9911796707
TMI Blog2021 (11) TMI 405X X X X Extracts X X X X X X X X Extracts X X X X ..... not justified in allowing the assessee's appeal on the chargeability of tax as per normal rates instead of amended provisions of section 115BBE of the act applicable w.e.f. 01/04/2017 relevant to AY 2017-18 which are clearly attracted in the case of the assessee." 2. The first ground relates to addition of Rs. 14,07,74,148/- on account of excess stock found during the course of search. 3. The brief facts leading to the case is this that the assessee is engaged in trading and manufacturing business of gold and diamond jewellery. A search operation under Section 132 of the Act was carried out on 28.09.2016 at the business as well as residential premises of Anand & Punjab Group of Indore including the assessee along with other concerns/business associates wherein certain discrepancies in the quantity of closing stock were found. The assessee offered additional income of Rs. 10,10,00,000/- on account of the aforesaid difference in the quantity of stock found in the said search proceeding. Subsequently, another survey proceeding under Section 133A was carried out on the business premises of the assessee on 15.11.2016 which was concluded on 19.11.2016. During the course of survey addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no dispute again on this issue on part of assessee. * After considering the quantitative difference in totality, the assessee itself has offered Rs. 10,10,00,000/- on account of excess stock found in jewellery business during the, course of search and valued by the Govt. approved Valuer on the basis of stock available at the premises on the date of search, which is not disputed, * The fact remained undisputed till the date of issuance of show cause Notice dated 31.10.2018 & 05.12.2018 whereas no reply was filed till 11.12.2018 * The assessee has now come forward with a plea that the valuation made by Govt. approved Valuer; is not correct on adopting the value of gold/ornaments in the valuation report, although there is no dispute over the quantity of the said report and is partly acceptable to assessee. * Now, the assessee pleaded that if the working is made on hypothetical figure taken in the valuation report on the quantity appearing in the books of account and there remains no difference and the surrender made by the assessee is excessive on the facts and is therefore not acceptable. * Surprisingly, the assessee has claimed to have declared Rs. 10.14 Crore on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the DVO in that case the overall difference was of Rs. 2,78,25,512/- only whereas the respondent assessee had declared additional income of Rs. 10,14,95,122/-. The same is calculated as under:- Particulars Stock as per DVO valuation Book Stock as per DVO Rates Cl. Stock as on 31.03.2016 (As per Annex. 1) 855514351 1048141462 Add: Purchases between 01.04.2016 & 28.09.2016 516053030 516053030 Add: Making Charges between 01.04.20 1 6 & 28.09.2016 0 21321624 Less: Sales between 01. 04.2016 & 61 1767 28.09.2016 779 Less: GP as per Audit Report 5 87 90 for AY 2016-17 9.61% 884 1 371567381 55 29 76895 15855 16 116 55 29 76 895 Cl. Stock as on 28.09.2016 as per Books of A/C 818590486 1032539221 Physical Stock as per DVO Reports 1060364733 1060364733 Excess Stock -24 1774247 -27825512 Less: Stock Surrendered Short/ Excess Surrendered 101495122 -140279125 101495122 73669610 1.10] That if the books stock in term of quantity as on the date of search was calculated as per the rates as adopted by the DVO, in that case also the valuation of book stock would increase from Rs. 81,85,90,485/- to Rs. 99,75,79,091/- . The valuation as calculated by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the IT Act was conducted at the business premises of the appellant on 25-09-2016. The appellant maintained day to day quantity records in GS-11 and GS-12. During the course of search, difference in the quantity as per GS-11 and GS-12 with the quantity as actually found during the course of search as per DVO report was duly accepted by the appellant and additional income to the tune of Rs, 10,10,00,0007- as per the rate adopted by the DVO on the date of search was surrendered. It is an undisputed fact that the difference in the quantity was duly reconciled and additional income on account of difference in quantity was duly surrendered by the appellant. The assessing officer while passing the assessment order considered the valuation of jewellery of all the showrooms of the appellant as per report of the DVO which came to Rs. 106,03,64,733/- as provided on Page No. 3 of the assessment order. The assessing officer then compared the said valuation with the cost of jewellery as per books of accounts as on the date of search which came to Rs. 81,85,90,485/- as provided on Page No. 5 of the assessment order. Difference of these two figures i.e. market value of jewellery found as per the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt order and after going through the submission of the appellant, I find strong force in the contention of the appellant that the amount added to the total income of the appellant was on account of difference in valuation of jewellery as per report of the DVO and cost of jewellery as shown in the books of the appellant. The said approach of the assessing officer was not correct more so when the appellant duly accepted additional income on account of difference in the quantity as per books of accounts and as actually found during the course of search as per report of the DVO. The appellant further demonstrated before the assessing officer and also in the appellate proceedings that if the cost of stock is converted as per rate adopted by the DVO, in that case, there shall no scope for any addition. I am in full agreement with the arguments of appellant that what could have been added to the total income of the appellant was only the difference in the quantity which was duly admitted by the appellant and additional income of Rs. 10,14,95,122/- was also offered for tax. The difference in valuation of jewellery as per report of DVO and cost of jewellery as per books of account cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t justified in making addition of Rs, 14,07,74,248/- on account of excess stock found during the course of search. Thus, the addition made by the AO amounting to Rs. 14,07,74,248/- is Deleted. Therefore, appeal on these ground is Allowed." 8. We have considered the judgment relied upon by the Ld. AR passed by the Hon'ble Delhi Bench in the case of Neha Jewellers Pvt. Ltd. vs. ACIT in ITA No. 3711/Del/2010. On the identical situation the Hon'ble Bench was pleased to observe as follows: "19. The Learned CIT(Appeals) after examining the facts of the case, held that the methodology adopted by the Assessing Officer in computing the unexplained stock is not correct. He agreed with the contention of the assessee that first weight of undisclosed stock has to be determined on the date of search. We also concurred with the contention of the assessee that the basis for making the addition will be difference in the weight of stock as per books of account as on the date of search and the weight of the stock found at the time of the search. 20. Thus, the issue raised in the appeal preferred by the Revenue is as to whether the Learned CIT(Appeals) was justified in computing the undisclosed s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot sustainable and this cannot be the reasoning for taking into consideration the stock as on 01.04.2005 as per books of account as against the stock as on the date of the search as per books of account. What is to be found out on the date of search is the stock as per books of account. While finding out the stock on the date of search i.e. on 09.12.2005, the purchases and sales made and recorded in the books of account during the period 01.04.2005 to 09.12.2005 have to be taken into consideration. 23. On having gone through the paper book, we note that the assessee had submitted complete details of purchases and sales in quantity and value and no discrepancy or error has been pointed out by the Assessing Officer, either in the assessment order or in the remand report. The purchases recorded in the books of account are the disclosed/accounted purchases. Similarly, sales recorded in the books of account are the disclosed/recorded sales in the books of account. It is not the case of the Assessing Officer that assessee had manipulated the books of account after the search. On the contrary, we note that in the remand report, the fact that the reconciliation was supported by the regul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce the valuation of the jewellery to the total income of the appellant. The addition made by the Ld. AO on account of excess stock found during the course of search those cannot be set to be justified in view of the observation made hereinabove and, thus, the deletion of addition made by the Ld. CIT(A) is according to us is just and proper so as to warrant interference. Hence, the grounds of appeal preferred by Revenue is found to be devoid of any merit and, thus, dismissed. Ground No.2:- 11. Allowing the appeal on the chargeability of tax as per normal rates instead of amended provision of Section 115BBE of the Act is the subject matter before us. The appellant has challenged the chargeability of tax @ 77.25% by invoking the amended provision of Section 115BBE of the Act on account of additional income declared at the time of search, survey and also the addition made by the AO. 12. The case of the assessee is this that the amendment in Section 115BBE came into force only on 15.12.2016 whereas the search was conducted on 21.09.2016 and the assessee has paid tax @ 30%. The provision of Section 115BBE of the Act tax prior to the amendment reads as follows: "115BBE. (1) Where th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 69C and 69D of the Income Tax Act is attracted when the additional income as offered or amount as added attract the provision of sections 68, 69, 69A, 69B, 69C and 69D of the Income Tax Act. The present case in hand, the assessing officer made addition to the total income of the respondent assessee by invoking the provision of section 69B of the Income Tax Act "69B. Where in any financial year the respondent assessee has made investments or is found to be the owner of any bullion, Jewellery or other valuable article, and the Assessing Officer finds that the amount expended on making such investments or in acquiring such bullion, Jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the respondent assessee for any source of income, and the respondent assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the respondent assessee for such financial year." 2.3] That provision of section 69B of the Act though invoked in the case of the above respondent assessee. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether under the head income from business or treated as unexplained investment by applying deeming provisions of section 69B of the Act. 2.5.4] That during the course of Search Proceedings vis-a-vis assessment proceedings the respondent assessee has explained before the Ld. A.O. that surrender of Excess Stock was in relation to business activities and it had direct nexus with business activities, accordingly the respondent assessee company included the same under the head "Business Income"." 14. It is also a fact that the Ld. AO has not brought on record any evidence or material to establish that the assessee was involved in any other activities or having any other source of income. While deleting the addition made by the Ld. AO the Ld. CIT(A) observed as follows: "First of all let me discuss whether the provisions of section 115BBE are applicable to this case or not. The provision of disallowance of any loss with the income as computed under clause (a) of sub section (1) of section 115BBE came into force w.e.f 01.04.2017. Hon'ble Supreme court in the case of CIT vs Vatika Township Pvt Ltd (2014) 24 ITJ 532 (SC); (2014) 271 CTR 1: (2014) 227 Taxmann 121 has held that "A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l income was offered and even addition was made on account of difference in the stock which was liable to be taxed under the head of income from business and profession only and valuation of stock was done on the basis of various observations drawn during the course of search & survey which took place on 28.09.2016 & 15.11.2016 respectively. Since, the search in the case of appellant was carried out on 28.09.2016 and additions were made consequential to search, therefore, the assessing officer, was not justified in stating that provisions u/s 115BBE were invoked by the appellant which in fact was applicable from 01.04.2017 and not from 28.09.2016 (date of search). Thus, the assessing officer is hereby directed to calculate tax as per normal rate applicable in the case of the appellant Therefore, appeal on this ground is Allowed." Since the search in the case of the appellant was carried out before the amendment the addition ought to have been made in terms of the prevailing provision and therefore, the addition made by the AO invoking Section 115BBE provision of which came into force only on 01.04.2017 is not sustainable. Therefore, the order passed by the Ld. CIT(A) deleting the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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