ITAT deletes LTCG on notionally calculated fictitious sale of jewellery
Ballabh Prasad Aggarwal (ITA No. 2351/Del/2019)
- A search & seizure operation u/s 132 of the Income Tax Act was conducted on the assessee. The total jewellery as per the Wealth Tax Return of the assessee and the wife of the assessee was Rs.2,17,56,423/-.
- During the search, total jewellery of Rs.43,17,442/- was found. Out of the jewellery found of Rs.43,17,442/-, jewellery amounting to Rs.16,77,363/- were seized owing to mismatch of the description of the jewellery.
- The assessee maintained that the loose diamonds which were part of the Wealth Tax Return were studded in the jewellery subsequently and that was the reason that the description of the jewellery was different.
- Owing to non-availability of the remaining jewellery, the Assessing Officer calculated Long Term Capital Gains on the presumption that the jewellery “undetected” during the search was sold and determined LTCG of Rs.71,86,743/-.
ITAT Delhi held as under:
- The shortage of jewellery could have been questioned at the time of search and any evidence with regard to the sale of jewellery should be collected during the search or post search enquiry. Nothing of such investigation has been made by the revenue authorities.
- The revenue authorities have come to presumption of “sale” of such jewellery and determined capital gains. There was absolutely no material to prove that there has been such sale which led to Long Term Capital Gains.
- There is no provision in the Income Tax Act to deem the difference between value of the jewellery declared (in the Wealth Tax Return) and the value of the jewellery found in the search, in case the jewellery falls short of the amount/quantity declared in the WTR.
- Hence, we direct that the addition made on account of Long Term Capital Gains on the purported, notional, fictitious sale of jewellery be deleted.
- With regard to the addition made u/s 69A, the jewellery seized of Rs.16,77,363/- is intra polated in the jewellery found of Rs.43,17,442/-. Hence, keeping in view the entire disclosed jewellery as per the WTR and as found in the premises, we hold that no addition can be made on this account.
- In the result, the appeal of the assessee is allowed.
The copy of the order is as under:
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