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2020 (9) TMI 1007
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....situation of Covid-19 Pandemic. Rival contentions have been heard and record perused. Facts in brief are that the assessee is an individual and derived income from salary and other sources during the years under consideration. A search was conducted on 18.07.2012 in the case of the assessee group. The assessee is head of family so he undertaken to pay all the due taxes and also undertake other responsibilities. The search was conducted on 18.07.2012. During the course of search in the statement recorded u/s 132(4) of the Income Tax Act, 1961 the assessee has admitted total surrendered of Rs. 15.89 Crores in the hands of all the family members. The details of surrender admitted are as under: - Sr.No. Particulars Surrender in the hands of Amount Remarks 1 On account of loans and advances as per exhibit-4, 5 & 6 Mangi Lal Kandoi 86000000 2 Seized documents Mangi Lal Kandoi 2500000 Set off is claimed 3 Seized documents Mangi Lal Kandoi 4924000 4 Seized documents Mangi Lal Kandoi 1241200 4 Jewellery and other discrepancies Mangi Lal Kandoi 40000000 Subject to verification and clarification ....
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....Rs. 2.55 crores. The A.O. also made addition of Rs. 49,160/- on account of interest income earned on advances of Rs. 25.00 lacs. 8. A further addition of Rs. 1,91,200/- made by the A.O. in the A.Y. 2013-14 on account of advances and the same was confirmed by the ld. CIT(A). 9. An addition of Rs. 2,09,63,520/- was made by the A.O. on account of jewellery found during the course of search by treating the same as unexplained. By the impugned order, the ld. CIT(A) has confirmed the addition of Rs. 97,65,444/- out of the addition made on account of jewellery. 10. By the impugned order, the ld. CIT(A) has deleted the addition of Rs. 2,03,965/- made by the A.O. on account of interest earned on undisclosed advances of Rs. 25.00 lacs. Further the ld. CIT(A) has also deleted the addition of Rs. 6,87,125/- made by the A.O. on account of interest earned on undisclosed advances of Rs. 49.24 lacs. 11. The ld. CIT(A) also deleted addition of Rs. 2,06,257/- made by the A.O. on account of interest earned on undisclosed advances of Rs. 12.41 lacs. 12. During the course of assessment, the A.O. had also made addition of Rs. 4.00 crores on account of unexplained transactions which was de....
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....nt on the admission of or waiver by the assessee. Chargeability is dependent on the charging section of the Income Tax Act which needs to the strictly construed and followed. CIT vs. Bhaskar Mittar 262 ITR 638 (Kol). 17. In view of the above contention of the ld AR that there was no case for taking action u/s 153A in the hands of het assessee there being no material relating to him found during the course of search. Plethora of decisions were cited wherein it has been held that if during the course of search no undisclosed income is noticed, action u/s 153A is not triggered. The following case laws are relied on: - (i) DCIT Vs. Royal Marwar Tobacco Product (P.) Ltd [2009] 29 SOT 53 (AHD.)(URO): Since no material indicating any suppressed sales for assessment years 2000-01 to 2003-04 had been found during course of search for said years, and there was no defect in books of account, Assessing Officer was not. justified, in making addition for said years on basis of material seized relating to assessment year 2004-05. (ii) In Kusum Gupta v. DCIT (ITA Nos. 4873/DeI2009, (2005-06) 2510(A.Y. 2003-04), 3312 (A.Y. 2004-05) 2833/Del/2011 (A.Y. 2006-07) order dt....
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....assessment u/s 153A depends upon whether any assessment or reassessment proceedings were pending or completed on the date of the search. Whenever the abated proceedings are merged with the proceedings u/s 153A then scope of assessment is vide and it will cover all issues arising from the original return and issue arising on the basis of incriminating documents, and assets found and seized during the search. Wherever the proceedings are completed prior to the search then nothing merges with proceding u/s 153A of the Act and nothing abates. In such a situation, the AO has to respect the completeness of the proceedings. Admittedly, in the case of assessee, no incriminating documents were found and seized. The provisions of section 153A give power to assessing officer to assess and reassess the income. The assessing officer is empowered to make addition on account of undisclosed income or income escaped assessment. In the case under consideration, there is no incriminating material found during the course of search relating to the assessment year under consideration. The time period for issuing notice u/s 143(2) was already expired prior to the date of search. Therefore, the proceeding....
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.... foundation for issuing notice u/s 153A and hence the assessment cannot be framed on the strength of such an invalid notice which is ab-initio void. It is submitted that during the course of search absolutely no papers or any incriminating material was seized. No statements were recorded u/s 132(4) in respect of any issue for year under consideration. The provisions of section 153A trigger only when there exist any incriminating material found during search which may be in the form of any document, books of accounts, cash, stock or bullion. In this case nothing of the sort was found or seized. Hence the notice issued u/s 153A is invalid. The issue has now been decided by the Jurisdictional High Court of Rajasthan in the case of Jai Steel India Vs. ACIT 88 DTR 1. The Hon'ble High Court has held as under - "Section 153A cannot be read in isolation, in as much as, the same is triggered only on account of any search/requisition u/s 132 or 132A. If any books of accounts or other documents relevant to the assessment had not been produced in the court of original assessment and found in the course of search, such books of accounts or other documents have to be taken into cons....
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....under S. 153C of the IT Act, 1961. Since for all these years, the returns were originally filed and processed and since no additional material is found pertaining to the assessee, which is held to be belonging to the assessee the AO does not assume jurisdiction for framing assessment under S. 153C r.w.s. 153A of the IT Act, 1961. We therefore, cancel all the assessments made for all these years. As per the ld AR, the ratio of the aforesaid case laws is fully applicable to the facts of the case, therefore, framing of the assessment is illegal and unlawful. Therefore, the notice issued u/s 153A deserves to be quashed. 18. As per the ld AR while confirming the addition of Rs. 6.00 lacs the Ld. CIT(A) has not perused the seized papers nor has gone through the statement of the assessee recorded u/s 132(4) of the Act, wherein the assessee had very clearly stated that the amount of Rs. 600000/- was undisclosed income of Shri Anand Singhal who was present at the time of statement and admitted that the income of Rs. 600000/- pertained to him. The statement u/s 132(4) is on oath and carries evidentiary value. It cannot be superseded by a subsequent affidavit of the assessee that income....
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.... (ii) Mahaan Foods Ltd. Vs. DCIT (ITAT Delhi) (2009) 27 DTR 185 In the absence of any other evidence found during the course of search or brought on record by the Assessing Officer to show that the expenditure found noted on seized documents was actually incurred by the assessee, the same cannot be added to the undisclosed income of the assessee. No inference could be drawn against the assessee much less any inference of unexplained expenses on the basis of a dumb document found at the residence of its director as there is no proof to show that the amount mentioned in the said document was paid by the company. (iii) Moolchand Kumawat & Sons Vs. DCIT (Ajmer) ITAT Jaipur Bench 42 Taxworld 241 in M.A. No. 93/JP/2008 arising out of ITSSA No. 24/JP/2005 order dated 20.02.2009 Addition cannot be made on the basis of a dumb document or on the basis of entries found recorded on a paper seized during search without conducting any enquiry from the concerned party. (iv) Assistant Commissioner of Income Tax Vs. Satya Pal Wassan (2007) 295 ITR 9 AT 352 (Jabalpur) A documents found during the course of a search must be a speaking one an....
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.... principles of natural justice have been violated, and the A.O. should not make any addition on the basis of a report which was not disclosed to the assessee. The following case laws are quoted in support: - (i) Gargi Din Jwala Prasad Vs. CIT (1974) 96 ITR 97 (All) Principles of natural justice are applicable - The principals of natural justice are applicable to assessment proceedings. The elementary principle of natural justice is that the assessee should have knowledge of the material which is going to be used against him so that he may be able to meet it. (iii) Munna Lal Murlidhar Vs CIT (1971) 79 ITR 540 (All) The principle of natural justice involves a right in the assessee to inspect the reports and obtain the substance of the all relevant documents such as statements, orders, reports etc. so as to be able to lead evidence in rebuttal or to cross examine witness who have given evidence against him. It also means that the assessee should be given a reasonable time and opportunity to produce such evidence as he may consider necessary. (iii) In the following it was held that the Assessing Officer can make enquiries to gather material ....
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....her assets/valuable/jewellery/cash/stock/expenditure was found. 24. As per the ld AR, in the A.Y. 2011-12, the ld. CIT(A) has upheld addition of Rs. 33.00 lacs out of Rs. 34,34,440/-on account of interest earned and undisclosed advances made by the assessee on presumption basis. As per the ld AR, the paper i.e. page no. 1 and 2 of annexure AS-1 to AS-4 on the basis of which addition was made did not pertain to the assessee. Hence there was no occasion for making addition in the hands of the assessee. These papers were virtually dump papers as these did not contain any date particularly the year which these pertain, it was not known as who was the writer of these papers and further these papers did not contain signature of the assessee. It was argued that the A.O. had failed to link these papers with the business of the assessee either with the other material found during search or by conducting any post search enquires. It is settled principle of law that unless the period of the papers is established and the writer of these papers is known, no addition could be made. 25. As per the ld AR, the additions were made against the principles of natural justice. It was submitted tha....
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....urse of search or brought on record by the Assessing Officer to show that the expenditure found noted on seized documents was actually incurred by the assessee, the same cannot be added to the undisclosed income of the assessee. No inference could be drawn against the assessee much less any inference of unexplained expenses on the basis of a dumb document found at the residence of its director as there is no proof to show that the amount mentioned in the said document was paid by the company. (iii) Moolchand Kumawat & Sons Vs. DCIT (Ajmer) ITAT Jaipur Bench 42 Taxworld 241 in M.A. No. 93/JP/2008 arising out of ITSSA No. 24/JP/2005 order dated 20.02.2009 Addition cannot be made on the basis of a dumb document or on the basis of entries found recorded on a paper seized during search without conducting any enquiry from the concerned party. (iv) Assistant Commissioner of Income Tax Vs. Satya Pal Wassan (2007) 295 ITR 9 AT 352 (Jabalpur) A documents found during the course of a search must be a speaking one and without any second interpretation, must reflect all the details about the transaction of the assessee in the relevant Assessment Year....
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.... interest was bound to follow. It is submitted no addition can be made u/s 153A on basis of presumption. Presumption however strong cannot take the place of evidence. The following case laws are quoted in support: - (i) Uma Charan Shaw & Brothers 37 ITR 271 (SC) (ii) CIT vs. Anupam Kapoor 299 ITR 179 (P&H) (iii) CIT vs. Dhiraj Lal Girdhari Lal 26 OTR 736 (iv) Dhakeshwari Cotton Mills 26 ITR 775 (SC) (v) State vs. Gulzari Lal Tondon 1979 AIR 1382 (SC) (vi) J.A. Naidu vs. State of Maharastra 1979 AIR 1537 (SC) Further it is established position of law that interest cannot be taxed on notional basis. In this case there is no evidence that interest accrued to the assessee or interest was received by him. Even the assessee has challenged the addition on account of alleged advances and hence the question of taxing interest does not arise. There is no material on record to as to establish that assessee received interest on the alleged advances. It is the working of the mind of the A.O. that has resulted in addition on account of interest. The interest has been calculated notionally and addition has been made accordingly. No addit....
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....terial or on any enquiry but solely on the confessional statement of the assessee. It is established position of law that no addition can be made simply and simply on the basis confessional statement. Such statements are directly in violation of board circulars. Such additions deserve to be knocked down at the first sight. Therefore, the addition is assailed as under and deserves to be deleted. 32.1 The ld. AR invited our attention to Annexure AS-4, 5, 6 Seized from residence of Shri Mangi Lal Kandoi, Ambabari, Jaipur. Annexure-A Exhibit-1 Seized form Anand Singhal S/o Mangi Lal Kandoi, Ambabari, Jaipur. 32.2 As per the ld AR, Annexure-AS- 4, 5, 6 is summary of all loans and advances given by the assessee as on date of search that is 18.07.2020. The assessee has surrendered Rs. 8.6 Cr. on the basis of above Annexures. The assessee own's all the entries recorded in above Annexures and the total of this was 8.6 Cr. 32.3 As per the ld AR, Annexure-A Exhibit-1, 2 and 3 are found from Shri Anand Singhal son of the assessee who is recording entries at the time of transactions and subsequently merged in the Annexure-AS- 4, 5, 6. It was submitted before the Ld. AO that the entries....
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....lier paragraph......." Therefore this amount was part of the Rs. 8.6 Cr. and the addition deserve deleted. 32.4 In view of above contentions, it was the argument of the ld AR that all these documents found and seized on the basis of which income was assessed by the A.O. have again been taxed on the plea that the advances were given. As per the ld AR, all these amounts were part of Rs. 8.60 crores surrendered by the assessee, therefore, no separate addition are required. 33. On the other hand, the ld CIT-DR has supported the order of the A.O. and vehemently argued that all the additions were made on the basis of seized material and the surrender was made by the assessee during the course of search. As per the ld. CIT-DR, the set off asked by the assessee with regard to income earned and then used for advances was not before the lower authorities, therefore, no relief can be given for the amount so earned and used for advances. Our attention was drawn to the various findings by the A.O. with regard to each and every seized material giving description of the entries therein. He further contended that the ld. CIT(A) has not properly appreciated the finding of the A.O. wh....
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.... totaling to Rs. 3,73,12,662/- as per annexure 'A' got prepared by the assessee at the time of search itself on the basis of annexure AS-1 to AS-4. (iii) Addition of Rs. 25,00,000/- on account of undisclosed advances and interest of Rs. 2,53,125/- thereon as per annexure 'A-3' page no. 14 and Rs. 4250/- on account of brokerage earned @ 10% made by the assessee on presumption basis. (iv) Addition of Rs. 6,87,175/-on account of interest earned on undisclosed advances of Rs. 49,24,00,000/- addition made in earlier years on presumption basis with reference to annexure A-1 page 5. (v) Addition of Rs. 3,97,457/- (Rs. 1,91,200/- on account of undisclosed advances and Rs. on account of interest of Rs. 2,06,257/- on presumption basis on such advances with reference to annexure A-1 page 2.) (vi) Addition of Rs. 4,00,00,000/- with reference to annexure AS-3 and AS-7. (vii) Addition of Rs. 2,09,63,501/-on account of unexplained jewellery. (viii) Addition of Rs. 56,39,819/-on account of unexplained cash. 36. By the impugned order, the ld. CIT(A) has confirmed the following additions: (i) Addition of Rs. 2,55,00,00....
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....ficer, I find that except the declaration before the settlement commission there is no material in possession of assessing officer to hold that the appellant have earned the income from scrap trading. As per section 245 HA(2), where a proceeding before the settlement commission abates, the assessing officer before whom the proceeding at the time of making application was pending, shall dispose of the case in accordance with the provision of this act as if no application under section 245C has been made. The combined reading of section 245 HA (2) and 245 HA (3) suggest that whereas the assessment has to be made in accordance with the provision of the act as if no application for settlement has been made, the assessing officer is also entitled to use the material and information produced by the assessee before settlement commission as also the evidence recorded by the settlement commission. If the income is to be computed in accordance with the provision of law, it is settled law as laid down by the Supreme Court that, the primary onus lies upon the assessing officer to demonstrate that the assessee has earned certain income chargeable under the Act. There is no material before the a....
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....ted before the commission. Otherwise the assessee did not enjoy or earned such income. It was primarily on this ground that although the assessee in fact and in reality, did not earn any income from scrap business but the same was disclosed before the Settlement Commission so that the application was not rejected. The Settlement Commission concluded that the assessee failed to establish the source of income from scrap and its basis of disclosures. Therefore, the application before the Settlement Commission stood rejected. The Settlement Commission passed order on 19.09.2016 u/s 245D(4) and rejected the application of the assessee observing as under: - 11. Scrap income and miscellaneous income like commission 11.1 The SoFs mention that the two co-applicants have also indulged in trading of copper and other scrap on account of their contacts with the scrap dealers. It was claimed that some of these transactions were in cash, and they were not accounted for and the two co-applicants kept it with themselves. It was further claimed that the two co-applicants have earned miscellaneous commission income from supplies made by the venders to their group. 11.2 In f....
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....d in their application before the Settlement Commission that page no. 49 of AS-3 indicated regarding trading in scrap business. Having gone through this paper the Settlement Commission was of the view that it was only indicative that there was some trading in scrap but there was no way to make any estimate from such limited transactions. In view of this the Settlement Commission observed that the basis of surrender of income from scrap business was shrouded in mystery and therefore rejected the same. The Hon'ble Settlement Commission has very specifically mentioned in para 4 that the manner of earning of such income has been left vague and no basis was furnished for the working of the surrendered income. In the view of the Settlement Commission the assessee failed in providing vital ingredient regarding the disclosure made. The disclosure was held not to be candid in so far as the manner of earning was shown. In short, the Settlement Commission did not agree with the source of income so disclosed by the assessee on account of scrap business. The summum bonum of the rejection of the assessee's application by the Settlement Commission is the following - (i) The as....
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.... where the addition on account of notional interest was of Rs. 33,39,681/-. 41. It is established position of law that interest cannot be taxed on notional basis. In this case there is no evidence that interest accrued to the assessee or interest was received by him. Even the assessee has challenged the addition on account of alleged advances and hence the question of taxing interest does not arise. There is no material on record so as to establish that assessee received interest on the alleged advances. It is the working of the mind of the A.O. that has resulted in addition on account of interest. The interest has been calculated notionally and addition has been made accordingly. 42. The decision of the Ld. CIT(A) is based on many judicial pronouncement and sound law. Therefore, the decision of the Ld. CIT(A) in deleting the addition of Rs. 1,18,12,622/- deserves to be confirmed. 43. Similarly, addition of Rs. 6,87,125/- on account of interest earned on undisclosed advance of Rs. 49.24 lacs was deleted by the ld. CIT(A) by having the same observation to the effect that addition was made by the A.O. by presuming that the assessee had earned interest on advances although no....
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....n the revenue to bring on the record material substantiating the surrender. The Ld. CIT(A) has also referred that at first these papers on the basis of which addition has been made were stated by the assessee to relate with Kandoi Metal Powders Mfg. Pvt Ltd and not with the assessee. The precise observation of the ld. CIT(A) while deleting the impugned addition was as under: "17. I have carefully considered the relevant facts, the seized material, the argument advanced and the case law cited. The primary reason for addition is the admission by the appellant during the course of search. I have therefore considered the reply given while explaining the seized material referred therein. Firstly it was stated by the appellant that the said document primary relates to Kandoi Metal Powders Manufacturing Co Private limited. It was stated that out of the said papers in majority cases the transactions are not recorded in books of accounts and purchase, sales and debtors are outside the books of accounts. It was also stated that the transaction in annexure AS-7 which is a diary is also not recorded in regular books of accounts. Some of the transaction recorded in said seized material....
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....e notings in such seized material is giving rise to taxable income itself is doubtful. It is settled law that merely on the admission and without any corroborating material no addition can be made. Even after exercising the longest arm of the revenue by conducting search, no evidence of application of such income in the form of asset or expenditure is found against such huge income of 4 crores. Had the assessee earned such huge income, the same would have been found to have been applied either for acquisition of any asset or for spending the same. 17.2 Another reason given by the AO is that the statement was voluntary which is also found to be so by Hon'ble Settlement Commission. Even if it is considered that the statement was voluntary, the statement itself should be such which narrates the nature of transaction and relates the same with the seized material for computation of undisclosed income. In the present case it is seen that except the statement, neither the nature of transaction is stated nor its relation to the seized material is stated where such income of 4 crores are recorded. Therefore even if the statement is voluntary, since it has no corroboration or is....
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....assessing officer shall make an assessment of the total income. Since the primary onus to tax any income is upon the revenue and since the assessing officer failed to bring out any such material for taxing the income of Rs.4 crores, in my considered opinion the same is not sustainable on the facts of the case as also in law. Having examined the seized material, it is not discernible as to how such material demonstrates that the appellant has earned the income of Rs.4 crores. In my opinion only on the basis of admission by the appellant, the same is not sustainable. Even the assessing officer has not related the noting in the seized material with the amount of 4 crores. The addition of 4 Crores is therefore liable to be deleted and is accordingly hereby deleted." 47. We had carefully gone through the observation of the A.O. and the findings given by the ld. CIT(A) while deleting the addition and found that the ld. CIT(A) has dealt with each and every objection of the A.O. and after controverting the same, reached to the conclusion that no addition is warranted without any corroborating material. The ld. CIT(A) has further observed that the assessment U/s 143 is made on the basis ....
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....CIT(A) has followed the decision of the jurisdictional high court of Rajasthan in the case of Satya Narayan Patni 40 taxman 440. Following the instruction quoted above the Ld. CIT(A) has given credit of jewellery disclosed in the wealth tax return, although not disclosed in the balance sheet filed along with the return of income. The Ld. CIT(A) has held that the CBDT instruction does not require jewellery to be disclosed in the regular books of accounts or in the balance sheet. It is enough if the jewellery is disclosed in the wealth tax return, then credit has to be given accordingly. The Ld. CIT(A) has further held that credit of jewellery disclosed in the balance sheet has to be given with reference to weight and not value. In view of this the Ld. CIT(A) gave credit of 3421.779 grams gold jewelery, 189.62 carats of diamonds and 16.75 kg of silverware as disclosed by the assessee group in the wealth tax return or balance sheet. The Ld. CIT(A) further allowed relief in respect of Savitri Kandoi and Sneh Kandoi of gold jewellery 500 grams and 112 grams being covered fully under the CBDT instruction. 51. We found that the assessee had disclosed 1500 grams of gold jewellery in the....
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....not explain the jewellery found with wealth tax return, source of jewellery purchased or jewellery gifted. On the basis of the finding of the settlement commission the assessing officer proposed the addition. During assessment proceedings the assessee filed weight-wise chart of total jewellery found and that declared in the wealth tax returns as also credit for the several members of the family based on CBDT circular. The assessing officer held that since as per the income tax return, the jewellery declared in the balance sheet of various family members was Rs.32,03,735 only and the value of jewellery found during search was Rs.2,41,67,236, the balance jewellery of Rs. 2,09,63,501 is to be considered as unexplained and required to be added. He also held that benefit of jewellery shown in wealth tax returns filed before 30 years cannot be given to the assessee as the family members have not filed their wealth tax returns thereafter. In the balance sheet for A.Y. 2013-14, the jewellery declared is only Rs.32.03 Lakhs. He accordingly held that jewellery declared in the wealth tax returns filed more than 20-30 years back is not existing at present and if any then the same is covered by....
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....grams and if valued @ 2150/- per grams (present valuation) comes out to Rs. 5166450/- and not Rs. 20963501/-. The assessee is ready to include such income in his return of income" The Ld. Assessing Officer virtually did not consider the reply at all and made addition of Rs. 2,09,63,501/-. The addition made by the Ld. Assessing Officer is unlawful, illegal and unjust on the following counts: - 2. Jewellery seized only of Rs. 1,03,41,778/- It is submitted that as mentioned by the Ld. Assessing Officer in para 7.6 of the assessment order that out of total jewellery found of Rs. 2,41,67,236/- jewellery to the extent of Rs. 1,03,41,778/- was seized. In other words the remaining jewellery found to the extent of Rs. 1,38,35,458/- was treated as explained by the authorized officers. Therefore the explanation required is only in respect of jewellery seized of Rs. 1,03,41,778/-. Therefore the Ld. Assessing Officer was wrong in making addition of Rs. 2,09,63,501/-. 3. CBDT Instruction 1994 dated 11-05-1994 not followed by the Ld. Assessing Officer: It is submitted that the Ld. Assessing Officer has not followed the instructions of the CBDT issued u....
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....ealth tax return which were filed upto Assessment Year 1993-94 or earlier. However their wealth tax return disclosed possession of jewelery and the benefit of which required to be given. The Ld. Assessing Officer has not given any credit of this jewellery disclosed in wealth tax returns. Jewellery had been disclosed in the wealth tax returns by Shri Anand Singhal, Shri R.K. Kandoi and Shri N.K. Kandoi who had not disclosed jewellery in their income tax returns. The jewellery disclosed by these persons is in their income tax return upto Assessment Year 1993-94. Benefit has to be given of valuation as on 31.03.2013. This exercise has not been done by the Ld. Assessing Officer. Benefit has been given of this jewellery because it is not the case of the Ld. Assessing Officer that such jewellery was ever sold by these members. In case this benefit is given then there would be no unexplained jewellery warranting addition. In case if there remains any unexplained jewellery the same requires to be considered in the hands of the persons to whom the same belongs. In any case the Ld. Assessing Officer was not justified to consider the entire jewellery in the hands of the assessee and ....
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....ere personal wearing jewellery and same were received by ladies/daughter-in-law on/or at time of their marriage either from parental side or in-laws side - Revenue could not place any material to show otherwise than that stipulated in CBDT Circular 1916, dated 11-5-1994 which states that if jewellery found in possession of a married lady, unmarried lady and male member of family is to extent of 500 gms., 250. gms and 100 gms. each, officials would not question source and acquisition - Further, Assessing Officer, in first instance, did not seize said jewellery - Whether since jewellery was found to be within tolerable limit prescribed by CBDT, no addition was justifiable - Held, yes [Paras 12 to 14] [In favour of assessee] Circulars and Notifications : Instruction No. 1916, dated 11-5-1994 HELD On perusal of the circular of the Board, it is clear that in the case of wealth tax assessee, whatever gold jewellery and ornaments have been found and declared in the wealth tax return, need not be seized. However, sub-clause (ii) prescribes that in case of a person not assessed to wealth tax gold jewellery and ornaments to the extent of 500 gms. per married lady, ....
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....ned investment of the person with whom the said jewellery has been found. [Para 12] Similar view has also been taken by Hon'ble Delhi High court in the case of Ashok Chaddha Vs. CIT 14 Taxmann.com 57 (Del) 21. Thus, Applying the CBDT instruction, I note that various members of the family were declaring the jewellery in their wealth tax returns though may be much prior to the date of search. However the declaration of jewellery in wealth tax returns in earlier year will definitely explain that the jewellerywere in their possession in earlier years also. The assessing officer has not given credit for the jewellery declared in wealth tax returns for the reason that they are not appearing in the balance sheets for A.Y. 2013-14. In my opinion, the approach is not sustainable. The CBDT instruction nowhere provides that the jewellery declared in wealth tax returns should continue to be shown also in the regular books of accounts. Not showing the jewellery in books of accounts may be for the reason that the same are received by way of gifts etc. on various occasions. Since there will be no cost in respect of such jewellery received by way of gift or on various occasio....
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.....00 92.00 5.00 6 Male and Female Members 1500.00 0 8.00 Total 2112.00 184.00 23.00 Difference 2403 0 0 5166450 23. In the chart above, the gold jewellary, diamonds and Silver articles from the WT records 86 what is purchased by different assessees, is 3421.779 gms, 184 carat 85 16.75 Kgm. The appellant has successfully explained the same. The evidences of purchases have been filed with nature and sources of acquisition. Same were filed before the AO and also before me. I find no infirmity in the same. Coming to the further claim of 500 gms & 112 gms of gold in the name of Savitri Kandoi 86 Sneh kandoi, the claim of ld. A/R is correct as both of them are not WT assessee and such claim is in commensurate with the existing instruction of CBDT on Jewellary. Coming to the claim of 250 gms of gold in the hand of each of the 6 children, instead of 100 gms as provided by the CBDT instruction, I am of the view a further allowances of 100 gms each can be provided in the hand of each of the children considering the status of family and rajasthani traditions. Thus instead of 1500 gms claimed the claim ....
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....ined as unexplained. Thus a further addition of Rs.37,13,994 is made. Thus in nut shell the total disclosure on account of jewellary by appellant Rs.51,66,450 is increased by 1) Rs. 885000- on account of gold 950 gms treated as unexplained in the hands of each of six minor children 2) Rs. 3713994- on account of Diamonds. The total addition which would remain is thus : Rs.51,66,450 + 8,85,000 + 37,13,994 = 97,65,444). The appellant gets consequential relief of Rs.2,09,63,501 - 97,65,444 = Rs.1,11,98,057 25. As regards silver items of 39 kgs found, 16 kgs. are declared in wealth tax returns or in books of accounts. I also find that the appellant herein is quite aged and is head of huge family of 3 married sons, their wives and children. The total members of the family are 14. The appellant belongs to a Rajasthani family where giving large amount of jewellery & Silver utensils in marriage and on occasion of childbirth is very much prevalent. Regarding balance 23 Kgs., looking to the size of the family and usage and custom thereof these small items can be reasonably considered as explained and no addition is required in thi....
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....t tried to reconcile the cash found with the entries in the books of accounts. The report before settlement commission cannot be considered to be final after during assessment proceedings the appellant have furnished the reconciliation and tried to explain the cash found during search. Since the cash found is less than that shown in the books of accounts after further reconciliation and since no defect is pointed out specifically of such reconciliation, the addition under section 69A is not valid. It was explained that there are various payments which are not recorded. Thus at least to the extent of cash found the same is explained by way of books of accounts and hence no addition is justified. Section 69A provides that where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of accounts, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of money, bullion, jewellery or other valuable article, the assessing officer may make the addition. Thus the prer....
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.... Rs. 82, 26,670/- fully covered the cash found of Rs. 56,39,819/-. There was no case of any addition. Further after making necessary adjustment the position of cash as per books worked out to Rs. 1,34,68,974/-. Thus, in fact cash was found short. This was because various expenses and withdrawal remained to be debited which are done towards the month end. Thus, there was no case for any addition on account excess cash. 59. We also observe that the A.O. has not made effort to find out the book position of any concern. The same has not been discussed. The A.O. has also referred to report submitted under rule 9 to ITSC (Para 7.7.1) and has made the addition on the basis of such report. We observe that the A.O. was precluded in utilizing the report in making addition without furnishing a copy of the same to the assessee for defense and rebuttal. The action of the A.O. is contrary to the established principles of equity and justice. The addition is against the principles of natural justice. The A.O. could not have utilized the report submitted under rule 9 without first furnishing a copy of report to the assessee. This was not done. The assessee does not know the contents of the repor....
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....ed by the ld. CIT(A). 62. The contention of the ld. AR was that the paper i.e. page no. 1 and 2 of annexure AS-1 to AS-4 on the basis of which addition was made did not pertain to the assessee. Hence there was no occasion for making addition in the hands of the assessee. These papers were virtually dump papers as these did not contain any date particularly the year which these pertain, it was not known as who was the writer of these papers and further these papers did not contain signature of the assessee. It was argued that the A.O. had failed to link these papers with the business of the assessee either with the other material found during search or by conducting any post search enquires. It is settled principle of law that unless the period of the papers is established and the writer of these papers is known, no addition could be made. 63. The ld. AR further argued that the addition was made by the A.O. in the hands of the assessee despite the fact that in statement recorded u/s 132(4) it was brought on record that these papers pertained to Shri Anand Singhal and Shri R.K. Kandoi and Narendra Kandoi also and accordingly addition if any was required to be made equally in fo....
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....the advances in the A.Y. 2012-13, a set off of Rs. 2.43 crores are required to be allowed. Thus, we confirm the addition on account of loans and advances in the A.Y. 2012-13 to the extent of Rs. 3,25,50,000/- i.e. (5,68,50,000 - 2,43,00,000). We direct accordingly. 67. Similarly, in the A.Y. 2010-11, surrender of income of Rs. 6.00 lacs was confirmed by us. In the assessment order on page no. 13 in para 8.2.2 the assessee has submitted that above Rs. 6,00,000/- is part of 8.6 Cr. surrendered by the assessee on the basis of Annexure-AS- 4, 5, 6. This income is also required to be set off out of surrender for advances amounting to Rs. 33.00 lacs in A.Y. 2011-12. Accordingly, we direct the A.O. to restrict addition on account of advances in the A.Y. 2011-12 to Rs. 27,00,000/- (Rs. 33,00,000 - 6,00,000). 68. Similarly, we found that the addition was made on the basis of other seized documents, Rs. 49,24,000/- and Rs. 4,50,000/- in the A.Y. 2012-13. In this regard, we found that the additions were made on the basis of two seized documents :- A.) Annexure AS-4, 5, 6 Seized from residence of Shri Mangi Lal Kandoi, Ambabari, Jaipur. B.)Annexure-A Exhibit-1 Seized fo....
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.... of Rs. 25 Lacs in the order on page 11 in para 7.2.2. The assessee has stated as under : - "Firstly, the seized document on the basis of which addition to the tune of Rs. 25,00,000/- is proposed to be made pertains to memoranda interest calculation by a finance broker. If it is presumed that this document represents and transactions in the nature of loans then the loan amount Rs. 25 lacs has already been included in the calculation of amount of Rs. 8.6 crores. The seized document only contains calculation of interest on the amount which we have already disclosed in earlier paragraph......." Therefore this amount was part of the Rs. 8.6 Cr. and the addition deserve deleted. From the record, we found that the income surrendered on the basis of above documents i.e. Rs. 49,24,000/- and Rs. 4,50,000/- in the A.Y. 2012-13 and Rs. 25.00 lacs in the A.Y. 2013-14 which works out to be Rs. 78,74,000/-, deserves to be set off out of addition of Rs. 2.55 crores made in the A.Y. 2013-14 on account of surrender for advances. In nutshell, the addition of Rs. 2.55 crores made in the A.Y. 2013-14 on account of surrender for advances is restricted to Rs. 1,76,26,000/- (2,55,00,....