2023 (2) TMI 573 - AT - Income Tax

Addition u/s 69A r.w.s. 115BBE - unexplained jewellery fround in search proceddings - Whether seized jewellery should be assessed as income from business instead of assessing as income u/s 69A? - HELD THAT - As gone through paper book containing computation of income wherein the amount has been explicitly shown as surrendered for tax in pursuance to search . Further, while answering to the Question posed to the assessee by the ADIT(Inv.), Unit- 8(2), New Delhi during the statement recorded u/s 131(1) - The assessee confirmed that the amount has been undisclosed and surrendered. Subsequently, the assessee filed return of income. There was no documents submitted by the assessee to prove that the jewellery has been purchased out of this income. Even if, it is so, the generation of undisclosed income and application of such income has been unraveled. It is a fact on record that the income earned has been undisclosed and has been unearthed only due to the action u/s 132 and the jewellery is only application of such undisclosed income. Hence, the provisions of Section 115BBE(1)(a) that where the total income of an assessee, includes any income referred to in section 69A and reflected in the return of income furnished under section 139, are evidently applicable in the instant case. Appeal of the assessee is dismissed.

Summary

Issues:
1. Assessment of seized jewellery as income from business vs. income u/s 69A.
2. Treatment of surrendered undisclosed income during search proceedings.

Analysis:
1. The appeal was filed against the order of the ld. CIT(A)-24, Delhi regarding the assessment of seized jewellery. The assessee argued that the jewellery should be assessed as income from business rather than under section 69A. The search operation revealed jewellery worth Rs.11,08,520/- from the residential premises and Rs.35,61,751/- from lockers of the assessee. The assessee claimed that the jewellery was purchased from commission income from property transactions. However, the AO treated the amount as income from other sources under section 69A, leading to a demand of Rs.22,72,340/-. The ld. CIT(A) upheld the AO's decision, and the assessee appealed to ITAT.

2. The assessee contended that both the AO and ld. CIT(A) accepted the income tax return filed, and the explanation that the jewellery was purchased from commission income was not rejected. The AO invoked section 69A without concrete evidence of undisclosed income used for jewellery purchase. The burden of proving undisclosed income lies with the revenue, not the assessee. Citing legal precedents, the assessee argued against the application of section 69A. However, the ITAT upheld the ld. CIT(A)'s order based on the undisclosed nature of the income and the application of Section 115BBE(1)(a) due to the unearthing of undisclosed income during the search operation.

3. The ITAT's decision affirmed the ld. CIT(A)'s order, dismissing the assessee's appeal. The judgment highlighted the importance of concrete evidence and the burden of proof in cases involving undisclosed income and the application of relevant sections under the Income Tax Act. The case serves as a reminder of the legal principles guiding the assessment of seized assets and undisclosed income, emphasizing the need for substantiated claims and adherence to statutory provisions in tax assessments.

Conclusion:
The ITAT upheld the ld. CIT(A)'s decision regarding the assessment of seized jewellery as income under section 69A, emphasizing the importance of concrete evidence and the burden of proof in cases involving undisclosed income. The judgment serves as a legal precedent on the proper application of tax laws in assessing undisclosed income and seized assets, ensuring adherence to statutory provisions and the principles of evidence in tax assessments.