Merely because jewellery is converted into solid gold / gold biscuits, it cannot be presumed to be unexplained or in excess of permissible limit – ITAT
In a recent judgment, ITAT Ranchi has held that merely because the jewellery has been converted into solid gold / gold biscuits, it cannot be presumed to be unexplained or in excess of the permissible limit. So long as jewellery quantity remains within 400 grams, no addition can be made and no adverse view can be taken under the Income-tax Act.
ABCAUS Case Law Citation:
4957 (2025) (12) abcaus.in ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A) in sustaining the addition of value of jewellery and bullion found during the search.
A search and seizure operation under section 132(1) of the Income-tax Act, 1961 (the Act) was conducted on the premises of a Business Group. Simultaneously, survey proceedings under section 133A of the Act were also carried out at certain business premises of the group.
The case of the assessee was covered under search and survey. During the search, the locker maintained with a Bank was opened and statements of the husband of the assessee were recorded under section 131(1A) of the Act.
Jewellery found during the search was inventoried and valued. As per the inventory, 300 grams of gold biscuits and 2000 grams of silver were found. During the course of examination, specific questions were put to the husband of the assessee regarding disclosure of jewellery in the returns of income.
It was noted by the Assessing Officer that, as per the returns and balance sheet the assessee had disclosed substantial jewellery and bullion, whereas the jewellery and bullion found during the search were of much less value.
The assessee explained that the jewellery held by her had been converted into solid gold form and kept in the locker for safety purposes and remaining jewellery, bullion etc. kept with her mother-in-law at her native place.
However, the Assessing Officer held that the assessee failed to satisfactorily explain the source of acquisition of the gold biscuits and silver articles and accordingly treated the value of 300 grams of gold and 2000 grams of silver as unexplained investment and added the same to the total income of the assessee.
Before the Tribunal, the assessee submitted that as per the CBDT guidelines and settled legal position, a married woman is permitted to hold up to 400 grams of gold jewellery without any adverse inference. It was submitted that in the present case, the assessee was found in possession of only 300 grams of gold, which was well within the permissible limit. It was further submitted that the silver articles found were also of negligible value and within reasonable limits.
It was further explained that, for safety and preservation, the assessee had converted her jewellery into solid gold form and kept the same in the bank locker, which cannot be a ground for making an addition.
The Tribunal observed that the total gold found in the possession of the assessee during the search was 300 grams, which was within the permissible limit of 400 grams prescribed for a married woman. Merely because the jewellery was converted into solid gold form, no adverse inference can be drawn. Similarly, the quantity of silver found was also within reasonable limits.
The Tribunal noted that CBDT Instruction No. 1916 dated 11.05.1994 provides that a married woman is entitled to possess up to 400 grams of gold without any adverse inference. The said gold may be held either in the form of jewellery or in any other form, including gold biscuits,
The Tribunal opined that since the Instruction does not restrict the form in which gold is kept. Merely because the jewellery has been converted into solid gold / gold biscuits, it cannot be presumed to be unexplained or in excess of the permissible limit. So long as the quantity remains within 400 grams, no addition can be made and no adverse view can be taken under the Income-tax Act.
Accordingly, the Tribunal directed the Assessing Officer to delete the entire addition made on account of gold and silver. Accordingly, the appeal filed by the assessee was allowed.
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