9911796707
TMI Blog2011 (4) TMI 1460X X X X Extracts X X X X X X X X Extracts X X X X ..... s Jewellery. He is also the Kartha of Abirchand Galada(HUF). Abirchand Galada(HUF) is the proprietor of a business known as T.B. Jewellery, Chennai. A search and seizure operation u/s 132 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act' for short) was conducted on 19.5.2005, in the case of this assessee. One day before the search (on 19.5.2005), a survey operation u/s 133A of the Act was carried out at the businesscum-resident premises of Shri Surendra Kumar Galada. During the survey proceedings, it was found that the assessee and his family members were in possession of unaccounted gold jewellery, silver jewellery, diamond studded jewellery, loose diamonds and cash. Accordingly, the survey operation was followed by search operation as stated above. On 19.5.2005 itself survey operations u/s 133A were simultaneously carried at two other premises which are as under: (a) No.10, Nageswara Rao Road, T. Nagar, Chennai 17. This is the premise of M/s T.B. Jewellery, which is the proprietorship concern of A.Abirchand Galada(HUF), the Karta being Mr.Surender K.Galada and Shri Lalith Kumar Galada is the copacerner in the HUF and (b) No.4, Seethammal Colony Exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years. 2.2. The Id CIT(A) erred In allowing the claim of the assessee simply based on the socio-economic status of the assessee while the same Is not supported by admission in their respective balance sheets. 3. The ld CIT(A) erred In allowing the claim of the assessee regarding jewellery received from the Achari Shri.Himanshu, but not accounted in respect of discrepancy noted In the closing stock. 3.1. The ld CIT(A) ought to have appreciated the fact that entry updated after search will have no bearing on the determination of closing stock. 3.2. The Id CIT(A) erred in not considering the fact the Assessing Officer has already taken Into account the entry found under 'alloy' while determining the stock. 3.3. The reliance of CIT(A) on jewellery received from Mr.Himangshu not booked as the entries had not been updated though the bill was available and had been noted by the search party' is misrepresented and not supported by any post search report. 3.4. The Id CIT(A) erred in allowing telescoping of the income admitted In the earlier years against the value of unaccounted investment in gold jewellery. 3.5. The ld CIT(A) ought to have appreciated the fact th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... silver 221.899 kgs. Deficit of diamonds 201.360 cts. During the hearing stage, the AR of the assessee was asked to explain the basis of his calculation which have led to showing deficit in respect of all the items. He stated that apart from the jewelleries disclosed under VDIS 1997, most of the assessees had stock of opening jewellery in their hands and as an evidence, he produced the last wealth tax return filed by those assessees which were way back in AY 1986-87. The AR has also produced the respective persons' income tax records starting from A Y 1987-88 (for Smt. Nirmala AY 1983-84) wherefrom it could be seen that during the intervening period i.e. between 1985-86 and 2000-01 (the first year of search assessment), none of the family members has shown any capital gain loss in their total income computation sheets. So, the AR pleaded that it should be reasonably presumed that the jewelleries appearing in the wealth tax returns for AY 1985-86 for all the family members, increased by the amounts disclosed under VDIS 1991 should be treated as the jewellery available in the hands of respective persons as on 1.4.2000. Here it may be noted that in respect of those persons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 006-07; for Akshay Galada AY 2006-07. In none of these cases, the trial balances attached with the returns reflect any jewellery. In respect of minor Ms. Ishita, who is the daughter of Mr Abhisek, no mention of this 52.30 grms of jewellery is reflected in the returns of Mr Abhisek Galada for any of the years upto A Y 2006-07. Accordingly, I conclude that the assessee has only cooked these up as an afterthought to explain the excess jewelleries and it is not to be accepted. Because of this contradiction, in argument as put forward by the assessee and rejection of opening jewellery in the hands of the four persons mentioned in the immediate preceding paragraphs, I decide to reject the assessee's claim of opening jewellery in the hands of some of the family members to the extent of the quantum as furnished by the assessee. Total Jewellery of Surender Kumar Galada and family as per VDIS '97 records and subsequent purchase: Name of the assessee Gold Bit (in grams) Gold Jewellery (in grams) Diamond (Ct.) Silver (Kg) Surender Kumar Galada (Indl.) 320 2082.9 + 21.44 (purchase) -150 (sold) 25 - 22.21 (sold) 33 Nirmala (Indl.) 2198.20 40.76 + 6.14 (purchase) 39 Abish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the undersigned and he explained about the contents of the seized/impounded documents made during survey/search at the residences and in the shops. At that time, the print-outs taken from CDs (marked page-1 to 18) were also shown to Shri Lalith Kumar Galada and discussed. When asked to explain the contents of page-14 of those print-outs (a photocopy of which is made overleaf as per page-11 of this assessment order), he replied that he would refer back to his accountant and auditor and would submit a reconciliation statement. Thereafter, on 12.12.2007, a reply was filed by Shri Abhirchand Galada (HUF) in this matter (kept in the folder of Shri Abhirchand Galada (HUF) for AY 2006-07) which is reproduced below: "Please refer to the loose sheet, Shri Heeralal, HUF and Smt. Asha Nahar. In the said sheet it has been depicted that gold 7345 grms has been shown as deposited with M/s T.B. Jewellery. In response to the same, I submit that the said sheet is only a proposal sheet and was made for further prospects. But then, later on only gold 7345 grms. was deposited with T.B. Jewellery and the rest was not taken. This is evident from the books of account and the CD which has been se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 570/grams as value of gold (done by Registered Valuer) on 20-5-2005, the total unaccounted investment made in Gold Jewellery during F. Y. 2005-06 comes to(7141.01 X 570) ₹ 40, 70,375/-. Total diamond found on the date of search (at residence + as per page 14 of CD printout was 92.80 carat whereas as per the chart above, it should have been 175.22 ct. So there was a deficit stock of 82.42 ct of diamonds. Total silver found at residence of Mr. Surender Galada, on 20-5-2005 was 33.547 kgs, whereas the total quantity disclosed in VDIS '97 by the family members is 175 kg. This means (17533.547) i.e. 141.453 kg of deficit silver was found as on 20.5.2005 at the residence of Shri Surender. There may be many reasons for finding such deficit stock of silver and diamonds viz. the assessee could have lost them or might have gifted them to a person or some temple authorities (for ego it is very common practice at Lord Venkateswara Temple at Tirupathi to donate gold, silver etc. besides cash). In this case, it is also possible that those silver and diamonds which were found to be in deficit compared to what should have been available, were actually kept at the Kodaikanal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ughter-in-law) 520.90 gm Rajul Galada(daughter) 520.130 gm Akshay Galada(son) 142.74 gm Ishita Galada(grand daughter) 52.30 gm 1236.07 gm If these two claims are considered, the position would be as under: Total gold jewellery found 16,493.85 Less: Jewellery items declared in VDIS and Subsequent purchase+125 gms out Of the gold bits declared under VDIS (refer para 7.8/page 4 of the Asst. Order accepted by the Assessing Officer 9,352.84 Wealth of the family members in whose cases WT returns were filed prior to the date of search i.e 1986-87 5,397.74 Wealth of the family members in whose cases Returns were filed after the search 15,986.65 1,236.07 Excess 507.20 The Assessing Officer has summarily rejected the claim of the appellant. The Assessing officer has been furnished with copies of the wealth tax returns of the family members, filed before the department based on which assessments have also been completed. The Assessing officer had also verified the income-tax returns furnished by these family members right from 1986-87 to 2000-01 and satisfied himself that there was no sale of jewellery by any of the family members during this period. Apart from this, all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a vis the jewellery found on the date of search. The same is depicted hereunder: CHART OF GOLD/SILVER DIAMOND/CASH FOUND AS ON DATE OF SEARCH VIS-À-VIS RECORDS Particulars Found Refer Sch. I As per Records Refer Sch. II Excess/Deficit Gold 10956.000 [Grms] 16866.950[Grms] -5910.950 [Grms] Silver 33.547 [ Kg] 255.446 [Kgs] -221.899 [Kgs] Cash ₹ 59700.00 ₹ 3,04,377.00 ₹ 2,44,677.00 [-] Diamond 15.00 Carats 216.360 [Carats] -201.360 [Carats] As per Schedule I As per Schedule II S.No. Panchanama No. Gold Silver Cash Diamonds Grms Kgs. Rs. Carats 1] Annexure ANN/DV/GJ/NS3 3570.000 … .... ….. 2] Annexure ANN/DV/GJ/NS 1 5278.000 …. …. …. 3] Annexure ANN/DV/GJ/NS 2108.000 …. …. …. 4] Annexure ANN/DV/SILVER/NS …. 33.547 …. …. 5] Annexure ANN/DR/CASH/NS …. …. 59700 … As per income tax Panchanama not mentioned 15.000 10956.00 33.547 59700. 15.000 The excess or deficit has been worked out and listed in the last column. These details have been enumerated on the basis of the last wealthtax retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the group. It can be seen that the income returned by the family members from assessment year 2001-02to 2005-06 has been ₹ 70.99 lakhs, 104.61 lakhs, 82.81 lakhs, 79.75 lakhs and 118.10 lakhs, respectively. These factors should themselves independently justify the possession of the small quantify of jewellery by the appellant's daughter-in-law, son, daughter and the grand daughter. The Assessing officer, however, did not take cognizance of these factors. In conclusion, the appellant submits that the Assessing officer has observed in page 4 of the assessment order that the appellant has cooked up explanations as an afterthought. This allegation is baseless and against facts of the case. As already submitted above, the records produced before the Assessing officer and on which the explanation is based, are part of the records with the department for the past several years. And therefore, now to turn a blind eye and call each and every document as an afterthought is against the facts available with him. Copies of the wealth-tax returns furnished by the appellant and family members have been annexed here.(Annexure-2)" 10. After examining the above submission, the ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 133A was conducted on 19.5.2005 in the business-cum-residence of Shri Surendra Kumar Galada, the present assessee, at No.42, Venkatanarayana Road, T. Nagar, Chennai. During survey, it was noticed that Shri Surendra Kumar Galada and other members of his family were in possession of unaccounted gold jewellery, silver jewellery, diamond studded jewellery, loose diamonds, cash etc., For that matter, the survey proceedings were converted into search operation u/s 132 which was initiated on 20.5.2005 i.e the following day after the survey. In the Panchnama prepared on 20.5.2005 inventories of gold, diamond, silver etc were prepared. The cash found also inventorized. Subsequently, on 14.6.2005, another Panchanama was prepared vide which certain books and documents were seized as per Annexure CB/B&D/S from Shri Surendra Kumar Galada's residence. These documents related to three financial concerns namely, S.J International (Prop. Shri Surendra Kumar Galada, A.G International (Prop. Shri Abhishek Galada) and L.G International (Prop. Shri Lalith Kumar Galada). It is an undeniable fact that in the statement recorded during survey on 20.5.2005, Shri Surendra Kumar Galada has stated that jewell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the letter by way of a note and appended to the return of income, as under: Deficit of gold 5910.950 gms Deficit of silver 221.899 gms Deficit of diamonds 201.360 cts 14. As against excess gold, silver and diamond found, the assessee has given details showing deficit of all these three itmes. The clarification for the above anomaly is that apart from jewelleries disclosed under VDIS 1997, the assessee and his family members had stock of opening jewellery in their hands. To substantiate this claim, copies of wealth tax returns filed for assessment year 1986-87 were produced. The income tax records starting from assessment year 1987-88 of the members of the family except in the case of Smt Nirmala Kanwar Galada in which case records starting from assessment year 1983-84, were produced. The claim of the assessee is that a probable presumption in the given circumstances is that the jewellery appearing in the wealth tax returns for assessment year 1985-86 for all the family members plus the quantum of jewellery disclosed under VDIS 1997 has to be treated as the jewellery available in their respective hands as on 1.4.2000. To our mind, this contention of the assessee seems to be v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation rather this explanation seems to be based on reality of life and cannot be ignored. The assessee has given a chart of opening jewellery of the family members. In this chart apart from seven members, viz Shri Surendra Kumar Galada (Individual, HUF, S.HUF), Shri Abhishek galada (Individual and HUF0, Smt Nirmala Kanwar Galada and Smt Suryakanth Galada, four other names are included as under : Smt Sushma Galada 520.90 gm Rajul Galada 520.130 gm Akshay Galada 142.74 gm Ms. Ishita Galada(Minor) 52.30 gm 15. These persons, as per the assessee received the jewellery, mentioned against their names, from gifts on various occasions. Again in the income tax returns of Shri Rajul Galada and Shri Akshay Galada for assessment year 2006-07 and also for assessment year 2005-06 in the case of Sushma Galada in the trial balances attached with their returns, these jewelleries are not reflected. Likewise, in the case of the minor, in her father, Shri Abirchand Galada's return for assessment year 2006-07, in the appended trial balance, no such jewellery is found reflected. On that basis, the Assessing Officer again has concluded that this is a made up and cooked up claim of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eory of probability as we have discussed above. 16. Five compact discs which were impounded during survey at the business premises of T.B. Jewellery, at No.10, Nageswaran Road, T.Nagar, Chennai, on 20.5.2005. On 2.11.2007, print outs of some selected files, copied in the CDs, were taken out in the presence of Shri Lalith Kumar Galada. On 17.12.2007, the contents of these printouts were got explained from Shri Lalith Kumar Galada by showing pages 1 to 18 of print-out taken from these CDs. He was specifically asked to explain page-14 (a photocopy of which is made overleaf at page 11 of the assessment order). On 12.12.2007 a reply was filed by Shri Abirchand Galada in this matter. The reply is enclosed at page 5 of Assessing Officer's order. This explanation was not accepted by the Assessing Officer but we are not in agreement with the reasoning given by the Assessing Officer. 17. As per page 14, gold bit of 1745 gms was deposited with M/s T.B jewellery. Shri Surendra Kumar Galada and his family members deposited 77.79 carats of diamond with M/s T.B Jewellery. This has been treated by the Assessing Officer as excess jewellery on the basis of the seized record. Likewise, gold jewelle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and just ignored the deficit. In case we venture to add gross profit on the sale of deficit, particularly in the given facts and the circumstances, where excess of one bullion is also noticed, is not at all reasonable and justified. The only acceptable possibility is that it may have been converted from convert one kind of jewellery into different kind of jewellery, being the business routine. This is the only plausible view which a judicial forum can take in the given facts and circumstances of the case. The hypothetical view of Assessing Officer that the deficit jewellery may have been kept at the house not covered by search/survey is baseless and devoid of merits. It is found for a fact that wealth tax returns had been furnished by the assessee and his family members. The jewellery weighing 5397.740 gms had been declared in the wealth tax returns for assessment year 1985-86 of the assessee and his family members. Qua the declared wealth credit has to be given. In our opinion, not showing jewellery in the trial balance of the family members filed alongwith the return, for the subsequent year, cannot be as fatal as to deny the availability of declared jewellery and the same can b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he department and should under no circumstances be under-estimated or taken advantage of by them." Gani Silk Palace: "Held, that when the assessee on its part had produced the discharged hundis and also vouchers showing payment of interest, that was sufficient for the assessee to discharge its initial burden and it was for the Income-tax Officer to have examined the bankers when he wanted to rely on the statements obtained from them and given an opportunity to the assessee to cross examine them before taking into account the contents of those statements. When the Appellate Assistant Commissioner had given a specific direction to the officer to examine the bankers before making use of their statements, the Income-tax Officer could not, without complying with the said direction, make reassessment on the same basis as was done on the prior occasion, As the Tribunal had pointed out that the order of reassessment made by the officer was a verbatim reproduction of the original order of assessment except for the preamble portion and had come to the conclusion that there was nothing to show that the credit entries in the books of account were false, this finding of the Tribunal, being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he entries had not been updated, though the bill was available and noted by the search party Excess 8049.189 grams Thus there was excess jewellery to the extent of 8049.189 grams. Apart from this, gold jewellery to the extent of 5357.850 grams, found at the residence of Lalit Kumar Galada, also belonged to Surendra Kumar Galada family. Investment in gold has been made out of the sale of silver, diamond and out of the finance business along with its accretions". Again vide letter dated 12.12.2007 the assessee, in respect of the chart as given in para 8.1 above gave a different explanation which is as under: "This, we submit is not correct. The pure gold issued to Goldsmith for conversion to Hiimanshu Achary 4106.036 grams has been treated as issued outside. However, Hiimanshu Achary is in the shop itself in the same premises and as such the same was included in the physical stock found at shop (i.e.) 17754.28 grams. As such, the gold treated as issued outside the premises is not correct and hence, the error needs to be rectified. This is also testified by the fact that no were gold was found with the Goldsmith, Himanshu Achary other than this but the same is record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued to the workshop (to Mr. Himanshu Achary) of 4106 after conversion into jewellery (adding alloys) come to 5230.635 gms. In the normal practice, once the gold is received from workshop/Achary, it is recredited in books. This did not take place. The show room and the workshop are two divisions of the same establishment and cannot be seen in two compartments. If the establishment is seen in toto as one, there is no discrepancy. In conclusion, the appellant submits that working out the excess as above, the Assessing officer has ignored the fact that the appellant had earlier issued 4106.046 gm of pure gold to one Mr. Himanshu. He sits in the business premises of the appellant only and does his work. The system followed by the appellant is to hand over pure gold to the goldsmith, and at the time of handing over the gold, an entry for issue of gold is made in the computer. Using the pure gold, the goldsmith had manufactured gold jewellery, and returned the manufactured gold jewellery weighing 5230.635.on the date of search, entry for the receipt of which was yet to be made in the books. Therefore the quantity of gold issued to Mr. Himanshu for which an entry is available in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year 2004-05, does not speak anything by itself. In all that it could be referred to as a "dumb document". The zeros to the figures have been arrived at only on the basis of the statement recorded on oath by the Authorised Officer. There is no other material or document or pronotes or securities on the basis of which these figures could have been arrived at. The sole factor or basis on which the figures in 'Dhanraj' has been arrived at is assessee's own statement recorded on oath at the time of search. The appellant submits that this being the case, the Assessing officer has conveniently ignored the other part of the statement wherein, the appellant has explained his operations which involved buying and selling of gold/silver/diamonds and the circulation of funds in finance. The relevant extracts from the appellant's statement are reproduced below: "Qn. No.4: During the course of survey conducted at your premises at No.4, Seethammal Colony 2nd Main Road, on 19-05-2005 & 20-05-2005, we have examined the books of account and related fields maintained in the system and found a file, viz., Dhanraj. This particular account is maintained in ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal 503,581 Golden Moments jewellery 13,36,508 The printout containing the cash balance had been taken from the system and signed by your Accountant Mr. Kasi viswanathan and your son Mr. Abishek Galada who were present at the premises. On the other hand, as per the inventory of the cash found in the premises, the actual cash available as on the date of survey was ₹ 123,585. Kindly go through the print outs containing the cash balance as per books and physical inventory of cash vide Ann/PC/Cash/NS and explain the discrepancy? Ans: I have gone through the cash balance as per books and inventory of physical cash prepared by survey team and verified the same. It is true that there is a shortage of cash to the tune of ₹ 28,81,767. I had invested this cash for the purpose of purchase and sale of gold jewellery/bullion without bills and also some amounts in finance business. (vii) that this being the case, the Assessing Officer has been very much in the wrong by arriving at conclusions like "depositing the entire deficit calculated to the last grams and carats in the Hundi of Thirupathi temple etc. etc. ". The Assessing Officer ought to have refrained from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant requests that the Hon'ble Commissioner of Income-tax may kindly delete the addition of ₹ 75,69,499 made on this account." 22. On the basis of the above explanation, the ld. CIT(A) held that the gross repayment could show that gold of 24 ct was issued to various goldsmiths for making jewellery. On examination of G-11 Register maintained by the assessee it was found that 4106 gms of gold of 24 ct was issued to Shri Himanshu Achary who was present in the workshop at the time of search also. So a bare credit of jewellery weighting 5230.635 gms converted out of stock issued to Shri Himanshu Achary (4106.036 of 24 ct jewellery ) was recovered for arriving at the book balance as against, the Assessing Officer has worked out excess stock of 13279.424 gms and after reducing the duly converted from raw gold issued to gold smith. He determined the excess stock at 13279.824 gms - 5230.635 gms = 8049.189 gms. Accordingly, he determined the value of the excess stock of gold jewellery valuing at ₹ 45,88,037/-. The income offered in assessment years 2003-04 to 2005-06 totalling to ₹ 21,39,157/- was treated as available with the assessee on the date of search and ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are of the opinion that this issue of jewellery received from Shri Himanshu Achary has to be examined by the Assessing Officer afresh. If the entries are found subsequently in the G-11 Register, the Assessing Officer is directed to give credit for the jewellery to that extent worked out either at pure gold basis or with alloy content. The stock statement on 19.05.2005 indicates that only a debit of 4106.036 gms gold was stated to be issued to Shri Himanshu Achary. If any amount of credit is to be considered, it is to be at 4106.037 gms. and not 5230.635 gms. given credit by the ld. CIT(A). However, this aspect requires examination as we are not in a position to verify whether the physical stock found was pure gold or with alloy content. Moreover, the issue to Shri Himanshu Achary was dated 19.05.2005 only (as issued to him accounted in stock statement sheets). It is doubtful whether he could have manufactured the jewellery immediately on the same day by the time the search had occurred. This aspect requires examination. Subject to the finding of gold inventory prepared, with reference to physical stock found on 19.05.2005 of 17670.120 gms., the Assessing Officer is directed to ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debtors. 4. The Id CIT(A) erred In allowing relief by deducting the value of unaccounted sale of jewellery to the extent of ₹ 84,44,759/. 5. The Id CIT(A) ought to have appreciated the fact that the claim of sale of jewellery belonging to family members was not supported any documentary evidences. 6. The Id CIT(A) erred in not considering the fact the claim of the assessee regarding the sale of jewellery without the knowledge of the other members cannot be true as the assessee is the karta of Surendra Kumar (HUF) and the transactions could not take place without the knowledge of the assessee. 7. It is also pointed out here that gold was found to be In excess I at the residence of the assessee and the deficit of silver and diamond was 141.453 kg and 82.42 carat as against 221 kg and 201.36 carat claimed by the assessee and accepted by the CIT(A). 8. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set aside and that of the Assessing Officer restored." 29. In the cross objection, the assessee has raised the following grounds: "1. The Commissioner of Income-tad(Appeals) erred in confirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s reply is as under: "Ans: I have gone through the printouts taken from the system and examined the same. Further, I . have signed the printouts for having gone through the same. This particular account was maintained in the system for the F. Y. 03-04 in the name of Dhanaraj by me in 'Quicken software'. These transactions are pertaining to my gold jewellery business and finance business which are not reflected in the regular books of account maintained by me. The entries appearing in this are mentioned in coded form in thousands. But in really they are in lakhs. i.e. two zeros are omitted. In order to arrive at the correct amounts, the decimal appearing before the last two zeros should be removed . Further, 'minus' appearing before some of the entries represents amount due from the parties on account of sale of gold jewellery/bullion items. I shall explain the exact nature of the transaction in respect of all the entries appearing in the account in a couple of day's time." 32. The observations of the Assessing Officer in this regard is as under: "This secret file, as explained by Shri Surender Kumar Galada contained details of loans forwarded as well as amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the guise of 'Dhanraj'. In the context of issue relating to Dhanraj, the AIR submitted the following: "The asseesee has already agreed to the finances having been made between the period 1.1.2003 to 7.2.2004 thereafter all the finances have been received back by March 2005 for the purpose of acquiring jewellery. The assessee further claims that even for the finances he used to sell gold, silver or diamond belonging to himself and his families members as and when the need used to arise without their knowledge and used to repurchase the gold, silver & diamond. This cycle used to continue and continued till the date of search. The assessee now contends that the amount in circulation either by way of finance or by way of sale or purchase of gold, silver, diamond should be telescoped against each other. The assesee further submits that there are no conclusive evidences to support each and every transaction be it the sale of jewellery or its repurchase there of or its deployment in finance business. As a matter of fact the assessee strongly contends that even for the finance business there are no evidences either in the form of promissory notes, securites, documen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o of business have been utilised and disposed and deployed on finance or for reinvestment in gold, silver, diamond etc. Essentially, the jewelleries available with family members and the stocks in business have been utilised for various activities. Principally, there are occasions when items have been sold and used for finance and .the collections thereof have been reinvested either in gold, silver or diamond. None of my family members was aware or has any participation in the entire activity. I have not maintained any detailed record of the jewelleries disposed off or purchases made thereupon. The surpluses arising out of jewellery business were being circulated in the finance business and the receipts and the income accretions were again being utilised for being reinvested in gold, silver, diamond etc. at various points of time. The funds kept on circulating and kept changing from one form to another. Thus, after the search on 19.05.2005, I have taken stock of the entire situation and have included the omissions made in the hands of the respective members records. I have considered the finance transactions and have offered the interest, income thereon. I have also estimated the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2004-05 for a total amount of ₹ 66,68,567. The profit of ₹ 2,50,000 has been offered for assessment in the return now filed for A.Y.2004-05. Out of the sale proceeds, ₹ 65 lakhs was advanced as loans during the year. On the total advance of ₹ 81 lakhs (16 lakhs + 65 lakhs), interest due of ₹ 7,74,558 has been offered for assessment in the return of income for the A.Y.2004-05." On account of undisclosed finance business and jewellery business, the assessee has shown the following incomes on estimate basis for three years:· A.Y Nature of income Amount disclosed 2003-04 Estimated GP from jewellery sale ₹ 1,50,000 Interest receipt on loan forwarded ₹ 29,589 2004-05 Estimated GP from Jewellery sale ₹ 2,50,000 Interest receipt on loanforwarded ₹ 7,74,558 2005-06 Interest receipt on loan forwarded ₹ 13,35,300 Thus, it can be seen that though the assessee basically accepted the transactions in "Dhanraj" but regarding the amount involved of ₹ 1,07,78,150,which is the sum total of loans advanced by the assessee, he is only forwarding estimated interest income for three years but for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period. In course of hearing the AIR was asked about this evident anomaly and he explained that all the family members used to keep their jewelleries in custody of the senior most person of the family, Mr.Surendar Kumar Galada and they were not aware that what Mr. Galada did with the jewellery in the intervening period. Accordingly on good faith the other members had filed their W.T. returns for all five years showing the same quantity of jewellery being possessed through out. This explanation has got a major loophole. Mr. Surendar Kumar Galada himself is the karta of two HUFs Surendar Kumar Galada (HUF) and Surendar Kumar Galada (Small HUF). Here the plea that these two assessees were not aware of the sale and subsequent re-purchase of the jewelleries is simply not acceptable because Mr. Surendar Kumar Galada (Individual) himself is the karta and he cannot be unaware of his own actions. Then again, even though Mr. Surendar Galada has not filed his W.T. returns but along with his LT. returns :for A.Y. 2000-01 to 2006-07 trial balances are attached where the item jewellery is appearing. Again for all the returns the amount mentioned against "Jewellery" in those trial bala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... March 2005 - and again reutilizing the fund for purchase of jewellery is nothing but an afterthought and is not acceptable. Thus it is concluded that as per the computer print-out of the 'Dhanraj' Chart, the total amount of ₹ 1,07,78,150/- which represents the loans forwarded by the assessee during financial year 2003-04 and an amount of ₹ 1,06,43,000/- which is due to the assessee on account of sale of gold jewellery/bullion (as per the statement of Mr. Surender u/s 132(4) on 26.05.05 - in answer to Q.No4) is to be treated as loan forwarded/gold, bullion purchased (corresponding to the sale of which gold/bullion, ₹ 1,06,43,000/- is due to him) by the assessee from sources which is not disclosed and hence the total amount of ₹ 2,14,21,150/- is to be treated as assessee's income from undisclosed source for the F. Y.2003-04 relevant to the A. Y.2004-05. Further, as per the same Chart printed from computer and counter-signed by the assessee, a cash balance of ₹ 34,17,850/- was also available to the assessee in F.Y. 2003-04 and this also is to be treated as undisclosed income of the assessee for the A. Y.2004-05. Thus, the total undisclosed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the entire deficit Silver and Diamond has been deposited by the appellant in the Hundi of Tirumala Temple. [viii] That the Assessing Officer has completely ignored all the submission made by the appellant and the evidences available with him on records and made an adhoc addition of ₹ 2,48,00,000/- which is without any basis and needs to be quashed. The Commissioner of Income tax (Appeals) may be please to consider the submissions and delete the addition made in toto. 12. The appellant therefore submits that the addition made by the Assessing Offieer is against the facts of the case and therefore may kindly be deleted in toto." 34. After examining the entire detailed argument of the assessee, the ld. CIT(A) has given his finding in para 5.2 as under: 5.2 I have examined the facts of the case. It is found that the impugned additlon is based on seized document downloaded from the "quicken software"; These documents are referred as 'Dhanraj'. The assessee was examined regarding this document. The relevant question and answer are as under: Qn. No.4: During the course of survey conducted at your premises at No.4, Seethammal Colony 2nd Main Road, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 1,41,96,000/-. If the assessee's admission is not relied upon in the asst. proceeding the total of unaccounted cash and investment will come to only ₹ 1,41,960/- In the same answer the appellant had stated that the transactions are pertaining to his unaccounted purchase and sale of jewellery and financing. The appellant bad said that minus figure represent amount due from the parties on account of sale of gold jewellery/bullion is also to be read correctly in cohesion with the seized documents on which he is examined. In 'Annexure 2' the total of positive figure, is ₹ 1,41,960/-. and the total of negative figure is ₹ 1,06,430/-. At the bottom of the annexure the difference between plus and' minus figure is written as ₹ 35,530/-. (On careful reading of the appellant's deposition on the seized document, it becomes clear that the minus figure of ₹ 1,06,43,000/- is the amount received on sale of jewellery from 5 parties. Out of this realization and the unaccounted amount of ₹ 35,53,000/- shown as balance at the bottom of the seized document , the unaccounted deposits to various parties totalling to ₹ 1,07,78,150/- is adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 17,75,192 in assessment year 2003-04 and ₹ 55,68,567/- in assessment year 2004-05. The Revenue has now disputed the quantum of unaccounted sale and profits thereon. In the returns for these two years to the claim of the assessee regarding source of the unaccounted deposit and cash seems to be plausible and one of the possible view. When two possible views are there one view which favours the assessee has to be accepted. The shortage of cash found during search has to be set off against unaccounted cash balance shown in the documents and to that extent we are in agreement with the above finding of the ld. CIT(A). In fact, the Assessing Officer has made addition of ₹ 2,48,39,000/- on account of unaccounted cash, deposits and purchase of gold and bullion. During survey, the taxman laid hands at a computerized file named 'Dhanraj' pertaining to financial year 2003-04. This file was created in 'Quicken Software'. The print out of this file is extracted in para 23 of this order. In his statement recorded on 26.5.2006, during survey, Shri Surendra Kumar Galada, revealed the modus of recording the entries on this file, in coded language. He stated that a correct figure woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t would definitely give a distorted figure of assessee's income. From the circumspection of the entire records, it cannot be denied that the assessee had to utilize gold, silver and diamond belonging to various family members and the money between the two businesses have been flowing to and fro. It is a well established legal position that when the Department has to rely on a particular piece of evidence or any statement, it has to reply on it in its entirety and not by way of pick and choose. We find force in the submission of the ld.AR when he says that after the date of search entire situation has been taken stock of and omissions have been tried to be corrected. The assessee has considered the finance transactions and has also offered the interest income for tax. He has also estimated profit from sale of silver, gold and diamond and offered the same for tax. The assessee has relied mainly on the inventory and physical stock for computing the income which has been offered for tax. It is true that the assessee has not maintained detailed records regarding jewellery sold and purchased, and has offered the accretions, in respective years, for assessment. This assessee had a deficit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ures have to be considered together and in this case, the total negative figure comes to ₹ 1,06,430/-. The Assessing Officer has not disputed the quantity of unaccounted sales and profit on sale for assessment years 2003-04 and 2004-05. Thus, in our considered opinion, the ld.CIT(A) has not given credit to the surplus cash in the 'Dhanraj' A/c on the pretext that there was no excess cash and in fact deficit in various assets. However, this statement of the ld.CIT(A) cannot be accepted for the fact that many of the transactions were accepted as indicating assessee's business transactions. On the date of search no cash was found and whatever surplus remained as per the documents have been circulated in advance or available in the form of gold. Therefore, we are of the opinion that the issue of giving credit to the amount of ₹ 57,52,241/- should be restored to the file of the Assessing Officer as the requirement of cash flow on sale of silver, gold and diamonds should be given credit. Further there is excess stock confirmed in A.Y. 2004-05. These aspects require examination by the Assessing Officer and the Assessing Officer is directed to examine the source of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.107 Kgms. There is no basis for the addition and the same ought to have been deleted. 2. The Commissioner of Income Tax (Appeals) erred in confirming the addition of ₹ 1,33,208 on account of the alleged stock deficit in diamonds. 3. The Commissioner of Income Tax (Appeals) ought to have deleted the entire addition of ₹ 25,000 on account of alleged excess stock of items of ruby and emerald. The entire addition ought to be deleted in so far as the same is not based on any materials. 4. The Commissioner of Income Tax (Appeals) erred in confirming the addition of ₹ 3,09,080 on account of alleged unaccounted sales. The conclusion that these sales are recorded in the seized documents is not correct. The entire addition has been confirmed without any materials but based on presumptions and ought to have been deleted." 40. The relevant facts of this case are that as a result of the search and survey as stated above, in response to notice u/s 153A, this assessee Abirchand Galada(HUF) filed the return of income on 27.9.2009 showing total income of ₹ 52,79,200/-. As against this, the Assessing Officer passed assessment order on 26.12.2007, at a total income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed that his accounted jewellery was 9352.84 gms. So, already an extra quantity of 7266.01 gms of gold jewellery was determined in respect of Mr. Surender and his family members. Then, wherefrom can he transfer a further quantity of 5454.55 gms. of gold jewellery to M/sT.B. Jewellery? This is mathematically impossible. It can only imply that either Mr. Surender and his family. members' owned ·further unaccounted jewellery of 5454.55 gms (apart from 7266.01 gms) or that the explanation of transfer of 5454.55 gms. of gold by Mr. Surender to M/s T;B. Jewellery, as furnished by the assessee, is:false and only an afterthought to avoid tax by way of inter-assessee setting off of gold jewellery. Since, this explanation is given by M/s. T.B. Jewellery and not Mr. Suredner Galada, it is conclued that no jewellery was transferred by Shri Surender Galada to M/s T.B. Jewellery, as submitted by the assessee. Thus the explanation is rejected as devoid of any merit and unsatisfactory, and the reality is that as on the date of survey, M/s T.B. Jewellery was in possession of excess gold of jewellery to the extent of 7282.58 grms; Taking the value of gold at ₹ 570 per gm., the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant submits that while calculating the total quantum of jewellery possessed by Surendra kumar Galada and his family members, the Assessing Officer has totally ignored the quantum of jewellery disclosed by Shri Surendrakumar Galada and the family members, as declared in the returns of wealth filed by them upto assessment years 1986- -87, the details of which are as under: Surendrakumar Galada(Indl) 178.390.00 gms Surendrakumar Galada(HUF) 597.000 Nirmala Kanwar Galada(mother) 2286.950 Suryakantha Galada 1555.400 5497.740 Shri Surendra Kumar Galada, in the course of his assessment proceedings, had furnished the copies of the returns of wealth filed by the above persons for assessment year 1986-87, and in spite of this, the Assessing Officer has ignored the claim of possession of gold jewellery to the above extent by Surendrakumar Galada on the ground that no returns were furnished in the later years. The appellant submits that in view of the explanation offered by the appellant, the Assessing Officer ought to have accepted the source for 5454.55 gms of gold jewellery. It is requested that the Hon'ble Commissioner of Income-tax may kindly delete the addition made.&qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground of appeal is allowed." 43. After hearing both sides, we find that there is no fallacy in the finding of the ld. CIT(A) and deserves to be confirmed in this regard. The reasons for our above finding are that during survey conducted at M/s T.B Jewellery, total gold jewellery weighing 87653.02 gms was found as against the book balance as on date of 87003.247 gms. Thus, the excess stock was arrived at 649.77 gms. During assessment proceedings, jewellery weighing 6632.81 gms found at the residence of Shri Lalith Kumar Galada was treated as belonging to the assessee- HUF. The claim of the assessee is that out of this jewellery 5454.55 gms belonged to Shri Surendra Kumar Galada. In fact, before the Assessing Officer it was claimed by Shri Lalith Kumar Galada that jewellery weighing 6632.81 gms found from his possession belonged to him, but out of that, jewellery weighing 5454.55 gms was given to him by Shri Surendra Kumar Galada (Individual). The Assessing Officer has added value of this gold jewellery on the basis of two letters, but he has not accepted contents of the letter in entirety, but has interpreted the averments of the letters in his own way. He has made the impugned ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s opined that quantification was not possible so valuation was done on piece-basis which comes to ₹ 2,26,653/-. This action of the Assessing Officer has resulted into a total addition of ₹ 20,42,830/- made on account of assessee's income from undisclosed sources. In first appeal, the assessee could not get any relief. Now, the assessee is further aggrieved. 47. We have considered the rival submissions and have perused the entire material available on record. The records revealed that in fact the Assessing Officer has made total addition on account of excess stock of silver jewellery at ₹ 20,42,380/-. The case of the assessee is that in so far as excess stock of silver, to the tune of 165.170 kgs is concerned, was wrongly valued by taking ₹ 11,000/- per kg as against the prevailing rate of ₹ 10,000/- per kg. Further, that the assessee has itself offered a sum of ₹ 13,09,613/- in the returns and has further ratified the same vide letter dated 3.12.2007. Unfortunately, the ld. CIT(A) has not considered this aspect of the matter despite extracting the entire submission of the assessee in para 6.1 at page 8 of his order. He has simply mentioned about ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, we allow Ground No.2 of the cross objection by ordering to delete the impugned addition. 49. Ground No.3 relates to profits from unaccounted sales of gold jewellery amounting to ₹ 25,000/-. The facts of this issue are that during survey Ruby measuring 1.76 carats and Emerald measuring 1.46 carats were found. As these items were not found mentioned in the books, the Assessing Officer added their total value taking their price at ₹ 25,000/-. The ld. CIT(A) has simply confirmed this addition by stating that there is no flaw in Assessing Officer's finding in this regard. 50. We have heard the rival submissions and have found that the Assessing Officer has not given any basis for valuing these items at ₹ 25,000/-. The case of the assessee is that Ruby and Emerald are not as precious stones as diamond but these are only semi-precious stones which cost approximately ₹ 250 to ₹ 300 per carat and in that view of the matter, the total value of these items would come to a very less amount. It is stated that in this regard, the assessee has already admitted ₹ 893/- while filing its return of income. It has been prayed that the addition made in this rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the assessee cannot be likely ignored and brushed aside. Since the assessee seems to be indulging in purchase and sale outside the books of account and certain loose sheets were found during the search/survey which established that assessee was purchasing and selling jewellery outside the books of account. In view of this we confirm the undisclosed sales arrived at on the basis of the loose slips found. This finding is also in conformity with the findings given in para 36 with reference to the modus operandi of the assessee 53. In the result, the cross objection stands partly allowed. I.T.A.No. 1293 & 1294/Mds/09 54. These two appeals by the assessee, Abirchand Galada(HUF), for assessment years 2004-05 and 2005-06, are directed against the common order of the ld. CIT(A), dated 1.7.2009. The common grounds raised in these appeals can be read as under: "The order of the Commissioner of income-tax (Appeals) II, Chennai, in ITA No.106 & 107/07-08 dated 01-07-2009, it is submitted, is opposed to law, facts and circumstances of the case. The learned Commissioner of Income-tax (.Appeals) erred in upholding the addition of ₹ 642,824 under the head 'undisclosed sales& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king into the answer relevant to such question, has proceeded to make additions on the basis of slip No.64 by treating the amount recorded thereon as assessee's unaccounted sales and the Assessing Officer has totally refused to give credence to the prevailing practice/customs in this line of business. In our considered opinion, the claim of the assessee is to be rejected in the light of our findings in A.Y. 2006-07 vide para 52 above. Therefore this ground is dismissed. 57. In the result, both the appeals stand dismissed. I.T.A.No. 1482/Mds/08 & C.O 13/Mds/09 58. The appeal of the Revenue and the cross objection by the assessee, Shri A.Lalith Kumar Galada, are directed against the order of the ld. CIT(A), dated 3.4.2008. 59. In Revenue's appeal, following grounds have been raised. "1. The order of the learned CIT(A) is contrary to law and facts of the case. 2. The Learned CIT(A) erred in deleting the addition of ₹ 25,21,365/being addition made towards undisclosed investment In diamond jewellery. 3. The CIT(A) erred In giving allowance for the jewellery declared under VDIS when the same was shown in the Trial Balance for the subsequent years. 4. The CIT(A) failed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer. It was argued that the Assessing Officer has simply ignored the documentary evidence in the form of VDIS filed and accepted by the Department in the hands of this assessee, his HUF and wife in the year 1997. It was also argued that he Assessing Officer has erred in concluding that 68 carats of diamond jewellery had been deposited with M/s T.B Jewellery. Such a conclusion of the Assessing Officer is without basis and simply based on his presumptions. The ld. CIT(A) has considered these submissions and has given due credit to these valid documents and has come to a conclusion that no such addition can be made on the basis of slight difference noticed between the explained quantity of diamond and the total quantity of diamond found. Now, the Revenue is aggrieved and has repeated the same reasons which have been given by the Assessing Officer in his order. The ld.AR has relied on appellate findings. 61. We have considered the rival submissions and have carefully perused the material available on record. It is an undeniable and undisputed fact that on the data found in CD, the information available is regarding proposed deposit which was proposed to be deposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h balance. 2. The Commissioner of Income Tax (Appeals) erred in confirming the addition of ₹ 10,610 out of the addition of ₹ 30,610 on account of the deposits in the bank accounts of the minor daughters. He erred in restraining the allowance to ₹ 10,000 each and disallowing the balance." 65. During search at the residence of Shri Lalith Kumar Galada, cash of ₹ 5,63,000/- was found. In his statement recorded on 20.5.2005, while replying to Question No.11, he explained the source of this cash to be from M/s T.B.Jewellery and gifts and finally he offered ₹ 4 lakhs in total towards cash found during search. In his returns filed on 27.9.2007 for assessment year 2006-07, he explained the source by way of a note appended to the return as under: " There was an excess of cash of ₹ 3,71,300/- which was worked out based only on the personal books of Shri Lalith Kumar Galada. But Shri Lalith Kumar Galada is also the proprietor of L.G International in whose books there was a cash balance of ₹ 5,03,581/- which was not considered while working out the excess cash. The difference was adjusted against creditors." 66. After considering the entire facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings Bank Accounts with Corporation Bank, T. Nagar Branch, which were not reflected in the respective daughters' trial balances. The assessee stated that these accounts were beyond his knowledge and his wife was maintaining them. The source of deposits was stated to be out of gifts received on various occasions, but the Assessing Officer did not believe in the absence of supporting evidence. He has treated the entire amount in assessee's hands. But the ld. CIT(A) has reduced the addition to ₹ 10,610/- by accepting the above explanation. In our opinion, the finding of the ld. CIT(A) is quite balancing and justifiable. We do not find any infirmity in the same and dismiss this limb of the issue taken by the assessee. 69. In the result, the appeal of the Revenue is dismissed and the cross objection of the assessee is partly allowed. 68. To summarize the result, I.T.A.No.1483/Mds/08 - Partly allowed for statistical purposes C.O.No. 14/Mds/09 - Partly allowed for statistical purposes I.T.A.No. 1484/Mds/08 - Dismissed C.O.No.15/Mds/09 - Allowed for statistical purposes I.T.A.No. 1485/Mds/08 - Dismissed C.O.No.23/Mds/09 - Partly allowed I.T.A.No.1293& 1294/Mds/09 - Di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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