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2020 (2) TMI 1092 - AT - Income TaxUnexplained gold jewellery - search proceedings - HELD THAT - There is no dispute regarding the fact that jewellery to the extent 343.328 gms. represents the purchases made by the assessee from time to time which is duly supported by the purchase bills found during the search and seizure action. The said quantity of jewellery is duly recorded in the balance sheet/ books of account of the assessee and his family members. Once the AO has not disputed the purchases made by the assessee of the said quantity of jewellery then the same cannot be treated as unexplained jewellery of the assessee. AO has denied the benefit of the said quantity of jewellery on the ground that since the benefit of reasonable jewellery to the extent of 850 gms. as per CBDT Instruction No. 1916 dated 11-05-1994 is already granted, therefore, to that extent, no further benefit can be granted. It is pertinent to note that CBDT Instruction No. 1916 dated 11-05-1994 has explained in case of gold jewellery found in the possession of the assessee during the course of search and seizure action and the assessee is not able to explain the same then the quantity prescribed under the said CBDT Instruction No. 1916 in respect of married female member, unmarried female member and male member of the assessee would be treated as a reasonable holding of jewellery on account of acquisition of that much jewellery on various occasions of marriages, other social customary occasions as prevailing in the society. Reasonable possession of the jewellery as per the customs prevailing in the society is the basis for allowing the benefit of certain quantity of jewellery explained by the CBDT Instruction No. 1916 dated 11-05-1994 which means that the assessee need not to explain the source of jewellery found in his possession to the extent of specified quantity treated as reasonable possession by family members of the assessee. The said CBDT Instruction No. 1916 allowing the specific quantity as reasonable and need not to be explained, does not include the jewellery which is otherwise explained by proof of documents of acquisition as well as declared/ recorded in the books of account of the assessee. Quantity of jewellery which is otherwise explained by the assessee by producing the purchase bills as well as recorded in the books of account of the assessee and the AO had not disputed the said explanation then the quantity which is explained otherwise by producing the purchase bills and books of account would not be treated as part of the quantity of reasonable possession as prescribed under the said CBDT Instruction No. 1916 dated 11-05-1994. Therefore, the benefit of CBDT Instruction No. 1916 dated 11-05-1994 will not take away the benefit of the explained jewellery acquired by the assessee. Accordingly, quantity of jewellery to the extent of 343.328 gms. has to be allowed separately as explained jewellery and no addition can be made to that extent. Valuation of gold jewellery - AO has valued the entire jewellery by applying the prevailing rate of 2700/- per gram and by ignoring the fact of actual cost of acquisition to the extent of 343.328 gms. at ₹ 4,57,404/- as reflected in the purchase bills as well as in the books of account of the assessee. No error illegality to the extent of value of said jewellery accepted by the CIT(A). Hence, the addition sustained by the CIT(A) on account of unexplained jewellery is deleted. 50% of the addition on account of silver items sustained by the CIT(A) - we find that silver items of ₹ 1,33,650/- were found at the time of search out of which the CIT(A) has considered 50% of the same as reasonable holding of silver items by the assessee, considering the status and standing of the assessee family. In the absence of any other material or facts brought before us, we do not find any error or illegality in the order of the ld. CIT(A) by considering 50% of silver items as reasonable and to the extent the order of the CIT(A) is upheld. - Appeal of the assessee is partly allowed.
Issues Involved:
1. Addition of unexplained jewellery during search and seizure action. Analysis: The appeal was against the order of the ld. CIT(A) for the Assessment Year 2016-17. The assessee challenged the addition of ?9,76,895 on account of unexplained jewellery found during the search, with the ld. CIT(A) upholding ?4,57,404 of the same. The jewellery included gold and silver items valued at ?32,71,895. The assessee claimed benefit under CBDT Instruction No. 1916 for 850 gms. of jewellery, but the AO denied the benefit for 343.328 gms. purchased and recorded in the books. The ld. CIT(A) confirmed this denial but allowed the cost of jewellery as per purchase bills, upholding ?4,57,404. Additionally, 50% of the value of unexplained silver items was sustained by the ld. CIT(A) based on the family's status. The assessee argued that the purchases made and recorded should be considered separately from the CBDT Instruction. The AO valued the jewellery at ?2700 per gram, while the ld. CIT(A) accepted the cost as per purchase bills. The Tribunal held that the explained jewellery should not be part of the reasonable possession under CBDT Instruction, thus deleting the addition. The 50% addition for silver items was upheld as reasonable. In conclusion, the appeal was partly allowed, with the addition on unexplained jewellery being deleted due to correct valuation and separate consideration of explained purchases. The 50% addition on silver items was upheld based on the family's status.
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