Tribunal overturns revenue's additions for alleged capital gains and unexplained investments

The tribunal allowed the appeal of the assessee, directing the deletion of the additions made by the revenue authorities for Long Term Capital Gain on the alleged sale of jewellery and diamond, as well as under Section 69A for unexplained investment in jewellery. The tribunal emphasized the lack of concrete evidence to support the additions, ruling that the differences in declared and found jewellery did not automatically imply a sale or unexplained investment.

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Issues involved:
The judgment involves the following issues: Addition of Long Term Capital Gain (LTCG) on alleged sale of jewellery, addition of LTCG on alleged sale of diamond, and addition under section 69A on account of alleged unexplained investment in jewellery.

Addition of Long Term Capital Gain on Sale of Jewellery:
The appeal was filed against the order upholding the addition of Rs.71,86,743 as LTCG on alleged sale of jewellery. The search operation under section 132 of the Income Tax Act, 1961 revealed a discrepancy in the jewellery found compared to the declared amount. The Assessing Officer calculated LTCG based on the presumption of sale of "undetected" jewellery, without concrete evidence. The tribunal ruled that there was no provision in the Act to deem the difference between declared and found jewellery as a sale, leading to LTCG. Therefore, the addition on account of LTCG on the purported sale of jewellery was directed to be deleted.

Addition of Long Term Capital Gain on Sale of Diamond:
Similarly, an addition of Rs.29,19,732 was made as LTCG on the alleged sale of diamond. The tribunal examined the issue holistically, considering the discrepancy in the description of jewellery due to loose diamonds being studded subsequently. It was held that no addition could be made on this account, as the disclosed jewellery as per Wealth Tax Return and found in the premises did not warrant such an addition.

Addition under Section 69A - Unexplained Investment in Jewellery:
An addition of Rs.16,77,368 was made under section 69A on account of alleged unexplained investment in jewellery. The tribunal observed that the seized jewellery was part of the disclosed jewellery, and the description discrepancy arose due to loose diamonds being studded in the jewellery. Considering the entire disclosed jewellery, no addition was deemed necessary under section 69A.

Conclusion:
The tribunal allowed the appeal of the assessee, emphasizing the lack of concrete evidence to support the additions made by the revenue authorities. The judgment was pronounced in the open court on 17/05/2023.

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