1993 (4) TMI 105 - AT - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 1,97,768 for excess gold jewellery found during survey.
2. Computation of profit at Rs. 650 on sales of said jewellery outside the books.
3. Addition of Rs. 52,354 out of Rs. 2,04,014 as income from undisclosed sources.
4. Addition of Rs. 50,000 as income from undisclosed sources.

Issue-wise Detailed Analysis:

1. Addition of Rs. 1,97,768 for excess gold jewellery found during survey:
The assessee firm, dealing in gold ornaments, was subjected to a survey under Section 133A of the IT Act on 4th Nov., 1988. During the survey, an excess stock of gold weighing 649.100 grams was found compared to the books. The assessee explained that a voucher dated 3rd Nov., 1988, for gold purchased from M/s B.K. Manufacturing Jewellers, Delhi, was not accounted for due to the absence of a partner, Shri Shadi Lal. The Assessing Officer rejected this explanation, citing improbabilities and discrepancies in the stock and the conduct of the partners. The CIT(A) upheld the addition, finding the explanation implausible.

Upon appeal, the Tribunal examined the evidence, including vouchers, stock registers, and the explanation provided by the assessee. The Tribunal found the explanation satisfactory, noting that the discrepancy in categorizing 22 and 23-carat gold ornaments was plausible. The Tribunal concluded that the excess stock was satisfactorily explained and directed the deletion of the addition of Rs. 1,97,768.

2. Computation of profit at Rs. 650 on sales of said jewellery outside the books:
This issue was directly related to the first issue. Since the Tribunal found the explanation for the excess stock satisfactory and directed the deletion of the addition, it also held that there was no basis for computing any extra profit from the sale of these ornaments. Therefore, the addition of Rs. 650 was also deleted.

3. Addition of Rs. 52,354 out of Rs. 2,04,014 as income from undisclosed sources:
On 8th Dec., 1988, Shri Neeraj Malhotra, son of a partner, was found in possession of 50 gold chains, two gold karas, and Rs. 50,000 in cash. The assessee claimed that these items were being carried to M/s Bhola Sons Jewellers, Delhi. The Assessing Officer doubted the genuineness of the explanation, particularly the timing of the manufacture and delivery of the gold chains. The CIT(A) partially accepted the explanation, confirming the addition for 13 chains and the cash amount.

The Tribunal considered the evidence, including stock registers, statements from karigars, and a report confirming the possibility of manufacturing 20 chains in a short period. It found the explanation satisfactory and directed the deletion of the addition of Rs. 52,354.

4. Addition of Rs. 50,000 as income from undisclosed sources:
The Assessing Officer and CIT(A) doubted the availability of cash, citing manipulation in the cash book entries. The Tribunal examined the cash book, which showed sufficient cash balance on the relevant dates. It noted that the cash was released by the Court after verification, indicating no hanky-panky. The Tribunal found the explanation satisfactory and directed the deletion of the addition of Rs. 50,000.

Conclusion:
The Tribunal allowed the appeal, deleting all the additions made by the CIT(A) and the Assessing Officer. The explanations provided by the assessee regarding the excess gold jewellery, the profit computation, the gold chains, and the cash were found satisfactory based on the evidence presented.