SANJAY DANGI,MUMBAI vs. DCIT CEN CIR 22 & 30, MUMBAI

O R D E R PER RAJESH KUMAR, A.M: This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax(Appeals)-39, Mumbai, dated 05-08-2014. 2. The only issue raised by assessee in various grounds of appeal, is against the confirmation of addition of Rs.1,22,66,225/- by the CIT(A) as made by the Assessing Officer (AO) towards un-disclosed jewellery declared by the assessee during the search proceedings u/s 132 of the Act.

: 2 : 3. The facts in brief are that a search operation u/s.132(1) of the Income Tax Act (Act) was conducted on 03-12-2010. Assessee filed the original return of income on 30-09-2011 declaring total income at Rs.27,73,910/- which was processed u/s.143(1) of the Act. Thereafter, notice u/s.153A of the Act was issued to the assessee to file return of income. During the course of assessment proceedings AO noticed that , certain undisclosed jewellery found during the course of search action and offered as income during search , was not offered to tax in the return filed pursuant to notice u/s.153A of the Act and accordingly, AO issued a show cause notice dt.07-03-2013, referring to the statement recorded u/s.132(4) of the Act. The AO observed that while answering Question No.5, - the assessee have admitted that one diamond necklace having gross weight 95.200 gms and net weight of 82.500 gms valued at Rs.1,22,66,225/- was purchased during the year, out of unaccounted cash which was offered the same for taxation during search. However, in the return of income, the assessee has not disclosed the same as income. The assessee replied the said show cause by submitting that the diamond necklace was purchased on 07-04-2008 from M/s.Ronak Gems Pvt. Ltd., and payment for the same was made from IDBI Bank vide cheque dt.07-04-2008 of Rs. 35,38,267/-. It was also stated that due to tremendous pressure during the course of search, the assessee could not match this bill with the jewellery inventorized. The assessee also made a without prejudice claim that in case addition is made, the same can be only Rs.90,00,000/- and not at Rs.1,22,66,225/-. However, the reply of assessee did not find favour of AO and he added : 3 : Rs. 1,22,66,225/- by holding that it is nothing but an afterthought and thus, treated the same as ‘un-disclosed income’ by framing assessment u/s.143(3) of the Act dt.18- 03-2013.

4. In the appellate proceedings, Ld. CIT(A) confirmed the addition, by holding that assessee himself had admitted that the said diamond necklace was purchased by assessee in the current year out of un-accounted income and offered the same to tax however the same was not declared in the return filed in response to notice u/s.153A of the Act. The CIT(A) also noted that the appellant produced a bill dt.03-04-2008 before the AO evidencing the purchase from M/s.Ronak Gems Pvt. Ltd., showing purchase of diamond jewellery for Rs.35,33,867/- by Mrs. Alpana Dangi and it was further stated that payment for the same had been made through cheque of IDBI Bank in the name of Mrs.Alpana Dangi. Assessee also produced a valuation report from Mahavir Lodha dt.04-04-2011,wherein a necklace weighing 95.200 grams, with net weight of 84.766 grams had been valued at Rs.98,16,744/-. The CIT(A) also noted that assessee contended before the AO that the said asset was reflected in the Wealth Tax return of Mrs.Alpana Dangi and in the remand proceedings before the AO, it was reported that on a comparison between the bill issued by M/s.Ronak Gems P. Ltd., and the Valuation Report of the departmental valuer dt.04-12-2010, there were differences noticed. The AO stated that though the total number of diamonds as per the bill and the valuation report did tally (134 small diamonds + 27 big diamonds) and though the gross : 4 : weight tally at 95.200 grams, there is difference in weight of the big diamonds and the small diamonds. The assessee stated that there is no difference in the gross weight with big diamonds and small diamonds, both are tallied and AO should have accepted the explanation of assessee. It was also stated before the CIT(A) that the statement recorded u/s.132(4) of the Act has no evidentiary value. However, Ld. CIT(A) held that assessee has failed to demonstrate that earlier statement was wrong and was given under pressure. Ld. CIT(A) relied on the decision of Hon'ble Supreme Court in the case of Pullangode Rubber Produce Co. Ltd., Vs. State of Kerala (1993) [91 ITR 18], wherein it was held that – admission is an extremely important piece of evidence and onus lies on the assessee to establish that the statement made at the time of search was wrong. The ld CIT(A) held that the assessee had failed to demonstrate that the statement made was wrong and finally dismissed the appeal of assessee.

: 5 : The ld AR contended that even the AO admitted that number of big and small diamonds were tally however there was some difference in the weights which is bound to be there as the Departmental Valuer valued the jewellary on estimation basis.The ld AR therefore submitted that the unexplained diamond jewellary was fully explained during the assessment proceedings and therefore there is no question of offering the same for taxation.In defense of his argument, Ld. AR relied on a series of decisions, as under:

(2012) 25 Taxman.com 413 (Supreme Court);

(2008) 214 CTR 589 (Madras);

(2013) 354 ITR 116 (Madras);

5. Paul Mathew & Sons Vs. Commissioner of Income Tax (2003) 129 Taxmann 416 (Kerala);

(1973) 91 ITR 18;

8. P R Metrani Vs. Commissioner of Income Tax, Bangalore – Supreme Court of India 157 Taxmann 325;

6. Ld. DR heavily relied on the orders of the authorities below and submitted that the disclosure was made by the assessee during the course of search while recording statement u/s.132(4) of the Act. Ld. DR also submitted that the necklace was found during the course of search and the assessee admitted that it was bought during the year out of undisclosed income, however, later on assessee stated that the same was bought out of the disclosed sources and tried to explain the same with the bills issued by the sellers and payment details. Therefore, the same is an after thought and cannot be accepted. Hence, the order of CIT(A) needs to be affirmed.

7. After hearing both the parties and perusing material on record, we observe that the necklace was found during the course of search u/s.132(4) of the Act, which was offered as undisclosed income in the statement recorded u/s.132(4) of the Act. However, at the time of filing the returns in response to notice u/s.153A of the Act , the assessee did not offer the same to tax on the ground that the said statement u/s.132(4) of the Act was given under tremendous pressure and mental strain was wrong. The said diamond jewellery stood disclosed in the return of wealth of Mrs. Alpana Dangi wife of the assessee. The assessee also produced sale bills of the seller along with payment details. Thus, the assessee has completely : 7 : explained the purchase of jewellery with reference to bills, vouchers and payment details. Under these circumstances, we are not in conclusion with the Ld.CIT(A) that the non disclosure was an after thought. In our opinion where assessee has offered the income in the statement recorded u/s.132(4) of the Act but when the same is explained with reference purchase bills and payment details then the same cannot be treated as ‘un-disclosed income’. The case of assessee is also squarely covered by the decision of CIT Vs. S.Khader Khan Son [300 ITR 157] (Madras), wherein it has been held that the statement has no evidentiary value unless corroborating evidences are there to support the same. Even the case of assessee is fully supported by the Instruction F.No.286/2/2003IT(Inv-II) issued by CBDT which states no confession of additional income during the course of search and seizure and survey operations to be taken by the officers without credible evidences. In view of above, the order passed by CIT(A) is wrong and can not be sustained. Accordingly we is set aside the order of CIT(A) and direct the AO to delete the addition so made.

Order pronounced in the open court on 14.08.2019 (RAM LAL NEGI) (RAJESH KUMAR) "याियक सद"य/JUDICIAL MEMBER लेखा सद"य/ACCOUNTANT MEMBER मुंबई/Mumbai; "दनांक/Dated : 14.08.2019 TNMM