Kumkum Kanodia, New Delhi V. DCIT, New Delhi

ITA 5260/DEL/2014

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1568 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 26-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY VERMA
• Assessee Lawyers: ASHISH GOEL; KISLAYA PA RASHAR S
• Keywords: Search and seizure; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : D : NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.5260/DEL/2014 ASSESSMENT YEAR: 2011-12 KUMKUM KANODIA, C-175, PUSHPANJALI ENCLAVE, PITAMPURA, NEW DELHI. PAN: AANPK6021C VS. DCIT, CENTRAL CIRCLE-11, NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VED JAIN & SHRI KISLAYA PA RASHAR, ADVOCATES; AND SHRI ASHISH GOEL, CA REVENUE BY : SHRI VIJAY VERMA, CIT, DR DATE OF HEARING : 04.10.2018 DATE OF PRONOUNCEMENT : 20.11.2018 ORDER PER R.K. PANDA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 29 TH AUGUST, 2014 OF THE CIT(A)-31, NEW DELHI RELATING TO ASSESSMENT YEAR 2011-12. 2. ALTHOUGH A NUMBER OF GROUNDS HAVE BEEN RAISED BY THE ASSESSEE, THESE ALL RELATE TO THE ORDER OF THE CIT(A) IN SUSTAINING THE ADDITI ON TO THE EXTENT OF RS.4,24,773/- ON ACCOUNT OF DIAMOND JEWELLERY FOUND DURING THE COURS E OF SEARCH. ITA NO.5260/DEL/2014 2 3. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE AS SESSEE IS AN INDIVIDUAL. A SEARCH AND SEIZURE OPERATION U/S 132(1) OF THE IT ACT WAS CONDUCTED AT THE RESIDENTIAL PREMISES OF SHRI RAJESH KUMAR KANODIA AND HIS GROUP CONCERN AND FAMILY MEMBERS ON 28 TH MARCH, 2011. SIMULTANEOUSLY, A SEARCH IN THE CASE OF THE ASSESSEE WAS ALSO CONDUCTED. THE ASSESSEE FILED HER RETURN OF INCOME DECLARING AN INCOME OF RS.32,83,430/-. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS, THE ASSESSING OFFICER NOTED THAT AT THE TIME OF SEARCH, CERTAIN JEWELLERY WERE FOUND WHICH WAS VALUED BY THE DEPARTMENTAL VALUER AS UNDER:- VALUATION REPORTS NET WEIGHT OF GOLD (GMS) DIAMONDS (IN CT.) AMOUNT (RS.) VALUATION REPORT-1 1846.400 154 41,72,650.00 VALUATION REPORT-2 1387.100 199 46,09,580.00 TOTAL 3233.500 353 87,82,230.00 4. IN THE STATEMENT RECORDED U/S 132(4), SHRI KANOD IA GAVE AN EXPLANATION THAT PART OF THIS JEWELLERY HAS BEEN BROUGHT HOME FOR APPROVA L AS SAMPLES FOR HIS DAUGHTERS MARRIAGE FROM M/S PASHUPATI JEWELLERS AND, IN SUPPO RT OF THIS CLAIM, HE PROVIDED A COPY OF INVOICE OF JEWELLERY ITEMS PURCHASED BY M/S PASHUPATI JEWELLERS FROM SHREE NATH JEWELLERS. SO FAR AS THE BALANCE JEWELLERY IS CONCERNED, IT WAS EXPLAINED THAT THE SAME BELONGS TO THE ENTIRE FAMILY AND STANDS EXPLAI NED IN VIEW OF CBDT INSTRUCTIONS NO.1916 DATED 11 TH APRIL, 1994 AND, THEREFORE, JEWELLERY TO THE EXTEN T OF 1950 GMS. HAS BEEN EXPLAINED. ITA NO.5260/DEL/2014 3 5. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE OBSERVED THAT THE CLAIM OF THE ASS ESSEE THAT THE JEWELLERY AMOUNTING TO RS.46,09,580/- ARE THE SAME JEWELLERY WHICH WAS PURCHASED BY M/S PASHUPATI JEWELLERS PROPRIETOR MRS. SUMEDHA PATHAK IS NOT ACC EPTABLE SINCE THE JEWELLERY PURCHASED BY M/S PASHUPATI JEWELLERS WAS OF 14 CT. ORNAMENTS WHEREAS THE JEWELLERY FOUND FROM THE ASSESSEES RESIDENCE DOES NOT SHOW A NY JEWELLERY OF 14 CT. GOLD ORNAMENTS. HOWEVER, SINCE THE AMOUNT HAS ALREADY BE EN ADDED IN THE HANDS OF MRS. SUMEDHA PATHAK IN THE ASSESSMENT YEAR 2011-12, THE ASSESSING OFFICER DID NOT MAKE ANY ADDITION ON ACCOUNT OF THE SAME. SO FAR AS THE REMAINING JEWELLERY OF RS.41,72,650/- IS CONCERNED, THE A.O REJECTED THE E XPLANATION OF THE ASSESSEE AND NOTED THAT THE CBDT INSTRUCTION NO.1916 DATED 11 TH APRIL, 1994 DOES NOT COVER DIAMOND JEWELLERY OF 154 CT. VALUED AT RS.13,86,500 /-. REJECTING THE VARIOUS EXPLANATION GIVEN BY THE ASSESSEE, THE A.O. MADE AD DITION OF RS.13,86,500/- TO THE TOTAL INCOME OF THE ASSESSEE AND DETERMINED THE INC OME AT RS.46,69,930/-. 6. IN APPEAL, THE LD. CIT(A) RESTRICTED SUCH DISALL OWANCE TO RS.4,24,773/- BY OBSERVING AS UNDER:- 4.2.1 IN THIS GROUND THE APPELLANT IS AGITATING AGAINST ADDITION OF RS. 13,86,5007/- BEING UNEXPLAINED DIAMOND JEWELLERY FO UND DURING THE COURSE OF SEARCH. IT IS NOTED HERE THAT IN THE COURSE OF S EARCH, INITIATED AT THE RESIDENCE OF MR. RAJESH KUMAR KANODIA, (THE HUSBAND OF THE APPELLANT) 3,233.500 GMS OF GOLD AND 353 CARATS OF DIAMOND JEW ELLERY WERE FOUND. THE BREAKUP OF THE SAME AS REPRODUCED IN THE ASSESS MENT ORDER IS AS UNDER:- ITA NO.5260/DEL/2014 4 NAME AS PER VALUATION REPORT OF REGISTERED VALUER NET WEIGHT OF GOLD (GMS) DIAMOND (IN CT.) AMOUNT (RS.) KUMKUM KANODIA 1846.400 154 4,172,650.00 SUMEDHA PATHAK 1387.100 199 4,609,580.00 TOTAL 3233.500 353 8,782,230.00 4.2.2 IN THE CASE OF MRS. SUMEDHA PATHAK, THE AO HAS TREA TED JEWELLERY OF THE VALUE RS. 46,09,580/- (1,387.100 GMS OF GOLD AND 199 CARATS OF DIAMOND) AS UNEXPLAINED IN HER HANDS. OUT OF THE BA LANCE JEWELLERY OF RS. 41,72,650/-, THE AO HAS GIVEN CREDIT ONLY FOR 1846. 400 GMS OF GOLD JEWELLERY AS PER CBDT INSTRUCTION NO. 1916 OF 11.04 .1994. THE BALANCE JEWELLERY BEING 154 CARATS OF DIAMOND HAS BEEN HELD AS UNEXPLAINED JEWELLERY IN THE HANDS OF THE APPELLANT. 4.2.3 VIDE MY SEPARATE ORDER IN THE CASE OF MRS. SUMEDHA PATHAK A.Y. 2011-12 (APPEAL NO. 484/13-14) DATED TODAY, 1 HAVE HELD THAT THE AO COULD NOT HAVE IGNORED THE SUBMISSIONS OF THE APPEL LANT THAT THE JEWELLERY FOUND AT THE RESIDENCE WAS IN FACT BROUGHT ON APPRO VAL BASIS FROM THE PROPRIETARY CONCERN OF MRS. SUMEDHA PATHAK. AS PER THE INVOICE, 1487.52 GMS OF GOLD AND 305.82 CARATS OF DIAMOND JEWELLERY WAS PURCHASED BY M/S PASHUPATI JEWELLERS. THE AR HAS SUBMITTED DURING TH E APPEAL PROCEEDINGS THAT AFTER GIVING CREDIT TO THE JEWELLERY BELONGING TO M/S PASHUPATI JEWELLERS, EXCESS JEWELLERY COMES TO 1745.98 GMS (3 233.500-1487.52) OF GOLD AND 47.18 CARATS (353-305.82) OF DIAMOND. HE H AS SUBMITTED THAT THE INSTRUCTION NO. 1916 OF THE CBDT DOES NOT DIFFERENT IATE GOLD AND DIAMOND JEWELLERY. AS PER THE SAID CIRCULAR, THE APPELLANT S FAMILY IS ELIGIBLE FOR GETTING CREDIT TO THE TUNE OF 1950 GMS OF JEWELLERY AS NOTED BY THE AO HIMSELF. IF THE JEWELLERY WEIGHING 1745.98 GMS OF G OLD AND 47.18 CARATS OF DIAMOND ARE TOGETHER DEDUCTED FROM 1950 GMS, THERE WOULD BE NO EXCESS JEWELLERY AVAILABLE WITH THE APPELLANTS FAMILY. HE , THEREFORE, SUBMITTED THAT NO ADDITION ON ACCOUNT OF UNEXPLAINED JEWELLER Y WAS CALLED FOR. I HAVE CONSIDERED ARS SUBMISSION. HE HAS ATTEMPTED TO EQU ATE DIAMOND JEWELLERY WITH GOLD JEWELLERY WHICH IS NOT THE OBJE CTIVE OF THE SAID INSTRUCTION OF THE BOARD. THE AO HAS ALREADY GIVEN CREDIT TO THE ENTIRE GOLD JEWELLERY FOUND AND VALUED IN THE HANDS OF THE APPE LLANT. HE HAS ADDED 154 CARATS OF DIAMOND IN THE APPELLANTS HANDS AS EXCES S JEWELLERY. IT IS NOTED HERE THAT THE DIAMOND JEWELLERY AS PER THE INVOICE WAS 305.82 CARATS AS AGAINST 353 CARATS FOUND AND VALUED IN THE HANDS OF THE APPELLANT AND MRS. ITA NO.5260/DEL/2014 5 SUMEDHA PATHAK. THUS THE AO IS REQUIRED TO GIVE CRE DIT FOR THE SAID 305.82 CARATS OF DIAMOND BELONGING TO M/S PASHUPATI JEWELL ERS. IF THE SAME IS CONSIDERED, THE EXCESS DIAMOND JEWELLERY WORKS OUT TO 47.18 CARATS (353- 305.82). THE PROPORTIONATE VALUE OF 47.18 CARAT OF DIAMOND WORKS OUT TO RS. 4,24,773/- (RS. 17,85,400 DIVIDED BY 154 AND MU LTIPLIED BY 47.18). AFTER CONSIDERING THE REASONS MENTIONED IN MY ORDER DATED TODAY IN THE CASE OF MRS. SUMEDHA PATHAK (APPEAL NO. 484/13-14, A.Y. 2011-12) AND AFTER CONSIDERING THE ABOVE FACTS, I AM OF THE VIEW THAT, THE EXCESS JEWELLERY LIABLE TO BE ASSESSED IN THE HANDS OF THE APPELLANT WORKS OUT TO RS. 4,24,773/- AS ABOVE. THEREFORE THE AO IS DIRECTED T O DELETE THE BALANCE ADDITION. IN THE RESULT GROUND IS PARTLY ALLOWED. 7. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASS ESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 8. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLE NGED THE ORDER OF THE CIT(A) IN CONFIRMING THE ADDITION OF RS.4,24,773/- ON ACCOUNT OF UNEXPLAINED DIAMOND JEWELLERY TREATING THE SAME AS NOT COVERED BY THE CBDT INSTRU CTIONS. REFERRING TO THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF MRS. NAWAZ SINGHANIA VS. DCIT REPORTED IN (2017) 88 TAXMANN.COM 327, HE SUBMITTED THAT THE TRIBUNAL, UNDER SIMILAR CIRCUMSTANCES, HAS DELETED THE ADDITION ON ACCOUNT OF GOLD AND DIAMOND JEWELLERY KEEPING IN MIND THE CBDT INSTRUCTIONS NO.1916 DATED 11 TH APRIL, 1994. REFERRING TO THE CBDT INSTRUCTIONS NO.1916 DATED 11 TH APRIL, HE SUBMITTED THAT THE SAID INSTRUCTION REFERS TO JEWELLERY AS DISCLOSED IN THE WEALTH-TAX ACT AND WEALTH-TAX ACT DEFINES JEWELLERY UNDER EXPLANATION 1(A) TO SECTION 2(EA) O F THE ACT WHICH READ AS UNDER:- (A) JEWELLERY INCLUDES (I) ORNAMENTS MADE OF GOLD, SILVER, PLATINUM OR ANY OTH ER PRECIOUS METAL OR ANY ALLOY CONTAINING ONE OR MORE OF SUCH P RECIOUS METALS, WHETHER OR NOT CONTAINING ANY PRECIOUS OR SEMI-PRECIOUS STONES , AND WHETHER OR NOT WORKED OR SEWN INTO ANY WEARING APPAREL; (II) PRECIOUS OR SEMI-PRECIOUS STONES, WHETHER OR NOT SE T IN ANY ITA NO.5260/DEL/2014 6 FURNITURE, UTENSILS OR OTHER ARTICLE OR WORKED OR S EWN INTO ANY WEARING APPAREL; 9. HE, ACCORDINGLY, SUBMITTED THAT SINCE DIAMOND IS THE PRECIOUS METAL AND, THUS, THE SAME IS INCLUDED IN THE DEFINITION OF JEWELLERY , THEREFORE, IT CANNOT BE SAID THAT THE INSTRUCTION DOES NOT INCLUDE DIAMOND. HE, ACCORDIN GLY, SUBMITTED THAT THIS BEING A COVERED MATTER IN FAVOUR OF THE ASSESSEE, THE ADDIT ION SUSTAINED BY THE CIT(A) DESERVES TO BE DELETED. HE ALSO FILED A FAMILY CHA RT AS UNDER TO SUBSTANTIATE THAT THE JEWELLERY FOUND AT THE TIME OF SEARCH BELONGING TO VARIOUS PERSONS OF THE FAMILY IS WITHIN THE LIMITS PRESCRIBED UNDER THE SAID INSTRUC TION:- SL. NO. NAME OF THE FAMILY MEMBER RELATION JEWELLERY ASSIGNED AS PER THE INSTRUCTION 1. RAJESH KANODIA HUSBAND OF THE ASSESSEE 100 GM. 2. KUMKUM KANODIA ASSESSEE 500 GM. 3. SUMEDHA PATHAK DAUGHTER IN LAW 500 GM. 4. RAJAT KANODIA SON 500 GM 5. BHAGWATI DEVI KANODIA MOTHER IN LAW 500 GM 6. NIKITA KANODIA UNMARRIED DAUGHTER 250 GM TOTAL 1950 GM 10. THE LD. DR, ON THE OTHER HAND, STRONGLY SUPPORT ED THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE LD.CIT(A) HAS ALREADY GRANTED SU BSTANTIAL RELIEF AND HE HAS ONLY SUSTAINED THE ADDITION ON ACCOUNT OF DIAMONDS STUDD ED IN THE JEWELLERY. SINCE THE ORDER OF THE CIT(A) IS IN ACCORDANCE WITH THE LAW, THEREFORE, THE SAME SHOULD BE UPHELD AND THE GROUNDS RAISED BY THE ASSESSEE SHOUL D BE DISMISSED. ITA NO.5260/DEL/2014 7 11. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT OUT OF THE TOTAL JEWELLERY VALUED AT RS.87,82,230/- COMPRISING TWO REPORTS, THE ASSESSIN G OFFICER HAS NOT MADE ANY ADDITION IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF JEWELLERY VALUED AT RS.46,09,580/- BEING THE JEWELLERY PURCHASED BY M/S PASHUPATI JEWE LLERS, PROPRIETOR MRS. SUMEDHA PATHAK ON THE GROUND THAT THE SAME HAS BEEN ADDED I N THE HANDS OF MRS. SUMEDHA PATHAK IN THE ASSESSMENT YEAR 2011-12. ALTHOUGH IN APPEAL THE LD.CIT(A) HAS DELETED SUCH ADDITIONS, HOWEVER, THE REVENUE IS NOT IN APPE AL BEFORE THE TRIBUNAL. THEREFORE, WE ARE NOT CONCERNED WITH THE SAME. SO FAR AS THE JEWELLERY WEIGHING 1846.400 GM WITH 154 CT. DIAMOND VALUED AT RS.41,72,650/- IS CO NCERNED, WE FIND THE ASSESSING OFFICER HAS MADE ADDITION OF RS.13,86,500/- WHICH H AS BEEN REDUCED TO RS.4,24,773/- BY THE CIT(A), THE REASONS FOR WHICH HAS ALREADY BE EN REPRODUCED IN THE PRECEDING PARAGRAPH. HOWEVER, WHILE SUSTAINING THE ADDITION, HE HAS HELD THAT DIAMOND JEWELLERY CANNOT BE EQUATED WITH GOLD JEWELLERY IN THE LIGHT OF THE CBDT INSTRUCTIONS. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASS ESSEE THAT JEWELLERY INCLUDES ORNAMENTS MADE OF GOLD, SILVER, PLATINUM OR ANY OTH ER PRECIOUS METALS OR ANY ALLOY CONTAINING ONE OR MORE PRECIOUS METALS, WHETHER OR NOT CONTAINING ANY PRECIOUS OR SEMI-PRECIOUS STONES. WE FIND MERIT IN THE ABOVE A RGUMENTS OF THE LD. COUNSEL FOR THE ASSESSEE. IN OUR OPINION, MERELY BECAUSE THE JEWEL LERY IS STUDDED WITH THE DIAMOND OF 47.18 CARAT IN THE INSTANT CASE, THE SAME CANNOT BE ADDED IN THE HANDS OF THE ASSESSEE WHEN SUCH JEWELLERY FORMED PART OF THE GROSS WEIGHT OF THE JEWELLERY FOUND FROM THE PREMISES OF THE ASSESSEE WHICH IS WITHIN THE PERMIS SIBLE LIMITS PRESCRIBED AS PER ITA NO.5260/DEL/2014 8 CBDT INSTRUCTION NO.1916 DATED 11 TH APRIL, 1994. THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE SUPPORTS HIS CASE WHEREIN THE TRIBUNAL, AFTER CONSIDERING THE CBDT IN STRUCTION DATED 11 TH APRIL, 1994, HAS DELETED THE ADDITION ON ACCOUNT OF GOLD AND DIA MOND JEWELLERY. SINCE THE ADDITION HAS BEEN DELETED BY THE CIT(A) AND THE REVENUE IS N OT IN APPEAL BEFORE THE TRIBUNAL, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THE LD.CIT(A) IS NOT JUSTIFIED IN SUST AINING THE ADDITION TO THE TUNE OF RS.4,24,773/- ON ACCOUNT OF UNEXPLAINED DIAMOND JEW ELLERY OF 47.18 CARAT TREATING THE SAME AS NOT COVERED BY THE CBDT INSTRUCTION NO.1916 DATED 11 TH APRIL, 1994. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND DI RECT THE ASSESSING OFFICER TO DELETE THE ADDITION. THE GROUNDS RAISED BY THE ASSESSEE A RE, ACCORDINGLY, ALLOWED. 12. IN THE RESULT, THE APPEAL FILED BY THE AS SESSEE IS ALLOWED. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 2 0.11.2018. SD/- SD/- (SUCHITRA KAMBLE) (R.K. P ANDA) JUDICIAL MEMBER ACCOUNTAN T MEMFBER DATED: 20 TH NOVEMBER, 2018 DK COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI.