2018 (3) TMI 1038 - AT - Income Tax

Unexplained jewellery addition - jewellery found from the joint lockers - Held that - AO has made the addition on account of purported unexplained jewellery claimed by the assessee without appreciating the fact that the jewellery found during the course of search and seizure operations was from the locker held by the father in law and husband of the assessee and hence the addition in the hands of the assessee is uncalled for. As was noted that jewellery found from the joint lockers was explained to be belonging to Late mother in law of the assessee Smt. Sarita Soni, however, the AO has rejected this contention. It is further noted that assessee s belongs to joint family and it is undisputed position that marriages of mother in law had taken place 53 years prior to the search and marriage of the assessee had taken place 20 years. As further note that the Hon ble High Court of Delhi in the case of Ashok Chadha vs. ITO 2010 (9) TMI 1174 - ITAT DELHI has accepted the jewellery of 906.60 grams in the case of married lady even without documentary evidence as the denying the explanation would tantamount to overlooking the realities of life - Decided in favour of assessee

Issues Involved:
1. Reasonable opportunity to substantiate claims.
2. Addition of ?10,65,312 on account of purported unexplained jewelry.
3. Deletion of additions confirmed by the CIT(A).
4. Dropping of penalty u/s 271(1)(c).

Issue-wise Detailed Analysis:

1. Reasonable Opportunity to Substantiate Claims:
The Assessee contended that the Learned Commissioner of Income Tax (Appeals) -2, New Delhi erred in confirming the additions made by the Assessing Officer (AO) without providing a reasonable opportunity to the appellant to submit and substantiate his claim on the additions. The Tribunal did not specifically address this procedural issue in its judgment, focusing instead on the substantive merits of the jewelry addition.

2. Addition of ?10,65,312 on Account of Purported Unexplained Jewelry:
The Assessee challenged the addition of ?10,65,312 made by the AO on the grounds that the jewelry found during the search and seizure operations belonged to her late mother-in-law and was held in joint lockers with her father-in-law and husband. The AO had rejected this explanation, relying on Section 132(4A) and Section 69 of the Income Tax Act, which presume that the items found during a search are owned by the person from whom they are found unless proven otherwise. The AO accepted 500 grams of jewelry as explained but treated the excess as unexplained and added it to the income.

During the hearing, the Assessee's counsel argued that the jewelry was part of "streedhan" and cited CBDT Instruction No. 1916, which provides guidelines for the seizure of jewelry during searches. The counsel also referenced the Delhi High Court's decision in Ashok Chadha vs. ITO, which accepted the explanation of jewelry as "streedhan" accumulated over years without documentary evidence.

3. Deletion of Additions Confirmed by the CIT(A):
The Tribunal found merit in the Assessee's argument, noting that the jewelry found was explained as belonging to the Assessee's late mother-in-law and was part of "streedhan." The Tribunal referred to the Delhi High Court's judgment in Ashok Chadha vs. ITO, which held that collecting jewelry over 25-30 years of married life is not abnormal and should be accepted as explained in the absence of substantial contrary evidence.

The Tribunal concluded that the AO's decision to treat only 500 grams as explained and the rest as unexplained was arbitrary and not based on any cogent evidence. Therefore, the Tribunal accepted the Assessee's explanation and deleted the addition of ?10,65,312.

4. Dropping of Penalty u/s 271(1)(c):
The Assessee also prayed for the penalty initiated under Section 271(1)(c) to be dropped. The Tribunal's decision to delete the addition of ?10,65,312 implicitly supports the dropping of the penalty, as the basis for the penalty (the purported unexplained jewelry) was found to be explained satisfactorily.

Conclusion:
The Tribunal allowed the Assessee's appeal, deleting the addition of ?10,65,312 on account of purported unexplained jewelry and implicitly supporting the dropping of the penalty under Section 271(1)(c). The Tribunal's decision was based on the acceptance of the Assessee's explanation and the application of relevant legal precedents, particularly the Delhi High Court's judgment in Ashok Chadha vs. ITO.

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