FACTS OF THE CASE

A search and seizure operation under Section 132 was conducted at the residential and business premises of the assessee engaged in saree trading. During the search, jewellery, cash, and stock were found and seized.

Gold jewellery weighing 714.620 grams was discovered. The assessee explained that the jewellery belonged to his wife and daughter-in-law and had been acquired at the time of marriage and on festive occasions as customary Stridhan. The Assessing Officer accepted only 500 grams as explained and treated the balance as unexplained investment.

Cash amounting to ₹96,280 was also found. Part of the explanation was accepted, while the remaining amount was treated as unexplained.

At the business premises, saree stock valued at ₹10,33,655 (at MRP) was inventorised. After adjustments and estimations, the Assessing Officer treated part of the stock as undisclosed investment.

 ISSUES INVOLVED

  1. Whether jewellery found during search in possession of married women can be treated as explained under CBDT Instruction No. 1916.
  2. Whether the addition on unexplained cash found during search was justified.
  3. Whether addition for alleged undisclosed stock based on estimation was sustainable.

 PETITIONER’S ARGUMENTS (ASSESSEE)

The assessee contended that:

  • Jewellery belonged to his wife and daughter-in-law and was received at marriage and on customary occasions.
  • CBDT Instruction No. 1916 permits presumption of ownership of jewellery by married women up to specified limits.
  • Cash found was from business receipts and amounts belonging to relatives and family members.
  • The stock addition was based purely on estimates without concrete evidence.

RESPONDENT’S ARGUMENTS (REVENUE)

The Revenue argued that:

  • Source of jewellery beyond the accepted limit was not satisfactorily proved.
  • CBDT Instruction deals only with seizure guidelines and not with explaining source of investment.
  • Cash explanation was partly unsubstantiated.
  • Excess stock represented undisclosed investment not recorded in books.

 COURT ORDER / FINDINGS

1. Jewellery Addition — Deleted

The Tribunal held that the CBDT Instruction should be considered while evaluating the source of jewellery. Considering Indian social customs and the presence of two married women in the household, jewellery of 714.620 grams was treated as explained.

2. Cash Addition — Partly Deleted

The Tribunal observed that part of the cash represented business sale proceeds and amounts belonging to relatives. Since the explanation regarding sale proceeds was not disproved, further relief was granted and the addition was reduced.

3. Undisclosed Stock — Reduced

The Tribunal noted that both the Assessing Officer and CIT(A) relied on estimates to determine closing stock. Considering the lack of precise evidence, the Tribunal re-estimated the stock and sustained addition only to the extent of ₹1,36,516 instead of ₹2,01,516.

IMPORTANT CLARIFICATION

CBDT Instruction No. 1916, though primarily framed for seizure guidelines, can also be relied upon to draw a reasonable presumption regarding the source of jewellery held by married women in Indian households, particularly in search assessments.

Additions based purely on estimations without corroborative evidence may be reduced or deleted by appellate authorities.

 Link to download the order - https://itat.gov.in/public/files/upload/1698735231-57%20of%202023%20%20Sheo%20Chandra%20Gupta(Assessee%20Appeal)%20uder%20section%20143(3)%20of%20the%20Act%20SMC%20(Corrected).pdf

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