FAISAL SIDDQUI,MUMBAI vs. ASST CIT CEN CIR 47, MUMBAI

The assesse in his appeal raised the following ground of appeal:-

The learned counsel for the assessee submits that in the course of remand proceedings all the information was furnished, details were given to the Assessing Officer and it was explained that the currency seized does not belong to the assessee and merely because the currency is seized from the assessees premises it is not a ground for making addition in assessees hands. The learned counsel further submits that the foreign currency was received by the assessee from Fourways Travels Pvt. Ltd. and is duly accounted for and it belongs to the company. The foreign currency was A.Y.2011-12 returned to the company on 31.03.2011, therefore, the addition is not justified. The DR supported the orders of the authorities below.

We have heard the rival submissions perused the orders of the authorities below. On hearing both the sides we are of the considered view that this issue has to be examined and verified by the Assessing Officer with reference to the submissions made by the assessee that the foreign currency is belongs to the company and it has been accounted for in company’s books as on 31.03.2011. The learned counsel for the assessee further submits that as per the RBI Rules and Regulations assessee can retained the foreign exchange for 180 days. Thus we restore this issue to the file of the Assessing Officer who shall examine the issue afresh in accordance with law. The assessee shall provide necessary details to the Assessing Officer to substantiate his claim. Needless to say the Assessing Officer shall provide adequate opportunity of being heard to the assessee.

The second ground raised by the assessee is in respect of deemed dividend. Assessee is challenging the order of the CIT(A) in sustaining the addition of Rs.60,00,000/- u/s.2(22)(e) of the Act as deemed dividend. Before us the learned counsel for the assessee submits that the assessee’s only plea is that the deemed dividend is to be restricted to the accumulated profits of the company. The DR has no serious objection in restricting the deemed dividend to the accumulated profits of the company. On hearing both sides in principle we hold that the CIT(A) is justified in sustaining the addition made u/s.2(22)(e) of the Act. However, such addition should be restricted only to the accumulated profits of the company as specified in the provisions of section 2(22)(e) of the Act. Therefore, for the limited purpose A.Y.2011-12 on verification and quantification of deemed dividend we restore this issue to the file of the Assessing Officer who shall quantify the disallowance u/s.2(22)(e) of the Act restricting to the accumulated profits of the company.

The last issue in the assessee’s appeal is in respect of confirmation of addition towards jewelleries of Rs.15,44,780/-. Briefly stated the facts are that during the course of search, gold, diamond and silver valuables worth Rs.49,35,502/- were found in the wardrobe of the assessee’s residence. In the course of search proceedings it was stated in the statement that the said gold, diamond and silver jewelleries belongs to family members. It was further stated that though the entire jewellery belongs to his family members source of acquisition cannot be explained. In the statement it was also stated that gold, diamond and silver jewellery lying in the wardrobe valued at Rs.49,35,502/- also belongs to his family. However, the same is explained and acquired in the current Financial Year i.e. 2010-11 relevant to the A.Y.2011-12.

During the course of assessment proceedings, the Assessing Officer required the assessee to explain as to why the jewellery worth Rs.49,35,502/- found in the course of search should not be added as undisclosed income of the assessee for the A.Y.2011-12. The assessee in the course of assessment proceedings submitted that jewellery valued of approximately Rs.25,00,000/- belong to his forefathers and were collected over the period of time on various occasions in family and the remaining jewellery were acquired in financial year ending 31.03.2011 relevant to A.Y.2011-12. It was also stated that the assessee has already paid A.Y.2011-12 Rs.51,82,505/- vide pay order dated 24.03.2011 for the undisclosed income relating the value of unaccounted jewellery found in the wardrobe and the bank lockers. It was further submitted that the inherited jewellery was passed on over ages in his family. Not satisfied with the explanation of the assessee the Assessing Officer added the jewellery, diamond and valuable worth Rs.54,96,155/- as against Rs.49,35,502/-. The CIT(Appeals) considering the submission of the assessee and applying CBDT Instruction No.1916 dated 11.05.1994 and looking into the social status of the family, agreed with the assessee’s submission and partly allowed the ground of appeal by following various decisions of the Hon’ble High Courts and also the Mumbai Bench of Tribunal in in the case of Shri Hiten Mehta Vs. ACIT. The CIT(A) restricted the addition to Rs.15,44,780/- accepting the alternate contention that if at all it is to be treated as unexplained income it is only Rs.15,44,780/- as per the working submitted in the course of appellate proceedings before the CIT(A). The assessee could not substantiate its claim that the jewellery was purchased in earlier years and its source. Therefore we do not see any good reason to hold that the assessee explained the sources for the jewellery found worth Rs.15,44,780/-. Hence the CIT(A) order is sustained and ground raised by the assessee is rejected.

The only issued in the ground numbers1 to 4 of the revenue’s appeal is regarding the deletion of entire addition of Rs.54,96,155/- on account of unexplained investment in jewellery. As explained in the above para we find that the CIT(A) observing that the correct addition should have been A.Y.2011-12 Rs.49,35,040/- and not Rs.54,96,155/-, restricted the addition to Rs.15,44,780/- based on the CBDT Instruction No.1916 dated 11.05.1994 and the case laws refer to therein. In the circumstances we do not find any valid reason to interfere with the directions of the CIT(A) in restricting the addition to Rs.15,44,780/-. Accordingly this ground is dismissed.