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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI DUVVURU RL REDDY & SHRI S. JAYARAMAN
आयकर अपील सं./ Year: 2010-11 Shri K. Mohammed Rafi, Vs. The Income Tax Officer, Prop. M/s. Sumangali Jewellery, Ward I(5), No.52, Bazaar Street, Vellore. Vandavasi – 604 408. PAN: AGJPM 8375M (अपीलाथ�/Appellant) (��यथ�/Respondent) अपीलाथ� क� ओर से/ Appellant by : Shri S. Sridhar, Advocate ��यथ� क� ओर से /Respondent by : Shri Clement Ramesh Kumar,Addl.CIT सुनवाई क� तार�ख/Date of Hearing : 19.08.2019 घोषणा क� तार�ख /Date of Pronouncement : 07.11.2019 आदेश / O R D E R PER SHRI S. JAYARAMAN, ACCOUNTANT MEMBER:
The Assessee filed this appeal against the order of the Commissioner of Income Tax (Appeals)-VII, Chennai in dated 03.01.2014 for the assessment year 2010-11.
Shri K. Mohammed Rafi, the assessee, is proprietor of M/s. Sumangali Jewellery, filed his return of income for the assessment year 2010-11 admitting total income of Rs.32,32,744/-. A 2 -: survey action was conducted in his business premises on 04.03.2010. Based on the stock inventory and sworn statement, the assessee admitted excess stock of Rs.1,05,79,360/-. However, he has not admitted the same in the return of income. Therefore, the Assessing Officer after giving opportunity, considering the materials etc added the value of unaccounted stock determined at the time of survey at Rs.1,05,79,360/- to the returned income. Aggrieved against that order, the assessee filed appeal before the CIT(A). The ld.CIT(A) partly allowed the appeal. Against the order of the ld.CIT(A), the assessee filed this appeal with the following grounds:- 1. The order of The Commissioner of Income Tax (Appeals) VII, Chennai - 600 034 dated 03.01.2014 in I.T.A.No.1016/13-14 for the above mentioned Assessment Year is contrary to law, facts, and in the circumstances of the case.
2. The CIT (Appeals) erred in partly sustaining the addition of Rs.49,00,635/- towards excess stock as against the original addition of Rs.1,05,79,360/- in the computation of taxable total income without asigning proper reasons and justification.
3. The CIT (Appeals) failed to appreciate that the reconciliation statement filed by the Appellant was not considered in proper perspective and ought to have appreciated that the credit for base stock, stock of the others including goldsmiths were correctly claimed in the reconciliation statement and thereby vitiating his action in relation thereto.
4. The CIT (Appeals) failed to appreciate that the claim for credit for purchase of stock out of sale of property was wrongly rejected in spite
3 -: of the acceptance of evidence filed in relation thereto.
5. The CIT (Appeals) failed to appreciate that the reworking of the stock position of the previous year relating to the Assessment Year under consideration as reflected in page 7 of the impugned order was wrong, erroneous, unjustified, incorrect and not sustainable in law.
The ld.AR assailed the order of the ld.CIT(A) on the above lines of grounds of appeal. Per contra, the ld.DR submitted that the ld.CIT(A) after duly considering the various aspects and materials, has determined the value of excess stock of Rs.49,00,635/- and hence, the assessee’s appeal may be dismissed. In this regard, the ld.DR took us elaborately to the order of the ld.CIT(A). The relevant portion of the order of the ld.CIT(A) is extracted as under:- 4.3 After considering the arguments of the appellant as stated above, it is seen that the addition of Rs.1,05,79,360/- on account of unaccounted stock of gold and silver jewellery was made only on the basis of sworn statement of appellant's son at the time of survey and later confirmed by the appellant. For the AY 2009-10, the returned income was Rs.1,91,100/- as per the calculation filed by the appellant. But the returned income was Rs.32,32,744/- for the AY 2010-11. Perusal of the profit & loss a/c reveals that the assessee admitted closing stock of Rs.40,01,201/- which resulted in increase of' income. It shows that the appellant did not go back completely from the sworn statement. Perusal of the miscellaneous records for AY 2010-11 does not reveal how the excess stock of Rs.l,05,79,360/- was arrived at. The calculation arrived at by the AO is not clear i.e. whether the excess stock is arrived at on the date of survey or as on 31.03.2010. The AO reduced the book stock of Rs.6,22,000/- from physical stock found (gold) of Rs.1,20,07,097/. But the opening stock was shown at Rs.12,48,076/- by the appellant as on 01.04.2009. The AO reduced the purchase value of jewellery at 4 -: Rs.6,00,000/- whereas purchase was shown at Rs 14,99,966/-. Similarly in the case of working relating to silver also, there are discrepancies. The AO passed the order in a cursory manner without trying to establish that the unaccounted stock is worked out in a systematic manner by taking into account opening stock, purchase and sales made upto the date of survey. This was not done. The statements recorded from Mr. Mohamed Gani and Mr.R. Abdulla were not disproved by the assessing officer. On 04.03.201.0 the following excess stock was arrived at Gold Rs.1,15,33,221 Silver Rs.11,64,746 Total excess Rs.1,26,97,967 In some other sheet of working, the excess stock was arrived at as under: Gold Rs.95,32,736 Silver Rs.10,46,624 Total excess Rs.1,05,79,360
4.4 But the AO adopted the later figure n the assessment order. No paper reasons were furnished by the AO for taking a different figure. The appellant claimed deduction for stones, other Jewellery kept In the shop, etc. They were not considered. In the situation, the addition of unaccounted stock is not based factual things and hence cannot be treated as a correct one. At the same time, the appellant’s arguments cannot be accepted in toto. It is also imperative that it is customary to give jewellery to the bride when there is a marriage in the family. Therefore, giving of jewellery by the appellant and appellant's father- in-law to the daughter of the appellant cannot be simply brushed aside. A rational view is to be taken to allow set-off, for the jewels given by the relatives. But keeping of other's jewellery (Gold smith's jewellery) as claimed by the appellant in the appellant's business premises cannot be believed. Because no evidence was made available either at the time of assessment or before the undersigned. The appellant also claimed
5 -: base stock of 4500 gms of gold and 15 kg of silver and pleaded for allowance of the same.
4.5 The assessee filed a reconciliation statement and arrived at the closing stock value at Rs.40,01,201/- (gold & silver). The working is reproduced as under;
RECONCILIATION 1 Base stock 4500 15000 2 Purchase out of sale of land in 2007 500 11000 3 Relatives 1120 5000 4 Stones 800 0 5 Others 871 17555 Stock as at 05.03.2010 7791 48555 6 Purchased at 31.03.2010 181 0 Stock as at 31.03.2010 7972 48555
STOCK VALUATION - GOLD Year Qty in gms Price per gram Value 2004 4855 608.1 2214244 2005 1345 615 620381 2007 400 951 285300 2010 252 1732 308448 TOTAL 6852 3428373 NOTE: SINCE THE GOLD JEWELLERY CONTAINS STONES AND IS NOT PURELY 24 CARATS AND HENCE THE VLAUE HAS BEEN TAKEN AT 75% OF THE VALUE OF 24 CARATS.
STOCK VALUATION - SILVER Year Qty in gms Price per gram Value 2004 15 11800 174000 2005 17.555 10500 184328 2007 11 19500 214500 TOTAL 43.555 572828
4.6 From the above discussion, I am of the considered view that the value of excess stock adopted for taxation seems to be very high. It is not based on any kind of logic acceptable both from factual point of view or from any logical method. Genuine allowances such as family jewellery stone, purchase from out of sale proceeds of landed property, base stock, etc. were not considered by the AO while arriving at the Value. Therefore, to be fair, the following deductions are to be given to arrive at somewhat reasonable value.
The value of unaccounted stock arrived at by the AO Rs.1,05,79,360 Less: Value of jewellery given by Mr.Abdulla, father-in- law of Appellant’s son (since not disproved by the AO) 70 sovereign x 8 gm/sovereign x Rs.1590 (adopted by the (-) Rs.8,90,400 AO) Rs.96,78,960 Less: Value of jewellery given by Mr.Seeni Mohamed, father-in-law of the assessee since not disproved by the AO 60 x 8 x1590 = Rs.7,63,200 (-) Rs.7,63,200 Rs.89,25,760 Less: Value of jewellery accounted by the appellant because of survey not taken into account by the AO. 40,01,201 (c/s)-12,48,076 (o/s) =Rs.27,53,125 (-) Rs.27,53,125 Rs.61,72,635 Less: Claim for stone of 800 gm. Allowed 800 x 1590 = Rs.12,72,000 (-) Rs.12,72,000 Excess stock Rs.49,00,635
It seems that the excess stock of Rs.49,00,635/- arrived at above will be fair and meets the ends of justice. Base stock theory and purchase by sale of land are rejected. Therefore, the AO is directed to tax Rs.49,00,635/- towards excess stock. The balance addition of Rs.56,78,725/- (Rs.1,05,79,360 – Rs.49,00,635) is directed to be deleted.
7 -: 4. We have heard the rival submissions and gone through the materials on record. It is clear from the above, that the ld.CIT(A) after duly considering the submission of the assessee and the records, has arrived the value of excess stock with which we are in agreement. Therefore, we do not find any merit in the appeal of the assessee and hence, the assessee’s appeal is dismissed.
In the result, the appeal of the assessee is dismissed.
Order pronounced in the Court on 7th November, 2019 in Chennai.