2014 (1) TMI 1026 - AT - Income Tax

Unexplained investment in jewellery - Held that - The assessee has been regularly showing the acquisition/purchase of jewellery in his balance sheet filed along with his income tax returns since the assessment year 1995-96 - The ld. CIT(A) has also assailed the action of AO in rejecting the books of accounts of the assessee which the assessee had been maintaining in the regular course of business The CIT(A) has accepted the books of accounts of the assessee for the assessment year 2001-02 - The jewellery is shown in the balance sheet by the assessee for the financial year ending on 31.03.2001 - The rates of the gold jewellery at the most can be adopted as that were on 31.03.01 and there was no justification for the AO to adopt the rates as on 31.03.06 Decided in favour of assessee. Unexplained investment - Held that - The jewellery/gold claimed to be belonging to different persons was found in separate packets under their name - The assessee had also given a reasonable explanation that the said persons had deposited the gold with the assessee for the facilitation of grant of interest free loan for the said persons through M/s. Burhani Quarzen Hasanah Trust - After examining the said persons except Mr. Burhanuddin Bhai, who was said to be residing in Kuwait, the claim in respect of two persons was admitted by the AO - The ld. CIT(A) rejected the contention of the AO in the case of Mrs. Zainab Gandhi observing that merely because the family income of Mrs. Zainab Gandhi was nominal, that itself could not be a ground to reject the contention of the assessee which was further corroborated with the statement of Mrs. Gandhi - Even if, one or two of them could not give the exact proof of purchase of jewellery in the shape of bills etc. that itself alone cannot be a basis to hold that said jewellery did not belong to the said persons, especially, in the presence of other correlating evidence supporting the claim of the assessee. In the case of Mr. Shabir Bhai Ahmedabadwala, the reasoning given by the ld. CIT(A) is not well founded - It is a common practice in India that people generally invest their money in purchase of gold because of the market trend of rise in prices of the gold - The purchase of gold is also a customary practice in India - The gold biscuits were allegedly deposited by the said Mr. Shabir Bhai Ahmedabadwala for getting interest free loan which could have been used for his business or/other requirements, but at the same time, he would have been getting the benefit of appreciation in the price of gold biscuits which ultimately belonged to him - It was not the case of sale of jewellery but it was a case of deposit of gold as a security The addition with respect to this jewellery was also deleted. In the case relating to jewelry of Mr. Burhanuddin Bhai is concerned, the evidentiary position is same as in the case of other persons except that he was not produced for examination before the AO - His absence had been well explained by the assessee that he was not in India at that time but was residing in Kuwait - However, his duly sworn statement/affidavit was filed before the AO vide which he claimed that the said jewellery belonged to him - The addition made in case of Mr. Burhanuddin Bhai cannot be sustained and is hereby ordered to be deleted - Decided in favour of assessee. Unexplained cash credit - Held that - The loose papers found during search were written in Gujarati in the handwriting of the wife of the assessee - She was neither examined at the time of search procedure nor during the assessment proceedings - The assessee, through the evidence placed in the paper book, has also tried to establish that Mr. Rashid and Mr. Yusuf were his employees and the payment of salary was made to them through banking channels - The Revenue has also contested the identity of Mr. Mohammed as being not the name of assessee - A perusal of the assessment order as well as order of the ld. CIT(A) reveals that the contentions of the assessee have not been properly looked into by the lower authorities The issue has been restored for fresh adjudication.

Summary

Issues Involved:
1. Addition of Rs.1,44,542/- as unexplained investment in jewellery.
2. Addition of Rs.6,43,319/- as unexplained investments in jewellery belonging to third parties.
3. Addition of Rs.8,49,000/-, Rs.4,10,000/-, and Rs.13,32,300/- as unexplained cash credits.
4. Additional grounds regarding Rs.1,90,800/- paid to laborers and Rs.7,54,324/- as unexplained cash credit under section 68 of the Act.

Issue-wise Detailed Analysis:

1. Addition of Rs.1,44,542/- as unexplained investment in jewellery:
The assessee contested the addition of Rs.1,44,542/- as unexplained investment in jewellery. During the search, jewellery worth Rs.22,42,399/- was found, of which Rs.10,45,039/- was seized. The assessee claimed part of the jewellery belonged to his wife, received as gifts. The AO rejected the books of accounts for earlier years and estimated the value of jewellery based on gold rates as of 31.03.06, adding Rs.3,11,738/- to the income. The CIT(A) reduced this addition to Rs.1,44,542/-. The Tribunal directed the AO to adopt the rates of gold jewellery as on 31.03.01 and work out the unexplained investment accordingly.

2. Addition of Rs.6,43,319/- as unexplained investments in jewellery belonging to third parties:
Jewellery worth Rs.11,89,039/- was claimed to belong to different individuals. The AO rejected the claims for Mrs. Zainab Gandhi, Mr. Shabir Bhai Ahmedabadwala, and Mr. Burhanuddin Bhai. The CIT(A) deleted the addition for Mrs. Zainab Gandhi but confirmed the others. The Tribunal upheld the deletion for Mrs. Zainab Gandhi, stating her ownership was corroborated. For Mr. Shabir Bhai, the Tribunal found the reasoning for rejection flawed and ordered the deletion of the addition. For Mr. Burhanuddin Bhai, despite his absence, the Tribunal accepted his affidavit and ordered the deletion of the addition.

3. Addition of Rs.8,49,000/-, Rs.4,10,000/-, and Rs.13,32,300/- as unexplained cash credits:
The AO added Rs.8,49,000/- based on loose papers showing money distributed, Rs.4,10,000/- as unaccounted loans, and Rs.13,32,300/- as unexplained cash credits from Mr. Rashid. The CIT(A) confirmed these additions except for Rs.1,30,000/- and Rs.19,00,000/- which were deleted. The Tribunal noted that the loose papers were in the handwriting of the assessee's wife and that the assessee's contentions were not properly considered. The Tribunal set aside these issues for fresh adjudication, directing the AO to give the assessee a proper opportunity to present his case.

4. Additional grounds regarding Rs.1,90,800/- paid to laborers and Rs.7,54,324/- as unexplained cash credit under section 68 of the Act:
The assessee contended that the CIT(A) did not adjudicate these grounds. The Tribunal restored these issues to the AO for fresh adjudication, considering previous orders and giving the assessee a proper opportunity to present his case.

Separate Judgments Delivered:
Not applicable as the judgment was delivered by a single bench.

Conclusion:
The appeal of the assessee is allowed for statistical purposes, and the appeal of the Revenue is partly allowed for statistical purposes. The Tribunal directed the AO to reconsider the issues with proper opportunity for the assessee to present his case.