2022 (12) TMI 240 - AT - Income Tax

Addition u/s. 69A on account of unexplained jewellery - search seizure operation u/s. 132(1) - AO by not allowing the benefit of gold jewellery inherited from mother in law and father in law of assessee and also joint holder of locker - AO by not allowing the credit of gold jewellery of 538.33 gms as per books of accounts of Sanjay Aggarwal prop. M/s. S.K. Jewellers - HELD THAT - It is a matter of fact that search was conducted on the business premises of the assessee and the residence of the assessee was also covered therein. It is a matter of fact that the business was run by Shri Sanjay Aggarwal alongwith his wife. AR has repeatedly submitted before us that in the case of the husband, no addition has been made. He has questioned that if it was unexplained gold, then the repeated submissions of the assessee before the AO and before the CIT(A) was that it pertained to the stock in trade of assessee's business. We find on a perusal of the respective orders of the authorities that there is no rebuttal on any of these submissions. The argument of the Revenue that no such statements were given at the time of the search cannot have any meaning in the present case. Hence, the occasion for requiring the assessee to substantiate its case relying on the statement recorded during the search would arise only if a relevant question is put to the assessee. The questions put to the assessee cannot be dictated to by the assessee and if in the statement recorded, certain facts subsequently repeatedly pleaded on record are not discussed, then absence of any discussion in the statement recorded of those facts by itself cannot be allowed to be given advantage to the Revenue justifying the ignoring of the repeated submission on record. The submission has to be dealt with facts on record. No such effort has been done. Also seen that repeatedly the argument on facts that the assessee's husband was the only child of late Shri Santosh Kumar Aggarwal and late Smt. Janak Aggarwal. The assessee as per record had been married for almost 29 years and Mrs. Janak Aggarwal died on 31.03.2010 i.e. just before the search period and Shri Santosh Aggarwal died on 21.05.2015. Thus, for this specific period, the benefit of 500 grams of jewellery in the hands of Shri Santosh Kumar Aggarwal on account of jewellery held by his wife and 100 grams of jewellery in his own hand was very much available to the family of the assessee. The fact available on record that the locker was maintained in the name of Shri Santosh Kumar Aggarwal alongwith his daughter-in-law i.e. the assessee is a fact also available on record. We find no logic for enhancing the quantity of gold by the weight of stones and diamonds. There was no loose stones/diamonds found during the search. What was found was jewellery studded with stones/diamonds. They have neither been valued nor any Expert Valuer's report is available on record. Such an action cannot be supported. Even if it is considered even then alongwith the gold reflected in the books of accounts of the assessee and the explanation on record that credit for the jewellery held by late father and mother-in-law is also considered the occasion to sustain the addition even then does not arise. We find that the addition made cannot be sustained. Appeal of assessee allowed.

Issues Involved:

1. Addition of Rs. 11,84,000/- under Section 69A for unexplained jewellery.
2. Non-allowance of benefit for inherited gold jewellery from the assessee's in-laws.
3. Non-allowance of credit for gold jewellery recorded in the books of M/s. S.K. Jewellers.
4. Assessment of jewellery as income under Section 115BBE.

Issue-wise Detailed Analysis:

1. Addition of Rs. 11,84,000/- under Section 69A for unexplained jewellery:

The assessee challenged the confirmation of the addition of Rs. 11,84,000/- under Section 69A for unexplained jewellery by the CIT(A). The jewellery in question was found during a search and seizure operation at the assessee's residence and a jointly held bank locker. The AO had accepted the explanation for 800 grams of jewellery based on family size but did not accept the explanation for the remaining 460.64 grams, resulting in the addition under Section 69A.

2. Non-allowance of benefit for inherited gold jewellery from the assessee's in-laws:

The assessee argued that the jewellery found in the locker was inherited from her deceased in-laws. The locker was jointly held with her late father-in-law. The CIT(A) did not allow credit for the jewellery owned by the in-laws, as there was no claim made during the assessment proceedings. The assessee contended that the jewellery belonged to her in-laws and should be considered accordingly.

3. Non-allowance of credit for gold jewellery recorded in the books of M/s. S.K. Jewellers:

The assessee claimed that gold jewellery weighing 538.33 grams was recorded in the books of M/s. S.K. Jewellers, her husband's business. The CIT(A) did not allow credit for this jewellery, stating that there was no material on record to substantiate the claim that the stock-in-trade was taken to the residence for valuation. The assessee argued that the jewellery was part of the business stock and should be credited accordingly.

4. Assessment of jewellery as income under Section 115BBE:

The assessee contested the assessment of the jewellery as income under Section 115BBE. The AO had enhanced the weight of the jewellery found by converting the weight of stones and diamonds to gold, which the assessee argued was contrary to legal precedents and CBDT instructions. The ITAT noted that no loose stones or diamonds were found, and the jewellery was studded with stones/diamonds, making the AO's enhancement unsustainable.

Judgment:

The ITAT considered the submissions and facts on record, including the statements made during the search and the explanations provided by the assessee. The ITAT found that the jewellery was inherited and acquired over time from tax-paid income, and the assessee's husband was the only child of the deceased in-laws. The ITAT also noted that the jewellery was recorded in the books of the business and that the enhancement by the AO was not justified.

The ITAT concluded that the addition under Section 69A could not be sustained and directed the deletion of the addition. The appeal of the assessee was allowed, and the order was pronounced on 14th June 2022.

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