MR.B.KUNHI AHMED ,MANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE, MANGALORE

Per Laxmi Prasad Sahu, Accountant Member : This appeal filed by the assessee against the Order passed by the CIT(A) on 29.11.2016, challenging the Order passed by the CIT(A) confirming the addition of jewellery of 100 gms and 600 gms which were considered as unexplained jewellery in the hands of the assessee, in the case of Smt. Nadia and Mrs. Mehtab respectively The learned Counsel for the assessee has also raised additional ground regarding protective addition on sale of property of Rs.22,70,000/- which was substantive assessed in the Assessment Year 2011-12 and the case reached the finality and assessee has paid tax thereon. Since the additional ground raised by the assessee goes to the root of the matter to decide Page 2 of 7 this particular issue, therefore, the additional ground raised by the assesseee is accepted. 2. Briefly stated the facts of the case are that a search under section 132 of the Act was conducted in the case of M/s. Hasan Hajee & Company, Mangalore on 04.08.2011. During the course of search proceedings at the residence of the assessee Hasnain Nadir, 6758.15 gms of gold and 4.31 ct. diamond were found. In assessee filed return of income under section 139 of the Act on 30.11.2012 disclosing taxable income of Rs.2,38,62,250/-. The return was processed under section 143(1) of the Act. Subsequently, the case was selected for scrutiny and statutory notice was issued to the assessee. The assessee filed detailed written submissions. Out of total jewelly of 6758.15 gms gold, 4929.100 gms of gold was explained. And balance of 1829.05 gms of gold and 4.31 cent diamond was not explained. Further, the assessee sold family property situated at Adya/Kannur for a consideration of Rs.2,08,00,000/-. The capital gain out of this Rs.17,02,503/- assessee’s share was worked out at Rs.22,70,006/-. Assessee has declared capital gain of Rs.22,61,932/- for the Assessment Year 2011-12 as the property sold as per the assessee in financial Year 2010-11. The PROPerty was got registered on 01.04.2011 therefore, for the current year, the same was assessed protectively. 3. Aggrieved from the above Order, assessee filed appeal before the CIT(A). The learned CIT(A) called for remand report and remand report was submitted. On the basis of remand report and rejoinder, jewellery relating to Mrs. Mehtab accepted 186.20 gms and the balance of 100 gms was considered as unexplained. Furhter, in the case of jewellery relating to Mrs. Nadia, 792.90 gms were accepted and the balance of 600 gms were considered as unexplained and the learned CIT(A) partly allowd the appeal of the assessee. Page 3 of 7 4. Aggrieved from the above Order, assessee filed appeal before the Triubnal. 5. The learned Counsel for the assessee reiterated the submissions made before the lower authorities and further submitted that the learned CIT(A) while deciding the issue has not given the benefit of instruction No.1916 dated 11.05.1994. The learned CIT(A) has ignored the customary practice and status of the family. As per the instruction issued by the CBDT and decision of the various Hon’ble Courts in which it has been decided that the assessee should have been allowed benefit of circular in spite of not having any documentary evidence to prove the unexplained jewellry found to the extent of 500 gms in the case of married women and 250 gms in the case of unmarried women and 100 gms in the case of gents. Further, in the case of protective assessments, the learned Counsel submitted that the sale agreement was executed in the Assessment Year 2011-12 merely sale deed was executed on 01.04.2011 will not affect. Assessee has accepted the addition made by the AO and has paid taxes and reached finalty and the revnue is not on appeal on this point. and the protective addition should not have been made by the AO in this year and he relied on the following judgments: 6. On the other hand, learned DR relied on the Order of the lower authorities and submitted that the circulars cited by the learned Counsel does not say about the over and above of the quantifiedjewellary should be treated as explained jewellary. It is instruction to the search authorities not to seize the specified quantity of jewellry but it does not say about unexplained jewellery found during the course of search and seizure operations. Further, in repect of additional grounds raised bythe assessee regarding protective assessment, the learned DR submitted since the assessee has raised this issue before the ITAT and submitted that under section 2(47) of the Act, regarding date of transfer of the capital asset is date te of execution of sale deed is considered. The date of sale agreement is out of purview of definition of transfer as per the Act. Howevr, in this case, the Page 4 of 7 sale deed was executed and got registered in the name of transferee and right was handed over as on 01.04.2011. Therefore, relying on the judgment of Hon’ble Apex Court in the case of Suraj Lamp and Industries (P) Ltd., reported in [2011] 14 taxmann.com 103, the date of transfer of the capital asset is 01.04.2011. Therefore, the capital gain should be ccomputed in the Assessment Year 2012- 13. 7. In the rejoinder, the learned AR submitted that if the transfer of property is considered as 01.04.2011 following the judgment of the Hon’ble Apex Court noted supra, the capital gain paid in the Assessment Year 2011-12 against the said property should be given credit to the assessee in the Assessment Year 2012- 13. 8. Considering the rival submissions, we noted that during the First Appellate proceedings, the First Appellate Authoirty has treated 100 grms jewellery as unexplained jewellery in the hands of Mrs. Mehtab and relating to Mrs. Nadia of 600 gms is treated as unexplained jewellery, whereas it has been accepted that father of Mrs. Nadiawas employed in USA and got salary of US$ 2,49,436/-. It shows that he had creditworthyness on the date of gifting the jewellary Assessee was unable to explain the above jewellery with documentary evidence. The CBDT instruction No.1916 dated 11.05.1994 is very much applicable to the present facts of the case as decided by the Co-ordinate Benches: 9. following the above instruction, we direct the AO to give credit as per the above instructions. During the course of hearing, it was stated that as per the above instruction, 500 gms of the benefit is to be allowed since during the course of search and valuation, it was identified as jewellery of Mrs. Mehtab and Mrs. Nadia clearly. Therefore, the addition made of 100 gms of jewellary in the case of Mrs. Mehtab is deleted and in addition of Mrs. Nadia being given benefit of Page 5 of 7 the CBDT’s instruction 500 gms of jewellery is hereby deeeelted and balance of 100 gms of jewellary is confirmed. 10. Further, in respect of protective assessment, the sale agreement was executed on 28.02.2011 and 17.03.2011. Assessee has offered capital gain in the Assessment Year 2011-12 which has reached finality and assessee has paid tax on substantive basis addition made by the AO but the AO has made protective assessment for the Assessment Year 2012-13also. Since the property was got registered on 01.04.2011, the arguments advanced by the learned Counsel is not tenable since the property was actually transferred as per the provision of Income Tax Act, 1961 under section 2(47) on 01.04.2011. Therefore, the capital gain should have been computed in the Assessment Year 2012-13, the date of transfer of the property is 01.04.2011 which falls in the Assessment Year 2012-13. Our view is supported by the judgment of the Hon’ble Apex Court in the case of Suraj Lamp and Industries (P) Ltd., (supra) in which it has been held as under: 12.Any contract of sale (agreement to sell) which is not a registered deed of conveyance (deed of sale) would fall short of the requirements of sections 54 and 55 of TP Act and will not confer any title nor transfer any interest in an immovable property (except to the limited right granted under section 53A of TP Act). According to TP Act, an agreement of sale, whether with possession or without possession, is not a conveyance. Section 54 of TP Act enacts that sale of immoveable property can be made only by a registered instrument and an agreement of sale does not create any interest or charge on its subject matter. Page 6 of 7 11. The judgments crelied by the learned Counsel are not applicable since there is direct judgment of the Hon’ble Apex Court on the relevant point. 12. However, the assessee has paid entire due taxes against the demand raised in the Assessment Year 2011-12 on substantive basis against the said property . Therefore, the AO is directed to give tax credit for the demand of Assessment Year 2012-13 as the tax were paid forAY 2011-12. Page 7 of 7 13. In the result, appeal of the assessee is partly allowed. Pronounced in the court on the date mentioned on the caption page. (KESHAV DUBEY) Accountant Member Bangalore, Dated : 03.06.2025. /NS/* Copy to: 1. Appellant 2. Respondent 3. Pr.CIT4.CIT(A) 5. DR, ITAT, Bangalore. By order