2013 (5) TMI 936 - AT - Income Tax

Summary

Issues involved: Appeal against deletion of addition of unexplained jewelry by AO, interpretation of CBDT Circular 1916, determination of ownership of gold jewelry found during search.

Summary:

Issue 1: Addition of unexplained jewelry by AO
The appeal was filed by the Revenue against the deletion of the addition of Rs. 13,36,977 made by the AO on account of unexplained jewelry found during the search operation. The Assessee, a partner in a construction firm, had gold and diamond jewelry valued at Rs. 98,50,550 found during the search. The Assessee surrendered some jewelry as undisclosed income, while explaining the ownership of the remaining jewelry. The AO added Rs. 13,36,977 to the Assessee's income, which was disputed in an appeal before the Ld. CIT(A).

Issue 2: Interpretation of CBDT Circular 1916
The Assessee argued before the Ld. CIT(A) that as per CBDT Circular 1916, certain quantities of jewelry need not be seized during a search. The Assessee claimed that the family could have possessed 1850 gms of jewelry based on family members' allowances as per the circular. The Ld. CIT(A) accepted the Assessee's explanation, citing the circular and a decision of the Gujarat High Court, and deleted the addition made by the AO.

Issue 3: Determination of ownership of gold jewelry
During the Tribunal hearing, the Revenue contended that the CBDT Circular should not be solely relied upon to treat the jewelry as explained without corroborating evidence. However, the Tribunal upheld the Ld. CIT(A)'s decision, citing the Gujarat High Court's ruling that the circular considers the general quantity of jewelry held by family members. The Tribunal upheld the deletion of the addition of Rs. 13,36,997 as explained jewelry, based on the CBDT Circular 1916.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the Ld. CIT(A)'s order treating the jewelry found during the search as explained, in line with the CBDT Circular 1916.