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Facts
A search action under Section 132 of the Income Tax Act was conducted on the Punihani Group, leading to the seizure of gold and diamond jewellery. The Assessing Officer made additions under Section 69A for unexplained jewellery, which were partly upheld by the CIT(A). The assessees contended that the jewellery was explained, part of joint family assets, acquired from disclosed sources, and covered by CBDT Circular No. 1916 and ancestral/gifted sources.
Held
The Tribunal accepted the assessees' contention that the family should be considered as one unit for assessing jewellery, given their joint living and common use. It found that the jewellery was fully explained through purchase bills, CBDT circular limits, and documented gifts. The explanation that excess diamonds were converted to gold was considered plausible, and upon netting, no unexplained jewellery warranting addition under Section 69A remained.
Key Issues
Whether additions made under Section 69A for unexplained jewellery found during a search operation were justified, considering the family's joint status, sources of acquisition (purchases, gifts, ancestral), and the applicability of CBDT Instruction No. 1916.
Sections Cited
Section 69A, Section 115BBE, Section 132, Section 143(3), Section 153A, Section 153D
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Income Tax Appellate Tribunal, DELHI BENCH “A” NEW DELHI
Before: SHRI G.S. PANNU, HON’BLE & SHRI CHALLA NAGENDRA PRASAD
आदेश /O R D E R PER C.N. PRASAD, J.M.
All these appeals are filed by the Assessee against different orders of the Ld.CIT(Appeals) for the AY 2019-20 in partly upholding the addition made u/s 69A of the Act by the Assessing Officer (hereinafter referred in short as “AO”) in respect of unexplained jewellery found in the course of search. Grounds of appeal read as under: - 1. “(i) That on the facts and circumstances of the case, the Ld.CIT(A) was not justified in upholding the additions to the extent of Rs.1,31,30,074/- made u/s 69A on the alleged ground of unexplained jewellery in total disregard to facts and circumstances of the case.
(ii) That in absence of any adverse material or evidence in support of the allegation that jewellery so found was acquired or purchased in the year under reference, the invocation of provisions of section 69A and consequential addition without even considering the status of the family is highly arbitrary and misconceived. (iii) That the Appellant being part of a joint family and total jewellery of the family found during the course of search being for common use and acquired from common pool of funds is fully supported from documentary evidences in the , 1744, 1747 & 1749/Del/2022 form of bills/invoices/will and other corroborative and circumstantial evidences, the impugned addition u/s 69A is improper and unjustified. (iv) That the source of jewellery found and seized during the search being fully explained and same being accumulated in considerable period of time on account of self-acquisition, gifts, ancestral jewellery and streedhan; there is no case of any unexplained jewellery in terms of section 69A of the Income Tax Act, 1961.
That in any case, the valuation of jewellery so found being highly excessive and irrational and appellant having objected to the same, the addition of Rs.1,31,30,074/- is unreasonable and without any basis or justification.
That on the facts and circumstances of the case, the addition u/s 69A and invocation of section 115BBE of the Income Tax Act, 1961 is illegal and not sustainable on facts and under the law.
4. That on the facts and circumstances of the case, the Ld.CIT(A) has erred in upholding the validity of the order u/s 153A r.w.s. 143(3) even though the same was passed without proper approval u/s 153D of the Income Tax Act, 1961.” 2. Briefly stated the facts are that the cases of the assessees were covered under search action u/s 132 of the Act on 04.01.2019 on Punihani Group of cases. During the course of search at various places including residential premises and lockers, gold and diamond jewellery belonging to family members were found and seized. The AO while completing the assessment u/s 143(3)/153A of the Act has made the following additions in all these cases: , 1744, 1747 & 1749/Del/2022
Name of Assessee Addition of Jewellery made by the Assessing Officer Gold (In grams) Diamond (In carats) Amount (In Rs.) Gurpreet Kaur Punihani 4,157 672 1,63,10,439 Bawniet Kaur Punihani 1,626 390 1,51,10,074 Amarjeet Singh Punihani 2,566 359 1,75,15,175 Jaspreet Kaur Punihani 325 69 28,06,294 TOTAL 8,674 1,490 5,17,41,982 3. In the course of assessment proceedings, the AO required the assessees to explain the source of the above jewellery found during search with the documentary evidences. The assessees furnished replies stating that the gold jewllery either have been duly declared in the Wealth-tax returns or where such ornaments are within the prescribed limits of 100, 250, or 500 gms in case of male, female, married, unmarried tax payers respectively who have not filing any tax returns. The assessee contended that as per the CBDT Circular No.1916 dated 11.05.1994 and the Hon’ble Delhi High Court in the case of Ashok Chadha Vs. ITO it was contended that jewellery found to the extent of limits prescribed in the circular are presumed as explained and should either be seized or added in assessments.
Assessees also contended that jewellery to the extent of 9.371 kgs belongs to Smt. Jaswant Kaur which was part of her ancestral jewellery and was duly disclosed in her will dated 15.09.2017 which was registered with Sub Registrar, Hauz Khaz, New Delhi. It was also contended that Punihani family received gifts on various , 1744, 1747 & 1749/Del/2022 auspicious occasions as can be verified from the facts that Smt.
Bawniet Kaur received gifts in the form of jewellery on the occasion of her marriage from various members of her family. It was also submitted that in the course of search as a matter of fact that gift deed was found which evidenced that 1 kg of gold jewellery was received from her brother Shri Guneet Singh on the occasion of her marriage. It was also contended that Smt. Gurpreet Kaur has been married for about 32 years Smt. Avniet Kaur has been married for about 28 years and Smt. Jaspreet Kaur has been married for about 25 years and have accumulated jewellery over their married life.
Therefore, it was contended that jewellery accumulated by a lady over her married life even if in excess of limits prescribed under Instruction No.1916 cannot be added as undisclosed investment for which the assessees have relied on the decision of the Hon’ble Delhi High Court in the case of Ashok Chadha Vs. ITO 20 taxmann.com 387 and Sushila Devi Vs. CIT (WP No.7620/2011). Not convinced with the submissions of the assessee the AO made additions u/s 69 of the Act as referred to in the table above.
The assessees preferred appeal before the Ld.CIT(A) and the Ld.CIT(A) partly deleted the addition made by the AO as under:
Chart showing Addition of Jewellery made by AO and upheld by CIT(A) Annexure 1 , 1744, 1747 & 1749/Del/2022 Name of Jewllery Addition by AO Addition upheld Assessee found during by CIT(A) Search – As per Panchnama
Gold Diamond Gold Diamond Gold Diamond (in grams) (In Carats) (in grams) (in Carats) (in grams) (in Carats) Tarlok Singh 1,281 18 - - - - Punihani Gurpreet Kaur 6,400 771 4,157 672 3,457 104 Punihani Bawniet Kaur 2,626 390 1,626 390 1,026 390 Punihani Narinder Singh 193 22 - - - - Punihani Amarjeet Singh 3,347 383 2,566 359 1,792 359 Punihani Jaspreet kaur 1,106 93 325 69 - 69 Punihani TOTAL 14,952 1,676 8,674 1,490 6,275 922 5. Ld. Counsel for the assessees submitted that the contentions regarding the jewellery belonging to joint family consisting of families of three brothers were rejected by the Ld.CIT(A). The Ld. Counsel for the assessee also submitted that Ld.CIT(Appeals) failed to appreciate and consider the joint family jewellery purchase bills submitted by the assessees. It was also submitted that Ld.CIT(A) has allowed only partial benefit of CBDT Circular No.1916 dated 19.04.1994 in respect of immediate family members only.
Therefore, the Ld. Counsel submitted that the only issue involved in this appeal is regarding the addition u/s 69 of the Act made by the Assessing Officer on the alleged ground of unexplained jewellery found during the course of search proceedings without considering , 1744, 1747 & 1749/Del/2022 the explanation and documentary evidences furnished during the course of assessment proceedings.
The Ld. Counsel submitted that the Assessees are living in a close-knit joint family consisting of around 15 members at Farm House No. F-5, Radhey Mohan Drive, Gadaipur, Mehrauli, New Delhi and having joint business. The Joint family consists of three brothers and their respective families and the jewellery is for common use of family members and kept in the lockers in the name of some of the family members. The family tree of the members is enclosed at page 24 of the paper book. Ld. Counsel submits that at this juncture, it is important to highlight the financial status and background of the Punihani Family in order to appreciate the facts of the case. The Punihani family is a highly reputed business family enjoys a special status in the society. The family members are declaring decent income in the ITR and the income chart of the family is extracted at page 13 to 15 of the CIT(A) order. It is submitted that it is trite law that the reasonableness of the jewellery and valuable things found in the search is to be seen keeping in mind the financial position and social status of the family. , 1744, 1747 & 1749/Del/2022
Ld. Counsel submits that the search party during the course of search conducted at various premises along with bank lockers found aggregate jewellery weighing 15,607.32 grams of gold and 1690.82 carats of diamonds. As per the panchnama, the jewellery so found is identified amongst the family members as under. The copies of valuation reports prepared at the time of search are enclosed at page 28 – 47 of the paper book:
Name of Assessee Gold Diamond (Net value in grams) (Net value in Carats) Shri. Tarlok Singh 1,280.86 17.86 Smt. Gurpreet Kaur 6,399.68 770.55 Smt. Bawniet Kaur 2,625.78 389.80 Shri Narinder Singh 193.00 22.00 Shri Amarjeet Singh 3,346.55 382.71 Smt. Jaspreet Kaur 1,105.65 92.90 TOTAL 14,952.00 1,676.00 It is submitted that the aggregate jewellery as found and seized from common premises is shared by the joint family and as such there is intermixing of the jewellery found from the possession of individual persons. Further, due to strong cohesiveness and habit of sharing amongst the family members, it is difficult to identify the jewellery items in hands of individual persons and as such it would be appropriate and rational to consider the aggregate jewellery together in the hands of all the family members for the purpose of examining the explained jewellery. It is submitted that this position is further corroborated from the fact that in some cases, there was , 1744, 1747 & 1749/Del/2022 excess jewellery and in some cases there was shortfall but total jewellery of the family is fully supported and verifiable.
Thus, it is submitted that there is complete verification & reconciliation of jewellery considering the family as one unit and the reconciliation of jewellery is as under:
S.No. Particulars Net Gold Diamond (in grams) (in Carats) i. Bills of jewellery purchased by 9,522 1,864 the family members ii. Entitlement as per CBDT 3,600 - Instruction No.1916 iii. Gift received by Bawniet Kaur 1,000 - from her brother [Fat accepted by the AO and CIT(A)] [Refer Assessment Order of Bawniet kaur – Page 22] Total explained Jewellery held 14,122 1,864 by the family members It is submitted that the assessees have duly filed supporting documents in respect of purchase of jewellery and the list of these documents are as under:
• The copies of jewellery bills are enclsoed at page 48 – 89 of the paper book.
• The copies of bank statement reflecting the payments made in respect of jewellery are enclosed at page 90 – 110 of the paper book. Ld. Counsel with regard to serial no. ii, it is submitted that the CBDT Instruction No.1916 dated 11th May 1994 provides an exemption from seizure of gold jewellery and ornaments to the , 1744, 1747 & 1749/Del/2022 extent of 500 gms per married lady, 250 gms per unmarried lady and 100 gms per male member of the family. The CIT(A) in total disregard to the instructions issued by the CBDT has failed to provide the benefit of this circular in respect of all the family members. The chart showing the minimum entitlement of each of the family members is enclosed at page 27 of the paper book. The Assessing Officer and CIT(A) has duly accepted the fact of the gift of jewellery of 1000 grams received by the appellant from her brother on the occasion of her marriage. The factual position to this effect is also substantiated from the Gift Deed which was found and seized during the course of search and was marked at page 88 of Annexure 4 by team AP-4 of the search party.
The table showing jewellery found and that explained by the Appellant is as under:
Particulars Net Gold Diamond (in grams) (in Carats) Total jewellery found 14,952 1,676 during search [As per Pachnama] Less: Jewellery explained 14,122 1,864 by the Appellant Balance short/excess 830 -188 jewellery Rates applied by the @Rs.3300 per gram @Rs.25,000 per carat Department Valuer Value of 27,39,000 -47,00,000 Short/ExcessJewellery From the above details, it is self-evident that there is no case of any excess jewellery and the entire jewellery is duly supported from 10 , 1744, 1747 & 1749/Del/2022 meritorious explanation. It may be appreciated that as against aggregate jewellery of 14,952 grams of gold and 1,676 carats of diamonds found during the search, the appellant has explained the existence of jewellery weighing 14,122 grams of gold and 1,864 Ct. of diamonds. In fact, part of diamond jewellery was converted to gold jewellery. This position is supported from the fact that value of excess gold of Rs.27,39,000/- [830 grams * Rs.3,300 per gram] as found is corroborated from the value of excess diamonds of Rs.47,00,000/- available [188 carats * Rs.25,000 per carat]. Thus, on netting of the short gold jewellery and excess diamonds, it is clear that the jewellery found is fully covered by the purchase bills submitted by the Appellant.
The Ld. Counsel for the assessee further submits that Punihani family is a wealthy and a highly reputed family having prominent status in the society. The Ld. Counsel submits that as a matter of fact the aggregate returned income of last 9 years of all the family members along with the income of the partnership firm M/s Punihani Industrial comes to aggregate amount of Rs.75,79,90,405/-.
Therefore, the Ld. Counsel submits that keeping in view the sound financial status and capacity of the family the purchase of jewellery to the extent of 9,522 gms of gold and diamonds weighing 1,864 , 1744, 1747 & 1749/Del/2022 carats cannot be disbelieved and as such the allegation of the AO that the jewellery found during the course of search being unexplained is not justified even though the said gold jewellery and diamonds were duly supported from the purchase bills which are all made from disclosed sources.
In light of the above submission, Ld. Counsel submitted that despite of having explained the justification of entire jewellery found as result of search, the lower authorities have considered the issue in an arbitrary and distorted manner. The AO and CIT(A) have not stated the basis for disregarding the purchase bills and non- granting of benefit of limit as per CBDT instruction. Therefore, the Ld. Counsel submits that in the light of the above facts, the jewellery found during the course of search is fully explained and verifiable from the documents placed on record.
Further, the Ld. Counsel for the assessee placed reliance on the following decisions for the proposition that the gold jewellery has to be considered family as a whole.
a) Nirmal Kumar Minda Vs. ACIT [ITA No.1151/DEL/2020] [Dt. 03/05/2023] b) Smt. Bommana Swarna Rekha Vs. ACIT ][2005] 94 TTJ 885 (Visakhapatnam) c) Amith Kumar Bethala Vs. DCIT (ITAT Bangalore) (ITA No.2026/Bang/18) (28/01/2021) 12 , 1744, 1747 & 1749/Del/2022 d) G.C. Bafna Vs. DCIT [2004] 90 ITD 115 (Pune) (TM). 13. On the other hand, the Ld. DR strongly supported the orders of the authorities below.
Heard rival submissions, perused the orders of the authorities below and the evidences furnished before us.
The main plank of arguments of the Ld. Counsel is that all the family members of the Punihani are joint family members and, therefore, should be considered as one single unit. On perusal of the statements recorded from the family members of the assessees during search the family members have deposed that the jewellery found were either belonging to them or to their family members/relatives. This shows that all the family members comprising of 14 persons are from joint family staying together. We further observed that sister-in-law of Smt. Gurpreet Kaur who is an NRI occasionally coming to India also stays with them and her jewellery was also found in the lockers of the family members of the assessees. In the circumstances, the contentions of the assessee that the entire family of 14 persons should be considered as one single unit has got lot of force and deserves to be accepted. This view of ours is further fortified by the Third Member decision of the , 1744, 1747 & 1749/Del/2022 Pune Bench in the case of GC Bafna Vs. DCIT (19 ITD 115), wherein it has been held as under:
32. We have considered the rival submissions and perused the facts on record. We find that vide letter dated 26th September, 1997, the assessee had brought to the notice of the Ld. CIT that the lady members of Bafna family had declared jewellery in their Wealth-tax returns filed for the AY 1982-83. This fact was not before the Assessing Officer. It was also pointed out that jewellery was purchased in subsequent period from disclosed sources of funds. There was an addition of jewellery also on account of lady members when they god married in the family. The submissions made before us now by the Ld. Counsel with facts and figures were not before the Assessing Officer and accordingly, we restore this issue to the file of the Assessing Officer to re-adjudicate upon the same after giving an opportunity of being heard to the assessee. Same is the position with silver. The issue of gold jewellery and silver has to be considered in the context of different members of the family as a whole and accordingly we restore both the issues to the file of the Assessing Officer with direction that he should go through the details furnished before us in the paper book and referred to supra and re-adjudicate upon the issue after giving an opportunity of being heard to the assessee.
In the light of the above observations, let us examine whether the entire jewellery stands explained by the assessees or not. The assessee explained the jewellery found in the following manner:
S.No. Particulars Net Gold Diamond (in grams) (in Carats) i. Bills of jewellery purchased by 9,522 1,864 the family members ii. Entitlement as per CBDT 3,600 - Instruction No.1916 iii. Gift received by Bawniet Kaur 1,000 - from her brother [Fat accepted by the AO and CIT(A)] 14 , 1744, 1747 & 1749/Del/2022
[Refer Assessment Order of Bawniet kaur – Page 22] Total explained Jewellery held 14,122 1,864 by the family members 17. We find that assessee has filed Annexure 4 & 5 containing purchase bills date wise, assessee wise, quantity wise and mode of payments thereon which are reproduced hereunder:
Details of Jewellery Bills along with payment details: - Details of Bills of Jewellery paid through Bank: , 1744, 1747 & 1749/Del/2022
As could be observed from the above Annexures the assessee was able to explain the jewellery to the extent of 9,522 gms by way of purchase bills and mode of payments thereon. It is not the case , 1744, 1747 & 1749/Del/2022 of the Revenue that assessee has made payments in cash for purchase of jewellery out of undisclosed sources of income. Further assessees explanation that they have converted diamonds partly to gold jewellery is a plausible explanation which cannot be brushed aside as it is the usual custom and practice of the household ladies to do so.
Considering the overall family status and community of the assessees holding of jewellery of 9,522 gms which is also supported by purchase bills stands clearly explained. As could be seen from the above table there is excess diamonds to the extent of 188 carats (valued at Rs.-47,00,000/-) and there is a deficit in gold jewellery to the extent of 830 gms (valued at Rs.27,39,000/-) and this could be for the reason that the assessee converted diamonds partly to jewellery which is a plausible explanation. If this explanation is accepted and set off the excess diamond against deficit in gold is considered, there is no addition that would be warranted u/s 69A of the Act. In view of what is discussed above, we allow ground no.1 of grounds of appeal of the assessee. As we have allowed ground no.1 of grounds of appeal of the assessee, the adjudication of other grounds become academic in nature. Other contentions in the grounds raised other than ground no.1 are left open. , 1744, 1747 & 1749/Del/2022
In the result, appeals of the assessees are allowed.
Order pronounced in the open court on 14/02/2024