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Income Tax Appellate Tribunal, JAIPUR BENCHES,SMC JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI,
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA No. 732/JP/2023 fu/kZkj.k o"kZ@Assessment Years : 2017-18 cuke Ram Sahai Sharma Income Tax Officer, Vs. 43 Ladu Baba, Dulai Ke Pass, Ward-1(1), Jaipur Sanganer Dhani, Sanjharia, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: CDPPS 3174 K vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. S. R. Sharma, CA & Sh. R. K. Bhatra, CA jktLo dh vksj ls@ Revenue by : Smt. Monisha Choudhary (Addl. CIT) lquokbZ dh rkjh[k@ Date of Hearing : 22/02/2024 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 25/04/2024 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM
This appeal filed by assessee is arising out of the order of the National Faceless Appeal Centre, Delhi dated 27/10/2023 [here in after (NFAC)/ ld. CIT(A)] for assessment year 2017-18 which in turn arise from the order dated 19.12.2019 passed under section 143(3) of the Income Tax Act, by ITO, Ward-1(1), Jaipur.
“1. That on the facts and in the circumstances of the case the Id CIT (A) is wrong, unjust and has erred in law in upholding the finding recorded by the ld AO that out of jewellery valuing Rs. 1933522/- found with the appellant at the time of interception by Air Intelligence Unit, Goa, jewellery valuing Rs. 1135308/- allegedly remained unexplained and thereby confirming the addition of the said amount of Rs. 1135308/- made to the income of the appellant by the Id AO.
That without prejudice to the ground No (1) above the finding of ld CIT(A) in appeal order that appellant tried to match the value of stock found in his possession by 'hook & crook' is wrong and unwarranted as the assessee has explained the stock found in his possession with correct facts & plausible explanations and therefore said finding deserves to be deleted.
3. The Id CIT(A) is further wrong and has erred in law in dismissing appeal without adjudicating the issue of chargeability of addition confirmed vide ground No (1) u/s 115BBE of the IT Act, 1961.
The assessee craves permission to add to or amend to any of grounds of appeal or to withdraw any of them.”
Succinctly, the fact as culled out from the records is that the return of income declaring income of Rs. 3,78,620/- was e-filed on 04.06.2017. The case of the assessee was selected under CASS for scrutiny. Notice under section 143(2) dated 27.09.2018 was issued and served upon the assessee. Further, consequent upon change of incumbent, notice under sec. 142(1) dated 26.08.2019 along with query letter was issued and served upon the assessee. In response thereto the assessee submitted the requisite details under e-proceedings, which were duly examined. The under the name & style M/s Vinayak Gems at Jaipur.
3.1 The assessee was intercepted by the Air Intelligence Unit, Income-tax Department, Goa on 11.01.2017. The Air Intelligence Unit, Goa found silver jewellery items in possession of the assessee, which were later valued by the registered Valuer with the Income-tax Department, who valued the said silver jewellery items at Rs. 19,33,522/-. During said proceedings the statements of the assessee were recorded under section 131 of the Income-tax Act, 1961. In the above statements, the assessee agreed with the valuation made by the Registered Valuer of the Income-tax Department and the assessee tendered no objection with the findings and valuation made by the official valuer.
3.2 Based on these set of facts a survey was carried out at the business premises of M/s. Vinayak Gems, 2470, Yadav Building, Rasta Telipara, Jaipur on 12.01.2017. The survey team found that Yadav Building is a big premises and the assessee was having one room in the said premises wherein the assessee runs his firm M/s Vinayak Gems. The survey team found the said room was totally empty. Thus, it is understood that was intercepted by the Air Intelligence Unit of Income-tax Department, Goa. The survey team also found no books of accounts, no bill books, no stock and any other thing related to the business of the assessee at the said room. Therefore, the contention of the assessee made in the statements remained unverified leaving the source of investment of jewellery items of Rs. 19,33,522/- found with the assessee at Goa unexplained. During the course of assessment proceedings, the assessee stated that the assessee computes his profit from business under sec.
44AD of the Income Tax Act, 1961, as such no regular books are maintained. However, details of purchase/sales were produced along with the supporting vouchers which were examined and copies were obtained and placed on the records by the ld. AO. A show cause was issued and served upon the assessee to show cause as why not the silver items valuing at Rs. 19,33,522/- found in his possession by the Air Intelligence Unit, Income-tax Department, Goa, may be considered as unexplained and added his total income. The assessee has not furnished any explanation on the said account. During the course of assessment proceedings it was noticed that the assessee was having opening stock of Rs. 4,30,728/- at the beginning of the F.Y 2016-17 corresponding to A.Y 2017-18. As per the assessment proceedings, till 10.01.2017 (i.e. immediately before when he was intercepted by the Air Intelligence Unit, Goa on 11.01.2017), the assessee had made purchases of Rs. 21,87,497/- and sales of Rs. 18,20,011/-. Taking note of above facts, the stock as on 11.01.2017 with the assessee is worked out as under:-
Opening Stock as on 01.04.2016 (As declared by the assessee) Rs. 4,30,728/- Add: Purchases made during the period 01.04.2016 to 10.01.2017 Rs. 21,87,497/- (as per records produced & verified by the assessee) Less: Sales made during the period 01.04.2016 to 10.01.2017 (as Rs. 18,20,011/- per records produced & verified by the assessee) Closing stock in the hands of assessee as on 10.01.2017 Rs. 7,98,214/- As such the stock with the assessee ought to be of Rs. 7,98,214/-.
Whereas, the Air Intelligence Unit, Goa found silver jewellery items in possession of the assessee, of Rs. 19,33,522/-. Thus, the assessee was found to be having excess silver jewellery (stock) Rs. 11,35,308/- (19,33,522-7,98,214). Since the assessee has not furnished any explanation in this regard, the said excess silver jewellery (stock) so found in the possession of the assessee is treated as unexplained and accordingly added to his total income. appeal before the ld. CIT(A)/NFAC, the ld. CIT(A) has dismissed the appeal of the assessee. The finding of the ld. CIT(A) on the issue challenged before him is reproduced herein below :
“5. Decision:- Return of income for A.Y 2017-18 was filed on 04.06.2017 declaring total income of Rs. 3,78,620/-. The case was selected for scrutiny under CASS and assessment was completed on 18.12.2019 u/s 143(3) at a total income of Rs. 15,13,928/-. The appellant was intercepted at Goa by Air Intelligence Unit, Income Tax Department Goa on 11.01.2017 with items of silver jewelry. The silver jewelry found in the possession of the appellant was valued by the registered valuer at Rs. 19,33,522/-. A statement u/s 131 was recorded during the above proceeding and in answer to question no. 17, the appellant agreed with the valuation made by the registered valuer. The appellant in his statement stated that he maintained purchase register, sales register, stock register digitally in computer at his business premises at Jaipur. A survey u/s 133A was conducted at his business premise at 2470, Yadav Building, Rasta Telipara, Jaipur on 12.01.2017. The survey team found the said room totally empty. Neither any books of account nor any stocks were found at the said premise. During the assessment proceeding, the AO asked to explain the source of the stock of jewelry of Rs. 19,33,522/-. Though no explanation was filed but the appellant produced details of purchase and sales with supporting vouchers. On examination of these details, the AO noticed that opening stock of the silver jewelry as on 01.04.2016 was Rs. 4,30,728/-and purchases and sales during the period 01.04.2016 to 10.01.2017 were Rs. 21,87,497/- and 18,20,011/- respectively. From these figures, the AO concluded that the appellant has closing stock of Rs. 7,98,214/- on 10.01.2017 whereas the value of jewelry found in his possession on 11.09.2017 was Rs. 19,33,522/-. Therefore, the AO treated the balance amount of Rs. 11,35,308/- as unexplained and added the same to the total income of the appellant. Being aggrieved with this order, the appellant filed this instant appeal. During the appellate proceeding, the appellant agreed with the valuation of stock found in his possession by the registered valuer at Rs. 19,33,522/-. The appellant also agreed with the opening stock as on 01.04.2016 and purchases made during the period 01.04.2016 to 10.01.2017 taken by the AO at Rs. 4,30,728/- and 21,87,497/- respectively. The appellant submitted that while taking sale figure at Rs. 18,20,011/- the assessing officer has not reduced the four sales bills totaling to Rs. 3,07,811/- which were issued and included in the sales of Rs. 18,20,011/- was to be done at Goa and the same was part of the goods found in his possession. The appellant also contended that while arriving at the cost of stock as on 10.01.2017, the G.P. margin which is imbedded with the sale value of Rs.
7 Ram Sahai Sharma vs. ITO 18,20,011/- is to be reduced. According to the appellant, during the previous year 2015-16, he has shown G.P. rate of 30.54%. The appellant has submitted a calculation of closing stock as on 10.01.2017 which is as under:-
Opening stock as on 01.04.2016 Rs. 4,30,728/- Purchase made during 01.04.2016 to 10.01.2017 Rs. 21,87,497/- Less: Cost of sales (Sales Rs. 15,12,130/-) as explained above Rs. Rs. 10,50,325/- 10,50,325/- Closing Stock in the hands of assessee as on 10.01.2017 (at cost) Rs. 15,67,900/-
The appellant further submitted that if the G.P. margin of 25 to 30% is reduced from Rs. 19,33,522/-, the figure almost matches with the closing stock as per valuation of the appellant at Rs. 15,67,900/-. Therefore, the stock found with the appellant at Goa is totally explained. I have considered the submission of the appellant and also perused the assessment order. It appears that the appellant has considered the value of stock found with him at Goa as sales value and asking for reduction of G.P. margin of 25 to 30% to arrive at cost of stock. No reason has been given by the appellant for this. The valuation made by the valuer was value of stock found in the possession of the appellant. The appellant has also not submitted any evidence in support of his argument that four sale bills totaling to Rs. 3,07.811/- which were issued and included in the sale of Rs. 18,20,011/-. It appears that the appellant tried to match the closing stock calculated by the AO on the basis of bills and vouchers with the value of stock found in his possession at Goa by hook and crook. The explanation submitted by the appellant is devoid of merit and hence rejected. Therefore, in the facts and circumstances, I do not find any infirmity in the order of the AO in treating the jewelry of Rs. 11,35,308/- as unexplained. The grounds of appeal of the appellant are dismissed.
6. In the result, the appeal is Dismissed.”
5. Feeling dissatisfied the assessee prefer the present appeal on the ground as reproduced hereinabove. To support the various grounds so raised by the ld. AR of the assessee, filed the written submissions in respect of the grounds raised by the assessee and the same is reproduced herein below:
The present appeal is against the said addition confirmed by Ld CIT(A):- Groundwise submissions Ground No. (1 and 2) The ground No. (1) and (2) relates to the same issue i.e. challenging addition of Rs. 11,35,500/- made as unexplained income in the hands of assessee and so are clubbed and combined submissions are made hereinunder. It is submitted that assessee while travelling from Jaipur to Goa on 10-1-2017 for the purposes of his business of delivering goods to purchasers at Goa to whom he sold goods and for sale of his stock to Goa shopkeepers while touring he was intercepted by Air Intelligence Unit, Income Tax Department, Goa and total stock of silver jewellery/items found with him was valued by registered valuer of Income tax at Rs. 19,33,522/-. There was no stock at his Jaipur office which got proved in survey u/s 133A at his business premises by Jaipur Authorities and so stock found with him was total stock of his business. The assessee agreed to the said valuation of stock of Rs. 19,33,522/- valued by department valuer which is at market value as valuation of stock by a valuer is always at market value. The assessee in course of assessment proceedings submitted details of purchases/sales and supporting vouchers and purchase and sales register. The Ld. A.O. with these details worked out stock as on 11-01-2017 as under:
Opening stock as on 01.04.2016 (As declared by the assessee) Rs. 4,30,728/- Add: Purchases made during the period 01.04.2016 to 10.01.2017 Rs. 21,87,497/- (as per records produced & verified by the assessee) Less: Sales made during the period 01.04.2016 to 10.01.2017 (as per Rs. 18,20,011/- records produced & verified by the assessee) Closing stock in the hands of assessee as on 10.01.2017. Rs. 7,98,214/-
The A.O. on this working held that assessee on 10-1-2017 when intercepted by Air Intelligence Unit was found to having excess jewellery (stock) Rs. 11,35,308/- (19,33,522 – 7,98,214) and held to be treated as unexplained and accordingly added to total income of assessee. It is submitted that above working done by Ld. A.O. is incorrect as per following facts/reasons. (a) The op. stock as on 1-4-2016 Rs. It is correctly taken as per record. 4,30,728/-. (b) Purchases made during the year Purchases taken are correct. 1-4-2016 to 10-01-2017 Rs.
21,87,497/-. (c) Sales made during the period 1- The sales are totaled from sale bills 4-2016 to 10-1-2017 Rs. which is correct, but the delivery of 18,20,011/-. goods of four sale bills totaling to Rs. 3,07,811/- which were issued and included in sales of Rs. 18,20,011/- was to be done at Goa which goods assessee was carrying with him and for which he informed to Air Intelligence Unit, I.T. Deptt. – refer Q. No.9 and its answer noted on Page No.–3 of Assessment Order. Thus Rs. 3,07,811/- is to be reduced from sales. The sales are thus to be taken Rs. 15,12,200/-. The sale value as per sale bills is embedded with G.P. margin which is to be deducted for arriving at cost of sales and therefrom to arrive cost of stock as on 10-01-2017. The G.P. rate of assessee for last year as per trading account submitted is 30.54% which is to be reduced. Thus cost of sales upto 10- 1-2017 is Rs. 10,50,325/-.
Thus the correct working of stock with assessee as per accounts supported with bills/vouchers as on 11-01-2017 will be as under: -
Op. stock as on 01.04.2016 Rs. 4,30,728/- Purchases made during 01.04.2016 to 10.01.2017 Rs. 21,87,497/- Less: Cost of sales (sales Rs. 15,12,130/-) as explained above Rs. Rs. 10,50,325/- 10,50,325/- Closing stock in the hands of assessee as on 10.01.2017 (at cost). Rs. 15,67,900/-
The market value of total stock of assessee physically found with him on 10-01- 2017 which was valued by Dept. valuer of I. Tax Department is Rs. 19,33,522/- which is also market value and is to be reduced by G.P. Margin to compare with cost of stock 15,67,900/- and if G.P. margin of about 25-30% is reduced from 19,33,522/- to arrive at cost of sales. The stock physically found with assessee
10 Ram Sahai Sharma vs. ITO on 10-1-2017 almost tallies with stock as per books of accounts and there is no unexplained stock. It is further submitted that the Ld. CIT(A) is wrong in not allowing gross profit margin @ 30.54% which was claimed as per last year G.P. rate. As for reduction of G.P. margin from market value of stock sold the Ld. A.O. has not stated anything in assessment order which is allowable in law to assessee. In fact the authorized officers in search and Ld. A.O. in assessment themselves in various similar cases (Bhura Mal Raj Mal Surana P. Ltd. (Appeal No. 439/16-17, Chandra Kumar Surana (Appeal No. 425/16-17), Vikas Jewellers (789/JP/2019) passed by ld. CIT(A)-IV, Jaipur) and confirmed by Hon’ble Jurisdictional ITAT, Bench, Jaipur has allowed deduction of margin of G.P. from valuation made by approved valuer. The Ld. A.O. is therefore wrong and incorrect in law in not allowing the G.P. margin while arriving the closing stock which may kindly be allowed. In view of the above submission, facts of the case and judicial pronouncement the addition of Rs. 11,35,300/- made by Ld. A.O. in assessment as unexplained income on account of alleged unexplained stock is on wrong calculations and so uncalled for and deserves to be deleted. The appellant prays accordingly. Ground No. (3) The ld CIT(A) is further wrong and has erred in law in dismissing appeal without adjudicating the issue of chargeability of addition confirmed vide ground No (1) u/s 115BBE of the IT Act, 1961. As explained above there is no unexplained stock or any unexplained income and furthur Ld. A.O. has not invoked section 68,69,69A or section 69B, 69C or section 69D in assessment order, the provisions of section 115BBE are not attracted. The Ld. A.O. is thus wrong in holding that total income assessed is taxed u/s 115BBE of the Act at the rate of 60% which deserves to be set aside and total income be ordered to be assessed at normal rates of tax as per provisions of Act. Ground No. (4) General ground. The assessee prays accordingly.”
6. To support the contention so raised in the written submission reliance was placed on the following evidence / records / decisions:
S. No. Name of Case Name of Court Date of order Page No. 1 DCIT, Central Circle-2, vs. ITAT Jaipur Bench 01.11.2021 1-20 Vikas Jewellers, Jaipur
11 Ram Sahai Sharma vs. ITO 2 Bhuramal Rajmal Surana CIT(A)-4, Jaipur 12.11.2018 21-31 & Sons Pvt. Ltd. vs. DCIT, Central Circle-02, Jaipur 3 Chandra Kumar Surana CIT(A)-4, Jaipur 12.11.2018 32-46 vs. DCIT, Central Circle- 02, Jaipur
The ld. AR of the assessee in addition vehemently argued that considering the contention that the assessee has submitted the bills for sale and the considering that stock is required to be computed and the same has not been done. If that sale bill is considered while calculating the sales then there is no such difference as alleged by the lower authority. The gross profit is required to be deducted from the valuation of stock and for that contention he relied upon the case laws.
The ld DR is heard who relied on the findings of the lower authorities and more particularly advanced the similar contentions as stated in the order of the ld. AO and ld. CIT(A). The ld. DR submitted that the paper book contains no certification as to submission of sales bills to the ld. AO even the ld. CIT(A) has not discussed this contention of the assessee and therefore, there is no error as such pointed out and therefore, the appeal is required to be dismissed. on record and also gone through the various judicial precedent cited to drive home to the respective contention so raised. The brief fact as emerges from the order of the lower authority is that the assessee is an individual engaged in small business of manufacturing and sale of silver jewellery in the name of Vinayak Gems. The jewellery manufactured by him is sold/delivered to shops at tourist cities as per orders for such silver jewellery to assessee. The assessee for his business purposes was going to Goa on 11-01-2017 carrying with him stock of silver jewellery to deliver silver items to traders to whom sale was affected as per their order by assessee and for sale to local shopkeepers while touring when he was intercepted by Air Intelligence Unit. The Air Intelligence Unit, Goa found silver jewellery items in possession of assessee which were later valued by valuer of I.T. Deptt. who valued the said stock of silver jewellery items at Rs. 19,33,522/-. The authorized officer of I.T. Deptt. at Goa also recorded statement of assessee u/s 131. In Jaipur at business premises (a room) of assessee at Yadav Building, Telepara, Jaipur where assessee carries on work of manufacturing and business in the name of Vinayak Gems a survey u/s 133A was also carried on 12-01-2017 in which survey team found the room was empty i.e. no account books, no stock and nothing related to made in statement recorded by I.T. Officer at Goa remained unverified as for source of investment in silver jewellery items of Rs. 19,33,552/- found with assessee. During the course of assessment proceedings the assessee through his counsel submitted that the assessee computes his profits from business under Section 44AD of I. T. Act, 1961 and no regular books of accounts are maintained. The assessee, however submitted before A.O. details of purchase/sales/direct expenses of manufacturing along with supported vouchers which were examined, and copies thereof were given to A.O. who placed them on record. In the course of assessment proceedings the ld. AO required assessee to explain silver items valuing at Rs. 19,33,522/- found in possession of assessee by the Air Intelligence Unit, Goa and issued show cause notice as why the silver items valuing at 19,33,522/- may not be considered as unexplained and added to his total income. The assessee did not respond to the notices so the ld. AO based on material available with him as provided by assessee computed excess silver jewellery (stock) Rs. 11,35,308/- as per details given in para 7.2 and 7.3 of assessment order and considered the same as unexplained stock of the assessee. Based on the submission and arguments raised by the assessee the ld. CIT(A) has held that 14 Ram Sahai Sharma vs. ITO It appears that the appellant has considered the value of stock found with him at Goa as sales value and asking for reduction of G.P. margin of 25 to 30% to arrive at cost of stock. No reason has been given by the appellant for this. The valuation made by the valuer was value of stock found in the possession of the appellant. The appellant has also not submitted any evidence in support of his argument that four sale bills totaling to Rs. 3,07,811/- which were issued and included in the sale of Rs. 18,20,011/-. It appears that the appellant tried to match the closing stock calculated by the AO on the basis of bills and vouchers with the value of stock found in his possession at Goa by hook and crook. The explanation submitted by the appellant is devoid of merit and hence rejected.” Whereas, the assessee submitted before us that there is no dispute as to the total of the sales so reported but the delivery of goods of four sale bills totaling to Rs. 3,07,811/- which were issued and included in sales of Rs. 18,20,011/- was to be done at Goa which the goods, assessee was carrying with him. For this contention he informed to Air Intelligence Unit, I.T. Deptt.
–[ refer Q. No.9 ] and its answer noted on Page No.–3 of Assessment Order. The list of parties to whom the sales for an amount of Rs. 18,20,011/- was placed on record and we found that the same were included in the said list of parties to whom the sales were made. The assessee at the time of recording of the statement submitted about the sales made to these parties as recorded in question no. 9 reproduced in the assessment order. Thus, the sales made to these parties are required to be deducted while computing the value of the unaccounted stock if any. Since the ld. DR raised objections to the fact that there is no finding of the lower authority about the submission of these bills by the assessee and even the invoices on record this fact needs to be examined by the ld. AO. Therefore, to give effect there to for Rs. 3,07,811/- from the sales, these bills are required to be verified. As regards the contention of the profit to be reduced we get support from the decision of the honourable jurisdictional High Court in the case of Clarity Gold (P) Ltd in where in the court has held that:
Taking into account the evidence on record, the tribunal while considering the matter has totally deleted the amount of addition. In our considered opinion taking into account the industry which is running the business, the addition which has been made on the basis of GP which has been shown of the identical industry whose is also heard together. The GP rate of previous years reads as under:
16 Ram Sahai Sharma vs. ITO Taking into account the average GP rate which will be applied in the present case will be 12 per cent. It is made clear that where ever the profit is more than 12 per cent, the same will not be refunded to the assessee but where it is less than 12 per cent, the income will be assessed on the basis of 12 per cent GP.
Considering that aspect of the matter we remand the matter back to the file of the ld. AO who will verify that the sales made by the assessee for an amount of Rs. 18,20,011/- is inclusive of the four bills as contended by the assessee in his statement and as regards the contention of the reducing the profit margin the same shall be considered at 12% as per the recent judgment of the Hon’ble Jurisdictional High court. Thus, with grounds so raised by the assessee, we set aside the issue to the file of the ld. AO who will decide the issue afresh in accordance with the direction as contained herein above by providing one more opportunity of hearing to the assessee.
Thus, the matter is restored back to the file of the ld. AO who will decide the issue based on evidence and submission of the assessee. However, the assessee will not seek any adjournment on frivolous ground and remain cooperative during proceedings before the ld. AO for the remand on the specific direction as contained herein above.
In terms of these observations, the appeal of the assessee in ITA no.
732/JP/2023 is allowed for statistical purposes.