2019 (11) TMI 627 - AT - Income Tax

Unexplained investment in jewellery found during the course of the search - violation of principles of natural Justice - HELD THAT - We have deliberated at length on the issue under consideration and, are of the considered view that the unsubstantiated valuation report of the government approved valuer, the authenticity of which had never been scrutinised and, therein verified by the department, can in no way support the claim of the A.R, that the jewellery found during the course of the search proceedings was acquired by the assessee from his explained sources. A.R could not draw our attention to any such document/records, which would lend credence and justify the veracity of the said valuation report. It is not the case of the ld. A.R, that the assessee and his family members were being assessed to wealth tax and, the aforesaid valuation report containing the details as regards the gold/diamond jewellery held by the assessee and his family members was furnished with the department in the course of any such proceedings. In our considered view, the stand alone and unsubstantiated valuation report of the government approved valuer, would in no way assist the assessee for characterising the jewellery found from his residential premises/lockers, as an investment made by him from explained sources. We thus not being able to persuade ourselves to accept the contention advanced by the ld. A.R, that the lower authorities had erred in treating the jewellery found from his premises/lockers during the course of the search proceedings, as an unexplained investment in the hands of the assessee, thus reject the same. Accordingly, finding no infirmity in the order of the CIT(A) - Decided against assessee

Issues Involved:
1. Validity of the order passed by the Assessing Officer (A.O) under Section 143(3) of the Income-Tax Act, 1961.
2. Addition of ?29,26,148/- on account of alleged unexplained investment in jewellery found during the search.
3. Violation of principles of natural justice by the CIT(A).

Detailed Analysis:

1. Validity of the Order Passed by the Assessing Officer:
The assessee challenged the validity of the order passed by the A.O under Section 143(3) of the Income-Tax Act, 1961. The Tribunal did not find any specific arguments or evidence presented by the assessee to substantiate this claim. The focus of the Tribunal was primarily on the issues of unexplained investments in jewellery rather than the procedural validity of the A.O's order. Thus, this ground of appeal was not elaborated upon and implicitly rejected.

2. Addition of ?29,26,148/- on Account of Alleged Unexplained Investment in Jewellery:
During the search and seizure proceedings, jewellery worth ?72,02,034/- was found from the residential premises and bank lockers of the assessee and his wife. The jewellery included gold, diamond, and silver items. The A.O, after considering the structure of the assessee's family and CBDT Instruction No. 1916, treated 1450 grams of gold jewellery as explained and seized the balance 564.80 grams of gold jewellery and diamond jewellery worth ?15,61,800/-.

During the assessment proceedings, the assessee provided a detailed explanation regarding the source of the jewellery, including ancestral inheritance, gifts, and purchases made from personal funds. The assessee also submitted valuation reports and purchase bills for certain items. However, the A.O was not convinced by the explanations and supporting documents provided by the assessee, particularly regarding the diamond jewellery and the balance gold jewellery weighing 230.25 grams. Consequently, the A.O made an addition of ?29,26,148/- (?5,68,031/- for gold jewellery and ?23,58,117/- for diamond jewellery) as unexplained investments.

The CIT(A) upheld the A.O's decision, stating that the assessee had already been granted the benefit of CBDT Instruction No. 1916 and had failed to provide credible documentary evidence for the remaining jewellery.

In the appeal before the Tribunal, the assessee reiterated the explanations provided earlier and relied on the valuation reports to claim that the jewellery was acquired from explained sources. However, the Tribunal noted that the assessee failed to substantiate the source of acquisition of the jewellery with credible evidence. The Tribunal emphasized that the unsubstantiated valuation reports and the absence of wealth tax assessments did not support the assessee's claims. Consequently, the Tribunal upheld the addition made by the A.O and dismissed the appeal.

3. Violation of Principles of Natural Justice:
The assessee contended that the order passed by the CIT(A) was in violation of the principles of natural justice. However, the Tribunal did not find any specific arguments or evidence to support this claim. The focus remained on the substantive issue of unexplained investments in jewellery. Therefore, this ground of appeal was implicitly rejected.

Conclusion:
The Tribunal dismissed the appeal filed by the assessee, upholding the addition of ?29,26,148/- made by the A.O on account of unexplained investments in jewellery. The Tribunal found no infirmity in the order of the CIT(A) and concluded that the assessee failed to provide credible evidence to substantiate the source of acquisition of the jewellery. The appeal was dismissed in its entirety.

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