VIKAS JAIN,NEW DELHI vs. ACIT, CENTRL CIRCLE-4, NEW DELHI
Income Tax Appellate Tribunal, DELHI BENCH ‘E’: NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRIS.RIFAUR RAHMANVikas Jain, vs. ACIT, Central Circle 4, H.No.197, Ground Floor,
PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER :
The assessee has filed appeal against the order of the Learned Commissioner of Income Tax (Appeals)-23, New Delhi [for short “ld. CIT(A)”] dated 17.03.2023 for the Assessment Year 2018-19. 2. Brief facts of the case are, this is an appeal filed by the assessee against the order dated 17.03.2023 passed by the ld. CIT (A) restricting the addition made by the Assessing Officer to the extent of Rs.39,02,686/- on 2 account of alleged unexplained jewellery found during the course of search.
1 The assessee is an individual and has filed his return on 11.10.2018. However, a search and seizure operation was carried out on residential premises and bank locker of the assessee on 10.08.2017 and during search, items of gold jewellery, diamond studded gold jewellery and silver items were found and inventorised as per Panchnama placed at pages 5 to 19 of the paper book. Thereafter, notices u/s 143(2) and 142 (1) of the Income-tax Act, 1961 (for short ‘the Act’) were issued and served on the assessee and the assessee was asked to explain the investment in jewellery made by him. In response, the assessee vide reply dated 24.12.2019 explained that the jewellery pertained to the assessee and his joint family members and such jewellery ornaments were mainly received as gifts at the time of birth, marriage, various festivals and functions including certain ornaments which were purchased from time to time. The assessee further submitted that the family of the assessee consisted of the following members who are eligible to claim benefit of above said jewellery to the extent of limit as prescribed in the CBDT Instruction No.1916 dated 11.05.1994 :-
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Name
Eligible weight of jewellery to be claimed
Relationship with assessee
Vikas Jain
100
Self
Sheenu Jain
500
Wife
Kusum Lata Jain
500
Mother
Vishal Jain
100
Brother
Palak Jain
500
Wife of brother
Khushi Jain
250
Unmarried daughter of the assessee
Aadhiv Jain
100
Unmarried son of the assessee
Sanskriti Jain
250
Unmarried daughter of brighter of assessee
Aariv Jain
100
Unmarried son of brother of assessee
Total
2400
2 Further the assessee explained that jewellery items found over and above the prescribed limit of jewellery as per CBDT Instruction No.1916 (supra) were inherited by assessee’s father from his mother (i.e. assessee’s grandmother) through a Will and copy of the Will is placed at page 45 of the paper book. 2.3 Thereafter, ld. Assessing Officer though granted relief to the extent of 2400 gms. of jewellery as per CBDT Instruction No.1916, however, made addition of Rs.69,07,106/- on the reasoning of non-filing of wealth tax return and ignoring the Will of the assessee’s grandmother and without considering the status of the family and the customs and practices of the community in which the family belongs.
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3. Aggrieved assessee preferred an appeal before the ld. CIT (A) and filed detailed submissions. Ld. CIT (A) after considering the detailed submissions observed that jewellery to the extent of 916.46 gms. is explained as per the Will of assessee’s grandmother and subsequently, the addition made by the Assessing Officer u/s 69B of Rs.69,07,106/- was restricted to Rs.39,02,686/-.
4. Aggrieved assessee is in appeal before us raising following grounds of appeal :-
“1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad both in the eye of law and on facts.
(i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in sustaining the addition of Rs. 39,02,686/- made by the AO on account of jewellery found during the course of search treating the same as unexplained investment of the appellant invoking the provisions of section 69B of the Income Tax Act.
(ii)
That the abovesaid addition has been confirmed rejecting the detailed explanation and the evidences brought on record by the assessee explaining the source of the jewellery seized during the course of search.
(iii)
That the abovesaid addition has been confirmed by indulging into surmises and on the basis of illogical assumptions without there being any basis for the same.”
At the time of hearing, ld. AR submitted detailed submissions and the same are also given in the form of written submissions which are reproduced below :-
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“11. It is pertinent to note here that:
i.
The assessee has been married for more than 20-25 years and lives in a joint family comprising of 10members.
ii.
The jewellery found during the course of search pertains to all of the family members.
iii.
It is an undisputed fact the majority of the jewellery was obtained as gift on birthdays, marriage functions and festivals by various members of the family and the quantum and the worth of the gift also depend upon the social as well as financial status not only of the donor but of the donee also.
iv.
It is a tradition in joint families to have a common pool of jewellery and use it interchangeably at various occasions and functions.
v.
The fact that the assessee 1ives in a joint family and that this jewellery belongs to the whole of the family has not been doubted by the AO.
vi.
No defect has been pointed out in the Will of assessee's grandmother furnished by the AO.
vii. Nothing adverse has been brought on record either by the AO or CIT(A) to prove that such jeweller, has been acquired in cash or otherwise.
viii. The intent of CBDT Instruction No.1916 was never that the Assessing Authority should restrict the amount of eligible jewellery to the quantity mentioned in the circular, instead to give due consideration to the status and community of the assessee as is also evident from Clause (iii) of such CBDT
Instruction No.1916 placed at PB Pg.44. ix.
However, the fact that assessee is a businessman engaged in the business of film distribution and having good financial status of the has been completely ignored by the AO as well as by CIT(A).
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x.
The addition has been made by the AO and CIT(A) in complete disregard to the customs and practices of the community to which the family of the assessee belongs and solely on the basis of surmises and conjectures.
xi.
The value of jewellery held by the assessee's family is reasonable in view of the number of members in the assessee's family and the status and social positioning that the family enjoys.
xii. Reliance is placed on the following judicial pronouncements wherein it has been held that the limits specified in CBDT
Instruction No.1916 are not to be read in strict sense and due consideration is to be given to the status of family and customary practices.
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MRS. NAWAZ SINGHANIA VERSUS DCIT CENT. CIR -
8 (1) , MUMBAI, 2018 (1) TMI 21 ITAT MUMBAI, Dated:
- 22-12-2017
"38. I found that the claim of gifts has been there before assessing officer and therefore the argument that before CIT(A) in earlier submission this claim was not put up carries no weight for the purpose of dismissal of the claim itself And, as for Wealth tax returns, it needs to tax understood that there is always a cyclical kind of rotation between the item being re-made, gift received etc.
This is recognized by the CBDT in their Instruction 1916 dated
11/05/1994 where they gave powers to the department of taking into account the status of the family, customs and practices of the community to which the family belongs. Therefore rejection in the manner done by the appellate authority is not justified at all.
Keeping the status of assessee's family in mind as well as customs and practices of the community to which the family belongs as detailed in preceding paragraphs/ the benefit of CBDT Instruction 1916 dated 11th May 1994, is warranted for assessee.
In view of the above discussion, I do not find any merit for the addition so made on account Gold and Diamond jewellery."
.
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ASHOK CHADDHA VERSUS INCOME TAX OFFICER
2011 (7) TMI142 - DELHI HIGH COURT - Dated: - 5-7-
2011
"3. Learned Counsel for the respondent on the other hand relied upon the reasoning given by the authorities below. After considering the aforesaid submissions we are of the view that addition made is total/y arbitrary and is not founded on any cogent basis or evidence. We have to keep in mind that the assessee was married for more than 25-30 years. The jewellery in question is no very substantial. The learned counsel for the appellant/assessee is correct in her submission that it is a normal custom for woman to receive jewellery in the form of "streedhan" or on other occasions such as birth of a child etc. collecting jewellery of 906.900 grams by a woman in a married life of 25-30 years is not abnormal.
Furthermore, there was no valid and/or proper yardstick adopted by the Assessing Officer to treat only 400 grams as "reasonable allowance" and treat the other as "unexplained". Matter would have been different if the quantum and value of the jewellery found was substantial.
We are, therefore, of the opinion that the findings of the Tribunal are totally perverse and far from the realities of life. In the peculiar facts of this case we answer the question in favour of the assessee and against the revenue thereby deleting the aforesaid addition of Rs.3,87,364/-."
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ANKUR SHARMA VERSUS DCIT, CENTRAL CIRCLE,
GHAZIABAD 2023 (10) TMI653 –ITAT DELHI, Dated: -
6-10-2023
"9. At the outset, we hold that CBDT's instruction no. 1916
dated 11.05.1994 and press release dated 01.12.2016 pertains to seizure of jewellery. It postulates that by going through the archetypal Indian family standard, a persons of an Income Tax payee of considerable amount could have had the prescribed amount of jewellery in the circular. It was brought into force after a series of due deliberation and its impact on taxation. It is never envisaged that the Assessing Authority should restrict the amount of eligible jewellery to the quantity mentioned in the circular.
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15. Hence, keeping in view the facts and circumstances of the instant case and also the jewellery found, the total income declared and in view of the various judgments cited above, we direct that the addition made on this account be deleted."
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SH. VIBHU AGGARWAL VERSUS DCIT, CC-06, NEW
DELHI 2018 (5) TMI586 -ITAT DELHI Dated: - 4-5-2018
"6.1 In view of above instructions, the excess jewellery found in the case of assessee, his parents his wife, their children and the HUF was very nominal, and was very much reasonable, keeping in mind the riches and high status and more customary practices. Our aforesaid view is fortified by following decisions/ judgments ...
2 After perusing the aforesaid decisions of the Hon'ble Delhi High Court as well as the ITAT Delhi, we are of the considered view that facts and circumstances of the present case are similar to the aforesaid decision of the Hon'ble Delhi High Court and Tribunal, hence, the issue in dispute is squarely covered by the aforesaid decisions.
3 Keeping in view of the aforesaid facts and circumstances of the case as well as the status of the family and on the anvil of the judgement of the High Court of Delhi in the case of Ashok Chadha vs. ITO (Supra) & of Sushila Devi in Writ Petition No. 7620 of 2011 dated 21. 10.2016 and the ITAT Delhi decision in the case of SuneelaSoni vs. DCIT passed in ITA No. 52591Del12017 dated 16.3.2018, the explanation given by the assessee's counsel is accepted. Accordingly the orders of the authorities below are cancelled and addition made by the AO and partly confirmed by the Ld. CIT(A) on account of balance jewellery weighting 1050 gms of gold as unexplained is hereby deleted."
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SUNEELA SONI VERSUS DCIT, CC-20, NEW DELHI
2018 (3) TMI 1038 - ITA T DELHI, Dated -16-3-2018
"6.1 After perusing the aforesaid decision of the Hon 'ble Delhi
High Court, I am of the considered view that facts and circumstances of the present case are similar to the aforesaid decision of the Hon'ble Delhi High Court and hence, the issue in dispute is squarely covered by the aforesaid decision.
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6.2
395, the explanation given by the assessee's counsel is accepted.
Accordingly the orders of the authorities below are cancelled and addition made by the AO and confirmed by the Ld. CIT(A) amounting to Rs.10,65,312/- on account of purported unexplained jewellery claimed by the assessee is deleted."
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HAROON
MOHO.
UNNI.,
MUMBAI
VERSUS
DEPARTMENT OF INCOME TAX AND VICE VERSA
2014(1) TMI1836-ITATMUMBAI, Dated: -31-1-2014
"5. We have considered the submissions of both the representatives of the parties. The assessee is a businessman having good financial status. It is also very common that as per the customs and practices prevalent in our country, the jewellery/gold etc. is gifted by the relatives and friends of a person at the time of certain occasions like marriages, birth of a child, birthdays, marriage anniversaries etc. The quantum and the worth of the gifts also depend upon the social as well as financial status not only of the donor but of the donee also. Further, as per CBD T circular No.
1916 dated 11.5.1994 which contains guidelines to be followed in the matters of seizure of gold and jewellery during the course of search action, it is apparent that in case of a person not assessee to wealth-tax, gold jewellery and ornaments to the extent of 500 gms.
PW married lady, 250 gms per unmarried lady and 100 gms. per male member of the family need not be seized. He has further brought our attention to the clause (iii) of the said guidelines wherein it has been mentioned that the authorized officer may, 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 decide to exclude a larger quantity of jewellery and ornaments from seizure. 6. The Hon'ble Gujarat High
Court in the case of "CIT vs. RatanlalVyaparilal Jain"(supra) has held that though the said circular had been issued for the purpose of non seizure of the jewellery, but the basis for the same ITA
NO.463/M/2012 M/s. Shri HaroonMohd. Unni recognizes customs of gifts of jewellery by the relatives and friends on certain occasions such as marriages, birthdays, marriage anniversary and other festivals. In such circumstances, unless the Revenue shows
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anything to the contrary, it can be safely presumed that source to the extent of the jewellery stated in the circular stands explained. In view of above stated position of law, we do not find any infirmity in the well reasoned order of the CIT(A)."
Therefore, in view of the above mentioned facts and circumstances of the case and the status and customary practices and the community to which the family of the assessee belongs and the judicial pronouncements relied upon by the assessee, the addition made by AO and sustained by CIT(A) on account of alleged unexplained investment in jewellery is unwarranted in the eyes of law and same is liable to be deleted.
B.
Addition made by AO under section 69B is liable to be quashed -
It is pertinent to note here that the AO has completed the assessment u/s 143(3) and made an addition under section 69B of Act on account of alleged unexplained jewellery found during the course of search.
It is relevant to note the provisions of Section 69B which are reproduced hereunder for the sake of convenience:
69B. Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable article, and the Assessing Officer finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year.
On a plain reading of the above provisions of section 69B, it can be noted that all the following conditions need to be satisfied cumulatively in order to fall under the purview of Section 69B:
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i.
Assessee shall be the owner of any bullion, jewellery or other valuable article ii.
Such investments should be recorded in books of accounts maintained by assessee iii.
AO should be of a belief that the amount expended on making such investments exceeds the amount recorded in the books of account maintained by the assessee
However, the case of the assessee' is contrary to the provisions of Section 69B as there is no finding by the AO that assessee has recorded the investments at a lower value than the amount actually expended to acquire such jewellery.
Nowhere in the assessment order or notices issued to the assessee, Ld. AO has conveyed this belief that there is a discrepancy in the value of investments as recorded in the books of accounts and actual amount spent for purchase of such jewellery.
Infact, the Ld. AO has made out a case by alleging that the source of the entire jewellery has not been proved by the assessee. This observation and addition made thereupon by invoking section 69B in illegal and bad as the conditions stipulated for the applicability of Section 69B are not fulfilled.
It is also relevant to note here that it is neither the case of the AO nor CIT(A) that assessee has undervalued the jewellery in his books of accounts. However, for invoking the provisions of Section 69B, the onus is or revenue to prove that assessee has undervalued such investments in the books of accounts. Reliance is placed on the following judicial pronouncement in this regard:
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ASSISTANT
COMMISSIONER
OF INCOME-TAX,
CENTRAL
CIRCLE-16,
NEW
DELHI
VERSUS
AMBIENCE DEVELOPERS & INFRASTRUCTURE (P.)
LTD. 2011 (8) TMI514 -ITAT DELHI Dated - 5-8-2011 has held that -
Section 69 is not applicable in the case of the assessee as it pertains to investments which are not recorded in the books of account. Section 69B deals with a situation where Assessing
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Officer finds that amount of investment exceeds the amount recorded in this behalf in the books of account and assessee does not offer satisfactory explanation. In such case, the excess investment may be deemed to be income of the assessee. This section can be attracted when the Assessing Officer asks the assessee an explanation about inadequate investment. As already explained, in this case, neither Assessing Officer put up a question about inadequate cost of construction in the books of account nor assessee's explanation offered in respect of seized documents is adverted to by the Assessing Officer which is placed on paper book page 4 onwards. Thus, section 69B was not properly applied by the Assessing Officer in these facts.
Hence in view of the above-mentioned facts and circumstances of the case, addition made by the AO by invoking provisions of section 69B of-the Act is illegal and bad in law and thus the same is liable to be deleted.
Therefore, considering the above mentioned facts and circumstances of the case, and the status and customary practices and the community to which the family of the assessee belongs and the judicial pronouncements relied upon by the assessee, the addition made by AO and sustained by CIT(A) on account of alleged unexplained investment in jewellery is unwarranted in the eyes of law and same is liable to be deleted.
Moreover, the case made by the AO by invoking the provisions of Section 69B are itself flawed as such section is not applicable in the current facts and circumstances of the case more particularly in the absence of any finding by the AO itself as regard the undervaluation of jewellery in the books of the assessee. Therefore even on this ground the addition made by AO and sustained by CIT(A) u/s 69B is flawed and unsustainable.
C.
Without prejudice to the above, the jewellery seized belongs to both the assessee and his brother, Vishal Jain.
The jewelry seized during the search belongs to both the assessee and his brother, Vishal Jain, as evidence by the separate valuation reports submitted at PB pages 12-13 and 14-16. These reports distinctly identify the jewelry attributed to each individual,
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thereby establishing that the entire quantity does not belong solely to the assessee.
The mere fact that the jewelry was found at the premises does not imply exclusive ownership by the assessee particularly when there is documented evidence attributing a portion to another individual. The valuation reports clearly delineate the division of jewelry, and no contrary evidence has been brought on record to dispute this allocation.
The addition made entirely in the hands of the assessee is thus devoid of merit and fails to consider the factual position supported by the valuation reports. It is respectfully submitted that the addition be deleted.”
On the other hand, ld. DR of the Revenue submitted that ld. CIT(A) has already given relief to the extent allowable in this case and submitted that he heavily relies on the findings of Ld CIT(A). 7. Considered the rival submissions and material placed on record. We observed that during search proceedings at the premises of the assessee’s family, found gold jewellery, silver and diamond studded jewelleries to the extent of 4657.97 grams and 6.5 kgs of silver valued at Rs.134,50,122/- and to the extent of allowable quantities as per CBDT instruction no.1916, the AO has allowed 2400 grams and to the extent of grandmother’s will, ld. CIT(A) has allowed to the extent of 916.51 grams. The assessee is in appeal before us for the rest of the jewellery with the plea that the status and family back ground has to be considered while determining the allowance. It was referred to the CBDT instruction,
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wherein, in the para 4, the direction given to the authorities to consider the family background before determining the allowance.
8. In this case, we noticed that there are 10 family members involved and the assessee could not submit any bills or any supporting documents to prove the source of these jewelleries. No doubt, there is an instruction in the CBDT instruction towards this and there is no specific instruction how to determine the family status or family background. It is a general instruction. It needs be evaluated case by case basis. We observed that there are 10 family members and the details of net worth of each members are not readily available. We have only details of the assessee.
As per the financial statements, the net worth of the assessee is Rs.13,12,234/- (total assets less total liabilities). This is one of the indicators to determining the status of the assessee. We do not know the fair market values of the totalproperty held by the assessee. Therefore, we are not in a position to determine the actual worth of the assessee and also the family members. We cannot accept the general submissions on the status of the assessee and moreover, the CBDT instructions are for the officers of search party and not to the assessing officers. It is the duty of the assessee to raise this issue before the search parties to evaluate the status of the family, so that the status of the family is on the record.
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9. Since, there are several decisions filed before us, the relevant ratios are in favour of the assessee and observed that there is no status report of the assessee and family before us, we are inclined to give further relief to the extent of 50% of the amount sustained by the Ld CIT(A). In the result, grounds raised by the assessee are partly allowed.
10. In the result, appeal filed by the assessee is partly allowed.
Order pronounced in the open court on this 27th day of January, 2025. (SATBEER SINGH GODARA)
ACCOUNTANT MEMBER
Dated: 27.01.2025
TS