Ashok Chaddha vs Income Tax Officer
2011 Latest Caselaw 3131 Del

*              IN THE HIGH COURT OF DELHI AT NEW DELHI

+                           ITA 274/2011

                        JUDGMENT DELIVERED ON: JULY 05,2011

ASHOK CHADDHA                                     . . . APPELLANT
                          Through :       Mr. Shashi M. Kapila,
                                          Advocate with Mr. R.R.
                                          Maurya, Advocate

                               VERSUS


INCOME TAX OFFICER                                . . .RESPONDENT

                          Through:        Mr.Kiran    Babu,          Sr.
                                          Standing Counsel


CORAM :-

      HON'BLE MR. JUSTICE A.K. SIKRI
      HON'BLE MR. JUSTICE M.L. MEHTA

      1.       Whether Reporters of Local newspapers may be
               allowed to see the Judgment?
      2.       To be referred to the Reporter or not?
      3.       Whether the Judgment should be reported in the
               Digest?

A.K. SIKRI, J. (ORAL)

1. Admit on the following substantial questions of law:-

"(i) Whether the order of the Ld. ITAT is perverse in holding that the entire jewellery found during the search belonged to the appellant and not his wife and was undisclosed income of AY 2006-07 without any evidence?

(ii) Whether the Ld. ITAT erred in wrongly upholding the addition of the entire 506.9

grams of jewellery pertained to AY 1996-97 without appreciating that the said jewellery was acquired at the time of marriage over a period of time?"

Filing of paper books is dispensed with as the learned

counsel for the parties are prepared to finally argue the matter.

We have heard arguments of both the parties at length and now

proceed to answer the questions formulated above. Before that,

however, it would be necessary to take note of the relevant facts.

2. A search and seizure operation under Section 132 (1) of the

Income-Tax Act, 1961 (hereinafter referred to as the Act) was

conducted in the case of Dilbagh Rai Group on 1st September,

2005 and 28th September, 2005. This search covers the residential

premises of the appellant as also his locker no. 476 at Union Bank

of India, Naraina. During the search, apart from some cash and

jewellery, loose papers/documents were also found seized.

On 21st July, 2006, the assessee filed his return of income for

the assessment year 2006 under Section 139 of the Act. In order

to proceed with this assessment year detailed questionnaire was

also issued which related to queries in connection with the seized

material. This questionnaire was duly replied by the appellant who

submitted supporting evidence as well. Thereafter, assessment

order was framed by the Assessing officer assessing the income at

` 2,64,02,210 making several additions under Section 69 of the

Act. This assessment was made under Section 143 (3) and under

Section 153 A of the Act in respect of assessment years 2000-01

to assessment year 2006-07. The assessee approached the CIT

(A) by way of appeal against all the additions made by the

Assessing Officer. The CIT (A) disposed of the appeals by

consolidated order in respect of all these assessment years and

deleted the all the additions except two namely addition of `

3,87,364/- on account of jewellery found during the search and `

50,000/- on account of receipt of booking at Tivoli Garden. Both,

the assessee as well as the Revenue challenged the orders of the

CIT (A) by filing their respective appeals. In these appeals the

two additions sustained by the CIT (A) are affirmed by the ITAT as

well. In this appeal preferred by the assessee against the

impugned orders dated 17th September, 2010, we are concerned

with these two additions only. It may also be mentioned that at

the time of arguments the learned counsel for the appellant did

not press about the addition of `50,000/- on account of receipt of

Rs. 50,000/- at Tivoli Garden. For this reason, the questions of law

which are formulated pertain to addition of ` 3,87,364/- on account

of jewellery.

As far as addition qua jewellery is concerned, during the

course of search, jewellery weighing 906.900 grams of the value

amounting to ` 6,93,582/- was found. The appellant's explanation

was that he was married about 25 years back and the jewellery

comprised "stree dhan" of Smt. Jyoti Chadha, his wife and other

small items jewellery subsequently purchased and accumulated

over the years. However, the Assessing Officer did not accept the

above explanation on the ground that documentary evidence

regarding family status and their financial position was not

furnished by the appellant. The Assessing Officer accepted 400

grams of jewellery as explained and treated jewellery amounting

to 506.900 grams as unexplained and made an adhoc addition of `

3,87,364 under Section 69A of the Act working on unexplained

jewellery, by applying average rate of the total jewellery found.

The relevant portion of the assessment order reads as follows:-

"a very reasonable allowance of ownership of gold jewellery to the extent of 400 grams is considered reasonable and the balance quantity of 506 grams by applying average rate, the unexplained gold jewellery is considered at Rs. 3,87,364/-(506/900 x 6,93,582) u/s 69A of the Act".

The CIT (A) confirmed this addition stating that the AO had

been fair in accepting the part of jewellery as unexplained. The

ITAT has also endorsed the aforesaid view. Learned counsel for

appellant Ms. Kapila submitted that there was no basis for the

Assessing Officer to accept the ownership of the gold jewellery to

the extent of 400 grams only as "reasonable allowance" and treat

the remaining jewellery of Rs. 506.900 as unexplained. She also

submitted that another glaring fact ignored by the Assessing

Officer as well as other authorities was that as the department had

conducted a search of all the financial dealings which were within

his knowledge and no paper or document was found to indicate

that this jewellery belonged to the appellant and that it was

undisclosed income of the assessment year 2006-2007. In a

search operation, no scope is left with the tax department to make

addition on subjective guess work, conjectures and surmises. It

was also argued that jewellery is "stree dhan" of the assessee's

wife, evidenced in the form of declaration which was furnished by

mother-in-law of the assessee stating that she had given the

jewellery in question to her daughter. She argued that it is a

normal custom for a woman to receive jewellery in the form of

marriage and other occasions such as birth of a child. The

assessee had been married more than 25-30 years and acquisition

of the jewellery of 906.900 grams could not be treated as

excessive.

3. Learned Counsel for the respondent on the other hand relied

upon the reasoning given by the authorities below. After

considering the aforesaid submissions we are of the view that

addition made is totally arbitrary and is not founded on any cogent

basis or evidence. We have to keep in mind that the assessee was

married for more than 25-30 years. The jewellery in question is

not very substantial. The learned counsel for the

appellant/assessee is correct in her submission that it is a normal

custom for woman to receive jewellery in the form of "stree dhan"

or on other occasions such as birth of a child etc. Collecting

jewellery of 906.900 grams by a woman in a married life of 25-30

years is not abnormal. Furthermore, there was no valid and/or

proper yardstick adopted by the Assessing Officer to treat only 400

grams as "reasonable allowance" and treat the other as

"unexplained". Matter would have been different if the quantum

and value of the jewellery found was substantial.

4. We are, therefore, of the opinion that the findings of the

Tribunal are totally perverse and far from the realities of life. In

the peculiar facts of this case we answer the question in favour of

the assessee and against the revenue thereby deleting the

aforesaid addition of ` 3,87,364/-.

5. Appeal is allowed in the aforesaid terms.

(A.K. SIKRI) JUDGE

(M.L. MEHTA) JUDGE JULY 05, 2011 skb