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Income Tax Appellate Tribunal, DELHI BENCH: ‘G’, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI O.P. KANT
ORDER PER O.P. KANT, AM:
This appeal by the assessee is directed against order dated 16/09/2019 passed by the Learned CIT(Appeals)-24, New Delhi [in short ‘the Learned CIT(A)’] for assessment year 2017-18 raising following grounds: 1. That under the facts and circumstances Ld. CIT (A) grossly erred in law as well as on merits in accepting the jewellery only to the extent of 500 Gms. as explained one out of jewellery found of 947.074 Gms. from PNB locker No.487, thus in not accepting the jewellery to the extent of balance weight of 447.074 Gms. valued at Rs.12,53,121/- and consequently erred in sustaining addition of Rs.12,53,121/- U/S.69A r/w Sec.115BBE of the I.T. Act.
1.1 That the jewellery found during search being 947.074 Gms. being less than the jewellery found during earlier search on assessee on 28.02.07 when jewellery of 969.300 Gms. was found and as there is no dispute that none of the old jewellery stands disposed off till the date of present search, therefore in view of explanations given, the complete jewellery of 947.074 Gms. should be held as fully explained. 1.2 That without prejudice, in view of the fact that prior to the date of present search, the locker No.487PNB from where the jewellery was found was lastly operated on 29.10.15 (A.Y. 16-17), hence under no circumstance, the issue of this jewellery can be considered in A.Y.17-18. 1.3 That Without prejudice, Ld. CIT(A), under the facts and circumstances, erred in law and on merits in not accepting the alleged additional evidences, filed before him on the jewellery issue.
That under the facts and circumstances, deduction of Rs.34,070/- should had been allowed u/s.24 out of income from house property in respect of let out Flat No.5K-096, Ridge Wood Estate DLF-Gurgaom
2. The briefly stated facts of the case are that the assessee is an individual, was subjected to search proceedings under section 132A of the Income-tax Act, 1961 (in short ‘the Act’) on 12/04/2016. During the course of search proceedings, certain jewelry was found from the premises of the assessee and out of which part of the jewelry was seized by the Income-tax Department. For the year under consideration, the assessee filed return of income on 30/01/2018, declaring income of ₹8,62,030/-. The income declared include rental income from house property. Notice under section 143(2) of the Act was issued and complied with. During assessment proceeding, the Assessing Officer observed that building maintenance charges of ₹ 34,070/- was claimed by the assessee under the head “profit and gain of the business and profession”, which being not allowed under law, he thus made addition for the same. Further, he made addition of ₹17,49,941/-for unexplained jewelry in terms of section 69A of the Act read with section 115BBE of the Act. Aggrieved, the assessee filed appeal before the Ld. CIT(A), who partly allowed the appeal. 2.1 Aggrieved with the additions sustained by the Learned CIT(A), the assessee is in appeal before the Tribunal raising the grounds as reproduced above.
Before us, the Learned Counsel of the assessee appeared through virtual hearing and filed a paper-book electronically containing pages 1-75. The ld. DR also appeared through the facility of the virtual hearing and submitted his arguments. 4. We have heard arguments of both the parties and perused relevant material on record including the paper-book filed by the assessee. 4.1 The ground No. 1.1 to and 1.4 of the appeal relates to the addition of jewellery of ₹12,53,121/- sustained by the Learned CIT(A). The jewellery found during the course of the search was valued by the Departmental Valuer in his report dated 25/04/2017 at ₹ 37,54,085/-. The jewelry found was bifurcated in the name of the various family members as under: Belonging to Item S. Nos. Value Vijay Chawla (Husband) 1-5 3,60,766/- Mrs. Kumud Chawla (mother in 6-10 5,84,591/- law) Shalini Chawla (assessee) 11-30 28,08,728/- Total 37,54,085/- 4.2 The net weight of the jewellery belonging to the assessee was worked out as 947.074 gms. Out of the jewelry belonging to the assessee of ₹ 28,08,728/- weighing 947.074 gms, the jewellery for ₹ 17,49,941/- was seized. Before the AO the assessee explained that the assessee was covered in earlier search proceeding during the year 2007 also and a list of the jewellery weight 969.300 gms. found was also made at that time. The assessee submitted that net weight of the jewelry found in present search is lower than the jewelry found during the year 2007. But, according to the Assessing Officer, the assessee failed to reconcile items of jewellery found in the present search with the list of the jewellery found in the search during 2007 and therefore he held the jewellery of ₹ 17,49,941/-, which was seized during search, as unexplained jewelry u/s 69A of the Act. Before the Learned CIT(A), the assessee reiterated the submission that weight of the jewellery found in present search being less than the weight of the jewellery found in the search for the year 2007 & therefore, the jewelry found in the current search stands explained. The assessee also filed locker opening record, which were obtained from the bank, and submitted that the locker was lastly operated on 29/10/2015 (assessment year 2016-17) and therefore jewellery existed in the locker as on 29/10/2015. The assessee, before the learned CIT(A) submitted that in view of the locker opening record, the jewelry cannot be examined in assessment year 2017-18 and it is for this reason the addition in dispute needed to be quashed. According to Learned CIT(A), the locker opening record was not submitted before the Assessing Officer and it was submitted before him for the first time, therefore it was in the nature of the additional evidence and the assessee was required to make a request for admitting additional evidences in terms of rule 46A of the Income-tax Rules,1962. The Learned CIT(A) observed that the assessee had not filed any application for admitting additional evidence. In view of the observations made in the impugned order and the CBDT Instruction No. 1961 dated 11/05/1994, the learned CIT(A) allowed credit of total jewellery of 500 gms in the hands of the assessee as explained and balance jewellery (447.074 gms) worth Rs.12,53,121/- was upheld as unexplained. 4.3 Before us, the Learned Counsel of the assessee has raised various contention challenging the addition. 4.4 The first contention of the Learned Counsel is that the complete jewelry stand explained as it was available at the time of the earlier search dated 18/02/2007. He submitted that during the period from 18/02/ 2007 to till date no jewellery has been sold. He submitted that main reason for not accepting the source of the jewellery found during the course of the search is not matching of the many items found during the search with the items as per valuation report of search dated 18/02/2007. The learned Counsel submitted that change in the specification of part item was due to remaking, remodeling, change of design, exchange of old items for new items during the period of nine years. He submitted that it is a matter of the common knowledge that Indian ladies even without the knowledge of their husband, gets their jewelry items changed/remodelled etc. for keeping pace with the current design. According to him, when no items available in 2007 have been sold till the date of the present search, the weight found in the search for the year 2007 should be accepted as available with the assessee. The Learned Counsel in support of the claim relied on the decision of the Tribunal in the case of Krishan Kumar Modi versus ACIT 180 DTR (Delhi) Trib.
He also relied on the decision of the SMC bench of the Tribunal in the case of Mrs Nawaz Singhania reported in (2017) 88 taxmann.com 327 ( Mumbai -Trib) and decision of the Pune bench of the Tribunal in the case of Raj Kumar B Agrawal Vs DCIT 176 DTR (Pune) Trib 273. 4.5 The Learned DR, on the other hand, submitted that decisions relied upon by the Learned Counsel of the assessee are not applicable in the case of the assessee and he distinguished the decisions on the ground that in above cases jewelry was found declared in wealth tax returns/VDIS declaration, which are documents maintained under statutory regulations. 4.6 The second contention raised by the learned Counsel of the assessee is that keeping in view the span of the long married life of 25 years, the jewelry found of 947.074 gms should not be doubted as assessee belong to an affluent family and ladies gets jewellery as a gift and get the same out of the liquid funds received by them from various relatives friends and well-wishers on various occasions. In support of the claim the Learned Counsel of assessee relied on the decision in the case of Ashok Chaddha Vs ITO (2012) 69 DTR (DEL) 82. With regard to this contention of the Learned Counsel of the assessee, the learned DR submitted that credit of 500 gms has already been allowed to the assessee in view of the CBDT Circular (supra) to cover the jewellery received on account of the gifts from relatives friends etc.
4.7 The third contention which has been taken by the Learned Counsel of the assessee in respect of the addition is that the bank locker was last operated on 29/10/2015 (which falls in assessment year 2016-17) and therefore under no circumstances the said jewelry can be considered and assessed in assessment year 2017-18. The assessee has filed locker operation history before us, which is available on page 19 and 20 of the paper- book. 4.8 The learned Counsel of the assessee also raised the issue that section 115BBE of the Act cannot be applied in the case of the assessee. He submitted that by way of the amendment dated 15/12/2016 in the section 115BBE of the Act, the rate of the tax on the income assessed under section 69A of the Act has been increased to 60%. This amendment has been made effective from 01/04/2017. The Learned Counsel contended that in the case of the assessee search was conducted on 12/04/2016 which is prior to the amendment in the section 115BBE of the Act, making the tax rate of the 60% applicable. The learned Counsel submitted that this amendment cannot be made applicable retrospectively to cover the transactions carried prior to 15/12/2016 i.e. the date on which the amendment got permission of Hon’ble President of India. 4.9 The learned DR, on the other hand, submitted that the assessee should have challenged the validity of the amendment in appropriate forum. 4.10 After hearing arguments of parties at length through video conferencing and analysis of the judicial decisions relied upon by the parties, we find that the Tribunal in the case of Krishan Kumar Modi (supra) in para 8.11 of the order has noted that the jewellery declared in the wealth tax returns of the assessee in his family members was higher in weight as compared to the jewelry found during the course of the search. This is one of the reason for deleting the addition of unexplained jewellery by the Tribunal (supra) in that case. In the case of Mrs Nawaz Singhania (supra) also the gross weight of the jewellery disclosed in the regular wealth tax returns was in excess of the gross weight of the jewelry found in the course of the search and the Tribunal held that no addition was permissible merely because there was frequent remaking of the old jewellery into new designs. In the case of RajKumar B Agrawal (supra) also the Tribunal concluded that so long as the total weight of the gold jewellery found at the time of the search matches with the earlier declaration made by the assessee in wealth tax returns and VDIS declaration the addition cannot be made simply on the ground that description of the items in the list declared under wealth tax returns/VDIS is different from those actually found. 4.11 In the present case before us, to support the availability of the jewellery, the assessee has filed a copy of the valuation report prepared during the course of the search in calendar year 2007, which is a document of the Department having evidential value akin to a copy wealth tax return or VDIS declaration. We do not agree with the contention of the Learned DR that slight mismatch in the name of the jewelry articles, should not be allowed just because the jewellery weight found during search of 2007 is not supported by wealth tax returns. In the case of the assessee, the wealth of the assessee was less than the threshold amount of wealth liable to wealth tax and therefore the assessee did not file the wealth tax return. So if the wealth tax return is not filed by the assessee, then in our opinion the inventory of the jewelry found and seized during the course of the search in calendar year 2007 and valuation report of the same prepared by the Departmental Valuer, is one of the document prepared under statutory rules and regulations and cannot be brushed aside. It is undisputed that the total weight of the jewelry found and seized during the course of the search in calendar year 2007 is more than the jewelry found during the current search, and therefore respectfully following the decision of the Tribunal in the case of Rajkumar B Agarwal (supra), we hold that no addition of unexplained jewellery under section 69A of the Act is warranted in the case of the assessee just due to minor mismatch in the items of the jewellery found in the current search and the jewellery found during the search on 18/02/2007 4.12 Since we have already deleted the addition of the unexplained jewelry, we are not adjudicating upon other contentions raised by the Learned Counsel of the assessee, as same are rendered only academic. The ground No. 1 and 1.1 of the appeal are accordingly allowed.
In ground No.2 , the assessee has challenged confirmation of disallowance of ₹ 34,070/-, which was claimed by the assessee in profit and loss account as deduction for maintenance charges paid in respect of flat let out. The Assessing Officer disallowed claim of said maintenance charges paid to the society as same was not allowable under the head profit in gains of the business being related to the property, income of which was liable under the head ‘income from the house property’. Before us the learned Counsel of the assessee referred to page No. 26 and 27 of the paper book, which is computation of the income of Rs.8,62,030/-. In this computation of income, under the head “profit and gains of the business and profession”, the assessee has added back flat maintenance expenses of ₹ 34,070/-. Since the assessee has already added back the maintenance expenses under the head “profit and gains of the business and profession” and this amount has not been claimed under that income from house property, the contention of the Assessing Officer that the assessee has claimed flat maintenance expenses in the profit and loss account is factually incorrect and thus no addition can be made on this ground. The finding of the Learned CIT(A) of confirming the disallowance is against the factual record and therefore it is set aside. The addition of ₹ 34,070/- upheld by the learned CIT(A) is accordingly deleted. The ground No. 2 of the appeal of the assessee is accordingly allowed. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 27th August, 2020.