2021 (1) TMI 619 - AT - Income Tax

Unexplained jewellery - jewellery found from the premises R-4 during search action - source of acquisition of the jewellery found from the room of the assessee - HELD THAT - From the facts recorded by the lower authorities, it is not clear whether the jewellery stated to be issued on approval, was forming part of the stock of M/s Raj Mahal Jewellers Private Limited as on the date of the search. In absence of such a finding of the fact, the jewellery found from room of the assessee cannot be treated as explained merely by presenting approval notes. In the facts and circumstances of the case, we feel appropriate to set aside the finding of the Learned CIT(A) and restore the matter back to the file of the AO for verifying source of acquisition of the jewellery. AO may also carry out any other inquiries or verification deem fit in the facts and circumstances of the case and ensure that reconciliation is done with genuine evidences found during the course of the search action. It is needless to mention that the assessee shall be afforded adequate opportunity of being heard. Addition on account of commission income for obtaining accommodation entries - AO observed huge amount of credits in two bank accounts maintained with Federal Bank Ltd. and Karnataka Bank Ltd. respectively - HELD THAT - On perusal of the order of the AO, we find that addition has made on the presumption that assessee was engaged in providing accommodation entries, but no evidence has been brought on record by the AO to substantiate that the assessee was engaged in providing accommodation entries. The assessee has been subject to search and if at all the assessee was carrying out business of providing the accommodation entries, then such evidence must have been found against the assessee. But as per record no such evidences have been found even after conducting search at the premises of the assessee. Thus, addition cannot be made merely on the presumption that family concerns have admitted providing accommodation entries in their statement of facts before the Settlement Commission. Accordingly, we do not find any infirmity in the finding of the Ld. CIT(A) on the issue-in-dispute and accordingly, we uphold the same. The ground No. 2 of the appeal of the Revenue is accordingly dismissed. Unexplained investment in shares - HELD THAT - We find that the AO held the investment in shares as unexplained mainly due to reason that no information regarding source of investment was provided by the assessee, however, before the Learned CIT(A), the assessee has duly explained the bank account through which investment was made and the source of money. DR has not disputed this finding of the CIT(A) that investment had been made through bank account. In our opinion, finding of the CIT(A) on the issue-in-dispute is well reasoned and we do not find any infirmity in order of the learned CIT(A) and accordingly, we uphold the same. The ground of the appeal of the Revenue is accordingly dismissed.

Summary

Issues Involved:
1. Addition on account of unexplained jewellery.
2. Addition on account of commission income.
3. Addition on account of unexplained investment in shares.

Issue-wise Detailed Analysis:

1. Addition on account of unexplained jewellery:
The Assessing Officer (AO) made an addition of ?1,48,92,281/- under Section 69A of the Income-tax Act for unexplained jewelry found during a search. The assessee claimed that the jewelry was received on approval from a family concern and also included gifts received during marriage and other occasions. The AO rejected this claim due to the unusual duration of the approval period and the lack of direct approval in the assessee's name. The Ld. CIT(A) partially accepted the assessee's explanation, sustaining an addition of ?5,76,580/- for unreconciled jewelry. The Tribunal found that the source of the jewelry needed further verification, specifically whether the jewelry was part of the stock of M/s Raj Mahal Jewellers Private Limited. The matter was remanded back to the AO for detailed verification with specific directions to ensure reconciliation with genuine evidence.

2. Addition on account of commission income:
The AO added ?6,22,637/- as commission income for providing accommodation entries, based on substantial credit entries in the assessee's bank accounts. The Ld. CIT(A) deleted this addition, stating that the AO's conclusion was based on conjecture without substantive evidence. The Tribunal upheld the Ld. CIT(A)'s decision, noting that no evidence was found during the search to support the claim that the assessee was engaged in providing accommodation entries. The addition was deemed speculative and thus, dismissed.

3. Addition on account of unexplained investment in shares:
The AO treated an investment of ?12,53,36,332/- in shares of M/s Ginni Industries Ltd. and M/s Shree Raj Mahal Jewellers Private Ltd. as unexplained due to the assessee's failure to provide source details. The Ld. CIT(A) found that the investments were made through banking channels and were reflected in the assessee's statement of affairs. The Tribunal confirmed the Ld. CIT(A)'s findings, noting that the investments were duly explained and supported by bank records. The addition was therefore deleted.

General Grounds:
The remaining grounds raised by both the Revenue and the assessee were deemed general and dismissed as infructuous.

Conclusion:
The appeals were partly allowed for statistical purposes, with specific matters remanded for further verification by the AO. The Tribunal emphasized the need for thorough verification and reconciliation of the jewelry's source and dismissed speculative additions without substantive evidence.