ITO, New Delhi v. M/s. Chauhan Jewels, New Delhi

ITA 3731/DEL/2009 | 2006-2007
Pronouncement Date: 31-05-2010 | Result: Dismissed

Appeal Details

RSA Number 373120114 RSA 2009
Assessee PAN AXACT1961W
Bench Delhi
Appeal Number ITA 3731/DEL/2009
Duration Of Justice 8 month(s) 27 day(s)
Appellant ITO, New Delhi
Respondent M/s. Chauhan Jewels, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 31-05-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 31-05-2010
Date Of Final Hearing 07-04-2010
Next Hearing Date 07-04-2010
Assessment Year 2006-2007
Appeal Filed On 03-09-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : B NEW DELHI BEFORE SHRI G.E. VEERABHDRAPPA VICE PRESIDENT AN D SHRI RAJPAL YADAV JUDICIAL MEMBER I.T.A NO. 3731/DEL/09 ASSTT. YEAR 2006-07 ITO WARD-20(4) NEW DELHI. VS. M/S. CHAUHAN JEWELS SHOP NO. 3 EDWARD LINES KINGSWAY CAMP NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI MANISH GUPTA DR RESPONDENT BY: SHRI RAJESH JAIN CA ORDER PER RAJPAL YADAV JM: THE REVENUE IS IN APPEAL BEFORE US AGAINST THE O RDER OF LD. CIT(A) DATED 3 RD JULY 2009 PASSED FOR ASSTT. YEAR 2006-07. THE SOL ITARY GRIEVANCE OF THE REVENUE IS THAT LD. CIT(A) HAS ERR ED IN RESTRICTING THE ADDITION MADE BY THE AO U/S 69C OF THE INCOME TAX A CT TO RS. 1 25 180/- AS AGAINST RS. 21 03 076/-. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A PARTNERSHIP FIRM CONSTITUTED ON 25 TH JULY 1999 BY THE TWO PARTNERS SHRI ANIL KUMAR AND SHRI ASHWANI KUMAR. IT HAS FILED ITS RETURN OF INCO ME ON 31 ST MARCH 2007 ITA NO. 3731/DEL/2009 ASSTT. YEAR 2006-07 2 DISCLOSING TOTAL INCOME OF RS. 15 416/-. THE ASSESS EE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF GOLD AND SILVER ORNAME NTS ON JOB WORK BASIS UNDER THE NAME AND STYLE OF M/S. CHAUHAN JEWE LS. A SURVEY OPERATION U/S 133(A) OF THE INCOME TAX ACT 1961 WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE COMPRISED AT SHOP NO. 3 EDWARD LINES KINGSWAY CAMP DELHI ON 16 TH FEBRUARY 2006.THE TOTAL QUANTITY OF JEWELLERY FOUND AT THE PREMISES WAS 5977.990 GRAMS. THERE IS NO DISPUTE BETWEEN THE ASSESSEE AS WELL AS BETWEEN THE REVENUE WITH REGARD TO THE QUANTITY OF THE JEWELLERY FOUND AT THE TIME OF SURVEY VIS A VIS AVAILABLE IN THE RECORD MAINTAINED BY THE ASSESSEE. THE AREA OF DIFFERENCE BETWEEN THE ASSESSEE AS WELL AS REVENUE IS WITH REGARD TO THE VALUATION OF THE JEWELLERY FOUND AT THE TIME OF SURVEY. THE SURVEY TEAM PREPARED A PROVISIONAL TRADING ACCOUNT OF THE ASSESSEE AS ON 16 TH FEBRUARY 2006 WITH THE FIGURES OF OPENING STOCK PU RCHASES SALES AND EXPENSES AS REFLECTED IN THE BOOKS OF ACCOUNTS PUR CHASE VOUCHERS AND SALES VOUCHERS TILL THE DATE OF SURVEY AND AFTE R APPLYING THE GP RATE OF 19.90% DECLARED IN THE PRECEDING ASSTT. YEA R I.E. IN ASSTT. YEAR 2005-06. THE ALLEGED TRADING ACCOUNT HAS BEEN REFER RED AS A TRIAL BALANCE IN THE ASSTT. ORDER AND THE SAME READ AS UN DER :- ITA NO. 3731/DEL/2009 ASSTT. YEAR 2006-07 3 OPENING STOCK 16 53 500 SALES 12 46 141 PURCHASES 11 84 870 CLOSING STOCK 19 30 211 EXPENSES (DIRECT) 90 000 GROSS-PROFIT 2 47 982 TOTAL 31 76 352 31 76 352 3. THE PHYSICAL STOCK OF THE JEWELLERY WAS GOT VALU ED BY THE GOVT. VALUER WHO VIDE HIS REPORT DATED 16 TH FEBRUARY 2006 VALUED STOCK AT RS. 3920682/-. THE STATEMENT OF ONE OF PARTNER SHRI ANI L KUMAR WAS RECORDED AT THE TIME OF SURVEY. HE WAS CONFRONTED W ITH THE DIFFERENCE IN THE VALUE OF STOCK WORKED OUT BY THE GOVT. VALUE R AS WELL AS WORK OUT ON THE BASIS OF ASSESSEES BOOKS OF ACCOUNTS. THE R EGISTERED VALUER HAS DETERMINED THE VALUE OF STOCK AT RS. 3920682/- WHER EAS THE SURVEY TEAM HAS WORKED OUT THE VALUE OF STOCK ON THE BASIS OF THE DOCUMENTS AT RS. 1930211/-. ACCORDING TO THE AO THE PARTNER H AS ACCEPTED THAT DIFFERENCE IN THE VALUE OF STOCK WOULD BE OFFER FOR TAX. ACCORDINGLY AO HAS MADE AN ADDITION OF RS. 21 03 076/-. 4. WHEN THE ASSESSEE FILED THE RETURN IT DID NOT I NCLUDE THE ALLEGED DIFFERENCE IN THE TAXABLE INCOME. IT HAS APPENDED A NOTE WITH THE COMPUTATION OF INCOME AND CONTENDED THAT THERE WAS NO EXCESS STOCK AVAILABLE AT THE SHOP. ACCORDING TO THE ASSES SEE THE AO CAN NOT ITA NO. 3731/DEL/2009 ASSTT. YEAR 2006-07 4 RECORD ANY STATEMENT ON OATH U/S 133A OF THE ACT AN D FOR THIS PREPOSITION ASSESSEE RELIED UPON THE JUDGMENT OF HO NBLE MADRAS HIGH COURT IN THE CASE OF KADAR KHAN REPORTED IN 300 IT R 157. THE ASSESSEE FURTHER CONTENDED THAT PARTNERS OF THE FIRM INTRODU CED GOLD JEWELLERY APPROX. 3634.27 GRAMS WITH 90% PURITY AS CAPITAL AS DISCERNABLE IN THE PARTNERSHIP DEED. IT WAS ALSO EXPLAINED THAT THE S AID GOLD/ JEWELLERY WAS DECLARED BY THE PARTNERS SHRI ANIL CHAUHAN AND SHRI ASHWANI CHAUHAN UNDER VDIS SCHEME. THE ASSESSEE HAD FIELD C OPY OF CERTIFICATE ISSUED BY THE COMMISSIONER OF INCOME TA X AND THE REPORTS OF THE GOVT. APPROVED VALUER APPENDED WITH DECLARATION OF VDIS. THE ASSESSEE FURTHER CONTENDED THAT SAID JEWELLERY WAS CONVERTED INTO 78% PURITY OF GOLD AND ACCORDINGLY SHRI ANIL CHAUHANS SHARE COMES TO 2087.273 GRAMS OF GOLD AND SHRI ASHWANIS SHARE CO MES TO 2346.535 GRAMS. THIS TOTAL GOLD / JEWELLERY OF 4433.808 GRAM S WAS CREDITED IN THE CAPITAL ACCOUNT BY RS. 1591710/- APPLYING RS. 359/- APPROX. PER 1 GRAM OF GOLD. ACCORDING TO THE ASSESSEE IT CONSISTENTLY VALUING THE GOLD JEWELLERY AVAILABLE IN THE CAPITAL ACCOUNT OF PARTN ERS AT COST ON WHICH IT WAS INTRODUCED. THE GOVT VALUER AT THE TIME OF S URVEY HAD ERRED IN ADOPTING THE VALUE OF THIS JEWELLERY AT MARKET PRIC E WHICH GIVE RISE TO THE ENHANCED VALUE OF STOCK AVAILABLE AT THE TIME O F SURVEY. IF IT IS ACCEPTED THEN IT WILL GIVE A GROSS PROFIT OF 179.63 % TO THE FIRM THIS YEAR ITA NO. 3731/DEL/2009 ASSTT. YEAR 2006-07 5 WHICH IS HIGHLY IMAGINATIVE AND HYPOTHETICAL IN THI S BUSINESS LD. FIRST APPELLATE AUTHORITY HAS CONSIDERED ALL THESE ASPECT S AND TOOK NOTE OF THE TOTAL DETAILS SUBMITTED BY THE ASSESSEE STARTIN G FROM F.Y 2000-01 UPTO THE DATE OF SURVEY IN RESPECT OF SALES MADE B Y IT AND THE GROSS PROFIT SHOWN BY IT. THERE IS NO CHANGE IN THE CLOSI NG STOCK IN TERMS OF VALUE AT THE END OF EVERY FINANCIAL YEAR BECAUSE TH ERE IS NO CHANGE IN THE VALUE OF THE CAPITAL CONTRIBUTION MADE BY THE P ARTNERS. THESE DETAILS ARE REPRODUCED AT PAGE NO. 12 OF THE LD. CI T ORDER LD. CIT(A) IN THIS WAY DELETED THE ADDITION BY RS. 18 65 291/- HE ONLY CONFIRMED THE ADDITION WHICH REPRESENT EXCESS STOCK FOUND AT THE TIME OF SURVEY. 5. WITH THE ASSISTANCE OF LD. REPRESENTATIVE WE HAV E GONE THROUGH THE RECORD CAREFULLY. THERE IS NO DIFFERENCE BETWEE N THE ASSESSEE AS WELL AS REVENUE WITH REGARD TO THE QUANTITY OF GOLD /JEWELLERY AVAILABLE IN THE BOOKS AS WELL AS FOUND AT THE TIME OF SURVEY . THE DEPARTMENT IS VALUING THE VALUE OF JEWELLERY ON THE DATE OF SURVE Y BY ADOPTING A RATE AT 655 PER GRAM WHEREAS VALUE OF OPENING STOCK AS O N 1 ST APRIL 2005 IS 321.76 PER GMS WHICH IS ADOPTED AT THE COST. THE CO NTENTION OF ASSESSEE THAT CAPITAL CONTRIBUTION MADE BY THE PART NER IN TERMS OF GOLD QUANTITY BE VALUED AT COST REPRESENTING IN THE YEA R OF INTRODUCTION HAS BEEN REJECTED BY THE SURVEY TEAM WHICH LEADS TO AN ARTIFICIAL ENHANCEMENT OF THE VALUE OF CLOSING STOCK FOUND ON THE DATE OF ITA NO. 3731/DEL/2009 ASSTT. YEAR 2006-07 6 SURVEY. THE ASSESSEE WITH THE HELP OF PAST DETAIL H AS DEMONSTRATED ON RECORD THAT THERE WAS NO FLUCTUATION IN THE VALUE O F ITS CLOSING STOCK REPRESENTING THE CAPITAL CONTRIBUTION IN THE FORM O F GOLD BY THE PARTNERS. THE VALUE OF CLOSING STOCK IN FY 2000-01 WAS RS. 15 97 115/- I.E. THE VALUE ADOPTED BY THE ASSESSEE AT THE TIME OF IN TRODUCTION OF 4433.808 GRAMS OF GOLD JEWELLERY BY THE PARTNERS @ 359. IN NEXT FOUR YEARS THIS VALUE WAS IN BETWEEN 16.50 LACS TO 16.9 8 LACKS. THUS IT INDICATE THAT THERE IS A MARGINAL INCLUSION OF OTHE R GOLD IN THE VALUE OF CLOSING STOCK. 6. THIS CONSISTENCY IN THE VALUE OF CLOSING STOCK A LSO FORTIFIED THE STAND OF ASSESSEE THAT IT WAS FOLLOWING FIFO METHOD I.E FIRST IN FIRST GO IN ITS TRANSACTION. WE COULD UNDERSTAND THE CASE OF AO HAD THERE WAS ANY EXCESS STOCK IN TERMS OF QUANTITY WAS FOUND AT THE TIME OF SURVEY. THE ADDITION HAS BEEN MADE U/S 69C OF THE INCOME TA X ACT. ACCORDING TO SECTION 69C IF IN ANY FINANCIAL YEAR AN ASSESSE E HAS INCURRED ANY EXPENDITURE AND HE OFFERS NO EXPLANATION ABOUT THE SOURCE OF SUCH EXPENDITURE OR PART THEREOF OR THE EXPLANATION IF ANY OFFERED BY HIM IS NOT IN THE OPINION OF THE AO SATISFACTORY THE AM OUNT COVERED BY SUCH EXPENDITURE OR PART THEREOF AS THE CASE MAY BE MA Y BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YE AR. THERE IS NO EVIDENCE FOUND AT THE TIME OF SURVEY WHICH CAN INDI CATE THAT ASSESSEE ITA NO. 3731/DEL/2009 ASSTT. YEAR 2006-07 7 HAS INCURRED ANY EXPENDITURE IN PROCURING THE GOLD FOUND AT THE TIME OF SURVEY BECAUSE THERE WAS NO EXCESS GOLD IN TERM OF QUANTITY WAS FOUND. THE DIFFERENCE WORKED OUT BY THE AO IS BASE D ON VALUING THE SAME GOLD WITH DIFFERENT RATES I.E THE SURVEY TEAM HAS VALUED THE OPENING STOCK WITH THE DIFFERENT RATE AND THE CLOSI NG STOCK AS ON THE DATE OF SURVEY WAS VALUED WITH A DIFFERENT RATE. I N OUR OPINION I.E NOT THE RIGHT COURSE FOR WORKING OUT THE ADDITION. THE ASSESSEE CANNOT BE CHARGED THAT IT HAS INCURRED EXPENSES FOR PROCURING THE GOLD FROM UNEXPLAINED SOURCES. IN OUR OPINION FIRSTLY THERE I S NO EVIDENCE EXHIBITING THE EXPENSES INCURRED FOR PURCHASING OF THE GOLD OTHERWISE WHATEVER GOLD WAS FOUND ASSESSEE HAS DULY EXPLAINED THE SOURCE. LD. CIT(A) HAS RIGHTLY APPRECIATED THE CONTROVERSY IN A DETAILED SPEAKING ORDER AND NO INTERFERENCE IS CALLED FOR IN THE ORDE R OF THE LD. CIT(A). 7. IN THE RESULT APPEAL OF THE REVENUE IS REJECTED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.5.2010. [G.E.VEERABHDRAPPA] [RAJPAL YADAV] VICE PRESIDENT JUDICIAL MEMBER VEENA DATED: ITA NO. 3731/DEL/2009 ASSTT. YEAR 2006-07 8 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT