Wealthy family's excess jewellery from relatives deemed reasonable gifts, no section 69A addition warranted

The ITAT Delhi allowed the appellant's appeal against addition under section 69A for unexplained jewellery found during search and seizure operations under section 132. The appellant claimed the jewellery was received as gifts during various occasions like marriage and birth of children, which are common in Indian culture. Following the precedent in Preeti Singh case, the Tribunal held that since the assessee belonged to a wealthy family with sufficient return income and jewellery was received from relatives on occasions, the excess jewellery was reasonable and no addition under section 69A was warranted.

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Issues Involved:
1. Legitimacy of addition under Section 69A of the IT Act for unexplained jewelry.
2. Application of CBDT Instruction No. 1916 regarding the allowable limit of jewelry.
3. Consideration of family status, customs, and traditions in assessing unexplained jewelry.

Summary:

1. Legitimacy of Addition under Section 69A of the IT Act:
The appeal was filed against the order of Ld. CIT(A)-4, Kanpur, which confirmed the addition of Rs. 59,57,480/- under Section 69A of the IT Act for unexplained jewelry found during a search and seizure operation conducted on 27.11.2020. The appellant declared an income of Rs. 42,15,110/-, and the assessment included an additional Rs. 59,57,480/- for unexplained jewelry.

2. Application of CBDT Instruction No. 1916:
The appellant argued that the jewelry was gifted on various occasions and should be considered as per CBDT Instruction No. 1916, which allows specific limits for jewelry possession without being treated as unexplained. The Instruction specifies 500 gms per married lady, 250 gms per unmarried lady, and 100 gms per male member. The AO initially allowed 1300 gms for the family but added the value of the remaining jewelry as unexplained.

3. Consideration of Family Status, Customs, and Traditions:
The Tribunal referenced several judgments, including Ashok Chaddha vs. ITO and Vibhu Aggarwal vs. DCIT, which emphasized considering the family's status, customs, and traditions. It was noted that collecting jewelry over a married life of several years is not abnormal. The Tribunal found that the AO's strict adherence to the 500 gms limit without considering the family's status and customs was inappropriate.

Conclusion:
The Tribunal concluded that the addition of Rs. 9,66,000/- under Section 69A was not justified. The appellant's income over the years showed substantial earnings, supporting the possession of the jewelry. The Tribunal directed the deletion of the addition, allowing the appeal in favor of the appellant.

Order Pronounced:
The appeal of the assessee was allowed, and the order was pronounced in the Open Court on 17/11/2023.

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