IN THE INCOME TAX APPELLATE TRIBUNAL DELHI ‘C’ BENCH

BEFORE SHRI U.B.S. BEDI, JM & SHRI A.N. PAHUJA, AM

ITA No.2117/Del/2007
Assessment year:2002-03

A.C.I.T.,Circle-47(1), V/s. Shri Faiz Murtaza Ali,

New Delhi 112, Uday Park,
New Delhi
[PAN :ABVPA 9827 B]

(Appellant) (Respondent)

Assessee by S/Shri Ashwani Taneja, Tarun &

Somail Aggarwal,ARs
Revenue by Shri Sat Pal Singh,DR

Date of hearing 11-04-2012

Date of pronouncement 31-05-2012

ORDER

A.N.Pahuja:- This appeal was earlier disposed of vide order dated 17th October,
2008 .Only issue in the appeal related to addition of `1,09,40,000/- u/s 68 of the
Income-tax Act,1961[hereinafter referred to as the ‘Act’]. The break up of the
amount as given on page 2 of the aforesaid order dated 17.10.2008, is as under:-
S. No. Date Amount[In `]
1 3.4.2001 `72,40,000/-
2. 9.4.2001 `14,00,000/-
3. 8.6.01 `2,00,000/-
4. 8.6.01 `2,00,000/-
5. 9.6.01 `1,00,000/-
6. 8.10.01 `8,00,000/-
7. 21.11.01 `10,00,000/-
`1,09,40,000
 2 ITA No.2117/Del./2007

2. While explaining the source of the aforesaid two amounts of `72,40,000/-

on 3.4.2001 & `14,00,000/- on 9.4.2001, the assessee submitted that he
received advances against various properties amounting to `40,00,000 & sold
personal effects for a sum of `39,47,136/-. With regard to the amount of
``39,47,136/- stated to be received on sale of personal effects, the ITAT
concluded as under:-
“6.3 We have considered the facts of the case and rival
submissions. We find that the assessee had received various
items described above, from her aunt by way of gift. The gift deed
has not been challenged by the Assessing Officer. In view thereof,
his objection that the place of keeping these items was not
disclosed, is not really material. Further, the assessee has
furnished confirmations from the buyers and all of them have
confirmed that the respective amounts were paid in cash in
financial year 2001-02. All confirmations contain the addresses and
some contain permanent account number also. It was also
explained to us by the learned counsel that there were an error in
mentioning financial year as 2001-02, which should have been read
as assessment year 2001-02. Thus, the whole of this money was
available with the assessee on or before 31.3.2001. Such an error
is feasible as the assessee and the buyers are not expected to be
well conversant with the tax terminology. This whole evidence
cannot be converted into no evidence by pointing out some error
because what is to be seen is whether the factual position before
the CIT(A) that inspectors were deputed to make enquiry from the
buyers. This fact has not been narrated in the assessment order
but has also not been contradicted by the learned DR. Therefore, it
is a case where the Assessing Officer tended to convert some
material evidence into no evidence without bringing any
contradictory evidence on record. We may mention here that the
position here is quite different from the position in regard to receipt
of two sums of money in cash aggregating to ``40 lacs, discussed
earlier. There, the assessee was not able to bring any evidence on
record to show that the money was received on or before 3.4.2001.
Further, there were contradictions in the documents filed by the
assessee. The onus of satisfactorily proving the source of money
as on 3.4.2001 was on the assessee and it was held that the
assessee failed to discharge this onus. However, in regard to sale
of various items, the assessee has proved ownership and also
brought sufficient evidence on record from a number of different
persons, who are identifiable, to show that the sales were, in fact,
made. He is not a dealer in antiques and personal effects.
Therefore, it was not expected that he will maintain a detailed
 3 ITA No.2117/Del./2007

account of each sale along with a foolproof evidence thereof. The

evidence produced by the assessee is believable on the face of it
and, thus, the onus thereafter shifted to the revenue to prove either
the items were not received by way of gift or they were not sold.
Instead of doing so, the revenue has picked up some holes in the
evidence, which according to us, do not displace the onus from the
revenue to the assessee again. In this view of the matter, we are of
the view that the learned CIT(A) was right in holding that nature and
source of this money has been proved along with the fact that this
money was available with the assessee on the date of deposit in
the bank. The revenue has not challenged before us the findings of
the learned CIT(A) that the items were personal effects. Therefore,
this issue is not before us. Thus, it is held that the learned CIT(A)
was right in deleting the addition of ``39,47,136/-.”

3. As is apparent on the aforesaid findings, the co-ordinate bench

inter alia, observed that the Revenue did not challenge the findings of the ld.
CIT(A) that items sold by the assessee were personal effects. On further appeal
by the Revenue, the Hon’ble Court directed in their order dated 10th May, 2011
in I.T.A. no.929/2009 in the following terms:-

“10. The ground which was taken by the revenue in the appeal
before the Tribunal reads as ‘on the facts and circumstances of the
case and in law’, the CIT(A) erred in holding the additions of
``1,09,40,000/- allegedly made by the Assessing Officer. The
aforesaid amount of ``1,09,40,000/- includes the amount of ``39.47
lakhs as well. No doubt no separate ground was raised by the
revenue dealing with the nature of articles sold by the assessee
against which he had realized a sum of ``39,47 lakhs. However,
the ground relating to addition of ``1,09,40,000/- was raised. In the
ground it was specifically stated that whether the addition made by
the Assessing Officer was correct ‘in law’. The aspect as to
whether the articles sold were to be treated as personal effects or
capital assets was specifically considered by the Assessing Officer.

11. The CIT(A) also discussed this issue though he treated the
same as personal effects. Under these circumstances, one of the
issue was whether the articles claimed to be sold by the assessee
are capital assets or not as per section 2(14) of the Act. Even
otherwise, the nature of articles which were sold as extracted
above were taken on record by the Tribunal.
 4 ITA No.2117/Del./2007

12. The question was only applicability of section 2(14) in

respect of these articles. No factual aspects were involved and it
was a question to be decided on the basis of facts.

13. Under these circumstances we are of the opinion that the

Tribunal should have gone into this issue and decided the same.
For this reason alone we remit the case back to the ITAT for
deciding this aspect of the matter. For this reason we are not
deciding the proposed question of law.”

4. In pursuance to the aforesaid directions of the Hon’ble High Court,

the appeal was scheduled for hearing before us. Facts on this issue as per
relevant orders are that to a query by the AO seeking further information in
respect of claim made by the assessee that deposit of `39,47,136/- was on
account of sale of personal effects, the assessee replied that he had taken
possession of various household items, paintings, collector items, furniture items
etc., which, according to the assessee were either owned by his grandfather or
father or uncle and aunt of the assessee. The assessee claimed that these
articles being for personal use , are personal effects and therefore, excluded
from the definition of capital assets. The items received by the assessee are
detailed in the assessment order as under:-

A) Carpets (Silk on Silk Carpets) 35 items

B) Paintings 20 pcs.
C) Collector items which included
Antique watches, rings &
Decorative items. 14 pcs
D) House hold items which
Included crystal items. 12 pcs
E) Antique furniture which
Includes table, chairs,
Center table. Chest etc. 34 pcs.
 5 ITA No.2117/Del./2007

4.1 In addition to above, the assessee is stated to have sold to one Mr.
A.K.Singh, all furniture items including fixtures, household items, one silk carpet
and two paintings located at premises at Bank Road, Patna and sold handicraft
items i.e.artificial jewellery to M/s Shriram International . However, the AO did not
accept the submissions of the assessee, that the items sold were personal
effects. The AO referred to the Random House Dictionary, wherein the
expression “personal effects” is defined as privately owned articles consisting
chiefly of clothing, toilet items, etc., for intimate use by an individual. In Black’s
Law Dictionary, the expression is defined to include articles associated with
person, as property having more or less intimate relation to person of possessor.
In the light of these definitions and referring to decisions in Maharaja Rana
Hemant SinghJi Vs. CIT (1976) 103 ITR 61 (SC);&. R. Ramanathan Chettiar Vs.
CIT (1985) 20 Taxman 52 (Mad.),especially when the assessee failed to
establish the identity of the items sold individually to each buyer, which were
claimed exempt u/s 2(14) as also failed to establish as to how and where these
items were kept by him prior to sale, the AO concluded that the assessee had
not been able to establish genuineness of his claim for exemption u/s 2(14) of the
Act.
.
5. On appeal, the learned CIT(A) concluded on the issue as under:-

“4. Before deciding the Appeal I would like to clarify that the
assessee has sold certain furniture items including fixtures,
household items, silk carpets, paintings etc. which were assets of
personal use of the assessee’s father and parcel of the immovable
properties the assessee has inherited The assessee was using
these assets along with the immovable properties where these
assets were located. Hence sale of these assets, in my opinion is
sale of articles meant for personal use.
………………………………………………………………………………

As regards further cash of ``39,47,136/- received on sale of

personal effects I find that the assessee had inherited certain
personal effects from his father and his aunt, and which are not
capital assets within the meaning of section 2(14) of the Income-tax
Act, 1961. Apart from the above, the Assessing Officer had also
 6 ITA No.2117/Del./2007

verified the sale of these personal effects through spot enquiries,

and, had also obtained confirmations from these parties through
inspector deputed with him. All the parties corroborated the
statement of the assessee. Further nothing adverse has been
brought on record by the Assessing Officer to negate the stand of
the assessee. In such facts and circumstances of the case, I am of
the opinion, that cash accruing on sale of personal effects was also
available with the assessee.”

6. In terms of the aforesaid directions of the Hon’ble High Court, issue before us
is as to whether or not the articles claimed to be sold by the assessee are
capital assets as per section 2(14) of the Act. The ld. DR while supporting the
findings of the AO, contended that the assessee did not establish as to how the
items sold by the assessee were his personal effects.

7. On the other hand, the ld. AR on behalf of the assessee while

carrying us through page 14 to 17 of the paper book contended that the
assessee belongs to a very respective family and inherited various items like
paintings, carpets ,collector’s items, antiques, furniture and fittings. The details
of these items sold to various persons is mentioned on page 8 and 9 of the
paper book. Some of these items were received in gift as per deed placed on
papers 16 and 17 of the paper book. While relying on decisions in ACIT Vs. Mrs.
Dilnavaz S. Variava 87 ITD 113 (Mum.); Income Tax Officer Vs. Bijoy Kumar
Pandya, 25 TTJ 480 (Gau.); Badrinarain Kalani Vs. Income Tax Officer, 14 TTJ
314 (Indore); Income Tax Officer Vs. Maharaj Kumar Ranjit Singh 10 TTJ 317
(Jaipur); CIT Vs. Benarshilal Kataruka 185 ITR 493 (Cal.); CIT Vs. Smt. Ammini
Varoo 173 ITR 57 (Kerala); Himatlal C. Valia Vs. CIT 248 ITR 262 (Guj.); Jayanti
Lal A. Shah Vs. K.N. Anantharam Aiyar 156 ITR 448 (Bom.) and CIT Vs. H.H.
Maharani Usha Devi ,231 ITR 793 (SC) , the ld. AR submitted that even
paintings, silver bed chairs, dining pieces and heirloom jewellery meant for
personal use has been treated as personal effects .Accordingly, the ld. AR
vehemently argued that all the items sold as per details on page 8-9 of the paper
book were personal effect and thus, excluded from the definition of capital
asset..While inviting our attention to amended definition of ‘capital asset’ as per
 7 ITA No.2117/Del./2007

Section 2(14) of the Act, the ld. AR on behalf of the assessee supported the
findings of the ld. CIT(A).

8. We have heard both the parties and gone through the facts of the
case as also the decisions referred to by the ld. AR .The only issue before us is
as to whether the articles claimed to be sold by the assessee are capital assets
or not as per section 2(14) of the Act. The AO pointed out in the assessment
order that the assessee failed to establish identity of articles sold to each of the
buyer individually while the assessee merely claimed that sale of items like
carpets, paintings, antique watches, antique furniture and other household items
fall within the purview of personal effects under sec. 2(14) of the Act .The ld.
CIT(A) did not even identify articles sold individually to each of the buyer nor
analysed as to how those items were personal effects of the assessee and
concluded that since the assessee was using these assets along with the
immovable properties where these assets were located, hence sale of these
assets, in his opinion was sale of articles meant for personal use. Without even
identifying the location or description of articles. inherited or received by way of
gift, which have been sold to each buyer individually, how the ld. CIT(A)
concluded that these items were for personal use of the assessee is not
understood. Here let us advert to the articles mentioned in the confirmation of
sales furnished by the assessee and placed on page 34 to 51 of the paper book.
Page 36 of the paper book contains confirmation of Shri Syed M Ahmed for
purchase of old carpets, curios and other collector items for INR 8.81 lacs.
Neither the number of carpets, curios or collector items nor any other
identification is evident from the said confirmation. Page 37 is confirmation of
Mrs. Sheel Goel for receipt of a sum of `.26,000/- in cash towards household
items sold to her. The description & nature of individual household articles is not
evident from this confirmation. How this confirmation establishes the articles as
personal effects has not been explained before us nor any evidence that these
articles were for personal use by the assessee or his family members, has been
brought to our notice. Next page 38 mentions payment of `. 40,000/- in cash by
 8 ITA No.2117/Del./2007

Mrs. Ridhima Sarin residing in Indonesia for purchase of collector items from shri
FM Ali. .Complete address is not given nor any identification of collector items.
Page 39 is another confirmation of Mrs. Rohini Wahi for receipt cash of `26,000/-
towards sale of furniture. What is the nature or description of furniture, is not
evident from this confirmation. Page 40 is again another confirmation of Mrs.
Sudershan Goswami r/o Ajit Arcade,New delhi for receipt cash of `28,000/-
towards sale of furniture. Here also what is the nature of furniture is not evident
from this confirmation. Page 41 is confirmation of Mrs. Indu Srivastava for
payment of `.1,55,000/- in cash on account of purchase of household articles.
The nature & description of individual household articles or address of payer is
not evident from this confirmation. Page 42 is confirmation of Shri Amit Kumar
Singh for payment of `.7,50,000/- in cash on account of purchase of household
& furniture items. The nature & description of individual household articles or
furniture is not evident from this confirmation. Page 43 is confirmation of
accountant of Shriram International for payment of `.1,40,000/- in cash on
account of purchase of artificial jewellery. The description & nature of individual
artificial jewellery is not evident from this confirmation. Page 44 is confirmation
of Mr. Gopal Kohli of San Francisco, USA for receipt cash of `.45,000 towards
sale of painting. Page 45 is another similar confirmation of Mr. Govind Kohli of
Davol Square, Providence for receipt cash of `.47,000/- towards sale of
collector items. Here also what is the nature & description of collector items is not
evident from this confirmation .Page 46 is confirmation of Mr. Pradeep Goyal for
payment of `.5,10,000/- on account of purchase of household articles &
furniture. The nature & description of individual household articles or furniture is
not evident from this confirmation. Page 47 is another confirmation of Mr. RPS
Mann of Kasauli for receipt cash of `.45,000/- towards sale of carpets. Page 48
is another similar confirmation of Mr. Rajat Ukil of Vasant Kunj,New Delhi for
receipt of cash of `.45,000/- towards sale of painting. Similarly page 49 is
another confirmation of Mrs. Ranjana Mann of Vasant Kunj,New Delhi for receipt
cash of `.26,000/- towards sale of collector items. The nature & description of
collector items is not evident from this confirmation. Page 50 & 51 are also
 9 ITA No.2117/Del./2007

similar confirmations of Mrs. Jaspal for receipt cash of `.42,000/- each towards
sale of collector items. Here also address of Mrs. Jaspal or the nature &
description of collector items is not evident from these confirmations. In nutshell ,
there is nothing in these confirmations regarding description ,nature or number of
household articles or furniture or collector items or artificial jewellery nor any
evidence has been placed before us to suggest that these articles were for
personal use by the assessee or by his dependent family members and thus,
were personal effects of the assessee.

8. 1 Before proceeding further ,we may have a look at the extant provisions of
sec. 2(14) of the Act, which read as under:

“2(14)capital asset" means property of any kind held by an assessee,

whether or not connected with his business or profession, but does not
include-

(i) any stock-in-trade, consumable stores or raw materials held for

the purposes of his business or profession;

(ii) personal effects, that is to say, movable property (including

wearing apparel and furniture, but excluding jewellery) held for
personal use by the assessee or any member of his family
dependent on him.

Explanation.-For the purposes of this sub-clause, " jewellery

" includes-

(a) ornaments made of gold, silver, platinum or any

other precious metal or any alloy containing one or
more of such precious metals, whether or not
containing any precious or semi-precious stone, and
whether or not worked or sewn into any wearing
apparel;

(b) precious or semi-precious stones, whether or not

set in any furniture, utensil or other article or worked
or sewn into any wearing apparel; “
 10 ITA No.2117/Del./2007

8.2 As is apparent from the aforesaid definition, personal effects are excluded
from the definition of capital asset . The term personal effects implies any
movable property (including wearing apparel and furniture, but excluding
jewellery) held for personal use by the assessee or any member of his family
dependent on him. This means only those effects can legitimately be said to be
personal which pertain to the assessee’s person. Hon'ble Apex Court in the case
of H.H. Maharaja Rana Hemant Singhji v. CIT [1976] 103 ITR 61, explained the
term "personal use” as under :

"The expression "personal use" occurring in clause (ii) of the above quoted
provision is very significant. A close scrutiny of the context in which the
expression occurs shows that only those effects can legitimately be said to be
personal which pertain to the assessee's person. In other words, an intimate
connection between the effects and the person of the assessee must be
shown to exist to render them "personal effects". The enumeration of articles
like wearing apparel, jewellery, and furniture mentioned by way of illustrations
in the above-quoted definition of "personal effects" also shows that the
legislature intended only those articles to be included in the definition which
were intimately and commonly used by the assessee.
The meaning assigned to the expression "personal effects" in various
dictionaries also lends support to this view. In the Unabridged Edition of the
Random House Dictionary of the English Language, at page 1075, the
expression is given the following meaning:
"Personal effects, privately owned articles consisting chiefly of clothing, toilet items,
etc., for intimate use by an individual."
In Black's Law Dictionary, Fourth Edition, at page 1301, the expression is
assigned the following meaning :
"Personal effects, articles associated with person, as property having more or less
intimate relation to person of possessor."
In Cyclopaedic Law Dictionary, Third Edition, at page 832, the expression
"personal effects" without qualifying words is interpreted to include generally
such tangible property as is worn or carried about the person.
In "Words and Phrases" (permanent edition), volume 32, at page 277, it is
stated that the words "personal effects" when used without qualification,
generally include such tangible property as is worn or carried about the
person, or to designate articles associated with the person. At another place
at the same page, it is stated that the words "personal effects" are used to
designate articles associated with person, as property having more or less
intimate relation to person of possessor or such tangible property as attends
the person.
 11 ITA No.2117/Del./2007

Bearing in mind the aforesaid meaning assigned to the expression in various

dictionaries and cases, the silver bars or bullion can by no stretch of
imagination be deemed to be "effects" meant for personal use. Even the
sovereigns and the silver coins which are alleged to have been customarily
brought out of the iron safes and boxes on two special occasions, namely, the
Ashtami Day of "Sharadh Paksh" for Maha Lakshmi Puja and for worship on
the occasion of Diwali festival cannot also be designated as effects meant for
personal use. They may have been used for puja of the deities as a matter of
pride or ornamentation but it is difficult to understand how such user can be
characterised as personal use. As rightly observed by the income-tax
authorities if sanctity of puja were considered so essential by the assessee,
the aforesaid articles would not have been delivered by his guardian to the
banks for sale."

8.3 Now in the case before us, the assessee is stated to have inherited certain
carpets(silk on silk), paintings, collector’s items(antique watches,rings &
decorative items),household items(including crystals),antique furniture(table,
chairs, centre table, chest)etc. form his grandfather ,father and uncle while
acquired under a gift deed dated 5.2.1999 from Mrs. Saiyada Mohdi Imam,
certain silk carpets, painting, crystal items, antique watches, decorative items,
furniture & fittings(various items) . There is no direct evidence available before us
in support of the claim of the assessee that these inherited and gifted articles
were in personal use by the assessee or his dependent family members. First of
all the composition of the family of the assessee and his dependents is nowhere
placed before us by the ld. AR. The exact description and location of the
movables has not been placed before the lower authorities and even before us
while immoveable properties are stated to at three different locations in Patna,
one in Mussorie and other at New Delhi. As already observed, the confirmations
of sales even do not reveal nature/description or location of items or even
number of articles at the time of their sale.. When we look at the list of items
inherited or received by way of gift in the background of the assessee, it cannot
be said that all these are were in personal use of the assessee ;not even an iota
of evidence is on record that the aforesaid articles were meant for personal use
by the assessee or his dependent family members and if so, in which premises
these were located or in use. The frequency of use of the property depends on
 12 ITA No.2117/Del./2007

the nature of the property and in the absence of description or nature of article in
the confirmation of sales placed in the paper book, it cannot be held that the
aforesaid articles were personal effects. The assessee inherited antique furniture
and other such decorative items. In the absence of nature or description of
various items in the confirmation of sales, it cannot be said that these very items
inherited or received in gift alone were sold and before that were individually,
commonly or personally used by the assessee and his dependent family
members. Mere declaration of such an intention cannot convert them into articles
of personal use. Now the decisions relied upon by the ld. AR before us, are not
of any assistance to the asssesee, especially when in all these decisions exact
nature and description of items has been given. . Likewise the occasion on which
the jewellery is used depends upon the nature of the jewellery. Before us not
even a whisper has been made in respect of jewellery as to whether it was
meant for females or males or on which occasiosn it was used & by whom. In
respect of antique or decorative items and collectors items, we are of opinion that
these cannot be classified as personal effects. If the assessee has made any
collection which might give him solace or pleasure whenever he looks at the
collection, such collection cannot be classified as " personal effects " as held in
H. R. Maharaja Rana Hemant Singhji. Vs. CIT,77 ITR 1007(Raj.) . The said
antique & collectors items were inherited or received in gift by the assessee. The
ld. AR has not explained as to how these antique ,decorative and collector items
were personal effects of the assessee. We are also supported in our view by the
decision of the Hon’ble Calcutta High Court in Smt. Shree Kumari Mundra v. CIT
[1997] 228 ITR 548 (Cal.).

9. In view of the foregoing ,especially in the absence of nature and full

description of each of the household articles or furniture and collector items in
the confirmation of sales placed in the paper book nor any evidence of intimate
connection between the effects and the person of the assessee having been
placed before us, we are unable to accept the plea of the assessee, that items
 13 ITA No.2117/Del./2007

sold were personal effects within the meaning of provisions of sec.2(14) of the
Act.

10. No other plea or argument was made before us.

11. In the result, appeal of the Revenue is allowed on the aforesaid issue ..
Order pronounced in open Court

Sd/- Sd/-
(U.B.S. BEDI) (A.N. PAHUJA)
(Judicial Member) (Accountant Member)

NS

Copy of the Order forwarded to:-

1. ACIT, Circle-47(1), New Delhi.

2. Shri Faiz Murtaza Ali, 112, Uday Park, New Delhi
3. CIT concerned.
4. CIT(A)-XXX, New Delhi.
5. DR, ITAT,’C’ Bench, New Delhi
6. Guard File.
BY ORDER,

Deputy/Asstt.Registrar
ITAT, Delhi