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DCIT, JAIPUR vs AMRAPALI JEWELS PVT. LTD. , JAIPUR | BharatTax

DCIT, JAIPUR vs. AMRAPALI JEWELS PVT. LTD. , JAIPUR

ITA 740/JPR/2024Status: DisposedITAT Jaipur19 February 2025Bench: DR. S. SEETHALAKSHMI (Judicial Member), SHRI RATHOD KAMLESH JAYANTBHAI (Accountant Member)19 pages

AI SummaryPartly Allowed

Facts

During a survey operation, the Assessing Officer found excess stock valued at Rs. 267,43,88,096, while the books of accounts showed stock valued at Rs. 126,08,06,402, resulting in an alleged excess of Rs. 141,35,81,694. The AO invoked Section 69B for this excess stock, claiming it was unexplained. The assessee contested the valuation methods, the handling of data, and the applicability of Section 69B.

Held

The Tribunal noted that while the AO's addition based on valuation reports was flawed and the CIT(A) also made significant changes without proper procedure, the core issue of excess stock needs to be addressed. The Tribunal intends to delve into the arguments and case laws presented by both sides regarding the valuation, the applicability of Section 69B, and the sufficiency of evidence.

Key Issues

1. Validity of stock valuation methods and additions made under Section 69B. 2. Whether the CIT(A) erred in enhancing the assessment without issuing a show cause notice.

Sections Cited

133A, 127, 143(2), 142(1), 139, 69B, 145(3), 251, 115BBE, 234A, 234B, 234C, 69C, 14, 28, 68, 106, 118, 120, 122, 123, 124, 125, 126, 127, 128, 129, 130, 131, 132, 133, 134, 135, 136, 137, 138, 139, 140, 141, 142, 143, 144, 145, 146, 147, 148, 149, 150, 151, 152, 153, 154, 155, 156, 157, 159, 161, 162, 163, 164, 165, 166, 167, 168, 169, 170, 171, 172, 173, 174, 175, 176, 177, 178, 179, 180, 181, 182, 183, 184, 185, 186, 187, 188, 189, 190, 191, 192, 193, 194, 195, 196, 197, 198, 199, 200, 201, 202, 203, 204, 205, 206, 207, 208, 209, 210, 211, 212, 213, 214, 215, 216, 217, 218, 219, 220, 221, 222, 223, 224, 225, 226, 227, 228, 229, 230, 231, 232, 233, 234, 235, 236, 237, 238, 239, 240, 241, 242, 243, 244, 245, 246, 247, 248, 249, 250, 251, 252, 253, 254, 255, 256, 257, 258, 259, 260, 261, 262, 263, 264, 265, 266, 267, 268, 269, 270, 271, 272, 273, 274, 275, 276, 277, 278, 279, 280, 281, 282, 283, 284, 285, 286, 287, 288, 289, 290, 291, 292, 293, 294, 295, 296

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, JAIPUR BENCHES,”B” JAIPUR

Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA No. 750/JP/2024

For Appellant: Adv. Sh. Prakul Khurana, Adv. &, Adv. jktLo dh vksj ls@

Pronounced: 19/02/2025

appearing in excel sheet in order to support that Rs.25.59 Crore was asking price and not cost. The Value of stock at Cost price was Rs. 18.75 crore only. The assessee also submitted that different approach in valuation of stock of different branches of same organization, where no physical survey was conducted, has been applied, which was not justified.

Based on that assessee contended that Value of stock taken by the Department at Delhi outlets of Rs. 25,59,78,648/- was erroneous. Correct value of Stock of Rs. 18,75,87,847/- is required to be considered while taking value of stock at Delhi outlets.

3.22 Stock lying at Mumbai Branch as per the Tally books of account of the branch as on 31.3.2020 and as adjusted up to 13.7.2020 reported at Rs 53,62,45,741/- and Stock lying at Bangalore Branch as per the Tally books of account of the branch as on 31.3.2020 and as adjusted up to 13.7.2020- Rs 16,51,51,691/-. In Mumbai assessee company was having three outlets/stores at Mumbai one is at (a) Amarpali Juhu Shop, Mumbai, Shop, Mumbai. The assessee also has 2 outlets / Stores at Bangalore, (a)

Amrapali Jaynagar Shop, Banglore and (b) Amrapali Shop, Bangalore. No Physical survey was conducted at any of the stores of the company situated at Mumbai and Bangalore by Income Tax Department. In the proceeding of post survey assessee company was asked to submit details of Stock lying at other Branches/Showrooms/other outlets of the company as at 31.03.2020 and 13.07.2020. The assessee company has submitted complete details of stock lying at all the outlets/stores at Mumbai and Bangalore as on 31.03.2020 and 13.07.2020 to DDIT Investigation Jaipur.

Total Value of Closing Stock of all Jewellery items at Mumbai Stores was Rs 24,84,70,166/- and at Bangalore Stores was Rs. 9,19,85,061/-as per books of accounts of the company as on 13.07.2020. In the assessment proceeding ld. AO taken the Value of Closing stock at Mumbai and Bangalore Stores at Rs. 53,62,45,741/- and Rs. 16,51,51,691/- respectively and the assessee contended that the same was without any basis. Since no basis was available, the assessee was requested vide letter dated 08.12.2022 to provide the basis on which such value was taken. In response, the basis was given and the same reads as under :

** Sales 2474210 – GP @ 30% = Rs. 17,31,947/- ** Sales 5086113 – GP @ 30% = Rs. 35,60,280/- Thus, stock of Rs. 53,62,45,741/- was considered with Mumbai Branch and stock of Rs. 16,51,51,691/- was lying with Bangalore Branch, as on 13.7.2020. No explanation was asked from the management during the course of post survey proceedings by investigation department about such difference in the Value of Stock, as assessee gave details of stock lying at Mumbai and Bangalore Branches vide letter dated 16.03.2021. The assessee thus contended that the value of stock was wrongly taken based on incomplete tally data. The assessee also contended that ld. AO generated the Balance sheets of Mumbai and Bangalore, Branches for this regard that Tally data on the Rinkesh Jain Computer was not regular tally data. Regular Books of accounts maintained by Mr. Vijay Kumar Jain on his Computer, which was also impounded during the survey. Tally data found from the Rinkesh Jain Computer was incomplete. The assessee also contended that various Jewellery items was return to the HO in the month of June 2020 and was supported with the copy of Tax Invoice for stock transfer from Bangalore to HO and was placed on record as Annexure 7 and the said stock was already included in the stock at HO by the survey team. No effect of such transfer was given while computing the stock lying at Bangalore by the ld. AO. Not only that assessee contended that different approach in valuation of stock of different branches of same organization, where no physical survey was conducted, was taken and therefore, that was also objected. Assessee also contended that the Stock transfer invoice does not reflect the actual cost of item. They are normally above the cost price including margin. The method of valuation of inventory regularly adopted is cost or market price whichever is lower. Therefore, goods lying at Mumbai and Bangalore Branches given by the company during post survey proceedings should be valued at cost and thereby objected to the Value of stock taken by the Department at Mumbai and Bangalore Stores value of Stock of all Jewellery items at Mumbai Stores and Bangalore Stores was Rs 24,84,70,166/- and Rs. 9,19.85,061/- respectively as per books of accounts of the company as on 13.07.2020.

3.24 The assessee company has also Consignment Agent M/s Amrapali UK Ltd., there was not physical survey / stock taking was conducted at the premises of above Consignment Agent by revenue. On being asked to submit details of Stock lying with Franchisees/ Consignment Agent as at 31.03.2020 and 13.07 2020 The assessee company submitted complete details of stock lying at all the Franchisees/Consignment Agents as on 31.03.2020 and 13.07.2020. Total Value of Closing Stock of all Jewellery books of accounts of the company as on 13.07.2020. Value of Closing stock of Rs. 11,64,46,108/- at Consignment Agent M/s Amrapali UK Ltd. without any basis. Since no basis was available, letter dated 08.12.22 to provide the basis on which such value has been taken. In response vide letter dated 21.12.2022 assessee submitted that Value of Stock lying with Amrapali UK Ltd was taken on the basis of Consignment account in Tally books of A/C for the period from 1.04.2020 to 13.07.2020. No explanation was asked from the management during the course of post survey proceedings by investigation department about such difference in the Value of Stock at Consignment Agent Amrapali UK Ltd. Assessee also contended that the tally records taken by the department was incomplete. Whenever the goods were sent on Consignment basis to any Foreign Consignment Agent, Consignment Invoice is raised at selling price, accordingly his account debited by the Consignment invoice. Necessary documents are also sent as per Custom Laws. On receipt of sales notes same was accounted for as Export Sales in the books of accounts. In case any goods were returned the same was credited to his consignment account. During the year 2019-20 certain unsold items were returned by Consignee, which were earlier sent on consignment basis to UK. The same were not entered COVID 19. These items were actually returned/reimport/ received before 31st March 2020. In support of that contention assessee submitted copy of correct Consignment Account of Amrapali Inc. UK for the period from 01.04.2019 to 31.03.2020, Return Invoice (Unsold), Bill of Entry for Reimport( Return of Goods), List of items returned and Airway/Shipping Bill for Returned goods. After giving effects of above returned goods, the balance receivable from the above consignee as on 31.03.2020 was of Rs. 3,07,98,096/- on account of unsold stock lying with company. Since the consignment Invoices were raised at selling price, the amount shown was Selling price of the stock lying with the consignee, not the cost.

3.25 For the goods sent to Doha for Exhibition for Rs 51,96,689/- and the same was sent to Amiri Gems on Consignment Account. In the post survey proceeding assessee was asked to submit details of Stock Lying with Franchisees/ Consignment Agent as at 31.03.2020 and 13.07.2020. The Franchisees/Consignment Agents as on 31.03.2020 and 13.07.201 to DDIT Investigation Jaipur. There was no stock in this consignment account as 13.07.2020. Even though the revenue consider the Value of Closing stock of Rs. 51,96,689 Jewellery & Watches Exhibition without any basis. Since no basis was available, vide letter dated 08.12.22 assessee requested to provide the basis on which such values was taken. In response, vide reply dated 21.12.2022, it was contended that value of stock lying with this consignee was taken on the basis of Consignment account in Tally books of account for the period from 1.04.2020 to 13.07.2020. There was no confrontation about the arrival of such difference in the Value of Stock at Doha Jewellery & Watches Exhibition-Amiri Gems on Consignment account. As stated repeated that the accounts were incomplete. The assessee submitted that whenever the goods were sent on Consignment basis to any Foreign Consignment Agent Consignment Invoice is raised at selling price, accordingly his account was debited by the Consignment invoice. Necessary documents were sent as per Custom Laws. Whenever any sales notes are received from the Consignee the same was accounted for as Export Sales in the books of accounts. In case any goods were returned the same way it was credited to his consignment account. During were earlier sent on a consignment basis. The same were not entered in tally due to sudden lockdown imposed by Government on account of COVID 19. These items were actually returned/reimport/received before 31st March 2020. In support of that contention assessee submitted copy of correct Consignment Account of for the period from 01.04.2019 to 31.03.2020, Copy of Return Invoice (Unsold), Bill of Entry for Reimport( Return of Goods), List of items returned and Airway/Shipping Bill for Returned goods. If this contention considered the balance receivable from the above consignee as on 31.03.2020 was of Rs. Nill- as there was no stock lying with consignee and thereby the same should not have been considered separately for an amount of Rs. 51,96,689.

(xviii) Even though the appellant has furnished one valuation report which has been obtained by the appellant from the valuer appointed by it after the conclusion of the survey, such valuation report suffers from similar kind of alleged infirmities which the appellant has highlighted in its objections against the valuation done by the official valuers. There is no item wise linkage to the purchase bills. The appellant purchases the stock from different suppliers. There may be or may not be items in stock which are manufactured by appellant itself. Further there is no identification and quantification and the quality details of the workmanship, design, machine technology used, etcetera. All these are very subjective elements of the cost and there cannot be any standard formula. In case the appellant has an understanding with the supplier that similar design would not be supplied to any other trader that would lead to increase in the cost substantially as the manufacturer will not be able to replicate the design and the entire cost of designing and workmanship etcetera of each design has to be recovered from one party sale itself. One jewellery designer may charge X' amount for designing one particular type of jewelry and other designer may charge 'Y' amount for designing similar type of jewelry and some other designer may charge some other amount for designing similar type of jewelry. Similarly the workmanship charges etcetera can differ from manufacturer to manufacturer. For example, cost of a silk saree cannot be determined merely by valuing the rate of silk thread gone into making of that saree. The valuation depends on number of factors like the design, the intricacies, the technology used, whether handmade or machine made, whether handpainted or machine printed, whether having hand thread work or machine work, etcetera. For all kind of hand works the cost would be significantly more and differ from artisan to artisan. Similarly for example, cost of a painting cannot be determined merely on the basis of quantification of the quantity of different kind of paints which have gone into making of that painting.

The valuation report prepared by appellant's valuer and submitted by the appellant at volume 2,3,4 of the paper book has been perused on sample basis. As is seen from the beginning of the report itself, no cost valuation has been done with respect to the design, workmanship of different categories as it is a matter of common understanding that different specialists or artisan are involved in jewellery making. This issue has been discussed in detail in the earlier part of this order also. Further in terms of the raw material which has gone into the items the appellant has only mentioned 'Stone' or 'Pearl' or 'Diamond'. No details are mentioned regarding the cut, colour, size etcetera. For the stones there is no mention of even the type of stone used. Similar is the case with the pearl. It is a matter of common knowledge that for example diamonds' values vary very much significantly depending upon the associated factors and the appellant's valuer has not quantified these factors and has not thus assigned any value. Further in terms of size itself if 0.1 carat of Diamond costs X amount per unit, the 1 carat of Diamond will not cost simply 10X but may cost 100X or 200X amount per unit. Further the different mix of metals and the technology and the machinery used etcetera are not considered in the valuation report. In the valuation report, in the description column, very general description has been given like Gold stone ring, Gold stone bangle etc. and there is no reference to the particular design category, name of the manufacturer, name of the supplier entity, name of the designer and the artists who made the jewellery item, etc. The appellant itself has stated that ".....there are tens of thousands of items of individual jewellery and other items which are all unique and idiosyncratic in their size, shape, content of metal, value of design, value of labour, marketability, appearance and class of customers." The appellant has also submitted that each item needs to be valued independenly, as "each item is unique and combination of difference contents of metals". The valuer has not taken into consideration such uniqueness of each item in the valuation. All the items have been valued treating them to be same similar except in terms of weight.

(xxi) The valuer has been engaged by the appellant itself and the independence of the valuation cannot be fully relied upon. The methodology of the valuation is also not been stated in the valuation report. How the valuer has arrived at the figures of the weights of the stones and that the Diamond and the pearl and the gold etcetera? What is the basis of the taking rates for the stones, pearls and the diamonds etc. If the valuation has been done using the details mentioned in the excel sheet by the appellant in that case the valuation has not been done of the actual items but merely of the descriptions mentioned in the excel sheet. Further as seen on each page of the valuation report on the top right corner, the valuation purposes mentioned as 'market rate'. Hence on the one hand the appellant has found fault in the valuation of the official valuers that such valuation is at the market rate, on the other hand the appellant has also furnished the valuation at the market rate. Statement in this regard is also made at the bottom of the page. Further the & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT valuation done of various items is also contradictory to each other. For example at page 784 of the paper book, there are some silver items of the gross weight 10.000 gms. Some of the items have been valued by the valuer at 411 per item and two items of same weight have been valued at 937 per item. Similar situation is seen in other items of the report. The appellant has not produced any valuation report of similar nature of having done such valuation in the past. Further the net gold weight is also different in the valuer report of the valuer of the appellant whereas the official valuers had adopted the gold content value as reflected in the excel sheet of the appellant. The possibilities of items getting changed after the survey and till the valuation by the appellant's valuer cannot be ruled out. Further, the appellant if was not satisfied with the valuer report of the official valuers, was required or could have highlighted and reconciled the difference in the valuation for each item along with supporting and evidences for challenging the valuation of the official valuers. However no such item wise reconciliation has been done. In view of the above detailed discussion, the valuer report of the valuers of the appellant is hereby rejected.

(xxii) The proposition of the appellant on how the valuation should have been done is impractical and not possible in view of the facts of the case and the extent of documentation maintained. It is the settled law that no one can claim benefit of its own wrong. In view of the above discussion, the approach of the valuation of the stock as proposed by the appellant is hereby rejected. The official valuers in the valuation have adopted either the raw material valuation approach to the stock valuation and also at Panch Batti store adopted selling price minus gross profit- based approach. The raw material ingredient-based approach valuation in the case of the appellant would show extremely high erroneous gross profit on sales on its comparison with the final selling price as such cost computation does not include some crucial components of cost like design, workmanship technology, man-hours etc.. The raw material approach based valuation of the jewellery stock adopted by the official valuers in some of the valuation and proposed by the appellant are not found suitable and cannot be determined in the present set of facts as reasonably correct valuation cannot be arrived at and this approach invariably leads to materially and substantially incorrect results in the present case and is rejected. Considering the facts of the case, the practice regularly adopted by the appellant in earlier years, the acceptable practices, the extent of documentation available etcetera - it is found to be most reasonable that the valuation of the stock of the appellant is done by the averaging-based approach. Such approach is more suitable in the present set of the facts when each item is differently made in terms of various quantitative and qualitative factors and no stock register is a maintained and no sales Bill and purchase bill linkage is maintained and assessee itself also follow the gross profit-based averaging method in the earlier years etcetera. The averaging-based approach is hereby upheld and is directed to be applied with respect to all the locations where the valuation was carried out by the official valuers. The calculation is in this regard are subject to discussion in the following paragraph. One variant of such approach (taking selling price minus profitability)

(xxv) In continuation, the other way to look at it is arriving at the cost price of the items vis-à-vis the excel sheet price. It is stated by the appellant's director in the statement that the items are transferred to the branches at a price which is 30 to 50% below the tag price and the same can be considered the cost of the items. The statement is applicable to all kinds of items of the appellant. This has not been doubted or controverted in the assessment order. There is no retraction by the appellant. For the first time in brief submission dated 01.03.2024 in the appeal proceedings the appellant has commented on the same and the submission is vague and irrelevant and found to be self-serving statement. There is no documentary support with this submission. In such a scenario and in view of the lack of documentation maintenance from the appellant, it is reasonable to use the mean and median rate of 40% to arrive at the cost (thus the cost being 60% of tag & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT price) of the items which are purchased by the appellant. Considering the facts of the case in totality. I consider this percentage rate to be appropriate. In other words, if an item is purchased by the appellant today and the same is transferred to the branch today, the appellant would transfer it at 40% below the tag price on an average. One of the official valuers at Paanch Batti Store had applied rate of 67% on the Tag price for gold items to arrive at the cost price thus allowing a deduction of 33%. Accordingly the appellant gets partial relief in this regard. At the same time some other valuers had applied the raw material-based approach which has been found to be giving lesser than real valuation of cost and not suitable as discussed in above paragraphs. Appellant has inter-alia contended that same or uniform approach should have been used by the official valuers when doing the physical valuation of the stock. The averaging based profit calculation and stock valuation practice regularly followed by the appellant from year to year has also been considered. The valuation method of tag price less 40% has been found to be most suitable. Accordingly, the uniform rate of 40% is to be used to arrive at the cost (thus the cost being 60% of tag price) to arrive at the stock valuation of the stock at all the premises in Jaipur (K-14B, Ashok Marg, C- Scheme Jaipur, Tholia Mansion, Panch Batti, M. I. Road, Jaipur) for all the items purchased recently. The issue that valuation can be done using this rate (subject to issue of increase in metal prices which is discussed in next para) in the above factual background was queried during hearing on which the Id. ARs submitted arguments. The main contention on behalf of the appellant is that in the statement Sh. Rajesh Ajmera initially stated that the cost can be less than this and in the next question he accepted and confirmed that the same can be considered as the cost thereby that some further reduction is possible below this 60% (as arrived above) and that the statement should not be used to arrive at the cost. The appellant/ld. ARs has filed submission on 01-03-2024 on the issue of statement of Sh. Rajesh Ajmera as discussed above. Appellant itself has never submitted a valuation which meets and satisfies various issues raised by appellant itself and is based on documentary evidences. Only objections are being raised. Whereas onus is on the appellant to come clean and place on record a genuine and bonafide valuation which is complete in all respects and is duly supporeted with documents. The contentions of the appellant in submission dated 01-03-2024 are found to be devoid of merit as the statement of the director of the company is very clear and no retraction was filed on this issue and no better exact percentage working has been worked out by the appellant to rebut or counter the rate proposed. These aspects and the most reasonableness of the approach adopted in arriving at 60% ratio as discussed above have also been discussed in earlier part of the discussion. Also, statement recorded in the survey has significant evidence value. In this regard following judgements are referred to.

(xxvii) Firstly, the appellant does not maintain the valuation of the stock on the basis of the latest market price so that it could claim the reduction in the valuation on account of the increase in the precious metal prices. The appellant has not maintained the stock register etcetera and the cost valuation has been done in the past on the basis of averaging and balancing figure in the trading account after estimating the gross profit for the year. The appellant has in a brief submission claimed that the item code includes the number code of the calendar year of purchase of the item. The appellant has also submitted that in the earlier years such year codes were not mentioned in the item codes. As per the appellant itself on some items such codes are mentioned and on some items such codes are not mentioned. Also, this contention of the appellant is a fresh factual contention. No additional evidence application under Rule 46A has been filed in this regard. It has not been shown that such modus operandi was explained during the survey or any time thereafter to the investigation wing or any time thereafter to the learned assessing officer. Further the submission on this issue by the appellant is only in terms of the statement of the appellant without any supporting evidences in terms of purchase bills showing the item codes etc. Further the appellant has also not & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT furnished the old inventory sheets (or old software downloaded excel files) to show the item codes in the earlier years. In fact it is the stand of the appellant that physical stock taking was never done earlier. At the same time it has been verified that the excel sheet downloaded from the software is not available for the earlier period. Further, no separate year stamping or year sticker is pasted on the items. Also it has been found in decision in this order on grounds of appeal number 11 to 13 that apparently the item code represents the design code and thus even going by the argument of the appellant, without accepting, the year in the code would represent the year when this design was designed and incorporated in the records of the appellant and not the year of the purchase of the item. Accordingly this claim of the appellant is rejected. The relevant facts as discussed above are not repeated here for the sake of brevity. Accordingly, considering the facts and material on record, and applying the reasonableness approach, it is hereby held that the stock items found during the survey were purchased on the basis of the averaging of the items in terms of first in first out.

In the case of Jewellers Co. v. Income-tax Officer [1987] 23 ITD 532 (Allahabad)/[1988] 30 TTJ 54 (Allahabad)[19-05-1987] it has been held by the Hon’ble ITAT that “FIFO assumption approximates more closely to the reality”. Hon’ble ITAT also referred to Kanga and Palkhivala’s” The Law and Practice of Income-tax’, Seventh Edition, Volume 1. An extract of the judgment is as under:- x x x x Secondly, in the averaging approach which is being used in the case of the appellant for the valuation of the stock as has been discussed in detail in the earlier paragraphs, the valuation is being done on the basis of cost price as a certain percentage of the tag price. In this approach, the appellant needs to prove that the tag price was being revised regularly as per the increase in the prices of the precious metals, before the claim of deduction on account of increase in precious metal prices is being claimed. However the appellant has not shown so. The appellant is having thousands of items. The appellant has claimed that the prices were manually updated in the software even during the Covid 19 period. The appellant is not having any set formula which can be applied to the weight of the item and the market price of metal to arrive at the final selling price. There is no such automation built into the software. Further, as submitted by the appellant each item of the appellant is claimed to be unique and is having unique mix of metals and composition of stones and designs etc. and thus such automated formula is not possible. Help of the staff is also needed while updating the prices of items in the software however during the start of the Covid period April to Jun 2020 lockdown was in operation and social distancing norms were in force and there was uncertainty or anxiety in social environment. This completely makes the claim of the appellant unnatural and improbable that the prices were revised even during the Covid period in April to June 2020. In the statement of the director of the company, Shri Rajesh Ajmera, there is reference to the sales invoices wherein the items have been sold above the tag price which shows the final selling price may be above the tag price in some cases. The books of accounts where only few entries were to be done are also found to be incomplete for the Covid period then & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT how thousands of entries could have been done regarding the prices. During the Covid period the trading activity was also at the minimum. Further the appellant was not also maintaining the stock registers etc. no evidences have been furnished by the appellant that such price revision was done and this is a mere self-serving statement. Accordingly this claim of the appellant that prices were revised even during the Covid period till/before the date of survey (23 March 2020 to 12 July 2020) is hereby rejected.

(xxxi) The appellant has contended that Ld. AO has opted for different valuation method to value stock for different branch. For instance, for Delhi Branch, the basis of valuation is computerized excel sheet provided by the Appellant during the survey proceedings. As per the excel sheet the value of stock was Rs. 25,59,78,648/- and Ld. AO picked the total of such prices as value of stock at Delhi branch. As stated by the director of the company in the statement that items transferred to the branches are transferred and recorded at the cost. As stated in the assessment order "In the books of a/c of the Branches, goods received from HO are shown as branch transfer purchases and goods returned back to HO are shown as Branch transfer sales. The sales made to customers and the expenses of the branch are also booked in the books of the respective branch. Opening stock and closing stock of the goods lying with branches are also shown in the Trading & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT accounts of the Branches at the transfer price of respective items of jewellery. It is an admitted fact on record that the jewellery / goods are dispatched to branches after making deduction of 30% to 50% from the tagged sale price. The appellant has contended that for Mumbai and Bangalore branch, Appellant has provided similar excel sheet of Rs. 35,58,12,452/- and Rs. 12,90,41,131/-respectively (Refer page no. 41 and 50 of AO order), however, Ld. AO has not considered the same for valuation rather picked high value from incomplete tally, which was not regular tally, and valued the stock at Rs. 53,62,45,741/- and Rs. 16,51,51,691/- for Mumbai and Bangalore Branch. It is thus not clear that the excel sheet and prices w.r.t. Bengaluru and Mumbai locations were also found during the survey or were submitted by the appellant later-on and in that case such excel files cannot be relied with supporting underlying verifiable documentation. The summary of the contention of the appellat in terms of valuation is as under:-

As per the above judgement, the observations of the Hon'ble Allahabad High Court that because the amount was entered in the books of account of the business, there was some material to hold that the amount was income of the assessee from the business and not from some other source, were not approved by the Hon'ble Supreme Court and was reversed, as it was held by the Hon'ble Supreme Court that it assumed it was for the Income-tax Officer to indicate the source of the income which was not the correct legal position and that where there is an explained cash credit, it is open to the Income-tax Officer to hold that it is income of the assessee and no further burden lies on the Income-tax Officer to show that that income is from any particular source. It is for the assessee to prove that even if the (I) The opening words of section 14 'Save as otherwise provided by this Act' clearly leave scope for 'deemed income' of the nature covered under the scheme of sections 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from other sources' because the provisions of sections 69, 69A, 69B, and 69C treat unexplained investments, unexplained money, bullion, etc., and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Section 69C even clearly mentions that such unexplained expenditure will not be deductible under any head of income. Loans given /stock in hand / loan received etc. are otherwise not taxable as these are in the nature of asset/liability/capital nature in the hands of the taxpayer and not in the nature of revenue income. However when these are unexplained in terms of sections 68/69/69A etc. these become income and become taxable. These are the special provisions dealing with the situation and the incomes which are the subject matter of the contention in the appeal and being the specific provisions they are preferred and override the general provisions. Once the income is as per these sections, there cannot be any dispute regarding the applicability of section 155BBE of the Act. These sections are in the nature of complete code in itself. In this regard it is held by Hon'ble Gujarat High Court in Fakir Mohmed Haji Hasan v. Commissioner of Income-tax [2002] 120 Taxman 11 (Gujarat)/[2001] 247 ITR 290 (Gujarat)/[2001] 165 CTR 111 (Gujarat)[10-08-2000] that "62 The opening words of section 14 'Save as otherwise provided by this Act clearly leave scope for 'deemed income of the nature covered under the scheme of sections 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from 'other sources' because the provisions of sections 69, 69A, 69B, and 69C treat unexplained investments, unexplained money, bullion, etc., and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Therefore, in these cases, the source not being known, such deemed income will not fall even under the head, 'Income from other sources'. Therefore, the corresponding deductions, which are applicable to the incomes under any of these various heads, will not be attracted in case of deemed incomes which are covered under the provisions of sections 69, 69A, 69B and 69C in view of the scheme of those provisions."

Accordingly, subject to above discussion, the ground of appeal number 7 and 8 are adjudicated in above terms. Ground of Appeal No. 9 The appellant has raised the following three issues in this ground of appeal • Valuing the stock at the market rate prevailing at the time of survey instead of cost. • without following applicable accounting principle of valuation of stock. • Without appreciating that no quantity of stock was found in excess during survey. The first issue pertaining to the valuation of stock in the market rate prevailing at the time of survey has been dealt with in greater detail in the adjudication of ground of appeal number 7 and 8. The discussion and the adjudication and in those grounds of appeal is hereby referred to and not repeated for the sake of brevity. The conclusion in this regard is that the valuation on the date of survey was not at the market rate prevailing at the time of survey however there were some inaccuracies in the same however the valuation arrived at was less than the market rate prevailing at the time of survey and in some cases even less than the cost which should have been worked out. The valuation has been arrived at in adjudication of ground of appeal number 7 and 8 considering the various objections raised by the appellant. Hence this issue of this ground of appeal is hereby dismissed. The second issue that the valuation was done by the independent government empanelled valuers without following applicable accounting principle of valuation of stock is also without merits. Valuation was done by the government empanelled valuers as per the knowledge and understanding and they are expert in their field. Further the appellant itself has not maintained the sufficient documentation to arrive at the exact cost of each of the unique item and the deficiencies in this regard have been discussed in detail in the carlier part of this order. The different valuers called by the Department took different approaches for the valuation as per their independent assessment of the material at hand and the documentation and the situation further strengthens the view regarding the independence and impartiality of the valuers. The valuation as per this appeal order has been arrived at in adjudication of ground of appeal number 7 and 8 considering the various objections raised by the appellant. Hence this issue of this ground of appeal is hereby dismissed. The appellant has raised another issue that no quantity of stock was found in excess during survey. The appellant has made this claim with a lot of passion ignoring the real facts of the case. The question of excess quantity arises only when a quantity has been recorded in the books of accounts and the same as & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT compared with the actual quality found in the physical verification during the survey. However in the present case the appellant has not maintained the quantity in the stock register. As per the tax audit report no stock register has been maintained. Even in the purchases and sales the appellant has not maintained the quantities. Even during the appellate proceedings the appellant has not produced the details of quantities of opening stock and the quantities of the purchases and the quantities of the sales and the quantities of the closing stock as per books of accounts both in terms of the quantity and in terms of the value. Once the quantities comparison (quantity actually found during the survey versus the quantity shown in the books of accounts) is not possible due to non-maintenance of the details by the assessee, the comparison is to be made on the valuations of the stock shown in the books of accounts and of the stock found actually. The details in the software or the excel file are in the nature of the actual stock found during the survey. The software or the excel file prepared from the same during the course of the survey is in the nature of incriminating undisclosed document material unearthed during the course of survey That the valuation of the stock as per this data is more than the valuation of the stock shown by the appellant in the books of accounts, itself shows that the appellant had excess stock or the undisclosed stock over and above the stock shown in the books of accounts. Further this issue has been discussed in detail in the adjudication of ground of appeal no. 7 and 8 and the same is referred to and not repeated here. Hence this argument of the appellant that no excess quantity was found during the survey is completely erroneous and is hereby dismissed.

(iii) Shri Rajesh Ajmera, Director of the assessee company stated that nine items were sent for repairs. There is no explanation available with the director with respect to the remaining 32 items. Further regarding the 9 items which were claimed to have been sent for the repairs, it was asked from the director of the company to furnish the challan in support of this claim however the same were not produced and it was stated that such documents will be produced within 15 days however even after lapse of very long period such documents were not produced. And have not been furnished till date. As per the appellant the details of the items were furnished on 05.04.2021 this letter only has an annexure having the list of items along with some names and dates claiming to be the names of the persons to whom such items were sent for repair. However the documents like challan, gate pass, acknowledgement of the receiver, the terms of the repairs required, repair cost quote document by the artisan, etcetera were not furnished. None of such documents were found during the survey not even for one of such items. (iv) In the letter dated 05.04.2021 (Pg 905 of PB) the appellant has claimed that 11 items were traced on the date of survey itself and were shown on 13.07.2020. However the statement appears to be baseless and mere self-serving. There is no reference to any document prepared on the date of survey or statement recorded during the survey in which such matching of 11 items is discussed. Further in the & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT statement of the director recorded on 16.07.2020, the director was asked to reconcile the missing 41 items (and not the missing 30 items). In the reply also the director is not referred to such 11 items and he has only referred to the claim that 9 items were sent on repairs. Thus on 16.07.2020, statements/language of both the revenue authorities as well as of the appellant, shows that none of the party had any doubt that all the 41 items were still unreconciled and unverified. Thus the assertion in this letter, after nine months of the survey and that too without any supporting, is rejected.

(x) These affidavits are silent on why and for what purpose these affidavits have been prepared. These affidavits are also silent on the various issues as discussed above of the procedure and the details of requirement from the appellant and the amounts charged etcetera. These affidavits also do not have any enclosure of the documents received from the appellant along with the jewellery items when such items. were allegedly given for the repairing/rework/refurbishing to substantiate the contents of the affidavits. The affidavits are also silent on the specific history and relationship of the individuals with the appellant. Bills raised by them are also not referred. At the same time the appellant itself is a manufacturer of the jewellery and its associated concerns are also in the same business, in such a case the claim of sending the jewellery items to the individuals with whom the appellant has claimed the relationship in terms of only 'repairs' is very much unprobable and unlikely. The tasks performed by such individuals as stated by them in their affidavits appear to & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT be very basic like cleaning and polishing, laser soldering. stone polishing, stone change, daak change etc. and one person Mr Ankur Jain has stated to have done all these tasks in his affidavit with respect to various different items. Such tasks can easily be done by the manufacturing team of the appellant as well as of its group entities and as well as by the manufacturing job workers. In fact one of the affidavit is from one of the group entity of the appellant. However at the same time the appellant has not furnished the balance sheet and the profit and loss account etcetera of Amrapali design studio to see whether the income on account of repairs is being shown in the earlier years as well. At the same time if the item was given in repair to the group entity that should have been immediately informed during the survey and after the survey as the employees and the directors of the appellant company had sufficient time and opportunity to recall the details and also discuss the things amongst themselves. However that was not done. It shows afterthought on account of the appellant.

Page number 120 of Exhibit 3 of Annexure AS: The Id. AO has held that expenses of Rs.2,00,000/- were made under various heads by the assesse. Id. AO has mentioned heads' in the assessment order whereas the relevant part of the documents refers to some names as well. The relevant part of the notings refer to instalment', 'AK', Bhim ji' etc. and opposite the total 'net required' has been written. Which shows the expenditure had not been incurred. The part of the document relied upon in the assessment order is a dumb document as neither there is reference to appellant or appellant's business, nor details of parties (except some first names)/purpose deciphered to whom such payment was done, nor the document is also not supported through any statement recorded or through an enquiries and also the diary has been explained to be belonging to ex-employee and date also explained by appellant. In view of the discussion in the paragraphs above of this ground of appeal and in this para, and considering the submissions of the appellant, this addition is hereby directed to be deleted. Back side of page number 122 of Exhibit -3 of Annexure AS: Ld. AO has held that expenses of Rs.5,55,000/- were made under various heads by the assesse. Ld. AO has mentioned 'heads' in the assessment order whereas the relevant part of the documents refers to some names like Abhishek, Sanjay, Om Singh etc. and no heads are mentioned. Except name and amount nothing is mentioned. The part of the document relied upon in the assessment order is a dumb document as there is neither reference to appellant or appellant's business, nor no details of parties (except some first names)/purpose deciphered to whom such payment was done, nor the document is also supported through any statement recorded or through an enquiries and also the diary has been explained to be belonging to ex-employee and date also explained by appellant. In view of the discussion in the paragraphs above of this ground of appeal and in this para, and considering the submissions of the appellant, this addition is hereby directed to be deleted. Accordingly appeal of the appellant on the grounds of appeal number 15 and 16 is hereby allowed.

2. Physical verification was not done by Delhi, Mumbai and other Branches including Franchise Stock 3. No case of understatement of consideration made by Ld. AO 4. Metal price impact not considered by Ld. CIT(A) 5. Statement of Mr. Ajmera cannot be relied upon 6. Other submission with respect of application of Section 69B. Written Submission Reference (Vol. 9 paper Book, Internal Page) • Page No. 51, Para No.A.10 (Stock lying in Delhi is as per computerized stock list) • Page No.52, Para No.B.2(No physical verification) • Page No.88-89, Para No.128-130(Different branches different method of valuation) 7. Stock at No Physical verification Franchisees AO has accepted taken the value as per our books, which is accepted and not disputed. (Reference Page no. 941 of PB Vol. 5.). This acceptance also implied accept the cost valuation of Rs. 132 Crore taken by Assessee as per books of accounts as no dispute raised on cost given for Franchise items. • No case of understatement of consideration made by Ld. AO 8. Stock with • Other submission with respect of application of Section 69B. Consignment agent USA • Value of consignment stock at various location taken from incomplete tally wherein accounting entries were pending • Correct ledger statement duly submitted in assessment proceedings, duly supported by documentary evidence like Bills, bill of entries, item wise return list etc. (which has not been considered) Reference Vol. 6 Paper Book for example page no. & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT S. Location ASSESSEE SUBMISSION No. 963, 1034, 1037 followed by 1027 etc.) • Accounting entries of returns remained to be accounted in tally found which is duly established by leading supporting documents (Vol. 8) Written Submission Reference (Vol. 9 paper Book, Internal Page) • Page No. 59-61(No physical verification, balance receivable from consignee as on 31.03.2020 was Rs. 37,15,798/- PB No. 964 of Vol. Vol-6. • No accounting was done before the survey • Followed by custom documents in the same paper book like pages 967, 968, 1015 • Invoice at Page No. 990 verifiable from custom document at 1015 • Invoice for entry at page no. 963, r.w.s. custom document at 1016 • verification submitted during hearing

Copy of the Statement of Mr. Rajesh Ajmera u/s 131 of the Act from 122-144 Vol. 1 14.07.2020 to 16.07.2020 6. Copy of objection letter to Ld. DIT(Inv.), Jaipur dated 21.07.2020 145-146 Vol. 1 7. Copy of Valuation reports of Independent Valuer Mr. Kamal Kumar 147-838 Vol. 2 Kasliwal dated 30.07.2020 Vol. 3 Vol. 4 8. Copy of valuation report of Stock in trade by Department valuer Mr. 839-851 Vol. 5 Kailash Chauhan 9. Copy of valuation report of Stock in trade by Department valuer Mr. 852-861 Vol. 5 Kamal Kant Parekh 10. Copy of valuation report of Stock in trade by Department valuer Mr. 862-867 Vol. 5 Jagdish Chandra Jajoo 11. Copy of objection letter dated 18.08.2020 against the valuation done 868-870 Vol. 5 by Income Tax Department 12. Copy of letter dated 11.03.2021 submitted by Assessee regarding 871-875 Vol. 5 details of stock in trade as on 31st March 2020 and 13th July 2020. 13. Copy of letter dated 11.03.2021 submitted by Assessee for details of 876 Vol. 5 jewellery along with ownership at Museum. Copy of Annexure 1 of above letter containing details of Jewellery & Vol. 5 Articles at Museum of: i. Mr. Rajiv Arora 877 ii. Rajiv Arora HUF 878 iii. Mr. Rajesh Ajmera 879 iv. Mrs. Neeru Arora 880 v. Amrapali Jewels Pvt. Ltd. 881-882 14. Copy of Notice issued u/s 143(2) of the Act dated 21.02.2022 883-890 Vol. 5 15. Copy of letter in response to notice issued u/s 143(2) of the Act 891 Vol. 5 16. Copy of Notice issued u/s 142(1) of the Act dated 23.11.2022 892-902 Vol. 5 17. Copy of Reply dated 30.11.2022 submitted in response to point no. 1 903-904 Vol. 5 to 4 of notice issued u/s 142(1) of the Act dated 23.11.2022 i. Copy of Annexure 5 of above reply containing letter submitted to 905-908 Vol. 5 DDIT (Inv.) with complete details of items sent for repair. 18. Copy of Reply dated 23.12.2022 submitted in response to point no. 5 909-936 Vol. 5 of notice issued u/s 142(1) of the Act dated 23.11.2022. i. Copy of Annexure 1 of above reply containing details of stock lying 937-941 Vol. 5 at branches/other outlets and Franchisees and Consignment agent as at 31.03.2020 and 13.07.2020 to ADIT Inv. - 3, Jaipur ii. Copy of Annexure 2 of above reply which is submission of 942-943 Vol. 5 Assessee dated 21.07.2020 iii. Copy of Annexure 3 of above reply which is valuation report of Refer S.No. Vol. 5 Department Valuer Mr. Kamal Kant Parekh 7 iv. Copy of Annexure 4 of above reply which is objection dated 944-948 Vol. 5 18.08.2020 of Assessee on methods adopted by Departmental Valuers v. Copy of Annexure 5 of above reply which is month wise rate chart 949 Vol. 5 of Gold and Silver of last 3-4 year downloaded from RBI site. vi. Copy of Annexure 6 of above reply which details of jewellery along 950-956 Vol. 5 with ownership at Museum. vii. Copy of Annexure 7 of above reply which is copies of tax invoice 957-962 Vol. 5 for stock transfer from Bangalore to HO. viii. Copy of Annexure 8 of above reply which is related to returns of 963-1033 Vol. 6 consignment sales to USA. ix. Copy of Annexure 9 of above reply which is details of stock lying 963-1033 Vol. 6 with consignee (USA) as on 31.03.2020 x. Copy of Annexure 10 of above reply which is related to returns of 1034-1137 Vol. 6 consignment sales to UK. xi. Copy of Annexure 11 of above reply which is details of stock lying 1034-1137 Vol. 6 with consignee (UK) as on 31.03.2020 xii. Copy of Annexure 12 of above reply which is related to returns of 1138-1146 Vol. 6 consignment sales to Doha Jewellery Exhibition. xiii. Copy of Annexure 13 of above reply which is related to returns of 1147-1150 Vol. 6 consignment sales to Hongkong.

2. 7-11 Commissioner of 5. This Court had in the decision reported as CIT v. Dinesh Income-tax, Delhi Jain, HUF [2013] 352 ITR 629/[2012] 211Taxman 23/25 -I taxmann.com 550 and connected cases occasioned to consider v. an identical question. Afternoticing the relevant provision, i.e. Agile Properties Section 69B, the Court noticed in paragraph 9 as follows: — (P.) Ltd, [2014] 45 13. The error committed by the income-tax authorities in taxmann.com 512 the present case is to jump the first step in theprocess (Delhi) of applying section 69B – that of proving understatement of the investment – and apply themeasure of understatement. If anything, the language employed in section 69B is in stricter terms thanthe erstwhile section 52(2). It does not even authorise the adoption of any yardstick to measure theprecise extent of understatement. There can therefore be no compromise in the application of the section.It would seem to require the Assessing Officer even to show the exact extent of understatement of theinvestment; it does not even give the Assessing Officer the option of applying any reasonable yardstick tomeasure the precise extent of understatement of the investment once the fact of understatement is proved.It appears to us that the Assessing Officer is not only required to prove understatement of the purchaseprice, but also to show the precise extent of the understatement. There is no authority given by the sectionto adopt some reasonable yardstick to measure the extent of understatement. But since it may not bepossible in all cases to prove the precise or exact amount of undisclosed investment, it is perhapsreasonable to permit the Assessing Officer to rely on some acceptable basis of ascertaining the marketvalue of the property to assess the undisclosed investment. Whether the basis adopted by the AssessingOfficer is an acceptable one or not may depend on the facts and circumstances of the particular case. Thatquestion may however arise only when actual understatement is first proved by the Assessing Officer. Itis only to this extent that the rigour of the burden placed on the Assessing Officer may be relaxed in caseswhere there is evidence to show understatement of the investment, but evidence to show the preciseextent thereof is lacking.' 3 GayatriEnterprise 29. The Delhi HighCourt in the case of CIT v. Bajrang Lal 12- v. Bansal [2011] 335 ITR 572/200 Taxman 188 (Mag.)/12 31 Income-tax taxmann.com 88 held as under: Officer, Ward "5. Ms. Rashmi Chopra, learned counsel for the revenue 1(2)4 [2020] 116 submitted that the Tribunal had erred in law in deleting the taxmann.com 359 addition of 99,33,000/- as undisclosed income of the (Gujarat) respondent-assessee under Section 69B of the Act, 1961.

Section 69B of the Act is not applicable if AO does not prove that the Assessee has made purchase which exceed the purchase recorded in the books of account 4. Dilshad Trading Co. 8………………………..Provisions of section 69B can be invoked 32-35 (P) if(i) it is found that the assessee has made investment; (ii) it is Ltd. v. ITO, [1994] found that the amount expended on making such investment 49 ITD 348 (Bom- exceeded the amount recorded in that behalf in the books of Trib.) account; and (iii) either the assessee offers no explanation about such excess amount or the explanation offered is not satisfactory in the opinion of the Assessing Officer. These three findings are cumulative to be recorded on gathering the necessary facts, but the basic finding which is to be recorded on clear and cogent material is in respect of the amount expended by the assessee in excess of that shown in the books of account. In the instant case, the onus was on the department to show that the assessee had expended extra amount therefore, merely because there existed some comparable cases showing higher price in respect of similar transactions, it could not be said that the assessee had expended extra amount. Therefore, no addition could be made. There also did not exist any other material either by way of confession from some connected person with regard to the extra amount having been spent by the assessee or by way of a finding that the books of account of the assessee were not found to be reliable in any of the years when the records were examined by the Commissioner 5. M/s DDK Spinning 10. It is a settled proposition of law that the statement recorded 36-52 Mills vs The DCIT u/s 131 during the course of survey has no evidentiary value in Circle-3, [2023] 157 absence of any corroborative evidence on record and in this taxmann.com 817 regard, useful reference can be drawn to the decision of Hon’ble (Chandigarh - Madras High Court in case of CIT vs Khader Khan Son reported Trib.): in 300 ITR 157 wherein it was held that statement recorded during the course of survey u/s 133A has no evidentiary value as the officer is not authorized to administer the oath and to take any sworn statement which alone has evidentiary value as contemplated under law and reference was drawn to provisions of section 132(4) which enables the authorized officer to examine person on oath and where any such statement so recorded can be used in evidence under the Act. In that case, it was held by the Hon’ble High Court that basis statement of one of the partner’s of the assessee firm, it cannot be held that disclosed income was assessable as lawful income of the assessee firm since there was no material on record to prove the existence of such disclosed income or earning of such income in the hands of the assessee and it cannot be held that Revenue has lost lawful tax payable by the assessee. Therefore, in our considered view, in the instant case, the statement of the partner of the assessee firm recorded u/s 131 during the course of survey and subsequent affirmation thereof by the assessee by way of surrender letter on a standalone basis and without any corroborative evidence doesn’t fulfill the statutory mandate of deeming provisions which provides that it is for the Assessing officer to records a finding that the assessee has made investments during the financial year in the construction/purchase of the building and the amount expended on making such investments in the building exceeds the amount recorded in this behalf in the books of account so maintained by the assessee and for the purposes of recording such a finding, there has to be some tangible material in possession of the Assessing officer which demonstrate that certain amount has been actually expended by the assessee during the year towards the purchase or construction of the building which is clearly absent in the instant case. Therefore, the statement of the one of the partners of the assessee firm without any corroborative evidence cannot come to the aid of the Assessing officer for the purposes of invoking the deeming provisions of Section 69B of the Act.

8. The Asst. 15. Coming back to difference in value of stock amounting to 106- Commissioner- of Rs.28,11,13,718/-. Admittedly, the Survey Team and the AO 137 Income Tax vs M/s. could not establish existence of unaccounted stock in terms of Saratha’s, 45, quantity of stock. In fact, the AO and the Survey Team both N.S.B. Road, ITA agreed that ‘physical stock’ found at the time of survey in terms No.568/Chny/2022 of quantity is matching with stock in trade maintained with books of accounts of the assessee. In fact, all stock in trade found during the course of survey, is having tag price which is covered by valid purchase bills. The assessee has explained difference in value of stock by filing reconciliation statement. According to the assessee, the AO allowed deduction towards 5% GST, even though, the average GST component embedded in selling price works out to 8.5%. The assessee further claimed that the GP declared by the assessee for the impugned assessment year works out to 27.71%. The assessee has claimed deduction towards ‘obsolete stock’ @2% stock in trade. If you exclude correct amount of GST & GP and also towards ‘obsolete stock’ the difference in stock in trade value quantified by the Survey Team comes down to Rs.98,83,528/-. Although, the assessee could able to explain difference in stock in trade value quantified by the Survey Team before the AO but had admitted additional income on account of difference in value of Rs.28,11,13,718/- under the head ‘income from business’ and also paid taxes. The AO assessed said difference u/s.69B of the Act, only on the ground that the assessee could not able to explain source for ‘excess stock’ found during the course of survey. As we have already stated in earlier part of this order, there is a fundamental difference between ‘excess stock’ and ‘excess value of stock’. If there is an ‘excess stock’ in terms of quantity and the same has not been recorded in the books of accounts maintained for that year, then, the same needs to be treated as deemed income in terms of s.69B of the Act. If there is no ‘excess stock’ in terms of quantity but there is a difference in value of stock on account of different method of valuation of stock, then, such difference cannot be assessed u/s.69B of the Act, as unexplained investment. The assessee has right from the beginning explained that stock difference quantified by the Survey Team is incorrect due to various factors including incorrect application of GST and incorrect application of GP. Since, there is no difference in stock in trade in terms of quantity, in our considered view, the assessee has rightly offered additional income towards difference in value of stock under the head ‘income from business’ and this principle is squarely covered by the decision of the Hon’ble jurisdictional High Court in the case of SVS Oil Mills v. ACIT (supra) and also decision of the Tribunal in the case of Lovish Singhal & Others v. ITO 53 CCH 0250 (Jodhpur). Therefore, we are of the considered view that the AO is erred in assessing additional income offered by the assessee towards difference in value of stock u/s.69B of the Act r.w.s.115BBE of the Act. Section 69B not applicable on stock in trade

10. M/s. Supremo India 10. The Hon’ble Apex Court has analyzed the provision of 147- Pvt. Ltd. 400/2 vs section 69, 69A & 69B and particularly the term other valuable 175 ACIT Central-3 articles as employed in the provision of section 69B of the Act. In Indore, ITA the light of the Doctrine of ejusdem generis & noscitur a sociis it No.29/Ind/2023 is held that other valuable articles as provided in section 69A & 69B of the Act must be read ejusdem generis and statutory interpretation would be that a generic word receives a limited interpretation by reason of its context and take its meaning from the specific term used in the provision. Therefore, the term other valuable articles would draw the meaning from the specific terms used in the provision of section 69B which is bullion and jewellery. Hence the other valuable articles shall be in the nature of the valuable article like bullion and jewellery and therefore, it must be a substitute of money like bullion and jewellery which has the liquidity and negotiability like money/currency. Therefore, in view of the judgment of Hon’ble Supreme Court as well as the decision of Hon’ble Rajasthan High Court and Coordinate Bench of this Tribunal cited (supra) the excess stock found during the course of search which is not separable from the whole lot of stock of the assesse generated as a result of business activity of the assessee company and the same cannot be brought into mischief of provision of section 69B of the Act. Accordingly, this issue is decided in favour of the assesse and against the revenue. The orders of the authorities below qua this issue are set aside 11. Chokshi Hiralal 9.In the instant case, excess stock found during the survey was 176- Maganlal v. DCIT, not separately and clearly identifiable but it was part of mixed 182 Circle 12, lots of stock found at the premises which included declared Ahmedabad [2011] stock as per books and also the excess stock as computed by 45 SOT 349 the survey officers. The provisions of section 69B could not be (Ahmedabad) made applicable as primary condition for invoking the provisions of sections 69A, 69B is that the asset should be separately identifiable and it should have independent physical existence of its own. Valuation of Jewellery should be made at cost price only

S.S. Jyothi Prakash v. 14. The aforesaid shows that the primary burden to 1-6 Additional Commissioner of prove the understatement or concealment of the Income-tax* [2016] 71 income by way of unexplained investment is on the taxmann.com 127 revenue and it is only when such burden is (Karnataka) IT APPEAL NO. discharged, it would be permissible to rely upon the 460 OF 2010 JUNE 7, 2016 valuation given by the District Valuation Officer. Further, it was also held that if there was no evidence or material in possession to come to the conclusion that the assessee had paid extra consideration over and above what was stated in the sale deed, the District Valuation Officer's report cannot be a sole basis for assessment of the income. It was further held that opinion of the District Valuation Officer per se was not sufficient and the other corroborative evidence was required. (Para 14) 2. Shri Nanda Ram V & PO 11. As regards the other issue as we have noted that 7-52 Bilu, Makrana, Nagour V/s in earlier paras that the ld AO made the addition as ITO, Ward-1, Makrana I.T.A. per provision of section 69B of the Act. The said No. 190/Jodh/2024 & provision reads as under: Amount of investments, 191/Jodh/2024 Assessment etc., not fully disclosed in books of account. 69B. Years: 2014-15- & 2017-18- Where in any financial year the assessee has made Income Tax Appellate investments or is found to be the owner of any Tribunal Jodhpur Bench bullion, jewellery or other valuable article, and the Assessing Officer finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year. As is evident from the above provision of law that the same can be invoked only if; (a) It is found that the assessee has made investment or the assessee is found be the owner of any bullion, jewellery or other valuable article,and (b) it is found that the amount expanded on making such investment or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in that behalf in the books of account maintained by the assessee, and (c) either the assessee offers no explanation about such excess amount, or the explanation offered by him is not satisfactory. As we note that these cumulative circumstances need to be existed, which are failed and the Ld. AO in the assessment order merely on the presumption and assumption added the amount on the re-casted trading account. Based on these facts no addition u/s. 69B of the Act can be made in the hands of the assessee. We get support of our view from the decision of our Hon’ble Jurisdiction High Court in the case of Smt. Amar Kumari Surana v. Commissioner of Income-tax [ 89 TAXMAN 544 (RAJ.) ] (Para 11) 3. Smt. Amar Kumari Surana v.

9. So far as the finding that the money and valuable articles are owned by the assessee is concerned, the burden is squarely on the revenue because it is only on reaching such finding the opinion that can be given about the source of its acquisition. It is only on establishment of ownership of such articles either on admission of the assessee or otherwise if assessee fails to explain satisfactorily the source of acquisition of such valuables that section 69A can be invoked for making additions into the total income of the assessee value of such articles as income from undisclosed sources for the assessment year relevant to previous year during which the assessee is found to be owner of such valuable articles. Therefore, the burden of proving ownership of the assessee in valuables found in possession of the assessee rests on the revenue and not with the assessee. (Para 7,8,9) 5. Commissioner of Income-tax 5. The Income Tax Appellate Tribunal also 66-69 v. Gian Gupta* [2014] 46 examined this issue once again and came to the taxmann.com 372 (Delhi) IT conclusion that as the transaction itself never took APPEAL NO. 955 OF 2011 place, there would be no question of investment MAY 8, 2014 and, therefore, no question of any unexplained investment. The amount of Rs 1 crore, which was paid by cheque, was returned as the transaction had fallen through. The Tribunal also took the view that the onus was on the Assessing Officer to establish that an investment of Rs 1 crore in cash had been made. That onus was not discharged and, therefore, it could be concluded that an unexplained investment of Rs 1 crore in cash had been made by the assessee. The exact findings of the Tribunal are as under: — "5. On due consideration of the above facts, we are of the opinion that the Assessing Officer Assessing Officer has given unnecessary weightage to the copy of MoU. The factum of transfer of a capital asset by Mrs Jind Singh in favour of the assessee was not established. The case of the assessee is that he has not purchased any land. The alleged MoU is a document exhibiting the negotiation of the purchase of land, but it never materialized. The Assessing Officer has erroneously observed that it is for the assessee to establish that land was not purchased. In our opinion, for charging the assessee with tax on account of unexplained investment, it is the Assessing Officer who ought to have established that land was purchased by the assessee and he failed to disclose the source of such purchase. Instead of discharging this onus, learned Assessing Officer treated a document as gospel truth and tried to put an onus upon the assessee to prove a negative fact which is not permissible in law. Learned First Appellate Authority has rightly considered this aspect and deleted the addition."

After having heard the counsel for the parties on this issue of the deletion of the addition of Rs 1 crore on account of the alleged unexplained investment, we are of the view that the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal have deleted the said addition on examination of facts. In our view, no question of law arises for our consideration. The facts, as established on record, do not point conclusively to unexplained investment of Rs 1 crore in cash by the assessee particularly because the MoU as well as the receipt in question were unsigned documents and the transaction had not materialized. (Para 5 & 6) 6. Commissioner of Income-tax That question was answered by this Court in favour 70-72 v. Sadhna Gupta* [2013] 32 of the assessee and against the revenue. The taxmann.com 185 (Delhi) IT Division Bench in the case of Puneet Sabharwal APPEAL NO. 434 OF 2012 (supra) had also placed reliance on the decision of MARCH 6, 2013 Supreme Court in K.P. Varghese (supra) as also on another decision of a Division Bench of this Court in CIT v. Smt. Suraj Devi [2010] 328 ITR 604/[2011] 197 Taxman 173 (Delhi) (Mag.) wherein this Court held that the primary burden of proof with regard to concealment of income was on the revenue and it was only when the said burden was discharged that reliance could be placed on the valuation report of the DVO. There are several other decisions of this Court in the same vein. One such case being the case of CIT v. Vinod Singhal (IT Appeal No.482/2010 decided on 05.05.2010) where, again, reliance was placed on the very same decision of the Supreme Court in K.P. Varghese (supra) and also on a decision of this Court in CIT v. Smt. Shakuntala Devi [2009] 316 ITR 46. It was observed that there must be a finding that the assessee had received an amount over and above the consideration stated in the sale deed and for this the primary burden was cast on the revenue. It is only when this burden is discharged by the revenue that it would be permissible to rely upon the value as given in the valuation report of the DVO. (Para 4) 7. Commissioner of Income-tax 8. As far as question No. 2 is concerned, as already 73-75 v. Puneet Sabharwal* [2011] indicated above, the Assessing Officer solely relied 16 taxmann.com 320 (Delhi) upon the report of the District Valuation Officer. IT APPEAL NO. 758 OF 2005 Apart from this, there was admittedly no evidence or DECEMBER 3, 2010 material in his possession to come to the conclusion that the assessee had paid extra consideration over and above what was stated in the sale deed. This very issue has come up for consideration before this court repeatedly and after following the judgment of the Supreme Court in the case of K. P. Varghese (supra), the aforesaid proposition of law is reiterated time and again. For our benefit, we may refer to the latest judgment of this court in the case of CIT v. Smt. Suraj Devi [2010] 328 ITR 604 (Delhi), wherein this court had held that the primary burden of proof to prove understatement or concealment of income is on the Revenue and it is only when such burden is discharged that it would be permissible to rely upon the valuation given by the District Valuation Officer. It was also held that the opinion of the Valuation Officer per se was not an information and could not be relied upon without the books of account being rejected which had not been done in that case.

13. The Tribunal lost sight of the fact that section 69 94-98 Commissioner of Income-tax of the Act opens with the words "where in the IT REFERENCE NO. 287 OF financial year immediately preceding the 1994 DECEMBER 22, 2005 assessment year, the assessee has made [2006] 154 TAXMAN 55 investment...". Therefore, in the first instance it was (GUJ.) HIGH COURT OF incumbent upon the authority to establish that there GUJARAT were investments made by the assessee; that such investments were not recorded in the books of account maintained by the assessee; and that, such investments had been made in the financial year immediately preceding the assessment year in question. Unfortunately, despite the CIT(A) having recorded a categorical finding, the Tribunal has failed to appreciate the said finding and dealt with the same without giving cogent reasons. If the Tribunal found that the said finding was not correct, it was necessary for the Tribunal to have recorded reasons for reversing the same. The observation of the Tribunal that the difficulty as to financial year had to be finalised in accordance with the provisions and the date of search and seizure is too general and vague. It does not indicate anything. When the provision requires fulfilment of certain prerequisite conditions before the assessee can be called upon to explain, the Tribunal has to record its finding on this issue in a specific manner, because the case of the assessee all along has been that in the first place the seized documents do not reflect any investments, in the second place, even if the entries could be treated as investments made by the assessee, it was further necessary to show that such investments have been made by the assessee in the financial year immediately preceding the assessment year and are not recorded in the books maintained by the assessee. The Tribunal’s order does not record any findings. In fact, the Tribunal is & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT hardly aware, it appears, as to what the requirements of section 69 are, and if it is aware, it has consciously chosen to ignore the same. It could not have done so in face of the finding recorded by CIT(A) on this issue. (Para 13)

& 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Hazi Hasan 247 ITR 290 that unaccounted income ought to be categorized under the residuary head of 'Income from other sources'. In respect to the said issue, the findings of the Coordinate Bench are as follows: "We have heard the rival contentions and perused the material available on record. Undisputed facts emerged from the record that at the time of survey excess stock was found. It is also not disputed that assessee is engaged in the business of jewellery. During the course of survey excess stock valuing Rs. 77,66,887/- was found in respect of gold and jewellery. The Coordinate Bench in the case of Choksi Hiralal Mangnlal v. DCIT 131, TTJ (Ahd.) 1 has held that in a cases where source of investment/expenditure is clearly identifiable and alleged undisclosed asset has no independent existence of its own or there is no separate physical identity of such investment/expenditure then first what is to be taxed is the undisclosed business receipt invested in unidentifiable unaccounted asset and only on failure it should be considered to be taxed u/s 69 on the premises that such excess investment is not recorded in the books of account and its nature and source is not identifiable. Once such excess investment is taxed as undeclared business receipt then taxing it further as deemed income under section 69 would not be necessary. Therefore, the first attempt of the assessing authority should be to find out link of undeclared investment/expenditure with the known head, give opportunity to the assessee to establish nexus and if it is satisfactorily established then first such investment should be considered as undeclared receipt under that particular head. It is observed that there is no conflict with the decision of Hon'ble Gujarat High Court in the case of Fakir Mohd. Jajihasan (supra) where investment in an asset or expenditure is not identifiable and no nexus was established then with any head of income and thus was not available for set off against any loss under any other head. Therefore, the Hon'ble Coordinate Bench held that where asset in which undeclared investment is sought to be taxed is not clearly identifiable or does not have independent identity but is integral and inseparable (mixed) part of declared asset falling under a particular head, then the difference should be treated as undeclared business income explaining the investment. In the present case the excess stock was part of the stock. The revenue has not pointed out that the excess stock has any nexus with any other receipts. Therefore, we do not find any fault with the decision of the ld. CIT(A) directing the AO to treat the surrendered amount as excess stock qua the excess stock found." 2.10. We have heard the rival contentions and perused the material available on record. During the course of survey, the assessee has surrendered an amount of Rs. 70,04,814/- towards investment in stock of rice which had not been recorded in the books of accounts. Subsequently, in the books of accounts, the assessee has incorporated this transaction by debiting the purchase account and crediting the income from undisclosed sources. In the annual accounts, the purchases of Rs. 70,04,814/-were finally reflected as part of total purchases amounting to Rs. 33,47,19,658/- in the profit and loss account and the same also found included as part of the closing stock amount to Rs. 1,94,42,569/-in the profit/loss account since the said stock of rice was not sold out. In addition to the purchase and the closing stock, the amount of RS. 70,04,814/- also found credited in the profit and loss & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT account as income from undisclosed sources. The net effect of this double entry accounting treatment is that firstly the unrecorded stock of rice has been brought on the books and now forms part of the recorded stock which can be subsequently sold out and the profit/loss therefrom would be subject to tax as any other normal business transaction. Secondly, the unrecorded investment which has gone in purchase of such unrecorded stock of rice has been recorded in the books of accounts and offered to tax by crediting the said amount in the profit and loss account. Had this investment been made out of known source, there was no necessity for assessee to credit the profit/loss account and offer the same to tax. Accordingly, we do not see any infirmity in assessee's bringing such transaction in its books of accounts and the accounting treatment thereof so as to regularise its books of accounts. In fact, the same provides a credible base for Revenue to bring to tax subsequent profit/loss on sale of such stock of rice in future. 2.11. Having said that, the next issue that arises for consideration is whether the amount surrendered byway of investment in the unrecorded stock of rice has to be brought to tax under the head "business income" or "income from other sources". In the present case, the assessee is dealing in sale of foodgrains, rice and oil seeds, and the excess stock which has been found during the course of survey is stock of rice. Therefore, the investment in procurement of such stock of rice is clearly identifiable and related to the regular business stock of the assessee. The decision of the Co-ordinate Bench in case of Shri Ramnarayan Birla (supra) supports the case of the assessee in this regard. Therefore, the investment in the excess stock has to be brought to tax under the head "business income" and not under the head income from other sources". In the result, ground No. 1 of the assessee is allowed.” (Emphasis supplied) As per the above judgement (i) source of investment/expenditure is (should be) clearly identifiable and (ii) undisclosed asset has no independent existence of its own or (iii) there is no separate physical identity of such investment/expenditure Further, in the judgement of Hon’ble High Court in the case of Principal Commissioner of Income-tax v. Bajargan Traders [2017] 86 taxmann.com 295 (Rajasthan)[12-09-2017], the paras from the judgement of Hon’ble ITAT in the case of ‘Bajargan Traders’ have been extracted and in the judgement of the Hon’ble ITAT there is reference and reliance upon another judgement of Hon’ble ITAT in the case of Shri Ramnarayan Birla (in dated 30.09.2016). Hon’ble ITAT in the case of Shri Ramnarayan Birla (in ITA No. 482/JP/15 dated 30.09.2016) which is relied upon by the Hon’ble ITAT in the case of Bajrang Traders, it is held by the Hon’ble ITAT that the first attempt of the assessing authority should be to find out link of undeclared investment/expenditure with the known head, give opportunity to the assessee to establish nexus and if it is satisfactorily established then first such investment should be considered as undeclared receipt under that particular head. Hon’ble Supreme Court in Devi & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Prasad Vishwanath [1969] 72 ITR 194 (SC) has given a verdict upholding the reverse view that onus to identify the source solely lies on the assessee and it cannot be shifted to the assessing authority. Hon’ble ITAT in the case of Shri Ramnarayan Birla (in ITA No. 482/JP/15 dated 30.09.2016) which is relied upon by the Hon’ble ITAT in the case of Bajrang Traders, it is held by the Hon’ble ITAT that “The revenue has not pointed out that the excess stock has any nexus with any other receipts”. As as per judgement of Hon’ble Supreme Court there is no onus on the assessing authority to look for or identify the sources. As per the ratio of the judgement, it cannot be the case that if the AO has not proved the source from some other receipts then the source is to be treated as business income of the year. Hon’ble Supreme Court in the case of Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC)[01-08-1968, held that onus to identify the source cannot be shifted on the assessing authority. If the assesse claims so, the assesse is required to prove the same. This judgement has been referred in detail in the later part of this order. Hon’ble ITAT in the case of Shri Ramnarayan Birla (in ITA No. 482/JP/15 dated 30.09.2016) which is relied upon by the Hon’ble ITAT in the case of Bajrang Traders, also observed that the in the case of Choksi Hiralal Mangnlal v. DCIT 131, TTJ (Ahd.) 1 “has held that in a cases where source of investment/expenditure is clearly identifiable and ……...” Even as per the judgement of Hon’ble ITAT referred in the judgement of Bajarang Traders (supra), source of investment/expenditure must be clearly identifiable. The onus in this regard is on the assessee to prove the source. The appellant has not referred to judgement of Hon’ble Supreme Court in the case of Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC)[01-08-1968. Wherein the similar underlying legal principle as discussed in the judgement referred by the appellant has been discussed and decided in favour of the revenue. As per the judgement of Hon’ble Supreme Court, unexplained credit (or stock) cannot be presumed to be business income. Onus to identify the source cannot be shifted on the assessing authority. If the assesse claims so, the assesse is required to prove the same. Further, in the case also it is held by the Hon’ble Supreme Court in the case of Roshan Di Hatti v. Commissioner of Income-tax [1977] 107 ITR 938 (SC)[08-03- 1977] that even after the items (stock in trade) were “introduced in the books of account of its business”, the assessee was still required to “to prove satisfactorily the nature and source of these assets” and in the event of failure to prove these, “the revenue could legitimately hold that these assets represented the undisclosed income of the assessee”. Roshan Di Hatti (supra) is case on the similar issue involving issue of stock in trade which was included by the assessee in the books of accounts and even then & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT it was held in the judgement that assessee was still required to prove satisfactorily the nature and source of these assets and in the event of failure to prove these, the revenue could legitimately hold that these assets represented the undisclosed income of the assessee. There is no presumption in favor of business income. Onus to prove is on assessee. The Hon’ble Supreme Court in the case of Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC)[01-08-1968] has held as under:- “There is nothing in law which prevents the Income-tax Officer in an appropriate case in taxing both the cash credit, the source and nature of which is not satisfactorily explained, and the business income estimated by him under section 13 of the Income-tax Act, after rejecting the books of account of the assessee as unreliable. This was so decided in Kale Khan Mohammad Hanif v. Commissioner of Income-tax [1963] 50 ITR 1 (SC). Whether in a given case the Income-tax Officer may tax the cash credit entered in the books of account of the business, and at the same time estimate the profit must, however, depend upon the facts of each case. …………… The High Court, in disposing of the application under section 66(2), expressed the view that because the amount of Rs. 20,000 was entered in the books of account of the business, there was some material to hold that the amount was income of the assessee from the business and not from some other source. But it was not open to the High Court to direct the Tribunal to state a case on a question which was never raised before or decided by the Tribunal at the hearing of the appeal. The question again assumes that it was for the Income-tax Officer to indicate the source of the income before the income could be held taxable and unless he did so, the assessee was entitled to succeed. That is not, in our judgment, the correct legal position. Where there is an explained cash credit, it is open to the Income-tax Officer to hold that it is income of the assessee and no further burden lies on the Income-tax Officer to show that that income is from any particular source. It is for the assessee to prove that even if the cash credit represents income it is income from a source which has already been taxed”. As per the headnotes “Section 145 of the Income-tax Act, 1961 [Corresponding to section 13 of the Indian Income tax Act, 1922] - Method of accounting - System of accounting - Assessment year 1946-47 - Whether where there is an unexplained cash credit it is open to ITO to hold that it is income of assessee and no further burden lies on ITO to show that income is from any particular source - Held, yes”. As per the above judgement, the observations of the Hon’ble Allahabad High Court that because the amount was entered in the books of account of the business, there was some material to hold that the amount was income of the assessee from the business and not from some other source, were not approved by the Hon’ble Supreme Court and was reversed, as it was held by the Hon’ble Supreme Court & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT that it assumed it was for the Income-tax Officer to indicate the source of the income which was not the correct legal position and that where there is an explained cash credit, it is open to the Income-tax Officer to hold that it is income of the assessee and no further burden lies on the Income-tax Officer to show that that income is from any particular source. It is for the assessee to prove that even if the cash credit represents income it is income from a source which has already been taxed. In the case of Roshan Di Hatti v. Commissioner of Income-tax [1977] 107 ITR 938 (SC)[08-03-1977] it is held by the Hon’ble Supreme Court as under:- “Now, the law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee is on him. If he disputes the liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the revenue is entitled to treat it as taxable income. This was laid down as far back as 1958 when this court pointed out in A. Govindarajulu Mudaliar v. Commisioner of Income-tax [1958] 34 ITR 807 , 810 (SC) that: "There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipts are of an assessable nature." To put it differently, where the nature and source of a receipt, whether it be of money or of other property, cannot be satisfactorily explained by the assessee, it is open to the revenue to hold that it is the income of the assessee and no further burden lies on the revenue to show that that income is from any particular source. vide Commissioner of Income-tax v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194 (SC). Here, in the present case, the assessee introduced in the books of account of its business on 30th March, 1948, capital of Rs. 3,33,414 which consisted of gold rawa, gold ornaments, stones and cash. The burden of accounting for the receipt of these assets was clearly on the assessee and if the assessee failed to prove satisfactorily the nature and source of these assets, the revenue could legitimately hold that these assets represented the undisclosed income of the assessee…..” (emphasis supplied) In the case of Kale Khan Mohammad Hanif v. Commissioner of Income-tax [1963] 50 ITR 1 (SC)[08-02-1963] it is held by the Hon’ble Supreme Court as under:- “It seems to us that the answer to this question must be in the affirmative and that is how it was answered by the High Court. It is well established that the onus of proving the source of a sum of money found to have been received by the assessee is on him. If he disputes liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the Income-tax Officer is & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT entitled to treat it as taxable income: see A. Govindarajulu Mudaliar v. Commissioner of Income-tax [1958] 34 ITR 807 (SC)”. As per judgements of Hon’ble Supreme Court in the case of CIT v. M.Ganapathi Mudaliar [1964] 53 ITR 623 (SC)/A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC), where the assessee has failed to prove satisfactorily the source and nature of a credit entry in his books, and it is held that the relevant amount is the income of the assesse, it is not necessary for the department to locate its exact source. Referring to the above judgements of Hon’ble Supreme Court, it is held by the Hon’ble ITAT in the case of Navin Shantilal Mehta v. Income-tax Officer, Ward-32 (2) (4), Mumbai [2018] 90 taxmann.com 16 (Mumbai - Trib.) as under:- “3.2 As per section 68 of the Act, onus is upon the assessee to discharge the burden so cast upon. First burden is upon the assessee to satisfactorily explain the credit entry contained in his books of accounts. The burden has to be discharged with positive material (Oceanic Products Exporting Co. v. CIT [2000] 241 ITR 497 (Ker.). The legislature had laid down that in the absence of satisfactory explanation, the unexplained cash credit may be charged u/s 68 of the Act. Our view is fortified by the ratio laid down in Hon'ble Apex Court in CIT v. P. Mohankala [2007] 291 ITR 278/161 Taxman 169. A close reading of section 68 and 69 of the Act makes it clear that in the case of section 68, there should be credit entry in the books of account whereas in the case of 69 there may not be an entry in such books of account. The law is well settled, the onus of proving the source of a sum, found to be received/transacted by the assessee, is on him and where it is not satisfactorily explained, it is open to the Revenue to hold that it is income of the assessee and no further burden lies on the Revenue to show that income is from any other particular source. Where the assessee failed to prove satisfactorily the source and nature of such credit, the Revenue is free to make the addition. The principle laid down in CIT v. M. Ganpati Mudaliar [1964] 53 ITR 623 (SC)A. Govinda Rajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC) and also CIT v. Durga Prasad More [1969] 72 ITR 807 (SC) are the landmark decisions. The ratio laid down therein are that if the explanation of the assessee is unsatisfactory, the amount can be treated as income of the assessee. The ratio laid down in CIT v. Daulat Ram Rawatmal [1973] 87 ITR 349 (SC) further throws light on the issue. In the case of a cash entry, it is necessary for the assessee to prove not only the identity of the creditor but also the capacity of the creditor and genuineness of the transactions. The onus lies on the assessee, under the facts available on record. A harmonious construction of section 106 of the evidence Act and section 68 of the Income Tax Act will be that apart from establishing the identity of the creditor, the assessee must establish the genuineness of the transaction as well as the creditworthiness of the creditors. In CIT v. Korlay Trading Co. Ltd. [1998] 232 ITR 820 (Cal.), it was held that mere mention of file number of creditor will not suffice and each entry has to be explained separately by the assesseeCIT v. R.S. Rathaore [1995] 212 ITR 390/86 Taxman 20 (Raj.). The Hon'ble Guwahati High & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Court in Nemi Chandra Kothari v. CIT [2003] 264 ITR 254/[2004] 136 Taxman 213 held that transaction by cheques may not be always sacrosanct. ………”. (Emphasis Supplied) In the following cases the excess stock was upheld as taxable in the context of section 69/69B of the Act:- In the case of Neeraj Agrawal v. Deputy Commissioner of Income-tax [2023] 152 taxmann.com 632 (Allahabad - Trib.) it is held by the Hon’ble ITAT as under:- Headnote extracts:- INCOMETAX : Where during survey at premises of assessee manufacturing and trading silver ornaments certain excess stock of silver ornament was found to which assessee did not give any explanation at time of survey, explanation of assessee at time of assessment that it had purchased certain artificial silver jewellery which was not entered in stock register was merely an afterthought and therefore, Assessing Officer rightly made additions with respect to difference in physical stock of silver ornaments found during survey and stock as per stock register INCOMETAX : Where during survey at premises of assessee, manufacturing and trading silver and gold ornaments, certain gold ornaments were found regarding which assessee did not give any explanation at time of survey but during assessment proceedings contended that same was purchased from 14 different persons who were not registered with VAT/Commercial Tax department, and purchases were claimed to be made by assessee just few days prior to date of survey, such explanation was not believable and, therefore, addition made by Assessing Officer in respect of same was to be upheld In the case of Suraj Bhan Oil (P.) Ltd. v. Deputy Commissioner of Income-tax [2022] 138 taxmann.com 19 (Madhya Pradesh)/[2022] 286 Taxman 680 (Madhya Pradesh)/[2022] 446 ITR 539 (Madhya Pradesh)[18-02-2022], it is held by the Hon’ble Madhya Pradesh High Court as under:- Headnote:- Section 69B of the Income-tax Act, 1961 - Undisclosed investments (Stock) - Assessment year 2005-06 - Assessee was engaged in manufacturing and trading of edible oils and grains - Assessing Officer having found that value of stock shown by assessee in stock statement as on 28-3-2005 submitted to bank was far in excess to value of stock shown in audit report for period ending 31-3-2005 and difference was to extent of Rs. 2.71 crores and assessee despite opportunity afforded could not either reconcile difference or explain reasons therefor, treated difference amount as unexplained investment in stock from undisclosed sources and added same to total income of assessee under section 69B - Commissioner (Appeals) deleted impugned addition by referring to a chart indicating stock position as on 28-3-2005 submitted to bank with stock position as per stock register on 28-3-2005 - Tribunal held that assessee was bound to explain & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT difference either before Assessing Officer or before Commissioner (Appeals) or before Tribunal and same was not done - It taking view that excess stock represented income of assessee from undisclosed sources, set aside order of Commissioner (Appeals) and upheld order of Assessing Officer - It was noted that once it was found by Assessing Officer that there was excess stock, in absence of explanation by assessee, conclusion was inescapable that excess stock, if any, was from undisclosed sources - Further once assessee's explanation, if any, had not been accepted, resultant position was that there was excess stock undisclosed in books of account and non disclosure was only with a view to suppress income - Whether order of Assessing Officer and that of Tribunal deserved to be affirmed - Held, yes [Para 10] [In favour of revenue] (emphasis supplied) SLP against the above judgement Suraj Bhan Oil (P.) Ltd. v. Deputy Commissioner of Income-tax [2022] 138 taxmann.com 19 (Madhya Pradesh) was dismissed by Hon’ble Supreme Court. Reported at [2022] 141 taxmann.com 477 (SC)/[2022] 288 Taxman 635 (SC)[25-07-2022] Headnote:- Section 69B of the Income-tax Act, 1961 - Undisclosed investments (Stock) - Assessment year 2005-06 - Assessee was engaged in manufacturing and trading of edible oils and grains - Assessing Officer found that value of stock shown by assessee in stock statement as on 28- 3-2005 submitted to bank was far in excess to value of stock shown in audit report for period ending 31-3-2005 and despite opportunity afforded assessee could not either reconcile difference or explain reasons therefor - Hence, Assessing Officer treated difference amount as unexplained investment in stock from undisclosed sources and added same to total income of assessee under section 69B - Commissioner (Appeals) deleted impugned addition by referring to a chart indicating stock position as on 28-3-2005 submitted to bank with stock position as per stock register on 28-3-2005 - Tribunal observed that assessee was bound to explain difference either before Assessing Officer or before Commissioner (Appeals) or before Tribunal and since same was not done, Tribunal set aside order of Commissioner (Appeals) and remanded matter back to Assessing Officer for adjudication afresh - High Court by impugned order upheld order of Assessing Officer and that of Tribunal taking view that excess stock represented income of assessee from undisclosed sources - Assessee filed Special Leave Petition against above impugned order, however, after arguing for sometime sought permission to withdraw SLP - Whether therefore, SLP was to be dismissed as withdrawn - Held, yes [Para 3] [In favour of revenue] In the case of SVS Oil Mills v. Assistant Commissioner of Income-tax, Non Corporate Circle-6(1), Chennai [2020] 113 taxmann.com 388 (Madras)/[2020] 269 Taxman 508 (Madras)/[2019] 418 ITR 442 (Madras)[26-03-2019], it is held by the Hon’ble Madras High Court as under:-

10. In our opinion, the learned Tribunal as well as the Authorities below were justified in bringing to tax the Undisclosed Income under Section 69B/69C of the Act and such findings of fact do not give rise to any substantial question of law. The order passed by the learned Income Tax Appellate Tribunal, Ahmedabad Bench does not enure to the benefit of the arguments advanced by the learned Senior Counsel as there also the learned Tribunal has rightly held that the value of excess stock of Rs.58,02,095/-should suffer tax and by inclusion of those Stocks in the value of Closing Stock the Assessee has recognised income over and above recorded in its Books of Accounts. Such Additions of the excess Stocks declared by the Assessee during the course of search in the closing stock does not amount to double taxation as contended. Mere remand of the case by the Ahmedabad Bench of Income Tax Appellate Tribunal to the Assessing Authority for verifying the figures, does not lay down any principle as contended by the learned Senior Counsel for the Assessee. (Emphasis supplied) No double taxation & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Such Additions of the excess stocks declared by the Assessee during the course of search/survey in the stock does not amount to double taxation as contended. [SVS Oil Mills v. Assistant Commissioner of Income-tax, Non Corporate Circle- 6(1), Chennai [2020] 113 taxmann.com 388 (Madras)] Verifiable Purchase behind the stock otherwise unexplained: If the contention of the Assessee/Appellant was to be accepted viz., by allowing the purchases corresponding to the alleged excess stock, the Assessee will have to now record verifiable purchases in his Books of Accounts and for that he will have valid as well as back-dated purchase Invoices from genuine and existing Sellers which is not possible. When the excess stocks were found during the Survey, there is no question of allowing the Assessee to record any additional purchases because actual purchases had already taken place and already been recorded in the books of accounts of the Assessee. [SVS Oil Mills v. Assistant Commissioner of Income-tax, Non Corporate Circle- 6(1), Chennai [2020] 113 taxmann.com 388 (Madras)]. Thus this is an impossible proposition of going back in time. Head of Income Regarding the contention of the appellant regarding applicability of charge to tax under a particular head, the question arises whether the income subject matter of addition is chargeable to tax as per provisions of chapters on salary, profits and gains of business and profession Or capital gain Or income from house property Or income from other sources. If the same is chargeable to tax under these chapters as per specific provisions contained therein (even before application of provisions of section 68/69/69A etc.) then section 115BBE will not have application. Section 28 is not an inclusive definition as the opening sentence of the section 28 reads as under:- “The following income shall be chargeable to income-tax under the head "Profits and gains of business or profession",—” Accordingly, in case the appellant claims that the income is chargeable under the head business income and nowhere else, the onus is on the appellant to show under which clause of section 28 the claimed income gets covered. Even as per judgement in the Principal Commissioner of Income-tax v. Bajargan Traders, the “source of investment/expenditure is clearly identifiable” i.e. the source must be clearly identifiable. In this regard, as per provisions of the Act, not only the source but the year of earning of income also needs to be shown for taxing in the current year under assessment/appeal as the law provides that income for each year be taxed in the ITR/assessment of that year only. This also has ramifications on the interest payable by the taxpayer because if the income was earned in earlier year and the & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT same is being offered to tax now in that case the taxpayer is liable to pay interest for the intervening period. Sections 68/69/69A etc. also provides for year of taxation irrespective of the year of earning of income. However in case the subject matter of addition is not expressly falling under the four chapters of income heads and for the year under assessment/appeal (before application of provisions of section 68/69/69A etc.) in that case applicability of section 68/69/69A etc. is to be seen. If the sources, genuineness etc. are explained satisfactorily i.e. sources are out of genuine disclosed/taxed income in that case and section 68/69/69A etc. are not applicable even in that case section 115BBE will not have application. However if the asset/credit/expenditure is treated as income because of the applicability of section 68/69/69A etc. in that case section 115BBE will have application. The incomes mentioned under these sections are not specific to any head of income. Section 69C even clearly mentions that such unexplained expenditure will not be deductible under any head of income. Loans given / stock in hand / loan received etc. are otherwise not taxable as these are in the nature of asset/liability/capital nature in the hands of the taxpayer and not in the nature of revenue income. However when these are unexplained in terms of sections 68/69/69A etc. these become income and become taxable. Section 14 of the Income-tax Act, 1961 - Heads of income - Assessment year 1984-85 - Whether opening words of section 14, ‘save as otherwise provided by this Act,’ clearly leave scope for ‘deemed income’ of nature covered under scheme of sections 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from ‘other sources’ - Held, yes. [Fakir Mohmed Haji Hasan v. Commissioner of Income-tax [2002] 120 Taxman 11 (Gujarat)/[2001] 247 ITR 290 (Gujarat)/[2001] 165 CTR 111 (Gujarat)[10-08-2000]] These are the special provisions dealing with the situation and the incomes which are the subject matter of the contention in the appeal and being the specific provisions they are preferred and override the general provisions. Sections 68/69/69A etc. also provides for year of taxation of asset/credit/expenditure irrespective of the year of earning of the source revenue income (if any). Year of earning: The appellant has not proved that these excess undisclosed stock were added in the stock in the year under appeal i.e. that these were not part of the opening stock of the year. The appellant has not shown the sources i.e. name, address, PAN, purpose etc. of the funds gone into acquisition of these excess stock.

& 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT If the undisclosed income earned and accumulated over the years is taxed in the year in which it is detected by the Revenue and the same is merely taxed as per normal provisions of the law such an interpretation will place a premium on dishonesty i.e. it tantamounts to rewarding the dishonesty. There is no interest burden on such taxpayer even if the income was earned over past years and there is no extra tax rate and deduction of expenses/losses will also be claimed by taxpayer if the same is taxed as per normal provisions of section 28 and onwards. When the receipts do not pertain to the year under appeal the appellant should have declared these receipts in the appropriate year to which these receipts belong and the appellant would have paid the taxes on the same along with the penalty if any arising due to the reopening of the case of the earlier year. By offering these receipts as business receipts of the year under appeal the appellant has unfairly tried to save on these accounts. Legally as per section 28 only the income earned during the year can be taxed. The appellant has not disclosed or clarified under which subsection or clause of section 28 the income falls on this account offered by the appellant for the year. Only by the application of sections 68/69/69A etc. the income is even if earned in earlier year but detected during the year in the form of unexplained credit / unexplained investment etc. is to be taxed in the year in which the application of such income is found. Once sections 68/69/69A etc. are applicable, there is no dispute regarding the applicability of section 115BBE of the Act. Complete code: The opening words of section 14 ‘Save as otherwise provided by this Act’ clearly leave scope for ‘deemed income’ of the nature covered under the scheme of sections 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from ‘other sources’ because the provisions of sections 69, 69A, 69B, and 69C treat unexplained investments, unexplained money, bullion, etc., and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Section 69C even clearly mentions that such unexplained expenditure will not be deductible under any head of income. Loans given / stock in hand / loan received etc. are otherwise not taxable as these are in the nature of asset/liability/capital nature in the hands of the taxpayer and not in the nature of revenue income. However when these are unexplained in terms of sections 68/69/69A etc. these become income and become taxable. These are the special provisions dealing with the situation and the incomes which are the subject matter of the contention in the appeal and being the specific provisions they are preferred and override the general provisions. Once the income is as per these sections, there cannot be any dispute regarding the applicability of section 155BBE of the Act. These sections 68/69/69A etc. along & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT with section 115BBE are in the nature of complete code in itself. In this regard it is held by Hon’ble Gujarat High Court in Fakir Mohmed Haji Hasan v. Commissioner of Income-tax [2002] 120 Taxman 11 (Gujarat)/[2001] 247 ITR 290 (Gujarat)/[2001] 165 CTR 111 (Gujarat)[10-08-2000] that “6.2 The opening words of section 14 ‘Save as otherwise provided by this Act’ clearly leave scope for ‘deemed income’ of the nature covered under the scheme of sections 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from ‘other sources’ because the provisions of sections 69, 69A, 69B, and 69C treat unexplained investments, unexplained money, bullion, etc., and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Therefore, in these cases, the source not being known, such deemed income will not fall even under the head, ‘Income from other sources’. Therefore, the corresponding deductions, which are applicable to the incomes under any of these various heads, will not be attracted in case of deemed incomes which are covered under the provisions of sections 69, 69A, 69B and 69C in view of the scheme of those provisions.” Summary:- (a) Onus is upon the assessee to discharge the burden so cast upon. First burden is upon the assessee to satisfactorily explain the source of amount invested / spent in his excess stock. The burden has to be discharged with positive material. [As per principles laid down in Roshan Di Hatti v. Commissioner of Income-tax [1977] 107 ITR 938 (SC)[08-03-1977], Kale Khan Mohammad Hanif v. Commissioner of Income-tax [1963] 50 ITR 1 (SC)[08-02-1963], CIT v. M.Ganapathi Mudaliar [1964] 53 ITR 623 (SC)/A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC)]. (b) As per section 69B of the Act, if the burden is not discharged satisfactorily, it is open to the Revenue to hold that it is income of the assessee and no further burden lies on the Revenue to show that income is from any other particular source. [As per principle laid down in CIT v. M.Ganapathi Mudaliar [1964] 53 ITR 623 (SC)/A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC)]. (c) Unexplained stock cannot be presumed to be business income. If the assesse claims so, the assesse is required to prove the same. [Hon’ble Supreme Court in the case of Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC)[01-08-1968] Making book entries regarding the excess / unexplained stock does not result into such stock to be treated as explained. The assessee is required to show and explain the source of the investment in such excess or unexplained stock. [Ratio of judgements of Hon’ble Supreme Court in the cases of Commissioner of Income- tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC)[01-08-1968 and Roshan Di Hatti v. Commissioner of Income-tax [1977] 107 ITR 938 (SC)[08-03-1977] & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT (d) Once it was found by Assessing Officer that there was excess stock, in absence of explanation by assessee, conclusion was inescapable that excess stock, if any, was from undisclosed sources - Further once assessee's explanation, if any, had not been accepted, resultant position was that there was excess stock undisclosed in books of account and non disclosure was only with a view to suppress income. [Suraj Bhan Oil (P.) Ltd. v. Deputy Commissioner of Income-tax [2022] 138 taxmann.com 19 (Madhya Pradesh)] [SLP against this judgement was dismissed – reported at [2022] 141 taxmann.com 477 (SC)/[2022] 288 Taxman 635 (SC)[25-07-2022] (e) Undisclosed income or undisclosed investment cannot be explained through another unexplained income or unexplained source. That tantamounts to mere creation of an artificial layer. Verifiable purchases should be behind the undisclosed stock detected otherwise such excess stock is to be treated as unexplained. (f) Deemed income under sections 68/69/69A etc. is separate from any ‘head of income’. If the assessee claims that the undisclosed investment or undisclosed income falls under any particular head of income, the onus in this regard is on the assessee to show under which clause of with section of the respective head of income the undisclosed income of the appellant gets covered. (g) Taxing the undisclosed investment or the undisclosed income at the normal rates of taxes in the year in which these undisclosed were detected rewards the dishonesty. The assessee is not only required to show the sources but also to show with positive evidence the year in which the respective amounts of undisclosed income was earned which were subsequently invested in the undisclosed investment. Sections 68/69/69A etc. along with section 115BBE are in the nature of complete code in itself. In view of the above the action of the ld. AO in the assessment order is upheld and the unexplained stock found during the course of survey action is alternatively held to be taxable under section 69B of the Act.

25. Ld. Sr. Revenue officer further contended that the department has valued the stock by using an Excel sheet found during the survey on the Assessee’s computer. Each item listed in the sheet contains a tag price, so the excel file prepared from the software during survey proceeding along with the other loose papers and material which had the nature of incriminating document and therefore, the contention of the assessee cannot be relied upon. No evidence has been brought on record as to what was the actual price of stock that was available with the assessee. There was no stock record maintained by the assessee. There was no supporting records made available so as to arrive at the stock available. Even the statement of the Mr. Rajesh Ajmera vide statement himself dealing with question no. 23 (Q. No. 23 PB No. 126/127 of Vol. I, AO Page No. 28) submitted that after giving a discount of 30-50% the cost price derived. Ld. DR referring the comments in the audit report supported by the statement when the assessee did not support the details of the stock and its price the revenue adopted the method to derive the correct stock value. All the items were valued based on the records given by the assessee themselves. So the process of valuation is based on the items list given by the assessee and no notional valuation was done by the revenue. Thus, when no records maintained for valuation the correct way to value the stock price and that too after considering the discount embedded in the tag price. As regards the consignment stock no details of quantity made available and how the failed to give the reconciliation of tag price and transfer price the difference in the valuation was correctly derived. The ld. CIT(A) has in detailed discussed at page 172, 178 and 183 when the revenue found that the stock is not valued properly the year of taxability can be the year of the survey as the source of investment in the excess stock was not explained. Therefore, the burden u/s 69B is on the Assessee to prove source of excess stock.

At the outset, it is humbly submitted that addition has been made in the hands of Assesee-Appellant for alleged excess stock of Rs. 141 Crore. The Ld. DR has argued that addition made as well sustained by Ld. CIT(A) is correct and Ld. AO has correctly invoked the provisions of the Section 69B of the Act, as source of alleged excess stock has not been explained. In this context, it is humbly submitted that to invoke the provisions of Section 69B of the Act, primary condition is that there is understatement of purchase consideration in acquiring or making investment or jewellery or other valuable article of this and Ld. AO finds that amount expended on making such investment or in acquiring such bullion, jewellery or other article exceeds amount recorded in this behalf in books of accounts maintained by the Assessee. Once this primary & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT condition is satisfied, then only the question of adoption any yardstick how to measure the extent of understatement would arise whereas in the present case, the department without discharging its burden or establishing such understatement has straight jumped to process of valuation by the departmental valuers and rather making it the basis for invoking Section 69B. The aforesaid basis is absolutely illegal/without jurisdiction and contrary to mandate of Section itself as held in various judicial precedents as referred in case compilation submitted before the Hon’ble Bench. The attention is drawn to following citations in the case law compilation: CIT v. Dinesh Jain HUF [2012] 25 taxmann.com 550 (Delhi) Section 69B in terms requires that the Assessing Officer has to first 'find' that the assessee has 'expended' an amount which he has not fully recorded in his books of account. It is only then that the burden shifts to the assessee to furnish a satisfactory explanation. Till the initial burden is discharged by the Assessing Officer, the section remains dormant. [Para 8] A 'finding' obviously should rest on evidence. In the instant case, it is common ground that no incriminating material was seized during the search which revealed any understatement of the purchase price. That is precisely the reason why the Assessing Officer had to resort to Rule 3 of Schedule III to the Wealth Tax Act. [Para 9] Section 69B does not permit an inference to be drawn from the circumstances surrounding the transaction that the purchaser of the property must have paid more than what was actually recorded in his books of account for the simple reason that such an inference could be very subjective and could involve the dangerous consequence of a notional or fictional income being brought to tax contrary to the strict provisions of article 265 of the Constitution of India and Entry 82 in List I of the Seventh Schedule thereto which deals with 'Taxes on income other than agricultural income'. [Para 11] Applying the logic and reasoning in K.P. Varghese v. ITO [1981] 131 ITR 597 / 7 Taxman 13 (SC), for the purposes of section 69B it is the burden of the Assessing Officer to first prove that there was understatement of the consideration (investment) in the books of account. Once that undervaluation is established as a matter of fact, the Assessing Officer, in the absence of any satisfactory explanation from the assessee as to the source of the undisclosed portion of the investment, can proceed to adopt some dependable or reliable yardstick with which to measure the extent of understatement of the investment. One such yardstick can be the fair market value of the property determined in accordance with the Wealth Tax Act. [Para 12] Since the entire case has proceeded on the assumption that there was understatement of the investment, without a finding that the assessee invested more than what was recorded in the books of account, the decision of the Income- & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT tax Authorities cannot be approved. Section 69B was wrongly invoked. The order of the Tribunal is upheld. [Para 15] Commissioner of Income-tax, Delhi -I v. Agile Properties (P.) Ltd, [2014] 45 taxmann.com 512 (Delhi) 5. This Court had in the decision reported as CIT v. Dinesh Jain, HUF [2013] 352 ITR 629/[2012] 211Taxman 23/25 taxmann.com 550 and connected cases occasioned to consider an identical question. Afternoticing the relevant provision, i.e. Section 69B, the Court noticed in paragraph 9 as follows: — 13. The error committed by the income-tax authorities in the present case is to jump the first step in the process of applying section 69B – that of proving understatement of the investment – and apply the measure of understatement. If anything, the language employed in section 69B is in stricter terms than the erstwhile section 52(2). It does not even authorise the adoption of any yardstick to measure the precise extent of understatement. There can therefore be no compromise in the application of the section. It would seem to require the Assessing Officer even to show the exact extent of understatement of the investment; it does not even give the Assessing Officer the option of applying any reasonable yardstick to measure the precise extent of understatement of the investment once the fact of understatement is proved. It appears to us that the Assessing Officer is not only required to prove understatement of the purchase price, but also to show the precise extent of the understatement. There is no authority given by the section to adopt some reasonable yardstick to measure the extent of understatement. But since it may not be possible in all cases to prove the precise or exact amount of undisclosed investment, it is perhaps reasonable to permit the Assessing Officer to rely on some acceptable basis of ascertaining the market value of the property to assess the undisclosed investment. Whether the basis adopted by the Assessing Officer is an acceptable one or not may depend on the facts and circumstances of the particular case. That question may however arise only when actual understatement is first proved by the Assessing Officer. Itis only to this extent that the rigour of the burden placed on the Assessing Officer may be relaxed in cases where there is evidence to show understatement of the investment, but evidence to show the precise extent thereof is lacking.' Gayatri Enterprise v. Income-tax Officer, Ward 1(2)4 [2020] 116 taxmann.com 359 (Gujarat) 29. The Delhi High Court in the case of CIT v. Bajrang Lal Bansal [2011] 335 ITR 572/200 Taxman 188 (Mag.)/12 taxmann.com 88 held as under: "5. Ms. Rashmi Chopra, learned counsel for the revenue submitted that the Tribunal had erred in law in deleting the addition of 99,33,000/- as undisclosed income of the respondent-assessee under Section 69B of the Act, 1961.

3. It is unreasonable for the Appellant to argue • Department has to stand on its own feet by that the department did not consider the bringing on record tangible material to various factors in their valuation, which is at make/sustain addition u/s 69B instead of market rates. pointing alleged in actions on the part of the Assessee. • Addition u/s 69B not sustainable on hypothesis/suspicion. • The departments sole basis being the valuation report of department valuer for addition u/s 69B rejected by Ld. CIT(A) against which no appeal preferred by department. • The Assessee obtained an independent valuation after the survey to substantiate its objections that the department's valuers have not done their duty diligently or methodically and resulting valuation arrived at is also exorbitantly high and grossly arbitrary and incorrect. Obviously, Assessee was not knowing at that point of time that AO will make the valuation reports of the department valuer as the basis for invoking and making additions under section 69B of the Act. • The intent behind getting the valuations done is evident from the statement of Mr. Rajesh Ajmera recorded during survey while objecting to valuations arrived by department valuer in S. Arguments of department Rejoinder/Counter Arguments of the Assessee No stating that he will get the correct valuations done to disprove departments valuation through registered valuer. (REFER Q-43, PAGE 143 VOL-1). • Assessee is not proposing any method. Stand of the assessee is that closing stock as on 13.07.2020 is of Rs. 132 Crore and there is no evidence with the department to prove under recording of purchase consideration which is a pre-requisite for invoking 69B of the Act. • Rather on the contrary it is the department which is constantly adopting/shifting stands or basis to sustain additions u/s 69B of the Act by adopting unscientific and arbitrary methodology completely overlooking the fundamental/statutory pre-requisites for invoking section 69B of the Act.

• Shri Nanda Ram V & PO Billu, vs. ITO Ward- 1 Makaran (190/JODH/2024) (Sr. No. 2 in Additional Compilation) • Commissioner of Income-tax v. Gian Gupta [2014] 46 taxmann.com 372 (Delhi) (Sr. No. 5 in Additional case Compilation • Ananthakrishna Vasudev Aithal v. Income-tax Officer, [2023] 147 taxmann.com 376 (Bangalore - Trib.) (Sr. No. 10 in Additional Compilation • In view of the above, burden with respect to allegation that the Appellant has made S. Arguments of department Rejoinder/Counter Arguments of the Assessee No investment or made purchases outside books has not been discharged. • The department has not brought on record any single piece of evidence that at the time of purchase, the Appellant paid extra consideration. • Further, relied upon decision with respect to addition made u/s 68 of the Act also does not make out the case of the department because Section 68 addition cannot be made when books are rejected. In the instance case, at the outset, there is no addition made u/s 68 of the Act, even otherwise, addition under deeming provision of the law, is not sustainable if the books of accounts are rejected. • As far as provision of Section 69B of the Act is concerned, it is humbly submitted that u/s 69B of the Act, the burden is first on the revenue to establish that the amount expended on investment etc. exceeds the amount recorded in the books of account. In present case, no such evidence of understatement of purchase was brough on record and were also not found during survey to support the allegation of excess stock. Therefore, on this ground itself addition made u/s 69B of the Act deserves to be deleted. • It is further submitted that for making addition u/s 69B of the Act maintaining books of account is a prime condition. In the present case, as strenuously argued by the Ld. DR, no books of account are maintained. Therefore, on this ground alone, the addition made under Section 69B of the Act is not justified. Dr. Prakash Tiwari v. Commissioner of Income-tax, [1983] 14 Taxman 252 (MP)(Supra)

32. The methodology of the valuation is also not Valuation of stock by independent valuer been stated in the valuation report given by appointed by Appellant was done by Assessee-Appellant. separately valuing each item and valuing the gold and silver items at market rate, meticulously detailing each item of inventory, their component and the same is more detailed than departmental valuer report. • There is no force in the argument raised as these valuation reports cannot be basis of addition u/s 69B of the Act as condition precedent is proving of understatement of purchase consideration, which is not established. XI. Case Laws relied by Ld. DR mentioned at Page No. 51-54 of Impugned Order • T. CIT Vs British Paints India Ltd (1991) 188 ITR 44 As per the case law relied by the Ld. CIT(A), it (SC) wherein it was held that “it is the duty of the is a duty on the AO to act in exercise of his assessing officer to determine the taxable income by statutory power” for determining the correct making such computation as he considers taxable income. appropriate in the given situation. • In the present case, no such duty casted on Ld.AO is discharged by him judicially because impugned assessment made by Ld. AO has resulted into exponentially higher GP beyond the industry comparable, which is not justified. • Thus, admittedly, there is no appropriate income determination. • In the case law relied upon by the Ld. DR, goods/stock was being valued below cost, whereas, in the case of the Appellant goods/stock is being valued at market value by the department itself as against the requirement of section 69B of the Act. • U. Commissioner of Income-tax v. Devi Prasad The case law relied by the Ld. CIT(A) is Vishwanath [1969] 72 ITR 194 (SC)[Ol-08-1968], pertaining to alleged cash credit u/s 68 of the Whether where there is an unexplained cash credit it Act. is open to ITO to hold that it is income of assessee • and no further burden lies on ITO to show that Accordingly, case law relied by the Ld. CIT(A)

S. Arguments of department Rejoinder/Counter Arguments of the Assessee No income is from any particular source is distinguishable as no impugned addition is regarding excess stock which was not made u/s 68 of the Act. • V. Commissioner of Income-tax-I v. G.S. Tiwari & Co. The case law relied by the Ld. CIT(A) is [2014] 41 taxmann.com 17 (Allahabad)/[2014] 220 pertaining to addition made u/s 68 of the Act Taxman 111 (Allahabad) (Mag.)/[2013] 357 ITR 651 and rejection of books of account u/s 44AD (Allahabad)[30-05-2013 and addition of estimated net profit rate of 8%. • The fact of present case is distinguishable because it is not a case of alleged unexplained cash credit u/s 68 of the Act. • In the case law relied by the Ld. CIT(A), the Hon’ble court held that there is nothing in law which prevents in taxing both unexplained sundry credit and estimating business income. • The judgment is on facts wherein income was offered on estimate basis u/s 44AD (presumptive taxation of income). • Without prejudice, reliance is placed on jurisdictional High Court judgement in case of CIT vs. G. K. Contractor [2009] 19 DTR 305 (Raj.) wherein it was held no separate addition u/s 68 of the Act, if books of accounts are rejected. XII. Case laws relating to Statement recorded during survey relied upon by Ld. DR (Page No. 157-160 of Impugned Order) • W. Bachittar Singh v. Commissioner of Income-tax The case law relied upon by the Ld. CIT(A) is [2010] 328 ITR 400, wherein it was held that “the not applicable to the facts and circumstances assessee failed to produce books of account which of the present case because no adverse may have been maintained during regular course of statement was made by Shri Rajesh Ajmera. business or any other authentic contemporaneous • evidence of agricultural income. In the Instead, only excerpts of his statement are circumstances, the statement of the assessee could being used against the Appellant, without certainly be acted upon” considering the full context in which his statements were made. • One instance is that heavy reliance was placed on Q. No. 23/24 wherein as per department Rajesh Ajmera stated that discount given is between 30-50% however whole context of his statement was not understood as it was related to transfer price. • The relied upon case law is also distinguishable on facts also as there is no claim of agricultural income, which in the case law relied upon, there was failure to prove claim of agriculture income.

S. Arguments of department Rejoinder/Counter Arguments of the Assessee No • Contents of the statement relied upon by the department has not been corroborated. • Hence relied upon case law is distinguishable. • X. Dr. S.C. Gupta v. Commissioner of Income-tax No admission of alleged excess stock made 120011 118 Taxman 252 (Allahabad), wherein it was by Shri Rajesh Ajmera. held that “The mere fact that the assessee retracted • the statement could not make the statement Accordingly, the case law relied upon by the unacceptable. The burden lay on the assessee to Ld. CIT(A) is clearly distinguishable from the establish that the admission made in the statement at facts and circumstances of the present case. the time of survey was wrong and, in fact, there was no additional income” • Y. Raj Hans Towers (P.) Ltd. v. Commissioner of In the present case, no such surrender of lncome-tax-V [2015] 56 taxmann.com 67 income was made. (Delhi)/[2015] 230 Taxman 567 (Delhi)/[2015] 373 • ITR 9 (Delhi)[27-0l-2015], wherein it was held that Accordingly, the case law relied upon by the “where the appellant had not offered any satisfactory Ld. CIT(A) is clearly distinguishable. explanation regarding surrendered amount being not bonafide and it was not borne out in any contentions raised by the appellant, additions made after adjusting expenditure were justified” • Z. Pebble Investment and Finance Ltd Vs. ITO in ITA The case law is relied upon to place on the No.988/2014, wherein it was held that “"9 We note reliance on statement recorded during survey that a statement made under Section 133A of the Act to ascertain fact. is not bereft of any evidentary value. The same may • not be conclusive but in the absence of any contrary Though the Ld. CIT(A) placed reliance on evidence or explanation as to why the statement statement of Mr. Rajesh Ajmera, however, the made under Section 133A of the Act is not credible, it said reliance is based on pick and choose can be acted upon” and not entire statement has not been considered. • Without prejudice, it is trite law that corroboration with some tangible material is required before taking any adverse view on the basis of statement recorded during survey.

S. Arguments of department Rejoinder/Counter Arguments of the Assessee No in A. Govindarajulu Mudaliar v. Commisioner of DR was not filing its regular income tax Income-tax [1958] 34 !TR 807 , 810 (SC)” returns and non-filer of return of income for various years. • Accordingly, his explanation was not accepted that source of cash deposit is from business. • The law laid down in the relied upon case law by Ld. DR is in the context of burden of proof u/s 68 of the Act, which section is not applicable in the instant case of the Appellant. • In the present case, the Appellant is not admitting any fact of excess stock and there is no surrender also; rather, the Appellant is denying the allegation of excess stock. • Therefore, the reliance placed on judgment is misconceived besides the fact that case law relied upon is clearly distinguishable. • BB. Kale Khan Mohammad Hanif v. Commissioner of The case law relied by the Ld.CIT(A) is Income-tax [1963] 50 ITR 1 (SC)[08-02-1963 wherein distinguishable and is not applicable on the it was held that “"It seems to us that the answer to facts and circumstances of the present case. this question must be in the affirmative and that is • how it was answered by the High Court. It is well No sum of money or unexplained cash/cash established that the onus of proving the source of a credit was found during survey in present sum of money found to have been received by the case of the Appellant. assessee is on him” • The case law relied upon is also not applicable on account of fact that no burden has been discharged as to fact that there was understatement of purchase price. • Even otherwise, as per the contentions of the department the Appellant does not maintain books of account, therefore no question of proving credit entries in books of the Appellant would arise in case of the Appellant. • The case law relied upon in on the scope of unexplained cash credit, whereas there are no such facts of the present case in hand of unexplained cash credit as the impugned addition is relating to alleged excess valuation of stock. • Thus, case law relied upon is clearly distinguishable. • CC. CIT v. M.Ganapathi Mudaliar [1964] 53 ITR 623 The case law relied by the Ld. CIT(A) is (SC)/A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR distinguishable and is not applicable on the 807 (SC), wherein it was held that “where the facts and circumstances of the present case. assessee has failed to prove satisfactorily the source S. Arguments of department Rejoinder/Counter Arguments of the Assessee No and nature of a credit entry in his books, and it is held • that the relevant amount is the income of the The case law relied upon in on the scope of assesse, it is not necessary for the department to unexplained cash credit, whereas there are locate its exact source” no such facts of the present case in hand of DD. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 unexplained cash credit as the impugned (SC), wherein it was held that “where the assessee addition is relating to alleged excess valuation has failed to prove satisfactorily the source and of stock. nature of a credit entry in his books, and it is held that • the relevant amount is the income of the assesse, it Even otherwise, as per the contentions of the is not necessary for the department to locate its exact department the Appellant does not maintain source” books of account, therefore no question of EE. Navin Shantilal Mehta v. Income-tax Officer, Ward-32 proving credit entries in books of the (2) (4), Mumbai [2018] 90 taxmann.com 16 (Mumbai Appellant would arise in case of the - Trib.), wherein it was held that “as per section 68 of Appellant. the Act, onus is upon the assessee to discharge the • burden so cast upon. First burden is upon the There is no case of alleged bogus purchase assessee to satisfactorily explain the credit entry as was the case in hand in the case of Navin contained in his books of accounts. The burden has Shanti Lal Mehta relied upon by Ld. CIT(A) to be discharged with positive material” • Thus, case law relied upon is clearly distinguishable. • FF. Suraj Bhan Oil (P.) Ltd. v. Deputy Commissioner of In the case relied upon by the Ld. CIT(A), the Income tax [2022] 138 taxmann.com 19 (Madhya difference in stock was based on the stock Pradesh)/[2022] 286 Taxman 680 (Madhya Pradesh], statement submitted to the bank and the wherein it was held that “- It was noted that once it stock recorded in the books of account. was found by Assessing Officer that there was • excess stock. in absence of explanation by In the present case, the allegation of excess assessee. conclusion was inescapable that excess stock valuation is based on computerized stock, if any. was from undisclosed sources - Further software, where the complete stock details once assessee's explanation, if any, had not been are available at the tag price. The Ld. AO accepted, resultant position was that there was assumed it to be the cost price and used this excess stock undisclosed in books of account and to make the stock valuation as against the non disclosure was only with a view to suppress law, which requires that Ld. AO has to income” establish understatement of purchase price first before invoking Section 69B of the Act. • Without prejudice, reliance is placed on jurisdictional High Court Judgment in the case of CIT vs. Laxmi Engineering Industries (2009) 308 ITR 279 (Raj), which held that merely on the basis of stock statement submitted to bank, addition u/s 69B is not justified.

• Hence the relied upon case law is distinguishable. • GG. Principal Commissioner of Income-tax v. Deccan The case relied upon by the Ld. CIT(A) is not Tobacco Company [2022] 137 taxmann.com 470 applicable to the facts and circumstances of (SC)/[2022] 286 Taxman 558 (SC)[ll03-2022], the present case and is distinguishable. • The issue raised in the case law pertains to S. Arguments of department Rejoinder/Counter Arguments of the Assessee No scope of revisional jurisdiction under Section 263 of the Act. Whether it could be exercised by the Ld. PCIT, where AO did not treat excess stock as 'undisclosed investment' under Section 69 of the Act. • In this case, only notice has been issued by Hon’ble Apex Court in pending SLP, whereas relevant Hon’ble High Court of Andara Pradesh judgment is in favour of the Appellant on the basis that Ld. AO took plausible view of taxing alleged excess stock as business income in view of consistent view of various judicial authorities that where excess stock found is neither separately identifiable nor has independent physical existence, it cannot be treated as ‘undisclosed investment’ u/s 69. • Thus, the relied upon case law is not favouring the case of the department. • HH. SVS Oil Mills v. Assistant Commissioner of Income- In the case relied by the Ld. CIT(A), physical tax, Non Corporate Circle-6(1), Chennai [2020] 113 verification was conducted, and partner of the taxmann.com 388 (Madras)/ [2020], wherein it was Assessee firm has accepted excess stock held that “9. In the light of the above, the contention difference. raised by the learned counsel for the Assessee has • essentially emanated from a misconception that the Further excess stock was recorded in stock Additions made under Section 69B/69C have to be register but was not recorded in financial reduced to some extent by giving leverage to the books of account. Thus, addition was made Assessee to claim some deductions from these u/s 69B of the Act. Additions as well. If the contention of the learned counsel for the Assessee was to be accepted viz., by • Thus, the facts of relied upon judgment are allowing the purchases corresponding to the alleged clearly distinguishable, there is no quantity of excess stock, the Assessee will have to now record stock found in excess and no surrender of verifiable purchases in his Books of Accounts and for excess stock by Assessee. that he will have valid purchase Invoices from genuine and existing Sellers which is not possible. • The issue involved in this judgment was with When the excess stocks were found during the reference to allowability of deduction under Survey, there is no question of allowing the Assessee section 69C and not with reference to to record any additional purchases because such taxability of excess stock. purchases had already been recorded in the books of accounts of the Assessee. Therefore, the excess • There is no claim of deduction allowing stock, per se, has to be naturally brought to tax as purchases made for alleged excess stock, 'undisclosed income' by itself and there is no whereas the Appellant case is that there in question of any corresponding deduction from that in excess stock at all and no burden casted such cases” upon department of understatement of purchase price has been discharged. • Thus, the case law relied upon is clearly distinguishable and specifically countered.

Dilshad Trading Co. (P) Ltd. v. ITO, [1994] 49 ITD 348 (Bom-Trib.) 8………………………..Provisions of section 69B can be invoked if(i) it is found that the assessee has made investment; (ii) it is found that the amount expended & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT on making such investment exceeded the amount recorded in that behalf in the books of account; and (iii) either the assessee offers no explanation about such excess amount or the explanation offered is not satisfactory in the opinion of the Assessing Officer. These three findings are cumulative to be recorded on gathering the necessary facts, but the basic finding which is to be recorded on clear and cogent material is in respect of the amount expended by the assessee in excess of that shown in the books of account. In the instant case, the onus was on the department to show that the assessee had expended extra amount therefore, merely because there existed some comparable cases showing higher price in respect of similar transactions, it could not be said that the assessee had expended extra amount. Therefore, no addition could be made. There also did not exist any other material either by way of confession from some connected person with regard to the extra amount having been spent by the assessee or by way of a finding that the books of account of the assessee were not found to be reliable in any of the years when the records were examined by the Commissioner M/s DDK Spinning Mills vs The DCIT Circle-3, [2023] 157 taxmann.com 817 (Chandigarh - Trib.) 10. It is a settled proposition of law that the statement recorded u/s 131 during the course of survey has no evidentiary value in absence of any corroborative evidence on record and in this regard, useful reference can be drawn to the decision of Hon’ble Madras High Court in case of CIT vs Khader Khan Son reported in 300 ITR 157 wherein it was held that statement recorded during the course of survey u/s 133A has no evidentiary value as the officer is not authorized to administer the oath and to take any sworn statement which alone has evidentiary value as contemplated under law and reference was drawn to provisions of section 132(4) which enables the authorized officer to examine person on oath and where any such statement so recorded can be used in evidence under the Act. In that case, it was held by the Hon’ble High Court that basis statement of one of the partner’s of the assessee firm, it cannot be held that disclosed income was assessable as lawful income of the assessee firm since there was no material on record to prove the existence of such disclosed income or earning of such income in the hands of the assessee and it cannot be held that Revenue has lost lawful tax payable by the assessee. Therefore, in our considered view, in the instant case, the statement of the partner of the assessee firm recorded u/s 131 during the course of survey and subsequent affirmation thereof by the assessee by way of surrender letter on a standalone basis and without any corroborative evidence doesn’t fulfill the statutory mandate of deeming provisions which provides that it is for the Assessing officer to records a finding that the assessee has made investments during the financial year in the construction/purchase of the building and the amount expended on making such investments in the building exceeds the amount recorded in this behalf in the books of account so maintained by the assessee and for the purposes of recording such a finding, there has to be some tangible material in possession of the Assessing officer which demonstrate that certain amount has been actually & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT expended by the assessee during the year towards the purchase or construction of the building which is clearly absent in the instant case. Therefore, the statement of the one of the partners of the assessee firm without any corroborative evidence cannot come to the aid of the Assessing officer for the purposes of invoking the deeming provisions of Section 69B of the Act.

“18. Rival contentions have been heard and record perused. Brief facts are that, during the course of search operation total stock found at the business premises of assessee firm situated at D-7, M.I. Road, Jaipur and shop titled as Boutique, Hotel Rambagh Palace, Jaipur was quantified and valued by departmental valuer at Rs. 26,62,93,376/-. The search team based on incomplete books of accounts worked out the cost of stock as per books as on the date of search i.e. on 18.12.2014 at Rs. 20,47,95,518/- and the differential amount of Rs. 6,14,97,858/- was alleged as excess unexplained stock and based on this working an admission of Shri Anup Bohra, one of the partners of assessee’s firm, was obtained in his statements recorded during the course of search as stated above. On the date of search books of the assessee were not complete and certain entries pertaining to cash sales made on 16.12.2014 remained to be incorporated therein, which fact is established from the copy of cash book print outs seized during the course of search where the cash balance as on 16.12.2014 is appearing in the Balance Sheet marked as Anx-1 page 22 from where the value of stock of Rs. 20,47,95,518.00 is taken by the search team. The other most important factor which is ignored by the department is that while valuing the stock found, the departmental valuer took the value of precious metal and other precious and semi-precious stones at prevailing market price as on the date of search (18.12.2014) whereas in accordance with the specified norms and accounting standards, the stock recorded in the books is at the cost price and or market value whichever is lower and since cost price is lower, same has been recorded at cost price in the books. It is relevant to state that there is no dispute in quantity measured by the departmental valuer. It was thus contended that since the stock found at the time of search was valued at prevailing market value and to compare the stock as per books of accounts which had always been recorded on cost price, the profit element embedded in value estimated by DVO to bring both the values in parity and make them comparable and thereafter the AO is required to find out any excess or any shortage of stock. It was also found that after giving effect to the cash sales made on 16.12.2014, entry of which were remained to be made in the books as on the date of search and further reducing the profit element from the gross value determined by departmental valuer, the total value of stock found as on the date of search was equal to the value of stock recorded in the books of the assessee and therefore no addition is warranted. However, the AO without appreciating the same and simply for the reason that one of the partners had admitted the same as unexplained in the statement recorded during the search, had made the addition. When all these facts alongwith the same evidences which were submitted before the AO during course of assessment proceedings were produced before the ld. CIT(A) in appellate proceedings, ld. CIT(A) after appreciating the same had deleted the addition made in this regard. Findings recorded by the ld. CIT(A) in this regard are as under:

8. We hear the Id. Counsel for the parties at sufficient length. Whereas the Id. Counsel for the assessee mainly urged that the cost of the stock had been correctly estimated in the books and there was no justification at all for arriving at the cost of the stock by making the tag prices, which were in fact the asking price, as basis and supported his reasoning with Tribunal's approach in ACIT vs. Bhandari Jewellers (1994) Tax World 292 Sec. 1), the Id. D/R vehemently argued that in view of the statement of Sri Heera Lal employee the tag prices represented Singapore Dollars on verifiable Indian currency by a multiplier of 5.7 and therefore the AO was justified in valuing all the stock by the rates mentioned on the tag It is evident in the present case that the articles found either at the shop in the Ram bagh Palace Hotel or at the main show room at M.I. Road, Jaipur were valued by the two methods vis, on the basis or the prices mentioned the tags tied with the articles or by the estimate made by the approved value. The difference between the valuations as mentioned in the books and as arrived at either at the time or search or at the time of assessment was the result of the difference in the estimation of the cost of the articles made. After all it was the estimation of the cost or the articles one made by the assessee on the basis of his personal knowledge & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT which was likely to be influenced by personal interest. The estimation of the cost made on the basis of the prices mentioned in the tags could not be, on the fact of it, indicative of the correct cost of the article. It was in the fact the asking price which is ordinarily subject to negotiation between the buyer and seller. Therefore, the estimation of cost made on the basis of the prices mentioned in the tags could not be accepted. The third name was the report of the Approved Valuer. An approved valuer having the special knowledge of the subject may be a better person than others to make 19 ITA 303 & 234/JP/2019_ M/s Jewels Emporium Vs ACIT estimation of the cost and gie his opinion. His opinion is in the nature of the opinion of an export and hence admissible and as such acceptable if it is uninterested, impartial and trustworthy. In the present case it is not shown that the approved valuer was in any way interested in either of the parties. The estimation made by him of the cost of untagged a articles was, therefore, acceptable. Incidentally such estimation, more or less, tallied with the estimation made by the assessee. Therefore, the cost of the stock declared by the assessee at the time of search must have been accepted. There are thus reasons to take the view that since the basis of the addition of Rs. 54,250/- was after all estimation of the cost of articles and such estimation was done at an intermediary stage of the accounting period it is not safe to declare that the assessee was having any stock in excess of that mentioned in the books. It may be mentioned that the cost of the stock was not arrived at itemwise or weightwise so as to pin point the excess articles or weight. Under such circumstances we find it difficult to uphold the sustained addition even. The addition sustained by the learned CIT(A) therefore deserved to be deleted. However, as detailed at page 69 and shown in the chart supplied to us during the course of argument at the most addition of Rs. 24,476/- only, as declared by the assessee may be and is hereby sustained. We think, we are fortified in our view, by the approach adopted by the Tribunal in M/s Bhandari Jewellers case (Supra) relied upon by Mr. N.C. Dhadda. Ground relating to this point in assessee's appeal are, therefore, partly allowed but in Revenue's appeal dismissed. 9.8 Accordingly I am of the considered opinion that AO should have considered the deduction of Gross Profit embedded in the valuation of physical stock so done. The meager difference of stock which is about 1.15% of the total valuation arrived at by the DVO may be ignored which may bound to occur on account of estimation while valuing fair market value of the precious and semi precious stones embedded in the jewellery. Further in my view even if addition is somehow made on account of said valuation of stock and sustained in assessment than credit of the same has to be allowed in year end while computing profit at year end which has not been allowed and as assessing officer accepted declared closing stock as on 31.3.2015 in books of accounts the addition of difference in value as on 17.12.2014 will get set off. The assessee carried forward the closing stock of this year end as declared in books of accounts as opening stock for next year. The AO neither allowed credit of difference while accepting closing stock at year end but accepted closing stock declared by the assessee which has been 20 ITA 303 & 234/JP/2019_ M/s Jewels Emporium Vs ACIT taken as op. stock in next year. In next year also no credit allowed for enhanced stock and even it is done it will be revenue neutral exercise. The Hon'ble ITAT in case of Manoj Kumar Johari (ITA No. 479/JP/ 13 & 383/JP/ 13 order dated & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT 16-10-2015) has held that: "Apropos Ground No. 5 of the assessee, we find merit in the arguments of the Ld. counsel for the assessee that increase in valuation of the closing stock is to be allowed in next year as increase in opening stock in next year i.e. 2010-11. It has not been disputed that the assessee has not claimed any benefit by increase in valuation of stock in subsequent year. Hence, the addition becomes revenue neutral. Consequently, respectfully following the decision of Hon'ble Supreme Court in the case of CIT Vs. Excel Industries Ltd. (2013) 358 ITR 295, the addition being tax neutral and the assessee having not derived any benefit, the addition is deleted" Also in case of Paras Mal JaM vs ACIT (1TA No.916/JP/ 12 dated 17-10-2015 has held that: "Assuming an addition on account of closing stock is somehow made, the same is to be allowed to the assessee in the next year as opening stock which will reduce the profits of next year. This exercise is essentially revenue neutral between two years. The Hon'ble Supreme Court in the case of CIT vs. Excel India, 358 ITR 295 has held that addition in such revenue neutral exercise should not be made by the Department. Thus on both the counts, there is no justification in retaining the addition which is deleted." 9.9 19. In above para, accordingly the addition so made by the AO is deleted and these grounds of appeal of A/R on this issue are allowed. On the facts and in the circumstances of the case, the AO is directed to delete the addition of 6,14,97,858/-“

12.

Their Lordships of the Supreme Court in the case of K.P. Varghese (supra)have observed as under : ". . . This burden may be discharged by the revenue by establishing facts and circumstances from which a reasonable inference can be drawn that the assessee has not correctly declared or disclosed the consideration received by him and there is an understatement or concealment of the consideration in respect of the transfer. Sub-section (2) has no application in the case of an honest and bona fide transaction where the consideration received by the assessee has been correctly declared or disclosed by him, and there is no concealment or suppression of the consideration. We find that in the present case, it was not the contention of the revenue that the property was sold by the assessee to his daughter-in-law and five of his children for a consideration which was more than the sum of Rs. 16,500 shown to be the consideration for the property in the instrument of transfer and there was an understatement or concealment of the consideration in respect of the transfer. It was common ground between the parties and that was a finding of fact reached by the income-tax authorities that the transfer of the property by the assessee was a perfectly honest and bona fide transaction where the full value of consideration received by the assessee was correctly disclosed at the figure of Rs. 16,500 ..." (p. 618) 13. The consistent finding of the ITO, the AAC and the Tribunal is that the petitioner has not shown the correct value of the property in her account books and thereby concealed the investment made for purchase of the plot of land in C- scheme, Jaipur. The Tribunal has considered the valuation report of the Valuer in & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT respect of the plot in question and also the fact that notice was given to the assessee as to why the value of the plot should not be taken as has been valued by the Valuer. The assessee failed to give any reason, as to why the value, valued by the valuer should not be accepted. The Tribunal has also considered the size of the plot, location and potential use of the plot of land. It is also noticed by the Tribunal that the assessee has failed to show that in area of C-scheme the value of plots is lesser than the rate which has been shown in valuation report.

21.

It is true that the burden is on the department to establish the fact that the property has been sold for lesser consideration that the market value. It is also to be established that actual consideration is more than the consideration shown in account books/sale deed. In the case of K.P. Varghese (supra)their Lordships have observed that before invoking the powers under sub-section (2) of section 52 of the Act, the burden is on the revenue to prove that the actual consideration was more than that disclosed by the assessee. But their Lordships have further observed that this burden may be discharged by establishing the facts and circumstances, from which reasonable inference can be drawn that the assessee has not correctly declared or disclosed the consideration received or paid by him. As stated above, in the locality of C scheme the adjoining plots were sold at the rate of Rs. 60 or 75 per sq. yd. and if we take the estimated rate taken by the AAC and the Tribunal, the rate of plot in question comes to Rs. 36 per sq. yd. that is, roughly half of the rate than the prevalent market rate in the area. Admittedly, no reason has been shown by the assessee as to why the plot of land has been sold to her half of rate of market rate. Nor any other reason has been shown to the ITO at the time of assessment. Even, in spite of specific query, the assessee failed to point out any mistake/lacuna in ascertaining the value of plot of land by the valuer. In these circumstances, the only reasonable inference that can be drawn is that the assessee has shown less amount in the account books and sale-deed that the actual consideration paid. Considering, the comparable cases and the facts of the case we find no ground to interfere in the addition made under section 69B. conducted for various branches, franchise store, other location except head office, Panch Batti Store and Museum. Thus, there remains no question of any excess stock more particularly for various other locations at which admittedly, no physical verification was done. It is a trite law that no addition is justified merely based on assumption, presumption and guess work.

15. Coming back to difference in value of stock amounting to Rs.28,11,13,718/-. Admittedly, the Survey Team and the AO could not establish existence of & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT unaccounted stock in terms of quantity of stock. In fact, the AO and the Survey Team both agreed that ‘physical stock’ found at the time of survey in terms of quantity is matching with stock in trade maintained with books of accounts of the assessee. In fact, all stock in trade found during the course of survey, is having tag price which is covered by valid purchase bills. The assessee has explained difference in value of stock by filing reconciliation statement. According to the assessee, the AO allowed deduction towards 5% GST, even though, the average GST component embedded in selling price works out to 8.5%. The assessee further claimed that the GP declared by the assessee for the impugned assessment year works out to 27.71%. The assessee has claimed deduction towards ‘obsolete stock’ @2% stock in trade. If you exclude correct amount of GST & GP and also towards ‘obsolete stock’ the difference in stock in trade value quantified by the Survey Team comes down to Rs.98,83,528/-. Although, the assessee could able to explain difference in stock in trade value quantified by the Survey Team before the AO but had admitted additional income on account of difference in value of Rs.28,11,13,718/- under the head ‘income from business’ and also paid taxes. The AO assessed said difference u/s.69B of the Act, only on the ground that the assessee could not able to explain source for ‘excess stock’ found during the course of survey. As we have already stated in earlier part of this order, there is a fundamental difference between ‘excess stock’ and ‘excess value of stock’. If there is an ‘excess stock’ in terms of quantity and the same has not been recorded in the books of accounts maintained for that year, then, the same needs to be treated as deemed income in terms of s.69B of the Act. If there is no ‘excess stock’ in terms of quantity but there is a difference in value of stock on account of different method of valuation of stock, then, such difference cannot be assessed u/s.69B of the Act, as unexplained investment. The assessee has right from the beginning explained that stock difference quantified by the Survey Team is incorrect due to various factors including incorrect application of GST and incorrect application of GP. Since, there is no difference in stock in trade in terms of quantity, in our considered view, the assessee has rightly offered additional income towards difference in value of stock under the head ‘income from business’ and this principle is squarely covered by the decision of the Hon’ble jurisdictional High Court in the case of SVS Oil Mills v. ACIT (supra) and also decision of the Tribunal in the case of Lovish Singhal & Others v. ITO 53 CCH 0250 (Jodhpur). Therefore, we are of the considered view that the AO is erred in assessing additional income offered by the assessee towards difference in value of stock u/s.69B of the Act r.w.s.115BBE of the Act.

& 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT The decision of Commissioner of Income-tax (Appeals) and the Tribunal were upheld holding that no addition was justified on the basis of these loose papers. In this case, nothings in the seized diary found from the premises were the only material on the basis of which the A.O. had made the impugned additions. The A.O. had not brought any corroborative material on record to prove that such sales were made and ‘on-money’ was received by the assessee outside the books of account. The A.O. had not examined any purchaser to whom the sales of shops were effected. Onus heavily lay on the revenue to prove with corroborative evidence that the entries in the seized diary actually represented the sales made by the assessee. Such onus had not been discharged by the revenue. Mere entries in the seized material were not sufficient to prove that the assessee had indulged in such a transaction. Layer Exports Pvt. Ltd. v. ACIT, CC-21, Mumbai [2017] 88 taxmann.com 620 (Mumbai-Trib.) While making an assessment, additions are required to be supported by tangible evidence and not by what Assessing Officer believes to be a prevalent practice. No inference can be drawn on the basis of market gossips unless backed by corroborating evidence. Smt. Harmohinder Kaur v. Deputy Commissioner of Income tax, CC-II, Jalandar [2021] 124 taxmann.com 68 (Amritsar – Trib. We are of the view, diary seized during the survey/search operation, without corroboration, have no authenticity and therefore, cannot be relied upon. Even entry recorded in the diary qua amount of sale was not confirmed from the buyers of the property and without confirmation, question of any assumption or belief that the entry belongs to the assessee did not arise and hence entry found in diary without any corroborative evidence, cannot be made basis of addition. The authorities below in the instant case, made the addition only on the basis of surmises, suspicion and guess work. Hence, respectively following the judgments referred above we are unable to sustain the addition made by the Assessing Officer and affirmed by the Ld. CIT(A). Consequently we are inclined to delete the same, resultantly the appeal of the assessee is liable to be allowed.

& 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT ...When it is a mere entry on a loose sheet of paper and if the assessee claims that it was only a planning, not supported by actual cash, then there has to be circumstantial evidences to support that this entry really represent cash of Rs. 60 lakhs. There is no such evidence found by the Revenue in the form of extra cash, jewellery or investment outside the books. Amarjit Singh Bakshi (HUF) v. Asstt. CIT [2003] 86 ITD 13 (Delhi) ™ Held that any noting in the loose sheet is no evidence by itself. An entry in the books of account maintained in the regular course of business is relevant for purposes of considering the nature and impact of a transaction, but nothings on slips of paper or loose sheets of paper cannot fall in this category. Nothings on loose sheets of paper are required to be supported/corroborated by other evidence which may include the statement of a person, who admittedly is a party to the nothings. It was further observed in that case that the provisions of the Indian Evidence Act are not strictly applicable to the proceedings under the IT Act, but the broad principles of law of evidence do apply to such proceedings. ACIT v. Sharad Chaudhary [2015] 55 taxmann.com 324 (Delhi –Trib.) Held that a loose paper found during search standalone could not be used as a basis for making impugned addition without the company of any other 276upport- tive material and evidence more so when contents of main three parts of the notings were not interlinked and the Assessing Officer had deleted decimal from noting of the figure of Rs. 4,47,000.00 for reading and accepting the same as Rs. 4,47,00,000 which was not permissible in absence of other supportive evidence. The addition was, therefore, deleted. D.A. Patel v. Dy. CIT [2000] 72 ITD 340 (Mum.) There was no evidence connecting the appellant to this seized paper. Simply because a sheet of paper was found during the search at the premises of an assessee, he could not be saddled with a tax liability unless it could conceivably be related to the assessee in some reasonable manner.

Arguments of department Rejoinder/Counter Arguments of the Assessee & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT • 1. Affidavits of artisan and In support of the fact that the items were sent for Amarpali Design Studio has repair, the Appellant submitted affidavits from the been submitted after lapse of concerned parties. However, the Ld. AO did not sufficient time and that too conduct any independent inquiry from the parties during appeal proceedings during remand proceedings before rejecting their before Ld. CIT(A)) affidavits. • 2. PAN Nos are not mentioned in Merely because it was submitted before Ld. CIT(A) affidavits only does not absolve the AO from performing its duty to check the veracity of the affidavits. • 3. No details when such items There is no inquiry or verification if there were were sent for repairs. some doubts or suspicion. It is clarified that there was no previous occasion for submission of these 4. There are no affidavits as Ld. AO during the assessment invoice/challan/bills of proceedings did not confront the Appellant for any whatsoever nature, and no shortcomings in the supporting documents supplied supporting documents during assessment proceedings. submitted. • The Appellant clarified the position before the DDIT(Inv) on 05.04.2021 itself regarding various items sent for repairs and in the statement of Mr. Rajesh Ajmera, the fact of items sent for repairs was establishes and photos of items shown. • The details of the parties were duly given on 5.04.21 before the investigation wing. Refer page 905- 908 PB VOL 5. • Delay in submission of additional evidence, is not a valid ground for rejecting them, especially without conducting an independent inquiry from the parties whose affidavits were submitted. In this context, the Appellant places its reliance in case of Mehta Parikh & Co. v. CIT [1956] 30 ITR 181 wherein Hon’ble Apex Court has held that unless the person making the statement in the affidavit is cross- examined by the revenue, it is not open to the revenue to challenge the correctness of the statement made by the deponent in the affidavit. Further Reference Deputy Commissioner of Income-tax v. Smt. Jayita Bose, [2004] 3 SOT 525 (KOL.) (Refer S. No. 21 of the case compilation) • It is humbly submitted that in the jewellery industry, it is a common practice for items to be sent for repair based on mutual trust between the parties involved as items are sent to known person/parties with huge trust and primary artisan with low- income level but very high trust in them. The repair process for a trading company is typically not documented in the same way as being wishes of the Ld. DR considering the faith and nature of the jewellery industry. • Furthermore, it is important to note that only few items, which is very small fraction out of the total inventory of more than three thousand items of gold and more than 14 thousand items of silver, were found deficient and reasonably explained to be sent for repair by the Appellant. • This itself proves that vast majority of the stock remained present at time of impugned valuation by department. • Therefore, there is no ground to reject the explanation of the Appellant which is reasonable and justified. • No contrary evidence has been brought on record to negate the explanation of the Appellant, mere doubts or insufficiency of trails are being argued, which is not justified. • Based on the stance taken by the Ld. AO, the inference is that no item could have been sent for repair, which is an unreasonable and flawed conclusion. Such an assumption disregards the customary practices in the jewellery industry, where repair activities often occur, especially when dealing with trusted parties. • The Ld. DR has simply disapproved the affidavits without even seeing them and blindly placed reliance on one liner general comments of Ld. CIT(A) in its impugned order. • From the face of the affidavits placed on records, the identity, purpose, details of the movement and other particulars are duly established, which supports the details submitted during post survey proceedings itself. Kindly refer to page no. page 905- 908 PB VOL 5. duly supported by affidavits at page no. 1745-1754 of Vol. 9. • The nature of work done and fact of items were sent for repair/refurbishing etc, is very much evident from affidavits of parties placed on record. record, written submission and affidavit and other supporting documents placed by Assessee to justify its explanation submitted during survey as well as in post survey proceeding. We find that factual position of 41 high value items was duly clarified to investigation wing on 05.04.2021 itself vide letter dated 05.04.2021 Page No. 905- 908 PB Vol 5 and nothing on record to show that department has ever controverted the same. The names of the parties to whom items were sent for repair and received back were also given to investigation wing post survey at the available time considering COVID-19 situation/restriction. The department has not conducted any further verification from the parties. There is also force in the argument of the Ld. Senior counsel that considering the value of gold content in items appearing at Sr. No. 1, the typing error explained by Mr. Rajesh Ajmera in his statement in answer to Q. No. 40 (Page No. 142-143 of Vol. I) deserves to be accepted. Thus, the documentary evidence in form of affidavits placed on record, were in furtherance to the substantiates the explanation of the assessee regarding these items of jewellery that it were sent for repairs. The explanation of the Assessee is plausible that in the jewellery industry, the Artisens are individuals or person of unorganized sector who are trustworthy person, similarly repair work has been done through sister items were not found during the survey. The Assessee has shown repair/job work charges in his audited financial statements, for which relevant nature of work performed has also been shown to us during hearing on sample basis. No evidence of sale of such items has been found during the survey. Needless to say burden to prove is on the department. Hence, in the absence of any corroborative material, no inference that items were sold outside the books can be drawn. These affidavits cannot be rejected at threshold without any inquiry or cross examination, the AO as well as CIT(A) has not made any inquiry or cross examined these persons. Thus, unless the parties are cross examined, it is not open to the department to simply discard these affidavits Our view is supported by judgment of Hon’ble Apex Court in the case of Mehta Parikh & Co. v. CIT [1956] 30 ITR 181 wherein Hon’ble Apex Court has held that unless the person making the statement in the affidavit is cross-examined by the revenue, it is not open to the revenue to challenge the correctness of the statement made by the deponent in the affidavit. The bench also noted that for the impugned addition of Rs. 11.40 crores made on account of non availability of high value 41 items of jewellery the proof that 30 items were sent on repairs and 11 items were traced on the same day and shown as to on record by the assessee vide letter dated 05.04.2021. This letter was filed by the assessee at page No. 905 volume (v) of the paper book placed on record and therefore, that amount cannot be considered as unaccounted sales because the revenue did not deal with the contention of the assessee which was duly supported by the evidence placed on record and supported by the affidavit placed on record. In the light of this observation ground no. 17 raised by the assessee stands allowed.