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Income Tax Appellate Tribunal, HYDERABAD BENCH “A”, HYDERABAD
Before: SMT P. MADHAVI DEVI & SHRI S. RIFAUR RAHMAN
PER S. RIFAUR RAHMAN, A.M.:
This appeal filed by the assessee is directed against the order dated 04/07/2016 of CIT(A) – 3, Hyderabad for AY 2009-10.
Briefly the facts of the case are, the assessee filed his Return of income of Rs.8,03,630/- for the Asst. Year 2009-10 on 27-3-2009. There was search & seizure operation u/s. 132 in Mohanlal Agarwal group of cases on 29-01-2009. During the search proceedings, the jewellery of the family members was valued at Rs.417,30,073/-. However, as per Wealth tax returns filed for Asst. Year 2008-09, the value of the jewellery was Rs.114,32,771/- standing in the name of Laxminandan Agarwal individual and Shri Sunil Kumar and Smt. Richa. Therefore, the difference of Rs. 3,02,97,302/- was added in the assessment u/s 143(3) dated 31/12/2010.
2 ITA No. 1314/Hyd/16 Laxmi Nandan, Hyd. 2.1 On appeal, the CIT(Appeals)-7, Hyderabad directed the Assessing Officer to consider the jewellery admitted in the hands of other family members in their Wealth Tax Returns. Further, the CIT(Appeals) - 7, gave further relief to the extent of Rs.50,59,236/- on the ground that the substantial portion of the jewellery was of precious stones and there can be too much of subjectivity in valuing the same.
2.2 Both the assessee and the department went in appeal to the Hon'ble ITAT-A Bench. The Hon'ble ITAT in its order ITA No's 1597/Hyd/12 & ITA No.1655/Hyd/12 dt.13-12-2013 remitted the issue to the Assessing Officer stating that CIT(Appeal) should have given opportunity to the Assessing Officer before giving relief to the assessee as the assessee did not submit any basis for valuation of Gold jewellery, stones, diamonds etc. The Hon'ble ITAT also directed the Assessing Officer to take into account the gold rate as on 31-3- 2009 against the value adopted by the Assessing Officer as on 31-3- 2008. The Hon'ble ITAT also directed the Assessing Officer to take into account the jewellery declared in the hands of the other family members as per Wealth tax Returns while arriving at undisclosed investment in Jewellery.
2.3 In proceedings u/s. 143(3) r.w.s. 254, the A.O. considered the jewellery declared in Wealth-tax Returns for A.Y. 2008-09 in the hands of all family members of Sri Laxminandan, adopted the rate of gold as on 31-03-2009 and assessed the income as under: Value of Jewellery:
Value as on 19/01/2009 arrived at by the Registered valuer 4,17,30,073 Less: Net wealth declared by the assessee and His family members as on 31/03/2008 2,70,77,656
Add: Rate difference (as on 39,63,945 31/03/2009 & 31/03/2008)
3 ITA No. 1314/Hyd/16 Laxmi Nandan, Hyd. 3,10,41,601 3,10,41,601 Net difference 1,06,88,472
Income returned by the assessee Rs. 8,03,630 Add: 1. Unexplained investment in Jewellery as discussed above Rs. 1,06,88,472 2. unexplained investment in Silverware as above Rs. 3,68,856 Total income Rs. 1,18,60,958 ============
Aggrieved by the order of AO, the assessee preferred an appeal before the CIT(A).
As regards the unexplained investment in jewellery of Rs. 1,06,88,472/-, the CIT(A) confirmed the same by observing as under: 5.1 The main contention of the appellant was that there is no change in the quantum of Jewellery since the Asst.Year 2002- 03. Further the A.R. claims that the same quantity of jewellery was increased every year by 5 to 15%, therefore no addition can be made. However this plea cannot be accepted as the appellant failed to show any evidence that quantitative details of jewellery were filed along with any wealth tax returns filed earlier.
5.2 The A.R. also pleaded that since much of the jewellery was of diamond and precious stones, the valuation becomes very subjective, therefore the difference in valuation. Therefore the addition made by the Assessing Officer of Rs.1,06,88,472/- has no 'merit. Even this contention of the appellant also does not have any merit, as the valuation of wealth was made by the appellant himself in Wealth tax returns and the same was reduced while arriving at undisclosed wealth. Therefore the addition made by the Assessing Officer of Rs.1,06,88,472/- is confirmed.”
Aggrieved by the order of CIT(A), the assessee is in appeal before us raising the following grounds of appeal: “ 1. The Order passed by the Commissioner of Income Tax (Appeals) - 3 is erroneous in law and on facts of the case.
The learned Commissioner of Income Tax (Appeals) - 3, erred in sustaining the addition of Rs.1,06,88,472/- being the difference in the valuation of jewellery as on the date of search i.e. 29th January 2009 and as admitted in wealth tax return
4 ITA No. 1314/Hyd/16 Laxmi Nandan, Hyd. without appreciating the fact that the difference is only on account of valuation and without fully appreciating the directions of the Hon'ble Income Tax Appellate Tribunal and with total disregard to earlier order of Commissioner of Income Tax (Appeals).
Any other Ground/s that may be urged at the time of hearing.”
Considered the rival submissions and perused the material on record. We find that similar issue came up for consideration before the coordinate bench of this Tribunal in the case of Krishna Kumar in ITA No. 1075/Hyd/2016, order dated 27/09/2017 wherein the Tribunal has held as under: 8. Considered the rival submissions and perused the material facts on record. Ld. AR submitted before us a statement which gives information of valuation of jewellery and precious stones adopted by assessee for the purpose of wealth tax for the period 2001-02 to 2007-08. He compared the periodical data and the valuation report as on the date of search. He made the submission that there is no difference in the quantity but there is considerable difference in valuation of the jewellery. We have gone through the statement and for the sake of clarity, the same is extracted below: eriod Net Gold Rate per Net Gold value Qty/weight 10 gm of in Rs. gold 2001-02 4,465.45 5,010.00 2,237,196.00 2002-03 5,291.60 5,310.00 2,809,845.00 2003-04 5,291.60 6081.00 3,217,828.00 2004-05 5,291.60 6150.00 3,254,340.00 2005-06 5,291.60 8,560.00 4,529,618.00 2006-07 5,291.60 9,510.00 5,032,322.00 2007-08 5,321.61 12,280.00 6,534,471.00
Date of 5321.61 13,900 73,97,024 search
From the above statement, it is clear that the valuation of gold is properly evaluated and there is no much variation, wherever there is variation in the quantity, it was explained before the lower authorities. When we analyse the precious stone valuation, the valuation submitted by the assessee as per the Wealth Tax returns is reproduced below: Period Wt. of Diamonds Precious stones and in CT/Gram diamonds 2001-02 1058 12,545,771.00
5 ITA No. 1314/Hyd/16 Laxmi Nandan, Hyd. 2002-03 1225 16,893,617.00 2003-04 1225 17,528,506.00 2004-05 1225 18,813,634.00 2005-06 1225 20,685,632.00 2006-07 1225 22,711,119.00 2007-08 1225 25,861,959.00
Date of 1230 3,17,23,300 search
From the above statement, it is observed that in the period 2007-08, quantity of precious stone is 1225 CRT and was valued at Rs. 2,58,61,959, whereas on the date of search, the quantity stated by assessee is 1230 CRT which was valued by valuer at Rs. 3,17,23,300/-. Thus, it is evident that there is substantial variation in the valuation of the precious stones. Further, we have also analysed the valuation report of the registered valuer on the date of search and found that the quantity valued was 1789.10 CRT and not 1230 CRT as stated by the assessee and, therefore, there is a difference in quantity as well, which substantiates the difference in valuation of precious stones. In our considered view, it is not only variation in valuation, but also, variation of quantity. 8.1 It is also pertinent to note that in the first round of appeal, the ld. CIT(A) has found excess of valuation to the extent of Rs. 14,88,694/- and disallowed to the extent of 50% amounting to Rs. 7,44,347/-. At that stage, the findings of CIT(A) were acceptable to assessee. The revenue came in appeal and ITAT had set aside the matter back to AO for verification. Now, the assessee cannot argue that it is only valuation difference and that there is no difference in quantity. 8.2 Considering the variations in the quantity of precious stones as indicated above, in our considered view, the valuation report as on the date of search is proper and the difference in the valuation report and the wealth tax return, as determined by the AO is proper and accordingly, the contention of the assessee is rejected and ground raised by the assessee is dismissed. Though the issue in the present case is materially identical to the above case, but, in the above case, the bench came to such a conclusion after comparing the quantity of precious metals declared by the assessee in the Wealth Tax Assessment and the valuation report submitted by revenue department. The bench noted that there was considerable variation. But, in the case on hand, we compared the quantity details as per Wealth Tax return submitted by ld. AR (which is part of record) and the valuation report submitted by
6 ITA No. 1314/Hyd/16 Laxmi Nandan, Hyd. department. For the sake of convenience, we reproduce the details in tabular form as under: Description As per Valuation As per Wealth Tax Return report as on 29/01/2009 Gold 5958.70 5865.70 Diamonds 837.05 840.05 Wax, Pearls, 779.00 786.50 etc.
From the above table, we notice that there is no variation in terms of quantity declared by the assessee in Wealth Tax Return and Valuation report as on 29/01/2009. Since, there is no variation in the quantity declared by the assessee, no addition can be made on mere valuation difference. Therefore, the addition made by the AO is accordingly, deleted. Therefore, the ground raised by the assessee is allowed.
In the result, appeal of the assessee is treated as allowed. Pronounced in the open Court on 20th July, 2018.
Sd/- Sd/- (P. MADHAVI DEVI) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, Dated: 20th July, 2018 kv
Copy to:-
1) Shri Laxminandan, 13-6-433/157, Netaji Nagar Colony, Mehdipatnam, Hyderabad. 2) ITO, Ward – 7(2),Hyderabad. 3) CIT(A) – 3, Hyderabad. 4) Pr. CIT - 3, Hyd. 5) The Departmental Representative, I.T.A.T., Hyderabad. 6) Guard File