2023 (1) TMI 763 - AT - Income Tax

Unexplained jewellery - During the course of gold jewellery and Diamond were found in huge quantity - assessee could not file any evidence to justify the purchase of jewellery by the family members including wealth tax returns filed for the relevant assessment years - CIT-A deleted the addition - HELD THAT:- Once the appellant disowned jewellery found during the course of search, it does not belong to him and also the statement of the appellant has been accepted by the family members, then if at all the family members could not explain source for purchase of jewellery, the AO can make addition only in the hands of the family members, but not in the hands of the appellant.

When the family members explained the mode and method of acquiring jewellery, the AO cannot disbelieve the statement of the assessee merely for the reason that the assessee could not furnish necessary evidence, because it is customary in Indian society, during marriages ladies will get substantial amount of jewellery from their parents as marriage gift.

Family members had also claimed that they have purchased part of jewellery for many years. No doubt, the appellant could not furnish necessary bills, but fact remains that when the appellant claims that jewellery was purchased for many years, the AO cannot insist bills for purchase of jewellery. Further, the family members claimed that they did not file wealth tax returns because taxable wealth in their hands for all these assessment years is below taxable limit.

Merely for the reason that there is no wealth tax returns filed by the family members no adverse inference could be drawn against the assessee. Appellant had admitted a sum of Rs. 35 lakhs towards unexplained jewellery. CIT(A) after considering relevant facts has rightly deleted addition towards unexplained jewellery and thus, we are inclined to uphold the findings of the Ld. CIT(A) and reject the ground taken by the revenue.

Unexplained expenditure u/s. 69C - AO made addition towards jotting found in loose sheet as unexplained expenditure on the ground that the assessee could not prove the source for repayment of loan - HELD THAT:- First of all addition cannot be made on the basis of jottings in loose sheet, unless other corroborative evidence to prove that whatever recorded in loose sheet are correct. Secondly, when the AO treated repayment of loan to his friend as unexplained, he ought to have accepted the explanation of the assessee that he had borrowed loan from his friend. He cannot reject loan borrowed from the friend and at the same time, cannot make addition towards source for repayment of loan. If there is no loan from the friend then the question of repayment of said loan does not arise. If you consider loan taken from his friend is true and correct, then the assessee is having source with him to explain repayment of said loan to his friend. CIT(A) after considering relevant facts had rightly held that the AO cannot ignore loan borrowed from his friend and make addition towards repayment of said loan. Therefore, we are of the considered view that there is no error in the reasons given by the CIT(A) to delete addition made towards unexplained expenditure towards repayment of loan to Shri Shanmugasundaram of Mysore and thus, we are inclined to uphold the findings of the Ld. CIT(A) and reject the ground taken by the revenue.

Unexplained investment u/s. 69B of the Act for purchase of property - HELD THAT:- Assessee and the ld. DR present for the revenue fairly agreed that, the assessee has settled the dispute with regard to addition on account of unexplained investment under the Direct Tax Vivad Se Vishwas Scheme, 2020 and paid relevant taxes and in this regard, he has filed Form no. 5 issued by the designated authority. Therefore, we are of the considered view that the ground taken by the revenue on this issue becomes infructuous