The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that the purchases reflected in the books of accounts cannot be treated as unexplained investments.
The assessee is an individual deriving income by way of salary, capital gains, and income from other sources. The Investigation Wing of the Income Tax Department found out that certain concerns floated by the Rajendra Jain Group are providing accommodation entries in the form of purchases of diamonds and jewellery.
The Assessing Officer (AO) reopened the assessment by issuing notice under Section 147 of the Income Tax Act, 1961. He treated the above said purchases as unexplained investments and assessed the same under Section 69 of the Income Tax Act. The Commissioner of Income Tax (Appeal) [CIT(A)] also confirmed the same.
The Authorized Representative submitted that the assessee had purchased jewellery from M/s. Kriya Impex Pvt. Ltd. and M/s. Arihant Exports by making payments through banking channels. It was further, submitted that these investments have been duly reflected in the balance sheet under the head “Jewellery”.
The Departmental Representative on the contrary supported the order passed by the Commissioner of Income Tax (Appeal).
The Two-bench member comprising of B.R. Baskaran (Accountant member) and Narender Kumar Choudhry (Judicial member) held that there is no scope for treating the above said purchases as unexplained investment warranting addition of under Section 69 of the Income Tax Act.
Therefore, the order passed by the Commissioner of Income Tax (Appeal) was set aside and the Assessing Officer was directed to delete the disallowance under Section 69 of the Income Tax Act.
Thus, the appeal of the assessee was allowed.
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