2015 (7) TMI 603 - AT - Income Tax

Unexplained investment u/s.69 - assessee failed to substantiate that the jewellery worth ₹ 11,00,996/- belonged to the said ladies staying at his residence - Held that - In view of the Instruction of the CBDT bearing No.1916 dated 11th May, 1994 the gold jewellery found from the premises of the assessee from five female members ought to have been accepted as explained as the same is much lesser than the limit of gold ornaments not to be seized in a case of a person not assessed to wealth-tax. This has been recognised in a catena of cases including the recent case Of Ashok Chhada (2011 (7) TMI 142 - DELHI HIGH COURT ), wherein over 900 gms of gold jewellery were accepted in the case of lady married for over 20-25 years, in view of her status and background. As per Instruction No.1916 of CBDT, the acceptable/explained Jewellery in the case of the assessee would be 3050 gms, as against 1372 gms found during the search. In view of the above facts and the mandatory instructions of the CBDT, the AO was not justified in adding the sum of ₹ 8,50,996/- to the income of the assessee on account of gold jewellery which represents Streedhan of family members of the assessee s family. Accordingly, we direct the AO to delete the same. The AO has also made an addition of ₹ 2,75,773/- on account of cash found during the course of search. From the record we found that during the said search action, cash of ₹ 3,05,773/- was found, It was stated that ₹ 2,25,000/ belonged to the appellant s married daughter who was then staying with him, The balance ₹ 80,773/- belonged to his nephew Anil Vanani, from whose bank account it was withdrawn and was reflected in the books of account of M/s Niru Impex. However, no confirmation from Nidhi Devani or evidence with regard to source of generation of cash in her hands has been filed. The AO also observed that she is not assessed to tax and has not definite source of income. Accordingly, we confirm the addition of ₹ 2,25,000/- treated by the AO as unexplained cash. In respect of ₹ 80,773/-, we found that this amount was withdrawn by Anil Vanani, nephew of assessee from his bank account and was reflected in his books of account of M/s Niru Impex. Accordingly, we direct the AO to delete the addition of ₹ 80,773/- which was duly explained by documentary evidence. - Decided partly in favour of assessee.

Summary

Issues Involved:
1. Treatment of gold and diamond jewelry found during the search.
2. Addition of unexplained investment under Section 69 of the Income Tax Act.
3. Relief granted by CIT(A) regarding the value of jewelry.
4. Addition of cash found during the search.

Detailed Analysis:

1. Treatment of Gold and Diamond Jewelry Found During the Search:
The search at the assessee's residence on 04.10.2006 resulted in the discovery of gold and diamond jewelry worth Rs. 49,84,841/-. The assessee explained that the diamond jewelry was accounted for by family members, but the gold jewelry of 1,372.20 grams was claimed as 'streedhan' of the female members of the household. The Assessing Officer (AO) demanded evidence of purchase, but the assessee failed to produce documentary proof, leading the AO to treat jewelry worth Rs. 11,00,996/- as unexplained investment. However, the AO allowed a benefit of Rs. 50,000/- per female member, reducing the unexplained amount to Rs. 8,50,996/-.

2. Addition of Unexplained Investment Under Section 69:
The CIT(A) increased the relief to Rs. 1,00,000/- per female member, reducing the unexplained investment by Rs. 2,50,000/-. The CIT(A) acknowledged the custom of Indian ladies possessing jewelry and referred to CBDT Instruction No. 1916, which provides benchmarks for acceptable jewelry based on social status and customs. The CIT(A) criticized the AO for not adopting a valid benchmark and concluded that a set-off of Rs. 1,00,000/- per person was justified.

3. Relief Granted by CIT(A) Regarding the Value of Jewelry:
The Tribunal noted that the assessee's family background and the nature of the business (diamond trading) justified the possession of the jewelry. The Tribunal referenced the CBDT Instruction No. 1916, which allows for 500 grams of gold jewelry per married lady, 250 grams per unmarried lady, and 100 grams per male member to be considered explained. The Tribunal found that the jewelry held by each female member was within these limits and should be accepted as explained. The Tribunal also cited various cases, including the Delhi High Court's decision in Ashok Chaddha, supporting the acceptance of jewelry within these limits as explained.

4. Addition of Cash Found During the Search:
The AO added Rs. 2,75,773/- as unexplained cash found during the search. The assessee claimed Rs. 2,25,000/- belonged to his married daughter and Rs. 80,773/- to his nephew, Anil Vanani. The AO did not accept the explanation for Rs. 2,25,000/- due to lack of evidence and the daughter's non-assessment to tax. However, the Tribunal confirmed the addition of Rs. 2,25,000/- as unexplained cash but directed the AO to delete the addition of Rs. 80,773/- as it was supported by documentary evidence from Anil Vanani's bank account and books of M/s Niru Impex.

Conclusion:
The appeal was partly allowed. The Tribunal directed the AO to delete the addition of Rs. 8,50,996/- related to the gold jewelry and Rs. 80,773/- related to the cash, while confirming the addition of Rs. 2,25,000/- as unexplained cash. The order pronounced on 08/07/2015.