Ankit Sharma Vs DCIT (ITAT Delhi)
Addition u/s 69A towards excess jewellery found unsustainable as assessee belonged to wealthy family
Introduction: In the case of Ankit Sharma vs. DCIT, the Income Tax Appellate Tribunal (ITAT) Delhi ruled that the addition made under Section 69A of the Income Tax Act for excess jewelry found during a search operation was unsustainable. The decision was based on the fact that the assessee belonged to a wealthy family, and the jewelry in question was received on occasions from relatives, making it reasonable.
Detailed Analysis: The case involved a search and seizure operation conducted under Section 132 of the Income Tax Act, 1961, at the residential premises of the assessee, Ankit Sharma. During the search proceedings, gold jewelry weighing 3877.5 grams with a value of Rs. 1,46,15,635 was found. The assessee could not explain the source of this jewelry during the search. After allowing for the eligible limit exemption, the remaining jewelry weighing 1627.5 grams, with a total value of Rs. 61,34,610 as of the date of the search, was treated as unexplained jewelry.
The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the addition. Dissatisfied with this decision, the present appeal was filed.
In its conclusion, the ITAT Delhi referred to a similar case, Vibhu Aggarwal vs. DCIT, where it was held that when the Assessing Officer makes an addition under Section 69A due to jewelry found in a search of the assessee, and the assessee belongs to a wealthy family and received jewelry on occasions from relatives, excess jewelry is reasonable. Consequently, no addition under Section 69A is warranted.
Based on the facts and circumstances of the case, along with the nature of the jewelry found and the total income declared, and considering previous judgments, the ITAT Delhi directed that the addition made in this case be deleted.
Conclusion: The decision by ITAT Delhi in the case of Ankit Sharma vs. DCIT emphasizes the importance of a reasonable and justified approach when making additions under Section 69A of the Income Tax Act. In this instance, the tribunal found that the addition for excess jewelry was unsustainable due to the assessee’s belonging to a wealthy family and the jewelry being received on special occasions from relatives. This ruling underscores the need for a fair and evidence-based assessment of such additions during income tax proceedings.
FULL TEXT OF THE ORDER OF ITAT DELHI
The present appeals have been filed by the assesses and the Revenue against the orders of ld. CIT(A)-4, Kanpur dated 27. 06. 2022.
2. In ITA No. 1842/Del/2022, following grounds have been raised by the assessee:
“1. That on the facts of the case, in law and under the circumstances, the Commissioner of Income Tax (Appeal)- 4, Kanpur erred in confirming the action of the assessing officer to make an addition of Rs. 20,44,870/- (1/3 of Rs. 61,34,610/-treated as unexplained jewellery) to the income of the appellant in respect of the alleged unexplained gold ornaments found at the time of search by invoking the provisions of section 69A read with section 115BBE of the Act. The addition confirmed is unjustified and bad in law.
2. That on the facts of the case, in law and under the circumstances, the Commissioner of Income Tax (Appeal)- 4, Kanpur erred to confirm the action of the assessing officer to make an addition of Rs. 20,44,870/- (1/3″ of Rs. 61,34,610/- treated as unexplained jewellery) by invoking the provisions of section 69A read with section 115BBE of the Act under section ignoring the plea that jewellery belonging to the daughter is also kept in the house. The addition confirmed by Hon ‘ble Commissioner of Income Tax (Appeal)-4, Kanpur is unjustified, unwarranted based on surmises, conjectures, and the same is bad in law.
3 That on the facts of the case, in law and under the circumstances, the Commissioner of Income Tax (Appeal)- 4, Kanpur erred to confirm the action of the assessing officer to make an addition of Rs 92,00,000/- to the incomer of the appellant for the alleged loan figures jotted on the rough paper bearing number Z-1, of Annexure LP-3, page number 27 by invoking the provisions of section 69A of the Act, while no such loan was ever received but these were only figures jotted to show higher cost. The addition confirmed by the Hon’ble Commissioner of Income Tax (Appeal) 4, Kanpur is based on surmises, conjectures and on mere hypothetical reasonings and the same is unjustified unwarranted and bad in law
4 That on the facts and in law and under the circumstances, the assessing officer erred to issue the penalty notice under section 271AAB and also the interest charged under section 234A, 2348, 234C and 234D is thus illegal and bad in law.”
3. In ITA No. 2124/Del/2022, following grounds have been raised by the Revenue:
“1. On facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made by Assessing Officer of Rs. 75,00,000/- on account of unexplained loan u/s 68 of the IT Act, 1961 without considering that lender company i.e. M/s Sarvottam Securities Pvt. Ltd. does not have the creditworthiness to pay huge amount of loan i.e. Rs. 1,50,00,000/- to the assessee as the lender company had declared income of Rs 9,99,730/- only during the year. Further, enquiries were made by the Investigation Wing and it was found that the lender company is a bogus entity and merely working for providing accommodation entries to various entities. Thus, the creditworthiness of lender and genuineness of the loan received by the assessee from M/s Sarvottam Securities could not be proved.
2. On facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made by Assessing Officer of Rs. 50,00,000/- on account of unexplained loan u/s 68 of the IT Act, 1961 without considering that lender company i.e. M/s Aspire Sales Pvt. Ltd. does not have the creditworthiness to pay huge amount of loan i.e. Rs. 50,00,000/- to the assessee as the lender company had declared income of Rs 6,36,870/- only during the year. Besides, from the perusal of balance sheet of the lender company for the period ending 31.03.2016, it is seen that it has shown total loan and advances given (short term and long term) of only Rs. 1,83,359/- during the year and no other loans and advances have been mentioned in the balance sheet. Further, during assessment proceedings, summon u/s 131 was issued to the lender company to verify the claim of the assessee but no response was made by it. Since the assessee failed to prove the genuineness of his receipt of loan from M/s Aspire Sales Pvt. Ltd., addition of Rs. 50,00,000/- made by the AO as unexplained loan u/s 68 of the Act, is justified.
3. On facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made by Assessing Officer of Rs. 25,00,000/- on account of unexplained loan u/s 68 of the IT Act, 1961 without considering that lender company namely M/s Moral Sales Pvt. Ltd. does not have the creditworthiness to pay huge amount of loan i.e. Rs. 25,00,000/- to the assessee as the lender company had declared income of Rs. 1,05,690/- only during the year. Only transaction through banking channel does not make a transaction genuine. Further, the assessee had not shown the amount of loans forwarded to the assessee in its balance sheet. Since the assessee failed to prove the genuineness of her receipt of loan from M/s Moral Sales Pvt. Ltd., addition of Rs.25,00,000/- made by the AO as unexplained loan u/s 68 of the Act, is justified.”
4. In ITA No. 2125/Del/2022, following grounds have been raised by the Revenue:
“1. On facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made by Assessing Officer of Rs. 1,50,00,000/- on account of unexplained loan u/s 68 of the IT Act, 1961 without considering that lender company i.e. M/s Sarvottam Securities Pvt. Ltd. does not have the creditworthiness to pay huge amount of loan i.e. Rs. 1,50,00,000/- to the assessee as the lender company had declared income of Rs 9,99,730/- only during the year. Further, enquiries were made by the Investigation Wing and it was found that the lender company is a bogus entity and merely working for providing accommodation entries to various persons/entities. Thus, the creditworthiness of lender and genuineness of the loan received by the assessee from M/s Sarvottam Securities could not be proved.
2. On facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made by Assessing Officer of Rs. 50,00,000/- on account of unexplained loan u/s 68 of the IT Act, 1961 without considering that lender company i.e. M/s Aspire Sales Pvt. Ltd. does not have the creditworthiness to pay huge amount of loan i.e. Rs. 50,00,000/- to the assessee as the lender company had declared income of Rs 6,36,870/- only during the year. Besides, from the perusal of balance sheet of the lender company for the period ending 31.03.2016, it is seen that it has shown total loan and advances given (short term and long term) of only Rs. 1,83,359/- during the year and no other loans and advances have been mentioned in the balance sheet. Further, during assessment proceedings, summon u/s 131 was issued to the lender company to verify the claim of the assessee but no response was made by it. Since the assessee failed to prove the genuineness of his receipt of loan from M/s Aspire Sales Pvt. Ltd., addition of Rs. 50,00,000/- made by the AO as unexplained loan u/s 68 of the Act, is justified.”
5. In ITA No. 2126/Del/2022, following grounds have been raised by the Revenue:
“1. On facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made by Assessing Officer of Rs. 2,55,00,000/- on account of unexplained loan u/s 68 of the 1.T Act, 1961 without considering that the lender company namely M/s KG Fivest Pvt. Ltd. does not have the creditworthiness to pay huge amount of loan i.e. Rs. 2,55,00,000/- to the assessee as the lender company had declared income of Rs 28,47,920/- only during the year. Further, enquiries were made by the Investigation Wing and it was found that the company is a bogus entity and merely working for providing accommodation entries to various entities. In such facts and circumstances, the creditworthiness of lender and genuineness of the loan received by the assessee from M/s KG Finvest Pvt. Ltd. could not be proved.
2. On facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made by Assessing Officer of Rs. 37,00,000/- on account of unexplained loan u/s 68 of the I.T Act, 1961 without considering that as the lender company M/s Sarvottam Securities Pvt. Ltd. does not have the creditworthiness to pay huge amount of loan i.e. Rs. 37,00,000/- to the assessee as the lender company had declared income of Rs 9,99,730/- only during the year. Further, enquiries were made by the Investigation Wing and it was found that the company is a bogus entity and merely working for providing accommodation entries to various entities. In such facts and circumstances, the creditworthiness of lender and genuineness of the loan received by the assessee from M/s Sarvottam Securities could not be proved.
3. On facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made by Assessing Officer of Rs. 80,00,000/- on account of unexplained loan u/s 68 of the IT Act, 1961 without considering that the lender company namely M/s Upaj Leasing and Finance Company Pvt. Lid does not have the creditworthiness to pay huge amount of loan i.e. Rs. 80,00,000/- to the assessee as the lender company had declared income of Rs 13,63,530/- only during the year. Further, enquiries were made by the Investigation Wing and it was found that the company is a bogus entity and merely working for providing accommodation entries to various entities. Since the assessee failed to prove the genuineness of his receipt of loan from M/s Upaj Leasing and Finance Company Pvt. Ltd., addition of Rs. 80,00,000/- made by the JAO as unexplained loan u/s 68 of the Act, is justified.
4. On facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made by Assessing Officer of Rs. 50,00,000/- on account of unexplained donation u/s 68 of the IT Act, 1961 without considering that the doner company namely M/s Amsoft Global Pvt. Ltd. does not have the creditworthiness to pay huge amount of loan i.e. Rs. 50,00,000/- to the assessee as the doner company had declared income of Rs 1,40,880/- only during the year. It had also not furnished its financial statement to prove its net worth and capital to forward loans. Further, enquiries were made by the Investigation Wing and it was found that the company is a bogus paper company and the transaction of giving loan to the assessee trust is bogus. It is also note worthy here that during search proceedings, the said amount of donation were accounted as corpus donations in the books of the assessee, however, after filing the return in consequence of notice u/s 153A, it converted the same from corpus donation to volunatry donation. Whereas the donor company had categorically stated that it had provided corpus donations to the assessee. In such facts and circumstances, the creditworthiness of donor company and genuineness of the donation received by the assessee from M/s Amsoft Global Pvt. Ltd. could not be proved.”
6. In ITA No. 2127/Del/2022, following grounds have been raised by the Revenue:
“1. On facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made by Assessing Officer of Rs. 1,00,00,000/- on account of unexplained loan u/s 68 of the I.T Act, 1961 without considering that the lender company namely M/s Sarvottam Securities Pvt. Ltd. does not have the creditworthiness to pay huge amount of loan i.e. Rs. 1,00,00,000/- to the assessee as the lender company had declared income of Rs 19,89,470/- only during the year. Further, enquiries were made by the Investigation Wing and it was found that the company is a bogus entity and merely working for providing accommodation entries to various entities. In such facts and circumstances, the creditworthiness of lender and genuineness of the loan received by the assessee from M/s Sarvottam Securities could not be proved.
2. On facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made by Assessing Officer of Rs. 3,30,00,000/- on account of unexplained donation u/s 68 of the I.T Act, 1961 without considering that the doner doner companies namely M/s Moral Sales Pvt. Ltd. & M/s Amsoft Global Pvt. Ltd. do not have the creditworthiness to pay huge amount of loan i.e. Rs. 2,80,00,000/- & Rs. 50,00,000/- respectively to the assessee as the doner companies had declared very low incomes during the year. It had also not furnished its financial statement to prove its net worth and capital to forward loans. Further, enquiries were made by the Investigation Wing and it was found that the company is a bogus paper company and the transaction of giving loan to the assessee trust is bogus. It is also note worthy here that during search proceedings, the said amount of donation were accounted as corpus donations in the books of the assessee, however, after filing the return in consequence of notice u/s 153A, it converted the same from corpus donation to voluntary donation. Whereas the donor company had categorically stated that it had provided corpus donations to the assessee. In such facts and circumstances, the creditworthiness of donor companies and genuineness of the donations received by the assessee from M/s Moral Sales Pvt. Ltd. & M/s Amsoft Global Pvt. Ltd. could not be proved.”
ITA No. 1842/Del/2022 (Assessee Appeal)
An kit Sharma Vs. ACIT
Unexplained Jewellery – Rs.20,44,870/-:
(1/3rd of Rs.61,34,610/-)
7. Keeping in view the similarity of facts, the adjudication in the case of Sh. Ankur Sharma applies mutatis mutandis.
8. For the sake of ready reference, the order of Sh. Ankur Sharma in ITA No.1843/Del/2022 vide order dated 03.10.2023 is reproduced hereunder:
“Unexplained Jewellery – Rs. 20,44,870/-:
(1/3r d of Rs.61,34,610/-)
3. Proceedings before the Assessing Officer:
“During the course of search & seizure operation conducted u/s 132 of the Income Tax Act, 1961 at the residential premises of the assessee at KA-5, Kavi Nagar Ghaziabad, gold jewellery weighing 3877.5 Grams amounting to Rs. 1,46,15,635/- was found. During the course of search proceedings, the assessee could not explain the source of the above jewellery. In this regard, the assessee vide notices u/s 142(1) of the Income Tax Act, 1961 dated 20.1 0.2020, 05.01.2021 and 16.01.2021, was required to explain the above cash, along with supporting documents and was also required to explain the source of the above cash, along with supporting documents. However no reply was received. Hence, the assessee, vide show cause notice dated 23.02.2021, was specifically required to explain the above said cash, along with documentary evidences and was required to explain the sources of the above said cash, along with documentary evidences. In response to the show cause, the AR of the assessee vide reply furnished on 06.08.2021, has stated that the jewellery has been inherited and received in marriages of the family members. However, the source of jewellery has not been properly explained by the assessee. In order to follow principles of natural justice, the CBDT’s instruction no. 1916 dated 11/05/1994 and press release dated 01/12/2016 regarding the eligible amount of jewellery that can be kept by the family members is applied. The family of the assessee consists of the following members who are eligible to claim benefit of above said jewellery to the extent of limit as prescribed in the above said circular.
