SHREE JEWELLERS,KOLHAPUR vs. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-KOLHAPUR, KOLHAPUR

आदेश/ ORDER

PER DR. DIPAK P. RIPOTE, AM:

1. On the facts and in the circumstances of the case and in Law,the Ld. the learned CIT(A) erred in confirming the action of Authority, Central Circle, Kolhapur (hereinafter referred to as the AO), that the principles of natural justice have been violated in as much as the conclusion and inferences of AO are based on suspicious, conjectures, surmises and extraneous and irrelevant consideration respondents. Further, AO did not give show cause notice and went ahead and passed the impugned order.

2. On facts and circumstances of the case, the learned CIT(A) has erred in upholding the assessment of additions u/s 69A for stock of gold ornament of 2203.483 gms having worth ₹65,05,980/- and of 0.722 kg having worth ₹22,38,000/- and of 638.912 gms having worth ₹19,80,627/- as unaccounted, without considering reconciliation of stock statement, books of account and documentary evidence like confirmations received from creditors on enquiry u/s 133(6) available on record.

3. On facts and circumstances of the case, the learned CIT(A) has erred in upholding the assessment in respect of not excluding excess stock, at the year end, through comparison of stock as per books with physical stock carried on 31 03-2020 and excess stock found of 46.998 grams, valued at Rs 176512.33 which was offered for taxation by including the same in closing stock. This amounts to doubly taxing the same income and hence the income offered by the appellant in respect of the excess stock ought to be reduced from the taxable income if the addition in respect of unaccounted stock is sustained.

4. On facts and circumstances of the case, the CIT(A), in upholding the action of the AO, failed to appreciate that the AO has accepted and considered the stock statement as on 10/10/2019 while working the difference for addition of 0.722 Kg. However, that stock statement as on 10/10/2019 contains the stock found at shop also. Accordingly, The Ld AO erred while making the addition of 2203.4836 grams and 638.912 grams. As such Ld AO himself is making contradictory addition.

5. On facts and circumstances of the case, the learned CIT(A) erred in confirming the view of assessing additional income at maximum marginal rate U/S 115BBE and that too by recording incorrect facts and irrelevant observations and taxing the additional income u/s 69A as against the contention of the appellant that the same is taxable under the head 'Profits and Gains from Business and profession.

6. On fact and circumstances of the case and in the law, the learned CIT(A) has erred in upholding the assessment order passed u/s 143(3) of the Act which is bad in law, as the additions stand made, without detecting any defect in the books of accounts nor the Ld. AO was able to reject book of accounts u/s. 145(3) and the addition u/s 69A had been made in an arbitrary manner, when the entire jewellery found is recorded in the books of accounts. As such, three conditions of section 69A have not been fulfilled.

7. On fact and circumstances of the case and in the law, the CIT(A) has failed to appreciate that self-declaration paper is not a valuable article in the context of Section 69A, while making the addition Ld A.O. has solely and arbitrarily based on self- declaration paper.

The appellant craves leave to add to, amend, alter, delete or modify all or any of the above grounds of appeal or raise a new ground of appeal before or at the time of hearing.”

Brief Facts of the case : 2. In this case, on 10.10.2019, Static Surveillance Team (SST) had intercepted Mr.Mayur Tejpal Shah(admittedly assessee’s authorized person) carrying jewellery weighing 4642.60 grams. This information was passed on to Assistant Director Income Tax(Inv.) on 12.10.2019 who recorded statement of Mr.Mayur Shah and Mr.Yuvraj Shah on 12.10.2019. Both of them submitted that jewellery belongs to M/s.Shree Jewellers/assessee. Mr.Yuvraj Shah was also asked to state the stock in the Shop Premises of M/s.Shree Jewellers and he stated that physical stock of 2.203 kilograms was present in the Shop on 12.10.2019. Mr.Mayur Shah was carrying a statement of stock as on 10.10.2019 with him, when he was intercepted by SST, and the stock as per the said Stock Statement was 8.906 kgs. The ADIT(Inv.) reached to a conclusion that there was excess stock. The case was centralized with Assistant Commissioner of Income Tax, Central Circle, Kolhapur. The Assessee filed its Return of Income under section 139(1) on 12.09.2020 admitting Returned Income of Rs. 8,42,260/-. The AO made an addition under section 69A of Rs.1,07,24,607/-. The Assessing Officer(AO) made the additions relying on stock statement which was carried by Mr.Mayur Shah when he was intercepted by SST. The Assessing Officer held that stock of 2203.482 grams of Gold + 0.722 kg Gold + 638 grams Gold Jewellery were unaccounted. Aggrieved by the assessment order, assessee filed an appeal before ld.CIT(A) who has upheld the assessment findings.

2.1 Aggrieved by the order of ld.CIT(A), the assessee filed appeal before this Tribunal.

Submission of ld.Authorised Representative(ld.AR) : 3. Ld.AR of the assessee filed a paper book containing 177 pages. In the paper book, ld.AR filed copies of statement of Mr.Mayur Shah, Mr.Yuvraj Shah, Stock Statements, Affidavit of Mr.Mayur Shah, Summary of Purchases and Sales for the entire year, Reconciliation Statement, Stock Statement for the entire year.

3.1 The ld.AR submitted that AO has made the addition merely based on the Stock Statement which was being carried by Mr.Mayur Shah when he was intercepted by Static Surveillance Team. The ld.AR submitted that those were the Election Days. Therefore, at various points static surveillance teams were deployed. Mr.Mayur Shah was returning from Ichalkaranji to Kolhapur when he was intercepted by SST. Mr.Mayur Shah had carried certain Gold Jewellery from Kolhapur to Ichalkaranji for the opening ceremony of M/s.Tejpal Chandulal Shah Jewellers for display. After the ceremony he was returning to Kolhapur with the remaining stock. As per the procedure, he was carrying a Self-Declaration along with him stating the stock of jewellery. This Self-Declaration of stock was showing total stock of 8.906 kilograms. However, this self-declaration was hurriedly prepared by the Accountant Mr. Sampat Patil and Mr. Mayur Shah signed it without verification. The said self-declaration was being carried as a routine precaution, because during elections vehicles were intercepted. This particular self- declaration was not based on any actual stock register. During the statement, recorded by Assistant Director of Income Tax(Investigation), this fact was explained to the ADIT. Ld.AR invited our attention to the statement dated 12.10.2019 specifically to Answers to Question No. 12 and 13. Ld.AR submitted that the same was explained again in the statement recorded on 18.10.2019. Ld.AR also submitted reconciliation statement for stock. Ld.AR submitted that the self-declaration relied by AO was showing the stock of 8.906 kilograms, however, this was the Total Stock of the assessee as on 10.10.2019. Ld.AR submitted that no businessmen will carry his Total Stock for display. Ld.AR also submitted that no defect has been pointed in the books of accounts, stock statement filed by the assessee during the assessment proceedings. The ld.AR explained the difference as under:

SHREE JEWELLERS RECONCILIATION OF STOCK AS PER BOOKS OF ACCOUNTS DATED 12-10-2019 SR NO. DETAILS WT- GM. WT-GM. STOCK FOUND & SEALED IN POLICE STAION LOCK UP ON 12-10-2019 BY SST TEAM AS PER 1 VALUATION REPORT 4642.600

- VALUATION REPORT OF GOVT. APPROVED JEWELLERY VALUATOR - [ RANJEET ENTERPRISE] ATTACHED DATED 12-10-2019 4642.600 STOCK FOUND IN SHREE JEWELLERS SHOP AT KOLHAPUR ON 12-10-2019 AS PER COUNTING 2 SHEET ATTACHED [A + B -C] 2797.063

ADD - STOCK FOUND IN SHREE JEWELLERS SHOP AT KOLHAPU R ON 12-10-2019 AS PER COUNTING A 2203.483 ADD - COUNT SKKIP-ED IN STOCK FOUND IN SHREE JEWELLERS SHOP AT KOLHAPUR ON 12-10- 2019, BUT MENTIONED ON STOCK COUNTING SHEET- B 638.912 LESS -STOCK RECEIVED BUT ENTERY NOT DONE IN BOOKS OF ACCOUNTS TILL 12-10-2019 IN STOCK FOUND IN SHREE JEWELLERS SHOP AT KOLHPUR - C 45.332

STOCK SALE AS PER DELIVERY CHALLAN TO TEJPAL C SHAH JEWELLERS LLP ON 10-10-2019 , 3 BUT BILL PENDING DELIVERY CHALLAN & INVOICE COPY ATTACHED [THIS SALE WAS EFFECTED AT THE TIME OF SAID LLP'S OPENING FUNCTION] 435.095

STOCK SALE AS PER DELIVERY CHALLAN TO OM 4 JEWELLERS TILL 12-10-2019, BUT BILL PENDING [D + E] 338.099 DELIVERY CHALLAN ON 10-9-2019 - D 202.899 DELIVERY CHALLAN OM 3-10-2019 - E 135.200 5 DIFFERENCE INSTOCK -35.992 STOCK AS PER BOOKS OF ACCOUNTS DATED 12- 10-2019 & IS GENERATED FROM ACCOUNTING SYSTEAM 8176.865 3.2 The Ld.AR submitted that since beginning Mr.Shah has been stating before the ADIT/DDIT that he was carrying stock only 5-6 kg and the stock statement was prepared hurriedly. The ld.AR submitted that as per CBDT Circular, no addition can be made merely based on self-declaration. Ld.AR submitted that assessee has submitted details of entire purchases and sales to the AO and AO has not pointed out a single defect in the purchase and sales, therefore, the addition is baseless.

Submission of ld.Departmental Representative(ld.DR) : 4. The ld.DR for the Revenue filed a paper book containing report of the ADIT, Copy of the Self-Declaration, Copy of the Stock Statement, Copy of the Statements, Copy of the Tentative Balance Sheet and Profit & Loss Account. Ld.DR heavily relied on the order of lower authorities.

Findings & Analysis : 5. We have heard both the parties and perused the records. On perusal of the assessment order, it is observed that the AO has made addition only on the basis of the assessee’s alleged Self-serving Stock statement dated 10.10.2019 which was in the possession of Mr.Mayur Shah, manager of Shree Jewellers when he was intercepted by Static Surveillance Team. The Assessing Officer has not pointed out any defect in the Stock-Register, Sale Register, Purchase Register and Regular Books of Accounts of the assessee which were produced during Scrutiny proceedings. The AO has not rejected its Books of Accounts. The entire contention of the Assessing Officer is that Mr.Mayur Shah had carried 8.906 kilograms of Gold from Kolhapur to Ichalkaranji as per the Self-Declaration. However, when he was intercepted, in his custody stock of 4.642 kilograms was found. Admittedly, stock of 0.435 kilograms was sold at Ichalkaranji. The physical stock in the shop as submitted by assessee as on 12.10.2019 was 2.203 kilograms. Therefore, according to the AO, since Mr.Mayur Shah had carried entire stock of 8.906 kilograms from Kolhapur to Ichalkaranji and Stock as per assessee’s Books of Accounts was 8.184 kilograms. Therefore, as per Assessing Officer, the stock found at the Shop was Unaccounted Stock.

5.1 Thus, though assessee had submitted details of purchase and sales, during the assessment proceedings, the AO has merely relied on the Self-prepared Stock Statement. 5.2 It is observed that on 12.10.2019, during the statement, Mr.Mayur Shah explained as under:

“Q.12. In the stock statement of Shree Jewellers as on 12/10/2019 produced by you, quantity of gold mentioned is 8. 184 kg, as stock available whereas as per the statement given by Yuvraj Tejpal Shah at business premises of Shree Jewellers at 475/C, shop No.5, Nagarseth Tower, Bhausingji Road, Kolhapur-416002 the actual physical stock present at the premise is 2.203 kg. Please explain the difference between stock ot gold as per your books and actual stock at your premises at 475/C, shop No,5, Nagarseth Tower, Bhausingji Road, Kolhapur-416002 on 12.10.2019. Also mention if stock of Shree Jewellers is kept at any other premises. Ans. The difference in the stock is because I have carried stock of gold ornament from Shree Jewellers, Kolhapur to Ichalkaranji for the display and sale purpose at recently renovated showroom of Tejpal Chandulal Shah Jewellers LLP at Ichalkaranji. 1 have carried around 5 to 6 kg of gold ornaments with me from Kolhapur to Ichalkaranji on 10.10.02019. Q.13. I am showing you a copy of Declaration made by Shree Jewellers dated10.10.2019 which is duly signed by you, wherein stock belonging to Shree Jewellers is mentioned as being carried by you and Ganesh Salunkhe. Stock details as per said declaration: Madhuban Collection Jewellery- 6855.511 gms, 1. Shrishti Collection Jewellery- 1920.972 gms.

2. Style Jewellery' -129.53 gms.

Q.13. I am showing you a copy of Declaration made by Shree Jewellers dated10.10.2019 which is duly signed by you, wherein stock belonging to Shree Jewellers is mentioned as being carried by you and Ganesh Salunkhe. Stock details as per said declaration: Madhuban Collection Jewellery- 6855.511 gms, 1. Shrishti Collection Jewellery- 1920.972 gms.

3. The net weight of total of the above stocks comes to 8.906 kg. On verification, of physical stock found at check post to the SST team, the weight of the gold ornaments comes to 4.4642 kg. Please explain lire discrepancy of the stock.

Ans. I had to attend the opening ceremony of newly renovated premise of Tejpal Chandual Shah Jewellers LLP, Ichalkaranji. The accountant Samput Patil had prepared the declaration letter of stock to be carried to Ichalkaranji shop and lie had put up the same for signature. In hurry I have signed the declaration letter without verifying the stock physically. However, the actual stock is 5 to 6 kg as explained earlier.”

5.4 On perusal of the above answers of Mr.Mayur Shah, it is observed that Mr.Mayur Shah repeatedly stated that he had carried actual stock of 5 to 6 kilograms of Gold from Kolhapur to Ichalkaranji for the purpose of Inauguration Ceremony of M/s.Tejpal Chandulal Shah Jewelers. Mr.Mayur Shah had repeatedly stated that the Self-Declaration of Stock was prepared hurriedly and without verification by the Accountant. Thus, from the Day-1 i.e. initial statement recorded on 12.10.2019, Mr.Mayur Shah had explained that the Self-Declared Stock Statement was prepared without any verification. However, the Revenue has neither bothered to verify this contention of the assessee nor has rebutted the same. Subsequently, Mr.Mayur Shah had also filed an Affidavit stating the same thing. The AO has not rebutted the affidavit. In these facts and circumstances of the case, the addition made by the AO merely on the basis of the Self-Declaration does not have any legs to stand. The assessee has properly explained and reconciled the Sock Difference. Therefore, we direct the AO to delete the impugned addition. Accordingly, grounds of appeal raised by the assessee are allowed.

6. In the result, appeal of the assessee is allowed. Order pronounced in the open Court on 19th Dec, 2023.