Sunita Aggarwal, New Delhi vs Department Of Income Tax

BEFORE SMT/ DIVA SINGH, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. No. 2620/Del/2012 Assessment year : 2009-10 Acit, CC-2, Vs. Shailendra Kumar Aggarwal, New Delhi 240, Okhla Industrial Estate, Phase III, New Delhi. GIR / PAN:AACPA4448E

I.T.A.No. 2619/Del/2012 (Assessment Year 2009-10) ACIT, CC-2, Vs. Sunita Aggarwal, New Delhi 240, Okhla Industrial Estate, Phase III, New Delhi. GIR/PAN:AAAPA4413D (Appellant) (Respondent)

Appellant by : Shri Adesh Kumar Jain,CA Shri Akshat Jain, CA Respondent by : Shri BRR Kumar, Sr. DR Date of hearing : 25.03.2015 Date of pronouncement : 31.03.2015

ORDER

PER T.S. KAPOOR, AM:

These are two appeals field by Revenue against two different assessees against separate orders of Ld. CIT(A) both dated 27.03.2012. In I.T.A. No. 2619/Del/2012, the A.O. had made addition on protective basis on account of unexplained jewellery u/s 69 of the Act whereas the same addition has been made on substantive basis in the case of Shri Shailender Aggarwal in I.T.A. No. 2620/Del/2012. Besides the above substantive 2 ITA No.2620/Del/2012 I.T.A.No. 2619/Del/2012

addition, further addition has been made for Rs.20 lacs by A.O. on account of unexplained expenses on marriage of his son. Both these appeals were heard together, therefore, for the sake of convenience, common and consolidated order is being passed.

2. Ld. D.R. while arguing appeal in I.T.A. No. 2620/Del/2012, took us to assessment order and submitted that during the course of search on the assessee, huge amount of jewellery and diamond was found form the house and lockers of the assessee. The A.O. had determined the total value of jewellery at Rs.1,00,23,165/- and after accounting for additional income of Rs.58 lacs declared during the year the addition was made for remaining unexplained value of Rs.42,23,165 and therefore it was argued that the addition made u/s 69 needs to be upheld.

2.1 Regarding 2nd ground of appeal, Ld .D.R. submitted that the addition was made on the basis of statement of Shri Sharad Chaudhary, a relative of assessee, wherein he had stated that on the occasion of marriage of Shri Gaurav Aggarwal Son of Shri Shailender Kr. Aggarwal, he along with other family members had received gifts worth Rs.20,000/- to Rs.30,000/- each and therefore, the A.O. had rightly estimated the addition of rs.20 lacs which was made to meet out the expenses on gifts and related expenses, on the occasion of marriage.

3. Ld. A.R. on the other hand submitted that the assessee had duly explained the difference in value of jewellelry as per Wealth Tax Return and as found during search operation and therefore, there was no difference. He further submitted that the A.O. has arbitrarily taken value of Rs.18,000/- per ct. and that is why he has estimated the amount of unexplained jewellery which was based upon assumptions and surmises only. Ld. A.R. took us to 3 ITA No.2620/Del/2012 I.T.A.No. 2619/Del/2012

the findings of Ld. CIT(A) and submitted that Ld. CIT(A) has rightly understood the facts of the case and has rightly deleted the addition. 3.1 In respect of 2nd ground of appeal, Ld. A.R. submitted that Shri Sharad Chaudary and other family members who had claimed to have received cash gifts on the occasion of marriage of son of the assessee, had not claimed any credit in respect of cash receipts as gifts to explain cash found form their residence and lockers of assessee and therefore, the addition made by A.O. was not substantiated by evidence. Ld. A.R. invited our attention to the findings of Ld. CIT(A) and submitted that Ld. CIT(A) has understood the whole issue in its right perspective and deleted the addition.

4. We have heard rival parties and have gone through the material placed on record. We find that a search and seizure operation was carried in the case of the assessee and during the course of search and seizure operation, jewellery, and diamonds including cash was found from the residence and lockers of the assessee. The A.O. made addition holding that the jewellery etc. found and seized from the house/lockers of assessee were not solitaire but studded pendants, Mangalsutra etc. and he had taken a higher rate per ct for arriving at the value of jewellery and diamonds and compared with the value of jewellery as declared in the wealth tax return of the assessee and made the addition of difference after giving credit ofRs.58 lacs which the assessee had declared as additional income. We find that rates taken by A.O. was arbitrary and without any basis and Ld. CIT(A) has appreciated the facts and circumstances of the case and has deleted the addition by holding as under:

"4. Finding on Ground of Appeal No.1 4 ITA No.2620/Del/2012 I.T.A.No. 2619/Del/2012

Upon a careful consideration of the findings of the AO and the detailed submissions made by the appellant it is evident that the AO has given credit to the appellant from the jewelry and diamond items found during the course of search, based on the total weight of the gold jewellery and diamond items declared in the Wealth Tax and valuation reports as well as the items which have been purchased during FY 2008-09 out of the declared source or income by these two assessee's. Thus it is a fact on record that no item wise tallying of the description has been made in the facts of the case. This leaves the issue to be examined on two planes. Firstly, the fact that the total valuation of the gold jewellery and diamond items as per the various annexures prepared during the course of search, based on the valuation report of the Govt. approved valuer, is for Rs. 2,86,28,988/- which includes jewellery of the value of Rs. 28,72,547/- (493.5 grams) which belongs to Srnt. Nisha Aggarwal ,the daughter -in -Law of the appellant. On this issue the appellant has submitted that this jewellery is explainable in the hands of Smt. Nisha Aggarwal ,being married lady, as per Instruction No. 1916 dated 11.05.1994 issued by CBDT.

The appellant argues that as against this the total declaration made by the appellant and his wife Smt. Sunita Aggarwal is respectively for Rs. 25,83,849/- and Rs. 1,88,73,6421- in their Wealth Tax Returns for A Y 2008-09. Further to this the appellant and his wife Smt. Sunita Aggarwal have purchased jewellery amounting to Rs. 41,56,4701- and Rs. 16,55,996/- respectively during the period 01.04.08 to 14.01.09 and that apart from this the appellant has also declared additional. investment in jewellery for Rs. 58 lacs in his Wealth Tax Return for A Y 2009-10, which was acquired out of additional income of Rs. 1.80 Crores declared in return of income for A Y 2009- 10. In nut- shell the submission of the appellant veers around the proposition that the total value of jewellery declared by the appellant and his wife Smt. Sunita Aggarwal thus comes to Rs. 3,30,69,957/- while total jewellery valued at Rs. 2,86,28,988/- only was found during the course of search and therefore the appellant has declared jewellery of the value which is more than the jewellery found during the course of search and consequently there is no case for further addition to income in his case on this account.

Thus, if one were to go only by the total valuation aspect of the jewellery including diamond items found from the various premises of the appellant when compared to the total value of jewellery as declared in the Wealth Tax 5 ITA No.2620/Del/2012 I.T.A.No. 2619/Del/2012

Returns for A Y 2009-10 of the two assessee taken together, the submission of the appellant appears to be acceptable for the reason that even while including the value of jewellery belonging to Smt. Nisha Aggarwal (valued at Rs. 28,72,547/-) the total jewellery found is only for Rs. 2,86,28,988/- while the total value of gold jewelry including diamond items declared by the assessee and his wife comes to Rs. 3,30,69,957/- (inclusive of the additional investment of Rs. 58 lacs made out of the declared income of Rs. 1.80 Crores) which is at a higher figure than the value of jewellery found and therefore no further addition to income can be made on the basis of comparison between the valuation aspect of jewellery and diamond items. However, the above issue can be viewed from the other perspective of the comparison of total weight of jewellery and diamond items found during the course of search and the total weight of jewellery and diamond items as declared in the Wealth Tax Returns of the appellant and his wife Smt. Sunita Aggarwal for A Y 2003-04 onwards and including therein the total weight of gold jewellery and diamond items purchased by these two individuals from their accounted sources of income and declared in their return of income for respective assessment years.

Apparently, this exercise has also been carried out both by the AO as well as the appellant in his submissions made. This has also been carefully examined by me vis-a-vis the copy of Wealth Tax Returns and valuation reports dated 3l.3 .2003· as well as copies of bills for purchases made thereafter by the appellant and his wife and it is found that the AO has correctly worked out the difference that is excess of 73 3 .116 gram of gold and 116.40 carat of diamond. The appellant has also accepted this difference in this submission but has however tried to explain that this difference in jewellery and diamond is explained by the fact of investment of Rs. 58 lacs declared by the appellant in his Wealth Tax return for A.Y .2009-10, which in turn is invested from the total income of Rs. 1.80 Crores declared by him in his return of income. Thus the issue which remains to be examined is whether the AO is justified in applying average rate per carat of diamond and then extrapolating the same for valuing the excess Carats of diamond items found during the search. In my considered view the same is not legally permissible in the facts of the case as the entire valuation has apparently been carried out by Departmentally Approved Valuers who are experts in their field whereas the estimate made by the A.O. is based on a mathematical 6 ITA No.2620/Del/2012 I.T.A.No.

2619/Del/2012

exercise which may not be appropriate in valuation of diamonds which is highly subjective in nature. In view of these facts too the addition to income made for Rs. 42,23,165/- made by the A.O., after giving credit for the investment made in unexplained jewellery and diamond items from the additional income declared for Rs. 1.80 Crores, is directed to be deleted."

5. From the above findings of Ld. CIT(A), we find that Ld. CIT(A) has decided the issue after carefully examining the facts and circumstances of the case and we are in agreement with his findings and we do not find any infirmity in the same.

6. In view of above, ground No.1 of appeal is dismissed.

7. Ground No.2 has been decided by Ld. CIT(A) by holding as under:

"8. Finding on Ground of Appeal No.3:-

I have considered the submission of the appellant and the finding of the A.O. on the above addition to income in assessment order. I have also carefully gone through the written submission along with paper book filed by the appellant as well as the judicial pronouncements relied upon by the appellant. After considering the material placed on record, it is evident that estimated addition of Rs. 20,00,000/- on account of return gift on the marriage of the son's of the appellant has been made only on the basis of statement of Shri Sharad Chaudhary recorded during the course of search & seizure operation. There is no positive evidence found during the course of search and seizure operation which suggests that the alleged gift have been made. The appellant has contended that in the statement of Shri Sharad Chaudhary, he has stated that his family members including his father and mother have received gift of Rs. 20,000/- to Rs.30,000/- . However, they have not claimed any credit in respect of cash received a gift while explaining the cash found from their residence and lockers either in the return of income or assessment proceedings before the AO. The AO has also not given any credit in respect of ca h gift received by Shri Sharad Chaudhary and his mother and father while framing assessments in their cases. Thus the AO has partially relied upon the statement of Sharad Chaudhary which is beneficial to revenue and at the same time the said statement has not accepted 7 ITA No.2620/Del/2012 I.T.A.No. 2619/Del/2012

when the same is detrimental to the interest of revenue. I also find force in the contention of the appellant that even if for the sake of argument, the contention of the AO that the appellant has made gift of Rs 20,000/- to 30,000/- to Shri Sharad Chaudhary and his family members including his parents is considered as true, the said gift of Rs.20,000/- to 30,000/- could as well have been made out from the amount of Rs 39, 82,362/- withdrawn by the appellant for the purpose of marriage of his son. In fact the AO has himself acknowledged the said fact in the impugned order holding that the appellant has withdrawn Rs 39,82,362/- for the purpose of marriage of his son. Accordingly, the estimated addition for Rs 20,00,000/- on account of expenses on return gifts and related expenses on marriage of son of the appellant made without any corroboration apart from the un- confronted statement of Sh. Sharad Chaudhary, is bad in law and is hereby directed to be deleted."

8. We find that Ld. CIT(A) has decided the issue and has passed a speaking and well reasoned order. The Ld. CIT(A) has made a finding of fact that A.O. himself had held that assessee had withdrawn Rs/.39,82,362/-

for the marriage of his son and further the statement of Sh. Sharad Chaudary was without any corroborative material. In view of above, ground No.2 is also dismissed. Hence, the appeal filed by Revenue in I.T.A. No. 2620/Del/2012 is dismissed.

9. In I.T.A. No. 2619/Del/2012, the addition was made on protective basis only ;and since we have decided the appeal on substantive basis addition in favour of assessee, therefore, protective assessment made by A.O. does not survive and, therefore, the appeal filed by Revenue in I.T.A. No. 2619/Del/2012 is also dismissed.

8 ITA No.2620/Del/2012 I.T.A.No. 2619/Del/2012 10. In nutshell, both the appeals filed by Revenue are dismissed.

11. Order pronounced in the open court on 31st March, 2015.

Sd./- Sd./- ( DIVA SINGH) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER Date: 31.03.2015

Sp

Copy forwarded to:- 1. The appellant 2. The respondent 3. The CIT 4. The CIT (A)-, New Delhi.

5. The DR, ITAT, Loknayak Bhawan, Khan Market, New Delhi. True copy.

By Order

(ITAT, New Delhi).

S.No. Details Date Initials Designation 1 Draft dictated on Sr. PS/PS 2 Draft placed before author 26,30, Sr. PS/PS Draft proposed & placed before the 3 JM/AM Second Member Draft discussed/approved by Second 4 AM/AM Member 5 Approved Draft comes to the Sr. PS/PS 31/3 Sr. PS/PS 6 Kept for pronouncement 31/3 Sr. PS/PS 7 File sent to Bench Clerk 31/3 Sr. PS/PS Date on which the file goes to Head 8 Clerk 9 Date on which file goes to A.R. 10 Date of Dispatch of order