February 2010
Unexplained investment: S. 69 of I. T. Act, 1961: Assessee explained source of disputed jewellery and also offered 20% thereof to buy peace: AO rejected explanation and made full addition: Tribunal accepted the explanation but retained the offered 20%: No
By K. B. Bhujle | Advocate
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Reported:
48 Unexplained investment: S. 69 of I. T. Act, 1961:
Assessee explained source of disputed jewellery and also offered 20% thereof
to buy peace: AO rejected explanation and made full addition: Tribunal
accepted the explanation but retained the offered 20%: Not justified: No
addition can be sustained:
Sonia Magu Vs. CIT; 185 Taxman 402(Del):
In a search and seizure operation, certain jewellery was recovered from the assessee. The assessee explained the source of the said jewellery. Notwithstanding the
explanation, she also offered 20% of the disputed jewellery and was ready to
pay tax thereupon in order to buy peace and to avoid litigation. The Assessing
Officer did not accept the explanation and the offer and accordingly added the
full value of jewellery as undisclosed income. The Commissioner (Appeals)
accepted that the assessee had satisfactorily explained the source of
purchase/acquisition of the disputed jewellery. However, he gave only partial
relief to the assessee in view of the voluntary offer of the assessee whereby
20% of the disputed jewellery amount was offered to tax and retained the
addition of the 20% amount. The Tribunal upheld the decision of the
Commissioner (Appeals) on the ground that it was the amount offered by the
assessee herself.
On appeal filed by the assessee, the Delhi High Court
allowed the assessee’s claim and held as under:
“i) The assessee maintained her stand that she had been
accounting for the entire jewellery including the source thereof.
Notwithstanding the same, only with a desire to buy peace and to avoid
litigation, she had offered 20% of the excess jewellery. That offer was,
thus, conditional. She would have paid the tax on the aforesaid amount, had
the Assessing Officer accepted the offer, thereby giving a quietus to the
matter. Instead, the Assessing Officer ignored that offer and proceeded to
deal with the matter on merits and fastened the liability of much higher
amount upon the assessee. In those circumstances, the assessee was
constrained to take up the matter in detail. She maintained her stand that
she had proper explanation for the purchase of the aforesaid jewellery. Her
stand was vindicated inasmuch as the Commissioner (Appeals) accepted her
explanation in respect of the entire jewellery. Once the assessee was able
to duly explain the source of purchase of the entire disputed jewellery, the
Commissioner (Appeals) committed an error in falling back on the conditional
offer made by the assessee before the Assessing Officer along with the
return in Form 2B.
ii) From the language of the offer made, it was clear
that it was an offer without prejudice and was not in the nature of
‘admission on the basis of which she could be fastened with the liability
which otherwise did not exceed’. Provision of section 23 of the Indian
Evidence Act would clearly be applicable to such a case. That apart, it is
trite law that the principle of estoppel has no application in the Act.
iii) The matter can be looked into from another angle as
well. Once the assessee has given a satisfactory explanation regarding the
purchase/acquisition of the disputed jewellery, the necessary consequence
would be that there was no unexplained asset in the hands of the assessee.
In such a situation, it is neither proper nor legally permissible for the
revenue to still fasten the assessee with the liability of tax. It would be
a clear ground of illegal extraction of tax from the assessee. Therefore,
the addition as an unexplained investment in jewellery was to be deleted and
the appeals were to be allowed.”
