2014 (2) TMI 1327 - AT - Income Tax

Addition on account of unexplained jewellery and silver articles found during the course of search - Held that - In the present case, it is noticed that the statement of the assessee was recorded during the course of search and the assessee stated that the firm is compendious name for partners and acts through the partners, therefore, the income may be utilized by the partners in the assets of the firm itself. It is not in dispute that the assessee surrendered the income of ₹ 21 lacs in the hands of the firm and claimed that the realization of the stock found short in the firm was utilized for purchasing the jewellery. Nothing is brought on record to substantiate that the amount disclosed by the partners of the firm was utilized elsewhere. Therefore, the benefit of the said surrender was to be given for acquiring the jewellery weighing 2518.20 gms, accordingly the addition to the extent of ₹ 21 lacs made in the hands of the assessee deserves to be deleted. For the benefit of CBDT instruction No. 1916 for the jewellery found in the locker belonging to the deceased wife of the assessee Smt. Saroj Lashkary and in possession of male members i.e. Shri Shyam Sunder Lashkary and this assessee it is noticed that in the answer to the question No. 26, the assessee categorically stated that the jewellery also include the jewellery of his deceased wife Smt. Saroj Lashkary, therefore, the benefit of 500 gms gold jewellery was to be given on account of jewellery belonging to deceased wife of the assessee, particularly when it was found from the locker which was in her name. Therefore, the jewellery weighing 500 gms should have been treated as explained. CIT(A) was not justified in denying the benefit to the male members for 100 gms gold jewellery each i.e. to Shri Shyam Sunder Lashkary, father of the assessee and the assessee himself, particularly when the similar benefit was allowed in identical circumstances to other members of the family, therefore in reference to instruction No. 1916 of the CBDT, the benefit of 200 gms gold jewellery is also directed to be given as per the ratio laid down in the case of CIT Vs Kailash Chand Sharma (2004 (7) TMI 647 - RAJASTHAN HIGH COURT) As regards to the silver articles is concerned, in our opinion, the Ld. CIT(A) was fully justified in deleting the addition by holding that it was customary to receive silver utensils and articles in the marriage and other auspicious occasions, therefore, considering the family status of the assessee, the silver articles found by the searched party was not unreasonable. Appeal of the assessee are allowed.

Summary

Issues Involved:
1. Deletion of addition on account of unexplained jewellery and silver articles found during the search.
2. Sustenance of addition on account of unexplained investment in gold jewellery.
3. Denial of benefit of telescoping, recycling, and rotation of funds.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Unexplained Jewellery and Silver Articles:

The departmental appeal contested the deletion of Rs. 25,11,684 out of the total addition of Rs. 48,11,437 made by the Assessing Officer (AO) on account of unexplained jewellery and silver articles found during the search. The AO observed that the jewellery found (gold valued at Rs. 52,86,863 and silver at Rs. 5,36,534) was not satisfactorily explained by the assessee. The AO denied the benefit of CBDT Instruction No. 1916, which provides limits for non-seizure of jewellery, stating that it does not address the explanation of assets.

The CIT(A) allowed the benefit for jewellery weighing 111.83 grams purchased by Shri Shyam Sunder Lashkary, as it was shown in the balance sheet and purchased through a cheque. The CIT(A) also allowed the benefit of 2150 grams of jewellery as per CBDT Instruction No. 1916, which prescribes limits for married ladies, unmarried ladies, and male members. However, the CIT(A) did not allow the benefit for jewellery declared in the hands of the firm M/s Pawan Enterprises, as this was not stated during the search.

Regarding silver articles, the CIT(A) held that it was customary to receive silver utensils and articles during marriage and auspicious occasions, considering the family status of the assessee. Thus, the addition was deleted.

2. Sustenance of Addition on Account of Unexplained Investment in Gold Jewellery:

The assessee's appeal contested the sustenance of Rs. 22,99,753 in respect of 2699.53 grams of gold jewellery. The AO accepted gold worth Rs. 10,11,960 as explained, based on the balance sheets of Shri Shyam Sunder Lashkary and the assessee, but treated the rest as unexplained. The CIT(A) sustained the addition for 2699.53 grams of jewellery, valuing Rs. 22,99,753, after considering the explained jewellery and the benefit under CBDT Instruction No. 1916.

The Tribunal noted that the jewellery weighing 2518.20 grams worth Rs. 21 lacs was declared in the hands of the firm M/s Pawan Enterprises, and the stock found short in the firm was utilized for purchasing the jewellery. The Tribunal held that the benefit of this surrender should be given to the assessee, deleting the addition of Rs. 21 lacs.

3. Denial of Benefit of Telescoping, Recycling, and Rotation of Funds:

The assessee argued that the benefit of telescoping, recycling, and rotation of funds was not allowed. The Tribunal observed that the jewellery found included that belonging to the deceased wife of the assessee, and the benefit of 500 grams should be given. Additionally, the benefit of 100 grams each for the assessee and his father should be allowed, as per CBDT Instruction No. 1916 and judicial precedents.

Conclusion:

The Tribunal concluded that the CIT(A) was justified in allowing the benefit for jewellery weighing 111.83 grams purchased by Shri Shyam Sunder Lashkary and the benefit of 2150 grams as per CBDT Instruction No. 1916. The Tribunal also directed the deletion of the addition of Rs. 21 lacs declared in the hands of the firm M/s Pawan Enterprises. The benefit for jewellery belonging to the deceased wife of the assessee and 100 grams each for the assessee and his father was also allowed. The deletion of the addition for silver articles was upheld, considering the family status and customary practices. Consequently, the department's appeal was dismissed, and the assessee's appeal was allowed.