Mrs. Nawaz Singhania Vs. DCIT (ITAT Mumbai)
Instruction 1916 issued by the Board with regard to seizure of jewellery has inherent foundation of undisclosed portion of jewellery that may be identified in the search. The Instruction No. 1916, therefore is describing the criteria for decision making for jewellery to be undisclosed. Accordingly, any portion of the jewellery, which in terms of Instruction No. 1916 is not to be seized is automatically not undisclosed. It is in this background that Courts have held that once seizure is not permitted by virtue of Instruction No. 1916, addition to income cannot be made in the assessment. In the present facts of the case, by virtue of Clause (i) of Instruction 1916, because the gross weight of the jewellery disclosed by the family is in their regular returns were in excess of gross weight of jewellery found in the search, no seizure was possible and therefore, no addition to income is consequently permissible.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
1. This is an appeal filed by the assessee against the order of CIT(A)-50, Mumbai dated 22/03/2017 for A.Y.2012-13 in the matter of order passed u/s.143(3) of the IT Act.
2. The following ground has been taken by the assessee:-
On the facts and in the circumstances of the case and in law, the H’ble CIT(A) erred in confirming addition of Rs. 22,57,632 on account of jewellery u/s. 69A of the Income Tax Act, 1961. The appellant prays that the action of the H’ble CIT(A) may be treated as bad-in-law and the addition upheld by the CIT(A) may kindly be deleted.
3. Rival contentions have been heard and record perused. Facts in brief are that a search action u/s.132 of the Act was carried out at the residence of the Directors / Promoters of Raymond Group on 03.11.2011. During the course of search operation, jewellery, diamond 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 tax return of assessee has been a valuation as on 31/03/2000, report being dated 08/09/2000. The jewellery value in this valuation has been increased year after year at the prevalent rate of gold on successive valuation dates. There are Valuation Reports of jewellery belonging to Shri Gautam Hari Singhania, husband of the assessee which is dated 25.04.2011 and of minor daughter, Miss Niharika Singhania of even date.
5. From the record I also found that the declared jewellery (as per the Wealth Tax Returns and the Valuation Reports), of the family as on the date of search is as under:
