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Income Tax Appellate Tribunal, DELHI BENCH: ‘A’: NEW DELHI
Before: SHRI G.D. AGRAWAL & SHRI SUDHANSHU SRIVASTAVA
against the order dated 16.3.2012 passed by the Ld. CIT (Appeals)- XXXII whereas pertaining to Asstt. Year 2006-07 and passed by the Ld. CIT (A) – XXXII is also dated 16.3.2012. Since both the appeals have a common issue and were heard together, they are being disposed of through this common order.
132 of the I.T. Act was conducted by the Investigation Wing of the department on 23.12.2005 in the Ferns 'N' Petals group of cases. The assessee is the mother of Shri Vikas Gutgutia, one of the directors of the Ferns N’ Petals group. The search included the residential premises (No. J-238, Sainik Farms, New Delhi) of the assessee. A notice u/s 153A of the I.T. Act was issued to the assessee on 13.09.2007 and in response thereto return of income was filed on 19.10.2007 declaring NIL income. During the assessment proceedings, the AO examined the statement of affairs of the assessee as on 31/03/2003 wherefrom it was seen that the assessee had credited an amount of Rs. 4,86,068/- to her capital account on account of sale of jewellery. Copy of the sale bill was also filed by the assessee. The AO noted that the assessee was not a Wealth Tax assessee and also mentioned that in view of the fact that in the A.Y. 2006-07 also the assessee had shown sale of jewellery worth Rs. 13,00,419/- , hence the assessee was under an obligation to file her return of wealth for the assessment year under consideration.
However, no wealth tax return was ever filed by the assessee. In view of the aforesaid facts, the AO concluded that the source of acquisition of jewellery sold for Rs. 4,86,068/- remained unexplained and therefore the claim of the assessee in regard to sale of jewellery worth being the amount of sale of jewellery, was treated as assessee’s income from undisclosed sources and added to her income u/s 68 of the I.T. Act 1961 . Similarly, for AY 2006-07, the assessee had shown an amount of Rs. 13,00,419/- received from sale of jewellery credited to her capital account and the AO added back the same to her income on the same reasoning as adopted by the AO in AY 2003-04. Further, the AO observed that during the course of search u/s 132, locker no. 1125 at Standard Chartered Bank, Greater Kailash – I Branch, New Delhi belonging to the assessee was searched and jewellery worth Rs. 9,47,020/- was found in the locker. Although the assessee claimed that she was the eldest female member in the family and hence was the custodian of jewellery of the entire family and that the jewellery belonged to the entire family, the AO did not accept the assessee’s contention and held that by virtue of the jewellery being found in the assessee’s locker, the same belonged to the assessee and an amount of Rs. 9,47,020/- was accordingly added back to the income of the assesesee as unexplained income.
Aggrieved, the assessee preferred appeals before the Ld. CIT (A).
It was contended by the assessee before the First Appellate Authority Families, to give jewellery at the time of marriage, birth of child, festivals & other occasions. The assessee who got married in the Year 1966-1967 received about 2500 grams jewellery from her parents, in laws & other relatives at the time of marriage, birth of their children, festivals & other occasions in the family. The assessee sold her jewellery in the old age for giving financial assistance to his son & daughter in law for investment in the business. It was further contended that the treatment of sale proceeds of jewellery as deemed income u/s 68 of the Act by the assessing officer is highly illegal as section 68 of the Act deals with unexplained credit entries in the books of accounts, whereas the assessee explained the receipts of cheques from Jewellers on sale of Jewellery with documentary evidences.
Therefore, no addition U/s 68 of the Act could be made on the instant fact of the case. Otherwise also, there was no other undisclosed source of income which has been noticed in consequence to Search U/s 132(1) on the assessee. Further, before the Ld. CIT (A), for asstt. year 2003- 04, the assessee relied on Instruction No. 1916 (F No. 286/63/93- IT(INV.II) dated 11.5.1994 for the proposition that in the case of a person not assessed to wealth-tax, gold jewellery and ornaments to the extent of 500 gms per married lady need not be seized. The Ld. by holding that 500 gms x Rs. 5025 / 10gm (rate of gold in that particular year) is explainable and accordingly out of a total addition of Rs. 4,86,068/-, Rs. 2,51,250/- (value of 500 gms) was treated as explained and addition of Rs. 2,34,818/- was upheld. For Asstt. Year 2006-07, the Ld. CIT (A) held that since the benefit of CBDT Instruction No. 1916 had already been allowed to the assessee in the appeal for asstt. Year 2003-04, no further benefit could be given in asstt. eyar 2006-07 and accordingly, the addition of Rs. 13,00,419/- was confirmed. Another point of agitation before the Ld. CIT (A) in Asstt.
Year 2006-07 was the addition of Rs. 9,47,020/- as unexplained investment in jewellery found in the locker of the assessee. The assessee relied on the statement of Shri C.K. Gutgutia, her husband, recorded during the search that the jewellery found in the locker belonged to him, his wife, his son Vikas Gutgutia, Meeta Gutgutia – daughter-in-law, grandson Udyat and granddaughter Mannat and as the assessee was the eldest female member of the family, the entire jewellery was being kept in her custody. It was also submitted that this jewellery remained after the sale of some jewellery in the past, out of the jewellery required and accumulated from time to time on various social occasions. On this issue, the Ld. CIT(A) held that as per CBDT unmarried lady and 100 gms per male member of the family is to be given and as the assessee had already been given this benefit in the appeal for Asstt. Year 2003-04, no further benefit could be given to her again. However, the Ld. CIT (A) also held that since no other jewellery was found in the case of other family member during the search, benefits of the CBDT Instruction was to be allowed for other members.
Accordingly, out of the total jewellery found in the locker weighing 1117.100 gms, the assessee was given the benefit of 1050 gms and the balance of 67.10 gms was held to be taxable on account of unexplained investment. Thus, the assessee was allowed a relief on Rs. 8,82,537/- and only an addition of Rs. 64,483/- was upheld.
Aggrieved, the assessee had now preferred appeals before the ITAT and has raised the following grounds of appeal:-
1. That the learned CIT (A) erred in upholding the addition of Rs.2,34,818/- U/S 68 of the Act on account of sale proceeds of Jewellery deposited by the appellant in her bank account inspite of the fact that all evidences in respect of sale of Jewellery were duly submitted by the appellant before the assessing Authority and before the appellate Authority. The appellant also explained the source of acquisition of the said Jewellery before both the Authorities.
ITA No. 2415/Del/2012 Asstt. year 2006-07
That the learned CIT (A) erred in upholding the addition of Rs.23,00,419/- U/S 68 of the Act on account of sale proceeds of Jewellery deposited by the appellant in her bank account inspite of the fact that all evidences in respect of sale of Jewellery were duly submitted by the appellant before the assessing Authority and before the appellate Authority. The appellant also explained the source of acquisition of the said Jewellery before both the Authorities.
That the learned CIT(A) erred in upholding the addition of Rs. 64,483/- u/s 69 of the Act as unexplained jewellery found from the locker of the appellant. 3. That the interest U/s 2348 of the Act has been wrongly charged under the facts of the case and as per law. Otherwise also the same has been charged in excess.
The Ld. AR, apart from raising the similar pleas as raised before the lower authorities also submitted that simply for the reason that no wealth tax returns were filed, the contentions of the assessee cannot be disbelieved. It was submitted that the Department has no where raised any doubt about the sale of jewellery. It was also submitted that the locker was in the joint name of Shri C.K. Gutgutia (the husband of the assessee) and hence the impugned additions should have been made in both the names. It was also submitted that since no books of accounts are maintained, the sale bill has not been been filed, the addition was not sustainable u/s 68 of the Income Tax Act, 1961. As an alternate plea, the Ld. AR also submitted that the addition should have been made in the hands of the tax-payer and not an old lady like the assessee. The Ld. AR also relied on the decision of the Hon’ble Apex Court in CIT vs Smt. P.K. Noorjahan 237 ITR 570 and on the decision by the ITAT Hyderabad Bench in Harish Kumar vs DCIT 85 ITD 366 (Hyd) for the proposition that additions u/s 68 were not tenable.
The Ld. DR, in response, defended the impugned order and submitted that the additions have been made on account of amounts credited to the capital account of the assesee and hence provisions of section 68 are fully applicable. He submitted that the impugned order deserves to be upheld on the facts of the case. It was also submitted that the decisions being relied upon buy the assessee were distinguishable on facts.
We have heard the rival submissions and perused the relevant records. It is seen that the Ld. CIT (A) has adjudicated the issue for Asstt Year 2003-04 in a detailed and logical way in Paras 2.3 and 2.3.1 reference as under :-
2.3. “ I have carefully considered the facts of the case, the arguments of the appellant ann the position of law, The appellant has shown in her capital account the impugned amount as received from sale of jewellery, However, as stated by the AO, the acquisition of the said jewellery has remained unexplained as the appellant has not filed wealth tax returns ever and has shown sale of jewellery in the instant year of 967.300 qrams and in the AY. 2006-07 of 1353.080 grams, thereby taking the total existing jewellery on the date of sale of jewellery in the instant year, i.e., 30/01/2003 to 2320.380 grams. The rate of gold as shown in the sale bill dated 30/01/2003 is Rs.5025/- per 10 grams. If the jewellery's value is calculated at that rate it comes to Rs.11 ,65,990/- which is below the exemption limit of Rs.15 lakh as applicable during the relevant period. Therefore, during the instant assessment year, the appellant was not required to file Wealth Tax Return. The appellant has submitted that she has had received this jewellery at the time of her marriage during the year 1966-67 from her parents, in-laws and other relatives as well as on other occasions like childbirth, festivals and other family occasions, which is in accordance with the prevalent social custom in Hindu family in the country. The CBDT in their instruction No. 1918 dated 11.5.1994 relating to seizure of jewellery have laid down specific guidelines. 2.3.1 In several judicial pronouncements including in the cases of Smt. Pati Devi v ITO & Another 240 ITR 727 (Kar), and CIT v Kailash Chandra Sharma 146 Taxmann 376 (Raj) it has been held that the issue regarding acquisition of jewellery has to be decided keeping in mind the benefits allowed in the afore cited CBDT Instruction No. 1916 as well as the status of the family of the assessee. In view of the above judicial pronouncements, benefit of 500 grams of jewellery is 10 2415/Del/2012 required to be given to the appellant. Accordingly, the sale value of 500 grams of jewellery is treated as explainable on the part of the appellant and the appellant will get a relief of Rs. 2,51,250/- (Value of 500 grams @ Rs. 5025/10grams) and the balance addition of Rs. 2,34,818/- is upheld as unexplained investment.”
Similary, for Asstt. Year 2006-07, the relevant findings of the Ld. CIT (A) are in paras 4.3., 4.3.1, 5 and 5.3
4.3 “I have carefully considered the facts of the case, the arguments of the appellant and the position of law. The appellant has shown in her capital account the impugned amount as received from sale of jewellery. However, as stated by the AO, the acquisition of the said jewellery has remained unexplained as the appellant has not filed wealth tax returns ever and has shown sale of jewellery in the instant year of the impugned amount of Rs. 13,00,4191- and in the next A.Y. to the tune of Rs.22,66,240/-thereby taking the total existing jewellery on the date of sale of jewellery in the instant year above the exemption limit of Rs.15 lakh under the Wealth Tax Act as applicable during the relevant period. Therefore, during the instant assessment year, the appellant was required to file Wealth Tax Return. The appellant has submitted that she has had received this jewellery at the time of her marriage during the year 1966-67 from her parents, in-laws and other relatives as well as on other occasions like childbirth, festivals and other family occasions, which is in accordance with the prevalent social custom in Hindu families in the country. The CBDT in their Instruction NO.1916 dated 11/05/1994 relating to seizure of jewellery have laid down specific guidelines.
4.3.1 In several judicial pronouncements including in the cases of Smt. Pati Devi v ITO & Another 240 ITR 727(Kar), and CIT v Kailash Chandra Sharma 146 Taxmann 376(Raj) it has been held that the issue regarding acquisition of 11 2415/Del/2012 jewellery has to be decided keeping in mind the benefits allowed in the aforecited CBDT Instruction No. 1916 as well as the status of the family of the assessee. In view of the above judicial pronouncements, benefit of 500 grams of jewellery was required to be given to the appellant, which has already been allowed in the appeal for the A.Y. 2003 - 04 in the appellant's case by the undersigned. As the appellant has claimed that the jewellery in question was old jewellery, no further benefit in accordance with the CBDT Instruction No 1916 can be given again in the instant assessment year. Since the appellant had never filed Wealth Tax return, the jewellery sold during the year has to be treated as unexplained and the amount shown against the sale of the same has tobe treated as unexplained credit in the capital account of the appellant. It is therefore held that the appellant has not been able to explain the acquisition of jewellery which was claimed to have been sold during the relevant previous year. The addition made by the AO of Rs. 13,00,419/- is, therefore, upheld. XXXXX 5.Ground No. 3 is against the action of the AO in making addition of Rs. 9,47,020/- as unexplained investment in jewellery found in the locker of the appellant. XXXXX 5.3.I have carefully considered the facts of the case, the arguments of the appellant and the position of law. From the copies of submissions made before the AO, copy of panchnama dated 25/01/2006 in respect of the search of the locker No 1125 in the name of Shri C.K.Gutgutia and Smt Beena Gutgutia and the statement of Shri C.K. Gutgutia as recorded by the authorised officer on 25/01/2006 itself, it is seen that on the date of search itself, Shri C.K.Gutgutia had stated on oath that the jewellery found in the locker was belonging to his family members consisting of himself, his wife, the appellant in this case, his son Vikas , his daughter- in- law Meeta, his grand son Udyat and grand daughter Mannat. He had also stated that the jewellery has been brought over a long period of time, received during marriage by the appellant and her daughter in Iaw was also received as gifts by his grandson. In view of the judicial pronouncements including
12 2415/Del/2012 in the cases of Smt. Pati Devi v ITO & Another 240 ITR 727(Kar), and CIT v Kallash Chandra Sharma 146 Taxmann 376(Raj) and the CBDT Instruction 1916, benefits of 500 gms per married lady, 250 gms per unmarried lady and 100 gms per- male member of the family is to be given. As this benefit has already been given in the case of the appellant while deciding her appeal for the A.Y. 2003 -04, no such benefit could be given in her case again. Since no other Jewellery was found in the case of other family members during the search, benefits as per CBDT Instruction No. 1916 is to be allowed as under: Shri C.K. Gugutia Husband of the appellant 100 grams Shri Vikas Gutgutia Son of the appellant 100 grams Smt. Meeta Gutgutia Daughter-in-law 500 grams Shri Udyat Gutgutia Grand son of the appellant 100 grams Ms. Mannat Gutgutia Grand-daughter 250 grams Total 1050 grams
The total weight of the jewellery found during the search of the locker according to the Departmental Valuer's report dated 24/01/2006 is 1117.100 grams, out of which the appellant will be given the benefit as per CBDT Instruction to the extent of 1050 grams and rest 67.1 grams will be taxable on account of unexplained investment. During the relevant previous year the appellant had sold jewellery at an average rate of Rs, 9610/10grams and calculated on the same basis, the value of unexplained investment in 67.1 grams of jewellery comes to Rs. 64,483/-. The appellant gets a relilef of Rs. 8,82,537/- on account of the benefit available in terms of Instruction No. 1916. (Relief of Rs. 8,82,537/-)”
The assesee has submitted that the addition could not have been made u/s 68 as no books of accounts are being maintained. However, a perusal of the documents on record shows that the assessee has herself submitted statement of affairs for both the years before the lower authorities and the impugned amounts are shown as credited in the capital account of the assessee. Moreover, the bank statements of account’ and we concur with the submissions of the Ld. DR that provisions of Section 68 will be attracted. Further a perusal of the impugned orders show that the issue has been given a thoughtful consideration by the First Appellate Authority and the benefit of the CBDT Instruction No. 1916 has also been duly given. It is not the sale of jewellery which is doubted but its acquisition which could not be satisfactorily proved by the assessee. The assessee has relied in the the decision of the Hon’ble Apex Court in the case of CIT vs. Smt. P.K.
Noorjahan (supra). The Hon’ble Apex Court has opined that “the intention of the Parliament in enacting section 69 was to confer a discretion on the Income Tax Officer in the matter of treating the source of investment which has not been satisfactorily explained by the assessee as the income of the assessee and the Income Tax Officer is not obliged to treat such source of investment as income in every case where the explanation offered by the assessee is found not to be satisfactory. The question whether the source of investment should be treated as income or not under section 69 has to be considered in the light of the facts of each case. In other words, a discretion has been conferred on the Income Tax officer under section 69 of the Act to treat the source of investment as income of the assessee if the said discretion has to be exercised keeping in view the facts and circumstances of the particular case.” This case, in our opinion, is of no help to the assessee because in this case the Hon’ble Apex Court has only laid down that the addition u/s 69 is not mandatory but discretionary and that if the facts of the case so warrant, the addition can be made. In the present appeals before us, on the facts of the case, we have no hesitation in holding that this discretion has been properly exercised by the AO. The assessee has also relied on the decision of the co-ordinate Hyderabad Bench of the ITAT in Harish Kumar vs. DCIT (supra). In this case, the Bench opined that provisions of section 68 and 69 are pari materia and therefore the AO has to exercise his discretion judiciously while making addition u/s 68. This case related to a disclosure by the assessee under the VDIS scheme and the genuineness of the sale of diamonds was being questioned whereas in the present appeals, it is the source of acquisition of jewellery which remains unexplained. Hence this decision also does not come to the rescue of the assessee.
Therefore, on the facts of the case and in view of the logical working of the disallowance by the Ld. CIT (A), which could not be both the appeals of the assessee.
In the result both the appeals are dismissed.
The order is pronounced in the open court on 21st July, 2016.