2021 (3) TMI 878 - AT - Income Tax

Assessment u/s 153A - addition made was on account of excess jewellery found in the residence of the assessee during the search - HELD THAT - The entire addition in respect of excess jewellery were added exclusively in the hands of the assessee without giving any cogent reason as to why the addition has been made only in the hands of the assessee when it was established on the file that jewellery found from the premises belongs to all family members of the assessee. It is an admitted fact that the assessee had only salary income and income from interest in his hands. As per the records, the assessee is a CEO of M/s Integral Urban Co-operative Bank Ltd. and is getting salary. He also had income from interest on his past savings. The assessee is not getting any remuneration of being an honorary Secretary of St. Wilfred Educational Society. Thus, he does not have any ostensible source of income which could generate unaccounted income. As found from the records that no incriminating document was found during search of his residence to show or demonstrate that the assessee had unaccounted income of any sort from any source. No corroborative evidence has been placed on record by the revenue to show that the said excess jewellery found during search exclusively belonged to, or was purchased out of unaccounted income of the assessee - jewellery is something which primarily belongs to the ladies of the House. Moreover, in the present case, once it is accepted that these jewellery items belong to other members of the family and the assesse has given specific details regarding such items identified to other family members, therefore, in our view, the entire addition could not have been made in the hands of assessee alone and it should have been added on pro-rata basis in the hands of all the family members and not the assessee alone. It has already been brought on record that all the family members are income tax payee and are filing their respective income tax returns. Therefore, the addition so made in the hands of assessee needs to be reduced on this score. Hence, we direct the A.O. to make addition in respect of unexplained jewellery on pro-rata basis and restrict the additions in the hands of assessee of his share alone. Appeal of the assessee is allowed partly.

Summary

Issues Involved:
1. Sustaining an addition of ?9,29,858/- under the Income Tax Act.
2. Additional credit of only 50 grams of gold and stones per family member.
3. Consideration of the ownership of jewelry by ladies and pro-rata addition among family members.

Issue-Wise Detailed Analysis:

1. Sustaining an Addition of ?9,29,858/-:
The assessee contested the addition of ?9,29,858/- sustained by the CIT(A). The addition was made due to the alleged excess jewelry found during a search at the assessee's residence. The jewelry was seized, and the Assessing Officer (A.O.) relied on CBDT Circular No. 1916, which allows certain quantities of jewelry to be treated as explained based on family status. The A.O. allowed 2050 grams as explained and added the remaining 647 grams as unexplained, resulting in an addition of ?27,92,397/-. The CIT(A) reduced this addition by considering the social status of the family and the embedded stones in the jewelry, ultimately sustaining an addition of ?9,29,858/-. The assessee argued that the status and standing of the family were higher than the minimum recognized by the circular, and thus, the entire jewelry should be considered explained.

2. Additional Credit of Only 50 Grams of Gold and Stones Per Family Member:
The CIT(A) acknowledged the A.O.'s error in interpreting the CBDT circular and gave additional credit of 50 grams per family member due to the social status of the family. The assessee argued that this additional credit was insufficient given the family's higher social standing and the tradition of owning significant jewelry in their community. The assessee provided details of income tax returns filed by family members to demonstrate their financial status and argued for a higher credit for the jewelry found.

3. Consideration of the Ownership of Jewelry by Ladies and Pro-Rata Addition Among Family Members:
The assessee contended that the jewelry primarily belonged to the ladies of the house and any addition for excess jewelry should be made in their hands, not solely in the assessee's hands. The CIT(A) did not fully consider this argument. The ITAT noted that the jewelry belonged to all family members and directed that the addition should be made on a pro-rata basis among all family members, not just the assessee. The ITAT emphasized that the assessee had only salary and interest income, with no evidence of unaccounted income, and the jewelry should be attributed to the family members proportionately.

Conclusion:
The ITAT found merit in the assessee's arguments regarding the ownership and distribution of jewelry among family members. The ITAT upheld the CIT(A)'s decision to grant additional credit of 50 grams per family member but directed that the addition for excess jewelry should be made on a pro-rata basis among all family members, reducing the addition in the assessee's hands. The appeal was partly allowed, with the A.O. instructed to make the necessary adjustments.