2021 (6) TMI 1145 - AT - Income Tax

Addition u/s 69A - undisclosed and unexplained income of the assessee being Gold and Jewellery seized - presumption u/s 132(4A) r.w.s. 292C takes the AO to a conclusion that the gold in question belongs to the assessee as it was seized from the assessee and as the assessee could not produce cogent material to rebut the aforesaid presumption the additions have been made - HELD THAT - The original challans seized with the gold bullion and gold jewellery supported the claim of the assessee. In the statement recorded u/s 131 assessee reiterated this contention. DDIT (Inv.) Kolkata and Investigation Wing at Chennai conducted verification with M/s. B.B. Jewellers and M/s Lalithaa Jewellery Mart Pvt. Ltd. The claim of the assessee has been supported and proved by the independent verification done by the Investigation Wing with the third party Jewellers in Chennai. Lack of distinctive identification numbers of the gold bullion on the challans seized along with the gold from the assessee was the grounds on which the AO made the addition - CIT(A) has rightly stated that this cannot be a basis of making this addition. Decided against revenue.

Summary

Issues:
1. Addition of undisclosed income u/s 69A of the Income Tax Act, 1961 based on seized gold and jewellery.
2. Rebuttal of presumption u/s 132(4A) r.w.s. 292C of the Act regarding ownership of the seized assets.

Analysis:

Issue 1: Addition of undisclosed income u/s 69A:
The case involved an appeal by the Revenue against the CIT(A)'s order deleting an addition of undisclosed income of the assessee amounting to Rs. 6,41,92,737 under section 69A of the Income Tax Act. The AO had completed the assessment under section 143(3) of the Act, determining the total income of the assessee. The Revenue contended that the assessee failed to provide identification numbers for the gold bullion and ornaments, leading to the addition. The Revenue argued that the presumption under section 132(4A) r.w.s. 292C of the Act indicated that the gold belonged to the assessee as it was seized from them. However, the assessee's counsel countered this by explaining the source of the gold and jewellery, stating they were brought from Chennai for manufacturing and polishing. The ld. CIT(A) had deleted the addition based on the evidence provided by the assessee, leading to the Revenue's appeal.

Issue 2: Rebuttal of presumption u/s 132(4A) r.w.s. 292C:
The Tribunal analyzed the facts and circumstances of the case, considering the independent verification conducted with third-party jewellers in Chennai. The assessee, a partner in a partnership firm, regularly carried gold and ornaments from M/s. B.B. Jewellers and others for manufacturing and polishing purposes. The original challans seized with the gold bullion and jewellery supported the assessee's claim, which was further corroborated by statements from the involved parties. The AO's addition was primarily based on the lack of distinctive identification numbers on the seized items, but the ld. CIT(A) found this insufficient to attribute ownership to the assessee. The Tribunal agreed with the ld. CIT(A)'s findings, emphasizing that the presumption under section 132(4A) r.w.s. 292C of the Act could be rebutted based on the evidence provided. The Tribunal dismissed the Revenue's appeal, upholding the order of the ld. CIT(A) and concluding that the seized assets did not belong to the assessee.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the deletion of the addition of undisclosed income by the ld. CIT(A) based on the lack of evidence attributing ownership of the seized assets to the assessee. The Tribunal's decision highlighted the importance of providing substantial evidence to rebut legal presumptions under the Income Tax Act, ultimately ruling in favor of the assessee in this case.