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TMI Blog2004 (8) TMI 330X X X X Extracts X X X X X X X X Extracts X X X X ..... apart from the books/documents, cash, jewellery (gold), silver utensils/articles and other assets like N.S.C., fixed deposit, etc. were found and seized. 4. Regarding stock of gold ornaments found during the course of search, the AO stated that the gold jewelleries weighing 19,462.883 gms. (net weight) were found, as per the valuation report prepared by the Departmental Valuer. The AO found that the closing stock of gold jewelleries as on 31st March, 1990, as shown in the return of income was 5,063.040 gms. Taking into account the sales and purchase from 1st April, 1990 to 30th Nov., 1990, the AO reached to the closing stock of 4,589.300 gms. which worked out to be as under: Opening stock as on 1-4-1990. 5,063.450 gms. Add : Purchases from 1-4-1990 to 30-11-90 (as per seized book PKD-25) 4,209.550 gms. 9,273.000 gms. Less : Sales during 1-4-1990 to 30-11-1990 (as per seized book PKD-28) 4,683.700 gms. Closing stock as on 1-12-1990 as per books : 4,589.300 gms. The assessee vide letter No. 2903, dt 22nd Nov., 1993, was asked to explain the source of balance stock of gold jewellery of 14,833.583 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made from the financial years 1968-69 till 1987-88 and PKD-24 contains entries from financial year 1988-89 till the month of October, 1990. The AO held that the assessee's objection regarding the so-called incorrectness in the valuer's report does not hold much water as the assessee could not furnish any specific instances where these alleged discrepancies have occurred. He also stated that the so-called protest made by the assessee at the time of weighment is not recorded anywhere and it is not known in which specific respect this protest was made during the course of search. He further stated that in the statement recorded under s. 132, Shri Somnath Naik has specifically stated that he does not have any dispute about valuation. The AO also rejected the assessee's contention for valuing the gold at purchase price on the plea that the assessee has not been able to pinpoint specifically as to which items belong to which particular purchase. The AO also found that the assessee could not produce any concrete evidence in support of his claim that the stock belongs to customers except the so-called GS-11 and GS-12 registers and customers issue and receipt register. The assessee was all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Gold Control Act and even after the said Act was not in operation w.e.f. 1st April, 1990, the total possession of 17,546.400 gms. including customers' gold was proved with some minor adjustments of transactions not recorded during a week before the date of search, and that the balance deficiency of 2,436.483 gms. was duly covered by the disclosure of Rs. 5 lakhs in the statement under s. 132(4) towards appropriate value thereof. The learned CIT(A) observed that from the very beginning and also as explained finally before the AO, the assessee had relied on stock registers, GS-11 and GS-12, quarterly returns of gold stock filed before the Gold Control authorities, specifically as on 31st March, 1990 and 30th June, 1990, registers of receipt and issue of customers gold continuously maintained from 1968 to 25th Oct., 1990 (marked PKM-1 and PKD-24), two sets of gold vouchers, one for purchase or receipt and the other for sale or issue, the reference of voucher numbers having been duly recorded in the registers, GS-11 and GS-12. The learned CIT(A) found that the AO has never examined the quantitative particulars of stock position with reference to the aforesaid documentary evidences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplain the same now." (ii) Petition dt. 12th Dec., 1990, filed before the DDI Investigation: 'It may be pertinent to state that ours is one of the oldest jewellery shops in the town assessed to tax since last 40 years. During this period the business has generated tremendous amount of goodwill in the market. As your honour may appreciate that this type of business continues mostly on faith and mutual trust for which the customers usually leave their old ornaments gold for conversion to new ornaments or repair. This continues year after year and our income from this transaction is from making charges only which are separately disclosed for our income-tax purposes, in our annual accounts. Every year we adjust this head, after each completed transaction with a customer, and his name is deleted from our book. We get fresh customers every year and the process goes on. There are instances in which a particular customer's account is closed even after 3/4 years or more. We maintain registers for this purpose every year to get the progressive details. In fact, truly speaking, we also sometime make some proforma from out of intermediate sale of a particular ornament, before it is hande ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the business premises represented own gold and gold belonging to customers which were duly recorded in the prescribed registers and were individually identifiable, the search party mixed them together, thereby making a mesh of everything and have seized a part of it. That inspite of the protest by Shri S. Naik, the authorities engaged in conducting the search in the business premises, without taking into consideration the separate identity of gold ornaments as were kept by us in separate containers making a segregation between gold used by us for making ornaments for readymade sales and gold ornaments given by customers for either repair, exchange, remake, or change of designs and such other services, mixed up everything. That the search party weighed and valued the ornaments in a most casual manner through valuer and without taking into consideration the reasonableness of the entries in the books of account prescribed for such business, seized about 50 per cent of the stock on approximation and returned us the balance as they thought necessary and desirable. That the gold ornaments retained by IT Department mostly represent customers' gold kept by us for making new ornaments a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hosen to remove the identification packets with a view to carry out substantial seizure. As per learned CIT(A) for finding out the correct state of affairs, it was for the AO and his higher administrative authorities to make proper enquiries, but that was a different issue. The fact remains that in discarding the assessee's version, no cogent material was brought on record in framing the assessment order. If there were any post-search investigations either by the Investigation wing or by the AO, nothing was placed on the assessment record or brought to his notice. 11. After verifying the assessment records, the learned CIT(A) stated that after issue of initial so-called letter dt. 22nd Nov., 1993, which contained no query asking for explanation regarding customers gold, the effective hearing of the case was taken up during March, 1994, and was concluded during the last week of that month without making any independent enquiries on the issue despite, voluminous explanations and evidences furnished by the assessee. The learned CIT(A), therefore, made his calculation as contained at pp. 30 and 31 of his order and reached to the conclusion that after giving due credit for the custom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sentative, unless such registers are corroborated with the version of the customers or any other documentary evidence, it could not be established that whatever entries were made by the assessee are true and correct. These entries are done by the assessee himself and there was no corroborative material on record to prove them correct. He also drawn our attention to the order of the learned CIT(A) at para (ii) of p. 28 and submitted that the learned CIT(A) has only presumed the ornaments being belonging to the customers without any material to support such presumption. 15. The learned CIT-Departmental Representative further submitted that the learned CIT(A) has got co-terminus power and whatever the AO or Department has failed to do, he should do the same. Rather, in the instant case, the learned CIT(A) has tried to patch-up the lacunae of the assessee and just by pointing out the mistake in the AO's order, had given the relief to the assessee. As per learned Departmental Representative, if the learned CIT(A) found that there was some lapses on the part of the AO, which he should have performed before making the addition, the learned CIT(A) should have himself undertaken the prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment did not undertake any post-search investigation to find out the genuineness of such vouchers. As per learned Authorised Representative, during the course of search, the Departmental authorities mixed the jewelleries belonging to the customers which were properly covered in the papers in which name and separate identity of customer was mentioned and, therefore, the assessee could not tell properly the names of customers to whom jewellery belonged. He also submitted that a protest letter was also filed to the competent authorities in this regard. Thus, as per learned Authorised Representative, the genuineness of the vouchers remained intact and the learned CIT(A) after giving very elaborate reasonings and after examining all the records and vouchers personally, in the presence of the AO, had deleted the addition in respect of gold ornaments belonging to the customers. He, therefore, submitted that the learned CIT(A) was perfectly justified in relying on authenticity of statutory registers properly maintained by the assessee and the returns under Gold Control Act filed by the assessee immediately prior to the date of search, indicating the customers' gold possessed by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the ornaments given to the assessee for repairing/remaking, until the framing of the assessment which was 4 years after the year of search. IV. There is also no dispute that correctness of these records was found to be doubtful when some of the vouchers found during search indicated delivery of such gold ornaments having been taken back by the customers, but these were not found to be entered in the respective records, resulting in higher stock of customers' gold with the assessee which have been actually taken back by them. V. There is also no dispute to the fact that the assessee showed his inability in giving full address of the alleged customers whose gold were recorded in these registers. VI. There is also no dispute that the AO had made the addition on account of assessee's failure to substantiate the fact of such entries of gold in the customers' name and also on account of human improbability on not taking back gold by the alleged customers for such a long period ranging between 1 to 15 years. VII. There is also no dispute to the fact that the CIT(A) had allowed the relief only on the ground that the Department did not undertake any inquiry either during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that there is no dispute to the fact that during the course of search, the Department has found the GS-11 and GS-12 registers in which entry regarding receipt and issue of customers' gold was entered. These stock registers indicate the stock carried on by the assessee at the material point of time. The Department has also found quarterly return of gold stock filed before the Gold Control authorities as on 31st March, 1990 and 30th June, 1990. It was also found that the registers for receipt and issue of customers' gold were continuously maintained from 1968 to 25th Oct., 1990, marked 'RKM-1' and 'PKD-24', and which were also seized by the Department during the course of search itself. The Department had also found two sets of gold vouchers, one for purchase or receipt and the other for sale or issue, the reference of vouchers was also duly recorded in the registers RKM-1 and PKD-24 as well as also in GS-11 and GS-12. There is also no dispute to the nature of trade the assessee was carrying on, in which there is a practice for leaving old gold ornaments with the assessee for remaking, repair, etc. There is also a general practice that such customers could not be insisted for givi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove that the gold jewellery found with it actually belonged to the customers. Once the assessee is able to rebut the presumption by brining evidence to the contrary, the officer or authority shall consider all the evidence and facts judiciously. In the instant case, the assessee failed to rebut the presumption due to its inability to furnish the full address of such customers. Under these circumstances, mere entry in these records does not conclusively prove the ownership of such gold by the alleged customers so as to absolve the assessee from its onus to prove that gold possessed by it actually belongs to the customers which is lying with the assessee for abnormally long period ranging from 1 to 15 years. Hon'ble Supreme Court in the case of Sumati Dayal vs. CIT (1995) 125 CTR (SC) 124 : (1995) 214 ITR 801 (SC) had observed that after considering the surrounding circumstances and applying the test of human probabilities, one has to decide the genuineness of assessee's claim. In the instant case, the finding recorded by the learned CIT(A) reads as under: "Further, there was no post-search investigation and inquiry to ascertain if some of the customers could not have taken back t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the trade secrets, the assessee did not keep addresses of customers at the time of receipt of gold. If the assessee wants the Department to rely on the authenticity and correctness of these registers, i.e., GS-11 and GS-12, which the assessee is required to maintain as per s. 55 of the Gold Control Act, 1968 r/w r. 11 of the Gold Control Rules, the assessee is statutorily required to enter full name and address of the person from whom such gold was received or to whom such gold was returned along with the number and description of the articles and ornaments. During the course of search and also thereafter the AO has categorically noted that the names and addresses in respect of all the instances were not complete and, therefore, genuineness of such registers could not be taken as 100 per cent true. 28. The correctness of such registers becomes doubtful in view of the effect that some of the vouchers indicating return of ornaments to the customers, found and seized from the assessee's premises during the course of search, but the same were not found to be entered in GS-12 register nor in the customers' receipt and issue register as per the findings recorded by the AO at p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 70-71, 10 such instances in the financial year 1971-72, which lead to the conclusion that reliability, authenticity or correctness of such records were fully doubtful. As per learned Departmental Representative, as the authenticity of these records was doubtful, the assessee was required to establish the genuineness of gold deposited with the assessee long back and remained with the assessee for such period, which cannot be relied on under normal circumstances, without furnishing corroborative evidence, but there was a gross failure on the part of the assessee to furnish such corroborative evidence. Now, we advert to the legality of the addition made under s. 69A of the IT Act. Provisions contained under ss. 68, 69/69A clearly stipulate that the burden is on the assessee to explain the nature and source of credits in his books of account/valuables found in his possession. The assessee is required to discharge the onus. Sec. 132(4A) does not over ride these specific provisions. In the instant case, cls. (i) and (ii) of sub-s. (4A) of s. 132 are applicable. As per cl. (i), the books of account and other documents, jewellery, etc., found during the course of search are presumed to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n order being made in the case on hand. That by itself does not take away the presumptive value attached to s. 132(4A) for other proceedings under the IT Act. Sec. 110 of the Evidence Act of 1887, embodies a statutory principle of common law jurisprudence to the effect that if a person is in possession found of something, he is deemed to be owner by virtue of possessory title and the onus should be on him if he wants to disclaim the ownership. In the instant case, the explanation offered by the assessee was found to be not satisfactory regarding excess gold found, as belonging to the customers, the AO has correctly invoked provisions of 69A while making the addition. 30. Learned Departmental Representative further submitted that the learned CIT(A) had brushed aside all these findings recorded by the AO and faulted the Department for not conducting inquiry, which was not possible because of non-furnishing of full addresses of such customers. Under these circumstances, we are persuaded to agree with the learned Departmental Representative that instead of pointing out the defect in the AO's order and deficiency on the AO's part to comply with for ascertaining the correctness of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that hearing was concluded in one month only. It indicates that proper opportunities were not given to the assessee to substantiate its case. 34. However, during the course of hearing before us, the learned Authorised Representative was also asked to furnish some evidence but in view of the fact that the matter is again restored to the file of the AO, we give liberty to the assessee to file any such document before the AO in support of its contention that the alleged gold found recorded in the GS-11 and GS-12 registers pertained to the customers only, and which have either been taken back by them or are still lying with the assessee. Thus, the AO is directed to verify the correctness of GS-11 and GS-12 as well as RKM-1 and PKD-24 after giving the assessee reasonable opportunity for filing necessary confirmation. 35. So far as gold ornaments as mentioned in the list of Annex. 3 of the inventory of ornaments are concerned and which had been kept only for the repairs aggregating to 54 items having total weight of 401.300 gms. and which were not even seized by the Department during the search, by accepting the fact that these items were kept in a separate pocket bearing the nam ..... X X X X Extracts X X X X X X X X Extracts X X X X
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