2010 (5) TMI 822 - AT - Income Tax

Summary

Issues involved:
The only issue in this appeal is against the order of CIT(A) confirming the action of Assessing Officer in making addition of diamonds found during search of 485.26 carats as undisclosed income of the assessee.

Comprehensive Details:

1. Background:
The appeal arises from the order of Commissioner of Income-tax (Appeals)-II, Ahmedabad confirming the addition of diamonds found during a search as undisclosed income of the assessee for assessment year 2005-06.

2. Facts of the Case:
The assessee, engaged in diamond trading, filed a return of income declaring total income. During a search operation, diamonds were found in a packet claimed by the assessee. The Assessing Officer made an addition of the diamond value as undisclosed income, not accepting the assessee's explanation.

3. Assessing Officer's Observations:
The Assessing Officer noted discrepancies in the documentation accompanying the diamonds, lack of clear ownership proof, and inconsistencies in the explanation provided by the assessee regarding the movement of the diamonds from Mumbai to Surat.

4. CIT(A) Decision:
The CIT(A) confirmed the addition of the diamond value as income from undisclosed sources, based on the lack of proper documentation and failure to link the seized diamonds with the books of accounts.

5. Appellate Tribunal's Findings:
Upon review, the Appellate Tribunal found substantial evidence supporting the ownership of the diamonds by the assessee. The Tribunal considered the documentation, statements of involved parties, and the correlation of seized diamonds with the purchases made by the assessee from disclosed sources.

6. Conclusion:
Based on the presented evidence and explanations, the Appellate Tribunal allowed the assessee's appeal, reversing the lower authorities' decision to add the diamond value as undisclosed income.

Final Verdict:
The Appellate Tribunal allowed the assessee's appeal, overturning the addition of the diamond value as undisclosed income.