2021 (6) TMI 968 - AT - Income Tax

Unexplained investment in Jewellery - search party found invoices of jewellery - Central Board of Direct Taxes Circular No. 1916, dated May 11, 1994, lays down guidelines for seizure of jewellery and ornaments in the course of search - HELD THAT - Having regard to the circular and size of the family, the ornaments to the extent specified in the circular should be accepted as reasonable. The Tribunal, accordingly, found that the jewellery held by the assessee and his family members was well within the limit laid down under the Central Board of Direct Taxes circular and, accordingly, deleted the whole addition on the ground that the jewellery held by each of the family members was below the limits specified in the said circular. Bills of purchase of jewellery were found instead of jewellery itself and assessee has explained that the jewellery is purchased for the friends and relatives of the assessee when the bills are found but the jewellery is not available with the assesseeduring the course of search the addition is also required to be made u/s 69 of the act. Therefore we do not find any difference in the above those situations so far as the overall jewellery found during the course of search as well as the bills of such jewellery do not exceed the limits specified in the above instructions. Respectfully following the decision of the Coordinate bench for AY 2010-11 and 2013-14 2019 (2) TMI 1798 - ITAT DELHI we are of the considered view that addition on account of unexplained investment in jewellery is in teeth of CBDT Circular no. 1914 and deserves to be deleted. - Decided in favour of assessee.

Summary

Issues Involved:
Addition on account of jewellery found during search action under section 132 of the Income Tax Act, 1961 for Assessment Years 2007-08 and 2009-10.

Analysis:

Issue 1: Addition on account of jewellery for AY 2007-08
The issue pertains to the addition of ?2,07,218 on the ground of unexplained investment in jewellery found during a search action. The assessing officer made the addition based on invoices of jewellery worth ?10,83,958 found during the search. The assessee claimed that the jewellery was purchased for relatives and friends, but the assessing officer rejected this explanation. The First Appellate authority upheld the addition, leading to the appeal. The assessee argued that the issue is covered by a previous ITAT order for AY 2010-11 and 2013-14, where the ITAT directed the assessing officer to calculate the quantity of jewellery from the invoices and assess accordingly. The assessing officer, following this direction, found the total jewellery to be within the allowable limit as per CBDT Circular no. 1914. Relying on the Gujarat High Court decision, the ITAT set aside the addition, directing the assessing officer to delete it.

Issue 2: Addition on account of jewellery for AY 2009-10
The appeal for AY 2009-10 raised identical grounds regarding the addition of ?4,78,000 on account of unexplained investment in jewellery. The ITAT, by parity of reasoning with the decision for AY 2007-08, ordered the deletion of this addition as well.

In conclusion, both appeals by the assessee were allowed, and the additions on account of unexplained investment in jewellery for AY 2007-08 and AY 2009-10 were deleted. The ITAT relied on the CBDT Circular no. 1914 and the Gujarat High Court decision to support its decision.