2022 (7) TMI 686 - AT - Income Tax

Assessment u/s 153A - during the course of search at the premises of the assessee gold jewellery weighing 5543grams (net.wt.) and 175.30 carat diamond jewellery were found which was valued by the Registered Valuer - HELD THAT - Quantity in weight of gold jewellery found on the date of search and the quantity of gold jewellery declared in the Wealth Tax Return on the valuation date should have been first considered. Thereafter, whatever withdrawals available to the assessee for purchase of such diamond/gold jewellery on the basis of the market value should have been considered and only the balance amount should have been added or if according to the AO the source stands explained, then no addition should have been made. However, in the instant case neither the AO nor the CIT (A) have done this exercise, nor even the assessee has done this exercise and the addition has been made on the basis of lumpsum market value which in our opinion is a flawed exercise. In view of the above discussion, we deem it proper to restore the issue to the file of the AO with a direction to do this exercise of quantifying the weight of diamond and gold jewellery on the date of search and that has been declared in the Wealth Tax Return prior to the date of search. If the assessee in the wealth tax return has not quantified the weight of such diamond/gold jewellery and consolidated value has been given, then the same, in our opinion has to be brought down to the quantity of diamond and gold jewellery by adopting the market value as on the date of valuation. Thereafter due credit should be given for new purchases as per availability of cash. AO shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. The grounds raised by the assessee on this issue are accordingly allowed for statistical purposes.

Summary

Issues:
1. Determination of unexplained jewellery found during search and seizure operation.
2. Assessment of sources for acquisition of jewellery.
3. Evaluation of additions made by the Assessing Officer and confirmed by the CIT (A).
4. Appeal against the decision of the CIT (A) regarding the addition of unexplained investment in jewellery.

Issue 1: Determination of unexplained jewellery found during search and seizure operation:
The appeal was filed by the assessee against the order of the CIT (A) confirming the addition of Rs.59,55,350 out of the total addition of Rs.87,11,600 made by the Assessing Officer. The Assessing Officer had made the addition based on unexplained jewellery found during the search. The jewellery, valued at Rs.2,17,95,600, was found during the search, and the Assessing Officer added the balance amount as unexplained. The CIT (A) sustained the addition, leading to the appeal before the Tribunal. The Tribunal noted discrepancies in the assessment and directed the Assessing Officer to quantify the weight of jewellery found during the search and compare it with the jewellery declared in the Wealth Tax Return. The Tribunal emphasized the need for a detailed assessment of the jewellery's quantity and market value, along with considering withdrawals available for jewellery purchases. The Tribunal found the previous assessment to be flawed and ordered a reevaluation by the Assessing Officer.

Issue 2: Assessment of sources for acquisition of jewellery:
The Assessing Officer considered the withdrawals from the bank accounts of the assessee and her spouse as sources for the acquisition of jewellery. Cash withdrawals totaling Rs.25,84,000 during the financial year 2014-15 were deemed relevant for explaining the sources of excess jewellery worth Rs.1,12,95,600. The Assessing Officer brought to tax the balance amount of Rs.87,11,600 as unexplained. The CIT (A) partially sustained this addition, leading to the appeal before the Tribunal. The Tribunal highlighted the need for a detailed assessment of the sources of jewellery acquisition, emphasizing the importance of considering withdrawals and market values in determining unexplained investments.

Issue 3: Evaluation of additions made by the Assessing Officer and confirmed by the CIT (A):
The Assessing Officer made an addition of Rs.87,11,600 as unexplained jewellery found during the search, while the CIT (A) confirmed an addition of Rs.59,55,350. The CIT (A) considered various arguments presented by the appellant regarding the valuation and sources of jewellery acquisition. The Tribunal noted discrepancies in the assessment process, emphasizing the importance of a thorough evaluation of jewellery quantities, market values, and available withdrawals. The Tribunal found the previous assessments lacking in detailed analysis and directed the Assessing Officer to reevaluate the issue based on quantifiable data and market values.

Issue 4: Appeal against the decision of the CIT (A) regarding the addition of unexplained investment in jewellery:
The appellant challenged the decision of the CIT (A) in confirming the addition of Rs.59,55,350 out of the total addition made by the Assessing Officer. The appellant argued that the jewellery found during the search and seizure operations was properly explained and that no addition under section 69 was necessary. The Tribunal considered the arguments presented by both sides and highlighted the need for a comprehensive assessment of jewellery quantities, market values, and available withdrawals. The Tribunal found flaws in the previous assessments and directed the Assessing Officer to reevaluate the issue based on detailed quantification and market valuations. The Tribunal allowed the appeal for statistical purposes.

In conclusion, the Tribunal directed the Assessing Officer to conduct a detailed assessment of the jewellery quantities, market values, and available withdrawals to determine the unexplained investments accurately. The Tribunal found discrepancies in the previous assessments and ordered a reevaluation to ensure a fair and accurate determination of the additions made by the Assessing Officer and confirmed by the CIT (A). The appeal was allowed for statistical purposes, emphasizing the importance of a thorough and precise assessment process in such cases.