2011 (5) TMI 819 - HC - Income Tax

Whether Tribunal is right in law in deleting addition on account of diamonds purchased out of undisclosed source of income Held that - aseized diamonds being those shown by the assessee in the books of account. - The declaration by the assessee, even before the search, in the course of return previously filed and the valuation of the closing stock and the valuation of the seized diamonds as per the Department were same. All these factors persuaded the Tribunal to come to the conclusion that the seized diamonds did not form part of undisclosed source of the assessee, Tax Appeal is dismissed

Summary

Issues:
1. Addition on account of diamonds purchased out of undisclosed source of income worth Rs. 67,93,643/-.

Analysis:
The primary issue in this case revolved around the addition of Rs. 67,93,643/- in the income of the assessee, representing diamonds purchased from an undisclosed source. The Income Tax Department seized these diamonds during search operations in a mini-bus belonging to a specific company. The Assessing Officer, after examining evidence and the assessee, concluded that the diamonds were not reflected in the accounts, leading to the addition in income. The CIT[A] upheld this decision, prompting the appeal to the Tribunal.

The Tribunal, in its judgment, considered various pieces of evidence presented by the assessee. The assessee produced bills of purchase, a stock register, and other documents supporting the source of the seized diamonds. The weight of the diamonds matched the purchase bills, and the sellers were tax-assessed entities with valid GST and CST numbers. Additionally, the seized diamonds closely matched the closing stock shown by the assessee in previous financial statements. The Tribunal found that the valuation of the diamonds by the assessee closely aligned with the Department's valuation. Based on these factors, the Tribunal concluded that the purchases were made from disclosed sources and were fully accounted for in the books even before the search operation.

Upon reviewing the orders of the Assessing Officer, CIT[A], and the Tribunal, the High Court judges found that the issue hinged on the evaluation of evidence. The Tribunal's reasoning, supported by various factual aspects, led to the conclusion that the seized diamonds were part of the assessee's disclosed stock. The judges noted that the Tribunal's findings were based on concrete evidence, and while the Assessing Officer's view was plausible, it did not warrant interference with the Tribunal's decision. As a result, the High Court dismissed the Tax Appeal, stating that no substantial question of law arose from the case.