2023 (7) TMI 791 - AT - Income Tax

Unexplained excess stock of silver - valuation of stock of silver ornaments of assessee during survey - CIT(A) in appeal order relied on local trader and ascertained the purity of silver jewellery from @ 40% to @62 % and ascertained the purity @ 52% on silver jewellery - HELD THAT - The assessee has not disputed the weight and purity during survey, and merely has stated in a general manner that value is higher. Thus, the assessee cannot retract from his own statement, and the only reason acceptable is the applicability of average rate of 65% of purity in silver item adopted by departmental valuer despite being actual weight and purity of each and every item of silver available with departmental valuer during the course of survey. Matter need to be set aside to the AO and an expert departmental valuer(who is an approved valuer) be appointed by the department to find out the correct value of silver based on actual weight and purity and then applying the then prevailing rate of silver at that relevant point of time. AO had not allowed the opening stock of silver (stock of silver claimed to be available in the books of accounts on the date of survey) which was already declared in the books of assessee. Interest of justice would be sub served if the impugned order is set aside and the matters are remitted back to the ld. AO for consideration thereof afresh related valuation of silver silver jewellery for ascertain the rate of purity, as directed by us in the preceding para of this order. The opportunity for fresh valuation of silver silver jewellery should be allowed to assessee considering the books of accounts, as directed by us in this order. Decided in favour of assessee for statistical purposes.

Issues Involved:

1. Legitimacy of additions made under Section 143(3) of the IT Act.
2. Validity of the assessment of the purity of silver ornaments.
3. Justification of the Commissioner of Income Tax (Appeals) in reducing the addition.
4. Consideration of the declared income and books of accounts.
5. Legitimacy of interest charged under various sections of the IT Act.
6. Right to take fresh grounds of appeal.

Summary:

1. Legitimacy of Additions under Section 143(3) of the IT Act:

The assessee challenged the assessment framed under Section 143(3) of the IT Act, arguing that the additions made by the assessing officer were arbitrary and unjustified. The Commissioner of Income Tax (Appeals) partly confirmed these additions, which the assessee found incorrect.

2. Validity of the Assessment of the Purity of Silver Ornaments:

The assessee contested the addition of Rs. 2,60,88,428/- made by the assessing officer based on the departmental valuer's report, which estimated the purity of silver ornaments. The Commissioner of Income Tax (Appeals) reduced this addition to Rs. 79,17,668/- by adjusting the purity from 65% to 52% without supporting evidence. The assessee argued that this reduction was still unjustified. The departmental valuer's failure to offer a satisfactory explanation for the purity assessment led to the conclusion that the basis for the addition was unwarranted and illegal.

3. Justification of the Commissioner of Income Tax (Appeals) in Reducing the Addition:

The Commissioner of Income Tax (Appeals) examined the departmental valuer and found no scientific method was used to determine the purity of silver ornaments. The Commissioner estimated the purity at 52% based on local inquiries and other cases, which the assessee argued was correct. However, the tribunal found this estimation unreasonable and directed a fresh determination by an expert valuer.

4. Consideration of the Declared Income and Books of Accounts:

The assessee maintained audited books of accounts and disclosed turnover accepted by the Sales Tax department. The tribunal noted that there was no discrepancy in cash or gold ornaments but found issues with the valuation of silver ornaments. The tribunal directed the assessing officer to reconsider the valuation of silver ornaments with the aid of an expert valuer and to account for the opening stock of silver declared in the books.

5. Legitimacy of Interest Charged under Various Sections of the IT Act:

The assessee argued that the interest charged under different sections of the IT Act was unjustified and illegal. The tribunal did not specifically address this issue in the judgment.

6. Right to Take Fresh Grounds of Appeal:

The assessee reserved the right to take any fresh grounds of appeal before the hearing. The tribunal allowed the assessee to present new evidence and explanations during the set-aside proceedings.

Conclusion:

The tribunal set aside the orders related to the valuation of silver ornaments and directed a fresh assessment by the assessing officer with the assistance of an expert valuer. The appeal of the revenue was allowed for statistical purposes, the appeal of the assessee was allowed for statistical purposes, and the cross-objection by the assessee was dismissed. The tribunal emphasized the need for proper and adequate opportunity for the assessee to present their case.

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