Ram Avtar Gupta Vs ITO (ITAT Delhi)
Delhi ITAT: ₹2 Crore Jewellery Capital Addition Deleted – Marriage Gifts & Ancestral Jewellery Sufficiently Explained; AO Proceeded on Incorrect Facts
The assessee, a government contractor, had shown an increase in capital which included ₹2 crore representing gold jewellery and other precious items. The AO treated the amount as unexplained under Section 68, principally because the assessee could not produce old wealth-tax returns or adequate contemporaneous documentary evidence.
The assessee explained that the jewellery represented gifts received from family members at the time of his own marriage in 1982 and ancestral jewellery inherited on the death of his mother. Significantly, however, the AO proceeded on the incorrect factual assumption that the jewellery had been received at the time of the assessee’s son’s marriage. The assessee had also obtained a valuation report, but claimed that it could not be uploaded because the portal had been closed/there were technical difficulties.
On the legal argument that Section 68 applies only to cash credits and therefore cannot apply to jewellery introduced as capital, the ITAT rejected the assessee’s contention. It held that the expression “any sum found credited in the books” is wide enough to cover the value of jewellery introduced as capital accretion; there is no specific exemption merely because capital is introduced through jewellery or precious items rather than cash.
However, on merits, the ITAT deleted the entire ₹2 crore addition. It found that the assessee’s explanation stood on a convincing footing and that the AO had proceeded on misquoted facts and non-application of mind. The evidence showed that the assessee had consistently explained the jewellery as received at his own marriage and as inherited ancestral property. The Tribunal also took note of the attempted filing of the jeweller’s valuation report and accepted the explanation regarding non-availability of wealth-tax returns.
Accordingly, the Tribunal held that the assessee had justified the source of the ₹2 crore capital accretion, set aside the orders of the lower authorities and directed deletion of the entire addition. The assessee’s appeal was allowed.
Key takeaway: The ruling is particularly important because it draws a distinction between applicability of Section 68 and satisfactory explanation of the credit. The ITAT held that jewellery capitalisation can in principle fall within Section 68, but once the source and surrounding circumstances are satisfactorily explained, an addition cannot survive merely because decades-old wealth-tax returns or documentary evidence of marriage gifts are unavailable.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal filed by the Assessee is directed against the order of Ld. Commissioner of Income Tax (Appeals)/NFAC, New Delhi, dated 23.10.2025 arising out of assessment order dated 09.02.2019 passed by Income Tax Officer, Ward-44(8), Delhi, u/s 143(3) of the Income Tax Act, 1961, for the Assessment Year 2017-18. The word ‘Act’ herein this order would mean Income Tax Act, 1961.
