2016 (11) TMI 1035 - AT - Income Tax

Tribunal allows deletion of unaccounted cash, remits jewelry issues back to Assessing Officer. Revenue's appeal allowed.

The Tribunal partly allowed the assessee's appeal by directing the deletion of the addition of Rs. 5,86,900 as unaccounted cash. The issues related to ... Search and seizure under section 132 - admission recorded during search not conclusive - explanation of cash found by reference to bank withdrawals and family withdrawals - obligation of revenue to consider statement in entirety and not rely on selective portions - addition for unexplained jewellery to be made only in respect of jewellery found in the assessee's personal possession - remand for fresh adjudication with opportunity and consideration of documents and precedentsAdmission recorded during search not conclusive - explanation of cash found by reference to bank withdrawals and family withdrawals - obligation of revenue to consider statement in entirety and not rely on selective portions - Deletion of addition made on account of cash found at the time of search treated as unexplained income. - HELD THAT: - The assessee had stated at the search that the cash found was accumulated from day-to-day withdrawals from bank accounts of the assessee and family members and later offered the cash as income due to misunderstanding about requirement of books. The Tribunal accepted that an admission made under pressure or misunderstanding is not conclusive and may be disproved. The statement, when read in entirety together with submitted details of withdrawals over several years by family members (total withdrawals submitted), showed sufficient availability of cash to explain the amount found. There was no contrary material to show that the withdrawals were entirely exhausted on expenses; selective reliance by the Assessing Officer on parts of the statement was impermissible. Accordingly the addition of the cash seized was not sustainable and directed to be deleted. [Paras 4]Addition of Rs. 6,36,900 (cash found at search) deleted.Addition for unexplained jewellery to be made only in respect of jewellery found in the assessee's personal possession - remand for fresh adjudication with opportunity and consideration of documents and precedents - Treatment of additions in respect of gold and diamond jewellery found at search and distribution among family members. - HELD THAT: - Jewellery was recovered from the separate personal possession of several major family members who filed separate returns; valuation was done separately in the panchnama. There was no evidence that the assessee had acquired jewellery on behalf of those family members. Consequently law did not permit making the entire addition in the hands of the assessee. The Tribunal directed that the Assessing Officer may make additions only in respect of jewellery found from the assessee's personal possession and only to the extent such jewellery remains unexplained. The assessee was permitted to produce documentary evidence, judgments and CBDT circulars, and the Assessing Officer was directed to afford an opportunity of hearing and decide afresh after considering submissions and evidence. [Paras 5]Issue remitted to the Assessing Officer for fresh adjudication limited to jewellery found in the assessee's personal possession, with directions to consider evidence and afford hearing; treated as allowed for statistical purposes.Remand for fresh adjudication with opportunity and consideration of documents and precedents - Revenue's appeal challenging relief on diamond jewellery. - HELD THAT: - As the Tribunal has remitted the gold and diamond jewellery issues back to the Assessing Officer with directions for fresh adjudication, the Revenue's grounds relating to diamond jewellery are similarly sent back for reconsideration. Accordingly the Revenue's appeal is disposed of as being remitted and is treated as allowed for statistical purposes. [Paras 6]Revenue's appeal remitted to the Assessing Officer for fresh decision; treated as allowed for statistical purposes.Final Conclusion: Tribunal deleted the addition in respect of cash found at the time of search, and remitted the issues relating to gold and diamond jewellery to the Assessing Officer for fresh adjudication limited to jewellery found in the assessee's personal possession, directing opportunity of hearing and consideration of evidence and precedents; Revenue's appeal is treated as allowed for statistical purposes. Issues Involved:1. Addition of Rs. 5,86,900 as unaccounted cash.2. Addition of Rs. 14,07,682 as unexplained investments in gold ornaments.3. Addition of Rs. 9,48,867 as unexplained investments in diamond jewelry.4. Validity of assessment based on searches conducted under section 132.Issue-wise Detailed Analysis:1. Addition of Rs. 5,86,900 as Unaccounted Cash:The primary issue was the addition of Rs. 5,86,900 as unaccounted cash found during a search operation. The assessee explained that the cash was accumulated from bank withdrawals over several years. However, the Assessing Officer (AO) was not convinced and relied on the assessee's statement during the search, where the assessee admitted the cash was not recorded in the books and offered Rs. 5,51,000 for taxation. The Commissioner of Income-tax (Appeals) [CIT(A)] confirmed the addition, stating that the assessee failed to furnish details of expenses incurred from these withdrawals.Upon appeal, the Tribunal noted that the assessee was under pressure and misunderstood the legal position during the search. It was highlighted that the assessee, an individual, was not required to maintain books like a firm or company. The Tribunal cited the Supreme Court's judgment in Pullan Gode Rubber Produce Co. Ltd. v. State of Kerala, which stated that an admission is important but not conclusive. The Tribunal found that the cash withdrawals over the years sufficiently explained the cash found and directed the deletion of the addition.2. Addition of Rs. 14,07,682 as Unexplained Investments in Gold Ornaments:During the search, gold jewelry worth Rs. 47,07,818 was found, out of which Rs. 14,84,600 was seized. The assessee claimed the jewelry was either ancestral or purchased over several years, supported by wealth-tax returns and valuation reports. The AO, however, found discrepancies and treated 1804.74 grams of gold as unexplained, resulting in an addition of Rs. 14,07,682.The Tribunal noted that the jewelry was found in the possession of various family members, who were separately assessed and filed individual returns. It was inappropriate to attribute the entire addition to the assessee. The Tribunal remitted the issue back to the AO to make additions only for unexplained jewelry found in the assessee's possession, allowing the assessee to provide further evidence.3. Addition of Rs. 9,48,867 as Unexplained Investments in Diamond Jewelry:Similarly, diamond jewelry worth Rs. 35,35,166 was found, with Rs. 21,32,958 seized. The AO made an addition based on discrepancies between the wealth-tax returns and the valuation report. The CIT(A) provided partial relief, reducing the addition to Rs. 9,48,867.The Tribunal remitted this issue back to the AO, similar to the gold jewelry issue, directing the AO to consider only the unexplained jewelry found in the assessee's possession and allowing the assessee to submit additional evidence.4. Validity of Assessment Based on Searches Conducted Under Section 132:The assessee raised an additional ground challenging the validity of the assessment based on searches conducted under section 132. However, this ground was not pressed during the hearing and was dismissed.Revenue's Appeal:The only ground raised by the Revenue was regarding the relief given by the CIT(A) on the diamond jewelry. Since the Tribunal had remitted the issues related to both gold and diamond jewelry back to the AO, the Revenue's appeal was also treated as allowed for statistical purposes.Conclusion:The Tribunal partly allowed the assessee's appeal by directing the deletion of the addition of Rs. 5,86,900 and remitting the issues related to gold and diamond jewelry back to the AO for fresh consideration. The Revenue's appeal was allowed for statistical purposes. The order was pronounced in the open court on August 5, 2016.