ADDITION OF THE VALUE OF UNEXPLAINED JEWELLERY IN THE LOCKER

[DR.MARIAPPAN GOVINDARAJAN]

Section 69A of the Income Tax Act, 1961 (‘Act’ for short) provides that where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.

The Department used to cause search the premises or some related places of the assessee, if they are having doubt about the tax evasion.  During such search they may seize cash, documents etc., and even gold jewellery.  If the jewellery is found more than the eligible quantum then it is the liability of the assessee to explain the departmental authorities to show evidence for source to acquire such gold jewels.  If the authorities are not satisfied with the explanation offered by the assessee, the value of the said jewellery may be added to the income of the assessee under Section 69A of the Act as unexplained jewellery.

In ASHOK CHADDHA VERSUS INCOME TAX OFFICER- 2011 (7) TMI 142 - DELHI HIGH COURT, a search was conducted in the premises of the appellant.  This search covers the residential premises of the appellant as also his locker no. 476 at Union Bank of India, Naraina.  During the search, apart from some cash and jewellery, loose papers/documents were also found seized.  An assessment order was framed by the Assessing officer assessing the income at Rs. 2,64,02,210 making several additions under Section 69 of the Act. The assessee approached the Commissioner of Income Tax (Appeals) by way of appeal against all the additions made by the Assessing Officer.   As far as addition qua jewellery is concerned, during the course of search, jewellery weighing 906.900 grams of the value amounting to Rs. 6,93,582/- was found. The appellant’s explanation was that he was married about 25 years back and the jewellery comprised ‘stree dhan’ of Jyoti Chadha, his wife and other small items jewellery subsequently purchased and accumulated over the years. However, the Assessing Officer did not accept the above explanation on the ground that documentary evidence regarding family status and their financial position was not furnished by the appellant. The Assessing Officer accepted 400 grams of jewellery as explained and treated jewellery amounting to 506.900 grams as unexplained and made an adhoc addition of Rs. 3,87,364 under Section 69A of the Act working on unexplained jewellery, by applying average rate of the total jewellery found.  The Commissioner of Income Tax (Appeals) confirmed this addition stating that the Assessing Officer had been fair in accepting the part of jewellery as unexplained. 

Both the assessee and the Department filed appeals before the Income Tax Appellate Tribunal (‘ITAT’ for short).  The ITAT endorsed the views of the Commissioner of Income Tax (Appeals).  Therefore, the case went to the High Court.  The High Court observed that the assessee was married for more than 25-30 years. The jewellery in question is not very substantial.    It is a normal custom for woman to receive jewellery in the form of ‘stree dhan’ or on other occasions such as birth of a child etc. Collecting jewellery of 906.900 grams by a woman in a married life of 25-30 years is not abnormal. Furthermore, there was no valid and/or proper yardstick adopted by the Assessing Officer to treat only 400 grams as “reasonable allowance” and treat the other as ‘unexplained’. Matter would have been different if the quantum and value of the jewellery found was substantial.  Therefore, the High Court was of the opinion that the findings of the Tribunal are totally perverse and far from the realities of life. The High Court allowed the appeal and deleted the sum of Rs.3,87,364/-.

In GEETA SUBHASH DALAL (L/ H. OF LATE SUBHASH B. DALAL) , BARODA VERSUS DEPUT Y COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, VADODARA - 2025 (2) TMI 920 - ITAT AHMEDABAD, the Departmental authorities conducted a search in the premises of Subash B. Dalal (expired and the case is represented by his wife).  During the search the authorities found a locker key of Karnataka Bank.  The same was seized and impounded.  On opening the said locker, the authorities found jewelleries.  The locker was operated by the wife of the assessee and her daughter jointly.    Geetha Dalal, in her statement, told that the gold jewellery belongs to her daughter Kanan Dalal, who was settled in UK.  In her statement Kanan Dalal deposed the entire jewellery belonged to her and her family members.  The Assessing Officer noted that there was no documentary evidence for the source of acquisition of the said jewelleries.  The locker was frequently operated by Geetha Dalal.  Therefore, the Assessing Officer came to a conclusion that the entire jewellery belonged to Geetha Dalal.  The Assessing Officer made an addition of unexplained jewellery amounting to Rs. 6,16,620/- as unexplained income of the assessee under Section 69A of the Act.

Geetha Dalal filed an appeal before the Commissioner of Income Tax (Appeals) against the order of the Assessing Officer.  The Commissioner of Income Tax (Appeals) observed that it is an undisputed fact that no documentary evidence, such as purchase bills or invoices, was furnished either during the assessment proceedings or in the appellate proceedings. As a result, the source of acquisition of the seized jewellery valued at Rs.6,16,620/- remains unexplained due to the absence of supporting documentary evidence.  Therefore, the action taken by the Assessing Officer to make an addition for the unexplained jewellery in the hands of the appellant is justified.  The Commissioner of Income Tax (Appeals) confirmed the addition and dismissed the appeal. 

Against this order the assessee filed the present appeal before the ITAT.  The appellant raised the following grounds before ITAT-

• The Commissioner of Income Tax (Appeals) has grossly erred in confirming the addition of Rs. 6,16,620/- under Section 69A of the Act, being unexplained jewellery without considering the merits of the case.
• The Commissioner of Income Tax (Appeals) has failed to appreciate the facts that while recording statement on oath, the appellant has categorically stated that the jewellery found from the locker, belongs to her daughter and in support of the same, the appellant has duly produced an affidavit of Kanan Dalal, a daughter and valuation report of Government Approved Valuer.
• The Commissioner of Income Tax (Appeals) has grossly erred in contending that the appellant has not produced documentary evidence, such as purchase bills or invoices that therefore, the impounded jewellery remains unexplained, whereas the appellant has duly produced the evidences in the form of an affidavit of Kanan Dalai, during assessment proceedings & even appellate proceedings.
• The Commissioner of Income Tax (Appeals) has failed to appreciate the facts that In India, it is common trend and customs to keep the jewellery of the daughters, though they are married, with her mother and nowhere, in the entire Act, it is prohibited that the daughter, after marriage, cannot keep her jewellery with her mother.
• The Authorities below have interpreted the subject matter in arbitrary manner.

The Revenue supported the findings of the Authorities below.

The ITAT considered the submissions of both the parties and observed the following from the facts of the case and records available-

•  It is an undisputed fact that the locker was in the joint name of the assessee and her daughter.
• The assessee had given a categorical statement that the jewellery in the said locker belonged to her daughter, who was now a resident of UK at the time of search.
• The daughter of the assessee had also filed an Affidavit dated 18.11.2019 stating that the jewellery seized from the locker belonged to her and that the same was received from her parents and relatives at the time of her marriage, on the occasion of birth of her children and on other occasion etc.
• The only reason for the addition was that since the locker was being regularly operated by the assessee, the natural presumption would be that the jewellery found in said locker, belonged to the assessee only.

The ITAT was of the view that no such presumption can necessarily be drawn, looking into the fact that the locker in question was jointly held by the assessee and her daughter who was residing in UK and hence it was practically not possible for her to operate the locker and further, the daughter of the assessee also filed an Affidavit stating that the jewellery impounded from the locker belonged to her and her family members.  The ITAT was of the view that the additions made by the Assessing Officer are liable to be deleted.  The ITAT allowed the appeal.