Ram Prakash Mahawar Vs DCIT (ITAT Jaipur); ITA No. 918/JP/2019; Date-20/02/2020; A.Y 016-17
An important practical judgement pronounced on Jewellery Held By the Assessee
Whether the benefit of CBDT Instruction No. 1916 dated 11-05-1994 is available to the assessee in respect of jewellery received by various family members on the occasions of marriages and other social & customary occasions.
Whether the prescribed quantity is a presumptively allowed quantity.
Facts of the Case:
The assessee is an individual and derives income from salary and other sources. Search and seizure action u/s 132 of the Act was carried out on 14-10-2015 in the case of Data Group and the assessee was also covered by the said search and seizure action. During the course of search, gold and silver jewellery valued at Rs. 32,71,895/- were found from the residential premises of the assessee. The bifurcations of gold and silver jewellery value are as under:-
Gold jewellery items Rs. 31,38,245/-
Silver jewellery items Rs. 1,33,650/-
Total Rs. 32,71,895/-
Assessing Officer Proceedings:
Before A.O., the assessee claimed benefit of CBDT Instruction No. 1916 dated 11-05-1994 to the extent of 850 gms. of jewellery in the hands of his wife, daughter and himself. The AO accepted the said claim and allowed the benefit to the extent of 850 gms. of jewellery. The assessee also claimed that gold jewellery of 343.328 gms. were purchased from time to time and recorded in the books of account and balance sheet of the assessee and his family members.
The A.O. denied the said claim of the assessee.
Proceedings Before CIT(A):
The ld. CIT(A) in principle confirmed the order of the AO to the extent of not granting the benefit of jewellery of 343.328 gms
However, the ld. CIT(A) has held that valuation of the said jewellery would be the cost of jewellery as reflected in the purchase bills and thereby Rs. 4,57,404/- was upheld as against the addition made by the AO by taking prevailing rate of gold at Rs. 2700/- per gram
The ld. CIT(A) has also granted part relief in respect of the addition made by the AO on account of unexplained silver items by holding that 50% of silver items found during the course of search is a reasonable holding.
Pray Before ITAT:
The assessee submitted that the benefit of CBDT Instruction No. 1916 is available to the assessee in respect of jewellery received by various family members on the occasions of marriages and other social & customary occasions. Therefore, the purchases made by the assessee would not form part of the said quantity of 850 gms. of jewellery allowed by the AO as per CBDT Instruction No. 1916 dated 11- 05-1994.
Findings And Order by ITAT:
The said quantity of jewellery is duly recorded in the balance sheet/ books of account of the assessee and his family members. Once the AO has not disputed the purchases made by the assessee of the said quantity of jewellery then the same cannot be treated as unexplained jewellery of the assessee.
It is pertinent to note that CBDT Instruction No. 1916 dated 11-05-1994 has explained in case of gold jewellery found in the possession of the assessee during the course of search and seizure action and the assessee is not able to explain the same, then the quantity prescribed under the said CBDT Instruction No. 1916 in respect of married female member, unmarried female member and male member of the assessee would be treated as a reasonable holding of jewellery on account of acquisition of that much jewellery on various occasions of marriages, other social & customary occasions as prevailing in the society
The assessee need not to explain the source of jewellery found in his possession to the extent of specified quantity treated as reasonable possession by family members of the assessee
The benefit of CBDT Instruction No. 1916 dated 11-05-1994 will not take away the benefit of the explained jewellery acquired by the assessee.
The AO has valued the entire jewellery by applying the prevailing rate of 2700/- per gram and by ignoring the fact of actual cost of acquisition to the extent of 343.328 gms. at Rs. 4,57,404/- as reflected in the purchase bills as well as in the books of account of the assessee. Hence, the addition sustained by the ld. CIT(A) on account of unexplained jewellery is deleted
As regards 50% of the addition on account of silver items sustained by the ld. CIT(A), we find that silver items of Rs. 1,33,650/- were found at the time of search out of which the ld. CIT(A) has considered 50% of the same as reasonable holding of silver items by the assessee, considering the status and standing of the assessee family. Therefore, in the absence of any other material or facts brought before us, we do not find any error or illegality in the order of the ld. CIT(A) by considering 50% of silver items as reasonable and to the extent the order of the ld. CIT(A) is upheld.
After demonetisation, the instruction no. 1916 became the talk of the town wherein the maximum quantity held by the family members was prescribed as per this instruction.
The moot point discussed here is very important where in, the allowed quantity as per the Instruction no 1916 is applicable in case where the assessee does not explain the source of the jewellery and the presumptive quantity is allowed. Such quantity is a Blanket Allowance.
But if the assessee has documentary evidence as to the purchases of jewellery, then the presumptive quantity is over and above the recorded and documented jewellery.
The presumptive specified quantity of the jewellery is reasonably accounted on occasions of marriages, other social and customary occasions as prevailing in the society.