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TMI Blog2019 (11) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... complete address of the customers were available. Having regard to the foregoing facts and also having regard to the trade and custom practiced in the jewellery business and also having regard to the volume of assessee s business, we are of the opinion that the assessee s explanation with regard to jewelleries weighing 1406.27 gms belonging to seven customers should have been accepted by the AO. As regards jewelleries weighing 842.340 gms, we find no further evidences were submitted by the assessee either before the lower authorities or before us to substantiate his explanation. We therefore direct the AO to delete the addition made with reference jewellery weighing 1406.27 gms and uphold the addition of jewellery weighing 842.340 gms. We uphold the addition to the extent of 2343.34 gms (4759.460 548.300 461.550 1406.270) out of 4759.460 gms equivalent to ₹ 65,93,763/- and accordingly assessee gets relief of ₹ 67,98,553/-. Ground No. 1 is therefore partly allowed. Income from unrecorded purchase sale transactions - estimation of benefit of telescoping should be allowed against the addition made on account of unexplained investment u/s 69A - HELD THAT: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the assessee s possession which was seized with ID mark MKJ/01 to MKJ/06, [Pages 81 to 172 of the paper book]. Further in the course of search, statement of the assessee u/s 132(4) of the Act was recorded wherein he explained the source of the jewellery and silver coins found from his possession, [copy of which is available at Pages 72 to 80 of the paper book]. Consequent thereto survey operations were conducted at the office premises of the assessee at Kolkata and certain documents and loose papers with ID mark SD/01 to SD/03 were found and impounded by the Income-tax Department. In the assessment proceedings which followed the said search and survey operations, the assessee was required to substantiate the source of the jewellery and silver coins valued at ₹ 2,42,19,293/-. In response the assessee [vide his letter dated 02.02.2014, which has been reproduced at Pages 3 to 4 of the assessment order], explained the source of the jewellery and silver coins found from his possession. The AO vide order sheet entry dated 02.02.2015 required the assessee to produce all his customers to substantiate the explanation furnished, to which the assessee expressed his inability to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 - 461.550), the ld. AR submitted that it belonged to several customers of the assessee who had given their gold jewellery for repair work to the assessee. In support thereof, the Ld. AR referred to the sworn affidavits furnished by some of the customers, which are placed at Pages 33 to 38 of the paper book. He thus claimed that the source of remaining jewellery weighing 3049.61 gms was also explained by the assessee before the lower authorities who had erred in not correctly appreciating the evidences placed before them. The Ld. AR thus prayed that the impugned addition be deleted. 4. Per contra the Ld. CIT, DR appearing on behalf of the Revenue vehemently supported the order of the lower authorities. He submitted that the AO had objectively considered the evidences furnished before him in support of the source of jewellery and had rightly treated the jewellery worth ₹ 1,33,92,316/- to be unexplained. He submitted that the assessee had failed to produce any of the customers before the AO to substantiate the genuineness of his claim and in that view of the matter, according to him there was no reason to interfere by us with the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jewellery which he carried on behalf of Mr. Navratna Soni in the light of the fact that assessee produced the copy of the bailment of the jewellery from Mr. Navtratna Soni, The case of the Revenue to draw adverse inference against the jewellery of Mr. Navratna Soni is only on the fact that Mr. Soni did not personally appear before him. In our opinion however when two out of the four parties had personally confirmed that the assessee indeed also acted as courier for delivering gold jewelleries and the relevant documentary evidences in form of bailment, etc. had been placed on record, then in our considered view the assessee had discharged his initial onus of establishing the source of gold jewellery received from Mr. Navranta Soni. The assessee therefore gets credit for the 548.30 gms of gold jewellery which he carried on behalf of Navranta Soni. 6. We however find that neither before the lower authorities nor before us, the Ld. AR of the assessee was able to bring on record any tangible material to substantiate he was carrying jewellery weighing 700 gms belonging to M/s Vikram Jewellers for delivery purpose. In absence of any convincing material br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nated from the said gold. We therefore direct the AO to give credit for 461.550 gms and delete the addition of the corresponding value. 8. Before the AO the assessee had further explained that jewelleries weighing 2248.610 gms belonged to his several customers and individual customer wise details were furnished. In order to substantiate the said explanation, the AO required the assessee to produce customers in person vide his order sheet noting dated 02.02.2015. In response the assessee had explained that it was not legally possible for him to enforce attendance of these parties before the AO since the assessee did not have any statutory power to do so. He therefore requested the AO to issue notices u/s 131 of the Act to the respective parties for enforcing attendance. Additionally in respect of seven customers namely Madhu Agarwal, Sumitra Rungta, Rita Verma, Triveni Gope, Santosh Devi, Asha Singh Rakesh Kumar Sharma, the assessee had filed duly sworn affidavits in support of the explanation furnished in this regard. In respect of remaining customers from whom the assessee had received jewelleries weighing 842.340 gms, the assessee was unable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged and the burden shifted on the AO to disprove the transaction by bringing on record some tangible material to show that the averments made in the affidavit or the explanation offered by the assessee was false or factually incorrect. We however find that having received these affidavits, no manner of any further enquiry was carried out by the AO. We find that in other cases where the assessee had claimed the jewelleries belonged to jewelers or karigars, the AO had issued notices u/s 131 of the Act. However in the case of jewelleries belonging to the customers, no enquiry from the customers were carried out by the AO by issuing notices u/s 131 of the Act, even though in the sworn affidavits complete address of the customers were available. Having regard to the foregoing facts and also having regard to the trade and custom practiced in the jewellery business and also having regard to the volume of assessee s business, we are of the opinion that the assessee s explanation with regard to jewelleries weighing 1406.27 gms belonging to seven customers should have been accepted by the AO. However as regards jewelleries weighing 842.340 gms, we find no further evidences were submitted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounted of jewellery items logically demands for availability of stock of gold or purchase of gold for making such jeweleries. Here in this case as nothing was available or found as a stock with the assessee, so naturally in order to accept sale of unaccounted Jewellery items, argument of purchase of unaccounted gold has to be accepted. It is because gold jewellery items cannot be made out of air. There has to be gold in any form in order to convert it/make it in jewellery form. Here, the AO has made an addition for both, purchase of unaccounted gold as well as for sale of unaccounted gold. Logically it is not acceptable. In case sale of gold jewellery item is accepted, then purchase of gold is also to be accepted. Accordingly, both these additions are overlapping. So in order to accept AO's finding of sale of jewellery item of ₹ 22309128/-, purchase of gold of ₹ 20469909/- is to be accepted. Therefore, addition on account of unaccounted sales may be ₹ 22309128/- minus ₹ 20469909/- i.e. ₹ 1839219/-. Accordingly, AO's addition of ₹ 22309128/- + ₹ 20469909 / - is restricted to &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of the Ld. CIT(A). He contended that the Ld. CIT(A) had rightly considered the notings found in MKJ/5, MKJ2 MKJ/4 together. He argued that it is logical to presume that the gold jewellery sold by the assessee was made out of raw gold purchased by the him and in that view of the matter the Ld. CIT(A) was right in assessing only the profit element of ₹ 18,39,219/- embedded in the purchase of gold and sale of gold jewellery. He however further submitted that in case any addition on account of unexplained asset in the form of gold jewellery u/s 69A is upheld, then the assessee ought to be granted the benefit of telescoping such estimated profit against the addition, if any, upheld on account of unexplained asset i.e. jewellery. In support thereof, he placed reliance on the decision of Hon'ble Supreme Court in the case of Anantharam Veerasinghaiah Co Vs. CIT reported in 123 ITR 457, which was followed by the Hon'ble Bombay High Court Punjab Haryana High Court in the cases of CIT Vs. Jawanmal Gemaji Gandhi reported in 151 ITR 353 and CIT Vs. Prem Chand Jain reported in 189 ITR 320 respectively. 14. We have considered the ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales on account of gold and gold jewellery was of ₹ 1,00,21,204/- ₹ 2,23,09,128/- respectively. According to AO the entire sale proceeds of ₹ 2,23,09,128/- found recorded in MKJ/2 MKJ/4 represented assessee s undisclosed income. On appeal the Ld. CIT(A) however held that entries both in respect of gold purchased recorded in MKJ/5 and gold jewellery sold recorded in MKJ/2 MKJ/4 was required to be treated as undisclosed. He however concluded that since for sale of gold jewellery purchase of gold was necessary, he applied the principle of telescoping and netted of cost of purchase against sales and confirmed the addition of ₹ 18,39,219/- which the differential amount between the unrecorded sales of ₹ 2,23,09,128/- and alleged unrecorded investment in gold of ₹ 2,04,69,909/-. 15. We are of the considered opinion that the manner in which the Ld. CIT(A) dealt with the issue was not appropriate on the facts of the case. It is not in dispute that the sales recorded in MKJ/1 was also unaccounted sale of gold and therefore in arriving at income of the assessee such sale value of ₹ 1,00,21,204/- was required to be taken into acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red or of cash credits recorded during a subsequent assessment year. The mere availability of such a fund cannot, in all cases, imply that the assessee has not earned further secret profits during the relevant assessment year. Neither law nor human experience guarantees that an assessee who has been dishonest in one assessment year is bound to be honest in a subsequent assessment year. It is a matter for consideration by the taxing authority in each case whether the unexplained cash deficits and the cash credits can be reasonably attributed to a pre-existing fund of concealed profits or they are reasonably explained by reference to concealed income earned in that very year. In each case the true nature of the cash deficit and the cash credit must be ascertained from an oveall consideration of the particular facts and circumstances of the case. Evidence may exist to show that reliance cannot be placed completely on the availability of a previously earned undisclosed income. A number of circumstances of vital significance may point to the conclusion that the cash deficit or cash credit cannot reasonably be related to the amount covered by the intanigble addition bu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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