Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI V. DURGA RAO& SHRI D.S. SUNDER SINGH
आयकरअपीलीयअधिकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्री िी. दुगाा राि,न्याधयक सदस्य एिं श्री धड.एस. सुन्दर धसंह, लेखा सदस्य के समक्ष BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER& SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER आयकर अपीलसं./I.T.A.No.629/Viz/2018 (निर्धारण वर्ा/Assessment Year:2016-17) Asst.Commissioner of Vs. M/s Manchukondas Income Tax Shyam Zaveri Central Circle-1 D.No.10-1-27, Visakhapatnam Opp:Vemana Mandir Gold Plaza, Sampath Vinayak Temple Road Asilmetta Junction Visakhapatnam [PAN : ABAFM3933F] (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) CO No.26/Viz/2019 (Arising out of I.T.A. No.629/Viz/2018) (निर्धारण वर्ा/Assessment Year:2016-17) M/s Manchukondas Shyam Zaveri Asst.Commissioner of D.No.10-1-27, Income Tax Opp:Vemana Mandir Central Circle-1 Gold Plaza, Sampath Vinayak Temple Visakhapatnam Road, Asilmetta Junction Visakhapatnam [PAN : ABAFM3933F] (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) रधजस्व की ओर से /Revenue by Smt Suman Malik, DR निर्धाऩरती की ओर से / Assessee by : Shri G.V.N.Hari, AR सुिवधई की तधरीख / Date of Hearing : 09.04.2019 घोर्णध की तधरीख/Date of Pronouncement : 30.04.2019
2 I.T.A. No.629/Viz/2018 and CO No.26/Viz/2019 M/s Manchukondas Shyam Zaveri, Visakhapatnam आदेश /O R D E R PER D.S. SUNDER SINGH, Accountant Member: This appeal is filed by the revenue against the order of the Commissioner of Income Tax (Appeals) [CIT(A)]-3, Visakhapatnam vide ITA No.253/2017-18/CIT(A)-3/VSP/2018-19 dated 17.09.2018 for the Assessment Year (A.Y.) 2016-17 and the assessee also filed the cross objections in support of the order of the Ld.CIT(A).
The revenue has raised total 12 grounds in this appeal. Ground No.1 is related to the statement given by Sri Manchukonda Mouli Krishna on 24.11.2015 with regard to updation of books of accounts till the date of survey and subsequent deviation from his statements and explanation of the difference in stocks.
2.1. During the appeal hearing, the Ld.DR argued that survey u/s 133A was conducted in the case of the assessee on 24.11.2015 and during the course of survey, the department has taken the inventory of stock which resulted the following differences. (i) Deficit stock of gold ornaments 2324.906 grams (ii) Deficit stock of gold bars 508.25 grams (iii) Diamonds 182.411 grams (iv) Shortage of Diamonds 14.96 cts (v) Shortage of Silver Articles 35109 grams
3 I.T.A. No.629/Viz/2018 and CO No.26/Viz/2019 M/s Manchukondas Shyam Zaveri, Visakhapatnam A statement u/s 133A was recorded on 24.11.2015 from Shri Manchukonda Mouli Krishna, partner of the firm who was available on the date of survey and the physical stock was inventorized. During the survey the AO has asked the assesse regarding the updation of books of accounts and in response to question No.14, Shri Mouli Krishna has stated that the books of accounts were updated and all the relevant entries were made in the stock book till the date of survey. Subsequently in the statement recorded on 03.12.2015 and the submissions made on 13.01.2016, the assessee has explained that the shortage of stock was due to gold issued to Sampath Assaying & Hallmarking Private Limited and produced the relevant voucher. Similarly, with regard to deficit stock of gold bars of 508.25 grams also, the assessee explained that the deficit was due to gold bars issued to B.G.Jewellers. With regard to silver articles, the assessee explained that the shortage was due to the fact that the issue of silver to the extent of 28.860 kgs. from Manchukonda Shyam Zaveri to Padma Jewellers, Chennai for making ornaments. Since there was mismatch in the statement given by Shri Mouli Krishna during the course of survey and subsequent explanation dated 13.01.2016 by another partner, Shri Manchukonda Shyam, the Assessing officer (AO) is of the view that
4 I.T.A. No.629/Viz/2018 and CO No.26/Viz/2019 M/s Manchukondas Shyam Zaveri, Visakhapatnam having stated that the books of accounts were updated, the assessee is barred from explaining the difference and the Ld.CIT(A) also should not have entertained and accepted the explanation of the assessee regarding the stock differences. According to the AO, having stated that the books of accounts were updated, the assessee has to accept the difference as unaccounted income.
2.2. On the other hand, the Ld.AR supported the order of the Ld.CIT(A) and argued that in the interest of justice the assessee should be permitted to explain the difference and argued that no interference is called for in the order of the Ld.CIT(A).
We have heard both the parties and perused the material placed on record. A survey u/s 133A was conducted on 24.11.2015 and the department has taken stock position as on that date. During the course of survey, the department found discrepancies in the stock with regard to shortage of stock in respect of gold ornaments, gold bars, silver bars and ornaments, diamonds and diamond ornaments. The contention of the assessee is that the said gold was issued to the manufacturers, which was not recorded in the books of accounts and the assessee also has placed
5 I.T.A. No.629/Viz/2018 and CO No.26/Viz/2019 M/s Manchukondas Shyam Zaveri, Visakhapatnam necessary evidences in the form of vouchers before the AO. The contention of the revenue is that the evidences produced subsequent to the date of survey are not acceptable and the Ld.CIT(A) should not have entertained the same. The contention of the assessee is that the assessee could not reconcile the difference at the time of survey due to absence of crucial persons who are handling the affairs were not available and they were out of station. Therefore, argued that the assessee should be allowed to reconcile the difference and place the genuine transactions before the Income Tax authorities before closing the books of accounts. Since, the time is available and the books of accounts were not closed, the assessee had reconciled the stock difference and furnished the evidences for issue of gold to Sampath Assaying & Hallmarking Private Ltd. and submitted a copy of jewellery receipt challan dated 21.11.2015, bearing No.977 and stated that the gold was issued for hallmarking. In respect of gold bars, the assessee submitted a copy of receipt dated 23.11.2015 issued by B.G.Jewellers mentioning the receipt of 500 grams of gold bars from the assessee. In respect of silver articles also, the assessee had furnished the evidence, the copy of order form dated 20.11.2015 bearing No.185 from Padma Jewellers, Chennai, mentioning the receipt of 28860 grams of silver
6 I.T.A. No.629/Viz/2018 and CO No.26/Viz/2019 M/s Manchukondas Shyam Zaveri, Visakhapatnam from the assessee. All the evidences produced by the assessee before the AO are with proper address of business entities and verifiable transactions. The AO should have verified the correctness of vouchers issued by the respective parties for receipt of the jewellery. In the instant case, survey was conducted on 24.11.2015 and the evidences with regard to issue of jewellery / silver were placed before the AO on 13.01.2016 within reasonable period i.e. within 2 months. The assessment in this case was completed u/s 143(3) on 28.12.2017, when there was genuine transaction, the same should be allowed to be furnished and AO is obliged to verify the same before taking any adverse view against the assessee. In the instant case, no such exercise was done by the AO. Though the assessee has explained the difference, the AO has not discharged his burden. Therefore, it cannot said to be an afterthought and there was sufficient time for the AO to make further enquiries to find out the facts. Hence, we do not find any merit in the argument and it would hamper the justice if the argument of the revenue is accepted. Hence, we dismiss this ground of Revenue’s appeal.
The first issue in this appeal is related to the deficit stock of silver articles. A survey u/s 133A was conducted in the business premises of the
7 I.T.A. No.629/Viz/2018 and CO No.26/Viz/2019 M/s Manchukondas Shyam Zaveri, Visakhapatnam assessee on 24.11.2015 and during the course of survey, the AO found physical stock of 417755 grams of silver articles against the book stock of 452864 grams resulting in difference of 35109 grams of deficit stock. The assessee was asked to explain the deficit stock at the time of survey and the partner of the firm Shri Manchukonda Mouli Krishna who was available at the time of survey had stated that he needs to consult Shri Vamsi Krishna for difference in silver articles who was out of the country at that time. Subsequently, in the statement recorded u/s 131(1A) on 03.12.2015, Shri Manchukonda Shyam, father of Shri Mouli Krishna and Partner of the firm explained that in the physical inventory taken on 24.11.2015, silver bars were not taken at the time of survey, hence there was a difference. He further explained that out of book stock, the silver bars weighing 28.860Kgs were given to Padma Jewellers for making silver articles as per order form No.185 of 20.11.2015 and the same was not entered in the books of accounts by oversight. The assessee further submitted that the balance of 5,298 grams, of silver was still available in the shop which was not inventorised on 24.11.2015. The AO observed that the physical stock was taken by the department in the presence of Shri Manchukonda Mouli Krishna, the partner of the firm who is having 50% share in the firm. The
8 I.T.A. No.629/Viz/2018 and CO No.26/Viz/2019 M/s Manchukondas Shyam Zaveri, Visakhapatnam fact of availability of silver bars was not brought to the notice of the survey team, hence, viewed that the assessee’s claim of availability of silver bars in the firm as on the date of survey was an afterthought and not acceptable. The AO further held that it is the obligation of the assessee to furnish the true and correct information during the course of the survey. Since the assessee failed to furnish the true and correct information and the availability of silver bars at the time of survey, The AO, rejected the explanation of the assessee and assessed the entire value of the deficit stock of 35109 grams amounting to Rs.11,93,706/- as unexplained income.
Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) observed that while taking the physical stock, the survey team failed to take the inventory of silver bars available in the premises on the date of survey. The Ld.CIT(A) believed the issue of silver bars to Padma Jewellers for a quantity of 28.860 kgs. as true. Since the father of Shri Mouli Krishna who is looking after the business was not available at the time of survey the difference could not be reconciled by Shri Mouli Krishna and subsequently in the next date of opportunity, when the statement was recorded, his father and another partner Shri Manchukonda Shyam had explained the difference found at the time of
9 I.T.A. No.629/Viz/2018 and CO No.26/Viz/2019 M/s Manchukondas Shyam Zaveri, Visakhapatnam survey taking reference to the silver bars sent to Padma Jewellers for making the articles. Since the explanation was given without any delay and within the reasonable time, the same cannot be simply discarded. The Ld.CIT(A) further observed that the AO has rejected the explanation of the assessee without causing any enquiry. Since the AO has accepted the stock register and the book results, Ld.CIT(A) held that there is no reason to disbelieve the explanation of the assessee with regard to issue of silver bars to Padma Jewelelrs. Having paid the manufacturing charges of Rs.28,860/- and allowed the same as deduction, there was no reason to disbelieve the making of silver articles. Accordingly, the Ld.CIT(A) held that the addition is unjustified and the same was deleted and the appeal of the assessee was allowed.
Against the order of the CIT(A), the revenue has filed appeal before this Tribunal. During the appeal hearing, the Ld.DR vehemently supported the order of the AO and argued that during the course of survey u/s 133A, there was deficit stock of 35,109 grams of silver articles and the assessee did not explain the difference and speak about the issue of silver bars for making silver articles and availability of silver bars in the shop. In respect of specific question asked with regard to updation of books of accounts, it
10 I.T.A. No.629/Viz/2018 and CO No.26/Viz/2019 M/s Manchukondas Shyam Zaveri, Visakhapatnam was stated that the books of accounts were updated. The assessee neither explained the availability of silver bars to the extent of 5298 grams in the shop nor stated regarding the issue of silver bars to Padma Jewellers at the time of survey. Therefore, the Ld.DR argued that the explanation of the assessee on 03.12.2015 and 13.01.2016 is an afterthought and the AO has rightly made the addition of Rs.11,93,706/- relating to the deficit stock. Therefore, requested to set aside the order of the Ld.CIT(A) and allow the appeal of the revenue.
On the other hand, the Ld.AR supported the order of the Ld.CIT(A).
The next issue in this appeal is related to the deficit stock of gold ornaments of 2324.906 grams and gold bars of 508.250 grams. During the course of survey, inventory of gold ornaments and gold bars was taken by the department and found deficit stock of 2324.906 grams of gold ornaments and 508.250 grams of gold bars. During the survey, one of the partners Shri Mouli Krishna has stated that the books of accounts were updated including the stock book. However, with regard to the differences in stock, the partner stated that he has to consult his father Mr.Shyam who is looking after the business. Subsequently, his father, Shri Shyam who is
11 I.T.A. No.629/Viz/2018 and CO No.26/Viz/2019 M/s Manchukondas Shyam Zaveri, Visakhapatnam also the managing partner of the firm had appeared before the AO and submitted that 72 no. of pieces of gold ornaments weighing 2811.610 grams were given to Sampath Assaying & Hallmarking Pvt. Ltd. for hallmarking and furnished the jewellery receipt No.977 as a proof. He further stated that out of 72 pieces 44 pieces of jewellery weighing 391.610 grams was returned on 21st November as per the jewellery delivery challan No.977 and the balance 28 pieces weighing 2420.000 grams were subsequently received on 26.11.2015 after the survey. The differences is weighment differences and therefore submitted that there was no deficit stock, if the stock given for hallmarking is taken into account .
With regard to the gold bars also the assessee explained that the gold bars weighing 540.00 grams was given to B.G.Jewellers for making the jewellery and submitted the receipt from M/s B.G. Jewellers dated 23.11.2015 and stated that the jewellery was received subsequently. In a nut shell the assessee argued that there was no difference in the book stocks and the physical stocks and the difference was only due to ignoring the stocks given to manufacturers and weighment differences. However, the AO did not accept the explanation offered by the assessee and treated
12 I.T.A. No.629/Viz/2018 and CO No.26/Viz/2019 M/s Manchukondas Shyam Zaveri, Visakhapatnam the entire deficit stock of gold ornaments as well as gold bars as undisclosed income and valued the same at Rs.54,86,778/- and Rs.11,99,470/- respectively and made the addition of Rs.66,86,248/- u/s 68 of the Act.
Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) observed that there was deficit stock of gold ornaments to the extent of Rs.2324.906 grams. The explanation of the assessee with regard to the issue of gold ornaments to Sampath Assaying and Hallmarking Private Limited and receipt of gold ornaments partly from them cannot be brushed aside without having any evidence and causing the enquiries, thus, held that there was no difference in the gold ornaments. The Ld.CIT(A) also observed that sending ornaments for hallmarking purpose is not a financial transaction and such transaction need not be entered in tally package. All the reputed shops sell the jewellery only after hallmarking. Ld.CIT(A) further observed that the AO did not believe the explanation of the assessee inspite of providing necessary evidences, hence, held that the AO is not justified in disbelieving the evidence without proper reason and without making any enquiries, accordingly deleted the addition of Rs.54,86,778/- in respect of deficit stock of gold ornaments.
13 I.T.A. No.629/Viz/2018 and CO No.26/Viz/2019 M/s Manchukondas Shyam Zaveri, Visakhapatnam Similarly in the case of gold bars, the book stock of 508.25 grams stated to be given to M/s B.G.Jewellers for making ornaments was disbelieved by the AO. The Ld.CIT(A) observed that the AO has allowed Rs.81,000/-towards manufacturing charges, if the making charges is considered to have been genuinely incurred, the issue of gold bars for the purpose of making gold ornaments cannot be ignored, since both are complimentary to each other. Since the assessee has furnished the stock register and evidence for issue of gold bars for making gold ornaments and the receipt of ornaments subsequently, there is no case for disbelieving the issue of gold to B.G.Jewellers, accordingly, held that the AO is not justified in making the addition of Rs.11,99,470/-. Accordingly, deleted the addition in respect of gold bars also.
Aggrieved by the order of the Ld.CIT(A), the revenue has filed appeal before this Tribunal.
The next issue is related to deficit of diamond stock and diamond jewellery. The physical stock of diamond was taken by the department during the course of survey which showed that against net weight of diamond ornaments of 756.219 grams, physical stock was 938.36 grams
14 I.T.A. No.629/Viz/2018 and CO No.26/Viz/2019 M/s Manchukondas Shyam Zaveri, Visakhapatnam resulting in excess stock of 182.411 grams. In the case of diamonds against book stock of 117.16 carats, physical stock of 102.20 carats was found. During the course of survey, the assessee had admitted the excess stock of gold and jewellery i.e. 182.411 grams valuing Rs.4,30,490/- and the deficit stock of 14.96 cts which is valued at Rs.6,88,610/- as additional income. However, in the assessment proceedings, the assessee did not admit the additional income. Therefore, the AO treated the value of difference in diamond jewellery and diamonds as additional income and brought to tax.
On appeal, the Ld.CIT(A) observed that regarding stock difference of diamonds and diamond jewellery, the assessee did not submit any valid reason except stating that it could be on account of weighment. Shri Shyam, partner of the firm admitted the difference as income before the AO. However, they made the alternate contention before the CIT(A) stating that the nature of difference with regard to the diamonds and diamond jewellery was exactly opposite shortage of diamonds was Rs.6,88,160/- and excess of diamond jewellery was Rs.4,30,490/-. Therefore, contended that only the net difference to be treated as income. The Ld.CIT(A) found that the contention of the assessee was reasonable, accordingly, restricted
15 I.T.A. No.629/Viz/2018 and CO No.26/Viz/2019 M/s Manchukondas Shyam Zaveri, Visakhapatnam the addition to Rs.2,57,670/- representing the difference between the shortage of diamonds and the excess stock of gold in diamond jewellery.
Against the order of the Ld.CIT(A), the department filed appeal before this Tribunal.
We have heard both the parties and perused the material placed on record. A survey u/s 133A was conducted in the business premises of the assessee on 24.11.2015. During the course of survey, AO found the shortage of silver bars, silver articles, gold bars, gold jewellery, diamonds and diamond ornaments. During the survey a statement u/s 133A was recorded by the Authorised Officer from Shri Manchukonda Mouli Krishna, one of the partners of the firm who was available as at the time of survey. In the statement recorded u/s 133A, though the partner has stated that the cash book and stock book were updated up to 24.11.2015, in response to question No.45, he stated with regard to the discrepancies found in the survey that he has to consult his father to explain the differences relating to the gold bars, gold jewelry, diamonds diamond jewelry. Specifically in case of silver, he has stated that the silver bars and silver articles are being handled by his manager Shri Vamsi Krishna who was out of country and he
16 I.T.A. No.629/Viz/2018 and CO No.26/Viz/2019 M/s Manchukondas Shyam Zaveri, Visakhapatnam has to consult him to explain the difference, thus he explained to the Authorised Officer of survey team that he does not know the reasons for differences found and only his father Shri Shyam and his manager only could explain the difference. Accordingly, on the date of survey, the partner did not accept the stock difference and submitted that the difference could be explained only after consulting his father and his manager. In the next opportunity i.e 03.12.2015, his father, Shri Manchukonda Shyam appeared before the authorized officer who had recorded the statement u/s 131(1A) and in statement, in response to question No.24, he has explained the shortage of 35109 grams, stating that 28,860 grams was given to Padma Jewellery for manufacturing of silver articles and furnished the evidence in the form of voucher from Padma Jewellers. He has further stated that the remaining silver bars were very much available in the shop itself but the survey team did not inventorise the same. 16. In the case of gold bars and gold jewellery, initially he stated in the statement on 03.12.2015 that he has to verify the books for shortage. With reference to diamonds and Diamond jewelry he has offered the difference as income. In the next date of hearing i.e on 13.01.2016, Shri Manchukonda Shyam explained the difference in shortage of gold
17 I.T.A. No.629/Viz/2018 and CO No.26/Viz/2019 M/s Manchukondas Shyam Zaveri, Visakhapatnam ornaments and gold bars stating that72 pieces of gold jewellery were given to Sampath Assaying & Hallmarking P.Ltd. for hallmarking on 21.11.2015 vide jewellery receipt dated 21.11.2015 weighing 2811.610 grams of gold jewelry. He has further submitted that 44 pieces of gold jewellery weighing 391.610 grams were returned on 21.11.2015 and the balance 28 pieces weighing 2420 grams, were lying with Sampath Assaying & Hallmarking P.Ltd., which was returned on 26.11.2015. The said jewellery of 2420 grams was not taken in the stock statement, hence, there was difference. He also submitted the relevant vouchers before the AO. If the gold jewellery lying with Sampath Assaying & Hallmarking P.Ltd. is considered there was no difference in the stock position of gold ornaments. In respect of gold bars, he has stated that gold bars of 24 carats were given to B.G.Jewellers for making ornaments which was returned subsequent to the survey. The assessee has given 500 grams of gold bars to the manufacturer and the manufacturer had returned 540 grams of gold bars inclusive of copper which was 22 carats subsequent to the date of survey. The relevant voucher was placed before the AO. The manufacturers also raised the labour bills which was allowed by the AO, as explained.
18 I.T.A. No.629/Viz/2018 and CO No.26/Viz/2019 M/s Manchukondas Shyam Zaveri, Visakhapatnam 17. In the case of diamond and diamond ornaments, though the assessee could not explain the reasons for deficit stock and excess stock, he has argued that since there was apparently opposite stock differences, requested to set off of excess stock with the deficit stock and tax the difference. In the instant case, at the time of survey, as evident from the statement recorded on 24.11.2015, the partner has requested for time to consult his father who is looking after gold bars and gold ornaments. In respect of silver articles, he has stated that he has to consult his section manager. Both of them were not available at the time of survey. In the statement recorded on 03.12.2015, his father had explained the difference in silver and sought time for reconciling the differences in gold ornaments, gold bars. On 13.01.2016, within two months time, the assessee had reconciled the stock position and placed before the AO with relevant vouchers and evidences for the deficit stock. The AO rejected the assessee’s explanation and brushed aside the evidences placed before him without causing any enquiry and heavily relied on the statement recorded on 24.11.2015, wherein, the partner had stated that the stock book and the cash books were updated. Though the partner has stated that the stock
19 I.T.A. No.629/Viz/2018 and CO No.26/Viz/2019 M/s Manchukondas Shyam Zaveri, Visakhapatnam book and cash book were updated, with regard to stock differences he has categorically stated that he has to consult his father and his manager who are not available at the time of survey. Therefore, much reliance cannot be placed on the statement recorded on the date of survey with regard to updation of stock book, since, the assessee has explained the differences with relevant vouchers in the next opportunities on 03.12.15 and 13.01.2016. The explanation of the assessee needs to be considered with due importance and simply cannot be brushed aside. The argument of revenue that once the assessee says that the books of accounts were updated, not to consider the missing entries and to ignore the crucial evidence is lopsided view and not acceptable. It is the duty of the AO to examine the explanation and the evidences placed before him and to decide the issue on merits and should not reject the same arbitrarily. In this background, we discuss the items of stock differences and explanation of the assessee item wise as under : 18. Silver and Silver Bars. During the course of survey u/s 133A, the Income Tax department found shortage of stock of 35.109 kgs out of which, the assessee explained on 03.12.2015 that 28.860 kgs of silver was given to Padma Jewellery for manufacturing the silver articles and the balance of
20 I.T.A. No.629/Viz/2018 and CO No.26/Viz/2019 M/s Manchukondas Shyam Zaveri, Visakhapatnam silver bars were stated to be lying in the shop. With regard to 28,860 grams of silver bars, it is evident as per the assessment record that the assessee is maintaining stocks of silver articles as well as silver bars separately and at the time of survey, no silver bars were found. The assessee explained that 28.860 kgs of silver bars were given to Padma Jewellers for manufacturing of silver articles vide order form No.185 dated 20.11.2015 and the said articles were stated to be returned on 30.11.2015. The AO without making any further enquiry treated the difference as income u/s 68 of the Act. Since the assessee has provided the evidences for giving silver bars to Padma Jewellers and also received silver articles on 30.11.2015, which was subsequently put to sale, there is no reason to doubt the issue of silver bars to Padma Jewellers, hence, 28,860 grams required to be considered as available with Padma Jewellers. The balance silver bars weighing 5298 grams, though stated that they were available in the business premises itself, the stock was inventorised in the presence of the partner and inventorised the complete stock and no other silver bars were available in the business premises. It is mandatory obligation of the assessee to furnish true and correct details at the time of survey to the department. Since the assessee failed to furnish the correct details and
21 I.T.A. No.629/Viz/2018 and CO No.26/Viz/2019 M/s Manchukondas Shyam Zaveri, Visakhapatnam failed to prove the availability of stock at the time of survey to the extent of 5298 grams, the same required to be considered as deficit stock. The AO valued the deficit stock and assessed the value of difference in stock as income u/s 69B of the act, without giving any reason how the deficit stock would constitute as income. Deficit stock cannot be treated as unexplained investment unless there is a plausible reason and the evidence brought on record to show that there was an unexplained investment. It is to be considered as sales outside the books of accounts and the gross profit on the sales outside the books of accounts would be income. Since, there was no other evidence brought on record, we direct the AO to assess the gross profit on the deficit stock relating to silver articles of 5298 grams as income. Accordingly, the revenue’s appeal on the ground of deficit stock is partly allowed. 19. Gold Ornaments. During the course of survey, the deficit stock of gold ornaments of 2324.906 grams was found for which the assessee could not explain the reasons. Subsequent to survey, the assessee explained that gold ornaments of 2811.610 grams were given for hallmarking to M/s Sampath Assaying & Hallmarking P.Ltd. on 21.11.2015 and also produced challan dated 21.11.2015 bearing No.977 issued by the manufacturer. The
22 I.T.A. No.629/Viz/2018 and CO No.26/Viz/2019 M/s Manchukondas Shyam Zaveri, Visakhapatnam assessee submitted that out of 2811.610 grams of gold jewellery given to Sampath Assaying & Hallmarking Pvt.Ltd., 44 pieces weighing 391.610 grams was received back on 21.11.2015 and the balance 28 pieces weighing 2420 grams were held to be lying with Sampath Assaying & Hallmarking Pvt. Ltd., which was returned on 26.11.2015. The assessee has placed necessary evidences for issue of gold to Sampath Assaying & Hallmarking, the AO did not bring any other material to disprove the submission made by the assessee. The Ld.CIT(A) made an observation that it is normal practice of gold jeweler to make hallmarking of jewellery before sale. The AO has rejected the explanation of the assessee without making any enquiry and bringing any other evidence. The evidence placed by the assessee was verifiable evidence. Therefore, there is no reason to disbelieve the submission made by the assessee with regard to issue of 28 pieces to Sampath Assaying and Hallmarking Pvt. Ltd. If the quantity of 2420 grams lying with the Hallmarking agent is taken into physical stock, the difference would be 95.084 grams, which is stated to be the difference between the gross weight and net weight. However, in the absence of the specific details of gross weight and the net weight of each item, the explanation of the assessee is not acceptable and difference has to be
23 I.T.A. No.629/Viz/2018 and CO No.26/Viz/2019 M/s Manchukondas Shyam Zaveri, Visakhapatnam treated as excess stock for which the source remained unexplained. Therefore we hold that the excess stock required to be assessed as undisclosed income in the hands of the assessee. The AO valued 2324.906 grams at Rs.54,86,778/-, which works out to Rs.2360/- per gram. Accordingly, the value of excess stock of 95.084 grams works out to Rs.2,24,400/- which should be assessed as undisclosed income in place of Rs.54,86,778/-. Accordingly, the appeal of the revenue relating to deficit stock of gold ornaments is partly allowed. 20. Gold Bars. The next issue is deficit stock of gold bars. As discussed earlier, the assessee submitted that the gold bars weighing 508 grams was given to BG Jewellers for making gold ornaments. As per the stock book, there were gold bars, but physical stock of gold bars was not available in the business premises during the course of survey. The assessee stated on 13.01.2016 that gold bars were given to B.G.Jewellers for manufacturing ornaments. He has also submitted receipt dated 23.11.2015 and also submitted receipt for return of gold jewellery of 540 grams, the difference being copper used for making jewellery of 22 carats of gold. The relevant evidences were also submitted before the AO. The assessee also provided the labour bill and claimed as expenditure which was allowed by the AO.
24 I.T.A. No.629/Viz/2018 and CO No.26/Viz/2019 M/s Manchukondas Shyam Zaveri, Visakhapatnam Therefore, the assessee had explained the difference and there was no deficit stock found as far as gold bars are concerned. Therefore, we decline to interfere with the order of the Ld.CIT(A) and the same is upheld. The revenue’s appeal on the ground relating to gold bars is dismissed.
The next issue is diamonds and diamond jewellery. There was excess stock in diamonds which was valued at Rs.6,88,160/- and the deficit stock in diamond jewellery for Rs.4,30,490/-. The assessee submitted before the Ld.CIT(A) that the difference could be on account of weighment and requested to set off of deficit stock with the excess stock and the balance being admitted as income. The Ld.CIT(A) accepted the alternate argument and confirmed the addition of Rs.2,57,670/- against the addition of Rs.11,18,650/-. During the course of survey, though the department found excess stock with respect to diamonds and shortage of stock in respect of diamond jewellery, no other evidence was found relating to unaccounted sales or the unexplained investments. Therefore, there is no reason to disagree with the Ld.CIT(A) to hold that deficit stock and excess stock should be allowed to be set off and the net difference to be brought to tax. Accordingly, we uphold the order of the Ld.CIT(A) and dismiss the appeal of the revenue on this ground.
25 I.T.A. No.629/Viz/2018 and CO No.26/Viz/2019 M/s Manchukondas Shyam Zaveri, Visakhapatnam
The assessee filed cross objections in support of the order of the Ld.CIT(A). Since the appeal of the revenue is partly allowed, the cross objections of the assessee also stand partly allowed.
In the result, appeal of the revenue as well cross objections of the assessee are partly allowed.
Order pronounced in the open court on 30th April 2019.
Sd/- Sd/- (िी.दुगाा राि) (धड.एस. सुन्दर धसंह) (V. DURGA RAO) (D.S. SUNDER SINGH) न्याधयक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER नवशधखधपटणम /Visakhapatnam नििधंक /Dated : 30.04.2019 L.Rama, SPS
26 I.T.A. No.629/Viz/2018 and CO No.26/Viz/2019 M/s Manchukondas Shyam Zaveri, Visakhapatnam आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:- 1. रधजस्व/ The Revenue –Asst.Commissioner of Income Tax, Central Circle-1 Visakhapatnam 2. निर्धाऩरती/ The Assessee- M/s Manchukondas Shyam Zaveri, D.No.10-1-27, Opp:Vemana Mandir, Gold Plaza, Sampath Vinayak Temple Road, Asilmetta Junction, Visakhapatnam 3. प्रप्रतििि आयकर आयुक्त (केंद्रीय) / The Pr.Commissioner of Income Tax (Central), Visakhapatnam 4. आयकर आयुक्त(अिीि) / The Commissioner of Income-Tax (Appeals)-3, Visakhapatnam 5. तिभागीय प्रतितिति, आयकर अिीिीय अतिकरण, तिशाखािटणम/DR, ITAT, Visakhapatnam 6.गार्ड फ़ाईि / Guard file आदेशािुिार / BY ORDER // True Copy //
Sr. Private Secretary ITAT, Visakhapatnam