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TMI Blog2017 (3) TMI 958X X X X Extracts X X X X X X X X Extracts X X X X ..... in the interest of natural justice learned CIT (A) has erred m making additions in the value of the jewellery of Rs. 2,84,996/- 2] Addition on Account of Car Rs. 1,67,256/-. On the facts and under the circumstances and in law and in the interest of natural justice, the learned CIT CA) has erred in making addition of Rs. 1,67,256/- in the value of Motor-car. 3] Disallowance u/s. 14A - Rs. 23,338/- On the facts and under the circumstances and in law and in the interest of natural justice, the learned CIT CA) has erred in disallowing Rs. 23,338/- u/s. 14A of the Income Tax Act, 1961. 4] PRAYERS (i) On the facts and circumstances of the case the appellant submits that the order passed by the Learned CIT CA) is bad in law as the said order is passed against the principles of natural justice. (ii) The appellant further craves leave to add, alter or amend his Grounds of Appeal during the course of appeal." 3. Brief facts of the case are that the assessee is engaged in rendering services like reiki and other medicinal treatments. During the course of assessment proceedings u/s 143(3) r.w.s. 143(2) of 1961 Act, it was observed by the A.O. that the assessee has shown following jewell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplanation with this regard. The A.O. accordingly made disallowance of administrative expenses of Rs. 23,338/- u/s 14A of 1961 Act read with Rule 8D(2)(iii) of Income-tax Rules, 1962 @ 0.5% of average value of investment by holding that it was not possible to earn any exempt income without incurring some administrative expenses , vide assessment order dated 28-03-2013 passed by the AO u/s 143(3) of 1961 Act. 6. Aggrieved by the assessment order dated 28-03-2013 passed by the A.O. u/s 143(3) of 1961 Act, the assessee carried the matter in appeal before the ld. CIT(A). 7. Before the ld. CIT(A), the assessee submitted that the assessee has not purchased any jewellery during the previous year relevant to the impugned assessment year under appeal . The assessee submitted that the said jewellery was inherited from his family members when he was five year old. The said jewellery is shown in wealth tax return filed with Revenue. The assessee submitted that the assessee is engaged in rendering services like Reiki and other medicinal treatment. It was submitted that he has been regularly filing wealth tax returns since more than last 35 years and the jewellery declared in the wealth tax re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce the said necklace was not in the possession of the assessee during the years after 1990, the assessee had not offered the same in the Wealth Tax Returns for years prior to assessment years 2003-04. The assessee refers to and relied upon the documents of pledge with the said Association. The other two items of difference are 20.00 Cts. Out of the 40.00 Cts. of (four) 4 diamond bangles, appearing at sr. no. 6. Out of this item, 20.00 CTS. were already existing and the balance 20 Cts. were acquired after the year 1998. Similarly the item at sr. no. 7 of the 2009 Valuation Report, viz. four (4) diamond bangles of 16 Cts., is an item acquired after the year 1998 .The assessee submitted that new items acquired (appearing at Sr. Nos. 6 & 7 of the 2009 valuation report) were purchased in the Financial year 1998-99 and shown in the books of the assessee for the year 31st March 1999, in the capital account for an amount of Rs. 3,64,500/-. It was submitted that there would be a minor difference in the weight/ value of the two (2) valuation reports which was very normal in jewellery items because valuation included an element of guess-work & estimate on part of the valuer and hence differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .0 2,75,000 - 16.0 4,00,000 - 16.0 4,00,000 -do- 62.50 37.0 3,50,000 62.50 37.0 5,00,000 62.50 37.0 5,00,000 2 pairs earstud - 4.0 1,40,000 - 4.0 2,00,000 - 4.0 2,00,000 Ring 4.50 2.0 1,70,000 4.50 2.0 2,50,000 4.50 2.0 2,50,000 8 buttons - 2.5 31,500 - 2.5 45,000 - 2.5 45,000 4 buttons 5.50 4.0 1,40,000 5.50 4.0 2,00,000 5.50 4.0 2,00,000 Nath 4.50 2.5 35,000 4.50 2.5 50,000 4.50 2.5 50,000 Packet of loose diamonds - 1.0 17,000 - 1.0 25,000 - 1.0 25,000 Total value of diamond jewellery 27,26,000 39,15,000 39,15,000 Gold jewellery Various items are described in the valuation report 1712.20 - 7,36,246 1712.2 - 21,83,055 1712.2 - 21,83,055 7 sovereigns - - 25,900 - - 70,000 - - 70,000 Total value - - 7,62,146 - - 22,53,055 - - 22,53,055 of gold jewellery Silver items Silver Utensils 10 Kg - 68,000 10 kg - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s u/s 37 of the Act against the professional income of the assessee , vide appellate order dated 06.02.2015 passed by learned CIT(A). 9. With respect to the car, the ld. CIT(A) observed that the assessee has made investment in motor car of Rs. 6,70,890/- out of which loan taken was Rs. 4,89,634/- which source was considered as explained by learned CIT(A) . For the remaining amount of Rs. 1,81,256/- the source of which was not explained. It was also observed by the ld. CIT(A) that the assessee had further spent Rs. 36,000/- on accessories. It was also observed by learned CIT(A) from wealth tax return of the assessee that the assessee has shown an old Mercedes car valued at Rs. 50,000/- from last many years , while the aggregate value of cars shown in the Wealth Tax return was Rs. 2,17,256/-. The ld. CIT(A, thus deleted the addition to the tune of Rs. 50,000/- for old Mercedez Car which was shown for last many years but sustained the addition to the tune of Rs. 1,67,256/-, vide appellate order dated 06.02.2015 passed by learned CIT(A). 10. The ld. CIT(A) upheld the disallowance of expenditure of Rs. 23,338/- incurred by the assessee for earning of exempt income as made by the AO u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2015 passed by the ld. CIT(A) , the assessee is in appeal before the tribunal. 12. The ld. Counsel for the assessee submitted that the assessee is regularly filing wealth tax return since last more than 35 years. The assessee has got valuation of jewellery done from the government approved valuer and valuation report dated 29-08-2009 is placed in paper book, wherein valuer valued the jewellery as at 31-03-2009. The wealth tax returns were filed in time for the assessment year 2009-10 and 2010-11. The wealth tax return for assessment year 2003-04 to 2009-10 were accepted by Revenue. It was submitted that these were old jewelleries acquired prior to 1998-99 except some minor items acquired in previous year 1998-99 period which were duly explained and reconciled. . It was submitted that no jewellery was acquired during the impugned assessment year. All the items were duly tallied and reconciled. There were some difference in the valuation report and the items valued by the assessee as on 31-03-2010 as declared in wealth tax return, which is due to rate difference adopted by the assessee for declaring in wealth tax return which value is slightly higher than as valued by approved value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to impugned assessment year. The assessee placed on record the invoice of the car and submitted that no addition can be made on this account as no car was purchased during the previous year relevant to the impugned assessment year. It was not shown in the balance sheet but it was debited to the capital account was the submissions of learned counsel for the assessee.The ledger account of loan availed from Kotak Mahindra Prime Limited is placed in paper book page 20-21. The insurance documents and amortization chart of loan from Kotak Mahindra Prime Limited is also placed at paper book/page 2-8. Our attention was drawn to depreciated value as shown in insurance documents placed in paper book/page 6 and it was submitted that the said value was adopted for reflecting in wealth tax returns after adjusting for outstanding loan payable to Kotak Mahindra Prime Limited.It was submitted that the same basis was adopted for earlier years and chart along with insurance documents for earlier years are placed in paper book/page 1-6. With respect to the disallowance u/s 14A of 1961 Act amounting to Rs. 23,338/-, the ld. Counsel submitted that A.O. invoked provisions of Section 14A of 1961 Act re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) upheld/sustained the addition of difference of Rs. 2,47,845/- between the two values while rest of the additions were deleted by learned CIT(A). The dispute thus narrowed down to the additions sustained by learned CIT(A) which is to the tune of difference of Rs. 2,47,845/- between value of jewellery as reflected in valuation report dated 29-08-2009 by government approved valuer adopting market value as on 31-03-2009 wherein total jewellery was valued at Rs. 64,58,055 (paper book/page 16-19) whereas the assessee declared the value of jewellery in wealth tax return for assessment year 2010-11 at Rs. 67,05,900/- valuing the jewellery as per market price as on 31-03-2010. The assessee has also filed copy of wealth tax return for assessment year 2009-10 and 2010-11 which are placed in paper book page 9-15. We have carefully gone through the value as declared in valuation report as prepared by government valuer on 29-08-2009 based on market value as on 31-03-2009 and the value as declared in wealth tax return as on 31-03-2010 and we have no hesitation in holding that this difference of Rs. 2,47,845/- between the two values is merely difference on account of higher value of gold and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness income , as jewellery was held to be personal asset of the assessee. The assessee is contending that the same was debited to capital account of the assessee and no such claim has been made by the assessee as deduction as business expenses from business income of the assessee, but no capital account has been filed in the paper book filed before the tribunal. The said contention of the assessee need verification and the matter is restored to the file of the AO for verifications of the contention of the assessee that the said sum of Rs. 34,151/- was debited to capital account of the assessee and not to the Profit and Loss Account of Business of the assessee and hence , no prejudice is caused to Revenue. after giving proper and adequate opportunity of being heard to the assessee. We order accordingly. With respect to the addition on account of car and accessories to the tune of Rs. 1,67,256 sustained by learned CIT(A), we find that the assessee was having one old Mercedes car of value to the tune of Rs. 50,000/- which was shown regularly in the wealth tax return for the last so many years and was accepted by the Revenue and there is no dispute as to the same. The assessee acqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of total income u/s 14A of 1961 Act. The disallowance worked out by the authorities below was Rs. 23,338/- u/r 8D(2)(iii) of 1962 Rule read with Section 14A of 1961 Act. In our considered view, the A.O. has rightly invoked provisions of section 14A of the Act and made the disallowance by adopting Rule 8D of 1962 Rules as method for computing disallowance keeping in view factual matrix of the case as the assessee has merely stated that no expenses have been incurred in relation to the earning of the income which does not form part of total income. The assessee did not elaborate the expenses and nature of incurring of the said expenses and the assessee merely stated that no expenses have been incurred for earning exempt income .The AO was not satisfied with the correctness of the claim made by the assessee that no expenses have been incurred in relation to earning of income which does not form part of total income as the assessee did not come out with any details as to the details and nature of expenses incurred by the assessee, while a bald claim is made that no expenses were incurred which could be disallowed by invoking Section 14A of 1961 Act. The facts of the details and na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded satisfaction as mandated by Section 14A of the Act before proceeding to invoke Rule 8D of Income-tax Rules, 1962. Thus keeping in view factual matrix of the case as detailed above in the instant case, in our considered view, the assessee has failed to discharge primary and initial burden/ onus as mandated u/s 106 of the Act of 1872 as is cast on the assessee as these are facts which are especially and exclusively within the knowledge of the assessee and the assessee did not discharge its burden u/s 106 of Act of 1872 as it comes forward with the bald explanation that no expenses have been incurred without referring having regards to the accounts of the assessee as mandated u/s 14A of the Act of 1961 r.w.s Section 106 of the Act of 1872. Once the assessee discharges its primary burden/onus as mandated u/s 14A of the Act of 1961 r.w.s. 106 of the Act of 1872 wherein the assessee comes forward with complete details and nature of expenses incurred in relation to the earning of exempt income having regards to the accounts of the assessee, then only the primary onus / burden cast on the assessee shall stood discharged which in the instant case has not been discharged as no expl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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