Case Law Details
V.G.P.Ravidas Vs Asst.CIT (Madras High Court)
Madras High Court upholds assessment of excess gold jewellery as unexplained investment; rejects plea based on Board Instruction dated 11.5.1994.
The Board Instruction dated 11.5.1994 stipulates the circumstances under which excess gold jewellery or ornaments could be seized and where it need not be seized. It does not state that it should not be treated as unexplained investment in jewellery. In this case, the Original Authority has correctly included the excess jewellery other than what has been found in the wealth tax assessment as unexplained investment in jewellery and demanded tax and penalty.
FULL TEXT OF THE HIGH COURT JUDGMENT
These appeals are filed by the assessees challenging the common order of the Income Tax Appellate Tribunal Chennai ‘D’ Bench, dated 31.12.2013 made in ITA No.48/Mds/2013 and ITA.No.49/Mds/2013 respectively for the assessment year 2009-2010, raising the following substantial questions of law:
1. Whether the Tribunal is correct in law in not considering the validity of the search assessment framed even after the repeated submission of lack of seized materials indicating as well as justifying the quantification of the excess jewellery by the search party as well as by the respondent in the assessment framed in consequence to the said search?
2. Whether the Tribunal is correct in law in sustaining the addition of the value of excess jewellery quantified as unexplained investment presumably in terms of Section 69 of the Act even though there was no indication in the assessment order passed by the respondent on the method of such quantification for making the assessment?
3. Whether the Tribunal is correct in law in not considering the binding nature of the Circular issued by the Board dated 11.5.1994 on the respondent and further not considering the binding nature of the decisions cited before them explaining the scope of the said circular in order to consider the source for the disputed excess jewellery on the facts and in the circumstances of the case?
2.1. The brief facts of the case are as under: The assessees filed their original return of income for the assessment year 2009-2010 on 30.9.2009. The Assessing Officer, after conducting search in terms of Section 132 of the Income Tax Act (for brevity, “the Act”), reopened the assessment after issuing notice under Section 153A of the Act and such reassessment was completed under Section 143(3) of the Act on 29.12.2010. The Assessing Officer, while completing the assessments, found excess gold jewellery of 242.200 Grams and 331.700 Grams and seized it from the assessees respectively and such excess gold jewellery seized was treated as unexplained investment in jewellery.
2.2. Impugning the said assessment orders, the assessees preferred appeals before the Commissioner of Income Tax (Appeals), who confirmed the order passed by the Assessing Officer and held that the assessees have not submitted any explanation either before the Assessing Officer or before him as to why the excess jewellery found in the course of search should not be treated as unexplained income. The Commissioner of Income Tax (Appeals) categorically held that such excess jewellery was determined only after accounting for all jewellery for which explanation has been offered by the assessees and accepted by the Department and, therefore, the assessment orders warrant no interference.
2.3. Challenging the orders passed by the Commissioner of Income Tax (Appeals), the assessees appealed to the Tribunal, which confirmed the orders passed by the Commissioner of Income Tax (Appeals).
2.4. Aggrieved by the said order, the present appeals are filed raising the substantial questions of law, referred supra.
3. The short question that arises for consideration is whether the assessees in both the cases are entitled to plead that the quantum of excess gold jewellery seized does not warrant inclusion in the income of the assessees as unexplained investment in the light of the Board Instruction No.1916 [F.No.286/63/93-IT (INV.II)], dated 11.5.1994.
4. In fact, the above said plea was taken by the assessees before the Commissioner of Income Tax (Appeals) as well as the Tribunal did not find favour with the said authorities.
5. For better appreciation of the issue involved in these cases, it would be appropriate to refer to the Board Instruction No.1916 [F.No.286/63/93-IT (INV.II)], dated 11.5.1994, which reads as under:
“Instruction No.1916 [F.No.286/63/93-IT (INV.II)]
Guidelines for seizure of jewellery and ornaments in course of search 11.5.1994
SEARCH & SEIZURE
SECTIONS 132,
Instances of seizure of jewellery of small quantity in course of operations under s.132 have come to the notice of the Board. The question of a common approach to situations where search parties come across items of jewellery, has been examined by the Board and following guidelines are issued for strict compliance-
(i) In the case of a wealth-tax assessee, gold jewellery and ornaments found in excess of the gross weight declared in the wealth-tax return only need be seized.
(ii) In the case of a person not assessed to wealth-tax, gold jewellery and ornaments to the extent of 500 gms per married lady, 250 gms per unmarried lady and 100 gms per male member of the family, need not be seized.
(iii) The authorised officer may, having regard to the status of the family and the custom 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.
(iv) In all cases, a detailed inventory of the jewellery and ornaments found must be prepared to be used for assessment purposes.”
6. The plea of the assessees is that considering the number of family members [{C.(A) No.387 of 2014 – 2 Sons, 1 Daughter and his spouse} and {T.C.(A) No.388 of 2014 – Spouse and children}], the social status of the assesses and the custom and practices of the community to which the family belongs, the jewellery ought not to have been seized by the Department.
7. In the assessment orders, it was held that there is excess gold jewellery in respect of each assessee and that has been assessed to tax as unexplained investment in jewellery. However, we find that there are no detailed reasons given by the Original Authority for assessing the excess gold jewellery as unexplained investment.
8. The Commissioner of Income Tax (Appeals) as well as the Tribunal came to hold that since there was no explanation offered by the assessees before the Assessing Officer or Commissioner of Income Tax (Appeals) or Tribunal, their mere placing reliance on the Board Instruction No.1916 [F.No.286/63/93-IT (INV.II)], dated 11.5.1994 will be no avail. In fact, the Commissioner of Income Tax (Appeals) has correctly held that the Board Instruction does not make allowance in calculation of unexplained jewellery and it only states that in the case of a person not assessed to wealth tax, gold jewellery and ornaments to the extent of 500 gms per married lady, 250 gms per unmarried lady and 100 gms per male member of the family, need not be seized. Whereas, in the case of a wealth-tax assessee, gold jewellery and ornaments found in excess of the gross weight declared in the wealth-tax return can be seized, which is the fact in the present case.
9. No doubt, Clause (iii) of the Board Instruction dated 11.5.1994 provides that the authorised officer may, having regard to the status of the family and the custom 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. We find that this is only an enabling provision and will be applicable if there are circumstances to come to the conclusion that the status of the family and custom and practices of the community require holding of such jewellery. In this case, the assssees have not given any such explanation either before the Original Authority or the First Appellate Authority or the Tribunal. We find the Board Instruction is of no avail to the assesses, except to the extent that the assessees families consist of large number of members and, therefore, there is an element of justification for the excess jewellery in hand.
10. The Board Instruction dated 11.5.1994 stipulates the circumstances under which excess gold jewellery or ornaments could be seized and where it need not be seized. It does not state that it should not be treated as unexplained investment in jewellery. In this case, the Original Authority has correctly included the excess jewellery other than what has been found in the wealth tax assessment as unexplained investment in jewellery and demanded tax and penalty. We find no error in such order passed by the Assessing Officer, which was confirmed by the Commissioner of Income Tax (Appeals) and Tribunal. In fact, in paragraph (6) of the order of the Tribunal, it is held as under:
“6. On going through the order of the Commissioner of Income Tax (Appeals), we find that the assessee has not offered any explanation either before the Assessing Officer or the Commissioner of Income Tax (Appeals) for excess jewellery found in the course of search as to whey it should not be treated as unexplained income. The Commissioner of Income Tax (Appeals) also observed that excess jewellery is arrived only after accounting for all jewellery for which explanation has been offered and accepted. In the circumstances, we do not find any infirmity in the orders passed by the Commissioner of Income Tax (Appeals) in confirming the assessments made by the Assessing Officer.”
11. For the foregoing reasons, we find that there no justification to interfere with the order of the Tribunal and in our considered opinion, on the facts and circumstances of the case, no substantial question of law arises for consideration in these appeals.
12. However, considering the earnest plea made by Mr.S.Sridhar, learned counsel for the assesses that in view of the penalty proceedings there is a likelihood of initiation of prosecution, we observe that in case the assessees claim that in view of the the status of the family; the custom and practices of the community to which the family belongs; and the family size there is excess jewellery, the holding of such excess jewellery could be treated as bona fide holding by the family. If such a plea is made the assessees, the Department shall consider the same before initiation of prosecution proceedings, if any, and grant benefit to the assessees on this score alone.
In the result, these appeals are disposed of with the above observation. No costs.
