2019 (1) TMI 1998 - HC - Income Tax

Unexplained jewellery - Addition of the value of gold jewellery of 250 gms as unexplained - Whether Tribunal was right in not accepting the claim of the assessee regarding purchase of gold jewellery merely because of the absence of purchase bill and denial by the jeweller, when the assessee had proved and the Appellate Tribunal had accepted the source of moneys for purchase of the gold jewellery? - HELD THAT - The assessee carried the matter by way of appeal before the Commissioner of Income Tax (Appeals) II, Madurai. CIT (A) had called for remand report and considered the factual matrix and held that the assessee has established the source of funds for the purchase of gold jewellery to the tune of Rs.2 lakhs. Further, the CIT(A) discredited the statement of one N.S.R. Mohan, gold merchant, who admittedly had transactions with the family members of the assessee and it is his own statement that he had sold gold jewellery without bills. CIT (A) had analysed the entire factual matrix and found that the assessee had received Rs.2 lakhs from her sons. Further, the CIT(A) after considering the conduct of the said N.S.R. Mohan held that his statement cannot be relied. When the Department filed the appeal before the Tribunal, the Tribunal examined the matter and granted partial relief to the assessee to the extent of 50 gms as there were purchase bills produced by the assessee in respect of 250 gms. Tribunal solely relied upon the statement of N.S.R. Mohan stating that he had no transaction with the assessee and in the absence of purchase bill treated the same as unexplained jewellery. In our considered view, the approach of the Tribunal is incorrect because the statement of N.S.R. Mohan was that he did not sell any gold jewellerry to the assessee and it was the said N.S.R. Mohan has accepted the fact that the had more than seven transactions with the family members of the assessee. Furthermore, the CIT(A) found that N.S.R. Mohan sold gold jewellery without bills and that is why he had stated that there were no transaction between himself and the assessee. Thus, if the Tribunal was of the view that the statement of N.S.R. Mohan should not be discredited, then it should have remanded the matter to the authority but could not have taken a contrary view based on the statement which was appreciated by the CIT(A) and factual finding was recorded. That apart, the Tribunal should have held that the interpretation given by the CIT(A) is either perverse or unsustainable. In the absence of any such finding, we are of the considered view that the Tribunal was not justified in interfering with the order passed by the CIT(A). That apart, the Tribunal also found that the assessee had sufficient funds and had proved the source of funds. Merely because gold merchant stated that he has no transactions with the assessee could not have been a reason to disbelieve the claim of the assessee. This is more so because admittedly N.S.R.Mohan had more than seven transactions with the family members of the assesssee and whenever he sold gold jewellery, it was without bills. Thus, for the above reasons, we find that the Tribunal erred in interfering with the order passed by the CIT (A). Appeal filed by the assessee is allowed.

Summary

Issues:
1. Whether the Appellate Tribunal was justified in reversing the order of the Commissioner of Income Tax (Appeals) regarding the addition of the value of gold jewellery.
2. Whether the Appellate Tribunal was right in not accepting the claim of the assessee regarding the purchase of gold jewellery due to the absence of purchase bill.

Analysis:
1. The main issue in this case revolves around the rejection of the assessee's contention regarding the purchase of 250 gms of gold jewellery and whether it can be considered "unexplained jewellery." The Tribunal questioned the purchase of 300 gms of gold jewellery due to the absence of purchase bills, leading to it being treated as unexplained. However, the CIT (A) found that the assessee had established the source of funds for the purchase of gold jewellery amounting to Rs.2 lakhs. The CIT (A) discredited the statement of a gold merchant who had transactions with the family members of the assessee without bills, leading to the deletion of the addition of unexplained jewellery.

2. The Tribunal granted partial relief to the assessee for 50 gms of gold jewellery as purchase bills were produced. However, the Tribunal solely relied on the statement of the gold merchant, N.S.R. Mohan, who claimed no transactions with the assessee. The High Court found this approach incorrect as N.S.R. Mohan had multiple transactions with the family members of the assessee without bills. The Tribunal should have either remanded the matter or held the interpretation by the CIT (A) as perverse or unsustainable. The Tribunal erred in interfering with the order passed by the CIT (A) without proper justification, especially when the source of funds was proven by the assessee.

3. In conclusion, the High Court allowed the appeal filed by the assessee, answering the substantial questions of law in favor of the assessee. The Court found that the Tribunal's interference with the CIT (A) order was unjustified, especially considering the proven source of funds for the purchase of gold jewellery. No costs were awarded, and the connected miscellaneous petition was closed.