2018 (7) TMI 120 - AT - Income Tax

Unexplained investments in jewellery - Held that - Jewellery found by the assessee stands fully explained and no addition can be made in the hands of the assessee for undisclosed investment in jewellery. We accordingly hold that there cannot be any addition in respect of the jewellery u/s 69A of the Act. - Decided in favour of assessee

Summary

Issues Involved:
1. Validity of proceedings under Section 153A.
2. Explanation of the source of jewellery found during the search.
3. Addition under Section 69A for unexplained investment in jewellery.
4. Application of CBDT Instruction No. 1916 regarding non-seizure of jewellery.
5. Assessment of the value and description of jewellery in wealth tax returns.

Issue-wise Detailed Analysis:

1. Validity of Proceedings under Section 153A:
The assessee challenged the validity of the proceedings under Section 153A, arguing there was no search against her. However, the CIT (A) found that a search and seizure action under Section 132 was indeed carried out at the residence of the appellant, a member of the DS Group. Thus, the assessment under Section 143(3) was upheld as valid.

2. Explanation of the Source of Jewellery Found During the Search:
The assessee argued that the jewellery found was declared in wealth tax returns filed for A.Y. 2010-11 by Smt. Vinod Kumari Gupta and Smt. Shalini Gupta, totaling ?124.48 lacs. Additionally, credit for jewellery as per CBDT Instruction No. 1916 was claimed for family members. The Assessing Officer rejected this explanation, noting discrepancies in the items and weights of jewellery found versus those declared in wealth tax returns.

3. Addition under Section 69A for Unexplained Investment in Jewellery:
The Assessing Officer added ?62,65,670/- to the total income of the assessee as unexplained investment under Section 69A, citing the discrepancy in the jewellery items found and those declared. The CIT (A) partially upheld this, sustaining an addition of ?6,26,567/- (10% of the jewellery's value), acknowledging the possibility of remade or altered jewellery.

4. Application of CBDT Instruction No. 1916 Regarding Non-Seizure of Jewellery:
The CIT (A) considered the CBDT Instruction No. 1916, which provides guidelines for non-seizure of jewellery, and accepted the assessee's claim for credit of 450 grams of jewellery for family members. The Assessing Officer's argument that this instruction does not explain the source of jewellery was noted but not fully upheld.

5. Assessment of the Value and Description of Jewellery in Wealth Tax Returns:
The CIT (A) noted that the jewellery declared in wealth tax returns was valued at ?124.48 lacs, and after considering the CBDT Instruction, the unexplained jewellery value was reduced. The Tribunal, referencing similar cases within the same group, found that the jewellery declared in wealth tax returns was more than the jewellery found during the search, supporting the assessee's explanation of remade jewellery and household withdrawals for remaking charges.

Conclusion:
The Tribunal followed precedents from related cases within the DS Group, where the entire addition made by the Assessing Officer was deleted. The Tribunal found the jewellery declared in wealth tax returns sufficient to explain the jewellery found during the search. Consequently, the appeal filed by the assessee was allowed, and the appeal filed by the revenue was dismissed.