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Facts
A search action was conducted on the assessee, leading to the discovery of jewellery, watches, and foreign currency. The Assessing Officer made additions under section 69A for these items. The CIT(A) granted partial relief, but confirmed some additions for jewellery and watches. The assessee appealed against the confirmed additions.
Held
The Tribunal deleted the addition on account of jewellery as it was considered nominal and justifiable for a high net worth individual from a wealthy family. However, the issue regarding the addition for watches was remitted back to the Assessing Officer for fresh valuation and consideration, as the assessee contended the valuation was incorrect and the watches were not real.
Key Issues
Whether the additions made under Section 69A for jewellery and watches are justified, considering the assessee's high net worth and status, and whether the valuation of watches was correct.
Sections Cited
69A, 143(3), 271AAB
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Income Tax Appellate Tribunal, “B” BENCH MUMBAI
Before: SHRI SANDEEP GOSAIN & SHRI GIRISH AGRAWAL
PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of Ld. CIT(A)- 54, Mumbai vide order no. ITBA/APL/S/250/2024-25/1066475227(1), dated 08.07.2024, passed against the assessment order by Dy. Commissioner of Income Tax, Central Circle 6(4), u/s.143(3) of the Income-tax Act (hereinafter referred to as the “Act”), dated 14.09.2022 for Assessment Year 2021-22.
Grounds taken by the assessee are reproduced as under: 1. Addition under section 69A of the Act on account of jewellery and watches amounting to Rs 52,54,820/- 1.1. The Commissioner of Income-tax (Appeals) (hereinafter referred to as "the CIT(A)] erred in confirming the action of the Assessing Officer (hereinafter referred to as "the AO"] in taxing jewellery and watches worth Rs. 52,54,820/-under section 69A of the Income-tax Act, 1961 [hereinafter referred to as "the Act"). The reasons given are wrong, contrary to facts of the case and against the provision of law; 1.2. The CIT(A)/AO failed to appreciate that holding jewellery / watches worth Rs. 52,54,820/- is commensurate with the assessee's net worth and social standing; 1.3. The CIT(A) / AO erred in estimating the valuation of watches found in possession of the assessee at Rs. 48,40,000/- on an adhoc basis without appreciating that some of the watches were not even real; 2. Addition under section 69A of the Act on account of foreign currency of Rs. 10,00,000/- 2.1. The CIT(A) erred in confirming the action of the AO in taxing foreign currency worth Rs. 10,00,000/-, found in possession of the assessee, under section 69A of the Act. The reasons given are wrong, contrary to facts of the case and against the provision of law, 2.2. The CIT(A) / AO failed to appreciate that holding foreign currency worth Rs. 10,00,000/- is commensurate with the assessee's net worth, social standing and surrounding circumstances, 3. The CIT(A) erred in upholding the action of the AO on initiating penalty proceedings under section 271AAB of the Act; 4. The above grounds/sub grounds of appeal
are without prejudice to each other;
5. The assessee craves the leave to add, amend or alter all or any of the grounds of appeal.
Brief facts of the case are that a search action was conducted on the assessee and others on 09.03.2021. During the course of search at the residential premises of the assessee at 7B, II Palazzo, Little Gibbs Road, Malabar Hill, Mumbai-400006, Investigating Officer found gold and diamond jewellery amounting to Rs 6,35,81,339/-, watches of Rs. 3,01,30,000/- and foreign currency of Rs. 10,00,000/-. Investigating Officer seized jewellery of Rs 4,06,92,696/-, watches of Rs 1,46,30,000/- and foreign currency of Rs 10,00,000/-. Pursuant to the search action, in the case of the assessee , assessment was completed vide order dated 14.09.2022 under section 143(3) of Act, assessing the total income at Rs. 5,73,11,230/- by making the following additions/disallowances:
i. Addition under section 69A of the Act with respect to seized jewellery -Rs. 4,06,92,696/-: ii. Addition under section 69A of the Act with respect to seized watches Rs 1,46,30,000/-: iii. Addition under section 69A of the Act on account of seized foreign currency -Rs. 10,00,000/-.
3.1. Aggrieved, assessee preferred an appeal before the ld. CIT(A) who vide order dated 08.07.2024 granted substantial relief and restrict the addition as under: i. Addition under section 69A of the Act with respect to seized jewellery Rs. 4,14,820/- ii. Addition under section 69A of the Act with respect to seized watches - Rs 48,40,000/-: iii. Addition under section 69A of the Act on account of seized foreign currency -Rs. 10,00,000/-.
3.2. Aggrieved, assessee is in appeal before the Tribunal on the additions confirmed by the ld. CIT(A). Department has not challenged the additions deleted by the ld. CIT(A).
Ground No.1 has two components of addition, one on account of jewellery amounting to Rs.4,14,820/- and second relating to watches amounting to Rs.48,40,000/-, thus, totalling to Rs.52,54,820/- u/s.69A. As regards addition in respect of jewellery of Rs.4,14,820/- against the original addition of Rs.4,06,92,696/- made by ld. Assessing Officer, assessee could explain the nature and source of substantial portion of the addition which resulted into relief from ld. CIT(A) and against which Department is not in appeal before the Tribunal. The details of the additions made on this account is tabulated as under:
Sr. No. Name of the party Amount (in Rs.) 1. Anita Garware 1,23,85,080 2. Chandrakant Garware Family Trust 1,25,21,199 3. Nihal Garware 12,95,940 4. Nikita Garware 32,34,357 5. Nikita Garware (through her mother will) 1,08,41,297 6. Nishka Garware 1,89,100 7. Miscellaneous 2,25,720 Total 4,06,92,696 4.1. From the table, it can be seen that the addition sustained is in respect of Sr.No.6 and 7, i.e., Rs.1,89,100/- for Ms. Nishka Garware and Rs.2,25,720/- towards miscellaneous. In order to explain the nature and source of jewellery for the above two additions, assessee made submissions as under: “The AO has made addition of Rs 1,89,100/- in respect of jewellery pertaining to Nishka Garware. Nishka Garware is the daughter of the appellant. This jewellery is one ring worth Rs 1.43 lakhs and one gold coin worth Rs 0.45 lakhs. Both these items were gifted to her during family functions like birthdays and other ceremonies. In view of the above, we most humbly request Your Honour to delete the addition of jewellery of Rs 1,89,100/- pertaining to Nishka Garware.
Six items of jewellery amounting to Rs 2,25,720/- are not belonging to any family members. The same were acquired by Garware family during family occasions. A breakup of the same is as under Sr No Particulars Valuation as per Search Team (Rs) 1. Two Earrings 44,300 2. Two Diamond Tops 22,550 3. Two Tops 52,132 4. Two Tops 49,610 5. Two Earrings 13,548 6. Two Diamond Tops 43,580 Total 2,25,720
In view of the above, we most humbly request Your Honour to delete the addition of jewellery of Rs 2,25,720/- Further, it is well settled that where an assessee hails from a wealthy family, no addition can be made on account of reasonable jewellery. In the present case, as explained, the assessee is a high net worth individual and being a person of means, jewellery of Rs. 4,06,92,695/- cannot be said to be excessive to his status. Accordingly, no addition under section 69A of the Act is warranted.”
4.2. On the above submission, ld. CIT(A) observed that these are general in nature and not supported with any documentary evidences and thus sustained the addition.
Before us, ld. Counsel submitted that assessee is a high net worth individual and comes from a family of means. Assessee has made detailed submission on this aspect vide letter dated 27.04.2021. Similar submission was made before ld. CIT(A) vide letter dated 18.06.2024. In such a case, it would not be uncommon to hold jewellery of Rs. 4,14,820/-. It is well settled that additions towards unexplained investment in jewellery is to be deleted if such jewellery was a small amount vis-a-vis high income. Reliance is placed on the following judgments:
i. Vibhu Aggarwal Vs. DCIT 93 taxmann.com 275 (Del) ii. Monisha R. Jaising Vs. DCIT 101 taxmann.com 519 (Mum)
5.1. In the above decisions, it is held that keeping in mind the high income of the assessee and having regard to wealthy family status where gifting of jewellery is customary, the explanation offered by the assessee towards holding gold and ornaments in excess of CBDT instruction was treated as explained.
We have heard both the parties and perused the material on record, as well as submissions made before us. The details of aforesaid jewellery for which additions have been made is extracted below:
6.1. Considering the fact of assessee being a high net worth individual and coming from a family of means, in view of instruction No.1916, dated 11.05.1994 by Central Board of Direct Taxes (CBDT), the aforesaid jewellery found in the case of assessee and his family members, for which addition has been sustained, we note that substantial portion of it has been deleted by ld. CIT(A). We further, note that jewellery so found is very nominal and reasonable, keeping in mind the riches and high status of the assessee. Ms. Nishka Garware is the daughter of assessee and the explanation given of she having received the aforesaid jewellery amounting to Rs.1,89,100/- by way of gift during family functions is justifiable. Similarly, in respect of miscellaneous items for which addition has been made of Rs.2,25,720/-, it is stated that the same have been acquired by the family of the assessee during various family occasions, details of which is already extracted above. This also is reasonable and justifiable taking into consideration the high net worth status of the assessee and his family. Accordingly, no addition u/s. 69A is called for, we delete the addition so sustained in this respect.
6.2. As regards the addition of Rs.48,40,000/- relating to watches found and seized during the course of search of the assessee, ld. Assessing Officer had made an addition of Rs.1,46,30,000/- u/s.69A. Against this, ld. CIT(A) deleted the addition of Rs.97,90,000/- accepting the explanation given by the assessee towards nature and source of such watches. He confirmed the addition of Rs.48,40,000/- for which assessee is in appeal. In this respect, assessee submitted that some of the watches were not real and had insignificant value and some of the watches were received as souvenirs. According to the assessee, value adopted for the purpose of addition is incorrect, since the watches are not real. Assessee thus, contends that the addition is based on incorrect valuation and therefore ought to be deleted. Furthermore, according to him, considering the status of high net worth of the assessee, it is not uncommon to hold watches of such value. Ld. CIT(A) has sustained addition for this amount by observing that valuation of watches is supported by valuation report of a registered valuer. Assessee could not furnish contrary evidence in the form of invoice and valuation report to substantiate its claim and thus the addition was sustained.
6.3. Before us, assessee contends that in the course of search, the above Jewellery and watches were seized and continue to remain with the department till date. Detailed submissions were made before the Investigating Officer, ld. Assessing Officer and ld. CIT(A) that the watches were not real. As the watches were seized by the ld. Assessing Officer, assessee had no occasion to submit his own valuation report to counter the valuation adopted by the Department. Infact, till date, the watches are in custody of the Department. A copy of a recent letter dated 19.07.2024 written to the Department to release the seized jewellery and watches was furnished. According to the assessee, the said jewellery / watches are yet with the Department. At the same time, it is contended that the submissions of the assessee were not at all rebutted.
6.4. Considering the submissions made by the assessee and the facts on record, in the interest of justice and fair play, we find it appropriate to remit the issue back to the file of ld. Jurisdictional Assessing Officer (JAO) for granting an opportunity to the assessee to undertake exercise of valuation of the watches so seized and held in custody of the Department. Ld. JAO is directed to facilitate the exercise of valuation on the part of the assessee and consider the same objectively to arrive at his satisfaction in respect of nature and source of these watches for which addition has been sustained and consider the claim of the assessee in accordance of the provisions of the Act. Needless to say, that the assessee be given reasonable opportunity of being heard.
In the result, ground No.1 is partly allowed.
Ground No.2 raised by the assessee is towards addition relating to foreign currency of Rs.10 lakhs found and seized during the course of search, details of which is tabulated as under:
Sr No Foreign Currency Amount in USD 1. USD 3,090 2. Pound Sterling 4,285 3. UAE Dirham 3,250 4. Singapore Dollar 6.637 Total 17,262 8.1 In this respect, it is contended by the assessee that the aforesaid foreign currency was obtained during various overseas travels. According to him status of assessee was Non-resident Indian (NRI) from Assessment Year 2016-17 to Assessment Year 2020-21. Status of the assessee is a high net worth individual and he comes from a family of means. According to him, holding foreign currency of this amount being a non-resident in the earlier years and considering the stature is not unreasonable. Both, ld. Assessing Officer and Ld. CIT(A) have sustained the addition made in this respect. Ld. CIT(A) observed that holding of the aforesaid foreign currency is not substantiated with documentary evidences like declaration made before Indian Customs on arrival or invoice of purchase of such foreign currency.
Before us, nothing cogent is brought on record to establish the contention made by the assessee so as to corroborate with documentary evidences. Accordingly, we do not find any reason to interfere with the observation and finding arrived at by ld. CIT(A) in this respect. Thus, ground No.2 is dismissed.
In the result, appeal of the assessee is partly allowed.
Order is pronounced in the open court on 28 March, 2025