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Income Tax Appellate Tribunal, BANGALORE BENCH ‘B’, BANGALORE
Before: SHRI A.K.GARODIA, AM (SMC)
This is assessee’s appeal directed against the order of the ld.CIT(A), Hubli dated 30-11-2015 for the assessment year 1998-99.
The grounds raised by the assessee are as under;
“1 The order of the CIT (A) in so far as they are against the appellant are opposed to law, equity, and weight of evidence, probabilities, facts and circumstances of the case.
2 The appellant denies to be assessed at Rs. 6,17,400/-against the declared total income of Rs.56,670- on the facts and circumstances of the case.
3 The learned CIT (A) is not justified in confirming the addition of Rs.5,60,730/- under section 68 of the Act on the facts and circumstances of the case.
4 The learned CIT(A) was not justified in confirming the finding of the AO that the nomenclature as per the declaration differed from the sale invoice and hence the said sale was out of diamonds different from the one in the declaration made on the facts and circumstances of the case.
5.The learned CIT(A) was not justified in relying on the observations made in the earlier appellate orders to arrive at a finding that the declaration stood unproved and hence the diamonds sold were not out of the declaration made.
6 The learned CIT(A) was not justified on facts in not considering the gold on hand with the appellant as per the declaration, to be the same gold sold on the facts and circumstances of the case.
7.Without prejudice to the right to seek waiver with the Hon'ble Chief Commissioner of Income Tax/Director General of Income Tax, the Appellant denies itself liable to be charged to interest under section 234B of the Act which under the facts and circumstances of the case deserves to be cancelled. The calculation of interest under section 234B is not in accordance with law as the rate, amount and method for calculating interest is not discernible from the order of assessment.
8 The appellant craves leave to add, alter, modify, delete or substitute any or all of the grounds and to file a paper book at the time of hearing the appeal.
9 In view of the above and other grounds that may be taken at the time of the hearing the appeal, the appellant prays that the appeal be allowed in the interest of justice and equity.
It was submitted by the ld.AR of the assessee that this matter reached up to the Hon’ble High Court of Karnataka in the first round and as per the judgment of the Hon’ble Karnataka High Court in dated 22-09-2008, copy submitted by the ld. AR of the assessee, Hon’ble High Court restored the matter to the file of the AO for fresh decision by following another detailed judgment rendered in ITA No. 186/2004 dated 22.09.2008in which it was directed that if the assessee is able to prove that the goods that are sold under the transactions declared in the regular return are the same goods which were declared in the application filed under the VDIS Scheme 1997 and accepted by the revenue then the question of taxing the transactions declared in the regular returns u/s 68 of the IT Act would not arise and tax has to be imposed u/s 45 of the IT Act, 1961. He submitted that in the present proceedings, the AO and the ld. CIT(A) has repeated the same addition and therefore, the addition made by the lower authorities is not justified and the same should be deleted. He also submitted copy of two Tribunal orders rendered in the case of Shri Shjyam B Habib Vs ITO in ITA No.819B)/2016 dated 30-06-2016 and in the case of Smt Umabai M Kothari Vs ITO in ITA No.86,106 & 268(B)/2016 and placed reliance on the same.
The ld. DR of the revenue supported the orders of the authorities below. He also submitted that in his order, a clear finding has been given by the ld. CIT(A) that what is sold under the sale transactions and claimed by the assessee and what is declared in the application filed under VDIS 1997 are different. She submitted that no interference is called for in the order of the ld. CIT (A).
At this juncture, a query was raised by the Bench regarding sale bill and valuation report submitted with VDIS declaration statement. In reply, it was submitted by the ld. AR of the assessee that the jewellery declared under VDIS 1997 were converted into Gold and diamonds as per the conversion bill available on page 6 of the paper book resulting into Gold of 475 Grams and diamond declared is 15.5 carats and the sale bill is on pages 7 to 8 of the paper book.
I have considered the rival submissions. I find that the direction of the Hon’ble High Court in the case of assessee itself is this that if the assessee is able to establish that the items sold in the present year is the same which was declared by the assessee under VDIS 1997 then no addition can be made u/s 68 of the IT Act, 1961 in the present year. Hence in the light of the direction of the Hon’ble Karnataka High Court, I examine the facts of the present case. As per the valuation report submitted by the ld. AR being copy submitted with the declaration under VDIS 1997 as available on page-4 of the paper book, the assessee has made declaration of diamonds as under; Sl.No Carats Pieces Amount 1. 8.50 85 68,000 2. 7.00 70 42,000 3. Net Weight of Gold 578.160 Gms. 123,360 Total……….. 2,33,360
On pages 7 & 8 of the paper book, sale bills are not available As per page No. 2 of the original assessment order available on page 8 of the paper book, out of Rs. 560,730/- being total sales consideration, sale of gold is for Rs. 185,730/- and sale of diamonds is for Rs. 375,000/-. Regarding sale proceeds of gold, I am of the opinion that since gold jewellery was converted in to gold, its sale for Rs. 185,730/- should be accepted and resultant long term capital loss on sale of gold should be allowed. I direct the A.O. accordingly because gold sold and declared under VDIS cannot be different and this is not the case of the revenue that gold sold is more that gold declared under VDIS 1997.
Regarding Diamonds, mere Carat quantity alone cannot determine that the Diamond sold and declared under VDIS 1997 are same because the price of the price of Diamond mainly depends upon quality of the Diamonds being its cut and colour apart from its size.
Regarding this sale of Diamonds for Rs. 375,000/-, I do not know the size and the cut and colour of diamonds are also not known because the same is not mentioned in the VDIS declaration. Hence it is seen that the assessee has failed to establish that the diamonds sold in the present year and declared under VDIS are same. Hence, I feel that no interference is called for regarding addition in respect of sale of diamonds of Rs. 375,000/-.
Now I examine the applicability of two Tribunal orders cited by the ld.AR of the assessee. First Tribunal order is rendered in the case of Shri Shyam B Habib Vs ITO (Supra) and in para-5 of the Tribunal order, it is noted by the Tribunal that the weight of Gold and silver bullion is the same but there is no such finding that even in the absence of size, cut and colour of the diamonds, it can be accepted that the diamond sold and declared under VDIS are same merely on this basis that Carat quantity is tallying. Hence, this Tribunal order cited by the ld. AR of the assessee is not applicable in the present case in respect of diamonds sale.
As per the second judgment cited by the ld. AR of the assessee rendered in the case of Smt. Umabai M.Kothari (Supra), I find that in that case, there was no sale of Diamond and there was only sale of Gold and Silver, whereas in the present case, I have decided the issue about sale of gold in favour of the assessee and for the dispute regarding sale of Diamond, I have seen that the assessee could not establish this fact that the Diamond sold in the present case is the same Diamond which was declared by the assessee under VDIS declaration 1997 because the assessee could not show that the size, colour and cut of the Diamond sold in the present year and Diamond declared under the VDIS declaration are the same and without that, it cannot be accepted that the Diamond in question is the same on this basis alone the quantity in carat is tallying because the price of the Diamond is mainly determined by the size, colour and cut of the Diamond. Hence, I hold that this Tribunal order is also not applicable in respect of diamond issue in the present case.
As per above discussion, I have found that none of the Tribunal orders cited above by the ld.AR of the assessee is rendering any help to the assessee in respect of diamond sale issue and since, the assessee has failed to establish this fact that the Diamonds sold in the present year are the same Diamonds which declared by the assessee in VDIS declaration 1997 as directed by the Hon’ble Karnataka High Court and therefore, I find no reason to interfere with the order of the ld.CIT(A) in respect of diamond issue.
In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open Court on the date mentioned in captioned page.