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Facts
The assessee challenged an order by the AO, confirmed by the DRP, which made two additions for AY 2019-20: Rs. 34,66,946/- as disallowance from the indexed cost of acquisition for Long Term Capital Gain, and Rs. 15,00,000/- as unexplained money for jewellery under section 69A of the Income Tax Act. The disallowance was due to a difference in property valuation, and the jewellery addition was for alleged unexplained source, despite the assessee claiming it was inherited/gifted/purchased over time and declared for the first time as income exceeded Rs. 50 lakhs.
Held
The tribunal held that the addition to the indexed cost of acquisition was unwarranted because the difference between the DVO's valuation and the assessee's valuer's valuation was less than 5%. Regarding the unexplained jewellery, the tribunal found the assessee's explanation valid, noting that the declared value was within the limits prescribed by CBDT Instruction No. 1916, and criticized the DRP for not providing cogent reasons to treat it as undisclosed. Consequently, both additions made by the AO were deleted.
Key Issues
1. Whether an addition to indexed cost of acquisition for LTCG is justified when the difference between departmental and assessee's property valuation is less than 5%. 2. Whether an addition for unexplained jewellery under section 69A is justified if the assessee provides a reasonable explanation for the source and the value is within CBDT prescribed limits.
Sections Cited
143(3), 144C(13), 69A, 142(1), CBDT Instruction No. 1916 dated 11-May-1994
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Income Tax Appellate Tribunal, DELHI BENCH ‘D’, NEW DELHI
Before: Dr. B. R. R. Kumar, Sh. Anubhav Sharma
ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the assessee against the order dated 24.03.2023 passed by the AO u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961. 2. Following grounds have been raised by the assessee: ”1. On the facts and in the circumstances of the case and in law, the authorities below have erred in passing the order passed under 143(3) r.w.s 144C(13) which is bad in law. The action of the authorities below is wrong, illegal, misconceived and unjustified therefore it should be quashed.
2. On the facts and in the circumstances of the case and in law, the authorities below have erred in confirming the addition on account of disallowance of Rs.34,66,946/- from the indexed cost of acquisition, claimed as a deduction by the assessee in computing Long Term Capital Gain. The action of the authorities below is wrong, illegal, misconceived and unjustified therefore it should be quashed.
Vivek Bali 3. On the facts and in the circumstances of the case and in law, the authorities below have erred in confirming the addition on account of unexplained money (jewellery) under section 69A of the Act amounting to Rs.11,83,600/- The action of the authorities below is wrong, illegal, misconceived and unjustified therefore it should be quashed.” 3. Two small issues.
Disallowance from indexed cost acquisition:
The details are as under:
Particulars As per Assessee As per AO Sale of the property 11,00,00,000 11,00,00,000 Consideration Cost of acquisition as on 2,50,26,000 2,37,87,805 01/04/2001 Cost of Improvement 2,75,800 Nil (F.Y 2003-04) Index Cost of Acquisition 7,07,81,277 6,66,05,854 (70072800+708477) (2,50,26,000*280/100 = 7,00,72,800 (2,37,87,805*280/100 = 6,66,05,854) (275800*280/109) = 7,08,477 Less: Deduction u/s 54 of 3,18,00,000 3,18,00,000 the Act Capital Gain 74,18,723 1,08,85,669
Based on the above calculation, the AO made addition of Rs.34,66,946/- under the head ‘capital gains’ being the difference between Rs.1,08,85,669-Rs.74,18,723/-.
Vivek Bali 6. It was found that the difference between value adopted by the DVO and value adopted by the assessee’s valuer is less than 5%.
S.No. Particulars Amount 1. Valuation of property as per assessee’s valuer 2,50,26,000 2. Valuation of property as per DVO 2,37,87,805 3. Difference (*) (2,50,26,000 – 2,37,87,805) 12,38,195 *The difference of valuation is Rs.12,38,195/- which is less than 5% [12,38,195/2,50,26,000*100 = 4.95%
A number of judicial authorities have held that no addition is called for in cases where the difference between the departmental valuation and the valuation of the assessee in case of property is less than 5%. In the instant case, since the difference in valuation is less than 5%, we hold that no addition is called for.
Unexplained Money:
The Assessee in Part B of ITR filed for A.Y 2019-20 has declared jewellery and bullion amounting to Rs.15,00,000/-. Assessee vide notice u/s 142(1) of Act dated 11.05.2022 has requested to provide the following details:
"The details of movable assets fumished against jewellery/bullion amounting to Rs. 15,00,000/- You are hereby required to furnish the holding of jewellery/bullion exceeding the limit if any along with reasons thereof. You are also required to explain the source of income for investment in jewellery/bullion"
Vivek Bali 9. The assessee submitted before the Assessing Officer that,
“…..we would like to submit the assesee was received jewellery from his parents, gift on his marriage and some time he buy out of his saving.”
The Assessing Officer held that the reply of assessee was considered and not found tenable as the assessee has not provided the details called for such as sale along with the source. The assesse was show caused again vide notice dated 19.05.2022 which was as under:
"You have not provided any documentary proof/sources/invoices/gift deed to acquire gold Jewelley amounting to Rs. 15,00,000/-. You are hereby show- caused as to why the same may not be treated as unexplained money.”
As the assessee has not furnished any details to establish the source of jewellery, the AO made addition of Rs.15,00,000/- on account of jewellery. The ld. DRP affirmed the action of the Assessing Officer disregarding the explanation given by the assessee before them (para 4.6.3 page 8 of DRP order).
From the record, we find that the assessee submitted before the ld. DRP, in this regard, we again wish to submit that the mother of the assessee passed away in 1965 and father passed away in 1988. Upon the demise of the parents, the jewellery was inherited by the assessee as he was the only child with no other sibling. Further, in view of the guidelines of the CBDT Instruction No. 1916 dated 11-May-1994, possession of 700 gms. (i.e. 500 gms for the assessee's mother, 100 gms for the assessee's father and 100 gms for the assessee himself) is permissible and may be treated as explained irrespective of the availability of documents.
The maximum value as per the prevailing rate (i.e. INR 31,640 per 10 gms.) in AY 2019-20 is Rs.22,14,800/-. However, the value of jewellery declared by the assessee is Rs.15,00,000/- which is below the threshold limit of Rs.22,14,800/- and is within the prescribed grammage limits of the CBDT Instruction No. 1916 dated 11-May-1994......."
Further, it was submitted that at the time of filing of return, the assessee filled up column in the ITR, in the column of statement of assets & liabilities at schedule A1. This column was filled first time by the assessee as during the year first time his total income exceeded Rs. 50 lakhs because of long term capital gain during the year. For immediately preceding two years return of income for A.Y 2018-19 & 2017-18, these columns were not required to be filled as the income was below Rs.50 Lacs. During the year, the Assessee shown jewellery in hand at Rs.15,00,000/- as on 31.03.2019 as the returned income was more than Rs.50 lacs. This jewellery in hand of assessee as on 31.03.2019 is total accumulated value of jewellery which the assessee acquired during his lifetime from his family, at the time of marriage, on various other occasions and purchase also in last 30 years or so, and considering his NRI status and his base in South Delhi and family background the estimated value accumulated at Rs.15,00,000/- is not huge amount. The ld. DR relied on the order of the ld. DRP. We find that the accumulated jewellery of Rs.15,00,000/- as shown by the assessee for the first time in return owing to the increased quantum of the returned income cannot be treated as undisclosed income as the earlier provisions do not mandate maintenance of balance sheet or declaration of the jewellery by Vivek Bali the individuals. The ld. DRP miserably failed to give any cogent, logical, convincing reasons for treating the jewellery as undisclosed inspite of the valid explanation given by the assessee. Hence, we hold that no addition is called for on account of jewellery.
In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 26/06/2024.