2015 (7) TMI 1052 - AT - Income Tax

Unexplained investments in relation to jewellery found during the course of search action - Held that - if the difference in weight is ignored the description of the items of the jewellery almost tallied with that of the items already declared by the assessee. Moreover the overall weight of jewellery already declared by the assessee in her books of accounts is more than that of the jewellery found during the course of search action. In view of the above stated facts it cannot be said in this case that the jewellery found during the search action was unexplained. The additions thus in this case are not warranted and the same are ordered to be deleted. - Decided in favour of assessee

Summary

Issues Involved:
1. Confirmation of additions made by the Assessing Officer (AO) as unexplained investments in relation to jewellery found during the search action.
2. Deletion of certain additions by the Commissioner of Income Tax (Appeals) [CIT(A)].
3. Appeal by a different but related assessee against a similar order by the CIT(A).

Issue-Wise Detailed Analysis:

1. Confirmation of Additions as Unexplained Investments:

The core issue in ITA No.3513/M/2012 was the challenge by the assessee against the CIT(A)'s confirmation of additions made by the AO as unexplained investments concerning jewellery found during a search action under Section 132 of the I.T. Act. The jewellery valued at Rs. 1,73,30,641/- was found, out of which jewellery worth Rs. 36,93,026/- was seized. The AO deemed jewellery valued at Rs. 21,58,524/- as unexplained and added this amount to the assessee's income under Section 69A of the Act.

The assessee contended that the jewellery belonged to various family members and provided evidence, including valuation reports and purchase bills, to explain the source of the jewellery. The CIT(A) required a detailed item-wise matching of the jewellery found with the declared items in the valuation reports. The CIT(A) found most items matched but confirmed additions where descriptions did not match exactly, particularly for diamond jewellery due to differences in carat weight estimates.

2. Deletion of Certain Additions by CIT(A):

The CIT(A) directed the AO to delete additions for items where the description matched with the approved valuer's report, except for two items (gold ginni and gold coin) valued at Rs. 82,392/- and Rs. 75,823/-, respectively. For items where descriptions did not match, the CIT(A) confirmed the additions. The CIT(A) also required similar charts for diamond jewellery, confirming additions where there were discrepancies in carat weight estimates.

The assessee appealed, arguing that minor differences in carat weight estimates should not lead to additions, especially when the overall weight of jewellery declared was more than that found during the search. The Tribunal agreed, noting that the estimation by the Departmental Valuer was not exact and minor differences should not be the sole criteria for additions. The Tribunal cited precedents where similar discrepancies did not warrant additions if the overall quantity of jewellery matched or was less than declared.

3. Appeal by Different but Related Assessee:

In ITA No.3514/M/2012, involving Smt. Alka M. Doshi, the facts were almost identical. The CIT(A) confirmed additions for two items of gold jewellery valued at Rs. 2,76,727/-. The Tribunal, applying the same reasoning as in the primary appeal, ordered the deletion of these additions, noting that the total value of jewellery declared by the Doshi family exceeded the jewellery found during the search.

Conclusion:

The Tribunal concluded that the jewellery found during the search action was not unexplained, as the overall weight declared by the assessee's family was more than the jewellery found. The Tribunal ordered the deletion of the additions in both assessees' cases and dismissed the Revenue's appeal, noting the tax effect was below the threshold for appeal as per CBDT instructions.

Order:

The appeals by both assessees were allowed, and the appeal by the Revenue was dismissed. The order was pronounced in the open court on 31.07.2015.