LATE SMT. KAILASH AGRAWAL THROUGH LH MR. SUSHIL AGRAWAL,BHOPAL vs. THE DCIT CENTRAL-1, BHOPAL

Assessment Year: 2012-13 Late Smt. Kailash Agrawal DCIT-1 Through LH Mr. Sudhir बनाम/ Kumar Agrawal, Bhopal Vs. E-2/4, Arera Colony, Bhopal (Appellant) (Revenue) PAN: AARPA4436B Appellant by Shri S.S. Deshpande, CA Revenue by Smt. Ashima Gupta, CIT- DR Date of Hearing: 23.01.2019 Date of Pronouncement: 06.02.2019 आदेश / O R D E R PER MANISH BORAD, A.M: This appeal by Assessee pertaining to A.Y. 2012-13 is directed against the order of Ld. Commissioner of Income Tax(Appeals)-3 Bhopal, (in short ‘CIT(A)’), dated 28.02.2017 which is arising out of the order u/s 143(3) of the Income Tax Act 1961(hereinafter called as the ‘Act’) framed on 31.01.2014 by DCIT(Central) Bhopal. The assessee has raised following grounds of appeal:

Late Kailash Agrawal ITANo.426/Ind/2017 “1.That on the facts and in the circumstances of the case, the order of the ld. CIT(A) is incorrect and bad in law. 2. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in not deleting the complete addition made on account of Gold for 722.010 gms.”

Reliance is placed on instruction no. 1916 of CBDT: "Instruction No. 1916 (F.No. 286/63/93-IT(INV.I/), dated 1I-5- 1994, issued by the Central Board of Direct Taxes ('CBDT') directs the income tax authorities, conducting a search, to not seize jewellery and ornaments found during the course of search of varying quantities specified in the instructions, depending upon the marital status and the gender of a person searched. The guidelines are issued to address the instances of seizure of jewellery of small quantity in the course of search operations u/s. 132 that have been noticed by the CBDT A common approach is suggested in situations where search parties come across items of jewellery for strict compliance by the authorities. The CBDT directed that in the case of a person not assessed to wealth-tax, gold jewellery and ornaments to the extent of 500 gms. per married lady, 250 gms. per unmarried lady and 100 Late Kailash Agrawal ITANo.426/Ind/2017 gms. per male member of the family, need not be seized. " 4.2 The law with respect to quantity of jewellery and ornaments which would generally be held by the family members of an assessee has gone through huge litigations. Boards' instruction no 1916 dated l l " mat 1994 which lays down guidelines for seizure of jewellery and ornaments has also been interpreted by various courts and tribunals. •In the case Commissioner of Income Tax vs Ratanlal VyaparilaJ Jain [(2010) 235 CTR 0568: (2010) 45 DTR 0290; (2011) 339 ITR 0351J it has been that: "Instruction no. 1916, dt 11 til may 1994 which lays down guidelines for seizure of jewe II ery in the course of search takes into account the quanity ofjwellery which would generally be held by the family members of an assesse and, therefore unless anything contrary is shown, it can be safely presumed that the source to the extent of the jewellery ststed in the circular stands explained". •In the case Commissioner of Income Tax vs M.S Agrawal (HUF) [(2008) 76 CCH 0802 MPHC: (2008) 11 DTR 0169 (MP)J it has been held that: "In the absence of any material found during search having nexus with undisclosed income, no addition could be made in block assessment under chapter XlV-B; further Tribunal was justified in deleting addition on account of jewellery having regard to CBDT Instruction No. 1916 dt. 11 may 1994." • In the case Ashok Cbaddba vs ITO (2011) 202 Taxman 395 it has been held that: "Section 69A of the income-tax Act, 1961 - Unexplained moneys - Assessment year 2006-07 During a search at assessee's residential premises, 906.900 gms jewellery was found from assessee - Assessee explained that he was married 25 years back and jewellery was received by his wife in form ofstree dhan' or on other occasions such as birth of a child, etc. - Assessing Officer accepted only 400 gms of jewellery as explained and treated 506.900 gms of jewellery as unexplained and, accordingly, made addition under section 69A - Whether collecting jewellery of 906.900 gms by a woman in a married life of25 years inform ofstree dhan or on other occasions is abnormal - Held, no - Whether therefore, Assessing Officer was 4 Late Kailash Agrawal ITANo.426/Ind/2017 unjustified in treating only 400 gms as 'reasonable' and treating remaining jewellery as 'unexplained' - Held. yes - Whether. therefore, addition made was to be deleted - Held, yes [In favour of assessee]". In the case Smt Pati Devi vs Income Tax Officer and others Reported in 240 ITR -727 (Karnataka High Court) it has been held that: "by referring to instruction no 1916 it was held that it is not the value which is considered but it is the weight which is considered reasonable looking to the social circumstances prevailing in the country. "

4.3 Considering the aforesaid facts and circumstances of the case and the various decisions cited above the findings on this issue are as· below: i). The appellant assessee is married for more than 55 years. For a married lady, collecting jewellery in the form of stri-dhan or buying jewellery on other important occasions is very normal and common in Hindu families. This depends to a large extent on the status and income of the family. In this case the appellant's status is reflected from the regular returns of income filed and status of the family. The A. 0' s findings has no merit that the appellant ii). assesse has not submitted any material evidence to substantiate her claim regarding jewellery received as gift at the time of marriage. At the time of marriage jewellery is given as gift by close relatives and friends and a person giving a gift of jewellery does not attach the bill of purchase. iii). During the last 7 to 8 years the prices of gold have gone up many folds. The valuation of jewellery was done at the time of search. It would be proper to consider the weight of the jewellery rather than the valuation on the date of search. The jewellery which is part of stri-dhan and also acquired at an earlier date would have been acquired at a price much lower than the value arrived at the time of search on account of valuation. iv). The A.O has not mentioned any specific material found during the course of search which would show that the investment in jewellery found in the locker on account of undisclosed sources. The A.O has not been able to connect 5 Late Kailash Agrawal ITANo.426/Ind/2017 acquisition of jewellery with any undisclosed income. The A.O has proceeded with the onus being on the assessee to prove the genuineness of the source of acquisition of jewellery. But, the A.O has not been able to establish any nexus with any document or evidence collected during the search. Merely, if an evidence IS not filled regarding receiving of jewellery at the time of marriage, it cannot be presumed that it has been acquired out of undisclosed investments. In the case of Commissioner of Income Tax vs Ratanlal Vyaparilal Jain [(2010) 235 CTR 0568: (2010) 45 DTR 0290: (2011) 339 ITR 03511- where it has been held:- "The Tribunal found that the jewellery held by the assessee and his family members was well within the limit laid down under the CBDT circular and accordingly, deleted the whole addition on the ground that the jewellery held by each of the family members was below the limits specified in the said circular. Though it is true that the CBDT Instruction No. 1 9 1 6, dt. 11th May, J 994 lays down guidelines for seizure of jewellery and ornaments in the course of search, the same takes into account the quantity of jewellery which would generally be held by family members of an assessee belonging to an ordinary Hindu household. The approach adopted by the Tribunal in following the said circular and giving benefit to the assessee, even for explaining the source in respect of the jewellery being held by the family is in consonance with the general practice in Hindu families whereby jewellery is gifted by the relatives and friends at the time of social functions, viz., marriages, birthdays, marriage anniversary and other festivals. These gifts are customary and customs prevailing in a society cannot be ignored. Thus although the circular had been issued for the purpose of non-seizure of jewellery during the 'course of search, the basis for [he same recognizes customs prevailing in Hindu Society. In the circumstances, 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. Thus, the approach adopted by the Tribunal in considering the extent of jewellery specified under the said circular to be a reasonable quantity, cannot be faulted with. In the circumstances, it is not possible to state that the Tribunal 6 Late Kailash Agrawal ITANo.426/Ind/2017 has committed any legal error so as to give rise to a question of law. .. In the case Commissioner of Income Tax vs M.S Agrawal (HUF) [(2008) 76 CCH 080J MPHC: (2008) 11 DTR 0169 (MP)} where it has been held; "In the case at hand, the AO has not connected any undisclosed income with anything that has come in search and seizure. The AO has himself recorded with regarded with regard 10 the NRI gifts that the assessee had denied of having made any compensatory payments. He has also found that {he statements recorded of the donor were nor dear and he has nor specifically mentioned anything about the gifts made 10 the assessee. The AO has proceeded with regard 10 the OI1I1S on the assessee to prove the genuineness of the transaction and 011 that basis, he has held it to be non-genuine. But the fact remains that no nexus has been established with any document or evidence collected during search and seizure with regard to the gifts made. There is no finding as to how the gifts are not genuine except stating about the onus. Be that as it may, in the absence of any document during search or seizure, it is difficult to accept the submission of the counsel for the Revenue that the conclusion arrived at by the Tribunal to the effect thai the proceedings could not have been initiated under Chapter XlV-B is erroneous or perverse. The CBDT instruction which relate to guidelines for seizure of jewellery and ornaments in the course of search provides that in the case of a wealth-tax-assessee, gold jewellery and ornaments found in excess of the gross weight declared in the WT returns only need be seized, the officer having regard to the status of the family and the custom and practices of the community to which the family belongs and other circumstances of the case. " In the case Ashok kumar Jain vs DCIT- reported in (2004) 32 ITC 527 (lnd) where it has been held; .... the CBDT instruction be taken as yard stick to arrive at reasonableness of holding of gold ornaments in a middle class Hindu family, prevailing customs also to give gifts to minor children's on festive occasions ". 4.4 The appellant assessee has been filing regular returns of income. Thus, looking into the income and status of family of 7 Late Kailash Agrawal ITANo.426/Ind/2017 the appellant assessee and in view of the decisions cited above, the gold jewellery in possession of the appellant late Smt. Kailash Agarwal along with her husband Shri Sushi! Agarwal to the extent of 600 grams is reasonable. Keeping in view Board' circular 1916, the breakup of jewellery to the extent of 600 grams taken as reasonable is given as under;

In grams Kailash Agarwal (Appellant Assessee) 500 Sushil Agarwal (Appellant Assessee's husband) 100 Total 600 It is, therefore, held that out of the total gold jewellery found in possession, as claimed by the appellant late Smt. Kailash Agarwal through legal heir Shri Sushil Agarwal, only 600 grams is treated as reasonable. Addition on account of 600 grams of gold jewellery out of the total gold jewellery found in possession of late Smt. Kailash Agarwal through legal heir Shri Sushil Agrawal is hereby, deleted. The assessing officer may recomputed the addition and allow appropriate relief to the appellant.”

by the assessee. 9. In the result, appeal of the assessee is allowed. Order was pronounced in the open court on 06 .02.2019.