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Income Tax Appellate Tribunal, DELHI BENCH “G” NEW DELHI
Before: SHRI I.C. SUDHIR & SHRI O.P. KANT
ORDER
PER I.C. SUDHIR: JUDICIAL MEMBER These are two appeals filed by the revenue and two Cross Objections filed by the assessee. Since the issues are common, both the appeals and the Cross Objections are being taken together.
First we take up the appeal for the A.Y. 2005-06 i.e. Cross Objection No. 182/Del/2011 for A.Y.
2 2005-06. The brief facts leading to the present appeal are that a search and seizure operation under section 132 of the Income Tax Act was carried out at the residential premises of the assessee at B-26, Swastiya Vihar, New Delhi and also at the business premises of Neha Jewellers Pvt. Ltd. at 1170, Kucha Mahajani, Chandni Chowk, Delhi- 110 006 on 9th December, 2005. During the course of the search at the business premises of M/s. Neha Jewellers Pvt. Ltd. a diary was seized which reveal that amount ranging from Rs.40,000/- to Rs.1,40,000/- was contributed towards Chit (Committees).
The Assessing Officer during the course of the assessment of Neha Jewellers Pvt. Ltd. raised the issue about such investment stated in the diary. Neha Jewellers (P) Ltd. in its reply submitted that these chits have been contributed by and sources of the investment is from M/s. Neha Jewellers Pvt. Ltd. and the undisclosed profit on this account has been taken into consideration while computing the undisclosed stock of M/s. Neha Jewellers Pvt. Ltd. The AO not being satisfied with the above reply made an addition in the hands of the assessee of Rs.2,04,80,000/- in assessment year 2005-06 and Rs.3,02,40,000/- in assessment year 2006-07 in the hands of the assessee.
Aggrieved by the order of the Assessing Officer, the assessee came in appeal before the learned CIT(A). Before the learned CIT(A), the assessee raised the legal issue of the order being without jurisdiction in the absence of independent search warrant in the name of the assessee. The assessee also raised the issue that the AO was not justified in adding a sum of Rs.2,04,80,000/- as the assessee has not made any investment in the alleged chits. It was submitted by the assessee before the learned CIT(A)that this diary was found at the premises of the company, viz., Neha Jewellers Pvt. Ltd. During the course of the assessment, the AO raised this issue with Neha Jewellers Pvt. Ltd. only. The company did not disclaim the diary and nor it ever stated that the diary belongs to the assessee. On the contrary the company in its reply gave explanation about the contents of the diary and clarified that the recording of the diary is in the hands of one of the employees of the company and the contribution so made by the company are received back at the time of the redemption of the Chit and such redemption money has been used for the purpose of the business of the company and further contribution and this amount has been taken into consideration while computing the additional income offered in the return of income by way of undisclosed stock in the hands of the company. It was further contended that the AO has made the addition without taking into consideration the amount received on redemption as stated in the diary itself. The assessee also submitted page-wise summary of debit and credit entries of the entire diary whereby the peak amount was worked out to Rs.28,62,699/- in assessment year 2005-06.
The learned CIT(A) after considering the contention of the assessee rejected the contention of the assessee that in the absence of independent search warrant in its name, proceedings are bad in law. The learned CIT(A) also did not agree with the contention of the assessee that this diary does not belong to the assessee but belongs to the company, viz., M/s. Neha Jewellers Pvt. Ltd. The learned CIT(A), however, agreed with the contention of the assessee that entire debit side cannot be added as income. He accordingly, after examining the debit and credit entries of the diary, worked out that the peak investment comes to Rs.52,77,574/- in the assessment year 2005-06 and accordingly restricted the addition to Rs.52,77,574/- in assessment year 2005-06. The peak amount in assessment year 2006-07 being less than the peak amount of Rs.52,77,574/- in assessment year 2005-06, the Learned CIT(Appeals) deleted the entire addition made by the AO in the assessment year 2006-07.
Aggrieved by the order of the learned CIT(A), revenue has filed this appeal and the assessee has filed Cross Objection. In the revenue’s appeal the effective ground is Ground no. 2 which reads as under:-
“2. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in law and facts in deleting the addition of Rs.1,52,02,426/- made by the AO on account of unexplained payment to chits.”
In the Cross Objection, the assessee has raised following two effective objections which read as under:-
“1. Ld. CIT(A) was not justified in rejecting Legal Grounds taken by the assessee before him that ‘the order passed by the AO u/s 153A is without jurisdiction, since there was no specific authorization u/s 132 of the I.T. Act in the name of the assessee’.
2. The Ld. CIT(A), has failed to appreciate that the diary as per Annexure-A-15 of Panchnama in the name of the company M/s Neha Jewellers Pvt. Ltd. containing notings of deposits and receipts from chits was found from the premises of the company and had direct nexus with it’s undisclosed stock in trade found during search, therefore, no addition was justified in the hands of the assessee.”
Objection No.1 in assessee’s Cross Objection is a legal issue challenging the very jurisdiction of making assessment under Section 153A of the Income-tax Act,1961.
At the time of hearing the learned AR was fair enough to admit that the Objection no.1 is no more sustainable in view of the retrospective amendment made by the Finance Act, 2012 inserting Section 292CC with effect from April, 1976 to the effect that even if the authorization has been issued in joint names of several persons assessment under section 153A can still be made in the individual names. In view of the above, the Objection No.1 of assessee’s cross objection is rejected.
As regards Objection No.2 of the assessee’s Cross Objection is concerned, which is linked to the revenue’s Ground NO.2 also, it was contended by the learned AR that the AO as well as learned CIT(A) have gone wrong in considering this diary in the hands of the assessee. It was argued that at no stage of the assessment of the assessee, this issue was raised by the AO. The AO during the course of the assessment proceedings of Neha Jewellers Pvt. Ltd. has raised this issue in its questionnaire dated 12.11.2007 whereby in Para 161 placed at Paper Book Pg. 16, the AO invited attention of Neha Jewellers Pvt. Ltd. to the diary being Annexure A-15 and asked the company, Neha Jewellers Pvt. Ltd. to explain the source of the amount contributed towards the chit fund on various dates as stated in the diary. In response thereto, Neha Jewellers Pvt. Ltd. filed its reply dated 12.12.2007 at PB Pg. 29. In this letter it was submitted by Neha Jewellers Pvt. Ltd. that these are the entries written in the diary maintained by Mr. Bilas, an employee of the company and this diary contains the details of the receipts and contributions made to various committees. It was submitted that contribution made by Neha Jewellers Pvt. Ltd. in respect of the said committees through Mr. Bilas and the receipts from the committees represented a circle comprising of contributions, net receipts from the committees, purchase and sale of diamonds and thereafter going into succeeding circles. Neha Jewellers (P) Ltd. in its reply categorically stated that net profit from the committees after taking into account the discounts paid by others have been taken into account by Neha Jewellers Pvt. Ltd. in its income tax returns for the said two years. 10.1 It was contended by the learned AR that this issue was raised by the AO with Neha Jewellers Pvt. Ltd. as is evident from the assessment order also and Neha Jewellers Pvt. Ltd. has not disowned this diary. On the contrary Neha Jewellers Pvt. Ltd. has owned the diary and has given explanation about the contents of the diary and the income arising thereof being included in the income surrendered by the company.The learned AR further referred to the observation of the Assessing Officer in the assessment order that addition has been made merely on the basis of doubt since the AO himself was not clear as to which concern these chits belongs to. The addition made by the Assessing Officer is untenable as the Assessing Officer has failed to appreciate that he has raised this question with Neha Jewellers Pvt.
Ltd. and Neha Jewellers Pvt. Ltd. having not disowned the diary and having given an explanation that income arising from this committees has been included in its income, there was no uncertainty about the fact to whom this diary belongs. Further the Assessing Officer has also not brought any material to substantiate its allegation that this diary belongs to the assessee and not to the Neha Jewellers (P) Ltd. Further the Assessing Officer has not raised this issue of the diary with the assessee during the course of the assessment, nor has he brought any material to link this diary with that of the assessee. It was further contended that this diary was found from the business premises of the company and was being written by the employee of the company and as such the AO was not justified in considering the diary in the hands of the assessee.
It was further contended that the learned CIT(A) has arbitrarily rejected the contention of the assessee. The learned CIT(A) has not considered the facts and circumstances and the explanation given by Neha Jewellers Pvt. Ltd. and no justification has been given for considering this diary in the hands of the assessee. It was further contended that even if the explanation given by Neha Jewellers Pvt. Ltd. regarding computation of the income, on the basis of the diary, is found to be unsatisfactory that cannot be a ground for making addition in the hands of the assessee.
It was contended by the learned AR that the difference in the income offered by Neha Jewellers Pvt. Ltd. and the income being estimated by the AO on the basis of the diary cannot be a ground to hold that diary belong to the assessee. Further during the course of the assessment proceedings this issue was raised by the AO only from Neha Jewellers Pvt. Ltd. and Neha Jewellers Pvt. Ltd. having not disowned the diary there was no reason for the learned CIT(A) in rejecting assessee’s contention that the diary does not belong to him. The learned AR further submitted that in the absence of any issue or query being raised about this diary in the assessment proceedings of the assessee the addition on account of this diary is untenable. It was further contended that the learned CIT(A) has wrongly shifted the onus on the assessee by making an observation that there is no entry in these seized documents to prove that such investments were made from Neha Jewellers Pvt. Ltd. It being the allegation of the AO the onus was upon the AO to establish that the entry in the seized documents and the investments were from the assessee and not from Neha Jewellers Pvt. Ltd.
In reply, the learned DR submitted that the AO was justified in making the addition on account of this diary in the hands of the assessee. It was contended that the amount of undisclosed income on account of this undisclosed stock in the hands of Neha Jewellers Pvt. Ltd. was far lesser. It was further submitted that as taken note by the AO, the assessee has interest not only in Neha Jewellers Pvt. Ltd. but also other jewellery concerns as well and since it was unclear as to which concern these chits belong to, the AO has opted to assess income on account of this diary in the hands of the assessee. It was further contended by the learned DR that the learned CIT(A) has rightly rejected the explanation of the assessee on two grounds, firstly that the stock disclosed by Neha Jewellers Pvt. Ltd. was far less than the stock actually found and secondly, there is no entry in these seized documents to prove that such investments were from Neha Jewellers Pvt. Ltd.
With regard to Ground No.2 of the revenue’s appeal, it was contended by the learned Senior DR that the AO has made the addition by making aggregate of the debit side of the diary. The learned CIT(A) has taken into consideration the credit side and has worked out the peak amount. The learned DR relied upon the order of the AO in support of its contention.
14.1 In reply to Revenue’s appeal on Ground No.2, it was submitted by the learned AR that so far revenue’s appeal is concerned the learned CIT(A) has worked out the peak amount. No error or deficiency has been pointed out in the computation and the working of the peak amount and accordingly the appeal of the revenue on this issue has to be dismissed.
We heard and considered the arguments advanced by the parties and have gone through the orders of the authorities below. In assessee’s Cross Objection, Objection No.2 is on the issue that this diary cannot be considered in the hands of the assessee and hence no addition can be made in the hands of the assessee. Whereas in Revenue’s appeal Ground No. 2 is that learned CIT(A) was not justified in restricting the addition to peak amount. Thus the first issue to be decided is whether learned CIT(A) was justified in upholding the action of AO in making the addition in the hands of the assessee.
15.1 On going through the assessment order we note that the Assessing Officer has raised this issue vide questionnaire dated 12.11.2007 in the assessment proceedings of Neha Jewellers (P) Ltd. This questionnaire was addressed to Neha Jewellers Pvt. Ltd. The relevant question on this diary was Question No. 161 which reads as under:- “161. The following Pages indicated against dates mentioned in a diary marked as Annexure A-15 shows that the below mentioned amount has been contributed towards chit fund. You are requested to explain the source of the below mentioned amount contributed towards chit fund on various dates.” 15.2 In response thereto, Neha Jewellers Pvt. Ltd. filed its reply dated 20.12.2007. In this reply complete explanation about this diary was given including of the facts relevant thereto. In the relevant Para 3 of this reply dated 20.12.2007, it was explained by Neha Jewellers Pvt. Ltd. that these are the entries written in the diary maintained by Mr. Bilas, an employee of the assessee company. It was further accepted by Neha Jewellers Pvt. Ltd. that the diary contains the details of the receipts and contributions made to various committees. Further it was confirmed in this reply that the net profit from the committees after taking into account the discounts paid has been taken into account by Neha Jewellers Pvt. Ltd. in its income tax returns for the two years which obviously were A.Y. 2005-06 and A.Y. 2006-07. M/s Neha Jewellers Pvt. Ltd. submitted that the contributions made by M/s Neha Jewellers Pvt. Ltd. in respect of the said committees through Mr. Bilas and the net receipts from the committees represented a circle comprising of contributions, net receipts from the committees, purchase and sale of diamonds and thereafter going into the succeeding circles. Despite getting such categorical reply from Neha Jewellers Pvt. Ltd. the AO opted to not to make any addition in the hands of Neha Jewellers Pvt. Ltd. and made the addition on account of this diary in the hands of the assessee. The AO in the assessment order of the assessee after making reference to the questionnaire issued to Neha Jewellers (P) Ltd. and the reply received from the company has merely stated that assessee has filed its reply which is unsatisfactory. No plausible reason has been given for considering the reply as unsatisfactory.
It is an undisputed fact that Neha Jewellers Pvt. Ltd. filed its reply to the questionnaire issued by the AO. In its reply it explained the contents of the diary. In its reply Neha Jewellers Pvt. Ltd. never contended that this diary does not belong to it. On the contrary from the reply it is found that Neha Jewellers Pvt. Ltd. has owned this diary and it has even named the employee who has maintained this diary. The AO at no point of time raised further issue with Neha Jewellers (P) Ltd. nor with the assessee so as why he is not satisfied with the reply given by Neha Jewellers Pvt. Ltd. In case the AO was of the view that this diary does not belong to Neha Jewellers Pvt. Ltd. he ought to have raised this issue in the case of the assessee. From the assessment order it is evident that at no point of time this issue was raised to the assessee. The AO has made additions in the hands of the assessee by making an observation that the undisclosed stock disclosed in the case of Neha Jewellers Pvt. Ltd. is far lesser than the actual stock found. If the AO was having any concern about the amount disclosed in the hands of Neha Jewellers Pvt. Ltd. being less than the amount which in his opinion ought to be, he could have raised this issue with Neha Jewellers (P) Ltd. and not being satisfied could have increased the amount in the hands of Neha Jewellers Pvt. Ltd. The difference in the amount disclosed and amount as per AO cannot be a ground for shifting addition from Neha Jewellers (P) Ltd. to the hands of the assessee. The other contention of the AO that there is no entry in this entire document that shows that the same is being maintained on behalf of Neha Jewellers Pvt. Ltd. is also not tenable. It is AO’s allegation that this diary belongs to the assessee. Thus onus was upon him to demonstrate that this diary belongs to the assessee. Nothing has been mentioned in the assessment order to demonstrate that this diary belongs to the assessee. The AO has totally ignored the explanation given by Neha Jewellers Pvt. Ltd. where the company has explained that this diary is being maintained by its employee, Mr. Bilas. In fact Neha Jewellers Pvt. Ltd. has contended before the AO that the profit in business income in this diary has been taken into consideration while computing the entire business income which has been offered as additional income in the hands of M/s. Neha Jewellers Pvt. Ltd. From the assessment order it is also evident that the AO himself was unsure as to whom this diary pertains to as he himself has recorded the fact that it is unclear as to which concern these chits belong to.
The learned CIT(A) has also failed to take into consideration the contention of the assessee and the above facts. The learned CIT(A) has rejected the explanation of the assessee by observing that the stock disclosed by Neha Jewellers Pvt. Ltd. was far less than the stock actually found and secondly, there is no entry in these seized documents to prove that such investments were made from Neha Jewellers Pvt. Ltd. On the first reasoning of the learned CIT(A), we are of the view that even if the stock disclosed by Neha Jewellers Pvt. Ltd., is less than the stock actually found that cannot be a ground for holding that this diary belongs to the assessee. This diary was found at the business premises of Neha Jewellers Pvt. Ltd. Neha Jewellers Pvt. Ltd. in its reply has explained the contents of this diary. On the basis of its explanation it has computed the income and has justified the undisclosed income on the basis of this diary being invested into stock which have been taken into consideration while offering the additional income. In case the AO and the learned CIT(A) were of the view that this computation of income is less than the income being computed on the basis of the diary, such issue ought to have been raised with the Neha Jewellers Pvt. Ltd. so as to seek explanation and on not being satisfied with the explanation the addition of such amount obviously could have been made in the hands of Neha Jewellers Pvt. Ltd.
As regards the second contention of the learned CIT(A) that there is no entry in these seized documents that such investments were from Neha Jewellers Pvt. Ltd. we are of the view that the learned CIT(A) was not justified in shifting the negative onus on the assessee. The diary having been found from the business premises of Neha Jewellers Pvt. Ltd. and Neha Jewellers Pvt. Ltd. having owned the diary and given explanation, in case the AO as well as learned CIT(A) were of the view that this diary does not belong to Neha Jewellers Pvt. Ltd. the AO ought to have brought material to demonstrate that this diary belongs to the assessee. This diary has been found from the premises of Neha Jewellers Pvt. Ltd. where a search was carried out. This diary has not been disowned by Neha Jewellers Pvt. Ltd. This diary was being maintained by an employee of Neha Jewellers Pvt. Ltd. and in the absence of any material being brought on record against the assessee we are of the view that addition on account of this diary cannot be sustained in the hands of the assessee and accordingly we direct the AO to delete addition on this account.
Accordingly, Objection No.2 of the assessee’s Cross Objection is allowed and correspondingly Ground No. 2 of the revenue’s appeal is rejected. In the result revenue’s appeal for assessment year 2005-06 is dismissed and the Cross Objection filed by the assessee is partly allowed. & C.O. No. 147/Del/2014 – A.Y. 2006-07 20. In this appeal the revenue has raised the following grounds of appeal:- “1. The order of the Ld. CIT (Appeal) us bit correct and facts.
2. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in law and facts in deleting the addition of Rs.3,02,40,000/- made by the AO on account of unexplained payments to chits.
3. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in law and facts in deleting the addition of Rs.88,22,148/- out of the total addition made by the AO of Rs.1,18,73,548/- on account of undisclosed profit, by adopting G.P. rate of 1.46% as against 5.68% taken by the A.O.
4. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in law and facts in deleting the addition of Rs.1,27,20,196/- made by the AO on account of unexplained factory expenses.
5. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in law and facts in deleting the addition of Rs.15,32,680/- made by the AO on account of unexplained income invested in the cash and jewellery found in locker No. 148-B, P.N.B., Krishna Nagar, Delhi.
6. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in law and facts in deleting the addition of Rs.18,50,483/- made by the AO on account of valuation of jewellery by the valuation officer.
7. The appellant craves leave to add, alter or amend any/all of the grounds of appeal
before or during the course of the hearing of the appeal.”
21. The assessee in its Cross Objection has raised following objections:- “1. That the Ld. CIT(A) has erred in law as well as on facts by confirming the addition to the extent of 1.46% of Rs.20.90 Cr calculated by the AO on the basis of loose papers marked as Annexure A-4 seized during search.
2. Ld AO has erred in law as well as on facts in raising ground No 2 without appreciating the income already declared by assessee and M/s Neha Jewellers which was accepted by himself.
3. Ld AO has further erred in law as well as on facts in raising ground No. 4 without appreciating that the factory has already been assessed separately and it has no relationship with the assessee in the individual capacity.
4. Ld AO has further erred in law as well as on facts in raising ground No 5 & 6 without appreciating that the same income has already been accepted in other years and there cannot be two additions of the same amount once it is confirmed that locker was not operated during the year in concern.”
22. Ground No. 1 in revenue’s appeal is general in nature and hence need no adjudication.
23. Ground No.2 in revenue’s appeal is against the action of the learned CIT(A) in deleting the addition of Rs.3,02,40,000/- made by the AO on account of the diary found during the course of the search. This issue is the same as in the assessment year 2005-06 in .
23.1 In assessment year 2005-06, on this issue we have held that addition on account of this diary cannot be sustained in the hands of the assessee. The issue being the same, following the order for assessment year 2005-06, this ground of the revenue is dismissed.
Ground No.3 in revenue’s appeal is regarding deletion of addition of Rs.88,22,148/- out of the total addition of Rs.1,18,73,548/- made by the AO on account of the profit made in respect of sale outside the books of account. This ground is common with Ground No.1 and 2 in assessee’s Cross Objection.
24.1 The brief facts leading to this issue are that during the search and seizure operation certain loose papers marked as Annexure A-4 were seized. These were the papers in respect of purchase and sale of gold bullion. The total amount of the transaction computed by the AO in respect of these seized documents was Rs.20.90 Crores. The AO accordingly held that these are the sales outside the books of account and by applying a G.P. rate of 5.68%, being the G.P. rate in the case of sister concern, Neha Jewellers Pvt. Ltd. made an addition of Rs.1,18,73,548/- as undisclosed income earned by the assessee.
24.2 The learned CIT(A) held that the transaction as per Annexure A-4 is the wholesale business of dealing in bullion. Accordingly, the gross profit rate to be applied should not be that of the jewellery but that of the bullion. The G.P. rate of the bullion business in the case of a sister concern, M/s Brijwasi Jewellers were that of 0.46%. Taking into consideration this fact, the learned CIT(A) directed the AO to recompute the addition by applying the G.P. rate of 1.46% as against 5.68% applied by the AO.
24.3 The learned DR submitted that the learned CIT(A) was not justified in tinkering with the G.P. rate applied by the AO. In this regard he relied upon the order of the AO.
24.4 In reply it was submitted by the learned AR that the transaction as per Annexure A-4 are that of bullion and there is vast difference in the G.P rate in the business of jewellery and that of bullion. Accordingly, the rate to be applied should be that of the bullion and not that of the jewellery. It was further contended that the G.P. rate in the business of bullion having been accepted in the case of a sister concern at the rate of 0.46% by the AO himself, the learned CIT(A) was not justified in applying 1.46% as against 0.46%.
24.5 We have considered the arguments advanced by the parties and have gone through the orders of the authorities below. On going through the same we note that there is no dispute so far amount of sales outside the books of account of Rs.20.90 is concerned. The only dispute is regarding the G.P. rate. We are in agreement with the contention of the learned AR that there is difference in the G.P. rate in the business of jewellery and gold and bullion. So far as nature of transaction is concerned we note that the learned CIT(A) has considered this issue. The appellant has carried out the business of sales and purchase of gold and bullion as per Annexure A-4. These being transaction of gold and bullion, the G.P. rate to be applied on such transaction has to be the G.P. rate that of in the business of gold and bullion. In this regard we note that the G.P. rate of 0.46% in the case of the sister concern i.e. Brijwasi Jewellers has been considered by the learned CIT(A). That being the comparative rate available in the case of business of gold and bullion, that rate has to be applied. Accordingly, we are of the view that AO was not justified in applying the G.P. rate of the ‘jewellery business’ instead of that of ‘gold and bullion business’. The learned DR during the course of the hearing also could not give any reason why G.P. rate of jewellery be applied in the present case as against the G.P. rate of gold and bullion. As regards assessee’s Cross Objection that no addition on account of this is to be made, we are of the view that in the absence of any explanation about these transactions, these transactions have to be considered in the hands of the assessee. However, we are in agreement with the learned AR’s alternative contention that the G.P. rate to be applied should be 0.46% against 1.46% as directed by the learned CIT(A). The AO has made the addition by applying G.P. rate of 5.68% which is exactly the same as that of the G.P. rate of Neha Jewellers Pvt. Ltd. in jewellery business. So no markup was added by the AO while applying G.P. rate of jewellery business on the transaction of gold and bullion. Accordingly, the learned CIT(A) was not justified in adding a markup of 1% over and above the G.P. rate of 0.46% in the similar gold and bullion business of M/s Brijwasi Jewellers. Accordingly, we direct the AO to restrict the addition by applying G.P. rate of 0.46%. Accordingly, Ground No. 3 of Revenue’s appeal is dismissed and Objection Nos.1 and 2 of the Cross Objection of the assessee are partly allowed.
Ground No. 4 in revenue’s appeal is against deletion of addition of Rs.1,27,20,196/- made by the AO on account of undisclosed factory expenses. This addition has been made on the basis of Page 28 of Annexure A-4. The AO was of the view that the assessee did not furnish any explanation in respect of the payment of factory expenses and accordingly he made the above said addition. The learned CIT(A) has deleted this addition by holding that these expenses pertain to M/s Haryana Chains which is a business unit of Brijwasi Impex Pvt. Ltd. These expenses have been recorded in the books of accounts found from the factory of M/s Haryana Chains. Accordingly, he held that these expenses are to be considered in the hands of Brijwasi Impex Pvt. Ltd. in the relevant assessment year and not in the hands of the assessee.
25.1 Before us, the learned DR simply relied upon the order of the AO without giving any reason or justification for making this addition in the hands of the assessee. The learned AR supported the order of the learned CIT(A) and it was contended that these expenses pertain to Haryana Chains which has set up a factory and which is a unit of Brijwasi Impex Pvt. Ltd. These expenses have been found recorded in the books of accounts found from the factory premise of Haryana Chains.
25.2 We have considered the above submissions and perused the orders of the authorities below. The learned CIT(A) while deleting the addition had examined the issue. After examination of the issue, the learned CIT(A) has held that these pages are with reference to expenditure which relates to the factory. It has been further held that the loose papers are of the same account as recorded in the books of accounts of the factory. These books of accounts were found from the factory of Haryana Chains. The books of accounts of Haryana Chains have been considered in the hands of Brijwasi Impex Pvt. Ltd. Accordingly we are of the view that the learned CIT(A) was justified in holding that no addition can be made on the basis of these loose papers in the hands of the assessee. The learned DR could not point out any reason for making addition on account of these expenses in the hands of the assessee. Accordingly this Ground No. 4 of the revenue is dismissed.
Ground No.5 in revenue’s appeal is against deletion of addition of Rs.15,32,680/- made by the AO on account of unexplained investment in cash and jewellery found in lockers. The above addition comprises of two figures i.e. cash of Rs.8,17,000/- and jewellery of Rs.7,15,860/- found during the course of the search. The learned CIT(A) has deleted this addition in respect of cash of Rs.8,17,000/- on the ground that the same has been included in the additional income offered for taxation for assessment year 2004-05. The addition on account of jewellery has been deleted on the ground that firstly the value to be applied shall be of the year in which the locker was last operated and secondly, such value of the jewellery has been offered for taxation by the assessee in the relevant assessment year as additional income.
26.1 During the course of the hearing the learned DR simply relied upon the order of the AO. On the other hand, the learned AR has relied upon the order of the learned CIT(A). It was submitted that it is a factual finding recorded by the learned CIT(A) and there being no error in such factual finding the addition has been rightly deleted.
26.2 We have considered the above submissions in view of the orders of the authorities below. On going through the same we note that a sum of Rs.8,17,000/- was found in the locker with Punjab National Bank, Krishna Nagar and jewellery of value Rs.7,15,860/- was found from the locker of Punjab National Bank. It is also undisputed fact that this locker was not operated during the year under consideration. Based on the last date of operation of the locker, the assessee has offered the cash found in the locker in the said assessment year as additional income. Similarly as regards jewellery, the assessee has valued the jewellery on the basis of the rate applicable in the relevant year in which the locker was last operated.
On the basis of such valuation, the value so arrived has been offered as additional income in the relevant year in which the locker was last operated. Thus the assessee has included both cash in hand as well as jewellery in its income for the relevant assessment year. There being no dispute about the last date of operation of the locker and such amount being included in the return of income filed by the assessee we are of the view that the learned CIT(A) was justified in deleting the addition. Accordingly, this ground of appeal of the revenue is rejected.
27. Ground No.6 in revenue’s appeal is regarding deletion of addition of Rs.18,50,483/- made by the AO on account of the value of the jewellery. As per the assessment order, jewellery of Rs.18,50,483/- was found in locker No. 1812 with Central Bank of India, Chandni Chowk, Delhi. The AO not being satisfied with the reply of the assessee made this addition as unexplained investment. The learned CIT(A) has deleted the addition on the ground that a sum of Rs.12,75,301/- on account of this unexplained jewellery has been offered and included in the return of income by the assessee for assessment year 2004-05 being the last date of operation of the locker falling in that year.
27.1 During the course of the hearing the learned DR supported the order of the Assessing Officer whereas the learned AR submitted that the addition has been rightly deleted by the learned CIT(A) as the correct amount has been included in the correct assessment year.
27.2 We have considered the above submissions and have gone through the orders of the authorities below. On going through the facts we note that there is no dispute about the last date of operation of the locker which falls in assessment year 2004-05. The assessee has valued the jewellery by applying the rate of that year in which the locker was last operated. The value so arrived has been included in the return of income. The learned DR could not controvert the above facts. Accordingly we are of the view that the value of the jewellery having been included in the relevant assessment year the learned CIT(A) was justified in deleting the addition in the year under consideration. Accordingly, this ground of the revenue is rejected.
Objection Nos. 3 and 4 in the Cross Objection filed by the assessee are in support of the deletion of the addition by the learned CIT(A) and hence need no independent adjudication in view of our above finding on each of the ground.
28 29. In the result the appeal for assessment year 2006-07 of the revenue is dismissed and Cross Objection of the assessee is partly allowed.
In summary, appeals preferred by the Revenue are dismissed and cross objections of the assessee are partly allowed. Order pronounced in the open court on 20.06.2016 Sd/- Sd/- ( O.P. KANT ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 20 /06/2016 Mohan Lal Copy forwarded to: 1) Appellant 2) Respondent 3) CIT 4) CIT(Appeals) 5) DR:ITAT ASSISTANT REGISTRAR
Date Draft dictated directly on computer 20.06.2016 Draft placed before author 20.06.2016 Draft proposed & placed before the second member Draft discussed/approved by Second Member. 20.06.2016 Approved Draft comes to the Sr.PS/PS 21.06.2016 Kept for pronouncement on 20.06.2016 File sent to the Bench Clerk 21.06.2016 Date on which file goes to the AR Date on which file goes to the Head Clerk. Date of dispatch of Order.