Income Tax Appellate Tribunal - Ahmedabad
Gautam Laljibhai Gajjar vs Income-Tax Officer on 22 February, 1991
Equivalent citations: [1991]37ITD514(AHD)
ORDER
B.M. Kothari, Accountant Member
1. The assessee derives income from salary as Managing Director of M/s. Ugomi Private Limited, income from property and other sources. Proceedings of search under Section 132 of the Income-tax Act, 1961 was carried out at the residence of the appellant on 16-1-1982. The only point of dispute in this appeal relates to an addition of Rs. 46,232 made by the ITO on account of difference in the value of certain diamond ornaments found during the course of search. The other ground taken by the assessee relates to invalidity of interest charged under Sections 139(8) and 215 of the Income-tax Act.
2. During the course of search, diamond ornaments mentioned at Sr. Nos. 40 to 45 of the Annexure-A to the Panchnama dated 21-1-1982 were found, which was valued by the Valuer appointed by the Income-tax department at an aggregate sum of Rs. 75,300. Para 10 of the order passed under Section 132(5) dated 15-4-1982 reveals that Shri Gautam produced at the time of search a bill of M/s. V.J. Jewellers for Rs. 22,568 in respect of purchase of 17.35 carats of diamonds and the bill for labour charges for Rs. 6,500 to explain the sources of acquiring the aforesaid items of diamond ornaments valued by the department at an aggregate value of Rs. 75,300. The total value of the diamond jewellery in question according to the assessee works out to Rs. 29,068 (Rs. 22,568 + Rs. 6,500) as against the value of Rs. 75,300 determined by the department's Valuer. The difference of Rs. 46,232 was added by the ITO by rejecting the aforesaid explanation submitted by the assessee. The CIT(A) confirmed the order passed by the ITO in this regard.
3. In the ground No. 1 of assessee's appeal submitted before the Tribunal, the amount of addition appears to have wrongly been mentioned at Rs. 68,019 as against the addition of only Rs. 46,232 made by the ITO. However, in ground No. 5 which summarises the assessee's prayer for grant of relief, the amount of addition required to be deleted has been stated at Rs. 46,232.
4. Before us, the learned counsel for the assessee contended that during the contemporary period of search, the aforesaid bill for purchase of diamond and bill for making charges of the diamond ornaments were submitted before the authorised Officers, on the basis of which the diamond jewellery in question was released. The assessee also wrote a letter on 18-1-1982 to the Officer in charge of search operations under Section 132 requesting that the assessee may be allowed to keep his Valuer also present at the time of valuation, so that the Departmental Valuer may not value the ornaments on high side. The assessee did not receive any response from the said authority and was not allowed to have the benefit of presence of his Valuer. He further invited our attention towards his letter dated 12-4-1982 in which again a reference of the aforesaid letter submitted to the DDI was given. It was further contended that the value adopted by the Departmental Valuer is extremely high and cannot be accepted unless the assessee is given an opportunity to cross-examine the Departmental Valuer. The assessee submitted that the aforesaid diamond ornaments are fully verifiable from the purchase bills obtained from M/s. V J. Jewellers coupled with the bill for labour charges. The payment was made to M/s. V.J. Jewellers by cheques. There is no evidence that the assessee paid higher price that the one shown in the purchase bill and the bill for labour charges. He submitted that this matter is just like invoking the provisions of Section 52(2) without any basis. He also relied upon the judgment of Hon'ble Supreme Court in the case of K.P. Varghese v. ITO [1981] 131 ITR 597 (SC). It was further contended that the department has not discharged its burden of proving that the value stated in the purchase bill is not true and correct. In the absence of any material or evidence on records, the addition made by the ITO ought to have been deleted by the learned CIT(A). He also relied upon the decision of ITAT, Ahmedabad in the case of Babyland Hostel v. ITO [1988] 31 TTJ (Ahd.) 136 and decision of ITAT Delhi Bench in the case of Mohinder Kumar Bhatia v. ITO [1986] 16 ITD 627.
5. The learned Departmental Representative vehemently supported the orders passed by the departmental authorities. He contended that the judgment of Hon'ble Supreme Court in the case of K.P. Varghese (supra), is not at all applicable to the facts of the present case. He elaborately explained the reasons given by the ITO in order under Section 132(5) and in the regular assessment order under Section 143(3) to support his contention that the said addition has rightly been confirmed by the CIT (A).
6. We have carefully considered the rival submissions made by the learned representatives and have also gone through the entire material, to which our attention was drawn during the course of hearing. A perusal of para 8 of order passed by the ITO, under Section 132(5) shows that gold ornaments value at Rs. 88,874 appearing at S.Nos. 52 to 74 of Annexure-A to Panchnama dated 21 -1 -1982 were the only items, which were seized as the assessee could not explain the sources of those items. It is also an undisputed fact that the assessee produced at the time of search itself the above referred bill of M/s. V.J. Jewellers for purchase of 17.35 carats of diamonds and the bill for labour charges for making the diamond jewellery in question for Rs. 6,500. The authorised Officers of the department were apparently satisfied about the aforesaid explanation given by the assessee at the time of search itself and in view of such explanation, the authorised Officers had chosen not to seize the diamond ornaments appearing at Sr.Nos. 40 to 45 of the Annexure to the said Panchnama. The ITO has also not disputed the assessee's contention that the items of diamond jewellery valued by the department at Rs. 75,300 are those very items which were acquired by the assessee by purchasing the diamonds from M/s. V.J. Jewellers and thereafter getting it made by paying the labour charges of Rs. 6,500. The nexus between the aforesaid purchase invoices and bill for labour charges with the diamond jewellery found during the course of search has been accepted by the ITO himself, which is proved from the fact that he has made the addition of the difference amount of Rs. 46,232 by holding that the cost shown by the assessee cannot be accepted in preference to the valuation of the same jewellery made by the Departmental Valuer. Once the identity of the diamond jewellery found during the course of search has been accepted as explainable from the purchase voucher and labour charges bill produced by the assessee at the time of search as well as during the course of regular assessment proceedings, the addition for the difference amount of Rs. 46,232 could be made by the ITO only by establishing the fact that the value stated in the purchase invoice is fictitious. The burden clearly lies upon the department to prove that the value shown in the purchase invoice is not the real value. The department has not brought any material whatsoever on records to prove that the value of such diamonds embedded in the diamond jewellery at the time of its purchase in the month of July 1981 was under-stated in the purchase invoices. Such a burden is required to be discharged by the department by bringing clinching and conclusive evidence on records. The ITO has not even examined the jeweller from whom these diamonds were purchased.
7.1 The CIT(A) has also not given any reasons as to on what basis he was inclined to accept the stand taken by the ITO in treating the difference of the value of diamond jewellery as un-explained income of the assessee. In our view, the assessee has successfully discharged the initial burden of proving the sources of acquisition of aforesaid diamond jewellery by producing the aforesaid bills at the time of search. The authorised Officers apparently appears to be satisfied with those explanation, which is proved by the fact that they have chosen not to seize the said diamond jewellery in question. The ITO, thereafter has completely failed to bring any evidence on record to show that the cost of ornaments shown by the assessee does not represent the real cost.
7.2 Such a case made by the ITO cannot even be sustained by resort to Section 69B which provides that amount of investment etc. not fully disclosed in books of account may be deemed to be the income of the assessee for such financial year in which the assessee is found to be the owner of such assets. The legal fiction enacted in Section 69B comes into effect only where all the circumstances enumerated in Section 69B do factually exist. The onus to prove the existence of all circumstances lies on the department. There is no room or scope for making any presumption about the estimated or hypothetical value of the diamond jewellery in question. It must be factually established that the real investment made by the assessee for purchase of the diamond jewellery in question was more than what was shown in the purchase invoices. The valuation report prepared by the Valuer of the department at the time of search cannot be made the basis for concluding that the assessee really spent more amount than what has been shown in the respective purchase bill and bill for labour charges.
We are, therefore, of the considered view that the said addition cannot be sustained. The ITO is, therefore, directed to delete the addition of Rs. 46,232.
7.3 As regards interest charged under Sections 139(8) and 215, no arguments were advanced before us by the learned counsel for the assessee. However, the ITO is directed to grant consequential relief.
8. In the result, the appeal is partly allowed.