2008 (9) TMI 526 - HC - Income Tax

Income from undisclosed sources - The Assessing Authority held that the assessee had failed to prove the transaction of sale to M for an amount of Rs. 4, 08, 080 and sale of diamonds for Rs. 4, 21, 250 to S. having regard to the statement recorded by him and after considering the contentions of the assessee the assessing officer also held that sale proceeds as income and charged the entire credit of Rs. 4, 08, 080 and Rs. 4, 21, 250 as income from other sources u/s 68. Declaration was given to the amount that was declared under the declaration filed under the Scheme 1997 towards gold jewellary and diamond. Tribunal and Commissioner (Appeals) confirm this view. Held that - however the real question that was required to be decided by the first appellate authority and the assessing authority was as to whether the subject matter of the sale transaction was in respect of the goods that were the subject matter of the declaration filed under the 1997 Scheme which declaration was accepted by revenue. There was no specific finding on this material fact which would decide the contention of the assessee or the revenue. The addition to income was not justified.

Summary

Issues involved:
1. Appeal against order passed by Income-tax Appellate Tribunal
2. Discrepancies in declaration of income and sale transactions
3. Application under Voluntary Disclosure of Income Scheme, 1997
4. Assessment of income from sale of gold jewellery and diamond
5. Confirmation of orders by authorities
6. Interpretation of tax implications under section 68 of Income-tax Act, 1961

Detailed Analysis:

1. Appeal against order passed by Income-tax Appellate Tribunal:
The appellant filed an appeal against the order passed by the Income-tax Appellate Tribunal, Bangalore Bench-C, confirming the order of the Commissioner of Income-tax (Appeals), Hubli. The Tribunal upheld the assessment of the entire amount of Rs. 8,29,330 as the income of the appellant.

2. Discrepancies in declaration of income and sale transactions:
The appellant had declared income under the Voluntary Disclosure of Income Scheme, 1997, for gold jewellery and diamond. However, discrepancies arose regarding the sale transactions of gold jewellery and diamond, leading to a dispute over the tax implications.

3. Application under Voluntary Disclosure of Income Scheme, 1997:
The appellant had filed an application under the Scheme, 1997, declaring income from gold jewellery and diamond. The Revenue accepted this declaration by issuing a certificate, but the subsequent sale transactions raised questions about the consistency of the declared assets.

4. Assessment of income from sale of gold jewellery and diamond:
The assessing authority treated the sale proceeds as income from other sources under section 68 of the Income-tax Act, 1961. The appellant contested this assessment, claiming that the sold goods were the same as those declared under the Scheme, 1997.

5. Confirmation of orders by authorities:
The Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal confirmed the assessing authority's order, holding the entire amount as the appellant's income. The appellant challenged these decisions, leading to the present appeal.

6. Interpretation of tax implications under section 68 of Income-tax Act, 1961:
The High Court analyzed whether the sale transactions declared in the regular returns were taxable under section 68, considering if the goods sold matched those declared under the Scheme, 1997. The Court emphasized the importance of proving the consistency between the declared assets and the actual sale transactions to determine the tax liability accurately.

In conclusion, the High Court allowed the appeal, setting aside the Tribunal's order and remitting the matter to the Income-tax Officer for fresh assessment based on the observations made in the judgment. The Court highlighted the necessity of establishing a clear link between declared assets and sale transactions to determine the correct tax treatment under the Income-tax Act.