CHANDER R. GUPTA,MUMBAI vs. ITO WD 12(2)(1), NAVI MUMBAI

Per Sanjay Arora, A. M.: This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals)-33, Mumbai (‘CIT(A)’ for short) dated 29.11.2013, dismissing the assessee’s appeal contesting its assessment u/s.143(3) of the Income Tax Act, 1961 (‘the Act’ hereinafter) for the assessment year (A.Y.) 2008- 09 vide order dated 03.12.2010. 2 Similar notices in the past, i.e., for 16/6/2015, 06/7/2015, 04/8/2015 and 16/9/2015, were observed to have met the same fate, and remained un-responded. There is also no power of attorney on record. Under the circumstances, it was only considered proper that the hearing of the appeal be proceeded with, and the matter disposed of after hearing the party before us, considering the material on record.

The Assessee’s case

Clearly, if, as stated, 1550.150 gms. is the total jewellery admittedly received by the assessee, how could all of its be available at the time of valuation (28.12.2007), given its admitted sale prior thereto. Then, again, the report shows both the gross and net weight of jewellery at 1550.150 gms. How could that be in the case of jewellery? The wealth-tax returns also would be to no consequence. This is as, firstly, the said returns were not required to be filed in-as-such as the assessee’s wealth is not taxable for the relevant years. Secondly, the same, filed for A.Ys. 2006-07 & 2007-08, have been so only on 08.01.2008 & 09.01.2008 respectively, i.e., belatedly. Never in the 4 Smt. Chander R. Gupta vs. ITO past had wealth-tax returns been filed, and the same are clearly to back up her claim qua jewellery.

Findings

5 Toward the explanation, we find that the assessee nowhere backs her claim of gift of jewellery with confirmation/s or affidavit/s from her parents or close relatives, the stated donors of the gold jewellery. It is only, where so, that the Assessing Officer (AO) could, where deemed fit, examine or question them on the source of the gifted jewellery in their hands. The assessee has, however, filed wealth-tax returns for A.Ys. 2006-07 and 2007-08. The same, though filed belatedly, are legally valid documents, being filed within the statutorily provided time for furnishing belated returns. The same cannot be dismissed, as done by the Revenue, for being furnished belatedly, or for the reason that no similar return/s had been filed by the assessee for the preceding years. To this extent, the Revenue’s stand cannot be accepted. The question that, however, arises, and accordingly would require being inquired into is whether the same were examined by the Revenue or not. Where not, so that these were only subject to processing u/s. 16(1) of the Wealth-tax Act, 1957 (corresponding to s. 143(1) of the Act), accepting the returned wealth, there is no finding/s by the A.O. If, on the other hand, the returns were subject to the verification procedure by the Revenue and, consequently, to assessment u/s. 16(3), it would bind the Revenue. That is, the wealth and, thus, the gold jewellery, as assessed, would have to be regarded as her wealth as on 31/3/2006 and 31/3/2007, the relevant valuation dates. That, however, could be the only import of the said returns, which though bind the assessee. The wealth-tax returns are not toward the source of acquisition of her wealth by the assessee and, accordingly, cannot be construed as so. The same have been filed only in support of the assessee’s claim of having acquired jewellery over the past years and, consequently, of being its’ owner (to that extent). The said returns are thus protective in nature, even as observed by the ld. CIT(A). That apart, section 14(2) of the Wealth Tax Act, a non obstante clause, overriding any of the provision of the said Act, provides that a return of wealth showing the net wealth below the maximum amount not chargeable to tax shall be deemed never to have been filed. That is, is non- est in the eyes of law. In view thereof, the said returns cannot be taken cognizance of,

6 Smt. Chander R. Gupta vs. ITO or considered as legal documents, and the aspect of their assessment, afore-discussed, is rendered to no consequence. The matter shall accordingly have to be proceeded with ignoring the said returns, except that they shall bind the assessee. The assessee’s claim qua the source of jewellery is being examined in the assessment proceedings under the Act for the current year for the first time. As such, if the claim fails, ex consequenti, the assessee, notwithstanding her furnishing returns of wealth for AYs. 2006-07 & 2007-08, cannot be said to own jewellery to that extent as at the end of the relevant years. Further, an acceptance of the assessee’s claim as to source would not, however, by itself imply an acceptance of the sale of jewellery, as claimed. The assessee shall, in any case, have to reconcile the jewellery acquired and that sold from time to time, with that admittedly available on 31.3.2006 and 31.3.2007. 5.3

As regards the valuation report (dated 28/12/2007), the valuation aspect has not been questioned or commented upon by the Revenue. This, however, has to be seen in context of it not accepting the explanation qua the source of jewellery, stated to be in the past, making an examination of that aspect irrelevant. The second aspect of the said report is toward existence of the jewellery as on 28/12/2007. But does that prove it to be the assessee’s jewellery or the source of its acquisition? All it would imply is that jewellery to that extent was produced before the valuer for his examination and valuation. Coupled with the sale bills, two of three of which are prior to the date of the report, establishing sale, i.e., where not impugned, it would imply that the assessee sold her jewellery, to the extent stated, as can be said to be available with her on the date of valuation, consistent with the material on record, i.e., on the basis of the said report, the statement of gifts, the wealth-tax returns and sales prior to that date. This would also resolve the question as to whether or not the jewellery declared and valued is in respect of gross or net weight thereof.

7 Coming back to the assessee’s explanation as to the acquisition of the jewellery, i.e., by way of gift from parents and relatives. If found acceptable, no part of the credit on the sale can be brought to tax u/s. 68 or, as the case may be, sections 69/69A, which would extend only to the capital gain arising on such sale. Toward this, as afore-stated, the assessee has not supported her claim with any confirmation /affidavit by her parents or other donors. Gift of gold jewellery to a married daughter on the occasion of marriage as well as on the birth of grandchildren, or on important occasions, as purchase of residential house, is customary in Hindu society. The question, however, is not of the gift by the parents (or even close relatives) per se, but of the volume thereof. That is, what could, in the facts and circumstances, be considered as a reasonable quantity and, thus, acceptable. Whether the parents are assessees? What is their status, financial or otherwise? How many children they have, as gold would have been similarly given to other children, and on their attaining different milestones, as well? Then, again, the assessee states of having received gift/s from relatives as well, though their names and quantities are not specified, and which would again have to satisfy the test of reasonableness in the given facts and circumstances. What is their relation with the assessee and socio-economic standing? Further, if the gifts have been given by them, it is only understandable and reasonable to infer that gifts, similarly, would also have been given by the assessee’s parents to their sons and daughters as well; the custom prevailing both ways. It is notable that no gold jewellery has been received by the assessee from her husband’s family in the 27 years of her marriage, i.e., from 1982 to 2008, despite several auspicious occasions. Her in-laws would ostensibly be of the same socio-economic standing, and subject to the same customs. Or, is it that the assessee had not returned the total jewellery, which we presume to have been at a total of 1550.150 grams, i.e., as stated to be received in gift from her parents and relatives. What is reasonable under the circumstances is principally a matter and, accordingly, a question of fact. At this stage, we may clarify that the exclusion from seizure of 500 grams of gold jewellery in case of a married

8 Continuing further, I next consider the assessee’s claim with regard to the sale aspect of the transaction. True, as claimed by the assessee, the Revenue has not impugned the sale, making no enquiry with the jeweller, M/s. Vimalson Jewellers, Mumbai, to whom the same is stated to have been sold. However, once the source of acquisition of jewellery is not accepted, it becomes irrelevant (for the Revenue) whether the credit arises, as claimed, on the sale of jewellery, the source of which is not satisfactorily explained, or is a case of unexplained credit per se. Further, qua sale, it needs to be appreciated that just as gift of gold jewellery by parents to their daughters is a fact of life in our society, so is its’ non-sale, except in times of distress/dire need. No such circumstance has been pointed out by the assessee. The said jewellery has sentimental value, and is carried over from generation to generation. The reason for the sale, which, as it transpires, is the third year in succession, has nowhere been explained by the assessee; she also withdrawing the deduction u/s. 54 on the capital gain, initially claimed. This aspect of the matter, equally pertinent, cannot but be taken note of or disregarded. Also, the jewellery sold would, needless to add, match that returned and stated as gifted.

Conclusion

9 Smt. Chander R. Gupta vs. ITO years, and the assessee’s declaration of gifts (from time to time). The sale of jewellery also cannot be taken at face value, given the fact of life in our society. That is, the sale aspect of the transaction has been found deficient in-as-much as the jewellery forms part of the family heirloom, and is not easily disposed of, even as no accentuating circumstance has been stated. This aspect would therefore also require being determined, also taking into account the valuation report dated 28.12.2007. The onus to substantiate her return, and the claims preferred thereby, is only on the assessee, and which the A.O. is rather duty bound to verify and determine. Under the circumstances, I only consider it fit and proper to restore the matter back to the file of the A.O. for adjudication afresh, addressing the various aspects of the matter brought to the fore, issuing definite findings of fact. Before parting, we may add that the computation of capital gain, if any, would have to be consistent with the findings by the A.O. in the set aside proceedings, of course allowing the assessee an opportunity to raise objection/s, if any. We decide accordingly.

10 आदेश क" ""त"ल"प अ"े"षत/Copy of the Order forwarded to : अपीलाथ" / The Appellant

उप/सहायक पंजीकार (Dy./Asstt.