2010 (7) TMI 124 - HC - Income Tax

Discloser in VDIS revenue alleges the assessee that jewellery disclosed in VDIS-1997 had not been found in the earlier searches conducted on 15th September, 1992 and 10th February, 2000 AO made the addition, ITAT deleted the additions - held that - just because the said jewellery was not found in the earlier searches, it cannot be said that non-existent jewellery had been declared in VDI Scheme 1997. - In any event, as rightly pointed out by the ITAT, it was not open to the Assessing Officer to question existence of the said jewellery when it had been declared under the VDI Scheme. decided in favor of revenue.

Summary

Issues:
Challenging deletion of addition made by Assessing Officer on account of unexplained investment in jewellery under Income Tax Act, 1961.

Analysis:
The judgment involves two appeals challenging the deletion of additions made by the Assessing Officer on account of unexplained investment in jewellery by two assesses. The Income Tax Appellate Tribunal (ITAT) had deleted the additions of Rs.9,34,215/- and Rs.8,20,410/-, which were challenged under Section 260A of the Income Tax Act, 1961. The counsel for the revenue argued that the Commissioner of Income Tax (Appeals) and ITAT erred in law by deleting the additions, especially since the jewellery declared under the Voluntary Disclosure of Income Scheme, 1997 (VDIS) was not found in earlier searches conducted in 1992 and 2000.

The ITAT, in its order, rejected the revenue's appeal by considering the explanation provided by the assesses regarding the source of jewellery found in their possession. The ITAT observed that the major source of jewellery was explained by the assesses as being declared under the VDIS-1997. The Assessing Officer did not accept this explanation, citing discrepancies in the timing of acquisition of the jewellery as per the VDIS declaration and the dates of earlier searches. However, the CIT(A) accepted the explanation based on a decision of the Special Bench of ITAT at Kolkata. The ITAT held that the Assessing Officer's rejection of the explanation was unjustified, considering the provisions of the VDIS and the circumstances of the case.

The High Court, while upholding the ITAT's decision, emphasized that the Assessing Officer could not question the existence of jewellery declared under the VDIS. The Court noted that the absence of the jewellery in earlier searches did not automatically imply that the declared jewellery was non-existent. Therefore, the Court concluded that no substantial question of law arose in the case, leading to the dismissal of both appeals without costs.

In summary, the judgment dealt with the challenge to the deletion of additions made by the Assessing Officer regarding unexplained investment in jewellery. The ITAT and subsequently the High Court upheld the assesses' explanation based on the VDIS declaration, emphasizing that the Assessing Officer's rejection was unjustified. The Court clarified that the absence of jewellery in earlier searches did not invalidate the VDIS declaration, leading to the dismissal of the appeals.