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Income Tax Appellate Tribunal, “C”
Before: HON’BLE SH. SANDEEP GOSAIN, JM & HON’BLE SH. N. K. PRADHAN, AM
Shri Prithviraj Kothari, DCIT Cen Cir -8(3) 27/2, 109, Shaikh Memon (Erstwhile DCIT CC-46) बिधम/ R. No. 659, 6th floor, Street, Shashi Galli, Zaveri Vs. Bazar, Mumbai-400 005 Aayakar Bhavan, Mumbai-400 020 स्थायीलेखासं./जीआइआरसं./ PAN No. AAGPK2833F (अपीलाथी/Appellant) (प्रत्यथी / Respondent) : अपीलाथीकीओरसे/ Appellant : Shri Abi Rama Karthkiyen, DR by प्रत्यथीकीओरसे/Respondentby : Shri Chetan A. Karia, AR सुनवाईकीतारीख/ : 14.02.2019 Date of Hearing घोषणाकीतारीख / : 09.04.2019 Date of Pronouncement आदेश / O R D E R
Per Sandeep Gosain, Judicial Member:
The present Appeal has been filed by the revenue against the order of Commissioner of Income Tax (Appeals)-50, Mumbai, dated 25.10.17 for AY 2014-15 on the grounds mentioned herein below:-
Shri Prithviraj Kothari, 1. Whether on the facts and in the circumstances of the case and in law, the Id. CIT[A) has erred in deleting the addition of Rs. 44,40,906/- u/s. 69A on account of unexplained jewellery by not appreciating the preponderant improbability brought out by the Assessing Officer."
2. "Whether on the facts and in the circumstances of the case and in law, the Id. C1T(A) has erred in deleting the addition u/s. 69A of Rs. 54,000/- on account of unexplained money and ignored the fact that the assessee has accepted in his statement under oath u/s 132(4) that there was no evidence present at the time of search action."
The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored.
The appellant craves leave to amend or alter any ground and/or add new grounds which may be necessary.
As per the facts of the present case, the return of income was e-filed on 29.11.2014 declaring total income at Rs.67,48,200/-. Subsequently, the case was selected for scrutiny
Shri Prithviraj Kothari, and after serving statutory notice, assessment order u/s. 143(3)dated 30.03.2016 was passed by the AO determining the total income of the assessee at Rs. 1,36,72,240/- after making various additions.
Aggrieved by the order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of both the parties partly allowed the appeal of the assessee.
Aggrieved by the order of Ld. CIT(A), revenue has filed the present appeal before us on the grounds mentioned herein above.
Ground No. 1 5. This ground raised by the revenue relates to challenging the order of Ld. CIT(A) in deleting the addition of Rs. 44,40,906/- u/s. 69A on account of unexplained jewellery by not appreciating the preponderant improbability brought out by the AO.
Shri Prithviraj Kothari, 6. Ld. DR while relying upon the order of AO submitted before us that cut and polished diamonds were purchased on credit from M/s Raj International Ltd and were given for re- making of jewellery to Bani Kumar Mondal. In this regard, Ld. DR submitted that assessee’s statement on oath was recorded u/s 132(4) of the Act and in which, it was confronted that as to whether in the last 10 years, jewellery of such high value was purchased by the assessee, but the assessee answered in negative. Therefore, because of non-explanation of jewellery items re- made clearly exhibit the fact that the whole purchase of cut and polished diamonds from jewelers and converting them into diamond jewellery by the assessee just before the date of search is an after thought to explain the source of acquisition of jewellery. Therefore, according to Ld. DR, the AO had rightly made additions by relying upon the decision of Sumati Dayal (2014) ITR 801 (SC). Thus, it was prayed that the additions made by AO be upheld.
On the contrary, Ld. AR reiterated the same arguments as were raised by him before Ld. CIT(A) and submitted that Shri Prithviraj Kothari, complete reconciliation of jwellery was submitted by the assessee before AO which comprises one to one matched either with the invoice of the supplier namely M/s Raj International Ltd or with the valuation report of the assessee’s family members considered in their wealth tax return. In this respect, Ld. AR drawn our attention to the documents attached in the paper book. Ld. AR also relied upon the written submission contained in para no. 5.2.1 of the order of Ld. CIT(A).
We have heard the counsels for both the parties at length and we have also perused the material placed on record, judgment cited by the parties as well as the orders passed by revenue authorities. Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A). The Ld. CIT(A) has dealt with the above grounds raised by the revenue in para no. 5 of its order. The operative portion of the order of Ld. CIT(A) is contained in para no. 5.3 of its order and the same is reproduced below:-
Shri Prithviraj Kothari, 5.3 I have considered the facts of the case and the submissions made by the A.R. of the assessee and have also perused the assessment order. The A.R. of the assessee vehemently submits that, in the course of search conducted on the RSBL group wherein the assessee and his family members were also covered under the search, certain jewellery was found and explanations were sought. In this regard, during the course of assessment proceedings, the Assessing Officer issued a show cause in relation to the explanation of the jewellery items including gold watch found in the course of search and an explanation along with the supporting evidence regarding the source of investment for the purchase of diamond from M/s Raj International Ltd, Surat for an amount of Rs. 25,75,800/-. The appellant submitted the reply but not found satisfactory by the Assessing Officer and accordingly, the addition of the said diamond jewellery of Rs. 44,40,906/- and gold watch of Rs. 8,00,000/- was made.
It is seen that the appellant has reiterated the same submission before me as well. I have perused the material on record and find that a sum of Rs. 42,42,300/- is made on account of acquisition of diamond jewellery for remaking of jewellery for which the appellant has furnished
Shri Prithviraj Kothari, reconciliation along with evidences of invoices and remaking bills thereof. Whereas, remaining sum of Rs. 1,98.606/- is reconciled through the valuation report of the assessee and the government appointed valuers. Also, it is found that a sum of Rs. 8,00,000-of family withdrawals over the period of years from AY 2008-09 to AY 2014-15. It is no denying of the fact that the appellant hails from a high-profile family background and lives in a joint Marwari family and even have substantial withdrawals of Rs. 1.51 crores since A.Y. 2008-09 to 2014-15 and accordingly, I deem it fit to give the benefit to the appellant to the extent of 50% of such gold watch. Accordingly, the addition of Rs. 4,00,000/- is sustained out of the total addition of Rs 8,00,000/- . In relation to the balance diamond jewellery of Rs.44,40,906/-, it is noticed that the appellant had duly adduced all the evidences in the form of valuation report of the assessee and Mrs. Kalawati Kothari (wife of the assessee) and the purchase bills of diamonds, remaking bills for conversion of diamonds into jewellery and payment details in support of its acquisition at the time of post search proceedings and even in the assessment proceedings. In order to disbelieve the Shri Prithviraj Kothari, submission of the appellant, the Assessing Officer has not brought any cogent material to point out any discrepancies therein but has guessed as to why the purchases were made on credit just prior to search and paid after the date of search. Such a guess work or presumption without any corroborative evidence is not permissible in law. I find merit in the contention of the appellant that the Assessing Officer cannot invoke provisions of section 69A just on the basis of presumptions and conjectures. Even the decision of Hon’ble Supreme Court in the case of Smt. Sumati Dayal relied upon by the Assessing Officer was on a completely different footing and therefore not applicable in the present case. Accordingly, the diamond jewellery of Rs. 44,40,906/- stands explained.
In light of the above discussion, I direct the AO to delete the addition to the tune of Rs. 44,40,906/. Accordingly, ground no.2 of appeal is therefore allowed and ground, no.3 relating to watch is partly allowed.
In the result, ground no.2 is allowed and ground no.3 is partly allowed.
Shri Prithviraj Kothari, 9. After having gone through the facts of the present case and hearing the parties at length, we find that as far as diamond jewellery of Rs.44,40,906/- is concerned, the assessee had adduced all the relevant evidences before the AO in the form of valuation report of the assessee and Mrs. Kalawati Kothari (wife of the assessee) and the purchase bills of diamonds, remaking bills for conversion of diamonds into jewellery and payment details in support of its acquisition at the time of post search proceedings and even in the assessment proceedings. Whereas the AO has not brought any cogent or convincing material to point out any discrepancies therein. However, it was mere presumption on the part of AO to the effect that as to why the purchases were made on credit just prior to search and paid after the date of search. According to us, the presumption howsoever strong may be cannot take place of proof. Thus, according to the facts of the present case, the assessee has not led any corroborative evidence in order to point out any discrepancies in the documents filed by the assessee. We are also of the view that Section 69A cannot be invoked, just on the basis of presumptions, conjectures and surmises. The decision of Hon’ble
Shri Prithviraj Kothari, Supreme Court in the case of Smt. Sumati Dayal is completely on a different footing, therefore not applicable in the present case.
Even no new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld CIT (A). Therefore, there are no reasons for us to interfere into or deviate from the findings recorded by the Ld. CIT (A). Hence, we are of the considered view that the findings so recorded by the Ld. CIT (A) are judicious and are well reasoned. Resultantly, this ground raised by the revenue stands dismissed.
Ground No. 2 11. This ground raised by the revenue relates to challenging the order of Ld. CIT(A) in deleting the addition u/s. 69A of Rs. 54,000/- on account of unexplained money and ignored the fact that the assessee has accepted in his statement under oath u/s 132(4) that there was no evidence present at the time of search action.
Ld. DR while relying upon the order of AO submitted before us that since noting in the diaries found pertain to cash loan transaction entered by Rakesh Kothari, the assessee, therefore the AO was rightly of the view that since the said Rakesh Kothari had accepted before the Settlement Commission that the notings in the diaries pertains to unaccounted loan transactions. Simply because the income was offered by Rakesh Kothari cannot be accepted as AO had rightly held that the application of Rakesh Kothari has only been allowed u/s 245D (2C), but final orders have not been passed u/s 245D(4) of the Act. Hence, it was prayed that the order of AO be upheld.
On the contrary, Ld. AR reiterated the same arguments as were raised by him before Ld. CIT(A) and submitted that the material found during the search belong to Rakesh Kothari and the same was in his own handwriting and thus, no presumption u/s 132(4A) of the Act can be borrowed against the assessee. It was also submitted that assessee was not aware of the privy to reason and purpose for which Rakesh Kothari had written the Shri Prithviraj Kothari, word ‘PK’ in his diaries. It was also submitted that AO had presumed the figures to have been mentioned in lakhs and such a wild presumption is not sustainable in law and is against the principle of law. It was also submitted that Hon’ble Settlement Commission had called for an inquiry report u/s 245D(3) of the Act from the AO, wherein the said Rakesh Kothari had clarified that no loan was given to the family members rather the said amount was given by Rakesh Kothari to his family member for safe custody. In this respect, an affidavit was also filed before the AO affirming the above facts. Ld. AR also relied upon the written submissions and judgments filed by him and contained in para no. 6.2 of its order.
We have heard the counsels for both the parties at length and we have also perused the material placed on record, judgment cited by the parties as well as the orders passed by revenue authorities. Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A). The Ld. CIT(A) has dealt with the above grounds raised by the revenue in para no. 6
Shri Prithviraj Kothari, of its order. The operative portion of the order of Ld. CIT(A) is contained in para no. 6.3 of its order and the same is reproduced below:-
6.3 I have considered the facts of the case and the submissions made by the A.R. of the appellant and have also perused the assessment order. The A.R. submits that, in the course of search conducted on the RSBL group wherein the assessee and his family members -were also covered under the search, certain diaries belonging to Shri Rakesh Kothari and written by him were found from his clandestine premise which revealed noting of transactions done with 'PK'. In the course of assessment proceedings, the Assessing Officer issued a show cause to the assesse.In regard to which he replied that these noting does not belong to him and he also do not have any privy to reason as to what was written therein by Shri Rakesh Kothari. The Assessing Officer did not accept the submission made by the assessee and made the addition of Rs. 54.000/- u/s. 69A in the hands of the assessee.
Before me, the appellant submits that he is not aware as to what was written in the diaries maintained by Shri Rakesh Kothari. The A.R. of the appellant drew my attention to the Affidavit filed by Shri Rakesh
Shri Prithviraj Kothari, Kothari that the noting made in his diaries were his personal dealings and none of the family members was involved in his transactions. Further, Shri Rakesh Kothari has already considered all these alleged transactions in his Application filed before the Hon'ble Settlement Commission u/s. 245C(1) of the Act.
On perusal of the order, it is also observed that at the time of passing the assessment order, the application made by Shri Rakesh Kothari u/s. 245C(1) of the Act was allowed to be proceeded with by virtue of the Order u/s. 245D(4) of the Act and had not attained finality.
The A.R. of the appellant submits that post assessment proceedings, in the case of Shri Rakesh Kothari, investigation was awarded to the department by virtue of the Order passed u/s. 245D(3) of the Act. During the course of the said proceedings, Shri Rakesh Kothari again affirmed that the noting made in his diary are Strictly not loan to/from family members but his personal dealings and was just written for the sake of his remembrance.
I have perused the Report u/s. 245D(3) of the Act forwarded to the Hon'ble Settlement Commission and the Order passed u/s. 245D(4) of the Act in the case of Shri Rakesh Kothari, which was produced by the A/R
Shri Prithviraj Kothari, during appeal. It is seen that these unaccounted transactions have already been owned up by him and considered in the additions/offer made in his hands. I therefore find merit in the contention of the appellant that the income on such undisclosed transactions are already brought to tax by the department. Further, even the decisions of the Hon'ble Supreme Court in the case of Common Cause relied upon by the appellant is squarely applicable to the present facts and therefore mere noting in diaries of a third person cannot be taken as admissible evidence u/s. 34 of the Indian Evidence Act.
In view of the above, in absence of any other corroborative and cogent evidence brought on record against the appellant, I hold that the addition of Rs.54,000/- made u/s. 69A of the Act deserves to be deleted.
In the result, ground no.4 is allowed.
After having gone through the facts of the present case and hearing the parties at length, we find that in the course of assessment proceedings, the Assessing Officer issued a show cause to the assessee, in this regard, assessee replied that these noting does not belong to him and he also do not have any privy
Shri Prithviraj Kothari, to reason as to what was written therein by Shri Rakesh Kothari. We have considered the entire facts, documents and affidavit filed by Rakesh Kothari that the noting made in his diaries were his personal dealings and none of the family members was involved in his transactions. Further, Shri Rakesh Kothari has already considered all these alleged transactions in his Application filed before the Hon'ble Settlement Commission u/s. 245C(1) of the Act. We have also perused the report and the orders passed by the Settlement Commission, wherein the unaccounted transactions have already been owned up by the him and considered in the additions/offer made in his hands. Therefore in this way, the undisclosed transactions have already been brought to tax by the department. The decision of the Hon'ble Supreme Court in the case of Common Cause relied upon by the assessee is squarely applicable to the present facts and therefore we are also of the view that mere noting in diaries of a third person cannot be taken as admissible evidence u/s. 34 of the Indian Evidence Act.
Shri Prithviraj Kothari, 16. Moreover, no new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld CIT (A). Therefore, there are no reasons for us to interfere into or deviate from the findings recorded by the Ld. CIT (A). Hence, we are of the considered view that the findings so recorded by the Ld. CIT (A) are judicious and are well reasoned. Resultantly, this ground raised by the revenue stands dismissed.