2019 (5) TMI 1312 - AT - Income Tax

Unexplained jewellery - addition based no source of the jewellery given - HELD THAT - Gold jewellery which was intercepted by the Police Authorities under suspicious circumstances, has been declared by Hon ble Judicial Magistrate as belonging to Sh. Dhiraj Kumar, the possessor thereof which is evident from the orders of Hon ble court as placed on record. Nothing on record suggest that Sh. Dhiraj Kumar was not an employee of the assessee company and the said jewellery did not belong to assessee company. In fact, the statement of Sh. Dhiraj Kumar as well as the director of the assessee company, in unison, confirm the said facts. Proceeding further, the said jewellery was duly accounted for in the stock registers submitted by the assessee during assessment proceedings and the assessee produced documentary evidences in the shape of sales invoices, authorization letter issued by assessee in respect of goods to be delivered to the aforesaid parties, copy of issue vouchers for gold bars weighing 796.810 grams issued by M/s Swasthikas Jewelers. The stock of gold jewellery under dispute, upon release by judicial authorities, has been received back in the stock register maintained by the assessee and hence, duly accounted for. Lastly, the whole basis of making additions i.e. denial by the 3 parties as to placing any work order with the assessee, was never confronted to the assessee which was in violation of principle of natural justice. It is trite law that no addition could be made merely on the basis of suspicion, conjectures or surmises. In fact, the assessee has supplied the jewellery to few of these parties subsequently during the impugned AY itself which further weakens that stand of Ld.AO. The given factual matrix convinces us to concur with the stand taken by Ld. first appellate authority in the impugned order. By confirming the same, we dismiss revenue s appeal.

Summary

Issues Involved:
- Appeal by revenue contesting deletion of addition made towards unexplained cash credits under section 68 of the Income Tax Act.
- Assessee's cross-objection challenging the confirmation of addition made under section 143(3) read with section 153C of the Act.
- Assessment of the assessee for the Assessment Year (AY) 2014-15 regarding the income determination and additions made during the assessment proceedings.

Analysis:

1. Appeal by Revenue:
- The Revenue appealed the deletion of the addition made towards unexplained cash credits under section 68 of the Income Tax Act. The Assessing Officer (AO) had treated an aggregate amount as unexplained cash credit based on the suspicion that the jewellery and cash found with an employee of the assessee were not accounted for. However, the first appellate authority deleted the additions, emphasizing that the assessee had provided substantial documentary evidence to prove the legitimacy of the transactions. The appellate authority noted that the denial by the concerned parties, on which the AO based the additions, was not sufficient grounds for such additions. The appellate tribunal upheld the first appellate authority's decision, highlighting that the jewellery was duly accounted for in the books of accounts, and the source of the jewellery was verified. The tribunal dismissed the Revenue's appeal, affirming that no addition could be made based solely on suspicion without concrete evidence.

2. Assessee's Cross-Objection:
- The assessee raised a cross-objection challenging the confirmation of the addition made under section 143(3) read with section 153C of the Act. The cross-objection contended that the assessment proceedings were void ab initio due to the absence of specific notices or warrants issued under relevant sections of the Income Tax Act. The cross-objection also argued that no assessment could be made as the court had rejected the petition of the Deputy Director of Income Tax and released the seized assets. However, since the tribunal adjudicated the main issue in favor of the assessee on merits, the cross-objection was dismissed as infructuous.

3. Assessment Proceedings for AY 2014-15:
- The assessment for the AY 2014-15 involved the determination of the assessee's income, where certain additions were made by the AO based on the suspicion surrounding jewellery and cash found with an employee. The assessee provided detailed explanations and documentary evidence to substantiate the transactions and the legitimacy of the assets in question. The first appellate authority and the appellate tribunal both agreed with the assessee's contentions, emphasizing the importance of concrete evidence over mere denials by third parties. The tribunal upheld the deletion of the additions, concluding that the onus to prove unexplained cash credits was not discharged by the Revenue. The assessment proceedings were deemed valid, and the tribunal dismissed both the Revenue's appeal and the assessee's cross-objection.

This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive overview of the arguments presented, decisions made, and the reasoning behind the tribunal's final judgment.