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2018 (9) TMI 72 - AT - Income TaxUnexplained cash treated - undisclosed income found and seized from lockers in the name of the assessee during the course of search and seizure - Held that - According to provision of section 69A of the act the income is charged to tax in the year in which the assessee is found to be owner of the money. As the sum was found to be owned by the assessee for Assessment Year 2007-08, it is correctly charged by the ld AO as income of the assessee for this year. We are not in agreement with the ld CIT (A) that as the report from the Govt of Israel is pending, it should not be taxed in the hands of the assessee bit in the hands of Dr. M V Rao as it is alleged that he has earned commission on defense supplies. We state that those cases are not covered under the Income tax act but under the different laws altogether. Merely because the income is taxed u/s 69A of the Act in the hands of the assessee in the Income tax proceedings does not have any impact on proceedings under the other laws against Dr M. V. Rao and Mr. Suresh Nanda. In view of this, ground No. 2 of the appeal of the revenue is partly allowed. Unexplained jewellery found from locker No. 5333 weighing 1748.80 out of which 999.10 grams was seized - Held that - Merely because Dr. MV Rao has shown certain valuation of jewellery in his wealth tax return for AY 2008-09 which was found in the locker owned by the assessee is belonging to Dr. MV Rao and cannot be taxed as income u/s 69A in the hands of the assessee for AY 2007-08. We are not concerned with the wealth tax matters but Income tax matters. If the jewelry is from tax paid money of the assessee, then irrespective of whether same is shown in wealth tax return or not, it cannot be charges to tax under the Income tax Act. Conversely, if the same is shown in the wealth tax return, it cannot be excluded from the income tax computation if assessee fails to show that same was acquired out of tax paid money. Hence, we reject the contention of the ld AR that total of 819.4 and 288.4 gms of different purity of gold is owned by Dr. MV Rao. We also do not find any infirmity in his order to allow 750 gms to the mother and assessee as per CBDT Instructions. The balance jewellery of 165.70 gms is remaining unexplained and therefore, addition to that extent is correctly confirmed by the ld CIT(A). Penalty levied u/s 271(1)(c) - Held that - We have confirmed the addition to that extent. In absence of any plausible explanation with respect to the above sum , we confirm the penalty on addition of ₹ 70 lakhs found in the locker in the name of the assessee , which is held to be the income of the assessee u/s 69A of the act, thereby the assessee has concealed her income to that extent. We direct the ld AO to re-compute the penalty on the addition of ₹ 70 lacs as concealed income. Further with respect to the addition on account of jewelry, we have confirmed the order of the ld CIT (A) in quantum appeal where in the most of the addition on account of jewelry is deleted. The ld CIT (A) has also deleted the penalty to that extent only. Therefore, we do not find any infirmity in the order of the ld CIT (A) in deleting the penalty on addition on account of undisclosed jewelry. Accordingly, we confirm the action of the AO in levying penalty u/s 271 (1) (c ) of the act on account of undisclosed income of cash found in the locker in the name of the assessee to the extent of ₹ 70 Lakhs only. Unexplained cash treated as undisclosed income found and seized from the lockers in the name of the assessee during the search - Held that - CIT (A) is right in deleting the addition to the extent of ₹ 5.50 Crores in the hands of the assessee. We confirm the order of the ld CIT (A) to the extent of this amount and also for the reason given by us in our order for AY 2007-08 in case of the assessee where similar addition of ₹ 1 Crore is deleted. With respect to the balance of sum of ₹ 49 lacs the assessee has explained that this amount was from explained source and cash withdrawal from the bank earlier. No evidence were placed before us to show the correlation between the sum of ₹ 49 lacs found in the locker with respect to respective dates of deposits of cash in the bank lockers vis a vis withdrawal from bank accounts. In view of this, we confirm the addition to that extent of ₹ 49 lacs as undisclosed income of the assessee u/s 69A of the act on account of cash found from various lockers in her name. Hence, addition to that extent of ₹ 49 lacs is confirmed.
Issues Involved:
1. Addition of unexplained cash found in the locker. 2. Addition of unexplained jewelry found in the locker. 3. Deletion of penalty levied under Section 271(1)(c) of the Income Tax Act. Detailed Analysis: Issue 1: Addition of Unexplained Cash Found in the Locker Assessment Year 2007-08: - Facts: During a search on 24.02.2012, cash of ?1.70 crores was found in a locker in the name of the assessee. The AO added this amount to the assessee's income, which was later contested. - CIT(A) Decision: The CIT(A) deleted the addition, stating the cash belonged to Dr. M. V. Rao, who had substantial income from commissions on defense supplies. - ITAT Decision: The ITAT upheld the deletion of ?1 crore, already taxed in Dr. M. V. Rao's hands, but confirmed the addition of ?70 lakhs as the assessee could not provide evidence that it was deposited before the block period. Assessment Year 2012-13: - Facts: ?5.99 crores found in lockers in the name of the assessee was added to her income. - CIT(A) Decision: The CIT(A) deleted ?5.50 crores, stating it was already assessed in Dr. M. V. Rao's hands. - ITAT Decision: The ITAT confirmed the deletion of ?5.50 crores but upheld the addition of ?49 lakhs as unexplained income. Issue 2: Addition of Unexplained Jewelry Found in the Locker Assessment Year 2007-08: - Facts: Jewelry worth ?49,24,152/- was found in the locker, out of which ?28 lakhs was seized. The AO added the entire amount to the assessee's income. - CIT(A) Decision: The CIT(A) treated most of the jewelry as explained based on probate records and CBDT instructions, confirming the addition of only ?1,47,142/-. - ITAT Decision: The ITAT upheld the CIT(A)'s decision, confirming the addition of ?1,47,142/- as unexplained jewelry. Issue 3: Deletion of Penalty Levied Under Section 271(1)(c) of the Income Tax Act Assessment Year 2007-08: - Facts: The AO levied a penalty of ?73,25,683/- for concealment of income on the addition of ?2,19,24,152/-. - CIT(A) Decision: The CIT(A) deleted the penalty on ?1.70 crores, stating it belonged to Dr. M. V. Rao, and upheld the penalty on ?1,47,142/- for unexplained jewelry. - ITAT Decision: The ITAT confirmed the deletion of the penalty on ?1 crore already taxed in Dr. M. V. Rao's hands but upheld the penalty on ?70 lakhs. The penalty on unexplained jewelry of ?1,47,142/- was also upheld. Assessment Year 2012-13: - Facts: The AO levied a penalty of ?1,83,69,266/- on the addition of ?5.99 crores. - CIT(A) Decision: The CIT(A) deleted the penalty, stating that the cash belonged to Dr. M. V. Rao and the assessee could not generate substantial income. - ITAT Decision: The ITAT confirmed the deletion of the penalty on ?5.50 crores but upheld the penalty on ?49 lakhs as the source was unexplained. Assessment Year 2010-11: - Facts: The AO taxed ?35 lakhs found in the locker of the assessee on a protective basis in the hands of Dr. M. V. Rao. - CIT(A) Decision: The CIT(A) held that the amount should be taxed on a substantive basis in the hands of Dr. M. V. Rao. - ITAT Decision: The ITAT found no infirmity in the CIT(A)'s order and dismissed the revenue's appeal. Conclusion: The ITAT upheld the CIT(A)'s decisions in most aspects, confirming the deletion of additions and penalties where the income was already taxed in Dr. M. V. Rao's hands. However, the ITAT upheld the additions and penalties where the assessee could not provide satisfactory explanations. The appeals were disposed of accordingly.
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