2020 (5) TMI 570 - AT - Income Tax

Addition on account of peak investment with regard to interception of gold jewellery in Mumbai airport which was sold to M/s SBM Jewellers - HELD THAT - Interception of above said jewellery was made on 14.02.12 and subsequently assessee has already recorded the above said sales in its books of accounts and the same was part of the turnover disclosed in return of income submitted before tax authorities. Since, these sales were already recorded in the books of accounts, we do not see any reason to interfere with the order passed by Ld. CIT(A), accordingly ground no. 1 raised by the revenue is dismissed. Undisclosed sales and undisclosed stock which was found during survey proceedings - HELD THAT - We notice that the stock found during survey proceeding to the extent of 3,863.697 gms and assessee has already shown in stock in trade to the extent of 3942.152 gms in its books of accounts and the same was disclosed in financial statements and part of return of income filed before the tax authorities. There is no discrepancy found with the stock maintained by the assessee, therefore we are inclined to accept the findings of Ld. CIT(A). Interest on loans and advances taken from Bhanwarlal Jain Group - CIT(A) deleted this addition with observation that AO has rejected the books of account and the same book results cannot be considered for making this addition - HELD THAT - We are not in agreement with the observation of Ld. CIT(A) and Ld. CIT(A) has deleted most of the additions based on the book results, therefore we are not inclined to accept the deletion on account of interest payment on alleged bogus loans. We do not know the outcome of the appeal filed by the assessee in AY 2010-11, it all depends upon the findings in above said appeal. Before us, Ld. AR has not made any submission. Moreover, we notice that assessee has only credited the interest and not actually paid. We are inclined to sustain the addition made by AO.

Issues Involved:
1. Addition of peak investment of ?91,91,683/-
2. Addition of profit on unaccounted sales of ?48,96,798/-
3. Addition of undisclosed stock of ?1,00,45,612/-
4. Addition of undisclosed payment of wages of ?5,00,620/-
5. Addition of bogus unsecured loans of ?70,85,000/-
6. Deletion of interest on bogus loans of ?5,85,000/-

Detailed Analysis:

1. Addition of Peak Investment of ?91,91,683/-
The AO added ?91,91,683/- as peak investment based on the interception of gold jewelry weighing 3500 gm at Mumbai Airport, which was sold to M/s SBM Jewellers. The assessee contended that this sale was recorded in the books on the day of verification under section 131 of the Act. The Ld. CIT(A) accepted the assessee's explanation, noting that the sale was part of the turnover disclosed in the return of income. Consequently, the ITAT upheld the Ld. CIT(A)'s decision, dismissing the revenue's ground on this issue.

2. Addition of Profit on Unaccounted Sales of ?48,96,798/-
The AO estimated a gross profit of ?48,96,798/- (5% of alleged unaccounted sales) based on discrepancies in sales records maintained in Tally Software and Excel format. The assessee provided confirmations from various parties, showing that many transactions were labor jobs rather than sales. The Ld. CIT(A) accepted these explanations, supported by documentary evidence. The ITAT found no discrepancy in the stock maintained by the assessee and upheld the Ld. CIT(A)'s findings, dismissing the revenue's ground on this issue.

3. Addition of Undisclosed Stock of ?1,00,45,612/-
The AO added ?1,00,45,612/- as undisclosed stock found during survey proceedings. The assessee argued that the stock of 3863.697 gm was already recorded in the books, with only a minor difference of 78.455 gm. The Ld. CIT(A) accepted this explanation, noting that the stock was part of the disclosed financial statements. The ITAT upheld the Ld. CIT(A)'s findings, dismissing the revenue's ground on this issue.

4. Addition of Undisclosed Payment of Wages of ?5,00,620/-
The AO added ?5,00,620/- for undisclosed payment of wages in January 2012. The Ld. CIT(A) confirmed this addition, and the ITAT did not interfere with this decision, effectively sustaining the addition.

5. Addition of Bogus Unsecured Loans of ?70,85,000/-
The AO added ?70,85,000/- as bogus unsecured loans, citing a search and seizure action on the Bhanwarlal Jain Group, which allegedly provided accommodation entries. The Ld. CIT(A) noted that the principal amount of ?65,00,000/- was already added in AY 2010-11, and deleted the addition to avoid double taxation. The ITAT upheld the Ld. CIT(A)'s decision, dismissing the revenue's ground on this issue.

6. Deletion of Interest on Bogus Loans of ?5,85,000/-
The AO added ?5,85,000/- as interest on bogus loans. The Ld. CIT(A) deleted this addition on technical grounds, stating that the AO had rejected the books of accounts and could not rely on them for this addition. The ITAT disagreed with the Ld. CIT(A)'s reasoning, noting that the books were used to delete other additions. Since the outcome of the appeal for AY 2010-11 was unknown, the ITAT sustained the AO's addition of ?5,85,000/-.

Conclusion:
The ITAT upheld the Ld. CIT(A)'s decisions on the peak investment, profit on unaccounted sales, and undisclosed stock, dismissing the revenue's grounds on these issues. However, it sustained the AO's addition of ?5,85,000/- for interest on bogus loans, partially allowing the revenue's appeal. The other grounds were deemed general and required no specific adjudication. The appeal was thus partly allowed.

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