2020 (8) TMI 816 - AT - Income Tax

Unexplained jewellery u/s 69A r.w.s. 115BBE - search proceedings - certain jewellery was found from the premises of the assessee and out of which part of the jewellery was seized by the Income-tax Department. - HELD THAT - To support the availability of the jewellery, the assessee has filed a copy of the valuation report prepared during the course of the search in calendar year 2007, which is a document of the Department having evidential value akin to a copy wealth tax return or VDIS declaration. Not agreeing with DR that slight mismatch in the name of the jewellery articles, should not be allowed just because the jewellery weight found during search of 2007 is not supported by wealth tax returns. In the case of the assessee, the wealth of the assessee was less than the threshold amount of wealth liable to wealth tax and therefore the assessee did not file the wealth tax return. So if the wealth tax return is not filed by the assessee, then in our opinion the inventory of the jewellery found and seized during the course of the search in calendar year 2007 and valuation report of the same prepared by the Departmental Valuer, is one of the document prepared under statutory rules and regulations and cannot be brushed aside. Total weight of the jewellery found and seized during the course of the search in calendar year 2007 is more than the jewellery found during the current search, and therefore respectfully following the decision of the Tribunal in the case of Rajkumar B Agarwal 2019 (1) TMI 687 - ITAT PUNE no addition of unexplained jewellery under section 69A of the Act is warranted in the case of the assessee just due to minor mismatch in the items of the jewellery found in the current search and the jewellery found during the search on 18/02/2007.- Decided in favour of assessee. Deduction for maintenance charges paid in respect of flat let out - HELD THAT - Since the assessee has already added back the maintenance expenses under the head profit and gains of the business and profession and this amount has not been claimed under that income from house property, the contention of the Assessing Officer that the assessee has claimed flat maintenance expenses in the profit and loss account is factually incorrect and thus no addition can be made on this ground. Finding of CIT(A) of confirming the disallowance is against the factual record and therefore it is set aside. Addition upheld by the learned CIT(A) is accordingly deleted. - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of unexplained jewelry under Section 69A read with Section 115BBE of the Income-tax Act.
2. Disallowance of maintenance charges claimed under the head "profit and gains of business and profession."

Detailed Analysis:

Issue 1: Addition of Unexplained Jewelry

The primary contention revolves around the addition of ?12,53,121/- for unexplained jewelry found during a search operation. The jewelry, totaling 947.074 grams, was found in a PNB locker and valued at ?37,54,085/-. The assessee argued that the jewelry should be considered explained because it was less than the jewelry found in an earlier search in 2007, which totaled 969.300 grams. The assessee also provided a history of locker operations, indicating the jewelry was last accessed in October 2015, suggesting it should not be assessed in the year 2017-18.

The Assessing Officer (AO) did not accept this explanation, stating the assessee failed to reconcile the items found in the current search with those from 2007. Consequently, the AO treated jewelry worth ?17,49,941/- as unexplained under Section 69A. The Learned CIT(A) partially upheld this addition, allowing credit for only 500 grams of jewelry as explained, based on CBDT Instruction No. 1961, and sustained the addition for the remaining 447.074 grams valued at ?12,53,121/-.

The Tribunal, however, found merit in the assessee's argument, noting that the jewelry found in the current search was less in weight compared to the 2007 search, and no items had been sold since then. The Tribunal referenced similar cases where additions were deleted if the total weight of jewelry found was less than previously declared amounts, even if there were discrepancies in item descriptions. Given the evidential value of the 2007 valuation report, the Tribunal held that no addition for unexplained jewelry was warranted due to minor mismatches in item descriptions. Thus, the addition of ?12,53,121/- was deleted.

Issue 2: Disallowance of Maintenance Charges

The second issue concerned the disallowance of ?34,070/- claimed as maintenance charges for a let-out flat. The AO disallowed this claim, arguing it was not allowable under the head "profit and gains of business and profession" as it related to income from house property. However, the Tribunal found that the assessee had already added back this amount in the computation of income under "profit and gains of business and profession" and had not claimed it under "income from house property." Therefore, the AO's basis for disallowance was factually incorrect. The Tribunal set aside the CIT(A)'s confirmation of this disallowance and deleted the addition of ?34,070/-.

Conclusion:

The Tribunal allowed the appeal in favor of the assessee, deleting the addition for unexplained jewelry and the disallowance of maintenance charges. The judgment emphasized the importance of considering historical evidence and the factual accuracy of claims in tax assessments.