2017 (2) TMI 545 - AT - Income Tax

Revision u/s 263 - valuation of unexplained sale of gold - Held that - What is required to be proved by the assessee is that it has included 40950.66 grams of gold at NIL value in the manufactured items of jewellery also. If the assessee is able to show the same to the satisfaction of the AO, in our view, no addition is called for as presumed by the AO. Since this fact requires verification, we are of the view that the same needs to be set aside to the file of the AO. Accordingly we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of the AO for the purpose of verifying the contentions of the assessee that the 40950.656 grams of gold, which was shown at NIL value in Sales was included in the manufactured items also at NIL value. If the contentions of the assessee were found to be correct, we direct the AO not to make any addition on account of unaccounted sales. If it is found otherwise, the AO may make appropriate decision in accordance with the law. The assessee is also directed to furnish necessary details to the AO in this regard. Unaccounted purchase of finished goods - Held that - We notice that the assessing officer has made his own computation on the basis of statement of stock given to the bank and accordingly came to the conclusion that there is unaccounted purchase of finished goods. We notice that the assessing officer did not examine the quantity details of raw materials and finished goods furnished by the assessee by referring the books of accounts. The question of making own estimate, in our view, would arise only if the AO finds faults and deficiencies in the books of account and consequently come to the conclusion that the quantity details furnished by the assessee is not reliable. Before the AO, the assessee has submitted that the stock statement furnished to the bank is a provisional one and the value shown therein was average value. We notice that the AO did not examine the said explanation at all. Thus CIT(A) was justified in coming to the conclusion that the AO has computed the value of undisclosed purchases on surmises and conjectures and justified in deleting the impugned addition relating to undisclosed purchases and accordingly we uphold the same.

Issues Involved:
1. Limitation on the appeal filed by the assessee challenging the revision order under Section 263.
2. Admission of additional evidence regarding legal and professional fees.
3. Addition relating to unaccounted sales of gold.
4. Addition relating to unaccounted purchases of finished goods.

Detailed Analysis:

1. Limitation on the Appeal Filed by the Assessee:
The appeal filed by the assessee challenging the revision order passed under Section 263 of the I.T. Act was barred by limitation by 637 days. The assessee attributed the delay to the erstwhile tax consultant's failure to advise on filing the appeal. The Tribunal found this reason unconvincing and declined to condone the delay, resulting in the dismissal of the appeal in ITA No. 1252/Mum/2014 in limine.

2. Admission of Additional Evidence Regarding Legal and Professional Fees:
The assessee was aggrieved by the learned CIT(A)'s refusal to admit additional evidence related to the disallowance of legal and professional fees amounting to Rs. 20,77,576/-. The Tribunal noted that the Assessing Officer (AO) had disallowed the expenses due to the lack of certain details, which the assessee later provided to the CIT(A). In the interest of natural justice, the Tribunal decided that the additional evidence should be admitted. The issue was remanded to the AO for re-examination with directions to consider the additional evidence and any further information provided by the assessee.

3. Addition Relating to Unaccounted Sales of Gold:
The AO identified a discrepancy in the quantity details of gold consumption and finished goods, suspecting unaccounted sales of approximately 30,000 grams of gold, valued at Rs. 2,55,87,625/-. The assessee claimed a typographical error in the quantity details of 18-carat stone-studded jewelry. The AO accepted the possibility of a typographical error but was concerned with 40,950.66 grams of gold shown as issued to Karigars at zero value. The Tribunal found that the AO's quantification methodology needed further verification. The issue was remanded to the AO to verify if the 40,950.66 grams of gold issued to Karigars at zero value was included in the manufactured items also at zero value. If the assessee's contention was correct, no addition would be warranted.

4. Addition Relating to Unaccounted Purchases of Finished Goods:
The AO computed unaccounted purchases of finished goods based on the stock statement furnished to the bank, concluding suppressed purchases of Rs. 65,01,324/-. The assessee argued that the stock statement was provisional and the values shown were average values. The Tribunal noted that the AO did not examine the quantity details of raw materials and finished goods in the assessee's books of accounts. The CIT(A) found the AO's computation to be based on surmises and conjectures and deleted the addition. The Tribunal upheld the CIT(A)'s decision, agreeing that the AO's estimate was unjustified without finding faults in the books of accounts.

Conclusion:
- The appeal in ITA No. 1252/M/14 was dismissed due to the delay.
- The issue regarding legal and professional fees was remanded for re-examination.
- The issue of unaccounted sales of gold was remanded for verification.
- The deletion of the addition relating to unaccounted purchases was upheld.

Order Pronounced:
The final order was pronounced in the Court on 8.2.2017, with the appeal of the assessee in ITA No. 3676/M/2014 treated as allowed, and the appeal of the revenue treated as partly allowed.

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