2010 (12) TMI 506 - HC - Income Tax

Reassessment - Unexplained investment - Voluntary disclosure of income - There is no dispute about the proposition that under Section 69A any undisclosed income or valuables found with the assessee can be added to the income of the year in which the same are found - Assessing Officer was thus justified in initiating proceedings for reassessment under Section 148 of the Act and holding that the valuables found were liable to be added to the income of the assessee for assessment year 1998-99 in absence of valid explanation - Such declaration by itself was not enough to rebut the statutory presumption under section 69A unless the assessee substantiated the same - Decided in favour of the revenue by way of remand to Tribunal

Summary

Issues:
Validity of reassessment proceedings under section 147/148 for the assessment year 1998-99 based on declaration under Voluntary Disclosure of Income Scheme, 1997 (VDIS) regarding ownership of gold and diamond jewellery.

Detailed Analysis:

1. Issue of Reassessment Proceedings:
In the case, the assessee declared ownership of unexplained investment in jewellery under VDIS for financial years 1985-86 and 1986-87. The Assessing Officer initiated reassessment proceedings under section 147/148 for the assessment year 1998-99 based on this declaration. The Tribunal set aside the initiation of proceedings, stating that the declaration could not be the basis for reassessment for the year in question. The Tribunal emphasized that the assets were acquired in 1986-87 and 1987-88, not in 1998-99, rendering the reassessment proceedings unjustified and untenable.

2. Jurisdictional Grounds and Merits of Addition:
In other cases, the CIT(A) deleted the addition based on the justification that the assets were acquired in the financial year 1980-81, not in 1998-99. The Tribunal upheld the deletion on jurisdictional grounds without delving into the merits. The Tribunal's decision was based on the lack of material with the department regarding the escapement of income, as highlighted in various Tribunal judgments.

3. Statutory Provisions and Burden of Proof:
The dispute revolved around Section 69A, which allows for the addition of unexplained money or valuables to the assessee's income for the year in which they are found, unless a satisfactory explanation is provided. The burden of proof to show that the income does not relate to the year in which it was found lies with the assessee, not the department. The Tribunal's decision was challenged on the grounds that the burden of proof was on the assessee to rebut the statutory presumption under Section 69A.

4. Conclusion and Decision:
The High Court held that the initiation of reassessment proceedings based on the declaration under VDIS for the financial year 1997-98 was justified. The Court emphasized that the declaration alone was not sufficient to rebut the statutory presumption under Section 69A. Therefore, the Tribunal's decision to invalidate the reassessment for lack of jurisdiction was overturned. The Court allowed the appeals, set aside the previous orders, and remanded the matter to the Tribunal for a fresh decision on merits in accordance with the law.