2017 (3) TMI 1516 - AT - Income Tax

Addition on unexplained investment in Jewellery and Silver - Search & seizure action - Held that - It is clear that Smt Neeta Bai the assessee s wife had declared 900 grams of gold and 10 Kgs of silver only in her WT returns filed for a ys 1991-92 & 1992- 93. Hence the assessee s plea that the particulars contained in the earlier year return should be considered in favour of the assessee can not be accepted. With regard to the benefit claimed on the basis of Circular No. 1916 dated 11. 05.94 providing for non-seizure of certain minimum amount of gold jewellery etc. as per the circular what could be given credit for a male member is only 100 gms. No credit could be given for HUF for the simple reason that an HUF cannot wear any jewellery by itself. Vis-a-vis silver circular does not mention anything about holding of silver or diamonds. Therefore we are of the opinion that the maximum relief that could be given to the assessee is only on the value of gold jewellery The maximum relief that could be given to the assessee in addition to what was given by the AO was 650 grams of gold only and accordingly we direct the AO to give such relief alone.

Summary

Issues:
- Explanation of unexplained investment in jewelry and silver
- Application of Circular No. 1916 dated 11.05.94
- Assessment of the quantum of jewelry and silver items found

Analysis:

Explanation of Unexplained Investment in Jewelry and Silver:
The appeal was filed against the order passed by the CIT (A) regarding the assessment year 2012-13. During a search and seizure action, gold jewelry and silver bars were found at the assessee's residence. The assessee provided explanations regarding the ownership and sources of the jewelry. The Assessing Officer (AO) accepted some of the explanations but treated the remaining quantity as unexplained investment. The AO did not accept the reliance on a High Court decision regarding the circular that highlights the non-seizure of certain minimum amounts of jewelry. The CIT (A) upheld the AO's decision, leading to the appeal.

Application of Circular No. 1916 dated 11.05.94:
The AR argued that the family tradition and background should be considered in assessing the reasonability of the jewelry quantity. Reference was made to Circular No. 1916, which provides guidelines on non-seizure of minimum amounts of jewelry. Various judicial decisions were cited to support the claim that the circular should be considered in determining the quantum of jewelry held by family members. However, the Tribunal emphasized that the circular allows specific credits based on gender and relationship within the family. The Tribunal directed the AO to reconsider the relief based on the circular guidelines.

Assessment of the Quantum of Jewelry and Silver Items Found:
The Tribunal analyzed the declarations made by the assessee's wife in wealth tax returns from previous years and found discrepancies in the quantities declared. The Tribunal referred to a previous decision to determine the maximum relief that could be granted based on the circular. Relief was granted for a specific quantity of gold jewelry, and the addition for unexplained silver was upheld. The Tribunal directed the AO to provide relief to the assessee based on the specified quantities mentioned in the decision.

In conclusion, the appeal was partly allowed, and the AO was directed to grant relief to the assessee based on the specified quantities of gold jewelry. The Tribunal's decision highlighted the importance of considering family background, judicial precedents, and circular guidelines in assessing unexplained investments in jewelry and silver.