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TMI Blog2018 (8) TMI 1252X X X X Extracts X X X X X X X X Extracts X X X X ..... was declared in the books of accounts, hence no case for making the addition. No other evidence was brought on record by the revenue to controvert the submission made by the assessee with regard to admission of stocks as well as the liability in the assessee’s books of accounts.. Since the liability as well as the stock are declared and continued in the books of accounts, there was no under assessment, and there was no bogus liability to make the addition. - Decided in favor of assessee. - I.T.A.No.23 & 24/Viz/2018 And .T.A.No.50/Viz/2018 - - - Dated:- 21-8-2018 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER For The Assessee : Shri G.V.N.Hari, AR For The Revenue : Shri Deba Kumar Sonowal, DR ORDER Per Bench: ITA Nos. 24/Viz/2018 and 50/Viz/2018 These cross appeals are filed by the assessee and the revenue respectively against the order of the Commissioner of Income Tax (Appeals) [CIT(A)]-3, Visakhapatnam vide ITA No.211/2016-17/CIT(A)- 3/VSP/2017-18 dated 31.10.2017 for the assessment year 2014-15. 2. The assessee raised the following grounds in his appeal : 1. The order dt.31.10.2U17 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gold ornaments making charges-Local - Rs.3,81,46,409 Out Station - Rs.19,62,567 Total - Rs.4,27,35,976/- 4.2. The AO, found that the assessee has debited the gold ornament making charges for outstation goldsmiths at an average rate of ₹ 82/- to ₹ 150/- per gram. The assessee has given gold weighing 17,780.74 gms for making the ornaments to outstation goldsmiths and incurred the aggregate expenditure of ₹ 19,60,567/-, whereas in the case of local goldsmiths the expenditure incurred for making charges was ₹ 3,81,46,409/- at an average rate of ₹ 166.66/- per gram. The AO called for the details and the assessee produced relevant vouchers, books and found from the information some deficiencies such as self made vouchers, incomplete details, non verification of the payment by authenticated person etc. The assessee did not produce the stock register with the details of gold given to goldsmiths person wise, item wise and the items received back from the goldsmith etc. All the payments were made in cash but not exceeding ₹ 20,000/- in e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total value of 22ct gold ornament available for sale Rs.86,52,55,017 Computation how the weight of the gold arrived : Total value of 22ct gold ornament available for sale Rs.86,52,55,017 DIVIDE by average rate per gram adduced by the a as mentioned above [86,52,55,017 /Rs.3.100 ] 2,79,114.522 grams Less : Weight of 22ct gold ornaments purchased 44,524.021 grams Weight of 22ct gold for outstation making charges 17,780.740 grams 62,304.761 grams Quantity of gold available for local making 2,16,809.759 grams 4.3. The AO adopted the rate of ₹ 82/- per gram towards making charges which was the least rate given in the case of non local gold smiths and , accordingly determined the total making charges at ₹ 1,77,78,400/- in the case of local goldsmiths as against the amount debited to Profit Loss account of ₹ 3,81,46,409/- and accordingly worked out the excess amount debited to Profit Loss Account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - to ₹ 150/- for Grade 5 and the average price of these ranges would be around ₹ 123/- per gram against the average price paid to local smiths at ₹ 166/- per gm. Accordingly, the CIT(A) directed the AO to adopt ₹ 140/- per gram instead of ₹ 82/- per gram and partly allowed the appeal of the assessee. Aggrieved by the order of the Ld.CIT(A), the assessee filed appeal in ITA No.24/Viz/2018 and the revenue filed cross appeal in ITA No.50/Viz/2018 as mentioned above. 5. During the appeal hearing, the Ld.AR argued that the assessee is getting the items manufactured by goldsmiths both locally and non locally. In the case of non local gold smiths, the assessee had paid minimum of ₹ 82/- per gram and the maximum of ₹ 150/- per gram depending upon the shape, size and design of the items manufactured by the assessee. Only in one case the minimum charges of ₹ 82/- per gram was paid to Veer jewelers of Mumbai and in the remaining cases minimum of ₹ 110/- and maximum of ₹ 150/- was paid as making charges to non locals also. In the case of local goldsmiths, the assessee had incurred the making charges of ₹ 3,81,46,409/- and pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... waist belt etc. Each item consists of different models and designs with a simple plain bangles to complicated designs of items. The plain item such as bangles, chains involve less work which can be made on machine and the making charges would be lesser compared to the complicated man made items of design. The AO adopted the rate of ₹ 82/- per gram which was the least rate of making charges by pointing out certain deficiencies in the vouchers and lack of signatures in small number of vouchers. The said amount ₹ 82/- per gram was paid only in one case of non local goldsmith. The assessee argued before the CIT(A) as well as before the Tribunal that number of vouchers which do not contain the signatures were negligible in number. The assessee has maintained the books of accounts and the same were duly audited by the qualified accountant. No defects were raised by the AO except certain deficiencies in the vouchers. The CIT(A) verified the vouchers and found that there are 5 grades of making charges and the average price ranges from ₹ 123/- to 160/- per gram. The Ld.CIT(A) directed the AO to adopt ₹ 140/- instead of ₹ 82/-, accordingly the Ld. CIT(A) confirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidering the facts and merits of the case we are of the considered opinion that adopting the rate of ₹ 150/- per gram as average would be fair and reasonable to meet the ends of justice. Accordingly, we direct the AO to adopt ₹ 150/- per gram instead of ₹ 140/- per gram as adopted by the Ld.CIT(A). Accordingly, the assessee succeeds partly on this ground and appeal of the revenue is dismissed. 8. Ground No.5,6 and 7 are related to the addition of ₹ 80,91,947/- related to purchase of jewellery from Veer Jewellers u/s 68 of the Act. During the assessment proceedings, the AO found that the assessee had purchased jewellery from Veer Jewellers for an amount of ₹ 80,81,947/- on 30.07.2013 and paid a sum of ₹ 1,47,770/- towards making charges aggregating the total amount at ₹ 82,39,717/- and shown the credit balance of ₹ 82,39,717 payable to M/s Veer Jewellers, Mumbai, in their books. The AO caused the enquiries and called for the ledger account copy of the assessee in the books of Veer Jewellers and found that there was a debit balance of ₹ 1,46,292/- excluding TDS of ₹ 1,478/- resulting in difference of ₹ 80,91,947/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of jewellery and taken to the stock. On return of jewellery, the assessee failed to make necessary entries immediately in the stock book as well as the creditors ledger hence there was a difference. Necessary entries were made after reconciliation of books of accounts on 30.03.2015. The assessee stated that the stocks are maintained in the ledger. The assessee has produced books of accounts before the AO and no defect was pointed out by the AO in the books of account in support of the jewellery purchased from M/s Veer Jewellers. The assessee explained that both the stock and liability was declared in the books of accounts, hence no case for making the addition. No other evidence was brought on record by the revenue to controvert the submission made by the assessee with regard to admission of stocks as well as the liability in the assessee s books of accounts.. Since the liability as well as the stock are declared and continued in the books of accounts, there was no under assessment, and there was no bogus liability to make the addition. Accordingly, we hold that the Ld.CIT(A) erred in upholding the addition made by the AO, therefore, we set aside the order of the Ld.CIT(A) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the Ld.CIT(A), the income declared by the assessee for 23.33 acres was ₹ 6,23,005/- which works out to ₹ 26,704/- per acre which was on higher side. The CIT(A) held that the agricultural income may be reasonably estimated at ₹ 3,50,000/-. The assessee in his arguments submitted that average yield per acre is 5 candies weighs 227 kgs. 23.33 acres of land held by the assessee is capable of producing 115 candies. The rate per candy was 13,000/- therefore arrived at the total income of ₹ 14,95,000/- . After deducting the expenses, the assessee argued that ₹ 6,23,005/- is reasonable. The revenue could not controvert the details furnished by the assessee with the tangible evidence. Therefore we hold that the income of ₹ 623005/- from 23.33 acres is reasonable Accordingly, we set aside the order of the Ld.CIT(A) and allow the appeal of the assessee on this ground. 18. In the result appeal of the assessee for the assessment year 2014-15 is partly allowed and the appeal of the revenue is dismissed. ITA No.23/Viz/2018 19. This appeal is filed by the assessee against the order of the Commissioner of Income Tax (Appeals) [CIT(A)]-3, Visakh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the order of the Ld.CIT(A). 25. We have heard both the parties and perused the material on record. The assessee has taken unsecured loan of ₹ 7,62,50,650/- and advanced an amount of ₹ 1.00crore to M/s Usha Pictures and Financiers and charged interest @6%. The assessee submitted that he is having the sum of ₹ 4,05,27,956/- his own funds which does not bear any interest element. For the assessment year, under consideration the assessee has returned the income of ₹ 3,07,81,690/- and argued that there is no reason to understate the interest. The AO has not brought on record any evidence to show that the interest free funds were used by the assessee for any other purposes. It was submitted by the assessee that in the subsequent year, the Ld.CIT(A) deleted the addition on similar facts. In the instant case the assessee has demonstrated that, it had interest free funds available in the business and in the subsequent year the and the Ld.CIT(A) has deleted the addition on similar facts. If the interest free surplus funds are available to the assessee, assessee is free to use the funds at his option. Therefore we do not see any reason to make the disallowance on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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