2022 (9) TMI 1078 - AT - Income Tax

Unexplained jewellery - search action at the residential premises and locker, various items of gold jewellery and diamond jewellery were found which were valued from the Government Approved Valuer - Jewellery earned as per Indian customs and traditions - HELD THAT - It is undisputed fact that during the time of search, the assessee has stated that these jewelleries mainly belongs to his wife and his mother and are ancestral jewellery which were gifted during the time of his marriage by his relatives, parents and grand parents and also the parents of his wife. During the course of assessment proceedings itself, the assessee filed the copies of valuation report which proves that these jewelleries are 10-30 years old belonging to the family members. The details of which have been incorporated in the appellate order. Some of the valuation reports were for the year 1990, 2002 and 2009. AO nowhere mentioned about the valuation report which was filed before him and duly noted by Ld. CIT (A) who has tallied the description of the jewelleries as given in the valuation report filed by the assessee from the valuation report of the Govt. Approved Valuer. It was after taking into account the said reports, he has given part relief. Thus, the jewellery which was found on the possession of his wife and mother were old jewelleries and ancestral inheritance and also gifted 2-3 decades ago. CBDT Instruction no. 1916 which has been subject matter of interpretation by various courts in the case of Smt. Pati Devi 1999 (2) TMI 43 - KARNATAKA HIGH COURT , CIT vs. Ghanshyam Das Johri 2013 (10) TMI 1187 - ALLAHABAD HIGH COURT and Ratanlal vs. Yaparilal Jain 2010 (7) TMI 769 - GUJARAT HIGH COURT and others and several other decisions of the Coordinate Bench, the courts have held that CBDT instruction should be taken as guiding factor for presuming assessee to the extent of limit prescribed for the family members should be treated as explained looking to the Indian customs and traditions where jewelleries were given to the ladies at the time of marriage and other occasions. Thus, when the various Hon ble High Courts have held this proposition in favour of the assessee, we find that the ratio laid down has more pursusive value. CBDT circular strongly prescribed that in excess of assessee wealth tax, gold jewellery ornaments found in excess of the carat weight declared in the wealth tax return only need to be assessed. Thus on the peculiar facts, the addition was confirmed by the Hon ble High Court, which ratio cannot be made applicable here. Accordingly, the order of Ld. CIT(A) giving part relief is confirmed. Therefore the ground raised by the revenue is dismissed. Addition on account of unaccounted cash - As not only assessee had shown there was huge withdrawal from his regular bank account but has also shown withdrawals of bank account more than 11 lakhs and also in the income tax return for AY 2016-17, Rs. 4,93,824/- was shown as cash in hand. Thus to this extent, Ld. CIT(A) has rightly held that the said cash cannot be treated as unexplained or undeclared. Accordingly, the order of Ld. CIT(A) on this ground is confirmed.

Summary

Issues Involved:

1. Relief on account of jewellery items worth Rs. 84,53,902/-.
2. Relief on account of cash found at the assessee's residential premises during the search action to the extent of Rs. 4,93,824/-.

Issue-wise Detailed Analysis:

1. Relief on Account of Jewellery Items Worth Rs. 84,53,902/-:

The revenue challenged the CIT(A)'s decision to allow relief on jewellery items worth Rs. 84,53,902/-. The revenue argued that the CIT(A) misconstrued CBDT Instruction No. 1916, which instructs that jewellery up to a certain limit should not be seized but does not imply that such jewellery should be treated as explained for assessment purposes. The revenue also pointed out that the assessee and his family members had not filed wealth-tax returns, which could indicate ownership of such jewellery items.

The assessee, a Director of India Bulls Real Estate Ltd., had various items of gold and diamond jewellery found during a search at his residence and locker. The jewellery was valued by a Government Approved Valuer. The assessee claimed that the jewellery belonged to his wife and mother, was ancestral, and was received as gifts during various family occasions. The AO rejected this explanation, adding the entire jewellery value as income from unexplained sources under Section 69A of the Act.

The CIT(A) noted that the assessee had filed copies of valuation reports indicating that the jewellery was more than two decades old and inherited three generations back. The CIT(A) relied on CBDT Circular No. 11.04.1994, which provides exemption limits for jewellery based on family status and customs. The CIT(A) granted part relief by verifying the items and matching them with the valuation report, allowing relief of Rs. 84,53,902/- and upholding an addition of Rs. 2,45,650/- for items not matching the valuation report.

The ITAT upheld the CIT(A)'s decision, noting that the jewellery was ancestral and gifted decades ago. The ITAT also referred to various court decisions supporting the CBDT instructions as a guiding factor for presuming jewellery within prescribed limits as explained. The ITAT dismissed the revenue's appeal on this ground.

2. Relief on Account of Cash Found at the Assessee's Residential Premises During the Search Action to the Extent of Rs. 4,93,824/-:

The revenue also challenged the CIT(A)'s decision to allow relief on cash found at the assessee's residential premises during the search action to the extent of Rs. 4,93,824/-. The AO had noted that the assessee could not provide a proper explanation for the cash found during the search. The assessee claimed that the cash was from withdrawals from his savings bank accounts and was reflected in his books of accounts. The AO rejected this explanation, adding the entire amount as income from unexplained sources under Section 69A of the Act.

The CIT(A) verified the withdrawals from the assessee's bank account and the balance sheet, noting that the assessee had shown cash in hand of Rs. 4,93,824/- in his income tax return for AY 2016-17. The CIT(A) allowed relief to the extent of Rs. 4,93,824/-, upholding an addition of Rs. 10,176/- as unexplained cash.

The ITAT upheld the CIT(A)'s decision, noting that the assessee had shown substantial withdrawals from his bank account and had declared cash in hand in his income tax return. The ITAT dismissed the revenue's appeal on this ground.

Conclusion:

The ITAT dismissed the revenue's appeal, upholding the CIT(A)'s decisions to allow relief on jewellery items worth Rs. 84,53,902/- and cash found at the assessee's residential premises to the extent of Rs. 4,93,824/-. The ITAT found that the jewellery was ancestral and gifted decades ago, and the cash was adequately explained through bank withdrawals and declared cash in hand.