SHRI DINESH VITHALBHAI SONI (GHAGHADA),RAJKOT vs. ACIT, CENTRAL CIRCLE-2, RAJKOT, RAJKOT

That the learned CIT(Appeals) has grievously erred in law and on facts in not deleting the addition made u/s 69A of the Act on the basis of legal provisions as well as on merits of the case. 6. That the appellant craves leave to add, amend, alter, vary and / or withdraw any or/ all the above grounds of Appeal.”

The Ld. Counsel for the assessee submitted that during the assessment proceedings as well as appellate proceedings the assessee submitted relevant documents and evidences as and when called by the authorities below. The Ld. Counsel for the assessee submitted that the documents which were submitted before the AO were already placed in the paper-book of the assessee and there is no new evidence in the paper-book.

The Ld. Counsel for the assessee has submitted that in this case the substantive addition has not been made in the hands of the true owner and only protective addition was made in the hands of the assessee. The Ld. Counsel pointed out that the true owner in whose hands the substantive addition was to be made is Om Jewellers who is the proprietor of Sonu Luthra. As no assessment was framed in the hands of M/s. OM Jewellers, that is, no substantive addition was made in the hands of OM Jewellers therefore, protective addition should not be made in the hands of the assessee. Ld. Counsel submitted that this protective addition was made in the hands of the assessee u/s.69 A of the Act, which was not required as the substantive addition has not been made by the Department in the hands of true owner, then no protective addition should be made in the hands of the assessee under consideration, under the wrong section of the Income Tax Act, 1961.

On the other hand, the Ld. DR for the Revenue relied on the findings of the authorities below and stated that since no substantive addition has been framed by AO, therefore, the protective addition should be sustained in the hands of the assessee, to protect the revenue.

We have heard the both the parties and perused the materials available on record. We note that AO had made an addition of Rs.14,01,303/- u/s 69A of the Act on protective basis. The ADIT, Investigation, Rajkot had intercepted two persons namely Shri Sureshkumar Jaikishan Bhangarwa and Shri Jagdish Prasad of Bright Courier on 27.10.2017 at Rajkot Airport who were carrying Delhi weighing 460.955 gms gold to the assessee through Jet Airways. The parcels allegedly were to be delivered to the assessee containing total Fine Gold 4 | P a g e A.Y 2018-19 Dineshbhai V Soni vs.ACIT weighing 460.955 gms. The said Gold was finally seized by the ADIT, Rajkot and on not being satisfied with the supporting documents provided or produced regarding the ownership of above stated Gold during post interception interrogation/investigation. Subsequently, proceedings u/s 153C was initiated in the case of the assessee Shri Dineshbhal Vithalbhai Soni and AO has also sent the information/his satisfaction note for initiation of proceedings u/s 153C to the jurisdictional AO of the supplier M/s. Om Jewellers, Delhi.

The appellant has contended that the supplier M/s. Om Jewellers, Delhi is the owner of the gold and they had sent parcel to the appellant for the job-work purposes and had submitted all the details during the post-search proceedings. It is also stated that the supplier had furnished the stock register as well as his purchase bills evidencing that he had enough stock on hand from which the gold has been sent to the appellant for job-work. All these facts have already been verified by the AO during the assessment proceedings and no new evidences have been filed during the appellate proceedings before CIT(A). It is also stated that the copy of assessment order in the case of Om Jewellers is not available with the appellant and that as per knowledge of the appellant, the assessment was not reopened for the A.Y. 2018-19. However, the appellant has not 5 | P a g e A.Y 2018-19 Dineshbhai V Soni vs.ACIT submitted any evidence(s) to this claim nor could explain the fate of thegold, claimed to have been sent by M/s. Om Jewellers, Delhi for job-work purpose despite giving various opportunities. Since, the appellant has failed to prove with evidences, the onus cast upon him to prove that the gold ornaments sent to him by Om Jewellers, Delhi for job-work had been considered by the AO in that case, the action of the AO in treating the fine gold valued at Rs.14,01,303/- as unaccounted investment and adding it to the total income of the appellant U/s. 69A of the Act on protective basis was confirmed by CIT(A).

We note that since the substantive addition itself has not been made in the hands of M/s. Om Jewellers and substantive addition is normally made to protect the interest of Revenue. However, the Revenue itself did not take care to make the substantive addition in the hands of the true owner. Therefore, protective addition made in the assessee’s case under consideration should not be sustained. We note that assessee has furnished the following documents and evidences before the Assessing Officer.

Since the Ld. DR for the Revenue confirmed this fact that substantive addition has not been made in the hands of M/s. Om Jewellers, who was the true 6 | P a g e A.Y 2018-19 Dineshbhai V Soni vs.ACIT owner of the gold. The Protective addition was merely made in the hands of the assessee under consideration to protect the revenue. The AO made protective addition only in the hands of the assessee on the presumption that if substantive addition is made in the hands of M/s. Om Jewellers and till M/s. Om Jewellers accepted, its responsibility as a true owner, the protective addition may be made in the hands of the assessee and, therefore, it was imperative to protect the interest of revenue to avoid the possibility of leakage of revenue and to deal with the contingent situation till the substantive addition gets finalized. We note that since the substantive addition has not been made in the hands of the true owner, then no protective addition should be made in the hands of the assessee. The protective addition can only be made when prima facie which appears to the revenue that income has been received either by M/s. Om Jewellers or by assessee under consideration, then it would be open to the Income Tax Authorities either to tax the income in hands of M/s. Om Jewellers or in the hands of the assessee under consideration. We note that the Department did not take care to make addition in the hands of true owner, M/s. Om Jewellers and M/s. Om Jewellers has accepted this responsibility, however, the Department has failed to make the addition in the hands of M/s. Om Jewellers (true owner). Therefore, we find that the assessee cannot be made liable to pay the income-tax on protective basis as the assessee is not the true owner of the gold and for that we rely on the judgement of Hon’ble Supreme Court in the case of Lalji Haridas vs. ITO reported at (1961) 43 ITR 367 (SC). We find that the Ld. DR for the Revenue submitted before the Bench that no substantive addition has been made in the hands of M/s. Om Jewellers and this fact we have recorded after doing enquiry by the Ld. DR for the Revenue in the Income Tax Department and it has been categorically stated by the Ld. DR for the Revenue that no substantive addition was made in the hands of direct 7 | P a g e A.Y 2018-19 Dineshbhai V Soni vs.ACIT owner, M/s Om Jewellers. Therefore, we find that the Department was unable to collect the taxes from the true owner, then in that situation, the Department cannot collect the taxes from the person in whose hands the protective addition was made, just to protect the revenue till the time the substantive addition has been made in the hands of the true owner. Since the Department has failed to frame the substantive addition in the hands of the True owner, therefore assessee is not liable to accept these transactions as there is no any facts which shows that assessee under consideration is true owner of the transactions. We have examined the facts and find that assessee under consideration is not true owner of the gold. Therefore, considering these facts and circumstances, we delete the addition.

In the result, the appeal of the assessee is allowed.