ITAT Deletes Jewellery Addition, Considering Assessee’s family Background & professional standing

Mudita Chaturvedi Vs ACIT (ITAT Delhi)

The Income Tax Appellate Tribunal (ITAT) Delhi delivered a notable judgment in the case of Mudita Chaturvedi Vs. ACIT, overturning the decision of the Commissioner of Income Tax (Appeals) [CIT(A)]. This article provides a comprehensive overview of the case and the pivotal ruling issued by the ITAT.

Case Overview

• Background: The appeal by the assessee, Mudita Chaturvedi, pertained to the assessment year 2019-20. The sole grievance of the assessee was regarding the addition of Rs. 6,35,025 under section 69 r.w.s. 115BBE of the Income Tax Act.

• Search Operation: A search and seizure operation under section 132 of the Act was conducted by the Investigation Wing on 12th July 2018 in the Rohit Tiwari Group of cases. The locker of the assessee at New Delhi Vaults Limited was included in the operation, resulting in the discovery of jewellery weighing 719.916 grams.

• Assessee’s Explanation: The assessee claimed that the jewellery found in the locker constituted her Stri Dhan, received at the time of her marriage and on various festive occasions from her parents, in-laws, and relatives. Additionally, reliance was placed on CBDT Instruction No. 1916.
• AO’s Decision: Despite the explanation provided by the assessee, the Assessing Officer (AO) accepted only a portion of the jewellery as Stri Dhan and treated the excess weight as unexplained investment under section 69 of the Act r.w.s. 115BBE.
• CIT(A) Proceedings: The assessee appealed before the CIT(A), reiterating her claim of Stri Dhan. However, the CIT(A) modified the addition by considering the gross weight of jewellery found, albeit restricting the addition to the amount determined by the AO.

ITAT Delhi’s Verdict

• Family Background: The ITAT took cognizance of the family background of the assessee and her husband, emphasizing their reputed and financially sound status. The professional accomplishments and esteemed positions held by the family members were considered.
• Educational and Professional Credentials: Both the assessee and her husband were highly educated and held prestigious positions. The father-in-law of the assessee, a Senior IAS officer, further underscored the family’s stature.
• Judicial Analysis: Considering the significant lapse of time between the marriage of the assessee and the search operation, coupled with the family’s affluent background, the ITAT concluded that the possession of 719.91 grams of gold jewellery by the assessee was plausible.
• Verdict: The ITAT, therefore, ruled in favor of the assessee, directing the AO to delete the addition made under section 69 r.w.s. 115BBE of the Act.

Conclusion

The judgment delivered by the ITAT Delhi in the case of Mudita Chaturvedi Vs. ACIT highlights the importance of considering the entirety of circumstances, including family background and professional standing, while adjudicating tax disputes. This ruling serves as a precedent for equitable assessment and upholding taxpayer rights.

FULL TEXT OF THE ORDER OF ITAT DELHI

This appeal by the assessee is preferred against the order of the CIT(A)-27, New Delhi dated 04.01.2023 pertaining to A.Y. 2019-20.

2. The solitary grievance of the assessee is that the CIT(A) erred in confirming the addition of Rs.635025/- u/s. 69 r.w.s. 115BBE of the Act.

3. Representatives of both the sides were heard at length. Case records carefully perused. Briefly stated the facts of the case are that a search and seizure operation u/s. 132 of the Act was conducted by the Investigation Wing on 12.07.2018 in Rohit Tiwari Group of cases.

4. The locker of the assessee at New Delhi Vaults Limited was also covered and on operation of the locker jewellery of 719.916 grams amounting to Rs.27,34,231/- was found. Assessee was asked to explain the source of jewellery of 719.916 grams found in the locker and to show cause as to why the jewellery found should not be taxed as unexplained investment u/s. 69 of the Act.

5. Assessee filed a detailed reply explaining that the jewellery found in the locker is Stri Dhan of the assessee which was received by the assessee at the time of her marriage and at various festive and auspicious occasions from her parents, in laws and other close relatives. Further reliance on the CBDT instruction No.1916 was also made.

6. The reply of the assessee did not find any favour with the AO though the AO gave the benefit of CBDT Circular and accepted jewellery of 500 grams belonging to the assessee 100 grams each belonging to her husband and minor child and excess above 700 grams i.e. 19 grams was treated as unexplained investment u/s. 69 of the Act r.w.s. 115BBE.

7. Assessee carried the matter before the CIT(A) and reiterated its claim of Stri Dhan etc.

8. After considering the facts and the submission not only the CIT(A) was not convinced with the explanation but also modified the addition by taking gross weight of jewellery found though restricted the addition to the amount of addition made by the AO.

9. Before us the Counsel for the assessee explained the family background of the assessee and her husband and emphatically stated that being a married lady well employed the assessee was having a status of possession of gold ornaments of 719 grams. The Counsel stated that the assessee has highly reputed good family antecedents and is from well to do financial status.

10. The DR strongly supported the findings of the AO but could not controvert to the submission of family status of the assessee.

11. Fact on record shows that a search and seizure was conducted on 12.07.2018 more than 15 years after the marriage of the assessee. The assessee is not only well educated / qualified but also holding a green card of USA. Her husband is a graduate from Michigan University and worked out at various lead positions including global head of emerging market and equity Finance at Nomura Securities in New York. The father in law of the assessee was a Senior IAS officer and was in service at various Government positions including serving as Chief Information Commissioner of India, Secretary DOPT, Secretary Power, Additional Secretary Urban Development and Secretary to Vice President of India.

12. Considering family background of the assessee possession of 019.91 grams gold jewellery cannot be ruled out.

13. Considering the facts in totality we do not find any merit in the impugned addition we accordingly direct the AO to delete the same.

14. In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 10.01.2024.