2024 (3) TMI 428 - AT - Income Tax

Addition on account of diamond set received as gift by the appellant - Valuation of gift at cost of Acquistion or market value at the time of gift - The CIT(A) accepted the appellant's submission that the diamond set was indeed gifted by his late father. However, CIT(A) granted relief only to the extent of cost of Acquistion and confirmed the additions of difference amount between market value and cost - HELD THAT - When the cost of acquisition is proved the market value as on the date of marriage difference of 2 lac can not be added as income of the assessee. The assessee also submitted that such gift given by father who alternatively expired on 06.01.2016 and therefore, the affidavit of the mother of the assessee submitted to supplement the assessee s claim. Since this affidavit is not controverted by bringing any contrary to the matter. The statement made by the assessee supported by his mother s affidavit that his father has given the diamond set gift for his daughter in law cannot be valued at market price when the CIT(A) has already considered the relief to the extent of Rs. 3 lac there is no reason to sustain the addition of Rs. 2 lac being the cost of diamond set and market value at the time of marriage. This set of fact supported by version of the assessee and his mother on affidavit we direct to delete the addition sustained by the CIT(A). With this observation the appeal of the assessee is allowed.

Summary

Issues Involved:
1. Addition of Rs. 200,000 on account of a diamond set received as a gift.
2. Rectification of the order under section 154.

Summary:

Issue 1: Addition of Rs. 200,000 on account of a diamond set received as a gift:
The assessee contested the addition of Rs. 200,000 maintained by the CIT(A) concerning a diamond set received as a gift. The diamond set was claimed to have been purchased by the assessee's father in 2007 for Rs. 300,000 and gifted to the assessee during a housewarming ceremony. The AO initially added Rs. 500,000 to the assessee's income, estimating the value of the diamond set at the time of the daughter's marriage in 2011. The CIT(A) found the addition of Rs. 500,000 unjustifiable and reduced it to Rs. 300,000, considering the proof of purchase and affidavit from the assessee's mother. The Tribunal noted that the market value difference of Rs. 200,000 could not be added as income since the cost of acquisition was proven. The Tribunal directed the deletion of the Rs. 200,000 addition, fully allowing the assessee's appeal.

Issue 2: Rectification of the order under section 154:
The assessee filed an application under section 154 to rectify the order, arguing that the addition should not have arisen since the diamond set was purchased by the father in 2007. The CIT(A) acknowledged a typographical mistake and reduced the addition to Rs. 200,000 but did not fully rectify the order. The Tribunal found that the CIT(A) had already accepted the proof of purchase and the gift, and thus, there was no reason to sustain any addition. The Tribunal concluded that the addition of Rs. 200,000 should be deleted, as the appreciation in value over time does not justify the addition to the income.

Conclusion:
The Tribunal allowed the appeal, directing the deletion of the Rs. 200,000 addition, and emphasized that the market value difference could not be considered as income when the cost of acquisition was substantiated.