NARESH J. KOTAK,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 6(4), MUMBAI

The first issue on merits in this appeal of assessee is against the order of CIT(A) partially upheld the addition made by the Assessing Officer under section 69 of the Act and restricted the same to 18,01,280/- as against the addition made by AO at Rs. 77,44,219/-. For this, assessee has raised the following ground nos. 2 to 5: -

2. Without prejudice, the learned Commissioner of Income Tax (Appeals) erred in partially upholding the addition made by the Assessing Officer under section 69A, to the tune of Rs.18,01,280/-.

The learned Commissioner of Income Tax (Appeals) failed to consider the difference in valuation dates while arriving at, what in his opinion, was unexplained/ unaccounted jewellery.

Without prejudice, and in any event, the appellant submits that the learned Commissioner of Income Tax (Appeals) erred in arriving at a

Briefly stated facts are that a search action was carried out on one J.M. baxi & Co. Group of cases on 23.03.2012 and a consequential search was also conducted on the residence of the assessee. During the course of search, the assessee’s jewellery was found from the residence which was valued as per valuation report, value for which bills were produced and value for which bills were not produced. The following are the details:-

Gold Jewellery 35,23,050 35,23,050 NIL 2. Diamond Jewellry 46,71,050 36,03,85 10,67,200 3. Branded Frames 1,80,050 40,750 1,39,300 4. Diamond Belts 80,32,350 32,33,750 47,98,600 5. Branded watches 47,06,940 29,67,821 17,39,119 Total 2,11,13,440 1,33,69,221 77,44,219 4. The Assessing Officer required the assessee to explain the jewellery worth Rs.77,44,219/- and in the eventuality it is not explained then why it should not be added to returned income of the assessee. The assessee before the Assessing Officer replied that he has been assessed to wealth tax for more than 30 years and the value of jewellery declared by the assessee in the wealth tax returns for AY 2011-12 was Rs. 6,42,85,668/- . It was explained by the assessee that it is practice to declare the value of his jewellery in his wealth tax returns at a lump sum figure including JEWELLERY DECLARED Assessment Amount Year Rs. 2011-12 6,42,85,668 2010-11 5,58,52,888 2009-10 4,07,59,858 2008-09 3,74,76,717 2007-08 3,27,59,890 2006-07 2,64,88,381 5. The Assessing Officer has not considered the explanation and treated the jewellery as excess than the declared jewellery at Rs. 77,44,219/- as unexplained jewellery and added to the returned income of the assessee. Aggrieved, assessee preferred the appeal before CIT(A).

The CIT(A), who deleted the addition to the extent of Rs.59,42,939/- and sustained the balanced jewellery at Rs.18,01,280/- i.e. diamond jewellery difference of Rs.3,70,810/- and diamond belt jewellery at Rs.14,30,470/-. The reasoning given by the CIT(A) for sustaining the unexplained jewellery to the extent of Rs.18,01,280/- was that the valuation done by the department valuer and as per the assessee’s own submission under the category of diamond jewellery and diamond belt jewellery in the wealth tax return has been admitted less “7.4.7 The appellant has also submitted that the entire jewellery found during the course of search proceedings were duly reflected in WT return filled for A.Y. 2011-12, wherein the jewellery has been admitted at Rs. 6,42,85,668/-. The appellant has also submitted category wise bifurcation of said jewellery admitted by the appellant in WT return for A.Y.2011-12. The appellant has also submitted that the difference in value as shown by him in WT return and the Department valuer’s report is due to fact that the appellant has estimated higher value as some of the items are branded. From perusal of details submitted by the appellant and said valuation report it is observed that the appellant has shown value of certain category of jewellery less in WT return for AY 2011-12 as compared to the value determined by Departmental valuer and the details of same is as under Sr. NO. Items Value as adopted Value as Less amount in the valuation adopted by the admitted by report prepared appellant in the appellant during the course WT return filed of search for AY 2011- Aggrieved, now assessee is in appeal before Tribunal.

We have heard the rival contentions and gone through the facts and circumstances of the case. We noted that the assessee has declared the value of jewellery in various years as noted above and finally in AY 2011-12 at Rs. 6,42,85,668/-. We noted that the CIT(A) has restricted the addition of excess jewellery only on the reasoning’s that there is a difference in the alleged valuation submitted by assessee as well as value adopted by departmental valuer during the course of search. But we noted that when the departmental valuer assessed the market value of these items on the date of search i.e. 23.03.2012 at Rs.77,44,290/-, it is apparent that these items relates to purchases made prior to 1999. It is presumed that the cost of acquisition of these items will be miniscule compared to the income returned by the assessee. It is fact that the CIT(A) has restricted the addition simply based on the valuation, not that any further item or quantity of gold jewellery or diamond jewellery was found from the premises of the assessee during the course of search. These items were purchased prior to 1999 and assessee has already declared the jewellery valued at Rs.1,08,29,561/- as on 31.03.2001. All subsequent purchases have been made by cheque and bills have been produced. The jewellery which was declared as on 31.03.2001 was over Rs.1.08 cores and these are varying items which the department is making in the present addition. The simple basis for make addition is the valuation which is not permitted as per law.