake of ₹ 35 lacs or odd in valuation difference. 36. Few cases on which reliance has been placed by the department and assessee are discussed here as under :- 37. In case of Hotel Kiran vs. ACIT, 82 ITD 453, it has been held that statement made unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8-10 months and immediately thereafter the assessee reconciled its stock and filed explanation accordingly. 41. We have also seen other cases relied on by ld. CIT D/R and found that similarly they are not applicable on the facts of the present case, rather they supports the case of the assessee as almost each and every court including the Hon ble Supreme Court has held that retraction is permissible, however, there should be a valid explanation with corroborative evidence. Assessee has filed corroborative evidence along with his explanation. Therefore, in our considered view, all the case laws relied on by ld. CIT D/R either are not in favour of the department or are in support of the case of the assessee. 42. The assessee has also placed reliance on various case laws i.e. in case of CIT vs. Dharmendra Sharma decided in DB Appeal IT No. 16/2008 dated 14.12.2008 (Rajasthan High Court), in case of Vijay Builders vs. ACIT decided in ITA No. 640/JP/2007 dated 20.3.2008 (JPR), in case of CIT vs. Ramdas Motor Transport, 238 ITR 178, in case of DCIT vs. Pratap Singh Rajendra Chomola Co., 19 DTR 182 (P H), in case of Kailashben Manharlal Chokshi vs. CIT, 14 DTR 257 (Guj.) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s admitted by the assessee in the statement recorded on 27.8.2007 in which he admitted that stock found at 14, Vishnupuri, Jagatpura Road, Jaipur was ₹ 6.67 crores, stocks found at 696, Pano-ka-Dariba was ₹ 4,00,00,000/- and stocks at 14A, Vishnupuri, Jagatpura Road, Jaipur was ₹ 0.06 crores totaling to ₹ 10.73 crores. In respect to stock at 14, Vishnupuri and 14A, Vishnupuri, there is no dispute with the department. The dispute in respect of stock found at Pano-ka-Dariba for which the assessee has stated this stock is bearing cost of ₹ 4,00,00,000/- purchased last so many years back. The statement of the assessee was also recorded on 23.8.2007and on this date also the assessee has admitted that stock found at Pano-ka-Dariba was purchased in the past and the stock found at Pano-ka-Dariba contains rough stock which was purchased from the market on a very lower rate. However, he has admitted the cost of this stock at around Rs., 4,00,00,000/-. The department got valued this stock at ₹ 9,45,50,000/-. 13. After reducing the stock as per books of ccount at ₹ 5.14 crores, the remaining stock was arrived at ₹ 5.59 crores. The assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e valuer. The date of valuation has been mentioned by the valuer on 23.8.2007. It means the value of the above stock was valued as on the date 23.8.2007, whereas the assessee has categorically stated that there is a vast difference in the valuation which is not acceptable to him. The statement was again recorded on27.8.2007 and on this date also he has categorically stated that the valuation made by the valuer is not acceptable to him as there is a vast difference and at that point of time he admitted that the stock of ₹ 4,00,00,000/- will be offered for taxation as the cost of the same is ₹ 4,00,00,000/- and as per record available. Thereafter no investigation was done by the search party neither revaluation was done on account of stock found at Pano-ka-Dariba whereas revaluation was done in respect of stock found at other two places. Therefore, this is a case of strong presumption that the department has agreed with the explanation of the assessee that the cost of stock was of ₹ 4,00,00,000/- and he is ready to surrender the same. The assessee has surrendered also the valuation of this stock by declaring a extra income of ₹ 4.21 crores on account of excess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... example of various other items found at three places different value has been taken by the valuer. A copy showing the same items found at three different places has been filed by the ld. Counsel which has been compiled with the stock register as copy of the stock register is also enclosed along with the chart, and after going through this chart and stock register entries, it is clearly established that the valuer has adopted a different yardstick for valuing the same item found at three different places. The stock found at basement of Vishnupuri is valued on a very lower rate than stock found at ground floor of Vishnupuri where the value has been adopted on some higher prices whereas the stock of same item found at Pano-ka-Dariba has been valued on a very high price. The difference is about ₹ 5,000/- to ₹ 6,000/- and no reason whatsoever has been assigned by the valuer that why this difference is there whereas the same items were found. For the sake of clarification, we are enclosing herewith this chart along with chart showing details of entries in the stock register of goods lying at Pano-ka-Dariba during the course of search as Annexure A and Annexure-B. 15. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is 23.8.2007. Therefore, it is clear that the valuer has adopted market rate. It is also a matter of common knowledge that valuation done by the departmental valuer or any other valuer has to be made on the basis of market price and if the price has to be determined on the basis of cost price then the date of valuation has to be made in the valuation report by mentioning that this is the date for the purpose of cost price which is not mentioned in the valuer s report and the date of valuation is mentioned as 23.8.2007 asstated above. We have also gone through the copy of purchase bills which are placed in the compilation and as per these purchase bills the material found at Pano-ka-Dariba was purchased from assessment year 1996-97 to 2003-04. Therefore, there is no doubt that the stock was purchased in the past which has been recorded in the books of account also. 16. The Hon ble Jurisdictional High Court in the case of Amar Kumari Surana, 226 ITR 344 has held that merely on the basis of valuation report addition cannot be made and assessee should be given opportunity to explain as to why not the same should be taken as the basis of determining cost of investment and if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egard are discussed in the order of ld. CIT (A) in para 5.1 to 5.2 at pages 19 to 21, are as under :- 5.1 Briefly stated the facts that the A.O. noticed that the appellant is deriving income from processing and trading of gem stones under the name and style of M/s. RH Exports. Apart from it, the appellant is also trading in commodities through commodity exchange under the name and style of M/s. Raghav Trading Company since 2003-04 and share related business in M/s. Ravi Haldia since 2004-05. The A.O. has given the chart for purchase, sale, N.P., G.P. related to all the three business in the assessment order, out of which details of gem stone business for A.Y. 2005-06 onward are extracted below: A.Y. Sales Purchase Stock G.P. G.P.% Net Profit 05-06 19132770/- 42740333/- 36301125/- 2172925/- 11.36% 9987110/- 06-07 142135/- 11159105/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernational, M/s. Rahul Exports, M/s. S.V. Enterprises in various years. However in the appellant s own case and in the case of his brother Shri Dinesh Haldia in regular assessment proceedings in A.Y. 2004-05 purchases from these parties were held to be bogus/unverifiable by the A.O. and same was confirmed by the Hon ble ITAT in ITA no.320-321/JP/08 vide order dated 31.7.08 and considering the peculiarity of the facts that heavy purchases have been shown from these parties which are unverifiable, the Hon ble ITAT has upheld the gross profit rate of 30% in the appellant s own case and in the case of his brother Sh. Dinesh Haldia. The A.O. accordingly applied the G.P. rate of 30% after rejecting books results in the case of appellant and made the trading addition of ₹ 35,66,906/-, ₹ 18,761/-, ₹ 6,91,350/- and ₹ 2,33,218/- respectively in A.Y. 2005-06, 2006-07, 2007-08 AND 2008-09. Out of the aforesaid two addition/disallowance i.e. disallowances out of the purchase and trading addition, the A.O. has added only one itm on substantive basis, whichever is higher in particular assessment year and other item was considered on protective basis. In A.Y. 200809, as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT (A) made and sustained additions on the basis of GP rate applied by Tribunal for assessment year 2004-405 at 30%. This rate was applied by Tribunal against GP rate shown by assessee at 27% as stated by ld. A/R. It is seen that from assessment years 2005-06 to 08-09 the assessee has shown GP ranging from 11% to 16.80%. In assessment year 2008-09 assessee has shown 16.06%, in assessment year 2006-07 assessee has shown GP rate at 16.80%. The books of accounts were complete upto assessment year 2006-07 and thereafter the books of account were prepared after search. Taking into consideration all aspects, we are of the view that if a GP rate of 18% is applied, then it will meet the ends of justice. The AO is directed to re-compute the trading addition taking the GP rate at 18% instead of 30%. The ground is partly allowed. 41. Ground No. 9 is against confirming the purchases made by assessee from Unregistered Dealers of ₹ 44,279/- in cash as bogus being unverified, unexplained and thereby confirming an addition of ₹ 11,070/- being 25% of unverifiable/unexplained purchases. 42. This issue should be decided in favour of the assessee for the simple reason that the Jaip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot pressed. Therefore, the same is dismissed as not pressed. 53. Ground No. 2 is against rejecting the assessee s explanation that assessee has already surrendered ₹ 2,00,000/- in assessment year 2008-09 towards possible interest which accrued/arose on surrender of KVP/FDR. 54. This issue we have restored to the file of AO while disposing the appeal of the assessee for assessment year 2008-09. Therefore, this ground is also restored to the file of AO to examine this issue afresh. 55. Ground No. 3 is against sustaining application of provisions of section 145(3). 56. This issue was also decided in the appeal for assessment year 2008-09 and we have rejected the ground of the assessee. On the same reasoning, this ground of the assessee is rejected here also. 57. Ground No. 4 is against sustaining the trading addition of ₹ 6,91,350/- on account of alleged inflated purchases. 58. Similar issue was also involved in the assessment year 2008-09. The AO applied 30% GP and the ld. CIT (A) confirmed the same. We have directed the AO to apply GP rate at 18%. Here also we are of the view that if a GP rate of 18% is applied, that will meet the ends of justice. Accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reduced the addition by observing that 25% should be disallowed. We have already held that addition @ 25% of unverifiable purchases is not justified as addition should be made on the basis of past history of the case. We have taken into consideration past history of the case. The assessee has shown GP rate ranging from 11% to 16% from assessment year 2005-06 to 08-09. We have sustained trading addition by directing the AO to apply GP rate at 18% which is much higher against GP rate shown by assessee at 11.2% for the year under consideration. Accordingly these grounds of the department are rejected. 69. In the result, appeal of the assessee is partly allowed and appeal of the department is dismissed. 70. Now we will take the appeal of the assessee for the assessment year 2005-06. 71. Ground No. 1 is similar to Ground no. 1 in assessment year 2008-09, which was not pressed. Therefore, on the same reasoning this ground of the assessee is rejected. 72. Ground No. 2 relates to rejecting the explanation in regard to surrender of ₹ 2,00,000/- in assessment year 2008-09 towards possible interest which accrued/arose on surrender of KVP/FDR in the previous year. 73. We h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment year 2003-04. 84. Ground nos. 1 2 are against sustaining addition of ₹ 7,800/- made by AO on account of unexplained income of interest accrued/arose on surrender of KVP/FDR and on account of surrender of ₹ 2,00,000/- in assessment year 2008-09. 85. We have already restored similar issue to the file of AO while disposing the ground for other years appeals. On the same reasoning, these grounds are also restored to the file of AO. 86. Ground No. 3 against sustaining addition of ₹ 3,56,483/- out of total addition of ₹ 6,27,734/- (cost of construction determined by the departmental valuer). 87. Brief facts of the case are recorded in para 4.1 in the order of ld. CIT (A) at page 3 are as under :- 4.1 Brief facts on this issue are that the appellant alongwith this mother purchase a house situated at C-18, Jyoti Marg, Bapu Nagar and made certain construction over it in the period relevant to A.Y 2002-03. A.O made reference to the DVO u/s 142 A(1) of I.T. Act to elucidate the cost of construction. The DVO determined the cost of construction of the property at ₹ 1,54,06,975/- as against ₹ 1,41,66,192/- declared by the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has argued that construction account details are available in the ledger account, the copy of which is filed before me, but it remains a fact that all the voucher etc were not furnished/produced before the A.O. and accordingly, A.O. was justified in referring the matter to the DVO. Various arguments do taken by the appellant in this regards is rejected. 4.5 Now coming to the specific defects pointed out, from perusal of the map of the then house available alongwith the copy of sale deed, I agree with the argument of the appellant that ground floor, ceiling varanda, covered balconies, servant block were already existing alongwith the RCC overhead tank on the terrace. These items totals up to ₹ 3,47,402/-. However, I do not agree with the argument of the appellant that nothing was spent on these construction/items. All these construction have also been renovated and repaired and given a fresh look, requiring expenditure to be incurred, which is estimated at ₹ 50,000/-. Thus the total construction cost is reduced by ₹ 2,97,402/-. The other argument of the wood of the existing wardrobe claimed to be utilized for new cupboard/wardrobe is nothing but a eye wash, as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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