PRINCIPAL COMMISSIONER OF INCOME TAX 1 vs. PRADIP JAYANTILAL KARIA

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TAXAP/286/2018HC GujaratGJHC24011182201804 April 2018Bench: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA4 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal's decision to delete the addition of Rs. 74,45,639 was upheld. The High Court focused on the fundamental question of whether the entire addition could be made in the hands of the assessee based solely on the disclosure statement. The Court noted that the assessee's statement under section 132(4) was not solely for himself but was made on behalf of the entire family, with the Rs. 1.74 crore of jewellery and ornaments bifurcated among different family members. The Court found it doubtful whether additions could be made in the hands of other family members based on such a statement, especially since no such additions were made in their assessments. Furthermore, the Court held that it was not possible for the AO to make the entire addition in the hands of the assessee, as the disclosure statement was qualified and did not exclusively concern the assessee. The ratio is that a disclosure statement made on behalf of multiple individuals cannot be the sole basis for making the entire addition in the hands of one individual, particularly when other family members were also beneficiaries of the disclosure and no additions were made in their cases.

What were the facts?

The Revenue is in appeal against an Income Tax Appellate Tribunal (Tribunal) order dated June 27, 2017. The dispute concerns an addition of Rs. 74,45,639 made by the Assessing Officer (AO) for Assessment Year 2011-12. This addition was deleted by the Commissioner of Income Tax (Appeals) and confirmed by the Tribunal. During a search operation, the assessee admitted unexplained gold ornaments and jewellery worth Rs. 1.74 crore and cash of Rs. 4.46 lakh, totaling approximately Rs. 1.80 crore. This disclosure statement was made on behalf of the assessee and other family members, with a breakdown of assets held by each. While other family members filed returns acknowledging their share of the disclosed assets, the AO noted a shortfall of Rs. 74.45 lakh in the total declared assets compared to the assessee's statement. The AO made the addition of this shortfall in the hands of the assessee.

What were the issues?

1. Whether the Tribunal erred in deleting the addition of Rs. 74,45,639, made by the AO, by rejecting the assessee's contention that Rs. 1.80 crore was part of a buffer disclosure of Rs. 14 crore? (Question of law). 2. Whether the Tribunal erred in considering the assessee's contention that the disclosure of Rs. 1.80 crore was part of a buffer disclosure of Rs. 14 crore, despite it not being supported by any evidence? (Question of mixed law and fact). Assessee's Contention: The assessee argued that the Rs. 1.80 crore disclosure was part of a larger buffer disclosure of Rs. 14 crore. (No specific authorities or precedents mentioned for this argument in the judgment). Revenue's Contention: The Revenue contended that the assessee never retracted his statement recorded under section 132(4) of the Income Tax Act, 1961 (Act), and his post-search correspondence confirmed the disclosures. The Revenue argued that the assessee's contention regarding the Rs. 1.80 crore being part of a buffer disclosure was not supported by evidence.

Which sections of the Income-tax Act were involved?

Section 132(4)

AI-generated summary — verify with the full judgment below

C/TAXAP/286/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 286 of 2018 ========================================================== PRINCIPAL COMMISSIONER OF INCOME TAX 1 Versus PRADIP JAYANTILAL KARIA ========================================================== Appearance: MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA

Date : 04/04/2018 ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. Revenue is in appeal against the judgement of the Income Tax Appellate Tribunal dated 27.06.2017 raising following questions for our consideration: “1. Whether the Appellate Tribunal has substantially erred in deleting the addition of Rs. 74,45,639/- which was made by the AO by rightly rejecting the contention of the assessee that Rs. 1.80 crore was part of buffer disclosure of Rs. 14 Crore? 2. Whether the Appellate Tribunal has substantially erred in considering the fact, that the contention of the assessee that the disclosure of Rs. 1.80 crore was a part of buffer disclosure of Rs. 14 crores is not supported by any evidences?” 2. The issue pertains to addition of Rs. 74.45 lacs made by the Assessing Officer in the hands of the respondent-assessee for Page 1 of 4

C/TAXAP/286/2018 ORDER the assessment year 2011-12 which was deleted by the CIT(Appeals) and deletion was confirmed by the Tribunal. 3. Facts emerging from the record would suggest that the assessee and the other family members were subjected to search operation. During the course of such search operation, statement of the assessee was recorded under section 132(4) of the Act. In such statement, he admitted unexplained gold ornaments and jewellery worth Rs. 1.74 crore and cash of Rs. 4.46 lacs total coming approximately Rs. 1.80 crore. He had given the break up of such jewellery and cash in the hands of different family members. His disclosure statement thus was clearly on behalf of the entire family and not only for himself. Evidentially all family members filed individual return owing up partially disclosed jewellery and cash. Assessments in case of other family members were made substantially accepting the returns. To the extent the Assessing Officer made modifications. The same were deleted by the CIT (Appeals). When it came to the assessment in case of the present assessee, the Assessing Officer noticed that against the total disclosures of Rs. 1.80 crore made by him towards jewellery and cash, he and other family members had, in the returns filed, owned up only a sum of Rs. 1 crore (rounded off). To the extent, the cash seized was explained. The Assessing Officer dropped the issue. With respect to the gold jewellery and ornaments, he was of the opinion that the assessee was, by his own statement, informed of the shortfall in the returns filed by the assessee Page 2 of 4

C/TAXAP/286/2018 ORDER and other family members as compared to the assessee's statement during search. He added said sum of Rs. 74.45 lacs in the hands of the assessee. 4. CIT (Appeals) deleted such amount principally on two grounds. Firstly, that statements under section 132(4) of the Act could not form the sole basis for making the additions and secondly, that also doubting whether the Assessing Officer could have made the entire addition at the hands of the assessee when the disclosure statement was made for and on behalf of family members. Tribunal mainly proceeded on the basis of evidentiary value and the statement under section 132(4) of the Act. 5. Learned counsel for the Revenue may be correct in pointing out that the assessee never retracted his statement recorded during the search under section 132(4) of the Act. In fact, his post search statement and correspondence confirmed such disclosures. Had this been the only issue we would have examined the question further. However, the fundamental question which occurs to us is, whether on the strength of such disclosure statement entire addition could be made in the hands of the assessee? We may recall, the assessee's statement of disclosure was not for himself alone. The entire value of gold jewellery and ornaments of Rs. 1.74 crore was bifurcated in the hands of the different family members. Firstly, it is doubtful whether on the basis of such a statement any Page 3 of 4

C/TAXAP/286/2018 ORDER additions could be made in the hands of the other persons. This apart, admittedly no such additions were made in the hands of the other family members. It was not possible for the Assessing Officer in any case to make the entire additions in the hands of the assessee on the basis of the statement which was qualified in sence that the disclosures were not concerning the assessee alone to attribute such unexplained gold jewellery and ornament in the hands of the other family members in different proportion. 6. Tax Appeal is therefore, dismissed. (AKIL KURESHI, J) (B.N. KARIA, J) JYOTI V. JANI Page 4 of 4

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