2024 (1) TMI 354 - AT - Income Tax

Addition u/s 69A - Search and seizure and survey operation u/s 132/133A as conducted on the assessee and other family members as well as the entire group - jewelleries and three watches were sent for valuation to a registered Valuer - HELD THAT - As assessee had enough means to invest in the wrist watches. It will be pertinent to mention that the departmental authorities have accepted the source of investment in jewelleries found at the time of search and seizure operation. Only because bills and invoices of the wrist watches were not found at the time of search, the addition has been made. Thus we are of the view that the provisions of section 69A will not be attracted as the explanation offered by the assessee regarding the source of investment in the wrist watches, by no means, can be considered to be unsatisfactory. On the contrary, the explanation offered by the assessee appears to be plausible. Thus, in our view, the addition made under section 69A of the Act is unsustainable. While coming to such conclusion, we have drawn support from the decision of the Coordinate Bench in case of ACIT Vs. Gurnam Arora 2016 (4) TMI 249 - ITAT DELHI . Accordingly, we delete the addition. Grounds are allowed.

Summary

Issues Involved:
- Addition of an amount under section 69A of the Income Tax Act, 1961 based on unexplained money found during a search and seizure operation.

Summary:
The dispute in the present appeal revolves around the addition of Rs. 21 lakhs under section 69A of the Income Tax Act, 1961. The assessee, a resident individual, had three wrist watches valued at Rs. 21 lakhs seized during a search and seizure operation. The Assessing Officer treated this amount as unexplained money and added it to the assessee's income, which was upheld by the first appellate authority.

Upon review, it was found that the Valuation Report did not provide detailed information about the watches, such as the make and year of manufacture, and no bills or invoices were found during the operation. The assessee explained that the watches were purchased over a period of time from disclosed sources of income, supported by cash flow statements and credit card transactions. The assessee's financial statements demonstrated significant assets and funds available in various assessment years.

The Tribunal observed that the assessee's explanation regarding the source of investment in the watches was satisfactory, considering the lack of evidence indicating the purchase in the relevant assessment year. Relying on precedent and the plausible explanation provided by the assessee, the addition under section 69A was deemed unsustainable, and the Tribunal allowed the appeal.

In conclusion, the Tribunal ruled in favor of the assessee, deleting the addition of Rs. 21 lakhs under section 69A of the Income Tax Act, 1961.