2015 (8) TMI 554 - AT - Income Tax

Disallowance of interest availed by the assessee towards housing loan - Held that - This Tribunal is of the considered opinion that that the assessee has diverted a sum of ₹ 70 lakhs borrowed for the purpose other than construction. Under section 24 of the Income-tax Act, the interest paid by the assessee on the loan borrowed has to be allowed only from the rental income. Since the loan borrowed was diverted for the purpose other than construction, this Tribunal is of the considered opinion that the Assessing Officer has rightly disallowed the claim of the assessee. In the absence of any material to indicate the nexus between the utilization of funds by RMKV & Sons for construction and repayment of donation by the assessee to various temples, this Tribunal is of the considered opinion that the CIT(A) has rightly confirmed the addition. If at all, there was any obligation for reimbursing the cost of construction as claimed by the assessee then definitely there should be a reference in the lease agreement dated 19.10.2007 between the assessee and RMKV & Sons. In the absence of any reference about the investment of funds by RMKV & Sons and the liability of the assessee to reimburse the same, this Tribunal is of the considered opinion that the claim of the assessee that the donation paid to the temples is only reimbursement of the expenditure is not justified. This Tribunal do not find any infirmity in the order of the CIT(A) on this issue and the same is confirmed. - decided against assessee. Addition towards unexplained investment in silver articles to the extent of 18.23 kgs. - Held that - streedhan has to be estimated depending upon the social status of the respective family in the society. Similarly, depending upon the social status, it cannot be totally ruled out the possibility of receiving gold and silver ornaments as gift. Admittedly, the assessee was married for the last 25 years and there are many occasions for them to receive gift from the close relatives. Here again, expecting documentary evidence to establish the receipt of gift is impossible one. Therefore, everything has to be estimated depending upon the facts of each case by taking into account the social status of the family in the locality in which they are living. This Tribunal is of the considered opinion that the assessee might have received gift of 15 kgs of silver articles as streedhan property during her marriage. Similarly, for the last 25 years of married life they might have also received 10 kgs of silver articles as gift. In those circumstances, this Tribunal is of the considered opinion that that the balance remains to be explained is only 13.23 kgs of silver articles. It is made clear this estimation is made by taking into consideration the business of the assessee s family and the social status maintained by them in the area in which they are living. Therefore, the balance silver article remains to be explained is only 13.23 kgs. Accordingly, the orders of the lower authorities are modified and the Assessing Officer is directed to make addition only in respect of 13.23 kgs of silver articles. - Decided partly in favour of assessee. Addition towards jewellery purchases without invoices - CIT(A) deleted the addition - Held that - It is not in dispute that the purchase of jewellery has a reference in the bank account maintained by the assessee with ICICI Bank and the payments were made through cheques. Therefore, it is obvious that the purchase of jewellery to the extent of ₹ 3,76,470/- was made through known sources of income the addition of ₹ 3,76,470/- has rightly been deleted by the CIT(A). This Tribunal do not find any infirmity in the order of the CIT(A). Accordingly the same is confirmed. Coming to the addition of unexplained investment in 2.38 carats of diamond claim of the assessee that 2.38 carats of diamond was inherited from her motherin- law, cannot be doubted since the status of the family in society would indicate that they are used to wear diamond jewellery. this Tribunal is of the considered opinion that it is not known how the assessee could establish by material evidence to indicate the inheritance of 2.38 carats of diamond from her mother-in-law. This Tribunal is of the considered opinion that in view of the smallness of the value, the CIT(A) has rightly deleted the addition. In fact, the Assessing Officer himself has made addition of ₹ 65,071/-. Therefore, this Tribunal do not find any infirmity in the order of the CIT(A) on this issue - Decided against revenue. Unexplained investment in gold jewellery to the extent of 407.3 gms and diamond jewellery to the extent of ₹ 1,38,800/- - Held that - 240 gms of gold jewellery belongs to the assessee s daughter might have been kept in the house of the assessee. Now the difference is 133.59 gms. The assessee claims that this is the difference between the gross and net weight. On a query from the Bench, the ld. Counsel explained that this difference is due to the weight of the stone embedded in the jewellery and impurities. This Tribunal is of the considered opinion that it is common practice in all jewellery shop that stones are valued at the gold rate and in addition to the rate which prevails for the gold. The assessee has also required to pay charges for wastage, making charges besides the applicable taxes. Therefore, this Tribunal is of the considered opinion that the difference between the gross and net weight of 133.59 gms cannot be allowed. Now, coming to the diamond jewellery, the dispute is only with regard to 9.93 carats of diamond jewellery. As rightly pointed out by the ld. Counsel, it is usual practice in custom to gift diamond ear stud and diamond ring to the bride and bridegroom apart from diamond necklace. Since the assessee was married 45 years back and now aged about 70 years, asking the assessee to produce material evidence may not be practically possible. Therefore, this Tribunal is of the considered opinion that by taking into consideration the customary practice which prevails in this part of the country and the social status of the assessee, and the nature of business engaged by the assessee, this Tribunal is of the considered opinion that the assessee would have earned the value of 9.93 carates of diamond jewellery. Therefore, no addition is called for with regard to the value of diamond jewellery of 9.93 carats. - Decided partly in favour of assessee. Unexplained investment to the extent of 600.2 gms of gold jewellery - Held that - This Tribunal is of the considered opinion that while purchasing jewellery the assessee has to make payment on the gross weight and not on the net weight. The stones which form part of jewellery would be weighed alongwith the gold and the assessee has to necessarily pay the cost of the stone at gold rate. Therefore, there is no justifiable reason for excluding the difference between the gross and net weight of the jewellery found. Therefore, the claim of the assessee that 97.7 gms of jewellery being the difference between the gross and net weight has to be excluded cannot be accepted. In view of the above, the balance remains to be explained is 200.2 gms. Accordingly, the order of the lower authority is modified and the Assessing Officer is directed to add the value of 200.2 gms of gold jewellery as unexplained investment.- Decided partly in favour of assessee. Unexplained investment in the gold and diamond jewellery - Held that - Making addition to the extent of 11.74 carats of diamond may not be correct. After estimating the gold jewellery to the extent of 1000 gms as streedhan, the balance remains is only 204 gms of jewellery. The assessee also claims the difference between the gross and net weight to the extent of 224.6 gms. As already observed, the assessee has to necessarily pay the price of the jewellery on the gross weight and not on the net weight, therefore, the difference between the gross weight and net weight cannot be allowed as deduction while computing the value. After giving deduction of 1000 gms instead of 800 gms as streedhan jewellery to the assessee s wife, the balance remains to explain is only 204 gms of gold jewellery. Accordingly, the orders of the lower authorities are modified and the Assessing Officer is directed to make addition to the extent of 204 gms of gold jewellery. - Decided partly in favour of assessee. Unexplained investment made in gold jewellery to the extent of 261.54 gms. - Held that - This Tribunal is of the considered opinion that instead of 800 gms of jewellery found by the Assessing Officer as streedhan on the occasion of marriage, credit has to be given to the extent of 1000 gms. Therefore, the balance comes to only 61.54 gms of jewellery. As already observed in the case of other assessees, the difference between the gross and net weight cannot be taken into consideration since the assessee has to pay the price for the gross weight. In view of the above discussion, this Tribunal is of the considered opinion that 61.54 gms of gold jewellery remains to be unexplained. Accordingly, the orders of the lower authorities are modified and the Assessing Officer is directed to make addition of 61.54 gs of gold jewellery as unexplained investment. Coming to the diamond jewellery, as rightly submitted by the ld. Counsel, it is common in this part of the country to give streedhan to the girl child during her marriage in the form of gold and diamond jewellery. Therefore, this Tribunal is of the considered opinion that the assessee s wife might have received 38.01 carats of diamond jewellery during her marriage. Therefore, the CIT(A) ought to have deleted the addition of entire 38.01 carats of diamond jewellery. Accordingly, the orders of the lower authorities are set aside and the Assessing Officer is directed to delete the entire addition towards 38.01 carats of diamond jewellery.- Decided partly in favour of assessee. Unexplained investment in silver articles - Held that - It is not in dispute that what was found during the course of search operation are mostly pooja articles like kuthuvilakku, panner fan, camphor stand, kukum bowk, sandal bowl and plates etc besides tumblers. By taking into consideration the status of the assessee s family in the society and the nature of business, it is not uncommon to receive silver articles as gift on various occasions, family functions etc. It is also common in this part of the country to receive silver articles as gift during marriage time. Apart from that the assessee s father-in-law being a resident in Dubai, the assessee might have received some gift as streedhan property. In those circumstances, this Tribunal is of the considered opinion that the assessee might have received 28.17 kgs of silver articles as gift during his marriage. Therefore, the orders of the lower authorities are set aside and the Assessing Officer is directed to delete the entire addition of 28.17 kgs of silver articles found during the search operation. - Decided in favour of assessee.

Summary

Issues Involved:
1. Disallowance of interest on housing loan.
2. Addition towards unexplained investment in silver articles.
3. Addition towards unexplained investment in gold and diamond jewelry.
4. Addition towards jewelry purchases without invoices.

Issue-wise Detailed Analysis:

1. Disallowance of Interest on Housing Loan:
The main contention revolved around the disallowance of interest on Rs. 83.50 lakhs availed by the assessee towards a housing loan. The assessee utilized part of the loan for purposes other than construction, notably Rs. 70 lakhs paid as donations to temples as per the Hindu Charitable & Religious Endowments (HR&CE) directive. The Tribunal upheld the disallowance, noting the absence of any evidence linking the donations to the construction costs incurred by RMKV & Sons. The Tribunal emphasized that under Section 24 of the Income-tax Act, interest on a loan is deductible only if the loan is used for construction purposes.

2. Addition towards Unexplained Investment in Silver Articles:
During a search operation, the Revenue authorities found 43.28 kgs of silver. The Assessing Officer accepted 15.05 kgs declared in the wealth tax return and 10 kgs as streedhan property, treating the balance as unexplained. The Tribunal, considering the social status and customary practices, concluded that the unexplained silver articles should be reduced to 13.23 kgs. The Tribunal acknowledged the difficulty in providing documentary evidence for streedhan property and gifts received over the years.

3. Addition towards Unexplained Investment in Gold and Diamond Jewelry:
Several appeals addressed the issue of unexplained investments in gold and diamond jewelry found during search operations. The Tribunal considered the customary practice of gifting jewelry during marriages and family functions, the social status of the assessee, and the nature of their business. It allowed certain claims of streedhan and gifts, reducing the additions made by the Assessing Officer. For instance, in one case, the Tribunal reduced the unexplained gold jewelry to 200.2 gms and diamond jewelry to 0 carats, acknowledging the social customs and status of the family.

4. Addition towards Jewelry Purchases without Invoices:
The Tribunal dealt with the addition of Rs. 3,76,470/- towards jewelry purchases not supported by invoices. The Tribunal upheld the CIT(A)'s decision to allow the claim, noting that the purchases were reflected in the books and payments were made through bank accounts, indicating known sources of income.

Separate Judgments:
The Tribunal delivered a common order addressing multiple appeals with similar issues. The judgments were consistent in their approach, emphasizing the need for evidence to support claims and considering social customs and family status in estimating unexplained investments. The Tribunal upheld some disallowances and reduced others, providing detailed reasoning for each decision.