RAJ SONS JEWELLERS Vs. ITO

JUDGEMENT

(1.) KESHAW Prasad, A.M. The appeal is directed by the assessed against the order passed by the Commissioner (Appeals) dated 24 -6 -2002 confirming various additions made by the assessing officer pertaining to assessment year 1998 -99.

(2.) BRIEFLY the facts of the case are that the assessed is a partnership firm engaged in the business of export of jewellery. The assessed makes purchase of gold mainly from MMTC/SBI. Issues that gold to various karigars and get the jewellery manufactured on job work basis. The assessed during the Year has also purchased old jewellery and has got the same remanufactured on job work basis. All sales made during the year were export sales. It filed its return of income declaring export sales of 3,10,00,109. The gross profit declared on such sales was 13 per cent which was better than the GP Rate of 8.6390 in the immediately preceding year. The return of income was accompanied by audited balance sheet, profit and loss account, tax audit report under section 44AB, certificate under section SOHHC for claiming exemption of income from export sales. Since all sales was export sales, the total profit of Rs. 19,61,339 was claimed to be exempt. During the course of assessment proceedings the assessing officer asked for producing the books of accounting. The assessing officer noticed certain discrepancy in the books of account. On the basis of these defects the assessing officer held that the assessed is not maintaining proper books of account. He further held that the assessed is maintaining minimum double set of books of account one meant for auditors, on the basis of which audit report has been issued and the other set of account is meant for the assessing officer. He on the basis of various mistakes stated in the asstt. Order rejected books of account and made addition of Rs. 17,55,882 being total of all totalling and posting errors in the cash books, ledger etc. These amounts were added to the income computed by the assessed as per Profit and Loss account. Further, the assessing officer made an addition of Rs. 15,50,005 by assuming that assessed is doing local business. The above addition was made on the ground that purchase vouchers have not been produced and books of account have been rejected under section 145(3). He estimated that 5 per cent of export turnover of Rs. 3,10,00,109 as local business (Business in India) and added the total turnover as income as the assessed has not declared purchases for the local business. A further addition of Rs. 19,50,231 was also made by the assessing officer on account of unexplained investment on the ground that assessed has not declared wastage in making of jewellery. He estimated 5 per cent should be normal wastage and accordingly worked out a figure of Rs. 19,50,231 by adding closing stock to the export turnover of Rs. 3,10,00,109 and then applying rate of 5 per cent. A sum of Rs. 14,46,510 was added as interest income on the basis of certain debits and credits appearing in the books of account. The claim for deduction under section 80HHC was denied on the ground that assessed has failed to furnish bank certificate of export and realization on Form No. 1 which according to the assessing officer is mandatory. Thus the total income assessed by him was Rs. 86,63,967.

(3.) THE assessed carried the matter in appeal to the Commissioner (Appeals). The Commissioner (Appeals) confirmed the action of the assessing officer so far rejection of books of account was concerned. However, she deleted the addition of Rs. 17,55,882 made for various en ors of totalling and posting in cash book, ledger. However, she confirmed the addition of Rs. 15,50,005 on the ground that under the circumstances estimation of concealed profit at 5 per cent of the turnover is justified. As regards addition of Rs. 19,50,231 on account of unexplained investment by not showing wastage in manufacturing of jewellery, the same was reduced to Rs. 4,00,000 as in her opinion most of the purchases by the assessed are of standard gold are from MWC/S131 which does not contain impurities. T e addition on account o interest was deleted by Rs. 14,3 5, 100 as the same represented reverse entries in the books of account. The rejection of claim of deduction under section 80HHC, however, was upheld by the Commissioner (Appeals) on the ground that the CA certificate is not based on proper auditing of the books of account. The assessed is in appeal before us against the order of the Commissioner (Appeals). The assessed has raised 20 grounds of appeal against the order of the Commissioner (Appeals).