Income Tax

CBDT Instruction 1916 Jewellery relief is applicable to additions also. This is held by ITAT Delhi taking the pre-dominant view of various High Courts

CBDT Instruction 1916 dated 11-05-1994 cbdt-instruction-1916 Jewellery relief is applicable to additions also. This is held by ITAT Delhi taking the pre-dominant view of various High Courts

ABCAUS Case Law Citation:
932 2016 (05) ITAT

Assessment Year : 2010-11

Brief Facts of the Case:
The assessee was subjected to a search action u/s 132(1) at his residential premises. During the course of search, apart from cash and other documents, total jewellery weighing 2327.6 gms was found from the assessee and his family members. The assessee in response to question no. 2 in the statement of recorded during the course of search, submitted that jewellery belonged to himself, his mother, his son, his wife and daughter-in-law. However, the the assessee could substantiate jewellery belonging to his family members by means of any wealth tax the AO made addition for the entire value of jewellery found during the course of search.

On appeal, CIT(A) deleted the additions made on account of the jewellery belonging to the assessee’s son and daughter-in-law which was found from their exclusive bed room and locker. Further he allowed the benefit of CBDT Instruction No.1916 dated 11.5.94 and gave deduction to the tune of 500 gms each for the assessee’s wife and mother and 100 gms for the assessee. Thus the total addition was restricted to 136.90 gms

The Revenue contested the order of the CIT(A) and contended that such an Instruction is relevant only for seizure at the time of search and hence cannot be applied in the context of addition

ITAT Observed that as per As per this CBDT Instruction No. 1916 dated 10-05-1994, no seizure of jewellery can be made upto 500 gms belonging to a married lady, 250 gms. belonging to unmarried girls and 100 gms belonging to males.

However the Tribunal noted that the predominant view of the various High Court allowed such benefits to additions only, as under:

Madras High Court held that the Instruction No.1916 issued by the Board cannot be considered for making addition on account of unexplained investment.
The Instruction was held to be applicable in the context of making addition u/s 69A/69B by the Rajasthan High Court i
Karnataka High Court held that CBDT Instruction dated 11 May, 1994 directing the authorities not to seize specified quantities of gold jewellery applies qua the addition as well. 
The Gujarat High Court  held that Instruction No.1916 can be safely applied in presuming that the source to the extent of jewellery stated in the Circular stands explained

Excerpts from ITAT Judgment:

We do not directly fall under jurisdiction of any of the above High Courts holding for or against the applicability of this Instruction in the context of making addition as well. Thus, it is apparent that the predominant view of the Hon’ble High Courts is in favour of applying the mandate of Instruction in treating the explanation of jewellery as justified. Going with the mandate of the Hon’ble Rajasthan High Court, Hon’ble Karnataka High Court and Hon’ble Gujarat High Court, we hold that the ld. CIT(A) was justified in treating the jewellery weighing 1100 gms as explained out of total jewellery of 1236.80 gms.

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