2019 (6) TMI 347 - AT - Income Tax

Unexplained investment in jewellery and silver articles - Claimed by the appellant to have been received from friends and relatives on marriage and other occasion - search and seizure action u/s 132 - jewellery is personal wearing - what is the reasonable quantity of jewellery which can be considered as acquired/received by the assessee over the period of time and which can be considered as explained for tax purposes? - HELD THAT - The assessee is married for last 30 years and the family of the assessee consists of his wife, three daughters out of which two are unmarried and one unmarried son. It is not in dispute that the assessee over the period of time had purchased some gold jewellery for himself and his family members, and further customary possession of gold jewellery/silver items on account of marriage gifts and gifts on other social occasions and festivities to the assessee and his family members cannot be denied. The statement of the assessee has to be read as a whole and not in parts. The Revenue cannot take the stand that only part of the statement is accepted and remaining is not acceptable. Where the Revenue disputes a part of the statement as not correct, the onus shifts on the Revenue to prove otherwise and not the assessee. Therefore, going strictly by clause (i) of the CBDT Circular dated 11.05.1994, the gold jewellery found in possession of the assessee is within the permissible limits as belonging to the assessee and other family members including married daughter and children. The assessee belongs to a reputed old Jagirdar family and so enjoying high status in society, married about 30 years back and has three daughters and one son and possession of gold and silver jewellery is customary in the Indian society and also gifts on marriages and other social functions. The Courts have held that where the CBDT looking to such customs and practices prevailing throughout India, in one way or the another, came out with this Circular and the search team makes no such seizure effectively accepting the status of the assessee, customs and practices and possession of the jewellery, it should also mean that to the extent of the aforesaid jewellery, found in possession of the assessee, even source cannot be questioned. In the present case, looking at the status of the family and the jewellery found during the search, it was held to be reasonable and therefore, the search team, in the first instance, did not seize the said jewellery and thus, in our view, subsequent addition is also not justified on the part of the Assessing Officer. Similar is the position regarding silver jewellery and items found in possession of the assessee in respect of which the source can be said to be duly explained. See CIT., ALWAR VERSUS SATYA NARAIN PATNI 2014 (5) TMI 1002 - RAJASTHAN HIGH COURT . The the matter is decided in favour of the assessee and against the Revenue.

Summary

Issues Involved
1. Addition of ?10,26,240/- on account of unexplained investment in jewellery and silver articles.
2. Application of CBDT guidelines regarding the possession of jewellery.
3. Consideration of family status, customs, and practices in determining the reasonableness of jewellery possession.
4. Telescoping benefit of actual cash balance available with the assessee.

Detailed Analysis

Issue 1: Addition of ?10,26,240/- on Account of Unexplained Investment in Jewellery and Silver Articles
The assessee contested the addition of ?10,26,240/- made by the Assessing Officer (AO) on the grounds that the jewellery and silver articles were received as gifts from friends and relatives on various occasions, including marriage. The AO, however, did not find the explanation acceptable, noting that neither the assessee nor his family members filed Wealth Tax Returns or personal balance sheets. The AO allowed a customary possession of 1200 grams of gold jewellery as per CBDT guidelines but taxed the excess amount equally in the hands of the assessee and his wife under Section 69A of the Income Tax Act.

Issue 2: Application of CBDT Guidelines Regarding the Possession of Jewellery
The assessee referred to CBDT Instruction No. 1916 dated 11/05/1994, which provides guidelines for not seizing jewellery during search operations up to specified limits (500 grams per married lady, 250 grams per unmarried lady, and 100 grams per male member). The AO adhered to these guidelines but did not consider the jewellery belonging to the assessee's married daughter, as no proper evidence was provided.

Issue 3: Consideration of Family Status, Customs, and Practices in Determining the Reasonableness of Jewellery Possession
The assessee argued that considering the family's high social status, customs, and practices, the possession of the jewellery should be deemed reasonable. The Tribunal noted that the family belonged to an old Jagirdar family and enjoyed a high status in society. The Tribunal also emphasized the customary practice in Indian society of gifting jewellery during marriages and other occasions.

Issue 4: Telescoping Benefit of Actual Cash Balance Available with the Assessee
The assessee sought relief by allowing the telescoping benefit of ?96,220/- as expenditure for treating the unexplained gold jewellery/silver articles. However, the CIT(A) did not find any reason to grant this relief.

Tribunal's Findings
1. Addition of ?10,26,240/-: The Tribunal found that the AO's action of taxing the excess jewellery was not justified. The Tribunal noted that the jewellery found was within permissible limits considering the family's status, customs, and practices. The Tribunal relied on the statement of the assessee's wife recorded under Section 132(4), which stated that part of the jewellery belonged to their married daughter and grandchildren. The Tribunal held that the AO had no basis to exclude these family members.

2. CBDT Guidelines: The Tribunal emphasized that the CBDT guidelines were designed to prevent the seizure of jewellery within specified limits and that these guidelines should also imply that the source of such jewellery should not be questioned. The Tribunal cited the Hon'ble Rajasthan High Court decision in the case of CIT vs. Satya Narain Patni, which supported this interpretation.

3. Family Status and Customs: The Tribunal recognized the family's high social status and customary practices, which justified the possession of the jewellery. The Tribunal noted that the search team did not seize the jewellery, indicating that it was considered reasonable.

4. Telescoping Benefit: The Tribunal did not specifically address the issue of the telescoping benefit in the final decision, as the primary relief was granted by accepting the jewellery as explained.

Conclusion
The Tribunal allowed the appeals, setting aside the orders of the lower authorities and holding that the jewellery and silver articles found during the search were reasonably explained considering the family's status, customs, and practices. The additions made by the AO were thus deleted. The Tribunal's decision was pronounced in the open court on 24/05/2019.