2018 (11) TMI 1704 - AT - Income Tax

Addition on account of diamond jewellery found during the course of search - search and seizure operation u/s 132(1) - unexplained diamond jewellery of 47.18 carat treating the same as not covered by the CBDT Instruction No.1916 dated 11th April 1994 jewellery as disclosed in the Wealth-tax Act - HELD THAT - Merely because the jewellery is studded with the diamond of 47.18 carat in the instant case 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 which is within the permissible limits prescribed as per CBDT Instruction No.1916 dated 11th April 1994. The decision of Mrs. Nawaz Singhania vs. DCIT 2018 (1) TMI 21 - ITAT MUMBAI relied on by the ld. counsel for the assessee supports his case wherein the Tribunal after considering the CBDT Instruction dated 11th April 1994 has deleted the addition on account of gold and diamond jewellery. Since the addition has been deleted by the CIT(A) and the Revenue is not in appeal before the Tribunal therefore we are of the considered opinion that the CIT(A) is not justified in sustaining the addition on account of unexplained diamond jewellery of 47.18 carat treating the same as not covered by the CBDT Instruction No.1916 dated 11th April 1994. We therefore set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition. - Decided in favour of assessee.

Summary

Issues:
Addition of unexplained diamond jewellery during search operation.

Analysis:
1. The appeal was against the CIT(A)'s order sustaining the addition of Rs. 4,24,773 on account of diamond jewellery found during a search operation.
2. The Assessing Officer had added Rs. 13,86,500 to the total income of the assessee, considering the diamond jewellery unexplained.
3. The CIT(A) restricted the disallowance to Rs. 4,24,773 after detailed analysis.
4. The CIT(A) noted that the excess jewellery liable to be assessed in the hands of the appellant was Rs. 4,24,773, based on the facts presented.
5. The assessee challenged the addition, citing CBDT Instructions and a Mumbai Tribunal decision in a similar case.
6. The Tribunal found merit in the argument that diamond jewellery should be included in the definition of jewellery as per CBDT Instructions.
7. Relying on the Mumbai Tribunal decision, the Tribunal set aside the CIT(A)'s order and directed the Assessing Officer to delete the addition of Rs. 4,24,773.
8. The Tribunal allowed the appeal filed by the assessee, pronouncing the decision on 20.11.2018.