2023 (10) TMI 653 - AT - Income Tax

Tribunal allows appeal, deletes Rs. 20,44,870 as unexplained jewellery. CBDT Instruction not limiting.

The Tribunal allowed the assessee's appeal, deleting the addition of Rs. 20,44,870/- as unexplained jewellery. The Tribunal found that the CBDT's ... Unexplained jewellery - Reasonable allowance for family jewellery based on status, customs and traditions - invoking the provisions of section 69A read with section 115BBE - CBDT Instruction No. 1916 and related press release - Search and seizure under section 132Unexplained jewellery - Reasonable allowance for family jewellery based on status, customs and traditions - invoking the provisions of section 69A read with section 115BBE - CBDT Instruction No. 1916 and related press release - Addition of Rs. 20,44,870 (one-third of value treated as unexplained jewellery) made under section 69A read with section 115BBE. - HELD THAT: - The Tribunal held that the CBDT instruction and press release regarding eligible jewellery on seizure are not rigid caps to be mechanically applied to restrict legitimate family holdings; they are indicative benchmarks. Having regard to the family's demonstrated status, declared incomes over relevant years and substantial withdrawals, the assessee's explanation that a major portion of the jewellery arose from family inheritance and matrimonial and customary receipts was accepted. The coordinate precedents of higher fora and the Tribunal (including Ashok Chaddha, Suneela Soni and Vibhu Aggarwal) recognising that customs, status and long matrimonial life may justify holdings of jewellery were applied. On the facts and circumstances the Tribunal found the assessing authority and the CIT(A) erred in treating the challenged proportion of jewellery as unexplained and, therefore, deleted the addition. [Paras 9, 11, 15, 16]The addition of Rs. 20,44,870 made under section 69A read with section 115BBE on account of unexplained jewellery is deleted and the appeal is allowed.Final Conclusion: The Tribunal accepted the assessee's explanation in light of family status, income records and precedents, held the CBDT instruction not to be a strict ceiling, and deleted the addition; the appeal is allowed. Issues Involved:1. Addition of Rs. 20,44,870/- as unexplained jewellery under section 69A read with section 115BBE of the Income Tax Act, 1961.2. Penalty notice under section 271AAB and interest charged under section 234A/B/C/D.Summary:Issue 1: Addition of Rs. 20,44,870/- as Unexplained Jewellery- Proceedings before the Assessing Officer: During a search and seizure operation at the assessee's residence, gold jewellery weighing 3877.5 grams valued at Rs. 1,46,15,635/- was found. The assessee failed to explain the source of the jewellery. The Assessing Officer applied CBDT's Instruction No. 1916 and allowed a claim for 2250 grams, treating the remaining 1627.5 grams valued at Rs. 61,34,610/- as unexplained, and added Rs. 20,44,870/- (1/3 share) to the assessee's income under section 69A read with section 115BBE.- Proceedings before the CIT(A): The assessee claimed the jewellery was inherited and received during marriages and other ceremonies. The CIT(A) held that the assessee's explanations were vague and lacked specificity, as no purchase bills or valuation certificates were provided. The CIT(A) confirmed the AO's decision, stating that the jewellery belonging to the assessee's sister was not conclusively proven to be kept at the assessee's residence.- Tribunal's Findings: The Tribunal noted that CBDT's Instruction No. 1916 was intended for seizure purposes and should not restrict the eligible amount of jewellery. The Tribunal observed that the family had substantial income and withdrawals over the years, which justified the possession of the jewellery. Citing various judgments, the Tribunal concluded that the addition made by the AO was not justified and directed that the addition be deleted.Issue 2: Penalty Notice and Interest Charges- The Tribunal did not specifically address the issue of the penalty notice under section 271AAB and interest charged under section 234A/B/C/D, as the primary focus was on the addition of unexplained jewellery.Conclusion:The appeal of the assessee was allowed, and the addition of Rs. 20,44,870/- as unexplained jewellery was deleted. The Tribunal emphasized the importance of considering the family's status, customs, and traditions, and relied on precedents to support its decision.