SATISH CHANDRA, J. - (1.) PRESENT appeal has been filed by the department under Section 260 -A of the Income Tax Act, 1961, against the judgment and order dated 30.04.2007 passed by the Income Tax Appellate Tribunal, Lucknow, in I.T.A. No.563/Luc/2003 for the Block Period 01.04.1990 to 16.01.2001.
(2.) ON 14.07.2009, a Coordinate Bench of this Court has admitted the appeal on the following substantial questions of law: - (i) Whether on the fact and circumstances of the case Income Tax Appellate Tribunal was correct in deleting the addition made by the Assessing Officer on account of unexplained investment in diamond jewellery when the anomaly between the item wise tally of diamonds so found at the time of survey/search operation and that declared under the Voluntary Disclosure of Income Scheme, 1997, remained unexplained. (ii) Whether on the fact and circumstances of the case Income Tax Appellate Tribunal was justified in deleting the surcharge levied under section 113 of the Act by holding that the insertion of proviso to Section 113 of the I.T.Act by the Finance Act, 2002 w.e.f. 01.06.2002 was not clarificatory in nature in view of the decision of the Hon'ble Supreme Court in the case of CIT Vs. Suresh N. Gupta reported in 297 ITR, page 322 and also the order of this Hon'ble Court dated 21.02.2008 passed in CIT (Central), Kanpur Vs. Lakhan Lal Ahuja, Lucknow in ITA No.121 of 2006. The brief facts of the case are that the assessee is a partnership firm dealing in manufacturing and sale of jewellery. From 13 -15.January, 2001, an exhibition of jewellery was held in Taj Hotel in the name of "Swarn Sanbandh", where 16 jewellers, including the assessee have participated. On 15.01.2001, a survey was conducted against all the participants of the exhibition including the assessee. Regarding the assessee, the survey action was converted into the search and seizure operation. The said search and seizure operation was carried out at the residential and business premises of the assessee. On the basis of the material, finally, the A.O. has made an addition for Rs.47,00,190 on account of unexplained investment in diamond jewellery. But the CIT(A) as well as the Tribunal had deleted the said addition. Still not being satisfied, the department has filed the present appeal.
(3.) WITH this background, Sri D.D.Chopra, learned counsel for the department has justified the action of the A.O. He submits that the assessee was asked to explain diamond holdings. In reply, the assessee stated that diamonds in question were covered under VDIS, declared in the earlier year and also included a purchase from Surat. The assessee had produced a receipt from M/s Aashi Diamond, Surat and also a voucher book with 7 vouchers filled up, showing receipt of diamonds from family members and the partners of the assessee and its transferred from M/s Trubhuwan Dass Bhim Ji Zavery of Pune for being set in gold. The gold sent by Javery Brothers, was entered in the stock register. The A.O. stated that explanation given by the assessee was not convincing.;