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TMI Blog2015 (11) TMI 729X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The brief facts of the case are that the assessee is a private limited company, engaged in the business of manufacturing and sale of gold ornaments, etc. It has filed its return of income on September 30, 2009 declaring an income of Rs. 47,27,146. The case of the assessee was selected for scrutiny assessment and a notice under section 143(2) of the Income-tax Act, 1961 was issued on September 20, 2010 which was served on September 23, 2010. The learned Assessing Officer thereafter, issued a questionnaire under section 142(1) on January 12, 2011. A survey under section 133A was conducted at the business premises of the assessee at Vastrapur and Ratanpole on August 27, 2008. During the course of survey excess stock having value of Rs. 85,17,439 was detected. The learned Assessing Officer has noticed the working of excess stock in para 3 of the assessment order which reads as under : (Rs.) "(1) Physical inventory of stock found at Vastrapur 1,33,03,011 (2) Physical inventory of stock found at Ratanpole 77,29,694 Total 2,10,32,705 Less : Stock as on 27/08/08 as per books of account 1,25,15,266 Excess stock found 85,17,439 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee on the ground that during the course of survey, the director Shri Vinodbhai D. Soni was specifically asked, whether any gold purchased by the company, whose bill yet to be received is available in stock or not ? He failed to disclose about this fact during the course of survey. Therefore, whatever explanation prepared by the assessee is an afterthought. Accordingly, the learned Assessing Officer has rejected the contentions of the assessee and made an addition of Rs. 27,18,000 which include disallowance of some conversion charges. 6. Dissatisfied with the addition, the assessee carried the matter in appeal before the learned Commissioner of Income-tax (Appeals). 7. The learned first appellate authority has reappreciated the controversy and confirmed the addition to the extent of Rs. 26,68,441. The learned Commissioner of Income-tax (Appeals) has allowed the relief of Rs. 49,559 which was added by the Assessing Officer on the ground that the assesse had made a claim of conversion of gold bars to 22 carat ornaments. He disallowed this claim of the assessee. The finding recorded by the learned first appellate authority in para 2.6 is worth noting which reads as under : "2.6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchased this gold on August 21, 2008. The gold was also supplied on that very day. In order to buttress his contention, he drew our attention towards pages 34 of the paper book where bill No. 56 dated August 21, 2008 issued by M/s. Jain Creation is available. Learned counsel for the assessee further contended that M/s. Jain Creation had given a confirmation which is available on pages 33. The payments have been made through account-payee cheque and the copy of the bank statement of the assessee's bank is available on pages 27 and 28. On the strength of these details, learned counsel for the assessee contended that credit of 3000 grams of gold ought to have been given to the asessee. He also pointed that though during the course of survey it was contended by the assessee that jewellery of 2500 grams was purchased from M/s. Oasis Jewels which remained to be accounted. The credit of this jewellery has been given by the survey party while working out the stock, but ultimately, in the return the asessee has recognised the gold jewellery purchased from this concern at 1662.64 grams and the excess of 837.36 grams has been offered for tax. It indicates the bona fides of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imate conclusion from those information has to be drawn at the time of assessment stage. Therefore, if an assessee has submitted a reconciliation supporting with evidence then that reconciliation cannot be brushed aside lightly. We do not dispute with regard to the proposition raised by Shri S. N. Divetia, the assessee can explain the discrepancy in the stock at the assessment proceedings. The dispute relates to the merit of explanation. The question is, whether the explanation of the assessee is acceptable, when it is to be evaluated in the light of direct evidence, circumstantial evidence and with the angle of probability. Before we embark upon an inquiry with regard to the material submitted by the assesse along with its explanation, we deem it appropriate to take note of the questions and replies of the statement given by the director at the time of survey. The relevant questions and replies read as under : "Question No. 13 : Today in the print of the accounts of the computer of your company total purchase have been shown as Rs. 3,98,55,165 so far as such purchase your company is keeping inward register, if you have then show it. And if in your purchase goods have been receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the stocks as well as other details were brought to the notice of director. The employees were present and they were having ample time to recall this transaction. The learned first appellate authority also observed that as per market practice the owner of jewellery shop knew the gold purchase made in the recent past by heart because the purchase in terms of money is quite big. Keeping in mind this background, we have to appreciate the alleged evidence produced by the assessee along with the explanation. The first is the bank statement of Vijaya Bank. This is the statement of the assessee's account. In this bank statement, payments to M/s. Jain Creation through account-payee cheques are available, starting from August 14, August 18, and August 19, these payments were of Rs. 42 lakhs then on August 21st and 23rd, again the assessee paid Rs. 10 lakhs. It is not discernable against which purchases these payments have been given set off. The purchases of the jewellery on August 21, has been alleged to Rs. 35,68,000 but payments of Rs. 42 lakhs were made before August 19. If this amount was to be accounted for purchase of the jewellery then what was the need to make payment of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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