NAROTHAM REDDY,CHENNAI vs. ACIT CENTRAL CIRCLE 3(1), CHENNAI

The assessee worked with M/s Apollo Group and was subjected to search action u/s 132 on 29-12-2017. During search operations, the jewellery belonging to the assessee and his family members was found. The jewellery weighed 2061.600 Grams which was valued at Rs.61.74 Lacs. In reply to question no. 5 of the statement, the assessee submitted that the jewellery belonged to assessee and his family. The family consists of his wife, mother, daughter and son. Some of the jewellery was stated to be received during wedding and some of the jewellery was stated to be purchased out of savings. It was also stated that few jewels were received from relatives as gifts during some important occasions. In reply to question no.6, the assessee agreed to offer excess jewellery for taxation beyond exempted limit.

During assessment proceedings, the assessee filed affidavit from his mother and wife who owned up jewellery weighing 503.30 grams each. The same was accepted by Ld. AO. The assessee stated that 611 grams of jewellery belonged to his sister and sister-in-law. However, this explanation was not accepted by Ld. AO. Finally, jewellery weighing 1055 grams valued at Rs.25.79 Lacs was held to be unexplained investment u/s 69A which was added to assessee’s income. The stand of Ld. AO, upon confirmation by Ld. CIT(A), is in further challenge before us.

Upon careful consideration of factual matrix, it could be seen that in the recorded statement, the assessee had submitted that the jewellery 3 - belonged to assessee and his family. The family consists of his wife, mother, daughter and son. Some of the jewellery was stated to be received during wedding and some of the jewellery was stated to be purchased out of savings. It was also stated that few jewels were received from relatives as gifts during some important occasions. However, upon perusal of assessment order, we find that Ld. AO has granted concession only for the jewellery owned up by the assessee’s mother and wife but declined to grant concession for jewellery held by other family members. Even as per cited CBDT circular, the jewellery, to the following extent, need not be seized and the same could be a deemed to be a reasonable quantity which a family could possess: - No. Family Member Qty.

Mrs. Leelavathamma – Mother 500 Grams 2. Mrs. Chandrika – Wife 500 Grams 3. Ms. Shreya Reddy – Daughter (Unmarried) 250 Grams 4. Master Anish Reddy – Son 100 Grams 5. Assessee himself 100 Grams Total 1450 Grams The same is further fortified by the fact that the returned income of the assessee for various earlier years was as follows: - No. Assessment Year Gross Total Income 1 2010-11 30,46,540 2 2011-12 33,90,716 3 2012-13 41,67,018 4 2013-14 52,62,704 5 2014-15 72,60,882 6 2015-16 81,27,135 7 2016-17 97,10,529 Therefore, the jewellery to the extent of 1450 Grams could be considered as explained jewellery. The submissions of Ld. AR that 4 - some jewellery belonged to sister and sister-in-law could not be accepted since the same run contrary to the statement given by the assessee and also there is nothing on record which would show that those family members kept their jewellery with the assessee. Accordingly, Ld. AO is directed to restrict the impugned additions to the extent of value of balance jewellery of 611.60 Grams.

The appeal stands partly allowed.