Facts of the Case

A search under section 132 was conducted in the Hari Om Rastogi group on 02.07.2018. During the search, a bank locker belonging to the assessee’s son and daughter-in-law was also covered. Pawned jewellery with slips detailing borrowers, amounts advanced, and dates was found in that locker.

Based on the statement of the assessee’s son that the jewellery pertained to the assessee’s money-lending activities, the Assessing Officer treated the amounts reflected in the slips as undisclosed investments in a pawning business and made additions under section 69 across multiple assessment years. The CIT(A) confirmed these additions.

Issues Involved

  1. Whether pawned jewellery found in a locker belonging to relatives can be taxed in the assessee’s hands solely because a money-lending license stood in her name.
  2. Whether additions under section 69 in a search assessment require identification of the real beneficiary of the business.
  3. Whether possession-based presumptions under section 292C apply against the assessee when the assets are found with another person.

 Petitioner’s Arguments

The assessee contended that the locker did not belong to her and that she had never admitted that the pawned jewellery represented her business assets. Although she held a money-lending license, the business was allegedly conducted by the family collectively.

It was submitted that the initial investment originated from funds provided by her husband and son, which were rotated over the years. Further, her son had made substantial disclosure during the search to cover possible undisclosed income of the group. Therefore, the addition in her individual hands was unjustified.

 Respondent’s Arguments

The Revenue argued that the assessee had taken contradictory stands during proceedings. Since the money-lending license was in her name and she had admitted to advancing money, the business could reasonably be attributed to her.

It was further submitted that the slips attached to the pawned jewellery constituted incriminating

 Court Order / Findings (ITAT Allahabad)

The Tribunal observed that while the license stood in the assessee’s name, the pawned jewellery was recovered from a locker belonging to her son and daughter-in-law. The linkage to the assessee arose primarily from her son’s statement rather than direct evidence of ownership or control.

The Tribunal held that the statutory presumption regarding possession could apply against the person from whose custody the assets were found, not automatically against the assessee. It emphasized that before taxing income from money-lending activities, the authorities must determine who actually carried on the business and who was the beneficiary of the income.

Accordingly, the Tribunal restored the matter to the CIT(A) to determine whether the money-lending business was conducted by the assessee individually or by family members using her name. The income was directed to be taxed in the hands of the appropriate person based on such determination.

 Important Clarification

The Tribunal clarified that the pawned jewellery and accompanying slips constituted incriminating material sufficient to support proceedings under section 153A. However, attribution of income requires identification of the true beneficiary of the business, not merely reliance on formal licensing or familial association.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1771062227_SMT.LAXMIDEVIFATEHPURVS.ACITCCALLAHABAD.pdf

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