2014 (4) TMI 155 - AT - Income Tax

Sale proceeds of inherited articrafts and Jewellry personal effects - Capital gain OR income from other sources - Held that - The assessee had sold some decorative vases and display plates, etc., which do not come within the purview of capital assets as defined in section 2(14)(ii) - the assessee had submitted the valuation report of household artifacts and furnitures wherein such decorative vases and display plates have been mentioned - it is not a capital asset and these are only household decorative items which are mentioned in the valuation report dated 8th January 1975 thus, there is no reason to sustain the addition on account of sale proceeds of artifacts, under the head income from other sources . Sale of jewellery Held that - There is no rebuttle of the findings of the AO and the CIT(A) that the assessee could not produce any corroborative evidence to show that the assessee has initiated the same jewellery from her late father, as shown in the valuation report dated 7th June 1972 - The onus is upon the assessee to show nexus of the inheritance of the jewellery and the sale of jewellery in this year - The explanation offered by the assessee, has not been found to be satisfactory and is not corroborated by any credible evidence on record. Once the assessee has sold the ornaments in this year, the onus was on the assessee to prove that it has been acquired either by way of inheritance or by her in the earlier years - provisions of section 69A, clinches the issue and it has to be treated as deemed income of the assessee, if there is no satisfactory explanation with regard to the source of acquisition Decided partly in favour of Assessee.

Summary

Issues:
Challenging the assessment order under Income Tax Act, 1961 regarding the addition of sale proceeds of inherited artifacts and jewelry, classification of artifacts as capital assets, taxability of jewelry sale proceeds as capital gains, and the applicability of indexation.

Analysis:

Issue 1: Addition of Sale Proceeds of Artifacts
The assessee challenged the addition of Rs. 1,21,500 as income from other sources, representing the sale proceeds of inherited artifacts. The Assessing Officer added the amount as income, as the assessee failed to provide evidence that the artifacts were inherited personal effects. The Commissioner (Appeals) upheld the addition due to lack of evidence. However, the Tribunal found that the artifacts were not capital assets and were only household items, supported by a valuation report. Therefore, the addition was deleted as the sale of artifacts did not qualify as income from other sources.

Issue 2: Taxability of Jewelry Sale Proceeds
Regarding the addition of Rs. 1,94,927 from the sale of inherited jewelry, the Assessing Officer treated it as income from other sources due to insufficient evidence of inheritance. The Commissioner (Appeals) confirmed the addition. The Tribunal noted that the assessee failed to prove the inheritance of jewelry, leading to a deeming presumption under section 69A. As the explanation provided was unsatisfactory and lacked credible evidence, the addition was upheld as income of the assessee.

Issue 3: Classification of Artifacts as Capital Assets
The assessee contended that artifacts were not capital assets and should not be taxed. The Tribunal agreed, stating that the decorative items did not fall under the definition of capital assets. The valuation report supported this claim, leading to the deletion of the addition related to the sale of artifacts.

Issue 4: Applicability of Indexation on Jewelry Sale
The assessee argued for indexation on the sale of jewelry as a capital asset. However, as the inheritance of jewelry was not proven, the Tribunal rejected the claim for indexation. Section 69A deemed the jewelry sale proceeds as income due to lack of satisfactory explanation on inheritance, resulting in the rejection of the alternative contention.

In conclusion, the Tribunal partly allowed the assessee's appeal, deleting the addition related to artifacts but upholding the addition concerning jewelry sale proceeds. The alternative contention for indexation was rejected due to the inability to prove inheritance.