2014 (12) TMI 52 - AT - Income Tax

Addition of unaccounted jewellery excess value of jewellery treated as unexplained investment - Held that - Following the decision in ACIT CC-4 Hyderabad Versus Sri Krishna Kumar And Other 2014 (12) TMI 67 - ITAT HYDERABAD it has been held that the AO on the basis of the jewellery declared in the wealth-tax return filed by the assessee - before the CIT (A) it was contended by the assessee that the AO has not taken into consideration the jewellery declared by Sri Krishna Kumar HUF in the wealth-tax return declared in the wealth tax return which was included in the valuation made by the valuer - it is seen from the assessment order that so far as value of jewellery stated to have been declared in the wealth-tax return of Sri Krishna Kumar HUF does not appear in the assessment order wherein the AO has considered the jewellery declared in the case of the assessee and other family members - It is not known whether this fact was brought to the notice of the AO by the assessee - CIT (A) before accepting the contention of the assessee should have given an opportunity to the AO to put forth his opinion on the issue - This is because of the fact as it appears from the assessment order the assessee has not submitted the basis for valuation of gold jewellery stones diamonds etc. thus the matter is to be remitted back to the AO for fresh adjudication in accordance with law after affording a reasonable opportunity of being heard to the assessee Decided in favour of assessee.

Issues Involved:
1. Addition of Rs. 50,59,236 as unaccounted jewelry.
2. Consideration of jewelry belonging to family members in wealth tax returns.
3. Method of conversion of jewelry value into quantity.
4. Mixing of jewelry among family members.
5. Reliance on information not in possession of the Assessing Officer.
6. Opportunity for the Assessing Officer to review additional information.

Detailed Analysis:

1. Addition of Rs. 50,59,236 as Unaccounted Jewelry:
The CIT (A) confirmed an addition of Rs. 50,59,236 out of the total addition of Rs. 3,02,97,302 made by the Assessing Officer, treating it as the value of unaccounted jewelry. This was based on the valuation report dated 29.01.2009, which valued the jewelry at Rs. 4,17,30,073, compared to the wealth tax returns showing Rs. 2,70,77,656. The CIT (A) acknowledged the appellant's argument regarding the valuation differences and reduced the addition to Rs. 50,59,236.

2. Consideration of Jewelry Belonging to Family Members in Wealth Tax Returns:
The appellant argued that the jewelry belonged to several family members and should be considered accordingly. The CIT (A) noted that the Assessing Officer did not consider the jewelry declared in the wealth tax returns of Sri Laxminandan (HUF), Smt. Taradevi, and Ms. Namrata, totaling Rs. 90,01,432, Rs. 61,75,700, and Rs. 4,67,753 respectively. The CIT (A) included these amounts in the total jewelry value, reducing the unexplained investment.

3. Method of Conversion of Jewelry Value into Quantity:
The appellant proposed converting the jewelry value into quantity based on rates from previous years to explain the excess. The CIT (A) found this argument reasonable and deserving of consideration. The appellant suggested converting the value as on 31.03.2002 at Rs. 5,010 per 10 grams and then valuing it as on 29.01.2009 at Rs. 13,900 per 10 grams, which would explain the gap.

4. Mixing of Jewelry Among Family Members:
The appellant contended that the jewelry of the three families got mixed up, leading to discrepancies in valuation. The CIT (A) rejected this argument, stating that the jewelry was found in the respective residential premises and bank lockers, with no indication of mixing in the valuation report.

5. Reliance on Information Not in Possession of the Assessing Officer:
The revenue argued that the CIT (A) relied on information not in possession of the Assessing Officer. However, the CIT (A) clarified that the information was from wealth tax returns filed with the Assessing Officer. The Tribunal noted that the Assessing Officer had relied on similar information for other family members and found the revenue's argument factually incorrect.

6. Opportunity for the Assessing Officer to Review Additional Information:
The Tribunal observed that the CIT (A) should have given the Assessing Officer an opportunity to review the additional information provided by the appellant. The Tribunal remitted the issue back to the Assessing Officer for verification, directing them to consider the jewelry declared in the wealth tax returns and the difference in gold rates.

Conclusion:
Both the appeals filed by the assessee and the department were allowed for statistical purposes, with the Tribunal remitting the issues back to the Assessing Officer for a fresh decision after affording a reasonable opportunity of being heard to the assessee.

← Previous Next →