2014 (7) TMI 1315 - AT - Income Tax

Revision u/s 263 - unexplained investment in jewellery u/s 69A - HELD THAT - After going through the board s instruction no.1916 we are of the view that though the aforesaid circular is in the context of seizure of gold jewellery but the same can also be applied while considering the unexplained investment in gold jewellery by the assessee. In the aforesaid instruction 1916 dated 11.5.1994 it is clearly mentioned that in case of married lady 500 gms. And in case of unmarried lady 250 gms can be given credit. The Hon ble Gujarat High court in case of CIT Vs. Ratanlal Vyaparilal Jain 2010 (7) TMI 769 - GUJARAT HIGH COURT taking note of board s instruction no.1916 has also expressed similar view by holding that though the circular has been issued for the purpose of laying down guidelines for seizure of jewellery but it can also be considered for the purpose of explaining the source of jewellery in terms with the guidelines laid down in the said instruction. Considering the aforesaid facts and circumstances and in the light of the board s instruction no.1916 dated 11.5.1994 and decision of Hon ble Gujarat High Court we direct the assessing officer to work out the unexplained investment if any after giving credit for gold jewellery as per clause (iii) of board s instruction no.1916 dated 11.5.1994. Accordingly assessee s appeal is considered to be allowed for statistical purposes. Assessment u/s 153A - Addition of unexplained cash credit - AO has only disputed the source of investment which is already reflected in the books of accounts and return filed prior to the date of search - HELD THAT - an amount which has already been recorded in the books of accounts and disclosed in the return of income cannot be made subject matter of assessment u/s 153A of the Act in absence of abatement of assessment proceeding. We therefore hold that the addition made of Rs. 7, 30, 000/- is not justified. So far as merits of the issue is concerned undisputedly the assessee from the very beginning has explained that the amount was received as gift from his father. This fact was confirmed during the assessment proceeding through affidavit of his mother and father s brother. The assessing officer has simply disbelieved the affidavit without verifying the veracity of the averments made therein which in our view is not a correct approach on the part of the assessing officer. - Decided in favour of assessee. Revision u/s 263 - CIT (Central) Hyderabad u/s 263 revising the assessment orders passed u/s 143(3) r.w.s. 153A - HELD THAT - As can be seen the assessing officer in the assessment order passed u/s 143(3) r.w.s. 153A of the Act has not made any addition in reference to any seized material but has treated the investment made in property of Rs. 7, 30, 000/- as unexplained credit. This amount has already been shown in the books of accounts and disclosed in the return. Therefore when there is no assessment proceeding pending on the date of search for the impugned assessment year the assessing officer cannot consider income which has already been recorded in the books of accounts and reflected in the return filed prior to the date of search. An amount which has already been recorded in the books of accounts and disclosed in the return of income cannot be made subject matter of assessment u/s 153A of the Act in absence of abatement of assessment proceeding. We therefore hold that the addition made of Rs. 7, 30, 000/- is not justified. So far as merits of the issue is concerned undisputedly the assessee from the very beginning has explained that the amount was received as gift from his father. This fact was confirmed during the assessment proceeding through affidavit of his mother and father s brother. The assessing officer has simply disbelieved the affidavit without verifying the veracity of the averments made therein which in our view is not a correct approach on the part of the assessing officer. Hence the assessing officer having made the addition purely on presumption and surmises without making any enquiry the same cannot be sustained. Accordingly we direct the assessing officer to delete the same. Assessment proceeding initiated u/s 153A which were ultimately completed by the assessing officer - HELD THAT - Assessing officer at the time of assessment proceeding has conducted enquiry specifically in respect of the loans to M/s. Sai Agro Industries. Merely because the result of such enquiry has not been mentioned in the assessment order it will not tantamount to assessment order being erroneous and prejudicial to the interest of revenue as it is not a case of no enquiry. Further CIT has not brought any material on record to show that advances were not in regular course of business. Therefore on merits also the CIT was not justified in exercising jurisdiction u/s 263 of the Act as the assessing officer has conducted enquiry and passed the order after application of mind. In the aforesaid view of the matter we hold that the impugned order passed u/s 263 of the Act is invalid and therefore we quash the same.

Summary

Issues Involved:

1. Addition of unexplained investment in jewellery under Section 69A of the Income-tax Act.
2. Addition of unexplained cash credit.
3. Validity of assessment orders under Section 263 of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Addition of Unexplained Investment in Jewellery (ITA 30/Vizag/2012):

The primary issue in this appeal is the addition of Rs. 5,86,950/- sustained by the CIT(A) out of a total addition of Rs. 28,49,360/- made by the AO towards unexplained investment in jewellery under Section 69A of the Income-tax Act. The facts reveal that during a search and seizure operation, gold jewellery and silver articles were found at the assessee's residence. The AO disallowed the assessee's claim that the jewellery was ancestral and added the value of the jewellery as unexplained investment. The CIT(A) partially accepted the assessee's contention based on the economic status and customary nature of holding jewellery, reducing the unexplained investment to 999 grams of gold valued at Rs. 13,63,635/-. The assessee contested this, arguing for a higher allowable quantity of jewellery based on CBDT instructions. The Tribunal directed the AO to rework the unexplained investment after giving credit for gold jewellery as per CBDT Instruction No.1916, thus allowing the appeal for statistical purposes.

2. Addition of Unexplained Cash Credit (ITA 410/Vizag/2012):

This appeal involves the addition of Rs. 7,30,000/- as unexplained cash credit. The delay of 247 days in filing the appeal was condoned. The facts indicate that the assessee claimed the amount as a gift from his father, supported by affidavits from his mother and uncle. The AO disbelieved the claim and added the amount as unexplained credit. The CIT(A) upheld this addition. The Tribunal, however, noted that the investment was already disclosed in the books and return filed prior to the search, and no incriminating material was found during the search. Citing the ITAT Vizag Bench decision in Sri Lalitha Constructions, the Tribunal held that the AO cannot make additions without reference to seized materials when no assessment proceeding was pending. The Tribunal directed the deletion of the addition, thus allowing the appeal.

3. Validity of Assessment Orders under Section 263 (ITA 412 to 416/Vizag/2013):

These appeals challenge the revision of assessment orders under Section 263 by the CIT for assessment years 2003-04 to 2007-08. The CIT found the orders erroneous and prejudicial to revenue for various reasons, including non-examination of interest allowability, unexplained investment in assets, unverified agricultural income, and excess lease rent without TDS deduction. The Tribunal observed that the issues raised by the CIT were already reflected in the books and returns filed before the search, and no assessment proceedings were pending at the time of the search. The Tribunal reiterated that in the absence of incriminating material, the AO cannot consider such issues in an assessment under Section 153A. The Tribunal also noted that the AO had conducted enquiries during the assessment proceedings, and the CIT's different view did not justify the revision under Section 263. Consequently, the Tribunal quashed the CIT's order, allowing the appeals.

Conclusion:

The Tribunal provided detailed analyses for each issue, emphasizing adherence to CBDT instructions, the necessity of incriminating material for additions under Section 153A, and the limitations of the CIT's revisionary powers under Section 263. The appeals were allowed, either for statistical purposes or by quashing the impugned orders.