TMI Blog2003 (1) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... . was not trading activity in respect of those sales, but was a sale of capital asset liable to capital gain - Tribunal was correct in law in holding the assessee-family liable to tax on long-term, capital gain of Rs. 44,84,116 against the gross profit of Rs. 3,07,665 declared by the assessee-family - Tribunal was right in law in holding that the conversion of a part of the jewellery, into stock-in-trade was a mere device or pretence adopted by the assessee to reduce its liability to tax - - - - - Dated:- 2-1-2003 - Judge(s) : Y. R. MEENA., K. C. Sharma. JUDGMENT On an application filed under section 256(1) of the Income-tax Act, 1961, the Tribunal has referred the following questions for the opinion of this court: "Whether, on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m, namely, Manna Lal Nirmal Kumar Surana. The assessee has disclosed ornaments, cut and polished precious stones, household goods, silver utensils, and cash under the Voluntary Disclosure Scheme, 1975. The details of the items disclosed are in para. 5 of the reference application. The assessee has disclosed 121 items of ornaments under the Voluntary Disclosure Scheme, 1975. The total disclosure of items was of Rs. 88,70,848. Out of these 121 items of jewellery, the assessee claimed that the assessee has converted 17 items into stock-in-trade from capital investment. On January 4, 1976, partial partition of jewellery took place and jewellery was partitioned in the ratio shown in para. 8 of the reference application. These 17 items have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i K. Kooka's case [1962] 46 ITR 86, in respect of such conversion. The total value of those 17 items, as declared by the assessee in the voluntary disclosure was Rs. 10,27,970. These have been revalued at Rs. 32,58,030 for the purpose of transfer to the 'jewellery ornaments stock-in-trade account'. Out of that stock-in-trade account, the assessee has taken out three items for the purpose of its trading. These are three necklaces, whose value, as declared in the disclosure was Rs. 9,70,950 and their value according to the revaluation was Rs. 32,50,400. The precious metal obtained by breaking up the three necklaces has been valued at Rs. 16,000 and the value of the stones transferred to the manufacturing account has been put at Rs. 31,43,000. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red for taxation as a matter of expediency for the purpose of a settlement with the Income-tax Department. Shri Sharma had vehemently contended on behalf of the assessee that from this circumstance alone, a history of trading in jewellery on the part of the assessee should not be inferred. We have accepted that plea put forward on behalf of the assessee also. In the circumstances the net result would be that the assessee did not have any trading activity in jewellery or precious stones prior to October 21, 1976. Even subsequent to that date, the sale was only of the precious metal obtained from the breaking up of the same three items. Thus the assessee's claim of having traded in jewellery and precious stones is based solely and exclusively ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity and reason to convert the 17 items of jewellery out of 121 items discussed under the Voluntary Disclosure Scheme nor there is any explanation that when the assessee was not in the trading line of the items involved, why these 17 items were picked up for conversion in the stock-in-trade account. If the conversion is bona fide, why there was no further purchase and sale of similar type of items, if it has the intention to deal in the trading line. Not only that, after the sale of these three items, rest of the items were again partitioned among the members of the Hindu undivided family. Considering these facts, we do not find any perversity in the finding of fact found by the Tribunal that there was no conversion of these 17 items into ..... X X X X Extracts X X X X X X X X Extracts X X X X
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