1999 (8) TMI 984 - AT - Income Tax

Tribunal applies Supreme Court decision to Amnesty Scheme returns, upholds addition to income for non-genuine transactions

The Tribunal held that the Supreme Court decision in Jamna Prasad Kanhaiyalal vs. CIT is applicable to returns filed under the Amnesty Scheme, 1985. The ... - Issues Involved:1. Applicability of the Supreme Court decision in Jamna Prasad Kanhaiyalal vs. CIT to returns filed under the Amnesty Scheme, 1985.2. Genuineness of the purchase of gold ornaments by the assessee-firm from its partners and their family members.3. Assessment of the income derived from the alleged purchase of gold ornaments.Summary of Judgment:Issue 1: Applicability of Supreme Court DecisionThe CIT(A) erred in holding that the Supreme Court decision in Jamna Prasad Kanhaiyalal vs. CIT is not applicable to returns filed under the Amnesty Scheme, 1985. The CIT(A) argued that the Amnesty Scheme is a non-statutory scheme, unlike the Voluntary Disclosure Scheme (VDS), which was statutory. The CIT(A) relied on a CBDT letter stating that no inquiry into the true nature and source of the disclosed amount was to be made unless positive material existed. However, the Tribunal disagreed, stating that the benefits of the Amnesty Scheme are restricted to the declarants themselves and do not extend to third parties.Issue 2: Genuineness of PurchaseThe assessee-firm claimed to have purchased gold ornaments worth Rs. 1,53,02,266 from its partners and their family members, who had declared the jewellery under the Amnesty Scheme. The AO found several discrepancies and concluded that the transactions were not genuine. Key findings included:- The jewellery was declared by all 18 persons on the same day and valued by the same valuer.- The jewellery was converted into new ornaments and sold to the firm in the same year.- The declarants, including minors, claimed to have acquired the jewellery from undisclosed sources but could not provide details about the jewellers from whom the jewellery was purchased.- The jewellery was not found during a search action in September 1982.- The purchase consideration was credited to the accounts of the declarants and not paid in cash.Issue 3: Assessment of IncomeThe AO added Rs. 1,53,02,266 to the income of the assessee-firm, concluding that the purchases were financed out of its income from undisclosed sources. The CIT(A) deleted the addition, arguing that the tax effect would be the same even if the amnesty was availed of by the assessee-firm. However, the Tribunal upheld the AO's findings, stating that the assessee-firm could not prove the purchases and that the entire scheme appeared to be a tax planning device. The Tribunal emphasized that the ratio of the Supreme Court decision in Jamna Prasad Kanhaiyalal applies, allowing the Department to investigate the true source of the amount, even if it was declared under the Amnesty Scheme.Conclusion:The Tribunal set aside the order of the CIT(A) and restored that of the AO, thereby allowing the appeal of the Department. The Tribunal concluded that the assessee-firm is liable for the addition of Rs. 1,53,02,266 to its income for the assessment year 1988-89.