2016 (10) TMI 201 - AT - Income Tax

Addition u/s 69A and 69C - deposit of penalty amount on behalf of the jewellers - Held that - The assessee s explanation regarding his commission income from carrier business has been accepted by the Revenue for the year under consideration. Further nothing has been brought on record to suggest that the assessee is the owner of the gold and silver jewellery other than the documents received from the Commercial Sales tax department which we have already examined or the assessee has any other sources of income other than the income from carrier business. In light of above we delete the addition made u/s 69A of the IT Act. Further the assessee s explanation regarding deposit of penalty amount on behalf of the jewellers is also found reasonable and we see no justification in the addition made by the AO u/s 69C of the Act which is hereby deleted. - Decided in favour of assessee

Issues Involved:
1. Ownership of the seized goods (gold ornaments and jewellery).
2. Addition of ?29,32,344/- under Section 69A of the Income Tax Act, 1961.
3. Addition of ?10,37,257/- as income from undisclosed sources under Section 69C of the Income Tax Act, 1961.
4. Non-telescoping of separate additions.

Issue-wise Detailed Analysis:

1. Ownership of the Seized Goods:
The primary issue revolves around whether the assessee is the owner of the seized goods (gold ornaments and jewellery) or merely a carrier. The assessee claimed to be a carrier, transporting goods on behalf of several traders from Gangapur City. This was supported by statements made before the Sales Tax Authorities and the Assessing Officer (AO). The AO, however, treated the assessee as the owner based on the order by the Commercial Taxes Department, which imposed penalties under the Rajasthan Sales Tax Act, 1994. The assessee argued that the goods belonged to ten different traders, whose details were provided during the investigation.

2. Addition of ?29,32,344/- under Section 69A:
The AO made an addition of ?34,15,100/- under Section 69A, treating the value of the seized goods as unexplained income. The CIT(A) provided partial relief by deleting ?4,82,756/- related to three traders who admitted ownership, but sustained the addition of ?29,32,344/-. The Tribunal reviewed the evidence, including statements from the traders and the appellant's consistent position that he was only a carrier. The Tribunal found that the penalty imposed by the Commercial Taxes Department was on the appellant as the in-charge of the goods, not as the owner. The Tribunal referred to legal precedents, including the decisions of the Rajasthan High Court and Madras High Court, which held that mere possession does not establish ownership under Section 69A. Consequently, the Tribunal deleted the addition of ?29,32,344/-.

3. Addition of ?10,37,257/- under Section 69C:
The AO also added ?11,03,077/- under Section 69C, treating the penalty amount paid to the Commercial Taxes Department as unexplained expenditure. The CIT(A) reduced this to ?10,37,257/-. The assessee contended that the penalty was paid by the traders whose goods were seized, and he merely collected and deposited the amount on their behalf. The Tribunal found this explanation reasonable and noted that the AO had acknowledged the appellant's role as a carrier. Therefore, the Tribunal deleted the addition under Section 69C.

4. Non-telescoping of Separate Additions:
The assessee argued that the separate additions should have been telescoped, meaning one addition should offset the other. However, since the Tribunal decided in favor of the assessee on the primary issues, this point became academic and was not examined further.

Conclusion:
The Tribunal allowed the appeal, deleting the additions of ?29,32,344/- under Section 69A and ?10,37,257/- under Section 69C, based on the consistent position of the assessee as a carrier and the lack of evidence to establish ownership of the seized goods. The order was pronounced in the open court on 23/08/2016.

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