2020 (1) TMI 1134 - AT - Income Tax

Unexplained jewellery found during the course of search carried out u/s 132 - HELD THAT - Assessee has placed evidence on record to explain the source of jewellery found during the course of search in the form of affidavits given by her relatives having sufficient means, we direct the revenue authorities to delete the addition for unexplained jewellery. However our this view should not taken as a precedence as the same depends on the material facts of a particular case. Ground No.1of the assessee is allowed.

Summary

Issues Involved:
1. Addition of ?6,51,090/- upheld by Ld. CIT(A) out of total addition of ?9,51,090/- on account of jewellery found during search.

Issue-wise Detailed Analysis:

1. Addition of ?6,51,090/- on Account of Jewellery Found During Search:

The appeal pertains to the assessment year 2010-11, following a search conducted under section 132 at the assessee's residence on 23.07.2009. The search led to the discovery of jewellery valued at ?9,51,090/- (550 grams), which the Assessing Officer (AO) treated as unexplained investment under section 69 of the Income Tax Act, 1961. The assessee contended that the jewellery was received as gifts from her maternal relatives over the years, supported by affidavits from her aunts and maternal grandmother. However, the AO did not accept these affidavits, leading to the addition of the jewellery's value to the assessee's income.

Upon appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] provided partial relief by considering 250 grams of the jewellery as normal for an unmarried girl in an Indian family, based on CBDT Instruction No. 1916. Consequently, CIT(A) reduced the addition by ?3,00,000/- but upheld the remaining ?6,51,090/-.

The Tribunal examined the affidavits and other evidence provided by the assessee, including the status of the family and Indian customs of gifting jewellery. The Tribunal noted that the affidavits were not discredited by cross-examination and that the assessee's explanation was consistent with cultural practices and the family's status.

The Tribunal referred to judicial precedents, including the Delhi High Court's judgment in *Ashok Chaddha vs. ITO* and the ITAT Delhi Bench's decision in *Vibhu Aggarwal vs. DCIT*, which emphasized that jewellery received over time through customary practices should not be treated as unexplained merely due to lack of documentary evidence.

In light of these precedents and the affidavits provided by the assessee, the Tribunal concluded that the addition of ?6,51,090/- for unexplained jewellery was unwarranted. The Tribunal directed the revenue authorities to delete this addition, allowing the appeal in favor of the assessee.

Conclusion:

The Tribunal's decision underscores the importance of considering cultural practices and family status in cases involving jewellery found during searches. The Tribunal's reliance on affidavits and judicial precedents highlights the necessity for revenue authorities to adopt a reasonable and lenient approach in such matters. The appeal was allowed, and the addition of ?6,51,090/- was deleted.