Assessee cannot be asked to prove something which is beyond its control

Brief of the Case

In the case of DCIT Vs. Raj Kumar Saraogi the Kolkata ITAT held that comparison with the items of jewellery found at the time of search with wealth tax return, which were filed much earlier was putting an onerous task on assessee to prove something impossible, and assessee cannot be asked to prove something which is beyond its control.

Facts of the Case

The Assessee had filed return showing total income of Rs.1,59,33,480/-. A search and seizure operation was conducted on 11.09.2009 in the residential premises of the assesse. In course of search and seizure operation in his residential flat along with his brother, Sri Pradeep Kr. Saraogi, jewellery worth of Rs.3,38,98,933/- was found out of which jewellery of Rs.1,78,93,857/- was seized and assessee in its disclosure petition u/s 132(4), disclosed his undisclosed jewellery at Rs. 75 lakhs. In order to explain the difference between the inventorised jewellery and jewellery disclosed in petition u/s. 132(4) of the Act, the assessee pointed out that the Wealth Tax return were filed by the family members before the date of search showing their respective jewellery.

It was further stated that apart from above, the family members purchased jewellery on the occasion of marriage of ShyamSaraogi, son of the assesse during the financial year 2008-09 and assessee filed copy of bills along with copy of the relevant bank statement in support of the said purchases of jewellery. He also submitted the details of jewellery offered by the Assessee as undisclosed vide reconciliation statement. The summary of details submitted by the assesse and the details of total Jewellery found in the course of search as per Department’s Valuer’s Report is as follows:-

Contention of the Assessee

During the assessment proceedings the assessee contended that no addition should be made on account of jewellery found in search because jewellery as per books including undisclosed jewellery disclosed vide reconciliation statement was more than that jewellery found during the course of search.

The assessee had, inter alia, submitted that gross weight of diamond and gold as per regular returns (including voluntarily offerings by assessee) was higher than the jewellery inventorized on search. It was pointed out that the ladies are in the habit of jewellery having different combinations i.e. some part of one set may be mixed with another set and, therefore, item to item reconciliation could not be possible since jewellery inventorized may not be exactly be in the lot as per in the return.

Contention of the Revenue

The AO compared the jewellery item wise and concluded that jewellery amounting to Rs.33,95,444/- could not be tallied. He found that assessee had disclosed the undisclosed jewellery out of jewellery found valuing at Rs.65,76,777/- and, therefore, he concluded that jewellery amounting at Rs.99,72,221/- remained not tallied. As the assessee had made the disclosure of Rs.75 lakh, the AO made the addition of Rs.24,72,221/-.

The Ld. DR of Department relied on the orders of the lower authorities.

Held by CIT(A)

Ld. CIT(A) relying on various decisions of Co-ordinate Benches wherein it has been held that jewellery has to be considered on the basis of gross weight even if item to item reconciliation of jewellery was not possible and he deleted the addition.

Ld. CIT(A) has observed that the gross weight of gold jewellery disclosed by the assessee in the Wealth Tax Returns, Purchases and as Non-reconciled or undisclosed, and the gross weight of Jewellery found during search and valued by the Department Valuer is not disputed/controverted in any manner by the Department. The only dispute was that assessee was not being able to reconcile item-wise jewellery which was found at the time of search vis-à-vis the wealth tax and purchases made during the financial year by assessee.

Held by ITAT

The Hon’ble ITAT is in agreement with the findings of Ld. CIT(A) that items of jewellery are often subjected to remaking on account of changing fashion and designs. In Indian society, the yellow metal and diamond has assumed lot of significance for ladies, which is a status symbol and they buy it or convert the jewellery as per the prevailing fashion. There has no gainsaying that fashion keeps on changing and, accordingly, the jewellery is re-modelled from time to time according to the prevailing fashion. Under the facts and circumstances, comparison with the items of jewellery found at the time of search with wealth tax return, which were filed much earlier, was putting an onerous task on assessee to prove something impossible, and assessee cannot be as bed to prove something which is beyond its control.