Petitioner fails to challenge excess jewellery addition as CBDT Circular applies only to investigation stage

The Madras HC dismissed a petition challenging addition of excess jewellery found during search operations. The petitioner contested addition of 1099.96 gms gold from total 10514.960 gms gold and 14.05 carats diamond seized from residence. The court held that CBDT Circular No.1916 dated 11.05.1994 regarding seizure of small quantity jewellery applies only to investigation stage, not assessment stage. The circular allows Authorized Officer to exclude larger quantities considering family status and community customs during seizure, but requires detailed inventory for assessment purposes. The court found no grounds to interfere with the impugned order but granted liberty to pursue alternate remedy before Appellate Commissioner under Section 246A of Income Tax Act, 1961.

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Issues:
Challenge to assessment order u/s 143(3) r/w 254 of the Income Tax Act, 1961, Compliance with CBDT Instruction 1916 dated 11.05.1994.

Assessment Order Challenge:
The petitioner challenged the assessment order confirming tax on a portion of gold and diamond found during a search, following a previous adverse assessment order. The Appellate Commissioner partly allowed the appeal, reducing the addition made by the Assessing Officer. Subsequently, the Tribunal remanded the case for verification of the source of jewellery purchased by the petitioner through banking channels or accounting entries.

Compliance with CBDT Instruction 1916:
The petitioner contended that the respondent failed to comply with CBDT Instruction 1916 dated 11.05.1994, which sets limits on seizure of jewellery. The petitioner argued that the circular provides a clear limit on jewellery seizure and that the respondent did not consider the explanations provided. The respondent, however, argued that the circular pertains to restrictions on seizure during inspection and not post-seizure assessment.

CBDT Instruction 1916 Clarification:
The circular states that an Authorized Officer may decide to exclude a larger quantity of jewellery from seizure based on family status, community customs, and other circumstances. It emphasizes preparing a detailed inventory of seized jewellery for assessment purposes. The circular's purpose is limited to the seizure stage and not assessment, as clarified in its provisions.

Conclusion:
The Court found no grounds to interfere with the impugned order, granting the petitioner liberty to pursue the alternate remedy before the Appellate Commissioner. The Court extended the time for filing an appeal by 30 days from the date of receipt of the order. The Writ Petition was disposed of with no costs, allowing the connected Miscellaneous Petition to be closed.

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