Loading judgment…
Facts
A search and seizure operation was conducted on the assessee, an individual and managing trustee of an educational trust. The assessee's return of income was ₹.3,47,23,570/-. The Assessing Officer made additions for unexplained cash, gold/diamond jewellery, determining total income at ₹.5,89,80,463/-. The CIT(A) deleted additions for unaccounted cash but restricted additions for jewellery.
Held
The Tribunal found that the CIT(A)'s method of adopting cost inflation index instead of actual value for gold and diamond jewellery was not justified. The Tribunal also accepted the assessee's contentions regarding sreedhanam and birthday gifts, and found justification for the value of jewellery shown in the balance sheet.
Key Issues
Whether the CIT(A) was justified in confirming additions related to jewellery valuation, sreedhanam, and birthday gifts without considering actual value or evidence provided by the assessee.
Sections Cited
132, 143(2), 142(1), 143(3), 153B(1)(b)
AI-generated summary — verify with the full judgment below
Before: Shri S.S. Viswanethra Ravi & Shri Jagadish
O R D E R
PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER:
This appeal filed by the assessee is directed against the order dated 06.02.2025 passed by the ld. Commissioner of Income Tax (Appeals) 18, Chennai for the assessment year 2020-21. 2. The assessee raised 4 grounds of appeal amongst which, the only issue emanates for our consideration as to whether the ld. CIT(A) is justified in confirming the addition in part in the facts and circumstances of the case.
Brief facts relating to the issue are that the assessee is an individual and managing trustee of M/s. Jaisakthi Educational Trust. A search and seizure operation was conducted under section 132 of the Income Tax Act, 1961 [“Act” in short] in the college premises and residence of the assessee on 07.11.2019. The assessee filed return of income declaring total income of ₹.3,47,23,570/-. The Assessing Officer issued notices under section 143(2) and 142(1) of the Act calling for certain details and in response to which, the assessee was represented by Authorized Representative and filed details before the Assessing Officer. The Assessing Officer made addition on account of unexplained cash, unexplained gold/diamond jewellery and determined total income of the assessee at ₹.5,89,80,463/- vide order dated 29.09.2021 passed under section 143(3) r.w.s. 153B(1)(b) of the Act.
As aggrieved by the said order, first appeal was preferred before the First Appellate Authority. The ld. CIT(A) as first appellate authority deleted the addition made on account of unaccounted cash by examining withdrawals from the bank in cash for AYs 2017-18 and 2018-19 as is evident in para 4 and para 7.45 of the impugned order. Further, the ld. CIT(A) restricted the value of diamond studded jewellery/watches to an extent of ₹.74.87 lakhs as against ₹.97.24 lakhs, sreedhanam of 400 grams against the claim of 1240 grams (gold jewellery), 100 grams of jewellery gifts of grandson as against 545 grams and ₹.31,12,560/- (69,96,460-38,83,900) being the difference listed in the balance sheet for the year ending 31.03.2016 and 31.03.2017 respectively. As aggrieved by confirmation of addition in part, the assessee is in appeal before us for the above mentioned 4 grounds.
The ld. AR Ms. Jaya Shree, F.C.A. submits by referring to pages 8 & 9 of the paper book regarding the value of 1006 grams gold as per valuer report is ₹.28,23,962/- and diamond value from 2014 to 2019-20 valued at ₹.64,00,000/- by taking 10% increase year to year. She submits that the ld. CIT(A) allowed only to the extent of ₹.74,87,000/- as against the total value of gold and diamond taking into 10% increase per year totalling to ₹.92,23,962/-. The difference of ₹.17,36,962/- was because, the ld. CIT(A) taken the value of gold jewellery as on 2019 basing on cost inflation index instead of adopting actual value in 2019. She argued that the assessee is entitled to get the benefit of remaining difference of ₹.17,36,962/- as the ld. CIT(A) has not considered actual value as in 2019. 4 I.T.A. No.984/Chny/25
With regard to Sreedhanam of assessee’s daughter-in-law, she submits that by referring to page 92 of the paper book and argued that the mother of daughter-in-law of assessee had given confirmation that she has given more than 1240 grams gold and diamond as sreedhanam to her daughter. The ld. AR submits that parents of daughter-in-law of assessee were Central Government employees and the said gold jewelleries were acquired in phased manner and some of the jewellery inherited by her through her mother and mother-in-law. The ld. AR argued vehemently that the ld. CIT(A) confirmed the addition to an extent of 400 grams as against 1240 grams ignoring the confirmation given by mother of the assessee’s daughter-in-law.
With regard to the claim of 545 grams jewellery in respect of birthday gifts to assessee’s grandson, the ld. AR submits that the assessee’s grandson received gold jewellery gifts during his birthday held in 7 times before the search and seizure operation took place. She submits that the assessee belongs to upper higher strata in the society and it is very common for the assessee and his family to receive gifts in the form of jewellery on various occasions such as marriage, birthday and other such auspicious occasions. She refers to assessee’s submission before the ld. CIT(A) at page 12 & 13 of the 5 impugned order and argued that the assessee used to celebrate every birthday at different hotels and his grandson used to get gold jewels as gift from Shri Jeppiaar, Great Grand father and his two daughters. She argued that the ld. CIT(A), without considering the submissions of the assessee, restricted the addition to an extent of 100 grams as against 545 grams.
With regard to the difference between the value of gold of ₹.31,12,560/- as reflected in the balance sheet for AYs 2016-17 & 2017-18, the ld. AR argued that the assessee shown the value of jewellery in the balance sheet as on 31.03.2016 (AY 2016-17) at ₹.38,83,900/- and as on 31.03.2017 (AY 2017-18) at ₹.69,96,460/-. She argued that the ld. CIT(A) failed to consider the additional purchase of jewellery admitted and debited in the balance sheet of assessee’s son for AY 2016-17. She argued vehemently that the ld. CIT(A) added the said difference only because of non-reflection of the additional purchases in the return of income. She drew our attention to the return of income for AY 2016-17 at page 80 of the paper book and submits that there was no column in the return of income to show the additional purchases. She argued without there being no relevant column in the return of income, finding of the ld. CIT(A) for non- reflection of the same, is not justified.
The ld. DR Ms. R. Anita, Addl. CIT submits that no proof was ever produced before the Assessing Officer as well as the ld. CIT(A) corroborating the submissions of the ld. AR. The Assessing Officer and the ld. CIT(A), considering the evidences given benefit to the assessee and confirmed addition therein for non-furnishing of proof of evidences. She relied on the order of the ld. CIT(A) and prayed to dismiss the appeal.
Heard both the parties and perused the material available on record. We find that the confirmation of difference of ₹.17,36,962/- by the ld. CIT(A) was only by adopting the cost inflation index for the current year to the value of gold and diamond jewellery as on 31.03.2014 at ₹.57 lakhs. The main contention of the ld. AR is that the ld. CIT(A) ought to have adopted the actual value as on 2019 instead of cost inflation index for the current year to the value declared in Wealth Tax Return of the assessee. Admittedly, the assessee valued the diamond and jewellery watches at ₹.57 lakhs as on 31.03.2014 in the WTR. We find the details of seizure and disallowance by the 7 authorities at page 8 & 9 of the paper book. We note from page 9 of the paper book that the assessee furnished the value of 1006 grams of gold in 2019 as per valuer report at ₹.28,23,962/- and by adopting 10% increase from year to year i.e. from 2014 to 2019-20, the assessee valued the diamond at ₹.64,00,000/- totalling to ₹.92,23,962/-. The ld. CIT(A) allowed only ₹.74,87,000/-. We find the WTR, which is reproduced by the ld. CIT(A) from page 19 to 23 of the impugned order, wherein, there is no dispute with regard to the value declared by the assessee. We find the ld. CIT(A), by observing that it was challenging to separately bifurcate the value between the gold and diamond jewellery determined revised value at ₹.74.87 lakhs by applying cost inflation index for the current year to the value of ₹.57 lakhs as declared by the assessee as on 31.03.2014 in wealth tax return. We find there is no basis for adopting cost inflation index of the current year when there is valuer’s report by considering actual value as in 2019. As per valuer’s report, we find the value of 18 carat gold as in 2019 and diamond jewellery by taking 10% increase year to year, which is at page 9 of the paper book, shows the value at ₹.92,23,962/-. We find no reference to this value in the impugned order, but, however, in our opinion, the ld. CIT(A) adopted the cost inflation index for the 8 I.T.A. No.984/Chny/25 current year, is not justified. Therefore, we find force in the arguments of the ld. AR that the ld. CIT(A) ought to have adopted the actual value of gold as it is reflecting in page 9 of the paper book for 18 carat gold of 1006 grams in 2019 and 10% increase for diamond jewellery. Therefore, the order of the ld. CIT(A) is not justified in adopting cost inflation index instead of actual value in 2019. Therefore, the addition of ₹.17,36,962/- being difference between the value adopted of cost inflation index as against actual value in 2019, is deleted.
In respect of Sreedhanam, the ld. CIT(A) has given benefit of only 400 grams as against 1240 grams. We find confirmation given by Smt. Jayanthi Sithardhan at page 92 of paper book, wherein, she clearly stated that she had given more than 1240 grams of gold and diamond jewellery to her daughter. The said gold and diamond jewelleries were acquired by her in phased manner and some of the jewelleries were inherited from her mother and mother-in-law and she also given the list of sreedhanam as enclosure to the ld. CIT(A). We find no reference of list of sreedhanam and confirmation in the impugned order, but, however, the ld. CIT(A) accepted only 400 grams jewellery as explained taking into assessee’s financial status. We find that the gold and diamond jewelleries were acquired by mother of 9 assessee’s daughter-in-law in a phased manner and expecting invoices and documentary evidences are not justified as they were acquired in phased manner. Further, she stated that some of the jewels were inherited from her mother and mother-in-law for which it is difficult to furnish documentary evidence in support of the same inherited from past many years. Therefore, we accept the arguments of the ld. AR in contending that the ld. CIT(A) failed to consider the confirmation letter furnished by mother of assessee’s daughter-in-law in this regard. Thus, the addition to the extent confirmed by the ld. CIT(A) is deleted and benefit is given to 1240 grams.
Next issue is regarding birthday gift relating to assessee’s grandson. We note that the assessee’s grandson was born on 12.12.2011 and the details of expenditure and venue of birthday functions were given to the ld. CIT(A), which are reproduced in pages 12 & 13 of the impugned order. The ld. AR contended that the birthday functions of the assessee’s grandson were celebrated at different hotels and guests used to give gifts by way of jewellery. The assessee’s submissions are also reproduced in the impugned order. The ld. CIT(A) did not accept assessee’s contention for non-production of evidence in respect of such gifts. The d. CIT(A) had given benefit to 10 100 grams as against 545 grams. The contention of the assessee was that the assessee celebrated his grandson’s birthday in various hotels for seven years prior to the search date and also requested to give benefit of entire claim. We note that the ld. CIT(A) did not accept the contention of the assessee only for non-production of evidence and we find the submissions as well as details of expenditure incurred from 2011 to 2018 clearly establishes that the assessee celebrated his grandson’s birthday and receipt of jewellery gifts as blessings to his grandson. We find no contrary evidence brought on record in this regard. Therefore, we delete the addition to the extent confirmed by the ld. CIT(A).
The next issue is the difference between the value of jewels as shown in the balance sheet for AY 2016-17 and 2017-18. We find the two balance sheets at page 66 for AY 2016-17 and page 70 for AY 2017-18 of the paper book. The ld. CIT(A) observed that there is no reflection mentioning of purchase of jewellery in the return of income. In reply, the ld. AR contended that there is no specific column in the return of income to show the details of jewellery purchased in the said year and referred to the return of income placed at page 80 of the paper book. We note that as rightly pointed out by the ld. AR that there is no column in the return of income, but, however, in the current assets column, particularly at “other current assets” for AY 2016-17, it was shown at ₹.2,86,82,636/-, whereas, for AY 2017-18, the value of “other current assets” shown at ₹.4,34,34,019/- which clearly establishes that the assessee has shown the value of jewellery purchased during that years as reflected in column “current assets” particularly at “other current assets”. Therefore, we find no justification in the findings of the ld. CIT(A) in confirming the above addition for non-reflection of purchases in the return of income. The return of income for AY 2016-17 and 2017-18 clearly shows the value of jewellery in column “other current assets”. Therefore, the addition confirmed by the ld. CIT(A) is deleted.