2019 (4) TMI 1478 - AT - Income Tax

Addition to excess stock of gold jewellery weighing 2717.400 gms - proof of purchased pure gold - bill produced for conversion of pure gold into jewellery - HELD THAT - There is no dispute that the assessee had purchased pure gold from M/s SVBC, Vizag on 09.11.2015 and 13.11.2015 and the said gold was not available with the assessee at the time of survey and it was also not in dispute that the gold jewellery weighing 2717.400 gms was physically available in the shop at the time of survey. Once, it is established that the assessee had purchased 3,100 gms and the same was not available in the shop, there is no reason to disbelieve the issue of pure gold for making the gold jewellery ornaments. In this case, the assessee has produced the bill for receipt of gold jewellery from M/s Jai Mata Di Jewellers on 03.12.2015 which is within the reasonable time of conducting the survey. Therefore, there is no reason to disbelieve the genuineness of the bill. AO did not make any enquiry with M/s Jai Mata Di Jewellers to find out the correctness of the bill. The assessee is free to furnish the necessary evidence to address the difference found during the course of survey in the reasonable time. In the instant case, the assessee had furnished all the bills from M/s Jai Mata Di Jewellers and voucher No.92, which was raised for issue of gold to M/s Jai Mata di Jewelelrs before the Ld.CIT(A) as well as the AO. Therefore, the assessee has established that the pure gold was issued to M/s Jai Mata Di Jewellers was received back subsequently. The department did not make out a case that the bill issued by M/s Jai Mata Di Jewellers as either bogus or fake. We agree with the observation of the CIT(A) that the AO has made the addition only on suspicion and surmises, hence, the addition made by the AO is unsustainable. Addition for deficit cash found in the business premises during the survey - Addition u/s 68 - HELD THAT - In this case, there was deficit cash of ₹ 11,59,906/- which was found during the course of survey and the assessee had explained that ₹ 8,00,000/- was kept in his house. The said statement given at the time of survey was also confirmed u/s 132 on 24.11.2015 during the course of search conducted in the residence of Mr.Mahendra Jain. Therefore, there is no reason to disbelieve explanation of the assessee that the sum of ₹ 8,00,000/- found in the residential premises was related to the business and deficit cash of ₹ 8,00,000/- in the business premises stands explained. There was further difference of ₹ 3,59,906/- which was stated to be partly counter cash which was not inventorised by the survey team and offered to income. As rightly observed by the CIT(A), there is no reason to disbelieve the explanation of the assessee with regard to the source of ₹ 8,00,000/- and balance of ₹ 3,50,000/- was admitted as income in response to show cause notice issued by the AO vide his letter dated 04.12.2017. Since the assessee failed to explain the reason for deficit cash and admitted the same as income in its hands, we do not see any reason to interfere with the order of the CIT(A). Accordingly, we uphold the order of the Ld.CIT(A) and confirm the addition

Summary

Issues Involved:
1. Addition of ?64,96,471/- relating to excess stock of gold jewellery.
2. Deficit cash of ?11,59,906/- found during the survey.

Issue-wise Detailed Analysis:

1. Addition of ?64,96,471/- relating to excess stock of gold jewellery:
The Income Tax Department conducted a survey under Section 133A at the business premises of the assessee on 24.11.2015, finding an excess stock of 4247.486 grams of gold jewellery. The assessee provided a purchase bill from M/s B.G. Jewellers for 1521.744 grams, reducing the excess stock to 2752.742 grams. The assessee later submitted a bill from M/s Jai Mata Di Jewellers for 2717.400 grams, which the Assessing Officer (AO) rejected due to inconsistencies and lack of supporting evidence. Consequently, the AO treated the 2717.400 grams of gold jewellery as unaccounted investment under Section 69B, adding ?64,96,471/- to the income.

The Commissioner of Income Tax (Appeals) [CIT(A)] found that the AO's rejection was based on suspicion without proper enquiry. The CIT(A) verified the ledger accounts and noted that the practice of not detailing the ornaments in bills was common among jewellers. The AO did not examine the partner who had the bill during the survey. The CIT(A) concluded that the AO's addition was based on mere suspicion and deleted the addition.

Upon appeal, the Tribunal upheld the CIT(A)'s decision, noting that the assessee had provided sufficient evidence to reconcile the stock difference. The Tribunal emphasized that the AO did not verify the genuineness of the bill from M/s Jai Mata Di Jewellers and made the addition based on suspicion. Therefore, the Tribunal dismissed the revenue's appeal on this ground.

2. Deficit cash of ?11,59,906/- found during the survey:
During the survey, the physical cash balance was ?22,65,000/- against the book balance of ?34,24,906/-, resulting in a deficit of ?11,59,906/-. The assessee explained that ?8,00,000/- was taken by a partner to his residence and the remaining ?3,59,906/- was miscellaneous cash. The AO found a mismatch in the explanation and treated the deficit as unexplained cash credit under Section 68, adding ?11,59,906/- to the income.

The CIT(A) partly confirmed the addition, accepting the explanation for ?8,00,000/- but upholding the addition of ?3,50,000/- as admitted by the assessee. The Tribunal agreed with the CIT(A), noting that the explanation for ?8,00,000/- was reasonable and supported by evidence. The Tribunal also upheld the addition of ?3,50,000/- as the assessee admitted it as income. Consequently, both the revenue's appeal and the assessee's cross objections on this issue were dismissed.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to delete the addition of ?64,96,471/- relating to excess stock of gold jewellery, as the AO's addition was based on suspicion without proper enquiry. The Tribunal also upheld the CIT(A)'s decision to partly confirm the addition of ?3,50,000/- for the deficit cash, while accepting the explanation for ?8,00,000/-. Both the revenue's appeal and the assessee's cross objections were dismissed.