Bhurat Sunilkumar (HUF) v. Income-tax Officer, W-2(2), Hubballi
[Citation -2019-LL-0730-30]

Citation 2019-LL-0730-30
Appellant Name Bhurat Sunilkumar (HUF)
Respondent Name Income-tax Officer, W-2(2), Hubballi
Court HIGH COURT OF KARNATAKA CIRCUIT BENCH AT DHARWAD
Relevant Act Income-tax
Date of Order 30/07/2019
Assessment Year 1998-99
Judgment View Judgment
Keyword Tags voluntary disclosure • rejection of appeal • scrutiny assessment • valuation report • initial burden • vdis • capital gain
Bot Summary: Said gold is said to have been smelted after diamonds being removed by the assessees through M/s. Balaji Refinery, Hubli and bullion so smelted was sold to Shree Mahalakshmi Jewellers. If at all, assessing officer was of the view that declaration 7 made by the assessees is incorrect, on the premise that shops had not been occupied by them namely, address shown in the purchase invoice and sale bills, had not yet been occupied by the respective jewellers and have relied upon any other evidence, it was mandatory for the assessing officer to confront the said evidence to the assessees and after eliciting the say of assessees, he could have either rejected the same or accepted. Assessees had submitted copies of bills issued by M/s. Balaji Refinery which did show similar details of gold and diamond as returned in the 10 VDIS. In such situation we are of the opinion that assessees had discharged their onus to show that the gold and diamond sold by them were the same which were declared by them in the VDIS declarations. Assessee had filed 11 Misc.Petition No.91(B)/2016 which came to be allowed after having brought to the notice of the tribunal that claim of the assessee was similarly placed to that of assessee in the matter of SMT.MANJULADEVI. Thus, it is evident from the above orders, even in respect of other assessees who had filed declaration under Section 65(1) of VDIS 1997 during same period had enclosed the valuation reports as similar and identical to the valuation report filed by the present assessee and subsequently, they have also got the gold so declared smelted through Balaji Refinery and sold the bullion to M/s.Mahalakshmi Jewellers and diamonds to M/s.Sheetal Exports. Even in said case, assessee had got the gold smelted through Mahalakshmi Jewellers and assessing officer therein had questioned the source of amount deposited in Bank account of assessee, by rejecting the contention of the assessee that same is out of sale proceeds of jewellery and had treated the same as unexplained credit/investment, which is also the factual scenario in the instant case or in other words, the same exercise has been undertaken by the 12 assessing officer. Tribunal had rejected the same and held that assessee had submitted copies of the bills issued by M/s.Balaji Refineries which did show similar details of gold and diamond as returned in the VDIS. Thereby, tribunal held that assessee had discharged their onus to establish that gold and diamond sold by them were the same items which had been declared by them in their VDIS declaration. The assessee in the instant case being similarly placed and gold having been smelted through Balaji Refinery and having sold the same to M/s.Mahalakshmi Jewellers, the chain of link stood established with regard to the gold/jewellery declared by the assessee under VDIS- 1997 on 05.11.1997 being the same items which had been got smelted by them through goldsmith M/s.Shree Balaji Refinery and then sold to M/s.Mahalakshmi Jewellery and M/s.Sheetal Exports.


IN HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS 30th DAY OF JULY, 2019 BEFORE HON BLE MR.JUSTICE ARAVIND KUMAR & HON BLE MR. JUSTICE P.G.M.PATIL I.T.A.Nos.100005-100006/2018 BETWEEN: 1. BHURAT SUNILKUMAR (HUF) PAN: B-268/W-2(2) (AACHB0752Q) OCCUPATION: BUSINESS MOBILE: 9341020222 EMAIL: bhuratsunil@rediffmail.com. 2. BHURAT ANILKUMAR (HUF) PAN:B-268/W-2(2) (AADHB3038C) OCCUPATION: BUSINESS MOBILE: 9448351585 EMAIL: jay.bhurat@yahoo.com Present address for 1 & 2: SHANTI NIWAS, BHURAT BUILDING, SHETTAR ONI HIREPETH HUBBALLI-580 028. ... APPELLANTS (BY SRI. A. SHANKAR SR. COUNSEL AND SRI. MANOJ D PUKALE) AND: INCOME TAX OFFICER W-2(2) CRB., ITO., NAVANAGAR, P.B. ROAD, HUBBALLI -580025 2 EMAIL: HUBLI.IOT.1.1@ INCOME TAX.GOV.IN ...RESPONDENT (BY SRI. Y.V. RAVIRAJ, ADVOCATE) THESE ITAs ARE FILED UNDER SECTION 260A OF INCOME TAX ACT, 1961 PRAYING TO FORMULATE SUBSTANTIAL QUESTION OF LAW AS STATED ABOVE AND ALLOW APPEAL AND SET ASIDE ORDER OF ITAT DATED 11.08.2017 VIDE ITA NOS.2095 AND 2096/BANG/2016 TO EXTENT URGED IN APPEAL. THESE ITAs HAVING BEEN HEARD AND RESERVED, COMING ON FOR PRONOUNCEMENT OF JUDGMENT THIS DAY, ARAVIND KUMAR J., DELIVERED FOLLOWING: JUDGMENT Though matter is listed for Admission, by consent of learned Advocates appearing for parties, we have heard appeal on merits by formulating following substantial questions of law: (i) Whether weight of jewellery as declared by appellants-assessee under Voluntary Disclosure of Income Scheme VDIS as per valuation reports B & C is same as claimed by assessee by relying on invoices Annexures F & G ? (ii) Whether tribunal was correct in not relying upon decisions rendered by it in ITA No.102/BANG/2016, ITA 3 No.103/BANG/2016, ITA No.105(B)/2016 and ITA No.1509/BANG/2015 under facts identical as pleaded by appellants in instant case? BACKGROUND OF CASE: 2. Appellants voluntarily disclosed gold and diamond jewellery under Section 65(1) of VDIS 1997, which was accompanied by valuation report in respect of declared items, reflecting itemwise weight with other particulars. declaration as submitted by appellants came to be accepted by Commissioner of Income Tax and Certificate under Section 68(2) of VDIS 1997 came to be issued. 3. Appellants filed income tax returns for Assessment Year-1998-99 under Section 139 of Income Tax Act, 1961 (for short IT Act ) by declaring negative income from sale of above said VDIS declared gold and diamond jewellery items, which gold had been converted into bullion after smelting and separating diamonds through goldsmith - M/s. Balaji Refinery, 4 represented by its Proprietor Sri. Chaganlal. During scrutiny assessment, affidavit of goldsmith was also produced by assessees to prove fact of smelting. Valuation reports which was accompanying declaration and which had been accepted by Commissioner of Income Tax, were also produced in said assessment proceedings. Original purchase invoices for sale of above VDIS in favour of M/s. Shree Mahalakshmi Jewellers and M/s. Sheetal Exports were also produced. However, assessing officer rejected capital gains income from sale of VDIS declared items and entire sale consideration of said items came to be charged to tax under Section 68 of IT Act by assessment order dated 26.03.2001. Appeal filed by assessee before Commissioner of Income Tax as well as appeal preferred before Income Tax Appellate Tribunal being aggrieved by rejection of appeal by CIT(A), also did not yield any result and both appeals came to be dismissed. Hence, this appeal by assessees. 5 4. We have heard arguments of Sri. A. Shankar, learned Senior Counsel appearing for Sri.Manoj D. Pukale for appellants and Sri.Y.V.Raviraj, learned panel counsel appearing for respondent. We have perused orders under challenge. 5. Findings of authorities to reject claim of appellants was on ground that tenants - Balaji Refinery, Mahalakshmi Jewellers and Sheetal Exports, who had smelted gold belonging to appellants were not occupying premises reflected in invoices. It was also held that assessees had not examined any person from above said jewellery firms to establish gold declared under VDIS had been smelted by him. It was also held that description of gold purity, diamond carat, colour and cut are not mentioned in sale invoices. It is also held that affidavit of Chaganlal Proprietor of M/s.Balaji Refinery had no evidentiary value. In this background, substantial questions of law requires to be adjudicated and answered. 6 FINDINGS ON SUBSTANTIAL QUESTIONS OF LAW 1 & 2: 6. undisputed facts are that appellants had filed declaration under Section 65(1) of VDIS 1997 on 05.11.1997, enclosing valuation reports which reflected entire details of jewellery declared by appellants, its weight, design and all other incidental details. Said declaration came to be accepted by Commissioner of Income Tax (Appeals) under Section 68(2) of IT Act on 07.11.1997. Said gold is said to have been smelted after diamonds being removed by assessees through M/s. Balaji Refinery, Hubli and bullion so smelted was sold to Shree Mahalakshmi Jewellers (Annexures- F and G ). To substantiate that gold was smelted by M/s. Balaji Refinery, Hubli, affidavit (Annexure-D) of its Proprietor Sri. Chaganlal also came to be filed. In fact, weight of items sold were also produced together with copies of bank drafts and payments received by appellants on said items. Yet, assessing officer did not accept same, for reason aforestated. If at all, assessing officer was of view that declaration 7 made by assessees is incorrect, on premise that shops had not been occupied by them namely, address shown in purchase invoice and sale bills, had not yet been occupied by respective jewellers and have relied upon any other evidence, it was mandatory for assessing officer to confront said evidence to assessees and after eliciting say of assessees, he could have either rejected same or accepted. However, such exercise was not undertaken. But on other hand, evidence which is said to have been collected during course of enquiry, is sought to be used against assessees to disallow claim without extending any opportunity to assessees to rebut same. It is not case of assessing officer that either weight or gold sold by assessees after smelting is different from jewellery declared by assessees in their declaration filed under Section 65(1) of VDIS 1997. In fact, initial burden cast on assessee has been discharged by establishing and proving that sold items were items which had been declared by them under VDIS 1997. 8 7. In fact, under similar circumstances arising out of declaration filed by assessees Sri.Bijendra G. Agarwal and Smt. Kailash Devi G. Agarwal, who had raised similar contentions, had come up for consideration before tribunal, who had also got jewellery declared by them smelted through M/s. Balaji Refinery, Hubli and sold same to Shree Mahalakshmi Jewellers (Gold) and loose diamonds in favour of Sheetal Exports. Assessing officer in said cases had obtained letter from Gold and Silver Refinery Welfare Association, Hubli, wherein it was indicated that no such refinery existed. This finding was not accepted by tribunal and at paragraph 15 tribunal, it came to be recorded in ITA No.102/BANG/2016 and ITA No.103/BANG/2016 by its order dated 30.06.2016 to following effect: 15. What we note is that all items which were appearing in bill issued by M/s. Balaji Refinery were also mentioned in valuation report filed in support of VDIS declarations. Gross weight also tallies. Purchase invoice issued by concern which purchased gold and diamonds also shows that same 9 weight of bullion as mentioned in bill of M/s. Balaji. Refinery and same caretage of diamonds marked in valuation report. Case of Revenue is that M/s. Balaji Refinery, which melted ornaments and concern to which gold/bullion were sold were not found in Keshvapur, Hubli. Assessees were repeatedly questioned about this during course of second round of proceedings. Inspector s report relied on by AO was based on enquiry done more than 15 years after event. There was no way assessees could ensure that M/s. Balaji Refinery continued to do its business all through. Much reliance has been placed by AO on letter issued by Gold and Silver Refinery Welfare Association, Hubli, wherein it was mentioned that no refinery called M/s. Balaji Refinery, did any refinery work in Hubli since 15 years. However, it is not necessary that every refinery should be member of association. glance at bill issued by M/s. Balaji Refinery does show that it was holding licence. look at purchase bill issued by conerns namely Shri. Mahalaxmi Jewellery and M s. Sheetal Exports, show that they were having KST and CST registration numbers. In my opinion, these evidence do tilt case in favour of assessees. Assessees had done whatever possible, within their means to show that gold and diamond sold by them were same gold and diamond declared in VDIS, after conversion. Assessees had submitted copies of bills issued by M/s. Balaji Refinery which did show similar details of gold and diamond as returned in 10 VDIS. In such situation we are of opinion that assessees had discharged their onus to show that gold and diamond sold by them were same which were declared by them in VDIS declarations. Reasoning given by AO that antique jewellery would not have been sold by assessees is only surmise and cannot dislodge evidence filed by assessee. Further there is nothing on record to show that gold jewellery which were sold by assessee were antique in nature. In such circumstances, I am of opinion that lower authorities fell in error in disbelieving source for credits shown by assessees concerned. I have no hesitation in deleting additions made in hands of assessees. (emphasis supplied by me) 8. It would be relevant to note at this juncture that in matter of ITA No.105/(B)/2016 in case of RAMAVATAR S MAHAJAN vs I.T.O. disposed of on 18.11.2016, tribunal which was faced with identical facts had dismissed appeal of assessee and confirmed order of ITO/CIT(A) and held that assessee had failed to establish that sold diamonds are VDIS declared items on account of number of pieces of diamond, their size, cut and colour of sold diamonds was not verifiable. However, assessee had filed 11 Misc.Petition No.91(B)/2016 which came to be allowed after having brought to notice of tribunal that claim of assessee was similarly placed to that of assessee in matter of SMT.MANJULADEVI. Thus, it is evident from above orders, even in respect of other assessees who had filed declaration under Section 65(1) of VDIS 1997 during same period had enclosed valuation reports as similar and identical to valuation report filed by present assessee and subsequently, they have also got gold so declared smelted through Balaji Refinery and sold bullion to M/s.Mahalakshmi Jewellers and diamonds to M/s.Sheetal Exports. Even in said case, assessee had got gold smelted through Mahalakshmi Jewellers and assessing officer therein had questioned source of amount deposited in Bank account of assessee, by rejecting contention of assessee that same is out of sale proceeds of jewellery and had treated same as unexplained credit/investment, which is also factual scenario in instant case or in other words, same exercise has been undertaken by 12 assessing officer. However, tribunal had rejected same and held that assessee had submitted copies of bills issued by M/s.Balaji Refineries which did show similar details of gold and diamond as returned in VDIS. Thereby, tribunal held that assessee had discharged their onus to establish that gold and diamond sold by them were same items which had been declared by them in their VDIS declaration. assessee in instant case being similarly placed and gold having been smelted through Balaji Refinery and having sold same to M/s.Mahalakshmi Jewellers, chain of link stood established with regard to gold/jewellery declared by assessee under VDIS- 1997 on 05.11.1997 being same items which had been got smelted by them through goldsmith M/s.Shree Balaji Refinery and then sold to M/s.Mahalakshmi Jewellery and M/s.Sheetal Exports. As such, tribunal was not justified in not applying ratio of its own orders rendered in several matters which have been referred to herein above. In fact, tribunal in its various decisions rendered in respect of assessees who are 13 similarly placed, who also contended that gold declared by them under VDIS had been smelted through Balaji Refinery and sold thereafter to Mahalakshmi Jewellers had been accepted in following cases: Appeal Number Appellant Resp Order Dt ITA.77/Bang/2016 Sri Ghisulal Chopra ITO 30/06/16 ITA.80/Bang/2016 Smt Vimaladevi Doshi ITO 30/06/16 ITA.81/Bang/2016 Sri Shyam B Habib ITO 30/06/16 ITA.84/Bang/2016 Smt.Sabita ITO 30/06/16 Kallianpurkar ITA.107/Bang/2016 Kailash O Mahajan ITO 30/06/16 ITA.108/Bang/2016 Sri Parasmal J Jain ITO 30/06/16 ITA.109/Bang/2016 Sri Seshmal J Jain ITO 30/06/16 ITA.111/Bang/2016 Sri G W Bafna DCIT 30/06/16 ITA.133/Bang/2016 Kanchanbai M Jain ITO 30/06/16 ITA.139/Bang/2016 Ramakant R Sharma ITO 30/06/16 ITA.283/Bang/2016 Shri S Linganna DCIT 30/06/16 ITA.431/Bang/2016 M/s.Rittal India DCIT 30/06/16 Pvt.Ltd ITA.137/Bang/2016 Manjumala R Sharma ITO 04/07/16 ITA.82/Bang/2016 Sri Pukhraj D Jain, ITO 04/07/16 Hubli ITA.42/Bang/2016 Jayantilal P Jain ITO 31/08/16 9. In light of above stated facts, we are of considered view that tribunal committed serious error in not accepting sale invoices Annexures- F and J submitted by assessee on ground that it is not same items which had been shown and declared by them in VDIS declaration and valuation report annexed to such declaration. It further 14 committed serious error in not applying ratio of its earlier decision to facts on hand which were not only similar but also identical as it relates to same Refinery who had smelted gold declared by assessee under VDIS-1997. Hence, we answer substantial questions of law in favour of assessee and against Revenue. 10. For reasons aforestated, we proceed to pass following: ORDER (i) ITA Nos.100005-100006/2018 are allowed. (ii) Order dated 11.08.2017 passed by Income Tax Appellate Tribunal, Bangalore Bench C, Bengaluru in ITA No.2095/Bang/2016 and ITA No.2096/Bang/2016 for assessment year 1998-99 is set aside and appeals filed by assessees before Income Tax Appellate Tribunal, 15 Bengaluru Bench C, Bengaluru are allowed. (iii) No order as to costs. (Sd/-) JUDGE (Sd/-) JUDGE DR/sp Bhurat Sunilkumar (HUF) v. Income-tax Officer, W-2(2), Hubballi
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