Radha Kishan Soni vs Commissioner of Income Tax

The appeal was admitted in terms of the following question :- Whether on the facts and in the circumstances of the case, the Tribunal was justified in reversing order passed by the CIT(A), on account of addition made by the Assessing Officer regarding seized gold ornaments in absence of Panchnama or valuation report, irrespective of the fact that Panchnama was prepared at the time of search on 7-9-1989?

A search was conducted in this case on 7-9-1989, inter alia jewellery weighing 382.5 gms. was found at the time of search. Before Assessing Officer, the case of the assessee was that there are three ladies in the family and this jewellery belong to them. The explanation was rejected and addition of Rs. 1,00,000 was made on account of unexplained investment in jewellery and precious stones.

In appeal before the CIT(A), the CIT(A) considering the status of the assessee found that the gold jewellery belong to three ladies and addition on account of unexplained investment in gold jewellery was deleted. However, the CIT(A) has remitted the matter back for reconsideration of addition on account of precious stones found worth Rs. 53,500.

In appeal before the Tribunal, the Tribunal has reversed the finding of CIT(A) on the ground that no Panchnama or Valuation Report was brought on record, therefore, the deletion of addition by CIT(A) in this regard is bad and the Tribunal restored the addition made by the Assessing Officer.

Heard learned counsel for the parties.

Whether the addition on account of unexplained investment in the gold jewellery and precious stones found is justified or not, the CIT(A) has considered this aspect in paras 3.6 and 3.7 of its order. For ready reference it reads as under:-

3.6 The total gold ornaments and jewellery found is 382.5 grams which works out to 32.80 Tolas. It needs to be mentioned that neither during the search operations nor during the assessment proceedings the statement of any of the ladies in regard to the jewellery belonging to them and source thereof was recorded. As already stated that after the assessee filed his explanation vide his letter dated 3-9-1992, the ld. Assessing Officer did not raise any further query and the assessment was completed thereafter. It has been held by the Assessing Officer, while estimating the house-hold expenses of the assessee that assessee had a decent standard of living. In other words, the assessee was from a good background. Moreover, to have a jewellery or ornaments weighing nearly 33 Tolas between 3 ladies is not a substantial quantity as it works out to nearly 11 Tolas per married lady. No material or evidence has been placed on record to show that the part or whole of gold ornaments/jewellery found are unaccounted. Besides, the ld. Assessing Officer has himself taken the value of unexplained investment of Rs. 1 lakh. Therefore, in my opinion, no addition was called for as well as the jewellery and gold ornaments found was concerned because, as already stated, the quantity of the jewellery or ornaments held by each lady had not been determined during the proceedings and, secondly, no material or evidence has been placed on record to show that the said ornaments or jewellery were unexplained. The Assessing Officer has not even specified in his impugned assessment order, the quantity of the gold jewellery/ornaments which is held to be unexplained and valued thereof. The Assessing Officer has made addition purely on ad hoc basis on surmise and conjecture which cannot be sustained in law. The value of the seized jewellery works out to Rs. 46,500, which would stand deleted form the addition made Rs. 1 lakh.

3.7 The fact that the value of the seized gold ornaments works out to Rs. 46,500, it implies that the value of the stones weighing 100 grams had been taken at Rs. 53,500. The Assessing Officer has not specified and clarified in his order as to at what rate the stones had been valued and what were the stones in question? It is noted from the letter dated 3-9-1992 of the assessee, placed in the assessment record, that the assessee had stated that the value of stones was only of Rs. 3,000. It was further submitted, "these items are still lying with the department and in case of any dispute as to its valuation the same may be got valued by the departmental valuer". It was further submitted that the stones found were the assessee''s stock-in-trade. It has not been specified by the ld. Assessing Officer as to on what basis the value of the stones was determined at Rs. 53,500. There is merit and rational in the submissions of the ld. counsel of the assessee that in case the Assessing Officer did not agree with the value of the stone asserted by the assessee, the Assessing Officer should have exercised the option given by the assessee, i.e., to get the stones valued by an approved valuer. The action of the Assessing Officer in taking the value at Rs. 53,500 without any basis is definitely arbitrary which cannot be sustained in law. In the circumstances, I have no other alternative but to restore the question of value of stones found to the file of the Assessing Officer with the direction that the stones seized may be got valued through an approved valuer and thereafter the value of the stones should be determined. Secondly, the Assessing Officer should also pass a speaking order on the plea of the assessee that the stones found were part of his stock-in-trade on why the Assessing Officer does not agree with the said submission/explanation of the assessee. Consequently, the addition of Rs. 53,500 is restored to the file of the Assessing Officer with above directions for fresh consideration.

Considering the status of the family of the assessee which has been discussed by the CIT(A), we see no justification in the order of the Tribunal and we are of the view that no addition should be made on account of gold jewellery, therefore, the addition of Rs. 46,500 has rightly been deleted by the CIT(A).

In view of these facts, we allow the appeal of the appellant holding that there is no justification for addition of Rs. 46,500 on account of unexplained investment in gold jewellery which was found during the course of search. The appeal stands allowed.