2015 (9) TMI 1725 - AT - Income Tax

Unexplained jewellery - search and seizure operation - assessee was not being able to reconcile item-wise jewellery which were found at the time of search vis- -vis the wealth tax and purchases made during the financial year by assessee - HELD THAT - We are in agreement with the findings of Ld. CIT(A) that items of jewellery are often subjected to remaking on account of changing fashion and designs. In Indian society the yellow metal and diamond has assumed lot of significance for ladies which is a status symbol and they buy it or convert the jewellery as per the prevailing fashion. There has no gainsaying that fashion keeps on changing and accordingly the jewellery is re-modeled from time to time according to the prevailing fashion. Under the facts and circumstances comparison with the items of jewellery found at the time of search with wealth tax return which were filed much earlier was putting an onerous task on assessee to prove something impossible and assessee cannot be as bed to prove something which is beyond its control. We accordingly confirm the order of Ld. CIT(A) and this issue of Revenue s appeals are dismissed.

Summary

Issues:
Addition of undisclosed jewellery in assessment under Income Tax Act, 1961.

Analysis:
The Revenue filed appeals against separate orders of the Commissioner of Income Tax for the assessment year 2010-11. The main issue in both appeals was the addition of Rs. 24,72,221 made by the Assessing Officer under sections 143(3) and 153A/153B/147 of the Income Tax Act. The case involved a search and seizure operation where undisclosed jewellery was found, and the assessee made a disclosure petition under section 132(4) revealing some jewellery. Discrepancies arose between the inventoried jewellery and the disclosed jewellery. The Assessing Officer added Rs. 24,72,221 as jewellery remained unaccounted for. The assessee appealed to the CIT(A) challenging the addition.

The CIT(A) noted that the gross weight of jewellery declared in returns exceeded the jewellery found during the search. The CIT(A) relied on precedents stating that jewellery should be considered based on gross weight, even if item-to-item reconciliation was not feasible. Consequently, the CIT(A) deleted the addition. The Revenue appealed the decision, questioning the need for item-to-item reconciliation and the possibility of altering jewellery without evidence.

The ITAT observed that the jewellery's gross weight and carats were explained by the assessee and family members. The dispute centered around the inability to reconcile item-wise jewellery found during the search with wealth tax returns and subsequent purchases. The ITAT agreed with the CIT(A) that jewellery often undergoes remaking due to changing fashion trends. Expecting item-wise reconciliation was deemed unreasonable as jewellery is frequently remodeled according to prevailing trends. The ITAT upheld the CIT(A)'s decision, dismissing the Revenue's appeals.

In conclusion, both appeals by the Revenue were dismissed, affirming the CIT(A)'s order.