The Kolkata bench of Income Tax Appellate Tribunal, in its recent order said that Investment in Jewellery cannot be treated as Unexplained when it is reflected in the books & the source of Fund is evidenced through Bank A/c.
In instant case these are the appeals filed by two assessees against two orders of C.I.T (A)-10, Kolkata relating to A.Y.2010-11.
The two assessees purchased jewellery from Minal Gems, Mumbai and as far as Smt. Kusum Bhura is concerned she had paid Minal Gems through a cheque which was duly encashed by Minal Gems.
The same assessee also filed Copy of the bank statement evidencing encashment of cheque and invoice of Minal Gems. The assessee in the course of assessment proceedings also filed confirmation from Minal Gems that they have sold polished diamond to the assessee. In the case of Shrenik Bhura, second assessee similar invoice and bank statement evidencing payment to Minal Gems was also placed on record by the assessee.
During the Proceeding the AO’s of both the assessee received the information that there was a search and seizure operation conducted in the case of Bhawarlal Jain Group, was providing bogus/accommodation entries to several persons and entities and Minal Gems is one among them. Since the assessee claimed to have made purchases from Minal Gems, the assessments in the case of both the assessees were reopened u/s 147 of the Income Tax Act, 1961 (Act.).
During the assessment proceedings, the AO after making reference to all the evidences came to the conclusion that the purchases in question were not genuine and made an addition in the case of Smt. Kusum Bhura considered as unexplained investment u/s 69 of the Act and deemed to be the income of the assessee for the financial year 2009-10.
But in the case of Shrenik Bhura the AO made an addition based on the purchase of diamonds shown as investment in the Balance Sheet is considered as being made from unexplained source and deemed to be the income of the assessee for the financial year 2009-10.
On appeal by the assessees the CIT (A) confirmed the action of AO; the assessees raised the appeal before the tribunal.
While hearing both the petitioners contention the bench had an opinion that investments of jewellery is duly reflected in the books of accounts of the assessees. Therefore there is no scope of applying the provision of Section 69 of the Income Tax Act.
The bench also added that apart from the above Source of funds is evidenced by the payments from disclosed bank accounts. Therefore the source of investments is also properly and satisfactorily explained by the assessees and based on this fact the bench had a view that additions made by the AO and confirmed by CIT (A) cannot be sustained.
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