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TMI Blog2014 (7) TMI 602X X X X Extracts X X X X X X X X Extracts X X X X ..... mers for remaking or remodeling – CIT(A) pointed out that in the affidavits of the karigars it is not stated that they carried out work of repairing/remodelling at the premises of the assessee and kept such goods at the premises of the assessee - no material was brought to controvert the point highlighted by the CIT(A) - in absence of any material, there was no reason to interfere with the orders – Decided against Revenue. Disallowance of Labour payment – Held that:- The assessee has shown receipt for labour charges which was accepted by the AO as income of the assessee - to hold that no labour charge expenses were incurred for earning the labour charges income is not justified without cogent material – CIT(A) allowed labour charge expenses at the rate of 50% of the labour charge receipt which is also without any basis - In absence of any specific defect being pointed out in the vouchers of labour charge expenses, the disallowance made by the CIT(A) is unsustainable – thus, the disallowance under the head ‘labour charge expenses’ is set aside – Decided in favour of Assessee. Disallowance u/s 40(a)(ia) of the Act - Hallmark checking expenses - Held that:- CIT(A) has found that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Stock actually found as on 05.03.2008 21610.620 gms 111.493 Kg 4. The assessee was required to give the details of stock of gold and silver ornaments as per its books of account on 05.03.2008. The details submitted by the assessee were as under: Details Gold Silver Opening stock Less: Sale from 01.04.2007 to 05.03.2008 16701/861 Gram (-) 4081/660 Gram 83320.029 gram 11648.000 gram Total closing stock of old ornaments 12620/201 gram 71672.029 gram Add: purchase of gold from 01.04.2007 to 05.03.2008 6712/337 gram 35244.300 gram Total stock as per books 19332/578 gram 106916.329 gram Value: Gold 12620/201x850/- (Old stock) 6712/377x11125/- (New stock) ₹ 10730069/- ₹ 7467519/- Silver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a proof. In view of these facts, the assessee retracted its disclosure of additional income of ₹ 26,04,350/-. 6. The Assessing Officer observed that the submission of the assessee was not acceptable because of the fact that the assessee s advocate or accountant having nothing to do with the excess stock found in survey. Neither the advocate nor the accountant would take jangads to their home. 7. The Assessing Officer further observed that during the assessment proceedings, the assessee submitted copies of job bills, majuri bills showing details of old gold and silver ornaments received from different persons for converting it into new ones and also produced copies of affidavits of concerned persons. The Assessing Officer in the assessment order has tabulated the same as follows: S.NO Name .of the person from whom received Gold in grams Silver in gms Date of receipt of such goods from the persons 1 Nareshbhai Ramsunghbhai Chaudhary 75.740 14/02/2008 2 Nanjibhai Narsangb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch they had returned me a gold chain of 75-720 gram on 13/03/2008. Against this I have paid ₹ 9843/- as job work charges which is a true fact. I know that giving wrong statement on oath is a criminal act. 9. He observed that the affidavits in respect of the 14 persons were submitted by the assessee. The Assessing Officer observed that after perusing all the affidavits, it appears that it is an afterthought on part of the assessee. The Assessing Officer observed that all the persons have mentioned that they have given old gold/silver ornaments to Shree Arbuda Jewellers for job work and that they were lying deposited with Shree Arbuda Jewellers on 05.03.2008 i.e. the date on which survey was conducted. The Assessing Officer observed that it is not possible for all of them to know that their old ornaments are actually lying with Shree Arbuda Jewellers at the shop or with the persons through whom the assessee has got the job work done. The Assessing Officer noted that the assessee does not do any manufacturing/repairing work in the shop. The assessee itself has admitted that it has got the job work done through other persons to whom it had paid job work charges. Copies of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove table that it can be seen that in the first case that is of Shri Nareshbhai Chaudhary, the ornaments 75.74 grams were shown as received from him on 14.02.2008, which was given to Shri Usmanbhai Momin (Bengali) for job work on 14.02.2008, the same were received from him on 13.03.2008 and returned to Nareshbhai Chaudhary on 13.03.2008. Similarly, in the case of Devjibhai Ratubhai Samodia, ornaments were received from him on 16.02.2008 and given to 3 persons namely (i) Rameshbhai Harjibhai Patel (ii) Ratanbhai Bangali (iii) Ketanbhai Ramanlal Soni for job work. The same were received back from them on 10.03.2008 and finally returned to Shri Devjibhai Ratubhai Samodia on the same day i.e. on 10.03.2008. Similarly, in each of the other 12 cases, the assessee has stated that the ornaments from the persons to whom it was given for job work were received back during the period 10.03.2010 to 26.03.2010 i.e. after the date of survey. Therefore, even if it is assumed that all the persons are stating the truth that they have given the old gold/silver ornaments to the assessee for job work, then as per the details submitted by the assessee on the date of survey, these jewellery were definit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellate proceedings that the ornaments received from the customers were .given to karigars who carried out the repair / remodeling work at the premises of the appellant. This claim of the AR of the appellant is not supported by any evidence. It is seen that no evidence was found at the business premises of the appellant which indicated that the karigars had carried on the repair / remodeling work at the business premises of the appellant. This contention was not raised by the appellant at the time of survey. Further it is beyond human probability that karigars who were handed over gold or silver ornaments after they had signed the receipt for receiving the same would leave the gold and silver at the business premises of the appellant without any documentation whatsoever. Even in their affidavits filed the karigars have not stated that they have carried out the work at the business premises of the appellant. -The above makes it clear that the claim of the appellant that the excess gold and 'silver found at the time of survey represented gold and silver received from the customers for remaking / remodeling is not correct. In view of the above the AO was justified in treating the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e survey proceedings at the business premises of the assessee belonged to the assessee and represented the additional income of ₹ 26,04,350/- declared by the assessee as its unaccounted income. Therefore, he made addition of the same to the income of the assessee. On appeal, the Commissioner of Income Tax (Appeals) confirmed the action of the Assessing Officer observing that the Authorized Representative of the assessee has claimed that the ornaments received from customers were given to karigars who carried out the repair/remodeling work at the premises of the assessee. The claim of the Authorized Representative of the assessee is not supported by any evidence. He further noted that it is seen that no evidence was found at the business premises of the assessee that the karigars had carried on repair/ remodeling work at the business premises of the assessee. This contention was not raised by the assessee at the time of survey. The Commissioner of Income Tax (Appeals) has further observed that it is beyond human probability that karigars who were handed over gold and silver ornaments after they had received the same would leave gold and silver at the business premises of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock of gold and silver ornaments found during the course of survey proceedings were actually belonging to other persons received for job work was rebutted earlier in para 3.5 of his order as the same has been found untrue. The assessee has shown labour payment of ₹ 2,90,981/- against job work of this jewellery. As it has been proved earlier that the payment of labour has been shown only to create an alibi of excess stock, the same labour payment is treated as unexplained income. He, therefore, disallowed the entire labour payment of ₹ 2,90,981/- and added the same to the income of the assessee. 17. On appeal, the Commissioner of Income Tax (Appeals) restricted the disallowance to ₹ 66,459/- by observing as under: 4.3 I have gone through the submissions of the AR and the assessment order carefully. It is seen that the Assessing Officer has held that since the claim of the appellant that it had received gold and silver from customers has not been found to be correct hence the labour payment is not genuine. This contention of the AO does not stand to reason. It is seen that many of the karigars have appeared before the AO and their statements have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rate of 50% of the labour charge receipt which is also without any basis. In absence of any specific defect being pointed out in the vouchers of labour charge expenses, in our considered view, the disallowance of ₹ 66,459/- made by the Commissioner of Income Tax (Appeals) is unsustainable. We, therefore, delete the disallowance of ₹ 66,459/- under the head labour charge expenses and allow this ground of appeal of the assessee. 20. Ground no. 3 of the assessee s appeal is directed against the order of the Commissioner of Income Tax (Appeals) confirming the disallowance u/s. 40(a)(ia) amounting to ₹ 75,601/-. 21. The brief facts of the case are that the Assessing Officer observed that the assessee has debited ₹ 1,08,646/- in its profit and loss account under the head hallmark checking expenses . He observed that the assessee has made payment of ₹ 75,601/- to Gujarat Board Centre and not deducted any tax at source on it. The assessee was asked to show cause why the same should not be disallowed u/s. 40(a)(ia) of the Act. 22. The assessee submitted that the hallmark is not contract or a professional service provided by the entity. It is a qua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 75,601/- to Gujarat Board Centre and not deducted any tax at source on it. Therefore, he disallowed the same by invoking the provisions of section 40(a)(ia) of the Act which was confirmed in appeal by the Commissioner of Income Tax (Appeals). The first contention of the Authorized Representative of the assessee is that hallmark certification is not a contract of professional service provided by the entity and therefore, the assessee was not liable to deduct tax at source from payment made for hallmark certificate for quality of the ornaments. The Authorized Representative of the assessee could not bring any material on record to show that how hallmark certificate service was not liable for deduction of tax at source under the Income Tax Act. In absence of the same, this contention of the assessee is rejected. The second contention of the Authorized Representative of the assessee is that each payment made in majority of the bills of hallmark are below ₹ 500/- and therefore, the assessee had not deducted tax at source from tiny bill amount credited in the books of account. We find that the Commissioner of Income Tax (Appeals) has found that the aggregate of the payments ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not sold a single gram of new gold purchased by it during the year. The assessee had shown sales out of only old ornaments. He observed that the balance sheet as on 31.03.2008 submitted by the assessee alongwith audit report in form no. 3CD was perused and found hat from the said balance sheet, the assessee has shown closing stock of old gold at 12620.801 grams which implies that after 05.03.2008, no gold have been sold by it. The stock of new gold ornament was shown as 55575.268 grams. This implies that after 05.03.2008, the assessee sold only new gold ornaments purchased during the year. Hence, vide letter dated 10.12.2010, the assessee was required to confirm he same. The Assessing Officer observed from the copies of purchase bills submitted by the assessee that the value of gold purchased during the year from 01.04.2008 to 05.03.2009 comes in the range of ₹ 832/- to ₹ 1009/- per gram. Therefore, the assessee was required to justify valuation of closing stock on 05.03.2008 on new gold at ₹ 1125/- per gram. In reply, the assessee submitted that the assessee has maintained item-wise stock and submitted copy of closing stock item-wise during the course of hearin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d therein reveal that the opening stock of gold available with the appellant on 31/3/2007 was 16701.861gms. It is seen that the appellant has sold gold weighing 4081.660 gms from 1/4/2007 upto the date of survey. Therefore the stock of gold available with the appellant out of the earlier stock of gold on the date of survey was 12,620.201 gms. After considering the purchase of gold weighing 6712.337gms the AO has worked out the gold available with the appellant on the date of survey as 15,250.878 gms by taking the stock of gold available with the appellant out of the old gold at 538.541 gms. The calculation by the AO is not correct. As indicated earlier the stock of gold available with the appellant out of the earlier stock of gold on the date of survey was 12,620.201gms, when the purchases of 6712.337 gms are added to this then the stock of gold available with the appellant on the date of survey works out to 19,3332.538 gms. Thus the excess gold found would work out to 2278.042 gms and not 6359.742 gms. The addition of ₹ 45,40,891/- representing value of 4081.660 gms of gold is hence deleted. Thus the addition made by the AO of ₹ 71,45,241/- is reduced to ₹ ..... 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