ASSISTANT COMMISSIONER OF INCOME TAX,, NASHIK vs. GOVIND JAIKRISHNA DANDE & SONS,, NASHIK

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI S. S. VISWANETHRA RAVI, JUDICIAL MEMBER आयकर अपील सं. / ITA No.1001/PUN/2017 िनधा�रण वष� / Assessment Year: 2013-14 ACIT, Circle-1, Nashik. Vs. Govind Jaikrishna Dande & Sons, Anant Commerce Centre, Datta Mandir Stop, Poona-Nashik Road, Nashik-422101. PAN : AAGFG6627F Appellant Respondent Revenue by : Shri S. P. Walimbe Assessee by : Shri Sanket Milind Joshi Date of hearing : 13.07.2022 Date of pronouncement : 03.08.2022 आदेश / ORDER PER INTURI RAMA RAO, AM: This is an appeal filed by the Revenue directed against the order of ld. Commissioner of Income Tax- 1, Nashik [‘the CIT(A)] dated 03.02.2017 for the assessment year 2013-14. 2. Briefly, the facts of the case are that the respondent-assessee is a partnership firm. It is engaged in the business of trading in gold and silver ornaments. The return of income for the assessment year 2013-14 was filed on 30.08.2013 declaring total income of

2 ITA No.1001/PUN/2017 Rs.1,37,06,928/-. The same was revised on 26.02.2014 at total income of Rs.1,73,50,820/-. Subsequently, the survey operations were conducted in the business premises of the respondent-assessee firm on 07.10.2013. During the course of survey operations, the Assessing Officer found some discrepancies in stock as per the books of accounts and stock as per register maintained through a software application i.e. “ACME Software”. During the course of survey proceedings, the Assessing Officer had estimated the such difference of stock as on 31.03.2013 at Rs.4,11,88,184/-. The details of which are as under :- Sr. Item Stock as per Stock as per Difference Value No. audit report system 1 Gold 40554.07 gm 51395 gm (+) 10841 gm 3,24,14,590/- 2 Diamond 2017.949 2788.977 (+) 771 50,90,448/- 3 Silver 226344.91 299544.578 gm (+) 73199.66 36,67,303/- 4 Platinum 157.64 gm 162.44 gm (+) 4.801 gm 15,843/- 3. Thereafter, the assessment was completed by the Assistant Commissioner of Income Tax, Circle-1, Nashik (‘the Assessing Officer’) vide order dated 09.02.2016 passed u/s 143(3) of the Income Tax Act, 1961 (‘the Act’) at total income of Rs.5,48,95,112/- after making addition of Rs.3,75,44,292/- on account of alleged discrepancies in the stock between the value of stock shown in the Profit & Loss Account and the value of stock

3 ITA No.1001/PUN/2017 shown in the ACEM Software. The factual matrix leading to the above addition is as under : An amount of Rs.36,43,892/- was offered to tax as additional income by filing the revised return of income u/s 139(5) of the Act. When the respondent-assessee was asked to explain said discrepancies in the value of stock as per Profit & Loss Account and the value of stock shown in the ACEM Software, it was explained by the respondent-assessee that the respondent-assessee firm had accepted the deposits of gold from the customers under the gold deposits scheme and for making the ornaments. Such gold, diamond, silver jewelleries were not forming a part of the stock of the respondent-assessee firm, hence not reflected in the Profit & Loss Account, whereas in the software maintained in the computer i.e. ACEM Software, the stock of the customers lying with the respondent-assessee firm i.e. being gold received from customers under the gold deposits scheme or for making ornaments is shown as part of the stock of the assessee firm. It is also mentioned that the stock received from customers is kept under separate box. The respondent-assessee also furnished the statement of reconciliation of stock as on 31.03.2013 vide 08.11.2013. Accordingly, on reconciliation of difference, the excess stock was found to the extent

4 ITA No.1001/PUN/2017 of Rs.36,43,892/- and the same was offered as additional income by revising the return of income. The respondent-assessee firm also field the details of gold, diamond, silver jewelleries received from the customers under the gold deposits scheme, names and addresses of the customers/persons, who had deposited the gold, diamond, silver jewelleries with the respondent-assessee firm under gold deposits scheme and for the purpose of making the ornaments etc. However, disbelieving the reconciliation statements furnished by the respondent-assessee firm, the Assessing Officer brought to tax a sum of Rs.3,75,44,292/-. 4. Being aggrieved by the order of assessment, an appeal was preferred before the ld. CIT(A), who vide impugned order, after considering the submissions furnished by the respondent-assessee firm, reasoning of the Assessing Officer for making the additions, as well as considering the fact that the respondent-assessee firm had deducted TDS on interest paid on gold, diamond, silver jewelleries received from the customers under the gold deposits scheme and also the fact that the stock of these items like gold, diamond, silver jewelleries had not been included as a part of the closing stock shown in the Profit & Loss Account even in the earlier years, deleted the addition made by the Assessing Officer.

5 ITA No.1001/PUN/2017 5. Being aggrieved by the decision of the ld. CIT(A), the Revenue is in appeal before us in the present appeal. 6. The ld. Sr. DR submits that the ld. CIT(A) ought not to have accepted the explanation given by the respondent-assessee firm that the difference between the stock as per the computer software i.e. ACME Software and the stock shown in the Profit & Loss Account, inasmuch as, the respondent-assessee firm was found in possession of excess stock which were not recorded in the books of accounts of the respondent-assessee firm. It is further submitted that during the course of assessment proceedings, the respondent-assessee firm could not explain the discrepancies with evidence and the fact that the respondent-assessee firm itself had offered additional income of Rs.36,43,892/- by filing the revised return of income would establish the fact that the explanation offered by the respondent- assessee firm is not believable. The explanation offered by the respondent-assessee firm is an afterthought and self-contradictory as the fact that the discrepancies between the stock as per the Profit & Loss Account and the stock as per computer software i.e. ACME Software is established by the fact that the respondent-assessee firm itself had offered additional income of Rs.36,43,892/- on notifying such discrepancies. He further submitted that the ld. CIT(A) ought

6 ITA No.1001/PUN/2017 not to have granted relief taking into consideration the fact that in the earlier assessment year, as no addition on account of such discrepancies of the stock was made. This issue was not subject matter of addition in the earlier years, and the principle of res- judicata has not application to the facts of the present case. 7. On the other hand, ld. AR submits that during the course of assessment proceedings, the respondent-assessee firm offered an explanation as to how the discrepancies between the stock as per the Profit & Loss Account and the stock as per the ACME Software maintained in the computer had arisen. The respondent-assessee firm also filed details of the customers from whom gold, diamond, silver jewelleries were received under the gold deposits scheme and for the purpose of making the ornaments, which are placed at page no.89 to 90 of the Paper Book. He also filed before us the copies of the applications received from the customers under gold deposits scheme and also the copies of details in respect of gold received from customers for making the gold ornaments. He further submits that the Assessing Officer had failed to consider the melting loss of gold at 2026 gms. Finally, he submits that the order of the ld. CIT(A) is based on the proper appreciation of material on record

7 ITA No.1001/PUN/2017 and thus pleaded that no interference with the order of the ld. CIT(A) is called for. 8. We heard the rival submissions and perused the material on record. The issue in the present appeal relates to the addition on account of alleged discrepancies between the stock as per the Profit & Loss Account as on 31.03.2013 and the stock as per register maintained under computer software, namely, ACME Software. It is an admitted fact that there is a difference of the stock as per Profit & Loss Account and stock as per statement generated under ACME Software. Such difference was quantified Rs.4,11,88,184/- out of which a sum of Rs.36,43,892/- was offered as additional income by filing revised return of income. The difference was explained by the respondent-assessee firm by stating that the stock of the customers deposited under gold deposits scheme and the gold, silver and diamond of the customers lying with the respondent-assessee firm for the purpose of making the ornaments, was not included as a part of the stock belonging to the respondent-assessee firm and hence not reflected in the Profit & Loss Account. The respondent- assessee firm also filed the full details of the customers who had deposited the gold under gold deposits scheme as well as the list of the customers who had deposited the gold, silver and diamond lying

8 ITA No.1001/PUN/2017 with the respondent-assessee firm for the purpose of making the ornaments. It is further asserted that the respondent-assessee firm had been continuously following this particular method of accounting the closing stock by excluding the gold, silver and diamond belonging to the customers either received under gold deposits scheme or received for the purpose of making the ornaments. The photocopies of such applications for gold deposits scheme received from the customers were also part of the record with such details like photograph of the customers, their communication address, identify proof, PAN card and mobile numbers etc.. The respondent-assessee firm had been paying interest @ 4% on gold received under gold deposits scheme on which tax was deducted. Thus, it appears that the respondent- assessee firm had discharged primary onus lying upon it by explaining the difference between the stock as per Profit & Loss Account and stock as per stock register maintained through computer software ‘ACME Software’. On receipt of the explanation, the Assessing Officer had not done anything to verify the veracity of the explanation of the respondent-assessee firm. He simply proceeded with by making addition by observing that the explanation of the respondent-assessee firm cannot be believed for

9 ITA No.1001/PUN/2017 the reason that stock received from the customers in respect of the gold, diamond, silver jewelleries either under gold deposits scheme or gold received for making ornaments were not accounted in the books of accounts of the respondent-assessee firm. This reasoning of the Assessing Officer has no legs to stand in view of the well- settled position of law that the presence and absence of entries in the books of accounts do not determine the true nature of the transaction. Reference in this regard can be made to the decision of the Hon’ble Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. vs. CIT 82 ITR 363 (SC). Further, it is not even the case of the Assessing Officer that the respondent-assessee firm had failed to discharge the primary onus lying upon it i.e. filing full details of the customers from whom gold was received under gold deposits scheme or for the purpose of making the ornaments. Without making any further enquiries, the Assessing Officer cannot make any addition based on the conjectures and assumptions as well as without bringing any conclusive evidence on record. Reference can be made on the decision of the Hon’ble Supreme Court in the case of Dhakeswari Cotton Mills Ltd. vs. CIT 26 ITR 775 (SC). In these circumstances, we are of the considered opinion that the order of the ld. CIT(A) is fair and reasonable and based on the appreciation of

10 ITA No.1001/PUN/2017 material facts of the case. Therefore, we do not find any reason to interfere with the order of the ld. CIT(A). Accordingly, we do not find any merits in the grounds of appeal filed by the Revenue. Thus, the ground of appeal filed by the Revenue stand dismissed. 9. In the result, the appeal filed by the Revenue stands dismissed. Order pronounced on this 03rd day of August, 2022. Sd/- Sd/- (S. S. VISWANETHRA RAVI) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; �दनांक / Dated : 03rd August, 2022. Sujeet आदेश क� �ितिलिप अ�ेिषत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(A) -1, Nashik. 4. The Pr. CIT-1, Nashik. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “A” ब�च, 5. पुणे / DR, ITAT, “A” Bench, Pune. गाड� फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.