The Bangalore ITAT clarified that the same jewellery cannot be considered unexplained in the hands of the husband (respondent-taxpayer) when its source and ownership had already been accepted in the hands of the spouse by the same AO on identical facts and documents. Accordingly, the ITAT affirmed the CIT(A)’s order in deleting the addition made by the AO under Section 69 of the Income Tax Act.
The Division Bench comprising Soundararajan K (Judicial Member) and Laxmi Prasad Sahu (Accountant Member) observed that in the assessment of the spouse, completed under Section 143(3) read with Section 153D, the returned income was accepted, and the explanation regarding the source of the seized jewellery was found satisfactory. Therefore, the same jewellery could not be taxed again in another individual’s assessment.
The Bench further observed that the nature and description of the jewellery clearly pertained to the wife of the respondent, and once the AO himself had accepted the ownership and source in the spouse’s case, treating it as unexplained investment in the husband’s case was contradictory and unsustainable in law.
Thus, the Bench concluded that once the same issue has been accepted by the same AO in the hands of wife, then the AO cannot assume that the said jewellery as mentioned in Annexures are unexplained and belong to the husband, i.e., the respondent.
Briefly, in this case, a search and seizure operation was conducted leading to seizure of some jewellery from the residence of the respondent. Subsequently, the AO made an addition of Rs. 1.65 crore under Section 69 treating the seized jewellery as unexplained investment, citing discrepancies between the invoices produced, banking records, and the inventory prepared during search. The AO also noted that some jewellery purchases were made after the search date, and the respondent could not conclusively establish that the jewellery was acquired through ancestral sources or gifts.
The respondent contended that the jewellery did not belong to him but to his spouse, and furnished evidence that similar jewellery, recorded under identical annexures, had been considered in her assessment. Notably, the same AO, based on an identical satisfaction note, had already completed assessment in the case of the spouse under Section 143(3) read with Sections 153C and 153D, wherein the source of jewellery was accepted as explained and duly disclosed in her return of income.
The CIT(A) accepted this contention, holding that since the same set of seized jewellery had already been assessed and accepted in the wife’s case, no separate or duplicate addition could be made in the hands of the respondent.
Appearances:
Additional CIT Sankar Ganesh D, for the Appellant/ Revenue
Advocate V. Srinivasan, for the Respondent/ Taxpayer
