2024 (9) TMI 337 - AT - Income Tax

Addition u/s 69A - unexplained jewellery found during the course of search - assessees submitted that the contentions regarding the jewellery belonging to joint family consisting of families of three brothers - HELD THAT - Assessee was able to explain the jewellery to the extent of 9,522 gms by way of purchase bills and mode of payments thereon. It is not the case of the Revenue that assessee has made payments in cash for purchase of jewellery out of undisclosed sources of income. Further assessees explanation that they have converted diamonds partly to gold jewellery is a plausible explanation which cannot be brushed aside as it is the usual custom and practice of the household ladies to do so. Considering the overall family status and community of the assessees holding of jewellery of 9,522 gms which is also supported by purchase bills stands clearly explained. As could be seen from the above table there is excess diamonds to the extent of 188 carats (valued at Rs. -47,00,000/-) and there is a deficit in gold jewellery to the extent of 830 gms (valued at Rs. 27,39,000/-) and this could be for the reason that the assessee converted diamonds partly to jewellery which is a plausible explanation. If this explanation is accepted and set off the excess diamond against deficit in gold is considered, there is no addition that would be warranted u/s 69A - we allow ground no.1 of grounds of appeal of the assessee.

Issues Involved:
1. Justification of additions under Section 69A for unexplained jewellery.
2. Absence of adverse material or evidence supporting the allegation of unexplained jewellery.
3. Consideration of joint family status and common use of jewellery.
4. Valuation of jewellery found during the search.
5. Legality of invoking Section 115BBE.
6. Validity of the order under Section 153A read with Section 143(3) without proper approval under Section 153D.

Detailed Analysis:

1. Justification of Additions under Section 69A for Unexplained Jewellery:
The primary issue was whether the addition of Rs. 1,31,30,074/- under Section 69A for unexplained jewellery was justified. The Assessee argued that the jewellery was for common use among family members and was acquired over time through self-acquisition, gifts, ancestral jewellery, and streedhan. The AO, however, made additions based on the jewellery found during the search.

2. Absence of Adverse Material or Evidence Supporting the Allegation of Unexplained Jewellery:
The Assessee contended that there was no adverse material or evidence indicating that the jewellery was acquired or purchased in the relevant year. The AO's invocation of Section 69A was deemed arbitrary and misconceived. The Assessee provided documentary evidence, including bills, invoices, and a will, to support their claim.

3. Consideration of Joint Family Status and Common Use of Jewellery:
The Assessee argued that being part of a joint family, the jewellery found during the search was for common use and acquired from a common pool of funds. The jewellery was shared among family members, making it difficult to identify individual ownership. The AO and CIT(A) partially accepted this argument but did not fully consider the joint family status.

4. Valuation of Jewellery Found During the Search:
The Assessee objected to the valuation of the jewellery, claiming it was highly excessive and irrational. The AO made additions based on the valuation, which the CIT(A) partly upheld. The Assessee provided a detailed reconciliation of the jewellery found and explained its sources, including purchase bills and gifts.

5. Legality of Invoking Section 115BBE:
The Assessee challenged the legality of invoking Section 115BBE, arguing that the addition under Section 69A was not sustainable. The AO and CIT(A) did not address this contention directly, focusing instead on the justification for the additions.

6. Validity of the Order under Section 153A read with Section 143(3) without Proper Approval under Section 153D:
The Assessee argued that the order under Section 153A read with Section 143(3) was invalid as it lacked proper approval under Section 153D. The AO and CIT(A) did not provide a clear basis for disregarding this procedural requirement.

Judgment Summary:
The Tribunal examined the arguments and evidence presented by both parties. It was observed that the Assessee's family was a joint family living together, and the jewellery was for common use. The Tribunal found merit in the Assessee's explanation that the jewellery was accumulated over time and supported by purchase bills and gifts. The Tribunal accepted the Assessee's reconciliation of the jewellery and noted that the excess diamonds could be set off against the deficit in gold jewellery.

The Tribunal concluded that the jewellery found during the search was fully explained and verifiable from the documents provided. Consequently, the addition under Section 69A was not warranted. The Tribunal allowed the Assessee's appeal on this ground, making the adjudication of other grounds academic.

Conclusion:
The appeals of the Assessees were allowed, and the additions under Section 69A were deleted. The Tribunal emphasized the importance of considering the joint family status and the documentary evidence provided by the Assessee. The decision highlighted the need for a thorough and fair assessment of the facts and circumstances in cases involving unexplained jewellery.

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