2018 (6) TMI 68 - AT - Income Tax

Unexplained jewellery - reason given by the CIT (A) for not accepting the assessee s contention is that, the wealth tax return was filed 19 years earlier and it is difficult to believe that the same jewellery continued till the date of search - assessee filed reconciliation statement to show that most of the jewellery as was disclosed earlier in the wealth tax return still continued to be in possession and some of them were reconverted over the period of time - Held that - Even if there was a reconversion then if the overall quantity of jewellery is available with the assessee, then presumption goes in favour of the assessee that same quantity which stood disclosed earlier is available with the assessee and hence nothing can be treated as unexplained. Similarly would be in case of jewellery bequeathed upon assessee after partition of bigger HUF, because bigger HUF had jewellery which was duly disclosed in the wealth tax return. Thus, availability of jewellery with HUF also stands proved. Accordingly, the addition partly sustained by the ld. CIT (A) stands deleted. Unexplained cash - Held that - We find that though there is no proper explanation given by the assessee as per the availability of the cash, because the bank withdrawal and household expenditure and the contribution made by the wife is not subject to proper verification. In any case, some availability of cash with house wife with old savings and some with the assessee cannot be ruled out. We hold that out of 5,25,000/-, sum of ₹ 2,25,000/- may be treated as explained in view of cash withdrawals and availability of some cash with his wife who is elderly lady. Thus, assessee gets a part relief of ₹ 2,25,000/- and the balance is ₹ 3 lacs is confirmed. - Appeal of the assessee is partly allowed.

Summary

Issues Involved:
1. Treatment of jewelry found during search.
2. Treatment of unaccounted cash found during search.

Issue-wise Detailed Analysis:

1. Treatment of Jewelry Found During Search:
The main contention was whether the jewelry found during the search belonged solely to the assessee or also to his wife, and whether it was properly accounted for in the past wealth tax returns. The jewelry found was valued at ?37,17,892/-, with 1383.90 grams found in total. The assessee argued that part of the jewelry belonged to his wife, as evidenced by past wealth tax returns, and some was received from a partial partition of a bigger HUF (Hindu Undivided Family). The Assessing Officer (AO) rejected this claim, adding the entire amount to the assessee’s income, citing the lack of recent wealth tax returns and considering the affidavit provided as self-serving.

The CIT (A) partly confirmed the AO's decision, allowing relief for 600 grams of jewelry based on Instruction No. 1914 but maintaining the addition for the rest. The CIT (A) reasoned that the jewelry claimed to belong to the wife and HUF could not be verified as it was last declared in wealth tax returns filed 19 years prior to the search. The Tribunal, however, found this reasoning insufficient, stating that without contrary evidence, the presumption should favor the assessee if the jewelry was disclosed earlier. The Tribunal accepted the reconciliation statement provided by the assessee and deleted the addition sustained by the CIT (A), allowing the appeal on this ground.

2. Treatment of Unaccounted Cash Found During Search:
The second issue involved ?5,25,000/- in unaccounted cash found during the search. The assessee claimed this was accumulated from his salary savings and his wife’s pin money. The AO rejected this explanation, adding the amount as unexplained under Section 69A. The CIT (A) upheld this addition, noting that the household expenses shown by the assessee were unrealistically low and the cash withdrawals from the bank did not support the claimed savings. The CIT (A) allowed a nominal credit of ?24,000/- for pin money.

The Tribunal, after considering the arguments, acknowledged that some cash savings by the wife and the assessee could not be ruled out entirely. It partially allowed the appeal, treating ?2,25,000/- as explained and confirming the addition of the remaining ?3,00,000/-.

Conclusion:
The Tribunal provided relief to the assessee by deleting the addition related to the jewelry and partially allowing the appeal concerning the unaccounted cash, treating ?2,25,000/- as explained. The appeal was thus partly allowed, providing significant relief to the assessee. The order was pronounced in open court on 30th May 2018.