2020 (9) TMI 923 - AT - Income Tax

Unexplained investment u/s 69A - acquisition of jewellery - HELD THAT - Assessee had furnished an affidavit of his wife, wherein the receipt of gifts on specific events have been clearly mentioned. Averments made in the affidavit have not been dislodged or proved false by the A.O. by bringing any contrary evidence on record. Status/reputation of the assessee and the amount of income he has declared annually in the return of income filed, it cannot be denied that the assessee is a man of means and had the capacity to make the investment in gold/diamond jewellery as well as silver articles. A.O. has allowed an allowance of 500 grams in respect of gold jewellery only in respect of assessee and his wife. Whereas, as per CBDT Instruction No. 1916 dated 11.05.1994, the allowance of 500 grams has to be granted in respect of each married lady and 250 grams for each unmarried girl and 100 grams for each male member of the family. As well settled that the aforesaid CBDT Circular would also be applicable in respect of addition made u/s. 69A of the Act. If one goes by the aforesaid CBDT Instruction, then, there will be no unexplained jewellery to be treated as unexplained investment u/s. 69 A of the Act. Thus, looked at from any angle, the addition made by the A.O. on account of unexplained investment u/s.69A of the Act cannot survive. Accordingly, we delete the addition. Levy of interest u/s. 234B - claim of the assessee that in the year under consideration, the assessee did not have any income chargeable under the head profits and gains of business and profession and further he is a Senior Citizen of more than 60 years old - HELD THAT - Sub section (2) of section 207 which has been inserted by Finance Act, 2012 w.e.f. 01.04.2012 carves out an exception by stating that sub section (1) would not be applicable to a resident individual assessee who does not have any income chargeable under the head profits and gains of business and profession and if he has attained the age of 60 years or more at any time during the relevant previous year. As per the copy of PAN card submitted before us, the date of birth of the assessee is 03.05.1949. Thus, during the previous year relevant to the assessment year under dispute, the assessee has crossed the age of 60 years. Further, it is the claim of the assessee that during the year under consideration, the assessee had no income which is chargeable under the head profits and gains of business and profession. In case, the aforesaid claim of the assessee is correct, no interest u/s. 234B of the Act can be levied in view of the provision contained under sub section (2) of section 207. The A.O. is directed to factually verify the aforesaid claim of the assessee and delete the interest charged u/s. 234B of the Act. This ground is allowed for statistical purposes.

Summary

Issues Involved:
1. Addition of ?13,15,618/- on account of unexplained investment in gold, diamond jewellery, and silver articles.
2. Levy of interest under section 234B of the Income Tax Act, 1961.
3. Additional ground challenging the addition on the basis of lack of incriminating material found during the search and seizure operation.

Issue-wise Detailed Analysis:

1. Addition of ?13,15,618/- on account of unexplained investment in gold, diamond jewellery, and silver articles:

The assessee, an individual, filed a return of income declaring ?1,06,64,728/- for the assessment year 2013-14. During a search and seizure operation under section 132 of the Income Tax Act, gold/diamond jewellery and silver articles worth ?40,13,231/- were found at the assessee's residential premises and lockers. The Assessing Officer (A.O.) requested the assessee to explain the source of acquisition of these items. The assessee provided detailed submissions, reconciliation statements, purchase bills, and an affidavit from his wife claiming ownership of part of the jewellery.

The A.O. accepted 251.3 grams of gold jewellery as explained, as they were purchased through cheque/credit card payments. Additionally, considering Indian customs and the assessee's status, the A.O. allowed 500 grams for the assessee and his spouse, totaling 751.3 grams as explained. The remaining jewellery was treated as unexplained and added back ?9,50,855/- under section 69A. Similarly, for diamond jewellery, the A.O. accepted 12.49 carats as explained and added back ?1,47,257/- for 5.69 carats as unexplained investment. For silver articles, ?2,17,506/- was added back as unexplained investment, totaling ?13,15,618/-.

The first appellate authority (CIT(A)) sustained the A.O.'s addition. However, the assessee argued that the A.O. and CIT(A) failed to consider the evidence provided. The assessee claimed that the jewellery was acquired through ‘monthly bhisi scheme’ contributions made via cheque/credit card, and only a small amount was paid in cash. The assessee also converted old ornaments to new ones by paying minimal making charges. The affidavit from the assessee’s wife detailed the receipt of gifts, which the A.O. did not disprove.

The Tribunal observed that the A.O. did not find any discrepancies in the reconciliation statement, bills, and invoices provided by the assessee. The Tribunal noted that the A.O.'s allegation of cash purchases was not based on facts and that the evidence supported the assessee's claim. The Tribunal also considered the CBDT Instruction No. 1916, which allows for certain quantities of jewellery to be considered explained based on family composition. The Tribunal concluded that the addition made by the A.O. could not survive and deleted the addition of ?13,15,618/-.

2. Levy of interest under section 234B of the Income Tax Act, 1961:

The assessee challenged the levy of interest under section 234B, claiming that he was a Senior Citizen (over 60 years old) during the relevant financial year and did not have income chargeable under the head profits and gains from business and profession. Section 207(2) exempts resident individuals over 60 years old without business income from paying advance tax.

The Tribunal noted that the CIT(A) did not record any substantive finding on this issue. The Tribunal directed the A.O. to verify the assessee's claim regarding his age and income and, if found correct, to delete the interest charged under section 234B.

3. Additional ground challenging the addition on the basis of lack of incriminating material found during the search and seizure operation:

Since the Tribunal deleted the addition made towards unexplained investment while deciding the primary grounds on merits, the additional ground was rendered unfructuous and dismissed.

Conclusion:

The appeal was allowed, with the addition of ?13,15,618/- deleted and the issue of interest under section 234B remanded to the A.O. for verification. The additional ground was dismissed as unfructuous.