2016 (3) TMI 113 - AT - Income Tax

Unexplained investments in jewellery - addition on account of variation in description of jewellery disclosed in the reports filed with the Revenue authorities - Held that - As submitted that the assessee her husband and their daughter-in-law have been possessing jewellary in the preceding and subsequent years and have been always assessed to wealth tax. The fact remains that the jewellary found was much less than the jewellary disclosed in the wealth tax returns accepted by the Department and hence no addition can be made in the hands of the assessee. In the present case, the ld. CIT(A) sustained the addition on account of making charges of the jewellary without bringing any cogent material on record. The ld. CIT(A) presumed that all the jewellary was remade and sustained the addition to the extent of 10% of the value of jewellary without any basis which in our opinion is not sustainable. Even otherwise, addition made on the basis of suspicion alone is not sustainable. Suspicion however strong it may be, cannot take place of evidence - Decided in favour of assessee

Summary

Issues:
1. Disallowance of claimed amount by the assessee.
2. Addition of unexplained jewellery.
3. Jurisdiction of the assessment order.
4. Charging of interest under the Income Tax Act.

Issue 1: Disallowance of claimed amount by the assessee:
The cross-appeals were filed by both the assessee and the Revenue against the order passed by the CIT(A) in relation to the assessment year 2011-12. The assessee challenged the disallowance made by the AO, arguing that it was not justified and could not have been made under section 153A of the Act. The appeal also questioned the addition of a substantial amount on account of unexplained jewellery. The CIT(A) upheld the disallowance and addition, citing potential unaccounted money spent during remaking charges. The Tribunal noted that the issue was referred back to the AO for verification, and hence, did not adjudicate on these grounds.

Issue 2: Addition of unexplained jewellery:
The main contention revolved around the addition of unexplained investments in jewellery. The AO had made this addition based on discrepancies in the jewellery descriptions provided to the Revenue authorities. The Tribunal observed that the jewellery disclosed in the wealth-tax returns by the individuals exceeded the jewellery seized during the search. It was noted that the possession of jewellery was accepted, and the addition was not justified merely on the basis of suspicion. The Tribunal held that the addition on account of making charges without substantial evidence was unsustainable. Therefore, the Tribunal allowed this ground of appeal.

Issue 3: Jurisdiction of the assessment order:
Grounds 4 to 7 raised concerns about the validity of the jurisdiction of the assessment order under section 153A/143(3). However, as these grounds were not argued before the Tribunal, they were not adjudicated upon, and the appeal was partly allowed.

Issue 4: Charging of interest under the Income Tax Act:
The appeal by the Revenue focused on the deletion of the addition made by the AO regarding unexplained investments in jewellery. The Tribunal, after thorough consideration, concluded that the jewellery found was adequately explained, and no further addition was warranted under section 69A of the Act. Consequently, the ground raised by the Revenue was dismissed, and the appeal filed by the Revenue was ultimately dismissed.

In conclusion, the Tribunal's judgment addressed various issues concerning disallowances, additions of unexplained jewellery, jurisdiction of the assessment order, and charging of interest under the Income Tax Act. The Tribunal provided detailed analysis and reasoning for each issue, ultimately allowing some grounds of appeal while dismissing others based on the merits of the arguments presented.