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IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH
DATED THIS THE 9TH DAY OF OCTOBER, 2019
BEFORE
THE HON’BLE MR. JUSTICE ARAVIND KUMAR
PRESENT
THE HON’BLE MR. JUSTICE P.G.M.PATIL
I.T.A.No.100025/2018 C/W I.T.A.Nos.100024/2018, 100062/2018, 100063/2018
IN I.T.A.No.100025/2018:
BETWEEN:
N.R. GANGAVATHI (HUF) REPRESENTED BY ITS KARTA/MANAGER C/O GANGAVATHI SILK PALACE DAJIBAN PETH, HUBLI – 580 028 PRESENTLY CAMPING AT DHARWAD.
... APPELLANT
(BY SRI. V. CHANDRASHEKAR, ADVOCATE FOR SRI. M. LAVA AND SHASHANK S HEGDE, ADVOCATE)
AND:
THE INCOME TAX OFFICER WARD -3 [2], HUBLI PRESENTLY JURISDICTIONAL AO THE INCOME TAX OFFICE WARD 1 (3), HUBLI.
...RESPONDENT
(BY SRI. Y.V. RAVIRAJ, ADVOCATE)
THIS ITA IS FILED UNDER SECTION 260A OF THE INCOME-TAX ACT 1961, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTION OF LAW AS STATED ABOVE AND ANSWER THE SAME IN FAVOUR OF THE APPELLANT AND TO ALLOW THE APPEAL AND SET ASIDE THE FINDINGS TO THE EXTENT AGAIST THE APPELLANT IN THE ORDER PASSED BY THE INCOME TAX APPELLANT TRIBUNAL, BANGALORE BENCH ‘C’, BANGALORE IN ITA NO,840/BANG/2016 DATED:22.12.2017 FOR THE ASSESSEMENT YEAR 1998-99 VIDE ANNEXURE-A.
IN I.T.A.No.100024/2018:
BETWEEN:
BASAVARAJ KAMATGI (HUF) REPRESENTED BY ITS KARTA/MANAGER C/O GANGAVATHI SILK PALACE DAJIBAN PETH, HUBLI – 580 028 PRESENTLY CAMPING AT DHARWAD.
... APPELLANT
(BY SRI. V. CHANDRASHEKAR, ADVOCATE FOR SRI. M. LAVA AND SHASHANK S HEGDE, ADVOCATE)
AND:
THE INCOME TAX OFFICER WARD -3 [2], HUBLI PRESENTLY JURISDICTIONAL AO THE INCOME TAX OFFICER WARD 1(1), HUBLI.
...RESPONDENT
(BY SRI. Y.V. RAVIRAJ, ADVOCATE)
THIS ITA IS FILED UNDER SECTION 260A OF THE INCOME-TAX ACT 1961, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTION OF LAW AS STATED ABOVE AND ANSWER THE SAME IN FAVOUR OF THE APPELLANT AND TO ALLOW THE APPEAL AND SET ASIDE THE FINDINGS
TO THE EXTENT AGAIST THE APPELLANT IN THE ORDER PASSED BY THE INCOME TAX APPELLANT TRIBUNAL, BANGALORE BENCH ‘C’, BANGALORE IN
ITA NO.839/BANG/2016 FOR THE ASSESSEMENT YEAR 1998- 99 VIDE ANNEXURE-A.
IN I.T.A.No.100062/2018:
BETWEEN:
BASAVARAJ KAMATGI (HUF) REPRESENTED BY ITS KARTA C/O GANGAVATHI SILK PALACE DAJIBAN PETH, HUBLI – 580 028 PRESENTLY CAMPING AT DHARWAD.
... APPELLANT
(BY SRI. V. CHANDRASHEKAR, ADVOCATE FOR SRI. M. LAVA AND SHASHANK S HEGDE, ADVOCATE)
AND:
THE INCOME TAX OFFICER WARD -3 [2], HUBLI.
...RESPONDENT
(BY SRI. Y.V. RAVIRAJ, ADVOCATE)
THIS ITA IS FILED UNDER SECTION 260A OF THE INCOME-TAX ACT 1961, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTION OF LAW AS STATED ABOVE AND ANSWER THE SAME IN FAVOUR OF THE APPELLANT AND ALLOW THE APPEAL AND SET ASIDE THE FINDINGS TO THE EXTENT AGAIST THE APPELLANT IN THE ORDER PASSED BY THE INCOME TAX APPELLANT TRIBUNAL, BANGALORE BENCH ‘C’, BANGALORE IN
MP NO.108/BANG/2018 FOR THE DATED 20.07.2018 FOR THE ASSESSEMENT YEAR 1998-99 VIDE ANNEXURE-A.
IN I.T.A.No.100063/2018:
BETWEEN:
N.R. GANGAVATHI (HUF) REPRESENTED BY ITS MANAGER C/O GANGAVATHI SILK PALACE DAJIBAN PETH, HUBLI – 580 028 PRESENTLY CAMPING AT DHARWAD.
... APPELLANT
(BY SRI. V. CHANDRASHEKAR, ADVOCATE FOR SRI. M. LAVA AND SHASHANK S HEGDE, ADVOCATE)
AND:
THE INCOME TAX OFFICER WARD -3 [2], HUBLI.
...RESPONDENT
(BY SRI. Y.V. RAVIRAJ, ADVOCATE)
THIS ITA IS FILED UNDER SECTION 260A OF THE INCOME-TAX ACT 1961, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTION OF LAW AS STATED ABOVE AND ANSWER THE SAME IN FAVOUR OF THE APPELLANT AND TO ALLOW THE APPEAL AND SET ASIDE THE FINDINGS TO THE EXTENT AGAIST THE APPELLANT IN THE ORDER PASSED BY THE INCOME TAX APPELLANT TRIBUNAL, BANGALORE BENCH ‘C’, BANGALORE IN
MP NO.109/BANG/2018 FOR THE ASSESSEMENT YEAR 1998- 99 VIDE ANNEXURE-A.
THESE ITAs HAVING BEEN HEARD AND RESERVED, COMING ON FOR PRONOUNCEMENT OF JUDGMENT THIS DAY, ARAVIND KUMAR J., DELIVERED THE FOLLOWING:
JUDGMENT
Though matters are listed for Hearing on Interlocutory Applications, by consent of learned Advocates appearing for parties, we have taken up the appeals for hearing on merits and having heard, we are of the considered view that following substantial questions of law would arise for our consideration: (i) Whether tribunal was correct and justified in law in arriving at a conclusion that items sold by the appellants were different from the jewellery declared?
(ii) Whether the appellants had proved beyond reasonable doubts that sale of jewellery/goods were out of the declaration made under the Voluntary Disclosure of Income Scheme – VDIS?
BACKGROUND OF THE CASE:
Appellants in the respective appeals are HUF and for the assessment year 1998-99 filed its return reporting interest income and said returns came to be
processed under Section 143(3) of Income Tax Act, 1961 (for short ‘Act’) by making additions. In exercise of the power vested under Section 263 of the Act the Assessing Officer proceeded to assess and complete the sale consideration as unexplained credits and made additions. Appellants being aggrieved by the same, filed appeals before CIT (Appeals), Hubli, which was not entertained due to lack of jurisdiction and appeal filed to the Appellate Tribunal also came to be dismissed. However, the appeals filed by the assessees before this Court was allowed and the matter was remanded to the file of the Assessing Officer vide order dated 23.09.2008.
The Assessing Officer on such order of remand called for details from the assessees and during the course of the assessment having extracted the details of jewellery declared and sale of bullion and diamonds made by the assessees, has proceeded to hold that the additions to capital assets were unexplained and not out of the declaration made under
VDIS on the ground that there was a disparity in the nomenclature of the jewellery declared and the goods/jewellery sold by order dated 23.12.2009 (Annexure-B). Appellants being aggrieved by the same, filed an appeal before CIT (Appeals), which came to be dismissed by order dated 30.11.2015/30.10.2015 (Annexure-C).
Assessees not being satisfied with the order of the CIT (Appeals) preferred further an appeal before Income Tax Appellate Tribunal (for short ‘ITAT/Tribunal’), which came to be dismissed by order dated 22.12.2017. Hence, these second appeals.
It is the contention of Sri.A.Shankar, learned counsel appearing for appellants that authorities below as well as tribunal committed a serious error in arriving at a conclusion that there was difference between the quantity of declared items and sold items without considering the fact that appellants had declared gold jewellery, silver and diamonds embedded in the
precious metals under the VDIS Scheme-1997, which has been accepted by the Revenue upon payment of requisite taxes and as such, doubting the transaction afresh would not arise. He would also contend that the appellants had filed the copies of VDIS declaration and valuation report which described each item of jewellery along with the gross and net weight, purity of the jewellery and the caratage of the diamonds held by the appellants on the date of declaration as also the invoice for conversion of gold and silver jewellery to bullion form, which established the gross weight of the jewellery converted and net weight received by the appellants.
He would further contend that authorities below were not justified in doubting the difference in quantity declared visa-vis quantities sold to form an opinion that full quantity was not sold and same cannot be as the same goods as declared under the VDIS return. On these grounds he seeks for answering the
substantial questions of law in favour of appellants and against the Revenue.
Per contra, Sri.Y.V.Raviraj, learned counsel appearing for the respondent/Revenue would support the impugned orders and contends the discrepancies are short fall between the declared jewellery and the bullion/diamonds sold was clearly visible by virtue of weight and said discrepancy having remained unexplained, the disallowance is justified and hence, he prays for answering the substantial questions of law in favour of the Revenue by dismissing the appeals.
RE. SUBSTANTIAL QUESTIONS OF LAW - 1 AND 2:
Since these two questions are interlinked, they are taken up together for consideration, adjudication and answered as under:
It is not in dispute that the respective appellants/assessees having filed declarations under VDIS 1997 and same having been accepted by the Department, including taxes paid thereon. Under the
said VDIS the assessees had declared the gold jewellery, diamond jewellery, etc. and the claim of the assessees before the Assessing Officer was that he/she converted the jewellery items into gold and silver bullion after removing the diamonds and had sold the same.
As noticed herein above, the order of remand which came to be passed was based on following the decision of the Coordinate Bench rendered in SMT. KAILASHI DEVI AGARWAL VS. ITO in ITA No.186/2004 rendered on 22.09.2008 and following the same the case of the assessees in question namely, appellants herein were also remanded. The ground on which the remand order came to be passed as could be discerned from the order dated 22.09.2008 passed in ITA No.186/2004 reads: “10. It is clear from the perusal of the material on record that xxxx is not in dispute. However, the real question that was required to be decided by the first appellate authority and the assessing authority was to whether the subject matter of the sale transaction is in respect of the goods that were subject matter of declaration filed
under the Scheme 1997 which declaration has been admittedly accepted by the revenue. If the assessee xxxx and pass the following:”
Thus, the exercise which was to be undertaken by the assessing officer was to ascertain whether the gold and jewellery sold by the assessees-appellants were the same as declared under the VDIS or not? By undertaking such an exercise it has been held by the Assessing Officer that what has been sold by the assessee is gold bullion and silver bullion and what has been declared in the VDIS is ornaments and as such assessees had not proved that what is sold under the sale transaction is same as the items declared under the application filed under VDIS. Insofar as, diamonds are concerned it has been held that on account of VDIS declaration not containing the details as to whether they were cut and polished diamonds and the sale bill which has been relied upon by the assessees disclosing they are cut and polished, it cannot be accepted.
There is no dispute to the fact about the appellants having declared gold jewellery, silver and diamonds which were embedded in the said jewellery under the VDIS 1997 which declaration has been accepted upon the appellants paying requisite taxes. It is the specific case of assessees that in order to fund its capital has converted the jewellery acquired into standard bullion form and same was sold for which the sale bills had been tendered before the Assessing Officer. In fact, the sale proceeds has been received by the assessees through its bank which is not disputed by the Revenue. The invoice for the conversion of the gold and silver jewellery to bullion form demonstrates or establishes the gross weight of the jewellery converted and the net weight received by the appellants. The documents filed in support of the same were available before the Assessing Officer and it is on record, which is not in dispute. In fact, the copies of the sale bills of the gold and silver bullion correspond to the bullion quantities as converted, which is also not in dispute.
The mere change in the nomenclature from jewellery to bullion in the VDIS declaration visa-vis sale bills would not be relevant and is of no consequence. The only exercise the Assessing Officer had to undertake was whether the gold, silver and diamond declared under the VDIS and subsequently, claimed to have been sold after converting the same into bullion are one and the same. However, on the premise that there is change in the nomenclature the Assessing Officer as well as the Appellate Authorities have disbelieved the claim of the appellants.
Now turning our attention to the finding of the tribunal vide paragraph 7, which is to the effect that Assessing Officer has held in the assessment proceedings there was a difference in quantities of gold, silver and diamond declared and sold is an erroneous and perverse finding inasmuch as there is no such finding by the Assessing Officer. On the other hand, the Assessing Officer has merely stated there was a change in nomenclature and as such it could not be accepted
that the items declared under the VDIS was the same as sold by the appellants. In fact, tribunal fell in error by presuming that Assessing Officer had disputed the quantitative details, which was not the factual scenario, since the Assessing Officer had verified the details of the quantities returned and sold, which has not been disputed and obviously for the reason sale having been correlated on the assaying of the jewellery. In fact, it has been brought to the notice of the tribunal that jewellery declared was of lower purity and as such on conversion i.e., upon assaying purity had reduced proportionately, which has been erroneously ignored by the tribunal.
In fact, the tribunal erred in not considering the fact that under similar circumstances in the following cases rendered in respect of the assessees who were similarly placed, had been accepted and the appeals filed by the respective assessees had been allowed. The details of the orders so passed by the tribunal are as under:
Appeal Number Appellant Resp Order Dt ITA.77/Bang/2016 Sri Ghisulal Chopra ITO 30/06/16 ITA.80/Bang/2016 Smt Vimaladevi Doshi ITO 30/06/16 ITA.81/Bang/2016 Sri Shyam B Habib ITO 30/06/16 ITA.84/Bang/2016 Smt.Sabita Kallianpurkar ITO 30/06/16 ITA.107/Bang/2016 Kailash O Mahajan ITO 30/06/16 ITA.108/Bang/2016 Sri Parasmal J Jain ITO 30/06/16 ITA.109/Bang/2016 & 110/Bang/2016 Sri Seshmal J Jain ITO 30/06/16 ITA.111/Bang/2016 Sri G W Bafna DCIT 30/06/16 ITA.133/Bang/2016 & 134/Bang/2016 Kanchanbai M Jain ITO 30/06/16 ITA.139/Bang/2016 Ramakant R Sharma ITO 30/06/16 ITA.283/Bang/2016 Shri S Linganna DCIT 30/06/16 ITA.137/Bang/2016 Manjumala R Sharma ITO 04/07/16 ITA.82/Bang/2016 Sri Pukhraj D Jain, Hubli ITO 04/07/16 ITA.42/Bang/2016 Jayantilal P Jain ITO 31/08/16
In the light of above stated facts we are of the considered view that tribunal committed a serious error in arriving at a conclusion that items sold by the respective appellants were different from the jewellery declared under the VDIS and as such the substantial questions of law deserves to be answered in favour of the assessees and against the Revenue.
For the reasons aforestated, we proceed to pass the following:
JUDGMENT (i) ITA Nos.100025/2018 c/w 100062/2018 100063/2018, 100024/2018 are allowed by answering the substantial questions of law in favour of the assessees and against the Revenue.
(ii) Order dated 22.12.2017 passed by ITAT “C” Bench, Bangalore, in ITA Nos.839/Bang/2016 and 840/Bang/2016 for the assessment year 1998-99, is set aside and appeals filed by the assessees before the ITAT, Bengaluru, are allowed.
(iii) No order as to costs.
(SD/-) JUDGE
(SD/-)
JUDGE DR