Sri. Shantilal Gajraj (HUF), Hubli V. ITO, Hubli

ITA 194/BANG/2016

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9761 (ITAT-BANGALORE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 23-06-2016
• Assessment Year: 1998-1999
• Appeal Filed On: 16-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAVISHANKAR S V
• Keywords: Wrong claim; Valuation report

Judgement Text

ITA.194 & 83/BANG/2016 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'C', BANGALORE SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER 1. ITA NO.194/BANG/2016 (ASST. YEAR : 1998-99) 2. ITA NO.83/BANG/2016 (ASST. YEAR : 1998-99) 1. SHRI. SHANTILAL GAJRAJ JAIN (HUF), M. G. MARKET, HUBBALLI PAN : AAPHS1709H 2. SMT. SANGEETA A. SHAH, L/R OF LATE SRI AMBALAL D. SHAH, NO.203, 2 ND FLOOR, SUVIDA ANNEXE, KESHWAPUR, HUBBALLI PAN : AADHA6725K .. APPELLANTS V. 1. INCOME TAX OFFICER, WARD -1(3), HUBBALLI 2. INCOME-TAX OFFICER, WARD - 3(2), HUBBALLI .. RESPONDENT ASSESSEES BY : SHRI. RAVISHANKAR S. V, ADVOCATE REVENUE BY : SMT. SWAPNA DAS, JCIT HEARD ON : 23.06.2016 PRONOUNCED ON : .07.2016 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THESE ARE APPEALS BY DIFFERENT ASSESSES FOR ASSESS MENT YEAR 1998-99 AGAINST ORDERS OF CIT (A), HUBLI. SINCE THE FACTS LEADING TO THESE APPEALS ITA.194 & 83/BANG/2016 PAGE - 2 FALL WITHIN THE SAME COMPASS, THESE APPEALS ARE DEA LT WITH THROUGH THIS COMMON ORDER. 02. FACTS OF THE CASE ARE THAT THESE ASSESSEES HAD FILED RETURNS FOR THE IMPUGNED ASSESSMENT YEAR DECLARING INCOME, AS UNDER : TABLE NO.1 SL.NO. NAME OF THE ASSESSEE INCOME DECLARED RS. 1. SHRI. SHANTILAL GAJRAJ JAIN 28,075/- (LOSS) 2. SMT. SANGEETHA A. SHAH 18,820/- 03. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTED BY THE AO THAT THESE ASSESSEES HAD CREDITED CERTAIN AMOUNTS I N THEIR ACCOUNTS WHICH WERE EXPLAINED AS COMING OUT OF THE SALE PROCEEDS O F GOLD / DIAMONDS. IN THE CASE OF SHRI. SHANTILAL GAJRAJ JAIN THE CLAIM W AS FOR RS.21,26,359/- OF WHICH RS.13,82,150/- WAS CONSIDERED AS UNEXPLAINED. IN THE CASE OF SHRI. AMBALAL D. SHAH, THE CLAIM WAS FOR RS.4,26,349/-. FORMER COMPRISED OF SALE VALUE OF DIAMONDS CLAIMED AT RS.10,05,500/- AN D SILVER CLAIMED AT RS.3,76,650/-. LATTER COMPRISED OF CLAIM FOR SALE OF GOLD OF RS.70,339/- SALE OF SILVER OF RS.2,65,834/- AND SALE OF DIAMOND OF RS.90,176/-. 04. THESE ASSESSEES HAD TAKEN ADVANTAGE OF VDIS, 19 97 (VDIS IN SHORT), UNDER THIS SCHEME ASSESSEES HAD DECLARED JEWELLERY VALUED AS UNDER: ITA.194 & 83/BANG/2016 PAGE - 3 TABLE NO.2 SL. NO NAME OF THE ASSESSEE GOLD JEWELLERY RS. SILVER UTENSILS RS. DIAMONDS RS. 1. SHANTILAL GAJRAJ JAIN 4,90,091 1,10,400 2,51,000 2. AMBALAL D. SHAH 1,52,585 52,886 - 05. WHEN QUERIES WERE RAISED ABOUT THE SOURCE OF TH E GOLD /DIAMOND/ SILVER SOLD, ASSESSEES STATED BEFORE THE AO THAT THESE WERE THE JEWELLERY DECLARED UNDER VDIS SCHEME AFTER CONVERTING IT TO BULLION. HOWEVER, AO DID NOT ACCEPT THIS CONT ENTION OF THE ASSESSEES. ACCORDING TO HIM, THE CONCERNS TO WHICH ASSESSEES HAD CLAIMED TO HAVE SOLD THE GOLD AND DIAMOND NEVER WORKED FROM THE ADDRESSES GIVEN BY THE ASSESSEE. AS PER T HE AO, LANDLORD OF THE BUILDING WHOSE PREMISES WERE SHOWN AS THE ADDRESS OF M/S. MLJ, ONE AMONG THE CONCERNS WHO HAD PURCHASED THE BULLION / DIAMOND, HAD STATED THAT NO SUCH LEASE WAS GIVEN BY THEM TO MLJ AND NO POSSESSION WAS GIVE N. AS PER THE AO, THE SAID MLJ OCCUPIED THE PREMISES ONLY DUR ING THE PERIOD 27.03.1998 TO 30.11.1998. FURTHER AS PER TH E AO, M/S. BALAJI REFINERY, THROUGH WHICH ASSESSEES HAD CLAIME D THE JEWELLERY TO HAVE BEEN ASSAYED INTO BULLION NEVER E XISTED. AS PER ITA.194 & 83/BANG/2016 PAGE - 4 THE AO, A LARGE NUMBER OF SIMILAR ASSESSEES WHO HA D DECLARED GOLD JEWELLERY THROUGH VDIS RETURN, HAD CLAIMED SAL E OF SUCH GOLD AND SILVER THROUGH MLJ FOR SHOWING SOURCE. THE INFERENCE DRAWN BY THE AO WAS THAT SUCH SALES COULD NOT HAVE BEEN EFFECTED IN A SHORT SPAN OF FOUR MONTHS TIME AND ML J COULD NOT HAVE DONE BUSINESS TO THE TUNE OF RS.20 CRORES IN S UCH A SHORT SPAN OF TIME. THUS THE AO HELD IN ALL THE ABOVE CA SES THAT THE SOURCE FOR THE CREDITS MENTIONED AT PARA THREE ABO VE WERE NOT PROVED BY THE ASSESSEES AND ADDITIONS WERE MADE ACC ORDINGLY. SIMILAR INFERENCES WERE MADE WITH REGARDS TO DIAMON D AND SILVER SALES CLAIMED BY THE ASSESSEE. 06. AGGRIEVED, ASSESSEES MOVED IN APPEAL BEFORE THE CIT (A), WHO AFTER EXAMINATION OF THE VDIS SCHEME HELD THEY WERE TRYING TO MISUSE THE SCHEME. HE NOT ONLY CONFIRMED THE OR DER OF AO BUT ALSO DIRECTED ENHANCEMENT OF THE INCOME. 07. AGGRIEVED BY THIS, ASSESSEES HAD MOVED BEFORE T HIS TRIBUNAL AND THIS TRIBUNAL HAD DISMISSED SUCH APPEA LS CONFIRMING THE ORDER OF THE CIT (A). ITA.194 & 83/BANG/2016 PAGE - 5 08. ASSESSEES THEREAFTER CHALLENGED THE ORDER OF TH E TRIBUNAL BEFORE THE HONBLE JURISDICTIONAL HIGH COURT. HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SHANTILAL GAJRAJ JAIN IN ITS JUDGMENT DT.22.09.2008 IN ITA.NO.207/2004, GAVE SIM ILAR DIRECTIONS AS GIVEN IN THE CASE OF ONE SMT. KAILASH I DEVI AGRAWAL [ITA NO.186/2004], WHERE ALSO FACT SITUATIO N WAS SIMILAR. WHAT WAS HELD IN THE LATTER CASE ON 22.09 .2008 IS REPRODUCED HEREUNDER : ITA.194 & 83/BANG/2016 PAGE - 6 ITA.194 & 83/BANG/2016 PAGE - 7 SIMILAR DIRECTIONS WERE GIVEN IN THE CASE OF THE AS SESSEE SHRI. AMBALAL D. SHAH ALSO IN ITA NO.192/2004, DT.22.09.2008. 09. PURSUANT TO THE ABOVE DIRECTIONS OF THE HONBLE JURISDICTIONAL HIGH COURT, CASES WERE AGAIN CONSIDERED BY THE AO. NOTICES WERE ISSUED TO THE ASSESSEES. CLAIM OF THE ASSESSEES WE RE THAT THE GOLD ORNAMENTS WHICH WERE GIVEN FOR MELTING WITH M/S. BA LAJI REFINERY, HUBLI, WAS THE VERY SAME WHICH WAS SHOWN BY THEM IN VDIS DECLARATIONS. ASSESSEES AGAIN RELIED ON THE BILLS OF THE CONCERNS TO WHICH SALE OF GOLD AND SILVER WERE MADE. AO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE BILLS ISSUED BY M/S. BALAJI REFINERY, HUBLI, FOUND THAT WEIGHT OF THE JEWELLERY DECLARED BY THE ASSESSEES, IN THE VALUATION REPORT SUPPORTING THE V DIS DECLARATIONS WERE DIFFERENT FROM THE WEIGHT OF GOLD / BULLION TH AT WERE SOLD. AS PER THE AO ASSESSEES COULD NOT PROVE THAT WHAT WAS SOLD BY THEM WERE THE ITA.194 & 83/BANG/2016 PAGE - 8 SAME GOLD JEWELLERY WHICH WERE DECLARED IN THE VDIS DECLARATIONS. FURTHER AS PER THE AO NEITHER OF THE CONCERNS TO WH OM ASSESSEE CLAIMED SALES, VIZ., SHRI. MAHALAXMI JEWELLERY FOR GOLD AND M/S. HUNNEY EXPORTS FOR DIAMONDS WERE TRACEABLE. AO ALS O NOTED THAT SOME OF THE ITEMS OF GOLD JEWELLERY DECLARED IN VDIS COM PRISED OF ANTIQUE ITEMS AND ASSESSEES WHO WERE FINANCIALLY SOUND WOUL D NOT HAVE SOLD SUCH OLD GOLD JEWELLERY. FURTHER AS PER THE AO, IF AT ALL THE ASSESSEES WANTED TO SELL THE JEWELLERY THEY WOULD HAVE SOLD I T DIRECTLY WITHOUT MELTING AND SHAPING IT AS BULLION. THUS HE REACHED A CONCLUSION THAT WHAT WAS SOLD BY THE ASSESSEES WERE NOT THE GOLD JE WELLERY WHICH WERE DECLARED BY THEM IN VDIS. HE DID NOT ACCEPT THE SO URCE FOR THE CREDITS. ADDITIONS WERE MADE ONCE AGAIN. 10. AGGRIEVED, ASSESSEES MOVED IN APPEAL BEFORE THE CIT (A) ONCE MORE. CIT (A) NOTED THAT M/S. BALAJI REFINERY, HUB LI THROUGH WHICH ASSESSEES CLAIMED TO HAVE MELTED THE GOLD AND SILVE R ARTICLES TO BULLION, NEVER EXISTED IN THE ADDRESS GIVEN BY THE ASSESSEES . AS PER THE CIT (A), LETTERS ADDRESSED TO M/S. BALAJI REFINERY, HUBLI WE RE RETURNED UNSERVED. CIT (A) ALSO NOTED THAT GOLD AND SILVER REFINERY AS SOCIATION, HUBLI, HAD WRITTEN TO THE AO THAT NO SUCH REFINERY CALLED M/S. BALAJI REFINERY ITA.194 & 83/BANG/2016 PAGE - 9 EVER DID ANY REFINERY WORK SINCE 15 YEARS. FURTHER AS PER THE CIT (A), THE INSPECTOR DEPUTED BY THE AO HAD ENQUIRED NEAR J AIN MANDIR, KESHAVAPUR, HUBLI, AS WELL AS AZAD COLONY, HUBLI, W HERE, AS PER ASSESSEES, M/S. BALAJI REFINERY FUNCTIONED. AS PER THE CIT (A), INSPECTOR HAD ALSO VERIFIED WITH THE OWNERS OF VARI OUS BUILDINGS IN KESHAVPUR, WHO VOUCHED THAT NO SUCH BUILDING NAMED, AZAD COMPLEX, EXISTED NOR THEY NEW ANY BALAJI REFINERY. THUS ACC ORDING TO CIT (A) ASSESSEES WERE UNABLE TO SHOW THAT THE GOLD AND DIA MOND JEWELLERY WHICH WERE DECLARED BY THEM IN THEIR VDIS RETURNS W ERE MELTED AND CONVERTED THROUGH THE CONCERN CALLED M/S. BALAJI RE FINERY, NOR WERE THEY ABLE TO SHOW THAT ANY SALE THEREOF WERE EFFECT ED THROUGH ANY CONCERN CALLED MLJ OR M/S. HUNNEY EXPORTS. THUS TH E CIT (A) UPHELD THE ORDER OF THE AO. 11. NOW BEFORE US, LD. AR SUBMITTED THAT THE ONUS O N THE ASSESSEES TO SHOW THAT GOLD AND SILVER JEWELLERY DE CLARED IN VDIS RETURNS WERE MELTED AND CONVERTED INTO BULLION AND SOLD WAS DISCHARGED. HONBLE JURISDICTIONAL HIGH COURT HAD CLEARLY HELD THAT IF THE ASSESSEES WERE ABLE TO SHOW THAT THE SALES WERE OF THE VERY SAME GOLD, SILVER AND DIAMOND JEWELLERY WHICH WERE DECL ARED IN VDIS, THEN ITA.194 & 83/BANG/2016 PAGE - 10 THE SOURCE FOR THE CREDITS STOOD EXPLAINED. AS PER THE LD. AR, M/S. BALAJI REFINERY HAD CLEARLY GIVEN THE DETAILS OF TH E JEWELLERY ITEMS WHICH WERE GIVEN TO THEM FOR MELTING. LABOUR CHARG ES WERE ALSO PAID BY THE ASSESSEES. LD. AR SUBMITTED THAT COPIES OF BILLS ISSUED BY M/S. BALAJI REFINERY CLEARLY PROVED CONVERSION OF THE OR NAMENTS INTO BULLION. AS PER THE LD. AR, ASSESSEES CONCERNED HA D CONVERTED THE GOLD AND SILVER JEWELLERY TO BULLION AND SEPARATED OUT THE PRECIOUS STONES, SINCE IF SOLD DIRECTLY AS JEWELLERY THE ITE MS WOULD HAVE FETCHED MUCH LESSER AMOUNT. AS PER THE LD. AR IF ON AN ENQ UIRY CONDUCTED AFTER TWELVE YEARS BY THE AO, M/S. BALAJI REFINERY WAS FOUND NOT AVAILABLE AT THE PREMISES MENTIONED, ASSESSEES COUL D NOT BE BLAMED. THUS ACCORDING TO HIM, ASSESSEES HAD DONE WHAT ALL WAS NECESSARY AND POSSIBLE TO PROVE THE SALE OF GOLD AND SILVER JEWEL LERY WERE MELTED THROUGH M/S. BALAJI REFINERY AND SOLD TO ONE OR OTH ER CONCERNS WHO WERE DOING GOLD / BULLION BUSINESS. LD. AR HAS ALS O PLACED BEFORE US COPIES OF ASSESSMENT ORDERS PASSED BY THE AO IN THE CASE OF ONE SHRI. SHAILESH V. PATEL AND SHRI. VITHALBHAI N. PATEL, FO R THE ASSESSMENT YEAR 1998-99, WHERE ON SIMILAR SET OF FACTS THE CREDITS WERE ACCEPTED. ITA.194 & 83/BANG/2016 PAGE - 11 12. PER CONTRA, LD. DR STRONGLY SUPPORTING THE ORDE RS OF AUTHORITIES BELOW SUBMITTED THAT AO HAD DONE DETAIL ED ENQUIRIES INTO THE BILLS SUBMITTED BY THE ASSESSEES FOR MELTING TH E GOLD JEWELLERY AS WELL AS FOR SELLING THE GOLD, SILVER AND DIAMONDS. AS PER THE LD. DR IT WAS QUITE UNUSUAL THAT BOTH THE REFINERY WHO MELTED THE GOLD AND SILVER JEWELLERY AND THE SHOP WHICH BOUGHT THE GOLD, SILVE R AND DIAMONDS WERE NON-EXISTENT AT THE TIME OF ENQUIRY. GOLD AND SILVER MERCHANTS ASSOCIATION OF HUBLI, HAD ALSO CONFIRMED THAT NO SU CH REFINERY EVER FUNCTIONED IN THAT PARTICULAR ADDRESS. THUS ACCORD ING TO HIM ASSESSEES WERE MAKING BOGUS CLAIMS AND SHOULD NOT BE ALLOWED TO GET AWAY WITH SUCH CLAIMS. AS PER THE LD. DR ADDITIONS WERE RIGH TLY MADE BY THE AO AND CONFIRMED BY THE CIT (A). 13. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. EVIDENCE FURNISHED BY THE ASSESSEES IN SUPPORT OF T HEIR CONTENTION THAT WHAT WERE SOLD BY THEM WAS THE SAME GOLD JEWELLERY AFTER CONVERTING IT INTO BULLION HAS BEEN PERUSED BY US. CASE OF THE F IRST ASSESSEE, NAMELY SHRI. SHANTILAL GAJRAJ JAIN IS TAKEN AS AN EXAMPLE . THE VALUATION REPORT DT.05.11.1997 FILED IN AUPPORT OF THE VDIS DECLARAT ION, BILL DT.01.01.1998 FROM M/S. BALAJI REFINERY, PURCHASE I NVOICE ITA.194 & 83/BANG/2016 PAGE - 12 DT.08.01.1998 ISSUED BY MLJ, AND PURCHASE MEMO DT. 03.03.1998 OF M/S. HUNNEY EXPORTS ARE REPRODUCED HEREUNDER: ITA.194 & 83/BANG/2016 PAGE - 13 ITA.194 & 83/BANG/2016 PAGE - 14 14. WHAT WE NOTE IS THAT ALL THE ITEMS WHICH WERE A PPEARING IN BILL ISSUED BY M/S. BALAJI REFINERY WERE ALSO MENTIONED IN THE VALUATION REPORT FILED IN SUPPORT OF THE VDIS DECLARATIONS. GROSS WEIGHT ALSO TALLIES. PURCHASE ITA.194 & 83/BANG/2016 PAGE - 15 INVOICE ISSUED BY THE CONCERNS WHICH PURCHASED THE SILVER, GOLD AND DIAMONDS ALSO SHOWS THE SAME WEIGHT OF BULLION AS M ENTIONED IN THE BILL OF M/S. BALAJI REFINERY AND/ OR SAME CARTAGE OF DIAMON DS MENTIONED IN THE VALUATION REPORT. CASE OF THE REVENUE IS THAT M/S. BALAJI REFINERY, WHICH MELTED THE ORNAMENTS AND THE CONCERN TO WHICH THE G OLD / BULLION WERE SOLD WERE NOT FOUND IN KESHAVPUR, HUBLI. ASSESSEES WERE REPEATEDLY QUESTIONED ABOUT THIS DURING THE COURSE OF SECOND R OUND OF PROCEEDINGS. INSPECTORS REPORT RELIED ON BY THE AO WAS BASED ON AN ENQUIRY DONE MORE THAN 15 YEARS AFTER THE EVENT. THERE WAS NO WAY AS SESSEES COULD ENSURE THAT M/S. BALAJI REFINERY CONTINUED TO DO ITS BUSIN ESS ALL THROUGH. MUCH RELIANCE HAS BEEN PLACED BY THE AO ON A LETTER ISSU ED BY GOLD AND SILVER REFINERY WELFARE ASSOCIATION, HUBLI, WHEREIN IT WAS MENTIONED THAT NO REFINERY CALLED M/S. BALAJI REFINERY, DID ANY REFIN ERY WORK IN HUBLI SINCE 15 YEARS. HOWEVER, IT IS NOT NECESSARY THAT EVERY REFINERY SHOULD BE A MEMBER OF AN ASSOCIATION. A GLANCE AT THE BILL ISS UED BY M/S. BALAJI REFINERY DOES SHOW THAT IT WAS HOLDING A LICENCE. A LOOK AT THE PURCHASE BILL ISSUED BY THE CONCERNS SHOW THAT THEY WERE HAV ING KST AND CST REGISTRATION NUMBERS. IN MY OPINION, THESE EVIDE NCE DO TILT THE CASE IN FAVOUR OF THE ASSESSEES. ASSESSEES HAD DONE WHATEV ER POSSIBLE, WITHIN THEIR MEANS TO SHOW THAT THE GOLD, SILVER AND DIAMONDS S OLD BY THEM WERE THE ITA.194 & 83/BANG/2016 PAGE - 16 SAME GOLD, SILVER AND DIAMOND DECLARED IN VDIS, AFT ER CONVERSION. ASSESSEES HAD SUBMITTED COPIES OF BILLS ISSUED BY M /S. BALAJI REFINERY WHICH DID SHOW SIMILAR DETAILS OF GOLD JEWELLERY AS RETURNED IN THE VDIS. IN SUCH SITUATION WE ARE OF THE OPINION THAT ASSESS EES HAD DISCHARGED THEIR ONUS TO SHOW THAT THE GOLD, SILVER AND DIAMONDS SOL D BY THEM WERE THE SAME WHICH WERE DECLARED BY THEM IN THE VDIS DECLAR ATIONS. REASONING GIVEN BY THE AO THAT ANTIQUE JEWELLERY WOULD NOT HA VE BEEN SOLD BY THE ASSESSEES IS ONLY A SURMISE AND CANNOT DISLODGE THE EVIDENCE FILED BY THE ASSESSEE. FURTHER THERE IS NOTHING ON RECORD TO SH OW THAT THE GOLD JEWELLERY WHICH WERE SOLD BY THE ASSESSEE WERE ANTIQUE IN NAT URE. IN SUCH CIRCUMSTANCES, I AM OF THE OPINION THAT THE LOWER A UTHORITIES FELL IN ERROR IN DISBELIEVING THE SOURCE FOR CREDITS SHOWN BY THE AS SESSEES CONCERNED. I HAVE NO HESITATION IN DELETING THE ADDITIONS MADE I N THE HANDS OF THE ASSESSEES. 15. IN THE RESULT, APPEALS OF ALL THE ASSESSEES STA ND ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON ____ JULY, 20 16. (ABRAHAM P GEORGE) ACCOUNTANT ME MBER MCN ITA.194 & 83/BANG/2016 PAGE - 17 COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR