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Income Tax Appellate Tribunal, DELHI BENCH ‘E’, NEW DELHI
Before: Sh. A. D. Jain, Vice-Dr. B. R. R. Kumar
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the assessee against the order of ld. CIT(A)-33, New Delhi dated 23.03.2017.
Following grounds have been raised by the assessee:
1. That the Ld. CIT (A) has erred in giving part relief to the assessee and against the addition of Rs.2,06,03,900/-, the CIT(A) has granted a relief of Rs.59,87,250/- and has erred in confirming the other addition, which is against the facts and circumstances of the case.
2. That the Ld. CIT(A) has erred in considering certain unauthenticated loose documents seized from the premises of some other party, which do not have the confirmation/signatures of the assessee, cannot be taken as conclusive evidence against the assessee for alleged transactions outside the books of accounts and the judgment of the Hon’ble Supreme Court in the case of Common Cause Vs Union of India has been ignored summarily.
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3. Notwithstanding the above said facts, there cannot be any addition of Rs. 64,12,500/-, Rs.37,23,000/- (27,78,500 on 25.1.2012 and Rs.9,44,500/- on 09.02.2012) alleged paid in cash by M/s KGE to the assessee as the same can only be said to be an advance by the said party to the assessee and, thus, the receipt of amount from M/s KGE by the applicant under no circumstances be treated as income of the assessee.
4. That the Ld. CIT (A) has also erred in confirming the addition of Rs. 46,03,600/-, which is against the facts and circumstances of the case, based on unauthenticated documents and also on merits the addition is not sustainable.
5. That the Ld. CIT(A) has failed to consider our detailed submission made during the course of hearing and specially, our submission, dated February 27, 2017.
6. That the finding and conclusion as arrived by the CIT(A) in sustaining the part addition is against the facts and circumstances of the case.”
Brief facts of the case are that the assessee filed return of income on 30.03.2013 declaring income of Rs.12,08,836/-.
The assessee M/s MGV Jain Jewellers Pvt. Ltd. was incorporated on 23.12.2009 to take over the running business of the partnership firm named as “M/s Jain Jewellers”, a partnership firm which has been converted into a Pvt. Ltd. company to carry on the business of manufacturing, trading and dealing in all sorts of Gold & Diamond jewellery which is managed by the Directors namely Mr. Mangat Rai Jain, Mr. Gautam Jain and Mr. Vikram Jain.
Brief facts are that the additions contested by the assessee have been made by the Assessing Officer on the basis of search conducted on one party at ‘Batala’ namely ‘M/s
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Kartika Gold Enterprises’ on 14.03.2012 and on the basis of such certain documents seized from the ‘Batala’ party, where on the basis of name of the assessee as mentioned in the seized documents, the additions have been made in the hands of assessee on account of sales made by the assessee and remittances received by the assessee from M/s Kartika Gold Enterprises.
The seized material found that at the premises of M/s Kartika Gold Enterprises is as under:
Page No. Name of the Party Amount 23 JAIN JEW Rs. 27,78,500/- 24 JAIN JEW Rs. 64,12,500/- 25 JAIN JEW Rs. 9,44,500/-
On the basis of these documents, statement of Sh. Gautam Jain, the then director of the company was recorded during post search enquiries by the Deputy Director of Income Tax (Inv.), Amritsar, in which, he stated that the names as mentioned in the seized documents may belongs to the assessee. The Assessing Officer based on the documents and statement brought this amount to tax in the hands of the assessee which the ld. CIT(A) has confirmed.
Aggrieved the assessee filed appeal before us.
The ld. AR argued that these documents bear no signatures of the assessee at all and hence the seized material cannot be attributed to the assessee. It was argued that the entire addition have been made on the basis of documents seized from the ‘third party' and it is not that the copy of account of the assessee in the books of accounts of ‘M/s
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Kartika Gold Enterprises’ which have been seized but only on account of some Rough tabulation of notings, which includes the rough notings made by person of ‘M/s Kartika Gold Enterprises’ and the assessee cannot liable for the same. The assessee cannot be made liable to the notice made by the third party. Even there is a figure of “closing stock” at page 25 in the seized document of that assessee and it is beyond comprehension how the assessee’s closing stock could be made a part of a noting of a third party. Further, it was argued that such documents as seized are not as per regular books of accounts of that party, but notings made on rough paper at any given point of time and, therefore, the addition as made in the hands of assessee on the basis of such unauthentic ‘computerized prints’ have no evidencery value and, therefore, the addition made in the hands of assessee deserves to be deleted.
The main plea of the assessee is that how and when and at which point of time, such documents at pages 23 to 25 have been made by that party and, how, the tabulation of figures have been made against the name of the assessee is also not clear and, therefore,-no cognizance can be taken on such rough/loose documents found from the premises of Ws Kartika Gold Enterprises’ ‘third party'. It is not the case of the department, that there is copy of account of assessee in the regular books of accounts of ‘M/s Kartika Gold Enterprises’ and reliance is being placed on the judgment of Hon’ble Apex Court in the case of Common Cause and Others Vs. Union of India 394 ITR 220, in which, it has been held that since the documents seized are not in the form of regular books of accounts and the whole case has been made out on the basis of ‘loose sheet’ and some other stray material and, therefore, the 5 MGV Jain Jewellers Pvt. Ltd.
same could not be considered as admissible evidence against the third party.
With regard to the addition of Rs.46,03,600/- made by the AO based on Annexures A-2/X-2 with regard to purchase of bullion of 7000 gms. by M/s Kartika Gold Enterprises from the assessee company. The AO held that the assessee could substantiate the sale of 5000 gms. and the value of the remaining 2000 gms. sold by the assessee to M/s Kartika Gold Enterprises has been brought to tax.
The ld. DR relied on the orders of authorities below.
We have gone through the entire facts of the case in totality. It reveals that during the search conducted in the case of M/s Kartika Gold Enterprises, the documents and details of purchase entered by M/s Kartika Gold Enterprises have been found and seized. Based on the details of purchases, the revenue authorities have added the entire quantum of the value of the sale of gold made by the assessee. We find that addition of the entire amount cannot be held to be valid and there is no dispute that the sale to M/s Kartika Gold Enterprises could not have been made without purchase of gold by the assessee. Hence, the cost of gold has to be deducted from the sale price and the profit earned by the assessee through the sale should be rightly brought to tax. The appropriate way to determine the profit earned by the assessee is to be based on the gross profit earned by the in the regular course of business. We find that the gross profit earned by the assessee as per the return was 1.42% as sustained by the ld. CIT(A) with regard to the other transactions entered by the assessee. Since, there is no dispute about the gross profit, keeping in view the other expenses which have already been debited in the regular books of 6 MGV Jain Jewellers Pvt. Ltd.
accounts, we hereby hold that an amount of 1.9% of the total transaction of Rs.1,47,39,100/- i.e. Rs.2,80,042/- would be the correct income evaded by the assessee. Ordered accordingly.
In the result, the appeal of the assessee is allowed for statistical purpose. Order Pronounced in the Open Court on 10/01/2022.