2015 (4) TMI 1337 - AT - Income Tax

Unexplained jewellery - unaccounted jewellery - jewellery, which was found to be not matching in any of these four criteria with the assessee s valuation report, was therefore seized - comparison between the valuation of the assessee and the valuer of the department - HELD THAT - DR could not controvert the conclusion of the CIT(A) that minor difference in description of jewellery in two valuation reports is possible, because of difference in nomenclature used by two valuers, the minor difference in number of small diamonds is possible on the facts of the case, because of human counting error or because of normal wear and tear, and nominal difference in weight could also be on account of two different perceptions of jewelers. We, thus, do not find any force in the appeal of the Revenue, and accordingly, the same is dismissed. Whether gold jewellery to the extent of gross weight already disclosed should not be treated as undisclosed, because description of the jewellery keep on changing on remaking of jewellery? - We find that no finding has been recorded by the lower authorities as to whether the jewellery found during the course of search, which were not tallied with the description of jewellery given in the valuation report filed with wealth-tax return, could be made from remaking of untallied jewellery stated in the valuation report filed along with wealth-tax return or not. We, further, observe that the assessee also could not bring any material before us to show that the same was possible. In the above circumstances, in our considered view, it shall be in the interest of justice to restore this issue back to the file of the AO for deciding the issue afresh after taking into consideration the above cited decision, and actual position in the light of the discussion made above. Needless to mention that, the AO shall allow reasonable and proper opportunity of hearing to the assessee before adjudicating the issue afresh. Thus, this ground of the cross objection of the assessee is allowed for statistical purpose.

Summary

Issues Involved:
1. Deletion of addition on account of unexplained jewellery by CIT(A).
2. Upholding of addition in respect of unaccounted jewellery by CIT(A).
3. Acceptance of gross weight of jewellery without item-wise tally.
4. Alleged non-compliance with Rule 46A of the I.T. Rules regarding new/additional evidence.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Unexplained Jewellery by CIT(A):
The Revenue appealed against the CIT(A)'s decision to delete an addition of Rs. 32,55,685 out of a total addition of Rs. 53,27,057 made for unexplained jewellery. During a search under section 132 of the IT Act, jewellery was found and seized from the assessee's premises. The AO observed discrepancies between the jewellery found and the jewellery declared in the assessee's wealth-tax return. The CIT(A) noted that minor differences in the description, weight, and number of diamonds are possible due to human error and remaking of jewellery. The CIT(A) accepted the assessee's explanation for the discrepancies in several items and deleted the addition of Rs. 32,55,685, noting that the overall diamond jewellery found was less than what was declared in the wealth-tax return.

2. Upholding of Addition in Respect of Unaccounted Jewellery by CIT(A):
The CIT(A) upheld the addition of Rs. 20,71,372 for certain items where there were gross discrepancies in the description, weight, and carat of the jewellery between the departmental valuer's report and the assessee's valuation report. The CIT(A) found that these discrepancies could not be explained by minor errors or remaking of jewellery. The CIT(A) also rejected the assessee's claim for credit as per CBDT Circular No. 1916, dated 11th May 1994, as no separate addition was made for gold ornaments, and the items were not identified as belonging to specific family members.

3. Acceptance of Gross Weight of Jewellery Without Item-wise Tally:
The assessee argued that the gross weight of jewellery shown in the wealth-tax return should be accepted without requiring item-wise tallying. The Tribunal referred to its decision in the case of Liza Girish Shah Vs. DCIT, where it was held that over time, jewellery items change due to remaking, and gross weight should be the primary criterion. The Tribunal found no reason to interfere with the CIT(A)'s order that accepted the gross weight of jewellery, noting that minor differences in description, weight, and number of diamonds are possible due to human error or remaking.

4. Alleged Non-compliance with Rule 46A of the I.T. Rules Regarding New/Additional Evidence:
The Revenue contended that the CIT(A) erred by not giving the AO an opportunity to comment on new/additional evidence in the form of reconciliation statements. The assessee clarified that no new evidence was submitted; the reconciliation statement was based on existing valuation reports. The Tribunal found the Revenue's ground to be without merit, as no new evidence was entertained by the CIT(A).

Conclusion:
The Tribunal dismissed the Revenue's appeal, finding no merit in their contentions. The Tribunal also allowed the assessee's cross-objection for statistical purposes, directing the AO to reconsider whether the untallied jewellery found during the search could have been remade from the jewellery stated in the wealth-tax return, in light of the Tribunal's decision in the case of Liza Girish Shah Vs. DCIT. The AO was instructed to provide a reasonable opportunity for hearing before making a fresh adjudication.