2015 (8) TMI 883 - AT - Income Tax

Unexplained jewellery - Held that - The Departmental Valuer in this case has reported that the jewellery found with the assessee has gross weight of 7949.550 gms and net weight was 5400.450 gms. The A.O. held that the assessee has explained jewellery having gross weight 5686.310 gms and net weight 5144.600 gms. This leaves us with unexplained jewellery of net weight of 255.850 gms and gross weight of 2263.240 gms. The difference in net weight is reported by the departmental valuer. Instead of accounting the net weight jewellery as arrived by Departmental Valuer, the A.O. deducted 10.52% from the gross weight of jewellery i.e. 2263.2450 gms, which is gross weight of unexplained jewellery arrived at par the departmental valuer and arrived at a net weight of 2025.147 gms. of jewellery. Such estimation cannot be the basis of addition. When DVO has given a report specifying the gross and net weight of jewellery found, then applying a rough and ready formulae without an scientific basis to arrive at net weight, is only surmises and conjectures. Such a calculation cannot be the basis of addition. An expert opinion cannot be discarded without giving any room. Thus, the order of A.O. is bad in law.Merely saying that the assessee has not explained, when the A.O. stated otherwise, cannot be countenanced. The shortage or excess holding of gold and jewellery, under the facts of this case, has to be arrived at on an overall basis. Report of the Departmental Valuation Officer should be the basis of determining the value of unexplained jewellery. Thus, this ground of assessee is allowed and addition toward unexplained jewellery is deleted. - Decided in favour of assessee. Unexplained cash - Held that - The A.O. and Ld. CIT(A) do not state that which evidence is sought by them and what was not furnished by the assessee. Withdrawal from bank accounts is very much evidenced by bank pass book and statement. In view of above discussion, though we are not accepting the general argument made by assessee based on turnover of the group and taxes paid, status of family etc., we delete the addition solely on the basis that the extract of copies of books of accounts, remained uncontroverted by the Department. This addition is deleted - Decided in favour of assessee. Unexplained gifts - Held that - The gift of ₹ 5 lacs was received from the father Shri Rakesh Batra through cheque. He is an income tax assessee and filed a confirmation letter before the A.O. Similarly an amount of ₹ 21,000/- was received by the assessee from her brother Shri Manav Batra who is also an income tax assessee. On these facts, the first appellate authority deleted the addition. We find no infirmity in the same. Hence, we confirm the order of Ld. CIT(A) and dismiss this ground of revenue. - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition on account of unexplained jewellery.
2. Addition on account of unexplained cash.
3. Addition on account of unexplained gifts.

Detailed Analysis:

1. Addition on Account of Unexplained Jewellery:
The case involved a search operation on the assessee, revealing jewellery worth Rs. 94,92,531. The Assessing Officer (A.O.) determined unexplained jewellery valued at Rs. 31,79,480. The assessee argued that the A.O.'s method, which included reducing 10.52% from the gross weight to arrive at the net weight, was incorrect. The Departmental Valuer (DVO) had reported the gross and net weights of the jewellery, and the A.O. made an estimated addition based on this. The assessee contended that only 255.850 gms of jewellery was unexplained as per the DVO's report. The CIT(A) partially accepted the assessee's explanation but still held some items as unexplained. The Tribunal found that the A.O.'s estimation lacked scientific basis and that the CIT(A) had erred by changing the basis of addition without evidence. The Tribunal deleted the addition towards unexplained jewellery, stating the DVO's report should be the basis for determining the value of unexplained jewellery.

2. Addition on Account of Unexplained Cash:
The A.O. added Rs. 3,75,000 as unexplained cash found during the search. The assessee argued that the cash was evidenced by the books of accounts, which showed substantial cash withdrawals by various family members. The Tribunal noted that the A.O. made the addition based on general human behavior and probabilities, without rejecting the books of accounts or the cash flow statement provided by the assessee. The Tribunal held that without finding defects in the books of accounts or specifically stating why the cash flow statement could not be accepted, the addition could not be sustained. Therefore, the Tribunal deleted the addition of unexplained cash.

3. Addition on Account of Unexplained Gifts:
The CIT(A) deleted the addition of Rs. 5,21,000 made by the A.O. on account of unexplained gifts. The assessee had received Rs. 5,00,000 from her father and Rs. 21,000 from her brother, both of whom were income tax assessees and had filed confirmation letters before the A.O. The Tribunal found no infirmity in the CIT(A)'s decision and confirmed the deletion of the addition.

Separate Judgments:
The Tribunal also dealt with appeals in I.T.A. No. 4500/Del/2014 and I.T.A. No. 4505/Del/2014, which involved similar issues of unexplained cash. Consistent with the view taken in the main appeal, the Tribunal deleted the additions in these cases as well.

Conclusion:
The Tribunal allowed the assessee's appeals and dismissed the Revenue's appeal, concluding that the additions made by the A.O. on account of unexplained jewellery, cash, and gifts were not sustainable based on the evidence and explanations provided by the assessee.