BINA SANGHAVI,MUMBAI vs. DCIT CEN CIR 5(2), MUMBAI

The assessee is aggrieved by the decision of the learned CIT(A) in confirming the addition relating to unexplained cash and jewellery made by the AO. The assessee has also raised an additional ground challenging the validity of reopening of assessment.

The facts relating to the case are stated in brief. The assessee was subjected to search and seizure operation on 23.12.2010 along with M/s. Satra Properties (I) Ltd. The assessee filed return of income in response to notice under Section 153A of the Income Tax Act (hereinafter “the Act”) declaring total income of `3,86,590/-. The AO accepted the same and passed assessment order under Section 143(3) r.w.s. 153A of the Act. Subsequently the AO noticed that the search operations has revealed availability of bank locker where jewellery worth `31.40 lakhs was found, out of which jewellery worth `10.56 lakhs was found to be undisclosed. Further, during the course of search operation cash of `2,33,430/- was also Smt. Bina Sanghavi found. Both these items were omitted to be assessed in the hands of the assessee. Hence the AO reopened the assessment of AY 2010-11 by issuing notice under Section 148 of the Act and assessed the unexplained cash of Rs.2.33 lakhs and jewellery of Rs.10.56 lakhs, both aggregating to `12.89 lakhs as income of the assessee in A.Y. 2010-11. Before the CIT(A) the assessee challenged the assessment order but could not get relief.

Before the Tribunal the assessee challenged the validity of reopening of assessment by contending that the reopening has been done without having any material evidence on record.

We have heard the parties on this legal issue and perused the record. We noticed that the search operation has been taken place in the hands of the assessee on 23.10.2010 and during the course of search unexplained cash of `2.3 lakhs and unexplained jewellery worth `10.56 lakhs were found. As per provisions of Section 69 addition, if any, relating to the above said assets can be made by the AO in the year in which these assets were found. Since the search has taken place on 23.10.2010, these assets are assessable as income of the assessee in A.Y. 2011-12. However, we notice that the AO has assessed the above said assets in A.Y. 2010-11 treating them as unexplained. Hence there is merit in the contentions of the assessee that the AO has reopened the assessment for A.Y. 2010-11 without having any material evidence with him. Hence we are of the view that reopening of assessment is liable to be quashed for the reasons stated above. Accordingly we quash the orders passed by the tax authorities on the legal grounds discussed above.

Since we have quashed the assessment, there is no necessity to adjudicate the grounds urged on merits.