Tax on 40 kg unexplained gold bullion upheld as income under Sections 69A and 115BBE post-search

ITAT Delhi upheld the addition made pursuant to a search u/s 132, where 40 kg of unexplained gold bullion was found and valued by a government valuer. The assessee had declared the value of this gold as additional income in a return filed u/s 153A, offering it to tax u/s 69A. ITAT held that the return u/s 153A was technically valid and, as the source of the gold remained unexplained, addition u/s 69A and tax u/s 115BBE were correctly applied and confirmed by CIT(A). The assessee's appeal was dismissed.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether, consequent to a search under section 132, the return filed under section 153A replaces the original return under section 139(1) and must be treated as the operative return for assessment purposes for the relevant assessment year.

1.2 Whether the additional income represented by bullion of Rs. 11,44,00,000/-, found during search and declared in the revised return and in the return under section 153A, could again be added as unexplained income by ignoring the section 153A return.

1.3 Whether the bullion of Rs. 11,44,00,000/- found in the assessee's locker constitutes "unexplained" income chargeable under section 69A and taxable at the rate prescribed under section 115BBE, notwithstanding its inclusion in the return filed under section 153A.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Status and effect of return filed under section 153A; permissibility of separate addition of Rs. 11,44,00,000/- already declared therein

Legal framework (as discussed)

2.1 The judgment sets out and analyses section 153A(1), its opening non obstante clause overriding sections 139, 147, 148, 149, 151 and 153, and the second proviso providing that assessments or reassessments pending on the date of initiation of search shall abate.

2.2 It is noted that once notice under section 153A is issued and returns are filed, such returns are to be treated "as if" they were returns required to be furnished under section 139; and that sections 153A, 153B and 153C constitute a complete code for post-search assessments.

Interpretation and reasoning

2.3 The Tribunal notes the finding that at the time of search on 05.10.2017, the assessment for the relevant year was pending and therefore abated under the second proviso to section 153A(1). Consequently, the original return filed under section 139(1) "loses its originality" and the return filed under section 153A takes its place.

2.4 The return filed under section 153A is to be construed as a return filed under section 139(1) for all other provisions of the Act; a return filed under section 153A "takes the place" of the original section 139 return.

2.5 It is found as a matter of fact that income of Rs. 11,44,00,000/- was already shown in the return filed under section 153A, and that the Assessing Officer, by taking income only as per section 139(1) return (Rs. 6,56,770/-) and separately adding Rs. 11,44,00,000/-, effectively ignored the valid section 153A return and duplicated the same income as an addition.

Conclusions

2.6 The Tribunal affirms the finding that the return filed under section 153A for the relevant year is technically valid and must be treated as the original return under section 139(1) for all purposes.

2.7 The separate addition of Rs. 11,44,00,000/- by the Assessing Officer, when such income already formed part of the total income declared in the section 153A return, was held to be "not correct" and not sustainable as a separate addition over and above the section 153A returned income.

Issue 3: Characterisation and taxability of bullion of Rs. 11,44,00,000/- under sections 69A and 115BBE

Legal framework (as discussed)

3.1 Section 69A is referred to and applied as the provision dealing with "unexplained" money, bullion, etc., where the assessee is found to be the owner and offers no satisfactory explanation about the nature and source.

3.2 Section 115BBE is applied as prescribing the special rate of tax on incomes assessed, inter alia, under section 69A, including incomes detected as a result of search.

Interpretation and reasoning

3.3 It is recorded that during search, bullion valued at Rs. 11,44,00,000/- was found in the assessee's locker; the assessee failed to explain the source of this gold and admitted that he survived only on salary; the bullion was therefore considered "unexplained bullion" within the meaning of section 69A.

3.4 The bullion was declared as additional income in the revised return and in the section 153A return, and offered to tax at normal rates. However, the authority finds that such inclusion does not alter the character of the income as "undisclosed" or "unexplained" discovered as a result of the search.

3.5 It is specifically held that the inclusion of such income in the revised and section 153A returns was not a "voluntary" inclusion in the sense claimed by the assessee, since the income was unearthed by the Department in search; therefore, its nature as income exigible under section 69A remained unaffected.

3.6 The proper course, as identified, was to commence assessment with the income as per the section 153A return and then treat the amount of Rs. 11,44,00,000/- within that income as unexplained bullion taxable under section 69A, with section 115BBE applying to such income.

Conclusions

3.7 The bullion of Rs. 11,44,00,000/- found in the locker constitutes unexplained income of the assessee and rightly attracts the provisions of section 69A.

3.8 Since this unexplained income was detected as a result of search and was offered for taxation only consequent upon such detection, it is chargeable at the rate prescribed under section 115BBE.

3.9 The Tribunal agrees with the first appellate authority that, while the section 153A return is to be treated as the operative return, the characterization and taxation of Rs. 11,44,00,000/- as unexplained income under section 69A, chargeable under section 115BBE, is in accordance with law.

3.10 On this basis, the Tribunal upholds the order of the appellate authority confirming the taxability of the additional income under sections 69A and 115BBE and dismisses the assessee's appeal.

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