MR.AMITH KUMAR BETHALA ,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1(4), BANGALORE

The appeal filed by the assessee is directed against the order dated 13-04-2018 passed by Ld CIT(A)-11, Bangalore and it relates to the assessment year 2013-14.

The grounds numbered as 1, 2, 7 to 11 are general in nature. At the time of hearing, the Ld A.R did not press ground no.6. The remaining ground relates to the following issues:-

The facts relating to the above said issues are discussed in brief. The revenue carried out search and seizure operations u/s 132 of the Act in the hands of the assessee on 08-12-2013. During the course of search, the gold ornaments weighing 7442.30 grams was found, which included bullion of 1500 grams. After considering the explanations given by the assessee, the AO assessed value of following jewellery/bullion as unexplained investment in the hands of the assessee:- Value of bullion (1500 grms x Rs.2872/- per gram) - Rs. 43,08,000 Value of Ornaments (2668.390 gms x Rs.2620/gm) - Rs. 69,91,181 Value of jewellery not seized(2308 gms xRs.2620/gm)-Rs. 60,46,960 ------------------- Total Value Rs.1,73,46,141 ============= 4. The Ld CIT(A) confirmed the addition of Rs.43,08,000/- and Rs.69,91,181/- relating to first two items stated above. With regard to the third item, the Ld CIT(A) granted relief of Rs.22,27,000/-,being the value of 850 grams. In this regard, the Ld CIT(A) has given credit of 500 grams for married lady (wife of assessee), 250 grams for unmarried lady (daughter of assessee) and 100 grams (for the assessee) by considering the Instruction No.1916 dated 11.05.1994 issued by CBDT for not seizing the jewellery. Aggrieved by the order passed by Ld CIT(A), the assessee has filed this appeal before us.

The Ld A.R submitted that the assessee is a director of M/s B & B Jewellers and Finance Ltd along with his brother Shri Deepak Bethala. He submitted that the assessee has explained that he has brought 1500 grams of bullion to home for safe custody prior to the date of search. He submitted that a statement of Mr. Deepak Bethala was taken on the date of search and he has furnished stock statement on the date of search. However, he has clearly mentioned that the stock register has not been completed updated and further the copy of sales register as on 13.01.2013 was only furnished. He

The Ld D.R, on the contrary, reiterated the opinion expressed by the AO by adverting our attention to the relevant pages of the assessment order.

We heard rival contentions on this issue and perused the record. We noticed that the assessee has disowned the gold bullion of 1500 grams and in support of the same, he has furnished a copy of stock register of M/s B & B Jewellers and Finance Ltd. The AO has rejected the said explanation on the reasoning that there is variation between the stock register obtained at the time of search and the stock register furnished during the course of assessment proceedings. It is the contention of the assessee that the stock register taken by the revenue during the course of search proceedings was not updated completed. Subsequently, it has been updated and furnished. It is the submission of the assessee all the purchases have been duly accounted for and they have been accepted by the VAT department

On the contrary, it is the case of the revenue that the stock register has been manipulated by M/s B & B Jewellers and Finance Ltd and hence the explanations of the assessee cannot be accepted.

However, the fact remains that M/s B & B Jewellers and Finance Ltd is a limited company and its accounts have been duly audited. It is also stated that the books of accounts have been accepted by the VAT department. These facts show that the entries made in the books of accounts and stock register have been accepted by the auditor and VAT department. When a specific query as to whether any adjustment was made by the AO in the assessment of M/s B & B Jewellers and Finance Ltd with regard to the impugned 1500 grams, the Ld A.R submitted that no adjustment has been made. In this view of the matter, normally, the explanations of the assessee should have been accepted. However, since there was variation between the copy of stock register taken during the course of search and the copy submitted during the course of search, the AO has rejected the above said explanations. In our view, before rejecting the explanations of the assessee, the AO should have conducted necessary with regard to the veracity of the suspected entries made in the stock register. However, the AO did not conduct any enquiry to find out the veracity of alleged modifications made in the stock register. Accordingly, we are of the view that the AO was Mr. Amith Kumar Bethala, Bangalore

If the stock register of M/s B & B Jewellers and Finance Ltd has been accepted in its assessment by the concerned assessing officer and further, in the absence of any other credible material to support the view of the AO, we are of the opinion that there is no reason to take a different view in the hands of the assessee. However, since this fact requires verification, we restore this issue to the file of the AO for the limited purpose of examining the view taken by the AO in the hands of M/s B & B Jewellers and Finance Ltd. If the AO of the above said company has accepted the stock register, then we direct that the present addition should be deleted. Accordingly, the order passed by Ld CIT(A) on this issue stands set aside.

The next issue relates to the addition of Rs.69,91,181/- relating to 2668.390 grams of jewellery found during the course of search. With regard to these jewelleries, the assessee explained that they belong to his wife Smt. Teena Bethala and they were purchased in 2004. In support of the same, the assessee furnished a copy of purchase bill dated 03-10-2004. The AO noticed that the above said purchase bill has been issued by M/s B B Jewellers & Finance (P) Ltd and it did not contain the descriptions of gold jewellery. Accordingly, the AO took the view that the same could be an accommodative entry given by B B Jewellers & Finance (P) Ltd, since it is their own family concern. The AO also noticed that Smt. Teena Bethala had declared income of around 1.08 lakhs in AY 2004-05 and she did not file return of income in subsequent years. Accordingly, the AO rejected the explanations of the assessee and assessed the above said sum of Rs.69,91,181/- in the hands of the assessee. The Ld CIT(A) also confirmed the same.

On the contrary, the Ld D.R submitted that the income of the wife of the assessee Smt Teena Bethala was not commensurate with the amount of investment made in the alleged purchases. Further, the bill has been given by the related concern, wherein the assessee is a director and hence it could be an accommodative entry.

We heard rival contentions on this issue and perused the record. The undisputed fact remains that the purchase bill dated 03- 10-2004 issued by M/s B B Jewellers & Finance (P) Ltd was issued in the name of Smt. Teena Bethala and it shows that gold jewelleries weighing 3006.46 grams have been sold to Smt. Teena Bethala. We notice that the AO has rejected this evidence for the reasons that there was no description of the jewelleries and further it could be an accommodative entry, since the bill has been issued by a related concern. We have noticed earlier that the bill also shows that a VAT of Rs.51,350/- has been collected. There is no finding that this bill was a bogus bill and the same has not been accounted for by M/s B B Jewellers & Finance (P) Ltd. The facts are that (a) the sales bill issued by the above said concern has not been proved to be bogus (b) both the seller and buyer have accepted the transactions.

Accordingly, we are of the view that the AO has not brought on record any credible material to disprove the explanations of the assessee and accordingly we are of the view that this addition could not be made in the hands of the assessee. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this addition.

The last issue relates to the addition of Rs.38,19,960/- relating to 2308 grams relating to undisclosed investment in jewellery sustained by Ld CIT(A). The assessee submitted that these jewelleries belong to various members of the family. He submitted that the Instruction No.1916 dated 11.05.1994 issued by CBDT permits acceptance of 500 grams of jewellery in the case of married woman, 250 grams in the case of unmarried woman and 100 grams in the case of male member. Accordingly, it was submitted that the Mr. Amith Kumar Bethala, Bangalore

Before Ld CIT(A), the assessee placed his reliance on the decision rendered by Hon’ble Rajasthan High Court in the case of CIT vs. Satya Narain Patni (366 ITR 325), wherein it was held that when the jewelleries found during the course of search were within the tolerable limits prescribed by the CBDT in its instructions, no addition was justifiable. Accordingly, the assessee pleaded that the credit @ quantity prescribed by the CBDT should be given to all the family members, i.e., parents, brother’s family and assessee’s family. The Ld CIT(A), however, partially accepted the contentions of the assessee, i.e., he restricted the credit to the members of assessee’s family only and accordingly give relief to the extent of 850 grams. With regard to the claim for credit of parents and family members of his brother, the Ld CIT(A) did not accept the claim for the reason that the jewelleries were found in the bed room of the assessee.

The Ld A.R submitted that the parents of the assessee, his brother and brother’s wife are assessed to income tax. Their PAN details were given to the AO during the course of assessment proceedings. The letter furnished to the AO is placed at pages 39 to 46 of the paper book. At page 43, the assessee has stated that he has filed wealth tax computation and at page 44 the PAN details of all family members are given. The Ld A.R submitted that the assessee’s family is carrying on jewellery business and the AO should not have presumed that the family members could not have possessed any jewellery. In any case, the limits of jewellery

On the contrary, the Ld D.R supported the order passed by Ld CIT(A).

We heard the parties on this issue and perused the record. There is no dispute with regard to the fact that the family of the assessee is engaged in jewellery business. Hence it is inconceivable that the family members could not have possessed any jewellery. The quantity of 500 grams, 250 grams and 100 grams mentioned in the CBDT instruction is not the upper limit for giving credit. Hence, as contended by the Ld A.R, a reasonable estimate should have been made considering the family status of the assessee. In any case, the Ld CIT(A) has given credit of 850 grams on the basis of CBDT instruction in respect of family members of the assessee only. When the assessee, his parents and brother are living in joint family, in our view, the credit should be given for all the members of the joint family. The Hon’ble Rajasthan High Court, in the case of Satya Narain Patni (supra) has expressed the following view with regard to the CBDT instruction (referred above):- “ It is true that the circular of the Central Board of Direct Taxes, referred to supra dated May 11, 1994, only refers to the jewellery to the extent of 500 gms. per married lady, 250 gms. per unmarried lady and 100 gms. per male member of the family, need not be seized and it does not speak about the questioning of the said jewellery from the person who has been found with possession of the said jewellery. However, the Board, looking to the Indian customs and traditions, has fairly expressed that jewellery to the said extent