Case Law Details

Case Name : C.I.T. Alwar Vs Satya Narain Patni (Rajasthan High Court)
Appeal Number : D.B.Income Tax Appeal No. 196/2010
Date of Judgement/Order : 07/04/2014
Related Assessment Year : 2005-06
Courts : All High Courts (6271) Rajasthan High Court (153)

C.I.T. Alwar Vs Satya Narain Patni (Rajasthan High Court)

Rajasthan High Court held that the CBDT had clearly provided that prescribed limit of jewellery will not be seized, it would mean that taxpayer, found with possession of such jewellery, will also not be questioned about its source and acquisition.

It is true that the circular of the CBDT, referred to supra dt. 11/05/1994 only refers to the jewellery 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 and it does not speak about the questioning of the said jewellery from the person who has been found with possession of the said jewellery. However, the Board, looking to the Indian customs and traditions, has fairly expressed that jewellery to the said extent will not be seized and once the Board is also of the express opinion that the said jewellery cannot be seized, it should normally mean that any jewellery, found in possesion of a married lady to the extent of 500 gms, 250 gms per unmarried lady and 100 gms per male member of the family will also not be questioned about its source and acquisation. We can take notice of the fact that at the time of wedding, the daughter/daughter-in-law receives gold ornaments jewellery and other goods not only from parental side but in-laws side as well at the time of ‘Vidai’ (farewell) or/and at the time when the daughter-in-law enters the house of her husband. We can also take notice of the fact that thereafter also, she continues to receive some small items by various other close friends and relatives of both the sides as well as on the auspicious occasion of birth of a child whether male or female and the CBDT, looking to such cutoms prevailing throughout India, in one way or the another, came out with this Circular and we accordingly are of the firm opinion that it should also mean that to the extent of the aforesaid jewellery, found in possession of the varoius persons, even source cannot be questioned. It is certainly ‘Stridhan’ of the woman and normally no question at least to the said extent can be made. However, if the authorized officers or/and the Assessing Officers, find jewellery beyond the said weight, then certainly they can question the source of acquisation of the jewellery and also in appropriate cases, if no proper explanation has been offered, can treat the jewellery beyond the said limit as unexplained investment of the person with whom the said jewellery has been found.

FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT

1. This instant income tax appeal under Section 260A of the Income Tax, Act 1961 (hereinafter referred to in short as ‘Act of 1961’) filed by the revenue assailing the order of the Income Tax Appellate Tribunal, Jaipur Bench ‘A’, Jaipur dated 15.1.2010 passed in ITA No.715/JP/09 and cross-objection No.150/JP/2009, relates to assessment year 2005-06. Though the revenue has raised as many as 07 questions which according to the revenue, are substantial questions of law, but primarily, during the course of arguments, counsel for the revenue has contended that the question no.3 pertains to addition of Rs.2,88,176/- made by the Assessing Officer on account of unexplained jewellery found during the search, and whether there was any proper explanation for its deletion deserves consideration of this Court, and according to him, rest of the substantial questions of law, needs no consideration of this court.

2. Brief facts which have been culled out on perusal of the impugned orders, are that a search and seizure operation was carried out at the business and residential premises of the assessee on 30.6.2004 where certain incriminating books of accounts and documents were seized. During the course of search operation, cash amounting to RS.1,50,600/- was found besides Gold jewellery weighing 2202.464 gms. valued at Rs.10,53,520/- and Silver items valued at Rs.93,678/-. Looking to the status of the assessee and the statement given during the course of search operation by various family members and considering the fact that there are four married ladies in the house including the wife of the assessee, no jewellery was seized by the authorised officer, however, the jewellery to the extent of 1600 gm was treated as reasonable by the Assessing Officer which had been received by them at the time of their marriage. The balance jewellery weighing 602.464 gm was treated as unexplained in absence of any satisfactory explanation from the assessee and the value of the same which was determined at Rs.2,88,176/-, was added back to the income of the assessee treating the same as purchased out of Income from undisclosed sources of the assessee and accordingly added back to his income. The assessment order came to be passed on 28.12.2006 where this addition was made along with other additions based on the incriminating documents found during the course of search.

3. Being dissatisfied with the observations and addition, the respondent-assessee preferred an appeal before the Commissioner of Income Tax (Appeals) Central, Jaipur who vide order dated 19.6.2009, substantially deleted the additions made by the Assessing Officer including the addition of the jewellery made by the Assessing Officer to the tune of Rs.2,88,176/-

4. Being aggrieved of the order dated 19.6.2009 whereby certain deletions were made, the department preferred an appeal before the Income Tax Appellate Tribunal and the assessee also filed cross objection. The learned Tribunal also on appreciation of facts & evidence available on record, confirmed the order of CIT (A). Hence this appeal.

5. Learned counsel for the revenue has contended that the Assessing Officer had given due credit of jewellery to the various family members. He has also contended that out of jewellery of Rs.10,53,520/-, only jewellery of Rs.2,88,176/- was found unexplained and almost 75% of the jewellery found was treated as explained by the Assessing Officer himself and only where the respondent-assessee or family members were not in position to explain the balance jewellery, the addition was made. The respondent-assessee or/and other family members were not in position to adequately explain the source of receipt of aforesaid jewellery and it was duty of the assessee to lead proper evidence, but since no evidence was led, therefore, according to the status of the respondent, Assessing Officer rightly gave credit to the respondent of 1600 gms of jewellery, and being not satisfied with the balance, made addition which was correct and justified. He has further contended that though there is circular of the Board which has been referred to by the Tribunal dated 11.5.1994, but it simply lays down that in case a person is not assessed to wealth tax, then in that case, 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 but it does not mean that Assessing Officer is debarred from questioning even the items found. The circular emphasized only that jewellery will not be seized, however, the Assessing Officer was duty bound to seek explanation of owning and possessing of such jewellery. He has also contended that when majority of the jewellery in accordance with the status of the respondent-assessee had been accepted, then only to the extent the assessee was unable to prove by acceptable evidence of the balance, the said addition was made and which is proper and contended that the Tribunal is unjustified and that substantial question of law arise for consideration.

6. We have considered the arguments raised on behalf of the counsel for the revenue, and have gone through the impugned orders so also the circular of CBDT. It is necessary to quote the instruction no.1916 dated 11.5.1994 issued by the Central Board Direct Tax, which reads ad-infra:

“Instances of seizure of jewellery of small quantity in course of operations under Section 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 authorized 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 circumatances 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.

These guidelines may please be brought to the notice of the officers in your region.

Yours faithfully,
Sd/-
Siddhartha Mukherjee
Secretary (CBDT)
[F.No.286/63/93-IT(Inv.II) dt. 11.5.1994 from CBDT, New Delhi]”

7. We have gone through the order of CIT (Appeals) wherein it has been observed as under:

“In search total gold jewellery of 2202.464 gms (net weight) was found. The jewellery was found from the bedroom of various persons, locker and on person which was identified as belonging to specific persons. The same is tabulated below:

Belongs To Found from- Smt.Anila W/o Satyendra Patni(self) Smt.Aparna W/o Chandra Prakash Patni (Eldest son) Smt Priyanka W/o Pushpendra Patni(2nd son) Smt.  Ruchi  W/o Girish Patni (3rd son
Bank Locker 139.5 240.3 210.8 137.6
Bed rooms   315 163.2 195.1 
Bed room of Satyendra Patni 395 232.4 229.7 246.5 
Found on Person 40 15 19 32 
Total gross wt. 574.5 802.7 622.7 611.2 
Total Net wt. 500.5 722.5 529.5 449.764

In the statements recorded on 25.8.2004 during search u/s.132(4) the assessee and various family members stated as below:

Satyendra Patni:- In reply to Q.No.5 he stated that he possess one gold ring & 2 gold chains and his wife possess 30 tola gold jewellery. He further stated that all his 3 daughter-in-law also possess 30 tola gold jewelry each which they received from their parental side at the time of marriage and subsequently at the time of birth of children.

Chandraprakash Patni (eldest son):- In reply to Q.No.12 regarding jewelry lying with him at that time, he stated that around 10 tola of jewelry is lying with him belonging to his wife.

Pushpendra Patni:- In reply to Q.No.16 he stated that he has one gold chain, braclet and two rings. In reply to Q.No.17 he stated that he is not aware of the jewelry owned by his wife but the jewelry she possess has been received at the time of marriage in 2000 and he has not purchased any jewelry thereafter.

Smt.Aparna Jain w/o Chandraprakash Patni:-In reply to Q.No.6 she stated that she possess one chain, four churi, two bangles, two pair tops, ladies braclet, gents braclet, 3-4 rings and mangalsutra. She further stated that two sets received from her parents and one set received from in-laws are lying with her mother-in-law Smt.Anila Patni.”

8. Thus, from the perusal of above chart as well as statements, it is abundantly clear that jewellery which has been found in possession of the family members is in accordance with customs and practice prevalent in the community and in accordance with status of the family.

9. On perusal of the order of CIT (Appeals) as also the Tribunal, we notice that the Assessing Officer had not given any basis for restricting the claim of jewellery at 1600 gms as reasonable while the Assessing Officer has simply mentioned about there being four ladies, but ignored that in addition to four ladies, there were four male members so also three children and if the male members so also the children are considered, then even factually the claim of respondent-assessee appears to be reasonable in the light of the aforesaid instruction dated 11.5.1994. If the circular is strictly followed, then to the extent of 2700 gms, no jewellery could be seized. (500×4 ladies+100×7 male+ children=2700 gms.). In the aforesaid facts, we fail to understand the basis of 1600 gms held reasonable by the Assessing Officer.

10. Therefore, in our view, the Tribunal has rightly considered the said issue and we are also in conformity with the order passed by the Tribunal. We are also of the view that the Central Board of Direct Taxes keeping in view the status of the family, customs and practice of the community, came down with the said circular and one has to go with the weight and not with the value as the value may fluctuate over the years. The Tribunal has also appreciated the fact on record that the marriage of three sons were performed in the year 1996, 2000 and 2003 and all the marriages including the assessee and three sons were performed prior to 2003. It is also on record that the statement of various family members were recorded and none has stated that these are not personal wearing jewellery and same were received by the respective ladies/daughter-in-law on/or at the time of their marriages either from the parental side or in-laws side and even subsequently at the time of birth of their children.

11. On perusal of the circular of the Board, quoted supra, it is clear that in the case of wealth tax assessee, whatever gold jewellery and ornaments have been found and declared in the wealth tax return, need not be seized. However, sub-clause (ii) prescribes that in 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. Sub-clause (iii) also prescribes 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.

12. It is true that the circular of the CBDT, referred to supra dt. 11/05/1994 only refers to the jewellery 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 and it does not speak about the questioning of the said jewellery from the person who has been found with possession of the said jewellery. However, the Board, looking to the Indian customs and traditions, has fairly expressed that jewellery to the said extent will not be seized and once the Board is also of the express opinion that the said jewellery cannot be seized, it should normally mean that any jewellery, found in possesion of a married lady to the extent of 500 gms, 250 gms per unmarried lady and 100 gms per male member of the family will also not be questioned about its source and acquisation. We can take notice of the fact that at the time of wedding, the daughter/daughter-in-law receives gold ornaments jewellery and other goods not only from parental side but in-laws side as well at the time of ‘Vidai’ (farewell) or/and at the time when the daughter-in-law enters the house of her husband. We can also take notice of the fact that thereafter also, she continues to receive some small items by various other close friends and relatives of both the sides as well as on the auspicious occasion of birth of a child whether male or female and the CBDT, looking to such cutoms prevailing throughout India, in one way or the another, came out with this Circular and we accordingly are of the firm opinion that it should also mean that to the extent of the aforesaid jewellery, found in possession of the varoius persons, even source cannot be questioned. It is certainly ‘Stridhan’ of the woman and normally no question at least to the said extent can be made. However, if the authorized officers or/and the Assessing Officers, find jewellery beyond the said weight, then certainly they can question the source of acquisation of the jewellery and also in appropriate cases, if no proper explanation has been offered, can treat the jewellery beyond the said limit as unexplained investment of the person with whom the said jewellery has been found.

13. Admittedly, looking to the status of the family and the jewellery found in possesssion of four ladies, was held to be reasonable and therefore, the authorized officers, in the first instance, did not seize the said jewellery as the same being within the tolerable limit or the limits prescribed by the Board and thus, in our view, subsequent addition is also not justificable on the part of the Assessing Officer and rightly deleted by both the two appellate authorities namely’ CIT(A) as well as the Tribunal.

14. It can also be observed here that prior to 1992, when the exemption limit under the Wealth Tax Act was about Rs.1,00,000/- or Rs.1,50,000/-, then in most of the cases, returns were filed under the Wealth Tax Act because even in case of possession of 500 gms per lady and the other assets namely; capital, investments in firms/shares, landed property etc. etc. being taxable return of wealth were invariably filed by the assessees. However, by the Finance Act, 1992 w.e.f. 01/04/1993 drastic change was introduced under the Wealth Tax Act where only some assets u/s 2(ea) came within the perview of the definition of an “Asset” under the wealth tax and by and large, the other assets namely; liquid, capital investments in firms/shares, one house property, commercial assets were exempt and even the limit of other assets was raised to 15 lacs (for the Assessment Year 1993-94 to 2009-10) and thereafter, by and large, even the assessees, who were furnishing returns prior to 01/04/1992, in view of the drastic amendment made under the Wealth Tax Act, chose not to file wealth tax return as there was no liability for furnishing wealth tax returns. That does not mean that whatever assets were there in their possession, not disclosed under the Wealth Tax Act, remained undisclosed. May be, later on, on account of increase in the gold/silver prices, value of gems/ stones, value of jewellery may have exceeded but that does not mean that if a person has not filed wealth tax return, then jewellery even to the said extent of 500 gms prescribed by the aforesaid circular, became undisclosed. Admittedly, it is not the case of the revenue that the jewellery, so found, which has been prescribed hereinabove, was not admitted by the family members at the time of search. All the ladies in the family admitted that the jewellery found were all their own and some of the jewellery was lying in custody and control of their mother-in-law and in Indian conditions, it happens that the daughter-in-law keeps her jewellery with her mother-in-law or/and head of the family and takes the same whenever required for some occasion in the family. Even otherwise, the jewellery is personal wearing in nature and the revenue has not placed any material on record to show that the items, which were found, were not personal wearing of the ladies.

15. Considering the above facts and circumstances, in our view, the Tribunal has correctly analyzed the Circular of the Board and we do not find any infirmity or perversity in the order of the ITAT so as to call for any interference of this Court. In our view, no substantial question of law arise out of the order passed by the ITAT.

16. Accordingly, the appeal, being devoid of any merit, is hereby dismissed in limine. No order as to costs.

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