Jewellery found in search can not be apportioned equally among family members

Jewellery found in search can not be apportioned equally among family members – ITAT

In a recent judgment, ITAT Delhi has held that when jewellery found in house cohabited by various family members, AO can not apportion jewellery in equal proportion without identifying the person to whom the jewellery in reality belongs.

ABCAUS Case Law Citation:
4222 (2024) (08) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming addition on account of undisclosed investment in jewellery under section 69B of the of the Income Tax Act, 1961 (the Act).

In course of search and seizure operation in a residential premises, jewellery was found in the name of three ladies. Before the Assessing Officer, sworn affidavits were filed by the assessee and one other female family member stating that jewellery of certain amount belonged to assessee herein. It was also stated that the rest of the jewellery belonged to other family members.

Alleging that no documentary evidences were furnished by the assessee to prove such claim and the affidavit was not notarized, the Assessing Officer divided the total value of jewellery amongst three ladies and apportioned 1/3^rd amount as assessee’s share and added back to her income u/s 69B of the Act.

Before the first appellate authority, the assessee reiterated the stand taken before the Assessing Officer. However, first appellate authority did not record any finding on the issue.

Before the Tribunal the assessee submitted that jewellery amounting to as value mentioned in affidavit belonged to the assessee and the remaining jewellery belonged to other family members. He submitted, since the jewellery found is within the permissible limits prescribed by Central Board of Direct Taxes (CBDT), no addition should have been made.

The Tribunal observed that it was a fact that in course of search and seizure operation carried out in the residential premises, jewellery was alleged to have been found in the names of three female family members. It was further evident that the AO had distributed the value of jewellery equally amongst the three ladies and made addition 1/3^rd at the hands of the assessee.

The Tribunal further observed that there was nothing on record to suggest that the jewellery was found from the possession of the assessee. It was a fact on record that affidavits had been filed by the assessee and one family member stating that the value of jewellery belonged to the assessee and remaining jewellery belonged to other family member.

The Tribunal opined that when the jewellery was found in a residential premise cohabited by various family members, it was not understood how the Assessing Officer can apportion the jewellery in equal proportion without identifying the person to whom the jewellery in reality belonged. Moreso, when two of the ladies had come forward to claim that the assessee owned value of jewellery as stated, without establishing on record that the jewellery found was equally owned by all the three ladies, addition could not have been made on estimate basis.

The Tribunal held that the addition made was unsustainable.

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