JUDGMENT :

Mohammed Shaffiq, J.

Prayer: Appeal under Section 260A of the Income Tax Act, 1961 against the order dated 22.12.2006 made in ITA.No.1255(Mds)/2000 on the file of the Income Tax Appellate Tribunal, Chennai ‘D’ Bench for the assessment year 1995-96.

1. The substantial questions of law that arise for consideration in this Tax Case Appeal are relating to the admissibility, relevance and evidentiary value of the statement recorded at the time of search under Section 132(4) of the Income Tax Act, 1961, while making assessment by the assessing officer.

2. At the outset, it may be relevant to set out briefly the following facts:

2.1 The appellant is engaged in Jewellery and pawn brokerage business. While so, there was a search in his business and residential premises on 7th and 8th December, 1994, in the course of which, cash of Rs.2,28,975/-, excess stock of gold jewellery to the extent of 3838 grams and silver ornaments to the extent of 117.894 kgs and advance of Rs.1,50,000/- made to one K.C.Sampathkumar were recovered. The statement of the appellant was also recorded under section 132(4), during which, he admitted the unexplained income at Rs.2,00,000/-, excess stock of gold jewellery valued at Rs.15,35,000/-, silver articles and ornaments valued at Rs.5,75,266/- and also advance of Rs.1,50,000/- made to the said K.C.Sampathkumar.

2.2 The appellant filed his return of income on 24.08.1995 admitting a total income of Rs.10,24,170/-. After scrutiny of the same, notice under section 143(2) was issued. In response to the same, a representative of the appellant appeared and made a statement. In the return of income, the appellant admitted only the cash of Rs.43,134/- and the value of the gold & jewellery of 1305.3 grams. Besides that, he admitted the value of the silver items only at Rs.5,75,266/- and accounted the sum of Rs.1,50,000/- to Sakthi Finance at Rs.1,00,000/-, K.C.Sampathkumar at Rs.26,000/- and Sri Chinnaraj at Rs.24,000/- under the HUF status. Since the appellant did not explain the sources with material evidence, the assessing officer rejected the same as an afterthought and passed the order of assessment under section 143(3) levying tax on the unexplained income/ investment to the tune of Rs.14,15,769/-.

2.3 Aggrieved by the order of assessment, the appellant preferred an appeal before the Commissioner of Income Tax (Appeals), who partly allowed the appeal by setting aside the assessment order, primarily on the ground that the differences noticed in the cash balance as well as gold jewellery and silver articles were explained by the appellant and in support of the same, an affidavit of the appellant’s mother-in-law by name Amsa Boi was also filed.

2.4 Challenging the order of the Appellate Authority, the Revenue carried the matter by way of appeal before the Income Tax Appellate Tribunal, which allowed the said appeal. Therefore, this Tax Case Appeal by the assessee.

3. Heard both sides and perused the materials available on record.

4. In this case, the assessing officer, while computing the assessment under section 143(3), made the following additions:

On appeal, the Appellate Authority modified the cash balance and value of silver articles and deleted the value of gold jewellery and advance made to Sampathkumar, as unwarranted. In the appeal filed by the Revenue, the Tribunal set aside the order of the Appellate Authority and restored the order of assessment. For better understanding, the findings rendered by the Tribunal read as follows:

a. Cash balance: