Unexplained gold ornaments in possession: assessee must prove source with reliable records or face undisclosed income treatment.

Where valuable articles are found in an assessee's possession, the assessee must explain their source, and the burden is not displaced merely by asserting later claims. In the present discussion, newly made gold ornaments were found during a search, while the contemporaneous statement at the shop supported the inference that the articles were still under preparation and not shown to belong to third parties. Because the later explanation lacked reliable supporting records, the adverse inference was sustained and the value of the gold was treated as undisclosed income. The note also emphasises that the status of alleged claimants does not by itself prove ownership without credible evidence.

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Issues: Whether the burden of proof in respect of gold ornaments found in the assessee's premises was wrongly cast on the Revenue, and whether the addition of the value of the seized gold as income from undisclosed sources was sustainable.

Analysis: The assessee was found in possession of newly made gold bangles during a search, while the contemporaneous sworn statement of the person present at the shop indicated that gold had been received from a third party on the previous day and that the ornaments then under preparation had not yet been converted into new bangles. The later claim that the gold belonged to five customers was not supported by reliable contemporaneous records. The Court held that a person in possession of an article must explain its source, and the assessee failed to dislodge the adverse inference. It further held that the status or standing of the alleged claimants could not by itself establish the truth of their later statements, and that the authorities below had wrongly applied the burden of proof.

Conclusion: The addition was justified, and the assessee's explanation was rejected; the order of the assessing authority was restored.

Ratio Decidendi: Where unexplained valuable articles are found in the assessee's possession, the assessee bears the burden of proving their source, and failure to produce reliable supporting records permits the income-tax authorities to treat them as undisclosed income.

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