2019 (11) TMI 63 - HC - Income Tax

Voluntary Disclosure of Income Scheme VDIS - identification of jewellery declared - whether sale of jewellery/goods were out of the declaration made under the Voluntary Disclosure of Income Scheme VDIS? - HELD THAT - The mere change in the nomenclature from jewellery to bullion in the VDIS declaration visa-vis sale bills would not be relevant and is of no consequence. The only exercise the Assessing Officer had to undertake was whether the gold, silver and diamond declared under the VDIS and subsequently, claimed to have been sold after converting the same into bullion are one and the same. However, on the premise that there is change in the nomenclature the Assessing Officer as well as the Appellate Authorities have disbelieved the claim of the appellants. AO has merely stated there was a change in nomenclature and as such it could not be accepted that the items declared under the VDIS was the same as sold by the appellants. In fact, tribunal fell in error by presuming that Assessing Officer had disputed the quantitative details, which was not the factual scenario, since the Assessing Officer had verified the details of the quantities returned and sold, which has not been disputed and obviously for the reason sale having been correlated on the assaying of the jewellery. In fact, it has been brought to the notice of the tribunal that jewellery declared was of lower purity and as such on conversion i.e., upon assaying purity had reduced proportionately, which has been erroneously ignored by the tribunal. Tribunal erred in not considering the fact that under similar circumstances in the following cases rendered in respect of the assessees who were similarly placed, had been accepted and the appeals filed by the respective assessees had been allowed. Tribunal committed a serious error in arriving at a conclusion that items sold by the respective appellants were different from the jewellery declared under the VDIS and as such the substantial questions of law deserves to be answered in favour of the assessees and against the Revenue.

Summary

Issues:
1. Whether the tribunal was correct in concluding that items sold were different from the jewellery declared?
2. Whether the appellants proved that the sale of jewellery/goods was out of the declaration made under the Voluntary Disclosure of Income Scheme (VDIS)?

Issue 1:
The appellants, Hindu Undivided Family (HUF), filed returns for the assessment year 1998-99, reporting interest income. The Assessing Officer made additions to the sale consideration as unexplained credits under Section 263 of the Income Tax Act. The matter was remanded to the Assessing Officer by the High Court, questioning the additions made. The Assessing Officer, upon reviewing the details of jewellery declared and sold by the appellants, concluded that the additions to capital assets were unexplained, as there was a disparity in the nomenclature of the jewellery declared and the goods sold. The CIT (Appeals) and the Income Tax Appellate Tribunal (ITAT) upheld this decision, leading to the second appeals by the appellants.

Issue 2:
The appellants argued that the authorities erred in concluding that there was a difference between the declared and sold items, as they had declared gold jewellery, silver, and diamonds under the VDIS 1997, which was accepted by the Revenue after payment of taxes. They provided copies of the VDIS declaration, valuation reports, and invoices for the conversion of jewellery to bullion form, supporting the conversion and sale of jewellery. The appellants contended that the change in nomenclature from jewellery to bullion in the VDIS declaration did not affect the substance of the transaction. The Revenue, on the other hand, argued that the discrepancies in quantities sold versus declared justified the disallowance.

Judgment:
The High Court held that the Assessing Officer and the Appellate Authorities erred in disbelieving the appellants' claim that the sold items were the same as those declared under the VDIS. The Court noted that the conversion of jewellery into bullion and subsequent sale was supported by documentary evidence, including sale bills and bank transactions. The Court criticized the tribunal for presuming that the Assessing Officer disputed the quantities sold, as the Assessing Officer had only raised concerns about the nomenclature. The Court referenced similar cases where such transactions were accepted, leading to a favorable judgment for the appellants. Consequently, the substantial questions of law were answered in favor of the assessees, and the ITAT's order was set aside, allowing the appeals filed by the assessees.

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