2018 (8) TMI 1416 - AT - Income Tax

Undisclosed investment - during search, from the locker, 100 gold bars weighing 1 kg. each were found out of which 38 gold bars were seized - Held that - both the assessees declared income during the course of original search in 2009 in respect of 114 gold bars. That apart, Wealth Tax returns showing so much gold were also filed. Now, in the instant search, only 100 gold bars were found, which number is patently less than the gold bars declared by the assessees during the course of earlier search with the same weight. When the amount of income was offered for taxation in the search carried out in 2009, in our considered opinion, the AO could not have once again made a fresh addition in respect of 100 gold bars found at the time of later search carried out in January, 2012, simply on the ground that the gold bars found in the locker were physically different as these were purchased at a later date from those declared before the Settlement Commission. The assessee has specifically submitted that the gold bars earlier declared were exchanged later on with the new gold bars which were placed in the bank locker and found at the time of search. The AO simply dislodged the claim of the assesses on the premise that they could not place on record any evidence of such exchange. He has not pointed out anywhere in the orders that the investment in gold bars surrendered by the assessee during the course of the earlier search was liquidated and the amount so realized was utilized elsewhere. Additions deleted - Decided against the revenue.

Summary

Issues:
Appeals filed by the Department arising from orders passed by CIT(A) for the assessment year 2010-11 regarding search and seizure action, addition of undisclosed income from gold bars found during search, and the validity of the Assessing Officer's decision.

Analysis:
The appeals before the ITAT New Delhi stemmed from orders by CIT(A) related to two connected assessees for the assessment year 2010-11, following a search and seizure action under section 132(1) of the Income-tax Act, 1961. The search revealed 100 gold bars weighing 1 kg each, with 38 bars seized. The Assessing Officer made additions to the undisclosed income of the assessees based on the disparity between the gold bars found during the search and those declared in a previous search in 2009. However, the CIT(A) deleted these additions, prompting the Department to appeal before the Tribunal.

During the proceedings, it was established that the assessees had declared income in the earlier search in 2009 before the Settlement Commission, including investments in gold bars. The Settlement Commission's order confirmed the declaration of income and the investment in gold bars. The assessees had also filed Wealth Tax returns reflecting the declared gold. In the subsequent search in 2012, fewer gold bars were found than declared earlier. The assessees explained that the gold bars found in 2012 were from the earlier declared income and were exchanged with new gold bars. The Tribunal found that since the assessees had already declared and offered the income for taxation in the previous search, the Assessing Officer erred in making fresh additions based solely on the physical difference of the gold bars without evidence of liquidation or diversion of funds.

The Tribunal upheld the CIT(A)'s decision, emphasizing that the gold bars found in 2012 were sourced from the income declared in 2009, and the Assessing Officer's rejection of the explanation lacked merit. Consequently, both appeals by the Department were dismissed by the Tribunal on 04.07.2018.