2015 (12) TMI 100 - AT - Income Tax

Undisclosed acquisition of the silver jewellery - search proceedings - Held that - From the details furnished by the assessee we find the assessee is not a wealth tax assessee. There is no direct evidence regarding date-wise purchase of silver articles. There is also no evidence that the agricultural income earned by the assessee and his wife is exclusively utilized for purchase of silver articles/jewellery. Therefore, the plea of the Ld. Counsel for the assessee that no addition is called for is not sustainable. However, it is a fact to be noted that the assessee comes from a very reputed family of Pune and is engaged in the business of medical profession. Therefore, customary gifts might have been received by the assessee on various occasions in the last 35 to 40 years. Further, there is possibility of inheriting some silver items by the assessee from his parents/grand parents and also by his wife from her parents and in-laws. Further, from the rate of silver from A.Y.1981-82 to 2009-10 filed by the Ld. Counsel for the assessee, we find the rate of silver has gone up from ₹ 2,715/- per kg during A.Y. 1981-82 to ₹ 22,230/- per kg during A.Y. 2009-10. Thus there is wide variation in the rate of silver in the last 30 years. Considering the totality of the facts of the case, silver jewellery weighing 12 kgs in our opinion can be considered as reasonably explained. We therefore hold that assessee has duly explained the source of acquisition of silver articles to the tune of 12 kgs out of 21,021 grams found during the course of search. We accordingly modify the order of the CIT(A) and direct the AO to accept the silver articles weighing 12 kgs valued at ₹ 2,40,000/- as explained and make addition of the remaining silver weighing 9,021 grams valued at ₹ 1,80,420/- to the total income of the assessee. We hold and direct accordingly. - Decided partly in favour of assessee.

Summary

Issues:
Explanation of source of acquisition of silver jewellery found during search action under section 132 of the Income Tax Act, 1961 for Assessment Year 2009-10.

Analysis:
The appeal was filed against the order of the CIT(A)-II, Pune regarding the assessment year 2009-10. The Assessing Officer (AO) noted silver jewellery weighing 21,021 grams valued at Rs. 4,20,420 during a search. The assessee claimed the silver articles were received as gifts and some were purchased over time. The AO, unsatisfied with the explanation, added the value to the total income. The CIT(A) noted the lack of material linking income to the investment but considered the background of the assessee and society norms of receiving silver gifts. He allowed credit for 5 kgs of silver, reducing the addition to Rs. 3,20,320 out of Rs. 4 lakhs. The assessee appealed this decision.

The assessee argued that agricultural income of Rs. 1,89,900 and Rs. 2,78,850 earned by him and his wife respectively, along with the historical silver rates, were sufficient to explain the acquisition. The Departmental Representative supported the CIT(A)'s decision. The ITAT found 21,021 grams of silver worth Rs. 4,20,420 during the search. Considering the family background and circumstances, the CIT(A) allowed credit for 5 kgs of silver. The ITAT held that the assessee's agricultural income did not exclusively show the silver purchase. It noted the possibility of customary gifts and inheritance. Considering the variation in silver rates over the years, the ITAT accepted the explanation for 12 kgs of silver, reducing the addition to Rs. 1,80,420. The appeal was partly allowed.

In conclusion, the ITAT upheld the addition of Rs. 1,80,420 for unexplained silver acquisition, while accepting the explanation for 12 kgs of silver. The decision was based on the totality of facts, including family background, societal norms, and historical silver rates. The appeal was partly allowed on 4th September 2015.