Facts of the Case

·         A search and seizure operation was executed at the appellant's business and residential premises on November 2, 2004.

·         During this operation, jewellery amounting to a total value of 85,44,147/- was seized.

·         The appellant was unable to explain the source of a specific portion of the jewellery valued at 8,06,035/-.

·         The appellant initially claimed during the search that the jewellery was taken on approval from M/s. K.K. Jewellers.

·         On the same day, Mr. Kailash Chand Jain, a partner at K.K. Jewellers, explicitly denied giving any jewellery to the appellant on an approval basis.

·         Over two years later, on December 26, 2006, the appellant submitted a communication claiming the jewellery was actually supplied by an associate concern, M/s. Kesri Chand & Co.

·         Mr. Kailash Chand Jain, who was also a partner at M/s. Kesri Chand & Co., stated during a subsequent assessment on December 11, 2006, that the jewellery was given to the appellant through M/s. Kesri Chand & Co.

Issues Involved

·         The primary issue was to determine whether the appellant's delayed change of statement, attributing the source of the jewellery to M/s. Kesri Chand & Co. instead of M/s. K.K. Jewellers, was a fabricated afterthought.

Petitioner’s Arguments

·         The appellant argued that the jewellery did not belong to her and was obtained on an approval basis.

·         She eventually contended that the jewellery was sent by M/s. Kesri Chand & Co. one day prior to the date of the search.

·         She relied upon a specific voucher to substantiate her claim that the transaction took place with M/s. Kesri Chand & Co.

Respondent’s Arguments

·         The Department maintained that the initial and immediate denial by the partner of K.K. Jewellers invalidated the appellant's on-the-spot explanation.

·         The assessing authorities emphasized that the burden of proof lay entirely on the appellant to explain the seized assets.

Court Order / Findings

·         The Delhi High Court upheld the Income Tax Appellate Tribunal's finding that the revised plea was an afterthought.

·         The Court noted that the appellant maintained a "stoic silence" for more than two years before changing her explanation.

·         The Court highlighted a significant discrepancy: the appellant claimed the jewellery was delivered on November 1, 2004, yet the voucher she relied upon was dated November 29, 2004.

·         The Tribunal correctly observed that the sale voucher lacked critical details, including the firm's name, phone number, sales tax number, and registration number.

·         The Court found no perversity in the Tribunal's findings, concluded that no question of law arose, and subsequently dismissed the appeal.

Important Clarification

The burden of proof to demonstrate the legitimate source of jewellery found during a search operation rests squarely on the assessee under the provisions of the Income Tax Act.

Sections Involved

·         Section 132(4A) of the Income Tax Act.

·         Section 292C of the Income Tax Act.

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2010:DHC:4960-DB/RK04102010ITA9452008.pdf

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