INCOME TAX ACT, 1961

Section 69A

Income from undisclosed sources - Addition under section 69A - AO alleged that assessee purchased diamond/gold jewellery and silver articles by making cash payments - Treatment as unexplained investment

During search and seizure operation in case of assessee, gold/diamond jewellery and silver articles were found in residential premises and lockers of the assessee. Assessee filed detailed submissions along with reconciliation of ownership of jewellery, purchase bills and affidavit of his wife owning up her share of jewellery. AO found that a part of the jewellery was supported by invoices and payments towards such jewellery had been made either through cheque or credit card. Accordingly, the AO treated such jewellery as explained. Insofar as, the balance jewellery, the AO observed that they were either purchased through cash, or, as per the explanation of the assessee, were received as gift at the time of marriage and other social occasions. Alleging that the assessee failed to explain the source of acquisition of such jewellery through proper evidence, the AO treated them as unexplained investment under section 69A. Held: It was found that assessee participated in 'monthly basis scheme' launched by certain jewellery makers under which he made monthly payment in cash or credit card and only a small amount of such payment was made in cash. Similarly, the assessee converted old ornaments to new ornaments by paying making charges and only a meager amount was paid in cash towards the making charges. Thus, the allegation of the AO that the assessee purchased the diamond/gold jewellery and silver articles by making cash payment was without any basis. Further, it was noticed that the assessee furnished an affidavit of his wife, wherein the receipt of diamond/gold jewellery and silver articles as gifts on specific events had been clearly mentioned. It was also observed that the AO allowed an allowance of 500 grams in respect of gold jewellery only in respect of assessee and his wife. Whereas, as per CBDT Instruction No. 1916, dated 11-5-1994, the allowance of 500 grams has to be granted in respect of each married lady and 250 grams for each unmarried girl and 100 grams for each male member of the family. Now, it is well-settled position of law that the said CBDT Instruction would also be applicable in respect of addition made under section 69A. Therefore, going by the said CBDT Instruction, there would be no unexplained jewellery to be treated as unexplained investment. Hence, addition made on account of unexplained investment under section 69A was deleted.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2013-14

INCOME TAX ACT, 1961

Section 234B

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