2014 (5) TMI 775 - AT - Income Tax

Jurisdiction of the AO u/s 153A of the Act No valid search conducted u/s 132 of the Act Addition u/s 69 of the Act Unexplained investment - Allowability of rebate in respect of jewellery Held that - The issue of applicability of the Instruction No. 1916 dated 11.5.1994 to the assessment proceedings was considered in CIT vs. Ratanlal Vyaparilal Jain 2010 (7) TMI 769 - Gujarat High Court Tribunal has allowed the rebate to the assessee as per the aforesaid CBDT s Instructions unless the Revenue shows anything to the contrary, it can safely be presumed that the source to the extent of the jewellery stated in the circular stands explained - the approach adopted in considering the extent of jewellery specified under the circular to be a reasonable quantity, cannot be faulted with - it is not possible to state that the Tribunal has committed any legal error so as to give rise to a question of law - the AO is directed to allow the rebate of 950 gms. of jewellery as against the 700 gms. of jewellery directed by the CIT(A) Decided in favour of Assessee.

Summary

Issues:
1. Validity of jurisdiction under section 153A for assessment.
2. Calculation of rebate on unexplained jewelry under section 69 of the I.T. Act.
3. Applicability of CBDT Instruction No. 1916 dated 11.5.1994 in assessment proceedings.

Analysis:

Issue 1:
The first issue raised in the appeal was regarding the validity of the Assessing Officer's jurisdiction to frame the assessment under section 153A without a valid search conducted in accordance with section 132. The appellant contested the assumption of jurisdiction by the AO. However, during the hearing, it was revealed that there was indeed a search conducted at the appellant's residence under section 132 of the I.T. Act. Consequently, the total jewelry found from the appellant and her bank locker was treated as unexplained, leading to an addition in the assessment.

Issue 2:
The second issue pertained to the calculation of rebate on unexplained investment in jewelry under section 69 of the I.T. Act. The appellant claimed a rebate based on CBDT Instruction No. 1916 dated 11.5.1994, which specified different quantities of jewelry for different family members. The CIT(A) allowed a rebate of only 700 gms of jewelry, leading to a dispute. The appellant argued that the rebate should be 950 gms as per the CBDT's Instruction, which was contested by the Departmental Representative. However, the Hon'ble Gujarat High Court's decision in a similar case supported the appellant's claim for the higher rebate of 950 gms, emphasizing the customary practices in Hindu families regarding jewelry gifts during social functions.

Issue 3:
The third issue revolved around the applicability of CBDT Instruction No. 1916 dated 11.5.1994 in the assessment proceedings. The Departmental Representative argued that these instructions were only relevant to the seizure of jewelry and did not apply to assessment proceedings. However, the Tribunal's decision in line with the CBDT's Instruction was upheld by the Hon'ble Gujarat High Court, emphasizing the cultural practices and customs related to jewelry in Hindu households. The High Court's ruling supported the Tribunal's approach of considering the jewelry quantities specified in the circular as reasonable, thereby directing the AO to allow the higher rebate of 950 gms as per the CBDT's Instruction.

In conclusion, the ITAT Delhi allowed the appellant's appeal, directing the AO to grant a rebate of 950 gms of jewelry instead of the 700 gms allowed by the CIT(A), in accordance with the CBDT Instruction and the precedent set by the Hon'ble Gujarat High Court.