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Income Tax Appellate Tribunal, JAIPUR BENCH “B”, JAIPUR
Before: Dr. S. SEETHALAKSHMI & SHRI GAGAN GOYAL
This appeal by revenue is directed against the order of Ld. CIT(A), Jaipur-05 dated 25.02.2025 passed u/s. 250 of the Income Tax Act, 1961 (in short ‘the Act’). The revenue has raised the following grounds of appeal: - (i) Whether on the facts and in the circumstances of the case, the Ld. CIT (A) is justified in restricting the addition to Rs. 63, 70,395/-instead of addition made by AO of Rs. 32, 55, 85,384/ without considering the fact that Assessing Officer made above addition on account of the excess stock found which was not recorded in the regular books of account of the assessee.. (ii) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is justified in justified in deleting the addition of Rs. 12,46,11,347/ without appreciating the fact During the search proceedings short stock amounting to Rs. 40,32,72,969/- was found, addition of Rs. 12,46,11,347/- (at GP rate of 30.90%) on account of unaccounted sale made by the assessee. (iii) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is justified in granting relief of Rs. 79,276/ out of total addition of Rs. 32,16,784/- without appreciating the fact that during the assessment proceedings AO considered that assessee infused the unaccounted stock in manufacturing. Further, the assessee did not produce any explanation in respect of the precious and semi-precious, a logical conclusion is warranted here. Considering the details of manufacturing, 20% of the stock of precious and semi precious stones had been infused in the manufacturing in addition gold and silver. The Ld. AO has taken average rate of Gold and silver to calculate the amount of the Gold/Silver used for manufacturing. Thus, the manufacturing of Jewellery amount to Rs. 32,16,784/- was added back to the income of the assessee, being unaccounted Gold and Silver and stock of precious and semi precious stones had been infused in the manufacturing. (iv) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is justified in granting relief of Rs. 62,006/- out of total addition of Rs. 92,306/ without appreciating the fact that during the assessment proceedings the AO come to the conclusion that sale of Rs. 300667/- has been made in cash and Gross Profit rate of 30.90% (as per books of the assessee) has applied and Rs. 92906/-(300667*30.90%) has been added back as unaccounted profit on sale of paintings. (v) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is justified in deleting the addition of Rs. 12,65,800/- without appreciating the fact that during the course of search, Exhibit 12 of Annexure AS-C- was seized. The said annexure is small note pad in which commission given to various parties are recorded. It was observed that all the transactions recorded on above pages were related to commission given to various persons who used to bring the customers at the showroom of the assessee. Accordingly, addition of Rs. 1265800/- is found to be paid in cash not routing through the regular books of accounts.
2. The brief facts of the case are that the assessee is a partnership firm engaged in the business of precious and semi-precious stones, Jewellery, textile and handicraft items etc. The assessee filed his return of income under section 139 of Silver & Arts Palace the Act on 15.02.2022, declaring total income at Rs. 8, 32,250/-. A search action under section 132 of the Act was carried out on 19.01.2021 on the assessee group and its associated concerns. Assessee was also searched under section 132 of the Act. Accordingly, notice under section 142(1) of the Act was issued and in response, the assessee submitted its reply. The AO made various additions to the returned income and assessed the total income at Rs. 45, 76, 59,325/-. The assessee being aggrieved with assessment order preferred an appeal before the Ld. CIT (A), who in turn allowed the following relief to the assessee:
S. Particulars Amount of No. Addition 1. Addition on account of alleged excess stock found 31,60,77,481/- during the course of search.
Addition on account of GP on alleged unrecorded 12,46,11,347/- sale.
Addition on account of unaccounted stock used 79,276/- alleged unrecorded manufacturing activity (repair, rework, modification etc.) presumed value of stones used in such alleged manufacturing activity.
Addition on account of GP on unrecorded sale of 62,600/- paintings in cash.
Addition on account of alleged cash commission 12,65,800/- given. Total Addition 44,20,96,504/-
4. Ground No. 1 of the revenue is related to the addition of Rs. 63, 70,395/- sustained by the Ld. CIT (A) on account of unaccounted excess stock. The brief facts of the case are that search was conducted on the assessee and during the search Stock of Jewellery, Stones, etc. found at the business premises of the assessee and valued by the departmental valuer at Rs. 102,29,01,231/- and the books stock was worked out at Rs. 69,73,16,847. The AO considered the difference of Rs. 32,55,84,384/- (Rs. 102,29,01,231/- (-) Rs. 69,73,16,847/-) as excess unexplained stock and made the addition of Rs. 32,55,84,384/-. The assessee explained the difference before the Ld. CIT (A) and submitted that there was no excess stock in terms of quantity in physical stock found during search and stock found recorded in physical stock control sheet of the assessee and the stock (which included old stock also) has been valued at market price as against the method of valuation followed by the assessee which is cost or market price, whichever is lower. The Ld. CIT(A) accepted the method of valuation followed by the assessee and after examining the facts of the case, worked out the cost of goods found at the time of search by reducing GP rate of 30.90% from the market value of stock of Rs. 102,29,01,231. Further, the Ld. CIT(A) has also held that the quantity of stock found during search was matching with the stock as per books except a minor difference of 100.552 Grams in total stock of 5,08,573.380 grams. Being aggrieved with the action of the Ld. CIT (A), the revenue is in appeal before us.
Silver & Arts Palace 5. We have heard both the parties and perused the order of the lower 5. We have heard both the parties and perused the order of the lower 5. We have heard both the parties and perused the order of the lower authorities. We find it appropriate to re authorities. We find it appropriate to re-produce the findings and observation produce the findings and observation (noted in para 5.3 from page 50 to 62) made by the Ld. (noted in para 5.3 from page 50 to 62) made by the Ld. CIT (A) in his order with A) in his order with regard to the relief so provided: ovided:
We have heard both the parties and perused the materials available on We have heard both the parties and perused the materials available on We have heard both the parties and perused the materials available on record. We also deliberated on the decisions relied upon by the assessee before record. We also deliberated on the decisions relied upon by the assessee before record. We also deliberated on the decisions relied upon by the assessee before the Ld. CIT (A) and by the Ld. A) and by the Ld. CIT (A) himself. We have noted that th A) himself. We have noted that the Ld. CIT(A) has given this specific finding that the assessee is consistently following the has given this specific finding that the assessee is consistently following the has given this specific finding that the assessee is consistently following the method of valuation: cost or market value whichever is lower to value his stock method of valuation: cost or market value whichever is lower to value his stock method of valuation: cost or market value whichever is lower to value his stock and hence the Ld. CIT(A) also worked out the cost of the stock after reducing the and hence the Ld. CIT(A) also worked out the cost of the stock after reducing the and hence the Ld. CIT(A) also worked out the cost of the stock after reducing the profit embedded in such stock. The Ld. rofit embedded in such stock. The Ld. CIT (A) has discussed the facts of the case A) has discussed the facts of the case in detail and came to the conclusion that goods are coming from previous in detail and came to the conclusion that goods are coming from previous in detail and came to the conclusion that goods are coming from previous years. Looking to the undisputed facts, we are in agreement to the facts relied upon by to the undisputed facts, we are in agreement to the facts relied upon by to the undisputed facts, we are in agreement to the facts relied upon by the CIT (A). We find that the action of the Ld. A). We find that the action of the Ld. CIT (A) is in consonance with the A) is in consonance with the view taken by Hon’ble ITAT, Jaipur in the case of DCIT view taken by Hon’ble ITAT, Jaipur in the case of DCIT vs. M/s . M/s. Jewels Emporium [ITA No. 234/JP/2019] dated 15.09.2020 which was subsequently upheld by the [ITA No. 234/JP/2019] dated 15.09.2020 which was subsequently upheld by the [ITA No. 234/JP/2019] dated 15.09.2020 which was subsequently upheld by the Hon’ble Rajasthan High Cour Hon’ble Rajasthan High Court in D.B. Income Tax Appeal No. 43/2021. Hence, we t in D.B. Income Tax Appeal No. 43/2021. Hence, we are in agreement with the findings of the Ld. are in agreement with the findings of the Ld. CIT (A) except findings given by us in A) except findings given by us in the appeal filed by the assessee in ground of appeal no. 3 for the year under the appeal filed by the assessee in ground of appeal no. 3 for the year under the appeal filed by the assessee in ground of appeal no. 3 for the year under consideration. Therefore, the said order d consideration. Therefore, the said order does not require our interference. oes not require our interference. Accordingly, we dismiss this ground of revenue and upheld the order of the Ld. Accordingly, we dismiss this ground of revenue and upheld the order of the Ld. Accordingly, we dismiss this ground of revenue and upheld the order of the Ld. CIT (A).
Silver & Arts Palace 7. Coming to Ground No. 2 which is related to relief of Rs. 12,46,11,347/- granted by the Ld. CIT(A) on short stock of Rs. 40,32,72,969/-. The brief facts relating to this issue are that the during the course of search, stock control sheets were found and inventoried as Annexure C-2, C-3, C-4, C-5, C-6, C-40, C-41, AS-32 and AS-33. These stock control sheets were carrying description of items along with Tag details which were alpha numeric in nature. The total value of the items found in the stock control sheet, was derived by the AO (by multiplying the numeric value of the code with multiplier of 2.07) at Rs. 132,11,25,459/-. Further, the value of the physical stock items, as determined by the departmental registered valuer, came to Rs. 91,78,52,490/-. The Ld. AO concluded that out of stocks of Rs. 1,32,11,25,459, the assessee sold the stock, amounting to Rs. 40,32,72,969/-(Rs. 1,32,11,25,459/- (-) Rs. 91,78,52,490/-) in the year F.Y. 2020-21 which was not routed through books of the assessee. This alleged short stock of Rs. 40, 32, 72,969/- was treated as unaccounted sale by the AO. The AO applied Gross profit rate of 30.90% on such unaccounted sale to ascertain profit of the assessee and added Rs. 12,46,11,347/- (Rs. 40,32,72,969/- * 30.90%) on account of unaccounted profit on unaccounted sales.
Before the Ld. CIT(A), the assessee submitted that stock found physically during the course of search and stock noted in the stock control sheets were same and no excess stock was found and the quantification of value of stock of Rs. 132,11,25,459/- is completely based on presumptive multiplier of 2.07.
We have heard both the parties and perused the material available on record. We note that the Ld. CIT(A) has deleted the addition of Rs. 12,46,11,347 Silver & Arts Palace by giving the detailed finding in para 6.3 at page 111 to 122 of the order which is by giving the detailed finding in para 6.3 at page 111 to 122 of the order which is by giving the detailed finding in para 6.3 at page 111 to 122 of the order which is reproduced below:
We have considered the impugned order and we note that the observation We have considered the impugned order and we note that the observation We have considered the impugned order and we note that the observation made and relief provided by the Ld. made and relief provided by the Ld. CIT (A) are based on specific facts on specific facts. Further, we also note that the Ld. we also note that the Ld. CIT (A) has addressed all the issues arising fr A) has addressed all the issues arising from the matter under consideration and after detailed examination of facts matter under consideration and after detailed examination of facts matter under consideration and after detailed examination of facts, allowed the appeal of the assessee. Hence, we are in agreement with the findings of the Ld. appeal of the assessee. Hence, we are in agreement with the findings of the Ld. appeal of the assessee. Hence, we are in agreement with the findings of the Ld. CIT (A) since the order of Ld. A) since the order of Ld. CIT (A) is well reasoned as he has given reasons why A) is well reasoned as he has given reasons why he hasn’t accepted the contention of the AO and why the appeal of the assessee sn’t accepted the contention of the AO and why the appeal of the assessee sn’t accepted the contention of the AO and why the appeal of the assessee was allowed. Thus, we uphold the order of the Ld. Thus, we uphold the order of the Ld. CIT (A). Accordingly, this A). Accordingly, this ground of appeal raised by the revenue is dismissed. ground of appeal raised by the revenue is dismissed.
The Revenue raised Ground of Appeal No. 3 regarding the relief of Rs. The Revenue raised Ground of Appeal No. 3 regarding the relief of Rs. The Revenue raised Ground of Appeal No. 3 regarding the relief of Rs. 79,276/- provided by the Ld. provided by the Ld. CIT (A). We noted that during the search of the A). We noted that during the search of the assessee certain material was found and seized which was inventoried as assessee certain material was found and seized which was inventoried as assessee certain material was found and seized which was inventoried as Annexure-AS-C. The lower authorities C. The lower authorities contended that seized material are related contended that seized material are related to manufacturing activity of gold and silver ornaments and contain details of to manufacturing activity of gold and silver ornaments and contain details of to manufacturing activity of gold and silver ornaments and contain details of issuing raw material, metals, jewellery items to various karigars for specific work issuing raw material, metals, jewellery items to various karigars for specific work issuing raw material, metals, jewellery items to various karigars for specific work and labour charges were also paid to such karigars. and labour charges were also paid to such karigars. However, the entire However, the entire manufacturing activities from purchase of raw material to sale of finished goods activities from purchase of raw material to sale of finished goods activities from purchase of raw material to sale of finished goods were kept out of books of the assessee. Further, the AO also presumed that at kept out of books of the assessee. Further, the AO also presumed that at kept out of books of the assessee. Further, the AO also presumed that at
During the assessment and first appellate proceedings, the assessee submitted that the gold and silver mentioned in the seized material were not sourced externally rather sourced from melting of old or obsolete stock which is duly recorded. The assessee submitted evidences from the material seized during search which contains details of melting of existing stock and recovery of metals etc. therefrom. Further, the assessee also provided references from the seized material evidencing that the seized material clearly indicate that the stock items were issued for repair, rework etc. to karigars which was subsequently returned back after completion of such work. More importantly, items appearing in the seized material are duly found recorded in physical stock control sheet maintained by the appellant. Accordingly, in view of the evidence submitted during assessment, the assessee contended that it has not manufactured any stock out of books and whatever stock is appearing in the seized material are recovered from old/obsolete stock and indicating repair/rework of recorded stock. Further, the AR objected to the addition based on presumptive rate in case of precious and semi-precious stones since no supporting document were found in this regard. The Ld. CIT(A) did not find the submission as not tenable, however allowed the relief of Rs. 79,276/- for the claim of the assessee that gold/silver mentioned in the seized material is sourced from melting of old stock.
Silver & Arts Palace 13. We have perused the order of the Ld. CIT (A) and also perused the relevant seized material. At the outset, we consider it necessary to produce the findings of the Ld. CIT (A) made in this regard:
On perusal of the impugned order, we note that the assessee submitted documentary evidences in support of his argument that the stock of gold/silver appearing in the seized material are recovered from the existing/old stock and does not represent any new stock. The claim of the AR of the assessee also backed by order of the Ld. CIT (A) as produced above. Hence, we concur with the view taken by the learned CIT (A) insofar as the relief granted on account of melting old/existing stock is concerned. However, the Bench has specifically dealt Silver & Arts Palace with this issue in the assessee’s appeal for the relevant assessment year under consideration. Therefore, the quantum of relief is subject to the findings recorded by the Bench in the assessee’s own appeal. In view of the above, the appeal filed by the Revenue stands dismissed.
Now, we take up Ground of Appeal no. 4 which is related to the relief of Rs. 62,900/- provided to the assessee on the addition emerged from the seized page inventoried as Exhibit C-32 of Annexure-AS-C. The said seized contain details of 18 paintings which was in the view of the assessee received on approval. However, the AO held that the said 18 paintings have been sold in cash and the same were not routed through books of accounts of the assessee. The AO further derived cash sales of Rs. 3,00,667/- (by applying multiplier of 2.07 to codes written against these paintings) and added the gross profit of Rs. 92,906/- (300667*30.90%) in the income of the assessee. The Ld. CIT perused the said seized sheet and arrived at the conclusion that out of 18 paintings, only 1 painting of Rs. 1,00,000/- has been sold by the assessee and the remaining were received back unapproved. Accordingly, provided relief of the 62,006 (Rs. 2, 00,667/- * 30.90%) to the assessee.
We have heard both the parties and also perused the seized material. It is apropos to re-produce the following findings and observation (mentioned in para 10.3 at page 156 to 158) of the Ld. CIT (A) made with regard to the ground under consideration:
On perusal of the seized sheet, it is clear that the seized material itself On perusal of the seized sheet, it is clear that the seized material itself On perusal of the seized sheet, it is clear that the seized material itself speaking about the purpose for which the paintings were received as it explicitly speaking about the purpose for which the paintings were received as it explicitly speaking about the purpose for which the paintings were received as it explicitly incorporating the narration “ incorporating the narration “18 paintings received for approval approval”. The Ld. CIT (A) barring 1 entry in the seized sheet, also confirmed this fact. Therefore, we are in barring 1 entry in the seized sheet, also confirmed this fact. Therefore, we are in barring 1 entry in the seized sheet, also confirmed this fact. Therefore, we are in agreement with the finding made, by the agreement with the finding made, by the Ld. CIT (A), with respect to 17 paintings (A), with respect to 17 paintings and we do not find any reason to interfere with the order of the Ld. and we do not find any reason to interfere with the order of the Ld. and we do not find any reason to interfere with the order of the Ld. CIT (A) as far as relief of Rs. 62,006/- is concerned. is concerned. Accordingly, the ground of the revenue is ground of the revenue is hereby dismissed.
The Last Ground of Appeal No. 5 i The Last Ground of Appeal No. 5 is regarding the relief of Rs. 12 s regarding the relief of Rs. 12, 65,800/- provided by the Ld. CIT (A) in his order. A) in his order. The brief facts are that The brief facts are that during the search, a small note pad was found and seized which is inventoried as Exhibit a small note pad was found and seized which is inventoried as Exhibit a small note pad was found and seized which is inventoried as Exhibit-12 of Annexure AS-C which was claimed to be containing co C which was claimed to be containing commission of Rs. 12 mmission of Rs. 12, 65,800/- paid to various persons. The assessee submitted the details during paid to various persons. The assessee submitted the details during paid to various persons. The assessee submitted the details during assessment claiming the same to be recorded in books of accounts of the assessment claiming the same to be recorded in books of accounts of the assessment claiming the same to be recorded in books of accounts of the assessee, however the AO rejected the submission as non assessee, however the AO rejected the submission as non-tenable and added the tenable and added the Silver & Arts Palace commission of Rs. 12, 65,800 , 65,800/- in the total income of the assessee. The assessee. The assessee reiterated the submission before the Ld. reiterated the submission before the Ld. CIT (A) along with documentary A) along with documentary evidences. The Ld. CIT (A) verified the documents submitted by the assessee and A) verified the documents submitted by the assessee and A) verified the documents submitted by the assessee and after going through the submissio after going through the submissions, found that the submission of the assessee ns, found that the submission of the assessee satisfactory. Accordingly, deleted the addition of Rs. 12 satisfactory. Accordingly, deleted the addition of Rs. 12, 65,800 , 65,800/-.
At the outset, we consider it right to re At the outset, we consider it right to re-produce the findings of the Ld. produce the findings of the Ld. CIT (A) noted in para 11.3 at page 161 to 162of the order as b in para 11.3 at page 161 to 162of the order as below: elow:
In view of the facts and findings enumerated above, we find that the relief In view of the facts and findings enumerated above, we find that the relief In view of the facts and findings enumerated above, we find that the relief is fully fact based and is verified from the documents/explanation submitted by is fully fact based and is verified from the documents/explanation submitted by is fully fact based and is verified from the documents/explanation submitted by the assessee. The Ld. CIT ( CIT (A) has tabulated each entry appearing in the seized A) has tabulated each entry appearing in the seized sheet and also stated the reason for considering it as satisfactory. sheet and also stated the reason for considering it as satisfactory. sheet and also stated the reason for considering it as satisfactory. Thus, we do not find any reason to interfere with the order passed by the ld. CIT (A) and we find any reason to interfere with the order passed by the ld. CIT (A) and we find any reason to interfere with the order passed by the ld. CIT (A) and we uphold the same. In the result, ground of In the result, ground of appeal raised by the revenue is appeal raised by the revenue is dismissed. onounced in the open court on 29th day of September Order pronounced in the open court on September 2025. Sd/- Sd/- (Dr. S. SEETHALAKSHMI) (GAGAN GOYAL) (GAGAN GOYAL)