DCIT, NEW DELHI vs. M/S. ARORA JEWELLERS PVT. LTD., NEW DELHI

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ITA 3188/DEL/2011Status: DisposedITAT Delhi28 July 2016AY 2006-076 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the Assessing Officer (AO) erred in making additions solely because books of account were not found at the time of search, disregarding those produced during assessment. The CIT(A)'s deletion of additions was upheld as the assessee provided documentary evidence.

What were the facts?

During a search operation, cash of Rs. 8,21,435/- and gold and silver ornaments worth Rs. 92,01,488/- and Rs. 1,70,300/- respectively were found. The assessee later produced books of account during assessment proceedings to explain the source of these items.

What were the issues?

Whether additions made by the AO based on the absence of books of account at the time of search are sustainable when books were produced during assessment proceedings.

Which sections of the Income-tax Act were involved?

Section 132

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCHES : A : NEW DELHI

Before: SHRI R.S. SYAL, AM & MS SUCHITRA KAMBLE, JM

For Appellant: Shri Rajiv Saxena, Advocate &, Ms Sumangala Saxena, Advocate
For Respondent: Shri Ravi Jain, CIT, DR
Hearing: 26.07.2016Pronounced: 28.07.2016

ORDER

PER R.S. SYAL, AM:

1.

This appeal filed by the Revenue is directed against the order passed by the CIT(A) on 31.3.2011 in relation to the assessment year 2006-07.

2.

The first issue is against the deletion of addition of Rs.8,21,433/-

3.

Briefly stated, the facts of the case are that a search and seizure operation u/s 132 of the Act was carried out on 9.12.2005 at the business premises of the assessee. Return for the instant year was filed on 28.11.2006 declaring loss of Rs.4,33,236. During the course of search, on 9.12.2005, cash of Rs.8,21,435/- was found, out of which a sum of Rs.8 lac was seized. The assessee was called upon to explain the source of cash found amounting to Rs.8,21,435/- along with the complete details with documentary evidence during the course of assessment proceedings. The assessee furnished its reply vide letter dated 12.12.2007 explaining its position. The AO made addition for Rs.8,21,435/- by noticing that the assessee did not produce the books of account at the time of search to justify the availability of the aforesaid cash as per cash book. The ld. CIT(A) got convinced with the assessee’s submissions and ordered for the deletion of addition.

4.

After considering the rival submissions and perusing the relevant material on record, we find that the assessee produced its books of account before the AO during the course of assessment proceedings.

Such books of account indicated cash balance of Rs.8,21,435/- on the date of search. The AO made the addition disregarding books of account placed before him on the premise that no books of account were found at the time of search. We are unable to appreciate this view point of the AO. As the assessee produced books of account during the course of assessment proceedings, it became the duty of the AO to examine such books of account and show how these were not acceptable. It is observed that the AO has recorded a finding in the assessment order that the books of account were produced and examined by him. In view of the fact that the cash book of the assessee had cash balance of Rs.8,21,435/- equal to the amount found at the time of search, we countenance the opinion of the ld. CIT(A) in deleting this addition. This ground is not allowed.

5.

The next ground is against the deletion of addition of Rs.92,01,488/- made on account of unexplained stock of gold jewellery found during the course of search. Gold ornaments worth Rs.92,01,486/- were found at the time of search. The assessee produced books of account before the AO to show available stock of gold jewellery at this level. This was done by working out the value of stock on the basis of trading account prepared from 1.4.2005 to 9.12.2005 and applying the average GP rate of 22.50% for the last three years. The AO made addition for Rs.92,01,488/- on the ground that no books of account were found during the course of search. The ld. CIT(A) deleted the addition.

6.

After considering the rival submissions and perusing the relevant material on record, we find that the AO made addition simply on the ground that the books of account were not found at the time of search.

He, however, ignored the books of account filed before him during the course of assessment proceedings. The assessee worked out the value of stock of gold jewellery by applying average GP rate of 22.50% for the last three years on the basis of trading account prepared by adopting the figures of opening stock, closing stock, purchase and sale. The AO did not dispute the correctness of these items. In our considered opinion, no fault can be found in the order of the ld. CIT(A) in deleting this addition.

We, therefore, uphold the same. This ground fails.

7.

The next ground is against the deletion of addition of Rs.1,70,300/- made on account of unexplained stock of silver ornaments found during the course of search. Here again, the AO did not accept the availability of stock of silver ornaments of 13.100 kgs. on the ground that the books of account were not found at the time of search. The ld. CIT(A) deleted the addition. Following the reasoning given above for upholding the deletion of addition in respect of gold jewellery, we approve the view taken by the ld. CIT(A) in deleting the addition of Rs.1,70,300/- on account of stock of silver ornaments.

8.

The last ground is against the deletion of disallowance of Rs.2 lac made by the AO out of expenses. The AO made ‘ad hoc disallowance of expenses’ at Rs.2 lac, which was deleted by the ld. CIT(A).

9.

Having regard to the facts, we find that the AO has not pointed out any specific discrepancy in respect of the expenses incurred by the assessee. Under such circumstances, there can be no ad hoc disallowance of expenses. We approve the view taken by the ld. CIT(A) in deleting this disallowance.

10.

In the result, the appeal is dismissed.

The order pronounced in the open court on 28.07.2016.

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