2018 (4) TMI 125 - AT - Income Tax

Unexplained jewelry found in search - Held that - CIT (A) has taken note of the societal pattern in India and also that the jewellery was claimed to be belonging to other family members of the assessee who are also Income Tax Assessees. Therefore, he has rightly held that the entire jewellery found during the course of search cannot be considered as explainable by the assessee alone and also that the assessee had resources over the past years to explain the sources for investment in jewellery as not explained; and to be belonging to the family members. We find that the CIT (A) has appreciated the factual aspect of the issue at length and the learned DR has not been able to rebut these findings. No reason to interfere with the order of the CIT (A). - Decided against revenue

Issues Involved:

1. Legitimacy of the addition of ?1,05,00,000 as unexplained investment in gold and diamond jewellery.
2. Evaluation of evidence provided by the assessee regarding the ownership and source of the jewellery.
3. Consideration of societal norms and family traditions in the context of jewellery ownership.

Issue-Wise Detailed Analysis:

1. Legitimacy of the Addition of ?1,05,00,000 as Unexplained Investment:

The Revenue appealed against the order of the CIT (A), which had granted relief to the assessee by deleting the addition of ?1,05,00,000 made by the AO as unexplained investment in jewellery. The AO had observed that during a search at the assessee's premises, gold jewellery weighing 3730.200 grams and silver articles weighing 38.250 kgs were found, valued at ?1,29,84,804 and ?13,38,750 respectively. The AO considered ?1,05,00,000 worth of jewellery as unexplained investment, rejecting the assessee's explanation that the jewellery belonged to his family members.

2. Evaluation of Evidence Provided by the Assessee:

The assessee contended that the jewellery belonged to his wife, mother, and daughter, and produced a receipt from Krishna Das & Co. for the purchase of gold worth ?2 lakhs. He also provided photographs from family occasions to substantiate his claim. However, the AO rejected these explanations, stating that neither the assessee nor his family members had filed wealth tax returns to evidence the possession of such jewellery. The AO also dismissed the declaration by the assessee's father-in-law regarding the distribution of jewellery as a self-serving document and did not accept the photocopy of the bill from Krishna Das & Co. as valid evidence.

3. Consideration of Societal Norms and Family Traditions:

The CIT (A) considered the societal context in India, where it is customary for families to possess significant amounts of jewellery, especially gifted during weddings and other family functions. The CIT (A) noted that the jewellery found was claimed to belong to the assessee's wife, daughter, and mother, and that the assessee had consistently denied any liability to be taxed on this jewellery. The CIT (A) found that the AO had not addressed the claim that the jewellery belonged to other family members and had not provided any evidence to refute this claim.

The CIT (A) further observed that the jewellery found was distributed among the assessee's wife, daughter, and mother, and that the assessee had consistently maintained this position. The CIT (A) also noted that the assessee's wife and daughter were independent assessees under the Income Tax Act and that the jewellery's ownership should be considered in their hands, not the assessee's. The CIT (A) concluded that the AO had misdirected himself by seeking an explanation for the sources from the assessee for assets claimed to belong to other persons.

Conclusion:

The CIT (A) directed the AO to delete the addition of ?1,05,00,000, considering the societal norms, the consistent explanation provided by the assessee, and the lack of evidence to refute the claim that the jewellery belonged to other family members. The Tribunal upheld the CIT (A)'s order, noting that the Revenue had not been able to rebut the findings with any contrary material. Thus, the Revenue's appeal was dismissed.

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