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Income Tax Appellate Tribunal, BANGALORE BENCH C, BANGALORE
IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'C', BANGALORE SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER 1. (Asst. Year : 1998-99) 2. (Asst. Year : 1998-99) 1. Shri. Shantilal Gajraj Jain (HUF), M. G. Market, Hubballi PAN : AAPHS1709H 2. Smt. Sangeeta A. Shah, L/R of late Sri Ambalal D. Shah, No.203, 2nd floor, Suvida Annexe, Keshwapur, Hubballi PAN : AADHA6725K .. Appellants v.
Income tax Officer, Ward -1(3), Hubballi 2. Income-tax Officer, Ward - 3(2), Hubballi .. Respondent Assessees by : Shri. Ravishankar S. V, Advocate Revenue by : Smt. Swapna Das, JCIT Heard on : 23.06.2016 Pronounced on : .07.2016 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : These are appeals by different assesses for assessment year 1998-99 against orders of CIT (A), Hubli. Since the facts leading to these appeals ITA.194 & 83/Bang/2016 Page - 2 fall within the same compass, these appeals are dealt with through this common order.
Facts of the case are that these assessees had filed returns for the impugned assessment year declaring income, as under : Table No.1
Sl.No. Name of the assessee Income declared Rs. 1. Shri. Shantilal Gajraj Jain 28,075/- (loss) 2. Smt. Sangeetha A. Shah 18,820/-
During the course of assessment proceedings it was noted by the AO that these assessees had credited certain amounts in their accounts which were explained as coming out of the sale proceeds of gold / diamonds. In the case of Shri. Shantilal Gajraj Jain the claim was for Rs.21,26,359/- of which Rs.13,82,150/- was considered as unexplained. In the case of Shri. Ambalal D. Shah, the claim was for Rs.4,26,349/-. Former comprised of sale value of diamonds claimed at Rs.10,05,500/- and silver claimed at Rs.3,76,650/-. Latter comprised of claim for sale of gold of Rs.70,339/- sale of silver of Rs.2,65,834/- and sale of diamond of Rs.90,176/-.
These assessees had taken advantage of VDIS, 1997 (VDIS in short), Under this scheme assessees had declared jewellery valued as under:
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Table No.2
Sl. Name of the assessee Gold Silver utensils Diamonds No jewellery Rs. Rs. Rs. 1. Shantilal Gajraj Jain 4,90,091 1,10,400 2,51,000 2. Ambalal D. Shah 1,52,585 52,886 -
When queries were raised about the source of the gold /diamond/ silver sold, assessees stated before the AO that these were the jewellery declared under VDIS Scheme after converting it to bullion. However, AO did not accept this contention of the assessees. According to him, the concerns to which assessees had claimed to have sold the gold and diamond never worked from the addresses given by the assessee. As per the AO, landlord of the building whose premises were shown as the address of M/s. MLJ, one among the concerns who had purchased the bullion / diamond, had stated that no such lease was given by them to MLJ and no possession was given. As per the AO, the said MLJ occupied the premises only during the period 27.03.1998 to 30.11.1998. Further as per the AO, M/s. Balaji Refinery, through which assessees had claimed the jewellery to have been assayed into bullion never existed. As per ITA.194 & 83/Bang/2016 Page - 4
the AO, a large number of similar assessees who had declared gold jewellery through VDIS return, had claimed sale of such gold and silver through MLJ for showing source. The inference drawn by the AO was that such sales could not have been effected in a short span of four months time and MLJ could not have done business to the tune of Rs.20 crores in such a short span of time. Thus the AO held in all the above cases that the source for the credits mentioned at para three above were not proved by the assessees and additions were made accordingly. Similar inferences were made with regards to diamond and silver sales claimed by the assessee.
Aggrieved, assessees moved in appeal before the CIT (A), who after examination of the VDIS scheme held they were trying to misuse the scheme. He not only confirmed the order of AO but also directed enhancement of the income.
Aggrieved by this, assessees had moved before this Tribunal and this Tribunal had dismissed such appeals confirming the order of the CIT (A).
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Assessees thereafter challenged the order of the Tribunal before the Hon’ble jurisdictional High Court. Hon’ble jurisdictional High Court in the case of Shantilal Gajraj Jain in its judgment dt.22.09.2008 in ITA.No.207/2004, gave similar directions as given in the case of one Smt. Kailashi Devi Agrawal [ITA No.186/2004], where also fact situation was similar. What was held in the latter case on 22.09.2008 is reproduced hereunder :
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Similar directions were given in the case of the assessee Shri. Ambalal D. Shah also in dt.22.09.2008.
Pursuant to the above directions of the Hon’ble jurisdictional High Court, cases were again considered by the AO. Notices were issued to the assessees. Claim of the assessees were that the gold ornaments which were given for melting with M/s. Balaji Refinery, Hubli, was the very same which was shown by them in VDIS declarations. Assessees again relied on the bills of the concerns to which sale of gold and silver were made. AO after considering the submissions of the assessee and the bills issued by M/s. Balaji Refinery, Hubli, found that weight of the jewellery declared by the assessees, in the valuation report supporting the VDIS declarations were different from the weight of gold / bullion that were sold. As per the AO assessees could not prove that what was sold by them were the ITA.194 & 83/Bang/2016 Page - 8
same gold jewellery which were declared in the VDIS declarations. Further as per the AO neither of the concerns to whom assessee claimed sales, viz., Shri. Mahalaxmi Jewellery for gold and M/s. Hunney Exports for diamonds were traceable. AO also noted that some of the items of gold jewellery declared in VDIS comprised of antique items and assessees who were financially sound would not have sold such old gold jewellery. Further as per the AO, if at all the assessees wanted to sell the jewellery they would have sold it directly without melting and shaping it as bullion. Thus he reached a conclusion that what was sold by the assessees were not the gold jewellery which were declared by them in VDIS. He did not accept the source for the credits. Additions were made once again.
Aggrieved, assessees moved in appeal before the CIT (A) once more. CIT (A) noted that M/s. Balaji Refinery, Hubli through which assessees claimed to have melted the gold and silver articles to bullion, never existed in the address given by the assessees. As per the CIT (A), letters addressed to M/s. Balaji Refinery, Hubli were returned unserved. CIT (A) also noted that Gold and Silver Refinery Association, Hubli, had written to the AO that no such refinery called M/s. Balaji Refinery ITA.194 & 83/Bang/2016 Page - 9
ever did any refinery work since 15 years. Further as per the CIT (A), the Inspector deputed by the AO had enquired near Jain Mandir, Keshavapur, Hubli, as well as Azad Colony, Hubli, where, as per assessees, M/s. Balaji Refinery functioned. As per the CIT (A), Inspector had also verified with the owners of various buildings in Keshavpur, who vouched that no such building named, Azad Complex, existed nor they new any Balaji Refinery. Thus according to CIT (A) assessees were unable to show that the gold and diamond jewellery which were declared by them in their VDIS returns were melted and converted through the concern called M/s. Balaji Refinery, nor were they able to show that any sale thereof were effected through any concern called MLJ or M/s. Hunney Exports. Thus the CIT (A) upheld the order of the AO.
Now before us, Ld. AR submitted that the onus on the assessees to show that gold and silver jewellery declared in VDIS returns were melted and converted into bullion and sold was discharged. Hon’ble jurisdictional High Court had clearly held that if the assessees were able to show that the sales were of the very same gold, silver and diamond jewellery which were declared in VDIS, then ITA.194 & 83/Bang/2016 Page - 10
the source for the credits stood explained. As per the Ld. AR, M/s. Balaji Refinery had clearly given the details of the jewellery items which were given to them for melting. Labour charges were also paid by the assessees. Ld. AR submitted that copies of bills issued by M/s. Balaji Refinery clearly proved conversion of the ornaments into bullion. As per the Ld. AR, assessees concerned had converted the gold and silver jewellery to bullion and separated out the precious stones, since if sold directly as jewellery the items would have fetched much lesser amount. As per the Ld. AR if on an enquiry conducted after twelve years by the AO, M/s. Balaji Refinery was found not available at the premises mentioned, assessees could not be blamed. Thus according to him, assessees had done what all was necessary and possible to prove the sale of gold and silver jewellery were melted through M/s. Balaji Refinery and sold to one or other concerns who were doing gold / bullion business. Ld. AR has also placed before us copies of assessment orders passed by the AO in the case of one Shri. Shailesh V. Patel and Shri. Vithalbhai N. Patel, for the assessment year 1998-99, where on similar set of facts the credits were accepted.
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Per contra, Ld. DR strongly supporting the orders of authorities below submitted that AO had done detailed enquiries into the bills submitted by the assessees for melting the gold jewellery as well as for selling the gold, silver and diamonds. As per the Ld. DR it was quite unusual that both the refinery who melted the gold and silver jewellery and the shop which bought the gold, silver and diamonds were non-existent at the time of enquiry. Gold and Silver Merchants’ Association of Hubli, had also confirmed that no such refinery ever functioned in that particular address. Thus according to him assessees were making bogus claims and should not be allowed to get away with such claims. As per the Ld. DR additions were rightly made by the AO and confirmed by the CIT (A).
We have perused the orders and heard the rival contentions. Evidence furnished by the assessees in support of their contention that what were sold by them was the same gold jewellery after converting it into bullion has been perused by us. Case of the first assessee, namely Shri. Shantilal Gajraj Jain is taken as an example. The valuation report dt.05.11.1997 filed in aupport of the VDIS declaration, bill dt.01.01.1998 from M/s. Balaji Refinery, purchase invoice ITA.194 & 83/Bang/2016 Page - 12
dt.08.01.1998 issued by MLJ, and purchase memo dt.03.03.1998 of M/s. Hunney Exports are reproduced hereunder:
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What we note is that all the items which were appearing in bill issued by M/s. Balaji Refinery were also mentioned in the valuation report filed in support of the VDIS declarations. Gross weight also tallies. Purchase ITA.194 & 83/Bang/2016 Page - 15 invoice issued by the concerns which purchased the silver, gold and diamonds also shows the same weight of bullion as mentioned in the bill of M/s. Balaji Refinery and/ or same cartage of diamonds mentioned in the valuation report. Case of the Revenue is that M/s. Balaji Refinery, which melted the ornaments and the concern to which the gold / bullion were sold were not found in Keshavpur, Hubli. Assessees were repeatedly questioned about this during the course of second round of proceedings. Inspector’s report relied on by the AO was based on an enquiry done more than 15 years after the event. There was no way assessees could ensure that M/s. Balaji Refinery continued to do its business all through. Much reliance has been placed by the AO on a letter issued by Gold and Silver Refinery Welfare Association, Hubli, wherein it was mentioned that no refinery called M/s. Balaji Refinery, did any refinery work in Hubli since 15 years. However, it is not necessary that every refinery should be a member of an association. A glance at the bill issued by M/s. Balaji Refinery does show that it was holding a licence. A Look at the purchase bill issued by the concerns show that they were having KST and CST registration numbers. In my opinion, these evidence do tilt the case in favour of the assessees. Assessees had done whatever possible, within their means to show that the gold, silver and diamonds sold by them were the ITA.194 & 83/Bang/2016 Page - 16 same gold, silver and diamond declared in VDIS, after conversion. Assessees had submitted copies of bills issued by M/s. Balaji Refinery which did show similar details of gold jewellery as returned in the VDIS. In such situation we are of the opinion that assessees had discharged their onus to show that the gold, silver and diamonds sold by them were the same which were declared by them in the VDIS declarations. Reasoning given by the AO that antique jewellery would not have been sold by the assessees is only a surmise and cannot dislodge the evidence filed by the assessee. Further there is nothing on record to show that the gold jewellery which were sold by the assessee were antique in nature. In such circumstances, I am of the opinion that the lower authorities fell in error in disbelieving the source for credits shown by the assessees concerned. I have no hesitation in deleting the additions made in the hands of the assessees.
In the result, appeals of all the assessees stand allowed.
Order pronounced in the open court on ____ July, 2016.