D.b.income Tax Appeal v. Satya Narain Patni

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANAT JAIPUR BENCH, JAIPUR J U D G M E N T D.B.INCOME TAX APPEAL NO. 196/2010(C.I.T.,Alwar Vs. Satya Narain Patni) DATE OF JUDGMENT ::::: 07.04.2014 HON'BLE MR.JUSTICE AJAY RASTOGIHON'BLE MR.JUSTICE J.K.RANKA Mr.Anuroop Singhi , for the appellant/s. BY THE COURT (Per Hon'ble Ranka, J.) 1.This instant income tax appeal under Section 260A of theIncome Tax, Act 1961 (hereinafter referred to in short as 'Act of1961') filed by the revenue assailing the order of the Income TaxAppellate Tribunal, Jaipur Bench 'A', Jaipur dated 15.1.2010passedinITANo.715/JP/09andcross-objectionNo.150/JP/2009, relates to assessment year 2005-06. Thoughthe revenue has raised as many as 07 questions which accordingto the revenue, are substantial questions of law, but primarily,during the course of arguments, counsel for the revenue hascontended that the question no.3 pertains to addition ofRs.2,88,176/- made by the Assessing Officer on account ofunexplained jewellery found during the search, and whetherthere was any proper explanation for its deletion deservesconsideration of this Court, and according to him, rest of thesubstantial questions of law, needs no consideration of this court. 2.Brief facts which have been culled out on perusal of theimpugned orders, are that a search and seizure operation was carried out at the business and residential premises of theassessee on 30.6.2004 where certain incriminating books ofaccounts and documents were seized. During the course ofsearch operation, cash amounting to RS.1,50,600/- was foundbesides Gold jewellery weighing 2202.464 gms. valued atRs.10,53,520/- and Silver items valued at Rs.93,678/-. Lookingto the status of the assessee and the statement given during thecourse of search operation by various family members andconsidering the fact that there are four married ladies in thehouse including the wife of the assessee, no jewellery was seizedby the authorised officer, however, the jewellery to the extent of1600 gm was treated as reasonable by the Assessing Officerwhich had been received by them at the time of their marriage.The balance jewellery weighing 602.464 gm was treated asunexplained in absence of any satisfactory explanation from theassessee and the value of the same which was determined atRs.2,88,176/-, was added back to the income of the assesseetreating the same as purchased out of Income from undisclosedsources of the assessee and accordingly added back to hisincome. The assessment order came to be passed on 28.12.2006where this addition was made along with other additions basedon the incriminating documents found during the course ofsearch. 3.Being dissatisfied with the observations and addition, therespondent-assessee preferred an appeal before theCommissioner of Income Tax (Appeals) Central, Jaipur who videorder dated 19.6.2009, substantially deleted the additions made by the Assessing Officer including the addition of the jewellerymade by the Assessing Officer to the tune of Rs.2,88,176/- 4.Being aggrieved of the order dated 19.6.2009 wherebycertain deletions were made, the department preferred an appealbefore the Income Tax Appellate Tribunal and the assessee alsofiled cross objection. The learned Tribunal also on appreciation offacts & evidence available on record, confirmed the order of CIT(A). Hence this appeal. 3.Being dissatisfied with the observations and addition, therespondent-assessee preferred an appeal before theCommissioner of Income Tax (Appeals) Central, Jaipur who videorder dated 19.6.2009, substantially deleted the additions made by the Assessing Officer including the addition of the jewellerymade by the Assessing Officer to the tune of Rs.2,88,176/- 4.Being aggrieved of the order dated 19.6.2009 wherebycertain deletions were made, the department preferred an appealbefore the Income Tax Appellate Tribunal and the assessee alsofiled cross objection. The learned Tribunal also on appreciation offacts & evidence available on record, confirmed the order of CIT(A). Hence this appeal. 5.Learned counsel for the revenue has contended that theAssessing Officer had given due credit of jewellery to the variousfamily members. He has also contended that out of jewellery ofRs.10,53,520/-, only jewellery of Rs.2,88,176/- was foundunexplained and almost 75% of the jewellery found was treatedas explained by the Assessing Officer himself and only where therespondent-assessee or family members were not in position toexplain the balance jewellery, the addition was made. Therespondent-assessee or/and other family members were not inposition to adequately explain the source of receipt of aforesaidjewellery and it was duty of the assessee to lead properevidence, but since no evidence was led, therefore, according tothe status of the respondent, Assessing Officer rightly gave creditto the respondent of 1600 gms of jewellery, and being notsatisfied with the balance, made addition which was correct andjustified. He has further contended that though there is circularof the Board which has been referred to by the Tribunal dated11.5.1994, but it simply lays down that in case a person is not assessed to wealth tax, then in that case, jewellery andornaments to the extent of 500 gms per married lady, 250 gmsper unmarried lady and 100 gms per male member of the familyneed not be seized but it does not mean that Assessing Officer isdebarred from questioning even the items found. The circularemphasized only that jewellery will not be seized, however, theAssessing Officer was duty bound to seek explanation of owningand possessing of such jewellery. He has also contended thatwhen majority of the jewellery in accordance with the status ofthe respondent-assessee had been accepted, then only to theextent the assessee was unable to prove by acceptable evidenceof the balance, the said addition was made and which is properand contended that the Tribunal is unjustified and thatsubstantial question of law arise for consideration. 6.We have considered the arguments raised on behalf of thecounsel for the revenue, and have gone through the impugnedorders so also the circular of CBDT. It is necessary to quote theinstruction no.1916 dated 11.5.1994 issued by the CentralBoard Direct Tax, which reads ad-infra: "Instances of seizure of jewellery of small quantityin course of operations under Section 132 havecome to the notice of the Board. The question of acommon approach to situations where searchparties come across items of jewellery, has beenexamined by the Board and following guidelines areissued for strict compliance. (i)In the case of a wealth-tax assessee, goldjewellery and ornaments found in excess of the gross weight declared in the wealth-tax returnonly need be seized. (ii)In the case of a person not assessed to wealth-tax gold jewellery and ornaments to the extent of500 gms per married lady, 250 gms perunmarried lady and 100 gms per male member ofthe family need not be seized.tax gold jewellery and ornaments to the extent of500 gms per married lady, 250 gms perunmarried lady and 100 gms per male member ofthe family need not be seized. (i)In the case of a wealth-tax assessee, goldjewellery and ornaments found in excess of the gross weight declared in the wealth-tax returnonly need be seized. (ii)In the case of a person not assessed to wealth-tax gold jewellery and ornaments to the extent of500 gms per married lady, 250 gms perunmarried lady and 100 gms per male member ofthe family need not be seized.tax gold jewellery and ornaments to the extent of500 gms per married lady, 250 gms perunmarried lady and 100 gms per male member ofthe family need not be seized. (iii)The authorized officer may, having regard to thestatus of the family, and the custom and practicesof the community to which the family belongs andother circumatances of the case, decide toexclude a larger quantity of jewellery andornaments from seizure. This should be reportedto the Director of Income tax/Commissionerauthorising the search at the time of furnishingthe search report.status of the family, and the custom and practicesof the community to which the family belongs andother circumatances of the case, decide toexclude a larger quantity of jewellery andornaments from seizure. This should be reportedto the Director of Income tax/Commissionerauthorising the search at the time of furnishingthe search report. (iv)In all cases, a detailed inventory of the jewelleryand ornaments found must be prepared to beused for assessment purposes.and ornaments found must be prepared to beused for assessment purposes. These guidelines may please be brought to thenotice 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) whereinit has been observed as under: "In search total gold jewellery of 2202.464 gms (netweight) was found. The jewellery was found from thebedroom of various persons, locker and on personwhich was identified as belonging to specific persons.The same is tabulated below: In the statements recorded on 25.8.2004 duringsearch u/s.132(4) the assessee and various familymembers stated as below: Satyendra Patni:- In reply to Q.No.5 he stated thathe possess one gold ring & 2 gold chains and his wifepossess 30 tola gold jewellery. He further stated thatall his 3 daughter-in-law also possess 30 tola goldjewelry each which they received from their parentalside at the time of marriage and subsequently at thetime of birth of children. Chandraprakash Patni (eldest son):- In reply toQ.No.12 regarding jewelry lying with him at thattime, he stated that around 10 tola of jewelry islying with him belonging to his wife. Pushpendra Patni:- In reply to Q.No.16 he statedthat he has one gold chain, braclet and two rings. Inreply to Q.No.17 he stated that he is not aware ofthe jewelry owned by his wife but the jewelry shepossess has been received at the time of marriage in2000 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 onechain, four churi, two bangles, two pair tops, ladiesbraclet, gents braclet, 3-4 rings and mangalsutra.She further stated that two sets received from herparents and one set received from in-laws are lyingwith her mother-in-law Smt.Anila Patni." 8.Thus, from the perusal of above chart as well asstatements, it is abundantly clear that jewellery which has beenfound in possession of the family members is in accordance withcustoms and practice prevalent in the community and inaccordance with status of the family. thereafter. Smt.Aparna Jain w/o Chandraprakash Patni:-In reply to Q.No.6 she stated that she possess onechain, four churi, two bangles, two pair tops, ladiesbraclet, gents braclet, 3-4 rings and mangalsutra.She further stated that two sets received from herparents and one set received from in-laws are lyingwith her mother-in-law Smt.Anila Patni." 8.Thus, from the perusal of above chart as well asstatements, it is abundantly clear that jewellery which has beenfound in possession of the family members is in accordance withcustoms and practice prevalent in the community and inaccordance with status of the family. 9.On perusal of the order of CIT (Appeals) as also theTribunal, we notice that the Assessing Officer had not given anybasis for restricting the claim of jewellery at 1600 gms asreasonable while the Assessing Officer has simply mentionedabout there being four ladies, but ignored that in addition to fourladies, there were four male members so also three children andif the male members so also the children are considered, theneven factually the claim of respondent-assessee appears to bereasonable in the light of the aforesaid instruction dated11.5.1994. If the circular is strictly followed, then to the extentof 2700 gms, no jewellery could be seized. (500x4 ladies+100x7male+ children=2700 gms.). In the aforesaid facts, we fail tounderstand the basis of 1600 gms held reasonable by theAssessing Officer. 10.Therefore, in our view, the Tribunal has rightly consideredthe said issue and we are also in conformity with the orderpassed by the Tribunal. We are also of the view that the CentralBoard of Direct Taxes keeping in view the status of the family,customs and practice of the community, came down with thesaid circular and one has to go with the weight and not with thevalue as the value may fluctuate over the years. The Tribunalhas also appreciated the fact on record that the marriage ofthree sons were performed in the year 1996, 2000 and 2003 andall the marriages including the assessee and three sons wereperformed prior to 2003. It is also on record that the statementof various family members were recorded and none has statedthat these are not personal wearing jewellery and same werereceived by the respective ladies/daughter-in-law on/or at thetime of their marriages either from the parental side or in-lawsside and even subsequently at the time of birth of their children. 11On perusal of the circular of the Board, quoted supra, it isclear that in the case of wealth tax assessee, whatever goldjewellery and ornaments have been found and declared in thewealth tax return, need not be seized. However, sub-clause (ii)prescribes that in case of a person not assessed to wealth taxgold jewellery and ornaments to the extent of 500 gms permarried lady, 250 gms per unmarried lady and 100 gms permale member of the family need not be seized. Sub-clause (iii)also prescribes that the authorised officer may, having regard tothe status of the family, and the custom and practices of the community to which the family belongs and other circumstancesof the case, decide to exclude a larger quantity of jewellery andornaments from seizure. 11On perusal of the circular of the Board, quoted supra, it isclear that in the case of wealth tax assessee, whatever goldjewellery and ornaments have been found and declared in thewealth tax return, need not be seized. However, sub-clause (ii)prescribes that in case of a person not assessed to wealth taxgold jewellery and ornaments to the extent of 500 gms permarried lady, 250 gms per unmarried lady and 100 gms permale member of the family need not be seized. Sub-clause (iii)also prescribes that the authorised officer may, having regard tothe status of the family, and the custom and practices of the community to which the family belongs and other circumstancesof the case, decide to exclude a larger quantity of jewellery andornaments from seizure. 12.It is true that the circular of the CBDT, referred to supradt. 11/05/1994 only refers to the jewellery to the extent of 500gms per married lady, 250 gms per unmarried lady and 100 gmsper male member of the family, need not be seized and it doesnot speak about the questioning of the said jewellery from theperson who has been found with possession of the said jewellery.However, the Board, looking to the Indian customs andtraditions, has fairly expressed that jewellery to the said extentwill not be seized and once the Board is also of the expressopinion that the said jewellery cannot be seized, it shouldnormally mean that any jewellery, found in possesion of amarried lady to the extent of 500 gms, 250 gms per unmarriedlady and 100 gms per male member of the family will also notbe questioned about its source and acquisation. We can takenotice of the fact that at the time of wedding, thedaughter/daughter-in-law receives gold ornaments jewellery andother goods not only from parental side but in-laws side as wellat the time of 'Vidai' (farewell) or/and at the time when thedaughter-in-law enters the house of her husband. We can alsotake notice of the fact that thereafter also, she continues toreceive some small items by various other close friends andrelatives of both the sides as well as on the auspicious occasionof birth of a child whether male or female and the CBDT, lookingto such cutoms prevailing throughout India, in one way or the another, came out with this Circular and we accordingly are ofthe firm opinion that it should also mean that to the extent of theaforesaid jewellery, found in possession of the varoius persons,even source cannot be questioned. It is certainly 'Stridhan' ofthe woman and normally no question at least to the said extentcan be made. However, if the authorized officers or/and theAssessing Officers, find jewellery beyond the said weight, thencertainly they can question the source of acquisation of thejewellery and also in appropriate cases, if no proper explanationhas been offered, can treat the jewellery beyond the said limit asunexplained investment of the person with whom the saidjewellery has been found. 13.Admittedly, looking to the status of the family and thejewellery found in possesssion of four ladies, was held to bereasonable and therefore, the authorized officers, in the firstinstance, did not seize the said jewellery as the same beingwithin the tolerable limit or the limits prescribed by the Boardand thus, in our view, subsequent addition is also not justificableon the part of the Assessing Officer and rightly deleted by boththe two appellate authorities namely' CIT(A) as well as theTribunal. 14.It can also be observed here that prior to 1992, when theexemption limit under the Wealth Tax Act was aboutRs.1,00,000/- or Rs.1,50,000/-, then in most of the cases,returns were filed under the Wealth Tax Act because even incase of possession of 500 gms per lady and the other assets 14.It can also be observed here that prior to 1992, when theexemption limit under the Wealth Tax Act was aboutRs.1,00,000/- or Rs.1,50,000/-, then in most of the cases,returns were filed under the Wealth Tax Act because even incase of possession of 500 gms per lady and the other assets namely; capital, investments in firms/shares, landed propertyetc. etc. being taxable return of wealth were invariably filed bythe assessees. However, by the Finance Act, 1992 w.e.f.01/04/1993 drastic change was introduced under the Wealth TaxAct where only some assets u/s 2(ea) came within the perview ofthe definition of an "Asset" under the wealth tax and by andlarge, the other assets namely; liquid, capital investments infirms/shares, one house property, commercial assets wereexempt 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 returnsprior to 01/04/1992, in view of the drastic amendment madeunder the Wealth Tax Act, chose not to file wealth tax return asthere was no liability for furnishing wealth tax returns. That doesnot 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 exceededbut that does not mean that if a person has not filed wealth taxreturn, then jewellery even to the said extent of 500 gmsprescribed 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 notadmitted by the family members at the time of search. All theladies in the family admitted that the jewellery found were alltheir own and some of the jewellery was lying in custody andcontrol of their mother-in-law and in Indian conditions, ithappens that the daughter-in-law keeps her jewellery with her mother-in-law or/and head of the family and takes the samewhenever required for some occasion in the family. Evenotherwise, the jewellery is personal wearing in nature and therevenue has not placed any material on record to show that theitems, which were found, were not personal wearing of theladies. 15.Considering the above facts and circumstances, in ourview, the Tribunal has correctly analyzed the Circular of theBoard and we do not find any infirmity or perversity in the orderof the ITAT so as to call for any interference of this Court. In ourview, no substantial question of law arise out of the orderpassed by the ITAT. 16.Accordingly, the appeal, being devoid of any merit, ishereby dismissed in limine. No order as to costs. [J.K. RANKA],J. ,J. S.Rawat/ Raghu/p.12/ Certificate:All corrections made in the judgment/order have beenincorporated in the judgment/order being e-mailed./Raghu, Sr.PA.