Addition made for Jewellery belonging to mother in law deleted as it was given to assessee before her death-ITAT

Addition made for Jewellery belonging to mother-in-law deleted. Jewellery found during search was claimed as given to the assessee before her death-ITAT

The instant appeal was filed by the appellant assessee against the order of the CIT(A) enhancing the assessment by making an addition for unexplained investment in jewellery u/s 69 of the Income Tax Act, 1961 (the Act)with respect to the jewellery found during the search and claimed as belonging to deceased mother in law of the assessee.

ABCAUS Case Law Citation:
ABCAUS 2331 (2018) (05) ITAT

Important Case Laws Cited/relied upon by the parties:
National Auto World vs. ITO reported in 162 TTJ 74
Shri Satish Goyal vs. DCIT

Addition made for Jewellery belonging to mother in law deleted

Addition made for Jewellery belonging to mother in law deleted

A search and seizure operation u/s 132 of the Income Tax Act, 1961 (rhe Act) was conducted at the residential premises of the assessee. During the course of search operation, cash and jewellery were found from the residence of the assessee. Similarly, jewellery were also found from the Locker maintained with bank in the name of the assessee.

During the course of assessment proceedings, the Assessing Officer (AO) asked the assessee to explain the jewellery found from the residence as well as Locker of the assessee. The assessee explained that the jewellery found at the residence had been acquired by her on various occasions like marriage, birth of children, mundan ceremony of children as per culture and religion prevalent in the Hindu Society.

Regarding jewellery found from the locker, it was explained that there was a totaling mistake in the valuation report. It was further submitted that during the course of search, the statement of the assessee was recorded wherein she had stated that a portion of this jewellery originally belonged to her mother in law, who had given the same to the assessee before her death, since she was staying with the assessee at that time. A chart specifying the jewellery inherited from the mother in law of the assessee was filed before the Assessing Officer.

The Assessing Officer keeping in mind the social status, culture and religion prevalent in Hindu Society etc. allowed jewellery totalling to 1200 gms as under:

(i) The assessee 400 gms.
(ii) Two Sons 200 gms.
(iii) Husband 100 gms.
700 gms.
(iv) Jewellery belonging to mother in law of the assessee (treated as owned by mother in law.) 500 gms.
Total 1200 gms.

The Assessing Officer accordingly treated the remaining jewellery of 384 gms. as unexplained and added the same to the total income of the assessee as unexplained investment in jewellery u/s 69.

The assessee challenged the order of the AO before the CIT(A). However, the CIT(A) instead of granting any relief issued notice for an enhancement. CIT(A) did not accept the jewellery given by the mother in law of the assessee as belonging to the assessee and held that as per CBDT Instruction 1994, the 500 gms allowable to the assessee will take care of such jewellery. He made an addition regarding jewellery of appellant’s mother in law treating it as unexplained investment by observing that in view of the judicial pronouncements, no relief can be given on account of a deceased lady.

The Tribunal observed that It was an admitted fact that during the course of search jewellery totaling to 1584 gms were found from the residence and locker of the assessee out of which the Assessing Officer had accepted 1200 gms as explained which included the 500 gms belonging to mother in law of the assessee who was staying with the assessee prior to her death.

The Tribunal observed that it was  again an admitted fact that the assessee during the course of search had stated that a portion of the jewellery originally belonging to her mother in law was given by her to the assessee prior to her death since she was staying with her. The confirmation from the family members of the husband of the assessee was also filed before the Assessing Officer for which he had accepted the genuineness of such 500 gms apart from 700 gms as belonged to the assessee.

The ITAT observed that the Coordinate Bench in an identical case held that though the assessee could not furnish any clinching documentary evidence, however considering the status of assessee and the level of income of the entire family, it could not be ruled out that the assessee was in position of jewellery inherited from his parents.

In another identical case, it was held that it is customary in our society, where the concept of joint family system is still existing, that the members keep their jewelleries jointly and ladies wear them at times as per their wish.

Relying on the judgments of Coordinate Benches, the ITAT opined that since, the  brothers and sisters of the husband of the assessee had confirmed that the mother in law of the assessee had given her jewellery weighing 500 gms before her death since she was staying with her and since the Assessing Officer had also accepted the same, therefore, the order of CIT(A) enhancing the income was not proper.

The Tribunal set-aside the order of CIT(A) and allow the jewellery to the extent of 500 gms as explained.

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