The JCIT(OSD), Central Circle, Visakhapatnam v. Sri V Kesava Rao, Icchapuram., Ichapuram

IT(SS)A NOS 10 AND 16OF 2006 SRI V KESHAVA RAO ICCHA PURAM PAGE 1 OF 16 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER IT(SS)A NO.10/VIZAG/2006 BLOCK PERIOD 1.4.96 TO 28.10.2002 SRI VECHA KESAVA RAO ICCHAPURAM VS. DY.COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1 VISAKHAPATNAM (APPELLANT) PAN NO: AAQPV 7455 A (RESPONDENT) IT(SS)A NO.14/VIZAG/2006 ASSESSMENT YEARS: 1997-98 TO 2003-04 JCIT (OSD) CENTRAL CIRCLE-1 VISAKHAPATNAM VS. SRI VECHA KESAVA RAO ICCHAPURAM (APPELLANT) (RESPONDENT) PAN NO: AAQPV 7455 A APPELLANT BY: SHRI Y.A. RAO CA RESPONDENT BY: SHRI T.H. LUCAS PETER CIT(DR) ORDER PER SHRI B. R. BASKARAN ACCOUNTANT MEMBER: THESE CROSS APPEALS ARE DIRECTED AGAINST THE O RDER DATED 16.2.2006 PASSED BY LEARNED CIT(A)-I VISAKHAPATNAM AND THEY R ELATE TO THE BLOCK PERIOD FROM 1.4.1996 TO 28.10.2002. 2. FOLLOWING TWO ISSUES ARE URGED IN THE APPEALS FI LED BY THE ASSESSEE A) DETERMINATION OF QUANTITY OF UNDISCLOSED GOLD AN D SILVER B) SOURCE FOR MAKING FIXED DEPOSIT OF RS.30 000/- 3. THE REVENUE IS CHALLENGING ALL THE RELIEF GRANTE D BY THE LEARNED CIT (A) IN RESPECT OF GOLD AND SILVER ITEMS. 4. THE FACTS RELATING TO THE CASE ARE STATED IN BRI EF. THE ASSESSEE IS IN JEWELLERY BUSINESS. HE IS THE PROPRIETOR OF M/S KES AVA JEWELLERS. HIS WIFE SMT. V.V.G. LAKSHMI IS THE PROPRIETRIX OF M/S KESAV A AGENCIES. THERE WAS IT(SS)A NOS 10 AND 16OF 2006 SRI V KESHAVA RAO ICCHA PURAM PAGE 2 OF 16 ALSO A PARTNERSHIP CONCERN BY NAME M/S. V. KAMESHWA RA RAO & SONS WHEREIN THE ASSESSEE AND HIS FATHER WERE PARTNERS A ND THE SAID FIRM HAD BEEN DISSOLVED ON THE DEMISE OF ASSESSEES FATHER. THERE IS ALSO A HUF STATUS IN THE NAME OF KAMESHWARA RAO (HUF). THE DEP ARTMENT CARRIED OUT SEARCH AND SEIZURE OPERATIONS IN THE BUSINESS CUM R ESIDENTIAL PREMISES OF THE ASSESSEE ON 28.10.2002. DURING THE COURSE OF S EARCH GOLD JEWELLERIES SILVER ARTICLES AND BOOKS OF ACCOUNT PERTAINING TO THE 3 BUSINESS CONCERNS STATED ABOVE AND M/S V. KAMESHWARA RAO (HUF) WERE S EIZED. THE ASSESSEE FILED HIS BLOCK RETURN DISCLOSING A SUM OF RS.32 89 540/- AS HIS UNDISCLOSED INCOME. HOWEVER THE ASSESSING OFFICER DETERMINED THE UNDISCLOSED INCOME AT RS.79 34 056/-. THE ASSESSING OFFICER INTER ALIA MADE ADDITIONS IN RESPECT OF GOLD JEWELLERY SILVERWARE AND FIXED DEP OSITS. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT (A) AND GOT PARTIAL RELIEF. STILL AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. THE REVENUE IS IN APPEAL BEFORE US CONTESTING THE RELIEF GRANTED BY H IM. 5. THE MAIN DISPUTE RELATES TO THE DETERMINATION OF QUANTITY OF UNDISCLOSED GOLD JEWELLERY. DURING THE COURSE OF SE ARCH GOLD JEWELLERY WEIGHING 16927 GMS WERE FOUND OUT OF WHICH JEWELLE RY WEIGHING 14KGS WERE SEIZED AND THE REMAINING 2927 GMS WERE LEFT UN -SEIZED. THE SEIZED GOLD JEWELLERY WAS VALUED BY THE DEPARTMENT THROUGH AN APPROVED VALUER WHO DETERMINED THE NET WEIGHT OF GOLD AT 9414.25GMS BY GIVING A REDUCTION OF 32.75% IN THE TOTAL WEIGHT OF GOLD SEI ZED TOWARDS IMPURITIES AND STONES. BEFORE THE ASSESSING OFFICER THE ASS ESSEE SOUGHT DEDUCTION TOWARDS (A) QUANTITY OF BOOK STOCK IN HIS OWN BUSIN ESS (B) QUANTITY OF BOOK STOCK OF THE PARTNERSHIP FIRM (C) QUANTITY OF JEWE LLERY THAT WERE ALREADY DISCLOSED BY HIM AND FAMILY MEMBERS IN THEIR RESPEC TIVE WEALTH TAX RETURN FILED IN ASSESSMENT YEARS 1992-93 AND EARLIER YEARS AND (D) EXCESS GOLD DISCOVERED BY THE SALES TAX AUTHORITIES. BESIDES T HE ABOVE THE ASSESSEE ALSO GOT THE UNSEIZED JEWELLERY VALUED BY ANOTHER V ALUER WHO GAVE DEDUCTION OF 47%. HOWEVER THE AO GAVE REDUCTION O NLY TOWARDS THE BOOK STOCK OF PROPRIETARY CONCERN OF THE ASSESSEE AND AN OTHER QUANTITY OF 500 IT(SS)A NOS 10 AND 16OF 2006 SRI V KESHAVA RAO ICCHA PURAM PAGE 3 OF 16 GMS TOWARDS PERSONAL JEWELLERY. THE ASSESSING OFFI CER DID NOT ACCEPT THE VALUATION REPORT FURNISHED IN RESPECT OF UNSEIZED J EWELLERY AND APPLIED UNIFORM RATE OF REDUCTION OF 32.75% FOR UNSEIZED JE WELLERY ALSO. THE ASSESSING OFFICER ALSO REJECTED ALL OTHER CLAIMS MA DE BY THE ASSESSEE. THE AO 6. IT IS PERTINENT TO BE NOTED HERE THAT THE MAR KET PRICE IS QUOTED IN THE GOLD MARKET ONLY FOR PURE GOLD. WHILE MAKING AN O RNAMENT A SMALL QUANTITY OF OTHER METALS LIKE COPPER ETC. ARE USUAL LY ADDED IN ORDER TO GAIN MALLEABILITY. FURTHER STONES OF VARIOUS TYPES ARTE EMBEDDED IN THE ORNAMENT DEPENDING UPON THE DESIGN OF THE ORNAMENT. HENCE THE NET WEIGHT OF GOLD CONTAINED IN A GOLD ORNAMENT WOULD D EPEND UPON THE QUANTITY OF SUCH NON-GOLD METAL ADDED WHILE MAKING THE SAID GOLD ORNAMENT AND THE STONES EMBEDDED IN IT. SINCE THE PRICE OF NON-GOLD METAL AND STONES IS LOW THERE VALUE IS USUALLY IGNORED. IN T HIS SCENARIO THE VALUE OF GOLD JEWELLERY IS USUALLY DETERMINED IN TWO WAYS. THE FIRST METHOD IS TO GIVE APPROPRIATE DEDUCTION IN THE PRICE OF PURE GOL D AND THEN MULTIPLY THE PRICE SO REDUCED TO THE QUANTITY OF GOLD. ANOTHER METHOD IS TO ARRIVE AT THE NET QUANTITY OF GOLD CONTAINED IN THE GOLD JEWELLER Y AND APPLY THE MARKET RATE OF PURE GOLD TO IT. IN THE INSTANT CASE THE S ECOND METHOD HAS BEEN FOLLOWED. TAKING INTO ACCOUNT THE ABOVE SAID METHO DS GENERALLY FOLLOWED WE PROCEED TO DISPOSE OF VARIOUS ISSUES. 7. THE FIRST ISSUE RELATES TO THE DETERMINATION OF NET QUANTITY OF GOLD IN RESPECT OF UNSEIZED GOLD JEWELLERY WEIGHING 2927GMS . THE ASSESSEE GOT THEM VALUED BY ANOTHER VALUER NAMED M/S KAMESWARI J EWELLERS WHO GAVE A REDUCTION OF 47% TOWARDS IMPURITIES AND STONES AN D THUS DETERMINED THE NET WEIGHT OF UN-SEIZED GOLD JEWELLERY AT 1552.038G MS. HOWEVER THE ASSESSING OFFICER RESTRICTED THE REDUCTION TO 32.75 % AS FOLLOWED IN THE CASE OF SEIZED JEWELLERY AND ACCORDINGLY ARRIVED AT THE NET WEIGHT OF GOLD JEWELLERY AT 1968.40GMS AS AGAINST 1552.038GMS ADMI TTED BY THE ASSESSEE. IT(SS)A NOS 10 AND 16OF 2006 SRI V KESHAVA RAO ICCHA PURAM PAGE 4 OF 16 7.1 THE ASSESSING OFFICER DID NOT ACCEPT THE VALUAT ION REPORT GIVEN BY M/S KAMESWARI JEWELLERS AS ACCORDING TO AO THE AS SESSEE DID NOT SUBSTANTIATE THAT THE SAID CONCERN IS AN APPROVED V ALUER. FURTHER ACCORDING TO AO THE UN-SEIZED GOLD JEWELLERY ALSO FORMS PART OF SAME POOL OF STOCK OF JEWELLERY FOUND DURING THE COURSE OF SE ARCH AND HENCE THERE IS NO NECESSITY TO APPLY DIFFERENT RATE FOR ARRIVING A T THE NET QUANTITY OF GOLD. HOWEVER THE LEARNED CIT (A) ALLOWED THE CLAIM OF T HE ASSESSEE WITH THE FOLLOWING OBSERVATIONS: 4.3 I HAVE CAREFULLY EXAMINED THE FACTS OF THE CASE . WHILE GOING THROUGH THE PANCHANAMA IT IS SEEN THAT INITI ALLY A CONSOLIDATED LIST OF GOLD AND GOLD JEWELLERY FOUND IN THE COURSE OF THE SEARCH WAS PREPARED. THEREAFTER A SEPARATE LIST OF GOLD AND GOLD JEWELLERY SEIZED WAS PREPARED VIDE VKR/A-5 . COMPARISON OF BOTH THE LISTS SHOWS THAT THE JEWELLE RIES WHICH WERE SEIZED CONTAINED MORE OF GOLD AND LESS OF STON ES ETC. THEREFORE THE JEWELLERIES WHICH WERE NOT SEIZED CO NTAINED STONES PEARLS BEEDS CORALS WAX ETC. UNDER THE CIRCUMSTANCES THE VALUATION OF SUCH UNSEIZED JEWEL LERY WILL RESULT IN LESSER NET WEIGHT OF GOLD AS COMPARED TO NET WEIGHT OF GOLD JEWELLERIES WHICH WERE SEIZED. THE CLAIM OF THE APPELLANT THAT M/S KAMESWARI JEWELLERS IS A REGISTE RED VALUER WAS REJECTED BY THE ASSESSING OFFICER WITHOUT MAKIN G ANY VERIFICATION IN THIS REGARD. IT IS TRUE THAT AS PE R THE EVIDENCE ACT WHO EVER AFFIRMS SHOULD PROVE HIS CONTENTION. IN THIS CONTEXT THE APPELLANT PRIMARILY DISCHARGED THE ONU S BY FURNISHING A VALUATION REPORT FROM A VALUER WHO CLA IMED TO BE A REGISTERED VALUER. IN ORDER TO REBUT SUCH A CLAIM THE ONUS SHIFTS TO THE ASSESSING OFFICER WHO HAS TO PROVE TH AT THE VALUER WAS NOT A REGISTERED VALUER AND HENCE NOT AN APPROV ED VALUER. THE ASSESSING OFFICER EXCEPT REJECTING THE CLAIM HAS BROUGHT NOTHING ON RECORD TO SHOW THAT THE SAID VAL UER WAS NOT A REGISTERED VALUER. AS AGAINST THIS THE VALUA TION REPORT SUBMITTED BY M/S KAMESWARI JEWELLERS CLEARLY MENTIO NS THE REGISTRATION NUMBER AS CAT/III/36/98-99 WHICH PRIMA-F ACIE SHOWS THAT THE FACT RELATING TO REGISTRATION AS A A PPROVED VALUER IN THE ABSENCE OF ANY OTHER MATERIAL ON RECO RD TO SHOW THAT HE HAS BEEN OTHERWISE DISQUALIFIED AS A VALUER . MOREOVER WHEN THE ASSESSING OFFICER ADOPTED AND ACCEPTED THE VALUATION REPORT OF AN APPROVED VALUER ENGAGED BY T HE DEPARTMENT TO VALUE THE SEIZED GOLD JEWELLERY THER E IS NO REASON AS TO WHY THE REPORT OF ANOTHER APPROVED VAL UER ENGAGED BY THE APPELLANT TO VALUE THE UNSEIZED GOLD JEWELLERY SHOULD NOT BE ACCEPTED. UNDER THE CIRCUMSTANCES TH E VALUATION REPORT HAS TO BE ACCEPTED AND ACCORDINGLY THE NET IT(SS)A NOS 10 AND 16OF 2006 SRI V KESHAVA RAO ICCHA PURAM PAGE 5 OF 16 WEIGHT OF SEIZED JEWELLERY HAS TO BE TAKEN AT 1552. 038 GMS INSTEAD OF 1968GMS ADOPTED BY THE ASSESSING OFFICER . THE APPELLANTS CONTENTION IN THIS REGARD IS ACCEPTED A ND THIS GROUND OF APPEAL IS ALLOWED . 7.2 THE REVENUE IS ASSAILING THE SAID DECISION OF L EARNED CIT (A). WE NOTICE THAT THE LEARNED CIT (A) HAS COMPARED THE NA TURE OF ITEMS INCLUDED IN THE LIST OF SEIZED AND UNSEIZED JEWELLERY AND NO TICED THAT THE UNSEIZED JEWELLERY WERE EMBEDDED WITH MORE AMOUNT OF STONES PEARLS BEEDS CORALS WAX ETC WHEN COMPARED WITH THE LIST OF SEI ZED JEWELLERY. PRECISELY FOR THIS REASON THE LEARNED CIT (A) HAS CONCLUDED THAT THE QUANTITY OF GOLD CONTAINED IN THE UNSEIZED JEWELLERY WILL BE LESS VI S--VIS SEIZED GOLD JEWELLERY. THE LEARNED CIT (A) ALSO NOTICED THAT M/ S KAMESWARI JEWELLERS WHO VALUED THE UNSEIZED JEWELLERY IS AN APPROVED VA LUER AND HENCE OBSERVED THAT THE ASSESSING OFFICER SHOULD HAVE ACC EPTED THE VALUATION REPORT GIVEN BY THE SAID VALUER. FROM THE FOREGOIN G DISCUSSIONS IT IS NOTICED THAT THE LD CIT(A) HAS EXAMINED THE VARIOUS OBJECTIONS OF THE AO WITH RELEVANT EVIDENCES AND ACCORDINGLY ARRIVED AT A DECISION WHICH IN OUR VIEW IS A REASONABLE ONE. HENCE IN VIEW OF THE SP ECIFIC FINDINGS OF THE LEARNED CIT (A) CITED ABOVE WE DO NOT FIND ANY REA SON TO INTERFERE WITH THE SAME AND ACCORDINGLY UPHOLD HIS DECISION ON THIS IS SUE. 8. THE NEXT ISSUE RELATES TO THE DETERMINATION OF N ET QUANTITY OF GOLD PERTAINING TO THE PROPRIETARY CONCERN OF THE ASSESS EE NAMED M/S KESAVA JEWELLERS. THE ASSESSING OFFICER HAS EXTRACTED THE LIST OF STOCK OF GOLD JEWELLERY FROM THE BOOKS OF M/S KESAVA JEWELLERS AS UNDER: A) PURE GOLD - 97.82 GMS B) OLD GOLD - 137.64 GMS C) GOLD ORNAMENTS - 33.395 GMS D) GOLD ORNAMENTS (B) - 38.24 GMS E) GOLD ORNAMENTS (S) - 30.75 GMS -------------- TOTAL = 337.845 GMS ======== THE ASSESSING OFFICER ALSO NOTICED THAT THERE WAS A DEFICIT STOCK OF MANUFACTURING GOLD JEWELLERY TO THE EXTENT OF 44.01 5 GMS. HE ALSO NOTICED IT(SS)A NOS 10 AND 16OF 2006 SRI V KESHAVA RAO ICCHA PURAM PAGE 6 OF 16 THAT THE WEIGHT OF GOLD ORNAMENTS RECEIVED FROM GOL DSMITH WAS MORE THAN THE WEIGHT OF PURE GOLD ISSUED TO THEM BY 51.250 GM S. THE ASSESSING OFFICER CONSIDERED THE SAME AS EXCESS INFLOW OF GOL D. HENCE THE ASSESSING OFFICER REDUCED THE DEFICIT STOCK OF 44.015GMS AND THE EXCESS INFLOW OF 51.250GMS FROM THE TOTAL OF 337.845GMS CITED ABOVE AND THUS ARRIVED AT THE BOOK STOCK AT 242.580GMS. THE ASSESSING OFFICER FURTHER GAVE REDUCTION OF 32.75% TOWARDS IMPURITIES STONES ETC. AS GIVEN BY THE APPROVED VALUER IN CASE OF SEIZED JEWELLERY AND THUS ARRIVED AT THE NET QUANTITY OF GOLD IN BOOK STOCK AT 163.135GMS. THE ASSESSING OFFICER THU S ALLOWED CREDIT TO THE EXTENT OF 163.135GMS ONLY TOWARDS BOOKS STOCK OF M/ S KESAVA JEWELLERS. 8.1 THE LEARNED CIT (A) NOTICED THAT M/S KESAVA JEW ELLERS IS MAINTAINING SEPARATE ACCOUNT FOR PURCHASE AND ISSUE OF COPPER. HE ALSO NOTICED THAT BOTH COPPER AND GOLD ARE ISSUED TO GOLD SMITHS AND THEY MANUFACTURE THE GOLD JEWELLERY BY MIXING BOTH THE METALS. THUS THE LD CIT(A) NOTICED THAT THE INCREASE IN THE WEIGHT OF THE MANUFACTURED GOLD JEWELLERY IS ONLY DUE TO MIXING OF COPPER AND HENCE THERE IS NO EXCESS INFLO W OF GOLD AS PRESUMED BY THE ASSESSING OFFICER. ACCORDINGLY THE LEARNED C IT (A) OBSERVED THAT THE WEIGHT OF BOOK STOCK OF GOLD JEWELLERY SHOULD BE TA KEN AT 337.845 GMS ONLY. HOWEVER THE LD CIT(A) APPLIED THE RATE OF RE DUCTION OF 32.75% TOWARDS IMPURITIES AND STONES AND ACCORDINGLY DETE RMINED THE NET WEIGHT OF BOOKS STOCK OF GOLD AT 227.20GMS. 8.2 BOTH THE PARTIES ARE CONTESTING THE DECISION OF LD CIT(A). ON APPRECIATING THE METHOD OF MANUFACTURE OF GOLD ORNA MENTS WE ARE OF THE VIEW THAT THE LD CIT(A) IS RIGHT IN HOLDING THAT TH ERE IS NO REQUIREMENT OF REDUCTION OF 51.250 GMS WHICH WAS PRESUMED BY THE A O AS EXCESS INFLOW OF GOLD AS THE EXCESS INFLOW HAS OCCURRED DUE TO MIXI NG OF COPPER WITH GOLD WHILE MANUFACTURING THE GOLD ORNAMENTS. HENCE WE D O NOT FIND MERIT IN THE GROUND OF THE REVENUE ON THIS POINT. IT(SS)A NOS 10 AND 16OF 2006 SRI V KESHAVA RAO ICCHA PURAM PAGE 7 OF 16 8.3 THOUGH THE ASSESSEE IS CONTESTING THE REDUC TION OF 32.75% APPLIED BY LEARNED CIT (A) ON THE BOOK STOCK YET AT THE TI ME OF HEARING THE LD A.R RESTRICTED HIS CONTENTIONS ONLY WITH RESPECT TO THE QUANTITY OF PURE GOLD INCLUDED IN THE BOOK STOCK OF M/S KESAVA JEWELLERS. ACCORDING TO LD A.R. THERE IS NO NECESSITY OF GIVING REDUCTION OF 32.75% IN RESPECT OF PURE GOLD AS THERE IS NO MIXING OF COPPER IN IT AND FURTHER I T DOES NOT CONTAIN STONES ETC. WE FIND MERIT IN THE SAID CONTENTION OF THE A SSESSEE. AS STATED EARLIER THE GOLD ORNAMENTS ARE MANUFACTURED BY MIXING COPPE R WITH GOLD AND DEPENDING UPON THE DESIGNS STONES OF VARIOUS TYPES ARE IMPLANTED IN THE GOLD JEWELLERY. THUS THE WEIGHT OF GOLD ORNAMENTS IS THE AGGREGATE TOTAL OF WEIGHTS OF GOLD COPPER AND OTHER STONES. HENCE TH ERE IS A NECESSITY TO ARRIVE AT THE NET WEIGHT OF GOLD CONTAINED IN THE G OLD JEWELLERY WHERE AS THERE IS NO SUCH KIND OF REQUIREMENT IN RESPECT OF PURE GOLD. AS STATED IN PRECEDING PARAGRAPH THE AO HAS FOLLOWED THE METHOD OF ARRIVING AT THE NET QUANTITY OF PURE GOLD TO DETERMINE THE VALUE OF GOL D JEWELLERY. HENCE ALL TYPES OF GOLD ORNAMENTS HAVE TO BE CONVERTED INTO PURE GOLD IN ORDER TO MAINTAIN THE CONSISTENCY FOR MAKING ADDITIONS AND R EDUCTIONS. SINCE THERE IS NO REQUIREMENT OF MAKING ANY ADJUSTMENT WITH REG ARD TO PURE GOLD THERE IS NO REQUIREMENT OF GIVING REDUCTION FOR PURE GOLD . IN THE BOOK STOCK OF M/S KESAVA JEWELLERS WE NOTICE THAT THERE IS STOCK OF PURE GOLD TO THE EXTENT OF 235.46GMS (PURE GOLD 97.82GMS AND OLD GOL D 137.64GMS) ON WHICH THERE IS NO NECESSITY OF REDUCTION OF 32.75%. AS IN THE CASE OF GOLD ORNAMENTS. ACCORDINGLY WE MODIFY THE ORDER OF THE LEARNED CIT (A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER NOT TO APPLY THE REDUCTION OF 32.75% IN RESPECT OF PURE GOLD CITED ABOVE. 9. THE NEXT ISSUE RELATES TO THE DETERMINATION OF NET QUANTITY OF GOLD PERTAINING TO THE STOCK OF M/S VECHA KAMESWARA RAO & SONS.(PARTNERSHIP CONCERN). THE ASSESSEE AND HIS FATHER WERE PARTNER S OF THE SAID FIRM WHICH WAS DISSOLVED AFTER THE DEATH OF ASSESSEES FATHER ON 16.4.2000. BEFORE THE AO THE ASSESSEE CLAIMED CREDIT OF 539.318 GMS OF G OLD AS RELATING TO THE BOOK STOCK OF THE SAID PARTNERSHIP FIRM. THE AO DID NOT ACCEPT THE SAID IT(SS)A NOS 10 AND 16OF 2006 SRI V KESHAVA RAO ICCHA PURAM PAGE 8 OF 16 CLAIM FOR WANT OF ANY EVIDENCE TO SHOW THAT THE SAI D GOLD STOCKS WERE LYING WITH HIM AFTER THE DEMISE OF HIS FATHER. THE LD CI T(A) NOTICED THAT THE SAID FIRM HAS FILED ITS RETURN OF INCOME FOR THE YEAR EN DING 31.3.2000 I.E. FOR THE ASSESSMENT YEAR 2000-01 PRIOR TO THE DATE OF SEARC H. LD CIT(A) ALSO NOTICED THAT THE RECORDS PERTAINING TO THE FIRM WER E ALSO SEIZED DURING THE COURSE OF SEARCH. ACCORDINGLY THE LD CIT(A) HELD T HAT THE NECESSARY CREDIT SHOULD BE GIVEN TOWARDS THE BOOK STOCK OF THE PARTN ERSHIP FIRM. HIS OBSERVATIONS ARE GIVEN BELOW: THEREFORE THE STOCK AS SHOWN ON 31.3.2000 HAS TO B E TAKEN AS THE CLOSING STOCK OF THE SAID CONCERN AS ON THE DATE OF SEARCH. MOREOVER THE LEDGER OF THE SAID FIRM WAS SEIZED FO R THE FINANCIAL YEAR 1999-2000 VIDE S.NO.33 OF VKR/A-1/1 TO 37. AT PAGE 55 OF THE SAID LEDGER THE ABOVE STOCK POSITION HAS BEEN INCORPORA TED. THE VERY FACT THAT NO OTHER BOOKS OF ACCOUNTS AFTER THE FINA NCIAL YEAR 1999- 2000 RELATING TO THE SAID FIRM WAS EITHER SEIZED OR FOUND IN COURSE OF THE SEARCH CONCLUSIVELY PROVES THAT THE BUSINESS O F THE SAID FIRM WAS DISCONTINUED. NO DOUBT THE SAID BUSINESS WAS BEIN G CARRIED OUT FROM A DIFFERENT PREMISE. BUT AFTER THE DEATH OF H IS FATHER THE APPELLANT BROUGHT THOSE STOCKS TO HIS PREMISES FOR SAFE CUSTODY. THEREFORE AS ON THE DATE OF SEARCH THE APPELLANT WAS FOUND IN POSSESSION OF SUCH GOLD JEWELLERY. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE PRESUMPTION RELATING TO SEC. 132(4A) IN THE CASE OF THE APPELLANT CANNOT BE INVOKED. TH EREFORE CREDIT FOR THE STOCK OF THE SAID FIRM HAS TO BE ALLOWED. HOWE VER FOLLOWING THE PROCEDURE OF TAKING THE NET WEIGHT OF GOLD JEWELLER Y THE STOCK OF GOLD AND GOLD JEWELLERY OF M/S V.KAMESWARA RAO & SO NS IS TAKEN AT 67.25% OF 186.565 GMS I.E. 125.465 GMS WHICH IS TO BE ALLOWED CREDIT TO COMPUTE THE QUANTUM OF UNEXPLAINED JEWELL ERY. HOWEVER THE LD CIT(A) HAS TAKEN THE QUANTITY OF BO OK STOCK AT 186.565 GMS WHERE AS IT WAS CLAIMED TO BE 539.318 GMS BEFO RE THE AO. 9.1 BOTH THE PARTIES ARE CONTESTING THE DECISI ON OF LD CIT(A) ON THIS ISSUE. ACCORDING TO THE REVENUE THE LD CIT(A) SHO ULD NOT HAVE GIVEN CREDIT TOWARDS THE STOCK OF PARTNERSHIP FIRM. HOWEVER WE NOTICE THAT THE SAID PARTNERSHIP FIRM HAS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2000-01 WHEREIN THE CLOSING STOCK OF GOLD ITEMS WA S DECLARED. THE LD CIT(A) HAS CATEGORICALLY OBSERVED THAT THE FIRM DID NOT CARRY ON ANY BUSINESS FOR THE PERIOD FROM 1.4.2000 TO 16.4.2000 I.E. FOR THE PERIOD SUBSEQUENT TO THE PERIOD OF THE RETURN OF INCOME CI TED ABOVE AND UPTO THE IT(SS)A NOS 10 AND 16OF 2006 SRI V KESHAVA RAO ICCHA PURAM PAGE 9 OF 16 DATE OF ITS DISSOLUTION MEANING THERE BY THE CLOSI NG STOCK THAT WERE SHOWN AS ON 31.3.2000 SHOULD BE AVAILABLE IN TACT WITH TH E ASSESSEE SINCE HE IS THE ONLY SURVIVING PARTNER. AS OBSERVED BY LD CIT( A) THE DEPARTMENT DID NOT FIND ANY MATERIAL TO SUGGEST THAT THE SAID STOC K HAD BEEN PARTED WITH IN ANY OTHER MANNER. IN VIEW OF THE ABOVE WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD CIT(A) IN GIVING CREDIT TOWARDS THE BOOK STOCK OF THE PARTNERSHIP FIRM. 9.2 ACCORDING TO THE ASSESSEE THE LD CIT(A) HA S TAKEN THE QUANTITY OF STOCK OF PARTNERSHIP FIRM AT A WRONG FIGURE. AS ST ATED EARLIER THE ASSESSEE CLAIMED 539.318 GMS AS THE STOCK OF THE PARTNERSHIP FIRM WHERE AS THE LD CIT(A) HAS TAKEN THE SAME TO BE 186.565 GMS. THE L D A.R ALSO SUBMITTED THAT THERE IS NO REQUIREMENT OF APPLYING THE RATE O F REDUCTION OF 32.75% ON THE PURE GOLD. 9.3 WE HAVE ALREADY HELD THAT THERE IS NO REQUI REMENT OF APPLYING THE RATE OF REDUCTION OF 32.75% IN RESPECT OF PURE GOLD AND ACCORDINGLY WE DIRECT THE AO NOT TO APPLY THE RATE OF REDUCTION ON THE PURE GOLD FOUND IN THE STOCK OF PARTNERSHIP FIRM. IN OUR VIEW THE DIS PUTE WITH REGARD TO THE ACTUAL QUANTITY OF BOOK STOCK OF THE PARTNERSHIP FI RM REQUIRES VERIFICATION WITH THE RELEVANT BOOKS OF ACCOUNT SEIZED BY THE DE PARTMENT. ACCORDINGLY WE SET ASIDE THE SAID ISSUE TO THE FILE OF THE AO W ITH A DIRECTION TO FIND OUT THE ACTUAL QUANTITY OF BOOK STOCK OF GOLD ITEMS FRO M THE BOOKS OF THE PARTNERSHIP FIRM THEN APPLY THE RATE OF REDUCTION OF 32.75% ON THE GOLD ORNAMENTS ONLY AND GIVE CREDIT FOR THE QUANTITY OF PURE GOLD AND THE NET QUANTITY OF GOLD ORNAMENTS. THE ORDER OF LD CIT(A) STANDS MODIFIED ACCORDINGLY. 10. THE NEXT ISSUE RELATES TO THE QUANTITY OF G OLD JEWELLERY BELONGING TO THE ASSESSEE AND HIS FAMILY MEMBERS. THE ASSESSEE CLAIMED CREDIT FOR FOLLOWING QUANTITY OF GOLD JEWELLERY:- A) GOLD JEWELLERY BELONGING TO SRI V.KAMESWARA IT(SS)A NOS 10 AND 16OF 2006 SRI V KESHAVA RAO ICCHA PURAM PAGE 10 OF 16 RAO (HUF); SMT. V.SITARATNAM; SRI V.KESAVARAO AND SMT. V.V.G.LAKSHMI 4763.70 GMS B) GOLD JEWELLERY ACQUIRED PRIOR TO BLOCK PERIOD 655.000 GMS ACCORDING TO THE ASSESSEE GOLD JEWELLERY WEIGHING 4763.700 GMS HAVE BEEN DISCLOSED IN THE WEALTH TAX RETURNS OF THE FAM ILY MEMBERS. IT WAS FURTHER CLAIMED THAT A QUANTITY OF 655 GMS WERE ACQ UIRED BY THE FAMILY MEMBERS OF THE ASSESSEE BETWEEN 01-4-1989 TO THE DA TE OF SEARCH. THE AO DID NOT ACCEPT THE SAID CLAIMS OF THE ASSESSEE F OR THE FOLLOWING REASONS:- A) THE ASSESSEE FAILED TO PRODUCE COPIES OF THE WEALTH TAX RETURNS. B) THE WILL OF LATE V.KAMESWARA RAO IS SILENT ABOUT TH E DISTRIBUTION OF JEWELLERY. C) THERE IS NO LIST OF JEWELLERY WHICH WAS BEQUEATHED TO THE ASSESSEE. D) THE ASSESSEE COULD NOT PRODUCE ANY MATERIAL EVIDENC ING PURCHASE OF JEWELLERY BETWEEN 1.4.1989 TO THE DATE OF SEARCH INCLUDING THE ENTRIES IN INCOME TAX RETURNS. HOWEVER THE AO ALLOWED A CREDIT OF ONLY 500 GMS TO WARDS JEWELLERY BELONGING TO THE FAMILY MEMBERS. HOWEVER THE LD CI T(A) NOTICED THAT THE FAMILY MEMBERS OF THE ASSESSEE HAVE DISCLOSED FOLLO WING QUANTITIES OF GOLD JEWELLERY IN THEIR RESPECTIVE WEALTH TAX RETURNS. . V.KAMESWAR RAO (HUF) 1500.000 GMS V.SITARATNAM 2214.000 GMS V.KESAVA RAO 116.640 GMS V.V.G.LAKSHMI 933.120 GMS. ------------------ 4763.760 GMS ======== BEFORE LD CIT(A) THE ASSESSEE FILED COPIES OF STAT EMENTS FILED ALONG WITH THE WEALTH TAX RETURNS. HENCE THE LD CIT(A) CALLED FOR A REMAND REPORT FROM THE AO IN RESPECT OF THE DOCUMENTS FILED BEFOR E HIM. HOWEVER IN THE REMAND REPORT THE AO REITERATED HIS OPINION EXPRES SED IN THE ASSESSMENT ORDER. THE LD CIT(A) NOTICED THAT THE ASSESSEE HAS BEEN CLAIMING ABOUT THE AVAILABILITY OF JEWELLERY WITH HIS FAMILY MEMBE RS FROM THE DATE OF SEARCH IT(SS)A NOS 10 AND 16OF 2006 SRI V KESHAVA RAO ICCHA PURAM PAGE 11 OF 16 ITSELF. AFTER CONSIDERING THE SUBMISSIONS OF THE A SSESSEE AND EVIDENCES FILED BEFORE HIM THE LD CIT(A) HELD THAT THE PROBABILITI ES SUGGEST THAT THE ASSESSEE AND HIS FAMILY MEMBERS HAVE DISCLOSED JEWE LLERY WEIGHING 4763.760 GMS PRIOR TO THE DATE OF SEARCH. REGARDIN G THE WILL EXECUTED BY LATE SRI KAMESWARA RAO THE LD CIT(A) NOTICED THAT THE SAID WILL SPEAKS ABOUT BEQUEATHING OF IMMOVABLE PROPERTIES ONLY. HE NCE THE LD CIT(A) HELD THAT THE ASSESSEE BEING THE ONLY SON OF LATE SRI V.KAMESWARA RAO COULD HAVE BEEN GIVEN ENTIRE GOLD JEWELLERY BY HIS FATHE R. HOWEVER THE LD CIT(A) DETERMINED THE NET QUANTITY OF GOLD BY APPLY ING THE RATE OF REDUCTION OF 32.75% ON 4763.760 GMS AND ACCORDINGLY DETERMINE D THE NET QUANTITY AT 3203.629 GMS. THE LD CIT(A) DID NOT ACCEPT THE CON TENTIONS OF THE ASSESSEE THAT THERE IS NO REQUIREMENT OF REDUCTION AS THE FAMILY MEMBERS HAD DISCLOSED ONLY THE NET QUANTITY IN THEIR RESPE CTIVE WEALTH TAX RETURNS. THE LD CIT(A) ALSO REJECTED THE CLAIM OF PURCHASE O F 655 GMS JEWELLERY BETWEEN 1.4.89 AND THE DATE OF SEARCH. 10.1 BOTH THE PARTIES ARE IN APPEAL BEFORE US O N THIS ISSUE. WE HAVE GONE THROUGH THE DOCUMENTS FILED BY THE ASSESSEE BE FORE THE LEARNED CIT(A) IN ORDER TO PROVE THE AVAILABILITY OF JEWELL ERY WITH THE FAMILY MEMBERS. ON VERIFICATION OF THE STATEMENTS FILED A LONG WITH THE WEALTH TAX RETURN DETAILS OF PAYMENT OF WEALTH TAX ETC. WE A RE OF THE VIEW THAT THE LEARNED CIT(A) IS REASONABLE IN ACCEPTING THE AVAIL ABILITY OF 4763.760 GMS OF GOLD JEWELLERY WITH THE FAMILY MEMBERS OF THE AS SESSEE. THE ASSESSEE AND HIS FAMILY MEMBERS HAD TO STOP FROM FILING RETU RN OF WEALTH DUE TO THE INCREASE IN THE WEALTH TAX EXEMPTION LIMIT. HENCE IN OUR VIEW THE SAID SCENARIO CANNOT BE USED AGAINST THEM. THE OPINION G IVEN BY THE ASSESSING OFFICER IN HIS REMAND REPORT IS NOT BASED UPON ANY MATERIAL. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE JEWELLERY TH AT WAS SHOWN IN THE WEALTH TAX RETURNS HAS BEEN SOLD AWAY. IT CANNOT BE DISPUTED THAT THE GOLD JEWELLERY FORMS PART OF OUR CULTURE. FURTHER THE A SSESSEE HIMSELF IS IN THE JEWELLERY BUSINESS AND HENCE WE DO NOT FIND ANY REA SON AS TO WHY CREDIT SHOULD NOT BE GIVEN FOR THE JEWELLERY THAT WAS ALRE ADY DISCLOSED TO THE IT(SS)A NOS 10 AND 16OF 2006 SRI V KESHAVA RAO ICCHA PURAM PAGE 12 OF 16 DEPARTMENT. ACCORDINGLY WE UPHOLD THE ORDER OF LEAR NED CIT(A) IN APPROVING THE AVAILABILITY OF 4763.700 GMS WITH THE FAMILY MEMBERS OF THE ASSESSEE. ACCORDINGLY THE GROUND OF THE REVENUE ON THIS ISSUE IS DISMISSED. 10.2 THE ASSESSEE IS AGGRIEVED WITH THE DECISIO N OF LEARNED CIT(A) IN GIVING REDUCTION OF 32.75% ON THE ABOVE SAID QUANTI TY AND ALSO IN NOT ACCEPTING THE PURCHASE OF JEWELLERY WEIGHING 655 GM S ACQUIRED BETWEEN 1.4.89 AND THE DATE OF SEARCH. ACCORDING TO THE AS SESSEE THE FAMILY MEMBERS HAVE DISCLOSED ONLY THE NET QUANTITY OF GOL D AND HENCE THE ENTIRE QUANTITY OF 4763.700 GMS SHOULD HAVE BEEN GIVEN CRE DIT. HOWEVER WE NOTICE FROM THE ORDER OF LEARNED CIT(A) THAT THE AS SESSEE HAS REDUCED 16% FROM THE PRICE OF PURE GOLD FOR THE PURPOSE OF VALU ING THE GOLD ORNAMENTS FOR WEALTH TAX PURPOSES. AS STATED IN PARA 6 (SUPR A) EITHER THE PRICE OF GOLD OR THE WEIGHT OF THE GOLD ORNAMENTS HAS TO BE REDUCED TO ARRIVE AT THE VALUE OF THE GOLD JEWELLERY. THE ASSESSEE FOR WEA LTH TAX PURPOSES HAS REDUCED GOLD PRICE AT 16% IN ORDER TO ARRIVE AT THE VALUE OF GOLD ORNAMENTS. HOWEVER IN THE INSTANT BLOCK ASSESSMENT THE TAX AU THORITIES HAVE ADOPTED REDUCTION OF 32.75% IN THE WEIGHT OF THE GOLD ORNAM ENTS. 10.3 NOW THE QUESTION THAT ARISES IS ABOUT THE PERCENTAGE OF REDUCTION THAT IS REQUIRED TO BE APPLIED FOR 4763.700 GMS OF JEWELLERY. IT IS NOT AVAILABLE ON RECORD WHETHER THE FAMILY MEMBERS OF T HE ASSESSEE HELD THE SAID JEWELLERY IN THE VERY SAME FORM THROUGH OUT TH E PERIOD. ON A PERUSAL OF WEALTH TAX RETURNS WE NOTICE THAT THE FAMILY ME MBERS HAVE DECLARED ONLY THE WEIGHT OF THE GOLD AND THE DETAILS OF ITEM S ARE NOT AVAILABLE. SINCE THE ASSESSEE IS IN JEWELLERY BUSINESS THE POSSIBIL ITY OF REMAKING OF JEWELLERY CANNOT BE RULED OUT. SINCE THE ASSESSEE HAS ALREAD Y DEDUCTED 16% FROM THE PRICE OF GOLD FOR WEALTH TAX PURPOSES IT WOULD MEET THE ENDS OF JUSTICE IF THE SAME OF RATE OF REDUCTION IS ALSO APPLIED IN ORDER TO ARRIVE AT THE NET QUANTITY OF GOLD IN RESPECT OF THE JEWELLERY BELONG ING TO THE FAMILY MEMBERS. ACCORDINGLY WE MODIFY THE ORDER OF LEARN ED CIT(A) AND DIRECT IT(SS)A NOS 10 AND 16OF 2006 SRI V KESHAVA RAO ICCHA PURAM PAGE 13 OF 16 THE ASSESSING OFFICER TO APPLY THE RATE OF REDUCTIO N AT 16% ON 4763.760 GMS OF JEWELLERY AND GIVE CREDIT FOR THE SAME. 10.4 THE ASSESSEE HAS ALSO CLAIMED CREDIT OF 65 5 GMS TOWARDS ACQUISITION OF JEWELLERY BETWEEN 1.4.89 AND THE DAT E OF SEARCH AND THE SAID CLAIM WAS REJECTED BY BOTH THE TAX AUTHORITIES. TH E MEMBER WISE DETAIL FOR THE SAID JEWELLERY IS GIVEN BELOW: SHRI V. KAMESWARA RAO (HUF) - 250GMS SMT. V. SITARATNAM - 115GMS SRI V KESAVA RAO - 115GMS SMT. V V G LAKSHMI - 50GMS CHILDREN OF THE APPELLANT - 125GMS TOTAL - 655GMS ===== THE ASSESSEE DID NOT FURNISH THE DATE OF AND SOURCE FOR ACQUISITION OF ABOVE SAID JEWELLERY AND HENCE THE SAID CLAIM WAS REJECTE D BY THE TAX AUTHORITIES. HOWEVER CONSIDERING THE CUSTOM PREVAILING IN THE P LACE WE DIRECT THE ASSESSING OFFICER TO ALLOW CREDIT OF 125 GMS TOWARD S JEWELLERY PERTAINING TO THE CHILDREN AND FURTHER 200 GMS FOR JEWELLERY OF O THER FOUR MEMBERS. THE ORDER OF LEARNED CIT(A) STANDS MODIFIED ACCORDINGLY . 11. THE NEXT ISSUE RELATES TO THE CREDIT OF 0.3 50 GMS CLAIMED BY THE ASSESSEE TOWARDS THE EXCESS GOLD JEWELLERY DETECTED BY THE S ALES TAX AUTHORITIES. THE ASSESSING OFFICER DID NOT ALLOW THE CREDIT BUT THE LEARNED CIT(A) ALLOWED THE CREDIT ON THE GROUND THAT THE DEPARTMENT DID NOT SE IZE ANY MATERIAL TO SHOW THAT THE SAME REPRESENTS UNDISCLOSED INCOME OF THE ASSES SEE. HOWEVER WE ARE UNABLE TO UNDERSTAND THE RATIONALE OF THE SAID DECI SION. DURING THE COURSE OF SEARCH THE DEPARTMENT HAS TAKEN NOTE OF ALL THE QU ANTITY OF GOLD JEWELLERY THAT WAS AVAILABLE WITH THE ASSESSEE WHICH SHOULD INCLU DE THE EXCESS JEWELLERY DETECTED BY THE SALES TAX AUTHORITIES. THE ASSESSEE IS REQUIRED TO EXPLAIN THE SOURCES FOR THE ENTIRE JEWELLERY. THE DEPARTMENT I S EXPECTED TO GIVE CREDIT FOR THE QUANTITIES THAT WERE ALREADY DISCLOSED TO IT AN D FOR QUANTITIES THAT WERE AVAILABLE AS PER THE BOOKS OF ACCOUNT. IN THE INS TANT CASE THE IMPUGNED SALES TAX INSPECTION HAS TAKEN PLACE ON 19.6.2001 AND 22. 10.2001 AND THEY HAVE IT(SS)A NOS 10 AND 16OF 2006 SRI V KESHAVA RAO ICCHA PURAM PAGE 14 OF 16 NOTICED EXCESS QUANTITY OF GOLD TO THE TUNE OF 0.35 0 GMS. HOWEVER IT IS NOT KNOWN WHETHER THE ASSESSEE HAD ACCOUNTED FOR THIS E XCESS IN HIS BOOKS OF ACCOUNT. IF THE ASSESSEE HAD ALREADY ENTERED THIS QU ANTITY IN HIS BOOKS PRIOR TO THE DATE OF SEARCH THERE IS NO REQUIREMENT OF SEPA RATELY ALLOWING CREDIT FOR THE SAME. IF THE SAID QUANTITY IS NOT ENTERED IN THE BO OKS THEN THE ASSESSEE IS ANY WAY LIABLE TO EXPLAIN THE SAME EVEN BEFORE THE INCO ME TAX AUTHORITIES. IN OUR VIEW THE SAID CLAIM OF THE ASSESSEE HAS TO BE DECI DED IN THE MANNER NARRATED ABOVE. HOWEVER THIS ISSUE REQUIRES EXAMINATION OF BOOKS OF ACCOUNT AND OTHER RECORD OF THE ASSESSEE. ACCORDINGLY WE REVERSE TH E ORDER OF LEARNED CIT(A) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF TH E ASSESSING OFFICER FOR FRESH EXAMINATION IN THE LIGHT OF PRINCIPLES STATED ABOVE AFTER AFFORDING NECESSARY OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 12. THE NEXT ISSUE RELATES TO THE DETERMINATION OF THE QUANTITY OF SILVERWARE. DURING THE COURSE OF SEARCH 247322GMS OF SILVER AN D SILVER ARTICLES WERE FOUND AND THEY WERE NOT SEIZED. BEFORE THE ASSESSING OFFI CER THE ASSESSEE FILED A VALUATION REPORT GIVEN BY A VALUER NAMED M/S KAMESW ARI JEWELLERS. ACCORDING TO THE SAID VALUATION REPORT A DEDUCTION OF 25% TOWAR DS IMPURITIES AND OTHER METALS IS REQUIRED TO BE GIVEN ON THE ABOVE CITED Q UANTITY OF SILVER. THE ASSESSING OFFICER DID NOT ACCEPT THE SAID VALUATION REPORT DOUBTING THE CREDENTIALS OF SAID VALUER. THE ASSESSEE ALSO CLAIM ED DEDUCTION TOWARDS STOCK OF SILVER (A) AS PER THE BOOKS OF M/S KESAVA JEWELLERS PROPRIETARY CONCERN OF THE ASSESSEE (B) STOCK OF M/S V KAMESWARA RAO & SONS THE PARTNERSHIP CONCERN (C) THE QUANTITY OF SILVERWARE BELONGING TO THE FAM ILY MEMBERS (D) SILVER ACQUIRED BETWEEN 1989 AND THE DATE OF SEARCH AND (E) EXCESS STOCK OF SILVER FOUND DURING THE COURSE OF SALES TAX INSPECTION. 12.1 IT MAY BE NOTICED THAT THE ABOVE SAID CLAI MS WERE IDENTICAL WITH THE CLAIMS MADE FOR GOLD JEWELLERY. HOWEVER THE ASSESS ING OFFICER GAVE CREDIT ONLY IN RESPECT OF SILVERWARE BELONGING TO M/S KESAVA JE WELLERS. IN THE APPEAL THE LEARNED CIT (A) ACCEPTED THE VALUATION REPORT OF M/ S KAMESWARI JEWELLERS. WITH REGARD TO THE OTHER CLAIMS THE LEARNED CIT (A) APP LIED THE PRINCIPLES FOLLOWED BY IT(SS)A NOS 10 AND 16OF 2006 SRI V KESHAVA RAO ICCHA PURAM PAGE 15 OF 16 HIM IN RESPECT OF GOLD JEWELLERY AND ACCORDINGLY CO MPUTED THE QUANTITY OF UNEXPLAINED SILVER AS UNDER: NET WEIGHT OF SILVER FOUND IN COURSE OF THE SEARCH 1 86 656.100 GMS LESS: I. CLOSING STOCK OF SILVER OF KESAVA JEWELLERS AS PER THE ASSESSMENT ORDER (75% OF 44356.558) 33267.418 II. CLOSING STOCK OF SILVER OF M/S V. KAMESWARA RAO & SONS (75% OF 3487.381) 2615.535 III.SILVER BELONGING TO THE FAMILY MEMBERS OF THE APPELLANT (75% OF 26502.00) 19876.500 IV. EXCESS STOCK OF SIVLER DETECTED BY SALES TAX AUTHORITIES (75% OF 4453.000) 3339.750 59 099.203 UNEXPLAINED SILVER 1 27 556.897 12.2 BOTH THE PARTIES ARE AGGRIEVED WITH THE DECISI ON OF THE LEARNED CIT (A). WE FIND THAT THE DECISION OF THE LEARNED CIT (A) IS IN ACCORDANCE WITH THE DECISION REACHED BY US IN RESPECT OF (A) CLOSING ST OCK OF SILVER OF KESAVA JEWELLERS AND (B) CLOSING STOCK OF SILVER OF M/S V.KAMESWARA RAO & SONS. ACCORDINGLY WE UPHOLD THE ORDER OF THE LEARNED CIT (A) IN RESPECT OF THE ABOVE SAID TWO ITEMS. IN RESPECT OF THE SILVER BELONGING TO THE FAMILY MEM BERS THERE IS NO REQUIREMENT OF APPLYING REDUCTION RATE OF 75% IF THE FAMILY ME MBERS OF THE ASSESSEES HAVE OFFERED THE SAME AT GROSS WEIGHT FOR WEALTH TAX PUR POSES. IF SOME DEDUCTION HAD BEEN MADE IN THE WEALTH TAX RETURNS THE SAME R ATE OF DEDUCTION HAS TO BE APPLIED IN THE INSTANT CASE ALSO. ACCORDINGLY WE DI RECT THE ASSESSING OFFICER TO VERIFY THE WEALTH TAX RETURNS AND GIVE CREDIT ACCOR DINGLY. WITH REGARD TO THE CREDIT OF EXCESS OF STOCK SILVER DETECTED BY THE SA LES TAX AUTHORITIES WE SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR THE REASONS STATED BY US WHILE DEALING WITH THE IDENTICAL ISSUE IN RESPECT OF GOLD JEWELLERY. 13. THE LAST ISSUE IN THE APPEAL OF THE ASSESSEE PE RTAINS TO THE CLAIM OF SOURCE FOR MAKING INVESTMENT OF FIXED DEPOSIT FOR RS.30 00 0/-. THOUGH THE ASSESSEE CLAIMED THE SOURCE TO BE THE REALIZATION OF INDIRA V IKAS PATRA THE SAID CLAIM WAS REJECTED BY THE TAX AUTHORITIES FOR WANT OF PROOF. BEFORE US THE ASSESSEE HAS IT(SS)A NOS 10 AND 16OF 2006 SRI V KESHAVA RAO ICCHA PURAM PAGE 16 OF 16 FILED A CERTIFICATE FROM POSTAL AUTHORITIES AND MOV ED A PETITION FOR ADMISSION OF THE SAME AS ADDITIONAL EVIDENCE. IT WAS SUBMITTED TH AT THE SAID CERTIFICATE COULD NOT BE OBTAINED FROM THE POSTAL AUTHORITIES AT THE TIME OF ASSESSMENT AND APPELLATE PROCEEDINGS AS THE POSTAL AUTHORITIES HAD TO GIVE THE CERTIFICATE ON THE BASIS OF OLD RECORD. IN VIEW OF THE ABOVE WE ADMIT THE ADDITIONAL EVIDENCE AND ACCORDINGLY RESTORE THE ISSUE TO THE FILE OF THE AS SESSING OFFICER WITH A DIRECTION TO MAKE NECESSARY VERIFICATION AND DECIDE THE ISSUE IN ACCORDANCE WITH THE LAW. 14. IN THE RESULT THE BOTH THE APPEAL OF THE ASSESSE E AND REVENUE ARE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 2 ND FEBRUARY 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE: 02-02-2011 COPY TO 1 SHRI VECHA KESAVA RAO PROP. KESAVA JEWELLERS 12 -10-22 CHINA- MEDARA STREET ICHAPURAM SRIKAKULAM 2 THE DY.COMMISSIONER OF INCOME TAX CENTRAL CIRCLE- 1 VISAKHAPATNAM 3 THE JCIT (OSD) CENTRAL CIRCLE-1 VISAKHAPATNAM 4 THE CIT (CENTRAL) HYDERABAD 5 THE CIT(A)-I VISAKHAPATNAM 6 THE DR ITAT VISAKHAPATNAM. 7 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM