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TMI Blog2012 (10) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... bound to estimate the interest income received on account of pawning business. The CIT(A) has deleted the addition of Rs.13,685/- made by the A.O. on account of interest after rejecting the books of account. The CIT(A) observed that the assessee maintained a proper pawning register. The CIT(A) did not agree with the A.O. that it is necessary to carry forward each of these pawn account at the end of the year. The CIT(A) deleted the addition without appreciating the case made out by the A.O. Addition on account of Jaydad Brindawan - Held that:- The assessee told a different story before the A.O. and the CIT(A) simply accepted the assessee’s submission and deleted the addition. The CIT(A) noted that fresh deposit in this account is duly covered by debit entries made for investment in U.T.I. and leaves no scope for addition, whereas, before the A.O. it was submitted by the assessee that this is very old account left by the Grand father in his name for miscellaneous purchase. The assessee did not furnish any reply in respect of credit entry of Rs.1,39,565/- even though specific query was made by the A.O. Addition on account of “Narottam Das Sharma Amanat khata I & II” - Held that:- The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.1,00,000/- on account of marriage of daughter of Shri Brij Mohan Sharma, the assessee, and the house hold expenses. In respect of these two additions, in principle we do not agree with the A.O. that such addition is warranted in the hands of the HUF as these items are pertaining and related to the personal account of members of HUF - the additions deleted by the CIT(A) are confirmed not on those grounds on which the CIT(A) has deleted but on the ground of reasons as discussed above - in favour of assessee. Addition on Gold Nirman Khata & Silver Nirman Khata - Held that:- As A.O. before making the addition made some quantity calculation which is evident from the facts from the Assessing Officer’s calculation. The CIT(A) simply accepted the assessee’s contention that without examining the facts that how the quantity details given by the A.O. is incorrect. In absence of complete finding of facts, these issues cannot be decided at this stage. The order of CIT(A) is in contravention to rule 46A as is considered in various explanations and discussions above without providing opportunity of hearing to the A.O. Therefore, find it appropriate to send back this matter to the file of CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts, in deleting Addition of Rs.4,79,445/- made by the A.O. on account of "Narottam Das Sharma Amanat khata I". 6. The Ld. CIT (A) has erred in law and on facts, in deleting Addition of Rs.4,14,460/- made by the A.O. on account of "Narottam Das Sharma Amanat khata 2". 7. The Ld. CIT (A) has erred in law and on facts, in deleting Addition of Rs.3,27,632/- made by the A.O. in the name of Collector Babu Gupta. 8. The Ld. CIT (A) has erred in law and on facts, in deleting Addition of Rs.30,000/- made by the A.O. on account of difference between salary certificates and the salary account. 9. The Ld. CIT (A) has erred in law and on facts, in deleting Addition of Rs.1,00,000/- made by the A.O. on account of marriage of daughter of Shri Brij Mohan Sharma. 10. The Ld. CIT (A) has erred in law and on facts, in deleting Addition of Rs.78,000/- made by the A.O. on account of low house hold expenses. 11. The Ld. ClT (A) has erred in law and on facts, in deleting Addition of Rs.1,05,877/- made by the A.O. on account of Gold Nirman Khata. 12. The Ld. CIT (A) has erred in law and on facts, in deleting Addition of Rs.70,113/- made by the A.O. on account of Silver Nirman Khata. 13. Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to different parties were not available. The assessee expressed his inability in furnishing the year wise details of pawning/advance amount because no details were carried over year to year. The assessee explained before the A.O. that the advance of pawning is entered in Pawning Bahi since so many years. Thus, it was not easily possible to sort out the year wise details of advance money. The opening and closing is shown on the basis of original payment received during the year. The interest on amount was charged at the rate of 21% per annum. It was further explained by the assessee that when persons concerned came to take his valuables pawned, then old advances are sorted out from old Bahi and details are tallied and amounts including interest are recovered. The A.O. after considering the above system of accounting found that under these circumstances leakages cannot be ruled out. Hence the A.O. estimated the interest received on account of pawning at Rs.3,50,000/- as against disclosed by the assessee of Rs.3,36,315/-.The A.O. made addition of Rs.13,685/-. Addition of Rs.1,56,405/- on account of Jaydad Brindawan 5. The second item of addition made by the A.O. is of Rs.1,56,405/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the same as bogus/benami liability. Addition of Rs.4,14,460/- on account of Narottam Das Sharma Amanat Khata No.1 7. In this account, opening balance was Rs.3,70,054/- and during the year interest of Rs.44,406/- was credited as on 31.03.2007. Closing balance as on 31.03.2007 was Rs.4,14,416/-. The A.O. asked the assessee to explain the status of this account it was explained by the assessee that Shri Narottam Das Sharma was his father who died so many years ago and this Amanat Khata was crated. In absence of satisfactory explanation, the A.O. made addition of Rs.4,14,460/-. Addition of Rs.3,27,632/- on account of Collector Babu Gupta. 8. The A.O. noticed that there was outstanding liability of Rs.3,27,632/- in the name of Collector Babu Gupta. It was explained before the A.O. by the assessee that the Collector Babu Gupta was expired so many years ago and the successor of Collector Babu Gupta was not known to the assessee, even the addresses are not known. In the absence of confirmation and other explanation, the A.O. treated the said liability as unexplained benami liability and made addition of Rs.3,27,632/-. 9. The A.O. further noted that the interest payable to Narottam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 75) the difference as above. Thus the value of excess gold jewellery out of books comes to Rs.1,05,877/-, which is added in the total income of the assessee." Rs.70,113/- Excess Silver Ornament 12. The A.O. also examined the silver bullion account. The assessee did not submit any account of manufacturing as required by the A.O. It was submitted by the assessee that there was no manufacturing in the year hence no labour charges debited. Ornaments were sold from old stock. The A.O. examined the "Silver Nirman Khata" and observed as under :- (Page no.10) "The assessee in "Silver nirman khata" shown that the assessee has purchased pure silver (bullion)- 33-794-000 (Kg.- Gm.- mg.) for Rs.6,10,688/- and opening balance was- 42-638-100 of Rs.4,87,140/-. Thus the total pure Silver was- 76-432-100 worth Rs.10,97,928/- with the assessee. The closing balance of Silver Bullion remains at the end of the year 53-403-800 of Rs.7,74,355/-. Thus the assessee manufactured Silver ornaments of 23-028-000 of Rs.4,67,427/-. The assessee manufactured Silver Ornaments weight of 23-028-300. The 15% excess is taken of silver ornaments from silver Bullion, which comes to wt. of 3-454-245, which become th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the expense of Rs.5,540/- as labour charge of manufacturing of Silver ornaments was debited, the assessee was required to produce these bills on which this labour charges have been shown. As per bill dated 31.3.2007, which relates to Silver ornaments nirman reflects that 215.500 gm. silver ornaments prepared and labor charges are Rs.128/-. Thus the average of per gram comes to Rs.0.60 per gram. The assessee has got manufactured wt. of silver ornaments 23-028-300 (kg.- gm.- mg.). The labour @Rs.0.60 per gram comes to Rs.13,816/- (23-028-300 x 0.60). The assessee has shown Rs.5,540/- in the chandi nirman khata as majduri of ornaments. Thus this amount is reduced. Thus amount of labour, which has not been shown in the books of account comes to Rs.8,276/. This amount of Rs,.8,276/- labour treated as payment made out of books and added in the total income of the assessee." 15. The CIT(A) decided the issues as under :- (Page nos.18 to 22) "The rejection of books is found to be unwarranted. The appellant has been consistently maintaining the separate method of accounting and separate set of books for its two business. Books have been produced and test-checked. The purchases are all s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amounts was also not granted, as per Court's Citation referred by the A.R. It is thus held that the A.O. is in error to add back these amounts, duly evidenced from proved source and to disallow interest paid thereon. The additions in both the above a/c and interest disallowed are hereby deleted. 5.5 Collector Babu Rs.3,27,632/-: Like aforementioned loan a/cs, this is also an old a/c. The fact that the A.O. during the course of the assessment proceedings, for the assessment year 2006-07 u/s 143(3) enquired about this loan a/c, is proved from the copy of the Order Sheet for 2006-07 and reply dt. 28.03.08 of the assessee. It is sent that A.O., after being satisfied, accepted the same. The copy of the assessment order dt. 28.03.08 for the assessment year 2006-07 and appellant's reply dated 28.03.08 (06-07) supports the contention. The A.O. without looking into his past year's assessment order and without affording an opportunity required in law, have added the amount, which is apparently wrong and unsustainable and therefore, the addition Rs.3,27,632/- is deleted. 5.6 SalaryRs.30,000/-: As per details filed and list of employees per copy of the Paper Book, the A.O. failed to poi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Rs.70,113/-: Addition in both the above a/c are on identical reasoning. I find that the A.O. has worked out extra profits by following a unique system, not based on workable and practicable formula. In fact, as the appellant has pointed out purity in Gold and Silver items varies from item to item and their "Make". The A.O. has not established any defect and deficiency or placed any adverse evidence in the appellant's business system. The A.O. is not supposed to guide the Assessee regarding the manner and system for carrying on business. Also the system of valuing closing stock cannot be disturbed, when the assessee is following same pattern year after year and account books have always been accepted in assessment u/s 143(1) or 143(3) of the I/Tax Act '61, and therefore, addition in both the a/c does not stand fit in the eye of law and deserve deletion. Both the additions are deleted. 5.11 Wages Rs.8,276/- (Silver A/c) & Wages R.14,460/- (Gold A/c): The appellant has debited total wags of only Rs.5,540/- during the whole year which does not appear to be reasonable. The A.O. has followed a logical basis for working out the above additions on account of wages suppressed. The app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s account is duly covered by debit entries made for investment in U.T.I. and leaves no scope for addition, whereas, before the A.O. it was submitted by the assessee that this is very old account left by the Grand father in his name for miscellaneous purchase. The assessee did not furnish any reply in respect of credit entry of Rs.1,39,565/- even though specific query was made by the A.O. 18. Similar is the position in respect of Narottam Das Amanat Khata No.1 & 2. The assessee has taken different stands before the A.O. and before the CIT(A). Before the A.O. it was submitted that the Narottam Das Sharma was assessee's father who expired so many years ago and that the Amanat Khata No.2 was created. Similarly, in respect of Amanat Khata No.1, the A.O. specifically asked about the status of these accounts that in whose hands the tax liability of this interest account is assessed when father of the assessee has expired long back. The CIT(A) while deleting the addition accepted the assessee's contention that both these loan accounts are identical, coming from past 20 years and the A.O. has accepted the same in A.Y. 2006-07 while making the assessment under section 143(3). The CIT(A) fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business. Also the system of valuing closing stock cannot be disturbed, when the assessee is following same pattern year after year and account books have always been accepted in assessment u/s 143(1) or 143(3) of the I/Tax Act '61, and therefore, addition in both the a/c does not stand fit in the eye of law and deserve deletion. Both the additions are deleted." 22. We noticed that the A.O. before making the addition made some quantity calculation which is evident from the facts reproduced above from the Assessing Officer's. The CIT(A) simply accepted the assessee's contention that without examining the facts that how the quantity details given by the A.O. is incorrect. 23. The CIT(A) deleted the addition of Rs.1,00,000/- on account of marriage expenses and house hold expenses of Rs.78,000/- on the ground that the estimation made by the A.O. is willed estimate and followed some order of the I.T.A.T., Agra Bench. We notice that the assessee is HUF and the A.O. made the addition on account of marriage expenses Rs.1,00,000/- on account of marriage of daughter of Shri Brij Mohan Sharma, the assessee, and the house hold expenses. In respect of these two additions, in principle we do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.30/Agr/2012 by the assessee 27. The assessee has raised two grounds in his Cross Objection which are addition confirmed by the CIT(A) Rs.11.055/- under section 40A(3) and additions of Rs.8.276/- and Rs.14,460/- on account of wages in silver and gold accounts. 28. After hearing the ld. Representatives of the parties, in respect of payment under section 40A(3) we notice that the assessee has made cash purchases and before the A.O. it was submitted that these payments were covered by the provisions of Rule 6DDJ as the payments were made on Diwali festival. The A.O. noted that when the payment was made in cash there was no day of Diwali festival, it was Thursday and a Bank working day. The CIT(A) confirmed the order of the A.O. on the ground that the assessee has failed to establish that the payment is covered by Rule 6DDJ. The CIT(A) also found that the payment is not covered by exceptional circumstances provided under rule 6DDJ. Before us, the ld. Authorised Representative submitted that the payment is covered under rule 6DD as the payments were made to cottage industries. 29. After hearing the ld. Representatives of the parties, the contention of the ld. Authorized Representat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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