Addition cannot be made if no statement is recorded at the time of search

Brief of the Case:

Delhi ITAT held in the case of Smt. Rutu Jindal Vs. ACIT, that if no statement has been recorded at the time of search and where there is no occasion for the assessee to state the fact at the time of search, the addition can not be made without taking in to account the fact of the case which is stated during the appellate proceedings.

Brief Facts of the case:

Search u/s 132 was conducted at the residence of assessee and a panchnama was prepared for the jewellery owned by different family members of the assessee. During the assessment proceedings the assessee was required to explain the jewellery found during the search. The assessing officer rejected the contention of the assessee that the excess gold found in the assessee’s room actually belongs to her father in law and mother in law.

Question of Law:

Whether contention of the assessee after the date of search is acceptable and addition made on account of excess jewellery found from the room of assessee is justifiable?

Contention of the CIT (A):

CIT (A) rejected the claim of the assessee for the following two reasons:

1. That no such stand was taken by the assessee during the search. The appellant should has pointed out during inventorisation that a portion of jewellery found in possession was actually belonging to her father-in-law,
2. If some of the jewellery of father-in-law and mother-in-law was given credit to the appellant; then some of the items of jewellery as appearing in the list of jewellery of father-in law and mother-in-law, should have tallied with the items found in possession of the appellant at the time of search.

And therefore, the balance of jewellery found in excess is treated as unexplained investment and addition is made accordingly.

Contention of the Assessee:

The assessee contended that, on making the addition the authorities should appreciate the fact that in joint families living together in the same house, jewellery is not necessarily kept in watertight separate rooms/ lockers, and it is the total jewellery found from the family residing in the same premises is to be explained.

The assessee further submitted that no statement has been recorded from her at the time of search and only an inventory of the gold jewellery was made and also there was no occasion for the assessee to state the facts at the time of search or thereafter. Thus, he submits that at the first available opportunity, the assessee explained the correct position.

Held by ITAT:

After hearing rival contentions and the papers on record and orders of the authorities below, it was held by ITAT that the revenue has in some cases considered the jewellery found in the possession of one family member as belonging to the other family member. It is undisputed that all these family members are residing together and in such circumstances the jewellery can not be said to be kept in water tight compartments and that the jewellery of one family member is given to the other member for use only and the jewellery found in possession of one member could belong to another member of family, is a possible explanation. Further, the amount of jewellery found short in the hands of mother-in-law and father-in-law of the assessee tallies in value, with the jewellery found in excess in the room of the assessee. Regarding non tallying of the items of jewellery, it is sufficient explanation that the items are frequently changed by the ladies of the house. In this case, the addition was made on basis of value of jewellery and not on quantitative basis.

Further, no statement was recorded from assessee at the time of search and hence there was no occasion for assessee to explain the excess jewellery found in her possession. Under the circumstances no adverse inference can be drawn against the assessee. In result the addition is deleted and the assessee’s appeal is allowed.