PREMCHAND THAKARSI CHOKSI & SONS,,NASHIK vs. ASSISTANT COMMISSIONER OF INCOME-TAX,,

आदेश / ORDER PER ANIL CHATURVEDI, AM :

This appeal filed by assessee is emanating out of the order of 1. Commissioner of Income Tax (Appeals) – 12, Pune dated 26.03.2015 for the assessment year 2000-01.

Assessee is a partnership firm having three partners namely, (1) Shri Premchand T. Choksi (HUF) (2) Shri Pravin P. Choksi (HUF) and (3) Shri Rajendre P. Choksi and are in the business of Goldsmith. A

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search and seizure action u/s 132(1) of the Act was conducted on

21.01.2004 in the Amba Group of cases at Nashik. The business

premises of M/s. Premchand Thakarsi Choksi & Sons along with

residential premises of various groups were also covered in the search.

Thereafter, a notice u/s 153A of the Act was issued to the assessee on

25.03.2004 and served on assessee on 31.03.2004. In response to

notice u/s 153A of the Act, assessee furnished the return of income for

A.Y. 2000-01 on 13.08.2004 declaring total income of Rs.1,30,558/-.

Thereafter, the case was taken up for scrutiny and subsequently,

assessment was framed u/s 153A of the Act on 28.03.2006 whereby

the total income was determined at Rs.27,10,860/-. Aggrieved by the

order of AO, assessee carried the matter before CIT(A), who vide order

dt.06.08.2007 in appeal No.CIT(A)-I/266/2006-07 dismissed the appeal

of assessee. Thereafter, assessee preferred appeal before the Tribunal.

Tribunal vide order dt.30.06.2011 in ITA No.67/PN/2008 in the group

of cases, including the assessee restored the matter to the file of AO.

Pursuant to the directions of Tribunal, AO vide assessment order

dt.28.03.2013 passed u/s 153A r.w.s. 143(3) of the Act determined

the total income at Rs.32,42,291/-. Aggrieved by the order of AO,

assessee carried the matter before Ld.CIT(A), who vide order

dt.26.03.2015 (in appeal No.PN/CIT(A)-12/NSK-CIT(A)-I/164/2013-

14/441/2013-14) granted partial relief to the assessee. Aggrieved by

the order of Ld.CIT(A), assessee is now in appeal before us and has

raised the grounds which were subsequently concised by the assessee

which reads as under :

“1. On the facts & circumstances of case & in law lower authorities have erred in making an addition of Rs. 2,49,500/- on account of unexplained investment. The said addition being based on mere presumption and not supported by any documentary evidence therefore entire addition deserves to be struck down, Further lower authorities also erred in concluding that addition of RS.1 ,23,186/- made by Assessing officer on

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account of gross profit @ 7.92% on unrecorded sales 15,55,388/-, particularly when assessing officer has separately made addition of unrecorded sales calculated for the whole year. Learned CIT further erred in directly assessing to tax on net profit on such unrecorded sales instead of gross profit. 2. On the facts and in the circumstances of the case and in law the learned CIT(A) is not justified in confirming the addition of Rs. 23,30,802/- made by the AO on account of alleged unaccounted stock by disregarding appellants contention and documentary evidences and submission in support of its contention

account of “unexplained investment”.

3.1. During the course of search, certain documents and books were

seized from the business premises of the assessee. The assessee was

asked to explain the transactions contained in the documents seized.

The statement of Shri Pravinchandra Choksi was also recorded u/s

132(4) of the Act, wherein he stated that the books relates to the

assessee and it contains various amounts received respectively from

various customers on account of sale. It was further stated by him that

the transactions were not recorded in the regular books of assessee’s

firm. The documents seized (as per item No.85) which were for the

period from 22.12.1999 to 31.03.2000 showed the total amounts of

sales at Rs.15,55,388/-. Assessee admitted that the aforesaid sales

were not recorded in the regular books of accounts. The profit on such

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unaccounted sales was offered at 5% amounting to Rs.77,769/- as

income in A.Y. 2000-01. AO on perusing the trading account

submitted with the return of income noticed that on the recorded sales

of Rs.25,66,568/-, assessee had shown gross profit of Rs.6,22,272/-,

which included the labour charges receipt of Rs.4,06,332/-. After

reducing the amount of labour charges from the gross profit, the

effective gross profit on trading transactions worked out at

Rs.2,15,940/- which worked out to 8.41% of assessee’s recorded sales.

The assessee was therefore asked to show cause as to why the gross

profit on such unrecorded sales not be considered as 8.41% as against

5% offered by the assessee. The assessee was also show caused as to

why the amount of such credit sales not be treated as unexplained and

treated as income. Assessee worked out the rate of gross profit at

7.92% as against 8.41% worked out by the AO and assessee thus

agreed for gross profit addition at 7.92% on the suppressed sales at

Rs.15,55,338/-. Assessee further stated that the actual amount

receivable on account of credit sales was Rs.2,49,000/-. AO thereafter

considered the profit on un-recorded sales at 7.92% and worked out the

profit of Rs.1,23,186/- as concealed income of the assessee but since

assessee had admitted undisclosed and unexplained investments in

debtors of Rs.2,49,500/- on account of unrecorded credit sales, AO

made addition of Rs.2,49,000/- and no separate addition on account of

gross profit of Rs.1,23,186/- was made. Aggrieved by the order of AO,

assessee carried the matter before Ld.CIT(A), who after considering the

assessee’s submissions, the remand report of the AO and assessee’s

reply to the remand report upheld the order of AO by observing that the

amount was worked out by the AO based on the seized paper and

statement of Shri Pravinchandra Choksi wherein he admitted that the

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seized documents show the amount of receivables. He has further

noted that assessee did not furnish any evidence or working which

could demonstrate that there were no receivables or the amount

worked out by the AO was incorrect. Ld.CIT(A) upheld the order of AO

by noting that assessee’s unaccounted purchases remained blocked till

the realization of the amount receivables from debtors and therefore

such amount was considered as ‘initial investment’ in unaccounted

purchases. Aggrieved by the order of Ld.CIT(A), assessee is now in

appeal before us.

and Ld.CIT(A) and further submitted that no addition is called for in the

present case. Ld. D.R. on the other hand, supported the order of lower

authorities.

record. The issue in the present case is with respect to addition on

account of “unexplained debtors”. We find that AO had worked out the

addition based on the seized papers referring unaccounted sales and

the statement of Praveenchandra Choksi, who has admitted the same.

The addition of Rs.1,23,186/- is to made in the hands of assessee as

admitted during assessment proceedings. Further, the AO was of the

view that debtors to the tune of Rs.2,49,500/- are also to be added

being on account of unrecorded credit sales. We find no merit in the

same. Addition is restricted to Rs.1,23,186/-. Thus, the ground of

appeal No.1 is partly allowed.

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account of alleged unaccounted stock.

6.1. As per the register of assessee which was found during the

course of search, it was noticed that it contains the details of opening

stock, inward, goods, sales, sales on approval and closing stock on a

particular day. It was seen that on 31.03.2000 there was a stock of

gold of 17186.380 grams. It was noticed that in the return of income

filed by the assessee in response to notice u/s 153A of the Act

assessee had shown closing stock of gold of 4665.020 grams as against

the stock of 17186.380 grams and accordingly had not shown the

closing stock of 12521.360 grams. It was also noticed that assessee

had valued the closing stock of gold at Rs.4,200/- per Tola. The

assessee was asked to reconcile the working. Assessee furnished the

explanation of the stock which is reproduced by the AO at para 6.2 of

the assessment order. It was inter-alia submitted by assessee that the

stock register was combined stock register of the family and thus there

was no excess stock as on 31.03.2000. The submissions of the

assessee were not found acceptable to the AO. AO noted that in the

statement recorded u/s 132(4) of the Act, Shri Praveenchandra P.

Choksi confirmed the register being of the assessee firm. AO also

noted that assessee had not furnished any evidence in support of his

claim that the stock of 2539.00 grams belong to Shri Premchand

Thakarsi Choksi and 620.238 grams belongs to Pravinchand Choksi.

The submission of the assessee that 2145 grams of gold was offered for

taxation in the return of income and 1324.390 grams was offered by

Premchand T. Choksi in his individual capacity was also not found

acceptable. AO thereafter computed the actual excess stock at

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5549.530 grams (as noted in Para 6.7 of the assessment order and

valuing the same at Rs.420/- per gram, worked out the amount of

excess stock at Rs.23,30,802/- and made its addition. Aggrieved by the

order of AO, assessee carried the matter before Ld.CIT(A), who after

considering the submissions of the assessee, remand report and

assessee’s reply to the remand report for the reasons stated in para

2.2.13 to 2.2.30 confirmed the action of the AO. Aggrieved by the order

of Ld.CIT(A) assessee is now in appeal before us.

authorities and further pointed to the assessee’s reply vide letter

dt.07.10.2005 which was reproduced at para 6.2 of the assessment

order. From the table, which is reproduced by AO in the assessment

order submitted that the gold at 2145 grams was offered to taxation.

During the search, action u/s 132 of the Act, stock of gold of 3469.390

grams was offered in the return of income of Mr. Premchand T. Choksi

in his individual capacity. In support of his contention, he referred

to the computation of income of firm which is placed at Page 26 of the

Paper Book and Page 27, which is computation of income of Mr.

Premchand T. Choksi in his individual capacity. He thereafter

submitted that once the addition has been made in the individual

capacity, the addition of the same amount would result into double

taxation. With respect to gold of 2539 grams, he submitted that it

related to Premchand T. Choksi and gold of 620.238 grams related to

Pravinchand Choksi, Proprietor of M/s. Thakarsi Jewellers. He

submitted that since the aforesaid gold did not belong to assessee, the

same could not be added in his hands. Ld. D.R. on the other hand,

submitted that no evidence has been furnished by the assessee to

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support his contention about the stocks being offered by the respective

persons. He thus supported the order of AO.

record. The issue in the present ground is with respect to addition on

account of “unexplained stock”. We find that before AO, assessee had

furnished reconciliation of stock and according to that record 2145

grams and 1324 grams have been offered for taxation during the survey

action u/s 133A of the Act by the firm and Premchand T. Choksi in his

individual capacity respectively. In support of the contention that the

aforesaid quantity of gold has been offered to tax by the respective

assessees, we find that in the computation of income, the stock of gold

has been offered by the respective assessees. In view of the fact that

those amounts have already been offered to tax as unaccounted stock,

we are of the view that no addition of the same stock is called for in

assessee’s hand and therefore direct its deletion. As far as, the stock of

2539 grams and 620.238 grams of gold is concerned, no plausible

explanation has been given. In view of these facts, we find no reason to

interfere to the extent of addition of value of gold of 2539 grams and

620.238 grams in the hands of assessee is concerned. Thus, the

ground of appeal No.2 is partly allowed.

gross profit on unaccounted sales.

9.1. The AO in original assessment order had not made any separate

addition on this account because of telescopic effect. Since, we have

upheld the addition on account of gross profit on suppressed sales and

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unaccounted stock of gold, then no further addition is warranted. Thus, the ground of appeal No.3 is allowed.

Order pronounced on 28th day of February, 2019.

Sd/- Sd/- (SUSHMA CHOWLA) (ANIL CHATURVEDI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER

पुणे Pune; �दनांक Dated : 28th February, 2019. Yamini

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to :

आदेशानुसार/ BY ORDER

// True Copy // व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune.