SMT. DAYAWANTI,NEW DELHI vs. DCIT, NEW DELHI

The captioned appeals have been filed by the assessee against the order dated 29.12.2016 & 30.12.2016 passed by Ld. Commissioner of Income Tax (A)-25, Delhi [“Ld.CIT(A)”] in Appeal No.14/15-16/21/16-17 and Appeal No.278/15-16/28/16-17 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the penalty order dated 21.09.2015 passed u/s 271(1)(c) r.w.s 274 of the Act pertaining to assessment year 2012-13 respectively.

Ground Nos. 2 & 3 raised by the assessee are in respect of addition of INR 8,26,879/- made by the AO on account of addition of interest on HSBC Account on protective basis by holding that the assessee is having account with HSBC, Geneva, Switzerland. However, the Ld.CIT(A) has confirmed the addition on substantive basis.

Brief facts of the case are that the information was available with the Investigation Wing of the Department that the assessee alongwith her husband, Shri Praveen Swahney was having a bank account in HSBC Bank, Geneva, Switzerland. This information was received from the Competent Authority under exchange of information from time to time of DTAC/DTAA between India and France. Since the assessee’s husband has not disclosed this account in his return of income nor the funds were disclosed and the assessee was the beneficiary of this account. She has also not disclosed the said account in her return of income therefore, the AO estimated the interest @ 4 % on the yearly balance computed by him and made the additions from AYs 2008-09 to 2012-13 towards interest. The year under appeal i.e. AY 2012-13 where the AO has the interest of 16306.04 USD on the opening balance of 4,07,651.17 USD @ 4 % and by applying the conversion rate of 50.71, the interest was worked out at INR 8,26,879/- and the addition was made. At page 3 of the assessment order contained the working of the interest on year to year basis.

In first appeal, the Ld.CIT(A) confirmed the same by observing that during the course of appellate proceedings, opportunities were given to the assessee to explain the income credited with HSBC Bank, Geneva, Switzerland However, the details were not received therefore, he confirmed the addition. The Ld.CIT(A) further observed that the addition should be made on substantive basis as against the protective basis made by the AO. 6. Before us, Ld.AR for the assessee submitted a copy of bank statement of client No.1403168 with Client Account No.11389295 and having reference of 40529 SP. Nowhere in the said statement, name of the assessee is appearing however, in the assessment order in para 5, the AO observed that Shri Praveen Sawhney, husband of the assessee was having a bank account in HSBC Page | 2 account bearing No.BUP_SIFIC_PER_ bearing No.BUP_SIFIC_PER_ID 5090153915, created on 20.07.1990. 5090153915, created on 20.07.1990. The copy of the bank account as produced by the Ld.AR during the course of The copy of the bank account as produced by the Ld.AR during the course of The copy of the bank account as produced by the Ld.AR during the course of hearing, stated to have been filed before the lower stated to have been filed before the lower authorities is available at is available at page 87 of the Paper Book, , is reproduced as under:-

From the perusal of the said statement, it is clear that it contained the client No.1403168 & in box meant for the client name etc. “40529 SP” is mentioned. As observed above, the AO in para 5 has referred the client profile name as “40529 SP” with client profit code 5091403168 as pertaining to the assessee. Since the last seven digit of Client name are common and also profile name of the person is also common, it is presumed that the bank account submitted by the assessee is the same bank account which has been referred by the AO for making additions. 7.1. As is evident from the said bank account, the opening balance as on 01.04.2011 was 8599.72 (credit USD) and there were charges levied towards maintenance fee of 941.29 USD on 30.06.2011 and thereafter, on 21.09.2011, there was a debit entry vide cheque No.415838 in the name of Shri Praveen Sawhney of 7208.21 USD and further account maintenance charges were debited on 15.11.2011 of 450.22 USD and the remaining balance in the said account was 0.00 USD. The Ld.AR for the assessee submitted that when no bank interest was given by the bank on the said account rather there were maintenance charges levied of more than 1000 USD on the said account. There was closing balance of NIL on 30.09.2011, thus how it could be presumed that the assessee has received interest on the balance in the said account. He further submits that the AO has calculated the interest on estimation basis by applying rate of interest @ 4 % on the balance as on 01.04.2007 which was increased by year to year interest calculated by the AO himself @ 4 % wherein from the perusal of the statement as described above, there was no balance available in the bank account rather as against the alleged interest, the bank account has levied maintenance charges. Therefore, there is no question of estimating any income towards interest on the said account. The Ld.AR for the assessee further submits that the substantive additions made in the hands of the assessee’s husband, Shri Praveen Sawhney. However, the said order was quashed by the Co-ordinate Bench of the Tribunal, Delhi Benches in of the assessee on the issue of limitation as notice issued u/s 143(2) and served beyond the time limit prescribed under the Act. He further submits that similar additions were also made in the case of Krishan Kumar Modi vs ACIT in and others vide order dated 05.07.2019 where the interest @ 4 % was estimated on the balance in the bank account on notional basis. The said additions were deleted by the Ld.CIT(A) and such order was upheld by the Co- ordinate Bench of ITAT in ITA No.3951/Del/2017. A copy of the said order is placed on record. Ld.AR for the assessee thus, prayed for the deletion of the addition made on account of notional interest in the hands of the assessee.

On the other hand, Ld.CIT DR for the Revenue submits that the lower authorities has rightly made the additions under exchange of information with Swiss Government and the assessee has failed to submit the relevant details before the lower authorities therefore, he justifies the action of lower authorities in making the addition.

We have heard the contentions of both the parties and perused the material available on record. From the perusal of the bank statement as reproduced, it is found that the said bank account contained the client no. and client name which are matching with the client profile code and client name referred by the AO at page 5 of the assessment order. It is correct that nowhere in the statement, name of the assessee is mentioned however, the other particulars referred therein suggest that it is the same bank account which has been made basis for computing the notional interest by the AO. A bare perusal of the said bank account, it is seen that on opening day of previous year i.e. on 01.04.2011, there was a credit balance of 8,599.72 USD as against which the AO in the table at page 3 of the order has taken the balance at 4,07,651.17 USD. Further, the AO ignored the fact that the bank has not credited any interest rather account maintenance fee was charged on two occasions, totaling to 1391.51 USD (941.29 USD+ 450.22 USD) and NIL balance was remained as on 16.11.2011. These facts clearly suggest that neither the assessee is having the balance as alleged by the AO nor has received any interest for which the AO could made additions rather account maintenance charges was levied by the bank. Under these circumstances, in our considered view, no addition on account of notional interest could be made in the hands of the assessee. Page | 5 9.1. We further find that the Co-ordinate Bench of ITAT in the case of Krishan Kumar Modi (supra) where under identical circumstances, additions were made on notional interest @ 4% were deleted by the Co-ordinate Bench by observing in para 6.4 as under:- 6.4 “We have considered rival submissions and the decisions relied upon by both the parties. We have already deleted the addition made in assessment year 2006-07 and also in assessment year 2007-08, therefore, on this ground itself the addition made by the assessing officer is liable to be deleted. Independent thereof, we note that in the instant case, the addition of Rs.1,64,962 has been made purely on notional basis on the premise that the assessee: (a) had alleged foreign bank account, which itself is under serious challenge; and (b) on such bank account, assessee earned interest @ 4%. We are of the view that the case of the assessee is on a much better footing vis-à-vis the facts in judicial precedents relied upon by the Ld. Counsel inasmuch as in the aforesaid cases there was at least some basis of taxation of notional amount/ interest, which was never realized/ received by the assessee, but in the case of the assessee, the so-called amount of interest brought to tax is totally without any basis and is clearly hypothetical/ imaginary. Since there is no evidence that the assessee actually received interest on the disputed deposit and just by figment of imagination it has been concluded that the assessee earned interest on such deposits @ 4% p.a., the impugned addition on account of notional interest, has, even on merits, been rightly deleted by the CIT(A). For the said cumulative reasons, the Revenue’s appeal on this ground stands dismissed.”

In view of the above discussion and by following the judgement of Co- ordinate Bench in case of Krishan Kumar Modi (supra), we delete the addition made on account of notional interest of INR 8,26,879/-on substantive basis in the hands of the appellant. Ground Nos. 2 & 3 raised by the assessee are accordingly allowed.

Ground No.4 raised by the assessee is against the addition of INR 2,78,142/- made by the AO towards cash found/seized during the course of search which was upheld by Ld.CIT(A).

Ld. AR for the assessee submitted that during the course of search, total cash of INR 7,43,382/- was found at the residence of the assessee out of which an amount of INR 5,50,000/- was seized. With regard to the source, it was claimed by the assessee that out of total cash found, a sum of INR 2,78,142/- belonged to her and out of the cash seized of INR 5,50,000/- and INR 1,50,000/- pertains to her. With regard to the source thereof, Ld.AR for Page | 6 the assessee stated that the date of search in this case was 28.07.2011 and the assessee has made withdrawal of INR 4,50,000/- from her bank account with State Bank of India, Greater Kailash, Delhi from which withdrawal of INR 2,50,000/- was made on 26.11.2011 and INR 2,000,000/- was made on 08.07.2011. Ld.AR submitted that out of such withdrawal, the cash was found available with the assessee which was found/seized during the course of search. The Lower authorities has failed to appreciate these facts and made additions for the sole reason that during the course of search, this fact was not brought to the notice of the Department. He therefore, prayed that the addition may be deleted.

On the other hand, Ld.CIT DR for the Revenue vehemently supported the orders of the lower authorities and requested for the confirmation of the same.

We have heard the rival submissions and perused the material available on record. The immediate source as explained by the assessee that bank withdrawals made within the period of one month totaling to INR 4,50,000/- from her bank account out of which a sum of INR 2,78,142/- was available with assessee as on the date of search. The withdrawals were made on 26.11.2011 of INR 2,50,000/- and on 08.07.2011 of INR 2,00,000/- and the date of search is 28.07.2011. Looking to this short span of time of around of 30 days from the withdrawals and the search, the claim of the assessee cannot be ignored solely for the reason that she was not able to state these facts during the course of search. It is not the case of the Revenue that the bank account from where the withdrawals were made was not of the assessee nor the said account was undisclosed bank account. Therefore, we find no reason to confirm such addition. Accordingly, we hereby direct the AO to delete the addition of INR 2,78,142/-. Ground No.4 raised by the assessee is accordingly, allowed. Ground Nos. 5 & 6 raised by the assessee are in relation to the addition 15. of INR 1,01,52,902/- made towards the jewellery found during the course of search.

Brief facts of the case are that during the course of search, total jewellery 2196.800 grams having value at INR 63,10,550/- was found from the locker Page | 7 No.896 of HSBC Bank, South Extension, New Delhi and 1422.73 grams (net weight) having value of INR 77,00,668 totaling to INR 1,40,11,218/- (INR 77,00,668/- + INR 63,10,550/-) was found out of jewellery valued at INR 1,25,36,550/- was seized. The AO after allowing the credit of the jewellery declared by the assessee in VDIS, hold the remaining jewellery of INR 1,01,52,902/- as unexplained and made the addition of the same. Ld.CIT(A) has confirmed such addition therefore, the assessee is in appeal before us.

During the course of hearing, Ld.AR for the assessee drew our attention to the reconciliation statement filed which is placed at page 86 of the Paper Book. Ld.AR stated that as against the total jewellery found at is 3619.170 grams (1422.370 grams + 2196.800 grams), the AO has taken weight of jewellery at 3951.90 gram thus, there is a difference of 332.73 grams in calculation done by the AO. He further submits that the assessee is living with her husband and son and therefore, as per CBDT Instruction 1194 dated 10.05.1994, total 700 grams jewellery deserves to be accepted as explained. The Ld.AR further submits that jewellery having weight of 375.20 grams was received by her from mother in law, Smt. Raj Mohini Khoshla on the occasion of her 25th Anniversary on 10.10.2002. Besides, jewellery having weight of 534.10 grams was belonged to assessee’s husband. Ld.AR further submits that jewellery of 1621.14 grams were purchased by her from time to time out of the withdrawals made from her bank account for which the copy of bank statement was submitted wherein on regular basis there were bank withdrawals. Accordingly, Ld.AR submits that if the credit of jewellery received as a gift from mother in law , credit for CBDT circular and purchased from time to time is allowed, there remained no jewellery which could be held as unexplained. It is further submitted by Ld.AR that the assessee belonged to the reputed family of Sawhney Tyres and Tubes Fame and groups and looking to the social status of assessee’s family, the same deserves to be held as explained. For this, reliance is placed on the judgment of Co-ordinate Bench of ITAT, Delhi in the case of Shri Vibhu Aggarwal vs DCIT in dated 04.05.2018 and Mr. Nawaj Singham vs DCIT 88 taxmann.com 327 (ITAT, Mumbai). Ld.AR thus prayed that addition made deserves to be deleted.

On the other hand, Ld.CIT DR for the Revenue submits that the AO has already allowed the credit of jewellery declared by the assessee in VDIS and therefore, further claim of deduction is not permissible. He further submits that the assessee has failed to furnish the copies of the invoices of the jewellery purchased therefore, even otherwise, this claim of the assessee of purchase of jewellery cannot be allowed. Ld.CIT DR further submits that in absence of any declaration of gift from the mother in law, the claim of the assessee that certain jewellery was received as a gift also cannot be accepted and therefore, he prayed for the confirmation of the addition so made.

We have heard the rival contentions and perused the material available on record. It is seen that out of total jewellery 369.170 grams, the AO has wrongly taken the figure of 3951.900 grams which is evident from para 3 of page 5 of the assessment order where the AO after reducing the claim of the assessee of VDIS declaration of 1088.65 grams held the balance jewellery of 2863.25 grams as unexplained jewellery. Since the total jewellery found at 3619.170 gram as evident from the Annexure J-1 & J-2 prepared during the course of search which are available in the Paper Book at pages 29 to 32 therefore, we direct the AO to reduce 332.73 grams as error in calculation done by the AO.

Further, the assessee claimed that she had received 375.20 gram jewellery from her mother in law for which she had filed an affidavit before the AO also. The assessee also made reference to the valuation report prepared during the course of search and claimed that jewellery items received as gifts are found from the locker of the assessee. The claim of the assessee cannot be denied solely for the reason that the donor Smt. Smt. Raj Mohini Khoshla has not confirmed such gift. From the perusal of the assessment order, we find that a request was made by the assessee before the AO that Circle Inspector may be appointed to record her statement as she was 90 years old lady and could not be able to appear before the AO for confirmation of these facts. However, it appears that no such effort was made by the AO. It is customary in Page | 9 Indian family that normally on the occasion of marriage anniversary etc., elders of the family made gifts. Therefore, the claim of the assessee cannot be ruled out. In view of these facts, in our considered opinion, the claim of the assessee of receiving 375.20 grams of jewllery as gift from her mother in law cannot be denied. Accordingly, the credit for the same is hereby given to the assessee.

With respect to the purchase of jewellery of 1621.140 grams (including precious and semi-precious stones) claimed as purchased, from the perusal of bank statement filed for the period from 01.01.2002 to 30.06.2003, it is seen that assessee has made total cash withdrawal of INR 10 lakhs which was used to purchases of the jewellery. With these facts, we find that assessee has been able to demonstrate that during this period, she had made cash withdrawals from the bank on various occasions which were utilized for making such purchases. The claim of the assessee was dismissed by the lower authorities for want of bills however, the fact remained that such withdrawals were claimed to have been utilized for purchase of jewellery which was not denied by the lower authorities nor its utilization elsewhere was established either by bringing on record any material or on the basis of any material found as a result of search.

On the contrary, the assessee since beginning of the proceedings, assessee claimed that this amount of cash withdrawal was utilized for purchases of jewellery and the necessary bank statements were filed before the lower authorities and the AO never doubted the sources thereof, nor denied the withdrawals made on various dates. Looking to these facts, the claim of the assessee of purchase of jewellery out of such cash withdrawals cannot be denied.

It is further seen that CBDT vide its instruction No.1916 dated 11.05.1994 has held that “the jewellery of 500 grams in respect of married lady and 100 gram for male member should be treated as explained”. This view is supported by the judgement of Hon’ble Karnataka High Court in the case of Smt. Pati Devi vs ITO & Anr. [1999] 240 ITR 727 (Kar.) and further by Hon’ble Gujarat High Court in the case of CIT vs. Ratan Lal Vyapari Lal Jain (2011) 339 ITR 351 (Guj). Thus, by respectfully following the Page | 10 judgement of Hon’ble Karnataka High Court and Gujarat High Court (supra), we hold that 700 grams of jewellery in terms of CBDT instruction can be held as explained.

Thus, the total jewellery found of 3619.170 grams during the course of search, following jewelry could be held as explained:- (i) Declared under VDIS 1997 at 1088.910 grams; (ii) Gift from other in law 375.200 grams; (iii) Purchase of jewellery 1621.140 grams; and (iv) As per CBDT instruction, 700 grams.

The total comes to 3785.25 grams as against which the total jewellery was 3619.170 grams therefore, no jewellery could be held as unexplained accordingly, we direct the AO to delete the addition of INR 1,01,52,902/- made on account of jewellery. Ground Nos. 5 & 6 raised by the assessee are accordingly, allowed.

Ground No.7 raised by the assessee for not allowing the benefit of telescoping of additions made. Since we have already deleted the additions made therefore, this ground became academic in nature and needs no adjudication accordingly, the same is hereby dismissed. Ground Nos.1 & 8 are with regard to the legality of the assessment order 27. as the same was barred by limitation and without jurisdiction.

In this case, it is seen that a reference was made by the AO to FT & TR in respect of foreign assets and foreign transactions and as per Explanation (9) to section 158B of the Act. There is an extension of one year is granted. In view of these facts, we do not find any infirmity in the action of the AO and order is not barred by limitation and accordingly, these grounds of appeal

In the result, the appeal of the assessee is partly allowed.

In first appeal, Ld.CIT(A) has dismissed the appeal of the assessee and in the meantime, the AO proceeded to levy the penalty u/s 271(1)(c) of the Act in respect of the additions so made by holding that the assessee has concealed the particulars of income. The said order is upheld by Ld.CIT(A).

Since while deciding the appeal of the assessee in TIA No.1646/Del/2017, we have already deleted the additions made on account of notional interest, cash and jewellery found during the course of search by considering the arguments of the assessee on merits. Therefore, there remained no income for which any particulars were concealed by the assessee and therefore, the penalty levied u/s 271(1)(c) of the Act has no legs to stand and accordingly, the same is hereby dismissed.

In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 18.06.2025.