2022 (4) TMI 145 - AT - Income Tax

Addition of jewellery found in search - HELD THAT - AO failed to appreciate the status of the assessee family and unjustifiably made an addition of entire Jewellery seized by the department during course of the search. Thus assessee had substantially explained the entire quantity/weight of gold, diamonds, silver and other valuable stones found during the course of search and therefore, the ld. Assessing Officer/learned CIT(A) was not justified in making/confirming the ad hoc addition in respect the jewellery seized by the department. Hence, we set aside the orders of the Revenue Authorities on this issue and delete the addition on this issue - Appeal of assessee allowed.

Summary

Issues:
Appeals against orders of Ld. Commissioner of Income Tax(Appeals) regarding addition of unexplained jewellery under section 69 of the Income Tax Act for Assessment Year 2018-19.

Analysis:
1. The appeals were filed by both the Assessees and Revenue against separate orders of the Ld. Commissioner of Income Tax(Appeals) dated 18.01.2021, arising from orders u/s 143(3) of the Income Tax Act 1961 framed by ACIT (Central-1, Indore. The common issue raised was the upholding of additions of &8377; 37,93,608/- each in the total income of the respective assesse(s) regarding jewellery/ornaments seized during a search.

2. The case of Shri Manish Kumar Kedia was considered the lead case, with identical circumstances in the cases of Smt. Chardra Devi Kedia & Shri Santosh Kumar Kedia. The appeal related to the addition of jewellery of &8377; 37,93,608/- seized during the search. The Assessing Officer made the addition under section 69 r.w. 115 BBE of the Act, stating discrepancies between items specified in bills and items found during the search. The Ld. CIT(A) rejected all submissions and confirmed the addition.

3. The assessee contended that the addition was arbitrary and lacked merit, emphasizing that the gross weight of gold jewellery found should be considered explained based on bills/invoices or valuation reports. The Revenue Authorities failed to consider this explanation.

4. The ld. CIT-DR supported the orders of the Revenue Authorities, stating the assessee failed to explain the source of the jewellery.

5. The learned CIT(A) confirmed the addition of &8377; 37,93,608/- as unexplained jewellery, dismissing the appeal. The appellant's explanation regarding the source of acquisition was deemed unsatisfactory.

6. The details of the jewellery and ornaments found during the search were presented, showing discrepancies in weight between found and explained items. The family's reputation, history, and acquisition sources were detailed, supported by relevant documents.

7. The Tribunal found that the Revenue Authorities failed to appreciate the changing nature of jewellery over time, leading to discrepancies between items found and documented. Several judicial pronouncements were cited to support the view that jewellery remaking is common, and exact matches should not be expected during searches.

8. The Tribunal highlighted the importance of considering family status, customs, and CBDT Instructions in such cases. The Assessing Officer's failure to exclude a larger quantity of jewellery from seizure and the denial of benefits under CBDT Circular No. 1916 were noted. The Tribunal set aside the orders of the Revenue Authorities and deleted the addition of the seized jewellery.

9. Consequently, the appeals of the assessees were allowed, and the addition was deleted. The order was pronounced on 07.02.2022 as per Rule 34 of I.T.A.T., Rules 1963.