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Income Tax Appellate Tribunal, MUMBAI BENCHES “F”, MUMBAI
Before: Shri G S Pannu, Vice- & Shri Pawan Singh
O R D E R Per G S Pannu, Vice-President :
This appeal by the assessee is directed against the order of the CIT(A)-3, Thane, dated 01.11.2016, which in turn has arisen out of the order passed by the Assessing Officer u/s. 143(3) of the Income Tax Act, 1961 relating to assessment year 2010-11.
In this appeal, although assessee has raised multiple Grounds of appeal, the main grievance is on account of two additions made amounting to ` 11,93,000/- and ` 3,60,000/-. Both the additions arise out of the admission made by the assessee in Shri Udaylal H Jain the course of survey conducted by the department on 9th March 2010 at the business premises of the assessee.
In order to appreciate the relevant facts, following discussion is appropriate.
The appellant before us is an individual, engaged in the business of manufacture and sale of gold and silver ornaments. A survey action u/s. 133A of the Act was carried out at the business premises of the assessee on 9th March 2010 and at that time, a statement of the assessee was also recorded. A perusal of reply to Question no.4 of the said statement, a copy of which has been placed on record, reveals that the assessee had admitted of discrepancy in the closing stock of gold weighing 4000 gms. The assessee explained that the valuation of such stock worked out to ` 50 lacs considering the rate of ` 12,880/- per 10 gms of gold with purity of 18 carat. In the course of statement, assessee explained that the market rate of the gold of ` 16,600/- per 10 gms was in relation to 23 carat gold whereas normally gold used for making jewellery ranges from 18 to 22 carat purity. Thus, in this background, assessee offered for taxation additional income over and above the amounts declared in the books of account of Rs 50 lacs. Before us, learned representative explained that income so offered was duly disclosed by the assessee and requisite taxes were paid. In the course of assessment proceedings, the Assessing Officer disagreed with the version of the assessee regarding the purity of stock of gold found at the time of survey, as according to him, the quality wise purchase and sale of gold ornaments during the year was only of 22 carat purity, and thus the stock found could not be of 18 carat purity. Therefore, according to him, the valuation of closing stock of gold made at the rate of ` 12,880/- per 10 gms was erroneous and Shri Udaylal H Jain that the valuation of the undisclosed stock ought to have been made at ` 15,482.50/- per 10 gms being the rate of 22 carat gold purity. In this manner the Assessing Officer computed the value of unaccounted gold found at the time of survey at ` 61,93,000/- as against 50 lacs declared by the assessee, thereby resulting in an addition of ` 11,93,000/- to the returned income. Simultaneously, the Assessing Officer also presumed that the assessee would have incurred expenditure in the form of labour charges on such unaccounted stock of gold, which he estimated at ` 3,60,000/- The said amount was also added to the returned income as undisclosed income. Both the additions has since been sustained by the CIT(A) also against which the assessee is in further appeal before us.
Before us, although assessee has raised various grounds assailing the maintainability of the impugned addition, but the learned representative pointed out that the assessee would be satisfied if a direction is issued that since the additions of ` 11,93,000/- and ` 36,000/- would go to increase the value of closing stock of gold in this year, same enhanced value be taken as value of opening stock in the subsequent assessment year.
On this aspect the learned DR appearing for the Revenue did not seriously oppose because in any case the addition in the instant year is liable to be confirmed.
Having considered the rival submissions, in our view, the limited plea raised by the assessee is quite justified in as much as the value of the closing stock in this year is definitely to be understood as the opening stock valuation in the subsequent period. The plea of the assessee on the point of law is also supported by the recent
Shri Udaylal H Jain judgment of Hon’ble Supreme Court in the case of V K J Builders & Contracts Pvt. Ltd. vs. CIT 318 ITR 204. In this view of the matter, in conclusion, we hold that in view of the sustainability of the impugned additions, which results in corresponding enhancement in the value of the closing stock, the value of the opening stock in the next year be enhanced by the corresponding amount.
In the result, the appeal of the assessee is dismissed, subject to the above remarks
Order dictated and pronounced in the open court before both the parties on this day of 25th March, 2019.