Addition u/s 69A on account of unexplained jewellery

A search & seizure operation u/s 132(1) of the Income Tax Act, 1961 was carried out on the business and residential premises of M/s S.K. Jewellers Group of Cases which included the assessee who is shown to be the proprietor of M/s S.K. Jewellers. The subject matter of dispute pertains to the jewellery found at the residence of the assessee. It was held by the assessee that considering the Indian customs and traditions, jewellery to the extent of 800 grams was being allowed. The remaining was held to be unexplained and the addition of Rs.11,84,000 was made u/s 69A of the Income Tax Act.

Appeal before CIT(A): Aggrieved, the assessee went in appeal before the First Appellate Authority whereby the claim was held to be not substantiated as considering the customs and traditions in terms of the CBDT Circular, credit for jewellery for the three male members (assessee’s husband, two sons) to the extent of 100 grams each was given. For the assessee being a married lady, credit to the extent of 500 gms, of gold had been given. Thus, since credit for 800 gms. of gold already had been given, no further credit could be allowed and the addition of the said amount was sustained in appeal.

Appeal before ITAT: Aggrieved by this, the assessee is in appeal before the ITAT.  The tribunal observed that there was no logic in enhancing the quantity of gold by the weight of stones and diamonds. It was seen that there were no loose stones/diamonds found during the search but jewellery studded with stones/diamonds, which were neither valued nor any Expert Valuer’s report was available on record. Tribunal held that such an action cannot be supported as the question to sustain the addition does not arise, even if it is considered along with the gold reflected in the books of accounts of the assessee and the explanation on record that credit for the jewellery held by late father and mother-in-law is also considered. Therefore, the additions cannot be sustained. Hence, the tribunal being satisfied by the explanation offered by the assessee all along consistently, right from the assessment stage, the addition is directed to be deleted. Therefore, the appeal of the assessee was allowed.

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