DCIT, CENTRAL CIRCLE-3, NEW DELHI V. KUSHAL SINGH, GREAT NOIDA

ITA 1781/DEL/2023

AI Insights

The case involves an appeal by the Revenue against the decision of the CIT(A) which deleted the addition of unexplained investments in nine wrist watches and jewellery found during a search operation under section 132 of the Income Tax Act, 1961. The watches, valued at Rs.58.70 lakhs, were found in the residence of the assessee, Smt. Kushal Singh, during a search operation. The Assessing Officer (AO) initially treated these watches as unexplained investments under section 69 of the Act. However, the CIT(A) reclassified them under section 69A, leading to the deletion of the addition. The Tribunal agreed with the CIT(A)'s reclassification and decision. Similarly, for the jewellery, the CIT(A) accepted the assessee's explanation that it was accounted for in previous assessments, except for a portion which required further verification of ownership claims.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 31703 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2025
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2019-2020
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DAYAINDER SINGH SIDHU
• Assessee Lawyers: JASMEET SINGH; PUSH PENDRA S. BHADORIYA
• Keywords: Unexplained investment; Cost of acquisition; Search and seizure; Valuation report; Deemed to accrue or arise in india
• Section: 143(3); 143(2); 132; 153A; 69; 69A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘C’: NEW DELHI BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No.1781/Del/2023 [Assessment Year: 2019-20] Dy. Commissioner of Income Tax, Central Circle-03, Room No.333, E-2, ARA Centre, Jhandewalan Extension, Delhi-110055 Vs. Smt. Kushal Singh, E-9, Beta-1, Greater Noida, Nodia-201308, Uttar Pradesh PAN :AOVPK3108E (Revenue) (Assessee) Assessee by Shri Jasmeet Singh, Adv. & Shri Push Pendra S. Bhadoriya, Adv. Revenue by Shri Dayainder Singh Sidhu, CIT(DR) Date of Hearing 25.11.2024 Date of Pronouncement 08.01.2025 ORDER PER MAHAVIR SINGH, VP: This appeal by Revenue is arising out of the order of the Ld. CIT(A)- 23, New Delhi, in Appeal No.CIT(A), Delhi-23/10533/2018-19, vide dated 27.03.2023. The assessment was framed by DCIT, Central Circle-3, Delhi, for Assessment Year 2019-20 u/s 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’) vide his order dated 13.08.2021. 2. The first issue of this appeal of the Revenue is regard to the order of the Ld. CIT(A) in deleting the addition of unexplained investment made by Assessing Officer u/s 69A of the Act, amounting to Rs.58.70 lakhs on account of 9 wrist watches found during the course of search conducted by the Income Tax Department u/s 132 of the Act. For this, the Revenue 2 ITA No.1781/Del/2023 has raised ground no.1 to 5, which are factual and argumentative, hence need not be reproduced. 3. Brief facts of the case are that a search and seizure action was conducted on the Ravinder Singh Tongar Group of cases u/s 132 of the Act on 18.09.2018. During the course of search, the assessee was also covered in search operation u/s 132 of the Act and his case was centralized and accordingly assessment proceedings were started u/s 143(3) of the Act by issuing notice u/s 143(2) of the Act. During the course of search, the Income Tax Department seized nine wrist watches from the assessee residence at E-9, Beta-1, Greater Noida, Uttar Pradesh. The AO started the assessment proceedings and during the assessment proceedings, the AO required the assessee to explain the ownership and source of purchase of these watches. The AO also required the assessee to explain as to why the value of nine wrist watches, as valued by Government Approved Valuer, vide his report dated 06.12.2018 at Rs.58.70 lakhs be not assessed as undisclosed investment in view of the statement of the assessee recorded u/s 132(4) of the Act dated 18.09.2018. During the assessment proceedings, one shri Ram Das accepted the ownership of these nine wrist watches vide his reply dated 05.03.2021 stating that he has purchased these watches from various persons through declared source of income and after having a detailed discussion with his family members, he could recall and make the details of watches and their cost of acquisition. The AO recorded his reply dated 05.03.2021 in his assessment order. Vide this reply; he claimed ownership as well as cost of acquisition of these watches declared at 3 ITA No.1781/Del/2023 Rs.11.60 lakhs. The AO noted that Shri Ram Dass failed to support his claim with documentary evidence, accordingly a show-cause notice dated 15.04.2021 was again issued asking the assessee to state the basis of valuation of purchase of Rs.11.60 lakhs and also the documentary evidence of purchase of these watches. The assessee again vide his reply dated 16.04.2021 simply stated that the above watches were purchased by Shri Ram Dass from his declared source of income, which is reflected in his return of income and he admitted agricultural income in the returns of income filed from AYs 2012-13 to 2018-19. The AO have considered the reply of Shri Ram Dass but according to him, the same is not tenable for the reason that the ownership of wrist watches was accepted by the present assessee Smt. Kushal Singh, in her statement recorded u/s 132(4) of the Act. According to AO, the watches were found from the residence of Smt. Kushal Singh declared in her return of income as well as search conducted in the same premises, which is E-9, Beta-1, Greater Noida, Uttar Pradesh. The AO noted from the returns of income filed by the assessee for several years and he computed the total income at Rs.1.81 Crores, whereas, the income of Shri Ram Dass declared from agricultural income from the past five years was around Rs.50 lakhs. Comparing both and inferring the luxury watches claimed by Sh. Ram Dass, who is a person of 85 years of age and whose declared income (‘agricultural income’) is very small, which according to him is inconsistent. Hence, the AO treated the total value of nine wrist watches, as estimated by Departmental Valuer, while his valuation report dated 06.12.2018 at Rs.58.70 lakhs as deemed income within the meaning of 4 ITA No.1781/Del/2023 provisions of section 69 of the Act. Aggrieved, assessee preferred appeal before the ld. CIT(A). 4. The ld. CIT(A) on the first facet of argument of the assessee deleted this addition by observing that the provision of section 69 of the Act will not apply because this is not unexplained investment rather it being unexplained valuable article as mentioned in the provisions of section 69A of the Act. The ld. CIT(A) noted that the assessee is an individual and does not maintain any books of accounts. According to the CIT(A), section 69 of the Act applies for unexplained investment, whereas, the wrist watches comes within the definition of valuable articles, hence covered by the provisions of section 69A of the Act and deleted the addition. Against this deletion on this facet, Revenue came in appeal before the Tribunal. 5. Before us, the ld. CIT-DR argued that provisions of section 69 and 69A are similar provisions and these two provisions applies to unexplained investment as well as unexplained money, etc. He argued that the provisions of wrist watches falls within the meaning of unexplained investment as defined in the provisions of section 69 of the Act. 6. On the other hand, the ld. Counsel for the assessee supported the order of the Ld. CIT(A). 7. We have heard rival contentions and gone through the facts and circumstances of the case. We noted that during the course of search under section 132 of the Act, nine wrist watches were seized from the house of the assessee. In her statement recorded u/s 132 of the Act, she 5 ITA No.1781/Del/2023 admitted that the wrist watches have been purchased out of her own accounted cash and this fact was also noted by the Assessing Officer in his assessment order at para-11 at page-9, wherein, her statement recorded under section132 of the Act. But, as the case may be, now, we have to examine whether the provisions of section 69 will apply here or section 69A of the Act. Going by the provisions of section 69 of the Act and if analyzed, under this section, the value of investment made by the assessee in a financial year immediately preceding the assessment year may be deemed to be income of the assessee of such financial years, if, (i) such investments are not recorded in the books of accounts, if any, maintained by the assessee from any source of income (ii) the assessee offers no explanation about the nature and source of investment or the explanation offered by him is in the opinion of the Assessing Officer is not satisfactory. For applying provisions of section 69 of the Act, the Assessing Officer first must come to the finding that the assessee made investment but in the present case before us, the valuable articles in the shape of nine wrist watches were found and seized by Income Tax Department during the course of search and seizure under section 132 of the Act from her residence. The provisions of section 69A of the Act define the unexplained money, means the value of the bullion, jewellery or other valuable articles may be deemed to be income of the assessee in certain conditions i.e. (i) such money, etc are not recorded in the books of accounts, if any, maintained by the assessee for any source of income (ii) the assessee offered any explanation about the nature of source of acquisition of such money, etc or the explanation offered by him is in the 6 ITA No.1781/Del/2023 opinion of the Assessing Officer is satisfactory. The deeming provision of section 69A of the Act deals with unexplained money etc., and it comes into play only if the assessee is found to be ownership of the jewellery or valuable articles. This is the first condition. As in the present case, the Assessing Officer has applied provisions of section 69 of the Act, which can be invoked only for unexplained investment and not for unexplained money etc. Hence, going by the first principle of the provisions of section 69, in the present case and in the given facts and circumstances of the case, this provision could not be applied to nine wrist watches seized by the Income Tax Department from the house of the assessee during the course of search under section 132 of the Act, because it falls under section 69A of the Act. Hence, we are of the considered view that applying section 69 is without any basis and hence, the CIT(A) has rightly deleted the addition and we confirm the same. 8. Going to other issue on merits on this contention of nine wrist watches, we are refraining ourselves in adjudicating the same, since we have confirmed the order of the CIT(A) in deleting this addition on this issue on jurisdiction itself. 9. Next two common issues, which is practically one issue, is as regards to the order of the CIT(A) in deleting the addition of unexplained jewellery found during the course of search from the premises of the assessee u/s 69 of the Act amounting to Rs.2,37,01,947/-. For this, the Revenue has raised ground no.6 to 8, which are factual and argumentative, hence need not be reproduced. 7 ITA No.1781/Del/2023 10. Brief facts of the case are that during the course of search at the premises of the assessee, the total jewellery worth Rs.1,91,47,191/- was found, out of which jewellery of Rs.94,06,772/- was seized from premises of assessee at H. No.E-9, Beta-1, Greater Noida, Uttar Pradesh. Apart from the above jewellery of Rs.1,91,47,191/-, two locker keys from the house of the assessee was found i.e. locker no.4073 and 4074 in the name of one Shri Vivek Kumar, maintained at Axis Bank Ltd. D-1, Alpha- 1, Commercial Belt, Greater Noida, UP. When these lockers were operated under section 132 of the Act, jewellery of Rs.38,85,624/- in locker no.4073 was found and jewellery worth Rs.1,02,84,695/- was found from the locker no.4074 and accordingly, jewellery of both lockers were seized. Further, during the course of search u/s 132 of the Act, the Income Tax Department found and seized jewellery worth Rs.1,66,408/- from the locker no.289, maintained with Oriental Bank of Commerce in the name of the present assessee, situated at B-193, Lohia Nagar, Ghaziabad, UP. The assessee was asked to explain the source of both jewelleries, which were found and seized from her premises as well as from the bank lockers as mentioned above. The Assessing Officer required the assessee to explain with evidence regarding the ownership of the same and status of Wealth Tax return. The Assessing Officer also issued show-cause notice as to why the total worth of unaccounted jewelleries, found and seized from the above said premises and lockers should not be added back to the total income of the assessee for the relevant Assessment Year 2019-20. The assessee, before Assessing Officer, contended, first of all, that a search and seizure action under section132 of the Act was conducted at 8 ITA No.1781/Del/2023 the assessee’s premises on 18.09.2018 and from where, jewellery worth Rs.96,15,563/- was found and consequently assessment u/s 153A of the Act was framed, wherein, such jewellery amounting to Rs.96,15,563/- was added to the taxable income of the assessee for the relevant assessment year 2013-14. It was claimed by the assessee that thus, by virtue of the said assessment order, the following jewellery, which was found and seized stands explained. The details of which were given by the assessee vide its explanation dated 26.02.2021, which is reproduced at pages 23 to 26 of the assessment order, wherein, total gross weight of jewellery is 5704 grams i.e., gross weight and accordingly the value declared was at Rs.96,15,563/-. On this facet, the assessee also claimed by filing reconciliation out of Rs.96.15 lacks declared in erstwhile search, the value of all jewellery items is appreciated to Rs.1,07,22,844/- due to increase in gold and valuation rates between 2013 and 2018. Therefore, it was claimed by the assessee before the Assessing Officer that value of jewellery to the extent of Rs.1,07,22,844/- stands explained. 11. As regards to this jewellery explained of Rs.1,07,22,844/-, the assessee preferred appeal before the CIT(A) and the CIT(A) noted in his appellate order, at page-64 in paras 9.6 and 9.7 that the Assessing Officer treated jewellery to the extent of Rs.96,15,563/- as explained and has not made any addition. The assessee, before the CIT(A) contended that actually, the Assessing Officer should have taken the weight of jewellery found during the course of search conducted in year 2012. The CIT(A) found the assessee’s contention is correct and accordingly by accepting the reconciliation, allowed the deduction to the assessee to the extent of 9 ITA No.1781/Del/2023 Rs.1,07,22,844/-. The CIT(A) accepted this contention by paras 9.6 and 9.7 as under:- “9.6. In the assessment order, the Assessing Officer treated jewellery to the extent of Rs.96,15,563/- as explained and has not made any addition. The appellant contended that actually the Assessing Officer should have taken the weight of jewellery found in search in 2012 as explained instead of the value then prevailing. The appellant has stated that the value of the jewellery as on the date of present search on 18.09.2018 is Rs. 1,07,22,844/-and the same should have been treated as explained. 9.7 The reply of the appellant is found to be correct. The gross weight of jewellery found during the course of earlier search needs to be treated as explained and the appellant is eligible for deduction to the extent of the jewellery found in earlier search. The present value as on the date of last search of the jewellery needs to be taken. The appellant has computed the value of jewellery on present search at Rs.1,07,22,844/-. Therefore, the deduction allowable to the appellant should be Rs.1,07,22,844/-. Further deduction in terms of money of Rs.11,07,281/- is allowable to the appellant.” 12. When these facts were confronted to the Ld. CIT-DR, he could not controvert the above facts rather admittedly a search was conducted and in AY 2013-14 the jewellery to the extent of Rs.96,15,563/- was added hence the same can be treated as explained. Accordingly, we are of the considered view that the CIT(A) has rightly deleted the addition to the extent of Rs.1,07,22,844/-. We find no infirmity in the order of the CIT(A) and hence, we uphold the same. 13. As regards to the balance jewellery, out of total jewellery found during the course of search about 13,649 grams, the balance jewellery 6200 grams, the assessee tried to explain by filing the list of family members and claiming that the individual family members are entitled to keep the prescribed jewellery as per CBDT instruction No.1916 dated 10 ITA No.1781/Del/2023 11.05.1994. The AO has recorded the reply of the assessee dated 26.02.2021 in para 9 pages 19 to 22, wherein, the entitlement of the family members was tabulated at 15450 gms. We noted that now only premises of the assessee is that the jewellery belongs to various family members which are noted by the AO in his assessment order and the assessee has claimed that the jewellery is not to be added in view of CBDT instruction No.1916 dated 11.05.1994. For this end, to support the claim of the assessee, she has filed affidavits of few of the family members namely Shri Brahm Prakash S/o Shri Ram Dass, Kusum Devi W/o Shri Devendra Singh, Shri Amnesh Kumar S/o Shri Ram Dass, Shri Om Prakash and Shri Vivek Kumar few to be named. The CIT(A) has accepted the affidavits and also accepted the claim of the ownership of the assessee. Aggrieved Revenue is in appeal before the Tribunal. 14. Before us, the Ld. CIT-DR only made arguments that there is no evidence filed by the alleged claimant of ownership of the jewellery and even the CIT(A) has not examined these parties before deleting the addition. The Ld. CIT-DR made submission that unless and until the affidavits to show the ownership is not established, the CIT(A) should have restored the matter back to the file of the AO instead deleting the addition. 15. On the other hand, the ld. Counsel for the assessee supported the order of the CIT(A). The ld. Counsel for the assessee stated that once affidavits are accepted and not rejected or no cross examination is taken up by the AO, the ownership stands proved according to him. 11 ITA No.1781/Del/2023 16. We have heard both the sides on this issue and gone through the facts and circumstances of the case. Admittedly, the assessee in the present case has admitted the ownership of the jewellery during the course of search while making statement u/s 132(4) of the Act by question no.6 and answer. The relevant question and answer are reproduced as under:- 17. Since, the assessee has given statement u/s 132(4) of the Act, although this is a rebuttable presumption, the assessee has to prove substantially by evidence that the jewellery belongs to family members, which she fails. The assessee simplicitor files the affidavits of the family members and the AO has not examined these parties, whether the jewellery belongs to them or not, the matter needs reconsideration at the level of the AO for this jewellery of 6200 grams only. The AO will examine the claimant of ownership of the jewellery and then decide the issue as per law. In case, the claimant will be able to prove the ownership of the jewellery, the AO will allow the claim of the assessee. Accordingly, this partial issue of balance jewellery to the extent of 6200 grams is restored back to the file of AO with the above direction. 12 ITA No.1781/Del/2023 18. In the result, the appeal of the Revenue is partly allowed for statistical purpose. Order pronounced in the open court on 08th January, 2025 Sd/- Sd/- [NAVEEN CHANDRA] [MAHAVIR SINGH] ACCOUNTANT MEMBER VICE PRESIDENT Dated 08.01.2025. Shekhar Copy forwarded to: 1. Assessee 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi, "