Jewellery purportedly received from grandparent under Will added as unexplained credits

Addition u/s 68 for jewellery purportedly received on death of grandparent under Will upheld.

In a recent judgment, ITAT upheld the addition u/s 68 of the jewellery claimed to have been received on death of grandparent under Will as grandmother was a housewife with no regular sources of income.

ABCAUS Case Law Citation:
ABCAUS 3983 (2024) (04) ITAT

Important Case Laws relied upon:
GTC Industries Ltd. v. ACIT, ITAT Mumbai, 1995 (1998) 65 ITD 380 (Bom.)
Roshan Di Hatti vs. CIT, [1977] 107 ITR 938 (SC)
Kale Khan Mohammad Hanif vs. CIT [1963] 50 ITR 1 (SC)
CIT vs. T. Mohanakala, (2007) 291 ITR 278 (SC)
Nokia India (P.) Ltd v. DCIT, ITAT Delhi, 2015 (2015) 59 212
CIT v. Kuwer Fibers (P.) Ltd., Delhi High Court, 2017 (2017) 77 345 (Delhi)
M/s Pebble Investment and Finance Ltd v. ITO, 2017-TIOL-238-SC-IT
Mukesh Nanubhai Desai v. ACIT, (2022) 142 85
ITO v. M. Pirai Choodi (2011) 334 ITR 262 (SC)

In the instant case, the assessee had challenged the order passed by the National Faceless Appeal Centre / CIT(A) in confirming addition as unexplained cash credit u/s 68 towards jewellery claimed as received on death of grandparent under Will.

The assessee was an individual and was engaged in the business of trading of cut and polished diamonds. The case of the assessee was selected for compulsory scrutiny based on the information received from the Investigation Wing. The Assessing Officer (AO) found that the assessee had disclosed long-term capital gain from sale of jewellery and diamonds.

The AO asked the assessee to submit copies of purchase and sales bills and ledger accounts of the parties from whom the jewellery and diamonds were purchased and sold.

Regarding the source of acquisition of the jewelleryand diamonds, it was explained that the assessee received jewellery upon death of his grandparent as per the “Will” executed by the Grandmother.

However, the AO did not accept the explanation by observing that the age of the testator/grandmother was stated to be 75 years in the first para and in second para it is mentioned as 70 years. The AO also observed that the possession of high quantity of jewellery and carats of diamonds by the testator without any visible source of income was not possible.

According to the AO the testator was a house wife and therefore, according to the AO, gifting such large quantity of jewellery and diamonds to her grandson (assessee) as well as to her daughters, was unbelievable.

The AO taxed the income offered as capital gain as unexplained cash credit u/s 68 of the Act, invoked the provisions of section 115BBE of the Act and levied penalty u/s 271AAC of the Act.

The Tribunal noted the mentioning of different age of grandmother at two places in the Will as found by the AO and opined that the testator unlikely to make such glaring mistake when she states that she was “mentally fit and healthy” and that she has not executed any other will or testament.

Further the Tribunal observed that it was beyond the realm of human probability that she gifted/gave away such high value gold jewellery and diamonds to her grandson but there was no evidence of any such gift to her own children. There were also no supporting documents to prove the source of the aforesaid assets, since she was a housewife with no regular source of income. Also, there was no independent evidence apart from the “Will” which can prove that she was in possession of the impugned assets at the time of creation of the will.

The Tribunal also noted that the receipt of gold jewellery and diamonds of such high value was never shown either in the Income-tax returns or the Wealth-tax returns of the assessee for a very long period of 17 years.

In absence of the probate and existence of overwhelming surrounding circumstances, the Tribunal opined that the explanation of the appellant regarding the nature and source of the gold jewellery and diamonds was not prima facie satisfactory. And the concurrent findings of the AO and CIT(A) that the said will deed is concocted and cannot be relied upon is true.

In view of the above the Tribunal held that the onus with regard to creditworthiness and genuineness of the transactions has not been discharged satisfactorily as mandated in section 68 of the Act.

Therefore, the addition made by the AO and upheld by the CIT(A) was sustained and the grounds were dismissed.

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