The DCIT, Central Circle-3, Vadodara V. Smt. Pritty V Patel, Vadodara

ITA 1490/AHD/2019

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 5699 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 06-08-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 30-09-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained investment; Gift; Opportunity of being heard; Earning of tax free income; Source of fund; Corroborative evidences; Valuation report; Capital Gains
• Section: 69; 132; 143(3); 142(1); 143(1); 250; 143(2); 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD BEFORE SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER & Ms. MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील स ं ./I. T. A. No. 1490/Ahd/2019 A/w. CROSS OBJECTI ON No. 17/Ahd/202 0 (िनधा रण वष / Assessment Year : 2 017-18) D e pu t y C o m mi s s io ne r o f I n co me- t a x C e n tr a l C ir cle -3 , 6 03 , 6 t h Fl oo r , Aa yk ar B ha v an , R ac e C o u r se C i r cl e , V a do da r a - 39 0 0 07 बनाम/ Vs . Sm t . Pr it t y V. P a t el 5 8, A lk a p ur i So cie t y, A l ka p u r i, V a d od ar a थायी लेखा स ं . /जीआइआर स ं . / P A N / G IR N o. : AE U P P 4 1 5 5 P (Appellant/Respondent) . . (Respondent/Cross Objector) Revenue by : Shri Ashok Kumar Suthar, Sr. DR Assessee by : Shri Milin Mehta, A.R. स ु नवाई क तारीख / D a t e o f H ea ri n g 07/08/2023 घोषणा क तारीख /D a t e o f P r o n o u n c e me n t 02/11/2023 O R D E R PER Ms. MADHUMITA ROY - JM: The captioned appeal and cross objection have been filed at the instance of the Revenue an d ass es see respectively, are directed against the appellate order dated 29.07.2019 passed by the Ld. Commissioner of Income Tax (Appeals)-12, Ahmedabad (in short ‘CIT(A)’)(Appeal No. CIT(A)- ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 2 - 12/Ahd/266/CC-3/18-19) arising out of the order dated 19.12.2018 passed by the DCIT, Central Circle-3, Vadodara under Section 143(3) of the Income Tax Act, 1961, (hereinafter referred to as ‘the Act’) for Assessment Year 2017-18. 2. The respondent assessee, a partner, in M/s. Gaskets and Radiators Distributors and Baking Company, filed its return of income for the year under consideration declaring total income at Rs.9,61,810/-, which was processed under Section 143(1) of the Act. The said assessee is deriving income from business or profession, capital gains and income from other sources. A search under Section 132 of the Act in case of Banco Group of Vadodara was conducted on 02.08.2016. On the same day, search was also conducted in the case of assessee. Accordingly, the case was selected for scrutiny as per CBDT guidelines and also in terms of the provision of Section 153B(2) of the Act and a notice accordingly under Section 143(2) of the Act dated 17.08.2018 was issued and duly served upon the assessee followed by notice under Section 142(1) of the Act dated 08.10.2018 alongwith a detailed questionnaire, which was served upon the assessee on 09.10.2018. 3. During the course of search, jewellery amounting to Rs.83,45,380/-, (Gold 3287.800 (gross weight) 2599 grams (net weight) amounting to Rs.72,20,380/- and diamond 25.00 carat amounting to Rs.11,25,000/- ) was found in Locker No.908 with Bank of Baroda, Alkapuri Branch, Vadodara. Apart from that, jewellery weighing 556.110 gms. (net weight) gold, 17.76 carat diamond and 7.25 carat other jewellery totaling to Rs.36,87,834/- was found at residential premises of Smt. Pritty V. Patel, the respondent assessee herein. The statement of said Smt. Pritty V. Patel was also recorded during search ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 3 - proceeding. She was asked to specify the source of said jewellery and also produce documentary evidence in support of the same, in reply whereof, she specified that those jewelleries were gifted to her during her marriage occasion by her grand father, father, relatives and friends, but there was no existence of any gift deed in support of the same as also confessed by her. She further added that some of the jewelleries were purchased by her over a period of time, but bills in support of the same were not available during recording of statement. She also submitted that she would try for submission of the same shortly. 4. During recording statement, the entire jewellery found during search at her residence on 02.08.2016 were narrated before her by the Department and also reminded her that as per CBDT Circular No. 1916 of CBDT dated 11.05.1994, where a married woman is also allowed 500 gms. of jewellery and man 100 gms. of jewellery and in that view of the matter, comment was also invited from her on the fact of no documentary evidence in support of the excess jewellery found and excess quantum of jewellery as per permissible limit totaling to Gold jewellery 2599 gms. (net weight) and 25 carat of diamond jewellery seized. She, however, confirmed that total of 3155.11 gms. of gold jewellery and 49.99 carat of diamond was found during search conducted at her premises but as she failed to produce the bills in support of those jewellery she was not in a position to comment on it. In terms of the letter written by the Department on 08.10.2018 to substantiate the source of investment of gold jewellery of 2599 gms. (net weight) and 25 carat of diamond jewellery, the respondent assessee submitted in writing on 12.12.2018 along with certain details in respect of such source of jewelleries. The valuation report of Registered Valuer, namely, Shri Krishnakant Vallabhdas Chokshi alongwith certain invoices of purchase of jewellery was produced before the Ld. AO. ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 4 - 5. According to the Ld. AO, upon perusal of the said valuation report, it appeared that the same did not contain any name or date to establish the ownership of the said jewelleries with the respondent assessee Smt. Pritty V. Patel. Discrepancies were also cropped up upon comparison of the said valuation report with the valuation report made during the search operation by Mukeshbhai B Patadia, wherefrom the assessee was found to try to justify the source of above investment by fabricated documents as alleged by Revenue. The valuation reports so submitted by the assessee found to have huge variation in description and weight of jewelleries in comparison with the valuation reports made during search as mentioned hereinabove. As the valuation report submitted by the assessee did not bear any name from which the ownership and/or possession could have been established with respect to the source of investment, those documents were not found to have any basis to prove the source of investment and thus source of gold jewellery of 2866.16 gms. (net weight 3,366.16 gm – 500 gm) and diamond jewellery net weight 42.76 carat (net weight) remained unexplained. The investment in gold jewellery amounting to Rs.82,54,540/- (Gold @ 2880) and diamond jewelleries amounting to Rs.31,85,600/- (Totaling Rs.1,14,40,140/-) was added to the total income of the respondent assessee as unexplained investment under Section 69 of the Act, which was, in turn, restricted to Rs.28,42,848/- by the Ld. CIT(A) in the appeal preferred by the assessee. Hence, the instant appeal before us. 6. Before the First Appellate Authority, the appellant made certain submissions which has been reproduced by the Ld. CIT(A) in the order impugned appearing at Page 3 therein. Relying on three valuation reports prepared by one Krishnakant Chokshi all dated 20.03.1991, the assessee prepared following chart wherein the jewellery owned by the assessee and ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 5 - father which were subsequently gifted to her during marriage, the details of purchase over the period of time and also jewellery received from relatives and friends on various occasions were informed to the Ld. CIT(A): i. The tabulated chart of details is as follows: Sr. No. Particulars Gold Jewellery (Gms) Diamonds (Carats) Refer page no. (of Paper Book] 1. Valuation report of Krishnakant Chokshi dated 20.03.1991 in respect of jewellery owned by the Appellant 836.050 - 81 to 82 2. Valuation report of Krishnakant Chokshi dated 20.03.1991 in respect of jewellery owned by the Appellant 256.70 4.35 83 to 84 3. Valuation report of Krishnakant Chokshi dated 20.03.1991 in respect of jewellery owned by the father of the Appellant and gifted to her at the time of marriage 553.95 - 85 to 86 4. Purchased over period of time 525.40 66.74 87 to 95 5. Received as gift on various occasions from relatives and friends 987.10 79 to 80 Total jewellery owned by the Appellant 3159.20 71.09 ii. According to the assessee, the ownership of the above mentioned jewellery has not been doubted by the Ld. AO. Neither anything was brought on record by the department to demonstrate that jewellery found during search proceeding is over and above the jewellery owned by the assessee. ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 6 - iii. On this aspect, the assessee further relied upon the reconciliation of all the items of jewellery found during search proceeding specified in the valuation report of the department. iv. Further that, as per the assessee, the Ld. AO failed to consider the earnings of the assessee before treating the jewellery as unexplained. In view of the following returned income filed by her from A.Y. 2011-12 to 2017-18 as tabulated below which further highlights the status of the Appellant for owning jewellery of Rs. 1,14,40,140: A.Y. Net total income (Rs) Exempt income (Rs) Total earnings (Rs) Refer page no 2011-12 6,51,360 28,79,808 35,31,168 16 to 18 2012-13 17,69,830 43,70, 034 61,39,864 19 to 21 2013-14 17,15,360 37,84,496 54,99,855 22 to 26 2014-15 6,97,190 50,34,205 57,31,395 27 to 29 2015-16 7,58,570 16,52,977 24,11,547 30 to 33 2016-17 5,87,710 48,91,438 54,79,148 34 to 37 2017-18 9,61,810 1,94,97,125 2,04,58,935 38 to 42 v. The assessee belongs to elite and wealthy Patel Hindu family, having good financial background, and it is customary to gift jewellery on auspicious occasions like marriage, childbirth, birthdays, anniversary, etc, considering which possession of jewellery in present quantity is reasonable as also submitted by her. vi. Accordingly, the source of the jewellery can be summed up as ancestral, acquisition out of own funds, received on various occasions like marriages ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 7 - (of children or self), childbirth, marriage, anniversaries, birthday, etc and from parents of bride / bridegroom on marriage of girl (Streedhan). vii. Thus, all the required details explaining the source and ownership of jewellery found during search proceedings was submitted to the AO. viii. However, without considering the fact and evidence as stated to have been submitted by the assessee was not taken into consideration by the Ld. AO properly, explanation provided was found to be not acceptable. Addition in respect of gold jewellery of 2866.16 gms. valuation whereof was calculated as Rs.82,54,540/- and diamond jewellery to the tune of Rs.31,85,600/- totaling to Rs.1,14,40,140/- was made to the total income of the assessee as unexplained investment under Section 69 of the Act. ix. According to the assessee, it was not 3366.16 gms. but 3155.11 gms. as were found from the bank locker of the assessee. As wrongly recorded by the Ld. AO, the unexplained investment on account of excess jewellery of 211.05 gms. @ Rs.2880/- totaling to Rs.6,07,824/- were to be deleted. x. On the legal issue, the assessee submitted before that the addition as on surmises and conjuncture and without any supporting evidence made by the Ld. AO is liable to be deleted. 7. So far as the ownership of jewellery is concerned, though the assessee submitted the documents mainly the valuation report, bills, re-conciliation statement whereas the Ld. AO found those documents as fabricated. Further ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 8 - that, the valuation report submitted by the assessee was not found having any name or date in order to establish the ownership of the said jewellery whereas it is the case of the assessee that the valuation has been done for the purposes of filing of wealth tax return; the said report prepared on 20.03.1991 contains the name of the owner of the jewellery either of assessee or her father. In this aspect, we record following submissions made by the assessee reproduced by the Ld. CIT(A) at page No. 7 as follows: “While invoking harsh provisions of section 69 of the Act, the learned AO has stated that valuation report as submitted by the Appellant does not contain name or date to establish the ownership of said jewellery. In this regard, your kind attention is invited to page no. 81, 83 and 85 wherein it has been specifically mentioned that valuation has been done for wealth tax purpose on 20.03.1991 and the name the owner of jewellery has also been stated, either as Appellant or her father Dr. Madhukar T Mody. Despite the valuation report specifically mentions that the jewellery stated in the said report is owned either by the Appellant or her father and was valued on 20.03.1991 and most importantly, the valuation process was undertaken for wealth tax purpose, the AO has contended that ownership or possession of the jewellery could not be established. Further, the valuation was done for wealth tax purpose which clearly connotes the fact that jewellery owned as mentioned in the valuation reports was acquired from the explained / disclosed source of income which was valued for computing wealth tax liability. Thus, to treat gold jewellery, worth Rs. 46,84,896 (836.05 gms + 256.70 gms + 533.95 gms = 1626.70 gms at the rate of Rs, 2,880 per gram) as unexplained is without appreciating the fact's on record in proper perspective.” 8. The assessee submitted invoices in respect of the purchase of jewellery to the tune of 525.40 gms. of gold jewellery and 66.74 carat of diamond jewellery along with the list of jewellery of 987.10 gms. received as gift on various auspicious occasions like marriage, anniversary, birthdays, childbirth etc. According to the assessee, the Ld. AO has not rebutted the same and thus accepted the ownership of those jewellery belong to the assessee and her father. In that view of the matter, considering those jewellery as unexplained ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 9 - investment is factually wrong and addition made thereupon is stated to be wrong and thus liable to be deleted. 9. The case of the assessee is this that the addition in respect of 1512.45 gms. for gold jewellery and 42.76 carats of diamond jewellery valuing of Rs.75,41,600/- supported by the bills and list of gifts and payments made for buying those jewelleries to be treated as explained. 10. The finding of the Ld. AO to this effect that the valuation report submitted by the assessee having huge variation in description and weight of the jewelleries while comprising the valuation reports prepared at the time of search vis-à-vis the valuation made by the assessee’s valuer duly filed before the Ld. AO. is wrong. The assessee further contended that the valuation report submitted by the assessee was on 20.03.1991 whereas valuation report prepared by the department during search is only dated 02.08.2016, this time gap may lead to variation. 11. We have perused the valuation report prepared during search appearing at Page 11 of the Paper Book filed before us the contents whereof is as follows: ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 10 - ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 11 - ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 12 - 12. We have perused the following series of reply filed by the assessee to the notice issued under Section 142(1) of the Act dated 16.11.2018:- ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 13 - ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 14 - ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 15 - ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 16 - ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 17 - “To, ( Comments : This reply is filed on 20.12.2018, while assessment order is dated 19.12.2018) The Deputy Commissioner of Income Tax, Central Circle-3, Aayakar Bhawan, Race Course, Vadodara-390 007 Respected Sir, Sub: Further details called during the course of Assessment proceedings Ref: Notice u/s 142(1) of Income Tax Act, 1961 (hereinafter referred to as the "Act") dated 16.11.2018 Smt. Pritty Vimal Patel PAN: AEUPP4155P A. Y.: 2011-12 to 2017-18 ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 18 - During the course of hearing your office has directed to submit the explanation of jewellery found in the case of the Assessee during the search proceedings. In respect of the same we have been directed by our client to submit as under: 1. During the search proceedings, 2599 grams (Net weight) of gold jewellery and 25 carat diamond jewellery was found from Locker no. 908, with Bank of Baroda, Alkapuri in the name of Pritty Patel and Vimal Patel. In addition to this, 556.11 grams of gold jewellery and 17.76 carat diamond jewellery was found from residence of the Assessee. With respect to jewellery found it is submitted that the Assessee and her family members had purchased some jewellery out of earnings during/before block period and some of jewellery were received as gift in marriage/social functions from relatives or inherited by the Assessee. The reconciliation of jewellery found is enclosed as Annexure -1. 2. During the course of search operation in response to the question of jewellery found from her, residence and locker she has replied that on the day of search she was unable to produce the supporting evidences in support of jewellery and hence she was not in a position to comment on the jewellery found. Your office may please note that the jewellery found from the residence as well as locker belong to the Assessee and her family members only. However, due to age and mental stress she was unable to explain about jewellery found on that day and consequently the jewellery was seized by the Income Tax Officials. It is submitted that at the time of recording of statement she has mentioned that lots of jewellery has been gifted to her on her marriage occasion by her grandfather, father, relatives and friends. The copy of page listing the jewellery received by her as a present on her marriage is enclosed for your reference as Annexure - 2. The jewellery mentioned in this list is included in the valuation report submitted as above. Further it is submitted that jewellery found /eludes jewellery belongs to her family members (son, daughter in law and granddaughter) also. She has nowhere explicitly mentioned that jewellery above found belongs to her only. 3. We most respectfully submit that the Assessee herein concerned hails from a Patel family. Further, we would like to submit that the family of the Assessee belongs to extremely elite and wealthy strata of the society. It is a common custom in India, to save gold and jewellery, obtained at various family occasions. Since the family of the assessee is coming from fairly good financial background, possession of jewellery in the present quantity must be considered reasonable. Under the Indian tradition and customs and more particularly the person belonging to the financial background of the Assessee and the community the source of the jewellery and gold is from the following; a. Ancestral b. Acquisition out of own funds ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 19 - c. Received on various occasions like marriages (of children or self), birth of child, marriage anniversaries, birth day etc. d. From parents of bride/bridegroom on marriage of girl (Streedhan) 4. We would like to submit that the jewellery found during the search belong to the family members only. At the outset, we are firstly submitting following documents, evidences in support of overall holding of jewejlgry by the family and submitted at the time of search to explain the issue as under. a.) Valuation Report of Krishnakant V Chokshi dated 20 th March 1991 providing details of gold jewellery (836.050 grams) held by Pritty Patel is enclosed as Annexure - 3. b.) Valuation Report of Krishnakant V Chokshi dated 20 th March 1991 providing details of diamond and gold jewellery held (251.20 grams gold, 9.95 carets diamond) held by Pritty Patel is enclosed as Annexure - 4. c.) Valuation Report of Krishnakant V Chokshi dated 20 th March 1991 providing details of gold jewellery held by Dr. Madhukar T Mody (father of the Assessee) is enclosed as Annexure -5. d.) Copies of invoices of purchase of jewellery (to the extent available with the Assessee) is enclosed as Annexure-6. e.) The copy of valuation report of department along with explanation of the Assessee on each and every item of jewellery purchase/held by the Assessee and his family members is enclosed as Annexure - 7. 5. It is submitted the valuation of jewellery has been done for the purpose of calculation of wealth tax liability in the case of the Assessee and her father. Your office may please note that jewellery held by her father as reported in the above-mentioned report has been given as a gift to her. 6. We would like to invite your kind attention to CBDT Instruction No. 1916 dated 11/05/1994 which is to be followed not only while effecting the seizure of the jewellery but also in the assessment proceedings. As per the said instruction, in the case of a person not assessed to wealth- tax gold jewellery and ornaments to the extent of 500 grams per married lady, 250 grams per unmarried lady and 100 grams per male member of the family need not be seized. Therefore, as per above ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 20 - instruction in our case, the assessee should get the benefit of 850 grams of gold ornaments i.e. 100 grams for her son, 500 grams for her daughter-in-law, and 250 grams for her granddaughter. We submit that the ornaments to the extent specified in the instruction should be accepted as reasonable. Here we would like to rely upon following various judgments of Hon'ble High Court and Tribunal. 1. CIT vs Ratanlal Vyparilal Jain 235 CTR 568 (Guj) 2. ACIT vs Smt. Nceta Sudarshan Amin (2011) 2011 TPI 621 (ITAT – Ahmedabad) 3. ACIT vs Raj Kurnari Aggarwal, ITAT, Delhi dated 12/10/2012 - ITA No. 530/Del./2010 4. CTT vs Ghanshyam Das Johri, [2014] 41 taxmann.com 295 (Allahabad) 5. Rajendra C. Shah vs. JCIT. [2007 158 TAXMAN 170 (MUM.) (MAG.) In above judgments it was held that the guideline given in the instruction no. 1916 is to be followed not only while affecting the seizure of jewellery but also in the assessment proceedings. In the said judgments it was also mentioned that if jewellery to the extent mentioned in the instruction without any evidence substantiating the source than to the extent, the jewellery should be treated as explained. Based on the above we submit to your office as per the guidelines in the instruction, ornaments to the extent specified in the said instruction should be accepted as reasonable. In the present case, the jewellery found is even less than the limit specified in the instruction and therefore the same should be considered as explained jewellery. Should you require any further information of explanation we shall be pleased to submit the same on hearing from your office.” 13. The assessee filed the valuation report prepared by the Registered Valuer Shri K V Chokshi as on 20.03.1991 appearing at Page Nos. 81 to 86 of Paper Book. The contents whereof is as follows: ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 21 - ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 22 - ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 23 - ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 24 - ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 25 - ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 26 - ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 27 - 14. One of the more important aspects which was urged before us is this that the valuation report so submitted by the assessee during assessment proceeding was prepared on 20.03.1991 for the purpose of wealth tax and owner of the jewellery contained therein was either of the assessee or her father. Such jewellery mentioned in the said report should be treated as acquired from explained/disclosed sources of income. The same was also duly submitted before the First Appellate Authority. While granting relief to the assessee by restricting the addition to Rs.28,42,848/- against the addition of Rs.1,14,01,950/- made by the Ld. AO, the Ld. CIT(A) observed as follows: “5.1 At the outset, it is noted from the assessment order that the AO has relied upon the statement u/s 132(4) wherein the appellant admitted discovery of the jewellery and could not produce bills and said that she was not in a position to comment about it (jewellery found). The AO has mentioned item to item discrepancies in description and in weight to arrive at the adverse conclusion against the appellant. The addition of the entire amount is definitely not on any sound footing. From the perusal of the assessment order, it is seen that during the course of search, jewellery valued at Rs.83,45,380/- gold 3827.8/2599 gm Rs.72,20,380/- diamond 25 ct. Rs.11,25,000/- was found from locker. No 908 with Bank of Baroda and Rs.36,87.343/ gold 556.11 gm Diamond 17.76 ct. other jewellery) was found from residential premises. During the assessment proceedings, the appellant was given an opportunity to substantiate the source of investment in those jewellery. In response, the appellant submitted the Valuation Report of Registered Valuer, Shri Krishnakant Vallabhas Choksi along with few invoices of purchase of jewellery. It is the case of the AO that the said valuation report did not contain any name or date to establish the ownership of said Jewellery with the appellant and that there were huge variation in description and weight of the jewelleries as per the said valuation report when compared with the Valuation report of the Deparment's valuer, Shri Mukeshbhai B Patadia (made on the day of search). Therefore, the AO held the jewellery to be Unexplained, allowed credit of 500 gms, as relief as per CBDT Instruction-1916 and added the amount of Rs.1,14,40,140/- comprising of Rs.82,54,540/- (2866.166 gms. gold Rs.2880/gm.) and of Rs 31,85,600/- (diamond jewellery) to the total income. The assessment was completed determining total income at Rs.1,24,01,950/-. 5.2 There is no dispute that during the course of search, the appellant did not deny her ownership of any of the jewellery found from her possession, both at the residence and from the bank lockers standing in her name. Thus, as per Section-132 (4A)/292C, there is presumption in favour of the Revenue that the valuables belong ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 28 - to the appellant and it was for the appellant to substantiate that the valuables were acquired out of disclosed sources/funds for the purpose of income tax. As per the Assessing Officer, the explanations furnished by the appellant was not such to hold that the presumption in the favour of Revenue has been rebutted by the appellant. It is also the presumption under the act that the valuables will be treated to have been acquired during the Financial Year in which the search was conducted and it was for the appellant to prove that the valuables were acquired in the earlier years. This also has not been done by the appellant. Accordingly, the Ground No.5 that the AO has erred in making the addition of unexplained investment u/s.69 in A.Y. 2017-18 is not at all tenable. The AO, in view of the search conducted, is not required to prove that the valuables were acquired by the assessee in the previous year related to / a.y.2017- 18. 5.3 During the appeal proceedings, it has been submitted that total gold jewellery found from bank locker and residence is 3155.11 gns, and not 3366.16 gms. as considered by the AO for computing unexplained investment. This is a matter of fact verifiable from the valuation carried out on the day of search. The AO is directed to check and to allow relief to the appellant by deleting/correcting the addition of Rs.6,07,824/- (211.05 gms.*Rs.2,880) after having satisfied himself, which would be subject to the final decision in the last para 5.10. 5.4 It has been contended the provisions of Section-69 could not have been invoked in the appellant's case because the appellant had furnished the explanation and that the AO could have made the addition only to the extent, he was not satisfied with the explanation and that the opinion should have been formed on the basis of some evidences and not by making vague statements. The ground is found to be theoretical and not impacting the addition made by the AO because the present case emanates from search u/s 132 and the issue, in essence, is of primary onus and discharge/shifting of the onus. The burden of section 132(4)/292C will be primarily on the appellant herself. 5.5 It has been submitted that the Valuation Report submitted during the assessment proceedings was made en 20.03.1991 for the purpose of wealth tax and the owner of jewellery contained therein was either the appellant or her father, Dr. Madhukar T. Mody and that the jewellery mentioned in the Report should be treated as acquired from explained/disclosed sources of income. As per the appellant, the value of such jewellery is Rs.46,84,896/- [(836.05 + 256.70+ 533.95 gms.)*Rs 2880]. In this regard, it is seen from the valuation reports dated 20.03.1991 which are at page No 81 to 86 of the paper book and two of the valuation reports are in the name of Smt. Pritty V. Patel and one of the reports is in the name of Dr. Madhukar T. Mody. Good many of the items of these valuation reports have been tallied with the items of jewellery inventorised on the day of search. Under the circumstances, the AO is not Justified in rejecting such contention of the appellant in a summary manner and in making addition of such jewellery in a mechanical manner. The jewellery to the extent ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 29 - represented by the valuation reports dated 20.03.1991 should be treated as explained and appellant should get relief on that account. 5.6 The appellant has submitted copies of voices to substantiate the jewellery purchased to the of Rs.525.40 gms, of gold and 66.74 ct. of diamond. The appellant has alleged that the AO has not controverted the invoices. In this regard, it is seen that vide submission dated 12.12.2018 during the assessment proceedings, the appellant had furnished invoices of purchase of jewellery in the name of Shri Vimal Kanubhai Patel, Smit. Pritty Vimal Patel which are at page Nos. 65 to 74 of the paper book and in many of the cases, the payments have been made through cheques, Some of the items so acquired have been tallied with the items inventorised on the day of search. I am of the considered view that such items should be treated as explained and no addition should have been made to that extent. 5.7 The appellant has claimed to have received 987.10 gms of gold jewellery as gift on various auspicious occasions like marriage, anniversary, birth days, child birth etc. from relatives and friends. The appellant has alleged that the AO has not controverted the list of gifts received on various occasions. I am not convinced of the tenability of such claim without supporting evidence establishing the receipt of such gifts. But at the same time, I am also conscious of the customary practices that the gifts received/given are not amenable to strict documentary evidences, but I am of the view that the relief as per CBDT Instruction-1916 includes and takes care of such occasions and conditions. It is also the legal position that mere assertion by the tax payer cannot make such assertion as explanation let alone it being a plausible explanation. This position becomes important in the case of search u/s.132 and it becomes a matter of discharge of primary onus which is on the taxpayer/appellant and the adverse presumptions are in favour of the revenue and against the tax payer 5.8 The appellant has also argued that as per the return of income, she had substantial earning and she belonged to an elite and wealthy Patel Hindu family, so the total earning of Rs.2,04,58,935/- for the period AY. 2011-12 to 2017-18 should be considered to hold that the jewellery possessed by her and found during the course of search as explained for the purpose of income tax. I am not inclined to accept the argument because a person/family having reasonable source of income from business may also have opportunities to have income which were not disclosed for the purpose of income tax and they might have being utilized for acquiring movable assets specially jewellery, and accordingly they have higher anus of establishing that the valuables were acquired out of such disclosed income. 5.9 Giving the practices of the women in the Indian Society in relation to purchase of jewellery and remaking/exchange of jewellery, I am of the considered view that item by item tally of jewellery in description and weight (which is an ideal scenario ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 30 - for treating the jewellery explained) may not be possible for most of the items and therefore, a pragmatic approach should be to allow relief on the basis of gross/net weight of jewellery. In connection thereto, it is also noted that during the assessment proceedings vide submission dated 12.12.2018, the appellant had sought relief of 850 gms. of gold jewellery as per CBDT Instruction-1916 (100 gms for Mr. Kush V. Patel, 500 gms. for Ms. Rachana K. Patel and 250 gms. for daughter of Mr. Kush), however, no such claim appears to have been made during the appeal proceedings vide submission dated 24.07.2019. In this regard, I am of the considered view that as neither during the statement u/s 132(4) nor after the search any claim of ownership of jewellery by others was made, the above relief would not be proper. Moreover, as the appellant herself has jewellery more than the amount prescribed in the CBDT Instruction-1916, the appellant cannot be given further benefit of said Instruction. In the totality of facts and circumstances, I am of the considered view that of all the explanations and reconciliations, the following table may be adopted for the purpose of adjudication of the appeal under consideration and it may meet the requirement of justice to and satisfaction of the appellant. Sr. No. Particulars Gold Jewellery (Gms) Diamonds (Carats) 1. Valuation report of Krishnakant Chokshi dated 20.03.1991 in respect of jewellery owned by the Appellant 836.050 2. Valuation report of Krishnakant Chokshi dated 20.03.1991 in respect of jewellery owned by the Appellant 256.70 4.35 3. Valuation report of Krishnakant Chokshi dated 20.03.1991 in respect of jewellery owned by the father of the Appellant and gifted to her at the time of marriage 553.95 4. Purchased over period of time 525.40 66.74 5. Received as gift on various occasions from relatives and friends 987.10 - Total jewellery owned by the Appellant 3159.20 71.09 5.10 As already held before, the claim of receipt of gifts from relatives and friends without supporting evidences cannot be accepted in the case of the appellant, the: amount of gold jewellery, 987.10 gms. valued at Rs.28,42,848/- may be treated as unexplained and liable for addition to the total income of A.Y. 2017-18. Accordingly, the AO is directed to restrict the addition to Rs.28,42,848/- against the addition of Rs.1,24,01,950/-.” ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 31 - 15. After careful reading of the order passed by the Ld. CIT(A) and perusal of the relevant corroborative evidence annexed to the paper book filed by the assessee, it appears that the copies of invoice of different items of jewellery purchased by the assessee have been duly submitted. However, merely because the bills in the name of the assessee or her father will not prove the ownership of the jewellery as a whole towards the particular person. The valuation reports though have been relied upon by the Ld. CIT(A) as prepared in the year 1991 on the plea that the same was prepared for filing of wealth tax return, no evidence to that effect was forthcoming to the order passed by the Ld. CIT(A) neither the same is available before us at the initial stage of hearing of the matter. 16. Relevant to mention that while dealing with this particular submission made by the assessee, the Ld. CIT(A) observed as follows: “5.5 It has been submitted that the Valuation Report submitted during the assessment proceedings was made en 20.03.1991 for the purpose of wealth tax and the owner of jewellery contained therein was either the appellant or her father, Dr. Madhukar T. Mody and that the jewellery mentioned in the Report should be treated as acquired from explained/disclosed sources of income. As per the appellant, the value of such jewellery is Rs.46,84,896/- [(836.05 + 256.70+ 533.95 gms.)*Rs 2880]. In this regard, it is seen from the valuation reports dated 20.03.1991 which are at page No 81 to 86 of the paper book and two of the valuation reports are in the name of Smt. Pritty V. Patel and one of the reports is in the name of Dr. Madhukar T. Mody. Good many of the items of these valuation reports have been tallied with the items of jewellery inventorised on the day of search. Under the circumstances, the AO is not Justified in rejecting such contention of the appellant in a summary manner and in making addition of such jewellery in a mechanical manner. The jewellery to the extent represented by the valuation reports dated 20.03.1991 should be treated as explained and appellant should get relief on that account.” ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 32 - 17. Having regard to this particular facts and circumstances of the case, we, therefore, granted liberty to the Ld. Counsel appearing for the assessee to submit the copy of wealth tax return which was stated to have been filed by the assessee and her father in the year 1991. Pursuant to the said direction/liberty, the Ld. Counsel appearing for the assessee submitted the wealth tax return filed by the assessee only, as an individual, before the Wealth Tax Officer, Ward-2(1), Baroda, dated 31 st October, 1991, by and under a covering letter under the signature of Smt. Amrin Pathan, CA, Baroda. Relevant to mention that wealth tax return filed by the assessee’s father is not on record either before the Ld. CIT(A) or filed before us even after liberty granted to the Ld. Counsel appearing for the assessee before us. However, considering the assessee belong to an elite and wealthy family, having total earning of Rs.2,05,48,935/- commencing from the period A.Y. 2011-12 to 2017-18, the possession of the jewellery with the assessee and/her father in the larger scale as explained as has been claimed by the assessee cannot be brushed aside. 18. It also appears from the records that on 20.12.2018 the assessee preferred a representation before the Ld. AO clarifying the social status of the assessee hailing from Patel family being extremely elite and wealthy and further relied upon the valuation report prepared by Shri Krishnakant V. Chokshi on 20 th March, 1991 providing details of gold jewellery (836.050 grms.) and diamond jewellery as well held by the assessee. Further the valuation report prepared by the said Valuer dated 20.03.1991 provides details of gold jewellery held by the father of the assessee, namely, Dr. Madhukar T Mody was also submitted alongwith the said representation. The copies of invoices of purchase of jewellery were also annexed thereto. ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 33 - 19. The copy of the valuation report of the department alongwith explanation rendered by the assessee on each and every item of jewellery purchase/held by the assessee and her family members annexed to the said representation dated 20.12.2018 though filed by the assessee before the Ld. AO. only a day prior to that, the assessment order was passed on 19.12.2018. It also appears that the Ld. CIT(A) never called for any remand report on this document. In that view of the matter, the representation preferred by the assessee dated 20.12.2018 remained unconsidered by the Revenue authorities. 20. We, therefore, considering the entire aspect of the matter, particularly, the bills of purchase of jewellery submitted by the assessee and/or the financial and social status of the assessee and the wealth tax return filed by the assessee only, so submitted before us find it fit and proper to remit the issue to the file of the Ld. AO to re-visit the issue upon quashing the order passed by the Ld. CIT(A) impugned before us. The Ld. AO is directed to pass orders strictly in accordance with law. The Ld. AO while adjudicating the issue afresh is directed to give an opportunity of being heard to the assessee and to consider any other evidence which the assessee may choose to file at the time of hearing of the matter. 21. It the result, appeal preferred by the Revenue is allowed for statistical purposes. 22. As the Revenue’s appeal has been allowed for statistical purposes by sending the issue to the Ld. AO with certain directions upon quashing the order ITA No. 1490/Ahd/2019 A/w. CO No. 17/Ahd/2020 (DCIT vs. Smt.Pritty V. Patel) A.Y.– 2017-18 - 34 - passed by the Ld. CIT(A), the cross objection preferred by the assessee has lost its force and thus dismissed. 23. In the combined result, the appeal preferred by Revenue is allowed for statistical purposes and cross objection filed by the assessee is dismissed. This Order pronounced on 02/11/2023 Sd/- Sd/- (RAMIT KOCHAR) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 02/11/2023 S. K. SINHA True Copy आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad