2016 (8) TMI 95 - AT - Income Tax

Addition under section 68 - whether the items sold were the same which were disclosed under VDIS? - Held that - We find that the same quantity of gold, silver and diamonds which were declared under VDIS was sold. Though the assessee has declared the gold, silver and diamond jewellery in different form under VDIS, but in sale bill the assessee has sold gold & silver bullion and diamonds separately. The assessee has filed evidence with respect to conversion of gold and silver jewellery into gold bullion & silver bullion and diamonds. Since the same quantity which was disclosed under VDIS was sold, we find no justification in making the addition on introduction of sale proceeds in the books of account - Decided in favour of assessee.

Summary

Issues:
Introduction of cash in books of accounts on sale of gold, silver, and diamonds under VDIS.

Analysis:
1. The appeal was filed against the CIT(Appeals) order for the assessment year 1998-99. The appellant raised various grounds challenging the additions made by the authorities. The key contentions included the denial of assessment at a higher amount, disagreement with the addition made under section 68 of the Act, and discrepancies in the nomenclature of declared items and sale invoices.

2. The Assessing Officer noted that the cash introduced in the books was explained by the assessee as proceeds from the sale of gold, silver, and diamonds declared under VDIS. However, a technical objection was raised, stating that the items sold were not the same as those declared under VDIS, leading to the addition of the sale proceeds to the income of the assessee.

3. The matter was taken to the High Court, which remanded it back to the AO to determine if the items sold were the same as those disclosed under VDIS. The assessee provided details of the items sold and evidence of conversion of jewellery into bullion and diamonds, but the AO did not accept the explanation, leading to further additions.

4. The Tribunal reviewed the evidence presented by the assessee, including valuation reports, VDIS certificates, and sale documents. It was established that the same quantity of gold, silver, and diamonds declared under VDIS was indeed sold, despite being in a different form. The conversion of jewellery into bullion and diamonds was substantiated by evidence.

5. The Tribunal found no justification for the addition made by the revenue authorities, as the quantity declared under VDIS was consistent with the items sold. The acceptance of the declaration under VDIS and the tax deposited should have precluded further additions based on the introduction of sale proceeds in the books. Consequently, the order of the CIT(A) was set aside, and the addition was deleted, allowing the appeal by the assessee.