2015 (7) TMI 837 - AT - Income Tax

Assessment of long term capital gain as unexplained cash credits u/s 68 - Held that - Persuing the decision relied upon by the assessee in the case of Smt.Rooplata Jain vs. ACIT (2015 (7) TMI 637 - ITAT MUMBAI), wherein, the Tribunal has considered the identical issues of purchase and sale of shares of M/s Robinson Worldwide Trade Ltd and has observed that the evidences furnished by the assessee with regard to the purchase and sale of shares should have been discreetly examined and then a holistic view of the matter should have been taken by the tax authorities. The Tribunal in the said case has restored the matter for fresh examination to the assessing officer. The Tribunal has also directed the AO to take into account the decision rendered by the co-ordinate bench in the case of Shri Arvind M Kariya 2011 (12) TMI 509 - ITAT MUMBAI . Thus we set aside the order of Ld CIT(A) and restore all the issues to the file of the AO to decide the same a fresh - Decided in favour of assessee for statistical purposes. Unexplained investments in relation to jewellery found during the search action - Held that - As per the CBDT circular No.1916 dated 11.5.1994, the gold jewellery and ornaments to the extent of 500 gms per married lady, 250 gms per unmarried lady and 100 gms per male member of the family need not be seized. In such circumstances, unless the Revenue shows anything to the contrary, it can be safely presumed that source to the extent of the jewellery stated in the circular stands explained. Even as per clause (iii) of the CBDT Circular (Supra), it has been mentioned that the authorized officer may, having regard to the status of the family, and the custom and practices of the community to which the family belongs and other circumstances of the case, decide to exclude a larger quantity of jewellery and ornaments from seizure. We further find that the AO the addition made by the AO also includes ₹ 61500/- on account of silver items. As observed above, out of the seized jewellery worth about ₹ 24.75 lakhs, the assessee explained the source of acquisition of the jewellery worth about ₹ 8.85 lakhs which has been duly disclosed in the returns of his family members. It is also evident that the assessee is a Charted accountant and his family is having good financial status. The possession of a jewellery worth value of about ₹ 24.75 lakhs by the assessee and his family members cannot be said to be improbable or beyond the source of income of the assessee and his family members. Some of the jewellery had been duly shown by the wife of the assessee in her return even prior to her marriage. His mother has been assessed to income tax for the last 30 years. Assessee himself is assessed to tax for the last 20 years. Assessee and his mother have also disclosed a part of the jewellery purchased in earlier years in their returns. Thus in the light of CBDT circular and decision of CIT vs. Ratanlal Vyaparilal Jain (2010 (7) TMI 769 - Gujarat High Court ) as well as the explanation submitted by the assessee, it cannot be said to be a case of unexplained jewellery. - Decided in favour of assessee.

Summary

Issues Involved:
1. Assessment of Long Term Capital Gain (LTCG) as unexplained cash credits under Section 68 of the Income Tax Act.
2. Unexplained investments in relation to jewelry found during a search action.

Issue-Wise Detailed Analysis:

1. Assessment of Long Term Capital Gain (LTCG) as Unexplained Cash Credits under Section 68:

The assessee, a Chartered Accountant and director, declared LTCG on the sale of shares of M/s Robinson Worldwide Trade Ltd and claimed it as exempt. However, a search and seizure action revealed that the purchase transaction was conducted through M/s DPS Shares & Securities Pvt. Ltd, whose director admitted to providing only accommodation bills and not actually purchasing the shares. Consequently, the Assessing Officer (AO) assessed the LTCG as income from other sources, deeming the transactions as sham. The AO also added 5% of the LTCG as charges for obtaining bogus LTCG.

The Commissioner of Income Tax (Appeals) [CIT(A)] confirmed the additions, treating the amount as unexplained cash credits under Section 68. The assessee appealed, arguing that the shares were sold through a legitimate process, with sale proceeds received via account payee cheque and delivery confirmed by the Bombay Stock Exchange (BSE). The assessee contended that the statements by the directors of M/s DPS Shares & Securities Pvt. Ltd were self-serving.

The Tribunal, referencing a similar case ("Smt. Rooplata Jain vs. ACIT"), noted that the tax authorities should have examined the evidences provided by the assessee more thoroughly. The Tribunal decided to set aside the CIT(A)'s order and remand the case back to the AO for fresh examination, instructing the AO to consider the Tribunal's decision in the case of "Shri Arvind M Kariya."

2. Unexplained Investments in Relation to Jewelry Found During a Search Action:

During a search operation, jewelry weighing 1798 grams was found at the assessee's premises. The AO asked the assessee to explain the source of the jewelry, of which only a portion was accounted for in the returns. The AO treated jewelry worth Rs. 7,59,950 as explained and added the remaining Rs. 17,15,287 as unexplained income.

The CIT(A) granted additional relief for 160 grams of jewelry declared during earlier scrutiny assessments, reducing the unexplained amount to Rs. 15,91,447. The assessee appealed, citing the CBDT circular No.1916, which provides guidelines for non-seizure of jewelry based on family status and customs. The Tribunal referred to the Gujarat High Court's decision in "CIT vs. Ratanlal Vyaparilal Jain," which recognized the customary gifting of jewelry.

Considering the assessee's financial status and the customs of gifting jewelry, the Tribunal found the possession of jewelry worth Rs. 24.75 lakhs reasonable. The Tribunal concluded that the addition made by the AO and confirmed by the CIT(A) was unsustainable and set aside the addition, allowing the appeal.

Conclusion:

The appeals for AY 2005-06 and AY 2006-07 were allowed for statistical purposes, with the cases remanded back to the AO for fresh examination. The appeal for AY 2007-08 was allowed, with the Tribunal setting aside the addition related to unexplained jewelry. The order was pronounced in the open court on 30.06.2015.