M/S. GRT JEWELLERS INDIA PRIVATE LIMITED,CHENNAI vs. DCIT,. CENTRAL CIRCLE-3(3), CHENNAI

आदेश /O R D E R

PER MANJUNATHA. G, ACCOUNTANT MEMBER:

This appeal filed by the assessee is directed against final

assessment order passed by the Assessing Officer u/s. 143(3)

r.w.s. 144C(13) of the Income-tax Act, 1961 (hereinafter

referred to as “the Act”), dated 09.01.2024, in pursuant to

directions issued by the Dispute Resolution Panel-2,

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Bangalore, dated 29.12.2023 u/s. 144C(5) of the Act, for the

assessment year 2014-15.

“1. For that the order of the Learned Assessing Officer ('Learned AO') u/s. 143(3) r.w.s.144C(1) of the Income Tax Act, 1961 is opposed to law/facts and circumstances of the case.

2.1. For that the Order of the Learned Assessing Officer u/s 147 of the Act is bad in law and invalid.

2.2. For that the Dispute Resolution Panel ('Learned DRP') erred in upholding the action of Learned AO in reopening the assessment merely based on change of opinion which is not permissible in law as laid down by the Apex Court in case of CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561.

2.3. For that the Learned DRP/AO erred in reopening the assessment merely on the basis of an audit objection and concluded the assessment without independent application of mind.

2.4. For that the Learned AO, in the reasons recorded, failed to establish that there is any failure on the part of the appellant to disclose fully and truly all material facts and therefore, it is urged that the entire proceedings are non-est in the eyes of law.

2.5. For that the Learned DRP/AO erred in holding the reopening of an assessment beyond a period of four years as valid, without considering the fact that Original Assessment Completed u/s 143(3) of the Act on 31.03.2016 was consequent to a search, despite the fact that there is no failure on the part of the appellant to disclose fully and truly all material facts.

3.1. For that the Learned DRP erred in entertaining the fresh issues raised by the Learned AO through the remand report

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without appreciating the fact that the same were never suggested for enhancement by the Assessing Officer.

3.2. For that the Learned DRP erred in considering the issues raised by Learned AO as a passing reference without proper application of mind and without issuing a specific enhancement notice to the appellant company.

4.1. For that the Learned DRP/AO erred in disallowing the belated payments of employee's contribution towards PF & ESI u/s 36(1)(\va) of the Act amounting to 38,61 ,965/-. (Tax effect - Rs.13,12,682/-)

4.2. For that the Learned DRP/AO, relying upon the subsequent judgment of Apex Court in the case of M/s.Checkmate Services Private Limited, erred in disallowing u/s 36(1)(va) of the Act, which was considered and allowed while passing the Assessment Order u/s 143(3) of the Act.

5.1. For that the Learned DRPIAO erred in making an addition of 13,38,65,660/- towards the gross profit on the alleged unaccounted sales of gold bullion of 8,50,944 grams. (Tax effect- Rs.4,55,00,938/-)

5.2. For that the Learned DRP/AO erred in making an addition without appreciating the fact that the Assessing Officer had, in the remand proceedings, shirked his responsibility in verifying the copies of sales invoices furnished by the appellant.

5.3. For that the Learned DRP/IAO, having accepted the entire sales of gold jewellery& gold articles of Rs. 4,323.91 crores is duly accounted in the books of accounts, erred in making an addition of alleged unaccounted sales of gold bullion without application of mind and without considering the fact that the sale of gold jewellery& gold articles included sales of gold bullion of 247.95 crores (8,50,944 grams).

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6.1. For that the Learned DRP/AO erred in making an addition of 152,84,95,345/- towards the gross profit on the alleged unaccounted purchases of 6,09,205 grams' gold jewellery @2,509/gram without appreciating the fact that 6,09,205 grams pertains to silver articles which were duly substantiated by the appellant. (Tax effect - Rs. 51,95,35,568/-)

6.2. For that the Learned DRP erred in not considering the contents of the Remand Report dt 21.12.2023, wherein the Learned AO had stated that the appellant had not provided invoices for 24kgs of silver articles, which clearly proves that the appellant had duly furnished the purchase invoices for 585.205 kgs of silver articles which were duly verified by the Learned Assessing Officer.

6.3. For that the Learned DRP/AO, having accepted the total sales of gold jewellery and gold articles, erred in concluding an understatement of purchases without appreciating the fact that the same would have invariably resulted in higher gross margins offered by the appellant.

6.4. For that the Learned DRP/IAO erred in concluding the alleged unaccounted purchases of gold jewellery on surmises without being in possession of any material evidence to support their allegation of existence of unaccounted purchases of gold jewellery.

7.1. For that the Learned DRP / AO erred is disallowing a sum of 27,78,239/- towards the PF Admin Charges without appreciating the fact that these charges were forming part of the challans verified for the purposes of disallowance of 36(1) (va) of the Act by the Assessing Officer. (Tax effect Rs. 9,44,323/-)

7.2. For that the Learned DRPIAO erred in disallowing the payment of PF Admin charges without quoting any specific section of Income Tax Act.

7.3. For that the Learned DRPIAO erred in disallowing the contribution to labour welfare funds amounting to 1,92,628/-

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without appreciating the facts and circumstances of the case. (Tax effect - Rs. 65,474/-)

8.1. For that the Learned DRP/AO ought to have appreciated the fact that no variation found in the closing stock and opening stock of gold jewellery during the course of Original assessment proceedings.

8.2. For that the Learned DRP/AO erred in making an addition of T8,69,62,990/- on account of alleged differences between closing stock and opening stock of gold jewellery of 31,519.75 grams without appreciating the facts and circumstances of the case. (Tax effect - Rs. 2,95,58,720/-)

9.1. For that the Learned DRPIAO erred in making an addition of 1,86,03,414/- toward GP on presumed stock of gold jewellery lying with third party throughout the year. (Tax effect- Rs. 63,23,300/-)

9.2. For that the Dispute Resolution Panel failed to understand the modus operandi of the appellant in which the gold jewellery is in possession of the gold smiths round the year and after each delivery a fresh issue of gold is made for the manufacture of the go ornaments/jewellery.

9.3. For that the Learned DRP/AO ought to have considered the fact that the summary sheet provided by the appellant contained only the net movement of stock (ie., issues for manufacture and returns after manufacture) between the appellant company a goldsmiths.

10.1. For that the Learned DRP / AO erred in disallowing a sum of 13,73,09,683/- arising on account of reduction in total value of transactions reported u/s 40A(2)(b) of the Act in Revised Tax Audit Report as against the Original Tax Audit Report. (Tax effect Rs.4,66,71,561/-)

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10.2. For that the Dispute Resolution Panel failed to appreciate the fact that the appellant had rectified the inadvertent errors by properly disclosing the transactions which were in the nature of 'expenditure' fit.

10.3. For that the Dispute Resolution Panel ought to have considered the fact that the values reported in Clause 23 of Original Tax Audit Report had included the transactions like loan repayments and statutory payments which were reimbursed to persons referred in section 40A(2)(b) of the Act and even sales to related parties which form a part of related party transactions for Companies Act purposes but which are not in the nature of expenditure as required u/s 40A(2) of the Act.

10.4. For that the Learned DRP / AO erred in disallowing a sum of 13,73,09,683/-, which never claimed as expenditure in the books of the appellant company.

For these grounds and such other grounds that may be adduced before or during the hearing of the appeal, it is prayed that the Hon'ble Tribunal may be pleased to delete the additions/disallowances made and/or grant such other relief as this Hon'ble Tribunal may deem fit.”

GRT Jewellers India Pvt. Ltd., is engaged in retail business of

gold bullion, diamond, silver etc., and also engaged in the

business of generating electricity using solar and wind energy.

A search and seizure operation u/s. 132 of the Act, was carried

out in the GRT Group of cases on 16.05.2013. The assessee

was also covered u/s. 132 of the Act. Consequent to search,

notice u/s. 153A of the Act, was issued and served on the

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assessee. The assessee had filed its return of income on

29.09.2014, declaring a total income of Rs. 35,13,15,150/-.

The assessee had also reported Specified Domestic

Transactions in Form no. 3CEB. The assessment has been

completed u/s. 143(3) of the Act, on 31.03.2016 by making

disallowance of deduction claimed u/s. 80IA of the Act

amounting to Rs. 93,45,554/-. The assessee preferred an

appeal before the ld. CIT(A) and the ld. First Appellate

Authority, vide their order dated 04.10.2018, had directed the

Assessing Officer to allow the claim of deduction u/s. 80IA of

the Act. The case was, subsequently reopened u/s. 147 of the

Act, for the reasons recorded as per which income chargeable

to tax had been escaped assessment and thus, notice u/s. 148

of the Act dated 30.03.2021, was issued and served on the

assessee. In response, the assessee had filed its return of

income on 30.04.2021. The case was selected for scrutiny and

during the course of assessment proceedings, a reference was

made to the Transfer Pricing Officer (TPO) to determine Arm’s

Length Price (ALP) of Specified Domestic Transactions of the

assessee u/s. 92CA of the Act. The TPO, vide their order

dated 29.01.2023, has proposed downward adjustment of

Rs.1,07,28,724/-, in respect of transactions of inter-unit

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transfer of power generated by Wind Energy Generators.

Thereafter, the Assessing Officer passed draft assessment

order u/s. 144C(1) of the Act on 31.03.2023, and determined

total income of the assessee at Rs. 1309,42,20,824/-, by

making various additions, including downward adjustment

proposed by the TPO towards Specified Domestic Transactions,

additions towards disallowance of belated payment of

employees contribution to PF & ESI u/s. 36(1)(va) of the Act,

addition of gross profit on alleged unaccounted sales of gold

jewellery, addition of gross profit on alleged unaccounted

purchases, disallowance of PF admin charges and contribution

to labour welfare fund, addition towards difference observed as

between opening stock details furnished and that of closing

stock furnished during assessment proceedings for assessment

year 2013-14, addition towards unaccounted sales of

unfinished gold jewellery lying with third party and addition

towards difference in original and revised tax audit report

towards transactions reported u/s. 40A(2)(b) of the Act.

assessment order passed by the Assessing Officer before the

DRP and raised various grounds, including the validity of

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reopening of assessment. The assessee had also challenged

various additions made by the Assessing Officer, including

downward adjustment as suggested by the TPO u/s. 92CA of

the Act and other corporate tax issues like disallowance of PF

& ESI u/s. 36(1)(va) of the Act, additions towards gross profit

on alleged unaccounted sales, disallowance of PF admin

charges and contribution to labour welfare fund etc. The

appellant had also furnished certain additional evidences

including reconciliation between differences in stock in trade

reported in Form no. 3CD and argued that, the tax auditor has

reported quantitative details of stock in trade of all traded

goods without any individual details. The ld. DRP, has

forwarded additional evidences filed by the assessee to the

Assessing Officer for his comments and report. The ld.

Assessing Officer, submitted his remand report and

commented upon admissibility of additional evidences filed by

the assessee and also reconciliation furnished by the assessee

in respect of difference in stock in trade reported in Form no.

3CD, in respect of sale of gold jewellery. The ld. DRP, after

considering relevant submissions of the assessee and also

taken note of remand report submitted by the Assessing

Officer, disposed off objections filed by the assessee, where

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the ld. DRP allowed partial relief in respect of addition of gross

profit on alleged unaccounted purchases, disallowance of

belated payment of PF & ESI u/s. 36(1)(va) of the Act, but

sustained additions made by the Assessing Officer towards

addition of gross profit on alleged unaccounted sales of gold

bullion, addition towards difference in stock in trade, addition

towards unaccounted sale of unfinished gold jewellery lying

with third party and difference in original and revised tax audit

report in respect of transactions reported u/s. 40A(2)(b) of the

Act. Thereafter, the Assessing Officer passed final assessment

order u/s. 143(3) r.w.s. 147 r.w.s. 144C(13) of the Act, on

09.01.2024 and determined total income of Rs.

226,33,92,871/-. Aggrieved by the assessment order, the

assessee is in appeal before us.

does not require specific adjudication and thus, rejected.

of assessment u/s. 147 of the Act. The Ld. Counsel for the

assessee, Shri. B. Ramakrishna, FCA, at the time of hearing,

submitted that the assessee does not want to press ground no.

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2, challenging reopening of assessment. Thus, ground no. 2 of

assessee appeal is dismissed as not pressed.

challenging additions towards fresh issues raised through

remand report. The Ld. Counsel for the assessee submitted

that the assessee does not want to press ground no. 3. Thus,

ground no. 3 of assessee appeal is dismissed as not pressed.

ground no. 4.1 to 4.2 of assessee appeal is disallowance of

belated payment of employee’s contribution to PF & ESI u/s.

36(1)(va) of the Act, amounting to Rs. 38,61,965/-. The fact

with regard to the impugned dispute are that, during the

course of assessment proceedings, the Assessing Officer

noticed that as per Form no. 3CD, the assessee has claimed

deduction u/s. 36(1)(va) of the Act, towards employee’s

contribution to PF & ESI at Rs. 2,32,61,334/-. The Assessing

Officer, further noticed that contribution to the extent of Rs.

2,29,14,828/- was paid to the fund beyond due date

prescribed under respective Acts. Accordingly, belated

payment of Rs. 2,29,14,828/- was proposed to be added to

the total income of the assessee u/s. 36(1)(va) r.w.s. 2(24)(x)

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of the Act. Aggrieved by the draft assessment order, the

assessee company filed objections before the DRP. During the

proceedings before the DRP, the assessee submitted additional

evidences and in this regard, a remand report was called for

from the Assessing Officer. During remand proceedings, the

assessee has submitted challans in respect of payment of

employee’s contribution to PF & ESI and submitted that, there

was certain errors in reconciliation of branch data in respect of

contribution to various funds and in fact, the actual amount of

contribution was paid beyond the due date was only at Rs.

38,61,995/-. The ld DRP, after considering relevant

reconciliation statement submitted by the assessee and also

considering the findings of the Assessing Officer in his remand

report, allowed relief of Rs. 1,93,99,369/- and balance amount

of Rs. 36,65,965/- has been confirmed.

8.1 The Ld. Counsel for the assessee, Shri. B. Ramakrishna,

FCA, submitted that the ld. DRP/Assessing Officer erred in

sustaining belated payments of employee’s contribution to PF

& ESI u/s. 36(1)(va) r.w.s. 2(24)(x) of the Act, by relying on

subsequent judgments of Apex Court in the case of Checkmate

Services Pvt. Ltd. vs. CIT, 448 ITR 518(SC) , even though said

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claim was considered and allowed while passing the

assessment order u/s. 143(3) of the Act.

8.2 The ld. DR, Shri. R. Clement Ramesh Kumar, CIT, on the

other hand supporting the order of the ld. DRP submitted that,

the controversy around deduction towards belated payment of

employees contribution to PF & ESI has been finally resolved

by the Hon’ble Supreme Court in the case of Checkmate

Services Pvt Ltd vs CIT, 448 ITR 518 (SC), and thus, the DRP

and Assessing Officer has rightly disallowed belated payment

of employee’s contribution to PF & ESI and their order should

be upheld.

8.3 We have heard both the parties, perused materials

available on record and gone through orders of the authorities

below. The Hon’ble Supreme Court has considered the issue of

belated payment of employee’s contribution to PF in the case

of Checkmate Services Pvt. Ltd. vs. CIT in (2022) 448 ITR 518

(SC), and after considering relevant facts held that the

assessee is a custodian of funds received from employee’s

towards welfare fund. Thus, any remittances towards said

funds after the due date prescribed under respective Acts

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cannot be allowed as deduction under provisions of section

36(1)(va) r.w.s. 2(24)(x) of the Act. The Hon’ble Supreme

Court has considered the issue in light of their earlier decisions

in various cases and held in Para 54 of the order as under:

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8.4 The coordinate bench of ITAT, Chennai in the case of

Gokulam Chit and Finance Co Pvt. Ltd. vs. DCIT in ITA No.

765/2022, order dated 21.12.2022 has considered an identical

issue by following the decision of Hon’ble Supreme Court in the

case of Checkmate Services Pvt. Ltd. vs. CIT (Supra), held

that, belated payment of employee’s contribution to PF & ESI

made beyond the due dates specified in the respective Acts

attracted the provisions of section 36(1)(va) r.w.s. 2(24)(x) of

the Act. Therefore, we are of the considered view, that there

is no error in the reasons given by the ld. DRP/Assessing

Officer to sustain addition towards belated payment of

employee’s contribution to PF & ESI and thus, we are inclined

to uphold the findings of the ld. DRP and reject ground taken

by the assessee.

ground no. 5 of assessee appeal is addition towards gross

profit on alleged unaccounted sales of gold jewellery

amounting to Rs. 13,38,65,660/-. The facts with regard to the

impugned dispute are that, during the course of assessment

proceedings, the AO noticed that the quantitative details of

raw materials and finished goods submitted by the assessee

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shows excess stock of gold jewellery to the tune of 8,50,994

gms. The AO has recorded details of opening stock, purchases,

consumption, sales and closing stock in Para 4.1 of their order.

The assessee has reported consumption and sales separately.

The Assessing Officer, on the basis of closing stock reported by

the assessee in Form no. 3CD in relevant column observed

that the assessee has reported incorrect figure. Therefore, the

AO, called upon the assessee to explain discrepancy in

quantitative details reported in Form no. 3CD in respect of

gold jewellery. The assessee submitted that, the consumption

quantity of 9095156 Gms includes sales of 850944 Gms, but

by inadvertent error, the tax auditor has reported sales and

consumption separately. To justify their arguments, the

appellant has filed a revised Form no. 3CD, certifying from

Accountant and rectified the mistake and claimed that there is

no shortage as claimed by the AO. The AO however, was not

convinced with explanation furnished by the assessee.

According to the AO, the assessee has not accounted sales of

gold jewellery to the tune of 850944 gms and thus, computed

total unaccounted sales by adopting prevailing market rate of

gold (22 Karat), which was at Rs. 2509 per gram and

determined total value of sales at Rs. 213,50,18,496/-. The

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AO, further noticed that the assessee has reported gross profit

of 6.27% and taking into account assesses own gross profit

rate, has computed gross profit on unaccounted sales of gold

jewellery at Rs. 13,38,65,660/- and made addition. The

assessee challenged the additions made by the AO before the

DRP, but could not succeed. The ld. DRP, after considering

relevant facts and also taking note of remand report of the

Assessing Officer, rejected arguments of the assessee and

sustained addition made towards gross profit on unaccounted

sales of gold jewellery, on the ground that the assessee could

not furnish sufficient evidence to prove that sale of gold

jewellery is included in consumption of raw materials and

subsequent evidences filed during the course of DRP

proceedings cannot be accepted, that to when the evidences

are in the form of sale invoices for 850944 gms of gold

jewellery, which runs into hundreds of invoices.

9.1 The ld. Counsel for the assessee, Shri. B. Ramakrishna,

FCA, submitted that the ld. DRP/AO erred in making addition

of Rs. 13,38,65,660/- towards gross profit on alleged

unaccounted sales of gold bullion of 850944 gms, without

appreciating the fact that the AO had, in the remand

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proceedings, shirked his responsibility in verifying the copies of

sales invoices furnished by the appellant. The ld. Counsel for

the assessee further submitted that, total sale of gold

jewellery and gold bullion and other articles was at Rs.

4323.91 crores, which includes sale of gold jewellery 850944

gms. The assessee has furnished evidences including sale

invoices and relevant sales register before the AO. The AO

neither verified the details furnished by the assessee, nor

accepted the claim of the assessee. Therefore, he submitted

that the matter may be remitted back to the file of the AO to

reconsider the issue in light of evidences filed by the assessee.

9.2 The ld. DR, Shri. R. Clement Ramesh Kumar, CIT, on the

other hand supporting the order of the ld. DRP/AO submitted

that, books of accounts and tax audit report submitted by the

assessee are not reliable. In fact, the assessee itself has

admitted that tax audit report submitted by the tax auditor is

incorrect. The assessee has submitted revised tax audit report

and claimed that, there is no difference as computed by the

AO towards sale of gold jewellery. Since, the appellant could

not furnish necessary evidences in support of the claim, the

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DRP/AO has rightly rejected the claim of the assessee and

their order should be upheld.

9.3 We have heard both the parties, perused materials

available on record and gone through the orders of authorities

below. The assessee claims that there was an error in

reporting quantitative details of raw materials of gold bullion

by the tax auditor, which leads to the impugned dispute of

unaccounted sales of gold jewellery. According to the

assessee, sale of gold jewellery of 850944 gms is included in

consumption details and by inadvertent error, tax auditor has

reported sale of gold jewellery separately, even though the

same was included in consumption. The assessee has justified

its arguments by filing various details including sales bill of

gold jewellery, necessary registers and also total amount of

sales declared by the assessee and quantity of gold articles

sold. As per details submitted by the assessee, the assessee

has sold 13724652 Gms of gold bullion and reported total

sales amount of Rs. 4323.91 crores and if you work out sales

value per gram, it will come at Rs. 3150 per gram, which can

never be the cost given the market rate prevailing then was

already at Rs. 2509 per gram, as considered by the AO. From

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the details furnished by the assessee, it appears that the

unaccounted sales computed by the Assessing Officer, on the

basis of tax audit report, ignoring reconciliation filed by the

assessee appear to be incorrect. Further, the assessee has

filed sample copies of sale invoices along with registers to

prove their claim that sale of gold jewellery is already included

in consumption details. The fact needs further verification from

the AO. Therefore, we set aside the order of the ld. DRP/AO on

this issue and restore the issue back to the file of the AO with

a direction to re examine the claim of the assessee in light of

any evidences that may be filed by the assessee and decide

the issue in accordance with law.

ground no. 7 of assessee appeal is disallowance of PF admin

charges and contribution to labour welfare fund at Rs.

29,70,867/-. The AO has made additions of Rs. 1,31,39,000/-

towards employer contribution of PF & ESI, on the ground that

normally employees and employer contribution towards PF &

ESI would be at equal rate. The AO further observed that in

some instances, employee contribution may be at increased

rate but not employer contribution. Accordingly, he has

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worked out excess contribution of Rs. 131,39,000/-, by taking

into account employees contribution of Rs. 2,32,61,000/- and

employers contribution of Rs. 3,64,00,000/- and difference has

been added back to the total income of the assessee. The

assessee challenged addition made by the AO towards

disallowance of employer contribution of PF on the ground

that, the disallowance worked out by the AO is erroneous for

the reason that different rates of contribution was provided for

employees and employer in respect of ESI and in so far as PF

is concerned, in addition to employer contribution, the

assessee needs to pay admin charges. The assessee has filed

reconciliation explaining employee contribution, employer

contribution and admin charges as per respective Act and

claims that there is no difference as computed by the AO. The

assessee had also filed details with regard to contribution of

labour welfare funds. The assessee has filed a detailed

reconciliation, which has been extracted in Para 9.1 of ld. DRP

order. The ld. DRP, after considering relevant reconciliation

filed by the assessee and also taken note of rate of

contribution to ESI & PF has held that, the assessee could not

file any evidence to prove the genuineness of Rs. 27.78 lakhs

towards PF admin charges. The ld. DRP, further held that the

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rate of monthly contribution to labour welfare fund is Rs. 20

per employee and Rs. 40 per employer and if you consider said

rate, the amount claimed by the assessee is excess and thus,

out of total disallowance of Rs. 1,31,39,000/-, allowed relief to

the extent of Rs. 1,08,57,970/- and balance amount of Rs.

29,70,867/-has been confirmed.

10.1 The ld. Counsel for the assessee, Shri. B. Ramakrishna,

FCA, submitted that the ld. DRP has erred in sustaining

additions made towards disallowance of PF admin charges and

contribution to labour welfare fund, even though the assessee

has filed necessary details including challans for payment of

admin charges before the AO, during remand report.

Therefore, he submitted that the matter may be remitted back

to the file of AO to verify the claim of the assessee and allow

as per law.

10.2 The ld. DR, Shri. R. Clement Ramesh Kumar, CIT, on the

other hand submitted that the DRP has recorded categorical

finding that, the assessee could not file any evidence to prove

payment of PF admin charges. The assessee had also not

furnished any evidences to prove contribution to labour

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welfare fund. The ld. DRP, after considering relevant facts has

rightly sustained PF admin charges and contribution to labour

welfare fund and their order should be upheld.

10.3. We have heard both the parties, perused materials

available on record and gone through the orders of authorities

below. There is no dispute with regard to claim of the assessee

that, the employer needs to pay admin charges at prescribed

rate as per PF Act, in addition to employer contribution. The

assessee further claims that it has filed reconciliation

explaining difference and also furnished necessary challans for

payment of PF admin charges. But the AO has summarily

rejected evidences filed by the assessee and made additions.

In fact, the DRP never disputed the fact that PF admin charges

is required to be paid as per law, but sustained additions only

on the ground that, assessee could not furnish any evidence.

Now, the appellant has claimed to have furnished necessary

evidences including challans for payment of PF admin charges

and labour welfare fund. In our considered view, matter needs

further verification from the AO. Thus, we set aside the order

of the ld. DRP/AO, on this issue and restore the issue back to

the file of the AO and direct the AO to verify the claim of the

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assessee, in light of any evidence that may be filed by the

assessee to prove their claim with regard to payment of PF

admin charges and contribution to labour welfare fund.

ground no. 8 of assessee appeal is addition towards alleged

difference in opening stock and closing stock of gold jewellery.

During the course of assessment proceedings, the assessee

stated that the quantitative particulars of opening stock of gold

jewellery was 1,05,07,390 grams. But, in the tax audit report

it was stated that the opening stock was at 1,02,74,279

grams. The quantitative details of gold jewellery furnished by

the assessee when compared to opening stock reported in tax

audit report had a difference of 2,33,111 grams of gold

jewellery. The assessee was asked to furnish breakup and

also reconcile the difference. The assessee submitted that, the

difference in opening stock of gold jewellery as reported in tax

audit report was on account of bullion separately reported at

62,305 grams, old gold lying with third party not reported

59,431 grams and unfinished gold not reported in Form 3CD

1,11,376 grams. The claim made by the assessee was verified

with reference to closing stock figures reported as on

:-25-: ITA. No: 113/Chny/2024

31.03.2013 and noticed that, the assessee had given a

breakup for its closing stock as on 31.03.2013 which was at

19,01,691.510 grams. However, in the reconciliation

statement submitted during the course of remand

proceedings, the opening stock of gold jewellery as on

01.04.2013 was shown at 19,33,211.264 grams. Therefore,

the AO opined that, the assessee was not able to explain

difference in opening stock in trade of gold jewellery of

31,519.750 grams and thus, by taking prevailing market rate

which was at Rs. 2759 per gram, worked out unaccounted

sales of Rs. 8,69,62,990/- and added to total income. It was

the explanation of the assessee before the AO that, there is no

difference in value of closing stock as reported in the year

ending 31.03.2013 and opening stock value as on 01.04.2013.

Although, there was a difference in quantity of gold jewellery

reported in tax audit report and reconciliation filed by the

assessee, but said difference was on account of incorrect

details submitted by tax auditor in his report without verifying

the stock details furnished by the assessee. The assessee has

furnished correct quantitative details after reconciling the

items of traded goods including gold jewellery, silver articles,

diamonds etc and also explained the reason for difference.

:-26-: ITA. No: 113/Chny/2024

The tax auditor after considering relevant details has furnished

revised audit report and as per revised report, the quantitative

details of stock in trade reported by the tax auditor matches

with opening stock considered by the assessee in his audit

report.

11.1 We have heard both the parties, perused materials

available on record and gone through the orders of authorities

below. Admittedly, there is no difference in value of opening

stock reported by the assessee in tax audit report and as well

as in financial statement (profit and loss account) as on

01.04.2013, when compared to value of closing stock as

reported to the AO during the assessment proceedings for the

assessment year 2013-14. It is also admitted fact that, there

is a difference in quantitative details of opening stock reported

by the assessee in tax audit report, when compared to closing

stock details of quantity furnished to the AO in the previous

assessment year. The assessee has filed reconciliation

statement explaining the difference and argued that, while

reporting quantitative details of stock in trade of opening

stock, certain quantity of gold jewellery was lying with third

party was not reported. If you exclude said jewellery, the

:-27-: ITA. No: 113/Chny/2024

difference worked out by the AO on the basis of tax audit

report submitted by the auditor and reconciliation submitted

during the assessment proceedings, we find that there is no

difference as quantified by the AO in respect of opening stock

of gold jewellery. Further, when there is no difference in stock

in trade value as reported by the assessee as on 01.04.2013 in

financial statement when compared to closing stock as

reported on 31.03.2013, in our considered view discrepancy in

quantitative details reported by the assessee with explanation

and reconciliation submitted should be accepted. Since, the

assessee filed reconciliation explaining difference in

quantitative of stock in trade of gold jewellery, in our

considered view, the AO ought not to have made addition

towards value of gold jewellery, on the basis of quantitative

difference without there being any evidence to prove that, said

difference is on account of purchase of gold jewellery or sale of

gold jewellery. Therefore, we are of the considered view that

the AO and ld. DRP completely erred in making addition

towards value of gold jewellery amounting to Rs.

8,69,62,990/-, being difference between opening stock of

quantitative details as shown as on 01.04.2013 and closing

stock of quantitative details of gold jewellery shown as on

:-28-: ITA. No: 113/Chny/2024

31.03.2013. Thus, we set aside the findings of ld. DRP/AO on

this issue and direct the AO to delete addition made towards

difference in value of stock in trade of gold jewellery.

ground no. 9 of assessee appeal is addition towards gross

profit on unaccounted sales of gold jewellery lying with third

party. During the course of assessment proceedings, the

assessee explained the difference in closing stock of gold

jewellery as reported in tax audit report for the assessment

year 2013-14 and the opening stock of gold jewellery as

reported in tax audit report for the assessment year 2014-15

was due to 1,11,375.814 grams of unfinished gold jewellery

lying with third party. The assessee submitted that, the same

was missed to be included in the opening stock of gold

jewellery as on 01.04.2013. In the remand proceedings, the

assessee explained that in the closing stock as on 31.03.2013

unfinished gold jewellery of 190754.558 grams was shown

which comprises opening stock of 111375.814 grams of

unfinished jewellery lying with third party and accretion of

79378.744 grams during the year. Since, the assessee

statement itself showed that said jewellery lying with third

:-29-: ITA. No: 113/Chny/2024

party was not included in stock statement, a show cause

notice dated 21.12.2023 was issued to the assessee and called

upon to explain as to why enhancement of income should not

be made with respect to the value of unfinished jewellery lying

with third parties. In response, the assessee submitted that,

while reporting quantitative details of stock in trade by

inadvertent error the auditor missed to report jewellery lying

with third party. Further, in this line of business, the old

jewellery received from customers and certain jewellery or

ornaments were given to goldsmith for repair or modification.

The unfinished jewellery with goldsmith was verified at the end

of the year. The assessee has reconciled the difference and

explained to the AO and said unfinished jewellery value was

included in value of opening stock and closing stock. The DRP,

rejected arguments of the assessee and directed the AO to

make addition towards value of unfinished jewellery lying with

third party by taking into account gross profit @ 6.27% and

made addition of Rs. 1,86,03,414/-.

12.1 The ld. Counsel for the assessee, submitted that the ld.

DRP/AO erred in making addition towards gross profit on

unfinished stock of gold jewellery lying with third party without

:-30-: ITA. No: 113/Chny/2024

appreciating the modus operandi of the appellant in which the

gold jewellery is in possession of goldsmith around the year

and after each delivery a fresh issue of gold is made for

manufacture of gold ornaments/jewellery. The ld. Counsel for

the assessee submitted that, lower authorities ought to have

considered the fact that the summary sheet provided by the

appellant contained only the net movement of stock (i.e,

issues for manufacture and return after manufacture) between

the appellant companies and goldsmith. These facts have

been explained to the DRP, but they have rejected arguments

of the assessee and made addition towards gross profit.

12.2 The ld. DR, Shri. R. Clement Ramesh Kumar, CIT, on the

other hand supporting the order of the DRP/AO submitted that

the assessee itself has admitted fact that 1,11,375.814 grams

of unfinished gold jewellery was lying with third party and the

same was not part and partial of stock in trade of the

assessee. The assessee could not furnish any evidence to

prove unfinished jewellery lying with third parties. Therefore,

the DRP/AO rightly presumed that said quantity of unfinished

jewellery is unaccounted sale and accordingly, estimated gross

profit and made addition.

:-31-: ITA. No: 113/Chny/2024

12.3 We have heard both the parties, perused materials

available on record and gone through the orders of authorities

below. The assessee is in the business of manufacturing of

gold ornaments and jewellery, purchase gold bullion and

converting into gold jewellery/ornaments, by giving gold

bullion to goldsmith and makes ornaments. The unfinished

gold jewellery lying with goldsmith was valued at the end of

the year and included in the value of closing stock. This is the

modus operandi of the appellant employed in its business of

trading in gold jewellery and ornaments. If you go by the

nature of business of the assessee, the arguments taken by

the appellant that unfinished gold jewellery lying with

goldsmith was not considered in the opening stock of jewellery

by inadvertent error appears to be bonafide and genuine.

Therefore, in our considered view, when the appellant has

reconciled said difference by filing necessary evidences

including the quantity of unfinished jewellery lying with

goldsmith, in our considered view, the ld. DRP/AO ought not to

have made addition towards gross profit on unaccounted sale

of unfinished gold jewellery. But, fact remains that even before

us, the assessee could not explain as to how unfinished gold

:-32-: ITA. No: 113/Chny/2024

jewellery of 1,11,375.814 grams was included in the value of

opening stock as on 01.04.2013. If the assessee is able to

provide necessary evidences including delivery channels to be

used for handling the jewellery between the appellant and the

goldsmith and further, any other document that may be used

by that parties. If the assessee is able to prove 1,11,375.814

grams was in fact lying with the third party and further, the

value of same has been already included in the value of closing

stock, then the AO is directed to verify the claim of the

assessee with reference to necessary evidences and delete

addition made towards gross profit on unaccounted sales of

unfinished gold jewellery lying with third party, because even

the AO/DRP has presumed said quantity of unfinished gold

jewellery claimed to have been lying with third party was sold

by the assessee without any evidence. Thus, we set aside the

issue to the file of the AO and direct the AO to verify the claim

of the assessee and decide the issue in light of our discussions

given hereinabove.

ground no. 10 of assessee appeal is addition based on the

difference in transactions reported in original tax audit report

:-33-: ITA. No: 113/Chny/2024

vis-a-vis revised tax audit report u/s. 40A(2)(b) of the Act,

amounting to Rs. 13,73,09,683/-. During the course of remand

proceedings, the assessee filed revised audit report in Form

3CA and 3CD for the assessment year 2014-15, on

20.10.2023. On comparison of the original tax audit report

with the revised tax audit report, it was found that, there was

some difference between the figures mentioned in the original

audit report and the revised audit report, in respect of various

transactions covered u/s. 40A(2)(b) of the Act. There was a

net difference of Rs. 13,73,09,683/- as per transactions

reported in original tax audit report and revised tax audit

report. The AO, called upon the assessee to explain reasons.

During the course of DRP proceedings, the observations of the

AO with regard to mismatch in transactions reported u/s.

40A(2)(b) of the Act, as per tax audit report was

communicated to the assessee vide letter dated 27.12.2023

and the assessee was asked to show cause as to why the

difference should not be disallowed and added back to the

income of the assessee. In response, the assessee vide letter

dated 28.12.2023, submitted that the provisions of section

40A(2)(b) of the Act, pertains to disallowance of expenditure

which is made by the appellant, but it does not applicable to

:-34-: ITA. No: 113/Chny/2024

various other reportable transactions like repayment of loan,

etc. The assessee had also filed a reconciliation explaining

difference between amount reported u/s. 40A(2)(b) of the Act,

in tax audit report submitted by the assessee along with return

of income and revised tax audit report submitted during the

course of remand proceedings and claimed that, there was a

mismatch in reporting certain transactions in respect of

interest payments, director remuneration, purchase from

related parties, rent payment, making charges, other expenses

etc. The DRP, however was not convinced with explanation

furnished by the assessee and accordingly held that, in

absence of any supporting evidence in respect of mismatch of

various transactions, the explanation of the assessee could not

be accepted and thus, directed the AO to disallow difference to

the tune of Rs. 13,73,09,683/- while computing the total

income.

13.1 The ld. Counsel for the assessee, submitted that the ld.

DRP/AO erred in disallowing difference in original and revised

tax audit report arising on account of reduction in total value

of transactions reported u/s. 40A(2)(b) of the Act, in revised

tax audit report as against original tax audit report, without

:-35-: ITA. No: 113/Chny/2024

appreciating fact that the appellant had rectified an

inadvertent error by properly disclosing the transactions which

were in the nature of expenditure. The ld. Counsel for the

assessee, further submitted that value reported in Clause 23

of original tax audit report was included with transactions like

loan repayment and statutory payments which were

reimbursed to persons referred to in section 40A(2)(b) of the

Act and even sales to related parties which form a part of

related party transactions are in the nature of expenditure as

required u/s. 40A(2) of the Act. Therefore, he submitted that

the matter may be set aside to the file of the AO to verify the

reconciliation filed by the assessee and decide the issue in

accordance with law.

13.2 The ld. DR, on the other hand supporting the order of the

DRP/AO submitted that, it is the assessee who has reported

incorrect amount of various transactions reportable u/s.

40A(2)(b) of the Act, in Clause 23 of tax audit report.

Although, the assessee claimed to have reconciled the

difference with necessary explanation, but could not file any

details before the DRP and thus, the DRP has rightly directed

the AO to make addition towards difference in value of

:-36-: ITA. No: 113/Chny/2024

transactions reported u/s. 40A(2)(b) of the Act, as income of

the assessee and their order should be upheld.

13.3. We have heard both the parties, perused materials

available on record and gone through the orders of authorities

below. As per provisions of section 40A(2)(b) of the Act, any

transactions with related parties should be reported in clause

23 of tax audit report issued by auditor in Form 3CD. As per

Clause 23 of Form 3CD, in original tax audit report issued by

the auditor, the transactions reportable u/s. 40A(2) of the Act

was shown at Rs. 1,16,37,49,420/-, which comprises of

interest payment, director remuneration, purchases, rent

windmill expenses, making charges, refinery charges, other

expenses etc. In the revised tax audit report issued by the

auditor, the total value of reportable transactions under Clause

23 of Form 3CD was shown at Rs. 1,02,64,39,738/-. The

assessee has explained difference in each head of expenditure,

their transactions with corresponding remarks and claimed

that certain transactions of loan received and repaid has been

shown as interest payments. Likewise, certain transactions of

purchases from related parties have been classified as director

remuneration. Likewise, the assessee has reconciled each

:-37-: ITA. No: 113/Chny/2024

head of expenditure and explained the difference. The

reconciliation statement filed by the assessee is available in

Page no. 20 of paper book filed by the assessee, dated

29.02.2024. We have gone through the reconciliation filed by

the assessee and find that certain transactions of loan received

and repaid has been classified as interest payments. Similarly,

certain transactions of purchases from related parties have

been shown as director remuneration. Likewise, each and

every transaction has been explained with corresponding

narration. Further, transactions reported in Clause 23 of Form

3CD is not necessarily related to an expenditure claimed in the

profit and loss account or income credited in the profit and loss

account of the assessee for the relevant assessment year.

Sometimes, capital account transactions like loan received and

repaid and other transactions between related parties are also

needs to be reported. Therefore, based on the difference in

value of transactions reported as per original tax audit report

and revised tax audit report, it cannot be ascertained that said

difference is either income of the assessee, which has been

understated or expenditure of the assessee which can be

overstated. Each and every transaction needs to be verified

by the AO with regard to the explanation of the assessee and

:-38-: ITA. No: 113/Chny/2024

corresponding books of accounts maintained for relevant

assessment year. Since, the AO has summarily computed

difference between value reported in two tax audit reports and

treated as income of the assessee, in our considered view, the

AO is completely erred in treating the difference in value of

transactions reported in Clause 23 of revised tax audit report

as income of the assessee. Further, the assessee has already

filed reconciliation explaining said difference which needs

verification from the AO. Thus, we set aside the issue to the

file of the AO and direct the AO to reexamine the claim of the

assessee, in light of reconciliation filed by the assessee and

also verify each and every item of transactions reported in

Clause 23 of Form no. 3CD as per original tax audit report and

revised tax audit report filed by the assessee and ascertain the

nature of transactions and in case really there is a difference,

then said difference should be computed and decided in

accordance with law.

ground no. 6 of assessee appeal is addition towards gross

profit on unaccounted purchases of gold jewellery. The facts

with regard to the impugned dispute are that during the

:-39-: ITA. No: 113/Chny/2024

assessment proceedings, the AO seen from the profit and loss

account of the assessee that the purchase value of gold

jewellery was at Rs. 154053.71 lakh for assessment year

2014-15. However, the corresponding unit as shown in Form

3CD was 46912367 grams. The Assessing Officer after

considering these figures has worked out Rs. 328 per gram,

which is abnormally low when compared to the least market

rate that was prevalent during the financial year 2013-14 at

Rs. 2509 per gram. The AO, on the basis of said discrepancies

as noticed has worked out total purchase value of gold of Rs.

10,229,77,57,803/- by taking in to account per gram gold rate

at Rs. 2509/-.(46912367*Rs. 2509- Rs.15405371000). The

AO, after considering gross profit declared by the assessee for

the relevant financial year which was at 6.27%, has worked

out gross profit on unaccounted purchases of Rs.

6,41,40,69,414/- and proposed to be added to the total

income of the assessee. The assessee company filed objections

before the DRP. During the course of proceedings before the

DRP, the assessee has submitted additional evidences

including revised tax audit report and quantitative details of all

traded goods and claimed that, the tax auditor has reported

total quantity of all traded goods including gold jewellery, gold

:-40-: ITA. No: 113/Chny/2024

bullion, silver bullion, and silver articles in one column without

any bifurcation. The additional evidences filed by the assessee

have been furnished to the AO for his remand report. During

the remand proceedings, the assessee submitted that total

quantity of all items of traded goods was 475,21,572 grams,

whereas, in the tax audit report it was reported at 469,12,367

grams. The AO, noticed that for the difference of 609205

grams of gold jewellery, the assessee neither produced any

evidences like purchase bills/payment details/bank statement

to prove its claim, that the increase in quantity relates to

purchase of silver articles to the extent of 609205 grams, nor

submitted any valid reasons for omission of such huge

quantity of bullion. Therefore, taking in to account difference

in quantity of 609205 grams and adopting prevailing market

rate of Rs. 2509 per gram, worked out unaccounted sales of

Rs. 152,84,95,345/- and submitted his remand report to the

DRP and claimed that, the value of excess stock of 609205

grams of gold jewellery may be considered for addition in

place of Rs. 641,40,69,414/- proposed in the draft assessment

order.

:-41-: ITA. No: 113/Chny/2024

14.1 The ld. Counsel for the assessee, Shri. B. Ramakrishna,

FCA, submitted that the ld. DRP/AO erred in making addition

of Rs. 152,84,95,345/-, towards gross profit on alleged

unaccounted purchases of 609205 grams of gold jewellery @

2509 per gram, without appreciating fact that 609205 grams

pertains to silver articles, which was duly substantiated with

necessary evidences including purchase bills, payment details

etc. The ld. Counsel for the assessee further submitted that,

the ld. DRP erred in not considering the content of the remand

report dated 21.12.2023, wherein the ld. AO has stated that

the appellant had not provided invoices for 24 kgs of silver

articles which clearly proves that the appellant has duly

furnished the purchase invoices for 585.02 grams silver

articles which were duly verified by the AO. The ld. Counsel

for the assessee submitted that, the ld. DRP/AO having

accepted the total sales of gold jewellery and gold articles,

erred in concluding understatement of purchases without

appreciating the fact that, the same would have invariably

resulted in higher gross margin offered by the appellant. The

ld. Counsel for the assessee, further referring to reconciliation

filed by the assessee submitted that, the AO has not pointed

out any difference in value of purchases reported by the

:-42-: ITA. No: 113/Chny/2024

assessee in financial statement for the relevant assessment

year. Further, the AO himself has recorded a categorical

finding that, if you take total purchases reported by the

assessee for the relevant assessment year with corresponding

quantitative details shown in Form 3CD, the average rate per

gram was Rs. 328 which cannot be the rate at that time. The

AO having accepted the fact, simply concluded that the

difference in quantity of 609205 grams pertains to gold

jewellery, even though the assessee has submitted necessary

details to prove that the difference in quantity relates to silver

purchases and the same has been confirmed by the tax

auditor in their revised tax audit report, furnished during the

course of assessment proceedings. The ld. Counsel for the

assessee, took us to sample copies of purchase invoices of

jewellery and ledger account of Silver Emporium Southex LLP

submitted that, the assessee has purchased silver articles from

above party and also made payment through proper banking

channel. In fact, the assessee has furnished bills for 585.205

kgs of silver articles before the AO, during remand proceedings

and this fact has been confirmed by the AO in the remand

report, dated 21.12.2023. The balance quantity of 24 kgs was

also purchase of silver articles and relevant bills for purchase

:-43-: ITA. No: 113/Chny/2024

of 24 kgs of silver articles from Sunrise Jewellers and Silver

Emporium Southex LLP and Silver Emporium Pvt Ltd., is now

available and the AO may verify the facts. Therefore, he

submitted that the ld. DRP/AO is completely erred in treating

difference in quantity of 609205 grams as gold jewellery and

estimated sale value by taking into account prevailing market

value of gold jewelry at that time, at the rate of Rs. 2509 per

gram and made addition of Rs. 152,84,95,345/-.

14.2 The ld. DR, Shri. R. Clement Ramesh Kumar, CIT, on

the other hand supporting the order of the ld. CIT(A)

submitted that, the ld. DRP has given its categorical findings in

light of details filed by the assessee and remand report of the

Assessing Officer before arriving at a conclusion that the

assessee could not able to prove difference quantity of 609205

grams is purchase of silver and silver articles and further,

quantitative details reported in original tax audit report is

incorrect. He further submitted that, the DRP has considered

relevant details filed by the assessee and held that although,

the assessee has filed revised tax audit report along with

reconciliation statement explaining difference in quantity, but

still there is a difference of 609205 grams and in absence of

:-44-: ITA. No: 113/Chny/2024

necessary details, the Assessing Officer has rightly held that

said difference is on account of purchase of gold jewellery, but

not silver articles. Therefore, he submitted that there is no

error in the reasons given by the ld. DRP/AP to sustain

addition towards gross profit on alleged unaccounted

purchases and their order should be upheld.

14.3 We have heard both the parties, perused materials

available on record and gone through orders of the authorities

below. The assessee has reported total purchase value of gold

jewellery at Rs. 154053.71 lakhs. The assessee had also

reported corresponding quantity of purchases in Form no. 3CD

at 46912367 grams. Based on the details submitted by the

assessee, the Assessing Officer has worked out average rate

per gold jewellery at Rs. 328 per gram, which was abnormally

low when compared to the least market price that was

prevalent during the financial year 2013-14, which was at Rs.

2509 per gram. Therefore, the Assessing Officer taking into

total purchase value reported by the appellant in their financial

statement and corresponding quantity of jewellery purchased,

has worked out unaccounted purchases and estimated gross

profit on said unaccounted purchases. During remand

:-45-: ITA. No: 113/Chny/2024

proceedings, the assessee has furnished revised tax audit

report from the auditor and claimed that in original tax audit

report, the tax auditor has reported purchase of all traded

goods including gold jewellery, gold bullion, silver jewellery,

silver articles, diamond, platinum and other precious stones in

one column, without there being any bifurcation with regard to

quantitative details of each items of traded goods. The

assessee further claims that, the auditor has issued revised

tax audit report and as per said report, the total quantity of

purchases of all traded goods including gold jewellery, gold

bullion, silver articles, diamond, platinum etc is 47521572.136

grams but not 46912367 gms as reported in original tax audit

report. The assessee has furnished necessary details including

bills for purchase of all materials with corresponding stock

registers. In fact, the Assessing Officer has accepted the

revised purchase quantity as reported by the assessee during

the remand proceedings. Further, even after reconciliation of

total stock in trade as per books of accounts, still there is a

difference of 609205 grams (46912367 (-) 47521572 grams)

and assessee claimed that, there was an omission to include

silver articles purchased during the year totaling to 609205

grams. The assessee has filed corresponding purchase invoice

:-46-: ITA. No: 113/Chny/2024

and payment details to parties and argued before the

Assessing Officer that, by inadvertent error the tax auditor has

missed to report silver articles purchased and if you consider

said silver articles there is no difference as computed by the

Assessing Officer. The Assessing Officer, in their remand report

dated 23.12.2023, has observed that the assessee has

produced certain purchase bills and claimed that said

purchases is silver articles. However, the purchase invoices

submitted by the assessee is not tallying with the quantity of

609205 grams and there is no invoice for 24 kgs. From the

details filed by the assessee and remand report submitted by

the Assessing Officer, it is undoubtedly clear that the assessee

has furnished purchase bills for 585.205 kgs, out of total

difference computed by the Assessing Officer of 609205 grams

during remand proceedings. The assessee had also filed

remaining purchase bills for 24.894 kg of silver articles from

Sunrise Jewellers and Silver Emporium Southex LLP and Silver

Emporium Pvt Ltd., which was available at Page no. 15, 16 to

18 of paper book filed by the assessee, dated 29.02.2024.

From the details filed by the assessee, we find that the

assessee is able to furnish purchase invoices for 609205 grams

and if you consider additional purchase bills submitted by the

:-47-: ITA. No: 113/Chny/2024

assessee, there is no difference as quantified by the Assessing

Officer in his remand report.

14.4 Having said so, let us come back whether the

difference computed by the Assessing Officer of 609205 grams

is gold jewellery or silver articles as claimed by the assessee.

The Assessing Officer, was of the opinion that difference in

stock in trade of 609205 grams is pertains to gold jewellery,

but not silver articles as claimed by the assessee. The

assessee claims that difference in stock in trade quantified by

the Assessing Officer of 609205 grams is silver articles, which

was omitted to be reported in the original tax audit report and

said mistake has occurred due to reporting of consolidated

purchases of all traded goods including gold bullion, gold

jewellery, silver jewellery, silver articles, diamonds, platinum

etc. The assessee has filed a reconciliation statement

explaining difference computed by the Assessing Officer of

609205 grams. We have gone through reconciliation filed by

the assessee and find that the Assessing Officer has not

disputed total value of purchases reported by the assessee for

the assessment year 2014-15. In fact, the Assessing Officer

:-48-: ITA. No: 113/Chny/2024

accepted total value of purchases reported by the assessee in

their financial statement without there being any deviation.

The Assessing Officer has only computed difference in

quantitative details of all traded goods and observed that,

there is a difference of 609205 grams in total purchase

quantity and said difference is on account of purchase of gold

jewellery. We do not subscribe to the reasons given by the

DRP/AO to treat difference in purchase quantity of 609205

grams is only relates to gold jewellery, because except the

observation by the Assessing Officer, there is no evidence with

the Assessing Officer to allege that said difference is pertains

to gold jewellery alone. This fact has further strengthened by

the findings of the Assessing Officer in his assessment order

during assessment proceedings, where the Assessing Officer

has arrived at Rs. 328 per gram for gold jewellery based on

total purchases reported by the assessee and total quantitative

details reported in Form 3CD by the tax auditor and from the

above, it is undisputedly clear that the total quantity of

purchases reported by the assessee in their tax audit report is

incorrect. Once it is accepted that the total quantity of

purchases of all traded goods reported by the assessee in

original tax audit report is not correct, then the revised tax

:-49-: ITA. No: 113/Chny/2024

audit report submitted by the assessee from the same tax

auditor with item wise quantitative details of purchases of all

traded goods should be accepted. This is because, said

reconciliation is supported by a report of tax auditor and

further with corresponding purchase bills and payment details.

The assessee has reconciled difference in purchase quantity

arrived at by the Assessing Officer and proved that said

difference is on account of omission to include purchase of

silver articles of 609205 grams (609.205 kgs) and said

reconciliation is further supported by necessary purchase

invoices for purchase of silver articles and payment made

against said purchases. In fact, the Assessing Officer himself

has admitted in his remand report dated 25.12.2023, that the

assessee has furnished the purchase invoices for 583.205

grams of silver articles, but rejected claim of the assessee

stating that said difference is on account of omission of silver

articles only on the basis of surmises and suspicion. It is not

the case of the Assessing Officer that, the additional evidences

filed by the assessee in the form of purchase invoices of silver

articles for 585.28 kgs is not backed by any evidence. In fact,

the Assessing Officer himself has accepted the fact that said

quantity is supported by necessary purchase invoices and also

:-50-: ITA. No: 113/Chny/2024

the parties have confirmed the transactions. The tax auditor

has now certified the true and correct quantity of purchases by

issuing revised tax audit report and claimed that, there is an

error in reporting quantitative details of purchases in his

earlier tax audit report. In so far as, remaining 24 kgs of

silver articles, the assessee has now furnished bills for

purchase of silver articles from Sunrise Jewellers and Silver

Emporium Southex LLP and said details are available in Page

no. 16 to 18 of paper book filed by the assessee. From the

details furnished by the assessee, we find that the assessee

has purchased 24 kgs of silver articles from above parties and

also made payment through proper banking channels.

Therefore, we are of the considered view, that the assessee is

able to reconcile difference in purchase quantity of all traded

goods of 609205 grams as computed by the Assessing Officer

and said difference is on account of omission to include

purchase of silver articles by the tax auditor in tax audit report

and the same has been subsequently corrected by issuing

revised tax audit report. We further are of the opinion that,

when the Assessing Officer is not having any evidence to prove

his findings that difference in quantity of purchase of all traded

goods of 609205 grams is gold jewellery alone, in our

:-51-: ITA. No: 113/Chny/2024

considered view, the claim of the assessee that said difference

is on account of purchase of silver articles should be accepted

and that to, when the assessee is able to substantiate its claim

with necessary purchase invoices and other evidences.

Therefore, we are of the considered view that the ld.

DRP/Assessing Officer is erred in making addition towards

unaccounted purchases of gold jewellery. Thus, set aside the

findings of the ld. DRP on this issue and direct the Assessing

Officer to accept the difference in quantity of 609205 grams as

reconciled by the assessee is on account of purchase of silver

articles.

14.5 Having said so, let us come back to the reconciliation

furnished by the assessee. Admittedly, the assessee has

furnished different quantity of purchases in their original tax

audit report issued by the tax auditor. Although, the appellant

has furnished revised tax audit report along with reconciliation

of purchase of all traded goods, but still there was a difference

of 609205 grams. The assessee has furnished bills to the

extent of 585.205 kg of silver articles, which were duly verified

by the Assessing Officer during remand proceedings. In so far

as, balance 24 kgs of silver articles, the assessee has now

:-52-: ITA. No: 113/Chny/2024

furnished certain additional evidences like purchase bills,

payment details and confirmation from the parties and these

details were not before the ld. DRP/AO. Since, additional

evidences filed by the assessee to prove purchase of silver

articles to the tune of 24 kgs is a new evidence, which needs

to be verified by the Assessing Officer, we are of the

considered view that the matter needs verification from AO.

Thus, we direct the Assessing Officer to verify the

reconciliation filed by the assessee with regard to difference in

quantity of purchases computed during remand proceedings of

609205 grams with supporting evidence that may be filed by

the assessee. If the assessee is able to file details like

purchase invoices and payment details of 609205 grams

towards difference computed by the Assessing Officer, then

the Assessing Officer is directed to accept the details filed by

the assessee. To sum up, we direct the Assessing Officer to

accept the difference in purchase quantity computed at

609205 grams is on account of purchase of silver articles and

also verify the reconciliation filed by the assessee and if finds

correct, then delete addition made on unaccounted purchases

of gold jewellery at Rs. 1,52,84,95,345/-.

:-53-: ITA. No: 113/Chny/2024 15. In the result, appeal filed by the assessee is partly

allowed for statistical purposes.

Order pronounced in the court on 27th March, 2024 at Chennai.

Sd/- Sd/- (मंजुनाथा था था. जी था (वीदुगा�राव वीदुगा�राव वीदुगा�राव) वीदुगा�राव जी जी) जी (V. DURGA RAO) (MANJUNATHA. G) �या�यकसद�य/Judicial Member लेखासद�य/Accountant Member

चे�ई/Chennai, �दनांक/Dated: 27th March, 2024 JPV आदेशक��ितिलिपअ�ेिषत/Copy to: 1.अपीलाथ�/Appellant 2. ��थ�/Respondent 3.आयकरआयु�/CIT 4..िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF