1. These cross-appeals arise from the order of the CIT(A) dt. 19th Feb., 2001, in the block assessment for the period 1st April, 1988, to 6th Aug., 1998, which are being disposed of by a common order for the sake of convenience.
2. In ground Nos. 1 and 2, the assessee has challenged the validity of assessment made under Section 158BC contending the same to be without jurisdiction.
3. After hearing the rival submissions of the parties and perusing the material available on record we find that the assessment has been framed pursuant to an action under Section 132 of the IT Act, 1961, the action so taken was duly authorised in respect of the appellant-assessee. No legal infirmity is found in such an action and the assessment has been completed within the period of limitation.
Under such circumstances, we do not find any force in the assessee's plea that the assessment is invalid, nor do we find that the assessment so framed is without jurisdiction. Accordingly, the ground Nos. 1 and 2 raised by the assessee are rejected.
4. Ground No. 3 in assessee's appeal is against the addition of Rs. 1,79,969 treating the gold Jewellery as unexplained.
5. The learned authorised representative submits that the jewellery weighing 692.270 gms. was found at the time of search on the assessee, from the bedroom, locker and on person of Smt. Saroj Devi, wife of the assessee. The assessee has claimed that all these items are disclosed jewellery of his wife in her income-tax and wealth-tax returns as well as under VDIS. The AO, however, considered jewellery 248 gms, as explained and balance jewellery weighing 444.27 gms, the value of which was worked out at Rs. 1,79,969, as unexplained and treated the same as undisclosed income of the assessee in view of the statement given at the time of search by the assessee's wife. The learned authorised representative further submits that the authorities below have erred in not considering. the factum of disclosure of jewellery in the wealth-tax returns as well as under VDIS, for which the CIT has issued a certificate. The disclosed jewellery, therefore, could not have been brought to, tax as undisclosed income of the assessee for the block period. The learned authorised representative also draws our attention to the chart of computation of net wealth of Smt. Saroj Devi for the asst. yr. 1994-95, showing the value of 550 gms. jewellery at Rs. 2,52,890. He also refers the balance sheet of the assessee's wife as on 31st March, 1997, in which the value of jewellery weighing 550 gms was declared at Rs. 2,52,890 along with list of the items of jewellery. In the statement Smt. Saroj Devi was asked about the cash and jewellery, which was lying in her possession as on the date of search i.e. 6th Aug., 1998, which was replied by her keeping in mind the jewellery, which is lying with her possession. Since the question could not be understood properly by her, therefore, she could not disclose the total weight of jewellery owned and disclosed by her in wealth-tax returns and VDIS. Further, the assessee, in his statement in reply to question No. 5, specifically stated that all the jewellery of the family members is declared in the income-tax/wealth-tax returns and they have no unexplained jewellery. Hence, the statement of the assessee in the case of the assessee should be considered properly. He, therefore, submits that the addition of 444.27 gms. of jewellery for Rs. 1,79,669 sh6uld be deleted:' 6. On the other hand, the learned Departmental Representative strongly relied upon the orders of the AO and the CIT(A) and contends that in view of the statement given by the assessee's wife, the AO has rightly treated the gold jewellery weighing 248 gms: as explained and in view of the reasons as mentioned in the assessment order, no further relief should be given to the assessee.
7. We have carefully considered the rival submissions of the parties, perused the material available on record and the decision relied upon by the learned authorised representative. We find that the jewellery found at the residence was inventorised in the name of assessee's wife Smt. Saroj Devi. Likewise the locker from which jewellery was found, was also held jointly by Smt. Saroj Devi and a slip was found along with jewellery of her name besides jewellery from the person weighing 74 gms. In her wealth-tax return for the asst. yr. 1994-95, Smt. Saroj Devi has disclosed jewellery weighing 550 gms. for the value of Rs. 2,52,890. The assessee's wife has also made a disclosure of 545.950 gms. Of gold jewellery under VDIS for which the CIT, Jaipur, has issued a certificate under Section 68(2) of the Finance Act, 1997, on 20th March, 1998. The Department has neither, revoked the said certificate, nor cancelled any of the wealth-tax assessment, for which the said Smt.
Saro] Devi has disclosed her gold jewellery. In her statement at the time of search, she also did not state about the total jewellery possessed by her. Even if there were certain infirmities .in her statement taken at the time of search, the correct facts that more jewellery, as informed by the assessee belonging to her and accepted by the Department, cannot be lost sight of even if the items tally was not available, as such infirmity may be because of several reasons, including mixing of jewellery at the time of inventorisation, conversion, etc. However, the fact remains that the jewellery found was of Smt. Saroj Devi and the same was much less than her disclosed jewellery. No addition on account of the disclosed jewellery of Smt.
Saroj Devi could have been made as undisclosed income in the hands of the assessee. The AO and the CIT(A) appear to have sustained the addition on the basis of suspicion alone. Suspicion however strong may be cannot take place of the evidence more particularly when Smt. Saroj Devi had disclosed the factum of acquisition of jewellery in her regular wealth-tax returns. If any action was warranted, that could have been taken only in the hands of the assessee's wife Smt. Saroj Devi. The same by no stretch of imagination can form part of the undisclosed income as defined under Section 168B(b) of the Act. Hence, the CIT(A) is found to have committed an error in upholding the action of the AO. Accordingly, the addition of Rs. 1,79,969 on this account is directed to be deleted, 8. Ground No. 4 in assessee's appeal is against the addition of Rs. 5,50,575 by treating the sale proceeds of gold and diamond jewellery as bogus, which was declared under VDIS by assessee's HUF and his wife Smt. Saroj Devi, 9. The learned authorised representative contends that the CIT(A) has erred in upholding the action of the AO because of non-genuineness of the declaration made under VDIS. the disclosure made by Shri Ashok Kataria, HUF (in short, assessee's HUF), and Smt. Saroj Devi were duly accepted as genuine by the GIT, Jaipur, and certificates were issued.
The assessee's HUF has sold the jewellery of Rs. 2,82,457 and his wife Smt. Saroj Devi has sold the jewellery for Rs. 2,23,118 as per details mentioned at page Nos. 7 and 8 of the assessment order. The AO has held that the said sales as fictitious one and alleged that the sale proceeds have been introduced in the accounts to build up capital by laundering the; undisclosed income without there being any evidence or material in his possession. The disclosures as well as the assessments of assessee's HUF and the assessment of the assessee's wife. Smt. Saroj Devi are intact. He further submits that the Revenue has not discharged its onus of alleged bogus sales. Reliance has been placed on the Hon'ble Supreme Court decision in the case of CIT v. Daulat Mal Rawat Mal (1973) 87 ITR 349 (SC) and Bed] & Co. (P) Ltd v. CIT (1998) 230 ITR 580 (SC). The sale proceeds 'Of the disclosed jewellery could not be treated as undisclosed income in the hands of the assessee. He, therefore, submits that the addition made on this amount Rs. 5,05,575 should be deleted.
10. On the other hand, the learned Departmental Representative supported the findings recorded by the authorities below.
11. We have carefuly considered the rival submissions of the parties, perused the material available on record, including the written submissions filed by the learned authorised representative and the decision relied upon by him. We find that the jewellery under sale was a disclosed jewellery of assessee's HUF and his wife, Smt. Saroj Devi.
The CIT, Jaipur, has accepted the said disclosures of Shri Ashok Kataria HUF and his wife, Smt. Saroj Devi Kataria to be a valid disclosures and issued certificates under Section 68(2) of the Finance Act, 1997, on 9th March, 1998, and 20th March, 1998, respectively. The valuation reports of jewellery disclosures were also filed along with the disclosure made by the assessee's HUF and his wife after verification of the existence of the jewellery. The certificates issued by the CIT, Jaipur, have not been withdrawn. The sale bills are also in the names of these two persons and have been credited to their respective accounts. Neither any material was found or brought on record by the AO that there has been laundering of undisclosed income, nor it was found as a result of search from which it could be said that the appellant gave cash for arranging sale bills or for taking payments in the names of these two persons. Parties to whom sales have been made have also not denied the genuineness of all the transactions with them.
The disclosed jewellery, which stood already sold, could not be held to be bogus because the same was not found at the time of search for the simple reason that what was disclosed stands duly disposed of to the extent of sale and in consideration thereof, the payment had been received and disclosed in the regular accounts. The authorities below have proceeded merely on the basis of suspicion and no evidence was found as a result of search from which it can be said that the disclosures made under VDIS are bogus. The AO had no power to declare such disclosures as fictitious disclosures. Merely because description of certain remaining items was not tallying is attributable to various other reasons, like mixing of jewellery and conversion, etc. However, the same does not lead to the conclusion or evidence that the disclosures were not genuine. The burden lay on the AO to prove that the disclosures made were bogus. This has not been discharged. No addition can be made merely on the basis of suspicion as undisclosed income for the block period. Even otherwise, the sale was made by two different persons, namely, Shri Ashok Kataria, Karta of HUF and his wife, Smt. Saroj Devi. Under no circumstances, the sale proceeds thereof could have been treated as undisclosed income of the assessee.
The CIT(A) is, therefore, found to have committed an error of upholding the action of the AO to treat the amount of sale as undisclosed income on the premises that declarations made under VDIS are not genuine. We therefore, direct the AO to delete the addition of Rs. 5,05,575 on this account.
12. Ground No. 5 in assessee's appeal is against the addition of Rs. 23,607 on account of unexplained investment in plot of land at Basant Colony.
13. The learned authorised representative submits that the assessee has declared investment in this plot of land at Rs. 16,000 in the balance sheet filed with the return for the asst yr. 1995-96. The AO, on the basis of the valuation made by the Departmental Valuer, who valued it at Rs. 39,607, has made an addition of Rs. 23,607, which was confirmed by the CIT(A). He further submits that no material was found as a result of search from which it could be said that the assessee had made any investment, which was not recorded in his books. He. therefore, submits that the addition made by the AO and confirmed by the CIT(A) should be deleted, 14. On the other hand, the learned Departmental Representative supported the orders of the authorities below on this account also.
15. After considering the rival submissions of the parties and perusing the material available on record, we find that this issue is covered by the decision of this Bench in the case of Shri Kunti Lal Kataria v. Dy.
CIT in ITSSA No. 19/Jp/2001, dt. 6th Nov., 2001 in favour of the assessee vide para 13 of the said order. Accordingly, the addition of Rs. 23,607 is, therefore, directed to be deleted.
16. Ground No. 6 in assessee's appeal and ground No. 3 in Revenue's appeal are with regard to the unexplained marriage expenses.
17. The learned authorised representative submits that the marriage of assessee's daughter Ms. Amita was solemnised on 21st Feb., 1994. The assessee has shown withdrawals towards marriage expenses at Rs. 70,000.
Besides this, the deposit of Rs. 24,472 in the account of Ms. Amita lying in the books of M/s Swastik Udyog and Rs. 10,130 in the books of M/s Swastik Products were also withdrawn for marriage expenses. In the course of search, no incriminating material was found to suggest the factum of higher marriage expenses. The AO, without any material, has estimated such expenses at Rs. 5,00,000, which was reduced by the CIT(A) to Rs. 4,00,000 with a direction to give further credit of withdrawals of Rs. 34,602 after verification. The learned authorised representative further submits that the addition made by the AO and sustained by the CIT(A) is beyond the scope of Chapter XIV-B of the Act, a no incriminating material or information was found to suggest that the marriage expenses are more that that declared. Hence, in view of the various decisions, the undisclosed income on account of marriage expenses should be deleted. In alternative, the learned authorised representative submits that the addition made by the AO is without any basis and ignoring the assessee's explanation giving details of marriage expenses. He, therefore, submits that the addition sustained by the CIT(A) should be deleted and the Revenue's appeal should also be dismissed.
18. On the other hand, the learned Departmental Representative supported the order of the AO, and submits that in view of the reasons given by the AO, the addition made by him should be upheld.19. We have carefully considered the rival submissions of the parties, perused the material available on record and the decision relied upon by the learned authorised representative. We find that no evidence as a result of search was found from which it could be said that the assessee has incurred higher marriage expenses, which has not been recorded or disclosed in the regular returns. Since the assessee has disclosed the marriage expenses in his regular returns, therefore, in the absence of any contrary material, we are of the view that the addition of marriage expenses cannot be made under Chapter XIV-(B) and hence the CIT(A) has erred in upholding the addition made on account of marriage expenses. Accordingly, the addition of Rs. 3,30,000 sustained by the CIT(A) -is directed to be deleted and consequently the ground taken by the Revenue is dismissed.
20. Ground No. 7 in assessee's appeal is against the addition on account of deposits in bank account, deposit with firm, investment in share and securities of Shri Akhil Kataria.
21. The learned authorised representative submits that the credits in the bank account, shares and other deposits are duly reflected in the balance .sheet filed with the first return for the asst. yr. 1995-96, therefore, these are the disclosed investments and hence .the addition made by the AO and confirmed by the CIT{A) is beyond the scope of Chapter-XIV-B and, accordingly, it should be deleted.
22. On the other hand, the learned Departmental Representative supported the orders of the AO and the CIT(A) on this account also.
23. After hearing the rival submissions of the parties, pursuing the material available on record and in the absence of any contrary material the additions so made are found to be beyond the scope of assessment under Chapter XIV-B of the IT Act. The AO, therefore, is not justified in treating the same as undisclosed income of the assessee for the block period. Accordingly, the addition of Rs. 46,680 is directed to be deleted.
24. Ground No. 8 in assessee's appeal relates to telescoping and set off.
25. After hearing the rival submissions of the parties, the AO is directed to allow telescoping and set off of the finally sustained additions of income with various investments treated as undisclosed income of the assessee. He shall, however, give a reasonable opportunity of being heard to the assessee before finally determining the undisclosed income of the block period after having due regard to various- findings and directions mentioned in this order.
26. Ground Nos. 1 and 2 in Revenue's appeal relate to the addition of Rs. 1,02,500 on account of undisclosed income under the head 'Agricultural income', which has been deleted by the CIT(A).
27. After hearing the rival submissions of the parties and persuing the material available on record. We find that the CIT(A) has decided this issue vide para 5.2 of her order which reads as under: being found in search as claimed, and the Khasra Girdawari showing production, the fact of agricultural production cannot be denied.
The reconsideration of quantum of such production and resultant income does not fall within purview of order under Section 158BC. The addition made as undisclosed income is therefore, directed to be deleted." In the absence of any contrary material having been found during the course of search or brought on record before us, no infirmity is found in the decision-taken by the CIT(A) and, accordingly, the Ground Nos. 1 and 2 raised by. the Revenue are rejected.
28. Ground No. 4 in Revenue's appeal is against the deletion of addition of Rs. 23,880 made by the AO on account of bogus short-term capital gains.
29. After hearing the rival submissions of the parties and examining the material available on record, we find that the CIT(A) has decided this issue vide paras 9 and 9.1 of her order, which are reproduced as under: "9. Appellant objects to addition for treating short-term capital gains declared on sale of shares as bogus. It is objected that no incriminating document was found. The assessee has furnished the distinctive number of shares purchased and sold where delivery was given/taken. Where the transaction was settled otherwise than by delivery copy of contract note was filed. The AO has wrongly observed that speculation in shares are not allowed by law in view of the above position the dealing in shares cannot be said to be fake/fictitious (paper book page Nos. 133 to 135 & 138 to 140). The assessee has offered the profit in share dealings in the regular returns and paid tax on it Even if it is not considered as share income, the tax liability is same. Hence, such declared income cannot be considered as undisclosed income under Chapter XIV-B. 9.1 In view of the above submissions made income having been declared, no addition was to be made afresh. Addition is therefore, directed to be deleted." In the absence of any contrary material having been found during the course of search, we decline to interfere in the finding recorded by the CIT(A) on this account also and, accordingly, the ground so raised by the Revenue is rejected." 30. In the result, the appeal filed by the assessee is partly allowed and that of the Revenue is dismissed.