A.C.I.T CIR - 30,KOLKATA, KOLKATA vs. SAMAR KUMAR SEN, KOLKATA

ITA No. 952/Kol/2013 Samar Kumar Sen, AY 2009-10 IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH: KOLKATA [Before Shri M. Balaganesh, AM & Shri S. S. Viswanethra Ravi, JM]

I.T.A No.952/Kol/2013 Assessment Year: 2009-10 Assistant Commissioner of Income-tax, Vs. Samar Kumar Sen Circle-30, Kolkata. (PAN:AJVPS2270E) (Appellant) (Respondent)

Date of hearing: 23.06.2016 Date of pronouncement: 01.07.2016

For the Appellant: Shri Sallong Yaden, Addl. CIT, Sr. DR For the Respondent: Shri Subash Agarwal, AR

ORDER Per Shri M. Balaganesh, AM: This appeal by revenue is arising out of order of CIT(A)-XIV, Kolkata vide appeal No. 963/CIT(A)-XIV/Kol/11-12 dated 07.02.2013. Assessment was framed by ACIT, Circle-30, Kolkata u/s. 143(3) of the Income tax Act, 1961 (hereinafter referred to as the “Act”) for AY 2009-10 vide his order dated 30.12.2011.

2.1. The brief facts of this issue is that the assessee was sole proprietor of a concern named "Senco Jewellery Enterprise”. The assessee was a manufacturing Jeweller and order supplier and also trader of readymade jewellery items since last 20 years. The system of accounting was mercantile and the valuation method of closing stock was "Average Cost" on LIFO basis which was followed consistently by the assessee ever since inception of his business. That on 24.03.2009 survey under section 133A was conducted by the I. T. Department, but no excess gold was detected on physical verification, nor there was any disclosure made on the spot by the assessee Mr. Samar Kumar Sen. No regular Books of Accounts like Cash Book, Ledger, Journal, Stock Book, Karigar A/c. Book etc. were impounded save and except Identification Marks were affixed on Karigar Maal Joma Book-SJE-18, Karigar A/c Book-SJE-19,

ITA No. 952/Kol/2013 Samar Kumar Sen, AY 2009-10 Purchase Memo (Old Broken Ornaments, Standard Bar & Stone Purchase) Book No.1-SJE-20, Book No.2-SJE-21, One Flat File (small) containing Gold Received from Karigars-SJE-22, One small Flat File containing Gold Issue to Karigars-SJE-23, and Loose Sheets containing Purchase Memos from various Parties with serially marked (Page from 1 to 101)-SJE-27 by the I.T. Department. Only SJE-24, 25 and 26 were impounded which consisted two small hard bound daily cash books and one Item wise stock Register.

The Learned AO tabulated the summary of stock found as on the date of survey i.e 23.3.2009 as below:- Description Opening Purchases Sales upto Closing balance Balance As on from 01.04.08 23.03.2009 as on 23.03.2009 01.04.08 to 23.03.09 N.G. Ornaments 19,45,377/- 2,19,03,798/- 4,11,02,445/- (-)1,24,61,915/- Readymade 22 ct (2060 gramms) (18188 grams) (30829 grams) [(-)10580 grams] N.G. Ornaments 2,07,70,297/- Nil 10,93,533/- 2,01,53,741/- Manufactured 22 ct. (26041 grams) (773 grams) (25268 grams) N.G. Ornaments 15,42,703/- 10,98,815/- 5,27,810/- 23,35,725/- (2388 (Readymade 18 ct) (18010 grams) (890 grams) (313 grams) grams)

It is worth mentioning that the statement of the assessee was taken under oath on the date of survey and he was specifically asked to explain whether the aforementioned figures of stock, purchases and sales, taken from his books of account maintained in his business premises, were true and correct. The assessee, vide his reply to the specific question no. 14 of the sworn statement, stated that the above figures were true and correct and were in conformity with the accounts maintained in his system. He, however, failed to furnish any explanation regarding the issue that how negative stock happened on the date of survey. In the course of assessment proceedings, the assessee was requested to explain as to why the aforesaid negative stock should not be treated as purchases made out of books from unexplained sources and the same was subsequently sold. The assessee furnished a reconciliation statement dated 05.12.2011 claiming that there was positive stock of 819.490 grams on the date of survey i.e. 24.03.2009.

The assessee filed a reconciliation statement dated 5.12.2011 mentioning the following discrepancies which were not considered while preparing the stock summary on the date of survey :- 2

ITA No. 952/Kol/2013 Samar Kumar Sen, AY 2009-10

Sales not entered from 20.3.09 to 23.3.09 Purchases of 18 ct gold wrongly shown as 22 ct gold Excess sale entered by mistake Purchases not entered by mistake Sale of NG 22 ct (Mfg) wrongly entered as sale 22 ct (R ) NG 22 ct (R ) sent for polishing to karigars on poila baisakh

The assessee was requested to furnish credible documentary evidences in support of the above claim. The assessee appeared on 30.12.2011 to produce the copies of the bills and other documents in support of the above. However, the documents produced by the assessee needed cross verification to ascertain the correctness and veracity of the claim of the assessee and the assessee deliberately produced the same on the last date of the calendar year so as to ensure that independent verification of purchases and sales, which were claimed to have been wrongly entered in the accounts, is not made. Accordingly, the ld. AO brought the sum of Rs. 1,24,61,915/- to tax and added to the total income of the assessee.

2.2. Before the ld. CITA , the assessee stated that the reconciliation statement assailing the negative stock was duly filed before the department immediately after the survey stating that there is a positive stock of 819 .49 grams and also before the ld. AO on 5.12.2011. Only the supporting evidences in respect of the same were filed before the ld. AO on 30.12.2011 as desired by the ld. AO. It was also stated that the assessee had not taken any adjournment on a single occasion and all the details were filed before the ld. AO as and when called for. The supporting evidences were admittedly called for by the ld. AO only on 30.12.11 which were duly filed before him. Hence, it was argued that it is highly unfair on the part of the ld. AO to state that the assessee had deliberately filed the details on 30.12.11 to avoid verification by the ld. AO about the veracity of the evidences filed by the assessee. It was argued that from the reconciliation statement, there was no negative stock as stated by the ld. AO in respect of New Gold (NG) Ornaments 22 ct (Readymade) as on the date of survey i.e 23.3.09 and as per the audited accounts, the said stock stood positive at 802.96 grams. The assessee also filed audited statement of accounts upto the date of survey and thereafter for the remaining 8 days separately to prove his contentions. The assessee also brought to the attention of the ld. CITA to the relevant question no. 16 of 3

ITA No. 952/Kol/2013 Samar Kumar Sen, AY 2009-10 the sworn statement recorded during survey wherein it was mentioned that on the date of survey, there were incomplete and / or wrong entries in the computer system for which assessee answered that ‘there might be some posting errors in the said computer system’. Later on the accounts were completely subjected to tax audit u/s 44AB of the Act and all the posting errors were duly rectified and necessary rectification entries passed in the books and stock records and return filed accordingly. It was explained before the ld. CITA that the total stock position found in the course of survey in the computerized books of accounts were as given below:- Particulars Quantity Rate Value Stone 436329.49 Diamond 150.970 Ct 11623.80 1754844.35 Solid Bar 24 Ct 4810.940 Gr 1214.98 5845218.35 N.G.Or.18Ct (M) (-) 29.490 Gr N.G.Or. 18Ct ® 2388.180 Gr 978.04 2335724.80 N.G. Or.22 Ct (M) 25268.52 Gr 797.58 20153741.48 N.G. Or.22 Ct (R) (-) 10580.396 Gr 1177.83 (-) 12461914.91 Novelty 24265.00 O.G. Or. 22Ct (A) 8290.77 Gr 1039.29 86,16,504.24 O.G. Or. 22Ct (S) 1358.360 Gr 1168.18 1586807.67 Paridot (-) 15.650 Rt Silver 316.800 3.36 1064.44 Total 31506.884Gr 2,82,92,584.91

Out of so many items appearing in the stock statement as on 24.03.2009 the AO has considered only following three items in working out so called undisclosed purchase. N.G. Or. 18Ct ® 2388.180 Gr 978.04 2335724.80 N.G. Or.22 Ct (M) 25268.52 Gr 797.58 20153741.48 N.G. Or.22 Ct (R) (-) 10580.396 Gr 1177.83 (-) 12461914.91

Whereas stock statement consisted of following other three major items also O.G. Or. 22Ct (A) 8290.77 Gr 1039.29 86,16,504.24 O.G. Or. 22Ct (S) 1358.360 Gr 1168.18 1586807.67 Solid Bar 24 Ct 4810.940 Gr 1214.98 5845218.35

ITA No. 952/Kol/2013 Samar Kumar Sen, AY 2009-10 The Ld. A. O. was well aware about the nature of these items. In question no. 17 in the statement he has asked following question: "Summary of stock as on 20.03.2009 reflect closing balance of Gold Bar (24 Carats) at Rs. 58,45,218/ - (4811 gm) and stock of Old Gold at Rs.1,02,03,312/- (9649gms) , whereas We have found no gold bar in your shop and value of Gold Bar found in your shop was Rs.2,32,203/- only. How do you explain this?"

The assessee replied to this question as "The closing stock of gold bar and old gold include the opening stock and new purchases as well. The Gold Bar and old gold issued to the Karigars for making new gold ornaments have not been posted/ adjusted in the accounting system." These items were obviously manufactured as New 22 Ct. jewellery and against this massive quantity and value sales of Rs.10,94,878 has been shown against manufactured Jewellery.

2.2.1. The assessee also gave the break-up of sales as appearing in the computerized profit and loss account for the period 1.4.2008 to 23.3.2009 which was taken by the ld.AO and based on which he took the profit of the firm as Rs.46,26,796/- and this amount was mentioned in question no. 16 of the statement recorded during survey. The sales figures were as below:- Sales of Diamond FWGO 18Ct 8,91,216/- Sales of Diamond Loose Cut 5,655/- Sales of Gold Ornaments 18 Ct (R) FWD 5,13,921/- Sales of Gold Ornaments 22 Ct (M) 10,94,878/- Sales of Gold Ornaments 22 Ct (R) 4,10,92,124/- Sales of Gold Ornaments 18 Ct FWD (M) 81,157/ - Sales of Stone 5,00,830/- Total 4,41,79,781/-

Accordingly, it was argued that from these figures it becomes clear that bulk of the sales was posted due to mistake in one head i.e. Sales of Gold Ornaments 22 Ct ® only. The head shows a sales of Rs.4,10,92,124/- as against purchase of Rs.2,19,03,798/-. We are enclosing herewith a copy of purchase ledger of gold Ornaments 22 Ct (R ) for the period from 01.04.2008 to 24.03.2009. All the bills appearing in the ledger were numbered and kept in the file marked SJE-27. Other than

ITA No. 952/Kol/2013 Samar Kumar Sen, AY 2009-10 these bills the survey team did not find any other bill / paper/details showing any unaccounted purchase of Readymade Jewellery.

2.2.2. The assessee also submitted a reconciliation statement showing the reasons for negative stock of 22 Ct. Readymade Ornaments on 05.12.2011 to the A.O. The statement was showing that apart from some entries of purchase and sales which were not entered in the system, quantity of sales against Cash memo No. 1135 dated 14/08/2008 was posted as 2330.00 gm against actual quantity of 2.330 gm. Also sales of manufactured goods of 8689.400 gm were wrongly posted into sales of readymade goods. All the bill copy was produced before the A.O. for his verification. However he never tried to verify those despite 8 number of hearings conducted during the month of December, 2011 on various dates. These two major mistake accounts for wrong credit of almost 2327.67 gm + 8689.400 gms = 11017.07 gms which is more than the negative quantity of 10580.96 as appearing in the stock statement.

2.2.3. The ld. CITA considered the following reconciliation statement as below:- Reconciliation Statement Stock of Jewellery as per stock statement on 24.03.2009 In Gms N. G. Or. 18 Ct (M) (-)29.49 ` N.G. Or. 18 Ct (R) 2388.18 N.G. Or 22 Ct. (M) ` 25268.52 N.G. Or 22 Ct. (R) (-)10580.40 17046.81 Less: Sales not entered in accounts 96.44 16950.37 Add: Excess Sales entered in account 2327.67 Add: Purchase not entered by mistake 526.50 19804.54 Add: Jewellery obtained from Gold and other 12848.29 broken jewellery 32652.83 Less: Making loss 159.99 32492.84 Less: Sent to following karigars for polishing and petty repairs Jayanta Das 809.88 Tarak Roy 1836.46 Tanuj Basak 1681.10 Lacchiram Pincha 39.60 4367.04 Closing Stock 28125.95 Less: Lying with Karigars Undelivered 953.65 6

ITA No. 952/Kol/2013 Samar Kumar Sen, AY 2009-10 27172.15 Physical stock 27074.66 Difference 97.49

(b) From the above explanation it is very clear that there is only nominal difference of 97.49 gm between the book stock and physical stock taken.

2.2.4. The ld. CITA observed that the reconciliation statement was submitted before the ld. AO on 16.4.2009 immediately after survey and thereafter during assessment proceedings on 5.12.2011 and the supporting bills and evidences for the same as called for by the ld. AO were filed on 30.12.2011. He observed that the ld. AO had completely ignored the reconciliation statement and had only done cherry picking while analyzing the stock statement. He noted that the ld. AO had not found any evidence to establish that there were any undisclosed purchases and stated that the entire addition was merely based on suspicion. Accordingly , he directed the ld. AO to delete the addition of Rs. 1,24,61,915/- towards negative stock and directed to add a sum of Rs. 93,103/- (97.49 grams * Rs 955 per gram) on account of unreconciled stock. Aggrieved , the revenue is in appeal before us on the following ground :- “1. Whether on the facts and circumstances of the case, the Ld. CIT(A) was right in law as well as on facts in not giving cognizance to statement on oath taken during survey operations and deleting the additions on negative closing stock of Rs.1,24,61,915/-.”

2.3. The ld. DR assailed the different reconciliation statements filed by the assessee viz., one before the ld. AO and another before the ld. CITA and also stated that it is very unlikely for any person to commit the mistakes that were pointed out in the reconciliation statements. He stated that the ld. CITA directly admitted the revised reconciliation statement filed by the assessee before CITA without calling for a remand report from the ld. AO and thereby violating the provisions of Rule 46A of the IT Rules. He accordingly vehemently supported the order of the ld. AO.

2.4. In response to this, the ld. AR argued that it is incorrect on the part of the ld. AO to state that the reconciliation statement was filed before him only on the last day of completion of assessment. Factually the same was filed on 5.12.2011 which is also recorded by the ld. AO in his order and he wanted supporting evidences in respect of purchase and sales bills during the course of hearing and the same were submitted to him on 30.12.2011. This could be evident from the order sheet entries that are placed 7

ITA No. 952/Kol/2013 Samar Kumar Sen, AY 2009-10 on record wherein it could be noticed that not even a single adjournment had been taken by the assessee and all the details called for by the ld. AO were filed in the appointed date of hearing. Moreover, the reconciliation statement was filed by the assessee on 16.4.2009 immediately after the survey and the ld. AO was fully aware of the explanation offered by the assessee with regard to the negative stock. He argued that the assessee had been maintaining its stand that there is no negative stock as alleged by the revenue and had the reconciliation statement been properly considered, it only results in positive stock and hence there is no case for making any addition. He also argued that the stock summary found on the date of survey admittedly comprises of 22 Ct new gold ornaments, gold bars, etc. No discrepancy was found with regard to the stocks found in respect of other items by the ld. AO which is also prepared by the same team of officials. It is quite likely that the books and stock records could not be updated till the date of survey and the same would contain some posting errors, omission and commission errors etc. That is the precise purpose of undergoing audit of an entity wherein these errors would get rectified. Admittedly, the assessee could not explain the discrepancy of negative stock in respect of New Gold 22 Ct readymade ornaments on the date of survey and accordingly stated that the discrepancies pointed out by the survey team is right with a rider that there might be some posting errors , omission and commission errors . He argued that the reconciliation statement duly brought out the items of errors and the assessee had only positive stock subject to irreconciliable difference of 97.49 grams for which addition has been made by the ld. CITA. Accordingly, he stated that no interference should be made in the order of the ld. CITA in this regard.

2.5. We have heard the rival submissions and perused the materials available on record including the paper book filed by the assessee comprising of copy of audited financial statements for the period ended 31.3.2009 (pgs 1 to 22 of PB) ; break up of audited financial statements for the period 1.4.08 to 23.3.09 (pgs 23-30 of PB) and for the period 24.3.09 to 31.3.09 (pgs 31 to 39 of PB) ; copy of final accounts along with stock summary for the period 1.4.08 to 23.3.09 found at the time of survey proceedings ; copy of deposition of the assessee taken during the course of survey proceedings (pgs 44- 52 of PB) ; copy of final accounts along with stock summary for

ITA No. 952/Kol/2013 Samar Kumar Sen, AY 2009-10 the period 1.4.08 to 23.3.09 (reconciled and filed during the course of post survey proceedings) vide (pgs 53-56 of PB); copy of reconciliation statement of 22 CT readymade new gold ornaments (filed during the course of post survey proceedings ) along with supporting evidences (pgs 57 -88 of PB) ; copy of written submission filed during the course of post survey proceedings (pgs 89-92 of PB) ; copy of reconciliation statement of 22 CT readymade new gold ornaments filed during the course of assessment proceedings (pg 93 of PB) and copy of written submission dated 12.12.2011 filed during the course of assessment proceedings (pgs 94-95 of PB). The ld.AR also placed on record the copy of the entire order sheet entries from the assessment folder for Asst Year 2009-10 right from 18.7.2011 to 6.3.2013, wherein it could be seen that the assessee had fully cooperated with the entire assessment proceedings without taking even a single adjournment and filed all the details called for by the ld. AO from time to time. We find that the addition has been made by the ld. AO only based on the statement recorded during survey u/s 133A of the Act. We also find that the reconciliation statement had been filed by the assessee immediately after the survey and also before the ld. AO on 5.12.2011 stating that there is no negative stock as contended by the department. It is now well settled that the statement recorded during survey has got no evidentiary value and the ld. AO has no jurisdiction to record a statement on oath u/s 133A during the survey proceedings since the officer is not empowered u/s 133A to administer oath. Reliance is placed in this regard on the following decisions:- Paul Mathew & Sons vs CIT reported in (2003) 263 ITR 101 (Ker) Sec 133A of the Act does not empower any ITO to examine any person on oath . Thus the statement elicited during the survey operation has no evidentiary value.

CIT vs S Khader Khan Son reported in (2008) 300 ITR 157 (Mad)

“An admission is an extremely important piece of evidence , but it cannot be said that it is conclusive and it is open to the person , who made it, to show it has incorrectly been made and the person, making the statement should be given proper opportunity to show that it does not show the correct state of facts.”

ITA No. 952/Kol/2013 Samar Kumar Sen, AY 2009-10 This judgment of Hon’ble Madras High Court was approved by the Hon’ble Supreme Court in Civil Appeal Nos. 13224 of 2008 & 6747 of 2012 dated 20.9.2012 wherein it was held that :-

“Heard Counsel on both the sides. Leave granted. The civil appeal filed by the department pertains to Assessment Year 2001-02. In view of the concurrent findings of fact, this civil appeal is dismissed. ”

2.5.1. We find that the assessee had duly filed the reconciliation statement immediately after the survey and also during the assessment proceedings on 5.12.2011 objecting to the negative stock stated by the ld. AO and also stated that there is positive stock of 819.49 grams on the date of survey and there is no need to make any addition in that regard by filing a detailed reconciliation statement which was ignored by the ld AO. The Ld. CITA had duly considered the reconciliation statement and had granted relief to the assessee. We hold that the assessee is at liberty to file a reconciliation statement pointing out the discrepancies in stocks and other records that were found at the time of survey due to various reasons such as not updating the records properly, incorrect recording of facts, etc. We find that the ld. AO had not considered the explanation submitted by the assessee regarding the reasons for negative stock of Readymade Ornaments, particularly when there was practically no sales in manufactured jewellery despite having made substantial quantity of jewellery and also when he did not try to ascertain the treatment of quantity of gold and broken jewellery as reported by himself in question no. 17 of the statement forming part of the paper book filed before us. Hence the addition cannot be made as an automatic measure. In this regard, we draw support from the decision of the Co-ordinate Bench of Mumbai Tribunal in the case of Chawla Brothers (P) Ltd vs ACIT reported in (2011) 43 SOT 651 (Mumbai Tribunal) dated 4.5.2010 , wherein it was held that :- “Section 133A, read with section 69, of the Income-tax Act, 1961 - Survey - Assessment year 2005-06 - Whether reports and facts collected at time of survey are always subject to explanation and reconciliation by assessee which can be explained either at time of surveyor after survey before Assessing Officer at time of assessment - Held, yes - Whether therefore, merely on basis that at time of survey, some differences were found in stock that does not mean that there will be an automatic addition on account of differences - Held, yes - Assessee was engaged in business of trading and manufacturing of edible oil - A survey was conducted at business premises of assessee - Pursuant to survey proceedings, revenue authorities made certain addition to assessee's taxable income on account of variation in closing stock - Whether in view of 10

ITA No. 952/Kol/2013 Samar Kumar Sen, AY 2009-10 fact that assessee had reconciled differences with reasons and revenue authorities did not point out anything contrary that how reconciliation done by assessee was incorrect, impugned addition made by authorities below was to be deleted - Held, yes.”

2.5.2. In view of the aforesaid findings and respectfully following the judicial precedents relied upon hereinabove, we find no infirmity in the order of the ld. CITA in this regard and accordingly the ground no. 1 raised by the revenue is dismissed.

3.1. The brief facts of this issue is that pursuant to the survey, the survey team prepared a profit and loss account as on the date of survey. The survey team found that the profit and loss account as on 20.3.2009 was available in the accounts maintained in the computerized system wherein the net profit was shown at Rs. 46,26,796/-. The survey team arrived at the profit as on the date of survey at Rs. 2,48,71,438/- by taking into account the stocks lying with karigars and the stock of gold found in the shop duly valued by the registered valuer. The net profit worked out by the survey team is as below:- Net Profit as at 20/03/2009 46,26,796/- Add: Un posted sales for the period 21.03.2009 to 11,55,823/- 24.03.2009 Total 57,82,619/- Less: Unposted Purchase of Old Gold 70195/- Unposted expenses 5000/- 75,195/- Total 57,07,424/- Add: goods sent to karigars 14,69,160/- Add: Closing Stock as per Reg. Valurer 401,84,320/- Total 473,60,904/- Less: stock as disclosed 224,89,465/- Net Profit 248,71,438/-

The assessee stated that there might be some posting errors in the said computation arrived by the survey team but the ld. AO observed that the so called posting errors were never explained or elaborated by the assessee. He further observed that in the assessment proceedings, the assessee has failed to furnish any credible documentary evidence to establish that the net profit worked out at the time of survey was not true

ITA No. 952/Kol/2013 Samar Kumar Sen, AY 2009-10 and correct. The assessee in the assessment proceedings objected to the net profit computed on the date of survey and requested the ld. AO to consider the audited profit and loss account which was prepared after passing necessary rectification entries in the books and adopt the net profit of Rs. 91,67,818/- thereon. The ld. AO however not satisfied with the reply proceeded to make an addition of Rs. 2,48,71,438/- based on the net profit computed on the date of survey and completed the assessment by rejecting the accounts and net profit of the assessee.

3.2. Before the ld. CITA , the assessee objected to the valuation of stock of gold as on 24.3.2009 at Rs. 4,01,84,320/- which was admittedly valued by the departmental valuer at market price which was on the higher side than the Average cost price (Last in First Out – LIFO) method followed consistently by the assessee since inception of his business. The assessee also stated that during the asst year under appeal, he had shown a healthy gross profit of nearly 25% and net profit of 19% which was higher than the gross profit of 21% and net profit of 15% respectively in immediate previous year. It was argued that the method of accounting regularly employed by the assessee may be discarded only if in the opinion of the taxing authorities the income of the trade cannot be properly deduced therefrom. Therefore, the valuation of closing stock of the assessee as per the audited accounts as at 31.3.2009 showing total value of Rs. 3,23,77,712/- should not be disturbed. It was further argued that the ld. AO after conducting hearings on various dates and after calling for various details from the books of accounts from time to time as could be evident from the order sheet entries, strangely resorted to rejection of books of accounts and net profit declared by the assessee. The assessee produced the trading results for the period from 1.4.08 to 23.3.09 and for the period from 24.3.09 to 31.3.09 separately and stated that it had actually earned a profit of Rs. 1,10,54,018/- for the period upto 23.3.09 and had incurred loss of Rs. 18,86,200/- for the remaining 8 days as all the adjustment entries for conversion in case of new manufactured gold ornaments of 22 Ct from 24 Ct standard gold bar, refining loss / melting loss, making loss /wastage, karigars payment, depreciation , etc were incorporated in the books of accounts in the year end. Accordingly, the assessee had reported a net profit of Rs. 91,67,818/- for the whole year. The assessee had produced the entire books of accounts as called for by the ld.

ITA No. 952/Kol/2013 Samar Kumar Sen, AY 2009-10 AO from time to time and nothing prevented the ld. AO to check the details of debits and credits of second part of statement of accounts i.e for the period 24.3.09 to 31.3.09 which were already lying with him to verify the veracity of the same. Without doing so, the ld. AO simply stated in his assessment order that ‘complete details of debit and credit entries passed for the period of six days from 25.3.09 to 31.3.09 were not furnished nor was any satisfactory explanation / reconciliation filed to prove that the net profit declared in the audited accounts was true and correct’. It was further argued that the ld. AO by rejecting the books of accounts and net profit declared by the assessee , had only sought to tax the profit as excessively worked out by the survey team upto the date of survey ie upto 23.3.09 and ignore the profit or loss for the remaining days of the year. The ld. CITA agreed with the contentions of the assessee and reworked the profit by taking into the discrepancies pointed out by the assessee in the profits worked out by the ld. AO and after giving deduction towards depreciation, directed the ld. AO to adopt the net profit at Rs. 1,10,53,210/- as against Rs. 2,48,71,938/- adopted by the ld. AO. Aggrieved, the revenue is in appeal before us on the following ground:- “2. Whether on the facts and circumstances of the case, the Ld. CIT(A) was right in law as well as facts in deleting addition on concealed profit without giving fair opportunity to AO to verify Books of A/cs.”

3.3. We have heard the rival submissions and perused the materials available on record including the paper book filed by the assessee. We find that the ld. AO without pointing out any defects in the books of accounts and the audited statements had mechanically resorted to rejection of the same and proceeded to determine the profit of the business based on the profits worked out by the survey team upto the date of survey i.e on 23.3.09. We find that this profit was worked out only upto 23.3.09 by ignoring the profit or loss for the remaining period from 24.3.09 to 31.3.09. Admittedly, the assessee had filed separate trading results duly audited for the period 1.4.08 to 23.3.09 and from 24.3.09 to 31.3.09 wherein he had earned profit of Rs. 1,10,54,018/- and loss of Rs. 18,86,200/- respectively. The reason for the loss incurred in the latter part of the year has been duly explained by the assessee as admittedly the adjustment entries of conversion in case of new manufactured gold ornaments of 22 Ct from 24 Ct standard gold bar, refining loss / melting loss, making

ITA No. 952/Kol/2013 Samar Kumar Sen, AY 2009-10 loss /wastage, karigars payment, depreciation , etc were incorporated in the books of accounts in the year end. We also find that the method of accounting regularly employed for valuation of stock by adopting Average Cost Price (LIFO method) which is one of the recognized method for valuing stock and which has been consistently followed by the assessee for several years has been discarded without giving any reason by the ld. AO and the valuation of stock of gold was done at market price thereby increasing the profit of the assessee notionally which is without any basis or reasoning. The closing stock as per audited accounts was Rs. 3,25,27,574/- upto the date of survey, whereas the valuation done by the department at market price was worked out at Rs. 4,01,84,320/-. This has resulted in excess valuation of closing stock at Rs.76,56,746/- thereby notionally increasing the profit of the assessee. It is well settled that though the principle of res judicata does not apply to income tax proceedings, the principle of consistency cannot be given a go by when there is no change in facts and circumstances of the case. Reliance is placed in this regard on the decision of the Hon’ble Apex Court in the case of Radhaoswami Satsang vs CIT reported in 193 ITR 321 (SC).

3.3.1. We also find that the ld. CITA had observed that valuation of stock as per books was taken by the ld. AO at Rs. 2,24,89,465/- , whereas in the stock summary it was Rs. 2,82,93,585/- . The ld. CITA had observed that since this valuation of Rs. 2,82,93,585/- was part of the profit of Rs. 46,26,796/- as reported by the ld. AO , but while working out the profit, he had taken the valuation of stock at Rs. 2,24,89,465/- thereby adding a sum of Rs. 58,04,120 (2,82,93,585-2,24,89,465) as excessive profit without giving any reason. The ld. CITA also found that the depreciation and other deductions should have been given to the assessee to the extent of Rs. 3,57,362/- which was not given by the ld. AO. Accordingly, the ld. CITA had redrafted the profit for the year as below:-

Profit worked out by the ld. AO 2,48,71,438 Less: Excess valuation of closing stock of gold at market Price 76,56,746 ----------------- 1,72,14,692 Less: short valuation of closing stock as per stock summary 58,04,120 ----------------- 14

ITA No. 952/Kol/2013 Samar Kumar Sen, AY 2009-10 1,14,10,572 Less: Depreciation and other allowances 3,57,362 ----------------- 1,10,53,210 Less: Profit declared by the assessee 91,67,818 ----------------- Net profit for the year to be adopted 18,85,392 -----------------

The assessee has not preferred further appeal before against this revised computation of net profit made by the ld. CITA.

3.3.2. We find that the following chart would clearly prove that the assessee had in fact declared more profit in the asst year under appeal :- Year Turnover Gross Profit Net Profit 31.03.2006 33659776.00 6582739.00 (19.55%) 5064997.00 (15.04) 31.03.2007 45382431.00 9829303.00 (21.66%) 7611545.00 (16.77%) 31.03.2008 44204942.00 9221724.00 (20.86%) 6570535.00 (14.86%) 31.03.2009 45417889.00 11782918.00(25.89%) 9167818.00 (20.18%)

We find that ignoring the aforesaid profit and adopting the notional profit arrived by the ld. AO at Rs 2,48,71,438/- would only result in assessee deriving abnormal profit at 54.76% which is practically not possible in the business of the assessee.

3.3.3. Taking into account the totality of the facts and circumstances of the case, we find that the ld. CITA had made a fair determination of profit after giving due effect to the discrepancies of the ld. AO in his computation. Hence we find no infirmity in the order of the ld. CITA in this regard and accordingly the ground no.2 raised by the revenue is dismissed.

4.1. The brief facts of this issue is that that during the course of survey, a loose sheet was found wherein the details of investment made in purchase of flat at Puri were recorded at Rs. 28,42,938/-. The ld. AO found that the assessee had duly disclosed this purchase of flat in his books at Rs. 31,94,854/- and made an addition of

ITA No. 952/Kol/2013 Samar Kumar Sen, AY 2009-10 Rs. 3,51,916/- towards the difference as unexplained income. Before the ld. CITA, the assessee argued that the assessee had already disclosed a higher figure in his audited accounts and while this is so, based on a loose sheet which is only a scribbled paper, how an addition could be made in the hands of the assessee as unexplained difference. Accordingly, the ld. CITA deleted this addition. Aggrieved, the revenue is in appeal before us on the following ground:- “3. Whether the facts and circumstances of the case, the Ld. CIT(A) was right in law as well as on facts in not considering the fact that assessee could not explain sources of investment of Rs.3,51,916/- while deleting the addition.”

4.2. The ld. DR relied on the order of the ld. AO and in response to this, the ld. AR argued that the assessee had only disclosed higher figure towards purchase of flat at Puri in his balance sheet and the loose sheet is only a scribbled piece of paper containing certain details of the property with some values at Rs.28,42,938/- and in any case, there cannot be any addition towards the difference of Rs.3,51,916/-.

4.3. We have heard the rival submissions and perused the materials available on record. We find that the assessee had disclosed more figure in his audited balance sheet towards purchase of flat at Puri at Rs. 31,94,854/- with clearly explained sources and whereas the figure mentioned in the loose sheet was only Rs.28,42,938/-. Hence, there is no case for making any addition towards the same. Hence, we find no infirmity in the order of the ld. CITA in this regard and accordingly, the ground no. 3 raised by the revenue is dismissed.

Sd/- Sd/- (S.S. Viswanethra Ravi) (M. Balaganesh) Judicial Member Accountant Member

Dated : 1st July, 2016

Jd.(Sr.P.S.) Copy of the order forwarded to: 16

ITA No. 952/Kol/2013 Samar Kumar Sen, AY 2009-10

APPELLANT – ACIT, Circle-30, Kolkata 1. Respondent –Shri Samar Kumar Sen, C/o, Senco Jewellery Enterprise, 2 222/1, Rash Behari Avenue, Kolkata-19.. The CIT(A), Kolkata 3. 4. CIT , Kolkata 5. DR, Kolkata Benches, Kolkata /True Copy, By order,

Asstt. Registrar.