TaxTMI 
TaxTMI 
2017 (3) TMI 958
X X X X Extracts X X X X
X X X X Extracts X X X X
....cts and under the circumstances and in law and in the interest of natural justice learned CIT (A) has erred m making additions in the value of the jewellery of Rs. 2,84,996/- 2] Addition on Account of Car Rs. 1,67,256/-. On the facts and under the circumstances and in law and in the interest of natural justice, the learned CIT CA) has erred in making addition of Rs. 1,67,256/- in the value of Motor-car. 3] Disallowance u/s. 14A - Rs. 23,338/- On the facts and under the circumstances and in law and in the interest of natural justice, the learned CIT CA) has erred in disallowing Rs. 23,338/- u/s. 14A of the Income Tax Act, 1961. 4] PRAYERS (i) On the facts and circumstances of the case the appellant submits that the order passed by the Learned CIT CA) is bad in law as the said order is passed against the principles of natural justice. (ii) The appellant further craves leave to add, alter or amend his Grounds of Appeal during the course of appeal." 3. Brief facts of the case are that the assessee is engaged in rendering services like reiki and other medicinal treatments. During the course of assessment proceedings u/s 143(3) r.w.s. 143(2) of 1961 Act, it was obser....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of income which does not form part of total income, but the assessee failed to provide any explanation with this regard. The A.O. accordingly made disallowance of administrative expenses of Rs. 23,338/- u/s 14A of 1961 Act read with Rule 8D(2)(iii) of Income-tax Rules, 1962 @ 0.5% of average value of investment by holding that it was not possible to earn any exempt income without incurring some administrative expenses , vide assessment order dated 28-03-2013 passed by the AO u/s 143(3) of 1961 Act. 6. Aggrieved by the assessment order dated 28-03-2013 passed by the A.O. u/s 143(3) of 1961 Act, the assessee carried the matter in appeal before the ld. CIT(A). 7. Before the ld. CIT(A), the assessee submitted that the assessee has not purchased any jewellery during the previous year relevant to the impugned assessment year under appeal . The assessee submitted that the said jewellery was inherited from his family members when he was five year old. The said jewellery is shown in wealth tax return filed with Revenue. The assessee submitted that the assessee is engaged in rendering services like Reiki and other medicinal treatment. It was submitted that he has been regularly filing ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the said EMS by Revenue and the said necklace was released to the assessee. It was submitted that since the said necklace was not in the possession of the assessee during the years after 1990, the assessee had not offered the same in the Wealth Tax Returns for years prior to assessment years 2003-04. The assessee refers to and relied upon the documents of pledge with the said Association. The other two items of difference are 20.00 Cts. Out of the 40.00 Cts. of (four) 4 diamond bangles, appearing at sr. no. 6. Out of this item, 20.00 CTS. were already existing and the balance 20 Cts. were acquired after the year 1998. Similarly the item at sr. no. 7 of the 2009 Valuation Report, viz. four (4) diamond bangles of 16 Cts., is an item acquired after the year 1998 .The assessee submitted that new items acquired (appearing at Sr. Nos. 6 & 7 of the 2009 valuation report) were purchased in the Financial year 1998-99 and shown in the books of the assessee for the year 31st March 1999, in the capital account for an amount of Rs. 3,64,500/-. It was submitted that there would be a minor difference in the weight/ value of the two (2) valuation reports which was very normal in jewellery items be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....0.0 3,50,000 - 20.0 5,00,000 - 20.0 5,00,000 Chain 8.30 4.0 50,000 8.30 4.0 70,000 8.30 4.0 70,000 4 bangles - 40.0 6,25,000 - 40.0 9,00,000 - 40.0 9,00,000 -do- - 16.0 2,75,000 - 16.0 4,00,000 - 16.0 4,00,000 -do- 62.50 37.0 3,50,000 62.50 37.0 5,00,000 62.50 37.0 5,00,000 2 pairs earstud - 4.0 1,40,000 - 4.0 2,00,000 - 4.0 2,00,000 Ring 4.50 2.0 1,70,000 4.50 2.0 2,50,000 4.50 2.0 2,50,000 8 buttons - 2.5 31,500 - 2.5 45,000 - 2.5 45,000 4 buttons 5.50 4.0 1,40,000 5.50 4.0 2,00,000 5.50 4.0 2,00,000 Nath 4.50 2.5 35,000 4.50 2.5 50,000 4.50 2.5 50,000 Packet of loose diamonds - 1.0 17,000 - 1.0 25,000 - 1.0 25,000 Total value of diamond jewellery 27,26,000 39,15,000 39,15,000 Gold jewellery Various ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d by the learned CIT(A). The Revenue is not in appeal against deletion of addition by learned CIT(A) as learned DR could not bring to our notice any appeal filed by the Revenue challenging deletion of additions towards jewellery by learned CIT(A). 8. Further, learned CIT(A) observed that jewellery owned by the assessee is not declared in the asset side of the Balance Sheet for income tax purposes while the jewellery is being treated as personal asset by the assessee. Thus, the learned CIT(A) observed that jewellery valuation charges of Rs. 34,151/- will be treated as personal expenses of the assessee and cannot be allowed as business expenses u/s 37 of the Act against the professional income of the assessee , vide appellate order dated 06.02.2015 passed by learned CIT(A). 9. With respect to the car, the ld. CIT(A) observed that the assessee has made investment in motor car of Rs. 6,70,890/- out of which loan taken was Rs. 4,89,634/- which source was considered as explained by learned CIT(A) . For the remaining amount of Rs. 1,81,256/- the source of which was not explained. It was also observed by the ld. CIT(A) that the assessee had further spent Rs. 36,000/- on accessories. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... earning an income which does not form part of total income. The learned CIT(A) held that even indirect expenses may have a proximate cause to the exempt income and hence must be disallowed in view of the decision of Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd., 328 ITR 81 and since the assessee has not disallowed any expenses of his own, recourse by AO to Section 14A of 1961 Act read with Rule 8D of 1962 Rules is justified and learned CIT(A) upheld and sustained the additions of Rs. 23,338/- made by the AO , vide appellate orders dated 06.02.2015 passed by learned CIT(A). 11. Aggrieved by the appellate orders dated 06.02.2015 passed by the ld. CIT(A) , the assessee is in appeal before the tribunal. 12. The ld. Counsel for the assessee submitted that the assessee is regularly filing wealth tax return since last more than 35 years. The assessee has got valuation of jewellery done from the government approved valuer and valuation report dated 29-08-2009 is placed in paper book, wherein valuer valued the jewellery as at 31-03-2009. The wealth tax returns were filed in time for the assessment year 2009-10 and 2010-11. The wealth tax return for assessment ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s no dispute as to the same , while the dispute has arisen with respect to second vehicle owned by the assessee which is Toyoto Innova car which was purchased in the year 2007 and was financed from loan from Kotak Mahindra Prime Ltd. . Our attention was drawn to invoice for purchase of said Toyota Innova which was purchased by assessee on 26-07-2007. The said invoice is placed in paper book/page 22. The said invoice which is in the name of the assessee for purchase of Toyota Innova car carries the remarks that the said Toyota Innova is hypothecated to Kotak Mahindra Prime Limited .It was submitted that no new car was purchased in the previous year relevant to impugned assessment year. The assessee placed on record the invoice of the car and submitted that no addition can be made on this account as no car was purchased during the previous year relevant to the impugned assessment year. It was not shown in the balance sheet but it was debited to the capital account was the submissions of learned counsel for the assessee.The ledger account of loan availed from Kotak Mahindra Prime Limited is placed in paper book page 20-21. The insurance documents and amortization chart of loan from Ko....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nue. The AO made additions towards the entire jewellery as reflected in the wealth tax return for assessment year 2010-11 , while the learned CIT(A) after going through the entire records of wealth tax and valuation reports gave partial relief with respect to the value of jewellery as reflected in valuation report dated 29-08- 2009 of government approved valuer to the tune of Rs. 64,58,055/- who valued jewellery based on market rate prevailing as on 31-03-2009, while the assessee had declared jewellery to the tune of Rs. 67,05,900/- in his wealth tax return for assessment year 2010-11 based on market price of gold and silver as on 31-03-2010, wherein learned CIT(A) upheld/sustained the addition of difference of Rs. 2,47,845/- between the two values while rest of the additions were deleted by learned CIT(A). The dispute thus narrowed down to the additions sustained by learned CIT(A) which is to the tune of difference of Rs. 2,47,845/- between value of jewellery as reflected in valuation report dated 29-08-2009 by government approved valuer adopting market value as on 31-03-2009 wherein total jewellery was valued at Rs. 64,58,055 (paper book/page 16-19) whereas the assessee declared ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing as on 31-03-2010 vis-à-vis rate of gold and silver adopted by approved valuer in his valuation report dated 29-08-2009 which report is based on market rate of gold and silver as at 31-03-2009 We do not find any merit in the contention of the Revenue and in our view no addition u/s 69A to the tune of Rs. 2,47,845/- on account of unexplained jewellery cannot be sustained and is hereby ordered to be deleted.We order accordingly. With respect to jewellery valuation charges of Rs. 34,151/- disallowed by the AO and as sustained by learned CIT(A) on the grounds that these are personal expenses and cannot be allowed as business expenses to be reduced from business income , as jewellery was held to be personal asset of the assessee. The assessee is contending that the same was debited to capital account of the assessee and no such claim has been made by the assessee as deduction as business expenses from business income of the assessee, but no capital account has been filed in the paper book filed before the tribunal. The said contention of the assessee need verification and the matter is restored to the file of the AO for verifications of the contention of the assessee that t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly Trust. The assessee has also invested in shares , on which no dividend income was received during the previous year relevant to impugned assessment year. The assessee has claimed that no expenses have been incurred in relation to earning of total income which does not form part of the total income. It is also claim of the assessee that since no dividend income is received , no disallowance of expenses incurred in relation to earning of income which does not form part of total income can be made by invoking Section 14A of 1961 Act. The AO has adopted Rule 8D of 1962 for computing disallowance of expenses incurred in relation to earning of income which does not form part of total income u/s 14A of 1961 Act. The disallowance worked out by the authorities below was Rs. 23,338/- u/r 8D(2)(iii) of 1962 Rule read with Section 14A of 1961 Act. In our considered view, the A.O. has rightly invoked provisions of section 14A of the Act and made the disallowance by adopting Rule 8D of 1962 Rules as method for computing disallowance keeping in view factual matrix of the case as the assessee has merely stated that no expenses have been incurred in relation to the earning of the income which do....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly in absence of non-furnishing of these details, the AO could not ascertain the amount of disallowance of expenditure incurred in relation to earning of exempt income having regards to the accounts of the assessee in accordance with mandate of Section 14A(2) r.w.s 14A(3) of the Act and went ahead by adopting method as provided for by Rule 8D of 1962 Rules for making disallowance. The AO in the absence of details and break-up of disallowance of expenditure furnished by the assessee u/s 14A of the Act incurred in relation to earning of exempt income, proceeded by rejecting contention offered by the assesse that no expenditure has been incurred for earning of exempt income and recorded satisfaction as mandated by Section 14A of the Act before proceeding to invoke Rule 8D of Income-tax Rules, 1962. Thus keeping in view factual matrix of the case as detailed above in the instant case, in our considered view, the assessee has failed to discharge primary and initial burden/ onus as mandated u/s 106 of the Act of 1872 as is cast on the assessee as these are facts which are especially and exclusively within the knowledge of the assessee and the assessee did not discharge its burden u/s 106....