2014 (9) TMI 322 - HC - Income Tax

Unexplained investment Gold jewellery seized - Whether the assessees in both the cases are entitled to plead that the quantum of excess gold jewellery seized does not warrant inclusion in the income of the assessees as unexplained investment in the light of the Board Instruction No.1916 F.No.286/63/93-IT (INV.II) , dated 11.5.1994 Held that - CIT(A) has correctly held that the Board Instruction does not make allowance in calculation of unexplained jewellery and it only states that in the case of a person not assessed to wealth tax, gold jewellery and ornaments to the extent of 500 gms per married lady, 250 gms per unmarried lady and 100 gms per male member of the family, need not be seized - in the case of a wealth-tax assessee, gold jewellery and ornaments found in excess of the gross weight declared in the wealth-tax return can be seized - this is only an enabling provision and will be applicable if there are circumstances to come to the conclusion that the status of the family and custom and practices of the community require holding of such jewellery - the assssees have not given any such explanation either before the Original Authority or the First Appellate Authority or the Tribunal - there no justification to interfere with the order of the Tribunal and no substantial question of law arises for consideration Decided against assessee.

Summary

Issues:
1. Validity of search assessment and quantification of excess jewellery
2. Addition of excess jewellery as unexplained investment
3. Consideration of circular and decisions on excess jewellery source

Issue 1 - Validity of search assessment and quantification of excess jewellery:
The assessees challenged the order of the Income Tax Appellate Tribunal regarding the assessment year 2009-2010. The Assessing Officer found excess gold jewellery during a search and treated it as unexplained investment. The assessees contended that the Tribunal did not consider the validity of the search assessment and quantification of excess jewellery. The Commissioner of Income Tax (Appeals) and the Tribunal upheld the Assessing Officer's decision, stating that the excess jewellery was determined after considering explanations offered by the assessees. However, no detailed reasons were provided for assessing the excess jewellery as unexplained investment.

Issue 2 - Addition of excess jewellery as unexplained investment:
The assessees argued that the excess gold jewellery seized should not be included in their income based on a Board Instruction from 1994. The Instruction provided guidelines for seizure of jewellery during search operations. The assessees claimed that the jewellery should not have been seized considering their family size, social status, and community customs. However, the authorities did not accept this argument, stating that the Board Instruction did not make allowances for calculating unexplained jewellery. The Tribunal confirmed the Assessing Officer's decision to treat the excess jewellery as unexplained investment, as the assessees failed to provide any explanation.

Issue 3 - Consideration of circular and decisions on excess jewellery source:
The Board Instruction from 1994 specified circumstances for seizing excess jewellery but did not prevent treating it as unexplained investment. The Tribunal held that the assessees did not offer any explanation for the excess jewellery found during the search. The Tribunal confirmed the assessments made by the Assessing Officer, stating that there was no justification to interfere. However, the court noted that if the assessees claimed the excess jewellery was justified based on family status and customs, the Department should consider this before initiating prosecution proceedings.

In conclusion, the court disposed of the appeals, observing that no substantial question of law arose for consideration. The court advised the Department to consider the assessees' plea regarding excess jewellery before any prosecution proceedings.