M/S. ALANKAR JEWELLWER,VIDISHA vs. THE ACIT- II, VIDISHA

per the diary BS43 which are the foundation for the addition of

Rs.5,00,000/- do not belongs to the assessee. It actually belongs to

Jain trust namely Pandit Todarmal Smarak Trust. One of the partners

of the firm namely Shikhar Chand Jain is known to be a preacher and

a renowned speaker on Jain Dharma and also attached to the said

Jain Trust. These loose papers refer to purchase of the idols of God

worshiped by the Jain Community for being placed in a Jain Temple.

Therefore, under the given facts and circumstances of the case since

the alleged loose paper do not belong to the assessee firm, Ld CIT(A)

has rightly deleted the addition. The finding of Ld CIT(A) needs no

interference. Accordingly ground no.5 raised by the revenue stands

dismissed.

CIT(A) deleting the addition of Rs. 4,18,16,751/- made by the ld. AO.

for the assessee are that during the course of search valuation of

inventory which comprised of gold and diamond jewellery and silver

Alankar Jewellers ITANo.838/Ind/2019& IT(SS)No.205/Ind/2019 ornaments was done and the value of inventory was determined at Rs.

8,71,53,266/-. The books of accounts of the assessee were incomplete

as on the date of search and after reconciliation the quantity of stock

was determined at 6105.928 grams of gold and 85.27 kg of silver

which was valued at Rs. 1,52,26,036/-. The difference was

ascertained at Rs. 7,19,27,190/- which was accepted to be

surrendered as unrecorded investment. Subsequent to the search the

assessee got its books completed and reconciled the stocks with the

available information and offered to tax Rs. 3,03,10,439/- determined

as unexplained investment . Detailed reconciliation with reasons for

adjustments is given below to substantiate the correctness of the

income offered:-

Stock found during the course of the 33,853.86gms. Rs.8,10,16,131/- search (Gold and Diamond) Stock as per books of accounts as on the 6,105.938 gms. Rs.1,33,84,194/- date of search Difference 27747.922 gms Rs.6,76,31,937/- Difference in stock of silver 157gms Rs.42,95,253/- Total difference in stock Rs. 7,19,27,190/- Stocks surrendered in the return (wrongly taken by A.O. at 3,01,10,439/- 11075 gms Rs.3,03,10,439/-

Balance addition challenged 16672 gms. Rs. 4,16,16,751/-

Alankar Jewellers ITANo.838/Ind/2019& IT(SS)No.205/Ind/2019

Quantitative bifurcation of 16672 gms gold ornagments was explained before Ld. AO in the following manner: i. Personal jewellery of the partners 10987 gms. ii. Bills accounted after the search wherein the Purchases were made before the search 5686 gms. iii. Jewellery belonging to sister and brother in law while they were visiting to Canada 779 gms. --------------- Total 16672 gms

10987 gms. belonging to the partners was kept in the showroom/

residential premises is included in the stock taken by the Department.

This jewellery was received by the members from the will of the mother

Smt. Chamelibai. The said jewellery was declared by the members in

their wealth tax returns filed for A.Y. 2011-12 much before the date of

search. Regarding the bill received after the search all the details were

filed before the Ld. A.O. including the copy of the bills payment proof

and the copies of accounts. Regarding the jewellery belonging to the

sister, the affidavit of the brother-in-law was submitted.

assessee and made an addition of RS. 4,18,16,751/- ( Rs.

7,19,27,190/-(income declared u/s 132(4) (-) Rs. 3,03,10,439/-

(income offered in the ITR) It was submitted before the ld. A.O. that 42

Alankar Jewellers ITANo.838/Ind/2019& IT(SS)No.205/Ind/2019 the partners/family members are staying in the same premises in

which the show room of the assessee is situated. The AO in Para 7.2 of

his assessment order have specifically mentioned that the jewellery

under consideration was found at the residence and show room. The

statement of Mr. Shikhar Chand Jain made on 22.08.15 and the

inventory prepared at that time and place makes a specific mention of

the fact that gold jewellery of 7764.24 grams valued at app Rs.

1,95,05,738/- was found in the bed room of Shikhar Chand Jain. The

Ld. A.O. did not accept the contention of the assessee. The Ld. AO

disregarded the will and the submissions of the assessee and did not

make any adjustment for such jewellery and the reasons for

disbelieving the contentions of the assessee are summarized herein

below.

Para No Observation of the AO 7.16 Jewellery mentioned in the W.T return was not physically found Proof of conversion of gold into stock in trade was not furnished Assessee could not match the items in the W.T returns with the stock physically found The assessee has accepted the difference in stock as his undisclosed income in the statement u/s 132(4)

Alankar Jewellers ITANo.838/Ind/2019& IT(SS)No.205/Ind/2019 42. As regards bills accounted after search for purchases made before

search(gold) 5685.92 grams & Diamonds, Rs. 21,94,174/-

following submissions are made by Ld. counsel for the assessee:-

In some cases of purchase of jewellery/diamonds, though the material

was received prior to the date of search, the invoices were not

accounted in the books of account as on the date of search. Due to

this quantity of gold purchased reflected in these invoice was not

included in the book stock and therefore the difference in stock

calculated was not correct. Subsequent to the search the books of

accounts were completed, all invoices were booked and the correct

quantity of book stock was determined and thereafter the difference in

stock was recomputed and was offered to tax. During the course of

assessment proceedings the details of such invoices along with copy of

invoices and ledger account of the suppliers and their confirmations

were filed. All these details were however rejected by the AO on the

basis of following observations: i. The accounts of the suppliers (Raviraj bullion & Jewellers, Ankur Jewellers, Kanak Gems, Mansha Jewellers, Shilpi Jewellers, and Padamshree Gold) were not found in the seized hard disk data. ii. The assessee was given sufficient opportunity during the course of search to update the books of accounts up to the date of search.

Alankar Jewellers ITANo.838/Ind/2019& IT(SS)No.205/Ind/2019 iii. The assessee did not make mention of any such bills during the course of search proceedings and thus the details furnished are afterthought. iv. In case of Kanak jems Mumbai it was found by the investigation department Mumbai during the course of search on that entity on 03.10.13 that it does not carry on any actual business and the business premises were found vacant. v. There were some discrepancies in the entries appearing in the seized hard disk in comparison with the details submitted on 12.12.2014.

weighing 779.64 grams, Ld. counsel for the assessee following

submission made:

Mrs. Meena Jain is the sister of the partners of the assessee firm and

Mr. Ashok Jain is her husband and Mrs. Meena Jain intended to go to

Canada to meet her daughter and for the purpose of obtaining VISA she

had required the assessee firm to give a valuation report of the jewelry

owned by her family and with this object she had brought her jewelry

to the assessee firm. As she had planned to leave for Canada after

obtaining the VISA she had kept her jewelry with her father/brothers

for safe keeping which was kept in the business/residential premises

of the assessee. The quantum of jewelry belonging to the lady and her

husband is readily verifiable from the copy of valuation report of her

Alankar Jewellers ITANo.838/Ind/2019& IT(SS)No.205/Ind/2019 jewelry dated 12.05.2015 seized during the course of search (LPS-1

Page No 23-24). The said lady left for Canada on 29.07.2015 and

returned back to India on 27.10.2015 and this fact is also readily

verifiable from the copy of her pass port. During post search enquiries

this fact was brought to the knowledge of the Investigation wing which

issued summons to the said persons and duly recorded their statement

in which both the persons confirmed these facts. They also filed an

affidavit before the investigation wing confirming these facts. The copy

of the statement recorded was not provided to the assessee.

Alankar Jewellers ITANo.838/Ind/2019& IT(SS)No.205/Ind/2019

documentary evidences filed by the assessee has extensively dealt with

the facts of the case and deleted the impugned addition observing as

follows:

“5.6 Ground No.6 for A.Y. 2016-17:- Through this ground of appeal, the appellant has challenged addition of Rs.4,18,16,751/- on account of undisclosed stock of gold and silver. During the course of valuation of stock was done by registered valuer. The details of valuation report of registered are as under:-

S.No Item Name Gross Wt Total value

1 Gold' and diamond 33853.86 gms 8,10,16,1311-

2 silver 242.032 kg 61,37,135/-

Total 8,71,53,266/-

However, the details of stock as per books of account of the appellant are as under.- Value at current S.No Item 'Weight Current MY cost Purity 1 Gold 6105.928 2740 per gms 133841 gms 180% 85.27049 36000 per 13,113 2 Silver kg 60% kg 42 Total 152260 I 36 Shri Sanjay Jain was required to explain huge difference in stock, in reply he submitted that books of account are maintained till 08.0~.201j. However, the same are maintained ill tally only till 30.0G.2015 du: to ill health of accountant. Therefore, he accepted additional income of Rs. 7~19,27,190/- as undisclosed stock of the assessee firm. However, the assessee has offered income of Rs. 3,03,10,439/- while filing return of income e u/s IS31'. of the Act. Thereafter, the AO during the course of assessment proceedings required the assessee to explain the reasons for offering lower value of undisclosed

Alankar Jewellers ITANo.838/Ind/2019& IT(SS)No.205/Ind/2019

income declared during the course of search. The assessee in reply submitted that out of total jewelley 10987 gms belongs to partners and the same has been included in stock. Bills of jewellery of 5685.92 gms were pending as on date of search and were received after search. Jewellery of 448 gms belongs to Smt Meena Jain and jewellery of 331.64 gms belongs to Shri Ashok Jain. The AO after considering reply of the assessee did not find the same acceptable and stated that no such jewellery was found as mentioned in wealth tax return as physically found during the course of search. The assessee could not prove the conversion of such gold in stock in trade. Further, the bills received by the assessee after date of search are relating to parties not trading with assessee. Also, jewellery belonging to Smt Meena Jain and Shri Ashok Jain has not been claimed' to have been kept in showroom of the assessee. 5.5.1 The appellant during the course of appellate proceedings submitted late smt. Chameli Devi had executed a will on 30.05.2000 making distribution 0: her assets including gold/gold jewellery among various family members. The will was drafted by advocate Mr Ajay Khanerkar and Vias signed in presence of two witness Shri Maluk Chand Jain and Shri Kalyan Mal Jain. Smt Chameli Devi died on 04.06.2000. The beneficiary of will filed their wealth tax return for AY 2011-12 in which gold ornaments were duly reported. Further, entire jewelley of house and showroom was mixed together and then valuation was done. Further, bills of gold jewellery of 5685.92 gms were pending and appellant in support has filed copies of accounts of sUPF~;'er3 and jewellery of 779.64 grms belongs to Smt Meena Jain and shri Ashok Jain who were intended to go to Canada to meet their daughter and for the purpose of getting VISA she was required to submit details of her assets and net worth. Therefore, valuation of her jewellery was done on 12.05.2015 and jewelley was kept with Shri Shikar Chand Jain for security purpose. 5.5.2 I have considered the facts of the case, evidences on record and findings of the AO. During the course of search valuation of inventory which comprised of gold and diamond jewellery and silver ornaments was done and the value. of inventory was determined at Rs. 8,71,53,266/-. The books of accounts of the assessee were incomplete as on the date of search and accordingly quantity of stock was determined after making a reconciliation statement by incorporating details of known purchase/sales and the quantity of stock was determined at 6105.928 grams and 85.27 kg of gold and silver respectively which was valued at Rs. 1,52,26,036/-. After the course of search, the appellant completed its books of accounts and reconciled the stock with available information. The difference in stock found during the course of search was ascertained at Rs. 7,19,27,190/- which was accepted to be surrendered as unrecorded investment by Shri . Sanjay Jain. However, the appellant while filing return of income uls 153A of the Act has offered sum of. Rs. 3,03,10,439/- as unexplained investment in stock. The appellant in support of its contention has explained that the reasons for variation between the difference determined during the course of search and income offered to

Alankar Jewellers ITANo.838/Ind/2019& IT(SS)No.205/Ind/2019

tax was majorly on account of the following: e. Personal jewellery of partners 10937 grams f.Bills accounted after search for purchases made before search(gold) 5685.92 grams g. Jewellery belonging to sister am} brother in law 779.64 grams h. Bills accounted after search for purchases made before search( diamond) Rs.21,94,174/- After considering the plea- raised by the appellant I find it considerate to discuss this issue in depth and wider- . (a) Personal Jewellery of Partners (10987 gms)

The appellant during the course of assessment proceedings as well as appellate proceedings has claimed that out of total jewelley found during the course of search jewellery of 10987 gms belongs to family members and partners of the appellant firm. The appellant has also explained the acquisition of jewellery and stated that Mrs. Chameli Devi the wife' of the partner Mr. Shikar Chand Jain got married appx. 65 years back and belonged to an affluent family. She got married to a family of jewelers and as p?r the prevailing custom in the Indian society got substantial quantity of jewellery as gift from her parents and in laws and on other important occasions. However, she died on 04.06.2COO. Prior to her death she had executed a will on 30.05.2000 making distribution of her assets including gold/gold jewellery amongst her various family members, Tile will was drafted by her advocate Mr. AjayKhanerkar and was signed by two 'witnesses namely Maluk Chand Jain & Kalyan 1-1&! Jain. As per the will, the entire asset including gold and gold jewellery would be divided •.. mount different family members by her brother Devendra Jain. The assets of late Smt Chameli Devi were divided according to the will and the beneficiaries field their Wealth Tax Rectums in AY 2011-12 ill which the assets received on account of execution of will were also reported. The appellant in support has filed copies of Wealth Tax Return of family members for AY 2011-12. Further, an affidavit from Mr. Devendra Jain brother of late Smt Chameli Devi substantiating the gift made to her as well as affidavits of Mr. Ajay Khanerkar (the advocate who drafted the will), Mr Maluk Chand Jain S: Kalyan Mal Jain (the witnesses to the will) and Mr Devendra Jain (the person who was appointed as executor to execute the will and who made the distribution of assets as per the will) in this regard has been filed. A copy of these affidavit was forwarded to AO for comments, however, the AO has objected to the said papers on the following broad reasons:- (i) The paper submitted do not prove that jewelley given in will is part of stock found during search. (ii) The assessee did not provide any details during the course of search. (iii) The assessee did not explain why the copy of will was not found during search. (iv) The assessee has converted the jewellery into stock, entry of which is

Alankar Jewellers ITANo.838/Ind/2019& IT(SS)No.205/Ind/2019

not made in books. (v) The assessee could not match the list of items mentioned in the wealth Tax Return with the stock found during the course of search. (vi) The will is not registered and-various factors raise suspicion that t:1 ~ will is fabricated and after thought. Considering the various objections raised by the AO in point (i), (ii) andIiv) it is seen that the partners of the assessee firm have specifically stated in the statement that the jewellery of wife/family members of 10987 gms is included in the stock for which no accounting entry is made. The, jewellery under consideration was found at the residence and show room which was also confirmed by Mr. Shikhar Chand Jain in his statement recorded on oath on 22.08.15. Similarly, Shri Sanjay Jain in his statement recorded 011 22.08.2015, in reply to Q-53 stated that the investment in gold of the family members/concerns which was also reported in the wealth tax return have been merged in the stock in hand of the firm for which no accounting entry has been made in the books of account. Person wise details' of gold ornament aggregating to 10987.35 gram so included in the stock were also mentioned in the statement recorded: Therefore, it cannot be said that the assessee did not provide the details of jewelley of 10987 gms. As regard to observation made in (iii) & (v) it is seen that the assessee has submitted affidavits of four persons i.e. advocate (preparer of will), two witness and executor of the will, confirming the genuineness of the will, however, the AO did not raise any doubt on affidavits filed. The family members and partners have disclosed the jewellery in their wealth Tax Return which \Va3 submitted before the search. This cannot be called a case of afterthought. It may further be appreciated that no item wise inventory was prepared and the quantification/valuation was done on weight basis only in a lump SUD. manner as would be verifiable from the copy of inventory/valuation sheet enclosed. The fact that total jewelry found with the assessee and his family members during the course of search was 33853.86 grams whicl: have totally been considered as the stock in hand of the assessee firm is not in dispute. The partners of the assessee have filed their W.T returns and have offered their gold holding as assets for taxation in it is also not disputed. Thus it would not be proper to hold the will as fabricated and afterthought as held by the AO. Thus it is held that the AO was not justified in making an addition of 10987 gms of gold jewellery from the quantity of stock found (b) Bills of purchase of jewellery pending on the date of search (5685.92 grams) The appellant during the course of search as well as before the AO has stated that bills of various purchase of gold and diamond jewellery are pending, however, material was received prior to the date of search. Therefore, the quantity of gold purchased reflected by these invoice was not included in the book stock and accordingly the difference in stock calculated was not correct. The appellant afterwards received all the invoices and were duly recorded in regular books of accounts and thereafter the difference in stock was

Alankar Jewellers ITANo.838/Ind/2019& IT(SS)No.205/Ind/2019

recomputed and was offered to tax amounting to Rs. 3,03,10,439/· . The appellant has also filed copies of invokes received after search. The AO after taking into consideration these bills and, invoices mace following observations: i. vi. The accounts of the suppliers (Raviraj bullion & Jewellers, Ankur Jewellers, Kanak Gems, Mansha Jewellers, Shilpi Jewellers, and Padamshree Gold) were not found in the seized hard disk data. vii. The assessee was given sufficient opportunity during the course of search to update the books of accounts up to the date of search. viii. The assessee did not make mention of any such bills during the course, of search proceedings and thus the details furnished are afterthought. ix. In case of Kanak jems Mumbai it was found by the investigation department Mumbai during the course of search' on that entity on 03.10.13 that it does not carry on any actual business and the business premises were found vacant. x. There were some discrepancies in the entries appearing in the seized hard disk in comparison with the details submitted on 12.12.2014.

With regard to observations made by the AO it was observed that the appellant has been dealing with these supplier from long time and transactions with these suppliers are also reflected in regular books of accounts. The appellant has brought to my notice that it has been dealing with few of the suppliers since inception of the business. The brief details of dealing with these suppliers are as under:- Raviraj Bullion & Jewellers since 23.08.2012 Ankur Jewellers since March 2014 Kanak Gems since September 2013 Jaina Jewellers since 06.02.2012 Shilpi Jewellers since inception of the business Nonetheless, the AO has held that the assessee was provided various opportunity to complete its books of accounts, however, failed to do so. The appellant on contrary has stated that it was not provided any opportunity to complete the books during the course of search. The assessee was made to prepare a reconciliation statement of the jeweller; by incorporating details of sales/purchase available in an excel sheet. Shri Shikar Chand Jain in his sworn statement recorded on oath on 22.08.2015 has clearly admitted that books of accounts are completed till 30.06.2016 and some entries prior to 30.06.2015 are still pending and therefore, he was unable to produce P&L/Balancc sheet/Stock Register up to 20.03.2')15. The reasons given by the appellant for in complete books was that its accountant was iII and on leave. Once, the assessee has brought in the kind notice of the AO that various bills are pending from different parties. The AD· should have considered the plea and have provide the necessary set-off or relief .

Alankar Jewellers ITANo.838/Ind/2019& IT(SS)No.205/Ind/2019

The appellant has filed copies of bills/invoices received after the search. The brief details 'of these invoices are as under:- •Invoice of Rs. 2,85,857- for purchase of ornaments from M/s Padamshree .Gold had escaped accounting as on the date of search. The payments towards this invoice have been made through cheque on 08.11.2014 for Rs. 2,85,857/- through HDFC Bank account. •Invoice of Rs. 20,01,5611- and Rs. 26,64,945/- dated 27.09.2015 & 27.07.2015 respectively for purchase of ornaments from M/s Jaina Jewelers had escaped accounting as on the date of search. The payments toward these invoices have been made through cheque of Rs. 16,00,0001- on 23.04.2015, Rs. 14,09,0001.: on 28.07.15 and 6,00,000/- on 08.07.15 through HDFC Bank account. οInvoice of Rs. 3,40,000/- dated 13.08.15 for purchase of ornaments from M/s Raviraj Bullion & Jewellers had escaped accounting as OD the date of search. The payments toward these invoices have beer. made through cheque of Rs. 3,40,0001- on 13.08.20!5 through HDFC Bank account. . The AO in para 7.17 has made in observation that the appellant has no relation what so ever with NIls Kanam Jems, Mumbai. However, the appellant during the course of appellate proceedings submitted that the appellant has purchased material -from M/s. Kanak Gems & Jewellery and traders, (address opp Shriji temple, Goyal market Lakherapura, Bhopal) and not M/s Kanam J ems, Mumbai. Thus the AO has formed a negative opinion about this transaction simply on similarity in names of the entities. • Jewellery/ornaments were also purchased from 1-1/s Kiran Dhaore, Mis Mansa Jewelers, Mis Raviraj Bullion & Jewelers, Ankur Jewelers, Kanak Gems, Jaina Jewelers & Shilpi Jewelers. The appellant has filed copy of account of these suppliers in the books of the assessee along with the confirmation of the suppliers. Further, the appellant has filed copies of affidavits obtained from Mis Kiran Dhaore, Mis Mansa Jewelers, Mis Raviraj Bullion & Jewelers, Ankur Jewelers, Kanak Gems, Jaina Jewelers & Shilpi Jewelers confirming the fact that the ornaments under consideration were supplied and sold by them prior to 21.08.2015, the date of search. A copy of these affidavits were also provided to the AO. The AO' has not doubted the genuineness of the invoices and affidavits but \Va3 0 f the opinion that the assessee did not intent to show the same in b':'0ks of accounts. On perusal of copy of invoices, ledger account and affidavits it was observed that payments were made through cheques and various payments were made before the date of search which shown that intention of the assessee is correct and is not to hide any-purchase. The reason of non-reflection of these purchase in books of accounts was that the bills and invoices were pending from these parties and were recorded when received. The appellant has submitted that in certain cases the assessee had. purchased gold bars which were dully recorded in the regular books of accounts. These gold bars were sent for conversion into ornaments. In the conversion process the ornaments 52

Alankar Jewellers ITANo.838/Ind/2019& IT(SS)No.205/Ind/2019

received, gain in weight due to impurities added for making off the jewellery. Thus weight of ornaments received is much more than the weight of the gold bar purchased. This excess quantity' in certain cases has escaped, adjustment while calculating the weight of the books stocks which was adjusted in the reconciliation chart prepared and submitted before the AO during the course of assessment proceedings. The appellant has also filed copy of invoices for labour charges received includes the cost of material added and is accounted as labour charges and details of payment made towards labour charges after deduction of TDS thereon. On perusal of these bills and invoices it was found that few of the bills on which TDS was deducted were paid much before the date of search. Therefore, these quantities cannot be termed as afterthought. Thus it is held that the AO was not justified in making an addition of 5685.92 gms of gold jewellery from the quantity of stock found. (c) -Iewellery belonging to sister and brother in law (779.64 grams) The appellant at each, i.e. during post search, during assessment proceedings as well as during appellate proceedings has submitted that Mrs. Meena Jain is the sister of the partners of the assessee firm and Mr. Ashok Jain is her husband and the brother in law of the partners. Mrs, Meena Jain intended to go to Canada to meet her daughter and for the purpose of obtaining VISA she had reqired the assessee firm to give a valuation report of the jewellery owned by her family and with this object she had brought her jewelry to the assessee firm. As she had planned to leave for Canada after obtaining the 1SA she had kept her jewellery with, her father brothers for safe keeping which was kept in the business/residential premises of the assessee. The said lady left for Canada on 29.07.2015 and returned back to India on 27.10.2015. During post search, summons were also issued by Investigation wing to the said persons who appeared and statement were recorded confirming the same fact. An affidavit was also filed in this regard before the Investigation \Ving. After considering the factual matrix of the case, and evidences on record the AO was not justified in treating jewelle~ of Smt Meena Jain and Shri Ashok Jain as undisclosed stock of appellant firm even when the valuation report of jewelley of Smt Meena Jain and Shri Ashok Jain was found during the course of search. The valuation report clearly indicates that the jewelry of779.64 gms belongs to Smt Meenajain and Shri Ashok Jain which was kept with Shri Sikhar Chand Jain (father of Smt Meena jain) partner of the appellant for security reasons because Smt Meena Jain was travelling to Canada which was also verified from copy of passport filed by the appellant. Thus, the AO cannot be too harsh on appellant to make addition w.r.t jewellery of Smt Meena Jain and Shri Ashok Jain and therefore, the total quantity of 'jewellery found during the course of search be reduced to this extent. The appellant by taking an additional plea submitted that the rate adopted for determining the book value of stock was estimated with estimated purity of 80% whereas the physical stock found was valued by adopting varying

Alankar Jewellers ITANo.838/Ind/2019& IT(SS)No.205/Ind/2019 purity as was determined by the valuer. Further, the purity of the ornaments considered in physical stock and book stock should have been considered at The same level and accordingly the valuation should have been done at the e rates for determining the difference in value of stock. Also, If the same urity would have been adopted the book value of the stock would have een computed at Rs. 1,67,73,689.as against book value computed at Rs. i. 1,52,26,036/-as detailed below: Book Rate Correct Value Correct Quantity adopted rate calculated Value 6105.92 Gold/diamond 2192 2393 13384194 14611485 8 85.2704 Silver 21600 25537 1841842 2162204 9 Total 15226036 16773689 The plea raised by the appellant seems very genuine and therefore, the AO is. directed to compute valuation on difference of stock. 5.5.3 In view of the above discussion, the AO is directed to reduce the total jewellery found during the course of search by 10987 gnns (on account of jewellery of partners/family members), 5285.92 gms (on account of purchase bills received after search) and 779.64 gms (jewellery pertains to Smt Meena Jain and Shri Ashok Jain). Thus, addition made by the AO amounting to Rs. 4,18,16,751/- is Deleted. Therefore, appeal on this ground is Allowed

assessee and the finding of Ld. CIT(A) we find that during the course

of the search proceedings the inventory of gold and silver ornaments

and the diamonds was taken and the valuation was made at

Rs.8,71,53,266/-. This jewelry and ornaments were found in the shop

as well as in the residential premises of the partners. The books of

accounts were incomplete as on the date of the search and the stock

was shown in the books at 6105.938 gms. The actual stock of the gold

Alankar Jewellers ITANo.838/Ind/2019& IT(SS)No.205/Ind/2019 ornaments was found at 33,853 gms. Revenue has challenged the

deletion of addition of Rs. 4,18,16,751/- calculated in the following

manners:

Stock found during the course of 33,853.86gms.Rs.8,10,16,131/- the search (Gold and Diamond) Stock as per books of accounts as 6,105.938 on the Rs.1,33,84,194/- gms. date of search 27747.922 Difference Rs.6,76,31,937/- gms Difference in stock of silver 157gms Rs.42,95,253/- Total difference in stock Rs. 7,19,27,190/ Stocks surrendered in the return (wrongly taken by A.O. at 11075 gms Rs.3,03,10,439/- 3,01,10,439/-) Balance addition challenged 16672 gms. Rs. 4,16,16,751/

16672 gms is as follows:

It was explained before the Ld. A.O. that the stock of 16,672 gms is explained as under: i. Personal jewellery of the partners 10987 gms. ii. Bills accounted after the search wherein the Purchases were made before the search 5686 gms. iii. Jewellery belonging to sister and brother in law while they were visiting to Canada 779 gms. --------------- Total 16672 gms

Alankar Jewellers ITANo.838/Ind/2019& IT(SS)No.205/Ind/2019 48. As regards the personal jewellery of partners weighing at 10987

grams we notice that Mr. Shikhar Chand Jain in his preliminary

statement recorded on 21.08.15 in reply to question 6 has stated that

the jewelry of his wife has also been kept in the show room. The

partner Sanjay Jain in his statement recorded on 22.08.2015 have

also made a statement in reply to Q-53 that the investment in gold of

the family members/ concerns which was also reported in the wealth

tax return have been merged in the stock in hand of the firm for which

no accounting entry has been made in the books of account. Person

wise details of gold ornament aggregating to 10987.35 gram so

included in the stock were also mentioned in the statement recorded.

Jewelry found in the show room/residence was accumulated at one

place and inventory cum valuation was done, no item wise inventory

was prepared and the quantification/valuation was done on weight

basis only in a lump sum manner as verifiable from the copy of

inventory/valuation sheet (pg. 382-385 of the PB-III). The fact that

total jewelry found with the assessee and his family members during

the course of search was 33853.86 grams which have totally been

considered as the stock in hand of the assessee firm is not in dispute.

The partners of the assessee have filed their Wealth Tax returns and 56

Alankar Jewellers ITANo.838/Ind/2019& IT(SS)No.205/Ind/2019 have offered their gold jewellery as assets for taxation which is not in

dispute. It is a well known fact that in any Indian families the ladies

generally get their jewellery changed in their shape and form from time

to time. Thus no adverse inference can be drawn from the fact that the

jewelry found was not matching with the jewellery shown in the tax

return. In support of contentions following judgments/decisions are

relied:-

a. Subhash Agarwal v ACIT (IT-455 /IND/2013) Indore bench

It has been held that “change in jewelry found vis a vis declared to

the department- gold found less- diamonds found more- can be set off

against each other”.

b. Arjundas Kalwani, 102 TTJ 977 (Jodhpur Bench)

It has been held that simply because the items of the ornaments do

not tally with the items shown in the inventory prepared at the time

of search and the assessee could not lead evidence of conversion or

remaking of jewellery, it cannot be said that jewellery to this extent

was unexplained”.

c. Rakesh R. Purohit, 14 DTR 414 (Jaipur Bench)

Alankar Jewellers ITANo.838/Ind/2019& IT(SS)No.205/Ind/2019 It has been held that jewellery disclosed by the assessee in past

cannot be lost site in view of the non-availability of item-wise tally.

seizure of jewellery of small quantity in the course of operation under

section 132 have come to the notice of the Board. The question of a

common approach to situation where search parties come across items

of jewellery has been examined by the Board and following guidelines

are issued for strict compliance. In the case of a wealth tax assessee,

gold jewelry and ornaments found in excess of the gross weight

declared in the wealth tax return only needs to be seized. Various High

Courts, relying on the above referred instructions of the CBDT, has

consistently held that the possession of the jewellery and ornaments

to the extent of the quantities specified in the instruction is to

be treated as reasonable and therefore explained and should not be

the subject matter of additions in assessment of the total income of a

person.”

Alankar Jewellers ITANo.838/Ind/2019& IT(SS)No.205/Ind/2019 50. Therefore, in view of the CBDT circular dated 11.05.1994, settled

judicial precedents, will of late Chameli Devi, Wealth Tax returns for

A.Y..2011-12 of the beneficiaries referred in the will, affidavit of

Devendera Jain brother of late Chameli Devi substantiating the gift

and the statement during the course of search are sufficient enough to

explain the jewellery of 10987 grams which was included in the stock

of inventory but not accounted in the books as they were personal

assets of the partners and not of the assessee firm. Further in light of

the evidence filed before us which were also placed before lower

authorities which are of the dates preceding to the date of search it

cannot be said to be an afterthought submission to explain the gold

ornaments weighing 10987.35 grams.

appreciated the facts and documentary evidences in accepting the

contention of assessee that the alleged unexplained stock of gold

ornament weighing 10987 gms is the personal jewellery of partners

and is therefore duly explained.

claimed to be purchased prior to the date of search but bills accounted

for after the date of search and addition being deleted by ld. CIT(A), we 59

Alankar Jewellers ITANo.838/Ind/2019& IT(SS)No.205/Ind/2019 find that the assessee has provided the following details which

commonly states that the payments were made prior to the date of

search but the bills were received by the assessee subsequent to the

date of search. The details of such instance are mentioned below:

i. Invoice of Padamshree Gold dated 12.11.2014 for Rs. 2,85,857/- had escaped accounting as on the date of search and was submitted during the assessment proceedings, the payment for this purchase was made through account payee cheque dated 08.11.2014 for Rs. 2,85,857/- drawn on HDFC Bank (0086). (110 grams) ii. Invoice of Jaina Jewelers for Rs. 20,01,561/- and Rs. 26,64,945/- dated 29.07.2015 and 27.07.2015 respectively had escaped accounting as on the date of search and was produced during the assessment proceedings against which payment of Rs. 16,00,000/- was made on 23.04.2015, Rs. 14,00,000/- was made on 28.07.15 and 6,00,000/- was made on 08.07.15 through account payee cheques drawn on HDFC Bank. (1147 grams) (854.200) (Pg.451 and 451A of PB)

iii. Invoice of Raviraj Bullion & Jewellers dated 13.08.15 for Rs. 3,40,000/- had escaped accounting as on the date of search and was submitted during the assessment proceedings, the payment for this purchase was made by RTGS through account payee

Alankar Jewellers ITANo.838/Ind/2019& IT(SS)No.205/Ind/2019 cheque dated 13.08.15 for Rs. 3,40,000/- drawn on HDFC Bank .(131 grams) (Pg.451B) iv. Kiran Dhaore 80.712 grams date of purchase 27/04/2015 payment made through banking channel. v. Ankur Jewellers Guna bill dated 14/05/2015 and 19/08/2015 payment made through baking channel Rs.17,72,494/- (842.440 grams) (pg.454) and Rs.39,08,632/- ( 1825.440 grams) (Pg.458) Shipli jewelers Mumbai bill dated 18/08/2015 payment made through cheque Rs.9,15,865/- (409 grams) (Pg.457) v. Diamonds purchased from Mansha Jewelers, Alankar Jewellers and Kanak Jems were prior to the search but accounted for after the search. 53. We further find that all the above stated bills along with copy of

invoices of the suppliers, details of payments made and confirmations

received from suppliers were placed before the Ld. AO. who failed to

find any discrepancy or inaccuracy in the above said documents

produced before us. Under these given facts and circumstances of the

case, we are of the considered view that the Ld. CIT(A) after

appreciating the facts brought on record and in light of sufficient

documentary evidences has rightly accepted the explanation of the

jewellery weighing 5686 gms and thus rightly deleted the addition for

alleged unexplained stock.

Alankar Jewellers ITANo.838/Ind/2019& IT(SS)No.205/Ind/2019 54. As regards jewellery belonging to sister and brother in law

weighing 779.64 gms we find merit in the submissions made by the

assessee and finding of Ld. CIT(A) that this jewellery weighing 779.64

gms belong to Smt. Meena Jain and Ashok Jain who intended to go to

Canada and the same is verifiable on the copy of Passport filed by the

assessee. Thus, no addition was called for unexplained jewellery

779.64 gms. It is not in dispute that during the course of search

valuation report of jewellery in the name of Ms. Meena Jain and Ashok

Jain was found which clearly indicates that the jewellery of 779.64

gms belonged to them. Thus, we find no infirmity in the finding of Ld.

CIT(A) deleting addition for unexplained gold ornaments weighing

779.64 gms.

view of the discussion hereinabove find no reason to interfere in the

finding of Ld. CIT(A) who had examined the facts of the case in detail

and deleted the addition of unaccounted stock of Rs.4,18,16,751/-

which comprised of the alleged unaccounted stock of 10987 gms on

account of jewellery of partners/family member, 5685.92 grms on

account of purchase bills received after search and 779.64 gms

Alankar Jewellers ITANo.838/Ind/2019& IT(SS)No.205/Ind/2019 belonging to Ms. Meena Jain and Ashok Jain. Thus, ground no.6

raised by the revenue stands dismissed.

ITANo.838/Ind/2018 is allowed and appeal filed by the Revenue in

IT(SS)ANo.205/Ind/2019 is dismissed.

Order pronounced as per Rule 34 of I.T.A.T., Rules 1963 on 01.09.2021.

Sd/- Sd/- (RAJPAL YADAV) (MANISH BORAD) VICE PRESIDENT ACCOUNTANT MEMBER

Indore; �दनांक Dated :01/09/2021 Patel/PS Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file. By order Assistant Registrar, Indore