DCIT,CENTRAL CIRCLE-2(4), CHENNAI V. SHRI KRISHNAN VIJAYANAND, MADURAI

ITA 103/CHNY/2023

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The case involves cross appeals by the Revenue and the assessee, Shri Krishnan Vijayanand, arising from an order by the Commissioner of Income Tax (Appeals)-19, Chennai. The primary issue was the addition made by the Assessing Officer (AO) under section 69A of the Income Tax Act, 1961, for unexplained investments in gold jewellery and silver articles found during a search operation. The CIT(A) deleted this addition, which the Revenue challenged, arguing that the CIT(A) had erred in accepting the assessee's explanations and in not providing an opportunity to the AO to examine new evidence. The Tribunal dismissed the Revenue's appeal, agreeing with the CIT(A)'s findings and reasoning.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135174 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 05-09-2023
• Assessment Year: 2020-2021
• Appeal Filed On: 29-01-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Gift; Opportunity of being heard; Principle of natural justice
• Section: 250

Judgement Text

आयकर अपीलीय अिधकरण, ‘सी’ ᭠यायपीठ, चे᳖ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI ᮰ी महावीर ᳲसह, उपा᭟यᭃ एवं ᮰ी मंजुनाथ. जी, लेखा सद᭭य के समᭃ BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT AND SHRI MANJUNATHA.G, ACCOUNTANT MEMBER आयकर अपीलसं./ITA No.: 103/CHNY/2023 िनधाᭅरण वषᭅ/Assessment Year: 2020 – 21 & C.O No.4/CHNY/2023 [in I.T.A. No.103/CHNY/2023] The DCIT, Central Circle 2(4), Chennai – 600 034. vs. Shri Krishnan Vijayanand, Plot No.600, Sri Iyappan Illam, Magarishi Vidyalaya School Street, 3 rd Cross Street, K.K. Nagar, Madurai – 625 020. PAN: ACMPV 4407C (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) राजˢकीओर से /Revenue by : Shri P. Sajit Kumar, JCIT िनधाᭅᳯरती कᳱ ओर से/Assessee by : Shri G. Baskar, Advocate सुनवाई कᳱ तारीख/Date of Hearing : 06.09.2023 घोषणा कᳱ तारीख/Date of Pronouncement : 13.09.2023 आदेश /O R D E R PER MAHAVIR SINGH, VICE PRESIDENT: These cross appeals by the Revenue and assessee are arising out of order of the Commissioner of Income Tax (Appeals)-19, Chennai in ITA No.992/21-22 dated 25.11.2022. The assessment 2 ITA No.103/Chny/2023, & CO No.4/Chny/2023 was framed by the DCIT, Central Circle 2(4), Chennai, for the assessment year 2020-21 u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 28.09.2021. Revenue’s appeal in ITA No.103/CHNY/2023 2. At the outset, it is noticed that this appeal by Revenue is barred by limitation by 6 days. The Revenue received the impugned appellate order on 25.11.2022 and appeal was to be filed on or before 24.01.2023 but actually it was filed on 30.01.2023 thereby there was a delay of 6 days. The Revenue has filed condonation petition stating the reason that the appeal papers were mixed up with other files and it was traced only after exhaustive search and thereafter immediately appeal was filed, thereby there is a delay of 6 days. When this was confronted to ld.counsel for the assessee, he has not objected for condonation of delay. Hence, we condone the delay and admit the appeal. 3. The only issue in this appeal of Revenue is as regards to the order of CIT(A) deleting the addition made by AO towards unexplained investment in gold jewellery and silver articles found 3 ITA No.103/Chny/2023, & CO No.4/Chny/2023 and seized during the course of search amounting to Rs.76,23,737/- For this, Revenue has raised the following grounds:- 2 The Ld.CIT(A) erred in deleting the addition of RS.76,23,737/- made towards unexplained investment in Gold jewellery and Silver articles seized during the course of search in the absence of explanation of source by the assessee during the assessment proceedings. 2.1 The Ld.CIT(A) erred in relying on the new evidence produced before him to explain the source for acquisition of Gold jewellery and silver articles without providing opportunity to the assessing officer under Rule 46A of the Income tax Ruled. 2.2. The Ld.CIT(A) erred in accepting the explanation furnished by the assessee with regard to source of unexplained jewellery as drawing made out of income from the past years, Gift received etc, without appreciating that the assessing officer has assessed only value of jewellery found to the extent of Rs.73,73,682/- as against the total value of jewellery found of Rs.1,42,95,253/- 2.3 The CIT(A) ought to have directed the Assessing officer to verify the assessee's claim with reference to sufficiency of drawings to explain the source for jewellery after accounting for other investments and expenses. 3. Brief facts are that a search u/s.132 of the Act was conducted on the group cases of Velammal Group of Institutions on 21.01.2020 including the residence of the assessee. During the course of search, at the residence of the assessee gold jewellery to the extent of 1817.400 grams and silverwares to the extent of 4744 grams were found and seized totally valued at Rs.76,23,737/-. The AO while completing assessment issued show-cause notice dated 4 ITA No.103/Chny/2023, & CO No.4/Chny/2023 23.09.2021 and noted as per the statement of valuation, the gross weight of gold jewellery found was 3617.400 grams valued at Rs.1,42,95,253/- and that of silverware of 4744 grams valued at Rs.2,50,055/-. The assessee was questioned to explain the source but he could not explain the source of jewellery and silver articles. The search party has not seized 1800 grams of jewellery on account of Board Circular in regard to not to seize jewellery of 500 grams per married lady, 250 grams for unmarried lady and 100 grams per men, thereby the authorized officer has not seized gold jewellery to the extent of 1800 grams. The balance jewellery of 1817.400 grams was seized and also silverwares weighing 4744 grams. Therefore, according to AO, the unexplained jewellery considered by him was as under:- Sl. No. Description Annexure Gross Wt. (in grams) Net Wt. (in grams) Value (in Rs.) 1 Jewellery ANN/RM/VEL/GJ/F&S 1817.400 1710.600 73,73,682 2 Silver articles ANN/VSP/KVA/S/S 4744 4744 2,50,055 Total 76,23,737 Since no explanation was submitted before AO, the AO added the unaccounted or unexplained gold jewellery and silverwares found and seized from assessee, for value of Rs.76,23,737/- u/s.69A of the Act. Aggrieved, assessee came in appeal before CIT(A). 5 ITA No.103/Chny/2023, & CO No.4/Chny/2023 4. The CIT(A) after considering the family status, drawings made by family members to the extent of Rs.2,44,97,982/- and receipt of customary gifts by ladies of family and giving weightage to family members including ladies and gents, the CIT(A) treated the entire jewellery as explained by observing in para 6.6 as under:- 6.6 On merits 6.6.1 While going through the assessment order, it can be seen that the AO has made the addition of Rs. 76,23,73 7/- as unexplained investment in jewellery. In this regard, the appellant has contended that the jewellery belongs to the family members and explained the sources as under. The family members consist of three married ladies, two unmarried ladies, and three male members. Nithya and Suganya are sisters married to brothers. At the time of marriage of Nithya (on 25.01.2001), to the appellant and of Suganya (on 11.09.2008), to the appellant's brother K.Kannan, they have received 120 sovereigns(960 gms) of gold jewellery each, from their parents N.S.M.Muthuramalingam & M.Jayamani. Subsequent to their marriages, the children of the family, two daughters (Nikhila and Yazhini) and a son (Hayakriva), were receiving gifts from their grandparents on their birthdays/puberty function. Such gifts amounted to 480 gms. Further, Smt. Jothi, mother of the appellant and his brother K.Kannan, had gifted 20 sovereigns (160 gms) to each of her daughter-in-laws at the time of marriage. To summrise, the jewellery gift received from the parents and mother-in-law of Nithya and Suganya and other members of the family are as under: Nithya Gift from parents at the time of marriage 960 gms (120 sovereigns) Gift from mother-in-law at the time of marriage 160 gms (20 sovereigns) Suganya Gift from parents at the time of marriage 960 gms (120 sovereigns) Gift from mother-in-law at the time of marriage 160 gms (20 sovereigns) Nikhila Gift from grandparents at the time of birthdays/puberty 240 gms (30 sovereigns) Yazhini Gift from grandparents at the time of birthdays/puberty 240 gms (30 sovereigns) 6 ITA No.103/Chny/2023, & CO No.4/Chny/2023 Jothi Retained by her, from her Parent's sreedhan 480 gms (60 sovereigns) Total 3200 gms 6.6.2 In addition, the appellant has submitted the details of the income derived for the past 6 years. M/s.Hayakriva Associates & Builders, the partnership firm, consisting of the three family members as partners, had the following income in the past six assessment years(As per the return of income filed): A.Y. Hayakriva Rs. Vijayanand Rs. Nithya Rs. Kannan Rs. Total Rs. 2014-15 8,87,300 4,01,330 2,46,500 2,95,750 18,30,880 2015-16 22,81,680 17,22,310 3,50,380 3,30,200 46,84,570 2016-17 50,32,930 9,88,110 14,94,550 17,55,120 92,70,710 2017-18 86,87,050 25,70,88 27,39,940 24,95,550 1,64,93,420 2018-19 1,41,91,870 24,44,020 24,64,580 25,03,860 2,16,04,330 2019-20 1,28,36,270 22,64,740 23,33,260 20,94,500 1,95,28,770 2020-21 84,21,870 21,84,890 21,14,940 21,51,320 1,48,73,020 Total 5,23,38,970 1,25,76,280 1,17,44,150 1,16,26,300 8,82,85,700 6.6.3 The appellant further contended and argued that out of the above income disclosed by the family members, there are drawings to the extent of Rs.2,44,97,982/-, which the family members have sufficient sources to invest in jewellery over a period of time in addition to the gift received on various occasions by the family members which has been narrated in the written submission and grounds. 6.6.4 Thus, the appellant has explained that the family members are having sufficient sources to explain the investment made in acquiring the jewellery over a period of time including the receipt of jewellery by way of gift. The family members have not filed their wealth tax return, since they do not have any taxable wealth. 6.6.5 In view of the facts highlighted, the AR submitted that the appellant and the family members are having sufficient sources to invest in the form of jewellery and pleaded that the sources for investment of Rs. 76,23,737/- may be treated as explained. 7 ITA No.103/Chny/2023, & CO No.4/Chny/2023 6.6.6 The submission made by AR has been considered. The appellant and his family members have disclosed sufficient amount i.e Rs.8,82,85,700/- by filing return of income, for the past six assessment years. There are sufficient drawings to the extent of Rs.2,44,97,982/- from the above income disclosed. By considering the status of the appellant, his family members, and customs prevailing in the Indian society about the holding of gold jewellery, I hold that the amount of Rs.76,23,737/- which has been treated as undisclosed is hereby considered as convincingly explained. Thus the sources for the amount of Rs.76,23,737/- is treated as explained and the grounds raised by the appellant upon this issue are treated as allowed. In view of this, the addition of Rs.76,23,737/- made by the AO as unexplained investment is hereby deleted. Aggrieved, now Revenue is in appeal before us. 5. Now before us, the ld.counsel for the assessee filed complete paper-book consisting of 58 pages and stated that the complete details of jewellery explained before CIT(A) and noted by CIT(A) including affidavits given by family members confirm holding of jewellery, details of jewellery and withdrawals made by family members from various bank accounts to the extent of Rs.2,44,97,982/-, the documents which were filed during the course of search before authorized officer and also before the AO who has not gone into the same at all. He argued that the entire jewellery possessed by the family of the assessee is explained including the added jewellery by the AO of gross weight of 1817.400 grams i.e., net weight of 1710.600 grams of gold jewellery and silver articles 8 ITA No.103/Chny/2023, & CO No.4/Chny/2023 i.e., silverwares of 4744 grams valued at Rs.73,73,682/- & Rs.2,50,055/- respectively. 6. When these facts were confronted to ld. Senior DR, he only drew our attention to ground No.2.1 and that all these evidences were filed now in assessee’s paper-book consisting of 58 pages, which were filed before CIT(A) for the first time and the CIT(A) has not allowed opportunity either by calling a remand report or forwarding these documents to the AO for verification, he violated the provisions of Rule 46A of the Income Tax Rules, 1962. He only requested that matter be restored back to the file of the AO for going through these documents filed by assessee before CIT(A) and before Tribunal now in his paper-book. 7. In reply, the ld.counsel for the assessee stated that there is no violation of Rule 46 of the Income Tax Rules, for this he drew our attention to the findings given by the CIT(A) in para 6.3.8 that he has called for these documents and entertained new evidences and allowed new grounds which were not considered by the AO during the course of assessment proceedings as the notice was issued u/s.153C of the Act by the AO providing only two days time and also 9 ITA No.103/Chny/2023, & CO No.4/Chny/2023 assessment was completed on 28.09.2021 after fixing the case on 25.09.2021, within 3 days. In term of this, the CIT(A) allowed ground vide para 6.3.8, which reads as under:- 6.3.8 The issue involved in this case is that the Appellant was not provided sufficient opportunity of being heard. and thereby violated the principal of natural justice. The Commissioner of Income Tax (Appeals) is competent enough to entertain new evidences and allow new grounds which was not considered by the A.O. during the course of Assessment Proceedings. In fact, the CIT(A), is empowered to enter into the shoes of the A.0. and decide the issue. The Appellant was given multiple opportunities during the course of Appellate Proceedings to provide additional ground, additional evidence and submission. The various evidences and submissions made by the Appellant during the course of Appellate Proceedings have been duly taken to account in this order. In view of this, the issue raised by the Appellant that no opportunity of being heard was given to the Appellant at the time of assessment proceedings have been duly taken care of during the course of appellate proceedings. In this background, the grounds raised by the Appellant upon this issue are dismissed. Further, the ld.counsel for the assessee stated that all these documents filed in assessee’s paper-book consisting of 58 pages are part of assessment record for the reason that these were filed before authorized officer during search and it can be gone into if required. 8. We have heard rival contentions and gone through facts and circumstances of the case. We noted that the CIT(A) has considered and recorded the finding of fact that there are six family 10 ITA No.103/Chny/2023, & CO No.4/Chny/2023 members of the family and details are given in para 6.6.1 in the chart receiving gifts or jewellery received on marriage. The CIT(A) has also elaborated the withdrawals of the family to the extent of Rs.2,44,97,982/- during 2014-15 to 2020-21. We noted that the source seems to be reasonably explained and it also comes within the limits of CBDT Circular for non-seizure of gold jewellery. Hence, we find no infirmity in the order of CIT(A) and the same is confirmed. The appeal of the Revenue is dismissed. C.O. No.4/CHNY/2023 9. Coming to cross objection of the assessee, we noted that there is issue of violation of principles of natural justice as the notice u/s.153C of the Act was issued on 22.09.2021 providing two days time for filing of return of income as is mentioned in the notice and a show-cause notice was issued on 23.09.2021 i.e., before expiry of two days time for allowing to file return of income by providing two days time for posting of the case hearing on 25.09.2021. The assessment was finalized on 28.09.2021. That means, there are only 5 days between the notice issued u/s.153C of the Act, time allowed for hearing and taking evidences and finalizing the assessment and passing of assessment order. If this is the case, 11 ITA No.103/Chny/2023, & CO No.4/Chny/2023 there is certain violation of principles of natural justice and the order should not be sustained. However, we are not elaborating on this issue, because the CIT(A) has already deleted the addition on merits and we have confirmed the same, this issue has become academic. Accordingly, the same has become infructuous and hence, dismissed. 10. In the result, the appeal filed by the Revenue and the cross objection filed by the assessee are dismissed. Order pronounced in the open court on 13 th September, 2023 at Chennai. Sd/- Sd/- (मंजुनाथ. जी) (MANJUNATHA.G) लेखा सद᭭य/ACCOUNTANT MEMBER (महावीर ᳲसह ) (MAHAVIR SINGH) उपा᭟यᭃ /VICE PRESIDENT चे᳖ई/Chennai, ᳰदनांक/Dated, the 13 th September, 2023 RSR आदेशकᳱ ᮧितिलिप अᮕेिषत/Copy to: 1. अपीलाथᱮ/Appellant 2. ᮧ᭜यथᱮ/Respondent 3. आयकरआयुᲦ /CIT 4. िवभागीय ᮧितिनिध/DR 5. गाडᭅ फाईल/GF.