2020 (1) TMI 1660 - AT - Income Tax

Addition u/s. 69A - unexplained jewellery - preponderant improbability brought by the AO - CIT(A) deleted the addition - case of the assessee was selected for scrutiny assessment u/s 143(2) - in course of the search and seizure proceedings conducted on the assessee diamond jewellery of a value of Rs. 2,70,72,255/- was found - HELD THAT - As finding no infirmity in the view taken by the CIT(A) who in our considered view had rightly concluded that as the assessee by placing on record supporting documentary evidence viz. purchase bills of diamonds, remaking bills for conversion of diamonds into jewellery and payment details in respect of its acquisition, both at the time of post-search proceedings and the assessment proceedings had duly explained the source of acquisition of the diamond jewellery of a value of Rs. 1,23,95,850/-, therefore, the A.O. was in error in treating the same as an unexplained investment of the assessee u/s 69A of the Act, we uphold his order to the said extent. Claim of the assessee that part of the diamond jewellery found in the course of the search proceedings belonged to his NRI son and daughter-in-law - We find no infirmity in the view taken by the CIT(A). In our considered view, though the assessee had placed on record supporting documentary evidence in the form of 'valuation reports' pertaining to the jewellery owned by NRI son and NRI daughter-in-law which was stated to have been kept by the said respective persons with him for safe custody during their absence from India, the A.O. on the other hand had summarily discarded the said claim of the assessee and had without placing on record any material which could evidence the falsity of the said claim, had drawn adverse inferences. In fact, we find that the A.O. had not even recorded any reasoning for disbelieving the aforesaid claim of the assessee. As such, we are unable to persuade ourselves to subscribe to the aforesaid view taken by the A.O. and uphold the observations of the CIT(A) in context of the issue under consideration. For balance diamond jewellery CIT(A) in all fairness, in the totality of the facts of the case, adopting a balanced approach had fairly concluded that 50% of the aggregate value of the diamond jewellery of a value of Rs. 49,37,444/- could safely be held to have been acquired by the assessee out of the withdrawals which were made by him from his disclosed sources in the preceding years. Accordingly, we are of the considered view that the sustaining of the addition on a fair estimation by the CIT(A) to the extent of Rs. 24,68,722/- 50% of Rs. 49,37,444/- cannot be held to be suffering from any infirmity. Accordingly, finding no infirmity in the aforesaid view taken by the CIT(A), we uphold the same.

Summary

Issues Involved:
- Deletion of addition under Section 69A of the Income Tax Act, 1961 on account of unexplained jewellery.

Detailed Analysis:

1. Deletion of Addition under Section 69A on Account of Unexplained Jewellery:

The primary issue in this appeal was whether the CIT(A) erred in deleting the addition of Rs. 1,95,88,013/- under Section 69A on account of unexplained jewellery. The assessee had filed a return of income for A.Y. 2014-15, and during search and seizure proceedings on 11.06.2013, diamond jewellery worth Rs. 2,70,72,253/- was found. The Assessing Officer (A.O.) did not accept the assessee's explanation regarding the source of this jewellery, leading to an addition under Section 69A of the Act.

2. Assessee's Explanation and Evidence:

The assessee explained that the jewellery was acquired from various sources:
- Diamond jewellery worth Rs. 1,23,95,850/- was purchased in May 2013 in the names of family members from specific jewellers.
- Old diamond jewellery was disclosed in wealth tax returns.
- Some jewellery belonged to NRI family members and matched with valuation reports from 1994 and 2005.
- Jewellery found on a family member was her stree dhan.
- Jewellery found at a shop was purchased in cash, though no supporting bills were retained.

The A.O. rejected these explanations, considering them concocted and lacking documentary support, leading to the addition of Rs. 1,95,88,013/- as unexplained investment.

3. CIT(A)'s Observations:

The CIT(A) found that the assessee had provided sufficient evidence, including old valuation reports, purchase bills, remaking bills, and payment details, supporting the source of the jewellery. Consequently, the CIT(A) vacated the addition of Rs. 1,46,50,569/- and partially allowed the appeal by restricting the addition to Rs. 24,68,722/- (50% of Rs. 49,37,444/-) based on substantial cash withdrawals over the years.

4. Revenue's Appeal:

The revenue challenged the CIT(A)'s decision, arguing that the assessee's explanation was unsubstantiated and the CIT(A) erred in accepting it. The Departmental Representative emphasized that no purchase bills were found during the search and the explanation was concocted.

5. Tribunal's Findings:

The Tribunal analyzed the facts and evidence, noting:
- The A.O. did not verify the authenticity of the purchase bills provided by the assessee.
- The A.O. relied on assumptions without disproving the documentary evidence.
- The statutory obligation under Section 69A requires the A.O. to conclusively prove the falsity of the assessee's explanation.

The Tribunal upheld the CIT(A)'s decision, noting that the assessee had substantiated the source of the jewellery with documentary evidence and the A.O. failed to disprove it. The Tribunal also found that the CIT(A) fairly restricted the addition based on the assessee's substantial cash withdrawals.

6. Conclusion:

The Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s order that the assessee had satisfactorily explained the source of the jewellery and the A.O.'s addition under Section 69A was unwarranted. The Tribunal upheld the partial addition of Rs. 24,68,722/- as a fair estimation based on the facts.

Order:

The appeal filed by the revenue is dismissed.