2016 (12) TMI 557 - AT - Income Tax

Addition as profit from trading in gold - appellant had resorted to under valuation of closing stock - Held that - As decided in assessee s own case this Tribunal had indeed considered the argument of the assessee on gold content in the stock and held that only real gold content was to be considered. It also held that the valuation at rate of 538.599 per gram, as done by the assessee considering the actual gold content in 91.6 purity gold jewellery was correct. Since the method of valuation has to be consistant, following that decision we direct the AO to rework the net profit in accordance with the above Tribunal decision . To this extent, this appeal ground is allowed. Disallowance on the making charges, inter alia, on the ground that the vouchers are self-vouched and not verifiable etc the CIT(A) held that inter alia that apparently, it is an agreed addition and there is no dispute about the observations made by the AO. Thus find that the disallowance is reasonable and accordingly, the addition is confirmed . The assessee has not let in any material to dislodge the above findings and hence we dismiss this ground of appeal.- Decided against assessee TDS u/s 194C - non deduction of TDS on making charges to various persons - Held that - . The appellant has not furnished any details regarding the basis of the making charges paid to each of the 23 persons but it appears from the AO s observations that making charges were paid to each person according to the work completed by him. It is also mentioned in the assessment order that the 23 persons who were paid making charges were actually paid as lead persons for the work completed by their team. This lead person in turn paid to the other workers. But as far as the appellant is concerned, the payment is made to the lead person for the work done by himself or his team. Thus there is an implied contract between the appellant and such persons who have been paid the making charges. The provisions of sec 194C are clearly attracted. Even if we assume that the 23 persons who were paid making charges were employees of the appellant, then also in most of the cases TDS provisions are attracted because payment to each individual person exceeded the minimum taxable income. The appellant should have deducted tax u/s 192. The disallowance is therefore, confirmed. - Decided against assessee

Summary

Issues Involved:
1. Valuation of closing stock for the assessment year 2008-09.
2. Disallowance of making charges for the assessment year 2008-09.
3. Valuation of closing stock for the assessment year 2007-08.
4. Disallowance of making charges for the assessment year 2007-08.

Detailed Analysis:

1. Valuation of Closing Stock for the Assessment Year 2008-09:
The assessee, a partnership firm dealing in gold jewellery and silverware, contested the valuation of the closing stock determined by the Assessing Officer (AO). The AO adopted the average cost method, valuing the closing stock at ?999.76 per gram, resulting in a closing stock value of ?3,02,35,241/-. This led to an additional net profit of ?29,04,567/- being added to the returned income. The assessee objected, arguing that the valuation should consider the actual gold content and impurities. The Tribunal, referencing its earlier decision, directed the AO to rework the net profit in accordance with the method that considers only the real gold content, valuing it at ?538.599 per gram. Consequently, the appeal was allowed to this extent.

2. Disallowance of Making Charges for the Assessment Year 2008-09:
The AO disallowed ?4,18,908/- out of ?41,81,082/- claimed as making charges, citing unverifiable self-vouched receipts. The CIT(A) confirmed this disallowance, noting it as an agreed addition. The Tribunal upheld this decision, stating that the assessee failed to provide any material to disprove the findings. Thus, this ground of appeal was dismissed.

3. Valuation of Closing Stock for the Assessment Year 2007-08:
For the assessment year 2007-08, the AO valued the closing stock at ?837.20 per gram, resulting in a net profit of ?78,90,381/-. The CIT(A), following the Tribunal's earlier decision, valued the opening stock at ?538.59 per gram, leading to a revised net profit of ?87,18,317/-. The Tribunal found no infirmity in the CIT(A)'s consistent application of the valuation method and dismissed the assessee's appeal on this ground.

4. Disallowance of Making Charges for the Assessment Year 2007-08:
The AO disallowed ?30,35,224/- out of ?31,10,253/- claimed as making charges, due to non-deduction of TDS as required under Section 194C. The assessee argued that the payments were wages to employees, not subject to TDS under Section 194C. The CIT(A) rejected this argument, confirming that the payments were to lead persons for work done by their teams, thus attracting Section 194C. The Tribunal upheld the CIT(A)'s decision, noting that the assessee failed to provide any material to counter the findings. Therefore, the cross-objection was dismissed.

Conclusion:
The Tribunal partly allowed the assessee's appeal for the assessment year 2008-09 regarding the valuation of closing stock, directing a revaluation based on the real gold content. However, it upheld the disallowance of making charges for both assessment years and the valuation method applied for the assessment year 2007-08, dismissing the related grounds of appeal and cross-objection.