2015 (7) TMI 80 - AT - Income Tax

Addition to the income of the appellant in respect of 4 gold diamonds - Held that - In the light of the rival submissions and the order of the Tribunal in the case of Income Tax Officer vs. Shri. Gopal Verma, Kanpur we find that the explanations furnished by the assessee in the instant case were examined by the Tribunal in the case of Shri. Gopal Verma, the Director of the assessee-company. Being convinced with the explanations of Shri. Gopal Verma, the Tribunal has deleted the addition made in his hands on substantive basis and there is no evidence on record suggesting that the order of the Tribunal was ever reversed. Therefore, no addition is called for in the hands of the assessee on the basis of same facts. There is no evidence that the appellant had made any investment in purchase of these diamonds. The diamonds were property of M/s. Om Enterprises and these findings have been given in the assessment of M/s. Om Enterprises. Shri Gopal Verma had nothing go do with these diamonds in his individual capacity. He was holding these diamonds in the capacity of the Director of Company. It was the onus of M/s Mansingh & Sons Jwellers (P) Ltd. to explain the source of acquisition of diamonds. The nature of possession in his hand was holding the company property in trust, thus legally no addition can be made in the hands of Shri. Gopal Verma. In the present case even on the basis of facts no addition was justified to be made in the case of Shri Gopal Verma because the source of acquisition of diamonds was clearly explained and same was verified by conducting survey at M/s Om Enterprises as well as by making inquiry by deputing ITI to Calcutta and also by making inquiries by the Assessing Officer from M/s. Om Enterprises. The addition made by the AO of ₹ 21,30,372/- in the hands of the appellant cannot be sustained and is directed to be deleted. - Decided against revenue.

Summary

Issues Involved:
1. Legitimacy of the addition of Rs. 21,30,372/- to the assessee's income under section 69A of the Income-tax Act, 1961.
2. Validity of the explanations provided by the assessee regarding the possession of diamonds.
3. Examination of the Tribunal's previous decision in the case of Shri. Gopal Verma and its applicability to the current case.

Issue-wise Detailed Analysis:

1. Legitimacy of the Addition of Rs. 21,30,372/-:
The Revenue appealed against the order of the CIT(A), arguing that the CIT(A) erred in law and on facts by not appreciating the facts elaborated in the assessment order dated 31.3.2004. The assessment order added the value of undisclosed diamonds amounting to Rs. 21,30,372/- to the assessee's income under section 69A of the Income-tax Act, 1961. The Revenue contended that the diamonds were unlawfully retained and the entries in the books of accounts were an afterthought to regularize the possession of the diamonds.

2. Validity of the Explanations Provided by the Assessee:
The assessee explained that the diamonds were purchased by M/s. Om Enterprises from M/s. Ronak Gems Pvt. Ltd. and subsequently sold to the assessee company. The diamonds were sent to Kanpur and made into rings by Shri Sunil Karigar. However, the Assessing Officer did not accept the explanation, citing contradictions in the timeline of events and statements recorded during the survey. The AO made an addition of Rs. 21,30,372/- on a substantive basis in the hands of Shri. Gopal Verma and on a protective basis in the hands of the assessee under section 69A of the Act.

3. Examination of the Tribunal's Previous Decision:
During the hearing, the assessee's counsel referred to the Tribunal's previous decision in the case of Income Tax Officer vs. Shri. Gopal Verma, where the Tribunal accepted the explanations provided by Shri. Gopal Verma and deleted the addition in his hands. The Tribunal noted that the explanations furnished by the assessee in the instant case were identical to those in the case of Shri. Gopal Verma. The Tribunal found no evidence suggesting that the previous order was reversed and thus decided that no addition was called for in the hands of the assessee based on the same facts.

Conclusion:
The Tribunal confirmed the order of the CIT(A), who had rightly adjudicated the issue in light of the findings in the case of Shri. Gopal Verma. The Tribunal dismissed the Revenue's appeal, concluding that the explanations provided by the assessee were valid and that the addition of Rs. 21,30,372/- was not justified. The order was pronounced in the open court.