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Facts
The assessee, Sh. Rakesh Soni, started a proprietary concern M/s R.K. Bullion in 2016. During demonetization, significant cash deposits (Rs.3,17,06,000/-) were made, which were claimed to be from customer advances but were later admitted by the assessee's father, Sh. Ram Kumar Soni, to be proceeds from gold bullion/jewellery sales using demonetized notes, and he offered this income for tax in his own settlement petition. Gold bullion (83.840 gms, Rs.2,38,608/-) found with Sh. Arvind Soni during a search was treated as the assessee's unexplained investment, though it was claimed to belong to his father's concern (M/s M.B. & Sons Jewellers) and was verifiable in their stock.
Held
The Tribunal deleted the addition of Rs.3,30,88,964/- made under Section 68, reasoning that the undisclosed income from bullion sales had already been assessed and taxed in the hands of the assessee's father by the Hon'ble Settlement Commission, thus preventing double addition. The Tribunal also deleted the addition of Rs.2,38,608/- made under Section 69, finding that the gold bullion was verifiable from the books of M/s M.B. & Sons Jewellers and had been discussed by the Settlement Commission without being attributed to the assessee.
Key Issues
1. Whether cash deposits in the assessee's bank account could be added under Section 68 when the source was attributed to and taxed in the hands of his father by the Settlement Commission. 2. Whether gold bullion found during a search could be added as unexplained investment under Section 69 when it was verifiable in the books of the father's concern and already considered by the Settlement Commission.
Sections Cited
250, 68, 69, 132(4), 143(3), 153A
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Income Tax Appellate Tribunal, JAIPUR BENCHES,”B” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI GAGAN GOYAL, AM vk;dj vihy la-@ITA No. 1292/JPR/2024
vkns'k@ORDER PER: DR. S. SEETHALAKSHMI, J.M. This is an appeal filed by the assessee against the order of ld. CIT(A), Jaipur-4, Jaipur dated 04.09.2024 passed under section 250 of the I.T. Act, 1961, for the assessment year 2017-18. 2. The assessee has raised the following grounds of appeal :-
“1. The Ld. CIT(A) has erred on facts and in law in confirming the addition of Rs.3,30,88,964/- u/s 68 of the Act, being the cash deposit in the bank account from the alleged cash sales by making various incorrect & irrelevant observations and by relying on various decisions which are not applicable on the facts of the assessee’s case.
Sh. Rakesh Soni, Sikar.
2. The Ld. CIT(A) has erred on facts and in law in confirming the above addition by not appreciating that when the cash deposited in the bank account of assessee during demonetization period has been owned by his father Sh. Ram Kumar Soni as his unrecorded sales, profit on which has been offered for tax in the settlement petition filed by him and accepted by the Hon’ble Settlement Commission vide order dt. 26.12.2018 by applying net profit rate of 13.17% on the sales so declared, again making the addition of the entire amount deposited in the bank account in the hands of assessee is arbitrary, unreasonable & unjustified.
3. The Ld. CIT(A) has erred on facts and in law in confirming the addition of Rs.2,38,608/- u/s 69 of the Act by holding that 83.84 gms of gold bullion found in search is unexplained investment of the assessee by ignoring the fact that the said bullion pertains to Sh. Ram Kumar Soni which has been explained by him in the settlement petition and accepted by the Hon’ble Settlement Commission vide order dt.26.12.2018.
4. The assessee craves to amend, alter and modify any of the grounds of appeal
5. The appropriate cost be awarded to the assessee.”
Ground Nos. 1 & 2: 3. The brief facts of the case are that the assessee is employed with M/s. M.B & Sons Jewellers, a proprietary concern of his father Shri Ram Kumar Soni. In the year under consideration, he started a new proprietary concern in the name of M/s R.K. Bullion on 01.07.2016. The bank account of this concern was opened with Punjab National Bank on 01.12.2016. Search and seizure proceedings u/s 132 of the Act took place at the residential and business premises of Sh. Ram Kumar Soni on 26.12.2016.Assessee filed the return on 27.11.2017 declaring total income of Rs.17,79,000/-.
Sh. Rakesh Soni, Sikar. In the bank account of M/s R.K. Bullion, cash of Rs.3,17,06,000/- was deposited during the period 01.12.2016 to 18.12.2016. The turnover of M/s R.K. Bullion for the year was Rs.3,30,88,964/-. The assessee in his statement recorded u/s 132(4) dt. 20.12.2016, when required to explain the source of cash deposit in the bank account, in reply to Q. No.12 stated that the amount deposited in the bank account is out of the amount received from customer against the order given by them for purchase of jewellery. Statement of Sh. Neeraj Sharma, accountant of the assessee, Sh. Ram Kishan Sharma who printed the bills of M/s R.K. Bullion and Sh. Pooran Mal Sharma, accountant of M/s M.B. & Sons Jewellers was also recorded, extract of which is reproduced at Para 4.4 to 4.8 of the assessment order. All these statements were confronted to Sh. Ram Kumar Soni, father of the assessee who accepted that the claim of cash received from customers against advance order is false and the source of cash deposit in the bank account of M/s M.B. & Sons Jewellers and M/s R.K. Bullion is the proceeds of sale of gold bullion/ gold jewellery post demonetization in old demonetized currency notes. The relevant part of the statement is reproduced at Para 4.9 of the assessment order. Sh. Ram Kumar Soni filed petition before Hon’ble Settlement Commission for settlement of his case on 26.12.2018. At Para 7 of the petition he accepted that he has utilized the bank account of M/s R.K. Bullion, proprietary concern of his “The applicant during the demonetization period from 09.11.2016 to 19.12.2016 accepted old demonetized currency from various persons against sale of jewellery which was deposited in the bank account. This amount was utilised in purchase of bullion and sold in cash against old demonetized notes. The same was again deposited in the bank to purchase the gold bullion and the bullion so purchased was sold in old demonetized notes. This process was repeated number of times. During this period, approximately 36 kgs of gold bullion was purchased and sold in the same form or in the form of jewellery. The entire transaction by way of receipt and payment is recorded in kacchi cash book marked as AS- 12. However, in the regular books of accounts, these transactions were recorded as advance received from customers during the period 01.04.2016 to 07.11.2016 whereas the fact is that no such advance amount was received. The actual amount received is recorded in the kacchi cash book. This fact is accepted by the applicant in his statement dated 22.12.2016 recorded u/s 132(4) in reply to question nos. 137 and 140 (PB 53-57). For these transactions the applicant also utilised the bank account of his son, Shri Rakesh Soni opened in the name of name of M/s R. K. Bullion on 01.12.2016. This bank account is also considered by the applicant. On the basis of entries recorded in the kacchi cash book in respect of purchase and sale of bullion during demonetization period, the income works out at Rs.1,51,97,392.9/- as per the working placed at PB 106-107. However, in the regular books of accounts, the purchase of gold bullion was shown as converted into jewellery and sale of such jewellery is recorded by adjusting against the advance recorded in their name. Accordingly, in AY 2017-18 applicant has shown profit of Rs.1,35,81,588/- in the books of accounts and offered Rs.30 lakhs in computation as undisclosed income and Shri Rakesh Soni has shown profit of Rs.3,58,801/- in respect of his proprietory concern, M/s R.K. Bullion (PB 108-129). Thus, an income of Rs.1,69,40,389/- is already offered for tax in the regular return by the applicant and his son in AY 2017-18. Accordingly, considering the kacchi cash book and income earned during demonetized period on sale of bullion, additional income of Rs.58,00,000/- is declared in AY 2017-18 as estimated in Para 8 below.”
The AO, however, at Para 4.10 & 4.11 of its order held that since the assessee has not provided the names, addresses and identity of the parties, entire Sh. Rakesh Soni, Sikar. cash sales of Rs.3,30,88,964/- was added u/s 68 of the Act vide order dated 28.12.2018.
4. On appeal filed by the assessee, the Ld. CIT(A) after considering the submission of assessee, at Pages 22 & 23 of the order raised five issues vide notice dated 05.08.2024. Assessee filed the response with reference to each of such issues but the same was not accepted as per the discussion at Pages 23-27 of the order. For ready reference, the same are summarized as under:-
Issue Issue raised Explanation of assessee Finding of CIT(A) No.
Sh. Ram Kumar Soni The fact that cash was The assessee has not nowhere stated that cash deposited in the bank account placed on record any was deposited by him in of M/s R.K. Bullion by Sh. supporting document the bank account of M/s Ram Kumar Soni is evident to substantiate his R.K. Bullion. Rather he from kacchi cash book claim. stated that he had done wherein the fact of deposit of RTGS in the bank cash by Sh. Ram Kumar Soni account of M/s R.K. in the bank account of M/s Bullion. R.K. Bullion is evident (PB 2, 3 & 5). Thus the documentary evidence would prevail over the oral statement.
It is stated that Sh. Ram Sh. Ram Kumar Soni in the There is no own Kumar Soni misused settlement application has explanation or assessee’s bank account categorically admitted that he evidence from the for rotation of utilized the bank account of assessee regarding use demonetized currency. M/s R.K. Bullion. He also of bank account of However, the assesse offered the income generated M/s R.K. Bullion by himself on his own from the transaction of M/s Sh. Ram Kumar Soni accord has not given R.K. Bullion. This itself is and therefore proper explanation. the explanation of assessee statement of Sh. Ram about using his bank account Kumar Soni is not by Ram Kumar Soni. conclusive evidence.
It is claimed that Sh. The assessee earned income Any income taxable in Ram Kumar Soni has of Rs.3.08 lacs from M/s the hands of assessee, Sh. Rakesh Soni, Sikar. offered income at the end R.K. Bullion which has been even if offered by Sh. of the assessee in his declared by him in the return Ram Kumar Soni, will hands but the income of of income. However, the not absolve him from assessee is taxable in his PNB bank account of M/s taxation. hand only. The same is R.K. Bullion which was also not verifiable from opened on 01.12.2016 was the papers filed. exclusively used by Sh. Ram Kumar Soni for his own transaction and therefore such income is earned by Sh. Ram Kumar Soni which is offered by him for tax in the settlement petition.
During assessment The fact of cash deposit The assessee has been proceedings assessee made in the bank account of adopting the contrary stated that cash deposited M/s R.K. Bullion is evident approaches and none in the bank account is from the kacchi cash book. It of the approach is from the advance is a fact on record that substantiated by the booking of sales of assessee did not receive the evidence regarding the jewellery and the sales cash from the customers in genuineness and actual made by Sh. Ram Kumar form of advance against the trail of the cash Soni were the sales made jewellery sale but the fact source. by the assessee but in that such cash was deposited appeal completely out of the unrecorded sale of opposite stand have been Sh. Ram Kumar Soni as adopted. evident from the kacchi cash book proves the fact that the amount so deposited is from the sources of Sh. Ram Kumar Soni.
5. Nowhere it is stated by Sh. Ram Kumar Soni at Para The approaches Sh. Ram Kumar Soni that 7 of the settlement petition adopted by the income in the books of has categorically accepted assessee are mere M/s R.K. Bullion was his that he has earned the income afterthought. income and nowhere it is in respect of bullion stated by Sh. Ram Kumar transaction made through the Soni that the sales of bank account of M/s R.K. jewellery shown in the Bullion. The assessee has books of M/s R.K. offered income as earned by Bullion was his sales. him in his hands. Further the Ld. CIT(A) at Pages 27-28 of the order observed that assessee is only relying upon the settlement petition of his father Sh. Ram Kumar Soni but has not Sh. Rakesh Soni, Sikar. placed on record any material evidence to prove the receipt of cash from his father Sh. Ram Kumar Soni and subsequent deposit of the same in his bank account. Accordingly, he confirmed the order of AO. Aggrieved by the order of the ld. CIT (A), the assessee has preferred the present appeal before the Tribunal on the grounds reproduced herein above.
Before us, the ld. AR of the assessee, in addition to his verbal arguments, also submitted his ground-wise written submissions (gr. nos. 1 & 2), which are reproduced as under :- “1. At the outset it is submitted that M/s R.K. Bullion came into existence from 01.07.2016. The bank account of this concern was opened on 01.12.2016. In this concern advance against booking is shown to have been received from the customers and such amount was deposited in the bank account between 01.12.2016 to 08.12.2016. The total sale of this concern was shown at Rs.3,30,88,964/- and profit of this concern was declared at Rs.9,45,898/- which is offered for tax (copy enclosed at Pg 7-12).
2. In search it was admitted by Sh. Ram Kumar Soni that advance received from customers against sale is fake. He had unaccounted cash of around Rs.2 crores earned from unaccounted jewellery business. This amount was utilized for depositing in the bank account of M/s M.B. & Sons and M/s R.K. Bullion from where gold bullion was purchased. The bullion so purchased was sold in old demonetized notes. This process was repeated number of times. During this period 36 kgs of gold was purchased out of which 9 kgs of gold bullion was purchased in M/s R.K. Bullion from which he earned undisclosed income of Rs.36 lacs and offered the same for tax as undisclosed income on behalf of his son. Accordingly in the settlement petition filed by Sh. Ram Kumar Soni, profit from sale of gold bullion was determined at Rs.1,51,97,392/- against which the income declared by Sh. Ram Kumar Soni in the return was Rs.1,65,81,588/- (1,35,81,588+30,00,000). The Hon’ble Commission discussed all these facts at Para 4.1 to 4.6 of the order (PB 56-57). Thereafter Hon’ble Commission at Para 16.2 (PB 67-68) apart from the income of Rs.1,65,81,588/- (1,35,81,588+30,00,000) declared in the return of income, further made addition of Rs.31,02,000/- by applying n.p. rate of 13.17% as against n.p. rate of 8% on unrecorded sale disclosed in the petition. Thus it can be noted that undisclosed income Sh. Rakesh Soni, Sikar. earned from sale of bullion by M/s R.K. Bullion has been assessed to tax in the hands of Sh. Ram Kumar Soni and therefore, the sales of Rs.3,30,88,964/- declared by M/s R.K. Bullion cannot be added as unexplained credit u/s 68 of the Act.
3. The various objections raised by the Ld. CIT(A) in his order are incorrect. The fact that Sh. Ram Kumar Soni made deposit of Rs.3,17,06,000/- in the bank account of M/s R.K. Bullion between 01.12.2016 to 08.12.2016 is verifiable from the kacchi cash book found in search. Such kacchi cash book was found for different years and on the basis of the same, Sh. Ram Kumar Soni estimated unrecorded turnover of AY 2011-12 to 2017-18. On such unaccounted turnover, by applying n.p. rate of 8%, additional income of Rs.312 lacs was offered in settlement application which was enhanced to Rs.513.63 lacs by the Hon’ble Commission by applying n.p. rate of 13.17% on the estimated unrecorded sale. Thus the source of deposit in the bank account of M/s R.K. Bullion is the undisclosed income of Sh. Ram Kumar Soni which was introduced in the books of M/s R.K. Bullion as cash advance received from the customer against booking of jewellery. Hence the sales recorded in the books of M/s R.K. Bullion cannot be assessed u/s 68 of the Act more particularly when the real income from unrecorded sales has been assessed in the hands of Sh. Ram Kumar Soni.
In view of above, addition of Rs.3,30,88,964/- confirmed by Ld. CIT(A) u/s 68 is unjustified and uncalled for. Hence the same be deleted.”
In respect of Ground no. 3, relating to confirming the addition of Rs.2,38,608/- u/s 69 of the Act, the ld. AR submitted the facts and submissions as under :-
“ Facts & Submission:- 1. In search gold bullion of 83.840gms valued at Rs.2,38,608/- was found in possession of Sh. Arvind Soni. In statement u/s 132(4) dt. 22.12.2016, Sh. Arvind Soni stated that this bullion was given to him by the assessee and he would explain the source of the same.
2. The AO held that when Sh. Arvind Soni confirmed that these bullions are of the assessee, the same is undisclosed income of the assessee. Accordingly addition of Rs.2,38,608/- was made u/s 69 of the Act.
Sh. Rakesh Soni, Sikar.
3. The Ld. CIT(A) confirmed the addition by holding that none of the material placed on record proves that this gold bullion belongs to M/s M.B. & Sons Jewellers and nowhere in the petition filed before Hon’ble Settlement Commission the same is offered by Sh. Ram Kumar Soni.
4. It is submitted that gold bullion of 83.840 gms was not found from the possession of assessee. This gold bullion belongs to M/s M.B. & Sons Jewellers and the same is reflected in the closing stock as evident from clause 35(a) of the tax audit report (PB 44). This fact was also discussed at Para 13 of the petition(copy enclosed at Pg 13-14) where it was explained that fine gold of 83.840 gms found in search is verifiable from the stock as per books. Hon’ble Commission at Para 6.12 to 6.3 of its order (PB 62-63) has also discussed this issue and thereafter no addition was made on account of such stock. Thus when the gold bullion found in search is verifiable from the books of accounts, addition confirmed by Ld. CIT(A) be deleted.”
On the other hand, the ld. DR supporting the orders of the lower authorities, submitted that the order of the ld. CIT (A) be sustained.
We have heard the rival contentions, perused the material on record and gone through the orders of the authorities below. We note that M/s RK Bullion proprietary concern of the assessee came into existence on 01.07.2016 and its bank account was opened on 01.12.2016. On total sales of Rs.3,30,88,964/-, it declared profit of Rs.9,45,898/-. As per the books of accounts of this concern, it shown to have been received advance from customers which was deposited in the bank account between 01.12.2016 to 08.12.2016 of Rs.3,17,06,000/-. Shri Ram Kumar Soni father of the assessee in the statement recorded u/s 132(4) admitted that advance received from customer shown in the books in his proprietary concern M/s M.B. & Sons and in the proprietary concern of his son M/s RK Bullion is fake. He Sh. Rakesh Soni, Sikar. had unaccounted cash of around Rs. 2.00 crores earned from unaccounted jewellery business which was deposited in the bank account of these concerns from where gold bullion was purchased which was sold in old demonetized notes. This process was repeated number of times. During this period 36 kgs of gold was purchased out of which 9 kgs of gold bullion was purchased in M/s R.K. Bullion from which he earned undisclosed income of Rs.36 lacs and offered the same for tax as undisclosed income on behalf of his son. Accordingly in the settlement petition filed by Sh. Ram Kumar Soni, he admitted earning of undisclosed income from such transaction as his income and offered the same for tax. The finding of Hon’ble Commission on this issue is given at para 4.1 to 4.6 of its order dated 21.12.2022 (PB pages 56-57) which for ready reference is reproduced as under :
Sales during demonetization period : a. it is mentioned that the applicant has accepted old demonetized currency from various persons against sale of jewellery during demonetization period from 09.11.2016 to 18.12.2016 and the same was deposited in the bank account (details are available in the kachi cash book at Annex, AS-12). The amount so deposited in the bank account was utilised for purchase of bullion indemonetised notes and this process was repeated number of times. The details of purchase of 36.322 kgs of fine gold on various dates from Mohit Jewellers, Lawat Jewellers, Joda Bullion and Babulal Lawat, payments made through RTGS (PB 106) and the details of selling/ issued to karigar for making jewellery are available in kacchi cash books (PB 107). The applicant had deposited cash of Rs 12,11,13,000 (Rs. 8.94,07,000 - 3,17,06,000) out of the sale of bulion purchased/jewellery. The applicant has earned profit of Rs. 1,51,97,500/- as per the working placed at PB 108-107. Accordingly, the applicant has shown Rs.1.35.81,588/- in the books of accounts, income of Rs 30 lakhs declared in the computation, profit of Rs.3.58,801 declared by Rakesh Soni, proprietor of M/s. R.K. Bullion totaling to Rs.1,69,40,385/- and the same has already been offered to tax in the regular returns filed Sh. Rakesh Soni, Sikar. by the applicant and his son for the Assessment Year 2017-18. The applicant further offered Rs.58,00,000/- as additional income for the said period. Out of the above cash deposit of Rs.12,11,13,000/-, an amount of Rs.3,17,06,000/- was added in the assessment order passed under section 143(3) dated 28.12.2018 for the AY 2017-18 in the case of Shri Rakesh Kumar Soni (son of the applicant), which is pending before the CIT(A). b. The PCIT submitted that the explanation given by the applicant regarding sale and purchase of gold bullion is not acceptable in the absence of supporting bills, disclosure of identities to whom it was sold and also the identities of persons from whom the specific bank notes were accepted etc. Therefore, the PCIT requested for taxation of entire amount deposited in the bank account. c. The applicant has reiterated the facts mentioned in para 4.1 above and therefore submitted that the request of the PCIT is uncalled for. In response to the query raised by the Bench during its hearing on 05.10.2020 the applicant submitted that he had purchased fine gold of 36.322kgs of gold for Rs. 10,87,97,180/- during demonetization period (09.11.2016 to 19.12.2016) at an average rate of Rs.2,995.35 per gram (PB-106). The average sale of jewellery was Rs.3,413.75 per gram and thus earned a profit of Rs. 1,51,97,509/- (PB 106-107). d. During the hearing, the CIT(DR) narrated the modus operandi employed by the applicant during demonetization period where cash was received on sale of jewellery which was deposited in the bank, then utilised it for purchase of fine gold, later converted into jewellery and the same was sold partly as jewellery and partly as fine gold and again reintroduced the currency and on both the occasion the applicant used demonetized currency. The CIT(DR) stated that the PCIT, has pointed out three instances where the purchase was made at a lower figure and sold it for higher figure on the same day. For eg., the applicant gained Rs.2000/- on sale of gold at Rs. 5000/- and this is against demonetization. There is no one to on correlation between purchase and sale of gold found during the period. Further, there is a drastic fall in the GP rate prior and after demonetization period which is not possible because gold rate did not crash during this period. NP adopted by the applicant is not acceptable since no evidences were produced in support of expenses incurred. Therefore, the Department found lot of inconsistencies in this regard and therefore the entire income of the applicant has to be treated as undisclosed income. e. In this regard, the AR submitted that pg nos.106 & 107 related to transactions during the demonetisation period and the same were recorded in the kachi cash book seized during the search. In the course of demonetization period, the applicant purchased certain fine gold and the payments were made by cheque and thereafter, in the books of account these were stated to be issued to the manufacturers, jewellery was prepared and then the jewellery was sold. In fact, the details available in the kachi cash book according to which these items were either sold as such or some parts were issued to karigars for manufacturing and thereafter it was sold. The profit worked out by the applicant on the Sh. Rakesh Soni, Sikar. basis of seized materials was available at Page nos. 106 and 107 of APB. The purchase during demonetization period was Rs.10,87,97,160/-(PB106) and all these purchases were recorded in the books of accounts and the same was accepted by the PCIT. These were sold for Rs. 12,39,94,522/-resulting in a profit of Rs.1.51 crores These facts were already been mentioned at para 7, page 20 of the Settlement Application. The AR submitted that the applicant offered Rs.1.35 crores in the Settlement Application and Rs.30 lakhs in the return filed u/s. 153A totaling to Rs. 1.51 crores. It is the contention of the AR that the PCIT has picked up 2 or 3 items and linked the same with the other transactions and narrated the difference between purchase and sale price to be of 20%. The difference of 20% is related to only for the sale of gold in small quantity Para no.8, page nos. 21 & 22 of the Settlement Applicant narrates the estimation of unrecorded sales based on the kachi cash books available and application of net profit of 8% on these sales. The AR summarised the PCIT's contention at point no.6. of the report dated 31.10 2022 is the repetition of point no.1 and 2 of that report, In this connection, the AR referred to point no.8 of his submission dated 8.01.2021 wherein the detailed clarification for adopting 8% net profit has been provided by the applicant. Against this, nothing was mentioned by the PCIT in his report. f. The CIT(DR) pointed out that undisclosed cash amount of Rs.2 crores was deposited in the bank account, utilised for purchase of gold and the same was sold in the form of jewellery and earned profit during the demonetization period. The same was admitted by the applicant in his sworn statement in response to Q.no. 137 (page no. 53 of APB-I). The CIT(DR) raised a query how the admitted cash capital in the form of cash available has been explained in the disclosure and the concealed cash amount has to be brought to tax.
Thereafter, Hon’ble Commission at para 16.2 of the order after considering the unaccounted bout of book sales made by M/s MB & Sons in para 9.1 & purchases made in cash by M/s MB & Sons in para 9.2 for AY 2011-12 to 2017-18, gave the following decision: - “16.2 The applicant has estimated his unrecorded sales at Rs.39 crores for different AYs covered in the Settlement Application and has estimated undisclosed profit totaling to Rs. 3.12 crores, applying net profit at 8% thereon. Keeping in view the variations and discrepancies in the purchase bills submitted by the applicant, it is clear that the applicant Sh. Rakesh Soni, Sikar. has not been able to establish the veracity and genuineness of expenses incurred. Besides, the GP ratio was 13.8% during demonetisation period and it is also found that adequate expenses were already recorded in the books of accounts. Hence, the Board deems it reasonable to adopt net profit rate of 13.17% on the unrecorded sales of Rs.39 crores, which results in addition of Rs.2.01 crores (13.17% of Rs. 39 crores is Rs. 5.13crores minus 8% of Rs. 39 crores which is Rs.3.12 crores).The additions made by the Board is worked out as under: - AY Estimated Estimated undisclosed Undisclosed profit Difference unrecorded profit applying NP rate determined by the amount treated as sales (in Rs.) at 8% Board at 13.17% further addition (NP) 2011-12 200 16 26.34 10.34 2012-13 300 24 39.51 15.51 2013-14 500 40 65.85 25.85 2014-15 500 40 65.85 25.85 2015-16 1000 80 131.7 51.70 2016-17 800 64 105.36 41.36 2017-18 600 48 79.02 31.02 Total 3900 312 513.63 201.63 From the above discussion & the finding of the Hon’ble Interim Board of Settlement in its order dt.22.12.2022, we find that undisclosed income earned from sale of bullion by M/s R.K. Bullion has been assessed to tax in the hands of Shri Ram Kumar Soni. We also find that the fact of Shri Ram Kumar Soni having made deposit of Rs.3,17,06,000/- in the bank account of M/s R.K. Bullion between 01.12.2016 to 08.12.2016 is verifiable from the kacchi cash book found in search. Such kacchi cash book was found for different years and on the basis of the same, Shri Ram Kumar Soni estimated unrecorded turnover of AY 2011-12 to 2017-18. On such unaccounted turnover, by applying N.P. rate of 8%, additional income of Sh. Rakesh Soni, Sikar. Rs.312 lacs was offered in settlement application which was enhanced to Rs.513.63 lacs by the Hon’ble Commission by applying N.P rate of 13.17% on the estimated unrecorded sale as mentioned supra. Thus the source of deposit in the bank account of M/s R.K. Bullion is the undisclosed income of Shri Ram Kumar Soni which was introduced in the books of M/s R.K. Bullion as cash advance received from the customer against booking of jewellery. Hence the sales recorded in the books of M/s R.K. Bullion cannot be assessed u/s 68 of the Act more particularly when the real income from unrecorded sales has been assessed in the hands of Sh. Ram Kumar Soni. The addition made by AO and confirmed by ld. CIT(A) has in fact resulted into addition both in the hands of the assessee and also in the hands of his father Shri Ram Kumar Soni. In view of these facts, we do not find any justification in the addition of Rs.3,30,88,964/- confirmed by CIT(A) in the hands of the assessee and therefore the same is deleted. Ground no. 3 : 9. We have heard the rival submission and pursued the material available on record. We note that in search gold bullion of 83.840 gms valued at Rs.2,38,608/- was found in possession of Sh. Arvind Soni. In statement u/s 132(4) dated 22.12.2016, Shri Arvind Soni stated that this bullion was given to him by the assessee and he would explain the source of the same. Accordingly, the AO held that it is undisclosed income of the assessee and made addition of Rs.2,38,608/- u/s Sh. Rakesh Soni, Sikar. 69 of the Act. This addition is confirmed by ld. CIT(A) holding that none of the material placed on record proves that this gold bullion belongs to M/s M.B. & Sons Jewellers and nowhere in the petition filed before Hon’ble Settlement Commission the same is offered by Shri Ram Kumar Soni. This finding is incorrect in as much as the fact that the gold bullion of 83.840 gms belongs to M/s M.B. & Sons Jewellers is verifiable from the closing stock reported at clause 35(a) of the tax audit report (PB 44). Shri Ram Kumar Soni at Para 13 of the settlement petition admitted that fine gold of 83.840 gms found in search is verifiable from the stock as per his books of accounts. Hon’ble Commission at Para 6.1 to 6.3 of its order (PB 62-63) has also discussed this issue as under: - “Tax liability on the issue of unaccounted stock : 6.1. The stock found on the date of search is as under: Particulars Quantity (in grams) Amount in (Rs.) Gold Jewellery 20,068.150 5,37,99,668 Silver 48,953.000 12,25,769 Stones 1,33,550 Total 5,51,58,987 6.2 Apart from this, gold bullion weighing 83.840 grams valued at Rs. 2,38,608/- was also found and seized. 6.3 The stock position of gold of 83.840 grams, gold jewellery of 20,096.917 grams and silver articles of 50,719.594 grams was determined based on the opening stock as on 01.04.2016 and goods purchased and sold as per kacchi cash book and thus the gold/ silver articles found during the search has tallied with the working of the applicant. Thus, there is no excess jewellery found during the search. The PCIT has requested for taxation of unaccounted stock of Rs.5,51,58,987/- found during the search as the applicant has not provided any details of working based on the opening stock along with goods outward and inward. The applicant has rebutted that the PCIT has not specified any discrepancy in the working provided at PB-1/255-256. Further, the opening stock as on 01.04.2016 Sh. Rakesh Soni, Sikar. could be verifiable from the return filed for AY 2016-17 and also the quantity of goods inward and outward verifiable from the kacchi cash book. Therefore, no addition is warranted on this count.”
Thus, when the gold bullion found in search is verifiable from the books of accounts of M/s. MB Jewellers and also discussed by the Hon’ble Commission and there is no finding that the same belongs to the assessee, the addition confirmed by Ld. CIT(Appeal) is deleted. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 15/09/2025.