2025 (3) TMI 806 - AT - Income Tax

Unexplained money u/s 69A - cash found at business premises of the appellant at the time of search remained unexplained - AO relied on the statement made by the Director during the search - HELD THAT - Statement of the assessee is an extremely important piece of evident but it cannot be conclusive and later on the same may be amended. In support of this argument the appellant relies upon the judgment of Pullangode Rubber Produce Company Ltd. 1971 (9) TMI 64 - SUPREME COURT where in held that the admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the assessee who made admission to show that it is incorrect and the assessee should be given proper opportunity to show the correct state of affairs. Hon ble Delhi High Court in CIT vs. Sunil Aggarwal 2015 (11) TMI 286 - DELHI HIGH COURT held that addition cannot be made merely on the basis of the statement which is subsequently retracted even belatedly. Thus Bench does not concur with the findings of the ld. CIT(A) and the impugned addition made on account of alleged excess cash in hand is wrong and against the fact of the case. Thus the Ground No. 1 of the assessee is allowed. Addition as excess stock of silver jewellery - HELD THAT - The Bench noted from the orders of the lower authorities that no details or particulars were asked regarding silver jewellery received on approval by the ld. AO. The assessee had submitted the copy of statement of the Director from which facts and submissions are evident from the statement of the Director of the company recorded during the course of search. Thus the allegation of the AO that the appellant could not explain such as name of the entity from which the same has been received. In the statement recorded u/s 132(4) of the IT Act 1961 the appellant further submitted that the goods received on approval was duly recorded in the stock register and a copy of purchase bills of M/s Sangam Handicrafts for purchase of silver earlier received on approval was filed. It is also evident from the assessment order that the AO made no enquiry or collected any other legal evidence at his level regarding the said silver purchased from the above said concern. Thus the addition made by the AO on this account is against the correct facts duly supported by the documentary evidences. Ground No 2 of the assessee is allowed. Excess stock weighing 1567.89 gms of 18 cts. Gold jewellery and GP on the alleged undisclosed sales of the short weight of 22 cts. jewellery and gold ornaments - AO made the said additions for the reason that the 18 cts. Gold jewelry was in excess and 22 cts. gold jewellery was short as inventoried and valued by a registered valuer in presence of a representative of the assessee company - HELD THAT - As evident from the valuation report and a known method / procedure adopted by the valuer during the course of search that he heaped / piled up of the ornaments of both the purity items at one place instead of segregation of ornaments of both purities. It is noticed that during the said process the tags of so many items were jumbled / separated and vice versa from the ornaments and the registered valuer valued the ornaments as per his own wisdom and experience. Ss evident from the records after taking together the weight of 22 cts. and 18 cts. gold jewellery there remains a negligible difference in the total weight of jewellery ornaments as per books of accounts and physically found and valued during search. In this connection it is also pertinent to mention here that in jewellery shop the movement of each and every ornament including physical existence thereof is being monitored minutely otherwise no businessman can survive. For verification and in support of the above facts appellant also submitted copy of day-to-day stock register maintained for the period 01.04.2017 to 02.08.2017 before the lower authorities. We noted that the said record was available at the time of search and a copy thereof is lying seized with the AO. Hence, short weight of 191.142 gms. in gold jewellery ornaments of 22 cts and 18 cts purity and valuation was negligible and the same was occurred due to using the different weighing machines etc and thus the additions directed to be deleted. Hence Ground No. 3 4 of the assessee are allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

1. Whether the addition of Rs. 11,76,838/- as unexplained cash under Section 69A of the Income Tax Act, 1961, is justified.

2. Whether the addition of Rs. 6,57,672/- as unexplained investment in silver jewellery is justified.

3. Whether the addition of Rs. 41,48,637/- as unexplained investment in excess gold jewellery is justified.

4. Whether the addition of Rs. 3,67,688/- as profit on unaccounted sale of gold jewellery is justified.

5. Whether the application of provisions of Section 115BBE of the Income Tax Act, 1961, on the additions sustained is justified.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Unexplained Cash Addition

Relevant legal framework and precedents: Section 69A of the Income Tax Act, 1961, pertains to unexplained money, where any money found and not recorded in the books of account is deemed to be the income of the assessee for that financial year.

Court's interpretation and reasoning: The Tribunal noted that the assessee claimed a higher cash balance than recorded by the Assessing Officer (AO). The AO relied on the statement made by the Director during the search, which did not object to the cash in hand figure determined by the AO.

Key evidence and findings: The Tribunal found that the AO did not provide the working details of the cash in hand figure, and the Director's statement was not retracted. The Tribunal also noted that the cash book maintained by the assessee was not found to have any defects.

Application of law to facts: The Tribunal applied the legal principle that statements recorded during search have evidentiary value but are not conclusive. The Tribunal found the AO's reliance on the statement without considering the cash book and other evidence was unjustified.

Treatment of competing arguments: The Tribunal considered the assessee's argument about the cash book and advance payments from customers, which were not adequately addressed by the AO.

Conclusions: The Tribunal allowed the assessee's appeal on this ground, finding the addition of Rs. 11,76,838/- as unexplained cash unjustified.

Issue 2: Unexplained Investment in Silver Jewellery

Relevant legal framework and precedents: Section 69A of the Income Tax Act, 1961, was again relevant for unexplained investments.

Court's interpretation and reasoning: The Tribunal found that the AO did not seek details regarding the silver jewellery claimed to be received on approval from M/s Sangam Handicrafts.

Key evidence and findings: The Tribunal noted the absence of evidence from the AO's side to counter the assessee's claim that the silver items were received on approval.

Application of law to facts: The Tribunal found that the AO's decision was not supported by any inquiry or evidence, and the assessee's claim was backed by documentary evidence.

Treatment of competing arguments: The Tribunal considered the assessee's documentation and explanations, which were not refuted by the AO with evidence.

Conclusions: The Tribunal allowed the appeal, finding the addition of Rs. 6,57,672/- as unexplained investment unjustified.

Issue 3 & 4: Unexplained Investment in Gold Jewellery and Unaccounted Sale

Relevant legal framework and precedents: Section 69A of the Income Tax Act, 1961, was relevant for unexplained investments and profit from unaccounted sales.

Court's interpretation and reasoning: The Tribunal found discrepancies in the weight of gold jewellery as recorded by the AO and the actual stock as per the books. The Tribunal also considered the explanation that the jewellery was mixed up during the search.

Key evidence and findings: The Tribunal noted that the AO's calculation of excess and shortage was incorrect due to a mix-up of jewellery tags during the search.

Application of law to facts: The Tribunal applied the principle that minor discrepancies in stock due to handling during search should not lead to significant additions without concrete evidence.

Treatment of competing arguments: The Tribunal considered the assessee's explanation of the mix-up and the negligible difference in total weight, which was not refuted by the AO with evidence.

Conclusions: The Tribunal allowed the appeal, finding the additions of Rs. 41,48,637/- and Rs. 3,67,688/- unjustified.

Issue 5: Application of Section 115BBE

Relevant legal framework and precedents: Section 115BBE of the Income Tax Act, 1961, pertains to the tax rate on income referred to in Sections 68, 69, 69A, 69B, 69C, or 69D.

Court's interpretation and reasoning: Since the additions under Sections 69A were deleted, the application of Section 115BBE became academic.

Conclusions: The Tribunal found the issue academic and disposed of it accordingly.

3. SIGNIFICANT HOLDINGS

The Tribunal established that statements recorded during search operations have significant evidentiary value but are not conclusive. The burden of proof lies on the assessee to demonstrate inaccuracies in such statements, but the AO must also consider all available evidence, including books of accounts.

The Tribunal emphasized the importance of accurate calculations and evidence-based assessments in determining unexplained investments and cash. The Tribunal's decision underscores the need for the AO to substantiate additions with concrete evidence and not solely rely on statements made during searches.

The Tribunal's final determination was to allow the appeal of the assessee, deleting all the additions made by the AO and confirmed by the CIT(A), and finding the application of Section 115BBE academic given the deletions.