2017 (4) TMI 243 - AT - Income Tax

Excess of gold found during the course of search which is over and above the accepted norms or quantity - unexpalined nvestment - Held that - Hon ble Gujarat High Court in the case of Commissioner of Income Tax Vs. Ratanlal Vyaparilal Jain 2010 (7) TMI 769 - Gujarat High Court has also taken note of social customs and norms of Hindu families where the gold or diamond jewellary is usually gifted by close relatives at the time of functions such as marriages, birthdays etc. The findings of the CIT(A) that the affidavits of the assessee s uncle and also father-in-law does not contain specific items of jewellary may not hold much water as the parties were not examined as to exact nature of gold items presented by them. The value of the excess of gold for which the security of cash was accepted was ₹ 22,10,000/-, which is actually 50% of the gold found and seized. If the permitted or accepted quantity of gold by the A.O is taken at 500 grams excess of gold found with the assessee at 487 grams is well within the norms prescribed by the CBDT. Therefore, we are of the opinion that it cannot be treated as unexplained investment. As regards cash found at the time of search, the assessee has filed the copies of the cash book of both the assessee and his father to demonstrate that both he and his father had sufficient cash balance on the date of search. However, this was not verified by the A.O or CIT(A). In view of the same, we deem it fit and proper to remand this issue to the file of the A.O only for verification of the availability of cash balance in the assessee s and his father s books of account and if it is found that the assessee and his father had such cash balance, then the addition shall not be made. Accordingly, the assessee s appeal is partly allowed for statistical purposes.

Summary

Issues:
1. Addition of unexplained cash found during search
2. Addition of unexplained investment in gold jewelry and diamonds

Analysis:

Issue 1: Addition of unexplained cash found during search
The appellant contested the addition of unexplained cash amounting to ?2,26,600 found during the search. The appellant argued that the cash balance was already present in their books of accounts, which was not verified by the Assessing Officer (A.O) or the Commissioner of Income Tax (CIT). The Tribunal deemed it appropriate to remand this issue to the A.O for verification. If the cash balance is found to be legitimate, the addition shall not be made. Consequently, the appellant's appeal was partly allowed for statistical purposes.

Issue 2: Addition of unexplained investment in gold jewelry and diamonds
The dispute revolved around the addition of ?42,23,700 as unexplained investment in gold jewelry and diamonds found during the search operation. The appellant argued that the jewelry belonged to all four family members and was within the customary holdings of a Hindu family. The appellant cited CBDT guidelines exempting certain quantities of jewelry for married ladies and male members. The Tribunal noted that the excess gold found was only 487.78 grams, which was within acceptable limits considering the family size and CBDT norms. Referring to the Gujarat High Court judgment and social customs, the Tribunal concluded that the excess gold did not constitute unexplained investment. However, the Tribunal remanded the issue of cash verification to the A.O for further examination.

In conclusion, the Tribunal partially allowed the appellant's appeal, ruling in favor of the appellant on the issue of unexplained investment in gold jewelry and diamonds, while remanding the verification of cash balance to the A.O for further assessment.