Diamond jewellery is always studded with gold – Addition u/s 69A deleted by ITAT

Diamond jewellery is always studded with gold and loose diamonds were found during search operation, ITAT deleted addition u/s 69A 

ABCAUS Case Law Citation:
ABCAUS 3832 (2024) (01) ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the order of the Assessing Officer (AO) who made the addition under section 69A of the Income Tax Act, 1961 (the Act) towards diamonf jewellery found during search.

A search and seizure opertaion was conducted by Investigation Wing. During the search operation at the residential premise of the assessee and his wife, diamond jewellery of more than 13 carat was found from the possession of the assessee and his wife.

Further, during the operation of locker, diamond jewellery of 25 carat was also found. Thus, total diamond jewellery found in the possession of the assessee and his wife was nearly 40 carat.

The AO found that in the Wealth Tax Return, the assessee has not declared any diamond jewellery and the wife of the assessee did not filed any Wealth Tax Return. The AO was of the firm belief that diamond Jewellery was not declared in the Wealth Tax Return. The AO sought explanation from the assessee and the assessee filed a detailed reply, which did not find any favour with the AO.

The AO completed the assessment by making addition u/s 69A of the Act towards the diamond jewellery.

Before the Tribunal, the assessee contended that on identical set of facts in the appeals of the familly members, the Co-ordinate Bench of the Tribunal has deleted the addition.

It was the submission that the jewellery was studded with diamond and no loose diamond were found and the jewellery declared in the Wealth Tax Return was much higher than the jewellery found at the time of search.

The Tribunal observed that it is an admitted fact that loose diamond were not found during the search only the jewellery studded with Diamond was found. Also, it was also a fact that the jewellery declared in the Wealth Tax Return was higher than the jewellery found.

The Tribunal observed that on identical set of facts, the Co-ordinate Bench has deleted the addition observing that the diamond jewellery is always studded with gold and when no separate/loose diamonds were found during the search operation. The Co-ordinate Bench opined that merely because the jewellery was studded with the diamonds of around 50 carat, the same cannot be added in the hands of the assessee when such jewellery formed part of the gross weight of the jewellery found from the premises of the assessee.

Following the decision of co-ordinate Bench , the ITAT directed the AO to delete the impugned addition.

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