IN INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE, BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . ITA No.2188 PN 2012 Block Period 1996 to 2002 M s. Ranka Jewellers Pvt. Ltd., . Laxmi Road, Pune Appellant PAN No. AABCR1795D v s ACIT, Range-1, Pune . Respondent . ITA No.2189 PN 2012 Block Period 1996 to 2002 ACIT, Range-1, Pune . Appellant v s M s. Ranka Jewellers Pvt. Ltd., . Laxmi Road, Pune Respondent PAN No. AABCR1795D Assessee by : Shri S.U. Pathak Revenue by : Shri A.K. Modi Date of Hearing :04.07.2016 Date of Pronouncement: 23.09.2016 ORDER PER R.K.PANDA, AM : These are Cross appeals. first one is filed by Assessee and second one filed by Revenue and are directed against order dated 09-04-2012 of CIT(A)-I, Pune relating to Block Period 01-04-1996to 24-10-2002. For sake of convenience, these were heard together and are being disposed of by this common order. 2 ITA Nos.2188 and 2189 PN 2012 2. Facts of case, in brief, are that assessee is engaged in business of manufacturing and sale of Gold and Diamond jewellery and also deals in Silver articles. search action u s.132(1) of I.T. Act was conducted on 24-10-2002 at business premises and residential premises of Directors, i.e. entire Ranka Jewellers group along with some of their trusted employees and persons from whom group makes purchase etc. During course of search at business premises at Laxmi Road, Gold jewellery weighing 14032.700 gms valued at Rs.70,11,529 -, Diamond jewellery valued at Rs.18,95,786 -, Silver articles weighing 22.781 kg valued at Rs.1,76,553 -,Gems valued at Rs.8,33,683 -, Sunglasses valued at Rs.1,97,415 -, Uktamal valued at Rs.8,913 - and Perfumes and Cosmetics etc valued at Rs.65,699 - were seized from business premises at Laxmi Road, Pune. Further, Gold and Diamond jewellery valued at Rs.69,61,684 -, Silver articles weighing 100 Kgs valued at Rs.7,75,000 - and cash of Rs.9,51,101 - were seized from residence of Director Shri F.N. Ranka. 3. During course of search large number of books of account and other documents in form of loose sheets etc were seized from residential and business premises of assessee. In response to notice u s.158BC assessee filed return of income on 30-09-2003 declaring undisclosed income at Rs.1,50,00,000 -. AO issued notice u s.143(2) and 142(1) along with questionnaire asking assessee to explain as to how assets found during course of search has been accounted for and as to how transactions noted in seized books and documents have been accounted for in regular books of account. AO also got accounts audited u s.142(2A) of I.T. Act. After receiving aforementioned audit report AO 3 ITA Nos.2188 and 2189 PN 2012 asked assessee to submit its comments on finding in audit report to which assessee complied. 4. On basis of various submissions made by assessee from time to time and on basis of assets found and suppressed business turnover as well as personal expenses for which no satisfactory explanation was given by assessee AO determined total undisclosed income for block period at Rs.2,67,11,893 -. He also determined undisclosed income for block period on basis of undisclosed turnover at Rs.2,56,64,393 -. Since undisclosed income as per assets found is more than income as per undisclosed turnover he determined undisclosed turnover for block period at Rs.2,67,11,893 -. 5. In appeal Ld.CIT(A) gave part relief to assessee. bifurcation of individual items of additions as per order of AO as well as CIT(A) can be summarized as under : Particulars Income as As per Relief per AO CIT(A) 1. Estimation of undisclosed profit for F.Y.1996-97 to 10114255 7690964 2423561 2001-02 2. Estimation of income for 1-04-2002 to 24-10-2002 15898430 10353679 5544751 Less : Expenses 2346226 2346226 0 25664393 15698147 3. Addition on account of initial investment 744133 744133 4. Addition on account of valuation of closing stock 1997934 0 1997934 5. Addition on account of excess stock of gold 6673715 0 6673715 6. Addition of account of excess stock of silver 176553 0 176553 7. Addition of account of excess stock of Gems 833683 527733 305950 8. Addition of account of excess stock of sunglasses etc. 280553 280553 0 9. Addition of account of excess Diamond Director 2773230 749453 2023777 Residence 10. Addition of account of excess stock of Gold 5161014 5161014 0 Director Residence 11. Addition on account of excess Silver Director 613815 613815 0 Residence Excess cash 9951101 9951101 0 Unexplained expenses 248229 248229 0 Total 26711893 17531898 9179995 4 ITA Nos.2188 and 2189 PN 2012 6. Aggrieved with such order of CIT(A) giving part relief assessee as well as revenue are in appeal before us with following grounds : Grounds by Assessee : following grounds are taken without prejudice to each other - On fact and in law, 1. learned CIT(A) erred in holding that asst. u s 158BC(c) was valid in law (Page 156 to 158 of CIT(A)). 1.1 learned CIT(A) failed to appreciate that: a. asst. is barred by limitation as search was prolonged unreasonably without justification. b. seizure of Gold ornament and diamond ornament has been made out of stock which is not kept in prohibitory order. c. seizure of ornaments was made prior to reconciliation of stock and without giving proper opportunity to explain. d. seizure of ornaments was made even though there was no excess in stock. e. prohibitory order was only for one room in which no ornaments were kept. 2. learned CIT(A) erred in holding that there was excess stock of Gems of Rs.5,27,733 - on basis of average of two valuations done by valuers and accordingly, he erred in sustaining above addition. (page No. 92 of CIT(A)) 2.1 learned CIT(A) failed to appreciate that a. In reality, there was no excess stock of Gems found during search and hence, no addition was required to be made on that account. b. Without prejudice, registered valuer Shri Parag Gadgil had valued excess stock at Rs.2,21,783 - and same should have been accepted instead of taking average of two market values determined by two different valuers. c. When there are two valuation reports, if no apparent error discrepancy is found, lower of valuation ought to have been accepted instead of taking average of two market values. d. stock had to be considered at cost for determining excess and as same was taken by valuer at market value, excess was not correctly determined and therefore, no addition was required on this account. e. defects in valuation report of Shri Uttam Jain, who has given his valuation report on arbitrary basis without giving any basis required for valuation of Gems. 5 ITA Nos.2188 and 2189 PN 2012 f. valuation report of Shri Uttam Jain, relied upon by Department has not given any details about weight of stone, gold imbedded therein, gross and net weight of ornament in which gems are studded. 3. learned CIT(A) erred in sustaining addition of Rs.2,80,553 - on account of alleged excess stock of Sun Glasses, Uktamal, Perfumes, Watches, etc. (page No. 95 CIT(A)). 3.1 learned CIT(A) failed to appreciate that- a. above additions were based on valuation based on MRP rates as reduced by G.P. margin of 20% and bargain margin of 7% and hence, valuation was approximate and vague. b. learned CIT(A) failed to appreciate that there is lot of bargaining on sale of such products and hence, benefit of 25% on account of bargaining should have been given from valuation. c. appellant had submitted evidences for discounts given and thus, it was incorrect to reject claim of appellant. d. addition was not justified as valuation of stock was not done correctly and it was based on presumptions and in reality, there was no such excess stock. e. valuation was not done correctly as no discount was given for obsolete slow moving stock. 4. learned CIT(A) erred in directing A.O. to verify facts regarding addition of alleged unaccounted stock of Rs.79,34,244 -. (page No. 103 to 109 CIT(A)). 4.1 learned CIT(A) was not justified in restoring matter to A.O. when he had no power under law to set aside matter to A.O. 4.2 learned CIT(A) was not justified in restoring matter to A.O. when he himself has accepted on page 108 of his order that claim of appellant was reasonable and correct and also that special auditor has also opined that claim of appellant was acceptable. 4.3 learned CIT(A) was not justified in not giving finding on contentions of appellant in this context. He further erred in not giving telescopic benefit of addition against unaccounted income. 5. learned CIT(A) erred in extrapolating unaccounted sales for entire block period instead of restricting addition only to period for which evidences were found during search. (Page 142 to 146 of CIT(A) order). 5.1 learned CIT(A) accordingly, erred in sustaining addition of Rs.l,03,53,679 - for period 01.04.2002 to 24.10.2002 (Page 142 of CIT(A)) and addition of Rs.76,90,694 - for period F.Y. 1996 - 97 to 2001 - 02 (Page 146 CIT(A)). 5.2] learned CIT(A) was not justified in holding that- a. In block asst. addition could be made on basis of estimation - and extrapolation and it need not have been restricted only to evidences found during search. 6 ITA Nos.2188 and 2189 PN 2012 b. Even, when there were no incriminating evidences found for some year, (F.Y. 1997-98) addition could be sustained on basis of incriminating evidences for other years. c. estimation of unaccounted sales at such high figures was justified even though, incriminating evidences indicated very small amounts of unaccounted purchases for example, for F.Y. 2000-01 and F.Y. 1996-97. 5.3] learned CIT(A) failed to appreciate that- a. addition on account of unaccounted transactions had to be restricted only to extent of incriminating evidences found during search. b. Without prejudice assuming without admitting that extrapolation of sales was justified, it could not be made to such high level as made by him for block period. 6. learned CIT(A) erred in confirming addition of initial investment in unaccounted stock of Rs.7,44,133 - (page 146 to 152 of CIT(A) order). 7. appellant craves leave to add, alter, amend or delete any of above grounds of appeal. Grounds by Revenue : 1. order of Commissioner of Income-tax (Appeals) is contrary to law and to facts and circumstance of case. 2. Commissioner of Income-tax (Appeals) has erred on facts and in law in deleting addition of Rs.66,73,715 - on account of excess stock of gold when Assessing Officer has brought in sufficient circumstantial evidences on record to conclude that alleged purchases of gold was actually never received by assessee. 3. Commissioner of Income-tax (Appeals) has erred on facts and in law in deleting addition of Rs.1,76,553 - on account of excess stock of silver when valuation of stock was done by qualified Government valuer. 4. Commissioner of Income-tax (Appeals) has erred on facts and in law in arriving at his own figure of excess stock by applying average method and granting relief of Rs.3,05,950 - out of addition of Rs.8,33,683 - on account of excess stock of gems ignoring valuation done by qualified Government valuer. 5. Commissioner of Income-tax (Appeals) has erred on facts and in law in deleting addition of Rs.19,97,934 - on account of undervaluation of stock, when, in fact Assessing Officer has followed well established method of valuation of stock. 6. Commissioner of Income-tax (Appeals has erred on facts and in law in not agreeing to working of undisclosed turnover for F.Y. 2002-03 given by Assessing Officer and Special Auditor on basis of seized documents and substituting it with his own working. 7 ITA Nos.2188 and 2189 PN 2012 7. For this and other such grounds as may be urged at time of hearing, order of Commissioner of Income-tax (Appeals) may be vacated and that of Assessing officer be restored. 8. appellant craves leave to add, amend, alter or delete any of above grounds of appeal during course of appellate proceedings before Hon'ble ITAT. 7. Grounds of appeal No. 1 and 7 by assessee being general in nature are dismissed. 8. Grounds of appeal No.2 by assessee and grounds of appeal No.4 by revenue relate to order of CIT(A) in sustaining addition of Rs.5,27,733 - on account of excess stock of Gems as against Rs.8,33,683 -made by AO. 9. Facts of case, in brief, are that during course of search Gems and Jewellery valued at Rs.8,33,651 - was seized as per Annexure C to Panchanama dated 25-11-2002. During course of search valuation was done at Rs.36,00,256 -. assessee was also asked during course of search to explain as to how Gems have been accounted for. assessee reconciled such gems as under: Total valuation as per inventory Rs.3600256 Less : Cost of goods taken on approval and anamat Rs.501220 Rs.3099036 Less : GP 20% +5% bargain Rs.774759 Rs.2324777 Less : Value of gold (taken in gold stock) Rs.847308 Physical Stock of Gems Rs.1476969 Less : Valuation as per books Rs.643286 Excess Rs.833683 Thus, excess stock of Rs.8,33,683 - was computed. However, assessee disputed valuation made by Shri Uttam Jain, valuer appointed by department on ground that valuation done by him is based on estimate basis and stock of stones included goods purchased in earlier years which is at much lesser price. 8 ITA Nos.2188 and 2189 PN 2012 assessee got valuation report from another Valuer Shri Parag Gadgil on 06-11-2002 and copy of same was submitted to DDIT (investigation) on 25-11-2002. As per valuation done by Shri Parag Gadgil reconciliation was as under : Valuation of precious gems Rs.11,83,425 (Excluding items on approval and Anamat and excluding value of gold) Less : GP 20% +5% bargain Rs.2,88,356 Rs.8,65,069 Less : Valuation as per books Rs,6,43,286 Excess Rs.2,21,783 10. It was submitted by assessee that if at all there was any excess it was only Rs.2,21,783 - and not Rs.8,33,683 -. However, AO rejected above explanation given by assessee and made addition of Rs.8,33,683 - to total income as undisclosed income for block period u s.69A of I.T. Act. 11. In appeal Ld.CIT(A) restricted such addition to Rs.5,27,733 -. While doing so, he observed that special auditor appointed by department has considered both valuation report and has opined that valuation done by departmental valuer is more acceptable. However, auditor has not given any finding about acceptance or rejection of second report which was also given by registered valuer prepared during period of search itself and was given to Investigation Unit. There is no material available on record which can suggest why difference was existing except by argument made by assessee in its submission that Shri Uttam Jain has not done valuation in detail and has done this on estimation. He observed that it is not possible to verify objections of assessee at this stage. Since difference as per revenue as well as assessee is only Rs.6,11,900 -, i.e. Rs.8,33,683 Rs.2,21,783 - he arrived at figure 9 ITA Nos.2188 and 2189 PN 2012 which is somewhere in between two. Since average of difference comes to Rs.5,27,733 - he held that excess gems should be assessed at Rs.5,27,733 - as against Rs.8,33,683 - made by AO. 12. Ld. Counsel for assessee strongly opposed order of CIT(A). He submitted that why report of Shri Parag Gadgil should be accepted and that of Shri Uttam Jain should be rejected are already given before CIT(A). main reason for rejection of valuation report submitted by departmental valuer is that Shri Uttam Jain has not given details of weight of stones, purity of gold, gross net weight etc. while details are given in report of Shri Parag Gadgil. 13. Referring to decision of Hon ble Bombay High Court in case of CIT Vs. Vinod Dhanchand Ghodawat reported in 247 ITR 448 he submitted that in block assessment valuation difference should not constitute undisclosed income. He accordingly submitted that addition, if any, can be made on basis of report of Shri Parag Gadgil and excess stock as per his report being Rs.2,21,783 - addition should be restricted to Rs.2,21,783 -. 14. Ld. Departmental Representative on other heavily relied on order of CIT(A). 15. We have considered rival arguments made by both sides, perused orders of AO and CIT(A) and paper book filed on behalf of assessee. We have also considered decision cited before us. We find during course of search valuation of Gems and Jewellery was done at Rs.36,00,256 -. After considering book value of such gems, difference was determined at Rs.8,33,683 - which was added by AO to total undisclosed income of assessee u s.69A of I.T. Act. We find assessee during course of 10 ITA Nos.2188 and 2189 PN 2012 search itself has challenged determination of such excess stock found on basis of report of departmental valuer namely Shri Uttam Jain and filed valuation report from registered valuer Shri Parag Gadgil according to which difference for such valuation was narrowed down to Rs.2,21,783 -. We find AO on basis of report of Special auditor who had opined that report of departmental valuer is acceptable, had made addition of Rs.8,33,683 -. However, CIT(A) restricted disallowance to Rs.5,27,733 -being average of two reports. 16. It is submission of Ld. Counsel for assessee that there is no justification for rejecting valuation report given by Shri Uttam Jain, registered valuer appointed by assessee whose report gives details of weight of stones, purity of gold, gross net weight etc. whereas such details are not available in report given by departmental valuer, Shri Uttam Jain. It is also submission of Ld. Counsel for assessee that valuation difference should not constitute undisclosed income in block assessment year. 17. We find merit in above submission of Ld. Counsel for assessee. Admittedly, there are two valuation reports, one given by valuer appointed by department and other one given by valuer appointed by assessee. report of valuer appointed by assessee was given to DDIT (Investigation) on 25-11-2002 which is after search proceedings. We find there is no reason whatsoever has been given for either accepting or rejecting said valuation report. Since valuation report given by Shri Parag Gadgil, valuer appointed by assessee, gives details of weights of stones, purity of gold, gross net weight etc. whereas such details are 11 ITA Nos.2188 and 2189 PN 2012 not given in report of departmental valuer, therefore, we find no reason why report of valuer appointed by assessee should not be accepted. Since report given by valuer appointed by assessee shows difference of Rs.2,21,783 -only, therefore, we restrict addition to Rs.2,21,783 -. Accordingly, ground of appeal No.2 by assessee is partly allowed and ground of appeal No.4 by revenue is dismissed. 18. Grounds of appeal No.3 and 3.1 by assessee relates to addition of Rs.2,80,553 - on account of stock of sun glasses, Uktamal, perfumes, watches etc. 19. Facts of case, in brief, are that during course of search sun glasses valued at Rs.1,97,415 -, Uktamal valued at Rs.8,913 -, perfumes and cosmetics valued at Rs.65,699 - were put under deemed seizure. Similarly, stock of watches valued at Rs.3,93,843 - was also found. After considering inventory prepared at time of search, gross profit margin, bargain etc. thereon discrepancy on account of sun glasses was determined at Rs.1,97,415 -, Uktamal at Rs.8,913 -, perfumes and cosmetics at Rs.65,699 - and watches at Rs.8,526 - was determined. total of these 4 items comes to Rs.2,80,553 - which was added by AO as undisclosed income for block period u s.69A of I.T. Act, details of which are as under : Sr.No. Description Value as per Value as per Difference Rs. inventory Rs. books of accounts Rs. 1 Sunglasses 13,09,211 - 11,11,796 - 1,97,415 - 2 Uktamal 7,41,030 - 7,32,117 - 8,913 - 3 Perfumed and 3,12,608 - 2,46,909 - 65,699 - cosmetics 4 Watches 3,93,843 - 3,85,317 - 8,526 - 2,80,553 - 12 ITA Nos.2188 and 2189 PN 2012 20. Before CIT(A) assessee challenged above addition on ground that AO has erred in disregarding necessary evidences and explanations given at time of assessment. It was submitted that department while valuing above items has reduced 20% on account of gross profit and 7% on account of bargain from MRP. It was submitted that there is lot of bargaining and benefit of 25% should be given for bargaining etc. It was further submitted that these items are such wherein there are lots of latest design and fashion which keep on changing because of which part of stock is obsolete. No such benefit has been given by department, Further, in respect of items such as watches and Uktamal difference is very small and therefore there is no reason to make any addition. It was also submitted by assessee that assessee gives substantial discount to VIP and privileged customers. No reduction on this account has been given by AO. 21. However, CIT(A) was not satisfied with explanation given by assessee and upheld addition made by AO on ground that such addition is fair and reasonable. various arguments made by assessee according to him are based on assumptions and presumptions and therefore cannot be accepted. 22. Aggrieved with such order of CIT(A) assessee is in appeal before us. 23. Ld. Counsel for assessee submitted that main business of assessee is that of jewellery and these items are just fancy items kept in stock. There is lot of bargaining on these items. However, department has valued these stocks as per market value given in chits attached to stock. Since 13 ITA Nos.2188 and 2189 PN 2012 department itself has allowed 20% as gross profit and 7% on account of bargain whereas assessee request that benefit of 25% should be given for bargaining as against 7% allowed by department. 24. Ld. Departmental Representative on other hand heavily relied on order of CIT(A). 25. After hearing both sides, we find addition of Rs.2,80,553 - was made by AO on account of excess stock of sun glasses, Uktamal, perfumes and watches. main grievance of assessee is that 7% deduction given by AO on account of bargain which has been upheld by CIT(A) is very low since these are of fancy items and with arrival of latest designs these items become obsolete and assessee allows higher bargaining. It is also submission of Ld. Counsel for assessee that assessee gives higher discount to VIP and privileged customers. While we find some force in above argument of Ld. Counsel for assessee, however, plea to allow 25% reduction for bargaining appears to be very high whereas 7% allowed by revenue appears to be slightly low. Considering totality of facts of case, we direct AO to allow 15% reduction on account of bargain as against 7% considered by him which has been upheld by CIT(A). AO is directed to recompute addition accordingly. Ground raised by assessee is accordingly partly allowed. 26. Ground of appeal No.4 by assessee relates to addition of unaccounted stock of Rs.79,34,244 - made by AO and upheld by CIT(A). 14 ITA Nos.2188 and 2189 PN 2012 27. Facts of case, in brief, are that during course of search certain items were found in basement of residential premises of Shri F.N. Ranka, Director of assessee company. total diamonds found were 97.93 karat out of which 40.78 karat were declared by assessee in Wealth Tax return which was accepted by AO. However, for balance diamond of 57.15 karat AO held that they were unexplained and valued same at Rs.27,73,230 -. During course of assessment proceedings on being questioned by AO, it was explained by assessee that diamond bangles valued at Rs.15,82,777 - and diamond necklace and rings valued at Rs.4,41,000 - both totaling to Rs.20,23,777 - were received from Shri Ranka Jewellers, Karve Road. 28. However, AO did not accept above contention of assessee on ground that in course of search assessee did not give any explanation about receipt of jewellery found though specifically asked. Further, in course of search there was shortage in stock of diamonds to tune of 100 karat worth Rs.19.18 lakhs. It was requested by assessee to set off shortage, vis- -vis diamonds found with Directors. It was accordingly argued that no addition is warranted on this account. However, AO did not accept above plea of assessee and made addition of Rs.27,73,230 - to total undisclosed income of assessee. 29. Further, certain gold diamond jewellery was found in strong room at premises of Director which was valued at Rs.51,61,014 -. In absence of any satisfactory explanation given by assessee AO added above amount as unexplained investment in hands of assessee company. Thus AO made addition of 15 ITA Nos.2188 and 2189 PN 2012 Rs.79,34,244 - (i.e. Rs.27,73,230 + Rs.51,61,014). 30. In appeal Ld.CIT(A) directed AO to verify contention of assessee with certain remarks, details of which are as under: 10.3 I have carefully considered facts of issue and law as are apparent from records. Ground No. 6 relates to addition of Rs.27,73,230 and Rs.51,61,014, totaling to Rs.79,34,244 relating to unaccounted investment in gold and diamond jewellery etc found at residence of director Shri F.N. Ranka. On request of appellant, aforesaid unaccounted assets were considered in hands of appellant company and therefore, there is no objection on above issue. issues raised by appellant in Ground No. 6 under consideration relates to quantification of addition. Assessing Officer, as discussed in assessment order, relevant portion of which has already been quoted above in, para 10.1 above, has computed addition of Rs.79,34,244, whereas appellant has contended in their submissions quoted at para 10.2 above that entire addition requires to be deleted. From perusal of assessment order, it appears that Assessing Officer has examined gold and diamond jewellery found at residence in general separately then same which were subsequently found in underground strong room detected almost after 36 hours of initiation of search at residential premise. While making addition of Rs.27,73,230, Assessing Officer has stated that jewellery worth Rs.49,93,634 was found from basement(not underground strong room) and bedroom of Smt. Shashikala F. Ranka, as per panchanama dated 25.10.2002. Out of this, jewellery valued at Rs.21,48,777 was seized on same date and remaining was inventorised as found but not seized. reconciliation and explanation in respect of jewellery found but not seized out of total jewellery of Rs.49,93,634, referred to above, were submitted by appellant before Assessing Officer during course of assessment and it was found by Assessing Officer that total diamond included in entire jewellery was 97.93 ct. (total found, seized and not seized both). Out of this Assessing Officer found that diamond worth 40.78 ct were already declared in Wealth tax returns and therefore, excess was determined at 57.15 ct. This excess comprised of 40.47 ct. which were already seized and 16.68 ct. which were found but not seized. claim of appellant that some jewellery pertaining to Smt. Geeta Ranka and was lying at premise to explain excess diamond was found by Assessing Officer not acceptable, as it was found that whatever explained diamond was available in hands of Mrs. Geeta Ranka in her Wealth tax return, were already considered in their hand and therefore, claim was held to be not correct. In view of above, value of jewellery represented by excess diamond found but not seized at Sr. No. 18, 19, 21, 24, 27, 28 and 30, having total valuation of Rs.6,24,453 were treated as unexplained in addition to seizure of Rs.21,48,777, made by Annexure C-1 of panchanarna dated 25.10.2002 at residence. Therefore, in this fashion Assessing Officer computed addition in respect ofjewellery found at residence except jewellery found at concealed strong room at RS.27,73,230. It is also apparent that claim made by appellant that out of jeweller) of Rs.21,48,777, found and seized at residence vide AnnexureC-1, jewellery of value of Rs.15,82,977 having description of diamond bangles (four) with 38.25 ct diamond, gross weight 135 gms, net weight 127.35 gms, were received from Ranka 16 ITA Nos.2188 and 2189 PN 2012 Jewellers, Karve Road on Jangad was not accepted by Assessing Officer on ground that no such information or explanation was ever given during course of search at any stage and therefore, this explanation and evidence being produced at stage of assessment cannot be entertained. Assessing Officer has given detailed reasoning for same in para 36 of assessment order and can be referred to for details. In addition to above, Assessing Officer further considered jewellery, silver articles and cash found at underground strong room in para 37 and 38 of assessment order. Assessing Officer has stated that as per Annexure C-1 to C-5 of panchanama dated 26.10.2002 gold and diamond jewelleries of value of Rs.51,61,014 was found. As per Assessing Officer there were 55 items as per inventory referred to above. Out of above, jewellery valued at Rs.48,12,907 was seized per panchanama dated 28.10.2002. It has been noted by Assessing Officer in para 37, that Shri F.N. Ranka, in his statement recorded during search on 26.10.2002 has stated that gold bar pieces of 1168 gms belonged to his late' son Shri Shreepal Ranka, which is evidenced by RBI certificate also seized in search. However, no finding has been given by Assessing Officer in respect of above claim. It was further noted in assessment order that Mr. Ranka had stated in his statement on oath that other items are possessed traditionally and it is not clear whether investment in them are taxed or not. Assessing Officer has noted in para 38 that appellant was given opportunity to explain aforesaid jewellery and silver articles of Rs.51,61,014 during assessment and reconciliation vis-a-vis wealth tax returns were filed. As it was found by Assessing Officer that benefit of jewellery declared in wealth tax returns have already been given, further benefit was not available. Another claim made by appellant that item no. 51 (diamond neckless set with earings of value of Rs.1,10,000) and item no. 52 (diamond necklace set with earrings of value of Rs.3,31,000) were also received on Jangad from Ranka Jewellers, Karve Road, was also found to be not acceptable by Assessing Officer for same reasons as discussed in para 36 of assessment order while dealing with another similar claim for explanation of diamond bangles of Rs.15,82,977. In view of these facts and considering that appellant has no acceptable explanation for jewellery and silver articles found at concealed strong room, addition of Rs.51,61,014, representing entire assets found in underground strong room was held as taxable u s. 69A. In this manner, Assessing Officer computed addition of Rs.79,34,244, which is subject matter of this ground of appeal. During appeal appellant has made explanations which have been quoted in para 10.2 of this order and can be referred to for details. major issues raised by appellant relates to denial of benefit for jewellery claimed to have been received on Jangad from Ranka Jewellers, Karve Road of value of Rs.15,82,777 and Rs.4,41,000, as described above. It is noted that appellant has contended in this respect that aforesaid claims were genuine. In support of same appellant produced copy of Jangad appearing at page 249 of paper book. It is noted that Assessing Officer is 'right in saying that said Jagand No.1097 is printed for silver, however date noted is 24.9.2002 and not 24.10.2002 which has been stated in assessment order. only issue which arises is whether in facts and circumstances of case, Jangad being referred to is genuine or it has been created to escape from assessment of items mentioned therein. appellant has further contended in their submission that same Assessing Officer, while completing assessment of Shri Vastupal Ranka, prop. Ranka Jewellers, Karve Road, has accepted issuance of aforesaid items of jewellery in reconciliation of stock found at their premise and therefore, as per AR, Assessing Officer cannot change his stand in this assessment relating to 17 ITA Nos.2188 and 2189 PN 2012 same transaction. copy of assessment order has been placed on record. It is further noted that Special Auditor in his report prepared u s 142(2A) in Annexure 8-11, has also accepted these facts and has stated that jewellery appearing at Sr. No. 14 of Annexure C of panchanama dated 24.10.2002, having value of Rs.15,82,977 and jewellery appearing at Sr. No. 51 and 52 of Panchanama dated 26.10.2002, of value of Rs.1,10,000 and Rs.3,31,000 respectively are appearing in Jangad, which was verified during course of audit of Ranka. Jewellers, Karve Road and it was found that this Jangad is accounted for in regular books of accounts of M s Ranka Jewellers, Karve Road. In view of above, auditor has opined that explanation of appellant for these items is acceptable. He has computed unexplained items on this basis. Though reasons given by Assessing Officer for not accepting Jangad as genuine has some force' of acceptability but same gets fully reversed on finding that impugned Jangad was found to be recorded in regular books of accounts. Furthermore, Assessing Officer cannot blow hot and cold in respect of same transaction, If he has accepted issue of jewellery in hands of Ranka Jewellers, Karve Road on same Jangad, he cannot deny benefit of receipt of jewellery in hands of appellant when impugned Jangad clearly shows that it has been issued in name of Smt. Shashikala F. Ranka and descriptions are same. Therefore, Assessing Officer is directed to verify these facts once again and allow benefit to appellant in respect of jewellery appearing in Jangad. Another objection of appellant relates to gold bar of 1168 gms. Assessing Officer has himself admitted in assessment order that Shri F.N. Ranka, in his statement on oath during search has explained same to have been purchased by his late son Shri Shreepal Ranka under gold bond scheme of 1998 and documents were found and seized during search. Assessing Officer has not given any finding on this claim for not allowing same. claim of appellant appears reasonable and correct. However, Assessing Officer is directed to verify these facts again and if such gold bars were seized or found along with documents of its declaration under RBI scheme with roper legal entry in books and returns of late Shri Shreepal Ranka,, then there is no reason for not allowing this claim. Assessing Officer is therefore, directed to verify same and allow it if facts described above are found to be correct. As regards other claims made by appellant, relating to telescopic benefit of shortage of gold and diamond etc., same cannot be allowed in view of discussions already made that shortages are because of unaccounted sales carried out regularly and no benefit for same car be granted. Remaining additions of Assessing Officer are therefore, sustained subject to above remarks. Ground No. 6 is therefore, treated as partly allowed. 31. Aggrieved with such order of CIT(A) assessee is in appeal before us. 18 ITA Nos.2188 and 2189 PN 2012 32. Ld. Counsel for assessee submitted that some items of value mentioned on page 106 and 107 of CIT(A) were received from M s. Ranka Jewellers, Karve Road and they were reflected in their Jangad and their books of accounts. They were sent to assessee for approval. Secondly, gold bar of 1168 gms belonged to late Shreepal Ranka who had declared same under Gold Bond Scheme of 1998. He submitted that Ld.CIT(A) directed AO to consider evidences. Thereafter, AO has given relief on account of stock received from Ranka Jewellers, Karve Road. So far as gold bar of 1168 gms is concerned which belonged to late Shreepal Ranka, AO has not given any finding. He submitted that on page 22 of CIT(A) s order gold stock as per books of accounts was 1,41,945.785 gms while stock found was 1,36,279.54 gms. Thus, there was shortage of stock of 5,666.240 gms valued at Rs. 29,18,113 -. assessee requested that shortage in shop noticed during search is because of some stock kept at residence and set off should be given. Similarly, in diamonds also, there was shortage of stock of 100 cts worth Rs.19.80 lakhs (page 52 and 53 of asst. order). set off of this shortage should be considered against excess of stock found at residence. 33. He submitted that AO and CIT(A) have taxed excess stock at residence in hands of assessee company. Thus, when they accept that stock at residence belonged to company, set off of same against shortage at shop should have been given. CIT(A) on page 109 has not allowed same. His reasoning is that shortages are there because of unaccounted sales carried out by assessee regularly. However, he has not appreciated that for unaccounted sales, separate addition is made by AO and therefore, 19 ITA Nos.2188 and 2189 PN 2012 this reasoning has no bearing on issue. He submitted that set off of shortages in gold and diamond stock found during search should be given against stock at residence. 34. Ld. Counsel for assessee submitted that addition sustained by CIT(A) on this count is Rs.59,10,467 -. If set off of shortage of gold of Rs.29,18,113 -, shortage of diamond of Rs.19,18,000 - and Gold bar of late Shreepal of Rs.6,01,520 - is given then net addition comes to Rs.4,72,834 -. He accordingly submitted that addition should be restricted to Rs.4,72,834 -. 35. Ld. Departmental Representative on other hand heavily relied on order of CIT(A). 36. We have considered rival arguments made by both sides, perused orders of AO and CIT(A) and paper book filed on behalf of assessee. We find AO made addition of Rs.27,73,230 - on account of diamonds found in basement of residential premises of Shri F.N. Ranka on ground that out of total diamonds found at Rs.92.93 karat assessee could explain only 40.7 karat and could not explain balance items at 57.15 karat. Similarly, AO made another addition of Rs.51,61,014 - being certain gold diamond jewellery found from strong room at premises of Director on ground that assessee was unable to explain source of investment. 37. We find before CIT(A) assessee made certain submissions based on which Ld.CIT(A) directed AO to verify benefit for jewellery claimed to have been received at Jangad from M s. Ranka Jewellers, Karve Road valued at Rs.15,82,777 - and Rs.4,41,000 - 20 ITA Nos.2188 and 2189 PN 2012 respectively. Similarly, he has also directed AO to verify purchase of gold bars of 1168 grams under gold bond scheme 1998 by his Late Son Shri Shreepal Ranka. So far as claim by assessee relating to telescoping benefit of shortage of gold and diamond etc. he rejected same on ground that shortages are because of unaccounted sales carried out regularly and no benefit for same can be granted. 38. It is submission of Ld. Counsel for assessee that after order of CIT(A) directing AO to consider evidences AO has given relief on account of stock received from Ranka Jewellers, Karve Road. However, he has not given any finding on account of gold bar of 1168 grams belonging to Late Shreepal Ranka for which certificate issued by RBI as per Gold Bond Scheme 1998 was filed. It is also submission of Ld. counsel for assessee that stock as per books of account was 141945.785 grams while stock found was 1,36,279.54 grams. Thus, there was shortage of stock of 5,666.240 grams. Thus shortage according to Ld. Counsel for assessee is because some stock was kept at residence and therefore set off should be given. Similarly, for shortage of diamond of 100 karat worth Rs.19.80 lakhs set off should be given against excess stock found at residence. Therefore, when excess stock at residence has been taxed in assessee company, set off of same against shortage of stock should have been given. 39. So far as relief sought by assessee on account of gold bar of 1,168 grams is concerned we find Ld. Counsel for assessee has filed certificate issued by RBI under Gold Bond Scheme 1998 for 1,168 grams vide gold bond 1998 Certificate Nos. BYPSPN000682 and BYPSPN000683 for 584 grams each. Since Ld. Counsel for 21 ITA Nos.2188 and 2189 PN 2012 assessee has substantiated purchased under gold bond scheme 1998 for 1,168 grams, therefore, we direct AO to allow benefit of 1,168 grams from unaccounted stock. 40. So far as contention of Ld. Counsel for assessee that set off should be given from shortage of stock of 5,666.24 grams out of excess stock found we find some merit in above contention of Ld. Counsel for assessee. It is undisputed fact that AO as well as CIT(A) have taxed excess stock at residence in hands of assessee company. Therefore, when they have accepted that stock at residence belongs to assessee company, therefore, set off of same against shortage at shop should have been given. We do not find any reason in order of CIT(A) that shortages are there because of unaccounted sales carried out by assessee regularly. Since he has not appreciated that for unaccounted sales separate addition has been made by AO, therefore, we find merit in arguments advanced by Ld. Counsel for assessee that reasoning given by CIT(A) is devoid of merit. In view of above, we set aside order of CIT(A) and direct AO to give set off of shortage in gold and diamond stock found during course of search to extent of excess stock found. According to Ld. Counsel for assessee out of addition of Rs.59,10,467 - set off of shortage of gold comes to Rs.29,18,113 - and short of diamond comes to Rs.19,18,000 - and gold bar of Late Shreepal Ranka comes to Rs.6,01,520 - leaving net addition of Rs.4,72,834 - AO is directed to verify above and give consequential relief. Ground of appeal No.4 by assessee is accordingly partly allowed. 22 ITA Nos.2188 and 2189 PN 2012 41. In ground of appeal No.5 assessee has challenged addition of Rs.1,03,53,679 - for period from 01-04-2002 to 24-10-2002 and addition of Rs.7,69,06,944 - for period from 1996-97 to 2001-02. 42. Facts of case, in brief, are that during course of search certain loose papers showing unaccounted purchase and sales were found, details of such unaccounted purchases and unaccounted turnover found for various years are as under : F.Y. Unaccounted Unaccounted purchases Rs. turnover Rs. 1996-1997 14,759 - 16,964 - 1997-1998 Nil -- 1998-1999 14,03,149 - 16,12,815 - 1999-2000 76,04,023 - 87,40,256 - 2000-2001 7,095 - 8,155 - 2001-2002 72,12,505 - 82,90,236 - 2002-2003 5,27,44,980 - 12,22,95,618 - 43. For period from 01-04-2002 to 24-10-2002, i.e. date of search unaccounted purchases were found. Thereafter, for period 21-08-2002 to 24-09-2002 (28 days) loose papers in form of day to day cash book containing unaccounted transactions for each day were found. AO estimated unaccounted sales for entire period from 01-04-2002 to 24-10-2002 at Rs.12,22,95,618 - on basis of unaccounted turnover for period of 28 days as per loose papers found in form of cash book for period from 21-08-2002 to 24-09-2002 -. He estimated profit rate @13% and determined undisclosed income at Rs.1,58,98,430 -. Adopting same yard stick of period mentioned above he went on estimating unaccounted turnover for financial years 1996-97 to 2001-02 and calculated undisclosed income for each of these years at rate of GP disclosed in returns for those respective years. details of such computation determining undisclosed profit of Rs.1,01,14,255 - for financial years 1996-97 to 2001-02 are as under : 23 ITA Nos.2188 and 2189 PN 2012 Sr. F.Y. Disclosed Rate at Undisclosed Gross Profit No. Turnover which Turnover Profit rate undisclosed turnover computed 1 1996-1997 148826683 5% 74,41,334 5.30% 3,94,930 2 1997-1998 185990256 5% 92,99,513 4.85% 4,51,026 3 1998-1999 165127629 7.5% 1,23,84,572 8.90% 11,02,227 4 1999-2000 115394725 10% 1,15,39,473 10.85% 12,52,032 5 2000-2001 192705612 15% 2,89,05,842 9.73% 28,12,538 6 2001-2002 147422910 25% 3,68,55,727 11.13% 41,02,042 Total 1,01,14,255 44. Before CIT(A) it was submitted that during search certain loose papers were found on basis of which AO presumed that there are unaccounted purchases sales made by assessee. However, there is no evidence found to indicate that notings as per these papers were true, correct and genuine. assessee submitted that in block assessment estimation of sales income should not be made for entire period on basis of documents found for few days. Without prejudice to above contention, assessee further submitted that for period from 01-04-2002 to 24-10-2002 evidence found during search was in form of paper showing unaccounted purchases for period from 01-04-2002 to 24-10-2002. Further, loose papers in form of regular cash book including unaccounted and accounted transactions for period 21-08-2002 to 24-09-2002 was also found. However, AO estimated unaccounted sales for period of 28 days and on pro-rata basis adopted same yardstick for estimating unaccounted sales for entire period from 01-04-2002 to 24-10-2002. It was submitted that evidences were found for period 01-04-2002 to 24-10-2002 according to which unaccounted purchases as per these papers amounted to Rs.5,27,44,980 - only as per report of Special Auditor. These papers were for period from 01-04-2002 to 24-10- 2002 and there was no evidence found to show that there were 24 ITA Nos.2188 and 2189 PN 2012 unaccounted purchases for that period amounting to higher figure than what was calculated on basis of those seized papers. Therefore, presumption of AO that there were further unaccounted purchases for this period over and above figure as per seized papers is incorrect. Therefore, AO should have computed unaccounted income by way of profit on suppressed sales for period on basis of and in relation to unaccounted purchases which are actually noticed as per seized papers instead of presuming that unaccounted turnover for period was in same proportion as unaccounted turnover for period 21-08-2002 to 24-09-2002. It was accordingly argued that addition on account of unaccounted profit for period 01-04-2002 to 24-10-2002 at most can be only on unaccounted purchases found during that period. 45. assessee further submitted that AO is not justified in estimating income for balance period solely on basis of loose papers found for 28 days. There is no reason for AO to ignore other evidence found for balance period in form of purchases which clearly indicate that unaccounted transactions for balance period were not in same yardstick. There are no clinching evidences in form of seized papers indicating actual purchases for balance period and therefore to apply same yardstick by AO is totally unjustified. Relying on various decisions it was argued that seized documents should be taken as whole and department cannot ignore certain documents which are in favour of assessee. It was argued that in instant case there was enough evidence for balance period to prove that unaccounted transactions were not in same magnitude, therefore, to apply same ratio to balance period is not correct. AO should have determined income on 25 ITA Nos.2188 and 2189 PN 2012 basis of unaccounted purchases found for this period. assessee also submitted that during period 21-08-2002 to 24-09-2002 sales were more than normal sales because of festival season such as Ganesh festival, Paryusion for which sale was higher. Therefore, application of yardstick of estimating sales for balance period on this basis is not justified. assessee further submitted that AO has estimated unaccounted turnover for F.Y. 1996-97 to 2001-02 at rate varying from 5% to 25% of disclosed turnover for all these years. actual evidence indicating unaccounted turnover for all these years has been found for such smaller amounts. Therefore, AO is not justified in estimating unaccounted turnover for all these years on basis of evidence found for period 01-04-2002 to 24-10-2002 ignoring fact that in earlier years evidences regarding unaccounted purchases were found for much smaller amounts. Relying on various decisions assessee submitted that it is trite law that evidence found for one year cannot be used for estimating income for other years. 46. assessee without prejudice further submitted that estimation of unaccounted turnover made by AO for A.yrs. 1996-97 to 2001-02 needs to be drastically reduced in view of fact that there was no evidence found indicating suppressed turnover of magnitude estimate by AO. There is no basis yardstick for estimation resorted to by AO and therefore since estimation arrived at by him is only on basis of diary for 28 days for period 01-04-2002 to 24-10-2002, such estimation is not based on proper appreciation of facts and therefore deserves to be reduced. It was submitted that for A.Y. 2001-02 auditor has determined unaccounted purchases at Rs.72,12,505 -. seized papers 26 ITA Nos.2188 and 2189 PN 2012 indicating unaccounted purchases themselves indicate that quite few of loose papers indicate that goods were received only on estimate for approval. Further, certain papers indicate that assessee has not purchased jewellery but customers have given their old jewellery for repairs or remaking. It was submitted that certain papers also indicate that assessee has given gold for remaking ornaments to goldsmith and has received ornaments back from them and has only given Mazuri, i.e. labour charges. Therefore, considerable deduction should be given for unaccounted purchases of Rs.72,12,505 - determined by auditor. 47. However, Ld.CIT(A) was not satisfied with arguments advanced by assessee. So far as argument of assessee that AO cannot resort to estimation in block assessment is concerned, Ld.CIT(A) relying on various decisions rejected same on ground that when there is evidence of evasion whether small or large AO can very well estimate income of assessee for block period. So far as issue of extrapolation is concerned he also upheld action of AO in view of evidence showing unaccounted purchases and sales for part of period. He, however found certain inaccuracies in method adopted by AO for computing undisclosed income for block period. He, therefore, accordingly directed AO to compute undisclosed income at Rs.76,90,694 - as against Rs.1,01,14,255 - made by AO by observing as under : 12.3.1 I have carefully considered contention of A.O. and submissions of appellant. First of all, appellant has argued that A.O. has resorted to estimation which is not permitted in block asst. In my opinion, A.O. is justified in estimating income of appellant for block period as evidences of evasion, whether small or large have been found from first year of block period to last year of block period. From materials available on record and contentions raised by appellant as well as Assessing Officer, including report of 27 ITA Nos.2188 and 2189 PN 2012 special auditor submitted u s 142(2A) it is clear that evidences for unaccounted purchases and unaccounted expenses were found for FY 1996- 97 to FY 2002-03. Though no unaccounted sales were computed by special auditor for FY 1997-98, as no details of unaccounted sales or purchase for this year was found during search, but audit report clearly shows that details of unexplained expenses of Rs.73,950 was found in this year. Therefore for reasons that evidence for unaccounted purchases relating to earlier as well as later years were found alongwith evidence of unaccounted expenditure FY .1997-98, appellant as well as special auditor was incorrect in saying that no unaccounted sales should be computed for this year. Assessing Officer for making estimate of unaccounted turnover has relied on various judgements viz. H.M.Eusufali, M.K.E.Menon, Rajnik and co., Hotel Kiran etc., which has been objected to by appellant. I am of considered opinion that Assessing Officer has correctly applied law for making estimation of unaccounted turnover in facts and circumstances of case. All aforesaid judgements relied upon by Assessing Officer, clearly says that estimation is permitted if evidences found suggest evasion but only caution expressed in these judgements are relating to fact that estimation must be fair and reasonable, having nexus to evidences found. appellant, as can be seen from careful examination of their submissions, has also more or less interpreted these judgements in similar manner but has tried to contend that either estimation is not possible or should be strictly linked to specific evidences found in that particular year. In other words, main objection of appellant can be seen to disregard evidences found in form of jama kharcha pana of 28 days to remaining period of F.Y. 2'002-03 as well as other financial years of block period. arguments of appellant look incorrect. Undoubtedly, evidence giving complete picture of evasion has been found for 28 days only but other evidences found for entire block period clearly shows that same practice has been followed from first year of block to last year of block. 12.3.2 In view of discussions made above, only objection which can be examined relates to quantification of undisclosed income of block period. It can be seen from materials available on record i.e. various documents, slips, papers seized from premise of appellant as well as evidences of trusted employees (also covered in search), that appellant was engaged in evasion of income as described above for entire period of block. seized documents were given to auditor for special audit u s 142(2A). special auditor in his report along with annexures clearly found that papers found and seized except for jama kharch pana of 28 days, are not regular books of accounts but mostly contains notings etc. He has compiled details available in these papers including jama kharcha pana in audit report. It was found that except for jama kharch panas for 28 days covering period 21 8 2002 to 24 9 2002, all other papers were relating to unaccounted purchases, and unaccounted expenses etc. jama kharch pana of 28 days were found to contain entire transactions of these dates. Therefore auditors have found that these jama kharch panas contained accounted as well as unaccounted transactions and after comparing it with regular books of accounts, auditor have computed total of gold sales appearing in these panas, along with unaccounted transactions to compute total unaccounted gold sales at Rs.1 ,47,26,793 - in Annexure 1.3 of audit report. Similarly unaccounted sales of silver and other items of 28 days jama kharch panas) has been computed at Rs.51,81,796 in Annexure 1.4 of audit report. total of these two figures comes to Rs.1 ,99,08,589, which can be taken as total unaccounted sales of 28 days from 28 ITA Nos.2188 and 2189 PN 2012 21 8 2002 to 24 9 2002. auditor has divided total unaccounted sales so computed by 28 to arrive at figure of unaccounted transactions per day of Rs.7,11,021 and this figure has been multiplied with 172 working days of period 2002-03 to arrive at total turnover of unaccounted sales at Rs.12,22,95,618. Profit from this unaccounted transaction has been computed by auditor by applying GP rate of 13% to arrive at figure of Rs.1,58,98,430. Against this unaccounted expenses of Rs.1,86,905 found in seized document has been allowed to compute net unaccounted income of this year at Rs.1 ,57,11,525 in audit report. After considering above special auditor decided to compute unaccounted income for FY 1996-97 to FY 2001-02, on basis of seized papers representing unaccounted purchases and unaccounted expenses. auditor has also taken into account unaccounted purchase as income in first year of block. auditor, for these years also has applied GP rate of 13% for calculating turnover on basis of figures of unaccounted purchases found in seized papers in respective years. Along with above he has also considered unaccounted expenses for arriving at final figure of unaccounted income of different years. finding of special auditor. for aforesaid financial years can be seen from Annexure 1 of special audit report. From same it can be seen that auditor has computed following income or loss for different assessment years. Unaccounted Income Sl.No. Financial Year purchase (in Rs.) loss (in Rs.) 1 1996-97 14,759 2,48,229 2 1997-98 0 0 3 1998-99 14,03,149 2,31,225 4 1999-2000 76,04,023 5,16,233 5 2000-01 7,095 (-)12,04,814 6 2001-02 72,12,505 5,36,554 Assessing Officer has followed computation made by auditor in FY 2002-03 in assessment order but has not accepted approach adopted by auditor for remaining years while completing assessment. He, apparently was of opinion that evidences available on record especially jama kharch panas, clearly shows that appellant has been concealing transactions, which, is most comprehensively available for 28 days and for other period of entire block evidences only confirm about carrying on of this activity. Therefore, Assessing Officer decided to take cue from jama kharcha panas for other years also and for this reason he took actual turnovers' declared' in different years as basis and estimated percentage of undisclosed turnover for computing undisclosed turnover of respective years. From para 45 of assessment order, quoted at para 12.2 of this order, it can be seen that he has taken 5% of disclosed turnover as undisclosed turnover in FY 1996-97 and 1997-98 and thereafter has gradually increased it to 25% in FY 2001-02. From undisclosed turnover so computed, Assessing Officer has applied GP rate of respective years to compute undisclosed profit of different years. As Assessing Officer has adopted different approach for FY 1996-97 to 2001-02, he has separately allowed expenses appearing in th1 seized documents, which were considered and allowed by special auditor in computing income of different years, in para 47 of assessment order at Rs.23,46,226. Similarly, Assessing Officer has made separate addition of Rs. 7,44,133 as initial investment in 29 ITA Nos.2188 and 2189 PN 2012 unaccounted business in para 48 of assessment order. appellant has objected to this approach of Assessing Officer, but in my considered opinion objection is not valid. It is fact that jama kharch panas of 28 days gives clear picture of concealment and other documents available for unaccounted purchases and expenses can at best be considered to prove that this activity of concealment has been continued for entire block period. Therefore, Assessing Officer has every right to estimate undisclosed income in manner which can be considered as correct as well as just. Only because evidences found for other than jama panas are not complete, it would be incorrect to say that computation of undisclosed income should be restricted to those evidences only. This proposition has been upheld by different Courts also as relied by Assessing Officer. Therefore claim made by appellant to peg computation of undisclosed income to evidences of undisclosed purchases only cannot be accepted. Furthermore, it is also important to point out that nature of documents seized, except jama kharcha panas are in nature of rough notings only and therefore they cannot be considered to give complete picture of evasion. At most it can represent that evasion cannot be less than figures appearing in those papers in respective years. However, any material brought on record which can merit consideration for applying principle of computation of undisclosed income has to be given due attention. It has already been held that objection of appellant in respect of no computation of undisclosed income for entire block period is not acceptable but objections if any, which are valid and can show that computation made by Assessing Officer requires to be reexamined, can be considered. In view of above, objections made by appellant on account of computation of undisclosed income are being considered in following paragraphs. 12.3.3. In respect of computation of unaccounted transactions made by auditor as well as Assessing Officer, for FY 2002-03 at Rs.12,22,95,618, appellant has claimed that jama kharch panas are for period of 21 8 2002 to 24 09 2002, which is period when certain auspicious occasions like Ganapati festival, Raksha Bhandan, Ramzan and Padushan etc fall and therefore sales in these periods are generally high. It has further been stated that other periods falling in span of 1 4 2002 to 24 10 2002 have long patches of lean sales when generally sales are less than average and therefore by applying figure of average unaccounted sales on basis of peak period, Assessing Officer as well as auditor has computed undisclosed transaction of period 1 4 2002 to 24 10 2002 excessively. In support of their claim appellant has submitted chart for these 28 days in different financial years of block period to show that sales are varing from 10% to 17% of total sales of respective years, whereas average sales should be in vicinity of 8.33% of total sales in month. appellant after making detailed arguments on this issue has given more appropriate method of computation for FY 2002-03 vide their letter dated nil filed on 21 2 2012. This computation has already been quoted above. In this computation appellant has taken exact amount of unaccounted transactions computed for 28 days in Annexure 1.3 and 1.4 of audit report, which is at Rs.1,99,08,589. It has further been shown that aforesaid unaccounted transaction is 46.06% of total transactions appearing in jama kharch panas. Since total working days has been taken 172 days and figure of 28 days are actually available, unaccounted transactions for remaining 144 days have been computed from disclosed transactions for those 144 days @46.06%. On this 30 ITA Nos.2188 and 2189 PN 2012 calculation unaccounted transactions for 144 days comes to Rs.5,97,35,095. By adding both figures total unaccounted transaction for period 1 4 2002 to 24 10 2002 has been computed at Rs.7,96,43,684 and by applying same GP rate of 13%, which has been computed by Special Auditor for this year on basis of material available on record, unaccounted profit for this period comes to Rs.1,03,53,679. On careful consideration of materials available on records, which clearly show that method adopted by Assessing Officer and auditor has not taken into consideration fluctuation of business normally happening in different months, method discussed above was found to be more appropriate and just. In, view of above" and also because unaccounted transaction in this method becomes more proximate to figure of unaccounted purchases found, undisclosed income for FY 2002-03 is directed to be adopted, at Rs.1,03,53,679 subject to verification of different figures supplied by appellant during appeal. Assessing Officer is directed to verify these figures while giving appeal effect. 12.3.4 As regards addition made for balance years, I have already held that A.O. was justified' in estimating the' undisclosed income for all years i.e. FY 1996-97 to FY 2001-02, in manner done by him. It has also been held that evidences found in respect unaccounted purchases and unaccounted expenses are not complete. Therefore Assessing Officer has right to taken into account other evidences found during search which gives more comprehensive view of concealment. In view of above, approach adopted by Assessing Officer to compute undisclosed transactions as percentage of total disclosed turnover is upheld. For same reason finding of auditor given for estimating undisclosed sales on basis of undisclosed purchases only without any extrapolation has to be held as myopic. However, materials brought on record by appellant that business of FY 2001-02 remained affected due to massive renovation and constructions undertaken in this year, has been found to be correct. Furthermore, other materials brought on record, that shop existing in FY 1996-97 to 2001-02 was much smaller than same before renovation and civil construction, were also correct. Similarly, contention made that appellant company came into existence on 22 2 1990 after it's incorporation under 'the companies act and therefore initial years of block were represented by early phase of business, was also seen. During appeal, these arguments of appellant were considered and discussed with AR. It was asked, when Assessing Officer has computed undisclosed turnover on basis of disclosed turnover, then how these factors can be considered to be relevant for adopting lower figure. It was argued in this respect that appellant had lesser capacity and drive to keep transactions outside books of accounts in pre- renovation phase. It was case of appellant that turnover increased gradually after renovation and therefore, they were more inclined to keep transactions outside books after renovation to make increase gradual in subsequent years. Though proposition of appellant may look logical but is not based on any evidence. However, claim of appellant that figures adopted by Assessing Officer for different years is without any basis and should be linked more - to quantum of purchases found in different years of block, was found to have some merit. In view of these facts which were clearly not taken into account by Assessing Officer as per discussions available in assessment order, figures taken by Assessing Officer for computing undisclosed transaction based on disclosed transaction were decided to be 31 ITA Nos.2188 and 2189 PN 2012 examined. It is apparent that shop size increased many folds after renovations and therefore percentage of undisclosed income found in jama kharch panas has to be reduced substantially to take into account various considerations discussed above as well as to keep in mind actual evidence of unaccounted purchases found in respected years, was found reasonable. Assessing Officer has not discussed anything in assessment order for justifying rates adopted by him for different years for computing undisclosed transactions, however he can be seen to have very correctly applied rates in decending order by substantially reducing it from actual percentage of unaccounted transactions appearing in jama kharch panas. Though he has correctly kept rate minimum in FY 1996-97 and has gradually increased it upto FY 2001-02 but since he has not considered about disturbance of business due to renovation in FY 2001-02 and smaller size in earlier years, and most importantly amount of purchases available in different years, rates adopted can be seen to be giving slightly higher figures of unaccounted transactions and unaccounted income vis-a-vis figures of unaccounted purchases found in different years. In my considered opinion rational balance has to be drawn between different parameters available on issue for arriving at most appropriate amount of undisclosed transaction and profit. So -far as gross profit rate applied by Assessing Officer in different years are concerned, it is held that same is reasonable and correct as it has been taken from appellant's own .declared financial results. Therefore undisclosed income for different years are being computed in same manner as was done by Assessing Officer except for taking the, percentage rates of undisclosed turnover different from figures taken by Assessing Officer. In my opinion percentage to be taken are 3% for 1996-97 and 1997-98 as against 5% taken by Assessing Officer. In 1998-99 4% is taken against 7.5% of Assessing Officer and for 1999-2000 and 2000-01 7% and 13% are taken against 10% and 15% of Assessing Officer. For similar reasons and also for disturbance in business in 2001-02, figure is taken at 20% against 25%' of Assessing Officer. By these figures undisclosed turnover comes nearer to quantum of unaccounted purchases found. tabular computation can be seen as under : Sr. F.Y. Disclosed % for Undisclosed GP rate Undisclosed Unaccounted No. turnover computing turnover income purchase as undisclosed (Rs.) per Audit turnover report 1 1996-97 14,58,26,683 3% 44,64,800 5.3% 236634 14,759 2 1997-98 18,59,90,256 3% 55,79,707 4.85% 270615 Nil 3 1998-99 16,51,27,629 4% 66,05,105 8.9% 587854 14,03,149 4 1999-00 11,53,94,725 7% 80,77,630 10.85% 876422 76,04,023 5 2000-01 19,27,05,612 13% 2,50,51,729 9.73% 2437533 7,095 6 2001-02 14,74,22,910 20% 2,94,84,582 11.13% 3281633 72,12,505 7690694 12.3.5. Therefore, from discussions made above, it is held that undisclosed income of appellant for F.Y.1996-97 to 2001-02 should be assessed at Rs.76,90,694 as against computation of Assessing Officer made for Rs.1,01,14,255. appellant gets part relief for these years. With aforesaid discussions, issues raised by appellant can be treated as resolved in manner noted above. Grounds No. 8 and 9 of appellant therefore, can be treated as partly allowed. 32 ITA Nos.2188 and 2189 PN 2012 48. Aggrieved with such order of CIT(A) assessee is in appeal before us. 49. Ld. Counsel for assessee strongly opposed order of CIT(A). He submitted that during course of search unaccounted purchases were fund for entire period. Therefore, there is no reason to believe that assessee has made some more purchases. He submitted that from estimation of sales made by AO if GP adopted by AO is deducted balance amount would be purchases which is more than unaccounted purchases found during course of search. Therefore, this estimation theory adopted by AO is violating principle of section 132(4A) and it is also illogical. He submitted that assessee has submitted that sales for 28 days period were higher because of festival seasons like Raksha Bandan, Ganesh Festival, Paryushan, Ramzan etc. Therefore, same basis cannot be adopted for entire period. On this ground also estimation made by AO is not justified. He submitted that assessee during course of assessment proceedings as well as before CIT(A) has clarified that in all these unaccounted purchases of Rs.5,27,44,980 - entries of Rs.88,90,715 - pertains to goods received for approval, gold given to goldsmith and ornaments taken from them etc. Therefore, unaccounted purchases were actually Rs.4,38,54,265 - and GP of 13% on sales is equal to GP of 14.94% of purchases. Therefore, profit should be estimated at 14.94% on Rs.4,38,84,265 - which comes to Rs.65,61,620 - as against profit of Rs.1,58,98,430 - determined by AO which was reduced to Rs.1,03,53,679 - by CIT(A) as per para 12.3.3 of his order. He submitted that for earlier period, i.e. F.Y. 1996-97 to F.Y. 2001-02 33 ITA Nos.2188 and 2189 PN 2012 CIT(A) has estimated unaccounted turnover at varying percentage which is very excessive and profit should be reduced. 50. Ld. Departmental Representative on other hand heavily relied on order of CIT(A). He submitted that papers found during course of search are not regular unaccounted books but are loose sheets. Further, no papers were found for entire period. Therefore, estimation has to be made. He submitted that during year of search full records were found for 28 days. Therefore, it was fully justified on part of AO for extrapolation for entire year. Ld.CIT(A) has passed order after considering submission of assessee that paper found for period of 28 days was peak period and therefore extrapolation of same for entire year is not correct. He submitted that based on various submissions made by assessee Ld.CIT(A) has directed AO to adopt 3% of undisclosed turnover as disclosed turnover as against 5% adopted by AO. Therefore, grievance of assessee is well taken care and therefore, same should be upheld. 51. We have considered rival arguments made by both sides, perused orders of AO and CIT(A) and paper book filed on behalf of assessee. We have also considered various decisions cited before us. We find during course of search conducted in business and residential premises of assessee and its directors, certain papers for various years were found indicating unaccounted purchases and sales. Based on loose papers found special auditor appointed by department estimated unaccounted sales, details of which are already given at Para No.39 of this order. On basis of unaccounted purchases and sales found for period from 21-08-2002 to 24-09-2002 AO estimated sales for 34 ITA Nos.2188 and 2189 PN 2012 entire period from 01-04-2002 to 24-10-2002 on basis of sales for 28 days at Rs.12,22,95618 - and estimated profit at 13% at Rs.1,58,98,430 -. So far as other years of block period are concerned AO determined unaccounted turnover at 5% of disclosed turnover for F.Y. 1996-1997 to F.Y. 1997-1998 at 7.5% for F.Y. 1998-1999 at 10% for F.Y. 1999-2000 at 15% for 2000-01 and at 25% for F.Y. 2001-02. We find based on arguments advanced by assessee Ld.CIT(A) while upholding action of AO in proceeding for estimation of unaccounted turnover for block period, however, has given some consequential relief on account of undisclosed turnover. He however upheld GP rate adopted by AO. detailed reasoning given by CIT(A) while deciding this issue has already been reproduced in preceding paragraphs. order of CIT(A) is quite exhaustive and deals with each and every aspect of arguments advanced by Ld. Counsel for assessee. In our opinion, order of CIT(A) is reasoned one under facts and circumstances of case. Therefore, we do not find any infirmity in same. Ground raised by assessee on this issue is accordingly dismissed. 52. In ground of appeal No.6 assessee has challenged order of CIT(A) in confirming addition of initial investment in unaccounted stock at Rs.2,44,133 -. 53. Facts of case, in brief, are that AO in assessment order held that since assessee had carried out substantial turnover which was not recorded in books of account, therefore, same requires initial unaccounted money to carry out unaccounted turnover. Considering turnover of Rs.74,41,334 - for F.Y. 1996-97 he 35 ITA Nos.2188 and 2189 PN 2012 estimated initial investment at Rs.7,44,133 - being 10% of such turnover in first year, i.e., F.Y. 1996-1997. 54. Before CIT(A) assessee submitted that addition is based on unaccounted sale of Rs.74,41,334 - estimated by AO for F.Y. 1996-97. However, such estimation of unaccounted sales is not justified for past years since for F.Y. 1996-97, department has found unaccounted purchases of only Rs.14,759 -. Therefore, addition of Rs.7,47,133 - is not justified. 55. However, CIT(A) was not satisfied with explanation givne by assessee and upheld addition made by AO by observing as under : 13.3 It is also noted from materials available on record that on 16.01.2007, and order u sec. 250(4) was passed and Assessing Officer was directed to examine purchases computed by auditor in different years vis-a-vis seized documents and to re-examine computation of undisclosed investments in unaccounted purchases. Assessing Officer has submitted report vide his letter dated 13.2.2007 and in this letter it was submitted that seized material found relates to unaccounted sales and purchases made by assessee during block period and its study suggests that appellant has carried out unaccounted sales and purchases during entire block period. However, seized material was stated to be in form of loose papers, chits, scribblings etc. and not in form of proper accounts. In view of above, Assessing Officer submitted that it is not fully feasible to segregate transactions datewise, however, Assessing Officer prepared table showing yearwise unaccounted purchases, Number of days of unaccounted purchase and on that basis computed annualized unaccounted transactions by treating working days in year as 300. He computed different figures of unaccounted turnover which is quite at variance to figures computed by Assessing Officer. in assessment order. For example in F.Y. 2001-02, in his method unaccounted turnover came to Rs.21,33,06,310. On that basis and after considering fact that appellant was having working capital investment on disclosed turnover ranging from 0.06% to 0.61 % Assessing Officer suggested that initial investment should be considered as peak of 2001-02 at Rs.11,30,52,344. report of Assessing Officer was given to appellant and submission in rebuttal can be seen to have been filed by appellant vide his letter dated 26.2.2007. In this letter, appellant has vehemently objected to finding of initial investment made in report u s 250(4) at Rs.11,30,52,344 in F. Y. 2001-02 against computation of Rs. 7,44,133 made in original assessment. appellant pointed out that report of Assessing Officer is misdirected. As per appellant, Assessing Officer was asked to compute initial investment in unaccounted business, however he has computed peak 36 ITA Nos.2188 and 2189 PN 2012 investment in arbitrary manner for F.Y. 2001-02. basis adopted by Assessing Officer to treat 53% of unaccounted turnover as initial investment in F.Y. 2001-02 on basis of observation that appellant is having very high , working capital vis-a-vis disclosed turnover, was claimed to be incorrect. It was also submitted that Assessing Officer has not considered telescopic benefit of income computed in earlier years. appellant also gave reasons for having higher inventory vis-a-vis disclosed turnover. appellant objected to adoption of different figure of turnover for computation of initial investment than once taken in block assessment. appellant has also contended that seized documents itself suggests that most of purchases are on credit for which even interest has been paid. It has also been stated that 50% of transaction cannot be treated as investment. It has further been stated that no unaccounted stock was found during search. I have carefully considered discussions available on record along with report of Assessing Officer and submissions made thereupon. Now first of all coming to ground raised by appellant for addition of Rs.7,44,133 as initial investment in undisclosed turnover in F.Y.1996-97, it is noted that Assessing Officer while completing block assessment has considered all evidences in holistic manner and therefore, in F.Y. 1996-97, which was first year of block period and for which evidence .of unaccounted purchase of only Rs.14,759 was found, undisclosed turnover was computed as 5% of disclosed turnover at Rs. 74,41,334. Therefore, in absence of any other materials available on record, which can negate earlier finding given in assessment order that unaccounted business continued from F.Y. 1996-97 in regular manner and has gradually increased over period, it cannot be held that addition can be made on basis of 53% of unaccounted transaction computed in F.Y. 2001-02. Furthermore, unaccounted transaction computed in F.Y. 2001-02 in remand report is much higher than even disclosed transaction of Rs.14,74,22,910 of this year. finding of Assessing Officer in remand report is therefore, absurd and unreasonable. It is also important to note that claim of appellant that no substantial unaccounted stocks were found during search, is also material fact to be considered for this issue. As already discussed earlier while dealing with other grounds of appeal, I have given finding which has relevant bearing on this issue. search conducted at all business premises and residences has clearly shown that though appellant was engaged in carrying out unaccounted transactions regularly but same has been carried out regularly from same business premise. Therefore, stock found at business premise on date of search has to be accepted as total stock found during search. Since same has been found to be more or less matching with stock recorded in books, finding of Assessing Officer for huge unaccounted initial investment is arbitrary. Ground No. 2 of appellant relates to unaccounted stock of gold jewellery added by Assessing Officer at Rs.66,73,715 by rejecting purchases claimed to have been made from H Kumar Gems International, Ahmedabad and Mr. O.N. Ranka. On this basis Assessing Officer has given finding that stock of jewellery found during search is excess by 13,189.160 gms valued at Rs.66,73,715. This addition of Assessing Officer could not be upheld in facts and circumstances of case and it has been held that aforesaid evidences of purchases were correct and after considering it computation of shortage of jewellery of 5,666.240gms was upheld. While doing so, this issue was considered and after considering fact that appellant was maintaining its stock for unaccounted transactions together shortage of stock was taken as evidence that appellant conceals its transactions in regular manner. In light of above finding and also 37 ITA Nos.2188 and 2189 PN 2012 fact pointed out by Assessing Officer in remand report that appellant maintains high percentage of stock vis-a-vis turnover, it has to be held that above finding given by me gets further strengthened. In other words, since appellant is maintaining its stock for accounted and unaccounted transactions together, it is logical to maintain higher percentage of stock vis-a-vis recorded transactions. In fact such phenomenon is indicator of concealment of transaction generally. For discussions made above, I do not find any merit in either report of Assessing Officer for higher estimation of initial investment nor in argument of appellant for reducing initial investment made by Assessing Officer in assessment order. It is also important to reiterate that in case of another group' business concern i.e. M s Ranka Jewellers, Raviwar Peth, it has been seen that Assessing Officer initially missed to make any addition for initial investment in unaccounted business transactions found during search and therefore, made application before then CIT(A)-I, Pune and Ld. CIT(A) in his order made addition of Rs.10 lakhs as initial investment in facts and circumstances of that case. Both Department as well as appellant has filed appeals against impugned order of CIT(A) Pune, before ITAT, Pune in ITA No. 820 PN 2006 and ITA No. 801 PN 2006 respectively. However, aforesaid issue was only agitated by appellant in their Ground No.3, wherein it was claimed that Ld. CIT(A) erred in law and on facts in enhancing undisclosed income to extent of Rs.10,00,000 on account of alleged initial investment for making unaccounted sales. It is noted that Hon'ble ITAT in their consolidated order dated 6.6.2011, has decided aforesaid Ground No. 3 against appellant. additional ground raised for higher addition for initial capital made by DR also not accepted in said judgment. Hon'ble Tribunal held that turnover of Rs.50 lakhs estimated in initial year on basis of loose papers found for few days has been correctly appreciated by Ld. CIT(A) to arrive at addition of Rs.10 lakhs by considering investment requirement being of sales of 10 to 15 days and GP of 12.5%. Therefore, it can be seen that above finding of Assessing Officer has even backing of the, Hon'ble ITAT in another group case and therefore, addition is sustained. For similar reason, report submitted by Assessing Officer for higher estimation has also not been accepted. Therefore, Ground No. 10 is dismissed. 55.1 Aggrieved with such order of CIT(A) assessee is in appeal before us. 56. Ld. Counsel for assessee reiterated same submissions as made before CIT(A). 57. Ld. Departmental Representative on other hand referring to order of CIT(A) submitted that Ld.CIT(A) has given detailed reasoning. Further, he has also relied on order of Tribunal in sister concern of assessee where similar addition on 38 ITA Nos.2188 and 2189 PN 2012 account of initial investment has been upheld. Therefore, this ground raised by assessee should be dismissed. 58. We have considered rival arguments made by both sides, perused orders of AO and CIT(A) and paper book filed on behalf of assessee. We find AO made addition of Rs.7,44,133 - on account of initial investment in undisclosed business of assessee. Ld.CIT(A) in elaborate order on this issue has upheld this action of AO. While doing so, he has also relied on decision of Tribunal in case of M s. Ranka Jewellers, Raviwar Peth, sister concern of assessee where similar addition was made on account of initial investment by CIT(A). In appeal by assessee Tribunal vide ITA No.820 PN 2006 and ITA No.801 PN 2006 order dated 06-06- 2011 decided issue against assessee. Since Ld.CIT(A) while deciding issue has followed order of Tribunal in case of sister concern of assessee and since he has also given detailed reasoning justifying addition made by AO and since Ld. Counsel for assessee could not controvert factual findings given by CIT(A), therefore, we do not find any infirmity in order of CIT(A) on this issue. Accordingly, ground raised by assessee on this issue is dismissed. 59. Grounds of appeal No.1,7 and 8 by revenue being general in nature are dismissed. 60. In ground of appeal No.2 revenue has challenged order of CIT(A) in deleting addition of Rs.66,73,715 - on account of excess stock of gold. 39 ITA Nos.2188 and 2189 PN 2012 61. Facts of case, in brief, are that AO noted that during course of search Gold jewellery weighing 1,33,313.351 gms were found from shop out of which jewellery weighing 13865 gms (net weight) was seized vide panchanama dated 31-10-2002. During course of assessment proceedings AO noted that total gold found in shop was 1,36,279.54 gms whereas gold ornaments as per books of account was only 1,41,945.78 gms. Thus, there was shortage of gold of 5,666.240 gms. AO further noted that in statement recorded by DDIT (Investigation) on 11-11-2002 Director of assessee company Shri F.N. Ranka has worked out shortage of stock at 3462.280 gms but at that time comparison was made on basis of gold ornaments only. gold used in Gems, Diamonds etc. was not considered. He further noted that assessee has shown receipt of gold ornaments weighing 13,865.250 gms from M s. H. Kumar Gems International and receipt of 4990.150 gms of ornaments from his brother Shri Omprakash N. Ranka. He observed that Shri Omprakash N. Ranka has also claimed that jewellery weighing 4990.150 gms was purchased by him from M s. H. Kumar Gems International and sold to assessee. He observed that M s. H.Kumar Gems International is Ahmedabad based concern and proprietor of this concern is Shri Hitesh Kumar (HUF). All 3 concerns of Ranka group have regular transactions of purchase from this party. regular transactions made with this party are recorded in regular books of account of group. During course of search documents were seized from Ranka group which shows that besides regular transactions group was indulged in making unaccounted transactions with M s. H. Kumar Gems International at large scale and such transactions were not recorded in books of account. Evidences were also found that interest was paid by assessee to M s. H. 40 ITA Nos.2188 and 2189 PN 2012 Kumar Gems International when there was delay in making payments. Such transactions of purchase and payment of interest were not recorded in books of account. He, therefore, was of opinion that claim of Ranka group that they had purchases gold ornaments from M s. H. Kumar Gems International on 22-04-2002 is to be seen in light of above background and it is to be decided as to whether transactions as claimed by assessee were genuine or not. 62. AO noted that Ranka Group has claimed purchase of gold ornaments from M s H. Kumar Gems International in name of Shri Anil P. Ranka, Shri Omprakash N. Ranka and M s Ranka Jewellers Pvt. Ltd. Shri Anil P. Rank has claimed that he has sold his jewellery to M s Ranka Jewellers, Raviwar Peth and Shri Om Prakash N. Ranka has claimed that he has sold jewel1ery to M s Ranka Jewellers Pvt. Ltd. Thus, assessee, i.e. M s Ranka Jewellers Pvt. Ltd. has tried to explain its gold stock found during course of search by including jewellery claimed to have been purchased from M s. H. Kumar Gems International in its own name as well as in name of Shri Omprakash N. Ranka. He observed that Shri Anil P. Ranka has claimed purchase of 16050.350 gms jewellery vide invoice no 9 dated 22-10-2002, Shri Omprakash Ranka has claimed purchase of 4979.150 gms ornaments vide invoice no. 10 dated 22-10-2002 and M s Ranka Jewellers Pvt. Ltd. has claimed purchase of 13865.250 gms jewellery vide invoice no 8 dated 22-10-2002. Thus all three persons have claimed purchases vide invoices dated 22-10-2002, while search action u s.132(1) was conducted on 24-10-2002. AO further thought worthwhile to mention that in case of Shri Anil P.Ranka, M s H. Kumar Gems International has prepared issue voucher no 715 dated 41 ITA Nos.2188 and 2189 PN 2012 19-10-2002, On this voucher, initially description of goods was old gold jewellery, which was changed to 22 carats gold jewellery which is apparent from cutting. In case of M s Ranka Jewellers Pvt. Ltd., initially, on invoice date written was 12-10-2002, which was changed with black ink to 22-10-2002. Apparently, date was changed because assessee could not manage entry for 12-10-2002 because entries for that date were already written. He further noted that these bills of M s H. Kumar Gems International were shown by all three persons after few days of search, when valuation of stock was completed. He further noted that Shri Anil P. Ranka and Shri Omprakash Ranka have purchased jewellery from M s H. Kumar Gems International for first time, in their individual capacities. 63. He noted that in respect of claim of assessee regarding purchase of 13865.250 gms ornaments from M s H. Kumar Gems International, statement of director Shri Fatechand N. Ranka was recorded on 28-10-2002. AO also referred to statement of Shri Anil P. Ranka recorded on 10-12-2002 and statement of Shri Omprakash N. Ranka recorded on 29-10-2002. He further noted that survey action u s.133A of Act was conducted in case of M s. H. Kumar Gems International at Ahmedabad during which statement of Shri Hitendra Gundecha, proprietor of M s. H. Kumar Gems International in his capacity as Karta of HUF was recorded. He is also Managing Director of M s. H. Kumar Gems International. He had stated that on 22-10-2002 he has sold jewellery worth Rs.72,05,093 - to M s. Ranka Jewellers Pvt. Ltd. and Jewellery of Rs.25,97,703 - was sold on 22-10-2002 to Shri Omprakash Ranka and jewellery amounting to Rs.82,76,370 - was sold to Shri Anil Pukhraj Ranka on 19-10-2002. After considering statement of above parties AO came to 42 ITA Nos.2188 and 2189 PN 2012 conclusion that statements given by them were not true and were totally concocted. claim of assessee, i.e. Ranka group and statements by Shri Hiteshbhai, Shri Pragnesh P. Sukhadia according to AO are only make belief story as there were contradictions in statements given by above parties. He further noted that bill obtained from M s. H. Kumar Gems International, which was not entered in computer, was not available on date of search whereas same was made available to search party on subsequent day. 64. It was noted by AO that bills issued by H. Kumar International were accommodation bills issued to assessee and other members of Ranka family. bill issued to assessee, i.e. Ranka Jewellers Pvt. Ltd. and was fabricated as there was over writing of date on bill. date written on bill is 22-10-2002 while according to department it may be 12-10-2002. According to AO there were certain discrepancies in statements of Shri Pragnesh P. Sukhadi, vis- -vis statements given by Shri F.N. Ranka, Shri Anil Ranka and Shri Omprakash Ranka regarding date of order and date of receipt of gold ornaments. Thus, he was of opinion that bills were accommodation bills. According to AO assessee informed department about bill only on 28-10-2002 while search was carried on 24-10-2002. AO doubted as to why assessee waited for four days to submit to department that one bill of H. Kumar International was not debited in books prior to search. assessee made payments to M s. H. Kumar International after few months and therefore according to AO this fact does not prove genuineness of transaction. As per AO assessee along with Shri Omprakash Ranka and Shri Anil 43 ITA Nos.2188 and 2189 PN 2012 Ranka had ordered jewellery of such high amount but did not give details of designs of jewellery required. AO excluded total stock as per bills from stock as per books and worked out stock as per books at 123090.380 gms. Thus, there was excess stock found during search of 13189.160 gms which AO valued at Rs.66,73,715 - and made addition. He, therefore rejected concocted theory given by various persons of Ranka group that they have purchased gold from M s. H. Kumar Gems International and have supplied same to assessee on different dates and made addition of Rs.66,73,715 - as undisclosed income of assessee for block period by observing as under : 24. As mentioned earlier, that assessee company was also making purchases from M s H. Kumar Gems International, which were recorded in books of accounts. account of M s. H. Kumar Gems International in books of assessee was examined from F.Y. 1997-98 onwards. In F.Y. 1998-99 it was observed that most of time payment was made in advance and receipt of gold was on subsequent dates. Similar was situation in F.Y. 1999-2000. There were few transactions in this year where gold was received earlier and payment was made after 2-3 days. transactions for F.Y. 2000-01 were same as in F.Y. 1999-2000. maximum credit was for 15 days in few transactions. It is to be mentioned that till 31 3 2002 there was no outstanding payment. As on 31 3 2002, there was outstanding balance of Rs.72,05,693 - which was on account of alleged purchases vide invoice dt. 22 10 2002. payment of this amount was started from 12 4 02 i.e. after gap of almost 6 months and total payment was made by 3 12 03 i.e. after gap of over year. 'The schedule of payment made by Shri Omprakash Ranka and M s Ranka Jewellers Pvt. Ltd. itself speaks about fact that all was not well in these transactions. party which used to get advance payment in earlier years or allowed maximum credit of about 15 days, would allow credit of almost year for these alleged purchases dt 22 10 2002 is itself questionable. reply of assessee and Shri Ompraksh Ranka that terms of payments vary from transaction appears to correct because when there was actual transaction of purchase payment was made in advance or after few days out there was no purchases as per invoice date 22 10 2002 and it was only bill entry, hence payment was made after gap of one year. That is another question that in case of unrecorded purchases from this party, sometimes, there was delay in payments by assessee, but for that M s. H. Kumar Gems International has charged interest from assessee and this fact was evidenced by seized documents Nos.31, 32 of A-13 and document No.1 of A-15 seized from residence of trusted employee, Shri Rakesh Soni. 44 ITA Nos.2188 and 2189 PN 2012 25. From above discussion, it can be observed that there was no actual delivery of gold ornaments to Shri Anil Ranka on 20 10 2002 and to Shri Omprakash, Ranka and Shri Fatechand Ranka on 22 10 2002. story of receipt of ornaments from M s H. Kumar Gems International by Ranka Group is concocted story which has no legs to stand. Thus explanation given by assessee to explain stock of gold ornaments and calculation of shortage of gold stock at 5666.240 gms is not accepted. In fact, there was excess stock of gold ornaments as on date of search which is computed under : Gold stock as per Inventory as per para 11 - 136279.540 gms Gold as per books excluding - 123090.380 gms Claim of receipt from H. Kumar (13865.250) and from Shri Omprakash Ranka (4990.150) ---------------------------- 13189.160 gms ---------------------------- Thus, there was excess stock of gold weighing 13189.160 gms. At rate of Rs.506 - per gms, value of excess stock comes to Rs.66,73,715 - which is added to undisclosed income for block period u s.69A of Income Tax Act. On being confronted with assessee, it was submitted by authorized representative of assessee, that correct position of stock was explained to auditor as well as at time of assessment proceeding. However, assessee s contention is not accepted in view of discussion in earlier paras and addition of Rs.66,73,715 - is made to undisclosed income of block period. 65. Before CIT(A) it was submitted that search took place in case of assessee on 24-10-2002. During search bill was found in assessee s premises wherein gold jewellery weighing 13865.20 gms was found to have been purchased from M s. H. Kumar Gems International, Ahmedabad. It was submitted that above purchases were not recorded in books as on date of search since books were written upto 21-10-2002 whereas goods as per this bill were received after that date but before search. On being asked to identify stock received as per this bill assessee had done same. It was submitted that Shri Omprakash Ranka, and Shri Anil Ranka in their individual capacity had also purchased gold jewellery weighing 4990.150 gms and 16050.00 gms respectively from M s. H. Kumar Gems International. fact of purchase of jewellery from M s. 45 ITA Nos.2188 and 2189 PN 2012 H. Kumar Gems International was recorded by Shri Omprakash Ranka in his books of account which was seized during search and in respect of jewellery purchased by Shri Anil Ranka jewellery was given on loan to M s. Ranka Jewellers Pvt. Ltd. which was also recorded in books of M s. Ranka Jewellers Pvt. Ltd. prior to search. jewellery purchased by Shri Omprakash Ranka of 4990.150 gms and given to M s. Ranka Jewellers Pvt. Ltd. was not accepted by AO while working out stock. It was argued that total stock found in shop of assessee was to tune of 136279.54 gms. stock as per book after considering jewellery purchased from M s. H. Kumar Gems International and jewellery received from Shri Omprakash Ranka was 141945.78 gms. Thus there was shortage of 5,666.240 gms. Further survey was conducted on premises of M s. H. Kumar Gems International on 29-10-2002 wherein Shri Hitendra Gundecha, proprietor of M s. H. Kumar Gems International had accepted sale of gold ornaments to assessee, Shri Anil Ranka and Shri Omprakash Ranka. It was argued that AO did not accept bills issued by M s. H. Kumar Gems International treating same as accommodation bill and was fabricated as there was overwriting of date on bill. According to AO date written on bill is 22- 10-2002 is not correct and it should be 12-10-2002. 66. It was argued that bill issued by M s. H. Kumar Gems International to assessee was found in assessee s premises. Merely because bill was not debited in books AO was not justified in holding that bill issued was accommodation bill. It was further argued that Shri Anil Ranka and Shri Omprakash Ranka had also purchased jewellery which were duly recorded in books before date of search which they have given to assessee. Further, M s. 46 ITA Nos.2188 and 2189 PN 2012 H. Kumar Gems International had accepted in their submission during course of survey that jewellery was sold to assessee and sale was recorded in his books of account. Further, M s. H. Kumar Gems International is registered dealer under State and Central Sales Act and sales tax on this transaction has been paid by them. Further, they are also regularly assessed to income tax and have disclosed above transaction in their books of account. Further, in order passed u s.143(3) for A.Y. 2003-04 department has accepted sale of gold by M s. H. Kumar Gems International to assessee as genuine sale. Therefore, when one wing of department has accepted sale of jewellery as genuine sale, there is no reason to doubt purchases made by assessee. Further, special auditor in his report has also accepted purchases from M s. H. Kumar Gems International as genuine. It was argued that during survey at M s. H. Kumar Gems International, Ahmedabad, Mr. Pragnesh Sukhadia, employee and Shri Hitendra Gundecha, owner were examined and their statements were also recorded during which they have accepted that sales have been effected to M s. Ranka Jewellers Pvt. Ltd., Shri Anil Ranka and Shri Omprakash Ranka. 67. As regards allegation of AO that there were some overwriting on bill issued to M s. Ranka Jewellers Pvt. Ltd. it was submitted that assessee fails to understand as to how bill becomes bogus one. assessee had received bill in same condition and therefore there is no reason to hold that assessee had fabricated document. Further, AO himself has accepted that date of bill is changed from 12-10-2002 to 22-10-2002 which clearly indicates that goods were received by assessee. It was argued that even if contention of AO is 47 ITA Nos.2188 and 2189 PN 2012 accepted, still no addition is possible in hands of assessee because payment to M s. H. Kumar Gems International was made after search. Therefore, goods were received before search and if undisputedly payment was made after search no addition is possible in hands of assessee. 68. As regards contention of AO that assessee did not specify designs to justify that bills were merely accommodation bill, it was submitted that same is not correct at all. It was submitted that it is regular practice to ask for goods and assessee nowhere specifies any design etc. It was argued that during A.Y. 2003-04 Shri Omprakash Ranka has shown capital gain on transfer of jewellery purchased from M s. H. Kumar Gems International to M s. Ranka Jewellers Pvt. Ltd. and capital gains was offered to tax. assessment u s.143(3) was completed and department has accepted sale of jewellery as genuine by taxing capital gains thereon. 69. So far as variations in statements of family members of Ranka group, vis- -vis statement of Shri Pragnesh Sukhadia, who was employee of M s. H. Kumar Gems International is concerned it was argued that when all persons had accepted transaction of sale of gold ornaments to assessee and when discrepancy in statement of Shri Pragnesh Sukhadia was corrected by him in same statement, AO should have taken statement as whole and he is not justified in ignoring certain answers which was in favour of assessee. It was further submitted that department has exactly seized amount of jewellery weighing 13865 gms on 30-10-2002 before making any reconciliation of jewellery and total jewellery seized tallies with weighing as per bill issued to M s. Ranka 48 ITA Nos.2188 and 2189 PN 2012 Jewellers Pvt. Ltd. by M s. H.Kumar Gems International. This itself indicates that department confirms that these jewellery is received as per this bill. 70. Based on arguments advanced by assessee Ld.CIT(A) deleted addition by observing as under : 6.3.1. I have carefully considered facts of case and law as are apparent from records. During course of appeal, submission made and documents submitted from time to time were explained by AR. appellant also produced copies of panchanama, seized documents and invoices etc. which have been considered and examined. It can be noted from discussions available in assessment order that Assessing Officer for making aforesaid addition of Rs.66,73,715 for excess stock of gold ornaments found during search has not accepted explanation given by appellant in respect of certain purchases claimed to have been made from H. Kumar Gems International, Ahmedabad and also from Shri Omprakash Ranka, who inturn was also found to have purchased gold ornaments from same H. Kumar Gems International, Ahmedabad. claim of appellant was that bills of these purchases dated 22.10.2002 and 23.10.2002 respectively, had remained to be entered into books computer, whereas stock was already available in business premise. It was submitted in this respect that Mr. F.K.Ranka in his preliminary statement recorded for first time at business premise on 26 10 2002 has pointed out clearly that books were recorded upto 21 10 2002 and same is required to be further updated. It has been also stated that this fact of matter that books were written upto 21 10 2002 has remained undisputed. It has further been stated that no specific question in respect of details of bills which were yet to be recorded, were asked during recording of preliminary statement on 26 10 2002 and therefore appellant claims to have no occasion to give details in respect of impugned bills. It has further been submitted that appellant on first available occasion on 28 10 2002, when Mr. F. K. Ranka was asked about details of bills which are not entered in system, had not only given details of purchases made by appellant company from M s H. Kumar but also showed where said bill was laying in business premises. It has been further stated that controversy raised by Authorized Officer, suggesting implanting of impugned bill was without any basis and was only due to his suspicion. It has been claimed that appellant kept on explaining facts properly and never accepted, as same was not true, that any such implanting has taken place. argument has further been made during appeal that Authorized Officer, almost immediately carried out survey at selling party and it is matter of record that not only transactions were found recorded in books of Mr. H.Kumar, but even during statement, proprietor as well as concerned employee accepted impugned transaction. Except for differences committed in respect of dates, even which were immediately corrected on being pointed out about difference, nothing adverse was claimed to have been found. appellant is of view that despite these positive findings, Assessing Officer continued to rely on irrelevant facts by 49 ITA Nos.2188 and 2189 PN 2012 ignoring very relevant facts. It can be seen from assessment order that Assessing Officer, for not accepting claim of appellant for purchases described above, has elaborately relied upon statements of Shri. Anil Ranka, Shri. Omprakash Ranka, Shri. Fatechand Ranka, Shri. Hitesh Gadecha, proprietor of H. Kumar Gems International, Ahmedabad and Pragnesh Sukhodia, employee of H. Kumar Gems International etc. Assessing Officer has also referred to corrections appearing in respect of date in purchase bill shown in name of appellant. It was noted that date of 12 10 2002 has been corrected to 22 10 2002. Assessing Officer has also pointed out about similar correction found in books of H. Kumar found during survey at Ahmedabad on 29 10 2002. Though bill was found and seized from business premise of appellant, but suspicion raised by Authorized Officer while recording statement u s 132(4) of Shri. F.K.Ranka, has also been considered for holding bill as bogus and implanted. relevant extracts of statements have been incorporated in body of block assessment order, which has already been quoted above. Assessing Officer has also pointed out contradictory facts emanating from various statements, more particularly of appellant group persons and that of Mr.Hitesh Kumar and his employees, who have affirmed sale through impugned vouchers to appellant, Shri. Anil Ranka and Shri. O.N. Ranka and these contradictions have been used to arrive at inference that claim of purchase through these impugned bills are not genuine and therefore, no credit can be given for availability of gold stock as per books by adding amounts appearing in these bills. To strengthen above, Assessing Officer has also red to various other circumstantial facts viz. failure of director to explain tagging, identification, no evidence of placing order and design first such purchase by Shri O.N. Ranka, Shri Anil Ranka etc., delay in payments, non availability of tickets for journey by supplier, date of invoice on date of arrival in Pune, etc., which are clear from assessment order already quoted above for this addition. On basis of these reasons Assessing Officer has treated two purchases as bogus and computed excess gold stock to arrive at addition of Rs.66,73,715. appellant has claimed this finding as prejudiced and erroneous. For contradictions appearing in various statements as noted by Assessing Officer in para 20 of block assessment order (which can be referred to for details in para 6.2 above), it is claim of appellant that gold jewellery appearing in these bills were received prior to date of search and in support of that appellant is relying upon sale invoices, issue vouchers which have been found and seized during course of search and is part of panchanama prepared during search. argument of appellant about discrepancy noted in statements of different persons relied upon by Assessing Officer is that minor slippages occurring in statement here and there are due to mental stress which is so common while facing any interrogation from Government authority. It has been reiterated that purchases from Ahmedabad party is genuine and same is also supported from finding made by survey action carried out against aforesaid supplier i.e. H. Kumar Gems International, Ahmedabad almost within few days of action at premise of appellant. It has been also claimed that documents found at premise of supplier clearly supports claim of appellant. appellant has also produced copy of appellate order passed in case of Ahmedabad party (Appeal No. CIT(A) XIII Jt. CIT(OSD) Cir7 53 0506 dtd. 27.04.2006), in support of its above claim. It has been shown that impugned sale has been accepted by department as genuine in hands of H.Kumar and therefore same cannot be held to be not genuine in hands of appellant. Similarly, 50 ITA Nos.2188 and 2189 PN 2012 assessment order of Shri O.N.Ranka has been relied to claim that capital gains shown on sale of impugned jewellery to appellant company has been accepted by Assessing Officer without any reservations in scrutiny assessment and therefore purchase in hands of appellant for same transaction cannot be denied. appellant has also relied upon various decisions of Hon'ble ITAT reported on page no. 4907 of Chaturvedi & Pithisaria page no. 4907 and decision of Hon'ble ITAT in case of Ghanshyambhai Thakkar 56 TTJ 460 in support of its contention that statement has to be taken as whole and A.O. is not justified in ignoring certain answers which were in favour of assessee. In this respect, it has been pointed out by AR that Assessing Officer has quoted only specific question and answers from statement recorded, which were suiting his prejudiced finding. It has also been stated that Special Auditor, in his audit report has also treated these purchases as genuine to arrive at finding after reconciliation that there is no excess stock of gold jewellery at business premise. I have considered inventory reconciliation of gold stock made by auditor, which is appearing in Annexure B-1 of his report and in this report he has arrived at shortage of 5,666.240 gms and has concluded that "The assessee has not been able to explain shortage in gold stock. shortage in gold stock is nothing but unaccounted gold sales. unaccounted gold sales for F. Y. 2002-03 has been estimated on basis of Jama kharcha paper found and seized during course of search. This estimated unaccounted gold sales covers shortage in gold stock". Assessing Officer, apparently has not given any reason in his assessment order as to why he was not convinced with finding of Special Auditor on this issue. However, he has given detailed reasons for making additions as is apparent from relevant portion quoted earlier in para 6.2. 6.3.2. On careful consideration of materials available on record, it is noted that appellant has claimed that bills for purchases from H. Kumar Gems International in name of appellant company, which were not entered in books were found and seized during course of search. It is noted from materials available on record that though Assessing Officer has relied on some confusion about discovery of aforesaid bills from drawer of director's office as noted in statement on oath of Shri F.N. Ranka recorded u s 132(4) and also on circumstantial facts for arriving at finding that impugned bills were bogus, but it is clear from some relevant objections raised by Authorised Representative that some relevant facts were ignored. suspicion being raised can be seen from statement of Mr. F.N. Ranka, wherein Authorized Officer in statement recorded on 28 10 2002, has asked questions saying that this bill was earlier not available in drawer and therefore how same came there. It has been claimed by appellant during appeal that search commenced on 24 10 2002 and thereafter business premise has remained under control of search party till search was finally concluded and therefore it can neither be assumed nor considered that anybody can plant some paper in premise without knowledge of search party. In view of above, appellant has contended that it has to be held in facts of this case that impugned bills were existing in business premise and as same was existing in normal course of business, same has to be considered while evaluating stock of gold jewellery found during search vis-a-vis books of account. It has been claimed that Assessing Officer has ignored purchases made through these bills directly from H. Kumar and also from Shri.O.N. Ranka, for determining aforesaid addition as excess stock. 51 ITA Nos.2188 and 2189 PN 2012 On careful consideration of material available on record, it is noted that though Authorized Officer, during course of search has raised suspicion about coming into premise of impugned bills, while recording statement of Shri. F.N.Ranka on 28 10 2002, but there is no evidence available or found which can substantiate said suspicion. Circumstantial facts cannot negate fact that premise was under control of search party from 24.10.2002 onwards. Undisputedly bills of purchase by appellant of gold ornaments from H.Kumar was found from drawer of Director on 28 10 2002 and therefore unless there are evidences available which can show that same was planted unscrupulously, it will be difficult in law to hold same. It is further noted from copies of punchnamas prepared for search of business premise that first search apparently took place on 24 10 2002. As per this panchnama search commenced at 6.30 pm and was concluded at 6.45pm, without preparing any inventory or any material found or seized or recording of any statement. It is noted in this panchnama that premise was sealed and prohibitory order u s 132(3) was served on Director. On 26 10 2002, search resumed at 11.45 am and continued till 1.30 am of 27 10 2002, there upon again premise was sealed and prohibitory order was served. search thereafter subsequently commenced on 27 10 2002 at 10.30 am and was temporarily suspended on 29 10 2002 at 1.30 am. premise was again sealed and prohibitory order was served. As per this panchnama statement of Shri. F.N. Ranka was recorded. Therefore from perusal of panchnama also, it has to be accepted that business premise has remained in control of search party and there is no material available on record which can suggest that prohibitory order served on appellant u s 132(3) was violated. If it is assumed that suspicion of Authorized Officer that somebody during course of search implanted these bills, then also responsibility has to be on search party, in charge of search, as same would suggest lapse on their part. Nobody saw anybody or caught anybody placing bills in drawer and therefore suspicion raised by Authorized Officer has to be ignored. As per regular procedure search party has to search persons entering premise and after their search to party searched or their representatives in presence of panchas at time of commencement resumption of search or its temporary suspicion. Therefore it has to be accepted that bill dated 22 10 2002 was found during search and was not recorded in books, as books were admittedly written upto 21 10 2002 only. It is also noted that not much of discrepancy was found at end of seller at Ahmedabad during survey conducted on 29 10 2002 except for some correction in their stock book. These discrepancy noted at end of seller were not found sufficient by department to even reject books of account, as is apparent from order of CIT (A) quoted supra. sales made to Ranka group were found to be acceptable in hands of H. Kumar Gems International. Though correction appearing in bills seized at appellant's premise as well as in books of seller and similar other contradictions including date of invoice being on date of arrival in Pune by Hitesh Kumar, raises some suspicion but that alone cannot be held to be strong enough to deny other facts which are much stronger and are in favour of appellant. Similarly other discrepancies pointed' out by Assessing Officer, in respect of 'different statements are also of circumstantial in nature for which various explanations have been given and in facts available, it is neither possible to accept them or reject them and therefore they have to be ignored or treated as explained as balance of overall evidences, more particularly direct evidences are in favour of appellant. Since bills were found and seized during course of search itself, it cannot be ignored unless 52 ITA Nos.2188 and 2189 PN 2012 it is established that bill was only accommodation entry to inflate purchases. This is case where overwhelming evidences are available to suggest that part of sales and purchases have been kepi outside books of accounts and therefore in backdrop of same, it is not possible to accept that such assessee would take bogus bill in regular course of business. Had it been found with conclusive evidences that appellant obtained same subsequent to search to explain excess stock found, as was attempted by Assessing Officer, matter could become acceptable. In present case since bill was found in regular course of business during search itself, it cannot be assumed to be representing bogus bill. Furthermore, this fact was not found at end of seller also. survey party could not find that bills were bogus or bills were issued without having any stock with him and therefore findings of Assessing Officer cannot be accepted. This view further gets strength from fact that shortage has been determined by appellant in its explanation, which has been found acceptable by Special Auditor at 5666.240 gms. For this, both impugned purchases of 13,189 gms and 4950.150 gms have been considered. After treating these purchases as bogus, Assessing Officer has computed excess gold stock at 13,189.160 gms to make addition of Rs.66,73,715 @ Rs.506 per gm. If claim of Assessing Officer is taken as correct that appellant arranged for these two bogus bills on 28.10.2002 after reconciliation was made during search, then it is not explainable why he will take two bills to arrive at shortage of 5666.240 gms. In fact one bill in appellant's own name for 13,865.250 gms would have satisfactorily explained stock found. In this consideration also finding of Assessing Officer looks not logical. Similar facts can be noted in respect of purchases made from Shri. O.N.Ranka. Though Mr. O.N. Ranka has purchased jewellery sold to appellant from same party at Ahmedabad but in this case also nothing adverse which can substantiate claim of Assessing Officer were found. Furthermore, evidences submitted by appellant during appeal in form of assessment order made u s 143(3) showing that capital gains shown on impugned sale in its return was accepted by Assessing Officer, as well as copy of stock register etc seized during search from premise of Ranka Jewellers, Raviwar Peth, having details of purchase and sale recorded already before search, tilts balance in favour of appellant. As discussed above, even if this bill is not accepted excess stock remains explained. Furthermore, it is also fact that M s H.Kumar Gems International was acceptedly having regular business transactions with appellant for last many years and is name even appears in documents found on basis of which income from unaccounted transactions have been computed by Assessing Officer in this assessment order. This concern has been found registered for sales tax and invoices seized indicate charging of sales tax.. Nothing adverse in respect of this payment of sales tax on impugned bills, is available on record. claim made by appellant that this is not ordinary assessment but assessment consequent upon search, where no scope exists for any presumption or assumption, also cannot be ignored. argument made by learned A. R. that statement recorded during proceedings has to be read in whole and therefore A.O. was not justified in ignoring certain answers which were in favour of appellant, is also correct in law. It is significant to be noted that all concerned persons whose statements have been relied upon by A.O., to highlight some discrepancies, had actually accepted transaction of sale of gold appellant and therefore much importance given by A.O. to discrepancy in statement of Shri. Pragnesh, which he had corrected in same statement is not justified for drawing adverse inference. learned A.O. has not taken into account 53 ITA Nos.2188 and 2189 PN 2012 direct and relevant evidences available on issue, apparently because they were not his findings. Assessing Officer cannot disregard evidence which is direct and relevant on certain presumptions. He is duty bound to consider all materials available on records and evaluate same in dispassionate manner to finally conclude inference. Therefore, appellant has been able to show that Assessing Officer by ignoring certain facts available on record, viz. seizure of bills at search premise, acceptance of same on first available occasion by Director, entries of sale appearing in books of Shri. O.N.Ranka seized during simultaneous search and also in books of M s. H.Kumar International, during survey almost at same time i.e. on 29 10 2002 and similar such evidences, has ignored to consider many relevant issues for coming to finding which is in dispute in this ground of appeal. In view of above and after considering all relevant materials available on record for impugned addition of Rs.66,73,715, I am of opinion that Assessing Officer erred in giving finding that bills of purchase from Shri. O.N. Ranka and MIs H. Kumar Gems International are to be ignored while considering this explanation given by appellant in respect of stock of gold jewellery found during search at business premise of appellant. It is also important to be noted from table of computation given above, on asset side approach as well as income side approach, that Assessing Officer has taken excess cash on asset side approach at Rs.99,51,101 for computing total undisclosed income on asset side approach of Rs.2,67,11,893. It has been found that this excess cash of Rs.99,51,101, comprised of cash actually seized of Rs.9,51,101 and Rs.90,00,000 declared suo moto in block return as cash available at native place. On being asked about this declaration, it was explained by AR during appeal that this declaration for cash was made to cover up undisclosed income declared in return at Rs.1,50,00,000. There is no other discussion available in assessment order on this issue. Therefore it is apparent that declaration of cash of Rs.90,00,000 is not based on any finding of search. Though. act of declaring cash at native place of Rs.90,00,000 without any such finding in search is intriguing, but for limited purpose of issue in hand, it indirectly lends support to their claim that assessee who is declaring so much, of cash without any finding of evidence would probably not resort to implanting of bills, as has been suspected by Assessing Officer. It is also noteworthy that after accepting claim of impugned bills as part of purchase also stock does not tally completely. As per appellant's own computation gold ornaments found during search is short by 5666.240 gms. It is accepted fact that appellant was engaged in concealing transactions and income, for which Assessing Officer has made computation separately on income approach but relevant issue is that said activity has been carried out from same premise. No separate books of accounts or stock etc relating to this concealed transaction have been found. material found clearly shows that transactions were carried Gut together and part of it were not recorded in disclosed books of account. Therefore, even if on strength of overwriting, it is presumed that impugned bill related to concealed purchases and was not to be accounted for before search, and date was changed from 12 10 2002 to 22 10 2002, after search to explain excess stock, still it will have to be considered for arriving at quantum of excess stock as stocks for disclosed and undisclosed business was same and income for concealed transactions are separately being computed. It is admitted fact that books were recorded upto 21 10 2002 and payments for impugned purchases were made after search, though unduly late but this will not justify exclusion of these purchases. As already discussed, 54 ITA Nos.2188 and 2189 PN 2012 overwhelming evidences were on record which over weighs objections raised by Assessing Officer. Assessing Officer has given finding by ignoring these relevant facts, mostly on placing reliance of circumstantial evidences. Though circumstantial evidences are many and create reasonable doubt but same cannot overrule direct evidences. It is trite law that preponderance of circumstantial evidences and human probabilities can be applied where direct evidences are not available. In this case, Assessing Officer by ignoring direct evidences, has made error of judgment. Therefore, Ground No.2 of appellant is allowed. 71. Aggrieved with such order of CIT(A) revenue is in appeal before us. 72. Ld. Departmental Representative strongly opposed order of CIT(A). He submitted that search took placed on 24-10-2002 and books were written upto 21-10-2002. major dispute is regarding bill obtained from M s. H. Kumar Gems International, Ahmedabad in very suspicious manner. He submitted that on date of search, bill was not found whereas same was found in drawer on very next day. Further, there was some over writing on above bill. Therefore, manner in which bill was found raises suspicion. He submitted that AO had given valid reasons for not accepting that bill. He accordingly submitted that order of CIT(A) be reversed on this issue and ground raised by revenue be allowed. 73. Ld. Counsel for assessee on other hand heavily relied on order of CIT(A). He submitted that on date of search, i.e. 24-10-2002 shop was sealed and shop was opened on evening of 26-10-2002. Referring to answer of Shri F.N. Ranka to Question No.5 in statement recorded u s.132(4) on 28-10-2002 he submitted that authorized officer had specifically asked as to whether there are any goods articles in shop for which purchase bills have not been received. Referring to answer he submitted that 55 ITA Nos.2188 and 2189 PN 2012 Shri F.N. Ranka in his statement had categorically stated that they have received goods and bill of M s. H. Kumar Gems International is not fed in computer but is in drawer. He submitted that if contention of Ld. Departmental Representative that bill was subsequently inserted in drawer, then why no action has been taken against officers of department present during search. He submitted that when M s. H. Kumar Gems International had admitted to have sold goods to assessee and various other family members in his statement recorded during course of survey and when assessment of M s. H. Kumar Gems International was completed u s.143(3) accepting such sale of goods to assessee and other members, then there is no reason to doubt purchases made by assessee from M s. H. Kumar Gems International. He submitted that when one wing of department has accepted sale of jewellery as genuine sale, there is no reason to doubt purchases made by assessee. For above proposition he relied on decision of Hon ble Supreme Court in case of CIT Vs. Berger Paints India Ltd. reported in 266 ITR 99 and decision of Pune Bench of Tribunal in case of A.E. Lokhandwale reported in 35 ITD 50. Further, M s. H. Kumar Gems International is registered dealer both under State and Central Sales Tax Acts and tax on this transaction has been paid. special auditor has also accepted transaction as genuine. Therefore, order of CIT(A) being in consonance with law should be upheld. 74. Ld. Departmental Representative in his rejoinder submitted that special auditor cannot say transaction as genuine or not. He is to base his report on basis of papers found. 56 ITA Nos.2188 and 2189 PN 2012 75. We have considered rival arguments made by both sides, perused orders of AO and CIT(A) and paper book filed on behalf of assessee. We have also considered various decisions cited before us. We find excess stock of 13189.160 gms of gold was determined by AO on basis of actual stock found and stock as per books. value of above amount was Rs.66,73,715 -. On being confronted by AO it was submitted by assessee that it has purchased gold jewellery weighing 13865.250 gms from M s. H. Kumar Gems International, Ahmedabad. AO did not accept above contention of assessee on ground that bill issued to assessee, i.e. M s. Ranka Jewellers Pvt. Ltd. was fabricated and there was overwriting on date of bill. date written on bill is 22-10-2002 whereas AO inferred same as 12-10-2002. We find AO further noted that there were certain discrepancies in statements of Shri Pragnesh Sukhadia and statements given by Shri F.N. Ranka, Shri Anil Ranka and Shri Omprakash Ranka regarding date of order and date of receipt of gold ornaments. Further, assessee informed department about bill only on 28-10-2002 whereas search was carried out on 24- 10-2002, i.e. 4 days after initial search that bill of M s. H. Kumar Gems International was not debited in book prior to search. Further according to AO payment was made after few months which do not prove genuineness of transaction. We find CIT(A) accepted genuineness of bill on ground that bill issued by M s. H. Kumar Gems International to assessee was found in assessee s premises. Shri Anil Ranka and Shri Omprakash Ranka had also purchased jewellery from said party which were duly recorded in their books before date of search. Therefore, AO should not have disbelieved bill issued to M s. 57 ITA Nos.2188 and 2189 PN 2012 Ranka Jewellers Pvt. Ltd. i.e., assessee. Further, M s. H. Kumar Gems International had accepted that jewellery was sold to assessee and sale was found recorded in his books of account. M s. H. Kumar Gems International has given their confirmation. M s. H. Kumar Gems International is registered dealer in State and Central Sales Tax Act and sales tax on this transaction has been paid by M s. H. Kumar Gems International which are regularly assessed to tax and have disclosed above transaction in their books of account. Further, assessment has been completed u s.143(3) for A.Y. 2003-04 in case of M s. H. Kumar Gems International wherein such sale of gold to assessee has been accepted as genuine. We therefore find merit in submission of Ld. Counsel for assessee that when one wing of department has accepted sale of jewellery as genuine sale, there is no reason to doubt purchases made by assessee from said party. Further, special auditor in his report has also accepted purchases from M s. H. Kumar Gems International as genuine. We find during survey at M s. H. Kumar Gems International, Ahmedabad Shri Pragnesh Sukhadia, employee and Shri Hitendra Gundecha, owner were examined and their statements were recorded. They have accepted that sales have been effected to M s. Ranka Jewellers Pvt. Ltd., Shri Anil Ranka and Shri Omprakash Ranka. Further, submission of Ld. Counsel for assessee that in A.Y. 2003-04 Shri Omprakash Ranka has shown capital gains on transfer of these jewellery purchased from M s. H. Kumar Gems International to M s. Ranka Jewellers Pvt. Ltd. and that capital gain was offered to tax which has been accepted by AO in order passed u s.143(3) could not be controverted by Ld. Departmental Representative. In view of above facts and in view of detailed reasoning given by CIT(A) while deleting this addition 58 ITA Nos.2188 and 2189 PN 2012 we do not find any infirmity in order of CIT(A). Accordingly, order of CIT(A) on this issue is upheld and ground raised by revenue is dismissed. 76. Ground of appeal No.3 by revenue reads as under : 3. Commissioner of Income-tax (Appeals) has erred on facts and in law in deleting addition of Rs.1,76,553 - on account of excess stock of silver when valuation of stock was done by qualified Government valuer. 77. Facts of case, in brief, are that during course of search at business premises of assessee at Laxmi Road, silver articles weighing 21,709 gms were put under deemed seizure. As per inventory prepared at time of search action total weight of silver articles was taken at 36,14,108 gms during course of search as well as assessment proceedings, assessee was asked to explain as to how above silver has been accounted for in books. It was explained by Shri F.N. Ranka, Director of assessee company that as per inventory taken by department, gross weight of 36,14,108 gms include weight of plastic bags and plastic boxes. It was submitted that plastic bags and plastic boxes were weighing 1,14,400 gms. Thus net weight of silver articles was 35,00,108 gms. It was further explained that one company namely M s.Syngenta of 1170 27, Revenue Colony, Shivajinagar, Pune has placed order for silver coins for 93500 gms. order was ready on 10-10-2002 against which sale bill was made on 10-10-1002 vide Bill No.S 4755. amount of Rs.7,84,627 - was received by cheque No.936588 on 18-10- 2002 for which receipt was issued vide No.231 dated 18-10-2002 on same day, i.e. 18-10-2002. letter was given to said company stating fact that even though payment has been received, 59 ITA Nos.2188 and 2189 PN 2012 however, delivery is yet to be taken by company. Since programme was postponed, it was requested by company to keep coins and they will take when programme is fixed. It was submitted that these coins have been inventorised by departmental valuer while taking inventory. Accordingly assessee reconciled stock and it was submitted that excess, if any is only 22780.570 gms. assessee accordingly submitted that there is actually no excess stock. 78. However, AO did not accept above contention of assessee. He noted that approved valuer while valuing silver items has given due credit for weight of plastic bags and boxes. This shows clear cut of excess silver articles which comes to 22,780.570 gms. Applying rate of Rs.7750 - per kg, AO determined such excess stock of silver at Rs.1,76,553 - which he added to total undisclosed income of assessee for block period u s.69A of Act. 79. Before CIT(A) it was submitted that main difference is on account of valuation of plastic bags. bags contain silver articles and weight of bags ranges from 2 gms to 15 gms. It was submitted that Shri Uttam Jain, departmental valuer has reduced 114.400 kg on account of weight of plastic bags of around 22000 bags and thereby taking adhoc weight of 5 gms per bag. Shri F.N Ranka in his statement recorded u s.132(4) has pointed out certain discrepancies in valuation made by Shri Uttam Jain and had pointed out that weight of plastic bags was not taken correctly. It was argued that if average weight per bag is taken at 6 gms as against 5 gms adopted by Shri Uttain Jain there would be no excess stock at all. inventory itself shows that there have been number of 60 ITA Nos.2188 and 2189 PN 2012 items for which weight of plastic bags was taken at more than 5 gms by valuer. Therefore, there is no basis given by valuer for adopting average weight per plastic bag at 5 gms. It was argued that addition made by AO should be deleted. 80. Based on arguments advanced by assessee Ld.CIT(A) deleted addition by observing as under : 7.3 I have carefully considered facts of case and law as apparent from record. It is apparent from material available that silver stock of 36,14,109 gms was found during search, out of which silver article weighing 21,709 gms were placed under deemed seizure. As per fats noted by Assessing Officer in assessment order, Shri F.N. Ranka, Director of appellant company was found to have stated u s.132(4) on 25 11 2002, in respect of inventory of silver articles that registered valuers have weighed silver articles along with plastic bags and boxes, in which they were kept and weight of such containers was taken at 114400 gms on estimate basis. As per appellant it should have been more. On this basis it was explained that net weight is 35,00,108 gms. Assessing Officer has further noted in para 26 of assessment order that Mr. F.N. Ranka has further explained in said statement that silver coins weighing 93,500 gms were sold to M s. Syngenta of Pune and delivery of same was yet to be taken. Therefore appellant requested to remove these items. claim for exclusion of silver coins was accepted by Assessing Officer, however, claim for higher relied for containers was not accepted. Therefore, excess of silver articles of 22,780.57 gms computed after removing 93,500 gms of silver coins but taking weight of plastic container at 114400, as determined by departmental valuer was taken by Assessing Officer as undisclosed asset u s.69A @ Rs.7750 per kg of silver (Rs.1,76,553). claim of appellant that this excess should be treated as explained as objection was raised by Mr. F.N. Ranka even during search in his statement recorded on 25.11.2002 that weight of container is more, and even if weight of 22000 container is raised from 5gm to 6gm per container, excess will get explained, was not accepted by Assessing Officer. This was claimed to have been rejected without assigning much reasons only on ground that valuation was done by qualified person. appellant has disputed same and has relied on valuation report of department wherein Mr. Uttam Jain was claimed to have estimated weight of plastic bags at 114400 gms by taking weight of 22,000 bags @ 5 gms per bag. It has been contended that Mr. Ranka in his statement given u s. 132(4) during search itself on 25 11 2002 has pointed out this .discrepancy but department did not take said seriously. It has been stated in this respect that if weight of these bags is increased from 5 gms to 6 gms difference would vanish. It is noted that auditor in his report prepared u s 142(2A), at Annexure 8- 2 has given reconciliation of silver stock found in business premise and has arrived at excess silver stock of 22,780.570 gms. However, in concluding para in same Annexure, auditor has stated that "Actual excess 22781 gms i.e. 22.781 kg but Officer by mistake calculated excess as 21.709 kg and made deemed seizure. assessee has explained that in fact there is no excess. At many places weight of plastic box and bags are not deducted. Similarly, weight of plastic bag is taken ad- 61 ITA Nos.2188 and 2189 PN 2012 randum. weight of plastic bags are not taken in actual. No proper deduction of plastic bags, plastic boxes is done. Hence, excess of 22.281 has come. I have verified explanation and list of plastic bags prepared by valuer Shri Uttam Jain and found that weight of plastic bags and plastic bags of some items are not considered. However, same cannot be considered now as search party has not considered this aspect." On careful consideration of various materials available on record, it is noted that addition made by Assessing Officer is without any basis. Assessing Officer has not given any reasons in assessment order as to why he has not considered report of Special Auditor on this issue and has also not accepted arguments appellant. It is noted that objection about weight of plastic bags were taken during pendency of search on 25 11 2002, before search was finally concluded and therefore it ought to have been verified as search premise was still under control of search party. As aforesaid objection of appellant, having been found correct by Special Auditor and raised properly at relevant point of time, have remained unattended by search party as well as Assessing Officer, explanation given by appellant has remained uncontroverted and therefore has to be accepted in facts of case and in law. addition cannot be sustained in absence of facts and materials which can show that same has been done in fair manner. Ground No.3 therefore is allowed. 81. Aggrieved with such order of CIT(A) revenue is in appeal before us. 82. We have considered rival arguments made by both sides, perused orders of AO and CIT(A) and paper book filed on behalf of assessee. We find during course of search silver stock of 36,14,108 gms was found. AO asked assessee to explain as to how these silver articles are appearing in books of account. Although assessee tried to reconcile same, however, AO noted that there is excess stock of 22780.570 gms. submission of assessee that there is no excess stock as at many places weight of plastic bags and boxes are not deducted and in some cases weight of plastic bags has been taken at random was rejected by AO on ground that valuer has given due credit for weight of plastic bags and boxes. We find Ld.CIT(A) considering submission of assessee that weight of plastic bags have not been properly considered by search party as well as valuer accepted 62 ITA Nos.2188 and 2189 PN 2012 contention of assessee and deleted addition which has already been reproduced in preceding paragraph. We find order of CIT(A) in instant case is detailed and well reasoned one which does not call for any interference from our side. We therefore uphold same and ground raised by revenue on this issue is dismissed. 83. Ground of appeal No.4 raised by revenue has already been adjudicated while deciding ground of appeal of appeal No. 2 in assessee s appeal. Therefore, this ground is not being separately adjudicated. 84. Ground of appeal No.5 by Revenue reads as under : 5. Commissioner of Income-tax (Appeals) has erred on facts and in law in deleting addition of Rs.19,97,934 - on account of undervaluation of stock, when, in fact Assessing Officer has followed well established method of valuation of stock. 85. Facts of case, in brief, are that AO during course of assessment proceedings noted that assesses of Ranka Group i.e. M s Ranka JeweIlers Raviwar Peth, Ranka Jewellers Pvt. Ltd, and Ranka Jewellers, Karve Road are following average system of accounting for valuation of closing stock. average system means that assesses are taking quantity and value of opening stock as well as purchases made during year. In this quantity and value, quantity and value of mixing i.e. copper and silver etc. is added and burning loss is reduced. From value arrived in this manner, opening stock and purchases is added and similarly quantity is also added. value is divided by quantity to arrive at average price. quantity of closing stock is multiplied by average price to arrive at value of closing stock. This method of valuation holds good if there are no unaccounted purchases and sales. However, during 63 ITA Nos.2188 and 2189 PN 2012 course of search, evidences were found that assesses, of Ranka Group were indulged in making unaccounted purchases and sales. If unaccounted purchases are also taken into consideration for purpose of determining average price average price is increased in comparison to average price determined by assessee for purpose of valuation of closing stock shown in books. Thus, assesses of this group has undervalued stock as per books of account. 86. During course of assessment proceeding fact of under valuation was brought to knowledge of assessee and he was asked to explain as to why value of closing stock as per books should not be enhanced and it should be treated that stock was sold on FIFO method. In response to same it was submitted by assessee that average cost method is regularly being followed and accepted by department. method of valuation is already disclosed to department in regular returns and hence issue is out of purview of chapter XIV B. It was further contended that both opening and closing stock should be valued on same line and hence effect will be negligible. 87. However, AO was not satisfied with explanation given by assessee. He referred to order in case of M s. Ranka Jewellers, sister concern of assessee where similar additions were made. Rejecting various explanations given by assessee AO made addition of Rs.19,97,934 - by observing as under : 52. contention of assessee has been considered but for reasons discussed above and example given, contention of assessee is not accepted. During course of search at business premises of Ranka Jewellers Pvt. Ltd. gold jewellery weighing 88627.28 gms was found and total value shown in books was 4,41,59,424 -. Thus stock was valued at Rs.4982.59 for 10 gms (44159424 88627.28). However as 64 ITA Nos.2188 and 2189 PN 2012 discussed above minimum value of acquisition of jewellery after June 2002 was Rs.5208 per 10 gms. Therefore, value of gold jewellery lying at premises of assessee should be 520.8 x 88627.28 = Rs.4,61,57,358 -. Thus assessee has overvalued stock by Rs.19,97,934 - which is added to undisclosed income of block period. 88. Before CIT(A) assessee submitted as under which has been reproduced by CIT(A) at para 14.2 of his order and which reads as under : assessee has been following average cost method for determining valuation of closing stock at end of each year in books. avg. cost is determined on basis of purchases made during year and value of opening stock. A. O. has applied FIFO method for valuing closing stock. It is submitted that assessee's method is recognized method of valuation of stock and it has been accepted in past by dept. in regular assts. Secondly, this addition at best can be considered to be based on difference of opinion which is not justified in block asst. Thirdly, in case of Ranka Jewellers, Raviwar Peth, similar method has been adopted by assessee for-valuation of stock and in block asst. appeal, learned CIT(A) has deleted this addition. [copy of order is on page 318-391]. Accordingly, addition made be deleted. 89. Based on arguments advanced by assessee Ld.CIT(A) deleted addition by observing as under : 43. facts of case were duly considered and in my considered opinion, addition made by Assessing Officer cannot be upheld as above issue has been decided in favour of assessee by my Learned Predecessor in case of Ranka Jewellers, Raviwar Peth, Pune as claimed by appellant in their submission quoted above. Furthermore, it is noted that aforesaid finding of CIT(A) has been upheld by I TAT, Pune in ITA No. 801 PN 2006 by ITAT 'A' Bench in their order dated 6.6.2011. As it is not in dispute that facts and circumstances of this addition is similar to facts and circumstances of addition made in case of Ranka Jewellers, Raviwar Peth, aforesaid decisions has to be followed. In view of above, this ground of appeal is treated as allowed. 90. Aggrieved with such order of CIT(A) Revenue is in appeal before us. 91. After hearing both sides, we do not find any infirmity in order of CIT(A). We find addition on identical ground was made in case of Shri Vastupal Ranka, Proprietor of M s. Ranka Jewellers by 65 ITA Nos.2188 and 2189 PN 2012 AO which was deleted by CIT(A). On appeal by Revenue Tribunal vide ITA No.1376 PN 2013 order dated 30-04-2014 for block period 01-04-1996 to 24-10-2002 deleted addition by observing as under : 4. After hearing both sides, we find identical issue had come up before Tribunal in case of M s. Ranka Jewellers Vs. Addl.CIT vide ITA Nos. 801, 820 and 984 PN 2006 order dated 06-06-2011 for block period 01-04-1996 to 24-10-2002. We find Tribunal while deciding identical issue has dismissed appeal filed by Revenue by observing as under : 30. Ground No.3 relevant facts are that assessee firm engaged in jewellery business and following average cost method for valuing stock in books i.e. it takes average of opening stock and purchases during year and values closing stock at that rate. This method was being followed regularly and same was being accepted by department in past. During course of assessment proceedings, A.O. held that average cost method followed by assessee is not correct and assessee should have followed FIFO method for valuing stock. A.O. was thus of view that closing stock should be valued as per closing purchase rate in month of March by adopting FIFO method. Accordingly he held that there was under value of stock as per books by Rs.22,06,664 -. Accepting main submission of assessee that addition is made beyond scope of block assessment, Learned CIT(A) has deleted addition. 31. In support of ground Learned DR has placed reliance on view taken by A.O. as discussed above. Learned AR on other hand tried to justify first Appellate order. He reiterated submissions made before first appellate authority. 32. Considering above submissions we find that addition made by A.O. was objected by assessee before Learned CIT(A) with this contention, that there was no incriminating evidence found during course search relating to stock value. Hence, addition should not have been made in block assessment. assessee also clarified that average cost method is accepted method of stock value and it was being accepted by department in assessee's own case in past. In support of same, decisions were cited which have been reproduced by Learned CIT(A) at page nos. 32 and 33 of first appellate order, wherein Hon'ble courts have accepted such average cost method followed by assessees. Considering these submissions learned CIT(A), in our view has rightly come to conclusion that there was no reason to reject method of valuation of stock and addition made was thus not justified. We also find substance in observations of Learned CIT(A) on issue that undisclosed income has to be worked out on basis of seized papers and since in present case no such incriminating evidence was found 66 ITA Nos.2188 and 2189 PN 2012 regarding method of valuation of stock as A.O. tried to adopt, Learned CIT(A) was justified in deleting addition made on this account. first Appellate order in this regard is thus upheld. Ground no.3 is accordingly rejected. 4.1 Respectfully following decision of Coordinate Bench of Tribunal in case of sister concern under identical circumstances and in absence of any contrary material brought to our notice we find no infirmity in order of Ld.CIT(A) deleting addition. We accordingly uphold order of CIT(A) on this issue. ground raised by Revenue is therefore dismissed. 92. Since identical ground has been decided by Tribunal in case of sister concern of assessee which has been followed by CIT(A) while deleting addition made by AO on this issue, therefore, in absence of any contrary material brought to our notice against order of Tribunal in case of sister concern of assessee on identical issues we find no infirmity in order of CIT(A) deleting addition. Accordingly, same is upheld and ground raised by Revenue on this issue is dismissed. 93. Ground of appeal No.6 by Revenue reads as under : 6. Commissioner of Income-tax (Appeals has erred on facts and in law in not agreeing to working of undisclosed turnover for F.Y. 2002-03 given by Assessing Officer and Special Auditor on basis of seized documents and substituting it with his own working. 94. After hearing both sides, we find Ld.CIT(A) at para No.12.3.3 of his order has discussed issue where assessee has challenged computation of unaccounted transactions made by auditor as well as AO for F.Y. 2002-03 at Rs.12,22,96,618 -. explanation of assessee as well as finding of Ld.CIT(A) at para 12.3.3 of his order has already been reproduced at Para 47 of this order. We find Ld.CIT(A) in his order has given finding that method adopted by AO and auditor is faulty because they have not taken into consideration fluctuation of business normally 67 ITA Nos.2188 and 2189 PN 2012 happening in different months. He, therefore, adopted his own formula and came to conclusion that since assessee was indulged in unaccounted transaction, therefore, method becomes more proximate to determine profit on basis of unaccounted purchases which were systematically recorded by assessee as against estimation of turnover by AO and special auditor. This reasoned finding of CIT(A) in our opinion does not call for any interference. Accordingly, same is upheld and ground of appeal No.6 by revenue is dismissed. 95. Grounds of appeal No.7 and 8 being general in nature are dismissed. 96. In result, appeal filed by revenue is dismissed and appeal filed by assessee is partly allowed. Order pronounced in open court on 23-09-2016. Sd - Sd - (VIKAS AWASTHY) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER Pune; Dated :23rd September, 2016. &Copy of Order forwarded to : 1. Appellant 2. Respondent 3. CIT(A)-I, Pune 4. CIT-I, Pune 5. DR, ITAT, B Pune; 6. - Guard file. BY ORDER, True Copy True 0 Sr. Private Secretary ITAT, Pune M/s. Ranka Jewellers Pvt. Ltd. v. ACIT, Range-1, Pune