2014 (4) TMI 859 - HC - Income Tax

Restriction of addition of excess stock of silver Investment in excess stock of gold jewellery Held that - As regards the gold jewellery item, the Tribunal pointed out that the degree of error found in the weighing scales, warranting a reasonable deduction of 5% - the weighing of jewellery along with tax was also held to be not bad - the tax could not be included in the stock - as regards the stone studded jewellery 20% rebate as against 10% was allowed as against the Silver articles the Tribunal pointed out that there was an incorrect weighment of silver articles - The available scales could weigh articles only up to 6kgs at a time, whereas the serial numbers of the inventory list of the silver articles indicated the weight of items far exceeding the said upper limit - The order of the Tribunal shows a detailed discussion on the various aspects on the stock seized and the variations worked out by the AO - the appellate authority recorded its findings based on materials and this was considered and confirmed in toto by the Tribunal - the factual finding by the Tribunal is based on material and no exception could be taken to that thus, the question is a pure question of law Decided against Revenue.

Summary

Issues:
1. Addition of excess stock of silver
2. Restriction on addition made on account of investment in excess stock of gold jewellery

Issue 1: Addition of Excess Stock of Silver
The case involved a partnership firm engaged in retail business of gold and diamond jewellery, silver wares, stainless steel articles, and furniture. A search operation conducted by the Investigation Wing of the Department led to the seizure of gold ornaments and certain documents. The Revenue challenged the block assessment, particularly the deletion of addition made on account of gold jewellery and silver items. The Income Tax Appellate Tribunal reviewed the materials seized and the explanations provided by the assessee. It found that the re-made jewellery items were properly vouched in various control ledgers and documents. The Tribunal accepted the Commissioner's order, giving credit towards stock of gold jewellery for the re-modelled jewellery items. Additionally, the purchase of gold jewellery from a specific concern was justified based on the documents and clarifications provided.

Issue 2: Restriction on Addition Made on Account of Investment in Excess Stock of Gold Jewellery
The Income Tax Appellate Tribunal addressed the addition made on account of gold jewellery, specifically focusing on the weighing scales' margin of error. It upheld the Commissioner's decision to allow a reasonable deduction of 5% for the weighing error and excluded the tax from the stock. Furthermore, the Tribunal discussed the rebate for stone-studded jewellery, noting that a 20% rebate was justified compared to the initial 10% offered. Regarding the silver articles, discrepancies in the weighing process were identified, leading to the Commissioner's estimated weight relief. The Tribunal found no reason to interfere with the Commissioner's decision, emphasizing the detailed discussion and factual findings based on the materials presented.

In conclusion, the Tax Case (Appeals) was dismissed at the admission stage, with no costs awarded. The judgment highlighted the importance of factual findings based on material evidence and upheld the decisions made by the lower authorities regarding the additions and restrictions on stock assessments.