DINESH DHANJIBHAI POLARA,,RAJKOT-GUJARAT vs. THE ASSTT. COMMR. OF INCOME TAX, RANGE-5, RAJKOT-GUJARAT

The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income tax(Appeals)-2 , Rajkot, dated 30/01/2017 arising in the matter of assessment order passed under s.143(3) r.w.s 147 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2008-09.

The issue raised by the assessee is that the learned CIT-A erred in confirming the addition made by the AO for ₹48,32,197.00 on account of unaccounted purchases.

The facts in brief are that the assessee in the present case is an individual and claimed to being engaged in the business of gold jewellery. The assessee for the year under consideration filed his return of income declaring income of Rs. 2,93,810.00 only. The assessee was intercepted by the police authority of Madhya Pradesh with the gold of 4633.070 grams ( 22 carat) dated 21-4-2014. On question, the assessee submitted that the gold pertains to the financial year 2007-08 but on verification by the AO it was found that the assessee has shown gold jewellery stock of 94.16 g (22 carat) in the financial year 2007-08 leading to the difference of 4345.501 g which was valued at ₹48,32,197.00 only. On question by the AO about the difference in the quantity of stock, the assessee claimed to have received gifts from his brother and filed the copy of the gift deed on the stamp paper of ₹50 only. However, the AO was not satisfied with the submission of the assessee and held that the unaccounted stock of gold represents the unaccounted purchases. Accordingly, he made an addition of Rs. 48,32,197.00 to the total income of the assessee.

Aggrieved assessee preferred an appeal to the learned CIT-A who has also confirmed the order of the AO by observing as under: Having considered facts and circumstances of the case and rival contentions I find that the uncontroverted facts of the case are that the assessee was found in possession of gold weighing 4439.661 gms whereas in the assessment records gold weighing 94.16 gms only was found to be declared. The assessee has not adduced any evidence regarding the source of the excess gold found in his possession despite due opportunity by AO. It is not the case of assessee that he had declared the excess stock in his Income Tax or Sales Tax returns. The claim of assessee in the grounds of appeal is that the excess stock not declared in VAT return was his investment stock reflected in audit reports. No such audit reports have been furnished in the first place. Moreover, the Income Tax return or VAT returns admittedly do not reflect any such stock. Therefore, the assessee has failed to prove that gold found in his possession was out of explained sources. The contentions of assessee are therefore rejected. Addition is confirmed. All grounds, relating to single issue, being descriptive statements, require no separate adjudication.

Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us.

The assessee before us filed a paper book running from pages 1 to 48 and contended that he has not made any unaccounted purchase and therefore no addition of whatsoever is warranted in the given facts and circumstances. On the contrary the learned DR vehemently supported the order of the authorities below.

We have heard the rival contentions of both the parties and perused the materials available on record. Before we address the specific issue, we note grave anomaly in the order of the authorities below. The assessee was intercepted with the physical gold dated 21 April 2014 which was matched from the financial year 2007-08 by the revenue. The revenue found the mismatch between the physical stock of gold found in the month of April 2014 with the stock of the gold recorded in the books of accounts for the financial AR 2007-08. To our understanding, the entire basis adopted by the revenue to work out the difference of the gold between the physical and the book stock was on the surmise and conjecture. It is for the reason that the physical stock found in the month of April 2014 should have been matched/ compared with the corresponding period in order to work out the difference in the quantity of the stock, if any. There is no dispute to the fact that the assessee has been carrying on the business of gold and jewellery. A business concern is a going concern where the transaction with respect to purchase and sales keep on happening on regular basis. Thus, the stock which was shown in the financial year 2007-08 at all will not remain static. It will keep on changing on account of ongoing purchases and sales of the stock.

In the result, the appeal of the assessee is allowed.