2023 (12) TMI 346 - HC - Income Tax

Additions against unexplained jewellery, paintings and wrist watches - search and seizure operation was conducted u/s 132 - source of the money concerning investment in the aforesaid articles was unexplained, additions were made qua each of these articles - ITAT deleted the additions - HELD THAT - Insofar as the jewellery is concerned, the Tribunal noted that the entire family lived in one residential premises as a single family unit - jewellery declared/disclosed by the family as one unit in its wealth tax return was more than the jewellery found during the search action.Assessee had placed before the AO item-wise reconciliation of the articles mentioned in the wealth tax return, along with the valuation report prepared during the search No fault can be found with the approach adopted by the Tribunal with regard to the deletion of addition made by the AO qua jewellery. Besides the above observations, the Tribunal has also taken into account the fact that there were substantial withdrawals every month and also the income declared by the respondent/assessee. It is noted (something which is not disputed before us by Mr Kumar), that the returned income for the period in issue was Rs. 14.73 crores. Thus, as per contents of the wealth tax return, the Tribunal deleted the entire addition made in respect of jewellery. Addition made with regard to paintings , what has emerged is that not only had the respondent/assessee placed on record a valuation report, but also the appellant/revenue had the paintings valued by two valuers. The valuation arrived at by the two valuers appointed by the appellant/revenue were Yellow Flute and Delhi Art Gallery. Evidently, Yellow Flute valued the subject six paintings at Rs. 55,85,000/-, while Delhi Art Gallery valued the said paintings at Rs. 37,50,000/-. Valuer appointed by the respondent/assessee pegged the worth of five out of the six paintings at Rs. 19,50,000/-. Assessee had disclosed that out of five paintings, three paintings were purchased in 2004, while the remaining paintings were purchased in 2012 and 2017. Assessee s valuer has not estimated the worth of the sixth painting and, therefore, perhaps, has not provided the year in which it was purchased. Interestingly, insofar as the painting purchased in 2017 is concerned, the source of purchase was shown as bank . The remaining four paintings were claimed by the respondent/assessee as having been purchased by drawings . Tribunal, while taking into account the year of purchase (at least with regard to the paintings which were purchased in 2004), noted that this aspect had not been put in issue by the valuers appointed by the appellant/revenue. Based on this, the Tribunal, inter alia, concluded that no addition qua paintings purchased in 2004 could be made in the relevant period i.e., AY 2018-19. Tribunal noted, as indicated above, that the two valuers appointed by the appellant/revenue had estimated the worth of paintings differently and furthermore, had not pointed out any defect in the valuation report submitted by the expert appointed by the respondent/assessee. Tribunal concluded that insofar as valuation of artwork is concerned, experts could differ in their conclusions. Furthermore, given the fact that the valuers appointed by the appellant/revenue had not expressed any reservation with regard to the report submitted by the expert appointed by the respondent/assessee, the Tribunal held that the addition made with regard to the paintings was unmerited.Tribunal s approach, in the given facts and circumstances, cannot be faulted. Estimating the worth of an artwork can vary from expert to expert. Four out of five paintings were purchased, according to the respondent/assessee, in 2004; an aspect which was not contested by the valuers appointed by the appellant/revenue. Insofar as the painting which was purchased in 2017, the investment had been made, evidently, through banking channels - Thus, on the whole, the Tribunal, in our view, correctly deleted the addition. Addition made qua wrist watches - Having regard to the declared income and the fact that there were substantial withdrawals, the Tribunal deleted the additions made on account of investment in wrist watches.Once again, we are of the view that the Tribunal has, broadly, come to the correct conclusion. This is a case of wherein the Tribunal has returned the findings of fact after appreciating the material placed on record by the respondent/assessee. We are of the opinion that none of the findings of fact are perverse. We also notice that no question concerning perversity has been proposed by the appellant/revenue.

Summary

Issues:
The judgment concerns Assessment Year (AY) 2018-19 and involves a search and seizure operation under Section 132 of the Income Tax Act, 1961 against the Minda Group, leading to the discovery of articles like jewellery, paintings, and wrist watches at the residence of the respondent/assessee.

Jewellery Addition:
The Tribunal observed that the jewellery declared in the wealth tax return exceeded the jewellery found during the search. The respondent submitted item-wise reconciliation and valuation reports, which the AO failed to refute. The Tribunal considered the family's lifestyle, income, and wealth tax return, ultimately deleting the entire addition made for jewellery.

Paintings Addition:
Valuers appointed by both parties provided varying valuations for the paintings. The Tribunal noted the year of purchase, especially for paintings bought in 2004, and found no defects in the respondent's expert valuation report. Considering the differing expert opinions and lack of objections from the appellant's valuers, the Tribunal deemed the addition unjustified and deleted it.

Wrist Watches Addition:
The Tribunal considered the family's income in the previous AY and the substantial withdrawals, leading to the deletion of the additions for wrist watches. The Tribunal's decision was supported by the declared income and withdrawal amounts, with no objections raised by the appellant.

In conclusion, the Tribunal's factual findings were deemed reasonable, with no proposed questions of perversity by the appellant. As a result, the appeal was closed, as no substantial question of law was found to be raised for consideration by the court.