2023 (7) TMI 25 - AT - Income Tax

Excess jewellery found during the course of search - Jewellery belonging to family member (i.e sone and wife) or not? - person to whom said jewellery belongs - in whose hands said additions can be made for excess jewellery found during the course of search? - HELD THAT - If a person is major and having known source of income and also filing income tax returns, then the assets including jewellery if any belongs to said person needs to be assessed in the hands of the person, who filed return of income even though jewellery found during the course of search is in a common premises. In this case, admittedly jewellery belongs to the son of the appellant was found in his bedroom, but not in the appellant s bedroom. Similarly, jewellery belongs to the wife of the assessee found in the locker belongs to her. Therefore, excess jewellery found in the name of son of the appellant and wife of the assessee cannot be assessed in the hands of the assessee. Assessing Officer directed to delete additions made towards excess gold jewellery, diamond jewellery and silver articles found in the possession of son and wife. Additions towards remaining Jewellery - HELD THAT - When the assessee has explained source for purchase of new gold jewellery and diamond jewellery and such source is available to explain the shortage or excess gold jewellery and diamond jewellery found during the course of search, the AO ought to have allowed telescopic benefit towards excess jewellery. CIT(A), without appreciating relevant facts simply sustained additions made by the AO. - AO directed to delete additions made towards excess gold jewellery and diamond jewellery found during the course of search and assessed in the hands of the assessee. Appeal filed by the assessee is allowed.

Summary

Issues Involved:
1. Validity of additions made under Section 69A for excess gold and diamond jewellery.
2. Consideration of jewellery found in the possession of family members.
3. Application of telescopic view for sale proceeds of silver articles.

Summary:

1. Validity of Additions under Section 69A for Excess Jewellery:
The assessment was completed under Section 143(3) rws 254 of the Income Tax Act, 1961, with additions based on the difference between the quantum of jewellery as per Wealth Tax Return and the quantum found during the search operation. The Assessing Officer (AO) added Rs. 1,28,83,999 for excess gold jewellery and Rs. 32,60,474 for excess diamond jewellery. The CIT(A) allowed relief for jewellery declared in wealth tax returns and for certain quantities belonging to the assessee's wife and son but confirmed the balance excess jewellery found during the search.

2. Consideration of Jewellery Found with Family Members:
The assessee contended that jewellery found in the possession of his son and wife should not be assessed in his hands as they are separate legal entities and assessed to income tax independently. The CIT(A) rejected this argument, stating that since they lived in a joint family, the jewellery found during the search needed to be explained by the assessee. However, the Tribunal held that excess jewellery found in the possession of Shri. Ajeeth Challani and Smt. Shobha Challani should not be assessed in the hands of the assessee, directing the AO to delete these additions.

3. Application of Telescopic View for Sale Proceeds of Silver Articles:
The assessee claimed that the sale value of silver during AY 2011-12 was utilized for purchasing gold and diamond jewellery. The AO did not allow this claim due to the absence of bills and vouchers. The Tribunal found that the AO erred in disregarding the assessee's argument, as the AO had taxed capital gains from the sale of silver articles. The Tribunal directed the AO to allow telescopic benefit towards the source available from the sale proceeds of silver articles for the excess gold and diamond jewellery found during the search.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, directing the AO to delete the additions made towards excess gold and diamond jewellery found during the search and assessed in the hands of the assessee. The order was pronounced on 28th June 2023 at Chennai.