2010 (7) TMI 769 - GUJARAT HIGH COURT

Undisclosed investment in jewellery - search - Held that:- Central Board of Direct Taxes Circular No. 1916, dated May 11, 1994, lays down guidelines for seizure of jewellery and ornaments in the course of search, the same takes into account the quantity of jewellery which would generally be held by the family members of an assessee belonging to an ordinary Hindu household. The approach adopted by the Tribunal in following the said circular and giving benefit to the assessee, even for explaining the source in respect of the jewellery being held by the family is in consonance with the general practice in the Hindu families whereby jewellery is gifted by the relatives and friends at the time of social functions, viz., marriages, birthdays, marriage anniversary and other festivals. These gifts are customary and customs prevailing in a society cannot be ignored. Thus, although the circular had been issued for the purpose of non-seizure of jewellery during the course of search, the basis for the same recognizes customs prevailing in the Hindu society. In the circumstances, unless the Revenue shows anything to the contrary, it can safely be presumed that the source to the extent of the jewellery stated in the circular stands explained - in favour of assessee.

Gross profit - AO had applied the rate of 10 per cent. for working out the gross profit from trading activity and allowed the deduction at the rate of 5 per cent. towards expenses - Held that:- The gross profit had been merely estimated but there was no basis for such estimation in respect of gross profit or expenses in the assessment order. As whatever income the assessee may have earned from unaccounted business, the same would be held by the assessee as an investment or would have been spent towards personal expenses. During the course of search, no material had been brought on record to prove the investment of such undisclosed amount - Keeping in view the totality of the facts the Tribunal found it appropriate that the gross profit should be adopted at the rate of 5 per cent, on the same set of facts, the Commissioner (Appeals) has worked out the gross profit at the rate of 6 per cent. whereas the Tribunal has adopted the rate of 5 per cent. Thus, the two authorities have on the same set of facts made different estimates. Thus, on these facts, the order impugned does not give rise to a question of law so as to warrant interference because that would only be a case of replacing one estimate by another estimate.

Addition of income from bill discounting – Held that:- AO has estimated the bill discounting income on the basis of cheques being deposited in the accounts of Kamal Trading, Jai Ambe Trading Co. and Arihant Sales Corporation and others & observations of the AO clearly denote that this also relates to the discounting of the cheques, that is why the assessee has deposited the cheques in these accounts. As the figures of these cheques discounted relating to Kamal Trading, Jai Ambe Trading Co. and Arihant Sales Corporation have already confirmed the addition on account of income from the cheque discounting. Therefore, no separate addition can be made estimating as income from the bill discounting - in favour of assessee.

Unexplained expenditure incurred on renovation of house property - Held that:- The expenditure to the extent of ₹ 3.73 lakhs for renovation of the house property had been incurred by Smt. Kantadevi and the said expenditure was disclosed in the return filed by the said Smt.Kantadevi, hence, AO could not have disregarded the same. Besides the expenditure of ₹ 4.92 lakhs incurred by the asses-see is concerned, the assessee had already made a disclosure of the said amount in the total disclosure of ₹ 30 lakhs. In the circumstances, no infirmity can be found in the view taken by the Tribunal in holding that the addition was required to be reduced to the said extent - in favour of assessee.