TMI Blog2021 (2) TMI 582X X X X Extracts X X X X X X X X Extracts X X X X ..... are the estimates of cost of lands and cost of sale value area, average rate, car parking and mall from ₹ 20, 30,27,000/- paid by the assessee in cheque to the farmers for purchase of the land. There was no material to corroborate such an addition, the Assessing Officer merely went back the Annexure A 21 page no. 1 to make such addition. Hence, the action of the Assessing Officer cannot be supported. The appeal of the assessee on this ground is allowed and appeal of the revenue is dismissed. Unexplained Investment in Kashipur Land - HELD THAT:- Addition has been made on a presumptive basis. There was no evidence on record reflecting any payment of cash. Further, while the land has been purchased that Sargam Estate Pvt. Ltd. and reflected in the balance sheet of Sargam Estate pvt. Ltd., no addition is called for in the case of the assessee. It cannot be said that while the cheque has been paid on behalf of Sargam Estate Pvt. Ltd. cash has been paid by the assessee. The nature and contents of the seized material do not reflect any unexplained investment in the land purchased in Kashipur. Hence, we decline to interfere with the order of the ld. CIT (A) on this issue. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment in M/s Sargam Estate Pvt. Ltd - HELD THAT:- As gone through the facts on record and balance sheet of M/s Sargam Estate Pvt. Ltd., the share capital of ₹ 1, 00, 000 /- remained constant as at 31.03.2007 and as at 31.03.2006. The share application money as at 31.03.2006 was ₹ 32, 18, 000 /- which was refunded to the assessee company after receipt of fresh share application money of ₹ 53, 86, 000 /- by M/s Sargam Estate Pvt. Ltd. Instead of enquiring, the source of application money, the AO brought to tax the amount of share application money refunded to the assessee by M/s Sargam Estate Pvt. Ltd. Hence, the addition made has been rightly deleted by the ld. CIT (A). Unexplained advertisement expenses - HELD THAT:- CIT (A) has rightly deleted the addition as the total expenditure debited on account of advertisement Unexplained investment in stock of jewellery - Addition on account of GP - HELD THAT:- Since there is a panchnama drawn in the case of M/s GTM Jewellery Mart Pvt. Ltd., stock inventory was made in the said company and keeping in view the fact that M/s GTM Jewellery Mart Pvt. Ltd. is a separate assessable entity, keeping in view the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and facts in confirming the G.P. Rate @7 % applied for the calculation of value of alleged excess stock of jewellery by the Assessing Officer in making the additions of ₹ 4,27,22,971/- which is arbitrary, unjustified and against the provisions of law. 5. The Ld. Commissioner of Income Tax (Appeals) has erred in law and facts in confirming the action of the Assessing Officer for disallowing the difference in amount of ₹ 24,28,921 /- for G.P. Rate on gold jewellery of ₹ 3,46,98,876/- which is arbitrary, unjustified and against the provisions of law. 6. The Ld. Commissioner of Income Tax (Appeals) in law and facts in not accepting the submissions of the appellant regarding mode of valuation of stock of jewellery which is arbitrary unjustified and against the provisions of law. 7. The Ld. Commissioner of Income Tax (Appeals) has erred in law and facts in not entertaining the additional evidence as per Rule 46 A of the Income Tax Rates by ignoring the facts of the case which is arbitrary, unjustified and against the provisions of law. 3. In ITA No. 3783/Del/2010, following grounds have been raised by the revenue: 1. The order of the Ld. CIT(App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax Act, 1961. 9. In the fact and circumstances of the case, Learned CIT(A) has erred m law and on facts in deleting the addition of ₹ 34,78,000 /- towards undisclosed investment in M/ s Sargam Estates Pvt. Ltd. without appreciating facts on records. 10. In the facts and circumstances of the case, Learned CIT(A) has erred in law and on facts in deleting the addition of ₹ 34, 65, 559/- on account of unexplained advertisement expenses without giving opportunity to AO to examine the correct claim recorded in books of accounts. ITA No. 3578/Del/2010 AY 2006-07 (Assessee) ITA No. 3783/Del/2010 AY 2006-07 (Revenue) Brief backdrop: 4. A search and seizure operation was carried out on the GTM Group of companies which was controlled by Sh Gautam Kumar and his son Sh Tushar Kumar. During the course of search and seizure proceedings Sh Tushar Kumar surrendered an amount of ₹ 17 crores as undisclosed income while making statement u/ s 132(4) in front of the search parties. The disclosure relates to purchase of land at Dehradun, undisclosed investment in jewellery, share capital, unsecured loans and advances for different project e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07000 The other side of the above page showed the following entries: Total deal 271420134 Paid in cheque 174771637 Cash - 12100000 + 7500000 +10500000 30100000 Balance 204871637 48148497 4000000 44148497 The AO had drawn the following conclusion on the above seized documents. ₹ 25, 30, 20, 134 /- represents the cost of the project without registry. (Registry of the land was done at ₹ 1, 84, 00, 000 /-). The total cost of the project is ₹ 27,14,20,134 /-. Amount paid by cheque is ₹ 17,47,71,637/-. Amount paid by cash is ₹ 3, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluded stamp duty. The entire amount was paid by the assessee. 11. The ld. AR argued that the seized documents of Annexure A-21, page 9 of the dairy front back page and as per the noting on the diary pages and also the loose slips seized vide Annexure-21, Page-1, Annexure A- 16 page 28 -29 7 are rough calculations which have been made by calculating the amounts required but it cannot be treated as amounts paid. 12. He argued that while the rough pages reflects total payment of ₹ 27, 14, 20, 134/-, the actual payment made for the said land was infact ₹ 20, 30, 27, 000/-. Hence, the conclusion of the Assessing Officer that the undisclosed investments on the land amounts to ₹ 6, 84, 50, 134/- was wrong on facts. 13. It was argued that the AO has wrongly made addition of this amount of ₹ 6, 84, 50, 134/- substantially in the hands of the assessee and protective assessment has been made in the hands of M/ s Sargam Estate Pvt. Ltd. on the premise that the cheque payment has been made by the assessee and the cash payment could have been made by the M/ s Sargam Estate Pvt. Ltd. and since both the amounts are generated by the assessee, the same has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es around whether payment of ₹ 6.85 Cr. in cash has been made against the registered purchase value of ₹ 20.30 Cr. in view of the page no. 9 of Annexure A 21 seized from the premises of the assessee. 18. We have gone through the page no. 9 of Annexure A 21, page no. 28, 29 of Annexure A 16, page no. 7 of Annexure A 16. 19. Page no. 9 of Annexure A 21 is a diary relied upon by the Assessing Officer to treat the summary of transactions and payment of the land. Page no. 1 Annexure A 21 reflects calculation of cost of land area, average rate, car parking etc. Page no. 7 of Annexure A 16 gives the details of payment made to the sellers. Page no. 28, 29 of Annexure A 16 are the details of payments made to Iqbal. 20. Page no. 9 of Annexure A 21 reflects writing cheques to be paid to ₹ 2,27,50, 000 /- and cash 2,53,98, 497 below that is a figure of 18,27,12,497. On the back side of page no. 9 (page 143 of paper book) mentions above cost per bigha @ ₹ 43,62,416 /- which amounts to ₹ 27, 14, 20, 137/- including registration and other amounts. The page shows ₹ 3, 01, 00, 000/- and a total of ₹ 20, 48, 71, 637/-. We also find that the tota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that the actual value of the land was ₹ 19, 30, 000/- per acre whereas the registration value was ₹ 1, 02, 65, 700/- and calculated an amount of ₹ 90, 34, 300 /- and held that this amount has been paid in cash out of the disclosed income of the assessee group. The AO made protective assessment in the hands of Sargam Estate Pvt. Ltd. and substantive assessment in the case of the assessee. 24. The ld. CIT (A) deleted the addition on the grounds that there has been no evidence on record by the AO to show that Sargam Estate Pvt. Ltd. is a dummy company of the assessee. The ld. CIT (A) held that the addition has been made on the basis of statement recorded which cannot be given any credence. The ld. CIT (A) held that the transactions with Shri Virender Sing and Shri Paramjeet Singh could not be with the notings/jottings on Annexure A-20 on page 19 -20. If the AO had doubt about the rate of land reflected in the notings and purchase rate as disclosed in the records and deal he should have made thorough inquiry from the sellers and investigation about Mr. Shishir as to whether he was seller or broker etc. before jumping to any conclusion. He also held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e societies in Gurgaon and Dwarka. These included copies of application forms on the letterhead of the society requesting for membership, correspondence between the societies and the members regarding payment of installments, copies of share certificate of members, correspondence by members with the office bearers of the society, copies of cheques paid by members to the society, - copies of letters regarding disputes with the office bearers of the society! etc. In particular these documents were found and i seized from the residence of Shri Mohit Vohra who is an employee of GTM group and recently has been made one of the directors of the flagship company. In his statement recorded during the search as well as during post search proceeding, Shri Mohit Vohra stated that these papers were handed over to him by Mr. Tushar Kumar for further handing over to same to one Mr. Kansal at Sector 56, Gurgaon. He expressed his ignorance about the nature of these papers and did not give any further explanation. In addition to the above, some documents relating to cooperative societies were also found from the residence of Shri Tushar Kumar. During the course at the residence of Shri Mohit Vo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... papers and relate to geysers and other electrical fixtures to be fixed in flats of various projects. The names of the flat owners and the flat numbers are given alongside. On the top of the page (hi name of the society is given as GTM Ananda, Bhagwanti Society, Plot 83, Sector 50 Gurgaon or GTM Garima, GH-1 HUDA Society, Sector 56, Gurgaon. Please explain the same. Whether you have shown these transactions in your books of accounts. He replied I earlier used to provide geysers, electrical fixtures and other items in various societies/housing schemes on contract basis. I also used to assist in getting loans as I was having experience of arranging finance having worked with a finance company. This is only prospective list of the names of the flat owners along with the flat nos. for contacts etc. There is no transaction pertaining to me. 62. The reply provided is clearly an afterthought as there is a clear contradiction in the reply provided by Shri Mohit Vohra. Further when he was asked A-3 /1 -48 Copies of letters relating to payment of installments by members who have booked flats in Haryana CGHS Ltd., original receipts issued by Bhagwanti CGHS for payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is the valley . The article states that For those who travel on the Gurgaon- Faridabad road, Valley View Estate must be a familiar sight. The project spread over 22 acres consists of 14 towers housing separate societies One of the towers, GTM s Tower 11, is being promoted by Sri Balaji Company which has an ISO 9001:2000 certification. They also have to their credit smaller projects in Gurqaon Ananda and Garima of around 40 -50 flats each. 79. When Shri Tushar Kumar was confronted with this article during his statement on 13.03.2006 he was asked Q.7 I am showing you a printout of a newspaper article of Indian express dated 11.08.2006 which says that GTM projects also include Ananda and Garima in Gurgaon. What do you have to say? Ans. The facts are incorrect. GTM has nothing to do with the projects. As the matter of Bhagwanti Co-operative G/H Society pertains to Asstt. Year 2006-07, further discussion regarding the same is in Asstt. Order for Asstt. Year 2006-07. The Haryana Cooperative Group Housing Society, GH No. 80, Sector 56, Gurgaon 87. A survey was conducted u/s 133 A of the I T. act 1961 on 21.03.07 on Haryana Cooperative Group Hou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the notings on page 7 of the diary relating to I ushar are also authentic details of payments made on behalf of the society and not just estimates as claimed by Shri Rastogi. 90. However, inspite of these denials there is no denying that there is a business connection between the two. There is no plausible explanation for the presence of share certificates, application forms, correspondence etc lying at the premises of Shri Tushar Kumar and Shri Mohit Vohra. Some of the documents as shown in the table earlier clearly mention the name of GTM in correspondence with the society. Accordingly it would be reasonable to infer from the above that the notings in the diary of Shri Rastogi pertain to payments made to Tushar Kumar/ GTM. 91. When Haryana Cooperative Group Housing Society was questioned about various papers were found and seized from the residence of Shri Mohit Vohra, then filed the reply acknowledging that the paper related to their society but said that individual members might have applied for loans and hence the society cannot answer the question. When questioned about the dairy found and seized from Shri Rastogi replied that, This is a Rough and person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Janki Prasad Gurgaon Central Corporation Bank 327209 14.12.2006 7921.00 Rajesh Kumar Pandey Gurgaon Central Corporation Bank Total 129781.00 (c) Cheque Dt. 22.01.2008 of ₹ 2, 09, 268/- As per our Bank book following cheques drawn on HDFC Bank have been issued to various parties as per details given below: Cheque No Date Amount Name of the party 403522 22.01.2007 28166.00 Mohd. Ashraf 403523 22.01.2007 36166.00 Ajay Kumar Yadav 403524 22.01.2007 31166.00 Mahesh Tiwari 403525 22.01.2007 33125.00 Ashish Dubey 403526 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely monitors the account and activities of the society and regarding various documents and papers seized from Shri Mohit Vohra are not related with the society. The reply of the society cannot be accepted as it has been clearly established that society was having il legal links with M/ s GTM Builders. The diary seized from Shri Kishan Gopal Rastogi shows very clearly that money was paid to Shri Tushar Kumar in Cash. Thus, an addition of ₹ 1.25 Crores is being made in the hands of M/s GTM Builders on substantive basis and in the hands of Shri Tushar Kumar and M/s Haryana Citizens Cooperative Group Housing Society on the protective basis, on the basis of diary seized from Shri Kishan Gopal Rastogi which shows clearly that Cash payment was made to Shri Tushar Kumar director of M/ s GTM Builders. 29. Before us, the ld. DR relied on the order of the Assessing Officer while the ld. AR supported the order of the ld. CIT (A). 30. We have gone through the entire material on record and the orders of the authorities below. We find that the Assessing Officer has made addition by holding that the society has illegal links with the assessee and the diary seized from Shri Kisha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n agrees to apply for increase in members from 20 to 27 and agrees to add members as and when recommended by Shri Tushar Kumar. Tushar Kumar agrees to pay ₹ 1. 80 crores to Ajay Jain in installments and on payment, the managing committee and bank accounts would be handed over by Ajay Jain to Tushar Kumar. The agreement was signed by Ajay Jain on 17.5.2005. The agreement was not signed by Tushar Kumar. 33. During the statement record on the date of search itself it was answered that Shri Ajay Jain was misleading Shri Tushar Kumar and Shri Tushar Kumar did not want to enter into any agreement with Shri Ajay Jain. 34. The AO held that on page 35 of annexure A19, there are details of receipt or payment made to various persons and it specifically says 3 lacs paid to Wings on 13.04.06. Further there is a hand written note in the handwriting of Shri Tushar Kumar which was seized has been annexurised as A 16 /31 which may be seen on the following page. This note is in the handwriting of Shri Tushar Kumar and has been signed by two persons. One signature is dated 21.1.2006. The other signature is the same as the one which is on tint MOU seized from the residence o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the ld. CIT (A). The appeal of the revenue on this ground is dismissed. ITA No. 3783/Del/2010 AY 2007-08 Ground No. 9 Undisclosed investment in M/s Sargam Estate Pvt. Ltd.: 39. During the year under consideration, it was alleged that M/s GTM Builders Promoters invested in M/s Sargam Estate Pvt. Ltd. and acquired the company. The Balance sheet of M/ s Sargam Estate Pvt. Ltd. for the assessment year 2006-07 shows that the assessee was having share holders fund of ₹ 33, 18, 000 /- and loan fund of ₹ 1, 60, 000 /- whereas in the year 2007-08, the share application money of the company increased to ₹ 53, 86, 000 /-. 40. Before the AO, the assessee vide its submission dated 17.12.2008 replied that during the assessment year 2007-08, the company after receiving and payment/adjustments of share application money stood at ₹ 53, 86, 000/- as on 31.3.2007. But no reply was given to the fact that how the share holders fund of ₹ 33, 18, 000/- and loan fund of ₹ 1, 60, 000 /- was adjusted. Hence, the Assessing Officer concluded that adjustment of ₹ 34, 78, 000 was made through the unaccounted income and hence an addition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2109050 1625044 1479224 05 -06 75873 06 -07 5928229 5639178 2070286 3495904 14844666 JTM(J) is GTM Jewellery Mart Pvt. Ltd. GTM(B) is GTM Builders and Promoters Pvt. Ltd. 44. The assessee was asked to produce details of expenditure incurred on advertising. Assessee filed ledger copy of the advertisement expenses. The advertisement expenses of the assessee started from 17.11.2004. In the A.Y. 2007-08 assessee had spent an amount of ₹ 28, 512, 704/- as per the details filed. Whereas as per the details collected the amount spent was of ₹ 31, 978, 263/-. Hence an addition of ₹ 34, 65, 559 /- was made in the A.Y. 2007-08 for expenditure from undisclosed sources. 45. The ld. CIT (A) deleted the addition on the grounds that all the expenses on account of advertisement have been made by account payee cheques and duly recorded in the books of account main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... worth ₹ 7, 19, 07, 124/-. However, as per the stock statement appearing in the books of accounts, the total stock of jewellery was shown at ₹ 2, 17, 34, 864/-. Accordingly, on the date of search, there was found to be excess stock of ₹ 5, 01, 72, 260/- lying at the premises of the company. When asked to explain this discrepancy, the Director of the company Shri Gautam Kumar stated that in the case of the diamond jewellery the value had been taken at the tag price or the sale price which was tagged by the company on each item of jewellery. This he said, was higher than the purchase price of the jewellery and therefore stated that the G.P rate should be deducted to find out the cost of the jewellery. Shri Gautam Kumar was specifically asked during the course of search whether the stock of any other parties was lying at the office premises and whether any purchase bills were to be entered into the books. Shri Gautam Kumar in reply stated that certain purchases of jewellery had not been entered in the books of accounts and accordingly, the bill values of the same should also be taken into account while determining the value of jewellery shown in the books on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mar has specifically surrendered an amount of ₹ 4.57 crores on account of the undisclosed investment in the jewellery. Revised value of excess stock of jewellery The value of the excess stock was arrived at during the search by reducing from the gross value of ₹ 7, 19, 07, 124/-, the stock as per books ₹ 2, 65, 79, 576 /- as well as the GP @ 7 % which worked out to 50, 33, 498. It may be noted that the GP of 7 % was calculated on the gross yalue of ₹ 7, 19, 07, 124/-. However, only GP on the diamond jewellery which had been valued on the basis of the tag price was required to be reduced from the gross value of jewellery. The gold jewellery had not been valued on the basis of the tag price but as per the prevailing rate of gold on the date of search and thus the GP on Gold Jewellery had erroneously been reduced from the Gross Value. After correction of this discrepancy, the value of the excess stock is arrived at ₹ 4, 27, 22, 971/- in the following manner. 1) Gross Value of Jewellery as as Per valuation reports ₹ 7, 19, 07, 124 2) Less: Stock as per books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been valued by applying the mode of valuation adopted by the assessee since from their incorporation. They have always valued the stock at cost or market price whichever is lower/ average cost method. While in the instant case the stock has been valued merely by taking the tag value of each item. It will not be out of place to state here that even the valuer has stated in his certificate that it has been valued at tag value. The facts cannot be denied that in the assessee s line the tag value had never been its cost/average cost . Apart from it, the facts cannot be denied that there is day to day s fluctuation in the market in this line. One has to follow the rate declared early in the morning on that day. That without prejudice to such facts the stock is to be valued by applying the mode of valuation which has been adopted by the assessee. The assessee had prepared the list by taking its valuation on the mode applied by them. The assessee was further asked The value of the excess stock was arrived at during the search by reducing from the gross value of ₹ 7, 19, 07, 124/-, the stock as per books ₹ 2, 65, 79, 576/- as well as the GP y the rate of 7% which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost or market price whichever is lower/average cost method adopted by the assessee since its incorporation. As stated in the earlier paragraphs the assessee has prepared a list with supporting documents for its purchase, thus, the value desen/es to be considered accordingly. Further assessee filed a letter dated 17.12.2008 saying that The assessee company had complied with your questionnaire letter dated 3 rd November. 2008 by filing the sought information on 524 items of your questionnaire letter along with relevant documents to the support of each and every item, however, to avoid the lengthy process of its verification on each and every item of the questionnaire letter which may take considerable time as well as sufficient factors to arrive at that all the loose papers have been considered precisely or not. Further, in support of the statement recorded on the day of the action u/s 132 of income tax act 1961 we may summarise the facts that its (jewellery) valuation has been ascertained amounting to ₹ 6, 68, 73, 626 /- while the books of accounts were revealing to the tune of ₹ 26579576/-, the maximum justification could have ended by assessing the assessee- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... keeping in view the G.P. rate shown in the prescribed Form 3CD of Audit Report u/s 44 AB of Income Tax Act, 1961 while in fact the G.P. rate of Jewellery Unit is 19.47 % as an annexure is enclosed. It is needless to state here that in the previous year i.e. Asstt. Year 2006-07 when there was very nominal business the G.P. rate was.48 %. However, in the enclosed annexure the value has been ascertained by applying the G.P. rate @ 19.47%. It is quite admittable that the Director Sh. Tushar Kumar in the statement recorded on 13 th December, 2006 in continuation to the statement recorded on the date of search and seizure operation dated 12th December, 2006 agreed to surrender an amount of ₹ 4.57 Crores as undisclosed investment in the stock of jewellery in a reciprocal manner on the terms and conditions that no penal action u/s 271(1 )(c) shall be taken in this respect. The other Director Sh. Gautam Kumar also confirmed the statement of Sh. Tushar Kumar in this respect. It is humbly submitted that the quoted amount of ₹ 4.57 Crores was surrendered in haste after continuous seizure operation of 36 hours while in fact the difference even as per statement recorded is ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lery Mart Pvt. Ltd. During the course of search physical inventory of the jewellery stock lying in the show room was taken and the valuation it was worth ₹ 7, 19, 07, 124/-. However, as per stock records; the same was shown at ₹ 2, 17, 34, 864/-. He, therefore found excess stock of jewellery at ₹ 5, 01, 72, 260/-. When asked to explain, the discrepancy, Sh. Gautham Kumar, Director of the company stated that in the case of Diamond Jewellery, the value had been taken at tag price of sale price. Since this was higher than the purchase price of the jewellery, he stated that the GP rate should be deducted to find out the value jewellery. Considering this request, the AO valued the cost at ₹ 6, 68, 73, 626 /- whereas the stock shown was ₹ 2, 65, 79, 576/-. The difference of ₹ 4, 02, 94, 050/- was treated as unexplained cost of jewellery. The assessee further stated that the difference pertains to certain purchases which were not accounted for in the book of accounts as it is generally entered only on final approval. Further he also stated that the GP rate of jewellery is about 19.47% as against 7% shown in Form 3CD. The AO was not convinced with the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... going through the said rule it is noted that rule 46 is not applicable in the case of the appellant as there is no mentioning in the said rule for admission of fresh evidences in the appellate proceedings. However, it was treated as typing mistake in referring the rule 46 in place of rule 46A. In its submission before me the appellant has pleaded that the search party as well as the AO has allowed two unrecorded purchase bills of ₹ 4844712 /- to arrive at correct stock as per books of accounts, similarly bills for Goods on Approval should be admitted u/ r 46A which were accounted for on 31.03.2007 and 14.12.2007. In this regard it is worth noting and question arises as to why the list of so called Goods on Approval was not produced before the search party like two unrecorded purchase bills of ₹ 4844710/- and even after search operation. A further question arises as to why these bills for so called Goods on Approval which are claimed to have been entered into books of accounts on 31. 03.2007 and on 14.12.2007 were not produced before the AO during the assessment proceedings. The appellant has not given any reason for not producing the same before the sea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by any cause from producing the evidences before the AO which is relevant to this ground of appeal, or 4) The AO has afforded sufficient opportunity before passing the assessment order. Since this issue was never raised before the AO as it is admitted fact. Therefore, in view of above I do not find any circumstance or situation to admit the additional evidence u/r 46A of the Income Tax Rules, 1962. Hence, no fresh evidence is admitted u/ r 46A of the Income Tax Rules, 1962. The AO found that the Appellant has diversified into the business of jewellery under the name of GTM Jewellery Mart. During the course of search physical inventory of jewellery stock lying in the show- room was taken and the same was valued at ₹ 71907124/- by the Govt. registered valuer. However, in the books of accounts it was shown at ₹ 21734864/-, He, therefore found excess stock of jewellery at ₹ 50172260/-. When asked to explain the discrepancy, Sh. Gautam Kumar, Director of the appellant co. stated that in the case of Diamond jewellery, the value had been taken at tag price of sale. Since this was higher than the purchase price of the jewellery, he stated that GP rate should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed any proof whatsoever how it has arrived at GP rate of 19.47%. He has further mentioned that there is no separate profit and loss account and balance sheet that has been filed for the jewellery unit. It is also observed by the AO that the concession of GP @ 7% from the valuation of physical stock is given probably with a view of GP rate shown in the prescribed Form 3CD of Audit Report u/s 44 AB of the Income Tax Act, 1961. In the assessment order the AO has mentioned that in the statement recorded during the search Sh. Tushar Kumar has specifically surrendered to the extent of ₹ 4.57 crores on account of the undisclosed investment in the jewellery. Later on father of Sh. Tushar Kumar was confronted on this issue, he also admitted that total surrender includes surrender of undisclosed investment in jewellery. As mentioned above the AO found that two unrecorded purchase bills of jewellery worth ₹ 4844712/- had not been accounted for in the books of accounts for jewellery physically taken by the search party. The AO allowed the credits for bills of ₹ 4844712/- and consequently stock of jewellery was taken at ₹ 26579576/- (21734864+4844712) as per books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit loss account and balance sheet of jewellery unit. Under such circumstances he took the GP rate as reflected in the profit loss account, balance sheet and tax audit report of the appellant co. In support of its contention the appellant has mentioned that it has filed all purchase and sales records/ relevant vouchers before the AO. Further, it has stated that by taking out the figures relating to jewellery unit from its balance sheet it has deduced the GP rate of 19.47 %. In the appellate proceedings the appellant has filed the copy of purchase bills and a working sheet drawing the GP rate of 19. 47%. But in support of such working no separate books or any other proper/ reliable/authenticate evidence whatever has been produced wherefrom the reliability and authenticity could be established. It has not given details of opening stock and closing stock such as method of valuation and how they have been arrived at and on what basis. Further it is also observed that nothing concluding is there to know the correctness and genuineness of the figures of purchases and sales. Moreover, no expenses in the so called Trading account has been claimed to arrive at GP rate of 19.47 %. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of overall physical stock found on the date of search whereas it should have been deducted from the value of diamond jewellery only which was valued on tag price. The gold jewellery was valued at prevalent market price i. e. cost based on market price. Therefore, extra deduction of GP, worked out at ₹ 2428921/- on gold jewellery of ₹ 34698876/- @ 7 %. I have considered this issue and hold that correction made by the AO is based on facts. Therefore, keeping in view discussion made in the previous paragraphs I confirm the addition of ₹ 2428921/- made by the AO for gold jewellery. I do not find any infirmity in the action of the AO. Since this addition is a matter of mistake of facts. As far as issue regarding mode of valuation is concerned it is held that it is not tenable in view of irregularity and inconsistency in employing the method of valuation of stock on the part of the appellant for its benefit, as discussed above. 51. Having heard the arguments of both the sides who relied on the respective orders and submissions, we have perused the facts on record available before us and find that, 1. A panchanama has been prepared by party A-4 showing warrant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 16. Even, if the jwellery is to be assessed in the assessee s hands it can be done only after recording a satisfaction of such items not belonging to the person from whose position they have been seized. 17. It is only after recording a satisfaction such items not belonging to the person from whose position they have been seized that the entity for the assessment can be shifted. 18. In the instant case, there has been no denial by the M/ s GTM Jewellery Mart Pvt. Ltd. with respect to their ownership of the items. M/s GTM Jewellery Mart Pvt. Ltd. never mentioned in the statement that the jewellery do not belong to them but belong to the assessee. 19. The AO ignored this fact and without visiting the M/s GTM Jewellery Mart Pvt. Ltd. for obtaining explanation and elucidation as well as discharge of onus on that entity regarding the ownership of the jewellery straight away and made addition in the hands of the assessee which cannot be held to be legally valid as per Section 132(4A). 52. Keeping in view these facts, since there is a panchnama drawn in the case of M/s GTM Jewellery Mart Pvt. Ltd., stock inventory was made in the said company and keeping in view the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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