2014 (10) TMI 582 - HC - Income Tax

Income disclosed under Voluntary Disclosure of income Scheme 1997 - invocation of section 69A Failure to justify source of investment Held that - Tribunal was rightly of the view that where the assessee has failed to offer an explanation about the nature and source of acquisition of the items of jewellery in financial year 1986-87, statutory presumption provided u/s 69A of the Act comes into play and the value of the jewellery is deemed to be income of the assessee for the financial year 1997- 98 following the decision in CIT vs. Prem Pal 2010 (12) TMI 108 - Punjab and Haryana High Court - the AO was justified in initiating the proceedings for reassessment u/s 148 of the Act and holding that the valuables found were liable to be added to the income of the assessee for the AY 1998-99 in the absence of valid explanation - since the assessee failed to explain the nature and source of acquisition of the items of jewellery in the financial year 1986-87, presumption u/s 69A of the Act came into play and the value of the jewellery was deemed to be income of the assessee for the AY 1998-99 in which the assessee was found to be in possession of the items of jewellery- the order of the Tribunal is upheld as no substantial question of law arises for consideration Decided against assessee.

Summary

Issues involved:
1. Interpretation of Section 69A of the Income Tax Act, 1961 regarding addition of jewellery purchased in a previous year.
2. Validity of adding jewellery declared under VDIS Scheme for a previous year to income for a subsequent assessment year.
3. Justification of investigating the source of acquisition of jewellery from a previous year in a subsequent assessment year.
4. Assessment of income based on jewellery valuation and explanation of investment source.

Issue 1: Interpretation of Section 69A of the Income Tax Act
The appellant challenged the addition made under Section 69A of the Income Tax Act for jewellery purchased in 1986-87 but declared under VDIS Scheme in 1997. The Tribunal upheld the addition, citing the appellant's failure to explain the source of investment in the jewellery. The Tribunal invoked the statutory presumption under section 69A, deeming the jewellery's value as the appellant's income for the relevant assessment year. The Tribunal relied on a previous judgment by the High Court to support this decision, emphasizing the necessity of a valid explanation for the source of acquisition. The High Court concurred with the Tribunal's interpretation, finding no illegality or perversity in the decision. Consequently, the Court dismissed the appeal, stating that no substantial question of law arose from the Tribunal's application of Section 69A.

Issue 2: Validity of adding jewellery declared under VDIS Scheme
The appellant also contested the addition of jewellery declared under the VDIS Scheme for the assessment year 1987-88 to the income for the subsequent assessment year 1998-99. The Tribunal justified this addition by emphasizing the appellant's failure to provide a satisfactory explanation for the source of investment in the jewellery. The Tribunal deemed the jewellery's value as the appellant's income for the relevant assessment year, following the statutory presumption under section 69A. The Tribunal's decision was supported by a previous High Court judgment, which highlighted the importance of a valid explanation for acquisitions. The High Court upheld the Tribunal's decision, finding no grounds for interference due to the absence of illegality or perversity, and subsequently dismissed the appeal.

Issue 3: Justification of investigating the source of acquisition
The appellant raised concerns about the Tribunal's decision to investigate the source of acquisition of jewellery from 1986-87 in the subsequent assessment year 1998-99. The Tribunal justified this investigation by pointing out the appellant's failure to explain the nature and source of investment in the jewellery. The Tribunal applied the statutory presumption under section 69A, deeming the jewellery's value as the appellant's income for the relevant assessment year. The Tribunal's decision was supported by a previous High Court judgment, emphasizing the necessity of a valid explanation for acquisitions. The High Court concurred with the Tribunal's reasoning, finding no basis for interference due to the absence of illegality or perversity, and consequently dismissed the appeal.

Issue 4: Assessment of income based on jewellery valuation
The assessment of income was based on the valuation of jewellery declared under the VDIS Scheme for the assessment year 1987-88 but added to income for the subsequent assessment year 1998-99. The Tribunal valued the jewellery at &8377; 21,47,176, considering the market value as of March 31, 1998. This valuation was deemed as the appellant's income under section 69A of the Act due to the lack of a valid explanation for the source of investment in the jewellery. The High Court upheld this valuation, citing the Tribunal's application of the statutory presumption and the absence of any demonstrated illegality or perversity in the decision. Consequently, the Court dismissed the appeal, stating that no substantial question of law was raised.