D.b. Income Tax Appeal v. Shri Prabhu Dayal Jhalani,90, Jhalani Jewellers, Gopal Ji Ka Rasta, Jaipur

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 42 / 2014Commissioner of Income Tax-I, New Central Revenue Building,Statute Circle, Jaipur (Raj.) ----Appellant VersusRamesh Jhalani P/o. M/s . Jhalani and Sons, Gopal Ji ka Rasta,Jaipur. ----Respondent/Assessee Connected With D.B. Income Tax Appeal No. 43 / 2014 Commissioner of Income Tax-I, New Central Revenue Building, Statute Circle, Jaipur (Raj.) ----Appellant Versus Shri Prabhu Dayal Jhalani,90, Jhalani Jewellers, Gopal Ji Ka Rasta, Jaipur Respondent /Assessee _____________________________________________________ For Appellant(s) : Mr. Anuroop Singhi with Mr. Aditiya Vijay For Respondent(s) : Mr. Gunjan Pathak with Ms. Ishita Rawat _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYASJudgment 18/09/2017 1. In both these appeals since identical questions of law andfacts are involved, they are decided by this common judgment. 2.By way of these appeals, the appellant has challenged thejudgment and order of the Tribunal whereby the Tribunal hasallowed the appeals of the assessee and dismissed the appeal ofthe department. 3.This court while admitting the appeals framed the following questions of law:- D.B. Income Tax Appeal No. 42 / 2014 “Whether on the facts and circumstances of the case, theTribunal was justified in deleting the entire addition ofRs.62,65,772/- made under section 69C of the Act onaccount of valuation of excess stock, ignoring that theaddition was made on the basis of the valuation made byregistered valuer and on admission of assessee himself?” D.B. Income Tax Appeal No. 43 / 2014 “Whether on the facts and circumstances of the case, theTribunal was justified in deleting the entire addition ofRs.53,81,695/- made under section 69C of the Act onaccount of valuation of excess stock, ignoring that theaddition was made on the basis of the valuation made byregistered valuer and on admission of assessee himself?” 4.Brief facts of the case are that a survey u/s 133(A) wasconducted on the business premises of the assessee on 11.09.2007 inwhich total of Rs. 1,32,63,126/- was surrendered as excess stock andRs. 3,19,210/- were surrendered as excess cash by the assessee.Statements of the assessee were recorded. 4.1`However, while filling the return for the year underconsideration the assessee retracted from his statement and offered fortaxation excess stock of Rs. 79,21,316/- as against Rs. 1,32,63,126/-and Rs. 2,79,361/- as against Rs. 319210/- as excess cashsurrendered originally in his statement. The total amount of retractioncomes to Rs. 53,81,659/-.During the survey proceedings theassessee had taken a plea regarding the valuation of stock that in thevaluation report, the purity of gold was taken excess by 10% that is92-93% where as it should have been 82-83% as his gold jewellerywas of 20-22 carats. According to him, at least 10% of value was taken excess by the Registered Valuer. As per the assessee, the valueof stock should have been reduced by 10%. accordingly the value ofstock after reducing 10% was taken. The original value of the stock asvalued by the Registered Valuer came to Rs. 1,69,25,726/- andtherefore, the excess stock of Rs. 1,32,63,126/- was surrendered bythe assessee during the survey proceeding. Further, excess cash of Rs.3,19,210/- was surrendered by the assessee during the surveyadmitted in question no. 33 of the statement as well as in its letterdated 10.03.2010. However, in the computation of income an amountof Rs. 2,79,361/- only has been added back by the assessee. Thedifference of Rs. 39849/- remains to be considered as undisclosedincome of the assessee. taken excess by the Registered Valuer. As per the assessee, the valueof stock should have been reduced by 10%. accordingly the value ofstock after reducing 10% was taken. The original value of the stock asvalued by the Registered Valuer came to Rs. 1,69,25,726/- andtherefore, the excess stock of Rs. 1,32,63,126/- was surrendered bythe assessee during the survey proceeding. Further, excess cash of Rs.3,19,210/- was surrendered by the assessee during the surveyadmitted in question no. 33 of the statement as well as in its letterdated 10.03.2010. However, in the computation of income an amountof Rs. 2,79,361/- only has been added back by the assessee. Thedifference of Rs. 39849/- remains to be considered as undisclosedincome of the assessee. 5.Counsel for the appellant contended that Tribunal has seriouslycommitted an error in reversing the finding recorded by AO as well asCIT(A). 6. Counsel for the respondent has drew our attention to theobservation made by the Tribunal which reads as under:- 11. We have heard parties with reference to material on record.The jewellery stock found as a result of survey admittedly wasvalued at market price as is evidenced by the valuation ofjewellery made by the departmental valuation officer laid atassessee's PB 32 and 33. This valuation has been made by placingthe values of jewellery as on 11th September, 2007 i.e. the dateof survey on assessee's premises. The assessee is continuing thebusiness and had valued the stock at cost or market pricewhichever is lower. This method has been accepted in past andfollowed consistently for last several years. No change in methodof valuation of stock has been reported. The Ld. CIT(A) havingregard to the method of valuation of stock adopted by theassessee scaled down the market value of stock to the cost andthus allcwed relief of Rs. 33,85,152/-. We do not find any infirmityin correcting such valuation by the Ld. CIT (A). The ground inappeal raised by the revenue being devoid of any merit on thiscount, stands rejected. 12. In so far as the assessee's claim that there were impurities of20% in the gold ornaments except in items contained a Sl. No. 9, 12. In so far as the assessee's claim that there were impurities of20% in the gold ornaments except in items contained a Sl. No. 9, 19 and 27 to 29 and 30 at 32% and in the item No. 30 of thevaluation report at 50%. The survey team accepted the claimpartially to extent of impurity in all items by 18% only. This hasso been done without taking items second opinion from the experteven though jewellery found was available before the survey partyat the time when the appellant disputed such valuation made bythe departmental valuation officer. He was not even allowed tobring his own registered valuer, though protests are claimed tohave been made by him. In any event, the adjustment made onaccount of impurity by the survey team itself, reveals that theyhave disbelieved the valuation made by their own valuer. Theappellant did not rest his claim before the survey team only butpursued the matter further before the assessing officer and filed aletter on dated 17/3/2008 in that regard. The assessing officeralso remained passive on the face of it though it called for furtherenquiries. Essentially, therefore, the valuation adopted by thesurvey team can neither be taken a correct not conclusive.Statements elicited during survey have no evidentiary value ashas also been affirmed by the Hon'ble Apex Court in the case of S.Khader Khan Son reported in 79 DTR 184 (SC). Essentiallytherefore, the assessment could not have been made only on thebasis of statement elicited during the course of survey. Theassessee had a right to correct the valuation on the basis of actualgold content in such stock of jewellery found as a result of survey.The appellant made bonafide surrender of additional businessincome on account of investment in excess stock of jewelleryfound as a result of survey from him by showing 80% goldcontent as against 83% admitted by the survey team in respect ofall items except items at sl. No. 9 10 and 27 to 31 of the valuationreport. In respect of items at Sl. No. 9 being gold tops weighing2035 gms, mixed jewellery from item No. 19, 27 to 29 and 31weighing 3437gms. t 68% and for item No. 30 being nose pinweighing 1953 gms at 50% the appellant had supported his claimwith the tounch test report' and certificate of the jeweller'sassociation and also with making bill from the karigar. Theauthorities below embarked no enquiry to disprove such claim ofthe appellant. For the remissness on the part of the assessingofficer, the assessee cannot be made to suffer. Under the peculiarfacts of the case, we do not find any infirmity in the assessee'sdecision lo correct the valuation further on the basis of purity ofgold content in such jewellery and working out the excess stock ofjewellery found as a result of survey as such. Thus the correctedcost of jewellery has been worked out at Rs. 1,18,94,064/- asagainst Rs. 69,25,763/- adopted by the assessing officer andcorrected by the Ld. CIT(A) to Rs. 1,35,40,611/-. The assesseegets relief of Rs. 16,46,547/-” 7. Hence, both the issues are answered in favour of the asseesee and against the department. 8. The appeals stand dismissed. (VIJAY KUMAR VYAS),J. B. M.G./Gourav/33-34 (K.S. JHAVERI),J.