MAHESH JAGABANDHU ROY,MUMBAI vs. DCIT-CENTRAL CIRCLE 1(3), MUMBAI, MUMBAI

The assessee has challenged the confirmation of protective addition of ₹1,07,70,042 made under section 69A of the Act in respect of the gold ornaments seized from his possession. The assessee has also assailed the ex parte appellate order passed by the learned CIT(A) without adjudicating the controversy on the basis of the material already available on record.

At the outset, there is a delay of 657 days in filing the present appeal before the Tribunal. An application supported by a duly sworn affidavit has been filed explaining the circumstances leading to the delay. The affidavit discloses that after dismissal of the first appeal, the assessee, acting upon the legal advice then received, pursued various remedies before different judicial forums arising out of the very same seizure proceedings, including proceedings before the Hon’ble High Court for quashing of the criminal proceedings, applications for release of the seized jewellery and the subsequent proceedings culminating before the Hon’ble Supreme Court. It is only thereafter, upon obtaining fresh legal advice, that the assessee was advised to independently challenge the assessment order before this Tribunal.

The expression “sufficient cause” occurring in the provisions governing condonation of delay deserves a pragmatic and justice-oriented construction. The assessee admittedly derives income from commission and jewellery- related job work and had throughout acted upon professional legal advice. Refusal to condone the delay, despite the satisfactory explanation placed on record, would result in non-adjudication of a substantial dispute involving a protective addition exceeding ₹1 crore on technical considerations alone. We are, therefore, satisfied that the assessee was prevented by sufficient cause from filing the appeal within the prescribed period. The delay of 657 days is accordingly condoned and the appeal is admitted for adjudication on merits.

The material facts are largely undisputed. On 12.07.2017, the assessee and another individual, Shri Dev Kishan Joshi, were intercepted by the GRP at Ratlam while travelling with gold jewellery. Insofar as the present assessee is concerned, gold ornaments weighing gross 4,452.090 grams and net 3,919.230 grams valued at ₹1,07,70,042 were seized. During the course of investigation as well as during the assessment proceedings, the assessee consistently maintained that the jewellery did not belong to him but belonged to M/s B. Nishant Jewels Pvt. Ltd., for whom he was working as a commission agent engaged in marketing jewellery and booking orders.

Thus, the Revenue itself accepted, for the purpose of substantive assessment, that the ownership of the jewellery stood claimed by M/s B. Nishant Jewels Pvt. Ltd. Having accepted such a position, it was incumbent upon the Revenue to demonstrate by some independent and cogent material that the same jewellery simultaneously represented unexplained ownership of the present assessee. No such material has been brought on record. The protective addition merely proceeds on the basis that the jewellery was found in the physical possession of the assessee.

Mere physical possession, divorced from the surrounding circumstances and independent evidence regarding ownership, cannot by itself justify an addition under section

We further find that the surrounding circumstances probabilise the explanation offered by the assessee. The assessee is admittedly engaged only in commission activity and jewellery-related job work. There is no material brought on record by the Assessing Officer suggesting that the assessee possessed either the financial capacity or the independent business infrastructure necessary to own gold ornaments valued at more than ₹1 crore. On the contrary, the assessment records themselves show that the assessee was earning commission income and had disclosed a modest returned income.

Equally significant is the fact that the Assessing Officer has himself made a substantive addition of the identical amount in the hands of M/s B. Nishant Jewels Pvt. Ltd. after considering the statement of its Director. Protective assessment is only a procedural safeguard adopted where

In the present case, the entire material collected during the course of investigation consistently points towards one conclusion, namely, that the assessee was merely carrying the jewellery for the purpose of displaying the designs and booking orders on behalf of M/s B. Nishant Jewels Pvt. Ltd. The delivery of jewellery, booking of orders and collection of sale proceeds were stated to be controlled by the company itself. These facts substantially remained consistent throughout the proceedings and were never displaced by any positive material demonstrating independent ownership of the jewellery in the hands of the assessee.

The learned CIT(A.), while sustaining the addition, merely observed that the protective addition should continue till the substantive proceedings in the case of M/s B. Nishant Jewels Pvt. Ltd. attain finality. In our considered opinion, such reasoning overlooks the evidentiary foundation of a protective assessment. The existence of a substantive assessment cannot, by itself, justify indefinite continuation of a protective addition where the available evidence does not establish

Considering the entirety of the material available on record, the cumulative effect of the statements recorded by the Department itself, the categorical admission made by the Director of M/s B. Nishant Jewels Pvt. Ltd., the substantive assessment already framed in the hands of the said company, and the complete absence of any independent material establishing ownership of the jewellery in the hands of the assessee, we are unable to sustain the impugned protective addition of ₹1,07,70,042 made under section 69A of the Act. The same is accordingly directed to be deleted.

The consequential levy of interest shall be recomputed in accordance with law. The grounds relating to initiation of penalty proceedings are merely consequential and do not call for any independent adjudication at this stage.

In the result, the appeal filed by the assessee is allowed.