TMI Blog2023 (11) TMI 197X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Returns only. We completely agree with ld. CIT(A) that it is preposterous to hold that such identical jewellery found during search as different from that disclosed in the Wealth Tax Returns when there is no jewellery found during search identical in all terms with that disclosed in the Wealth Tax Returns. The finding of the Ld.CIT(A) in this regard is very pertinent that having conducted search and covered multiple premises and numerous receptacles in the group cases, the convenience of balance has to be in favour of the person searched and the inference/ conclusion against the person searched is that nothing more has remained undiscovered by the Department. That any presumption of separate set of similar jewellery should be based on hard undisputed facts. We agree with the CIT(A), that any basis adopted by the AO for treating such matched jewellery as unexplained is unacceptable, be it higher valuation by DVO or non operation of locker in which it was kept. We agree with the reasoning of the CIT(A) for rejecting higher valuation of jewellery by DVO as basis for treating matched jewellery as unexplained. Valuation is not an exact science, and in case of precious gems a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nels furnished by the assessee sufficiently evidence the fact of jewellery purchased over the years from disclosed sources. With nothing found by the department during search of such jewellery being converted into any other asset we do not find any infirmity in the CIT(A) giving credit of the same to the unmatched jewellery found during search. As for the balance unexplained jewellery Ld. CIT(A) has, noted that the assessees themselves have admitted certain jewelleries as unexplained and included in their Income-tax Returns for the impugned year. He noted the same to be of gross weight of 2026.810 gms, comprising of gold weight 2201.528 gms and diamond 82.890 Ct., reducing the same from the balance jewelleries and ornaments required to be explained by the Group which came to gross weight 3,943.260 gms, comprising of gold weight 3,937.147 gms and diamond 2,026.810 Ct., he held that the unexplained jewellery remaining to be explained remained in the hands of Smt. Ruchika Agrawal entirely who is not an assessee before us. This finding of fact by the ld. CIT(A) has also remained uncontroverted before us. We uphold the order of the CIT(A) in the case of all the assessee before us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance in the case of the assessee for the impugned year before us i.e. AY 2015-16. Revenue appeal dismissed. - Mrs. Annapurna Gupta, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member For the Assessee(s) : Shri Milin Mehta, AR For the Revenue : Shri Sudhendu Das, CIT-DR ORDER PER BENCH: All these appeals filed by the Department arise out of orders passed by the learned Commissioner of Income-tax (Appeals)-12, Ahmedabad [hereinafter referred to as CIT(A) for short] against different assessees, but all against assessments framed consequent to search conducted on the assessee group u/s 132 of the Income Tax Act, 1961 [hereinafter referred to as the Act for short]. 2. It was common ground that the issues involved in all these appeals were identical and interrelated, arising in the backdrop of the same facts, therefore all these appeals were taken up together for hearing and are being disposed of by this common order for the sake of convenience. 3. Briefly stated, search action u/s 132 of the Act was undertaken in the case of Shri Rakesh Agrawal Group on 12.02.2015. The search action included numerous residential and business prem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dately as a family and even individually for each assessee and therefore, these issues, in our considered opinion, need to be dealt with in a consolidated manner. 7. We shall first deal with the issue relating to addition made in the hands of the assesses before us on account of unexplained investment in jewellery. Issue No. 1 Unexplained jewellery 8. Briefly stated, during search action on the Rakesh Agarwal group, the jewellery found from the residence and various lockers amounted in all to Rs. 32,81,10,985/- as valued by the Registered Valuer of the Department and the details of the persons or places from where the jewellery was found is tabulated at page No. 3 of the assessment order as under:- Premises / Person Jewellery Found Residence at Bungalow Opp. Sairuchi Farm, Off. Sevasi Road, Vill. Khanpur, Baroda 11,88,02,038 Locker No. 1483, Bank of Baroda, Sayajigunj Branch, Baroda 2,04,77,303 Locker No. 907, Bank of Baroda, Alkapuri Branch, Baroda 7,51,02,204 Locker No.314, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which the Valuer of the assessee had allegedly physically verified them for valuation. Accordingly, he treated all the above unmatched and matched jewellery as unexplained in the hands of the different assesses. The matched jewellery treated as unexplained in the hands of assesses where disclosed in wealth tax returns and the unmatched jewellery in the hands of assessee where found during search. The details relating to the quantum of jewellery added in the hands of each assessee and its bifurcation on the basis on which the addition was made is as under:- Name of assessee Total Addition on account of the jewellery Jewellery Matched with WTR Jewellery Umatched Shri Rakesh S. Agrawal 11,39,28,300/- Locker No.430 4,77,34,315 Locker No.907 14,82,488/- Locker No.314 29,53,820 23,52,422 Locker No.1483 1,01,84,130/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied heavily on the order of the AO while the Ld.Counsel for the assessee relied on the order of the Ld.CIT(A). 14. We have heard both the parties and gone through the orders of the authorities below and also the documents referred to before us. On carefully going through the order of the Ld.CIT(A) we find that he has considered the aspect of jewellery found during search holistically, at the family level, noting certain facts relating to the same as under: 9.7 I have diligently perused the submission and the relevant Paper Book Vol-5 JWL on jewellery made on the Group. At the Group level out of total jewellery and ornaments found during the search of gross weight 18,085.700 gms comprising of gold weight 15,341.244 gms and diamond 2,532.950Ct., jewellery and ornaments of gross weight 9,397.650 gms comprising of gold weight 8,016.330 gms and diamond 1,485.900 Ct. were matched in description and weight during the assessment proceedings (though rejected by the AO on account of his conclusion arising out of last operation of lockers in Bank of Baroda and huge difference in valuation of various items by the DVO as compare to earlier valuation of RV for the purpose of WT ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d during search being already disclosed in wealth tax returns and the balance being surrendered to tax. The above declaration corroborated with Wealth tax returns filed to AO placed before us at P.B 15-57. 16. Besides, we have noted that the assessee filed details and evidences explaining that most of the jewellery found stood disclosed in wealth tax returns. To this effect we have noted the following to be filed placed before us in paper book as under; 17. Taking note of all the above the Ld.CIT(A) held that as far as jewellery which matched in description and weight with wealth tax returns filed there was no question of treating them as undisclosed on any count whatsoever. He rejected the basis of difference in valuation of jewellery adopted by the AO for treating such matched jewellery as undisclosed holding that as long jewellery matched in all respects , the jewellery found during search is that disclosed in wealth tax returns unless identical twin set of jewellery is found by the department . He considered it preposterous to treat matched jewellery as undisclosed . The valuation aspect was rejected by him noting that valuation of precious gems and stones is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ificant size and high quality diamond and other precious stones/gems that if a piece of diamond is picked up raw at source then got cut and polished or even if a cut and polished diamond but acquired at source from grey market, the actual money invested would be much lower than the cost that would be normally charged by a jewellery showroom. In fact it is possible to come up with many more instances to explain the variation in valuation of previous gem/stone studded ornaments. 9.4 Thus I am of the considered view that jewellery ornaments in the case of the Group should be tallied item to item on description and weight (found inventorised on date of search and valued by the Department s Valuer with those disclosed by the appellant as per the valuation by his Registered Valuer and/or with bills/vouchers of the purchase if after the date of valuation by the Registered Valuer) in the cases which do not fall under/covered by the CBDT s Instruction No. 1916 of 1994 and the case laws related thereto rather than drawing adverse inferences as has been the case here. 18. With respect to the unmatched jewellery he held that it should be treated as belonging to the person who owns it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Group comes to gross weight of 3,943.260 gms comprising of gold weight 3,937.147 gms and diamond 222.010 Ct. The jewellery and ornaments already admitted as unexplained and included in the IT return for A.Y.2015-16 pursuant to search of gross weight 2,026.810 gms (gold weight 2,201.528 gm and diamond 82.890 Ct.) valued at Rs. 74,17,156/-in the hand of Shri Rakesh Agrawal. After a minor correction of (-) 9.200 gms (gold weight 61.189 gm less diamond 20.710 Ct.) in the case of Smt. Madhavi Agrawal, jewellery and ornaments of gross weight 1,925.60 gms comprising of gold weight 1,674.700 gm and diamond 159.830 Ct. remain to be explained in the hand of Smt. Ruchika Agrawal which will be separately dealt in the appeal order in the case of Smt.Ruchika Agrawal for A.Y.2015-16. 19. The Assessing Officer had held jewellery found in two lockers,i.e. locker No. 907 and 1091, to be unexplained for the reason that besides not matching with wealth tax returns , the investigation by the AO relating to the last date of operation of the two lockers revealed that they were last operated much before the date on which the Registered Valuer of the assessee had stated to have examined the jewe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unmatched/unexplained jewellery should not be added in the hands of person in whose possession it was found disregarding the claimed ownership of family members and relatives. 21. He also noted that the conclusion of the jewellery in the aforestated lockers being unexplained was based on incorrect appreciation of facts. the fact noted by him from records before him was that locker no. 907 containing majority of the jewellery of Rs. 7.5 cores was last operated on 08.02.2011 and, therefore, the contentions of the Assessing Officer that since this locker was last operated much before the date when the Registered Valuer had prepared his report in 2009 after physical verification of the contents was found incorrect. The certificate of the bank ,where these lockers were kept, that is of Bank of Baroda, reproduced at page no. 14 of the assessment order mentions the last date of operation of locker no. 907 as 08.02.2011 and that of locker No. 1091 as 14.11.2007. The Assessing Officer reproduced the said certificate in the order but thereafter he went on to reverse the dates of operation of both the lockers mentioning the last date of operation of locker No. 907 as that of locker No. 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e inference/ conclusion against the person searched is that nothing more has remained undiscovered by the Department. That any presumption of separate set of similar jewellery should be based on hard undisputed facts. Having said so, we agree with the Ld.CIT(A), that any basis adopted by the AO for treating such matched jewellery as unexplained is unacceptable, be it higher valuation by DVO or non operation of locker in which it was kept. 24. Be that so we agree with the reasoning of the Ld.CIT(A) for rejecting higher valuation of jewellery by DVO as basis for treating matched jewellery as unexplained. Valuation is not an exact science, and in case of precious gems and stones, being a matter of estimate of size, weight and quality; there may be difference in valuation as submitted by two valuers. So also for jewellery found in two lockers, i.e. locker Nos. 907 and 1091, whose items otherwise tallied with that disclosed in the Wealth Tax Returns, we agree with the ld. CIT(A) that they cannot be treated as different from that disclosed in the Wealth Tax Returns for the reason that the lockers were not found to be operated when the valuation was done by the Registered Valuer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tting the last date of operation of these two lockers along with the daily register of operation of lockers as evidenced clearly demonstrates that locker No.907, which contained the substantial jewelleries, was last operated by Smt. Uma R. Agrawal on 08.02.2011. These facts find mention in the first paragraph of the bank s certificate also. The Assessing Officer, however, has noted the last date of operation of locker No. 907 as 14.11.2007, on which date also this locker was operated by Smt. Uma R. Agrawal. But, the daily attendance register also shows operation of this locker on 08.02.2011. Therefore, incorrectly noting the last date of operation of locker No.907 as in 2007, the Assessing Officer held that the Registered Valuer of the assessee could not have given a report in 2009 after physically examining the contents of the locker. Since, factually this locker was last operated in 2011; therefore, this basis of the Assessing Officer for rejecting the Registered Valuer s Report is rightly found by the Ld.CIT(A) to be not correct. On the contrary, the assessee s explanation of the contents in the locker being explained with that returned in the Wealth Tax Returns based on the Reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined jewellery remaining to be explained remained in the hands of Smt. Ruchika Agrawal entirely who is not an assessee before us. This finding of fact by the ld. CIT(A) has also remained uncontroverted before us. In effect, we uphold the order of the Ld.CIT(A) in the case of all the assessee before us deleting the addition of all the matched jewllery and the unmatched jewellery to the extent of jewllery remaining unmatched as disclosed in the wealth tax returns. 30. Issue No. 2 Addition on account of unexplained Investments in artwork 31. Brief facts relating to the issue are that, during search, 3240 items of artworks were found. The same were valued by the Expert ArtAppraiser / Valuer at Rs. 87,29,68,900/-; out of same, seizure of artwork of value Rs. 33,37,30,000/- was made. The assessee claimed that some of the artworks were purchased by him; out of which a few were fake/print of original. He contended that they were all evidenced by payments made through cheques for their purchases. The rest, he claimed, were gifted by artists who had participated in workshop conducted by him. The Assessing Officer was not satisfied with this explanation of the assessee stating the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial otherwise was found by the Department; and, this excel-sheet found from the assessee could not be treated as an afterthought for explaining the source of investment in the artworks. 33. During the course of hearing before us, ld. DR drew our attention to the Assessing Officer s findingin making the addition in the hands of the assessees, while learned Counsel for the assessee relied on the order of the learned CIT(A). 34. We have heard both the parties and also gone through the orders of the authorities below. The issue pertains to addition made on account of the source of investment in artworks found with the assessees remaining unexplained to the satisfaction of the Assessing Officer. The total items of artworks found from the premises of the Group being 3240 items, including paintings and sculptures. The explanation of the assessee being that these were acquired either by way of purchase or were gifted to the assessee by artists during art workshops conducted by the assessee in its premises. The basis with the Assessing Officer for treating the source of investment in these artworks as unexplained were:- i) the assessee was unable to substantiate its explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very few cases, purchase bills have been submitted by the assessee but on most of such bill proper addresses of the sellers are not mentioned, mere mention of the name of the seller doesn't prove the identity of the seller. Furthermore, the purchase cost of the items mentioned on the bills is abnormally low in comparison to the value estimated by the valuer of that item. Few of the bills even do not have description of nature and size of art work, therefore, it cannot be proved that these payments have actually been made for the artworks, as claimed by the assessee. 36. It is not denied the assessee s explanation that certain artworks were gifted to it during workshops while others were purchased; and, the details of the items of artworks gifted along with date of conducting the workshops when they were gifted, as also the details with respect to the items purchased giving details of parties to whom they were purchased and the cheques through which the payments were made all these details were maintained in an excel-sheet by the assessee which the Department lay its hands upon during the search conducted on the assessee. The ld. CIT(A) has given this finding in paragrap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the value of artwork is only a notional figure of estimation at a given point of time only and, therefore, cannot be relied upon for determining the cost of investment made in the artwork. His findings in this regard at paragraph 76.2 to 76.8 are as under:- 76.2 In context of search and jewellery and ornaments found/seized, the Department's Valuer makes the valuation on the date of search on which the price of metal gold, silver, platinum) is known and published and the price of precious stones (diamond, ruby, emerald, sapphire etc.) are also capable of reasonably comparable estimation. While the gross weight of a jewellery is accurately measurable (within the variance and sensitivity of the weighing device), the stone size etc. are estimated by the Valuer and the net weight of previous metal arrived at (after deduction of estimated weight of stone from gross weight of the jewellery). The value of precious stones is also reasonable standard (but not as standard, fixed and comparable as metal) based on size Le carat weight in standardized nomenclature of colour, clarity and cut of that stone. Thus, within the human variability in estimate of quality of stone, the jeweller ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and scientifically measure/value. One value is as per the artists, other various values are as per art experts valuers and some other value is a quotation of a buyer, if an art work finds a buyer. As they say beauty lies in the eyes of the beholder, it should be admitted that value of art lies in the eyes, heart and pocket of the buyer. Thus the valuation of an art cannot be possible even by the best of art experts and valuers for the purpose of unearthing undisclosed income under the Income-tax Act in case the person fails to establish the date, means and amount of acquisition of art work estimated in his possession. Thus a value of an art work by an Art Valuer is only a notional figure of its estimated worth at a given point of time, at the best. There is no correlation between the value of the art piece as per Art Appraiser and the price of that art piece in eyes of potential buyer/collector. 76.7 Further, unlike jewellery and ornaments, artwork was normally not Included as asset or specified assets in the Wealth Tax Act and was not to be disclosed in the Wealth Tax Return. In addition to that if an artwork has been purchased from the artist or the gallery, only the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of set off of business loss of Rs. 2,19,70,774/-. The ld. CIT(A) allowed the same. 41. Before us, the ld. Counsel for the assessee, at the outset itself, pointed out that an identical issue, which had arisen in the earlier years also in the case of Shri Rakesh S. Agrawal, has been adjudicated by the ITAT in assessee s appeal for AYs 2009-10 to 2014-15 in IT(SS)A Nos. 88 to 92/Ahd/2018 vide order dated 22.04.2022 upholding the order of the ld. CIT(A) deleting the addition made under Section 68 of the Act and allowing the assessee s claim of set off of business loss brought forward from earlier years. Copy of the order placed before us. The relevant part of the order allowing set off of losses at para 28-32 and deleting addition under section 68 of the Act at para 35 are as under: 28. Having said so we find that in the facts of the present case, the assessments were not abated, and the claim of business losses admittedly emanated from incriminating material i.e the foreign bank account of the assessee. Income from incriminating material is to be considered after defraying all expenses that are incurred for earning such income. The decision of the Hon ble apex court in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly do not qualify as fresh claim made in return filed u/s 153A of the Act, since they were necessarily to be disclosed at the same time and alongwith the positive incomes arising from the incriminating material. These losses cannot be considered in isolation from the profits to qualify as fresh claim , not originally claimed in the return filed u/s 139 of the Act. 30. We may clarify that set off of these business losses from any other income originally returned, other than profits from this business, would have qualified as a fresh claim and to which the assessee would not be entitled. The proceedings u/s 153A of the Act, being in consequence to search undertaken u/s 132 of the Act, cannot be utilized by the assessee to seek relief not claimed earlier. The proceedings are analogous to proceedings u/s 147 of the Act, as being for the benefit of the Revenue and not the assessee. The decision of the Hon ble apex court in the case of CIT vs Sun Engineering Works Pvt. Ltd. (1992) 198 ITR 297 (SC) is relevant for the purpose. 31. Having held so, that the claim of losses emanating from incriminating material, made in returns filed u/s 153A of the Act are to be treated as filed u/s 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guishing facts have been brought to our notice, there is no case with the Revenue challenging the same addition and disallowance in the case of the assessee for the impugned year before us i.e. AY 2015-16. There is no merit in the appeals of the Revenue on this count as well. 43. We shall now be dealing with each appeal before us. 44. Ground No.1 in ITA No.718/Ahd/2018, ground no.1 to 3 in ITA No.728/Ahd/2018 and the only ground raised in ITA No.720/Ahd/2018 are related to the issue of unaccounted jewellery found in the locker. These grounds raised in the respective appeals read as under: ITA No.720/Ahd/2018 1. On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition of Rs. 1,62,12,000/- (Rs.1,01,78,340/- +Rs. 60,33,660/-) out of total addition made of Rs. 1,76,15,680/- made on account of unexplained jewellery without considering the fact that the assessee could not explain the source of investment and also could not submit the documentary evidences regarding the source of jewellery like purchase bills, vouchers etc. ITA No.718/Ahd/2018 (1) On the facts and circumstances of the case and in law, the Ld.CIT(A) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No.718/Ahd/2018 (4) On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition made on account of unexplained investment in painting, sculpture Art work of Rs. 59,61,56,500/- without considering the fact that the assessee failed to prove the identity of such artists from whom the paintings were received as gift and also the assessee could not prove the genuineness of such gift. Moreover, the assessee could not submit any documentary evidences of the items of paintings/sculptures which were received as gifts. The Ld.CIT(A) has also not appreciated the departmental Art Valuer/Appraiser's report based on which the addition was made. ITA No.726/Ahd/2018 On the facts and circumstances of the case and in law, the Ld.CIT(A) has deleting the addition made on account of unexplained investment in painting, sculpture Art work of Rs. 18,25,000/- by invoking provision of section 69B of the Act, without considering the fact that the assessee failed to prove the identity of such artists from whom the paintings were received as gift and also the assessee could not prove the genuineness of such gift. Moreover, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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