Appellant wins appeal against Rs. 2 lakh addition for diamond set gift from deceased father

The ITAT Jodhpur allowed the appellant's appeal regarding addition of Rs. 2 lakh on account of a diamond set received as gift. The CIT(A) had accepted that the diamond set was genuinely gifted by appellant's late father but granted relief only for acquisition cost, confirming addition for the difference between market value and cost. The ITAT held that when acquisition cost is proved, the difference between market value at time of marriage and cost cannot be added as income. The appellant's claim was supported by mother's affidavit after father's death, which remained uncontroverted. The ITAT directed deletion of the sustained addition.

---

---

Issues Involved:
1. Addition of Rs. 200,000 on account of a diamond set received as a gift.
2. Rectification of the order under section 154.

Summary:

Issue 1: Addition of Rs. 200,000 on account of a diamond set received as a gift:
The assessee contested the addition of Rs. 200,000 maintained by the CIT(A) concerning a diamond set received as a gift. The diamond set was claimed to have been purchased by the assessee's father in 2007 for Rs. 300,000 and gifted to the assessee during a housewarming ceremony. The AO initially added Rs. 500,000 to the assessee's income, estimating the value of the diamond set at the time of the daughter's marriage in 2011. The CIT(A) found the addition of Rs. 500,000 unjustifiable and reduced it to Rs. 300,000, considering the proof of purchase and affidavit from the assessee's mother. The Tribunal noted that the market value difference of Rs. 200,000 could not be added as income since the cost of acquisition was proven. The Tribunal directed the deletion of the Rs. 200,000 addition, fully allowing the assessee's appeal.

Issue 2: Rectification of the order under section 154:
The assessee filed an application under section 154 to rectify the order, arguing that the addition should not have arisen since the diamond set was purchased by the father in 2007. The CIT(A) acknowledged a typographical mistake and reduced the addition to Rs. 200,000 but did not fully rectify the order. The Tribunal found that the CIT(A) had already accepted the proof of purchase and the gift, and thus, there was no reason to sustain any addition. The Tribunal concluded that the addition of Rs. 200,000 should be deleted, as the appreciation in value over time does not justify the addition to the income.

Conclusion:
The Tribunal allowed the appeal, directing the deletion of the Rs. 200,000 addition, and emphasized that the market value difference could not be considered as income when the cost of acquisition was substantiated.

---