2022 (11) TMI 420 - AT - Income Tax

Undisclosed income - addition was based on the sworn statement recorded from the assessee's brother u/s.132(4) - assessee submitted that no amount was paid by way of demand draft and the addition was based on total misconception of facts - HELD THAT - As besides cash payment there was no other unaccounted payment by the assessee or his brother. There was no payment through demand drafts. The payment through Cheques, as already noted, was duly accounted for and there is no allegation that the same were sourced out of unaccounted sources. Therefore, impugned order could not be faulted with. The impugned additions have rightly been deleted by Ld. CIT(A) in the impugned order. The appeal stands dismissed. Unexplained investment in Jewellery - As seen that AO has granted concession as per CBDT Instruction No.1916 dated 11.05.1994 but it failed to give applicable concession for minor son and daughter. If further quantities for minor son and daughter are considered, nothing would remain to be added since the quantity of jewellery fall within the permissible limits. Another fact to be noted is that the assessee has also discharged the onus of establishing the source of jewellery. Accordingly, the impugned additions have rightly been deleted by Ld. CIT(A). The ground raised by the revenue stand dismissed.

Issues Involved:
1. Erroneous order by the CIT(A).
2. Deletion of addition of undisclosed income of Rs.2,42,29,375/-.
3. Retraction of statement and its evidentiary value.
4. Unexplained investment in jewellery.

Detailed Analysis:

Erroneous Order by the CIT(A):
The revenue contended that the order of the CIT(A) was erroneous both factually and legally. The CIT(A) directed the AO to delete the addition of undisclosed income amounting to Rs.2,42,29,375/- based on the sworn statement of the assessee's brother under section 132(4). The revenue argued that the CIT(A) failed to appreciate the facts and did not pinpoint exact entries, relying instead on the assessee's balance sheet and financial entries without proper verification.

Deletion of Addition of Undisclosed Income of Rs.2,42,29,375/-:
The addition was based on the sworn statement of the assessee's brother, who claimed that payments were made to M/s. BSR Builders through demand drafts. The CIT(A) found the addition incorrect, noting that the AO did not verify the source of the payments and relied on a retracted statement. The CIT(A) observed that the payments were made through banking channels and were accounted for in the financials, leading to the deletion of the addition.

Retraction of Statement and Its Evidentiary Value:
The CIT(A) considered the retraction of the brother's statement, which clarified the modalities of the payments and explained that no demand drafts were issued. The retraction, made nearly two years later, was supported by evidence showing that payments were made through cheques and accounted for in the financials. The AO failed to provide concrete evidence to support the addition, relying solely on the retracted statement.

Unexplained Investment in Jewellery:
The AO added Rs.7.67 Lacs as unexplained investment in jewellery based on the valuation report. The CIT(A) deleted this addition, noting that the AO did not consider the permissible limits for minor children as per CBDT Instruction No.1916. The jewellery found was within the permissible limits, and the assessee provided affidavits and evidence to establish the source of the jewellery.

Conclusion:
The appellate tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal. The tribunal found that the AO failed to verify the facts properly and relied on a retracted statement without supporting evidence. The payments were accounted for in the financials, and the jewellery was within permissible limits. Both appeals were dismissed, affirming the deletion of the additions.

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