TMI Blog2017 (3) TMI 958X X X X Extracts X X X X X X X X Extracts X X X X ..... the difference which arose in valuation between the valuer report dated 29-08-2009 and the value declared by assessee in wealth tax return for assessment year 2010-11 is merely on account of higher rate of gold and silver adopted as prevailing as on 31-03-2010 vis-à-vis rate of gold and silver adopted by approved valuer in his valuation report dated 29-08-2009 which report is based on market rate of gold and silver as at 31-03-2009 We do not find any merit in the contention of the Revenue and in our view no addition u/s 69A to the tune of ₹ 2,47,845/- on account of unexplained jewellery cannot be sustained and is hereby ordered to be deleted. With respect to jewellery valuation charges disallowed by the AO and as sustained by learned CIT(A) on the grounds that these are personal expenses and cannot be allowed as business expenses to be reduced from business income as jewellery was held to be personal asset of the assessee 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceeded to make disallowance of expenses incurred in relation to earning of exempt income by invoking Section 14A of 1961 Act r.w.r. 8D of 1962 Rules which is one of the method prescribed for making disallowance u/s 14A of 1961 Act, as the assessee withheld information having regards to the accounts of the assessee . The assessee did earn exempt income as detailed above during the relevant previous year from trust. We do not find any merit in the submissions of the assessee, thus, we uphold the additions made by the A.O. u/s 14A of 1961 Act by invoking Rule 8D(2)(iii) of 1962 Rules. We order accordingly. - I .T.A. No.2293/Mum/2015 - - - Dated:- 17-3-2017 - SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Assessee : Shri Satish R. Mody For The Revenue : Ms. Pooja Swaroop, DR ORDER PER RAMIT KOCHAR, Accountant Member This appeal, filed by the assessee, being ITA No. 2293/Mum/2015, is directed against appellate order dated 6th February, 2015 passed by the learned Commissioner of Income Tax (Appeals)- 7, Mumbai (hereinafter called the CIT(A) ), for the assessment year 2010-11, the appellate proceedings before learned CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome tax returns filed by assessee, it was observed by the A.O. that the assessee has not shown any jewellery in his return of income filed with the Revenue, whereas the assessee has claimed valuation charges of ₹ 34,151/- for valuation dated 28th September, 2009 of the said jewellery. The assessee was asked to explain as to why jewellery shown in the wealth tax returns was not shown in the income tax return filed with the Revenue and why the same should not to be added to the total income. The AO observed that the assessee failed to provide any satisfactory and convincing explanation and the A.O. accordingly made addition of ₹ 63,85,900/- (correct figure should have been ₹ 67,05,900/- ) to the income of the assessee as income from undisclosed sources u/s 69A of 1961 Act, vide assessment order dated 28-03-2013 passed by the AO u/s 143(3) of 1961 Act. 4. The A.O. further observed that in the wealth tax return the assessee has shown motor car of ₹ 2,17,256/- which is not shown in the income tax return filed by the assessee with the Revenue. The assessee had shown only one car in the capital account of the firm. When asked, the assessee could not explain th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urns for assessment years 2003-04 to 2008-09 were delayed and were filed in the year 2009 but the wealth tax return for assessment year 2009-10 was filed within time. The assessee submitted that the wealth tax returns for all the assessment years 2003-04 to 2009-10 have been accepted by Revenue. The assessee relied upon its wealth tax returns filed for assessment years 1997- 98 and 1998-99 along with the valuation report of Govt. Approved Valuer dated 15th April 1998 for valuation of jewellery as on 31st March'98 along with valuation report of Govt. approved valuer dated 29th August, 2009 for valuation of jewellery as on 31-03-2003, 31-03-2006 and 31-03-2009. The assessee submitted that the AO erroneously held that the assessee has claimed jewellery valuation charges of ₹ 34,151/- but has not shown jewellery in return of income filed with revenue. The assessee submitted that he has not claimed said valuation charges in P L account of the business of the assessee but were claimed in the personal capital account and it has no effect on the taxable income of the assessee and no prejudice has been caused to Revenue . The assessee submitted before learned CIT(A) that on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct during the impugned assessment year. It was submitted that no contrary evidence has been brought on record by the A.O. incriminating assessee that the assessee purchased any jewellery out of any undisclosed income. The ld. CIT(A) considered the submissions made by the assessee and observed that the assessee has filed wealth tax returns for last many years. The said wealth tax returns cannot be treated at additional evidences as these returns are part of department records. It was also observed that the assessee has purchased part of jewellery in financial year 1998-99 and the same was debited in the capital account of relevant previous year. The learned observed that the assessee has filed copies of wealth tax returns from the assessment year 1997-98 up to the current year. It was observed by the learned CIT(A) that the assessee has furnished evidence of item-wise details of gold, diamond and silver jewellery and it was observed by learned CIT(A) that these items were in ownership and possession of the assessee from earlier years i.e. year 1997 and prior to it. It was observed by learned CIT(A) that valuation of jewellery was carried out as on 31st March 2003 and as on 31st M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year 2009-10. It was observed by learned CIT(A) that in the current previous year under consideration also, the jewellery items declared by the assessee are almost exactly the same and following jewellery owned by the appellant has been valued by the valuer as under: i) Diamond jewellery as per valuation report : Rs.39,15,000/- ii) Gold Ornaments and jewellery as per valuation report. : ₹ 22,53,055/- iii) Silver articles as per valuation report : ₹ 2,90,000/ Total value of jewellery : Rs.64,58,055/- The ld. CIT(A) observed that there was a difference in the total jewellery declared by the assessee i.e. the jewellery declared by the assessee ₹ 67,05,900/- (corrected figure vis- -vis wrong figure of ₹ 63,85,900/- taken by AO) in the wealth tax return , while the valuer valued the jewellery of the value of ₹ 64,58,055/- hence it was observed by learned CIT(A) that j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Rules, 1962. The assessee relied on the decisions in the case of CIT v. Holcim (I) Pvt. Ltd. 111 DTR (Del) 158, and decision of M/s Lakhani Marketing Incl. [2014] 111 DTR (P H) 149, wherein the assesee contended that no dividend income has been received by the assessee during relevant previous year and hence Section 14A of 1961 Act cannot be invoked. The assessee also relied on decision of Hon ble Bombay High Court in the case of Godrej and Boyce Manufacturing Co. Limited reported in 328 ITR 81 to contend that recourse to Rule 8D of 1962 Rules is not automatic and satisfaction of AO regarding impossibility of deducting the expenditure incurred for exempt income , is a sine qua non to invoke Rule 8D of Income-tax Rules, 1962 and prayed that the disallowance be deleted. The ld. CIT(A) observed that the assessee has received exempt income of ₹ 2,12,18,597/- as beneficiary of Esvee Poddar Family Trust. It was observed by learned CIT(A) that the assessee had also made investments in shares , income from which is exempt from tax and hence provisions of Section 14A of 1961 Act are attracted. The assessee has not made suo motu disallowance of expenditure incurred for earning inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed market rates as on 31-03-2009 while assessee adopted market rates as on 31-03-2010. The assessee drew our attention Note No. 1-4 filed along with the return of wealth(placed in pb/page 11) , whereby no addition whatsoever was made in jewellery during the year . our attention was also drawn to wealth tax return filed for assessment year 2009-10 and 2010-11(placed in paper book /page 9-15) and also to valuation report dated 29-08-2009 for valluing jewellery issued by government approved valuer which is placed in paper book/page 16-18. It was submitted that the jewellery is old jewellery which was duly explained and no new jewellery was purchased in relevant previous year. Our attention was also drawn to valuation report dated 29-08-2009 issued by Mandlik Brothers (Registered valuer of Jewellery by The Government of India) who valued jewellery based on rates prevailing as on 31-03-2009 and it was submitted that the assessee adjusted prices to the rates prevailing as on 31-03-2010 for wealth tax purposes. Similarly, with respect to the jewellery valuation charges of ₹ 34,151/-, the ld. Counsel submitted that the same has been debited to the capital account and no claim of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2)(iii) of 1962 Rules and 0.5% of the average value of the investment was computed as disallowance for expenditure incurred in relation to earning of exempt income u/r 8D(2)(iii) of 1962 Rules r.w.s. 14A of 1961 Act. He submitted that since there was no exempt income earned by the assessee by way of dividend on share investments , the A.O. cannot invoke the provisions of Section 14A of the Act, hence, no disallowance can be made. The learned counsel fairly submitted that the assessee earned exempt income of ₹ 2,12,18,597/- from Esvee Poddar Family Trust as his beneficial share. The ld. Counsel relied on the decisions of Hon ble Delhi High Court in the case of CIT v. Holcim (I) Pvt. Ltd. (2014)111 DTR (Del) 158 and decision of Hon ble Punjab and High Court in the case of CIT v. M/s Lakhani Marketing Incl. [2014] 111 DTR (P H) 149. 13. The ld. D.R. relied on the order of the ld. CIT(A) . She also relied on CBDT Circular No. 05/2014 dated 11.02.2014 to contend that disallowance of expenditure incurred in relation to earning of exempt income shall be made even if there is no exempt income earned by the assessee during the relevant previous year. 14. We have considered rival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of gold and silver adopted by assessee as on 31-03-2010 for filing wealth tax return for assessment year 2010-11 as against value as on 31-03-2009 adopted by government approved valuer and there is no addition to investment in jewellery which can be brought to tax within ambit of Section 69A of 1961 Act as unexplained jewellery, as the assessee has not made any additions to the jewellery during the relevant previous year as is emerging from records produced before us . The perusal of the computation of wealth as on 31-03- 2010 which is placed at page/11 of paper book clearly reflects vide note no 1- 4 that there is no change in the items of jewellery as on 31-03-2010 vis- -vis items as on 31-03-2009. Further, it also reflect that gold jewellery which was valued at ₹ 12,750/- per 10 gms as at 31-03-2009 was valued at ₹ 13,870/- per 10 gms as at 31-03-2010 for the purposes of filing wealth tax return. The approved valuer while issuing valuation report dated 29-08-2009 has adopted rate of gold as on 31-03-2009 of ₹ 12,750/- per 10 gms which is clearly reflected in said valuation report. Similarly, the assessee valued silver at 24,530/- per kg as on 31-03-2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is no dispute as to the same. The assessee acquired another Tototo Innova car in July 2007 for ₹ 9,64,236/- against which loan of ₹ 8,75,500/- was availed by the assessee from Kotak Mahindra Prime Ltd.. The invoice and complete loan account details are produced by the assesee in the paper book filed with the tribunal which is on record. The ledger extract of the said car loan from Kotak Mahindra Prime Limited is also filed in the paper book . The assessee has also explained that the value of the car adopted for wealth tax purposes was depreciated value of car as adopted by insurance company which was further reduced with the outstanding loan form Kotak Mahindra Prime Limited for which chart for three years are placed on record in paper book filed with the tribunal along with insurance cover for all these years. The loan account ledger extract with respect to loan availed by the assessee for purchase of car , from Kotak Mahindra Prime Limited is also filed for all these years . The explanation offered by the assessee , in our considered view, is satisfactory as is emerging from the records produced before us. In our considered view, no addition is called for as the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed by invoking Section 14A of 1961 Act. The facts of the details and nature of the accounts of the assessee are especially within the knowledge of the assessee and hence, the burden of proving that fact is upon the assessee . If a fact which especially are within the knowledge of the person, a duty and onus is cast on the person within whose knowledge especially such facts are , to prove such facts. This is the mandate of Section 106 of The Indian Evidence Act,1872 which is reproduced herein below :- 106. Burden of proving fact especially within knowledge.- When any fact is especially within the knowledge of any person, the burden of proving that fact is upon him. Illustrations (a)*** (b) A is charged with travelling on a railway without a ticket. The burden of proving that he had a ticket is on him. The assessee had in its knowledge especially fact of having incurred expenditure in relation to earning of exempt income as the assessee is privy to its accounts. The assessee did not come forward and divulge details and nature of these expenses which are incurred by the assessee in relation to earning of exempt income having regard to the accounts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee shall stood discharged which in the instant case has not been discharged as no explanation has been submitted except that a bald statement without reference to accounts that no expenses have been incurred in relation to earning of exempt income . The AO in the absence of any explanation of the assessee recorded satisfaction that claim of the assessee is incorrect and proceeded to make disallowance of expenses incurred in relation to earning of exempt income by invoking Section 14A of 1961 Act r.w.r. 8D of 1962 Rules which is one of the method prescribed for making disallowance u/s 14A of 1961 Act, as the assessee withheld information having regards to the accounts of the assessee . The assessee did earn exempt income as detailed above during the relevant previous year from trust. We do not find any merit in the submissions of the assessee, thus, we uphold the additions of ₹ 23,338/- made by the A.O. u/s 14A of 1961 Act by invoking Rule 8D(2)(iii) of 1962 Rules. We order accordingly. 15. In the result, appeal filed by the assessee in ITA No. 2293/Mum/2015 for assessment year 2010-11 is partly allowed as indicated above. Order pronounced in the open court on 17th M ..... X X X X Extracts X X X X X X X X Extracts X X X X
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