2016 (6) TMI 1113 - AT - Income Tax

Addition u/s 68 - VDIS declarations - Held that - A glance at the bill issued by M/s. Balaji Refinery does show that it was holding a licence. A Look at the purchase bill issued by the concerns show that they were having KST and CST registration numbers. In my opinion, these evidence do tilt the case in favour of the assessees. Assessees had done whatever possible, within their means to show that the gold jewellery sold by them were the same gold declared in VDIS, after converting it into bullion. Assessees had submitted copies of bills issued by M/s. Balaji Refinery which did show similar details of gold jewellery as returned in the VDIS. In such situation we are of the opinion that assessees had discharged their onus to show that the gold sold by them were the same which were declared by them in the VDIS declarations, after conversion. Reasoning given by the AO that antique jewellery would not have been sold by the assessees is only a surmise and cannot dislodge the evidence filed by the assessee. Further there is nothing on record to show that the gold jewellery which were sold by the assessee were antique in nature. In such circumstances, the lower authorities fell in error in disbelieving the source for credits shown by the assessees concerned. Thus have no hesitation in deleting the additions made in the hands of the assessees. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the sale proceeds of gold/silver/bullion declared by the assessees.
2. Credibility of the concerns (Mahalaxmi Jewellers and Balaji Refinery) involved in the transactions.
3. Compliance with the Voluntary Disclosure of Income Scheme (VDIS), 1997.
4. Onus on the assessees to prove the source of the gold/bullion sold.
5. Adequacy of evidence provided by the assessees to support their claims.

Detailed Analysis:

1. Validity of the Sale Proceeds:
During the assessment proceedings, the Assessing Officer (AO) noted that the assessees had credited significant sums as sale proceeds of gold/silver/bullion. The AO questioned the authenticity of these transactions, as the assessees could not substantiate the source of the gold/bullion sold. The AO concluded that the sales were not genuine and made additions accordingly.

2. Credibility of the Concerns Involved:
The AO found that the concerns to which the assessees claimed to have sold the gold (Mahalaxmi Jewellers and Balaji Refinery) did not exist at the provided addresses. Enquiries revealed that Mahalaxmi Jewellers occupied the premises only for a brief period, and Balaji Refinery never operated from the stated address. The AO inferred that these entities were non-existent, thus discrediting the transactions.

3. Compliance with VDIS, 1997:
The assessees had declared jewellery under the VDIS, 1997, claiming the sold items were the same as those declared. However, the AO and CIT (A) found discrepancies in the weight and nature of the jewellery declared and the bullion sold. They concluded that the assessees misused the VDIS scheme, leading to the confirmation and enhancement of the income by the CIT (A).

4. Onus on the Assessees:
The Tribunal initially dismissed the assessees' appeals, emphasizing the need for the assessees to prove the transactions' genuineness. The Tribunal noted that despite documentary evidence, the existence of Mahalaxmi Jewellers and the genuineness of the transactions were not proved. The jurisdictional High Court directed a reconsideration, emphasizing that if the assessees could show the sales were of the same jewellery declared in VDIS, the source for the credits would be explained.

5. Adequacy of Evidence:
Upon reconsideration, the AO found that the weight of the jewellery declared in VDIS differed from the bullion sold. The CIT (A) upheld this view, noting that Balaji Refinery did not exist, and the assessees failed to prove the conversion and sale of the jewellery. However, the Tribunal, upon further review, found that the assessees provided sufficient evidence, including valuation reports, bills from Balaji Refinery, and purchase invoices, showing the conversion and sale of the jewellery. The Tribunal concluded that the assessees discharged their onus, and the lower authorities erred in disbelieving the source of the credits.

Conclusion:
The Tribunal allowed the appeals of the assessees, concluding that they had provided adequate evidence to prove that the gold sold was the same as declared in the VDIS, after conversion into bullion. The additions made by the AO were deleted, and the assessees' claims were accepted. The judgment emphasized the importance of documentary evidence and the need for thorough verification before discrediting transactions.