2010 (1) TMI 697 - AT - Income Tax

Addition - Block assessment - Search and seizure - The issue under consideration is a pure matter of fact calling for factual findings including inferential made on an appreciation of the entirety of the facts and circumstances of the case - The presumption in law is that the person signing a statement has read and understood its contents even as the verification thereof specifically states so and his signature signifies his agreement therewith - It needs to be borne in mind that the assessee has accepted possessing excess stock to the extent of 5075.480 gms. failing to give any explanation in its respect save for the impugned 2105.2 gms. of gold ornaments - it was also found to be in possession of loose papers indicating purchases and sales outside books for which separate additions stood made by the Assessing Officer though telescoped by him against the principal addition for 5075.480 gms. of gold jewellery - assessee is thus engaged in the unaccounted business along with the accounted one - Decided against the assessee

Summary

Issues Involved:
1. Maintainability of the addition of Rs. 8,12,607 for gold ornaments found during the search.
2. Applicability of the surcharge provision under section 113 of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Maintainability of the addition of Rs. 8,12,607 for gold ornaments found during the search:

The first issue revolves around the addition of Rs. 8,12,607, representing the value of 2105.200 grams of gold ornaments found during a search at the assessee's business premises. The gold ornaments were found in excess of what was recorded in the books, and the assessee provided an explanation for 500 grams of gold as received for repairs. However, the balance of 5075.48 grams remained unaccounted for. The assessee claimed that 2105.2 grams were purchased from Shree Veer Jewellers, Nellore, and this fact was communicated to the Authorized Officer during the search. Despite this, the Assessing Officer (AO) did not accept the explanation, as the ADI (Inv.) denied any such explanation during the search and corroborated this with a statement from the Managing Partner. Further, an inspection at Shree Veer Jewellers revealed that the shop had been closed since 26-10-2000.

The Commissioner of Income-tax (Appeals) [CIT(A)] found favor with the assessee, stating that the Revenue's immediate inspection on the day of the search itself indicated that the assessee's claim could not be outrightly rejected. The CIT(A) suggested that the AO should have conducted further inquiries based on the evidence provided by the assessee. The Revenue, aggrieved by this decision, appealed.

Upon hearing both sides, the Tribunal noted that the issue required factual findings based on the entirety of the facts and circumstances. The AO primarily relied on the ADI's report and the Managing Partner's statement, which did not mention the purchase from Shree Veer Jewellers. The Tribunal highlighted that the CIT(A) should have caused further probe into the matter, as there were unanswered questions regarding the Revenue's immediate inspection at the supplier's address.

The Tribunal found that the assessee's conduct was not above reproach, as it failed to provide contemporaneous evidence or material to support its claim. There was no mention of the purchase in the statement on oath, and no documents were found during the search. The Tribunal emphasized that the assessee should have brought all relevant facts on record. The Tribunal concluded that the assessee's explanation was not satisfactorily proven, and the addition of Rs. 8,12,607 was justified.

2. Applicability of the surcharge provision under section 113 of the Income-tax Act, 1961:

The second issue pertains to the applicability of the surcharge provision under section 113 of the Act. The CIT(A) held that the surcharge provision was not applicable, as the proviso to section 113, introduced by the Finance Act, 2001, was applicable only from 1-6-2002. However, the matter was settled by the Hon'ble Apex Court in the case of CIT v. Suresh N. Gupta [2008] 297 ITR 322, which held that the surcharge provision applies to all assessments framed after 1-6-2002.

The Tribunal noted that this issue did not warrant much discussion, as it was covered against the assessee by the decision of the Hon'ble Apex Court. Therefore, the surcharge provision was applicable, and the Revenue succeeded on this ground.

Conclusion:

In conclusion, the Tribunal allowed the appeal filed by the Revenue, upholding the addition of Rs. 8,12,607 for the unaccounted gold ornaments and confirming the applicability of the surcharge provision under section 113 of the Act.