SUN & SUN JEWELLWES,RAYAGADA vs. ITO, RAYAGADA

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER

ITA No.453/CTK/2013 Assessment Year : 2009-2010

Sun & Sun Jewllers, Main Road, Vs. ITO, Rayagada Ward, Rayagada, Rayagada PAN/GIR No.ABIFS 1091 A (Appellant) .. ( Respondent)

Assessee by : None Revenue by : Shri Subhendu Dutta, DR

Date of Hearing : 06 /11/ 2019 Date of Pronouncement : 28 /11/ 2019

O R D E R Per C.M.Garg,JM This is an appeal filed by the assessee against the order of the

CIT(A), Berhampur dated 9.6.2013 for the assessment year 2009-2010.

AO was not correct in making addition on account of difference in closing

stock as per books of account and considering the closing stock belongs to

the customers for which the assessee is receiving making charges.

called for hearing. No adjournment petition was placed on record. On

perusal of appeal record, we find that the appeal was initially fixed for

P a g e 1 | 7 hearing on 28.4.2014 and later on, it is observed that the appeal was

adjourned on the request of ld A.R. of the assessee. This is an old appeal

filed in the year 2013 and as per the direction of Hon’ble Delhi High Court, it

is incumbent upon the Tribunal to dispose of all the appeals which are

pending for more than 5 years. Keeping in view the entire facts and

circumstances of the case, we proceed to decide the appeal on merits on

the basis of materials already available on record and after hearing ld D.R.

Assessing Officer has made addition on the basis of difference found in the

stock at the time of survey and the stock disclosed by the assessee in

trading account treating the same as undisclosed stock and the same was

added to the income.

explanation was indeed correct, the appellant could have easily furnished

details like the affidavits etc immediately after the survey. Non-production

of these details immediately after the survey despite specific query by the

AO both during the survey and immediately thereafter as detailed in the

assessment order clearly show that there was no contemporaneous

evidence with the assessee to explain the difference in stock. The CIT(A)

also held that the explanation submitted by the assessee is an afterthought.

From para 5.2 of the CIT(A) order, we observe that the contentions of the

assessee before the authorities below were that the assessee is maintaining

P a g e 2 | 7 regular books of account; that the valuation of closing stock by the AO is

unjust and unwarranted and not as per standard principles; the assessee is

undertaking making of gold ornaments from old gold given by the

customers; a separate stock register is also maintained for making of gold

ornaments which does not belong to the assessee and this fact was not

considered by the AO; the stock belongs to different customers, the details

submitted to the AO not considered, the AO has considered the making

charges as income but the stock belongs to the different customers had not

at all been considered and that the affidavits of each customers were filed

alongwith receipts book, confirmation letter and stock register, etc but the

same were not considered by the AO in the right perspective.

submitted that the affidavits filed by the assessee are afterthought as the

same were not filed immediately after the survey despite specific query by

the AO on both the points i.e. during the survey and immediately after the

survey. Therefore, the AO was right in making addition by considering the

difference in the stock found during the survey and shown by the assessee

in the trading account.

record, we are of the considered view that the assessee is a goldsmith and

doing business of trading in gold ornaments and as the AO is taxing the

amount of gold ornaments of making charges in the hands of the assessee,

P a g e 3 | 7 then we safely presume that the assessee is making ornaments from old

gold ornaments received from respective customers.

assessee has filed list of 80 customers and statement of conversion stock

details with affidavits for the financial year 2008-09 relevant to assessment

year 2009-2010, wherein, names and address of the customers, their age,

date of receipt of metal, quantity received, date of delivery, quantity

delivered and making charges have been mentioned in detail (silver

ornaments). In this list, there are 80 customers, which is evident from

pages 51 to 132. We observe that the assessee has filed affidavits of 40

customers, wherein, they have clearly stated that they have given old

gold/silver ornaments for making new ornaments describing therein the

weight and amount of paying making charges. All the customers have

confirmed that they have received the new gold /silver ornaments from the

assessee and they have also paid making charges at the time of receiving

new gold/silver ornaments made out of old ornaments. From the orders of

lower authorities, we are unable to see any findings either by the AO or by

the CIT(A) that these evidences are not correct. We are also unable to see

any exercise by them calling the customers even for sample test check basis

to verify the contents and statements given by them by way of affidavits.

Without conducting any such exercise about the evidences and without

calling the respective customers for examination, the CIT(A) proceeded to

P a g e 4 | 7 hold that these are afterthought as they were not submitted during the

course of survey and immediately after the survey. It can be easily

gathered even by a man of ordinary prudent that it is not practically

possible to submit evidence in the form of affidavits of 80 scattered

customers during the survey proceedings before the survey team.

Therefore, these allegations of the CIT(A) have no legs to stand.

thus, the same has been filed subsequently is concerned, we are of the

considered view that this kind of allegation can be made against the

assessee only by way of proper verification and examination of the

deponents, who are giving affidavit in favour of the assessee otherwise

without such exercise any allegation or doubt against voluminous evidence

and details filed by the assessee alongwith names and address of the

customers cannot be discarded and thrown out threshold. Therefore, we

are of the considered view that the assessee submitted all possible evidence

under his command, in the form of names and addresses of the customers,

details of old ornaments, new ornaments, making charges, etc alongwith

affidavit of half number of customers, which have not been examined and

verified by the authorities below by way of summoning them or any other

permissible mode. Hence, we have no hesitation to hold that the assessee

has discharged its onus to show that the impugned quantity of material

creating difference between stock shown in the trading account and

P a g e 5 | 7 physical stock found excess during survey by filing all the relevant details

and documentary evidence which was possible and under his control but

the same was dismissed at the threshold without verification or examination

of customers even on test check basis. This action of the authorities below

cannot be said to be a reasonable and justified approach of a qusai-judicial

officer/Revenue Officer and by holding so we dismiss the allegation of the

AO while making addition as well as of the CIT(A) while confirming the

same. One should not ignore the fact that the survey u/s.133A of the Act

was conducted on 24.9.2009 and the assessee is regularly maintaining

conversion register of new jewelers by using old jewelry or metal supplied

by the customers, which have also been placed at pages 6-11, 12-17 and

18-43 of the assessee’s paper book and thus evidence cannot be dismissed

without examination of the customers who are deposing in support of

assessee by way of affidavits.

dismiss the evidence on the threshold without any verification and

examination and, therefore, the addition made is unreasonable and

unjustified, which cannot be held as sustainable. We may point out that the

AO has taxed the amount of making charges earned by the assessee from

the same customers received by it against making of new gold ornaments

by using the old use given by the customers. Therefore, in view of the

totality of the facts and circumstances of the case and considering all

P a g e 6 | 7 relevant evidences produced before the authorities below, we are of the

considered view that in addition to trading of gold and silver ornaments

and articles, the assessee is also giving services to its customers by way of

making new ornaments out of old ornaments and metals receiving from the

respective customers, for which, the assessee is maintaining separate stock

registers and this fact has been ignored by the authorities below before

making the addition without considering the closing stock belongs to the

customers and stock in trading account of the assessee. Accordingly, we

are inclined to delete the addition made by the Assessing Officer and

confirmed by the CIT(A) by allowing the grounds of appeal of the assessee.

Order pronounced on 28 /11/2019. Sd/- sd/- (Laxmi Prasad Sahu) (Chandra Mohan Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER

Cuttack; Dated 28 /11/2019 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : Sun & Sun Jewellers, Main Road, Rayagada, 2. The Respondent. ITO, Rayagada Ward, Rayagada 3. The CIT(A)-, Berhampur 4. Pr.CIT- , Berhampur 5. DR, ITAT, Cuttack 6. Guard file. //True Copy//

By order Sr.Pvt.secretary ITAT, Cuttack

P a g e 7 | 7