2004 (3) TMI 319 - AT - Income Tax

Tribunal Upholds Deletion of Unexplained Gold Investment Addition; AO's Appeal Dismissed for Lack of Substantiation.

Income-tax Officer, Ward 14 (8). Versus Pukhraj N. Jain.

The Tribunal upheld the CIT(A)'s order, affirming the deletion of the addition made by the AO under section 69A of the I.T. Act. The Tribunal concluded ... Unexplained Money - addition u/s 69A - Ownership and possession of contraband gold - Burden of proof - HELD THAT:- As regards the statement of KNJ the same too was not recorded by the Assessing Officer during assessment proceedings but was recorded by the customs officials. The said statement was recorded at the back of the assessee and the assessee has not been allowed an opportunity to cross-examine KNJ on the said statement. Besides, whatever be contained in the said statement of KNJ dated 15-10-1986, the same has been retracted by KNJ as is evident from his letter dated 17-10-1986 and his another letter dated 7-11-1986 alleging that the same was recorded forcibly and under threat and under influence and that the same was not voluntary. In this regard, we may not be unmindful of this fact as well that KNJ, being himself involved in the unlawful transaction of carrying contraband gold, is a tainted witness, whose testimony, even otherwise, may not be worth reposing credence therein or placing reliance thereon. As against the said statement of KNJ there is also the statement of assessee (Pukhraj Jain) denying totally his involvement in or connection with the said gold transaction. There is no statement of Ahmed either on record to corroborate the department's case KNJ having been found in possession of gold, prima facie it is KNJ who is to be treated as owner of his possession (gold) unless this presumptive inference is rebutted by proper/convincing evidence. We do not find any such rebuttive evidence on record whether brought by the Assessing Officer or otherwise available, on record. There being no 'evidence' worth the name, the 'other material' being the said statement of KNJ and the order of Customs Collector, remain too feeble to entangle assessee as the owner of the said contraband gold, seized by the Customs Officials from the possession of KNJ. For making an addition u/s 69A of Income-tax Act, 1961, apart from ownership of the asset/valuable article, which is deemed to be the income of the assessee of that financial year, it is also a pre-requisite that such asset/valuable article 'is not recorded in the books of account' maintained by the assessee (if any). In the instant case, even if the department's factual allegations were assumed to be correct, the stage of recording the said seized gold in the books of account of the assessee cannot be said to have arrived yet as the gold is stated to have been seized on the way when KNJ was bringing the same, and thus the valuable article had not yet been brought to the assessee. Thus, we find no fault with the impugned order of the learned CIT(A) in deleting the addition made by the Assessing Officer. We therefore, decline to interfere with the same. In the result, this appeal of the Revenue is dismissed. Issues Involved:1. Deletion of addition u/s 69A of the I.T. Act.2. Ownership and possession of contraband gold.3. Reliance on the Customs Collector's order and statements recorded by customs officials.4. Burden of proof and rebuttable presumption u/s 69A.Summary:Issue 1: Deletion of addition u/s 69A of the I.T. ActThe revenue appealed against the CIT(A)'s order deleting the addition of Rs. 13,51,400 made u/s 69A of the I.T. Act. The Assessing Officer (AO) had added this amount as unexplained investment in gold not recorded in the assessee's books. The CIT(A) deleted this addition, leading to the revenue's appeal.Issue 2: Ownership and possession of contraband goldOn 15-10-1986, the assessee's brother, KNJ, was intercepted with 50 gold biscuits worth Rs. 13,51,400. The Customs Collector's order dated 31-5-1988 confiscated the gold and imposed penalties on KNJ and the assessee. The AO relied on KNJ's statement implicating the assessee, but the CIT(A) found no independent material brought by the AO to substantiate the addition.Issue 3: Reliance on the Customs Collector's order and statements recorded by customs officialsThe AO relied on the Customs Collector's order and KNJ's statement. However, the Tribunal noted that the AO, acting in a quasi-judicial capacity, must independently ascertain facts and cannot solely base his decision on findings from another authority. The Tribunal emphasized that the AO must apply his own mind and gather evidence independently.Issue 4: Burden of proof and rebuttable presumption u/s 69AThe Tribunal highlighted that the presumption u/s 69A is rebuttable and requires proof of ownership. The burden of proving ownership lies with the department. The Tribunal found that the AO did not provide sufficient evidence to prove the assessee's ownership of the gold. The Tribunal also noted that KNJ's statement was retracted, and the assessee was not given an opportunity to cross-examine KNJ or other witnesses.Conclusion:The Tribunal upheld the CIT(A)'s order, finding no fault in the deletion of the addition made by the AO. The appeal by the revenue was dismissed.