2005 (10) TMI 217 - AT - Income Tax

Income disclosed Under Voluntary Disclosure Scheme - Whether, the CIT(A) was justified in deleting the addition on account of introduction in the capital account, against the sale proceeds of silver utensils claimed to have been sold by the assessee ? - HELD THAT - We find that the Assessing Officer has given the remand report after examining the matter afresh in detail and nothing adverse was found against the assessee. Here it is important to mention that it is not the case of the revenue that the remand report furnished by the Assessing Officer is not a valid report or not reliable or the view taken by the Assessing Officer in the remand report is not a possible view permissible under the law. It is also not the case of the revenue that the revenue should be provided one more opportunity to furnish a revised remand report, therefore, in the absence thereof, we are of the view that the remand report furnished by the Assessing Officer is a valid report in the eye of law and in the absence of any other contrary material brought on record by the revenue, we do not find any infirmity in the order of the Ld. CIT(A) in relying on the remand report furnished by the Assessing Officer and in accepting the claim of the assessee. We are of the view that the revenue has failed to substantiate its claim that the silver utensils do not exist, neither transported from Kolkata to Delhi nor sold to Delhi merchants and the alleged sale proceeds is nothing but an accommodation entry. As a matter of fact, the Assessing Officer in the remand report has finally accepted that the silver utensils were properly disclosed, it was transported by trucks as evidenced by consignment notes, the same was delivered at Delhi which was also confirmed by the consignees and there is no direct evidence to show that the jewellers of Delhi have given accommodation entries to the assessee. Besides this, the Assessing Officer while disallowing the long-term capital loss on sale of such silver utensils has accepted that such loss is loss on sale of personal effects. Under these circumstances, we are of the view that assessee has discharged his burden that the silver utensils which were disclosed under VDIS, 1997, transported by trucks and sold at Delhi, the sale proceeds were obtained through banking channels and disclosed in the books of account, therefore, the assessee has proved the identity, creditworthiness and genuineness of the transactions in terms of section 68 of the I.T. Act and, therefore, the addition made by the Assessing Officer at Rs. 3,46,83,900 is not sustainable in law and accordingly, we are inclined to uphold the finding of the Ld. CIT(A) in deleting the same. We, therefore, answer the question referred to this Special Bench in favour of the assessee and against the revenue. The matter will now go to the regular Bench for disposing of the appeal of revenue on other issues keeping in view the decision of Special Bench rendered hereinabove. Thus, the reference stands disposed of.

Issues Involved:

1. Justification of CIT(A) in deleting the addition on account of the introduction in the capital account against the sale proceeds of silver utensils.
2. Verification of the genuineness of the sale transactions of silver utensils.
3. Examination of the valuation report and the role of the valuer.
4. Investigation into the transportation of silver utensils from Calcutta to Delhi.
5. Enquiries regarding the jewellers who purchased the silver utensils.
6. Application of Section 68 of the Income-tax Act, 1961.
7. Consideration of remand report by the Assessing Officer.
8. Admissibility of retracted statements.
9. Applicability of legal precedents and principles.

Detailed Analysis:

1. Justification of CIT(A) in Deleting the Addition:
The core issue was whether the CIT(A) was justified in deleting the addition of Rs. 3.46 crores introduced in the capital account against the sale proceeds of silver utensils. The CIT(A) deleted the addition based on the remand report and the Tribunal's orders in other related cases, concluding that the sale proceeds were genuine and not unexplained cash credits.

2. Verification of the Genuineness of the Sale Transactions:
The Assessing Officer (AO) conducted extensive enquiries to verify the genuineness of the sale transactions. Discrepancies were found, such as the valuer admitting to issuing a valuation report without actually weighing the silver utensils, and transporters denying the transportation of the silver. However, the remand report later confirmed the transportation and delivery of the silver utensils, thereby supporting the assessee's claim.

3. Examination of the Valuation Report and the Role of the Valuer:
The AO initially discredited the valuation report by Sri Raj Kumar Kothari, who admitted under duress that he did not weigh the silver utensils. However, Kothari retracted his statement, and the remand report accepted the retraction, stating that the valuation was done after physically inspecting the silver utensils.

4. Investigation into the Transportation of Silver Utensils:
The AO's investigation revealed that the transporters' consignment notes were issued during a lock-out period, and there were no records of the trucks passing through certain check-posts. However, the remand report confirmed the transportation through weighment slips and delivery receipts, validating the assessee's claim.

5. Enquiries Regarding the Jewellers Who Purchased the Silver Utensils:
The AO found that the jewellers could not provide details of the silver utensils' subsequent sale and had unusually high turnovers during the VDIS period. Despite this, the remand report found no direct evidence to disprove the sales, and the jewellers confirmed the transactions.

6. Application of Section 68 of the Income-tax Act, 1961:
Section 68 deals with unexplained cash credits. The assessee provided evidence of the identity, creditworthiness, and genuineness of the transactions. The remand report supported the assessee's explanation, shifting the burden of proof to the revenue, which failed to provide contrary evidence.

7. Consideration of Remand Report by the Assessing Officer:
The remand report, which was not disputed by the revenue, played a crucial role in the CIT(A)'s decision. It addressed the AO's initial findings, confirming the transportation, delivery, and sale of the silver utensils, and validating the assessee's claims.

8. Admissibility of Retracted Statements:
The valuer and transporters retracted their initial statements given under duress. The remand report and subsequent verifications accepted these retractions, supporting the genuineness of the transactions.

9. Applicability of Legal Precedents and Principles:
The judgment referenced several legal precedents, including the Supreme Court's decisions in Sumati Dayal v. CIT and Union of India v. Azadi Bachao Andolan. The principles from these cases were applied to assess the genuineness of the transactions and the burden of proof under Section 68.

Conclusion:
The Special Bench upheld the CIT(A)'s decision to delete the addition, concluding that the assessee had satisfactorily explained the nature and source of the sale proceeds of the silver utensils. The remand report played a pivotal role in confirming the genuineness of the transactions, and the revenue failed to provide contrary evidence. The judgment emphasized the importance of proper verification and the admissibility of retracted statements, ultimately ruling in favor of the assessee.

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