HITENDRAKUMAR CHIMANLAL PATEL,VADODARA vs. THE DY.CIT, CENTRAL CIRCLE-1, VADODARA

Your appellant craves liberty to add, alter, amend substitute or withdraw any of the ground(s) of appeal hereinabove contained.”

The solitary issue raised relates to the addition made on account of unexplained jewellery. The facts of the case are that during search conducted on the assessee on 31.01.2018, jewellery worth Rs.26,16,300/- (874 grams) was found at the residence of the assessee Shri Hitendra C Patel, one of assessees before us. On 08.03.2018 bank locker no.139 maintained with State bank of India, Harni Road, Vadodara in the name of Shri Hitendra C. Patel, was operated and jewellery worth Rs.27,78,955/- (942.4 grams) was found. Similarly, locker no. 03 maintained with State Bank of India, Harni Road, Vadodara Branch in the name of Smt. Sushilaben C Patel, Smt. Mitaben H Patel and Smt. Nainesha C Patel were operated; in which jewellery worth Rs.25,12,220/- (851.6 grams) was found. The total jewellery found at assessee’s residence and during operation of two bank security lockers, thus, & 1927/Ahd/2024 [Hitendrakumar Chimanlal Patel & Meetaben H. Patel vs. DCIT] A.Y. 2018-19 - 4 – was 2,668.0 grams. The AO considered 1200 grams of jewellery as explained in view of CBDT Instruction No. 1916 dated 11.05.1994 allowing benefit of jewellery to a certain extent to be treated as explained in the hands of assesses, being 500 grams in the hands of female assessees and 100 grams in the hands of male assessee.He, therefore, held that jewellery to the extent of 1211.7 grams worth Rs.35,74,515/- remained unexplained and finding the same to have belonged to both the assessees before us Shri Hitendra C Patel and his wife Smt. Meetaben H Patel jointly, he added the entire amount in the hands of both the assessees, out of which, 50% addition amounting to Rs.17,87,257/- was made on substantive basis and balance 50% of Rs.17,87,257/- was made on protective basis . The Ld. CIT(A) deleted the addition to the extent of Rs.23,12,800/-noting that M/s. Shree Jay Ambe Infra, a partnership concern of the assessee, which was also subjected to search action had opted for settlement before the Income Tax Settlement Commission (‘ITSC’) and submitted a cash flow to the ITSC wherein withdrawals made from the partnership firm were shown to the tune of Rs.23.13 lakhs and in the payment found in the cash flow it was reflected as jewellery of Shri Hitendra C Patel. The Ld. CIT(A) noted that the Settlement Commission had accepted the above cash flow statement and, therefore, held that no adverse inference on the issue of unaccounted jewellery could be drawn with respect to the cash flow submitted by Shree Jay Amber Infra. On this basis, he treated jewellery to the tune of Rs.23,12,800/-, incorporated in the cash flow statement as & 1927/Ahd/2024 [Hitendrakumar Chimanlal Patel & Meetaben H. Patel vs. DCIT] A.Y. 2018-19 - 5 – withdrawal made from partnership firm of the asessessee for buying jewellery, as duly explained and deleted the addition made by the AO to this extent. The balance addition of Rs.17,87,257/- was confirmed, 50% on substantive basis and 50% on protective basis amounting to Rs.6,31,857/-, each in the hands of both the assessees.

The argument of the Ld. Counsel for the assessee before us was that the authorities below had given no credence to the fact that when search was conducted on the assessee on 31-01-2018, there were a number of relatives present in the residential premises of the assessee for two reasons: i. The father of the assesse had expired on 19-01-2018, just about 10 days before search took place on 31-01-2018, and the relatives were present for his last rites and rituals, which was conducted on the day of search and all relatives including the assessee were allowed to attend ; & ii. The relatives were also staying at his place for attending the marriage of his niece Ms. Simouli C Patel that was to take place on 06.02.2018. Therefore, they were carrying jewellery and which the assessee had pointed out was found during search in all 800 grams.

He pointed out that except for the jewellery found at third persons and in their possession, none of the remaining jewellery was attributed to them ,which he stated in the background of the & 1927/Ahd/2024 [Hitendrakumar Chimanlal Patel & Meetaben H. Patel vs. DCIT] A.Y. 2018-19 - 6 – fact that the relatives had come to attend a marriage was highly improbable. He pointed out that the assessee had clarified in his statement recorded during search itself that the gold jewellery found at his premises of 874 Grams included jewellery of his relatives who were present in his house for attending marriage. In this regard, he drew our attention to Question No.13 asked to the assessee while recording his statement during search pointing out the fact of jewellery found at his premises of 874 grams and his reply to the same stating that there was a marriage function in his house and the jewellery belonged to his family, his sister, brother, their family, his daughter and son in law. Copy of the said statement was placed before us at paper book page nos. 115 & 116.

Ld. DR, on the other hand, stated that except for making oral statements in this regard the assessee had produced no evidence corroborating his contention that jewellery found during search included that belonging to his relatives.

Having heard the contentions of both the parties, we find merit in the contention made by the Ld. Counsel for the assessee that the authorities below had erred in not accepting that jewellery found during search at the assessee’s premises included that belonging to his relatives. It is admitted fact that when search was conducted on the assessee, there were relatives present in the premises of the assessee who had come to attend the marriage of & 1927/Ahd/2024 [Hitendrakumar Chimanlal Patel & Meetaben H. Patel vs. DCIT] A.Y. 2018-19 - 7 – assessee’s niece. There is no denying the fact that in such circumstances, they do carry some jewellery to be worn on the occasion. Therefore, completely denying the assessee any benefit on account of the same defies all logic. At the same time, we find even the assessee made no attempt to furnish any evidence by way of affidavit or applications or submissions from his relatives accepting certain jewellery found at the assessee’s premises as belonging to them. Considering the entire facts and circumstances of the case, therefore, and taking a judicious view on the issue, we direct deletion of addition confirmed by the Ld. CIT(A) to the extent of Rs.10 Lakhs. The balance addition is confirmed.

In the result, both appeals filed by the assessees are partly allowed.