SHIVAM TRADERS,TIRUPPUR vs. DCIT, TIRUPPUR

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) -3 Coimbatore, dated 24.10.2016 and pertains to assessment year 2014-15.

Shri S. Swaminathan, the Ld.counsel for the assessee, submitted that the assessee-partnership firm is engaged in the business of gold jewellery in the name and style of Sree Kumaran Thangamaligai. According to the Ld.counsel, there was a search on 19.03.2014 in respect of one of the employees of Sree Kumaran Thangamaligai, Shri Ikram Mulla Khan while travelling by Flight No.6E-277 to Kolkata. The said Shri Ikram Mulla Khan, in fact, was carrying on 3000 grams of gold bullion for making ornaments, to Kolkata by flight. According to the Ld. counsel, the Air Intelligence Unit of Income Tax Department intercepted the employee of the assessee and in fact seized the gold bullion. The assessee filed a Writ Petition before the Calcutta High Court in WP No.19090(w) of 2015. The Calcutta High Court by an order dated 08.09.2015 found that the specific case of the assessee is that the bullion seized by the Air Intelligence Unit of Income Tax Department was part of stock-in-trade of the assessee. In fact, according to the Ld. counsel, the Calcutta High Court directed the income-tax authorities to decide whether the bullion seized from Shri Ikram Mulla Khan was stock-in-trade of the assessee or not.

The Ld.counsel for the assessee further submitted that the assessee purchased the bullion from M/s Kuberan Bullion on 19.03.2014 by invoice dated 18.03.2014. Referring to page 5 of the paper-book, the Ld.counsel submitted that in fact the assessee purchased gold bullion and the same was issued to GM Jewellers, Kolkata for making gold ornaments. Referring to page 11 of the paper-book, the Ld.counsel submitted that this is the sales bill issued by M/s Kuberan Bullion, Coimbatore for purchasing 3000 grams of gold bullion by the assessee. Referring to page 12 of the paper-book, the Ld.counsel submitted that this is the ledger maintained by the assessee in respect of Pure Metal Bullion for purchase of 3000 grams of gold jewellery recorded on 18.03.2014.

Referring to page 28 of the paper-book, the Ld.counsel for the assessee submitted that this is the invoice issued by the assessee for issuing gold bullion to GM Jewellers, Kolkata for making gold ornaments. Since the computer was not working properly on the particular date, namely, 19.03.2014, a manual voucher was issued. In the manual voucher, the voucher number was wrongly mentioned by handwriting. By taking advantage of this mistake in writing the invoice while writing the invoice by hand, according to the Ld. counsel, the Revenue authorities claim that the gold seized by Air Intelligence Unit of Income Tax Department does not form part of assessee’s stock-in-trade. According to the Ld. counsel, the purchase of gold bullion and availability of gold bullion with the assessee is established by the invoice issued by M/s Kuberan Bullion. The issue of gold bullion to GM Jewellers is also established by entries made in Pure Metal Bullion account. Therefore, according to the Ld. counsel, the conclusion of the Revenue authorities that the gold bullion was unaccounted stock of the assessee is not justified.

On the contrary, Smt. Sumathi Venkatraman, the Ld. Departmental Representative, submitted that the invoices, copy of which is available at page 28 of the paper-book shows different numbers. First invoice shows as Invoice No.6065 and the second one shows 7479. According to the Ld. D.R., the Revenue authorities examined one Shri M.P. Kolinjinathan on 29.10.2015, who in fact prepared the invoice manually. The said Shri Kolinjinathan claims that his staff prepared the manual invoice in the last minute due to shortage of time and after waiting for long hours for the system to restore. One of the invoice slips numbered 7479 matches with system generated serial number. However, the other one does not match. According to the Ld. D.R., the assessee could not establish before the Assessing Officer that the gold bullion carried by Shri Ikram Mulla Khan was the same gold bar purchased by the assessee from M/s Kuberan Bullion. The Ld. D.R. further pointed out that the gold bullion did not have any distinctive serial number. The standard gold bullion issued by authorized banks contains distinctive serial number. When gold bullions are sold, the distinctive number shall be referred in the invoices. According to the Ld. D.R., the serial number of the invoices issued by the assessee has been tampered with. No material evidence was filed before the Assessing Officer to substantiate that the gold bullion issued by the assessee and carried by Shri Ikram Mulla Khan was part of the stock of the assessee. Hence, according to the Ld. D.R., the CIT(Appeals) has rightly confirmed the order of the Assessing Officer.

By way of rejoinder, Shri S. Swaminathan, the Ld.counsel for the assessee, submitted that it is not correct to say that the distinct number was not mentioned in the gold bullion. Referring to the report filed by the Deputy Director of Income Tax before the Calcutta High Court, the Ld.counsel submitted that the Deputy Director admitted that the gold bars sold by M/s Kuberan Bullion to the assessee on 18.03.2014 were 99.99% purity gold bars and do not have any distinct numbers as admitted by the Deputy Director before the Calcutta High Court. There is no question of referring the distinctive number in the invoice or sales bill either by M/s Kuberan Bullion or by the assessee. Referring to the report filed by the Deputy Director before Calcutta High Court, the Ld.counsel submitted that there are two types of bullions available in the market. One type of bullion is 995 gold bar and another one is 99.99% purity gold bullion. 995 gold bars are purchased either from the authorized bank or from importers which would have separate identity / distinct number embossed on each gold bar, whereas, 99.99% pure gold bar does not have any such identity or distinct number.

Referring to serial numbers in the invoices, the Ld.counsel for the assessee submitted that due to delay in recovery of computer system and shortage of time, the assessee was forced to prepare manual invoice slips and there was a mistake in one of the invoices while writing the serial number. According to the Ld. counsel, when one of the hand written invoices tally with the serial number generated by computer, there cannot be any intention on the part of assessee to suppress the other serial number.

We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, the Air Intelligence Unit of Income Tax Department intercepted the assessee’s employee Shri Ikram Mulla Khan and seized 3000 grams of gold bullion. After referring to issue vouchers, a copy of which is available at page 28 of the paper-book, the Revenue authorities found that there was difference in the serial number which was written in handwriting. It is an admitted fact that the assessee is maintaining books of account in the computer system and while preparing issue invoices, the serial number would come serially. Now the assessee claims that due to delay in recovery of system, the assessee was forced to prepare the issue voucher manually and when one of the voucher tallies with serial number generated by the computer, the other voucher does not tally which was a human error. The question arises for consideration is whether the 3000 grams of gold bullion seized by the Revenue authorities is a part of stock of the assessee or not? The Revenue authorities contend that it is not part of stock and it was a transaction outside the books. In other words, it is unaccounted stock.

We have carefully gone through the material available on record. The sales bill issued by M/s Kuberal Bullion, a copy of which is available at page 11 of the paper-book, shows that on 18.03.2014, the assessee purchased 3000 grams of gold bullion. The purchase of gold bullion was recorded in the Pure Metal Bullion account maintained by the assessee, a copy of which is available at page 12. Therefore, it is obvious that the assessee had sufficient stock of 3000 grams of gold bullion for issue to M/s GM Jewellers, Kolkata for making jewellery. It is not in dispute that the assessee is in the habit of sending gold bullion to M/s GM Jewellers for making gold ornaments. The other objection of the Revenue is that the distinct number of gold bullion is not referred in the bill issued by M/s Kuberan Bullion or invoices issued by the assessee to M/s GM Jewellers. The report filed by the Deputy Director of Income Tax before the Calcutta High Court clearly discloses that distinct number would be available in 995 gold bullion sold by authorized bank/importer. In respect of 99.99% pure gold bullion, it does not have any distinct or identity number. In view of this admission of Deputy Director of Income Tax before the Calcutta High Court in the report filed, the Revenue cannot contend that the gold bullion seized does not contain distinct or identity number. The Revenue is harping upon the serial number mentioned in the manual vouchers issued by the assessee.

When the assessee has purchased gold bullion from M/s Kuberan Bullion and sufficient stock of gold bullion was available with the assessee, this Tribunal is of the considered opinion that the issue of 3000 grams of gold bullion for making gold ornaments to M/s GM Jewellers cannot be doubted at all. The matter would stand differently in case the assessee did not have sufficient stock of gold bullion on the date of issue of invoice. Since the assessee had sufficient stock of gold bullion on 19.03.2014, mere entry of wrong invoice number cannot be a reason to hold that the gold bullion seized by the Air Intelligence Unit of the Department at Kolkata airport is outside the books. Therefore, this Tribunal is unable to uphold the orders of the lower authorities. Accordingly, the orders of the lower authorities are set aside and the addition made by the Assessing Officer is deleted.

In the result, the appeal filed by the assessee is allowed.