The tax department carried out a search and seizure operation in the premises of a taxpayer as a part of a wider search operation for a corporate taxpayer group. During the course of search, gold jewellery of which some were fitted with diamonds, was found in the possession of the taxpayer. As per the valuation exercise carried out by the tax officer, the jewellery was valued at Rs 4.43 lakh. Further, after four days, in yet another search carried out at the bank where the taxpayer had her locker, gold jewellery of which some were fitted with diamonds, weighing 723.100 gms was found and valued later by the tax officer at Rs 20.72 lakh. Thus, as a result of the search, total jewellery worth Rs 25.16 lakh were found in the taxpayer's possession.
During the course of hearings, the tax officer found out that the taxpayer could explain the source of acquisition of jewellery worth only Rs 1.07 lakh, which was purchased out of withdrawals from the bank account. Hence, the tax officer treated the balance jewellery worth Rs 24.09 lakh as acquired by the taxpayer from undisclosed sources and was added to her income for that year as such.
At the first level of appeal, the appellate authority confirmed the addition made by the tax officer and did not give any relief to the taxpayer.
Before the tax tribunal, the taxpayer submitted representations made before the first appellate authority. She submitted that some jewellery items belonged to her mother and, hence, are ancestral in nature. Some other items were received as gift during her marriage from friends, family and relatives. Some other items were purchased by her family at the time of her marriage as a part of normal Hindu tradition. Some smaller items were received by her children as a token of love at their time of birth and birthday functions. The taxpayer further submitted that in normal Hindu tradition, it is customary to give gold jewellery at various occasions/ events especially to children and ladies. Keeping in view the large size of her family and the good friends circle combined with good financial standing of her family, it was normal to receive gold items at various functions and parties.
Further, the taxpayer submitted that CBDT's instruction dated May 11, 1994, directs tax officers conducting a search, to not seize jewellery and ornaments found during the course of search of varying quantities specified in the instructions, depending upon the marital status and gender of a person searched.
The CBDT has directed that in the case of jewellery for a taxpayer who is not assessed under 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.
The tribunal observed that the taxpayer's family consisted of five members, which was the taxpayer, her mother-in-law, husband and one daughter and son each. Assigning the amount of jewellery as per the above circular, the amount of jewellery permissible for the taxpayer's family worked out to 1,450 gms. Thus, the Tribunal noted that the jewellery found in possession of the taxpayer is within the normal limits, which as per CBDT circular is not to be seized during search proceedings. The tribunal allowed the taxpayer's appeal and deleted the addition made by the tax officer on the grounds that the jewellery possessed by the taxpayer is reasonable.
The writer is a Sebi-registered investment advisor
