Income Tax Appellate Tribunal - Jaipur
Assistant Commissioner Of Income Tax ... vs M/S S.K. Jewellers, Jaipur on 19 June, 2018
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 645/JP/2017
fu/kZkj.k o"kZ@Assessment Year : 2013-14.
The ACIT, cuke M/s. S.K. Jewellers,
Circle-1, Vs. Kamla Nehru School Ki Gali,
Jaipur. Haldiyon Ka Rasta, Johari Bazar,
Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No. ABKFS 2694 D
vihykFkhZ@Appellant izR;FkhZ@Respondent
jktLo dh vksj ls@ Revenue by: Shri Varindra Mehta(CIT)
fu/kZkfjrh dh vksj ls@ Assessee by : Shri Manish Agarwal (CA)
lquokbZ dh rkjh[k@ Date of Hearing : 17.04.2018.
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 19/06/2018.
vkns'k@ ORDER
PER VIJAY PAL RAO, JM :
This appeal by the revenue is directed against the order dated 31st May, 2017 of ld. CIT (A)-4, Jaipur for the assessment year 2013-14. The revenue has raised the following grounds :-
" 1. Whether on the facts and in the circumstances of the case the CIT (A) was verified the claim of the assessee of declaration of NP at Rs. 4,57,08,453/- on account of fall in the market rate of gold before deleting the addition of Rs. 57,90,076/- in view of the prescribed cost formulas as per the AS-2 mandated by section 145(2) to be followed by the assessee.
2. Whether on the facts and in the circumstances of the case the CIT (A) was right in deleting the addition of Rs. 57,90,076/- in view of the fact this amount formed part of the value of excess stock found as on date of survey and hence is the unexplained 2 ITA NO. 645/JP/2017 M/s. S.K. Jewellers, Jaipur.
investment of the assessee u/s 69, liable to be taked u/s 115BBE of the Act.
3. Whether on the facts and in the circumstances of the case the CIT (A) was right in deleting the trading addition of Rs. 55,662/-
The appellant crave, leave or reserves the right to amend modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal."
The ground nos. 1 & 2 are regarding addition of Rs. 57,90,076/- made by the AO on account of unexplained investment under section 69 being excess stock found during the survey/search.
2. The assessee is a partnership firm engaged in the business of manufacturing and trading of jewellery. A search and seizure operation under section 132 of the IT Act was carried out at the premises of Harsh Group, of which the assessee is one of the member, along with the survey under section 133A carried out in the business premises of the assessee. During the course of survey and seizure operation, certain loose papers were found. The statement of the partner of the assessee firm was recorded under section 133A on 23rd January, 2013 and thereafter the statement of the same partner of the assessee firm was recorded under section 131 of the IT Act on 1st March, 2013. Since there was a search and seizure action under section132 of the Act in case of assessee group, therefore, the AO has framed the assessment under section 143(3) read with section 153B(1)(b) of the Act. The assessee filed its return of income declaring total income of Rs. 4,57,14,000/-. However, the AO has framed the assessment at the total income of Rs. 5,24,89,450/- by making the additions as under :-
3
ITA NO. 645/JP/2017 M/s. S.K. Jewellers, Jaipur.
S.No. Addition/Disallowance Amount
1. Disallowance of telescoping of excess stock 9,29,713.00
with excess cash, unrecorded purchases/sales
2. Addition u/s 69 r.w.s. 115BBE on account of 57,90,076.00
excess stock found
3. Trading addition 55,662.00
Total 67,75,450.00
The dispute in ground nos. 1 & 2 of the revenue's appeal is regarding the addition made under section 139 read with section 115BBE on account of excess stock of Rs.
57,90,076/-. The ld. CIT (A) deleted the said addition made by the AO by accepting the claim of the assessee that the price of gold as on 31st March, 2013 was much less than the price at the time of valuation done during survey.
3. Before us, the ld. D/R has submitted that it is not a simple case of statement recorded under section 133A but a statement under section 131 of the IT Act was recorded subsequently on 1st March, 2013 wherein the assessee has affirmed the excess stock found during the survey and value of the said stock as taken at the time of survey. Therefore, there was no whisper about the reduction of market price of gold during the intervening period from January to March when the statement of the assessee was recorded under section 131 of the Act. Further, the excess stock found during the survey and search was not in dispute so far as the quantity of the gold was found at the premises of the assessee. The valuation as on the date of survey was also not in dispute. However, the assessee has claimed the reduction of market price of gold as on 31st March, 2013 and, therefore, claimed the deduction against said amount of value to the extent of Rs. 57,90,076/- without bringing on record any material to show that the same stock which was found at the 4 ITA NO. 645/JP/2017 M/s. S.K. Jewellers, Jaipur.
time of survey remained unsold till 31st March, 2013. Thus the ld. D/R has contended that the ld. CIT (A) without examining the relevant material has accepted the contention of the assessee and further without taking into consideration the provisions of section 115BBE of the Act. He has relied upon the order of the A.O. 3.1. On the other hand, the ld. A/R of the assessee has submitted that sub-section (2) of section 115BBE has been amended with effect from 1.4.2017 and, therefore, the said amended proviso to section 115BBE is not applicable for the assessment year under consideration. He has further contended that the assessee has duly honoured the surrender during the course of survey. However, due to the prevailing price of gold fallen down as on 31st March, 2013 to Rs. 2130.67 per gram as against the price which was taken at the time of valuation of the stock during the course of survey at Rs. 2308.31 per gram, the assessee has valued the stock by considering the prevailing price as on 31st March, 2013. The AO has not disputed the prevailing price as on 31st March, 2013 and, therefore, the addition made by the AO by considering the price of gold as on the date of survey is not justified. He has further contended that as soon as the excess stock was introduced in the books of accounts it becomes part of the regular stock-in-trade and, therefore, the valuation of that stock as on 31st March, 2013 has to be taken at the prevailing price which was done by the assessee. The provisions of section 115BBE(2) are applicable only for the assessment year 2017-18 and not for the year under consideration. Hence the reliance placed by the AO on sub-section (2) of section 115BBE is misconceived. In support of his contention he has relied upon the following decisions :- 5
ITA NO. 645/JP/2017 M/s. S.K. Jewellers, Jaipur.
ACIT vs. Sanjay Bairathi Gems Ltd.
In ITA No. 157/JP/2017 ( Jaipur Trib.) M/s. Pitamber Commodity Futures Pvt. Ltd. vs. ACIT In ITA No. 863/JP/2017 (Jaipur Trib.) CIT vs. Shilpa Dyeing & Printing Mills (P) Ltd. 219 Taxman 279 (Guj. HC)
4. We have considered the rival submissions as well as the relevant material on record. As far as the excess stock found during the survey, the assessee has not disputed the quantity of excess stock and the only dispute is regarding the amount surrendered on account of excess stock during the survey as well as in the statement recorded under section 131 of the Act in post survey enquiry on 1st March, 2013 which was not offered to tax in the return of income filed by the assessee. The AO found that the assessee has claimed deduction of Rs. 57,90,076/- from undisclosed investment in stock of Rs. 5,14,98,529/-. The assessee has explained the claim of deduction and reduction in the amount of undisclosed investment in the stock due to the reduction of the prevailing price of gold as on 31st March, 2013 in comparison to the prevailing price of gold as on 23rd January, 2013 when the valuation of excess stock was done at the time of survey. The AO has placed reliance on the provisions of section 115BBE and consequently taxed the entire amount of unexplained investment @ 30%. However, the assessee disputed the application of said provision on the ground that the provisions of section 115BBE was introduced by Finance Bill 2016 with effect from 1.4.2017 and, therefore, the said provisions and amendment will take effect from 1.4.2017 and not prior to that. In support of his contention, the assessee has relied upon the decisions of this 6 ITA NO. 645/JP/2017 M/s. S.K. Jewellers, Jaipur.
Tribunal as well as the decision of Hon'ble Gujarat High Court. We note that this Tribunal in the case of ACIT vs. Sanjay Bairathi Gems Limited (supra) as well as in case of M/s. Pitamber Commodity Futures Pvt. Ltd. (supra) has taken a view that the amended provisions of section 155BBE are not applicable prior to the assessment year 2017-18. In case of M/s. Pitamber Commodity Futures Pvt. Ltd. vs. ACIT (supra), the Tribunal has held in para 6 to 8 as under :-
"6. We have heard the rival contentions and purused the material available on record. It is not in dispute that the amount of Rs 36,00,000 of undisclosed investment which has been surrendered during the course of search has been offered to tax subsequently while filing the return of income. It is also not disputed that the assessee has incurred business loss of Rs 767,768 during the year under consideration. Only limited dispute relates to whether the amount so surrendered during the course of search can be set off against business loss for the year under consideration. In case of ACIT CC-2 Vs. Sanjay Bairathi Gems Ltd (supra), speaking through one of us, we had an occasion to examine a similar issue and therein, we have also referred to the various authorities which have been relied upon by the AO and the ld CIT(A) in the instant case. It would therefore be relevant to refer to the findings in the said decision which are reproduced herein:
"7. We have heard the rival contentions and perused the material available on record, the factual matrix and various decisions relied upon by both the parties. The Assessing officer has brought to tax, undisclosed investment in excess stock of stones, gold & jewellery found and surrendered during the course of search proceedings which has not been recorded in the books of accounts of the assessee, under the provisions of section 69B read with section 115BBE of the Act. Further, the Assessing officer has not allowed the set off of business 7 ITA NO. 645/JP/2017 M/s. S.K. Jewellers, Jaipur.
loss of Rs 86,96,733 against the said income of Rs 2,31,41,217 which has been brought to tax under section 69B read with section 115BBE of the Act. The Assessing officer has however allowed the carry forward of said business loss to be set off in the subsequent assessment years. The fact that the business loss has been incurred during the year is thus not in dispute. The limited dispute relates to set off of said business loss against the income which has been brought to tax under section 69B read with section 115BBE of the Act.
8. Firstly, regarding the contention of the ld CIT DR that the provisions of section 115BBE comes under Chapter-XII providing for determination of rate of tax in certain special cases and accordingly, it relates to quantification of the amount of tax and not to the computation of total income and therefore, the amendment brought in by the Finance Act 2016 would not affect the computation of total income. It was accordingly contended that the business losses in the instant case cannot therefore be allowed set off against the amount brought to tax under section 69B in terms of undisclosed investment in stock of stones, gold and jewellery.
9. It is noted that by the Finance Act, 2016, an amendment has been brought-in in section 115BBE(2) wherein it has been provided that "notwithstanding anything contained in this Act, no set off of any loss shall be allowed to the assessee under any provision of this Act in computing his income as referred to clause (a) of subsection (1) of the Act. If we were to accept the contentions of the ld CIT(DR), the question that arises is would that interpretation render sub-section (2) otiose and what was the necessity for bringing in the subject amendment. The intent of the legislature has been provided in the memorandum explaining the said amendment which reads as under:
"Currently, there is uncertainty on the issue of set-off of losses against income referred in section 115BBE of the Act. The matter has been carried to judicial forums and courts in some cases has taken a view that losses shall not be allowed to be set-off against income referred to in section 115BBE. However, the current language of section 115BBE of the Act does not convey the desired intention and as a result the matter is litigated. In order to avoid unnecessary litigation, it is proposed to amend the provisions of the sub-section (2) of section 115BBE to expressly provide that no set off of any loss shall be allowable in respect of income under the sections 68 or section 69 or section 69A or section 69B or section 69C or section 69D."8
ITA NO. 645/JP/2017 M/s. S.K. Jewellers, Jaipur.
10. In light of above, given the fact that the AO has invoked the provisions of section 11BBE in the instant case, the provisions of sub- section (2) to section 11BBE are equally applicable. The amendment brought in by the Finance Act, 2016 whereby set off of losses against income referred to in section 69B has been denied is stated clearly to be effective from 1 April 2017 and will accordingly, apply to assessment year 2017-18 onwards. Accordingly, for the year under consideration, there is no restriction to set off of business losses against income brought to tax under section 69B of the Act.
11. Further, the matter could be looked at from another perspective. The provisions relating to set off of losses are contained in Chapter-VI relating to aggregation of income and set off of losses. Whenever legislature desires to restrict set-off of loss or allowance of loss, in a particular manner, usually, the provisions are made in Chapter-VI such as non-allowance of business loss against salary income as provided in section 71(2A), and treatment of short-term or long-term capital losses. There is no specific provision which restrict set off of business losses against income brought to tax under section 69B. Interestingly, both section 69B and section 71 falls under the same chapter VI. In the absence of any provisions in section 71 falling under Chapter-VI which restrict such set off, in the instant case, set off of business losses against income brought to tax under section 69B cannot be denied.
12. Now, we refer to various judicial pronouncements quoted by both the parties. We find that the decision of Hon'ble Gujarat High in case of Fakir Mohmed HajiHasan (supra) and subsequent decision of the Hon'ble Madras High Court in case of Chensing Ventures (supra) are two earliest decisions on the subject where the Hon'ble Courts have taken a divergent view in the matter. As per the decision of Hon'ble Gujarat High Court, the addition on account of unexplained investment would be considered as total income of the previous year without allowing set-off of business loss. As per Madras High Court's decision, the addition would be set-off against the business loss and the balance addition, if any, would form part of the total income and attract tax.
13. It is noticed that the Hon'ble Gujarat High Court in case of CIT vs Shilpa Dyeing & Printing Mills (P) ltd (supra) had an occasion to consider an identical issue where the said divergent view has been reconciled. In that decision, the Hon'ble High Court has considered its earlier decision rendered in case of Fakir Mohmed HajiHasan (supra) as explained in another decision in case of Radhe Developers India Ltd (supra) and also the decision of Madras High Court in case of Chensing 9 ITA NO. 645/JP/2017 M/s. S.K. Jewellers, Jaipur.
Ventures (supra). It would therefore to relevant to refer to the facts and the legal proposition laid down by the Hon'ble Gujarat High Court decision in case of Shilpa Dyeing & Printing Mills (P) ltd. Facts of the case Brief facts are that, the respondent-assessee is a company engaged in the business of dying and printing. During the course of scrutiny for the assessment year 2008-09, the Assessing Officer noticed that in a survey action conducted at the business premises of the assessee, it had declared a sum of Rs. 100.98 lacs (rounded off) on account of excess stock. In the return, the assessee had suggested current year's loss against such income. Assessing Officer holding a belief that income from unlisted source would not fall under any of the heads of the income, the same has to be taxed separately, the current losses cannot be set off against such income.
Findings and legal proposition "8. We, however, find that Section 71 of the Act permits an assessee to set off loss other than that of capital gains against income from other head. This very issue came-up for consideration before the Madras High Court in case of Chensing Ventures (supra). The Division Bench of the Court considered the issue in following manner:
"6. Heard counsel. The Assessing Officer has not given any reason whatsoever to deny the set off of the business loss against the income declared under the head & "other sources".
Section 71 deals with set off of loss against income under any other head. After setting off losses against the income under the same head, if the net result is still a loss, the assessee can set off the said loss under Section 71 of the Act against income of the same year under any other head, except for losses which arise under the head "capital gains". The income tax is only one tax and levied on the sum total of the income classified and chargeable under the various heads. Section 14 has classified the different heads of income and income under each head is separately computed. Income which is computed in accordance with law is one income and it is not a collection of distinct tax levied separately on each head of income and it is not an aggregate of various taxes computed with reference to each of the different sources separately. There is only one assessment and the same is made after the total income has been ascertained. The assessee is subject to income-tax on his total income though his income under each head may be well below 10 ITA NO. 645/JP/2017 M/s. S.K. Jewellers, Jaipur.
the taxable limit. Hence the loss sustained in any year under any heads of income will have to be set off against income under any other head. In this case, the Assessing Officer made addition of Rs.28,50,000/- as undisclosed income under Section 69 of the Act. Once the loss is determined, the same should be set off against the income determined under any other head of income. In the assessment, no reasons were given by the Assessing Officer to deny the benefit of Section 71 of the Act. The benefit provided under Section 71 of the Act cannot be denied and the learned Standing Counsel appearing for the Revenue is also unable to explain or give reasons why the assessee is not entitled to the benefit of Section 71 of the Act. The reasons given by the Tribunal are based on valid materials and evidence and the same is in accordance with the provisions of Section 71of the Act. We find no error or legal infirmity in the impugned order."
9. We may further notice that the decision in case of Fakir Mohmed Haji Hasan (supra) came-up for consideration in case of Radhe Developers Incia Ltd. (supra),it was observed as under:
"The decisions of this Court in the case of Fakir Mohmed Haji Hasan (supra) and Krishna Textiles (supra) are neither relevant nor germane to the issue considering the fact that in none of the decisions the Legislative Scheme emanating from conjoint reading of provisions of sections 14 & 56 of the Act have been considered. The Apex Court in the case of D.P. Sandu Bros.Chembur P. Ltd.,(supra) has dealt with this very issue while deciding the treatment to be given to a transaction of surrender of tenancy right. The earlier decisions of the Apex Court commencing from case of United Commercial Bank Ltd. v. CIT [1957] 32 ITR 688 (SC) have been considered by the Apex Court and, hence, it is not necessary to repeat the same. Suffice it to state that the Act does not envisage taxing any income under any head not specified in section 14 of the Act. In the circumstances, there is no question of trying to read any conflict in the two judgments of this Court as submitted by the learned Counsel for the Revenue."
10. In our opinion, the statutory provisions contained in Section 71 was applicable in the present case. By applying the decision in case of Fakir Mohmed Haji Hasan (supra) as explained in case of Radhe Developers Incia Ltd. (supra), the same cannot be declined. In the result, no question of law arises. Tax appeal is, therefore, dismissed." 11
ITA NO. 645/JP/2017 M/s. S.K. Jewellers, Jaipur.
14. It is also noted that in latest decision of Hon'ble Gujarat High Court in case of Krishnamegh Yarn Industries (supra) which has been brought to our attention by the ld CIT DR to support his contentions regarding applicability of section 69B, the earlier decision in case of Shilpa Dyeing and Printing Mills has been followed for setting off of losses under section 71 against such income. The relevant findings of Hon'ble High Court are as under:
"8. We have learned advocates for the respective parties. Perused the orders of the CIT (Appeals) as well as the ITAT. It is an undisputed fact that during scrutiny, the assessee himself has disclosed the fact that in his books of account, he had shown less stock to the tune of Rs.10,06,987/-. It is also an admitted fact that when the physical stock was examined by the authority, the value of the said stock was Rs. 13,33,485/-, however, as per the books of account, the value of stock was to the tune of Rs.3,26,498/- i.e. amount to the tune of Rs.10,06,987/- was not recorded in the books of account. However, it is admitted by the assessee himself that he has not completely disclosed the stock in the books of account. Now, considering the proviso of Section 69(B) of the act, we are of the opinion that the assessee had not fully disclosed the stocks in the books of account and therefore, the Assessing Officer as well as the CIT (Appeals) have rightly observed that the case of the assessee would fall under the proviso of Section 69(b) of the act.
We are also of the opinion that the submissions made by the learned advocate is that the case would fall under the proviso of Section 69(c) of the act does not apply to the facts of the present case. It is not the case of the revenue that there is an unexplained expenditure, which would cover under the proviso of this Act and therefore, the assessee would not be entitled for the set off under the proviso of Section 71 of the act. As far as applicability of the case of Shilpa Dyeing & Printing Mills (P.) Ltd. (Supra) is concerned, the same would be applicable since the Court had held that the amount of excess stock would fall under the definition of income as per Section 14 of the Act and therefore, the assessee would be entitled for the set off under proviso of section 71 of the act. As far as the case of Attar Singh Gurmukh Singh (Supra) is concerned, the same would not be applicable in the present facts and circumstances of the case since it is not the case that there was unexplained expenditure made by the assessee.12
ITA NO. 645/JP/2017 M/s. S.K. Jewellers, Jaipur.
9. Therefore, we are of the opinion that the CIT (Appeals) as well as the ITAT have committed error in refusing giving set off to the assessee under Section 71 of the act and accordingly, we allow these appeals by setting aside the order dated 28.02.2005 passed by the Income Tax Appellate Tribunal (the ITAT) and order dated 07.07.2014 passed by the Commissioner of Income Tax (Appeals) Ahmedabad [the CIT (Appeals)]."
15. In light of above, we are of the view that the assessee deserve to succeed in the subject appeal and will be eligible for set off business loss of Rs 86,96,733 against the income of Rs 2,31,41,217 which has been brought to tax under section 69B read with section 115BBE of the Act. In the result, grounds taken by Revenue are dismissed."
7. We also refer to the decision of the Coordinate Bench in the case of ACIT CC-2, Vs. M/s Girdhar Associates (supra) wherein it was held as under:
" 3.5 We have heard the rival contentions and perused the materials available on record including the Circular No. 3/2017 dated 20th Jan. 2017 issued by the CBDT, Ministry of Finance, New Delhi. It is not imperative to repeat the facts of the case as it is found that the issue in question is covered by the Circular No. 3/2017 dated 20-01-2017 issued by the CBDT, Ministry of Finance, New Delhi relating to the issue of section 115BBE of the Act and this section is operative from the assessment year 2017-18 and not related to the issue prior to it. Hence, the application of Section 115BBE of the Act applied by the AO on the assessee is not applicable in the present facts and circumstances of the case. In view of the above deliberations, the Ground No. 2 of the Revenue is dismissed."
8. In light of above discussions, it is clear that the amendment brought in section 115BBE wherein no set off of losses against surrendered income brought to tax is prospective in nature and doesn't apply for the assessment year under consideration. The decisions relied upon by the Revenue have also been examined and doesn't support its case. For the year under consideration, there is no bar for set off of current year business loss u/s 71 against income brought to tax under the 13 ITA NO. 645/JP/2017 M/s. S.K. Jewellers, Jaipur.
head "income from other sources". We are therefore of the view that the assessee will be eligible for set off of current year business loss of Rs 767,768 against the undisclosed investment of Rs 36,00,000 towards purchase of plot of land which has been surrendered during the course of search, and subsequently offered and brought to tax under section 69 read with section 115BBE of the Act. In the result, sole ground taken by the assessee is allowed."
Therefore, so far as the applicability of amended provisions of section 115BBE of the Act is concerned, the same is applicable with effect from 1.4.2017 and not prior to that. However, the question arises whether the entire stock which was found excess at the time of survey remained as unsold till 31st March, 2013 so that the assessee can take the benefit of reduction in the prevailing price of gold against the surrendered income on account of unexplained investment in the stock. Since this issue was not considered by the authorities below as the AO disallowed the claim of the assessee by placing reliance on the provisions of section115BBE and the ld. CIT (A) has accepted the prevailing price of gold as on 31st March, 2013 without verifying the actual details of the remaining stock out of the excess stock found at the time of survey, therefore, this factual aspect of the matter is required to be verified and examined by considering all the relevant details at the level of the AO. Accordingly, we set aside this issue for limited purposes of verification and examination of the quantity of stock which was remained unsold as on 31st March, 2013 out of the total excess stock found at the time of survey.
Ground No. 3 is regarding the trading addition of Rs. 55,662/- was deleted by the ld. CIT (A).
14
ITA NO. 645/JP/2017 M/s. S.K. Jewellers, Jaipur.
5. We have heard the ld. D/R as well as the ld. A/R and considered the relevant material on record. The AO rejected the books of accounts of the assessee by invoking the provisions of section 145(3) of the IT Act on the ground that excess stock was found during the course of search and survey. The AO then applied the net profit rate of 0.63% on the turnover declared by the assessee resulting in trading addition of Rs. 55,662/-. The assessee challenged the action of the AO before the ld. CIT (A) and contended that the AO has not pointed out any specific defect in the books of accounts and, therefore, the provisions of section 145(3) invoked by the AO is not justified. The ld. CIT (A) has accepted the contention of the assessee in para 3.3.2 as under :-
" 3.3.2. I have duly considered assessee's submission and carefully gone through the assessment order. Here AO has made a trading addition of Rs. 55,662/- by applying N.P. rate @ 0.63% to the total income declared. It is submitted that AO has not pointed out any deficiency in the A/c's /books although section 145(3) of the Act has been invoked for rejecting books of A/c's. further, interest paid on partners' capital and remuneration paid to partners are well within the prescribed limit, therefore, no further trading addition is required.
In view of these facts, addition made of Rs. 55,662/- is hereby deleted. Assessee's appeal in Gr No. 3 stands allowed."
It appears that the ld. CIT (A) has not analyzed the issue with thorough process with the facts but simply accepted the submissions of the assessee. The ld. A/R of the assessee has reiterated the contention that except the excess stock, no further 15 ITA NO. 645/JP/2017 M/s. S.K. Jewellers, Jaipur.
defect or deficiency was found in the books of accounts to warrant invocation of provisions of section 145(3). Whereas the ld. D/R has supported the action of the AO and submitted that when the assessee has not disputed the excess stock at the time of survey beyond the books of accounts of the assessee, it would not show the true and fair affairs of the assessee.
6. Having considered the rival submissions as well as the relevant material on record, we note that the excess stock of Rs. 5,24,89,450/- found at the time of survey itself speaks in volumes about the correctness of the books of accounts of the assessee. Therefore, this itself is a sufficient ground for invoking the provisions of section 145(3) and rejecting the book results of the assessee. Hence we find that the AO was justified in rejecting the books of account and accordingly we set aside the order of the ld. CIT (A) and upheld the order of the AO to the extent of rejection of books of accounts. As regards the estimation of income of the assessee, once the book results of the assessee were rejected, the only option left with the AO to estimate the income by applying a reasonable and proper basis. It is settled proposition of law that the past history of the assessee's GP or NP rate which has been accepted or has attained the finality can be a basis for estimation of income for the year under consideration. Therefore, the AO has not applied the average of past history of the assessee's declared NP but has considered only the NP declared by the assessee for the immediately preceding year. Since we have already set aside the issue involved in ground nos. 1 & 2 of the revenue's appeal, accordingly this issue for estimation of income by applying a reasonable and proper basis is set aside to 16 ITA NO. 645/JP/2017 M/s. S.K. Jewellers, Jaipur.
the record of the AO. Needless to say, the assessee be given a proper opportunity of hearing.
7. In the result, appeal of the Revenue is partly allowed for statistical purposes.
Order is pronounced in the open court on 19/06/2018.
Sd/- Sd/-
(foØe flag ;kno) (fot; iky jkWo ½
(VIKRAM SINGH YADAV ) (VIJAY PAL RAO)
ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member
Jaipur
Dated:- 19/06/2018.
Das/
vkns'k dh izfrfyfi vxzfs "kr@Copy of the order forwarded to:
1. The Appellant- The ACIT, Central Circle-1, Jaipur.
2. The Respondent - M/s. S.K. Jewellers, Jaipur.
3. The CIT(A).
4. The CIT,
5. The DR, ITAT, Jaipur
6. Guard File (ITA No. 645/JP/2017) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar 17 ITA NO. 645/JP/2017 M/s. S.K. Jewellers, Jaipur.