2008 (3) TMI 284 - HC - Income Tax

Additions made u/s 69A seizure of gold ornaments assessee s statement that other goldsmiths are owner of those seized items was not accepted by excise and income-tax authorities finding of excise authorities and income-tax authorities that assessee was owner of those items, cannot be discarded - Tribunal acted perversely in accepting the explanation offered by the assessee and other goldsmiths and subsequently deleting the additions - Held that additions were rightly made

Summary

Issues Involved:
1. Applicability of Section 69A of the Income-tax Act.
2. Deletion of additions made under Section 69A.
3. Deletion of interest levied under Sections 234B and 234C.

Issue-wise Detailed Analysis:

1. Applicability of Section 69A of the Income-tax Act:
The primary issue was whether Section 69A of the Income-tax Act was applicable in the case of the assessee. The Central excise authorities had seized gold ornaments from the assessee's residence and business premises. The Assessing Officer treated a substantial portion of the seized gold as unaccounted and invoked Section 69A, treating the value of the gold as income from undisclosed sources. The Tribunal initially held that Section 69A was not attracted, but the High Court found that the Tribunal had misdirected itself by wrongly placing the burden of proof on the Revenue. The High Court emphasized that the person in possession of the articles must prove their source, following the precedent set in CIT v. Smt. Jayalakshmi Devarajan [2006] 286 ITR 412.

2. Deletion of Additions Made Under Section 69A:
The Tribunal had accepted the explanations offered by the assessee and other claimants (goldsmiths) regarding the ownership of the seized gold, leading to the deletion of the additions made by the Assessing Officer. However, the High Court found this approach to be perverse and without legal basis. The High Court noted that the Tribunal had ignored the evidence and findings of the Central excise authorities and the Assessing Officer, which consistently found the claims of the assessee and other goldsmiths unsustainable. The High Court held that the Tribunal's decision lacked cogent evidence and was based on surmises and conjectures. Consequently, the High Court upheld the additions made under Section 69A, emphasizing that the legal fiction provided in Section 69A could be drawn as the explanation offered by the assessee was not satisfactory.

3. Deletion of Interest Levied Under Sections 234B and 234C:
The Tribunal had deleted the interest levied under Sections 234B and 234C. However, the High Court reversed this decision, stating that the levy of interest is automatic in light of the findings regarding the applicability of Section 69A. The High Court clarified that while the levy of interest is upheld, the assessee retains the liberty to seek a waiver of interest.

Conclusion:
The High Court found that the Tribunal acted perversely in accepting the explanations offered by the assessee and other goldsmiths. The High Court upheld the additions made by the Assessing Officer under Section 69A, emphasizing the importance of evidence and proper application of legal principles. The interest levied under Sections 234B and 234C was also upheld, with the option for the assessee to seek a waiver. The Tribunal was directed to pass appropriate consequential orders in line with the High Court's findings.