1989 (1) TMI 159 - AT - Income Tax

Assessment Proceedings, Assessment Year, Central Excise, Financial Year, Original Assessment, Reassessment Proceedings

Summary

Issues:
1. Reassessment proceedings based on addition of unaccounted gold under section 69 of the Income Tax Act, 1961 for the assessment year 1977-78.
2. Challenge against the reassessment proceedings on the grounds that the seized gold did not pertain to the relevant assessment year.
3. Interpretation of sections 69, 69A, and 69B regarding unexplained investments and ownership of assets not recorded in the books of account.

Analysis:
1. The appeal was against the CIT (A)III order relating to the assessment year 1977-78, challenging the addition of Rs. 20,662 under section 69 of the Income Tax Act, 1961. The primary issue was whether the seized gold, not accounted for in the books of the assessee, should be considered undisclosed stock. The reassessment proceedings were initiated based on the seizure of gold by the Central Excise authorities, leading to the imposition of fines and penalties. The CIT (A) held that the onus was on the assessee to prove the gold did not belong to them, which was not adequately discharged, justifying the addition to the total income.

2. The assessee contended that the gold seizure should be taxable in the financial year 1975-76, as per sections 69, 69A, and 69B of the Act. The argument was based on the premise that the gold was seized in 1976, and since it was not recorded in the books of account, the provisions of section 69A should apply. The assessee emphasized that the gold was not found in the business's regular books, indicating it should not be included in the assessment year 1977-78. The Department, however, argued that the assessment should follow the calendar year, making the gold seizure relevant to the assessment year 1977-78.

3. The Tribunal analyzed sections 69, 69A, and 69B to determine the applicability of the provisions to the case. It concluded that section 69A applied to the situation, as the assessee was found in possession of the bullion not recorded in the books of account. The Tribunal held that the value of the bullion should be deemed as the income of the assessee for the financial year 1975-76, based on the provisions of section 69A. Therefore, the inclusion of the amount in the assessment year 1977-78 was incorrect, and the Tribunal allowed the appeal on this ground, directing the exclusion of Rs. 20,662 from the total income of the assessee.