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Vijay L. Bhawe Versus Assistant Commissioner of Income-Tax (And Vice Versa)

[2016] 51 ITR (Trib) 474 - Addition made on account of cash found at the time of search - Held that:- The Revenue authorities were duty bound to consider the aspect of source of cash claimed to be out of the withdrawal from banks and other means. It is noted from the perusal of the orders of the lower authorities that the assessee had submitted that total amounts of withdrawals during the last seven years by the assessee's family stood at ₹ 127.25 lakhs. Thus amount of cash found at the ti .....

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the time of search out of the cash available on account of withdrawals made by the assessee and his family members in the current year as well as during the last seven years - Decided in favour of assessee - Addition on account of unexplained investment in gold ornaments and diamond jewellery - Held that:- law does not permit to make entire addition on account of difference found in the jewellery recovered and the jewellery disclosed in wealth-tax returns/ books of account, in the hands of t .....

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ore the Assessing Officer, copies of judgments and Central Board of Direct Taxes circular which have been relied on before us to explain the jewellery found from its possession - I. T. A. Nos. 3296 and 3650/Mum/2009 - Dated:- 5-8-2016 - Amit Shukla (Judicial Member) And Ashwani Taneja (Accountant Member) For the Assessee : S. C. Gupta, authorised representative For the Department : G. M. Doss, Departmental Representative ORDER Ashwani Taneja (Accountant Member) 1. These are cross appeals filed b .....

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onfirming the addition of ₹ 5,86,900 made as unaccounted cash despite the fact that at the time of search, the appellant categorically stated under section 132(4) that the said cash is accumulation of funds withdrawn from the bank and evidence for such withdrawals were also placed before the authorities below besides explaining the circumstances. Thus, the addition should be deleted. 2. The learned Commissioner of Income-tax (Appeals) erred in law and on facts in confirming the addition of .....

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The appellant craves leave to add, to alter or amend the groups of appeal on or before the hearing of this appeal. Additional ground of appeal taken on October 26, 2010 5. The Revenue erred in law in basing assessment order under section 143(3) for the assessment year 2006-07 on the outcome of searches conducted under section 132 when warrant was in the name of Vijay L. Bhawe, Pratibha V. Bhawe, Aniket Bhawe (as indicated in panchnamas) and when the Revenue was required to examine the matter in .....

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f hearing and, therefore, the same is dismissed. 4. Ground No. 1 : This ground deals with the addition made on account of cash found at the time of search which has been treated as unaccounted cash and, therefore, added as unexplained income of the assessee. 4.1. Brief background is that a search and seizure operation was carried out at the residence of the assessee under section 132 of the Act. During the course of search, cash amounting to ₹ 6,36,900 was found, out of which ₹ 5,51, .....

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fficer was not convinced with the assessee's reply and relied on the statement of the assessee recorded during the course of search on January 24, 2006, wherein the assessee admitted that cash was not accounted for in its books and cash of ₹ 5,51,000 was offered for taxation as income of the impugned year. 4.2. Being aggrieved, the assessee filed before the learned Commissioner of Income-tax (Appeals) wherein the assessee furnished details of withdrawals of past various years of all th .....

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ffered as unaccounted income. But the learned Commissioner of Income-tax (Appeals) was not satisfied with the submissions of the assessee and, therefore, he confirmed the addition made by the Assessing Officer by relying upon the statement of the asses see made at the time of search and also on the ground that though the assessee had submitted the details of withdrawals but the assessee had failed to furnish details of expenses incurred out of these withdrawals. 4.3. Being aggrieved, the assesse .....

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nt was made at the time of search under acute pressure and misunderstanding of facts and legal position as was narrated in detail before the learned Commissioner of Income-tax (Appeals) also. 4.5. Per contra, the learned Departmental representative submitted that though the assessee had sufficient withdrawals during the past few year but details of household expenses and other expenses which have been met out of the withdrawals have not been furnished and since the assessee had offered that this .....

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ere found and out of that ₹ 5,51,000 is seized. Please explain the source of this cash ? Answer. The cash which is found today during the search is in fact accumulated in my house through day-to-day withdrawals from banks and other means. But the cash is not accounted for in my books as my books is not maintained for this purpose. This cash cannot be explained in books. The seized cash of ₹ 5,51,000 is offered for taxation as income of current financial year." 4.7. The perusal o .....

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it is not compulsory that the cash has to be necessarily recorded in some books. The cash should be treated as explained if the source of cash is explained to be out of disclosed income or other sources on which taxes have been paid. It appears that, at the time of search, the assessee was not clear about this position of law. Under these circumstances, in our view, the assessee cannot be bound with its submissions in all times to come, particularly when the statement was given by him under som .....

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The judgment has been followed subsequently by many courts in our country which are not discussed here for the sake of brevity. Thus, the situation that emerges before us for our consideration is that whether the impugned addition could have been made dehors the aforesaid statement of the assessee wherein the assessee had offered the impugned amount of cash for taxation as its income. It is noted that the assessee is living in a joint family comprising various family members as have been discus .....

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from personal possession of the assessee and, thus, the entire cash has been wrongly added in the hands of the assessee only. 4.9. Further, it is noted that the assessee has been claiming right from the stage of the Assessing Officer that the assessee is having sufficient amount of cash withdrawals since last many years. The point worth noting here is that this fact was stated by the assessee in his statement also at the time of search. The learned Assessing Officer has chosen to rely only upon .....

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from the Assessing Officer that all the facts and circumstances, pleadings and evidences before the Assessing Officer would be taken into account. The statement of the assessee should be read in its entirety, particularly when it is being used against the assessee. Thus, in our considered view, the Revenue authorities were duty bound to consider the aspect of source of cash claimed to be out of the withdrawal from banks and other means. It is noted from the perusal of the orders of the lower au .....

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t no evidences were found during the course of search indicating that entire withdrawals were exhausted in meeting household, marriage and other expenses. Thus, we cannot ignore the avail ability of cash on account of huge amount of withdrawals from the bank just on the basis of doubts and surmise, especially when no contrary material has been brought on record. In our view, the assessee has duly explained the availability of cash of ₹ 6,36,900 found at the time of search out of the cash a .....

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of diamond jewellery. 5.1. The brief background and the facts as culled out from the orders of the lower authorities are that during the course of search, gold jewellery of ₹ 47,07,818, diamond jewellery of ₹ 35,35,166 and silver articles of ₹ 70,902 were found, out of which gold jewellery of ₹ 14,84,600 and diamond jewellery of ₹ 21,32,958 were seized. The assessee explained that out of 5266.490 grams of gold jewellery, 3485 grams was either ancestral or purchased .....

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tted that all the jewellery was purchased out of cash withdrawals from the bank. The assessee claimed that his two unmarried sisters were staying with him and one married sister was also residing at his house, jewellery of all the sisters were placed in the assessee's house. It was also contended that jewellery of the assessee's daughter gifted to her by her grandfather was also placed at the assessee's residence. The Assessing Officer held that the assessee did not submit any docume .....

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as purchased in 1997, 500 grams in 2000 and 931.49 grams in 2002 out of cash withdrawals. The Assessing Officer observed that at the time of giving details of withdrawals made by the assessee and his family members they did not state that out of withdrawals, some amount was saved and was utilised for purchase of jewellery nor any documentary evidence in support of purchase of jewellery weighing 350 grams was submitted. Accordingly, the Assessing Officer treated the balance 1781.49 grams (350 gra .....

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amount of difference between the value shown as per the wealth-tax returns and the value adopted by the Departmental Valuer arising on account of mismatch in the items as shown in the wealth-tax returns and as described by the valuer in its valuation report. The assessee made detailed submissions before the learned Commissioner of Income-tax (Appeals). But the addition on account of unaccounted gold jewellery was confirmed and part relief was given of ₹ 11,84,091 on account of diamond jew .....

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ach of the family members. But the entire addition has been wrongly made in the hands of the assessee. The learned counsel submitted that substantial part of the jewellery has been disclosed by the family members in their respective wealth-tax returns since last many years and, subsequently, there has been addition in the number of family members and the same jewellery has been added on account of fresh purchases made from the disclosed sources. 5.3. Per contra, the learned Departmental represen .....

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d and separate Income-tax and wealth-tax return are filed by the family members. No allegation has been made and no evidences have been brought on record by the Assessing Officer to show that investment was made by the assessee in acquiring jewellery on behalf of all the family members. Under these circumstances, in our opinion, law does not permit to make entire addition on account of difference found in the jewellery recovered and the jewellery disclosed in wealth-tax returns/ books of account .....

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