2017 (7) TMI 419 - AT - Income Tax

Search u/s.132 - gold jewellery weighing 21456.550 grams seized - assessee asserts that it had received as gold deposits from its family members/ relative - Held that - When the relatives/family members had come forward to file affidavit in support of deposit of gold jewellery and which were in turn supported by VDIS/Wealth Tax returns filed, prior to the date of search, it could never be considered as an after thought. In the circumstances, we are of the opinion that claim of the assessee that 15502 grams of gold represented deposits from its family members and relatives, in our opinion had to be accepted. Since Assessing Officer had accepted only 4437 grams out of it, we delete the addition for the value of the balance of 11065 grams as well. Ld. Assessing Officer is directed to give relief to the assessee to this extent. None of the lower authorities had examined the claim of the assessee that 1042 grams of gold jewellery belonged to goldsmith, whose affidavits were also filed. We are of the opinion that the correctness of claim of the assessee with regard to 1042 grams claimed to be received from the goldsmiths, requires fresh verification. Similarly, claim of the assessee that after excluding stones and converting the jewellery to 91.6% purity actual weight would only be 18302.790 grams also requires fresh look by the ld. Assessing Officer. The ld. Assessing Officer has to verify affidavits of the goldsmiths/ business associates filed by the assessee before coming to the conclusion whether the claim of source for 1042 grams of gold could be accepted. Thus, while deleting the addition for the value of gold jewellery received by the assessee from its family member/ relatives, we remit the issue regarding claim of the assessee on actual weight of jewellery found at the time of search, and source for 1042 grams claimed to have been received from business associates back to the file of the Assessing Officer for consideration afresh in accordance with law. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues Involved:
1. Addition of ?4,15,65,882/- arising out of undisclosed gold jewelry found during a search.
2. Acceptance and rejection of evidence provided by the assessee for the claimed gold jewelry.
3. Consideration of purity and weight conversion of the seized gold jewelry.
4. Verification of affidavits and supporting documents from family members and business associates.

Detailed Analysis:

1. Addition of ?4,15,65,882/- for Undisclosed Gold Jewelry:
The assessee, engaged in the gold jewelry business, filed a return disclosing an income of ?26,91,860/-. During a search on 21.11.2012, gold jewelry weighing 21456.550 grams was seized. The Assessing Officer (AO) accepted evidence for 4437 grams, considering the remaining 16619.550 grams as undisclosed income. The AO valued the undisclosed jewelry at ?4,40,40,882/- and, after accounting for the disclosed ?24,75,000/-, added ?4,15,65,882/- to the assessee's income.

2. Acceptance and Rejection of Evidence:
The assessee claimed that the balance gold jewelry was deposited by family members and business associates, providing affidavits and Wealth Tax returns as evidence. The AO deemed these documents as post-search fabrications and accepted only 4437 grams based on the statement recorded during the search. The AO also accepted 834 grams as business stock, totaling 5271 grams, and considered the rest as undisclosed investments.

3. Consideration of Purity and Weight Conversion:
The assessee argued that the seized jewelry was of 80% purity, and when converted to 91.6% purity, the weight would be 18,302.79 grams. This claim was not addressed by the AO or the Commissioner of Income Tax (Appeals) (CIT(A)).

4. Verification of Affidavits and Supporting Documents:
The CIT(A) upheld the AO's decision, rejecting the affidavits as afterthoughts and fabricated evidence. The assessee contended that the affidavits and supporting documents were genuine and predated the search. The CIT(A) noted that the affidavits were dated 28.11.2013, a year after the search, and doubted the claim that women would deposit their jewelry with the assessee.

Appellate Tribunal's Decision:
The Tribunal considered the rival contentions and found that the AO and CIT(A) did not adequately address the purity and weight conversion claim. The Tribunal noted that the assessee provided affidavits and corroborative evidence like VDIS declarations and Wealth Tax returns, which should not have been dismissed as afterthoughts. The Tribunal opined that the claim of 15502 grams from family members and relatives should be accepted, deleting the addition for the balance 11065 grams.

For the 1042 grams claimed from business associates, the Tribunal remitted the issue back to the AO for fresh verification of the affidavits and the purity conversion claim.

Conclusion:
The appeal was allowed for statistical purposes, directing the AO to re-examine the claims regarding the actual weight and source of the gold jewelry, supported by affidavits and corroborative evidence. The Tribunal emphasized the need for a detailed verification process before concluding on the claims.