2023 (4) TMI 694 - AT - Income Tax

Addition u/s 69A r.w.s 115BBE - unexplained gold jewellery found at the time of search - Certain documents were seized from the residence of the assessee which represented vouchers for sale of old jewellery made by the assessee and her family members - HELD THAT - Facts on record show that in response to summons u/s 131(1A) M/s Arjun Traders submitted its reply along with copy of Income tax Return, computation of income, balance sheet, Profit and Loss Account along with all Annexures for A.Ys 2016- 17 and 2017-18 along with copies of all bank account statements from 01.04.2016 to 30.09.2016 along with copy of stock register and copy of ledger account of purchase and sale. With these evidences on record submitted before the Investigation Wing, it can be safely presumed that M/s Arjun Traders is a regular assessee. Therefore, it was incumbent upon the AO to make direct enquiries from the officer of M/s Arjun Traders if it did not appear before the AO during the assessment proceedings. AO has questioned the deposits made in the bank account of M/s Arjun Traders. We fail to understand how the assessee is responsible/answerable to the transactions made by an unrelated party in its bank accounts. Interestingly, on similar facts, the AO has also made addition in the case of sale of jewellery to Assure Jewels Pvt Ltd. where a person appeared before the AO and in the case of M/s Arjun Traders, none appeared. Nothing prevented the AO to force the attendance of M/s Arjun Traders since the AO has all the powers vested with that of a court u/s 131 of the Act. As mentioned elsewhere, the assessee cannot be asked to explain the bank transactions of an unrelated party. Evidences in the form of confirmation, books of account, stock register and ledger account along with bank statement cannot be brushed aside lightly and considering these evidences, we do not find any merit in the impugned addition made u/s 69A - We direct the AO to delete the addition - Decided in favour of assessee.

Summary

Issues:
The judgment involves the addition of Rs. 9,98,815 representing alleged unexplained gold jewelry found during a search and brought to tax under section 69A read with section 115BBE of the Income-tax Act, 1961.

Assessee's Grievance:
The assessee contended that the ld. CIT(A) erred in upholding the addition of Rs. 9,98,815 as unexplained gold jewelry, arguing that the Assessing Officer demanded an impossible explanation regarding the source of bank transactions in M/s Arjun Traders' accounts. The assessee also claimed that section 69A did not apply to the case and that the sale of jewelry was confirmed by the purchaser through banking channels.

Facts and Findings:
The search conducted at the assessee's premises resulted in the seizure of documents related to the sale of old jewelry to M/s Arjun Traders. The Assessing Officer dismissed the detailed reply and supporting evidence provided by the assessee, making the addition based on suspicions of accommodation entries and lack of proof of purchase and sale. The ld. CIT(A) upheld the addition, but the ITAT Delhi found that M/s Arjun Traders had submitted detailed documentation to the Investigation Wing, indicating it was a regular assessee.

Judgment and Rationale:
The ITAT Delhi noted that the Assessing Officer's demands on the assessee regarding unrelated bank transactions were unjustified. It was deemed unreasonable to hold the assessee accountable for transactions in M/s Arjun Traders' accounts. The ITAT emphasized that the evidence submitted by M/s Arjun Traders, including tax returns and financial statements, indicated its regular compliance. The ITAT concluded that the addition under section 69A lacked merit, directing the Assessing Officer to delete the Rs. 9,98,815 addition.

Conclusion:
The ITAT allowed the appeal of the assessee, emphasizing that the Assessing Officer's actions were unwarranted given the evidence provided by M/s Arjun Traders. The judgment was pronounced on 17.04.2023 by the ITAT Delhi.