2015 (7) TMI 1186 - HC - Income Tax

Addition on account of the alleged excess stock found at the time of search - Held that - The sister concern, namely ; M/s. Rajendra Prasad Narendra Kumar is closely related with the partners and there was common business of both the concerns and though the shops are at a distance but the distance between the two concerns is about 100 meters only. The claim that both the concerns being closely related, was proved on the basis of the material found during course of search that the assessee was newly constituted and M/s. Rajendra Prasad Narendra Kumar being an old concern, goods were being transferred from M/s. Rajendra Prasad Narendra Kumar and vice versa to the present assessee and during the course of search itself, the partners in question No. 6 specifically asserted that the stock of M/s. Rajendra Prasad Narendra Kumar is also vailable at the premises of M/s. N. G. Jewellers (assessee). It is also admitted that silver items to the extent of 15.5 kgs. pertaining to stock of M/s. Rajendra Prasad Narendra Kumar was lying at the residence of the partners of the assessee firm at the time of search and on the, same material, this was held to be explained. It has also come on record that stock to this extent was found short at the time of survey simultaneously held at the business premises of Rajendra Prasad Narendra Kumar. Thus, on the said fact that the items used to be exchanged between the two sister concerns and admittedly proved, in our view, this being essentially a finding of fact based on the material available on record, no substantial question of law can be said to arise out of this addition. Purchase of jewellery - During the course of the assessment proceedings, the assessee also furnished affidavits of the above persons where they asserted that they had purchased jewellery from the assessee and paid the amount subsequently and even they had confirmed that no amount was outstanding as on the date of search. It is a finding of fact that the Assessing Officer did not call upon the persons who had filed affidavits. It is also a finding of fact that the statements of two persons, namely ; Ghasi Ram and Karan Singh were later on recorded by the Assessing Officer wherein they stated that they had paid the amount prior to the search. When admittedly all these persons have been found to have purchased goods from the assessee and adequate material was placed by the assessee before the Assessing Officer, the Tribunal has analysed the material based on the finding of fact and in our view, this being essentially a finding of fact, no substantial question of law can be said to arise out of this addition as well.

Summary

Issues:
Income-tax appeal under section 260A of the Income-tax Act, 1961 against the order passed by the Income-tax Appellate Tribunal relating to assessment year 2006-07.

Analysis:
1. The respondent-assessee derived income from trading gold and silver ornaments as a partnership firm. A search conducted at the business premises led to the initiation of proceedings under section 153C of the Income-tax Act.
2. The Assessing Officer raised queries regarding unexplained stock of gold and silver and the source of advanced amounts to parties. Despite explanations, additions were made to the income.
3. The Commissioner of Income-tax (Appeals) deleted the additions after considering explanations and supporting documents provided by the assessee.
4. The Revenue appealed to the Tribunal, which upheld the CIT(A)'s order, leading to the current appeal.
5. The appellant contended that the additions were justified due to lack of satisfactory explanations and proper documentation.
6. The court examined the arguments and material on record.
7. The court found no substantial question of law in the Tribunal's order.
8. Regarding the addition for unexplained stock, it was established that the sister concern was closely related, and goods were exchanged between the two concerns, justifying the deletion of the addition.
9. The addition related to advanced amounts was also justified by the assessee's ability to prove sales and payments through affidavits and supporting documents, leading to the deletion of this addition as well.
10. The court concluded that no interference was required in the Tribunal's order, dismissing the appeal.

This detailed analysis of the judgment highlights the issues involved, the arguments presented, and the court's reasoning for upholding the Tribunal's decision in the income-tax appeal case.