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Income Tax Appellate Tribunal, DELHI BENCH : D : NEW DELHI
Before: SHRI R.K. PANDA & MS SUCHITRA KAMBLE
BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER Assessment Year: 2011-12 Kumkum Kanodia, Vs. DCIT, C-175, Pushpanjali Enclave, Central Circle-11, Pitampura, New Delhi. New Delhi. PAN: AANPK6021C (Appellant) (Respondent) Assessee by : Shri Ved Jain & Shri Kislaya Parashar, Advocates; and Shri Ashish Goel, CA Revenue by : Shri Vijay Verma, CIT, DR Date of Hearing : 04.10.2018 Date of Pronouncement : 20.11.2018 ORDER
PER R.K. PANDA, AM:
This appeal by the assessee is directed against the order dated 29th August, 2014 of the CIT(A)-31, New Delhi relating to Assessment Year 2011-12.
Although a number of grounds have been raised by the assessee, these all relate to the order of the CIT(A) in sustaining the addition to the extent of Rs.4,24,773/- on account of diamond jewellery found during the course of search.
The facts of the case, in brief, are that the assessee is an individual. A search and seizure operation u/s 132(1) of the IT Act was conducted at the residential premises of Shri Rajesh Kumar Kanodia and his group concern and family members on 28th March, 2011. Simultaneously, a search in the case of the assessee was also conducted. The assessee filed her return of income declaring an income of Rs.32,83,430/-. During the course of assessment proceedings, the Assessing Officer noted that at the time of search, certain jewellery were found which was valued by the Departmental Valuer as under:-
Valuation Reports Net weight of gold (gms) Diamonds (in ct.) Amount (Rs.) Valuation Report-1 1846.400 154 41,72,650.00 Valuation Report-2 1387.100 199 46,09,580.00 Total 3233.500 353 87,82,230.00
In the statement recorded u/s 132(4), Shri Kanodia gave an explanation that part of this jewellery has been brought home for approval as samples for his daughter’s marriage from M/s Pashupati Jewellers and, in support of this claim, he provided a copy of invoice of jewellery items purchased by M/s Pashupati Jewellers from Shree Nath Jewellers. So far as the balance jewellery is concerned, it was explained that the same belongs to the entire family and stands explained in view of CBDT Instructions No.1916 dated 11th April, 1994 and, therefore, jewellery to the extent of 1950 gms. has been explained.
However, the Assessing Officer was not satisfied with the explanation given by the assessee. He observed that the claim of the assessee that the jewellery amounting to Rs.46,09,580/- are the same jewellery which was purchased by M/s Pashupati Jewellers proprietor Mrs. Sumedha Pathak is not acceptable since the jewellery purchased by M/s Pashupati Jewellers was of 14 ct. ornaments whereas the jewellery found from the assessee’s residence does not show any jewellery of 14 ct. gold ornaments. However, since the amount has already been added in the hands of Mrs. Sumedha Pathak in the assessment year 2011-12, the Assessing Officer did not make any addition on account of the same. So far as the remaining jewellery of Rs.41,72,650/- is concerned, the A.O rejected the explanation of the assessee and noted that the CBDT Instruction No.1916 dated 11th April, 1994 does not cover diamond jewellery of 154 ct. valued at Rs.13,86,500/-. Rejecting the various explanation given by the assessee, the A.O. made addition of Rs.13,86,500/- to the total income of the assessee and determined the income at Rs.46,69,930/-.
In appeal, the ld. CIT(A) restricted such disallowance to Rs.4,24,773/- by observing as under:-
4.2.1 In this ground the appellant is agitating against addition of Rs. 13,86,5007/- being unexplained diamond jewellery found during the course of search. It is noted here that in the course of search, initiated at the residence of Mr. Rajesh Kumar Kanodia, (the husband of the appellant) 3,233.500 gms of gold and 353 carats of diamond jewellery were found. The breakup of the same as reproduced in the assessment order is as under:-
Name as per Valuation Net Weight of Diamond Amount Report of Registered Valuer Gold (gms) (in ct.) (Rs.) Kumkum Kanodia 1846.400 154 4,172,650.00 Sumedha Pathak 1387.100 199 4,609,580.00 Total 3233.500 353 8,782,230.00
4.2.2 In the case of Mrs. Sumedha Pathak, the AO has treated jewellery of the value Rs. 46,09,580/- (1,387.100 gms of gold and 199 carats of diamond) as unexplained in her hands. Out of the balance jewellery of Rs. 41,72,650/-, the AO has given credit only for 1846.400 gms of gold jewellery as per CBDT Instruction No. 1916 of 11.04.1994. The balance jewellery being 154 carats of diamond has been held as unexplained jewellery in the hands of the appellant. 4.2.3 Vide my separate order in the case of Mrs. Sumedha Pathak A.Y. 2011-12 (Appeal No. 484/13-14) dated today, 1 have held that the AO could not have ignored the submissions of the appellant that the jewellery found at the residence was in fact brought on approval basis from the proprietary concern of Mrs. Sumedha Pathak. As per the invoice, 1487.52 gms of gold and 305.82 carats of diamond jewellery was purchased by M/s Pashupati Jewellers. The AR has submitted during the appeal proceedings that after giving credit to the jewellery belonging to M/s Pashupati Jewellers, excess jewellery comes to 1745.98 gms (3233.500-1487.52) of gold and 47.18 carats (353-305.82) of diamond. He has submitted that the Instruction No. 1916 of the CBDT does not differentiate gold and diamond jewellery. As per the said circular, the appellant’s family is eligible for getting credit to the tune of 1950 gms of jewellery as noted by the AO himself. If the jewellery weighing 1745.98 gms of gold and 47.18 carats of diamond are together deducted from 1950 gms, there would be no excess jewellery available with the appellant’s family. He, therefore, submitted that no addition on account of unexplained jewellery was called for. I have considered AR’s submission. He has attempted to equate diamond jewellery with gold jewellery which is not the objective of the said Instruction of the Board. The AO has already given credit to the entire gold jewellery found and valued in the hands of the appellant. He has added 154 carats of diamond in the appellant’s hands as excess jewellery. It is noted here that the diamond jewellery as per the invoice was 305.82 carats as against 353 carats found and valued in the hands of the appellant and Mrs.
Sumedha Pathak. Thus the AO is required to give credit for the said 305.82 carats of diamond belonging to M/s Pashupati Jewellers. If the same is considered, the excess diamond jewellery works out to 47.18 carats (353- 305.82). The proportionate value of 47.18 carat of diamond works out to Rs. 4,24,773/- (Rs. 17,85,400 divided by 154 and multiplied by 47.18). After considering the reasons mentioned in my order dated today in the case of Mrs. Sumedha Pathak (Appeal No. 484/13-14, A.Y. 2011-12) and after considering the above facts, I am of the view that, the excess jewellery liable to be assessed in the hands of the appellant works out to Rs. 4,24,773/- as above. Therefore the AO is directed to delete the balance addition. In the result ground is partly allowed.”
Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal.
The ld. counsel for the assessee strongly challenged the order of the CIT(A) in confirming the addition of Rs.4,24,773/- on account of unexplained diamond jewellery treating the same as not covered by the CBDT Instructions. Referring to the decision of the Mumbai Bench of the Tribunal in the case of Mrs. Nawaz Singhania vs. DCIT reported in (2017) 88 taxmann.com 327, he submitted that the Tribunal, under similar circumstances, has deleted the addition on account of gold and diamond jewellery keeping in mind the CBDT Instructions No.1916 dated 11th April, 1994. Referring to the CBDT Instructions No.1916 dated 11th April, he submitted that the said instruction refers to jewellery as disclosed in the Wealth-tax Act and Wealth-tax Act defines jewellery under Explanation 1(a) to section 2(ea) of the Act which read as under:- “(a) jewellery includes (i) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stones, and whether or not worked or sewn into any wearing apparel; (ii) precious or semi-precious stones, whether or not set in any 5
furniture, utensils or other article or worked or sewn into any wearing apparel;”
He, accordingly, submitted that since diamond is the precious metal and, thus, the same is included in the definition of jewellery, therefore, it cannot be said that the Instruction does not include diamond. He, accordingly, submitted that this being a covered matter in favour of the assessee, the addition sustained by the CIT(A) deserves to be deleted. He also filed a family chart as under to substantiate that the jewellery found at the time of search belonging to various persons of the family is within the limits prescribed under the said Instruction:-
Sl. Name of the Family Relation Jewellery No. Member Assigned as per the Instruction 1. Rajesh Kanodia Husband of the assessee 100 gm. 2. Kumkum Kanodia Assessee 500 gm. 3. Sumedha Pathak Daughter in law 500 gm. 4. Rajat Kanodia Son 500 gm 5. Bhagwati Devi Kanodia Mother in law 500 gm 6. Nikita Kanodia Unmarried daughter 250 gm Total 1950 gm
The ld. DR, on the other hand, strongly supported the order of the CIT(A). He submitted that the ld.CIT(A) has already granted substantial relief and he has only sustained the addition on account of diamonds studded in the jewellery. Since the order of the CIT(A) is in accordance with the law, therefore, the same should be upheld and the grounds raised by the assessee should be dismissed.
We have considered the rival arguments made by both sides and perused the orders of the authorities below. We find that out of the total jewellery valued at Rs.87,82,230/- comprising two reports, the Assessing Officer has not made any addition in the hands of the assessee on account of jewellery valued at Rs.46,09,580/- being the jewellery purchased by M/s Pashupati Jewellers, proprietor Mrs. Sumedha Pathak on the ground that the same has been added in the hands of Mrs. Sumedha Pathak in the assessment year 2011-12. Although in appeal the ld.CIT(A) has deleted such additions, however, the Revenue is not in appeal before the Tribunal. Therefore, we are not concerned with the same. So far as the jewellery weighing 1846.400 gm with 154 ct. diamond valued at Rs.41,72,650/- is concerned, we find the Assessing Officer has made addition of Rs.13,86,500/- which has been reduced to Rs.4,24,773/- by the CIT(A), the reasons for which has already been reproduced in the preceding paragraph. However, while sustaining the addition, he has held that diamond jewellery cannot be equated with gold jewellery in the light of the CBDT Instructions.
It is the submission of the ld. counsel for the assessee that jewellery includes ornaments made of gold, silver, platinum or any other precious metals or any alloy containing one or more precious metals, whether or not containing any precious or semi-precious stones. We find merit in the above arguments of the ld. counsel for the assessee. In our opinion, merely because the jewellery is studded with the diamond of 47.18 carat in the instant case, the same cannot be added in the hands of the assessee when such jewellery formed part of the gross weight of the jewellery found from the premises of the assessee which is within the permissible limits prescribed as per 7 CBDT Instruction No.1916 dated 11th April, 1994. The decision of the Mumbai Bench of the Tribunal relied on by the ld. counsel for the assessee supports his case wherein the Tribunal, after considering the CBDT Instruction dated 11th April, 1994, has deleted the addition on account of gold and diamond jewellery. Since the addition has been deleted by the CIT(A) and the Revenue is not in appeal before the Tribunal, therefore, considering the totality of the facts of the case, we are of the considered opinion that the ld.CIT(A) is not justified in sustaining the addition to the tune of Rs.4,24,773/- on account of unexplained diamond jewellery of 47.18 carat treating the same as not covered by the CBDT Instruction No.1916 dated 11th April, 1994. We, therefore, set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition. The grounds raised by the assessee are, accordingly, allowed.
In the result, the appeal filed by the assessee is allowed. The decision was pronounced in the open court on 20.11.2018.