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TMI Blog1993 (4) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... und. This was shown as under: (i), As per physical verification: Total weight of the 23 carat gold ornaments 7,828.000 gms Total weight of the 22 carat gold ornaments 434.000 gms . 8,262.000 gms (ii) As per Account books: Weight of the 23 carat gold ornaments 6,934.306 gms Weight of the 23 carat gold ornaments 223.300 gms . 7,157.606 gms Weight of 22 carat gold ornaments 455.294 gms . 7,612.900 gms At the time of survey Shri Krishan Lal, partner was present. Therefore, he was required to explain the difference in stock. He stated that he was away from the station for past several days and had returned only on that day. Therefore, he does not know about the difference in stock. However, it was mentioned that his brother Shri Shadi Lal, who normally attends to the business affairs is away toDelhi, could explain the difference, if any. The Assessing Officer again called upon the assessee to explain the difference by a letter dt.22nd Nov., 1988. In reply to that letter, the assessee stated that one voucher dt. 3rd Nov., 1988 issued by M/s B.K. Manufacturing Jewellers, Delhi could not be accounted for at the time of survey as the same was kept by Shri Shadi lal, par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a genuine colour to this alleged transaction. It was not understood as to why the goods brought for approval were not returned within a few days and why it took almost three months to return the goods. The keys of the shop as well as of the strong room always remained in the possession of Shri Mulkh Raj, partner, and even Shri Mulkh Raj was unaware that Shri Shadilal had left some goods in the shop on3rd Nov., 1988as alleged by the appellant. During the course of survey, i.e., throughout the day, no such version was given by anyone present at the shop." The ITO held that no goods were bought by Shri Shadilal as contended by the assessee firm. It was merely an accommodation bill which was secretly arranged by Shri Shadilal who was out of station on the date of survey in connivance with theDelhiparty. He further mentioned that the assessee firm had shown receipt of 22 carat gold ornaments weighing 641.450 gms purchased from M/s B.K. Manufacturing Jewellers on 3rd Nov., 1988 vide Voucher No. 087 but the gold ornaments of 22 carat were not found in excess. 22 Carat ornaments were found to be weighing only 434 gms as per physical verification. There was a shortage of 21.294 gms of 22 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent back toDelhito attend urgent affair. This jewellery was purchased from M/s B.K. Manufacturing Jewellers which is clear from copy of extract of stock register of M/s B.K. Mfg. Jewellers where gold ornaments weighing 641.450 gms. had been debited. Alongwith this reply the following documents were also produced before the Assessing Officer: (a) Issue voucher dt.3rd Nov., 1988issued by B.K. Mfg. Jewellers regarding gold weighing 641.450 gms. and labour bill for Rs. 3,450. (b) Extract from stock register which is to be kept under the Gold Control Act and can be checked by the custom authorities at any time (i.e., Gold Series No. 12) where the gold weighing 641.450 gms. has been issued to the assessee-firm on3rd Nov., 1988. (c) Extracts from stock register (Gold Series 12) of the assessee's stock register where, the gold received from B.K. Mfg. Jewellers has been entered on5th Nov., 1988though the goods have been received on3rd Nov., 1988. (d) A/c of gold received and gold sent back from M/s B.K. Mfg. Jewellers from time to time. (e) Issue voucher regarding sending of gold weighing 530.850 gms. (f) Extracts from Gold Series 12 where gold weighing 530.850 gms was issued to M/s B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly on5th Nov., 1988at aboutnoontime. Since the voucher was kept in his pocket and due to the urgency of his private work, he could not inform the partners, therefore, at the time of survey an excess stock of jewellery was found by the survey team. However, the fact remains that this jewellery was purchased by Shri Shadi Lal from M/s B.K. Mfg. Jewellers,Delhi, which is clear from the statement of Shri Krishan Lal recorded on5th Nov., 1988and the copy of voucher given by M/s B.K. Mfg. Jewellers dt.3rd Nov., 1988given at page 20 of the paper book and also from the copy of account of M/s B.K. Mfg. Jewellers given at pages 21 and 22 of the paper book where M/s B.K. Mfg. Jewellers have shown debit of 641.450 gms of gold ornaments to the assessee firm. Our attention was also invited to the copy of ornament account of the assessee firm where at Srl. No. 33 against 5th Nov., 1988, receipt of 641.450 gms gold is shown to have received from M/s B.K. Mfg. Jewellers vide receipt No. 087 dt.3rd Nov., 1988. Regarding discrepancy of 22 and 23 carats, it was submitted that against inventory of 23 carats given at page 7, the assessee had indicated word 'old' against name of ornament as well against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken, there is hardly any difference in weight of gold used in ornaments. Therefore, it cannot be said that there is difference of weight. It was also submitted that the assessee had been able to explain the discrepancy of 641.450 gms weight whereas the Department has taken it as 649.100 gms. The difference of 7.650 gms can occur if the same ornaments are weighed on an ordinary weighing machine other than Dharam Kanta. What the assessee has shown in the register is Dharamkanta weighment whereas the Department has taken weight on the basis of its own weighment. Therefore, there has to be a difference in these two weighments to the extent of 7 gms which is negligible. In terms of weight there is no difference and the discrepancy pointed out by the Department is fully explained by the documentary evidence produced by the assessee. As against this, the learned Departmental Representative Shri Rajendra Singh supported the action of the Revenue authorities and pointed out suspicious circumstances and probabilities similar to what pointed out by the ITO. 5. We have considered the rival submissions. In the present case the Revenue authorities have made addition under s. 69A of the IT Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, at the time of survey, partner Shri Shadilal was not present who could explain the nature of discrepancy in the physical verification and the stock. He returned fromDelhion5th Nov., 1988in the afternoon. The issue voucher regarding purchase of gold from third party ofDelhiwas kept by Shri Shadi Lal in his pocket. Therefore, this could not be brought to the notice of survey party. This explanation of the assessee was rejected by the Revenue authorities on the basis of probabilities and improbabilities of conduct and other surrounding circumstances in the case enumerated in the order of the CIT(A) at paragraph 3.7 of his order. The CIT(A) had treated the voucher issued by M/s B.K. Mfg. Jewellers,Delhiand other connecting documents as made up affair to accommodate the assessee. It was mentioned that the inventory prepared by the staff for 22 carat and 23 carat gold ornaments were prepared in the presence of one of the partner Shri Krishan Lal. Therefore, there is no possibility of mixing up of two types of ornaments at the time of preparation of inventories. When we have to assume an unreal state of things to be real under a deeming provision, the basis for such an assumpti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 gms. as on13th Feb., 1989vide Bill No. 577 alongwith extract from gold series 12 is also presented in order to show that out of 641.450 gms. gold received, the assessee returned this much of the gold to the said concern and regarding balance 110.60 gms., a bill was prepared by M/s B.K. Mfg. Jewellers. These documentary evidences produced before the Revenue authorities is an evidence to show that on3rd Nov., 1988, 641.450 gms. of gold was purchased by one of the partner of assessee from M/s B.K. Mfg. Jewellers. The Revenue has rejected the explanation on the basis of assumption that in the given facts and circumstances, it is not probable that Shri Shadi Lal will not inform the purchase of gold or will keep the voucher in his pocket and also will not make a separate packet even if purchased and will go back to Delhi. These are the inferences drawn by the Revenue authorities from a particular fact. The question is whether such an inference can be drawn or not. Inference can be drawn if it is found that the gold ornaments were not purchased. For that it was the duty of the Assessing Officer to examine M/s B.K. Mfg. Jewellers and its books of account and in case those entries were fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the CIT(A) in his order at paragraph 3.6. This factual aspect of mixing up of jewellery of 23 carats with 22 carats is obvious if we look into the vouchers submitted by the assessee given at pages 37 to 44 of the paper book where jewellery is mentioned as 23/22 carats, sometimes 20/22 carats and sometime 20 carats and in the gold issued to Shri Pradeep Kumar Karigar shown at page 53 of the paper book, it is mentioned at purity column as 23 carat plus copper. Besides certificates from Haryana Pradesh Sarafa Association and Gold Dealers Association, Rohtak are submitted for the purpose that gold dealers sell 22/22 carat gold equal to the rate of 23/22 carats gold ornaments or such 22/22 carats gold ornaments. This fact clearly establishes that the jewellery which is categorised as 23 carats gold may be of 22 carats whereas at the time of preparing inventory this has been categorised as 23 carats gold jewellery. It is surprising that most of the jewellery has been mentioned as 23 carat jewellery at Paper Book pages 6 and 7 (Inventory) where description is given of a particular jewellery and hardly in 4-5 cases, 22 carats jewellery is mentioned. In any case in view of the evidence g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst him and the case was pending in the Court of Metropolitan Magistrate of Tis Hazari,Delhi. The information was given to the IT Department. The assessee firm presented an application to the police authorities and to the Court stating that 50 gold chains and two gold karas weighing 720.900 gms were being carried by assessee's salesman Shri Neeraj Malhotra, are the properties of the assessee firm and, therefore, the same be released to them. In this application assessee-firm claimed the ownership of the said jewellery and cash found at the time of arrest of Shri Neeraj Malhotra before police as well before the Metropolitan Magistrate. On the basis of this information the Assessing Officer required the assessee firm to explain the acquisition of 50 gold chains two gold karas and Rs. 50,000 cash found at the time of arrest. The assessee explained that these items were being carried by its salesman Shri Neeraj Malhotra to deliver the same to M/s Bhola Sons Jewellers,Bank Street, Karol Bagh,New Delhion behalf of assessee-firm. The assessee further contended that 57 gold chains were available in the stock with the assessee out of which 50 gold chains were given to Shri Neeraj Malhotra t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to M/s Bhola Sons Jewellers through Shri Neeraj Malhotra alongwith Rs. 50,000 in cash: "(i) That the copy of account clearly shows that when the gold was received from M/s Bhola & Sons and when it was returned the gold received and sent back has duly been accounted for in Gold Series Nos. 11 & 12 which are to be kept under the Gold Control Act. When the raw gold is received, it is entered in Gold Series No. 11 and when after manufacturing, it is sent in the shape of ornaments, it is entered in Gold Series No. 12. The photostat copies of the stock register was given to the Assessing Officer. He has not doubted the genuineness of the entries made in the stock register. This is no ground that as the assessee firm sent the goods without receiving gold first it is not a genuine transaction as far as the goods sent have duly been accounted for in the stock register. (ii) That the detailed account regarding stock of 50 chains on 8th Dec., 1988 was supplied to the Assessing Authority/Officer. According to the chart supplied to the Assessing Officer, 57 chains were available with the assessee-firm on8th Dec., 1988. According to the Assessing Officer, as Shri Pradeep Kumar received gold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partner have not made any investment whatsoever after8th Dec., 1988. That the assessee firm has sufficient opening cash balance on8th Dec., 1988to give the same to Shri Neeraj Kant Malhotra." The CIT(A) considering the explanation of the assessee held that 37 gold chains and 2 gold karas were available with the assessee. Therefore, it cannot represent unexplained income and investment of the assessee. However, he disbelieved the availability of 13 gold chains. Therefore, he restricted the addition to the value of 13 gold chains and deleted the rest of the addition. He also confirmed the addition of Rs. 50,000 as income from undisclosed sources. The assessee is aggrieved. 8. The learned counsel for the assessee submitted that the chains weighing 720 gms were seized by the S.H.O. Police Station Nangloi when these chains alongwith cash amounting to Rs. 50,000 being carried by Shri Neeraj Malhotra from Rohtak to M/s Bhola Sons Jewellers, Bank Street, Karol Bagh, New Delhi on behalf of the assessee firm. The assessee got released the gold weighing 720 gms and the cash found at the time of arres by the S.H.O. Nangloi from the Metropolitan Magistrate, Tis Hazari, Delhi, after verificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... servation was made regarding time taken for the manufacturing of 20 gold chains. This observation was made at the business premises of M/s Quick Chain Industries, Rohtak of which Shri Pradeep Kumar is a partner. This firm is constituted by following partners-- (i) Shri Pradeep Kumar S/o Shri Shadi Lal (ii) Neeraj S/o Shri Shadi Lal (iii) Chanderkala W/o Shri Shadi Lal (iv) Rajinder S/o Hans Raj. It is further stated that Shri Shadi Lal is a partner in the firm M/s Malhotra Jewellers. Shri Pradeep Kumar manufactured 10 gold chains in my presence from 113.400 gms. gold. Shri Shadi Lal, Partner of M/s Malhotra Jewellers was also present. The gold chains were manufactured at an automatic machine. This machine is installed at business premises of Quick Chain Industries. It took about 20 minutes for conversion of 113.400 gms gold into gold wire. This wire was converted to gold chain 200 inches in length in about 28 minutes. This length of 200 inches was cut into 10 chains in 5 minutes. Another 10 minutes were consumed in affixing hooks to these chains. As such, in all, it took 63 minutes for manufacturing of 10 gold chains. As such, time taken for 20 gold chains manufacturing would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered the rival submissions and have gone through the evidence given by the assessee in connection with the manufacture of chains. It is not in dispute that the assessee firm is engaged in sale and purchase of gold and silver ornaments and for that purpose, it is getting manufactured gold chains also. The case of the assessee is that on the date when Shri Neeraj Malhotra was arrested, the assessee firm manufactured 57 chains out of which 50 chains were handed over to Shri Neeraj Malhotra alongwith cash of Rs. 50,000. The gold chains were carried by Shri Neeraj Malhotra to be delivered to M/s Bhola Sons Jewellers and the cash was being carried for the purchase of silver and silver utensils. The fact of availability of gold with the assessee firm for manufacturing gold chains is proved from the certificate issued by M/s Bhola Sons Jewellers given at page 49 and copies of account of ornaments maintained by the assessee as per Excise Rules. This fact is further corroborated by the entries made by the assessee in his register, copy of which is given at page 53 at the time of issuing gold to Karigars Pradeep Kumar and Rajendra Kumar and when the manufactured chains are received by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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