Gold jewellery found during search treated as unexplained; agricultural income accepted as source and addition deleted

107.48 grams of gold jewellery found during search was treated as unexplained by the assessing officer; the taxpayer contended the jewellery was purchased from agricultural income of the HUF. The explanation was held plausible in light of prior acceptance of 850 grams under the CBDT instruction, and the assessing officer lacked justification to treat the remaining 107.48 grams as unexplained. Consequently the addition under unexplained assets provisions was deleted and the taxpayer's appeal allowed.

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Issues: Whether the addition of Rs. 3,26,740/- made under Section 69A of the Income-tax Act, 1961 in respect of 107.48 grams of gold/jewellery found during search was justified.

Analysis: Section 69A of the Income-tax Act, 1961 permits deeming of unaccounted money, bullion or jewellery as income where the assessee offers no explanation or an explanation is unsatisfactory. The record shows possession of 957.48 grams of gold/jewellery, of which 850 grams were treated as explained under the cited CBDT guidance and 107.48 grams were treated as unexplained by the Assessing Officer. The assessee explained that the 107.48 grams were acquired out of agricultural income of the Bigger HUF pursuant to partition; that explanation was examined and found to be plausible and satisfactory for the purposes of Section 69A.

Conclusion: The addition of Rs. 3,26,740/- made under Section 69A in respect of 107.48 grams of gold/jewellery is deleted and the appeal is allowed in favour of the assessee.

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