2015 (11) TMI 1894 - AT - Income Tax

Unexplained investment in Gold and diamond jewelleries - jewellery found during search belonging to the assessee was less than 500 gms - HELD THAT - Considering Assessee status and the normal practice in Hindu families as such, and as per the CBDT Circular No.1916 dated 11.05.1994 such jewellery cannot be treated as unexplained jewellery and added to the income of the assessee. See Ratanlal Vyaparilal Jain 2010 (7) TMI 769 - GUJARAT HIGH COURT deleted the whole addition on the ground that the jewellery held by each of the family members was below the limits specified in the said circular. Although the circular had been issued for the purpose of non-seizure of jewellery during the course of search, the basis for the same recognizes customs prevailing in Hindu society - unless the Revenue shows anything to the contrary, it can safely be presumed that the source to the extent of the jewellery stated in the circular stands explained. Thus, the approach adopted in considering the extent of jewellery specified under the said circular to be a reasonable quantity, cannot be faulted with. Decided in favour of assessee.

Summary

Issues:
Challenge to correctness of order on unexplained investment in gold and diamond jewelleries under section 143(3) of the Income Tax Act, 1961 for Assessment Year 2012-13.

Analysis:
The appeal challenged the order of the ld. CIT(A) regarding the addition of Rs.7,56,105 made by the AO on account of alleged unexplained investment in gold and diamond jewelleries. The assessee explained that the ornaments were received from family members, but the AO rejected this explanation, considering it insufficient. The AO treated the difference in gold and diamond jewellery as unexplained, leading to the addition of Rs.7,56,105. The ld. CIT(A) summarily rejected the arguments of the assessee, stating that no further evidence was provided to rebut the AO's findings. The ITAT noted that the total jewellery found was less than 500 gms, and considering the status and practices in Hindu families, such jewellery could not be treated as unexplained. Referring to CBDT Circular No.1916, the ITAT cited a High Court case where it was held that jewellery within specified limits should be accepted as reasonable, leading to the deletion of the addition. The Tribunal's approach in following the circular and recognizing customs prevailing in Hindu society was upheld, leading to the direction to delete the addition of Rs.7,56,105.

In conclusion, the ITAT allowed the appeal, directing the Assessing Officer to delete the addition of Rs.7,56,105 based on the findings regarding the jewellery being within reasonable limits as per CBDT Circular No.1916 and the customs prevailing in Hindu society.