2017 (11) TMI 2001 - AT - Income Tax

Undisclosed investment in jewellery - submission of the ld. counsel for the assessee that he and his wife have received the above jewellery at the time of marriage - Scope of CBDT Circular No.19 of 2016 - HELD THAT - Since in the instant case, admittedly the jewellery found in the Locker was only 313.600 grams which is much less than 500 grams as per CBDT Circular No.19 of 2016, therefore CIT(A) should not have insisted for Wealth Tax Return or bills and vouchers to explain the source of such investment in jewellery and should have deleted the addition made by the AO - Although the above circular is for non-seizure of gold jewellery etc. however, various Courts and the Co-ordinate Benches of the Tribunal are taking a liberal view on the basis of this circular and are allowing credit for such gold/jewellery as explained. In this view of the matter, we set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition. The grounds raised by the assessee are accordingly allowed.

Summary

Issues:
1. Addition of undisclosed investment in jewellery based on search and seizure operation.
2. Rejection of assessee's explanation and evidence regarding the source of jewellery.
3. Interpretation of CBDT Circular No.19 of 2016 and relevant case laws.
4. Justification for deletion of addition by the Assessing Officer.

Analysis:
The appeal before the Appellate Tribunal ITAT Delhi pertained to the addition of Rs.8,93,760 as undisclosed investment in jewellery found during a search and seizure operation in the case of the assessee. The Assessing Officer made the addition since the source of the jewellery could not be explained by the assessee. The assessee argued before the CIT(A) that the jewellery was received at the time of marriage and provided various explanations and case laws to support the claim that such jewellery should not be treated as undisclosed investment. However, the CIT(A) upheld the addition citing lack of supporting documentary evidence and the assessee's failure to substantiate the source of the jewellery during the appellate proceedings.

The Tribunal considered the arguments presented by both sides and reviewed the orders of the authorities below. It noted that the jewellery found was less than 500 grams and referred to CBDT Circular No.19 of 2016 and relevant case laws. Citing the decision of the Hon'ble Bombay High Court and the Hon'ble Rajasthan High Court, the Tribunal held that in cases where jewellery is received at the time of marriage and falls within permissible limits, no addition should be made as per the CBDT Circular. The Tribunal emphasized that the insistence on wealth tax returns or bills to explain the source of investment in jewellery was unwarranted in such circumstances. Consequently, the Tribunal set aside the CIT(A)'s order and directed the Assessing Officer to delete the addition, ultimately allowing the grounds raised by the assessee.

In conclusion, the Tribunal allowed the appeal filed by the assessee, ordering the deletion of the addition of undisclosed investment in jewellery. The judgment highlighted the importance of considering the circumstances of jewellery acquisition, especially in cases of marriage, and the applicability of relevant circulars and case laws to determine the treatment of such assets in income tax assessments.