Inherited jewellery deemed legitimate, ITAT rules against addition under Section 69A

The ITAT allowed the appeal of the assessee, directing the deletion of the addition under Section 69A for unexplained jewellery. The ITAT found that the jewellery was inherited and acquired over time from tax-paid income, belonging to the deceased in-laws. Additionally, the jewellery recorded in the business books was considered legitimate, and the AO's enhancement of weight was deemed unjustified. The order was pronounced on 14th June 2022.

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Issues Involved:

1. Addition of Rs. 11,84,000/- under Section 69A for unexplained jewellery.
2. Non-allowance of benefit for inherited gold jewellery from the assessee's in-laws.
3. Non-allowance of credit for gold jewellery recorded in the books of M/s. S.K. Jewellers.
4. Assessment of jewellery as income under Section 115BBE.

Issue-wise Detailed Analysis:

1. Addition of Rs. 11,84,000/- under Section 69A for unexplained jewellery:

The assessee challenged the confirmation of the addition of Rs. 11,84,000/- under Section 69A for unexplained jewellery by the CIT(A). The jewellery in question was found during a search and seizure operation at the assessee's residence and a jointly held bank locker. The AO had accepted the explanation for 800 grams of jewellery based on family size but did not accept the explanation for the remaining 460.64 grams, resulting in the addition under Section 69A.

2. Non-allowance of benefit for inherited gold jewellery from the assessee's in-laws:

The assessee argued that the jewellery found in the locker was inherited from her deceased in-laws. The locker was jointly held with her late father-in-law. The CIT(A) did not allow credit for the jewellery owned by the in-laws, as there was no claim made during the assessment proceedings. The assessee contended that the jewellery belonged to her in-laws and should be considered accordingly.

3. Non-allowance of credit for gold jewellery recorded in the books of M/s. S.K. Jewellers:

The assessee claimed that gold jewellery weighing 538.33 grams was recorded in the books of M/s. S.K. Jewellers, her husband's business. The CIT(A) did not allow credit for this jewellery, stating that there was no material on record to substantiate the claim that the stock-in-trade was taken to the residence for valuation. The assessee argued that the jewellery was part of the business stock and should be credited accordingly.

4. Assessment of jewellery as income under Section 115BBE:

The assessee contested the assessment of the jewellery as income under Section 115BBE. The AO had enhanced the weight of the jewellery found by converting the weight of stones and diamonds to gold, which the assessee argued was contrary to legal precedents and CBDT instructions. The ITAT noted that no loose stones or diamonds were found, and the jewellery was studded with stones/diamonds, making the AO's enhancement unsustainable.

Judgment:

The ITAT considered the submissions and facts on record, including the statements made during the search and the explanations provided by the assessee. The ITAT found that the jewellery was inherited and acquired over time from tax-paid income, and the assessee's husband was the only child of the deceased in-laws. The ITAT also noted that the jewellery was recorded in the books of the business and that the enhancement by the AO was not justified.

The ITAT concluded that the addition under Section 69A could not be sustained and directed the deletion of the addition. The appeal of the assessee was allowed, and the order was pronounced on 14th June 2022.

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