TMI Blog2018 (9) TMI 1775X X X X Extracts X X X X X X X X Extracts X X X X ..... passed by the authorities below in making addition on account of contractual remuneration paid to the goldsmith. Discrepancy in stock addition or the gross profit embedded considered for addition - Held that:- As relying on M/S. SUBARNA RICE MILL VERSUS INCOME-TAX OFFICER, WD-2 (3) , BURDWAN [2015 (7) TMI 522 - ITAT KOLKATA] we observe that only the gross profit can be added to the income of the assessee and not the entire undisclosed stock. We thus delete the addition made by the authorities below. addition on account of excess stock of silver found at the time of survey treating the same as unexplained u/s 69 - Held that:- We find from the recording of the order of the ld. AO that in the assessment year the difference has been admitted by the assessee in his submission furnished before him on 30.11.2009. Such submissions was made on this premise that the difference arose because the assessee was valuing her stock at cost while departmental valuer valued this stock at market rate. However since there were no supporting documents how much quantity of silver was purchased and at what rate and how much silver was in stock and at what rate in the absence of which the contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucted by the AO is inadequate and the order passed by the AO is erroneous and prejudicial to the interest of the revenue. Such an enquiry has not been done by the CIT(A) to prove the order passed by the AO erroneous and prejudicial to the interest of the revenue instead he has shifted the ball to the AO’s court which in our considered view is not permissible under law. - Decided in favour of assessee - ITA No.1704/Kol/2011, 1567/Kol/2011, 1084/Kol/2014 - - - Dated:- 26-9-2018 - Shri J.Sudhakar Reddy Versus Smt. Madhumita Roy, JJ. For the Assessee: Shri Soumitra Chowdhury, Advocate For the Department : Shri G.Hangsing, CIT(DR) Shri Saurabh Kumar, Addl.CIT, Sr.DR ORDER Madhumita Roy, The instant cross appeals have been filed by the assessee as well as by the Revenue against the order dated 30.06.2011 passed by the ld. CIT(A)-XXXII, Kolkata arising out of the order dated 31.12.2009 passed by the D.C.I.T., Circle-5, Kolkata for A.Y.2007-08. ITA No.1704/Kol/2011 (Assesee s Appeal) 2. The instant appeal is time barred by one day. An application for condonation of delay has been filed by the assessee along with an affidavit before us. The stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntractual remuneration paid to goldsmith on the basis of karigarh note book (MCS-12) found at the time of survey, treating the same as omission of receipt of making charges which is completely arbitrary, unjustified and illegal. 8. For that. on the facts of the case, he Ld. C.LT.(A) has allowed only ₹ 9,24,798/-, out of total addition mace by the A.O. at. ₹ 55,70,948/- as undisclosed stock of gold [MCS 12 to 15]therefore, confirming the addition of ₹ 46,46,150/ - is completely arbitrary, unjust.ified and illegal. 9. For that. on the facts and in the circumstances of the case, the Ld. C.I.T.(A) ought. to have considered that. the assessee had discharged its onus by furnishing all the relevant documents in connection with the stock of gold and also proved the identity and creditworthiness and genuineness, therefore, the Ld. C.I.T.(A) may be directed to delete the addition amounting to ₹ 46,46, 150/-. 10. For that. on the facts of the case, the Ld. C.I.T. (A) was wrong in dittoing the order of the A.O. and confirming the add Lion of ₹ 3,40,697/ - on account of excess stock of silver found at the time of survey, treating the same as unexplained in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is having a jewellery manufacturing and trading business namely M/s M.C.Sircar Sons. Annexure MCS-16 contains record of several expenditures incurred by the assessee. According to the APO the same was not explained and came to a conclusion that the record were made by suppressing two digits. The total recording was of ₹ 3250/- instead of ₹ 325000/- as observed by the ld. AO and the same was added to the income of the assessee. In appeal the ld. CIT(A) confirmed such addition. The case of the assessee is this that these expenditures were made from the assessee s personal drawing amount and the business expenditure has duly been recorded in respective head of expenditure on audited accounts as on 31.03.2007. The ld. Representative of the assessed argued before us that the AO by adding two digits in Annexure-MCS-16 and the actual expenditure was of ₹ 32500/-. The addition, thus, is not sustainable. In appeal we find that the assessee submitted the following : The assessing officer added a sum of ₹ 3,25,000/- to the total income of your petitioner merely based on own assumption. During the course of survey he collected several information from a note book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing officer should make assessment based on proper enquity. ' 6. The ld. CIT(A) failed to find out any reason for such payment of small amount to the economic teacher and Chartered Accountant neither could justify that two digits has been suppressed by the assessee in the said MCS-16. On the contrary he wanted the assessee to justify that he has not suppressed two digits in recording expenditure as revealed in the said documents. We find no justification of the same for such assumption that the assessee has suppressed two digits in each count of expenditure as mentioned in the said documents and confirmed the addition made on the basis of the findings made by the ld. AO. Further that the expenditure were made in the earlier order and not relevant to this assessment year. On the contrary the ld.DR relies on the orders of the authorities below. 7. Having heard the representative appearing for the parties and having regard to the facts and circumstances of the case we are of the view that there is no justification of addition of ₹ 32,500/- on the basis of assumption of deletion of two digits on account of expenditure as recorded in MCS-16 as revealed or that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estimated basis. The ld. DR relies on the orders of the authorities below. 11. We have heard the ld. Counsel appearing for the parties. We have perused the materials available on record. We find substance in the submissions made by the assessee s representative. No cogent reason has been assigned by the authorities below while making addition on estimate basis on the making charge of the gold as mentioned therein. We thus delete the order passed by the authorities below in making addition of ₹ 38,893/- on account of contractual remuneration paid to the goldsmith. 12. Ground No.8 and 9 : These two grounds are against the addition of ₹ 46,46,150/- on the ground of undisclosed stock of gold. During the course of survey stock found in the business premises was valued by the Registered Valuer at ₹ 1,14,67,026/-. In the net weight of gold was found at 11206.200gms the value of which was determined at Rs./1,00,19,342/-. Apart from that silver and diamond jewelleries worth ₹ 14,47,684/- were also found. During the assessment proceedings the assessee sought to substantiate the claim of gold weighing 4442.470 gms belonging to kharigars. The names and addresses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firmed in response to notices issued to them u/s 133(6) that they had deposited gold with the assessee as security . The total quantity of gold admitted by the seven karigars was 1108.870 gms. The claim of the assessee of having received balance gold totalling to 3333.600 gms from karigars from karigrs and jewellery of the net gold content of 1352.170 gms from customers remained unsubstantiated, therefore, is not accepted. As regards the A.R.'s contention that the karigars and customers to whom notices/summons were issued by the A.O. were confused about the name of the persons in respect of whom information was sought by the A.O., it is observed that the assessee could have availed the opportunity of remand proceedings to remove and address any such confusion an could have got the verification done. But no such effort was made by her. The A.R. also contended during the appellate proceedings that the Departmental Valuer had valued the stock applying the rate of 24 carat gold and that he erred in not valuing the stock by applying the rates of 22 carat gold as the jewellery is normally made in 22 carat gold. This claim of the assessee is erroneous. From the perusal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein. On the contrary the ld.DR relies on the orders of the authorities below. Another judgment of ITA.No.1550/Kol/2016 passed by the Coordinate Bench of this Tribunal in the case of Ghosh Bishayee Associates vs ACIT, Circle-1, Burdwan was relied upon. 15. We have heard the representative of both the parties and perused the materials available on record. We find from the records that the entire amount has been added on the basis of the undisclosed stock of the business. The question arises as to whether the discrepancy in stock addition or the gross profit embedded therein is to be considered for addition. The issue has been settled by the following judgement relied upon by the representatives of the assessee passed by the jurisdictional High Court with the following observations :- The assessee's appeal before the Commissioner (Appeals) failed and by an order of August 25, 2014, the assessment order of March 28, 2013 was upheld. The Commissioner looked into the facts, the statements made by or on behalf of the assessee and the books of the assessee that had been looked into at the time of survey which the assessee subsequently claimed had been lost or destroyed and, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ored. The additional quantum as discovered during the course of the survey operation win fasten to the assessee. However, the other aspect of the matter was dealt with by the Appellate Tribunal on a point of principle and such matter does not call for any interference. According to the Appellate Tribunal the value of the entire quantity of additional stocks that were discovered in course of the survey operation could not be regarded as the additional income of the assessee and amenable to tax. There was a specific ground taken before the Appellate Tribunal which was a legal question, as to whether the undisclosed purchase could be taken as the additional income without reference to the possible sale of the paddy when converted. The assessee refers to a judgment of the Gujarat High Court reported at 388 ITR 377. The principle enunciated in such judgment is that when undisclosed purchases of such nature are discovered, it is only the profit embedded in the transaction which can be added to the total income. The Gujarat High Court relied on some of its previous judgments to hold that not the entire purchase price but only the profit element embedded in such purchases can be added to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired to be confirmed then the same can only be done on the basis of gross profit as has already been argued in support of ground no.8 and 9 addition. However the ld. DR relies on the order passed by the authorities below. We find from the recording of the order of the ld. AO that in the assessment year the difference has been admitted by the assessee in his submission furnished before him on 30.11.2009. Such submissions was made on this premise that the difference arose because the assessee was valuing her stock at cost while departmental valuer valued this stock at market rate. However since there were no supporting documents how much quantity of silver was purchased and at what rate and how much silver was in stock and at what rate in the absence of which the contentions made by the asessee was not accepted by the CIT(A) and an addition of ₹ 3,40,967/- was confirmed. We have however not appreciated the stand taken by the ld. CIT(A) relying upon the observations made herein above in respect of ground no..8 and 9 we delete the said addition of ₹ 3,40,967/- and remand this issue to the file of the AO in view of the above gross profit declared by the assessee which in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence between closing balance of the assessee s books of account and as per the books of account of M/s. Laxmi Narayan Bullion was considered by the ld.CIT(A) and added ₹ 1062480/- (1736816 674336) to the total income of the assessee. We find that in both the cases when there is a discrepancy in the accounts of the assessee and with the statements made by the assesee that no cash payment has been made by the assessee to M/s Laxmi Narayan Bullion the ld. AO ought to have done enquiry on this issue by issuing summons to the party concerned for verification of the controversy involved in the issue. In the absence of which addition as made by the AO and confirmed by the ld. CIT(A) is not called for. We therefore delete the addition of ₹ 1062480/- as confirmed by the ld. CIT(A) on account of bogus sundry creditors and ₹ 77553/- as confirmed by the ld.CIT(A) on account of unexplained investment . This grounds of appeal are allowed. Ground No.13 raised by the assessee is not pressed. ITA NO.1567/Kol/2011 22. The instant appeal has been filed by the revenue with the following grounds :- Ground No 4: That Ld CIT(A) has erred in law as well as facts in de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses as claimed amounting to ₹ 18,758/- has been treated to be too low by the ld. CIT. Regarding other expenses no examination was made by the AO for abnormal increase of the same over the immediately preceding year as observed by the ld.CIT(A). Further that while dealing with the order made by the AO the ld. CIT held as follows :- (i)Certain expenses were incurred in cash as follows :- a) Incentive to staff Rs.5,78,118/- b)New year expenses Rs.2,68,000/- c)Travellling and conveyance Rs.78,280/- d)Puja expenses Rs.48,000/- e)Staff welfare expenses Rs.86,000/- f)Repair and maintenance Rs.3,91,700/- It is not ascertainable from the assessment order that the AO had examined whether the above expenses were fully vouched or not. The AO also did not examine whether there was any element of personal use in those expenses. The AO did not examine the issue that the car running expenses claimed was so low at ₹ 18, 758/ -. In respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ials available on record we find from the order passed by the ld.CIT that he has shifted the duties and obligations on the AO while setting aside the order passed by him. It is a well settled law that in the event the ld. CIT finds that the order is erroneous on the ground of lack of enquiry and /or investigations on the part of the AO on the issue involved then it is the duty of the ld. CIT to conduct an enquiry into the matter and upon enquiry and examination of evidence to come to a conclusion upon specific finding that enquiry conducted by the ld. AO is inadequate and the order passed by the ld. AO is erroneous and prejudicial to the interest of the revenue. Such an enquiry has not been done by the ld. CIT(A) to prove the order passed by the ld. AO erroneous and prejudicial to the interest of the revenue instead he has shifted the ball to the ld. AO s court which in our considered view is not permissible under law. The judgement relied upon by the ld. AR in the case of ITO vs DG Housing Projects Ltd. (supra) considered this particular issue and finally observed in favour of the assessee. The case is identical to the instant case of the assessee. The relevant portion therein is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous. Therefore CIT must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the CIT must come to the conclusion that the order is erroneous and is unsustainable in law. We may notice that the material which the CIT can rely includes not only the record as it stands at the time when the order in question was passed by the Assessing Officer but also the record as it stands at the time of examination by the CIT [see CIT v. Shree Manjunathesware Packing Products Camphor Works [1998] 231 ITR 53 / 98 Taxman 1 (SC)]. Nothing bars/prohibits the CIT from collecting and relying upon new/additional material/evidence to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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