ITAT deletes section 69A addition for 906.900 gms jewellery received as gifts over 25 years of marriage

ITAT Delhi ruled in favor of the assessee regarding addition under section 69A for jewellery found during search operations. The appellant claimed jewellery was received as gifts on various occasions including marriage and childbirth, common in Indian culture. The tribunal noted that collecting 906.900 gms of jewellery over 25 years of married life is not abnormal, citing Delhi HC precedent. Following established jurisprudence that excess jewellery is reasonable for wealthy families receiving gifts from relatives, the tribunal directed deletion of the addition made under section 69A.

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Issues Involved:
1. Addition of Rs. 9,66,000/- under section 69A of the Income Tax Act on account of unexplained jewellery.

Judgment Summary:

Issue 1: Addition of Rs. 9,66,000/- under section 69A of the Income Tax Act on account of unexplained jewellery.

The present appeal was filed by the assessee against the order of Ld. CIT(A)-4, Kanpur dated 27.02.2023. A search and seizure operation under section 132 of the Income Tax Act was conducted on 27.11.2020 in the premises of M/s. Shiv Shakti Constructions Group, including the appellant's premises. The assessee filed a return of income on 28.12.2021 declaring income of Rs. 3,90,510/-. The A.O. completed the assessment by making an addition of Rs. 9,66,000/- under section 69A of the IT Act on account of unexplained jewellery found during the search operation.

The appellant contended that the jewellery was gifted on various occasions such as marriage and birth of children, which is common in Indian culture. The jewellery found was 3061 grams in total, and the allowable limit as per CBDT Instruction No. 1916 was 1300 grams. The A.O. allowed 1300 grams and treated the remaining jewellery as unexplained, making an addition of Rs. 9,66,000/- in the hands of the appellant.

The appellant argued that the A.O. erred in taking the gross weight instead of the net weight to calculate the credit allowed as per the CBDT Instruction and contended that the A.O. should have given credit based on the CBDT Instruction to the appellant, not her husband.

The Tribunal observed that the total jewellery found was 715 grams, and the Revenue Authorities allowed 500 grams as per the circular, treating the remaining 215 grams as undisclosed income. The Tribunal noted that the assessee had been earning substantial income over the years, establishing the status of the family. The Tribunal referred to several precedents, including Ashok Chaddha vs. ITO, where it was held that collecting jewellery over a married life of 25-30 years is not abnormal and should not be treated as unexplained.

Based on the facts, circumstances, and various judgments cited, the Tribunal directed that the addition of Rs. 9,66,000/- be deleted.

In the result, the appeal of the assessee was allowed.

Order Pronounced in the Open Court on 13/11/2023.

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