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2023 (2) TMI 457 - AT - Income TaxUnexplained investment in jewellery - search and seizure operation u/s 132(1) - HELD THAT - Considering the fact that once the department officer during the search has considered this silver items as explained and the ld. AO without bringing any contrary finding merely based on the same fact that was before the search team cannot make a separate addition. We find force in the arguments of the ld. AR that once the search team has accepted that silver items were considered as explained and the same is explicitly evident from the question 15 ignoring that primary acceptance by the revenue at the time of search there is no reason by the ld. AO and ld. CIT(A) and in making and sustaining the addition and based on that primary finding the addition sustained by the ld. CIT(A) is vacated and the ground no. 1 raised by the assessee is allowed. Penalty u/s 271AAB(1)(a) - Charge of tax u/s. 115BBE - Whether charging of tax as per provision of section 115BBE is in accordance with the law and principles of nature justice? - HELD THAT - On cogent reading of the amendment in both the sections of 115BBE and 271AAB with that of the press release, it is evidently clear that the intention of legislature is to segregate the taxation of income declared in search with that of the other amount found and disclosed by assessee in other then search cases. The search in this case is before the Taxation Laws (Second Amendment) Act, 2016 and it is clear from the press note that 16.12.2016 that the rate of penalty and rate of tax both are separately discussed and the penalty in this case proposed to be levied u/s. 271AAB and the were also amended and discussed in that press release and the amendment made in the Act. Based on the above intention of the legislature clearly evident we are of the considered view that once the ld. AO has already decided based on the fact that this is the case of search addition and amount declared u/s. 132(4) accepted by the assessee and offered the same in the return of income filed the same will be in accordance with the penal provision of section 271AAB and invoking to provision of section 115BBE in this case is not in accordance with the law and is also against principles of nature justice as no such issue is raised, discussed and confronted with the assessee. Thus, we direct the assessing officer to strict the calculation of tax in accordance with the provision of law as discussed here in above and give the relief in tax calculation accordingly. In terms of these observation, we allow the ground no 2 3 raised by the assessee.
Issues Involved:
1. Addition towards unexplained investment in jewelry. 2. Invocation of provisions of Section 115BBE for applying a higher rate of tax. Detailed Analysis: 1. Addition towards unexplained investment in jewelry: The primary issue revolves around the addition of Rs. 4,55,639 towards unexplained investment in jewelry. The search and seizure operation conducted on 21.07.2016 at the assessee's premises led to the discovery of gold, silver, and precious stones. The Assessing Officer (AO) treated a portion of this jewelry as unexplained due to the lack of documentary evidence or wealth tax returns. - Findings of CIT(A): The CIT(A) upheld the AO's decision, treating 1497 grams of gold, 17,300 grams of silver, and precious stones worth Rs. 19,21,250 as unexplained. The total unexplained investment was calculated at Rs. 60,61,119, from which the surrendered amount of Rs. 56,05,480 was deducted, resulting in an addition of Rs. 4,55,639. - Tribunal's Decision: The Tribunal noted that the search team had accepted the explanation for the silver items during the search itself, as evidenced by the seizure memo which did not include these items. The Tribunal found no justification for the AO to make an addition based on the same facts already considered by the search team. Consequently, the addition of Rs. 4,55,639 was vacated. 2. Invocation of provisions of Section 115BBE: The second issue is the invocation of Section 115BBE for applying a higher tax rate (60%) on the surrendered income during the search, which was not in force at the time of the search. - Arguments by Assessee: The assessee argued that Section 115BBE could not be invoked as the amended provisions were not in force during the search. They also contended that the AO did not provide an opportunity to contest this application and that the amendment should not be applied retrospectively. - Findings of CIT(A): The CIT(A) held that Section 115BBE was applicable as it was compensatory in nature and aimed at taxing undisclosed income at a higher rate. The CIT(A) dismissed the assessee's appeal on this ground. - Tribunal's Decision: The Tribunal observed that the AO had initiated penalty proceedings under Section 271AAB, which was applicable for the period before the amendment to Section 115BBE. The Tribunal found that invoking Section 115BBE without giving the assessee an opportunity to be heard was against the principles of natural justice. The Tribunal also noted that the amendment to Section 115BBE was intended to address income concealment post-demonetization and should not be applied retrospectively. Therefore, the Tribunal directed the AO to compute tax in accordance with the provisions of Section 271AAB and not Section 115BBE, providing relief to the assessee. Conclusion: The Tribunal allowed both appeals, vacating the addition towards unexplained investment in jewelry and directing the AO to compute tax without invoking the provisions of Section 115BBE.
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