2022 (11) TMI 974 - AT - Income Tax

Addition on account of jewellery/bullion found during the course of survey proceedings - CIT-A deleted the addition - HELD THAT - We find there is no infirmity in the order of the CIT(A). Assessee is covered his gold ornaments which was declared in return of income in the Schedule -AL . CIT-Dr was unable to bring any contrary fact against the submission of assessee. Assessee declared the gold in his return of income also covered by the departmental circular. So, the entire addition made by the AO amount is liable to be quashed. Unexplained money in the hands of the assessee and added as deemed income of the assessee u/s 69A - The assessee already declared the cash balance which is related to household savings in the return of income in Schedule AL which was filed u/s 139(1). Before the revenue authorities the assessee had explained the cash balance - CIT-Dr was unable to bring any contrary fact against the submission of assessee. We find no infirmity in the order of the CIT(A). Accordingly, the addition is deleted. Stock discrepancy of the valuation of the goods specially the laptop is duly un-reconciled and found excess during the physical verification in survey - As documents the assessee filed the reconciliation and the evidence related basis of valuation. The valuation of stock is based on cost market price whichever is lower. The stock of goods cannot be valued suo moto without any basis. The reconciliation was accepted by the ld. CIT(A), no discrepancy was found in the number of itemof the stock. CIT-Dr was unable to bring any contrary fact against the submission of assessee Accordingly, the addition made by the ld. AO is quashed and the balance addition which was up-held by the CIT(A) is also liable to be deleted. Addition u/s 69 - Deposit huge cash in the bank account of the assessee during the demonetisation period especially after 08.11.2016 - cash deposited in old currency in the bank account during the demonetisation period - HELD THAT - The entire addition was made on basis of human probability and assumption. AO made a percentage on aggregate sale and cash sale from September 2015 in October 2016. The ratio in between aggregate sale and aggregate cash sale was 50% and in November 2016, 36.14%. On basis of that assumption the addition was made. During investigation the DDIT, Jammu as not found any discrepancies in the stock number and item. The huge difference of the cash can be generated only by sale of goods. But in factual matrix the AO was unable to proof the deposit of cash during demonetisation was from undeclared source. We do not find any infirmity in the order of the ld. CIT(A), accordingly, the addition made by the ld. AO amount is liable to be quashed.

Issues Involved:

1. Deletion of addition related to 1Kg Gold Bar.
2. Deletion of addition on account of unexplained cash.
3. Deletion of addition on account of difference in closing stock.
4. Deletion of addition on account of small items.
5. Deletion of addition on account of cash deposited during demonetization.
6. Confirmation of partial addition on account of jewellery/bullion.
7. Confirmation of partial addition on account of difference in stock.

Detailed Analysis:

Issue 1: Deletion of addition related to 1Kg Gold Bar

The revenue challenged the deletion of Rs. 25,38,000/- out of Rs. 28,70,000/- by the CIT(A), arguing that the 1Kg Gold Bar found was foreign-made and the assessee failed to explain its source. The CIT(A) observed that the assessee had declared gold in his returns for A.Y. 2013-14 and 2014-15, and the gold was covered under the CBDT Notification No. 347(E) and Instruction No. 1916. The Tribunal found no infirmity in the CIT(A)'s order and upheld the deletion of the entire addition of Rs. 28,70,000/-, including the Rs. 3,32,000/- confirmed by the CIT(A).

Issue 2: Deletion of addition on account of unexplained cash

The revenue contested the deletion of Rs. 18,00,000/- on account of unexplained cash. The CIT(A) noted that the cash was explained through the books of M/s. Prime Computers and past savings, including Rs. 19,95,650/- declared in the assessee's return for A.Y. 2015-16. The Tribunal found the CIT(A)'s reasoning logical, emphasizing that no demonetized currency was found during the search and the cash balance was declared in the returns filed before the search. The Tribunal upheld the deletion of the Rs. 18,00,000/- addition.

Issue 3: Deletion of addition on account of difference in closing stock

The revenue argued that there was a discrepancy in stock valuation, with the AO adding Rs. 43,54,000/-. The CIT(A) accepted the assessee's reconciliation, reducing the addition to Rs. 10,89,016/-. The Tribunal found no discrepancy in the item and quantity of the stock and noted that the valuation was based on purchase value. The Tribunal deleted the entire addition, including the Rs. 10,89,016/- confirmed by the CIT(A).

Issue 4: Deletion of addition on account of small items

The revenue contended that the CIT(A) erred in deleting Rs. 69,637/- on account of small items. The CIT(A) accepted the assessee's argument that these items were small and prone to pilferage, and the counting might not be accurate. The Tribunal upheld the CIT(A)'s deletion.

Issue 5: Deletion of addition on account of cash deposited during demonetization

The revenue challenged the deletion of Rs. 1,87,02,000/- deposited during demonetization, arguing that the cash sales were unusually high. The CIT(A) found that the sales were recorded in the books and matched with the VAT returns. The Tribunal noted that the addition was based on assumptions and human probability without concrete evidence. The Tribunal upheld the CIT(A)'s deletion of the addition.

Issue 6: Confirmation of partial addition on account of jewellery/bullion

The assessee contested the confirmation of Rs. 3,32,000/- out of Rs. 28,70,000/- related to jewellery/bullion. The Tribunal found no reason for this partial addition and deleted the Rs. 3,32,000/-.

Issue 7: Confirmation of partial addition on account of difference in stock

The assessee challenged the confirmation of Rs. 10,89,016/- out of Rs. 43,54,000/- related to stock difference. The Tribunal found that the valuation was backed by purchase value and deleted the Rs. 10,89,016/- addition.

Conclusion:

The Tribunal dismissed the revenue's appeal and allowed the assessee's appeal, deleting all the contested additions and confirming the CIT(A)'s deletions. The Tribunal emphasized the importance of concrete evidence and proper reconciliation in upholding or deleting additions.

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