1998 (4) TMI 167 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the statement recorded under Section 132(4) of the IT Act.
2. Explanation and assessment of unexplained cash and jewellery.
3. Admissibility of affidavits and statements as evidence.
4. Application of CBDT Instruction No. 1996 regarding seizure of jewellery.
5. Determination of unexplained investments and income from profession.

Issue-wise Detailed Analysis:

1. Validity of the statement recorded under Section 132(4) of the IT Act:
The CIT(A) accepted the assessee's contention that the statement recorded under Section 132(4) was not voluntary but made under threats and intimidation by the search party. The appellate authority concluded that the statements of surrender recorded on 29th September 1988 were invalid and not voluntary. Consequently, it was deemed unfair to make additions based on such statements. The CIT(A) directed that any additions should be made on merits after examining relevant details and incriminating material.

2. Explanation and assessment of unexplained cash and jewellery:
Initially, the AO assessed the total income including unexplained cash and jewellery. The CIT(A) provided partial relief by allowing a reduction based on the merits of the case. The AO, in the reframed order, determined the total income assessed, including unexplained investments in gold and other assets. The assessee argued that the gold ornaments belonged to various family members and were received as gifts during marriages and other occasions. The CIT(A) allowed a relief of Rs. 60,000, considering the facts and circumstances, and noted that some relief was necessary to meet the ends of justice and fair play.

3. Admissibility of affidavits and statements as evidence:
The assessee submitted affidavits from various persons, including a witness present during the search, to support the claim that the gold ornaments belonged to family members. The AO did not rebut these affidavits or statements. The Tribunal noted that the AO had not challenged the possession of the gold ornaments and had ignored primary evidence during the assessment. The Tribunal accepted the affidavits and statements as credible evidence, indicating that the jewellery found belonged to the family ladies and was received as gifts.

4. Application of CBDT Instruction No. 1996 regarding seizure of jewellery:
The assessee referred to CBDT Instruction No. 1996, which provides guidelines for the seizure of jewellery during searches. According to these guidelines, certain amounts of jewellery per family member need not be seized. The Tribunal considered these guidelines and found that the possession of gold ornaments by the family members was reasonable and explained. The Tribunal concluded that the entire jewellery found should be accepted as explained and belonging to the various family members.

5. Determination of unexplained investments and income from profession:
The AO initially made additions for unexplained investments and income from the profession of goldsmith. The CIT(A) provided partial relief and directed the AO to examine the case on merits. The Tribunal noted that the AO had not provided evidence to disprove the various statements and affidavits filed by the assessee. The Tribunal held that the entire jewellery in possession of the assessee was well-explained and allowed the appeal filed by the assessee. Consequently, the appeal filed by the Revenue was dismissed.

Conclusion:
The Tribunal concluded that the statements recorded under Section 132(4) were not voluntary and could not be relied upon for making additions. The affidavits and statements provided by the assessee were accepted as credible evidence. The possession of jewellery was found to be reasonable and explained, considering family customs and gifts. The Tribunal allowed the appeal filed by the assessee and dismissed the appeal filed by the Revenue.