In a recent case, the Delhi ‘A’ bench of the Income Tax Appellate Tribunal ( ITAT ) held that income tax additions made on jewelry under section 69B of the Income Tax Act, 1961 was invalid as the Assessing Officer (AO) did so by assuming equal ownership among cohabitants without actually verifying who owns how much of the jewelry.
The assessee/appellant in this case is Ms. Ankita Aggarwal. During a search and seizure operation conducted at the residential premises of Sant Lal Aggarwal, jewelry valued at ₹78,77,328 was found. The jewelry was alleged to belong to three individuals namely Rajni Aggarwal, Ankita Aggarwal, and Khushboo Aggarwal.
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The assessee provided a sworn affidavit asserting that jewelry worth ₹9,50,000 belonged to her, while the remaining jewelry was claimed to belong to the other family members.
The Income tax Assessing Officer, however, was not satisfied with the evidence presented and questioned the validity of the affidavit, noting that it was not notarized. Consequently, the AO apportioned the total value of the jewelry equally among the three women, attributing ₹26,25,776 to the assessee .
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This amount was subsequently added to her income as an undisclosed investment under section 69B of the tax statute. Aggrieved, the appellant contested the addition before the Commissioner of Income Tax (Appeals), but the addition made by the AO was confirmed. Aggrieved again, the assessee appealed before ITAT.
Before the tribunal, the assessee contested the addition, maintaining that only ₹9,50,000 worth of jewelry belonged to her, and that the remaining jewelry was owned by other family members. She also argued that the jewelry found was within the permissible limits prescribed by the Central Board of Direct Taxes (CBDT), and thus, no addition should have been made.
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After examining the case, the Bench comprising Mr Saktijit Dey and Mr Rifaur Rahman observed that there was no concrete evidence indicating that the jewelry was specifically in the possession of the assessee .
The tribunal noted that the jewelry was found in a shared residential premise, cohabited by multiple family members. Thus, It was unclear on what basis the AO had equally distributed the value of the jewelry among the three women, especially when affidavits had been submitted indicating otherwise.
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Given these circumstances, the ITAT concluded that the addition made by the AO was unsustainable and directed the AO to delete the addition related to the alleged undisclosed investment in jewelry.
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