Addition for Jewellery in daughter-in-laws bedroom locker found during search operation u/s 132 deleted when she was having separate sources of income

Jewellery found in daughter-in-law’s bedroom locker of at the time of search u/s 132 can not be added to the assessee’s income  when she was having a seperate source of income- ITAT Delhi

Case Law Details:
ITA No.3763 and 3757/Del/2012 Assessment Year : 2010-11
S.C. Verma vs. ACIT/ACIT vs S.C. Verma
Date of Judgment: 18/05/2016

Brief Facts of the Case:
The assessee was subjected to a search action u/s 132(1) at his residential premises. During the course of search, apart from cash and other documents, total jewellery weighing 2327.6 gms was found from the assessee and his family members. The assessee in response to question no. 2 in the statement of recorded during the course of search, submitted that jewellery belonged to himself, his mother, his son, his wife and daughter-in-law. However, the the assessee could substantiate jewellery belonging to his family members by means of any wealth tax the AO made addition for the entire value of jewellery found during the course of search.

On appeal, CIT(A) deleted the additions made on account of the jewellery belonging to the assessee’s son and daughter-in-law which was found from their exclusive bed room and locker. 

Excerpts from ITAT Judgment:

In response to question no. 3, during the course of statement recorded u/s 132(4), the assessee submitted that his wife was employed with National Insurance Company and his son Shri Sumit Verma was employed with M/s Religare Insurance group with annual income of Rs.7 lac. The assessee also submitted that his daughter-in-law, Mrs. Shilpa, was working with M/s Steria and drawing a salary of Rs.8 lac per annum. This shows that the assessee’s son and daughter-in-law were having their separate sources of income. The search was conducted at the residential premises of the assessee in House No. 34, First Floor, Greater Kailash-I, New Delhi, wherein all the family members were living jointly, albeit in separate rooms. It is an admitted position that no separate assessments have been made for the other family members. It is further seen that the assessee at no stage admitted that the entire jewellery belonged to him alone. Au contraire, he specifically submitted that the jewellery belonged to all the family members. The factum of the assessee’s daughter-in-law, a working woman, having her own separate locker, amply goes to prove that she was keeping her jewellery separate from that of the larger family. Presently, we are dealing with the assessment of the assessee. It is, but, natural that the unexplained jewellery, if any, belonging to the assessee’s son and daughter-in-law, both of whom are separately assessed to tax, cannot be taxed in the hands of the assessee. In our considered opinion, the ld. CIT(A) was fully justified in excluding from consideration the value of jewellery found in the bed room and locker of the assessee’s daughter-in-law. The impugned order is, therefore, upheld pro tanto. 

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