DEV KISHAN JOSHI,MUMBAI vs. DCIT-CENTRAL CIRCLE 1(3), MUMBAI, MUMBAI

At the outset, there is a delay of 657 days in filing the present appeal before the Tribunal. The assessee has filed an application seeking condonation of the delay supported by an affidavit explaining the circumstances in which the appeal could not be filed within the prescribed period. It has been stated that after dismissal of the first appeal, the assessee, acting upon the legal advice then received, was pursuing various remedies arising out of the very same seizure proceedings, including proceedings relating to quashing of the criminal proceedings, release of the seized jewellery and proceedings which eventually travelled before the Hon’ble Supreme Court. It was thereafter, upon obtaining fresh legal advice, that the assessee was advised to independently challenge the appellate order before this Tribunal. We have considered the explanation in the light of the attendant circumstances. The material placed before us does not indicate that the assessee had deliberately abandoned his

The material facts giving rise to the present appeal are that on 12.07.2017, the GRP, Ratlam intercepted two persons, namely, Shri Mahesh Jagbandhu Roy and the present assessee, Shri Dev Kishan Joshi, and seized gold jewellery comprising in all 112 items weighing 6,020.46 grams. This was followed by issuance of warrant of authorisation under section 132A by the Pr. DIT (Investigation), Bhopal. Consequent to the requisition, the case of the assessee was centralised to the charge of the Assessing Officer, Central Circle-1(3), Mumbai. Notice under section 142(1) was thereafter issued and the assessee filed his return of income for Assessment Year 2018-19 on 22.10.2019 declaring total income of ₹1,52,350/-. Notices under sections 143(2) and

Insofar as the present assessee is concerned, 18 items of gold jewellery having gross weight of 1,568.370 grams and net weight of 1,323.120 grams, valued at ₹36,35,934/-, were attributed to his possession. His statement was initially recorded under section 131 before the ITO-2, Ratlam on 13.07.2017 and thereafter again before the ITO-18(2)(4), Mumbai on 17.11.2017. The tenor of his explanation throughout was that he had accompanied Shri Mahesh Jagbandhu Roy for marketing the gold ornaments and that he was not aware of their actual ownership. During the course of the assessment proceedings, his statement was once again recorded under section 131 on 01.10.2019. In answer to the questions put to him, he reiterated that his role was merely to accompany Shri Mahesh Roy for marketing the jewellery; that he did not maintain the stock register or records concerning the goods; that such records, if any, would be with Shri Mahesh Roy; and, importantly, that neither he nor Shri Mahesh Roy was the owner of the jewellery. When specifically confronted with the statement of Shri Mahesh Roy that the jewellery belonged to M/s B. Nishant Jewels Pvt. Ltd., the assessee stated that he was personally unaware of its precise

The Assessing Officer proceeded on the premise that since the jewellery was found in the physical possession of the assessee, the initial burden lay upon him to establish its source and ownership. The assessee was once again required through order-sheet entry dated 08.11.2019 to explain why the jewellery valued at ₹36,35,934/- should not be treated as unexplained. In reply dated 11.11.2019, the assessee reiterated that he had been travelling with Shri Mahesh Jagbandhu Roy to Delhi when they were intercepted at Ratlam and that the gold ornaments did not belong to him. A further notice under section 142(1) dated 15.11.2019 required him to furnish documentary evidence demonstrating that the jewellery was not his. Since the Assessing Officer found that no such documentary evidence had been furnished, he held that the assessee had failed to establish the source and ownership of the jewellery and, therefore, considered its value liable to be brought within the ambit of section 69A.

The assessee carried the matter in appeal before the learned CIT(A). Several notices under section 250 were issued on 13.07.2022, 18.10.2022, 18.11.2022, 19.12.2022, 01.06.2023 and 22.09.2023; however, there was no

We have considered the orders of the authorities below and the entire material available on record. The issue requiring adjudication is whether, in the peculiar factual setting obtaining here, the protective addition of ₹36,35,934/- under section 69A can legitimately continue in the hands of the assessee merely because the jewellery was physically found in his possession, notwithstanding that the Revenue itself has made the substantive addition in respect of the very same jewellery in the hands of M/s B. Nishant Jewels Pvt. Ltd.

In the present case, the assessee never admitted ownership of the jewellery. His statements recorded on different occasions consistently disclose that he was accompanying Shri Mahesh Jagbandhu Roy in connection with marketing of gold ornaments and was earning commission from such activity. It is true that the assessee was unable to furnish documentary evidence conclusively establishing the ownership of M/s B. Nishant Jewels Pvt. Ltd. and, when specifically questioned, stated that he himself was unaware of the exact ownership. This aspect cannot be ignored and has indeed been specifically noticed by the Assessing Officer. But this circumstance cannot equally be divorced from the other

The concept of a protective assessment is invoked where, owing to uncertainty regarding the correct person in whose hands a particular income or asset is liable to be assessed, the Revenue seeks to safeguard itself against possible loss while making the substantive assessment in the hands of the person whom it considers primarily liable. Such an assessment is, by its very nature, contingent and protective. Here, once the Assessing Officer chose, on the material before him, to bring the value of the very same jewellery to tax substantively in the hands of M/s B. Nishant Jewels Pvt. Ltd., the corresponding addition in the assessee’s hands was retained merely as a protective measure. For sustaining such

We are, therefore, unable to concur with the reasoning of the learned CIT(A) that the protective addition must necessarily remain alive until the substantive addition in the hands of M/s B. Nishant Jewels Pvt. Ltd. attains finality. If accepted as an inflexible proposition, such reasoning would permit a protective assessment to continue indefinitely without an affirmative determination, based upon evidence, that the income or asset was in fact taxable in the hands of the person protectively assessed. A protective assessment is intended to protect the legitimate interest of the Revenue during a period of genuine uncertainty; it cannot be transformed into an independent and perpetual charge merely because proceedings concerning the substantive assessee

There is also an important connected circumstance which reinforces the above conclusion. The present seizure was a composite interception involving the assessee and Shri Mahesh Jagbandhu Roy, both travelling together with the jewellery. We have already dealt with the connected appeal of Shri Mahesh Jagbandhu Roy arising out of the very same seizure, wherein the protective addition made in respect of the jewellery attributed to his possession has been deleted. The factual substratum in the present appeal is substantially the same: the interception is the same; the journey and the seizure are the same; the asserted owner is the same company, namely M/s B. Nishant Jewels Pvt. Ltd.; the statement of the Director claiming ownership forms part of the common evidentiary chain; and the substantive assessment has been made in the hands of the very same company. No distinguishing material has been brought before

Thus, when the entire factual matrix is viewed cumulatively rather than in isolated fragments, the position which emerges is that the assessee consistently denied ownership and explained the limited capacity in which he was accompanying Shri Mahesh Jagbandhu Roy; Shri Mahesh Roy attributed the jewellery to M/s B. Nishant Jewels Pvt. Ltd.; the Director of that company himself claimed that the seized jewellery belonged to the company; the Revenue proceeded to make a substantive addition in respect thereof in the hands of the company; and the addition in the assessee’s hands was consciously made only on a protective basis. Against these circumstances, there is no independent positive material establishing that the assessee was the actual or beneficial owner of the jewellery. Mere physical possession, though certainly relevant, cannot in the peculiar facts of this case outweigh the Revenue’s own substantive treatment of the same asset coupled with the surrounding statements and

Insofar as the levy of interest under sections 234A, 234B and 234C is concerned, the same is consequential and the Assessing Officer shall recompute the interest, if any, while giving effect to this order. The grounds concerning initiation of penalty proceedings under sections 271AAB and 271AAC do not call for any separate adjudication at this stage, being consequential/premature in nature. Accordingly, the substantive grounds raised by the assessee are allowed.

In the result, the appeal of the assessee is allowed.