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2018 (4) TMI 735

llery but on the date of search the books of account or stock register was not produced. The assessee in post search enquiry has submitted the reconciliation of stock by producing the copies of the bill of purchase and sale as well as the approval notes for the goods sent and received on approval. The details before the DDI stating that there is no difference in the quantity of the jewellery. Valuation is at cost and the total quantitative details of purchase and sales and receipt and issue on approval is supported by proper documentary evidences. The assessee has also submitted the quantitative details which could not be shown to be concocted. No defect could be pointed out in such quantity details. - The details of jewellery recorded on approval and sent on approval is supported by the documents produced before the ld AO but AO did not find any discrepancy in those details. Further, the valuation of jewellery made by the assessee on cost basis was also not disputed contrarily the cost of the jewellery was supported with the bills showing rates of purchases. Merely non maintenance of stock register by the assessee cannot result into addition unless the AO shows with conclusiv .....

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by invoices and goods received/ sent on approval supported by approval vouchers, and that the appellant had submitted complete documentary evidence to the DDI(Investigation) vide letter dated 14.06.2012. 4. That the ld CIT(A) correctly appreciated that the appellant s had valued stock at cost on the basis of gold rate prevailing on the date of purchase of respective items, whereas the department value had valued the items at gold rates prevailing on 12.04.2012. 5. That the ld CIT(A) had rightly deleted the addition made by the ld AO on account of undisclosed investment in stock, as the same was made without any credible or cogent objections against the valuation and explanation submitted by the appellant. 4. The brief facts of the case is that assessee is an individual. She is running a proprietary concern in the name and style of Jewel By Preeti . The business was started in October 2010 of purchase and sale of jewellery and accessories. She also undertakes services of organizing events for design and promotion of the jewellery on commission basis. The search and survey u/s 132 were conducted on 12.04.2012 in one of the group of which assessee is a member. The assessee filed her .....

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ock as per books of accounts was ₹ 2,27,75,908/-. The AO had considered the difference between ₹ 3,78,77,297/ and ₹ 2,27,75,908/- = ₹ 1,51,01,389/- as undisclosed investment in stock made by the appellant in asst year 2013- 14. 10. FINDINGS OF THE ASSESSING OFFICER It was gathered during the search that no books of accounts of M/S Jewel by Preeti were available at that business premise. The appellant had stated that I do not remember where the books of accounts have been kept. During post search proceedings, Ms. Preeti Jain has submitted the reconciliation of stock position of M/S Jewels by Preeti as on 12.04.2012 on the basis of purchase and sale bills, goods on approval received and goods on approval sent. She has also submitted copy of ITR filed on 28.09.2011 for asst year 2011-12, Balance sheet and Profit & Loss account wherein closing stock as on 31.03.2011 of M/S Jewels by Preeti has been reflected as ₹ 2,35,85,908/-. The value of closing stock a on 31.03.2011 and 31.03.2012 has been arrived as under:- Opening Stock - Nil Add Purchase during F.Y. 2010-11 Rs.2,41,90,431 Less Cost of sales of ₹ 7,07,048 Rs.6,04,523 Closing Stock as on 31. .....

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200.242 434.71 Sales 197.508 167.847 18.92 Purchase Return 472.300 458.491 39.50 Sent on Approval 249.449 235.984 18.14 Total 5,288.883 4,337.920 358.15 Item Received on Approval 2,066.668 1,567.976 94.52 Grand Total 7,355.551 5,905.896 452.67 Total as per valuation Report dated 12.04.2012 7,361.49 5,902.84, 449.91 As per the reconciliation prepared and submitted by the Appellant there was insignificant difference between jewelry physically found during search with jewelry available as per boons accounts. This insignificant difference can arise due to the fact that the ' n report is an estimate made by the Valuer whereas the quantity and weigh: as per books of accounts is supported by invoices and vouchers. Therefore, the primary grouse of the appellant is that the AO has erroneously considered the value of stock as estimated by the departmental valuer on the basis of gold rate prevailing as on 12.04.2012 the appellant had valued his stock at cost on the basis of rate of gold as prevailing on the date of purchase of respective item. The right course of action would have been for the AO to compare the net weight of stock as estimated by the valuer with the net difference in the .....

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ur of third parties. It indeed is a common trade practice in jewelry trade that expensive items are received or sent on approval basis . 12.2 Copy of ARs letter to DDI (Inv) dated 14.06.2012 was filed before the AO vide ARs letter on 20.03.2015 along with all the details and reconciliations between jewelry physically found during search with jewelry available as per books of accounts. There is insignificant difference in the net weight of gold and diamonds that can arise due to the fact that the valuation report is an estimate made by the Valuer whereas the quantity and weight as per books of accounts is supported by invoices and vouchers. 12.3 The AO has merely alleged that the appellant s contention regarding the receipt and issue of jewelry on approval basis was an afterthought. The AO has not found any error/discrepancy in appellant s submission regarding the receipt and issue of jewelry that was supported by vouchers and other evidence. The weight of closing stock of gold and diamond jewelry has been arrived at by the appellant on the basis of closing stock as declared by her in her ITR for AY 2011-12 filed on 28.09.2011 that was prior to the date of Search of 12.04.2012. The .....

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other cases of Aryan Sainik Group at various residential and business premises. 3. The assessee filed return of income for AY 2013-14 on 17.03.2015 declaring income of ₹ 3,34,028/-. 4. The Ld. AO passed assessment order u/s 143(3) of the Act on 27.03.2015. In the assessment order, the Ld. AO had alleged that the value of stock as on 12.04.2012 (i.e. on the date of search) as estimated by the Department Valuer was ₹ 3,78,77,297/-. As against this, the value of stock as per books of accounts was ₹ 2,27,75,908/-. Therefore AO considered the difference of ₹ 1,51,01,389/- as undisclosed investment in stock in AY 2013-14. 5. Appeal was preferred by the assessee against the said assessment order before CIT(A) wherein the Ld. CIT(A), vide appellate order dated 04.12.2015, deleted the addition made by the Ld. AO. Submission 1. The allegation of the Department that ₹ 1,51,01,389/- should be added on account of difference in valuation of stock under the head undisclosed investment in stock is not correct. 2. With respect to the above, it is submitted that the difference in value of stock i.e. ₹ 1,51,01,389/- [Rs.3,78,77,297 - ₹ 2,27,75,908] is differe .....

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osing stock as on 31.03.2011 ₹ 23585908 Opening stock as on 01.04.2011 ₹ 23585908 Purchase during the FY 2011-12 Nil less: Purchase return during FY 2011-12 Rs.3,90,000 less: Sale during FY 2011-12 Rs.4,20,000 Closing Stock as on 31.03.2012 Rs.2,27,75,908 4.1. As evident from above, in arriving at the stock of jewellery as on 31.03.2012, goods received on approval is not added also goods sent on approval has not been deducted as actual purchase and sale were not effected. 4.2. With respect to the above, the assessee would like to submit that the ground no.3 raised by the department that the assessee was not maintaining stock register is of no relevance. The accounts of the Assessee are audited and as per the audited accounts as on 31.03.2011, value of closing stock was ₹ 2,35,85,908/-. Further to this purchases made during the year were added and sales were deducted. Therefore non maintenance of stock register has no bearing on the explanation furnished by the assessee explaining the nature of stock found at the time of search. 5. Thus the Assessee would like to state that the Ld. AO has erroneously considered the value of stock as estimated by the department valu .....

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d in giving assessee relief on account of jewellery received on approval without appreciating the fact the assessee has given statement on oath during the search and denied having received/ kept any jewellery for such purposes get answered. Apart from this the Ld. AO did not specify- any other good reason as to why the evidences produced by the Assessee in relation to value of stock as on 31.03.2012 cannot be accepted. Based on the above detailed submission of the assessee, it is humbly prayed before your H:nours to kindly uphold the Order of the ld. CIT(A) and dismiss the Departmental Appeal and also allow relief as prayed for on the Cross Objections of the Assessee. 10. We have carefully considered the rival contentions and also perused the orders of the lower authorities. Admittedly assessee is carrying on the business of jewellery but on the date of search the books of account or stock register was not produced. The assessee in post search enquiry has submitted the reconciliation of stock by producing the copies of the bill of purchase and sale as well as the approval notes for the goods sent and received on approval. The assessee further submitted the details before the DDI st .....

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