COMMISSIONER OF INCOME TAX Vs. KAILASH CHAND SHARMA

JUDGEMENT

(1.) IN this appeal, the following sub stantial questions of law have been framed at the time of admission :

(2.) WE have heard the learned Counsel for the parties on these questions.

(3.) THE subject -matter of the appeal relates to assessment of block years 1988 -89 to 1998 -99 which took place pursuant to search and seizure operations under Section 132 of the Act which were carried out on 12th Nov., 1997 at the residential premises of the assessee at Moti Doongri, Jaipur. As the dispute in this appeal relates to the additions made by the AO in respect of jewellery weighing 1435 gms. found at the time of search and in possession of the assessee and his family members at his residential premises as well as from the bank locker of Smt. Sarita Devi, wife and Smt. Tara Devi, mother of the assessee and on account of entries in certain loose papers found from the assessee, the AO after allowing the credit of the jewellery declared by the ladies in their respective WT returns weighing 794.15 gms. has treated the remaining jewellery weighing 640.85 gms. as unexplained jewellery in the hands of the assessee and added its value amounting to Rs. 2,68,600 as value of unexplained Investment in jewellery. On first appeal, the CIT(A) after giving benefit of CBDT Instructions dt. 11th May, 1994, and in view of the decision of Hon'ble Karnataka High Court in the case of Smt. Pati Devi v. ITO : [1999]240ITR727(KAR) , has held that the appellant and his family members are entitled for further exemption of gold jewellery of 450 gms. In this order, it was held that the jewellery to the extent mentioned in the Board's instructions dt. 11th May, 1994 should be considered as exempted as the family members were entitled to exemption of gold jewellery of 450 gms. by excluding for each male member 100 gms. and unmarried lady 250 gms. which was not held to be undisclosed investment and its value was reduced as in addition to income in the block assessment period. However, the remaining 190.85 gms. of jewellery and ornaments were held to be undisclosed investment and addition to that extent were retained as income from undisclosed sources. On appeal, the Tribunal found the explanation submitted by the assessee about the acquisition of the jewellery of gold and silver found and seized from possession of the assessee and Smt. Tara Devi and wife Smt. Sarita Devi to be acceptable and deleted the entire addition. The two ladies have been wealth -tax assessees upto asst. yr. 1985 -86 only and had declared the jewellery and ornaments upto that time in their WT returns. Later on, they received some gold ornaments on the occasion of marriage of brother of Smt. Sarita Devi, wife of the assessee and partly acquired out of ladies' own savings from rental income. It was also submitted that some petty gifts were received from in -laws at the time of engagement. It was also stated that some silver coins are generally received on customary occasions from other members of family and friends. With this explanation, it was also pleaded that in view of the circular issued on 11th May, 1994, i.e., exemption of 500 gms. for each married lady, 250 gms. for unmarried woman and 100 gms. for each male member should be granted by treating the same to be duly explained. It was also stated that in any case their family is hereditary Mahant family and therefore, gold and silver found is not in excess of family status.