ACIT Vs Sharada Narayanan (ITAT Bangalore)
ITAT Bangalore: Sale of Jewellery Inherited Through Will – Addition u/s 56 Deleted
Background
Assessee, Smt. Sharada Narayanan, declared LTCG of ₹6.29 crore on sale of jewellery valued at ₹7.09 crore, claimed as inherited from her late mother-in-law Smt. Kasturi Shoury through a notarized Will (dated 28.06.2007, disclosed after 7 years). The jewellery was sold to M/s Navarathan Jewellers, Bangalore between June 2015 and February 2016. Assessee reinvested ₹6.45 crore in a residential house, claiming exemption u/s 54F.
AO’s Assessment
AO rejected the claim holding that:
- Assessee failed to prove existence of inherited jewellery in hands of mother-in-law.
- Original Will not produced; genuineness doubted.
- Weight discrepancy: Will showed 7,243 gms, whereas jewellery sold was 26,038 gms.
- Assessee did not furnish complete list/description of jewellery.
- AO concluded there was no LTCG, treated ₹7.12 crore received from jeweller as income from other sources u/s 56, and denied exemption u/s 54F.
NFAC’s Order (CIT(A))
NFAC deleted the addition and accepted assessee’s claim, holding:
- Registration of Will not compulsory; notarized Will valid.
- Inheritance disclosed in assessee’s Wealth Tax return (AY 2015-16) showing ₹3.79 crore worth jewellery.
- Navarathan Jewellers’ register confirmed purchases in assessee’s name; payment was by RTGS.
- AO’s comments on “unequal distribution in Will” irrelevant – succession terms not subject to AO’s judgment.
- Once jewellery inherited & sold, LTCG arises; reinvestment u/s 54F verified.
- Directed AO to delete addition u/s 56 and grant 54F deduction.
Tribunal’s Findings
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