2014 (5) TMI 1002 - HC - Income Tax

Addition of unexplained jewellery Proper explanation made or not Held that - The jewellery which has been found in possession of the family members is in accordance with customs and practice prevalent in the community and in accordance with status of the family - the Tribunal was rightly of the view that the Central Board of Direct Taxes keeping in view the status of the family, customs and practice of the community, came down with the circular and one has to go with the weight and not with the value as the value may fluctuate over the years - the marriage of three sons were performed in the year 1996, 2000 and 2003 and all the marriages including the assessee and three sons were performed prior to 2003 - the statement of various family members were recorded and none has stated that these are not personal wearing jewellery and same were received by the respective ladies/daughter-in-law on/or at the time of their marriages either from the parental side or in-laws side and even subsequently at the time of birth of their children - Looking to the status of the family and the jewellery found in possesssion of four ladies, was held to be reasonable and the authorized officers, in the first instance, did not seize the jewellery as it was being within the tolerable limit or the limits prescribed by the Board - the Tribunal has correctly analyzed the Circular of the Board and there was no infirmity in the order of the Tribunal Decided against Revenue.

Issues Involved:
1. Addition of Rs.2,88,176/- on account of unexplained jewellery found during the search.
2. Whether there was any proper explanation for the deletion of the addition by the CIT(A) and ITAT.

Detailed Analysis:

1. Addition of Rs.2,88,176/- on account of unexplained jewellery found during the search:

The case involved a search and seizure operation at the business and residential premises of the assessee on 30.6.2004, where certain incriminating books of accounts and documents were seized. During the search, cash amounting to Rs.1,50,600/-, gold jewellery weighing 2202.464 gms valued at Rs.10,53,520/-, and silver items valued at Rs.93,678/- were found. The Assessing Officer (AO) treated 1600 gms of the jewellery as reasonable, considering it was received by the family members at the time of their marriage. The remaining jewellery weighing 602.464 gms, valued at Rs.2,88,176/-, was treated as unexplained due to the absence of satisfactory explanation and added back to the income of the assessee as income from undisclosed sources.

2. Whether there was any proper explanation for the deletion of the addition by the CIT(A) and ITAT:

The respondent-assessee appealed against the addition, and the Commissioner of Income Tax (Appeals) [CIT(A)] substantially deleted the additions made by the AO, including the jewellery addition. The department then appealed to the Income Tax Appellate Tribunal (ITAT), which confirmed the order of the CIT(A).

The revenue's counsel argued that the AO had given due credit for the jewellery to various family members and that the unexplained jewellery of Rs.2,88,176/- was correctly added since the assessee could not provide adequate evidence for the balance jewellery. The counsel also referred to a CBDT circular dated 11.5.1994, which stated that jewellery within certain limits should not be seized but could still be questioned.

The court considered the arguments and the CBDT circular, which provided guidelines for the seizure of jewellery during search operations. The circular stated that in the case of a person not assessed to wealth tax, jewellery up to 500 gms per married lady, 250 gms per unmarried lady, and 100 gms per male member of the family should not be seized. The court noted that the AO had not provided any basis for restricting the claim of jewellery to 1600 gms and that the jewellery found was in accordance with the customs and practices of the community and the status of the family.

The court observed that the jewellery found was reasonable and within the limits prescribed by the CBDT circular. It was also noted that the marriage of the assessee's sons took place in 1996, 2000, and 2003, and the jewellery was received by the respective ladies at the time of their marriages and subsequent events. The court held that the jewellery found in possession of the family members was their 'Stridhan' and could not be questioned to the extent prescribed by the circular.

The court concluded that the addition made by the AO was not justified, and the deletion by the CIT(A) and ITAT was correct. It was also noted that the revenue had not provided any material to show that the jewellery was not personal wearing of the ladies. The court, therefore, dismissed the appeal, stating that no substantial question of law arose from the ITAT's order.

Conclusion:

The appeal was dismissed in limine, with no order as to costs, as the court found that the jewellery found was reasonable and in accordance with the customs and practices of the community and the status of the family. The deletion of the addition by the CIT(A) and ITAT was upheld.

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