2013 (8) TMI 734 - AT - Income Tax

Unexplained investment u/s 69 - Ownership of income - Protective assessment - A.O. has concluded that the transaction in question related to purchase of beetel nut made by DTI Dinesh Tobacco Industries and not related to Shri Nand Kishore Malani in any manner - A.O. proposed to assess the income in the hands of DTI on the basis of DRI's finding - Held that - n there is no scope for making the addition of ₹ 3,75,00,000/- , in the same manner as it was surrendered by Shri Nand Kishore Malani, in the hands of the assessee firm when Shri Nand Kishore Malani has made a surrender of the entire money and he has also paid taxes thereon and has also disclosed this income in his return of income. There is no scope for making any addition either on substantive basis or on protective basis in the hands of the assessee firm or in the hands of M/s Dinesh Pouches Ltd. - Following decision of M/s Dinesh Tobacco Industries Vs. DCIT 2013 (8) TMI 715 - ITAT JODHPUR - Decided in favour of assessee.

Summary

Issues Involved:
1. Assessment of alleged investment in beetle nuts under Section 69 of the Income Tax Act.
2. Confirmation of addition on account of alleged long-term capital gains on sale of silver.
3. Confirmation of addition on account of unexplained investment in gold ornaments.
4. Confirmation of addition on account of unexplained cash.

Detailed Analysis:

1. Assessment of Alleged Investment in Beetle Nuts under Section 69:
The primary issue revolves around the assessment of alleged investment worth Rs. 3,00,00,000 in the purchase of beetle nuts under Section 69 of the Income Tax Act. The assessee had declared undisclosed income amounting to Rs. 2.5 crores during A.Y. 2007-08 towards unaccounted transactions relating to the import of supari (beetle nuts) aggregating to Rs. 3.75 crores. The Assessing Officer (A.O.) concluded that the transaction related to the purchase of beetle nuts made by Dinesh Tobacco Industries (DTI) and not the assessee. The A.O. made substantive additions based on the differential duty assessed by the Directorate General of Revenue Intelligence (DRI). The CIT(A) confirmed the A.O.'s action. However, the Tribunal held that the income should be assessed in the hands of Shri Nand Kishore Malani, who had surrendered the income and paid taxes thereon. Thus, the Tribunal allowed the appeal in favor of the assessee by holding that the income has to be assessed in the hands of Shri Nand Kishore Malani on a substantive basis.

2. Confirmation of Addition on Account of Alleged Long-Term Capital Gains on Sale of Silver:
Ground Nos. 1 and 2 of the assessee's appeal relating to the confirmation of addition of Rs. 10,218 on account of alleged long-term capital gains on the sale of silver were not pressed during the hearing. Therefore, these grounds were dismissed as not pressed.

3. Confirmation of Addition on Account of Unexplained Investment in Gold Ornaments:
During the search operation, gold ornaments valuing Rs. 74,92,410 were found, and the assessee surrendered investment in gold ornaments weighing 215.709 grams. The A.O. treated the entire excess 815.709 grams as unexplained investment instead of the 215.709 grams surrendered by the assessee, resulting in an addition of Rs. 5,65,800. The CIT(A) confirmed this addition. However, the Tribunal, considering the Board's Instruction No. 1916 and the Jurisdictional High Court's decision in CIT Vs. Kailash Chand Sharma, allowed the appeal by ordering the deletion of the impugned addition, treating the quantum of jewelry mentioned in the instruction as explained.

4. Confirmation of Addition on Account of Unexplained Cash:
During the search, cash amounting to Rs. 1,50,90,391 was found from various members of the family and business concerns of the Malani Group. The A.O. made an addition of Rs. 2,72,365 as unexplained cash after giving credit for cash available in the books. The CIT(A) considered the excess unaccounted cash remaining unexplained after considering the cash surrendered by Shri N.K. Malani and added Rs. 9,37,182 as unexplained cash. The Tribunal found no infirmity in the CIT(A)'s finding and upheld the addition of Rs. 9,37,182 as unexplained cash in the hands of Shri N.K. Malani.

Conclusion:
The appeals of the assessee were partly allowed, and the appeal of the revenue was dismissed. The Tribunal ordered that the income related to the purchase of beetle nuts be assessed in the hands of Shri Nand Kishore Malani, allowed the deletion of the addition related to unexplained investment in gold ornaments, and upheld the addition of unexplained cash as determined by the CIT(A).