9911796707
TMI Blog2021 (2) TMI 582X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the provisions of law. 2. The Ld. Commissioner of Income Tax (Appeals) has erred in law and facts in not appreciating the facts that the appellant has not made the cash payment of Rs. 3,01,00,000/- apart from the amount mentioned in the registered purchase/sale deed for the investment in the purchase of land. Further, before the tax authority, the person who is alleged to had received the cash payment had confirmed that he had not received any amount over and above the consideration stated in the sale deed. Therefore, the Ld. Commissioner of Income Tax (Appeals) is not justified in confirming the additions of Rs. 3,01,00,000/- in the hands of the appellant. 3. The Ld. Commissioner of Income Tax (Appeals) has erred in law and facts in not appreciating the judgments of the various High Court and the Apex Court relied upon by the appellant which squarely applies to the facts of the case while confirming the additions of Rs. 3,01,00,000/- and therefore, the action of the Ld. Commissioner of Income Tax (Appeals) is arbitrary, unjustified and against the provisions of law. 4. The Ld. Commissioner of Income Tax (Appeals) has erred in law and facts in confirming the G.P. Rate @ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in violation of Rule 46A(3 ) of Income Tax Rule 1962. 6. In the fact and circumstance of the case, Learned CIT(A) has erred in law and on facts in deleting the addition of Rs. 90,34,000 /- towards unexplained investment in GTM Kashipur - II on the basis of seized documents while ignoring the provisions of section 132 (4 A) and 292- C of Income Tax Act. 7. In the facts and circumstances of the case, Learned CIT(A) has erred in law and on facts in deleting the addition of Rs. 1,25,00,000 /- towards undisclosed income on sale of flats as recorded in documents seized during search in GTM Group and impounded during survey under section 133A in M/ s Haryana Citizen Co-operative Housing Society while ignoring the provisions of section 132(4A) and 292-C of Income Tax Act, 1961. 8. In the facts and circumstances of the case, Learned CIT(A) has erred in law on facts in deleting the addition of Rs. 1,80,00, 000 /- towards undisclosed expenditure for acquiring certain rights in Wings CGHS Limited, Gurgaon while ignoring the provisions of section 132(4A) and 292 -C of Income Tax Act, 1961. 9. In the fact and circumstances of the case, Learned CIT(A) has erred m law and on facts in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 8500000 10500000 B.N.B. 55907000 The other side of the above page showed the following entries: Total deal 271420134 Paid in cheque 174771637 Cash - 12100000 + 7500000 +10500000 30100000 Balance 204871637 48148497 4000000 44148497 The AO had drawn the following conclusion on the above seized documents. "Rs. 25, 30, 20, 134 /- represents the cost of the project without registry. (Registry of the land was done at Rs. 1, 84, 00, 000 /-). The total cost of the project is Rs. 27,14,20,134 /-. Amount paid by cheque is Rs. 17,47,71,637/-. Amount paid by cash is Rs. 3,01,00,000/-. Therefore total amount paid is Rs. 20,48,71,637/-. Balance amount payable is Rs. 25,30,20,134/- less Rs. 20,48,71,637 /- = Rs. 4,81,48,497 /- From the above, it can be deduced that the balance amount payable by cheque is Rs. 18,45,70,000/- less Rs. 17,47,71,637/- = Rs. 97,98,363/-. Accordingly ,the balance amount payable by cash should be Rs. 4,81,48,947/- less 97,98,363 = Rs. 3,84,50,134/- and the to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d land was infact Rs. 20, 30, 27, 000/-. Hence, the conclusion of the Assessing Officer that the undisclosed investments on the land amounts to Rs. 6, 84, 50, 134/- was wrong on facts. 13. It was argued that the AO has wrongly made addition of this amount of Rs. 6, 84, 50, 134/- substantially in the hands of the assessee and protective assessment has been made in the hands of M/ s Sargam Estate Pvt. Ltd. on the premise that the cheque payment has been made by the assessee and the cash payment could have been made by the M/ s Sargam Estate Pvt. Ltd. and since both the amounts are generated by the assessee, the same has been added substantially in the hands of the assessee. It was argued that while the land of 58 Bighas was purchased on 22.08.2006 for total consideration of Rs. 20, 30, 27, 000/- including the stamp duty. The payment made to Shri Iqbal Wasu of Rs. 4, 44, 07, 000/- was post purchase of the land. It was argued that the sellers of the land have denied that any cash received by them from the assessee as cost of land. Without having any concrete evidence in support of the fact that the assessee has paid excess amount than what has been indicated in the deeds, the purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of payment made to the sellers. Page no. 28, 29 of Annexure A 16 are the details of payments made to Iqbal. 20. Page no. 9 of Annexure A 21 reflects writing "cheques to be paid" to Rs. 2,27,50, 000 /- and " cash 2,53,98, 497 below that is a figure of 18,27,12,497. On the back side of page no. 9 (page 143 of paper book) mentions above cost per bigha @ Rs. 43,62,416 /- which amounts to Rs. 27, 14, 20, 137/- including registration and other amounts. The page shows Rs. 3, 01, 00, 000/- and a total of Rs. 20, 48, 71, 637/-. We also find that the total consideration for purchase of land at Dehradun was Rs. 20, 30, 27, 000/-. Hence, it cannot be said that the amount of Rs. 3.01 Cr. has been paid in cash. Had Rs. 3.01 Cr. been paid in cash, the total cost of purchase paid in cheque as per the four sale deed should be Rs. 17,47,71,637/- whereas in reality the total amount of Rs. 20,30,27,000/- has been paid in cheque. Hence, there is no scope to treat the amount as paid in cash to be brought under unexplained investment u/s 69. Regarding the addition made by the AO of Rs. 3, 84, 00, 000 /-, we find no material to come to such a conclusion. The AO has merely subtracted the amount of Rs. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. CIT (A) held that the transactions with Shri Virender Sing and Shri Paramjeet Singh could not be with the notings/jottings on Annexure A-20 on page 19 -20. If the AO had doubt about the rate of land reflected in the notings and purchase rate as disclosed in the records and deal he should have made thorough inquiry from the sellers and investigation about Mr. Shishir as to whether he was seller or broker etc. before jumping to any conclusion. He also held that the transaction of land had taken place with Mr. Virender Singh & others and Mr. Parmjeet Singh whereas on the notings in Annexure A-20 on page 19-20 is in the name of 'Mr. Shishir' and land measurement is '9.81' in place of 10 acre. 25. Before us, the ld. DR relied on the order of the Assessing Officer while the ld. AR supported the order of the ld. CIT (A). 26. We have gone through the issue de novo and find that the Assessing Officer has made addition based on the seized material of Annexure A 20 page no. 19 wherein it was mentioned that " Kashipur -10 acres @ Rs. 19, 30, 000 per acre". On page no. 20, it was mentioned Kashipur new land Mr. Shishir @ Rs. 19, 30, 000 /- land 9.81 acres. On page no. 19, it was also ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elating to cooperative societies were also found from the residence of Shri Tushar Kumar. During the course at the residence of Shri Mohit Vohra various documents were found which were related with the Bhagwanti cooperative group housing society. 61. Shri Mohit Vohra was asked about these papers during the course of search at his residence. He was asked Q.1 I am showing you annexure A 1 containing pages 1 to 10, which is seized from your residence during the course of search. Please go through each page of this annexure thoroughly and carefully, please tell what they are about? Ans. I have gone through each and every page of this annexure, but I find myself unable to explain them and they are not related to my duty, but I was asked to hand over these papers to Mr. Kansal, who resides at sector 56, Gurgaon by Shri Tushar Kumar Director at M/S GTM Builders and Promoters, G-5 Pushkar Enclave New Delhi 63. Q.2 I am showing you annexure A 4 containing pages 1 to 101, annexure A 5 containing pages 1 to 62, annexure A 6 containing pages 1 to 95, annexure A 7 containing pages 1 to 109, annexure A 8 containing pages 1 to 103 annexure A 9 containing pages 1 to 159, annexure A 10 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... booked flats in Haryana CGHS Ltd., original receipts issued by Bhagwanti CGHS for payments made by members. Please explain the same. Whether you have shown these transactions in your books of accounts. He replied I was an authorized loan coordinator of Loan Pundit and Trendsetters Finance Company vide their letter dated 10.01.2006 I was a mediator between the mentioned companies and various clients for different housing projects. The clients in various housing projects would approach me for arranging financial assistance or I used to contact them so that I could arrange housing loans for them and they could pay the outstanding amount for their fiats. The papers of various parties/members of housing societies etc. were lying with me for this purpose or for arranging supplies as stated in Item 1 above. There is no transaction pertaining to me. 63. When the same question was put to M/S GTM Builders and promoters ltd: A-5 / pages 36 to 46 and page 62 these are handwritten loose papers and relate to geysers and other electrical fixtures to be fixed in flats of various projects. The names of the flat owners and the flat numbers are given alongside. On the top of the page the name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.03.07 on Haryana Cooperative Group Housing Society. This society was formed in 1998 but construction of the society is in progress. The society has 43 flats. During the course of survey, a diary was found in the possession of Shri Kishan Gopal Rastogi who was the construction supervisor at the site which was impounded as Annexure A-10. The diary has various notings in the handwriting of Shri Kishan Gopal Rastogi of payments made and received. On page 7 of the diary the following has been written: " Tushar credit 5000000/refundable. 5000000 1000000 by cheques (15) 10.4.2006 (5) 23.4.2006 (10) 4.5.2006 (10) 11.5.2006 (50) B/F (75) (5) 8.12.2006 (30) 26.5.2006 (15) 20.6.2006 (10) 26.6.2006 (4) 8.7.2006 (6) 29.7.2006 (5) 8.8.2006 (5) 10.10.2006 88. The above details show that total payment of Rs. 1.25 crores has been made to Tushar. The date wise break up of these payments are also provided. Apart from the cheque payment of Rs. 10 lakhs, the other payments appear to be made in cash. Shri Rastogi when questioned about the notings he stated that it was his personal diary in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k even with Tushar. The Society cannot provide any proof of what so ever in this regard, hence there is no question of even thinking any income to the society. It has not issued or received any cheque from or to Tushar. This can be verified from our books of accounts which are produced before your good self hence this page has no relation or link with society. When further questioned about entries on other pages the society replied that Annexure A - 10 (Page 3) We have made effort to reconcile and trace the details of followings:- (a) Cheque Dt. 30. 11.06 of Rs. 1, 85, 000/- As per our Bank book following two cheque were issued drawn on HDFC Bank. Cheque No. Date Amount Name of the party 403501 30.11.2006 100000.00 Devender Singh 403502 30.11.2006 85000.00 Jagmag Tyagi Total 185000.00 (b) Cheque dt. 14.12.2006 of Rs. 1, 29, 761/- As per our Bank book following details can be linked: Cheque No Date Amount Name of the party Bank 403507 14.12 2005 99509.00 Jyoti Shankar HDFC Bank 403508 14.12.2006 12921.00 Jagmag Tyagi HDFC Bank 327207 14.12.2006 6509.00 Devender Singh Gurgaon Central Corporation Bank 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ety. When the Haryana Citizen Group Housing Society were questioned about why it should not be treated as a benami concern of M/s GTM Builders the replied saying that That the society is a Artificial Judicial Person having separately distinct from its members. The registrar of cooperative society Chandigarh, Haryana closely monitors the account and activities of the society and regarding various documents and papers seized from Shri Mohit Vohra are not related with the society. The reply of the society cannot be accepted as it has been clearly established that society was having il legal links with M/ s GTM Builders. The diary seized from Shri Kishan Gopal Rastogi shows very clearly that money was paid to Shri Tushar Kumar in Cash. Thus, an addition of Rs. 1.25 Crores is being made in the hands of M/s GTM Builders on substantive basis and in the hands of Shri Tushar Kumar and M/s Haryana Citizens Cooperative Group Housing Society on the protective basis, on the basis of diary seized from Shri Kishan Gopal Rastogi which shows clearly that Cash payment was made to Shri Tushar Kumar director of M/ s GTM Builders." 29. Before us, the ld. DR relied on the order of the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This MoU is between one Shri Ajay Jain and Shri Tushar Kumar for replacement 20 members in the WCGHS. The excerpts of MoU are as under: * Ajay Jain is in possession of plot 1, sector 9, Gurgaon and a society presently consists of 20 members which can be increased to 30 members. * Ajay Jain agrees to apply for increase in members from 20 to 27 and agrees to add members as and when recommended by Shri Tushar Kumar. * Tushar Kumar agrees to pay Rs. 1. 80 crores to Ajay Jain in installments and on payment, the managing committee and bank accounts would be handed over by Ajay Jain to Tushar Kumar. * The agreement was signed by Ajay Jain on 17.5.2005. * The agreement was not signed by Tushar Kumar. 33. During the statement record on the date of search itself it was answered that Shri Ajay Jain was misleading Shri Tushar Kumar and Shri Tushar Kumar did not want to enter into any agreement with Shri Ajay Jain. 34. The AO held that on page 35 of annexure A19, there are details of receipt or payment made to various persons and it specifically says 3 lacs paid to Wings on 13.04.06. Further there is a hand written note in the handwriting of Shri Tushar Kumar which was seized has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of cash. Hence, it cannot be held that the assessee has paid an amount of Rs. 1.80 Cr. for taking the control of the WCGHS which is a Co-operative Society registered with Registrar of Cooperatives. Hence, we decline to interfere with the order of the ld. CIT (A). The appeal of the revenue on this ground is dismissed. ITA No. 3783/Del/2010 AY 2007-08 Ground No. 9 Undisclosed investment in M/s Sargam Estate Pvt. Ltd.: 39. During the year under consideration, it was alleged that M/s GTM Builders & Promoters invested in M/s Sargam Estate Pvt. Ltd. and acquired the company. The Balance sheet of M/ s Sargam Estate Pvt. Ltd. for the assessment year 2006-07 shows that the assessee was having share holders fund of Rs. 33, 18, 000 /- and loan fund of Rs. 1, 60, 000 /- whereas in the year 2007-08, the share application money of the company increased to Rs. 53, 86, 000 /-. 40. Before the AO, the assessee vide its submission dated 17.12.2008 replied that during the assessment year 2007-08, the company after receiving and payment/adjustments of share application money stood at Rs. 53, 86, 000/- as on 31.3.2007. But no reply was given to the fact that how the share holders fund of Rs. 33, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 75873 06 -07 5928229 5639178 2070286 3495904 14844666 JTM(J) is GTM Jewellery Mart Pvt. Ltd. GTM(B) is GTM Builders and Promoters Pvt. Ltd. 44. The assessee was asked to produce details of expenditure incurred on advertising. Assessee filed ledger copy of the advertisement expenses. The advertisement expenses of the assessee started from 17.11.2004. In the A.Y. 2007-08 assessee had spent an amount of Rs. 28, 512, 704/- as per the details filed. Whereas as per the details collected the amount spent was of Rs. 31, 978, 263/-. Hence an addition of Rs. 34, 65, 559 /- was made in the A.Y. 2007-08 for expenditure from undisclosed sources. 45. The ld. CIT (A) deleted the addition on the grounds that all the expenses on account of advertisement have been made by account payee cheques and duly recorded in the books of account maintained by the assessee. No cash payment has been made on this account. Relevant copies of account in this regard were produced. In the profit and loss account, the total debit of Jewellery division is Rs. 2, 85, 12, 704 /- besides in the builders divisions there is a advertisement expenditure of Rs. 3, 92, 29, 402/- as per schedule 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of the diamond jewellery the value had been taken at the " tag price" or the sale price which was tagged by the company on each item of jewellery. This he said, was higher than the purchase price of the jewellery and therefore stated that the G.P rate should be deducted to find out the cost of the jewellery. Shri Gautam Kumar was specifically asked during the course of search whether the stock of any other parties was lying at the office premises and whether any purchase bills were to be entered into the books. Shri Gautam Kumar in reply stated that certain purchases of jewellery had not been entered in the books of accounts and accordingly, the bill values of the same should also be taken into account while determining the value of jewellery shown in the books on the date of search. There were two purchases specially mentioned by Shri Gautam Kumar. One relating to purchase of Rs. 22, 19, 063/- from Zaveri Jewellers, Mumbai and the other relating to purchase of gold ornaments from M/s KK Exports for Rs. 26, 25, 649/-, Enquiries were carried out during the search itself by officials of the department to verify the genuineness of the same. Shri Gautam Kumar stated that n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss yalue of Rs. 7, 19, 07, 124/-. However, only GP on the diamond jewellery which had been valued on the basis of the tag price was required to be reduced from the gross value of jewellery. The gold jewellery had not been valued on the basis of the tag price but as per the prevailing rate of gold on the date of search and thus the GP on Gold Jewellery had erroneously been reduced from the Gross Value. After correction of this discrepancy, the value of the excess stock is arrived at Rs. 4, 27, 22, 971/- in the following manner. 1) Gross Value of Jewellery as as Per valuation reports Rs. 7, 19, 07, 124 2) Less: Stock as per books Existing value: Rs. 2, 17, 34, 864 corded Add unrecorded purchases: Rs. 48, 44, 712 (-) Rs. 2, 65, 79, 576 4, 53, 27, 548 3) Less GP @ 7% Rs. 50, 33, 498 on Rs. 7, 19, 07, 124 (-) 50, 33, 498 4, 02, 94, 050 4) Add : Wrongly deducted GP on Gold Jewel lery 7% on Rs. 3, 4698, 876 Rs. 24, 28, 921 (+) 24, 28, 921 Value of Excess Stock Rs. 4, 27, 22, 971 As per the calculations, the value of undisclosed investment in jewellery made by GTM Jewellery Mart Pvt. Ltd amounts to Rs. 4, 27, 22, 971/-. GTM Jewellery m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Rs. 2, 65, 79, 576/- as well as the GP y the rate of 7% which worked out to 50, 33, 498. It may be noted that the GP of 7 % was calculated on the gross value of Rs. 7, 19, 07, 124/-. However, only GP on the diamond Jewellery which had been valued on the basis of the tag price was required to be reduced from the gross value of Jewellery, The gold Jewellery had not been valued on the basis of the tag price but as per the prevailing rate of gold on the date of search and thus the GP on Gold Jewellery had erroneously been reduced from the Gross Value. After correction of this discrepancy, the value of the excess stock is arrived at Rs. 4, 27, 22, 971/- in the following manner:- 1) Gross Value of Jewellery as as Per valuation reports Rs. 7, 19, 07, 124 2) Less: Stock as per books Existing value: Rs. 2, 17, 34, 864 corded Add unrecorded purchases: Rs. 48, 44, 712 (-) Rs. 2, 65, 79, 576 4, 53, 27, 548 3) Less GP @ 7% Rs. 50, 33, 498 on Rs. 7, 19, 07, 124 (-) 50, 33, 498 4, 02, 94, 050 4) Add : Wrongly deducted GP on Gold Jewel lery 7% on Rs. 3, 4698, 876 Rs. 24, 28, 921 (+) 24, 28, 921 Value of Excess Stock Rs. 4, 27, 22, 971 Please pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 4, 0294050 /- as the deficit found by taking the " physical inventory" on the day of search operation subject to the humble submission that it has been valued at " tag" value while it deserves to be valued "cost or market price whichever is lower/ average cost method." In support of the above submission the list is enclosed where there is no change in the quantitative figures, the change is only confined to its value in view of the facts submitted above. The valuation taken is supported with invoices which are also in your possession and no doubt has also been accounted for in the books of accounts accordingly. It will be precise to state here that enclosed comparative " annexure" to the Revenue Valuer's valuation apparently reveals that there is no change in " Gold Jewellery", the change pertains only to " Diamond article". It will not be out of place to state here that it is supported with invoices which are in your possession, the reference of such invoices have also been given to make it convenient, thus, it leaves no scope of any doubt and deserves to be accepted. Apart from it, the other difference pertains to labour/making charges related to 22 Kt which has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst them in respect of Jewellery Unit. The contention of the assessee cannot be accepted as at the time of search assessee himself had accepted a G. P. of 7 %. The return filed by assessee for the year 2007 -08 is dated 14.11.2008. It is the first year of business on a large scale by the unit GTM Jewellery Mart. In the previous year, a sale of only Rs. 88, 000/- was made by the unit on which a gross profit of 44% registered. In the present year, a sale of around Rs. 10 crores has been s sown on which the assessee is trying to claim a gross profit of 19%. The, contention of the assessee that they have a G.P. of 19% cannot be accepted and it looks like an afterthought on the part of the assessee to decrease their amount of surrender. Ld. Authorized Representative in his reply dated 17.12.2008 which has been quoted above at full length has nowhere accepted that there was any unaccounted stock. Although he had accepted that value of gold jewellery cannot be challenged as it is based on the weight of gold and the prevailing price of gold which is taken by the valuer at the time of valuation. Further the assessee has not produced any proof whatsoever how he is claiming a G.P. of 19 % a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rth Rs. 26987283/- were received on approval and the same were also part of physical stock taking during search operation. These purchase bills of Rs. 26987283/- were accounted for in the books of accounts on 31. 03.2007 and 14.12.2007 as claimed by the appellant co. in the appellate proceedings. This fact was never brought to the knowledge of search party. The appellant had never given list of ' Goods on Approval' to the search party during/after search operation. During the assessment proceedings also these bills or list of so called 'Goods on Approval' were never produced/claimed before the AO even after almost 2 years of the search operation. In the appellate proceedings this claim has been made first time on 26.02.2010 i.e. after more than 3 years of search operation. In this regard the appellant has made a submission before me which as under:- 'lt is admitted fact that " Goods received on Approval" could not be filed during the course of Asstt. Proceedings as it were initiated in the month of Nov-Dee.2008, it deserves to entertained in the course of appellate hearing Under Rule 46 of Income Tax Rules, 1962.' This fact is totally new one as there is nothing mentioned i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als)], any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the [Assessing Officer] except in the following circumstances, namely:- (a) where the [Assessing Officer] has refused to admit evidence which ought to have been admitted; or (b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the [Assessing Officer]; or (c) where the appellant was prevented by sufficient cause from producing before the [ Assessing Officer] any evidence which is relevant to any ground of appeal; or (d) where the [Assessing Officer] has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant any ground of appeal." From the plain reading of above rule prescribing the circumstances for admission of additional evidence it is crystal clear that the matter of the appellant is not covered by any circumstance where additional evidence could be admitted. The appellant has also not given reason as to why such evidences may be admitted u/ r 46A of the Income Tax Rules, 1962. Moreover, no separate application u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jewellery had been made on 'tag price' which includes GP. The GP rate was taken at 7 % from the Form 3 CD annexed to Tax Audit Report u/s 44AB of the Income Tax Act, 1961 of the appellant co. for the reason that there was no separate/exclusive books of accounts were available for jewellery unit. After considering these facts the search party allowed credit for GP @ 7% on total physical stock of Rs. 71907124 /- i.e. Rs. 5033498/- In this way the physical stock was ascertained at Rs. 66873626/- (71907124-5033498 ). However, during the assessment proceedings the assessee has pleaded before the AO that GP rate on diamond jewellery should be taken at 19. 47% in place of 7%. The assessee submitted evidences but the AO did not accept them as they were not credible evidence and no separate profit & loss account and balance sheet etc. were produced by the assessee in support of its contention. The assessee also did not produce separate set of books for jewellery unit or other credible evidence which could support the contention of the assessee in respect of higher GP rate. The AO has also mentioned in the order that it is all fabricated and after thought story so that surrendered amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate and the same is also included in the total physical jewellery of Rs. 71907124/-. During assessment proceedings the AO found that GP rate was applied erroneously on overall value of physical stock on the date of search which includes the gold jewellery valued not on tag price but at cost price i.e. prevalent price of gold on that day whereon no deduction of GP was required. Since tag value was taken only for diamond jewellery. To correct this mistake the AO has, disallowed the deduction for GP on gold jewellery of Rs. 34698876/- amounting to Rs. 2428921/- while making the assessment. In this way the AO arrived at undisclosed investment of the appellant at Rs. 42722971/- (40294050 + 2428921 ) in place of 40294050/-. 9.3 The appellant in the appeal has submitted as under:- In respect of valuation of gold jewellery " The contention of the A. O. is unlawful. It is quite admittable that the gold jewellery was on the prevalent price on the day of search and seizure operation. But the mode of valuation adopted by the appellant-company in regular return of income cannot be overruled. The audited balance sheet along with Auditor's report placed on the record apparently reveals i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. Under such circumstances the department is left with no option but to adopt the rate as shown in the audited balance sheet of the appellant co. and as reported by the auditor of the appellant co. in Form 3CD for tax audit u/s 44AB of the Income Tax Act, 1961. Further, it is also worth to note that during the search operation and later on the appellant had made surrender for the undisclosed investment. I, therefore, confirm the GP rate at 7 % for allowing deduction from the valuation of physical stock taking of diamond jewellery. In regard to dispute regarding method of valuation of jewellery I have considered the facts and submissions made by the appellant. From the perusal of tax audit reports for the A. Y. 2006-07, copy of which was furnished by the appellant in the course of appellate proceedings, it is noted that the Auditor of the appellant co, has mentioned in the Form 3 CD annexed to audit report u/ s 44AB of the I.T Act, 1961 for the A.Y, 2006 -07 that the appellant has followed cost or market whichever is less for all divisions. But for the assessment year 2007-08 It is reported in the audit report u/ s 44 AB that the appellant has followed average cost method for j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstead of the cost price. The business of gold and diamond ornaments, the prices vary on day to day basis. 6. Shri Gautam Kumar stated that no stock of M/s GTM Jewellery Mart Pvt. Ltd. was lying outside the premises. 7. The record shows that the G.P. was 19% as against the 17% allowed by the Assessing Officer. 8. Statement of Shri Gautam Kumar recorded on the date of search clearly mentioned about two distinct entities M/s GTM Jewellery Mart Pvt. Ltd. and M/ s GTM Builders & Promoters Pvt. Ltd. 9. There has not been any quantitative difference between the book stock and the physical stock in comparison with the items. 10. The difference in the value is only because of the different price taken by the valuer, the pricing existing on the date of search instead of historical cost of the goods. 11. Further, the labour charges have been added up twice in certain instances while computing the aggregate value. 12. The revenue could not repudiate the quantities tallying with the book stock during the search or even during the assessment proceedings. Reliance is being placed in the judgment of Hon'ble Supreme Court in the case of CIT Vs Hindustan Zinc Ltd. 291 ITR 391. 13. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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