2015 (12) TMI 1735 - AT - Income Tax

Addition made u/s 153A/143(3) - Held that - There is no incriminating evidence found during the course of search. Hence as per the binding decision in Commissioner of Income Tax v. Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT addition to income cannot be made in respect of items which are originally disclosed in the original assessment proceedings. Therefore we do not find any merits in this ground of appeal of the Revenue so it is dismissed. Unexplained income of the assessee - receipt of gifts - Held that - Both the amounts added to the income of the assessee cannot be held to be unexplained income of the assessee since it was a gift from the father who was the Donor and an NRI from his bank account at Singapore. So the ld. CIT (A) has rightly deleted the addition for both the years and so we uphold the order of the ld. CIT (A) and dismiss these ground of the revenue in both the assessment years. Unexplained jewellery found with the assessee - Held that - The value of jewellery declared is far in excess of the value of jewellery found during the course of search which finding also could not be controverted before us by the department. The ld CIT(A) has considered individually i.e. assessee wise the value of jewellery declared taking the rate of gold at Rs. 900/- per gram is in excess of jewellery found during the course of search. The CIT(A) rightly observes that it is not unusual for families to spend money on modification of their jewellery and very often the bills evidencing the modification are not retained for a long period of time. However since there was sufficient cash available with the assessee and her family there is no reason to disbelieve her contention that the jewellery was remodeled altered from time to time and hence the difference in description. The Assessing Officer in his assessment order and in the remand report has nowhere refuted the claim of the assessee that both in terms of value and quantity the jewellery declared in the wealth tax return far exceed the jewellery found during the course of search. There is also no evidence that has been brought on record to prove that the jewellery seized was purchased out of undisclosed income. The reconciliation of jewellery is quite detailed and in the absence of any discrepancies found during the assessment proceedings and remand proceedings it cannot be faulted with - Decided against revenue.

Summary

Issues Involved:
1. Legal correctness of the CIT (Appeals) order.
2. Legality of additions made under Section 153A/143(3).
3. Deletion of additions on account of unexplained money received from Shri Suresh Nanda.
4. Deletion of additions on account of unexplained jewelry found with the assessee.

Detailed Analysis:

1. Legal Correctness of the CIT (Appeals) Order:
The revenue challenged the correctness of the CIT (Appeals) order for both assessment years 2001-02 and 2007-08. However, this ground was deemed general and required no adjudication.

2. Legality of Additions Made Under Section 153A/143(3):
For AY 2001-02, the CIT (A) held that the addition made under Section 153A/143(3) was legally untenable, noting the absence of any incriminating evidence found during the search. The original return was filed, and no notice under Section 143(2) or 148 was issued, meaning no proceedings were pending on the date of the search. The CIT (A) referenced the case of Anil Kumar Bhatia, which established that Section 153A does not authorize a denovo assessment unless there is pending assessment on the date of the search. The Delhi High Court's decision in CIT vs. Kabul Chawla further supported this, stating that completed assessments can only be interfered with based on incriminating material found during the search. Consequently, the addition was deemed legally untenable and dismissed.

For AY 2007-08, the CIT (A) ruled against the assessee, noting that the return of income had not become due on the date of the search, and notice under Section 143(2) was issued for further scrutiny. Therefore, the assessment was pending, and the decision in Anil Kumar Bhatia did not apply. The revenue's ground was found to be misconceived and dismissed.

3. Deletion of Additions on Account of Unexplained Money Received from Shri Suresh Nanda:
The AO added Rs. 50,44,459/- for AY 2001-02 and Rs. 1 crore for AY 2007-08 to the assessee's income, noting that the amounts were received from the assessee's father, Shri Suresh Nanda, who refused to disclose his income sources abroad. The CIT (A) deleted these additions, stating that the funds were received through account payee cheques from a known income tax assessee, and the identity and genuineness of the transaction were established. The CIT (A) cited several judicial precedents, including the Rajasthan High Court's decision in Aravali Trading Co., which held that the assessee need not prove the source of the source. The Delhi High Court's decision in CIT vs. Suresh Nanda confirmed that Shri Suresh Nanda was an NRI, further supporting the deletion of the additions. The Tribunal upheld the CIT (A)'s order, dismissing the revenue's grounds.

4. Deletion of Additions on Account of Unexplained Jewelry Found with the Assessee:
During the search, jewelry worth Rs. 1,84,93,605/- was found, of which Rs. 53,98,050/- was seized. The AO added this amount to the assessee's income, citing a failure to reconcile the jewelry with the wealth tax return. The CIT (A) deleted the addition, noting that the total weight and value of jewelry declared in the wealth tax return exceeded the jewelry found during the search. The CIT (A) accepted the assessee's explanation of using family jewelry interchangeably and the possibility of modifications over time. The Tribunal found no infirmity in the CIT (A)'s detailed order and dismissed the revenue's ground for AY 2007-08.

Conclusion:
Both appeals by the revenue were dismissed, and the CIT (A)'s order was upheld. The additions made by the AO under Section 153A/143(3) were found to be legally untenable due to the absence of incriminating evidence, and the explanations provided by the assessee regarding the money received and the jewelry found were accepted.