M/S. RATNA KUBER TRADERS JEWELLERY,HOJAI vs. TOINT COMMISSIONER OF INCOME TAX,(OSD), I/C. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2, GUWAHATI

आयकर अपीलीय अधिकरण गुवाहाटी पीठ, कोलकाता में IN THE INCOME TAX APPELLATE TRIBUNAL GUWAHATI BENCH AT KOLKATA [वर्ुअल कोटु] [Virtual Court] श्री राजपाल यादव, उपाध्यक्ष (कोलकाता क्षेत्र) एवं डॉ. मनीष बोरड, लेखा सदस्य के समक्ष Before SRI RAJPAL YADAV, VICE PRESIDENT (KZ) & DR. MANISH BORAD, ACCOUNTANT MEMBER I.T.A. No.: 158/GTY/2019 Assessment Year: 2009-10 M/s. Ratna Kuber Traders & Jewellery.....................Appellant [PAN: AAKFR 4614 H] Vs. JCIT (OSD), 1/C, ACIT, Circle-2, Guwahati…………Respondent I.T.A. No.: 171/GTY/2019 Assessment Year: 2009-10 M/s. Ratna Kuber Gems & Jewellery.........................Appellant [PAN: AFRPD 3307 C] Vs. JCIT (OSD), 1/C, ACIT, Circle-2, Guwahati…………Respondent Appearances by: Sh. A. B. Das, Adv., appeared on behalf of the Assessee. Sh. N.T. Sherpa, JCIT, appeared on behalf of the Revenue. Date of concluding the hearing : December 19th, 2022 Date of pronouncing the order : March 7th, 2023

I.T.A. No.: 158/GTY/2019 I.T.A. No.: 171/GTY/2019 Assessment Year: 2009-10 M/s. Ratna Kuber Traders & Jewellery M/s. Ratna Kuber Gems & Jewellery. ORDER Per Manish Borad, Accountant Member: Both these appeals filed by the assessee pertaining to the Assessment Year (in short “AY”) 2009-10 are directed against separate orders passed u/s 250 of the Income Tax Act, 1961 (in short the “Act”) by ld. Commissioner of Income-tax (Appeals)-1, Guwahati [in short ld. “CIT(A)”] dated 28.02.2019. 2. The assessee is in appeal before this Tribunal raising the following grounds: I.T.A. No.: 158/GTY/2019 “A) For that the search proceedings has not been legally initiated and hence bad in law and the learned CIT(A) erred in confirming the same. B) For that the learned CIT(A) erred in confirming the following additions made by the A.O. under the head “Income from other sources.” Assessment orders i) Para 4.5 Rs. 3,00,000/- ii) Para 4.6 Rs. 1,68,795/- iii) Para 4.8 Rs. 1,04,35,067/- Rs. 1,09,03,857/-.” I.T.A. No.: 171/GTY/2019 “A) For that CIT(A) erred in sustaining the following additions made by the learned A.O.- (i) Para 4.2 (Asstt. Order) Rs. 1,22,775/- (ii) Para 4.5 (Asstt. Order) Rs. 15,376/- (iii) Para 5 (Asstt. Order) Rs. 12,70,970/-

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I.T.A. No.: 158/GTY/2019 I.T.A. No.: 171/GTY/2019 Assessment Year: 2009-10 M/s. Ratna Kuber Traders & Jewellery M/s. Ratna Kuber Gems & Jewellery. (iv) Para 6 (Asstt. Order) Rs. 3,37,126/- Rs. (12,77,540/- (-) 9,40,414/-) B) For that any other grounds may be taken up at the time of hearing with leave of the learned CIT(A).” 3. We will first take up I.T.A. No. 158/GTY/2019. 4. Ld. Counsel for the assessee vehemently argued referring to the submissions made before the lower authorities. On the other hand, ld. D/R supported the order of the ld. CIT(A). 5. We have heard rival contentions and perused the records placed before us. 6. We first take up ground no. 1 raised by the assessee challenging the legality of the search proceedings carried out in the case of the assessee. We notice that the assessee is a partnership firm engaged in the business of jewellery. Search action was conducted u/s 132 of the Act on 27.03.2009. The panchnama was addressed in the name of Mr. Pallob Das treating him as proprietor of the assessee firm. However, the fact is that Mr. Pallob Das was not the partner of the assessee firm but was found to be a key person of the Ratna Kuber Group. Ld. CIT(A) has dealt with this issue in the following manner: “I have gone through the above submissions of the Appellant and have considered the facts and evidences on record. Ground No. 1 The above ground of appeal challenges the assessment proceedings in pursuance to a search conducted under Section 132 of the Income Tax Act, 1961 in the case of the appellant. The appellant has stated that the Panchnama was addressed in the name of Shri. Pallob Das

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I.T.A. No.: 158/GTY/2019 I.T.A. No.: 171/GTY/2019 Assessment Year: 2009-10 M/s. Ratna Kuber Traders & Jewellery M/s. Ratna Kuber Gems & Jewellery. of Guwahati. Likewise inventory of cash and stock found in the name of Shri. Pallob das treating him as the proprietor of the assessee firm. Thus, it is the contention of the appellant that in its case no search has been conducted and therefore the consequential proceedings are vitiated and bad in law. In this regard, a copy of the panchnama would reveal that the name of the appellant was duly appearing at the panchnama prepared and the name of Sh. Pallob Das was written in the panchanama as being c/o RatnaKuber. The search team had a valid authorization to search the premises of the appellant. In any case, the partners and firm are treated, under the Income Tax Act as well as under the Indian Partnership Act, as interchangeable and thus, I find no substance in the submission of the appellant and this ground of appeal is dismissed.” 6.1. The above finding of ld. CIT(A) could not be controverted by ld. Counsel for the assessee. Therefore, we find no infirmity in the finding of ld. CIT(A) and the validity of search carried out in the case of the assessee. Thus, ground no. 1 raised by the assessee is dismissed. 7. Now we take up ground no. 2 which consists of three additions of ground no. 2a Rs. 3,00,000/-, ground no. 2b Rs.1,68,795/- & ground no. 2c Rs. 1,04,35,067/-. So far as addition of Rs. 3,00,000/- is concerned, the same was made on account of unexplained investment in firm by the partners. Relevant finding of ld. CIT(A) reads as follows: “ii) Para 4.5impugns an addition of Rs.3,00,000/- on account of unexplained investment in firm by partners. The fact of the addition is that the appellant, a partnership firm was constituted on 01/04/2008 and as per the partnership deed, each of the four partners had decided to contribute Rs.75,000/- per person as their respective capital in the firm. The impugned addition of Rs.3,00,000/- (Rs.75,000 X’ 4) has been made, since the cash

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I.T.A. No.: 158/GTY/2019 I.T.A. No.: 171/GTY/2019 Assessment Year: 2009-10 M/s. Ratna Kuber Traders & Jewellery M/s. Ratna Kuber Gems & Jewellery. received by the appellant as partners contribution was not found credited in the respective ledger account of the appellant. Accordingly, in the absence of the corresponding entries in the books of accounts of the appellant, the aforesaid amount has been added to the income of the appellant. Per Contra, the appellant has stated that the AO has failed to appreciate that the amount has been duly recorded in the Cash Book. It was also explained by the AR that the partners had actually contributed towards the capital of the firm as per the deed and the cash book is the main book and the ledgers are subsidiary books. From a conspectus of the facts, I find that the cash in hand in the case of the appellant comprised of the contributions from the partners towards their capital. There is no averment of the AO that the partners did not make any contribution or that their sources were not known. The only infirmity was that the amount of capital contribution was not found to be credited in their respective names. Even during the course of appellate proceedings, the appellant could not controvert the above finding of the AO as to why the impugned amounts were not credited to the individual capital accounts of the partners. Thus, it is not clear as to whether the appellant was maintaining the books of accounts on a single entry basis or on double entry basis and if at all, the books of accounts were properly written as to which account was credited as against the capital received. Thus, I find no reason to interfere and confirm the addition made.” 7.1. From perusal of the above finding we notice that the said addition has been made because the entries of capital contribution made by the partners was not recorded. We find that the copy of the partnership deed was available during the course of search which indicated that each partner has to contribute Rs. 75,000/- each. The authenticity of the deed is not in dispute. Search was conducted on 27.03.2009 which is the very first year of incorporation of the partnership firm and that too before the close of the financial year. One cannot ignore the fact that books of accounts were not complete are not complete since the year has

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I.T.A. No.: 158/GTY/2019 I.T.A. No.: 171/GTY/2019 Assessment Year: 2009-10 M/s. Ratna Kuber Traders & Jewellery M/s. Ratna Kuber Gems & Jewellery. not ended. Under these given facts where cash given by the partners is reflected in the cash book and addition is made only for not making entry in ledger, we find merit in the ground raised by the assessee and thus, set aside the finding of ld. CIT(A) and delete the addition of Rs. 3,00,000/-. 8. Addition of Rs. 1,68,795/- was also made for the similar reason that the said amount was deposited in the bank account but not reflected in the cash book. Ld. CIT(A) dealt with the issue in the following manner: “iii) Para 4.6 impugns an addition of Rs. 1,68,795/- on account of cash found deposited in bank account, not reflected in cash book The fact of the addition is that the above amount of Rs. 1,68,795/- was found deposited in the bank account of the appellant [A/c No.30378156411 of SBI,Hojai] in cash. However, no corresponding entry was found recorded in the cash book of the appellant. To a query in this regard, the appellant has stated that the amount was on account of installments deposited by the parties, directly in its bank accounts. Even during the course of appellate proceedings, the appellant maintained the same stand and submissions as were put forth by it before the AO. I find that while the submission put for by the appellant is a plausible one, wherein the parties deposit cash directly, themselves in the bank account of the other party, the fact remains that the appellant has not been able to prove as to why the corresponding amounts were not found entered in the cash book of the appellant. Evenmore, there were no details of such parties, leave apart any invoice, any agreement (incase the cash deposit was on account of installment) or any other documentary evidence as would prove the identity of the said party or the nature of transaction. In the absence of any such details before the AO or even during the appellate proceedings, I find no reason to interfere with the addition made of Rs.1,68,795/-, and the same is hereby sustained.”

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I.T.A. No.: 158/GTY/2019 I.T.A. No.: 171/GTY/2019 Assessment Year: 2009-10 M/s. Ratna Kuber Traders & Jewellery M/s. Ratna Kuber Gems & Jewellery. 8.1. We fail to find any merit in the above finding of ld. CIT(A) since the bank account in which the alleged sum is deposited is part of the books of accounts and since the entries in the cash book could not be completed because search was conducted before the end of the financial year it cannot be presumed that the said sum deposited in the bank account is undisclosed. Therefore, since the bank account is disclosed, we fail to find any merit in the finding of ld. CIT(A) and thus, set aside the same and delete the addition of Rs. 1,68,795/-. 9. The next addition for unexplained cash is of Rs. 1,04,35,067/-. The said addition was made by ld. AO for the reason that they were recorded in the cash book but their entries were not made in the ledger account. Ld. CIT(A) confirmed the said addition observing as follows: “iv) Para 4.8 impugns an addition of Rs. 1,04,35,067/- on account of cash recorded in the cash book, but details of parties and nature and source of cash remaining unsubstantiated The fact of the addition is that during the course of search, the cash book of the appellant was found to be debited (i.e. increased) by the aggregate amount as impugned herein on different dates. However, since there were no corresponding entries in the ledger/subsidiary ledger accounts, the aforesaid amounts were added back to the total income of the appellant. Even during the course of appellate proceedings, the appellant could not controvert the above finding of the AO as to why the impugned amounts were not credited to the respective accounts/ ledgers/ subsidiary ledgers in its books of account. Thus, it is not clear as to whether the appellant was maintaining the books of accounts on a single entry basis or on double entry basis and if at all, the books of accounts were properly written as to which account were credited as against the cash received, leave apart furnishing of any other

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I.T.A. No.: 158/GTY/2019 I.T.A. No.: 171/GTY/2019 Assessment Year: 2009-10 M/s. Ratna Kuber Traders & Jewellery M/s. Ratna Kuber Gems & Jewellery. documentary evidence as would prove the identity of the respective parties from whom such cash was received, the nature of transaction, etc. It is rather painful to note that on one hand the appellant is contending that the cash was recorded in its books of accounts and on the other, the appellant is clearly reluctant in furnishing the details of the parties from whom such cash has been received, the nature and purpose of receipt of such cash and other vital aspects of the transactions relating to receipt of the cash. In the absence of any such details furnished before the AO or even during the appellate proceedings, I find no reason to interfere with the addition made of Rs.1,04,35,067/-, and the same is hereby sustained.” 9.1. From perusal of the finding of ld. CIT(A) we fail to find any merit and are surprised to note that at some places where the entries are appearing in the bank book but no recorded in the cash book, ld. AO made the addition for unexplained cash whereas in this case where all the entries are appearing in the cash book both the lower authorities have made the addition for not recording in the ledger account. The business transactions for the purpose of being entered in the books can come in three forms; i) the entry in the cash book or ii) in the bank book or iii) through journal book. Once any entry of transactions takes place under any of the three modes then the posting of the entry in the affected accounts is made in the ledger account. Therefore, since the primary entry i.e. the cash recorded in the cash book is duly made and was found during the course of search then merely for not entering the said transactions in the ledger account cannot be a basis to make the addition for undisclosed cash. We again like to repeat that the financial year under consideration is 2008-09 and search was conducted much before the close of the financial year which possibly can be a reason for not making all the entries in the books

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I.T.A. No.: 158/GTY/2019 I.T.A. No.: 171/GTY/2019 Assessment Year: 2009-10 M/s. Ratna Kuber Traders & Jewellery M/s. Ratna Kuber Gems & Jewellery. of accounts. We thus, set aside the finding of ld. CIT(A) and delete the addition of Rs. 1,04,35,067/-. Thus, ground nos. 2a, 2b & 2c raised by the assessee are allowed and the addition totalling to Rs. 1,09,03,857/- [3,00,000/- (+) 1,68,795/- (+) 1,04,35,067/-] is deleted. 10. In the result, the appeal filed by the assessee is partly allowed. 11. Now, we take up I.T.A. No. 171/GTY/2019. 12. Ld. Counsel for the assessee vehemently argued referring to the submissions made before the lower authorities. On the other hand, ld. D/R supported the order of the ld. CIT(A). 13. We have heard rival contentions and perused the records placed before us. 14. The first ground relates to addition of Rs. 1,22,775/- for the alleged undisclosed business receipt. Ld. CIT(A) confirmed the said addition observing as follows: “i) Para 4.2 impugns an addition of Rs, 1,22,775/- on account of cash in hand not substantiated The facts of the addition is that the cash in hand found during the course of search of Rs.1,22,775/- remained unsubstantiated and addition has been made since the appellant did not produce the books of accounts during the course of assessment proceedings to prove the cash in hand found. Per contra, the appellant contends that the cash in hand, as per its books of accounts, as on the date of search was duly reconciled with the physical cash in hand found at the time of search and thus, there was no difference. The appellant also contends that the books of accounts were produced before the investigation wing as well as Page 9 of 13

I.T.A. No.: 158/GTY/2019 I.T.A. No.: 171/GTY/2019 Assessment Year: 2009-10 M/s. Ratna Kuber Traders & Jewellery M/s. Ratna Kuber Gems & Jewellery. before the AO and thus, there was no reason for making the impugned addition. In the factual matrix, as aforesaid, I have to consider, on one hand, the contentions of the appellant that the books of accounts were produced by it before the Investigation Wing as well as during the assessment proceedings and on the other hand, the observation of the AO that the appellant did not produce the books of accounts during the course of assessment proceedings to prove the cash in hand found. In the absence of any specific material as would prove that the appellant did produce his books of accounts before the AO, I find myself constrained to sustain the addition made. This ground of appeal is dismissed.” 14.1. The above finding of ld. CIT(A) could not be rebutted by ld. Counsel for the assessee by placing relevant material like the abstract of the cash book as on the date of search, and the physical cash found without which we fail to find any reason to interfere in the finding of ld. CIT(A). We, therefore, confirm the addition of Rs. 1,22,775/-. 15. The next issue for our consideration is the addition of Rs. 15,376/-. Ld. CIT(A) considering the submissions of the assessee has confirmed the addition observing as follows: “iii) Para 4.5 impugns an addition of Rs. 15,576/- under Section 69 of the Act The above amount was added on account of the fact that as per books of accounts of the appellant, there was no stock of silver jewellery and silver jewellery amounting to the above amount was found during the course of search. In the absence of any supporting evidence to prove that the appellant was having stock of silver jewellery, the impugned amount has been added. Per contra, the appellant has contended that the valuation of silver items has been made by it at cost price in conformity with the

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I.T.A. No.: 158/GTY/2019 I.T.A. No.: 171/GTY/2019 Assessment Year: 2009-10 M/s. Ratna Kuber Traders & Jewellery M/s. Ratna Kuber Gems & Jewellery. accounting system and as such the addition is liable to be deleted in full. I find that the appellant has not been able to appreciate the observation of the AO that the instant addition has been made for want of documentary evidence to prove that the appellant did have silver jewellery as part of its stock in trade and not on the aspect of valuation. Unfortunately, even during the appellate proceedings, the appellant could not furnish any evidence, such as corresponding bills of purchases made by the appellant of silver or silver jewellery, as would prove that the appellant was having stock in trade of silver jewellery. The above ground of appeal is, hereby, dismissed.” 15.1. We, on perusal of the above finding as well as considering the fact that the assessee firm is engaged in the business of jewellery and net profit offered to tax before appropriation of interest and remuneration to partners is Rs. 26,59,320/-, do not consider the action of ld. AO justified in making addition of a meagre amount of 15,376/- and thus, do not consider it to be categorised under unexplained income. Thus, the finding of ld. CIT(A) is set aside and the addition of Rs. 15,376/- is deleted. 16. The next issue for our consideration is the addition of Rs. 12,70,970/-. The said sum is a total of amount received by the assessee from different credit cards and recorded in a book name “PD-16”. Ld. CIT(A) confirmed the said addition observing as follows: “iv) Para 5 impugns an addition of Rs.12,70,970/- on account of undisclosed income The fact of the addition is that the impugned amount was added based on a book "PD-16" which was found and seized. The AO has observed that the total transactions recorded of payment received by the appellant in this book through different credit cards is found to be

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I.T.A. No.: 158/GTY/2019 I.T.A. No.: 171/GTY/2019 Assessment Year: 2009-10 M/s. Ratna Kuber Traders & Jewellery M/s. Ratna Kuber Gems & Jewellery. Rs.12,70,970/- which is not recorded in the books of account of the appellant. Per contra, the appellant has stated that these transactions are duly reflected in its books of accounts. I note that the AO has observed that the above amounts are in the nature of receipts, not recorded by the appellant in its books of accounts. Per appellant, the above amounts are payments which the appellant has made through credit cards. The appellant has stated that the above credit card transactions are duly recorded in its books of accounts, which were even produced before the Investigation Wing and were subsequently impounded. That, however, did not preclude the appellant from furnishing the relevant ledger accounts, corresponding bank statements, corresponding sources/ purpose of proof to negate the contentions of the AO. Thus, in the absence of any evidence, I find no reason to interfere with the addition made. This ground of appeal is dismissed.” 16.1. From perusal of the above finding and the details filed by the assessee before ld. CIT(A) we notice that the said transactions are received through credit cards and since these were found at the business place it is to be presumed that the said amount has been received from various customers towards sale. Since the assessee is in the business of gold jewellery, various documents have been found for the purchase of goods and other material required for the purpose of making gold jewellery. We are of the considered view that since the alleged sum of Rs. 12,70,970/- is on account of sales, therefore only the profit element which is part of the said sales should only be brought to tax. Before us, the assessee has not filed any details of the net profit percentage declared for the year. We, therefore, taking a conservative view and applying the net profit rate of 8%, which should not be taken as a precedence in other cases and thus, sustain the addition at Rs. 1,01,678/- as

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I.T.A. No.: 158/GTY/2019 I.T.A. No.: 171/GTY/2019 Assessment Year: 2009-10 M/s. Ratna Kuber Traders & Jewellery M/s. Ratna Kuber Gems & Jewellery. against Rs. 12,70,970/- made by ld. AO. Thus, finding of ld. CIT(A) is set aside and this ground raised by the assessee is partly allowed. 17. Ground no. 4 is regarding the addition of Rs. 3,37,126/- which has not been pressed by the assessee and therefore, the same is dismissed as not pressed. 18. In the result, both the appeals in I.T.A. No. 158/GTY/2019 & I.T.A. No. 171/GTY/2019 are partly allowed. Kolkata, the 7th March, 2023 Sd/- Sd/- [Rajpal Yadav] [Manish Borad] Vice President Accountant Member Dated: 07.03.2023 Bidhan (P.S.) Copy of the order forwarded to: 1. M/s. Ratna Kuber Traders & Jewellery, Lalpatty, Hojai, Pin- 782 435. 2. M/s. Ratna Kuber Gems & Jewellery, Manipuribasti, Guwahati-781 007. 3. JCIT (OSD), 1/C, ACIT, Circle-2, Guwahati. 4. CIT(A)-1, Guwahati. 5. CIT- 6. CIT(DR), Guwahati Bench, Guwahati. //True copy // By order

Assistant Registrar ITAT, Kolkata Benches Kolkata

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