The Income Tax Officer,Ward1(1),Kumbakonam. Vs. Manmull Inderchand(HUF),Prop.Sujatha Jewellery 33 TSR Big Street, Kumbakonam.
June, 14th 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
`B' BENCH, CHENNAI
BEFORE Dr. O.K. NARAYANAN, VICE-PRESIDENT AND
SHRI VIKAS AWASTHY, JUDICIAL MEMBER
(Assessment Year: 2007-08)
The Income Tax Officer, Vs. Manmull Inderchand(HUF),
Ward1(1), Prop.Sujatha Jewellery
Kumbakonam. 33 TSR Big Street,
Appellant by : Mr. Vikramaditya, Sr. AR
Respondent by : None
Date of Hearing : 7th June ,2012
Date of Pronouncement : 12th June, 2012
PER VIKAS AWASTHY, JUDICIAL MEMBER:
The present appeal has been filed by the Revenue
impugning order of CIT(A), Tiruchirapalli dated 3.2.2011.
2. The assessee is running jewellery business under the
name and style of M/s. Sujatha Jewellery. The assessee filed
return of income for the assessment year 2007-08 on
27.03.2008 admitting total income of ` 1,78,470/-. The case of
the assessee was selected for scrutiny and notice under
section 143(2) was issued to the assessee on 26.09.2008.
The Assessing Officer vide order dated 16.12.2009 made
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addition on account of difference in valuation of closing stock
of gold and silver to the tune of ` 17,63,893/- and ` 2,45,784/-
respectively. Apart from the above additions, the Assessing
Officer made additions of ` 3,87,430/- on account of
unexplained credits in the books of accounts of the assessee,
and disallowed ` 42,654/- on account of interest and `
92,352/- towards unaccounted sale of gold and silver.
3. Aggrieved against the assessment order dated
16.12.2009, the assessee preferred an appeal before the
CIT(A). The CIT(A) vide order dated 03.2.2011 partly allowed
the appeal of the assessee inter-alia deleting the following
additions made by the Assessing Officer:-
i) Difference in valuation of closing stock of gold and silver
` 17,63,893/- and ` 2,45,784/- respectively;
ii) Addition towards unexplained credits in assessee's
iii) Proportionate interest of ` 1,26,798/- under section 24
considering the investment made in dwelling house out
of the interest towards non-business purpose.
3 ITA No.787/Mds/11
Aggrieved against the impugned order of the CIT(A), the
Revenue is in second appeal before the Tribunal assailing the
above findings of the CIT(A).
4. Shri Vikramaditya, representing the Department
submitted that no stock register was produced by the
assessee before the Assessing Officer. He contended that
assessee did not respond to the notice issued under section
142(1) of the Act calling for evidence in support of the
calculation of closing stock declared by him. He further
contended that the CIT(A) has erred in deleting the addition of
` 3,88,430/- towards unexplained credit by holding that mere
adjustments in the books of account will not constitute income
of the year unless it has not been assessed. He further
submitted that the CIT(A) has not taken into consideration
the provisions of section 24 of the Act as the deduction can
be allowed only when the house was purchased or
constructed with the borrowed capital and during the period
when the house of the assessee was constructed, the
assessee did not borrow any sum for purchase/construction of
4 ITA No.787/Mds/11
5. None has appeared on behalf of the assessee.
6. We have heard the submissions made by D.R. and
have gone through the orders passed by the lower authorities.
A perusal of the record shows that for valuation of stock, the
assessee has been following a particular method. The
Assessing Officer while valuating the closing stock relevant to
the assessment year 2007-08 has adopted FIFO method in
an arbitrary manner without justifying the reason for change in
valuation method. Similarly, for other additions made, the
Assessing Officer has failed to give any cogent reasons for
making additions. Even the order of CIT(A) is sketchy and
7. We, therefore, in the interest of justice, deem it
appropriate to remand the matter back to the Assessing
Officer to decide the matter afresh by adopting method of
valuation of stock as adopted by the assessee in the earlier
years and thereafter calculate, difference if any, in the
valuation of closing stock as per the provisions of the Act and
also to decide other issues as per the provisions of law by
giving detailed reasons for making additions. Thus, we set
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aside the order of the CIT(A) and remand the matter back to
the Assessing Officer to decide the issues afresh within a
reasonable period of time after affording opportunity of
hearing to the assessee.
8. The appeal of the Revenue is allowed in the above
terms for statistical purposes.
Order pronounced in the open court on Tuesday, the 12th day of June,
2012 at Chennai.
( Dr. O.K.Narayanan ) ( Vikas Awasthy )
Vice President Judicial Member
Dated the 12th June, 2012.
Copy to: (1) Appellant (2) Respondent (3) CIT
(4) CIT(A) (5) D.R. (6) G.F.