IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH ‘C’, NEW DELHI

Before Sh. Amit Shukla, Judicial Member
Dr. B. R. R. Kumar, Accountant Member

(Through Video Conferencing)

ITA No. 3578/Del/2010 : Asstt. Year : 2007-08
&

SA No. 187/Del/2020 : Asstt. Year : 2007-08

M/s GTM Builders & Promoters Pvt. Vs ACIT,
Ltd., G-5, Pushkar Enclave, Outer Central Circle-12,
Ring Road, Pachim Vihar, New Delhi
New Delhi-110063
(APPELLANT) (RESPONDENT)
PAN No. AACCG2716R

ITA No. 3783/Del/2010 : Asstt. Year : 2007-08

ACIT, Vs M/s GTM Builders & Promoters Pvt.
Central Circle-12, Ltd., G-5, Pushkar Enclave, Outer
New Delhi Ring Road, Pachim Vihar,
New Delhi-110063
(APPELLANT) (RESPONDENT)
PAN No. AACCG2716R

Assessee by : Sh. K. Sampath, Adv.
Revenue by : Ms. Sunita Singh, CIT DR

Date of Hearing: 14.01.2021 Date of Pronouncement: 10.02.2021

ORDER

Per Dr. B. R. R. Kumar, Accountant Member:

The present appeals have been filed by the assessee and
the revenue against the order of ld. CIT(A)-I, New Delhi dated
28.05.2010.
2 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

2. In ITA No. 3578/Del/2010, following grounds have been

raised by the assessee:

“1. The Ld. Commissioner of Income Tax (Appeals)
has erred in law and facts in confirming the part
addition of Rs. 3,01,00,000/- out of the total
additions of Rs. 6,84,50,134/- made on account of
the undisclosed investment in land alleging that
there was a nothing in seized dairy (Annexure A 21
page 9) indicating the cash payment of Rs.
3,01,00,000/- made by the appellant ignoring the
submissions of the appellant. The action of the Ld.
Commissioner of Income Tax (Appeals) is arbitrary,
unjustified and against the provisions of law.

2. The Ld. Commissioner of Income Tax (Appeals)
has erred in law and facts in not appreciating the
facts that the appellant has not made the cash
payment of Rs. 3,01,00,000/- apart from the amount
mentioned in the registered purchase/sale deed for
the investment in the purchase of land. Further,
before the tax authority, the person who is alleged to
had received the cash payment had confirmed that
he had not received any amount over and above the
consideration stated in the sale deed. Therefore, the
Ld. Commissioner of Income Tax (Appeals) is not
justified in confirming the additions of Rs.
3,01,00,000/- in the hands of the appellant.

3. The Ld. Commissioner of Income Tax (Appeals)
has erred in law and facts in not appreciating the
judgments of the various High Court and the Apex
Court relied upon by the appellant which squarely
applies to the facts of the case while confirming the
additions of Rs. 3,01,00,000/- and therefore, the
action of the Ld. Commissioner of Income Tax
(Appeals) is arbitrary, unjustified and against the
provisions of law.

4. The Ld. Commissioner of Income Tax (Appeals)
has erred in law and facts in confirming the G.P.
Rate @7% applied for the calculation of value of
alleged excess stock of jewellery by the Assessing
3 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

Officer in making the additions of Rs.4,27,22,971/-
which is arbitrary, unjustified and against the
provisions of law.

5. The Ld. Commissioner of Income Tax (Appeals)
has erred in law and facts in confirming the action of
the Assessing Officer for disallowing the difference in
amount of Rs. 24,28,921/- for G.P. Rate on gold
jewellery of Rs. 3,46,98,876/- which is arbitrary,
unjustified and against the provisions of law.
6. The Ld. Commissioner of Income Tax (Appeals) in
law and facts in not accepting the submissions of the
appellant regarding mode of valuation of stock of
jewellery which is arbitrary unjustified and against
the provisions of law.

7. The Ld. Commissioner of Income Tax (Appeals)
has erred in law and facts in not entertaining the
additional evidence as per Rule 46 A of the Income
Tax Rates by ignoring the facts of the case which is
arbitrary, unjustified and against the provisions of
law.”

3. In ITA No. 3783/Del/2010, following grounds have been

raised by the revenue:

“1. The order of the Ld. CIT(Appeals) is not correct
in law and facts.

2. In the facts and circumstances of the case,
Learned CIT(A) has erred in law and on facts in
deleting the addition of Rs. 3,83,50,134/- out of
addition of Rs. 6,84,50,134/- towards unexplained
investment in properties in Dehraduri under section
69 of Income Tax Act 1961 on the basis of seized
documents.

3. In the facts and circumstances of the case,
Learned CIT(A) has erred in law and facts in deleting
the addition of Rs. 3,83,50,134/- towards
unexplained investment in properties in Dehradun on
the basis of seized documents while ignoring the
provisions of section 132(4A) and 292-C of Income
Tax Act 1961.
4 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

4. In the fact and circumstances of the case,
Learned CIT(A) has erred in law and on facts in
deleting the addition of Rs. 90,34,000/- towards
unexplained investment in GTM Kashipur - II in
Uttarakhand whereas such undisclosed investment is
found recorded in seized documents.

5. In the facts and circumstances of the case,
Learned CIT(A) has erred in law and on facts in
deleting the addition of Rs. 90,34,000/- towards
unexplained investment in land while admitting
additional evidence that the land in respect on noting
are made, has not been purchased and adjacent land
was purchased, was admitted in violation of Rule
46A(3) of Income Tax Rule 1962.

6. In the fact and circumstance of the case,
Learned CIT(A) has erred in law and on facts in
deleting the addition of Rs. 90,34,000/- towards
unexplained investment in GTM Kashipur - II on the
basis of seized documents while ignoring the
provisions of section 132(4A) and 292- C of Income
Tax Act.

7. In the facts and circumstances of the case,
Learned CIT(A) has erred in law and on facts in
deleting the addition of Rs. 1,25,00,000/- towards
undisclosed income on sale of flats as recorded in
documents seized during search in GTM Group and
impounded during survey under section 133A in M/s
Haryana Citizen Co-operative Housing Society while
ignoring the provisions of section 132(4A) and 292-C
of Income Tax Act, 1961.

8. In the facts and circumstances of the case,
Learned CIT(A) has erred in law on facts in deleting
the addition of Rs. 1,80,00,000/- towards
undisclosed expenditure for acquiring certain rights
in Wings CGHS Limited, Gurgaon while ignoring the
provisions of section 132(4A) and 292-C of Income
Tax Act, 1961.

9. In the fact and circumstances of the case,
Learned CIT(A) has erred m law and on facts in
5 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

deleting the addition of Rs. 34,78,000/- towards
undisclosed investment in M/s Sargam Estates Pvt.
Ltd. without appreciating facts on records.

10. In the facts and circumstances of the case,
Learned CIT(A) has erred in law and on facts in
deleting the addition of Rs. 34,65,559/- on account
of unexplained advertisement expenses without
giving opportunity to AO to examine the correct
claim recorded in books of accounts.”

ITA No. 3578/Del/2010 AY 2006-07 (Assessee)
ITA No. 3783/Del/2010 AY 2006-07 (Revenue)

Brief backdrop:

4. A search and seizure operation was carried out on the GTM
Group of companies which was controlled by Sh Gautam Kumar
and his son Sh Tushar Kumar. During the course of search and
seizure proceedings Sh Tushar Kumar surrendered an amount of
Rs.17 crores as undisclosed income while making statement u/s
132(4) in front of the search parties. The disclosure relates to
purchase of land at Dehradun, undisclosed investment in
jewellery, share capital, unsecured loans and advances for
different project etc. The statement was subsequently retracted
by the assessee as the disclosure was allegedly made under
pressure and no corresponding incriminating documents was
found during the course of search to substantiate the said
disclosure.
6 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

Undisclosed Investment in Land:

Ground No. 2 & 3 ITA No. 3783/Del/2010 A.Y. 2007-08

Ground Nos. 1, 2 & 3 ITA No. 3578/Del/2010 A.Y. 2007-08

5. The AO had made the addition on the basis of statement
made during the course of search and seizure proceedings and
also on the basis of analysis of the seized documents Annexure
A-21 page-9 a diary in the handwriting of Sh Tushar Kumar
which was found from the office premises of the company and
some other connected documents thereof.

6. The content of page 9 of Annexure A-21 is as under:

“Register Dehradun

Ch. No. Date Amount
8995000
263310 23.08.2006 15955000
20850000
263309 21.08.2006 32857000
78657000
263285 21.08.2006

262286 21.08.2006

Cheques given to Iqbal at the

time of Registry
7 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

Amount paid in cheque

300000

500000

1000000

8995000

4612000

5000000

4000000

1500000

3500000

1500000 Cheques to be paid of Rs.2,27,50,000/-

500000 Cash of Rs.2,53,98,497/-

1000000 1827124997

2000000

2500000

8500000

10500000 B.N.B.

55907000

The other side of the above page showed the following entries:

Total deal 271420134
Paid in cheque 174771637

Cash - 12100000
+ 7500000
+10500000
30100000

Balance 204871637
48148497
4000000
44148497
8 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

The AO had drawn the following conclusion on the above seized

documents.

“Rs.25,30,20,134/- represents the cost of the project without

registry. (Registry of the land was done at Rs.1,84,00,000/-).

The total cost of the project is rs.27,14,20,134/-. Amount paid

by cheque is Rs.17,47,71,637/-. Amount paid by cash is

Rs.3,01,00,000/-. Therefore total amount paid is

Rs.20,48,71,637/-. Balance amount payable is

Rs.25,30,20,134/- less Rs.20,48,71,637/- = Rs.4,81,48,497/-

From the above, it can be deduced that the balance amount
payable by cheque is Rs.18,45,70,000/- less Rs.17,47,71,637/-
= Rs.97,98,363/-.

Accordingly, the balance amount payable by cash should be
Rs.4,81,48,947/- less 97,98,363 = Rs.3,84,50,134/- and the
total 'amount payable in cash would be Rs. 6,85,50,134/-
(Rs.3,0100,000 + Rs.4,81,48,497),” (Rs.48148497/- should be
read as Rs.38350134/- as there is apparently typographical
mistake).

To summarize the land deal, as per the noting on the sheet, the
total cost of the project is Rs.27,14,20,134/- and the sale
consideration on the sale deed alongwith registry is
Rs.20,29,70,000/-. Accordingly, GTM has paid a total of
Rs.6,84,50,134/- in cash (Rs.27,14,20,134 - Rs.20,30,27,000/-)
for the 58 bighas of land at Dehradun.”

Thus, the AO has concluded on the basis of the above
calculation that a sum of Rs 68450134/- i.e. (30100000 +
9 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

38350134 = 68450134 ) has been paid in cash and treated the

same as undisclosed investment in land of the project.”

7. The deal was in a joint manner between GTM Builders and
Promoters and Sargam Estates Pvt. Ltd. and the payment was
made by GTM Builders and Promoter, substantive addition was
made in the hands of GTM Builders and Promoters and
protective addition was made in the hands of Sargam Estates
Pvt. Ltd.

8. The ld. CIT (A) confirmed the addition of Rs.3.01 Cr. said
to have been paid in cash by the assessee and deleted an
amount of Rs.3.83 Cr. as there was no corroborative evidence
to establish the said payment in cash.

9. The revenue came into appeal against the deletion of
Rs.3.83 Cr. whereas the assessee is in appeal against the
confirmation of Rs.3.01 Cr. Since, the matters are inter linked
arises out of the addition made by the AO of Rs.6.84 Cr. on
account of unexplained investment in properties in Dehradun
they are being dealt together.

10. Before us, the ld. AR argued that as per the four sale
deeds, M/s GTM Builders and Promoters Ltd. group company and
M/s Sargam Estate Pvt. Ltd. purchased 58 Bighas of land for a
total consideration of Rs. 20,30,27,000/- which included stamp
duty. The entire amount was paid by the assessee.

11. The ld. AR argued that the seized documents of Annexure
A-21, page 9 of the dairy front & back page and as per the
noting on the diary pages and also the loose slips seized vide
10 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

Annexure-21, Page-1, Annexure A- 16 page 28-29 & 7 are rough

calculations which have been made by calculating the amounts

required but it cannot be treated as amounts paid.

12. He argued that while the rough pages reflects total
payment of Rs.27,14,20,134/-, the actual payment made for the
said land was infact Rs.20,30,27,000/-. Hence, the conclusion
of the Assessing Officer that the undisclosed investments on the
land amounts to Rs.6,84,50,134/- was wrong on facts.

13. It was argued that the AO has wrongly made addition of
this amount of Rs.6,84,50,134/- substantially in the hands of
the assessee and protective assessment has been made in the
hands of M/s Sargam Estate Pvt. Ltd. on the premise that the
cheque payment has been made by the assessee and the cash
payment could have been made by the M/s Sargam Estate Pvt.
Ltd. and since both the amounts are generated by the assessee,
the same has been added substantially in the hands of the
assessee. It was argued that while the land of 58 Bighas was
purchased on 22.08.2006 for total consideration of
Rs.20,30,27,000/- including the stamp duty. The payment made
to Shri Iqbal Wasu of Rs.4,44,07,000/- was post purchase of
the land. It was argued that the sellers of the land have denied
that any cash received by them from the assessee as cost of
land. Without having any concrete evidence in support of the
fact that the assessee has paid excess amount than what has
been indicated in the deeds, the purchase price of the land by
the assessee is as per the value shown in the purchase deeds
which are accounted for in the books of account of the
assessee. Therefore, the conclusion arrived at by the Assessing
11 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

Officer that the assessee has paid cash in excess of purchase

price indicated in the deeds, which has come out of undisclosed

sources, is not justified. Thus, the AO was not correct in making

the addition of Rs. 6,84,50,134/- on this account in the hands

of the assessee and further making a protective addition of

same amount of Rs. 6,84,50,134/- in the hands of M/s Sargam

Estate Pvt. Ltd on the ground that the purchase of land was

done jointly by assessee and Sargam Estate Pvt. Ltd.

14. On the other hand, the ld. DR argued that the diaries
seized are in the handwriting of the Director of the company
and related to financial transactions for purchase of land in
Dehradun for GTM Forest and Hills Project and hence the figures
quoted giving the details of cheques as well as cash to the
sellers of the land cannot be disputed. The amount paid for 58
Bighas was Rs.18,45,70,000/- and Rs.1,84,54,000 towards the
stamp duty and the total amount paid was Rs.20,30,27,000 and
hence, the cash payment mentioned on the seized material
cannot be simply brush aside. The page no. 9 of Annexure 21
clearly shows that the transactions have taken place indeed. So
it cannot be accepted that the noting in the seized diaries are
rough noting.

15. The said noting go against the purchase of 58 Bighas of
land for Rs.20.30 Cr. Weighed this noting against the actual
purchase, the balance of Rs.6.8 Cr. has to be treated as
undisclosed income of the assessee.

16. Heard the arguments of both the parties and perused the
material available on record.
12 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

17. The point revolves around whether payment of Rs.6.85 Cr.

in cash has been made against the registered purchase value of

Rs.20.30 Cr. in view of the page no. 9 of Annexure A 21 seized

from the premises of the assessee.

18. We have gone through the page no. 9 of Annexure A 21,
page no. 28, 29 of Annexure A 16, page no. 7 of Annexure A 16.

19. Page no. 9 of Annexure A 21 is a diary relied upon by the
Assessing Officer to treat the summary of transactions and
payment of the land. Page no. 1 Annexure A 21 reflects
calculation of cost of land area, average rate, car parking etc.
Page no. 7 of Annexure A 16 gives the details of payment made
to the sellers. Page no. 28, 29 of Annexure A 16 are the details
of payments made to Iqbal.

20. Page no. 9 of Annexure A 21 reflects writing “cheques to

be paid” to Rs.2,27,50,000/- and “cash 2,53,98,497 below

that is a figure of 18,27,12,497. On the back side of page no. 9

(page 143 of paper book) mentions above cost per bigha @

Rs.43,62,416/- which amounts to Rs.27,14,20,137/- including

registration and other amounts. The page shows

Rs.3,01,00,000/- and a total of Rs.20,48,71,637/-. We also find

that the total consideration for purchase of land at Dehradun

was Rs.20,30,27,000/-. Hence, it cannot be said that the

amount of Rs.3.01 Cr. has been paid in cash. Had Rs.3.01 Cr.

been paid in cash, the total cost of purchase paid in cheque as

per the four sale deed should be Rs.17,47,71,637/- whereas in

reality the total amount of Rs.20,30,27,000/- has been paid in

cheque. Hence, there is no scope to treat the amount as paid in
13 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

cash to be brought under unexplained investment u/s 69.

Regarding the addition made by the AO of Rs.3,84,00,000/-, we

find no material to come to such a conclusion. The AO has

merely subtracted the amount of Rs.27,14,20,134/- mentioned

in the seized material which are the estimates of cost of lands

and cost of sale value area, average rate, car parking and mall

from Rs.20,30,27,000/- paid by the assessee in cheque to the

farmers for purchase of the land. There was no material to

corroborate such an addition, the Assessing Officer merely went

back the Annexure A 21 page no. 1 to make such addition.

Hence, the action of the Assessing Officer cannot be supported.

The appeal of the assessee on this ground is allowed and appeal

of the revenue is dismissed.

ITA No. 3783/Del/2010 AY 2007-08 Ground Nos. 4, 5 & 6
Unexplained Investment in Kashipur Land:

21. The Assessing Officer held that the assessee has purchased
land in Kashipur for the project designated as GTM Kashipur –II.
The said land has been purchased in the name of Sargam Estate
Pvt. Ltd. which is group company of the assessee in
Uttaranchal. During the search, copies of the registered sale
deeds were seized. As per the register deed, the land was
purchased from one Shri Virender Singh and Shri Parajeet Singh
and the amounts have been paid of Rs.1 Cr. and Rs. 2,65,700/-
respectively. The total area purchased as per the AO was 10.02
acres. Thus, the average rate, purchase of land as determined
by the Assessing Officer was Rs.10,24,000/-.
14 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

22. During the search, seized material marked as Annexure A

20 containing page nos. 19 & 20 were seized. The seized

material contain noting of Shri Tushar Kumar in his handwriting.

It mentions that – “Kashipur new land 9.81 acres –

Rs.1930000/-. On page no. 19 further shows Rs.77,20,000/- till

20.07.2006.

23. Based on the seized material, the Assessing Officer held
that the actual value of the land was Rs.19,30,000/- per acre
whereas the registration value was Rs.1,02,65,700/- and
calculated an amount of Rs.90,34,300/- and held that this
amount has been paid in cash out of the disclosed income of the
assessee group. The AO made protective assessment in the
hands of Sargam Estate Pvt. Ltd. and substantive assessment in
the case of the assessee.

24. The ld. CIT (A) deleted the addition on the grounds that
there has been no evidence on record by the AO to show that
Sargam Estate Pvt. Ltd. is a dummy company of the assessee.
The ld. CIT (A) held that the addition has been made on the
basis of statement recorded which cannot be given any
credence. The ld. CIT (A) held that the transactions with Shri
Virender Sing and Shri Paramjeet Singh could not be with the
notings/jottings on Annexure A-20 on page 19-20. If the AO had
doubt about the rate of land reflected in the notings and
purchase rate as disclosed in the records and deal he should
have made thorough inquiry from the sellers and investigation
about Mr. Shishir as to whether he was seller or broker etc.
before jumping to any conclusion. He also held that the
transaction of land had taken place with Mr. Virender Singh &
15 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

others and Mr. Parmjeet Singh whereas on the notings in

Annexure A-20 on page 19-20 is in the name of ‘Mr. Shishir’ and

land measurement is ‘9.81’ in place of 10 acre.

25. Before us, the ld. DR relied on the order of the Assessing
Officer while the ld. AR supported the order of the ld. CIT (A).

26. We have gone through the issue de novo and find that the
Assessing Officer has made addition based on the seized
material of Annexure A 20 page no. 19 wherein it was
mentioned that “Kashipur -10 acres @ Rs.19,30,000 per acre”.
On page no. 20, it was mentioned Kashipur new land Mr. Shishir
@ Rs.19,30,000/- land 9.81 acres. On page no. 19, it was also
mentioned,

“Net Rs. 1380 p.sft

Total flats 44 of 1650 sft

Refund 220 paid

160 profit

Total 380

Payment 60 to 90 days

Kahshipur 10 acres

Rs. 193000 p/acre

Payment 31/7/06

Rs 7720000”

27. On going through the entire factum and orders of
authorities below, we find that the addition has been made on a
presumptive basis. There was no evidence on record reflecting
any payment of cash. Further, while the land has been
16 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

purchased that Sargam Estate Pvt. Ltd. and reflected in the

balance sheet of Sargam Estate pvt. Ltd., no addition is called

for in the case of the assessee. It cannot be said that while the

cheque has been paid on behalf of Sargam Estate Pvt. Ltd. cash

has been paid by the assessee. The nature and contents of the

seized material do not reflect any unexplained investment in the

land purchased in Kashipur. Hence, we decline to interfere with

the order of the ld. CIT (A) on this issue. The appeal of the

revenue on this ground is dismissed.

ITA No. 3783/Del/2010 AY 2007-08 Ground Nos. 7 & 8
Amount received from Harayana Citizen CHS:

28. The relevant part of the Assessment Order dealing with
this issue is reproduced as under for ready reference:

“53. In the course of the search operation, various incriminating
documents were found and seized from the various premises
relating to cooperative societies in Gurgaon and Dwarka. These
included copies of application forms on the letterhead of the
society requesting for membership, correspondence between the
societies and the members regarding payment of installments,
copies of share certificate of members, correspondence by
members with the office bearers of the society, copies of
cheques paid by members to the society, - copies of letters
regarding disputes with the office bearers of the society! etc. In
particular these documents were found and i seized from the
residence of Shri Mohit Vohra who is an employee of GTM group
and recently has been made one of the directors of the flagship
company. In his statement recorded during the search as well
as during post search proceeding, Shri Mohit Vohra stated that
these papers were handed over to him by Mr. Tushar Kumar for
further handing over to same to one Mr. Kansal at Sector 56,
Gurgaon. He expressed his ignorance about the nature of these
papers and did not give any further explanation. In addition to
17 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

the above, some documents relating to cooperative societies
were also found from the residence of Shri Tushar Kumar.

During the course at the residence of Shri Mohit Vohra various
documents were found which were related with the Bhagwanti
cooperative group housing society.

61. Shri Mohit Vohra was asked about these papers during the
course of search at his residence. He was asked

Q.1 I am showing you annexure A 1 containing pages 1 to 10,
which is seized from your residence during the course of search.
Please go through each page of this annexure thoroughly and
carefully, please tell what they are about?

Ans. I have gone through each and every page of this annexure,
but I find myself unable to explain them and they are not
related to my duty, but I was asked to hand over these papers
to Mr. Kansal, who resides at sector 56, Gurgaon by Shri Tushar
Kumar Director at M/S GTM Builders and Promoters, G-5
Pushkar Enclave New Delhi 63.

Q.2 I am showing you annexure A 4 containing pages 1 to 101,
annexure A 5 containing pages 1 to 62, annexure A 6 containing
pages 1 to 95, annexure A 7 containing pages 1 to 109,
annexure A 8 containing pages 1 to 103 annexure A 9
containing pages 1 to 159, annexure A 10 containing pages 1 to
108 and annexure A 11 containing pages 1 to 170. Please go
through these annexures carefully thoroughly and state what
they are all about?

Ans. I have gone through annexures A 4 to A 11 thoroughly and
carefully and state that the pages contained in these annexures
were handed over me yesterday by Shri Tushar Kumar director
of M/S GTM builders and promoters private limited at G-5
Pushkar Enclave Outer Ring Road, Paschim Vihar New Deihi for
further handing over to one Shri Kansal at sector 56 Gurgaon.
18 ITA Nos.3578 & 3783 /Del/2010 &

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GTM Builders & Promoters Pvt. Ltd.

Therefore I am unable to throw light on papers of these
annexures.

Q.3. During the course of search various documents pertaining
to

1. M/S Haryana Citizens cooperative Group Housing Society Ltd
2. M/S Bhagwanti cooperative group housing society
3. Shri Ganesh cooperative group housing society
4. Sukhmany sahib realtors and builders & developers limited
were found. Please state how you and your concern employer
are related to them?

Ans. I do not know anything about these concerns and about
the owners of our employer M/S GTM Builders & Promoters Pvt.
Ltd. and Sargam Estate Private Limited only Directors of them
can tell.

In the questionnaire when Shri Mohit Vohra was asked about
them:

A-5/ pages 36 to 46 and page 62 these are handwritten loose
papers and relate to geysers and other electrical fixtures to be
fixed in flats of various projects. The names of the flat owners
and the flat numbers are given alongside. On the top of the
page (hi name of the society is given as “GTM Ananda,
Bhagwanti Society, Plot 83, Sector 50 Gurgaon” or “GTM
Garima, GH-1 HUDA Society, Sector 56, Gurgaon. Please explain
the same. Whether you have shown these transactions in your
books of accounts.

He replied
I earlier used to provide geysers, electrical fixtures and other
items in various societies/housing schemes on contract basis. I
also used to assist in getting loans as I was having experience
of arranging finance having worked with a finance company.
This is only prospective list of the names of the flat owners
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along with the flat nos. for contacts etc. There is no transaction
pertaining to me.

62. The reply provided is clearly an afterthought as there is a
clear contradiction in the reply provided by Shri Mohit Vohra.
Further when he was asked

A-3/1-48 Copies of letters relating to payment of installments
by members who have booked flats in Haryana CGHS Ltd.,
original receipts issued by Bhagwanti CGHS for payments made
by members. Please explain the same. Whether you have shown
these transactions in your books of accounts.

He replied

I was an authorized loan coordinator of Loan Pundit and
Trendsetters Finance Company vide their letter dated
10.01.2006 I was a mediator between the mentioned companies
and various clients for different housing projects. The clients in
various housing projects would approach me for arranging
financial assistance or I used to contact them so that I could
arrange housing loans for them and they could pay the
outstanding amount for their fiats. The papers of various
parties/members of housing societies etc. were lying with me
for this purpose or for arranging supplies as stated in Item 1
above. There is no transaction pertaining to me.

63. When the same question was put to M/S GTM Builders and
promoters ltd:

A-5/ pages 36 to 46 and page 62 these are handwritten loose
papers and relate to geysers and other electrical fixtures to be
fixed in flats of various projects. The names of the flat owners
and the flat numbers are given alongside. On the top of the
page the name of the society is given as “GTM Ananda,
Bhagwanti Society, Plot 83, Doctor 56 Gurgaon" or “GTM
Garima, GH-1 Huda Society, Sector 56, Gurgaon. Please explain
20 ITA Nos.3578 & 3783 /Del/2010 &

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the same. Whether you have shown these transactions in your
books of accounts.

They filed the reply saying that

The documents mentioned in this item and all subsequent items
have not been recovered from our premises but from the
premises of Shri Mohit Vohra and he is the proper person to
answer the queries. We may, however, state that Shri Mohit
Vohra is our employee and, besides working for us, he has been
doing separate and independent side business/moonlighting
with which we are not concerned. We are told by Shri Mohit
Vohra that some of queries in the questionnaire under reply
have already been replied by him in his case and we request
that the reply already given by him should meet your
requirement from us. We reiterate that we have nothing to do
with the societies mentioned in the query and no transaction
appears as such in out books of accounts. This reply may be
taken into consideration for subsequent replies pertaining to
Shri Mohit Vohra only for the sake of brevity.

78. Interestingly, a newspaper article had appeared in the
Indian Express on 11.08.2006 titled “How green is the valley”.
The article states that “For those who travel on the Gurgaon-
Faridabad road, Valley View Estate must be a familiar sight. The
project spread over 22 acres consists of 14 towers housing
separate societies One of the towers, GTM’s Tower 11, is being
promoted by Sri Balaji & Company which has an ISO 9001:2000
certification. They also have to their credit smaller projects in
Gurqaon Ananda and Garima of around 40-50 flats each.

79. When Shri Tushar Kumar was confronted with this article
during his statement on 13.03.2006 he was asked

Q.7 I am showing you a printout of a newspaper article of
Indian express dated 11.08.2006 which says that GTM projects
also include Ananda and Garima in Gurgaon. What do you have
to say?
21 ITA Nos.3578 & 3783 /Del/2010 &

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Ans. The facts are incorrect. GTM has nothing to do with the
projects.

As the matter of Bhagwanti Co-operative G/H Society pertains
to Asstt. Year 2006-07, further discussion regarding the same is
in Asstt. Order for Asstt. Year 2006-07.

The Haryana Cooperative Group Housing Society, GH No. 80, Sector
56, Gurgaon

87. A survey was conducted u/s 133A of the I T. act 1961 on
21.03.07 on Haryana Cooperative Group Housing Society. This
society was formed in 1998 but construction of the society is in
progress. The society has 43 flats. During the course of survey,
a diary was found in the possession of Shri Kishan Gopal
Rastogi who was the construction supervisor at the site which
was impounded as Annexure A-10. The diary has various notings
in the handwriting of Shri Kishan Gopal Rastogi of payments
made and received. On page 7 of the diary the following has
been written:

“Tushar credit 5000000/refundable.
5000000 1000000 by cheques
(15) 10.4.2006
(5) 23.4.2006
(10) 4.5.2006
(10) 11.5.2006
(50)

B/F (75) (5) 8.12.2006
(30) 26.5.2006
(15) 20.6.2006
(10) 26.6.2006
(4) 8.7.2006
(6) 29.7.2006
(5) 8.8.2006
(5) 10.10.2006
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88. The above details show that total payment of Rs 1.25
crores has been made to Tushar. The date wise break up of
these payments are also provided. Apart from the cheque
payment of Rs 10 lakhs, the other payments appear to be made
in cash. Shri Rastogi when questioned about the notings he
stated that it was his personal diary in which he writes various
estimates and that he had not given the amounts to anyone. He
stated that he did not know who Tushar was and it may be
someone who had asked for an estimate.

89. However, it does not seem that the notings in the diary are
only estimates. On page 3 of the same the account of Mama
Khan is given totaling Rs.3,10,24,048. Mama Khan is the nick
name of Shri Rastogi. The account gives the details of cheque
payments “CH" and cash payments ”C”. On verifying the cheque
payments with the hank ledger of HDFC Bank in the books of
Haryana CGHS it was seen that the Cheque payments are
clearly reflected therein thereby proving the authenticity of the
account statement as a record of transactions pertaining to
Haryana CGHS. By inference therefore, it may be said that the
notings on page 7 of the diary relating to I ushar are also
authentic details of payments made on behalf of the society and
not just estimates as claimed by Shri Rastogi.

90. However, inspite of these denials there is no denying that
there is a business connection between the two. There is no
plausible explanation for the presence of share certificates,
application forms, correspondence etc lying at the premises of
Shri Tushar Kumar and Shri Mohit Vohra. Some of the
documents as shown in the table earlier clearly mention the
name of GTM in correspondence with the society. Accordingly it
would be reasonable to infer from the above that the notings in
the diary of Shri Rastogi pertain to payments made to Tushar
Kumar/GTM.
91. When Haryana Cooperative Group Housing Society was
questioned about various papers were found and seized from
the residence of Shri Mohit Vohra, then filed the reply
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acknowledging that the paper related to their society but said
that individual members might have applied for loans and hence
the society cannot answer the question. When questioned about
the dairy found and seized from Shri Rastogi replied that,

This is a Rough and personal diary of Shri Kishan Gopal Rastogi.
He is neither a member nor office bearer of the society. We
have thoroughly scrutinized the accounts of the Society and
could not establish any correlation with the noting of this page.
As per the sources known, it is found that Shri Kishan Gopal
Rastogi used to work as supervisor for few contractors of this as
well as other societies. It is further mention that there is no
link even with Tushar. The Society cannot provide any proof of
what so ever in this regard, hence there is no question of even
thinking any income to the society. It has not issued or received
any cheque from or to Tushar. This can be verified from our
books of accounts which are produced before your good self
hence this page has no relation or link with society.

When further questioned about entries on other pages the
society replied that

Annexure A - 10 (Page 3)

We have made effort to reconcile and trace the details of
followings:-

(a) Cheque Dt. 30.11.06 of Rs.1,85,000/- As per our Bank
book following two cheque were issued drawn on HDFC Bank.

Cheque No. Date Amount Name of the party

403501 30.11.2006 100000.00 Devender Singh

403502 30.11.2006 85000.00 Jagmag Tyagi

Total 185000.00

(b) Cheque dt. 14.12.2006 of Rs.1,29,761/- As per our Bank
book following details can be linked:
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Cheque No Date Amount Name of the Bank
99509.00 party

403507 14.12 2005 Jyoti Shankar HDFC
Bank

403508 14.12.2006 12921.00 Jagmag Tyagi HDFC
327207 14.12.2006 Bank
6509.00 Devender Singh
Gurgaon
327208 14.12.2006 2921.00 Janki Prasad Central
Corporation
327209 14.12.2006 7921.00 Rajesh Kumar Bank
Pandey Gurgaon
Central
Corporation
Bank
Gurgaon
Central
Corporation
Bank

Total 129781.00

(c) Cheque Dt. 22.01.2008 of Rs.2,09,268/- As per our Bank
book following cheques drawn on HDFC Bank have been issued
to various parties as per details given below:

Cheque No Date Amount Name of the party

403522 22.01.2007 28166.00 Mohd. Ashraf
403523 Ajay Kumar Yadav
403524 22.01.2007 36166.00
403525 Mahesh Tiwari
403526 22.01.2007 31166.00 Ashish Dubey
403527 Rakesh Singh
403528 22.01.2007 33125.00 Mohd. Akram
Om Prakash
22.01.2007 29918.00

22.01.2007 35085.00

22.01.2007 15642.00

Total 209268.00

Thus, it is absolutely clear that the entries in the diary of Shri
Rastogi are not fictitious figures but represent real figures.
When M/s GTM Builders were questioned about the entries in
the diary of Shri Rastogi replied that we request for cross
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examination of Shri Kishan Kumar Rastogi whose statement Is
recorded at our back and for supply of copy of material being
relied. We deny the allegations and have received any such
amount as a least.

Inspite of giving a copy of diary of Shri Kishan Kumar Rastogi
no reply was received.

Discreet market enquiries reveal that Haryana Citizens
Cooperative Group Housing Society is also known as the Park
Royal. When the society was questioned about it, replied

It is also advised that ‘Park Royal’ is the name of the building of
the society considered by the member of the society.

During the course of search in the office of M/s GTM Builders, a
diary as found and seized annexurised as party A-3, annexure
19. On page 34 of this dairy following has been written in the
hand writing of Shri Tushar Kumar.

“Transfer charges P. Royal, Shri Sankalep Gautom, Shri Hari
Singh and Shri A. K. Mishra." When M/s GTM Builders were
questioned about them then he replied that these are only
rough notings. When Haryana Citizen Group Housing Society
then they replied that

Party A-3 “Annexure XIX" page 34 in connection with above we
can only say that Shri Sanklap Gautam, Hari Singh and A.K.
Mishra appears to be the member of the society.

Thus, it is absolutely clear that M/s GTM Builders were involved
in the working of Haryana Citizen Group Housing Society.

When the Haryana Citizen Group Housing Society were
questioned about why it should not be treated as a benami
concern of M/s GTM Builders the replied saying that
26 ITA Nos.3578 & 3783 /Del/2010 &

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That the society is a Artificial Judicial Person having separately
distinct from its members. The registrar of cooperative society
Chandigarh, Haryana closely monitors the account and activities
of the society and regarding various documents and papers
seized from Shri Mohit Vohra are not related with the society.

The reply of the society cannot be accepted as it has been
clearly established that society was having illegal links with M/s
GTM Builders. The diary seized from Shri Kishan Gopal Rastogi
shows very clearly that money was paid to Shri Tushar Kumar in
Cash. Thus, an addition of Rs.1.25 Crores is being made in the
hands of M/s GTM Builders on substantive basis and in the
hands of Shri Tushar Kumar and M/s Haryana Citizens
Cooperative Group Housing Society on the protective basis, on
the basis of diary seized from Shri Kishan Gopal Rastogi which
shows clearly that Cash payment was made to Shri Tushar
Kumar director of M/s GTM Builders.”

29. Before us, the ld. DR relied on the order of the Assessing

Officer while the ld. AR supported the order of the ld. CIT (A).

30. We have gone through the entire material on record and
the orders of the authorities below. We find that the Assessing
Officer has made addition by holding that the society has illegal
links with the assessee and the diary seized from Shri Kishan
Gopal Rastogi indicates that money was paid to Shri Tushar
Kumar in cash. The Assessing Officer made addition in the
hands of the M/s Haryana Citizens Cooperative group housing
society on a protective basis and in the hand of the assessee on
substantive basis. The Assessing Officer made addition in the
case of the assessee as the Director, Shri Tushar Kumar has
allegedly received the amounts.
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31. We have gone through the details of the survey conducted

by the revenue. Shri K.G. Rastogi was a construction supervisor

at the site. The AO held that from the diary of Shri K.G.

Rastogi, the order payments “appear to be made in cash”. There

was no evidence that cash has been paid to the assessee

company or to the Director of the assessee company. Even the

cheque entries were not proved to be encashed in the bank

account of the assessee or the Director. The presence of share

certificate, application forms and correspondence at the

premises of Shri Tushar Kumar and Shri Mohan Vohra swerved

the Assessing Officer to make the addition. The society clearly

submitted before the AO that he was neither a member nor

office bearer of the society. He was a work supervisor for few

contractors of HCCGHS and also to other societies. No link with

the society has been found as per the statement of the society.

The allegation of the revenue that the HCCGH society is a

benami of the assessee company cannot be held to be a valid

statement as the society is a separate distinct entity and

registered with Registrar of Cooperative Societies, Chandigarh.

There was no proof that the society has given money in cash to

the company or is Director. In the absence of any material

depicting or indicating payment of cash to the assessee, no

addition is called for. Hence, we decline to interfere with the

order of the ld. CIT (A) on this ground. The appeal of the

revenue on this ground is dismissed.
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ITA No. 3783/Del/2010 AY 2007-08 Ground No. 8

Undisclosed expenditure in Wings CGHS:

32. During the search, at the residence of Director a MoU was
seized as annexurised as Annexure A 4. This MoU is between
one Shri Ajay Jain and Shri Tushar Kumar for replacement 20
members in the WCGHS. The excerpts of MoU are as under:

• Ajay Jain is in possession of plot 1, sector 9, Gurgaon and
a society presently consists of 20 members which can be
increased to 30 members.

• Ajay Jain agrees to apply for increase in members from 20
to 27 and agrees to add members as and when
recommended by Shri Tushar Kumar.

• Tushar Kumar agrees to pay Rs.1.80 crores to Ajay Jain in
installments and on payment, the managing committee and
bank accounts would be handed over by Ajay Jain to
Tushar Kumar.

• The agreement was signed by Ajay Jain on 17.5.2005.
• The agreement was not signed by Tushar Kumar.

33. During the statement record on the date of search itself it
was answered that Shri Ajay Jain was misleading Shri Tushar
Kumar and Shri Tushar Kumar did not want to enter into any
agreement with Shri Ajay Jain.

34. The AO held that on page 35 of annexure A19, there are
details of receipt or payment made to various persons and it
specifically says 3 lacs paid to Wings on 13.04.06. Further there
is a hand written note in the handwriting of Shri Tushar Kumar
which was seized has been annexurised as A 16/31 which may
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be seen on the following page. This note is in the handwriting of

Shri Tushar Kumar and has been signed by two persons. One

signature is dated 21.1.2006. The other signature is the same

as the one which is on tint MOU seized from the residence of

Tushar Kumar which presumably is the signature of Shri Ajai

Jain. Thus it is certain that this paper is regarding the

introduction of members into Wings Society. Further, Tushar

Kumar has written on the paper that “new members shall be

enrolled” which obviously is a reference to the introduction of

new members into the society. There is further evidence to

correlate the paper with the MOU. Firstly, in the paper the total

deal is for “1.5” which can be taken to mean 1.5 crores. In the

MOU although the total deal is shown for Rs 1.8 crores, it

specifically says that Rs 30 lakhs has been already paid as

advance. This brings the balance to Rs 1.5 crores which is

mentioned on the paper. Secondly, the paper shows that Rs 40

lakhs has been received on 21.1.2006 by the signatory (Jhri

Ajai Jain). As already mentioned above, in the diary seized from

the office of Tushar Kumar, there is a noting relating to

payment of Rs.40 lacs to “Ajai Wings”. This undoubtedly proves

a crucial link between the MoU and the handwritten paper.

35. The AO held that from the seized material, it is absolutely
clear that Shri Tushar Kumar has paid an amount of Rs. 1.80
Crores for enrolling members and taking control of the society
and the amount was added u/s 69 of the Act.

36. The ld. CIT (A) deleted the addition on the grounds that
the agreement has not fructified prima facie.
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37. Before us, the ld. DR relied on the order of the Assessing

Officer while the ld. AR supported the order of the ld. CIT (A).

38. We have gone through the entire material on record and
the orders of the authorities below. We find that the Assessing
Officer has made addition by holding that the MoU mentions
about payment of amount by Shri Tushar Kumar to Shri Ajay
Jain whereas the facts speak otherwise. During the search
itself, it was conveyed that Shri Tushar Kumar did not want to
enter into an agreement with Shri Ajay Jain as per the MoU. The
said MoU was also not signed by Shri Tushar Kumar. The MoU
cannot be treated as executed. There was no evidence of
payment of cash. The seized material did not mention any
payment of cash. Hence, it cannot be held that the assessee has
paid an amount of Rs.1.80 Cr. for taking the control of the
WCGHS which is a Co-operative Society registered with
Registrar of Cooperatives. Hence, we decline to interfere with
the order of the ld. CIT (A). The appeal of the revenue on this
ground is dismissed.

ITA No. 3783/Del/2010 AY 2007-08 Ground No. 9
Undisclosed investment in M/s Sargam Estate Pvt. Ltd.:

39. During the year under consideration, it was alleged that
M/s GTM Builders & Promoters invested in M/s Sargam Estate
Pvt. Ltd. and acquired the company. The Balance sheet of M/s
Sargam Estate Pvt. Ltd. for the assessment year 2006-07 shows
that the assessee was having share holders fund of
Rs.33,18,000/- and loan fund of Rs.1,60,000/- whereas in the
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year 2007-08, the share application money of the company

increased to Rs.53,86,000/-.

40. Before the AO, the assessee vide its submission dated
17.12.2008 replied that during the assessment year 2007-08,
the company after receiving and payment/adjustments of share
application money stood at Rs.53,86,000/- as on 31.3.2007. But
no reply was given to the fact that how the share holders fund
of Rs.33,18,000/- and loan fund of Rs.1,60,000/- was adjusted.
Hence, the Assessing Officer concluded that adjustment of
Rs.34,78,000 was made through the unaccounted income and
hence an addition of Rs.34,78,000/- is being made in the
income of M/s GTM Builders and Promoters.

41. The ld. CIT (A) deleted the addition on the grounds that
the original share application money was returned by M/s
Sargam Estate Pvt. Ltd. in their bank account of Rs.32,18,100/-
and balance of Rs.1,00,000/- is the share capital of the
company. The loan fund of Rs.1,60,000/- was repaid by M/s
Sargam Estate Pvt. Ltd. from their own source.

42. We have gone through the facts on record and balance
sheet of M/s Sargam Estate Pvt. Ltd., the share capital of
Rs.1,00,000/- remained constant as at 31.03.2007 and as at
31.03.2006. The share application money as at 31.03.2006 was
Rs.32,18,000/- which was refunded to the assessee company
after receipt of fresh share application money of Rs.53,86,000/-
by M/s Sargam Estate Pvt. Ltd. Instead of enquiring, the source
of application money, the AO brought to tax the amount of
share application money refunded to the assessee by M/s
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Sargam Estate Pvt. Ltd. Hence, the addition made has been

rightly deleted by the ld. CIT (A).

ITA No. 3783/Del/2010 AY 2007-08 Ground No. 10
Unexplained advertisement expenses:

43. The AO held that the GTM group has tried exceedingly hard
to build a brand image through advertising on T.V., FM Radio
and the print media on a very large scale. They are one of the
highest advertisers in terms of spending on Red FM Channel and
advertisements of “GTM Jewellery Mart” and “Jewellery Tips by
Tushar Kumar” are a regular feature on the channel. It was held
that the revolving box of the GTM group can invariably be seen
on the Ticker on the Sahara Channels. In order to ascertain the
quantum of advertisement expenditure summons were issued by
the Investigation Wing to the following parties,

(i) Sahara TV network (ii) Radio City (FM) (iii) Red FM (iv)
Radio Mirchi

to ascertain the actual amount of advertising expenditure being
incurred by the group.
The results are presented as under

F.Y. Sahara TV Radio Radio Mirchi Red FM

City

GTM(J) GTM(B) GTM(J) GTM(B)

04-05 2109050 1625044 1479224

05-06 75873

06-07 5928229 5639178 2070286 3495904 14844666

JTM(J) is GTM Jewellery Mart Pvt. Ltd.
GTM(B) is GTM Builders and Promoters Pvt. Ltd.
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44. The assessee was asked to produce details of expenditure

incurred on advertising. Assessee filed ledger copy of the

advertisement expenses. The advertisement expenses of the

assessee started from 17.11.2004. In the A.Y. 2007-08

assessee had spent an amount of Rs.28,512,704/- as per the

details filed. Whereas as per the details collected the amount

spent was of Rs.31,978,263/-. Hence an addition of

Rs.34,65,559/- was made in the A.Y. 2007-08 for expenditure

from undisclosed sources.

45. The ld. CIT (A) deleted the addition on the grounds that all
the expenses on account of advertisement have been made by
account payee cheques and duly recorded in the books of
account maintained by the assessee. No cash payment has been
made on this account. Relevant copies of account in this regard
were produced. In the profit and loss account, the total debit of
Jewellery division is Rs.2,85,12,704/- besides in the builders
divisions there is a advertisement expenditure of
Rs.3,92,29,402/- as per schedule 19 under the head “Direct
Expenses” (Schedule 19) which has been ignored by the
Assessing Officer.

46. The ld. CIT (A) further held that the expenditure on
advertisement was debited in two division of jewellery and
building amounting to Rs.28512704/- and Rs.39229402/-
respectively as per the books of account of the assessee. During
the assessment proceedings the AO has not considered the
amount debited in the building division of the company. The
total details of expenditure collected by AO is of Rs
3,19,78,263/- whereas the total expenses debited by assessee
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is much more at Rs 6,77,42,106/- (2,85,12,704 + 3,92,29,402).

Therefore, on the facts of the case since no additions can be

made on this account, the AO was therefore directed to delete

the addition on this account.

47. Having heard the arguments of both the sides, we have
perused the facts on record available before us and find that
the ld. CIT (A) has rightly deleted the addition as the total
expenditure debited on account of advertisement was Rs.3.19
Cr. as against Rs.2.85 Cr. alleged by the Assessing Officer.
Hence, we decline to interfere with the order of ld. CIT (A) on
this ground.

ITA No. 3578/Del/2010 AY 2007-08 Ground No. 4 & 5
Unexplained investment in stock of jewellery:
Addition on account of GP:

48. The GTM group has diversified into certain other areas of
business activity, one of them being the sale of jewellery. A
separate company by the name of GTM Jewellery Mart Pvt. Ltd
has been formed for this purpose with effect from 26.7.2006. A
jewellery showroom has been opened at the main office
premises of the Group namely GTM House, G-5, Pushkar
Enclave, Paschim Vihar, New Delhi.

49. The excerpts from the order of the AO are as under:

“During the course of search the physical inventory of the
jewellery stock lying at the showroom was taken and valuation
was done by the Government registered valuers. As a result the
total stock of jewellery lying at the premises was found to worth
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Rs.7,19,07,124/-. However, as per the stock statement

appearing in the books of accounts, the total stock of jewellery

was shown at Rs.2,17,34,864/-. Accordingly, on the date of

search, there was found to be excess stock of Rs.5,01,72,260/-

lying at the premises of the company.

When asked to explain this discrepancy, the Director of the
company Shri Gautam Kumar stated that in the case of the
diamond jewellery the value had been taken at the “tag price”
or the sale price which was tagged by the company on each
item of jewellery. This he said, was higher than the purchase
price of the jewellery and therefore stated that the G.P rate
should be deducted to find out the cost of the jewellery.

Shri Gautam Kumar was specifically asked during the course of
search whether the stock of any other parties was lying at the
office premises and whether any purchase bills were to be
entered into the books. Shri Gautam Kumar in reply stated that
certain purchases of jewellery had not been entered in the
books of accounts and accordingly, the bill values of the same
should also be taken into account while determining the value of
jewellery shown in the books on the date of search. There were
two purchases specially mentioned by Shri Gautam Kumar. One
relating to purchase of Rs.22,19,063/- from Zaveri Jewellers,
Mumbai and the other relating to purchase of gold ornaments
from M/s KK Exports for Rs.26,25,649/-, Enquiries were carried
out during the search itself by officials of the department to
verify the genuineness of the same. Shri Gautam Kumar stated
that no goods of any other parties were lying at the showroom
36 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

and also that no stock of GTM Jewellery Mart Pvt. Ltd. was lying

anywhere outside the premises.

Accordingly, after given credit for the purchases not recorded in
the books, the total value of stock as per the books was
computed at Rs.2,65,79,576/-. Further, on account of the fact
that the value of diamond jewellery was taken at the tag price,
further correction was carried out by reducing the GP rate of 7
percent from the value. Shri Gautam Kumar in the course of his
statement during the course of search had specifically stated
that the rate of Gross Profits of the company is about 7% of the
total sales of gold and diamond jewellery in the current year.
Therefore after making all the above corrections, the final value
of the physical stock lying at the premises of GTM Jewellery
Mart was found to be Rs.6,68,73,626/- i.e. [7,19,07,124 less
2,65,79,576 (stock as per books) less 50,33,498(GP)]

Therefore the value of physical stock found at the premises on
the date of search was found to Rs.6,68,73,626/- while the
stock being shown in the books was only Rs.2,65,79,576/-. Thus
there was excess stock of jewellery to the extent of
Rs.4,02,94,050/- which had not been shown in the books of
accounts and thus clearly represented investment made by the
group out of its undisclosed income. When confronted with this
fact, Shri Gautam Kumar replied as under:-

"As my son Tushar Kumar has already declared Rs 17 crores
as undisclosed income and offered for taxation on account of
overall business activities of GTM Group i.e., M/s GTM
Jewellery Mart Pvt. Ltd, M/s GTM Builders and Promoters Pvt.
37 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

Ltd, M/s GTM Blanket Udyog Pvt. Ltd, including residence of

Tushar Kumar and myself. The bifurcation of this surrender

u/s 132(4) of the I. T Act will be submitted later”

As stated earlier, in his statement recorded during the search
Shri Tushar Kumar has specifically surrendered an amount of Rs
4.57 crores on account of the undisclosed investment in the
jewellery.

Revised value of excess stock of jewellery
The value of the excess stock was arrived at during the search
by reducing from the gross value of Rs.7,19,07,124/-, the stock
as per books Rs.2,65,79,576/- as well as the GP @ 7% which
worked out to 50,33,498. It may be noted that the GP of 7%
was calculated on the gross yalue of Rs.7,19,07,124/-.
However, only GP on the diamond jewellery which had been
valued on the basis of the tag price was required to be reduced
from the gross value of jewellery. The gold jewellery had not
been valued on the basis of the tag price but as per the
prevailing rate of gold on the date of search and thus the GP on
Gold Jewellery had erroneously been reduced from the Gross
Value. After correction of this discrepancy, the value of the
excess stock is arrived at Rs.4,27,22,971/- in the following
manner.

1) Gross Value of Jewellery as as Per Rs 7,19,07,124
valuation reports
2) Less: Stock as per books

Existing value: Rs2,17,34,864 corded

Add unrecorded purchases: Rs.48,44,712 (-) Rs 2,65,79,576
4,53,27,548
38 ITA Nos.3578 & 3783 /Del/2010 &
SA No.187/Del/2020
3) Less GP @ 7% Rs.50,33,498
GTM Builders & Promoters Pvt. Ltd.
on Rs 7,19,07,124
(-) 50,33,498

4,02,94,050

4) Add : Wrongly deducted

GP on Gold Jewellery

7% on Rs.3,4698,876 Rs.24,28,921 (+) 24,28,921

Value of Excess Stock Rs.4,27,22,971

As per the calculations, the value of undisclosed investment in
jewellery made by GTM Jewellery Mart Pvt. Ltd amounts to
Rs.4,27,22,971/-.

GTM Jewellery mart is a unit of GTM Builders and promoters.
During the assessment proceedings they were asked

Question: During the course of search the physical inventory of
the Jewellery stock lying at the showroom was taken and
valuation was done by the Government registered valuers. As a
result the total stock of Jewellery lying at the premises was
found to worth Rs.7,19,07,124/-. However, as per the stock
statement appearing in the books of accounts, the total stock of
Jewellery was shown at Rs.2,17,34,864/-. Accordingly, on the
date of search, there was found to be excess stock of
Rs.5,01,72,260/- lying at the premises of the company. Please
explain the above excess stock of Jewellery found at your
premises.

The assessee filed the reply saying that

That as stated in Para-1 that by giving the deduction of G.P.
rate the excess stock found as per statement is Rs.40,294,050.
39 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

Stock as per Books 2,17,34,864 As per physical 71,9,07,124
accounts of inventory held on 50,33,498
12/12/06
Add: Bills which were 48,44,712
accounted for in the Less: G.P.
books of accounts

2,65,79,576 6,68,73,626

Difference (6,68,73,626 - 2,65,79,576): 4,02,94,050

But in fact the stock has not been valued by applying the mode
of valuation adopted by the assessee since from their
incorporation. They have always valued the stock “at cost or
market price whichever is lower/average cost method. While in
the instant case the stock has been valued merely by taking the
tag value of each item. It will not be out of place to state here
that even the valuer has stated in his certificate that it has
been valued at tag value. The facts cannot be denied that in the
assessee’s line the tag value had never been its “cost/average
cost". Apart from it, the facts cannot be denied that there is
day to day’s fluctuation in the market in this line. One has to
follow the rate declared early in the morning on that day. That
without prejudice to such facts the stock is to be valued by
applying the mode of valuation which has been adopted by the
assessee. The assessee had prepared the list by taking its
valuation on the mode applied by them.

The assessee was further asked

The value of the excess stock was arrived at during the search
by reducing from the gross value of Rs.7,19,07,124/-, the stock
as per books Rs.2,65,79,576/- as well as the GP y the rate of
7% which worked out to 50,33,498. It may be noted that the GP
40 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

of 7 % was calculated on the gross value of Rs.7,19,07,124/-.

However, only GP on the diamond Jewellery which had been

valued on the basis of the tag price was required to be reduced

from the gross value of Jewellery, The gold Jewellery had not

been valued on the basis of the tag price but as per the

prevailing rate of gold on the date of search and thus the GP on

Gold Jewellery had erroneously been reduced from the Gross

Value. After correction of this discrepancy, the value of the

excess stock is arrived at Rs.4,27,22,971/- in the following

manner:-

1) Gross Value of Jewellery as as Per Rs 7,19,07,124
valuation reports

2) Less: Stock as per books

Existing value: Rs2,17,34,864 corded

Add unrecorded purchases: Rs.48,44,712 (-) Rs 2,65,79,576
4,53,27,548
3) Less GP @ 7% Rs.50,33,498
(-) 50,33,498
on Rs 7,19,07,124

4,02,94,050

4) Add : Wrongly deducted

GP on Gold Jewellery

7% on Rs.3,4698,876 Rs.24,28,921 (+) 24,28,921

Value of Excess Stock Rs.4,27,22,971

Please produce necessary books of accounts to show that that
the GP rate on diamond Jewellery (as against gold Jewellery),
varies from the average GP rate of 7% and why addition on the
above head should not be made in your total income.

The assessee replied saying that
41 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

“It relates to the reworking of value of excess stock found on

the day of an action u/s 132 of Income tax act. 1961. The

contention has been given that G. P. Rate is to be reduced only

on the valuation relating to diamond which were valued at tag

value while the reduction of G. P. is not required in golden

ornaments as its value were taken on the prevalent price on

that day.

In this connection it is submitted that even the reduction of

G.P. rate has been given by applying the G.P. rate on total sale

while in fact it is not an appropriate mode. When the physical

inventory was taken it deserves to be valued at cost or market

price whichever is lower/average cost method adopted by the

assessee since its incorporation. As stated in the earlier

paragraphs the assessee has prepared a list with supporting

documents for its purchase, thus, the value desen/es to be

considered accordingly.“

Further assessee filed a letter dated 17.12.2008 saying that

The assessee company had complied with your questionnaire
letter dated 3rd November. 2008 by filing the sought
information on 524 items of your questionnaire letter along with
relevant documents to the support of each and every item,
however, to avoid the lengthy process of its verification on each
and every item of the questionnaire letter which may take
considerable time as well as sufficient factors to arrive at that
all the loose papers have been considered precisely or not.
Further, in support of the statement recorded on the day of the
action u/s 132 of income tax act 1961 we may summarise the
facts that its (jewellery) valuation has been ascertained
42 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

amounting to Rs. 6,68,73,626/- while the books of accounts

were revealing to the tune of Rs. 26579576/-, the maximum

justification could have ended by assessing the assessee-

company on ascertained value as the entire seized

records/papers related to Jewellery unit are again ultimately to

be concentrate with "physical inventory". That nothing/no one

can supersede it, thus, the maximum adverse or to say the

maximum justification for the sake of revenue could have ended

by treating an addition of Rs. 4,0294050/- as the deficit found

by taking the “physical inventory” on the day of search

operation subject to the humble submission that it has been

valued at “tag" value while it deserves to be valued “cost or

market price whichever is lower/average cost method.”

In support of the above submission the list is enclosed where
there is no change in the quantitative figures, the change is
only confined to its value in view of the facts submitted above.
The valuation taken is supported with invoices which are also in
your possession and no doubt has also been accounted for in
the books of accounts accordingly.

It will be precise to state here that enclosed comparative
“annexure” to the Revenue Valuer's valuation apparently reveals
that there is no change in "Gold Jewellery”, the change pertains
only to “Diamond article”. It will not be out of place to state
here that it is supported with invoices which are in your
possession, the reference of such invoices have also been given
to make it convenient, thus, it leaves no scope of any doubt and
deserves to be accepted.
43 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

Apart from it, the other difference pertains to labour/making

charges related to 22 Kt which has been taken twice/double by

the Govt, valuer. We may make it clear that the value taken by

the Valuer for each item related to 22 kt. gold includes the

labour charges as it has been ascertained by taking its Gross

Weight” at the rate prevalent on that date. Further, it has been

added in computing its aggregate value, therefore, in an

enclosed annexure the labour added by the approved Valuer

amounting to Rs. 8,65,188/- and Rs. 3,60,000/- =

Rs.12,25,188/- is not recommended and is excluded in view of

the well settled principle.

Further, the difference also pertains to certain purchases which
were not accounted for in the books of accounts as generally it
is entered only on final approval, while it were taken in
“physical inventory” on the day of search operation. Moreover;
the concession of G.P. rate is given by applying 7% probably
keeping in view the G.P. rate shown in the prescribed Form 3CD
of Audit Report u/s 44AB of Income Tax Act, 1961 while in fact
the G.P. rate of Jewellery Unit is 19.47 % as an annexure is
enclosed. It is needless to state here that in the previous year
i.e. Asstt. Year 2006-07 when there was very nominal business
the G.P. rate was .48%. However, in the enclosed annexure the
value has been ascertained by applying the G.P. rate @
19.47%.

It is quite admittable that the Director Sh. Tushar Kumar in the
statement recorded on 13th December, 2006 in continuation to
the statement recorded on the date of search and seizure
operation dated 12th December, 2006 agreed to surrender an
44 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

amount of Rs. 4.57 Crores as undisclosed investment in the

stock of jewellery in a reciprocal manner on the terms and

conditions that no penal action u/s 271(1)(c) shall be taken in

this respect. The other Director Sh. Gautam Kumar also

confirmed the statement of Sh. Tushar Kumar in this respect. It

is humbly submitted that the quoted amount of Rs. 4.57 Crores

was surrendered in haste after continuous seizure operation of

36 hours while in fact the difference even as per statement

recorded is Rs. 4.02,94,050/-.

In the circumstances and the facts stated above and to maintain
the spirit of reciprocal agreement / statement and to have
peace of mind by avoiding the lengthy process for its
verification the assessee-company is prepared to surrender the
deficit given in the enclosed annexure with the condition that no
pencil action would be taken against them in respect of
Jewellery Unit.

The contention of the assessee cannot be accepted as at the
time of search assessee himself had accepted a G.P. of 7%. The
return filed by assessee for the year 2007-08 is dated
14.11.2008. It is the first year of business on a large scale by
the unit GTM Jewellery Mart. In the previous year, a sale of only
Rs.88,000/- was made by the unit on which a gross profit of
44% registered. In the present year, a sale of around Rs. 10
crores has been s sown on which the assessee is trying to claim
a gross profit of 19%. The, contention of the assessee that they
have a G.P. of 19% cannot be accepted and it looks like an
afterthought on the part of the assessee to decrease their
amount of surrender. Ld. Authorized Representative in his reply
45 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

dated 17.12.2008 which has been quoted above at full length

has nowhere accepted that there was any unaccounted stock.

Although he had accepted that value of gold jewellery cannot be

challenged as it is based on the weight of gold and the

prevailing price of gold which is taken by the valuer at the time

of valuation. Further the assessee has not produced any proof

whatsoever how he is claiming a G.P. of 19% and how he is

concluding about the making charges. There is no separate

profit and loss account and balance sheet that has been filed for

the jewellery unit and hence the contention of the assessee

cannot be accepted. Thus, reducing the gross profit from the

tag price of the diamond jewellery brings the undisclosed stock

at Rs.4,27,22,971/-. Thus, an addition of Rs.4,27,22,971/- is

being made to the total income of the assessee.”

50. The ld. CIT (A) concurred with the order of the Assessing
Officer on the grounds that the approval memos have not been
brought to notice of the department till two years from the date
of search. The relevant part of the ld. CIT (A) on this issue is as
under:

“9.1 The AO found that the Appellant has diversified into the
business of jewellery under the name of GTM Jewellery Mart
Pvt. Ltd. During the course of search physical inventory of the
jewellery stock lying in the show room was taken and the
valuation it was worth Rs. 7,19,07,124/-. However, as per stock
records; the same was shown at Rs.2,17,34,864/-. He,
therefore found excess stock of jewellery at Rs.5,01,72,260/-.
When asked to explain, the discrepancy, Sh. Gautham Kumar,
Director of the company stated that in the case of Diamond
46 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

Jewellery, the value had been taken at tag price of sale price.

Since this was higher than the purchase price of the jewellery,

he stated that the GP rate should be deducted to find out the

value jewellery. Considering this request, the AO valued the

cost at Rs. 6,68,73,626/- whereas the stock shown was

Rs.2,65,79,576/-. The difference of Rs.4,02,94,050/- was

treated as unexplained cost of jewellery. The assessee further

stated that the difference pertains to certain purchases which

were not accounted for in the book of accounts as it is generally

entered only on final approval. Further he also stated that the

GP rate of jewellery is about 19.47% as against 7% shown in

Form 3CD. The AO was not convinced with the reply of the

assessee. In the absence of any proof of GP of 19%, he made

an addition of Rs.4,27,22,971/-.

9.2 Sh. G S Kohli AR represented the case on the issue on
behalf of the appellant.

During the appellate proceedings only the appellant had made
request for admission of fresh evidences u/r 46A of the Income
Tax Rules, 1962.

The appellant has submitted in the appeal that Jewellery items
worth Rs. 26987283/- were received on approval and the same
were also part of physical stock taking during search operation.
These purchase bills of Rs. 26987283/- were accounted for in
the books of accounts on 31.03.2007 and 14.12.2007 as
claimed by the appellant co. in the appellate proceedings. This
fact was never brought to the knowledge of search party. The
appellant had never given list of ‘Goods on Approval’ to the
47 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

search party during/after search operation. During the

assessment proceedings also these bills or list of so called

‘Goods on Approval’ were never produced/claimed before the AO

even after almost 2 years of the search operation. In the

appellate proceedings this claim has been made first time on

26.02.2010 i.e. after more than 3 years of search operation.

In this regard the appellant has made a submission before me
which as under:-

‘lt is admitted fact that “Goods received on Approval” could
not be filed during the course of Asstt. Proceedings as it were
initiated in the month of Nov-Dee.2008, it deserves to
entertained in the course of appellate hearing Under Rule 46
of Income Tax Rules, 1962.’

This fact is totally new one as there is nothing mentioned in the
assessment order. Moreover, no evidence was produced before
the AO despite that the AO had afforded sufficient opportunity
for detailed discussion and submissions. As per the submission
of the appellant these facts were recorded in the books of
accounts on 31/03/2007 and 14.12.2007 but evidences as
claimed and details in this regard were not at all produced
before the AO during the assessment proceedings even
within/after 2 years of search operation/accounted for in the
books of accounts, as claimed by the appellant, for the reason
best known to the appellant co. In the appellate proceedings
the appellant has requested for admission of the same u/r .46
of the Income Tax Rules, 1962 without assigning any reason for
admission in the appellate proceedings. While going through the
48 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

said rule it is noted that rule 46 is not applicable in the case of

the appellant as there is no mentioning in the said rule for

admission of fresh evidences in the appellate proceedings.

However, it was treated as typing mistake in referring the rule

46 in place of rule 46A.

In its submission before me the appellant has pleaded that the
search party as well as the AO has allowed two unrecorded
purchase bills of Rs. 4844712/- to arrive at correct stock as per
books of accounts, similarly bills for ‘Goods on Approval’ should
be admitted u/r 46A which were accounted for on 31.03.2007
and 14.12.2007.

In this regard it is worth noting and question arises as to why
the list of so called ‘Goods on Approval’ was not produced
before the search party like two unrecorded purchase bills of
Rs. 4844710/- and even after search operation. A further
question arises as to why these bills for so called ‘Goods on
Approval’ which are claimed to have been entered into books of
accounts on 31.03.2007 and on 14.12.2007 were not produced
before the AO during the assessment proceedings. The appellant
has not given any reason for not producing the same before the
search party or the AO. From the facts it appears that it is after
thought, fabricated and not genuine.

Before admitting/non-admitting the additional evidences
produced by the appellant it is better to go through the rule
46A(1) of the Income Tax Rules, 1962 which are reproduced as
under:-
49 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

(1) “The appellant shall not be entitled to produce before the

[Deputy Commissioner (Appeals)] [or, as the case may be, the

Commissioner (Appeals)], any evidence, whether oral or

documentary, other than the evidence produced by him during

the course of proceedings before the [Assessing Officer] except

in the following circumstances, namely:-

(a) where the [Assessing Officer] has refused to admit
evidence which ought to have been admitted; or
(b) where the appellant was prevented by sufficient cause
from producing the evidence which he was called upon to
produce by the [Assessing Officer]; or
(c) where the appellant was prevented by sufficient cause
from producing before the [Assessing Officer] any evidence
which is relevant to any ground of appeal; or
(d) where the [Assessing Officer] has made the order appealed
against without giving sufficient opportunity to the appellant to
adduce evidence relevant any ground of appeal."

From the plain reading of above rule prescribing the
circumstances for admission of additional evidence it is crystal
clear that the matter of the appellant is not covered by any
circumstance where additional evidence could be admitted. The
appellant has also not given reason as to why such evidences
may be admitted u/r 46A of the Income Tax Rules, 1962.
Moreover, no separate application u/r 46A of the Income Tax
Rules, 1962 has been made before me. The appellant co. has
also not assigned any reason as to why these facts and
evidences could not be produced before the AO during the
assessment proceedings even after so called recording in the
50 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

books of accounts. From these facts it appears to be after

thought, fabricated and manipulated. Hence, the authenticity

and reliability of such evidences are doubtful.

Rule 46A of the Income Tax Rules, 1962 prescribes four
conditions for admission of fresh evidences as mentioned above.
In the present case:

1) The AO has not refused to admit the evidences as the
same were never produced before him. or
2) The appellant was not prevented by any cause, or
3) The appellant was not prevented by any cause from
producing the evidences before the AO which is relevant to this
ground of appeal, or
4) The AO has afforded sufficient opportunity before passing
the assessment order. Since this issue was never raised before
the AO as it is admitted fact.

Therefore, in view of above I do not find any circumstance or
situation to admit the additional evidence u/r 46A of the Income
Tax Rules, 1962. Hence, no fresh evidence is admitted u/r 46A
of the Income Tax Rules, 1962.

The AO found that the Appellant has diversified into the
business of jewellery under the name of GTM Jewellery Mart.
During the course of search physical inventory of jewellery
stock lying in the show-room was taken and the same was
valued at Rs. 71907124/- by the Govt. registered valuer.
However, in the books of accounts it was shown at Rs.
21734864/-, He, therefore found excess stock of jewellery at
Rs. 50172260/-. When asked to explain the discrepancy, Sh.
51 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

Gautam Kumar, Director of the appellant co. stated that in the

case of Diamond jewellery, the value had been taken at tag

price of sale. Since this was higher than the purchase price of

the jewellery, he stated that GP rate should be deducted to find

out the value of jewellery. Considering this request, the AO

valued the cost at Rs. 66873626/- after allowing the GP rate @

7% on all value of physical stock whereas stock as per books

was taken at Rs. 26579576/- after allowing unrecorded two

purchase bills. The difference of Rs. 40294050/- was treated as

unexplained investment in jewellery.

In the statement recorded during the course of search it was
stated that valuation of diamond jewellery had been made on
'tag price’ which includes GP. The GP rate was taken at 7% from
the Form 3CD annexed to Tax Audit Report u/s 44AB of the
Income Tax Act, 1961 of the appellant co. for the reason that
there was no separate/exclusive books of accounts were
available for jewellery unit. After considering these facts the
search party allowed credit for GP @ 7% on total physical stock
of Rs. 71907124/- i.e. Rs. 5033498/- In this way the physical
stock was ascertained at Rs. 66873626/- (71907124-5033498 ).

However, during the assessment proceedings the assessee has
pleaded before the AO that GP rate on diamond jewellery should
be taken at 19.47% in place of 7%. The assessee submitted
evidences but the AO did not accept them as they were not
credible evidence and no separate profit & loss account and
balance sheet etc. were produced by the assessee in support of
its contention. The assessee also did not produce separate set
of books for jewellery unit or other credible evidence which
52 ITA Nos.3578 & 3783 /Del/2010 &

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GTM Builders & Promoters Pvt. Ltd.

could support the contention of the assessee in respect of

higher GP rate. The AO has also mentioned in the order that it

is all fabricated and after thought story so that surrendered

amount on account of undisclosed investment in jewellery might

be reduced.

The AO has rejected the contention of the assessee on the
ground that in the statement recorded during search the
assessee has stated that GP rate was 7%. The contention of GP
rate at 19.47% was taken by the assessee during assessment
proceedings only on the basis of return of income for the
assessment year 2007-08 filed on 14.11.2008 i.e. the assessee
has manipulated the facts for the purpose of reducing the
surrendered amount. The AO has further mentioned that the AR
has nowhere mentioned the matter of surrender during the
assessment proceedings. The AO has also mentioned in the
assessment order that the assessee has not produced any proof
whatsoever how it has arrived at GP rate of 19.47%. He has
further mentioned that there is no separate profit and loss
account and balance sheet that has been filed for the jewellery
unit. It is also observed by the AO that the concession of GP @
7% from the valuation of physical stock is given probably with a
view of GP rate shown in the prescribed Form 3CD of Audit
Report u/s 44AB of the Income Tax Act, 1961.

In the assessment order the AO has mentioned that in the
statement recorded during the search Sh. Tushar Kumar has
specifically surrendered to the extent of Rs. 4.57 crores on
account of the undisclosed investment in the jewellery. Later on
father of Sh. Tushar Kumar was confronted on this issue, he
53 ITA Nos.3578 & 3783 /Del/2010 &
SA No.187/Del/2020
also admitted that total surrender
undisclosed investment in jewellery. GTM Builders & Promoters Pvt. Ltd.

includes surrender of

As mentioned above the AO found that two unrecorded purchase
bills of jewellery worth Rs. 4844712/- had not been accounted
for in the books of accounts for jewellery physically taken by
the search party. The AO allowed the credits for bills of Rs.
4844712/- and consequently stock of jewellery was taken at Rs.
26579576/- (21734864+4844712) as per books of accounts.

Therefore, the value of physical stock found by the search party
was Rs. 66873626/- whereas the stock was taken as per books
at Rs. 26579576/-.

The assessee was asked to explain the difference of Rs.
40294050/- i.e. 66873626-26579576=40294050. In reply the
assessee co. could not explain the difference and made
surrender for the said difference as undisclosed investment.

During assessment proceedings the AO found that cost of gold
jewellery of Rs. 34698876/- was valued at prevailing rate and
the same is also included in the total physical jewellery of Rs.
71907124/-. During assessment proceedings the AO found that
GP rate was applied erroneously on overall value of physical
stock on the date of search which includes the gold jewellery
valued not on tag price but at cost price i.e. prevalent price of
gold on that day whereon no deduction of GP was required.
Since tag value was taken only for diamond jewellery. To
correct this mistake the AO has ,disallowed the deduction for GP
on gold jewellery of Rs. 34698876/- amounting to Rs.
2428921/- while making the assessment. In this way the AO
54 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

arrived at undisclosed investment of the appellant at Rs

42722971/- ( 40294050 + 2428921 ) in place of 40294050/-.

9.3 The appellant in the appeal has submitted as under:-

In respect of valuation of gold jewellery
“The contention of the A.O. is unlawful. It is quite admittable
that the gold jewellery was on the prevalent price on the day of
search and seizure operation. But the mode of valuation
adopted by the appellant-company in regular return of income
cannot be overruled. The audited balance sheet along with
Auditor’s report placed on the record apparently reveals its
mode of valuation as 'average cost method for jewellery
division’.

In the assessment proceedings the appellant has stated that it
has been following the method of valuation of stock as cost or
market price whichever is lower / average cost method for
jewellery stock. Now in the appellant proceedings it is stating
that it is following average cost method for valuation of stock.

I have considered the findings of the AO in the assessment
order and facts & submission made before me by the appellant
co. regarding GP rate. The AO has mentioned in the assessment
order that the assessee co. has not maintained any separate
books of accounts/profit & loss account and balance sheet of
jewellery unit. Under such circumstances he took the GP rate as
reflected in the profit & loss account, balance sheet and tax
audit report of the appellant co.
55 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

In support of its contention the appellant has mentioned that it

has filed all purchase and sales records/ relevant vouchers

before the AO. Further, it has stated that by taking out the

figures relating to jewellery unit from its balance sheet it has

deduced the GP rate of 19.47%. In the appellate proceedings

the appellant has filed the copy of purchase bills and a working

sheet drawing the GP rate of 19.47%. But in support of such

working no separate books or any other

proper/reliable/authenticate evidence whatever has been

produced wherefrom the reliability and authenticity could be

established. It has not given details of opening stock and

closing stock such as method of valuation and how they have

been arrived at and on what basis. Further it is also observed

that nothing concluding is there to know the correctness and

genuineness of the figures of purchases and sales. Moreover, no

expenses in the so called Trading account has been claimed to

arrive at GP rate of 19.47%. In all the appellant co. could not

establish the reliability and authenticity of such working.

Moreover, the appellant has stated that it has taken out figures

relating to jewellery unit from its balance sheet etc., it also

implies that no separate books of accounts for jewellery unit

have been maintained. Under such circumstances reliability and

authenticity of the GP rate of 19.47% are not established.

Hence, in the absence of such separate records GP rate of

19.47% as deduced / contended by the appellant is not possible

to be relied upon. Under such circumstances the department is

left with no option but to adopt the rate as shown in the audited

balance sheet of the appellant co. and as reported by the

auditor of the appellant co. in Form 3CD for tax audit u/s 44AB
56 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

of the Income Tax Act, 1961. Further, it is also worth to note

that during the search operation and later on the appellant had

made surrender for the undisclosed investment.

I, therefore, confirm the GP rate at 7% for allowing deduction
from the valuation of physical stock taking of diamond
jewellery.
In regard to dispute regarding method of valuation of jewellery
I have considered the facts and submissions made by the
appellant. From the perusal of tax audit reports for the A. Y.
2006-07, copy of which was furnished by the appellant in the
course of appellate proceedings, it is noted that the Auditor of
the appellant co, has mentioned in the Form 3CD annexed to
audit report u/s 44AB of the I.T Act, 1961 for the A.Y, 2006-07
that the appellant has followed cost or market whichever is less
for all divisions. But for the assessment year 2007-08 It is
reported in the audit report u/s 44AB that the appellant has
followed average cost method for jewellery division. It means
the appellant has changed the method of valuation of stock of
jewellery division from cost or market price whichever is low to
average cost method as per audit report. Since jewellery
division was also very much there in the A.Y. 2006-07.

From the above it is clear that the appellant has not been
following consistently the single method for valuation of stock
of jewellery. It has changed the method of valuation after
search operation for its convenience and benefit. Hence, the
submission regarding mode of valuation is not accepted.
57 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

Since the AO found a mistake that deduction for GP was made

from the valuation of overall physical stock found on the date of

search whereas it should have been deducted from the value of

diamond jewellery only which was valued on tag price. The gold

jewellery was valued at prevalent market price i.e. cost based

on market price. Therefore, extra deduction of GP, worked out

at Rs. 2428921/- on gold jewellery of Rs. 34698876/- @ 7%. I

have considered this issue and hold that correction made by the

AO is based on facts. Therefore, keeping in view discussion

made in the previous paragraphs I confirm the addition of Rs.

2428921/- made by the AO for gold jewellery. I do not find any

infirmity in the action of the AO. Since this addition is a matter

of mistake of facts. As far as issue regarding mode of valuation

is concerned it is held that it is not tenable in view of

irregularity and inconsistency in employing the method of

valuation of stock on the part of the appellant for its benefit, as

discussed above.”

51. Having heard the arguments of both the sides who relied
on the respective orders and submissions, we have perused the
facts on record available before us and find that,

1. A panchanama has been prepared by party A-4 showing
warrant in the case of : M/s GTM Jewellery Mart Pvt.
Ltd. (showroom GTM house, G-5, Pushkar Enclave, Outer
Ring Road, Paschim Vihar, New Delhi)

2. M/s GTM jewellery Mart Pvt. Ltd. has been incorporated
on 04.08.2006 relevant to the assessment year 2007-
08.

3. Date of search in the case of the assessee - 12.12.2006
58 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

4. The other valuable articles or things as per Annexure –

2 & 3 consists of 25 sheets have been inventorised

during the search in the case of M/s GTM Jewellery Mart

Pvt. Ltd.

5. The valuation was done as per the price prevalent on

the date of search instead of the cost price. The

business of gold and diamond ornaments, the prices

vary on day to day basis.

6. Shri Gautam Kumar stated that no stock of M/s GTM

Jewellery Mart Pvt. Ltd. was lying outside the premises.

7. The record shows that the G.P. was 19% as against the

17% allowed by the Assessing Officer.

8. Statement of Shri Gautam Kumar recorded on the date

of search clearly mentioned about two distinct entities

M/s GTM Jewellery Mart Pvt. Ltd. and M/s GTM Builders

& Promoters Pvt. Ltd.

9. There has not been any quantitative difference between

the book stock and the physical stock in comparison

with the items.

10. The difference in the value is only because of the

different price taken by the valuer, the pricing existing

on the date of search instead of historical cost of the

goods.

11. Further, the labour charges have been added up twice in

certain instances while computing the aggregate value.

12. The revenue could not repudiate the quantities tallying

with the book stock during the search or even during the

assessment proceedings. Reliance is being placed in the
59 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

judgment of Hon’ble Supreme Court in the case of CIT

Vs Hindustan Zinc Ltd. 291 ITR 391.

13. The Assessing Officer also acknowledges that a separate

company by the name of M/s GTM Jwellery Mart Pvt. Ltd.

has been found from 26.07.2006.

14. The addition made was based on the statement of the

Director of that company Shri Gautam Kumar wherein

due cognizance was taken of the factum of the

separation of jewellery business from that of the

assessee business of building activity.

15. The panchanama of the copy prepared after executing

the warrant in the case of M/s GTM Jwellery Mart Pvt.

Ltd. has been served on Shri Gautam Kumar, Director of

the company wherein the jwellery was treated as stock-

in-trade.

16. Even, if the jwellery is to be assessed in the assessee’s

hands it can be done only after recording a satisfaction

of such items not belonging to the person from whose

position they have been seized.

17. It is only after recording a satisfaction such items not

belonging to the person from whose position they have

been seized that the entity for the assessment can be

shifted.

18. In the instant case, there has been no denial by the M/s

GTM Jewellery Mart Pvt. Ltd. with respect to their

ownership of the items. M/s GTM Jewellery Mart Pvt.

Ltd. never mentioned in the statement that the jewellery

do not belong to them but belong to the assessee.
60 ITA Nos.3578 & 3783 /Del/2010 &

SA No.187/Del/2020

GTM Builders & Promoters Pvt. Ltd.

19. The AO ignored this fact and without visiting the M/s

GTM Jewellery Mart Pvt. Ltd. for obtaining explanation

and elucidation as well as discharge of onus on that

entity regarding the ownership of the jewellery straight

away and made addition in the hands of the assessee

which cannot be held to be legally valid as per Section

132(4A).

52. Keeping in view these facts, since there is a panchnama
drawn in the case of M/s GTM Jewellery Mart Pvt. Ltd., stock
inventory was made in the said company and keeping in view
the fact that M/s GTM Jewellery Mart Pvt. Ltd. is a separate
assessable entity, keeping in view the fact that the difference is
due to difference in price but not in quantity, we hold that the
addition cannot be made in the hands of the assessee in the
instant year.

53. In the result, the appeal of the assessee is allowed and
that of the revenue is dismissed.

54. Owing to the disposal of the appeal of the revenue as well
as the assessee, the Stay Application No. 187/Del/2020 is
treated as redundant.

Order Pronounced in the Open Court on 10/02/2021.

Sd/- Sd/-

(Amit Shukla) (Dr. B. R. R. Kumar)
Judicial Member Accountant Member

Dated: 10/02/2021

*Subodh*