2023 (2) TMI 172 - AT - Income Tax

Addition u/s 69 - unexplained jewellery - declaration by the assessee s husband in the statement recorded at the time of search of offering a sum as undisclosed income on account of investment in jewellery, there was no declaration in the return of income filed in response to the notice issued under section 153C - HELD THAT - The standard of proof required cannot be equal to proof on preponderance of probability as is required in judicial proceedings. Search was conducted in the case of the assessee s husband. In the statement recorded u/s 132(4) of the Act, the husband of the assessee admitted that the jewellery belonged to him and the assessee and some of the jewellery was received by the assessee during her marriage and the rest was purchased over a period of several years. The admission of the assessee s husband in a statement u/s 132(4) of declaring undisclosed income cannot bind the assessee. Therefore, the case has to be decided on the basis that there was no admission of undisclosed income whatsoever. The evidence with regard to bills in respect of gold and diamond jewellery as on 03.08.2009 of a value of Rs.11,88,206/- was also filed by the assessee. It is also seen that the assessee has given details of the income declared by her over a period of 16 years and the income declared is to the tune of Rs.4.78 Crores. Considering the status of the family and other surrounding circumstances including the statement of evidence given by the assessee, the possession of jewellery worth Rs.28.54 lakhs have to be accepted. Admittedly, the jewellery was purchased in the year 2009 and this evidence has been completely ignored by the Revenue authorities. All the facts cumulatively considered, proves the credit worthiness of the assessee to buy the jewellery out of the taxed incomes. Hence, even by the process of telescoping the income with the source of acquiring jewellery, the explanation of the assessee needs to be accepted. The impugned addition made by the Revenue authorities cannot be sustained. Accordingly, the same is directed to be deleted. - Decided in favour of assessee.

Summary

Issues:
Assessment of undisclosed income from jewellery found during search operation under section 132(1) of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Declaration of Undisclosed Income
The assessee's husband admitted to undisclosed income related to jewellery found during a search operation. The assessee claimed that the jewellery belonged to multiple family members and was within the permissible limits as per CBDT Circular No. 1916. However, the AO treated the undisclosed jewellery as unexplained investment under section 69 of the Act, leading to a tax liability at 60%. The CIT(A) upheld this decision, emphasizing the lack of evidence supporting the source of acquisition of the jewellery.

Issue 2: Burden of Proof and Explanation
The burden of proof under section 69 lies on the assessee to provide a satisfactory explanation for the investment in jewellery. The Tribunal noted that the husband's admission of undisclosed income does not bind the assessee. The assessee presented bills for the jewellery purchased in 2009 and declared substantial income over the years. The Tribunal considered the family's creditworthiness and the evidence provided, concluding that the undisclosed jewellery should be accepted based on the source of income.

Issue 3: Application of CBDT Circular and Valuation
The assessee relied on CBDT Circular No. 1916 to support the permissible limits of jewellery holdings for family members. The Tribunal highlighted that the circular's application is limited to seizure during search and cannot be extended to explaining the source of jewellery. Valuation discrepancies were noted, with the jewellery purchased over several years not being considered in the assessment.

Conclusion
The Tribunal allowed the assessee's appeal, concluding that the addition of undisclosed income from jewellery was not sustainable. Considering the evidence presented, the Tribunal directed the deletion of the impugned addition made by the Revenue authorities. The Tribunal emphasized the creditworthiness of the assessee and the source of income as sufficient explanation for the jewellery holdings, leading to the favorable decision for the assessee.