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TMI Blog2015 (6) TMI 1232X X X X Extracts X X X X X X X X Extracts X X X X ..... mental valuer had properly considered the quantity, rate of gold jewellery and other precious stones at the time of the search operation and valued it accordingly. On the basis of these findings, he has rejected the contention of the assessee regarding the defects in the valuation. Considering the overall facts and circumstances of the case and the fact that this valuation was done on the date of search, when stock was physically examined, we do not see any reason to deviate with the findings given by the Learned CIT(Appeals) on this issue. In result, ground Nos. 3 and 4 of the assessee's appeal are rejected. Offering Undisclosed income for taxation - HELD THAT:- CIT(Appeals) was not correct in not giving credit of the jewellery acquired out of the income offered by Mr. Sanjiv Kumar Aggarwal and we thus direct the Assessing Officer to allow credit of the jewellery to the extent of 18,548.448 grams contributed by its director Mr. Sanjiv Kumar Aggarwal while computing the valuation of the undisclosed stock as on the date of the search. - ITA Nos. 3711/Del/2010 and 4018/Del/2010 - - - Dated:- 26-6-2015 - I.C. Sudhir, Member (J) and J.S. Reddy, Member (A) For Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom additional income offered for taxation by him. 4. Heard and considered the arguments advanced by the parties in view of orders of the authorities below, material available on record and the decisions relied upon. 5. The facts in brief are that the business premises of the assessee and residential premises of its director Shri Sanjiv Kumar Aggarwal was subjected to search and seizure operation under sec. 132 of the Income-tax Act, 1961 on 9.12.2005. The assessee company filed its return of income on 29.11.2006 declaring income of ₹ 5,85,119 which was latter on revised to the income of ₹ 1,78,65,526. The revised income included ₹ 1,65,73,947 towards value of excess stock and ₹ 7,06,460 towards excess cash found during search. The assessee is engaged in the business of manufacturing and trading of gold ornaments and jewellery. During the course of search at business premises, the stock in trade of gold ornaments, jewellery and diamonds was found and was valued by a certified valuer at ₹ 13,93,13,844. After considering the submissions of the assessee along with revised return of income, the Assessing Officer added an amount of ₹ 4,78,14,86 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of search comes to ₹ 3,31,00,417. 7. The Learned CIT(Appeals), however, did not allow the deduction of 18,548.448 grams of gold claimed to have been contributed by its director, Shri Sanjiv Kumar Aggarwal. On this basis the Learned CIT(Appeals) held that the value of undisclosed stock as on the date of search comes to ₹ 3,31,00,417. After deducting the additional income offered by the assessee for this year at ₹ 1,65,73,948, the Learned CIT(Appeals) confirmed the balance amount of ₹ 1,65,26,469 as against ₹ 4,78,14,866 made by the Assessing Officer. 8. The Learned CIT(Appeals) has thus given a partial relief of ₹ 3,12,88,397, which has been questioned by the Revenue in its appeal and the assessee is in appeal in respect of the addition of ₹ 1,65,26,469 upheld by the Learned CIT(Appeals) by not giving deduction in respect of the gold ornaments contributed by its director Shri Sanjiv Kumar Aggarwal. 9. In the appeal of the Revenue, ground No. 1 is general in nature, hence, it does not need independent adjudication. 10. Ground No. 2 is regarding deletion of addition of ₹ 3,12,88,397. In assessee's appeal, is general i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock as per books of account as on the date of search. In support, he placed reliance on the decision of Chandigarh Bench of the ITAT in the case of Talwar Sons Jeweller v. ACIT- ITA No. 1313 to 1317/Chd/2010 dated 30.9.2013. 14. In support of ground Nos. 3 and 4 of the appeal of the assessee, the Learned AR contended that the valuation done by the valuer on the date of search was also incorrect. He invited our attention to the letter dated 10.12.2005 i.e. the date immediately after the date of search, filed with the Additional Director of Income-tax (Inv.). In this letter, it was pointed out that the stock stating and the valuation on the date of search was done cursorily. Further in the case of Kundan Jewellery Studded Gold Ornaments, the net weight of the gold was over stated as no deduction for weight of stones, beads and glasses etc. has been given. It was further submitted that the valuation of the diamond jewellery has been carried out by an unauthorized person, Mr. Vikram Mehta. All these issues were raised by the assessee at the time of search on 09.12.2005 and also followed up with a letter on 10.12.2005 i.e. the very next day with a valuation report done by an app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit of jewellery acquired out of undisclosed income offered by its director Shri Sanjiv Kumar Aggarwal, the Learned CIT(DR) contended that the explanation given by the assessee cannot be accepted in the absence of any direct evidence being produced by it despite the fact that its director, Shri Sanjiv Kumar Aggarwal had offered undisclosed income and which has been assessed in his hands. The credit of the same cannot be given to the assessee in absence of any concrete evidence as rightly observed by the Learned CIT(Appeals). 17. Considering the above submission, we find that n the date of the search physical inventory of the stock of board and jewellery was prepared and valued at ₹ 13,93,13,844. The assessee computed an amount of ₹ 2,15,73,947 as the value of the undisclosed stock as under: 18. Based on the above reconciliation, the assessee offered a sum of ₹ 50 lacs as additional income in the year 2005-06 and balance ₹ 1,65,73,947 in the year under consideration. The Assessing Officer accepted the additional income of ₹ 50 lacs in the assessment year 2005-06. However, in the year under consideration, the Assessing Officer was of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is methodology has straight away gone to the value of the stock physically found on the date of search and there from he has deducted the value of the stock that too as on 01.04.2005, not as on the date of search. Thus, the Assessing Officer has committed two mistakes. One in not ascertaining the unexplained quantity of stock and two in taking the stock as per books of account as on 01.04.2005 as against as on 09.12.2005. 22. During the course of assessment proceedings, the Learned CIT(Appeals) has also called for the remand report from the Assessing Officer. In his remand report, the Assessing Officer has also not pointed out any specific error or defect in the computation of the excess stock. As regards the stock to be taken as on the date of the search as against taken by the Assessing Officer as on 01.04.2005, the explanation of the Assessing Officer in the remand report was that in view of the unaccounted sales and purchases, he was justified in taking the stock as on 01.04.2005. We are of the view that this contention of the Assessing Officer is not sustainable and this cannot be the reasoning for taking into consideration the stock as on 01.04.2005 as per books of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is rejected. 25. Coming to the assessee's appeal, Ground Nos. 3 and 4 are regarding the valuation done by the approved valuer as on the date of search. The Learned AR in this regard has relied upon the letter dated 10.12.2005 filed with the Addl. Director of Income-tax (Inv.) and the report of the approved valuer submitted along with that. On going through this letter and also the discrepancy pointed out by the Learned AR in the two valuations, there appears to be some differences in the valuation carried out on the date of search. The Learned CIT(Appeals) has considered this issue and has held that the departmental valuer had properly considered the quantity, rate of gold jewellery and other precious stones at the time of the search operation and valued it accordingly. On the basis of these findings, he has rejected the contention of the assessee regarding the defects in the valuation. Considering the overall facts and circumstances of the case and the fact that this valuation was done on the date of search, when stock was physically examined, we do not see any reason to deviate with the findings given by the Learned CIT(Appeals) on this issue. In result, ground Nos. 3 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdingly, we hold that the Learned CIT(Appeals) was not justified in rejecting the assessee's explanation. 27. Our above view is also supported from the fact that subsequently the Assessing Officer himself in the assessment order for the assessment year 2008-09 in assessee's own case has accepted this explanation. The relevant finding recorded by the Assessing Officer in the assessment order for the assessment year 2008-09 are being reproduced hereunder: During the year, assessee company has allotted 750000 new equity shares of ₹ 10/- each fully paid up at for ₹ 75,00,000/- to Mr. Sanjeev Kumar Aggarwal. The source of the same has been explained by the assessee to be out of Mr. Sanjeev Kumar Aggarwal's sale proceeds/value of gold ornaments/jewellery weighing 18548.448 grams invested in assessee company, which asset were acquired by the allottee in earlier years out of his income declared during earlier assessment years 2000-01 to 2006-07 and disclosed in his returns filed during the assessment proceedings u/s. 153A which are already on record. the explanation of the assessee is accepted. 28. As such, we are of the view that the Learned CIT(Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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