KOLAPARTHY SUVARNA LAKSHMI,NELLORE vs. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, NELLORE

O R D E R PER LALIET KUMAR, J.M.

This appeal is filed by the assessee, feeling aggrieved by the order passed by the Commissioner of Income Tax (Appeals) – 12, dated 31.07.2023 invoking proceedings under section 143(3) r.w.s. 153C of the Income Tax Act, 1961 (in short, “the Act”) for the A.Y 2018-19 on the following grounds :

2. The grounds raised by the assessee reads as under :

“1. The learned CIT (Appeals) is erred in facts and law while passing the order.

3. The Leaned CIT (A) ought to have considered that the excess gold found during the search operations need to be taxed during the year of search only i.e., Asst.Year 2019-20 but not in the Asst.Year 2018-19 and thereby would have annulled the assessment made for AY 2018-19 as void- ab- intio.

2.1. The appeal filed by the assessee is barred by limitation by 64 days. She has moved a condonation application explaining reasons thereof. We have heard both the parties on this preliminary issue. Having regard to the reasons given in the petition, we allow the application for condonation of delay Accordingly, the delay is condoned and the appeal of the assessee is admitted for hearing.

“6. Decision: I have gone through the grounds of appeal, statement of facts, assessment order and the submissions of the appellant. The issue involved in the present appeal is, whether the unaccounted gold jewellery found during search action valued of Rs.28,55,377/- should be taxed u/ s 115BBE of the Act in the Assessment Year 2018-19 or should be taxed in the AY 2019-20. A search and seizure operation was conducted in the case of firm M/S. Sri Raja Rajeswari Rice Industries & its Managing Partner Sri Kolaparthy Venkata Ramesh Kumar (husband of the appellant) on 12.06.2018 and gold jewellery with net weight of 2807.97 gms valuing of Rs.81,43,113/- was foun at the residential premises of the appellant. Out of the said jewelry, gold weighing 2000 gms was already declared by Sri Kolaparthy Venkata Ramesh Kumar in his Wealth Tax Return and the balance 807.97 gms valuing of Rs.28,55,377/- was stated to be belonging to his wife Smt. Kolaparthy Suvarna Lakshmi i.e. the appellant and the same was confirmed in the Sworn statement u/ s 132(4) of the Act dated 24.09.2018. The relevant portion of the said statement is reproduced as under: "Yes, I confirm and agree that gold for a value ofRs.28,55,377/- was found in excess the wealth shown in my wealth tax return. These ornaments were purchased over period of time from my marnage and same were purchased exchange of old ornaments. As I am unable to produce the bills/ vouchers, I offer the same as income in the hands of my wife Smt. K. Suvarna Lakshmi for the Financial Year 2017-18 apart from her regular income of Rs. 14,98,552/-. " In pursuance to the sworn statement u/s 132(4), the appellant filled return of Income u/s 139 of the Act on 22.12.2018 declaring total income of Rs.47,91,890/- (including an amount of Rs.28,55,377/- on account of unaccounted jewellery found during the course of search action) and paid taxes as applicable . Subsequently, the case of the appellant was selected for scrutiny u/ s 153C of the Act. Thereafter, notices u/ s 153C and 142(1) of the Act were issued to the appellant and in response, the appellant had filed return of income in response to notice u/ s 153C of the Act on 13.06.2019 admitting the total income of Rs.47,91,890/- and submitted the required information in response to notice u/ s 142(1) of the Act before the AO time to time.

During the course of assessment proceedings, the Assessing Officer has observed that during the course of search action, the husband of the appellant Sri Kolaparthy Venkata Ramesh Kumar has voluntarily offered the amount of Rs.43,53,929/- out of which Rs. 14,98,552/- being the regular profits for the current A.Y. and the balance of Rs.28,55,377/- being the jewellery found in excess of wealth shown in the wealth tax return. Accordingly, the Assessing Officer treated the excess jewellery worth Rs.28,55,377/- as unexplained jewellery u/ s 69A of the Act and taxed the same as per the provisions of section 115BBE of the Act in the current year under consideration. During the course of appeal proceedings, the AR of the appellant has submitted that since the search action was conducted on 12.06.2018 i.e. during F.Y. 2018-19 and thus, the F.Y. in which the gold jewellery was found should be considered as F.Y. 2018-19 relevant to the A.Y. 2019-20 and consequently, the value of gold of Rs.28,55,377 /- should have been considered as deemed income of the appellant in the A.Y. 2019-20 and not in the current A.Y. 2018-19. The AR has requested to delete the addition in the current year. I have considered the submissions of the appellant and the order of the Assessing Officer. It is seen that during the course of search & seizure operation conducted in the case of the husband of the appellant, the unaccounted gold jewellery worth Rs.28,55,377/- was found at his residential premises. Being the owner of the gold jewellery, the husband of the appellant Sri Kolaparthy Venkata Ramesh Kumar has admitted to have acquired the said jewellery in the F.Y. 2017-18 relevant to the A.Y. 2018-19 in his statement recorded u/s 132(4) of the Act dated 24.09.2018. Based on the sworn statement u/ s 132(4) of the Act and on the fact that undisclosed income was reflected in the return of income filed for the AY 2018-19, the Assessing Officer treated the unexplained jewellery in the A.Y 2018-19 relevant to F.Y 2017-18 based on the admission of the husband of the appellant only that the said jewellery belongs to the F.Y. 2017-18. The plea of the appellant during appeal proceedings that the unaccounted gold jewellery found during search should be considered as unexplained for the search year i.e. A.Y. 2019-20 and not the current A.Y. 2018-19 in which the declaration was made by the appellant, is not acceptable on the following grounds: i). The appellant's husband on his own admission in the statement recorded u/s 132(4) had declared that the unexplained jewellery was acquired in the F.Y. 2017-18 relevant to the A.Y. 2018-19. There is no retraction from the statement recorded u/ s 132(4) of the Act dated 24.09.2018 either by the husband of the appellant or the appellant. Therefore, now the claim of the appellant that the unaccounted jewellery should be taxed in the search year and not the current year is without any basis. The appellant had filed return for A.Y. 2018-19 after the search (ii) action (before issue of notice u/ s 153C) and offered the undisclosed investment in the gold jewellery and paid taxes. Therefore, the return filed by the appellant disclosing the unaccounted investment as per statement recorded u/ s 132(4) and payment of taxes cannot be faulted now. (iii) The appellant herself claimed that the said unaccounted jewellery belonged to the F.Y. 2017-18, and her plea during appeal proceedings that she was ignorant about the exact Assessment Year is not acceptable, as she had reiterated the unaccounted jewellery in the return filed before the assessment proceedings on 22.12.2018 and also in response to notice u/ s 153C, for the A.Y.2018-19 on 13.06.2019 i.e. after one year from the search action conducted on 12.06.2018. (iv) The amount of Rs.28,55,377/- was treated as unexplained jewellery u/ s 69A of the Act by the Assessing Officer and taxed the same as per the provisions of section 115BBE of the Act. The relevant section 69A of the Act is reproduced as under: Unexplained money, etc. "69A. VVhere in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Income-tax Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assesseefor such financial year. "

As per the provisions under section 69A of the Act, where any assessee is found to be the owner of any money, bullion, jewelry or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of accounts and sources of acquisition of money, bullion, jewellery or other valuable article are not properly explained or the explanation is not satisfactory, then such money, bullion, jewellery or other valuable article is deemed to be the income of the assessee. Applying it to the facts of the present case, the unaccounted jewellery of Rs.28,55,377 /- was found at the residential premises of the appellant and the husband of the appellant has admitted in the sworn statement recorded u/ s 132(4) of the Act dated 24.09.2018 that the said jewellery belongs to the appellant. The said jewellery was not recorded in the books of the appellant and sources for such jewellery were not properly explained by the appellant as discussed in the above paragraphs, therefore, the unaccounted jewellery of Rs.28,55,377/- was rightly treated as unexplained money u/ s 69A of the Act by the AO and taxed as per the provisions of section 115BBE of the Act. In view of the above, the taxation of unexplained jewellery of Rs.28,55,377/- found during search action as per the provisions of the section 115BBE of the Act in the current A.Y. is held correct and accordingly, the grounds no.2, 5 and related part of ground no.4 of the appeal are dismissed. In ground no.3 and part of ground no.4, the appellant contended that the cash seized at the time of search was not considered towards payment of self assessment tax for the A.Y. 2018-19 and consequently interest was calculated at higher amount. In exercise of powers given under section 251(1)(c) of Income Tax Act, 1961, the Assessing Officer is directed to verify the said claim of the appellant and act as per the provisions prescribed under section 132B of the Income Tax Act. The appellant shall file necessary details before the AO, if required. No adverse view shall be taken against the appellant without providing an opportunity of hearing. The grounds no.3 and related part of the ground no.4 of the appeal are taken as disposed off accordingly. Grounds no. 1 is general in nature and needs no separate adjudication. To sum up, the appeal is dismissed.”

Q.8 On verification of bills / vouchers it has noticed that the particulars of the parties have not properly mentioned? Please offer your explanation for the same? Ans. Yes, I accept the discrepancy that the details were not completely mentioned on some vouchers. In this connection, I submit that, in this line of business we dealt with people who are generally from village back ground and they did not produce complete details and we receive paddy from distant villages. In this process we missed to write the complete details. However, accepting the discrepancy, I offer an amount of Rs.8,50,000/- for assessment year 2016-17, Rs.11,50,000/- for the Assessment Year 2017- 18 as additional incomes in the respective asst. years and file revised returns and I will offer Rs.28,50,500/- at higher side towards regular income for the assessment year 2018-19 in the firm Sri Raja Rajeswari Rice Industry and pay respective taxes.

Q.11 Do you want to say anything ? Ans: I once again confirm on behalf of on my wife and as a managing partner of the firm Sri Rajarajeswari Rice Industry, Nellore, the following amount we will declare as income in the respective status for the assessment year mentioned against and further submit that we abide to my statement will not claim any deductions or any expenditure from the following declared incomes and will pay taxes as per the Income Tax Act, 1961. Sri Rajarajswari Rice Industry : Assessment Year 2016-17 : Rs.8,50,000/- Assessment year 2017-18 : Rs.10,50,000/- Assessment year 2018-19 : Rs.1,14,95,571/-. Sri K. Venkata Ramesh Kumar : Assessment year 2018-19 : Rs.75,50,500/-. Smt. K. Suwarna Lakshmi : Assessment year 2018-19 : Rs.43,53,929/-.”

“26. Section 69 and Section 69A, apart from being close neighbours, do bear resemblance with one another. Section 69 deals with unexplained investment. Section 69A deals with unexplained money, bullion, jewellery or other valuable articles. Section 69A was inserted by Amending Act 5 of 1964 and it came into effect w.e.f. 1-4-1964. Both sections require that the subject matter of the provisions, viz., investments in the case of section 69 and money, bullion, jewellery or other valuable articles in the case of section 69A are not recorded in the Books of Account. That is, in a case where Books of Accounts are maintained. In the case of investments under section 69, necessarily, the Law-Giver contemplates the Assessing Officer finding that the assessee had made the investments. In the case of section 69A, the assessee must be found to be the owner of the money, bullion, jewellery or other valuable articles. In both cases, if the assessee is able to offer an explanation for the nature and the source for the investments and money, bullion, jewellery or other valuable articles, respectively, and it is not found unsatisfactory, there can be no deemed income under either section.

underlying Section 110 of the Evidence Act, 1872, would assist the Revenue to conclude that a person, in possession, could be treated as the owner. This Court held, inter alia, as follows: "6. … In other words, it follows from well settled principle of law that normally, unless contrary is established, title always follows possession. In the facts of this case, indubitably, possession of the wrist-watches was found with the petitioner. The petitioner did not adduce any evidence, far less discharged the onus of proving that the wrist-watches in question did not belong to the petitioner. Hence, the High Court held, and in our opinion rightly, that the value of the wrist-watches is the income of the assessee."

11.1 In our view, the issue before the ld.CIT(A) / Assessing Officer is not whether the addition on account of excess gold found during the course of search is to be made or not. The issue before the lower authorities is with respect to the applicability of the special rates as per the provisions of Section 115BBE of the Act. Once the addition of Rs.28,55,377/- was accepted by the assessee while filing the return of income towards the excess gold found during the course of search, the necessary sequel to that is whether the said income would fall within the realm of Section 69A of the Act or not. It is the case of the assessee that the said gold was found during the year under consideration and therefore, only he had declared the income in the year under consideration. Once we found that the income was shown by the assessee, in the return, on the account of gold found during the course of search, for the year under consideration, then the argument of the assessee that the addition cannot be made on the basis of search is required to be rejected being devoid of any merit. For the above said proposition, we may rely upon the decision of Hon'ble Supreme Court in the case of CIT Vs. Shelly Products reported in 261 ITR 367 and also the decision of this Tribunal in the case of Nagarjuna Construction Company Limited Vs. DCIT (ITA Nos.73 to 75/Hyd/2017) wherein it was held that the income of the assessee cannot be computed below the returned income. In view of the above, the amount of Rs.28,55,377/- had been correctly assessed by the lower authorities. Having held that the income declared by the assessee in the return of income cannot be reduced below the income declared by the assessee in the return of income, now the question is whether the assessee is liable for the application of said provision as mentioned under section 115BBE of the Act. It is clear from the income tax return filed by the assessee that the said income was only declared by the assessee on account of search carried out from the premises of assessee and for that purposes, the Assessing Officer has rightly invoked provision of section 69A of the Act as it was found during the course of search and it was to so accepted by the assessee by filing the return of income. Therefore, in our view, the special provision was rightly applied by the Assessing Officer and the ld.CIT(A). Further, the decision relied upon by the assessee in the case of D.N. Singh was not applicable as the facts were different in the said case. Moreover in the present case, the assessee herself had admitted the addition in return of income. In the light of the above, we do not find any merit in the appeal of the assessee and accordingly, the appeal of the assessee is dismissed.

Order pronounced in the Open Court on 22nd March, 2024.