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TMI Blog2023 (4) TMI 1113X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee in ground no. 3, 4 5 is partly allowed. Valuation of excess stock of gold jewellery found during the course of survey - Difference in stock based on the survey report - at course of survey u/s. 133A stock verification was carried out - Excess stock of 13262 grams of gold jewellery was found and the same was accepted by the assessee but in the return of income assessee disclosed the excess stock of 12810.920 grams of gold jewellery only - HELD THAT:- AO has not found any discrepancy in the books of accounts nor has he rejected the book results. The addition made by the Assessing Officer is purely based on the statement given by the assessee during the course of survey but the same does not have any evidentiary value as consistently held by Hon ble courts. The alleged addition is only on account of the rates applied by the AO which is higher to the rate adopted by the assessee. From perusal of the calculation of AO, we notice that he has totally ignored the cost of the precious and semi - precious stones and other metals which are necessary to make gold jewellery. Under this given facts and circumstances of the case, the details filed by the assessee based on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort in the computation of taxable total income without assigning proper reasons and justification. 7. The CIT (Appeals) failed to appreciate that the quantification of difference/the excess stock at 451 gms. was completely erroneous and ought to have appreciated that the non consideration of the reconciliation would vitiate the decision rendered in para 5.8.2 of the impugned order. 8. The CIT (Appeals) failed to appreciate that in any event the adoption of the value for the assessment of the presumed excess stock was wrong, erroneous, unjustified, incorrect and not sustainable in law and ought to have appreciated that the explanation offered in this regard for proper adoption of the rate would fortify the error in the findings in para 5.9. 7 of the impugned order. 9. The CIT (Appeals) failed to appreciate that the survey statements relied upon for making the additions under consideration had no legal sanctity and ought to have appreciated that in the absence of supporting evidence in substantiating the answers given in the survey statements, the reliance based on such statements should be reckoned as bad in law in the light of the consistent judicial trend. 10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stage or manufacturing loss which is inevitable. 6. On the other hand, ld. DR vehemently argued the details filed by the ld. CIT(A). 7. We have heard the rival contentions and perused the records placed before us. The estimation of addition of Rs. 27,18,374/- representing the manufacturing loss to the extent of Rs. 1060.738 grams in the conversion of old gold jewellery into new gold jewellery by the Assessing Officer and confirmed by ld. CIT(A) is in dispute before us. The claim of the assessee is that there is no wastage in the conversion of old gold jewellery to new gold jewellery. It is also not in dispute that assessee charges 15% towards making charges, wastage and takka from its customers. It is also claimed that such conversion is carried out through other goldsmith on job work basis who adds copper during the course of converting old jewellery into new jewellery. It is an admitted fact that when the old jewellery is converted into new jewellery there are certain inherent impurities in the old jewellery which are cleaned or washed out during the course of conversion. Though, the facts are not clear to the extent that whether old jewellery is first converted into pure g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3A of the Act does not carry any evidentiary value and addition in the hands of the assessee can be made only on the basis of incriminating material found during the course of survey. In the case of assessee, excess jewellery was found and the same has been offered to tax by the assessee. However, ld. AO had adopted different rate without considering the factual aspect that gold jewellery does not constitute only gold but also has precious and semi-precious stones and other metals. Therefore, the valuation adopted by the assessee should have been accepted and the impugned addition may be deleted. 13. On the other hand ld. DR vehemently supported the order of both the lower authorities. 14. We have heard the rival contentions and perused records placed before us. Addition of Rs. 33,90,758/- towards valuation of excess stock of gold jewellery found during the course of survey is in dispute before us. We observe that 13262 grams was found in excess at the time of survey and in the return assessee only offered 12810.920 grams of gold jewellery for tax and the remaining 451.08 grams was not offered on the ground that after reconciliation of the statement no such difference was fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 451.08 gms value of the gold jewellery to the returned income. b. Old Gold Jewellery SI Details Grams Remarks 1 Old Gold Jewellery found on surve 399.5 2 Old Gold Jewellery as per accounts 474.0 3 Shortage of old Gold jewellery 74.580 If the value of the shortage of Old Gold Jewellery 74.580 gms is treated as income and the said value shall be given credit/offset against the value of the excess stock admitted as income in the return of income. 15. Based on the above details, the assessee offered the amount of Rs. 2,93,62,629/- for taxation. Whereas, ld. AO computed the value of Rs. 3,23,55,528/- in the following manner: Gold in the 24K is the 100% pure gold. And 24K gold is used to make the 22K gold. Some alloys and impurities are added to the 24K god and thereby, 22K gold is manufactured. The content of gold in 24K Gold is 100% and that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose of the valuation of the content of the Gold in excess stock of Gold Jewellery. By adopting this method the value of Gold Jewellery is arrived and for manufacturing the said jewellery, the manufacturing cost of Rs.30/g is added. The total value is admitted for the excess gold jewellery found. While valuing the Gold jewellery no distinction is made i.e. Gold jewellery stones and gold jewellery without stones. Only 15% deduction is made for impurities, soldering materials i.e. takka from the bullion rates, As alleged in the show cause notice, the entire stock of excess gold jewellery is not having purity Of 91.667%. hence the value worked out based on 22K is unreasonable an- and against the normal practice followed in this line of business. Further, in the recent article of The Hindu dated 11.12.2017 will clearly show that the content of the Gold in Gold Jewellery 91.667. Copy of the The Hindu dt: 11.12.17 enclosed. The excess Gold Jewellery found has not been valued as old gold jewellery since New: Gold Jewellery was found at the time of survey. Hence, the said Gold Jewellery has been taken/recorded in New Gold Jewellery. The method of valuation adopted by m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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