2018 (6) TMI 68 - AT - Income Tax

Tribunal Partially Allows Appeal, Provides Relief to Assessee

The Tribunal allowed the appeal in part, deleting the addition related to the jewelry and partially allowing the appeal regarding the unaccounted cash by ... Disclosure of jewellery by prior wealth tax returns as evidence of possession - presumption of continuity of disclosed assets at the time of search - partial partition of HUF and transfer of ancestral jewellery - CBDT instruction no.1914 relief for specified quantity of jewellery - addition as unexplained cash under section 69A - burden on assessee to explain source and availability of cashDisclosure of jewellery by prior wealth tax returns as evidence of possession - presumption of continuity of disclosed assets at the time of search - CBDT instruction no.1914 relief for specified quantity of jewellery - partial partition of HUF and transfer of ancestral jewellery - Whether jewellery seized during search could be treated as explained by reference to earlier wealth tax returns, valuation reports and claim of partition - HELD THAT: - The Tribunal accepted that substantial quantities of the seized jewellery had been shown earlier in wealth tax returns of the assessee's wife and of the larger HUF and that a partial partition had been claimed to have transferred specified jewellery to the assessee. The mere lapse of years between the earlier wealth tax filings and the search does not, without contrary material discovered during search, displace the presumption that disclosed jewellery continued to be in possession. The assessee filed valuation documents, wealth tax returns and a reconciliation showing retention/reconversion of disclosed jewellery. On this basis the Tribunal found the reason given by the CIT(A) - that returns were old - insufficient to sustain the addition for the total jewellery. The Tribunal also accepted relief permitted by CBDT instruction no.1914 for specified quantities and accordingly deleted the addition relating to the jewellery held as shown and bequeathed by partition, directing that the addition upheld by lower authorities be deleted to that extent. [Paras 7]Addition in respect of jewellery deleted to the extent that it was shown in earlier wealth tax returns or attributable to partition; the assessee's ground on jewellery is allowed.Addition as unexplained cash under section 69A - burden on assessee to explain source and availability of cash - Whether the cash of Rs.5,25,000 found at the time of search was adequately explained and liable to be deleted - HELD THAT: - The assessee claimed the cash represented household withdrawals, old savings and pin money of his wife and placed before the Tribunal a year wise reconciliation of bank withdrawals, household expenditure and residual balances. The Tribunal observed that the explanations and charts were not fully verifiable against books or records, and that the CIT(A) was entitled to disbelieve the claimed household expenses to the extent they were implausibly low. Nonetheless, the Tribunal accepted that some part of the cash could legitimately be explained by withdrawals and the wife's savings and, on a factual assessment, treated part of the seized cash as explained while confirming the remainder as unexplained income under the relevant provision. Accordingly the Tribunal treated Rs.2,25,000 as explained and upheld an addition of Rs.3,00,000 as unexplained. [Paras 10]Part relief granted: Rs.2,25,000 treated as explained; balance of Rs.3,00,000 confirmed as unexplained cash and added to income.Final Conclusion: The appeal is partly allowed: the additions in respect of jewellery seized in the search are deleted to the extent supported by earlier wealth tax disclosure and partition, and CBDT instruction relief is applied; in respect of seized cash the Tribunal allowed part relief by treating a portion as explained and confirmed the remaining addition, resulting in a partly successful appeal for the assessee for Assessment Year 2011-12. Issues Involved:1. Treatment of jewelry found during search.2. Treatment of unaccounted cash found during search.Issue-wise Detailed Analysis:1. Treatment of Jewelry Found During Search:The main contention was whether the jewelry found during the search belonged solely to the assessee or also to his wife, and whether it was properly accounted for in the past wealth tax returns. The jewelry found was valued at Rs. 37,17,892/-, with 1383.90 grams found in total. The assessee argued that part of the jewelry belonged to his wife, as evidenced by past wealth tax returns, and some was received from a partial partition of a bigger HUF (Hindu Undivided Family). The Assessing Officer (AO) rejected this claim, adding the entire amount to the assessee’s income, citing the lack of recent wealth tax returns and considering the affidavit provided as self-serving.The CIT (A) partly confirmed the AO's decision, allowing relief for 600 grams of jewelry based on Instruction No. 1914 but maintaining the addition for the rest. The CIT (A) reasoned that the jewelry claimed to belong to the wife and HUF could not be verified as it was last declared in wealth tax returns filed 19 years prior to the search. The Tribunal, however, found this reasoning insufficient, stating that without contrary evidence, the presumption should favor the assessee if the jewelry was disclosed earlier. The Tribunal accepted the reconciliation statement provided by the assessee and deleted the addition sustained by the CIT (A), allowing the appeal on this ground.2. Treatment of Unaccounted Cash Found During Search:The second issue involved Rs. 5,25,000/- in unaccounted cash found during the search. The assessee claimed this was accumulated from his salary savings and his wife’s pin money. The AO rejected this explanation, adding the amount as unexplained under Section 69A. The CIT (A) upheld this addition, noting that the household expenses shown by the assessee were unrealistically low and the cash withdrawals from the bank did not support the claimed savings. The CIT (A) allowed a nominal credit of Rs. 24,000/- for pin money.The Tribunal, after considering the arguments, acknowledged that some cash savings by the wife and the assessee could not be ruled out entirely. It partially allowed the appeal, treating Rs. 2,25,000/- as explained and confirming the addition of the remaining Rs. 3,00,000/-.Conclusion:The Tribunal provided relief to the assessee by deleting the addition related to the jewelry and partially allowing the appeal concerning the unaccounted cash, treating Rs. 2,25,000/- as explained. The appeal was thus partly allowed, providing significant relief to the assessee. The order was pronounced in open court on 30th May 2018.