SHRI DHRUV MAHESHWARI C/O B.P. MUNDRA & CO. CA, MUNDRA HOUSE, 822, A, SHIVAJI NAGAR, CIVIL LINES, JAIPUR,JAIPUR vs. DY.CITI, CENTRAL CIRCLE-2, JAIPUR, CENTRAL CIRCLE-2, JAIPUR

With the consent of both the parties, the case of the assessee, Shri Vijay Kumar Maheshwari, in was taken as the lead case for the purposes of present discussion and adjudication wherein the assessee has challenged the action of ld. CIT(A) in confirming the addition of Rs. 13,69,096/- made by the Assessing officer on account of unexplained investment in Gold & Silver articles u/s 69B of the Act.

Briefly stated, the facts of the case are that a search and seizure action u/s 132 of the Act and/or survey action u/s 133A was carried out on the members of Bajrang Group and the assessee is one of the members of the said group. During the course of search at the residential premises of the assessee, jewellery amounting to Rs. 2,34,32,323/- pertaining to various family members was found and individual inventory was prepared for each of the family members wherein the inventory pertaining to the assessee and his wife were also inventorised and was valued at Rs. 95,46,282/-. The Assessing officer noted that the assessee, being the key person of the family, in his statement recorded u/s 132(4) of the I.T. Act, 1961 during the course of search proceedings offered Rs 1,50,00,000/- to tax on account of undisclosed investment in jewellery, whereas in the ROI filled for the relevant period, this surrendered amount was not shown by the assessee in his return of income. As the assessee has not shown it in his ROI, as per the Assessing officer, it has to be taxed individually in hands of the respective persons. The Assessing officer also noted that the assessee has furnished an affidavit stating that to avoid the multiple proceedings, he shall not make technical ground/plea that proposed 2 , 526 & 525/JP/2019 Shri Vijay Kumar Maheshwari, Jaipur vs. DCIT, Jaipur unexplained jewellery in the hands of his wife can't be made in his hands. Therefore, considering the affidavit filed by the assessee, the Assessing officer considered entire jewellery found in possession of the assessee and his wife in the hands of the assessee for tax purposes and the assessee was asked to explain the reasons for not complying with the surrender so made during the course of search and source of acquisition of above jewellery. In response, the assessee submitted that after surrender of jewellery, he has filed an affidavit before the DDIT Investigation stating that jewellery was purchased from time to time and was also received from his brother and wife and inherited from his parents and surrender of jewellery was subject to verification of various bills and other documents. The source of acquisition of jewellery was thereafter explained by the assessee in three parts i.e. jewellery purchased by cheque payment, jewellery received in gift from Shri Ajay Kumar Maheshwari and jewellery received from Late Shri Ramswaroop Maheshwari, father of the assessee as well as in his own possession. The reply of the assessee was considered by the Assessing officer and the jewellery equivalent to purchases made by cheque payment was found genuine as source of acquisition. Thereafter, a specific show cause notice dated 23.03.2016 was issued to the assessee to explain the source of remaining jewellery and after calling for the submission from the assessee, out of total jewellery valued at Rs. 95,46,282/-, jewellery amounting to Rs. 40,69,900/- was considered as explained and remaining jewellery valued at Rs. 54,76,382/- was treated as unexplained jewellery and the same was brought to tax u/s 69B of the Act. On appeal, the ld. CIT(A) has allowed part relief of Rs. 41,07,286/- to the assessee and remaining addition of Rs. 13,69,096/- was confirmed and against the said finding, the assessee is in appeal before us. , 526 & 525/JP/2019 Shri Vijay Kumar Maheshwari, Jaipur vs. DCIT, Jaipur 4. During the course of hearing, the ld. AR taken us through findings of the ld. CIT(A) which are contained at para 5 to 6.5 of the appellate order and the contents thereof read as under:-

It was submitted by the ld AR that firstly, as apparent from para 5.2 of the order of ld. CIT(A), he has accepted the explanation of the assessee as regards jewellery received in form of gift from Sh. Ajay Maheshwari valued at Rs. 10,40,290/-. However, towards the end of his order while summarizing his findings, he has only allowed 75% of the said jewellery as explained. It was submitted that since the explanation of the assessee has been duly accepted by the ld. CIT(A), the addition to the extent of Rs. 10,40,290/- should be deleted in totality instead of restricting it to 75% and the whole of the jewellery , 526 & 525/JP/2019 Shri Vijay Kumar Maheshwari, Jaipur vs. DCIT, Jaipur so received as gift be treated as explained jewellery and necessary relief be provided to the assessee.

Regarding remaining jewellery in respect of which 25% has been treated as unexplained and part addition has been confirmed, it was submitted that the said finding is in turn based only on a single finding that there is no other details other than balance sheet entries which is filed with the return of income in terms of breakup of gold and/or diamond jewellery which were possessed by Late Shri Ramswaroop Maheshwari as on 31.03.2005. In this regard, it was submitted that the ld. CIT(A) has confirmed that the existence of substantial jewellery cannot be denied especially as it is evident from the return of income filed with the department much before the date of search. It was further submitted that the assessee submitted the valuation report showing detail break up of gold &/or diamond jewellery which were possessed by Late Ramswaroop Maheshwari on 31.3.2005. The said valuation report was obtained by Late Shri Ramswaroop Maheshwari from the registered valuer and handed over to the assessee along with jewellery and the same was submitted before the Assessing officer as well as before the ld CIT(A) and there was no adverse inference recorded by the ld CIT(A) on the verification of valuation report and inspite of that, the addition has been confirmed. It was further submitted that the assessee was having these jewellery recorded in the his books of accounts which was submitted before the AO and the ld CIT(A) and it is thus an undisputed fact that the detail break up of jewellery is very much available on record and was properly recorded in the books of accounts which was produced before both the lower authorities and there is no adverse inference recorded by ld CIT(A) and inspite of that, the additions have been confirmed.

It was further submitted that Late Shri Ramswaroop Maheshwari was having sufficient means of possessing the above gold and diamond jewellery. A 8 , 526 & 525/JP/2019 Shri Vijay Kumar Maheshwari, Jaipur vs. DCIT, Jaipur copy of his last ITR for A.Y 2005-06 and balance Sheet was furnished to the AO and is placed on record. As per Balance Sheet, the capital account of late Shri Ram Swaroop Maheshwari was of Rs. 93.21 Lacs and God & Diamond Jewellery & Silver Utensils since 1952 was Rs. 2,32,080/- at cost and applying gold price prevailing in 1952 of Rs. 76.81 per Tolla, it comes near about 3 kg. It was accordingly submitted that break up of gold &/or diamond jewellery which were possessed by late Shri Ramswaroop Maheshwari as on 31.3.2005 is very much available on record in terms of valuation report as well as financial statements and in light of the same, the addition so made and confirmed by the ld CIT(A) may kindly be deleted.

Per contra, the ld. PCIT/DR submitted that out of total jewellery found during the course of search and valued at Rs. 54,76,382/- which was treated as unexplained jewellery by the Assessing officer, the ld. CIT(A) has already allowed substantial relief of Rs. 41,07,286/- to the assessee and remaining addition of Rs. 13,69,096/- has only been confirmed. It was submitted that it was a case of surrender during the course of search wherein the statement of the assessee was also recorded u/s 132(4) and though the department is not in appeal against the order of the ld CIT(A), the addition to the extent confirmed by the ld CIT(A) should be affirmed. It was further submitted that the ld CIT(A) has righty held that other than entries in the balance sheet, there is no evidence of possession of jewellery by the late Shri Ram Swaroop Maheshwari. Regarding the valuation report of M/s Kankariya Jewellers, it was submitted that the valuation report has neither been signed by donor of the jewellery nor by the receiver of that jewellery and has only been signed by the valuer. Therefore, genuineness of this valuation report is not proved, hence it can't be taken as valid evidence for source of jewellery as claimed by the assessee. It was submitted that during the course of assessment proceedings, information u/s 133(6) of the I.T. Act, 1961 was called from the valuer to produce/furnish 9 , 526 & 525/JP/2019 Shri Vijay Kumar Maheshwari, Jaipur vs. DCIT, Jaipur the copy of the register in which entry regarding the valuation has been made and the copy of bank statement for the relevant period to get verify the entry made in its register regarding the valuation of assessee's jewellery items as well as to verify the receipt of valuation charges by the valuer, but M/s Kankariya Jewellers failed to furnish any of the documents by stating that record is not available. It was accordingly submitted that no cognisance can be taken of the valuation report and the addition so confirmed by the ld CIT(A) be upheld.

In his rejoinder, the ld AR submitted that during the course of assessment proceedings, the assessee was asked to explain the reasons as to why the surrender so made in respect of jewellery was not complied with while filing the return of income and in response, it was submitted by the assessee that after surrender of jewellery, he has filed an affidavit before the DDIT Investigation stating that the assessee along with his family members have purchased jewellery from time to time, certain jewellery has been inherited from his parents and also received from his brother and wife and accordingly submitted that surrender of jewellery was subject to verification of various bills and other documents and accordingly, the surrender so made was retracted and not acted upon while filing the return of income. Thereafter, the assessee was asked to explain the source of acquisition and possession of jewellery and in response, the assessee furnished the source of acquisition of jewellery in three parts i.e. jewellery purchased by cheque payment, jewellery received in gift from Shri Ajay Kumar Maheshwari and jewellery received from Late Shri Ramswaroop Maheshwari, father of the assessee as well as in his own possession. The reply of the assessee was considered by the Assessing officer and the jewellery equivalent to purchases made by cheque payment was found genuine as source of acquisition and out of total jewellery of Rs. 95,46,282/-, jewellery of Rs. 40,69,900/- was considered as explained and remaining 10 , 526 & 525/JP/2019 Shri Vijay Kumar Maheshwari, Jaipur vs. DCIT, Jaipur jewellery valued at Rs. 54,76,382/- was treated as unexplained jewellery and the same was brought to tax u/s 69B of the Act. It was accordingly submitted that where the AO himself has accepted the fact not all jewellery so surrendered is unexplained and has taken into consideration the retraction in form of affidavit filed by the assessee and has only brought to tax a part of the jewellery which as per the Assessing officer still remain unexplained, there is no basis for accepting the contention advanced by the ld PCIT/DR at this stage that it is a case of surrender of jewellery and in absence of retraction, the addition so confirmed by the ld CIT(A) be upheld.

We have heard the rival contentions and perused the material available on record. Firstly, we find that where the Assessing officer himself has accepted the fact not all jewellery so surrendered is unexplained and has taken into consideration the retraction in form of affidavit filed by the assessee and supported by evidence in form of bills and cheque payment and other documentation and has thus accepted a part of the jewellery as explained and has only brought to tax a part of the jewellery which as per the Assessing officer still remained unexplained, there is no basis for accepting the contention advanced by the ld PCIT/DR at this stage that it is a case of surrender of jewellery and in absence of retraction, the addition so confirmed by the ld CIT(A) be upheld. Therefore, the contention so advanced by the ld PCIT/DR cannot be accepted. In any case, the Revenue is not in appeal against the order so passed by the ld CIT(A) and we therefore restrict ourselves to the findings of the ld CIT(A) which are under challenge by the assessee.

As regards jewellery received in form of gift from Sh. Ajay Maheshwari which was valued at Rs. 10,40,290/-, it is noted from para 5.2 of the order of ld. CIT(A) that he has accepted the explanation of the assessee and held that “jewellery received from Sh. Ajay Maheshwari and considered as unexplained 11 , 526 & 525/JP/2019 Shri Vijay Kumar Maheshwari, Jaipur vs. DCIT, Jaipur by the AO is not tenable and the addition of Rs 8,95,890/- and Rs 1,44,000/- has been directed to be deleted.” There is thus a clear and specific finding of the ld CIT(A) in respect of jewellery received from Sh. Ajay Maheshwari and the addition totaling to Rs. 10,40,290/- has been directed to be deleted. However, the ld CIT(A), in subsequent part of his order where he has discussed the matter in context of jewellery received from Late Shri Ramswaroop Maheswari in para 6 onwards, while summarizing his findings in para 6.4 has taken the whole of the figure of jewellery amounting to Rs 54,76,382/- treated as unexplained including the jewellery received from Sh. Ajay Maheshwari amounting to Rs 10,40,290/- and has directed to treat 75% of the whole of jewellery of Rs 54,76,382/- as explained and remaining 25% has been treated as unexplained. We therefore find that there is an apparent mistake in form of considering the wrong figure which has occurred in the findings of the ld CIT(A) in para 6.4 of the order when the same is read along with his specific findings at para 6.2 of his order and the figure of Rs 44,36,092/- should have actually been taken instead of Rs 54,76,382/. We accordingly agree with the contention of the ld AR that where the explanation of the assessee has been duly accepted by the ld. CIT(A) in para 6.2 of his order, the addition to the extent of Rs. 10,40,290/- should be deleted in totality instead of restricting it to 75% and the whole of the jewellery so received as gift from Shri Ajay Maheshwari be treated as explained jewellery.

Now, coming to the matter relating to jewellery received from Late Shri Shri Ramswaroop Maheshwari, it is noted that the assessee has submitted before the ld CIT(A) as well as before the AO that Late Shri Ramswaroop Maheshwari during the period 2005-06 was not keeping well and wanted to handover the jewellery to the assessee and other family members and for the purposes, has got the valuation of the jewellery done by M/s Kankariya jewellers on 12.07.2005 and thereafter, he has handed over the jewellery as 12 , 526 & 525/JP/2019 Shri Vijay Kumar Maheshwari, Jaipur vs. DCIT, Jaipur well as valuation report to the assessee and other members of the family; and in support of the said explanation, the assessee has submitted the valuation report of registered valuer, M/s Kankariya jewellers, confirmation letter from the registered valuer, confirmation letters regarding receipt of the inherited jewellery by the family members, copy of balance sheet and ITR of Late Shri Ramswaroop Maheshwari for A.Y 2005-06 reflecting gold and diamond jewellery, and assessee’s and his wife’s own ledger and books of accounts where the said jewellery was recorded. During the appellate proceedings, the ld CIT(A) called for the remand report from the AO and after considering the explanation and documentation submitted by the assessee and the remand report of the AO, the ld CIT(A) accepted the factum of jewellery received by the assessee, his wife and other family members from Late Shri Ramswaroop Maheshwari and while doing so, has accepted the valuation report of the registered valuer as well as appreciated the fact of possession of substantial jewellery by Late Shri Ramswaroop Maheshwari as reflected in his tax return filed for A.Y 2005-06. At the same time, in terms of quantum of jewellery, the ld CIT(A) has accepted the jewellery only to the extent of 75% as explained and remaining 25% has been treated as unexplained. The reason for the same has been stated to be non-availability of details/break up of gold and diamond jewellery in the return of income so filed on behalf of Late Shri Ramswaroop Maheshwari for A.Y 2005-06. In this regard, the ld AR has submitted that the valuation report of the registered valuer shows detail break up of individual gold and diamond jewellery which were possessed by Late Ramswaroop Maheshwari and the details of jewellery have also been recorded in assessee’s own books of accounts which were submitted for verification and no adverse inference has been drawn by either of the authorities. In our view, where the valuation report has been accepted by the ld CIT(A) which not just contains the total value rather it contains the valuation in respect of individual items of gold and diamond jewellery, the details of gold and diamond jewellery were very 13 , 526 & 525/JP/2019 Shri Vijay Kumar Maheshwari, Jaipur vs. DCIT, Jaipur much on record along with disclosure thereof in the tax return filed for A.Y 2005-06. Therefore, having accepted the valuation report and factum of possession of substantial jewellery and the fact that necessary details of individual jewellery items are available on record, the action of the ld CIT(A) in treating only 75% of jewellery as explained and remaining 25% as unexplained doesn’t have a rational basis with the material available on record and as to how the ld CIT(A) has arrived at the figure of 75% has also not been spelt out in the order so passed by him and the said action of ld CIT(A) of restricting the explained jewellery to 75% and treating the remaining 25% as unexplained therefore cannot be upheld.

In light of aforesaid discussion and in the entirety of facts and circumstances of the case, the whole of jewellery so received by the assessee and his wife from Late Shri Ramswaroop Maheshwari are treated as explained and addition of 25% of jewellery so confirmed by the ld CIT(A) is hereby directed to be deleted.

In the result, the addition of Rs 13,69,096/- is hereby directed to be deleted and the appeal of the assessee is allowed.

In respect of these two matters, it was submitted by both the parties that the facts of the circumstances of these two cases are exactly identical as in case of Sh. Vijay Kumar Maheshwari in and contentions advanced in the said matter may be considered for the purposes of adjudication of these matters. Therefore, considering the identical set of facts and circumstances of the case as submitted by both the parties, our findings