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Income Tax Appellate Tribunal, BANGALORE BENCH ‘ C ’
Before: SHRI VIJAY PAL RAO & SHRI JASON P BOAZ
Per Shri Vijay Pal Rao, J.M. : This appeal by the assessee is directed against the order dt.15.01.2015 of Commissioner of Income Tax (Appeals)-11, Bangalore for the Assessment Year 2012-13. 2. The assessee has raised the following grounds :
3. Ground No.1 is regarding the addition made on account of unaccounted stock declared by the assessee. The assessee is engaged in the business of gold and jewellery through his proprietary concern M/s. M.P. Jewellers. There was a search under Section 132 of the Income Tax Act, 1961 (in short 'the Act') on 12.3.2012 during which a physical verification of stock of the assessee was undertaken with the help of Registered Valuer. The Assessing Officer noted that as per the physical verification, the gold jewellery stock found at the premises of the assessee was 51,386.06 grams whereas as per the stock register seized as MPJ/6 the opening stock was shown as on 1.4.2011 at 18,782.470 grams. This stock register was written up to 10.3.2012. The Assessing Officer has given the details of the opening stock, purchases, sales as per the books of accounts / stock register as under : O.S. 18782.470 gms Add : Purchase 2522.330 gms 21304.800 gms Less : Sales 3866.545 gms 17438.255 gms Thus the Assessing Officer found that the physical stock should have been at Rs.17,438.255 grams whereas it was found at the time of search 51,386.06 grams. The Assessing Officer further noted that as per the seized material at page Nos.1 to 23 of the Annexure MPJ/6 Dt.12.3.2012, the assessee increased his stocks on two occasions on 30.6.2011 and in the month of January, 2012. In the statement recorded under Section 132(4) of the Act, the assessee explained the discrepancy and excess of gold jewellery stock as received old jewellery from customers however, was not able to give the details of the same as well as any proof to support the claim of receiving old jewellery. Finally the assessee in reply to Question No.22 offered the current value of Rs.4,85,12,988 @ Rs.2,594 per gram as undisclosed income for the F.Y. 2011-12 relevant to the assessment year under consideration. The assessee admitted unaccounted stock of 34,616.800 grams. The Assessing Officer accepted the said quantity of unaccounted stock of 34,616.800 grams however, the Assessing Officer was of the view that the value adopted by the assessee is not based on the prevalent market price. Accordingly, the Assessing Officer took the rates of gold/bullion as maintained by the Jewellery Association of Bangalore and worked out the value of the unaccounted stock at Rs.8,08,56,672 as against Rs.7,65,00,000. The assessee challenged the action of the Assessing Officer before the CIT (Appeals) but could not succeed.
4. Before us, the learned Authorised Representative has submitted that the Assessing Officer has adopted the price of pure gold whereas the stock found in the premises of the assessee was old jewellery having lot of impurity and therefore a proper and reasonable adjustment in the reduction of price of gold was required to be given which was not done by the Assessing Officer. He has further submitted that it is undisputed that old jewellery got worn-out and partly damaged or dented, it also get dirt and dust accumulated in the ornaments. He has referred to the rate of gold and silver as given in the Mehta Ready Reckoner and submitted 21% adjustment in gold rate of 22 carats ought to have been made while adopting the rates of gold by the Assessing Officer. Thus the Assessing Officer erred in valuing the excess stock of jewellery at 22 carat value without taking into consideration the impurity in the old jewellery. Therefore the assessee was correct in adopting the value @ Rs.2200 per gram for the entire excess stock. Hence the learned Authorised Representative has submitted that an appropriate deduction / adjustment has to be given in the value of the unaccounted stock and consequently no addition is called for on this account.
On the other hand, the ld. DR has submitted that there is no evidence that the jewellery found during the search was old jewellery as the assessee himself has stated in the statement that he was not having any evidence or proof or even details to show that the jewellery was received from the clients as old jewellery for exchanging with the new jewellery. Further the assessee in his statement has admitted the rate at Rs2,594 per gram and therefore the Assessing Officer adopted market rate as per the rate quoted by the Jewellery Association of Bangalore during the relevant period. He has relied upon the orders of the authorities below.
We have considered the rival submissions as well as the relevant material on record. There is no dispute as far as the quantity / weight of the unaccounted jewellery found during the course of search as the assessee admitted the same and agreed to offer to tax. The only dispute is valuation of jewellery and rate applied by the Assessing Officer for calculating the value of the unaccounted jewellery. The Assessing Officer adopted the prevailing rate at the relevant time as mentioned and quoted by the Jewellery Assoiationof Bangalore. The assessee has not disputed the prevailing rate as adopted by the Assessing Officer but the only grievance of the assessee is that since it was old jewellery therefore a lot of impurity, dirt and dust was involved in the quantity measured and therefore a proper and reasonable adjustment in the rate was to be made. In support of its contention, the learned Authorised Representative has relied upon the Mehta Ready Reckoner of bullion rates and contended that 21% deduction in respect of gold ornaments was to be given by the Assessing Officer. One principle we do agree with the contention that the old jewellery cannot be compared with the rates of the jewellery of 22 carats gold. However we note that the valuation of the jewellery was done by the valuer at the time of the search and preparing the inventory. In such exercise the registered valuer has given a substantial reduction and adjustment in the weight of the jewellery on account of impurity in the old jewellery. The valuer has taken into account net weight after giving an appropriate adjustment on account of impurity in the old jewellery. Therefore once the valuer has already granted the adjustment / reduction in the weight of the unaccounted jewellery then a further reduction in the rate of the jewellery is not warranted. Moreover, the assessee itself accepted the prevailing rate @ Rs.2,594 per gram for offering the unaccounted stock to tax. Therefore in the facts and circumstances of the case when the valuation of the jewellery was done by the registered valuer after giving due adjustment on account of impurity in the old jewellery then no further adjustment can be made for the purpose of valuation. This adjustment can be granted either in the weight or in the rate. In case the gross weight of the jewellery is taken into account for the purpose of computation of value then an appropriate adjustment has to be given in the rate on account of impurity in the old jewellery. However in the case on hand when the net weight was taken into account and not gross weight then the question of further adjustment on account of rate is not called for. Accordingly we do not find any error or illegality in the order of CIT (Appeals) qua this issue.
Ground No.2 is regarding addition on account of unexplained personal jewellery.
During the course of search, gold jewellery to the tune of 4,242.96 grams (net) and silver jewellery to the tune of 20 kgs was found at the residence of the assessee. The Assessing Officer after considering the jewellery as declared in the wealth tax returns of various members of the family finally held that out of the total jewellery of 4,242.96 grams found at the residence only 2,148.96 grams is held as explained. Hence the Assessing Officer treated the balance of 2,094.96 grams as unexplained investment and brought to tax in the hands of the assessee. The assessee challenged the action of the Assessing Officer before the CIT (Appeals) but could not succeed.
Before us, the ld. AR has submitted that the Assessing Officer has not given the benefit of CBDT Circular No.1916 Dt.11.5.1994 and treated the entire jewellery belonging to the family members of the assessee as unexplained investment. In support of his contention, he has relied upon the decision of Hon'ble jurisdictional High Court in the case of Smt. Pati Devi 240 ITR 72 as well as the decision of Hon'ble Gujarat High Court in the case of CIT Vs. Ratanlal Vyaparilal Jain 339 ITR 351. The ld. AR has also relied upon the decision of co-ordinate Bench of this Tribunal dt.6.12.2016 in the case of P. Goutam Chand Vs. DCIT in as well as decision dt.14.8.2015 in the case of M. Vimal Kumar & Another Vs. DCIT in ITA Nos.642 & 643/Bang/2015.
On the other hand, the learned Departmental Representative has submitted that the assessee has failed to explain the source of total quantum of jewellery found at the residence and therefore the assessee cannot take the shelter of CBDT Circular No.1916 Dt.11.5.1994. He has relied upon the decision of the co-ordinate Bench of this Tribunal dt.28.3.2017 in the case of M. Sunil Kumar Vs. DCIT in ITA No.1144/Bang/2016. 11. Having considered the rival submissions as well as the relevant material on record, at the outset we note that out of the total jewellery of 4,242.96 grams found at the residence of the assessee, the Assessing Officer accepted the jewellery to the extent of 2,148.96 grams which was declared by some of the family members of the assessee in Wealth Tax Returns and also shown in the books of accounts. The balance quantity
2,094.96 grams was treated as unexplained investment. The assessee claimed the credit of the quantity as per CBDT Circular No.1916 Dt.11.5.1994 as under : a) Myself 200 gms b) Son (VAnsh) 200 gms c) Daughter (Ayushi) 250 gms d) Daughter (Shraddha) 250 gms e) My Father (Sri Motilal) 200 gms f) My Wife (Smt. Rekha) 556 gms g) Prakash Bai 1,538 gms 3,194 gms (Net)
The Assessing Officer did not accept this claim of the assessee however, the Assessing Officer did not make any addition in respect of the jewellery of Smt. Rekha and Shri Prakash Bhai as the same was declared in the Wealth Tax Return as well as in the books of accounts. Now the grievance of the assessee is only in respect of other five members which includes the assessee with son, two daughters and father. Therefore the Assessing Officer has not given the benefit of the Circular (supra) in respect of five members. It is well settled proposition that the quantity of the jewellery against each male member and female member of the assessee as per the said CBDT Circular No.1916 is to be considered as explained and therefore no addition to that extent is to be made. The co-ordinate Bench of this Tribunal has taken a consistent view on this P.Goutham Chand Vs. DCIT (supra). The Tribunal in the said case cited supra, has dealt with an identical issue in paras 9 to 11 as under : 9. In the meanwhile, our reference is drawn to an identical issue considered by the earlier Bench of this Tribunal in the case of Shri M.Vimal Kumar and Sri M Sanjay Kumar v. DCIT, CC 2(1), Bangalore in & 643/Bang/2015 dated 14.8.2015. After due consideration of the rival submissions and also extensively quoting the ruling of the Hon’ble Gujarat High Court in the case of Ratanlal Vyaparilal Jain [339 ITR 351 (Guj)] on a similar issue, the earlier Bench had recorded its findings as under:
08. We are therefore of the opinion that assessee can always claim exclusion from undisclosed jewellery the quantum of jewellery mentioned in the said circular. However, the circular allows only 100 gms per male member, 250 gms for unmarried lady and 500 gms for married lady in the family. The list mentioned by the assessee claims 200 gms each for himself and his son and 250 gms for the HUF. As per the circular what could be given credit for a member is only 100 gms. No credit could be given for HUF for the simple reason that an HUF cannot wear any jewellery by itself. In our opinion, the maximum relief that could be given to the assessee in addition to what was given by the AO was 950 gms. Viz., 100 gms for assessee, 100 gms for assessee’s son, 250 gms for assessee’s daughter and 500 gms for assessee’s daughter-in-law. Contention of the ld. AR that status of the assessee had to be considered and higher relief should be given cannot be accepted for the simple reason that nothing was produced to show any special social status enjoyed by the assessee except for stating that the assessee belonged to a Marwari business family.
10. On an identical issue, the Hon’ble jurisdictional High Court in the case of Smt Pati Devi v. Income-tax Officer reported in (1999) 240 ITR 72 (Kar), had ruled as under:
“…………Learned counsel for the petition has brought to my notice instruction dated May 11, 1994 issued by the Central Board of Direct Taxes by which 500 gms of gold jewellery and ornaments per married lady, 250 gms per unmarried lady, 100 gms per male member of the family were directed not to be seized. The instruction issued could only be retrospective in the sense that even if a seizure is made to day irrespective of the date of acquisition of gold jewellery, the benefit has to be given to that extent. It is not the value which is increased but it is the weight which is considered reasonable looking to the social circumstances prevailing in the country. ………….”
In view of the facts and circumstances of the issue as deliberated upon in the fore-going paragraphs and in consonance with the (i) Instruction No.1916 of the CBDT; (ii) the findings of the earlier Bench of this Tribunal (supra); and (iii) the ruling of the Hon’ble jurisdictional High Court (supra), we are of the view that the issue should be restored on the file of the AO for fresh consideration as the details furnished by the assessee’s counsel during the course of hearing before us as well as the break-up of 2100 gms furnished by the assessee vide his letter dated 11.4.2012 [Refer: Para 5 of the asst. order], it could not be ascertainable as to whether the ladies mentioned in the list for 2100 gms are married ladies or not. Hence, the assessee should produce details and evidences on this aspect and thereafter the AO should quantify the quantum of jewellery to be accepted per lady whether 250 gms or 500 gms and then allow benefit to the assessee accordingly.”
Even in the case of M Sunil Kumar Vs. DCIT as relied upon by learned Departmental Representative, the Tribunal has not disputed this proposition of giving the benefit of the quantity as per the said circular. Accordingly, we direct the Assessing Officer to consider and allow the benefit of the CBDT Circular No.1916 Dt.11.5.1994 and accordingly recomputed the addition if any on this account.
Ground No.3 is regarding addition on account of unexplained investment in silver article.
At the time of hearing, the learned Authorised Representative of the assessee has stated at Bar that the assessee does not press Ground No.3 due to smallness of the amount involved and the same may be dismissed as not pressed. The learned Departmental Representative has raised no objection if the Ground No. 3 is dismissed as not pressed. Accordingly, Ground No.3 are dismissed being not pressed. 14. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on the 23rd day of Oct., 2017.