2007 (8) TMI 37 - HC - Income Tax

Unexplained investments - Income tax officer made an addition as unexplained investment in jewellery by assessee - Held that addition was justified after not finding any substantive evidence

Summary

Issues:
1. Interpretation of will regarding inheritance of jewellery.
2. Tax leviable under Section 69A of the Income Tax Act for jewellery assessed under Wealth-tax Act.

Issue 1: Interpretation of will regarding inheritance of jewellery
The case involved a search action in 1983 where jewellery was found at the assessee's premises. The Income Tax Officer rejected the explanation that the jewellery was inherited, adding it as unexplained investments. The assessee's appeals were dismissed, leading to the Tribunal's decision. The assessee argued the jewellery was inherited from her father in 1928, supported by wealth tax returns. The Tribunal found the will exhaustive and lacking mention of the jewellery, thus denying inheritance claims. The Court upheld this, noting discrepancies in the timeline of jewellery transfer, leading to a dismissal of the assessee's claims.

Issue 2: Tax leviable under Section 69A for jewellery assessed under Wealth-tax Act
The assessee contended that the jewellery, though belatedly disclosed in wealth tax returns, should not be considered unexplained investments. The Court disagreed, stating non-disclosure in income and wealth tax proceedings until the search in 1983 was crucial. The Court also dismissed reliance on a circular regarding jewellery possession, emphasizing the need for proper investigation. The Court found no fault in the Tribunal's decision, affirming that the jewellery constituted unexplained investments, ruling in favor of the revenue and against the assessee.

In conclusion, the Court upheld the Tribunal's decision, dismissing the assessee's claims regarding the inheritance of jewellery and affirming the tax levied under Section 69A. The reference was disposed of with no costs awarded.