2015 (6) TMI 761 - AT - Income Tax

Unaccounted jewellery - joint family system - search u/s 132 - Held that - Revenue has in some cases considered the jewellery found in the possession of one family members, as jewellery belonging to the other family member. It is undisputed that all these family members are residing together. Under these circumstances the submissions of the assessee that jewellery cannot be said to be kept in water tight compartments in joint hindu families and that the jewellery of one family member is given to the other member for use only and that the jewellery found in the possession of one member could belong to another member of the family, is a possible explanation. Further the amount of jewellery found short in the hands of the mother in law and father in law of the assessee tallies in value, with the jewellery found in excess in the room of the assessee. Regarding non tallying of the items of jewellery the explanation that the items are changed frequently by the ladies of the house, is a possible explanation. In any event the additions in this case was made on the basis of values of jewellery and not on the basis of quantitative tally. The assessee in this case explained that ₹ 3 lakhs is the value of 60 tolas as gold ornaments as on 3.7.2002, the date of her marriage, which was duly declared by her, in her I.T.returns. The value of these 60 tolas, as on the date of search is fixed at ₹ 11,59,032/- by the valuer. Deduction is granted by the Ld.CIT(A) to such value of ₹ 11,59,032/-. As regards jewellery worth ₹ 13,02,245/- the Ld.CIT(A) ignored the fact that at the time of search no statement was recorded from the assessee and hence there was no occasion for her to state that part of the jewellery belong to her mother in law/ father in law or to specify the items of such jewellery. AT the first available opportunity the assessee had stated her position. Under the circumstances no adverse inference can be drawn against the assessee. Addition made on account of unexplained investments in jewellery in the hands of the assessee, is devoid of merit. - Decided in favour of assessee.

Summary

Issues Involved:
1. Ownership of excess gold found during the search.
2. Valuation of gold as on the date of search versus the date of marriage.
3. Treatment of joint family jewellery in tax assessments.

Detailed Analysis:

1. Ownership of Excess Gold:
The Assessing Officer (AO) rejected the assessee's contention that the excess gold found in her room belonged to her father-in-law and mother-in-law. The First Appellate Authority also rejected this contention, stating that no such stand was taken during the search and that the items of jewellery did not tally with those of the father-in-law and mother-in-law. The assessee argued that in joint families, jewellery is not kept in watertight separate rooms/lockers, and the total jewellery found from the family residing in the same premises should be explained collectively. The Tribunal found this explanation plausible, noting that the Revenue had, in some cases, considered jewellery found in the possession of one family member as belonging to another. The Tribunal concluded that the jewellery of one family member could be given to another for use and that the jewellery found in the possession of one member could belong to another member of the family.

2. Valuation of Gold:
The AO did not give credit for the value of 60 tolas of gold as on the date of search (14.10.2008) but instead gave credit for the value as on the date of marriage in 2002. The First Appellate Authority granted a reduction in the value of the jewellery as on the date of search instead of the value as on 2002. The Tribunal noted that the assessee had explained that Rs. 3 lakhs was the value of 60 tolas of gold ornaments as on 3.7.2002, the date of her marriage, which was duly declared in her I.T. returns. The value of these 60 tolas as on the date of search was fixed at Rs. 11,59,032 by the valuer. The Tribunal found that the Ld.CIT(A) had granted a deduction for this value but ignored the fact that no statement was recorded from the assessee at the time of search, hence there was no occasion for her to specify the items of such jewellery.

3. Treatment of Joint Family Jewellery:
The Tribunal acknowledged that in joint families, jewellery is often shared and not kept in separate compartments. The Tribunal found that the amount of jewellery found short in the hands of the mother-in-law and father-in-law tallied in value with the jewellery found in excess in the room of the assessee. The explanation that items of jewellery are frequently changed by the ladies of the house was considered plausible. The Tribunal held that the addition made on account of unexplained investments in jewellery in the hands of the assessee was devoid of merit.

Conclusion:
The Tribunal allowed the assessee's appeal, deleting the addition made on account of unexplained investments in jewellery. The order was pronounced in the Open Court on 17th June 2015.