M.MAHAVEER CHAND , CHENNAI V. DCIT , CENTRAL CIRCLE - 3 (4) , CHENNAI

ITA 803/CHNY/2022

• Counselvise Citation: [2023] 101 COUNSELVISE.COM (IT) 9375 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Next Hearing Date: 18-10-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 21-09-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Gift; Business income; Income from undisclosed sources; Search and seizure; Cost of acquisition
• Section: 69; 132; 143(2); 73; 153C

Judgement Text

अपीलीय अिधकरण, ’ए’ Ɋायपीठ, चेɄई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI ŵी वी दुगाŊ राव Ɋाियक सद˟ एवं ŵी जी. मंजुनाथा, लेखा सद˟ के समƗ Before Shri V. Durga Rao, Judicial Member & Shri Manjunatha, G., Accountant Member आयकर अपील सं./I.T.A. No.803/Chny/2022 िनधाŊरण वषŊ/Assessment Year: 2018-19 Shri M. Mahaveer Chand, Old No. 31, New No. 32, Narayanappa Naicken Street, Old Washermenpet, Chennai 600 032. [PAN: AGMPM9554B] Vs. The Deputy Commissioner of Income Tax, Central Circle 3(4), Chennai. (अपीलाथŎ/Appellant) (ŮȑथŎ/Respondent) अपीलाथŎ की ओर से / Appellant by : Shri G. Baskar, Advocate ŮȑथŎ की ओर से/Respondent by : Shri AR V Sreenivasan, Addl. CIT सुनवाई की तारीख/ Date of hearing : 19.10.2023 घोषणा की तारीख /Date of Pronouncement : 22.12.2023 आदेश /O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) 18, Chennai, dated 26.08.2022 relevant to the assessment year 2018-19. The grounds raised by the assessee are as under: 1. Unexplained investment in gold and diamond jewellery – Rs.66,64,219/- 1.1 The CIT(A) erred in confirming the addition of Rs. 66,64,219/- towards gold ornaments found at the residence of the Appellant. I.T.A. No. 803/Chny/22 2 1.2 The CIT(A) erred in not noting that the Company, M/s.Kaleesuwari Jewellery Private Limited had considered the jewellery in its books of account. 1.3 The CIT(A) erred in not relying on the order of the Income Tax Settlement Commission confirming presence of gold ornaments of the Company at the residence of the Appellant. 1.4 The CIT(A) erred in upholding the additions, in the absence of any other evidence to support AO’s findings, apart from the statement of the Appellant, which was since retracted and thus had no legs to stand. 2. Unexplained investment in silver bars and articles – Rs.16,40,000/- 2.1 The CIT(A) erred in sustaining a part of the addition without considering the quantity of silver articles offered under wealth tax by the appellant and his relatives and the general practice and financial status of the appellant and other family members. 2.2 The claim made being lawful and allowable as per the provisions of the Act, the CIT(A) ought to have deleted the entire addition. 3 Addition u/s 115BBE @ 60% In any event, the CIT(A) failed to note that the Appellant is in the business of gold and silver jewellery and the addition, if made, would fall under business income and shall not attract Section 115BBE. 2. Brief facts of the case are that the assessee is an individual and Managing Director of M/s. Kaleesuwari Jewellery Private Limited (KJPL), which is part of Kaleeswari group of concerns. KJPL is engaged in the business of manufacturing and trading of bullion, gold ornaments, silver articles, etc. The assessee is one of the Directors of company KJPL. The assessee filed his original return of income for the assessment year 2018- 19 on 30.09.2018 showing a total income of ₹.28,81,760/-. I.T.A. No. 803/Chny/22 3 3. A search and seizure operation under section 132 of the Income Tax Act, 1961 [“Act” in short] was carried out in M/s. Kaleesuwari Jewellery Pvt. Ltd. and residential/business premises of the assessee was also searched. As certain incriminating materials were seized, which has a bearing on the determination of total income assessee, a notice under section 153C of the Act was issued to the assessee. The Assessing Officer, after issuing statutory notices under section 143(2) and 142(1) of the Act, completed the assessment by making addition towards unexplained investments in gold bullion of ₹.66,64,219/-. During the course of assessment proceedings, the Assessing Officer has asked the assessee to explain in respect of gold jewellery found in the residence of the assessee of 2.86 kg and diamond jewellery of 1.89 carats. By letter dated 20.11.2019, the assessee has submitted that he is the Managing Director and that the business was run by him. It was further submitted by the assessee that at times he used to take certain jewellery to show it to VIP customers at their residence and in case of delay in taking back such jewellery to the showroom due to late hours in the evening, for safety purposes, such jewellery was taken to his house and kept there and thereafter such jewellery was taken back to the shop the following day. The above stated gold jewellery of 2.86 kg and diamond jewellery of 1.89 carats thus, belonged to the company’s stock. The Assessing Officer has I.T.A. No. 803/Chny/22 4 noted that the KJPL has filed an application before the Income Tax Settlement Commission [ITSC] and it was seen that the KJPL has not taken the jewellery found in the assessee’s residence as its stock and this conclusively proves that the assessee’s claim is false. If the stock actually belonged to KJPL, nothing prevented him from saying the above fact during the course of search. On the contrary, the assessee clearly admitted in his sworn statement recorded under section 132(4) of the Act during the course of search proceedings that the jewellery belonged to him and that it is not part of the company’s stock and also agree to offer it as his additional income. Accordingly, the Assessing Officer assessed the value of excess gold & diamond jewellery found in his residence of the assessee at ₹.66,64,219/- as unaccounted income of under section 69 of the Act and brought to tax. 4. On appeal, the ld. CIT(A) confirmed the order of the Assessing Officer by observing as under: 7.1 The first addition -made is Rs.66,64,219/- representing unexplained investment in gold and diamond jewellery. 7.1.1 During the course of search, at the residence of the appellant, 6.72 Kg of Gold Jewellery and 21.19 carats of Diamond jewellery were found and inventorised vide annexure(s) ANN/SP/MC/ JEW/Gold/Found (1-4); ANN/SP/MC/Jew/Found (1-4) both dt. 18.05.2017 and valued at Rs. 1,71,67,213/-. After evaluating the Wealth tax return and other details submitted by the assessee, it is ascertained that the excess quantum of jewellery found is 2.86 Kg of gold and 1.89 carats of Diamond jewellery. The assessee has admitted in his sworn statements that the said excess gold & I.T.A. No. 803/Chny/22 5 Diamond jewellery was invested out of his unaccounted income earned over the period. This has been valued at Rs. 66,64,219/-. 7.1.2 In the appeal proceedings, the appellant had only reiterated the submission as he made before the AO. The submission of the appellant that the jewellery belonged to the company KJPL and therefore, it cannot be taken in his account. However, the KJPL has not taken the jewellery in the possession of the appellant to its stock at all and therefore the claim of the appellant cannot be accepted and has been rightly rejected as afterthought by the AO especially when the appellant at the time of search itself has accepted to offer the investment in unexplained jewellery in gold and diamond articles for tax. Though the appellant had retracted his earlier statement given at the time of search, there are no valid grounds to accept the claim that jewellery found in the possession of the appellant did not belong to him. All things considered, I am of the view that the AO has rightly brought to tax the unexplained investment in gold and diamond jewellery of Rs.66,64,219/-. The addition made is thus sustained and the grounds of appeal are dismissed. 5. On being aggrieved, the assessee is in appeal before the Tribunal. Before us, the ld. Counsel for the assessee as submitted that during the course of search, when the search team questioned the assessee, has explained that the gold and diamond jewellery belonged to him. However, subsequently, the assessee has retracted the same before the Assessing Officer. Therefore, the statement made by the assessee under section 132(4) of the Act cannot be a conclusive proof. The ld. Counsel for the assessee has pointed out that the company has filed an application before the ITSC vide application No. TN/CN/51/2019-20/18/IT dated 28.06.2019 and specifically pointed out that in the application filed befoe the Settlement Commission, it was clearly stated that gold ornaments seized at the residence of Shri Mahaveer Chand of 2866.20 gms and the Settlement Commission has already considered the application of the I.T.A. No. 803/Chny/22 6 assessee and passed the order accepting the gross profit ratio at 3.50% on the total value of the deficit stock and the same was offered before the ITSC as additional income. Once the ITSC has accepted the claim of the assessee and taxes are paid, again it cannot be taxed in the hands of the assessee and amounting to double taxation. 6. On the other hand, the ld. DR strongly supported the orders of authorities below. 7. We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. There was a search and seizure action carried in the premises and residence of the assessee and found unaccounted gold jewellery of 2.86 kg and diamond jewellery of 1.89 carats. When the assessee was asked, it was submitted that it is belonging to him under section 132(4) of the Act and subsequently, he has retracted the same before the Assessing Officer. The case of the Assessing Officer is that once the assessee has accepted under section 132(4) of the Act, it has to be taxed in the hands of the assessee even though subsequently, it was retracted the same. The above view of the Assessing Officer was confirmed by the ld. CIT(A). The case of the assessee is that gold and diamond ornaments found in the residence of the assessee Shri Mahaveer Chand has been offered for I.T.A. No. 803/Chny/22 7 taxation by KJPL and taxes are paid as per the decision of the Income Tax Settlement Commission and therefore, it cannot be taxed in the hands of the assessee. But, this aspect is concerned; the Assessing Officer was of the opinion that the KJPL has not taken the jewellery found in the assessee’s residence as its stock. We find that before the settlement commission, the KJPL made detailed submissions and after considering the same, the ITSC has observed and held as under: 8.4 Applicant’s reply: The correct working of the deficit stock is given as under: Grams Book stock (pg. 73 APB II) 66329.471 Gold ornaments (pg. 69 APB II) 28815.415 Gold ornaments (pg. 70 APB II) 5310.440 97455.326 Less: Physical Stock Gold Bar (pg. APBII) 9295.830 Gold ornaments (pg. 60 APB II) 20033.560 Gold ornaments (pg. 54 APB II) 5343.170 Gold ornament at the residence of Sh. Mahaveer Chand 2866.20 Gold ornaments on approval BKB Thangamaligai 1093.980 BKB Thangamaligai 1090.320 Palani Bapu Jewellers 6344.090 Gold ornament on job work Prithivi Link Works 5000.000 Prithivi Chain Works 5000.000 56067.150 Deficit Stock 41388.176 8.5 The applicant company stated that it had incorrectly written off the deficit stock for 37200 grams in the financial statement for the year ending 31.03.2017 instead of 41388.176 grams. Therefore, further stock in deficit to the extent of 4188.170 grams requires to be written off. The applicant company lodged a complaint against Sh. Mahaveerchand but it did not pursue the case because of the request of his family members. 9. DECISION 9.1 We have carefully considered the reports/submissions made by the Revenue and the Applicant’s side and perused the materials on record. On I.T.A. No. 803/Chny/22 8 thoughtful consideration of the information contained in the documents brought on record and after considering the written and oral submissions advanced by both the sides, our findings in respect of the issue involved in the applicant’s case are given below: 9. 2 We find that the Department did not find any unaccounted gold stock during the search and it had found only discrepancy in the stock of gold jewellery/bar/coins to the extent of 61470.715 grams and the said quantity was quantified at Rs.17.84 crores. However, the applicant company had quantified the stock at Rs.18.14 crores which is found to be higher than that of the Department. The request of the Department to treat the entire amount of ₹.17.84 as undisclosed income of the applicant on this count is not acceptable as it had applied only the market value while quantifying but not considered other factors such as manufacturing cost, purchase cost, etc. On the other hand, the applicant had applied Gross Profit ratio at 3.50% on the total value of the deficit stock and the same was offered before the ITSC as additional income. Therefore, we order the settlement of the case on the additional income disclosed in the Settlement Application.” 8. From the above, it is very clear that the Income Tax Settlement Commission had accepted the gold ornament found in the residence of Shri Mahaveer Chand and the Gross Profit ratio of 3.50% on the total value of the deficit stock offered by the assessee before the ITSC for taxation. Therefore, the Assessing Officer was not correct that the Settlement Commission not considered the gold jewellery found in the residence of Shri Mahaveer Chand as stock of KJPL and moreover, the ld. CIT(A) was also not correct in confirming the order of the Assessing Officer. Further, we are of the opinion that the assessee has accepted the unaccounted income under section 132(4) of the Act and subsequently retracted the same. Therefore, in view of the application of KJPL submitted before the Income Tax Settlement Commission that gold I.T.A. No. 803/Chny/22 9 jewellery found in the residence of Shri Mahaveer Chand and the same has been considered by the ITSC and offered for taxation, it cannot be taxed again in the hands of the assessee. In view of the above, we reverse the order passed by the ld. CIT(A) and allow the ground raised by the assessee. 9. So far as addition in respect of 90.172 kg of silver articles are concerned, during the course of search, the assessee accepted the excess silver articles found in the assessee’s premises were investments out of his unaccounted income earned over a period of time and agreed for ₹.18,50,000/- being value of silver articles. However, during the course of assessment proceedings, when the Assessing Officer has confronted with this issue, the assessee has retracted and claimed that the silver articles belonged to himself and his family members. Considering the sworn statement recorded under section 132(4) of the Act, wherein, the assessee had said that the excess silver articles were invested out of his unaccounted income earned and agreed to offer a sum of ₹.18,50,000/- being the value of the said silver articles, the Assessing Officer brought to tax the same. On appeal, the ld. CIT(A) has observed and held as under: 7.2.2 In the appeal proceedings before me, the appellant submitted that the silver articles found and seized belonged to the appellant, his mother, wife, sister and daughter who had acquired silver articles at the time of marriage and subsequently on various festive occasions by way of gifts and presents from relatives and friends. I have considered the submissions of the I.T.A. No. 803/Chny/22 10 appellant. The excess stock of silver articles was arrived at after considering the quantity of silver articles offered under wealth-tax by the appellant and his relatives. However, considering the general practice, customs and traditions that the appellant’s mother, wife and sister being married persons would have definitely brought some silver articles at the time of marriage and would have also received some quantity of silver articles on festive occasions, I allow 2 Kgs. for each of the female married members of the family and thus I would allow further 6 kgs of silver articles as explained by the appellant and sustain the addition only to the extent of 46.786 kgs. The value of 6 kgs of silver articles at Rs.35,000 per. kg works out to Rs.2,10,000/-. The appellant would get relief to this extent of ₹.2,10,000/- and the balance addition made is sustained. The grounds raised are partly allowed. 10. On perusal of the appellate order, we find that the ld. CIT(A) has reasonably allowed the relief and the balance addition was confirmed. We find no infirmity in the order passed by the ld. CIT(A) on this issue. Thus, the ground raised by the assessee is dismissed. 11. So far as ground No. 3 raised by the assessee in respect of addition under section 115BBE of the Act, this ground was neither raised before the ld. CIT(A) nor advanced any argument before the Tribunal. Thus, the ground raised by the assessee is dismissed. 12. In the result, the appeal filed by the assessee is partly allowed. Order pronounced on 22 nd December, 2023 at Chennai. Sd/- Sd/- (MANJUNATHA, G.) ACCOUNTANT MEMBER (V. DURGA RAO) JUDICIAL MEMBER Chennai, Dated, 22.12.2023 Vm/- I.T.A. No. 803/Chny/22 11 आदेश की Ůितिलिप अŤेिषत/Copy to: 1. अपीलाथŎ/Appellant, 2.ŮȑथŎ/ Respondent, 3.आयकर आयुƅ/CIT, 4. िवभागीय Ůितिनिध/DR & 5. गाडŊ फाईल/GF.