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Income Tax Appellate Tribunal, DELHI BENCH: ‘G’: NEW DELHI
Before: SH. I.C. SUDHIR & SH. O.P. KANT
GIR/PAN : AEJPB3096E (Appellant) (Respondent) Assessee by Sh. Rajesh Arora, CA Department by Sh. B.K. Singh, CIT (DR) Date of hearing 07.04.2016 Date of pronouncement 30.05.2016 ORDER PER O.P. KANT, A.M.: These cross appeals of the Revenue and assessee are directed against order dated 28/08/2012 of the Commissioner of Income-tax(Appeals)-III, New Delhi, for assessment year 2007-08. As in both the appeals, the issue involved is same, both are heard together and disposed of by this consolidated order.
In this appeal of the Revenue, following grounds of appeal have been raised:
1. On the facts and in the circumstances of the case, the Commissioner of Income Tax(Appeals) has erred in deleting the addition of Rs. 1,33,943/-, made by the A.O. on account of difference in valuation of jewellery.
2. On the facts and in the circumstances of the case, the Commissioner of Income Tax(Appeals) has erred in deleting the addition of Rs. 16,19,330/-, made by the A.O. u/s 69B of the I.T. Act, 1961.
3. The order of the Commissioner of Income Tax(Appeals) 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.
At the outset, the ld. Authorized Representative of the assessee submitted that the tax effect involved in the appeal does not exceed the monetary limit of Rs. 10 Lacs specified in circular No. 21/2015 dated 10th December, 2015. The learned DR also could not controvert the fact of tax effect below Rs. 10 lakh.
We are of the opinion that the circular of the CBDT results in Revenue’s appeal being non-maintainable. Further, the instruction has been applied retrospectively to all pending appeals. From the grounds of the appeal, we find that the tax effect on the issue in dispute is below the monetary limit of Rs. 10 lakhs, therefore, we dismiss the appeal filed the Revenue on the ground that the tax effect involved in the present appeal is not exceeding the monetary limit specified in the CBDT circular No. 21/2015. In case, if there is a mistake in the calculation of the tax effect or the case is covered by any of the exceptions specified in the circular, the Revenue will be at liberty to file the Miscellaneous Application under section 254(2) of the Income-tax Act, 1961, pointing out the mistake and if the bench is convinced of the mistake, the order may be recalled for fresh disposal on merits. 5. In the result, the appeal of the Revenue is dismissed.
The sole ground of appeal raised by the assessee is as under: 1. The assessee is an individual assessed to tax vide PAN AEJBP3096E. The 3 & 5408/Del/2012 AY: 2007-08 assessee filed her return of income on 31.10.2007 declaring total income amounting to Rs. 97,51,950/- 2. The learned AO called for the details of the jewellery to substantiate the holding thereof. The Assessee submitted explanation to the learned AO but however the learned AO did not agree with the Assessee completely and made an addition of Rs. 41,21,674/- on the ground that the valuation of jewellery held by the Assessee and declared in the Wealth Tax Return allegedly mismatched. The learned AO rejected the explanation of the Assessee and made the above addition.
3. On appeal, the learned CIT(A) granted partial relief to the Assessee accepting the explanation in part, granting relief of Rs. 16,19,330/-. Hence the balance addition of Rs. 25,02,344/- was upheld.
4. The Assessee still aggrieved by the order has preferred an appeal before the Hon'ble ITAT on the grounds stated herein after 7. The facts in brief are that the assessee filed return declaring income of Rs. 97,51,951/- on 31/10/2007. The case of the assessee was selected for scrutiny. During the scrutiny, the Assessing Officer observed that the assessee declared additional income of Rs. 86 lacs under section 132(4) of the Income-tax Act, 1961 (for short “the Act”), out of which Rs. 75 lakhs was related to the year under consideration in respect of three sets of diamond necklaces valued at Rs. 76,33,943/- by the valuer. The Assessing Officer further observed that as per the valuation reports of the Departmental Valuers, a jewellery of Rs. 10,68,305/- was found from the residence containing items from 1 to 59 and jewellary of Rs. 43,98,137/- containing items no. 1 t 20 was found from lockers of the assessee. The assessee filed evidence of wealth tax returns filed for assessment year 1999-2000 alongwith valuation report dated 24/12/1999, having jewellery declared therein of Rs. 23,93,879/-. The assessee submitted another revolution report dated 27/07/2005 and in which the same items of jewellery were valued at Rs. 31,33,150/-. The total net weight of gold jewellery declared in the valuation report was approximately 430 gm., however, considering the size of the family of the assessee, gold jewellery of net weight 947.34 gm. valued at Rs. 9,03,683/- was treated as explained by the Assessing Officer. However, in respect of the diamond jewellery, the number of items found during the course of search could 4 & 5408/Del/2012 AY: 2007-08 not be matched with the valuation report dated 24/12/1999. The assessee explained that on account of modification/alteration in the jewellery over a period it was not possible to verify each item. The Assessing Officer did not accept the contention on the ground that neither bills of modification/alteration were produced before him, nor any drawing was specifically made for alteration of the jewellery during the period from 01/04/2000 to 31/03/2007. The Assessing Officer also observed that there was no change in the items in the valuation report dated 24/12/1999 and the valuation report dated 27/07/2005 submitted by the assessee, which indicated that no modification/alteration were carried out in the jewellery. Accordingly, the Assessing Officer rejected the explanation the assessee and held the items of diamond jewellery found during the course of search and not tallied with the valuation report dated 24/12/1999 as acquired from unexplained sources amounting to Rs. 41,21,674/-. Aggrieved, the assessee filed appeal before the learned Commissioner of Income-tax (Appeals), who allowed part relief of Rs. 16,19,330/- for the diamond jewellery declared in the net wealth of M/s. Punit Beriwala, HUF, and confirmed the balance addition of Rs. 25,02,344/-. Aggrieved with the findings of the learned Commissioner of Income-tax(Appeals), the assessee in appeal before us.
In the sole ground of appeal
the assessee has challenged the confirming of the addition of Rs. 25,02,344/- on account of unexplained diamond jewellery.
9. Before us, the learned Authorized Representative of the assessee addressing the facts of the case submitted that the spouse of the assessee, Sh. Punit Beriwala, had already declared a sum of Rs. 5 lacs on account of conversion of jewellery in his hands, but the same was not considered by the Assessing Officer to support the modification/alteration charges incurred by the assessee, whereas the sum of Rs. 5 lakh declared was accepted by the AO as undisclosed income of the spouse. In support of the contention, the ld. AR placed reliance on the judgment of the Hon’ble Supreme Court in the case of Mehta Parikh and Company Vs. Commissioner of Income Tax, (1956) 30 ITR 5 & 5408/Del/2012 AY: 2007-08 181, which has laid down the principle that the Revenue can either discard or accept the explanation offered by the assessee but there was no scope for apportionment. Further, the ld. AR submitted that item-wise reconciliation does not hold good when sufficient funds were declared for conversion of the jewellery. The ld AR relied on the decision of the ITAT, Jodhpur Bench in the case of DCIT Vs. Arjun Kalwani, (2006) 101 ITD 337 (JD) and the decision of Kolkata Bench of Tribunal in the case of DCIT Vs. Rajkumar Sarogi in ITA No. 1776/Kol/2012 and IT(SS)A No. 97/Kol/2012 .
10. On the other hand, the learned DR relied on the findings of the authorities below and submitted that the assessee failed to submit evidence in respect of remodelling/conversion of jewellery.
We have heard the rival submissions and perused the material on record. The only issue in dispute in the case is whether in absence of any documentary evidence of remodelling/conversion of old jewellery available with the assessee as per wealth tax record could explain the jewellery found during the course of search proceedings. We find that in the case of Arjun Dass Kalwani (supra), the Tribunal has held as under:
“6. We have heard the rival submissions and perused the relevant material on record. As regards the jewellery of 667.3 gms claimed to be belonging to Smt. Meera Bai, wife of the assessee, we find that the AO had accepted only 94.2 gms. on the ground that the description of items in list dt. 20th Dec., 1983 and those found in the present search was not tallying. Pages 13 and 14 of the paper book are the copy of the assessment order passed in the hands of Smt. Meera Bai under s. 16(3) of the WT Act for asst. yr. 1978-79 in which the gold ornaments at 1100 gms. (net) have been assessed by the Revenue. Page Nos. 15 to 21 of the paper book are the wealth-tax assessment orders passed under s. 16(3) in the hands of Smt. Meera Kalwani for the asst. yrs. 1988-89 and 1989-90 in which gold ornaments of 667.300 gms. have been accepted. Not only that, the lady had claimed before the authorities below that she was in possession of jewellery which was coming from the period anterior to the earlier search conducted on the assessee in 1983. Simply because the assessee could not lead evidence for conversion or remaking of the jewellery, the possession of which is otherwise accepted, it cannot be said 6 & 5408/Del/2012 AY: 2007-08 that the holding of gold jewellery to this extent cannot be accepted, when overwhelming evidence is available in which the Revenue has assessed her at much more jewellery in the asst. yr. 1978-79 and to the present holding of jewellery in the asst. yrs. 1988-89 and 1989-90. In our considered opinion, the learned CIT(A) was justified in accepting the claim of the assessee with regard to the possession of gold jewellery by Smt. Meera Kalwani to the tune of 667.300 gms. of gold jewellery. Insofar as Smt. Indra, the daughter-in-law of the assessee is concerned, she was claimed to be the owner of 350.5 gms. of gold jewellery. It was explained during the assessment proceedings that she received 194 gms. of gold ornaments as wedding gift from her parents and brothers who resided at Dubai and Taiwan. She further claimed that she received four gold bangles from her mother-in-law as prenuptial gift and four more bangles on the occasion of Diwali in 1987. Thus, the total possession of gold claimed to be belonging to her is 350.5 gms. We are reminded of the order passed by the Chandigarh Bench of the Tribunal in the case of Smt. Neena Syal vs. Asstt. CIT (2000) 69 TTJ (Chd) 516 : (1999) 70 ITD 62 (Chd) in which it was held that CBDT Instruction No. F. 288/63/93-IT (Inv.)-II dt. 11th May, 1994 containing guidelines for seizure of jewellery and ornaments in the course of search, was relevant with reference to the deeming provision of s. 69A as well. In this instruction, the possession of gold jewellery by married ladies upto 500 gms. has been held to be immune from seizure. The Chandigarh Bench in this case held that the possession of gold jewellery by married ladies to the extent of 500 gms. should be considered as explained. Several orders have been passed all over India by different Benches of the Tribunal accepting the possession of gold jewellery to the extent of 500 gms. per married lady. Since Smt. Indra had claimed jewellery of 350.5 gms. in her possession, which is much below the prescribed limit of 500 gms. we are of the considered opinion that no addition can be held to be sustainable on this count and the learned CIT(A), was justified in deleting it. As regards the two daughters of the assessee, namely Smt. Krishna and Smt. Usha Khubani for which 101 gms. and 177.2 gms,. have been claimed respectively to be belonging to them, we find that both of them had claimed to have left the jewellery with their mother for conversion. It is a common practice in our society that the daughters rely upon the experience and wisdom of their mother with regard to the conversion or purchase of jewellery. Both of them had asserted through affidavits the retention of gold jewellery with their mother to this extent. Not only this, the assessee in his statement recorded during the course of search also accepted this fact that some jewellery, IVPs and KVPs belonging to his daughters was lying with him. Apart from that, another important aspect, which cannot be lost sight of is that the gold jewellery was found in packets bearing the names of the 7 & 5408/Del/2012 AY: 2007-08 ladies concerned. Copy of Panchnama placed at p. 65 onwards of the paper book clearly admits the fact of different boxes containing jewellery belonging to these ladies separately. These facts indicate that the jewellery to the extent claimed did belong to the concerned ladies. In our considered opinion, the learned CIT(A) was justified in deleting the addition which was erroneously made by the AO. We, therefore, uphold his action.”
Similarly, the ITAT, Kolkata Bench in the case of Rajkumar Sarogi (supra) has held as under: “6. We have considered the submissions of both the parties. Ld. CIT(A) has observed that gold jewellery of gross weight 7277.080 grams (net weight : 6374.056 – 1005.010 carats of diamonds was duly explained in the hands of assessee and his family members. Further, assessee surrendered gold jewellery of gross weight 3164.160 (net weight 2495.62 gms) and 199.670 carats of diamond in course of search. Consequently, gold jewellery of gross weight 10441.240 gms (net weight 8869.718 gms) and 1204.680 carat of diamond was explained in the hands of assessee and his family members which is not disputed. On the other hand, gold jewellery of gross weight 8905.410 grams (net weight 7655.910 gms) and 968.230 carats of diamond was found at the time of search. These basic details are not disputed/controverted in any manner by the Department. The only dispute was that assessee was not being able to reconcile item- wise jewellery which were found at the time of search vis-à-vis the wealth tax and purchases made during the financial year by assessee. In this regard, we are in agreement with the findings of Ld. CIT(A) that items of jewellery are often subjected to remaking on account of changing fashion and designs. In Indian society, the yellow metal and diamond has assumed lot of significance for ladies which is a status symbol and they buy it or convert the jewellery as per the prevailing fashion. There has no gainsaying that fashion keeps on changing and, accordingly, the jewellery is re-modeled from time to time according to the prevailing fashion. Under the facts and circumstances, comparison with the items of jewellery found at the time of search with wealth tax return, which were filed much earlier was putting an onerous task on assessee to prove ITA No.1776/Kol/2012 & IT(SS)97/Kol/2013 A.Y. 2010-11 DCIT CC-V Kol v. Raj Kumar Saraogi Page 6 something impossible, and assessee cannot be as bed to prove something which is beyond its control. We, accordingly, confirm the order of Ld. CIT(A) and this issue of Revenue’s appeals are dismissed.”
8 & 5408/Del/2012 AY: 2007-08 13. In the above precedents, it was held that the jewellery is remodelled from time to time by the ladies according to the prevailing fashion and simply because the items jewellery found during the course of search do not tally with the items of jewellery declared earlier in search or in the return of wealth and the assessee could not lead the evidence of conversion or remaking of the jewellery, it cannot be said that the jewellery to that extent is unexplained.
Respectfully following the above precedents, we are of the considered opinion that diamond jewellery found during the search in carats/weight stands explained to the extent of diamond jewellery in carats/weight declared in the valuation report dated 24/12/1999. Accordingly, we direct the Assessing Officer to treat the diamond jewellery in carats/weight to the extent of declared in the valuation report dated 24/12/1999 as explained. The ground of appeal
is accordingly partly allowed. Hence, the appeal is partly allowed.
15. In the result, appeal of the Revenue is dismissed and the appeal of the assessee is partly allowed. The decision is pronounced in the open court on 30th May, 2016.