2018 (6) TMI 223 - AT - Income Tax

Unexplained jewellery - Held that - Jewellery stands released at the time of the search itself on the basis of the invoice shown by the assessee at the time of the search itself. No doubt has been raised about the invoice. The invoice produced before the AO has not been doubted. This very invoice was before the authorized officer at the time of the search. The jewellery was also physically present before him on the date of search. Thus, the assumption made by the CIT(A) that the Authorized Officer would have been released the jewellery only after comparing the jewellery as per the invoice and as physically available is a correct assumption. There is no doubt about items not matching with the invoice. However, DR was fair enough to admit that there is no other difference in the item and the same are matching.

Issues Involved:
1. Deletion of addition on account of profit made on sale of gold in cash.
2. Deletion of addition on account of investment in jewellery.
3. Deletion of addition on account of interest payment to Vijay Dixit Group.
4. Validity of proceedings initiated under Section 153A and assessment framed under Section 143A/143(3).

Detailed Analysis:

1. Deletion of Addition on Account of Profit Made on Sale of Gold in Cash:
The Revenue contested the deletion of ?41,565/- added by the Assessing Officer (AO) due to a low gross profit rate. The CIT(A) deleted this addition based on findings in similar cases, noting that the AO's addition was ad hoc without empirical basis. The AO did not dispute the total turnover or the books of accounts, which included VAT returns and detailed stock registers. The ITAT upheld the CIT(A)’s decision, referencing previous ITAT rulings that emphasized the necessity of rejecting books of accounts before estimating gross profit rates. Thus, the ITAT found no merit in the Revenue’s appeal on this ground.

2. Deletion of Addition on Account of Investment in Jewellery:
The Revenue challenged the deletion of ?46,09,580/- added by the AO, who doubted the explanation that the jewellery was received on approval and not owned by the assessee. The CIT(A) provided detailed reasoning, pointing out that the jewellery was released during the search based on the invoice presented, which matched the items found. The AO did not raise specific queries during the assessment, and the jewellery was part of the closing stock of M/s Pashupati Jewellers. The ITAT agreed with the CIT(A), noting that the jewellery was released based on the invoice, and no discrepancies were found. Thus, the ITAT upheld the CIT(A)’s decision to delete the addition.

3. Deletion of Addition on Account of Interest Payment to Vijay Dixit Group:
The Revenue appealed against the deletion of ?54,27,849/- added by the AO based on a seized document. The AO had allocated interest computed from this document between Mr. Rajesh Kanodia and the assessee. The CIT(A) deleted the addition, and the ITAT upheld this decision in Mr. Rajesh Kanodia’s case, noting that the AO did not cross-check the transactions with Vijay Dixit Group and had no basis for the interest rate applied. The ITAT found the CIT(A)’s reasoning sound and upheld the deletion of the addition in the assessee’s case as well.

4. Validity of Proceedings Initiated Under Section 153A and Assessment Framed Under Section 143A/143(3):
The assessee’s Cross Objection challenged the validity of proceedings under Section 153A and the assessment under Section 143A/143(3), claiming they violated statutory conditions and were based on an unlawful search. However, the assessee did not press these objections during the hearing. Consequently, the ITAT dismissed the Cross Objection as “not pressed.”

Conclusion:
The ITAT dismissed both the Revenue’s appeal and the assessee’s Cross Objection, upholding the CIT(A)’s deletions of the additions made by the AO. The ITAT’s decisions were based on detailed reasoning provided by the CIT(A) and precedents from similar cases. The order was pronounced on 04/06/2018.

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