2017 (7) TMI 804 - AT - Income Tax

Unexplained investment - unexplained jewellery - Held that - In view of the fact that assessee has received gold jewellery on occasion of his marriage which is confirmed by the persons who gifted the same and further looking to the family status of the assessee who is belonging to a business man family residing at Sainik Farms and wife of the assessee belonging to non-resident Indian family based in Nairobi and whose father is garment exporter and grandfather was in the Ministry of Himachal Pradesh it is not unreasonable to have the quantity of gold in his possession. Further it was unexpected to reject the contention of the assessee merely for non-filing of return of wealth tax as well as the statement of affairs under the income tax act when assessee is not legally obliged to. In view of this we delete the addition made by the ld AO and reverse the order of Ld CIT (A). In the result ground of the appeal of the assessee is allowed. Disallowance of claim of deduction u/s 80C - nexus between income earned and income invested - Held that - It is normal behaviour of an individual s private life that all incomes are amalgamated and spent. The Income-tax Act does not require that the investment in NSC should be made from the same amount which an assessee had earned by way of income. It is always open to an assessee to either spend the amount earned by him as an income which is more than the amount invested under section 80C. The investment in NSC can be said to be out of income of the previous year. See Rajkumar Dewan & Sons V CIT 2005 (2) TMI 80 - ALLAHABAD High Court We allow the claim of the assessee fully for deduction u/s 80 C of the act reversing the orders of lower authorities. - Decided in favour of assessee.

Summary

Issues:
1. Appeal against CIT(A) order for Assessment Year 2006-07.
2. Addition of undisclosed income on account of unexplained investment in jewelry.
3. Disallowance of deduction u/s 80C for &8377; 20,000.

Issue 1: Appeal against CIT(A) order for Assessment Year 2006-07
The appeal was filed by the assessee against the order of the CIT(A) for the Assessment Year 2006-07. Ground No. 1 of the appeal was dismissed as it was general in nature.

Issue 2: Addition of undisclosed income on account of unexplained investment in jewelry
The dispute arose from the addition of &8377; 923,000 as undisclosed income due to unexplained investment in jewelry during a search operation. The assessee claimed the jewelry was received as gifts during their marriage, supported by letters and affidavits. The lower authorities upheld the addition, but the ITAT found in favor of the assessee. The ITAT noted the family status of the assessee and the wife, belonging to affluent backgrounds, justifying the quantity of jewelry. The ITAT deleted the addition, reversing the lower authorities' decision.

Issue 3: Disallowance of deduction u/s 80C for &8377; 20,000
The dispute involved the disallowance of a deduction u/s 80C for &8377; 20,000, reduced from the claimed &8377; 50,000. The ITAT allowed the full deduction based on legal contentions favoring the assessee, citing relevant case laws. The ITAT reversed the lower authorities' decision and allowed the deduction in full.

The ITAT partially allowed the assessee's appeal, reversing the CIT(A) order on both issues. The ITAT also handled a similar case involving the wife of the assessee, where the addition of unexplained income was deleted for the same reasons. The orders were pronounced on 17/02/2017.