Assessee's Appeal Granted: Addition for Capital Gain & Unexplained Investment Deleted

The Tribunal allowed the appeal of the assessee, deleting both the additions of Rs. 1,33,61,901 on account of alleged long-term capital gain on jewellery and Rs. 8,59,018 under section 69A for unexplained investment in jewellery.

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Issues Involved:

1. Addition of Rs. 1,33,61,901 on account of alleged long-term capital gain on jewellery.
2. Addition of Rs. 8,59,018 under section 69A on account of alleged unexplained investment in jewellery.

Issue-Wise Detailed Analysis:

1. Addition of Rs. 1,33,61,901 on Account of Alleged Long-Term Capital Gain on Jewellery:

A search and seizure operation under section 132 of the Income Tax Act was conducted on 16.12.2014, which included the assessee's premises. Jewellery worth Rs. 54,70,566 was found, but the assessee had declared jewellery worth Rs. 1,93,05,359 in the Wealth Tax Return for Assessment Year 2013-14. The Assessing Officer (AO) concluded that the shortfall in jewellery (6267.39 grams) was sold and computed long-term capital gains based on the value declared in the Wealth Tax Return for AY 2013-14. The AO adopted the year 1997 as the purchase year and calculated the capital gain at Rs. 1,33,61,901.

The assessee argued that the jewellery was not sold but was with relatives or a valuer, and provided an affidavit and details of the jewellery. The AO, however, was not convinced and maintained the addition. The CIT(A) upheld the AO's decision.

The Tribunal noted that the AO's conclusion was based on suspicion without any concrete evidence of sale. The assessee's explanation that the jewellery was with relatives or a valuer was not disproven by the Revenue. The Tribunal emphasized that additions cannot be based on mere suspicion and must be supported by evidence. Consequently, the Tribunal allowed the assessee's appeal on this ground, deleting the addition of Rs. 1,33,61,901.

2. Addition of Rs. 8,59,018 under Section 69A on Account of Alleged Unexplained Investment in Jewellery:

During the search, diamond jewellery worth Rs. 8,59,018 was found in a bank locker, which was not declared in the Wealth Tax Returns. The AO treated this as an unexplained investment and added the amount to the assessee's income under section 69A. The assessee contended that the jewellery was part of the total jewellery declared and no separate diamonds were found. The assessee argued that the addition was based on surmises without any tangible evidence.

The Tribunal observed that diamond jewellery is typically part of gold jewellery and no separate diamonds were found. The jewellery was part of the gross weight of the jewellery found during the search. The Tribunal held that the addition was not justified as the jewellery was already disclosed and accepted by the authorities. Therefore, the Tribunal allowed the assessee's appeal on this ground, deleting the addition of Rs. 8,59,018.

Conclusion:

The Tribunal allowed the appeal of the assessee, deleting both the additions of Rs. 1,33,61,901 on account of alleged long-term capital gain on jewellery and Rs. 8,59,018 under section 69A for unexplained investment in jewellery. The stay application was dismissed as it became infructuous. The order was pronounced in the Open Court on 30th October 2019.

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