Income Tax Appellate Tribunal - Jaipur
Amrapali Jewels Pvt Ltd,Jaipur vs Acit, Central Circle-1, Jaipur, Jaipur on 19 February, 2025
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,"B" JAIPUR
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BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI,
vk;dj vihy la-@ITA No. 750/JP/2024
fu/kZkj.k o"kZ@Assessment Year : 2021-22
Amrapali Jewels Pvt. Ltd. cuke ACIT,
K-14B Ashok Marg, C-Scheme, Vs. Central Circle-01,
Jaipur Jaipur
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABCA 3277 F
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ITA No. 740/JP/2024
fu/kZkj.k o"kZ@Assessment Years : 2021-22
DCIT cuke Amrapali Jewels Pvt. Ltd.
Jaipur Vs. K-14B Ashok Marg, C-
Scheme, Jaipur
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABCA 3277 F
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj l@
s Assessee by : Sh. Sanjay Jhanwar, Sr. Adv.
Sh. Prakul Khurana, Adv. &
Sh. Mukesh Soni, Adv.
jktLo dh vksj ls@ Revenue by : Mrs. Alka Gautam, CIT-DR
lquokbZ dh rkjh[k@ Dates of Hearing :
18/11/2024, 20/11/2024,
28/11/2024, 02/12/2024,
09/12/2024, 18/12/2024,
19/12/2024, 07/01/2025,
09/01/2025, 16/01/2025 &
20/01/2025
mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 19/02/2025
vkns'k@ ORDER
2 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT PER: RATHOD KAMLESH JAYANTBHAI, AM Both the present cross appeals are filed because revenue and assessee aggrieved with the order of Commissioner of Income Tax (Appeals)-4, Jaipur [ for short 'CIT(A)' ] dated 20.03.2024 for the Assessment Year 2021-22. The said order of the ld. CIT(A) is passed because the assessee challenged the assessment order passed by ACIT, Central Circle-1, Jaipur passed u/s 143(3) of the Income Tax Act, 1961 [ for short "Act"] on 30.12.2022 before him.
2. Since these cross appeals relates to one assessee involving the same assessment year on the separate grounds raised by rival parties in their respective appeal and we have heard both the cases together with the consent of the parties, passing this consolidated order, as the issues involved are interconnected and interdependent.
2.1 The grounds of appeal taken by the assessee in ITA No. 750/JP/2024 for A.Y 2021-22 are as under;
"1. Under the facts and circumstances of the case and in law, the impugned order dated 20.03.2024 by Ld. CIT(A)-4, Jaipur ("Ld. CIT(A)" for Short) is perverse, arbitrary, non-speaking, bad in law and is in excess of jurisdiction besides in violation of principles of natural justice.
2. Under the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not adjudicating the ground assailing the validity of assessment order 3 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT u/s 143(3) on account of non-existence/validity/not providing of approval of Ld. JCIT/Add. CIT u/s 153D of the Act.
3. Under the facts and circumstances of the case and in law, the Ld. CIT(A)- 4, Jaipur has erred in sustaining the very invocation of provision of Section 69B of the Act by the Ld. AO as bad in law.
4. Under the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not deleting the entire addition on account of alleged excess stock despite despite having rejected/not approved the stock valuation exercise done during course of survey which further constitutes the basis of the said impugned addition.
5. Under the facts and circumstances of the case and in law, the Ld. CIT(A) has exceeded jurisdiction by adopting a new basis for making addition u/s 69B of the Act.
6. Under the facts and circumstances of the case and in law, the Impugned Order passed by Ld. CIT(A), having the effect of enhancing the assessment in respect of impugned addition on account of alleged excess stock, is in violation of mandatory procedure u/s 251 of the Act and in violation of principles of natural justice.
7. Under the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the rejection of books of accounts u/s 145(3) of the Act.
8. Under the facts and circumstances of the case and in law, the Ld. CIT(A) having rejected the books of account was not justified in making separate additions instead of applying /estimating reasonable profit.
9. Under the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in placing reliance and further misconstruing/misinterpreting the statement of Mr. Rajesh Ajmera for sustaining/upholding addition/disallowances against the Assessee.
10. Under the facts and circumstances of the case and in law, various observations of the Ld. CIT(A) with respect to upholding of addition on account of alleged excess stock is perverse.
11. Under the facts and circumstances of the case and in law, the Ld. CIT(A) 4 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT has grossly erred in calculating the stock turnover ratio and thereby made grave error in calculating stock holding period at 7 months as against period of about 19 months and thereby making consequential error of calculating metal price increase at 7%.
12. Under the facts and circumstances of the case and in law, the Ld. CIT(A) is not justified upholding the action of Ld. AO in making impugned addition in respect of alleged excess stock on the basis of valuation of stock during the survey done in haste and hurried manner:
a. by making assumption, presumption, guess work
b. on the basis of estimates.
c. by applying standard rate on every item.
d. by making adhoc valuation without appreciating the fact that each item is
unique and different in nature and quality.
e. without conducting physical verification of stock at branches other than C-
scheme and Panch Batti, Jaipur.
f. blindly relying of the valuation report of department valuers.
g. Without negating/appreciating the valuation report of independent valuer.
h. without following applicable accounting principle of valuation of stock.
i. Valuing the stock on arbitrary basis and theory as against the cost details
submitted by Appellant.
j. Valuing the stock as per books at Rs.126,08,06,402/- as against actual
stock as per books at Rs. 1,32,77,94,165
k. Valuating the stock allegedly found during survey at Rs. 2,67,43,88,096/-
13. Under the facts and circumstances of the case and in law, Ld. CIT(A) has erred in sustaining the addition of alleged excess stock to the extent of Rs. 1,46,31,52,182/-u/s 69B of the Act in respect of various locations by estimating the stock at the time of survey at various locations as follows:
a. Head Office at Rs. 89,18,794/-
b. Panch Batti Stock at Rs. 63,44,89,391
c. Delhi Branch Stock - at Rs. 25,59,78,648/-
d. Mumbai Branch Stock - at Rs. 53,62,45,741/-
e. Bangalore Branch Stock at -Rs.16,51,51,691/-
f. stock with other franchise at Rs. 10,65,57,868/-
g. Consignment Stock at UK - at Rs. Rs.11,64,46,108
h. Consignment Stock at USA at Rs. 1,19,69,563
i. Doha Jewellery Exhibition Stock at Rs. Rs.51,96,689/-
j. Goods sent for consignment basis to Hong Kong at Rs. 31,091/-
5
ITA Nos. 740 & 750/JP/2024
Amrapali Jewels Pvt. Ltd. vs. ACIT
k. And also for Museum Stock
14. Under the facts and circumstances of the case and in law, the Ld. CIT(A) is not justified in declining the alternative relief of taxing the alleged income on account of excess stock as income under the head business or profession and other consequential/equitable relief of allowing treatment of the same as opening stock for subsequent AY etc..
15. Under the facts and circumstances of the case and in law, the Ld. CIT(A) is not justified in sustaining addition on account of alleged excess stock on mere estimations by applying standard reduction at the rate of 47% on tag price for Head Office and Panch Batti Stores/location.
16. Under the facts and circumstances of the case and in law, the Ld. CIT(A) is not justified in sustaining the impugned addition on account of alleged unaccounted sale to the extent of Rs. 6,80,05,286/- out of total addition of Rs. 24,95,17,849/- on the basis of loose slips/deaf and dumb piece of papers
17. Under the facts and circumstances of the case and in law, the Ld. CIT(A)- 4, Jaipur has erred:
a. in sustaining the impugned addition of Rs. 11.40 Crore in respect of high value items on account of alleged unaccounted sale on mere suspicion/conjectures and surmises b. in not reducing addition of Rs. 11.40 Crore by Rs. 4 Crore (Approx) on account of erroneous recording of higher value of item weighing about 478.5 gms in the list of items sent for repairs by overlooking the submission/explanation placed on record.
c. in rejecting the application for additional evidence in relation to impugned addition without any cogent basis
18. Under the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not granting alternative relief by not applying reasonable profit rate on alleged unaccounted sale of Rs. 6.80 crore (approx.) and of Rs. 11.40 Crore
19. Under the facts and circumstances of the case and in law, the Ld. CIT(A)-
4, Jaipur is not justified in not allowing the set off/telescoping of the impugned addition sustained on account of alleged unaccounted sale against the impugned addition on account of alleged excess stock
20. Under the facts and circumstances of the case and in law, the Ld. CIT(A) 6 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT is not justified in upholding the action of the Ld. AO taxing the impugned additions u/s 115BBE of the Act.
21. Under the facts and circumstances of the case and in law, the Ld. CIT(A) is not justified in upholding the action of the Ld. AO of adjusting the unabsorbed depreciation of Rs. 1,03,23,047/- against impugned additions made.
22. Under the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in upholding levy of interest u/s 234A, 234B and 234C of the Act.
23. The Appellant craves leave to add, amend and modify all or any ground of appeal on or before the date of hearing."
2.2 Whereas the grounds appeal raised by the revenue in appeal No. 740/JP/2024 for assessment year 2021-22 reads as follows:
"1. Whether on facts and in circumstances of the case, the ld. CIT(A) is justified in restricting the addition of Rs. 24,95,17,849/- to Rs. 6,80,05,286/- made on account of unrecorded sales without appreciating the fact that the assessee had not provided any evidence with regard to the sales of Rs. 18,15,12,563/- recorded in its regular books of accounts for the year under consideration during the assessment proceedings despite having sufficient opportunities.
2. Whether on facts and in circumstances of the case, the ld. CIT(A) is justified in deleting the addition of Rs. 11,65,000/- made on account of unaccounted expenditure holding that the seized documents relied upon in the assessment order are dumb documents."
3. First, we take up the appeal filed by the assessee and the brief facts of the case as emerges from the orders of the lower authority are that the assessee is a company engaged mainly in retail and wholesale sales of gold and/or silver jewellery with or without studded stones [precious or semi-precious]. At the various premises of the assessee there was a survey conducted by the revenue as per the provision of section 133A of 7 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT the Act on 13.07.2020. Because of the survey conducted the case of the assessee was centralized to ACIT, CC-1, Jaipur vide order u/s. 127 of the Act dated 30.07.2021. Consequent to the survey and transfer of jurisdiction notice u/s. 143(2) of the Act was issued on 21.02.2022 and a further notice u/s. 142(1) of the Act was issued on 23.11.2022, 01.12.2022 & 05.12.2022 calling for details/explanations. In response to the notices so issued assessee submitted requisite details/explanations to the Id. AO.
3.1 For the year under consideration the assessee filed return of income u/s. 139 of the Act on 20.01.2022 declaring total income at Rs. Nil.
3.2 The survey team while action u/s. 133A taken the physical verification of the stock and the same was valued at Rs. 267,43,88,096/-. The value of stock as per the books of accounts was found to have been recorded at Rs.
126,08,06,402/- and thereby the survey team observed the difference for an amount of Rs. 141,35,81,694/-. The breakup of the total value of stock derived by the team with the places and its derived valuation reads as under:
8ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT 9 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT 3.3 Vide show cause notice dated 23.11.2022 the assessee was asked to explain the reasons for excess stock found along with the documentary evidence and get it verified with the regular books of accounts maintained by the assessee. In response to the said show cause notice the assessee filed reply on 23.12.2022 by explaining the alleged difference worked out at each location.
3.4 In the reply the assessee contended that the income tax department carried out survey operations at Head office and Museum of the company at Ashok Marg and Showroom / Retail Store at Panch Batti. No survey was conducted at any other outlets / franchisee of the assessee company.
During the course of Survey conducted by the Revenue at Panch Batti showroom of the company, stock was physically verified and valued by Mr. Jagdish Chandra Jajoo a Registered Valuer appointed by the Income Tax Department at Rs. 80,38,17,100/-, as per Valuation Report dated 14.07.2020, provided by the Income Tax Department to the Assessee Company during post survey proceedings. Stock at Head Office, Showroom and Museum situated at Ashok Marg were physically verified and it was valued by 3 Valuers namely Mr. Kamal Kant Pareek, Mr. Kailash Chauhan and Mr. Jagdish Chandra Jajoo, Registered Valuers appointed by 10 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT the Income Tax Department. Stock was valued by all the above 3 were summarized as reproduced herein below:-
Name of Valuer Date of Valuation Report Value of Stock as per Report
1. Mr. Kamal Kant Pareek 13.07.2020 Rs. 19,70,48,486/-
2. Mr. Kailash Chauhan 15.07.2020 Rs. 40,02,77,750/-
3.Mr. Jagdish Chandra Jajoo 15.07.2020 Rs. 6,01,84,736/-
(excluding Museum) Total Rs. 65,75,10,972/-
3.5 The Survey was conducted during the period, when there were a lot of restrictions by the Central and State Government due to Covid 19.
Statements were also recorded and were continued till late at night. During the post survey proceedings, the assessee company was asked to submit Value of Stock lying at other Branches /Showrooms / other outlets of the company as at 31.03.2020 and 13.07.2020. The assessee submitted complete Value details of stock lying at branches / other outlets and with Franchisees and Consignment agents as at 31.03.2020 and 13.07. 2020 to DDIT Investigation Jaipur.
3.6 During the course of survey, statement of one of the Director Shri Rajesh Ajmera was recorded and in the statement recorded vide question number 39 it was asked to provide reconciliation of stock value as per physical verification conducted by the department with the books of account. In reply he stated that due to Covid 19 books are incomplete 11 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT therefore it was not possible to provide the reconciliation of Value of physical stock undertaken by the department and Value of stock as per books of accounts. He has also objected to the valuation method adopted by the department by stating that he was not satisfied / agree with the valuation method adopted by the department on the following reasons:-
(i) Stock taken at Paanch Batti in our absence and not aware of the valuation method adopted:
Stock at the Panch Batti was undertaken only in the presence of one of our employee Shreya and we were not asked to come at the time of valuation Thus we are not present at the time of valuation and not aware of the valuation method adopted by the department for valuation of stock. Besides in valuing thousands of items no single question/doubt arose in the valuation which is very surprising. Hence it is one sided valuation and we are not agreeing with the same.
(ii) Overvaluation of stock lying at HO:
I have also objection in valuation done of stock at Head Office, as there various items specially stones have been overvalued. Like item no 16-453 and item no M 18-109 in which various precious and semi-precious stones, have been overvalued by 10 times from its original price. And in support of this he has also shown some photos and evidence.
3.7 While replying to question no 43 he has again shown his dissatisfaction against the valuation done by the department approved valuer and therefore he urge to get the valuation again from the approved valuer of the department and will submit the report within 15 days.12
ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT 3.8 When the above objection was raised the Ld. Officers present at the time of the survey suggested that the management may undertake an independent valuation exercise again for all the items valued by the Govt approved Valuer and share the findings of such valuer with the department.
In compliance with the suggestion of the presiding officer, the assessee undertook the process of detailed valuation of the inventory, at the above places by involving the independent Government approved Valuer Mr. Kamal Kumar Kasliwalat at the cost of suspending at regular business operations. The assessee vide letter dated 21.07.2020 made a request that departmental representative, inspector/valuer deputed at stores to witness such valuation of individual items, but no such representative was appointed even after requested many times. The assessee also requested to provide Copy of Valuation Report of Department Valuer for both Head office cum Store and Panch Batti Store.
3.9 The assessee company has got the valuation done from the approved valuer Mr. Kamal Kumar Kastiwal for every item of stock found during survey proceedings in respect of Jewellery items lying at Showroom at Paanch Batti, M.I. Road Branch and Jewellery items valued by Mr. Kamal Kant Pareek at HO, Showroom, at Ashok Marg C Scheme. Jaipur, and submitted the Valuation report to the department.
13ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT 3.10 The assessee company raised various objections regarding Valuation so done vide its letter dated 18.08.2020. Even while the Survey proceedings Director of assessee company has objected various times on the method adopted by the valuer for valuation of the stock. As is clear from the records that that item wise stock of each and every item of Jewellery lying at all the business places of the company, is maintained with complete specification viz Item No., description of item, and parity of metal and precious / semi-precious stones also, in the software. Complete details of which have been obtained by Income Tax Department during the course of Survey. Valuers have also obtained that list and verified the items physically available at the places and valued the same. Whenever any item purchased/manufactured the same entered item wise stock maintained in software after assigning unique item number to that Jewellery item, which includes item and year also, for easy identification. While assigning item no.. year of acquisition of the items were also mentioned since 2011.
3.11 There was no difference or discrepancy found in the quantity of the stock as per list of inventories maintained by the company in the Software and physically available at the time of survey proceedings except 41 items at HO & Showroom situated at Ashok Marg Jaipur. A detailed explanation was given for those 41 items found short during the course of Survey at the 14 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT premises of assessee company and during post survey proceedings.
These items were sent for repairs to various suppliers. Copy of Letter in that regard was also submitted. The quantity of stock found and recorded in books of accounts are the same. The Valuer has verified and inspected the Stock of each and every item of Jewellery from the said list so maintained by the company, which is evident from the Valuation Report itself.
3.12 Thus, the difference in the value of the stock was due to the difference in valuation method adopted by the valuer and Value of Cost of each and every item in Stock maintained by the company. As per accounting policy of the Company the stock is valued at Cost or Market Value, whichever is less. Cost includes Historical Cost of Purchase and any related cost. Company is consistently following this method. All the purchases and sales are properly vouched / delivered.
3.13 The assessee also contended that the Income Tax Department conducted the survey on 13th July 2020, when most the shops / factories were closed from 21st March 2020 to June 2020 on account of Country wide lockdown imposed by Government due to COVID 19. From 01.04.2020 to 12.07.2020 there were some purchases and nominal sales.
So, it can be said most of the stock which was there as on the date of survey i.e. 13.07.2020 relates to opening stock as on 01.04.2020. The 15 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT average Rate of Gold and Silver in domestic market for the year 2019-20 was Approx Rs. 37000/- per 10 gram and Rs. 42,514 per Kg., respectively.
In the month of April 2019 the prices of Gold and Silver was only Rs.
31,659/- per 10 gram and Re 17,328 per kg., respectively, which increased to Rs.42,283/- per 10 gram and Rs. 41,382/-per Kg respectively, in the month of March 2020. Thereafter prices of Gold and Silver were continuously increasing trend and the same were increased to Rs. 50,000/-
per 10 gram and Rs. 54,800/- per Kg. respectively in the Month of July 2020, in which survey was conducted. Thus, the stock valued by the departmental valuer was overvalued and has taken market value for the purpose of valuation Instead of taking as cost or market value which is lower as per the accounting policy followed by the company. Therefore, the assessee contended that there was no difference in the quantity of the stock physically found and that recorded in the books of account and difference in the value was also due to wrong valuation method adopted by the valuer. Accordingly, there is no Excess in the Stock as alleged in the aforesaid notice and point wise explanation was furnished for each of the locations stock.
3.14 At the premises situated at Panch Batti showroom of the company, stock was physically verified and valued by Mr. Jagdish Chandra Jajoo a 16 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Registered Valuer appointed by the Income Tax Department. Stock at Head Office, Showroom and Museum situated at Ashok Marg were physically verified and valued by 3 Valuers namely Mr. Kamal Kant Pareek, Mr. Kailash Chauhan and Mr. Jagdish Chandra Jajoo, Registered Valuers appointed by the Income Tax Department. The valuation done by the valuers were contended to be vague, arbitrary and based on assumption presumption and surmises. The stores contains thousands of items of Individual Jewellery related to Silver, Gold Metal and precious and semi-
precious stones which are unique and idiosyncratic in their size, shape, content of metal, value of design, Value of Labour, marketability, appearance and class of customers. None of the items are standard items.
If a valuation of these items is required, it should have been done on item wise basis by valuing each item independently. The Valuer is required to segregate the metal value and the stone value and estimate the labour involved of each item, then only the correct value of each item may be determined at any date. In view of the large number of individual items with no similarity, the survey team avoided the individual valuation of the items as it would take at least 10-12 days. It appears that with the aim of concluding the survey quickly they adopted ad-hoc valuation approach without any rationale or basis. Even all the three valuers adopted different 17 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT approach for stock valuation. The inventory Valuation done by the department Valuer during the survey proceeding comprises of thousands of Silver and Gold Jewellery and stones and it is also not humanly possible to do valuation of the same in a very short span of time i.e., 1 or 2 days.
During the course of survey proceedings, CCTV Camera at Showroom were operational and same was recorded. For the proper inventory valuation, each item should be properly evaluated to identify the metal used and Precious/semi-precious stone used and labour cost incurred in it. But no such exercise was done by Valuer at the time of survey. But from the valuation sheet it is seen that the valuer has taken all the arbitrary values and the approach followed by the valuer is also based on some assumptions for which no mystified base provided. Even while valuing item ad-hoc percentages were applied arbitrarily to the Tag Price for determining the valuation without valuing the entire inventory by individual item. During the course of survey, statement of one of the Director Shri Rajesh Ajmera was recorded and in the statement recorded he has also objected the valuation method adopted by the department by stating that he is not satisfy/agree with the valuation method adopted the department.
In support of that claim that valuation done by all the three valuers was erroneous, assessee submitted that the difference in valuation undertaken 18 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT by the valuer while valuing each item independently as against the ad-hoc valuation approach adopted by the valuer appointed at the time of survey was different as tabulated herein below:-
The data clearly indicates that the ad-hoc approach of valuation by deducing a percentage from the tag price was erroneous and without any rationale. Further, there had been instances wherein erroneously an extra zero was added to the price or a zero was reduced in the tag price (maximum asking price) mentioned in the list. However, this anomaly was also reflected in the valuation undertaken by the valuer, as an item whose tag price has been identified at Rs. 8.6 lakh has been valued at Rs. 57.75 lakh by the valuer and at the same time a Rs. 11.1 lakh tag price item has been valued at Rs. 74.370 only. Assessee and after receipt of the detailed Valuation report from the Department further observed that (a) there were more than 11400 items of silver and more than 3200 items of Gold Jewellery at the store on the date of survey. He has taken the complete list of item wise inventory of every item and verified the same from the physical 19 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT stock. More than 7600 items of silver were mixed and a Lum sum valuation was done which is clearly evident from the Valuation sheet attached with the Valuation report. (b) As already pointed out that the Valuer was required to segregate the metal value and the stone value and estimate the labour involved of each item, then only correct value of each item may be determined at any date. No such exercise was done by the Department Valuer instead Certain ad-hoc percentages were applied to the tag price for determining the valuation without examining the entire inventory by individual item.
3.15 At the Head Office cum retail store and Museum situated at Ashok Marg were physically verified and valued by 3 Valuers namely Mr. Kamal Kant Pareek, Mr. Kailash Chauhan and Mr. Jagdish Chandra Jajoo, Registered Valuers appointed by the Income Tax Department. Based on the report of the value Mr. Kamal Kant Pareek, it was found that most of the items were very much high valued which were considered as not justified.
Director of the Company has also objected valuation done of stock at Head Office, as there various items specially stones have been overhead. In the statement he categorically raised his objection that item no 16-453 and item no M-18-109 in which various precious and semi-precious stones, have been overvalued by 10 times from its original price. Further in case of 20 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Silver Jewellery Semi the price of semi precious stones embedded in Silver Jewellery are ranging from Rs. 2 to Rs. 10/- per Ct. The said valuation might have been done using excel sheet and formula. While entering the price of Semi-Precious Stones, he might have inadvertently entered the price of Semi-precious stones by adding extra zeros, resulting into very high valuation of Jewellery items by more than 10 to 100 times.
3.16 The assessee also pointed out the discrepancies in Method of Valuation and high valuation done. In case of Valuation done by Jagdish Chandra Jajoo Vide report dated 15.07.2020 wherein it was noted that Mr. Jagdish Chandra Jajoo, valued item wise valuation as is evident form the page No.1 and Page No. 2 of the valuation report of the valuer. Whereas after that page that value adopted the lump sum valuation of remaining items. All the items found in Tarang Arora's Room and Anil Ajmera's Room were mixed up and consolidated valuation of the various items was done by the valuer. Whereas in the case of Valuation done by Kailash Chauhan Vide report dated 15.07.2020 it was noted that item wise valuation has not been conducted by the valuer, giving description of the item, Gross/net Weight, Purity of the Metal, Rate etc. of the item. Thus, it was contended that valuation has been done on hurriedly by taking a target of completing in one day only so this exercise of consolidated all items in the valuation 21 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT has been followed by the valuer which is baseless and vague. It was also found that in case of Mixed Silver Item also different approaches have been adopted by the valuer like in 1 Sheet mixed silver has been valued @37/-
per gram, in 2nd Sheet mixed Sttver have been valued @ 60/- per gram to 70/- per gram and in 3d sheet it has valued mixed silver item @100 to 150/-
per gram, whereas the price of Silver of 999 purity was only Rs. 52,500/- as on that date. The valuer has also overvalued the stock of silver items by such a high amount.
3.17 Thus, as is clear that while valuing the inventory at the Head Office cum retail store, three valuers were appointed, out of the three, one valuer was deputed from the Paanch Batti store after completion of the valuation exercise there the same valuer Ironically, adopted an altogether different valuation approach as against the approach adopted at the Paanch Batti store even when the nature of inventory was similar at Head office.
3.18 The valuer valued the valuation at high valuation wherein they identified the high valuable Jewellery items as sample for undertaking valuation of whole inventory on that basis and then undertook an item wise valuation on such sample Inventory basis only. Thereafter, the remaining 22 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT inventory was valued cumulatively by applying an ad-hoc valuation approach without any rationale or basis on individual item.
3.19 Looking to the valuation method adopted by the assessee, the Valuation was done at current market price instead of cost incurred by the assessee.
3.20 The valuer team did not consider that the item they valued were much old Inventory and the same were recorded at the historical cost and the same cannot be valued on current market price. Therefore, there is huge difference in the value of stock as per books and value of the stock as per valuer. The assessee company has submitted a complete list of Jewellery found at the museum containing details of the owner of the Jewellery. Based on the above contention, the assessee claimed that there was no excess stock, as alleged in the notice, at the time of survey conducted at business premises of assessee Company.
3.21 The assessee company has two outlets / stores at Delhi one at Amarpali 39/394, Khan Market, New Delhi 110003 and another at Amarpali, Indira Gandhi, International Airport, Terminal 3, New Delhi-
110037. No Physical survey was conducted at any of stores of the company situated at Delhi. The assessee company has submitted 23 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT complete details of stock lying at both the outlets/stores at Delhi as on 31.03.2020 and 13.07.2020 to DDIT Investigation Jaipur. Total Value of Closing Stock of all Jewellery items at Delhi Stores was Rs. 18,75,87,847/-
as per books of accounts of the company as on 13.07.2020. Whereas revenue arbitrarily taken the Value of Closing stock at Delhi Stores of Rs 25,59,78,648/- without any basis. Since no basis was available, assessee requested vide letter dated 08.12.22 to provide the basis on which such value was arrived at. In response, it was stated that Value of Stock at Delhi Branch was has been taken from the Computerized stock list provided by assessee company in pen drive during the course of Survey. No explanation was asked from the management during the course of post survey proceedings by investigation department about such difference in the Value of Stock. As noted that at these places no physical Survey was conducted and total value of Stock of these outlets have been determined by the departmental on the basis of computerized excel stock sheet found at the time of survey proceeding at Head office of the assessee company.
The price mentioned in the computerized stock list obtained at the time of survey contains "Asking / selling price" of the jewellery and not cost at which stock is valued in the books of accounts of the company. The method of valuation of inventory is cost or market price whichever is lower.
24ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Therefore, as stated goods mentioned in the computerized sheet were valued at cost in the books of account of the assessee and stock in the computerized excel sheet is Rs. 25,59,78,648/- which is asking/Selling price. Asking Price has Margin + Anticipated discount to be given to customer. Assessee submitted copy of certain sales bills of goods appearing in excel sheet in order to support that Rs.25.59 Crore was asking price and not cost. The Value of stock at Cost price was Rs. 18.75 crore only. The assessee also submitted that different approach in valuation of stock of different branches of same organization, where no physical survey was conducted, has been applied, which was not justified.
Based on that assessee contended that Value of stock taken by the Department at Delhi outlets of Rs. 25,59,78,648/- was erroneous. Correct value of Stock of Rs. 18,75,87,847/- is required to be considered while taking value of stock at Delhi outlets.
3.22 Stock lying at Mumbai Branch as per the Tally books of account of the branch as on 31.3.2020 and as adjusted up to 13.7.2020 reported at Rs 53,62,45,741/- and Stock lying at Bangalore Branch as per the Tally books of account of the branch as on 31.3.2020 and as adjusted up to 13.7.2020- Rs 16,51,51,691/-. In Mumbai assessee company was having three outlets/stores at Mumbai one is at (a) Amarpali Juhu Shop, Mumbai, 25 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT second at Amarpali, Oberoi Shop, Mumbai and third at Amrapali Taj Hotel Shop, Mumbai. The assessee also has 2 outlets / Stores at Bangalore, (a) Amrapali Jaynagar Shop, Banglore and (b) Amrapali Shop, Bangalore. No Physical survey was conducted at any of the stores of the company situated at Mumbai and Bangalore by Income Tax Department. In the proceeding of post survey assessee company was asked to submit details of Stock lying at other Branches/Showrooms/other outlets of the company as at 31.03.2020 and 13.07.2020. The assessee company has submitted complete details of stock lying at all the outlets/stores at Mumbai and Bangalore as on 31.03.2020 and 13.07.2020 to DDIT Investigation Jaipur.
Total Value of Closing Stock of all Jewellery items at Mumbai Stores was Rs 24,84,70,166/- and at Bangalore Stores was Rs. 9,19,85,061/-as per books of accounts of the company as on 13.07.2020. In the assessment proceeding ld. AO taken the Value of Closing stock at Mumbai and Bangalore Stores at Rs. 53,62,45,741/- and Rs. 16,51,51,691/- respectively and the assessee contended that the same was without any basis. Since no basis was available, the assessee was requested vide letter dated 08.12.2022 to provide the basis on which such value was taken. In response, the basis was given and the same reads as under :
Computation of stock as on 13.7.2020 as per Books of the Branch 26 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT ** Sales 2474210 - GP @ 30% = Rs. 17,31,947/-
** Sales 5086113 - GP @ 30% = Rs. 35,60,280/-
Thus, stock of Rs. 53,62,45,741/- was considered with Mumbai Branch and stock of Rs. 16,51,51,691/- was lying with Bangalore Branch, as on 13.7.2020. No explanation was asked from the management during the course of post survey proceedings by investigation department about such difference in the Value of Stock, as assessee gave details of stock lying at Mumbai and Bangalore Branches vide letter dated 16.03.2021. The assessee thus contended that the value of stock was wrongly taken based on incomplete tally data. The assessee also contended that ld. AO generated the Balance sheets of Mumbai and Bangalore, Branches for 27 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT financial year 2019-20 from the tally data of Rinkesh Jain's Computer. In this regard that Tally data on the Rinkesh Jain Computer was not regular tally data. Regular Books of accounts maintained by Mr. Vijay Kumar Jain on his Computer, which was also impounded during the survey. Tally data found from the Rinkesh Jain Computer was incomplete. The assessee also contended that various Jewellery items was return to the HO in the month of June 2020 and was supported with the copy of Tax Invoice for stock transfer from Bangalore to HO and was placed on record as Annexure 7 and the said stock was already included in the stock at HO by the survey team. No effect of such transfer was given while computing the stock lying at Bangalore by the ld. AO. Not only that assessee contended that different approach in valuation of stock of different branches of same organization, where no physical survey was conducted, was taken and therefore, that was also objected. Assessee also contended that the Stock transfer invoice does not reflect the actual cost of item. They are normally above the cost price including margin. The method of valuation of inventory regularly adopted is cost or market price whichever is lower. Therefore, goods lying at Mumbai and Bangalore Branches given by the company during post survey proceedings should be valued at cost and thereby objected to the Value of stock taken by the Department at Mumbai and Bangalore Stores 28 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT of Rs. 53,62,45,741/- and Rs. 16,51,51,691/- respectively. The correct value of Stock of all Jewellery items at Mumbai Stores and Bangalore Stores was Rs 24,84,70,166/- and Rs. 9,19.85,061/- respectively as per books of accounts of the company as on 13.07.2020.
3.23 As regards the Goods sent on consignment basis to USA to Consignment Agent M/s Amrapali Inc. Usa there were no Physical survey.
But while proceeding to the post survey, the assessee company was asked to submit details of Stock lying with Franchisees/ Consignment Agent as at 31.03.2020 and 13.07.2020. The assessee company submitted complete details of stock lying at all the Franchisees/Consignment Agents as on 31.03.2020 and 13.07.2020 to DDIT Investigation Jaipur. Department arbitrarily taken the Value of Closing stock of Rs. 1,19.69.563 at Consignment Agent M/s Amrapali USA without any basis. Since no basis was available, vide letter dated 08.12.22. Assessee requested to provide the basis on which such value was taken. It was stated that Value of Stock Iying with Amrapali Inc. USA has been taken on the basis of Consignment account in Tally books of account for the period from 1.04.2020 to 13.07.2020. It was contended that no explanation was asked from the management during the course of post survey proceedings by investigation department about such difference in the Value of Stock at Consignment 29 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Agent Amrapali Inc. USA. Assessee submitted that the tally account considered were incomplete. Whenever the goods are sent on Consignment basis to any Foreign Consignment Agent, Consignment Invoice is raised at selling price, accordingly his account was debited by the Consignment invoice. Necessary documents are also sent as per Custom Laws Whenever any sales notes are received from the Consignee the same accounted for as Export Sales in the books of accounts. In case any goods were returned the same were credited to his consignment account.
During the year 2019-20 certain unsold items were returned by Consignee, which were earlier sent on a consignment basis to USA. The same were not entered in tally due to sudden lockdown imposed by Government on account of COVID 19. These items were actually returned/reimport/received before 31 March 2020. In support of that contention assessee submitted copy of correct Consignment Account of Amrapali Inc for the period from 01.04.2019 το 31.03.2020, Return Invoice (Unsold), Bill of Entry for Reimport(Return of Goods), List of items returned and Airway/Shipping Bill for Returned goods. After giving effects of above returned goods, the balance receivable from the above consignee as on 31.03.2020 was of Rs. 37,15,798/- on account of unsold stock lying with him. Since the Consignment Invoices were raised at selling price, the 30 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT amount shown above was selling price of the stock lying with the consignee, not the cost. Item wise details of stock lying with the consignee as on 31.03.2020 along with its cost was given as Annexure 9. Accordingly the Cost of unsold stock with Amrapali Inc. USA as on 13.07.2020 was of Rs. 17.42.300/- only which is already included in the value of stock mentioned. Assesses submitted consignment Account of Amrapali Inc. USA in books of account for the period 01.04.2020 to 31.03.2021. All the goods lying at Consignment agent as on 01.04.2020 have been sold by Consignee and necessary Export Sales accounted for in books of accounts in the current financial year. Cost of Stock lying with Consignment Agent Amrapali Inc. USA of Rs. 17,42,300/- was already included in the value of stock mentioned, accordingly Value of stock of Rs. 1,19,69,563 as alleged in the notice should not be considered separately.
3.24 The assessee company has also Consignment Agent M/s Amrapali UK Ltd., there was not physical survey / stock taking was conducted at the premises of above Consignment Agent by revenue. On being asked to submit details of Stock lying with Franchisees/ Consignment Agent as at 31.03.2020 and 13.07 2020 The assessee company submitted complete details of stock lying at all the Franchisees/Consignment Agents as on 31.03.2020 and 13.07.2020. Total Value of Closing Stock of all Jewellery 31 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT items at Consignment Agent Amrapali UK Ltd was Rs 1,28,19,625/- as per books of accounts of the company as on 13.07.2020. Value of Closing stock of Rs. 11,64,46,108/- at Consignment Agent M/s Amrapali UK Ltd.
without any basis. Since no basis was available, letter dated 08.12.22 to provide the basis on which such value has been taken. In response vide letter dated 21.12.2022 assessee submitted that Value of Stock lying with Amrapali UK Ltd was taken on the basis of Consignment account in Tally books of A/C for the period from 1.04.2020 to 13.07.2020. No explanation was asked from the management during the course of post survey proceedings by investigation department about such difference in the Value of Stock at Consignment Agent Amrapali UK Ltd. Assessee also contended that the tally records taken by the department was incomplete. Whenever the goods were sent on Consignment basis to any Foreign Consignment Agent, Consignment Invoice is raised at selling price, accordingly his account debited by the Consignment invoice. Necessary documents are also sent as per Custom Laws. On receipt of sales notes same was accounted for as Export Sales in the books of accounts. In case any goods were returned the same was credited to his consignment account. During the year 2019-20 certain unsold items were returned by Consignee, which were earlier sent on consignment basis to UK. The same were not entered 32 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT in tally due to sudden lockdown imposed by Government on account of COVID 19. These items were actually returned/reimport/ received before 31st March 2020. In support of that contention assessee submitted copy of correct Consignment Account of Amrapali Inc. UK for the period from 01.04.2019 to 31.03.2020, Return Invoice (Unsold), Bill of Entry for Reimport( Return of Goods), List of items returned and Airway/Shipping Bill for Returned goods. After giving effects of above returned goods, the balance receivable from the above consignee as on 31.03.2020 was of Rs.
3,07,98,096/- on account of unsold stock lying with company. Since the consignment Invoices were raised at selling price, the amount shown was Selling price of the stock lying with the consignee, not the cost.
Accordingly, the Cost of unsold stock with Amrapali UK Ltd as on 13.07.2020 was Rs. 1,28,19,625/- only which was already included in the value of stock given by the assessee which was reflected in the Consignment Account of Amrapali Inc. USA from the books of account for the period 01.04.2020 to 31.03.2021 was filed.
3.25 For the goods sent to Doha for Exhibition for Rs 51,96,689/- and the same was sent to Amiri Gems on Consignment Account. In the post survey proceeding assessee was asked to submit details of Stock Lying with Franchisees/ Consignment Agent as at 31.03.2020 and 13.07.2020. The 33 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT assessee company has submitted complete details of stock lying at all the Franchisees/Consignment Agents as on 31.03.2020 and 13.07.201 to DDIT Investigation Jaipur. There was no stock in this consignment account as 13.07.2020. Even though the revenue consider the Value of Closing stock of Rs. 51,96,689 Jewellery & Watches Exhibition without any basis. Since no basis was available, vide letter dated 08.12.22 assessee requested to provide the basis on which such values was taken. In response, vide reply dated 21.12.2022, it was contended that value of stock lying with this consignee was taken on the basis of Consignment account in Tally books of account for the period from 1.04.2020 to 13.07.2020. There was no confrontation about the arrival of such difference in the Value of Stock at Doha Jewellery & Watches Exhibition-Amiri Gems on Consignment account. As stated repeated that the accounts were incomplete. The assessee submitted that whenever the goods were sent on Consignment basis to any Foreign Consignment Agent Consignment Invoice is raised at selling price, accordingly his account was debited by the Consignment invoice. Necessary documents were sent as per Custom Laws. Whenever any sales notes are received from the Consignee the same was accounted for as Export Sales in the books of accounts. In case any goods were returned the same way it was credited to his consignment account. During 34 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT the year 2019-20 certain unsold items were returned by Consignee, which were earlier sent on a consignment basis. The same were not entered in tally due to sudden lockdown imposed by Government on account of COVID 19. These items were actually returned/reimport/received before 31st March 2020. In support of that contention assessee submitted copy of correct Consignment Account of for the period from 01.04.2019 to 31.03.2020, Copy of Return Invoice (Unsold), Bill of Entry for Reimport( Return of Goods), List of items returned and Airway/Shipping Bill for Returned goods. If this contention considered the balance receivable from the above consignee as on 31.03.2020 was of Rs. Nill- as there was no stock lying with consignee and thereby the same should not have been considered separately for an amount of Rs. 51,96,689.
3.26 Similarly the case of goods sent on consignment basis to Hongkong, as on 13.7.2020 for an amount is not required to be considered separately.
Because the assessee company has sent goods at EPOCA TRADE LTD.
Hongkong Consignment account. During the post survey proceedings, assessee company was asked to submit details of Stock lying with Franchisees/ Consignment Agent as al 31.03.2020 and 13.07.2020 The assessee company has submitted complete details of stock lying at all the Franchisees/Consignment Agents as on 31.03.2020 and 13.07.2020 to 35 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT DDIT Investigation Jaipur. There was no stock in this consignment account as on 13.07.2020. Ld. AO arbitrarily taken the Value of Closing stock of Rs 31,091/- at consignee at Hongkong without any basis. Since no basis was available, the assessee requested vide letter dated 08.12.22 to provide the basis on which such value was taken. In response, it was stated that Value of Stock lying with this consignee has been taken based on Consignment account in Tally books of account for the period from 1.04.2020 to 13.07.2020. No explanation was asked from the management during the course of post survey proceedings by investigation department about such difference in the Value of Stock at Consignment account Hongkong.
Whenever the goods are sent on Consignment basis to any Foreign Consignment Agent. Consignment Invoice is raised at selling price;
accordingly his account was debited by the Consignment invoice.
Necessary documents were also sent as per Custom Laws. Whenever any sales notes received from Consignee the same was accounted for as Export Sales in the books of accounts. In case any goods were returned the same is credited to his consignment account. In case of any charges on consignment the same credited to his account. As on 31.03.2020 there was a balance of Rs. 31,091/- in the consignment account. No stock was pending with him. This may be on account of certain charges which could 36 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT not be credited in the absence of any statement from Consignee. However, this amount was credited in the Consignment account in current Financial year i.e. 2020-21 Copy of Consignment account for the financial year 2020- 21 showing Nil Balance was placed on record. Therefore, assessee contended that there was no Stock lying with Hongkong Consignment account as on 13.07.2020. Accordingly, Value of stock of Rs. 31,091/- as alleged in the notice should not be considered separately.
3.27 Ld. AO considered the above reply and submissions made by the assessee, but the same were not found to be fully convincing and acceptable, because, the assessee has not maintained stock register, which was clear from the remarks given by the Auditor vide form No. 3CA furnished along with audit report u/s 44 AB of the Income Tax Act 1961 as extracted here in below:
S. No. Observations/qualifications 2. Others The stock register has not been maintained
3. Valuation of closing stock is Valuation has been taken as certified by not possible Director.
Thus, the Auditor has categorically mentioned that no stock register has been kept by the assessee and the valuation has been taken as stated by 37 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT the Director of the company. From the list of account books maintained as per Annexure A to the Audit report, it is obvious that no stock register has been kept. During survey, Shri Rajesh Ajmera, Director of the company, admitted in his statement recorded during the course of survey on 13/7/2020, that at the close of the financial year on 31/3/2020, physical verification of stock was not done, nor any list based on cost price was prepared. He further admitted that the profit was estimated after applying the assumed GP rate based on the profit rate declared in preceding years and the balancing figure taken as closing stock. The assessee company is engaged in the business of manufacturing gold and silver jewellery studded with precious and semi-precious stones and sale thereof. That apart, during survey, Incriminating papers were found and impounded (Exhibit 3 of Annexure AS), in which unaccounted expenses were found mentioned.
Further, incriminating papers of unaccounted sales were also found and impounded as per Exhibit AS/1, AS-2, AS-3, AS-6, AS-11 and AS-13 while survey. Thus, it was noted that the books of accounts maintained by the assessee were not reliable and the same cannot be taken to be conclusive and, therefore, the provisions of Sec. 145(3) were invoked and thereby the books of accounts were rejected.
38ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT 3.28 The assessee company, M/s Amrapali Jewels Pvt. Ltd. (for short AJPL) runs many showrooms, where gold, silver jewellery studded with diamonds, precious and semi-precious stones displayed and sold. Such show rooms/ branches situated at Jaipur, Delhi, Mumbai and Bangalore.
This Company purchases jewellery items from the manufacturing concerns of the Group as well as from outside third parties. Survey u/s 133A of the Act was carried out on 13/7/2020 at the two showrooms of M/s AJPL at Jaipur on at M.I. Road, Jaipur and H.O. cum show room at Ashok Marg, C-
Scheme, Jaipur. Assessee company was also engaged in making sales to USA and UK on consignment basis through its agents. Besides, M/s AJPL is making sales through several franchisee dealers spread across the country. It is pertinent to mention here that the stock lying with the showrooms/ branches and overseas consignment agents is owned by M/s AJPL, as no sale bills are issued while dispatching the goods to the branches, showrooms and consignment agents. As regards the franchisee stores, Initially the jewellery items are dispatched through challans and after confirmation by the concerned franchisee, final sale bill is issued by M/s AJPL. Thus, on a given date, unbilled jewellery is also lying as stock of M/s AJPL with various franchisees. During the course of survey operation, the survey team observed discrepancies in the maintenance of the books 39 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT of accounts and stock records, which were confronted to Shri Rajesh Ajmera , Director of M/s AJPL. The explanations offered and admissions made by Shri Rajesh Ajmera were recorded in the statements recorded during survey operation. The brief contentions as stated by Shri Rajesh Ajmera reads as under:-
(i) Shri Rajesh Ajmera had stated that no stock register in respect of the raw material and WIP is maintained by M/s AJPL.
(ii) The quantitative details of the finished goods i.e. the items of jewellery are maintained in the customized GST billing software, which consist of the details of each item of jewellery viz. itens no., description, weight of the items consumed and selling price of each item. Further, these details are stored online on i-cloud.
(iii) No details in respect of the cost of jewellery items are maintained by M/s AJPL.
(iv) During the course of survey, the books of accounts for the year 2019-20 were found incomplete and hence the closing stock of M/s AJPL as on 31.3.2020 had not been computed. Since, the opening stock as on 01.04.2020 was not known, the books of account for the period from 01.04.2020 to 13.07.2020 were also not complete. In these circumstances, the stock as on the date of survey i.e. 13.07.2020 as per the books of a/c, could not be computed during the course of survey operation.
(v) Subsequent to search/survey action, the assessee company has filed its ITR for the A.Y 2020-21 on 18.01.2021. In the Final accounts filed along with the return, the closing stock as on 31.03.2020 is shown as under:-
Raw Material Rs. 1,25,66,828/-
Finished Goods Rs. 1,26,90,17,876/-
40
ITA Nos. 740 & 750/JP/2024
Amrapali Jewels Pvt. Ltd. vs. ACIT
Total Rs. 128,15,84,704/-
3.29 During the course of survey operation, the stock as per the book of accounts could not be computed, as the books of account of neither for the F.Y 2019-20 nor for the period from 01.04.2020 to 13.7.2020 were found complete. Print-out of the trial balance as on 31.3.2020 and as on 13.7.2020 were taken out from the computers of the Account's Department of M/s AJPL. Moreover, the Tally Data Printouts of sales register, cash book etc. for the year 2019-20 and 2020-21 (till 13.7.2020) were also taken, during the course of the survey operation. Subsequently, the assessee company (M/s AJPL) got its accounts audited and filed the ITR for the relevant period i.e. A.Y 2020-21. On comparison of both the Trading accounts, the main points of difference have been noted which reads as under:-
i) For the assessment years preceding the survey year, the assessee company had declared Gross profit @ 27.5% for F.Y. 2016-17, 27.2% for F.Y. 2017-18 and 30% for the F.Y. 2018-19. However, for the F.Y. 2019-20, the assessee company has shown Gross Profit at the Increased rate of 34%. This has been done to inflate the figure of opening stock as on 01-04-2020 and ultimately the stock, as per the books of a/c as on 13-7-2020. It needs to be noted here that the return of income for the A.Y. 2020-21 relevant to F.Y. 2019-20 had been filed after the search & survey operation carried out on "Amrapali Group". During the course of survey operation, Shri Rajesh Ajmera, Director of M/s AJPL had agreed that following the past practice and considering the declared GP rates of the preceding years, it will be fair to apply a GP rate of 30% to compute the stock in hand as per books of a/c as on 31-3-2020.
ii) Accordingly, the GP rate declared in the return was 30%. Accordingly, the stock as per the books of a/c as on 13-7-2020 was compared as detailed below:-41
ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT As per the above tabular data, the stock as per books of account was computed at Rs. 1,26,08,06,402/- as on the date of survey i.e. 13.07.2020.
Based on that facts total stock of M/s AJPL physically present at different locations as on the date of survey i.e 13.07.2020 was determined as under:-
Stock physically available, as on 13.07.2020 42 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT 43 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT 3.30 Computation of Excess stock:
Based on above chart, the total stock amounting to Rs.
267,43,88,096/- was considered physically found at different showrooms, branches, franchisee stores and with consignment agents as on the date of survey i.e. on 13.7.2020. On the other hand, the total stock as per books of account of M/s AJPL was worked out at Rs. 1,26,08,06,402/- only. On the basis of these figures, the excess / unaccounted stock as on 13.7.2020 was computed and the same was derived as under:-
Stock physically lying as on 13.7.2020 Rs. 267,43,88,096/-
Less: Stock as per books of a/c as on 13.7.2020 Rs. 126,08,06,402/-
Excess / Unaccounted stock Rs. 141,35,81,694/-
Ld. AO thus considered this excess stock of Rs. 141,35,81,694/- as computed above liable to be added to the income of assessee company M/s AJPL u/s 69B of the Act.
3.31 While in the preceding of survey at two showrooms situated at Panch Batti, Jaipur and Ashok Marg, C-Scheme, Jaipur on 13.07.2020, various diaries, slip pads and loose papers were found and seized. These documents show that unaccounted sales of jewellery were made by the assessee company. During assessment proceedings, the assessee was 44 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT issued a detailed show-cause notice along with notice u/s 142(1) on 23.11.2022 asking to explain as to how sales of Rs. 24,95,17,849/- made during the year under consideration has been accounted for, which was computed based on the above records found in survey. In response to the said show cause notice, the assessee filed a reply on 23.12.2022. Ld. AO considered the reply and submissions made by the assessee, but the same were not found to be convincing and acceptable as discussed in the assessment order and finally he considered unaccounted sales made by the assessee during the year under consideration for an amount of Rs.
24,95,17,849/- and same was considered as unaccounted sales and was added to the Total Income of M/s Amrapali Jewels Pvt Ltd for the A.Y. 2021-22 on account of unaccounted sales as the corresponding purchases are also not verifiable with books of accounts, the whole of the sale amount was considered as undisclosed Income of the assessee.
3.32 During the course of survey at the Head Office cum Showroom of the assessee, it was noticed that a total of 41 high value items of jewellery having total tag price of Rs. 11,40,00,000/- were not found on physical verification at the premise. The non-availability of the above high value 41 items of jewellery clearly proves that these items have been sold without recording the same in books of accounts. During assessment proceedings, 45 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT the assessee was issued a detailed show-cause notice along with notice u/s 142(1) dated 23.11.2022 on this issue. In response to the show-cause notice, the assessee filed reply on 01.12.2022. Ld. AO considered the reply and submissions made by the assessee, but the same was not found to be fully convincing and acceptable to him and therefore, he hold that the non-
availability of the above high value 41 items of jewellery, clearly prove that these items have been sold without recording the same in books of account. The sale value of these high value jewellery consists of the cost of the items plus the gross profit earned thereon. Since the purchase of these high value items were also not recorded in regular books of account, the entire sale consideration i.e. 11.40 Crore was added to the income of M/s AJPL on account of undisclosed Income as a result of unaccounted sales.
3.33 During the course of survey proceedings, certain incriminating documents were found and seized as per Annexure-AS. On perusal of the back side of page no. 115 of Exhibit-3 of Annexure-AS, it was noticed by the ld. AO that expenses of Rs. 2,00,000/- were made under various heads by the assessee. During the course of assessment proceedings, the assessee was issued a detailed show cause notice along with notice u/s 142(1) dated 23.11.2022 on this issue. In response to the show cause notice, the assessee filed a reply on 23.12.2022. The ld. AO considered the 46 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT reply and submissions made by the assessee, but the same were not found to be fully convincing and acceptable and therefore he added unaccounted expenditure of Rs. 2,00,000/- u/s 69 of the IT Act. On perusal of page no.
119 of Exhibit-3 of Annexure-AS, it was noticed that expenses of Rs.
2,10,000/- were made under various heads by the assessee. During assessment proceedings, the assessee was issued a detailed show cause notice along with notice u/s 142(1) on 23.11.2022. In response to the show cause notice, the assessee filed a reply on 23.12.2022. The ld. AO considered the reply and submissions made by the assessee, but the same was not found to be fully convincing and acceptable. Therefore, he held that the assessee company has made unaccounted expenditure of Rs.
2,10,000/- during the year under consideration and accordingly it was considered as liable to be taxed as per provision of section 69C of the Act.
3.34 On perusal of page no. 120 of Exhibit-3 of Annexure-AS, it was noticed that expenses of Rs. 2,00,000/- were made under various heads by the assessee. The assessee was issued a detailed show-cause notice along with notice u/s 142(1) dated 23.11.2022 on this issue. In response to the show cause notice, the assessee filed a reply on 23.12.2022. Ld. AO considered the reply and submissions made by the assessee, but the same was not found to be fully convincing and acceptable and therefore, he 47 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT made addition of unaccounted expenditure of Rs. 2,00,000/- u/s 69C of the Act.
3.35 On perusal of back side of page no. 122 of Exhibit-3 of Annexure-AS, it was noticed that expenses of Rs. 5,55,000/- were made under various heads by the assessee. The assessee was issued a detailed show cause notice along with notice u/s 142(1) dated 23.11.2022 on this issue. In response to the show cause notice, the assessee filed reply on 23.12.2022.
Ld. AO considered the reply and submissions made by the assessee, but the same were not found to be fully convincing and acceptable and therefore, he made an unaccounted expenditure of Rs. 5,55,000/-, as per provision of section 69C of the Act.
3.36 Based on the above observations so recorded by the ld. AO determined the income of the assessee at Rs. 176,78,18,453/- after allowing the business loss and unabsorbed Depreciation.
4. Aggrieved from the observations so recorded by the ld. AO while passing the assessment order, the assessee carried the matter before the learned Commissioner of Income Tax, Appeal-4, [ for short CIT(A) ] Jaipur by filling an appeal before him. While dealing with various grounds of the appeal raised by the assessee, ld. CIT(A) has partly allowed the appeal of the assessee. The relevant observations of the ld. CIT(A) on the various 48 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT grounds / issue raised are reiterated here in below so as to understands its contextual understanding to decide the grounds raised before us:
Finding of ld. CIT(A) for rejection of books of accounts 9.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment for order the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-
The ld. AO has in this regard found that the Auditor has categorically mentioned that no stock register has been kept by the appellant and the valuation has been taken as stated by the Director of the company. From the list of account books maintained as per Annexure A to the Audit report, it is obvious that no stock register has been kept. During the course of course of survey on 13/7/2020, that at the close of the financial year on 31/3/2020, physical verification of stock was not done, nor any list based on cost price was prepared. He further admitted that the profit is estimated after applying assumed GP rate based on the profit rate declared in preceding years and the balancing figure is taken as closing stock. The appellant company is engaged in the business of gold and silver jewellery studded with precious and semi-previous stones and sale thereof. That apart, during the course of survey, incriminating papers were found and impounded (Exhibit 3 of Annexure AS), in which unaccounted expenses were found mentioned. Further, incriminating papers of unaccounted sales were also found and impounded as per Exhibit AS/1, AS-2, AS-3, AS-6, AS-11 and AS-13 during the course of survey. From the above facts, it is noted that the books of account maintained by the assessee are not reliable and the same cannot be taken to be conclusive and, therefore, it is a case to which the provisions of Sec. 145(3) are attracted. In view of the defective nature of books of account mainained by the assessee, the same were rejected by invoking Sec. 145(3).
Further it is noticed that additions have been done in the assessment order on the ground that loose papers were found during the course of survey wherein details of sales made out of books have been detected and addition has been made to the income of the appellant in this regard. Further addition has been made in the assessment order regarding the jewellery items which were claimed by the appellant to be have been sent for the repairs however it was found and concluded in the assessment order that such jewellery items were sold by the appellant and not recorded in the books of accounts.
From the perusal of the audit report it is seen that in col. 35 page 47 (PB vol. 1) in the manufacturing column the appellant has mentioned NA meaning that not applicable. In the trading column it has been mentioned that the "the assessee has inform us that it is not possible to maintain stock register. At the same time, in the 49 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT financial statements the appellant has shown consumption of raw material of gold and silver bullion and gemstones (Pg. 30 of PB vol 1). The appellant has also shown job charges and wages. The tax audit report is contradictory to the results shown in the financial statements and hence the same are not reliable. At the same time in the stock found during the course of survey there is no reference to the valuation of the closing stock in terms of the raw material of bullion and gemstones implying that the stock of raw material was not in existence. No work in progress has been shown anywhere - as per the statement recorded (Pg 123-PB- Vol.1) no stock of WIP is maintained and the WIP is not recorded in books as per the regular practice, In the profit and loss account also cost of material consumed has been claimed. The job charges and wages are Rs. 37,96,209 in F.Y. 2019-20 and are Rs. 98,14,578 in the F.Y. 2020-21 showing an increase by almost 160% whereas the raw material consumed value is Rs. 1,84,40,923 (F.Y. 2019-20) and Rs. 2,39,83,602 (F.Y. 2020-21) showing an increase of only 30%. The aspect also remains unexplained. At the same time the sales however have gone down substantially from 117.54 Cr. to 43.03 Cr.
It is also noticed from the tax audit report of the earlier year that in the financial year 2018-19 the consumption of raw material of bullion of gold and silver and stones is nil; however at the same time even then the appellant has claimed job charges and wages of Rs. 24,72,617. (Vol 1 PB Pg 74).
From the financial statements (PB-29 of Vol. 1) it is seen that the appellant is also into business of handicraft items. In the submissions of the appellant is no reference to these items. In the survey statement and inventory also there is no reference to business in these items.
Further in the related party transactions reported in the tax audit report (col. 23) (PB Vol.1 Pg.40), no transaction of purchase from the related party are shown whereas in the submissions the appellant has stated that purchases are made from the related party as well as from the third parties.
Further discrepancies have been found in the books of accounts with respect to the goods sent on consignment to USA, UK, Hong Kong and Doha. As per the submissions of the appellant, without accepting, the goods were received back starting the period May 2019 however the entries in the books of accounts were not done. With respect to the material in Hong Kong, the appellant has done the ledger entry in March 2021 thus indirectly accepting the error in the books of accounts.
Further the director of the company Shri Rajesh accepted in his statement that the material owned by the company which is kept in the museum is not recorded in the books of accounts and in the balance-sheet and he offered the same to be added to the stock and his income.50
ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT In view of the above discussed factual findings and infirmities and due to the non- maintenance of the stock register and due to the fact that stock was being taken as the balancing figure year after year taking an estimated rate of gross profit lead to the conclusion that the books of accounts of the appellant and the gross profit ratio (of the earlier years also) are not reliable for the purpose of computation of income. Thus the books of accounts have been the rightly rejected by the learned assessing officer.
Further in the present case not only the stock also the turnover is also found to be unreliable. The appellant has been estimating the gross profit year after year and not bound of the real gross profit in earlier years also. Further the addition on account of stock can be made even after applying the gross profit ratio in case the stock on hand is found excess then stock as per books even after applying the gross profit ratio. In such a situation, the purpose in the assessment order is to arrive at the amount closest to the real income of the appellant. The approach suggested or argued by the appellant does not lead to correct determination of the income in the present case. If the argument of the appellant is that no figure from the rejected books of accounts can be used in that case even the turnover amount cannot be used in case of the rejection of books of accounts and the argument of the appellant leads to impossibility. Further as per the law and as per the accounting principles addition on account of excess stock is different than the addition on account of the gross profit ratio. Hon'ble Supreme Court of India in the case of CIT Vs British Paints India Ltd (1991) 188 ITR 44 (SC) has held that it is the duty of the assessing officer to determine the taxable income by making such computation as he considers appropriate in the given situation.
As per the law, gross profit ratio pertains to the trading results of one year whereas the unexplained excess stock detected during one year may have come from possible several sources like suppression of closing stock in earlier years as well as in the current year or introduction of a unaccounted money in buying the cash stock or unaccounted stock provided by related party for sale in unaccounted manner etc. For example:-
Trading Account as per assesse:-
Opening Stock 100000 Sales 2000000
Purchases 1500000 Closing Stock 100000
Gross Profit 500000
2100000 2100000
If in the above, Gross profit after rejection of books of accounts is increased to Rs. 5,50,000 (increased by Rs. 50 thousand) and however on physical verification the stock is found to be of Rs. 8,00,000 (as against recorded amount of Rs. 1,00,000). In such a case the addition on account of unexplained asset u/s 69 can be done.51
ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT It is held by the Honourable Supreme Court that "There is nothing in law which prevents the Income-tax Officer in an appropriate case in taxing both the cash credit, the source and nature of which is not satisfactorily explained, and the business income estimated by him under section 13 of the Income-tax Act, after rejecting the books of account of the assessee as unreliable".
The Hon'ble Supreme Court in the case of Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC)[01-08-1968] has held as under:-
x x x x As per the headnotes "Section 145 of the Income-tax Act, 1961 (Corresponding to section 13 of the Indian Income tax Act, 1922] Method of accounting System of accounting Assessment year 1946-47 Whether where there is an unexplained cash credit it is open to ITO to hold that it is income of assessec and no further burden lies on ITO to show that income is from any particular source Held, yes".
As per the above judgement, the observations of the Hon'ble Allahabad High Court that because the amount was entered in the books of account of the business, there was some material to hold that the amount was income of the assessee from the business and not from some other source, were not approved by the Hon'ble Supreme Court and was reversed, as it was held by the Hon'ble Supreme Court that it assumed it was for the Income-tax Officer to indicate the source of the income which was not the correct legal position and that where there is an explained cash credit, it is open to the Income-tax Officer to hold that it is income of the assessee and no further burden lies on the Income-tax Officer to show that income is from any particular source. It is for the assessee to prove that even if the cash credit represents income it is income from a source which has already been taxed.
Further, it is held by Hon'ble Allahabad High Court in the case of Commissioner of Income-tax-I v. G.S. Tiwari & Co. [2014] 41 taxmann.com 17 (Allahabad)/[2014] 220 Taxman 111 (Allahabad) (Mag.)/[2013] 357 ITR 651 (Allahabad)[30-05-2013) that (headnote extract) In course of assessment, Assessing Officer noted that assessee had not maintained proper books of account He thus rejected book results and estimated net profit rate of 8 per cent under section 44AD Assessing Officer also made certain addition under section 68 in respect of unexplained cash credit Commissioner (Appeals) as well as Tribunal held that once addition was made on estimate basis under section 44AD, no separate addition could be made in respect of cash credit under section 68 Whether there is nothing in law which prevents Assessing Officer in an appropriate case in taxing both sundry credit, source and nature of which is not satisfactorily explained, and business income estimated by him after rejecting books of account of assessee as unreliable Held, yes. The relevant part of the judgement is as under:-52
ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT "10. It may be mentioned that in the case of CIT v. Maduri Rajaiahgari Kistaiah [1979] 120 ITR 294 (AP), it was observed that where a particular business income of the assessee has been estimated and determined and in such a case certain sundry creditors are found, the AO may be precluded from adding the said unexplained sundry creditors as undisclosed income from the business, the income of which was determined on estimate basis. But where the unexplained sundry creditors are not referable to the business income of the assessee which was estimated, the AO is not precluded from treating the unexplained sundry creditors as income from other sources such as salaries securities or any other income from a business, the source of which was not disclosed by the assessee.
Where certain unexplained sundry creditors are found in the account books of the assessee, whose business income is determined on estimate basis and not on the basis of his returned income, the AO is not prevented from treating the unexplained sundry creditors standing in the books of account as income from undisclosed sources.
11. In the instant case, the consistent plea of the assessee was that the sundry creditors are genuine but at any point of time the assessee take the stand that the sundry creditors are referable to the income of the business which has been determined on estimate basis. Hence, the assessee must be held to have failed to establish that the unexplained sundry creditors were referable to the business income. The addition of the unexplained sundry creditors as income from other sources by the AO, therefore, was held valid.
12. Further, the Hon'ble Apex Court in the case of CIT v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194 observed that where there is an unexplained credit, it is open to the AO to hold that it is income of the assessee, and no further burden lies on the AO to show that the income is from any particular source. It is for the assessee to prove that, even if the sundry creditors represents income, it is income from a source which has already been taxed. There is nothing in law which prevents the AO in an appropriate case in taxing both the sundry credit, the source and nature of which is not satisfactorily explained, and the business income estimate by him after rejecting the books of account of the assessee as unreliable."
(Emphasis Supplied) In view of the above discussion, this ground of appeal is hereby dismissed.
Finding of ld. CIT(A) for making the addition of Rs. 141,35,81,694/- u/s 69B of the Act 10.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-
An indicative index of the issue and the para number in which the same has been discussed in this ground of appeal is as under:-53
ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Brief Issue Para Numbers Page Numbers of this order Valuation process and Valuation of (vii) to (xxx) 140-167 Stock at head office, C-Scheme & tholi mention, Panch Batti, Jaipur Valuation of stock at Delhi, Mumbai (xxxi) to (xxxvii) 167-172 & Bengaluru Stock on consignment (xxxviii) to (xlii) 173-176 Items at museum (xliiii) 176-177 Applicability of section 69B of the (xlivi) to (li) 177-196 Act.
Conclusion of grounds no 7 & 8 (lii) 196-198 Adjudication of ground of appeal 9 198-201
(i) The appellant has submitted that survey operations were carried out at Head office and Museum of the company at Ashok Marg and Showroom/Retail Store at Panch Batti from 13.07.2020. No survey was conducted at any other outlets/franchisee of the assessee company. During the course of Survey conducted by Income Tax Department at Panch Batti showroom of the company, stock was physically verified and valued by Mr. Jagdish Chandra Jajoo a Registered Valuer appointed by the Income Tax Department at Rs. 80,38,17,100/-, as per Valuation Report dated 14.07.2020. There are more than 11400 items of silver and more than 3200 items of Gold Jewellery at the store on the date of survey.
(ii) Further, that stock at Head Office, Showroom and Museum situated at Ashok Marg were physically verified and valued by 3 Valuers namely Mr. Kamal Kant Pareek, Mr. Kailash Chauhan and Mr. Jagdish Chandra Jajoo, Registered Valuers appointed by the Income Tax Department. Stock was valued by all the above 3 valuers as under (K-14B, Ashok Marg, C- Scheme, Jaipur):
Name of Valuer Date of Valuation Value of Stock as
Report per Report
Mr. Kamal Kant Pareek 13.07.2020 Rs. 19,70,48,486/-
Mr. Kailash Chauhan 15.07.2020 Rs. 40,02,77,750/-
Mr. Jagdish Chandra Jajoo 15.07.2020 Rs. 6,01,84,736/-
(excluding Museum)
Total Rs. 65,75,10,972/-
At another place, the appellant has submitted the following w.r.t the valuation at H.O. at Ashok Marg, C-Scheme, Jaipur, 65,75,10,972/-, Showroom, Panch Batti, Jaipur- Rs. 80,38,17,100/- and Jewellery kept in the Museum, as verified and valued during survey u/s 133A- Rs. 1,54,82,625.54
ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT The appellant has also submitted that by mistake wrong tag price was taken by the official valuers in some of the items. The appellant has submitted few examples as under:-
(iii) The appellant has also submitted that for valuation of inventory at the Head Office cum retail store, three valuers were appointed. Out of the three, one valuer was deputed from the Paanch Batti store after completion of the valuation exercise there. Ironically, the said valuer adopted an all together different valuation approach as against the approach adopted at the Paanch Batti store even when the nature of inventory was similar. The valuers at the Head Office cum retail store adopted an approach wherein they identified the more valuable Jewellery items and then undertook an item wise valuation of such sample inventory only.
Thereafter, the remaining inventory was valued cumulatively by applying an ad-hoc valuation approach without any rationale or basis.
(iv) The appellant has also submitted that "During the course of survey, statement of one of the Director Shri Rajesh Ajmera was recorded and in the statement recorded vide question number 39 it was asked to provide reconciliation of stock value as per physical verification of the conducted by the department with the books of account. In reply of the same he has already stated that due to Covid 19 books are incomplete therefore it is not possible to provide the recon of Value of physical stock undertaken by the department and Value of stock as per books of accounts.".
(v) During the course of Survey proceedings Director of appellant company has objected various times on method adopted by the valuer for valuation of the stock.
55ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT The appellant has also submitted that appellant undertook the process of detailed valuation of the inventory, at the above places by involving the independent Govt. approved Valuer Mr. Kamal Kumar Kasliwal. The appellant had requested vide letter dated 21.07.2020, that a departmental representative, inspector/valuer be deputed at our stores to witness such valuation of individual items, but no such representative was appointed. The appellant has also submitted that the closing stock as per books of accounts was Rs. 132,77,94,165/- as on 13.07.2020 as against the amount stated by the ld. AO in Notice of Rs. 126,08,06,402/- Further that closing stock as per books of account as on 31.03.2020 was of Rs. 128,22,12, 840/- Appellant has also submitted that Ld. AO has not appreciated that actual selling price is usually much lesser than Tag fetched in software. Shri Rajesh Ajmera has also highlighted in his statement recorded during survey proceedings that the actual selling price will be much lesser (after deduction of discount) than the tag price as mentioned in sheet extracted from the software. However, Ld. AO has ignored the same. The appellant has invited attention to answer to Q. No. 40 of statement of Shri Rajesh Ajmera, recorded during survey (PB Vol 1 page no. 142).
(vi) The appellant has submitted following factual objections to the valuation done on each location:-
56ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT 57 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT 58 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Decision:
(vii) The facts of the case are that survey under section 133A of the Income-tax Act, 1961 (hereinafter "the Act") was carried out on 13-07-2020 at various business premises of the appellant company. During the course of survey action at various business premises of assessee company, on physical verification of stock, stock of the value of Rs.267,43,88,096/ was found. As per the assessment order, the value of stock as per the books of accounts was at Rs. 126,08,06,402/-. Therefore, excess stock of Rs. 141,35,81,694/- (Rs. 267,43,88,096-126,08,06,402) was found.
(viii) The ld. AO issued a show cause notice to the appellant along with notice u/s 142(1) dated 23.11.2022 on this issue highlighting the location wise inventory as under:-59
ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT In response to the show-cause notice, the appellant submitted reply on 23.12.2022.60
ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT
(ix) After considering the replies of the appellant the learned AO observed that the appellant has not maintained stock register, which is clear from the remarks given by the Auditor vide form No. 3CA furnished along with audit report u/s 44AB of the Income Tax Act 1961 and that the Auditor has categorically mentioned that no stock register has been kept by the assessee and the valuation has been taken as stated by the Director of the company. During the course of survey, Shri Rajesh Ajmera, Director of the company, has admitted in his statement recorded during the course of survey on 13/7/2020, that at the close of the financial year on 31/3/2020, physical verification of stock was not done, nor any list based on cost price was prepared. He further admitted that the profit is estimated after applying assumed GP rate based on the profit rate declared in preceding years and the balancing figure is taken as closing stock. That apart, during the course of survey, incriminating papers were found and impounded (Exhibit 3 of Annexure AS), in which unaccounted expenses were found mentioned. Further, incriminating papers of unaccounted sales were also found and impounded as per Exhibit AS/1, AS-2, AS-3, AS-6, AS-11 and AS-13 during the course of survey. From the above facts, it is noted in the assessment order that the books of account maintained by the assessee are not reliable and the same cannot be taken to be conclusive and, therefore, it is a case to which the provisions of Sec. 145(3) are attracted. In view of the defective nature of books of account maintained by the assessee, the same were rejected by invoking Sec. 145(3) in the assessment order.
(x) The learned AO has also noted that the stock lying with the showrooms/branches and overseas consignment agents is owned by M/s AJPL, as no sale bills are issued while dispatching the goods to the branches, showrooms and consignment agents. As regards the franchisee stores, initially the jewellery items are dispatched through challans and after confirmation by the concerned franchisee, final sale bill is issued by M/s AJPL. Thus, on a given date, unbilled jewellery is also lying as stock of M/s AJPL with varous franchisee.
(xi) The brief facts as stated by Shri Rajesh Ajmera in his statement as extracted in the assessment order on page No. 30 are reproduced hereunder, for ready reference: -
(i) Shri Rajesh Ajmera had stated that no stock register in respect of the raw material and WIP is maintained by M/s AJPL..
(ii) The quantitative details of the finished goods i.e. the items of jewellery are maintained in the customized GST billing software, which consist of the details of each item of jewellery viz. items no., description, weight of the items consumed and selling price of each item. Further, these details are stored online on i-cloud.
(iii) No details in respect of the cost of jewellery items are maintained by M/s AJPL.
(iv) During the course of survey, the books of accounts for the year 2019-20 were found incomplete and hence the closing stock of M/s AJPL as on 31.3.2020 had 61 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT not been computed. Since, the opening stock as on 01.04.2020 was not known, the books of account for the period from 01.04.2020 to 13.07.2020 were also not complete. In these circumstances, the stock as on the date of survey i.e. 13.07.2020 as per the books of a/c, could not be computed during the course of survey operation.
(xii) The main issues which arise in the present ground of appeal are as under
(a) valuation of the stock, and
(b) applicability of section 69B of the Act on the excess stock found during the course of survey
(xiii) The valuation of the stock was done by the official valuers during the survey.
The valuation was done using different approaches by the different valuers. The appellant has filed various objections regarding the approach adopted by the official valuers. The appellant has also filed his own valuation report obtained after the conclusion of the survey from the valuer appointed by the appellant.
In this regard, some of the important facts regarding the business of the appellant which are relevant to the present proceedings as understood from the records and as explained by the learned ARs during the course of hearing are as under:-
A. The appellant is a manufacturer as well as trader in jewellery as per the financial statements whereas as per the tax audit report the appellant is only into trading. There is no explanation regarding the nature of products in terms of design, quality, workmanship, machine requirement etcetera between the purchase jewellery and the manufactured jewellery. There is no separate maintenance of record in this regard. From the financial statements it is seen that the appellant is also into handicraft items. Appellant purchases the jewellery from the related parties of the appellant as well as some independent parties in the market.
B. The purchases are done in a general manner i.e. in the invoices there is no item wise description regarding the design, item code, mix ratio of the metals, net weight of gold or other precious stones etc. C. The appellant is known for high quality of the finishing and designs in the jewellery market. Thus the cost of designing as well as the cost of labour and the high-tech machinery etc. which goes into making the jewellery and also the implied cost charged by the manufacturers and the designers of keeping such designs unique from other sellers are the major components of the purchase cost. The matter gets complicated as some of the manufacturing is also shown by the appellant however there are no details of the kinds of items manufactured by the appellant and the type of qualitative component going to the same in comparison to the items purchased by the appellant. There is no separate record of purchased and manufactured items. Manufacturing account is not prepared by the appellant.62
ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT D. The appellant does not sell the jewellery in a traditional way whereby the gross and net weight of each item of precious metal, stones and there carat and quality etc. were used to be mentioned and value for the each item was calculated based on prices on that day and further on that value, making charges per gram or in percentage were added. The appellant sells the jewellery on the price assigned by them and is referred by them as the Tag Price.
Considering the business model of the appellant which is design and high finishing oriented and the sales are affected on price per item basis and not on the basis of cost of raw material plus making charges the appellant is able to generate good percentage of gross profit.
E. As submitted by appellant ".....there are tens of thousands of items of individual jewellery and other items which are all unique and idiosyncratic in their size, shape, content of metal, value of design, value of labour, marketability, appearance and class of customers." The appellant has also submitted that each item needs to be valued independenly, as "each item is unique and combination of difference contents of metals". However the appellant does not maintain any record of exact quality and quantity of each metal and each stone type along with colour, size, clarity etc., value of design value of labour etc. for each unique item of the jewellery. Neither such details are mentioned in the purchase bills nor in the sales bills.
The appellant has in the context of rejection of books of accounts has also stated that "in this regard, it is humbly submitted that it is not possible to maintain item wise list of inventory due to voluminous items F. Jewellery items can also be mixed to create a one set of jewellery. For example, one jewellery item from one purchase bill and another jewellery item from another purchase bill and the third jewellery item from some other purchase are combined together to make one single jewellery set to be sold under a single item code and tag price. Even though such purchases may be from the same manufacturer.
G. After the purchase is done some codes are assigned to each jewellery by the appellant and in this regard, no linkage is maintained between the purchase bill and the item code of the appellant. And from the ledger or the financials there is no way back to reach the exact purchase invoice with respect to one item code jewellery in the list.
The appellant submitted that "Assessee has already submitted vide para no. 3 of reply dated 20.12.2023 that purchases are generally made in bulk quantity and consolidated market rate charged by the supplier. Copy of purchase ledger along with sample invoices were also submitted. It is not possible to track the particular invoice for a particular item number as purchases were made in bulk quantity and unique item code was assigned afterwards.".63
ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT In the audit report on page 36-PB-Vol.1, it has been stated by the auditor w.r.t. ICDS-II that "the stock items are not ordinarily interchangeable".
H. The appellant has submitted that the item code of each jewellery shows the year of the purchase. This is not a standard or common practice of the jewellery industry. Also it is seen that the number of items such numericals are not mentioned. The details in the software have never been submitted before the Department in earlier years. Such details as available in the software are not available for the earlier years. There is no linkage of the purchase bills with the so- called item code given by the appellant. Similarly there is no linkage of the purchase bill and sale bill. Most importantly the regular practice followed by the appellant is that the closing stock figure is taken as the balancing figure after arriving at an estimated gross profit figure by the management. Such statement has been made for the first time during appeal and has never been examined by the learned assessing officer and there is no application of additional evidence in this regard, the same is hereby discarded.
I. In the past years the appellant has not carried out an item wise valuation and the valuation has been done on averaging basis. This is also admitted by the director of the appellant company in the statement recorded during the survey. It is undisputed that the valuation report of the earlier years are not available.
J. List of items in the inventory is shown in the excel file provided during the survey. However this excel file never formed the basis of quantitative details and valuation of closing stock in the Income Tax proceedings as such details are nowhere disclosed. This excel was used only for sales pricing etc. and item quantitative control on staff. In the tax audit report no quantitative details are mentioned. This list is in the nature of undisclosed records or incriminating material unearthed during the survey.
(xiv) The appellant has claimed that the valuation should have been by the official valuers for each item separately of the taking into consideration the exact details of various metals which have gone into that item, the quantity colour cut clarity etcetera of the different kinds of stones studded in the jewellery, the designing, the nature of finishing, the quality and quantity of workmanship, the date/time of purchase of such jewellery item etcetera.
The appellant has also contended that where the valuation has been done by the official valuers assigning value to various raw materials of the jewellery, the gold price and silver price on the date of survey should not have been taken and the cost price of the metals should have been taken for the purposes of section 69B of the Act. This section reads as under:-
"Amount of investments, etc., not fully disclosed in books of account.64
ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT 69B. Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable article, and the Assessing Officer finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year"
(emphasis supplied)
(xv) This section brings to charge to tax the amount expended on making or acquiring unexplained investments etc. Accordingly the contention of the appellant is correct that the market price the gold and silver which is the raw material which has gone into the jewellery, their price on the date of survey cannot be considered for making addition under section 69B of the Act. However at the same time, there is no identification and quantification and the quality details of the workmanship, design, man hours, intricacies, machine technology used, etcetera. In case the appellant has an understanding with the supplier that similar design would not be supplied to any other trader that would lead to increase in the cost substantially as the manufacturer will not be able to replicate the design and the entire cost of designing and workmanship etcetera of each design has to be recovered from sale to the appellant only. This is for the reason that no such details are maintained by the appellant and were not provided during the course of survey. The valuation arrived at in the survey is thus does not include an important and crucial part of the cost as there as there is no quantification and the valuation and the above qualitative and quantitative aspects. Thus the raw material approach based valuation is not suitable to the facts of the case.
(xvi) However as briefly discussed in the pre-paragraph the appellant has itself never ever maintained such kind of valuation in any year as is admitted by the director of the appellant company during the statement recorded during the survey. Further such kind of item wise details are not maintained by the appellant. Only some part basic details are maintained which are non verifiable and cannot be linked with the purchases bills and that too maintained only in their internal software which is used for the purposes of non-income tax purposes. It is undisputed that the stock register is not maintained by the appellant.
(xvii) Further the purchases are done by the appellant without reference to such kind of details meaning thereby that the valuation at the time of purchases is also not done by giving separate value to each component of the jewellery as has been referred by the appellant that the official valuers should have done. Similarly the sales are also not done by the appellant mentioning all those parameters and the sales are done on the basis of prices assigned by the appellant to the each composite unit.
65ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT The items are not similar to each other and are different in terms of the raw material and the workmanship and the design etcetera. The appellant itself has also stated that "there are tens of thousands of items of individual jewellery and other items which are all unique and idiosyncratic in their size, shape, content of metal, value of design, value of labour, marketability, appearance and class of customers.
(xviii) Even though the appellant has furnished one valuation report which has been obtained by the appellant from the valuer appointed by it after the conclusion of the survey, such valuation report suffers from similar kind of alleged infirmities which the appellant has highlighted in its objections against the valuation done by the official valuers. There is no item wise linkage to the purchase bills. The appellant purchases the stock from different suppliers. There may be or may not be items in stock which are manufactured by appellant itself. Further there is no identification and quantification and the quality details of the workmanship, design, machine technology used, etcetera. All these are very subjective elements of the cost and there cannot be any standard formula. In case the appellant has an understanding with the supplier that similar design would not be supplied to any other trader that would lead to increase in the cost substantially as the manufacturer will not be able to replicate the design and the entire cost of designing and workmanship etcetera of each design has to be recovered from one party sale itself. One jewellery designer may charge X' amount for designing one particular type of jewelry and other designer may charge 'Y' amount for designing similar type of jewelry and some other designer may charge some other amount for designing similar type of jewelry. Similarly the workmanship charges etcetera can differ from manufacturer to manufacturer. For example, cost of a silk saree cannot be determined merely by valuing the rate of silk thread gone into making of that saree. The valuation depends on number of factors like the design, the intricacies, the technology used, whether handmade or machine made, whether handpainted or machine printed, whether having hand thread work or machine work, etcetera. For all kind of hand works the cost would be significantly more and differ from artisan to artisan. Similarly for example, cost of a painting cannot be determined merely on the basis of quantification of the quantity of different kind of paints which have gone into making of that painting.
(xix) Taking into the unique proposition and design and the finishing of each item of the appellant as discussed in detail above, and keeping in mind the profitability of the appellant which naturally comes from the design and making elements, it can be stated that the charges over and above the cost of the raw material would be very much significant and high that in the items purchased by the appellant almost 40% to 50% of the purchase cost would be on account of designing and making and the charges over and above the cost of the raw material. Such charges are likely to be higher in the gold items in comparison to silver items in view of the normal market fact that silver items are usually heavy whereas minimum amount of gold used is given the maximum spread and description in the gold jewellery which requires more time and better skill etc. 66 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT (xx) Valuation report of the valuers of the appellant:
The valuation report prepared by appellant's valuer and submitted by the appellant at volume 2,3,4 of the paper book has been perused on sample basis. As is seen from the beginning of the report itself, no cost valuation has been done with respect to the design, workmanship of different categories as it is a matter of common understanding that different specialists or artisan are involved in jewellery making. This issue has been discussed in detail in the earlier part of this order also. Further in terms of the raw material which has gone into the items the appellant has only mentioned 'Stone' or 'Pearl' or 'Diamond'. No details are mentioned regarding the cut, colour, size etcetera. For the stones there is no mention of even the type of stone used. Similar is the case with the pearl. It is a matter of common knowledge that for example diamonds' values vary very much significantly depending upon the associated factors and the appellant's valuer has not quantified these factors and has not thus assigned any value. Further in terms of size itself if 0.1 carat of Diamond costs X amount per unit, the 1 carat of Diamond will not cost simply 10X but may cost 100X or 200X amount per unit. Further the different mix of metals and the technology and the machinery used etcetera are not considered in the valuation report. In the valuation report, in the description column, very general description has been given like Gold stone ring, Gold stone bangle etc. and there is no reference to the particular design category, name of the manufacturer, name of the supplier entity, name of the designer and the artists who made the jewellery item, etc. The appellant itself has stated that ".....there are tens of thousands of items of individual jewellery and other items which are all unique and idiosyncratic in their size, shape, content of metal, value of design, value of labour, marketability, appearance and class of customers." The appellant has also submitted that each item needs to be valued independenly, as "each item is unique and combination of difference contents of metals". The valuer has not taken into consideration such uniqueness of each item in the valuation. All the items have been valued treating them to be same similar except in terms of weight.
(xxi) The valuer has been engaged by the appellant itself and the independence of the valuation cannot be fully relied upon. The methodology of the valuation is also not been stated in the valuation report. How the valuer has arrived at the figures of the weights of the stones and that the Diamond and the pearl and the gold etcetera? What is the basis of the taking rates for the stones, pearls and the diamonds etc. If the valuation has been done using the details mentioned in the excel sheet by the appellant in that case the valuation has not been done of the actual items but merely of the descriptions mentioned in the excel sheet. Further as seen on each page of the valuation report on the top right corner, the valuation purposes mentioned as 'market rate'. Hence on the one hand the appellant has found fault in the valuation of the official valuers that such valuation is at the market rate, on the other hand the appellant has also furnished the valuation at the market rate. Statement in this regard is also made at the bottom of the page. Further the 67 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT valuation done of various items is also contradictory to each other. For example at page 784 of the paper book, there are some silver items of the gross weight 10.000 gms. Some of the items have been valued by the valuer at 411 per item and two items of same weight have been valued at 937 per item. Similar situation is seen in other items of the report. The appellant has not produced any valuation report of similar nature of having done such valuation in the past. Further the net gold weight is also different in the valuer report of the valuer of the appellant whereas the official valuers had adopted the gold content value as reflected in the excel sheet of the appellant. The possibilities of items getting changed after the survey and till the valuation by the appellant's valuer cannot be ruled out. Further, the appellant if was not satisfied with the valuer report of the official valuers, was required or could have highlighted and reconciled the difference in the valuation for each item along with supporting and evidences for challenging the valuation of the official valuers. However no such item wise reconciliation has been done. In view of the above detailed discussion, the valuer report of the valuers of the appellant is hereby rejected.
(xxii) The proposition of the appellant on how the valuation should have been done is impractical and not possible in view of the facts of the case and the extent of documentation maintained. It is the settled law that no one can claim benefit of its own wrong. In view of the above discussion, the approach of the valuation of the stock as proposed by the appellant is hereby rejected. The official valuers in the valuation have adopted either the raw material valuation approach to the stock valuation and also at Panch Batti store adopted selling price minus gross profit-
based approach. The raw material ingredient-based approach valuation in the case of the appellant would show extremely high erroneous gross profit on sales on its comparison with the final selling price as such cost computation does not include some crucial components of cost like design, workmanship technology, man-hours etc.. The raw material approach based valuation of the jewellery stock adopted by the official valuers in some of the valuation and proposed by the appellant are not found suitable and cannot be determined in the present set of facts as reasonably correct valuation cannot be arrived at and this approach invariably leads to materially and substantially incorrect results in the present case and is rejected. Considering the facts of the case, the practice regularly adopted by the appellant in earlier years, the acceptable practices, the extent of documentation available etcetera - it is found to be most reasonable that the valuation of the stock of the appellant is done by the averaging-based approach. Such approach is more suitable in the present set of the facts when each item is differently made in terms of various quantitative and qualitative factors and no stock register is a maintained and no sales Bill and purchase bill linkage is maintained and assessee itself also follow the gross profit-based averaging method in the earlier years etcetera. The averaging-based approach is hereby upheld and is directed to be applied with respect to all the locations where the valuation was carried out by the official valuers. The calculation is in this regard are subject to discussion in the following paragraph. One variant of such approach (taking selling price minus profitability) 68 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT has also been adopted in valuations done by the official valuers during the course of survey at the Panch Batti Store.
(xxiii) The appellant has in the submissions filed objections against the valuation done at the Panch Batti Store. The objections are mainly that the valuation should have been done itemise and component-wise using the raw material component- based approach. This proposition of the appellant has already been rejected in the earlier paragraphs. Secondly the appellant has objected that the valuation of the stock is to be done at the cost and as the inventory of the appellant also has old items which were acquired cheap due to the lower metal prices, the appellant has claimed that deduction on account of increase in metal prices should be done. Thirdly the appellant has objected to the rate of 67% applied on the tag price at Panch Batti Store to arrive at the cost.
(xxiv) In the present case, the tag price can be considered the selling price with respect to the retail sales, however the sales of the appellant has retail sales as well as wholesale sales. As per the survey statement of Shri Rajesh Ajmera, substantial discount is given to the franchisee stores and resellers. As such it cannot be held that the sales in the earlier periods as reported in the financial statements were only billed at the tag price. Thus the gross profit ratio of the appellant is after considering both retail sales (made at the tag price) as well as sales to the franchisee and other shopkeepers etcetera (selling price to these buyers is that discount on the tag price). However the exact discount percentage data in this regard is neither claimed to be have been furnished before the assessing authority nor the same is anyway stated to have been verified.
To apply the gross profit ratio of the appellant on the sales value, to reduce the gross profit from the sales value, to arrive at the cost it is necessary to first arrive at the sales value of the items in stock i.e. the sales value which the appellant would get if the items are sold with the same quantitative and pricing (and discounting) patterns which was there in the earlier year on average basis, which has yielded the gross profit ratio of 30%. However such details are not available to arrive at the said sales value of the items in the inventory.
(xxv) In continuation, the other way to look at it is arriving at the cost price of the items vis-à-vis the excel sheet price. It is stated by the appellant's director in the statement that the items are transferred to the branches at a price which is 30 to 50% below the tag price and the same can be considered the cost of the items. The statement is applicable to all kinds of items of the appellant. This has not been doubted or controverted in the assessment order. There is no retraction by the appellant. For the first time in brief submission dated 01.03.2024 in the appeal proceedings the appellant has commented on the same and the submission is vague and irrelevant and found to be self-serving statement. There is no documentary support with this submission. In such a scenario and in view of the lack of documentation maintenance from the appellant, it is reasonable to use the mean and median rate of 40% to arrive at the cost (thus the cost being 60% of tag 69 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT price) of the items which are purchased by the appellant. Considering the facts of the case in totality. I consider this percentage rate to be appropriate. In other words, if an item is purchased by the appellant today and the same is transferred to the branch today, the appellant would transfer it at 40% below the tag price on an average. One of the official valuers at Paanch Batti Store had applied rate of 67% on the Tag price for gold items to arrive at the cost price thus allowing a deduction of 33%. Accordingly the appellant gets partial relief in this regard. At the same time some other valuers had applied the raw material-based approach which has been found to be giving lesser than real valuation of cost and not suitable as discussed in above paragraphs. Appellant has inter-alia contended that same or uniform approach should have been used by the official valuers when doing the physical valuation of the stock. The averaging based profit calculation and stock valuation practice regularly followed by the appellant from year to year has also been considered. The valuation method of tag price less 40% has been found to be most suitable. Accordingly, the uniform rate of 40% is to be used to arrive at the cost (thus the cost being 60% of tag price) to arrive at the stock valuation of the stock at all the premises in Jaipur (K-14B, Ashok Marg, C- Scheme Jaipur, Tholia Mansion, Panch Batti, M. I. Road, Jaipur) for all the items purchased recently. The issue that valuation can be done using this rate (subject to issue of increase in metal prices which is discussed in next para) in the above factual background was queried during hearing on which the Id. ARs submitted arguments. The main contention on behalf of the appellant is that in the statement Sh. Rajesh Ajmera initially stated that the cost can be less than this and in the next question he accepted and confirmed that the same can be considered as the cost thereby that some further reduction is possible below this 60% (as arrived above) and that the statement should not be used to arrive at the cost. The appellant/ld. ARs has filed submission on 01-03-2024 on the issue of statement of Sh. Rajesh Ajmera as discussed above. Appellant itself has never submitted a valuation which meets and satisfies various issues raised by appellant itself and is based on documentary evidences. Only objections are being raised. Whereas onus is on the appellant to come clean and place on record a genuine and bonafide valuation which is complete in all respects and is duly supporeted with documents. The contentions of the appellant in submission dated 01-03-2024 are found to be devoid of merit as the statement of the director of the company is very clear and no retraction was filed on this issue and no better exact percentage working has been worked out by the appellant to rebut or counter the rate proposed. These aspects and the most reasonableness of the approach adopted in arriving at 60% ratio as discussed above have also been discussed in earlier part of the discussion. Also, statement recorded in the survey has significant evidence value. In this regard following judgements are referred to.
In the case of Bachittar Singh v. Commissioner of Income-tax [2010] 328 ITR 400 it is held by the Hon'ble Punjab & Haryana High Court as under:-
x x x x Dr. S. C. Gupta v. CIT [2001] 118 Taxman 252 (Allahabad) 70 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT x x x x The Hon'ble Delhi High Court in the case of Raj Hans Towers (P.) Ltd. v. Commissioner of Income-tax-V [2015] 56 taxmann.com 67 (Delhi)/[2015] 230 Taxman 567 (Delhi)/[2015] 373 ITR 9 (Delhi) [27-01-2015] held that where the appellant had not offered any satisfactory explanation regarding surrendered amount being not bonafide and it was not borne out in any contentions raised by the appellant, additions made after adjusting expenditure were justified. The relevant para of the judgements are as under:-
x x x x In the case of Pebble Investment and Finance Ltd vs. ITO in ITA No. 988/2004 it is held by the Hon'ble Bombay High Court as under:-
x x x x Accordingly the contentions of the appellant in this regard are rejected. Issues regarding the valuation of items of the branches (Delhi / Mumbai / Bengaluru etc.) have been dealt with separately in this order.
(xxvi) Issue of reduction in the valuation on account of increase in prices of gold and silver and the description of item codes:-
In the submissions the appellant has repeatedly and vehemently asked for the reduction in the valuation of the closing stock on account of the increase in the precious metals prices on the date of the survey in comparison to the prices of the precious metals (gold and silver) in the earlier period. In this regard the claim of the appellant is that since the items were purchased in the past when the gold price was lower and when presently the valuation is being done the precious metals prices are higher, hence the old gold prices and silver prices should be considered for the valuation of the closing stock.
(xxvii) Firstly, the appellant does not maintain the valuation of the stock on the basis of the latest market price so that it could claim the reduction in the valuation on account of the increase in the precious metal prices. The appellant has not maintained the stock register etcetera and the cost valuation has been done in the past on the basis of averaging and balancing figure in the trading account after estimating the gross profit for the year. The appellant has in a brief submission claimed that the item code includes the number code of the calendar year of purchase of the item. The appellant has also submitted that in the earlier years such year codes were not mentioned in the item codes. As per the appellant itself on some items such codes are mentioned and on some items such codes are not mentioned. Also, this contention of the appellant is a fresh factual contention. No additional evidence application under Rule 46A has been filed in this regard. It has not been shown that such modus operandi was explained during the survey or any time thereafter to the investigation wing or any time thereafter to the learned assessing officer. Further the submission on this issue by the appellant is only in terms of the statement of the appellant without any supporting evidences in terms of purchase bills showing the item codes etc. Further the appellant has also not 71 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT furnished the old inventory sheets (or old software downloaded excel files) to show the item codes in the earlier years. In fact it is the stand of the appellant that physical stock taking was never done earlier. At the same time it has been verified that the excel sheet downloaded from the software is not available for the earlier period. Further, no separate year stamping or year sticker is pasted on the items.
Also it has been found in decision in this order on grounds of appeal number 11 to 13 that apparently the item code represents the design code and thus even going by the argument of the appellant, without accepting, the year in the code would represent the year when this design was designed and incorporated in the records of the appellant and not the year of the purchase of the item. Accordingly this claim of the appellant is rejected. The relevant facts as discussed above are not repeated here for the sake of brevity. Accordingly, considering the facts and material on record, and applying the reasonableness approach, it is hereby held that the stock items found during the survey were purchased on the basis of the averaging of the items in terms of first in first out.
In the case of Jewellers Co. v. Income-tax Officer [1987] 23 ITD 532 (Allahabad)/[1988] 30 TTJ 54 (Allahabad)[19-05-1987] it has been held by the Hon'ble ITAT that "FIFO assumption approximates more closely to the reality". Hon'ble ITAT also referred to Kanga and Palkhivala's" The Law and Practice of Income-tax', Seventh Edition, Volume 1. An extract of the judgment is as under:-
x x x x Secondly, in the averaging approach which is being used in the case of the appellant for the valuation of the stock as has been discussed in detail in the earlier paragraphs, the valuation is being done on the basis of cost price as a certain percentage of the tag price. In this approach, the appellant needs to prove that the tag price was being revised regularly as per the increase in the prices of the precious metals, before the claim of deduction on account of increase in precious metal prices is being claimed. However the appellant has not shown so. The appellant is having thousands of items. The appellant has claimed that the prices were manually updated in the software even during the Covid 19 period. The appellant is not having any set formula which can be applied to the weight of the item and the market price of metal to arrive at the final selling price. There is no such automation built into the software. Further, as submitted by the appellant each item of the appellant is claimed to be unique and is having unique mix of metals and composition of stones and designs etc. and thus such automated formula is not possible. Help of the staff is also needed while updating the prices of items in the software however during the start of the Covid period April to Jun 2020 lockdown was in operation and social distancing norms were in force and there was uncertainty or anxiety in social environment. This completely makes the claim of the appellant unnatural and improbable that the prices were revised even during the Covid period in April to June 2020. In the statement of the director of the company, Shri Rajesh Ajmera, there is reference to the sales invoices wherein the items have been sold above the tag price which shows the final selling price may be above the tag price in some cases. The books of accounts where only few entries were to be done are also found to be incomplete for the Covid period then 72 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT how thousands of entries could have been done regarding the prices. During the Covid period the trading activity was also at the minimum. Further the appellant was not also maintaining the stock registers etc. no evidences have been furnished by the appellant that such price revision was done and this is a mere self-serving statement. Accordingly this claim of the appellant that prices were revised even during the Covid period till/before the date of survey (23 March 2020 to 12 July 2020) is hereby rejected.
The appellant has also stated that "107 It is also submitted that Shri Rajesh Ajmera, director of Appellant Company has also denied/not satisfied with valuation done by the department valuers in the answer of Q. No. 39 of his statement recorded u/s 131 of the Act. (Page no. 138-139 of PB Vol. 1). He also highlighted that stock is valued at current market rate however, the goods in stock were purchased in last 4 years which rate is 33% lower than current market rate and also there are many items which are not owned by the Appellant Company in the stock. The relevant extract of statement is reproduced hereinunder:" However no details of such items in stock out of purchases in last 4 years were furnished neither before the ld. AO nor in the appeal proceedings. Further the claim is very general as old itmes in stock (if any) would not be out of purchase on a single day/month but spread over different periods.
(xxix) Also considering the first in first-out method as discussed above, the time band during which the entire stock of the appellant is sold is in the range of 7 to 8 months (referring to the stock turnover ratio taking the cost of goods sold) for which the metal prices may require consideration. Considering the normal practice in the jewellery industry in the averaging based LIFO based valuation regarding the valuation and as is also explained by the learned ARs, the appellant is entitled to deduction on account of increase in metal prices only in the averaging based LIFO based valuation. The average monthly gold prices as per the RBI chart submitted by the appellant are as under:-
73ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT The average of the above comes to 39402.63 i.e. the gold metal prices w.r.t. the purchases of the appellant during this period. The average price of March 2020 is more by 7.316% over this average price.
Also, if looked at from the contribution of such matters in the overall cost on average basis, the cost of metals is only one factor and there are other factors also which are very crucial and material like the prices and value of diamonds, cost of designing, cost of workmanship etc. Further, from the RBI average monthly prices submitted by the appellant it is seen that prices of silver have not moved much in the year 2019-20. However at the same time gold items constitute the significant majority in the stock in terms of value. In the earlier paragraphs above, the rate of 40% deduction has been found to be reasonable and as well as arising from the evidences. In view of the above discussion, on the issue of increase in metal prices, old items and any other issues which have been taken by the appellant, it is hereby held that the rate of 47% deduction from tag price/excel sheet price would be very much appropriate and this would take care of all the contentions of the appellant.
(xxx) Considering the facts of the case, statement of the director of the company and the submissions of the appellant and the analysis above, tag price minus 47% is held to be the cost of the stock items. This is held to be the method for the valuation of the stock at Jaipur locations (HO, Showroom etc.). This also takes care of the various objections of the appellant against the prices of the precious metal, stones etcetera taken by the official valuers in the valuation reports. Since the complete data of tag prices having been verified by the learned assessing officer, is not available on the appeal file, learned assessing officer is directed to calculate out the cost and valuation of stock in accordance with the finding in this order. The appellant has also raised the issue of tag price has been taken erroneously in some of the items, learned assessing officer is directed to verify the same from the original record of tag prices/excel sheet prices as obtained during the survey and use the correct tag prices. Appellant, if desires, may make submission before the Id. AO regarding the tag prices / calculation.
VALUATION OF STOCK AT DELHI, MUMBAI AND BENGALURU:
(xxxi) The appellant has contended that Ld. AO has opted for different valuation method to value stock for different branch. For instance, for Delhi Branch, the basis of valuation is computerized excel sheet provided by the Appellant during the survey proceedings. As per the excel sheet the value of stock was Rs.
25,59,78,648/- and Ld. AO picked the total of such prices as value of stock at Delhi branch. As stated by the director of the company in the statement that items transferred to the branches are transferred and recorded at the cost. As stated in the assessment order "In the books of a/c of the Branches, goods received from HO are shown as branch transfer purchases and goods returned back to HO are shown as Branch transfer sales. The sales made to customers and the expenses of the branch are also booked in the books of the respective branch. Opening stock and closing stock of the goods lying with branches are also shown in the Trading 74 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT accounts of the Branches at the transfer price of respective items of jewellery. It is an admitted fact on record that the jewellery / goods are dispatched to branches after making deduction of 30% to 50% from the tagged sale price. The appellant has contended that for Mumbai and Bangalore branch, Appellant has provided similar excel sheet of Rs. 35,58,12,452/- and Rs. 12,90,41,131/-respectively (Refer page no. 41 and 50 of AO order), however, Ld. AO has not considered the same for valuation rather picked high value from incomplete tally, which was not regular tally, and valued the stock at Rs. 53,62,45,741/- and Rs. 16,51,51,691/- for Mumbai and Bangalore Branch. It is thus not clear that the excel sheet and prices w.r.t. Bengaluru and Mumbai locations were also found during the survey or were submitted by the appellant later-on and in that case such excel files cannot be relied with supporting underlying verifiable documentation. The summary of the contention of the appellat in terms of valuation is as under:-
The appellant has concurred with the approach of the learned assessing officer with respect to the valuation of the stock at the Delhi branch. The appellant has contended that similar method of taking the tag price should have been used by the learned AO to calculate the cost of the items in the Mumbai and Bangalore branch. Appellant has contended that the tally data which Ld. AO has relied upon is incomplete tally data impounded from the computer of Shri Rinkesh Jain and Appellant has already highlighted the instances which shows that the tally relied upon by the Ld. AO is incomplete vide its letter dated 23.12.2022. The appellant has highlighted such instances as under:
• The balance sheet itself shows the opening balance difference of 72.26 Crore.
• Depreciation entries are not passed in the books, it shows that data considered is incomplete and cannot be relied.
• There is variance in Sundry Debtors and Creditors as on 31.03.2020 as per audited financials as appearing in regular Tally maintained. • During the course of consolidation of account of each and every branch with Head office, Inter branch transactions are to be nullified in the tally and stock held at branches to be merged with Head office account so that actual position can be derived, but in the tally relied by Ld. AO, inter branch transaction were not nullified.
• Certain stock transfer entries and sales and purchase entries are not entered in the above tally.75
ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT (xxxiii) The appellant has also submitted that in Annexure 1 cost value of stock as on March 2020 was taken as basis and after making certain adjustments, cost is arrived at which is in sync with cost already submitted by Appellant. The Annexure 1 is submitted by the appellant in the letter submissions which is as under:-
Alternative Computation of Stock as on 13.07.2020 as per books of accounts of Mumbai and Bangalore Branch (xxxiν) The appellant in the brief table of the summary of the issues raised against the valuation at each location has also raised the issue that for the branches in Delhi, Bengaluru and Mumbai also the data provided in the excel sheet represents the selling price and not the cost price. This appears to be a new ground as no such issue is mentioned in the assessment order. No evidences like matching sales invoices have been filed to prove the same. No application for additional evidence has been filed. At the same time this is in contradiction to the statement made by the director of the company during the survey.
The total of excel sheet price value of Delhi, Bengaluru and Mumbai locations is Rs. 74,08,32,231 (25,59,78,648 12,90,41,131 35,58,12,452) and the total cost value as claimed by appellant at each of these locations is around Rs. 52,80,43,075 (18,75,87,847 +9,19,85,062 + 24,84,70,166). The total of the cost vis-à-vis total of excel sheet value at these locations is 71.28%. As per this rate of 71.28%, the total cost value at HO and Panch Batti works out to Rs. 205,28,38,696 on the excel sheet price value of Rs. 287,99,64,500 which would lead to higher addition in terms of undisclosed stock at Jaipur locations. However 71.28% gives a G.P. Rate of 28.72% on tag price whereas discounts on wholesale/franchise sales is also given on excel sheet prices. Hence the claim of the appellant that excel sheet price reflects the selling price even in case of branches is incorrect and is rejected. It is hereby clarified that the data used in this sub-para are from the submissions of the appellant and not from the verified data from the Id. AO and are thus subject to verification by the Id. AO.76
ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT This claim of the appellant that the tag price is not the transfer price but is the selling price in the case of the branches is rejected as this appears to have been made for the first time in the appeal proceedings and only brief submissions are made and further the same apparently has not been verified by the learned AO and there was no additional evidence application in this regard and further in the submissions the appellant has not referred to the statement of the director during the survey where he has very categorically stated that transfer to branches is done at the cost price and also categorically stated that the values in the excel file with respect to the branches show the cost price or the transfer price. This statement has been relied upon by the appellant also in the submissions and has also been referred in the assessment order.
(xxxv) From the perusal of the details submitted by the appellant and the findings in the assessment order, it is observed that no physical verification of the inventory was done at the branches and further that the learned assessing officer has taken the value of the closing stock for the Mumbai and Bangalore branch as per the documents found during the course of survey. The assessing officer is entitled to use such document found during the course of survey against the assessee until or unless such document is sufficiently proved baseless and wrong by the assessee. In this regard reference is made to section 292C of the Act which is as under:-
Presumption as to assets, books of account, etc. 292C. (1) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search under section 132 or survey under section 133A, it may, in any proceeding under this Act, be presumed-
(i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;
(ii) that the contents of such books of account and other documents are true; and
(iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.
(2) Where any books of account, other documents or assets have been delivered to the requisitioning officer in accordance with the provisions of section 132A, then, the provisions of sub-section (1) shall apply as if such books of account, other documents or assets which had been taken into custody from the person referred to in clause (a) or clause (b) or clause (c), as the case may be, of sub-section (1) of 77 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT section 132A had been found in the possession or control of that person in the course of a search under section 132 (xxxvi) It is undisputed that the tally accounts books which is relied upon by the learned assessing officer was found in the premises of the appellant and further that it is also not disputed that such document was prepared by the employees of the appellant company. The limited contention of the appellant is that such document was incomplete. The possibility of tally software showing higher stock in terms of value than the excel sheet provided by the appellant even after making the pending entries in the tally software, cannot be ruled out. Tally books are financial records whereas the excel sheet is never earlier submitted in income tax.
(xxxvii) The onus is completely on the appellant. However the appellant has merely stated some vague & irrelevant discrepancies in the tally data which have not been gone into. Supporting documents have not been provided by the appellant. The appellant cannot shrug off the onus merely by highlighting some vague and irrelevant incompleteness in the books of accounts found during the course of survey specially in a scenario when the document was prepared by the appellant and is owned by the appellant and there is no dispute in this regard and that the appellant is in a position to complete such document. For example, depreciation has no impact on stock valuation. The assessing authority cannot be expected to know the correctness or otherwise of the incompleteness highlighted by the appellant. In such a scenario it was incumbent upon the appellant to reconcile the books with the missing entries and complete the same and submitted the entries passed in the tally software to complete the incompleteness before the learned assessing officer for his verification along with the supportings. Further the analysis prepared by the appellant as referred as Annexure 1 in the paragraph above is based on the closing stock as on 31 March 2020 whereas on the date of the survey the stock of 31 March 20 was also not quantified and not valued and as such the stock on this date is also un verified and cannot be relied upon. The appellant itself has stated some other part of the submissions that addition has been made by the learned assessing officer in the earlier years on account of the gross profit due to which the value of stock has increased and such orders have been challenged by the appellant before the honourable High Court in the writ petition. Accordingly the reconciliation submitted by the appellant in the Annexure is also not reliable and is rejected.
In view of the above discussion, the value adopted in the assessment order with respect to stock at Delhi, Mumbai and Bengaluru is hereby upheld.
STOCK ON CONSIGNMENT:
(xxxviii) The company M/s AJPL is also sending goods on consignment basis to UK and USA. The goods lying with the consignee remains property of M/s AJPL till the goods are sold by the agents to third parties and the sale is booked by M/s AJPL. As per the Tally books of a/c for the period from 01-04-2020 to 13-7-2020, the appellant had sent jewellery for sale on consignment basis, as under:-78
ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Stock lying with Amrapali Inc. USA 1,19,69,563 Stock lying with consignment agents at UK 11,64,46,108 The above was taken by the learned assessing officer as part of the actual stock of the appellant on the date of the survey. Appellant has briefly challenged this issue in the appeal. No reconciliation has been filed. No account confirmation, certificate from the auditors of the consignee etc. have been filed.
(xxxix) Stock lying with Consignment agents at UK:
The appellant has made brief submission on the issue. During FY 2019-20, certain unsold items were returned by Consignee which were earlier sent on consignment basis to UK, the same was not entered into tally due to sudden lockdown. The appellant has also submitted that supporting documents being Current ledger of consignment agent along with return invoice, bill of entry, airway bill are available on page no. 1034-1137 of PB Vol. 6. As per the details submitted by the appellant the items were received back on 13.05.2019, 18.09.2019, 23.12.2019, 29.01.2020. The lockdown was announced in the last week of the March 2020. Hence the argument of the appellant that these items were received back and not entered in the tally due to the sudden lockdown is devoid of merit. With respect to the first return, the appellant had more than 10 months before the lockdown. Hence these documents which are submitted by the appellant represented something else. The appellant also did not file any legally valid confirmation etc. from the consignee in the UK. Accordingly the finding of the learned assessing officer in the assessment order in this regard is upheld.
Appellant had provided list of items which remain unsold along with cost available with Amrapali UK Ltd. (Refer page no. 1129-1137 and page no. 941 of PB). It is also submitted that value of these items are already included in Stock with HO and contended that therefore, double addition should be deleted. However no where the appellant has shown any reconciliation along with supporting and item codes to prove this point that the items are already included in the stock inventory of the head office. Even in the appeal this has not been shown. Hence this ground is rejected and dismissed.
(xl) Stock lying with Amrapali Inc. USA:
The appellant has made brief submission on the issue. Appellant has submitted that items were returned by Consignee which were earlier sent on consignment basis to USA, the same was not entered into tally due to sudden lockdown. Supporting documents being current ledger of consignment agent along with return invoice, bill of entry, airway bill are available on page no. 963-1033 of PB Vol. 6. As per the details submitted by the appellant the items were received back on 7 August 2019, 1 October 2019 and 27 February 2020. The lockdown was 79 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT announced in the last week of the March 2020. Hence the argument of the appellant that these items were received back and not entered in the tally due to the sudden lockdown is devoid of merit. With respect to the first return, the appellant had more than six months before the lockdown. Hence these documents which are submitted by the appellant represented something else. The appellant also did not file any legally valid confirmation etc. from the consignee in the USA. Accordingly the finding of the learned assessing officer in the assessment order in this regard is upheld.
Appellant had provided list of items which remain unsold along with cost available with Amrapali Inc. (refer page no. 1032-1033 and 941 of PB). It is also submitted value of these items are already included in Stock with HO and contended that therefore, double addition should be deleted. However no where the appellant has shown any reconciliation along with supporting and item codes to prove this point that the items are already included in the stock inventory of the head office. Even in the appeal this has not been shown. Hence this ground is rejected and dismissed.
(xli) Stock lying at Doha Jewellery Exhibition:
The appellant has made brief submission on the issue. Appellant has submitted that during FY 2019-20, certain unsold items were returned by Consignee which were earlier sent on consignment basis, the same was not entered into tally due to sudden lockdown. Copies of ledger of Doha Jewellery Exhibition, return invoice, bill of entry for return of goods are available on page no. 1138-1146 of PB vol. 6.
As per the details submitted by the appellant the items were received back 21.05.2019. The lockdown was announced in the last week of the March 2020.
Hence the argument of the appellant that these items were received back and not entered in the tally due to the sudden lockdown is devoid of merit. The appellant had almost 10 months before the lockdown. Hence these documents which are submitted by the appellant represent something else. The appellant also did not file any legally valid confirmation etc. from the consignee in the UK. No where the appellant has shown any reconciliation along with supporting and item codes to prove this point that the items are already included in the stock inventory of the head office. Even in the appeal this has not been shown. Accordingly the finding of the learned assessing officer in the assessment order in this regard is upheld. (xlii) Stock lying with EPOCA Trade Ltd., Hongkong:
The appellant has made brief submission on the issue. As on 31.03.2020, there was balance of Rs. 31,091/ in the EPOCA Trade Limited Consignment Account however, there was no stock pending with them. This may be on account of certain charges which could not be credited in the absence of any statement from consignee. Later, the said amount is credited in the Consignment Account in FY 2020-21. Copy of consignment ledger is available on page no. 1147-1150 of PB Vol. 6. The appellant has contended that thus, the addition deserved to be deleted. As per the copy of ledger submitted by the appellant the entries in this regard has been done by the appellant on the date of 19 March 2021 which is almost one year 80 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT after the date of the survey. Thus it is indirectly admitted by the appellant that on the date of survey such items were not included in the books of accounts even though these should have been. Hence the action of the learned assessing officer in this regard is upheld.
Items at Museum (xliii) Shri Rajesh Ajmera in his statement recorded in reply to question number 38 (PB Pg 138) has stated that the items in the museum are not recorded in the books of accounts and are not recorded in the balance-sheet. This clearly shows that unaccounted stock was kept by the appellant. Further he also stated that value of such items belonging to the company should be added to the value of the stock of the appellant company.
The appellant has submitted that "Appellant submitted vide reply dated 11.03.2021 in which details of jewellery held at museum owned by directors, promoter, etc., were provided, however, the said fact was not appreciated".
The Id. AO has in thus regard stated in the assessment order that"
Only 2423.600 gms. of Gold items and 61.019 kgs. of silver items, as admitted by Shri Rajesh Ajmera in his statements recorded u/s 131 are to be considered as owned by M/s AJPL................ Accordingly, the value of the jewellery items owned by M/s AJPL comes to Rs. 1,09,06,200/- for 2423.600 gram gold items and Rs. 45,76,425/- for 61.019 kg. silver items. These figures shall be considered, while working out excess stock in the hands of M/s AJPL. From the submissions of the appellant in the letter dated 11.03.2021 referred by the appellant with the contention that the same should be considered by the assessing authority, it is seen that weight of the gold items owned by the appellant is different at 7630.3 grams and weight of the silver items owned by the appellant is 81259.31 grams (81.259 Kgs).
The appellant has in its fairness had mentioned the higher weight of the items to be considered, however the same was not considered by the learned assessing officer. Appellant has again raised this issue in the appeal. It is not stated by the appellant or in the assessment order whether any addition has been done in the hands of the individuals in whose hands the ownership was initially claimed in the survey. In view of the whatever information on the file, this contention of the appellant is found to be correct and thus allowed. In view of the above submissions of the appellant, on this issue, learned AO is directed to take the weight of the items owned by the appellant in cost valuation as per the details submitted by the appellant in letter dated 11.03.2021. This quantification issue is decided as per the request of the appellant.
APPLICABILITY OF SECTION 69B OF THE ACT:-
(xliv) The appellant has inter-alia submitted that:-81
ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT a. No difference or discrepancy was found in the quantity of the stock as per list of inventory maintained by the company in the Software and physically available at the time of survey proceedings.
b. Section 69B of the Act does not apply as no initial burden is discharged by Ld. AO that any excess quantity of stock is found which is not recorded in books of account c. It is the allegation of Ld. AO that stock was physically available with Assessee but not recorded in books of account. Though the said allegation is not accepted but even if it is assumed that contention of Ld. AO to be true, then it means Appellant has purchased stock in past years which was not recorded in books of account. In earlier years, Ld. AO has made impugned trading addition by estimating the sale and by applying higher profit rate which is under dispute. Even, as per the stand taken by the department, there lies no case of alleged unexplained source as the source of alleged stock is explained by alleged impugned trading addition made by Ld. AO in earlier assessment years.
d. Income tax department has not conducted any physical verification of stock lying at some of the locations, however, value of stock at these places have been determined by the department on the basis of computerized excel stock sheet found at the time of survey proceedings at HO of Appellant and after making some arbitrarily calculation by applying GP rate of 30%.
e. Appellant received copy of alleged basis of valuation done by the Ld. AO dated 21.12.2022. Ld. AO has opted different valuation method to value stock for different branch.
For instance, for Delhi Branch, the basis of valuation is computerized excel sheet provided by the Appellant during the survey proceedings. As per the excel sheet which contains Tag price' only, the value of stock was Rs. 25,59,78,648/-and Ld. AO picked the total of Tag price as value of stock at Delhi branch. However, for Mumbai and Bangalore branch, Appellant has provided similar excel sheet with total Tag price of Rs. 35,58,12,452/- and Rs. 12,90,41,131/-respectively (Refer page no. 41 and 50 of AO order), however, Ld. AO has not considered the same for valuation rather picked high value from incomplete tally, which was not regular tally, and valued the stock at Rs. 53,62,45,741/-and Rs. 16,51,51,691/- for Mumbai and Bangalore Branch.
(xlv) Issue of discrepancy in quantity of stock vis-à-vis books of accounts:-
The appellant has raised another issue that no quantity difference of stock was found in excess during survey. The appellant has made this claim ignoring the real facts of the case. The question of reconciliation of quantity arises only when a quantity has been recorded in the books of accounts and the same as compared 82 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT with the actual quality found in the physical verification during the survey. However in the present case the appellant has not maintained the quantity in the stock register. As per the tax audit report no stock register has been maintained. Even in the purchases and sales the appellant has not maintained the quantities. Even during the appellate proceedings the appellant has not produced the details of quantities of opening stock and the quantities of the purchases and the quantities of the sales and the quantities of the closing stock as per books of accounts both in terms of the quantity and in terms of the value. Once the quantities comparison (quantity actually found during the survey versus the quantity shown in the books of accounts) is not possible due to non-maintenance of the details by the assessee, the comparison is to be made on the valuations of the stock shown in the books of accounts and value of the stock found actually. The details in the software or the excel file are in the nature of the actual stock found during the survey. The software or the excel file prepared from the software during the course of the survey is in the nature of incriminating undisclosed document material unearthed during the course of survey. That the valuation of the stock as per this data is more than the valuation of the stock shown by the appellant in the books of accounts, itself shows that the appellant had excess stock or the undisclosed stock over and above the stock shown in the books of accounts.
As discussed in detail in this order in the earlier part the details of the gross and net weight of various metals, cut colour clarity quality of various precious and semiprecious stones, nature of workmanship, the rate of workmanship, the manner spent in the workmanship, the design pricing, the rate of the designer, etc. have not been maintained as has been discussed in detail in the earlier part of this order.
Further, during the course of survey at Head Office cum Showroom situated at Panch Batti, Jaipur and Ashok Marg, C-Scheme, Jaipur on 13.07.2020, it is noticed that a total of 41 high value items of jewellery having total tag price of Rs. 11,40,00,000/- though mentioned in the non-income tax records, were not found on physical verification at the premise.
The quantity of the stock as per books of accounts has never been maintained. Even though it is a claim of the appellant that as per CARO report the quantities were verified by the management from time to time however the Id. ARS expressed the inability during the appeal on the query that whether these earlier reports could be produced. Be that as it may it is indisputable that for the purposes of Income Tax Act and the documentation of income tax proceedings the appellant has never furnished the quantitative details in any year and in the tax audit report also it has a mentioned that the quantitative details have not been maintained and the stock register has not been maintained. Regarding the Excel file provided by the appellant during the course of survey in which the details of the item code and tag price and some further details are mentioned, this Excel file is in the nature of incriminating material unearthed during the course of survey. There is no reconciliation between the details in this Excel file and the books of accounts.83
ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Further the learned ARs expressed the inability during the appeal on the query that whether such Excel files for the earlier periods could be produced. It is the admitted position of the appellant that the closing stock was determined as the balancing figure after applying an estimated rate of gross profit on the sales for the respective year. This has been the stand of the appellant from year to year. Hence for the purposes of the income tax proceedings and the tax audit report and the trading account for the purposes of income tax act the appellant has never earlier worked out the item wise valuation and the item wise quantity.
In a scenario where the quantitative details as per books of accounts are not available and only the monetary value is available as per the books of accounts and when huge differences are found between the monetary value of the stock as per books of accounts and the monetary value of the stock found during the course of survey, the inescapable conclusion is that the excess value of the closing stock found during the course of survey represents the excess quantity of the stock. It is not the case of the appellant that the same quantity of the stock was being valued at much lesser value say 30% or 40% of the actual cost price to suppress the profit. The appellant has not claimed so. Rather it is a claim of the appellant that the stock was being valued correctly. The closing stock was being valued by the appellant using the gross profit ratio in the earlier years and in this year also in this order the closing stock has been valued using the gross profit ratio thus in such a scenario if the closing stock value is found to be excess by huge amount amount that itself leads to inescapable conclusion that the excess value of the stock represents the excess quantity of the stock in the same proportion.
Shri Rajesh Ajmera in his statement recorded in reply to question number 38 (PB Pg 138) has stated that the items in the museum are not recorded in the books of accounts and are not recorded in the balance-sheet. This clearly shows that unaccounted stock was kept by the appellant. Further he also stated that value of such items belonging to the company should be added to the value of the stock of the appellant company.
Hence this argument of the appellant that no excess quantity was found during the survey is completely erroneous and is hereby dismissed.
(xlvi) Furthermore it is not the requirement of section 69B of the Act that excess quantity is required to be proved by the Revenue. As per section 69B of the Act, "the Assessing Officer finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee, the section revolves around the amount recorded in this behalf in the books of accounts.
For example, if one asset (lets say, one diamond studded necklace) is purchased by one assessee for Rupees one crore in reality however only 60 lakhs are shown and recorded in the books of accounts having been spent in purchasing such asset 84 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT and 40 lakhs are paid in unaccounted and undisclosed manner. In that case 40 lakhs would be taxable under section 69B of the Act in case (as per language of the section) "the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year even though there is no difference in the actual quantity vis- à-vis quantity recorded in the books of accounts. In the present example such 40 lakhs might have been paid by the assessee using the unaccounted cash for which the source was unknown however in this regard the assessing officer is not required to find or link the source as is the settled legal position as per the judgements of honourable Supreme Court as discussed in adjudication on ground of appeal number 7 and 8.
The above is strengthened by the below expected submissions of the appellant:-
"CIT v, Dinesh Jain HUF [2012] 25 taxmann.com 550 (Delhi) .............
............
Applying the logic and reasoning in K.P. Varghese v. ITO [1981] 131 ITR 597/7 Taxman 13 (SC). for the purposes of section 698 it is the burden of the Assessing Officer to first prove that there was understatement of the consideration (investment) in the books of account. Once that undervaluation is established as a matter of fact. the Assessing Officer, in the absence of any satisfactory explanation from the assessee as to the source of the undisclosed portion of the investment, can proceed to adopt some dependable or reliable yardstick with which to measure the extent of understatement of the investment. One such yardstick can be the fair market value of the property determined in accordance with the Wealth Tax Act. [Para 12]"
(xlvil) Onus is on the assessee to explain the differences. The learned AO has discharged his onus as huge difference has been found in the value of the stock actually found during the survey and the value of the stock reflected in the books of accounts. The appellant has not explained the difference. That the appellant has claimed different grounds on without prejudice basis which itself shows that these grounds are contradictory in nature and cancel each other and further shows that the appellant is merely trying to explore/shop the legal ways out instead of giving the clear factual bonafide explanation and reconciliation and valuation which meets all the issues involved in the case. During the appellate proceedings also a specific query was raised towards the beginning of the hearings to submit a reconciliation however the appellant has not been able to reconcile the differences in the value of the stock as per the learned assessing officer and as per the appellant.
Appellant has also contended that excess stock should be considered the result of the addition made by the learned assessing officer in the earlier assessment years on account of the gross profit. This contention is in the nature of the legal argument. This does not explain the difference in the stock or cannot be 85 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT considered an explanation as referred under section 69B of the Act. At the same time, first of all the appellant has not produced copies of such assessment orders. Due to absence of details, it is not known how and what impact these assessment orders of the earlier years will have on the value of stock as per the books of accounts. Further the appellant itself has stated that such assessment orders have been challenged before the honourable High Court in the writ petition. These assessment orders have not become final.
(xlviii) In the case of Roshan Di Hatti v. CIT [1977] 107 ITR 938 (SC) (08.03.1977) it is held by the Hon'ble Supreme Court as under:-
x x x x In the case of Kale Khan Mohammad Hanif v. CIT [1963] 50 ITR 1 (SC) [08.02.1963] it is held by the Hon'ble Supreme Court as under:-
x x x x As per judgments of Hon'ble Supreme Court in the case of CIT vs. M. Ganapathi Mudaliar (1964) 53 ITR 623 (SC)/A. Govindarajulu Mudaliar. V. CIT [1958] 34 ITR 807 (SC), where the assessee has failed to provide satisfactorily the source and nature of a credit entry in his books, and it is held that the relevant amount is the income of the assessee, it is not necessary for the department to locate its exact source.
Referring to the above judgments of Hon'ble Supreme Court, it is held by the Hon'ble ITAT in the case of Navin Shantilal Mehta v. ITO, Ward-32 (2) (4), Mumbai [2018] 90 taxmann.com 16 (Mumbai-Trib.) as under:-
x x x x In the case of Suraj Bhan Oil (P.) Ltd. v. DCIT [2022] 138 taxmann.com 19 (Madhya Pradesh)/[2022] 286 Taxman 680 (Madhya Pradesh)/[2022] 446 ITR 539 [Madhya Pradesh]/[18.02.2022] it is held as under:-
x x x x SLP against the above judgment Suraj Bhan Oil (P.) Ltd. vs. DCIT [2022] 138 taxmann.com 19 (Madhya Pradesh) was dismissed by Hon'ble Supreme Court. Reported at [2022] 141 taxmann.com 477 (SC)/[2022] 288 Taxman 635 (SC)[25.07.2022]:-
x x x x In the case of PCIT vs. Deccan Tobacco Company [2022] 137 taxmann.com 470 (SC)/[2022] 286 Taxman 558 (SC) [11.03.2022] [Hon'ble Supreme Court], the ratio is as under:-
x x x x In the case of SVS Oil Mills v. ACIT, Non-Corporate Circle-6(1), Chennai [2020] 113 taxmann.com 388 (Madras)/[2020] 269 Taxman 508 (Madras)/[2019] 418 ITR 442 (Madras) (26.03.2019) it is held as under:-
x x x x Accordingly, the following legal position emerges:-
86ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT
a) Onus is upon the assessee to discharge the burden so cast upon. First burden is upon the assessee to satisfactorily explain the source of amount invested/spent in his excess stock. The burden has to be discharged with positive material. [As per principles laid down in Roshan Di Hatti v. CIT [1977] 107 ITR 938 (SC)[08.03.1977], Kale Khan Mohammad Hanif v. CIT [1963] 50 ITR 1 (SC)[08-02- 1963), CIT v. M.Ganapathi Mudaliar [1964] 53 ITR 623 (SC)/A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC)).
b) As per section 69B of the Act, if the burden is not discharged satisfactorily, it is open to the Revenue to hold that it is income of the assessee and no further burden lies on the Revenue to show that income is from any other particular source. As per principle laid down in CIT v. M.Ganapathi Mudaliar [1964] 53 ITR 623 (SC)/A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC)].
c) Unexplained stock cannot be presumed to be business income. If the assesse claims so, the assesse is required to prove the same. [Hon'ble Supreme Court in the case of Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC) [01-08-1968)
d) Once it was found by Assessing Officer that there was excess stock, in absence of explanation by assessee, conclusion was inescapable that excess stock, if any, was from undisclosed sources Further once assessee's explanation, if any, had not been accepted, resultant position was that there was excess stock undisclosed in books of account and non disclosure was only with a view to suppress income. (Suraj Bhan Oil (P.) Ltd. v. Deputy Commissioner of Income-tax [2022] 138 taxmann.com 19 (Madhya Pradesh)] [SLP against this judgement was dismissed reported at [2022] 141 taxmann.com 477 (SC)/[2022] 288 Taxman 635 (SC)[25-07- 2022) Verifiable Purchase behind the stock otherwise unexplained:
If the contention of the Assessee/Appellant was to be accepted viz., by allowing the purchases corresponding to the alleged excess stock, the Assessee will have to now record verifiable purchases in his Books of Accounts and for that he will have valid as well as back-dated purchase Invoices from genuine and existing Sellers which is not possible. When the excess stocks were found during the Survey, there is no question of allowing the Assessee to record any additional purchases because actual purchases had already taken place and already been recorded in the books of accounts of the Assessee.
[SVS Oil Mills v. Assistant Commissioner of Income-tax, Non Corporate Circle-6(1), Chennai [2020] 113 taxmann.com 388 (Madras)). Thus this is an impossible proposition of going back in time.
Head of Income 87 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Regarding the contention of the appellant regarding applicability of charge to tax under a particular head, the question arises whether the income subject matter of addition is chargeable to tax as per provisions of chapters on salary, profits and gains of business and profession Or capital gain Or income from house property Or income from other sources. If the same is chargeable to tax under these chapters as per specific provisions contained therein (even before application of provisions of section 68/69/69A etc.) then section 115BBE will not have application.
Section 28 is not an inclusive definition as the opening sentence of the section 28 reads as under:-
"The following income shall be chargeable to income-tax under the head "Profits and gains of business or profession","
Accordingly, in case the appellant claims that the income is chargeable under the head business income and nowhere else, the onus is on the appellant to show under which clause of section 28 the claimed income gets covered. Even as per judgement in the Principal Commissioner of Income-tax v. Bajargan Traders, the "source of investment/expenditure is clearly identifiable" i.e. the source must be clearly identifiable.
In this regard, as per provisions of the Act, not only the source but the year of earning of income also needs to be shown for taxing in the current year under assessment/appeal as the law provides that income for each year be taxed in the ITR/assessment of that year only. This also has ramifications on the interest payable by the taxpayer because if the income was earned in earlier year and the same is being offered to tax now in that case the taxpayer is liable to pay interest for the intervening period. Sections 68/69/69A etc. also provides for year of taxation irrespective of the year of earning of income.
However in case the subject matter of addition is not expressly falling under the four chapters of income heads and for the year under assessment/appeal (before application of provisions of section 68/69/69A etc.) in that case applicability of section 68/69/69A etc. is to be seen. If the sources, genuineness etc. are explained satisfactorily i.e. sources are out of genuine disclosed/taxed income in that case and section 68/69/69A etc. are not applicable even in that case section 115BBE will not have application. However if the asset/credit/expenditure is treated as income because of the applicability of section 68/69/69A etc. in that case section 115BBE will have application. The incomes mentioned under these sections are not specific to any head of income. Section 69C even clearly mentions that such unexplained expenditure will not be deductible under any head of income. Loans given / stock in hand / loan received etc. are otherwise not taxable as these are in the nature of asset/liability/capital nature in the hands of the taxpayer and not in the nature of revenue income. However when these are unexplained in terms of sections 68/69/69A etc. these become income and become taxable.
88ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Section 14 of the Income-tax Act, 1961 Heads of income Assessment year 1984- 85- Whether opening words of section 14, 'save as otherwise provided by this Act, clearly leave scope for 'deemed income' of nature covered under scheme of sections 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from other sources' Held, yes. [Fakir Mohmed Haji Hasan v. Commissioner of Income-tax [2002] 120 Taxman 11 (Gujarat)/(2001] 247 ITR 290 (Gujarat)/[2001] 165 CTR 111 (Gujarat)(10-08-2000]| These are the special provisions dealing with the situation and the incomes which are the subject matter of the contention in the appeal and being the specific provisions they are preferred and override the general provisions. Sections 68/69/69A etc. also provides for year of taxation of asset/credit/expenditure irrespective of the year of earning of the source revenue income (if any).
If the undisclosed income earned and accumulated over the years is taxed in the year in which it is detected by the Revenue and the same is merely taxed as per normal provisions of the law such an interpretation will place a premium on dishonesty ie. it tantamounts to rewarding the dishonesty. There is no interest burden on such taxpayer even if the income was earned over past years and there is no extra tax rate and deduction of expenses/losses will also be claimed by taxpayer if the same is taxed as per normal provisions of section 28 and onwards.
(xlix) No Presumption in favor of business income. Appellant is required to show and prove the same:
The Hon'ble Supreme Court in the case of Commissioner of Income-tax v.
Devi Prasad Vishwanath [1969] 72 ITR 194 (SC)[01-08-1968] has held as under:-
x x x x As per the headnotes "Section 145 of the Income-tax Act, 1961 [Corresponding to section 13 of the Indian Income tax Act, 1922] Method of accounting System of accounting Assessment year 1946-47 Whether where there is an unexplained cash credit it is open to ITO to hold that it is income of assessee and no further burden lies on ITO to show that income is from any particular source Held, yes".
As per the above judgement, the observations of the Hon'ble Allahabad High Court that because the amount was entered in the books of account of the business, there was some material to hold that the amount was income of the assessee from the business and not from some other source, were not approved by the Hon'ble Supreme Court and was reversed, as it was held by the Hon'ble Supreme Court that it assumed it was for the Income-tax Officer to indicate the source of the income which was not the correct legal position and that where there is an explained cash credit, it is open to the Income-tax Officer to hold that it is income of the assessee and no further burden lies on the Income-tax Officer to show that that income is from any particular source. It is for the assessee to prove that even if the 89 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT cash credit represents income it is income from a source which has already been taxed.
(I) The opening words of section 14 'Save as otherwise provided by this Act' clearly leave scope for 'deemed income' of the nature covered under the scheme of sections 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from other sources' because the provisions of sections 69, 69A, 69B, and 69C treat unexplained investments, unexplained money, bullion, etc., and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Section 69C even clearly mentions that such unexplained expenditure will not be deductible under any head of income. Loans given /stock in hand / loan received etc. are otherwise not taxable as these are in the nature of asset/liability/capital nature in the hands of the taxpayer and not in the nature of revenue income. However when these are unexplained in terms of sections 68/69/69A etc. these become income and become taxable. These are the special provisions dealing with the situation and the incomes which are the subject matter of the contention in the appeal and being the specific provisions they are preferred and override the general provisions. Once the income is as per these sections, there cannot be any dispute regarding the applicability of section 155BBE of the Act. These sections are in the nature of complete code in itself. In this regard it is held by Hon'ble Gujarat High Court in Fakir Mohmed Haji Hasan v. Commissioner of Income-tax [2002] 120 Taxman 11 (Gujarat)/[2001] 247 ITR 290 (Gujarat)/[2001] 165 CTR 111 (Gujarat)[10-08-2000] that "62 The opening words of section 14 'Save as otherwise provided by this Act clearly leave scope for 'deemed income of the nature covered under the scheme of sections 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from 'other sources' because the provisions of sections 69, 69A, 69B, and 69C treat unexplained investments, unexplained money, bullion, etc., and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Therefore, in these cases, the source not being known, such deemed income will not fall even under the head, 'Income from other sources'. Therefore, the corresponding deductions, which are applicable to the incomes under any of these various heads, will not be attracted in case of deemed incomes which are covered under the provisions of sections 69, 69A, 69B and 69C in view of the scheme of those provisions."
(ii) Conclusion:
The appellant has not been able to explain the source of funds for making expenditure for buying the stock in trade as found excess. In case it is claimed that it is from business income the appellant is required to show how the same is from business sources and not from any other sources. As per CIT v. M.Ganapathi 90 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Mudaliar [1964] 53 ITR 623 (SC), A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC), the Revenue is not to find out the source and the assessee is required to explain the source with supportings.
Unexplained stock cannot be presumed to be business income. If the assessee claims so, the assessee is required to prove the same. [Hon'ble Supreme Court in the case of Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC)[01-08-1968] Once it was found by Assessing Officer that there was excess stock, in absence of explanation by assessce, conclusion was inescapable that excess stock, if any, was from undisclosed sources - Further once assessee's explanation, if any, had not been accepted, resultant position was that there was excess stock undisclosed in books of account and non disclosure was only with a view to suppress income. [Suraj Bhan Oil (P.) Ltd. v. Deputy Commissioner of Income-tax [2022] 138 taxmann.com 19 (Madhya Pradesh)] [SLP against this judgement was dismissed reported at [2022] 141 taxmann.com 477 (SC)/[2022] 288 Taxman 635 (SC) [25- 07-2022). Further excess stock found cannot be presumed to be from business income of the year as the sources of buying unaccounted excess stock can be numerous. It has also not been shown with sources details that it is only the earlier earned (during the same year) business income (manner of earning and source of earning of such income) which has been invested in the excess stock..
In view of the above detailed discussion, in principle the approach of the learned AO is hereby upheld and the excess value stock as determined as per this order is to be taxed as per section 69B of the Act. Accordingly the ground of appeal on the issue is hereby dismissed.
(lii) In view of the above discussion, stock valuation as per the assessment order at various locations / various issues stock lying at Delhi, stock lying at Mumbai, stock lying at Bangalore, stock with franchisees, goods sent on consignment basis to USA, goods sent on consignment basis to U.K., goods sent to Doha Jewellery Exhibition, goods sent on consignment basis to Hongkong, are upheld and confirmed. Further stock of Jaipur HO and Panch Batti Store is worked out at Rs. 1,52,63,81,185 which is 53% (Tag price minus 47% as discussed on page 166) of 287,99,64,500 i.e. total value of tag price as per 1 values provided by appellant and is subject to verification by the Id. AO. Further, the Ld. AO has worked out the value of stock of all locations as per books of account in para no 3.4.7 in the assessment order was Rs. 1,26,08,06,402/- as on date of survey. I do not find any infirmity regarding work out of value of stock as per books as on 13.07.2020. The same is upheld. On the basis of figures mentioned in above discussion, the excess/ unaccounted stock other than museum stock, as on 13.07.2020 is computed at Rs. 146,31,52,182/-. Further, the AO is directed to work out the value of Jewellery kept in the Museum separately as per discussion made in para No. (Xliii) in this order considering the request of the appellant on the quantities and give effect accordingly.
91ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Accordingly, subject to above discussion, the ground of appeal number 7 and 8 are adjudicated in above terms.
Ground of Appeal No. 9The appellant has raised the following three issues in this ground of appeal • Valuing the stock at the market rate prevailing at the time of survey instead of cost.
• without following applicable accounting principle of valuation of stock. • Without appreciating that no quantity of stock was found in excess during survey.
The first issue pertaining to the valuation of stock in the market rate prevailing at the time of survey has been dealt with in greater detail in the adjudication of ground of appeal number 7 and 8. The discussion and the adjudication and in those grounds of appeal is hereby referred to and not repeated for the sake of brevity. The conclusion in this regard is that the valuation on the date of survey was not at the market rate prevailing at the time of survey however there were some inaccuracies in the same however the valuation arrived at was less than the market rate prevailing at the time of survey and in some cases even less than the cost which should have been worked out. The valuation has been arrived at in adjudication of ground of appeal number 7 and 8 considering the various objections raised by the appellant. Hence this issue of this ground of appeal is hereby dismissed.
The second issue that the valuation was done by the independent government empanelled valuers without following applicable accounting principle of valuation of stock is also without merits. Valuation was done by the government empanelled valuers as per the knowledge and understanding and they are expert in their field. Further the appellant itself has not maintained the sufficient documentation to arrive at the exact cost of each of the unique item and the deficiencies in this regard have been discussed in detail in the carlier part of this order. The different valuers called by the Department took different approaches for the valuation as per their independent assessment of the material at hand and the documentation and the situation further strengthens the view regarding the independence and impartiality of the valuers. The valuation as per this appeal order has been arrived at in adjudication of ground of appeal number 7 and 8 considering the various objections raised by the appellant. Hence this issue of this ground of appeal is hereby dismissed.
The appellant has raised another issue that no quantity of stock was found in excess during survey. The appellant has made this claim with a lot of passion ignoring the real facts of the case. The question of excess quantity arises only when a quantity has been recorded in the books of accounts and the same as 92 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT compared with the actual quality found in the physical verification during the survey. However in the present case the appellant has not maintained the quantity in the stock register. As per the tax audit report no stock register has been maintained. Even in the purchases and sales the appellant has not maintained the quantities. Even during the appellate proceedings the appellant has not produced the details of quantities of opening stock and the quantities of the purchases and the quantities of the sales and the quantities of the closing stock as per books of accounts both in terms of the quantity and in terms of the value. Once the quantities comparison (quantity actually found during the survey versus the quantity shown in the books of accounts) is not possible due to non-maintenance of the details by the assessee, the comparison is to be made on the valuations of the stock shown in the books of accounts and of the stock found actually. The details in the software or the excel file are in the nature of the actual stock found during the survey. The software or the excel file prepared from the same during the course of the survey is in the nature of incriminating undisclosed document material unearthed during the course of survey That the valuation of the stock as per this data is more than the valuation of the stock shown by the appellant in the books of accounts, itself shows that the appellant had excess stock or the undisclosed stock over and above the stock shown in the books of accounts. Further this issue has been discussed in detail in the adjudication of ground of appeal no. 7 and 8 and the same is referred to and not repeated here. Hence this argument of the appellant that no excess quantity was found during the survey is completely erroneous and is hereby dismissed.
Further more it is not the requirement of section 69B of the Act that excess quantity is required to be proved by the Revenue. As per section 69B of the Act, "the Assessing Officer finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee, the section revolves around the amount recorded in this behalf in the books of accounts.
For example, if one asset (lets say, one diamond studded necklace) is purchased by one assessee for Rupees one crore in reality however only 60 lakhs are shown and recorded in the books of accounts having been spent in purchasing such asset and 40 lakhs are paid in unaccounted and undisclosed manner. In that case 40 lakhs would be taxable under section 69B of the Act in case (as per language of the section) "the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year even though there is no difference in the actual quantity vis- à-vis quantity recorded in the books of accounts. In the present example such ₹ 40 lakhs might have been paid by the assessee using the unaccounted cash for which the source was unknown however in this regard the assessing officer is not required to find or link the source as is the settled legal position as per the 93 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT judgements of honourable Supreme Court as discussed in adjudicated on ground of appeal number 7 and 8.
In view of above discussion the ground of appeal no. 9 is hereby dismissed."
Finding of ld. CIT(A) for addition of Rs. 24.95 Crores in respect of alleged unaccounted sales 11.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-
The appellant commonly contended that the year of the sale is not proved. As far as the contention of the appellant on the issue of date and year is concerned, the onus as per section 292C of the Act is on the appellant to disprove the reasonable inference drawn by the learned AO which however has not been done. Further taxation in the current year is not prejudicial to the appellant as the appellant gains on the interest cost of the tax. It is the settled law that in such cases of unaccounted sales etc. clear cut documentation and/or evidences are rarely available and the adjudication is to be done on the basis of circumstantial evidences as per human probabilities. Accordingly this contention of the appellant regarding the year of sale is dismissed. This will be applied on all impounded paper discussed under these grounds of appeal. Now the respective pages and the addition made there under are discussed here under:-
1. Exhibit-1 Page 2, 3 &4 Showroom at PanchBatti, Jaipur (Party C-7) Addition in assessment order -Rs. 39,50,000.
The appellant has mainly made two contentions. Firstly the year of the sale is not proved and secondly that these items are mentioned in the valuation report of the official valuer and hence the items remained unsold. The summary of sale is mentioned on 3rd paper. There is no dispute regarding the ownership and the content of the documents. These belong to the appellant business activity and pertain to the sale. As per the details noted on these papers, item No. N 6848 of Victorian design was finally sold for Rs. 14,00,000/-, item no. N 19-903 of Kolhapuri design was sold for Rs. 11,00,000/- and item no. M-354 of Kalangi design was sold for Rs. 14.50 lacs.
Item description, item code, value of each item, customer name etc. clearly mentioned on these 3 papers. Further various sub- entries and markings are made on these pages which shows the result of finer and final discussions.
Appellant has shown that the stated item codes are mentioned in the inventory sheet of the official valuers prepared during the survey.
94ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT The details in the paper do indicate with reasonable certainty that there is sale out of books of accounts. The presumption under section 292C is also in favour of the revenue. There is no proof from the appellant that same design items are not manufactured again once or after they are sold/transferred to franchise. Whereas the documents impounded during the survey and as discussed in this ground of appeal shows otherwise ie. customization / pick & choose by customers using the various item codes. The item codes most apparently indicate only the design code. Other sales as reflected in the paper under consideration are found to be transacted out of books. In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby confirmed.
2. (Page No. 6 back of Annexure-AS/1) Addition in assessment order- Rs. 18,70,000 The details noted on this paper show various jewellery items viz. gold bangles, gold bracelet, hoops and gem stones viz. spinal, rose, ruby etc. Value of each item is also mentioned on this paper. The appellant has mainly made two contentions. Firstly the date/year of the sale is not proved and the names etc. are not mentioned and the information is incomplete.
On perusal of the paper it is found that item code, name of customer etc. not mentioned on the paper. There is no rebuttal of the same in the assessment order. The details in the paper do not indicate with reasonable certainty that there is sale out of books of accounts.
In view of the above discussion, as per preponderance of probabilities, the contents of the documents do not sufficiently show sale out of books of accounts, accordingly, addition with respect of this paper is hereby deleted.
3. (Page 7 of Annexure-AS/1), Addition in assessment order-Rs. 18,98,000 As per the details noted on this seized Page No. 4, jewellery items have been sold to one Sonakshi Malhan for a total consideration of Rs. 18,98,000/-. Item code, customer name & mobile no. and value of each item are clearly mentioned on the paper.
The appellant has mainly made two contentions. Firstly the year of the sale is not proved and secondly that three items are mentioned in the valuation report of the official valuer and one item was already sold to other customer.
Appellant has shown that the stated item codes are mentioned in the inventory sheet of the official valuers prepared during the survey.
Further, the Appellant has shown that the stated item codes are mentioned in the invoice which was also submitted to the Id. AO.
95ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Appellant has shown that the stated item codes are mentioned in the inventory sheet of the official valuers prepared during the survey. There is no rebuttal of the same in the assessment order. The details in the paper do not indicate with reasonable certainty that there is sale out of books of accounts. In view of this the addition with respect to these items is hereby deleted.
4. Page 8 of Annexure-AS/1, Addition in assessment order-31,68,000 As per the details noted on this seized paper, various jewellery items of Rs. 24.36 lakh have been sold to a customer named Bhawna and sale of Rs. 7.32 was made to another customer named Astha. The appellant has mainly made two contentions. Firstly the year of the sale is not proved and secondly that there was no clarity as to what item has been sold by the Appellant in respect of above noting.
There is no rebuttal of the same in the assessment order. The details in the paper do not indicate with reasonable certainty that there is sale out of books of accounts.
In view of the above discussion, as per preponderance of probabilities, the contents of the documents do not sufficiently show sale out of books of accounts, accordingly, addition with respect of this paper is hereby deleted.
5. Page No. 10 of Annexure-AS/1, Addition in assessment order Rs. 7,60,000 The appellant has mainly made two contentions. Firstly the year of the sale is not proved and secondly that there was no documentary evidence found during the survey proceedings which substantiate the fact that any cash sale has been made by the Appellant.
On the top of the page, there is a clear mention that jewellery items worth Rs. 15.20 lacs were sold out of which a sum of Rs. 7.60 lacs (i.e. 50% of actual consideration) was paid in cash with invoice and for the balance of Rs. 7.60 lakh, 3 invoices of Rs. 2.25 lakh, Rs. 1.85 lakh and Rs. 3.50 lakh were issued. It appears that one invoice issued to the customer namely Rini.
Regarding the contention of the appellant that there was no documentary evidence found during the survey proceedings which substantiate the fact that any cash sale has been made by the Appellant, the onus is on the appellant as per section 292C of the act. It has been seen from other papers also that the appellant has been in the business of making jewellery as per the requirement of the customers and appellant has involved in out of the books cash sales of jewellery. Contents of the document strongly indicate that sale was made by the appellant. Hence the contention of the appellant in this regard is hereby rejected.
96ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby confirmed.
6. Page No. 10 back of Annexure-AS/1, Addition in assessment order- Rs. 34,27,000 As per the noting made on this seized paper, details of several jewellery items valuing Rs. 34.27 lakh have been noted, which are not recorded in regular books of account. Item and value of each item mentioned on the paper.
The appellant has mainly made two contentions. Firstly the year of the sale is not proved and secondly that above loose sheet is just vague or incomplete sheet which does not contains details like, name of parties to whom goods were alleged to be sold and no date is mentioned, made of receiving payment, etc. There is no rebuttal of the same in the assessment order. The details in the paper do not indicate with reasonable certainty that there is sale out of books of accounts.
In view of the above discussion, as per preponderance of probabilities, the contents of the documents do not sufficiently show sale out of books of accounts, accordingly, addition with respect of this paper is hereby deleted.
7. Page No. 12 of Annexure-AS/1, Addition in assessment order Rs. 7,35,000 The appellant has mainly made two contentions. Firstly the year of the sale is not proved and secondly that these are deaf and dumb piece of paper only without any correlation and nexus to sales of the Appellant.
As per the noting made on this seized paper total sales of Rs. 15.20 lakh had been made. There is a clear mention that amount of Rs. 7,85,000/- was received through cheque and the balance amount of Rs. 7,35,000/- was received in cash. The total sales include sales of Rs. 4.50 lakh made to Richa, sales of Rs. 3.70 lakh made to Rini and sales of Rs. 7.00 lakh made to Nilesh. Further, there is clearly indicated in front of customer name Rini "No bill".
Regarding the contention of the appellant that these are deaf and dumb piece of paper only, the onus is on the appellant as per section 292C of the act. It has been seen from other papers also that the appellant has been in the business of making jewellery as per the requirement of the customers and appellant has involved in out of the books cash sales of jewellery. Contents of the document strongly indicate that sale was made by the appellant. Hence the contention of the appellant in this regard is hereby rejected.
In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby confirmed.
8. Page No. 12 backof Annexure-AS/1, Addition in assessment order Rs. 44,30,000 97 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT As per the details noted on the above seized paper, total 9 items of jewellery had been sold for a total consideration of Rs. 44.30 lakh. Item code clearly mentioned on the paper. Item code, value of each item, rate etc is clearly mentioned on the paper.
The appellant has mainly made two contentions. Firstly the year of the sale is not proved and secondly that the item no. R-5798, N16-314, B12-1020 which were mentioned in the above loose sheet are also included in the stock as per the stock valuation report of department valuer. A copy of relevant page of valuation report is available on page no. 1177-1179 of PB Vol. 7. The item no. E19-1702 was transferred to Chennai Franchiees vide invoice dated 07.02.2020. Regarding the sale bill filed-which has not been examined which are not admitted being additional evidence as there is no reference to the same in PB Pages 1151-1164 which is the reply of the appellant before the Id. AO on the issue. There is no reply on this page in annexure at PB Pages 1156 to 1164. These have not been verified by the AO and are to be treated as self-serving documents not warranting any relief. Learned AO is also stated in the assessment order that the appellant has not been able to reconcile the same in the books. Further despite of the above observation regarding the invoices, the marking on the paper clearly shows sold. There is no proof from the appellant that same design items are not manufactured again once or after they are sold/transferred to franchise. Whereas the documents impounded during the survey and as discussed in this ground of appeal shows otherwise i.e. customization / pick & choose by customers using the various item codes. Similar is the scenario with respect to item is stated to be transferred to the franchisee. This contention of the appellant is hereby rejected.
Appellant has shown that the stated item codes R-5798, N16-314, B12-1020 are mentioned in the inventory sheet of the official valuers prepared during the survey.
The impounded paper under consideration does not show whether sufficient strength of the probability that the unaccounted sale in cash was done by the appellant. Accordingly even though in the later part of this paragraph the addition has been confirmed to the extent of non-reconciled item codes however the reconciled item codes are not treated as sold due to the weak nature of the document. The scenario in this paper under consideration is different from the papers where strong evidence or indicators of sale are mentioned on the paper and it has been held that unaccounted sale has taken place even when the item codes have matched with inventory/invoices.
At the same time in this case the appellant has not reconciled the item codes((R- 5061, E-7192, В 15-1095, E-A-7869, E19-1702 & N 17-1047) neither with the stock valuation sheet prepared by the official valuers and nor with the invoices whereas in similar such other cases the appellant has reconciled the item code. This shows that these items were in existence with the appellant however these have been removed from the official records and are not in inventory also on the date of survey. The presumption under section 292C is also in favour of the revenue. The 98 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT totality of the facts leads to the conclusion that these item codes. jewellery items were sold out of books as mentioned in the loose papers or through some other sale for which the document could not be found. It is a settled law that unaccounted transactions take place in secrecy and direct evidence of such transactions is very rarely available and are to be decided on the basis of circumstantial evidences. Accordingly the sale with respect to the non reconciled item codes is treated to have taken place in unaccounted manner and the addition is hereby confirmed partly(Rs. 25,50,000).
In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby partly confirmed.
9. Page No. 13 of Annexure-AS/1, Addition in assessment order -Rs.22,70,000 The noting on above seized paper indicates that the various items of jewellery have been sold for a total consideration of Rs. 22.70 lakh. item name & item code clearly mentioned on the paper.
The appellant has mainly made two contentions. Firstly the year of the sale is not proved and secondly that item no. R13-656, R-2797, R-2691 and R17-857 are included in list of stock prepared by department valuer.
There are three items are also mentioned on the paper on first half of the page, the appellant has not made any reference regarding these three items.
The impounded paper under consideration does not show whether sufficient strength of the probability that the unaccounted sale in cash was done by the appellant. Accordingly even though in the later part of this paragraph the addition has been confirmed to the extent of non-reconciled item codes however the reconciled item codes are not treated as sold due to the weak nature of the document. The scenario in this paper under consideration is different from the papers where strong evidence or indicators of sale are mentioned on the paper and it has been held that unaccounted sale has taken place even when the item codes have matched with inventory/invoices.
At the same time in this case the appellant has not reconciled the item codes(E13-
322) neither with the stock valuation sheet prepared by the official valuers and nor with the invoices whereas in similar such other cases the appellant has reconciled the item code. This shows that these items were in existence with the appellant however these have been removed from the official records and are not in inventory also on the date of survey. The presumption under section 292C is also in favour of the revenue. The totality of the facts leads to the conclusion that these item codes jewellery items were sold out of books as mentioned in the loose papers or through some other sale for which the document could not be found. It is a settled law that unaccounted transactions take place in secrecy and direct evidence of such transactions is very rarely available and are to be decided on the basis of circumstantial evidences. Accordingly the sale with respect to the non 99 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT reconciled item codes is treated to have taken place in unaccounted manner and the addition is hereby confirmed partly (Rs. 4,50,000).
In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby partly confirmed.
10. Page No. 14 of Annexure-AS/1, Addition in assessment order-7,60,000 The noting on above seized paper indicate that various items of jewellery have been sold for a total consideration of Rs. 7.60 lakh. Item description & item code and value of each item clearly mentioned on the paper.
The appellant has mainly made two contentions. Firstly the year of the sale is not proved and secondly that these are deaf and dumb piece of paper only without any correlation and nexus to sales of the Appellant.
In this case the appellant has not reconciled the item codes neither with the stock valuation sheet prepared by the official valuers and nor with the invoices -whereas in similar such other cases the appellant has reconciled the item code. This shows that these items were in existence with the appellant however these have been removed from the official records and are not in inventory also on the date of survey. The presumption under section 292C is also in favour of the revenue. The totality of the facts leads to the conclusion that these item codes jewellery items were sold out of books as mentioned in the loose papers or through some other sale.
In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby confirmed.
11. Page No. 15 of Annexure-AS/1, Addition in assessment order-6,60,000 As per the noting made on the above seized paper, total sales of Rs. 15.20 lakh had been made. There is a clear mention that an amount of Rs. 8.60 lakh was received through cheque and the balance amount of Rs. 6.60 lakh was received in 'cash'. Starting letters of customers name are mentioned on the paper. Further, in front of the B-1.5 it is clearly indicate that 'No invoice'. This shows that the appellant indulged in cash sales as well without bill/ invoice sales which is also indicate about out of the books sales.
The appellant has mainly made two contentions. Firstly the year of the sale is not proved and secondly that these are deaf and dumb piece of paper only without any correlation and nexus to sales of the Appellant.
Regarding the contention of the appellant that these are deaf and dumb piece of paper only, the onus is on the appellant as per section 292C of the act. It has been seen from other papers also that the appellant has been in the business of making jewellery as per the requirement of the customers and appellant has involved in out 100 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT of the books cash sales of jewellery. Contents of the document strongly indicate that sale was made by the appellant. Hence the contention of the appellant in this regard is hereby rejected.
In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby confirmed.
12. Page No. 18 back of Annexure-AS/1, Addition in assessment order-Rs. 9,07,000 The above seized paper consist details of various items sent to Ahemedabad for sale which include Plain polki studs, thussi, Enamel and Jhumki. The total sale consideration noted on this paper comes to Rs. 9.07 lakh.
The appellant has mainly made two contentions. Firstly the year of the sale is not proved and secondly these noting are just memoranda noting which has no bearing on financials transaction of Appellant.
On perusal of seized papar it is found that item code, name of customer etc. not mentioned on the paper.
There is no rebuttal of the same in the assessment order. The details in the paper do not indicate with reasonable certainty that there is sale out of books of accounts.
In view of the above discussion, as per preponderance of probabilities, the contents of the documents do not sufficiently show sale out of books of accounts, accordingly, addition with respect of this paper is hereby deleted.
13. Page No. 19 of Annexure-AS/1, Addition in assessment order-6,44,000 The details noted on the above seized paper are the sales made by Rambagh outlet of various jewellery items. The aggregate of the sale comes to Rs. 6.44 lakhs. Item name mentioned on the paper. One item code amounting of Rs. 76k is clearly mentioned on the paper.
The appellant has mainly made two contentions. Firstly the year of the sale is not proved and secondly the item code R18-1375 is available in stock even as per valuation report prepared by Income tax Department during survey.
Appellant has shown that the stated item code R18-1375 is mentioned in the inventory sheet of the official valuers prepared during the survey. The appellant is silent about other four items mentioned on the paper. However there are no item code mentioned regarding other four items on the said paper.
Appellant has shown that the stated item codes are mentioned in the inventory sheet of the official valuers prepared during the survey. There is no rebuttal of the 101 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT same in the assessment order. The details in the paper do not indicate with reasonable certainty that there is sale out of books of accounts. In view of this the addition with respect to these items is hereby deleted.
In view of the above discussion, as per preponderance of probabilities, the contents of the documents do not sufficiently show sale out of books of accounts, accordingly, addition with respect of this paper is hereby deleted.
14. Page No. 20 of Annexure-AS/1, Addition in assessment order - Rs. 4,22,000 As per the above details total 3 jewellery items have been sold for a total consideration of Rs. 4.22 lakh. Item name & code and amount of each item are clearly mentioned on the paper. Customer name is not mentioned on the paper. Appeallant made contention that these items bearing code no. E19-455, E15-1849 and E14-73 were sold by the Appellant in the financial year 2019-20 These items were sold to Ms. Malavika Shivakumar at the invoice value of Rs. 4,22,000/-. A copy of said invoice is available on page no. 1186 of Paper book Vol. 7.
Appellant has shown that the stated item codes are mentioned in the invoice which was also submitted to the Id. AO.
Appellant has shown that the stated item codes are mentioned in the inventory sheet of the official valuers prepared during the survey. There is no rebuttal of the same in the assessment order. The details in the paper do not indicate with reasonable certainty that there is sale out of books of accounts.
In view of the above discussion, as per preponderance of probabilities, the contents of the documents do not sufficiently show sale out of books of accounts, accordingly, addition with respect of this paper is hereby deleted.
15. Party C-7, Exhibit-2-Page No.-1 & 2, Addition in assessment order-Rs. 67,00,000 As per the details noted in the assessment order the seized Page No. 1 & 2, total 4 items of jewellery were sold to Rashmi Kapoor for a total sale consideration of Rs. 67 lakh. Item description, item code, value of each item, cutomer name & mobile no. etc. clearly mentioned on these 2 papers.
The appellant has mainly made two contentions. Firstly the year of the sale is not proved and secondly that the item code N16-931 is available in stock even as per valuation report prepared by Income tax Department during survey. The same item code is available on S.No. 1190 of page no. 1187 of PB Vol-7. Other two items E17-228 and E16-4167 are also available in the stock and the same have been cumulated in the valuation report under one head.
However he has only one itme code reconciled in inventory sheet. Appellant has shown that the stated item codes N16-931 is mentioned in the inventory sheet of the official valuers prepared during the survey.
102ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT The impounded paper under consideration does not show whether sufficient strength of the probability that the unaccounted sale in cash was done by the appellant. Accordingly even though in the later part of this paragraph the addition has been confirmed to the extent of non-reconciled item codes however the reconciled item codes are not treated as sold due to the weak nature of the document. The scenario in this paper under consideration is different from the papers where strong evidence or indicators of sale are mentioned on the paper and it has been held that unaccounted sale has taken place even when the item codes have matched with inventory/invoices.
At the same time in this case the appellant has not reconciled the item codes E 17- 228 & E 16-4167 neither with the stock valuation sheet prepared by the official valuers and nor with the invoices whereas in similar such other cases the appellant has reconciled the item code. This shows that these items were in existence with the appellant however these have been removed from the official records and are not in inventory also on the date of survey. The presumption under section 292C is also in favour of the revenue. The totality of the facts leads to the conclusion that these item codes jewellery items were sold out of books as mentioned in the loose papers or through some other sale for which the document could not be found. It is a settled law that unaccounted transactions take place in secrecy and direct evidence of such transactions is very rarely available and are to be decided on the basis of circumstantial evidences. Accordingly the sale with respect to the non reconciled item codes is treated to have taken place in unaccounted manner and the addition is hereby confirmed partly.
In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby partly confirmed (Rs. 41,50,000).
16. Page No. 1 back of Annexure-AS/2, Addition in assessment order-8,90,000 It is clearly mentioned on the above seized page that jewellery items no. N 18-20 was sold to Sapan (Nepal) for a sum of Rs. 8.90 lakhs. Mobile no., Name of customer, amount and item no clearly shows that the jewellery items no. N 18-20 was sold out of books.
The appeillant has mainly made two contentions. Firstly the year of the sale is not proved and secondly that these are deaf and dumb piece of paper only without any correlation and nexus to sales of the Appellant. At the same time in this case the appellant has not reconciled the item codes N 18-20 neither with the stock valuation sheet prepared by the official valuers and nor with the invoices whereas in similar such other cases the appellant has reconciled the item code.
Regarding the contention of the appellant that these are deaf and dumb piece of paper only, the onus is on the appellant as per section 292C of the act. It has been seen from other papers also that the appellant has been in the business of making 103 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT jewellery as per the requirement of the customers and appellant has involved in out of the books cash sales of jewellery. Contents of the document strongly indicate that sale was made by the appellant. Hence the contention of the appellant in this regard is hereby rejected.
In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby confirmed.
17. Page No. 3 of Annexure-AS/2, Addition in assessment order-3,00,000 The details on page no. 3 indicate that jewellery Item No. E14-3476 was sold to Nepal cilient for Rs. 3.59 lakh, out of which a sum of Rs. 3.0 lakh was received in cash and balance amount of Rs. 59,000/- was outstanding, this is clearly indicate that appellant has made out of the books sales. On perusal of the page it is found that account no, quoted price, best price, cash amount, due amount clearly indicate that the item has been sold out of books by the appellant.
The appellant has mainly made two contentions. Firstly the year of the sale is not proved and secondly that these are deaf and dumb piece of paper only without any correlation and nexus to sales of the Appellant. The appellant has not reconciled the item codes E14-3476 neither with the stock valuation sheet prepared by the official valuers and nor with the invoices whereas in similar such other cases the appellant has reconciled the item code.
Regarding the contention of the appellant that these are deaf and dumb piece of paper only, the onus is on the appellant as per section 292C of the act. It has been seen from other papers also that the appellant has been in the business of making jewellery as per the requirement of the customers and appellant has involved in out of the books cash sales of jewellery. Contents of the document strongly indicate that sale was made by the appellant. Hence the contention of the appellant in this regard is hereby rejected.
In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby confirmed.
18. Page No. 4 of Annexure-AS/2, Addition in assessment order-3,20,000 The appellant has made contentions that there was no date mentioned on the loose sheet and it was not evident that how details written on this loose sheet pertains to year under consideration. There was no clarity that what item was sold and to whom. This paper was crossed by the staff persons which shows it is a rough paper. These are deaf and dumb piece of paper only without any correlation and nexus to sales of the Appellant during year under consideration. As per the noting on the above seized paper, three amount of Rs. 1,90,000, Rs. 1,16,00 and Rs. 14,000. Mobile no of one person mentioned on the paper. Customer name, item code etc is not appear on the paper.
104ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT There is no rebuttal of the same in the assessment order. The details in the paper do not indicate with reasonable certainty that there is sale out of books of accounts.
In view of the above discussion, as per preponderance of probabilities, the contents of the documents do not sufficiently show sale out of books of accounts, accordingly, addition with respect of this paper is hereby deleted.
19. Page No. 6 of Annexure-AS/2, Addition in assessment order-13,00,000 The appellant has made contentions that there was no date mentioned on the loose sheet and it was not evident that how details written on this loose sheet pertains to year under consideration. There was no clarity that what item was sold and to whom. This paper was crossed by the staff persons which shows it is a rough paper. These are deaf and dumb piece of paper only without any correlation and nexus to sales of the Appellant during year under consideration. The above seized page contains detail 2 items of jewellery had been mentioned. Customer name, item code etc is not appear on the paper.
There is no rebuttal of the same in the assessment order. The details in the paper do not indicate with reasonable certainty that there is sale out of books of accounts.
In view of the above discussion, as per preponderance of probabilities, the contents of the documents do not sufficiently show sale out of books of accounts, accordingly, addition with respect of this paper is hereby deleted.
20. Page No. 7 of Annexure-AS/2, Addition in assessment order-42,80,000 Ld. AO has noted in the assessment order that this page contains details of sales made to Archana of Delhi of 4 items of jewellery for a total consideration of Rs. 42.80 lakh.
The appellant has mainly made two contentions. Firstly the year of the sale is not proved and secondly that items mentioned in the loose sheet bearing code no. E16-652, N-5968, N18-335 and E19-1450 are in stock on the date of survey which is evident from copy of valuation report of department. Item bearing code E16-652, N-5968 and N18-335 are referred at S.no. 964, 1233 and 2141 respectively in the report of departmental valuers. Copy relevant pages are available on page no. 1188-1190 of PB Vol. 7. He further made contention item bearing code E19-1450 is available in stock at Bangalore branch.
Appellant has shown that the stated item codes are mentioned in the inventory sheet of the official valuers prepared during the survey.
Appellant has shown that the stated item codes are mentioned in the inventory sheet of the official valuers prepared during the survey. There is no rebuttal of the 105 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT same in the assessment order. The details in the paper do not indicate with reasonable certainty that there is sale out of books of accounts. In view of this the addition with respect to these items is hereby deleted.
21. Page No. 8 of Annexure-AS/2, Addition in assessment order-33,27,000 The appellant has mainly made two contentions. Firstly the year of the sale is not proved and secondly that that item bearing code no. N20-88, 816-365, B17-238 and N19-1078 are already included in the list of stock valued by departmental valuer and which are referred at S.No. 3197, 1566, 1820 and 2956 in the report of valuer. Further, Item bearing code no. B16-100 and B-4264 were held in stock at Hansa, Hyderabad Franchisee. Further, he made contention that item bearing code no. N19-1239 was sold to Mr. Rudran Poopalasingham in FY 2019-20 and duly recorded in book of account. A copy of the invoice is available on page no. 1191 of PB Vol. 7. Therefore, it is wrong finding of the Ld. AO that Appellant could not verify these from the regular books of accounts.
Appellant has shown that the stated item codes are mentioned in the inventory sheet of the official valuers prepared during the survey. Further, it has shown that the stated item codes are mentioned in the invoice which was also submitted to the Id. AO.
Appellant has shown that the stated item codes are mentioned in the inventory sheet of the official valuers prepared during the survey. There is no rebuttal of the same in the assessment order. The details in the paper do not indicate with reasonable certainty that there is sale out of books of accounts. In view of this the addition with respect to these items is hereby deleted.
22. Page No. 9 of Annexure-AS/2, Addition in assessment order-9,75,000 This page contains details of sales made to Mahendra Agarwal of 3 items of jewellery for a total consideration of Rs. 15.75 lakh. As clearly mentioned on the paper, the invoice was issued for Rs. 6.0 lakh only and the balance amount of Rs. 9.75 lakh was received in cash. Item name, item code amount etc. clearly mentioned on the paper. Further, on perusal of the page it is found that the word 'all paid' clearly mentioned on the page. On this page it is clearly mentioned 'cash' word, which indicate that cash paid by the customer for purchasing the items.
The appellant has mainly made two contentions. Firstly the year of the sale is not proved and secondly that this paper was crossed by the staff persons which shows it is a rough paper.
Like seen in number of papers (example paper numbers 1 of AS/3 etc.) and as discussed in this ground of appeal crossing on the paper shows that the transaction has been concluded and successfully taken place. Accordingly, the argument of the appellant in this regard is rejected.
106ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby confirmed.
23. Page No. 10 of Annexure-AS/2, Addition in assessment order-1,75,46,000 This page contains details of sales made to Anish Gupta and Madhu Gupta. A total of 6 items of jewellery have been sold for a total consideration of Rs. 175.46 lakh. Item code, customer name, amount etc. clearly mentioned on the paper. There is a clear mention of 6 jewellery items and the price of each item is also written against them.
The appellant has mainly made two contentions. Firstly the year of the sale is not proved and secondly that four items are included in list of stock prepared by departmental valuers.
Appellant has shown that the stated item codes N18-1087, N15-697, N-2209 & N18-1511 are mentioned in the inventory sheet of the official valuers prepared during the survey. Further, the appellant has not reconciled other two itmes N17- 1450 and N17-1079 mentioned on the paper.
The impounded paper under consideration does not show whether sufficient strength of the probability that the unaccounted sale in cash was done by the appellant. Accordingly even though in the later part of this paragraph the addition has been confirmed to the extent of non-reconciled item codes however the reconciled item codes are not treated as sold due to the weak nature of the document. The scenario in this paper under consideration is different from the papers where strong evidence or indicators of sale are mentioned on the paper and it has been held that unaccounted sale has taken place even when the item codes have matched with inventory/invoices.
At the same time in this case the appellant has not reconciled the item codes (N17- 1450 and N17-1079) neither with the stock valuation sheet prepared by the official valuers and nor with the invoices whereas in similar such other cases the appellant has reconciled the item code. This shows that these items were in existence with the appellant however these have been removed from the official records and are not in inventory also on the date of survey. The presumption under section 292C is also in favour of the revenue. The totality of the facts leads to the conclusion that these item codes jewellery items were sold out of books as mentioned in the loose papers or through some other sale for which the document could not be found. It is a settled law that unaccounted transactions take place in secrecy and direct evidence of such transactions is very rarely available and are to be decided on the basis of circumstantial evidences. Accordingly the sale with respect to the non reconciled item codes is treated to have taken place in unaccounted manner and the addition is hereby confirmed partly (Rs. 25,10,000) 107 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby partly confirmed.
24. Page No. 15 of Annexure-AS/2, Addition in assessment order-
Ld. AO has noted in the assessment order that the page contains details of sales made to one Smt. Neetu. A total of 8 items of jewellery have been sold for a total consideration of Rs. 300 lakh. Item name, item code, customer name & mobile no and amount clearly mentioned on the paper.
The appellant made contention that Item bearing code no. N-7224, N16-314, N13- 1033, N18-160, N15-497, N16-377, N-8025 and N14-1049 are included in the list of stock prepared by departmental valuers. Copies of relevant pages of the valuation report of departmental valuers is available on page no. 1203 to 1209 of PB Vol. 7. On perusal of above said pages one item code i.e N16-314 was not found in list of departmental valuer report.
The impounded paper under consideration does not show whether sufficient strength of the probability that the unaccounted sale in cash was done by the appellant. Accordingly even though in the later part of this paragraph the addition has been confirmed to the extent of non-reconciled item codes however the reconciled item codes are not treated as sold due to the weak nature of the document. The scenario in this paper under consideration is different from the papers where strong evidence or indicators of sale are mentioned on the paper and it has been held that unaccounted sale has taken place even when the item codes have matched with inventory/invoices.
At the same time in this case the appellant has not reconciled the item codes( N16-
314) neither with the stock valuation sheet prepared by the official valuers and nor with the invoices whereas in similar such other cases the appellant has reconciled the item code. This shows that these items were in existence with the appellant however these have been removed from the official records and are not in inventory also on the date of survey. The presumption under section 292C is also in favour of the revenue. The totality of the facts leads to the conclusion that these item codes jewellery items were sold out of books as mentioned in the loose papers or through some other sale for which the document could not be found. It is a settled law that unaccounted transactions take place in secrecy and direct evidence of such transactions is very rarely available and are to be decided on the basis of circumstantial evidences. Accordingly the sale with respect to the non reconciled item codes is treated to have taken place in unaccounted manner and the addition is hereby confirmed partly (Rs. 12,00,000).
25. Page No. 16 of Annexure-AS/2, Addition in assessment order-3,15,00,000.
Ld. AO has noted in the assessment order that the page contains details of unaccounted sales made to some customer. Total 9 items of jewellery have been 108 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT sold for a total consideration of Rs. 315 lakh. Item name, code & amount clearly mentioned on the paper.
Appellant made contention that item bearing code no. N15-867, E11-398, E11- 1419, E13-1419, N16-963, R14-1144, E15-1194, N15-852, E17-2221 and N18-769 are included in the list of stock prepared by departmental valuers.
Appellant has shown that the stated item codes are mentioned in the inventory sheet of the official valuers prepared during the survey.
Appellant has shown that the stated item codes are mentioned in the inventory sheet of the official valuers prepared during the survey. There is no rebuttal of the same in the assessment order. The details in the paper do not indicate with reasonable certainty that there is sale out of books of accounts. In view of this the addition with respect to these items is hereby deleted.
26. Page No. 17of Annexure-AS/2, 1,76,50,000 Addition in assessment order As noted from the assessment order the page contains details of sales of jewellery of Bridal look. Total 8 items of jewellery have been sold for a total consideration of Rs. 176.50 lakh. Item name, Code & amount clearly mentioned on the paper.
The appellant made contention that item bearing code no. B18-1277, B18-1278, NP12-130, M-516, M12-65, N17-979, N14-1191 and N-7242 are included in the list of stock prepared by departmental valuers which further substantiate the fact that these notings are incorrect and vague. Copies of relevant pages of the valuation report of departmental valuers is available on page no. 1218 to 1225 of PB Vol. 7.
Appellant has shown that the stated item codes are mentioned in the inventory sheet of the official valuers prepared during the survey.
Appellant has shown that the stated item codes are mentioned in the inventory sheet of the official valuers prepared during the survey. There is no rebuttal of the same in the assessment order. The details in the paper do not indicate with reasonable certainty that there is sale out of books of accounts.
In view of the above discussion, as per preponderance of probabilities, the contents of the documents do not sufficiently show sale out of books of accounts, accordingly, addition with respect of this paper is hereby deleted.
27. Page No. 20 of Annexure-AS/2, Addition in assessment order -1,36,000 As noted from the assessment order the page contains details of sales made to a customer named "Emily". Total 7 items of jewellery have been sold for a total consideration of Rs. 1,36,100/-. Customer name, item code & amount clearly mentioned on the paper.
109ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT The appellant made contention that item bearing code no. R15-895, R15-733, R- 3013, E19-861, E19-2352, E18-4873 and R18-1552 are included in the list of stock prepared by departmental valuers which further substantiates the fact that these notings are incorrect and vague.
Appellant has shown that the stated item codes are mentioned in the inventory sheet of the official valuers prepared during the survey.
Appellant has shown that the stated item codes are mentioned in the inventory sheet of the official valuers prepared during the survey. There is no rebuttal of the same in the assessment order. The details in the paper do not indicate with reasonable certainty that there is sale out of books of accounts.
In view of the above discussion, as per preponderance of probabilities, the contents of the documents do not sufficiently show sale out of books of accounts, accordingly, addition with respect of this paper is hereby deleted.
28. Page No. 22 of Annexure-AS/2, Addition in assessment order -2,54,000 In the assessment order the Id. AO has noted that the page consist details of sales made to Mr. Agarwal for a consideration of Rs. 2,54,900/-, out of which a sum of Rs. 36,450/- was received as advance and the balance of Rs. 2,18,450/-was to be paid on delivery of the goods.
The appellant made contention that No item no. is mentioned on the above loose slip and No details of mode of receiving alleged sales consideration. There are neither any jewellery item mentioned nor any item code mentioned on the paper. There is no rebuttal of the same in the assessment order. The details in the paper do not indicate with reasonable certainty that there is sale out of books of accounts.
In view of the above discussion, as per preponderance of probabilities, the contents of the documents do not sufficiently show sale out of books of accounts, accordingly, addition with respect of this paper is hereby deleted.
29. Page No. 24 of Annexure-AS/2, Addition in assessment order-15,30,000.
As noted form the assessment order this page contains details of sales made to some customer. Total 5 items of jewellery have been sold for a total consideration of Rs. 15.30 lakh. The appellant made contention that Ld. AO assumed the figures in lacs as there was no finding or conclusive evidence which suggest that these figures are in lacs. Futher he stated that there are no details of customer/person to whom the alleged sales were made. On perusal of this paper, it is found that only one item code E19-4563 along with item description is mentioned on the paper. The appellant has not reconciled this item code mentioned on the paper. Further other four item codes and customer name are not mentioned on the paper.
110ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT The impounded paper under consideration does not show whether sufficient strength of the probability that the unaccounted sale in cash was done by the appellant. Accordingly even though in the later part of this paragraph the addition has been confirmed to the extent of non-reconciled item codes however the reconciled item codes are not treated as sold due to the weak nature of the document. The scenario in this paper under consideration is different from the papers where strong evidence or indicators of sale are mentioned on the paper and it has been held that unaccounted sale has taken place even when the item codes have matched with inventory/invoices.
At the same time in this case the appellant has not reconciled the item codes(E19- 4563) neither with the stock valuation sheet prepared by the official valuers and nor with the invoices whereas in similar such other cases the appellant has reconciled the item code. This shows that these items were in existence with the appellant however these have been removed from the official records and are not in inventory also on the date of survey. The presumption under section 292C is also in favour of the revenue. The totality of the facts leads to the conclusion that these item codes jewellery items were sold out of books as mentioned in the loose papers or through some other sale for which the document could not be found. It is a settled law that unaccounted transactions take place in secrecy and direct evidence of such transactions is very rarely available and are to be decided on the basis of circumstantial evidences. Accordingly the sale with respect to the non reconciled item codes is treated to have taken place in unaccounted manner and the addition is hereby confirmed partly(Rs. 1,20,000).
30. Page No. 28 of Annexure-AS/2, Addition in assessment order-2,36,550 As noted from the assessment order Page no 28 contains details of sales made to a customer named, Neha Bayas. Total 5 items of jewellery have been sold for a total consideration of Rs. 2,36,550/-. Item code, customer name and amount clearly mentioned on the paper.
The appellant contention that the item no. mentioned on page no. 28 of AS/2 namely, N17-644, N19-763, E18-1830, MS-17-82719 and MS-19-86021 which were sold to Mr. Shardul singh Prithviraj Bayas vide invoice no. JPB/2021/000010 dated 11-06-2020 which was duly recorded in books of accounts.
Regarding the sale bill filed which has not been examined which are not admitted being additional evidence as there is no reference to the same in PB Pages 1151- 1164 which is the reply of the appellant before the Id. AO on the issue. There is no reply on this page in annexure at PB Pages 1156 to 1164. These have not been verified by the AO and are to be treated as self-serving documents not warranting any relief. Learned AO is also stated in the assessment order that the appellant has not been able to reconcile the same in the books. Further despite of the above observation regarding the invoices, the marking on the paper clearly shows sold. There is no proof from the appellant that same design items are not manufactured 111 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT again once or after they are sold/transferred to franchise. Whereas the documents impounded during the survey and as discussed in this ground of appeal shows otherwise i.e. customization / pick & choose by customers using the various item codes. Similar is the scenario with respect to item is stated to be transferred to the franchisee. This contention of the appellant is hereby rejected.
In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby confirmed.
31. Page No. 29 of Annexure-AS/2, Addition in assessment order-2,67,000
32. Page No. 30 of Annexure-A8/2, 2,35,444 Addition in assessment order As noted from the assessment order that page no. 29 contains details of sales made to some customer. Total 5 items of jewellery have been sold for a total consideration of Rs. 2,67,550/-. Item code, buyer name etc not mentioned on the paper.
As noted from the assessment order page no. 30 contains details of sales made to some customer. Total 5 items of jewellery have been sold for a total consideration of Rs. 2,35,444/-. Item code, name of customer etc. is not mentioned on the paper.
Further, the appellant made contention regarding about page no 29 and 30 that noting related to quotation for same items which were mentioned page no. 28 of AS/2 and already recorded in books of account. There is no rebuttal of the same in the assessment order. The details in the paper do not indicate with reasonable certainty that there is sale out of books of accounts. In view of this the addition with respect to these items is hereby deleted.
In view of the above discussion, as per preponderance of probabilities, the contents of the documents do not sufficiently show sale out of books of accounts, accordingly, addition with respect of this paper is hereby deleted.
33. Party C-7, Exhibit-3-Page No. 1, Addition in assessment order-Rs. 23,72,800 This page contains details of sales made to a customer named "Lucy". Total 7 items of stones have been sold for a total consideration of Rs. 23,72,800/-. On the top of the page, there is a clear mention that the items have been "sold". The appellant does not assign item codes to stones and in the submissions the appellant has not made reference to any sales of other than jewellery. Appellant has merely raised the issue of the date or the year of the sale. As far as the issue of year is concerned, the onus as per section 292C of the Act is on the appellant to disprove the reasonable inference drawn by the learned AO which however has not been done.
Appellant has also argued that there is a crossing on the paper and contended that this closing shows that the paper is rough. However this closing appears to be the 112 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT indication of final completion of the transaction as it is clearly mentioned in the document as "sold and tick marks are also there.
Like seen in number of papers (example paper numbers 9 AS/2 etc) and as discussed in this ground of appeal crossing on the paper shows that the transaction has been concluded and successfully taken place. Accordingly, the argument of the appellant in this regard is rejected.
In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby confirmed.
34. Page No. 3 of Annexure-AS/3, Addition in assessment order-Rs-This page contains details of sales made to Shri Mahendra Agarwal and Smt. Suchi Agarwal. After bargaining and giving discount, total 2 items of jewellery have been sold for a total consideration of Rs. 11 lakhs, out of which a sum of 5 lakh was received in cash and for the balance amount of Rs. 6 lakhs, invoice was to be issued. "Paid" has been mentioned against Rs. 5 lakhs which has also been underlined. Item code, name of customer & amount clearly mentioned on the paper. This means that sale of 5 lakhs was done out of books by suppression of the sales value. Appellant has merely raised the issue of the date or the year of the sale. As far as the issue of year is concerned, the onus as per section 292C of the Act is on the appellant to disprove the reasonable inference drawn by the learned AO which however has not been done.
In this case the appellant has not reconciled the item codes neither with the stock valuation sheet prepared by the official valuers and nor with the invoices -whereas in similar such other cases the appellant has reconciled the item code. This shows that these items were in existence with the appellant however these have been removed from the official records and are not in inventory also on the date of survey. The presumption under section 292C is also in favour of the revenue. The totality of the facts leads to the conclusion that these item codes jewellery items were sold out of books as mentioned in the loose papers or through some other sale.
In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby confirmed.
35. Page No. 4 & 5 of Annexure-AS/3, Addition in assessment order-Rs-23,72,800 These pages contain details of sales made to a customer named Swati, whose reference was given by Rajesh sir. Page 4 appears to be having lower part of page 5 also scanned along with it. Total 7 items of jewellery have been sold for a total consideration of Rs. 23,72,800. Figures on page 4 are apparently in lakhs.
On page 5 Item code, name of customer & amount clearly mentioned on the paper. The appellant has inter-alia contended that item bearing code no. R15-1252 is included in the list of stock prepared by departmental valuers. Appellant itself is 113 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT also silent about the remaining six items. Whereas in some other cases the appellant has also produced the sales invoice of the item code is mentioned in such loose papers however in the present case the appellant has been silent which further proves that the remaining six items are neither mentioned in the inventory sheets (excel file) nor anywhere in any of the invoices. The only conclusion to be drawn is that the items were sold out of books. Further the item code R15-1252 as claimed by the appellant to be appearing on page number PB-1234 is actually not appearing on this sheet. Thus even this item is not reconciled from the appellant side itself.
In this case the appellant has not reconciled the item codes neither with the stock valuation sheet prepared by the official valuers and nor with the invoices -
whereas in similar such other cases the appellant has reconciled the item code. This shows that these items were in existence with the appellant however these have been removed from the official records and are not in inventory also on the date of survey. The presumption under section 292C is also in favour of the revenue. The totality of the facts leads to the conclusion that these item codes. jewellery items were sold out of books as mentioned in the loose papers or through some other sale.
In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby confirmed.
36. Page No. 7 of Annexure-AS/3, Addition in assessment order-Rs. 5,62,000 As per the details noted on the above paper, total 3 items of jewellery have been sold for a total consideration of Rs. 5,62,000/-. There is a clear mention of item no., description and value against each item of jewellery sold. Appellant made contention that the item no. N14-171 and E18-60 mentioned on the above loose sheet were sold vide invoice no. JPB/1920/002713 dated 10.12.2019 and JPB/1920/002595 dated 02.12.2019 respectively, which were duly recorded in books of accounts.
Regarding the sale bill filed which has not been examined which are not admitted being additional evidence as there is no reference to the same in PB Pages 1151- 1164 which is the reply of the appellant before the Id. AO on the issue. There is no reply on this page in annexure at PB Pages 1156 to 1164. These have not been verified by the AO and are to be treated as self-serving documents not warranting any relief. Learned AO is also stated in the assessment order that the appellant has not been able to reconcile the same in the books. Further despite of the above observation regarding the invoices, the marking on the paper clearly shows sold. There is no proof from the appellant that same design items are not manufactured again once or after they are sold/transferred to franchise. Whereas the documents impounded during the survey and as discussed in this ground of appeal shows otherwise ie. customization / pick & choose by customers using the various item 114 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT codes. Similar is the scenario with respect to item is stated to be transferred to the franchisee. This contention of the appellant is hereby rejected. In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby confirmed.
37. Page No. 8 of Annexure-AS/3, Addition in assessment order-Rs. 17,47,400 As per the details noted on the above paper, total 4 items of jewellery have been sold for a total consideration of Rs. 17,47,400/- to customers named Rachna Rastogi, whose reference was given by Sanjivji and AlkaJi. Item code & amount are also clearly mentioned on the paper. Appellant has mainly contended the year and date of the sale. However this argument of the appellant is already rejected a number of other slips in the same ground of appeal as the onus in this regard is on the appellant considering section 292C of the Act.
In this case the appellant has not reconciled the item codes neither with the stock valuation sheet prepared by the official valuers and nor with the invoices -whereas in similar such other cases the appellant has reconciled the item code. This shows that these items were in existence with the appellant however these have been removed from the official records and are not in inventory also on the date of survey. The presumption under section 292C is also in favour of the revenue. The totality of the facts leads to the conclusion that these item codes jewellery items were sold out of books as mentioned in the loose papers or through some other sale.
In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby confirmed.
38. Page No. 9 of Annexure-AS/3, Addition in assessment order-Rs. 3,97,000 As per the details noted on the above paper, total 5 items of jewellery have been sold for a total consideration of Rs. 3,97,000/- to customers named Dr. C L Pandey and Ananya Chouhan. There is a clear mention that the items have been sold, as per the value written on the paper. Item code & amount are also clearly mentioned on the paper. The appellant has contended that the item no. CON19-361, CON19- 374 and CON19-711 mentioned on the above loose sheet were sold in FY 2019- 20, which were duly recorded in books of accounts. The copy of said invoices is available on page no. 1237-1239 of PB Vol. 7. Also, item no. E-7278 is included in the list of stock prepared by departmental valuers.
Regarding the sale bill filed which has not been examined which are not admitted being additional evidence as there is no reference to the same in PB Pages 1151- 1164 which is the reply of the appellant before the Id. AO on the issue. There is no reply on this page in annexure at PB Pages 1156 to 1164. These have not been verified by the AO and are to be treated as self-serving documents not warranting any relief. Learned AO is also stated in the assessment order that the appellant 115 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT has not been able to reconcile the same in the books. Further despite of the above observation regarding the invoices, the marking on the paper clearly shows sold. There is no proof from the appellant that same design items are not manufactured again once or after they are sold/transferred to franchise. Whereas the documents impounded during the survey and as discussed in this ground of appeal shows otherwise i.e. customization / pick & choose by customers using the various item codes. Similar is the scenario with respect to item is stated to be transferred to the franchisee. This contention of the appellant is hereby rejected.
Further, the details in the paper do indicate with reasonable certainty that there is sale out of books of accounts. The presumption under section 292C is also in favour of the revenue. There is no proof from the appellant that same design items are not manufactured again once or after they are sold/transferred to franchise. Whereas the documents impounded during the survey and as discussed in this ground of appeal shows otherwise ie. customization / pick & choose by customers using the various item codes. The item codes most apparently indicate only the design code. Other sales as reflected in the paper under consideration are found to be transacted out of books.
In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby confirmed.
In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby confirmed.
39. Page No. 11 of Annexure-AS/3, Addition in assessment order-Rs. 16,37,000 As per the details noted on the above paper, total 3 items of jewellery have been sold for a total consideration of Rs. 16,37,000/- to a customer from Aligargh on reference from Tarun Sir and Anil Sir. Item code & amount are clearly mentioned on the paper. Appellant has contended that No date mentioned on the loose paper. The above page is crossed down by the staff which made it rough and incorrect. Item bearing code no. B14-623, EA-4052 and N15-210 are included in the list of stock prepared by departmental valuers. Total of these three items on the impounded paper is Rs. 16,37,000 which has been added in the assessment order.
Appellant has shown that the stated item codes are mentioned in the inventory sheet of the official valuers prepared during the survey.
Appellant has shown that the stated item codes are mentioned in the inventory sheet of the official valuers prepared during the survey. There is no rebuttal of the same in the assessment order. The details in the paper do not indicate with reasonable certainty that there is sale out of books of accounts. In view of this the addition with respect to these items is hereby deleted.
116ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT In view of the above discussion, as per preponderance of probabilities, the contents of the documents do not sufficiently show sale out of books of accounts, accordingly, addition with respect of this paper is hereby deleted.
40. Page No. 12, 12 back of Annexure-AS/3, Addition in assessment order-Rs. 14,52,000 As per the details noted on the above papers, 2 Necklaces were sold for Rs. 13.50 lakh, out of which a sum of Rs. 10 lakh was received earlier in cash and the amount of Rs. 3.50 lakh has remained unpaid. There after, earring of Rs. 1.02 lakh were sold making the total dues to Rs. 4.52 lakh, which was all received in cash. There is mention of the names of Aashima and Shashi Sahay on the top of the paper, who are buyers of the jewellery. Item code & amount are also mentioned on the paper.
Appellant has mainly contended that these items were transferred to Mumbai branch and has mentioned the item code in this regard. Further the appellant has raised the issue of the date and year.
As far as the issue of year is concerned, the onus as per section 292C of the Act is on the appellant to disprove the reasonable inference drawn by the learned AO which however has not been done.
Regarding the sale bill filed which has not been examined which are not admitted being additional evidence as there is no reference to the same in PB Pages 1151- 1164 which is the reply of the appellant before the Id. AO on the issue. There is no reply on this page in annexure at PB Pages 1156 to 1164.
These have not been verified by the AO and are to be treated as self-serving documents not warranting any relief. Learned AO is also stated in the assessment order that the appellant has not been able to reconcile the same in the books. Further despite of the above observation regarding the invoices, the marking on the paper clearly shows sold. There is no proof from the appellant that same design items are not manufactured again once or after they are sold/transferred to franchise. Whereas the documents impounded during the survey and as discussed in this ground of appeal shows otherwise i.e. customization / pick & choose by customers using the various item codes. Similar is the scenario with respect to item is stated to be transferred to the franchisee. This contention of the appellant is hereby rejected.
Further this sheet shows that jewellery is also manufactured by the appellant as per the requirements of the customer. In this sheet the customer has selected circumference of E-19 1860 and has selected the design should be from E-19 3733. Blue ear ring should be 0.1 inch smaller. On the top of this page also the customer has selected designs from some of the codes of the appellant. This also 117 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT shows that these code represent the design code and not the item code. On the backside it is inter-alia mentioned that "all paid".
In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby confirmed.
41. Page No. 13 of Annexure-AS/3, Addition in assessment order-Rs. 3,80,000.
As per the details noted on the above paper, total 5 items of jewellery have been sold for a total consideration of Rs. 7,60,000/-. From the noting, it appears that 50% of the selling price was received in cash. There is a clear mention that the items have been sold, as per the value written on the paper. Item code of some item are also mentioned on the paper.
The appellant has contended that no date mentioned on the loose paper. The above page is crossed down by the staff which made it rough and incorrect. Item no. CON19-696, E19-898 and E18-2868 mentioned on the above loose sheet were sold in FY 2019-20, which were duly recorded in books of accounts. Item bearing code no. E19-2434 is included in the list of stock prepared by departmental valuers. For the fifth item the item code is incomplete.
The most important noting on this page is "SOLD" and a bracket which covers the whole the item codes. This shows that these items were sold.
Like seen in number of other papers and as discussed in this ground of appeal crossing on the paper shows that the transaction has been concluded and successfully taken place. Accordingly, the argument of the appellant in this regard is rejected.
As far as the issue of year is concerned, the onus as per section 292C of the Act is on the appellant to disprove the reasonable inference drawn by the learned AO which however has not been done.
Regarding the sale bill filed which has not been examined which are not admitted being additional evidence as there is no reference to the same in PB Pages 1151- 1164 which is the reply of the appellant before the Id. AO on the issue. There is no reply on this page in annexure at PB Pages 1156 to 1164. These have not been verified by the AO and are to be treated as self-serving documents not warranting any relief. Learned AO is also stated in the assessment order that the appellant has not been able to reconcile the same in the books. Further despite of the above observation regarding the invoices, the marking on the paper clearly shows sold. There is no proof from the appellant that same design items are not manufactured again once or after they are sold/transferred to franchise. Whereas the documents impounded during the survey and as discussed in this ground of appeal shows otherwise i.e. customization/pick & choose by customers using the various item codes. Similar is the scenario with respect to item is stated to be transferred to the franchisee. This contention of the appellant is hereby rejected.
118ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby confirmed.
42. Page No.14 of Annexure-AS/3, Addition in assessment order-Rs. 5,60,835.
As per the details noted on the above paper, one item of jewellery has been sold for a consideration of Rs. 5,60,835/ to the customer named, Maha. Item code also clearly mentioned on the paper. "sold" word is specifically mentioned. Regarding the sale bill filed which has not been examined which are not admitted being additional evidence as there is no reference to the same in PB Pages 1151-1164 which is the reply of the appellant before the Id. AO on the issue. There is no reply on this page in annexure at PB Pages 1156 to 1164. These have not been verified by the AO and are to be treated as self-serving documents not warranting any relief. Learned AO is also stated in the assessment order that the appellant has not been able to reconcile the same in the books. Further despite of the above observation regarding the invoices, the marking on the paper clearly shows sold. There is no proof from the appellant that same design items are not manufactured again once or after they are sold/transferred to franchise. Whereas the documents impounded during the survey and as discussed in this ground of appeal shows otherwise i.e. customization/pick & choose by customers using the various item codes.
Similar is the scenario with respect to item is stated to be transferred to the franchisee. This contention of the appellant is hereby rejected.
As far as the issue of year is concerned, the onus as per section 292C of the Act is on the appellant to disprove the reasonable inference drawn by the learned AO which however has not been done.
In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby confirmed.
43. Page No. 15 of Annexure-AS/3, Addition in assessment order-Rs, 7,80,000 As per the details noted on the above paper, total 9 items of jewellery have been sold for a total consideration of Rs.7,80,000/-. There is a clear mention of the details of each item along with item no. and value. On the left side of the paper vertically it has also been stated that advance has already been received with respect to the transaction on this paper.
Regarding the contention of the appellant that item code details are not mentioned, the onus is on the appellant as per section 292C of the act. It has been seen from other papers also that the appellant has been in the business of making jewellery as per the requirement of the customers and there is no reference to item code on 119 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT such customised jewelry item. Documents impounded during the survey and as discussed in this ground of appeal shows otherwise Le. customization / pick & choose by customers using the various item codes. The item codes most apparently indicate only the design code. Contents of the document strongly indicate that sale was made by the appellant. Hence the contention of the appellant in this regard is hereby rejected.
In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby confirmed.
44. Page No. 16 of Annexure-AS/3, Addition in assessment order-Rs, 94,50,000 As per the details noted on the above seized page, total 6 items of jewellery have been sold for a total consideration of Rs. 94.50 lakhs to a customers named Pranali Pandya, whose mobile no. is also mentioned on the paper. Item code is also mentioned on the paper. There is a clear mention on the paper that the deal has been "done". Two big tick marks are also given on the paper.
In this case the appellant has not reconciled the item codes neither with the stock valuation sheet prepared by the official valuers and nor with the invoices -
whereas in similar such other cases the appellant has reconciled the item code. This shows that these items were in existence with the appellant however these have disappeared from the official records and are not in physical possession also on the date of survey.
Like seen in number of papers (example paper numbers 9 of AS/2, 1 of AS/3 etc) and as discussed in this ground of appeal crossing on the paper shows that the transaction has been concluded and successfully taken place. Accordingly, the argument of the appellant in this regard is rejected.
In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby confirmed.
45. Page No. 18 of Annexure-AS/3, Addition in assessment order-Rs, 52,17,100 This is a very important seized paper on which details regarding unaccounted cash received / paid have been noted. It is clearly noted on the seized paper that cash has been paid to key persons/directors of the Group as under:
Rajeev Sir- Rs. 16,99,100/- Tarang Sir - Rs. 13,10,000/- Rajesh Sir- Rs. 19,87,000/- Ramya Mam- Rs. 2,21,000/- Total Rs. 52,17,100/-
Shri Rajeev Arora is a major shareholder in M/s A.JPL, Shri Tarang Arora is son of Shri Rajeev Arora, who is also a Manager in M/s AJPL. Further, Shri Rajesh Arora 120 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT is main working director and major shareholder in M/s AJPL and Smt. Ramya Sharma is manager in M/s AJPL. All these key persons normally work from the H.O. at Ashok marg, C-Scheme, Jaipur. Some other names are also mentioned on the paper, it appears that other names refer to payment regarding customer.
The appellant has stated that the above memoranda noting is regarding handing over of cash collected at panch batti store from sales to responsible persons at Head Officer for deposit in bank account. This contention or the explanation of the appellant is abnormal. If the cash is collected from the sale the same will be handled by the cashier immediately and there would not arise any requirement to note the names of various persons on the slip against the cash until or unless possibly such cash is unaccounted. The inference from this is that only in case of unaccounted cash the record with the employee or key person names will be kept.
In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby confirmed.
46. Page No. 19 & 20 of Annexure-AS/3, Addition in assessment order-Rs, 51,67,181 As per the details noted on the above paper, total 3 items of jewellery have been sold for a total consideration of Rs. 51,67,181/- (Rs. 7,00,000+ Rs. 19,10,000+ Rs. 25,57,181) to a customer named, Nitindeep. The original price of these 3 items was Rs. 55,62,700/- which was settled for Rs. 51,67,181/-, after bargaining. There is a clear mention of item code no. and value of each item written on the paper. Part of the sale consideration has been received in US dollars which is also mentioned on this paper.
In this case the appellant has not reconciled the item codes neither with the stock valuation sheet prepared by the official valuers and nor with the invoices -whereas in similar such other cases the appellant has reconciled the item code. This shows that these items were in existence with the appellant however these have disappeared from the official records and are not in physical possession also on the date of survey. The totality of the facts leads to the conclusion that these item codes jewellery items were sold out of books as mentioned in the loose papers.
Like seen in number of papers (example paper numbers 9 of AS/2, 1 of AS/3, 16 of AS/3 etc.) and as discussed in this ground of appeal crossing on the paper shows that the transaction has been concluded and successfully taken place. Accordingly, the argument of the appellant in this regard is rejected.
In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby confirmed.
47. Page No. 21 of Annexure-AS/3, Addition in assessment order-Rs-16,81,920 As per the details noted on the above paper, total 4 items of jewellery have been sold 121 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT for a total consideration of Rs. 16,81,920/- (Rs. 4.01 lakh Rs. 3.8 lakh+ Rs. 9.0 lakh) to a customer named Shashi Sahay/ Ashima. There is a clear mention of item no. and value of each item is also written on the seized paper.
Appellant has shown that the stated item code N-18-173 mentioned in the inventory sheet of the official valuers prepared during the survey. Appellant itself is also silent about the remaining items noted on the paper. Further regarding other two items clearly mentioned word as 'sold'.
The impounded paper under consideration does not show whether sufficient strength of the probability that the unaccounted sale in cash was done by the appellant. Accordingly even though in the later part of this paragraph the addition has been confirmed to the extent of non-reconciled item codes however the reconciled item codes are not treated as sold due to the weak nature of the document. The scenario in this paper under consideration is different from the papers where strong evidence or indicators of sale are mentioned on the paper and it has been held that unaccounted sale has taken place even when the item codes have matched with inventory/invoices.
At the same time in this case the appellant has not reconciled the item codes (N- 18-31, N 19-1048 & N 18-1037) neither with the stock valuation sheet prepared by the official valuers and nor with the invoices whereas in similar such other cases the appellant has reconciled the item code. This shows that these items were in existence with the appellant however these have been removed from the official records and are not in inventory also on the date of survey. The presumption under section 292C is also in favour of the revenue. The totality of the facts leads to the conclusion that these item codes jewellery items were sold out of books as mentioned in the loose papers or through some other sale for which the document could not be found. It is a settled law that unaccounted transactions take place in secrecy and direct evidence of such transactions is very rarely available and are to be decided on the basis of circumstantial evidences. Accordingly the sale with respect to the non reconciled item codes is treated to have taken place in unaccounted manner and the addition is hereby confirmed partly (Rs. 7, 81, 920).
48. Page No. 22 of Annexure-AS/3, Addition in assessment order-Rs-28,37,250 As per the details noted on the above paper, total 3 items of jewellery have been sold for a total consideration of Rs. 16830 USD to a customer named Shweta Puri. Name and mobile of Sanjay Singh is also mentioned. One more item no. N-17-979 was also sold for Rs. 15.75 lakh. Thus, the total sales made as per this seized paper comes to Rs. 28,37,250/- (16830 USDx75 plus Rs. 15,75,000/-). Customer name & mobile no clearly mentioned on the paper. One item code is also mentioned on the paper.
Appellant has shown that the N-17-979 code is mentioned in the inventory sheet of the official valuers prepared during the survey.
122ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Further, the details in the paper do indicate with reasonable certainty that there is sale out of books of accounts. The presumption under section 292C is also in favour of the revenue. There is no proof from the appellant that same design items are not manufactured again once or after they are sold/transferred to franchise. Whereas the documents impounded during the survey and as discussed in this ground of appeal shows otherwise i.e. customization / pick & choose by customers using the various item codes. The item codes most apparently indicate only the design code. Other sales as reflected in the paper under consideration are found to be transacted out of books. In view of this, taking into consideration the totality of the facts, the addition with respect to this items is hereby confirmed.
However the appellant has remained silent with respect to the other sale in the US dollars. From other purpose it is found that the appellant has sold the items even without mentioning item codes.
In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby confirmed.
49. Page No. 23 of Annexure-AS/3, Addition in assessment order-Rs- 8,31,000 As per the details noted on the above paper, total 2 items of jewellery have been sold for a total consideration of Rs. 8.31 lakh. Item code is mentioned on the paper.
Appellant has shown that the two stated item codes are mentioned in the inventory sheet of the official valuers prepared during the survey.
Appellant has shown that the stated item codes are mentioned in the inventory sheet of the official valuers prepared during the survey. There is no rebuttal of the same in the assessment order. The details in the paper do not indicate with reasonable certainty that there is sale out of books of accounts. In view of this the addition with respect to these items is hereby deleted.
In view of the above discussion, as per preponderance of probabilities, the contents of the documents do not sufficiently show sale out of books of accounts, accordingly, addition with respect of this paper is hereby deleted.
50. Page No. 24 of Annexure-AS/3, Addition in assessment order-Rs. 11,43,000 As per the details noted on the above seized paper, total 8 items of jewellery have been sold for a total consideration of Rs. 11,43,000. There is a clear mention of item no. and value of each item on the seized paper. Name of customer is not mentioned on the paper. Appellant has submitted the item no. R16-1431 and E19- 3011 mentioned on the above loose sheet were sold in FY 2019-20, which were duly recorded in books of accounts. Item bearing code no. R-5258, E19-3734, 123 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT R19-1248, E13-2664, E18-4219 and E18-102 are included in the list of stock prepared by departmental valuers.
Regarding the sale bill filed which has not been examined which are not admitted being additional evidence as there is no reference to the same in PB Pages 1151- 1164 which is the reply of the appellant before the Id. AO on the issue. There is no reply on this page in annexure at PB Pages 1156 to 1164. These have not been verified by the AO and are to be treated as self-serving documents not warranting any relief. Learned AO is also stated in the assessment order that the appellant has not been able to reconcile the same in the books. Further despite of the above observation regarding the invoices, the marking on the paper clearly shows sold. There is no proof from the appellant that same design items are not manufactured again once or after they are sold/transferred to franchise. Whereas the documents impounded during the survey and as discussed in this ground of appeal shows otherwise i.e. customization/pick & choose by customers using the various item codes. Similar is the scenario with respect to item is stated to be transferred to the franchisee. This contention of the appellant is hereby rejected.
Appellant has shown that the stated item codes are mentioned in the inventory sheet of the official valuers prepared during the survey.
Appellant has shown that the stated item codes R-5258, E19-3734, R19-1248, E13-2664, E18-4219 and E18-102 are mentioned in the inventory sheet of the official valuers prepared during the survey. There is no rebuttal of the same in the assessment order. The details in the paper do not indicate with reasonable certainty that there is sale out of books of accounts. In view of this the addition with respect to these items is hereby deleted.
In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby partly confirmed (Codes R16-1431 & E 19- 3011 of Rs. 3,36,000).
51. Page No. 26 of Annexure-AS/3, Addition in assessment order-Rs.
As per the details noted on the above paper, total 5 items of jewellery have been sold for a total consideration of Rs. 88.00 lakh to a customer named, Smita, who is KamayaniJi's relative. There is a clear mention of item no, and value of each item written on the paper.
In this case the appellant has not reconciled the item codes N16-1673 and N19-
207. The impounded paper under consideration does not show whether sufficient strength of the probability that the unaccounted sale in cash was done by the appellant. Accordingly even though in the later part of this paragraph the addition has been confirmed to the extent of non-reconciled item codes however the 124 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT reconciled item codes are not treated as sold due to the weak nature of the document. The scenario in this paper under consideration is different from the papers where strong evidence or indicators of sale are mentioned on the paper and it has been held that unaccounted sale has taken place even when the item codes have matched with inventory/invoices.
At the same time in this case the appellant has not reconciled the item codes (N16- 1673 and N19-207) neither with the stock valuation sheet prepared by the official valuers and nor with the invoices whereas in similar such other cases the appellant has reconciled the item code. This shows that these items were in existence with the appellant however these have been removed from the official records and are not in inventory also on the date of survey. The presumption under section 292C is also in favour of the revenue. The totality of the facts leads to the conclusion that these item codes jewellery items were sold out of books as mentioned in the loose papers or through some other sale for which the document could not be found. It is a settled law that unaccounted transactions take place in secrecy and direct evidence of such transactions is very rarely available and are to be decided on the basis of circumstantial evidences. Accordingly the sale with respect to the non reconciled item codes is treated to have taken place in unaccounted manner and the addition is hereby confirmed partly(Rs. 19,50,000).
52. Page No. 29 of Annexure-AS/3, Addition in assessment order-Rs. 10,13,000/-.
As per the details noted on the above paper, total 3 items of jewellery have been sold for a total consideration of Rs. 10,13,000/- to a customer whose e mail address and mobile no. is mentioned on the paper. There is a clear mention of item no and its sale value is also written on the paper.
Appellant has submitted that Item bearing code no. EA-7653 is included in the list of stock prepared by departmental valuers.
Appellant has shown that the stated item codes EA-7653 is mentioned in the inventory sheet of the official valuers prepared during the survey.
Appellant has shown that the stated item codes are mentioned in the inventory sheet of the official valuers prepared during the survey. There is no rebuttal of the same in the assessment order. The details in the paper do not indicate with reasonable certainty that there is sale out of books of accounts. In view of this the addition with respect to these items is hereby deleted.
Appellant has further submitted that the item no. B19-794 mentioned on the above loose sheet were sold in FY 2019-20, which were duly recorded in books of accounts. And Item no. N19-854 sent to Hyderabad franchise vide transfer invoice dated 19.06.2020.
125ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Regarding the sale bill filed which has not been examined which are not admitted being additional evidence as there is no reference to the same in PB Pages 1151- 1164 which is the reply of the appellant before the ld. AO on the issue. There is no reply on this page in annexure at PB Pages 1156 to 1164. These have not been verified by the AO and are to be treated as self-serving documents not warranting any relief. Learned AO is also stated in the assessment order that the appellant has not been able to reconcile the same in the books. Further despite of the above observation regarding the invoices, the marking on the paper clearly shows sold. There is no proof from the appellant that same design items are not manufactured again once or after they are sold/transferred to franchise. Whereas the documents impounded during the survey and as discussed in this ground of appeal shows otherwise i.e. customization / pick & choose by customers using the various item codes. Similar is the scenario with respect to item is stated to be transferred to the franchisee. This contention of the appellant is hereby rejected.
In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby partly confirmed (codes N19-854 & B19-794 of Rs. 9,95,000).
53. Page No. 30 of Annexure-AS/3, Addition in assessment order-Rs. 5,06,500/-
As per the details noted on the above paper, total 5 items of jewellery have been sold for a total consideration of Rs. 1,76,500/- to a customer named, Nitisha and one item has been sold to Jaspreet for Rs. 3.30 lakh. Thus, total sales as per this seized paper are amounting to Rs. 5,06,500/- Item code & item name and amount also mentioned on the paper.
Appellant has contended that the item no. E18-3000 mentioned on the above loose sheet were sold in FY 2019-20, which were duly recorded in books of accounts and Item bearing code no. E14-658 and E18-1827 are included in the list of stock prepared by departmental valuers.
Regarding the sale bill filed which has not been examined which are not admitted being additional evidence as there is no reference to the same in PB Pages 1151- 1164 which is the reply of the appellant before the Id. AO on the issue. There is no reply on this page in annexure at PB Pages 1156 to 1164.
These have not been verified by the AO and are to be treated as self-serving documents not warranting any relief. Learned AO is also stated in the assessment order that the appellant has not been able to reconcile the same in tae books. Further despite of the above observation regarding the invoices, the marking on the paper clearly shows sold. There is no proof from the appellant that same design items are not manufactured again once or after they are sold/transferred to franchise. Whereas the documents impounded during the survey and as discussed in this ground of appeal shows otherwise i.e. customization / pick & choose by customers using the various item codes. Similar is the scenario with respect to item 126 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT is stated to be transferred to the franchisee. This contention of the appellant is hereby rejected.
Appellant has shown that the stated item codes E14-658 and E18-1827 are mentioned in the inventory sheet of the official valuers prepared during the survey. Further remaining items code are not mentioned on the paper.
Appellant has shown that the stated item codes are mentioned in the inventory sheet of the official valuers prepared during the survey. There is no rebuttal of the same in the assessment order. The details in the paper do not indicate with reasonable certainty that there is sale out of books of accounts. In view of this the addition with respect to these items is hereby deleted.
In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby confirmed partly (codes E18-3000 of Rs.29,000/-).
54. Page No. 31 of Annexure-AS/3, Addition in assessment order-Rs. 28,81,000.
As per the details noted on the above paper, total 4 items of jewellery have been sold for a total consideration of Rs.28,81,000/-. There is a clear mention of item description and value of each jewellery item. Item code of some item & customer name is not mentioned on the paper. It is found that the calculation mentioned on the paper is maching with calculation mentioned on down side of page 30 and customer name appear on second half of page 30 is Jaspreet. It appears that the items mentioned on the page 31 has been sold to Jaspreet for sale consideration of Rs. 28,81,000/-. Further, Items description, value of each item, amount calculation, item code etc clearly mentioned on seized page.
Appellant has contended that there is no date mentioned on the loose sheet and no clarity in the above loose sheet.
In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby confirmed.
55. Page No. 32 of Annexure-AS/3, Addition in assessment order-Rs. 56,00,000 As per the details noted on the above paper, total 5 items of jewellery have been sold for a total consideration of Rs. 56,00,000/-. From the notings on the seized page, it is clear that all the figures written on this paper are in lakhs. There is a clear mention of item description and item number along with value of each jewellery on the seized paper. Name of customer is not mentioned on the paper.
127ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT The appellant has mainly made two contentions. Firstly the date/year of the sale is not proved and that item bearing code no. N-7989, N18-538, N16-263, N15-134 and N14-483 are included in the list of stock prepared by departmental valuer.
There is no rebuttal of the same in the assessment order. The details in the paper do not indicate with reasonable certainty that there is sale out of books of accounts.
In view of the above discussion, as per preponderance of probabilities, the contents of the documents do not sufficiently show sale out of books of accounts, accordingly, addition with respect of this paper is hereby deleted.
56. Page No. 34 of Annexure-AS/3, Addition in assessment order-Rs. 21,35,000 As per the details noted on the above paper, 2 items of jewellery have been sold for a total consideration of Rs. 21.35 lakh to a customer named, Gujjar. There is clearly mention of item description and number along with value of each jewellery item.
The appellant has mainly made two contentions. Firstly the date/year of the sale is not proved and that this noting related to quotation given to customer regarding certain items.
There is no rebuttal of the same in the assessment order. The details in the paper do not indicate with reasonable certainty that there is sale out of books of accounts.
In view of the above discussion, as per preponderance of probabilities, the contents of the documents do not sufficiently show sale out of books of accounts, accordingly, addition with respect of this paper is hereby deleted.
57. Page No. 35 of Annexure-AS/3, Addition in assessment order-Rs. 40,55,000 As per the details noted on the above paper, total 5 items of jewellery have been sold for a total consideration of Rs. 40.55 lakhs. From the notings, it is clear that all the figures written on this paper are in lakhs. There is a clear mention of item description and item number along with value of each jewellery item. Name of customer is not mentioned on the paper.
The appellant has mainly made two contentions. Firstly the date/year of the sale is not proved and that item bearing code no. N17-137, N12-747 and N18-229 are included in the list of stock prepared by departmental valuer.
Appellant has shown that the stated item codes are mentioned in the inventory sheet of the official valuers prepared during the survey.
128ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Further, appellant itself is also silent about the remaining two items. The impounded paper under consideration does not show whether sufficient strength of the probability that the unaccounted sale in cash was done by the appellant. Accordingly even though in the later part of this paragraph the addition has been confirmed to the extent of non-reconciled item codes however the reconciled item codes are not treated as sold due to the weak nature of the document. The scenario in this paper under consideration is different from the papers where strong evidence or indicators of sale are mentioned on the paper and it has been held that unaccounted sale has taken place even when the item codes have matched with inventory/invoices.
At the same time in this case the appellant has not reconciled the item codes (N 18-20 & N-8046) neither with the stock valuation sheet prepared by the official valuers and nor with the invoices whereas in similar such other cases the appellant has reconciled the item code. This shows that these items were in existence with the appellant however these have been removed from the official records and are not in inventory also on the date of survey. The presumption under section 292C is also in favour of the revenue. The totality of the facts leads to the conclusion that these item codes jewellery items were sold out of books as mentioned in the loose papers or through some other sale for which the document could not be found. It is a settled law that unaccounted transactions take place in secrecy and direct evidence of such transactions is very rarely available and are to be decided on the basis of circumstantial evidences. Accordingly the sale with respect to the non reconciled item codes is treated to have taken place in unaccounted manner and the addition is hereby confirmed partly (Rs. 15,10,000).
58. Page No. 36 of Annexure-AS/3, Addition in assessment order-Rs. 42,76,000 As per the details noted on the above paper, a total 11 items of jewellery have been sold for a total consideration of Rs. 42.76 lakh. From the notings, it is clear that all the figures (Except one figure of Rs. 48,000/-) written on this paper are in lakhs. There is a clear mention of item description and item number along with value of each jewellery item on the seized paper.
The appellant has mainly made two contentions. Firstly the date/year of the sale is not proved and that item bearing code no B12-154, B14-1094 and B-2244 are included in the list of stock prepared by departmental valuers.
Appellant has shown that the stated item codes are mentioned in the inventory sheet of the official valuers prepared during the survey.
Further, appellant itself is also silent about the remaining items.
The impounded paper under consideration does not show whether sufficient strength of the probability that the unaccounted sale in cash was done by the appellant. Accordingly even though in the later part of this paragraph the addition 129 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT has been confirmed to the extent of non-reconciled item codes however the reconciled item codes are not treated as sold due to the weak nature of the document. The scenario in this paper under consideration is different from the papers where strong evidence or indicators of sale are mentioned on the paper and it has been held that unaccounted sale has taken place even when the item codes have matched with inventory/invoices.
At the same time in this case the appellant has not reconciled the item codes (CON 19-331, R 18-457, E14-579, E15-3574, B15-1069, R16-830) neither with the stock valuation sheet prepared by the official valuers and nor with the invoices whereas in similar such other cases the appellant has reconciled the item code. This shows that these items were in existence with the appellant however these have been removed from the official records and are not in inventory also on the date of survey. The presumption under section 292C is also in favour of the revenue. The totality of the facts leads to the conclusion that these item codes jewellery items were sold out of books as mentioned in the loose papers or through some other sale for which the document could not be found. It is a settled law that unaccounted transactions take place in secrecy and direct evidence of such transactions is very rarely available and are to be decided on the basis of circumstantial evidences. Accordingly the sale with respect to the non reconciled item codes is treated to have taken place in unaccounted manner and the addition is hereby confirmed partly Rs. 10,66,000).
59. Page No. 37 of Annexure-AS/3, Addition in assessment order-Rs. 10,75,000.
As per the details noted on the above paper, total 4 items of jewellery have been sold for a total consideration of Rs. 10.75 lakh to a customer named Pallani from Hyderabad/ Kotkata. From the notings, it is clear that all the figures (except one figure of Rs. 35,000) written on this paper are in lakhs. There is a clear mention that these sales have been made in 'cash'.
The appellant has mainly made two contentions. Firstly the year of the sale is not proved and secondly that these are deaf and dumb piece of paper.
Regarding the contention of the appellant that these are deaf and dumb piece of paper only, the onus is on the appellant as per section 292C of the act. It has been seen from other papers also that the appellant has been in the business of making jewellery as per the requirement of the customers and appellant has involved in out of the books cash sales of jewellery. Contents of the document strongly indicate that sale was made by the appellant. Hence the contention of the appellant in this regard is hereby rejected.
In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby confirmed.
60. Page No. 38 of Annexure-AS/3, Addition in assessment order-Rs. 9,99,000 130 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT As per the details noted on the above paper, total 6 items of jewellery have been sold for a total consideration of Rs. 9,99,000/- to a customer named, Meera. The sale value written on this paper are in lakh as well as in thousands of rupees. There is a clear mention of item description along with value of each jewellery item. Items code are also mentioned on the paper.
The appellant has mainly made two contentions. Firstly the date/year of the sale is not proved and that item bearing code no B12-697 and E19-3040 are included in the list of stock prepared by departmental valuers.
Appellant has shown that the stated item codes B12-697 and E19-3040 are mentioned in the inventory sheet of the official valuers prepared during the survey. Further on perusal of said paper it is found that other four items code are not mentioned on the paper.
Appellant has shown that the stated item codes are mentioned in the inventory sheet of the official valuers prepared during the survey. There is no rebuttal of the same in the assessment order. The details in the paper do not indicate with reasonable certainty that there is sale out of books of accounts. In view of this the addition with respect to these items is hereby deleted.
In view of the above discussion, as per preponderance of probabilities, the contents of the documents do not sufficiently show sale out of books of accounts, accordingly, addition with respect of this paper is hereby deleted.
61. Page No. 39 of Annexure-AS/3, Addition in assessment order-Rs. 17,68,000 As per the details noted on the above paper, total 6 items of jewellery have been sold for a total consideration of Rs. 17,68,000/- to a customer named, Shashi SahayJi The sale value written on this paper are in lakh as well as in thousands of rupees. Item code of some articles are also mentioned on the paper.
The appellant has mainly made contentions that paper contains noting of working of customer enquiry of the certain jewellery items and these are deaf and dumb piece of paper.
In this case the appellant has not reconciled the item codes neither with the stock valuation sheet prepared by the official valuers and nor with the invoices -whereas in similar such other cases the appellant has reconciled the item code. This shows that these items were in existence with the appellant however these have been removed from the official records and are not in inventory also on the date of survey. The presumption under section 292C is also in favour of the revenue. The totality of the facts leads to the conclusion that these item codes jewellery items were sold out of books as mentioned in the loose papers or through some other sale.
131ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby confirmed
62. Page No. 40 of Annexure-AS/3, Addition in assessment order-Rs. 19,60,000 As per the details noted on the above paper, total 3 items of jewellery have been mentioned for a total consideration of Rs. 19,60,000/- for a family consisting of 3 members. The sale value written on this paper are in lakh as well as in thousand of rupees. Item code, name of customer etc. is not mentioned on the paper. The appellant has contended that the above rough paper contains noting of working of customer enquiry of the certain jewellery items.
On perusal of the said paper it is found that on that paper customer name, item code etc. not mentioned. Further, there is no rebuttal of the same in the assessment order. The details in the paper do not indicate with reasonable certainty that there is sale out of books of accounts. In view of the above discussion, as per preponderance of probabilities, the contents of the documents do not sufficiently show sale out of books of accounts, accordingly, addition with respect of this paper is hereby deleted.
63. Page No. 41 of Annexure-AS/3, Addition in assessment order-Rs. 1,71,000/-
As per the details noted on the above paper, total 5 items of jewellery have been sold for a total consideration of Rs. 1,71,000/-. Item code, name of customer etc. is not mentioned on the page. Item code, name of customer etc. is not mentioned on the paper. The appellant has contended that the above rough paper contains noting of working of customer enquiry of the certain jewellery items.
On perusal of the said paper it is found that on that paper customer name, item code etc. not mentioned. Further, there is no rebuttal of the same in the assessment order. The details in the paper do not indicate with reasonable certainty that there is sale out of books of accounts.
In view of the above discussion, as per preponderance of probabilities, the contents of the documents do not sufficiently show sale out of books of accounts, accordingly, addition with respect of this paper is hereby deleted.
64. Page No. 41 back of Annexure-AS/3, Addition in assessment order-Rs. 47,00,000 As per the details noted on the above paper, total 3 items of jewellery have been sold for a total consideration of Rs. 47 lakh to a customer named, Sarika. The sale value written on this paper are in lakh of rupees. Customer name and mobile number are clearly noted on the paper. The appellant has contended that the 132 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT above rough paper contains noting of working of customer enquiry of the certain jewellery items and it is a deaf and dumb piece of paper.
On perusal of the said paper it is found that on that paper item code etc. not mentioned. Further, there is no rebuttal of the same in the assessment order. The details in the paper do not indicate with reasonable certainty that there is sale out of books of accounts.
In view of the above discussion, as per preponderance of probabilities, the contents of the documents do not sufficiently show sale out of books of accounts, accordingly, addition with respect of this paper is hereby deleted.
65. Page No. 37 of Exhibit-4 of Annexure-AS, Addition in assessment order-Rs. 14,90,000 As per the details noted on the above paper, total 4 items of jewellery have been mentioned for a total amount of Rs. 14.90 lakh. Customer name Neha and her mobile no. are also written on the paper. The sale value written on this paper are in lakh as well as in thousands of rupees. Item code is not mentioned on the paper. The appellant has contended that the above rough paper contains noting of working of customer enquiry of the certain jewellery items and it is a deaf and dumb piece of paper.
On perusal of the said paper it is found that on that paper item code etc. not mentioned. Further, there is no rebuttal of the same in the assessment order. The details in the paper do not indicate with reasonable certainty that there is sale out of books of accounts.
In view of the above discussion, as per preponderance of probabilities, the contents of the documents do not sufficiently show sale out of books of accounts, accordingly, addition with respect of this paper is hereby deleted.
66. Party C-5, Exhibit-6- Page No. 06, Addition in assessment order-Rs. 12,42,150/-
As per the details noted on the above seized page, 8 items of jewellery have been sold for a sum of Rs. 12,42,150. Item code and amount of each item clearly mentioned on the paper.
The appellant has made contention that item bearing code no M 15-28 is included in the list of stock prepared by departmental valuers. The relevant page of valuation report is available on page no. 1165 of PB Vol. 7. Appellant itself is also silent about the remaining seven items.
Appellant has shown that the stated item code M 15-28 is mentioned in the inventory sheet of the official valuers prepared during the survey. The impounded paper under consideration does not show whether sufficient strength of the 133 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT probability that the unaccounted sale in cash was done by the appellant. Accordingly even though in the later part of this paragraph the addition has been confirmed to the extent of non-reconciled item codes however the reconciled item codes are not treated as sold due to the weak nature of the document. The scenario in this paper under consideration is different from the papers where strong evidence or indicators of sale are mentioned on the paper and it has been held that unaccounted sale has taken place even when the item codes have matched with inventory/invoices.
At the same time in this case the appellant has not reconciled the item codes( N 18- 91, N18-58, N17-766, N16-1046, N 16-954, M17-46 & B14-357) neither with the stock valuation sheet prepared by the official valuers and nor with the invoices whereas in similar such other cases the appellant has reconciled the item code. This shows that these items were in existence with the appellant however these have been removed from the official records and are not in inventory also on the date of survey. The presumption under section 292C is also in favour of the revenue. The totality of the facts leads to the conclusion that these item codes jewellery items were sold out of books as mentioned in the loose papers or through some other sale for which the document could not be found. It is a settled law that unaccounted transactions take place in secrecy and direct evidence of such transactions is very rarely available and are to be decided on the basis of circumstantial evidences. Accordingly the sale with respect to the non reconciled item codes is treated to have taken place in unaccounted manner and the addition is hereby confirmed partly (Rs. 12,11,450)
67. Party C-5, Exhibit-11, Page No. 39 back, Addition in assessment order-Rs. 2,11,73,369/-
As per assessment order this seized page, 7 articles were sold for Rs. 33,70,091/. Another two articles were sold for Rs. 1,74,69,698/- & Rs. 3,33,580/-. The total unaccounted sale as per this seized page works out to Rs. 2,11,73,369/-.
The appellant has made contention that details noted on paper has no relation to sales and purchase of items. Further, there was no date mentioned on the above rough sheet and this page is part of diary of calendar year 2017.
On perusal of paper it appears to be related to C Form / F Form sales. For the last two items on the page there is no form mentioned. Further there is no item code, no customer related identity details, no product details etc. In view of the above discussion, as per preponderance of probabilities, the contents of the documents do not sufficiently show sale out of books of accounts, accordingly, addition with respect of this paper is hereby deleted.
68. Page No. 31 of Annexure-AS/13, Addition in assessment order-Rs 3,59,000 134 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT As per this seized page, an article was sold for an amount of Rs. 3,59,000/. The noting on this paper is also an example of suppression by five zeroes, while writing the figures on the seized paper. Item description and code are clearly mentioned on the paper. On this paper there is clearly mentioned payment 35.99 against E14- 3476 and paid 3 lacs & due 59,000/-
The appellant has mainly made two contentions. Firstly the year of the sale is not proved and secondly that the item no. E14-3476 was transferred to Chennai Franchiees vide invoice dated 06.02.2020.
Regarding the sale bill filed -which has not been examined which are not admitted being additional evidence as there is no reference to the same in PB Pages 1151- 1164 which is the reply of the appellant before the Id. AO on the issue. There is no reply on this page in annexure at PB Pages 1156 to 1164. These have not been verified by the AO and are to be treated as self-serving documents not warranting any relief. Learned AO is also stated in the assessment order that the appellant has not been able to reconcile the same in the books. Further despite of the above observation regarding the invoices, the marking on the paper clearly shows sold. There is no proof from the appellant that same design items are not manufactured again once or after they are sold/transferred to franchise. Whereas the documents impounded during the survey and as discussed in this ground of appeal shows otherwise i.e. customization / pick & choose by customers using the various item codes. Similar is the scenario with respect to item is stated to be transferred to the franchisee. This contention of the appellant is hereby rejected.
In view of the above discussion, as per preponderance of probabilities, addition with respect of this paper is hereby confirmed.
69. Page No. 35 of Annexure-AS/13, Addition in assessment order-Rs 19,25,000 As per this seized page, two articles were sold for Rs. 15,50,000/- & Rs. 3,75,000/- respectively to Ms Sharadha Upadhyaya on 06.06.2020. Item code, customer name, gross weight, gold weight, stone weight & amount are clearly mentioned on the paper.
The appellant has mainly made two contentions. Firstly this is a rough paper and secondly that item codes N13-765 and E-A-7719 are mentioned in the valuation report of the official valuer.
Appellant has shown that the stated item codes are mentioned in the inventory sheet of the official valuers prepared during the survey.
Appellant has shown that the stated item codes are mentioned in the inventory sheet of the official valuers prepared during the survey. There is no rebuttal of the same in the assessment order. The details in the paper do not indicate with 135 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT reasonable certainty that there is sale out of books of accounts. In view of this the addition with respect to these items is hereby deleted.
In view of the above discussion, as per preponderance of probabilities, the contents of the documents do not sufficiently show sale out of books of accounts, accordingly, addition with respect of this paper is hereby deleted.
70. Page No. 35 back of Annexure-AS/13, Addition in assessment order-Rs 9,50,000 As per this seized page, an article was sold for an amount of Rs. 9,50,000/. This amount is written on the seized paper with suppression of five zeroes. Item code, gross weight of item, gold weight, diamond weight etc. clearly mentioned on the paper.
The appellant has contended that the item no. R16-184 was sold at delhi showroom vide invoice dated 28.012.2019. A copy of said invoice is available on page no. 1170 of PB Vol. 7.
Appellant has shown that the stated item codes are mentioned in the invoice which was also submitted to the ld. AO.
Appellant has shown that the stated item codes are mentioned in the inventory sheet of the official valuers prepared during the survey. There is no rebuttal of the same in the assessment order. The details in the paper do not indicate with reasonable certainty that there is sale out of books of accounts. In view of this the addition with respect to these items is hereby deleted.
In view of the above discussion, as per preponderance of probabilities, the contents of the documents do not sufficiently show sale out of books of accounts, accordingly, addition with respect of this paper is hereby deleted.
The Addition sustained in this ground of appeal is summarized and tabulated as under:-
136ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT 137 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT 138 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Finding of ld. CIT(A) in respect of addition of Rs. 11.40 crores on account of alleged unaccounted sales of high value jewellery by taking tag price instead of cost price and by taking entire alleged unaccounted sales as against reasonable profit rate.
12.6 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-139
ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT
(i) As stated in the assessment order, during the course of survey at the H.O. cum showroom of M/s Amrapali Jewels Pvt. Ltd., physical verification of high value jewellery items, having a tag price of Rs. 10 Lakhs and more was made on an item-to-item basis. This exercise revealed that a total of 41 high value items of jewellery having total tag price of Rs. 11.40 Crores were not found on physical verification at the premises. During the course of survey at Head Office cum Showroom situated at Panch Batti, Jaipur and Ashok Marg, C-Scheme, Jaipur on 13.07.2020, it is noticed that a total of 41 high value items of jewellery having total tag price of Rs.11,40,00,000/- were not found on physical verification at the premise.
(ii) In the statement recorded on oath u/s 131 of the Act on the date of 16-07-2020 Shri Rajesh Ajmera, Director of the assessee company was confronted on this discrepancy and asked to explain the same. He could not explain this discrepancy. He gave three clarifications as under:-
(a) 9 items have been sent for repairs.
(b) appellant gives discount on the tag price in the wholesale sales.
(c) tag price of one item was erroneous.
Even for the remaining 32 items there is no clarification at all in the statement recorded of the director of the company.
Issue of items sent for repairs:-
(iii) Shri Rajesh Ajmera, Director of the assessee company stated that nine items were sent for repairs. There is no explanation available with the director with respect to the remaining 32 items. Further regarding the 9 items which were claimed to have been sent for the repairs, it was asked from the director of the company to furnish the challan in support of this claim however the same were not produced and it was stated that such documents will be produced within 15 days however even after lapse of very long period such documents were not produced.
And have not been furnished till date. As per the appellant the details of the items were furnished on 05.04.2021 this letter only has an annexure having the list of items along with some names and dates claiming to be the names of the persons to whom such items were sent for repair. However the documents like challan, gate pass, acknowledgement of the receiver, the terms of the repairs required, repair cost quote document by the artisan, etcetera were not furnished. None of such documents were found during the survey not even for one of such items.
(iv) In the letter dated 05.04.2021 (Pg 905 of PB) the appellant has claimed that 11 items were traced on the date of survey itself and were shown on 13.07.2020. However the statement appears to be baseless and mere self-serving. There is no reference to any document prepared on the date of survey or statement recorded during the survey in which such matching of 11 items is discussed. Further in the 140 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT statement of the director recorded on 16.07.2020, the director was asked to reconcile the missing 41 items (and not the missing 30 items). In the reply also the director is not referred to such 11 items and he has only referred to the claim that 9 items were sent on repairs. Thus on 16.07.2020, statements/language of both the revenue authorities as well as of the appellant, shows that none of the party had any doubt that all the 41 items were still unreconciled and unverified. Thus the assertion in this letter, after nine months of the survey and that too without any supporting, is rejected.
In the appeal proceedings the appellant has claimed that these 41 items were not sold and 30 items out of 41 were sent for repairing/rework/refurbishing to various suppliers. Appellant has submitted a list in this regard providing details of items which were sent for repair or re-work.
(v) As the initial response on 16.07.2020, it was stated by the director of the company that 9 items were sent for the repairs. However much later on 05.04.2021 the appellant has claimed that 30 items were sent for repairs. Even the appellant has indirectly accepted that 11 items were sold out of books as there is no explanation in this regard even after the finding of such sales in the assessment order. Further the contention of the appellant that 30 items were sent for repairs, is a clear case of improvement and afterthought in an effort to artificially explain the missing items. At the same time neither the documents which could support and show that the items were sent for repairs, were found during the survey and nor such documents were furnished subsequently. Non discovery of such documents during the survey and no explanation from the appellant regarding the absence of such documents during the survey, clearly points towards the fact that such documents were not in existence on the date of survey.
(vi) It is beyond human probabilities and as per normal business practices no businessman would give such precious high-value items without any record and documentation and acknowledgement to the job workers who are very small time workers and do not even have PAN in most of the cases as is seen from the affidavits furnished by the appellant as additional evidences during the appeal. Further it is not the case that such items were handed over personally by the director of the company to such job workers and as it involves the role of the employees of the company, the authorisation document from the management is also crucial otherwise the security guards would never allow such items to pass without proper documentation.
(vii) The appellant has much after the passing of assessment order, on 20.12.2023, has furnished copies of affidavits of some individuals claiming to be the job workers who repaired the items. Before discussing these affidavits, it is noted that the appellant has not furnished the supporting documents as discussed in paragraphs above and not explained the stepwise procedure. In case, and very much normally and possibly, the employees of the appellant was involved in the process of handing over and taking over of the items, the appellant has neither explain the procedure, how the repair requirements were communicated to the job work, nor 141 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT the roles of the specific employees in this regard, nor the affidavits of the employees etc. for the verification of the assessing authority. This shows that the appellant has not discharged the onus in furnishing the true and complete disclosure for the verification. Further, the appellant has only furnished the affidavits of the not so well to do individuals as it is seen in the affidavits they have not even mention the PAN numbers except in case of Amrapali design studio which is the group entity of the appellant.
(viii) The Id. AO in the remand report has objected to the admission of the additional evidence in this regard. Concurring with the same these affidavits have not been admitted in the earlier part of this order dealing with the legal issue of the admission of the additional evidences. The learned AO has also stated that "on bare perusal of same it was noticed that these affidavits were purchased on 20.12.2023 i.e. after lapse of around three and half year. No such documents were filed by the assessee during the post search proceedings as well as during the assessment proceedings. Therefore, no cognizance of the same is required to be taken as it is a mere afterthought". The issue was also raised in the statement of the director of the company on 16-07-2020 under section 131 of the Act.
(ix) As is inferred from the discussion above the affidavits furnished by the appellant are of not so well to do or the poor individuals. The appellant has not produced any documents that these repairers have worked for the appellant in the past. Regular old relationship has not been established. The appellant has not shown how the details of the requirements of the repair were communicated to the individuals. Precise details are required to be communicated for the desired repairs outcome. There was no acknowledgement from these repairers found during the course of survey. From the details furnished by the appellant it is seen that the items were in the possession of these parties/individuals for number of months whereas the appellant has not shown on what security and guarantee such costly items were handed over to these individuals. It is seen that the appellant itself is not clear for what purposes the items were sent as it is stated by the appellant in the submissions that the items were sent for repairing/rework/refurbishing.
(x) These affidavits are silent on why and for what purpose these affidavits have been prepared. These affidavits are also silent on the various issues as discussed above of the procedure and the details of requirement from the appellant and the amounts charged etcetera. These affidavits also do not have any enclosure of the documents received from the appellant along with the jewellery items when such items. were allegedly given for the repairing/rework/refurbishing to substantiate the contents of the affidavits. The affidavits are also silent on the specific history and relationship of the individuals with the appellant. Bills raised by them are also not referred. At the same time the appellant itself is a manufacturer of the jewellery and its associated concerns are also in the same business, in such a case the claim of sending the jewellery items to the individuals with whom the appellant has claimed the relationship in terms of only 'repairs' is very much unprobable and unlikely. The tasks performed by such individuals as stated by them in their affidavits appear to 142 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT be very basic like cleaning and polishing, laser soldering. stone polishing, stone change, daak change etc. and one person Mr Ankur Jain has stated to have done all these tasks in his affidavit with respect to various different items. Such tasks can easily be done by the manufacturing team of the appellant as well as of its group entities and as well as by the manufacturing job workers. In fact one of the affidavit is from one of the group entity of the appellant. However at the same time the appellant has not furnished the balance sheet and the profit and loss account etcetera of Amrapali design studio to see whether the income on account of repairs is being shown in the earlier years as well. At the same time if the item was given in repair to the group entity that should have been immediately informed during the survey and after the survey as the employees and the directors of the appellant company had sufficient time and opportunity to recall the details and also discuss the things amongst themselves. However that was not done. It shows afterthought on account of the appellant.
(xi) As per the details submitted by the appellant, items were given to Ankur Jain on 12 May 2020 which was the lockdown period due to Covid 19. And the items are also stated to be have been received back during the same Covid period during which lockdowns were being observed. This shows that the contention of the appellant that the items were given on repairs is not reliable.
(xii) The post search enquiries had revealed that sale of such high value items was not recorded in the regular books of a/c of the assessee. Further, the assessee was also not able to co-relate the purchase of these high value items from the regular books of account. As such these high value items were prima facie transacted outside the books of account.
(xiii) The conclusive inference from the totality of the facts and circumstances is that the contention of the appellant that these items were given on repairs is unreliable and baseless and is rejected and further that these affidavits have apparently been obtained artificially. In view of this discussion, these affidavits are found to be unreliable and are rejected on the merits also.
The Id. AO has concluded that the non availability of the above high value 41 items of jewellery, clearly prove that these items have been sold without recording the same in books of accounts. These findings have not been proved wrong by the appellant.
In view of the above discussion, the finding of the learned assessing officer is hereby upheld that such 41 items were sold out of books.
(xiv) The appellant has also claimed alternatively that only the profit element inside sales could be added to the income. However in this regard the purchase of these items is un verified. In the appeal also the appellant has not verified the purchase of this items. Further the quantitative reconciliation is not proved by the appellant. It is not the claim of the appellant that the purchases with respect to such sales were 143 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT also made out of books in cash out of business funds. All the purchases of the appellant have been considered as per the terms of the appellant in the trading account while computing the profit. Thus the expenditure with respect to the impugned sales has already been considered. The appellant has diverted the entire sales consideration out of books of accounts and the sales reflected in the books of accounts needs to be increased by the same amount which would lead to the increase in the profit by the same equal amount.
In the statement dated 16.07.2020, Shri Rajesh Ajmera has also made a passing statement that discount is given on the wholesale sales. However with respect to these 41 items, it is not the claim of the appellant that these items were sold in wholesale. Further, wholesale items are generally sold on credit or with proper bills and invoices. In view of this decision the natural corollary is that the items were sold in retail. Hence the sale value is to be considered at the tag price.
Accordingly, the learned AO has rightly added the total sales consideration to the income of the appellant.
Accordingly, these grounds of appeal are hereby dismissed.
Finding of ld. CIT(A) on the addition of Rs. 11,65,000/- made u/s 69C of the Act 13.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-
During the course of survey proceedings at the business premises of appellant Company situated at K-14B, Ashok Marg, C-Scheme, Jaipur, certain incriminating documents were found and seized as per Annexure-AS. Learned AO has noted that expenses of Rs. 11,65,000/- were made under various heads by the appellant and the same are held to be unexplained under section 69C of the Act..
Appellant has submitted that (i) back side of page no. 115, (ii) page no. 119, (iii) page no. 120 and (iv) Back side of Page no. 122 of Exhibit-3 of Annexure-AS are part of Personal Diary of one employee Mr. Himanshu Danghi The appellant had contended before the Id. AO that Mr. Himanshu Danghi has already left the organization in the 2018-19 i.e., approx. 1 to 1.5 year earlier than the date of Survey and he was looking after matters related with Franchisee of the company. This diary is related to calendar year 2018 and all these pages were of Oct 2018. As it can also be seen that this Rough Diary is of any DS Group (Dharampal Satypal Group), not of assessee company. On top of the page (Personal Memorandum) of this diary he has written his personal details viz his name, address, details of his Insurance Policy, his PAN number, details of his 144 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT personal doctor, emergency contact no. of his wife Isha and Brother etc., which proves that this is his personal diary. Appellant has also contended that in this page some figures are written against some names and company does not have any relation to any of the names mentioned on that page. It is also seen that some mobile numbers are written on top and bottom of the page which he might have written for his personal reference. On the Extreme bottom of the page he has written date which is 31.10.2018, which clearly reflects that this rough diary relates to Oct. 2018 and the names against which some amount is mentioned is also for his personal reference which does not have any relation to any transactions of the company.
In the assessment order the learned assessing officer has not rebutted the submissions of the appellant on the issue on the facts and no third party enquiry is also been done. Further the contention of the appellant that these do not pertain to the appellant has been explained by the appellant from the contents on the document. There is no reference to any entries pertaining to the appellant on other pages of the diary other than 4 pages as discussed in the assessment order. Also further on perusal of the facts of the issue and submissions of the appellant, it is observed that these notings do not pertain to the year under consideration. Back side of page number 115 of Exhibit -3 of Annexure AS:
The Id. AO has on perusal of this page noticed that expenses of Rs.2,00,000/- were made under various heads by the assessee. The part of the document relied upon in the assessment order is a dumb document as there is neither reference to appellant or appellant's business, nor details of parties/purpose deciphered to whom such payment was done, nor the document is also not referred in any statement recorded or other enquiries and also the diary has been explained to be belonging to ex-employee and date also explained by appellant. In view of the discussion in the paragraphs above of this ground of appeal and in this para, and considering the submissions of the appellant, this addition is hereby directed to be deleted.
Page number 119 of Exhibit -3 of Annexure AS:
The Id. AO has observed that on perusal of page no.119 of Exhibit-3 of Annexure- AS, that expenses of Rs. 2,10,000/- were made under various heads by the assessee. Ld. AO has mentioned 'heads' in the assessment order whereas the relevant part of the documents refers to some names. The part of the document relied upon in the assessment order is a dumb document as there is neither reference to appellant or appellant's business, nor no details of parties (except some first names)/purpose deciphered to whom such payment was done, nor the document is also supported through any statement recorded or through an enquiries and also the diary has been explained to be belonging to ex-employee and date also explained by appellant. In view of the discussion in the paragraphs above of this ground of appeal and in this para, and considering the submissions of the appellant, this addition is hereby directed to be deleted.145
ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Page number 120 of Exhibit 3 of Annexure AS:
The Id. AO has held that expenses of Rs.2,00,000/- were made under various heads by the assesse. Id. AO has mentioned heads' in the assessment order whereas the relevant part of the documents refers to some names as well. The relevant part of the notings refer to instalment', 'AK', Bhim ji' etc. and opposite the total 'net required' has been written. Which shows the expenditure had not been incurred. The part of the document relied upon in the assessment order is a dumb document as neither there is reference to appellant or appellant's business, nor details of parties (except some first names)/purpose deciphered to whom such payment was done, nor the document is also not supported through any statement recorded or through an enquiries and also the diary has been explained to be belonging to ex-employee and date also explained by appellant. In view of the discussion in the paragraphs above of this ground of appeal and in this para, and considering the submissions of the appellant, this addition is hereby directed to be deleted.
Back side of page number 122 of Exhibit -3 of Annexure AS:
Ld. AO has held that expenses of Rs.5,55,000/- were made under various heads by the assesse. Ld. AO has mentioned 'heads' in the assessment order whereas the relevant part of the documents refers to some names like Abhishek, Sanjay, Om Singh etc. and no heads are mentioned. Except name and amount nothing is mentioned. The part of the document relied upon in the assessment order is a dumb document as there is neither reference to appellant or appellant's business, nor no details of parties (except some first names)/purpose deciphered to whom such payment was done, nor the document is also supported through any statement recorded or through an enquiries and also the diary has been explained to be belonging to ex-employee and date also explained by appellant. In view of the discussion in the paragraphs above of this ground of appeal and in this para, and considering the submissions of the appellant, this addition is hereby directed to be deleted.
Accordingly appeal of the appellant on the grounds of appeal number 15 and 16 is hereby allowed.
5. As the appeal of the assessee was allowed in part by ld. CIT(A), both the revenue as well as that of the assessee challenged that order of the ld.
CIT(A) before this tribunal by filling separate appeal.
146ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT
6. First, we take up the appeal filed by the assessee. Since the facts of the case were already stated here in above at para 3 above, the same are not repeated here. In this appeal filed by the assessee they have raised as much as 23 grounds of appeal as stated vide para 2.1 above. The issue / addition made in the assessment order and disputed by both the parties before this tribunal is summarized herein below:
Sr. Particulars Amount Remarks
No.
1. Addition on account of alleged excess 141,35,81,694/- Enhanced by Ld. stock computed based on the valuation CIT(A) report u/s. 69B of the Act
2. Addition in respect of high value items 11,40,00,000/- Confirmed by Ld. allegedly found short during survey CIT(A) proceedings
3. Addition in respect of alleged 24,95,17,849/- Addition of unaccounted sale based on loose Rs.18,15,12,563 papers found during survey deleted by Ld. CIT(A) and Rs.
6,80,05,286
confirmed by
CIT(A)
4. Addition in respect of alleged 11,65,000/- Deleted by CIT(A)
unaccounted expense of different
amount - u/s. 69C of the Act
7. The Ld. Senior counsel Shri Sanjay Jhanwar representing the assessee argued that ld. AO made the addition on the four issues listed herein above which were confirmed or deleted by the CIT(A) as narrated herein above.
The Authorized Representative (AR) of the assessee supported all the grounds raised and stated that the assessee relies on detailed written 147 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT submission and the paper book, which comprises in nine volumes totaling 1945 pages. As is evident that the assessee got the partial relief from the order of the ld. CIT(A) and for the sustained addition the assessee in appeal. In support of the various grounds so raised ld. AR of the assessee filed the following written submission:
BRIEF FACTS:
1. Date of survey 13.07.2020
2. Premise covered under survey are:
a. Head Office - C Scheme Ashok Marg b. Head Office - Museum at Basement c. Panch Batti - Jaipur.
3. No incriminating material forming basis to invoke section 69B of the Act was found during course of survey and entire addition made by AO is based on the valuation report of departmental valuers ASSESSEE SUBMISSION - LOCATION WISE S. Location ASSESSEE SUBMISSION No.
1. Stock at HO, 1. Modus operandi adopted for valuation : Raw material approach a Head Office, - term coined by Ld. CIT(A) i.e. estimated the gold component in C-Scheme jewelry item, its purity, precious stone etc. and arrived at market Ashok Marge value of the same as on 13.07.2020(date of survey).
2. However, different rate of gold and silver adopted for the same date i.e. 13.07.2020.
S. Name of valuer Rate Adopted
No
1 Kamal kant Pareek: @ 50450/- per 10 gms
(Page No.852, Vol. 5)
2 Jagdish Chandra @ 3800/- per 1 gm
Jajoo: (Page No.864, Vol. 5)
3 Kailash Chauhan @ 50500/- per 10 gms
(Page No.850 of PB,
Vol. 5)
148
ITA Nos. 740 & 750/JP/2024
Amrapali Jewels Pvt. Ltd. vs. ACIT
S. Location ASSESSEE SUBMISSION
No.
3. The Ld. CIT(A) adopted an adhoc approach of applying 47% on Excel Price (Tag Price) to arrive at cost of inventory/stock. (Refer Para No. xxx at Page No. 167 of CIT(A) order).
4. The basis of valuation (being department valuer report) has been rejected by Ld. CIT(A) (Reference Para No. (xxii) Page No. 153- 154 of Ld. CIT(A) Order for which department is also not in appeal.
5. The CIT(A) has completely changed the entire foundation/basis of the assessment order from being based on valuation arrived at the department valuers minus the closing stock as per books derived by the AO to assumption of cost of the jewellery by reducing tag price/excel sheet price by 47%.
6. Addition u/s 69B cannot be sustained in the absence of direct proof and merely by arriving at cost superficially
7. The Ld. CIT(A) having found the very basis of the assessment to be legally unsustainable ought to have quashed the same.
8. No show cause notice issued to the Assessee for adopting new basis for making addition u/s 69B.
9. The Order of the Ld. CIT(A) has resulted in enhancement from Rs. 141 Crore to 146 Crore (Refer Page No. 197 of CIT(A) Order) contrary to Section 251(2) of the Act
10. The burden of proof u/s 69B not discharged
11. Declared GP is 34.32% for year under consideration, if addition is sustained, then it would result in exorbitant GP and arbitrary trading result for year under consideration and consequentially for subsequent assessment year.
12. The action of the Ld. CIT(A) tantamount to putting cart before the horse in as much as the entire exercise undertaken by the Ld. CIT(A) is focused on arriving at cost (superficially) completely overlooking the primary/foremost statutory prerequisite that "the Assessee has expanded an amount which has not been fully recorded in books of account". Hence, the action of the Ld. AO/Ld. CIT(A) is without jurisdiction.
13. No incriminating material found to establish that any amount expended in acquiring such jewelry exceeding the amount recorded in the books of account.
14. The entire valuation exercise was done to arrive at the market value as on the date of survey which cannot be made the basis for invoking Section 69B of the Act.149
ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT S. Location ASSESSEE SUBMISSION No.
15. No allegation of excess stock as admittedly section 69B invoked and not section 69.
16. No allegation of excess stock as items found during course of survey as every item has been assigned unique item code which matches as per the computerized stock list/tag price list /GST software being relied upon by the department valuer and AO himself.
17. Rather allegation of shortage of stock (41 items) being not found during survey viz a viz the computerized stock list/GST software. Refer ground No. 17.
18. Only dispute with respect to valuation of identified items The Assessing Officer has adopted valuation reports of the department valuers as such and made addition u/s 69B (Refer Page No. 52 of AO Order)
19. The statement of Mr. Rajesh Ajmera PB No. 125-127 in Vol. I) cannot be the foundation/basis:
a. Excel sheet/computerized list is maintained by internal control purpose b. Neither selling price nor cost is mentioned therein c. Mr. Rajesh Ajmera was discussing about transfer cost for GST purpose and not the value reflected in MIS sheet.
d. Q. No. 24 (PB No. 125-127 Vol. I), he specifically stated that cost price is actually lower than transfer value from HO to branches e. In Q. 25 (PB No. 126-127 Vol. I), he stated transfer price is almost near cost, which demonstrate that answer to Q. No. 25 recorded in duress and therefore not reliable. In any case, self-contradictory. f. Alternatively, his statement was with reference to transfers from HO to branches and not with respect to arriving at cost of individual items. (Reference Page No. 1944) g. Addition u/s 69B cannot be made solely based on statement in the absence of corroborative evidence.
h. Any admission can always be clarified and explained by the assessee.
Written Submission Reference (Vol. 9 paper Book, Internal Page)
20. The Appellant agitated the issue before the Ld. CIT(A) by filing detailed written submissions, further submission are available in Vol. 9 of the Paper Book. For ease of reference internal pages of 150 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT S. Location ASSESSEE SUBMISSION No. said submission have been referred.
21. At Page No. 1548 (Internal Page 38), Para No.2, the Appellant has specifically described about fact of different valuation by different valuer and inconsistencies therein.
22. At internal Page No. 47-48, the Appellant give an example of overvaluation of items for eg. item no 16-453 and item no M-18- 109 in which various precious and semi-precious stones, have been overvalued by 10 times from its original price
23. At internal Page No.93, Para No. 141 the Appellant summarized out various inconsistencies, which also formed the basis of rejection of department valuation by the Ld. CIT(A) (Reference Para No. (xxii) Page No. 153-154 of Ld. CIT(A) Order)
24. Departmental valuer made valuation on lumpsum basis and not item wise/code wise valuation.
Relevant Findings of the Ld. CIT(A) Submission of the Assessee Page No. 55 onwards Submission with respect to Section 69B - Page No. 55-61 Discrepancies in valuation Page No. 62-75 Findings of the Ld. CIT(A) (Page No. 134 onwards), Relevant Page No. 140 Para No. (xv) Page No. 148, the exercise of finding of the market price of the gold and silver used in the jewelry on the date of survey cannot form the basis for making addition u/s 69B of the Act.
Para No. (xviii) Page No. 150, the valuation report of the Assessee suffers from the same infirmities as highlighted against the valuation by the official valuers.
Para No. (xxi) Page No. 152: Appellant valuer also valued item from description made in excel sheet and not of actual items. valuation done at market rate.
Para No. (xxii) Page No. 153-154, the method adopted by department valuer of raw material-based valuation is rejected and approach should be averaging based approach, which is directed to be applied at all the locations where the valuation was carried out by the official valuers.
Para No. (xxiv) Page No. 154, the tag price can be considered as selling price Para No. (xxv) Page No. 155, for arriving at the cost price of the items vis a vis excel sheet price. Reference made to statement of 151 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT S. Location ASSESSEE SUBMISSION No. Mr. Rajesh Ajmera taking the median rate of 40%.
Para No. (xxix) Page No. 165, considering increase in metal prices rate of reduction by 47% on tag price excel sheet applied.
2. Stock at Panch Department Valuer: Jagdish Chand Jajoo Bati Modus operandi adopted: Shri Jagdish Chand Jajoo have arrived Showroom/ valuation by reducing the Tag Price (as per stock list maintained in Store computer of the Assessee) by 33 % in case of gold items, 35% in case of silver items and 40% in case of other (Page no. 1366-1511 of PB Vol. 8) • Refer internal page 40 of the Assessment Order Assessee's valuer: Shri Kamal Kumar Kasliwal, made independent valuation of the stock at Panch Bati Stores PB 147- 838 Vol. 2,3,4 and gold items at Head Office (PB No. 1311-1365, Vol. 8, which valued the stock 29,52,42,301/- against the valuation of 80,83,17,099/- by the department valuer (mentioned at Page No. 9 of the AO Order also) on account gold contents, valuation difference etc. (Refer Comparative given during CIT(A) proceedings at Page No. 1872-1909 in Vol. 9)
1. The department conducted valuation in just 2-3 days and Appellant got the valuation done through registered value by shutting down its operations post survey and requested departmental official be present there. (Reference Letter 21.07.2020 Page No. 145-146 in Vol. I
2. Other submission as above for Head Office Written Submission Reference (Vol. 9 paper Book, Internal Page) • The detailed written submission was made against Ground No. 8 from para 75-85 • The Appellant in Page No.75-82 in Para A under Para No. 98 of its written submission has contended and established that valuation was on assumption and presumption • At Page No.82, Para No. 108-109, the Appellant has specifically contented that no responsible person was present at time of valuation.
• Page No.83, Para No.115, it was duly submitted that there was no dispute in quantity, moreover, there is no addition made u/s 69 of the Act.
• Page No.90, Para No.134-135 specific discrepancies in valuation were highlighted, which were further explained in Para No. 135 152 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT S. Location ASSESSEE SUBMISSION No. about adopting adhoc approach of valuation at 67%, 65% and 60% after reducing 33%, 35% and 40% from excel/tag price.
3. Museum The Ld. CIT(A) gave direction to the Ld. AO and remanded the issue to Ld. AO with direction resulting into enhancement of addition without any notice u/s 251(2) of the Act Written Submission Reference (Vol. 9 paper Book, Internal Page) • Page No.51, Para A.10, it was submitted that Jewellery mounting to Rs. 1.90 crore belong to company and rest belong to other). The jewellery • Amount taken by department valuer is of Rs. 1,54,82,625/-(Refer Page No. 42 of Submission), which is valuation at market rate only Other submission as for Head Office and PanchBatti.
4. Stock at 1. Physical verification was not done by Delhi, Mumbai and other Mumbai Branches including Franchise Stock Branch 2. Notional calculations done by Ld. AO for making impugned addition on estimations, assumption and presumption.
3. The data of closing stock was taken by Ld. AO from incomplete/incorrect tally data (Reference 19 of AO Order, reproducing our written submission) a. The balance sheet on face of it shows opening balance difference b. Depreciation entries not passed c. There is variance in sundry debtor and credits as compared to audited financials d. Inter branch or HO accounts shown which are nullified on consolidation e. Certain stock transfer entries and sales and purchase entries are not entered in the above tally.
4. Pick and choose adopted by Ld. AO (Delhi Excel sheet, Mumbai and Bangalore branches incomplete Tally) (Reference Page No. 50 and 51 AO Order)
5. This inconsistency reflects the arbitrariness in the impugned orders
6. No case of understatement of consideration made by Ld. AO
7. Metal price impact not considered by Ld. CIT(A)
8. Other submission with respect of application of Section 69B.
Written Submission Reference (Vol. 9 paper Book, Internal Page) 153 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT S. Location ASSESSEE SUBMISSION No. • Page No.53-55, Para no.C.1, C.2, C.3(detail of Valuation) • Page No.88-89, Para No.128-132(Different valuation approach by department and tally data is incomplete and incorrect) • Page No.126(Vol-1), Q. No.24(Rajesh Ajmera stated that cost price is lesser than the transfer value), therefore, the excel price is neither selling price nor cost price.
5. Stock at Same as above Bangalore Branch
6. Stock at Delhi 1. The excel sheet contains Tag price which is neither selling price Branch nor cost price.
2. Physical verification was not done by Delhi, Mumbai and other Branches including Franchise Stock
3. No case of understatement of consideration made by Ld. AO
4. Metal price impact not considered by Ld. CIT(A)
5. Statement of Mr. Ajmera cannot be relied upon
6. Other submission with respect of application of Section 69B.
Written Submission Reference (Vol. 9 paper Book, Internal Page) • Page No. 51, Para No.A.10 (Stock lying in Delhi is as per computerized stock list) • Page No.52, Para No.B.2(No physical verification) • Page No.88-89, Para No.128-130(Different branches different method of valuation)
7. Stock at No Physical verification Franchisees AO has accepted taken the value as per our books, which is accepted and not disputed. (Reference Page no. 941 of PB Vol. 5.). This acceptance also implied accept the cost valuation of Rs. 132 Crore taken by Assessee as per books of accounts as no dispute raised on cost given for Franchise items.
8. Stock with • No case of understatement of consideration made by Ld. AO Consignment • Other submission with respect of application of Section 69B. agent USA • Value of consignment stock at various location taken from incomplete tally wherein accounting entries were pending • Correct ledger statement duly submitted in assessment proceedings, duly supported by documentary evidence like Bills, bill of entries, item wise return list etc. (which has not been considered) Reference Vol. 6 Paper Book for example page no.
154
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S. Location ASSESSEE SUBMISSION
No.
963, 1034, 1037 followed by 1027 etc.)
• Accounting entries of returns remained to be accounted in tally found which is duly established by leading supporting documents (Vol. 8) Written Submission Reference (Vol. 9 paper Book, Internal Page) • Page No. 59-61(No physical verification, balance receivable from consignee as on 31.03.2020 was Rs. 37,15,798/- PB No. 964 of Vol. Vol-6.
• No accounting was done before the survey • Followed by custom documents in the same paper book like pages 967, 968, 1015 • Invoice at Page No. 990 verifiable from custom document at 1015 • Invoice for entry at page no. 963, r.w.s. custom document at 1016 • verification submitted during hearing
9. Stock with Main Submission as above including no Physical verification done Consignment Written Submission Reference (Vol. 9 paper Book, Internal agent UK Page) • Page No. 61-63, (No physical verification, Tally taken by department was incomplete (Page No. 1039 of Vol. 6) • Corrected Tally Ledger available in Paper book in Vol. 6 at page No. 1034-35, 1037-1038 • Custom documents also in said paper book followed by said invoices • verification submitted during hearing
10. Stock with Main Submission as above including no Physical verification done Doha Written Submission Reference (Vol. 9 paper Book, Internal jewellery Page exhibition • Page No. 64-65, (No physical verification) • Page No.65(there is no stock lying with doha as on 13.07.2020) • Page No.87, Para no.125(Cost as per books for Doha Jewellery is NIL) • PB No. 1140 and supporting document at 1142
11. Stock with Main Submission as above including no Physical verification done 155 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT S. Location ASSESSEE SUBMISSION No. Consignment Written Submission Reference (Vol. 9 paper Book, Internal agent Hong Page Kong Page No.87, Para no.125(Cost as per books is NIL) As per ledger from Incomplete tally. (PB No. 1148, 1147) Corrected Tally ledger available at page no. 1148_______ OTHER SUBMISSIONS ON VALUE AS PER BOOKS OF ACCOUNTS:
The Ld. AO estimated value of stock as per books of accounts at Rs. 126 Crore as balancing figure (Reference at page no. 39 of Impugned Assessment Order). Though the stock as per books of account is of Rs. 132 Crore (Approx) including the franchise stock. The Ld. AO while arriving at balancing figure of Rs. 1,26,08,06,402 as alleged stock as per books, assumed the GP rate of 30% as against declared GP of 34.22 (Page No. 1769 of Vol. 9. Further, Ld. AO took Rs. 1201789418/- in assessment order as opening stock to work out impugned figure of Rs. 1,26,08,06,402/- as against the opening stock finished goods as on 31.03.2020 is Rs. 1269017876/- as per audited financials (Reference PB No. 28 of Vol. I).
8. To support the contention so raised in the written submission reliance was placed on the following evidence & records:
S.No. Particulars Page Vol.
Number No.
1. Copy of Acknowledgment of return of income and Computation of 1-8 Vol. 1
Income of AY 2021-22
2. Copy of Audited Financial Statement for FY 2020-21 and tax audit 9-53 Vol. 1
report
3. Copy of Audited Financial Statement for FY 2019-20 and tax audit 54-101 Vol. 1
report
4. Copy of Punchanamas of Survey proceedings and Impounding Order 102-104 Vol. 1
passed u/s 133A(3)(ia) of the Act
i. List of books of accounts impounded during survey in Annexure 105-109 Vol. 1
A Exhibit 1 to 6
ii. List of books of accounts impounded during survey in Annexure 110-111 Vol. 1
A Exhibit 1 to 15
iii. List of books of accounts impounded during survey in Annexure 112-113 Vol. 1
A Exhibit 1 to 4
iv. List of books of accounts impounded during survey in Annexure 114-117 Vol. 1
A Exhibit 1 to 16
v. Other documents 118-121 Vol. 1
156
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5. Copy of the Statement of Mr. Rajesh Ajmera u/s 131 of the Act from 122-144 Vol. 1
14.07.2020 to 16.07.2020
6. Copy of objection letter to Ld. DIT(Inv.), Jaipur dated 21.07.2020 145-146 Vol. 1
7. Copy of Valuation reports of Independent Valuer Mr. Kamal Kumar 147-838 Vol. 2
Kasliwal dated 30.07.2020 Vol. 3
Vol. 4
8. Copy of valuation report of Stock in trade by Department valuer Mr. 839-851 Vol. 5
Kailash Chauhan
9. Copy of valuation report of Stock in trade by Department valuer Mr. 852-861 Vol. 5
Kamal Kant Parekh
10. Copy of valuation report of Stock in trade by Department valuer Mr. 862-867 Vol. 5
Jagdish Chandra Jajoo
11. Copy of objection letter dated 18.08.2020 against the valuation done 868-870 Vol. 5
by Income Tax Department
12. Copy of letter dated 11.03.2021 submitted by Assessee regarding 871-875 Vol. 5
st th
details of stock in trade as on 31 March 2020 and 13 July 2020.
13. Copy of letter dated 11.03.2021 submitted by Assessee for details of 876 Vol. 5 jewellery along with ownership at Museum.
Copy of Annexure 1 of above letter containing details of Jewellery & Vol. 5 Articles at Museum of:
i. Mr. Rajiv Arora 877 ii. Rajiv Arora HUF 878 iii. Mr. Rajesh Ajmera 879 iv. Mrs. Neeru Arora 880v. Amrapali Jewels Pvt. Ltd. 881-882 14. Copy of Notice issued u/s 143(2) of the Act dated 21.02.2022 883-890 Vol. 5 15. Copy of letter in response to notice issued u/s 143(2) of the Act 891 Vol. 5 16. Copy of Notice issued u/s 142(1) of the Act dated 23.11.2022 892-902 Vol. 5 17. Copy of Reply dated 30.11.2022 submitted in response to point no. 1 903-904 Vol. 5
to 4 of notice issued u/s 142(1) of the Act dated 23.11.2022 i. Copy of Annexure 5 of above reply containing letter submitted to 905-908 Vol. 5 DDIT (Inv.) with complete details of items sent for repair.
18. Copy of Reply dated 23.12.2022 submitted in response to point no. 5 909-936 Vol. 5 of notice issued u/s 142(1) of the Act dated 23.11.2022. i. Copy of Annexure 1 of above reply containing details of stock lying 937-941 Vol. 5 at branches/other outlets and Franchisees and Consignment agent as at 31.03.2020 and 13.07.2020 to ADIT Inv. - 3, Jaipur ii. Copy of Annexure 2 of above reply which is submission of 942-943 Vol. 5 Assessee dated 21.07.2020 iii. Copy of Annexure 3 of above reply which is valuation report of Refer S.No. Vol. 5 Department Valuer Mr. Kamal Kant Parekh 7 iv. Copy of Annexure 4 of above reply which is objection dated 944-948 Vol. 5 18.08.2020 of Assessee on methods adopted by Departmental Valuers v. Copy of Annexure 5 of above reply which is month wise rate chart 949 Vol. 5 of Gold and Silver of last 3-4 year downloaded from RBI site. vi. Copy of Annexure 6 of above reply which details of jewellery along 950-956 Vol. 5 with ownership at Museum.
vii. Copy of Annexure 7 of above reply which is copies of tax invoice 957-962 Vol. 5 for stock transfer from Bangalore to HO.
viii. Copy of Annexure 8 of above reply which is related to returns of 963-1033 Vol. 6 consignment sales to USA.
ix. Copy of Annexure 9 of above reply which is details of stock lying 963-1033 Vol. 6 with consignee (USA) as on 31.03.2020 157 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT x. Copy of Annexure 10 of above reply which is related to returns of 1034-1137 Vol. 6 consignment sales to UK.
xi. Copy of Annexure 11 of above reply which is details of stock lying 1034-1137 Vol. 6 with consignee (UK) as on 31.03.2020 xii. Copy of Annexure 12 of above reply which is related to returns of 1138-1146 Vol. 6 consignment sales to Doha Jewellery Exhibition.
xiii. Copy of Annexure 13 of above reply which is related to returns of 1147-1150 Vol. 6 consignment sales to Hongkong.
19. Copy of Reply dated 23.12.2022 submitted in response to point no. 7 1151-1285 Vol. 7 of notice issued u/s 142(1) of the Act dated 23.11.2022.
20. Copy of Reply dated 23.12.2022 submitted in response to point no. 8 1286-1291 Vol. 7 to 11 of notice issued u/s 142(1) of the Act dated 23.11.2022.
21. Copy of letter dated 08.12.2022 by Assessee requesting for basis of 1292-1294 Vol. 7 value stock in trade.
22. Copy of notice dated 21.12.2022 providing basis of value of stock in 1295-1310 Vol. 7 trade.
23. Copy of Reply dated 23.12.2022 submitted in counter of notice dated Refer S.no. Vol. 7 21.12.2022. 18
24. Copy of Valuation reports of Independent Valuer Mr. Kamal Kumar 1311-1365 Vol. 8 Kasliwal dated 05.08.2020 for head office
25. Copy of valuation report of Stock in trade by Department valuer Mr. 1366-1511 Vol. 8 Jagdish Chandra Jajoo for Panch Batti Store
26. Copy of Written submission filed before the Ld. CIT(A)on 06.12.2023 1512-1727 Vol. 9
27. Copy of synopsis of case filed before the Ld. CIT(A) on 06.11.2023. 1728-1732 Vol. 9
28. Copy of Reply dated 06.12.2023 filed in response to the query asked 1733-1735 Vol. 9 during the hearing held on 23.11.2023.Ld. CIT(A) on 20.12.2023
29. Copy of application of additional evidence filed before the Ld. CIT(A) 1736-1754 Vol. 9 ON 20.12.2023
30. Copy of remand report dated 25.01.2024 1755-1760 Vol.9
31. Copy of Reply dated 20.12.2023 filed in response to query asked 1761-1770 Vol. 9 during the hearing held on 06.12.2023.
32. Copy of Reply dated 26.12.2023 filed in response to query raised 1771-1910 Vol. 9 during hearing held on 20.12.2023.
33. Copy of reply dated 19.01.2024 filed before the Ld. CIT(A) with respect 1911-1932 Vol. 9 to the query asked during the hearing held on 10.01.2024,
34. Copy of Reply dated 08.02.2024 filed in response to the remand 1933-1937 Vol. 9 report.
35. Copy of reply filed before the Ld. CIT(A) on 10.01.2024 1938-1939 Vol. 9
36. Copy of reply dated 24.01.2024 filed in response to query asked 1940-1941 Vol. 9 during the hearing held on 19.01.2024.
37. Copy of Further submission in respect of Ground no.8 dated 1942-1943 Vol. 9 29.02.2024.
38. Copy of Further submission in respect of Ground no. 8 dated 1944-1945 Vol. 9 01.03.2024 Index of Documents S. No. Particulars Page No.
1. Pictures of Various Jewellery Items presented as illustrations on how jewellery 1-17 items in stock are reworked to convert into a different jewellery item & for which 158 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT the Assessee has to incur Job Work Charges 2 Details of Break-up of Manufacturing Cost as reflected in Audited Financial 18 Statements (Refer Note No. 22 of Audited Financial Statements of AY 2021-22) 3 Details of Break-up of cost of Goods Sold as reflected in Audited Financial 19 Statements (Refer Note No. 19-20 of Audited Financial Statements of AY 2021- 22
9. The ld. AR of the assessee in addition to what has been submitted in the written submission he started his arguments for the addition made u/s 69B being the excess stock for various locations. To challenge that addition the assessee raised various grounds No. 3,4,5,6, 9,10,11,12,13,14,15 which we consider all together as the same is related to the alleged excess stock considered in the hands of the assessee. The issue of excess stock addition was explained with the help of a control chart by the ld. AR of the assessee and brief written synopsis were also presented. That chart presented is reproduced herein below:
159ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT 160 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT 161 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT
10. The bench noted that at para 3.1 of the Assessment order, it is mentioned that on physical verification, stock of value of Rs.
267,43,88,096/- was found and value of stock as per books of accounts 162 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT was at Rs. 126,08,06,402/- as on 13.07.2020. Accordingly, ld. AO has made addition of Rs. 141,35,81,694/- ( 267,43,88,096/- minus 126,08,06,402/-) on account of excess stock and for doing so ld. AO invoked the provision of section 69B of the Act. He also submitted that physical verification were conducted at three locations only i.e Head Office at C-Scheme, Panch Batti and Museum and at the remaining locations being branches, consignment locations etc. no physical verification was done and value of the stock as on the date of survey was arrived at on the basis of computerized list, tally accounts of branches etc.
11. Vide para 3.4.1 of the Assessment order, ld. AO rejected the books of accounts by invoking provisions of section 145(3) of the Act by observing discrepancies in maintenance of books of accounts including non-
maintenance of items wise stock register and for that the ld. AO relied upon the comments as reported by the auditors in their audit report that the assessee has not maintained stock register.
12. Vide para 3.4.3 ld. AO noted that out of stock valued at Rs.
267,43,88,096/-, stock valued at Rs. 152,54,44,672/- was found at three places i.e_Head Office, Panch Batti and Museum which was physically verified by the survey team with the help of the valuers and remaining stock 163 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT pertains to other locations and the stock of those locations were not physically verified.
13. The period of survey was covered by the pandemic covid-19 and therefore, the ld. AO vide para 3.4.6 mentioned that books of accounts were not complete at the time of survey. In the light of these facts the trading accounts were drawn from books found during survey for FY 2019- 20 and after comparing them with audited financial, they re-casted the trading account as on 13.07.2020 by applying GP rate of 30% on sales. By that way the survey team derived the stock as per books of accounts at Rs.
126,08,06,402/- as balancing figure as tabulated at page no. 39 of the assessment order.
14. Ld. AO vide page 40-49, discussed as to how he has determined the value of stock as found during survey for branch locations (wherein no physical verification was done) at Rs. 25,59,78,648/- for Delhi Branch considering excel sheet impounded during survey, at Rs. 53,62,45,741/- for Mumbai Branch and at Rs. 16,51,51,691/- for Bangalore branches considering values appearing in the Tally accounts as found during survey.
In conclusion, AO determined the stock physically available as on 164 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT 13.07.2020 at Rs. 2,67,43,88,096/- as per details mentioned at page no.
52-53 of Assessment Order.
15. When the matter carried before the ld. CIT(A) he has confirmed the rejection of books of account on the ground that the assessee has not maintained stock register and discrepancies of unaccounted expenditure or sales being reported by AO and that is why supported the finding of the ld.
AO vide page no. 50 of his order stating that the closing stock was being taken as balancing figure on year-to-year basis and no stock register was maintained which were sufficient to reject the books of account by the ld.
AO. Ld. CIT(A) has dealt with the issue of impugned addition of excess stock and issue of invocation of section 69B at page no. 143 Para (xii) onwards. Ld. CIT(A) at page no. 148 while taking note of the provisions of section 69B, in Para (xv) he has on the one hand agreed with the contention of Assessee that the market price of gold / silver which has gone into the jewellery, their price on the date of survey cannot be considered for making addition u/s 69B of the Act. That is why he clearly discarded the valuation exercise done by the Department Valuer for arriving at the market price on the date of the survey. While observing so he went on identifying different valuation methodologies of determining cost of inventory by extensively discussing and agreeing the subjectivity involved in identifying 165 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT the cost while giving the example of silk saree, which cannot be determined merely valuing the rate of silk thread gone into the making of that saree.
The valuation depends on number of factors like the design, the intricacies, the technology used, whether handmade or machine made, whether hand painted or machine printed, whether having hand thread work or machine work, etcetera. For all kind of hand works the cost would be significantly more and differ from artisan to artisan. Similarly for example, cost of a painting cannot be determined merely on the basis of quantification of the quantity of different kind of paints which have gone into making of that painting (sic).
Accordingly, he vide Para (xxii) concluded that raw material approach adopted by official valuers was not correct and it would be appropriate to value the stock of the assessee-appellant on the basis of averaging based approach. The Ld. CIT(A) while taking note of statement of one of the directors, Mr. Rajesh Ajmera, held that it would be reasonable to assume the cost being 60% of tag price to arrive at valuation of the stock at all the premises for Jaipur. Additionally, on account of the increase in metal prices, old items, the CIT(A) has considered appropriate to allow further deduction of 7%. Thus, holding tag price minus 47% to be the cost of the stock items for the HO and showroom etc. For other locations being 166 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT branches, wherein no physical verification was done, ld. CIT(A) confirmed the basis of AO being either excel sheet, computerized list or tally accounts value as taken by AO and for stock stated to be on consignment at USA/UK, the ld. CIT(A) has upheld the assessment order stating the same to remain unexplained by the Assessee.
16. While hearing the appeal of the assessee, ld. Sr. Counsel stated to refer to the written submissions filed before the Ld. CIT(A) contained in Vol.
9 of Paper Book. He drew our attention to internal page no. 38 (PB 1162 Vol 9), 47-49, 75-85, 75-82, Para A under Para No. 98, 93 (Para No. 141) etc., of assessee's submission wherein assessee pointed out how the valuation exercise was undertaken by the departmental valuers and that is why that process of valuation was erroneous and arbitrary. Based on those mistakes and errors pointed out by the assessee for that matter even ld.
CIT(A) has agreed to the fact that valuation process was not correct. It is also clear from the facts that a survey was carried out during the period of COVID-19 wherein various life threating natural and government restriction and situation were prevailing. The whole exercise of taking the physical verification was completed at three locations were concluded in 2- 3 days for thousands of inventory items which are all unique and idiosyncratic in their size, shape, content of metal, value of design, value of 167 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT labour, marketability, appearance and class of customers unique. During physical verification at these three locations there was no case of inventory found in excess. But the valuation done by departmental valuers was exorbitant, arbitrary and at market price. It was also submitted that finding flagrant inaccuracy in the valuation arrived at by the department valuers, Assessee has also got valuation of stock done independently from registered valuer by closing its operations. The Ld. Senior counsel on this aspect of the matter drawn our attention to the letter dated 21.07.2020 (Page No. 145-146 in Vol. 1 of PB) which was filed before the department for witnessing valuation exercise done immediately post survey by department approved valuer.
17. Ld. Sr. Counsel referring the observation recorded at Para No. (xxii) Page No. 153-154 and Para No. xxx at Page No. 167 of CIT(A) order to argue that very basis of valuation of AO (being department valuer report) has been rejected by Ld. CIT(A) which finding has attained finality as Department has not filed any appeal against such findings recorded by the ld. CIT(A). Considering that facts of the case provision of section 69B cannot be invoked. Not only that, no items were found out of books all the quantitative information available is duly recorded as stock item in the books of account. While verification not a single item found extra 168 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT in fact they found shortage and the same was also explained with the reasons and evidences before the post survey proceedings. Thus, with that facts of the case no addition can be made u/s. 69B of the Act.
Ld. Sr. Counsel also submitted that the stock in trade of the assessee cannot be compared to that of the investment even otherwise. While invoking the provisions of section 69B of the Act the ld. AO as well as the ld. CIT(A) failed to appreciate that there was not a single material found which suggest the out of books expenditure incurred and thereby the stock was undervalued. The assessee's AR argued that the revenue could not prove, even after an extensive survey of the business premises, that the amounts recorded in the books for purchase were under recorded and the assessee incurred any further amount which has not been recorded in the books of the assessee and therefore, even on this count, the provisions of section 69B of the Act cannot be invoked in the case of the assessee.
The ld. AR of the assessee submitted that the stock items found are duly recorded as stock and there is no finding of lower authorities as to the incurring of an extra amount which is not recorded in the books of accounts by the assessee and therefore without finding any such instances.
Revenue cannot invoke the provisions of section 69B of the Act, merely 169 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT because the revenue is making the addition based on the valuation of stock done by their valuer appointed by them. In fact it is evident that different methods of valuation was adopted and there is no consistency in the valuation report taken by the revenue at the time of survey while valuing stock of gold items and that of silver items in span of short survey proceedings conducted by the revenue.
The assessee as per options given by the revenue also deputed his own valuer them (Govt. approved) who made detailed valuation on consistent valuation method. While doing so, the assessee closed his business activities and at the same time requested the revenue to depute a person to monitor the valuation process and thus the revenue merely based on the price appreciation of that of the reported in the valuation report with that of books of accounts making addition is not in accordance with law and the assessee at his liberty to value the stock at cost or market price whichever is lower and price appreciation cannot be subjected to tax.
Merely based on the Departmental Valuation Officer report, the assessee in the written submissions made before lower authorities pointed out in detailed various difficulties such as to taking the rate of same item at different rate on different of valuation itself suggest that the valuation made was not in accordance with guidelines of valuations. The assessee has not 170 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT changed the policy of valuation of stock it consistency by valuing its stock as per regular method of accountant adopted at valuing the stock at market price or cost whichever is less. The revenue did not bring anything so as to found that the assessee has under stated purchase price and therefore without being established that the amount recorded in the books of accounts are under stated. No additions can be made in the hands of the assessee and to drive to this contention, the ld. AR of the assessee relied upon the decision of CIT vs. Dinesh Jain HUF [2012] 25 taxmann.com 550 (Delhi). Relying on that decision, Delhi High Court further in the case of CIT vs. CIT vs. Agile Properties (P.) Ltd., [2014] 45 taxmann.com 512 (Delhi) held that there is no authority to the Assessing Officer without establishing that the assessee has under stated its stock addition u/s 69B of the Act cannot be made. As held by the Gujarat High Court in the case of Gayatri Enterprises v. ITO, Ward 1(2) 4 [2020] 116 taxmann.com 359 (Gujarat) wherein the Gujarat High Court has held that the primarily burden is on the revenue and it is only when such burden is discharged. The addition cannot be made relying upon the valuation report.
Except placed at Jaipur at Head Office, Pach Batti, Museum other side and franchise no physical verification of stock was carried out the difference which has been added u/s 69B of the Act is merely based on the 171 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT valuation report or the valuation done based on the tag price found recorded in the records made available to the revenue and therefore, the addition made was not in accordance with the provisions of section 69B of the Act.
Ld. AR of the assessee drawing our attention to the valuation report obtained by the revenue stated that the assessee valuation had adopted different method of valuing stock (not considered the proper valuation even the rate of gold and silver taken by them are different and therefore, that valuation report is also valuation only and there is no exercise so as to determine the correct cost of the assessee or the market value as on the date when the assessee purchased or made it in accordance with their job work prescription while dealing with the appeal of the assessee.
Even, the ld. CIT(A) did not appreciate the detailed observations on the valuation filed by the assessee. The lower authorities did not consider as to the objections of the assessee about the applicability of section 69B of the Act invoked in their case. The ld. AR of the assessee relying on (xv) observations at Page 148 of his order wherein ld. CIT(A) observed that "accordingly the contentions of the appellant is correct that the market price of the gold and silver which is raw material which has 172 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT gone into jewellery, their price on the date of survey cannot be considered for making addition u/s 69B of the Act"
As we see that finding of the ld. CIT(A) thus contradictory, he did not bring anything on record as to the burden cost upon the revenue that the value recorded in the books of accounts is not correct and the assessee has incurred more amount then what is disclosed in the books of accounts on the stock in fact the provisions of section 69B of the Act cannot be applied to stock as i.e. not the investments made by the assessee but it is stock in trade and profit of which is regularly chargeable to tax when the assessee sold the said goods.
Therefore, the confirmations of applicability of section 69B of the Act even by the ld. CIT(A) is incorrect contradictory and without discharging the burden casted upon the revenue.
Revenue grossly failed to discharge the burden casred upon them for making the additions u/s 69B of the Act even otherwise ld. CIT(A) changed the method of valuation without giving an opportunity to the assessee and without any show cause notice because that action of the ld. CIT(A) enhanced the addition with that of made by the Assessing Officer. There is no whisper in the order of ld. CIT(A) as to the invocations of the said show 173 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT cause notice has required under law and therefore, the valuation proposed by ld. CIT(A) is also not in accordance with law by adopting the deductions @ 47% on the tag price.
The Ld. CIT(A) did not give any reason or basis of adopting such change of valuation which though was made by the ld. AO at the time of survey. The ld. AR of the assessee submitted that stocks of various branches also valued at different based adopted by the revenue at Mumbai adopted the tag price reduced appropriately at Bangaluru based in complete tally data and at Delhi excel sheet provided by the assessee of the stock. The assessee submitted detailed explanations which has not been considered by the lower authorities. No physical verification whatsoever was made on these branches and therefore, notional addition cannot be made in the hands of the assessee when the matter was carried before ld. CIT(A). The assessee vide para No. 128 to 156 (page No. 1597 to 1611 of the assessee's paper book) wherein the assessee explained any detailed alleged difference of stock valuation added in the hands of the assessee. Ld. CIT(A) did not appropriately deal with those contentions of the assessee. As regards the addition made in the hands of the franchise without disputing the cost reflected in the accounts. No addition can be made. As regards the out-of-country franchise on goods 174 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT sales/consignment, the assessee placed on record all the required documents which are third party evidence therefore not believing those records and thereby sustaining the addition for franchise goods on sales/consignment also deserves to be deleted. The assessee filed the relevant documents at volume No. 9 page book page No. 1924 to 1932.
The assessee also filed the detailed ledger of consignment sales and related documents. The assessee got verified with books of accounts based on the 3rd party evidence placed on record which has duly been ignored. The lower authorities made the addition on a choose and pick basis without dealing with the extensive records produced by the assessee.
The ld. CIT(A) concluded that raw material method adopted by the valuation is correct method and therefore, he debited with the different average cost and ad hoc approach of applying and thereby 47 percent on excel price them (tag price) to arrive at with the cost inventory/stock.
There has been substantial price appreciation in the price of the silver and gold and therefore, that appreciation in the stock cannot be taxed now without selling the goods by the assessee and there is no concept to charge the unrealized income in the hands of the assessee. Thus, without that finding that purchases are not correctly accounted for, there cannot be 175 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT addition merely based on the valuation. To drive home to this contention ld.
AR of the assessee referred various case laws as to the applicability of the provision of section 69B of the Act. Except for three places no physical verification was conducted, and the revenue intended to charge the profit which has not been realised by the assessee so far.
The ld. AR of the assessee vehemently argued that the method of valuation adopted by the valuer are different qua valuer and even the qua premises as detailed in the written submission so filed. The method and the errors observed were also explained in the written submission so filed.
As evident in the discussion recorded in the assessment order that at the Headquarter Office the valuation was made based on the market value at Pach Batti. It was derived cost at some branches as per tally data some branches based on the GST recorded at some branches whatever the assessee submitted based on that. Even the explanation of the assessee that the stock was on consignment on account of Covid-19 was not considered. The revenue conducted a detailed survey that at time when the whole World passed through divesting effect of Covid-19 and there were certain strict lock down norms were prevailing. The stock derived as on the 176 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT difference of the survey was not on the correct method of accounting regularly followed by the assessee.
The assessee has already undertaken the valuation as per the detailed valuation method. It started on 01.07.2007 ended on 21.07.2020.
The revenue did not participate even though notified by the assessee for the detailed evaluation process initiated by the assessee and as such the valuation furnished by the assessee's departmental approved valuation has not been considered.
As regards the alleged difference for the franchisee the evidence in the form of third party was not considered and made the addition for the alleged difference in valuation. The stock transferred to franchisee with the markup has not been considered at all.
Ld. CIT(A), stated that raw material based valuation approach or valuation at market rate is not the correct approach of valuation of stock as either of this approach invariably leads to materially and substantially incorrect results in the present case. He further noted that there is no merit in the valuation exercise done either by departmental valuers or valuer appointed by assessee. Based on that finding so not being challenged 177 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT entire addition needs to be deleted not only that the application of Section 69B itself to be without authority of law.
The Ld. CIT(A), however, instead of deleting the entire addition as it was made by applying to the provision of section 69B of the Act, he went on to adopt a different methodology for arriving at quantum of addition on account of excess stock by arbitrarily applying deduction of 47% on Excel Price (Tag Price) to arrive at cost of inventory/stock. It was pointed out for determining 47% deduction. Ld. CIT(A) has given 7% benefit in respect of gold prices evidently on the assumption that the stock was acquired about 7 months ago, however, as a matter of record it was shown and explained that in jewellery business, stock are required for several number of years and there are certain stock item which were lying in stock for more than 10 to 12 years old and the gold prices of 12 years ago were much lower than the present prices. Thus, even the benefit of 7 % gap between the acquisition cost and present market value were considered at substantially higher that the 7%.
While adopting the different method by ld. CIT(A) the valuation of stock vis a vis Head Office and Panch Batti locations has actually got enhanced as compared to the department own valuations by registered valuers. Thus, 178 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT order of the Ld. CIT(A) has resulted in enhancement from Rs. 141 Crore to 146 Crore as evident from Page No. 197 of CIT(A) Order and this further signifies that the departmental own valuations report of registered valuers has been rejected by him. This action of the ld. CIT(A) was absolutely in violation of section 251(2) of the Act, which mandates issuance of show cause notice before enhancement and the same was not provided to the assessee which has violated the principles of natural justice and when the ld. CIT(A) recorded the finding that the valuation method adopted by the valuer were wrong the entire addition being collapsed ld. CIT(A) without hearing to the assessee cannot went on the different methodology violating the principles of natural justice. The fact that ld. CIT(A) enhanced the addition is recorded at page no. 197 of CIT(A) order wherein he has computed excess unaccounted stock other than museum stock, as on 13.07.2020 at Rs. 146,31,52,182/- as against excess unaccounted stock at Rs. 141,35,81,694/- computed by AO, thereby resulting in enhancement.
Now at this stage, it is very much clear that both the revenue officer adopted the method of valuation as they deem fit without considering the various aspects of the matter of the stock lying with the assessee. Even the applicability of the section 69B made in this case was also in violation of the provision of section 69B of the Act and the lower authority did not dealt 179 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT with the objections of the assessee against the invocation of the provisions of section 69B of the Act. The case of the assessee right from the survey proceeding that no incriminating material forming basis to invoke section 69B of the Act was found during the course of survey and entire addition made by ld. AO was based on the valuation reports and computerized list/ incorrect tally etc. which nowhere proves/establishes the understatement of purchase price or consideration in purchase of the jewellery/stock.
Similarly, the Ld. CIT(A) has also gone on estimating the quantum of the addition by making hypothetical assumptions, in the absence of any material, basis or evidence available with him.
Thus, the valuation was done of the same stock differently as no difference for excess / shortage were observed on the quantity recorded in the books of accounts. Rather it was a case of the revenue that about 41 items were not found during survey, for which addition was made. Ld. Counsel for the assessee invited attention to the observation recorded in the valuation report of department in relation to Panch Batti stores and valuation report of valuer engaged by the Assessee to establish that there is no excess item found.180
ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Based on that aspect of the matter ld. Senior counsel vehemently submitted that invocation of provision of section 69B of the Act without establishing understatement of purchase consideration or price is not satisfied in the present case. In this context, he has drawn our attention to provisions of Section 69, 69A, 69B vis a vis provision of section 68 and stressed that while the burden of proof u/s 68 of the Act for any cash credit is on the Assessee, whereas the burden of proof u/s 69, 69A or 69B or 69C of the Act is on the department to first prove that there is unexplained investment or amount spent on acquiring bullion or jewellery or other article valuable thing, is not recorded or under stated in the books of accounts. To drive home to these contentions ld. Senior Counsel placed reliance on the following judicial precedent:
S. Case law Relevant portion Page No No. No addition u/s 69B if burden not discharged 1. CIT v. Dinesh Jain Section 69B in terms requires that the Assessing Officer has to 1-6 HUF [2012] 25 first 'find' that the assessee has 'expended' an amount which he taxmann.com 550 has not fully recorded in his books of account. It is only then (Delhi) that the burden shifts to the assessee to furnish a satisfactory
explanation. Till the initial burden is discharged by the Assessing Officer, the section remains dormant. [Para 8] A 'finding' obviously should rest on evidence. In the instant case, it is common ground that no incriminating material was seized during the search which revealed any understatement of the purchase price. That is precisely the reason why the Assessing Officer had to resort to Rule 3 of Schedule III to the Wealth Tax Act. [Para 9] Section 69B does not permit an inference to be drawn from the circumstances surrounding the transaction that the purchaser of the property must have paid more than what was actually recorded in his books of account for the simple reason that 181 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT such an inference could be very subjective and could involve the dangerous consequence of a notional or fictional income being brought to tax contrary to the strict provisions of article 265 of the Constitution of India and Entry 82 in List I of the Seventh Schedule thereto which deals with 'Taxes on income other than agricultural income'. [Para 11] Applying the logic and reasoning in K.P. Varghese v. ITO [1981] 131 ITR 597 / 7 Taxman 13 (SC), for the purposes of section 69B it is the burden of the Assessing Officer to first prove that there was understatement of the consideration (investment) in the books of account. Once that undervaluation is established as a matter of fact, the Assessing Officer, in the absence of any satisfactory explanation from the assessee as to the source of the undisclosed portion of the investment, can proceed to adopt some dependable or reliable yardstick with which to measure the extent of understatement of the investment. One such yardstick can be the fair market value of the property determined in accordance with the Wealth Tax Act. [Para 12] Since the entire case has proceeded on the assumption that there was understatement of the investment, without a finding that the assessee invested more than what was recorded in the books of account, the decision of the Income-tax Authorities cannot be approved. Section 69B was wrongly invoked. The order of the Tribunal is upheld. [Para 15]
2. 7-11 Commissioner of 5. This Court had in the decision reported as CIT v. Dinesh Income-tax, Delhi Jain, HUF [2013] 352 ITR 629/[2012] 211Taxman 23/25
-I taxmann.com 550 and connected cases occasioned to consider v. an identical question. Afternoticing the relevant provision, i.e. Agile Properties Section 69B, the Court noticed in paragraph 9 as follows: -- (P.) Ltd, [2014] 45 13. The error committed by the income-tax authorities in taxmann.com 512 the present case is to jump the first step in theprocess (Delhi) of applying section 69B - that of proving understatement of the investment - and apply themeasure of understatement. If anything, the language employed in section 69B is in stricter terms thanthe erstwhile section 52(2). It does not even authorise the adoption of any yardstick to measure theprecise extent of understatement. There can therefore be no compromise in the application of the section.It would seem to require the Assessing Officer even to show the exact extent of understatement of theinvestment; it does not even give the Assessing Officer the option of applying any reasonable yardstick tomeasure the precise extent of understatement of the investment once the fact of understatement is proved.It appears to us that the Assessing Officer is not only required to prove understatement of the purchaseprice, but also to show the precise extent of the understatement. There is no authority given by the 182 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT sectionto adopt some reasonable yardstick to measure the extent of understatement. But since it may not bepossible in all cases to prove the precise or exact amount of undisclosed investment, it is perhapsreasonable to permit the Assessing Officer to rely on some acceptable basis of ascertaining the marketvalue of the property to assess the undisclosed investment. Whether the basis adopted by the AssessingOfficer is an acceptable one or not may depend on the facts and circumstances of the particular case. Thatquestion may however arise only when actual understatement is first proved by the Assessing Officer.
Itis only to this extent that the rigour of the burden placed on the Assessing Officer may be relaxed in caseswhere there is evidence to show understatement of the investment, but evidence to show the preciseextent thereof is lacking.' 3 GayatriEnterprise 29. The Delhi HighCourt in the case of CIT v. Bajrang Lal 12-
v. Bansal [2011] 335 ITR 572/200 Taxman 188 (Mag.)/12 31
Income-tax taxmann.com 88 held as under:
Officer, Ward "5. Ms. Rashmi Chopra, learned counsel for the revenue 1(2)4 [2020] 116 submitted that the Tribunal had erred in law in deleting the taxmann.com 359 addition of 99,33,000/- as undisclosed income of the (Gujarat) respondent-assessee under Section 69B of the Act, 1961.
6. It is settled law that the primary burden of proof to prove under-statement or concealment of income is on the revenue and it is only when such burden is discharged that it would be permissible to rely upon the valuation given by the DVO. (SeeK.P. Varghese (supra), CIT v. Shakuntala Devi , (2009) 316 ITR 46, CIT v. Manoj Jain , 287 ITR 285 and ITA No. 482/2010 decided by this Court on 5th May, 2010 Section 69B of the Act is not applicable if AO does not prove that the Assessee has made purchase which exceed the purchase recorded in the books of account
4. Dilshad Trading Co. 8.............................Provisions of section 69B can be invoked 32-35 (P) if(i) it is found that the assessee has made investment; (ii) it is Ltd. v. ITO, [1994] found that the amount expended on making such investment 49 ITD 348 (Bom- exceeded the amount recorded in that behalf in the books of Trib.) account; and (iii) either the assessee offers no explanation about such excess amount or the explanation offered is not satisfactory in the opinion of the Assessing Officer. These three findings are cumulative to be recorded on gathering the necessary facts, but the basic finding which is to be recorded on clear and cogent material is in respect of the amount expended by the assessee in excess of that shown in the books of account. In the instant case, the onus was on the department to show that the assessee had expended extra amount therefore, merely because there existed some comparable cases showing higher price in respect of similar transactions, it could not be said that the assessee had expended extra amount. Therefore, no addition could be made. There also did not exist any other material either by way of confession from some connected person with regard to the extra amount having been spent by the assessee or by way of a finding that the books of account of the 183 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT assessee were not found to be reliable in any of the years when the records were examined by the Commissioner
5. M/s DDK Spinning 10. It is a settled proposition of law that the statement recorded 36-52 Mills vs The DCIT u/s 131 during the course of survey has no evidentiary value in Circle-3, [2023] 157 absence of any corroborative evidence on record and in this taxmann.com 817 regard, useful reference can be drawn to the decision of Hon'ble (Chandigarh - Madras High Court in case of CIT vs Khader Khan Son reported Trib.): in 300 ITR 157 wherein it was held that statement recorded during the course of survey u/s 133A has no evidentiary value as the officer is not authorized to administer the oath and to take any sworn statement which alone has evidentiary value as contemplated under law and reference was drawn to provisions of section 132(4) which enables the authorized officer to examine person on oath and where any such statement so recorded can be used in evidence under the Act. In that case, it was held by the Hon'ble High Court that basis statement of one of the partner's of the assessee firm, it cannot be held that disclosed income was assessable as lawful income of the assessee firm since there was no material on record to prove the existence of such disclosed income or earning of such income in the hands of the assessee and it cannot be held that Revenue has lost lawful tax payable by the assessee. Therefore, in our considered view, in the instant case, the statement of the partner of the assessee firm recorded u/s 131 during the course of survey and subsequent affirmation thereof by the assessee by way of surrender letter on a standalone basis and without any corroborative evidence doesn't fulfill the statutory mandate of deeming provisions which provides that it is for the Assessing officer to records a finding that the assessee has made investments during the financial year in the construction/purchase of the building and the amount expended on making such investments in the building exceeds the amount recorded in this behalf in the books of account so maintained by the assessee and for the purposes of recording such a finding, there has to be some tangible material in possession of the Assessing officer which demonstrate that certain amount has been actually expended by the assessee during the year towards the purchase or construction of the building which is clearly absent in the instant case. Therefore, the statement of the one of the partners of the assessee firm without any corroborative evidence cannot come to the aid of the Assessing officer for the purposes of invoking the deeming provisions of Section 69B of the Act.
Physical Verification is important for invoking Section 69B
6. Chawla Brothers 6.11.The physical stock inventory taken partly by physical 53- Pvt. Ltd. v. ACIT, counting and partly on the basis of details given by the 95 CC 10, Mumbai branches could not be said to be a correct method of taking [2011] 43 SOT 651 physical stock during the survey. Under the circumstances, (Mumbai - Trib.) though the assessee had not disputed inventory physical stock found for Rs. 21.91 crores but certainly the reconciliation furnished by the assessee was required to be considered in the light of the fact that the stock of branches were taken on the basis of statement given by the assessee 184 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT from branches. Under the circumstances, it could be held that it was a case of survey where the normal procedure was adopted for taking physical inventory of all items of stock though the assessee was not disputing that method adopted and to compare with the stock register i.e. RG-1. If there is a difference and the same could not be explained by the assessee, then only, the addition is warranted but in the case under consideration, as stated above, the physical stock of branches taken itself on the basis of statement submitted by the assessee, which could not be said to be a physical stock as per the procedure. Therefore, the comparison itself was incorrect. However, the assessee had explained each and every item of difference by reconciliation. The Assessing Officer and Commissioner (Appeals) both had failed to point out how the reconciliation submitted by the assessee was incorrect. It could not be the matter of arguments that such differences itself could not represent the income of the assessee unless it was correlated how this difference of raw material and finished stock became the income of the assessee.
7. M/s Montu Shallu 96- Knitwears vs The 22. No such physical distinction was found by the Revenue 105 DCIT [2024] 159 either. We therefore find that the difference in stock so found out taxmann.com 677 by the authorities has no independent identity and is in terms of (Chandigarh - Trib.) value terms only and thus part and parcel of entire stock, therefore, it cannot be said that there is an undisclosed asset which existed independently and thus, what is not declared to the department is receipt from business and not any investment as it cannot be co-related with any specific asset and the difference should thus be treated as business income"
8. The Asst. 15. Coming back to difference in value of stock amounting to 106- Commissioner- of Rs.28,11,13,718/-. Admittedly, the Survey Team and the AO 137 Income Tax vs M/s. could not establish existence of unaccounted stock in terms of Saratha's, 45, quantity of stock. In fact, the AO and the Survey Team both N.S.B. Road, ITA agreed that 'physical stock' found at the time of survey in terms No.568/Chny/2022 of quantity is matching with stock in trade maintained with books of accounts of the assessee. In fact, all stock in trade found during the course of survey, is having tag price which is covered by valid purchase bills. The assessee has explained difference in value of stock by filing reconciliation statement. According to the assessee, the AO allowed deduction towards 5% GST, even though, the average GST component embedded in selling price works out to 8.5%. The assessee further claimed that the GP declared by the assessee for the impugned assessment year works out to 27.71%. The assessee has claimed deduction towards 'obsolete stock' @2% stock in trade. If you exclude correct amount of GST & GP and also towards 'obsolete stock' the difference in stock in trade value quantified by the Survey Team comes down to Rs.98,83,528/-. Although, the assessee could able to explain difference in stock in trade value quantified by the Survey Team before the AO but had admitted additional income on account of difference in value of Rs.28,11,13,718/- under the head 'income from business' and also paid taxes. The AO assessed said difference u/s.69B of the Act, only on the 185 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT ground that the assessee could not able to explain source for 'excess stock' found during the course of survey. As we have already stated in earlier part of this order, there is a fundamental difference between 'excess stock' and 'excess value of stock'. If there is an 'excess stock' in terms of quantity and the same has not been recorded in the books of accounts maintained for that year, then, the same needs to be treated as deemed income in terms of s.69B of the Act. If there is no 'excess stock' in terms of quantity but there is a difference in value of stock on account of different method of valuation of stock, then, such difference cannot be assessed u/s.69B of the Act, as unexplained investment. The assessee has right from the beginning explained that stock difference quantified by the Survey Team is incorrect due to various factors including incorrect application of GST and incorrect application of GP. Since, there is no difference in stock in trade in terms of quantity, in our considered view, the assessee has rightly offered additional income towards difference in value of stock under the head 'income from business' and this principle is squarely covered by the decision of the Hon'ble jurisdictional High Court in the case of SVS Oil Mills v. ACIT (supra) and also decision of the Tribunal in the case of Lovish Singhal & Others v. ITO 53 CCH 0250 (Jodhpur). Therefore, we are of the considered view that the AO is erred in assessing additional income offered by the assessee towards difference in value of stock u/s.69B of the Act r.w.s.115BBE of the Act.
Section 69B not applicable on stock in trade
9. DCIT, Cir. 30(1), 7.. Learned counsel for the assessee reiterated the arguments 138-
New Delhi. Vs M/s and case laws relied on before lower authorities. It is pleaded 146
Nihalsons Real that: (i) Provisions of Sec. 69B and Sec. 50C are not applicable
Estate Developers to trading transactions;
67/4, ITA No. The provisions of Sec. 50C have not been invoked against the
5597/Del/11 sellers of the property who had earned capital gains thereon. (iii)
(iv) (v) (vi) The land in question were agricultural land purchased from the villagers against whom no provisions u/s sec. 50C have been invoked. Without invoking sec. 50C and making reference to these provisions against the seller, addition cannot be made in the hands of the assessee. The provision for reference to valuation u/s 142A, reference to sec. 69B for the investment and not for stock in trade; sec. 69B specifically refers to investment and not stock in trade. If the business transactions are taken to be investments, then each and every business transaction will be covered u/s 69B which is against the legislative intent and principles of interpretation as they lead to manifestly unjust result. The burden to prove that the assessee has acquired the stock in trade at a price more than declared in the books, lied on the Assessing Officer. Mere reference to DVO's report which is not sought in accordance with legal provisions, cannot discharge the burden of the Assessing Officer on this behalf. (vii) Since the DVO's report could not have been called u/s 142A a sec. 69B does not cover stock in trade, the valuation report cannot beheld to be conclusive to hold that the assessee paid undisclosed amount, 186 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT more so when neither the statement of the seller has been obtained nor a cross-examination has been allowed to the assessee.
Excess stock cannot be treated as unexplained investment u/s 69B of the Act.
10. M/s. Supremo India 10. The Hon'ble Apex Court has analyzed the provision of 147- Pvt. Ltd. 400/2 vs section 69, 69A & 69B and particularly the term other valuable 175 ACIT Central-3 articles as employed in the provision of section 69B of the Act. In Indore, ITA the light of the Doctrine of ejusdem generis & noscitur a sociis it No.29/Ind/2023 is held that other valuable articles as provided in section 69A & 69B of the Act must be read ejusdem generis and statutory interpretation would be that a generic word receives a limited interpretation by reason of its context and take its meaning from the specific term used in the provision. Therefore, the term other valuable articles would draw the meaning from the specific terms used in the provision of section 69B which is bullion and jewellery. Hence the other valuable articles shall be in the nature of the valuable article like bullion and jewellery and therefore, it must be a substitute of money like bullion and jewellery which has the liquidity and negotiability like money/currency. Therefore, in view of the judgment of Hon'ble Supreme Court as well as the decision of Hon'ble Rajasthan High Court and Coordinate Bench of this Tribunal cited (supra) the excess stock found during the course of search which is not separable from the whole lot of stock of the assesse generated as a result of business activity of the assessee company and the same cannot be brought into mischief of provision of section 69B of the Act. Accordingly, this issue is decided in favour of the assesse and against the revenue. The orders of the authorities below qua this issue are set aside
11. Chokshi Hiralal 9.In the instant case, excess stock found during the survey was 176- Maganlal v. DCIT, not separately and clearly identifiable but it was part of mixed 182 Circle 12, lots of stock found at the premises which included declared Ahmedabad [2011] stock as per books and also the excess stock as computed by 45 SOT 349 the survey officers. The provisions of section 69B could not be (Ahmedabad) made applicable as primary condition for invoking the provisions of sections 69A, 69B is that the asset should be separately identifiable and it should have independent physical existence of its own.
Valuation of Jewellery should be made at cost price only
12. ITO v. Vishal 6. It was clear from the assessment order itself that assessee- 183- Jewellers [2011] 12 firm stood dissolved with effect from 6-5- 2004, and the closing 185 taxmann.com 173 stock was taken over by the company 'V' Ltd. It was also not in (Delhi-Trib.) dispute that the survey under section 133A was conducted on 24-2-2005 at the business premises certainly belonging to 'V' Ltd., as the assessee firm was not existing at that point of time. The Commissioner(Appeals) had noted the fact that there was no variation in the quantity of the stock. The difference had been worked out as per the valuation made by the Departmental Valuer, who had valued the stock at market price. It is well settled that for the purpose of determining profit, the value of closing stock is to be taken at cost price or market price, 187 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT whichever is lower, as per the system of accounting regularly followed by the assessee. No addition, therefore, could be made on the basis of market value of the stock lying in the business. The Commissioner(Appeals) had rightly deleted the addition on this count. However, even otherwise, this addition was not called for in the hands of the assessee inasmuch as on the date of the survey the firm was not in existence, and the stock found at the time of survey did not belong to the partnership firm but to a company by name 'V' Ltd. Therefore, any discrepancy in the stock could be considered in the hands of the company, but not in the hands of the assessee-firm. Therefore, on this count, addition was not called for. The order of the Commissioner (Appeals) was to be thus, upheld. [Para 6]
13. CIT (Central), So far as addition of income which is at Rs. 41,51,301 is 186- Patna v. Jever concerned this is mainly for the reason that the Assessing 193 Jewellers [2015] 64 Officer has not properly appreciated the accounting system taxmann.com 277 followed by the respondent and about the valuation of stock. The (Jharkhand) assessee has calculated the valuation of the closing stock on the basis of the cost price or market price, whichever is lessor, which is always permissible as per the principle of accountancy. The documents contains the balance sheet, trading and profit and loss account, inventory of stock and valuation of stock for the period 1-4-2001 to 25-9-2001 showing net profit of the assessee at Rs. 41,81,301. In fact, this is an error committed by Assessing Officer without appreciating the fact that what is the basic principles of valuation of the closing stock.
In view of the principles propounded by the Supreme Court the valuation of closing stock may be 'as per the stock price or as per the market price, whichever is lower,' and, therefore, the additions made by the Assessing Officer were wrong. This principles have been properly appreciated by the Commissioner (Appeals) and the Tribunal.
No addition under 69B of the Act if no discrepancy in the physical quantity of stock
14. Stone Age Pvt. Where there was practically no difference in physical inventory 194-
Ltd. v. DCIT, taken by survey team vis-a-vis inventory as per Books of 202
Circle-2, Jaipur Account, impugned addition made on account of difference in
[2020] 116 value of stock was to be deleted
taxmann.com
930 (Jaipur-
Trib.)
No Section 69B addition merely on basis of statement
15. Commissioner of It is settled proposition of law that except the statement that too 203- Income-tax-1 also in view of threat, there was no other material either in the 210 form of cash, bullion, jewellery or document in any other form v.
which could come to the conclusion that the statement made Mantri Share was supported by some documentary evidence. The 188 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Brokers (P.) Ltd, Commissioner (Appeals) has rightly, which was confirmed by the [2018] 96 Tribunal. [Para 11] taxmann.com 279 (Rajasthan).
No addition under 69B of the Act if books are rejected
16. ACIT, Central14. In the present case, having rejected the books of accounts 211- Circle- 2(1), Pune maintained by assessee, Assessing Officer cannot rely upon on 224 vs M/s. ISMT the same books of account for the purpose of making addition in Limited, 2nd Floor, respect of sale of scrap etc. Lunkad Towers, 15. Thus, in the light of the above settled legal position, the Viman Nagar, approach of both the authorities is totally flawed and cannot be Pune-411014, ITA sustained in the eyes of law. Thus, the addition made by the Nos.2751 & Assessing Officer under the normal provisions of the I.T. Act as 2752/PUN/2016 confirmed by the ld. CIT(A) cannot be sustained under the law.
Accordingly, ground of appeal no.1 raised by the assessee stands allowed.
27. Since in the assessee's appeal for the reasons stated therein, we hold that the addition cannot be made once the books result stood rejected except by applying the flat rate of profit, this ground of appeal no.1 raised by the Revenue stands dismissed.
On unaccounted sales only profit rate could be tax
17. Commissioner of 2. The facts giving rise to the present case are the at during the 225- Income-tax v. course of survey conducted on the premises of the assessee on 226 President Industries 1-12-1994, from the excise records, found inference was drawn [2002] 124 by the Assessing officer from the movement of finished goods TAXMAN 654 from the premises of the assessee to godowns that sales (GUJ.) amounting to Rs. 29,01,300 have not been disclosed in the books of account. The AO made the addition for the entire sum of the said undisclosed sales as income of the assessee for the assessment year 1994-95. The addition on account of undisclosed was affirmed by the Commissioner (Appeals) to the reduced sum of Rs. 28,35,883. On further appeal, the Tribunal found that the entire sales could not have been added as income of the assessee for the assessment year in question but only to the extent the estimated profits embedded in the sales for which the net profit rate was adopted entailing addition of income on the suppressed amount of sales.
18. Commissioner of 4. The revenue, being aggrieved with the order of Commissioner 227- Income-tax v. (Appeals) carried the matter before the Tribunal. At the time of 228 Gurubachhan hearing there was difference of opinion between the two Singh J. Juneja Members of the Tribunal. Ultimately, the matter was referred to [2008] 171 Taxman 3rd Member of the Tribunal, who agreed with the view adopted 406 (Gujarat) by the Accountant Member. The Tribunal held that the assessee could not be taxed on the entire amount of Rs. 10,85,003, but, was liable to be taxed only on the gross profit earned on the said sales. The basis of this finding is the fact that all the purchases are from reputed companies and/or their dealers and such purchases are fully vouched.
189ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Hence, the finding of the Tribunal that only the gross profit on the said amount can be brought to tax does not call for any interference
19. Jyotichand The Assessing Officer has made addition of entire 229-
Bhaichand Saraf & unaccounted/suppressed sales without appreciating the fact that 238
Sons (P.) Ltd. v. the entire sales could not be added as the income of the
Deputy assessee but the addition could be made only to the extent of
Commissioner of gross profit earned on the unaccounted/suppressed sales. [Para
Income-tax, Circle 15]
11(1) [2012] 26
taxmann.com 239
(Pune)
20. Shri Nawal Kishore 23.4 It is settled law that not only from the illegal business but 239-
Soni Vs. The ACIT also the unaccounted transaction of purchase and sale only 287
Central Circle - 3 profit/ income on sales could be assessed as undisclosed
Jaipur, ITA No. income and could be subjected to tax. Case laws to the point are
1256, 1257, & as under:
1258/JP/2019, 1. Dr. T.A. Quereshi (157 taxmann.com 514) (Supreme Court) dated 15.09.2020 2. Piara Singh (124 ITR 40) (Supreme Court)
3. S.C. Kothari (82 ITR 794 (Supreme Court) Affidavit cannot be rejected without cross examining the person filing affidavit
21. Deputy According to the assessee, the jewelleries belonged to different 288- Commissioner of members of the family, as mentioned above. We have already 289 Income-tax noticed that the mother-in-law of the assessee changed her v. Smt. Jayita Bose, locker and kept the jewelleries with her daughter because in her [2004] 3 SOT 525 original locker, jewelleries were being damaged due to defect in (KOL.) that locker. This fact is supported by her letter addressed to the bank and the reply furnished by the bank against that letter copies of which have been annexed with the Paper Book which have been noticed by us. Similarly, small amount of jewellery weighing 40 gm. belonged to the grand-mother of the assessee. Being an old lady, she kept the jewellery with the assessee for safe custody. This fact is also supported by the affidavit sworn by her. Moreover, these two ladies had disclosed their jewelleries under the V.D.I. Scheme. The quantity of jewellery belonging to each person mentioned above is insignificant and not exceeding 358 gms. in each hand. It is true that an affidavit is a self-serving statement sworn by the deponent. In the case of Mehta Parikh & Co. v. CIT [1956] 30 ITR 181, the Hon'ble Supreme Court has held that unless the person making the statement in the affidavit is cross-examined by the revenue, it is not open to the revenue to challenge the correctness of the statement made by the deponent in the affidavit. Similar view has been taken by the Allahabad High Court in the case of L. Sohan Lal Gupta v. CIT [1958] 33 ITR
786. The assessee has also filed a copy of the Instruction No. 190 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT 1916 dated 11-5-1994 issued by the CBDT where it has been held that as a common approach, at the time of search, ornaments to the extent of 500 gms. for a married lady should not be seized. The aforesaid instruction issued by the Board is based on the customary practice prevailing in the Indian society. It is presumed that each member of the family shall possess some jewellery which was either inherited by her or she got it by way of presentation at the time of marriage and other occasions. Therefore, looking to the circumstances of the case, we do not find any infirmity in the impugned order passed by the CIT (Appeals).
In addition to the above case law compilation, ld. AR of the assessee further submitted additional case law compilation on this issue which reads as under;
S. Case law Relevant portion Page
No No.
To Invoke Sec 69/69A/69B, the burden of proof lies on Revenue
1. S.S. Jyothi Prakash v. 14. The aforesaid shows that the primary burden to 1-6 Additional Commissioner of prove the understatement or concealment of the Income-tax* [2016] 71 income by way of unexplained investment is on the taxmann.com 127 revenue and it is only when such burden is (Karnataka) IT APPEAL NO. discharged, it would be permissible to rely upon the 460 OF 2010 JUNE 7, 2016 valuation given by the District Valuation Officer.
Further, it was also held that if there was no evidence or material in possession to come to the conclusion that the assessee had paid extra consideration over and above what was stated in the sale deed, the District Valuation Officer's report cannot be a sole basis for assessment of the income. It was further held that opinion of the District Valuation Officer per se was not sufficient and the other corroborative evidence was required. (Para 14)
2. Shri Nanda Ram V & PO 11. As regards the other issue as we have noted that 7-52 Bilu, Makrana, Nagour V/s in earlier paras that the ld AO made the addition as ITO, Ward-1, Makrana I.T.A. per provision of section 69B of the Act. The said No. 190/Jodh/2024 & provision reads as under: Amount of investments, 191/Jodh/2024 Assessment etc., not fully disclosed in books of account. 69B. Years: 2014-15- & 2017-18- Where in any financial year the assessee has made Income Tax Appellate investments or is found to be the owner of any Tribunal Jodhpur Bench bullion, jewellery or other valuable article, and the Assessing Officer finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of 191 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year. As is evident from the above provision of law that the same can be invoked only if; (a) It is found that the assessee has made investment or the assessee is found be the owner of any bullion, jewellery or other valuable article,and (b) it is found that the amount expanded on making such investment or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in that behalf in the books of account maintained by the assessee, and (c) either the assessee offers no explanation about such excess amount, or the explanation offered by him is not satisfactory. As we note that these cumulative circumstances need to be existed, which are failed and the Ld. AO in the assessment order merely on the presumption and assumption added the amount on the re-casted trading account. Based on these facts no addition u/s. 69B of the Act can be made in the hands of the assessee. We get support of our view from the decision of our Hon'ble Jurisdiction High Court in the case of Smt. Amar Kumari Surana v. Commissioner of Income-tax [ 89 TAXMAN 544 (RAJ.) ] (Para 11)
3. Smt. Amar Kumari Surana v. 10. Section 69B reads as under: 53-56 Commissioner of Income-tax "Amount of investments etc., not fully disclosed in [1996] 89 TAXMAN 544 books of account - Where in any financial year the (RAJ.) HIGH COURT OF assessee has made investments or is found to be RAJASTHAN DBIT the owner of any bullion jewellery, or other valuable REFERENCE NO. 46 OF article, and the Assessing Officer finds that the 1980 MAY 1, 1996 amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year."
11. It is true that merely on the basis of fair market value no addition can be made under section 69B but on the basis of sufficient material on record some reasonable inference can be drawn that the petitioner has invested more amount than the one shown in account books, then only the addition under section 69B can be made. The burden is on the revenue to prove that real investment exceeds the investment shown in account books of the assessee.
192ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT (para 10 & 11)
4. Mangilal Agarwal v. 7. It will be apposite to reproduce section 69A at 57-65 Assistant Commissioner of this stage : "69A. Unexplained money, etc.--Where Income-tax*[2007] 163 in any financial year the assessee is found to be Taxman 399 (Rajasthan) the owner of any bullion, jewellery or valuable HIGH COURT OF articles not recorded in the books of account, if any, RAJASTHAN IT APPEAL maintained by him for any source of income, and NO. 9 OF 2001 OCTOBER the assessee offers no explanation about the 18, 2006 nature and source of acquisition of the money, bullion, jewellery or other valuable articles, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year."
8. The primary condition of invoking section 69A for the purpose of making additions of the value of jewellery, bullion, or other valuable articles or money 'of which the assessee is found to be the owner of any of these articles' and not recorded in the books of account, as income from undisclosed sources. Apparently, the condition precedent for invoking section 69A is the finding that the assessee is found to be the owner of any bullion, jewellery or other valuable articles. No presumption of ownership has been raised statutorily in favour of revenue and against the assessee, nor there is any warrant to invoke section 69A merely on the basis of assessee's possession. On his disclaimer that such articles found in his possession do not belong to him, the burden lies on the revenue to establish the ownership of the assessee before raising any presumption against him.
9. So far as the finding that the money and valuable articles are owned by the assessee is concerned, the burden is squarely on the revenue because it is only on reaching such finding the opinion that can be given about the source of its acquisition. It is only on establishment of ownership of such articles either on admission of the assessee or otherwise if assessee fails to explain satisfactorily the source of acquisition of such valuables that section 69A can be invoked for making additions into the total income of the assessee value of such articles as income from undisclosed sources for the assessment year relevant to previous year during which the assessee is found to be owner of such valuable articles. Therefore, the burden of proving ownership of the assessee in valuables found in possession of the assessee rests on the revenue and not with the assessee.
(Para 7,8,9)
5. Commissioner of Income-tax 5. The Income Tax Appellate Tribunal also 66-69 v. Gian Gupta* [2014] 46 examined this issue once again and came to the taxmann.com 372 (Delhi) IT conclusion that as the transaction itself never took 193 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT APPEAL NO. 955 OF 2011 place, there would be no question of investment MAY 8, 2014 and, therefore, no question of any unexplained investment. The amount of Rs 1 crore, which was paid by cheque, was returned as the transaction had fallen through. The Tribunal also took the view that the onus was on the Assessing Officer to establish that an investment of Rs 1 crore in cash had been made. That onus was not discharged and, therefore, it could be concluded that an unexplained investment of Rs 1 crore in cash had been made by the assessee. The exact findings of the Tribunal are as under: --
"5. On due consideration of the above facts, we are of the opinion that the Assessing Officer Assessing Officer has given unnecessary weightage to the copy of MoU. The factum of transfer of a capital asset by Mrs Jind Singh in favour of the assessee was not established. The case of the assessee is that he has not purchased any land. The alleged MoU is a document exhibiting the negotiation of the purchase of land, but it never materialized. The Assessing Officer has erroneously observed that it is for the assessee to establish that land was not purchased. In our opinion, for charging the assessee with tax on account of unexplained investment, it is the Assessing Officer who ought to have established that land was purchased by the assessee and he failed to disclose the source of such purchase. Instead of discharging this onus, learned Assessing Officer treated a document as gospel truth and tried to put an onus upon the assessee to prove a negative fact which is not permissible in law. Learned First Appellate Authority has rightly considered this aspect and deleted the addition."
6. After having heard the counsel for the parties on this issue of the deletion of the addition of Rs 1 crore on account of the alleged unexplained investment, we are of the view that the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal have deleted the said addition on examination of facts. In our view, no question of law arises for our consideration. The facts, as established on record, do not point conclusively to unexplained investment of Rs 1 crore in cash by the assessee particularly because the MoU as well as the receipt in question were unsigned documents and the transaction had not materialized.
(Para 5 & 6)
6. Commissioner of Income-tax That question was answered by this Court in favour 70-72 v. Sadhna Gupta* [2013] 32 of the assessee and against the revenue. The taxmann.com 185 (Delhi) IT Division Bench in the case of Puneet Sabharwal APPEAL NO. 434 OF 2012 (supra) had also placed reliance on the decision of MARCH 6, 2013 Supreme Court in K.P. Varghese (supra) as also on 194 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT another decision of a Division Bench of this Court in CIT v. Smt. Suraj Devi [2010] 328 ITR 604/[2011] 197 Taxman 173 (Delhi) (Mag.) wherein this Court held that the primary burden of proof with regard to concealment of income was on the revenue and it was only when the said burden was discharged that reliance could be placed on the valuation report of the DVO. There are several other decisions of this Court in the same vein. One such case being the case of CIT v. Vinod Singhal (IT Appeal No.482/2010 decided on 05.05.2010) where, again, reliance was placed on the very same decision of the Supreme Court in K.P. Varghese (supra) and also on a decision of this Court in CIT v. Smt. Shakuntala Devi [2009] 316 ITR 46. It was observed that there must be a finding that the assessee had received an amount over and above the consideration stated in the sale deed and for this the primary burden was cast on the revenue. It is only when this burden is discharged by the revenue that it would be permissible to rely upon the value as given in the valuation report of the DVO.
(Para 4)
7. Commissioner of Income-tax 8. As far as question No. 2 is concerned, as already 73-75 v. Puneet Sabharwal* [2011] indicated above, the Assessing Officer solely relied 16 taxmann.com 320 (Delhi) upon the report of the District Valuation Officer. IT APPEAL NO. 758 OF 2005 Apart from this, there was admittedly no evidence or DECEMBER 3, 2010 material in his possession to come to the conclusion that the assessee had paid extra consideration over and above what was stated in the sale deed. This very issue has come up for consideration before this court repeatedly and after following the judgment of the Supreme Court in the case of K. P. Varghese (supra), the aforesaid proposition of law is reiterated time and again. For our benefit, we may refer to the latest judgment of this court in the case of CIT v.
Smt. Suraj Devi [2010] 328 ITR 604 (Delhi), wherein this court had held that the primary burden of proof to prove understatement or concealment of income is on the Revenue and it is only when such burden is discharged that it would be permissible to rely upon the valuation given by the District Valuation Officer. It was also held that the opinion of the Valuation Officer per se was not an information and could not be relied upon without the books of account being rejected which had not been done in that case.
9. The aforesaid principle of law has been reaffirmed in CIT v. Naveen Gera [2010] 328 ITR 516 (Delhi) stating that the opinion of the District Valuation Officer per se was not sufficient and other corroborated evidence is required. Mr. Maratha, learned counsel appearing for the Revenue submitted that the judgment of the Supreme Court in K. P. Varghese (supra) has been explained by the Rajasthan High Court in the case of Smt. Amar 195 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Kumari Surana v. CIT [1997] 226 ITR 344/[1996] 89 Taxman 544.
(Para 8 & 9)
8. Commissioner of Income-tax 3. Ms. Prem Lata Bansal, learned counsel for the 76-78 v. Smt. Suraj Devi* [2010] Revenue submitted that the Income-tax Appellate 328 ITR 604 (Delhi) IT Tribunal had erred in law in deleting the addition of APPEAL No. 811 Of 2010 Rs. 48,78,900 made by the Assessing Officer on [Assessment Year 2005- account of undisclosed investment in purchase of 2006] August 13, 2010 the aforesaid shop and the flat at Bangla Sahib Road. She further submitted that the Income-tax Appellate Tribunal had failed to appreciate that the DVO's report was admissible evidence for making addition on account of undisclosed investment in the property. Ms. Bansal also relied upon para 3.4.1. of the Assessing Officer's order to contend that the respondent-assessee had made a statement which suggested undisclosed investment in the aforesaid property.
4. It is settled law that the primary burden of proof to prove understatement or concealment of income is on the Revenue and it is only when such burden is discharged that it would be permissible to rely upon the valuation given by the DVO. (See K.P. Varghese v. ITO [1981] 131 ITR 597 (SC), CIT v. Shakuntala Devi [2009] 316 ITR 46 (Delhi) and CIT v. Vinod Singhal (I.T.Appeal No. 482 of 2010 decided by this court on 5 5-2010).
(Para 3 & 4)
9. Commissioner of Incom-tax v. It may be relevant to note that a Division Bench of 79-81 Smt. Shakuntala Devi* [2009] this Court, comprising Dr. Arijit Pasayat and D.K. 224 CTR 79 (Delhi) IT Jain, JJ., as their Lordships then were, reiterated APPEAL NO. 345 OF 2007 that there must be a finding of the Revenue that the MARCH 2, 2009 assessee had received amounts over and above the consideration stated in the sale deeds, following Varghese (supra). Varghese had also been followed and applied by the Supreme Court in CIT v .
Godavari Corpn. Ltd. [1993] 112 CTR (SC) 310 :
[1993] 200 ITR 567 (SC). The Division Bench of this Court in CIT v . Ashok Khetrapal [2007] 211 CTR (Delhi) 576 : [2007] 294 ITR 143 (Delhi) referred to the report of a Valuation Officer in the absence of any incriminating documents found in the course of a search. The decision in CIT v . Manoj Jain [2006] 200 CTR (Delhi) 327 : [2006] 287 ITR 285 (Delhi) is also to the same effect. In CIT v. Shivakami Co. (P) Ltd. [1986] 52 CTR (SC) 108 : [1986] 159 ITR 71 (SC) their Lordships have once again reiterated that the onus whether the assessee had received more consideration than what was stated in the documents of transfer rested on the Revenue and in the absence of that burden being discharged it would be legally impermissible to make any inferences against the assessee.
(Para 5)
10. Ananthakrishna Vasudev The factum of the assesses having made investment 82-84 196 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Aithal v. Income-tax should be first proved by the AO, only then the Officer*[2023] 147 burden shifts on the assessee to prove the source of taxmann.com 376 (Bangalore investment. Such investment outside the books of
- Trib.) N. V. VASUDEVAN, account must be positively proved by the AO and not VICE PRESIDENT IT only inferred from the attending facts. If such an APPEAL NO. 711 (BANG.) investment outside the books is not proved, the OF 2022 [ASSESSMENT assessee cannot be called upon to prove the source YEAR 2014-15] NOVEMBER of such a hypothetical investment. Adverting to the 24, 2022 facts of the instant case, we find that apart from relying on the DVO's report, the AO has not brought anything on record or any other material to indicate that the assessee did make investment in purchase of property over and above that declared in the books of account.
(Para 9) Books of accounts not maintained; thus, no addition can be made u/s 69B
11. Dr. Prakash Tiwari v. 5. We have heard the learned counsel for the 85-86 Commissioner of Income-tax parties. The learned counsel for the assessee [1983] 14 Taxman 252 (MP) contended that as the assessee did not maintain any account, section 69B of the Act was not applicable and, therefore, the Tribunal was not justified in adding Rs. 10,000 as the income of the assessee from undisclosed sources. In our opinion, on the facts and in the circumstances of the case, reference to section 69B was not appropriate because the assessee did not maintain any accounts. However, the matter is squarely governed by section 69 of the Act which provides that : "Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the ITO, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year."
(Para 5)
12. Shri Nanda Ram V & PO Bilu, Refer S.NO 2 7-52 Makrana, Nagour V/s ITO, Ward-1, Makrana I.T.A. No. 190/Jodh/2024 & 191/Jodh/2024 Assessment Years: 2014-15- & 2017-18- Income Tax Appellate Tribunal Jodhpur Bench Miscellaneous
13. Mehta Parikh & Co. v. It has to be noted, however, that beyond these 87-93 Commissioner of Income-tax calculations of figures, no further scrutiny was made [1956] 30 ITR 181 (SC) CIVIL by the Income-tax Officer or the Appellate Assistant 197 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT APPEAL NO. 81 OF 1954 Commissioner of the entries in the cash book of the MAY 10, 1956 appellants. The cash book of the appellants was accepted and the entries therein were not challenged. No further documents or vouchers in relation to those entries were called for, nor was the presence of the deponents of the three affidavits considered necessary by either party. The appellants took it that the affidavits of these parties were enough and neither the Appellate Assistant Commissioner, nor the Income-tax Officer, who was present at the hearing of the appeal before the Appellate Assistant Commissioner, considered it necessary to call for them in order to cross-examine them with reference to the statements made by them in their affidavits. Under these circumstances it was not open to the Revenue to challenge the correctness of the cash book entries or the statements made by those deponents in their affidavits.
14. Ushakant N. Patel* v. 13. The Tribunal lost sight of the fact that section 69 94-98 Commissioner of Income-tax of the Act opens with the words "where in the IT REFERENCE NO. 287 OF financial year immediately preceding the 1994 DECEMBER 22, 2005 assessment year, the assessee has made [2006] 154 TAXMAN 55 investment...". Therefore, in the first instance it was (GUJ.) HIGH COURT OF incumbent upon the authority to establish that there GUJARAT were investments made by the assessee; that such investments were not recorded in the books of account maintained by the assessee; and that, such investments had been made in the financial year immediately preceding the assessment year in question. Unfortunately, despite the CIT(A) having recorded a categorical finding, the Tribunal has failed to appreciate the said finding and dealt with the same without giving cogent reasons. If the Tribunal found that the said finding was not correct, it was necessary for the Tribunal to have recorded reasons for reversing the same. The observation of the Tribunal that the difficulty as to financial year had to be finalised in accordance with the provisions and the date of search and seizure is too general and vague. It does not indicate anything. When the provision requires fulfilment of certain prerequisite conditions before the assessee can be called upon to explain, the Tribunal has to record its finding on this issue in a specific manner, because the case of the assessee all along has been that in the first place the seized documents do not reflect any investments, in the second place, even if the entries could be treated as investments made by the assessee, it was further necessary to show that such investments have been made by the assessee in the financial year immediately preceding the assessment year and are not recorded in the books maintained by the assessee. The Tribunal's order does not record any findings. In fact, the Tribunal is 198 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT hardly aware, it appears, as to what the requirements of section 69 are, and if it is aware, it has consciously chosen to ignore the same. It could not have done so in face of the finding recorded by CIT(A) on this issue.
(Para 13)
18. Going further ld. Senior counsel referring to Page no. 28 of PB Vol. I contended that AO committed error in quoting closing stock as per books of accounts at Rs. 1,26,08,60,402/- instead of Rs. 1,32,77,94,165. The said erroneous figure of closing stock has arrived on account of adoption of incorrect figure of opening stock at Rs. 120,17,89,418/- instead of Rs.
126,90,17,876/- as per audited financials at Page no. 28 of PB Vol. I. Further while arriving at such an impugned balancing figure of closing stock as on date of survey, the AO assumed the GP rate of 30% as against the declared GP rate of 34.32% by the assessee. This all shows the way the assessee treated.
19. Ld. Senior counsel further argued that Ld. CIT(A) was not justified in estimating the cost of the stock on the basis of excel sheets impounded during survey by giving deduction of 47% to excel price (tag price) taking reference from the statement of Mr. Rajesh Ajmera, during survey. It has been contended that it is common knowledge and accepted trade practice in jewellery trade that tag price is the suggested maximum retail price and 199 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT not the actual sale price on which discounts are being offered while negotiating the final deal with the customers.
20. Ld. Senior Counsel has vehemently argued that statement of Mr. Rajesh Ajmera dated 16.07.2020 (PB No. 125-127 in Vol. I) is of no consequence and the same in any case cannot be made the foundation/basis for arriving at cost of the stock. Mr. Rajesh Ajmera has not made any statement that there was an understatement of purchase price or there was any extract consideration paid for purchases made by Assessee.
Mr. Rajesh Ajmera has categorially stated that stocks are valued at current market rate by the departmental however, the goods in stock were purchased in last 4 years which rate is approx. 33% lower than current market rate. He further challenging the valuation of stock at branches argued that different yardsticks have been adopted by the department as per departments convenience to maximize additions in as much as while for Delhi Branch, the valuation has been confirmed on excel price list without any deduction, but for Mumbai and Bangalore Branch, the stock has been taken from incomplete tally accounts for which specific inconsistencies were pointed out by drawing attention to written submission placed before CIT(A). It was also contended that no physical verification was done at any of the branches, thus, the question of excess stock does 200 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT not arise at all. Thus, modes operandi for determining stock for those locations were based on assumption, presumption and guess work and that is why the addition cannot be made u/s. 69B of the Act. In support of that contention he referred the various judgement cited herein above. It was a matter of fact that for determining the excess stock at least two things are mandatorily required i.e. quantity as per books and physical quantity. Here that is not the case of the assessee as no difference was found and recorded by the survey team. Thus, if that data is not present in no manner the excess quantity can be ascertained and thereby no addition can be done u/s. 69B of the Act.
21. Similarly, the valuation of stock lying with consignment agents, the values reported in ledger account of consignment stock as on date of survey from incomplete tally accounts have been taken, which has occurred due to omission of certain entries, which was explained through supporting evidence put forth during assessment as well as appellate proceedings. However, the same was doubted by the authorities below.
After considering effect of the same, there is no basis to consider the said values as cost of inventory lying with consignment agents, which has rather been returned as evidenced by bill of entries and other documents placed on record. It was also contended that no physical verification was done for 201 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT such item of stock lying with consignments etc., thus, the question of excess stock does not arise at all.
22. Without prejudice to the contention so raised here in above the ld. AR of the assessee objected to the action of ld. CIT(A) making and enhancement in respect of stock of museum without issuing any show cause notice to the assessee violates the principles of natural justice. Even the ld. CIT(A) did not give the assessee break up for making increase in addition in the stock amount which is already considered by the Assessing Officer.
23. The ld. DR was heard in detail on the various dates as mentioned above who relied on the findings of the lower authorities. Ld. DR also filed a detailed written submission which we reproduce herein below for the better understanding of the stand taken by the revenue: -.
"The appellant has placed reliance on the judgement in the case of Principal Commissioner of Income-tax v. Bajargan Traders [2017] 86 taxmann.com 295 (Rajasthan)[12-09-2017]. In this judgement of Hon'ble High Court, inter-alia, the following paras of the order of Hon'ble ITAT have been extracted:-
"2.7. It is further submitted that the real issue in this case is whether the excess stock surrendered should be made as a part of business income or not and if so, assessee can claim deduction on account of payment of remuneration to partners on account u/s 40b(v). In this regard, our reference was drawn to the decision of Co-ordinate Bench in case of Shri Ramnarayan Birla (in ITA No. 482/JP/15 dated 30.09.2016). In that case, the question before the Coordinate Bench was "whether the CIT(A)-2, Udaipur has erred in directing the AO to assess the unexplained investment surrendered by the assessee under the head "income from Business"
ignoring the decision of the Hon'ble Gujarat High Court in the case of Fakir Mohd.
202ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Hazi Hasan 247 ITR 290 that unaccounted income ought to be categorized under the residuary head of 'Income from other sources'. In respect to the said issue, the findings of the Coordinate Bench are as follows:
"We have heard the rival contentions and perused the material available on record. Undisputed facts emerged from the record that at the time of survey excess stock was found. It is also not disputed that assessee is engaged in the business of jewellery. During the course of survey excess stock valuing Rs. 77,66,887/- was found in respect of gold and jewellery. The Coordinate Bench in the case of Choksi Hiralal Mangnlal v. DCIT 131, TTJ (Ahd.) 1 has held that in a cases where source of investment/expenditure is clearly identifiable and alleged undisclosed asset has no independent existence of its own or there is no separate physical identity of such investment/expenditure then first what is to be taxed is the undisclosed business receipt invested in unidentifiable unaccounted asset and only on failure it should be considered to be taxed u/s 69 on the premises that such excess investment is not recorded in the books of account and its nature and source is not identifiable. Once such excess investment is taxed as undeclared business receipt then taxing it further as deemed income under section 69 would not be necessary. Therefore, the first attempt of the assessing authority should be to find out link of undeclared investment/expenditure with the known head, give opportunity to the assessee to establish nexus and if it is satisfactorily established then first such investment should be considered as undeclared receipt under that particular head. It is observed that there is no conflict with the decision of Hon'ble Gujarat High Court in the case of Fakir Mohd. Jajihasan (supra) where investment in an asset or expenditure is not identifiable and no nexus was established then with any head of income and thus was not available for set off against any loss under any other head. Therefore, the Hon'ble Coordinate Bench held that where asset in which undeclared investment is sought to be taxed is not clearly identifiable or does not have independent identity but is integral and inseparable (mixed) part of declared asset falling under a particular head, then the difference should be treated as undeclared business income explaining the investment. In the present case the excess stock was part of the stock. The revenue has not pointed out that the excess stock has any nexus with any other receipts. Therefore, we do not find any fault with the decision of the ld. CIT(A) directing the AO to treat the surrendered amount as excess stock qua the excess stock found."
2.10. We have heard the rival contentions and perused the material available on record. During the course of survey, the assessee has surrendered an amount of Rs. 70,04,814/- towards investment in stock of rice which had not been recorded in the books of accounts. Subsequently, in the books of accounts, the assessee has incorporated this transaction by debiting the purchase account and crediting the income from undisclosed sources. In the annual accounts, the purchases of Rs. 70,04,814/-were finally reflected as part of total purchases amounting to Rs. 33,47,19,658/- in the profit and loss account and the same also found included as part of the closing stock amount to Rs. 1,94,42,569/-in the profit/loss account since the said stock of rice was not sold out. In addition to the purchase and the closing stock, the amount of RS. 70,04,814/- also found credited in the profit and loss 203 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT account as income from undisclosed sources. The net effect of this double entry accounting treatment is that firstly the unrecorded stock of rice has been brought on the books and now forms part of the recorded stock which can be subsequently sold out and the profit/loss therefrom would be subject to tax as any other normal business transaction. Secondly, the unrecorded investment which has gone in purchase of such unrecorded stock of rice has been recorded in the books of accounts and offered to tax by crediting the said amount in the profit and loss account. Had this investment been made out of known source, there was no necessity for assessee to credit the profit/loss account and offer the same to tax. Accordingly, we do not see any infirmity in assessee's bringing such transaction in its books of accounts and the accounting treatment thereof so as to regularise its books of accounts. In fact, the same provides a credible base for Revenue to bring to tax subsequent profit/loss on sale of such stock of rice in future. 2.11. Having said that, the next issue that arises for consideration is whether the amount surrendered byway of investment in the unrecorded stock of rice has to be brought to tax under the head "business income" or "income from other sources". In the present case, the assessee is dealing in sale of foodgrains, rice and oil seeds, and the excess stock which has been found during the course of survey is stock of rice. Therefore, the investment in procurement of such stock of rice is clearly identifiable and related to the regular business stock of the assessee. The decision of the Co-ordinate Bench in case of Shri Ramnarayan Birla (supra) supports the case of the assessee in this regard. Therefore, the investment in the excess stock has to be brought to tax under the head "business income" and not under the head income from other sources". In the result, ground No. 1 of the assessee is allowed."
(Emphasis supplied) As per the above judgement (i) source of investment/expenditure is (should be) clearly identifiable and (ii) undisclosed asset has no independent existence of its own or (iii) there is no separate physical identity of such investment/expenditure Further, in the judgement of Hon'ble High Court in the case of Principal Commissioner of Income-tax v. Bajargan Traders [2017] 86 taxmann.com 295 (Rajasthan)[12-09-2017], the paras from the judgement of Hon'ble ITAT in the case of 'Bajargan Traders' have been extracted and in the judgement of the Hon'ble ITAT there is reference and reliance upon another judgement of Hon'ble ITAT in the case of Shri Ramnarayan Birla (in ITA No. 482/JP/15 dated 30.09.2016).
Hon'ble ITAT in the case of Shri Ramnarayan Birla (in ITA No. 482/JP/15 dated 30.09.2016) which is relied upon by the Hon'ble ITAT in the case of Bajrang Traders, it is held by the Hon'ble ITAT that the first attempt of the assessing authority should be to find out link of undeclared investment/expenditure with the known head, give opportunity to the assessee to establish nexus and if it is satisfactorily established then first such investment should be considered as undeclared receipt under that particular head. Hon'ble Supreme Court in Devi 204 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Prasad Vishwanath [1969] 72 ITR 194 (SC) has given a verdict upholding the reverse view that onus to identify the source solely lies on the assessee and it cannot be shifted to the assessing authority.
Hon'ble ITAT in the case of Shri Ramnarayan Birla (in ITA No. 482/JP/15 dated 30.09.2016) which is relied upon by the Hon'ble ITAT in the case of Bajrang Traders, it is held by the Hon'ble ITAT that "The revenue has not pointed out that the excess stock has any nexus with any other receipts". As as per judgement of Hon'ble Supreme Court there is no onus on the assessing authority to look for or identify the sources. As per the ratio of the judgement, it cannot be the case that if the AO has not proved the source from some other receipts then the source is to be treated as business income of the year.
Hon'ble Supreme Court in the case of Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC)[01-08-1968, held that onus to identify the source cannot be shifted on the assessing authority. If the assesse claims so, the assesse is required to prove the same. This judgement has been referred in detail in the later part of this order.
Hon'ble ITAT in the case of Shri Ramnarayan Birla (in ITA No. 482/JP/15 dated 30.09.2016) which is relied upon by the Hon'ble ITAT in the case of Bajrang Traders, also observed that the in the case of Choksi Hiralal Mangnlal v. DCIT 131, TTJ (Ahd.) 1 "has held that in a cases where source of investment/expenditure is clearly identifiable and ........." Even as per the judgement of Hon'ble ITAT referred in the judgement of Bajarang Traders (supra), source of investment/expenditure must be clearly identifiable. The onus in this regard is on the assessee to prove the source. The appellant has not referred to judgement of Hon'ble Supreme Court in the case of Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC)[01-08-1968. Wherein the similar underlying legal principle as discussed in the judgement referred by the appellant has been discussed and decided in favour of the revenue. As per the judgement of Hon'ble Supreme Court, unexplained credit (or stock) cannot be presumed to be business income. Onus to identify the source cannot be shifted on the assessing authority. If the assesse claims so, the assesse is required to prove the same.
Further, in the case also it is held by the Hon'ble Supreme Court in the case of Roshan Di Hatti v. Commissioner of Income-tax [1977] 107 ITR 938 (SC)[08-03- 1977] that even after the items (stock in trade) were "introduced in the books of account of its business", the assessee was still required to "to prove satisfactorily the nature and source of these assets" and in the event of failure to prove these, "the revenue could legitimately hold that these assets represented the undisclosed income of the assessee".
Roshan Di Hatti (supra) is case on the similar issue involving issue of stock in trade which was included by the assessee in the books of accounts and even then 205 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT it was held in the judgement that assessee was still required to prove satisfactorily the nature and source of these assets and in the event of failure to prove these, the revenue could legitimately hold that these assets represented the undisclosed income of the assessee.
There is no presumption in favor of business income. Onus to prove is on assessee.
The Hon'ble Supreme Court in the case of Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC)[01-08-1968] has held as under:-
"There is nothing in law which prevents the Income-tax Officer in an appropriate case in taxing both the cash credit, the source and nature of which is not satisfactorily explained, and the business income estimated by him under section 13 of the Income-tax Act, after rejecting the books of account of the assessee as unreliable. This was so decided in Kale Khan Mohammad Hanif v. Commissioner of Income-tax [1963] 50 ITR 1 (SC). Whether in a given case the Income-tax Officer may tax the cash credit entered in the books of account of the business, and at the same time estimate the profit must, however, depend upon the facts of each case.
...............
The High Court, in disposing of the application under section 66(2), expressed the view that because the amount of Rs. 20,000 was entered in the books of account of the business, there was some material to hold that the amount was income of the assessee from the business and not from some other source. But it was not open to the High Court to direct the Tribunal to state a case on a question which was never raised before or decided by the Tribunal at the hearing of the appeal. The question again assumes that it was for the Income-tax Officer to indicate the source of the income before the income could be held taxable and unless he did so, the assessee was entitled to succeed. That is not, in our judgment, the correct legal position. Where there is an explained cash credit, it is open to the Income-tax Officer to hold that it is income of the assessee and no further burden lies on the Income-tax Officer to show that that income is from any particular source. It is for the assessee to prove that even if the cash credit represents income it is income from a source which has already been taxed".
As per the headnotes "Section 145 of the Income-tax Act, 1961 [Corresponding to section 13 of the Indian Income tax Act, 1922] - Method of accounting - System of accounting - Assessment year 1946-47 - Whether where there is an unexplained cash credit it is open to ITO to hold that it is income of assessee and no further burden lies on ITO to show that income is from any particular source - Held, yes". As per the above judgement, the observations of the Hon'ble Allahabad High Court that because the amount was entered in the books of account of the business, there was some material to hold that the amount was income of the assessee from the business and not from some other source, were not approved by the Hon'ble Supreme Court and was reversed, as it was held by the Hon'ble Supreme Court 206 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT that it assumed it was for the Income-tax Officer to indicate the source of the income which was not the correct legal position and that where there is an explained cash credit, it is open to the Income-tax Officer to hold that it is income of the assessee and no further burden lies on the Income-tax Officer to show that that income is from any particular source. It is for the assessee to prove that even if the cash credit represents income it is income from a source which has already been taxed.
In the case of Roshan Di Hatti v. Commissioner of Income-tax [1977] 107 ITR 938 (SC)[08-03-1977] it is held by the Hon'ble Supreme Court as under:-
"Now, the law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee is on him. If he disputes the liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the revenue is entitled to treat it as taxable income. This was laid down as far back as 1958 when this court pointed out in A. Govindarajulu Mudaliar v. Commisioner of Income-tax [1958] 34 ITR 807 , 810 (SC) that:
"There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipts are of an assessable nature."
To put it differently, where the nature and source of a receipt, whether it be of money or of other property, cannot be satisfactorily explained by the assessee, it is open to the revenue to hold that it is the income of the assessee and no further burden lies on the revenue to show that that income is from any particular source. vide Commissioner of Income-tax v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194 (SC). Here, in the present case, the assessee introduced in the books of account of its business on 30th March, 1948, capital of Rs. 3,33,414 which consisted of gold rawa, gold ornaments, stones and cash. The burden of accounting for the receipt of these assets was clearly on the assessee and if the assessee failed to prove satisfactorily the nature and source of these assets, the revenue could legitimately hold that these assets represented the undisclosed income of the assessee....."
(emphasis supplied) In the case of Kale Khan Mohammad Hanif v. Commissioner of Income-tax [1963] 50 ITR 1 (SC)[08-02-1963] it is held by the Hon'ble Supreme Court as under:-
"It seems to us that the answer to this question must be in the affirmative and that is how it was answered by the High Court. It is well established that the onus of proving the source of a sum of money found to have been received by the assessee is on him. If he disputes liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the Income-tax Officer is 207 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT entitled to treat it as taxable income: see A. Govindarajulu Mudaliar v. Commissioner of Income-tax [1958] 34 ITR 807 (SC)".
As per judgements of Hon'ble Supreme Court in the case of CIT v. M.Ganapathi Mudaliar [1964] 53 ITR 623 (SC)/A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC), where the assessee has failed to prove satisfactorily the source and nature of a credit entry in his books, and it is held that the relevant amount is the income of the assesse, it is not necessary for the department to locate its exact source.
Referring to the above judgements of Hon'ble Supreme Court, it is held by the Hon'ble ITAT in the case of Navin Shantilal Mehta v. Income-tax Officer, Ward-32 (2) (4), Mumbai [2018] 90 taxmann.com 16 (Mumbai - Trib.) as under:-
"3.2 As per section 68 of the Act, onus is upon the assessee to discharge the burden so cast upon. First burden is upon the assessee to satisfactorily explain the credit entry contained in his books of accounts. The burden has to be discharged with positive material (Oceanic Products Exporting Co. v. CIT [2000] 241 ITR 497 (Ker.). The legislature had laid down that in the absence of satisfactory explanation, the unexplained cash credit may be charged u/s 68 of the Act. Our view is fortified by the ratio laid down in Hon'ble Apex Court in CIT v. P. Mohankala [2007] 291 ITR 278/161 Taxman 169. A close reading of section 68 and 69 of the Act makes it clear that in the case of section 68, there should be credit entry in the books of account whereas in the case of 69 there may not be an entry in such books of account. The law is well settled, the onus of proving the source of a sum, found to be received/transacted by the assessee, is on him and where it is not satisfactorily explained, it is open to the Revenue to hold that it is income of the assessee and no further burden lies on the Revenue to show that income is from any other particular source. Where the assessee failed to prove satisfactorily the source and nature of such credit, the Revenue is free to make the addition. The principle laid down in CIT v. M. Ganpati Mudaliar [1964] 53 ITR 623 (SC)A. Govinda Rajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC) and also CIT v.
Durga Prasad More [1969] 72 ITR 807 (SC) are the landmark decisions. The ratio laid down therein are that if the explanation of the assessee is unsatisfactory, the amount can be treated as income of the assessee. The ratio laid down in CIT v. Daulat Ram Rawatmal [1973] 87 ITR 349 (SC) further throws light on the issue. In the case of a cash entry, it is necessary for the assessee to prove not only the identity of the creditor but also the capacity of the creditor and genuineness of the transactions. The onus lies on the assessee, under the facts available on record. A harmonious construction of section 106 of the evidence Act and section 68 of the Income Tax Act will be that apart from establishing the identity of the creditor, the assessee must establish the genuineness of the transaction as well as the creditworthiness of the creditors. In CIT v. Korlay Trading Co. Ltd. [1998] 232 ITR 820 (Cal.), it was held that mere mention of file number of creditor will not suffice and each entry has to be explained separately by the assesseeCIT v. R.S. Rathaore [1995] 212 ITR 390/86 Taxman 20 (Raj.). The Hon'ble Guwahati High 208 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Court in Nemi Chandra Kothari v. CIT [2003] 264 ITR 254/[2004] 136 Taxman 213 held that transaction by cheques may not be always sacrosanct. .........".
(Emphasis Supplied) In the following cases the excess stock was upheld as taxable in the context of section 69/69B of the Act:-
In the case of Neeraj Agrawal v. Deputy Commissioner of Income-tax [2023] 152 taxmann.com 632 (Allahabad - Trib.) it is held by the Hon'ble ITAT as under:-
Headnote extracts:-
INCOMETAX : Where during survey at premises of assessee manufacturing and trading silver ornaments certain excess stock of silver ornament was found to which assessee did not give any explanation at time of survey, explanation of assessee at time of assessment that it had purchased certain artificial silver jewellery which was not entered in stock register was merely an afterthought and therefore, Assessing Officer rightly made additions with respect to difference in physical stock of silver ornaments found during survey and stock as per stock register INCOMETAX : Where during survey at premises of assessee, manufacturing and trading silver and gold ornaments, certain gold ornaments were found regarding which assessee did not give any explanation at time of survey but during assessment proceedings contended that same was purchased from 14 different persons who were not registered with VAT/Commercial Tax department, and purchases were claimed to be made by assessee just few days prior to date of survey, such explanation was not believable and, therefore, addition made by Assessing Officer in respect of same was to be upheld In the case of Suraj Bhan Oil (P.) Ltd. v. Deputy Commissioner of Income-tax [2022] 138 taxmann.com 19 (Madhya Pradesh)/[2022] 286 Taxman 680 (Madhya Pradesh)/[2022] 446 ITR 539 (Madhya Pradesh)[18-02-2022], it is held by the Hon'ble Madhya Pradesh High Court as under:-
Headnote:-
Section 69B of the Income-tax Act, 1961 - Undisclosed investments (Stock) - Assessment year 2005-06 - Assessee was engaged in manufacturing and trading of edible oils and grains - Assessing Officer having found that value of stock shown by assessee in stock statement as on 28-3-2005 submitted to bank was far in excess to value of stock shown in audit report for period ending 31-3-2005 and difference was to extent of Rs. 2.71 crores and assessee despite opportunity afforded could not either reconcile difference or explain reasons therefor, treated difference amount as unexplained investment in stock from undisclosed sources and added same to total income of assessee under section 69B - Commissioner (Appeals) deleted impugned addition by referring to a chart indicating stock position as on 28-3-2005 submitted to bank with stock position as per stock register on 28-3-2005 - Tribunal held that assessee was bound to explain 209 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT difference either before Assessing Officer or before Commissioner (Appeals) or before Tribunal and same was not done - It taking view that excess stock represented income of assessee from undisclosed sources, set aside order of Commissioner (Appeals) and upheld order of Assessing Officer - It was noted that once it was found by Assessing Officer that there was excess stock, in absence of explanation by assessee, conclusion was inescapable that excess stock, if any, was from undisclosed sources - Further once assessee's explanation, if any, had not been accepted, resultant position was that there was excess stock undisclosed in books of account and non disclosure was only with a view to suppress income - Whether order of Assessing Officer and that of Tribunal deserved to be affirmed - Held, yes [Para 10] [In favour of revenue] (emphasis supplied) SLP against the above judgement Suraj Bhan Oil (P.) Ltd. v. Deputy Commissioner of Income-tax [2022] 138 taxmann.com 19 (Madhya Pradesh) was dismissed by Hon'ble Supreme Court. Reported at [2022] 141 taxmann.com 477 (SC)/[2022] 288 Taxman 635 (SC)[25-07-2022] Headnote:-
Section 69B of the Income-tax Act, 1961 - Undisclosed investments (Stock) - Assessment year 2005-06 - Assessee was engaged in manufacturing and trading of edible oils and grains - Assessing Officer found that value of stock shown by assessee in stock statement as on 28- 3-2005 submitted to bank was far in excess to value of stock shown in audit report for period ending 31-3-2005 and despite opportunity afforded assessee could not either reconcile difference or explain reasons therefor - Hence, Assessing Officer treated difference amount as unexplained investment in stock from undisclosed sources and added same to total income of assessee under section 69B - Commissioner (Appeals) deleted impugned addition by referring to a chart indicating stock position as on 28-3-2005 submitted to bank with stock position as per stock register on 28-3-2005 - Tribunal observed that assessee was bound to explain difference either before Assessing Officer or before Commissioner (Appeals) or before Tribunal and since same was not done, Tribunal set aside order of Commissioner (Appeals) and remanded matter back to Assessing Officer for adjudication afresh - High Court by impugned order upheld order of Assessing Officer and that of Tribunal taking view that excess stock represented income of assessee from undisclosed sources - Assessee filed Special Leave Petition against above impugned order, however, after arguing for sometime sought permission to withdraw SLP - Whether therefore, SLP was to be dismissed as withdrawn - Held, yes [Para 3] [In favour of revenue] In the case of SVS Oil Mills v. Assistant Commissioner of Income-tax, Non Corporate Circle-6(1), Chennai [2020] 113 taxmann.com 388 (Madras)/[2020] 269 Taxman 508 (Madras)/[2019] 418 ITR 442 (Madras)[26-03-2019], it is held by the Hon'ble Madras High Court as under:-210
ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT
8. In our opinion, Section 69B providing for amounts of investments in Bullion, Jewellery or other valuable articles (including excess Stocks as well) would have been more appropriate Section to be indicated in the orders passed by the Authorities below rather than Section 69C-Unexplained Expenditure. Nonetheless, we are of the clear opinion that mentioning of wrong section would not upset the Additions made by the Assessing Authorities below in the present case. All these 5 provisions enumerated above have been enacted with a view to bring to tax the unexplained debit balances in the Balance Sheet of the Assessee either in the form of Unexplained Investments, Expenses or Stocks, etc., or unexplained Assets, Money, Bullion, Jewellery, etc., and therefore, such unexplained investments and expenses intended to be brought to tax as Undisclosed Income, these provisions are not only clearly worded but also indicated to plug the loopholes and check the menace of black money. Likewise, unexplained credits in the Balance Sheet are also brought to tax under Section 68 of the Act.
9. In the light of the above, the contention raised by the learned counsel for the Assessee has essentially emanated from a misconception that the Additions made under Section 69B/69C have to be reduced to some extent by giving leverage to the Assessee to claim some deductions from these Additions as well. If the contention of the learned counsel for the Assessee was to be accepted viz., by allowing the purchases corresponding to the alleged excess stock, the Assessee will have to now record verifiable purchases in his Books of Accounts and for that he will have valid purchase Invoices from genuine and existing Sellers which is not possible. When the excess stocks were found during the Survey, there is no question of allowing the Assessee to record any additional purchases because such purchases had already been recorded in the books of accounts of the Assessee. Therefore, the excess stock, per se, has to be naturally brought to tax as 'undisclosed income' by itself and there is no question of any corresponding deduction from that in such cases.
10. In our opinion, the learned Tribunal as well as the Authorities below were justified in bringing to tax the Undisclosed Income under Section 69B/69C of the Act and such findings of fact do not give rise to any substantial question of law.
The order passed by the learned Income Tax Appellate Tribunal, Ahmedabad Bench does not enure to the benefit of the arguments advanced by the learned Senior Counsel as there also the learned Tribunal has rightly held that the value of excess stock of Rs.58,02,095/-should suffer tax and by inclusion of those Stocks in the value of Closing Stock the Assessee has recognised income over and above recorded in its Books of Accounts. Such Additions of the excess Stocks declared by the Assessee during the course of search in the closing stock does not amount to double taxation as contended. Mere remand of the case by the Ahmedabad Bench of Income Tax Appellate Tribunal to the Assessing Authority for verifying the figures, does not lay down any principle as contended by the learned Senior Counsel for the Assessee.
(Emphasis supplied) No double taxation 211 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Such Additions of the excess stocks declared by the Assessee during the course of search/survey in the stock does not amount to double taxation as contended. [SVS Oil Mills v. Assistant Commissioner of Income-tax, Non Corporate Circle- 6(1), Chennai [2020] 113 taxmann.com 388 (Madras)] Verifiable Purchase behind the stock otherwise unexplained:
If the contention of the Assessee/Appellant was to be accepted viz., by allowing the purchases corresponding to the alleged excess stock, the Assessee will have to now record verifiable purchases in his Books of Accounts and for that he will have valid as well as back-dated purchase Invoices from genuine and existing Sellers which is not possible. When the excess stocks were found during the Survey, there is no question of allowing the Assessee to record any additional purchases because actual purchases had already taken place and already been recorded in the books of accounts of the Assessee.
[SVS Oil Mills v. Assistant Commissioner of Income-tax, Non Corporate Circle- 6(1), Chennai [2020] 113 taxmann.com 388 (Madras)]. Thus this is an impossible proposition of going back in time.
Head of Income Regarding the contention of the appellant regarding applicability of charge to tax under a particular head, the question arises whether the income subject matter of addition is chargeable to tax as per provisions of chapters on salary, profits and gains of business and profession Or capital gain Or income from house property Or income from other sources. If the same is chargeable to tax under these chapters as per specific provisions contained therein (even before application of provisions of section 68/69/69A etc.) then section 115BBE will not have application.
Section 28 is not an inclusive definition as the opening sentence of the section 28 reads as under:-
"The following income shall be chargeable to income-tax under the head "Profits and gains of business or profession",--"
Accordingly, in case the appellant claims that the income is chargeable under the head business income and nowhere else, the onus is on the appellant to show under which clause of section 28 the claimed income gets covered. Even as per judgement in the Principal Commissioner of Income-tax v. Bajargan Traders, the "source of investment/expenditure is clearly identifiable" i.e. the source must be clearly identifiable.
In this regard, as per provisions of the Act, not only the source but the year of earning of income also needs to be shown for taxing in the current year under assessment/appeal as the law provides that income for each year be taxed in the ITR/assessment of that year only. This also has ramifications on the interest payable by the taxpayer because if the income was earned in earlier year and the 212 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT same is being offered to tax now in that case the taxpayer is liable to pay interest for the intervening period. Sections 68/69/69A etc. also provides for year of taxation irrespective of the year of earning of income. However in case the subject matter of addition is not expressly falling under the four chapters of income heads and for the year under assessment/appeal (before application of provisions of section 68/69/69A etc.) in that case applicability of section 68/69/69A etc. is to be seen. If the sources, genuineness etc. are explained satisfactorily i.e. sources are out of genuine disclosed/taxed income in that case and section 68/69/69A etc. are not applicable even in that case section 115BBE will not have application.
However if the asset/credit/expenditure is treated as income because of the applicability of section 68/69/69A etc. in that case section 115BBE will have application. The incomes mentioned under these sections are not specific to any head of income.
Section 69C even clearly mentions that such unexplained expenditure will not be deductible under any head of income. Loans given / stock in hand / loan received etc. are otherwise not taxable as these are in the nature of asset/liability/capital nature in the hands of the taxpayer and not in the nature of revenue income. However when these are unexplained in terms of sections 68/69/69A etc. these become income and become taxable.
Section 14 of the Income-tax Act, 1961 - Heads of income - Assessment year 1984-85 - Whether opening words of section 14, 'save as otherwise provided by this Act,' clearly leave scope for 'deemed income' of nature covered under scheme of sections 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from 'other sources' - Held, yes. [Fakir Mohmed Haji Hasan v. Commissioner of Income-tax [2002] 120 Taxman 11 (Gujarat)/[2001] 247 ITR 290 (Gujarat)/[2001] 165 CTR 111 (Gujarat)[10-08-2000]] These are the special provisions dealing with the situation and the incomes which are the subject matter of the contention in the appeal and being the specific provisions they are preferred and override the general provisions. Sections 68/69/69A etc. also provides for year of taxation of asset/credit/expenditure irrespective of the year of earning of the source revenue income (if any).
Year of earning:
The appellant has not proved that these excess undisclosed stock were added in the stock in the year under appeal i.e. that these were not part of the opening stock of the year. The appellant has not shown the sources i.e. name, address, PAN, purpose etc. of the funds gone into acquisition of these excess stock.213
ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT If the undisclosed income earned and accumulated over the years is taxed in the year in which it is detected by the Revenue and the same is merely taxed as per normal provisions of the law such an interpretation will place a premium on dishonesty i.e. it tantamounts to rewarding the dishonesty. There is no interest burden on such taxpayer even if the income was earned over past years and there is no extra tax rate and deduction of expenses/losses will also be claimed by taxpayer if the same is taxed as per normal provisions of section 28 and onwards. When the receipts do not pertain to the year under appeal the appellant should have declared these receipts in the appropriate year to which these receipts belong and the appellant would have paid the taxes on the same along with the penalty if any arising due to the reopening of the case of the earlier year. By offering these receipts as business receipts of the year under appeal the appellant has unfairly tried to save on these accounts. Legally as per section 28 only the income earned during the year can be taxed. The appellant has not disclosed or clarified under which subsection or clause of section 28 the income falls on this account offered by the appellant for the year.
Only by the application of sections 68/69/69A etc. the income is even if earned in earlier year but detected during the year in the form of unexplained credit / unexplained investment etc. is to be taxed in the year in which the application of such income is found. Once sections 68/69/69A etc. are applicable, there is no dispute regarding the applicability of section 115BBE of the Act. Complete code:
The opening words of section 14 'Save as otherwise provided by this Act' clearly leave scope for 'deemed income' of the nature covered under the scheme of sections 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from 'other sources' because the provisions of sections 69, 69A, 69B, and 69C treat unexplained investments, unexplained money, bullion, etc., and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Section 69C even clearly mentions that such unexplained expenditure will not be deductible under any head of income. Loans given / stock in hand / loan received etc. are otherwise not taxable as these are in the nature of asset/liability/capital nature in the hands of the taxpayer and not in the nature of revenue income. However when these are unexplained in terms of sections 68/69/69A etc. these become income and become taxable.
These are the special provisions dealing with the situation and the incomes which are the subject matter of the contention in the appeal and being the specific provisions they are preferred and override the general provisions. Once the income is as per these sections, there cannot be any dispute regarding the applicability of section 155BBE of the Act. These sections 68/69/69A etc. along 214 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT with section 115BBE are in the nature of complete code in itself. In this regard it is held by Hon'ble Gujarat High Court in Fakir Mohmed Haji Hasan v. Commissioner of Income-tax [2002] 120 Taxman 11 (Gujarat)/[2001] 247 ITR 290 (Gujarat)/[2001] 165 CTR 111 (Gujarat)[10-08-2000] that "6.2 The opening words of section 14 'Save as otherwise provided by this Act' clearly leave scope for 'deemed income' of the nature covered under the scheme of sections 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from 'other sources' because the provisions of sections 69, 69A, 69B, and 69C treat unexplained investments, unexplained money, bullion, etc., and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Therefore, in these cases, the source not being known, such deemed income will not fall even under the head, 'Income from other sources'. Therefore, the corresponding deductions, which are applicable to the incomes under any of these various heads, will not be attracted in case of deemed incomes which are covered under the provisions of sections 69, 69A, 69B and 69C in view of the scheme of those provisions."
Summary:-
(a) Onus is upon the assessee to discharge the burden so cast upon. First burden is upon the assessee to satisfactorily explain the source of amount invested / spent in his excess stock. The burden has to be discharged with positive material. [As per principles laid down in Roshan Di Hatti v. Commissioner of Income-tax [1977] 107 ITR 938 (SC)[08-03-1977], Kale Khan Mohammad Hanif v.
Commissioner of Income-tax [1963] 50 ITR 1 (SC)[08-02-1963], CIT v. M.Ganapathi Mudaliar [1964] 53 ITR 623 (SC)/A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC)].
(b) As per section 69B of the Act, if the burden is not discharged satisfactorily, it is open to the Revenue to hold that it is income of the assessee and no further burden lies on the Revenue to show that income is from any other particular source. [As per principle laid down in CIT v. M.Ganapathi Mudaliar [1964] 53 ITR 623 (SC)/A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC)].
(c) Unexplained stock cannot be presumed to be business income. If the assesse claims so, the assesse is required to prove the same. [Hon'ble Supreme Court in the case of Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC)[01-08-1968] Making book entries regarding the excess / unexplained stock does not result into such stock to be treated as explained. The assessee is required to show and explain the source of the investment in such excess or unexplained stock. [Ratio of judgements of Hon'ble Supreme Court in the cases of Commissioner of Income- tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC)[01-08-1968 and Roshan Di Hatti v. Commissioner of Income-tax [1977] 107 ITR 938 (SC)[08-03-1977] 215 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT
(d) Once it was found by Assessing Officer that there was excess stock, in absence of explanation by assessee, conclusion was inescapable that excess stock, if any, was from undisclosed sources - Further once assessee's explanation, if any, had not been accepted, resultant position was that there was excess stock undisclosed in books of account and non disclosure was only with a view to suppress income. [Suraj Bhan Oil (P.) Ltd. v. Deputy Commissioner of Income-tax [2022] 138 taxmann.com 19 (Madhya Pradesh)] [SLP against this judgement was dismissed - reported at [2022] 141 taxmann.com 477 (SC)/[2022] 288 Taxman 635 (SC)[25-07-2022]
(e) Undisclosed income or undisclosed investment cannot be explained through another unexplained income or unexplained source. That tantamounts to mere creation of an artificial layer. Verifiable purchases should be behind the undisclosed stock detected otherwise such excess stock is to be treated as unexplained.
(f) Deemed income under sections 68/69/69A etc. is separate from any 'head of income'. If the assessee claims that the undisclosed investment or undisclosed income falls under any particular head of income, the onus in this regard is on the assessee to show under which clause of with section of the respective head of income the undisclosed income of the appellant gets covered.
(g) Taxing the undisclosed investment or the undisclosed income at the normal rates of taxes in the year in which these undisclosed were detected rewards the dishonesty. The assessee is not only required to show the sources but also to show with positive evidence the year in which the respective amounts of undisclosed income was earned which were subsequently invested in the undisclosed investment.
Sections 68/69/69A etc. along with section 115BBE are in the nature of complete code in itself.
In view of the above the action of the ld. AO in the assessment order is upheld and the unexplained stock found during the course of survey action is alternatively held to be taxable under section 69B of the Act.
Ld. DR in addition to the above written submission also filed a paper book on 11.11.2024 containing tax audit report copy of the statement recorded and the loose paper relied upon by the revenue while making the addition.
216ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT
24. Ld. DR while supporting the order of the lower authority vehemently argued that no stock register was maintained and made available by the assessee and that is why the book results were rejected by invoking the provision of section 145(3) of the Act. Referring question 16 at page 124 ld.
DR stated that year to year valuation of stock exercise was not done by the assessee and that is why the valuation report of each item was considered to be the correct method to value the stock on hand available with the assessee. The valuation was done by the technical experts in the presence of the assessee and their representative. Thus, the assessee do not have any records to support the closing stock valuation there is no alternative with the revenue left and such high value item. Even the assessee also supported the stock price with the valuation report so as to demonstrate the stock value. The valuation done by the assessee's appointed valuer also used assumption and presumptions. Thus, when the assessee unable to substantiate the details of the closing stock the revenue in all fairness conducted the valuation of each item and thereby derived the difference which were rightly added in the hands of the assessee. The ld. DR relied on the finding of the ld. CIT(A) recorded vide page 48, 49, 143, 144,145 , 146 147, 148, 150, 153, 154, 155, 156, 161, 164 & 166 wherein all the contention of the revenue and objections were considered and thereby she 217 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT supported the addition stating that the assessee has not supported the stock price by filling the proof of purchase price and no details of the item wise cost price was available with the assessee.
In the statement of Mr. Rajesh Ajmera, he has categorically stated the price mentioned in excel price is after 30-50% discount, so no further deduction or discount was justified. The onus of the Assessee has not been discharged as it could not explain the source of excess stock found during the survey. She further forcefully argued that no details were provided regarding which stones, such as rubies, are overvalued. There is no information about the carat weight or quality of the stones which were overvalued. It is not open to the Assessee to dispute the valuation report of the departmental valuers relied upon by the assessing officer as the Assessee's own valuation report also uses market rates and therefore, now that the assessee does not maintain the proper records, they cannot raise the question of how they can claim that no items were found outside the books of account.
25. Ld. Sr. Revenue officer further contended that the department has valued the stock by using an Excel sheet found during the survey on the Assessee's computer. Each item listed in the sheet contains a tag price, so 218 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT there is no notional valuation on the part of the Ld. AO/CIT(A). Software or the excel file prepared from the software during survey proceeding along with the other loose papers and material which had the nature of incriminating document and therefore, the contention of the assessee cannot be relied upon. No evidence has been brought on record as to what was the actual price of stock that was available with the assessee. There was no stock record maintained by the assessee. There was no supporting records made available so as to arrive at the stock available. Even the statement of the Mr. Rajesh Ajmera vide statement himself dealing with question no. 23 (Q. No. 23 PB No. 126/127 of Vol. I, AO Page No. 28) submitted that after giving a discount of 30-50% the cost price derived. Ld. DR referring the comments in the audit report supported by the statement when the assessee did not support the details of the stock and its price the revenue adopted the method to derive the correct stock value. All the items were valued based on the records given by the assessee themselves. So the process of valuation is based on the items list given by the assessee and no notional valuation was done by the revenue. Thus, when no records maintained for valuation the correct way to value the stock price and that too after considering the discount embedded in the tag price. As regards the consignment stock no details of quantity made available and how the 219 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT same were recorded in the earlier year was made available and assessee failed to give the reconciliation of tag price and transfer price the difference in the valuation was correctly derived. The ld. CIT(A) has in detailed discussed at page 172, 178 and 183 when the revenue found that the stock is not valued properly the year of taxability can be the year of the survey as the source of investment in the excess stock was not explained. Therefore, the burden u/s 69B is on the Assessee to prove source of excess stock.
The AO is not required to inquire about the source of the amount expended by the Assessee. To drive home this contention ld. Sr. DR placed reliance on following case laws in support of addition u/s 69B of the Act:
a) CIT Vs British Paints India Ltd (1991) 188 ITR 44 (SC)
b) Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC)[Ol-08-1968)
c) Commissioner of Income-tax-I v. G.S. Tiwari & Co. [2014] 41 taxmann.com 17 (Allahabad)
d) Bachittar Singh v. Commissioner of Income-tax [2010] 328 ITR 400,
e) Dr. S.C. Gupta v. Commissioner of Income-tax 120011 118 Taxman 252 (Allahabad),
f) Raj Hans Towers (P.) Ltd. v. Commissioner of lncome-tax-V [2015] 56 taxmann.com 67 (Delhi)
g) Pebble Investment and Finance Ltd Vs. ITO in ITA No.988/2014
h) Roshan Di Hatti v. Commissioner of Income-tax [1977] 107 ITR 938 (SC)[08-
03-1977],
i) Kale Khan Mohammad Hanif v. Commissioner of Income-tax [1963] 50 ITR 1 (SC)[08-02-1963
j) CIT v. M.Ganapathi Mudaliar [1964] 53 ITR 623 (SC)/A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC),
k) Navin Shantilal Mehta v. Income-tax Officer, Ward-32 (2) (4), Mumbai [2018] 90 taxmann.com 16 (Mumbai - Trib.),
l) Suraj Bhan Oil (P.) Ltd. v. Deputy Commissioner of Income tax [2022] 138 taxmann.com 19 (Madhya Pradesh) 220 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT
m) Principal Commissioner of Income-tax v. Deccan Tobacco Company [2022] 137 taxmann.com 470 (SC)
n) SVS Oil Mills v. Assistant Commissioner of Income-tax, Non Corporate Circle- 6(1), Chennai [2020] 113 taxmann.com 388 (Madras)
26. As regards the contention of the assessee for enhancement of the addition, she contended that there was no enhancement in fact and ld.
CIT(A) in overall terms as it is only on account of the methodology of computation adopted by ld. CIT(A) that has resulted in an increase in value of stock at three locations wherein physical verification was conducted.
27. As regards the contention for valuation of stock at the consignment agent the assessee has not provided any confirmation and therefore, the contention raised by the assessee cannot be accepted in the absence of evidence not provided.
28. The ld. AR of the assessee in the rejoinder written submission submitted that;
At the outset, it is humbly submitted that addition has been made in the hands of Assesee-Appellant for alleged excess stock of Rs. 141 Crore. The Ld. DR has argued that addition made as well sustained by Ld. CIT(A) is correct and Ld. AO has correctly invoked the provisions of the Section 69B of the Act, as source of alleged excess stock has not been explained.
In this context, it is humbly submitted that to invoke the provisions of Section 69B of the Act, primary condition is that there is understatement of purchase consideration in acquiring or making investment or jewellery or other valuable article of this and Ld. AO finds that amount expended on making such investment or in acquiring such bullion, jewellery or other article exceeds amount recorded in this behalf in books of accounts maintained by the Assessee. Once this primary 221 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT condition is satisfied, then only the question of adoption any yardstick how to measure the extent of understatement would arise whereas in the present case, the department without discharging its burden or establishing such understatement has straight jumped to process of valuation by the departmental valuers and rather making it the basis for invoking Section 69B. The aforesaid basis is absolutely illegal/without jurisdiction and contrary to mandate of Section itself as held in various judicial precedents as referred in case compilation submitted before the Hon'ble Bench. The attention is drawn to following citations in the case law compilation:
CIT v. Dinesh Jain HUF [2012] 25 taxmann.com 550 (Delhi) Section 69B in terms requires that the Assessing Officer has to first 'find' that the assessee has 'expended' an amount which he has not fully recorded in his books of account. It is only then that the burden shifts to the assessee to furnish a satisfactory explanation. Till the initial burden is discharged by the Assessing Officer, the section remains dormant. [Para 8] A 'finding' obviously should rest on evidence. In the instant case, it is common ground that no incriminating material was seized during the search which revealed any understatement of the purchase price. That is precisely the reason why the Assessing Officer had to resort to Rule 3 of Schedule III to the Wealth Tax Act. [Para 9] Section 69B does not permit an inference to be drawn from the circumstances surrounding the transaction that the purchaser of the property must have paid more than what was actually recorded in his books of account for the simple reason that such an inference could be very subjective and could involve the dangerous consequence of a notional or fictional income being brought to tax contrary to the strict provisions of article 265 of the Constitution of India and Entry 82 in List I of the Seventh Schedule thereto which deals with 'Taxes on income other than agricultural income'. [Para 11] Applying the logic and reasoning in K.P. Varghese v. ITO [1981] 131 ITR 597 / 7 Taxman 13 (SC), for the purposes of section 69B it is the burden of the Assessing Officer to first prove that there was understatement of the consideration (investment) in the books of account. Once that undervaluation is established as a matter of fact, the Assessing Officer, in the absence of any satisfactory explanation from the assessee as to the source of the undisclosed portion of the investment, can proceed to adopt some dependable or reliable yardstick with which to measure the extent of understatement of the investment. One such yardstick can be the fair market value of the property determined in accordance with the Wealth Tax Act. [Para 12] Since the entire case has proceeded on the assumption that there was understatement of the investment, without a finding that the assessee invested more than what was recorded in the books of account, the decision of the Income-222
ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT tax Authorities cannot be approved. Section 69B was wrongly invoked. The order of the Tribunal is upheld. [Para 15] Commissioner of Income-tax, Delhi -I v. Agile Properties (P.) Ltd, [2014] 45 taxmann.com 512 (Delhi)
5. This Court had in the decision reported as CIT v. Dinesh Jain, HUF [2013] 352 ITR 629/[2012] 211Taxman 23/25 taxmann.com 550 and connected cases occasioned to consider an identical question. Afternoticing the relevant provision, i.e. Section 69B, the Court noticed in paragraph 9 as follows: --
13. The error committed by the income-tax authorities in the present case is to jump the first step in the process of applying section 69B - that of proving understatement of the investment - and apply the measure of understatement. If anything, the language employed in section 69B is in stricter terms than the erstwhile section 52(2). It does not even authorise the adoption of any yardstick to measure the precise extent of understatement. There can therefore be no compromise in the application of the section. It would seem to require the Assessing Officer even to show the exact extent of understatement of the investment; it does not even give the Assessing Officer the option of applying any reasonable yardstick to measure the precise extent of understatement of the investment once the fact of understatement is proved. It appears to us that the Assessing Officer is not only required to prove understatement of the purchase price, but also to show the precise extent of the understatement. There is no authority given by the section to adopt some reasonable yardstick to measure the extent of understatement. But since it may not be possible in all cases to prove the precise or exact amount of undisclosed investment, it is perhaps reasonable to permit the Assessing Officer to rely on some acceptable basis of ascertaining the market value of the property to assess the undisclosed investment. Whether the basis adopted by the Assessing Officer is an acceptable one or not may depend on the facts and circumstances of the particular case. That question may however arise only when actual understatement is first proved by the Assessing Officer. Itis only to this extent that the rigour of the burden placed on the Assessing Officer may be relaxed in cases where there is evidence to show understatement of the investment, but evidence to show the precise extent thereof is lacking.' Gayatri Enterprise v. Income-tax Officer, Ward 1(2)4 [2020] 116 taxmann.com 359 (Gujarat)
29. The Delhi High Court in the case of CIT v. Bajrang Lal Bansal [2011] 335 ITR 572/200 Taxman 188 (Mag.)/12 taxmann.com 88 held as under:
"5. Ms. Rashmi Chopra, learned counsel for the revenue submitted that the Tribunal had erred in law in deleting the addition of 99,33,000/- as undisclosed income of the respondent-assessee under Section 69B of the Act, 1961.
6. It is settled law that the primary burden of proof to prove under-statement or concealment of income is on the revenue and it is only when such burden is 223 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT discharged that it would be permissible to rely upon the valuation given by the DVO. (SeeK.P. Varghese (supra), CIT v. Shakuntala Devi , (2009) 316 ITR 46, CIT v. Manoj Jain , 287 ITR 285 and ITA No. 482/2010 decided by this Court on 5th May, 2010 The said mandate of the law has also been held in various other judicial precedents as referred to in case law compilations including:
Dilshad Trading Co. (P) Ltd. v. ITO, [1994] 49 ITD 348 (Bom-Trib.) M/s DDK Spinning Mills vs The DCIT Circle-3, [2023] 157 taxmann.com 817 (Chandigarh - Trib.) In the case of the Assessee, there is no finding that at the time of purchase of jewellery or stock, there is understatement of purchase consideration or money expended in acquiring such jewellery or stock is more than amount recorded in books of accounts. Therefore, on this basis, itself, the addition of alleged excess stock fails and deserves to be deleted.
Without prejudice to above, the other arguments of the department are countered as follows:
S. Arguments of department Rejoinder/Counter Arguments of the Assessee No I. Valuation made by the Ld.AO/Ld. CIT(A) is correct:
A. 1. No details were provided regarding which • Assessee has explained before the AO/CIT(A) stones, such as rubies, are overvalued. There that stones value ranges from Rs. 50 to Rs. is no information about the carat weight or 500 per Ct. only in gold items or Rs. 2 to 10 quality of the stones which is overvalued per Ct. in silver items whereas department valuer exorbitantly and without any basis adopted valuation range from Rs. 20000 to Rs.
40000/- per ct. (Reference Page No. 922 of Vol. 5) • Mr. Rajesh Ajmera specifically objected to the impugned valuation adopted by the department in respect of stones in his statement dated 16.07.20 (Refer page no. 139 of PB Vol-1) and categorically stated that department has overvalued items by more than 10 times.
• Quality or carat information are not mentioned in valuation report of department (Kindly refer 1 page no. 921 of Vol. 5 and Page No. 852 of Vol. 5) from which it is evident that adhoc value has been adopted on whims and fancies by the valuer/department.
• Whereas independent valuer appointed by the 224 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT S. Arguments of department Rejoinder/Counter Arguments of the Assessee No Assessee has specifically bifurcated the stones in different types such stones, pearls diamonds and has provided specific value for different category of stones used in each item.
For example, reference may be made to page no. 147 of Vol. 2. Thus, he objectively worked out the value of the stones/pearls/diamonds which goes on to show the arbitrariness in department valuation.
• Detailed reply of Assessee -Refer Page No. 1557-1558 of Vol. 9 or 920-922 of Vol. 5 (Reply dated 23.11.2022 during assessment) • Argument raised by the Ld. DR is contrary to settled legal position that burden is on department for invoking and making addition u/s 69B of the Act.
B. 2. The Assessee's own valuation report also • Since burden is on department u/s 69B, the uses market rates. argument raised is mis-conceived.
3. It is unreasonable for the Appellant to argue • Department has to stand on its own feet by that the department did not consider the bringing on record tangible material to various factors in their valuation, which is at make/sustain addition u/s 69B instead of market rates. pointing alleged in actions on the part of the Assessee.
• Addition u/s 69B not sustainable on hypothesis/suspicion.
• The departments sole basis being the valuation report of department valuer for addition u/s 69B rejected by Ld. CIT(A) against which no appeal preferred by department.
• The Assessee obtained an independent valuation after the survey to substantiate its objections that the department's valuers have not done their duty diligently or methodically and resulting valuation arrived at is also exorbitantly high and grossly arbitrary and incorrect. Obviously, Assessee was not knowing at that point of time that AO will make the valuation reports of the department valuer as the basis for invoking and making additions under section 69B of the Act.
• The intent behind getting the valuations done is evident from the statement of Mr. Rajesh Ajmera recorded during survey while objecting to valuations arrived by department valuer in 225 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT S. Arguments of department Rejoinder/Counter Arguments of the Assessee No stating that he will get the correct valuations done to disprove departments valuation through registered valuer. (REFER Q-43, PAGE 143 VOL-1).
• Assessee is not proposing any method. Stand of the assessee is that closing stock as on 13.07.2020 is of Rs. 132 Crore and there is no evidence with the department to prove under recording of purchase consideration which is a pre-requisite for invoking 69B of the Act.
• Rather on the contrary it is the department which is constantly adopting/shifting stands or basis to sustain additions u/s 69B of the Act by adopting unscientific and arbitrary methodology completely overlooking the fundamental/statutory pre-requisites for invoking section 69B of the Act.
II. No books of accounts have been maintained by Assessee C. 4. The Assessee does not maintain books of • The argument raised on the face of it is accounts, therefore, it raises the question of factually incorrect and self- destructive besides how they can claim that no items were found self- contradictory/doubting considering outside the books of account. department claim that 41 items were found out of books during survey for making separate addition of Rs. 11.40 Crore. Hence deserves
5. The Assessee is in this business for almost 45 to be rejected outrightly.
years, yet they are not maintaining books of account. • In absence of books, there cannot be invocation of Section 69B of the Act.
• Dr. Prakash Tiwari v. Commissioner of Income-tax, [1983] 14 Taxman 252 (MP), wherein it was held that:
"5. We have heard the learned counsel for the parties. The learned counsel for the assessee contended that as the assessee did not maintain any account, section 69B of the Act was not applicable and, therefore, the Tribunal was not justified in adding Rs. 10,000 as the income of the assessee from undisclosed sources. In our opinion, on the facts and in the circumstances of the case, reference to section 69B was not appropriate because the assessee did not maintain any accounts."
Also refer:
Shri Nanda Ram V & PO Bilu, Makrana, 226 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT S. Arguments of department Rejoinder/Counter Arguments of the Assessee No Nagour vs ITO, Ward-1, Makrana, I.T.A. No. 190/Jodh/2024 Smt. Amar Kumari Surana v.Commissioner of Income-tax [ 89
TAXMAN 544 (RAJ.)] • Thus, for Section 69B, maintenance of books of accounts is essential conditions before making any addition of any excess consideration paid outside the books of accounts.
D. 6. The Assessee-Appellant is engaged in the • Appellant is engaged in wholesale and retail manufacturing business and thus, a raw trading of jewellery and jewellery items. material-based approach should be used for valuation, as there is a cost associated with • The job charges/manufacturing charges raw materials from which profit is derived. The shown in profit and loss pertain to occasional Assessee-Appellant should have maintained a repair or rework work as and when required. trading account and manufacturing account, which is not maintained. • As the assessee is a private limited company, it has to prepare and report financials as per Schedule III of the Companies Act. As there is no separate grouping for job work charges, hence, the assessee has to group such expenses under manufacturing expenses only.
• Maintaining a manufacturing account is not required due to the nature of the Assessee's business as a trading company.
• Not maintaining a trading account or books of account in the format or manner specified by the department, as opposed to industry practice, does not permit the department to perform valuations based on inconsistent approaches for making addition u/s 69B.
E. 7. The department has valued the stock by using • The department's valuation of stock based on an Excel sheet found during the survey on the tag price has led to hypothetical income being Appellant's computer. Each item listed in the taxed in the year of survey, despite no sale of sheet contains a tag price, so there is no such stock during the year under notional valuation on the part of the Ld. consideration. AO/CIT(A).
• There is no basis to adopt the tag price as selling price. No evidence of under recording
8. Everything is notional, the closing stock of the of purchases for invoking 69B.
Appellant is even notional.• Shri Rajesh Ajmera stated in Question No. 14
of his statement recorded during that the software lists the suggested Maximum Retail Price (MRP). (REFER PB No. 124, Vol. I) 227 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT S. Arguments of department Rejoinder/Counter Arguments of the Assessee No • Valuation on the basis of suggested Maximum Retail Price is thus incorrect and notional only.
• Any valuation adopted on this basis is futile exercise and addition u/s 69B on notional calculation/guess work/hypothesis is not sustainable.
• The Ld. DR stated that the calculations for closing stock of the Appellant are notional.
Hence, such assumptions and guesses are insufficient to justify addition under section 69B of the Act without solid evidence.
• As per section 69B of the Act, the department must first prove the understatement of purchase consideration.
III. Books of Accounts F. 9. Software or the excel file prepared from the • No case/allegation of excess stock (item wise).
software during survey proceeding is in nature of incriminating documents. • Excel sheet or software data found during survey is part of regular financial records of
10. No evidence has been brought on record as to the Appellant which itself has been relied upon what is the actual price of stock. by the AO for making addition towards missing 41 items without alleging the same to be
11. Appellant does not maintain quantitative incriminating.
details of stock accordingly comparison is not possible.
• CIT(A) has not given any cogent basis to allege the excel sheet/software data as incriminating. Hence apparent perversity.
• No corroboration to the allegation of incriminating material.
• Nothing incriminatory related thereto pointed out by the department. Nevertheless, no corroboration.
• Department made valuation on the basis of excel files only which contains necessary details for identification of items.
•None of the arguments raised dispenses the burden of the department to prove under recording of consideration at the time of purchase. Hence, fault finding with assessee maintaining records doesn't suffice.
IV. The Ld. DR relied upon statement of Rajesh Ajmera, wherein he stated about the discount of 30-50% on 228 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT S. Arguments of department Rejoinder/Counter Arguments of the Assessee No Tag Price G. 12. Mr. Rajesh Ajmera in his statement itself (Q. • The Ld. DR has referred to statement of Shri No. 23 PB No. 126/127 of Vol. I, AO Page No. Rajesh Ajmera in Q. No. 23 wherein he has
28) has stated that after giving discount of 30- merely stated fact about transfer prices for 50% is cost price. branches.
• Shri Rajesh Ajmera in Q. No. 23(PB No.127, Vol.I) stated that price mentioned in excel sheet relating to branch is after 30-50% discount regarding transfer from HO to branches which is suggested selling price.• Shri Rajesh Ajmera stated in Question No. 14
(PB No. 124, Vol. I) of the survey that the software lists the suggested Maximum Retail Price (MRP).
• Pick and choose while reading a statement of a person recorded during proceeding is not justified. Required to be construed as whole.
• The AO and the department incorrectly interpreted Shri Rajesh Ajmera's statement, believing the branch price after a 30-50% discount was the cost price. However, in Question No. 24, Mr. Ajmera clarified that the cost price is actually lower than the transfer value.
• If version of department regarding statement of Rajesh Ajmera is assumed to be correct, then the statement itself is self-contradictory. Hence not reliable.
H. 13. Nothing has been brought on record regarding • The Appellant has duly submitted the details cost. of cost of stock as on 13.07.2021 of Rs. 132 Crore(Approx). (REFER Page No. 1767 PB Vol. 9) • Out of the total cost of Rs. 132 Crore, cost of franchise stock for various stores of Rs. 10.65 Crore has been accepted as such by the department. The Ld. AO has itself taken that cost for franchise location without any dispute. Reference Control Chart Page No. 3 submitted during hearing.
• Thus, it is incorrect contention that exact cost has not been placed on record, whereas Ld. AO has itself accepted part of the total cost in relation to one of the location during assessment proceedings.229
ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT S. Arguments of department Rejoinder/Counter Arguments of the Assessee No • Even otherwise, considering the GP margin of 34.32% (Approx) declared on the sales, closing stock valuation by the Appellant is reasonable and justified and thus supported.
• Hence incorrect argument.
• How it leads to addition u/s 69B still unknown.
I. 14. The Assessee did not clarify how much • In this industry there is exact science to how discount they provide. much discount to be provided. It depends on item to item, store to store and customer to customer.
• There is always a bargain margin (discount) in Tag price considering the nature of industry.
• Considering statement of Mr. Rajesh Ajmera, Ld. CIT(A) assumed a median rate of discount of 40% from tag price. The department is not in appeal on this issue of discount from tag price before Hon'ble Bench.
V. Excess stock is result of trading addition made in previous years. J. 15. There is admission on part of the Appellant • The Ld. CIT(A) in its order at page no. 172 that there is excess stock. Para xxxviii has given incorrect observation.
• There is no admission of the Appellant rather
16. Undisclosed income was taxed by the revenue an alternative argument taken which is in previous years. without prejudice to the main submission and actual fact that there is no excess stock.
Refer Page No. 1594-1596 of Vol. 9 Para No. 121-123 of Written Submission2.
• There is no case of excess stock established, rather the case of the department is excess valuation based on notional/arbitrary calculations.
• The Appellant in its Para No. 121-123 of Written Submission, without prejudice to main contentions, alternatively contended for source of alleged excess stock on the basis of impugned action of the Ld. AO making trading addition in earlier years (which is also disputed) and which actions/proceedings have been stayed by the Hon'ble High Court.
It is clarified that these submissions were made without prejudice to the main 230 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT S. Arguments of department Rejoinder/Counter Arguments of the Assessee No submission, that there is no excess stock at all and no addition u/s 69B of the Act is justified as the first onus/conditions of understatement of purchase price is not established.
• In view of the above, it is incorrect argument of the Ld. DR that appellant admitted excess stock and undisclosed income was taxed in previous years.
VI. Addition u/s 69B of the Act has rightly made by the Ld.AO K. 17. Burden u/s 69B is on the Appellant. • The Ld. CIT(A) has relied on case laws pertaining to additions made under Section 68
18. AO is not required to inquire about the source (Page No. 184-185) to project that the burden of amount expended by the Appellant. lies upon the Assessee.
19. There is huge difference in stock recorded in • Settled law under section 69B of the Act is books and stock found during survey that burden of proof that there is proceeding. understatement of purchase price is upon the department. Thus, argument made by Ld. DR
20. Ld. CIT has relied on various case law to is against the law and is based on confirm addition u/s 69B of the Act and thus misconstruing of law. has rightly sustained the addition.
• In this context, it is humbly submitted that as per Section 69/69A of the Act burden is on the department to prove that the Appellant has made investment which is not recorded in books of account.
Refer Also • S.S. Jyothi Prakash v. Additional Commisssioner of Income-tax, [2016] 71 taxmann.com 127 (Karnataka) (Sr. No. 1 in Additional Compilation) • Shri Nanda Ram V & PO Billu, vs. ITO Ward-
1 Makaran (190/JODH/2024) (Sr. No. 2 in Additional Compilation) • Commissioner of Income-tax v. Gian Gupta [2014] 46 taxmann.com 372 (Delhi) (Sr. No. 5 in Additional case Compilation • Ananthakrishna Vasudev Aithal v. Income-tax Officer, [2023] 147 taxmann.com 376 (Bangalore - Trib.) (Sr. No. 10 in Additional Compilation • In view of the above, burden with respect to allegation that the Appellant has made 231 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT S. Arguments of department Rejoinder/Counter Arguments of the Assessee No investment or made purchases outside books has not been discharged.
• The department has not brought on record any single piece of evidence that at the time of purchase, the Appellant paid extra consideration.
• Further, relied upon decision with respect to addition made u/s 68 of the Act also does not make out the case of the department because Section 68 addition cannot be made when books are rejected. In the instance case, at the outset, there is no addition made u/s 68 of the Act, even otherwise, addition under deeming provision of the law, is not sustainable if the books of accounts are rejected.
• As far as provision of Section 69B of the Act is concerned, it is humbly submitted that u/s 69B of the Act, the burden is first on the revenue to establish that the amount expended on investment etc. exceeds the amount recorded in the books of account. In present case, no such evidence of understatement of purchase was brough on record and were also not found during survey to support the allegation of excess stock.
Therefore, on this ground itself addition made u/s 69B of the Act deserves to be deleted.
• It is further submitted that for making addition u/s 69B of the Act maintaining books of account is a prime condition. In the present case, as strenuously argued by the Ld. DR, no books of account are maintained.
Therefore, on this ground alone, the addition made under Section 69B of the Act is not justified. Dr. Prakash Tiwari v. Commissioner of Income-tax, [1983] 14 Taxman 252 (MP)(Supra) VII. There is no enhancement by Ld. CIT(A) L. 21. Ld.AO has made total addition of 176 crore • With respect to the enhancement of income which Ld. CIT(A) has reduced to 165 crores kindly refer to the master chart which was after appeal effect. So, there is no submitted during physical hearing explaining enhancement by Ld. CIT(A), accordingly, no how there is enhancement of addition by the notice u/s 251 of the Act was required. Ld. CIT(A).
• The appeal effect order passed by Ld. AO passed after passing of Impugned Order, itself negates the assertion made by Ld. DR 232 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT S. Arguments of department Rejoinder/Counter Arguments of the Assessee No during the hearing.
• As explained in the chart, there is enhancement of Rs. 7.45 Crore (Approx) on the issue of excess stock. Kindly refer appeal effect order, wherein also, Ld. AO itself while giving appeal effect has mentioned enhancement.
• In view of the above, it is incorrect to state the notice u/s 251 of the Act was not required.
VIII. No evidence was submitted with respect to addition for stock sent to consignment agent M. 22. No confirmation was provided by the • With respect to the stock sent on Assessee- Appellant of the consignment consignment, the Appellant, during the agent. assessment proceedings, submitted the Bill of Entry (BOE), return invoice, and the correct ledger.
• Sample of such consignments have been got verified during the proceedings before the Hon'ble Bench also.
• No adverse findings on the said documentary evidence were submitted by Ld.AO.
• The argument is based on doubts only as veracity of the documentary evidence has not been negated by any contrary evidence.
• Even otherwise, the amount taken for the purpose of making impugned addition is amount which was recorded in incomplete books of accounts as available at the time of survey.
• Third parties evidence already placed on record (REFER 963-965, 966-967, 1015 of PB Vol. 6) therefore, mere doubt and suspicion on the same at this stage is not justified.
IX. There is no single evidence for Jewellery sent on repairs N. 23. Affidavits of artisan and Amarpali Design • In support of the fact that the items were sent Studio has been submitted after lapse of for repair, the Appellant submitted affidavits sufficient time and that too during appeal from the concerned parties. However, the Ld. proceedings before Ld. CIT(A)) AO did not conduct any independent inquiry from the parties during remand proceedings
24. PAN Nos are not mentioned in affidavits before rejecting their affidavits.
• Merely because it was submitted before Ld. 233 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT S. Arguments of department Rejoinder/Counter Arguments of the Assessee No
25. No details when such items were sent for CIT(A) only does not absolve the AO from repairs. performing its duty to check the veracity of the affidavits.
26. There are no invoice/challan/bills of whatsoever nature, and no supporting • There is no inquiry or verification if there were documents submitted. some doubts or suspicion. It is clarified that there was no previous occasion for submission of these affidavits as Ld. AO during the assessment proceedings did not confront the Appellant for any shortcomings in the supporting documents supplied during assessment proceedings.
• The Appellant clarified the position before the DDIT(Inv) on 05.04.2021 itself regarding various items sent for repairs and in the statement of Mr. Rajesh Ajmera, the fact of items sent for repairs was establishes and photos of items shown.
• The details of the parties were duly given on 5.04.21 before the investigation wing. Refer page 905- 908 PB VOL 5.
• Delay in submission of additional evidence, is not a valid ground for rejecting them, especially without conducting an independent inquiry from the parties whose affidavits were submitted. In this context, the Appellant places its reliance in case of Mehta Parikh & Co. v. CIT [1956] 30 ITR 181 wherein Hon'ble Apex Court has held that unless the person making the statement in the affidavit is cross-
examined by the revenue, it is not open to the revenue to challenge the correctness of the statement made by the deponent in the affidavit. Further Reference Deputy Commissioner of Income-tax v. Smt. Jayita Bose, [2004] 3 SOT 525 (KOL.) (Refer S. No. 21 of the case compilation) • It is humbly submitted that in the jewellery industry, it is a common practice for items to be sent for repair based on mutual trust between the parties involved as items are sent to known person/parties with huge trust and primary artisan with low-income level but very high trust in them. The repair process for a trading company is typically not documented in the same way as being wishes of the Ld. DR considering the faith and nature of the jewellery industry.234
ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT S. Arguments of department Rejoinder/Counter Arguments of the Assessee No • Furthermore, it is important to note that only few items, which is very small fraction out of the total inventory of more than three thousand items of gold and more than 14 thousand items of silver, were found deficient and reasonably explained to be sent for repair by the Appellant.
• This itself proves that vast majority of the stock remained present at time of impugned valuation by department.
• Therefore, there is no ground to reject the explanation of the Appellant which is reasonable and justified.
• No contrary evidence has been brought on record to negate the explanation of the Appellant, mere doubts or insufficiency of trails are being argued, which is not justified.
• Based on the stance taken by the Ld. AO, the inference is that no item could have been sent for repair, which is an unreasonable and flawed conclusion. Such an assumption disregards the customary practices in the jewellery industry, where repair activities often occur, especially when dealing with trusted parties.
• The Ld. DR has simply disapproved the affidavits without even seeing them and blindly placed reliance on one liner general comments of Ld. CIT(A) in its impugned order.
• From the face of the affidavits placed on records, the identity, purpose, details of the movement and other particulars are duly established, which supports the details submitted during post survey proceedings itself. Kindly refer to page no. page 905- 908 PB VOL 5. duly supported by affidavits at page no. 1745-1754 of Vol. 9.
• The nature of work done and fact of items were sent for repair/refurbishing etc, is very much evident from affidavits of parties placed on record.
X. Miscellaneous arguments 235 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT S. Arguments of department Rejoinder/Counter Arguments of the Assessee No O. 27. In the profit and loss account also cost of • It is humbly clarified that the Appellant is material consumed has been claimed. The job primarily engaged in trading business and not charges and wages are Rs. 37,96,209 in F.Y. manufacturing business. Rather Amrapali 2019-20 and are Rs. 98,14,578 in the F.Y. Design Studio (a sister concern) is engaged 2020-21 showing an increase by almost 160% in manufacturing business and accordingly, whereas the raw material consumed value is the Appellant is not required to maintain Rs. 1,84,40,923 (F.Y. 2019-20) and Rs. manufacturing account. 2,39,83,602 (F.Y. 2020-21) showing an increase of only 30%. The aspect also • As far as the charges of job work is remains unexplained. concerned, the same are regarding occasional repairs and rework required time to time for thousands of inventory items, out of which various items are held for since long period.
• Further, the Assessee at times rework the items in stock to convert it into a new item.
For eg. A necklace may be reworked to create a smaller necklace and matching earings.
• Further, sometimes while the assessee purchases final jewellery items for trading, it gets some opportunity to purchase certain stones at a good value. Thereafter, the assessee purchases the precious metal and uses these to get a jewellery item prepared through job work. This is not the primary model of the assessee and encompasses a negligible proportion of its entire business.
• The job work charges for AY 2021-22 included exceptional one time charges of repair of goods damaged at the Jaipur store of the assessee due to water logging at its store. Such goods had to be repaired, polished and other similar expenses had to be incurred by the assessee which was not there in previous year.
• Without prejudice to the explanation provided herein above, the argument raised has no force as far as the discharge of burden under the law, by the department is concerned.
P. 28. No details were provided as to year in item • The Appellant during the assessment code was updated annually. No separate year proceedings (refer Para No. 9 of Page 913 of stamping or year sticker is pasted on the Vol 5 of reply dated 23.12.2022) clarified that items. year of purchase is mentioned in each item code.
29. Details of the stock from previous year has not • Similarly, during the appeal proceedings, been provided. when query was raised by Ld. CIT(A), vide 236 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT S. Arguments of department Rejoinder/Counter Arguments of the Assessee No submission dated 06.12.2023 Page No. 1733-
1735 of Vol. 9, the Appellant clarified the description or parameters of various items code like 'N' stands for Neckles, 'E' for earing and "12 or 18", mentioned in item code represent year of purchase/items entered into inventory.
• Audited financials of the Appellant contain details of closing stock on year to year and the same has been duly reported to the department. Therefore, argument that no details of previous year is available is baseless.
• The department has not brought on record any single piece of evidence that at the time of purchase, the Appellant paid extra consideration, therefore, arguments being raised now that details of stock and year of purchase is not given is baseless and misconceived.
Q. 30. Excel sheet downloaded from the software is • Complete software data was taken by the not available for the earlier period. department; Complete data is available in software.
• Fault finding with assessee maintaining books/records doesn't justify invocation of section 69B.
R. 31. Appellant has not justified that tag price is • The Appellant in its reply dated 29.02.2024 revised regularly as per the increase in price (Reference Page no. 1942-1943 of Vol 9) filed of precious metal. before Ld. CIT(A) has duly clarified that in case of the Assessee indicative price in excel sheet/software (i.e. Tag Price) are regularly updated by the centralized sales and marketing team to reflect the increase/decrease in metal prices.
• The frequency of such revision is correlated with the frequency of movement in metal prices. For example, during the period, in and around Covid-19, even though the organisation hardly made any purchases during the period from March 2020 to July 2020, still owning to unprecedented increment in the metal prices, the prices were regularly updated in the excel sheet as and when the stores were permitted to operate under COVID guidelines in June 2020.
• Mr. Rajesh Ajmera in his statement recorded during survey in Q. No. 13 has specifically 237 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT S. Arguments of department Rejoinder/Counter Arguments of the Assessee No stated that material used in jewellery industry which obviously comprises of gold/silver/precious/semi-precious stones which keeps on changing.
• This exercise of updating prices is natural exercise because of trend of increase in price of metal. This is common practice in trade/industry.
• Thus, argument made is incorrect.
S. 32. The methodology of the valuation is also not • Valuation of stock by independent valuer been stated in the valuation report given by appointed by Appellant was done by Assessee-Appellant. separately valuing each item and valuing the gold and silver items at market rate, meticulously detailing each item of inventory, their component and the same is more detailed than departmental valuer report.
• There is no force in the argument raised as these valuation reports cannot be basis of addition u/s 69B of the Act as condition precedent is proving of understatement of purchase consideration, which is not established.
XI. Case Laws relied by Ld. DR mentioned at Page No. 51-54 of Impugned Order T. CIT Vs British Paints India Ltd (1991) 188 ITR 44 • As per the case law relied by the Ld. CIT(A), it (SC) wherein it was held that "it is the duty of the is a duty on the AO to act in exercise of his assessing officer to determine the taxable income by statutory power" for determining the correct making such computation as he considers taxable income. appropriate in the given situation.
• In the present case, no such duty casted on Ld.AO is discharged by him judicially because impugned assessment made by Ld. AO has resulted into exponentially higher GP beyond the industry comparable, which is not justified.
• Thus, admittedly, there is no appropriate income determination.
• In the case law relied upon by the Ld. DR, goods/stock was being valued below cost, whereas, in the case of the Appellant goods/stock is being valued at market value by the department itself as against the requirement of section 69B of the Act.
U. Commissioner of Income-tax v. Devi Prasad • The case law relied by the Ld. CIT(A) is Vishwanath [1969] 72 ITR 194 (SC)[Ol-08-1968], pertaining to alleged cash credit u/s 68 of the Whether where there is an unexplained cash credit it Act. is open to ITO to hold that it is income of assessee and no further burden lies on ITO to show that • Accordingly, case law relied by the Ld. CIT(A) 238 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT S. Arguments of department Rejoinder/Counter Arguments of the Assessee No income is from any particular source is distinguishable as no impugned addition is regarding excess stock which was not made u/s 68 of the Act.
V. Commissioner of Income-tax-I v. G.S. Tiwari & Co. • The case law relied by the Ld. CIT(A) is [2014] 41 taxmann.com 17 (Allahabad)/[2014] 220 pertaining to addition made u/s 68 of the Act Taxman 111 (Allahabad) (Mag.)/[2013] 357 ITR 651 and rejection of books of account u/s 44AD (Allahabad)[30-05-2013 and addition of estimated net profit rate of 8%.
• The fact of present case is distinguishable because it is not a case of alleged unexplained cash credit u/s 68 of the Act.
• In the case law relied by the Ld. CIT(A), the Hon'ble court held that there is nothing in law which prevents in taxing both unexplained sundry credit and estimating business income.
• The judgment is on facts wherein income was offered on estimate basis u/s 44AD (presumptive taxation of income).
• Without prejudice, reliance is placed on jurisdictional High Court judgement in case of CIT vs. G. K. Contractor [2009] 19 DTR 305 (Raj.) wherein it was held no separate addition u/s 68 of the Act, if books of accounts are rejected.
XII. Case laws relating to Statement recorded during survey relied upon by Ld. DR (Page No. 157-160 of Impugned Order) W. Bachittar Singh v. Commissioner of Income-tax • The case law relied upon by the Ld. CIT(A) is [2010] 328 ITR 400, wherein it was held that "the not applicable to the facts and circumstances assessee failed to produce books of account which of the present case because no adverse may have been maintained during regular course of statement was made by Shri Rajesh Ajmera. business or any other authentic contemporaneous evidence of agricultural income. In the • Instead, only excerpts of his statement are circumstances, the statement of the assessee could being used against the Appellant, without certainly be acted upon" considering the full context in which his statements were made.
• One instance is that heavy reliance was placed on Q. No. 23/24 wherein as per department Rajesh Ajmera stated that discount given is between 30-50% however whole context of his statement was not understood as it was related to transfer price.
• The relied upon case law is also distinguishable on facts also as there is no claim of agricultural income, which in the case law relied upon, there was failure to prove claim of agriculture income.
239ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT S. Arguments of department Rejoinder/Counter Arguments of the Assessee No • Contents of the statement relied upon by the department has not been corroborated.
• Hence relied upon case law is distinguishable.
X. Dr. S.C. Gupta v. Commissioner of Income-tax • No admission of alleged excess stock made 120011 118 Taxman 252 (Allahabad), wherein it was by Shri Rajesh Ajmera. held that "The mere fact that the assessee retracted the statement could not make the statement • Accordingly, the case law relied upon by the unacceptable. The burden lay on the assessee to Ld. CIT(A) is clearly distinguishable from the establish that the admission made in the statement at facts and circumstances of the present case. the time of survey was wrong and, in fact, there was no additional income"
Y. Raj Hans Towers (P.) Ltd. v. Commissioner of • In the present case, no such surrender of lncome-tax-V [2015] 56 taxmann.com 67 income was made. (Delhi)/[2015] 230 Taxman 567 (Delhi)/[2015] 373 ITR 9 (Delhi)[27-0l-2015], wherein it was held that • Accordingly, the case law relied upon by the "where the appellant had not offered any satisfactory Ld. CIT(A) is clearly distinguishable.
explanation regarding surrendered amount being not bonafide and it was not borne out in any contentions raised by the appellant, additions made after adjusting expenditure were justified"
Z. Pebble Investment and Finance Ltd Vs. ITO in ITA • The case law is relied upon to place on the No.988/2014, wherein it was held that ""9 We note reliance on statement recorded during survey that a statement made under Section 133A of the Act to ascertain fact. is not bereft of any evidentary value. The same may not be conclusive but in the absence of any contrary • Though the Ld. CIT(A) placed reliance on evidence or explanation as to why the statement statement of Mr. Rajesh Ajmera, however, the made under Section 133A of the Act is not credible, it said reliance is based on pick and choose can be acted upon" and not entire statement has not been considered.
• Without prejudice, it is trite law that corroboration with some tangible material is required before taking any adverse view on the basis of statement recorded during survey.
XIII. Case Laws relied by Ld. DR mentioned at Page No. 184 of Impugned Order AA. Roshan Di Hatti v. Commissioner of Income-tax • In the case relied by the Ld. CIT(A), is [1977] 107 ITR 938 (SC)[08-03-1977], wherein it was distinguishable because, in the case relied on held that "Now, the law is well settled that the onus of the Appellant has accepted that cash /cash proving the source of a sum of money found to have deposit belongs to him and was from his been received by an assessee is on him. If he business income and Ld.AO argued that it is disputes the liability for tax, it is for him to show either not possible that business income of the that tl1e receipt was not income or that if it was, it Assessee could generate such income. was exempt from taxation under the provisions of the Accordingly, the source of money was Act. In the absence of such proof, the revenue is disputed. entitled to treat it as taxable income. This was laid down as far back as 1958 when this court pointed out • The Assessee in the case relied upon by Ld. 240 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT S. Arguments of department Rejoinder/Counter Arguments of the Assessee No in A. Govindarajulu Mudaliar v. Commisioner of DR was not filing its regular income tax Income-tax [1958] 34 !TR 807 , 810 (SC)" returns and non-filer of return of income for various years.
• Accordingly, his explanation was not accepted that source of cash deposit is from business.
• The law laid down in the relied upon case law by Ld. DR is in the context of burden of proof u/s 68 of the Act, which section is not applicable in the instant case of the Appellant.
• In the present case, the Appellant is not admitting any fact of excess stock and there is no surrender also; rather, the Appellant is denying the allegation of excess stock.
• Therefore, the reliance placed on judgment is misconceived besides the fact that case law relied upon is clearly distinguishable.
BB. Kale Khan Mohammad Hanif v. Commissioner of • The case law relied by the Ld.CIT(A) is Income-tax [1963] 50 ITR 1 (SC)[08-02-1963 wherein distinguishable and is not applicable on the it was held that ""It seems to us that the answer to facts and circumstances of the present case. this question must be in the affirmative and that is how it was answered by the High Court. It is well • No sum of money or unexplained cash/cash established that the onus of proving the source of a credit was found during survey in present sum of money found to have been received by the case of the Appellant. assessee is on him"
• The case law relied upon is also not applicable on account of fact that no burden has been discharged as to fact that there was understatement of purchase price.
• Even otherwise, as per the contentions of the department the Appellant does not maintain books of account, therefore no question of proving credit entries in books of the Appellant would arise in case of the Appellant.
• The case law relied upon in on the scope of unexplained cash credit, whereas there are no such facts of the present case in hand of unexplained cash credit as the impugned addition is relating to alleged excess valuation of stock.
• Thus, case law relied upon is clearly distinguishable.
CC. CIT v. M.Ganapathi Mudaliar [1964] 53 ITR 623 • The case law relied by the Ld. CIT(A) is (SC)/A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR distinguishable and is not applicable on the 807 (SC), wherein it was held that "where the facts and circumstances of the present case. assessee has failed to prove satisfactorily the source 241 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT S. Arguments of department Rejoinder/Counter Arguments of the Assessee No and nature of a credit entry in his books, and it is held that the relevant amount is the income of the • The case law relied upon in on the scope of assesse, it is not necessary for the department to unexplained cash credit, whereas there are locate its exact source" no such facts of the present case in hand of DD. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 unexplained cash credit as the impugned (SC), wherein it was held that "where the assessee addition is relating to alleged excess valuation has failed to prove satisfactorily the source and of stock. nature of a credit entry in his books, and it is held that the relevant amount is the income of the assesse, it • Even otherwise, as per the contentions of the is not necessary for the department to locate its exact department the Appellant does not maintain source" books of account, therefore no question of EE. Navin Shantilal Mehta v. Income-tax Officer, Ward-32 proving credit entries in books of the (2) (4), Mumbai [2018] 90 taxmann.com 16 (Mumbai Appellant would arise in case of the
- Trib.), wherein it was held that "as per section 68 of Appellant. the Act, onus is upon the assessee to discharge the burden so cast upon. First burden is upon the • There is no case of alleged bogus purchase assessee to satisfactorily explain the credit entry as was the case in hand in the case of Navin contained in his books of accounts. The burden has Shanti Lal Mehta relied upon by Ld. CIT(A) to be discharged with positive material"
• Thus, case law relied upon is clearly
distinguishable.
FF. Suraj Bhan Oil (P.) Ltd. v. Deputy Commissioner of • In the case relied upon by the Ld. CIT(A), the
Income tax [2022] 138 taxmann.com 19 (Madhya difference in stock was based on the stock
Pradesh)/[2022] 286 Taxman 680 (Madhya Pradesh], statement submitted to the bank and the
wherein it was held that "- It was noted that once it stock recorded in the books of account.
was found by Assessing Officer that there was
excess stock. in absence of explanation by • In the present case, the allegation of excess
assessee. conclusion was inescapable that excess stock valuation is based on computerized
stock, if any. was from undisclosed sources - Further software, where the complete stock details
once assessee's explanation, if any, had not been are available at the tag price. The Ld. AO
accepted, resultant position was that there was assumed it to be the cost price and used this
excess stock undisclosed in books of account and to make the stock valuation as against the
non disclosure was only with a view to suppress law, which requires that Ld. AO has to
income" establish understatement of purchase price
first before invoking Section 69B of the Act.
• Without prejudice, reliance is placed on
jurisdictional High Court Judgment in the case
of CIT vs. Laxmi Engineering Industries
(2009) 308 ITR 279 (Raj), which held that
merely on the basis of stock statement
submitted to bank, addition u/s 69B is not
justified.
• Hence the relied upon case law is
distinguishable.
GG. Principal Commissioner of Income-tax v. Deccan • The case relied upon by the Ld. CIT(A) is not
Tobacco Company [2022] 137 taxmann.com 470 applicable to the facts and circumstances of
(SC)/[2022] 286 Taxman 558 (SC)[ll03-2022], the present case and is distinguishable.
• The issue raised in the case law pertains to
242
ITA Nos. 740 & 750/JP/2024
Amrapali Jewels Pvt. Ltd. vs. ACIT
S. Arguments of department Rejoinder/Counter Arguments of the Assessee
No
scope of revisional jurisdiction under Section
263 of the Act. Whether it could be exercised
by the Ld. PCIT, where AO did not treat
excess stock as 'undisclosed investment'
under Section 69 of the Act.
• In this case, only notice has been issued by
Hon'ble Apex Court in pending SLP, whereas
relevant Hon'ble High Court of Andara
Pradesh judgment is in favour of the
Appellant on the basis that Ld. AO took
plausible view of taxing alleged excess stock
as business income in view of consistent view
of various judicial authorities that where
excess stock found is neither separately
identifiable nor has independent physical
existence, it cannot be treated as
'undisclosed investment' u/s 69.
• Thus, the relied upon case law is not
favouring the case of the department.
HH. SVS Oil Mills v. Assistant Commissioner of Income- • In the case relied by the Ld. CIT(A), physical
tax, Non Corporate Circle-6(1), Chennai [2020] 113 verification was conducted, and partner of the
taxmann.com 388 (Madras)/ [2020], wherein it was Assessee firm has accepted excess stock
held that "9. In the light of the above, the contention difference.
raised by the learned counsel for the Assessee has
essentially emanated from a misconception that the • Further excess stock was recorded in stock
Additions made under Section 69B/69C have to be register but was not recorded in financial
reduced to some extent by giving leverage to the books of account. Thus, addition was made
Assessee to claim some deductions from these u/s 69B of the Act.
Additions as well. If the contention of the learned
counsel for the Assessee was to be accepted viz., by • Thus, the facts of relied upon judgment are
allowing the purchases corresponding to the alleged clearly distinguishable, there is no quantity of
excess stock, the Assessee will have to now record stock found in excess and no surrender of
verifiable purchases in his Books of Accounts and for excess stock by Assessee.
that he will have valid purchase Invoices from
genuine and existing Sellers which is not possible. • The issue involved in this judgment was with
When the excess stocks were found during the reference to allowability of deduction under
Survey, there is no question of allowing the Assessee section 69C and not with reference to
to record any additional purchases because such taxability of excess stock.
purchases had already been recorded in the books of
accounts of the Assessee. Therefore, the excess • There is no claim of deduction allowing
stock, per se, has to be naturally brought to tax as purchases made for alleged excess stock,
'undisclosed income' by itself and there is no whereas the Appellant case is that there in
question of any corresponding deduction from that in excess stock at all and no burden casted
such cases" upon department of understatement of
purchase price has been discharged.
• Thus, the case law relied upon is clearly
distinguishable and specifically countered.
Conclusion:
243
ITA Nos. 740 & 750/JP/2024
Amrapali Jewels Pvt. Ltd. vs. ACIT
In view of the above, various assertions and arguments taken by Ld. DR during hearing are specifically countered and answered. Accordingly, it is prayed to not to take any adverse inference against the Appellant based on these factually and legally incorrect assertions and arguments."
29. We have considered the rival submissions, material placed on record including written submissions, synopsis, case compilation filed by both parties. First, we take up the issue of excess stock addition made in the hands of the assessee. The issue involved in the various grounds raised by the Assessee with respect to the invocation of provisions of section 69B of the Act. In other words, whether addition made on account of alleged excess stock u/s 69B of the Act is legally tenable considering the facts and circumstances of the case or not. So, before we deal with the issue it would be appropriate to refer the provision of Section 69B of the Act. The said provision reads as under:
Amount of investments, etc., not fully disclosed in books of account. 69B. Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable article, and the Assessing Officer finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year.
30. As is evident from the bare reading of provision of section 69B of the Act, the provision can only attracted only if;
244ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT
(a) It is found that the assessee has made investment, or the assessee is found be the owner of any bullion, jewellery or other valuable article, and
(b) it is found that the amount expanded on making such investment or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in that behalf in the books of account maintained by the assessee, and
(c) either the assessee offers no explanation about such excess amount, or the explanation offered by him is not satisfactory.
(emphasis supplied)
31. In the present facts of the case the assessee is a jeweler and the issue of difference in the stock reflected in the books of account maintained by the assessee. The bench noted that there is no evidence found or presently before us stating that in the survey proceeding it was found to have undervalued its stock. The purchases made and reflected in the account books were not doubted and there was no claim of the revenue that the assessee undervalued the purchases made even in the recent past. In fact, no whisper as to whether the purchases made in the recent past were undervalued and found recorded differently in the books or not.
That exercise was not done during the survey or assessment proceedings therefore, without finding any fault on the regular books of accounts maintained there is no basis for the allegation of the revenue that the assessee has undervalued it stock. Thus, it would be appropriate at this juncture to refer to certain case laws cited on behalf the Assessee on the applicability of the provisions of section 69B of the Act.
245ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT CIT v. Dinesh Jain HUF [2012] 25 taxmann.com 550 (Delhi) Section 69B in terms requires that the Assessing Officer has to first 'find' that the assessee has 'expended' an amount which he has not fully recorded in his books of account. It is only then that the burden shifts to the assessee to furnish a satisfactory explanation. Till the initial burden is discharged by the Assessing Officer, the section remains dormant. [Para 8] A 'finding' obviously should rest on evidence. In the instant case, it is common ground that no incriminating material was seized during the search which revealed any understatement of the purchase price. That is precisely the reason why the Assessing Officer had to resort to Rule 3 of Schedule III to the Wealth Tax Act. [Para 9] Section 69B does not permit an inference to be drawn from the circumstances surrounding the transaction that the purchaser of the property must have paid more than what was actually recorded in his books of account for the simple reason that such an inference could be very subjective and could involve the dangerous consequence of a notional or fictional income being brought to tax contrary to the strict provisions of article 265 of the Constitution of India and Entry 82 in List I of the Seventh Schedule thereto which deals with 'Taxes on income other than agricultural income'. [Para 11] Applying the logic and reasoning in K.P. Varghese v. ITO [1981] 131 ITR 597 / 7 Taxman 13 (SC), for the purposes of section 69B it is the burden of the Assessing Officer to first prove that there was understatement of the consideration (investment) in the books of account. Once that undervaluation is established as a matter of fact, the Assessing Officer, in the absence of any satisfactory explanation from the assessee as to the source of the undisclosed portion of the investment, can proceed to adopt some dependable or reliable yardstick with which to measure the extent of understatement of the investment. One such yardstick can be the fair market value of the property determined in accordance with the Wealth Tax Act. [Para 12] Since the entire case has proceeded on the assumption that there was understatement of the investment, without a finding that the assessee invested more than what was recorded in the books of account, the decision of the Income- tax Authorities cannot be approved. Section 69B was wrongly invoked. The order of the Tribunal is upheld. [Para 15] Commissioner of Income-tax, Delhi -I v. Agile Properties (P.) Ltd, [2014] 45 taxmann.com 512 (Delhi)
5. This Court had in the decision reported as CIT v. Dinesh Jain, HUF [2013] 352 ITR 629/[2012] 211Taxman 23/25 taxmann.com 550 and connected cases occasioned to consider an identical question. Afternoticing the relevant provision, i.e. Section 69B, the Court noticed in paragraph 9 as follows: --
246ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT
13. The error committed by the income-tax authorities in the present case is to jump the first step in the process of applying section 69B - that of proving understatement of the investment - and apply the measure of understatement. If anything, the language employed in section 69B is in stricter terms than the erstwhile section 52(2). It does not even authorise the adoption of any yardstick to measure the precise extent of understatement. There can therefore be no compromise in the application of the section. It would seem to require the Assessing Officer even to show the exact extent of understatement of the investment; it does not even give the Assessing Officer the option of applying any reasonable yardstick to measure the precise extent of understatement of the investment once the fact of understatement is proved. It appears to us that the Assessing Officer is not only required to prove understatement of the purchase price, but also to show the precise extent of the understatement. There is no authority given by the section to adopt some reasonable yardstick to measure the extent of understatement. But since it may not be possible in all cases to prove the precise or exact amount of undisclosed investment, it is perhaps reasonable to permit the Assessing Officer to rely on some acceptable basis of ascertaining the market value of the property to assess the undisclosed investment. Whether the basis adopted by the Assessing Officer is an acceptable one or not may depend on the facts and circumstances of the particular case. That question may however arise only when actual understatement is first proved by the Assessing Officer. Itis only to this extent that the rigour of the burden placed on the Assessing Officer may be relaxed in cases where there is evidence to show understatement of the investment, but evidence to show the precise extent thereof is lacking.' Gayatri Enterprise v. Income-tax Officer, Ward 1(2)4 [2020] 116 taxmann.com 359 (Gujarat)
29. The Delhi High Court in the case of CIT v. Bajrang Lal Bansal [2011] 335 ITR 572/200 Taxman 188 (Mag.)/12 taxmann.com 88 held as under:
"5. Ms. Rashmi Chopra, learned counsel for the revenue submitted that the Tribunal had erred in law in deleting the addition of 99,33,000/- as undisclosed income of the respondent-assessee under Section 69B of the Act, 1961.
6. It is settled law that the primary burden of proof to prove under-statement or concealment of income is on the revenue and it is only when such burden is discharged that it would be permissible to rely upon the valuation given by the DVO. (SeeK.P. Varghese (supra), CIT v. Shakuntala Devi , (2009) 316 ITR 46, CIT v. Manoj Jain , 287 ITR 285 and ITA No. 482/2010 decided by this Court on 5th May, 2010 Dilshad Trading Co. (P) Ltd. v. ITO, [1994] 49 ITD 348 (Bom-Trib.)
8.............................Provisions of section 69B can be invoked if(i) it is found that the assessee has made investment; (ii) it is found that the amount expended 247 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT on making such investment exceeded the amount recorded in that behalf in the books of account; and (iii) either the assessee offers no explanation about such excess amount or the explanation offered is not satisfactory in the opinion of the Assessing Officer. These three findings are cumulative to be recorded on gathering the necessary facts, but the basic finding which is to be recorded on clear and cogent material is in respect of the amount expended by the assessee in excess of that shown in the books of account. In the instant case, the onus was on the department to show that the assessee had expended extra amount therefore, merely because there existed some comparable cases showing higher price in respect of similar transactions, it could not be said that the assessee had expended extra amount. Therefore, no addition could be made. There also did not exist any other material either by way of confession from some connected person with regard to the extra amount having been spent by the assessee or by way of a finding that the books of account of the assessee were not found to be reliable in any of the years when the records were examined by the Commissioner M/s DDK Spinning Mills vs The DCIT Circle-3, [2023] 157 taxmann.com 817 (Chandigarh - Trib.)
10. It is a settled proposition of law that the statement recorded u/s 131 during the course of survey has no evidentiary value in absence of any corroborative evidence on record and in this regard, useful reference can be drawn to the decision of Hon'ble Madras High Court in case of CIT vs Khader Khan Son reported in 300 ITR 157 wherein it was held that statement recorded during the course of survey u/s 133A has no evidentiary value as the officer is not authorized to administer the oath and to take any sworn statement which alone has evidentiary value as contemplated under law and reference was drawn to provisions of section 132(4) which enables the authorized officer to examine person on oath and where any such statement so recorded can be used in evidence under the Act. In that case, it was held by the Hon'ble High Court that basis statement of one of the partner's of the assessee firm, it cannot be held that disclosed income was assessable as lawful income of the assessee firm since there was no material on record to prove the existence of such disclosed income or earning of such income in the hands of the assessee and it cannot be held that Revenue has lost lawful tax payable by the assessee. Therefore, in our considered view, in the instant case, the statement of the partner of the assessee firm recorded u/s 131 during the course of survey and subsequent affirmation thereof by the assessee by way of surrender letter on a standalone basis and without any corroborative evidence doesn't fulfill the statutory mandate of deeming provisions which provides that it is for the Assessing officer to records a finding that the assessee has made investments during the financial year in the construction/purchase of the building and the amount expended on making such investments in the building exceeds the amount recorded in this behalf in the books of account so maintained by the assessee and for the purposes of recording such a finding, there has to be some tangible material in possession of the Assessing officer which demonstrate that certain amount has been actually 248 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT expended by the assessee during the year towards the purchase or construction of the building which is clearly absent in the instant case. Therefore, the statement of the one of the partners of the assessee firm without any corroborative evidence cannot come to the aid of the Assessing officer for the purposes of invoking the deeming provisions of Section 69B of the Act.
32. Applying the aforesaid legal position with respect to the applicability of section 69B of the Act on the facts of the present case, we find that there is no discussion/observation in the Assessment Order with respect to any material found during survey evidencing understatement of purchase consideration or money expended in acquiring such jewellery or stock items are more than value recorded in books of accounts but it was merely based on the valuation done by the valuer and that too each valuer adopted the different method of valuation qua premises. It was not pointed out by the ld. DR that any incriminatory material /evidence which can establish that consideration recorded in the books were understated in books of account, or some extra consideration has been paid in acquiring the stock. Rather the Ld. DR has argued that there are no books of accounts wherein the quantity has been recorded and drew our attention to the observation of the Ld. CIT(A) in this regard.
We have given our thoughtful consideration on this arguments raised and in our considered opinion the same even if accepted at face value to be true, the same still does not authorize the revenue to invoke provision of 249 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Section 69B of the Act as comparison with books of accounts is the pre-
requisite to invoke the provisions of Section 69B of the Act as evident from bare reading of the provision of Section 69B of the Act and as held in judgment of Hon'ble Madhya Pradesh High Court in case of Dr. Prakash Tiwari v. Commissioner of Income-tax [1983] 14 Taxman 252 (MP).
Further, the said argument runs contrary to the department's own action of using financial records of the Assessee containing price list maintained in computers as basis for making addition in respect of 41 items allegedly found short during the survey. From the audit report as well as observations of the auditors also as contained in the audited financial statements, we note that it is only item wise stock register and non-
maintenance of cost of each item separately on account of nature of industry and trade practice regularly followed, the auditor has made observation in its audit report. Therefore, the same cannot be stretched to the extent that no books of accounts are maintained by Assessee.
Moreover, Mr. Rajesh Ajmera also in his statement clarified the reasons as well as practical impossibility why item-wise linking and cost of each item could not be separately maintained in the jewellery business. Thus, in this regard we find force in the argument of Senior Counsel representing Assessee that revenue cannot be allowed to take contrary stands and blow 250 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT hot and cold in the same breath with respect to the existence of the books of accounts. We also do not find force in the argument of the Ld. DR and observation of the Ld. CIT(A) labelling software data or excel sheet impounded during survey as incriminating document. The department has not identified anything incriminating in the excel sheet as it contains data including tag price with identification of items of inventory. Rather the same has been treated as part of regular books of accounts on several occasions in as much as the valuation officer has himself made the same as basis for identification of items found during survey at Panch Batti, Jaipur. Further AO himself has relied upon for alleging shortage of items for making a separate addition of the same of Rs. 11.40 Crore. It is nobody's case that the excel file contained evidence of proof of payment of high purchase consideration than recorded in the books of accounts. Further, Ld. CIT(A) has himself taken the same as the basis for arriving at the cost price by allowing deduction of 47% towards the profit margin, escalation in the metal price etc.
33. We also do not subscribe to the argument of the Ld. DR that the burden of proof for making addition u/s 69B of the Act is on the Assessee and since Assessee has not maintained quantitative and qualitative details of the stock the liability u/s 69B of the Act can be fastened upon the 251 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Assessee. The said submissions are contrary to the settled legal position as is evident from the decisions cited on the applicability of section 69B of the Act mentioned above wherein it has been consistently held that burden of proof u/s 69B of the Act is on the department. We also find force in the argument of the Ld. Senior counsel for the Assessee that addition u/s 69B of the Act entails charging of tax at a higher rate of 60% u/s 115BBE and therefore, the department has to be put to strict proof and such huge tax liability cannot be fastened upon the Assessee merely on suspicion.
34. We have gone through the various judicial precedent cited by Ld. DR which are on the aspect of burden of proof u/s 68 of the Act and tax treatment of addition u/s 69B of the Act, once nature and source of excess stock found is not explained, under head of income, whether business or income from other sources. We have perused these judgments relied upon by the Ld. DR and also mentioned in the order of ld. CIT(A), which has been countered by the assessee-appellant in the written submissions in the rejoinder and find that these are clearly distinguishable as the legal position is very clear that finding of understatement of purchase price is first and foremost condition to invoke the provision of section 69B of the Act.252
ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT
35. Admittedly purchases have been made over the period, which fact itself has been acknowledged by the Ld. CIT(A) while giving effect of appreciation in metal prices over the years and the revenue while proceeding under survey could not differentiate single purchase price being understated which are recorded in the books of accounts maintained.
36. We find substance in the submission raised on behalf of the assessee-appellant that both the authorities in the present case have straightaway jumped to the exercise of estimating the extent of understatement of investment by discussing and adopting the most suitable methodology to compute/measure understatement without first establishing/proving understatement of investment, which is the foremost statutory requirement for pressing provisions of section 69B of the Act in service. The entire lengthy discussion and exercise done by the Ld. CIT(A) in the present case of estimating/deducing the cost of stock from tag price by reducing the gross profit margin, discount and metal price cannot substitute/overshadow the statutory prerequisite of proving under-recording of purchase consideration.
37. We also find that revenue failed to point out any item of identified stock items found in excess, and rather contrary, from the assessment 253 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT order it is noted that there was an addition made by AO of certain items of jewellery which are found shortage during survey. Furthermore, based on the statement of Mr. Rajesh Ajmera cost of stock cannot be determined because there has to be positive material to arrive at cost or understatement of consideration for purchase. It is not the case of the department that Mr. Rajesh Ajmera has stated that some extra consideration was paid out of books for purchase of jewellery by the Assessee, which is not recorded in the books of accounts. Ld. CIT(A) has made the statement of Mr. Rajesh Ajmera as the basis to estimate cost for further estimating value of stock. Moreover, there is a clear contradiction in the statement of Mr. Rajesh Ajmera in answer to Q. no. 23 and 24 as compared to answer to Q. No. 25 (PB No. 125-127 Vol. I).
38. Evidently, the present case is not a case of any understatement of consideration or excess stock in quantitative terms but only a notional addition of excess stock on account of mere valuation, which is beyond the scope of provision of Section 69B of the Act. In our view the issue on hand is squarely covered by the decision of coordinate bench in the case of M/s Jewels Emporium vs. ACIT Central Circle-1, Jaipur in ITA 303/JP/2019 decided on 15.09.2020, wherein order of the Ld. CIT(A) deleting the addition on account of excess stock wherein the difference was on account 254 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT of valuation was upheld. The relevant extract of the same is reiterated here in below:
"18. Rival contentions have been heard and record perused. Brief facts are that, during the course of search operation total stock found at the business premises of assessee firm situated at D-7, M.I. Road, Jaipur and shop titled as Boutique, Hotel Rambagh Palace, Jaipur was quantified and valued by departmental valuer at Rs. 26,62,93,376/-. The search team based on incomplete books of accounts worked out the cost of stock as per books as on the date of search i.e. on 18.12.2014 at Rs. 20,47,95,518/- and the differential amount of Rs. 6,14,97,858/- was alleged as excess unexplained stock and based on this working an admission of Shri Anup Bohra, one of the partners of assessee's firm, was obtained in his statements recorded during the course of search as stated above. On the date of search books of the assessee were not complete and certain entries pertaining to cash sales made on 16.12.2014 remained to be incorporated therein, which fact is established from the copy of cash book print outs seized during the course of search where the cash balance as on 16.12.2014 is appearing in the Balance Sheet marked as Anx-1 page 22 from where the value of stock of Rs. 20,47,95,518.00 is taken by the search team. The other most important factor which is ignored by the department is that while valuing the stock found, the departmental valuer took the value of precious metal and other precious and semi-precious stones at prevailing market price as on the date of search (18.12.2014) whereas in accordance with the specified norms and accounting standards, the stock recorded in the books is at the cost price and or market value whichever is lower and since cost price is lower, same has been recorded at cost price in the books. It is relevant to state that there is no dispute in quantity measured by the departmental valuer. It was thus contended that since the stock found at the time of search was valued at prevailing market value and to compare the stock as per books of accounts which had always been recorded on cost price, the profit element embedded in value estimated by DVO to bring both the values in parity and make them comparable and thereafter the AO is required to find out any excess or any shortage of stock. It was also found that after giving effect to the cash sales made on 16.12.2014, entry of which were remained to be made in the books as on the date of search and further reducing the profit element from the gross value determined by departmental valuer, the total value of stock found as on the date of search was equal to the value of stock recorded in the books of the assessee and therefore no addition is warranted. However, the AO without appreciating the same and simply for the reason that one of the partners had admitted the same as unexplained in the statement recorded during the search, had made the addition. When all these facts alongwith the same evidences which were submitted before the AO during course of assessment proceedings were produced before the ld. CIT(A) in appellate proceedings, ld. CIT(A) after appreciating the same had deleted the addition made in this regard. Findings recorded by the ld. CIT(A) in this regard are as under:255
ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT "9.1 9.2 I have perused the written submissions submitted by the Ld. A/R and the order of AO. I have also gone through various judgments cited by the Ld. A/R and those contained in the order of AO. Briefly the facts related to the issue under consideration are that during the search operation stock found at the business premises of the appellant firm situated at D-7, M.I. Road, Jaipur and shop titled as "Boutique", Hotel Rambagh Palace, Jaipur was inventoried and valued by the departmental valuer at t 26,62,93,376/-, as against the above, the cost price of the stock as per books of accounts of the firm as on the date of search was worked out by considering opening stock, purchases and sales till the date of search and gross profit related to these sales, which came to 20,47,95,518/-. The AO has considered the difference between the two amounting to 6,14,97,858/- as excess unexplained stock found during the course of search, as the same was also admitted by Shri Anup Bohra in his statement recorded during the course of search u/s 132(4) of I.T. Act.
9.3 It was submitted before me that stock inventory so prepared during the course of search has been valued at 'market value' and has not at all being valued at the 'cost price'. Accordingly the deduction of GP rate embedded in the value of physical stock is to be considered to arrive at the cost of stock physically found during the course of search for comparing the same with stock as per books of accounts. The working after deducting the Gross Profit embedded in the valuation of physical stock and after considering the same, it was submitted by the Ld. A/R that the cost of physical stock so found was more or less same as of the cost of stock as per books of accounts and rather the physical stock was slightly on lower side and the slight difference was only due to estimation of the valuation of the physical stock so done by the approved valuer. The AO has not accepted the argument of the Ld. A/R merely on the ground that the partner of the firm in his statement recorded at the time of search has admitted and surrendered the excess stock.
9.4 Accordingly in the return of income so filed by the appellant, no additional income was offered on the impugned excess stock and a note to this effect was also made in audited financial results. The Ld. A/R has also given the working of G.P. rate of last four preceding years other than the current year in order to fortify his argument about the G.P. rate in the current year being in the same range as that in earlier years. Moreover the Ld. A/R has also furnished raw material wise working of last six years in order to support his argument that the value so taken by the approved valuer has to be the market value and cannot be the cost price. In this connection it may be pointed out that said difference in value of stock in trade as per books of accounts and as per valuation report of registered valuer as on the date of search i.e. 17,12_2014. The AO has not held that there was any difference in quantity of stock as per Valuation report and as per books of accounts. The said stock in trade was of studded jewellery of gems stones, for which registered valuer adopts the value of studded stones on estimated basis at market value. Whereas the value as per books of accounts of the said items is supported by purchase bills and vouchers and is as per its cost to assessee as per regular books of accounts and valuation is made by valuer at market price i.e. at price which it will fetch in open 256 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT market so profit margin is also there in the value assessed by the valuer. Thus there can be no addition simply on the basis of valuation unless excess quantity of stock is found.
It is a common practice that during the course of search valuation of stock so physically found at the business premises of any assessee is done on prevailing market value. On the other hand in the present case as in all the cases of jewellers, the assessee is not maintaining the stock register, then stock as per books of accounts as on the date of search could only be determined after considering the opening stock, adding the purchases in it and considering the sales till the date of search as well as the Gross Profit embedded in these sales. It will give us the value / cost of the stock as per books of accounts. Same has to be compared with the cost of physical stock so found, which has to be determined after giving deduction the Gross Profit embedded in the valuation of physical stock so done by the approved valuer. The working for the closing stock accordingly would be: No. Particulars Amount 1. 2. 3. 4. 5. 6. Valuation as done by DVO during the course of Search Less: Value of raw gold 7,68,96,472.00 Less: Value of raw silver 5,70,580.00 Market Value of Stock Less: G.P. @ 34.20% Cost Price of Stock physically found Add: Value of raw gold and silver Cost price of total goods physically found Stock as per books of accounts as on date of search Shortage of goods due to estimation [5-4] 26,62,93,376.00 7,74,67,052.00 18,88,26,324.00 6,45,78,603.00 12,42,47,721.00 7,74,67,052.00 20,17,14,773.00 20,47,95,518.00 30,80,754.00 18 ITA 303 & 234/JP/2019_ M/s Jewels Emporium Vs ACIT Thus there is actually a shortage of stock instead of surplus as is determined by the AO 9.7 This view was also taken by the Hon'ble ITAT in assessee's own case in A.Y. 1987 88, wherein similar issue of valuation of physical stock found during the search conducted was decided by holding that deduction of gross profit embedded in the market value of the physical stock should be given, copy of which was placed before me. In the order no. ITA /1529/JP/91 and ITA/JP/ 1617 dated 10/04/1995 the Hon'ble ITAT Jaipur has held as under: 7. 8. We hear the Id. Counsel for the parties at sufficient length. Whereas the Id. Counsel for the assessee mainly urged that the cost of the stock had been correctly estimated in the books and there was no justification at all for arriving at the cost of the stock by making the tag prices, which were in fact the asking price, as basis and supported his reasoning with Tribunal's approach in ACIT vs. Bhandari Jewellers (1994) Tax World 292 Sec. 1), the Id. D/R vehemently argued that in view of the statement of Sri Heera Lal employee the tag prices represented Singapore Dollars on verifiable Indian currency by a multiplier of 5.7 and therefore the AO was justified in valuing all the stock by the rates mentioned on the tag It is evident in the present case that the articles found either at the shop in the Ram bagh Palace Hotel or at the main show room at M.I. Road, Jaipur were valued by the two methods vis, on the basis or the prices mentioned the tags tied with the articles or by the estimate made by the approved value. The difference between the valuations as mentioned in the books and as arrived at either at the time or search or at the time of assessment was the result of the difference in the estimation of the cost of the articles made. After all it was the estimation of the cost or the articles one made by the assessee on the basis of his personal knowledge 257 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT which was likely to be influenced by personal interest. The estimation of the cost made on the basis of the prices mentioned in the tags could not be, on the fact of it, indicative of the correct cost of the article. It was in the fact the asking price which is ordinarily subject to negotiation between the buyer and seller. Therefore, the estimation of cost made on the basis of the prices mentioned in the tags could not be accepted. The third name was the report of the Approved Valuer. An approved valuer having the special knowledge of the subject may be a better person than others to make 19 ITA 303 & 234/JP/2019_ M/s Jewels Emporium Vs ACIT estimation of the cost and gie his opinion. His opinion is in the nature of the opinion of an export and hence admissible and as such acceptable if it is uninterested, impartial and trustworthy. In the present case it is not shown that the approved valuer was in any way interested in either of the parties. The estimation made by him of the cost of untagged a articles was, therefore, acceptable. Incidentally such estimation, more or less, tallied with the estimation made by the assessee. Therefore, the cost of the stock declared by the assessee at the time of search must have been accepted. There are thus reasons to take the view that since the basis of the addition of Rs. 54,250/- was after all estimation of the cost of articles and such estimation was done at an intermediary stage of the accounting period it is not safe to declare that the assessee was having any stock in excess of that mentioned in the books. It may be mentioned that the cost of the stock was not arrived at itemwise or weightwise so as to pin point the excess articles or weight. Under such circumstances we find it difficult to uphold the sustained addition even. The addition sustained by the learned CIT(A) therefore deserved to be deleted. However, as detailed at page 69 and shown in the chart supplied to us during the course of argument at the most addition of Rs. 24,476/- only, as declared by the assessee may be and is hereby sustained. We think, we are fortified in our view, by the approach adopted by the Tribunal in M/s Bhandari Jewellers case (Supra) relied upon by Mr. N.C. Dhadda. Ground relating to this point in assessee's appeal are, therefore, partly allowed but in Revenue's appeal dismissed. 9.8 Accordingly I am of the considered opinion that AO should have considered the deduction of Gross Profit embedded in the valuation of physical stock so done. The meager difference of stock which is about 1.15% of the total valuation arrived at by the DVO may be ignored which may bound to occur on account of estimation while valuing fair market value of the precious and semi precious stones embedded in the jewellery. Further in my view even if addition is somehow made on account of said valuation of stock and sustained in assessment than credit of the same has to be allowed in year end while computing profit at year end which has not been allowed and as assessing officer accepted declared closing stock as on 31.3.2015 in books of accounts the addition of difference in value as on 17.12.2014 will get set off. The assessee carried forward the closing stock of this year end as declared in books of accounts as opening stock for next year. The AO neither allowed credit of difference while accepting closing stock at year end but accepted closing stock declared by the assessee which has been 20 ITA 303 & 234/JP/2019_ M/s Jewels Emporium Vs ACIT taken as op. stock in next year. In next year also no credit allowed for enhanced stock and even it is done it will be revenue neutral exercise. The Hon'ble ITAT in case of Manoj Kumar Johari (ITA No. 479/JP/ 13 & 383/JP/ 13 order dated 258 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT 16-10-2015) has held that: "Apropos Ground No. 5 of the assessee, we find merit in the arguments of the Ld. counsel for the assessee that increase in valuation of the closing stock is to be allowed in next year as increase in opening stock in next year i.e. 2010-11. It has not been disputed that the assessee has not claimed any benefit by increase in valuation of stock in subsequent year. Hence, the addition becomes revenue neutral. Consequently, respectfully following the decision of Hon'ble Supreme Court in the case of CIT Vs. Excel Industries Ltd. (2013) 358 ITR 295, the addition being tax neutral and the assessee having not derived any benefit, the addition is deleted" Also in case of Paras Mal JaM vs ACIT (1TA No.916/JP/ 12 dated 17-10-2015 has held that: "Assuming an addition on account of closing stock is somehow made, the same is to be allowed to the assessee in the next year as opening stock which will reduce the profits of next year. This exercise is essentially revenue neutral between two years. The Hon'ble Supreme Court in the case of CIT vs. Excel India, 358 ITR 295 has held that addition in such revenue neutral exercise should not be made by the Department. Thus on both the counts, there is no justification in retaining the addition which is deleted." 9.9 19. In above para, accordingly the addition so made by the AO is deleted and these grounds of appeal of A/R on this issue are allowed. On the facts and in the circumstances of the case, the AO is directed to delete the addition of 6,14,97,858/-"
The said decision of the co-ordinate bench of ITAT has been upheld in appeal by our Hon'ble Jurisdictional High Court in DBITA No. 43/2021 while dismissing the revenue's appeal wherein court further held that:
"6. Heard learned counsel for the parties and perused the pleadings.
7. The admitted facts are:
(i) that at the time of the search the books of accounts were incomplete and certain entries pertaining to cash were to be made.
(ii) the excess stock was result of difference in value as per valuation report compared with books of account.
(iii) that the valuation was done on the basis of the current price and not on the cost price.
(iv) the books were being maintained at cost price.
(v) there was no quantitative difference either in the jewels or of the precious metal
(vi) lastly no incriminating documents were found during the search to support the alleged excess stock.
8. The CIT(A) held that the statement of a partner recorded at the end of forty five hours long search cannot be the sole basis for making addition for excess stocks. Moreso, when there was no quantitative difference found, and difference was 259 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT result of valuation being done on current market price and books being maintained on cost"
39. Also, it is apposite to refer to the decision of our Hon'ble Jurisdictional High Court in the case of Smt. Amar Kumari Surana v. Commissioner of Income-tax [89 TAXMAN 544 (RAJ.)] wherein it has been held as under:
5. In second appeal before the Tribunal, after considering the material on record, it gave a finding of fact that the correct value of the plot of land and sale consideration have not been shown by the assessee in her account-books and in any case the investment cannot be less than Rs. 68,400. Therefore, the Tribunal upheld the addition sustained by the AAC under section 69B.
6. The aforesaid questions have been referred in the statement of case under section 256(2) by the Tribunal. The learned counsel for the assessee has not disputed the fact that the petitioner has shown Rs. 45,000 as cost of the plot purchased by her in C-scheme and that has been shown in sale- deed also. As per the valuation report comparable cases referred in valuation report were considered but no explanation has been given by the assessee or her husband before the ITO as to why the plot has been sold roughly at half of the rate, prevalent in area to the assessee by Vinaychand Praveenchand, Jaipur.
7. Mr. Ranka submits that no addition can be made under section 69B only on the basis of fair market value of the asset. The burden is on the department to prove that value of the asset has been shown less than the fair market value and also to prove that real consideration is exceeding the consideration shown in account books by the assessee.
8. Mr. Ranka has placed reliance on the decisions of their Lordships in cases of New Excelsior Theatre (P.) Ltd. v. M.B. Naik, ITO [1990] 185 ITR 158 (All.), Dinesh Kumar Mittal v. ITO [1992] 193 ITR 770 (Bom.), CIT v. Raja Narendra [1994] 210 ITR 250/74 Taxman 157 (Raj.), CIT v. Smt. Prem Kumari Surana [1994] 206 ITR 715 (Raj.), CIT v. Pratap Singh Amrosingh Rajendra Singh Deepak Kumar [1993] 200 ITR 788 (Raj.), CIT v. Godavari Corpn. Ltd. [1993] 200 ITR 567/68 Taxman 344 (SC), CIT v. H.H. Maharao Bhim Singhji [1988]173 ITR 79/36 Taxman 270 (Raj.), Abdul Qayume v. CIT [1990] 184 ITR 404/50 Taxman 171 (All.), M.D. Jewellers v. CIT [1994] 208 ITR 196/73 Taxman 493 (Raj.), CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC), CIT v. Pradyuman Kumar Kachhawa [1985] 156 ITR 105/23 Taxman 568 (Raj.) and K.P. Varghese v. ITO [1981] 131 ITR 597/7 Taxman 13 (SC). In the above referred cases mainly the question was involved under section 52(2) for reopening the case under section 147A/147B of the Act and the decision in the case of K.P. Varghese (supra)is a leading case.
The principles laid down in the case of K.P. Varghese (supra)have been followed in the subsequent cases.
260ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT
9. The main emphasis of Mr. Ranka is on the decision of their Lordships in the case of K.P. Varghese (supra)which is the leading authority on the issue, whether on the basis of fair market value any addition can be made in the hands of purchaser/seller, invoking the provisions of sub-section (2) of section 52.
10. Section 69B reads as under :
"Amount of investments etc., not fully disclosed in books of account - Where in any financial year the assessee has made investments or is found to be the owner of any bullion jewellery, or other valuable article, and the Assessing Officer finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year."
11. It is true that merely on the basis of fair market value no addition can be made under section 69B but on the basis of sufficient material on record some reasonable inference can be drawn that the petitioner has invested more amount than the one shown in account books, then only the addition under section 69B can be made. The burden is on the revenue to prove that real investment exceeds the investment shown in account books of the assessee.
12. Their Lordships of the Supreme Court in the case of K.P. Varghese (supra)have observed as under : ". . . This burden may be discharged by the revenue by establishing facts and circumstances from which a reasonable inference can be drawn that the assessee has not correctly declared or disclosed the consideration received by him and there is an understatement or concealment of the consideration in respect of the transfer. Sub-section (2) has no application in the case of an honest and bona fide transaction where the consideration received by the assessee has been correctly declared or disclosed by him, and there is no concealment or suppression of the consideration. We find that in the present case, it was not the contention of the revenue that the property was sold by the assessee to his daughter-in-law and five of his children for a consideration which was more than the sum of Rs. 16,500 shown to be the consideration for the property in the instrument of transfer and there was an understatement or concealment of the consideration in respect of the transfer. It was common ground between the parties and that was a finding of fact reached by the income-tax authorities that the transfer of the property by the assessee was a perfectly honest and bona fide transaction where the full value of consideration received by the assessee was correctly disclosed at the figure of Rs. 16,500 ..." (p. 618)
13. The consistent finding of the ITO, the AAC and the Tribunal is that the petitioner has not shown the correct value of the property in her account books and thereby concealed the investment made for purchase of the plot of land in C- scheme, Jaipur. The Tribunal has considered the valuation report of the Valuer in 261 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT respect of the plot in question and also the fact that notice was given to the assessee as to why the value of the plot should not be taken as has been valued by the Valuer. The assessee failed to give any reason, as to why the value, valued by the valuer should not be accepted. The Tribunal has also considered the size of the plot, location and potential use of the plot of land. It is also noticed by the Tribunal that the assessee has failed to show that in area of C-scheme the value of plots is lesser than the rate which has been shown in valuation report.
14. In the valuation report, the costs have also been given of the neighbouring plots which were sold during the relevant period in C- scheme. One plot was purchased by Smt. Prem Kumari in that area at the rate of Rs. 75 per sq. yd. Smt. Padam Kumari had purchased the plot of land in that area at the rate of Rs. 60 per sq. yd. Smt. Shobha Kumari has purchased plot of land at the rate of Rs. 60 per sq. yds. As such the plot in question which was purchased by the assessee was measuring 1799.99 sq. yds. The value has been estimated by the Tribunal as Rs. 68,400. The cost of the land which has been shown by the assessee comes to Rs. 36 per sq. yd., that is, roughly half of the rate prevalent in C-scheme.
15. It is true that merely on the basis of valuation report and fair market value no addition can be made. But in the case in hand after obtaining the valuation report of plot of land notice has been given to the assessee to show cause as to why the value of plot of land in question may not be taken as per valuation report and on the basis of comparable cases.
16. Admittedly in account-books of the assessee the investment of Rs. 45,000 has been shown to purchase the plot of land measuring 1799.99 sq. yds. which comes roughly at the rate of Rs. 36 per sq. yd. Mr. Ranka has not seriously disputed the value of the plot of land as has been estimated by the income-tax authorities but his main emphasis is on the question that under section 69B the department should establish the fact that more consideration has been passed than the consideration shown in account- books/sale-deed. Therefore, considering the report of valuer and com parable cases cited above and also the fact that sufficient opportunity was given to the assessee to show cause as to why the value of plot of land should not be taken on the basis of the rate prevalent in the area, we find no justification to interfere in the value finally estimated by the Tribunal.
17. Now, it brings us to see whether the revenue has established the fact that some more consideration has been passed by the assessee to Vinaychand Praveenchand than that shown in sale deed.
18. There is no direct evidence that the assessee has paid more than Rs. 45,000 to Vinaychand Praveenchand for purchase of plot of land, but at the same time it cannot be ignored that no evidence has been adduced by the assessee before the ITO as to why the plot of land has been sold to the assessee for roughly at half of the rate than the prevalent market rate.
19. In the case of K.P. Varghese (supra)their Lordships of the Supreme Court have observed that even if market value is more than the value/consideration 262 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT received in respect of the transfer, it would amount to gift under the Gift-tax Act, 1958. The Income-tax Act and the Gift-tax Act are parts of an integrated scheme of taxation and the same amount which is chargeable as gift could not be intended to be charged also as capital gains.
20. In the case of K.P. Varghese (supra), the house property was sold to daughter- in-law and five of her children. Therefore, the case of K.P. Varghese (supra)is covered under the provisions of section 4 and the differencebetween market value and consideration paid would amount to gift under section 4(1)(a)of Gift-tax Act, but that should be born out from the record that the particular case is of deeming gift. In that case certainly, no capital gain tax can be charged. But in the case on hand, there is no material on record which shows that property has been sold for less consideration and the difference between market value of property and consideration shown in account books can be a case of deemed gift under section 4(1)(a). Neither the assessee is a relation of seller nor of any reason has been advanced before the ITO as to why less consideration has been paid than the prevalent market rate. Not even a single reason has been given as to why the property has been sold to the assessee for roughly half of the prevalent market rate. In absence of that the only inference that can be drawn is that the petitioner has, in fact, concealed the actual consideration paid to seller.
21. It is true that the burden is on the department to establish the fact that the property has been sold for lesser consideration that the market value. It is also to be established that actual consideration is more than the consideration shown in account books/sale deed. In the case of K.P. Varghese (supra)their Lordships have observed that before invoking the powers under sub-section (2) of section 52 of the Act, the burden is on the revenue to prove that the actual consideration was more than that disclosed by the assessee. But their Lordships have further observed that this burden may be discharged by establishing the facts and circumstances, from which reasonable inference can be drawn that the assessee has not correctly declared or disclosed the consideration received or paid by him. As stated above, in the locality of C scheme the adjoining plots were sold at the rate of Rs. 60 or 75 per sq. yd. and if we take the estimated rate taken by the AAC and the Tribunal, the rate of plot in question comes to Rs. 36 per sq. yd. that is, roughly half of the rate than the prevalent market rate in the area. Admittedly, no reason has been shown by the assessee as to why the plot of land has been sold to her half of rate of market rate. Nor any other reason has been shown to the ITO at the time of assessment. Even, in spite of specific query, the assessee failed to point out any mistake/lacuna in ascertaining the value of plot of land by the valuer. In these circumstances, the only reasonable inference that can be drawn is that the assessee has shown less amount in the account books and sale-deed that the actual consideration paid. Considering, the comparable cases and the facts of the case we find no ground to interfere in the addition made under section 69B.
263ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT
40. Admittedly, in the present case, there was no physical verification conducted for various branches, franchise store, other location except head office, Panch Batti Store and Museum. Thus, there remains no question of any excess stock more particularly for various other locations at which admittedly, no physical verification was done. It is a trite law that no addition is justified merely based on assumption, presumption and guess work.
41. We have also verified that there is an error committed by AO for deriving the value of stock as per books of accounts as on date of survey at Rs. 1,26,08,60,402/-. Ld. AO has wrongly taken opening stock at Rs.
120,17,89,418/- instead of Rs. 126,90,17,876/- as per audited financials at Page no. 28 of PB Vol. I. Similarly, GP rate was assumed at 30% as against the declared GP rate of 34.32% for year under consideration, which is higher than GP rate of earlier years and considered by the ld. AO.
42. We also note that AO has derived the value of stock as on the date of survey for branches like Delhi, Mumbai and Bangalore without there being any physical verification. Therefore, in the absence of physical verification and actual counting of stock at such locations, there cannot be cases of excess stock. This view is supported by judgment in case of Chawla 264 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Brothers Pvt. Ltd. v. ACIT, CC 10, Mumbai [2011] 43 SOT 651 (Mumbai -
Trib.), to support the proposition that in the absence of physical verification, no addition u/s 69B of the Act is justified as in such case, it would be case of notional valuation or excess valuation only without there being any finding of any quantity of stock found in excess. The excerpt of said judgment is given as under:
6.11.The physical stock inventory taken partly by physical counting and partly on the basis of details given by the branches could not be said to be a correct method of taking physical stock during the survey. Under the circumstances, though the assessee had not disputed inventory physical stock found for Rs. 21.91 crores but certainly the reconciliation furnished by the assessee was required to be considered in the light of the fact that the stock of branches were taken on the basis of statement given by the assessee from branches. Under the circumstances, it could be held that it was a case of survey where the normal procedure was adopted for taking physical inventory of all items of stock though the assessee was not disputing that method adopted and to compare with the stock register i.e. RG-1. If there is a difference and the same could not be explained by the assessee, then only, the addition is warranted but in the case under consideration, as stated above, the physical stock of branches taken itself on the basis of statement submitted by the assessee, which could not be said to be a physical stock as per the procedure. Therefore, the comparison itself was incorrect. However, the assessee had explained each and every item of difference by reconciliation. The Assessing Officer and Commissioner (Appeals) both had failed to point out how the reconciliation submitted by the assessee was incorrect. It could not be the matter of arguments that such differences itself could not represent the income of the assessee unless it was correlated how this difference of raw material and finished stock became the income of the assessee.
43. Similarly, in the case of the Asst. Commissioner- of Income Tax vs M/s. Saratha's, 45, N.S.B. Road, ITA No.568/Chny/2022, it was held that:
15. Coming back to difference in value of stock amounting to Rs.28,11,13,718/-.
Admittedly, the Survey Team and the AO could not establish existence of 265 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT unaccounted stock in terms of quantity of stock. In fact, the AO and the Survey Team both agreed that 'physical stock' found at the time of survey in terms of quantity is matching with stock in trade maintained with books of accounts of the assessee. In fact, all stock in trade found during the course of survey, is having tag price which is covered by valid purchase bills. The assessee has explained difference in value of stock by filing reconciliation statement. According to the assessee, the AO allowed deduction towards 5% GST, even though, the average GST component embedded in selling price works out to 8.5%. The assessee further claimed that the GP declared by the assessee for the impugned assessment year works out to 27.71%. The assessee has claimed deduction towards 'obsolete stock' @2% stock in trade. If you exclude correct amount of GST & GP and also towards 'obsolete stock' the difference in stock in trade value quantified by the Survey Team comes down to Rs.98,83,528/-. Although, the assessee could able to explain difference in stock in trade value quantified by the Survey Team before the AO but had admitted additional income on account of difference in value of Rs.28,11,13,718/- under the head 'income from business' and also paid taxes. The AO assessed said difference u/s.69B of the Act, only on the ground that the assessee could not able to explain source for 'excess stock' found during the course of survey. As we have already stated in earlier part of this order, there is a fundamental difference between 'excess stock' and 'excess value of stock'. If there is an 'excess stock' in terms of quantity and the same has not been recorded in the books of accounts maintained for that year, then, the same needs to be treated as deemed income in terms of s.69B of the Act. If there is no 'excess stock' in terms of quantity but there is a difference in value of stock on account of different method of valuation of stock, then, such difference cannot be assessed u/s.69B of the Act, as unexplained investment. The assessee has right from the beginning explained that stock difference quantified by the Survey Team is incorrect due to various factors including incorrect application of GST and incorrect application of GP. Since, there is no difference in stock in trade in terms of quantity, in our considered view, the assessee has rightly offered additional income towards difference in value of stock under the head 'income from business' and this principle is squarely covered by the decision of the Hon'ble jurisdictional High Court in the case of SVS Oil Mills v. ACIT (supra) and also decision of the Tribunal in the case of Lovish Singhal & Others v. ITO 53 CCH 0250 (Jodhpur). Therefore, we are of the considered view that the AO is erred in assessing additional income offered by the assessee towards difference in value of stock u/s.69B of the Act r.w.s.115BBE of the Act.
44. Undisputedly, in the case in hand there is no quantity of stock found in excess. No finding has been given in the assessment order as well as by 266 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT ld. CIT(A) as to any item of stock at branches or other locations of franchises found in excess during survey. Therefore, an addition made for Delhi, Mumbai and Bangalore other franchisee branches based on excel price list, ledger accounts is not justified and directed to be deleted.
45. Similarly, as far as the valuation of stock lying with consignment agent is concerned, we find that the Assessee has submitted updated ledger account after considering the effect of omission of entries, which could not be completed for COVID-19 situation and incompleteness in the books maintained, followed by relevant tax invoices and bills of entries placed on record in Vol. 6 of Paper Book for example page no. 963, 1034, 1037 followed by Page No. 1027 of said Volume. We have also gone through the supporting evidence at page no. 967, 968, 1015 containing invoice at Page No. 990 verifiable from custom document at 1015, Invoice for entry at page no. 963, r.w.s. custom document at 1016 was placed on record which were gone through in the presence of both the counsel. Thus, finding of the AO as well as CIT(A) on this point is rejected and addition on this count is also directed to be deleted.
46. The addition regarding the Museum is unsustainable due to lack of evidence for understated purchase or extra payment. Further since the 267 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT valuation done by stock of Museum is also based on valuation report which was rejected by CIT(A), there is no further basis to sustain addition made on this count.
47. Based on the discussion so recorded herein above and respectfully following the binding precedent as discussed herein above of our Hon'ble Jurisdictional High Court in the case of M/s Jewels Emporium vs. ACIT Central Circle-1, Jaipur (Supra) in DBITA No. 43/2021 and other related case laws as discussed herein above the grounds of appeal no. 3 raised by the assessee is allowed and impugned addition made u/s 69B of the Act on this issue is directed to be deleted in entirety. The orders of the lower authorities with respect to this issue are set aside and Ground No. 3 of the Assessee appeal is thus allowed in favour of the Assessee.
48. With respect to ground no. 4 & 5, the main contention of the Assessee is that Ld. CIT(A) has exceeded its jurisdiction/acted erroneously by not deleting the entire addition despite discarding the valuations reports of the departmental valuers. We find that in view of our observations while adjudicating ground no 3, these grounds of appeals become academic in nature.
268ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT
49. With respect to ground no. 6 of appeal, the main contention of the Assessee is that no show cause notice was issued u/s 251(2) of the Act, despite the Ld. CIT(A) having enhanced the assessment. We may observe that we find force in the aforesaid contention of the Assessee that provision of Section 251(2) of the Act is mandatory, however, in view of our decision in relation to ground no. 3, there is no need to adjudicate this issue separately as the same has rendered academic when the impugned addition was directed to be deleted vide dealing with the ground no. 3 and therefore, ground no. 6 raised is also become academic in nature.
50. Similarly, Ground No. 9,10,11,12,13,14,15 relates the addition of stock which we have held in favour of the assessee vide ground no. 3 above, therefore, these grounds related to that addition on various other reasons also becomes academic in nature and are disposed off accordingly.
51. Now coming to the ground no. No.7 and 8 raised by the assessee which relates to the rejection of books of accounts. On this aspect of the matter, we note that while both AO and Ld. CIT(A) both have upheld the rejection of books of account but no consequential addition estimating profit 269 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT was made. Thus, we consider this issue also become academic in nature and does not require our finding.
52. Since we have decided the appeal of the assessee on its merits the technical ground no. 1 & 2 raised by the assessee becomes academic require no adjudication.
53. Now we take up ground no. 16 raised by the assessee wherein the assessee raised the ground that ld. CIT(A) was not justified in sustaining the impugned addition on account of alleged unaccounted sale to the extent of Rs. 6,80,05,286/- out of total addition of Rs. 24,95,17,849/- based on loose slips/deaf and dumb pieces of paper. Whereas revenue vide ground no. 1 challenged the deletion of an addition for an amount of Rs.
18,15,12,563/- considering transaction for that amount as recorded in the regular books of account.
54. Apropos to the issue of unaccounted sales for an amount of Rs.
24,95,17,849/- based on the material impounded the relevant facts as emerges from the order of the assessing officer is that ld. AO made an addition of Rs. 24,95,17,849/- in respect of about 70 loose papers found and impounded during survey marked as Annexure AS-1, AS-2 of Exhibit-
7. The ld. AO deciphered the noting in various such papers to be in coded 270 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT form, with some description of item codes in these papers. The contents of each such loose paper have been reproduced from page no. 70-128 along with observations of the AO that Assessee could not get the same verified with its regular books of accounts. Vide para-No. 11.2 from page 238 onwards, Ld. CIT(A) has discussed and recorded his detailed findings along written submissions of the Assessee against the impugned contents of each of such loose papers. In conclusion, as against the addition of Rs.
24,95,17,849/- made by the ld. AO, ld. CIT(A) sustained the addition of Rs.
6,80,05,286/- having allowed partial relief to the Assessee as per details mentioned on page no. 286-289 of his order.
The assessee is in appeal against the sustained amount of addition.
Whereas the revenue is in appeal before us against the deletion of addition to the extent of Rs. 18,15,12,563/-.
55. As regards the sustained addition of unexplained sales for an amount of Rs. 6,80,05,286/-, ld. AR of the assessee argued that he has placed on record a detailed chart explaining that the addition sustained by ld. CIT(A) are contrary to the same finding while dealing the majority part of the addition deleted, which has not been considered and based on the said 271 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT chart, he prayed to delete the addition so sustained by Ld. CIT(A). The chart submitted by the ld. AR of the assessee reads as under :
56. Therefore, based on the chart so placed on record, the ld. AR of the assessee prayed that addition of Rs.6,80,05,286/- was sustained merely based on the loose slips/deaf and dump documents. Additions cannot be sustained in the hands of the assessee, the same is explained by a detailed explanation from the same set of record which were considered by the ld. CIT(A) while deleting the addition of Rs. 18,15,12,563/-. On this issue ld. AR of the assessee reiterated his written submission filed before 272 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Ld. CIT(A). It has been submitted that these loose papers are memorandum noting by sales staff, employees of the Assessee in the form of slip pads/ loose sheets and nowhere signifies unrecorded sales. Our attention was drawn to the reply dated 23.12.2022 and documentary evidence available on page no. 1151-1285 of PB Vol. 7. The Ld. Senior counsel has further explained that noting in slip pads/rough pads are estimations which were written sometimes during negotiations with the customers, there are so many pages crossed in the rough pads containing memorandum/ noting's with no financial implication for an amount of Rs.
4,36,76,001/-. He also submitted that the allegation of Ld. AO `of alleged unaccounted sale is contrary from own stand of the department itself, as items code written in the Slip pads/Diary/Loose papers are mentioned in the department valuation report of stock valuation itself which establishes that such goods are part of the recorded inventory. Ld. Senior counsel has contended that there is no corroborative material/evidence with the department except loose slips. No unaccounted cash was found during the survey. For the sustained addition ld. AR of the assessee filed a chart as extracted herein above explaining as to why the addition is sustained is required to be deleted. Alternatively, he submitted that the addition can only 273 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT be made as to the profit embedded to the extent of the alleged unrecorded sales for an amount of Rs. 4,36,76,001/-.
57. On submission of the above chart by the ld. AR of the assessee claiming that the same are verifiable with the records filed in the paper book. Ld. DR seek time to verify the contention so raised by the ld. AR of the assessee. Subsequently ld. DR did not object to the submission of the ld. AR of the assessee for the item listed as per serial number 5 to 8 which amount to Rs 2,43,29,285/-. Thus, ld. DR for the balance amount prayed to sustain the addition as loose papers establishes that unaccounted sale was done for an amount of Rs. 4,36,76,001/-.
58. In the rejoinder the ld. AR of the assessee submitted that looking to the nature of business when the assessee got verified majority of the entry with the records explaining the same either lying with the stock or that the same was accounted for in the sales recorded by the assessee and therefore, ld. AR of the assessee placing reliance on the following judicial precedent prayed to delete the addition sustained by the ld. CIT(A):
CBI v. V.C. Shukla 1998 taxmann.com 2155 (SC) Loose sheets have been ruled out as of any evidentiary value. Loose sheets cannot be accounts books of a party. Even if it is taken as an informal accounting it is not the record of the assessee. Even assuming such entries as correct and authentic they cannot without independent evidence fix a liability upon a person. In 274 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT that connection the court also referred to Section 9 of the Evidence Act and observed that even if such entries are admissible under the said provisions to support an inference about correctness of the entries still such entries would not suffice without supportive independent evidence. They have no probative value in the absence of some corroborative primary evidence of the reality of such transaction shown in the noting in such loose sheets of paper. Even entries in the books of account need corroboration before acting against the third party on the basis of any entry in the books of account of a person.
Common Cause (A Registered Society) v. Union of India [2017] 394 ITR 220/ 245 Taxman 214 (SC)/ [2018] 9 SCC 382 Loose sheets of papers are wholly irrelevant as evidence being not admissible under section 34 so as to constitute evidence with respect to the transactions mentioned therein being of no evidentiary value. The entire prosecution based upon such entries which led to the investigation was quashed by this Court. [Para 20] Sant Lal v. Commissioner of Income-tax [2020] 118 taxmann.com 432 (Delhi) In view of the aforesaid facts and the concurrent findings given by the CIT (A) and ITAT, it is evident that the Revenue has not been able to produce any cogent material which could fasten the liability on the respondent. The CIT(A) has also examined the assessment record and has observed that the AO did not make any further inquiry/investigation on the information passed on by the DCIT, Central Circle-19, New Delhi. No attempt or effort was made to gather or corroborate evidence in this relation.
CIT v. Shadiram Ganga Prasad, 2010 UPTC 840 (Allahabad) Court held that the loose parchas found during search at the most could lead to a presumption, but the department cannot draw inference unless the entries made in the documents, so found are corroborated by evidence.
Ajay Gupta v. CIT [2020] 114 taxmann.com 577 (Allahabad) No addition could be made on account of undisclosed income only on basis of presumptions under section 132(4A) without recording any findings as to how loose sheets found during search were linked to assesse.
CIT v. Maulikkumar K. Shah [2008] 307 ITR 137 (Guj.) 275 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT The decision of Commissioner of Income-tax (Appeals) and the Tribunal were upheld holding that no addition was justified on the basis of these loose papers. In this case, nothings in the seized diary found from the premises were the only material on the basis of which the A.O. had made the impugned additions. The A.O. had not brought any corroborative material on record to prove that such sales were made and 'on-money' was received by the assessee outside the books of account. The A.O. had not examined any purchaser to whom the sales of shops were effected. Onus heavily lay on the revenue to prove with corroborative evidence that the entries in the seized diary actually represented the sales made by the assessee. Such onus had not been discharged by the revenue. Mere entries in the seized material were not sufficient to prove that the assessee had indulged in such a transaction.
Layer Exports Pvt. Ltd. v. ACIT, CC-21, Mumbai [2017] 88 taxmann.com 620 (Mumbai-Trib.) While making an assessment, additions are required to be supported by tangible evidence and not by what Assessing Officer believes to be a prevalent practice. No inference can be drawn on the basis of market gossips unless backed by corroborating evidence.
Smt. Harmohinder Kaur v. Deputy Commissioner of Income tax, CC-II, Jalandar [2021] 124 taxmann.com 68 (Amritsar - Trib. We are of the view, diary seized during the survey/search operation, without corroboration, have no authenticity and therefore, cannot be relied upon. Even entry recorded in the diary qua amount of sale was not confirmed from the buyers of the property and without confirmation, question of any assumption or belief that the entry belongs to the assessee did not arise and hence entry found in diary without any corroborative evidence, cannot be made basis of addition. The authorities below in the instant case, made the addition only on the basis of surmises, suspicion and guess work. Hence, respectively following the judgments referred above we are unable to sustain the addition made by the Assessing Officer and affirmed by the Ld. CIT(A). Consequently we are inclined to delete the same, resultantly the appeal of the assessee is liable to be allowed.
S.P. Goyal v. Dy. CIT [2002] 82 ITD 85 (Mum.) ™ Loose papers cannot be termed as books of an assessee maintained for any previous year. Loose sheet of paper torn out of a diary could not be construed as books for the purpose of section 68. Addition could not be made simply on the basis of certain nothings on loose sheets of a diary without any corroborative evidence in the form of extra cash, jewellery or investment outside the books. The loose papers appear to be part of a 1992 diary. However, these loose papers consist of pages torn out from March, April, November and December. There is no closing balances or opening balances and there is no reconciliation of these entries. Therefore, it cannot be termed as books maintained by the assessee during the previous year. . . . The loose paper in itself has got no intrinsic value.276
ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT ...When it is a mere entry on a loose sheet of paper and if the assessee claims that it was only a planning, not supported by actual cash, then there has to be circumstantial evidences to support that this entry really represent cash of Rs. 60 lakhs. There is no such evidence found by the Revenue in the form of extra cash, jewellery or investment outside the books.
Amarjit Singh Bakshi (HUF) v. Asstt. CIT [2003] 86 ITD 13 (Delhi) ™ Held that any noting in the loose sheet is no evidence by itself. An entry in the books of account maintained in the regular course of business is relevant for purposes of considering the nature and impact of a transaction, but nothings on slips of paper or loose sheets of paper cannot fall in this category. Nothings on loose sheets of paper are required to be supported/corroborated by other evidence which may include the statement of a person, who admittedly is a party to the nothings. It was further observed in that case that the provisions of the Indian Evidence Act are not strictly applicable to the proceedings under the IT Act, but the broad principles of law of evidence do apply to such proceedings. ACIT v. Sharad Chaudhary [2015] 55 taxmann.com 324 (Delhi -Trib.) Held that a loose paper found during search standalone could not be used as a basis for making impugned addition without the company of any other 276upport- tive material and evidence more so when contents of main three parts of the notings were not interlinked and the Assessing Officer had deleted decimal from noting of the figure of Rs. 4,47,000.00 for reading and accepting the same as Rs. 4,47,00,000 which was not permissible in absence of other supportive evidence. The addition was, therefore, deleted.
D.A. Patel v. Dy. CIT [2000] 72 ITD 340 (Mum.) There was no evidence connecting the appellant to this seized paper. Simply because a sheet of paper was found during the search at the premises of an assessee, he could not be saddled with a tax liability unless it could conceivably be related to the assessee in some reasonable manner.
ITO vs. Kranti Impex Pvt Ltd ITA No. 1229/Mum/2013, Mr. Abdul Khader Kodi, Kasargod vs. DCIT Central Circle-2, Mangaluru ITA No. 636-638/Bang/2023
59. We have perused the material placed on record and written submissions and gone through the reasoning given by the Ld. CIT(A) for deleting the addition in part and upholding the addition on other part. The Ld. DR has not been able to point out any infirmity in the reasoning of the Ld. CIT(A) with respect to deletion of addition wherein the item codes 277 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT mentioned in the loose slips matched with that mentioned in the list of inventory/invoices presented by way of chart.
Not only that the assessee-appellant while arguing his appeal for the sustained addition submitted a chart explaining a sum of Rs. 2,43,29,285/-
on the same line which was accepted by the ld. CIT(A) was presented to ld.
DR for her comments on the contentions so raised and to verify the same with the records produced by the assessee. The ld. DR did not dispute the contention recorded in that chart after due verification and with that of the amount recorded in the order of the ld. CIT(A) and further claimed by the assessee. Therefore, we do not find any merits in ground no. 1 raised by the revenue and the same is dismissed.
60. Now coming to the ground for sustained addition for an amount of Rs.
6,80,05,286/- raised by the assessee-appellant, we note that when the ld.
DR confronted, she did not dispute the amount for an amount of Rs.
2,43,29,285/- based on the same reasons as given by the ld. CIT(A) supported by the chart which was given to ld. DR for verification and after verification she did not dispute the contention for an amount of Rs.
2,43,29,285/-. But for the balance amount of Rs. 4,36,76,001/- she did not and we also agree with the contention of the ld. DR that the same are 278 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT required to be explained and cannot be deleted considering that amount based on the deaf and dump documents when majority of the transaction were explained by the assessee-appellant.
The bench also noted when the assessee out of total addition of Rs.
24,95,17,849/- able explain the amount of Rs. 18,15,12,563/- before ld.
CIT(A) and by way of a chart before us for an amount of Rs. 2,43,29,285/-, we do not find merit for the balance amount of Rs. 4,36,76,001/- to be deleted mere considering the same as deaf and dump documents. As is also evident that the loose slips contain noting's maintained in systemized manner and we do not find force in the explanation of the Assessee that there is no case of any unaccounted sale based on such vague, cryptic and non-speaking contents of the loose papers in absence of any corroborative material/evidence cannot be accepted.
At the same time, we agree on the aspect of the alternative arguments raised by the ld. AR of the assessee-appellant that an entire amount cannot be added in the hands of the assessee-appellant, but the profit element embedded in the alleged sale is taxable. To drive home to this contention, he relied upon the following judgments.
279ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT On unaccounted sales only profit rate could be tax
17. Commissioner of 2. The facts giving rise to the present case are the at during the Income-tax v. course of survey conducted on the premises of the assessee on 1-12- President Industries 1994, from the excise records, found inference was drawn by the [2002] 124 TAXMAN Assessing officer from the movement of finished goods from the 654 (GUJ.) premises of the assessee to godowns that sales amounting to Rs.
29,01,300 have not been disclosed in the books of account. The AO made the addition for the entire sum of the said undisclosed sales as income of the assessee for the assessment year 1994-95. The addition on account of undisclosed was affirmed by the Commissioner (Appeals) to the reduced sum of Rs. 28,35,883. On further appeal, the Tribunal found that the entire sales could not have been added as income of the assessee for the assessment year in question but only to the extent the estimated profits embedded in the sales for which the net profit rate was adopted entailing addition of income on the suppressed amount of sales.
18. Commissioner of 4. The revenue, being aggrieved with the order of Commissioner Income-tax v. (Appeals) carried the matter before the Tribunal. At the time of hearing Gurubachhan Singh there was difference of opinion between the two Members of the J. Juneja [2008] 171 Tribunal. Ultimately, the matter was referred to 3rd Member of the Taxman 406 Tribunal, who agreed with the view adopted by the Accountant (Gujarat) Member. The Tribunal held that the assessee could not be taxed on the entire amount of Rs. 10,85,003, but, was liable to be taxed only on the gross profit earned on the said sales. The basis of this finding is the fact that all the purchases are from reputed companies and/or their dealers and such purchases are fully vouched.
Hence, the finding of the Tribunal that only the gross profit on the said amount can be brought to tax does not call for any interference
19. Jyotichand The Assessing Officer has made addition of entire Bhaichand Saraf & unaccounted/suppressed sales without appreciating the fact that the Sons (P.) Ltd. v. entire sales could not be added as the income of the assessee but the Deputy addition could be made only to the extent of gross profit earned on the Commissioner of unaccounted/suppressed sales. [Para 15] Income-tax, Circle 11(1) [2012] 26 taxmann.com 239 (Pune)
20. Shri Nawal Kishore 23.4 It is settled law that not only from the illegal business but also the Soni Vs. The ACIT unaccounted transaction of purchase and sale only profit/ income on Central Circle - 3 sales could be assessed as undisclosed income and could be Jaipur, ITA No. 1256, subjected to tax. Case laws to the point are as under:
1257, & 1. Dr. T.A. Quereshi (157 taxmann.com 514) (Supreme Court) 1258/JP/2019, dated 2. Piara Singh (124 ITR 40) (Supreme Court) 15.09.2020 3. S.C. Kothari (82 ITR 794 (Supreme Court) 280 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Respectfully following the judicial precedent cited we direct ld. AO to tax the profit element on the balance amount of Rs. 4,36,76,001/-. Now having reached to the said conclusion we note that ld. AO considered the gross profit @ 30 % whereas the gross profit declared by the assessee at 34.32%. Therefore, we deem it fit to so as to meet the end of justice to tax the profit @ 34.32 % on the amount of Rs. 4,36,76,001/- remained to be explained, as survey year income under the business income head as income for an amount of Rs. 1,49,89,604 [ Rs. 4,36,76,001/- * 34.32 % ] and thereby the assessee further get relief to the extent of Rs.
5,30,15,682/- [ Rs. 2,43,29,285/- + ( 4,36,76,001 less 1,49,89,604= 2,86,86,397/-) ].
Based on these observations, ground no. 16 raised by the assessee is allowed in part.
61. Now coming to ground no. 17 and 18 raised by the assessee, the brief facts related to the issue are that ld. AO made addition of Rs. 11.40 Crore vide para no. 5 of the Assessment Order on account of unrecorded sales in respect of 41 high value items, which according to Ld. AO were found short during survey. The list of such items with column heading 281 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT selling price is mentioned in Assessment Order at page no. 134 and the same reproduced herein below for the sake of convenience :
282ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT 283 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT
62. As is evident that in the first appellate proceeding, the Assessee adduced affidavits of the parties to whom these items were explained to be sent for repairs, however this evidence so submitted were not accepted u/r 46A of the IT rules by the CIT(A). In Para No. 12.2 of his order vide which he rejected the additional evidence.
63. The Ld. Senior counsel submitted that the Assessee during post survey proceeding on 05.04.2021 submitted an explanation that out of 41 items, some items were shown during survey itself to departmental authorities, and remaining items were sent for repairs, with list of all items with pictures submitted to department. A letter dated 05.04.2021 to that effect was available in paper book page no. 905-908 of PB Vol. 5. Ld. AR of the assessee vehemently argued that it is routine practice to send items for repairs/rework in this industry and items sent for repair are miniscule as compared to the total items in the inventory and entire addition has been made on mere suspicion. It has been further argued that the value of item at Sr. No. 1 of the said list has been incorrectly taken and was explained to be typing mistake by Mr. Rajesh Ajmera in his statement recorded during survey. The net gms of such an item is about 478.5 gms only and even applying gold rate prevailing at the time of the survey, the explanation of Mr. Rajesh Ajmera in his statement deserves to be accepted. The ld. AR of 284 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT the assessee further submitted that Mr. Rajesh Ajmera in his statement recorded during the survey itself stated that items have been sent for repairs. No adverse view is called for merely for difference in the items claimed to be sent for repair. A Letter dated 5.04.2021 clarifying in this regard was sent to the department and the same is reproduced herein below:
285ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT Thus, once the identity of the parties to whom items were sent for repair and list of various items sent on repairs was established, there remains no case of upholding the addition merely on the ground that supplementary evidence were adduced during appeal stage as AO himself has not given any further show cause notice or opportunity during assessment proceedings. The ld. AR of the assessee alternatively submitted that in any case the entire value of the items cannot be added as per the tag price and only the profit embedded at most can be taxed.
64. The Ld. DR has pointed out defects in the affidavits to show they are unreliable and argued that explanation of the Assessee is afterthought and deserves to be rejected. She argued that no supporting documents has been adduced, and it is highly impracticable that items were sent for repairs without any documentations and placed reliance on the Order of Ld. CIT(A).
65. In the rejoinder filed by the Assessee, the assessee has submitted its counter submission against departmental arguments as follows:
Arguments of department Rejoinder/Counter Arguments of the Assessee 286 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT
1. Affidavits of artisan and • In support of the fact that the items were sent for Amarpali Design Studio has repair, the Appellant submitted affidavits from the been submitted after lapse of concerned parties. However, the Ld. AO did not sufficient time and that too conduct any independent inquiry from the parties during appeal proceedings during remand proceedings before rejecting their before Ld. CIT(A)) affidavits.
2. PAN Nos are not mentioned in • Merely because it was submitted before Ld. CIT(A) affidavits only does not absolve the AO from performing its duty to check the veracity of the affidavits.
3. No details when such items • There is no inquiry or verification if there were were sent for repairs. some doubts or suspicion. It is clarified that there was no previous occasion for submission of these
4. There are no affidavits as Ld. AO during the assessment invoice/challan/bills of proceedings did not confront the Appellant for any whatsoever nature, and no shortcomings in the supporting documents supplied supporting documents during assessment proceedings.
submitted.
• The Appellant clarified the position before the DDIT(Inv) on 05.04.2021 itself regarding various items sent for repairs and in the statement of Mr. Rajesh Ajmera, the fact of items sent for repairs was establishes and photos of items shown.
• The details of the parties were duly given on 5.04.21 before the investigation wing. Refer page 905- 908 PB VOL 5.
• Delay in submission of additional evidence, is not a valid ground for rejecting them, especially without conducting an independent inquiry from the parties whose affidavits were submitted. In this context, the Appellant places its reliance in case of Mehta Parikh & Co. v. CIT [1956] 30 ITR 181 wherein Hon'ble Apex Court has held that unless the person making the statement in the affidavit is cross-
examined by the revenue, it is not open to the revenue to challenge the correctness of the statement made by the deponent in the affidavit.
Further Reference Deputy Commissioner of Income-tax v. Smt. Jayita Bose, [2004] 3 SOT 525 (KOL.) (Refer S. No. 21 of the case compilation) • It is humbly submitted that in the jewellery industry, it is a common practice for items to be sent for repair based on mutual trust between the parties involved as items are sent to known person/parties with huge trust and primary artisan with low-
income level but very high trust in them. The repair 287 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT process for a trading company is typically not documented in the same way as being wishes of the Ld. DR considering the faith and nature of the jewellery industry.
• Furthermore, it is important to note that only few items, which is very small fraction out of the total inventory of more than three thousand items of gold and more than 14 thousand items of silver, were found deficient and reasonably explained to be sent for repair by the Appellant.
• This itself proves that vast majority of the stock remained present at time of impugned valuation by department.
• Therefore, there is no ground to reject the explanation of the Appellant which is reasonable and justified.
• No contrary evidence has been brought on record to negate the explanation of the Appellant, mere doubts or insufficiency of trails are being argued, which is not justified.
• Based on the stance taken by the Ld. AO, the inference is that no item could have been sent for repair, which is an unreasonable and flawed conclusion. Such an assumption disregards the customary practices in the jewellery industry, where repair activities often occur, especially when dealing with trusted parties.
• The Ld. DR has simply disapproved the affidavits without even seeing them and blindly placed reliance on one liner general comments of Ld. CIT(A) in its impugned order.
• From the face of the affidavits placed on records, the identity, purpose, details of the movement and other particulars are duly established, which supports the details submitted during post survey proceedings itself. Kindly refer to page no. page 905- 908 PB VOL 5. duly supported by affidavits at page no. 1745-1754 of Vol. 9.
• The nature of work done and fact of items were sent for repair/refurbishing etc, is very much evident from affidavits of parties placed on record.
288ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT
66. We have considered the rival submission and material placed on record, written submission and affidavit and other supporting documents placed by Assessee to justify its explanation submitted during survey as well as in post survey proceeding. We find that factual position of 41 high value items was duly clarified to investigation wing on 05.04.2021 itself vide letter dated 05.04.2021 Page No. 905- 908 PB Vol 5 and nothing on record to show that department has ever controverted the same. The names of the parties to whom items were sent for repair and received back were also given to investigation wing post survey at the available time considering COVID-19 situation/restriction. The department has not conducted any further verification from the parties. There is also force in the argument of the Ld. Senior counsel that considering the value of gold content in items appearing at Sr. No. 1, the typing error explained by Mr. Rajesh Ajmera in his statement in answer to Q. No. 40 (Page No. 142-143 of Vol. I) deserves to be accepted. Thus, the documentary evidence in form of affidavits placed on record, were in furtherance to the substantiates the explanation of the assessee regarding these items of jewellery that it were sent for repairs. The explanation of the Assessee is plausible that in the jewellery industry, the Artisens are individuals or person of unorganized sector who are trustworthy person, similarly repair work has been done through sister 289 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT concern. We also find that out of thousands of inventory items, only 41 items were not found during the survey. The Assessee has shown repair/job work charges in his audited financial statements, for which relevant nature of work performed has also been shown to us during hearing on sample basis. No evidence of sale of such items has been found during the survey. Needless to say burden to prove is on the department. Hence, in the absence of any corroborative material, no inference that items were sold outside the books can be drawn. These affidavits cannot be rejected at threshold without any inquiry or cross examination, the AO as well as CIT(A) has not made any inquiry or cross examined these persons. Thus, unless the parties are cross examined, it is not open to the department to simply discard these affidavits Our view is supported by judgment of Hon'ble Apex Court in the case of Mehta Parikh & Co. v. CIT [1956] 30 ITR 181 wherein Hon'ble Apex Court has held that unless the person making the statement in the affidavit is cross-examined by the revenue, it is not open to the revenue to challenge the correctness of the statement made by the deponent in the affidavit. The bench also noted that for the impugned addition of Rs. 11.40 crores made on account of non availability of high value 41 items of jewellery the proof that 30 items were sent on repairs and 11 items were traced on the same day and shown as to 290 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT search team and the ld. DR did not dispute that primary information placed on record by the assessee vide letter dated 05.04.2021. This letter was filed by the assessee at page No. 905 volume (v) of the paper book placed on record and therefore, that amount cannot be considered as unaccounted sales because the revenue did not deal with the contention of the assessee which was duly supported by the evidence placed on record and supported by the affidavit placed on record. In the light of this observation ground no. 17 raised by the assessee stands allowed.
67. Ground no. 18 deals with the addition referred to in ground no. 16 & 17 raising the ground that the whole amount of sales cannot be added but only the profit embedded to it can be taxed. Since we have while dealing with ground no. 16 accepted these arguments and addition was deleted vide ground no. 17 this ground no. 18 raised by the assessee stands allowed.
68. Ground no. 19 raised by the assessee asking the telescoping benefit of the excess stock with that of the amount considered as unaccounted sales by the ld. AO. Since we have deleted the excess stock amount added by the lower authority therefore, this ground raised by the assessee becomes adjudicative in nature.
291ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT
69. Ground no. 20 & 22 raised by the assessee for levy of tax as per provision of section 115BBE of the Act and Charge of interest as per provision of section 234A/B/C of the Act, being consequential in nature does not require our specific finding.
70. Ground no. 21 raised by the assessee deals with the adjustment of the unabsorbed depreciation of Rs. 1,03,23,047/- against impugned additions made. The ld. AR of the assessee argued that additions made by the ld. AO and ld. CIT(A) fundamentally flawed bad in law and as such, ld.
CIT(A) was not justified in not adjusting unabsorbed depreciation against the impugned additions, which are not tenable. Alternatively, it was contended that if the additions are sustained, the unabsorbed loss / depreciation should be adjusted to the extent of additions made.
The ld. CIT(A) upheld the decision of the ld. AO. Before us the ld. AR of the assessee submitted that whatever addition sustained in this order shall be adjusted against the unabsorbed depreciation / business loss. On this aspect since the same is required to be set off and there is no specific objection raised by the revenue we considered this ground as 292 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT consequential in nature and accordingly, this ground is disposed off accordingly.
71. Ground no. 23 raised by the assessee, being general ground does not require our finding.
72. Now we take up ground no. 2 raised by the revenue in ITA No. 740/JP/2024. In that ground revenue challenges the finding of the ld.
CIT(A) while deleting the addition of Rs. 11,65,000/- made on account of unaccounted expenditure holding that the seized documents relied upon in the assessment order are dumb documents. Apropos to this ground ld. DR stated that in the survey proceeding certain incriminating documents were found and seized as per annexure- AS. The page upon which the ld. AO found that the assessee has made the unaccounted expenditure and the list of the document wherein the expenditure recorded are as under:
Page no. Amount recorded
115 of Exhibit 3 of Annexure AS Rs. 2,00,000/-
119 of Exhibit 3 of Annexure AS Rs. 2,10,000/-
120 of Exhibit 3 of Annexure AS Rs. 2,00,000/-
122 of Exhibit 3 of Annexure AS Rs. 5,55,000/-
293
ITA Nos. 740 & 750/JP/2024
Amrapali Jewels Pvt. Ltd. vs. ACIT
Total Rs. 11,65,000/-
73. Based on these pages wherein the unrecorded expenditure were recorded ld. AO issued a detailed show cause notice along with notice u/s 142(1) dated 23.11.2022. In response to the show cause notice, the assessee filed a reply on 23.12.2022. The ld. AO considered the reply and submissions made by the assessee, but the same were not found to be fully convincing and acceptable and therefore he added unaccounted expenditure of Rs. 11,65,000/- u/s 69C of the IT Act. Ld. DR thus supported the finding recorded in the order of the assessee and stated that the finding of the ld. CIT(A) be set aside and that of the ld. AO be restored.
74. Ld. AR of the assessee submitted that the addition was made by AO u/s 69C of the Act in respect of diary seized who was ex-employee of the assessee. The revenue could not meet the burden before invoking section 69C of the Act. Not only that the content of the diary were not having any nexus with Assessee, therefore, the Ld. CIT(A) has correctly deleted the addition. He drew our attention to relevant findings of the CIT as given in Para No. 13.2. The assessee's representative argued that the revenue 294 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT could not present any contrary evidence against the view of the learned CIT(A).
75. We have heard both the parties and perused the materials available on record. Apropos to ground no. 2 raised by the revenue the brief facts are that in the survey proceedings at the business premises of appellant Company certain incriminating documents were found and seized as per Annexure-AS. Learned AO has noted that expenses of Rs. 11,65,000/-
were made under various heads by the appellant and the same were considered as unexplained expenditure under section 69C of the Act. The pages relate to the personal diary of an employee, Mr. Himansu Danghi who left the organization in the year 2018-19. He was handling the affairs of franchisee of the assessee company. The diary relets the calendar year 2018 and all these pages were for the month of October 2018. Even the diary under question was Rough Diary is of any DS Group (Dharampal Satypal Group), not of assessee company. On top of the page (Personal Memorandum) of this diary he has written his personal details viz his name, address, details of his Insurance Policy, his PAN number, details of his personal doctor, emergency contact no. of his wife Isha and Brother etc., 295 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT which proves that this is his personal diary of that employee and not of the assessee company. In the written submission the assessee contended that on these pages some figures were written against some names and company does not have any relation to any of the names mentioned on that page. It is also seen that some mobile numbers are written on top and bottom of the page which he might have written for his personal reference.
On the Extreme bottom of the page, he has written date which is 31.10.2018, which clearly reflects that this rough diary relates to October 2018 and the names against which some amount is mentioned is also for his personal reference which does not have any relation to any transactions of the company. We also take note of the fact upon submission of the assessee ld. AO has not rebutted the submissions of the assessee on the issue on the facts and no third-party enquiry was conducted. also been done. Further the contention of the appellant that these do not pertain to the appellant has been explained by the appellant from the contents on the document. Even if at all the same is related the said amount cannot be added in the year under consideration as it does not pertain to the year under consideration. The ld. CIT(A) dealt with all the contention of the assessee and has also given the page wise finding on the issue and that same was not proved to be wrong by the revenue by filling any evidence 296 ITA Nos. 740 & 750/JP/2024 Amrapali Jewels Pvt. Ltd. vs. ACIT and therefore, we are of the considered view that there is infirmity in the finding so recorded by the ld. CIT(A) and therefore, ground no. 2 raised by the revenue stands dismissed.
In the result, the appeal filed by the assessee is partly allowed and that of the revenue stands dismissed.
Order pronounced in the open court on 19/02/2025.
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(Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai)
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Tk;iqj@Jaipur
fnukad@Dated:- 19/02/2025
*Ganesh Kumar, Sr. PS
vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:
1. The Appellant- Amrapali Jewels Pvt. Ltd., Jaipur/DCIT, Jaipur
2. izR;FkhZ@ The Respondent- ACIT, Central Circle-01, Jaipur
3. vk;dj vk;qDr@ The ld CIT
4. vk;dj vk;qDr¼vihy½@The ld CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA Nos. 740 & 750/JP/2024) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar