Section 132 of the Act provides that
a search and seizure action can be carried out in the case of any person who is
in possession of any money, bullion, jewellery or other valuable
article or thing and such money, bullion,
jewellery or other valuable article or thing represents either wholly or partly
income or property which has not been disclosed or would not be disclosed for
the purpose of the Act. The department has power to seize any such
money, bullion, jewellery or
other valuable article, if found unexplained at the time of search. Most
commonly, during the course of search action, jewellery is seized from either
the residential premises or the bank locker. In this article, we will
elaborately discuss all the possible action against the searched person(s) in
respect of jewellery found during the course of search.
There is no limit on holding of gold jewellery or
ornaments by anybody provided it is acquired from explained sources of income
including inheritance. This means that Legitimate holding of jewellery up to
any extent is fully protected.
Power of authorised officer to Seize Jewellery during the course of search under section 132 of the Act
The power of
the authorised officer to seize jewellery during the course of search is
derived from section 132(1)(iii), which provides that the Authorized Officer
should seize any such books of account, other documents, money, bullion,
jewellery, or other valuable article or thing found as a result of such search.
However, as per the proviso to the said clause, any bullion, jewellery or other
valuable article or thing, being stock-in-trade of the business, found as a
result of such search shall not be seized but the authorised officer shall make
a note or inventory of such stock-in-trade of the business.
Government of India
Ministry of Finance Department of
Revenue
Central Board of Direct Taxes,
New Delhi, 01 December, 2016.
PRESS RELEASE
Subject : Taxation
Laws (Second Amendment ) Bill, 2016 - regarding
In
the wake of Taxation Laws (Second Amendment) Bill, 2016 which has been passed
by Lok Sabha and is under consideration withRajyaSabha, some rumours have been
making rounds that all gold jewellery including ancestral jewellery shall be
taxed @75% plus cess with a further penalty liability of 10% of tax payable.
2.
It is hereby clarified that the above Bill has not introduced any new provision
regarding chargeability of tax on jewellery. The Bill only seeks to enhance the
applicable tax rate under section 115BBE of the Income-tax Act, 1961 (the Act)
from existing 30% to 60% plus surcharge of 25% and cess thereon.This section
only provides rate of tax to be charged in case of unexplained investment in
assets. The chargeability of these assets as income is governed by the
provisions of section 69, 69A & 69B which are part of the Act since 1960s.
The Bill does not seek to amend the provisions of these sections. Tax rate
under section 115BBE is proposed to be increased only for unexplained income as
there were reports that the tax evaders are trying to include their undisclosed
income in the return of income as business income or income from other sources.
The provisions of section 115BBE apply mainly in those cases where assets or
cash etc. are sought to be declared as ‘unexplained cash or asset’ or where it
is hidden as unsubstantiated business income, and the Assessing Officer detects
it as such.
3.
It is clarified that the jewellery/gold purchased out of disclosed income or
out of exempted income like agricultural income or out of reasonable household
savings or legally inherited which has been acquired out of explained sources is
neither chargeable to tax under the existing provisions nor under the proposed
amended provisions. In this connection, a reference to instruction No.1916 is
also invited which provides that during the search operations, no seizure of
gold jewellery and ornaments to the extent of 500 grams per married lady, 250
grams per unmarried lady and 100 grams per male member of the family shall be
made. Further, legitimate holding of jewellery upto any extent is fully
protected.
4.
In view of the above, the apprehension sought to be created that the jewellery
with the household which is acquired out of disclosed sources or exempted
income shall become taxable under the proposed amendment is totally unfounded
and baseless.
(Meenakshi J. Goswami)
Commissioner of Income Tax (Media
and Technical Policy)
Official Spokesperson, CBDT.
Government of India
Ministry of Finance Department of
Revenue
Central Board of Direct Taxes,
New Delhi, 01 December, 2016.
PRESS RELEASE
Subject :
Clarifications with respect to Gold Jewellery under Income Tax Law
In
order to remove any doubt about the current position of Income Tax Law with
respect to gold jewellery, the following points are categorically clarified:
·
There
is no limit on holding of gold jewellery or ornaments by anybody provided it is
acquired from explained sources of income including inheritance
·
Vide
circular dated 11.05.1994, instructions have been issued in the matter of
search and seizure of gold jewellery.
·
Jewellery
and ornaments to the extent of 500 gms for married lady, 250 gms. for unmarried
lady and 100 gm for male member will not be seized, even if prima facie, it
does not seem to be matching with the income record of the assesse.
·
Officer
conducting search has discretion not to seize even higher quantity of gold
jewellery based on factors including family customs and traditions.
(Meenakshi J. Goswami)
Commissioner of Income Tax (Media
and Technical Policy)
Official Spokesperson, CBDT.
Guidelines
as per CBDT Instruction No. 1916 dated 11.05.1994
The Central Board of Direct Taxes has issued Guidelines/
Instruction No. 1916 dated 11.05.1994 in the matter of seizure of jewellery,
which reads:
Instances of seizure of jewellery of
small quantity in the course of operation under section 132 have come to the
notice of the Board. The question of a common approach to situation 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 to 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 customs 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 authorizing
the search all 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.
The CBDT has clarified that no
seizure of gold jewellery found during the course of search, should be made by
the Authorised Officer, when,
(a)
Searched person has disclosed
jewellery in its wealth tax return,
(b) Where the jewellery is within the prescribed
limit i.e 500 grams for married lady, 250 gram for
unmarried lady and 100 grams for male
members.
(c) Authorised Officer may exclude a larger quantity of jewellery from seizure having regards to status and customs of community to which they belongs.
Source of jewellery found being
part of the ancestral / inheritance jewellery attained through WILL, needs to
be proved
The
Central Board of Direct Taxes has issued Guidelines/ Instruction No. 1916 dated
11.05.1994 in the matter of seizure of jewellery which
provides that during the search, no seizure of gold jewellery and ornaments to
the extent of 500 grams per married lady, 250 grams per unmarried lady and 100
grams per male member of the family shall be made. It is submitted that
legitimate holding of jewellery to the extent is fully protected if source of
such jewellery is explained. In case of jewellery is claimed to be as per WILL,
the Assessee has to provide corroborative evidence substantiating that WILL
executed prior to search. In the matter of ancestral / inheritance jewellery,
assessee has to provide copy of will to substantiate jewellery in possession.
Jewellery found in Bank locker
Generally bank locker is opened
either in the name of lady member or jointly with lady member of the family. In
such cases, to operate the bank locker, a warrant under section 132 is required
and due to issuance of search warrant in the name of lady member, assessment of
six assessment years under section 153A shall be re-opened. In other words
because of the issuance of warrant under section 132 of the Act, to operate the
said bank locker, lady member would require to face notices for six years
assessment years under section 153A. In case, if such locker is opened in only
in the name of male members, and jewellery found from such locker partly or
fully belong to any lady member then such lady member may face proceeding under
section 153C of the Act. In such case notice for specific years and not all six
assessment year will be
issued.
Further, if during the course of
search, any jewellery is found from the possession of the Assessee, then he has
to explain such jewellery to the satisfaction of the authorised officer with
proper documentary evidences.
The necessary facts relating to gold
ornaments, how the same are acquired by family etc , whether such gold is
acquired through gift or inheritance etc. need to be mentioned in statement
recorded under section 132(4) of the Act as such statement carried weight and
has more evidentiary value in search proceedings as well as subsequent assessment
proceedings. In some cases, it is observed that jewellery found from the locker
of a person/from room of a person, actually belong to other family member of
the group. In such cases, the proper facts should be brought-out in the
statements recorded during and in post search proceedings mentioning the name
of the person to whom said jewellery actually belong to and if require,
necessary affidavits may be filed.
Application
to release the seized jewellery can be made [Section 132B(1)]
If during the course of search, any
jewellery or ornaments seized by the authorised officer, then in view of the
proviso to section 132B(1) of the Act, an application to the assessing officer
shall be made within thirty days from the end of the month in which the asset
was seized. In the said application for release of seized jewellery, Assessee
has to explain the nature and source of jewellery and other valuables found
during the course of search to the satisfaction of the Assessing Officer.
In which
year, addition of the unexplained jewellery should be made?
Section 69A provides that where in
any financial year, an assessee is found to be the owner of any jewellery which
is not recorded in the books of account and the explanation offered by assessee
about the nature and source of acquisition is not satisfactory, then value of
such jewellery would be deemed to be income of the assessee in the year in
which the assessee was found to be the owner of the jewellery. Meaning thereby,
in terms of section 69A, Assessee would be treated in possession of jewellery,
when jewellery was found and seized by revenue, and would be taxed as unexplained
investment in the year in which it was found i.e. mostly in the year of search.
Addition for unexplained gold cannot
include value of Silver
The
addition for unexplained Gold made by combining the value of Gold and Silver is
not justified in law. ITAT states that the Assessing Officer has started
by considering the valuation of gold at the quantity of 831.74 at Rs.28,83,301
and has finally added a sum of Rs.562,400 as unexplained gold. However, it is
the fact that actually the valuation of gold seized was Rs. 24,21,206. In the
valuation the silver found was Rs 4,62,095. Hence the inclusion of silver
valued at Rs 4,62,095 into gold ornaments and consequent addition to this
extent is not sustainable. Accordingly ITAT direct the addition of Rs 4,62,095
as not justified, and the same is directed to be deleted. (Related
Assessment Year : 2013-14) – [Shri Mohanlal Haridas Purwat v. DCIT - Date of Judgement : 15.07.2020 (ITAT Mumbai)]
Explained Jewellery cannot be included while giving benefit of CBDT Instruction related to Unexplained Jewellery - CBDT Instruction No. 1916 will not take away the benefit of explained jewellery
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 Assessing Officer 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 Assessing
Officer denied the said claim of the assessee.
The first issue is regarding the addition sustained by the ld. CIT(A) to the tune of Rs. 4,57,404/- on account of unexplained gold jewellery by rejecting the claim of the assessee being acquisition of the said jewellery by way of purchases made from time to time and also recorded in the books of account of the assessee. There is no dispute regarding the fact that jewellery to the extent 343.328 gms. represents the purchases made by the assessee from time to time which is duly supported by the purchase bills found during the search and seizure action. The said quantity of jewellery is duly recorded in the balance sheet/ books of account of the assessee and his family members. Once the Assessing Officer 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.
The Assessing Officer has denied the benefit of the said quantity of jewellery on the ground that since the benefit of reasonable jewellery to the extent of 850 gms. as per CBDT Instruction No. 1916 dated 11.05.1994 is already granted, therefore, to that extent, no further benefit can be granted. 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. Therefore, reasonable possession of the jewellery as per the customs prevailing in the society is the basis for allowing the benefit of certain quantity of jewellery explained by the CBDT Instruction No. 1916 dated 11.05.1994 which means that 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 said CBDT Instruction No. 1916 allowing the specific quantity as reasonable and need not to be explained, does not include the jewellery which is otherwise explained by proof of documents of acquisition as well as declared/ recorded in the books of account of the assessee. Hence, the quantity of jewellery which is otherwise explained by the assessee by producing the purchase bills as well as recorded in the books of account of the assessee and the Assessing Officer had not disputed the said explanation then the quantity which is explained otherwise by producing the purchase bills and books of account would not be treated as part of the quantity of reasonable possession as prescribed under the said CBDT Instruction No. 1916 dated 11.05.1994. Therefore, 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. Accordingly, in the facts and circumstance of the case, the quantity of jewellery to the extent of 343.328 gms. has to be allowed separately as explained jewellery and no addition can be made to that extent. (Related Assessment Year : 2016-17) - [Ram Prakash Mahawar v. DCIT, Central Circle Alwar - Date of Judgement : 20.02.2020 (ITAT Jaipur)]
Short of the jewellery found (i.e.
not found during search) can not be treated as sold to levy capital gain
ITAT states that, the assessee has given the explanation
that the short of the jewellery found during the search was due to the reason
that in a recent time the assessee’s daughter got married and some of the
jewellery is either with the relatives or with the valuer. These facts were brought
on record during the search and in the statement of the assessee taken during
the search has given details of the relatives of assessee with whom she has
kept the jewellery. It is the fact that the assessee has not filed any
confirmation of these relatives but it is also pertinent to note that the
Revenue has not issued 133(6) notice for obtaining the real picture of
assessee’s submissions. There is no mechanism under the provisions of Income
Tax Act, if there is short of the jewellery declared by the assessee then the
same should be treated as sold and the capital gain is attracted. In the
present case the Assessing Officer as merely suspected that the jewellery was
sold, but has not brought any material on record. Therefore the Assessing
Officer as well as CIT(A) overlooked the practical aspect that the jewellery is
with relatives / valuer. Hence, assessee’s appeal is allowed. (Related
Assessment Year : 2015-16) – [Bina Aggarwal v. ACIT Date of
Judgement : 30.10.2019 (ITAT Delhi)]
Unexplained Money
Section 69A: Where Assessing Officer under section 69A made addition on account
of jewellery assessee belonged to a wealthy family and jewellery was received
on occasions from relatives, excess jewellery was very much reasonable and,
thus, no addition under section 69A was called for
It was held that where gifting of
jewellery possessed by each of family members was customary and jewellery was
gifted to Assessee and his wife by their parents and grandparents and other
relatives at time of their marriage, and also on several occasions after that,
such as birth of their two children, marriage anniversaries, etc., excess
jewellery found was nominal, keeping in mind high status and more customary practices
and stands explained. – [Vibhu Aggarwal v. DCIT (2018)
93 taxmann.com 275 (ITAT Delhi)]
In the case of Dinkar Laxman Mujumdar v. DCIT, the ITAT
Indore has allowed benefit of CBDT Instruction No. 1916, dated 11.05.1994
to the silver article found
during the course of search considering the customs of the Indian culture. – [Dinkar Laxman Mujumdar v. DCIT – Date of
Judgement : 18.10.2018 (ITAT Indore)]
No
addition for jewellery found within CBDT Circular prescribed limit
The instant is a case where the assessee has not been
assessed to wealth tax and the gold jewellery found was within the permissible
limits contained in the CBDT circular dated 11.05.1994 (supra) and therefore
the ratio of the judgement of the Hon’ble Rajasthan High Court clearly covers
the issue in favour of the assessee. The Hon’ble Rajasthan High Court in
the case of CIT, Alwar v. Satya Narain Patni (2014) 366 ITR 325 (Raj.) noted
that the jewellery found during the search was within the limits prescribed by
the CBDT circular and in the first instance, the jewellery were not seized, and
it was held that no addition thereafter was justifiable. In fact the CBDT
circular dated 11.05.1994 specifically contains para (ii), which prescribes
that in the case of wealth tax assessees gold jewellery and ornaments found in
excess of the gross weight declared in the wealth tax returns only need to be
seized. We hold so. Therefore, we set aside the order of the CIT(A) and direct
the Assessing Officer to allow appropriate relief and recompute the income on
this aspect afresh. Thus, the assessee succeeds in this appeal.
(Related Assessment Year : 2012-13) – [Ashok Jain v. ACIT - Date of Judgement : 25.05.2018 (ITAT Mumbai)]
Streedhan in the form of jewellery
received during span of 20-25 years canot be said to be unexplained investment
under section 69A
Assessing Officer
has made the addition of Rs. 10,65,312 on account of purported unexplained
jewelery claimed by the assessee without appreciating the fact that the
jewelery found during the course of search and seizure operations was from the
locker held by the father in law and husband of the assessee and hence the
addition in the hands of the assessee is uncalled for. It was noted that
jewellery found from the joint lockers was explained to be belonging to Late
mother in law of the assessee Smt. Sarita Soni, however, the Assessing Officer
has rejected this contention. It is further noted that assessee’s belongs to
joint family and it is undisputed position that marriages of mother in law had
taken place 53 years prior to the search and marriage of the assessee had taken
place 20 years. I further note that the Hon’ble High Court of Delhi in the case
of Ashok Chadha v. ITO (2011) 202 Taxmann 395 : 14 taxmann.com 57 (Delhi.) has
accepted the jewellery of 906.60 grams in the case of married lady even without
documentary evidence as the denying the explanation would tantamount to
overlooking the realities of life.
Keeping in view of
the aforesaid facts and circumstances of the case as well as the status of the
family and on the anvil of the judgement of the High Court of Delhi in the case
of Ashok Chadha v. ITO (2011) 202 Taxmann 395 : 14 taxmann.com 57 (Delhi.), the
explanation given by the assessee’s counsel is accepted. Accordingly the orders
of the authorities below are cancelled and addition made by the Assessing Officer
and confirmed by the Ld. CIT(A) amounting to Rs. 10,65,312/- on account of
purported unexplained jewellery claimed by the assessee is deleted. (Related
Assessment Year : 2011-12) – [Suneela
Soni v. DCIT - Date
of Judgement : 16.03.2018 (ITAT Delhi)]
No
seizure of jewellery if gross weight disclosed in regular return exceeds
jewellery found during search
Instruction
1916 issued by the Board with regard to seizure of jewellery has inherent
foundation of undisclosed portion of jewellery that may be identified in the
search. The Instruction No. 1916, therefore is describing the criteria for
decision making for jewellery to be undisclosed. Accordingly, any portion of
the jewellery, which in terms of Instruction No. 1916 is not to be seized is
automatically not undisclosed. It is in this background that Courts have held
that once seizure is not permitted by virtue of Instruction No. 1916, addition
to income cannot be made in the assessment. In the present facts of the case,
by virtue of Clause (i) of Instruction 1916, because the gross weight of the
jewellery disclosed (1876.11 grams) by the family is in their
regular returns were in excess of gross weight of jewellery found (1650.10
grams) in the search, no seizure was possible and
therefore, no addition to income is consequently permissible. (Related
Assessment Year : 2012-13) – [Mrs. Nawaz
Singhania v. DCIT - Date
of Judgement : 22.12.2017 (ITAT Mumbai)]
The Hon’ble
Madras High Court in the case of V.G.P. Ravidas v. ACIT (2015) 370 ITR 364
and V. G. Selvaraj v. ACIT (2015) 370 ITR 364 wherein it is held that the
CBDT Instruction enable Assessing Officer to exclude a larger quantity of
jewellery and ornaments from seizure, only if there are circumstances to come
to conclusion that status of family and custom and practices of the community
require holding of such jewellery. If Assessee does not offer any such
explanation, the instruction will not be applicable and excess jewellery may be
seized and considered as unexplained investment.
It was held that no addition is
called for when total gold jewellery available with the Assessee as shown in
the Wealth Tax Return and obtained on maturity of Gold Bond Scheme which is
more than the gold Jewellery weighing found during the course of search. – [Rakesh
Bansal v. ACIT, Central Circle-II, Chandigarh 2020 (1) TMI 982 (ITAT Chandigarh)]
Seizure is not possible when
gross weight of jewellery disclosed in regular returns is in excess of gross
weight of jewellery found in search
It
was held that where gross weight of jewellery disclosed by
family in their regular returns was in excess of gross weight of jewellery
found in search, no seizure was possible and, thus, no addition to income would
consequently be permissible. It has also pointed out that jewellery may be
frequently converted into different design depending on the needs and status of
the family as well as customs and practices of the community and therefore,
comparison of item to item may not be possible with the weight disclosed in
regular returns. – [Mrs. Nawaz Singhania v. DCIT (2017)
88 taxmann.com 327 (ITAT Mumbai)]
It was held that Jewellery found in
excess of limited prescribed by the CBDT’s Instruction No. 1916, dated 11.05.1994
as explained on the ground that
jewellery belongs to the assessees having received as “streedhan” on the
occasion of marriage and also received subsequently on
occasions like birth of child etc. in pursuant to
customs/tradition of family. The Assessee
belonging to ‘Baniya’ family have been married since 35 years and 8 years.
Further they were jointly residing with their mother in law Shanti Mittal who had been married for
about 65 years. Apart from the above the family comprised of husband of both the
assessee and son. Thus looking to the tradition of family Hon’ble Tribunal has
accepted the Jewellery in excess of limit prescribed by the above circular was
in view of the fact that the same being received as Streedhan during the course of Marriage
and subsequent marriage. – [Radha Mital and Ruchie Mital v. DCIT ITA
No: 2810/Del/2016 dated 09.07.2016 (ITAT Delhi)]
In
case of wealth tax assessees gold jewellery and ornaments found in excess of
the gross weight declared in the wealth tax returns only need to be seized - Since
assessees had not offered any such explanation, Board Circular was not
applicable and excess jewellery was rightly included as unexplained investment
Assessing
Officer made addition by treating excess jewellery found during search as
unexplained investment. Assessees relied upon Board Instruction No. 1916 [F.No.
286/63/93-IT (INV.II)], dated 11.05.1994 for deletion of addition. Tribunal
confirmed the addition. On appeal by assesse the Court held that ,clause (iii)
of Board Instruction, dated 11.05.1994 which enables Assessing Officer to
exclude a larger quantity of jewellery and ornaments from seizure, will be
applicable only if there are circumstances to come to conclusion that status of
family and custom and practices of the community require holding of such
jewellery. On the facts since assessees had not offered any such explanation,
Board Circular was not applicable and excess jewellery was rightly included as
unexplained investment. It was a case where the
assessee was a wealth tax payee and therefore, it was required of him to
specifically show the source of jewellery found in excess of what was declared
in the respective wealth tax returns. In fact the CBDT circular dated
11.05.1994 specifically contains para (ii), which prescribes that in the case
of wealth tax assessees gold jewellery and ornaments found in excess of the
gross weight declared in the wealth tax returns only need to be seized. (Related
Assessment year : 2009-10) – [V.G.P. Ravidas v. CIT (2015) 370 ITR 364 : 228 Taxman 93 (2014) 51 taxmann.com 16
(Mad), V. G. Selvaraj v. ACIT (2015) 370 ITR 364 : 228 Taxman 93 (2014)
51 taxmann.com 16 (Mad.)]
It
was held that if one goes with CBDT’s Instruction No. 1916, dated 11.05.1994
then a married lady of reputed family is expected to own 500 gms of ornaments.
Therefore, jewellery found in possession to that extent could not be treated as
undisclosed investment. – [CIT
(Central),Kanpur v. Ghanshyam
Das Johri (2014) 41 taxmann.com 295 (All)]
Streedhan
in the form of jewellery received during the span of 25 yeas cannot be said to
be unexplained investment under section 69A of the Income tax Act 1961
Delhi
High court in the case of Ashok Chaddha v. ITO (2011) 14 taxmann.com 57 wherein
the Hon’ble High Court has accepted the jewellery of 906.60 grams in the case
of married lady even without documentary evidence. The court stated that
collecting jewellery of 906.900 grams by a woman in a married life of 25-30
years is not abnormal. The court has held that it is a normal custom for woman
to receive jewellery in the form of "streedhan" or on other occasions
such as birth of a child etc. – [Ashok
Chaddha v. ITO (2011) 14 taxmann.com 57 (Del.)]
No
power/authority under Section 132 of the Income Tax Act, is vested
with the Authorized Officer to seize any bullion, jewellery or valuable article
of thing being stock-in-trade the said stock-in-trade even it represents wholly
or partly undisclosed income or property of the Assessee
The assessee was engaged in the trading of gold and silver
jewellery. Search and seizure operation was conducted at the
residential-cum-business premises of the assessee and stock-in-trade of the
business and stock hypothecated were seized. Section 132(1)(iii)
empowers the authorized officer to seize any such books of account, other
documents, money, bullion, jewellery or other valuable article or thing found
as a result of such search which represent either wholly or partly undisclosed
income or property of the person. However, the proviso carves out an exception.
It provides that bullion, jewellery or other valuable article or thing, being
stock-in-trade of the business, found as a result of such search shall not be
seized but the authorized officer shall make a note or inventory of such
stock-in-trade of the business. Therefore, even if the authorized officer is of
the view that any bullion, jewellery or other valuable article or thing which
is in form of stock-in-trade either wholly or partly represents the undisclosed
income or property of the person/assessee searched, he cannot seize the same.
But he shall make a note or an inventory of such stock-in-trade of business.
[Para 17]. Therefore, the seizure of jewellery being stock-in-trade by the
authorized officer is wholly without authority of law and contrary to the
statutory provision contained in proviso to section 132(1)(iii) and third proviso to section 132(1)(v). The
Hon’ble Orissa High court has referred to Circular No. 8 of 2003 dated
18.09.2003, Instruction No. 7 of 2003 dated 30.07.2003 and held that under
section 132 of the Act, no
power/authority is vested with Assessing Officer to seize any bullion,
jewellery or valuable article or thing being stock-in-trade even if
he comes to conclusion that said stock-in-trade represents wholly or partly
undisclosed income or property of assessee. Therefore, the department is directed to return the jewellery (gold and
silver ornaments) seized by the authorized officer in course of search
forthwith to the petitioner-assessee after complying with the requirement
provided, i.e., making
a note or inventory. [Para 27] – [Puspa Ranjan Sahoo v. Assistant Director of
Income-tax (Inv.) (2012) 26 taxmann.com 83 (Orissa)]
Source to
the extent of the jewellery stated in the CBDT Instruction 11.05.1994
stands explained
The Hon'ble Gujarat High Court in
CIT v. Ratanlal Vyaparilal Jain has held (placitum 10, page 359):
"Though it is true that the Central Board of Direct
Taxes Instruction No. 1916, dated 11.05.1994, lays down guidelines for seizure
of jewellery and ornaments in the course of search, the same takes into account
the quantity of jewellery which would generally be held by the family members
of an assessee belonging to an ordinary Hindu household. The approach adopted
by the Tribunal in following the said circular and giving benefit to the
assessee, even for explaining the source in respect of the jewellery being held
by the family is in consonance with the general practice in the Hindu families
whereby jewellery is gifted by the relatives and friends at the time of social
functions, viz., marriages, birthdays, marriage anniversary and other
festivals. These gifts are customary and customs prevailing in a society cannot
be ignored. Thus, although the circular had been issued for the purpose of
non-seizure of jewellery during the course of search, the basis for the same
recognizes customs prevailing in the Hindu society. In the circumstances,
unless the Revenue shows anything to the contrary, it can safely be presumed
that the source to the extent of the jewellery stated in the circular stands
explained. Thus, the approach adopted by the Tribunal in considering the extent
of jewellery specified under the said circular to be a reasonable quantity,
cannot be faulted with. In the circumstances, it is not possible to state that
the Tribunal has committed any legal error so as to give rise to a question of
law." – [CIT
v. Ratanlal Vyaparilal Jain (2011) 339 ITR 351 (Guj)]
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