2017 (3) TMI 958 - AT - Income Tax

Unexplained jewellery - Jewellery valuation - Held that - The perusal of the computation of wealth as on 31-03- 2010 which is placed at page/11 of paper book clearly reflects vide note no 1- 4 that there is no change in the items of jewellery as on 31-03-2010 vis- -vis items as on 31-03-2009. Further, it also reflect that gold jewellery which was valued at ₹ 12,750/- per 10 gms as at 31-03-2009 was valued at ₹ 13,870/- per 10 gms as at 31-03-2010 for the purposes of filing wealth tax return. The approved valuer while issuing valuation report dated 29-08-2009 has adopted rate of gold as on 31-03-2009 of ₹ 12,750/- per 10 gms which is clearly reflected in said valuation report. Similarly, the assessee valued silver at 24,530/- per kg as on 31-03-2010 for filing wealth tax return for assessment year 2010-11 as against rate of ₹ 20,000/ per kg adopted as at 31-03-2009 while filing wealth tax return. The government valuer adopted rate of ₹ 20,000/- per kg while valuing silver in his valuation report dated 29-08-2009 for valuing silver as at 31-03-2009. Thus, the difference which arose in valuation between the valuer report dated 29-08-2009 and the value declared by assessee in wealth tax return for assessment year 2010-11 is merely on account of higher rate of gold and silver adopted as prevailing as on 31-03-2010 vis- -vis rate of gold and silver adopted by approved valuer in his valuation report dated 29-08-2009 which report is based on market rate of gold and silver as at 31-03-2009 We do not find any merit in the contention of the Revenue and in our view no addition u/s 69A to the tune of ₹ 2,47,845/- on account of unexplained jewellery cannot be sustained and is hereby ordered to be deleted. With respect to jewellery valuation charges disallowed by the AO and as sustained by learned CIT(A) on the grounds that these are personal expenses and cannot be allowed as business expenses to be reduced from business income as jewellery was held to be personal asset of the assessee assessee is contending that the same was debited to capital account of the assessee and no such claim has been made by the assessee as deduction as business expenses from business income of the assessee, but no capital account has been filed in the paper book filed before the tribunal. The said contention of the assessee need verification and the matter is restored to the file of the AO for verifications of the contention of the assessee that the said sum was debited to capital account of the assessee and not to the Profit and Loss Account of Business of the assessee and hence , no prejudice is caused to Revenue. after giving proper and adequate opportunity of being heard to the assessee. We order accordingly. Addition on account of car and accessories - Held that - The invoice and complete loan account details are produced by the assesee in the paper book filed with the tribunal which is on record. The ledger extract of the said car loan from Kotak Mahindra Prime Limited is also filed in the paper book . The assessee has also explained that the value of the car adopted for wealth tax purposes was depreciated value of car as adopted by insurance company which was further reduced with the outstanding loan form Kotak Mahindra Prime Limited for which chart for three years are placed on record in paper book filed with the tribunal along with insurance cover for all these years. The loan account ledger extract with respect to loan availed by the assessee for purchase of car , from Kotak Mahindra Prime Limited is also filed for all these years. The explanation offered by the assessee , in our considered view, is satisfactory as is emerging from the records produced before us. Thus no addition is called for as the assessee with respect to Toyota Innova Car which has been satisfactorily explained by the assessee by producing the relevant details / evidences Disallowance u/s 14A - Held that - Once the assessee discharges its primary burden/onus as mandated u/s 14A of the Act of 1961 r.w.s. 106 of the Act of 1872 wherein the assessee comes forward with complete details and nature of expenses incurred in relation to the earning of exempt income having regards to the accounts of the assessee, then only the primary onus / burden cast on the assessee shall stood discharged which in the instant case has not been discharged as no explanation has been submitted except that a bald statement without reference to accounts that no expenses have been incurred in relation to earning of exempt income. The AO in the absence of any explanation of the assessee recorded satisfaction that claim of the assessee is incorrect and proceeded to make disallowance of expenses incurred in relation to earning of exempt income by invoking Section 14A of 1961 Act r.w.r. 8D of 1962 Rules which is one of the method prescribed for making disallowance u/s 14A of 1961 Act, as the assessee withheld information having regards to the accounts of the assessee . The assessee did earn exempt income as detailed above during the relevant previous year from trust. We do not find any merit in the submissions of the assessee, thus, we uphold the additions made by the A.O. u/s 14A of 1961 Act by invoking Rule 8D(2)(iii) of 1962 Rules. We order accordingly.

Issues Involved:

1. Jewelry valuation and addition under section 69A.
2. Addition on account of car.
3. Disallowance under section 14A.
4. Treatment of jewelry valuation charges.

Detailed Analysis:

1. Jewelry Valuation and Addition under Section 69A:

The assessee declared jewelry worth ?67,05,900 in the wealth tax return, while the valuation report showed ?64,58,055. The AO added ?63,85,900 as undisclosed income under section 69A, which was corrected by the CIT(A) to ?2,47,845 due to the difference in valuation. The assessee argued that the jewelry was inherited and declared in wealth tax returns since 1997-98. The Tribunal found the difference in valuation was due to different market rates adopted and not due to new acquisitions, thus deleting the addition of ?2,47,845 under section 69A.

2. Addition on Account of Car:

The AO added ?2,17,256 for an undisclosed motor car. The CIT(A) found the source for ?4,89,634 of the total investment of ?6,70,890 explained, sustaining ?1,67,256 as unexplained. The Tribunal found the purchase of a Toyota Innova in 2007 was financed by a loan from Kotak Mahindra Prime Ltd., and the value was adjusted in the wealth tax return. The Tribunal deleted the addition of ?1,67,256, finding the explanation satisfactory.

3. Disallowance under Section 14A:

The AO disallowed ?23,338 under section 14A read with Rule 8D(2)(iii) for expenses related to earning exempt income. The assessee argued no expenses were incurred as no dividend income was received. The CIT(A) upheld the disallowance, noting the assessee received exempt income from a trust and had investments in shares. The Tribunal upheld the disallowance, emphasizing the assessee's failure to provide details of expenses, thus justifying the application of Rule 8D.

4. Treatment of Jewelry Valuation Charges:

The AO disallowed ?34,151 claimed as jewelry valuation charges, treating them as personal expenses. The CIT(A) upheld this, noting the jewelry was a personal asset. The assessee contended these charges were debited to the capital account, not the business account. The Tribunal restored the matter to the AO for verification, directing the AO to check if the charges were indeed debited to the capital account.

Conclusion:

The Tribunal allowed the appeal partly, deleting the additions for jewelry valuation and car, while upholding the disallowance under section 14A. The issue of jewelry valuation charges was remanded for verification.

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