2015 (8) TMI 1374 - AT - Income Tax

Addition on unexplained investment in Jewellery and Silver - Search & seizure action - Held that - We are of the opinion that the maximum relief that could be given to the assessee is only on the value of gold jewelelry to the extent as per the circular No. 1916, dated May 11, 1994, lays down guidelines for seizure of jewellery and ornaments in the course of search what could be given credit for a male member is only 100 gms. No credit could be given for HUF, for the simple reason that an HUF cannot wear any jewellery by itself. In our opinion, the maximum relief that could be given to the assessee in addition to what was given by the AO was 950 gms, viz., 100 gms for assessee, 100 gms for assessee s son, 250 gms for assessee s daughter and 500 gms for assessee s daughter-in-law. Addition made for unexplained silver found at the time of search was in our opinion was justified. AO is directed to give relief to the assessee for 950 gms of gold jewellery and rework the addition accordingly. Appeal of the assessee is treated as partly allowed.

Summary

Issues:
- Application of CBDT circular No.1916 for explaining the source of jewellery
- Credit claimed for gold, silver, and diamonds found during search
- Relief sought by the assessee against additions made by the AO
- Interpretation of circular guidelines and their applicability in the case
- Consideration of familial holdings and traditions in determining undisclosed jewellery

Analysis:

Issue 1: Application of CBDT circular No.1916 for explaining the source of jewellery
- The assessee, a dealer in jewellery, declared income including excess jewellery found during a search. The AO allowed credit for jewellery declared by the wife but held the remaining as unexplained. The CIT (A) upheld the additions, stating the circular did not apply as the wife had filed returns. The ITAT noted the circular's relevance in explaining jewellery sources, citing the Gujarat High Court's decision supporting this interpretation.

Issue 2: Credit claimed for gold, silver, and diamonds found during search
- The AO disallowed the credit claimed by the assessee for jewellery found during the search, leading to substantial additions to the income. The CIT (A) partially allowed relief based on jewellery declared in the wife's returns. The ITAT, considering the circular's guidelines, directed relief for specific quantities of gold jewellery based on family members and declarations in the wife's financial statements.

Issue 3: Relief sought by the assessee against additions made by the AO
- The ITAT analyzed the claims made by the assessee regarding familial holdings and traditions of gifting jewellery. It determined the maximum relief based on the circular's provisions and the specific quantities mentioned in the wife's returns and financial statements.

Issue 4: Interpretation of circular guidelines and their applicability in the case
- The ITAT emphasized the relevance of the CBDT circular in explaining the sources of jewellery found during the search. It highlighted the importance of considering family customs and traditions in determining the legitimacy of undisclosed jewellery holdings.

Issue 5: Consideration of familial holdings and traditions in determining undisclosed jewellery
- The ITAT assessed the familial holdings claimed by the assessee and the traditions of gifting jewellery in Marwari families. It applied the circular's provisions to determine the permissible credit for jewellery holdings based on family members and specific guidelines outlined in the circular.

This detailed analysis of the judgment highlights the key issues addressed by the ITAT regarding the application of the CBDT circular, credit claims for jewellery, relief sought by the assessee, interpretation of circular guidelines, and the consideration of familial holdings and traditions in determining undisclosed jewellery.