The Bangalore Bench of Income Tax Appellate Tribunal (ITAT) dismissed the addition under section 69A of the Income Tax Act,1961, which was based on an excel sheet relating to alleged unaccounted cash sales from the Nirav Modi Jewelry Store.
Rekha Ganesh,the appellant-assessee,earned income from ‘house property’ and ‘other sources’ and was a partner in two firms. A search under section 132 of the Act on January 14, 2017, related to the Nirav Modi Group, led to a survey at the Nirav Modi Jewelry Store in Mumbai.
An excel sheet detailing sales was found, revealing unaccounted cash sales of Rs. 28.20 crores from April to November 2016. The sheet listed the appellant-assessee as having made cash purchases totaling Rs. 5.73 crores and an additional Rs. 28 lakhs via cheque/RTGS between April 23, 2014, and November 23, 2014.
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When summoned under section 131, she denied the cash purchases but confirmed the Rs. 28 lakhs transaction through banking channels.
The Assessing officer(AO) reopened the assessment under section 147 read with section 148 of the Act on May 23, 2018, based on information from DDIT (Inv.) Mumbai. The appellant-assessee objected on February 18, 2019, but the AO overruled this objection in March and May 2019.
The AO relied on an excel sheet found on an employee’s laptop, which listed the appellant-assessee as a purchaser of jewelry and included details of accounted and unaccounted sales. The appellant-assessee had made jewelry purchases of Rs. 28 lakhs in the assessment year and Rs. 30,36,000 in the following year, indicating regular patronage.
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The appellant-assessee did not cross-examine the employee despite the opportunity. A statement from Smt. Reshma Varma confirmed unaccounted cash sales. As a result, the AO treated the purchases of Rs. 5.73 crores as unexplained income under section 69A of the Act and added it to the total income.The assessee filed an appeal before the Commissioner of Income Tax(Appeals)[CIT(A)].
The assessee contended before the CIT(A) that the reopening of proceedings under section 147 was based solely on an excel sheet and statements from employees of the Nirav Modi Jewelry Store, without any seized materials. The AO acknowledged this in a letter dated May 7, 2019, and the assessee argued that the reopening was invalid due to reliance on borrowed satisfaction.
The assessee also noted the lack of cross-examination opportunities, despite requests. A previous search under section 132 on June 27, 2016, found no discrepancies in jewelry declared by her family.
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On the merits, the assessee claimed to have purchased only Rs. 28 lakhs worth of jewelry through banking channels. However, the CIT(A) found evidence linking the assessee to cash purchases of Rs. 5.73 crores, which were not recorded in her balance sheet. The CIT(A) ruled that the addition was based on the recovered excel data and stated that the opportunity for cross-examination was not mandatory. The assessee appealed before the tribunal.
The tribunal upheld the reopening of proceedings under section 147, finding that the AO had verified the investigation wing’s information against the assessee’s balance sheet, confirming the absence of unaccounted jewelry purchases.
The bench rejected the argument for initiating proceedings under section 153C, as the excel sheet came from a survey, not a search. It concluded that the reopening was valid, citing rulings from the Gujarat and Madras High Courts.
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The tribunal addressed the merits of the case involving an excel sheet listing the assessee’s name against alleged cash sales of Rs.5.73 crores from the Nirav Modi Jewelry Store. The tribunal questioned the reliability of this third-party document as the basis for income additions, emphasizing the lack of independent evidence of unaccounted cash purchases.
Citing the Supreme Court’s ruling in CBI vs. VC Shukla, the tribunal highlighted the absence of corroborative evidence linking the assessee to unaccounted jewelry investments. A prior search at the assessee’s family residence revealed no incriminating evidence, undermining the revenue’s reliance on the excel sheet.
The two member bench comprising Soundararajan K(Judicial Member) Waseem Ahmed (Accountant Member) ruled that the excel sheet listing the assessee’s name against alleged cash sales of Rs.5.73 crores from the Nirav Modi Jewelry Store was not applicable to the disputed period.
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Consequently, it determined that no addition under section 69A was warranted, set aside the CIT(A)’s findings, and directed the AO to delete the addition, resulting in a partly allowed appeal for the assessee.
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