2016 (6) TMI 1368 - AT - Income Tax

Jewellery declared under VDIS Scheme after converting it to bullion - HELD THAT - All the items which were appearing in bill issued by M/s. Balaji Refinery were also mentioned in the valuation report filed in support of the VDIS declarations. Gross weight also tallies. Purchase invoice issued by the concern which purchased the gold and diamonds also shows the same weight of bullion as mentioned in the bill of M/s. Balaji Refinery and same caretage of diamonds mentioned in the valuation report. Case of the Revenue is that M/s. Balaji Refinery, which melted the ornaments and the concern to which the gold / bullion were sold were not found in Keshavpur, Hubli. Assessees were repeatedly questioned about this during the course of second round of proceedings. Inspector s report relied on by the AO was based on an enquiry done more than 15 years after the event. There was no way assessees could ensure that M/s. Balaji Refinery continued to do its business all through. Much reliance has been placed by the AO on a letter issued by Gold and Silver Refinery Welfare Association, Hubli, wherein it was mentioned that no refinery called M/s. Balaji Refinery, did any refinery work in Hubli since 15 years. It is not necessary that every refinery should be a member of an association. A glance at the bill issued by M/s. Balaji Refinery does show that it was holding a licence. A Look at the purchase bill issued by the concerns show that they were having KST and CST registration numbers. In the case of M/s. Hunney Exports even their PA Number was there. These evidence do tilt the case in favour of the assessees. Assessees had done whatever possible, within their means to show that the gold and diamond sold by them were the same gold and diamond declared in VDIS, after conversion. Assessees had submitted copies of bills issued by M/s. Balaji Refinery which did show similar details of gold and diamond as returned in the VDIS. We are of the opinion that assessee had discharged their onus to show that the gold and diamond sold by them were the same which were declared by them in the VDIS declarations. Reasoning given by the AO that antique jewellery would not have been sold by the assessee is only a surmise and cannot dislodge the evidence filed by the assessee. Further there is nothing on record to show that the gold jewellery which were sold by the assessee were antique in nature. Lower authorities fell in error in disbelieving the source for credits shown by the assessee concerned. No hesitation in deleting the additions made in the hands of the assessee. - Appeals of all the assessee stand allowed.

Summary

Issues:
Appeals by different assesses for assessment year 1998-99 against orders of CIT (A), Hubli regarding source of credits from sale of gold and diamonds.

Analysis:
The assesses had declared income for the assessment year 1998-99, listing the income declared by each assessee. During assessment proceedings, it was noted that the assesses had credited amounts from the sale proceeds of gold/diamonds, which were explained as coming from the sale of jewelry. The assesses had taken advantage of the VDIS, 1997 scheme. The AO did not accept the assesses' explanation, stating that the concerns to which the assesses claimed to have sold the gold and diamonds did not operate from the given addresses. The AO also found discrepancies in the claims made by the assesses regarding the sale of jewelry. The AO concluded that the source for the credits mentioned by the assesses was not proven, and additions were made accordingly.

The CIT (A) upheld the AO's order, stating that the assesses were trying to misuse the VDIS scheme. The assesses moved before the Tribunal, which dismissed their appeals. Subsequently, the jurisdictional High Court directed a re-consideration of the cases. The AO, after re-consideration, found discrepancies in the weight of jewelry declared by the assesses and the weight of gold/bullion sold. The AO concluded that the assesses failed to prove that the sold items were the same as those declared in VDIS, and additions were made again.

The assesses appealed before the CIT (A) once more, who found that the entities through which the assesses claimed to have melted and sold the jewelry did not exist at the given addresses. The CIT (A) upheld the AO's order. The assesses then appealed before the Tribunal, where they argued that they had fulfilled their onus to prove the conversion and sale of jewelry into bullion. The Tribunal considered the evidence presented by the assesses, including bills and reports, and found that the assesses had discharged their burden of proof. The Tribunal concluded that the lower authorities erred in disbelieving the source for the credits and deleted the additions made by the AO.

In conclusion, the Tribunal allowed the appeals of all the assesses, stating that they had provided sufficient evidence to prove the source of the credits from the sale of gold and diamonds.