GURDASMAL B. CHAWLA, MUMBAI V. ACIT CEN CIR 10, MUMBAI

ITA 3946/MUM/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6277 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 08-11-2010
• Assessment Year: 2007-2008
• Appeal Filed On: 22-06-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G GURUSAMAY
• Assessee Lawyers: S S PHADHKAR
• Keywords: Unexplained investment; Income from undisclosed sources; Search and seizure; Salary income; Valuation report; Retraction; Revised return
• Section: 69; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI S.V. MEHROTRA (AM) AND SMT. ASHA VIJAYAR AGHAVAN (JM) ITA NO. 3946/MUM/2009 ASSESSMENT YEAR-2007-08 SHRI GURDASMAL B. CHAWLA, 87, JEEVAN NIWAS, 5 TH FLOOR, KHAN ABDUL GAFFER KHAN ROAD, WORLI SEA FACE, MUMBAI-400 025 PAN-AABPC 1547P THE ACIT, CENTRAL CIRCLE-10, MUMBAI (APPELLANT) VS. (RESPONDENT) ITA NO. 4010/MUM/2009 ASSESSMENT YEAR-2007-08 THE ACIT, CENTRAL CIRCLE-10, MUMBAI SHRI GURDASMAL B. CHAWLA, 87, JEEVAN NIWAS, 5 TH FLOOR, KHAN ABDUL GAFFER KHAN ROAD, WORLI SEA FACE, MUMBAI-400 025 PAN-AABPC 1547P (APPELLANT) VS. (RESPONDENT) APPELLANT BY: SH RI S.S.PHADHKAR RESPONDENT BY: SHRI G. GURUSAMAY O R D E R PER ASHA VIJAYARAGHAVAN (JM) THESE ARE CROSS APPEALS ONE PREFERRED BY THE ASSESS EE AND THE OTHER PREFERRED BY THE REVENUE ARE DIRECTED AGAINST THE ORDERS DATED 27.4.2009 PASSED BY THE LD. CIT(A)- CENTRAL-II FOR THE ASSESSMENT YEAR 2007-08. ITA NO. 3946/MUM/2009- 2007-08 2. THE GROUND RAISED BY THE ASSESSEE IS THAT THE A SSESSING OFFICER HAS ERRED IN MAKING ADDITION OF RS. 5,82,900/- ON A CCOUNT OF 2 GURDASMAL B. CHAWLA UNEXPLAINED LOOSE DIAMONDS IN THE HANDS OF ASSESSEE EVENTHOUGH THE SAME HAS BEEN SUBMITTED TO BE THOSE HELD BY AARTI O . CHAWLA (RS. 2,88,000/-) AND POOJA O. CHAWLA (RS. 2,84,000) 3. AN ACTION U/S 132 OF THE I.T. ACT WAS CONDUCTED IN THE SUKHWANI CHAWLA GROUP CASES OF WHICH THE ASSESSEE IS A MEMBE R. THE PREMISES OF THE ASSESSEE WERE ALSO COVERED U/S 132 OF THE I.T. ACT. THE ACTION WAS CONDUCTED BY THE ADDL/ DIT(INV.) UNIT I PUNE ON 14 .6.2006. A WARRANT OF SEARCH AUTHORIZATION U/S 132 OF THE I.T. ACT WAS EXECUTED ON 14.6.2006 WHEREIN THE ASSESSEES NAME IS ALSO INCLU DED ALONG WITH MEMBERS OF HIS FAMILY. SINCE THE WARRANT OF SEARC H AUTHORIZATION WAS ISSUED IN THE NAME OF THE ASSESSEE, THE ASSESSMENT IN THIS CASE IS REQUIRED TO BE MADE IN THE MANNER LAID DOWN IN CHAP TER XIV OF THE I.T. ACT. 4. THE ASSESSEE HAS DECLARED INCOME FROM SALARY FRO M M/S ASHWIN VANASPATI INDUS P.LTD AND M/S CROWN WAREHOUSING P. LTD., BESIDES HE HAD ORIGINALLY DECLARED INCOME FROM OTHER SOURCES A S WELL. AS PER REVISED RETURN HE MADE DISCLOSURE CLAIMED TO BE U/S 132(4) AT RS. 1,05,21,294/-. 5. DURING THE COURSE OF SEARCH ACTION THE FOLLOW ING JEWELLERY WAS FOUND AT THE RESIDENCE OF THE ASSESSEE. GOLD ORNAMENTS RS. 1,29,70,215/- DIAMOND JEWELLERY RS. 1,13,98,321/- LOOSE DIAMONDS RS. 18,23,475/- SILVER UTENSILS RS. 93,02,241/- -------------- ---------- TOTAL RS.2,71,22,252 /- -------------- ---------- 6. OUT OF THE ABOVE JEWELLERY VALUED AT RS. 1,28,93 ,376/- HAS BEEN SEIZED. SIMILARLY, DURING THE COURSE OF SEARCH ACTI ON CASH OF RS. 19,61,850/- WAS FOUND AT THE RESIDENCE OF SHRI GURU DASMAL B. CHAWLA. THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE OF THI S CASH VIDE QUESTION 3 GURDASMAL B. CHAWLA NO. 19 OF THE STATEMENT RECORDED U/S 132(4) ON 14.6 .2006. IT WAS STATED THAT HE IS STAYING WITH ALL HIS FAMILY MEMBERS AT M UMBAI AND CASH OF RS. 4,50,000/- INCLUDES WITHDRAWALS FROM BANK ACCOUNT O F SELF AND HIS FAMILY MEMBERS AND FOR REMAINING CASH HE COULD NOT OFFER ANY EXPLANATION. HE THEREFORE OFFERED RS 15,11,850/- VO LUNTARILY FOR TAXATION FOR AY 2007-08 AS HIS UNDISCLOSED INCOME. HENCE CAS H OF RS. 15,11,850/- WAS SEIZED. 7. DURING THE COURSE OF SEARCH ACTION STATEMENT OF SHRI GURUDASMAL BODHARAM CHAWLA WAS RECORDED UNDER SECTION 132(4) O N 15.6.2006. HE WAS REQUESTED TO EXPLAIN THE SOURCE OF INVESTMENT I N THE JEWELLERY FOUND. THE RELEVANT PORTION OF HIS STATEMENT IS EXTRACTED BELOW. Q. PLEASE SUMMARISE THE TOTAL UNACCOUNTED INCOME OFFERED BY YOU. ANS: THE TOTAL UNDISCLOSED INVESTMENT IN THE CASE O F GOLD IS RS. 66,76,658/- FOR LOOSE DIAMONDS THE UNDISCLOSED INVE STMENT IS RS. 12,23,860/- IN THE CASE OF DIAMOND EMBEDDED GOLD JE WELLERY, THE TOTAL UNDISCLOSED INVESTMENT IS RS 49,92,858/- THUS THE T OTAL UNDISCLOSED INVESTMENT OFFERED BY ME FOR CURRENT YEAR IS RS. 1, 28,93,376/- IN ADDITION TO THIS, I ALSO OFFER THE UNACCOUNTED CASH OF RS 15 ,11,850/- THUS IN TOTALLY I OFFER AN ADDITIONAL INCOME OF RS. 1,44,05,226/- O VER AND ABOVE MY REGULAR INCOME. I PROMISE TO PAY DUE TAXES THERE ON BY 31 ST OF AUGUST 2006. THUS THE ASSESSEE HAS ADMITTED EXCESS GOLD UNDISCLOSED RS. 6 6,76,658/- EXCESS LOOSE DIAMONDS UNDISCLOSED RS. 12,23,8 60/- EXCESS DIAMOND EMBEDDED JEWELLERY RS. 49,92,85 8/- EXCESS CASH UNDISCLOSED RS. 15,11,850/- TOTAL UNDISCLOSED INCOME DISCLOSED --- --------------------- RS.1,44,05,226/- ------------------------ 8. HOWEVER, AS PER ORIGINAL RETURN OF INCOME FIL ED ON 31.3.2008 HE HAS NOT DISCLOSED ANY INCOME AGAINST THE ABOVE UNDI SCLOSED JEWELLERY AND CASH. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS ON 17.11.2008 4 GURDASMAL B. CHAWLA THE ASSESSEES REPRESENTATIVE WAS ASKED TO EXPLAIN WHY THE INCOME AS DECLARED IS NOT INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE AS PER THE RETURN OF INCOME. IN RESPONSE TO THE SAME, IT IS NO TICED THAT THE ASSESSEE FILED A REVISED RETURN OF INCOME ON 3 RD DECEMBER 2008 DECLARING TOTAL INCOME OF RS. 1,10,15,283/- WHICH INCLUDED DISCLOSU RE U/S 132(4) OF RS 1,08,21,294/- THE ASSESSEE SUBMITTED RECONCILIATION STATEMENT OF JEWELLERY FOUND AS ON THE DATE OF SEARCH AND STATED THAT THE ASSESSEE HAD DECLARED THE UNDISCLOSED INCOME AS PER REVISED RETU RN FILED ON 3.12.2008 FOR THE UNDISCLOSED JEWELLERY AS UNDER:- RS. 69,33,207/- TOWARDS GOLD ORNAMENTS RS. 35,05,446/- TOWARDS DIAMONDS JEWELLERY RS. 82,641/- TOWARDS SILVER UTENSILS ----------------- RS. 1,05,21,294/- TOTAL FROM THE ABOVE, IT CAN BE SEEN THAT THE ASSESSEE HA D NOT DISCLOSED TOWARDS THE UNDISCLOSED JEWELLERY AND CASH FOUND AS ON THE DATE OF SEARCH AS FOLLOWS: RS. 12,23,860/- EXCESS LOOSE DIAMONDS UNDISCLOSED RS. 14,87,412/- EXCESS DIAMOND EMBEDDED JEWELLERY RS. 15,11,850/- EXCESS CASH UNDISCLOSED RS. 42,23,122/- TOTAL THE AO FELT THAT THE RECONCILIATION STATEMENT SUBMI TTED BY THE ASSESSEE IS NOTHING BUT AN AFTERTHOUGHT THE DISCLOSURE U/S 132( 4) WAS MADE VOLUNTARILY AFTER CARRYING OUT RECONCILIATION WITH I.T./W.T RECORDS AND WHICH WAS DULY VERIFIED AND ADMITTED BY THE ASSESSE E. SUBSEQUENT PART RETRACTION AT THIS STAGE IS BASELESS AND CANNOT BE PERMITTED. ACCORDINGLY AO ADDED RS 42,23,122/- AS UNEXPLAINED INVESTMENT U /S 69 & 69A OF THE I.T. ACT. 9. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE PREFE RRED AN APPEAL BEFORE THE LD. CIT(A). THE FIRST APPELLATE AUTHORIT Y GRANTED PARTIAL RELIEF OBSERVING AS UNDER: AS FAR AS ADDITIONS ON ACCOUNT OF LOOSE DIAMONDS AN D DIAMONDS JEWELLERY AMOUNTING TO RS. 12,23,860/- AND RS. 14,8 7,412/- ARE CONCERNED THE APPELLANT HAS GIVEN A STATEMENT U/S 1 32(4) WHICH ARE RECORDED VIDE QUESTIONS AND ANSWERS EMBEDDED IN Q. NO. 20,21 AND 22 5 GURDASMAL B. CHAWLA AND WHICH ARE ALREADY EXTRACTED IN PARA 2.1.3 ON PA GES 5 TO 7 OF THIS ORDER. IT IS OBSERVED BY THE LD. ASSESSING OFFICER THAT THE APPELLANT HAD MADE DISCLOSURE U/S 132(4) WITH REFERENCE TO LO OSE DIAMONDS AND DIAMOND JEWELLERY AT RS. 12,23,860/- AND RS. 49 ,92,858/- ONLY. WHEREAS IN THE REVISED RETURN OF INCOME IT HA D INCORPORATED ONLY RS. 35,05,446/- ON ACCOUNT OF DIAMOND JEWELLER Y. ACCORDING TO LD. ASSESSING OFFICER, THE APPELLANT HAD NOT DISCLO SED RS 12,23,860/- ON ACCOUNT OF LOOSE DIAMONDS AND RS 14 ,87,412/- ON ACCOUNT OF DIAMOND JEWELLERY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE APPELLANT HAD FURNISHED RECONCILIAT ION STATEMENT BEFORE THE LD. ASSESSING OFFICER, SUCH RECONCILIATI ON WAS BASED ON THE WEALTH TAX RECORD AND THE VALUATION REPORT OF T HE APPELLANT AND HIS FAMILY MEMBERS. LD. ASSESSING OFFICER DID NOT A CCEPT SUCH RECONCILIATION ON THE GROUND THAT THE SAME WAS AN A FTER THOUGHT AND THAT SUBSEQUENT PART RETRACTION OF THE ASSESSMENT S TAGE WAS BASELESS AND CANNOT BE PERMITTED BY HIM. HE THEREF ORE MADE ADDITION OF RS 12,23,860/- AND RS 14,87,412/- ON AC COUNT OF LOOSE DIAMONDS AND DIAMOND JEWELLERY. HOWEVER IN THE REM AND REPORT HE HAS ADMITTED THAT THE APPELLANT HAD FURNISHED ITEM WISE RECONCILIATION STATEMENT ON 12.12.08 BEFORE HIM (D ATE OF ASSESSMENT 29.12.08) FOR THE VALUE OF RS 1,31,41,156/- AS AGAI NST ACTUAL DIAMONDS AND DIAMOND JEWELLERY FOUND DURING THE SEA RCH AT RS. 1,32,21,787/- HE VERIFIED SUCH RECONCILIATION STATE MENT WITH RETURNS OF WEALTH OF THE APPELLANT AND APPELLANTS FAMILY M EMBERS AND ALSO CONSIDERING THE BILLS PRODUCED TO PROVE THAT SOME J EWELLERY WAS ACTUALLY PURCHASED PRIOR TO THE DATE OF SEARCH IN P ROPER MANNER. IT IS FURTHER OBSERVED THAT THE APPELLANT HAD OFFER ED INCOME AS PER REVISED RETURN AT RS. 35,05,446/- AGAINST TH E UNMATCHED LOOSE DIAMONDS AND DIAMOND JEWELLERY AS APPEARING I N S.NO. 14 AND 15 OF THE IMPUGNED RECONCILIATION STATEMENT CO NSIDERED BY THE LD. ASSESSING OFFICER IN HIS REMAND REPORT AS WELL AS FURNISHED BEFORE HIM DURING THE COURSE OF ASSESSMENT PROCEEDI NGS ON 12.12.2008. THE ONLY REASON FOR MAKING ADDITION IN THE OPINION OF LD. ASSESSING OFFICER WAS THE STATEMENT MADE BY THE APPELLANT U/S 132(4) WHEREIN HE HAD OFFERED INCOME OF RS. 12,23,8 60/- TOWARDS UNDISCLOSED LOOSE DIAMONDS AND RS 49,92,858/- TOWAR DS JEWELLERY OUT OF WHICH THE APPELLANT HAD OFFERED ONLY RS. 35, 05,446/- I HAVE ALSO PERUSED THE RELEVANT RECONCILIATION STA TEMENT WHICH WAS FILED BEFORE THE LD. ASSESSING OFFICER ON 12.12.08 AND ON WHICH HE HAS GIVEN REMAND REPORT ALSO. WHEREAS THE APPELLANT HAS FURNISHED RECONCILIATION STATEMENT AND SUPPORTED SU CH RECONCILIATION STATEMENT ON THE BASIS OF WEALTH TAX RECORDS OF THE APPELLANT AND HIS 6 GURDASMAL B. CHAWLA FAMILY MEMBERS FURNISHED BEFORE THE DATE OF SEARCH AND SEIZURE OPERATION. HOWEVER IT IS NOTICED THAT IN THE FOLLO WING CASES AS PER THE PARTICULARS GIVEN BELOW. THE LOOSE DIAMONDS W ERE NOT DISCLOSED IN THE RELEVANT WEALTH TAX RETURNS. SL.NO. SEARCH SEARCH DESCRIPTION VAL UE S.NO. PAGE ------------------------------ NO. WT.DI AMOUNT. NO S. (RS.) 73 122D 16 LOOSE DIAMONDS 54 217500.00 74 122E 16 LOOSE DIAMOND 7 45000.00 75 122F 16 LOOSE DIAMOND 44 157500.00 76 22G 16 LOOSE DIAMOND 54 130500.00 77 122H 16 LOOSE DIAMOND 12 32400.00 TOTAL ------------------ --- TOTAL 582900.00 ------------------------- THESE LOOSE DIAMONDS HAVE BEEN RECONCILED IN THE NAME OF ARTI CHOWLA AND POOJA CHAWLA. HOWEVER LD. A R ADMITTED BEFORE ME THAT THESE LOOSE DIAMONDS WERE N OT DISCLOSED IN THEIR RESPECTIVE WEALTH TAX RETURNS. T HEREFORE, IN MY OPINION SUCH LOOSE DIAMONDS CANNOT BE DEEMED TO HAVE BEEN DISCLOSED TO THE DEPARTMENT BECAUSE THEY WERE NOT INCLUDED BY THE RESPECTIVE PERSONS IN THEIR INCOME TAX AND WEALTH TAX RECORDS BEFORE THE DATE OF SEARCH. THERE FORE THE ADDITION ON ACCOUNT OF LOOSE DIAMONDS WILL BE SUSTA INED TO THE SAID EXTENT OF RS 5,72,900/- THE REMAINING ADDITION ON ACCOUNT OF LOOSE DIAMONDS AND JEWELLERY CANNOT BE S USTAINED IN THE GIVEN FACTUAL MATRIX AND IN THE NARRATED CIR CUMSTANCES BECAUSE THE SAME HAVE BEEN RECONCILED BY THE APPELL ANT BEFORE THE ASSESSING OFFICER DURING THE COURSE OF A SSESSMENT PROCEEDINGS AS WELL AS DURING THE REMAND PROCEEDING S AN ALSO BEFORE ME. I HAVE ALREADY DISCUSSED THE LEGAL PROPOSITION MADE BY THE LEARNED COUNSEL IN EARLIER PART OF THIS ORDER. IT IS REITERATED THAT THE STATEMENT U/S 132(4) IS MERELY AN IMPORTAN T PIECE OF EVIDENCE BUT IT IS NOT A CONCLUSIVE PIECE OF EVIDEN CE AND IT IS OPEN TO THE APPELLANT WHO MADE THE ADMISSION U/S 13 2(4) TO DEMONSTRATE THAT IT IS INCORRECT. THIS LEGAL PROPOS ITION HAS BEEN UPHELD IN THE FOLLOWING CASE LAWS: 7 GURDASMAL B. CHAWLA PULLANGODE RUBBER PRODUCE CO/LTD VS STATE OF KERALA (1973) 91 ITR 18 (SC) KAILASHBEN MANHARLAL CHOKSHI VS CIT (2008) 220 CTR (GUJ) 138 GREENVIEW RESTAURANT VS ACIT (2003) 263 ITR 169 (GA U) DCIT VS PRAMUKH BUILDERS (2008) 112 ITD 179 (AHD) ( TM) ACIT VS RAVI AGRICULTURAL INDUSTRIES (2009) 117 IT D 338 (AGRA)(TM) (VI) MS. AISHWARYA K. RAI VS DY. CIT REPORTED IN 10 4 ITD 166(MUM) DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 2(1) VS BH AGILAL MULCHAND REPORTED IN 96 ITD 344 (AHD) FIRST GLOBAL STOCK BROKING (P) LTD VS ASSTT. CIT (M UMBAI) REPORTED IN 115 TTJ 173 (MUM) GYAN CHAND JAIN VS ITO REPORTED IN 73 TTJ (JD) 859. R.P. LOCKS COMPANY VS DEPUTY COMMISSIONER OF INCOME TAX REPORTED IN 67 TTJ 588 (DEL) ACIT VS ANOOP KUMAR REPORTED IN 94 TTJ 288(ASR) HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LIGHT OF THE AFORESAID DECISIONS OF HONBLE SUPREME COURT HONBLE GUJARAT HIGH COURT HONBLE GAUHATI HIGH COU RT AND VARIOUS THIRD MEMBER JUDGEMENTS OF HONBLE ITAT INCLUDING T HE LATEST JUDGMENT DATED 26 TH DECEMBER 2008 RENDERED BY FIVE JUDGES OF HONBLE ITAT, AGRA BENCH IN THE CASE OF ACIT VS RAV I AGRICULTURAL INDUSTRIES (SUPRA) ADDITION MADE ON ACCOUNT OF LOOS E DIAMONDS AMOUNTING TO RS 6,40,960/- (RS. 12,23,860 MINUS 5,8 2,900) IS ALLOWED AND BALANCE AMOUNT OF RS 5,82,900/- IS CONF IRMED AND ADDITION MADE ON ACCOUNT OF DIAMOND JEWELLERY AMOUN TING TO RS 14,87,412/- IS DIRECTED TO BE DELETED. GROUND NOS 2 TO 8 ARE ACCORDINGLY DISPOSED OFF. IN THE RESULT THE APPEAL IS PARTLY ALLOWED. 10. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE A SSESSEE IS ON APPEAL BEFORE US AGAINST THE ADDITION OF RS. 5,82,900/- O N ACCOUNT OF LOOSE DIAMONDS. HERE THE ADDITION HAS BEEN SUSTAINED BY T HE LD.CIT(A) ON THE GROUND THAT THE PERSONS WHO HAD SUBMITTED THAT THEY OWN IT HAVE NOT INCLUDED IN THEIR WEALTH TAX RETURNS. EVENTHOUGH TH E AR OF THE APPELLANT STRENUOUSLY CLAIMED THAT THE LOOSE DIAMONDS BELONGE D TO MS. ARTI CHOWLA AND POOJA CHAWLA, THE FACT REMAINS THAT THEY HAVE NOT INCLUDED THE SAME IN THEIR WEALTH TAX RETURNS. IN THE BACKGR OUND WE ARE AWARE OF THE FACT THAT THE ASSESSEE HAD UNDISCLOSED JEWELLER Y AND THE VALUE OF LOOSE DIAMONDS WERE ALSO OFFERED AS UNDISCLOSED INC OME. WHILE 8 GURDASMAL B. CHAWLA STATEMENT MADE IN THE COURSE OF SEARCH PROCEEDINGS BY THEMSELVES CANNOT BE THE BASIS OF ADDITION, CONSIDERING THE TO TALITY OF CIRCUMSTANCES, THE REBUTTAL/ EXPLANATION OF THE ASSESSEE THAT LOSE DIAMONDS BELONG TO TWO OTHER PERSONS IN OUR OPINION CANNOT BE ACCEPTED . IN THE RESULT THE ADDITION OF RS. 5,82,900/- ON ACCOUNT OF LOOSE DIAM OND FOUND AT THE TIME SEARCH IS SUSTAINED. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ITA NO. 4010/M/09-DEPARTMENTAL APPEAL 12. AGAINST THE ORDER OF THE LD. CIT(A), THE REVEN UE HAS PREFERRED AN APPEAL. THE FIRST ISSUE IS AGAINST DELETION OF THE ADDITION MADE ON ACCOUNT OF EXCESS CASH FOUND WITHOUT CONSIDERING TH E FACT THAT NO SUBSTANTIAL EVIDENCES WERE PRODUCED TO VERIFY THAT THE CASH FOUND WAS THE CASH IN HAND AVAILABLE WITH THE MEMBERS OF THE ASSESSEE FAMILY. 13. DURING THE SEARCH PROCEEDINGS THE ASSESSEE WAS QUESTIONED ABOUT THE EXCESS CASH FOUND. HE HAD REPLIED AS UNDER: Q. 19. DURING THE COURSE OF SEARCH ACTION OF YOUR R ESIDENCE CASH OF RS. 19,61,850/- WAS FOUND FROM YOUR BEDROOM PLEASE EXPLAIN THE SOURCE OF THE SAME TO WHOM THE CASH BEL ONGS? ANS: I AM STAYING WITH ALL MY FAMILY MEMBERS AT MUM BAI AND THE CASH OF RS 4.5 LAC INCLUDES WITHDRAWALS FROM BA NK ACCOUNT OF MYSELF MY WIFE KAUSHALYA AND OTHER FAMIL Y MEMBERS. THE REMAINING CASH I CANNOT EXPLAIN NOW. I WILL EXPLAIN IT LATER. NOW I OFFER THE AMOUNT OF RS 15,1 1,850/- AS MY UNDISCLOSED INCOME. I UNDERTAKE TO PAY THE TAXES THEREON. 14. THE LD. CIT(A) DELETED THE ADDITION OBSERVING A S UNDER: IT IS OBVIOUS THAT THE APPELLANT HAD SAID THAT HE CANNOT EXPLAIN THE POSSESSION OF RS. 19,61,850/- AND HE WO ULD EXPLAIN IT LATER. IT IS SIGNIFICANT THAT DURING THE SEARCH AND SEIZURE PROCEEDINGS THE BOOKS OF ACCOUNT WERE FOUND ON THE APPELLANTS COMPUTER AND THE SEARCH TEAM REPRESENTED BY THE AUTHORISED OFFIC ERS OF THE INVESTIGATION WING HAD SEIZED COMPUTER DATA BACK UP FROM THE 9 GURDASMAL B. CHAWLA HARD DISC OF THE APPELLANTS COMPUTER. THESE SEIZE D BOOKS OF ACCOUNTS THEMSELVES REVEALED THAT TOTAL CASH AVAILA BLE AS ON SEARCH DATE WAS RS 23,19,248/- AFTER EXCLUDING THE CASH OF THE COMPANIES IN WHICH THE APPELLANT WAS DIRECTOR OF PARTNER. TH IS EVIDENCE CANNOT BE IGNORED. MORE SO BECAUSE THIS EVIDENCE WAS ALSO SEIZED AND WAS AS PER THE SEIZED BOOKS OF ACCOUNTS AND COMPUTER DA TA BACK UP SEIZED BY THE AUTHORIZED OFFICERS DURING THE COURSE OF SEARCH AND SEIZURE. IN THE REMAND REPORT LD ASSESSING OFFICER HAS HIMSELF ADMITTED THAT ALL FAMILY MEMBERS OF THE APPELLANT W ERE RESIDING WITH HIM AND THERE WERE CASH WITHDRAWALS FROM BANKS BY T HE MEMBERS OF THE APPELLANTS FAMILY AND THE APPELLANT HIMSELF IMMEDIATELY BEFORE THE SEARCH DATE. LD. ASSESSING OFFICER HAD E XAMINED THE LEDGER COPIES OF APPELLANTS FAMILY MEMBERS AND ACC EPTED THAT IN 15 CASES OF THE INDIVIDUALS INCLUDING THE APPELLANT TH E CASH BALANCE AS PER LEDGER COPIES FURNISHED AMOUNTED TO RS 23,19,24 8/- WHEREAS THE CASH FOUND WAS ONLY RS 19,61,850/- THE SEIZED R ECORDS INCLUDING THE COMPUTER DATA BACK-UP DISCLOSED CASH BALANCE OF RS 23,19,248/- THIS FACT HAS NOT BEEN DISPUTED BY THE LD. ASSESSING OFFICER AND IS BASED ON THE SEIZED EVIDENCE AS WELL AS IN THE REMAND REPORT. IN THE CIRCUMSTANCES AND THESE FACTS NO ADD ITION CAN BE MADE ON ACCOUNT OF CASH FOUND BECAUSE THE CASH FOUN D WAS ALREADY DISCLOSED IN THE BOOKS OF ACCOUNTS MAINTAINED BY TH E APPELLANT AND HIS FAMILY MEMBERS AS EVIDENCED BY THE SEIZED RECOR DS AND AS ADMITTED IN THE REMAND REPORT. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LIGHT OF THE AFORESAID DECISIONS OF HONBLE SUPREME COURT, HON;BLE GUJARAT HIGH COURT AND VARIOUS THIRD MEMBER JUDGMENTS OF HONBLE ITAT INCLUDING THE LATEST JUDGMENT DATED 2 6 TH DECEMBER 2008 RENDERED BY FIVE JUDGES OF HONBLE ITAT AGRA B ENCH IN THE CASE OF ACIT VS RAVI AGRICULTURAL INDUSTRIES ADDITI ON OF CASH WORTH RS 15,11,850/- IS DIRECTED TO BE DELETED. THE ADDI TION OF RS 15,11,850/- ON ACCOUNT OF UNEXPLAINED CASH FOUND IS THEREFORE NOT SUSTAINABLE AND IS NOT SUSTAINED. GROUND NO.9 TO 13 INVOLVING THE ADDITION OF RS. 15,11,850/- ARE ACCORDINGLY ALLOWED . 15. AGGRIEVED THE DEPARTMENT IS ON APPEAL BEFORE US . THE ONLY BASIS OF THE ADDITION IS THE STATEMENT GIVEN BY THE ASSESSEE AT THE TIME OF THE SEARCH. EVEN IN THE STATEMENT THE ASSESSEE HAD NOT ACCEPTED THE SAME BUT ANSWERED THAT HE WOULD EXPLAIN THE CASH LATER. WHEN A REMAND REPORT WAS CALLED FOR, THE AO, HAD SUBMITTED AS FOL LOWS: 10 GURDASMAL B. CHAWLA CASH FOUND OF RS. 19,61,850/- DURING THE COURSE OF SEARCH ACTION CASH WAS FOUND FROM THE RESIDENCE OF THE ASSESSEE AT RS 19,61,850/- THE ASSESSEE HAS STA TED IN HIS STATEMENT RECORDED U/S 132(4) ON 14.6.2006 THAT THEIR FAMILY MEMBERS ARE STAYING TOGETHER AND THE CASH INCLUDED WITHDRAWAL OF RS 4,5 0,000/- MADE FROM BANK BY FAMILY MEMBERS. THIS FACT WAS VERIFIED AT T HE TIME OF ASSESSMENT. IT IS NOTICED THAT ALL THE FAMILY MEMBERS ARE SHOWI NG THERE ADDRESS AS THAT OF THE ASSESSEE AND THERE WERE CASH WITHDRAWALS FRO M BANK BY THE MEMBERS OF THE FAMILY AND THE ASSESSEE IMMEDIATELY BEFORE THE SEARCH DATE. ACCORDINGLY NO ADDITION TO THE EXTENT OF RS. 4,50,000/- WAS MADE. IN REGARD TO THE BALANCE CASH FOUND OF RS 15,11,850/- THE ASSESSEE FURNISHED COPIES OF THE LEDGER ACCOUNT OF THE 18 AS SESSEES INCLUDING THREE COMPANIES OWNED BY THE ASSESSEE AND FAMILY MEMBERS TO SHOW THAT AS PER THE CASH BOOKS OF THE ASSESSEES THE TOTAL CASH AVAILABLE AS ON SEARCH DATE WAS AT RS 43.19,370/- EVEN IF THE CASH OF THE COMPANIES DO NOT CONSIDER IN THE REMAINING 15 CASES OF THE INDIVIDUA LS INCLUDING THE ASSESSEE, THE CASH AS PER THE LEDGER COPIES FURNISH ED AMOUNT TO RS 23,19,248/- 16. HENCE THE AO HIMSELF HAD ACCEPTED THAT THERE WA S SUFFICIENT CASH BALANCE AS PER ACCOUNTS TO EXPLAIN THE CASH FOUND A T THE TIME OF SEARCH. THE ASSESSEE HAS EXPLAINED THAT THE CASH FOUND IN T HE PREMISES CONSISTS OF CASH OF OTHER FAMILY MEMBERS ALSO, WHO IN THE AG GREGATE HAS SHOWN A CASH BALANCE IN EXCESS OF THE CASH FOUND AT THE TIM E OF SEARCH. THE DEPARTMENT HAS NOT BROUGHT ANYTHING ON RECORD, EITH ER DIRECTLY OR IMPLIEDLY, TO SHOW THAT THE CASH FOUND IS ONLY THE CASH BELONGING TO THE ASSESSEE AND NOT TO OTHER MEMBERS. WE AGREE WITH TH E DECISION OF THE CIT(A) AND CONFIRM HIS ORDER DELETING THE ADDITION OF RS. 15,11,850/- AS UNEXPLAINED CASH, MADE BY THE AO. THE REVENUES APP EAL ON THIS ISSUE IS DISMISSED. 17. THE SECOND ISSUE IN ASSESSEES APPEAL IS AGAINS T THE DELETION BY LD CIT(A) OF THE ADDITIONS MADE ON ACCOUNT OF DIAMOND EMBEDDED JEWELLERY UNDISCLOSED AT RS 14,87,412/- AND THE LOOSE DIAMOND UNDISCLOSED AT RS. 6,40,960/- WITHOUT CONSIDERING THE FACT THAT NO SUBSTANTIAL EVIDENCE 11 GURDASMAL B. CHAWLA WERE PRODUCED BY THE ASSESSEE TO PROVE THAT THERE W AS NO EXCESS JEWELLERY FOUND AND THE DETAILS FURNISHED WERE NOT MATCHING WITH THE VALUE OF SEIZED ASSETS AND THE VALUE DISCLOSED BY THE ASSESSEE. 18. THE DECISION OF THE LD. CIT(A) ON THIS ISSUE IS DISCUSSED IN THE ASSESSEES APPEAL. AS FOUND BY THE CIT(A), THE ADDI TION ON ACCOUNT OF DIAMOND EMBEDDED JEWELLERY OF RS. 14,87,412/- IS PU RELY ON THE BASIS OF THE DECLARATION MADE IN THE STATEMENT AT THE TIME O F THE SEARCH. THE APPELLANT HAD MADE DISCLOSURE U/S 132(4) WITH REFER ENCE TO LOOSE DIAMONDS AND DIAMOND JEWELLERY AT RS. 12,23,860/- A ND RS. 49,92,858/- WHEREAS IN THE REVISED RETURN OF INCOME IT HAD INCO RPORATED ONLY RS. 35,05,446/- ON ACCOUNT OF DIAMOND JEWELLERY. ACCOR DING TO LD. ASSESSING OFFICER, THE APPELLANT HAD NOT DISCLOSED RS 12,23,8 60/- ON ACCOUNT OF LOOSE DIAMONDS AND RS 14,87,412/- ON ACCOUNT OF DIA MOND JEWELLERY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASS ESSEE HAD FURNISHED RECONCILIATION STATEMENT BEFORE THE ASSESSING OFFIC ER, SUCH RECONCILIATION WAS BASED ON THE WEALTH TAX RECORD AND THE VALUATIO N REPORT OF THE ASSESSEE AND HIS FAMILY MEMBERS. THE ASSESSING OFFI CER DID NOT ACCEPT SUCH RECONCILIATION ON THE GROUND THAT THE SAME WAS AN AFTERTHOUGHT AND THAT SUBSEQUENT PART RETRACTION OF THE ASSESSMENT S TAGE WAS BASELESS AND CANNOT BE PERMITTED BY HIM. HE THEREFORE MADE AN ADDITION OF RS 12,23,860/- AND RS 14,87,412/- ON ACCOUNT OF LOOSE DIAMONDS AND DIAMOND JEWELLERY. HOWEVER IN THE REMAND REPORT HE HAS ADMITTED THAT THE ASSESSEE HAD FURNISHED ITEM WISE RECONCILIATION STATEMENT ON 12.12.08 BEFORE HIM (DATE OF ASSESSMENT 29.12.08) F OR THE VALUE OF RS 1,31,41,156/- AS AGAINST ACTUAL DIAMONDS AND DIAMON D JEWELLERY FOUND DURING THE SEARCH AT RS. 1,32,21,787/- HE VERIFIED SUCH RECONCILIATION STATEMENT WITH RETURNS OF WEALTH OF THE ASSESSEE AN D ASSESSEES FAMILY MEMBERS AND ALSO CONSIDERING THE BILLS PRODUCED TO PROVE THAT SOME JEWELLERY WAS ACTUALLY PURCHASED PRIOR TO THE DATE OF SEARCH IN PROPER MANNER. 12 GURDASMAL B. CHAWLA 19. IT IS FURTHER OBSERVED THAT THE ASSESSEE HAD OF FERED INCOME AS PER REVISED RETURN AT RS. 35,05,446/- AGAINST THE UNMAT CHED LOOSE DIAMONDS AND DIAMOND JEWELLERY AS APPEARING IN S.NO. 14 AND 15 OF THE IMPUGNED RECONCILIATION STATEMENT CONSIDERED BY THE LD. ASSE SSING OFFICER IN HIS REMAND REPORT AS WELL AS FURNISHED BEFORE HIM DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS ON 12.12.2008. THE ONLY REA SON FOR MAKING ADDITION IN THE OPINION OF LD. ASSESSING OFFICER WA S THE STATEMENT MADE BY THE APPELLANT U/S 132(4) WHEREIN HE HAD OFFERED INCOME OF RS. 12,23,860/- TOWARDS UNDISCLOSED LOOSE DIAMONDS AND RS 49,92,858/- TOWARDS JEWELLERY OUT OF WHICH THE APPELLANT HAD OF FERED ONLY RS. 35,05,446/-. IN THE CIRCUMSTANCES THERE IS NO CASE FOR THE REVENUE AGAINST THE DELETION BY THE CIT(A) OF RS. 14,87,412 /-. THE ASSESSEE HAS EXPLAINED/ RECONCILED ALL THE DIAMOND JEWELLERY FOU ND AT THE TIME OF PURCHASE WITH THE WEALTH TAX RETURNS MADE BY THE FA MILY MEMBERS AS WELL AS BILLS FOR PURCHASE MADE PRIOR TO SEARCH. TH E ASSESSING OFFICER HAS NOT REBUTTED THE SAME. THAT BEING SO THERE IS NO RE ASON OR BASIS FOR MAKING ANY ADDITION ON ACCOUNT OF DIAMOND JEWELLERY FOUND AT THE TIME OF SEARCH. 20. WITH RESPECT TO DELETION OF ADDITION MADE ON AC COUNT OF LOOSE DIAMONDS AT RS. 6,40,960/- INCLUDED AT PARA 2.7.2., THE LD. CIT(A) HAS DEALT WITH THE ISSUE AS FOLLOWS: I HAVE ALSO PERUSED THE RELEVANT RECONCILIATION ST ATEMENT WHICH WAS FILED BEFORE THE AO ON 12.12.08 AND ON WH ICH HE HAS GIVEN REMAND REPORT ALSO. WHEREAS THE APPELLAN T HAS FURNISHED RECONCILIATION STATEMENT AND SUPPORTED SU CH RECONCILIATION STATEMENT ON THE BASIS OF WEALTH TAX RECORDS OF THE APPELLANT AND HIS FAMILY MEMBERS FURNISHED BEFO RE THE DATE OF SEARCH AND SEIZURE OPERATION. HOWEVER, IT IS NOTICED THAT IN THE FOLLOWING CASES, AS PER THE PARTICULARS GIVEN BELOW, THE LOOSE DIAMONDS WERE NOT DISCLOSED IN THE RELEVA NT WEALTH TAX RETURNS. THESE PARTICULARS ARE AS UNDER: 13 GURDASMAL B. CHAWLA SL.NO. SEARCH SEARCH DESCRIPTION VAL UE S.NO. PAGE ------------------------------ NO. WT.DI AMOUNT. NO S. (RS.) 73 122D 16 LOOSE DIAMONDS 54 217500.00 74 122E 16 LOOSE DIAMOND 7 45000.00 75 122F 16 LOOSE DIAMOND 44 157500.00 76 22G 16 LOOSE DIAMOND 54 130500.00 77 122H 16 LOOSE DIAMOND 12 32400.00 TOTAL ------------------ --- TOTAL 582900.00 ------------------------- THESE LOOSE DIAMONDS HAVE BEEN RECONCILED IN THE NAME OF ARTI CHOWLA AND POOJA CHAWLA. HOWEVER LD. A R ADMITTED BEFORE ME THAT THESE LOOSE DIAMONDS WERE N OT DISCLOSED IN THEIR RESPECTIVE WEALTH TAX RETURNS. T HEREFORE, IN MY OPINION SUCH LOOSE DIAMONDS CANNOT BE DEEMED TO HAVE BEEN DISCLOSED TO THE DEPARTMENT BECAUSE THEY WERE NOT INCLUDED BY THE RESPECTIVE PERSONS IN THEIR INCOME TAX AND WEALTH TAX RECORDS BEFORE THE DATE OF SEARCH. THERE FORE THE ADDITION ON ACCOUNT OF LOOSE DIAMONDS WILL BE SUSTA INED TO THE SAID EXTENT OF RS 5,72,900/- THE REMAINING ADDITION ON ACCOUNT OF LOOSE DIAMONDS AND JEWELLERY CANNOT BE S USTAINED IN THE GIVEN FACTUAL MATRIX AND IN THE NARRATED CIR CUMSTANCES BECAUSE THE SAME HAVE BEEN RECONCILED BY THE APPELL ANT BEFORE THE ASSESSING OFFICER DURING THE COURSE OF A SSESSMENT PROCEEDINGS AS WELL AS DURING THE REMAND PROCEEDING S AN ALSO BEFORE ME. 21. WE FIND THAT THE LOOSE DIAMONDS INCLUDED AT RS. 6,40,960/- HAVE BEEN RECONCILED BY THE ASSESSEE BEFORE THE AO DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS DURING THE REMAND PROCEEDINGS AND THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION. W E CONFIRM THE ORDER OF THE LD. CIT(A). THE SECOND GROUND RAISED BY THE REV ENUE IS DISMISSED. 14 GURDASMAL B. CHAWLA 22. IN THE RESULT BOTH THE ASSESSEES AND REVENUES APPEALS ARE DISMISSED. ORDER PRONOUNCED ON THIS 24 TH DAY OF NOVEMBER, 2010 SD/- SD/- (S.V. MEHROTRA) ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 24 TH NOVEMBER, 2010 RJ COPY TO : THE APPELLANT THE RESPONDENT THE CIT-CONCERNED THE CIT(A)-CONCERNED THE DR G BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI 15 GURDASMAL B. CHAWLA DATE INITIALS 1 DRAFT DICTATED ON: 9.11.2010 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 10.11.2010 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: _________ ______ 9. DATE OF DISPATCH OF ORDER: _________ ______