2016 (5) TMI 971 - AT - Income Tax

Search action u/s 132(1) - jewellery found from the bed room of the assessee s son and locker of his daughter-in-law - Held that - The search was conducted at the residential premises of the assessee in House No. 34, First Floor, Greater Kailash-I, New Delhi, wherein all the family members were living jointly, albeit in separate rooms. It is an admitted position that no separate assessments have been made for the other family members. It is further seen that the assessee at no stage admitted that the entire jewellery belonged to him alone. Au contraire, he specifically submitted that the jewellery belonged to all the family members. The factum of the assessee s daughter-in-law, a working woman, having her own separate locker, amply goes to prove that she was keeping her jewellery separate from that of the larger family. Presently, we are dealing with the assessment of the assessee. It is, but, natural that the unexplained jewellery, if any, belonging to the assessee s son and daughter-in-law, both of whom are separately assessed to tax, cannot be taxed in the hands of the assessee. In our considered opinion, the ld. CIT(A) was fully justified in excluding from consideration the value of jewellery found in the bed room and locker of the assessee s daughter-in-law. Applicability or otherwise of Instruction No.1916 dated 11.5.1994 - no seizure of jewellery can be made upto 500 gms belonging to a married lady, 250 gms. belonging to unmarried girls and 100 gms belonging to males - CIT(A) deleted the addition to the extent of 1100 gms from the total jewellery belonging to the assessee by relying on this Instruction - Held that - We are unable to countenance the contention of the ld. AR for treating the remaining 136.90 gms jewellery as also explained because the assessee has not led any evidence to demonstrate the source of investment in jewellery to this extent. Moreover, when we apply the mandate of Instruction No.1916 and treat jewellery to the tune of 1100 gms. as explained without there being any positive evidence, any jewellery over and above that can be treated as explained only if the assessee leads some positive evidence about the declared source of such excess investment in gold jewellery. We, therefore, affirm the view taken by the ld. CIT(A) in treating jewellery to the extent of 136.800 gms as explained. In the ultimate analysis, the impugned order is upheld.

Summary

Issues: Assessment of unaccounted jewellery found during a search action, exclusion of jewellery belonging to family members, applicability of CBDT Instruction No.1916 dated 11.5.1994 in determining unexplained jewellery.

Assessment of Unaccounted Jewellery:
The case involved two cross-appeals arising from the CIT(A)'s order regarding unaccounted jewellery found during a search action under section 132(1). The AO made an addition for the entire value of jewellery found, but the CIT(A) excluded jewellery belonging to the assessee's son and daughter-in-law, limiting the addition to jewellery found from the assessee's bed room and locker belonging to his wife. The CIT(A) applied Instruction No.1916 dated 11.5.94, restricting the unaccounted jewellery to 136.90 gms. Both parties appealed. The ITAT upheld the CIT(A)'s decision to exclude jewellery belonging to family members and restrict the addition to 136.90 gms, amounting to ?2,44,897.

Exclusion of Family Members' Jewellery:
The ITAT observed that the son and daughter-in-law had separate sources of income and separate lockers, indicating distinct ownership of jewellery. As separate assessments were not made for family members, unexplained jewellery of the son and daughter-in-law could not be taxed in the hands of the assessee. Thus, the CIT(A) was justified in excluding the jewellery found in the daughter-in-law's room and locker from the assessment of the assessee.

Applicability of CBDT Instruction No.1916:
Regarding the applicability of Instruction No.1916 dated 11.5.1994, the ITAT noted conflicting judgments. While the Madras High Court held that the Instruction cannot be considered for making additions on unexplained investments, the Rajasthan, Karnataka, and Gujarat High Courts supported its application in determining unexplained jewellery. The ITAT followed the latter view, upholding the CIT(A)'s decision to treat 1100 gms of jewellery as explained based on the Instruction.

Judicial Precedents and Final Decision:
The ITAT rejected the argument to treat the remaining 136.90 gms of jewellery as explained, citing the absence of evidence on the source of investment. Upholding the CIT(A)'s decision, the ITAT emphasized that positive evidence was required to explain jewellery beyond the 1100 gms already accounted for. The ITAT dismissed both appeals and upheld the CIT(A)'s order, concluding the judgment on 18.05.2016.

In conclusion, the ITAT's detailed analysis addressed the issues of unaccounted jewellery assessment, exclusion of family members' jewellery, and the applicability of CBDT Instruction No.1916, providing a comprehensive legal perspective on the matter.