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Issues: (i) Whether gifts received from the assessee's father-in-law could be taxed as unexplained money under section 69A of the Income-tax Act, 1961. (ii) Whether on-money received on sale of property could be assessed as unexplained money under section 69A or had to be treated as part of sale consideration for capital gains. (iii) Whether additions for alleged unexplained investment in jewellery and cash found during search were sustainable, and whether telescoping/set-off was available. (iv) Whether addition for the watch found during search was sustainable.
Issue (i): Whether gifts received from the assessee's father-in-law could be taxed as unexplained money under section 69A of the Income-tax Act, 1961.
Analysis: The gifts were credited in regular bank accounts and formed part of the assessee's recorded financial transactions. The source was traced to the father-in-law, an NRI, and the revenue did not establish any cash remittance or any corroborative material showing that the receipts were the assessee's own unaccounted funds routed back as gifts. The adverse inference drawn from WhatsApp chats and statements was found insufficient in the absence of supporting evidence.
Conclusion: The addition on account of gifts was not sustainable and the assessee succeeded on this issue.
Issue (ii): Whether on-money received on sale of property could be assessed as unexplained money under section 69A or had to be treated as part of sale consideration for capital gains.
Analysis: The amount was received from the buyer in connection with transfer of immovable property, so the source of the receipt was explained. Once the receipt was found to be part of the consideration for the property, it could not be brought to tax as unexplained money merely because it was not reflected in the declared sale consideration. The proper treatment was to include it in the full value of consideration while computing capital gains.
Conclusion: The receipt was held to be part of sale consideration and not income assessable under section 69A; the issue was decided in favour of the assessee.
Issue (iii): Whether additions for alleged unexplained investment in jewellery and cash found during search were sustainable, and whether telescoping/set-off was available.
Analysis: The part of the jewellery addition supported by family circumstances and bills was accepted as explained, while the balance without supporting evidence remained unexplained. As regards cash found during search, no evidence was produced to substantiate the claimed sources. However, where the assessee had already been taxed on on-money receipts in earlier issues, telescoping and set-off were directed to avoid double taxation of the same funds.
Conclusion: The jewellery addition was sustained only to the extent unsupported by evidence, the cash addition was sustained but telescoping was allowed, and the issue was decided partly in favour of the assessee.
Issue (iv): Whether addition for the watch found during search was sustainable.
Analysis: The assessee furnished the purchaser's identity details, invoice and explanation that the watch belonged to a customer and was in the assessee's custody for servicing and polishing. The revenue did not conduct independent verification to rebut this explanation.
Conclusion: The addition for the watch was rightly deleted and the assessee succeeded on this issue.
Final Conclusion: The common order resulted in relief to the assessee on the major substantive additions, with some additions sustained only to the limited extent found unexplained and with telescoping directed where applicable.
Ratio Decidendi: A receipt proved to be part of a property sale consideration cannot be assessed as unexplained money under section 69A, and additions based solely on uncorroborated material such as chats or spreadsheets are unsustainable unless supported by independent evidence establishing ownership, source and unexplained character of the asset or receipt.
Unexplained money additions fail where gifts and property receipts are proved by record, with telescoping allowed for search assets.
Receipts shown in regular bank accounts could not be taxed as unexplained money under section 69A where the source was traced to the assessee's father-in-law and the revenue produced no corroborative evidence of cash routing or own undisclosed funds; the gift addition was deleted. An amount received on sale of immovable property, even if not reflected in the declared consideration, was treated as part of sale proceeds and had to be assessed in capital gains, not as unexplained money; this addition was also deleted. For jewellery and cash found during search, only the portion of jewellery supported by evidence was accepted, cash remained unexplained, but telescoping was allowed to prevent double taxation of the same funds. The watch addition was deleted because the assessee's explanation and documents were not rebutted.
Addition u/s. 69A/115BBE - unaccounted unexplained money - On-money as part of sale consideration - Uncorroborated seized material - Unexplained investment in jewellery - Telescoping and set off Addition u/s 69A - unaccounted unexplained money - Gifts through banking channel - gifts received from father-in-law held as bogus - HELD THAT: - The Tribunal held that section 69A applies only where the assessee is found to be the owner of money not recorded in the books and the source is not satisfactorily explained. The gifts in question stood credited in the regular bank accounts forming part of the books, and the donor was identified as the assessee's NRI father-in-law. The Assessing Officer's allegation that the gifts represented the assessee's own unaccounted money was found to be unsupported by corroborative material; the WhatsApp chats did not establish cash remittance by the assessee, there was no finding of cash deposit in the donor's account before remittance, and the retracted statement could not by itself sustain the addition. On that basis, the addition sustained by the Commissioner (Appeals) was deleted and the deletion of the balance addition was upheld. The same view was applied mutatis mutandis for the later year. [Paras 11, 13, 14, 36, 37] The addition on account of gifts under section 69A was deleted, and the Revenue's challenge to the relief granted by the Commissioner (Appeals) failed. On-money as part of sale consideration - Capital gains - applicability of section 69A - whether Cash received as on-money on sale of property could be taxed as unexplained money u/s 69A and had to be treated as part of the sale consideration for capital gains purposes? - HELD THAT: - The Tribunal held that section 69A, being a deeming provision, can be invoked only when the assessee is found to own money not recorded in the books and the source is not explained. Here, the receipt itself was accepted as part of the sale transaction, and the buyer was identified. Once the source of the cash stood explained as coming from the purchaser of the property, the amount could not be brought to tax as unexplained money. The correct treatment was to include the assessee's share of the on-money in the total sale consideration and recompute capital gains accordingly. The same reasoning was followed for the similar additions in the subsequent year. [Paras 24, 25, 26, 27, 39] The additions made u/s 69A on account of on-money were set aside, and the AO was directed to recompute capital gains by including such amounts in the sale consideration. Uncorroborated seized material - Estimated figures in Excel sheets - Unexplained investment in construction - HELD THAT: - The Tribunal found that the addition was founded solely on Excel sheets recovered from the contractor's side. The figures therein were in round sums, contained expressions indicating discussion, and did not establish actual cash payment by the assessee over and above what was recorded. No corroborative material was produced to show that the contractor had in fact received such cash, and no further verification was undertaken. The Tribunal also noted that if the AO doubted the declared cost of construction, recourse could have been taken to valuation proceedings, which was not done. In these circumstances, the deletion of the addition by the Commissioner (Appeals) was upheld. [Paras 17, 19, 20] The deletion of the addition towards alleged cash expenditure on construction was upheld. Unexplained investment in jewellery - Family jewellery and customary gifts - Telescoping and set off - HELD THAT: - The Tribunal accepted the Commissioner (Appeals)'s finding that a substantial part of the jewellery stood explained as having been received by the assessee and his wife from relatives from time to time, supported by bills and viewed in light of the family and social status and the applicable CBDT instruction. Since the Revenue produced no material to dislodge that finding, the relief granted to that extent was affirmed. However, for the balance jewellery, the assessee had not furnished evidence of acquisition, and the addition to that extent was therefore sustained. Tribunal accepted the alternative plea that telescoping and set off should be allowed against the additions confirmed on account of on-money received from property sales, since application of that cash elsewhere had not been shown. [Paras 42, 43, 44, 45] The deletion of the major part of the jewellery addition was upheld, the remaining addition was sustained, and telescoping against the confirmed on-money additions was directed. Cash found during search - Lack of source evidence - Telescoping and set off - HELD THAT: - The Tribunal noted that the assessee's explanation regarding ownership and accumulation of the cash was unsupported by evidence both before the authorities and before the Tribunal. The confirmation of the addition was therefore not disturbed on merits. However, applying the same principle adopted for the jewellery addition, the Tribunal held that telescoping and set off should be granted out of the on-money additions, since the use of those amounts elsewhere had not been established. [Paras 47, 48] The addition on account of cash found was sustained in principle, but the assessee was granted telescoping and set off against the on-money additions. Addition u/s. 69B on account of watch found during the course of the search on assessee - Ownership of seized article - Independent verification - Unexplained investment - HELD THAT: - The Tribunal recorded that the assessee had consistently stated that the watch belonged to a customer of Kapoor Watch Company and had furnished the buyer's identity details and purchase invoice, explaining that the watch was with him for servicing and polishing. The Commissioner (Appeals) accepted that explanation. As the Revenue could not dislodge those findings and the Assessing Officer had not undertaken any independent verification despite being given complete particulars of the alleged owner, the deletion of the addition was upheld. [Paras 51, 52] The deletion of the addition relating to the watch found during search was upheld. Final Conclusion: The assessee's appeals for Assessment Years 2019-20, 2021-22 and 2023-24 were partly allowed, while the Revenue's appeals for Assessment Years 2019-20 and 2023-24 were dismissed. The Tribunal deleted the additions on account of gifts and watch, held that on-money from property sales was taxable as capital gains and not under section 69A, upheld deletion of the construction-related addition, and granted telescoping against the additions sustained for jewellery and cash.