1987 (5) TMI 65 - AT - Income Tax

Summary

Issues:
1. Whether the jewellery seized during a search operation should be considered as unexplained investment in the hands of the assessee under section 69A.
2. Whether the doctrine of merger applies to revision proceedings under section 263 when an order has been appealed.
3. Whether an order passed under section 132(5) is binding and conclusive in subsequent assessment proceedings.

Analysis:

Issue 1:
The Commissioner of Income-tax contended that jewellery weighing 761 grams seized during a search operation belonged to the assessee and should be assessed as unexplained investment under section 69A. The assessee claimed that a portion of the jewellery belonged to his daughter, but failed to provide satisfactory evidence of its source. The Commissioner initiated proceedings under section 263 to revise the order of the assessing officer, which did not make the addition. The Tribunal held that the AAC could not have considered the addition of unexplained investment in jewellery as the particulars of the seizure were not before him. The Tribunal dismissed the appeal, upholding the Commissioner's decision to reassess the jewellery as unexplained investment in the hands of the assessee.

Issue 2:
The assessee argued that the order of the assessing officer had merged with the order of the AAC, and therefore, the Commissioner could not initiate revision proceedings under section 263. The Tribunal considered various authorities cited by both parties and held that the doctrine of merger applies to income-tax proceedings to the extent decided by the appellate authority. As the AAC did not consider the unexplained investment in jewellery issue, the order of the assessing officer was not deemed to have merged with the appellate order. The Tribunal emphasized that a Full Bench decision takes precedence over Division Bench decisions, and thus upheld the Commissioner's jurisdiction to revise the assessing officer's order.

Issue 3:
The assessee contended that an order passed under section 132(5) had already considered the ownership of the jewellery in question. However, the Tribunal held that the order under section 132(5) was an interim measure and not conclusive for final assessment. The Tribunal noted that the assessing officer had not determined the year in which the jewellery should be assessed, leaving the matter open for reassessment. The Tribunal emphasized that the Commissioner could revise an order if the assessing officer failed to conduct necessary inquiries, as the assessing officer is obligated to investigate facts stated in the return. Therefore, the Tribunal dismissed the appeal, affirming the Commissioner's decision to reassess the jewellery as unexplained investment in the hands of the assessee.