ANJANI ASHOK PARIKH,MUMBAI vs. INCOME TAX OFFICER WARD 34(1)(1), MUMBAI

आदेश / ORDER PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by assessee is against the order of ld. Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre vide DIN: ITBA/NFAC/S/250/2025-26/1080018779(1), dated 26.08.2025, passed against the assessment order by the Assessment Unit of the Income-tax

Department, u/s 143(3) r.w.s. 144B of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 21.12.2022, for the Assessment Year 2021-22.

3.1. In the course of assessment proceedings, ld. Assessing Officer examined (i) jewellery valued at Rs. 67,39,949/- disclosed by assessee under Schedule AL (Assets and Liabilities) of her return of income, and (ii) brokerage of Rs. 12,00,000/- claimed by assessee as part of her cost of investment in the new residential flat forming part of her claim u/s 54 of the Act and made an addition of Rs. 67,39,949/- u/s 69A and a disallowance of Rs. 12,00,000/-, respectively, assessing total income at Rs. 11,00,87,689/-. Aggrieved, assessee preferred first appeal before the ld. CIT(A)(A) who sustained both the addition and the disallowance made by the ld. Assessing Officer, though granting relief on two further grounds relating to the rate of tax and the tax regime applicable to the disallowed brokerage, which are not the subject matter of the present appeal. Aggrieved, assessee is in appeal before the Tribunal on the two grounds extracted above.

4.1. Assessee thereafter furnished, inter alia, a copy of her Wealth-tax return for A.Y. 1997-98, wherein jewellery/ornaments valued at Rs. 19,55,105/- had

been disclosed. She also furnished along with the corresponding wealth-tax working and valuation report dated 31.03.1989 as well as wealth-tax workings for A.Y. 2014-15 relating to jewellery of her ancestors, namely Kantilal C. Parikh Estate (father-in-law), Kantilal C. Parikh HUF, and Kamal Kantilal Parikh Estate (mother-in-law).

4.2. Ld. Assessing Officer did not accept the explanation so furnished. He observed that the letter dated 10.12.2022 of the registered valuer, claimed by assessee to be a valuation report, did not contain an item-wise break-up of the jewellery and was a mere letter reproducing verbatim the sources from which the jewellery had devolved on assessee. It was further observed that assessee had not filed any Wealth-tax return after A.Y. 1997-98, which, according to ld. Assessing Officer, gave rise to a strong indication that the jewellery had been sold off or otherwise disposed of and was not in assessee’s possession during the year under consideration; that there was no evidence to prove that the jewellery was actually inherited by assessee; and that, even assuming it was inherited, it might have been sold off prior to the year under consideration. On this reasoning, the entire jewellery of Rs. 67,39,949/- disclosed by assessee was treated as unexplained credit and added u/s 69A.

Ld. CIT(A)(A) held that non-filing of a wealth-tax return subsequent to A.Y. 1997-98 established that assessee’s wealth was below the applicable statutory threshold, leading to the conclusion that the jewellery had been sold off prior to 31.03.2016 and accordingly sustained the addition. Aggrieved, assessee is in appeal before the Tribunal.

Sr. Total Value of Share of Value disclosed No. Source Jewellery Assessee by Assessee A. Kantilal C. Parikh Estate (Father-in- 1. 66,92,128 1/8th (5pprox..) 8,36,516 Law) Kantilal C. Parikh HUF (HUF of 2. 70,54,846 ¼th 17,63,712 Father-in-Law) Kamal Kantilal Parikh Estate 3. 83,77,278 ¼th 20,94,320 (Mother-in-Law) B. 4. Stridhan (Self-owned Jewellery) 20,45,402 Entire 20,45,402 Total 2,41,69,654 67,39,949

6.1. It was submitted that the major portion of the disclosed jewellery, amounting to Rs. 46,94,547/-, represents assessee’s share in the jewellery of her late father-in-law, Shri Kantilal C. Parikh, who passed away on 21.07.1968 and her late mother-in-law, Smt. Kamal K. Parikh, who passed away on 14.01.1993, both leaving behind four sons/heirs, namely Rajendra Parikh, 5

Ashok Parikh (assessee’s late husband), Ajit Parikh and Arun Parikh. It was submitted that although certain testamentary documents were available, a dispute persisted between the four legal heirs regarding distribution of the estates. During the subsistence of this dispute, assessee’s husband, Shri Ashok Parikh, also passed away on 22.07.1996, having bequeathed his entire estate to assessee vide will dated 01.03.1996, failing whom to his son. It was submitted that the estates of the late Shri Kantilal C. Parikh and the late Smt. Kamal Kantilal Parikh accordingly remained undistributed for several decades and were not partitioned until around the year 2015, when it was mutually agreed to equitably distribute the jewellery/ornaments forming part of the said estates and of Kantilal C. Parikh HUF amongst the four legal heirs, extracted below for ready reference:

Sr. Value of Rajendra Anjani Arun Kamal Estate Ajit Parikh No. Jewellery (Rs.) Parikh Parikh Parikh Parikh Kantilal C. Parikh (shares: 1. 66,92,128 8,36,516 8,36,516 8,36,516 8,36,516 33,46,064 1/8th each to the four sons; 1/2 to Kamal Parikh) Kantilal C. Parikh HUF (1/4th 2. 70,54,846 17,63,712 17,63,712 17,63,712 17,63,712 – each to the four sons) Kamal K. Parikh (including her share in the estate of Kantilal 3. 83,77,278 20,94,320 20,94,320 20,94,320 20,94,320 – C. Parikh) (1/4th each to the four sons) Total 2,21,24,253 46,94,547 46,94,547 46,94,547 46,94,547 33,46,064

6.2. It was further submitted that to substantiate the aforesaid distribution, a declaration/confirmation dated 08.12.2022 was executed by Shri Rajendra K. Parikh, being the eldest legal heir and executor/administrator of the estates as well as Karta of the HUF, confirming the ownership and equitable distribution of jewellery amongst the legal heirs in the year 2015, duly counter- signed by the remaining legal heirs. It was further submitted that assessee had also placed on record valuation reports dated 31.03.1989 of the jewellery of the late Shri Kantilal C. Parikh, the late Smt. Kamal Kantilal Parikh and Kantilal

C. Parikh HUF, as well as the wealth-tax returns filed for A.Y. 2014-15 in respect of the said three estates/HUF and that the values in the valuation reports and the wealth-tax returns were stated to be in tandem, having regard to the effect of inflation.

6.3. As regards the remaining jewellery valued at Rs. 20,45,402/-, being self- owned jewellery, it was submitted that this too had been disclosed and reported in assessee’s own Wealth-tax return filed for A.Y. 1997-98, wherein jewellery worth Rs. 19,55,105/- was reported based on the wealth-tax working as on 31.03.1997. It was submitted that assessee had, in addition, furnished a valuation report dated 10.12.2022 issued by Shri Amit B. Shah, a registered valuer, who, based on physical verification of the jewellery as well as the past records, certified that jewellery valued at Rs. 46,94,547/- was ancestral and the remainder, valued at Rs. 20,45,402/-, was self-owned, and further certified that there was no material variation in the quantum of jewellery/ornaments held by assessee from the dates mentioned in the past records, with photographs of the jewellery appended to the report. It was submitted that ld. CIT(A) erred in declining to act upon the valuation report only on the ground that it was in the form of a letter and did not contain a detailed break-up, when in fact both a break-up and photographs had been furnished.

8.2. We further note that assessee was called upon to furnish bills, vouchers and bank statements relating to jewellery acquired decades earlier, including jewellery inherited well before the year under consideration. In our view, the explanation that primary purchase documents of such vintage were not available cannot be rejected out of hand where assessee has, in their place, furnished independent historical records, viz., wealth-tax returns, valuation reports and a family settlement declaration, establishing ownership and lineage of the jewellery. The essential requirement of section 69A is that assessee is found to be the owner of jewellery and offers no explanation, or an unsatisfactory explanation, as to its nature and source. Where, as here, the explanation is supported by a consistent and long-standing documentary record, an addition cannot be sustained merely on suspicion or surmise. Reliance placed by assessee on judicial precedents of Dhirajlal Girdharilal v. CIT (supra), Dhakeswari Cotton Mills Ltd. v. CIT (supra) and Umacharan Shaw & Bros v. CIT (supra) for the proposition that suspicion, however strong, cannot take the place of proof, is well founded and squarely applies to the facts of the present case.

8.3. We also note that Coordinate Bench of ITAT Mumbai has, in ITA No. 3726/Mum/2024 of Nihal Chandrakant Garware v. DCIT, Central Circle 6(4), for AY 2021-22, order dated 28.03.2025 accepted an explanation of jewellery holding by reference to the assessee’s status and family circumstances, notwithstanding the absence of contemporaneous purchase bills for every item, and declined to sustain an addition founded on inference alone. The facts of the present case stand on an even stronger footing. Unlike the cited order, which arose from jewellery found in the course of search action u/s 132 of the Act and valued by the Department, the jewellery in the present case was

voluntarily disclosed by assessee herself for the first time in Schedule AL upon her income crossing the prescribed threshold and is supported by a documentary trail predating the year under consideration by several decades. 8.4. In view of the foregoing, we hold that the addition of Rs. 67,39,949/- made u/s 69A is not sustainable and is accordingly deleted. Ground no. 1 is allowed.

9.1. In first appeal, assessee submitted that ld. Assessing Officer had issued enquiry u/s 133(6) of the Act to Ajit Rao HUF, which confirmed receipt of the brokerage and furnished supporting confirmations, bills and financial statements demonstrating that the amount was offered to tax as business income; that the HUF acts through its Karta and there is no legal bar on an HUF earning brokerage income through its Karta or coparceners. Reliance was placed on the decision in the case of ACIT v. Industrial Metal Corporation in

ITA No. 1376/Mum/2016, order dated 17.01.2018 for Assessment Year 2012- 13, for the proposition that nothing in law debars payment of commission to an HUF. Ld. CIT(A) held that, since the coparceners of the HUF had already been separately rewarded with brokerage for the same services, the HUF could not be said to have separately rendered any service and accordingly upheld the disallowance.

10.1. Per-contra, ld. Sr. DR relied on the orders of the authorities below and submitted that brokerage, being a service dependent on the personal skill, effort and market knowledge of the individual who performs it, is not a service capable of being rendered by an HUF as such; that the very individual through whom the HUF is said to have acted had already been separately compensated for the identical transaction; and that the additional payment routed through the HUF was, in substance, gratuitous and rightly disallowed.

of the assessee or a gratuitous payment not qualifying for deduction u/s 54 of the Act.

11.1. It is well settled that a Hindu undivided family, having no capacity for personal exertion independent of its members, cannot in law be said to render a service that is inherently personal in nature, viz., identifying a suitable property, arranging site visits and negotiating price and terms on behalf of a client, merely because the individual performing that service happens to be its Karta or a coparcener. The governing test in this regard was laid down by the Hon’ble Supreme Court in Raj Kumar Singh Hukam Chandji v. CIT [1970] 78 ITR 33 (SC), where it was held that the broader principle is whether the remuneration received by a coparcener was, in substance though not in form, one of the modes of return made to the family because of investment of family funds in the business, or whether it was compensation for services rendered by the individual coparcener; if the former, it is income of the Hindu undivided family, but if the latter, it is the income of the individual coparcener, and the circumstance that the family had invested funds in the business, or that the coparcener held the qualifying interest by reason of family funds, would not by itself convert a receipt that is essentially remuneration for personal service into income of the family.

11.2. The same principle has been applied in P.N. Krishna Iyer v. CIT [1969] 73 ITR 539 (SC), where it was held that income received by a member of a Hindu undivided family, even where partially traceable to the member’s personal exertion, is taxable as income of the family only if it is earned to the detriment of the family funds or with the aid or assistance of those funds, and is otherwise taxable as the member’s separate income; in CIT v. D.C. Shah [1969] 73 ITR 692 (SC), where remuneration was held not to be income of the family in the absence of a real or sufficient connection between investment of 12

family funds and the remuneration paid. These decisions may usefully be contrasted with CIT v. Kalu Babu Lal Chand [1959] 37 ITR 123 (SC), where the very opportunity to earn a managing agency was found to have arisen from family funds invested to the detriment of the family, and the resulting remuneration was accordingly held assessable in the hands of the family. The distinction turns, in every case, on whether the income in question is, in substance, a return on the family’s investment, or compensation for an individual’s personal service. This line of authority has since been affirmed by the Hon’ble Supreme Court in K.S. Subbiah Pillai v. CIT [1999] 237 ITR 11 (SC). Para 5 of this judgment reads. “We cannot agree. Having analysed the law, as it did correctly, the High Court should have taken note of the finding recorded by the Tribunal and noticed by it earlier, namely, that the remuneration and commission that were earned by the karta were earned by him on account of his personal qualifications and exertions and not on account of the investment of the family funds and, therefore, should have held that the income could not be treated as the income of the HUF.”

11.3. Applying the above test to the facts before us, there is no material, and indeed no case set up by assessee that any fund or asset of Ajit Rao HUF was invested or deployed in earning the brokerage in question. On assessee’s own submission, the brokerage was earned through the personal effort of an individual, viz., identification of the property, arranging visits and negotiating the price. Where the very individual who is said to have rendered that personal service, Shri Abhiraj Ajit Rao, had already been separately and fully compensated at Rs. 12,00,000/- in his individual capacity for the identical transaction, the further payment of an identical sum routed through “Ajit Rao HUF” cannot, in our view, be said to represent a genuine service rendered by the HUF as such. The confirmation received by ld. Assessing Officer pursuant

to enquiry u/s 133(6) of the Act establishes only that the HUF received and offered the amount to tax; it does not, without more, establish that the HUF, as distinct from its Karta/coparcener already separately paid, itself rendered any additional service to assessee. We are, therefore, unable to accept assessee’s submission that sustaining the disallowance would result in double taxation; the enquiry as to allowability of the expenditure in assessee’s hands is independent of the treatment of the receipt in the hands of the recipient.

11.4. As regards assessee’s reliance on ACIT v. Industrial Metal Corporation (supra), for the general proposition that nothing in law debars payment of commission to an HUF, we find that the said proposition, even if correct, does not assist assessee on the facts of the present case. The present disallowance does not rest on a blanket bar against payment of brokerage to an HUF as such, but on the specific evidentiary infirmity that the identical personal service is shown to have already been compensated once, in the individual capacity of the very person through whom the HUF is said to have acted. On this footing, we find no infirmity in the view taken by the authorities below. The disallowance of Rs. 12,00,000/- is accordingly upheld. Ground no. 2 is dismissed.

Order pronounced in the open court on 01st September, 2026. Sd/- Sd/- Pawan Singh Girish Agrawal Judicial Member Accountant Member

Dated: 01st September, 2026 MP, Sr.P.S. Mumbai 14

Copy to: 1 The Appellant 2 The Respondent 3 The Pr. CIT / CIT concerned 4 The D.R., ITAT, Mumbai ‘A’ Bench 5 Guard File