2012 (4) TMI 423 - HC - Income Tax

Understatement of the sale of bullion (gold and silver) made by the assessee Addition made by AO as there are cash sales which are not verifiable and the rates whereof is below the average rate of Delhi Bullion Association - ITAT deleted the addition made by the AO - Held that - It is not the case of the AO that he has come across any material showing that the assessee is receiving something over and above that entered into the books of accounts maintained - all the requisite books and records are maintained duly audited and no specific defect in the same has been pointed out - the lower rates of the Delhi Bullion Association were also comparable with that shown by the assessee even though the rates of the Delhi Bullion Association were in respect of the retail trade and not in respect of the wholesale trade in which the assessee was involved against revenue. Addition on account of stock of silver bars written off - assessee contended that during weighing and re-weighing of the silver bars on a repeated basis a weight loss due to breakage of corners of the silver bricks occurs - The CIT (A) confirmed the addition as silver was not a perishable commodity Held that - AO while rejecting the explanation given by the assessee did not make any verification as to whether in the type of trade i.e., wholesale trade in silver a negligible amount of breakage occurs or not - AO without any evidence to this effect could not conclude that the sales had been made outside the books of accounts - on this basis the Tribunal on facts reversed the finding of the CIT (A) as also the Assessing Officer - the Tribunal arrived at this conclusion and the same is a pure finding of fact.

Summary

Issues:
1. Addition of Rs. 1,19,07,201/- for alleged understatement of sale of bullion invoking section 69A of the Income Tax Act, 1961.
2. Addition of Rs. 1,66,571/- for stock of silver bars written off.

Analysis:

Issue 1: Alleged Understatement of Sale of Bullion
The Assessing Officer added Rs. 1,19,07,201/- for understatement of sale of bullion invoking Section 69A of the Income Tax Act, 1961. The CIT (A) deleted this addition, noting that the Delhi Bullion Association rates used by the Assessing Officer were for retail transactions, not wholesale trade. The Tribunal concurred, stating that there was no evidence of sales outside the books of accounts. They upheld the CIT (A)'s decision, emphasizing that the lower rates of the Delhi Bullion Association were comparable to the assessee's. The Tribunal found no infirmity in the CIT (A)'s order, as there was no evidence of the assessee receiving amounts beyond what was recorded in the books. The Tribunal's decision was based on facts and no legal question arose.

Issue 2: Stock of Silver Bars Written Off
The Assessing Officer added Rs. 1,66,571/- for a difference of 14.28 kilograms in the stock of silver bars, attributing it to sales outside the books. The CIT (A) rejected the assessee's explanation, stating silver was not perishable and upheld the addition. The Tribunal, however, noted the lack of evidence for transactions outside the books and reversed the CIT (A)'s finding. They accepted the assessee's explanation of weight loss due to breakage during weighing. The Tribunal's decision was based on factual analysis, finding no evidence of transactions outside the books.

In conclusion, the High Court dismissed the appeals, as no substantial legal questions were raised. The Tribunal's factual findings were upheld, emphasizing the lack of evidence for transactions outside the books and the comparability of rates used for assessing the alleged understatement of sales of bullion.