2016 (7) TMI 505 - AT - Income Tax

VDIS declarations - genuity of gold sold - Held that - A glance at the bill issued by M/s. Balaji Refinery does show that it was holding a licence. A Look at the purchase bill issued by MLJ show that it was having KST and CST registration numbers. These registrations were effective from 23.10.1997. In our opinion, these evidence do tilt the case in favour of the assessees. Assessees had done whatever possible, within their means to show that the gold jewellery sold by them were the same gold declared in VDIS, after converting it into bullion. Assessees had submitted copies of bills issued by M/s. Balaji Refinery which did show similar details of gold jewellery as returned in the VDIS. In such situation we are of the opinion that assessees had discharged their onus to show that the gold sold by them were the same which were declared by them in the VDIS declarations, after conversion. Reasoning given by the AO that antique jewellery would not have been sold by the assessees is only a surmise and cannot dislodge the evidence filed by the assessee. Further there is nothing on record to show that the gold jewellery which were sold by the assessee were antique in nature. In such circumstances, it is of the opinion that the lower authorities fell in error in disbelieving the source for credits shown by the assessees concerned. No hesitation in deleting the additions made in the hands of the assessee. - Decided in favour of assessee

Summary

Issues Involved:
1. Validity of the sale of gold/bullion and the existence of the entities involved (Mahalakshmi Jewellers and Balaji Refinery).
2. Whether the gold/bullion sold was the same as declared under the VDIS, 1997 scheme.
3. Adequacy of evidence provided by the assessees to substantiate their claims.
4. The correctness of the additions made by the AO and confirmed by CIT (A).

Detailed Analysis:

1. Validity of the Sale and Existence of Entities:
The AO questioned the existence of Mahalakshmi Jewellers (MLJ) and Balaji Refinery, which were claimed by the assessees to have been involved in the melting and sale of gold/bullion. The AO found discrepancies in the addresses provided and concluded that MLJ and Balaji Refinery did not exist at the claimed locations. The CIT (A) upheld this view, noting that letters to Balaji Refinery were returned unserved and local inquiries confirmed no such entities existed. The Tribunal previously dismissed the appeals based on similar findings, emphasizing the non-existence of MLJ and the genuineness of transactions.

2. VDIS Declarations and Sale of Gold/Bullion:
Assessees claimed that the gold/bullion sold was the same as declared under the VDIS, 1997 scheme. The AO found inconsistencies in the weight of the jewellery declared in the VDIS and the weight of gold/bullion sold. The AO also argued that financially sound assessees would not sell antique jewellery and would have sold directly without converting to bullion. The CIT (A) supported this view, finding that the assessees could not prove the conversion and sale of the declared jewellery.

3. Evidence Provided by Assessees:
The assessees presented valuation reports, bills from Balaji Refinery, and purchase invoices from MLJ to support their claims. The Tribunal noted that the items in the bills from Balaji Refinery matched the valuation reports filed under VDIS. The purchase invoices from MLJ also showed corresponding weights. The Tribunal found that the assessees had done their best to prove the conversion and sale of the declared jewellery, despite the AO's reliance on outdated inquiries and assumptions.

4. Additions Made by AO and Confirmed by CIT (A):
The AO made additions based on the non-existence of MLJ and Balaji Refinery and the alleged inability of the assessees to prove the source of credits. The CIT (A) confirmed these additions. However, the Tribunal found that the assessees had provided sufficient evidence to support their claims and that the AO's reasoning was based on surmises. The Tribunal concluded that the lower authorities erred in disbelieving the source of credits and deleted the additions.

Conclusion:
The Tribunal allowed the appeals of the assessees, finding that they had discharged their onus to prove that the gold/bullion sold was the same as declared under VDIS, 1997, after conversion. The Tribunal emphasized that the evidence provided by the assessees, including bills and valuation reports, was sufficient to substantiate their claims. The Tribunal deleted the additions made by the AO and confirmed by CIT (A), ruling in favor of the assessees.