ITAT deletes additions of jewelry and cash found during search applying CBDT guidelines and considering family circumstances

The ITAT Jodhpur allowed the assessee's appeal regarding additions made during search and seizure proceedings. For gold and silver jewelry, the tribunal applied CBDT guidelines for reasonable holdings (500g for married women, 250g for unmarried women, 100g for males) and deleted the addition of Rs. 28,96,104 based on proper working calculations submitted by the assessee. Regarding cash of Rs. 5,41,000 found during search, while the AO added Rs. 3 lakh and CIT(A) sustained Rs. 2 lakh, the ITAT deleted the entire cash addition considering the assessee's family size, social status, wealth tax filing history, and cooperation with revenue authorities.

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Issues Involved:
1. Addition of Rs. 28,96,104/- as unexplained investment in jewellery u/s 69A of the Income Tax Act.
2. Addition of Rs. 2,00,000/- as unexplained cash u/s 69A of the Income Tax Act.

Summary:

Issue 1: Addition of Rs. 28,96,104/- as unexplained investment in jewellery u/s 69A of the Income Tax Act

The assessee challenged the addition of Rs. 28,96,104/- made by the Assessing Officer (AO) and sustained by the Commissioner of Income Tax (Appeals) [CIT(A)] as unexplained investment in jewellery. The AO noted that during a search and seizure operation, jewellery valued at Rs. 1,11,64,994/- was found, and the assessee admitted jewellery worth Rs. 70,00,000/- as unexplained money u/s 69A of the Income Tax Act. However, in the return of income, the assessee declared only Rs. 41,03,896/- as unexplained investment, leading to the addition of the remaining Rs. 28,96,104/-.

The CIT(A) upheld the AO's addition, stating that the assessee failed to provide acceptable evidence to explain the source of the jewellery. The CIT(A) noted that the jewellery declared in the wealth tax return was less than the jewellery found and that the AO had already considered the CBDT circular regarding reasonable holding of jewellery.

The Tribunal, however, found merit in the assessee's reconciliation chart, which justified the declaration of Rs. 41,03,896/- based on the CBDT guidelines and the evidence provided. The Tribunal directed the AO to delete the addition of Rs. 28,96,104/-.

Issue 2: Addition of Rs. 2,00,000/- as unexplained cash u/s 69A of the Income Tax Act

The assessee also challenged the addition of Rs. 2,00,000/- sustained by the CIT(A) out of the total cash of Rs. 5,41,000/- found during the search. The AO had added Rs. 3,00,000/- as unexplained cash, while the CIT(A) granted relief of Rs. 1,00,000/- and sustained the addition of Rs. 2,00,000/-.

The Tribunal noted that the assessee had explained that Rs. 1,50,000/- belonged to M/s. Sarvodaya Agrotech India Limited and that the remaining cash should be considered as savings of the family. Considering the size and status of the family, the Tribunal found no reason to sustain the addition of Rs. 2,00,000/- and directed the AO to delete the addition.

Conclusion:

The Tribunal allowed the appeal of the assessee, directing the AO to delete the additions of Rs. 28,96,104/- and Rs. 2,00,000/- made u/s 69A of the Income Tax Act. The order was pronounced in the open Court on 18/03/2024.

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