2018 (7) TMI 826 - AT - Income Tax

Unexplained jewellery - addition u/s 69C or 69A - jewellery belongs to the assessees having received as streedhan - Held that - DR has relied on the statement recorded of Sh. R. K. Mittal u/s 132(4) of the Act. It is however not denied that there was no surrender made by any of the assessees. Further even as per the statement of Sh. R.K. Mittal (husband of Radha Mittal) disclosure was made of Rs. .79 lacs in the hands of Radha Mittal, Rs. .79 lacs in the hands of Ruchie Mittal and ₹ 1.31 crores in the hands of R.K. Mittal husband of Radha Mittal. Contrary to the above additions were made on account of unexplained jewellery u/s 69A of the Act in the hands of assessees and no addition has been made in the hands of R.K. Mittal. In absence of any surrender made by the assessees u/s 132(4) of the Act, no obligation was imposed upon them to offer the impugned sums as income. Also judgments u/s 69C of the Act are distinguishable on the facts of the assessees. These judgments essentially relate to cash seized which were held to be unexplained which is not the case of the assessee. In the case of Karun Dutt Singh v. CIT 2017 (9) TMI 47 - KERALA HIGH COURT it was noted that AO made addition to assessee s income in respect of gold ornaments recovered from him after rejecting explanation that it belonged to his employer company since Director of employer company denied to have given ornaments to assessee for sale or as samples. There is no denial in the instant case either by the assesses or R.K.Mittal or any other person. The consistent explanation has been that acquisition of jewellery is as streedhan on marriage or other occasions and same could not be said to be unexplained jewellery. The basis that assessees have not filed wealth tax returns cannot be a ground to make an addition in view of the judgment of Roshan Di Hatti v. CIT (1977 (3) TMI 3 - SUPREME COURT). Having regard to the foregoing we hold that additions were made in the hands of assessee are not in accordance with law and therefore the same are deleted - Decided in favour of assessee

Issues Involved:
1. Validity of the notice issued under section 142(1) of the Income Tax Act.
2. Addition of unexplained jewelry under section 69A of the Income Tax Act.
3. Computation and valuation of jewelry for tax purposes.
4. Levy of interest under sections 234A and 234B of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of the notice issued under section 142(1):
The appellants argued that the notice issued under section 142(1) was invalid as they had already filed their original return of income, which was pending. They contended that the assessment framed in response to the invalid notice was without jurisdiction. However, this issue was not pressed during the proceedings and was dismissed.

2. Addition of unexplained jewelry under section 69A:
The main contention revolved around the addition of unexplained jewelry found during the search and seizure operations. The appellants argued that the jewelry was explained as "streedhan" received during marriages and other occasions, supported by customs and traditions. They presented evidence such as seized documents (Annexure A-4) showing marriage expenses and claimed that the jewelry was not acquired in the assessment year in question.

The Commissioner of Income Tax (Appeals) [CIT(A)] had allowed partial relief by considering 1100 grams of jewelry for Radha Mittal and 700 grams for Ruchie Mittal as per CBDT Instruction No. 1916 dated 11.5.1994. However, the appellants contended that the CIT(A) incorrectly applied the rate of ?2100 per gram instead of the average rate of ?8758.83 per gram.

The Tribunal noted that the total jewelry found was 3299.83 grams, and the quantity in dispute was 1499.83 grams after considering the relief granted by CIT(A). The Tribunal accepted the appellants' explanation, considering their long marital periods and family status, and deleted the additions made by the Assessing Officer (AO) and partly confirmed by CIT(A).

3. Computation and valuation of jewelry:
The Tribunal observed that the CIT(A) had incorrectly applied the rate of ?2100 per gram for the jewelry, whereas the average rate of the jewelry found was ?8758.83 per gram. The Tribunal referred to the jurisdictional High Court's judgment in Ashok Chaddha v. ITO, where the method of applying the average rate was accepted. The Tribunal thus corrected the valuation and granted relief accordingly.

4. Levy of interest under sections 234A and 234B:
The appellants challenged the levy of interest under sections 234A and 234B. The Tribunal noted that these issues were consequential in nature and would depend on the final outcome of the main issues. Since the Tribunal deleted the additions related to unexplained jewelry, the consequential interest levies were also addressed accordingly.

Conclusion:
The Tribunal allowed the appeals partly in favor of Radha Mittal and fully in favor of Ruchie Mittal, deleting the additions made on account of unexplained jewelry and correcting the valuation errors. The Tribunal also addressed the consequential interest levies based on the main issues' outcomes. The detailed analysis preserved the legal terminology and significant phrases from the original text, ensuring a comprehensive understanding of the judgment.

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