2013 (5) TMI 442 - AT - Income Tax

Addition u/s 69B - search action u/s 132 - unaccounted 5 paintings, Branded watches & 14 items of house-hold items & Melectronic goods ie TVs, Music Systems, ACs etc. - Held that - AO has not borrowed any experts opinion on the extent of additions made. He has not even bothered to refer the matter to the DVO for obtaining the value of the paintings, branded watches and branded electronic goods but simply picked up figure from the air without any basis. He should have employed his ITI at least to gather the market value from any branded shops before resorting to adhocism. Thus this kind of absurd assessment of value of impugned items is not appreciable and therefore, this kind of valuation is absolutely uncalled for and unwarranted in this kind of cases. Regarding the other issue of availability of explainable sources perusuing the cash withdrawals of self and other family members for the year are in the range of Rs. 35.13 lacs. The expenses / investment in question does not only belong to the self but also to the entire family members of the assessee, whose withdrawals for the past ten years were of Rs. 68.08 lacs, which is an undisputed fact. It is also not the case of the AO that the assessee has unaccounted sources of income. Thus the onus is on the Revenue to prove that the assessee has unaccounted sources of income and the withdrawals of Rs. 68.08 lacs were not spent for the impugned movable assets, valued at Rs. 18.75 lacs - grounds raised by the Revenue are dismissed.

Summary

Issues:
- Addition of Rs. 18,75,000/- u/s 69B of the IT Act, 1961 for unexplained investment in paintings, watches, and other valuables.

Analysis:
1. Valuation of Paintings:
- AO made an addition of Rs. 3.75 lacs for unexplained investment in five paintings without referring to DVO or providing evidence of undervaluation. CIT (A) concluded that the estimation was baseless and not sustainable in law as it lacked a proper valuation basis.

2. Valuation of Branded Watches:
- AO added Rs. 5 lacs for branded watches without proper valuation or evidence contradicting the explanation provided by the assessee. CIT (A) found the addition to be based on guesswork and lacking any substantial basis, thus directing deletion of the addition.

3. Valuation of Electronic Goods:
- AO added Rs. 10 lacs for electronic goods without adequate evidence or refuting the explanation provided by the assessee. CIT (A) found the additions to lack scientific basis and evidence linking withdrawals to purchases, leading to the deletion of the addition.

4. Appellate Tribunal's Decision:
- The Revenue appealed the CIT (A) decision, arguing that the assessee failed to prove the acquisition transactions of the movable assets. The Tribunal noted that the AO did not seek expert opinion or valuation for the items in question, making the additions unjustified. The Tribunal also considered the availability of explainable sources, highlighting the substantial cash withdrawals made by the assessee and family members over the years, which were deemed sufficient to cover the estimated amount. The Tribunal upheld the CIT (A) decision, dismissing the Revenue's appeal.

Overall, the Tribunal found the AO's valuation to be arbitrary and lacking a proper basis, while also emphasizing the onus on the Revenue to prove unaccounted sources of income, which was not established in this case. The Tribunal concluded that the CIT (A) decision was justified, leading to the dismissal of the Revenue's appeal.