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The Central Board of Direct Taxes (CBDT) issued Instruction No. 1916 on May 11, 1994, providing guidelines for the seizure of jewellery during income-tax raids and searches. These guidelines ensure that taxpayers' rights are protected while maintaining the integrity of the tax collection system. This article will examine the key provisions of Instruction No. 1916, clarifying when jewellery may or may not be seized, and the implications for taxpayers.

Background: Income-Tax Searches and Seizures:

Income-tax raids, formally referred to as search and seizure operations, are a crucial mechanism through which the Income Tax Department aims to uncover undeclared assets, black money, and other forms of tax evasion. However, in many cases, taxpayers own jewellery that may have been legally acquired or inherited over time. Instruction No. 1916 addresses this concern by laying out specific exemptions and thresholds that safeguard the jewellery from seizure during such operations.

Exemptions for Seizure of Jewellery under Instruction No. 1916:

To strike a balance between detecting tax evasion and respecting the cultural and family traditions of holding jewellery, Instruction No. 1916 sets out specific guidelines for when jewellery should not be seized. As per these guidelines:

• For Married Women: Jewellery up to a limit of 500 grams per married woman is not liable to be seized.
• For Unmarried Women: Jewellery up to a limit of 250 grams per unmarried woman is not liable to be seized.
• For Male Members of the Family: Jewellery up to 100 grams per male member of the family is exempt from seizure.

These guidelines are applicable regardless of whether the taxpayer is able to explain the source of the jewellery. This exemption is intended to acknowledge the customary holding of jewellery in Indian households.

Clarifications on the Seizure of Jewellery:

While the guidelines provide exemptions for a certain quantum of jewellery, it is important to note that this is not a blanket exemption. The CBDT instruction clarifies the following:

• Excess Jewellery: Any quantity of jewellery held beyond the prescribed limits can be seized, but only if the taxpayer fails to furnish an explanation or documentary evidence regarding its acquisition.
• Documented Jewellery: If the taxpayer provides legitimate documentation showing the source of funds or inheritance of the jewellery, even jewellery exceeding the prescribed limits may not be seized.
• Family Heirlooms and Religious Sentiment: Jewellery of significant cultural or religious importance, such as family heirlooms, can be considered while making seizure decisions, provided that the taxpayer can establish its origins.

Applicability of Instruction No. 1916:

Instruction No. 1916 applies to the search operations conducted under the provisions of the Income Tax Act, 1961. The instruction's underlying intention is to avoid unnecessary harassment of taxpayers during such operations, particularly when dealing with household jewellery, which often has cultural significance in India.

Legal Status of Instruction No. 1916:

It is important to note that this instruction is a guideline and not a part of statutory law. However, it is followed by the Income Tax Department during search and seizure operations to prevent excessive hardship. Courts have, in many instances, upheld this instruction while delivering judgments concerning the seizure of jewellery, thus reinforcing its practical relevance.

Implications for Taxpayers:

Understanding Instruction No. 1916 can help taxpayers protect their household jewellery during income-tax raids. If individuals or families possess jewellery within the prescribed limits, they need not fear its seizure. Additionally, maintaining proper documentation regarding the purchase or inheritance of jewellery can serve as a safeguard during such operations.

Conclusion:

Instruction No. 1916, issued by the CBDT, is a critical guideline that provides relief to taxpayers by limiting the arbitrary seizure of jewellery during income-tax raids. By specifying clear thresholds and emphasizing the importance of documentation, the instruction protects cultural and traditional practices in Indian households while ensuring compliance with tax laws. Taxpayers would do well to familiarize themselves with these guidelines to avoid undue hardship in the event of a tax raid or search operation.

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Disclaimer:

The information provided in this article is for general informational purposes only and does not constitute legal, tax, or professional advice. Readers are advised to consult with a qualified tax advisor or legal professional for specific advice tailored to their individual circumstances, particularly regarding reassessment proceedings and claiming refunds. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the content of this article.