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Source of gold jewellery with or without diamond studded will presumed to be explained in Income Tax matter provided total weight of jewellery is within the threshold as prescribed by CBDT’s (Central Board of Direct Taxes) instruction.
Relying on this, Delhi bench of Income Tax Appellate Tribunal (ITAT) disallowed the addition to taxable income of an assessee. As per CBDT instructions No. 1916 dated May 11, 1994, in course of IT Search under section 132, gold jewellery to the extent of 500 grams per married lady, 250 grams per unmarried lady and 100 grams per male member of the family, need not be seized by tax authorities.
Search and seizure operation
Income Tax Department conducted search and seizure operation at the residential as well as business/office premises of the assessee. During that, jewelry worth over ₹66 lakh was found, of which, for jewellery worth over ₹10 lakh, the assessee could not produce any documentary evidence. Weight of this gold attributable to the possession of the assessee was about 295.1 gram and there was also a diamond of 16.5 carats in that jewellery.
Assessing officer added the worth of this jewelry, i.e., over ₹10 lakh to the income of the assessee. Apart from this, Assessing Officer (AO) also added a sum of ₹50,000 on account of the cash possessed but unexplained of its sources. Accordingly, AO determined the income of the assessee at around ₹15.76 lakh as for the assessment year 2013-14 as against the returned income of around ₹3.91 lakh and ₹1.20 lakh towards agricultural income.
The matter reached at the first level of appeal where Commissioner of Income Tax (Appeal) directed the AP to modify the addition to the extent of giving relief to the value relating to 100 grams and confirmed the addition in respect of the balance of jewellery. There was no change in addition for cash of ₹50,000. Aggrieved by the entire order, the assessee appealed before ITAT.
Going through all the arguments and facts presented, the bench noted that AO himself mentioned that the gold worth over ₹10 lakh is attributable to wife if the assessee. According to the CBDT instructions in case of a married woman 500 g is the threshold limit and Gujarat High Court had said that to such an extent of jewelry, the source shall be presumed to have been explained.
Keeping the High Court ruling and order by ITAT in another matter, in a recent ruling, the bench said, “We are of the considered opinion that pursuant to the CBDT instructions, the wife of the assessee is entitled to keep 500 g of jewellery the source of which is a demoted have been explained and, therefore, no addition could be made are sustained.”
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