Income Tax Appellate Tribunal - Ahmedabad
Shree Arbuda Jewellers, Palanpur vs Assessee on 11 July, 2014
आयकर अपीलीय अिधकरण,
अिधकरण, अहमदाबाद Ûयायपीठ ''सी
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IN THE INCOME TAX APPELLATE TRIBUNAL
"C" BENCH, AHMEDABAD
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BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND
SHRI N.S. SAINI, ACCOUNTANT MEMBER
ITA No. 1349/Ahd/2011
Assessment Year 2008-09
M/s. Shri Arbuda Jewellers, Vs Income Tax Officer,
st
113, White House, 1 Floor, Ward-1
Palace Road, Palanpur Palanpur.
PAN: AAIFA0644A
अपीलाथȸ/ Appellant ू×यथȸ / Respondent
ITA No. 1622/Ahd/2011
Assessment Year 2008-09
Income Tax Officer, Vs M/s. Shri Arbuda Jewellers,
Ward-1 113, White House, 1st Floor,
Palanpur. Palace Road, Palanpur
PAN: AAIFA0644A
अपीलाथȸ/ Appellant ू×यथȸ / Respondent
Revenue by : Shri B.L. Yadav, Sr. DR
Assessee(s) by : Shri Sakar Sharma, AR
सुनवाई कȧ तारȣख/
/ D at e o f H e a r in g : 03 / 07 / 20 14
घोषणा कȧ तारȣख /Dat e o f P ro n ou n ce me nt : 1 1 /0 7/ 2 01 4
आदे श/O R D E R
PER SHRI N.S. SAINI, ACCOUNTANT MEMBER:
These are the cross appeals filed by the assessee and Revenue against the order of the Commissioner of Income Tax (Appeals)-XX dated 13.04.2011.
2. The first ground in the assessee's appeal is directed against the order of the Commissioner of Income Tax (Appeals) confirming the addition on account of alleged excess stock found during the course of survey ITA No. 1349 & 1622/Ahd/2011 Shree Arbuda Jewellers, Palanpur AY 2008-09 -2- proceedings to the extent of Rs 26,04,315/- holding the same to be unexplained stock.
3. The brief facts of the case are that the survey was conducted u/s. 133A of the Income Tax Act on 05.03.2008 at the business premises of the assessee. During the course of survey, stock of gold and silver ornaments and jewellery was found and inventorized on 05.03.2008 as under:
Details Gold Silver
Stock actually found as on 21610.620 gms 111.493 Kg
05.03.2008
4. The assessee was required to give the details of stock of gold and silver ornaments as per its books of account on 05.03.2008. The details submitted by the assessee were as under:
Details Gold Silver
Opening stock 16701/861 Gram 83320.029 gram
Less: Sale from 01.04.2007 to (-) 4081/660 Gram 11648.000 gram
05.03.2008
Total closing stock of old 12620/201 gram 71672.029 gram
ornaments
Add: purchase of gold from 6712/337 gram 35244.300 gram
01.04.2007 to 05.03.2008
Total stock as per books 19332/578 gram 106916.329
gram
Value:
Gold 12620/201x850/- Rs 10730069/-
(Old stock)
6712/377x11125/- Rs 7467519/-
(New stock)
Silver Rs 1669070/-
The above details of stock as per books were given in a signed statement of Ramji Patel, partner of the assessee firm. Thus, the Assessing Officer ITA No. 1349 & 1622/Ahd/2011 Shree Arbuda Jewellers, Palanpur AY 2008-09 -3- noticed that there was difference in stock of gold and silver as physically found and as shown in the books of account as under:
Details Gold Silver
Stock actually found as on 21610.620 gms 111.493 Kg
05.03.2008
Book stock as per sales & 19332.578 gms 106.916 Kg
purchase register as on
05.03.2008
Difference (Excess found) 2278.048 gms 5.577 Kg
Value of difference Rs 70,028/-
Shri Ramjibhai Patel, partner of the firm in reply to question no.7 of the statement admitted the above difference in stock of Rs 25,34,322/- in gold and Rs 70,028/- in silver as unaccounted income and offered the same for tax and thereby disclosed additional income of Rs 26,04,350/- over and above the regular income for the current financial year. He assured that he would pay Rs 8,04,000/- as advance tax towards additional income and accordingly made payment of Rs four lakhs as advance tax on 15.03.2008. However, in the return of income filed, he did not include this income in Assessment Year 2008-09 and the return of income showed income of Rs 16,369/- only.
5. The assessee filed written submission vide letter 11.03.2008 and submitted that certain parties had given their old gold and silver ornaments for remodelling into new ornaments which were lying in the shop on the date of survey and therefore, difference in the stock was found. It was submitted that such stock was as follows:
(i) Gold ornaments - 2778/042 grams
(ii) Silver ornaments- 4577/000 grams
It was therefore, submitted that there was no difference in stock actually found and that shows in the books of account. It was also submitted that due to the death of the father of their advocate and their accountant being ITA No. 1349 & 1622/Ahd/2011 Shree Arbuda Jewellers, Palanpur AY 2008-09 -4- out of station on social work, relevant record could not be submitted on the date of survey. The assessee submitted that it was filing copies of jangad bills and job register as a proof. In view of these facts, the assessee retracted its disclosure of additional income of Rs 26,04,350/-.
6. The Assessing Officer observed that the submission of the assessee was not acceptable because of the fact that the assessee's advocate or accountant having nothing to do with the excess stock found in survey. Neither the advocate nor the accountant would take jangads to their home.
7. The Assessing Officer further observed that during the assessment proceedings, the assessee submitted copies of job bills, majuri bills showing details of old gold and silver ornaments received from different persons for converting it into new ones and also produced copies of affidavits of concerned persons. The Assessing Officer in the assessment order has tabulated the same as follows:
S.NO Name .of the person from whom Gold Silver in Date received in grams gms of receipt of such goods from the persons 1 Nareshbhai Ramsunghbhai 75.740 14/02/2008 Chaudhary 2 Nanjibhai Narsangbhai Judal 238.000 23/02/2008 3 Devjibhai Ratubhai Samodiya 119.360 16/02/2008 4 Nareshbhai Virsangbhai Chaudhary 27.170 03/03/2008 5 Satishkumar P Mevada 33.070 22/02/2008 6 Hirjibhai Hemrajbhai Valaganth 142.560 27/02/2008 7 Shamlabhai Dhanrajbhai Patel - 658 01/03/2008 8 Smt. Surajben Jesungbhai Fof 476.590 20/02/2008 9 Baldevbhai Narottambahi Soni 409.760 16/02/2008 10 Rameshbliai Pafthibhai Chaudhary 105.460 18/02/2008 11 Smt Manjulaben Laxmanbhai Patel 650.330 23/02/2008 ITA No. 1349 & 1622/Ahd/2011 Shree Arbuda Jewellers, Palanpur AY 2008-09 -5- 12 Vasrambhai Laxmanbhai Ratda 1791 25/2/2008 13 Devabhai Laljibhai Fof 1089 28/02/2008 14 Sardarbhai Laxmanbhai Jegoda 1039 22/02/2008 Total 2278.04 4577.000
8. Further, the assessee also filed copies of affidavits prepared by the persons mentioned in the table above. The affidavits were in the same language except difference in figure and therefore, the Assessing Officer extracted one such affidavit as under:
"I, Nareshbhai Ramsungbhai Chaudhary, aged 42, resident of Sagrosana, occupation: business solemnly affirm that on 14/02/2008 vide challan No. 54 had given 75.740 grams of gold chain to Shree Arbuda Jewellers, Palanpur which was lying deposited with Shree Arbuda Jewellers on job work on 05/03/2008 at 75.740 grams from which they had returned me a gold chain of 75-720 gram on 13/03/2008. Against this I have paid Rs 9843/- as job work charges which is a true fact. I know that giving wrong statement on oath is a criminal act."
9. He observed that the affidavits in respect of the 14 persons were submitted by the assessee. The Assessing Officer observed that after perusing all the affidavits, it appears that it is an afterthought on part of the assessee. The Assessing Officer observed that all the persons have mentioned that they have given old gold/silver ornaments to Shree Arbuda Jewellers for job work and that they were lying deposited with Shree Arbuda Jewellers on 05.03.2008 i.e. the date on which survey was conducted. The Assessing Officer observed that it is not possible for all of them to know that their old ornaments are actually lying with Shree Arbuda Jewellers at the shop or with the persons through whom the assessee has got the job work done. The Assessing Officer noted that the assessee does not do any manufacturing/repairing work in the shop. The assessee itself has admitted that it has got the job work done through other persons to whom it had paid job work charges. Copies of the job work bills have also been produced by ITA No. 1349 & 1622/Ahd/2011 Shree Arbuda Jewellers, Palanpur AY 2008-09 -6- the assessee to prove the same. Therefore, it is clear that the affidavits have been made and submitted only to give an alibi to the assessee.
10. The Assessing Officer further observed that to make verifications in this regard, vide letter 10.12.2010 the assessee was asked to give details of job work done particularly in respect of the jewellery which it has claimed to have been lying with it on the date of survey. He submitted that the reply given by the assessee is as under:
1 2 3 4 5 6S.No Name and Whether Details of Date of Name of person to whom the address of the person gold/silver receipt said gold/silver given for work the person is covered received who had u/s for work given old 40A(2)(b) with gold/ silver weight for work 1 Nareshbhai No Sona Har 14/02/2008 Usmanbhai Momin (Bangali) Ramsangbhai 75.74 Chaudhary 2 Devjibhai No 55.630 16/02/2008 Rameshbhai Harjibhai Patel Ratubhai 20.990 16/02/2008 Ratanbhai Bangali Samodiya 42.740 16/02/2008 Ketanbhai Ramanlal Soni 7 8 9 10 11 12 Date when Date when Amount Rate per Date of Amount given received paid. gram return received back With date. at which of such against such Details work done gold/silver job work ofTDS ornaments 14/02/2008 13/03/2008 27/03/2008 130 13/03/2008 9843 Rs. 8105 16/02/2008 10/3/2008 20/03/2008 100.00 10/3/2008 5560.00 16/02/2008 10/3/2008 Rs. 7784 100.00 10/3/2008 2098.00 16/02/2008 10/3/2008 24/03/2008 100.00 10/3/2008 4270.00 Rs.2860 22/03/2008 Rs. 2860 ITA No. 1349 & 1622/Ahd/2011 Shree Arbuda Jewellers, Palanpur AY 2008-09 -7-
11. The Assessing Officer pointed out from the above table that it can be seen that in the first case that is of Shri Nareshbhai Chaudhary, the ornaments 75.74 grams were shown as received from him on 14.02.2008, which was given to Shri Usmanbhai Momin (Bengali) for job work on 14.02.2008, the same were received from him on 13.03.2008 and returned to Nareshbhai Chaudhary on 13.03.2008. Similarly, in the case of Devjibhai Ratubhai Samodia, ornaments were received from him on 16.02.2008 and given to 3 persons namely (i) Rameshbhai Harjibhai Patel (ii) Ratanbhai Bangali (iii) Ketanbhai Ramanlal Soni for job work. The same were received back from them on 10.03.2008 and finally returned to Shri Devjibhai Ratubhai Samodia on the same day i.e. on 10.03.2008. Similarly, in each of the other 12 cases, the assessee has stated that the ornaments from the persons to whom it was given for job work were received back during the period 10.03.2010 to 26.03.2010 i.e. after the date of survey. Therefore, even if it is assumed that all the persons are stating the truth that they have given the old gold/silver ornaments to the assessee for job work, then as per the details submitted by the assessee on the date of survey, these jewellery were definitely not lying in the business premises of the assessee. Therefore, it is clear that total physical stock found during the course of survey proceedings at business premises of the assessee belongs to the assessee alone and represents the additional income of Rs 26,04,350/- declared by the assessee as its unaccounted income. Therefore, the Assessing Officer held that in view of the above facts mentioned above, the assessee's submission that excess stock of gold of 2278.042 grams silver of 4577/000 grams belonged to other persons were lying with it on the date of survey is found to be false and not accepted. Hence, an amount of Rs 26,04,350/- was added to the income of the assessee on account of unexplained stock found during the course of survey proceedings.
12. On appeal, the Commissioner of Income Tax (Appeals) confirmed the action of the Assessing Officer by observing as under:
ITA No. 1349 & 1622/Ahd/2011 Shree Arbuda Jewellers, Palanpur AY 2008-09 -8- "3.3 I have gone through the submissions of the Authorized Representative of the assessee of the appellant, the details filed during the appellate proceedings and the assessment order carefully. It is seen that at the time of survey no evidence whatsoever was found which supports the claim of the appellant that gold and silver were received from customers for remaking/remodeling of ornaments. Even the slips relating to receipt of ornaments from customers were not found at the business premises. At the time of survey the partner of the appellant firm Shri Ramjibhai Patel admitted that excess quantity of gold and silver were the undisclosed income of the appellant firm which had not been recorded in the books of accounts.
Though the appellant retracted the disclosure made by Shri Ramjibhai Patel after the survey, it is clear that such retraction was an afterthought because even during the assessment proceedings the appellant has not .been able to satisfactorily explain the excess gold and silver found at the business premises. During assessment proceedings the appellant produced receipts from customers to evidence that gold and silver was received from them for remaking / remodeling however from the submissions filed before he AO it is seen that such gold or silver received was immediately issued to karigars for job work to be done. The explanation offered by the appellant has been made a part of the assessment order. The AR of the appellant has claimed during the appellate proceedings that the ornaments received from the customers were .given to karigars who carried out the repair / remodeling work at the premises of the appellant. This claim of the AR of the appellant is not supported by any evidence. It is seen that no evidence was found at the business premises of the appellant which indicated that the karigars had carried on the repair / remodeling work at the business premises of the appellant. This contention was not raised by the appellant at the time of survey. Further it is beyond human probability that karigars who were handed over gold or silver ornaments after they had signed the receipt for receiving the same would leave the gold and silver at the business premises of the appellant without any documentation whatsoever. Even in their affidavits filed the karigars have not stated that they have carried out the work at the business premises of the appellant. -The above makes it clear that the claim of the appellant that the excess gold and 'silver found at the time of survey represented gold and silver received from the customers for remaking / remodeling is not correct. In view of the above the AO was justified in treating the excess gold and silver found at the business premises of the appellant valued at ITA No. 1349 & 1622/Ahd/2011 Shree Arbuda Jewellers, Palanpur AY 2008-09 -9- Rs. 26,04,350/- as unexplained investment of the appellant. The addition of Rs. 26,04,350/- is hence confirmed."
13. The Authorized Representative of the assessee reiterated the submissions made before the lower authorities whereas the Departmental Representative supported the orders of lower authorities.
14. We have heard the rival submissions and perused the orders of lower authorities and material available on record. The undisputed facts of the case are that a survey u/s. 133A of the Income Tax Act was conducted at the business premises of the assessee on 05.03.2008. During the course of survey, stock of gold and silver lying at the business premises of the assessee was inventorized and it was found that the assessee had actual physical stock of gold of 21610.620 grams and of silver 111.493 kgs. The book stock of the assessee on that day was worked out at gold 19332.578 grams and silver 106.916 kgs. The assessee was required to explain the difference. During the course of the survey itself, Shri Ramjibhai Patel, partner of the firm admitted that the above difference in stock in gold and silver was unaccounted income of the assessee. Accordingly, the unaccounted stock of gold 2278.048 grams was valued at Rs 25,34,322/- and the difference in silver of 5.577 kgs. was valued at Rs 70,028/- and thus a total addition of Rs 26,04,350/- was offered to tax over and above the regular income of the current year. The partner Shri Ramjibhai Patel assured of making payment of advance tax of Rs 8,04,000/- and paid Rs 4,00,000/- as advance tax on 15.03.2008. However, in the return of income filed for the assessment year 2008-09, the income was shown at Rs 16,369/- only. The assessee explained before the Assessing Officer during the course of assessment that the excess stock found of gold and silver ornaments was received from different persons for converting it into new ones and filed affidavits of all concerned persons. The Assessing Officer found that the gold and silver ornaments were given to the assessee by the ITA No. 1349 & 1622/Ahd/2011 Shree Arbuda Jewellers, Palanpur AY 2008-09
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persons for job work and that as per the details submitted by the assessee, from the date of survey the jewellery were not lying in the business premises of the assessee and hence the total physical stock found during the course of the survey proceedings at the business premises of the assessee belonged to the assessee and represented the additional income of Rs 26,04,350/- declared by the assessee as its unaccounted income. Therefore, he made addition of the same to the income of the assessee. On appeal, the Commissioner of Income Tax (Appeals) confirmed the action of the Assessing Officer observing that the Authorized Representative of the assessee has claimed that the ornaments received from customers were given to karigars who carried out the repair/remodeling work at the premises of the assessee. The claim of the Authorized Representative of the assessee is not supported by any evidence. He further noted that it is seen that no evidence was found at the business premises of the assessee that the karigars had carried on repair/ remodeling work at the business premises of the assessee. This contention was not raised by the assessee at the time of survey. The Commissioner of Income Tax (Appeals) has further observed that it is beyond human probability that karigars who were handed over gold and silver ornaments after they had received the same would leave gold and silver at the business premises of the assessee without any documentation whatsoever. Even in their affidavits filed, karigars have not stated that they have carried out the work at the business premises of the assessee. Therefore, it is clear that the claim of the assessee that excess gold and silver found at the time of survey represented the gold and silver received from the customers for remaking/remodelling was not correct. The Authorized Representative of the assessee reiterated the submissions made before the lower authorities and the Departmental Representative supported the orders of the lower authorities. The claim of the assessee is that the goods inventorized at the time of survey also include the goods which were not owned by the assessee but were received by the assessee from its customers for remodelling. The Assessing Officer ITA No. 1349 & 1622/Ahd/2011 Shree Arbuda Jewellers, Palanpur AY 2008-09
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has not accepted the above contention of the assessee on the ground that at the time of the survey, it was stated that the goods received from customers were handed over to the karigars immediately i.e. such goods were not present in the premises of the assessee and consequently not included in the inventory prepared at the time of the survey. We find that copy of the statement which was recorded at the time of the survey was not produced before us to rebut the above contention of the Assessing Officer. Copy of inventory prepared at the time of survey was also not produced before us by the assessee to point out therefrom that such inventory included the goods received from customers for remaking or remodelling. The Commissioner of Income Tax (Appeals) pointed out that in the affidavits of the karigars it is not stated that they carried out work of repairing/remodelling at the premises of the assessee and kept such goods at the premises of the assessee. We find that no material was brought before us to controvert the above point highlighted by the Commissioner of Income Tax (Appeals). In absence of any such material, we do not find any good reason to interfere with the orders of the lower authorities. Therefore, this ground of appeal of the assessee is dismissed.
15. Ground no. 2 of the appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) confirming the disallowance of labour payment of Rs 66,459/-.
16. The brief facts of the case are that the Assessing Officer observed that the assessee claimed that excess stock of gold and silver ornaments found during the course of survey proceedings were actually belonging to other persons received for job work was rebutted earlier in para 3.5 of his order as the same has been found untrue. The assessee has shown labour payment of Rs 2,90,981/- against job work of this jewellery. As it has been proved earlier that the payment of labour has been shown only to create an alibi of excess stock, the same labour payment is treated ITA No. 1349 & 1622/Ahd/2011 Shree Arbuda Jewellers, Palanpur AY 2008-09
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as unexplained income. He, therefore, disallowed the entire labour payment of Rs 2,90,981/- and added the same to the income of the assessee.
17. On appeal, the Commissioner of Income Tax (Appeals) restricted the disallowance to Rs 66,459/- by observing as under:
"4.3 I have gone through the submissions of the AR and the assessment order carefully. It is seen that the Assessing Officer has held that since the claim of the appellant that it had received gold and silver from customers has not been found to be correct hence the labour payment is not genuine. This contention of the AO does not stand to reason. It is seen that many of the karigars have appeared before the AO and their statements have been recorded. Some of the karigars have filed sworn affidavits regarding the labour charges received by them. It is only in a few cases that the karigars have claimed that the work for the appellant on a fixed salary of Rs. 3500/- per month. Even such salary works out to Rs. 42,000/- per year. It is also seen that the appellant has received labour charges of Rs. 4,49,043/- during the year. This amount would not have been received if the entire labour work was bogus. Thus one the one hand the AO has accepted the labour charges received and on the other hand he has disallowed the entire labour charges paid. The AO has not found the statement of the customers to be entirely false. He has been able to establish that the gold and silver in question was not available at the business premises of the appellant because it had been issued to the workers for job work. Apart from raising a doubt about the language of the affidavit being similar the AO has not been able to establish that the affidavits are false. As far as the affidavits of the workers are concerned the AO has not given any reason why the same is not reliable. The AO has hence made the disallowance of entire labour charges paid on presumption. In view of the fact that some of the Karigars have stated that they were employees of the appellant and were not doing job work for him, the entire labour charges paid may not be correct. In view of the fact that the appellant has received labour charges of Rs 4,49,043/- it is held that the labour charges paid would be 50% of the same whether it is called salary or labour payment.
Thus the expenses on labour would be Rs 2,24,522/-. The addition made by the Assessing Officer is hence reduced from Rs 2,90,981/- to Rs 66,459/-."
ITA No. 1349 & 1622/Ahd/2011 Shree Arbuda Jewellers, Palanpur AY 2008-09
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18. The Authorized Representative of the assessee reiterated the submissions made before the lower authorities whereas the Departmental Representative supported the orders of lower authorities.
19. We find that it is not in dispute that the assessee has shown receipt for labour charges of Rs 4,49,043/- which was accepted by the Assessing Officer as income of the assessee. Thus, to hold that no labour charge expenses were incurred for earning the said labour charges income is not justified without cogent material. Further, the Commissioner of Income Tax (Appeals) allowed labour charge expenses at the rate of 50% of the labour charge receipt which is also without any basis. In absence of any specific defect being pointed out in the vouchers of labour charge expenses, in our considered view, the disallowance of Rs 66,459/- made by the Commissioner of Income Tax (Appeals) is unsustainable. We, therefore, delete the disallowance of Rs 66,459/- under the head 'labour charge expenses' and allow this ground of appeal of the assessee.
20. Ground no. 3 of the assessee's appeal is directed against the order of the Commissioner of Income Tax (Appeals) confirming the disallowance u/s. 40(a)(ia) amounting to Rs 75,601/-.
21. The brief facts of the case are that the Assessing Officer observed that the assessee has debited Rs 1,08,646/- in its profit and loss account under the head 'hallmark checking expenses'. He observed that the assessee has made payment of Rs 75,601/- to Gujarat Board Centre and not deducted any tax at source on it. The assessee was asked to show cause why the same should not be disallowed u/s. 40(a)(ia) of the Act.
22. The assessee submitted that the hallmark is not contract or a professional service provided by the entity. It is a quality certifying agency under the norms of Indian standards BIS. It was submitted that hallmark ITA No. 1349 & 1622/Ahd/2011 Shree Arbuda Jewellers, Palanpur AY 2008-09
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certificate for quality of the ornaments obtained by the assessee did not attract TDS. It was further submitted that majority of the bills of hallmark are below Rs 500/- and it will be very inconvenient to comply with the TDS provisions on each and every tiny amount bill credited in the books of account.
23. After considering the submissions of the assessee, the Assessing Officer observed that the provisions of the Income Tax Act do not see the convenience or inconvenience of the assessee for deducting tax at source. By not making any TDS on above payment which the assessee was obliged to make, the assessee has not complied with the provision of the I.T. Act and therefore, he disallowed Rs 75,601/- u/s. 40(a)(ia) of the Income Tax Act.
24. On appeal, the Commissioner of Income Tax (Appeals) held as under:
"I have gone through the submissions of the Authorized Representative of the assessee and the assessment order carefully. It is seen that hall marking is professional service which has been rendered by the Gujarat Gold Centre for the appellant. While making the payment to Gujarat Gold Centre the appellant has not deducted TDS. Thus the appellant has contravened the provisions of section 40(a)(ia) of the I. T. Act. The contention of the AR of the appellant that the appellant was free to approach other persons for getting the ornaments hallmarked is not relevant. It is seen that the aggregate of payments made to Gujarat Gold Centre exceeds Rs 50,000/- during the year. In view of the above the appellant was required to deduct TDS from the payments made to Gujarat Gold Centre.
In view of the above, the addition made by the Assessing Officer is justified. The same is confirmed."
25. The Authorized Representative of the assessee reiterated the submissions made before the lower authorities whereas the Departmental Representative supported the orders of lower authorities.
ITA No. 1349 & 1622/Ahd/2011 Shree Arbuda Jewellers, Palanpur AY 2008-09
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26. We have heard the rival submissions and perused the orders of lower authorities and material available on record. The undisputed facts of the case are that in the instant case, the assessee has debited Rs 1,08,646/- in the profit and loss account under the head "hallmark checking expenses". The Assessing Officer observed that the assessee has made payment of Rs 75,601/- to Gujarat Board Centre and not deducted any tax at source on it. Therefore, he disallowed the same by invoking the provisions of section 40(a)(ia) of the Act which was confirmed in appeal by the Commissioner of Income Tax (Appeals). The first contention of the Authorized Representative of the assessee is that hallmark certification is not a contract of professional service provided by the entity and therefore, the assessee was not liable to deduct tax at source from payment made for hallmark certificate for quality of the ornaments. The Authorized Representative of the assessee could not bring any material on record to show that how hallmark certificate service was not liable for deduction of tax at source under the Income Tax Act. In absence of the same, this contention of the assessee is rejected. The second contention of the Authorized Representative of the assessee is that each payment made in majority of the bills of hallmark are below Rs 500/- and therefore, the assessee had not deducted tax at source from tiny bill amount credited in the books of account. We find that the Commissioner of Income Tax (Appeals) has found that the aggregate of the payments made to Gujarat Board Centre exceeds Rs 50,000/- during the year and therefore, the assessee was liable to deduct tax at source from payment made to Gujarat Board Centre. The Authorized Representative of the assessee could not controvert this finding of the Commissioner of Income Tax (Appeals), hence we find no infirmity in the order of the Commissioner of Income Tax (Appeals) in confirming disallowance of Rs 75,601/- paid under the head hallmark checking expenses from out of the total expenditure of Rs 1,08,646/-. Thus, this ground of appeal of the assessee is dismissed.
ITA No. 1349 & 1622/Ahd/2011 Shree Arbuda Jewellers, Palanpur AY 2008-09
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27. In the Revenue's appeal, the sole ground taken is that the Commissioner of Income Tax (Appeals) erred in law and on facts in deleting the addition of Rs 45,40,891/- made by the Assessing Officer on account of unaccounted income.
28. The brief facts of the case are that the Assessing Officer observed that during the course of survey at the premises of the assessee, stock of gold and silver ornaments was found as under:
Details Gold Silver
Stock actually found as on 21610.620 gms 111.493 Kg
05.03.2008
The assessee was asked to furnish details of stocks as per books of account. The assessee submitted the stock as per books of account as follows:
Details Gold Silver
Opening stock 16701/861 Gram 83320.029 gram
Less: Sale from 01.04.2007 to (-) 4081/660 Gram 11648.000 gram
05.03.2008
Total closing stock of old 12620/201 gram 71672.029 gram
ornaments
Add: purchase of gold from 6712/337 gram 35244.300 gram
01.04.2007 to 05.03.2008
Total stock as per books 19332/578 gram 106916.329
gram
Value:
Gold 12620/201x850/- Rs 10730069/-
(Old stock)
6712/377x11125/- Rs 7467519/-
(New stock)
Silver Rs 1669070/-
From the above, the Assessing Officer observed that the assessee till 05.03.2008 had not sold a single gram of new gold purchased by it during the year. The assessee had shown sales out of only old ornaments. He ITA No. 1349 & 1622/Ahd/2011 Shree Arbuda Jewellers, Palanpur AY 2008-09
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observed that the balance sheet as on 31.03.2008 submitted by the assessee alongwith audit report in form no. 3CD was perused and found hat from the said balance sheet, the assessee has shown closing stock of old gold at 12620.801 grams which implies that after 05.03.2008, no gold have been sold by it. The stock of new gold ornament was shown as 55575.268 grams. This implies that after 05.03.2008, the assessee sold only new gold ornaments purchased during the year. Hence, vide letter dated 10.12.2010, the assessee was required to confirm he same. The Assessing Officer observed from the copies of purchase bills submitted by the assessee that the value of gold purchased during the year from 01.04.2008 to 05.03.2009 comes in the range of Rs 832/- to Rs 1009/- per gram. Therefore, the assessee was required to justify valuation of closing stock on 05.03.2008 on new gold at Rs 1125/- per gram. In reply, the assessee submitted that the assessee has maintained item-wise stock and submitted copy of closing stock item-wise during the course of hearing. The basis for valuation of closing stock was as per historical cost or market value whichever was less proportionate labour charges. The value of old gold ornaments was as per opening stock value due to the fact that there was no sale out of the old gold ornaments. New gold ornaments were valued as per the purchase price for valuation purpose. It was further submitted by the assessee that the opening stock of gold ornaments of Rs 12620.201 grams as on 01.04.2007 was still with the assessee and not a single gram is sold out of the stock during the year. Whatever new gold ornaments purchased during the year was sold during the year and whatever plus or minus in quantity is made is from only new gold ornaments. Copies of sale bills from 05.03.2008 to 31.03.2008 were enclosed. The difference in the stock actually found and that shown in books of account was reworked by the Assessing Officer as under:
Details Gold Silver
Stock actually found as on 21610.620 grams 111.493 Kg.
05/03/2008
ITA No. 1349 & 1622/Ahd/2011
Shree Arbuda Jewellers, Palanpur
AY 2008-09
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Book stock as on 05/03/2008 15250.878 grams 106.916 Kg.
as per letter dated
16/12/2010
Difference (excess found) 6359.742 4.577 Kg.
Value of excess stock 6359.742 x 1112.5 = 4.577 x 15300
Rs 70,75,213 = Rs 70,028
Total value of gold and silver: Rs 70,75,213 + Rs 70,028 = Rs 71,45,241/-
The Assessing Officer observed that from the table given above, the reworked value of excess gold and silver ornaments found on 05.03.2008 stands at Rs 71,45,241/-. Thus, amount of Rs 26,04,350/- was declared by the assessee as its additional income has already been added to its income. Therefore, balance amount of Rs 45,40,891/- (71,45,241 - 26,04,350) is added to the income of the assessee as unaccounted stock of the assessee.
29. On appeal, the Commissioner of Income Tax (Appeals) held as under:
"As far as the addition of Rs. 45,40,891/- is concerned, it is seen that the AO has taken the opening stock of gold as on 1/4/2007 as 12,620.201 gms. A perusal of the audit report and the documents contained therein reveal that the opening stock of gold available with the appellant on 31/3/2007 was 16701.861gms. It is seen that the appellant has sold gold weighing 4081.660 gms from 1/4/2007 upto the date of survey. Therefore the stock of gold available with the appellant out of the earlier stock of gold on the date of survey was 12,620.201 gms. After considering the purchase of gold weighing 6712.337gms the AO has worked out the gold available with the appellant on the date of survey as 15,250.878 gms by taking the stock of gold available with the appellant out of the old gold at 538.541 gms. The calculation by the AO is not correct. As indicated earlier the stock of gold available with the appellant out of the earlier stock of gold on the date of survey was 12,620.201gms, when the purchases of 6712.337 gms are added to this then the stock of gold available with the appellant on the date of survey works out to 19,3332.538 gms. Thus the excess gold found would work out to 2278.042 gms and not 6359.742 gms. The addition of Rs. 45,40,891/- representing value of 4081.660 gms of gold is hence deleted.
Thus the addition made by the AO of Rs 71,45,241/- is reduced to Rs. 26,04,350/-."
ITA No. 1349 & 1622/Ahd/2011 Shree Arbuda Jewellers, Palanpur AY 2008-09
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30. The Departmental Representative supported the order of the Assessing Officer whereas the Authorized Representative of the assessee supported the order of the Commissioner of Income Tax (Appeals). No material has been brought before us by the Revenue to rebut the finding of the Commissioner of Income Tax (Appeals). In absence of any such material, we do not find any good reason to interfere with the order of the Commissioner of Income Tax (Appeals) and therefore, this ground of appeal of the Revenue is dismissed.
31. In the result, the appeal of the assessee is partly allowed whereas the appeal of the Revenue is dismissed.
Order pronounced in the Court on Friday, the 11th of July, 2014 at Ahmedabad.
Sd/- Sd/-
(G.C. GUPTA) ( N.S. SAINI)
VICE PRESIDENT ACCOUNTANT MEMBER
Ahmedabad; Dated 11/07/2014
Ghanshyam Maurya, Sr. P.S.
TRUE COPY
आदे श कȧ ूितिलǒप अमेǒषत/Copy
षत of the Order forwarded to :
1. अपीलाथȸ / The Appellant
2. ू×यथȸ / The Respondent.
3. संबंिधत आयकर आयुƠ / Concerned CIT
4. आयकर आयुƠ(अपील) / The CIT(A)-III, Ahmedabad
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड[ फाईल / Guard file.
आदे शानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) उप/ आयकर अपीलीय अिधकरण, अिधकरण, अहमदाबाद / ITAT, Ahmedabad