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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 ..... there was no specific authorization u/s. 132 of the I.T. Act in the name of the assessee and hence in view of the decision of Allahabad High Court in the case of CIT v. Vandana Sharma in ITA No. 2 of 2009 the order of the A.O. is void ab initio.' 2. On the facts and in circumstances of the case Ld. Commissioner of Income Tax (Appeals), has erred in confirming addition of Rs. 1,65,26,469/- towards value of excess stock of gold ornaments and jewellery. 3. Ld. Commissioner of Income Tax (Appeals), was not justified in accepting the valuation report of Department Valuation Officer as sole basis for valuation of stock of gold ornaments and jewellery, and failed to appreciate the anomalies pointed out in the valuation report of DVO, by the Appellant before the Assessing Officer and during appellate proceedings. 4. On the facts and in circumstances of the case Ld. Commissioner of Income Tax (Appeals), was not justified in rejecting the valuation report of independent registered valuer, on valuation of stock-in trade on the date of search at Rs. 11,72,88,275/-, submitted by the assessee during assessment and appellate proceedings. 5. Ld. Commissioner of Income Tax (Appeals), w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the assessee preferred first appeal questioning the computation done by the Assessing Officer. It was contended that the Assessing Officer has wrongly compared the stock as per books of account as on 01.40.2005 and as on the date of search i.e. 09.12.2005. The Assessing Officer has considered absolute value to find out the excess stock instead of first determining the quantity of the excess stock and then applying the rate on the date of the search on such quantity. It was further contended the difference in the quantity as per books and the actual quantity of gold ornaments comes to 31,184.862 grams. Out of this, 18,548.448 grams is the weight of the gold ornaments contributed by Shri Sanjiv Kumar Aggarwal, the director in whose hands the additional income has been offered as per the statement filed by him. The Learned CIT(Appeals) called for the remand report from the Assessing Officer and after considering the remand report, he has accepted the contention of the assessee that Assessing Officer was incorrect in valuing the entire stock both disclosed and undisclosed at market value and then deducting the stock as on 01.04.2005 at book value for making the addition. The Learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer after taking into consideration the opening stock as on 01.04.2005 of Rs. 6,99,25,031 and also the stock/undisclosed income offered by the assessee for taxation in the earlier years of Rs. 2,15,73,947 has correctly computed the unexplained stock at Rs. 4,78,14,866 and the Learned CIT(Appeals) was not justified in reducing this amount to Rs. 1,65,26,269. He submitted that valuation of jewellery is the core issue in the present appeal. 13. On the other hand, the Learned AR tried to justify the relief given by the Learned CIT(Appeals). To this extent, he placed reliance on the First Appellate Order. He reiterated that computation of excess stock done by the Assessing Officer was incorrect. He had computed the difference as on 09.12.2005 and as such he was not correct in taking the stock as per books of accounts as on 01.04.2005. The Assessing Officer should have taken the stock as per books of account as on 09.12.2005. He contended further that the whole computation done by the Assessing Officer on the basis of absolute value without taking into consideration the weight is incorrect. For the purpose of determination of the excess stock, the Assessing Officer should ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing a casual remarks to the facts that the arguments cannot be accepted as no concrete evidences have been filed by the assessee. The Learned AR submitted that the remarks given by the Learned CIT(Appeals) are general. Shri Sanjiv Kumar Aggarwal had also filed an affidavit stating that the stock in trade of Neha Jewellery Pvt. Ltd. i.e. the assessee, includes gold ornaments acquired out of the income earned by Mr. Sanjiv Kumar Aggarwal. He submitted further that Shri Sanjiv Kumar Aggarwal is the promoter director and managing the affairs of the assessee company. The Learned AR submitted that the explanation given by Shri Aggarwal and the assessee was a logical explanation and there was nothing adverse to reject the same. The Learned AR submitted that the explanation of Shri Aggarwal has been accepted by the Assessing Officer himself subsequently in the assessment order passed under sec. 143(3) of the Act in the assessment year 2008-09 of the assessee company. 16. The Learned CIT(DR) on the other hand submitted that valuation on the date of search was carried out by an approved valuer and as such the same cannot be ignored. The letter though filed on the next date of search was an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he computation of undisclosed stock has been done by the Assessing Officer on the basis of value only without determining the undisclosed weight of the gold and jewellery. Further the Assessing Officer has taken the opening stock as on 01.04.2005 as against the stock as on 09.12.2005. This approach of the Assessing Officer, in our view, in computing the excess stock as on the date of the search is not correct. The methodology adopted by the assessee, in our opinion, is the correct procedure to determine the unexplained stock on the date of search. In this regard, we note from the page No. 104 of the paper book filed on behalf of the assessee that the weight of the stock as per books of account has been computed by taking into account the quantity of the stock as on 01.04.2005 and then adding the weight of the purchases made from 01.04.2005 to 08.12.2005 and deducting the quantity of the sales from 01.04.2005 to 08.04.2005. The difference in the weight of the stock physically found and the weight of stock as per books of account worked out in the manner stated hereinabove has been taken as weight of undisclosed stock. This unexplained weight of stock has then been valued by applying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... controverted. Further, the department was having the seized computer whereby data for the purchases and sales for the period of five years ending on 08.12.2005 was also there. In view of the above facts, the methodology adopted by the Assessing Officer in computing the undisclosed stock was not correct. As against this, the methodology adopted by the Learned CIT(Appeals) for computing the weight of undisclosed stock is the correct methodology. 24. The learned CIT(DR) during the course of hearing contended that the Assessing Officer's computation be upheld but could not point out any reason to differ with the methodology adopted by the Learned CIT(Appeals). Accordingly, so far as the Revenue's appeal is concerned, we are of the view that the methodology adopted by the Learned CIT(Appeals) is correct for determining the value of the undisclosed stock and the computation done by the Assessing Officer to determine the value of undisclosed stock is not correct one. For the purpose of making addition on account of undisclosed stock, first the quantity/weight of such undisclosed stock has to be determined and then market value of this undisclosed stock is to be added as income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the same cannot be accepted as no concrete evidence was be filed by the assessee. We are of the view that the Learned CIT(Appeals) was not justified in rejecting the explanation offered by the assessee. The search has taken place on both i.e. assessee company and its director Mr. Sanjiv Kumar Aggarwal. Undisclosed income has been offered in the hands of the assessee company as well as Mr. Sanjiv Kumar Aggarwal. The income so offered have been assessed in the hands of Mr. Sanjiv Kumar Aggarwal and the assessee company. The income so offered having been assessed, there was no reason for not accepting the further explanation that the income so earned has been utilized for purchase of jewellery. Though the assessee and Mr. Sanjiv Kumar Aggarwal are two difference assessees but the fact that Mr. Sanjiv Kumar Aggarwal is the main working and promoter director of this company, cannot be ignored. No material or evidence has been found to contradict the explanation given by the assessee company as well as Mr. Sanjiv Kumar Aggarwal. The explanation is supported by affidavit. In the absence of anything contrary, the explanation offered by the assessee company, being plausible explanation, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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