2015 (8) TMI 1379 - AT - Income Tax

Unexplained jewelry - excess jewellery found in a search - Held that - Central Board of Direct Taxes Circular No. 1916, dated May 11, 1994, lays down guidelines for seizure of jewellery and ornaments in the course of search, the same takes into account the quantity of jewellery which would generally be held by the family members of an assessee belonging to an ordinary Hindu household. Assessee can always claim exclusion from undisclosed jewellery the quantum of jewellery mentioned in the said circular. However, the circular allows only 100 gms per male member, 250 gms for unmarried lady and 500 gms for married lady in the family. The list mentioned by the assessee claims 200 gms each for himself and his son and 250 gms for the HUF. As per the circular 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. Contention of the Ld. AR that status of the assessee had to be considered and higher relief should be given cannot be accepted for the simple reason that nothing was produced to show any special social status enjoyed by the assessee, except for stating that assessee belonged to a marwari business family. Vis-a-vis silver, circular does not mention anything about holding of silver or diamonds. Therefore, 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 of holding mentioned at para 8 above. 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:
1. Explanation of unexplained investment in jewellery.
2. Application of CBDT circular No.1916 for explaining the source of jewellery.
3. Relief for undisclosed jewellery and investments.
4. Credit for jewellery disclosed in the return filed by the assessee's wife.
5. Consideration of social status in granting relief for jewellery.

Issue 1: Explanation of unexplained investment in jewellery:
The appeals were filed by brothers against orders of CIT (A) regarding unexplained investments in jewellery. The first appellant, a dealer in jewellery, declared income including excess jewellery found during a search. The Assessing Officer (AO) disallowed a portion of the claimed jewellery as unexplained investment. The CIT (A) upheld the additions. However, the Tribunal allowed exclusion of jewellery quantity mentioned in CBDT circular No.1916, limiting relief to 950 gms of gold jewellery. The Tribunal also upheld the addition for unexplained silver articles. The appeal was treated as partly allowed.

Issue 2: Application of CBDT circular No.1916 for explaining the source of jewellery:
The Tribunal ruled that the CBDT circular could be used to explain the source of jewellery. However, relief was limited to the quantities specified in the circular for family members. The Tribunal emphasized that special social status did not warrant additional relief beyond the circular's limits. The Tribunal directed the AO to rework the addition considering the relief for 950 gms of gold jewellery.

Issue 3: Relief for undisclosed jewellery and investments:
The Tribunal granted relief for 950 gms of gold jewellery based on the CBDT circular, while upholding the addition for unexplained silver articles. The Tribunal directed the AO to adjust the addition accordingly, partly allowing the appeal.

Issue 4: Credit for jewellery disclosed in the return filed by the assessee's wife:
The Tribunal considered the jewellery disclosed in the return filed by the assessee's wife for granting relief. It allowed credit for jewellery quantities mentioned in the wife's returns, in line with the CBDT circular. Relief was provided for the disclosed jewellery, partially allowing the appeal.

Issue 5: Consideration of social status in granting relief for jewellery:
The Tribunal rejected the argument to consider the assessee's social status for higher relief beyond the CBDT circular limits. It emphasized adherence to the circular's specified quantities for relief. The Tribunal directed the AO to rework the addition based on the relief granted, treating the appeal as partly allowed.

This detailed analysis covers the issues involved in the legal judgment, outlining the Tribunal's decisions and considerations regarding the unexplained jewellery investments, application of the CBDT circular, relief for undisclosed jewellery, credit for disclosed jewellery, and the relevance of social status in granting relief.