DCIT, NEW DELHI vs. MRS. SHALINI GUPTA, NEW DELHI

These are cross appeals. The first one is filed by the revenue and the second one filed by the assessee and are directed against the order dated 02.07.2014 of the CIT (A) – XXXIII, New Delhi relating to A. Y. 2011-12. For the sake of convenience, these were heard together and are being disposed of by this common order.

Description Residence Weight Jewellery found Rs.95,60,586/- 4514.084 grams precious metal & 129.58 (48 items) grams stones Jewellery seized Rs.62,65,670/-

“Smt. Vinod Kumari and Smt. Shalini Gupta are wealth tax assessee and they have been filing wealth tax return, entirely declaring jewellery purchased by them in their respective wealth tax return regularly. At the time of search following jewellery was found which has been valued by the Income Tax Department valuer from the room of Smt. Vinod Kumari Gupta valued at Rs.53.03 lacs and from the room of Smt. Shalini Gupta valued at Rs.95 lacs. Thus total jewellery found from them jointly at the time of search was valued for Rs.148.90 lacs. It is submitted that Wealth tax return filed for A. Y. 2010-11 by Smt. Vinod Kumari Gupta and Smt. Shalini Gupta have declared total jewellery at Rs.124.48 lacs (Rs.73.20 + 51.30 lacs). Copies of Wealth tax returns filed by them are enclosed. Thus the total difference in the jewellery found is Rs.24.07 lacs (Rs.148.90 lacs – Rs. 124.48 lacs). It is submitted that the joint family consists of other family member i.e. Shri Ajay Kumar Gupta and his children Ms. Prachi Gupta and master Amogh Gupta. As per instruction of CBDT credit for jewellery is required to be given to unmarried female 250 gms and for married and \ unmarried male member @ 1 0 0 gms of gold jewellery. Since no Wealth Tax return has been filed in the case of Sh. Ajay Kumar Gupta and their children and as per hindu custom and culture jewellery is received by the children and male member at the time of marriage, at the time of birth and at the time of other customs etc. Accordingly, in case of jewellery found during the search from these joint family members the due credit to extent of amount 450 gms of gold jewellery to be given to Shri Ajay Kumar and their children the approximate value of such jewellery is at 4 Del/2014 & 5938/Del/2014 Rs. 12 lacs. There are various court decision wherein it has been held that source of the investment of jewellery to the extent not required to be seized as per limit explained as above, may be treated as explained and no addition for undisclosed investment is called for. Further, for balance difference of amount of Rs.12 lacs (Rs.24.07 lacs - Rs.12 lacs) is to attributed for inflation/increase in the value ofjewellery from 31.03.2010 i.e. the date of Wealth Tax valuation up to the date of search i.e. 21.01.2011 having a gap of 10 months. ”

5 Del/2014 & 5938/Del/2014 6. Before the CIT (A) it was submitted that wealth tax return for A. Y. 2009-10 was filed much before the date of search declaring the jewellery at Rs.32,08,705/-. It was this very jewellery which was available in A. Y. 2010- 11 but was shown at the value prevalent as on 31.03.2010 at Rs.51,63,153.54/-. Therefore, wealth tax return for A. Y. 2010-11, even if filed after the date of search, does not cast any adverse effect as the quantity of jewellery declared prior to the search remains the same in the return filed after the date of search. Moreover, assessment for A. Y. 2010-11 has been done u/s 16 (3) of Wealth Tax Act, 1957, and there is no adverse observations as to the quantum/ value of the jewellery possessed by the assessee as on 31.03.2010. Therefore, this objection of the Assessing Officer does not mean anything adverse. As regards the observation of the Assessing Officer that the addition is in respect of those jewellery items which were not part of jewellery items declared in wealth tax returns is concerned, it was submitted that certain items of jewellery were remade according to charge in fashion and passage of time. However, the gross weight is almost matching. Therefore, a holistic view should be taken. It was submitted that this position has been accepted by CIT (A) in the ease of Smt Sunita Gupta and Smt Rita kumari.

3.4 I have considered the assessment order, written submission and arguments of Ld. AR. Ld. AR has argued that the Ld. Assessing Officer has made general remarks that search & seizure action was carried out against D. S. Group of cases. There is no search against the appellant. Therefore, section 153 A has been wrongly invoked. I have considered these arguments. These arguments are not applicable to the facts of the case. In the present case, there is a search & seizure action u/s 132 at the residence at 43/1, Rajpur Road, Delhi of the appellant who is a member of D. S. Group & Jewellery was found & seized as mentioned in para 3 of the assessment order in appellant’s hand. Therefore, it is proved beyond doubt that there was a search action u/s 132 against the appellant. Further, date of search is 21.01.2011. Therefore, the present assessment year 2011-12 is the search assessment year. Hence the assessment has been made u/s. 143 (3) & not u/s 153 A of I. T. Act, 1961. Hence this argument is not based on facts of the case.

On merits I have carefully considered the assessment order, written submission and oral arguments of Ld. AR. It is fact that the appellant and her mother in-law Smt. Vinod Kumari Gupta are wealth tax assessee. I do not agree with the arguments of ld. AR that the assessing officer has not considered the claim of the appellant for declaration of jewellery item in wealth tax return, as Ld. assessing officer has made addition only for the items of jewellery which are not tallied in the valuation report filed before the authorized officer & the During the appellate proceedings Ld. AR argued that the appellant has explained the source of total jewellery found and valued at Rs.148.90 lacs. Total jewellery declared in wealth tax return in the appellant's hand and her mother in-law Smt. Vinod Kumari Gupta as per wealth tax return for A.Y. 10-1 1 was Rs. 124.48 lacs. The appellant has claimed that jewellery as per CBDT’s instruction no.1916 for non seizure of jewellery has been held as explained to the extent of 100 g.m. in male member & 250 grams for unmarried woman for non wealth tax assessee. In this family, there are two male members Sh. Ajay Kumar Gupta & his son Amogh Gupta & one unmarried woman his daughter Ms. Prachi Gupta. Therefore, the appellant contended that total jewellery for these three individual who are non wealth tax assessee should be treated as 450gm explained valued at approximately Rs.12 lacs. For the balance Rs.12 lacs worth jewellery, the appellant explained enhancement of cost of jewellery declared in wealth tax from valuation date relevant to A.Y. 10-11 in case of wealth tax prayers in the family which is approximately 10% of valuation of jewellery as on valuation date for A.Y. 10-11.

I have considered this explanation of the appellant which is reproduced in the assessment order itself. Ld assessing officer has not adversely commented on this argument. He made addition on the basis of statement u/s 132(4), where the appellant could not tally certain jewellery items in the valuation report.

Considering the entire facts & circumstance of the ease, I agree that value & total quantity of the jewellery has reasonably been explained. However, particular items of jewellery seized and addition made is not tallying with the valuation report. Therefore, these

Under similar facts 1 have decided the appeals in D.S. Group in the ease of Mrs. Rita Kumari in IT A No. 117/13-14/1268 for A.Y'. 2011-12 where 1 have held that the jewellery has been remanufactured or alteration has been done by the assessee. That is why the items are not tallying with the valuation report. I have sustained 10% of value of such jewellery as unexplained investment on account of alteration /remanufacturing. In present ease also, I hereby sustain 10% of jewellery addition amounting to Rs. 6,26,567/- & balance addition is deleted. Accordingly this ground of appeal is partly allowed.”

9. Aggrieved with such part relief by Ld. CIT(A) the revenue as well as the assessee are in appeal before the Tribunal by raising the following grounds :-

(Assessee)

1. That on the facts and circumstances of the case, the Ld. CIT (A) has erred in holding 10% value of jewellery i.e. Rs.6,26,567/- as unexplained jewellery in view of the explanation given and documentary evidence submitted. Therefore, the same is liable to be deleted.

2. The appellant craves leave for addition, modification, alteration, amendment of any of the ground of appeal.

1. On the facts and in the circumstances of the case, the CIT (A) has erred in restricting the addition of Rs. 62,65,670/- made by the AO on account of unexplained investment to Rs. 6,26,567/- and directing the AO to delete 90% of the investment made by the assessee when it was clearly established that the assessee could not substantiate the source of investment.

2. On the facts and in the circumstances of the case, the CIT (A) has erred in not appreciating the evidence gathered during the course of search and seizure operation which very clearly pointed out that investment in jewellery was from 9 Del/2014 & 5938/Del/2014 undisclosed source. 3. The order of the CIT (A) is erroneous and is not tenable on facts and in law. 4. The appellant craves leave to add, alter or amend any/ all of the grounds of appeal before or during the course of the hearing of the appeal.

10. The Ld. DR heavily relied on the order of the Assessing Officer. He submitted that the assessee could not explain the source of acquisition of the jewellery found during the course of search which were not tallying with the items of jewellery mentioned in the wealth tax return. Therefore, the Ld. CIT (A) was not justified in giving substantial relief to the assessee. So far as the reliance on CBDT instruction no.1916 is concerned, he submitted that the same is for non seizure of jewellery and not for explaining the source of such jewellery. The Ld. DR further relied on the following decisions :

10 Del/2014 & 5938/Del/2014 11. The Ld. Counsel for the assessee on the other hand supported the order of the CIT (A) to the extent, he has granted the relief. Referring to the decision of the coordinate Bench of the Tribunal in the case of Smt. Sunita Gupta Vs. DCIT vide ITA No. 5295/Del /2013 and 5370/Del/2013 order dated 17.03.2016 for A. Y. 2011-12, he submitted that under identical circumstances the Tribunal has deleted the entire addition. Referring to the decision of the coordinate bench of the Tribunal in the case of Rita Kumari Vs. DCIT and vice versa vide ITA No. 5296/Del/2013 and 5369/Del/2013 order dated 12.02.2016, he submitted that the Tribunal has deleted the entire addition by dismissing the appeal filed by the revenue and allowing the appeal filed by the assessee. He submitted that both the above assessees belong to the same group. Therefore, following the decisions of the Tribunal the entire addition made by the Assessing Officer should be deleted and the appeal filed by the revenue should be dismissed. He also filed the jewellery reconcilement statement.

11 Del/2014 & 5938/Del/2014 mentioned in the Departmental valuer’s report which were prepared after the search for which jewellery valued at Rs.62,65,670/- was seized. We find Ld. CIT (A) sustained a part of the addition, the reasons of which are already reproduced in the preceding paragraphs. We find identical issue had come up in the case of other related persons of the assessee before the Tribunal. We find the Tribunal while deciding an identical issue in the case of Smt. Sunita Gupta (supra) has deleted the entire addition made by the Assessing Officer and thereby dismissed the appeal filed by the revenue and allowed appeal by the assessee by observing as under :-

9. Now the assessee is in appeal against the sustenance of addition while the grievance of the department relates to the relief allowed to the assessee. The ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the assessee and her husband were regularly filing their wealth tax returns wherein the jewellery was duly disclosed and the jewellery was got valued once in every 5 years, the said valuation as shown in the wealth tax returns by adding the estimated appreciation in the value of the jewellery. It was submitted that value of the jewellery declared in the wealth tax return was as under :- Sh. Rajiv Kumar Rs. 1,71,23,672.00 Smt. Sunita Gupta Rs. 5,33,58.446.00 Total Rs. 7,04,82,118.00 It was stated that the jewellery found during the course of search and seizure proceedings was worth Rs.6,05,33,471/-, therefore, the value declared by the assessee was more in the wealth tax return than found at the time of search. It was further submitted that for the year under consideration the assessee has shown the jewellery acquired for Rs.53,28,760/-, therefore, the addition sustained by the Id. CIT(A) to the extent of Rs.33,49,840/- was not justified.

10. In his rival submissions the Id. DR reiterated the observations made by the AO in the assessment order dated 21.03.2013 and further submitted that the jewellery found during the course of search did not match with the jewellery declared in the wealth tax return. Therefore, the Id. CIT(A) was not justified in allowing the relief to the assessee. It was further submitted that the assessee failed to offer any satisfactory explanation with regard to the acquisition of jewellery items not matching in description with the items d i sc lo se d i n the w e a lth t a x re turn. The re fo re , the add i t io n w a s r i g ht ly m ade b y th e AO and the I d. C I T(A) w a s no t ju s t ifie d in a llo w i ng th e re lie f to the a s se s se e .

only on this basis that the jewellery found during the course of search and declared in the wealth tax return was not matching, was not justified, particularly when the assessee explained during the course of search itself in her statement recorded u/s 132(4) of the Act as under:

Description of the items as per your seizure and also their weight could not tally pie to pie (gram to gram) because of make/remake of the concerned items. However, the concerned items and value thereof are reflected in our wealth tax return filed and on record.

12. The aforesaid explanation of the assessee appears to be plausible because in the society to which the assessee belongs the jewellery got remade with the passage of time/ and in accordance with the change in fashion/occasion. In the present case, it is undisputed fact that the AO nowhere stated that the jewellery found during the course of search was more than what was declared by the assessee in the regular wealth tax return furnished much earlier to the search. As regards to the addition sustained by the Id. CIT(A) by presuming that the assessee might have incurred certain expenses for making the jewellery is concerned, it is noticed that nothing is brought on record to substantiate that all the jewellery was got remade during the year under consideration. In this regard, the explanation of the assessee was that the source of remaking in the earlier years was from household withdrawals. In our opinion, the Id. CIT(A) sustained the addition only on the basis of presumption which is not tenable particularly when no evidence was brought on record to disprove this contention of the assessee that the remaking charges were incurred out of household withdrawals made from time to time in earlier

years. We, therefore, do not see any justification on the part of the Id. CIT(A) in sustaining the addition which was made on the basis of surmises and conjecture. Accordingly, the addition sustained by the Id. CIT(A) is deleted. We, therefore, do not see any merit in the appeal of the department and the appeal of the assessee is allowed.

8. We have perused the submissions and the wealth-tax returns filed by the assessee in the paper book placed before us. The addition in dispute has been made on account of variation in description of jewellery disclosed in the reports filed with the Revenue authorities 8.1 It is observed that the Id. AO has made the addition without considering the latest report. In our view, the assessee is entitled to the benefit of weight of jewellery disclosed in the return, as it is a well known fact that Indian ladies keep changing the design of jewellery from time to time. Simply because the assessee could not lead any evidence for conversion or remaking of the jewellery, the possession of which was otherwise accepted, it could not be said that holding of the jewellery to that extent could not be accepted. 8.2. It is further submitted that the assessee her husband and their daughter-in-law have been possessing jewellary in the preceding and subsequent years and have been always assessed to wealth tax. The fact remains that the jewellary found was much less than the jewellaiy disclosed in the wealth taoca-eturns accepted by the Department and hence no addition can be made in the hands of the assessee. In the present case, the Id. CIT(A) sustained the addition on account of making charges of the jewellary without bringing any cogent material on record. The Id. CIT(A) presumed that all the jewellary was remade and sustained the addition to the extent of 10% of the value of jewellary without any basis which in our opinion is not sustainable. Even otherwise, addition made on the basis of suspicion alone is not sustainable. Suspicion however strong it may be, cannot take place of evidence This ground of appeal, therefore, stands allowed. Ground Nos.4 to 7 are on the validity of the jurisdiction of the search action which has been conducted by the Id. AO without proper requisite approval. As these grounds have not been argued before us, we are not inclined to adjudicate the same.

16 Del/2014 & 5938/Del/2014 14. Since the facts of the present case are identical to the facts of the cases decided by the Tribunal in the case of other related persons, therefore, following the decisions of the co-ordinate Benches of the Tribunal the addition made by the Assessing Officer amounting to Rs.62,65,670/- u/s 69 Act of the IT Act is unsustainable. We, therefore, dismiss the grounds raised by the revenue and allow the appeal filed by the assessee.

Pronounced in the open court on 28.06.2018.