2013 (12) TMI 1366 - AT - Income Tax

Tribunal overturns tax authority's decision on unexplained jewellery, citing satisfactory explanations and evidence

Shri Rustom Godrej Joshi Versus Dy. Commissioner of Income Tax

The Tribunal allowed the appeal, setting aside the additions made by the Assessing Officer and confirmed by the Commissioner of Income Tax (Appeals) ... Unexplained investment in jewellery - Held that: - The assessee explained the source of acquisition of the jewellery worth about Rs. 38 lakhs with the help of jewellery reports and purchase bills - Though item-wise detail was not submitted, but the weight and the value of the jewellery was submitted by the assessee in the valuation report which was further verified by the AO during the remand proceedings and he did not point out any defect or suspicion regarding validity of the same - The balance of addition is explained by the fact of receiving of gifts - The evidences submitted by the assessee itself were sufficient in the absence of any contrary evidence to show any suspicion about the genuinity of the said documents - The assessee even has filed the statements of jewellery in his Income Tax Returns for the assessment year 2006-07 - It is also very common that as per the customs and practices prevalent in our country, the jewellery/gold etc. is gifted by the relatives and friends of a person at the time of certain occasions like marriages, birth of a child, birthdays, marriage anniversaries etc - The quantum and the worth of the gifts also depend upon the social as well as financial status not only of the donor but of the donee also - It cannot be said to be a case of unexplained jewellery - Decided in favour of assessee. Issues:Appeal against treating jewellery as unexplainedAnalysis:The appeal was filed against the CIT(A)'s order confirming the AO's treatment of jewellery worth Rs.35,21,049 as unexplained during a search & seizure operation. The assessee provided a valuation report and purchase details, but the AO considered only a portion of the jewellery as explained. In the first appeal, additional documents were submitted, but the sellers did not confirm the sale. The CIT(A) rejected new evidence, citing Rule 46 of the I.T. Rules. The AO, during remand, issued letters to parties but no confirmation was obtained. The CIT(A) upheld the AO's decision due to lack of cogent evidence. The assessee argued that the jewellery was family-owned, supported by bank statements, bills, and wealth tax returns. The AR highlighted reconciliation statements and circular guidelines exempting certain jewellery from seizure. The AR also emphasized the high income tax payments by the assessee.The AR contended that the jewellery was acquired over time through purchases and gifts, supported by bank transactions and bills. The AR argued that the AO should have summoned witnesses if sellers did not appear. The AR pointed out reconciliation of jewellery items and reliance on the valuation report. The AR referenced circular guidelines and the assessee's substantial income tax payments. The AR emphasized that the jewellery was within the family's financial means and customary gifting practices.The DR argued that a significant portion of jewellery was found at the assessee's office, and detailed item-wise information was lacking. However, the Tribunal found the explanations provided by the assessee, along with supporting documents and bank statements, to be satisfactory. The Tribunal noted the absence of contrary evidence questioning the genuineness of the documents. The Tribunal highlighted that the confirmations submitted were corroborative evidence and not fresh evidence. Considering the financial status of the assessee, the Tribunal deemed the jewellery acquisition plausible, especially in light of customs and gifting practices. Ultimately, the Tribunal allowed the appeal, setting aside the additions made by the AO and confirmed by the CIT(A) regarding the unexplained jewellery.In conclusion, the Tribunal ruled in favor of the assessee, emphasizing the adequacy of explanations and supporting documents, the fair exercise of discretion by appellate authorities, and the plausible source of income for the jewellery acquisition. The Tribunal found the additions regarding unexplained jewellery unsustainable, considering the overall circumstances of the case.