2020 (4) TMI 617 - AT - Income Tax

Unexplained expenditure - premium paid on life insurance policy - Addition u/s 69C - HELD THAT - Assessee has duly filed three LIC Premium receipt of payment which are appearing at Paper Book Page No. 12 to 14 and same is also shown paid in cash and reflected in cash book placed at Paper Book Page No. 15. The disallowance so made is uncalled for, hence, same is directed to be deleted. - Decided in favour of assessee. Unexplained jewellery - Addition u/s 69A - HELD THAT - Total gold jewellery with diamond studded therein of 321 grams were found as per inventory made during search belonging to the assessee. Nothing was seized during search. As per CBDT Instruction No. 1916 dated 11.05.1994, jewellery of 500 grams in the case of married lady member need not be seized. In the case of CIT v. Ratanlal Vyapari 2010 (7) TMI 769 - GUJARAT HIGH COURT observed that CBDT Instruction No. 1916 laid down guidelines for seizure of jewellery in the course of search takes into account the quantity of jewellery which should be generally be held by the family members of an assessee, and, therefore, unless anything contrary is shown , it can be safely presumed that the source to the extent of the jewellery stated in the Circular stands explained. In the case of the assessee only 321 grams of jewellery belonging to the assessee was found, which is less than 500 grams and same is inclusive diamond studded therein - the assessee has filed bills for purchase of gold of ₹ 2 lakhs and shown diamond jewellery in the balance sheet for the relevant assessment year. CIT (A) was not justified in confirming the addition on account of diamond jewellery. - Decided in favour of assessee.

Summary

Issues Involved:
1. Disallowance of unexplained expenditure - premium paid on life insurance policy under section 69C of the Income Tax Act.
2. Addition of unexplained jewellery under section 69A of the Income Tax Act.

Analysis:

Issue 1: Disallowance of unexplained expenditure - premium paid on life insurance policy under section 69C of the Income Tax Act:
- The Assessee's appeals were directed against the order of the Commissioner of Income tax (Appeals) concerning the disallowance of premium paid on life insurance policies under section 69C of the Act for Assessment Years 2011-12 to 2013-14.
- The Assessing Officer (AO) disallowed the premium payment as unexplained expenditure due to the lack of supporting documents and absence of payment reflection in the bank account.
- The Commissioner of Income tax (Appeals) confirmed the AO's decision, leading to the Assessee's appeal before the Tribunal.
- The Assessee provided evidence of premium payment through receipts and cash book entries, which were not considered by the lower authorities.
- Upon review, the Tribunal found that the Assessee had submitted the necessary LIC premium receipts and cash book entries, leading to the deletion of the disallowance.
- Consequently, the Tribunal allowed the Assessee's appeal for all three assessment years, directing the deletion of the disallowance under section 69C of the Act.

Issue 2: Addition of unexplained jewellery under section 69A of the Income Tax Act:
- The Assessee's appeal contested the addition of ?1,00,000 as unexplained jewellery under section 69A of the Act for the Assessment Year 2013-14.
- The AO added the amount based on unexplained diamond jewellery found during a search, as the Assessee failed to provide purchase bills or evidence of the source.
- The Commissioner of Income tax (Appeals) partially upheld the addition, considering the total jewellery found and applying CBDT Instruction No. 1916.
- The Assessee argued that the jewellery weight was below the threshold for married female members as per CBDT instructions and cited relevant court judgments.
- After reviewing the inventory and supporting documents, the Tribunal concluded that the addition of ?1,00,000 for diamond jewellery was unjustified.
- The Tribunal noted that the total jewellery weight was within permissible limits, bills for gold purchase were provided, and the diamond jewellery was reflected in the balance sheet.
- Consequently, the Tribunal allowed the Assessee's appeal, directing the deletion of the addition for unexplained jewellery under section 69A of the Act.

Conclusion:
- The Tribunal allowed all three appeals of the Assessee for the assessment years 2011-12, 2012-13, and 2013-14, overturning the disallowances and additions made by the lower authorities.
- The orders were pronounced on 11.02.2020, in favor of the Assessee.