The two member bench of Delhi Income Tax Appellate Tribunal (ITAT) ruled that stubbed diamond jewelry found during the search proceedings should not need to be declared in wealth tax return. Hence the bench deleted the addition made by the Assessing officer.
The assessee Shekhar Agarwal was included in a search seizure proceedings conducted by the investigation wing . During the search operation at the residential premise of the assessee and his wife Smt. Nidhi Agarwal, diamond jewellery of 13.75 carat was found from the possession of the assessee and his wife.
Thus, total diamond jewellery found in the possession of the assessee and his wife was 38.75 carats. 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 file any Wealth Tax Return.
Accordingly 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 an addition of Rs. 4,48,796/-.
Aggrieved, the assessee agitated the matter before the CIT(A) but without any success. Thus he filed a second appeal before the tribunal.
During the adjudication the assessee representative , Ved Jain argued 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.
Sanjay Gupta, the Department representative, strongly supported the orders of the authorities below.
Therefore the two-member bench Of N.K. Billaiya, (Accountant member) and Yogesh Kumar Us, (Judicial Member) observed that “diamond jewellery is always studded with gold and it is not a case of revenue that separate diamonds were found during the search operation. 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.”
Thus the bench deleted teh addition made by the assessing officer. Accordingly the bench allowed the appeal filed by the assessee.
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