ACIT (OSD) C.R. 7, MUMBAI V. PUYUSH M. GABANI, MUMBAI

ITA 3278/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55737 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 02-11-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 27-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D EVI SINGH
• Keywords: Income from undisclosed sources; Search and seizure; Loose papers; Source of fund; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI C BENCH BEFORE SHRI D. MANMOHAN, VICE PRESIDENT & BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER I.T.A.NO.3278/MUM/2010 A.Y 2005-06 DY. COMMISSIONER OF I.T. (OSD)-I, C.R.-7, MUMBAI. VS. SHRI PIYUSH M. GABANI, A -2, BLOCK NO.3, SUNDAR NAGAR, S.V. ROAD, MALAD (W), MUMBAI 400 064. AADPG 5179 M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DEVI SINGH, CIT DR RESPONDENT BY : SHRI SATISH R. MODY. DATE OF HEARING: 02-11-2011 DATE OF PRONOUNCEMENT: 11-11-2011 O R D E R PER T.R.SOOD, AM: IN THIS APPEAL REVENUE HAS RAISED VARIOUS GROUNDS B UT ONLY DISPUTE INVOLVED IS REGARDING DELETION OF ADDITION AMOUNTING TO RS.7,58,458/- ON ACCOUNT OF UNEXPLAINED JEWELLERY. 2. AFTER HEARING BOTH THE PARTIES, WE FIND THAT A S EARCH WAS CONDUCTED IN NIRU IMPEX GROUP OF CASES AND SINCE AS SESSEE WAS INVOLVED IN THE GROUP HIS CASE WAS ALSO COVERED. DU RING THE SEARCH SOME LOOSE PAPERS WERE FOUND WHICH HAVE BEEN TITLED AS ANNEXURE AI. THIS PAPER IS A VALUATION REPORT BY SHRI AMITKUMAR N. SONI, AN APPROVED VALUER. THE REPORT WAS DATED 9-7-2004 AND WAS IN THE NAME OF SHRI PIYUSH MOHANBHAI GABANI. THE REPORT VALUED THE JEWELLERY AT RS.7,58,454/-. INITIALLY, NO EXPLANATION WAS GIVEN FOR THE SOURCE OF ITA NO.3278 OF 2010 2 ACQUISITION OF THE JEWELLERY. FINALLY, ASSESSEE GAV E THE FOLLOWING EXPLANATION VIDE LETTER DATED 24-9-2008: THE SOURCE OF ACQUISITION OF JEWELLERY IS OBVIOUSLY FROM THE DATE OF MY CHILDHOOD AND MORE ESPECIALLY ON AND AROUND MARRIA GE. THESE ORNAMENTS ARE THOUGH APPARENTLY IN MY NAME BUT ALS O OF MY WIFE. IN HINDU CUSTOM, HAVING REASONABLE VALUE OF ORNAMENTS IS NOT RULED AWAY. MY AGE, MY SOURCES OF INCOME BEING FROM JEWE LLERY BUSINESS NATURE INCLUDED AGRICULTURAL INCOME AND MY WITHDRA WALS DO SUPPORT THIS SUBMISSION. NO DOUBT, TO YOUR EXACT QUERY TO LINK UP THE SOURCES WITH THE ITEMS WITH REFERENCE TO CONTENTS IN THE V ALUATION REPORT OF AMIT SONI DATED 9. Z 2004 I AM UNABLE TO SUBSTANTI ATE THE SAME. BUT WITH RESPECT, THIS WOULD NOT BE TAKEN THAT THIS IS MY UNACCOUNTED INCOME, THE JEWELLERY BEING THE PRINCIPLE SUBJECT OF THE LADIES ALWAYS UNDERGOES CHANGES WHICH NEED NOT BE EXPLAINED AS I T IS AN ACCEPTED MATTER OF MARITAL LIFE. THERE CANNOT BE PROOF ( WH ICH MAY BE IN YOUR MIND) FOR EVERY ITEM AND THEREFORE, EVEN CBDT IN I TS WISDOM HAS ACCEPTED CERTAIN DEEMED HOLDINGS KNOWN TO YOU. I F EAR, PROBABLY YOU MAY NOT ACCEPT MY CONTENTION IN TOTO. FRANKLY, SIN CE I AM NOT ABLE TO SUBSTANTIATE FULLY, AND TO BUY PEACE OF MIND AND C OMPLETE THE LONG PENDING PROCEEDINGS 1 WOULD GRACEFULLY ACCEPT A SU ITABLE ADDITION TO MY INCOME TO COVER UP THE PROBABLY DEFICIENCY. THE AO AFTER CONSIDERING THE ABOVE EXPLANATION WAS OF THE VIEW THAT THE ASSESSEE HAS FAILED TO PRODUCE ANY EVIDENCE WIT H REGARD TO THE CLAIM OF THE JEWELLERY AND THE SAME WAS ACCUMULATED RIGHT FROM THE DATE OF HIS BIRTH TILL THE TIME HE GOT MARRIED. ACC ORDINGLY, THE SUM OF RS.7,58,454/- WAS ADDED TO THE INCOME OF THE ASSESS EE. 3. BEFORE THE LD. CIT(A) IT WAS MAINLY ARGUED THAT AS HAS A LARGE FAMILY AND BELONGS TO THE JEWELLERY TRADE AND ALSO HELD AGRICULTURAL LAND. THE FAMILY CONSISTS OF HIMSELF, HIS WIFE AND TWO CHILDREN. THOUGH THE REPORT DATED 9-7-2004 WAS OF RS.7,58,454/- BUT THE ACTUAL JEWELLERY FOUND WAS RS.7,50,381/-. THE JEWELLERY HA S BEEN COLLECTED OVER A PERIOD OF TIME ON VARIOUS OCCASIONS IN VIEW OF THE CUSTOMS OF HINDU RELIGION. IT WAS ALSO POINTED OUT THAT EVEN I N VIEW OF THE CBDTS CIRCULAR NO.1916 DATED 11-5-1994, JEWELLERY UPTO 50 0 GMS. WAS NOT ITA NO.3278 OF 2010 3 UNREASONABLE AND THIS HAS BEEN CONFIRMED BY THE TRI BUNAL IN THE CASE OF HARAKCHAND N. JAIN VS. ACIT [61 TTJ 323]. IT WAS ALSO POINTED OUT THAT JEWELLERY FOUND WAS ALSO A MATTER OF ADDITION IN THE TOTAL INCOME OF THE ASSESSEE FOR A.Y 2007-08. THE LD. CIT(A) DEC IDED THE ISSUE IN FAVOUR OF THE ASSESSEE VIDE PARA 5.3 WHICH IS AS UN DER: 5.3 I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. AS I FIND, THE ADDITION IS PREMISED ON THE VALUATION REPORT DATED 09.O7.200, MISMATCH BETWEEN THE VALUATION RE PORTS DATED 9.7.2004 AND 04.10.2006 AND THE APPELLANTS EXPLAN ATION GIVEN VIDE HIS LETTER DATED 24.09.2008. AS AGAINST THIS, THE MAIN PLANK OF THE APPELLANTS DEFENSE IS THAT THE DIFFERENCE BETWEEN THE TWO VALUATION REPORTS WAS DUE TO MOVEMENT IN STOCK, RECYCLING/REDESIGNING/REWORKING OF JEWELLERY ITEMS . FURTHER POINT HAS ALSO BEEN MADE THAT SINCE THE ADDITION ON ACCOUNT OF JEWELLERY FOUND HAS ALREADY BEEN MADE IN THE A.Y.2007-08, THE ADDI TION OF RS.7,58,454/- WOULD AMOUNT TO DOUBLE ASSESSMENT ON ACCOUNT OF THE SAME SOURCE OF INCOME. WEIGHING THESE POSITIONS OF THE ASSESSING OFFICER AND THE APPELLANT, I AGREE WITH THE LATTER THAT ADDITION IS NOT JUSTIFIED ON THE GROUNDS IT HAS BEEN MADE. TO THIS END, IN THE FIRST PLACE, I FIND THAT WHATEVER PHYSICAL JEWELLERY WAS FOUND DURING THE SEARCH AND SEIZURE OPERATION HAS ALREADY BEING MAD E THE SUBJECT MATTER OF ADDITION IN THE A.Y.2007-08. THIS BEING SO, THE ADDITION FOR THE PRESENT ASSESSMENT YEAR TANTAMOUNTS TO ADDITION ON ACCOUNT OF NOTIONAL POSSESSION OF JEWELLERY, WHICH IS INCONSISTENT AS THE ADDITION HAS BEEN MADE ON ACCOUNT OF A PHYSICAL ASSET WITHOUT IT BEI NG IN EXISTENCE. THE ASSESSING OFFICER HAS, ALSO BEEN PROMPTED TO HIS D ECISION BY THE DIFFERENCE IN THE TWO VALUATION REPORTS. TO THIS E ND, I FIND THAT THERE IS A LONG GAP OF MORE THAN TWO YEARS IN THE TWO VALUA TION REPORTS AND ACCORDINGLY, WITHOUT BRINGING ANYTHING SPECIFIC ON RECORD, MERELY ON PRESUMPTION A VIEW CANNOT BE TAKEN THAT BECAUSE OF THE MISMATCH BETWEEN TWO VALUATION REPORTS, THE APPELLANT POSSE SSED THE ITEMS OF JEWELLERY RECORDED IN BOTH THE VALUATION REPORTS. WHEN THERE IS NO DETECTION OF THIS JEWELLERY DURING THE SEARCH OPER ATION, ON THE BASIS OF AN OLD VALUATION REPORT, EXISTENCE OF JEWELLERY CA NNOT BE PRESUMED. JEWELLERY IS A PHYSICAL ASSET AND IF IN EXISTENCE, IS BOUND TO BE PHYSICALLY AVAILABLE WITH THE PERSON CONCERNED. BE SIDES, IN ABSENCE OF ANY SPECIFIC DETECTION OF ANY JEWELLERY IN ADDITIO N TO THE JEWELLERY OF RS.7,50,000/-, I DO NOT FIND ANYTHING UNUSUAL IN T HE APPELLANTS EXPLANATION THAT THE JEWELLERY MENTIONED IN THE VA LUATION REPORT DATED 04.10.2006 IS RECYCLED JEWELLERY MENTIONED IN THE VALUATION REPORT DATED 9.7.2004. AS I SEE, WITHIN A GAP OF MORE THA N TWO YEARS, IT IS NOT UNUSUAL FOR A HOUSEHOLD TO REDESIGN THE EXISTING I TEMS OF JEWELLERY. THE ASSESSING OFFICERS RELIANCE ON THE APPELLANT S ADMISSION IS ALSO LOPSIDED AS THE ADMISSION IS DISTINCTLY NOT BASED ON SPECIFIC FACTS AND WAS ONLY GUIDED BY THE INTENTION TO BUY PEACE OF M IND AND TO AVOID ITA NO.3278 OF 2010 4 LITIGATION. A DISCLOSURE BASED ONLY ON GENERAL ADM ISSION HAS TO BE BACKED UP BY CORROBORATING EVIDENCE TO BE JUSTIFIA BLY MADE A GROUND FOR ADDITION. IN THIS CASE, THE ASSESSING OFFICER HAS NOT BEEN ABLE TO DO THIS. IN LINE WITH THE FOREGOING, I DO NOT FIND TH E ADDITION JUSTIFIED. IT IS DELETED AND THE GROUND OF APPEAL IS ALLOWED. 4. BEFORE US, LD. DR MAINLY CARRIED US THROUGH THE ASSESSMENT ORDER AND POINTED OUT THAT NO SOURCE WAS GIVEN FOR THE ACQUISITION OF THE JEWELLERY. HE STRONGLY SUPPORTED THE ORDER OF T HE AO. 5. ON THE OTHER HAND, LD. COUNSEL OF THE ASSESSEE M AINLY SUPPORTED THE ORDER OF THE CIT(A) AND SUBMITTED THA T EVEN IN VIEW OF THE BOARDS CIRCULAR RELIED ON BEFORE THE CIT(A), T HE TOTAL JEWELLERY FOUND IS NOT UNREASONABLE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND FIND THAT THE LD. CIT(A) HAS CORRECTLY ADJUDICATED THE ISSUE. FIRSTLY BECAUSE THE MISS MATCH IN ACTUAL JEWELLERY FOUND AND THE VALUAT ION REPORT CAN BE BECAUSE OF THE JEWELLERY BEING RE-DESIGNED OR RECYC LED BECAUSE OF LAPSE OF TIME. FURTHER, SINCE THE SAME HAS ALREADY BEEN TAXED IN A.Y 2007-08, THE SAME CANNOT BE TAXED AGAIN. MOREOVER, IN TERMS OF BOARDS CIRCULAR NO.1916 DATED 11-5-1994, JEWELLERY UPTO 500 GMS. HAS BEEN HELD TO BE REASONABLE. THEREFORE, WE FIND NOTH ING WRONG IN THE ORDER OF THE LD. CIT(A). 7. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 1/11/2011. SD/- SD/- (D.MANMOHAN) (T.R.SOOD) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI: 11/11/2011.