2020 (10) TMI 1086 - AT - Income Tax

Unexplained jewellery - Jewellery offered in original Return of income and said income was not withdrawn by filing Revised return of Income - whether said jewellery did not belong to assessee but belonged to the family members and that there is no estoppel against statute? - HELD THAT - As during the statement on oath under section 132(4) of the IT Act the assessee has duly submitted that the jewellery found in their lockers belong to the family members. In course of assessment proceedings the assessee has duly given details about the jewellery found in the search belonging to other family members. The very fact that the assessee was made to pay tax equivalent to 100% value of undisclosed jewellery clearly shows that the Revenue authorities have taken advantage of the assessee not being aware of his rights properly. By no stretch of imagination if tax is at all due the same is equivalent to 100% value of the jewellery found. Furthermore, the Revenue authorities cannot also show ignorance of the permissible limit of jewellery holdings as prescribed by the CBDT Instruction No. 1994. Assessee has duly brought on record affidavits of the family members owning jewellery. Just because the claim is made otherwise then by revised return the said claim does not seize to be a claim to be adjudicated as long as the claim is made. Hon'ble Supreme Court s decision in the case of Shelly Products 2003 (5) TMI 4 - SUPREME COURT , supports the proposition that if the assessee has erroneously paid more tax than he was legally required to do, he is entitled to claim the refund, as otherwise it would be violative of Article 265. Thus hold that the jewellery found was within the limit fixed by CBDT as per Instruction No. 1994 dated 11.5.1994. The authorities below have erred in rejecting the assessee s claim - Decided in favour of assessee.

Summary

Issues Involved:
1. Treatment of jewelry worth ?27,05,934/- as income of the assessee.
2. Whether the jewelry belonged to the assessee or his family members.
3. The applicability of CBDT Instruction No. 1916 dated 11.05.1994 regarding permissible limits of jewelry.
4. The legal implications of offering jewelry as income in the original return and not filing a revised return.
5. The relevance of affidavits and statements provided by family members regarding the ownership of the jewelry.
6. The role of estoppel against law in taxation.
7. The consideration of new claims and evidence during appellate proceedings.

Detailed Analysis:

1. Treatment of Jewelry Worth ?27,05,934/- as Income of the Assessee:
The Learned Commissioner of Income Tax (Appeals) [CIT(A)] treated the jewelry worth ?27,05,934/- as the income of the assessee because it was offered in the original return of income. The assessee argued that the jewelry did not belong to him but to his family members, and hence, it should not be taxed in his hands. The CIT(A) dismissed the appeal, stating that the assessee had not filed a revised return to withdraw the income offered.

2. Ownership of the Jewelry:
During the search, jewelry worth ?27,05,934/- was found in the bank lockers. The assessee initially offered it as his income but later claimed that it belonged to various family members. Statements recorded under Section 132(4) of the Income Tax Act, 1961, indicated that the jewelry was streedhan, ancestral jewelry, and gifts received by family members. The assessee provided affidavits from family members supporting this claim.

3. Applicability of CBDT Instruction No. 1916:
The assessee argued that the jewelry found was within the permissible limits prescribed by CBDT Instruction No. 1916 dated 11.05.1994. The instruction allows certain quantities of jewelry to be held by family members without being considered unexplained. The total jewelry found was within these limits, as per the assessee’s detailed submissions and affidavits.

4. Offering Jewelry as Income in the Original Return:
The CIT(A) held that the assessee should have filed a revised return if he believed the jewelry did not belong to him. The assessee contended that offering the jewelry as income was done to buy peace and avoid litigation, and there is no estoppel against law. The Income Tax Department has the power to tax income as per law, not based on a wrong disclosure made by the assessee.

5. Affidavits and Statements by Family Members:
The assessee provided affidavits from family members, stating that the jewelry belonged to them. These affidavits were crucial in establishing the ownership of the jewelry. The CIT(A) did not specifically comment on these affidavits but noted that the jewelry belonged to family members.

6. Estoppel Against Law:
The assessee argued that there is no estoppel against law, meaning that even if he had mistakenly offered the jewelry as his income, it should not be taxed if it legally belonged to someone else. This principle is supported by various judicial precedents, including the Bombay High Court’s decision in Balmukund Acharya v. DCIT.

7. Consideration of New Claims and Evidence During Appellate Proceedings:
The assessee relied on several judicial decisions to argue that new claims and evidence can be considered during appellate proceedings, even if not raised in the original return or during assessment. The Tribunal agreed, citing the Bombay High Court’s decision in CIT v. Pruthvi Brokers & Shareholders, which allows new claims to be raised before appellate authorities.

Conclusion:
The Tribunal noted that the jewelry found was within the permissible limits set by CBDT Instruction No. 1916. The affidavits and statements provided by family members substantiated the claim that the jewelry did not belong to the assessee. The Tribunal held that the authorities below erred in rejecting the assessee’s claim and deleted the addition of ?27,05,934/-. The appeal filed by the assessee was allowed, emphasizing that tax should be levied based on real income and legal ownership, not on incorrect disclosures made under compulsion or misunderstanding.