Whether when assessee fails to produce any proof towards claim that goods inventorized at time of Survey also included goods received from customers, such claim is to be construed as afterthought - YES: ITAT

THE issue before the Bench is - Whether when the assessee has failed to produce any proof towards its claim that the goods inventorized at the time of survey also included the goods received from its customers for remodeling, such a claim is to be construed as an afterthought. And the answer goes against the assessee.

Facts of the case

A survey u/s. 133A was conducted at the business premises of the assessee, during which stock of gold and silver lying at the business premises was inventorized and it was found that the assessee had actual physical stock of gold of 21610.620 grams and of silver 111.493 kgs. The book stock of the assessee on that day was worked out at gold 19332.578 grams and silver 106.916 kgs. The assessee was required to explain the difference. During survey, partner of the firm admitted that the above difference in stock in gold and silver was unaccounted income of the assessee. Accordingly, the unaccounted stock of gold 2278.048 grams was valued at Rs 25,34,322/- and the difference in silver of 5.577 kgs. was valued at Rs 70,028/- and thus a total addition of Rs 26,04,350/- was offered to tax over and above the regular income of the current year. The partner Shri Ramjibhai Patel assured of making payment of advance tax of Rs 8,04,000/- and paid Rs 4,00,000/- as advance tax on 15.03.2008. However, in the return of income filed for the assessment year 2008-09, the income was shown at Rs 16,369/- only. AO found that the gold and silver ornaments were given to the assessee by the persons for job work and that as per the details submitted by the assessee, from the date of survey the jewellery were not lying in the business premises of the assessee and hence the total physical stock found during the course of the survey proceedings at the business premises of the assessee belonged to the assessee and represented the additional income of Rs 26,04,350/- declared by the assessee as its unaccounted income. Therefore, he made addition of the same to the income of the assessee

On appeal, the Tribunal held that,

Excess stock

++ the claim of the assessee is that the goods inventorized at the time of survey also include the goods which were not owned by the assessee but were received by the assessee from its customers for remodelling. The Assessing Officer has not accepted the above contention of the assessee on the ground that at the time of the survey, it was stated that the goods received from customers were handed over to the karigars immediately i.e. such goods were not present in the premises of the assessee and consequently not included in the inventory prepared at the time of the survey. We find that copy of the statement which was recorded at the time of the survey was not produced before us to rebut the above contention of the Assessing Officer. Copy of inventory prepared at the time of survey was also not produced before us by the assessee to point out therefrom that such inventory included the goods received from customers for remaking or remodelling. The Commissioner of Income Tax (Appeals) pointed out that in the affidavits of the karigars it is not stated that they carried out work of repairing/remodelling at the premises of the assessee and kept such goods at the premises of the assessee. We find that no material was brought before us to controvert the above point highlighted by the Commissioner of Income Tax (Appeals). In the absence of any such material, we do not find any good reason to interfere with the orders of the lower authorities. Therefore, this ground of appeal of the assessee is dismissed;

Labour charges

++ no labour charge expenses were incurred for earning the said labour charges income is not justified without cogent material. Further, the Commissioner of Income Tax (Appeals) allowed labour charge expenses at the rate of 50% of the labour charge receipt which is also without any basis. In absence of any specific defect being pointed out in the vouchers of labour charge expenses, in our considered view, the disallowance of Rs 66,459/- made by the Commissioner of Income Tax (Appeals) is unsustainable. We, therefore, delete the disallowance of Rs 66,459/- under the head ‘labour charge expenses’ and allow this ground of appeal of the assessee;

Disallowance u/s 40(a)(ia)

++ the Authorized Representative of the assessee could not controvert this finding of the Commissioner of Income Tax (Appeals), hence we find no infirmity in the order of the Commissioner of Income Tax (Appeals) in confirming disallowance of Rs 75,601/- paid under the head hallmark checking expenses from out of the total expenditure of Rs 1,08,646/-. Thus, this ground of appeal of the assessee is dismissed;

Unaccounted income

++ no material has been brought before us by the Revenue to rebut the finding of the Commissioner of Income Tax (Appeals). In absence of any such material, we do not find any good reason to interfere with the order of the Commissioner of Income Tax (Appeals) and therefore, this ground of appeal of the Revenue is dismissed.