SURESH KUMAR JAIN,VISAKHAPATNAM vs. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, VISAKHAPATNAM

These appeals are filed by the assessee against the orders of the Commissioner of Income Tax (Appeals) [CIT(A)]-3, Visakhapatnam in Appeal No.230, 231 and 271/2017-18/CIT(A)-3/VSP/2019-20 dated 14.07.2019 for the Assessment Year (A.Y.) 2014-15. For the sake of convenience, these appeals are clubbed, heard together and a common order is being passed as under.

In this case, search and seizure operation u/s 132 of the Income Tax Act, 1961 (in short ‘Act’) was carried out in the business premises of the assessee, M/s Hira Panna Jewellers on 24.11.2015. The assessee was the proprietor of the said business concern, (M/s Hira Panna Jewellers) upto 31.10.2014. Thereafter, the proprietary concern was converted into the 3 S.A. No.69/Viz/2019 to 71/Viz/2019 and I.T.A Nos.585/Viz/2019 to 587/Viz/2019, A.Y.2014-15 to 2016-17 Sri Suresh Kumar Jain, Visakhapatnam status of partnership firm from 01.11.2014, consisting of 3 partners viz. Sri Suresh Kumar Jain, Sri Mahendra Kumar Jain and Sri Rajendra Jain. The assessee filed the return of income on 28.11.2014 admitting total income of Rs.1,87,83,950/-. Subsequently, a notice u/s 153A of the Act was issued to the assessee calling for the return of income for the A.Y.2014-15, in response to which the assessee filed his return of income on 24.02.2017 admitting total income of Rs.1,87,83,950/-. The Assessing Officer (AO) completed the assessment u/s 143(3) r.w.s. 153A of the Act on total income of Rs.3,49,19,910/-. The AO made the following additions to the returned income in the assessment made u/s 143(3) r.w.s. 153A : Unexplained expenditure u/s 69A of the Act - Rs.23,32,200 Unexplained money - Rs.1,28,90,658 Disallowance of deduction u/s 80IA of the Act - Rs.5,13,096

Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) dismissed the appeal of the assessee. Therefore, the assessee filed appeal before this Tribunal.

In the appeal, the assessee raised as many as five grounds in total. Ground No.1 and 5 are general in nature which does not require specific adjudication.

Against the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) found that having not filed the Form 10CCB electronically, the assessee is disentitled for deduction u/s 80IA of the Act, accordingly, confirmed the addition made by the AO. Against which the assessee filed appeal before us.

During the appeal hearing, the Ld.AR argued that in this case, the assessee has filed the return of income on 28.11.2014. Search took place on 24.11.2015 and the time limit for issue of notice u/s 143(2) expired on 30.09.2015, therefore submitted that the assessment is to be construed as a completed assessment. In the completed assessments, no addition is permitted without the support of the incriminating material. In the instant case, no incriminating material was found during the course of survey or 5 S.A. No.69/Viz/2019 to 71/Viz/2019 and I.T.A Nos.585/Viz/2019 to 587/Viz/2019, A.Y.2014-15 to 2016-17 Sri Suresh Kumar Jain, Visakhapatnam search and the deduction was claimed by the assessee in the regular returns of income. The audit report in Form 10CCB was filed manually. The assessee has made the genuine claim for deduction u/s 80IA, therefore, argued that the addition made by the AO is not permissible, hence requested to delete the addition.

On the other hand, the Ld.DR supported the orders of the lower authorities and requested to uphold the order of the Ld.CIT(A).

We have heard both the parties and perused the material placed on record. Though the assessee has raised this issue in ground No.2 assailing the additions made by the AO as outside the scope of assessment u/s 143(3) u/s 153A of the Act, the Ld.CIT(A) did not adjudicate the issue. In this case, there is no dispute that the assessee has filed the return of income on 28.11.2014 and the time limit for issue of notice u/s 143(2) was expired on 30.09.2015. As per the settled law, the AO is not permitted to make the addition u/s 153A in the completed assessments without the support of incriminating material. In the instant case, there was no incriminating material found and the assessee has filed the return of income claiming deduction u/s 80IA. The audit report in Form 10CCB was filed manually. Therefore, addition made by the AO without support of the 6 S.A. No.69/Viz/2019 to 71/Viz/2019 and I.T.A Nos.585/Viz/2019 to 587/Viz/2019, A.Y.2014-15 to 2016-17 Sri Suresh Kumar Jain, Visakhapatnam incriminating material u/s 80IA is unsustainable, accordingly, we set aside the order of the Ld.CIT(A) and allow the appeal of the assessee.

Ground No.3 is related to the addition of Rs.23,32,202/- and Rs.1,28,90,658/- u/s 69A of the Act. A survey u/s 133A was conducted in the business premises of Hira Panna Jewellers. During the course of survey, soft copy of data was found and marked as Annexure A/HPJ/02/VSP in the business premises of Hira Panna Jewellers on 24.11.2015. Based on the information found during the course of survey, the AO called for the explanation of the assessee requesting to clarify the contents of the loose sheets nos. 1 to 14 and 16 found during the course of survey. A statement u/s 131(1A) was recorded from Mahendra Kumar Jain to explain the contents on 25.02.2016. Shri Mahendra Kumar Jain stated that page No. 1 to 14 and 16 are the papers which do not belong to the firm and they were belonging to some other dealers who visited the shop and down loaded the contents using their computer system. However, he has not given the details of persons who downloaded the information. He has denied regarding the ownership of the papers bearing No. 1 to 14 and 16, however, he had accepted that page No.15, 17 and 18 were valuation reports belong to his brother Shri Suresh Kumar Jain. The AO did not 7 S.A. No.69/Viz/2019 to 71/Viz/2019 and I.T.A Nos.585/Viz/2019 to 587/Viz/2019, A.Y.2014-15 to 2016-17 Sri Suresh Kumar Jain, Visakhapatnam

Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) confirmed the addition made by the AO as discussed in para No.6.2 of the CIT(A) order as under :

Against the order of the Ld.CIT(A), the assessee is in appeal before this Tribunal. During the appeal hearing, the Ld.AR submitted that the assessee has retired from the partnership firm and he is no more a partner of Hira Panna Jewellers and the computer system does not belong to the assessee. Survey was conducted in Hira Panna Jewellers and the Managing Partner available at the time of survey has categorically told that the loose sheets found during the course of search do not belong to the firm or Shri Suresh Kumar Jain. Since, the material was not found in the assessee’s premises, the burden is on the Income Tax department to establish that the loose sheets found at the premises of Hira Panna Jewellers belonged to the assessee. As per the presumption u/s 292C of the Act, the books of accounts, loose sheets, documents found in the search / survey premises presumed to be belonging to the assessee who was under search / survey, unless it is established that the same belongs to the third party. In the instant case, neither the assessee nor Shri Mahendra Kumar Jain, Managing Partner of Hira Panna Jewellers have accepted that the material does belong to the assessee. The department also did not prove that the information contained in the loose sheets pertained to the assessee. Therefore, argued that the loose sheets found during the course of search do not belong to the assessee, hence, the same cannot be assessed in the 12 S.A. No.69/Viz/2019 to 71/Viz/2019 and I.T.A Nos.585/Viz/2019 to 587/Viz/2019, A.Y.2014-15 to 2016-17 Sri Suresh Kumar Jain, Visakhapatnam hands of the assessee. Accordingly, requested to set aside the order of the Ld.CIT(A) and allow the appeal of the assessee.

On the other hand, the Ld.DR argued that an Excel loose sheet was found during the course of survey conducted in the Hira Panna Jewellers and the assessee was the partner till 30.03.2015 and the loose sheets found during the course of survey were pertaining to the period when Suresh Kumar Jain was the Proprietor of the firm, i.e the date mentioned in the loose sheet was 20.03.2014. On the top of the loose sheet, it was mentioned as JKS, which means Suresh Kumar Jain in short. Contents of the loose sheets clearly show that these were the business transactions of the assessee for issue of gold and payments to goldsmiths for manufacture of ornaments. Therefore, argued that the material does belong to the assessee since, the loose sheets found in the premises were relating to the period of the Proprietary concern of Shri Suresh Kumar Jain. The Ld.DR strongly argued that the AO rightly made the addition which was confirmed by the Ld.CIT(A). Hence requested to uphold the order of the Ld.CIT(A) and dismiss the appeal of the assessee.

We have heard both the parties and perused the material placed on record. Hira Panna Jewellers was a proprietary concern of Shri Suresh

Loose sheets were extracted from the computer of Hira panna Jewellers pertaining to the period of April 2014 from 01.04.2014, though it was mentioned as JKS, neither the assessee, nor Shri Mahendra Kumar Jain have accepted that loose papers do belong to them. The assessee bluntly denied and stated that these loose papers did not belong to the assessee. The computer system found during the course of survey belonged to Hira Panna Jewellers, but not belonged to the assessee. As per section 292C of the Act, the loose sheets, books of accounts found during the course of search /survey are presumed to be belonging to the assessee, where the search or survey is conducted. In the instant case, survey was conducted in the business premises of Hira Panna Jewellers. Therefore, as per the presumption u/s 292C, loose sheets pertained to the Hira Panna Jewellers, but not to the assessee. Unless it is established that the loose sheets pertained to the assessee, the AO is not permitted to tax the contents or unexplained money or expenditure recorded in the loose sheets in the hands of the assessee. In the instant case, there was no material placed on record to show that the loose sheets were belonging to the assessee, therefore, the addition made by the AO in the hands of the assessee on account of unexplained money or expenditure is unsustainable.

Ground No.1 and 5 are general in nature which does not require specific adjudication.

Ground No.2 is related to the addition made on the basis of material impounded as Annexure A/HPJ/02/VSP in page No.1 to 16 discussed earlier in the assessment order. Since the facts are identical and the AO did not establish that the loose sheets found during the course of survey was belonging to the assessee, the addition made by the AO on account of unexplained money or expenditure in the hands of the assessee is unsustainable and the same is deleted. Accordingly, the order of the Ld.CIT(A) is set aside and the appeal of the assessee allowed.

Ground No.3 is related to the addition made by the AO u/s 80IA of the Act. The AO found that the assessee has claimed the deduction u/s 80IA for a sum of Rs.12,25,052/- and did not upload Form 10CCB electronically. Therefore, the AO disallowed the deduction claimed by the assessee u/s 80IA and accordingly made the addition.

Against the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) dismissed the appeal of the assessee. Against which the assessee filed appeal before us.

We have considered the submissions of both the sides. As per section 80IA, it is mandatory to file the audit report u/s 10CCB electronically and in the instant case, the assessee has failed to furnish the same. Therefore, we do not find any infirmity in the order of the Ld.CIT(A) and the same is upheld. Appeal of the assessee is dismissed on this ground.

Ground No.1 and 3 are general in nature which does not require specific adjudication.

Ground No.2 is related to the partly sustaining the addition of Rs.8,45,793/- in respect of unexplained jewellery. During the course of survey conducted in the residence of the assessee on 24.11.2015, the AO found gold ornaments with gross weight of 792.50 gms, net weight of 695.00 gms of value of which was estimated at Rs.16,30,900/-. Silver articles weighing 1210 gms, net weight 1070 gms valued at Rs.36,594/- were also found. The AO made the value of entire gold jewellery and silver

Against the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) allowed 50% of jewellery as explained keeping in view the Board Circular and confirmed the balance addition as discussed in para 5.2. of the Ld.CIT(A) order which reads as under. “5.2) 1 have carefully considered the facts of the case and the assessment order passed by the Assessing Officer and the submissions of the appellant. .It-is seen that the appellant only offered general explanation right from the search proceedings, post- search enquiries, assessment proceedings and also during the appellate \proceedings Except saying that jewellery is received during the marriage and as gift on other occasions no supporting evidence whatsoever has been produced by the appellant. The decisions relied on are not applicable to the facts of the case as the circumstances and factual position differs However, keeping in view the fact that substantial portion of the gold was explained as belonging to Mrs Kanchan Jain who is mother of the appellant and she has been Income Tax assessee for a long time, the explanation of the appellant can not be ignored a1 together also. The/ customs and tradition of the family of holding gold and jewellery also cannot be ignored. Accordingly, 50% of jewellery is treated as explained to meet the ends of justice. The addition to the extent of 50% is deleted and the balance is confirmed. The appellant partially succeeds on grounds raised.”

Against which the assessee filed appeal before us. During the appeal hearing, the Ld.AR submitted that as per the Board Circular 500 gms of gold jewellery to each married female member and 250 gms of gold jewellery to unmarried female member and 100 gms. of gold jewellery to male member is permitted, therefore, no addition is required to be made on account of gold jewellery found during the course of search. The assessee relied on 18 S.A. No.69/Viz/2019 to 71/Viz/2019 and I.T.A Nos.585/Viz/2019 to 587/Viz/2019, A.Y.2014-15 to 2016-17 Sri Suresh Kumar Jain, Visakhapatnam the decision of this Tribunal in the case of Chekuri Venkata Ranga Raju, Bhimavaram Vs. ACIT, CC, Rjy in I.A. No. 30 & 410/Viz/2012 dated 21.07.2014 and argued that as per the Board Circular, the credit may be given for the family members and the balance may be brought to tax.

On the other hand, the Ld.DR supported the orders of the lower authorities.

We have heard both the parties and perused the material placed on record. The ITAT, in the order cited supra held that though the Circular is issued for the purpose of laying guidelines for seizure of jewellery, but it also can be applied for the purpose of explaining the source of jewellery in terms of guidelines laid down in the Instruction. During the course of hearing, the Ld.AR submitted before us that the assessee is a business man and received the gifts or inherited the jewellery from their parents at the time of marriage and subsequent to the marriage on various occasions. Similarly, unmarried female also received the gifts over the period of years on various occasions. Therefore, submitted that gold jewellery to the extent of limits specified in Board Circular required to be treated as explained and no addition is called for. The assessee’s family consists of wife of the assessee, daughter and two male members including the 19 S.A. No.69/Viz/2019 to 71/Viz/2019 and I.T.A Nos.585/Viz/2019 to 587/Viz/2019, A.Y.2014-15 to 2016-17 Sri Suresh Kumar Jain, Visakhapatnam