2022 (8) TMI 82 - AT - Income Tax

Unexplained investment u/s 69 - Addition on account of jewellery (Gold Jewellery and Silver Jewellery) found from the residence as well as bank locker of the assessee during the course of search - HELD THAT - Assessee belongs to Rajput Community of Rajasthan and as per customs of the Community, some of the Gold/Silver Jewellery/articles are passed on to the subsequent generations and some of the jewellery was received on various festivals/ auspicious occasions and ceremonies. In fact, the assessee had furnished photographs of functions and marriages to show that ladies of his family wearing heavy gold jewellery which according to him is a part of STREEDHAN and deserves to be treated as explained. Assessee has also drawn our attention to the cash withdrawn by him from his bank account for purchasing some jewellery from time to time in past many years out of his own savings. Therefore, according to the ld. AR of the assessee, the acquisition of jewellery is not excessive looking to the social status of the assessee. In our view the intention of law is to stick to the jewellery limits mentioned in the Circular. There was no point in inserting the provision at clause (iii) which grants discretionary power to the Income Tax Authorities to decide as to what can be reasonable quantity of jewellery held by an assessee in view of community practices and social status. As we are of the considered view that the AO had ignored the factual position as well as failed to verify the fact that the assessee is living with his parents and belonged to a Rajput Family where the fact of having jewellery as Streedhan by the assessee s mother and wife cannot be ignored. Thus after considering the overall factual position in this case and keeping in view of high status, family tradition, deduction on account of purity and the deduction towards Streedhan, the excess jewellery found were nominal. In this view of the matter, the addition sustained by the ld. CIT(A) deserves to be deleted and the grounds raised by the assessee are allowed.

Issues Involved:
1. Addition of Rs. 17,55,262/- on account of unexplained jewellery under Section 69 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Addition of Rs. 17,55,262/- on account of unexplained jewellery:
The primary issue in this case revolves around the addition of Rs. 17,55,262/- made by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)] on account of unexplained jewellery found during a search operation. The jewellery in question includes Rs. 15,52,634/- worth of gold jewellery and Rs. 2,02,628/- worth of silver jewellery.

1.1 Confirmation of addition by CIT(A):
The assessee contended that the jewellery found during the search was "STRIDHAN" of the ladies in the family, acquired over various occasions and thus should not be treated as unexplained. However, the CIT(A) confirmed the AO's addition, disbelieving the sources of acquisition and ignoring the submissions and evidence provided by the assessee.

1.2 Assessment Proceedings and CIT(A)'s Findings:
During the search, gold jewellery weighing 1921.800 grams valued at Rs. 47,97,013/- (including precious stones valued at Rs. 6,47,773/-) and silver jewellery valued at Rs. 2,02,628/- were found. The AO allowed a benefit for gold jewellery worth 1300 grams as per CBDT Instruction No. 1916 dated 11-05-1994, resulting in an addition of Rs. 17,55,262/-, which was upheld by the CIT(A).

1.3 Assessee's Explanation and Evidence:
The assessee explained that the jewellery was ancestral and received during various family occasions, including marriages and the birth of children. The assessee also provided photographs of these occasions and bank statements showing cash withdrawals used to purchase some of the jewellery. The AO did not raise further queries or doubt the cash withdrawals but allowed only the jewellery covered by the CBDT instruction, treating the balance as unexplained.

1.4 Customary Practices and Community Traditions:
The assessee belongs to the Rajput Community of Rajasthan, where it is customary to pass on jewellery through generations and receive it on auspicious occasions. The assessee argued that the jewellery should be considered explained based on these customs and the family's social status.

1.5 Legal Precedents and CBDT Circular:
The tribunal referred to CBDT Circular No. 1916, which allows for a larger quantity of jewellery to be excluded from seizure based on family status and community customs. The tribunal also cited several legal precedents where courts have accepted jewellery as explained based on similar arguments, including cases from the Delhi High Court and various ITAT benches.

1.6 Tribunal's Decision:
The tribunal appreciated the CBDT Circular and the discretionary power it grants to the Income Tax Authorities. It noted that the AO and CIT(A) failed to consider the factual position and the family's customs. The tribunal concluded that the excess jewellery found was nominal and should be treated as explained, considering the family's high status, traditions, and the concept of Streedhan. Consequently, the addition sustained by the CIT(A) was deleted, and the grounds raised by the assessee were allowed.

Conclusion:
The appeal of the assessee was allowed, and the addition of Rs. 17,55,262/- made on account of unexplained jewellery was deleted. The tribunal emphasized the importance of considering family traditions, social status, and customary practices in such cases. The order was pronounced in the open court on 27/07/2022.

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