2017 (12) TMI 581 - AT - Income Tax

Addition on unexplained paintings - painting are stated to be received by the assessee as gift on various occasions from the artist - Held that - The perusal of these documentary evidences as placed in the paper book support the stand of the assessee that these paintings were acquired by the assessee much prior in earlier years and the revenue had no justification to add the same. The assessee, prima facie discharged the primary onus of proving the source of these painting and the onus was shifted on revenue to negate the same. There is nothing adverse on record to rebut the various contentions of the assessee and revenue has made the additions merely on the basis of suspicion which was not justified. Hence, we are inclined to delete the additions with respect to painting listed at Serial No. 1 to 8. Further, the paintings listed at Serial No. 9 & 10 belonging to an artist A.R.Chugta valued at ₹ 60 Lacs are supported by the voucher dated 12/02/2001 and the payment thereof amounting to ₹ 0.52 Lacs has been made by the assessee vide DD No.56463. A perusal of stock record of M/s reflections as on 31/03/2008 reveals that these painting forms part of the closing stock. Therefore, since the same have duly been accounted for in the books of accounts of the assessee and forms part of stock-in-trade, the addition thereof is not justified. So far as the addition on account of unexplained jewellery is concerned, we are of the opinion that the same is a factual one requiring reconciliation of the jewellery quantity. The onus is on assessee to reconcile the excess jewellery found during search operations. The Ld. AR has contended that the jewellery was held by the assessee under common hotchpotch and other family members had sufficient taxable income to acquire the jewllery. Hence, without delving much deeper into the issue, we remit the matter back to the Ld. AO for re-adjudication with a direction to the assessee to reconcile the quantities of jewellery found during the search. Resultantly this ground of assessee s appeal stands allowed for statistical purposes.

Summary

Issues Involved:
1. Addition of ?244.95 Lacs on account of unexplained paintings.
2. Addition of ?37.01 Lacs on account of unexplained jewellery.

Issue-wise Detailed Analysis:

1. Addition of ?244.95 Lacs on account of unexplained paintings:

The assessee, involved in the business of trading paintings, contested the addition of ?244.95 Lacs made by the Assessing Officer (AO) for unexplained paintings. During a search on the ACG Art group, unaccounted paintings were found, leading to the addition. The assessee provided various evidences to prove the acquisition of these paintings, but the AO rejected them. The CIT(A) partially accepted the assessee's evidence, granting relief for one painting valued at ?20 Lacs, but confirmed the rest.

Upon further appeal, the tribunal examined the evidences provided by the assessee:

- Serial No. 2: Two paintings valued at ?5 Lacs and ?25 Lacs were received as gifts from the artist Anjoli Ela Menon. The inscriptions on the paintings corroborated the gift claim. The tribunal found this evidence sufficient and deleted the addition.
- Serial No. 3: Ten paintings valued at ?146.75 Lacs were supported by documentary evidence showing they were acquired in earlier years. The tribunal noted that the assessee had discharged the primary onus of proving the source of these paintings, and the revenue's additions were based on suspicion. The additions were deleted.
- Serial No. 4: Seven paintings valued at ?33 Lacs were received on consignment basis. The assessee provided letters from artists confirming this. The tribunal found these evidences credible and deleted the addition.
- Serial No. 5: Seven low-value paintings, with two valued at ?3 Lacs each, were part of the closing stock and duly accounted for in the books. The tribunal deleted the addition for these two paintings but confirmed the addition for the remaining low-value paintings totaling ?4.60 Lacs.
- Serial No. 6: Three items were mere prints/photocopies valued at ?0.60 Lacs. The tribunal deleted this addition as they were not actual paintings.
- Serial No. 7: One painting valued at ?4 Lacs was supported by a letter from the seller with payment details. The tribunal found this evidence sufficient and deleted the addition.

2. Addition of ?37.01 Lacs on account of unexplained jewellery:

The addition pertained to excess jewellery found during the search, including gold and diamond jewellery. The CIT(A) granted partial relief, reducing the addition to ?37.01 Lacs. The tribunal noted that the issue required reconciliation of the jewellery quantities. The assessee claimed the jewellery was held in a common hotchpotch, and other family members had sufficient taxable income to acquire it. The tribunal remitted the matter back to the AO for re-adjudication, directing the assessee to reconcile the jewellery quantities.

Conclusion:

The tribunal partly allowed the assessee's appeal, deleting significant portions of the additions related to unexplained paintings while remitting the jewellery matter for further examination. The order was pronounced on 08th December 2017.