2021 (10) TMI 277 - AT - Income Tax

Addition on account of unexplained investment in Gold Silver articles u/s 69B - Jewellery surrendered by assessee - HELD THAT - AO himself has accepted the fact not all jewellery so surrendered is unexplained and has taken into consideration the retraction in form of affidavit filed by the assessee and supported by evidence in form of bills and cheque payment and other documentation and has thus accepted a part of the jewellery as explained and has only brought to tax a part of the jewellery which as per the AO still remained unexplained, there is no basis for accepting the contention advanced by the ld PCIT/DR at this stage that it is a case of surrender of jewellery and in absence of retraction, the addition so confirmed by the ld CIT(A) be upheld. Therefore, the contention so advanced by the ld PCIT/DR cannot be accepted. In any case, the Revenue is not in appeal against the order so passed by the ld CIT(A) and we therefore restrict ourselves to the findings of the ld CIT(A) which are under challenge by the assessee. Jewellery received in form of gift from Sh. Ajay Maheshwari there is an apparent mistake in form of considering the wrong figure which has occurred in the findings of the ld CIT(A) in para 6.4 of the order when the same is read along with his specific findings at para 6.2 of his order and the figure of ₹ 44,36,092/- should have actually been taken instead of ₹ 54,76,382/. We accordingly agree with the contention of the ld AR that where the explanation of the assessee has been duly accepted by the ld. CIT(A) addition to the extent should be deleted in totality instead of restricting it to 75% and the whole of the jewellery so received as gift from Shri Ajay Maheshwari be treated as explained jewellery. Where the valuation report has been accepted by the ld CIT(A) which not just contains the total value rather it contains the valuation in respect of individual items of gold and diamond jewellery, the details of gold and diamond jewellery were very much on record along with disclosure thereof in the tax return filed for A.Y 2005-06. Therefore, having accepted the valuation report and factum of possession of substantial jewellery and the fact that necessary details of individual jewellery items are available on record, the action of the ld CIT(A) in treating only 75% of jewellery as explained and remaining 25% as unexplained doesn t have a rational basis with the material available on record and as to how the ld CIT(A) has arrived at the figure of 75% has also not been spelt out in the order so passed by him and the said action of ld CIT(A) of restricting the explained jewellery to 75% and treating the remaining 25% as unexplained therefore cannot be upheld. The whole of jewellery so received by the assessee and his wife from Late Shri Ramswaroop Maheshwari are treated as explained and addition of 25% of jewellery so confirmed by the ld CIT(A) is hereby directed to be deleted.

Summary

Issues Involved:
1. Addition of ?13,69,096/- on account of unexplained investment in Gold & Silver articles under Section 69B of the Income Tax Act.
2. Validity and acceptance of the valuation report and evidence provided by the assessee.
3. Treatment of jewellery received as a gift and inherited jewellery as explained or unexplained.

Issue-wise Detailed Analysis:

1. Addition of ?13,69,096/- on account of unexplained investment in Gold & Silver articles under Section 69B of the Income Tax Act:
The case involved a search and seizure action under Section 132 and survey action under Section 133A on the members of a group, including the assessee. Jewellery valued at ?2,34,32,323/- was found, with ?95,46,282/- attributed to the assessee and his wife. The Assessing Officer (AO) noted that the assessee had offered ?1,50,00,000/- to tax on account of undisclosed investment in jewellery during the search proceedings but did not include this in his return of income (ROI). The AO treated ?54,76,382/- as unexplained jewellery and brought it to tax under Section 69B. The Commissioner of Income Tax (Appeals) [CIT(A)] allowed partial relief, confirming an addition of ?13,69,096/-. The assessee appealed against this decision.

2. Validity and acceptance of the valuation report and evidence provided by the assessee:
The assessee provided a gift declaration certificate, affidavits, and a valuation report to explain the source of the jewellery. The CIT(A) accepted the gift declaration from Shri Ajay Maheshwari and the valuation report of jewellery received from Late Shri Ramswaroop Maheshwari. However, the AO had raised objections regarding the valuation report's authenticity, citing technical issues such as the lack of a confirmatory letter and the valuation report being on plain paper without a serial number. The CIT(A) found these objections to be technical and not substantial enough to discredit the valuation report.

3. Treatment of jewellery received as a gift and inherited jewellery as explained or unexplained:
The CIT(A) initially accepted the explanation for jewellery received as a gift from Shri Ajay Maheshwari, valued at ?10,40,290/-, but later only considered 75% of it as explained. The assessee argued that the entire amount should be treated as explained since the CIT(A) had accepted the explanation. Regarding the jewellery inherited from Late Shri Ramswaroop Maheshwari, the CIT(A) accepted the valuation report and the fact of substantial jewellery possession but treated only 75% as explained due to the lack of detailed breakup in the tax return. The assessee contended that the valuation report provided a detailed breakup and should be fully accepted.

Judgment:
The Tribunal found that the CIT(A) had made an apparent mistake by considering the wrong figure in his findings. The Tribunal agreed with the assessee that the entire amount of ?10,40,290/- received as a gift from Shri Ajay Maheshwari should be treated as explained. The Tribunal also found that the CIT(A)'s decision to treat only 75% of the inherited jewellery as explained lacked a rational basis, as the valuation report provided a detailed breakup, and the jewellery was recorded in the assessee's books of accounts. Therefore, the Tribunal directed that the entire jewellery received from Late Shri Ramswaroop Maheshwari be treated as explained.

Conclusion:
The Tribunal allowed the appeal, directing the deletion of the addition of ?13,69,096/- and treating the entire jewellery as explained. The findings and directions in this case were also applied to two other identical cases, and those appeals were similarly allowed.