ITAT upholds relief on ancestral jewellery and explained cash at assessee's premises

The ITAT upheld the CIT(A)'s decisions to allow relief on jewellery items worth Rs. 84,53,902/- and cash found at the assessee's residential premises to the extent of Rs. 4,93,824/-. The ITAT found that the jewellery was ancestral and gifted decades ago, and the cash was adequately explained through bank withdrawals and declared cash in hand. The revenue's appeal was dismissed by the ITAT.

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Issues Involved:

1. Relief on account of jewellery items worth Rs. 84,53,902/-.
2. Relief on account of cash found at the assessee's residential premises during the search action to the extent of Rs. 4,93,824/-.

Issue-wise Detailed Analysis:

1. Relief on Account of Jewellery Items Worth Rs. 84,53,902/-:

The revenue challenged the CIT(A)'s decision to allow relief on jewellery items worth Rs. 84,53,902/-. The revenue argued that the CIT(A) misconstrued CBDT Instruction No. 1916, which instructs that jewellery up to a certain limit should not be seized but does not imply that such jewellery should be treated as explained for assessment purposes. The revenue also pointed out that the assessee and his family members had not filed wealth-tax returns, which could indicate ownership of such jewellery items.

The assessee, a Director of India Bulls Real Estate Ltd., had various items of gold and diamond jewellery found during a search at his residence and locker. The jewellery was valued by a Government Approved Valuer. The assessee claimed that the jewellery belonged to his wife and mother, was ancestral, and was received as gifts during various family occasions. The AO rejected this explanation, adding the entire jewellery value as income from unexplained sources under Section 69A of the Act.

The CIT(A) noted that the assessee had filed copies of valuation reports indicating that the jewellery was more than two decades old and inherited three generations back. The CIT(A) relied on CBDT Circular No. 11.04.1994, which provides exemption limits for jewellery based on family status and customs. The CIT(A) granted part relief by verifying the items and matching them with the valuation report, allowing relief of Rs. 84,53,902/- and upholding an addition of Rs. 2,45,650/- for items not matching the valuation report.

The ITAT upheld the CIT(A)'s decision, noting that the jewellery was ancestral and gifted decades ago. The ITAT also referred to various court decisions supporting the CBDT instructions as a guiding factor for presuming jewellery within prescribed limits as explained. The ITAT dismissed the revenue's appeal on this ground.

2. Relief on Account of Cash Found at the Assessee's Residential Premises During the Search Action to the Extent of Rs. 4,93,824/-:

The revenue also challenged the CIT(A)'s decision to allow relief on cash found at the assessee's residential premises during the search action to the extent of Rs. 4,93,824/-. The AO had noted that the assessee could not provide a proper explanation for the cash found during the search. The assessee claimed that the cash was from withdrawals from his savings bank accounts and was reflected in his books of accounts. The AO rejected this explanation, adding the entire amount as income from unexplained sources under Section 69A of the Act.

The CIT(A) verified the withdrawals from the assessee's bank account and the balance sheet, noting that the assessee had shown cash in hand of Rs. 4,93,824/- in his income tax return for AY 2016-17. The CIT(A) allowed relief to the extent of Rs. 4,93,824/-, upholding an addition of Rs. 10,176/- as unexplained cash.

The ITAT upheld the CIT(A)'s decision, noting that the assessee had shown substantial withdrawals from his bank account and had declared cash in hand in his income tax return. The ITAT dismissed the revenue's appeal on this ground.

Conclusion:

The ITAT dismissed the revenue's appeal, upholding the CIT(A)'s decisions to allow relief on jewellery items worth Rs. 84,53,902/- and cash found at the assessee's residential premises to the extent of Rs. 4,93,824/-. The ITAT found that the jewellery was ancestral and gifted decades ago, and the cash was adequately explained through bank withdrawals and declared cash in hand.

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