Late Smt. Abida Mohammed Rakhangi Vs ITO (ITAT Mumbai)- ITAT held that we cannot also shut our eyes to reality of Indian lives wherein there is a love, pride and preference of Indian households to invest and hold gold ornaments etc for their usage as well for rainy days wherein gold can be sold to tide over financial difficulties. However, we also note that there is a CBDT instruction/guidelines no. 1916 dated 11th May, 1994 which although relates to non seizure of gold during the course of search operation u/s 132 which has duly considered Indian traditions and culture , wherein it is permitted by CBDT not to seize gold ornaments and jewellery in case of married lady to the tune of 500 gram in the course of search operations where no wealth tax returns are filed by said married lady and hence we are of the view that the explanation of the assessee of holding of the gold ornament/jewellery to the tune of 500 gram stand accepted , while the rest of the theory of selling balance of the gold /silver as put forward by the assessee stood rejected and it is held that the assessee could not substantiate the genuineness of the transaction for the balance quantity of sale of gold ornaments/silver and hence after giving credit for value of gold to the tune of 500 gms, rest of the amount shall be charged to tax in the hands of the assessee as undisclosed income . While for sale of 500 gram of the gold , the same shall be brought to tax by computing income from capital gains for which the assessee shall submit necessary details which shall be verified by the AO in accordance with law.
Full Text of the ITAT Order is as follows:-
These two appeal, filed by the assessee, being ITA No. 4048/Mum/2013 & ITA No. 5448/Mum/2013 for assessment years 2005-06 and 2007-08 respectively are directed against the appellate order dated 23.04.2013 & 03.06.2013 respectively passed by learned Commissioner of Income Tax (Appeals)-29, Mumbai (hereinafter called “the CIT(A)”), appellate proceedings had arisen before learned CIT(A) from the assessment orders both dated 22-12-2011 passed by learned Assessing Officer (hereinafter called “the AO”) u/s 143(3) r.w.s. 147 of the Income-tax Act, 1961 (hereinafter called “the Act”).
2. The grounds of appeal in I.T.A. No. 4084/Mum/2013 raised by the Assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called “the tribunal”) read as under:-
“1. Under the facts and circumstances of your appellant, the Learned CIT(A) has erred in upholding the addition of Rs. 12,50,000 made by the assessing officer by treating the investment made in Fixed Deposits as unexplained investment u/s.69 of the Income-Tax, Act, 1961.
2. The Learned CIT(A) failed to appreciate the fact that your appellant has made investment in Fixed deposits from sale of gold ornaments.
3. The Learned CIT(A) has erred in stating that your appellant has not filed any evidence to substantiate that she was in the possession of gold jewellery as on 31.03.2004 which was subsequently sold by the appellant.
3.01 The Learned CIT(A) failed to appreciate the letter filed with A.O vide letter dated 10th October,2012 in which valuation report of jewellery as on 31/03/2002 vide valuer’s report dated 16/04/2002.
4. The Learned CIT(A) failed to appreciate the confirmations obtained from the buyers with respect to the sale of gold ornaments.
5. The Learned CIT(A) failed to appreciate the fact that buyers have utilized their agricultural income to fund their purchase. The details with respect to their ownership of the agriculture land had been provided along with confirmations.
6. The Learned CIT(A) failed to appreciate the fact that your appellant has suo-moto offered long term capital gain/loss on sale of jewellery for the assessment year under consideration during the course of appellate proceedings.
7. The Learned CIT(A) has erred in holding that appellant has not given any proof to substantiate that your appellant was in the possession of gold jewellery and there were also no corroborating evidence to prove that this gold jewellery was sold by her to her relatives in cash.
8. The Learned CIT(A) has failed to appreciate the remand report submitted by A.O which was submitted by A.O after considering all the evidences produce by your appellant.
9. The Learned CIT(A) has erred in holding that appellant has produced only two persons who have claimed to have purchased the jewellery from the appellant b their claims are not supported by any evidence.
9.01 The Learned CIT(A) has erred in holding that appellant has not filed any evidence in respect of another two persons.
9.02 The Learned CIT(A) has failed to appreciate the remand report in which it is clearly stated that in respect of another two persons documentary evidences were produced and furnished.
10. The CIT(A) has erred in holding that appellant has not been able to explain the source of investment of Rs 12,50,000/- made in the FDs in Kokan Mercantile Bank.
11. Under the facts and circumstances of your appellant, Learned CIT(A) has erred confirming the levy of interest u/s 234A and 234B of the Income Tax Act,1961.
12. Your appellant craves leave to add, alter or delete any of the above grounds of appeal”.
3. The grounds of appeal in I.T.A. No. 5448/Mum/2013 raised by the Assessee in the memo of appeal filed with the tribunal read as under:-
“1. Under the facts and circumstances of your appellant, the Learned CIT(A) has erred in upholding the addition of Rs. 30,00,000 made by the assessing officer by treating the investment made in Fixed Deposits as unexplained investment u/s.69 of the Income-Tax, Act, 1961.
2. The Learned CIT(A) failed to appreciate the fact that your appellant has made investment in Fixed deposits from sale of gold ornaments and silver.
3. The Learned CIT(A) has erred in stating that your appellant has not filed any evidence to substantiate that she was in the possession of gold jewellery as on 31.03.2002 which was subsequently sold by the appellant.
3.01 The Learned CIT(A) failed to appreciate the letter filed with A.O vide letter dated 10th October,2012 in which valuation report of jewellery as on 31/03/2002 vide valuer’s report dated 16/04/2002.
4. The Learned CIT (A) failed to appreciate the confirmations obtained from the buyers with respect to the sale of gold ornaments.
5. The Learned CIT(A) failed to appreciate the fact that buyers have utilized their agricultural income by Sale of Mangoes to fund their purchase. The details with respect to their ownership of the agriculture land had been provided along with confirmations.
6. The Learned CIT(A) failed to appreciate the fact that your appellant has suo-moto offered long term capital gain/loss on sale of jewellery for the assessment year under consideration during the course of appellate proceedings.
7. The Learned CIT(A) has erred in holding that appellant has not given any proof to substantiate that your appellant was in the possession of gold jewellery and there were also no corroborating evidence to prove that this gold jewellery was sold by her to her relatives in cash.
8. The Learned CIT(A) has erred in holding that appellant has not given any proof to substantiate that your appellant has received gift of Rs 300,000/- from Mr Abdul Rakhangi.
8.01 The Learned CIT(A) failed to appreciate the remand report in which it is clearly stated vide point 5 of remand report of A.O that Mr Abdul Rakhangi has confirmed vide letter dated 16/08/2012 that he has gifted in cash Rs 300,000/- on 26.07.2006 and the same was given out of his agriculture income and past savings.
9. The Learned CIT (A) has failed to appreciate the remand report submitted by A.O which was submitted by A.O after considering all the evidences produce by your appellant.
10. The Learned CIT (A) has erred, in holding that appellant has produced only two persons who have claimed to have purchased the jewellery from the appellant but their claims are not supported by any evidence.
10.01 The Learned CIT (A) has erred in .holding that appellant has not filed any evidence in respect of another three persons.
10.02 The Learned CIT (A) has failed to appreciate the remand report in which it is clearly stated that in respect of another two persons documentary evidences were produced and furnished.
11. The CIT(A) has erred in holding that appellant has not been able to explain the source of investment of Rs 30,00,000/- made in the FDs in Kokan Mercantile Bank and Bombay Mercantile Bank.
12. Under the facts and-circumstances of your appellant, Learned CIT (A) has erred in confirming the levy of interest U/S 234A and 234B of the Income Tax Act, 1961.
13. Your appellant craves leave to add, alter or delete any of the above grounds of appeal.”
4. First we shall take up appeal for assessment year 2005-06 in ITA no. 4084/Mum/2013. The assessee filed return of income for assessment year 2005-06 on 29.10.2005 declaring total income of Rs. 46,096/- which was processed by Revenue u/s. 143(1) of the Act. In the case of the assessee , the assessment for assessment year 2008-09 was completed u/s 143(3) on 27.12.2010, wherein during the course of assessment proceedings it was observed by the AO that assessee has made certain deposits with Kokan Mercantile Bank and Bombay Mercantile Bank on various dates and years and their maturity amount along with interest accrued there on was credited in Kokan Mercantile Bank saving bank account which were not declared in the return of income filed with revenue and same was not offered for taxation. The AO made additions to the income of the assessee on account of interest on matured FD/RD’s for assessment year 2008-09 . It was observed by the AO that the assessee did not disclosed all the material facts in the return of income regarding the source of FDs , hence, the case for assessment year 2005-06 were reopened by the AO u/s 147 which culminated in the issue of notice u/s. 148 dated 18.03.2011 which was served on assessee on 23-03-2011. The assessee was asked to explain the sources of making deposits in the bank to the tune of Rs.12.50 lacs which was made in Kokan Mercantile Bank and was not declared in the Balance Sheet filed by the assessee . The assessee did not declared the sources of making such investments by way of deposit in Kokan Mercantile Bank . The assessee did not give any explanation as to why this bank account was not declared to Revenue nor any details/explanations were furnished by the assessee , which led to addition to the tune of 12,50,000/- w.r.t. deposits made with Kokan Mercantile Bank as unexplained investment u/s. 69 of the Act, vide assessment order dated 22-12-2011 passed by the AO u/s 143(3) r.w.s. 147. The details of said deposits are as under:-
