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Income Tax Appellate Tribunal, MUMBAI BENCHES “H”, MUMBAI
Before: Shri C N Prasad & Shri Rajesh Kumar
Per Rajesh Kumar, Accountant Member
The appeal by the assessee for A.Y. 2007-08 and the cross appeals by the assessee and the revenue for A.Y. 2009-10 arises out of two different orders of the CIT(A)-12, Mumbai, both dated 01.02.20013
2 KBJ Jewellery Pvt. Ltd.
2 We shall first take up appeal by the assessee in ITA 3432/Mum/2013 for A.Y. 2007-08 (assessee’s appeal), wherein the following grounds have been raised:
“1. On the facts and circumstances of the appellant's case and in law the Id. CIT(A) erred in confirming the Ld. AO's action in reopening the assessment u/sl47 by issue of notice dated 7/12/2010 u/s!48 which is illegal and bad in law or otherwise void for want of jurisdiction.
2. On the facts and circumstances of the appellant's case and in law the Id. C1T(A) erred in confirming the Ld. AO's action of making an addition of Rs. IJ5.82.192/- on account of discrepancy in closing stock as per para 3 of the impugned order
3. On the facts and circumstances of the appellant's case and in law the Id. CIT(A) erred in not directing the Id. AO to restrict the addition to the extent of gross profit embedded in the alleged excess stock.
4. In any event the Id.CIT(A) erred in not directing the Id. AO to increase the opening stock for the AY-2008-09 to the extent of Rs. 1,15,82.192/-.
5. The Appellant craves leave to add, amend, alter, modify and or withdraw any of the above grounds of appeal, which are without prejudice to one another.”
3. At the outset, the learned counsel for the assessee submitted that ground no.1 relating re-opening of assessment u/s. 147 is not pressed, it is therefore dismissed as not being pressed.
4. The issue in ground no.2 is regarding the confirmation of addition of Rs.1,15,82,192/- by the learned CIT(A) as made by the Assessing Officer on account of discrepancy in closing stock. The facts in brief are that survey u/s. 133A of the Act was conducted on 13.08.2008 by ADIT (Inv), Mumbai. During the course of survey proceedings, certain print outs of the ledger in respect of stock statement were extracted from the computer for the period 05.04.2006 to 31.03.2007. The said print outs revealed the closing stock at Rs.2,26,31,232.73/- whereas as per the balance sheet for the same period
3 KBJ Jewellery Pvt. Ltd. states the closing stock at Rs.0.20. However, the closing stock as per the audited accounts of the assessee were at Rs.1,10,49,040/-. Accordingly, the assessee was required to explain the said discrepancy. The assessee vide letter dated 07.11.2011 stated that in the stock register, all items were duly reflected. Similar objection was raised by ADIT Inv, Mumbai for which the assessee had replied vide letter dated 15.10.2008. However, the Assessing Officer was not satisfied with the explanation of the assessee and he, therefore, vide his order dated 29.12.2011, added Rs.1,15,82,192/- to the income of the assessee as being the discrepancy in closing stock while framing assessment u/s. 143(3) r.w.s. 147 of the Act.
In the appellate proceedings, the learned CIT(A) upheld the addition made by the Assessing Officer, after taking into account the detailed submissions and contentions as made by the assessee by observing and holding as under:
“4.2 I find that the appellant has not maintained any quality-wise details of production in closing stock. In fact, the audited statements do not record maintenance of a stock register in the case of the appellant. It has been stated by the auditor very clearly that it was not possible to give quantitative details since no stock register is maintained by the appellant. It is only at the end of the year that the management verifies, certifies and values stock. It would mean that the closing stock has been valued by the appellant as per its convenience. It also stands that the appellant's valuation of stock has no scientific or mathematical basis behind it and none was explained during the course of assessment or appellate proceedings. Therefore, I find no infirmity in the order of the AO wherein to arrive at a correct picture of closing stock, the AO has taken into account the loose papers impounded from the premises of the appellant which clearly reveal the value of closing stock as on 31/3/2007 at Rs.2,26,31,232/-. The AO has also very fairly given the appellant benefit of audit report statement. The AO has taken into consideration the figures as were in the impounded documents found during the course of survey in the case of the appellant and has considered the figure as mentioned by the appellant in its own audited statement regarding the closing stock. It is obvious that the closing stock as declared in the books of accounts could not be adopted as it was obvious that the books had not been written in the method applicable and did not declare the correct working of the appellant's account. The audited report of the 4 KBJ Jewellery Pvt. Ltd. appellant also declared only those amounts which the appellant thought fit. Besides this, the appellant has not been able to give quantity-wise stock details of the amount declared in the audit report by way of stock register for it to be accepted as the correct figure especially when there exists documents as found in the premises of the appellant which give a completely different picture. In a business like that in which the appellant is, it is very necessary as jewellery value defers from piece to piece according to the quality, that the accounts are to be maintained meticulously recording the same in the proper stock record with respect to manufacturing and sale giving quality and quantity. Unless the details of purchase, production, sale, opening stock and closing stock are accurately mentioned / recorded the exact value of closing stock cannot be called from the books of accounts maintained. In the case of the appellant, I find that a stock summary that has been submitted shows clubbing of various precious stones ' under the head colour stones, all the diamonds together, all the gold ornaments together under the head coin, gold ornaments, new gold ornaments, old gold, on approval basis etc. and all the silver together. From the above, it is not clear whether the diamonds that have been valued were of the same category, carat and value. Similar is the position regarding coloured stones. It is not known whether they are emeralds, rubies or any other precious or semiprecious stones. Their size, purity and value are not reflected. The stock summary therefore is highly unreliable and cannot be taken as one giving true & correct picture of the stock available with the "appellant at all. Therefore, I find that the books of accounts maintained by the appellant would need to be rejected as they do not give the correct figure of the stock / business of the appellant. It is not as if a stock register could not be maintained in a business of jewellery. Reliance here is placed in the case of Kach Walla Gems (288 ITR 10) (SC) wherein the Hon'ble Supreme Court has upheld the rejection of accounts wherein it was found that the appellant had not maintained and kept any quantitative details / stock register and there was no basis of valuation of closing stock declared. It was further seen by the Hon'ble Court that there were unaccounted purchases and manipulation of profit by the appellant. Here it may be mentioned that during the course of survey in the case of the appellant it was noticed by the revenue that in the subsequent years, the appellant had undisclosed purchases and sales. These factors would definitely indicate the method of working adopted by the appellant-company in its business even though for the current year unaccounted purchases and sales are not the issue. In the current year, it is seen that the appellant has not been able to reconcile the differences between the audited accounts and that as found in the loose papers maintained by the appellant regarding closing stock valuation. Therefore, the AO's action in adopting the figure of closing stock as found in the loose papers is definitely in order and is to be confirmed as it is logical to accept that the accounting in the loose papers-are the basis of the books of accounts and that they reflect the actuals. It is also to be kept in view here that the appellant did not provide any quality-wise details of jewellery to the AO
5 KBJ Jewellery Pvt. Ltd. or reconciled the difference between the audited accounts valuation as available in the loose papers for the audited accounts to be held as being correct. It is also important to note that the audited accounts are prepared by an auditor only on the basis of information supplied by the appellant and if the appellant chooses to keep certain information out of the purview of the auditor, the auditor has no choice but to audit the accounts on the basis of details put forth before him by the appellant. It is clear that the appellant has adopted a closing stock balance which is much lower to manipulate its profit ratios. In the case of D. Subash Chandra & Co. for AY 2003-04, the Hon’ble ITAT Ahemedabad by their order dated 4/1/2008 have upheld, the addition made on account of on the valuation of closing stock due to discrepancies found. Under the circumstances keeping the above discussion in view and as the appellant has not been able to submit any details to rebut the observation of the AO, I find that there is no infirmity in the order of the AO wherein addition has been effected by him for discrepancy as found in the closing stock of the appellant and am not inclined to interfere with the said order. The addition made is confirmed and the ground of appeal filed dismissed.”
The learned AR vehemently submitted before us that the Assessing Officer relied on the print outs of ledger extracts in respect of stock statements, which the assessee denied during the survey itself and also in the statement recorded during the course of survey. The learned AR submitted that the Assessing Officer relied on incorrect documents(print outs), which showed the closing stock at Rs.2,26,31,232.73/- and at Rs.20 in the balance sheet as per computer print out extracted during the survey, whereas the assessee while filing return of income showed the closing stock at 1,10,49,040/- which were duly audited and filed prior to the date of survey on the assessee. The learned AR submitted that the addition is based upon the wrong appreciation of facts and reliance on the papers which were denied by the assessee. The learned AR contended that neither excess stock was found during the course of survey nor any cash or receivables were found to have been recorded out of the books of account during the course of survey meaning thereby that there was no sale of stocks out of books of accounts of the assessee. The learned AR argued that the Assessing Officer relied on the documents, existence of which were denied by the assessee right from 6 KBJ Jewellery Pvt. Ltd.
the beginning even during the survey. The assessee submitted that the return of income was filed on 04.10.2007, approximately ten months before the date of survey and, therefore, the CIT(A) has totally erred on facts in confirming the order of the Assessing Officer. The learned AR without any prejudice also made a submission that these stocks might have been prepared by the account personnel for the purpose of acquiring higher credit facilities from bank and thus, the same has no relevance to the actual income of the assessee. Another contention raised by the assessee during the course of hearing was that since no excess stock was actually found during the course of search action then the addition which can be sustained on alleged excess stock is to be restricted to the gross profit made. The learned AR submitted that the average gross profit of last three years is 3.42% and, therefore, at the most said rate could be applied.
The learned DR, on the other hand, opposed the arguments of the learned AR. He submitted that the additions were based upon the documents/ledger extracts taken during the course of survey, though the assessee denied the existence of the same right from the beginning. The learned DR contended that it is a common practice in the business to under value stocks for suppressing the income. He further relied on the orders of the authorities below and submitted that the same should be confirmed as being based on the documents found during the course of survey.
We have heard both the parties and perused the material available on record. The undisputed facts are that the assessee filed return of income on 04.10.2007, i.e. ten months prior to the date of survey, wherein as per its audited books of account, disclosed closing stock at Rs.1,10,49,040/-. The survey team extracted stock statements/ stock ledgers account print outs, which revealed the stock at Rs.2,26,31,232.73/- and as per the balance sheet print out at Rs.0.20. Now the only question before us whether the addition
7 KBJ Jewellery Pvt. Ltd. made by the Assessing Officer as sustained by the CIT(A) on account of difference in stocks based upon the print outs taken by the survey team is justified or not. We find from the facts before us that during the course of survey the survey team did not find any excess closing stock over and above what has been disclosed by the assessee in the audited books of account subject to the adjustments during the intervening period between the date of balance sheet and the date of survey. The survey team also did not find any cash or receivables, which may possibly lead to a possible presumption that the assessee might have sold stock outside books of accounts. The assessee had denied the value of closing stock arrived at by the survey team throughout i.e. right from the inception when the survey was conducted till the scrutiny proceedings. We find merits in the contentions of the assessee that the Revenue has relied on incorrect set of papers, which reveal two closing stock one at Rs.2,26,31,232.73/- as per ledger extract and another at Rs.0.20 as per the balance sheet print out. Under these circumstances, the addition of total stock difference between what has been found at the time of survey from the print outs and that as per audited accounts cannot be justified. We find merit in the alternative submissions of the assessee that at the most gross profit on the said stock could be added to the income of the assessee. We note that during the last three years the average gross profit of the assessee is 3.2% and it would be reasonable if the same is applied to bring to tax the income of the assessee. Accordingly, we set aside the order of the CIT(A)) on this issue and direct the Assessing Officer to apply gross profit @ 3.42% of Rs.1,15,82,192/- and add it to the income of the assessee and thus the assessee gets relief of Rs. 1,11,86,081/-.
Resultantly, the ground is partly allowed.
The issue in ground no.3 is as regards restricting the addition to the extent of gross profit embedded in the alleged excess stock. We have 8 KBJ Jewellery Pvt. Ltd.
already dealt with the issue, while dealing with ground no.2, in the foregoing paragraphs and, therefore, the ground is allowed.
The issue raised in ground no.4 is against the order of the CIT(A) in not directing the Assessing Officer to increase the opening stock for A.Y. 2008-09 to the extent of Rs.1,15,82,192/-. Since, we have already decided the ground no.2 relating to addition of Rs.1,15,82,192/- on account of closing stock and thus the ground raised becomes infructuous and is dismissed accordingly.
Now coming to for A.Y. 2009-10 (Revenue’s appeal). The grounds raised by the Revenue read as under:
"1.On the facts and circumstances of case and in law, the Ld.CIT(A) erred in deleting the addition of Rs.4.39 crores as undisclosed and unaccounted income in addition to the regular income by not giving opportunity under Rule 46A before admitting any new evidence which was very crucial in the case of the assessee, especially evidence with respect to that assessee owning up all the transactions in the impounded papers as reflecting its transaction of assessee's submission of its peak credit method."
"2.On the facts and circumstances of case and in law, the Ld.CIT(A) erred in deleting the addition of undisclosed and unaccounted income by not considering the A.O's finding of the 2 decimals to be added to all the figures of Annexure 'C', 'D','E' and impounded papers by merely giving benefit of doubt to the assessee without bringing any cogent evidence on record or any other evidence relating to reconciliation of details available from the assessee's impounded papers and its books of accounts."
3. "On the facts and circumstances of case and in law, the Ld CIT(A) erred in deleting the addition of undisclosed and unaccounted income by rejecting method of estimation of based on Annexure 'C' entries by adding two decimals point without proper logical reasons."
"The appellant prays that the order of Ld. CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored."
Ground no.1 relates to the deletion of the addition of Rs.4.39 crores by the CIT(A) as made by the Assessing Officer on account of undisclosed and 9 KBJ Jewellery Pvt. Ltd.
unaccounted income in addition to the regular income by not giving opportunity under Rule 46A before admitting new evidences. Facts in brief are that a survey action u/s. 133A was conducted on the premises of the assessee on 13.08.2008 at Mumbai. The survey team took print outs of some ledger accounts from the computer and, on verification with the bank statements of the Saraswat Co-op Bank, found the figures in the computer print out to be manipulated by shifting two decimal places. One such instance, as noted by the Assessing Officer in para 4 of his order is that in an entry dated 8.05.2008 in the computer print out the figure was shown as 34,500 whereas in the bank statement of Saraswat Co-op Bank, the figure was shown as Rs.34,50,000/-. One of the Directors of the assessee submitted before the Assessing Officer that these records did not pertain to the assessee however, the plea of the Director was not accepted by the Assessing Officer and he reached a conclusion that the purchase and sales were manipulated by two decimal points by shifting the decimal to the left say for Rs. 1000/- only Rs. 10/- were recorded and thus, worked out and estimated the cash sales at Rs.51,81,98,877/- (extrapolated by two decimals) and cash purchases in the same manner at Rs.48,59,61,726/-. Thus, the Assessing Officer calculated the undisclosed profits of the assessee at Rs.3,22,37,151/-. The Assessing Officer also calculated the peak on the basis of table appended in para 7.3 of the assessment order. The period covered was 17.04.2008 to 23.06.2008. The Assessing Officer noted that on 23.06.2008 the peak was Rs.4,39,795.20 and since the books were manipulated by two decimals, the Assessing Officer calculated the peal amount at Rs.4,39,79,520/- Finally the Assessing Officer compared the amount of undisclosed profit as has been calculated (supra) Rs.3,77,97,485/- with the peak of Rs.4,39,79,520/- and treated the higher of these two amounts a unaccounted income of the assessee during 1.04.2008 to 10 KBJ Jewellery Pvt. Ltd.
4.08.2008 and added Rs.4,39,79,520/- to the income of the assessee by framing assessment u/s. 143(3) of the Act vide order dated 30.12.2011.
In the appellate proceedings, the learned CIT(A) after considering the submissions of the assessee partly allowed the appeal of the assessee by observing and holding as under:
“4.2 The submissions of the appellant have already been recorded earlier on in this order. Carefully considering the issue, I find that the assessing officer has taken into account that the recording of cash inflow and outflow as available in Annexure-'C" found during the course of survey proceedings was interrelated with Annexure-'D1 and 'E' which recorded the unaccounted purchases and unaccounted sales of the appellate and has therefore merged the two. To this extent the action of the AO would need to be upheld as he has considered telescoping the details. This has been requested by the appellant also. However, it is also seen that the peak credit established by the assessing officer is not as per the accounting procedure. For preparing a peak the credits and debits of the entire year would need to be taken into consideration. Statement is to be made in a chronological manner and there has to be only one statement made in spite of the fact that the recordings may be in five different papers / bank accounts. There is no method prescribed for arriving at a peak figure by ignoring the negative balances between the received amount and the issued amount as done by the assessing officer. It is also seen that the AO has not followed a chronological method while calculating the above mentioned peak figure of Rs.439795.20 in the case of the appellant. As such this calculation of the AO cannot find favour. Similarly, it is seen that the appellant has ted a calculation of peak of cash receipts and payments by taking the untallied entries regarding receipts in the beginning to show that as on the 1st date of recording on 15/4/2008 the appellant had a balance of Rs.8,32,502/- available with it. This is probably been done to cover up for the discrepancy that was present in the recording dated 15/4/2008 which showed that the appellant had receipts of Rs.354676.09 on that day and had payments of Rs.602224.40 on the same day. This clearly pointed out to the fact that the appellant had issued more than what it had received and therefore besides the amount of Rs.354676.09 the appellant had undeclared / unaccounted cash available with it. It has also not been explained by the appellant as to why these untallied entries should be considered at the beginning of the chart made for cash receipts and payments. Further all these untallied entries relate to sales that are unaccounted for and these amounts should be considered while calculating the profit from unaccounted sales of the appellant. The first figure of unaccounted purchases as per the Annexure is on 18/4/2008 therefore it would stand that to the extent of the untallied entries that represent the sales of the appellant there have been no unaccounted purchases. Therefore, the sale so declared would need to be considered in totality as an addition in the hands of the appellant holding that the same is the income of the appellant and the corresponding expenses have already
11 KBJ Jewellery Pvt. Ltd. been debited in the P&L Account. The total of the sales amount to Rs.8,32,502/-. 4.3 Accordingly the peak as calculated by the appellant would also need to be rejected as being incorrect as it is seen that the appellant has also followed the same incorrect method it-has accused the assessing officer of that is of "pick and choose" to suit itself and justify the discrepancies noticed in its accounts. Accordingly it would not be incorrect to say that the difference of Rs.77,13,995/- between the received and the issued amount as available in Annexure C, chronologically recorded, along with the difference in the opening balance as on 15/4/2008 i.e. of Rs.2,47,548/- would be the correct amount of the funds available with the appellant during the period under concern to be treated as initial capital. Here it is once more stated that the appellant's statement that the AO has erred in making an addition by adding two decimal points to the entries recorded would need to be accepted for the reasons already discussed earlier on in this order. As there is a close relationship between these funds and the unaccounted transaction of the appellant, a fact which the assessing officer has himself taken into consideration, it can be stated that this amount of Rs.79.61,543/- was being used by the appellant as a circulating capital for its unaccounted business. Therefore this amount would need to be added to the income of the appellant as unaccounted funds available with it for running a parallel unaccounted business. Total addition in the hands of the appellant would therefore be Rs.3,22,371 + Rs.8,32,502 from the profits calculated on unaccounted transaction plus Rs.79,61,5437- taken to be the capital available with it for conducting unaccounted transaction. The addition in the hands of the appellant is therefore restricted to Rs.91,16,4167-. For the balance amount the appellant gets a relief. The AO may calculate accordingly. The grounds of appeal raised by the appellant is, therefore, partly allowed holding that there is no infirmity in the order of the assessing officer in observing that the appellant has profits from unaccounted transactions and that there exists unaccounted circulating capital in the hands of the appellant which needs to be treated as the income of the appellant. However, the amount calculated would need to be limited as discussed earlier on in this order keeping in view the telescoping to be allowed to the appellant in its case in respect of unaccounted profits, unaccounted circulating capital and the inflow & outflow of funds found to exist hi the case of the appellant during the course of survey. It is also important to note here that the peak calculated by both the assessing officer and the appellant cannot be accepted due to the discrepancies noticed in both the calculation and therefore the chronological inflow and outflow of funds as available in Annexure- "C" of the impounded documents would need to be taken into consideration. The contention of the appellant that there would be no need to increase the calculated figure by adding a "00" to it would need to be accepted for the reasons earlier stated in this order.”
12 KBJ Jewellery Pvt. Ltd.
Before us, the learned DR vehemently submitted that the learned CIT(A) has completely ignored and overlooked the facts on record that the assessee has been manipulating the books of account by shifting two decimal places and the Assessing Officer has comprehensively recorded the same in the assessment order. He further contended that since the peak worked out by the Assessing Officer i.e. Rs.4,39,79,520/- the higher of the two was rightly added to the income of the assessee whereas the CIT(A) has completely ignored the finding of the Assessing Officer and wrongly restricted the addition to Rs.91,16,460/- comprising of Rs.3,22,371/- on account of discrepancy in closing stock, Rs.8,32,502/- on account of opening balance and Rs.79,61,543 on account of capital required for conducting the unaccounted transactions. The learned DR contended that there is no basis of the said conclusion reached by the appellate authority. Therefore, the order of the CIT(A) be set aside on this issue and that of the Assessing Officer be restored.
The learned AR vehemently opposed the arguments of the learned DR by submitting that the learned CIT(A) has grossly erred in sustaining the part addition of Rs.3,22,371/- Rs.8,32,502/- and Rs.79,61,543/- by giving frivolous reasoning and thus, grossly erred in sustaining the addition aggregating to Rs.91,16,416/-. The learned AR submitted that these additions have also been challenged by the assessee in cross appeal No.3733/Mum/2013. The learned AR contended that the assessee has denied the knowledge of any such papers, which were stated to be extracted from the back up of the computer system of the assessee and thus, argued that the additions made by the Assessing Officer on the basis of presumptions and surmises was wrong and was rightly deleted by the CIT(A). It was also argued that the Revenue has failed to bring any material during the course of survey on record that the assessee has manipulated the books of account by two decimal points and, therefore, the first appellate authority was justified ,
13 KBJ Jewellery Pvt. Ltd. fair and reasonable in deleting the addition on this account as the same was based on presumptions and surmises and not on any concrete evidences. The learned counsel for the assessee argued that there were no bills/vouchers supporting record to substantiate the manipulation of the assessee by two decimal places and thus, the issue raised by the Revenue in ground no.1 needs to be dismissed. The learned AR also submitted that assessee has not filed any additional evidences before the first appellate authority and, therefore, there is no question of any opportunity to be allowed to the assessee under Rule 46A of the Appellate Tribunal Rules and whatever documents were furnished before the ld CIT(A) that were upon the direction of ld CIT(A).
We have heard the rival submissions and perused the material available on record. As could be seen from the record before us, during the course of survey on the assessee, the survey team extracted some documents from the computer back up of the assessee, which showed the figures were reduced by two decimal places in the books of account of the assessee vis-a-vis and its Saraswat Bank statements. Thus, the Assessing Officer extrapolated the total purchase and sale by increasing the same by two decimal places and worked out the undisclosed profit at Rs.3,77,97,485/-. The Assessing Officer also worked out the peak credit during the period 01.04.2008 to 4.08.2008 and found that on 26.06.2008 the peak was Rs.4,39,795.20 and increasing the said figure by two decimals, the peak was calculated at Rs.4,39,79,520/-. The Assessing Officer added the higher of the two to the income of the assessee by observing that both the figures cannot be added and justified the addition at higher amount of the two. The learned CIT(A) partly allowed the appeal of the assessee by sustaining the addition to the extent of Rs.91,16,460/- comprising of Rs.3,22,371/- on account of closing stock, Rs.8,32,502/- on account of opening balance and Rs.79,61,543 on account of circulating capital introduced by the assessee for doing this unaccounted
14 KBJ Jewellery Pvt. Ltd. transactions. The Revenue has challenged the deletion of Rs.4.39 Cr in its appeal where as the assessee has challenged the sustenance of addition to the extent of Rs.91,16,460/-. After examining the records before us in the light of the submissions made by the rival parties, we hold that the order passed by the CIT(A) is correct in deleting the addition of Rs.4.39 Cr as it was based upon surmises and presumptions and there is no concrete basis for the same. The learned CIT(A) has give a very clear and comprehensive findings while deleting the addition, and, therefore, we do not find any reason to interfere with the order of the first appellate authority and are inclined to dismiss the appeal by the Revenue.
Coming to the cross appeal by the assessee in for A.Y. 2009-10. So far as the issues raised by the assessee, the same read as under:
On the facts and circumstances of the appellant's case and in law the ld. CIT(A) erred in confirming the Ld. AO's action of making an addition to the extent of Rs.3,22,371/- on account of discrepancy in closing stock as per para 3.5 of the impugned order.
On the facts and circumstances of the appellant's case and in law the Id. CIT(A) erred to uphold the addition on account of initial investment in unaccounted trading to the extent of Rs.55.603/- .
On the facts and circumstances of the appellant's case and in law the Id. C1T(A) erred in making an addition of Rs.8,32,5027- on account of opening balance as per para 4.2 of the impugned order.
4. On the facts and circumstances of the appellant's case and in law the ld. CIT(A) erred in making an addition of Rs.2,47,548/- without considering the opening positive balance of the unaccounted cash flow prepared on the basis of impounded material as per para 4.3 of the impugned order.
5. On the facts and circumstances of the appellant's case and in law the ld. CIT(A) erred in holding the ld AO action of making an addition to the extent of Rs.77,13.995/- on account of unaccounted transactions initially recorded in Annexure_C to the impounded electronic data as per para 4.3 of the impugned order.
15 KBJ Jewellery Pvt. Ltd.
6. On the facts and circumstances of the appellant's case and in law the ld. CIT(A) erred not restricting the addition to the peak of unaccounted transactions initially recorded in Annexure C to the impounded electronic data .
7. The Appellant craves leave to add, amend, alter, modify and or withdraw any of the above grounds of appeal
, which are without prejudice to one another. The appellant prays this Hon’ble Tribunal to cancel/delete the addition made by the ld. A.O. which are confirmed by the Ld. CIT(A).”
18. The issue raised by the assessee in the first ground of appeal is that ld CIT(A) has wrongly confirmed the addition of Rs.3,77,151,/-. The facts in brief are that the first appellate authority rejected the application of decimal theory by the Assessing Officer and worked out the undisclosed profit at Rs.3,22,371.51 (by taking sales and purchases at Rs.51,81,988.77 minus Rs.48,59,617.26). The contention of the AR is that instead of calculating the undisclosed profit by taking the sales and purchases at respective amount the rate of gross profit should be applied and, thus, average gross profit rate of 3.43% should be applied on the total undisclosed sales of Rs.51,81,988.77/-. A perusal of the order of the CIT(A) reveals that the CIT(A) has taken a very balanced view of the mater and we, do not find any reason to interfere with the findings of the CIT(A) on this issue. According, ground no.1 raised by the assessee is dismissed.
19. The issue raised in ground no.2 is against the sustenance of addition of Rs.55,603/- out of Rs.55,60,334/- made by the Assessing Officer on account of opening capital. The learned CIT(A) reduced the said amount by two decimal places by rejecting the theory adopted by the Assessing Officer. The learned AR submitted before us that the opening balance of cash in hand as on 01.04.2008 was Rs.4,20,481/- and, therefore, the addition of Rs.55,603 was wrong and against the facts on record. We find merit in the contention of the learned AR as there was opening cash balance to the tune of Rs.4,20,481/- as on 01.04.2008. Accordingly, we are inclined to delete the 16 KBJ Jewellery Pvt. Ltd.
addition of Rs.55,603 sustained by the CIT(A). Resultantly, ground no.2 is allowed.
The assessee vide its ground nos. 3, 4 & 5 has challenged the additions of Rs.8,32,502 on account of opening balance, Rs.2,47,548/- on account initial capital and Rs.77,13,995/- on account of unaccounted transactions initially recorded. We find from the record that the CIT(A) has rejected the peak credit theory of the Assessing Officer and made the additions from the statement of “peak of cash receipts and payments”. The CIT(A) made the addition of Rs.8,32,502.49/-, which was appearing as opening balances as on 15.04.2008 in the said statement and Rs.2,47,548/- was added on the basis of transactions of receipts and payments on 15.04.2008. The total receipt on the said date was Rs.3,54,676.09 and payments were Rs.6,02,224.40/-. The CIT(A) concluded that since the receipts were less than the payments, the difference was added to the income of the assessee. The CIT(A) also added Rs.77,13,995/- by taking the total receipts and payments. The total receipts were Rs.1,42,44,260.15/- whereas the payments were Rs.2,59,58,655.62/-. After considering the rival submissions and perusing the material on record, we find that the first appellate authority has also made the additions without any basis. On examining the statement of receipts and payments filed by the assessee, we find that there was opening balance of Rs.8,32,502/- on 15.04.2008 and the difference between the receipt and payments on the same date was also at Rs.2,47,548/- whereas on all the dates till 12.08.2008 the peak was in negative. Thus, the peak theory has not served the purpose, at the most, on the basis of statement, the highest peak was Rs.8,32,502/-, which could be sustained by the CIT(A) whereas the remaining two additions of Rs.2,47,548/- and Rs.77,13,995/- are not correct and cannot be sustained. Based on our above finding, we direct the Assessing Officer to delete the additions of Rs.2,47,548/- and Rs.77,13,995/-, whereas the addition of Rs.8,32,508/- is sustained.
17 KBJ Jewellery Pvt. Ltd.
Resultantly, the appeal of the assessee is partly allowed.
In the result, the appeals filed by the assessee are partly allowed and that of the Revenue is dismissed.
Order pronounced in the open court on this day of 11th June 2018