2012 (10) TMI 538 - AT - Income Tax

Tribunal directs adherence to Rule 46A of IT Rules 1962, matter disposed following natural justice principles

Shri Sanjay Kumar Gupta Versus Income-tax Officer, Ward 37 (1), New Delhi

Shri Sanjay Kumar Gupta Versus Income-tax Officer, Ward 37 (1), New Delhi - TMI Issues Involved:1. Confirmation of addition of Rs. 2,50,000/- on account of unexplained investment in jewellery.2. Whether the jewellery was shown in the statement of affairs for the assessment year 2006-07.3. Proof of the source of investment in jewellery.4. Adherence to the procedure under Rule 46A of the IT Rules, 1962 by the CIT(A).Detailed Analysis:1. Confirmation of Addition of Rs. 2,50,000/- on Account of Unexplained Investment in Jewellery:The Assessing Officer (AO) added Rs. 2,50,000/- to the assessee's income as unexplained investment in jewellery. The assessee claimed that Rs. 1,03,000/- was used to purchase jewellery via a cheque from an ICICI bank account on 5.2.2007, and the remaining jewellery worth Rs. 1,47,000/- was received as a gift from in-laws during marriage in February 2007. However, the assessee failed to provide any supporting evidence, such as bills or quantitative details of the jewellery. Consequently, the AO did not accept the explanation and treated the amount as unexplained investment.2. Jewellery Not Shown in the Statement of Affairs for the Assessment Year 2006-07:The jewellery worth Rs. 2,50,000/- was not reflected in the statement of affairs as on 31.3.2007, which raised doubts about the source of the investment. The CIT(A) noted that the jewellery should have been included in the financial year 2006-07 if it was indeed purchased or received during that period. The absence of jewellery in the statement of affairs for 2006-07 led to the conclusion that the source of the addition remained unexplained.3. Proof of the Source of Investment in Jewellery:The assessee failed to furnish any evidence, such as bills or quantitative details, to substantiate the purchase of jewellery. The identity and creditworthiness of the donors (in-laws) were also not explained. The CIT(A) upheld the AO's addition, emphasizing that the assessee did not provide sufficient proof of the source of investment. Despite the assessee's claim that bills and quantitative details were available, they were not submitted during the assessment proceedings.4. Adherence to the Procedure under Rule 46A of the IT Rules, 1962 by the CIT(A):The CIT(A) admitted additional evidence submitted by the assessee without recording reasons as required under Rule 46A(2) of the IT Rules, 1962. The CIT(A) did not identify the relevant clause under Rule 46A(1) nor called for a report from the AO on the genuineness of the additional evidence. The CIT(A) failed to ascertain whether the assessee was prevented by sufficient cause from producing the evidence before the AO. The Hon'ble jurisdictional High Court in CIT vs. Manish Build Well (P.) Ltd. emphasized that the conditions prescribed in Rule 46A must be strictly complied with. The CIT(A) did not follow the procedure laid down in Rule 46A, leading to the conclusion that the additional evidence was admitted and accepted without proper verification.Conclusion:The Tribunal vacated the findings of the CIT(A) and restored the issues to her file, directing adherence to Rule 46A of the IT Rules, 1962, and principles of natural justice. The matter was to be disposed of in accordance with the law after allowing sufficient opportunity to both parties. The appeal was allowed for statistical purposes. Ground no. 4, being general in nature, was dismissed, and no other plea or argument was made before the Tribunal.