The Learned Senior Standing Counsel Placed Reliance On Thedecision Of The High Court Of Allahabad In The Case Ofr.c.jewellers v. Commissioner Of Income-Tax-I, Lucknow Reportedin [2014] 44 Taxmann.com 487 (Allahabad

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 19.06.2019 The Commissioner of Income-tax,Central-III, Madras. Shri S.V.Sreenivasan,No.10, Sreenivasaragavan Street,R.S.Puram, Coimbatore. .. Respondent Tax Case Appeal filed under Section 260A of the Income-taxAct, 1961 against the order 06.12.2006 passed by the Income TaxAppellate Tribunal Chennai Bench 'D', in I.T.A.No.2686/Mds/2005,for the assessment year 2002-03. Appeal against the order of theIncome Tax Appellate Tribunal 'D' Bench, Chennai, dated06/12/2006 passed in I.T.A.No.2686(mds)/2005 in Assessment year2002-2003 against the order of the Commissioner of Income Tax(Appeals)-II, Coimbatore in I.T.A. No.78-C/05-06 for theassessment year 2002-2003 PAN/GIR No. . This appeal, by the appellant/Revenue filed under Section260A of the Income Tax Act, 1961 (hereinafter referred to as“the Act”), is directed against the order dated 06.12.2006,passed by the Income Tax Appellate Tribunal Chennai Bench 'D'(for brevity, “the Tribunal”), in I.T.A.No.2686/Mds/2005 for theassessment year 2002-03. https://hcservices.ecourts.gov.in/hcservices/ 2.The above appeal has been admitted, on 08.07.2008, on thefollowing substantial question of law:-“Whether on the facts and in the circumstancesof the case, the Income-tax Appellate Tribunal wasright in law in deleting the addition ofRs.2,65,16,037/- on account of value of gold anddiamond in Peak in WPS account, even though theadditions made by the assessing officer andconfirmed by the Commissioner of Income Tax(Appeals) and the Tribunal not considering thematerials available on record including the seizedmaterial is valid?” 3.Heard Mr.T.R.Senthil Kumar, learned Senior StandingCounsel for the appellant/Revenue; and Mr.A.S.Sriraman, learnedcounsel forMr.S.Sridhar,learnedcounselfortherespondent/assessee. 4.The short issue which falls for consideration is whetherthe Tribunal was justified in law in deleting the addition onaccount of value of gold and diamond in peak in WPS account,that is, work in progress account, even though the additionsmade by the Assessing Officer and Confirmed by the Commissionerof Income-tax (Appeals)-II, Coimbatore (for brevity “the CIT(A)”) and not considering the materials available on record. 5.The learned Senior Standing Counsel placed reliance on thedecision of the High Court of Allahabad in the case ofR.C.Jewellers v. Commissioner of Income-tax-I, Lucknow reportedin [2014] 44 taxmann.com 487 (Allahabad). 6.We have carefully gone through the order passed by theTribunal and we find that the Tribunal had called for remandreports from the Assessing Officer. Two such reports have beengiven by the Assessing Officer as well as one report by theAdditional Commissioner of Income-tax, Central Range,Coimbatore, which have been referred to. The purpose for whichthe remand reports were called for from the Assessing Officerwas in the light of the stand taken by the assessee before theTribunal that it has got all the details of the customers, whohad entrusted gold to the assessee for the purpose of makingornaments. Further, it has been contended that the gold sogiven by the customers were handed over to job worker, who willmanufacture the jewellery and hand it over to the assessee afterreceiving charges for the same. 7.To be noted that all the details of the names of thepersons, quantity of gold etc., were culled out from thecomputer statement maintained by the assessee under the head'work in progress'. We have perused the remand report given by https://hcservices.ecourts.gov.in/hcservices/ 7.To be noted that all the details of the names of thepersons, quantity of gold etc., were culled out from thecomputer statement maintained by the assessee under the head'work in progress'. We have perused the remand report given by https://hcservices.ecourts.gov.in/hcservices/ the Assessing Officer dated 23.08.2006. From the remand report,it is seen that the assessee filed a letter dated 07.08.2006 andfurnished the names and addresses of 22 customers and 56 workerswho were working with the assessee. The Assessing Officerexamined the customers of the assessee on oath under Section 131of the Act on 17.08.2016 and 18.08.2006 and their swornstatements were recorded. The Assessing Officer would statethat all that they have stated were recorded. Apart from thatthe job workers were also examined who have stated on oath thatthe assessee takes 2% of the gold as his commission for the jobwork done, but they were unable to identify the parties fromwhom they were getting the gold for conversion into newjewellery. The workers also stated that they are getting goldfrom the assessee and making new jewellery for the assessee andthey are receiving cooly of 2%. The remand report specificallystates that all the customers and workers who were examined onoath have filed copies of their Ration Card, Driving Licence,Voter's Identity card for establishing their identity. 8.On a perusal of the copies of the sworn statements andother connected records, the Tribunal granted relief to theassessee. 9.It is the endeavour of Mr.T.R.Senthil Kumar, learnedSenior Standing Counsel to convince us that the Tribunal grantedthe relief without taking note of the fact that no such recordwas produced by the assessee before the Assessing Officer. 10.In our opinion, it would be too late for the Revenue toraise such a contention before this Court especially when, theRevenue had complied with the orders passed by the Tribunalgiving interim direction to the assessee to submit remandreports. 11.Additions have been made under Section 69 of the Act.The provision states that where in the financial yearimmediately preceding the assessment year the assessee has madeinvestments which are not recorded in the books of account, ifany, maintained by him for any source of income, and theassessee offers no explanation about the nature and source ofthe investments or the explanation offered by him is not, in theopinion of the Assessing Officer, satisfactory, the value of theinvestments may be deemed to be the income of the assessee ofsuch financial year. 12.In the instant case, the details were culled out from thebooks maintained by the assessee. The assessee, no doubt, didnot offer convincing explanation before the Assessing Officer,but raised a plea before the Tribunal that they are willing toproduce all the names of their customers as well as theirworkers who can be examined. The Tribunal was convinced with the stand taken by the assessee and therefore, granted anopportunity to the assessee to do so and called for a remandreport. Statements were recorded from the customers and the jobworkers and the identity of the customers and job workers wasnot disputed by the Revenue, as they had produced proper proofof identity. The explanation offered by the assessee read withthe statements given by the customers and job workers was foundto satisfactory to the Tribunal. This satisfaction beingrecorded by the Tribunal is a satisfaction on the facts placedbefore it. 13.We are afraid that exercising power under Section 260A ofthe Act, we cannot venture into the factual thicket to statethat the satisfaction recorded by the Tribunal was unfounded.Therefore, in our considered view, the Tribunal was right ingranting relief to the assessee. 13.We are afraid that exercising power under Section 260A ofthe Act, we cannot venture into the factual thicket to statethat the satisfaction recorded by the Tribunal was unfounded.Therefore, in our considered view, the Tribunal was right ingranting relief to the assessee. 14.The decision of the High Court of Allahabad inR.C.Jewellers (supra) is clearly distinguishable on facts. Inthe said case, the creditworthiness of the parties was in doubt.The Court took into consideration all the private parties whowere stated to have given gold and found each one of them wereincapable of delivering the gold to the assessee therein. Noentry was found in the books of accounts of the said assessee.Nothing was reflected in the books of account of the sixcreditors and the Tribunal in the said case was not convincedthat jewellery was given on credit basis. Further, the Tribunalheld that the credit of the gold ornaments by six parties wasnot established and the explanation furnished by the assesseewas found to be not acceptable. The decision in the case ofR.C.Jewellers (supra) can render no assistance to the case ofthe Revenue. 15.For the above reasons, this tax case appeal is dismissedand the substantial question of law is answered against theRevenue. No costs. Sd/-Assistant Registrar abr //True Copy// Sub Assistant Registrar To 1.The Assistant Commissioner of Income-tax, Central Circle-III, Coimbatore. Central Circle-III, Coimbatore. 2.The Commissioner of Income-tax (Appeals)-II, Coimbatore. Coimbatore. 3.The Income Tax Appellate Tribunal Chennai Bench 'D'. Chennai Bench 'D'. +1cc to Mr.S.Sridhar, Advocate, S.R.No.49903 VSN II(CO) RRS(01/08/2019)