M/S. RATNA KUBER GEMS & JEWELLERY,GUWAHATI vs. JOINT 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.

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/- 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).”

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 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 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.”

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/-.

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 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 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