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TMI Blog1988 (12) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee, and in that view upholding the order of the Appellate Assistant Commissioner deleting the addition of the value of the jewellery included in the assessment of the assessee ? (2) Whether, on the facts and in the circumstances of the case, and having regard to the fact that the Appellate Assistant Commissioner had upheld the validity of the proceedings initiated under section 147(a) of the Income-tax Act, 1961, and the assessee did not challenge before the Tribunal such finding of the Appellate Assistant Commissioner, the Tribunal misdirected itself in law in holding that the expenditure incurred in purchase of loom-hours could not be disallowed in the assessment made in pursuance of such proceedings even though such expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the jewellery should not be treated as the income of the assessee. The assessee denied that the jewellery was found in the business premises of the assessee. It pleaded that the jewellery was found in the residential portions of some of the partners of the assessee-firm. Shri D. K. Jalan one of the partners of the assessee, informed the Income-tax Officer that all the Jalan partners resided in the premises and that the guddy of the assessee used to be in the premises No. 61, M. G. Road. He admitted that he resided in a portion of the premises and that the entire office of the firm was situated therein. He further stated that substantial portion of the said jewellery belonged to the firm. All other partners denied that any jewellery was foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it was for the assessee to prove that the jewellery did not belong to the assessee-firm. According to him, the departmental case was that the partners did not reside in the aforementioned premises. He also relied upon the admission of a partner, Shri D. N. Jalan, in support of his contention. He urged that the partners were collectively responsible for proving that jewellery did not belong to the firm and that they failed to do so. He urged that the Appellate Assistant Commissioner upheld the reopening of the assessment and he could not come to the conclusion that the addition of Rs. 6 lakhs was not justified. He further urged that the assessee made a disclosure before the Income-tax Investigation Commission of the firm having purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jewellery or with regard to acquisition and possession of the said jewellery even in the course of search and seizure. This fact has not been challenged before the Tribunal. The Tribunal also found that, according to the search-list, the jewellery was found in the room occupied by Smt. Krishna Jalan, wife of Shri D. N. Jalan, and the room occupied by the widow of the late Shri B. N. Jalan and, accordingly, no inference could be drawn that because the partner or partner's wife was having jewellery in his or her possession, it must be belonging to the assessee-firm. The Tribunal, after considering the facts and circumstances of the case, held as follows: "Premises No. 61, Mahatma Gandhi Road, were searched in accordance with the directions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds of partner, Shri D. N. Jalan, on the grounds that the jewelleries found in the rooms occupied by his wife and his mother, the widow of the late Shri B. N. Jalan, belonged to him. The addition was made after reopening the assessment of Shri D. N. Jalan but the Tribunal cancelled the reopening of the assessment. It is, therefore, difficult to place any value on the statement of Shri D. N. Jalan that substantial jewelleries belonged to the assessee-firm. The earlier disclosure of the firm before the Income-tax Investigation Commission of the purchase of jewelleries for Rs. 25,00,000 for the marriage of the members of the families of the partners does not help the Department in connecting the jewelleries in question with the assessee. We, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1980] 124 ITR 1. It may be mentioned that in the original assessment, this expenditure was allowed as revenue expenditure, but in the reassessment proceedings, the said expenditure was sought to be disallowed, on the ground that it is capital expenditure. In view of the decision of the Supreme Court in Empire Jute Co. Ltd.'s case [1980] 124 ITR 1, holding that such expenditure is revenue expenditure, the Income-tax Officer was justified in allowing the expenditure as revenue expenditure in the original assessment. Accordingly, the question is answered in favour of the assessee by saying that the expenditure incurred in purchase of loom-hours is revenue expenditure allowable as a deduction and such expenditure cannot be disallowed in the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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