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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI AMIT SHUKLA, JM, & SHRI AMARJIT SINGH, AM
O R D E R
Per Amit Shukla, Judicial Member:
The aforesaid appeal has been filed by the revenue against the impugned order dated 07.07.2020, passed by Ld. CIT(A)-54, Mumbai for the quantum appeal of assessment passed u/s 143(3)
Shri Mehul Johnson for AY 2017-18. The revenue has taken the following grounds of appeal:-
(i) On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in allowing relief on account of jewellery items worth Rs.84,53,902/- by not appreciating the fact that the CBDT's Instruction No.1916 dated 11.05.1994 instructs the Authorized Officers at the searched premises not to seize jewellery up to a certain limit: However, the Ld.CIT(A) has erred in misconstruing the contents of the Circular by concluding that the jewellery items to the extent of the said prescribed limits are not warranted for addition though the assessee could not explain the source of acquisition thereof. (ii) On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in allowing relief on account of jewellery items worth Rs.84,53,902/- by not appreciating the fact that the reason for non-seizure of jewellery items to the extent of a prescribed limit cannot be the reason for non-considering the same for the assessment purpose also in view of the fact that the same may be acquired from undisclosed sources which had escaped taxation. (iii) On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in allowing relief on Shri Mehul Johnson account of jewellery items worth Rs.84,53,902/- by not appreciating the fact that the assessee or his family members have never filed their wealth-tax returns, which could indicate their ownership of such jewellery items. (iv) On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in allowing relief on account of cash found at the assessee's residential premises during the search action to the extent of Rs.4,93,824/- by not appreciating the fact that there was no proof that the said cash-in-hand as on 31.03.2016 was not spent by the assessee during the period from 01.04.2016 till 13.07.2016 or that the same was not parked back in any manner. The appellant prays that the order of Commissioner of Income-tax (Appeal) on the above grounds be set aside and that the order of DC CC 6(4) be restored. The appellate craves, leaves to amend or alter any grounds or add a new ground, which may be necessary.
The facts in brief are that the assessee is an individual and has filed the original return of income on 07.11.2017 declaring total income at Rs. 3,62,45,880/-. The search and seizure action was earlier conducted in the case of India Bulls Group on 13.07.2016 and consequent to the search action, the assessee was a Director of India Bulls Real Estate Ltd., who was also covered. The AO noted
Shri Mehul Johnson that during the search action at the residential premises and locker, various items of gold jewellery and diamond jewellery were found which were valued from the Government Approved Valuer. The details of which are incorporated from pages 2-5 of the assessment order. AO also incorporated the statement recorded at the time of search u/s 132(4) of the Act, wherein the following relevant statement has been incorporated:-
Q26. During the course of search action u/s 132 of the Income Tax Act, 1961 at your residence here, substantial jewellery has been found in the locker at home. Further, there was a bank locker also found viz. Locker no. 383 at HDFC Bank, Tardeo. During the operation of this locker today, more than substantial jewellery has been found. The same was brought back home subsequently. The valuation of these jewellery items was done by departmental registered valuer DINESH L SALVI. The valuation of these jewellery items has been done separately for the Jewellery found at home and the Jewellery found in the Locker. At HOME, as per the Valuation report, the total Gold jewellery of 329.800 gms valued at Rs.9,42,09/- and Diamond jewellery of 14.000 gms (5.71 cts) valued at Rs.18,55,690/- were found. In the Locker, as per the Shri Mehul Johnson Valuation report, the total Gold jewellery of 1446.000 gms valued at Rs.41,17,711/- and Diamond jewellery of 325.900 gms (53.60 cts) valued at Rs.17,84,054/- were found. Please confirm the same. Ans. Sir, I confirm that during the course of search and seizure action u/s 132 of the Income Tax Act, 1961 at my residence some jewellery items were found. The valuation of these jewellery items was done by departmental registered valuer DJNESH L SALVI in the presence of two independent witnesses, I agree with the valuation report of the valuer. During the course of search at HOME, as per the Valuation report, the total Gold jewellery of 329.800 gms valued at Rs.9,42,097/-and Diamond jewellery of 14.000 gms (5.71 cts) valued at Rs.18,55,690/- were found. In the LOCKER, as per the Valuation report, the total Gold jewellery of 1446.000 grns valued at Rs.41,17,711/- and Diamond jewellery of 325.900 gms (53.60 cts) valued at Rs.17,84,054/-were found. Q,27 Please state that who is the owner of the jewellery items found at your residence? Also state, whether you and your family members file Wealth Tax Return? What is the source of the jewellery items found at your residence? Sir, the jewellery mentioned above belongs to my wife and my mother. My mother had kept few of her jewellery items with me as she considered them to be more safe here. If you Shri Mehul Johnson will see it closely, it is ail my ancestral jewellery. Most of it was gifted to us during our marriage by my parents and grandparents and my wife's parents and grandparents. We never had an idea that wealth tax is also to be filed as all this jewellery came to us as a part of gift It is basically a 'Stridhan' received during my marriage and some items are received as a gift during various family functions (Children's birth, Mundan ceremony etc), I need some time to submit the source and other related documents. So kindly give me 7 days time to furnish the detailed reconciliation of the same.
The Aggregate value of the jewellery was amounting to Rs. 86,99,552/-. In response to the show cause notice, by the AO, assessee stated as under:-
Most of the jewellery & ornaments was gifted to my wife and mother during different ceremonies performed at the time of marriage by their parents, in law family members and close friends. Majority of the jewellery is ancestral and has been passed on from generations to generation. And also producing old valuation reports in the name of few family members viz. Mehul Johnson, Pia Johnson, Bala Johanson, J.C.Johnson and Tara Kripal Singh
Shri Mehul Johnson 4. From the above, AO rejected the contention of the assessee and added the entire jewellery as income from unexplained sources in the following manner:-
3.6 The reply of the assessee is considered but the same is found to be not acceptable as the assessee failed to produce any bills of jewellery and also the assessee is non-filer of Wealth Tax Returns whenever applicable. Moreover, in reply to question No.28, Shri Mehul Johnson stated that he is ready to pay taxes on it, if any. In view of the above discussion, it is hereby held that the assessee has not been able to substantiate his claim of having purchased and / or acquired the aforesaid items valued at Rs.86,99,552/-. Hence, it is hereby held that the gold & diamond jewellery items and bullions with the aggregate value of Rs.86,99,552/- are hereby held to have been acquired from the undisclosed sources of income and as such the same remain unexplained within the meaning of Section 69A of the Act and the same are taxed accordingly. Penalty proceedings u/s.271AAC of the Act are hereby initiated for the undisclosed income.
Apart from that, AO noted during the course of search, cash aggregating Rs. 5,04,000/- was found. The statement of assessee recorded u/s 132(4), assessee could not give any proper
Shri Mehul Johnson explanation. However, in response to the show cause notice, assessee stated that cash belongs to him which was out of withdrawal from his savings bank accounts and is also duly reflected in his books of Accounts. He also submitted the consolidated balance sheet for the year ending on 31st March 31, 2016, wherein cash in hand amounting to Rs. 12,99,564/- has been shown. However, Ld. AO rejected the said explanation after observing as under:-
4.4 The reply of the assessee is considered but the same is found to be not acceptable as the assessee's own statement and reply filed during the assessment proceeding are contradictory in so far as the assessee, during the search action, had stated that the sources of this cash is basically withdraw from the company and the same is taken from the company which was meant to be adjusted against his coming month's salary, on the other hand, during the assessment proceedings the assessee submitted that the cash in hand amounting to Rs. 12,99,564/- on year ended 31 March, 2016 and the difference refers to the amount that has been spent out for business as well as personal use between the date of Balance Sheet and the date of search for household expenses but could not explain the mount which was spent for business and for household.
Shri Mehul Johnson 4.5 In view of the above discussion, it is hereby held that the assessee has failed to explain the sources of cash amounting to Rs.5,04,000/- found during the search action. Therefore, the sum of Rs.5.04.000/- is undisclosed sources of income and the same remain unexplained within the meaning of Section 69A of the Act and the same are taxed accordingly.
Ld. CIT(A) in so far as addition account of jewellery is concerned, noted that assessee had filed copies of valuation report which has been incorporated in the appellate order at page no. 8-9. Based on this valuation report, he held that the contention of the assessee is correct that this jewellery pertains more than 2 decades ago and most of them were inherited 3 generations back. Ld. CIT(A) also relied on CBDT circular no. 11.04.1994 which provides for exemption up to 500 gm per married lady, 250 gms per unmarried lady and 100 gms for the male member. He also noted that in the statement, assessee has categorically stated that these jewellery belongs to his wife and mother which was ancestral jewellery given at the time of marriage and on various other occasions. Relying on the valuation report as well as CBDT instruction, he held that up to the limit prescribed in CBDT instruction, jewellery cannot be treated as unexplained having regard to the status of the family and Shri Mehul Johnson customs and practices of the community which the family belongs. He also referred to various decisions of Tribunal as well as decision of Hon’ble Rajasthan High Court wherein the Courts have held that quantity of jewellery as prescribed in CBDT instruction for married and unmarried lady and male member cannot be treated as unexplained.
Finally, Ld. CIT(A) granted part relief on verification of item as detail below:-
5.7 The details of items mentioned in the valuation report and the jewellery items found and seized during the search proceedings have been verified and on comparison it is found that most of the jewellery items matches with the description and weight of the jewellery. However, item No, 17 being Gold Mang Tikka in stones, Pearl and Lakh has not been mentioned in any of the valuation report. The gross weight of this jewellery is 59,500, net weight is 41.600 and the value is Rs.1,20,224/-." Similarly, item No.6 being 1-Goid Gems Chain valued at Rs.1,25,426/- does not match with the valuation report in the case of any of the family members. Therefore, the appellant's claim of the abovementioned two Jewellery items cannot be accepted. Therefore, the addition u/s.69A in respect of unexplained investment in jewellery to Shri Mehul Johnson the extent of Rs. 1.20.224/- and Rs,1,25,426/- which comes to Rs.2,45,650/- is upheld and the appellant gets part relief of Rs. 84,53,902/- in respect of addition u/s.69A of the Act,. This ground of appeal is Partly Allowed,
8. Regarding addition of Rs. 5,04,000/- on account of alleged unexplained cash, Ld. CIT(A) has given part relief after verifying the withdrawal of regular bank account and balance sheet, which are as under:-
Now, the appellant has submitted that the cash of Rs. 5,04,000/- was from the withdrawal made from his regular bank account and also the cash belonging to family members which was accumulated over the period of time. The appellant has submitted a copy of bank account in his name bearing Account No. 11050124088 held with Nariman Point Branch, HDFC Bank. The appellant has submitted a summary of withdrawal from the said bank account from 02.04.2015 to 14.05.2016. The total of withdrawal comes to Rs.11,02,000/-. 6.4 The bank account of the appellant with HDFC Bank has been examined and it is observed that the appellant had received salary from the company in which he is Director and the same was regularly credited in this bank account. Further there are some amounts transferred from another Shri Mehul Johnson bank account. The withdrawal of Rs.11,02,000/- has also been verified with the bank account. The submissions of the appellant could not be believed for the reason that there has been regular withdrawals and the same might have been utilized for the purpose for which it was withdrawn. However, from the copy of the Income-tax return filed for A.Y.2016-17, it is seen that the appellant had cash in hand of Rs.4,93,824/-. This cash in hand was always available with the appellant. Therefore, out of cash of Rs.5,04,000/- found and seized, cash of Rs.4,93,824/- would be cash in hand available with the appellant. However, the appellant is not able to explain the cash of Rs.10,176/- (Rs.5,04,000 - Rs.4,93,824). Therefore, the addition on account of unexplained cash u/s. 69A to the extent of Rs.10,176/- is upheld and the appellant gets relief of Rs.4,93,824/-. Thus, this ground of appeal is Partly Allowed.
7. In the result, the appeal is Partly Allowed.
9. Before us, Ld. DR submitted that CBDT instruction is only for the purpose of seizure but it does not mean that jewellery are to be treated as explained and supported the decision of Madras High Court in the case of V.G.P. Ravidas Vs. ACIT (2014) 51 Shri Mehul Johnson taxmann.com 16 (Madras) and drew our attention to para no. 10 of the said judgment, which are as under:-
10. The Board Instruction dated 11.5.1994 stipulates the circumstances under which excess gold jewellery or ornaments could be seized and where it need not be seized. It does not state that it should not be treated as unexplained investment in jewellery. In this case, the Original Authority has correctly included the excess jewellery other than what has been found in the wealth tax assessment as unexplained investment in jewellery and demanded tax and penalty. We find no error in such order passed by the Assessing Officer, which was confirmed by the Commissioner of Income Tax (Appeals) and Tribunal. 10. He further submitted that the valuation report as submitted by the assessee has not been examined by the AO and Ld. CIT(A), nor asked for the remand report from the AO on the valuation report. Thus, this matter should be remanded back to the AO to examine and reconcile the valuation report submitted by the assessee. On the issue of unaccounted cash, he strongly relied on the order of AO.
Shri Mehul Johnson 11. On the other hand, Ld. Counsel for the assessee submitted that the valuation report was filed before the AO, which is evident from the assessee’s explanation as incorporated in para 3.5 of the assessment order. Thus, there is no question of remanding the matter to verify the valuation report to the AO. Regarding the benefit of CBDT circular No. 1916 (supra), he said that there are plethoras of judgments of jewellery taken into account the quantity of jewellery to the family members. Therefore, to that extent, it can be safely presumed that jewelleries stated in the circular stands explained and he relied on the following judgments listed as below:-
2 15.2.199 240 ITR 727 (Kar) Smt. Pati Devi vs. ITO 9 3 25.10.20 41 taxmann.com 295 (All) CIT vs. Ghanshyam Das Johri 13 4 19.7.201 339 ITR 351(Guj) CIT vs. Ratanlal vs. Yaparilal Jain 0 5 31.1.201 463/Mum/2012DCIT vs. Sh. Haroon Mohd. Unni. In ITA 4 No. 6 7.4.2014 366 ITR 325 (Raj) CIT vs. Satya Narain Patni 7 4.5.2018 170 ITD 580 (Del-Trib.) Vibhu Aggarwal vs. DCIT 6 9.3.2018 63 ITR (Trib) 594 (Delhi) Ritu Bajaj vs. DCIT 7 4.6.2020 1 84 ITD 329 (Cuttack Bench) N. Raja vs. ACIT 8 20.2.202 182 ITD 55 (Jaipur Bench) Ram Prakash Mahawar vs. 0 DCIT 9 22.9.202 60 CCH 69 (Mum) Jaysing Laxman Rao Deshmukh vs. 0 DCIT 10 28.1.202 61 CCH 73 (Banglore) Amith Kumar Bethala vs. DCIT 1 11 13.9.202 191 ITD 618 (Surat Bench) Ankit Manubhai Kachadiya 1 vs. DCIT 12 3.7.2019 Shri Baljit Singh vs. ITO 13 25.5.201 ITA No. 6251/Mum/2016 Shri Ashok Jain vs. ACIT 8 14 6.4.2021 ITA No. 849/Del/2018 Diwakar Sharma vs. DCIT 15 13.2.201 ITA No. 410/Del/2017 (Delhi- Trib.) Parag Gupta vs. 7 DCIT 16 7.8.2019 ITA No. 4935/Mum/2018 Babulal D. Mehta vs. DCIT 17 21.10.20 ITA No. 6670/Mum/2019 Jiten Bhavanji Vora vs. DCIT 20
On the issue of unaccounted cash, he prayed that not only there are huge withdrawals of cash from assessee’s own bank account but also cash in hand has also shown in the income tax return and therefore, cash found duly stands explained. Thus, he strongly relied the order of Ld. CIT(A).
We have heard both the parties and perused the relevant findings given in the impugned orders. In so far as addition on Shri Mehul Johnson account of unexplained jewellery is concerned, it is undisputed fact that during the time of search, the assessee has stated that these jewelleries mainly belongs to his wife and his mother and are ancestral jewellery which were gifted during the time of his marriage by his relatives, parents and grand parents and also the parents of his wife. During the course of assessment proceedings itself, the assessee filed the copies of valuation report which proves that these jewelleries are 10-30 years old belonging to the family members. The details of which have been incorporated in the appellate order. Some of the valuation reports were for the year 1990, 2002 and 2009. The AO nowhere mentioned about the valuation report which was filed before him and duly noted by Ld. CIT (A) who has tallied the description of the jewelleries as given in the valuation report filed by the assessee from the valuation report of the Govt. Approved Valuer. It was after taking into account the said reports, he has given part relief. Thus, the jewellery which was found on the possession of his wife and mother were old jewelleries and ancestral inheritance and also gifted 2-3 decades ago. Apart from that, even if we go by the CBDT Instruction no. 1916 which has been subject matter of interpretation by various courts in the case of Smt. Pati Shri Mehul Johnson Devi Vs. ITO (240) ITR 727 (Kar), CIT vs. Ghanshyam Das Johri (41 taxmann.com 295) (All) and CIT vs. Ratanlal vs. Yaparilal Jain 339 ITR 351 (Guj) and others and several other decisions of the Coordinate Bench, the courts have held that CBDT instruction should be taken as guiding factor for presuming assessee to the extent of limit prescribed for the family members should be treated as explained looking to the Indian customs and traditions where jewelleries were given to the ladies at the time of marriage and other occasions. Thus, when the various Hon’ble High Courts have held this proposition in favour of the assessee, we find that the ratio laid down has more pursusive value. In so far as the judgment of Hon’ble Madras High Court is concerned, in the said case assessee was a wealth tax payee and has filed wealth tax return and assessee was asked to prove the source of jewelleries found in excess of what was declared in the respective wealth tax return. In fact CBDT circular strongly prescribed that in excess of assessee wealth tax, gold jewellery ornaments found in excess of the carat weight declared in the wealth tax return only need to be assessed. Thus on the peculiar facts, the addition was confirmed by the Hon’ble High Court, which ratio cannot be made applicable here.
Shri Mehul Johnson Accordingly, the order of Ld. CIT(A) giving part relief is confirmed. Therefore the ground raised by the revenue is dismissed.
In so far as addition on account of unaccounted cash is concerned, as noted above, not only assessee had shown there was huge withdrawal from his regular bank account but has also shown withdrawals of bank account more than 11 lakhs and also in the income tax return for AY 2016-17, Rs. 4,93,824/- was shown as cash in hand. Thus to this extent, Ld. CIT(A) has rightly held that the said cash cannot be treated as unexplained or undeclared. Accordingly, the order of Ld. CIT(A) on this ground is confirmed.