Corroborated diamond sale receipts cannot be taxed as unexplained cash credits, and protective jewellery addition needs independent linkage.

Contemporaneous and corroborative evidence of diamond processing and sale- including invoices, confirmations, stock records, bank statements, returns and responses under section 133(6)-was treated as sufficient to displace the allegation that sale proceeds were unexplained cash credits, so the addition under section 68 and the consequential commission addition under section 69C were deleted. For the jewellery issue, the protective addition failed because the jewellery and bullion were found from another family member's premises, the substantive addition stood in that person's hands, and no independent material linked the assessee to the seized assets or established her share; the protective addition was therefore deleted.

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Issues: (i) Whether the addition under section 68 of the Income-tax Act, 1961 on account of sale proceeds of diamonds, along with the consequential addition under section 69C of the Income-tax Act, 1961 towards alleged commission expenditure, was sustainable. (ii) Whether the protective addition made on account of unexplained jewellery was sustainable.

Issue (i): Whether the addition under section 68 of the Income-tax Act, 1961 on account of sale proceeds of diamonds, along with the consequential addition under section 69C of the Income-tax Act, 1961 towards alleged commission expenditure, was sustainable.

Analysis: The assessment rested on the view that the diamond sale receipts were unexplained cash credits and that commission expenditure had been incurred outside the books. The Tribunal followed the coordinate Bench decision in the family member's case and noted that the existence of rough diamonds had already been accepted through the IDS declaration, which had attained finality. It further noted that the processing of diamonds, the subsequent sales, and the receipt of sale consideration were supported by contemporaneous evidence such as invoices, confirmations, stock records, bank statements, returns, and direct responses under section 133(6) of the Income-tax Act, 1961. The adverse statements relied upon by the Revenue were found to have no evidentiary value in the face of the corroborative material.

Conclusion: The addition under section 68 and the consequential addition under section 69C were deleted and the issue was decided in favour of the assessee.

Issue (ii): Whether the protective addition made on account of unexplained jewellery was sustainable.

Analysis: The jewellery and bullion were found from the residential premises of another family member, and the substantive addition had already been made in that person's hands. No direct evidence was brought on record to connect the seized jewellery with the assessee or to establish the assessee's exact share in the seized assets. In these circumstances, the protective addition lacked the necessary evidentiary foundation.

Conclusion: The protective addition was held unsustainable and was deleted, in favour of the assessee.

Final Conclusion: The assessee succeeded on both contested issues, while the Revenue's challenge to deletion of the protective addition failed, resulting in a net outcome favourable to the assessee.

Ratio Decidendi: Where genuine sale consideration is supported by contemporaneous and corroborative evidence, it cannot be assessed as unexplained cash credit under section 68 of the Income-tax Act, 1961, and a protective addition cannot survive without independent material linking the assessee to the asset in question.

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