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TMI Blog2013 (9) TMI 1318X X X X Extracts X X X X X X X X Extracts X X X X ..... learned CIT(A) has erred, both on facts and in law in rejecting the contention of the assessee that the order passed by the learned AO under Section 153A is bad and liable to be quashed as the same has been framed consequent to a search which itself was unlawful and invalid in the eyes of law. 4. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in rejecting the contention of the assessee that the proceedings initiated under Section 153A are liable to be quashed in the absence of a valid search. 5. On the facts and circumstances of the case, the learned CIT(A) ahs erred, both on facts and in law in rejecting the contention of the assessee that the proceedings initiated under Section 153A against the appellant and the assessment framed under Section 153A/143(3) are in violation of the statutory conditions of the Act and the procedure prescribed under the law and as such the same is bad in the eye of law and liable to be quashed. 6. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in rejecting the contention of the assessee that the proceedings initiated under Section 153 A are b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned CIT(A) has erred in confirming the order passed by the learned AO rejecting the contention of the assessee that it amounts to reviewing the assessment proceedings for the year under consideration without there being any adverse material on record. (ii) That the above said additions are otherwise untenable since reassessment under Section 153 A consequent to search is to be confined only to the incriminating material belonging to the assessee found during the course of the search. 13. On the facts and circumstances of the case the learned CIT(A) has erred both on facts and in law in ignoring the fact that the assessment for the year under consideration have been scrutinized under Section 143(3) and as such the learned AO was not justified in reviewing its own order." 3 During the course of hearing out of above grounds, only ground No. 11 was pressed before us and all other grounds were not pressed, therefore, grounds No. 1 to 10, 12 & 13 are dismissed as not pressed. 4 Ground No. 11 - After hearing both the parties we find that a search was conducted in the premise of the assessee and assessment has been completed u/s 153A r.w.s 143(3) of I.T. Act. During this year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d before us. 11 In ground No. 11 disallowance of 1/5t h of vehicle maintenance expenditure has been made by the Assessing Officer. 12 In this case also the facts are identical as in the case for Assessment year 2004-05 in ITA No. 1313/Chd/2012 which we have discussed above. In this case also the Assessing Officer has disallowed a sum of ₹ 1,69,280/- being 1/5th of vehicle expenses on account of personal usage. Once the addition has been made in the assessment order u/s 143(3) then there is no justification for addition in the assessment made u/s 153A, therefore, following our order in ITA No. 1313/Chd/2012 in para No. 8, we delete this addition. 13 in the result, ITA No. 1314/Chd/2012 is partly allowed. ITA No. 1315/Chd/2012 - Assessee's appeal 14 In this appeal also the assessee has raised various grounds but only issue is regarding disallowance of vehicle maintenance expenses of ₹ 2,79,630/- was pressed before us. 15 In this case however, no addition was made originally. The ld. counsel of the assessee submitted that no addition was made because the assessee had paid FBT on account of car expenses. 16 On the other hand, the ld. DR for the revenue relied on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' light motor vehicle." Medium goods vehicle" and "medium passenger motor vehicle" but does not include" maxi cab", motor cab", tractor and "road-roller". The expression "heavy goods vehicle" heavy passenger motor vehicle" light motor vehicle", medium goods vehicle", medium passenger motor vehicle", maxi cab", "motor-cab", "tractor and "road roller" shall the meanings respectively assigned to them in section 2 of the Motor Vehicles Act, 1988(59 of 1988)" On going through the above your honour will notice that the commercial vehicle include not only heavy goods vehicle but also include light motor vehicles. The definition is quite comprehensive. Wherever exclusion is required it has been stated so. Further in the note it has been specifically stated that the light motor vehicle shall have the meaning assigned to it in section 2 of the motor vehicles act, 1988. As per section 2(21) of the motor vehicles act, 1988 the light motor vehicle has been defined- 2(21)' light Motor Vehicle' means a transport vehicle or Omni bus the gross vehicle weight either of which or a motor car or tractor or road roller the unladed weight of any of which, does not exceed 7500 kg." The reasoning giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal the assessee has raised following grounds: "1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] under Section 143(3) is bad both in the eye of law and on facts. 2(i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law, in confirming the addition of an amount of ₹ 3,34,965/- made by the AO as income earned by the assessee on undisclosed sale of ₹ 17,21,300/- (ii) That the above addition has been confirmed despite the same being made arbitrary rejecting the explanation given by the assessee. (iii) That the above addition is untenable in the absence of any supporting material or evidence to prove the allegation that the assessee has made unaccounted sales. 3(i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law, in confirming the addition of an amount of ₹ 4,58,106/- as profit earned on undisclosed sale of ₹ 23,54,094/- (ii) That the above addition has been confirmed despite the same being made arbitrarily rejecting the explanation given by the assessee. (iii) That the above a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irmed by the assessee. However, during the assessment proceedings some sale bills were provided. Some sale bills in respect of sale bill for ₹ 6,45,000/- and ₹ 18,000/- recorded at page 178 & 179 of the documents were furnished before the Assessing Officer, therefore, after reducing these amounts the Assessing Officer concluded that balance amount of ₹ 17,21,300/- sales were made outside the books. He applied GP Rate of 19.46% on these sales and added a sum of ₹ 3,34,965/- to the income of the assessee. 32 Before the ld. CIT(A) the submissions made before the Assessing Officer were reiterated. It was further contended that the Assessing Officer was not justified in making independent addition on this account because the profit, if any, on such undisclosed sales, would ultimately form part of stock which has been surrendered by theassessee. The ld. CIT(A) did not find force in the submissions and confirmed the addition. 33 Before us, the ld. counsel of the assessee mainly submitted that even if the assessee had carried some undisclosed sales the profit from the same shall be assumed to have been invested in the excess stock found during the search. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een withdrawn from the firm. No doubt assessee has surrendered additional income on account of unrecorded business transactions, in fact against the excess gold / diamonds found. Thus I would think that the unrecorded sale transactions of ₹ 3,34,965/- by no stretch of imagination can be said to be covered in the additional income surrendered, unless the assessee is able to correlate to a reasonable extent the excess gold jewelry with the sales as per the 'slips', or that the sale proceeds have been utilized for purchasing such particular items of the stock. It is also pertinent to note here that the assessee did not reply to the specific show cause issued by the Ld. AO. These unrecorded sale cannot be therefore covered under the surrendered amount in the absence of clear explanation by the assessee. Consequently, I have no reason not to sustain the addition, over and above the surrender, as made by the Ld. AO. " 36 The ld. CIT(A) has clearly given reasons why profit on undisclosed sale transaction cannot be telescoped with the amount of surrender on account of undisclosed stock. We are satisfied with this reasoning because even before us no corelation was made between unre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned by the assessee must be reflected by certain assets found from the possession of the assessee. In the present case, the assessee has disclosed substantial amount of income invested in excess stock found from, the premises of the assessee. Adverse inference against the assessee can only be taken if the gross profit earned by him including investment made in such transaction exceed the income surrendered by the assessee u/s 132(4). No cognizance of the income earned by the assessee and disclosed u/s 132(4) can be taken twice, once by way of income earned by him by doing business outside the books of account and secondly when this income is invested for accumulation of unaccounted stocks. It is only the undisclosed income which is taxable in the hands of the assessee." The Assessing Officer did not find force in the above submissions because the documents contained details of sales of jewellery which was also business of the assessee. Further the assessee had admitted that it used to export diamond jewellery to Canada. Shri Sukhdev Bedi also belongs to Canada. The Assessing Officer also found no force in the submissions that no separate addition should be made on account of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A No. 1315/Chd/2012. The facts and contentions of both the parties are identical which was made in respect of that order and therefore, following that order, we set aside the order of the Ld. CIT(A) and direct the AO to make disallowance of 1/10t h of vehicle maintenance. 44 In the result, ITA No. 1317/Chd/2012 is partly allowed. ITA No. 81/Chd/2013 - Revenue's appeal 45 In this appeal the revenue has raised the following grounds: "1 Whether on the facts and in the circumstances of the case the ld. CIT(A) has erred in law as well as facts by deleting the addition of ₹ 2,08,35,789/- on account of unexplained investment u/s 69B in stock (Gold) when the same was not objected to by the assessee in the course of search. 2 Whether on the facts and in the circumstances of the case the ld. CIT(A) has erred in deleting the addition on account of excess stock (Gold) by accepting the arguments of method of valuation while similar method valuation of stock (Diamond) is accepted by the assessee." 46 After hearing both the parties we find that a search was conducted in the premises of the assessee. During search some incriminating documents as well excess stock and cash were found. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 14,76,49,973). Therefore, the assessee was asked to explain the discrepancy in the surrender amount and the actual cost. The assessee filed reply in the letter dated 21.11.2011 which is as under: "The difference in the stock as calculated by the approved valuer and as shown in the books of account can be correctly worked out only on the basis of difference in the weight as per books and as physically found at the time of search. This is so because the assessee has maintained day to day stock in respect of 18 ct and 22 ct gold jewellery. Moreover, the approved valuer has valued the stock found at the time of search on the basis of market value as on the date of search whereas the method of accounting followed by the assessee to value its stock consistently and regularly is on the basis of cost or market price which ever is less. The Trading account prepared at the time of search by applying the GP Rate of the last year only depicts the value of the closing stock at cost and not at the market rate as has been adopted by the approved valuer. Therefore, the correct and the only scientific method to calculate the excess stock is to the first find out the excess quantity of stock f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand, the ld. DR for the revenue submitted that valuation of closing stock found during search by preparing the provisional trading account is also on market value and therefore, analyse given by the assessee, is not correct. He strongly supported the order of the Assessing Officer. 52 We have heard the rival submissions carefully . The ld. CIT(A) has decided the issue vide para 5.1 which is as under: "I have carefully considered the submissions of the assessee and the impugned assessment order at para 4.1 to 4.4. The copies of the panchnamas as well as the valuation report filed by the assessee have also been seen. It is not disputed that the assessee is maintaining complete books of account including stock record. It is also not in dispute that the excess stock worked out at the time of the search was accepted by the assessee. However the issue is the manner of valuation of the excess stock, as the quantitative details of the gold and diamond jewellery are not in dispute. It is the case of the AO that the excess stock determined was based of trading a/c drawn up on basis of details furnished by the assessee and that the closing stock inventoried by the departmental valuer was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te as done by the valuer, the value comes to ₹ 13,58,37,331/-. I find that the value of the gold as per the books of account has been worked out at ₹ 10,10,49,782/- The ensuing difference, thus, comes to ₹ 3,47,87,549/~. However, on applying the cost price to the excess gold stock, the value comes to ₹ 1,37,51,760/-. Thus the difference which had been added by the Ld AO of ₹ 2,08,35,789/- is therefore found to be arising due to difference on account of valuation only as assessee has valued his stock at cost while the valuer has valued at the market rate at the time of search. This excess stock value thereof, of ₹ 1,37,51,760/- is found to be corresponding to amount surrendered by the assessee on account of excess stock of gold. As regards the surrender on account of excess adiamond of ₹ 4,37,56,159/- the same is not in dispute. Consequently the assessee deserves to succeed in this ground of appeal." We find that the ld. CIT(A) has correctly adjudicated the issue. If the physical quantity of the stock which were found during search is compared with the stock recorded then the assessee has already valued the excess stock on the value whi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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