Delhi HC upholds Deletion of Income Tax Addition made on investment in Wrist Watches [Read Order]

The Delhi High Court upheld the order ofthe Income Tax Appellate Tribunal [“Tribunal”] which deleted the Income Tax Addition made on investment in Wrist Watches.                                                

The appellant/revenue seeks to assail the order dated 03.05.2023 passed by the Income Tax Appellate Tribunal [“Tribunal”].  A search and seizure operation was conducted under Section 132 of the Income Tax Act, 1961 [“Act”] against the Minda Group at business and residential premises.  

Shri Nirmal Kumar Minda, the respondent/assessee is part of Minda Group, the search action brought to the fore articles such as jewellery, paintings and wrist watches. These articles were found at the residence of the respondent/assessee.  

Since, according to the appellant/revenue, the source of the money concerning investment in the aforesaid articles was unexplained, additions were made to each of these articles. Consequently, against the returned income amounting to Rs.14,73,30,720/-, the cumulative amount that was added was Rs.3,21,70,029/-. As a result, the assessed income was pegged at Rs.17,95,00,749/-.  

The CIT(A) allowed the appeal of revenue and on appeal the Tribunal via the impugned order dated 03.05.2023 allowed the appeal preferred by the respondent/assessee and dismissed the appeal preferred by the appellant/revenue.

Mr Sanjay Kumar, senior standing counsel, who appeared on behalf of the appellant/revenue, submits that the additions to the aforementioned articles have been wrongly deleted. The addition made by the Assessing Officer (AO) towards jewellery was Rs.2,64,35,029/-. Insofar as the addition concerning investment for paintings is concerned, the AO added Rs.55,85,000/-, while as far as wrist watches are concerned, the AO added Rs.1,50,000/-.

The Tribunal noted that the entire family lived in one residential premise as a single-family unit.  It also found that the jewellery declared/disclosed by the family as one unit in its wealth tax return was more than the jewellery found during the search action.  

The Tribunal noted that the respondent/assessee had placed before the AO item-wise reconciliation of the articles mentioned in the wealth tax return, along with the valuation report prepared during the search. The Tribunal found that the AO was unable to flag any defect in the reconciliation statement submitted by the respondent/assessee.

that no fault can be found in the appreciation of the material placed on record and deduction drawn therefrom by the Tribunal. The Tribunal has taken into account the status and returned income of the respondent/assessee as well as the fact that the jewellery declared and disclosed by the family in its wealth tax return was more than the jewellery found during the search operation. 

the Tribunal concluded that insofar as the valuation of artwork is concerned, experts could differ in their conclusions. Furthermore, given the fact that the valuers appointed by the appellant/revenue had not expressed any reservation about the report submitted by the expert appointed by the respondent/assessee, the Tribunal held that the addition made about the paintings was unmerited.  

The Tribunal has deleted this addition having regard to the returned income of the family members in the previous AY i.e., AY 2017-18, which is noted as Rs.9.50 crores. As observed above, the returned income in the AY in issue i.e., AY 2018-19 was Rs.14,73,30,720/-.

A division bench comprising Justice Rajiv Shakdher and Justice Girish Kathpalia observed that there were substantial withdrawals, and the Tribunal deleted the additions made on account of investment in wristwatches.  

Further held that “none of the findings of fact are perverse. We also notice that no question concerning perversity has been proposed by the appellant/revenue.”

To Read the full text of the Order CLICK HERE

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