VINITA S. JHUNJHUNWALA, MUMBAI V. ACIT CEN CIR 11, MUMBAI

ITA 8837/MUM/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75273 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 20-01-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 16-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Search and seizure; Earning of tax free income; Valuation report
• Section: 143(3); 14A; 131; 132

Judgement Text

- 1 - VK;DJ VIHYH; VF/KDJ.K ,Q U;K;IHB EQACBZ ESAA IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUM BAI JH VKJ JH VKJ JH VKJ JH VKJ- -- - LH LHLH LH- -- - 'KEKZ] YS[KK LNL; ,OA 'KEKZ] YS[KK LNL; ,OA 'KEKZ] YS[KK LNL; ,OA 'KEKZ] YS[KK LNL; ,OA JH VFER KQDYK JH VFER KQDYK JH VFER KQDYK JH VFER KQDYK] U;KF;D LNL; DS ] U;KF;D LNL; DS ] U;KF;D LNL; DS ] U;KF;D LNL; DS LE{K LE{K LE{K LE{K BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER VK;DJ VIHY LA[;K /ITA NO.8837/MUM/2010 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR 2008-09 MRS. VINITA S. JHUNJHUNWALA FLAT NO. 41, 4 TH FLOOR, MEGHNA APARTMENT, S.V. ROAD SANTACRUZ (W), MUMBAI 400054. CUKE@ VS. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE -11, MUMBAI NEW CGO BUILDING, M.K. ROAD, MUMBAI. PAN:- ABFPJ7607L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VIHYKFKHZ DH VKSJ LS @ ASSESSEE BY SHRI PRAKASH JHUNJHUNWALA IZR;FKHZ DH VKSJ LS @ REVENUE BY SHRI O.P. SINGH VKNS'K@ VKNS'K@ VKNS'K@ VKNS'K@ ORDER PER R.C. SHARMA, AM. THIS IS AN APPEAL, FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A) DATED 12.10.2010 FOR A.Y. 2008-09, IN THE MATTER O F ORDER PASSED U/S 143(3) OF THE IT ACT. FOLLOWING GROUNDS HAVE BEEN T AKEN BY THE ASSESSEE:- 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERR ED INCONFIRMING THE ADDITION OF RS. 46,59,270/- ON ACCOUNT OF UNEXP LAINED JEWELLERY. LQUOKBZ DH RKJH[K@ DATE OF HEARING 20 - 01 - 2014 ?KKS'K.KK DH RKJH[K@ DATE OF PRONOUNCEMENT 20 - 01 - 2014 - 2 - 2. THE LD. COMMISSIONER OF INCOME TAX, ( APPEALS) F URTHER ERRED IN CONFIRMING THE ADDITION OF RS. 1,34,111/- ON ACCOUN T OF INTEREST PAID OF RS. 1,34,111/- 3. THE APPELLANT CRAVES LEAD TO ADD TO, ALTER OF MODI FY THE ABOVE GROUNDS OF APPEAL, AT THE TIME OF HEARING. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT ASSESSEE IS A RESIDENT INDIVIDUAL EN GAGED IN SHARE TRADING. SHE HAS DISCLOSED INCOME UNDER THE HEAD SALARY, BUS INESS, CAPITAL GAINS AND INCOME FROM OTHER SOURCES. SHE IS A DIRECTOR OF M/S JHUNJHUNWALA DISTRIBUTORS (P) LTD. AND ALSO A TRADER AND INVESTO R IN SHARES. SEARCH AND SEIZURE ACTION U/S 132 AND SURVEY ACTION U/S .133A OF THE ACT WERE CARRIED OUT ON 13/3/2008 IN THE PREMISES OF SHRI SUDHIR JHU NJHUNWALA GROUP AND THEIR ASSOCIATES. DURING THE COURSE OF SEARCH AND S EIZURE ACTION AN ASSESSEES PREMISES AT 41, 42, MEGHNA APARTMENTS, S .V. ROAD, SANTACRUZ (W), MUMBAI 400 054 GOLD AND DIAMOND JEWELLERY OF ASSESSEES FAMILY WERE FOUND AND PART OF THE SAME WERE SEIZED. THE AS SESSING OFFICER OBSERVED THAT JEWELLERY VALUED AT RS. 47,67,270/- WERE FOUND IN THE BEDROOM OF THE ASSESSEE ON 13/3/2008. 3. IT WAS EXPLAINED BY THE ASSESSEE THAT JEWELLERY WAS FOUND IN THE BEDROOM OF MR. SUSHIL JHUNJHUNWALA (HER HUSBAND) IS NOT REQUIRED TO BE ADDED IN HER HAND. IT WAS FURTHER CONTENDED THAT DU RING THE COURSE OF SEARCH ASSESSEE HAD NOT OWNED UP THE ENTIRE SEIZED JEWELLERY AND NO STATEMENT U/S 131 OR U/S 132(4) WAS EVER RECORDED. IT WAS ALSO EXPLAINED - 3 - THAT SOME OF THE JEWELLERIES BELONGED TO HER DAUGH TER MISS RITIKA JHUNJHUNWALA WHO HAS ALSO OWNED THE JEWELLERY AND H AD ALSO FILED HER WEALTH TAX RETURN MUCH PRIOR TO THE DATE OF SEARCH. HOWEVER, AO DID NOT AGREE WITH THE ASSESSEES CONTENTION TO THE EFFECT THAT ENTIRE JEWELLERY IN TERMS OF WEIGHT WERE DULY FURNISHED IN THE RESPECTI VE RETURNS, IN VIEW OF THE FACT THAT ASSESSEE COULD NOT MATCH EACH AND EVE RY ITEM OF JEWELLERY SO FOUND WITH THE JEWELLERY OFFERED BY ASSESSEE IN HER WEALTH TAX RETRUNS ETC. ACCORDINGLY ADDITION OF RS. 46,59,270/- WAS MA DE ON ACCOUNT OF JEWELLERY SO FOUND DURING COURSE OF SEARCH. AO ALSO MADE DISALLOWANCE ON ACCOUNT OF INTEREST EXPENDITURE. 3. BY THE IMPUGNED ORDER CIT(A) CONFIRMED THE ACTIO N OF THE AO BY OBSERVING THAT ASSESSEE HAS NOT FURNISHED RETURN OF INCOME OF A.Y. 2007- 08 TILL THE DATE OF SEARCH, EVEN THOUGH DUE DATE OF FILING OF RETURN HAS ALREADY EXPIRED. THE CIT(A) ALSO OBSERVED THAT VAL UATION OF JEWELLERY HAS NOT BEEN SHOWN IN THE BALANCE SHEET OF ASSESSEE AND THAT ASSESSEES FAMILY WERE NOT FILING WEALTH TAX RETURN SINCE LAST 15 YEARS AND THAT ASSESSEE WAS NOT IN A POSITION TO SHOW PURCHASE BIL LS AND ANY PURCHASE INVOICES. THE CIT(A) NOT ONLY CONFIRMED THE DISALLO WANCE OF INTEREST BUT ALSO DIRECTED TO ENHANCE THE ASSESSMENT BY DIRECTIN G THE AO TO MAKE FURTHER DISALLOWANCE AS PER RULE 8D R.W.S 14A OF IT ACT. 4. AGAINST THE ABOVE ORDER OF CIT(A) THE ASSESSEE I S IN APPEAL BEFORE TRIBUNAL. - 4 - 5. SHRI PRAKASH JHUNJHUNWALA APPEARED ON BEHALF OF THE ASSESSEE AND CONTENDED THAT FOLLOWING RECONCILIATION STATEMENT W AS FILED BEFORE THE LOWER AUTHORITIES:- RECONCILIATION OF GOLD AND DIAMOND JEWELLERY JEWELLERY FOUND IN SEARCH GOLD RS. 30,99,495/- 3025.40 GMS ========= DIAMOND RS. 15,59,775/- 57.14 CTS ======== GOLD (ATTACHED WITH DIAMONS ) 405 GMS ========== DISCLOSED BY APPELLANT AND HER FAMILY MEMBER A) AS PER VALUATION REPORT OF JOHRI RAJKUMAR BHANDARI DATED 12/9/1986 DISCLOSED IN W.T. RETURNS TILL 31/3/1992 1732.00GMS 34.80CTS 154.20GMS B) GOLD JEWELLERY ACQUIRED BY ASSESSEE DURING F.Y. 2006-07 OFFERED TO TAX 1222.00GMS -- -- C) DISCLOSED IN BALANCE SHEET OF SUSHIL JHUNJHUNWALA (HUF) 31/03/1995 -- 4.66CTS 0.80GMS D) PURCHASED BY MISS RITIKA S. JHUNJHUNWALA (DAUGHTER) IN F.Y. 2006 - 07 [ 70.50 CTS] -- 70.50CTS 250.00GMS STONES ATTACHED TO JEWELLERY ( RS. 73150/- 71.40GMS -- -- ------------- ------ -------- --------------- TOTAL 3025.40GMS 109.96CTS 405.00GMS =========== ========== ========== AS PER LD AR, CIT(A) ERRED IN IGNORING THE GOLD JEW ELLERY OF RS. 30,99,495/- (3025.40 GRAMS), BY IGNORING THE BELOW STATED FACTS;- A) THE APPELLANT DISCLOSED THE GOLD JEWELLERY WEIGHING 1732 GRAMS IN HER WEALTH TAX RETURNS OF 13/3/1986 TO 31/3/1992 FILED ALONGWITH VALUERS REPORT DATED - 5 - 19/3/1986. THE MANY ITEMS STATED IN VALUATION REPOR T OF M/S RAJKUMAR BHANDARI DATED 19/03/1986 MATCHES WITH THE JEWELLERY SEIZED BY THE DEPARTMENT. B) THE JEWELLERY ACQUIRED BY APPELLANT DURING A.Y. 200 6-07 OF RS. 12,19,000/- HAD ALREADY BEEN OFFERED TO TAX UND ER INCOME FROM OTHER SOURCES IN A.Y. 2007-08. THE LD. AO, IN SCRUTINY ASSESSMENT, HAD CONSIDERED SUCH ADDITIO NAL INCOME OF RS. 12,24,000/- IN A.Y. 2007-08. 6. AS REGARDS DIAMOND JEWELLERY OF RS. 15,59,775/- (57.14 CARATS), CIT(A) ERRED IN IGNORING FOLLOWING VITAL F ACTS. A) THE APPELLANT DISCLOSED THE DIAMOND JEWELLERY WEIGH ING 34.80 CARATS IN HER WEALTH TAX RETURNS OF 31/3/1986 TO 31/3/1992 FILED ALONGWITH VALUERS REPORT DATED 19/3/1986. THE MANY ITEMS STATED IN VALUATION REPOR T OF M/S RAJKUMAR BHANDARI DATED 19/3/1986 MATCHES WITH THE JEWELLERY SEIZED BY THE DEPARTMENT; B) THE DIAMOND JEWELLERY VALUING OF RS. 9,05,000/- (70 .50 CARATS) HAD BEEN OWNED BY MISS RITIKA JHUNJHUNWALA (DAUGHTER). THE SAID MISS RITIKA JHUNJHUNWALA ALSO FILED HER CONFIRMATORY LETTER ACCEPTING THE OWNERSHIP OF DIAMOND JEWELLERY OF 70.50 CARATS AND FILED COPIES OF - 6 - THE PURCHASE BILL, BANK STATEMENT EVIDENCING CHEQUE PAID BEFORE SEARCH AND IT RETURN ON RECORD; 7. ON THE OTHER HAND LD. DR RELIED UPON THE ORDERS OF LOWER AUTHORITIES AND CONTENDED THAT ASSESSEE COULD NOT M ATCH THE JEWELLERY DURING THE COURSE OF SEARCH WITH THE JEWELLERIES AC QUIRED BY HER AND SHOWN IN THE WEALTH TAX RETURNS FILED BY HER. 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND HAV E CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND FOUND F ROM RECORD THAT THE ASSESSEE HAD FILED VALUATION REPORT OF JEWELLERY AS PREPARED BY VALUER JOHARI RAJKUMAR BHANDARI DATED 12.09.1986 WHICH WAS DISCLOSED IN WT RETURNS TILL 31/3/1992 AND THE SAME AMOUNTED TO 173 2.00 GMS. THE ASSESSEE HAS ALSO OFFERED GOLD JEWELLERY WEIGHING O F 1222.00 GMS DURING FINANCIAL YEAR 2006-07 WHICH WAS ALSO OFFERED TO TA X AS INCOME FROM OTHER SOURCES. STONES ATTACHED TO JEWELLERIES WHI CH WAS ACQUIRED BY ASSESSEE DURING FINANCIAL YEAR 2006-07 WAS ALSO OFF ERED TO TAX AS INCOME FROM OTHER SOURCES AND WHICH AMOUNTED TO 71.40 CARA TS. THUS TOTAL GOLD JEWELLERY OF 3025.40 GRAMS HAVING VALUE OF RS. 30, 99,495/- WAS EXPLAINED BY ASSESSEE. IN RESPECT OF DIAMOND OF RS. 15,59,775 /- FOUND DURING THE COURSE OF SEARCH, THE ASSESSEE HAS FURNISHED THE VA LUATION REPORT OF JOHARI RAJKUMAR BHANDARI DATED 12.09.1986 WHICH WAS DISCLOSED IN THE WT RETURNS TILL 31.03.1992, COMPRISING OF DIAMOND OF 34.80 CARATS, GOLD (ATTACHED WITH DIAMOND) 154.20 GMS. THE ASSESSEE HA S ALSO FURNISHED THE DETAILS REGARDING DIAMOND JEWELLERY DISCLOSED IN TH E BALANCE SHEET OF SUSHIL JHUNJHUNWALA (HUF), AS ON 31.03.1995 EQUAL T O 4.66 CARATS OF - 7 - DIAMOND AND 0.80 GRAMS OF GOLD. EVIDENCES HAVE ALSO BEEN FURNISHED WITH REGARD TO DIAMOND OF 70.50 CARAT PURCHASED BY MISS. RITIKA JHUNJHUNWALA IN THE FINANCIAL YEAR 2006-07 WHICH WA S ALSO HAVING GOLD OF 250.00 GRAMS. THUS OUT OF TOTAL DIAMOND JEWELLERY F OUND, THE ASSESSEE HAS FURNISHED EVIDENCE WITH RESPECT TO DIAMOND OF 1 09.96 CARATS AND GOLD OF 405.00 GRAMS. 9. THUS AS PER RECONCILIATION STATEMENT, THE ASSESS EE HAS TRIED TO EXPLAIN THE JEWELLERY FOND DURING THE COURSE OF SEA RCH WHICH WAS DULY RETURNED BY THE ASSESSEE AS WELL AS BY THE OTHER ME MBERS OF HER FAMILY IN THEIR WEALTH TAX RETURNS OR BY WAY OF DOCUMENTARY E VIDENCE. MERELY ON THE BASIS THAT THE DESCRIPTION OF THE JEWELLERY FON D DURING THE COURSE OF SEARCH WAS NOT MATCHING WITH THE JEWELLERY DESCRIBE D BY ASSESSEE IN HER RETURNS AS WELL AS THE BILLS OF PURCHASE OF SUCH JE WELLERY BY MISS RITIKA JHUNJHUNWALA, THE AUTHORITIES BELOW WAS NOT JUSTIFI ED IN ADDING THE ENTIRE AMOUNT OF JEWELLEARY AS UNDISCLOSED INCOME OF THE A SSESSEE. LD. AR HAVE RELIED ON VARIOUS JUDICIAL PRONOUNCEMENTS OF CO-ORD INATE BENCH OF TRIBUNAL WHEREIN IT WAS HELD THAT NO ADDITION IS WA RRANTED ON ACCOUNT OF JEWELLERY FOUND DURING THE COURSE OF SEARCH, MERELY BECAUSE DESCRIPTION OF JEWELLERY HAS NOT MATCHED WITH THE DESCRIPTION A LREADY RETURNED BY THE ASSESSEE OR SHOWN IN THE HANDS OF OTHER MEMBERS OF THE FAMILY. IN THE CASE OF DCIT VS. RAJ KUMAR AGARWAL 102 TTJ 991 (JD), IT WAS OBSERVED THAT WHERE GOLD JEWELLERY DECLARED BY ALL FAMILY M EMBERS, AND WHEN THERE IS NOTHING ON RECORD TO SHOW THAT GOLD JEWELL ERY BELONGING TO OTHER FAMILY MEMBERS RESIDING IN THE SAME PREMISES WAS KE PT IN ANOTHER PLACE AND HENCE THE SAME HAVING BEEN FOUND IN ASSESSEES ROOMS CANNOT BE - 8 - DISBELIEVED. IN THE CASE OF GAURISHANKER OMKARMAL VS. ITO 37TTJ 353 (AHD), IT WAS OBSERVED THAT WHERE THE PROOF REGARDI NG CONVERSION OF JEWELLEY FOUND DURING THE COURSE OF SEARCH IS NOT FOUND, THE JEWELLERY DISCLOSED BY THE ASSESSEE UNDER THE VOLUNTARY DISCL OSURE SCHEME CANNOT BE DISBELIEVED. IT WAS OBSERVED THAT WHEN THE JEWEL LERY DISCLOSED UNDER THE VOLUNTARY DISCLOSURE SCHEME NOT FOUND DURING TH E COURSE OF SEARCH MIGHT HAVE BEEN SOLD AND THAT TOO WILL CONSTITUTE A VALID SOURCE FOR EXPLAINING THE SOURCE OF ACQUISITION OF OTHER JEWEL LERIES WHICH WAS FOUND DURING THE COURSE OF SEARCH, ACCORDINGLY, JEWELLERI ES DISCLOSED IN THE RETURN, CANNOT BE IGNORED WHILE MAKING ADDITION OF OTHER JEWELLERIES FOUND WHICH DO NOT MATCH WITH THE JEWELLERY RETURNE D BY THE ASSESSEE. IN THE CASE OF DCIT VS. ARJUN DAS KALWANI 102 TTJ 977 (JD), IT WAS OBSERVED BY THE BENCH THAT SIMPLY BECAUSE THE ITEMS OF ORNAM ENTS DO NOT TALLY WITH THE ITEMS SHOWN IN THE INVENTORY PREPARED AT T HE TIME OF EARLIER SEARCH AND THE ASSESSEE COULD NOT LEAD EVIDENCE OF CONVERSION OR REMAKING OF JEWELLERY, IT CANNOT BE SAID THAT THE J EWELLERY TO THIS EXTENT IS UNEXPLAINED. 10. IN VIEW OF JUDICIAL PRONOUNCEMENTS CITED BY LD. AR AND DISCUSSED HEREINABOVE, WE CAN SAFELY CONCLUDE THAT WHEN QUANT ITY OF JEWELLERY DISCLOSED BY THE ASSESSEE IS SAME AS THE QUANTITY O F JEWELLERY FOUND DURING THE COURSE OF SEARCH, NO ADDITION IS WARRANT ED MERELY BECAUSE THE DESCRIPTION IS NOT MATCHING. IT IS A VITAL FACT TH AT LADIES GET JEWELLERY CONVERTED AS PER LATEST DESIGN AND FOR WHICH EVEN T HE CONCERNED MAN IN THE FAMILY IS BEING NOT INFORMED. IN THESE CIRCUMST ANCES MERELY BECAUSE OF CONVERSION OF SUCH JEWELLERY, CANNOT BE MADE BAS IS FOR MAKING - 9 - ADDITION, WHEN THE JEWELLERY DISCLOSED BY THE ASSES SEE EITHER IN ITS OWN HAND OR IN THE HANDS OF THEIR FAMILY MEMBERS PRIOR TO THE DATE OF SEARCH IS EQUAL TO OR MORE THAN THE JEWELLERY FOUND DURING THE COURSE OF SEARCH. 10. IN VIEW OF THE ABOVE DISCUSSION, MATTER IS REST ORED BACK TO THE FILE OF AO WITH THE DIRECTION TO EXAMINE THE RECONCILIAT ION STATEMENT FURNISHED BY ASSESSEE AND IF THE AO FINDS THAT THE DISCLOSED JEWELLERY WAS EQUAL TO OR MORE THAN THE JEWELLERY FOUND DURING TH E COURSE OF SEARCH IN TERMS OF WEIGHT, NO ADDITION IS WARRANTED IRRESPECT IVE OF THE FACT THAT ASSESSEE COULD NOT MATCH THE DESCRIPTION OF JEWELLE RY SO FOUND WITH RESPECT TO THE JEWELLERY ALREADY RETURNED OR DISCLO SED IN HER HAND OR IN THE HANDS OF OTHER FAMILY MEMBERS. ACCORDINLGY, AO IS DIRECTED TO RE- ADJUDICATE THE MATTER AFRESH IN TERMS OF OUR ABOVE OBSERVATIONS. WE DIRECT ACCORDINGLY. 11. AS REGARDS THE DISALLOWANCE OF INTEREST U/S 14A , WE FIND THAT DISALLOWANCE HAS BEEN MADE WITH RESPECT TO THE INTE REST ON THE BORROWED FUNDS UTILIZED FOR INTEREST FREE INVESTMEN T IN THE FORM OF SHARES. THE AO OBSERVED THAT BORROWED FUNDS HAS BEE N USED MAINLY FOR INVESTMENT IN SHARES, INCOME FROM WHICH IS NOT INCL UDED IN TAXABLE INCOME. THE ASSESSEE WAS ASKED TO FURNISH THE WORKI NG OF DISALLOWABLE AMOUNT U/S 14A 1, 2 &3, R.W.R 8D. HOWEVER NO DETAIL S WAS FURNISHED BY THE ASSESSEE AND IT WAS SUBMITTED THAT NO DIVIDEND INCOME WAS EARNED. AFTER APPLYING RULE 8D, THE AO COMPUTED THE DISALLO WANCE AT RS. 1,34,111/-. - 10 - 12. WE DO NOT FIND ANYTHING WRONG IN THE CALCULATIO N MADE BY AO FOR DISALLOWING THE EXPENDITURE DEBITED TO THE P&L ACC OUNT WHICH WAS ATTRIBUTABLE TO INCOME NOT LIABLE TO TAX. ACCORDING LY WE CONFIRM THE DISALLOWANCE OF RS. 1,34,111/-. 9. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED IN PART FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 20 /01/2014 SD/- SD/- ( AMIT SHUKLA ) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED 20 /01/2014 SKS SR. P.S COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, E BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI