2023 (10) TMI 266 - AT - Income Tax

Unexplained investment in jewellery - addition made in the assessment order and not following the Instruction No. 1916 issued by CBDT - search and seizure operation was carried out u/s 132 - HELD THAT - From the assessment order it is clear that the AO made addition on account of non-explanation of source of acquisition/purchase of jewellery items worth Rs. 3,92,151/- and the learned CIT(A) in the appellate order states about gold coins and 17 gold ginnies. CIT(A) was of the view that gold coins and ginnies are not jewellery, which is contrary to the finding of the AO, who in unequivocal terms states that the source of acquisition/purchase of jewellery worth Rs. 3,92,151/- was without any documentary evidence. CIT(A) failed to take note of the fact that assessee is having high social status and duly declared jewellery of more than 6.27 crores. Looking to the peculiarity of facts of the present case where there is no finding by AO that addition was made on account of the fact that items do not partake the character of jewellery, we direct the AO to delete the impugned addition. Grounds of appeal are allowed.

Summary

Issues:
The judgment involves the assessment of an appeal against the order of the Commissioner of Income-tax (Appeals) regarding the addition made on account of alleged unexplained investment in jewellery and the application of CBDT Instruction No. 1916.

Assessment of Appeal:
The appeal was directed against the order of the Commissioner of Income-tax (Appeals) dated 27.10.2022, concerning the assessment year 2019-20. The main ground of appeal was upholding the addition made on account of alleged unexplained investment in jewellery and not following CBDT Instruction No. 1916.

Factual Background:
A search and seizure operation was conducted under section 132 of the Income-tax Act, 1961, in the case of M/s Super Cassettes Industries Pvt. Ltd., which also covered the assessee's case. The assessee filed its return of income, declaring total income of INR 1,97,57,870/-, which was processed under section 143(1) of the Act. Subsequently, an assessment was framed under section 143(3) of the Act, resulting in an addition of Rs. 3,92,151/- on account of unexplained investment in jewellery.

Arguments and Observations:
The counsel for the assessee contended that the authorities failed to consider the benefit of CBDT Instruction No. 1916, highlighting that the total jewellery found was valued at Rs. 6,27,00,968/-, out of which jewellery worth Rs. 3,92,151/- was treated as unexplained. The Department opposed these submissions and supported the lower authorities' orders.

Judgment and Conclusion:
The Tribunal noted that the Assessing Officer made the addition without satisfactory explanation from the appellant regarding the source of acquisition of jewellery items. The Commissioner of Income-tax (Appeals) upheld the addition, considering gold coins and ginnies as not part of jewellery. However, the Tribunal found that the appellant's high social status and declaration of jewellery worth over 6.27 crores were relevant. As there was no finding that the items did not qualify as jewellery, the Tribunal directed the Assessing Officer to delete the addition. Consequently, the grounds of appeal were allowed, and the assessee's appeal was upheld on 27th September 2023.