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Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI
ORDER Per N. K. Saini, AM: These cross appeals by the assessee and the department are directed against the order dated 11.06.2013 of ld. CIT(A)-XXXIII, New Delhi.
In the assessee’s appeal following grounds have been raised: “1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not deleting the addition of 2 & 5370/Del/2013 Sunita Gupta Rs.3,34,98,409/- fully as made by Ld. AO on account of alleged unexplained jewellery u/s 69A and has further erred in sustaining the addition to the extent of Rs.33,49,840/- (i.e. 10% of Rs.3,34,98,409/-) on account of remaking charges and that too without considering the submission/evidences of the assessee.
2. That in any case and in any view of the matter, impugned addition and impugned assessment order are bad in law, illegal, unjustified, barred by limitation, contrary to facts & law and based upon recording of incorrect facts and finding, without giving adequate opportunity of hearing, in violation of principles of natural justice and the same deserves to be quashed.
3. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in framing the impugned assessment order is contrary to law and facts, viod ab initio, beyond jurisdiction and the same is not sustainable on various legal and factual grounds.
4. Without prejudice to the above grounds, no addition could have been made in the present appeal because no incriminating material has been found as a result of search.
5. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest 234B of the Income Tax Act, 1961.
6. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the “1. On the facts and in the circumstances of the case, the CIT(A) has erred in restricting the addition of Rs.3,34,98,409/- made by the AO on account of unexplained investment to Rs.33,49,840/- and directing the AO to delete 90% of the investment made by the assessee when it was clearly established that the assessee could not substantiate the source of investment.
2. On the facts and in the circumstances of the case, the CIT(A) has erred in not appreciating the evidence gathered during the course of search and seizure operation which very clearly pointed out that investment in jewellery was from undisclosed source.
3. The order of the CIT(A) is erroneous and is not tenable on facts and in law.
4. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”
4. From the above grounds it is gathered that the grievance of the assessee as well as the department relates to the sustenance/deletion of addition made by the AO on account of alleged investment in jewellery.
4 & 5370/Del/2013 Sunita Gupta 5. Facts of the case in brief are that a search and seizure operation u/s 132 of the Income Tax Act, 1961 (hereinafter referred to as the Act) was carried out on 21.01.2011 in M/s Dharmpal Satyapal Group of cases. The assessee filed her return of income on 14.09.2011 declaring total taxable income of Rs.13,90,700/-. The AO noticed that during the course of search and seizure proceedings u/s 132(1) of the Act at E-1A (E-13), Maharani Bagh, New Delhi jewellery worth Rs.6,05,33,471/- in value was found. The AO asked the source of acquisition of the said jewellery. The assessee replied as under: “A search operation was carried on 21.01.2011 at E-1A, Maharani Bagh, New Delhi. In the case of Sh. Rajiv Kumar and his family members, the total jewellery found was listed on 11.03.2011 and as per valuation report made out in the name of Smt. Sunita Gupta & Rajiv Kumar, the value thereof comes to RS.6,05,33,471.00. The total net weight of precious metal as per the report is 8949.778 gms. Out of this total jewellery found jewellery having net precious metal weight of 5124.612 gms valued at Rs.2,70,35,062.00 has been given back on the spot and the balance jewellery having net precious metal weight of 3825.166 gms valued at Rs.3,34,98,409.00 has been seized. Further, analysis of this valuation list shows that the diamond weight in respect of the items given back is 466.08 cts. Similarly in respect of the items seized the diamond weight is 625.32 cts.
5 & 5370/Del/2013 Sunita Gupta Thus, the diamond weight in respect of total jewellery found is 1091.40 cts. It is further submitted that the various assessee’s to whom this jewellery found relate are regularly filing their wealth tax return where in the jewellery is duly disclosed. The assessees used to get the valuation of jewellery done once in 5 years and show the valuation of jewellery in wealth tax returns by adding estimated appreciation in the value of jewellery by applying the gold rate increase to the entire value of jewellery disclosed in the immediately preceding year and further adding the jewellery acquired during the respective years. The last valuation was done as on 31.03.2006. The value of jewellery as on 31.03.2010 (i.e. A.Y. 2010-11) as per wealth tax returns filed by various members of the family is as under: (i) Sh. Rajiv Kumar Rs. 1,71,23,672.00 (ii) Smt. Sunita Gupta Rs. 5,33,58,446.00 Total Rs. 7,04,82,118.00 A copy of acknowledgment receipts and statement of computation of net wealth in respect of above assessees for A.Y. 2009-10 & A.Y. 2010-11 is enclosed for your perusal and ready reference. Besides, the group of assessees mentioned above have also acquired jewellery since 01.04.2010 till date of search (i.e. upto 21.01.2011) amounting to Rs.53,28,760.00. Details of these are enclosed. Thus, the total value of jewellery as disclosed by the assessee as on date of search (even without taking 6 ITA Nos. 5295 & 5370/Del/2013 Sunita Gupta into account the appreciation since 01.04.2010 till the date of search) comes to Rs.7,58,10,878.00 as against the total value of jewellery found amounting to Rs.6,05,33,471.00. Further the net weight of precious metal of jewellery disclosed comes to 11887.079 gms as against 8949.778 gms in respect of jewellery found. Similarly, the weight of diamonds in respect of disclosed jewellery comes to 1323.93 cts against 1091.400 cts in respect of jewellery found during the course of search. In view of above factual position, it is submitted that the jewellery found is sufficiently explained and no interference is called for in the income returned for assessment on this issue.”
The AO after considering the submissions of the assessee observed that the assessee failed to offer any satisfactory explanation with regard to the acquisition of jewellery items not matching in description with the items disclosed in the wealth tax return and that the various submissions made during the course of search like making and remaking of the jewellery items, loaned to friends and relatives etc. remained unsubstantiated. The AO held that the assessee had not furnished any explanation of source of acquisition of the specific jewellery items which were not tallying with the assessee’s report and were seized during the course of search proceedings u/s 132(1) of the Act. The investment in the said jewellery items which had been 7 & 5370/Del/2013 Sunita Gupta determined by the government approved valuer at Rs.3,34,98,409/- was treated as unexplained investment made by the assessee and added to the total income u/s 69A of the Act.
Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted as under: "GROUND NO. 1 & 2 : The only effective issue in the present appeal is against the addition of Rs.3,34,98,409/- on the ground that total jewellery found at the time of search was of Rs.6,05,33,471/- out of which jewellery of Rs.2,70,35,062/- was explained and thus was released and balance jewellery of Rs.3,34,98,409/- was unexplained and was thus seized. It is respectfully submitted that the impugned addition is unjustified as the total jewellery with the assessee and her husband was explained and accounted for as noted in the reply of the assessee as reproduced in Para 4 of the assessment order. Your Good self would kindly see that the total jewellery as on 31-03-2010 as per wealth tax return of the assessee (Refer PB 19-21) and her husband (Refer PB 31-34) were to the tune of Rs.7,04,82,118/- (Rs.5,33,58,446/- + Rs. 1,71,23,672/-) (Refer PB 21, 34) which are far more than the jewellery of Rs.6,05,33,471/- (Refer PB 15) found at the time of search. Moreover, jewellery worth Rs.53,28,760/- was acquired from 01-04- 2010 till the date of search. Therefore total jewellery which was appearing in the wealth tax return is far more than the jewellery found and thus, there was no justification for holding any jewellery as 8 & 5370/Del/2013 Sunita Gupta unexplained and therefore, it is prayed that addition made may please be deleted. Adverse Observations of Ld. AO are met as under:-
1.
Ld. AO has mentioned that since at the time of search, jewellery worth Rs.3,34,98,409/-was seized hence it was unexplained. In reply, it is submitted that nothing was unexplained as submitted above in as much as jewellery declared in the wealth tax return filed much before the date of search was far higher than the jewellery found. Therefore, nothing ought to have been seized but in any case, even if seized, seizure does not mean that it has to be treated as unexplained for all times to come, more particularly when assessee has demonstrated with the help of wealth tax returns that accounted for and declared jewellery was far more than the jewellery found at the time of search.
2. Ld. AO has mentioned that the assessee could not match the jewellery items. In reply, it is submitted that assessee mentioned in the statement which is reproduced at page 3 of the assessment order itself that certain difference may be on account of remake. Such statement on oath cannot be brushed aside lightly. Moreover, it is not uncommon in the Indian families when jewellery are not remade/reworked and if for that reason, some items did not match yet it cannot be said to be unexplained as the total jewellery found at the lime of search is well covered within the total jewellery declared to the tax department much before the date of search by way of wealth tax returns. Therefore one needs to take holistic view and if that view is .so taken, Your Honour would find that there was no unexplained jewellery.
9 & 5370/Del/2013 Sunita Gupta It is therefore prayed that the impugned addition may please be deleted".
The ld. CIT(A) after considering the submissions of the assessee sustained the addition of Rs.33,49840/- by observing as under: “I have considered the findings of the Assessing Officer and arguments of Ld. AR. It is undisputed fact that total Jewellery declared in weight for gold and diamond in wealth tax return exceeds total Jewellery found during the search. Total Jewellery declared in the wealth tax return of the appellant in weight was 1104gm of gold and 1667 ct of diamond. During the course of search total weight found for gold jewellery was 4612 gm and 1166.55 ct of gold. The Assessing Officer has made addition on the ground that items declared in the wealth tax return does not match with the Jewellery found and seized during the search operation. The items which did not match was seized and addition has been made as unexplained investment. The contention of the appellant and Ld. AR is that it is usual to remake the ornament at various times, therefore, the items are not tallying. I have considered entire facts and circumstances of the case. As weight of the gold and diamond in Jewelleries found during the search and seizure operation is less than declared in wealth tax, the- findings of the Assessing officer that these unmatched ornament items are new jewellery and, therefore, unexplained investment cannot be approved. However, the appellant and Ld. AR's only explanation for mismatch of Jewellery items are that there are remark or change of Jewellery items. Therefore, for such change of jewellery items or remake, the appellant must have spent 10 & 5370/Del/2013 Sunita Gupta money for such alteration. Normal fresh making charges for ornament is in the range of 8-10% of value of seized jewellery as unaccounted investment in jewellery. As total value of seized jewellery is Rs. 3,34,98,409.00/-, 10% of the value comes to Rs. 33,49,840/- When source of remaking charge was asked from the Ld. AR. he contended that the same is from household withdrawal. However no quantification or evidence of household withdrawal was submitted during appellate proceedings. Before the Assessing Officer and before the undersigned only argument was that the discrepancies are on account of remake or alteration without producing any evidence for alteration and explaining the source for such alteration. Therefore, to the extent of Rs.33,49,840/- addition is confirmed treating these expenditure as unexplained investment in jewellery during the year under consideration and the Assessing Officer is directed to delete the balance addition. This ground of appeal
is partly allowed.”
9. Now the assessee is in appeal against the sustenance of addition while the grievance of the department relates to the relief allowed to the assessee. The ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the assessee and her husband were regularly filing their wealth tax returns wherein the jewellery was duly disclosed and the jewellery was got valued once in every 5 years, the said valuation was shown in the wealth tax returns by adding the estimated appreciation in the value of the jewellery. It was submitted 11 ITA Nos. 5295 & 5370/Del/2013 Sunita Gupta that the value of the jewellery declared in the wealth tax return was as under: (i) Sh. Rajiv Kumar Rs. 1,71,23,672.00 (ii) Smt. Sunita Gupta Rs. 5,33,58,446.00 Total Rs. 7,04,82,118.00 It was stated that the jewellery found during the course of search and seizure proceedings was worth Rs.6,05,33,471/-, therefore, the value declared by the assessee was more in the wealth tax return than found at the time of search. It was further submitted that for the year under consideration the assessee has shown the jewellery acquired for Rs.53,28,760/-, therefore, the addition sustained by the ld. CIT(A) to the extent of Rs.33,49,840/- was not justified.
10. In his rival submissions the ld. DR reiterated the observations made by the AO in the assessment order dated 21.03.2013 and further submitted that the jewellery found during the course of search did not match with the jewellery declared in the wealth tax return. Therefore, the ld. CIT(A) was not justified in allowing the relief to the assessee. It was further submitted that the assessee failed to offer any satisfactory explanation with regard to the acquisition of jewellery items not matching in description with the items 12 & 5370/Del/2013 Sunita Gupta disclosed in the wealth tax return. Therefore, the addition was rightly made by the AO and the ld. CIT(A) was not justified in allowing the relief to the assessee.
11. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is noticed that the jewellery valuing Rs.6,05,33,471/- was found during the course of search, out of the said jewellery, the department seized the jewellery valuing Rs.3,34,98,409/- weighting 3825.166 gms and the remaining jewellery weighting 5124.612 gms valued at Rs.2,70,35,062/- had been given back on the spot to the assessee and her husband Sh. Rajiv Kumar in whose name the valuation report was made. In the instant case, the assessee and her husband were regularly filing their wealth tax returns where in the jewellery declared was worth Rs.7,04,82,118/-. The assessee also declared the acquisition of jewellery since 01.04.2010 till date of search i.e. upto 21.01.2011 amounting to Rs.53,28,760/-. The said jewellery has been accepted by the department, therefore, the total value of the jewellery declared by the assessee till the date of search came to Rs.7,58,10,878/- (Rs.7,04,82,118 + Rs.53,28,760) which was more than the total value of jewellery found during the course of search & seizure operation. Therefore, the addition 13 & 5370/Del/2013 Sunita Gupta made by the AO only on this basis that the jewellery found during the course of search and declared in the wealth tax return was not matching, was not justified, particularly when the assessee explained during the course of search itself in her statement recorded u/s 132(4) of the Act as under: “Description of the items as per your seizure and also their weight could not tally pie to pie (gram to gram) because of make/remake of the concerned items. However, the concerned items and value thereof are reflected in our wealth tax return filed and on record.”
12. The aforesaid explanation of the assessee appears to be plausible because in the society to which the assessee belongs the jewellery got remade with the passage of time and in accordance with the change in fashion/occasion. In the present case, it is undisputed fact that the AO nowhere stated that the jewellery found during the course of search was more than what was declared by the assessee in the regular wealth tax return furnished much earlier to the search. As regards to the addition sustained by the ld. CIT(A) by presuming that the assessee might have incurred certain expenses for making the jewellery is concerned, it is noticed that nothing is brought on record to substantiate that all the jewellery was got remade during the year under consideration. In this regard, the explanation of the assessee 14 & 5370/Del/2013 Sunita Gupta was that the source of remaking in the earlier years was from household withdrawals. In our opinion, the ld. CIT(A) sustained the addition only on the basis of presumption which is not tenable particularly when no evidence was brought on record to disprove this contention of the assessee that the remaking charges were incurred out of household withdrawals made from time to time in earlier years. We, therefore, do not see any justification on the part of the ld. CIT(A) in sustaining the addition which was made on the basis of surmises and conjecture. Accordingly, the addition sustained by the ld. CIT(A) is deleted. We, therefore, do not see any merit in the appeal of the department and the appeal of the assessee is allowed.
In the result, appeal of the assessee is allowed and that of the department is dismissed. (Order Pronounced in the Court on 17/03/2016)