2017 (12) TMI 1733 - AT - Income Tax

Addition u/s 68 - assessee was selected for scrutiny - discrepancies in the jewellery declared under VDIS Scheme and sold - as noticed by the AO that assessee has maintained the capital account as received from sale of gold, silver and diamonds which were declared by the assessee under VDIS 1997 - AO came to the conclusion that the jewellery sold are not the same which were declared under VDIS as there was difference in quantities - HELD THAT - From the details of the bills, we find in the case of Basavaraj I. Kamatagi, HUF that the gold and silver jewellery were given for conversion into bullion to Shree Balaji Refinery and the gold bullion was sold on 28.01.98 and silver bullion on 18.01.98. Since the gold jewellery and silver jewellery were sold in the form of bullion on 28.01.98 and 18.01.98, where as the need to get it converted into bullion? The assessee has not made out the case that gold and silver jewellery were not saleable in the open market and the jewellers have forced them to get it converted into bullion before purchase. The assessee could not furnish the valid reasons for the conversion of jewellery into bullion. If in any case the jewelleries are to be converted into bullion, how the weight of jewellery gets substantially reduced. All these questions remained unanswered during the course of hearing. We cannot ignore the facts that in the original assessment proceedings, assessee has agreed for the additions proposed by the AO on account of profit and sale of jewelleries. But when the assessment order was revised under section 263 by the CIT in consequential order, assessee retracted from the earlier statement and tried to justify the sale of declared jewellery. Whatever quantity was declared under VDIS Scheme was not sold later on. Therefore, we are of the view that order of the Tribunal would not render any assistance to the assessee. Keeping in view the totality of the fact and circumstances of the case, we are of the considered opinion that assessee could not establish that the goods declared under the VDIS Scheme 1997 were sold as claimed by the assessee. Therefore, we find no infirmity in the order of the CIT(A) who has rightly confirmed the addition. - Decided against assessee.

Summary

Issues Involved:

1. Legitimacy of the addition under Section 68 of the Income Tax Act.
2. Discrepancy between declared and sold gold, silver, and diamond items.
3. Validity of interest charged under Section 234B of the Income Tax Act.

Detailed Analysis:

1. Legitimacy of the Addition under Section 68 of the Income Tax Act:

The primary issue revolves around the addition of ?11,21,625 under Section 68 of the Income Tax Act. The assessee had declared gold, silver, and diamonds under the VDIS 1997 scheme. However, the Assessing Officer (AO) concluded that the sales were not genuine and treated the entire sale proceeds as unexplained cash credits, leading to an addition of ?11,21,625 in the case of Shri. Basavaraj I Kamatagi (HUF) and ?11,08,610 in the case of Shri. N. R. Gangavati (HUF). The CIT(A) and the Tribunal confirmed this addition, but the High Court remanded the matter back to the AO with directions to verify if the goods sold were the same as those declared under the VDIS scheme.

2. Discrepancy Between Declared and Sold Gold, Silver, and Diamond Items:

The AO, upon re-examination, found discrepancies between the declared and sold items. For instance, the gold jewellery declared was 1401.100 grams, but the gold bullion sold was 1161.250 grams. Similarly, the silver articles declared were 38.710 Kgs, but the silver bullion sold was 34.900 Kgs. The diamonds declared were 291 stones, whereas the sold diamonds were cut and polished diamonds of 291 pieces. The AO concluded that the jewellery sold was not the same as declared under the VDIS scheme. The CIT(A) upheld this view, noting that the assessee could not prove that the goods sold were the same as those declared under the VDIS scheme.

3. Validity of Interest Charged under Section 234B of the Income Tax Act:

The assessee contended that it should not be liable for interest under Section 234B of the Act, arguing that the calculation of interest was not in accordance with the law. However, this issue was not the primary focus of the judgment, and the Tribunal did not provide a detailed analysis on this point.

Conclusion:

The Tribunal, after examining the evidence and discrepancies, upheld the AO's and CIT(A)'s findings that the jewellery sold was not the same as declared under the VDIS scheme. Consequently, the addition under Section 68 was justified. The Tribunal found no infirmity in the order of the CIT(A) and dismissed the appeals of the assessee. The judgment emphasized the importance of proving that the goods sold were the same as those declared under the VDIS scheme to avoid taxation under Section 68 of the Income Tax Act.