Unexplained gold jewellery addition turned on whether prior wealth-tax disclosure existed before the search.

Gold jewellery found during search was treated as an alleged unexplained investment, but the decisive question was whether it had already been disclosed in the relevant wealth-tax returns before the search. Because the authorities had not verified that disclosure and the record did not conclusively settle the timing of the returns, further examination was required. The matter was remanded to the Assessing Officer to verify the wealth-tax returns; if the jewellery had been disclosed in returns filed before the search, no addition would be warranted, and if the returns were filed later, the issue could be decided afresh.

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Issues: Whether 15 tolas of gold jewellery could be treated as unexplained investment in the assessee's hands without verification of its disclosure in the wealth-tax returns filed before the search.

Analysis: The addition was founded on gold jewellery found during search under section 132(1) of the Income-tax Act, 1961. The relevant factual controversy was whether the jewellery had already been disclosed in the wealth-tax returns of the ladies concerned and whether such returns were filed before the date of search. As this aspect had not been examined by the authorities below and the record did not conclusively establish disclosure, further verification was considered necessary.

Conclusion: The matter was sent back to the Assessing Officer to verify the wealth-tax returns. If the jewellery was disclosed in returns filed before the search, no addition was warranted; if the returns were filed after the search, the Assessing Officer was free to decide the issue afresh. The assessee obtained partial relief by way of remand of the addition.

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