2016 (12) TMI 1001 - AT - Income Tax

Addition of sale proceeds of old jewellery - Held that - In the instant case, the assessee has furnished the copies of sales bills of gold ornaments and has also explained the reason, which compelled the assessee to sell the jewellery. The assessee has also furnished a copy of confirmation letter given by him to M/s Shreeji Art Jewellers, being one of the buyers, whose PAN no. is stated as BWOPS 0889 N. The photocopy of PAN card was also furnished. Hence it is not understandable as to how the Inspector could not find the shop, when the assessee has furnished PAN No. of M/s Shreeji Jewellers. Assessee has also furnished a confirmation letter obtained from his father-in law/mother-in-law certifying the details of gold ornaments given at the time of marriage. Since the assessee is a salaried employee, he did not maintain regular books of accounts. Thus the assessee has discharged the primary responsibility placed upon him u/s 68 of the Act. On the contrary, the AO has claimed to have conducted enquiries through Inspector, but the same was not provided to the assessee. We have also noticed that the alleged enquiry conducted by the Inspector is found to be deficient. Hence we are of the view that the assessing officer has not discharged the responsibility shifted upon his shoulders. - Decided in favour of assessee

Summary

Issues:
1. Addition of sale proceeds of old jewellery to the income of the assessee.
2. Failure to prove the claim of sale of jewellery.
3. Justification of the assessing officer's actions regarding the jewellery sales.

Analysis:
1. The appeal was against the addition of ?21,68,000 to the income of the assessee, relating to the assessment year 2010-11. The Assessing Officer and the CIT(A) accepted sources like past savings and loans but disbelieved the claim of sale of old jewellery. The assessee explained the sources to be savings, loans, and sale proceeds of old jewellery. The assessing officer added the sale proceeds of old jewellery to the income, which was confirmed by the CIT(A), leading to the appeal.

2. The assessing officer asked the assessee to produce cash book and jewellers to whom gold ornaments were sold. The assessee provided purchase bills from two jewellers, but the officer found the telephone numbers non-existent and the jewellers not found at the given addresses. The assessing officer concluded that the claim of sale of jewellery was not proven. The AR argued that the jewellery was sold to meet education expenses, bills were produced, and the jewellers were not under the assessee's control. The DR supported the CIT(A)'s decision, claiming the bills were unreliable.

3. The tribunal noted that the assessing officer examined the deposits in the bank account under section 68 of the Income Tax Act and accepted past savings and loans. The AR stated that all loan creditors were produced before the AO, who accepted the loans after examination. Regarding jewellery sales, the assessee sold jewellery to two jewellers and provided purchase bills. The assessing officer's Inspector reported the jewellers were not found, but no explanation was sought from the assessee. The tribunal found the AO's actions unjustified, stating the assessee had discharged the primary onus by providing bills and explanations. The tribunal directed the AO to delete the addition, as there was no reason to disbelieve the claim of sale of jewellery.

In conclusion, the tribunal allowed the appeal, setting aside the CIT(A)'s order and directing the AO to delete the addition of ?21,68,000 to the assessee's income.