Delhi High Court

Assistant Commissioner Of Income ... vs Bhagwat Prasad Saraf on 8 January, 1999

Equivalent citations: (1999) 65 TTJ Del 820

ORDER

Phool Singh, J.M.:

This appeal of the assessee is directed against the order, dated 23-10-1990, recorded by Commissioner (Appeals) by which appeal of the assessee for asst, yr. 1988-89 was disposed of.

2. The first two grounds relate to addition of Rs. 42,350 made by assessing officer on account of profit taken on the value of unexplained gold/jewellery worth Rs. 16,94,000 found short during search and seizure operation.

3. Relevant facts are that there was a search carried out by the department under section 132 of Income Tax Act, 1961 (hereinafter referred to as the "Act") at the business premises of the assessee on 16-7-1987. During the search gold ornaments weighing 5,05 kg. were found. It was noted by the department that expected quantity of such stock should have been available with the assessee at 6.042 Kgs. The assessee was called upon to explain the shortage and it was submitted by the assessee that gold worth 1.037 Kgs. were issued to Karigars for making ornaments and that was evident from exhibit 13 of seized record. The assessing officer did find force in this explanation of the assessee but he observed that even after that there was discrepancy of 605 grams of gold. About this, the explanation of the assessee was that ornaments worth 605 grams of gold given to customers for approval but that explanation was rejected by the assessing officer on the ground that assessee could not substantiate this contention. He worked out the price of 605 grams of gold at Rs. 1,69,400 and made the addition of Rs. 42,300 after working out the profit @ 25 per cent on the value of gold. The assessee came in appeal and it was submitted by assessee before Commissioner (Appeals) that as per para 4 of the assessment order, it has been noted by assessing officer that assessee had sold gold jewellery of more than Rs. 2 lakhs outside the books of account and profit arising out of that sale of gold jewellery outside the books of account had been separately assessed by the assessing officer. As profit on sale of gold jewellery outside the books of account had already been assessed by the assessing officer separately then no addition in respect of alleged sale of gold jewellery outside books of accounts amounting to Rs. 1,69,400 should have been made. In the alternative, it was also pleaded that if this addition is confirmed here then assessee should have been given credit for the profit assessed here out of the addition in respect of the profit on gold jewellery sold outside books of accounts exceeding Rs. 2 lakhs. The Commissioner (Appeals) did find force in this plea of the learned representative of the assessee. According to him, the documents seized at the time of search from the premises of the assessee go to show that assessee had sold gold jewellery outside books of accounts exceeding Rs. 2 lakhs for the period 1-4-1987 to 16-7-1987, which has already been noted by assessing officer in para 4 of the assessment order and once addition on account of sale of gold jewellery outside books of account. On this amount of exceeding Rs. 2 lakhs which has already been added, there was no justification for making this addition of Rs. 42,350 as gold jewellery worth Rs. 16,94,000 allegedly sold at the time of search is to be treated as included in the sale of gold jewellery outside books of account exceeding Rs. 2 lakhs and he deleted the addition against which the Revenue is in appeal.

4. On the date of hearing, the learned departmental Representative placed reliance on the order of assessing officer and learned counsel for the assessee had reiterated the same submissions as were taken before the Commissioner (Appeals).

5. We have considered the submissions and perused the record carefully. It is relevant to point out that addition in respect of profit earned by the assessee on sale of gold jewellery outside books of account exceeding Rs. 2 lakhs and already been assessed in the hands of the assessee and once that * is the fact then there was no justification for making addition of Rs. 42,350 on alleged profit on the value of unexplained gold of Rs. 1,69,400 found short during the search and seizure operation as assessee must have sold the gold ornaments which were found short at the time of search and thus we confirm the finding of the Commissioner (Appeals) and both the grounds fail.

6. Ground Nos. 3 and 4 are in respect of addition of Rs. 90,000 made by the assessing officer on account of profit/income estimated on the sale of jewellery outside books of account which had been restricted to Rs. 73,500 by Commissioner (Appeals).

7. The assessing officer noted in para 4 of assessment order that assessee had sold ornaments worth Rs. 3.50 lakhs outside the books of account and he estimated Rs. 90,000 as profit/income on those sales effected outside the books. Assessee came in appeal and it was submitted that while arriving at the estimate of profit of Rs. 90,000 on sale of Rs. 3.5 lakhs outside the books, the assessing officer has taken the rate of profit at 25 per cent as shown by the assessee in the books of account as profit on the sale of gold jewellery. The plea was that the sale of Rs. 3.5 lakhs outside the books was not sale of gold ornaments alone but more than 50 per cent thereof was sale of silver jewellery and profit on the sale of silver jewellery was @ 15 per cent and assessing officer should have considered this aspect which he failed. Bifurcation of sale of Rs. 3.5 lakhs into silver and gold jewellery was also furnished before Commissioner (Appeals) in which silver jewellery sale was more takan 50 per cent. This plea did find favour with the Commissioner (Appeals) who observed that profit in silver jewellery was 15 per cent as against 25 per cent of gold jewellery. Placing reliance on the bifurcation so furnished by the assessee, he gave relief of Rs. 17,500 to the assessee and Revenue is in appeal.

8. The learned departmental Representative placed reliance on the order of assessing officer and contended that assessee had not furnished the detail of sale of gold and silver ornaments to the assessing officer and Commissioner (Appeals) was not justified in giving the relief. As against it, the learned counsel for the assessee had placed reliance on the submissions made by assessee before Commissioner (Appeals).

9. We have considered the rival submissions. At the very beginning, it may be pointed out that ground No. 3 is misconceived as it is against deleting the addition of Rs. 90,000 while in fact Commissioner (Appeals) has not deleted this addition but gave a relief of Rs. 17,500 only. Apart from it, it has been the case of the assessee that full details of sale of gold and silver ornaments were available on the record and assessing officer has not looked into the said details which were appreciated by the Commissioner (Appeals) and on that bifurcation of gold and silver ornaments the relief of Rs. 17,500 was given to the assessee. This contention of the assessee was rightly appreciated and assessing officer in para 4 of the order has not given the nature of ornaments of Rs. 3.5 lakhs and he simply worked out the profit at Rs. 90,000 in one line. Commissioners (Appeal) order does not suffer from any infirmity and the grounds agitated by the Revenue are without any substance and fail.

10. Ground No. 5: this ground relates to addition of Rs. 40,000 made by the assessing officer on account of job work, it was reduced to Rs. 10,000 by the Commissioner (Appeals).

11. During assessment proceeding, it was noted by assessing officer that assessee had carried out job work for Rs. 4 lakhs and no repair income has been recorded in the books of account and he estimated Rs. 40,000 from repair work and made the addition. Before Commissioner (Appeals), it was the case of the assessee that no doubt, repair work of Rs. 4 lakhs of gold/jewellery was carried out by the assessee, there was a nominal income from repair work as businessmen carry out repair work without any charge with an intention to earn goodwill among the customers. It was also the case of the assessee that during search operation no document was seized by the department showing any income from repair work in the case of the assessee as well as any other assessee who were also subject to search operation. The learned Commissioner (Appeals) noted that value of jewellery repair can hardly be any indication about the repair charges received as most of the time repair work was carried out free of charge to earn goodwill. But he estimated the income from repair work as Rs. 10,000 instead of Rs. 40,000 and Revenue is against this observation of Commissioner (Appeals).

12. Learned departmental Representative placed reliance on the orders of assessing officer, The learned counsel placed reliance on the order of Commissioner (Appeals) who had appreciated the submission of the assessee correctly.

13. After considering all the facts, we are of the view that no interference is called for in the order of Commissioner (Appeals) as no incriminating documents showing income from repair work was found at the time of search. No doubt, repair work carried out by assessee in ornaments worth Rs. 4 lakhs but that alone is not a criteria to estimate the income at Rs. 40,000. The Commissioner (Appeals) was justified in reducing it to Rs. 10,000. We confirm his finding.

14. Ground fails.

15. Ground Nos. 7 and 8 is in respect of addition of Rs. 50,000 on account of initial investment by the assessee on the sale of jewellery outside the books of account worth Rs. 3.5 lakhs. assessing officer vide para 8 of his order estimated an amount of Rs. 50,000 put by the assessee as initial investment for sales conducted outside the accounts book. The plea of the assessee before Commissioner (Appeals) was that assessee was having gold worth Rs. 1,69,400 with him as found short during the course of search and that gold was available for selling gold jewellery outside the books of account and there was no justification for making other addition on account of initial investment. The other plea was that in just preceding year, assessee had surrendered huge amount and addition of Rs. 3,49,000 was made on that account was also available to the assessee for alleged investment. On these two pleas, the Commissioner (Appeals) deleted the addition as these explanations were found sufficient to conclude that assessee was having sufficient gold and amount for making investment. Against deletion of this addition of Rs. 50,000, the Revenue has come in appeal.

16. The learned departmental Representative placed heavy reliance on the order of assessing officer and assessee placed reliance on the order of Commissioner (Appeals).

17. We are of the considered view that Commissioner (Appeals) has rightly appreciated the factual position as assessee found short of gold worth Rs. 1,69,400 at the time of search that gold was available to him to effect sale of gold ornaments outside books. Further, in the just preceding year, assessee surrendered a huge amount and addition of Rs, 3,49,000 was made. And that was also available to him and thus no justification of making an addition of Rs. 50,000 and Commissioner (Appeals) rightly deleted the same. We confirm his findings and ground fails.

18. Ground Nos. 8, 9 and 10. These grounds relate to the addition of Rs. 1 lakh on account of interest on pawning of jewellery. The assessing officer vide para 9 of assessment order noted that no pawning interest had been disclosed by the assessee but from the pawning slips found at the time of search, he further noted that such slips had been increasing. He was of the opinion that assessee during the just preceding assessment year 1987-88 had received interest from pawning at Rs. 1,71,000 as evident from the papers seized at the time of search and in the absence of any precise evidence during the year under consideration, he estimated such interest income from pawning of Rs. 1,40,000 and made the addition of Rs. 1 lakh which has since been deleted by the Commissioner (Appeals) on the ground that in just preceding year it is not specific from the paper seized that interest of Rs. 1,71,000 was from pawning business and there was no other evidence for making the addition in the year under consideration to show that assessee had earned any interest income from pawning business, etc., outside the books of account. He further noted that if addition like this could be justified without any evidence that such additions could continue for every case where documents seized in search as income from outside book in earlier years. The Revenue is in appeal.

19. As in every ground, the learned departmental Representative placed reliance on the order of assessing officer and learned counsel for the assessee placed reliance on the orders of Commissioner (Appeals).

20. We have considered the rival submissions and perused the record. Admittedly, there was no evidence with the assessing officer to show that assessee had earned any interest of pawning business during the year under consideration. It was a case of search and no document was seized by the Revenue to show that assessee earned any interest income from pawning business. The basis for the assessing officer to make addition was the earlier year's income but that addition was not merely on account of interest from pawning business. Assessee surrendered some amount on account of different additions and there was no basis for comparison of earlier addition to the year under consideration. For want of evidence, no justification for making addition in the year under consideration and Commissioner (Appeals) has rightly deleted the same. This ground also fails.

21. On the basis of above, we are of the opinion that the appeal of the Revenue has no force and liable to be dismissed.

22. In the result, the appeal is dismissed accordingly.