Documentary proof and credible confirmations can defeat unexplained cash and jewellery additions in search assessments.

Cash and jewellery found in search were held explainable where the assessee produced contemporaneous documents, affidavits, bank records and confirmations from the persons concerned. The cash explanation, traced to advance money received against an agreement to sell land, was accepted because the supporting parties confirmed the transaction and the time gap or delayed sale deed, by itself, did not discredit the source. The jewellery addition was also rejected because family affidavits were unrebutted and the assessee's admitted jewellery fell within the permissible holding recognised by CBDT Instruction No. 1916 and prevailing social practice. The additions were deleted as based on conjecture rather than evidence.

---

---

Issues: (i) Whether the addition of cash of Rs. 10,00,000 as unexplained cash under section 68 of the Income-tax Act, 1961 was sustainable; (ii) Whether the addition of Rs. 35,26,000 in respect of jewellery treated as unexplained was sustainable.

Issue (i): Whether the addition of cash of Rs. 10,00,000 as unexplained cash under section 68 of the Income-tax Act, 1961 was sustainable.

Analysis: The cash found in the locker was explained as having been received from the assessee's husband, who in turn had received advance money from two identified persons against an agreement to sell land. The supporting material included the agreement to sell, affidavits, bank statements and the statements of the said persons recorded during assessment. The explanation was corroborated by the appearance of the parties before the Assessing Officer and by their confirmation of the transaction. The absence of immediate execution of the sale deed and the time gap between withdrawal and payment were held insufficient, by themselves, to discredit the explanation.

Conclusion: The addition of Rs. 10,00,000 was not sustainable and was deleted in favour of the assessee.

Issue (ii): Whether the addition of Rs. 35,26,000 in respect of jewellery treated as unexplained was sustainable.

Analysis: The jewellery found in the locker was supported by affidavits of family members explaining that substantial portions belonged to them and were kept in safe custody. The record did not contain material rebutting those affidavits, and no statement of the family members was recorded to displace the claim. The assessee's own jewellery, to the extent admitted, was within the permissible holding contemplated by CBDT Instruction No. 1916 dated 11.05.1994. The instruction, read with the customary and social context of jewellery holdings, was treated as supporting the explanation of reasonable possession.

Conclusion: The addition of Rs. 35,26,000 was not sustainable and was deleted in favour of the assessee.

Final Conclusion: The assessee's explanation for both the cash and the jewellery was accepted, and the impugned additions were set aside in full.

Ratio Decidendi: Where cash or jewellery found in search is supported by contemporaneous documentary evidence and credible confirmations from the persons concerned, the assessee's burden stands discharged; additions cannot be sustained merely on conjecture, suspicion, or an unproved challenge to the source of the source, and reasonable jewellery holdings supported by family ownership and prevailing customs are not to be treated as unexplained.

---