Jyotichand Bhaichand Saraf, V. Dy.CIT,Cen.Cir.1(1), Pune,

ITA 1623/PUN/2007

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3152 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 06-12-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A S SINGH
• Assessee Lawyers: SUNIL PATHAK
• Keywords: Unexplained investment; Search and seizure; Block assessment; Onus to prove; Set aside
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES, B PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JM AND SHRI D. KARUNAKARA RAO, AM I.T.A. NO. 1623/PN/2007 BLOCK PERIOD 1996-97 TO 2002-03 (UPTO 6-11-2001) JYOTICHAND BHAICHAND SARAF JAYASHREE COMPLEX, STATION ROAD, BARAMATI PAN AAEFJ 6133B APPELLANT VS. DY. CIT CENT. CIR. 1(1) PUNE RESPONDENT APPELLANT BY : S/SHRI SUNIL PATHAK AND NIKHIL PATHAK RESPONDENT BY: SHRI A.S. SINGH ORDER PER SHAILENDRA KUMAR YADAV, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-I PUNE DATED 6-9-2007 FOR THE BLOCK ASSESSMENT YEAR 1996-97 TO 2002-03 (UPTO 6-11-2001) ON THE POINT OF CONFIRMATION OF ADDITION OF RS. 59,62,930/ - AS PROFIT ON SHORTAGE OF DIAMONDS FOR THE ASSESSMENT AND ALSO CONFIRMATION OF ADDITION OF RS. 1,50,29,000/- AS UN DISCLOSED INCOME ON ACCOUNT OF ACQUISITION OF 751.45 CARETS O F DIAMONDS RANGING BETWEEN 0.03 TO 0.06 CARATS. 2. IN THIS CASE, SEARCH AND SEIZURE ACTION U/S 132 OF THE ACT WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE ON 6- 11-2001. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEALING IN GOLD ITA NO. 1623/PN/2007, JYOTICHAND BHAICHAND SARAF B.P 1996-97 TO 2002-03 2 ORNAMENTS AND JEWELLERY. DURING THE COURSE OF SEAR CH ACTION, DIAMONDS OF FOLLOWING DESCRIPTION WERE FOUND IN THE BED ROOM OF PARTNERS SON SHRI ROHIT SHANTIKUMAR SHAH. S.NO. DESCRIPTION OF DIAMONDS FOUND WEIGHT IN CARATS 1. DIAMONDS RANGING FROM 0.07 TO 0.12 CARATS 1239.50 2. DIAMONDS RANGING FROM 0.03 TO 0.06 CARATS 751.45 TOTAL 1990.95 3. ON BEING QUESTIONED ABOUT THE SOURCE OF INVESTME NT OF THE AFORESAID DIAMONDS, THE PARTNER OF THE ASSESSEE EXPLAINED THAT THE SAID DIAMONDS WERE DISCLOSED BY HIM AND HI S BROTHER UNDER VDIS 1997 AND WERE SUBSEQUENTLY SOLD TO THE A SSESSEE. ACCORDING TO THE DECLARATION MADE UNDER VDIS 1997 T HE DESCRIPTION OF THE DIAMONDS WAS LOOSE CUT AND POLI SHED DIAMONDS EACH DIAMOND RANGING FROM 0.07 TO 0.12 CT . WHEREAS DIAMONDS FOUND WEIGHING 751.45 CTS. WERE R ANGING BETWEEN 0.03 TO 0.06 CARATS. THEREFORE, THE SEARCH PARTY WAS OF THE OPINION THAT THE DIAMONDS WEIGHING 751.45 CT S. RANGING FROM 0.03 TO 0.06 WERE NOT ACCORDING TO VDIS 1997 D ECLARATION AND WERE UNDISCLOSED. THEREFORE, THE SEARCH PARTY S EIZED THE DIAMONDS RANGING FROM 0.03 TO 0.06 CARATS AS UNDISC LOSED ONE. 4. THE ASSESSEE FILED A RETURN OF INCOME DECLARING UNDISCLOSED INCOME OF RS. 6,81,804/- WHICH WAS DETE RMINED ITA NO. 1623/PN/2007, JYOTICHAND BHAICHAND SARAF B.P 1996-97 TO 2002-03 3 BY THE ASSESSING OFFICER AT RS. 10,16,275/- IN THE ASSESSMENT MADE U/S 158BC(C) OF THE ACT. ON ENQUIR IES BEING MADE BY THE ASSESSING OFFICER THE ASSESSEE FILED A DETAILED REPLY WHICH WAS ACCEPTED BY THE ASSESSING OFFICER. 5. SUBSEQUENTLY, THE CIT SET ASIDE THE ASSESSMENT O RDER PASSED U/S 158BC(C) ON THE GROUND THAT IT WAS ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, INASMUCH AS THE ASSESSING OFFICER HAS NOT GONE THROUGH THE ISSUE O F SALE OF 962.70 CARATS OF DIAMONDS FOUND SHORT AND ACQUISITI ON OF FURTHER DIAMONDS OF 751.45 CARATS OF DIFFERENT DESC RIPTION. THE CIT THEREFORE, DIRECTED THE ASSESSING OFFICER TO VERIFY THE ISSUE AS TO WHETHER THE ADDITION WAS REQUIRED TO BE MADE IN UNDISCLOSED INCOME ON ACCOUNT OF UNACCOUNTED ACQUIS ITION OF 751.45 CTS OF 003 TO 0.06 CT AND ALSO ON SHORTAGE O F 962.70 CARATS OF 0.07 TO 0.12 CT INSTEAD OF 2.2 CT. OR ONL Y ON SALE OF 962 CT OF 0.07 TO 0.12 CT OUT OF WHICH ASSESSEE HAD ACQUIRED 751.45 CT OF 0.03 TO 0.06 CT. 6. ON THE BASIS OF THESE DIRECTIONS GIVEN BY THE C IT, THE ASSESSING OFFICER MADE AN ADDITION OF RS. 1,50,29,0 00/- BEING THE VALUE OF DIAMONDS RANGING FROM 0.03 TO 0.06 CTS . TREATING THEM AS DIFFERENT FROM DIAMONDS DECLARED UNDER VDIS 1997 BY THE PARTNERS OF THE ASSESSEE. THE ASSESSING OFFICE R ALSO MADE AN ADDITION OF RS. 59,62,930/- AS UNDISCLOSED INCOM E ARISING ITA NO. 1623/PN/2007, JYOTICHAND BHAICHAND SARAF B.P 1996-97 TO 2002-03 4 FROM PROFIT ON SHORTAGE OF DIAMONDS RANGING FROM 0. 07 TO 0.12 CARATS (962.7 CARATS) TREATING THE SHORTFALL AS SAL E OUTSIDE THE BOOKS OF ACCOUNT. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY AND MADE DETAI LED SUBMISSIONS. 7. ON CONSIDERATION OF DETAILED SUBMISSIONS FILED B Y THE ASSESSEE, THE CIT(A) WAS OF THE OPINION THAT THE AS SESSEES CONTENTION THAT 1990.95 CTS OF DIAMONDS FOUND AND S EIZED DURING THE COURSE OF SEARCH WERE THE DIAMONDS DECLA RED IN VDIS 1997, WAS NOT ACCEPTABLE FOR THE REASONS SUMM ARIZED AS BELOW: (A) EXCEPT FOR THE STATEMENTS RECORDED U/S 132(4) O F THE ACT OF A PARTNER, THERE IS NO MATERIAL IN SUPPORT OF AS SESSEES CLAIM THAT DIAMONDS OF 1990.95 CTS. FOUND AND SEIZED DURI NG THE COURSE OF SEARCH IN THE CASE OF ASSESSEE ARE THE SA ME DIAMONDS WHICH WAS DECLARED BY THE PARTNERS OF THE ASSESSEE; (B) THE ASSESSEE ITSELF HAS ACCEPTED THE SALE OUTSI DE THE BOOKS OF ACCOUNTS OF 212 CTS. OF DIAMONDS ON WHICH PROFIT @ RS. 2,500/- PER CARAT AMOUNTING TO RS. 5,30,000/- H AS BEEN DISCLOSED BY THE ASSESSEE IN THE RETURN OF INCOME F OR A.Y. 1999-00 IN THE BLOCK RETURN FILED BY THE ASSESSEE. THIS CLEARLY SHOWS THAT THE ASSESSEE IS ENGAGED IN UNDISCLOSED B USINESS OF DIAMONDS AND SUCH BUSINESS IS TOTALLY OUTSIDE THE B OOKS OF ACCOUNT OF THE ASSESSEE. IN RESPECT OF SUCH UNDISC LOSED ITA NO. 1623/PN/2007, JYOTICHAND BHAICHAND SARAF B.P 1996-97 TO 2002-03 5 BUSINESS OF DIAMONDS, NO BOOKS OF ACCOUNTS AND DOCU MENTS WERE FOUND DURING THE COURSE OF SEARCH. IT IS TRIT E LAW THAT FROM ACCEPTANCE OF SUCH UNDISCLOSED SALES, THE CARR YING ON OF UNDISCLOSED BUSINESS OF PURCHASE AND SALE OF DIAMON DS CAN BE INFERRED. UNDER THESE CIRCUMSTANCES THE BURDEN OF PROOF WAS CAST UPON THE ASSESSEE TO PROVE THAT DIAMONDS OF 19 90.95 CTS. FOUND DURING THE COURSE OF SEARCH REPRESENTED THE D IAMONDS DECLARED IN VDIS BY THE TWO PARTNERS BY PRODUCING R ELEVANT, RELIABLE AND COGENT MATERIAL ON RECORD. THEREFORE, THE ASSESSEE HAS FAILED TO PROVE THE SOURCE OF ACQUISITION AND N ATURE OF POSSESSION OF DIAMONDS RANGING FROM 0.03 TO 0.06 CT S WEIGHING 751.45 CTS. THE DESCRIPTION OF THESE DIAM ONDS WAS MATERIALLY DIFFERENT FROM THE DIAMONDS DECLARED DUR ING THE COURSE OF VDIS. (C) THE EXISTENCE OF UNDISCLOSED BUSINESS OF SALE O F DIAMONDS HAS ALREADY BEEN ACCEPTED BY THE ASSESSEE WHO HAS DISCLOSED INCOME OF RS. 5,40,000/- FOR A.Y. 1999-00 AND THEREFORE, THE ASSESSEE WAS ENGAGED IN CARRYING OUT UNDISCLOSED BUSINESS OF PURCHASE AND SALE OF DIAMON DS AND THEREFORE, THE ASSESSING OFFICER WAS JUSTIFIED IN MAKING THE IMPUGNED ADDITIONS. 8. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND PERU SED THE MATERIAL ON RECORD, WE FIND THAT THE CIT(A) WAS JUS TIFIED IN UPHOLDING THE ACTION OF ASSESSING OFFICER IN MAKIN G THE ITA NO. 1623/PN/2007, JYOTICHAND BHAICHAND SARAF B.P 1996-97 TO 2002-03 6 IMPUGNED ADDITIONS. THE CLAIM OF THE ASSESSEE REGAR DING ALLOWANCE OF TELESCOPIC BENEFIT OF ADDITIONS MADE O N ACCOUNT OF UNDISCLOSED INCOME FROM UNDISCLOSED SALE OF 962.70 CTS. OF DIAMONDS RANGING FROM 0.07 CTS. TO 0.12 CTS. DECLAR ED IN THE AMNESTY SCHEME FOR ACQUISITION OF 751.45 CTS. OF DI AMOND HAS NO MERIT. THE SUBMISSION OF THE ASSESSEE THAT STAT EMENT RECORDED U/S 132(4) HAS EVIDENTIARY VALUE AND CANNO T BE BRUSHED ASIDE IS ALSO NOT ACCEPTABLE BECAUSE THE ST ATEMENT OF THE ASSESSEE CANNOT BE TAKEN TO BE THE GOSPEL TRUTH . THE STATEMENT OF THE ASSESSEE IS WRONG IN VIEW OF THE F ACT THAT DESCRIPTION OF THE DIAMONDS FOUND AND SEIZED DURING THE COURSE OF SEARCH AND DECLARED DURING THE COURSE OF AMNESTY SCHEME DO NOT MATCH TO THE EXTENT THAT IN SO FAR AS DIAMONDS WEIGHING 751.45 CTS. RANGING BETWEEN 0.03 CTS TO 0. 06 CTS. WERE FOUND AND SEIZED DURING THE COURSE OF SEARCH I N CASE OF ASSESSEE BUT SUCH DIAMONDS WERE NEVER DECLARED IN T HE VDIS. 9. FURTHER, NO AMNESTY WAS AVAILABLE TO THE ASSESSE E. WHATEVER AMNESTY WAS AVAILABLE IT COULD BE ENJOYED BY THE TWO PARTNERS ONLY WHO MADE DECLARATION UNDER THE VDIS. THE DIAMONDS DECLARED BY THE PARTNERS IN VDIS WAS SOLD BY THEM TO THE ASSESSEE ON 31-3-1998 AND THE ASSESSEE HA S ENGAGED IN UNDISCLOSED BUSINESS OF DIAMONDS AS DISCUSSED HEREINABOVE. IN VIEW OF THIS, THE CIT(A) WAS JUSTI FIED ON FACTS IN UPHOLDING THE CONCLUSION OF THE ASSESSING OFFICE R IN ITA NO. 1623/PN/2007, JYOTICHAND BHAICHAND SARAF B.P 1996-97 TO 2002-03 7 RESPECT OF UNDISCLOSED SALE AND UNEXPLAINED INVESTM ENT IN DIAMONDS. 10. SIMILARLY, THE CIT(A) WAS ALSO JUSTIFIED ON FAC TS IN ACCEPTING THE CONCLUSION OF THE ASSESSING OFFICER THAT DIAMONDS WEIGHING 751.45 CTS. OF DESCRIPTION OF 0.0 3 CTS. TO 0.06 CTS. REMAINED UNEXPLAINED AND THEREFORE, THE I NVESTMENTS IN THESE DIAMONDS WAS CORRECTLY DEEMED TO BE THE IN COME OF THE ASSESSEE DURING THE ASSESSMENT IN WHICH THE SEA RCH TOOK PLACE. THE CONTENTION OF THE ASSESSEE THAT ALL TH E DIAMONDS WERE FOUND IN TWO PACKETS IN ONE CUPBOARD IS ALSO I RRELEVANT BECAUSE THE FACT THAT THE DIAMONDS ARE KEPT TOGETHE R DOES NOT GO TO PROVE THAT THE DIAMONDS ARE THE SAME AS DECLA RED IN THE VDIS SCHEME. THE ASSESSEE CANNOT GET AWAY WITH CONSEQUENCES OF OUTSIDE BOOKS SALE AND UNEXPLAINED INVESTMENT IN DIAMONDS BY KEEPING SUCH DIAMONDS ALO NG WITH DIAMONDS DECLARED DURING THE VDIS SCHEME. AS OBSER VED EARLIER, THE DIAMONDS WEIGHING 751.45 CTS. DIFFER M ATERIALLY FROM DIAMONDS DECLARED DURING THE COURSE OF VDIS SC HEME AND THEREFORE, THEY CANNOT BE SAID TO BE DIAMONDS D ECLARED DURING THE COURSE OF VDIS SCHEME. SIMILARLY, SINCE DIAMONDS DECLARED BY THE TWO PARTNERS WERE FOUND SHORT BY 96 2.7 CTS AND SINCE UNDISCLOSED SALE TO THE EXTENT OF 212 CTS . STOOD ACCEPTED BY THE ASSESSEE AND THEREFORE, THE ASSESSI NG OFFICER WAS JUSTIFIED IN REACHING THE CONCLUSION THAT THE E NTIRE ITA NO. 1623/PN/2007, JYOTICHAND BHAICHAND SARAF B.P 1996-97 TO 2002-03 8 SHORTAGE OF 962.7 CTS. OF DIAMONDS REPRESENTED UNDI SCLOSED SALES WHICH WAS RIGHTLY TAXED IN A.Y. 2002-03. IN THIS VIEW OF THE MATTER THE AUTHORITIES BELOW WERE JUSTIFIED ON FACTS IN MAKING THE ADDITIONS OF RS. 59,62,930/- ON ACCOUNT OF UNDISCLOSED PROFIT AND SHORTAGE OF DIAMONDS FOR A.Y . 2002-03 AND RS. 1,50,29,000/- AS UNDISCLOSED INCOME AND INV ESTMENT ON ACCOUNT OF ACQUISITION OF 751.45 CTS. OF DIAMOND S RANGING FROM 0.03 TO 0.06 CTS. THE ORDER OF THE CIT(A) DOE S NOT CALL FOR INTERFERENCE AT OUR HANDS. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH NOVEMBER 2010. SD/- SD/- (D. KARUNAKARA RAO) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED THE 19 TH NOVEMBER, 2010 ANKAM COPY FORWARDED TO: (1) ASSESSEE (2) DEPARTMENT (3) CIT (A) I PUNE (4) CIT I PUNE (5) THE D.R. ITAT 'B' PUNE BENCH, PUNE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL, PUNE BENCHES, PUNE