B. Srinivas Rao, Hyderabad V. Asst.CIT, Central Circle-I, Hyderabad

ITA 762/Hyd/2014

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 6618 (ITAT-HYDERABAD)
• Duration Of Justice: 7 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2010-2011
• Appeal Filed On: 27-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y.V.S.T. SAI
• Keywords: Retraction
• Section: 131; 132; 143(3); 250; 191; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “B”: HYDERABAD (THROUGH VIRTUAL CONFERENCE) BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA No. 762/H/2014 Assessment Year: 2010-11 B. Srinivas Rao, Hyderabad PAN – ADAPB 5985C Vs. Asst. Commissioner of Income-tax, Central Circle – 1, Hyderabad. (Appellant) (Respondent) Assessee by: Shri K.C. Devdas Revenue by: Shri Y.V.S.T. Sai Date of hearing: 08/11 /2021 Date of pronouncement: 10/12/2021 O R D E R PER L.P. SAHU, A.M.: This appeal filed by the assessee is directed against CIT(A) - 1, Hyderabad’s order dated 24/02/2014 for AY 2010-11 involving proceedings u/s 143(3) of the Income Tax Act, 1961 ; in short “the Act on the following grounds of appeal: “1. The learned Commissioner of income tax (Appeals)-I, by relying on the remand report of the learned AO, erred in holding that the source of jewellery of 298.39 ITA No. 762/Hyd/2014 B . S r i n i v a s R a o , H y d . :- 2 -: grams remained unexplained, in spite of furnishing the details of sources for full value of jewellery. 2. The learned Commissioner of Income tax (Appeals)-I erred in merely relying on the remand report of learned AO, which failed to consider the various sources in his remand report. 3. For the grounds of appeal pleaded as above and for such other grounds as may be prayed at the time of hearing it is prayed that the addition on account of jewellery of 298.39 grams may be deleted or to grant such other relief as the Han. Tribunal may deem fit.” 2. Briefly the facts of the case are that the assessee filed his return of income of Rs. 3,42,573/- and agricultural income of Rs. 1,40,000/- for the impugned AY 2010-11. A search and seizure operation u/s 132 of the Act was conducted in the group of M/s Prathima Educational Society, in which, the assessee is a Chairman and Managing Director. 2.1 During the course of search at the residence of Sri B. Srinivas Rao, the assessee on 10-9-2009, gold jewellery of net weight 3572.400 grams and diamonds weighing 40.6 carats were found and valued by the registered valuer at Rs.59,80,482/- in total. During the course of search proceedings, the appellant was asked to explain the sources for acquiring the jewellery . In reply, vide letter dt.5-10- 2009, he furnished the details of jewellery held by each family member and the sources thereof and submitted that the entire jewellery stands explained. When the appellant ITA No. 762/Hyd/2014 B . S r i n i v a s R a o , H y d . :- 3 -: was asked to furnish the evidences for the sources claimed, he replied that he is unable to explain the sources for the jewellery to the extent of 1622 grams and voluntarily offered the value of the same amounting to Rs.27,00,000/- as his additional income for the financial year 2009-10 relevant to the Asst.year 2010-11. During the course of assessment proceedings, the Assessing Officer noticed that in the return filed for AY 2010-11, the above income was not offered. Therefore, the Assessing Officer brought to tax the amount of Rs.27,00,000/- as additional income for AY 2010-11. 3. Aggrieved, the assessee preferred an appeal before the CIT(A) and during the course of appeal proceedings, it had been claimed by the appellant's representative that as per the Assessing Officer himself, the appellant had filed a letter dt.5-10-2009, furnishing a detailed family member- wise reconciliation of jewellery in the course of search. It is claimed that the jewellery found was either shown in the returns of income filed by the family members or representing purchases covered by bills, credit card payments or by wills etc., as explained in the above stated letter, which was ignored by the Assessing Officer. He also filed paper book/submissions. 4. In the light of the above contentions of the appellant, the CIT(A) requested the Assessing Officer to submit a ITA No. 762/Hyd/2014 B . S r i n i v a s R a o , H y d . :- 4 -: remand report after necessary verification of case records and evidences vide this office letter dt.9-4-2013. The Assessing Officer vide his letter dt.6-6-2013 had submitted a remand report in the matter. During the course of remand proceedings, the Authorized Representative of the appellant has filed the details of purchases of gold and jewellery by Sri B. Srinivasa Rao and B.Harini along with the sources before the Assessing Officer. The appellant was also asked to produce the capital account, ledger copies and balance sheet of Sri B. Srinivasa Rao and B. Harini which have been filed before the Assessing Officer. On examination of the transaction with reference to the capital account and ledger copies, the Assessing Officer found that the transactions are tallying with each other. The Assessing Officer has also submitted that the purchase transactions of gold and jewellery to the extent of 1323.61 grams as against 1622 grams are filed. 4.1 When a copy of the remand report was forwarded to the appellant for his submissions/objections if any, the appellant has submitted as under: "In spite of examining the details furnished by the assessee explaining the whole gamut of jewellery, at the end, the learned AO has suggested to treat Rs.27,00,000/- as unexplained merely basing on the declaration of the appellant at the time of search. It is, therefore, necessary to extract the sworn statement of the appellant at the time of search. ITA No. 762/Hyd/2014 B . S r i n i v a s R a o , H y d . :- 5 -: "Out of the above jewellery the sources for the jewellery to the extent of 1622 grams, the value of which is around Rs.27 lakhs is not readily explainable. In view of this I am offering an amount of Rs.27 lakhs as additional income, the details of which are required to be explained. I am willing to substitute the value of the gold jewellery to this extent with a demand draft. Hence it is requested that jewellery kept in the prohibitory order may please be released. I will submit demand draft for Rs.27 lakhs today. A perusal of the above declaration would reveal the following: i)The offer was a tentative one. The same is not unqualified, unambiguous. ii)This is apparent from the statement wherein the appellant has stated that the offer has been made as details were not readily available to explain the total quantity. iii) It further appears that he has admitted Rs.27 lakhs contending that the details were "required to be explained" iV)He has given Rs.27 lakhs by way of substitution only to secure release of jewellery kept under PO for sentimental reasons. Such an attempt may not be construed as an admission of any undisclosed income on account jewellery. v)It may kindly be appreciated that on no occasion subsequently at the stage of post search investigation, a confirmation of the said statement was taken by the Investigating officer. vi)Therefore while filing return, this amount was not shown and necessary explanation was filed explaining the jewellery. ITA No. 762/Hyd/2014 B . S r i n i v a s R a o , H y d . :- 6 -: vii)The Assessing officer only rested on the tentative and qualified explanation to make addition and the present Assessing officer supports the same. viii)While making the above submission / the appellant most humbly brings to CIT’s kind notice certain principles on admission for consideration. a)Admission is not conclusive of the matter stated therein. It is only a piece of evidence. In the case of the appellant from the beginning he has stated that the admission is made as the details are not readily available. Therefore/ it has been made clear that the admission is not conclusive. In course of assessment stage/ he has explained the position as during the intervening period from the date of search/ confirmation of the appellant on this score was not taken by the authorities. b )The admission was tentative and not unqualified. It was made subject to verification. In the case of [ Contech Transport Services P Ltd 2009 19 OTR 191 Mum] in course of search, the assessee admitted payment of speed money for clearance of goods to dock workers and others which were not supported by third party vouchers. This statement was confirmed in a subsequent statement under section 131 and also by an affidavit. As regards the admission, it was made with a condition that the same is subject to verification of books of account/ records and seized papers. But after a lapse of 58 days/ the assessee retracted from the earlier statement and informed that after verification/ it was found that such unvouched expenses were much less than what was originally admitted and accordingly/ declared the revised amount in the return. Assessment was framed on the basis of his original admission and affidavit. The principles enunciated in this case are: ITA No. 762/Hyd/2014 B . S r i n i v a s R a o , H y d . :- 7 -: i)The admission under section 132(4) was made in a very general manner and on an ad hoc basis. It was not unqualified as the same was given without reference to books and other seized materials. The same could not be a basis of assessment in the absence of evidence in the seized material to support the addition. Ij)Board's Instruction that no disclosure without the support of material evidence should be taken/ was relied upon by the ITAT. It was held that the Instruction is binding on the authorities. iii)It was held that the admission should be supported by material evidence which comprised of books and other details found in course of search. iv)An affidavit or statement made in a general manner without the support of any specific instances and material could not take the place of evidence to frame assessment. v)A statement under section 132(4) to the extent verified by the assessee, could be evidence to be utilized but the same could not support whole addition with regard to quantum. vi)Retraction could be possible at the time of filing the return. vii)The admission by the assessee while filing the return cannot give the authority a license to estimate the income in the absence of material collected on enquiry. In case no enquiry has been caused except relying on the statement made in a general manner, the assessment becomes infirm. viii)It was not correct to hold that admission of bogus expenses in the statement could be the basis of assessment when assessee suo motu worked out the undisclosed income from the seized document. ITA No. 762/Hyd/2014 B . S r i n i v a s R a o , H y d . :- 8 -: In this regard, it may be noted that the whole statement of the assessee may be considered to ascertain the true meaning of the same. There may be a case where some part may be favourable and other part not. It may be qualified. The object is to find out what the assessee has conceded against himself and therefore, could be presumed to be true. This necessitates evaluation of the whole statement. Therefore, when an assessee makes a qualified or a general statement of his undisclosed income, the statement cannot be used against him ignoring the qualifications placed on the statement and without causing further enquiry. One is precluded from converting that part of the statement which the assessee never intended to say and presume the same to be true.[ Lalla Sheoprasad v Juggernath 10 Ind App.74 (Privy Counsel)) c) It submitted that Board's Circular Circuiar No. F. No. 286/2/2003-1T (Inv.), dated 103-2003 emphasized to not take any admission of undisclosed income at the time of search. The purpose of search is to find evidence. It is humbly submitted that remissness of the department not to pursue enquiry and get the view of the appellant reconfirmed after the initial admission, when appellant never made an unqualified admission, cannot be a cause of addition. Therefore, sole reliance on the admission may not support the case of the department. " 4.2 After considering the submissions of the appellant and the remand report of the Assessing Officer, the CIT(A) held as under: “9.5 .......... It may be noted that during the course of search proceedings, the appellant vide his letter dt.5- 10-2009 has furnished the details of jewellery held by each family member and the sources thereof and submitted that entire jewellery stands explained. ITA No. 762/Hyd/2014 B . S r i n i v a s R a o , H y d . :- 9 -: During remand proceedings, the Assessing Officer reported that the appellant has filed all the details called for and found that the transactions are tallying with each other and stated that the purchase transactions of gold and jewellery to the extent of 1323.61 grams only filed during remand proceedings. Since the Assessing Officer did not give any adverse comments, it is assumed that the jewellery to the extent of 1323.61 grams stands explained and the addition made on account of jewellery to the extent of 1323.61 grams is ordered to be deleted and the addition made with regard to the balance of jewellery (i.e., 1622 - 1323.61 =298.39) is sustained.” 5. Aggrieved by the order of CIT(A) the assessee is in appeal before the ITAT. 6. Before us, the ld. AR of the assessee submitted that inspite of examining the details furnished by the assessee explaining the whole gamut of jewellery, at the end, the AO had suggested to treat Rs. 27,00,000/- as unexplained merely basing the declaration of the assessee at the time of search. In this connection, he referred to the reply submitted before the CIT(A) against the remand report of the AO quoted supra. He contended that the ld. CIT wrongly sustained the addition to the extent of jewellery weighing 298.39 grams. He submitted that as per the CBDT instruction at the time of search operation benefit of each female member of 500 gram and male member of 100 gram and female child of 250 gram in the family is allowed at the time of seizure made by the authorized officer. He, ITA No. 762/Hyd/2014 B . S r i n i v a s R a o , H y d . :- 10 -: therefore, submitted that the addition sustained by the CIT(A) to the extent of 298.39 grams of jewellery may be given benefit to assessee as per the CBDT Instruction. 7. The ld. DR, on the other hand relied on the order of CIT(A) and submitted that since the assessee failed to explain the jewellery of 298.39 grams, the CIT(A) is right in sustaining the same in the hands of the assessee. He further submitted that the Instruction No. 1916 dated 11/05/1994 is on the different footing that the assessee cannot get the benefit as prescribed in the Instruction. As per the Instruction, the prescribed limit of jewellery should not be seized by the searched team, but, the sources have to be explained by the assessee. 8. We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. In this connection, we refer to the CBDT Instruction No. 1916, dated 11 th May, 1994 wherein The Central Board of Direct Taxes has issued Guidelines in the matter of seizure of jewellery, which reads: “Instances of seizure of jewellery of small quantity in the course of operation under section 132 have come to the notice of the Board. The question of a common approach to situation where search parties come across items of jewellery has been examined by the Board and following guidelines are issued for strict compliance. ITA No. 762/Hyd/2014 B . S r i n i v a s R a o , H y d . :- 11 -: (i) In the case of a wealth-tax assessee, gold jewellery and ornaments found in excess of the gross weight declared in the wealth-tax return only need to be seized. (ii) In the case of a person not assessed to wealth-tax gold jewellery and ornaments to the extent of 500 gms. per married lady 250 gms per unmarried lady and 100 gms. per male member of the family, need not be seized. (iii) 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. This should be reported to the Director of Income- tax/Commissioner authorizing the search all the time of furnishing the search report. (iv) In all cases, a detailed inventory of the jewellery and ornaments found must be prepared to be used for assessment purposes. What this means is, Vide CBDT Instruction no. 1916 dated 11-05-1994, it has been clarified that no seizure should be made by the Search Party of the Jewellery and Ornaments found during the course of search proceedings under Section 132, where the same have been duly declared in the Wealth-tax Returns filed by the taxpayer or where such ornaments are within the prescribed limits of 100, 250 or 500 grams as stated in the said instruction.” 8.1 In the following cases, following the said CBDT guidelines, the benefit given to the assessee over and above the explained: • In case of CIT v. Satya NarainPatni [2014] 46 taxmann.com 440 (Rajasthan) the Rajasthan High Court held that the CBDT had clearly provided that prescribed limit of jewellery will not be seized, it would ITA No. 762/Hyd/2014 B . S r i n i v a s R a o , H y d . :- 12 -: mean that taxpayer, found with possession of such jewellery, will also not be questioned about its source and acquisition. • In case of CIT v. Ghanshyam Das Johri [2014] 41 taxmann.com 295 (Allahabad) the Allahabad High Court held that if one goes with CBDT's Instruction No. 1916, dated 11-5-1994 then a married lady of reputed family is expected to own 500 gms of ornaments. Therefore, jewellery found in possession to that extent could not be treated as undisclosed investment. • In the case of CIT v. Divya Devi [2014], it says that though it is true that the CBDT Instruction No. 1916, dt. 11th may, 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. 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. 8.2 In the case of N. Roja, Rayagada Vs. ACIT, IT(SS)A Nos. 101-106/CTK/2018, order dated 04/06/2020, the ITAT, Cuttack Bench has held that the assessee will get the benefit of Instruction No. 1916, dated 11/05/1994 over and above the explained quantity of ornaments/jewellery. The assessee is a married person and has a wife and daughter and, therefore, following the CBDT Instruction and the cases quoted supra, we hold that the unexplained gold jewelley 298.39 grams found in the possession of the ITA No. 762/Hyd/2014 B . S r i n i v a s R a o , H y d . :- 13 -: assessee cannot be treated as undisclosed investment in the hands of the assessee. Therefore, we set aside the order of the CIT(A) and direct the AO to delete the addition made to the extent of jewellery of 298.39 grams. Accordingly, the grounds raised by the assessee on this issue are allowed. 9. In the result, appeal of the assessee is allowed in above terms. Pronounced in the open court on 10 th December, 2021. Sd/- Sd/- (VIJAY PAL RAO) (L. P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated: 10 th December, 2021. kv Copy to : 1 B. Srinivasa Rao, H.No. 8-2-293/82/HH/32, Huda Heights Road No. 12, Banjara Hills, Hyderabad - 34 2 ITO, 7 th Floor, Aayakar Bhavan, Basheerbagh, Hyderabad 3 CIT(A) – I, , Hyderabad 4 CIT(Central), Hyderabad 5 ITAT, DR, Hyderabad. 6 Guard File. ITA No. 762/Hyd/2014 B . S r i n i v a s R a o , H y d . :- 14 -: S.No. Details Date 1 Draft dictated on 2 Draft placed before author 3 Draft proposed & placed before the Second Member 4 Draft discussed/approved by Second Member 5 Approved Draft comes to the Sr. PS/PS 6 Kept for pronouncement 7 File sent to Bench Clerk 8 Date on which the file goes to Head Clerk 9 Date on which file goes to A.R. 10 Date of Dispatch of order