ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-5(4), MUMBAI vs. SHRI YOGENDRA KANODIA, MUMBAI

per gram VR per gram 2007-08 62,740 449 2517 460.45 3,51,629 2008-09 6,15,530 972 2517 158.95 15,93,919 2009-10 5,28,720 1870 2517 34.62 7,11,747 2010-11 22,10,763 2524 2517 0 22,10,763 2011-12 5,05,500 2562 2517 0 5,05,500 Total 39,23,253 - - - 53,73,557

4.2 Yogendra Kanodia HUF

F.Y Items matching Items from VR and considered in Total in with VAR and WTR of A.Y 2015-16 appearing Rs. Bill available in ledger account A B C D 2007-08 0 9,85,197 9,85,197 2008-09 2,83,147 0 2,83,147 2009-10 0 1,29,510 1,29,510 2010-11 15,53,100 0 15,53,100 2011-12 5,30,823 0 5,30,823 Total 23,67,070 11,47,007 34,81,777

The equivalent value of jewellery for bills available is Rs. 60,98,152/- as per the department valuation report dated 11.05.2018.

4.2.1 Working of Appreciation in value of jewellery (as apprearing in column C) as appearing in the ledger account presuming Gold jewellery is as under:

F.Y Value Rate of Rate of Appreciation Appreciate Jewellery gold in the gold on d value in Rs. respective the date of year per search as gram per departmen t VR per gram 2007-08 9,85,197 972 2517 158.95 25,51,174 2009-10 1,29,510 1305 2517 92.87 2,49,791 Total 11,74,007 28,00,964

ITA No. 1544/Mum/2023 Mrs.Rashmi Yogendra Kanodia (legal heir of Late Shri Yogendra Surajmal Kanodia).Mumbai. - 12 -

4.3 It is submitted that the mother of the assessee Smt. Chandravatiji Kanodia (presently 95 years of age as on date) had gifted jewelleries to Smt Rashmi Kanodia in 2007-08 on account of distribution of her jewellery to her family members and the details of the same is as under:

a. Smt. Chandravatiji Kanodia had gifted her diamond earnings in A.Y2007-08 to Smt.Rashmi Kanodia which she had converted into a diamond pendant which is appearing at Serial no40 of Jay D Parekh valuation report dated 11.05.2018 which is valuing at Rs12.99 lakhs The Photgraph of Smt Chandravatiji Kanodia wearing the earing is enclosed Further we are also enclosing a photograph of Smt Chandravatiji Kanodia and SmtRashmi Kanodia togetherin which SmtRashmi Kanodia is wearing the diamond pendant (converted from earning gifted)

b. Smt Chandravatiji Kanodia had also gifted her a diamond bracelet in gold with one green stones which is appearing at Serial no69 of Jay D Parekh valuation report dated 11.05.2018 which is valuing at Rs.53,508/

4.4 It is submitted that your assessee has made payment of Rs12,500/- on 28.11.2002 Fo Meru Daimonds as Labour charges for jewellery making for 3 diamond pendants and 3 diamond bangles from the loose cut and polised diamonds of 17.7 cts available with the assessee which are appearing at Srno2 of Jewellery valuation report of 2002In this regard is submitted out of 17.7 cts, diamonds of 13.85 cts were used for making 3 diamond bangles and 3 diamond pendents which are appearing at Jay D Parekh's jewellery valuation report of 1.05.2018 at Sr.no30, 41, 4258 and 59 valuing to Rs6,28,703/-After utilizing the iamonds of 13.85 ctsthe balance 3.85 cts (17.7-13.85) were used in other jewellery

ITA No. 1544/Mum/2023 Mrs.Rashmi Yogendra Kanodia (legal heir of Late Shri Yogendra Surajmal Kanodia).Mumbai. - 13 -

4.5 It is further submitted that the following loose cut and polished diamonds are available om Valuation reports of assessee and his family members which can be considered for alance jewellery of Jay D Parekh's valuation report of 11.05.2018:

Particulars Sr. No. Wt. In Cts Assessee’s valuation report of 2002 D2 3.85 Assessee’s valuation report of 2002 D3 8.62 YSK HUF Valuation report of 2002 D15 15.05 Rashmi Kanodia Valuation report of 2002 D17 2.10 Total 29.62 Cts

And balance of Giniis in Gold are available for jewellery making out of the valuation reports of assessee and his family members which can be considered for balance jewellery of Jay D Parekhs valuation report of 11.05.2018:

Particulars Sr. No. Wt. In Gms Assessee’s valuation report of 2002 7 40 Assessee’s valuation report of 2002 8 4 Rashmi Kanodia Valuation report of 2002 6 40 Rashmi Kanodia Valuation report of 2002 7 2 Rashmi Kanodia Valuation report of 2002 10 5 Nishant Kanodia valuation report of 2002 6 40 Total 131 grms

4.6 It is further submitted that the Jewellery Valuation reports of 2002 of appellant and his family consisting Yogendra Kanodia HUF, Smt Rashmi Kanodia Shri. Siddharth Kanodia has unreconciled jewellery amounting to Rs. 9,43,405/which are either converted into new jewellery or refurbished or remade from time to time using diamonds and gold from para 4.5 above Further the appellant and his family member are in receipt of jewellery in form of gifts on various occasions like birthdays anniversaries weddings festivals etc which are not considered in above working.

ITA No. 1544/Mum/2023 Mrs.Rashmi Yogendra Kanodia (legal heir of Late Shri Yogendra Surajmal Kanodia).Mumbai. - 14 -

69AWhere in any financial year the assessee is found to be the owner of any money bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account if any, maintained by him for any source of income and the assessee offers no explanation about the nature and source of acquisition of the money, bullion jewellery or other valuable article or the explanation offered by him is not in the opinion of the Assessing Officer satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.

ITA No. 1544/Mum/2023 Mrs.Rashmi Yogendra Kanodia (legal heir of Late Shri Yogendra Surajmal Kanodia).Mumbai. - 15 -

6.1 It is submitted that the provisions of section 69A can be invoked only if the following cumulative conditions are complied:

a. The assessee is found to be owner of any money, bullion jewellery or valuable article which is not recorded in the books of account and

b. The assessee offers no explanation about the nature and source of such any money. bullion, jewellery or valuable article

In this regard we state that your assessee and its family members have duly recorded the jewellery in the books of account and the same is with the ledger accounts, jewellery purchase bill and the jewellery valuation reports which are referred as base for filing the Wealth Tax Returns from year to yearFurther your assesse during the course of search as well as through this submission has explained the nature and source of such jewellery acquired over the period of time. It is however submitted that your assessee is not required to maintain the books of account as per any statutory law of the country. Accordingly, since the first condition of section 69A relating to maintenance of books of accounts itself is not applicable then the second condition becomes in-applicable.

6.3 Furtherit is submitted that the provision of Section 44AA of the Income Tax Act1961 relates to provision for maintenance of books of accounts by certain person carrying on profession or businessWe would like to provide the relevant extract of provision of Section 44AA of the Income Tax Act1961 which reads as under:

Maintenance of accounts by certain persons carrying on profession or business

ITA No. 1544/Mum/2023 Mrs.Rashmi Yogendra Kanodia (legal heir of Late Shri Yogendra Surajmal Kanodia).Mumbai. - 16 -

44AA(1) Every person carrying on legal medical engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified by the Board in the Official Gazette shall keep and maintain such books of account and other documents as may enable the Assessing. Officer to compute his total income in accordance with the provisions of this Act

(2) Every person carrying on business or profession [not being a profession referred to in sub-section (1)] shall,-

(i) if his income from business or profession exceeds one lakh twenty thousand rupees or his total sales, turnover or gross receipts, as the case may bein business or profession exceed or exceeds ten lakh rupees in any one of the three years immediately preceding the previous year, or

(ii) where the business or profession is newly set up in any previous year, if his income from business or profession is likely to exceed one lakh twenty thousand rupees or his total sales, turnover or gross receipts, as the case may be, in business or profession are or is likely to exceed ten lakh rupees, during such previous year; or

(iii) where the profits and gains from the business are deemed to be the profits and gains of the assessee under s ection 44AE or s ection 44BB or section 44BBBas the case may be, and the assessee has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, during such previous year; or

(iv) where the provisions of sub-section (4) of section 44AD are applicable in his case and his income exceeds the maximum amount which is not chargeable to income-tax in any previous

ITA No. 1544/Mum/2023 Mrs.Rashmi Yogendra Kanodia (legal heir of Late Shri Yogendra Surajmal Kanodia).Mumbai. - 17 -

year, keep and maintain such books of account and other documents as may enable the Assessing Officer to compute his total income in accordance with the provisions of this Act:

Provided that in the case of a person being an individual or a Hindu undivided family, the provisions of clause (i) and clause (ii) shall have effect, as if for the words "one lakh twenty thousand rupees "the words "two lakh fifty thousand rupees" had been substituted:

Provided further that in the case of a person being an individual or a Hindu undivided family the provisions of clause (i) and clause (ii) shall have effect, as if for the words "ten lakh pees"the words "twenty-five lakh rupees" had been substituted

The Board may having regard to the nature of the business or profession carried on any class of persons, prescribe, by rules, the books of account and other documents including inventories, wherever necessary) to be kept and maintained under sub-section (1) sub-section (2)the particulars to be contained therein and the form and the manner in which and the place at which they shall be kept and maintained. (4) Without prejudice to the provisions of sub-section (3)the Board may prescribe, by rules, the period for which the books of account and other documents to be kept and maintained under sub-section (1) or sub-section (2) shall be retained.

5.4 It is submitted that the sources of income earned by your assessee is from Salaries, Capital gains and other sources No income from business or profession is ever earned by the assessee any time during the year under consideration as well in any of the earlier years. This can be substantiated by referring the computation of total income for the year under consideration as well of the earlier years.

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6.5 Further, this is to bring to your honour's notice that the assessee does not earn any profit or gains from any business or profession This means that there is no business or profession which has been independently carried out by the assessee during the year under consideration Therefore, the provision of Section 44AA of the Income Tax Act1961 is not applicable to the assessee during the year under consideration.

6.6 Regarding applicability of the provisions of section 115BBE of the Income Tax Act1961, we would like to reproduce the said the said provisions which reads as under:

115BBE. [(1) Where the total income of an assessee, -

a includes any income referred to in section 68, section 69section 69A, section 69B, section 69C or section 69D and reflected in the return of income furnished under section 139; or

b determined by the Assessing Officer includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, if such income is not covered unde

clause (a)the income-tax payable shall be the aggregate of-

(i) the amount of income-tax calculated on the income referred to in clause (a) and clause (b), at the rate of sixty per cent; and

(ii) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (i).]

(2) Notwithstanding anything contained in this Act no deduction in respect of any expenditure or allowance or set off of any loss shall be allowed to the assessee under any

ITA No. 1544/Mum/2023 Mrs.Rashmi Yogendra Kanodia (legal heir of Late Shri Yogendra Surajmal Kanodia).Mumbai. - 19 -

provision of this Act in computing his income referred to in clause (a) 30 [and clause (b)] of sub-section (1).

6.7 It is submitted that from the plain reading of the above provisions, two conditions are required to be satisfied to attract the provision of clause (a) of Sub- section 1(1) of Section 115BBE of the Income Tax Act1961The two conditions are:

i) Total Income includes any income referred to in Section 68, Section 69, Section 69A, Section 69B, Section 69C or Section 69D and

ii) The said income are reflected in the return of income furnished under Section 139

6.8 In the instant case, the assessee is not satisfying the conditions of Section 115BBE(1)(a) of the Income Tax Act1961 as the assessee does not have any income referred to in Section 68Section 69, Section 69A, Section 69BSection 69C or Section 69D during the year under consideration.

6.9 Further, it is submitted that the examination of fulfillment of condition under Section 68, Section 69, Section 69A, Section 69BSection 69C or Section 69D are is pre-requisite before Section 115BBE can be invoked It is submitted that the assessee is not satisfying the conditions of Section 115BBE(1)(a) of the Income Tax Act1961 and therefore Section 115BBE are not applicable to the assessee during the year under consideration

6.10 It is submitted that the assessee does not require to maintain the books of accounts and therefore the question of application of Section 69A does not arise during the year under consideration Without prejudice to above your assessee has duly explained the nature and source of the jewellery in detailed in the above paragraphs. Therefore when Section 69A

ITA No. 1544/Mum/2023 Mrs.Rashmi Yogendra Kanodia (legal heir of Late Shri Yogendra Surajmal Kanodia).Mumbai. - 20 -

is not attracted then there is no question of attraction of Section 115BBE arises during the year under consideration.

Therefore, it is submitted Section 69A and Section 115BBE of the Income Tax Act1961 are not applicable to the assessee during the year under TAX DE Consideration.

16.06.2021

With reference to the above and as per the instructions of above mentioned assessee, we would like to state that the abovementioned assessee is in receipt of your honour's notice u/s 142(1) of the Income Tax Act, 1961 dated 12.05.2021 for AY 2019-20 and in continuation to our online submission dated 15.05.2021 and 31.05.2021 we state as under :-

a. It is submitted that all the purchase of jewellery in case of assessee and its family members are made from banking channels and the same is evident from the jewellery ledgers of family members submitted to your honour.

b. There are recorded purchases of jewellery in ledger account in case of Assessee amounting to Rs. 39,23,253 (refer to para 4.1 of submission dated 31.05.2021) which could ot be reconciled with the Jay D Parekh Valuation report due to non- availability of bills. However, few copies of bills amounting to Rs. 31,46,463 are now found out of the above amount and the same are enclosed for your reference.

ITA No. 1544/Mum/2023 Mrs.Rashmi Yogendra Kanodia (legal heir of Late Shri Yogendra Surajmal Kanodia).Mumbai. - 21 -

C. Similarly, in case of Yogendra Kanodia HUF there are recorded purchases of jewellery in ledger account amounting to Rs11,47,007 (refer to para 4.2 of submission dated 31.05.2021) which could not be reconciled with the Jay D Parekh Valuation report due to non- availability of billsHowever, a copy of bills amounting to Rs78,000/is now found out of the above amount and the same are enclosed for your reference.

d. Further there are 29.62 carats of cut and polished diamonds available (refer to para 4.5 of submission dated 31.05.2021) from Jewellery Valuation of reports of 2002 of assessee and its family members which could not be reconciled with the Jay D Parekh Valuation report due to non-availability of jewellery making/ remaking bills Further we are now enclosing one bill dated 02.11.2011 of Nishant Kanodia for Purchase of Cut and polished diamonds weighing 3.01 carats. So the Total cut and polished Diamonds available are 32.63 (29.62 + 3.01) cts which remains un-reconciled and the same are used for making new jewellery / remaking or modifying the old items.

e. Also there is 131 grams of Gold in Ginnis available (refer to para 4.5 of submission dated 31.05.2021) from Jewellery Valuation of reports of 2002 of assessee and its family members which could not be reconciled with the Jay D Parekh Valuation report due to non- availability of jewellery making/remaking bills.

f. We are enclosing the copy of letter dated 21.05.2001 written bv Smt. Rashmi Kanodia to Shri Pradeep Jhaveri requesting him for removing the diamonds and returning the unset khokha and diamonds in loose form Further we are also enclosing the a letter dated 27.05.2001 from Shri Pradeep Jhaveri to Smt Rashmi Kanodia acknowledging the above letter and returning the unset khokha and diamonds in loose form. It is submitted

ITA No. 1544/Mum/2023 Mrs.Rashmi Yogendra Kanodia (legal heir of Late Shri Yogendra Surajmal Kanodia).Mumbai. - 22 -

that the above correspondence is evident to prove that assessee and his family members used to remake/refurbish the existing jewellery into new jewellery Further we are also enclosing few labour bills now found for remaking/refurbishing the existing jewellery. g. Further the assessee and his family member are in receipt of jewellery in form of gifts on various occasions like birthdays, anniversaries, weddingsfestivals etc which are not considered in above working. In view of the above facts, it is submitted that your assessee has fully explained the entire jewellery found on the date of search. It is submitted that infact your has value of Jewelley of 2002 valuation report amounting to Rs. 9,37,401 - which has not been considered at the appreciated value for the reason that the jewellery reconciled is more than the jewellery found on the date of search Accordingly, there is no question of drawing any adverse inferences invoking the provisions of section 69A of the Income Tax Act, 1961 as complete jewellery stands explained It is therefore prayed to your honor to release the jewellery of your assessee seized of Rs. 3,01,25,502/- on the date of search on the basis of arbitrary working and cooperate with your assessee."

ITA No. 1544/Mum/2023 Mrs.Rashmi Yogendra Kanodia (legal heir of Late Shri Yogendra Surajmal Kanodia).Mumbai. - 23 -

party and invoked the provisions U/sec69A of the Act and made addition on account of unexplained jewellary of Rs.1,17,18,360/-and assessed the total income of Rs. 2,02,20,970/- and passed the order u/sec 143(3) of the Act 29.09.2021.

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erred in accepting the bills in respect of purchase of jewellery from M/s Raghukul Diamonds Pvt ltd, as they are not dealing in the diamonds and the company was strike off by the MCA and the Ld.DR relied on the order of the Assessing officer. 6. Per Contra, the Ld.AR submitted that the assessee has disclosed the jewellery in the individual and Huf capacity. Further the family members also hold the jewellary and these facts are supported with the wealth tax returns. In the proceedings before the lower authorities, the assessee has substantiated with the evidences and information in respect of purchases and remade of jewellary. Further the Ld.AR substantiated the submissions with the facts sheet, judicial decisions and relied on the order of the CIT(A).

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bills in the case of Raghukul diamonds Pvt ltd as the company was not dealing in diamonds and has been struck off by the MCA. Whereas the transaction of purchase of jewellary with the company was in the financial year 2010- 2011 and the payments are made through the banking channels. Subsequently, the company has been struck off as per MCA data base after AGM on 30-09-2016, which is evident from Company Master Data sheet dated 18-06- 2021. Further the Ld.AR demonstrated the value of jewellary disclosed in the wealth tax returns for the A.Y.2015-16 in respect of the assesseee and his family members and the valuation report of jewellery obtained in the year 2002 was filed before the lower authorities. Further the old jewellary was remade from time to time and these facts were substantiated before the appellate authorities. We found that the CIT(A) has dealt on the factual aspects, provisions of the act, holding of jewellary and the submissions of the assessee. At this juncture, we consider it appropriate to refer to the findings of the CIT(A) in granting relief to the assesee dealt at Para 4.3 to 4.3.1 of the order read as under:

“4.3 I have considered the submissions of the appellant as also the material on record.

ITA No. 1544/Mum/2023 Mrs.Rashmi Yogendra Kanodia (legal heir of Late Shri Yogendra Surajmal Kanodia).Mumbai. - 26 -

a. The appellant has submitted that the purchase of jewellery has been made through banking channelsBesides, the appellant has received jewellery in the form of gifts on various occasions like birthdays, anniversaries, festivals, weddings etc.

b. As regards the itemwise discrepancyit is noted that several of the jewellery for which bills are available with the appellant were not actually found during the course of searchThe appellant has given a detailed working of such items which account for 518.22 gms of Gold and 146.55 ctsof diamonds.

The appellant has laid emphasis on the fact that such jewellery is converted to new jewellery or refurbished or remade from time-to-time.

As regards the purchases made from M/s. Raghukul Diamonds PLtd., it is een that these purchase bills are dated 02.04.2010 and 03.04.2010 and payments are made through banking channels. This company has been struck off subsequently and the date of last AGM is 30.09.2016 as per MCA database. The arrest of Shri Sanjay Jain is seen to have been made much later in 2017. Given this actual background this cannot be the basis for discrediting the purchase made in 2010, without any concrete evidence. A suspicion howsoever strong cannot partake the character of proof

e The appellant has filed details of various purchases and has explained that with bulk of the items being reconciled on one-to- one basis, the benefit of unreconciled items should be given in as much as the items purchased earlier had been converted or remade into new jewellery.

4.3.1 I find that the explanation offered by the appellant is reasonable. It is a fact that out of total jewellery of Rs. 8,43,67,583/-, the appellant has been able to reconcile itemwise jewellery or gave sufficient explanation to the extent of Rs.

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7,26,49,223/- L.e. about 7/8ths of the total jewellery. Hencethe appellant's contention to explain the remaining jewellery by way of remade items does have forceAs against the addition of Rs. 1,17,18,360/- made by the AO, consisting of 538.09 gms of gold and 89.17 ctsof diamonds, the appellant has given explanation for 518.22 gms. of gold and 146.55 cts of diamonds. Hence, in my viewthe addition cannot be sustained. However, as regards gold, the appellant has not been able to explain the difference of 19.87 gms. Hence, addition to this extent stands confirmed. Applying the rate of Gold @ Rs. 2,630/- per gram as per the Valuation Report on the date of search, addition of Rs. 52,258/- is sustained while addition of Rs1,16,66,102/- stands deleted.” 8. Further the Ld. AR has relied on the decision Honble High Court Of Bombay Mrs. Komal Wazir Vs DCIT (2015)(230 Taxman563) on the explanations of sources of jewellary including gifts received on the occasion of marriage from the family members. The Ld. AR also substantiated the income offered by the assessee and his family members for the A.Y 2013-14 to A.Y.2019-2020 to substantiate the holding of jewellary and networth. Whereas the CIT(A) has considered the facts, submissions and information and has sustained the addition to the extent of Rs.52,258/- and passed a conclusive and reasoned order. The Ld. DR could not controvert the findings of the CIT(A) with any new cogent evidence or information to take a different view. Accordingly, we do not

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find any infirmity in the order of the CIT(A) on the disputed issue and uphold the same and dismiss the grounds of appeal of the revenue.

Sd/- Sd/- (GAGAN GOYAL) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai, Dated 22.12.2023

KRK, PS Copy of the Order forwarded to : The Appellant 1. The Respondent 2. The CIT (Judicial) 3. The PCIT 4. DR, ITAT, Mumbai 5. Guard File 6. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// 1.

( Asst. Registrar) ITAT, Mumbai.