2019 (6) TMI 347 - AT - Income Tax

Appeals Allowed: Jewellery & Silver Articles Justified by Family Status & Customs

Shri Mohammed Akhlaq, Jaipur, Smt. Shaheen Akhlaq, Jaipur Versus Dy. Commissioner of Income-Tax, Central Circle-2, Jaipur

Shri Mohammed Akhlaq, Jaipur, Smt. Shaheen Akhlaq, Jaipur Versus Dy. Commissioner of Income-Tax, Central Circle-2, Jaipur - TMI Issues Involved1. Addition of Rs. 10,26,240/- on account of unexplained investment in jewellery and silver articles.2. Application of CBDT guidelines regarding the possession of jewellery.3. Consideration of family status, customs, and practices in determining the reasonableness of jewellery possession.4. Telescoping benefit of actual cash balance available with the assessee.Detailed AnalysisIssue 1: Addition of Rs. 10,26,240/- on Account of Unexplained Investment in Jewellery and Silver ArticlesThe assessee contested the addition of Rs. 10,26,240/- made by the Assessing Officer (AO) on the grounds that the jewellery and silver articles were received as gifts from friends and relatives on various occasions, including marriage. The AO, however, did not find the explanation acceptable, noting that neither the assessee nor his family members filed Wealth Tax Returns or personal balance sheets. The AO allowed a customary possession of 1200 grams of gold jewellery as per CBDT guidelines but taxed the excess amount equally in the hands of the assessee and his wife under Section 69A of the Income Tax Act.Issue 2: Application of CBDT Guidelines Regarding the Possession of JewelleryThe assessee referred to CBDT Instruction No. 1916 dated 11/05/1994, which provides guidelines for not seizing jewellery during search operations up to specified limits (500 grams per married lady, 250 grams per unmarried lady, and 100 grams per male member). The AO adhered to these guidelines but did not consider the jewellery belonging to the assessee's married daughter, as no proper evidence was provided.Issue 3: Consideration of Family Status, Customs, and Practices in Determining the Reasonableness of Jewellery PossessionThe assessee argued that considering the family's high social status, customs, and practices, the possession of the jewellery should be deemed reasonable. The Tribunal noted that the family belonged to an old Jagirdar family and enjoyed a high status in society. The Tribunal also emphasized the customary practice in Indian society of gifting jewellery during marriages and other occasions.Issue 4: Telescoping Benefit of Actual Cash Balance Available with the AssesseeThe assessee sought relief by allowing the telescoping benefit of Rs. 96,220/- as expenditure for treating the unexplained gold jewellery/silver articles. However, the CIT(A) did not find any reason to grant this relief.Tribunal's Findings1. Addition of Rs. 10,26,240/-: The Tribunal found that the AO's action of taxing the excess jewellery was not justified. The Tribunal noted that the jewellery found was within permissible limits considering the family's status, customs, and practices. The Tribunal relied on the statement of the assessee's wife recorded under Section 132(4), which stated that part of the jewellery belonged to their married daughter and grandchildren. The Tribunal held that the AO had no basis to exclude these family members.2. CBDT Guidelines: The Tribunal emphasized that the CBDT guidelines were designed to prevent the seizure of jewellery within specified limits and that these guidelines should also imply that the source of such jewellery should not be questioned. The Tribunal cited the Hon'ble Rajasthan High Court decision in the case of CIT vs. Satya Narain Patni, which supported this interpretation.3. Family Status and Customs: The Tribunal recognized the family's high social status and customary practices, which justified the possession of the jewellery. The Tribunal noted that the search team did not seize the jewellery, indicating that it was considered reasonable.4. Telescoping Benefit: The Tribunal did not specifically address the issue of the telescoping benefit in the final decision, as the primary relief was granted by accepting the jewellery as explained.ConclusionThe Tribunal allowed the appeals, setting aside the orders of the lower authorities and holding that the jewellery and silver articles found during the search were reasonably explained considering the family's status, customs, and practices. The additions made by the AO were thus deleted. The Tribunal's decision was pronounced in the open court on 24/05/2019.