2019 (4) TMI 81 - HC - Income Tax

Block assessment u/s 158BC - undisclosed income on account of excess stock of jewellery - no sized material found - Tribunal estimating the undisclosed income in the absence of any seized material, which is a condition precedent for computation of undisclosed income under section 158BB - HELD THAT - Tribunal being a fact finding body has failed to discharge its duty in an appropriate manner by recording the findings of facts on the basis of materials on record. CIT (Appeals) by giving an acceptable finding as quoted above on the basis of the seized material during the course of search, found that the alleged excess jewellery belonged to the partners of the Assesee firm and therefore the addition made in the hands of the Assessee firm to the extent of ₹ 7,62,190/- towards 1859 gms jewellery was not justified. Though the Tribunal had no contra material before it, but for the reasons best known to the learned members of the Tribunal, they stated in paragraph 5 that We specifically direct the assessee to offer some undisclosed income on account of excess stock of gold jewellery for the assessment year 1998-99 out of ₹ 7,62,190/- . Thereafter, the learned Tribunal proceeded to state that The ld. counsel for the assesee relied on the order passed by the first Appellate authority but, he agreed for the addition of ₹ 3,00,000/- out of ₹ 7,62,190/- as undisclosed income for the assessment year 1998- 99. We are unable to reconcile ourselves with the doubtful observations made by the learned Tribunal in the aforesaid manner. It was not at all open to the learned Tribunal to seek for any concession from the Assessee much less direct the learned counsel to make any such concession. No such concession is said to have been made by the learned counsel for the Assessee. We are rather pained and surprised at the aforesaid tenor of the order passed by the learned members of the Income Tax Appellate Tribunal- Decided in favour of assessee.

Summary

Issues:
1. Validity of adding undisclosed income on account of excess stock of jewellery for the assessment year 1998-99 in the block assessment under section 158 BC of the Income Tax Act, 1961.
2. Estimation of undisclosed income in the absence of seized material for computation under section 158 BB of the Income Tax Act, 1961.

Issue 1:
The Assessee filed an appeal under Section 260 A of the Income Tax Act, 1961, challenging the Income Tax Appellate Tribunal's order regarding undisclosed income from excess stock of jewellery for the assessment year 1998-99. The Tribunal found excess stock of jewellery during a search, admitted by a partner, leading to an addition of undisclosed income. The Court noted discrepancies in the Tribunal's approach, directing the Assessee's counsel to offer undisclosed income on excess stock of gold jewellery. Despite no concession made, the Tribunal added ?3,00,000 as undisclosed income, modifying the assessment order. The Assessee contended the Tribunal's direction was erroneous, as the CIT (Appeals) had deleted the additions based on jewellery details belonging to partners, and the Tribunal failed to justify the addition.

Issue 2:
The Tribunal's direction to offer undisclosed income on excess stock of gold jewellery for the assessment year 1998-99 raised concerns about the Tribunal's duty as a fact-finding body. The Court observed that the Tribunal did not discharge its duty appropriately by not justifying the addition of ?3,00,000 as undisclosed income. The Tribunal's request for concession from the Assessee's counsel, without any actual concession made, was deemed unjustified. The Court set aside the Tribunal's order and restored the CIT (Appeals) order, emphasizing the lack of basis for the Tribunal's addition of undisclosed income. The Assessee's appeal was allowed, with no costs imposed.