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Income Tax Appellate Tribunal, “B” BENCH : KOLKATA
Before: Hon’ble Shri M.Balaganesh, AM & Hon’ble Shri S.S.Viswanethra Ravi, JM]
ORDER Per M.Balaganesh, AM
This appeal by the assessee arises out of the order of the Learned Commissioner of Income Tax(Appeals)-XXX, Kolkata [in short the ld CIT(A)] in Appeal No.254/CIT(A)-XXX/Cir-44/2013-14 dated 29.10.2014 against the order passed by the DCIT, Circle-44, Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short “the Act”) dated 03.03.2014 for the Assessment Year 2011- 12.
The only issue to be decided in this appeal is as to whether the ld CITA was justified in reducing the addition made towards discrepancy in gold stock in the facts and circumstances of the case.
The brief facts of this issue are that the assessee is a partnership firm engaged in the business of manufacturing of jewellery. The return of income for the Asst Year 2011-12 was filed by the assessee on 27.9.2011 declaring total income of Rs 24,11,509/-. There was a survey conducted u/s 133A of the Act in the business premises of the assessee on 28.2.2011. At the time of survey, the survey team physically verified the entire gold stock and found as under:-
Stock of 22 carat gold - 5659.584 grams Stock of 18 carat gold - 333.980 grams ----------------------- 5993.564 grams As per books of accounts, the stock of gold as on 21.2.2011 was only 3444.65 grams. The assessee explained the discrepancy in gold stock as under:- Grams Gold stock as on 21.2.2011 taken from computer 3444.650 Add: Gold alloy for conversion not recorded in computer AY 2008-09 82.863 gms AY 2009-10 57.470 gms -------------- 140.333 Add: Gold alloy for conversion for AY 2010-11 240.085 ------------------ 3825.068 Add: Old Golds received for making new ornaments 1. Kusum Devi Bhatter (Wife of partner) 5, J.M. Avenue, Kol-700006 One full set of gold consisting of necklace, earrings 232.300 gms With Tana ring, tika with tana nath & 4 pieces bangles 327.800 gms ------------------- 560.100 Add: Miscellaneous Gold articles 2. Ravikumar Rajesh Kumar HUF 2
3. Ramdeo Rajesh Kumar 2, Gourdas Bysack Lane, Kolkata – 700007 367.210
4. Sitaram Soni S.P. Mukherjee, Siliguri 450.300 ----------------- 1042.660 Add: Received goods for polishing & repairing 5. Other receipts from customers Rajkumari Mundhra 155.840 Sri Kanta Mundhra 109.960 Kusum Binani 201.360 Madhu Bagri 111.970 Nilam Mishra 94.710 --------------- 673.840
Less: Sent to Karigar for repairing & polishing 103.630 ------------------ 570.210 ---------------- Stock as per Books 5998.038
Stock found physically 5993.564
Difference 4.474 3.1. The ld AO observed that the contention of the assessee that non-recording of gold alloys worth 140.333 grams pertaining to Asst Years 2008-09 and 2009-10 is very hard to believe due to huge effluxion of time. The ld AO observed further that the assessee had explained that Smt Kusum Devi Bhatter, wife of one of the partner of firm had deposited 232.30 grams of gold ornament in the shop for polish and repair. According to AO, Smt Kusum Devi had filed her wealth tax return for the Asst Year 2011-12, from where, it was found that she was in possession of jewellery of gold studded with 4 M/s M. Ramdeo & Co. (Bhatter) A.Yr. 2011-12 diamonds stores and silver utensils worth Rs 37,92,842/-. However, the description of gold jewellery in the valuation report did not match with the inventory of gold stock found during the survey. Hence the contention of the assessee was found to be not tenable by the ld AO. With regard to other parties, the ld AO observed that only names were given and that their addresses were not given by the assessee and hence could not be verified. He observed that in case of Ravi Kumar Rajesh Kumar HUF and Ramdeo Rajesh Kumar HUF, full addresses were given. The ld AO summoned both these parties for deposition. Both the parties deposed and submitted in writing that they had deposited gold for repair before the date of survey in the case of assessee firm, but failed to describe the ornaments deposited. They stated that they don’t remember the description of ornaments but only remember the weight of gold. They furnished the copies of cash memos wherein only weight of gold was mentioned. The ld AO did not heed to the contentions of the assessee and proceeded to treat the discrepancy in gold of 2549.51 grams valued at prevailing rate of Rs 2004 per gram and added Rs 51,09,218/- to the total income of the assessee firm.
The assessee explained that pure gold is mixed with alloys and then jewellery is made, the measure of which is higher than pure gold by the amount of alloys mixed in the course of making of jewellery. The assessee claimed that the book stock of gold picked up by the survey team was not the physical stock of jewellery present in the premises. It was only a figure that was arrived at in the computer sheet by considering purchases of pure gold amounts and sale of physical amount of jewellery made by the assessee. Thus it was claimed that the computer sheet does not indicate the correct physical stock of jewellery because correction for mixing of alloys are required. Pending such correction, the said computer sheet gives lower amount of physical stock if derived directly by adding purchase of pure gold and subtracting quantity of sale made of jewellery. The assessee had in the said statement quantified the weight of alloy used in making of pure gold in jewellery for the financial year 2010-11 to the tune of 4
5 M/s M. Ramdeo & Co. (Bhatter) A.Yr. 2011-12 240.085 grams . The ld CITA agreed to this contention of the assessee and held that adjustment to the tune of 240.085 grams is required to be made while identifying the discrepancy in stock between physical stock and computer sheet. However, similar adjustment that was sought for for the financial years 2008-09 and 2009-10 to the tune of 140.333 grams was not considered by the ld CITA in as much as they would have been consumed before the date of survey and hence the ld CITA held that the explanation given was not believable.
4.1. With regard to the claim of jewelleries belonging to his wife to the tune of 560.10 grams, the ld CITA observed that the ld AO himself had given deduction to the tune of 232.30 grams belonging to the wife of one of the partner. For the remaining 327.80 grams , the assessee stated that the names of gold articles being kandola and churi appear in inventory of survey team but against other names being bangles and miscellaneous items. It was further claimed that in the course of survey in reply to question no. 4 of the deposition on 2.3.2011, Mr Bhatter, the partner, had claimed that 559.90 grams of personal jewellery of Kusum Devi, his wife, was part of physical ornaments inventorised by the survey team. The survey officials did not seem to have recorded anything against the assessee in respect of the said answer of Mr Bhatter and therefore the ld AO should have been more specific in describing as to which item did not match with the inventory prepared in survey. The ld CITA observed that Smt Kusum Devi had been filing her wealth tax returns and had disclosed substantial jewellery thereon and he held that the jewellery of 327.80 grams stated to have been received from her by the assessee is required to be treated as explained. Accordingly he granted relief to the assessee to this extent.
4.2. With regard to the remaining jewellery having been received from outsiders for polishing and repairing, it was explained that in the course of survey, Mr Shree Lal Bhatter, a partner, claimed in reply to question no. 4 of deposition on 2.3.2011 that 5
6 M/s M. Ramdeo & Co. (Bhatter) A.Yr. 2011-12 1606.540 grams of gold was received from customers for making and polishing of gold ornaments and which are not included in stock account. Having said this, the assessee had also come forward to accept certain additional income towards excess stock pursuant to survey and pay additional advance tax of Rs 15 lakhs. Accordingly, the ld CITA granted ad hoc relief for the remaining portion of jewellery to the tune of 1612.87 grams to the extent of 50% to the assessee as it cannot be ruled out that certain jewelleries were actually received by the assessee from various customers towards polishing and repairing which are admittedly not included in the stock recorded in the computer sheet. Accordingly the ld CITA sustained the addition towards stock of jewellery as under:-
(1612.87 / 2 ) + 140.333 grams = 946.768 grams * Rs 2004 per gram = Rs 18,97,317/- Aggrieved, the assessee is in appeal before us.
We have heard the rival submissions. At the outset, we find that there is no dispute with regard to the rate adopted by the ld AO at Rs 2004 per gram for valuing the stock of gold on the date of survey. We find that the revenue also had preferred an appeal before us against the relief granted by the ld CITA, but the same was dismissed by this tribunal due to low tax effect by placing reliance on the CBDT Circular issued in this regard. Hence we have to adjudicate only the grievance of the assessee in this appeal. The assessee had tried to explain the excess physical stock found during the survey by way of a detailed reconciliation. It would be relevant to discuss each of the items in the reconciliation as above independently as under;- a) It is not in dispute that the certain alloys are to be mixed with the pure gold in order to make the ornaments and the assessee had claimed that the same were not included in the book stock recorded in the computer sheet and accordingly prayed for reduction of 6
7 M/s M. Ramdeo & Co. (Bhatter) A.Yr. 2011-12 the same while arriving at the excess stock. The claim made by the assessee in this regard pertains to the following financial years :-
FY 2008-09 - 82.863 grams FY 2009-10 - 57.470 grams -------------------- 140.333 grams FY 2010-11 240.085 grams The ld CITA accepted the plea of the assessee that certainly gold alloys for conversion were not recorded in the computer sheet by the assessee and hence such stock pertaining to financial year 2010-11 i.e the year under appeal to the tune of 240.085 grams deserves to be reduced while arriving at the discrepancy in stock. We find that the assessee has given a logical and plausible explanation in this regard which was rightly accepted by the ld CITA. However, we find that the similar jewellery pertaining to previous two financial years i.e FYs 2008-09 and 2009-10 to the tune of 140.333 grams would have been definitely consumed and recorded in the book stock in the earlier years. They cannot obviously remain in stock on the date of survey. Hence the same has been rightly rejected by the ld CITA. Accordingly, we do not find any infirmity in the action of the ld CITA in this regard. b) With regard to the jewellery of 1612.87 grams stated to have been received from various customers by the assessee for polishing and repairing, we find that the ld CITA had given 50% relief on an adhoc basis. The assessee had given only the name and address of only two customers who had deposed before the ld AO that they had indeed given their jewellery to the assessee for polishing and repairing but could not mention the description of the jewellery but merely confirmed the weight of gold deposited with the assessee firm. We find that those two parties also submitted the cash memos which contained only the details of weight of gold before the ld AO. Merely because the description of the jewellery were not confirmed by them before the ld AO, their fact of depositing the jewellery cannot be disputed when the fact of gold being deposited with 7
8 M/s M. Ramdeo & Co. (Bhatter) A.Yr. 2011-12 assessee and the confirmation given to the extent of weight of gold. Hence we direct the ld AO to accept the quantity of jewellery deposited by Ravi Kumar Rajesh Kumar HUF ( 225.150 grams) and Ramdeo Rajesh Kumar (367.210 grams) in full. However, with regard to other parties, we hold that - (i) the assessee had not furnished the detailed addresses of those parties (ii) the assessee had not proved the fact that they are per se its customers (iii) the assessee had not furnished any confirmation from those parties Hence the ld CITA had been more than magnanimous in granting 50% relief in this regard. We hold that the assessee cannot expect better relief than this when it had not even discharged its primary onus of proving the aforesaid facts and details.
5.1. In view of the aforesaid observations, we hold that the addition should be restricted to the following quantities of gold :- Grams Gold alloy for conversion not recorded in computer pertaining to Financial years 2008-09 and 2009-10 140.333 Gold received for polishing and repairing Sitaram Soni 450.300 Rajkumari Mundhra 155.840 Sri Kanta Mundhra 109.960 Kusum Binani 201.360 Madhu Bagri 111.970 Nilam Mishra 94.710 --------------- 673.840 Less: Sent to Karigar for repairing & polishing 103.630 ---------------- 570.210 ----------------- 8
9 M/s M. Ramdeo & Co. (Bhatter) A.Yr. 2011-12 1020.510 Less: 50% relief granted by ld CITA 510.255 ----------------- 510.255 ---------------- Total quantity of gold to be added 650.588 --------------- Addition to be made – 650.588 grams * Rs 2004 per gram Rs 13,03,778/- Accordingly, the grounds raised by the assessee are partly allowed.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the Court on 07.09.2018