Gold Jewellery Seized u/s 132A Held Explained – Addition u/s 69 r.w.s. 115BBE Deleted

S. Chandra Prakash Vs ITO (ITAT Chennai)

The Chennai ITAT (C Bench) partly allowed the appeal of S. Chandra Prakash for AY 2021-22, holding that the gold jewellery seized under section 132A was duly explained and that the addition made under section 69 r.w.s. 115BBE was unsustainable.

The Tribunal held that:

• The entire addition was based primarily on a confession obtained during police custody and enquiry u/s 131(1A), which was subsequently retracted and not corroborated by independent evidence.
• Confessional statements alone, especially when retracted, cannot form the sole basis for assessment without supporting material.
• The books of account were neither rejected nor disproved, and the assessee produced credible evidence showing that the jewellery represented business stock-in-trade.
• The record clearly established that the jewellery belonged to the partnership firm (M/s Shuba Manggalam) engaged in the jewellery business, and not to the assessee in his individual capacity.
• Once the jewellery was found to be explained on merits, the legal contention regarding prohibition on seizure of stock-in-trade under the proviso to section 132(1)(iii) became academic.
• Consequently, taxing the jewellery as unexplained income in the hands of the individual assessee was legally untenable.

Outcome:

• Addition u/s 69 r.w.s. 115BBE deleted.
• Assessment set aside on merits.
• Appeal partly allowed, and the stay application dismissed as infructuous

FULL TEXT OF THE ORDER OF ITAT CHENNAI