Basant Kumar Damani, Kolkata V. DCIT, Cent. Cir. 2(1), Kolkata

ITA 618/KOL/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 6145 (ITAT-KOLKATA)
• Duration Of Justice: 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2019-2020
• Appeal Filed On: 29-12-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift; Valuation report
• Section: 250; 69A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH KOLKATA Before Shri Sanjay Garg, Judicial Member and Shri Girish Agrawal, Accountant Member I.T.A. No.618/Kol/2021 Assessment Year: 2019-20 Basant Kumar Damani..............................................................................Appellant B.S. Harware Stores, 58-D, R. No.317, N S Road, Bara Bazar, Kol-1. [PAN: ADDPD6737B] vs. DCIT, Central Circle-2(1), Kolkata.......................................................Respondent Appearances by: Shri Sunil Surana, A.R, appeared on behalf of the appellant. Shri Subhrajyoti Chakraborty, Addl. CIT-DR, appeared on behalf of the Respondent. Date of concluding the hearing : July 13, 2022 Date of pronouncing the order : August 17, 2022 ORDER Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the assessee against the order dated 17.12.2021 of the Commissioner of Income Tax (Appeals)-20, Kolkata [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). The assessee in this appeal has taken the following grounds of appeal: “1. For that the CIT(A) erred in confirming the addition of cash of Rs.2,65,208/- out of Rs.3,88,600/- found during the course of search as unexplained money u/s 69A when the said cash was part of the families regular cash savings and balance kept in the locker. 2. For that the CIT(A) erred in confirming the addition of the value of jewellery amounting to Rs.35,65,535/- out of Rs 36,41,318/- seized during the course of search as unexplained u/s 69A when the said jewellery belonged to the assessee and his family members on record of the department covered by the VDIS 1997, the source of which were duly explained to the A.O and section 69A was not applicable. 3. For that even otherwise the jewellery found was within the limits specified by CBDT circular no.1916 dated 11.05.1994 considering the number of family members and CIT(A) erred in holding that the Circular applies only to seizure of jewellery and cannot be applied for explaining the source of jewellery. 4 For that the Ld CIT(A) erred in confirming the addition on the ground that the description of the disclosed jewellery did not tally the jewellery found. 5. For that the Ld CIT(A) erred in assuming that the assessee may have more jewellery in his house when the assessee coming from a middle class family living in rented house I.T.A. No.618/Kol/2021 Assessment Year: 2019-20 Basant Kumar Damani 2 kept the jewellery for safe custody in the locker operated by private party and available at marginal rates and became victim of the circumstances since all the lockers in the said locker room were sealed and searched. 6. For that even otherwise the jewellery found was much less than the jewellery allowable under the CBDT Circular. 2. Ground No.1 – The brief facts relating to the issue are that a search carried out at the locker rented by the assessee at Vardhan Safe Deposit Vaults Pvt. Ltd. led to the discovery of total cash of Rs.3,88,600/- and the entire cash was seized. During the assessment proceedings, the Assessing Officer considered the cash in hand by referring to the balance sheet of the assessee, his wife, Smt. Manju Damani, his Daughter-in-law, Ms. Sugandha Damani and his son, Sri Aditya Damani and noted that the aggregate cash- in-hand of all family members as per balance sheet was of Rs.86,408/- only. He, therefore, held that the cash amount to that extent stood explained. He added the remaining amount as unexplained income of the assessee. During the appellate proceedings before the CIT(A), the assessee contended that part of the cash balance was out of petty savings of the ladies from drawings made. Further, the Assessing Officer has referred to cash balances as on 31.03.2018 instead of 31.03.2019, as the search was conducted on 28.01.2019. The assessee also furnished the balance sheets of all the persons mentioned above as on 31.03.2019. The ld. CIT(A) considering the above submissions of the assessee observed that it would be fair to the assessee cash balance as on 31.03.2019 would be a better indicator of the source of cash, as it is nearer to the date of search, as compared to cash balances as on 31.03.2018. He further noted that a perusal of the balance sheet as on 31.03.2019 revealed cash-in-hand of Rs.11,342/- in the case of the assessee, Sri Basant Kumar Damani, cash-in-hand of Rs.71,347/- in the case of Smt. Manju Damani, cash-in-hand of Rs.18,561/- in the case of Ms. Sugandha, daughter-in-law and cash-in-hand of Rs.22,142/- in the case of Mr. Aditya Damani. Thus, total cash-in-hand of the family members was Rs.1,23,392/-. He, therefore, restricted the addition in respect of unexplained cash found in locker to Rs.2,65,208/- only. I.T.A. No.618/Kol/2021 Assessment Year: 2019-20 Basant Kumar Damani 3 3. Being aggrieved by the above order of the CIT(A), the assessee has come in appeal before us. The ld. counsel for the assessee has submitted that the amount found in the locker rented by the assessee was a joint locker with his wife. That the amount found at the locker was out of past savings of the assessee and his wife which inadvertently was not disclosed in the balance sheet. That the amount was a small amount which was saved over the time and that the said amount did not represent any unexplained income of the assessee. He has further submitted that even otherwise since the locker was joint with his wife, therefore, the entire cash found even otherwise cannot be added as income of the assessee. The ld. DR has relied upon the findings of the lower authorities. We have considered the rival submissions and gone through the records. It is to be noted that the amount found during the search action was a small amount which the assessee has claimed that the same has been saved out of past savings during long time by him and his wife. Though the aforesaid amount has not been reflected as cash in hand in the balance sheet of the assessee, however, considering the smallness of the amount and that too was found from the locker of the assessee which was placed along with jewellery of the family and that the amount was out of past savings of the assessee family and hence, considering the overall facts and circumstances of the case, we are of the view that the addition of the aforesaid amount was not warranted in this case. The same is accordingly ordered to be deleted. 4. Ground No.2 to 6 - The brief facts relating to the above issue are that during search at locker, total jewellery worth Rs.44,71,684/- was found. Out of jewellery/bullion found in the locker, 12 pieces of jewellery/bullion worth of Rs.36,41,318/- were found unexplained. Consequently, seizure of these 12 items worth of Rs.36,41,318 was made. During the appellate proceedings before CIT(A), the assessee submitted that the locker was in the joint name of the assessee and his wife and the jewellery/bullion of all the family members consisting of assessee, his spouse, his son, daughter and daughter-in-law was kept in the locker. Total weight of jewellery found was 1035.74 gms. Appellant further submitted that as per CBDT circular dated 11.05.1994, 1650 gms. of jewellery I.T.A. No.618/Kol/2021 Assessment Year: 2019-20 Basant Kumar Damani 4 gets explained as source of investment was not required to be explained as 500 gms. of jewellery for his spouse and daughter-in-law each, 250 gms for daughter and 200 gms each for himself and son was covered by the circular. Appellant further submitted that jewellery was very old and was also disclosed under VDIS. 5. However, the ld. CIT(A) observed that the CBDT Circular dated 11.05.1994 only clarifies that the minimum amount of jewellery which should be left in the possession of the assessee and his family members for their personal use. That non-seizure of this minimum quantity did not mean that the assessee was not required to explain the source of investment in such jewellery. He further noted that 16 items were found in the locker but only 12 items were seized, as these did not tally with the valuation report made at the time of VDIS declaration. He further noted that the assessee had claimed that some of the old items were remade as per latest design, but he failed to submit any proof in this regard. He further noted that only one locker of the assessee was seized, whereas his residential and other premises were not covered and it might be possible that some jewellery might be lying at the residential and other premises of the assessee. He further noted that as per the balance sheet of the assessee and his family members, the total disclosed investment in gold and jewellery was at Rs.9,06,149/-. He further noted that total value of jewellery and gold found in locker was Rs.44,71,684/- and out of this jewellery/gold worth Rs.36,41,318/- was seized. The jewellery/gold worth Rs.8,30,366/- were found to be explained. He, therefore, taking note of the investment in jewellery as per balance sheet at Rs.9,06,149/-. held that the value of the jewellery to that extent stood explained. He, accordingly, confirmed the addition to the extent of Rs.35,65,535/- in respect of jewellery found in the locker. 6. Being aggrieved by the above action of the CIT(A), the assessee has come in appeal before us. At the outset, the ld. counsel for the assessee has invited our attention to valuation report of jewellery dated 14.10.1997 which was prepared for VDIS scheme. As per the said report dated 14.10.1997, the assessee was possessed of 8 jewellery items worth of Rs.3,07,500/-. Further, as per the valuation report as on 31.03.2006, the assessee possessed 16 items of jewellery of the value of Rs.1093618/-. Both the above valuation reports have not been denied by the Revenue. The contention of the ld. counsel for the I.T.A. No.618/Kol/2021 Assessment Year: 2019-20 Basant Kumar Damani 5 assessee has been that the investment disclosed in the balance sheet was as per purchase price and not as per prevalent market rate of the jewellery. The items which were matched with the aforesaid list were not seized by the department. However, the items which did not match with the list were treated as unexplained. The case of the assessee is that some of the items were remade as per latest design. It is not the case of the Department that any gold/jewellery was found over and above the valuation as disclosed in the valuation dated 14.10.1997 and 31.03.2006. Moreover, as per CBDT Instruction No.1916 dated 12.05.1994, it has been stated that in a case of person not assessed to wealth tax, gold jewellery and ornaments 500 gms. per married lady 250 gms per unmarried lady and 200 gms. per male member of the family, need not be seized. It has been further provide that the authorized officer may having regard to the status of the family and the customs and practices of the community to which the family belongs and other circumstances of the case, decide to exclude a larger quantity of jewellery and ornaments from seizure. Considering the above CBDT Circular, Hon’ble Gujarat High court in the case of CIT vs. Ratanlal Vyaparilal Jain in Tax Appeal No.661 & 662 of 2009 decided on 19.07.2010 has observed as under: “10. Though it is true that the CBDT circular No.1916 dated 11.5.1994 lays down guidelines for seizure of jewellery and ornaments in the course of search, the same takes into account the quantity of jewellery which would generally be held by family members of an assessee belonging to an ordinary Hindu household. The approach adopted by the Tribunal in following the said circular and giving benefit to the assessee, even for explaining the source in respect of the jewellery being held by the family is in consonance with the general practice in Hindu families whereby jewellery is gifted by the relatives and friends at the time of social functions, viz., marriages, birthdays, marriage anniversary and other festivals. These gifts are customary and customs prevailing in a society cannot be ignored. Thus although the circular had been issued for the purpose of non-seizure of jewellery during the course of search, the basis for the same recognizes customs prevailing in Hindu society. In the circumstances, unless the revenue shows anything to the contrary, it can safely be presumed that the source to the extent of the jewellery stated in the circular stands explained. Thus, the approach adopted by the Tribunal in considering the extent of jewellery specified under the said circular to be a reasonable quantity, cannot be faulted with. In the circumstances, it is not possible to state that the Tribunal has committed any legal error so as to give rise to a question of law.” Considering the above stated proposition of law, in this case, as submitted by the counsel of the assessee, if the entire jewellery found in the locker is considered, still the same is less by 700 gms which a normal middle-class family was supposed to possess out of the I.T.A. No.618/Kol/2021 Assessment Year: 2019-20 Basant Kumar Damani 6 past savings, gifts etc. Therefore, in the light of the above observation of the Hon’ble Gujarat High Court, the aforesaid jewellery found from the locker of the assessee being less than the minimum quantity as instructed by the CBDT which a normal family under normal circumstances is supposed to possess, we do not find any justification on the part of the lower authorities to treat the same as unexplained. Moreover, as observed above, the above found jewellery is even otherwise less than the value of the jewellery already declared by the assessee in the valuation report from 1997 to 2006. In view of the above, the addition made by the lower authorities is ordered to be deleted. 7. Ground No.7 – Ground No.7 is reproduction of Ground No.1 and 6 and in view of our observation made above, the Ground is treated as allowed. 8. In the result, the appeal of the assessee stands allowed. Kolkata, the 17 th August, 2022. Sd/- Sd/- [Girish Agrawal] [Sanjay Garg] Accountant Member Judicial Member Dated: 17.08.2022. RS Copy of the order forwarded to: 1. Basant Kumar Damani 2. DCIT, Central Circle-2(1), Kolkata 3. CIT(A)- 4. CIT- , 5. CIT(DR), //True copy// By order Assistant Registrar, Kolkata Benches