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Judgment
PER MANISH AGARWAL, AM:
The captioned appeals filed by the above-mentioned different Assessees and the Revenue arising out of the respective orders of the Commissioner of Income Tax (Appeals)-27, New Delhi [“Ld. CIT(A)”] passed under s. 250 of the Income Tax Act, 1961 [the Act] emanating from respective assessment orders passed by the Assessing Officer [“AO”] tabulated hereunder:
| Sr. No. | Appeal Nos. | Asst. Years | CIT(A)’s Order dated | Assessment order dated | Assessment Order under section |
|---|---|---|---|---|---|
| 1 | 2795/Del/2022 | 2019-20 | 26.09.2022 | 30.09.2021 | 143(3) of the Act |
| 2. | 2806/Del/2022 | 2019-20 | 26.09.2022 | -Do- | -do- |
| 3. | 2796/Del/2022 | 2019-20 | 26.09.2022 | 28.09.2021 | -do- |
| 4. | 2807/Del/2022 | 2019-20 | 26.09.2022 | -Do- | -do- |
| 5. | 2808/Del/2022 | 2019-20 | 26.09.2022 | 30.09.2021 | -do- |
Since all the appeals filed by the assessee and the Revenue are with respect to one single family having common issue of additions made on account of jewellery found during the course of search treated as unexplained. Part of which were deleted by Ld. CIT(A) against which the Revenue is in appeal and on the additions sustained by Ld. CIT(A), the respective assessee is in appeal before us. Therefore, all these appeals having single and common issue arising from the common search therefore, all the appeals are decided by a common order.
First we take appeal in ITA Nos. 2795/Del/2022 and ITA No.2806/Del/2022 [Assessment Year 2019-20] in the case of Nitin Passi where the assessee has challenged the addition on account of unexplained jewellery and unexplained cash sustained by ld. CIT(A) whereas Revenue has challenged the deletion of addition made on account of jewellery and unexplained expenditure on foreign currency.
ITA Nos. 2795/Del/2022 and ITA No.2806/Del/2022
[Assessment Year 2019-20]
Ground of appeal No.1 raised by the assessee is general in nature hence, dismissed.
Ground of appeal Nos.2 to 2.3 raised by the assessee and Ground of appeal Nos. 1 to 7 raised by the Revenue are with respect to the addition made on account of jewellery found during the course of search as unexplained.
Brief facts of the case are that a search and seizure action u/s 132 of the Act was carried out on 31.10.2018 on Lotus Group promoted by Passi family. Residential premises of the assessee situated at A-18, Ansal Villas, Satbari Farm House, Chhattarpur, New Delhi-110074 was also covered under search therefore, the proceedings u/s 153A were initiated for various Assessment Years. The return of income was filed on 11.12.2019, declaring total income of INR 1,97,93,930/-. The year under appeal being the year of search, thus the proceedings u/s 143(3) were initiated by issue of notice u/s 143(2) on 23.09.2020. The AO observed that during the course of search, total jewellery found from the residence of the assessee as well as bank lockers owned the assessee alongwith his wife, Smt. Roshani Passi, which was valued at INR 15,20,76,861/-by the approved valuer out of which jewellery worth INR 5,05,58,482/- was seized during the course of search. The assessee claimed that as per the copies of the bills and vouchers and the jewellery declared in the wealth tax return, total jewellery found during the course of search was explained however, the AO has matched each individual item found at various places independently and observed that there were difference in the gross weight and net weight and also weight of the precious and semi-precious stones embedded with the jewellery physically found and as declared by the assessee. Therefore, claim of the assessee was not accepted and out of total jewellery found, the jewellery worth of INR 3,31,16,088/-was treated as undisclosed jewellery belonging to the assessee and his wife Smt. Roshni Passi and made the addition of INR 1,65,58,044/- in the hands of the assessee being 50% of the said jewellery. Besides this, out of the total cash found at the residence of the assessee [INR 70,80,400/- seized INR 65,00,000/-], the AO allowed the credit of the cash as per books of accounts of the assessee of INR 13,41,401/- and remaining cash of INR 57,38,999/-was treated as unexplained and made the addition in the hands of the assessee. Further, during the course of search, certain WhatsApp Chat and loose papers were found according to which assessee had purchased foreign currency on various occasions, the source of which remained unexplained. Therefore, an addition of INR 4,67,400/- was made u/s 69C of the Act. An addition of INR 6,77,528/- was made u/s 69A for the foreign currency in US $ 5100 and Euros-3600 found from the possession of the assessee and his family members. Accordingly, the total income of the assessee was assessed at INR 4,32,35,901/-.
Against the said order, assessee filed appeal before Ld. CIT(A) who partly allowed the appeal of the assessee and addition made on account of jewellery was reduced to INR 56,89,895/- and the additions on account of unexplained cash is sustained. The remaining additions on account of purchase of foreign currency were deleted by Ld. CIT(A).
Aggrieved by the order of Ld. CIT(A), both Revenue and the assessee are in appeal before the Tribunal by taking following Grounds of appeal:-
ITA No.2806/Del/2022 [AY 2019-20] [Nitin Passi]
Revenue’s Appeal
1.“The Ld. CIT (A) has erred on facts and in law by allowing the appeal of the assessee while restricting the addition of Rs. 1,65,58,044/- to Rs. 56,89,985, made on account of unexplained jewellery found on the premises of the assessee.
2.The Ld. CIT (A) has erred on facts and in law, by not appreciating the fact that the jewellery declared by the assessee in VDIS scheme was not only materially different in appearance and form, but also in caratage and weight to the ones seized during the search operation.
3.The Ld. CIT(A) has erred on facts and in law by not appreciating the fact that the jewellery shown in the invoices submitted by the assessee is substantially different to the ones which has been added as his unexplained jewellery u/s 69A of the Income Tax Act, 1961.
4.The Ld. CIT(A) has erred on facts and in law in allowing the appeal of the assessee by ignoring the fact that the assessee failed to provide any proof of remodeling or alteration of the jewellery in question during the assessment proceedings despite being accorded multiple opportunities.
5.The Ld. CIT(A) has erred on facts and in law in allowing the appeal of the assessee by considering the value of jewelry items encrusted with diamonds based on gross gram weightage of Gold only, ignoring the fact that the value of diamonds predominantly depends on the caratage, color, cut and clarity and valuation of it cannot be equated with the valuation of Gold items.
6.The Ld. CIT(A) has erred on facts and in law in allowing the appeal of the assessee by ignoring the fact that a composite valuation of the jewelry item with diamond encrusted on it based on gross weightage will not yield the actual value of such jewelry items, since it does not cover the value of diamond encrusted on such jewelry items.
7.The Ld. CIT(A) has erred on facts and in law in allowing the appeal of the assessee by ignoring the fact that in the valuation report of jewelry items prepared at the time of search, value of diamonds encrusted on the Gold Jewellery items were separately mentioned in the valuation report by the Valuer.
8.The Ld. CIT(A) has erred on facts and in law in allowing the appeal of the assessee by deleting the addition of Rs. 4,67,000/- made u/s 69C of the Income Tax act, 1961 on account of forex bought from unexplained cash.
9.The Ld. CIT(A) has erred on facts and in law in allowing the appeal of the assessee by accepting the contention of the assessee that cash used to make forex purchase was withdrawn from saving accounts, when the assessee himself failed to produce any supporting documents to substantiate his contention.
10.The Ld. CIT(A) has erred on facts and in law in allowing the appeal of the assessee by ignoring the fact that there was major time lag between cash withdrawals and the purchase of foreign currency.
11.(a) The order of the Ld. Commissioner of Income Tax (Appeals) is erroneous and not tenable in law and on facts.
(b)The appellant craves to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”
ITA No.2775/Del/2022 [AY 2019-20] [Nitin Passi]
Assessee’s appeal
1.“That on the fact and circumstances of the case and in law, the assessment order dated 30.09.2021 passed under section 143(3) of the Income Tax Act, 1961 ("the Act") is without jurisdiction, illegal, bad in law and is liable to be quashed.
2.Without prejudice, that the Commissioner of Income Tax (Appeals) erred on facts and in law in confirming addition to the extent of Rs.56,89,895 made under section 69A of the Act on account of alleged unexplained jewellery found during the course of search.
2.1.That the Commissioner of Income Tax (Appeals) erred on facts and in law in not appreciating that gross weight of jewellery declared by the appellant and his family members exceeded the gross weight of jewellery found during the course of search and thus, no addition on this account was called for.
2.2.That the Commissioner of Income Tax (Appeals) erred on facts and in law in not considering the reconciliation provided by the appellant during the course of assessment proceedings, which was duly supported by documentary evidences.
2.3.Without prejudice, that the Commissioner of Income Tax (Appeals) erred in adopting incorrect value of diamond jewellery for the purpose of valuation/ addition.
3.That the Commissioner of Income Tax (Appeals) erred on facts and in law in upholding the addition of Rs.57,38,999 on account of unexplained money found during the course of search under section 69A of the Act.
3.1.That the Commissioner of Income Tax (Appeals) erred in disregarding the reconciliation of cash found provided during the course of assessment and not appreciating that the alleged cash found during the course of search belonged to other members of the family and business entities.
4.That the Commissioner of Income Tax (Appeals) erred in upholding levy of higher rate of tax under section 115BBE on additions confirmed under section 69A of the Act.
5.That the Commissioner of Income Tax (Appeals) erred in not directing deletion of interest charged under sections 234B and 234C of the Act.
The appellant craves leave to add, alter, amend or vary from the aforesaid grounds of appeal at or before the time of hearing.”
Ground of appeal Nos. 1 to 2.3 of the assessee and Ground of appeal Nos. 1 to 7 raised by the Revenue are with respect to the addition of INR 1,65,58,044/- made towards jewellery found during the course of search held as unexplained u/s 69A r.w.s. 115BBE of the Act, out of which Ld. CIT(A) has confirmed the addition of INR 56,89,895/- and balance was deleted. Since all these Grounds of appeal pertained to single issue therefore, all these Grounds of appeal of both the parties are taken together.
Brief facts leading to this issue are that during the course of search, total jewellery having gross weight of 11860.740 Grams and 9377.130 net weight was found from the possession of the assessee and his wife Smt. Roshani Passi at his residences and in three bank lockers which was valued at INR 15,20,76,861/- by the approved valuer. The jewellery so found was studded with diamonds, precious and semi-precious stones of 1376.010 Carats. During the course of assessment proceedings, assessee was asked to explain the source of the same for which it was stated by the assessee that assessee alongwith his family members has declared jewellery in their respective Wealth Tax Returns filed upto AY 2015-16. Besides this they have purchased jewellery thereafter out of the disclosed sources and therefore, the entire jewellery was explained. However, the AO by alleging that there are certain items which are not matching with the description as given in the declarations made by the assessee therefore, the AO treated the jewellery worth of INR 3,31,16,088/-as unexplained and assessee’s share being 50% made the addition of INR 1,65,58,044/- u/s 69A r.w.s. 115BBE of the Act.
In first appeal, Ld. CIT(A) partly accepted the claim of the assessee and allowed deduction on account of jewellery in terms of the CBDT Instructions and confirmed the addition of INR 56,89,895/-. Against the said confirmation, the assessee is in appeal and against the deletion, Revenue is in appeal before us.
Before us, Ld.AR for the assessee submits that the total jewellery found at the residential premises of the assessee and in the lockers of various family members was owned by him alongwith his wife. Besides this, assessee claimed that the jewellery found from the possession of his mother Smt. Swarn Lata Passi, should also be considered for working out the unexplained jewellery. Ld.AR submits that the lower authorities have not allowed to consider the jewellery of the entire family as a whole and treated the jewellery found from the possession of the assessee alongwith his wife at the residence and in the lockers jointly owned with his wife separately with the jewellery found from the possession and lockers owned by his mother, Smt. Swarn Lata Passi. Ld.AR submits that since beginning of the search proceedings, in the statements recorded u/s 132(4) during the course of search at the residence as well as at the time of operation of bank lockers, all the family members including assessee himself have stated that the total jewellery found available with them may have included the jewellery related to other family members also. However, the lower authorities has not appreciated this fact and further not considered the entire jewellery as owned by the whole family to work out the unexplained jewellery and rejected the claim. Ld.AR further submits that if the jewellery declared by the assessee, his wife and his mother are taken together, the gross and net weight of the jewellery and also the weight of precious and semi-precious stones embedded therein is much higher and therefore, no addition is required to be made on this account. For this, reliance is placed on the judgement of Hon’ble Jurisdictional High Court in the case of PCIT vs Krishan Kumar Modi in ITA No.48-54 of 2021 order dated 20.02.2021. Ld.AR further submits that AO has ignored the fact that precious and semi-precious stones embedded in the jewellery were approximately weighted by the approved valuer since the same cannot be quantified and weighed separately. Therefore, the difference as pointed out by the AO in various items is nothing but due to such estimation of debate. Ld.AR also filed a detailed written submission which is reproduced as under:-
CBDT Instruction No.1916 dated 11.05.1994 (Refer Para 4.8 and 4.9 @ page 20-21 of CIT(A) order). Accordingly, the CIT(A) restricted the addition in respect of excess jewellery of 887.59 gm found during search amounting to Rs.1,13,79,790 [887.59 gm * 12821 (Average value per gram as found during search – Rs.15,20,76,861/11,860.740 grams] and an addition of Rs.56,89,895 each was sustained in the hands of the assessee and his wife.
11.The aforesaid addition is not sustainable for the reasons elaborated as under:
Re: Gross jewellery declared by family is substantially more than jewellery found during search – no addition is warranted
12.At the outset, it is respectfully submitted that since the gross jewellery declared by the family members who reside under a common roof on cumulative basis is substantially more than jewellery found during search, no addition is warranted. The complete details of jewellery found and respectively declared by the assessee, his wife (Smt. Roshni Passi) and his mother (Smt. Swarn Lata Passi) is tabulated as under:
S. No. Assessee Jewellery Found/ Declared Gross Weight (in gms.) Net Weight (in gms.) Diamond/ Stone (in cts.) A. Jewellery found during search 1. Nitin Passi / Roshni Passi 11,860.740 9,377.130 1,376.010 2. Swarn Lata Passi 8,356.390 7,202.010 906.670 Total (A) 20,217.130 16,579.140 2,282.680 B. Jewellery declared by the family members 3. Nitin Passi (Refer Annexure 1) 3,039.270 2,605.048 599.55 4. Roshni Passi (Refer Annexure 1) 7,124.630 5,258.848 771.270 5. Swarn Lata Passi (Refer Annexure 2) 12,281.990 10,356.390 1,629.050 Total (B) 22,445.89 18,220.286 2,999.870 IMPORTANT: Thus, jewellery found during search was much less than the jewellery declared by the family as a whole 13.It is a trite law that once the jewellery disclosed by the assessee exceeds the jewellery physically found during the course of search, the same could not be said to constitute undisclosed/ unaccounted jewellery of the assessee.
14.Reliance in this regard is placed on the following decisions:
- The Hon'ble jurisdictional High Court in the case of PCIT v. Krishan Kumar Modi: ITA No.48-54 of 2021 [order dated 22.02.2021] upheld the order of the Tribunal deleting the addition made on account of unaccounted jewellery where the jewellery found during the search was much lower than the jewellery disclosed in the wealth tax return by observing as under:
"Further, in ITA 53/2021, pertaining to AY 2012-13, there were certain additional facts regarding the discovery of undisclosed jewellery which were dealt with by the learned ITAT in detail... The issue being canvassed in the aforementioned question has been dealt with by the learned ITAT and the relevant portion of the impugned order reads as under-
“8.11We have carefully considered the rival submissions and the relevant material and ratio of the orders and judgment relied by both the parties, at the very outset we note that undisputedly the quantum of jewellery declared in the wealth tax returns of the assessee and his family members was much higher, than the jewellery found during the course of search. CBDT Instruction dated 11-5-1994 provides that no seizure should be made in the search for the jewellery held by the ladies at 500 gms, girls at 250 gms and males at 100 gms each. Though the Instruction speaks of not seizing the same, the extended meaning of the same shows the intention that the jewellery is to be treated as explained one and is not to be treated as unexplained for the purpose of Income-tax Act. This instruction came to be considered by several Benches all over India in which it has been held that it would be relevant for the purposes of making addition as well. The Hon’ble Rajasthan High Court in the case CIT v. Kailash Chand Sharma 147 Taxman 376 has upheld this view. When this instruction is applied to the facts of the case, we observe that the possession of gold jewellery of 38,748.28gms, which is far less than declared jewellery of 46,634.842 gms it cannot be held to be unexplained.”
10.In our view of the finding of fact noted above, the conclusion arrived at by the learned ITAT does not warrant any interference. No question of law, much less a substantial question of law, has arisen for our consideration in the present appeals. Accordingly, the present appeals are dismissed along with the pending applications.” (emphasis supplied)
- The Delhi bench of the Tribunal in the case of Bawniet Kaur Punihani v. DCIT: ITA No.1925/Del/2022 (order dated 14.02.2024) held that while computing the shortfall/excess between the jewellery found and jewellery declared, jewellery declared by the entire family as a single unit has to be considered instead of respective quantities of jewellery declared by each of the family members. The relevant observation of the Tribunal is reproduced as under:
“ ...
15.The main plank of arguments of the I.d. Counsel is that all the family members of the Punihani are joint family members and, therefore, should be considered as one single unit. On perusal of the statements recorded from the family members of the assessees during search the family members have deposed that the jewellery found were either belonging to them or to their family members/relatives. This shows that all the family members comprising of 14 persons are from joint family staying together. We further observed that sister-in-law of Smt. Gurpreet Kaur who is an NRI occasionally coming to India also stays with them and her jewellery was also found in the lockers of the family members of the assessees. In the circumstances, the contentions of the assessees that the entire family of 14 persons should be considered as one single unit has got lot of force and deserves to be accepted. This view of ours is further fortified by the Third Member decision of the Pune Bench in the case of GC Bafna Vs. DCIT (19 ITD 115), wherein it has been held as under: ...”
- The Pune bench of the Tribunal in the case of G.C. Bafna v. DCIT: [2004] 90 ITD 115 (Pune)(TM) similarly held as under:
“ ...
32.We have considered the rival submissions and perused the facts on record. We find that vide letter dated 26th September, 1997, the assessee had brought to the notice of the learned CIT that the lady members of Bafna family had declared jewellery in their Wealth-tax returns filed for the assessment year 1982-83. This fact was not before the Assessing Officer. It was also pointed out that jewellery was purchased in subsequent period from disclosed sources of funds. There was an addition of jewellery also on account of lady members when they got married in the family. The submissions made before us now by the learned counsel with facts and figures were not before the Assessing Officer and accordingly, we restore this issue to the file of the Assessing Officer to re-adjudicate upon the same after giving an opportunity of being heard to the assessee. Same is the position with silver. The issue of gold jewellery and silver has to be considered in the context of different members of the family as a whole and accordingly we restore both the issues to the file of the Assessing Officer with direction that he should go through the details furnished before us in the paper book and referred to supra and readjudicate upon the issue after giving an opportunity of being heard to the assessee,..." (emphasis supplied)
- It has been held likewise by the Jaipur bench of the Tribunal in the case of Ajay Data v. ACIT: [2025] 171 taxmann.com 308 (Jaipur - Trib.).
Reliance in this regard is further placed on the Instruction No.1916 dated 11th May, 1994 issued by CBDT specifying the basic limits up to which the jewellery found would be treated as explained for tax purpose and consequently, the same could not be subjected to seizure. In the aforesaid Circular, Board has clarified that:
(i)In the case of an assessee subjected to wealth-tax, gold jewellery and ornaments found in excess of the gross weight declared in the wealth-tax return only needs to be seized [refer clause (i)].
(ii)Having regard to the status of the family, customs and practices of the community to which the family belongs, even larger quantity of jewellery may be treated as disclosed. [refer clause (iii)].
The aforesaid Instruction is squarely applicable to the facts of the present case inasmuch as the gross weight of jewellery declared by the assessee exceeds the gross weight of jewellery found during the course of search.
Reliance in this regard is placed on the following decisions wherein it has been held that no addition can be made where jewellery found during search stood declared in the wealth tax return filed by the assessee:
- Mahadev Prasad Agarwal v. CIT: [2005] 272 ITR 598 (Rajasthan HC)
- CIT v. Kailash Chand Sharma: [2005] 198 CTR 201(Raj. HC)
- CIT v. Vinod Danchand Ghodawat: [2001] 247 ITR 448 (Bombay HC)
- Sunita Gupta v. DCIT: 5295 and 5370/Del/2013 (Delhi –Trib.)
- Sh. Arvind Agarwal and Sh. Subhash Agarwal: I.T.A. Nos. 455, 277, 278 & 443/Ind/2013 (Indore)
- Ashok Kumar Kataria v. DCIT: [2002] 75 TTJ 392 (Jaipur – Trib.)
- Amar Natvarlal Shah v. ACIT: [1997] 57 TTJ 454 (Ahmedabad -Trib.)
17.Reliance in this regard is also placed on the following decisions, wherein the Courts have categorically held that no addition can be made on account of jewellery which is within the tolerable limit stipulated in the aforesaid CBDT Instruction:
- CIT v. Ratanlal Vyaparilal Jain: [2010] 2 taxmann.com 997 (Gujarat)
- CIT v. Satya Narain Patni: [2014] 46 taxmann.com 440 (Rajasthan)
- DCIT v. Smt. Sushila Singh: ITA No.3988/Del/2010 (Delhi Tribunal)
- Kirti Singh v. ACIT: [2023] 157 taxmann.com 298 (Delhi – Trib.)
- Mrs. Divya Devi v. ACIT: ITA No.6397/Del/2012 (Del. Trib.)
- Kiran Kumar Reddy v. DCIT: [2025] 176 taxmann.com 164 (Hyderabad – Trib.)
- ACIT v. Gopi Lal Mor: 21 SOT 29 (Jodhpur ITAT)
- ACIT v. Shri Jeramibhai B. Khokharia: ITA No.2613/Ahd/2009 (Ahmedabad Tribunal)
- N. Roja v. ACIT: [2020] 117 taxmann.com 90 (Cuttack – Trib.)
- ACIT v. Rameshchandra R. Patel: [2004] 89 ITD 203 (Ahd.)(TM)
- Amith Kumar Bethala v. DCIT: ITA No.2026/Bang/2018 (Bangalore Tribunal)
18.Further reliance is placed on the following decision of Jaipur bench of the Tribunal in the case of Ram Prakash Mahawar v. DCIT: [2020] 115 taxmann.com 241 (Jaipur – Trib.) wherein the Tribunal observed that the benefit of CBDT Instruction No.1916 shall be granted to the assessee over and above the quantity of declared jewellery. The Tribunal observed as under:
"...
2.6We have considered the rival submissions as well as the relevant materials available on record. The first issue is regarding the addition sustained by the Id. 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 AO 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 AO 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, a 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 AO 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. ..." (emphasis supplied)
19.The aforesaid decision was subsequently followed by Bangalore bench of the Tribunal in the case of Shri Avinash Aradhya v. DCIT: ITA No.1418/Bang/2024 (order dated 19.09.2024).
20.In that view of the matter, when considered on a holistic basis, the cumulative jewellery declared by the assessee, his wife (Smt. Roshni Passi) and his mother (Smt. Swarn Lata Passi), far exceeded the cumulative jewellery found from their possession during the course of search.
21.Accordingly, the addition made by the AO on account of alleged unaccounted jewellery is devoid of any merit. Further, the CIT(A) gave part relief by considering the jewellery declared by the assessee and his wife alone, however, failed to consider the jewellery declared by the mother who resided in same premises.
22.It is emphatically submitted that on considering the cumulative jewellery declared by the assessee, his wife (Smt. Roshni Passi) and his mother (Smt. Swarn Lata Passi) as elaborated above, no addition on account of unaccounted jewellery would survive.
Re: Rebuttal to finding/ allegation of AO
(i) Item-wise reconciliation of jewellery items not furnished
23.As regards the finding/ allegation of the assessing officer that the item-wise reconciliation of jewellery items was not furnished, it is respectfully submission that CBDT vide its instruction quoted above has clearly stated that once the gross weight of the jewellery declared is in excess of the jewellery found during search, then, the same shall be regarded as explained. Importantly, CBDT instruction, it is submitted, nowhere requires the assessee to demonstrate an item-wise reconciliation of jewellery. Such instruction requiring consideration of gross weight of jewellery declared rightly takes into consideration accepted customs/ practices of the jewellery of various family members getting mixed and the natural/ general tendency of getting the jewellery remade from time-to-time.
24.It is settled law that once the jewellery disclosed by the assessee and his family members far exceeds the jewellery physically found during the course of search (as substantiated above), the same could not be said to constitute undisclosed jewellery of the assessee on the ground that the description of some of the jewellery items could not be matched/reconciled, as held in the following decisions: - Smt. Krishna Wanti Batra v. ACIT: [2004] 85 TTJ 550 (Delhi -Trib.) Sunita Gupta v. DCIT: 5295 and 5370/Del/2013 (Delhi -Trib.) DCIT vs. Arjun Dass Kalwani: 101 ITD 337 (Jodh. - Trib.) Mrs. Nawaz Singhania v. DCIT: ITA No. 3979 (Mum.) of 2017
(ii) Weight of Diamonds embedded in jewellery:-
The AO while verifying reconciliation of jewellery items alleged that there are differences in diamond carat-age of jewellery as per records and the diamond carat-age as estimated by the approved valuer in the jewellery found during the search.
In this regard, it is respectfully submitted that the AO failed to appreciate the practical difficulty in estimating the weight of diamonds embedded in the jewellery as there is no scientific method which is available to arrive at the precise weight of diamonds so embedded in the jewellery. To put it simply, there is no scientific method by which the diamond caratage can be measured unless it is taken out from the jewellery item. Moreover, valuation by different valuers based on estimation and presumption may lead to different results. Accordingly, no adverse inference could have been drawn by the AO for sole reason of certain deficiencies in the weight of diamonds embedded in the jewellery.
(iii) Method of measuring Gross Weight of jewellery:-
While passing the assessment order, the AO refused to give credit for certain jewellery items out of jewellery declared by the assessee since there were minor differences in weight of few jewellery items as declared by the assessee and those found during search.
In this regard, it is respectfully submitted that it is a well known fact that due to the passage of time, small differences might occur in the weight of jewellery items due to various factors such as wear and tear, minor repairs and modifications etc. Such minor differences in weight, more often than not are bound to occur and lie beyond the control of the assessee. Accordingly, no adverse inference could have been drawn by the AO for this reason alone that there were minor differences in weight of jewellery articles.
(iv) Method of measuring Net Weight of jewellery:-
In the light of our aforesaid submissions on Diamond Caratage and Gross Weight, consequently, it may be appreciated that, when a same jewellery article/ item is valued by two different persons, certain differences are bound to occur in the net weight of the jewellery article/ item.
In view of the above, the findings/ allegations of the AO are wholly erroneous and unsustainable. In that view of the matter, there is no warrant for making any addition under section 69A of the Act. It is thus, respectfully prayed that the appeal filed by the assessee may kindly be allowed and the appeals by the Revenue may be dismissed.
In view of above submission, ld. AR requested for the deletion of the addition made and uphold by ld. CIT(A).
On the other hand, Ld. CIT DR vehemently supported the order of the AO and submits that during the course of search, person-wise, locker-wise, jewellery was found and inventoried by the search team which was valued in the presence of the family members of the assessee. The assessee never doubted the valuation done by the approved valuer at the time of search. Ld. CIT DR further submits that claim of the assessee of re-making of jewellery was without any supporting evidence, nor any material was found during the course of search in this regard. Ld. CIT DR placed reliance on the order of the AO in this respect and submits that all the family members of the assessee separately disclosed the jewellery owned by them in their wealth tax returns and thus the jewellery found from their possession are rightly treated as belong to them by the AO. It is further submitted that since some items are not matching with the jewellery declared in the wealth tax return, the AO has rightly made the addition which deserves to be confirmed. Regarding deletion made by Ld. CIT(A) by allowing credit as per CBDT Instruction No.1916 dated 11.05.1994, ld. CIT DR submits that the said instruction only speaks about the jewellery which should not be seized during the course of search, however, it never provides that jewellery to such extent be treated as explained. It is thus requested by Ld. CIT DR that Ld. CIT(A) has wrongly deleted the additions which deserves to be restored. She prayed accordingly.
In the re-joinder, Ld. AR submits that in majority of items, the description given in wealth tax return/ purchases invoices are matching and only in few items it was alleged as not matched which is mainly due to the fact that either the said item was re-make or due to the fact the weight of precious or semi-precious stones and the metal are taken on approximate basis by the approved valuer. Ld. AR further submits that in case of the jewellery only gross weight of total jewellery found vis-a-vis jewellery declared in wealth tax return/ purchased thereafter is to be considered and not the item-wise matching should be done as it is a normal practice that during the course of search, all the jewellery items found at various places were pooled together and then valued by the approved valuer thus, there is every possibility that one complete set got mixed with the other items and their description declared in the bill as well as in the wealth tax return be differ from the description given by the approved valuer. He thus, prayed that the addition so confirmed be deleted.
Heard the contentions of both the parties and perused the material available on record. In the instant case, the issue of dispute in these grounds of appeal between the parties is wither the jewellery owned by the entire family should be taken together for working of the unexplained jewellery, if any, or it should be considered person-wise separately in terms of the separate Panchama prepared for various places where the jewellery was found and possession of the respective family members vis-a-vis the declaration made by them in the wealth tax return and the subsequent purchases. During the course of hearing, Ld.AR was asked to file the copies of the statements relevant to the issue in hand i.e. the questions put by the search period regarding the ownership of jewellery which was submitted in the shape of the Paper Book by Ld.AR alongwith chart containing the respective question and answer thereof. The said table of the questions and respective answers given by various family members of the assessee including the assessee during the course of search and at the time of operation of the bank lockers as tabulated by Ld.AR is reproduced as under:-
| S.No. | Statement of | Statement recorded at | Date of statement | Relevant Extracts of Statement | Page No. of PB (Vol. II) |
|---|---|---|---|---|---|
| 1. Perhaps we have been declaring the value of most of our jewellery on its purchase price mentioned in the bills of purchase. During the years the price of gold, diamond and other precious stones has appreciated considerably which has not been captured in our books of accounts and therefore the value of jewellery declared in the ITRs remained on the lower side compared to the current valuation. 2. The valuation done by the approved valuer on 1.11.2018 seems to be on the higher side. Kindly note that both myself as well as my wife have regularly filed Wealth Tax returns till the last year when it was abolished." | |||||
| 2. | Sh. Nitin Passi | Locker No.200, Axis Bank, E-146, Saket, New Delhi-110017 | Statement u/s 132(4) Dated: 28.11.2018 | "Q.6 Please furnish a reply whether you have kept belongings/particulars of any other person in the locker mentioned above. Ans. There should not be any content or belongings of any person other than myself and my mother Mrs. Swara Lata Passi. Since we are in joint family, I cannot rule out the possibility of jewellery items related to other Passi family members kept in these lockers." | 723 – 724 (723) |
| 3. | Sh. Nitin Passi | Locker No.241, HDFC Bank, Khasra No. 619/21, Chhatarpur, New Delhi-110074 | Statement u/s 132(4) Dated: 24.12.2018 | "Q.1 Kindly identify yourself? Ans. Myself Mr. Nitin Passi, S/o Late Sh. HJ Kamal Passi, resident of A-18, Ansal Villas, Satbari, New Delhi, 110074. I am present my Driving License bearing no. DL 032017/0390009. On behalf of Sh. Dipin Passi/ Ms. Shilpa Passi, I am representing myself with a duly signed Power of Attorney for the purpose of operation of locker no. 241. The copy of power of attorney is being furnished. Q.2 The locker no. 241 at HDFC Bank, Khasra No. 619/21, Chhatarpur, New Delhi, 110074, in the name of Sh. Dipin Passi & Mrs. Shilpa Passi was operated in the present of two independent witness namely Sh. Saurabh Kesarwani and Sh. Vipin Dagar. Kindly acknowledge the same. Ans. Yes, it was operated in the presence of myself and two witnesses as mentioned above." | 775 – 776 (775) |
| 4. | Sh. Nitin Passi | Locker No.427, HDFC Bank, E-143, Saket, New Delhi-110017 | Statement u/s 132(4) Dated: 24.12.2018 | "Q.1 Kindly identify yourself? Ans. Myself Mr. Nitin Passi, S/o Late Sh. HJ Kamal Passi, resident of A-18, Ansal Villas, Satbari, New Delhi, 110074. I am present my Driving License bearing no. DL 032017/0390009. On behalf of Sh. Dipin Passi/ Ms. Shilpa Passi, I am representing myself with a duly signed Power of Attorney for the purpose of operation of locker no. 427. The copy of power of attorney is being furnished." | 777 – 778 (777) |
| S.No. | Statement of | Statement recorded at | Date of statement | Relevant Extracts of Statement | Page No. of PB (Vol. II) |
|---|---|---|---|---|---|
| 5. | Smt. Reshni Passi | Locker No.93, HDFC Bank, E-143, Saket, New Delhi-110017 | Statement u/s 132(4) Dated:04.12.2018 | "Q.6 Please furnish a reply whether you have kept belongings/particulars of any other person in the locker mentioned above. Ans. There should not be any content or belongings of any person other than myself and my husband Nitin Passi. Since we are in joint family, I cannot rule out the possibility of jewellery items related to other Passi family members kept in these lockers." | 740 – 745 (741) |
| 6. | Smt. Reshni Passi | Locker No.222, HDFC Bank, Khasra No. 619/21, Chhattarpur, New Delhi-110074 | Statement u/s 132(4) Dated: 22.11.2018 | "Q.6 Please furnish a reply whether you have kept belongings/particulars of any other person in the locker mentioned above. Ans. There should not be any content or belongings of any person other than myself and my husband Nitin Passi. Since we are in joint family, I cannot rule out the possibility of jewellery items related to other Passi family members kept in these lockers." | 733 – 736 (734) |
| 7. | Smt. Reshni Passi | Locker No.240, HDFC Bank, Khasra No. 619/21, Chhattarpur, New Delhi-110074 | Statement u/s 132(4) Dated: 22.11.2018 | "Q.6 Please furnish a reply whether you have kept belongings/particulars of any other person in the locker mentioned above. Ans. There should not be any content or belongings of any person other than myself and my husband Nitin Passi. Since we are in joint family, I cannot rule out the possibility of jewellery items related to other Passi family members kept in these lockers. Q.8 During the course of search operation on 22.11.2014 at your locker no. 240, HDFC Bank, Khasra No. 619/21, Chhattarpur, New Delhi, 110074, different jewellery items were found. The Govt approved value's jewellery valuation report is being given to you. Kindly acknowledge the same and furnish item wise purchase invoices with copy of bank statement showing the payment for purchase of these items. Please also specify whether the same bank account has been disclosed in your ITR and what is the source of income being reflected in the bank statement. Did that income was subjected to income tax during the concerned AY? Ans. Yes, I acknowledge the same. In support of our purchases we are furnishing following documents- 1. Copy of purchase invoices. 2. Copy of wealth tax return (AY 2015-16) of myself along with copy of valuation report dated 31.07.2014. (For FY 2013-14). I am also furnishing copy of wealth tax returns of Nitin Passi, Swarn Latu Passi and Late Sh HJ Komal Passi. (Attached as exhibit-1) Q.12 Some of items found in your locker no. 240, HDFC Bank, Khasra No. 619/21, Chhattarpur, New Delhi, 110074 during the search proceedings as on 22.11.2018 don't match | 737 – 739 (737 – 738) (739) |
| S.No. | Statement of | Statement recorded at | Date of statement | Relevant Extracts of Statement | Page No. of PB (Vol. II) |
|---|---|---|---|---|---|
| with your valuation report attached with WTR for AY 2015-16. Please acknowledge it and explain the reason behind it with supporting evidence. Ans. Yes I do acknowledge that, However, there so called unmatched items are duly reflected in WTRs of either Nalin Passi or Swarm Lata Passi/Late HJ Komal Passi. I have already furnished the purchase invoices of these jewellery items, the payment of which have been made account payee cheques and duly reflected in our records. Reconciliation with documentary evidence of the same will be provided on next date of the hearing. | |||||
| 8. | Smt. Swarm Lata Passi | Locker No.238, HDFC Bank, Khasra No. 619/21, Chhatarpur, New Delhi-110074 | Statement u/s 132(4) Dated:03.12.2018 | "Q.3 Are you assessed to Income-tax/Wealth Tax? If so, please indicate the particulars of return filed and also you're PAN. Please also furnish copy of you last filed Wealth Tax Return. Ans. I am a regular assessee to Income Tax and regularly filed my ITRs (PAN: AAHPP19728). I also filed wealth tax return up to AY 2015-16 after that there was no requirement to file wealth tax returns. I am furnishing copies of last filed wealth tax returns of myself (For AY 2015-16) and my husband Late Sh. H J Komal Passi (for AY 2014-15). Since my husband died in April 2015 therefore his WTR for AY 2015-16 couldn't be filed. (WTRs of Swarm Lata Passi and Late HJ Komal Passi enclosed as exhibit-1 to the statement) Q.6 Please furnish a reply whether you have kept belongings/particulars of any other person in the locker mentioned above. Ans. There should not be any content or belongings of any person other than myself and my husband Late HJ Komal Passi. Since we are in joint family, I cannot rule out the possibility of jewellery items related to other Passi family members kept in these lockers. | 755 - 757 (755) (756) |
| 9. | Smt. Swarm Lata Passi | Locker No.345, ICICI Bank, M-Block, Greater Kailash-I, New Delhi-110048 | Statement u/s 132(4) Dated: 28.11.2018 | "Q.6 Please furnish a reply whether you have kept belongings/particulars of any other person in the locker mentioned above. Ans. There should not be any content or belongings of any person other than myself and my husband Late Sh. H J Komal Passi. Since we are in joint family, I can not rule out the possibility of jewellery items related to other Passi family members kept in these lockers. | 753 - 754 |
| 10. | Smt. Swarm Lata Passi | Locker No.652, HDFC Bank, E-143, Saket, New Delhi-110017 | Statement u/s 132(4) Dated: 04.12.2018 | "Q.1 Are you assessed to Income-tax/Wealth Tax? If so, please indicate the particulars of return filed and also you're PAN. Please also furnish copy of you last filed Wealth Tax Return. Ans. I am a regular assessee to Income Tax and regularly filed my ITRs (PAN: AAHPP19728). I also filed wealth tax return up to AY 2015-16 after that there was no requirement to file wealth tax returns. I am furnishing copies of last filed wealth tax returns of myself (For AY 2015-16) and my husband Late Sh. H J Komal Passi (for AY 2014-15). Since my husband died in April 2015 therefore his WTR for AY 2015-16 couldn't be filed. (WTRs of Swarm Lata Passi and Late HJ Komal Passi enclosed as exhibit-1 to the statement) | 758 - 761 (758 - 759) |
| Q.6 Please furnish a reply whether you have kept belongings/particulars of any other person in the locker mentioned above. Ans. There should not be any content or belongings of any person other than myself and my husband Late Sh. H J Kamal Passi. Since we are in joint family, I cannot rule out the possibility of jewellery items related to other Passi family members kept in this locker. | |||||
| 11. | Smt. Shilpa Passi | Locker No.241, HDFC Bank, Khosra No 619/21, Chhattarpur, New Delhi-110074 | Statement u/s 132(4) Dated: 03.12.2018 | "Q.7 Please furnish a reply whether you have kept belongings/particulars of any other person in the locker mentioned above. Ans. There should not be any content or belongings of any person other than myself and my husband Dipin Passi. Since we are in joint family, I cannot rule out the possibility of jewellery items related to other Passi family members kept in these lockers." | 762 - 764 (762 - 763) |
| 12. | Smt. Shilpa Passi | Locker No.427, HDFC Bank, E-143, Saket, New Delhi-110017 | Statement u/s 132(4) Dated: 04.12.2018 | "Q.7 Please furnish a reply whether you have kept belongings/particulars of any other person in the locker mentioned above. Ans. There should not be any content or belongings of any person other than myself and my husband Dipin Passi. Since we are in joint family, I cannot rule out the possibility of jewellery items related to other Passi family members kept in these lockers." | 765 - 772 (765 - 766) |
| 13. | Smt. Shilpa Passi | Locker No.582, HDFC Bank, E-143, Saket, New Delhi-110017 | Statement u/s 132(4) Dated: 04.12.2018 | "Q.7 Please furnish a reply whether you have kept belongings/particulars of any other person in the locker mentioned above. Ans. There should not be any content or belongings of any person other than myself and my husband Dipin Passi. Since we are in joint family, I cannot rule out the possibility of jewellery items related to other Passi family members kept in these lockers." | 773 - 774 |
In addition, to the above, it may also be pertinent to note that even during the course of post-search assessment proceedings, it was repeatedly submitted before the assessing officer that since the members of the Passi family live as a joint family under the same roof, the jewellery of various family members get mixed up. Details of the relevant replies filed before the assessing officer, in the case of Sh. Nitin Passi, is tabulated as under:
From the perusal of the answer to each question as reproduced herein above, it is observed that in reply to the specific question whether jewellery found also belong to any other person, every family member has replied that since we are in joint family and therefore, cannot ruled out the possibility of jewellery related to other Passi family members kept with them or in the bank lockers. This reply was given by all the family members during the course of search operations at their residence as well as at the locker owned by them. This clearly shows that there was clear cut admission that jewellery related to the other family members might be available with them and therefore, the approach of the AO in considering the jewellery found in the hands of each individual separately to work out the unexplained jewellery, if any. In such circumstances, claim of the assessee to consider the total jewellery owned by the whole family should be accepted as against comparison of the jewellery found from the possession of each individual members with the jewellery declared by that members in its wealth tax returns and subsequent purchases.
In this respect, Ld.AR vide para 12 of his submission, has given a chart which is reproduced herein above according to which the total jewellery found from the possession all the family members and the bank lockers owned by them is having gross weight of 20217.130 Grams and net weight of 16579.140 Grams and diamonds/stones of 2282.682 Carats as against which the gross jewellery declared by the assessee, his wife Smt. Roshni Passi and his mother Smt. Swarn Lata Passi in their wealth tax return and subsequently purchased by them/offered for tax in the return as undisclosed return comes to 22,445.890 Grams gross weight, 18220.286 net weight and diamond/stones at 2999.870 Carats. From the above, it is clear that the gross weight of jewellery found from the possession of entire family, if taken together, is much higher than the jewellery physically found during the search and therefore, no addition could be made on account of unexplained jewellery. The Hon’ble Jurisdictional High Court in the case of PCIT vs Krishan Kumar Modi in ITA No.53/2021 vide para 9-10 confirming the order of ITAT, has made following observations:-
9.“Further, in ITA 53/2021, pertaining to AY 2012-13, there were certain additional facts regarding the discovery of undisclosed jewellery which were dealt with by the learned ITAT in detail. Before moving to the observations of the learned ITAT in this regard, it is necessary to highlight the additional question proposed to be framed by the Appellant-Revenue. The same reads as under:
“a. Whether ITAT has not erred in deleting the addition of Rs. 1,12,89,616/- on account of alleged unexplained jewellery found during the course of search, which has been confirmed n appeal by CIT(A) without appreciating that assessee was unable to provide an item wise reconciliation of jewellery to the extent of 6,716.700 grams (valued at Rs. 1,12,89,616) by the departmental valuer applying the rates prevailing on the date of search?
The issue being canvassed in the aforementioned question has been dealt with by the learned ITAT and the relevant portion of the impugned order reads as under-
“8.11We have carefully considered the rival submissions and the relevant material and ratio of the orders and judgment relied by both the parties, at the very outset we note that undisputedly the quantum of jewellery declared in the wealth tax returns of the assessee and his family members was much higher, than the jewellery found during the course of search. CBDT Instruction dated 11-5-1994 provides that no seizure should be made in the search for the jewellery held by the ladies at 500 gms, girls at 250 gms and males at 100 gms each. Though the Instruction speaks of not seizing the same, the extended meaning of the same shows the intention that the jewellery is to be treated as explained one and is not to be treated as unexplained for the purpose of Income-tax Act. This instruction came to be considered by several Benches all over India in which it has been held that it would be relevant for the purposes of making addition as well. The Hon'ble Rajasthan High Court in the case CIT v. Kailash Chand Sharma 147 Taxman 376 has upheld this view. When this instruction is applied to the facts of the case, we observe that the possession of gold jewellery of 38,748.28gms, which is far less than declared jewellery of 46,634.842 gms it cannot be held to be unexplained.”
10.In our view of the finding of fact noted above, the conclusion arrived at by the learned ITAT does not warrant any interference. No question of law, much less a substantial question of law, has arisen for our consideration in the present appeals. Accordingly, the present appeals are dismissed along with the pending applications.”
The Hon’ble High Court has held that when the quantum of jewellery declared in the wealth tax return by all the family members was much higher than the jewellery found during the course of search, no addition is required to be made. Similarly, Co-ordinate Bench of Delhi Tribunal in the case of Bawniet Kaur Punihani vs DCIT in ITA No.1925/Del/2022 vide order dated 14.02.2024 in para 15 has made the following observations:-
15.“The main plank of arguments of the Ld. Counsel is that all the family members of the Punihani are joint family members and, therefore, should be considered as one single unit. On perusal of the statements recorded from the family members of the assessees during search the family members have deposed that the jewellery found were either belonging to them or to their family members/relatives. This shows that all the family members comprising of 14 persons are from joint family staying together. We further observed that sister-in-law of Smt. Gurpreet Kaur who is an NRI occasionally coming to India also stays with them and her jewellery was also found in the lockers of the family members of the assessees. In the circumstances, the contentions of the assessee that the entire family of 14 persons should be considered as one single unit has got lot of force and deserves to be accepted. This view of ours is further fortified by the Third Member decision of the Pune Bench in the case of GC Bafna Vs. DCIT (19 ITD 115), wherein it has been held as under:
"32.We have considered the rival submissions and perused the facts on record. We find that vide letter dated 26th September, 1997, the assessee had brought to the notice of the Ld. CIT that the lady members of Bafna family had declared jewellery in their Wealth-tax returns filed for the AY 1982-83. This fact was not before the Assessing Officer. It was also pointed out that jewellery was purchased in subsequent period from disclosed sources of funds. There was an addition of jewellery also on account of lady members when they got married in the family. The submissions made before us now by the Ld. Counsel with facts and figures were not before the Assessing Officer and accordingly, we restore this issue to the file of the Assessing Officer to re-adjudicate upon the same after giving an opportunity of being heard to the assessee. Same is the position with silver. The issue of gold jewellery and silver has to be considered in the context of different members of the family as a whole and accordingly we restore both the issues to the file of the Assessing Officer with direction that he should go through the details furnished before us in the paper book and referred to supra and re-adjudicate upon the issue after giving an opportunity of being heard to the assessee."
It is further observed that the AO has doubted some of the items as not matching. It is a matter of common knowledge that during the course of search, jewellery found at various places have been pooled together at one place and thereafter their descriptions were noted and valued by the approved valuer. In this process, many times, the jewellery items of one particular set got mixed up with the other items of jewellery and therefore, without physical comparison, it is impossible to match them with their description as the bill or as declared in the wealth tax returns. Under these circumstances, best method to compute the undisclosed investment in jewellery is to consider the entire family as one unit and gross weight of the jewellery of entire family should be compared with the gross weight of total jewellery found during the course of search from various places belonging to various family members more particularly in case where they have categorically stated that the jewellery owned by other family member might have been available with them.
As observed above, if the gross jewellery declared by the entire family members is taken together and compared with the jewellery found during the search, there was no deficiency either in the gross weight nor in the weight of precious and semi-precious stones embedded therein. Under these circumstances, by respectfully, following the judgement of Hon’ble Jurisdictional High Court in the case of Krishna Kumar Modi (supra) and of the coordinate bench of ITAT Delhi, we hold that jewellery of the entire family should be compared with the total jewellery found and as observed above, in such case there was no excess jewellery was found as a result of search and therefore, the addition made towards unexplained jewellery in the hands of assessee is hereby, deleted. Accordingly, Grounds of appeal Nos. 1 to 2.3 of the assessee are allowed and Grounds of appeal Nos. 1 to 7 of the Revenue are dismissed.
Grounds of appeal Nos. 3 to 3.1 raised by the assessee are with respect to the confirmation of addition of INR 57,38,999/-towards cash found during the course of search treated as unexplained.
Before us, Ld.AR for the assessee made a detailed written submissions in this respect which reads as under:-
Re: Grounds of Appeal Nos.3 to 3.1 [Assessee's Appeal]
31.During the course of search, cash of Rs.70,80,400 was found at the residence of the assessee, out of which cash of Rs.65,00,000 was seized.
32.The assessee, on being enquired into about the source of such cash, in his statement recorded under section 132(4) of the Act, submitted as under:
"Q.48 An amount of Rs. 70,80,400/- was found in cash at your premises at A-18, Ansal Villas, Satbari, New delhi during rummaging on; please explain why such large amount of cash was kept with you?
I have been withdrawing cash from my HDFC Savings bank account every month for many years. This cash withdrawal is for my household expenses, sundry petty expenses, cash savings, lady of the house expenses (example kitty parties) as well as emergency cash savings for emergency needs like health, emergency travel etc. Over a period of time this cash has been accumulated from cash savings from these cash withdrawals, emergency cash, lady of the house kitty party (recently) and shaguns from sundry relatives on wife's recent birthday (23rd Oct 2018)."
33.The above general statement was given under high pressure circumstances and without consulting books of accounts / records. During the course of post search investigation proceedings, the assessee submitted complete reconciliation of cash found and the sources of cash, which constituted (i) cash in hand withdrawn by the assessee and his family members [Smt. Swarn Lata Passi (mother), Mr. Dipin Passi (brother)] and (ii) cash belonging to various business concern(s) as on 31.10.2018, which was kept in the possession of the assessee, and was duly supported by the ledger account and bank statements. Subsequently, the same was also reiterated during the course of assessment proceedings.
34.However, the AO, disregarding the submission of the assessee which was duly supported by evidence, granted relief of Rs.13,41,401 only, i.e. cash available with the assessee, and made addition of Rs.57,38,999 (Rs.70,80,400 - Rs.13,41,401) as unexplained cash under section 69A of the Act merely on the ground that the assessee, in the statement recorded under section 132(4) of the Act, had stated that the cash so found was out of cash withdrawals made by the assessee only and accordingly, the said cash belonged to the assessee and not to the aforementioned individual(s) and business concern(s). (Refer page 27 of assessment order)
35.On appeal, the CIT(A), upheld the addition made by the AO. (Refer page 22 of CIT(A) order)
36.In this regard, it is respectfully submitted that the assessee resides in a joint family alongwith his mother, Mrs Swarn lata Passi and brother, Mr Dipin Passi and his family. It is a matter of record that Passi family members used to withdraw substantial cash from their savings bank account(s) every month for meeting household expenses and for personal savings.
37.Further, the Lotus group consists of closely held private limited companies and partnership firms. The registered office of the Lotus group is situated at Farm No. 2, Forest Lane, Sultanpur, MG road, New Delhi, which is very thinly populated and is just on the outskirts of New Delhi and therefore, for the sake of safety, the cash is kept at residence of the management i.e. at Villa No. 18, Ansal Villa, Satbari, New Delhi.
38.Being the elder male member of the family, after the death of his father (Karta/ Mukhia), the assessee used to handle cash for the entire family and the business, that is why the cash was found from the bedroom of the assessee.
39.The cash found during the search belonged to various family members of the assessee and companies / Partnership firms / LLP etc. belonging to the assessee family. The detailed cash in hand each party wise was duly furnished during the course of assessment proceedings and is detailed hereunder:
S. No. Particulars Cash available as on 31.10.2018 (in Rs.) Relevant Page No. of Paper Book 1. Sh. Nitin Passi 13,41,401 Cash in hand as on 31.10.2018 as per Books of account 243 244 Bank statement for cash withdrawals 251 – 260 2. Smt. Swarn Lata Passi 20,15,458 Cash in hand as on 31.10.2018 as per Books of account 243 245 Bank statement for cash withdrawals 273 – 278 3. Sh. Dipin Passi 16,93,946 Cash in hand as on 31.10.2018 as per Books of account 243 246 Bank statement for cash withdrawals 261 – 272 4. Kanidi Biotech LLP 12,68,688 Cash in hand as on 31.10.2018 as per Books of account 243 247 5. Lotus Herbals Color Cosmetics 6,50,000 Cash in hand as on 31.10.2018 as per Books of account 243 248 Bank statement for cash withdrawals 279 – 371 6. Evershine Garments Pvt. Ltd. 84,547 Cash in hand as on 31.10.2018 as per Books of account 243 249 7. Shagun Syntex Pvt. Ltd. 34,183 Cash in hand as on 31.10.2018 as per Books of account 243 250 Total 70,88,223 40.In this regard, it is respectfully submitted that addition of unexplained cash was made merely on the basis of the so-called inconsistency in the stand of the assessee in his statement under section 132(4) of the Act and during the assessment proceedings. Both the lower authorities have failed to appreciate that the statement under section 132(4) of the Act was a generic statement recorded under high pressure circumstances and was based on limited recollection of memory of the assessee, without going through any books of accounts/ documentary records. However, later on during the course of post search investigation proceedings, the exact reconciliation of sources of cash was prepared and submitted to DDIT-Inv Wing. There is no contradiction in the stand of the assessee qua source of cash at all. In fact, at the most it can be said that the later reconciliation is extended version of what has been stated earlier under section 132(4) of the Act.
41.The sole basis of the addition is that the assessee could not explain the source of cash at the time of recording statement under section 132(4) of the Act, without appreciating that during post search investigation and assessment proceedings, the assessee had furnished detailed explanation supported by documentary evidences, which have been ignored/disregarded by the assessing officer without pointing any error.
Attention in this regard is invited to CBDT Instruction F. No. 286/2/2003 – IT [INV]-II dated 10.3.2003 wherein it has been clearly instructed that during the course of the search & seizure and survey operations, focus should be on collection of evidence on undisclosed income and no attempt should be made to obtain confession only. Further, assessing officers have been instructed to rely upon the evidences/ materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders.
The Courts have in the following cases held that admission in a statement recorded under section 132(4) of the Act cannot be the foundation of assessment; admission may be an important piece of evidence but cannot be held to be conclusive:
- Pullangode Rubber Produce Co. Ltd. V. State of Kerala: 91 ITR 18 (SC)
- Sri Krishna V. Kurukshetra University, AIR 1976 SC 376
- Abdul Qayume V. CIT: 184 ITR 404 (All.)
- Federal Bank Ltd. V. The State of Kerala: AIR 1995 Kerala 62
- Basant Singh V. Janki Singh: AIR 1967 SC 341
- Bharat General Reinsurance Co. Ltd.: 81 ITR 303 (Del)
- Satinder Kumar (HUF) V. CIT: 106 ITR 64 (HP)
- DCIT V. Sreeni Printers: 67 STC 279 (Ker.)
- Krishan Lal Shiv Chand Rai V. CIT: 88 ITR 293 (P&H)
- Indo Java & Co. V. IAC: 30 ITD 161(SB)
In fact, it is a trite law that no addition can be made solely on the basis of a statement recorded during search without corroborative evidence. In this regard, reliance is placed on the decision of Hon'ble jurisdictional High Court in the case of PCIT v. Pavitra Realcon Pvt. Ltd.: ITA Nos.579, 587 & 590/2018 (judgment dated 29.05.2024) wherein the High Court observed as under:
"...20. However, it is an undisputed fact that the statement recorded under Section 132(4) of the Act has better evidentiary value but it is also a settled position of law that addition cannot be sustained merely on the basis of the statement. There has to be some material corroborating the content of the statements.
21.In the case of Kailashben Manharlal Chokshi v. CIT1, the Gujarat High Court held that the additions could not be made only on the basis of admissions made by the assessee, in the absence of any corroborative material. The relevant paragraph no. 26 of the said decision has been reproduced hereinbelow: -
22.Further, the position with respect to whether a statement recorded under Section 132(4) of the Act could be a standalone basis for making assessment was clarified by this Court in the case of CIT v. Harjeev Aggarwal2, wherein, it was held that merely because an admission has been made by the assessee during the search operation, the same could not be used to make additions in the absence of any evidence to corroborate the same. The relevant paragraph of the said decision is extracted herein below:
23.In our opinion, the Act does not contemplate computing of undisclosed income solely on the basis of statements made during a search. However, these statements do constitute information, and if they relate to the evidence or material found during the search, they can be used in proceedings under the Act, as specified under Section 132(4) of the Act. Nonetheless, such statements alone, without any other material discovered during the search which would corroborate said statements, do not grant the AO the authority to make an assessment.
To the similar effect are the following decisions:
CIT v. Harjeev Aggarwal: [2016] 70 taxmann.com 95 (Delhi) CIT v. Ashok Kumar Soni: [2008] 166 Taxman 371 (Rajasthan)
- Chetnaben J. Shah v. ITO: [2017] 79 taxmann.com 328 (Gujarat) Kailashben Manharlal Chokshi v. CIT: [2008] 174 Taxman 166 (Gujarat) CIT v. Naresh Kumar Aggarwal: [2014] 369 ITR 171 (Andhra Pradesh) Vineet Gupta v. ACIT: ITA No.1515/Del/2013 (Delhi Tribunal) Sh. Madan Lal Gupta v. ACIT: ITA Nos.579 & 580/JPR/2023 (Jaipur Tribunal) Dr. Purvesh Mansukhlal Shah v. ITO: ITA No.2952/Ahd/2016 (Ahmedabad Tibunal)
Specific reliance is also placed on the decision of the Chandigarh Bench of the tribunal in the case of Surinder Pal Verma V. ACIT: 89 ITD 129 (Chd.) (TM), wherein it was held assessee is entitled to modify/ clarify statements after verifying the records at a later point of time. The relevant observations are as under:
"24.It is well known fact that confessional statements made during the search are often vulnerable on the ground that the persons giving such statements remain under a great mental stress and strain. They also do not have the availability of relevant details, documents and books of accountant the time of giving such statements in the absence of which precise information relating to the mode of utilization of such income and the year of such investment cannot be correctly furnished. The assessees are, therefore, entitled to modify/clarify the statements after verifying the necessary details from the relevant records at a later point of time. Smt. Neelam Verma had consistently taken the same stand from the stage of filing of the return that the sum of Rs. 1 lakh has been utilized in construction of these three SCOs."
Further reliance is placed on the decision of Delhi bench of the Tribunal in the case of DCIT v. Creamy Foods Ltd.: ITA No.2179/Del/2022 (order dated 06.12.2023) wherein it was observed that cash found during search can be explained out of cash available with different group companies/ concerns. The relevant extract of the decision is hereby reproduced as under:
"14.We have carefully perused the orders of the authorities below. The cash in hand, as per the books of account on the date of search of the group concerns can be understood from the following chart:
15.From the above, cash belonging to Triaksh Education Pvt Ltd and Bharat Bhushan Infratech Pvt Ltd. cannot be considered to be found from the same premises, as these premises do not function/operate from the same premises. Therefore, availability of cash to the extent of Rs. 2,45,262/- cannot be considered in the hands of the assessee. Therefore, to this extent, we have no hesitation to sustain the addition, though the ld. CIT(A) has sustained the addition to the extent of Rs. 12,79,368/-, which on the facts of the case, we direct the Assessing Officer to restrict to Rs. 2,45,262/-.
Ld. AR thus, requested to delete the addition made.
On the other hand, Ld. CIT DR for the Revenue submits that during the course of search in the statements recorded u/s 132(4), assessee has never stated that the cash found from his possession also relates to other family/group companies. For this, Ld. CIT DR drew our attention to page 26 of the assessment order wherein reply of the assessee is reproduced and submits that AO has duly considered the submissions and thereafter, made the addition. Accordingly, she prayed for the confirmation of the same.
Heard the contentions of both the parties and perused the material available on record. The claim of the assessee is that the cash found from possession also included the cash belonged to various family members and group companies which was kept with the assessee for safety purposes. The immediate source of the same was explained as recorded in the books of account of all the respective entities as on the date of search and in support the necessary copies of the cash book were also filed which are duly supported by the bank withdrawals etc. The relevant copies of the documents are placed at page 243 onwards of the Paper Book filed before us.
After considering the overall facts and the circumstances of the case, we find that the AO by observing that assessee has not made this claim during the course of search, had denied the same without pointing out any defects in the details so filed. It is also a matter of fact that AO has not alleged that the cash of the equivalent amount as claimed by the assessee belonging to other family members, were found from their possessions. Looking to the entirety of the facts and circumstances of the case, we are of the considered view that the cash found at INR 70,80,400/- is matching with the total cash available as on date of search in the hands of the various entities as tabulated herein below:-
Since there was no deficit in cash as per the cash books of the various entities with the cash found from the possession of the assessee therefore, no addition is required to be made when such cash books have not been doubted by the AO. Accordingly, addition of INR 57,38,999/- as confirmed by Ld. CIT(A) after allowing the credit of cash as per cash book of the assessee is hereby, deleted. Grounds of appeal Nos. 3 to 3.1 of the assessee are thus, allowed.
Ground of appeal No.4 raised by the assessee is with respect of application of section 115BBE of the Act confirmed u/s 69A of the Act.
Since we have already deleted the additions made u/s 69A of the Act therefore, Ground of appeal No.4 raised by the assessee became infructuous thus, dismissed.
Ground of appeal No.5 raised by the assessee is with respect to levy of interest u/s 234B & 234C which are consequential in nature, we order accordingly.
The remaining Grounds of appeal Nos. 8 & 10 raised by the revenue are with respect to the deletion of addition of INR 4,67,000/-made towards the foreign exchange purchases by the assessee held as out of undisclosed sources.
Heard the contentions of both the parties and perused the material available on record. It is observed that Ld. CIT(A) has deleted the addition after verifying the evidences with respect to the purchases of foreign currency of INR 4,67,400/- of 5000 Pounds of Great Britain for which the assessee has filed the copy of bills and the copy of bank statements explaining the immediate source as out of cash withdrawal from the bank accounts.
Under these circumstances, we find no error in the order of Ld. CIT(A) which is hereby, confirmed. Accordingly, Grounds of appeal Nos. 8 to 10 raised by the assessee are dismissed.
In the result, appeal of the assessee is partly allowed and the appeal of the Revenue is dismissed.
ITA No.2796 & 2807/Del/2022 [AY 2019-20] Roshni Passi
These are the cross appeals filed by both the parties. The assessee has raised following Grounds of appeal:-
“1.That on the fact and circumstances of the case and in law, the assessment order dated 28.09.2021 passed under section 143(3) of the Income Tax Act, 1961 ("the Act") is without jurisdiction, illegal, bad in law and is liable to be quashed.
2.Without prejudice, that the Commissioner of Income Tax (Appeals) erred on facts and in law in confirming addition to the extent of Rs.56,89,895 made under section 69A of the Act on account of alleged unexplained jewellery found during the course of search.
2.1.That the Commissioner of Income Tax (Appeals) erred on facts and in law in not appreciating that gross weight of jewellery declared by the appellant and his family members exceeded the gross weight of jewellery found during the course of search and thus, no addition on this account was called for.
2.2.That the Commissioner of Income Tax (Appeals) erred on facts and in law in not considering the reconciliation provided by the appellant during the course of assessment proceedings, which was duly supported by documentary evidences.
2.3.Without prejudice, that the Commissioner of Income Tax (Appeals) erred in adopting incorrect value of jewellery for the purpose of valuation/ addition.
3.That the Commissioner of Income Tax (Appeals) erred in upholding levy of higher rate of tax under section 115BBE on additions confirmed under section 69A of the Act.
4.That the Commissioner of Income Tax (Appeals) erred in not directing deletion of interest charged under sections 234B and 2340 of the Act.
The appellant craves leave to add, alter, amend or vary from the aforesaid grounds of appeal at or before the time of hearing.”
The Revenue has raised following Grounds of appeal:-
1.“The Ld. CIT (A) has erred on facts and in law by allowing the appeal of the assessee while restricting the addition of Rs. 1,65,58,044/- to Rs. 56,89,985, made on account of unexplained jewellery found on the premises of the assessee.
2.The Ld. CIT (A) has erred on facts and in law, by not appreciating the fact that the jewellery declared by the assessee in VDIS scheme was not only materially different in appearance and form, but also in caratage and weight to the ones seized during the search operation.
3.The Ld. CIT(A) has erred on facts and in law by not appreciating the fact that the jewellery shown in the invoices submitted by the assessee is substantially different to the ones which has been added as his unexplained jewellery u/s 69A of the Income Tax Act, 1961.
4.The Ld. CIT(A) has erred on facts and in law in allowing the appeal of the assessee by ignoring the fact that the assessee failed to provide any proof of remodeling or alteration of the jewellery in question during the assessment proceedings despite being accorded multiple opportunities.
5.The Ld. CIT(A) has erred on facts and in law in allowing the appeal of the assessee by considering the value of jewelry items encrusted with diamonds based on gross gram weightage of Gold only, ignoring the fact that the value of diamonds predominantly depends on the cartage, color, cut and clarity and valuation of it cannot be equated with the valuation of Gold items.
6.The Ld. CIT(A) has erred on facts and in law in allowing the appeal of the assessee by ignoring the fact that a composite valuation of the jewelry item with diamond encrusted on it based on gross weightage will not yield the actual value of such jewelry items, since it does not cover the value of diamond encrusted on such jewelry items.
7.The Ld. CIT(A) has erred on facts and in law in allowing the appeal of the assessee by ignoring the fact that in the valuation report of jewelry items prepared at the time of search, value of diamonds encrusted on the Gold Jewellery items were separately mentioned in the valuation report by the Valuer.
8.(a) The order of the Ld. Commissioner of Income Tax (Appeals)is erroneous and not tenable in law and on facts.
(b)The appellant craves to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”
Ground of appeal Nos.1 to 7 raised by the Revenue and Ground of appeal Nos. 1 to 2.3 raised by the assessee are with respect to the addition on account of jewellery where 50% of the total unexplained jewellery was made in the hands of husband of the assessee Shri Nitin Passi.
This issue is identical to the facts and issue decided by us in the case of husband of the assessee Shri Nitin Passi in Revenue’s appeal in ITA No.2806/Del/2022 and assessee’s appeal in ITA No. 2795/Del/2022 for AY 2019-20 wherein we have hold that the jewellery belonged to various family members should be considered as a whole family to work out the unexplained jewellery and deleted the additions made. The assessee being part of the same family and the jewellery owned by her is also taken into consideration for comparison with the total jewellery found during the search thus the observations made in the case of Shri Nitin Passi in ITA Nos. 2806/Del/2022 (revenue appeal) and 2795/Del/2022 (assessee appeal) are Mutatis Mutandis applied to the facts of this case also. Thus, by following the same observations, the additions uphold by ld. CIT(A) in the hands of the assessee are also deleted. Grounds of appeal Nos. 1 to 2.3 raised by the assessee are accordingly, allowed and Ground of appeal Nos. 1 to 7 raised by the Revenue are dismissed.
Ground of appeal No.3 raised by the assessee is with respect to the action of AO in invoking the provisions of 115BBE on the additions made u/s 69A of the Act.
Since we have already deleted the addition made u/s 69A of the Act therefore, Ground of appeal No.3 raised by the assessee become infructuous thus, dismissed.
In the result, appeal of the assessee is partly allowed and appeal of the Revenue is dismissed.
ITA No.2808/Del/2022 [AY 2019-20] [Revenue’s appeal]
[Smt. Swarn Lata Passi]
The Revenue has raised following grounds of appeal:-
1.“The Ld. CIT (A) has erred on facts and in law by allowing the appeal of the assessee by deleting the addition of Rs. 1,63,69,629/- made on account of unexplained jewellery found on the premises of the assessee.
2.The Ld. CIT (A) has erred on facts and in law, by not appreciating the fact that the jewellery declared by the assessee in the invoices was not only materially different in appearance and form, but also in caratage and weight to the ones seized during the search operation.
3.The Ld. CIT(A) has erred on facts and in law by deleting the addition, ignoring the fact that the assessee had failed to furnish any documentary proof including any invoice/bills about the source of the jewellery item no. 12 of the jewellery item seized from her HDFC locker no. 238.
4.The Ld. CIT(A) has erred on facts and in law in allowing the appeal of the assessee by ignoring the fact that the assessee failed to provide any proof of remodeling or alteration of the jewellery in question during the assessment proceedings despite being accorded multiple opportunities.
5.The Ld. CIT(A) has erred on facts and in law in allowing the appeal of the assessee by considering the value of jewelry items encrusted with diamonds based on gross gram weightage of Gold only, ignoring the fact that the value of diamonds predominantly depends on the caratage, color, cut and clarity and valuation of it cannot be equated with the valuation of Gold items.
6.The Ld. CIT(A) has erred on facts and in law in allowing the appeal of the assessee by ignoring the fact that a composite valuation of the jewelry item with diamond encrusted on it based on gross weightage will not yield the actual value of such jewelry items, since it does not cover the value of diamond encrusted on such jewelry items.
7.The Ld. CIT(A) has erred on facts and in law in allowing the appeal of the assessee by ignoring the fact that in the valuation report of jewelry items prepared at the time of search, value of diamonds encrusted on the Gold Jewellery items were separately mentioned in the valuation report by the Valuer.
8.(a) The order of the Ld. Commissioner of Income Tax (Appeals)is erroneous and not tenable in law and on facts.
(b)The appellant craves to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”
All Grounds of appeal taken by the Revenue is with respect to addition of INR 1,63,69,629/- treating the jewellery as unexplained. This issue is identical to the facts and issue decided by us in the case of son of the assessee Shri Nitin Passi in Revenue’s appeal in ITA No.2806/Del/2022 and assessee’s appeal in 2795/Del/2022 for AY 2019-20 wherein we have hold that the jewellery belonged to various family members should be considered as a whole to work out the unexplained jewellery and deleted the additions made. The assessee being part of the same family and the jewellery owned by her is also taken into consideration for comparison with the total jewellery found during the search thus the observations made in the case of Shri Nitin Passi in ITA Nos. 2806/Del/2022 (revenue appeal) and 2795/Del/2022 (assessee appeal) are Mutatis Mutandis applied to the facts of this case also. Thus, by following the same observations, all Grounds of appeal raised by the Revenue in this appeal are dismissed.
In the result, appeal of the Revenue is dismissed.
In the final result, all appeals of the respective assessee in ITA Nos. 2795 to 2796/Del/2022 for Assessment Year 2019-20 are partly allowed and appeals of the Revenue in ITA Nos. 2806 to 2808/Del/2022 for Assessment Year 2019-20 are dismissed.