2013 (6) TMI 329 - AT - Income Tax

Unaccounted transactions of receipt of jewellery - addition of labour charges - CIT(A) deleted the addition - search and seizure operation carried out u/s 132 - Held that - It is a case where the receipt of the said jewellary on approval basis was duly recorded in the books of accounts of both parties, namely M/s. Auro gold Jewellery P. Ltd and the assessee. No incriminating document was found and seized during the course of search and survey operation in the cases of M/s. Auro gold Jewellery P. Ltd. and the assessee to prove that these goods were not sent on approval, but these were the sales and purchases of the two parties. In such circumstances, there is no case for taking any adverse inference. Undisputedly, it is an admitted fact that AO did not make any addition of unaccounted purchase of the impugned jewellary received by the assessee on approval basis. However, AO made only the addition of labour charges at Rs. 60/- per gm on the entire stock of jewellery sent to the assessee on approval basis. There is no evidence whatsoever to suggest that the assessee manufacture the said stock received on approval basis and assessee is due to receive the labour charges from M/s Auro gold Jewellery P. Ltd in lieu of any services rendered by the assessee in this regard. Thus such addition on account of labour charges constitutes a case of addition based on surmises or suspicion. Therefore agreeing with the findings of the CIT(A)- appeal of the Revenue is dismissed.

Summary

Issues Involved:
Appeal against order of CIT (A) for assessment year 2009-2010 regarding addition of Rs. 21,35,123/- for receipt of jewellery on approval basis and its return.

Analysis:

Issue 1: Addition of Rs. 21,35,123/- for receipt of jewellery on approval basis
- The Revenue challenged the deletion of the addition by CIT (A) regarding the receipt of jewellery on approval basis.
- The assessee, a jewellery merchant, declared income of Rs. 15,36,170/- and claimed to have received jewellery worth Rs. 21,35,123/- on approval basis.
- A search and seizure operation revealed that jewellery was sent to the assessee on approval basis by another company. The assessee maintained a consignment account for these transactions.
- The AO rejected the claim, but the CIT (A) allowed the appeal based on the consignment account and lack of incriminating evidence.
- The Tribunal upheld the CIT (A) decision, noting that the transactions were duly recorded, no incriminating evidence was found, and the addition of labour charges lacked supporting evidence.

Issue 2: Justification of the CIT (A) decision
- The CIT (A) considered the submissions and facts, concluding that the jewellery transactions were genuine consignment activities.
- The Tribunal agreed with the CIT (A) that no adverse inference could be drawn due to the absence of incriminating evidence.
- The AO's addition of labour charges was deemed speculative without evidence of manufacturing or service provision by the assessee.
- The Tribunal found the CIT (A) decision reasonable and confirmed the dismissal of the Revenue's appeal.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the CIT (A) decision regarding the deletion of the addition for jewellery received on approval basis. The judgment emphasized the importance of documented transactions and lack of incriminating evidence in tax assessments.