Department appealed against ITAT's decision confirming CIT(A)'s deletion of an unaccounted stock addition and further relief on stock valuation following the assessee's FIFO cost method after a search. The High Court held the issues were purely factual and found no substantial question of law, dismissing the appeal.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
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PR. COMMISSIONER OF INCOME TAX (CENTRAL)- 3
..... Appellant
Through: Mr. Sanjeev Menon, Adv. for Mr. Zoheb Hossain, Sr. SC.
versus
SH . CHARCHIT AGARWAL ..... Respondent
Through: Mr. Rajiv Saxena, Ms. Sumangla Saxena, and Mr. Shyam Sundar, Advs.
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV
CM APPL. 29649/2019 (133 Days Delay)
ITA 566/2019
This is a digitally signed order.
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A. Whether the ITAT has erred in law and on facts in confirming the Commissioner of Income Tax (Appeals)’s [“ CIT(A)” ] deletion of Rs. 3,38,58,247/- and in allowing further relief of Rs. 1,02,10,375/- by accepting the assessee’s change of method of valuation of stock to the cost price following FIFO method without considering the fact that the assessee had already accepted the method of average rate of cost of stock adopted by approved valuer at the time of search?
B. Whether the ITAT has erred in accepting the assessee’s change of valuation method on the ground that the closing stock for the year naturally becomes the opening stock of the next year and therefore is revenue neutral without considering the fact that the assessee would not have pressed for change had it been the case?
“8. With respect to ground No. 1 of the appeal of the assessee as well as ground No. 2 of the appeal of the revenue are pertaining to the addition on account of unaccounted stock. During the course of search the assessee was asked to reconcile the difference while Q. No. 12 of his statement recorded on 14.12.2005 to show that total jewellery is being 188599 grams of gold whereas, as per stock register total stock is 68822.475 grams resulting into difference of 119776.525 grams. Assessee submitted that he has received gold ornaments of 11500 for the job work and further 4527.34 grams received by bill has not been entered in books of accounts. It was further stated that he received jewellery for repairs for polishing from various customers and around 800 grams are lying with him for repairing. In Question No. 13 he disclosed Rs. 4 crores as
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additional income on account of difference in the stock. Consequently, he also gave the break-up of disclosure of 44079512.09 in his revised return. The ld Assessing Officer on query was explained by the assessee that total quantity of jewellery found was 188599 grams, goods received for approval is 28866.60 grams, goods received for repairs is 8015.490 grams and therefore, the excess stock is only 81691.389 grams. The revenue has taken its value at Rs. 57169471/- where the assessee has taken its value at Rs. 4744079512/-. Therefore, the revenue is challenging the adjustment in the quantity of gold given by the ld CIT(A) of goods received in approval of 28866.60 grams and 8015.490 grams on account of repairs received. In the submission the assessee has provided the details with respect to the above two items providing the date of transaction, bill no, name of the party and quantity mentioned in those bills. It was noted that all these transactions are with respect to dates prior to search. The copies of such bill where the name, address, TIN No., as well as the detail of VAT charge is provided for in case of sale. The ld Assessing Officer despite having those details have not examined the parties about the genuineness of the bills. It is also not the case of the ld Assessing Officer that rate at which the gold is purchased duly supported by the bills is not prevalent at market rate on that date. Further, with respect to the purchase of the jewellery which remains to be accounted for identical details of the parties is provided. Assessee has further provided in one case the mistake in sales quantity which increases the stock and similar mistake on three occasions which decreases the quantity. The assessee has also shown that it has received certain Jewellery from M/s. Sunil Jeweller and Sonilalaji Pitambar Das from Ahmadabad. The copies of bills of those parties are also provided showing their GST no, complete address and telephone nos, the assessee has also shown the details of jewellery received for repairing from various Jewelers providing their name, address and the copies of the respective documents. The Assessing Officer was asked to comment in remand proceedings and the ld AO could not show any Infirmity in these details submitted by the assessee. The ld DR also could not show that what is the error made by the assessee in the reconciliation statement submitted qua the quantity. We have also verified the reconciliation statement and we also find that such kind of difference is possible at the time of search in case of a jeweler who is engaged in the trading, repairing as well as recording sales on approvals. May that be the case but despite showing and making a statement with the evidence which is not refuted by the revenue it is not possible to reject the same and refuse to grant credit of or/adjustment of such quantities. Therefore, we do not find any merit in the appeal of the revenue where the ld CIT(A) has accepted the reconciliation which is supported by the documentary evidences showing the name, address and sales tax no of the parties. In the result we do not find
This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 16/12/2024 at 14:31:47
any infirmity in the order of the ld CIT(A) in deleting the addition on account of unaccounted stock to the extent of Rs. 33858247/-. In the result ground No. 2 of the appeal of the revenue is dismissed.
This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 16/12/2024 at 14:31:47
YASHWANT VARMA, J.
PURUSHAINDRA KUMAR KAURAV, J.
FEBRUARY 06, 2024/p
This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 16/12/2024 at 14:31:47
1 issue framed by the court
Whether the ITAT's confirmation of deletion of addition for unaccounted stock and acceptance of FIFO valuation of stock raised any substantial question of law.
PR. Commissioner of Income Tax (Central)-3
Sh. Charchit Agarwal
Yashwant Varma
Purushaindra Kumar Kaurav
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
