Income Tax Appellate Tribunal - Jaipur
M/S. Jasmine Design Private Limited, ... vs Ito, Ward-5(1), Jaipur on 18 February, 2020
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IN THE INCOME TAX APPELLATE TRIBUNAL,
JAIPUR BENCH 'B', JAIPUR
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Before : Shri Vijay Pal Rao, JM & Shri Vikram Singh Yadav, AM
vk;dj vihy la-@ITA No. 1286/JP/2019
fu/kZkj.k o"kZ@Assessment Year : 2015-16
M/s. Jasmine Design Pvt. Ltd. cuke The ITO
50, Shambha Ji Marg Vs. Ward- 5 (1)
Inderpuri Colony, Brahmpuri, Jaipur Jaipur
LFkk;h ys[kk la-@thvkbZvkj la-@ PAN/GIR No.: AADCJ 0715 H
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Shri S.L. Poddar, Advocate
jktLo dh vksj ls@ Revenue by : Smt. Runi Paul, JCIT-DR
lquokbZ dh rkjh[k@ Date of Hearing : 03/02/2020
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 18 /02/2020
vkns'k@ ORDER
PER VIJAY PAL RAO, JM
This appeal by the assessee is directed against the order of ld. CIT(A) -2, Jaipur dated 31-10-2019 for the Assessment Year 2015-16. The assessee has raised the following grounds.
''(1) Under the facts and circumstances of the case the AO as well as the ld. CIT(A) have erred in not accepting the valuation report of the departmental valuer Shri Ballabh Mayach dated 29-11-2014 submitted by the assessee.
2 ITA No.1286/JP/2019
M/s. Jasmine Design Pvt. Ltd. vs ITO,Ward- 5(1), Jaipur (2) Under the facts and circumstances of the case the AO as well as the ld. CIT(A) have erred in not meeting out the objections raised by the assessee for valuation made by the valuer M/s. Kankanriya Jewellers for valuation dated 25-11-2014 and 27-11-2014. (3) Under the facts and circumstances of the case the ld. CIT(A) has erred in confirming the addition of Rs. 1,30,46,608/- on account of excess stock found during the course of survey.
(4) Under the facts and circumstances of the case the ld. CIT(A) has erred in confirming the addition of Rs. 12,66,540/- on account of unverifiable purchases.'' 2.1 The Ground No. 1 to 3 of the assessee are regarding the addition made by the AO on account of excess stock found as per valuation made by the Departmental Valuer at the time of survey.
2.2 The assessee is a Private Limited Company and engaged in the business of gold/kundan meena jewellery. There was a survey u/s 133A of the Act on 25-11-2014 at the business premises of the assessee. During the course of survey, the stock of the assessee was valued by the Departmental approved valuer Shri Vijendra Kumar Kankariya. The Departmental approved Valuer has valued the stock as on the date of survey at Rs. 2,73,01,637/-. The assessee thereafter filed its return of income on 30-09-2015 for the year under consideration declaring total income at Rs. 14,77,100/-.During the scrutiny assessment, the AO has made the addition of Rs. 1,17,80,068/- on account of excess stock based 3 ITA No.1286/JP/2019 M/s. Jasmine Design Pvt. Ltd. vs ITO,Ward- 5(1), Jaipur on the valuation of the stock at the time of survey. The AO also treated the purchases to the extent of Rs. 12,66,540/- as unverifiable. However, no separate addition was made as the said amount was considered as covered by the addition made on account of excess stock. The assessee challenged the action of the AO before the ld. CIT(A) but could not succeed.
2.3 Before us, the ld.AR of the assessee submitted that the valuation by the Departmental approved Valuer is based on incorrect facts and also incorrect rates applied for various items of jewellery. He submitted that the assessee vide letter darted 16-12-2014 pointed out various defects in the valuation done by the Departmental approved valuer and specifically highlighted the facts that Departmental approved valuer has assumed the contents/ purity of the gold in all the articles at 22 Carat whereas most of the articles contain gold of 4,9,17 Carat and only very few articles contain 22 Carat gold. He further submitted that assessee has also pointed out that Yellow sapphire olka i.e. pukhraj has been valued by the Departmental approved valuer as Diamond Polka which has resulted into higher valuation. The quality of the diamond in the jewellery was in the range of Rs. 2,000/- to Rs. 3,000/- per carat whereas the Departmental approved 4 ITA No.1286/JP/2019 M/s. Jasmine Design Pvt. Ltd. vs ITO,Ward- 5(1), Jaipur valuer has taken it at a higher rate of Rs. 4,000/- to Rs. 5,000/- per carat. Thus the assessee immediately after survey pointed out the defects in the valuation done by the Departmental Approved Valuer. Further the Director of the assessee company Shri Umesh Soni in his statement recorded at the time of survey also pointed out that certain purchase bills were not recorded in the books of account. This fact was also accepted by the AO while passing the assessment order and granted the credit of Rs. 1,11,26,742/- on this account. Therefore, the valuation done by the Departmental Approved Valuer is not based on correct facts. The ld.AR of the assessee further contended that after considering the purchase bills to the tune of Rs. 1,11,26,742/-, there was no variation in the quantity of the stock as recorded in the books of account as well as found during the course of survey on physical verification. Thus the ld.AR of the assessee contended that addition was made merely because of higher valuation done by the Departmental Approved Valuer. The assessee immediately after survey has got the stock valued by the Registered Valuer and filed the valuation report with the Department. The AO as well as ld. CIT(A) have even not considered the valuation report filed by the assessee for examination or correctness of the valuation. Thus the valuation report 5 ITA No.1286/JP/2019 M/s. Jasmine Design Pvt. Ltd. vs ITO,Ward- 5(1), Jaipur filed by the assessee of the Registered Valuer was rejected out-rightly without pointing out any defect or error in the valuation. The ld.AR of the assessee thus submitted that as per the valuation done by the Registered Valuer, there is no variation in the value of the stock found as per the books of account as on the date of survey. If the valuation done by the Registered Valuer is taken into consideration then the difference between the book position and physical position of the stock is only Rs. 2,21,801/- which is very negligible due to element of estimate in gold valuation. The ld.AR of the assessee further submitted that the Departmental Approved Valuer has taken the rate of the jewellery as per sale bills which were found during the survey of jewellery sold by the assessee in the Exhibition in Mumbai. The said sale bills were having high rate due to the reason that it was sold in the Exhibition and high price was charged by the Manager of the Exhibition which is also the part of the sale bills. Thus if the valuation of the stock is done as per the purchase bills then there will be no excess stock.
2.4 On the other hand, the ld. DR has submitted that the valuation was done in the present of the Director of the assessee company who has not objected or raised any objections during the course of survey proceedings 6 ITA No.1286/JP/2019 M/s. Jasmine Design Pvt. Ltd. vs ITO,Ward- 5(1), Jaipur against the valuation. On the contrary, in his statement during the survey, Shri Umesh Soni, Director of the assessee, accepted the valuation done by the Departmental Approved Valuer and also accepted that the books of account were not complete as some entries of purchases/sales were not entered. The AO has given the credit of purchase bills not entered into the books of account at the time of survey and therefore, the balance amount was found to be excess stock which was not explained or recorded in the books of account. The ld. DR has relied on the orders of the lower authorities.
2.5 We have considered the rival submissions and considered the relevant material available on record. During the course of survey on 25-11-2014, the stock of the assessee was valued by the Departmental Approved Valuer at Rs. 2,73,01,637/- as against the stock as per books of account at Rs. 33,06,724/- and consequently excess stock of Rs. 2,39,94,913/- was found. The statement of the director of the assessee company Shri Umesh Soni was recorded by the Department who has pointed out that some of the purchase bills are yet to be recorded in the books of account. Similarly, some of the sale bills are yet to be recorded in the books of account. We further note that the Department has accepted 7 ITA No.1286/JP/2019 M/s. Jasmine Design Pvt. Ltd. vs ITO,Ward- 5(1), Jaipur the purchases to the tune of Rs. 1,11,26,742/- as purchase bills were not recorded in the books of account at the time of survey and consequently the AO has given the credit of the said amount out of total excess stock of Rs. 2,39,94,913/- . Accordingly, the AO made addition on account of excess stock of Rs. 1,17,80,068/-. There was no discrepancy found so far as the quantity and articles of jewellery physically found at the time of survey and recorded in the books of account as well as in the purchase bills of the assessee yet to be recorded. The only dispute remains after consideration of the unaccounted purchase bills is on account of valuation done by the Departmental Approved Valuer. Once the AO has accepted these purchase bills to the tune of Rs. 1,11,26,742/- then the quantity of the stock as per these purchase bills should have been removed from the excess stock and not merely the cost of purchase stock as shown in the purchase bills for which the AO has granted the credit. Therefore, the valuation difference representing the quantity of stock which is found as per the purchase bills as well as quantity found recorded in the books of account cannot be treated as excess stock. We further note that the valuer has valued the stock by applying current market rate or the rate as found recorded in the sale bills instead of cost price of the stock which is the 8 ITA No.1286/JP/2019 M/s. Jasmine Design Pvt. Ltd. vs ITO,Ward- 5(1), Jaipur prescribed and appropriate method as per accounting standard. The stock is required to be valued at the cost or realization whichever is less. Therefore, the stock cannot be valued more than the cost price in any case. The assessee vide letter dated 16-12-2014 has specifically highlighted the defects and discrepancies in the valuation determined by the Departmental Approved Valuer. Neither the Investigation Wing nor the AO in the assessment proceeding have even made an attempt to examine and verify the correctness of the fats as highlighted by the assessee. The AO has made addition based on the valuation whereas the assessee to counter the valuation done by the Departmental Approved Valuer has filed the valuation report of Registered Valuer dated 29-11- 2014. The ld. CIT(A) while confirming the addition and rejecting the valuation report filed by the assessee and observed in para 2.3.3. as under:-
''2.3.3. As per registered valuer's valuation report, it is made on 29-11-2014, though the same was filed with ADIT on 16-12-2014 and no explanation was tendered for such delay. All this creates a doubt that it is an afterthought and whether the assessee's valuer truly examined the same goods or not. The contention raised by assessee seems baseless and thus rejected and action of Assessing Officer is upheld. These grounds of appeal are dismissed.'' 9 ITA No.1286/JP/2019 M/s. Jasmine Design Pvt. Ltd. vs ITO,Ward- 5(1), Jaipur The only reason cited by the ld. CIT(A) for rejecting the valuation report of Registered Valuer is delay in submitting the report . It is pertinent to note that survey was conducted on 25-11-2014 and Departmental Approved Valuer has valued the stock as per his valuation report dated 25-11-2014 & 27-11-2014 whereas the assessee filed the valuation report dated 29-11-2014 which is after two days of the valuation report of the Departmental Approved Valuer, though the same was submitted before the ADIT on 16-12-2014. It is not a document prepared by the assessee but it is a report of the registered valuer and therefore, if there is any delay in filing the same with the ADIT then it would not change the material fact as pointed out in such report. Accordingly, we do not concur with the view of the ld. CIT(A) to reject the valuation report of the Registered Valuer filed by the assessee. The assessee has clearly pointed out that the Departmental Approved Valuer has applied very high rate instead of cost of purchase of stock and further the purity of the gold in the articles/ jewellery was also not considered correctly but a standard 22 Carat purity was taken by the Departmental Approved Valuer. Therefore, these facts as pointed out by the assessee have substance and merits when there was no discrepancy found in the quantity of the stock at the time of 10 ITA No.1286/JP/2019 M/s. Jasmine Design Pvt. Ltd. vs ITO,Ward- 5(1), Jaipur survey. Accordingly, in the facts and circumstances of the case the addition is based only on the higher valuation done by the Departmental Approved Valuer as against the valuation recorded by the assessee in the books of account and purchase bills. Further, some of the stock is also from the opening stock of the assessee and to that extent no addition can be made on account of higher valuation as the undervaluation, if any would not affect the income of the assessee being part of both sides of profit and loss account. Hence, the addition made by the AO and sustained by the ld. CIT(A) is deleted.
3.1 The Ground No. 4 of the assessee is regarding certain purchases treated by the AO as unverifiable purchases though no separate addition was made by the AO being part of the amount of excess stock. 3.2 During the course of assessment proceeding, the AO asked the assessee to produce three parties/ suppliers for verification with their books of account/ bank statements namely M/s. M.J. Enterprises, M/s. Prince Jewellers and M/s. V.R. Enterprises for the total purchases of Rs. 12,66,540/-. The assessee produced the confirmation of these parties, their bills and proof of payments through cheques. The AO did not accept the documentary evidence produced by the assessee on the ground that 11 ITA No.1286/JP/2019 M/s. Jasmine Design Pvt. Ltd. vs ITO,Ward- 5(1), Jaipur the assessee has failed to produce these parties for verification and consequently treated the purchases to the tune of Rs. 12,66,540/- as unverifiable purchases. The assessee challenged the action of the AO before the ld. CIT(A) but could not succeed.
3.3 Before us, the ld.AR of the assessee has submitted that the assessee submitted the confirmations of these three parties containing PAN and full addresses. The assessee also submitted the proof payments to these parties through banking channel. The AO without pointing out any defects in the evidence produced by the assessee, has treated the purchases as unverifiable on the ground that the assessee has not produced the parties before him for verification. The ld.AR of the assessee further contended that instead of asking the assessee to produce the parties for examination or verification, the AO ought to have exercised his powers to summon them or to verify their existence and genuineness through his Inspector. Thus the ld.AR of the assessee submitted that treating the said purchases as unverifiable by the AO is unjustified and uncalled for . The ld.AR of the assessee relied on the decision of Hon'ble Bombay High Court in the case of Nikunj Eximp Enterprises (P) Ltd. as well as decision of Hon'ble Gujarat High Court in 12 ITA No.1286/JP/2019 M/s. Jasmine Design Pvt. Ltd. vs ITO,Ward- 5(1), Jaipur the case of CIT vs Adinath Industries (2001), 252 ITR 476 (Guj.) and the SLP filed by the Department was also dismissed by the Hon'ble Supreme Court in the case of Adinath Industries,247 ITR (St.35. 3.4 On the other hand, the ld. DR has submitted that the AO has specifically asked the assessee to produce the parties for verification but the assessee has failed to produce these parties. Therefore, the purchases were rightly treated as unverifiable purchases by the AO. The ld. DR relied on the orders of the lower authorities.
3.5 We have considered the rival submissions as well as the relevant materials available on record. The AO has doubted the genuineness of the purchases to the tune of Rs. 12,66,540/-, the details of which are as under:-
1. M/s. M.J. Enterprises Rs. 2,16,540/-
2. M/s. Prince Jewellers Rs. 5,50,000/-
3. M/s. V.R. Enterprises Rs. 5,00,000 Total Rs.12,66,540 The AO asked the assessee to produce these parties for verification on test check basis. The assessee produced the confirmation from these parties alongwith PAN and their addresses. The assessee also produced the record of proof that payments were made to these parties against the 13 ITA No.1286/JP/2019 M/s. Jasmine Design Pvt. Ltd. vs ITO,Ward- 5(1), Jaipur purchase through banking channel. The AO instead of pointing out any defect in the documentary evidences produced by the assessee treated these purchase as unverifiable purchases for want of these parties produced before him. It is pertinent to note that once the assessee has produced the documentary evidence then the assessee cannot be forced by the AO to produce the suppliers/ parties for their verification and examination as suppliers/ parties are not in the direct control of the assessee. If the AO desires to examine and verify the parties then the suppliers/ parties should have been summoned by the AO or got them examined and verified through his Inspector or by issuing commission.
Non-production of parties cannot be a reason for holding the transaction as unverifiable. Even otherwise the AO has not given the conclusive findings that these purchases are not genuine. It is only a suspicion and doubt about the genuineness of purchases that too for want of non- production of parties. Further, once the Department has examined the stock of the assessee and no discrepancy was found as far as quantity on account of opening stock, closing stock and sales then the purchases of the assessee cannot be doubted. Accordingly, in the facts and 14 ITA No.1286/JP/2019 M/s. Jasmine Design Pvt. Ltd. vs ITO,Ward- 5(1), Jaipur circumstances of the case, the addition made by the AO is highly arbitrary and unjustified which is deleted.
4.0 In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 18 /02/2020.
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(Vikram Singh Yadav) (Vijay Pal Rao)
ys[kk lnL;@ Accountant Member U;kf;d lnL;@Judicial Member
Tk;iqj@Jaipur
fnukad@Dated:- 18 /02/ 2020
*Mishra
vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- M/s. Jasmine Design Pvt.Ltd. , Jaipur
2. izR;FkhZ@ The Respondent- The ITO, Ward- 5(1),Jaipur
3. vk;dj vk;qDr¼vihy ) @ CIT(A),
4. vk;dj vk;qDr@ CIT,
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No1286/JP/2019) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar