GRANDHI V.V.S.L.N.SUBBA RAO,SECUNDERABAD vs. THE ACIT, RAJAHMUNDRY

आदेश / O R D E R

PER Bench:

This appeal filed by the assessee is directed against order of the

Commissioner of Income Tax (Appeals) {CIT(A)}, Guntur vide ITA

No.457/CIT(A)/GNT/10-11 dated 18.2.2014 for the assessment year

2009-10.

ITA No.388/Vizag/2014 Grandhi V.V.S.L.N. Subba Rao, Secunderabad 2. The assessee filed return of income declaring total income of `

6,97,010/- on 30.11.2009. A search u/s 132 of the Income Tax Act,

1961 (hereinafter called as 'the Act') was carried out in the group cases

of the assessee on 3.2.2009. Consequently, the case of the assessee

was converted into scrutiny and the assessment was completed on total

income of ` 37,52,060/-. In the assessment order passed u/s 143(3) of

the Act, the assessing officer made the following additions:

Income returned 697010 Add: 1. Capital gains on sale of site as admitted during assessment proceedings 207410 2. Unexplained investment in gold jewellery as in para 4 1758720 3055049 3. Unexplained investment in silver as in para 5 788919 4. Unexplained cash as discussed in para 6 300000 Income assessed 3752059 3752060

jewellery weighing 2864 gms. was found and the assessee had admitted

jewellery weighing 1210 gms. valued at ` 13,05,600/- as an unexplained

investment in his hands. Further, silver articles weighing 59.754 kgs.

was found and the assessee has also admitted 30kgs. of silver valued at

` 5,88,000/- as unexplained investment. However, in the return of

income filed subsequent to the search the assessee did not admit the

additional income and explained the sources as un-reflected profit

amounts on which taxes were paid for the financial years 2004-05,

2005-06 & 2006-07 for acquiring the gold of 1133 grams as and with 2

ITA No.388/Vizag/2014 Grandhi V.V.S.L.N. Subba Rao, Secunderabad regard to 354 gms. of gold, the assessee stated that the same was

pertaining to children and the source of acquisition was not explained.

For the balance jewellery of 77 gms the assessee admitted the

additional income of Rs.83,006/-. Not being satisfied with the

explanation of the assessee, the AO assessed the value of gold

ornaments weighing 1564 gms and silver weighing 40.251 kgs as

unexplained investment and brought to tax.

before the CIT(A) and the Ld. CIT(A) confirmed the addition made by

the A.O. with regard to the gold jewellery and silver articles and

dismissed the appeal of the assessee. During the appeal hearing, before

the first appellate authority, the assessee reiterated the stand that the

gold was stated to be acquired out of the income generated during the

assessment year 2004-05 to 2006-07. The Ld.CIT(A) did not accept the

contention of the assessee, since the income admitted by the assessee

was not commensurating with the expenditure incurred by the assessee

as well as acquisition of the gold.

before this Tribunal. During the appeal hearing, the Ld. A.R. submitted

that there was a search in the case of the assessee on 3.2.2010 and

during the course of search, gold jewellery weighing 2864 gms. was

ITA No.388/Vizag/2014 Grandhi V.V.S.L.N. Subba Rao, Secunderabad found at the residence of the assessee, out of which 1300 gms. was

allowed as a deduction following order of the CIT(A), Rajahmundry in

accordance with the provisions of instruction No.1916 dated 11.5.1994.

The remaining gold jewellery weighing 1564 gms. was treated as

unexplained and accordingly made the addition of ` 17,58,720/-. In

addition to the above, silver articles weighing 59.754 kgs. was found at

the residence of the assessee, out of which the A.O. treated 40.251

gms. valued at ` 7,88,919/- as unexplained investment. The assessee

also made the disclosure at the time of search to the extent of `

13,50,600/- in respect of gold jewellery weighing 1210 gms. and `

5,88,000/- in respect of silver articles weighing 30 kgs of silver.

However, the assessee has admitted additional income of ` 20 lakhs in

M/s. Balaji Builders and ` 20 lakhs in M/s. Balaji Constructions

aggregating to ` 40 lakhs for the assessment year 2009-10. Since the

gold and jewellery was found during the course of search as on

3.2.2009, required to be assessed as undisclosed income for the

assessment year 2009-10, the sources for acquisition of the gold and

jewellery and silver articles required to be telescoped from the

undisclosed income admitted in the hands of both the firms i.e. M/s.

Balaji Builders and M/s. Balaji Constructions. The Ld. A.R. of the

assessee referring to paper book page No.51, in the statement recorded 4

ITA No.388/Vizag/2014 Grandhi V.V.S.L.N. Subba Rao, Secunderabad u/s 131 stated that in response to question No.19 the assessee had

admitted additional income of ` 20 lakhs in M/s. Balaji Builders and ` 20

lakhs in M/s. Balaji Construction for the financial year 2008-09 related to

the assessment year 2009-10. Referring to page No.47 of the paper

book, the ld.AR stated that the family members and relatives are only

the partners in the firm and no outsider is involved in business. The Ld.

A.R. further submitted that the partners of both the firms are members

of the same family and during the search, no other unaccounted asset

was found and the additional income admitted by the assessee

amounting ` 40 lakhs in both the firms required to be considered for

telescoping the acquisition of the gold and jewellery in the case of the

assessee.

inconsistency in the explanation of the assessee. Before the CIT(A) and

the A.O., the assessee tried to explain the source of acquisition of the

gold jewellery as the income generated from A.Y.s 2004-05 to 2006-07.

The income generated during the assessment years 2004-05 to 2006-07

was meager amount, and the same is not sufficient to meet the regular

expenditure as well as sources for acquiring the gold jewellery as rightly

observed by the Ld. CIT(A). The assessee took a different stand during

the appeal hearing before the Tribunal requesting for telescoping the

ITA No.388/Vizag/2014 Grandhi V.V.S.L.N. Subba Rao, Secunderabad benefit out of the additional income admitted by the assessee in the

hands of the firms, which is not permissible. Hence, the Ld. D.R. argued

that no telescoping benefit should be allowed with regard to the sources

for acquiring the gold jewellery.

on record and gone through the orders of the authorities below. A

search u/s 132 of the Act was carried out in the group cases of the

assessee on 3.2.2009. During the course of search, gold jewellery

weighing 2864 gms. was found and out of which the assessee had

admitted the value of gold jewellery weighing 1210 gms. as undisclosed

income for the assessment year 2009-10. Similarly, in the case of the

gold jewellery relating to the children weighing 354 gms, source could

not be explained by the assessee. Thereafter the assessee did not offer

the same as income in returns filed subsequent to the search. Therefore

the assessing officer made the addition of ` 17,58,720/- in respect of

unexplained investment in gold and jewelry and further sum of Rs.

7,88,919/- in respect of silver articles. During the appeal hearing, the

Ld. A.R. of the assessee argued that the assessee had admitted

additional income of ` 20 lakhs in M/s. Balaji Builders and ` 20 lakhs in

M/s. Balaji Constructions for the assessment year 2009-10. Both the

business concerns are family concerns and there is no dispute. No

ITA No.388/Vizag/2014 Grandhi V.V.S.L.N. Subba Rao, Secunderabad other unaccounted asset was found during the course of search

indicating the investments made by the assessee out of undisclosed

income. Both the firms are run by the family members of the assessee.

Both the commissioner of income tax(A) and the AO did not accept the

assessee’s contention that the gold jewellery was acquired in the earlier

years and the same is assessed in the year under consideration. During

the appeal hearing, the Ld. D.R. did not bring any material to show that

the undisclosed income admitted by the assessee was used in the

business of the firms. Therefore, automatic inference is unexplained

investment is made out of unaccounted income and required to be

allowed as telescopic benefit from the undisclosed income admitted by

the assessee. Accordingly, we direct the A.O. to allow the telescopic

benefit of the gold and jewellery and silver articles from the undisclosed

income admitted by the assessee. Accordingly, the appeal of the

assessee is allowed.

Sd/- Sd/- (वी. दुगा�राव) ( ड.एस. सु�दर "संह) (V. DURGA RAO) (D.S. SUNDER SINGH) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER #वशाखापटणम /Visakhapatnam: 'दनांक /Dated : 10.01.2018 VG/SPS 7

ITA No.388/Vizag/2014 Grandhi V.V.S.L.N. Subba Rao, Secunderabad

आदेश क� ��त)ल#प अ*े#षत/Copy of the order forwarded to:-