MANJUDEVI H JAIN,HUBLI vs. ITO, HUBLI

Facts of the case are that these assessee had filed returns for the impugned assessment year declaring income, as under : Table No.1

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. These are listed hereunder :

All these assessee had taken advantage of VDIS, 1997 (VDIS in short). Under this scheme assessees had declared jewellery valued as under: Table No.3

When queries were raised about the source of the gold/diamond sold, assessees stated before the AO that these were the jewellery declared under ITA.1509 to 1512/Bang/2015 Page - 4 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 diamonds 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 the AO, a large number of similar assessees who had declared gold jewellery through VDIS return, had claimed sale of such gold 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 Table No.2 above were not proved by the assessees and additions were made accordingly. Similar inferences were made with regard to diamond sales claimed by the assessees.

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, with following observations :

But for the change in figures, the judgments carried the same direction. 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 same gold jewellery which were declared in the VDIS declarations. Further as per the AO neither of the concern to whom assessee claimed sales viz., M/s. Shri. Mahalaxmi Jewellers in the case of ITA.1509 to 1512/Bang/2015 Page - 11 gold and M/s. Hunney Exports / M/s. B. Ashok Kumar & Co.,in the case of 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 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.

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 invoice issued by the concern which purchased the gold and diamonds also shows the same weight of bullion as mentioned in the bill of M/s. Balaji ITA.1509 to 1512/Bang/2015 Page - 18 Refinery and same caretage 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 the case of M/s. Hunney Exports even their PA Number was there. 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 and diamond sold by them were the same gold and diamond declared in VDIS, after conversion. Assessees had submitted copies of bills issued ITA.1509 to 1512/Bang/2015 Page - 19 by M/s. Balaji Refinery which did show similar details of gold and diamond as returned in the VDIS. In such situation we are of the opinion that assessees had discharged their onus to show that the gold and diamond 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.