ITAT allows appeal, deletes undisclosed jewellery addition based on reasonable possession

The ITAT allowed the appeal by the assessee, setting aside the addition of Rs. 13,47,827 on account of alleged undisclosed jewellery. The ITAT found the jewellery possessed by the assessee to be reasonable and within prescribed limits based on family composition and CBDT circular guidelines. The decision emphasized that the ld. CIT(A) did not adequately consider these factors, leading to the direction to delete the addition. Consequently, all grounds of the assessee were allowed, resulting in the deletion of the sustained addition by the ld. CIT(A).

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Issues:
1. Addition on account of alleged undisclosed jewellery.

Analysis:
The case involved an appeal by the assessee against the order of the ld. CIT(A)-25, Delhi confirming the addition of Rs. 13,47,827 on account of alleged undisclosed jewellery. The search and seizure action under section 132 of the Income Tax Act was conducted, leading to the discovery of jewellery valued at Rs. 25,16,327 from the assessee's possession. The Assessing Officer made an addition of Rs. 24,09,327 to the income of the assessee under section 69A of the IT Act, 1961. The ld. CIT(A) upheld the addition to the extent of Rs. 13,47,827.

The assessee contended that the jewellery found in possession had various sources, including being ancestral, received as gifts during marriage, purchased as part of Hindu tradition, and received as tokens of love at family events. The assessee also referred to Section 56 of the Income Tax Act, 1961, exempting certain sums of money received from relatives or on the occasion of marriage. Additionally, the assessee cited instructions from the CBDT regarding the seizure of jewellery during search operations, specifying quantities that need not be seized based on marital status and gender. The assessee's family composition and the jewellery found were within the limits specified by the CBDT circular.

The ITAT, after considering the submissions and circulars, held that the jewellery possessed by the assessee was reasonable and fell within the prescribed limits, as per the CBDT circular. The ITAT noted that the ld. CIT(A) did not adequately consider the family status and circular provisions, leading to the direction to delete the addition sustained by the ld. CIT(A). Consequently, all grounds of the assessee were allowed, and the appeal in ITA No.4101/Del/2017 was allowed.

In conclusion, the ITAT set aside the addition made on account of undisclosed jewellery, emphasizing the reasonableness of the jewellery possessed by the assessee based on family composition and the CBDT circular guidelines. The ITAT's decision was in favor of the assessee, directing the deletion of the sustained addition by the ld. CIT(A).

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