TaxTMI 
TaxTMI 
2018 (1) TMI 21
X X X X Extracts X X X X
X X X X Extracts X X X X
....ond jewellery, personal wear jewellery and household silver utensils were found at the residence of the assessee. The jewellery found was valued at Rs. 2,38,64,031/-. The only issue in this appeal relates to addition u/s. 69A of the Act, alleged undisclosed jewellery which has been confirmed by CIT(A) to the extent of Rs. 22,57/632/-/ being diamond jewellery. The primary basis for addition is that the items of diamond jewellery found in search do not match with items disclosed in valuation report of year 2000 which forms the basis of Wealth Tax returns of assessee. An item by item tally has been undertaken by the assessing officer to come to this conclusion. In the course of search the entire ornaments and jewellery found were clubbed together ignoring the fact that it belonged to three members, assessee her husband Shri Gautam Hari Singhania, and minor daughter Miss Niharika Singhania. Only one inventory was drawn and no identification of ownership was done. ' 4. From the record, I found that assessee and her husband have been Wealth Tax Assessees. Miss Niharika Singhania being minor, her wealth has been clubbed with Mr Gautam Hari Singhania. The basis of filing the wealth ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee, gold jewellery and ornaments found in excess of the gross weight declared in the wealth-tax return only need to be seized. - - -" 9. In view of the above, it was contended that once on the facts stated above, the jewellery of the assessee could not have been seized in accordance with Instruction No. 1916 dated 11th May 1994, no addition could have been made by the Assessing Officer in respect of such declared jewellery. This contention finds support from the following decisions, which are briefly elaborated in this submission. 1) Decision of Special Bench of Ahmedabad ITAT in the case of Rameshchandra R. Patel reported in 89 ITD 203 : 10. This decision was delivered on 27.02.2004 and in talking about the Instruction No. 1916, the Third Member has explained the intention of the Instruction in following terms : 'Though the Instruction speak of not seizing the same, the extended meaning of the same shows the intention that the jewellery is to be treated as explained one and is not to be treated as unexplained for the purpose of Income Tax Act". 11. As per learned AR, instruction 1916 dated 11/05/1994 dictates jewellery not to be seized in given fa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....05.1994 as well as the decision of the Hon'ble Gujrat High Court in the case of CIT vs. Ratanlal Vyaparilal Jain 235 CTR (Guj) 568, he treated the balance gold jewellery found during the course of search as explained and deleted the addition made by the A.O. on account of unexplained jewellery." 16. The decision has been delivered in following terms: "The only contention that has been raised by the Ld. DR is that the CBDT Circular 1916 dated 11.05.1994 lays down certain guidelines for seizure of jewellery found during the course of search and the same cannot be relied upon to treat the jewellery found during the course of search as explained, unless there is other evidence to corroborate the explanation of the assessee as regards the source of jewellery found during the course of search. It is however observed that this aspect of the matter has already been consented by Hon'ble Gujrat High Court in the case of CIT vs. Ratanlal Vyaparilal Jain (supra) relied upon by the Ld. CIT(A) wherein it was held that even though the CBDT instruction 1916 dated 11.051994 lays down the guidelines for seizure of jewellery in the course of search, the same takes into account th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat the said circular is not only with reference to seizure of jewellery but the intention underlying the same is also relevant for computation of deemed investment in jewellery." 20. In response to this pleading, the Tribunal has held as under: "We feel that the submission made by the Learned Counsel that the intention underlying CBDT Instruction issued on 11,05.1994 is also relevant with reference to deeming provisions of Section 69A, has force." 21. As per learned AR it is pertinent here to draw attention to CBDT Circular no. 14(XL-35) dated 11-04-1955, which holds good even today having not been withdrawn or superceded, the relevant portion of which read as under: "Officers of the department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the department, for it would inspire con....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tment valuer. 26. I have considered rival contentions and carefully gone through the orders of the authorities below. I have also deliberated on the judicial pronouncements referred by lower authorities in their respective orders as well as cited by learned AR during the course of hearing before me. From the record I found that addition has been made with respect to the jewellery found during course of search after comparing the same with the jewellery declared by the assessee in their wealth tax returns. It is clear from the facts narrated above that gross weight of declared jewellery was at Rs. 1876.11 grams more than the gross weight of jewellery found in the course of search at 1650.10 grams (1295.90 + 354.20). This fact has also been accepted by the lower authorities. The Instruction No. 1916 has been issued in connection with effecting seizure of jewellery etc. in the course of search. The power of seizure in the course of search is derived from Clause (iii) of Section 132(1), which reads as under: "(iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search." 27. The powe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed upon. The Courts have time and again held that the basis of Instruction 1916 is recognition of the customs prevailing in Hindu Society. It has been so held by Hon'ble Gujarat High Court in the case of Ratanlal Vyaparilal Jain (supra). It has been observed as under: "Thus, although Circular has been issued for the purpose of non- seizure of jewellery during the course of search, the basis for the same recognizes customs prevailing in Hindu Society." 30. The instruction itself has recognized the need to take into account the social and customary practices into account when clause (iii) of the Circular 1916 dated 11th May 1994 specifies as under: "(iii) The authorized officer may, having regard to the status of the family and the customs 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. This should be reported to the Director of Income-tax/Commissioner authorising the search at the time of furnishing the search report." 31. What is relevant critically includes status of the family, as well as customs and practices of the community to....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... unless those authorities exercise the power in a manner most beneficial to the revenue and consequently most adverse to the assessee, they should be deemed not to have exercised it in a proper and judicious manner." 35. From the record, I also found that in response to the show cause given by assessing officer proposing to make addition of alleged undisclosed jewellery, the assessee had taken the following objections: a. The jewellery found has been tallied with valuation done by the assessee ten years in the past and during the intervening period, several items were remade which has led to several items not tallying b. Items were received as gifts on various occasions c. Manner in which valuation was done by department's valuer during the search, in bathroom devoid of space and adequate light, and under time pressure (which facts have been recorded in statement on oath recorded during the search) have led to mistakes (which have also been acknowledged and credit given by CIT(A) in his order) and to improper description noted down in the report, All this it was claimed, has led to mismatch between jewellery found and those appearing in assessee's valuation report ....