2020 (2) TMI 150 - AT - Income Tax

Addition on account of unexplained paintings - documentary evidences furnished by the assessee in support of acquisition of paintings - HELD THAT - Restore the matter back to the file of Ld. AO and direct him to re-appreciate the evidences furnished by the assessee in the light of adjudication rendered by us in the case of Ms. Kavita Singh 2017 (12) TMI 581 - ITAT MUMBAI with a direction to the assessee to substantiate his stand, in this regard. The Ld. CIT(A) has observed that many of the paintings were not reflected as part of stock-in-trade of the assessee. However, we find that the assessee has been saddled with addition on account of unexplained paintings on aggregate basis for various group entities and therefore, in such a case, few of the paintings would not be reflecting in the stock-in-trade held by the assessee. With these observations, the matter stand remitted back to the file of Ld. AO as aforesaid. - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Addition of ?692.55 Lacs on account of unexplained paintings.
2. Assessment of the source and ownership of paintings.
3. Consideration of documentary evidence in support of the source of paintings.
4. Comparison with a similar case (Ms. Kavita Singh).

Detailed Analysis:

1. Addition of ?692.55 Lacs on Account of Unexplained Paintings:
The assessee contested the addition of ?692.55 Lacs made by the Assessing Officer (AO) on account of unexplained paintings. The AO determined the income of the assessee at ?988.79 Lacs against the returned income of ?295.20 Lacs, attributing the discrepancy to unexplained investments in paintings. During the search proceedings, 288 paintings valued at ?1939.92 Lacs were inventorized, with 71 paintings valued at ?999.20 Lacs put under constructive seizure. The AO made additions on the basis that the assessee failed to provide satisfactory evidence of the source of these paintings.

2. Assessment of the Source and Ownership of Paintings:
The assessee attempted to explain the source of the paintings by categorizing them into six groups, supported by various documents such as third-party magazines, photographs, vouchers, bills, and cheque payment details. However, the Commissioner of Income Tax (Appeals) [CIT(A)] found these explanations unsatisfactory for several reasons, including the absence of a stock register, lack of purchase invoices, and failure to substantiate the claims with credible evidence. The CIT(A) noted that if the paintings existed prior to the block period, they should have been part of the inventory during the earlier search in 2001, which was not the case.

3. Consideration of Documentary Evidence in Support of the Source of Paintings:
The CIT(A) rejected the documentary evidence provided by the assessee, such as magazines, photographs, and self-made vouchers, on the grounds that they were insufficient to prove the genuineness of the purchases. The CIT(A) emphasized that the appellant failed to produce confirmations from the sellers and did not provide adequate proof of the source of funds used for the purchases. The CIT(A) also referenced several judicial precedents to support the view that superficial documentation cannot establish the genuineness of transactions in the absence of corroborative evidence.

4. Comparison with a Similar Case (Ms. Kavita Singh):
The assessee relied on a previous decision by the same Tribunal in the case of Ms. Kavita Singh, where substantial additions were deleted based on documentary evidence. The Tribunal in the current case acknowledged the similarity in facts and circumstances and noted that the assessee had placed similar evidence on record. Consequently, the Tribunal decided to restore the matter to the file of the AO for re-appreciation of the evidence in light of the adjudication in Ms. Kavita Singh's case. The Tribunal directed the AO to consider the evidence provided by the assessee and to make a fresh determination.

Conclusion:
The Tribunal allowed the appeal for statistical purposes and remitted the matter back to the AO for a fresh assessment, instructing the AO to re-evaluate the evidence provided by the assessee in accordance with the principles established in the case of Ms. Kavita Singh. The Tribunal's decision emphasized the need for a thorough and fair re-assessment of the evidence to determine the genuineness of the paintings and the source of their acquisition.