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2021 (9) TMI 764 - AT - Income TaxAddition of unexplained jewellery and unexplained cash expenditure - HELD THAT - We find that in this case the jewellery was found to be unexplained during the course of search on account of gold as well diamond jewellery which has been narrated and discussed hereinabove. During the course search three family members namely Mr. Saket Mehta, Mr. Vivek Mehta, Mrs. Shilpa Sudheer Mehtah during recording of statement under section 132(4) specifically stated that the excess jewellery belonged to Ms. Sangeeta Mehta and Mr. Manoj Mehta who are Belgium residents and visit India during family functions and social occasions and used the said jewellery for their personal purposes. We also find that the couple bought some more jewellery during the marriage of their two daughters and the bills whereof are placed at page No.157 to 185 of the paper book with the bills for making the charges - Besides considering the net worth of the family which is approximately ₹ 314 crores as on 31.03.2016, we are quite convinced that the amount of addition is negligible and can not be justified in view of the financial strength and status of the family as well as the foreign residents Ms. Sangeeta Mehta and Mr. Manoj Mehta. Even considering the jewellery found with the family as per circular instruction No.1916 dated 11.05.1994, the addition as sustained by Ld. CIT(A) seems to be fallacious and without any cogent reasons. Considering all these facts and various case laws relied by the Ld. A.R., we are inclined to set aside the order of Ld. CIT(A) and direct the AO to delete the addition. We are not in agreement with the conclusion of Ld. CIT(A) that the assessee has offered general explanation not supported with the bills, vouchers and bank statement. We find that the confirmation of addition to the extent as unexplained expenditure is against the facts on record which were also available before the authorities below - both the authorities have failed to appreciate the facts in correct perspective. In view of these facts, we are inclined to set aside the order of Ld. CIT(A) and direct the AO to delete the addition made under section 69C of the Act. - Decided in favour of assessee.
Issues Involved:
1. Confirmation of addition of unexplained jewellery under Section 69A of the Income Tax Act. 2. Confirmation of addition of unexplained cash expenditure under Section 69C of the Income Tax Act. Detailed Analysis: 1. Confirmation of Addition of Unexplained Jewellery under Section 69A: The primary issue raised by the assessee was the confirmation of the addition of unexplained jewellery worth ?26,13,971/- and unexplained cash expenditure of ?13,90,000/- by the Commissioner of Income Tax (Appeals) [CIT(A)], thereby upholding the assessment order passed by the Assessing Officer (AO). The jewellery was found during a search and seizure action under section 132(1) of the Income Tax Act on 18.11.2015. The jewellery was valued by government-approved valuers and the assessee provided a reconciliation of the jewellery found. The AO added unexplained jewellery worth ?26,13,971/- to the income of the assessee, which included ?24,73,589/- as unexplained gold jewellery and ?1,40,382/- as unexplained diamond jewellery. The CIT(A) partly allowed the appeal by restricting the addition on account of unexplained gold jewellery to ?18,22,856/-, allowing a relief of ?6,50,733/-, but confirmed the addition of ?1,40,382/- for diamond jewellery. The CIT(A) noted that the assessee's claim that the jewellery belonged to Ms. Sangeeta Mehta and Mr. Manoj Mehta, citizens of Belgium, who had kept it for personal use during their visits to India, was not supported by sufficient evidence. The AO's rejection of the confirmations filed by Mr. Manoj Mehta and Mrs. Sangita Mehta owning up the entire excess jewellery was found to be correct. However, the CIT(A) allowed an allowance for gold jewellery to the extent of 350 grams as per CBDT Instruction No. 1916 dated 11.05.1994, which should be treated as explained. Upon appeal, the Tribunal found that the jewellery was explained by the statements of family members and the purchase bills provided. The Tribunal noted the substantial net worth of the family and the negligible amount of addition in comparison. The Tribunal was convinced that the addition was not justified and directed the AO to delete the addition, setting aside the order of the CIT(A). 2. Confirmation of Addition of Unexplained Cash Expenditure under Section 69C: The second issue involved the confirmation of addition of ?13,90,000/- as unexplained expenditure under Section 69C. During the search, emails with attachments related to Ashabaug house property indicated cash payments for construction materials totaling ?37,57,721/-. The AO added ?13,90,000/- as unexplained expenditure after considering the cash withdrawals evidenced by the bank statements. The CIT(A) affirmed the addition, noting that the assessee's claim of cash withdrawals over several months was general and not supported by specific bills or receipts. The CIT(A) found no infirmity in the AO's action. Upon appeal, the Tribunal reviewed the cash withdrawals and found that the difference of ?8,52,054/- was made up from withdrawals after 21.09.2016 till 31.03.2016. The Tribunal found merit in the assessee's contention that the expenditure was met from subsequent withdrawals and noted that the authorities below failed to appreciate the facts correctly. The Tribunal set aside the order of the CIT(A) and directed the AO to delete the addition under Section 69C. Conclusion: The appeals of the assessee were allowed for both issues. The Tribunal directed the deletion of additions for unexplained jewellery and unexplained cash expenditure, setting aside the orders of the CIT(A). The judgment was pronounced in the open court on 14.09.2021.
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