9911796707
TMI Blog2021 (2) TMI 900X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. The assessee also runs a savings scheme titled as Akshaya Gold scheme. The assessee was subjected to survey operation u/s 133A of the Income-tax Act,1961 ['the Act' for short] on 25.9.2012. During the course of survey, excess stock of gold titled by the AO as "un-reconciled gold" was noticed. It was claimed by the assessee that the gold and jewellery belonging to customers as well as family members weighing 17.319 kgs. were kept with it and the same was not included in its book stock. The assessee submitted that the above said gold weighing 17.319 kgs were taken from family members and customers as metal loan for physical stock purposes only, i.e., the value of gold was not considered as liability of the assessee firm. Since it does not belong to the assessee firm, the same was not included in its stock. The A.O. was of the view that the excess gold stock of 17.319 kgs. referred above has to be brought to tax in the hands of the assessee. Accordingly, he reopened the assessment of assessment years 2006-07 to 2012-13 by issuing notices u/s 148 of the Act for the above said years. The assessee is challenging the validity of re-opening the assessment. 4. For adjudicating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of the above mentioned stock of 17.319 kgs of maintained to arrive at the closing stock value. As the above mentioned gold and jewellery stock belonging to has to accounted in the books of account as it is nothing but transfer of gold and jewellery by family members & customers to the assessee's firm. Also, the capital gains on the date conversion of stock into business should have been declared in the individual returns of the family members of the assessee. Furthermore, it was found that the assessee is running a business of gold scheme under which customers pay monthly instalments of fixed amount for a fixed period and at the end of period the customer is given gold worth of assured amount under the scheme. This is nothing but sale of gold at the end of the period for which amounts are paid in monthly instalments. Hence, it is obligatory on the part of the assessee to maintain separate set of books of account in respect of each scheme and also arrive at profit in respect of each scheme and also arrive at profit in respect of each scheme and offer the same to tax. But it was observed that the assessee is not maintaining any records showing (a) Name of Customer (b) Add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " means cause or justification and the word "believe" means to accept as true or to have faith in it. Before the assessing officer has faith or accepts a fact to exist, there must be a justification for it. Belief may be subjective but reason is objective.- [Ganga Prasad Maheshwari v. CIT (1983)139 ITR 1043: (1981) 21 CTR 83 (All.)] The expression 'reason to believe' occurring in section 147 does not means a purely subjective satisfaction on the part of the ITO, the reasons for the belief must have a rational connection or relevant bearing to the formation of the belief.[ ITO v. Nawab Mir Barkat Ali Khan Bahadur (1974) 97 ITR 239 (SC)]. It is apt to refer to the following observations made by Hon'ble Supreme Court in the case of CIT v. Kelvinator of India Ltd.[2010] 187 Taxman 312 (SC) observed that, "6. On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, reopening could be done under above two conditions and fulfilment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in Section 147 of the Act [with effect from 1st April, 1989], they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs in the past and was well settled and its omission from Section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended Section 147 to reintroduce the expression 'has reason to believe' in place of the words 'for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new Section 147, however, remain the same." 8. Based on the above cited legal principles, we shall examine the facts available in this case. We notice that the AO is accepting the fact that the impugned un-reconciled stock of 17.319 kgs gold belong to family members. When he is accepting this fact that quality of being "un-reconciled stock" disappears. The AO's acceptance of the above fact is further fortified by the view taken by him, i.e., the AO has taken the view that the assessee should have taken the same in its books of accounts. Following observations made by the AO makes this point clear:- "Furthermore no purchase cost for item of the above mentioned stock of 17.319 kgs of maintained to arrive at the closing stock value. As the above mentioned gold and jewel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessing officer. He invited our attention to pages 93 to 95 of the paper book, which contains a statement taken from one of the partners of the assessee in the earlier survey operations conducted on 16.03.2001. In answer given to question no.5, the partner has reconciled the physical gold stock, after including gold of 17.319 kgs belonging to family members. It was not shown to us that the above said reconciliation of physical gold stock was not accepted by the revenue. This fact would show that the assessing officer is well aware of the fact that the gold belonging to family members were taken by the assessee as metal loan way back before 2001 itself. It also shows that the assessee is consistently following the practice of including the metal loan in its stock register as belonging to family members without showing the same as its own stock. We also notice that the assessee has been consistently not showing the value of gold as capital contribution/liability. 12. The Ld A.R also invited our attention to the assessment order passed for AY 2005-06 u/s 143(3) of the Act. The Ld A.R submitted that the assessee had entered into an agreement with family members titled as "Bilat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. The AO reopened the assessment on forming the belief that the above said stock should have been assessed as income of the firm. The Ld CIT(A) has recorded a finding that the value of above said gold was not credited to the concerned partner's capital account, but shown as due to a Sundry creditor, meaning thereby, the jewellery formed part and parcel of book stock. The Hon'ble High Court also noticed that the assessee has shown the same as its stock in AY 1986-87 and subsequent years. Thus we notice that the fact that the Ld CIT(A) has given a finding that the gold formed part and parcel of assessee's stock. The facts prevailing in the present case are totally different. All along, the assessee has been showing that the impugned gold of 17.319 kgs belong to the family members only and not to the assessee firm. Further, the assessee has been paying user fees to some of the family members for using the gold. Hence we are of the view that the above said decision is not applicable to the facts of the present case. 16. In view of the foregoing discussions, we hold that the reopening of assessment of all the years under consideration is on account of "change of opinion" and hence th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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