2017 (3) TMI 1862 - AT - Income Tax

Tribunal grants relief to assessee, dismisses Revenue's appeal on gold jewellery addition.

Shri Vinod Garg Versus The Dy. Commissioner of Income Tax – Central Cir 18 and 19, Mumbai AND The Asstt. Commissioner of Income Tax – Central Rg. 3, Mumbai Versus Shri Vinod Ramniwas Garg

The tribunal allowed the assessee's appeal, deleting the addition of Rs. 42,00,656/- made by the AO, and dismissed the Revenue's appeal. The tribunal ... Unexplained jewellery - chargeability to tax of jewellery seized during the course of search u/s 132 - As explained by the assessee to be an old jewellery acquired and held prior to seven years preceding the date of search through various modes such as streedhan to wife at the time of marriage , gift to the assessee at the time of marriage in 1986, acquisition of the jewellery since marriage in 1986 over a period of time for which bills were not retained, gifts to wife and the assessee since 1986 by relatives, gift to son on his birth and also during several birthdays over the years - AO is contending that since the assessee could not produce bills for the said jewellery and the same was not declared to Revenue by the assessee in past as no wealth tax returns were filed or otherwise it was also not declared as no statement of affairs was ever filed, the same being an unexplained jewellery is liable to be taxed u/s 69B - HELD THAT:- The assessee is a qualified Chartered Accountant being Executive Director (Commercial) of the listed company, Ispat Industries Limited which is flagship company of the Ispat Group of companies. The assessee belonged to Hindu Marwari family. The Marwari community in India is a respected community most of whom are successfully engaged in various spectrum of businesses . The assessee has not filed any wealth tax returns with the Revenue despite having taxable wealth which is undisputed. It is also admitted position that no statement of affairs had also been filed by the assessee before the authorities below prior to the date of search on 30-11-2010. Assessee was a man of means having substantial income declared to Revenue in last 7 years. The assessee has also filed copy of income tax return of the wife of the assesssee for assessment year 2009-10 ( which included income till her death on 26-112008 in Mumbai terror attack on Oberoi Hotel as thereafter , income is included in the hands of the assessee being a legal heirs of wife of the assessee as stated in ITR) wherein returned income was 16,14,540/- . The assessee being legal heir of wife after her death on 26-11-2008, the jewellery owned and possessed by wife at the time of her death on 26-11-2008 is also to be considered in the hands of the assessee being a legal heir of wife. The instant assessment year under appeal is assessment year 2011-12. The assessee was married in 1986 and has one son also. The assessee has one HUF also. Jewellery of value of ₹ 42,00,656/- weighing 1644.76 gms which is sought to be explained to have been acquired by the assessee and his wife for the period from the marriage of the assessee in 1986 till seven years preceding the date of search is not substantial keeping in view habitual pattern of the assessee, culture, traditions , customs, financial and social background of the assessee There was a seized ledger extracts which showed jewellery as on 31-03-2004 of ₹ 18.51 lacs owned by assessee wife and assessee’s HUF , market value of which jewellery as on the date of search comes to more than ₹ 50 lacs which has also to be considered while estimating unexplained jewellery in the hands of the assessee. This contentions of the assessee could not be controverted by Revenue/learned CIT-DR. Thus, no addition is warranted in the hands of the assessee in the instant case as we hold that jewellery to the extent of ₹ 42,00,656/- as was seized by the Revenue being found from locker of the assessee based on which additions have been made by the AO stood fully explained keeping in view factual matrix of the case, social and financial background of the assessee, culture, traditions and customs to which the assessee belonged. Thus, the addition made by the A.O. as sustained by the ld. CIT(A) is hereby ordered to be deleted. - Decided in favour of assessee. Issues Involved:1. Legality of the assessment order and partial confirmation by CIT(A).2. Addition of Rs. 42,00,650/- for unexplained investments under Section 69B of the Income Tax Act.3. Charging of interest under Section 234B.4. Relief granted by CIT(A) based on CBDT Instruction No. 1916.Detailed Analysis:1. Legality of the Assessment Order and Partial Confirmation by CIT(A):The assessee challenged the assessment order dated 28th March 2013, passed under Section 143(3) of the Income-tax Act, 1961, and the partial confirmation by CIT(A) on 2nd February 2015. The assessee contended that the order was bad in law and factually incorrect.2. Addition of Rs. 42,00,650/- for Unexplained Investments under Section 69B:During a search and seizure operation on 30th November 2010, jewellery worth Rs. 1,72,09,556/- was found in the assessee's locker. The AO added Rs. 42,00,650/- to the assessee's income under Section 69B, as the assessee could not produce purchase bills for 770.800 grams of gold jewellery and 936.956 grams of diamond jewellery. The assessee argued that the jewellery was acquired over 22 years through purchases, gifts, and as streedhan, and that bills were not retained as per advice from their tax consultant.3. Charging of Interest under Section 234B:The assessee contested the charging of interest under Section 234B, but the CIT(A) did not adjudicate this ground. The tribunal did not specifically address this issue in the final judgment.4. Relief Granted by CIT(A) Based on CBDT Instruction No. 1916:The CIT(A) granted partial relief to the assessee by considering 600 grams of gold jewellery as explained based on CBDT Instruction No. 1916, which allows certain quantities of jewellery to be considered as explained during search operations. The Revenue challenged this relief, arguing that the instruction pertains only to seizure and not to the explanation of assets.Tribunal's Findings:On the Addition of Rs. 42,00,650/-:The tribunal noted that the assessee and his wife had a habit of purchasing jewellery, evidenced by bills for jewellery worth Rs. 1.30 crores purchased in the seven years preceding the search. The tribunal accepted the assessee's explanation that the old jewellery was acquired over time through various means, including gifts and purchases for which bills were not retained. The tribunal emphasized the social and financial status of the assessee, customary practices, and the fact that no incriminating documents were found during the search.On the Relief Granted by CIT(A):The tribunal upheld the CIT(A)'s decision to grant relief for 600 grams of gold jewellery based on CBDT Instruction No. 1916. The tribunal further held that the entire jewellery worth Rs. 42,00,656/- was satisfactorily explained, considering the assessee's habitual pattern of purchasing jewellery, social customs, and financial background.Conclusion:The tribunal allowed the assessee's appeal, deleting the addition of Rs. 42,00,656/- made by the AO, and dismissed the Revenue's appeal. The tribunal did not adjudicate the issue of the applicability of Section 69A versus Section 69B, as the primary issue was resolved in favor of the assessee.Order Pronouncement:The order was pronounced in the open court on 9th March 2017.