9911796707
TMI Blog1996 (9) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... midas Jewellery, Mangalore, totalling 346.550 grams. Ground No. 9 is in respect of the addition of Rs. 10,000 to the professional income of the appellant. Ground Nos. 10 and 11 are against charging of interest under s. 234B of the IT Act, 1961. 3. In short, the assessee declared total income of Rs. 60,000 for the asst. yr. 1989-90, under appeal and the AO determined the total income of the appellant at Rs. 9,53,450 by making addition of the value of gold ornaments of unexplained investments under s. 69A of the Act. 902 grams of gold and gold ornaments were entered and accounted in the G.S. 13 Register. The same was not seized by the Central Excise authorities and it is not the subject-matter of appeal before us. The Central Excise authorities made a total seizure of 2323.500 gms from the business premises of the appellant and 1447.300 gms from the residence of the appellant. The Central Excise authorities conducted the search and seizure operation at the business and residential premises of the appellant on 15th June, 1988. Primary gold and gold ornaments totalling 3770.800 gms were seized on the ground that the appellant did not produce any satisfactory evidence to prove his ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gold ornaments need not be considered or it can be discarded only on the basis that such facts and evidence and also the explanation offered by the appellant was not satisfactory in the opinion of the AO. It all depends either on accepting the explanation in consonance with the facts and evidence as true or not accepting the same as untrue. Hence, it has become necessary, to scrutinise the facts and evidence to arrive at a reasonable and convincing conclusion that the explanation coupled with the facts and evidence offered by the appellant is probable or improbable, for either upholding the additions as made by the AO and confirmed by the CIT(A) or for deleting the same. It would be also necessary to mention here that the AO has not brought on record any evidence to hold that opinion regarding the explanation offered by the appellant as unsatisfactory. 5. 170 new bangles weighing 757.300 gms., 4 melted gold rods weighing 170.500 gms., 11 gold coins weighing 84.00 gms. and one gold wire weighing 245.500 gms. totalling 1257.300 gms. were seized from the residence of appellant. However, another 877.500 gms. of gold bangles were also found belonging to the appellant's wife and daugh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n assessee's brother-in-law—60 bangles weighing 445.000 gms.—seized from the shop at Mullackal. (7) Sri Murugappan, Goldsmith—52 bangles weighing 255.400 gms.—seized from the shop at Mullackal. (8) Sri Mohanan, (Manufacturer for M/s Laxmidas Jewellers, Mangalore)—primary gold in the form of 1 rod weighing 119.500 gms.—seized from the shop at Mullackal. (9) Sri Kaliparambil Sivan, Primary gold in the form of 1 rod weighing 67.000 gms.—seized from the shop at Mullackal. (10) Assessee and his family members claimed 5 Nos. of melted gold rod weighing 190.500 gms. seized from the residence. —do—11 Nos. of gold coins weighing 84.000 gms. seized from the residence. —do—48 bangles weighing 145.3200 gms. and another 20 bangles weighing 170.000 gms. claimed to have been received by the assessee from M/s Bhima and Bros., Alleppey. —do—1 gold wire weighing 245.500 gms. 31 gold coin lockets weighing 410.200 gms., 1 melted rod weighing 4.700 gms. and another 1 No. melted gold rod weighing 3.300 gms. claimed to have been received from M/s Laxmidas Jewellery, Mangalore. Total = 3770.800 gms. This claim of the assessee had been dealt with by the AO as well as by the CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y imposed on them was reduced to Rs. 1,000. 8. Sri Murugan stated that he had goldsmith's licence but he did not maintain accounts. The above order of the Customs, Excise and Gold (Control) Appellate Tribunal clarifies the fact that four others claimed certain quantity of gold and gold ornaments as belonging to them before the above Tribunal. They were also appellants before the said Tribunal and they were found eligible for getting redemption of the gold and gold ornaments seized from them. The explanation furnished before the said Tribunal regarding 336 numbers of bangles weighing 2040.800 gms. was as follows: E Ranga Achary 60 Nos 366.500 gms 2 K.K. Sasi 60 Nos 322.700 gms. 3 Gopalkrishnan 40 Nos 329.200 gms 4 Mohan 60 Nos 445.000 gms 5 Murugappan 52 Nos 255.400 gms 6 Murugesan 64 Nos 322.000 gms . . 336 Nos 2040.800 gms Out of the above only 272 bangles were seized from the business premises of the appellant. 9. The appellant has been working as a goldsmith to manufacture ornaments on the orders of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the appellant's wife and daughter are concerned, most of the gold ornaments did not appear to have been acquired in the previous year because they were not quite new. It is true that every explanation offered by the appellant need not be accepted as satisfactory, but, at the same time, if the explanation appears to be probable, reasonable and convincing, such explanation need not be rejected also. The AO as well as the CIT(A) are invested with discretion to accept or reject even the probable explanation. But the discretion is to be exercised judiciously. It would not be correct to say that it is entirely a different matter as to whether the discretion has been properly exercised by the AO. 11. Sri Murugesan is the brother-in-law of the appellant. The appellant as well as Sri Murugesan claimed that 64 bangles weighing 322 gms. belonged to Sri Murugesan. Sri Murugesan filed a confirmation letter admitting that he had entrusted 64 bangles with the appellant to keep them in safe custody as he did not have a secured place at his residence. Sri Murugesan was also working with the appellant. He has three children and was staying with his parents. He did not have a licence under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived on 21st Nov., 1990, 50 bangles weighing 298.500 gms. The difference of 1.150 gms. was considered as manufacturing shortage. However, Sri Rangan Achari had also claimed 60 bangles weighing 366.500 gms. seized from appellant's business premises as belonging to him. He claimed that he had entrusted these bangles with the appellant for safe custody, since he had no secure place at his residence. He also explained that 5 to 6 years back his father gave him 80 gms. of gold and again 160 gms. in 1987 and that he had got some more gold by way of manufacturing shortage while making the ornaments. He also submitted that 104 gms. of jewellery were received on the occasion of his marriage in 1967. The AO found that there was no proof that Sri Rangan Achari had received 240 gms. of gold jewellery from his father. He also referred to the fact that the jewellery released by the Central Excise authorities were kept in his custody whereas his earlier version was that the same was kept with the appellant as Sri Rangan Achari has no secured place to keep them. He also found that these bangles were found packed in the Malayala Manorama paper dt. 6th June, 1988, which would indicate that they w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant had to be treated as the owner of these gold bangles. The next claim of the appellant was that 60 bangles weighing 445 gms. and primary gold in the form of rod weighing 190.500 gms. belonged to his employee, Sri Mohanan. He also stated before the AO that he had entrusted these gold ornaments with the appellant for safe custody, while he had received 119.500 gms. of gold from M/s Laxmidas Jewellery, Mangalore, as per their voucher No. 85, dt. 13th June, 1988, for manufacturing new ornaments. The AO examined the managing partner of M/s Laxmidas Jewellery, Mangalore, who confirmed having handed over 118.600 gms. of gold to Sri Mohanan for making new ornaments and they received back new ornaments weighing 116.250 gms. on 23rd Nov., 1990, and that the difference of 2.350 gms. would account for manufacturing wastage. Though the AO accepted the above position, but regarding the other item of 60 bangles weighing 445 gms. stated to have been entrusted with the appellant for safe custody he did not accept the contention of Sri Mohanan that out of the above 60 bangles, 30 bangles represented ornaments received by his wife at the time of her marriage and the balance represented bangles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und that the marriage of Sri Sivan's daughter took place in 1991 without obtaining the new bangles from the appellant and it would be difficult to believe that Sri Sivan entrusted the gold with the appellant as early as June, 1988. Further, though this gold was released by the Central Excise authorities in November, 1990, they were not given to Sri Sivan in February, 1991, when his daughter got married. Considering all these facts, the CIT(A) agreed with the AO that gold weighing 67 gms. belonged to the appellant. 14. The appellant claimed that the remaining gold and ornaments belonged to himself and his family. The AO did not accept the claim of the assessee that 2 melted gold rods weighing 20 gms. and 170.500 gms. represented gold dust obtained by processing the same in and around the working places. This was because of the fact that the gold rod weighing 170.500 gms. was found hidden among the dresses in a steel almirah and that the acquisition of gold should have been accounted for in the appellant's register as required under s. 55 of the Gold Control Act. Accordingly, the AO did not accept the claim of the appellant that gold rods weighing 190.500 gms. belonged to him. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s Bhima Bros., Alleppey, and M/s Laxmidas Jewellery, Mangalore. The CIT(A) also found that the appellant is a goldsmith of long standing and he must be aware of the obligation to keep accounts under the provisions of the Gold Control Act under s. 55, which required every goldsmith to keep account of the gold owned, possessed, held, controlled or otherwise acquired, accepted, received, sold, delivered and transferred. He found that it is very difficult to accept the version of the appellant that these people had entrusted gold and gold ornaments with him as they had no secured place at their residences. He, however, held that there was no justification to include 77.900 gms. of jewellery belonging to the appellant's wife as belonging to the appellant. This was so accepted by the Central Excise authorities. He, therefore, directed the AO to exclude 77.900 gms. from the quantity of unaccounted gold and gold ornaments. 20. Regarding the contention advanced on behalf of the appellant that credit should have been given for 970.300 gms. of gold received from M/s Bhima Bros., Alleppey, and M/s Laxmidas Jewellery, Mangalore, the CIT(A) held that the AO had gone by the figures found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the gold ornaments as alleged and, therefore, the addition made under s. 69A is not sustainable. According to him, the provisions of s. 69A themselves are not applicable to the facts of the present case. All the gold was in the process of manufacture and only the bangles were fully manufactured. 24. The learned Departmental Representative relied on the decision of the Supreme Court in the case of CIT vs. Mussadilal Ram Bharose (1987) 60 CTR (SC) 34 : (1987) 165 ITR 14 (SC) and submitted that the observations made by the Supreme Court are very much relevant to the instant case. He submitted that the employees of the assessee had entrusted the appellant to keep in safe custody and the same was concealed. The names of owners were not written on the packets of gold. He has further submitted that the retraction from earlier statement of other goldsmiths and the appellant himself is an afterthought. The jewellery was found in the assessee's residence and having found the jewellery belonging to his wife and daughter, out of the same a portion was allowed. The retraction is not allowed under the law. According to him, if the assessee was found to be only a manufacturer of ornaments fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocate, Sri V. Ramachandran, relied on the judgment of the Supreme Court in the case of CIT vs. Piara Singh (1980) 17 CTR (SC) 111 : (1980) 124 ITR 40 (SC). The Supreme Court in that case held "that the carriage of the currency notes across the border was an essential part of the smuggling operation and detection by the Customs authorities and consequent confiscation was a necessary incident and constituted a normal feature of such an operation. The confiscation of the currency notes was a loss occasioned in pursuing the business of smuggling, it was a loss in much the same way as if the currency notes had been stolen or dropped on the way while carrying on the business. It was a loss which sprang directly from the carrying on of the business and was incidental to it and its deduction had to be allowed under s. 10 of the IT Act, 1922". However, this decision does not help the appellant as he is not carrying on business either in smuggling or claiming any loss in connection with the said business of smuggling. 29. The learned Departmental Representative, Sri P.I. John, relied on the judgment of the Supreme Court in the case of CIT vs. Mussadilal Ram Bharose. In that case the Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s conclusion leads us to accept the explanation offered by the appellant and other goldsmiths and to hold that the gold and gold ornaments claimed by other goldsmiths really belonged to them and not to the appellant and, therefore, the addition of the value of such gold and gold ornaments cannot be upheld. It is needless to say that we are satisfied not to uphold the addition made on account of the appellant's wife's and daughter's gold ornaments found at the residence of the appellant. Therefore, the assessee succeeds on the ground of making addition of the value of gold and gold ornaments in entirety. 32. The next ground in the appellant's appeal is regarding the levy of interest under s. 234A of the IT Act, 1961. The learned advocate has relied on the decision of the Cochin Bench of the Tribunal in the case of M. Mani vs. Asstt. CIT (1995) 51 TTJ (Coch) 273 in ITA Nos. 2048/(Coch) 1991 and 19/Coch/1992, for the asst. yrs. 1988-89 and 1989-90. The Tribunal in that case held that the "levy of interest cannot be made under ss. 234B and 234C without affording an opportunity of being heard to the assessee. The principles of natural justice should be read into the provisions of ss. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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