CBDT Instruction 1916 Does Not Conclude Excess Jewellery Dispute: ITAT Jodhpur

Bharat Kumar Parakh Vs ACIT (ITAT Jodhpur)

Jewellery Addition Cannot Be Sustained Without Examining Valuation Reports and Invoices: ITAT Jodhpur Orders Fresh Verification
Valuation Reports and Purchase Invoices Require Proper Examination

The Income Tax Appellate Tribunal, Jodhpur Bench, restored a ₹47,23,844 addition under Section 69A relating to gold jewellery, precious stones and silver to the jurisdictional Assessing Officer for fresh examination. The Tribunal found that the authorities had not adequately examined the assessee’s valuation reports, purchase invoices and explanation concerning family holdings.

The Bench comprising Judicial Member Amit Shukla and Accountant Member Girish Agrawal directed verification of the documentary evidence, the reasonableness of the family’s holdings and possible overlap with income offered in group settlement proceedings. It expressly left the merits open.

Background of the Dispute

A search under Section 132 was conducted on 19 February 2019 at premises connected with the Rajlaxmi Group, including the assessee’s residence. Gold jewellery, precious stones and silver articles were found at his residence and bank locker.

The valuables attributed to these premises were valued at ₹79,58,594. The Assessing Officer accepted 950 grams of gold jewellery, valued at ₹32,34,750, considering CBDT Instruction No. 1916, family composition, customary practices and judicial precedent.

The remaining ₹47,23,844 was treated as unexplained under Section 69A and subjected to tax under Section 115BBE. The assessment determined total income at ₹72,17,560 against returned income of ₹24,93,720.

Assessee Relied on Earlier Valuation Reports and Invoices

The assessee maintained that the valuables belonged to family members and were supported by valuation reports dated 17 June 2005 issued by a Government-approved registered valuer, together with purchase invoices.

According to the submissions, the valuation reports recorded 4,066.65 grams of gold jewellery and 24.67 kilograms of silver. Tax invoices separately evidenced purchases of 712.06 grams of gold jewellery and 15.99 kilograms of silver.

The assessee also explained that jewellery and precious stones had been received as stridhan and gifts on marriages, anniversaries, births and other customary occasions. The family’s status and accumulation of valuables over time were cited in support.

CIT(A) Rejected Reports for Want of Wealth-Tax Details

The Commissioner (Appeals) confirmed the addition. The valuation reports were rejected because the assessee had not demonstrated whether the jewellery had been disclosed in wealth-tax returns.

The appellate authority also considered the precedents relied upon distinguishable and held that the source of the excess valuables remained unsubstantiated.

Before the Tribunal, the assessee argued that the valuation reports constituted independent evidence and that purchase invoices required examination on their own merits. It was also submitted that wealth tax had been abolished from Assessment Year 2016-17, and no wealth-tax return was required for the assessment year under consideration.

Tribunal Finds Documentary Evidence Was Not Examined

The Tribunal observed that an addition under Section 69A depends on the absence of an explanation or an explanation found unsatisfactory. Such a conclusion must follow proper consideration of the explanation and supporting material.

The assessment order did not discuss the valuation reports or invoices referred to in the assessee’s submissions. It also recorded no specific query concerning precious stones or silver.

Likewise, the Commissioner (Appeals) had not examined the invoices’ dates, parties, quantities or connection with the valuables found. The Tribunal noted that rejecting the valuation reports solely for want of wealth-tax returns was insufficient. Whether the jewellery appeared in earlier wealth-tax returns remained a matter for verification.

Acceptance of 950 Grams Did Not Resolve the Balance

The Tribunal held that accepting 950 grams of gold jewellery by reference to CBDT Instruction No. 1916 did not settle the treatment of the remaining valuables.

The assessee’s explanation also rested on documentary evidence, family status and customs. The reasonableness of the holdings therefore required factual examination, including consideration of the judicial decisions cited concerning jewellery and silver.

Settlement Proceedings and Double Taxation Also Require Verification

The assessee further submitted that the Rajlaxmi Group had offered approximately ₹63.36 crore as additional income in settlement proceedings arising from the same search.

It was claimed that the disputed valuables or their value were covered by that disclosure. The Tribunal directed the Assessing Officer to verify this contention and decide accordingly to avoid taxing the same income twice.

Limited Remand: No Outright Deletion

The Assessing Officer must verify the genuineness and relevance of the reports and invoices, check for overlapping quantities and claims by other family members, and examine the family’s holdings and settlement disclosures.

The assessee must furnish supporting evidence, while the officer must provide a reasonable opportunity of hearing.

The appeal was allowed for statistical purposes. The Tribunal neither deleted the addition outright nor expressed a final view on its merits. Grounds concerning Section 234B interest and initiation of Section 271AAB penalty were treated as consequential.

Cases Discussed

• Kushal Jain Vs DCIT, ITA No. 835/Jodh/2025, 07/08/2026 (ITAT Jodhpur). Relied upon by the assessee concerning an addition arising from the same Rajlaxmi Group search which was said to be covered by income offered in settlement proceedings.
• Preeti Singh Vs ACIT, [2023] 156 taxmann.com 485 (ITAT Delhi). Cited by the assessee for deletion of a Section 69A jewellery addition where the ornaments were explained as gifts received on customary family occasions.
• Chandra Pal Vs ACIT, [2023] 156 taxmann.com 472 (ITAT Delhi). Cited by the assessee concerning jewellery explained through family gifts and income disclosed in earlier years.
• Ram Prakash Mahawar Vs DCIT, ITA No. 918/JP/2019, 20/02/2020 (ITAT Jaipur). Relied upon by the assessee concerning silver holdings and the principle that documented jewellery acquisitions require independent consideration beyond the quantity contemplated under CBDT Instruction No. 1916.
• Vibhu Aggarwal Vs DCIT, [2018] 93 taxmann.com 275 (ITAT Delhi). Cited by the assessee to support consideration of a wealthy family’s status and customary jewellery gifts when assessing excess holdings.
• CIT Vs Satya Narain Patni, [2014] 46 taxmann.com 440 (Rajasthan High Court). Relied upon by the Assessing Officer while accepting 950 grams of gold jewellery with reference to CBDT Instruction No. 1916.
• Ashok Chaddha Vs ITO, [2011] 14 taxmann.com 57; ITA No. 274/2011; 27/07/2011 (Delhi High Court). Relied upon by the assessee concerning jewellery accumulated through customary gifts and family circumstances.
• Jai Kumar Jain Vs ACIT, [2007] 11 SOT 61 (JP.)(URO) (ITAT Jaipur). Cited by the assessee regarding the reasonableness of silver holdings considering family size and status; the CIT(A) distinguished the decision on its facts.

FULL TEXT OF THE ORDER OF ITAT JODHPUR

This appeal filed by assessee is directed against the order of ld. Commissioner of Income Tax (Appeals), Jaipur-5 vide DIN & Order No. ITBA/APL/S/250/2024-25/1070814671(1) dated 02.12.2024 arising from assessment order passed by ld. Assessing Officer under section 143(3) r.w.s. 153B(1)(b) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) dated 22.06.2021 for Assessment Year 2019-20.

2. The grounds of appeal raised by the assessee are as under:

1. On the facts and in the circumstances of the appellant’s case and in law, the ld. Commissioner of Income Tax (Appeals) erred in upholding the addition of Rs. 47,23,844/- u/s 69A r.w.s 115BBE of the Income Tax Act, 1961 [hereafter referred as “the Act”] made by the ld. Assessing Officer in the impugned assessment order passed u/s 143(3) r.w.s 153B(1)(b) of the Act dated 22.06.2021.

2. On the facts and in the circumstances of the appellant’s case and in law, the ld. Commissioner of Income Tax (Appeals) erred in not quashing the impugned assessment order wherein the Assessing Officer has made addition of jewellery (Silver) found during the course of search & seizure action to the extent of Rs 47,23,844/- disregarding the detailed submission of the appellant, which is in gross violation of principles of natural justice.

3. On the facts and in the circumstances of the appellant’s case and in law, the ld. Commissioner of Income Tax (Appeals) erred in not quashing the impugned assessment order wherein the Assessing Officer has made addition of jewellery (silver) found during the course of search & seizure action even though the same remained explained backed by Government approved Registered Valuer, tax invoices, etc.

4. On the facts and in the circumstances of the appellant’s case and in law, the ld. Commissioner of Income Tax (Appeals) erred in upholding the addition of silver found during the course of search & seizure proceedings without considering the status and standing of the family.

5. On the facts and in the circumstances of the appellant’s case and in law, the ld. Commissioner of Income Tax (Appeals) erred in upholding the levy of interest u/s 234B amounting to Rs. 10,02,618/-.

6. On the facts and in the circumstances of the appellant’s case and in law, the ld. Commissioner of Income Tax (Appeals) erred in upholding the initiation of penalty u/s 271AAB of the Income Tax Act, 1961.

3. Brief facts of the case are that assessee is an individual. Return of income was filed on 22.08.2019, reporting total income at Rs. 24,93,720/-. A search and seizure action u/s 132(1) was carried out on 19.02.2019, at various premises of Rajlaxmi Group, Jodhpur. Assessee belongs to this group. His residence at 85 Amar Nagar Pal Road Jodhpur was also covered under the search action. Consequent to the search, jurisdiction over assessee was transferred to Central Circle-2 Jodhpur by order u/s 127 of Pr. CIT (Central) Jaipur dated 29.12.2020. Case was selected for compulsory scrutiny. Notice u/s 143(2) was issued on 13.03.2021 and notice u/s 142(1) was issued on 10.04.2021. Assessee filed replies on 23.04.2021 and 16.06.2021. Assessment was completed on 22.06.2021 determining total income at Rs. 72,17,560/-.

3.1. During the search, following valuables were found:

i. gold jewellery weighing 263.477 gms valued at Rs. 8,97,136/-, precious stones of 5.10 Ct. valued at Rs. 76,500/- and silver articles weighing 0.549 kg valued at Rs. 22,618/- from residence of assessee;

ii. gold jewellery weighing 1999.143 gms valued at Rs. 68,04,622/-, precious stones of 562.50 Ct. valued at Rs. 22,500/- and silver articles weighing 3.282 kg valued at Rs. 1,35,218/- from locker no. 10 of assessee at ICICI Bank Pal Road Jodhpur; and

iii. total valuables thus found from premises of assessee amounted to Rs. 79,58,594/-.

4. Ld. AO recorded that jewellery found from possession of parents of assessee namely, Paras Mal Parakh and Jethi Devi Parakh as per annexure JF-II was not added to income of assessee. This was on the basis of jewellery inventory and submission of assessee. Ld. AO further recorded that vide notice u/s 142(1) dated 10.04.2021 assessee was asked to explain source of gold jewellery found at residence and in locker. Assessee filed reply on 16.06.2021. Ld. AO took note of the family of assessee comprising assessee himself his wife his son and daughter.

4.1. Considering CBDT Instruction No. 1916 dated 11.05.1994, tradition in Hindu culture and decision of jurisdictional High Court in CIT v. Satya Narain Patni [2014] taxmann.com 440 (Raj), ld. AO found 950 gms of gold jewellery valued at Rs. 32,34,750/- acceptable. However ld. AO held that assessee failed to produce documentary evidence in support of remaining valuables found from residence and locker amounting to Rs. 47,23,844/-. This is the balance of Rs. 79,58,594/- left after allowing Rs. 32,34,750/-. Remaining valuables were accordingly treated as unexplained u/s 69A and added to total income. Ld. AO directed that it be taxed as per section 115BBE. Aggrieved, assessee went in appeal before ld. CIT(A).

5. During the hearing before the first appellate authority, assessee submitted that jewellery and ornaments found during search belonged to family members as under:

5.1 It was submitted that entire jewellery and ornaments stood reconciled with valuation reports dated 17.06.2005 of Government approved Registered Valuer Shri Patel Umesh Kantilal bearing registration no. CAT. VIII-118-2004-05 and tax invoices for acquisition of jewellery and ornaments. Summary of the same as filed is reproduced below:

5.2 It was further submitted that valuation reports record gold jewellery and ornaments of 4066.65 gms and silver of 24.67 kg. Tax invoices evidence purchase of 712.06 gms of gold jewellery and ornaments and 15.99 kg of silver. Assessee also submitted that most of the jewellery and precious stones belong to female members and were received as ‘stridhan’ and as gifts on various occasions such as marriage, anniversaries, house warming and birth of children. Status of family was also pleaded. Assessee relied on various judicial precedents and prayed for deletion of addition.

5.3 Ld. CIT(A) did not accept valuation reports dated 17.06.2005 on the ground that assessee had not stated whether such jewellery was shown in wealth tax return. It was held that in absence of wealth tax return authenticity of valuation report was not proved and that merely submitting such report was meaningless. Judicial precedents cited were held distinguishable on facts. It was noted that in Jai Kumar Jain jewellery was offered in VDIS and in Ram Prakash Mahawar 50% of silver was accepted as explained. Other decisions were held to relate to jewellery explained after considering CBDT Instruction No. 1916. Ld. CIT(A) noted that ld. AO had already allowed 950 gms of gold jewellery on the basis of the Instruction. It was held that assessee was unable to substantiate procurement and source of the excess jewellery and silver with documentary evidence. The addition was confirmed and the appeal was dismissed. Aggrieved, assessee is in appeal before the Tribunal.

6. Before us, ld. Counsel for the assessee submitted that valuables found from residence and locker of assessee comprising gold jewellery, precious stones and silver belonged to family members and that their source stood explained. Valuation reports dated 17.06.2005 record gold jewellery of 4066.65 gms and silver of 24.67 kg. Tax invoices for 712.06 gms of gold jewellery and ornaments and 15.99 kg of silver were also furnished. Ld. Counsel submitted that ld. CIT(A) discarded valuation reports solely because assessee did not demonstrate that jewellery was reflected in wealth tax return. Wealth-tax Act stood abolished with effect from AY 2016-17 and no wealth tax return was required for AY 2019-20. Absence of such return cannot be read as evidence against assessee. Valuation report of Government approved Registered Valuer is independent and contemporaneous third party evidence. Its value is not extinguished merely because it was not referred in a wealth tax return. Tax invoices are primary evidence of acquisition independent of wealth tax compliance. Ld. CIT(A) has not recorded any adverse finding on genuineness of these invoices. Ld. Counsel submitted that finding of ld. CIT(A) that explanation is unsupported by documentary evidence does not correctly appreciate material on record.

6.1 Ld. Counsel submitted that jewellery and precious stones were received as ‘stridhan’ and as gifts on marriages and other occasions and that silver formed part of customary holdings of family accumulated over years. Reliance was placed on following decisions:

i. Jai Kumar Jain v. ACIT [2007] 11 SOT 61 (JP.)(URO) wherein silver of 16.895 kg was held reasonable looking to size and status of family of assessee;

ii. Ram Prakash Mahawar v. DCIT ITA No. 918/JP/2019 (Jaipur Bench) wherein Tribunal found no error in order of ld. CIT(A) treating 50% of silver items valued at Rs. 1,33,650/- as reasonable holding considering status and standing of family;

iii. Preeti Singh v. ACIT [2023] 156 taxmann.com 485 (Delhi-Trib.) wherein addition u/s 69A on account of 227 gms jewellery found in bank locker was deleted as jewellery was gifted on various occasions such as marriage and birth of children;

iv. Chandra Pal v. ACIT [2023] 156 taxmann.com 472 (Delhi-Trib.) wherein addition u/s 69A on account of excess jewellery was deleted as assessee had shown sufficient income in returns of preceding years and jewellery was received on several occasions from relatives;

v. Ashok Chaddha v. ITO [2011] 14 taxmann.com 57 (Delhi) of Hon’ble Delhi High Court for the proposition that no addition u/s 69A is called for where jewellery stands explained by wealthy status of family and receipt from relatives on several occasions; and

vi. Vibhu Aggarwal v. DCIT [2018] 93 taxmann.com 275 (Delhi-Trib.) wherein excess jewellery was held reasonable as assessee belonged to a wealthy family and jewellery was received on occasions from relatives.

6.2 Ld. Counsel further submitted that Rajlaxmi Group had filed settlement application before Income Tax Settlement Commission on 26.12.2019 pursuant to the search of 19.02.2019. Additional income of approximately Rs. 63.36 crores was offered therein. According to ld. Counsel, this additional income encompasses transactions or amounts forming subject matter of impugned addition. Income already offered and taxed in hands of group entities or persons cannot be taxed again in hands of assessee. Reliance was placed on decision of this Tribunal in Kushal Jain v. DCIT ITA No. 835/Jodh/2025 order dated 07.08.2026 arising from same search. In that case addition of Rs. 25,000/- in hands of assessee was held to be part of additional income offered by M/s Rajlakshmi Industries in settlement application. Since the application had been acted upon by Interim Board, the addition was deleted. Ld. Counsel submitted that impugned addition is independently liable to be deleted to the extent corresponding income has been offered and dealt with in settlement proceedings.

6.3 Ld. Counsel further submitted that levy of interest u/s 234B and initiation of penalty u/s 271AAB are consequential to the quantum addition.

7. We have heard rival submissions and perused material placed on record. Issue before us is narrow. Gold jewellery to the extent of 950 gms valued at Rs. 32,34,750/- found during search has been accepted as explained by ld. AO. What remains in dispute is addition of Rs. 47,23,844/- on account of balance gold jewellery, precious stones and silver found from residence and locker of assessee. Section 69A reads as under:

“Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the market value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.”

[Emphasis supplied by us by bold and underline]

7.1 Plain reading shows that addition u/s 69A rests on absence of explanation or an explanation which is not satisfactory. Opinion of ld. AO on this aspect has to be formed after due consideration of explanation offered and evidence furnished by assessee.

7.2 Ld. AO records that notice u/s 142(1) dated 10.04.2021 asked assessee to explain source of gold jewellery found at residence and in locker. Assessment order records no query specific to precious stones or silver. Ld. AO concluded that assessee failed to produce documentary evidence in support of remaining valuables. Assessment order does not discuss valuation reports dated 17.06.2005 or tax invoices which as per submission reproduced by ld. CIT(A) were enclosed by assessee as Annexure 2 and Annexure 3 with reply filed before ld. AO. Assessment order is also silent on contents of reply dated 16.06.2021 as regards these valuables.

7.3 Ld. CIT(A) noted that valuation report of 2005 was furnished but did not accept it for want of wealth tax return. Order of ld. CIT(A) is silent on tax invoices for 712.06 gms of gold jewellery and ornaments and 15.99 kg of silver which find mention in the submission reproduced in the same order. It contains no examination of these invoices viz. dates, parties, quantity and nexus with valuables found. It also does not show that any remand report was called from ld. AO on this aspect.

7.4 We find that ld. CIT(A) discarded valuation reports dated 17.06.2005 solely on the ground that assessee did not state whether jewellery was shown in wealth-tax return. It is submitted that Wealth-tax Act stood abolished with effect from AY 2016-17 and no wealth tax return was required for year under consideration. Absence of such return cannot by itself be a ground to reject valuation report of a Government approved Registered Valuer. Whether jewellery was reflected in any earlier wealth tax return is a matter of verification. We also find an assumption in the order of ld. CIT(A) that stands in conflict with the record. Ld. CIT(A) holds that explanation is unsupported by documentary evidence. The written submission reproduced in the same order refers to valuation reports at Annexure 2 and tax invoices at Annexure 3. This conflict cannot be resolved without verification of valuation reports and invoices.

7.5 Ld. CIT(A) held that possession of jewellery to the extent specified in CBDT Instruction No. 1916 stands explained and that ld. AO had rightly allowed 950 gms of gold jewellery. This does not conclude the matter for balance valuables. Explanation of assessee does not rest on the Instruction alone. It rests also on documentary evidence and on status and customs of family. Reasonableness of holding is a question of fact to be examined with reference to quantity found and status of family. Decisions cited by ld. Counsel viz. Jai Kumar Jain and Ram Prakash Mahawar (supra) deal with silver specifically. Ld. CIT(A) held precedents cited to be distinguishable but did so by noting limited features of two decisions. Facts of other decisions were not examined against facts of assessee.

8. In view of the above, we find it appropriate to restore the issue of addition of Rs. 47,23,844/- to the file of ld. Jurisdictional Assessing Officer (JAO) for limited purposes. Ld. JAO shall decide the issue afresh after considering the following:

i. tax invoices for 712.06 gms of gold jewellery and ornaments and 15.99 kg of silver and valuation reports dated 17.06.2005 recording gold jewellery of 4066.65 gms and silver of 24.67 kg. Ld. JAO shall verify their genuineness and whether they relate to gold jewellery and silver found from residence and locker of assessee. Ld. JAO shall also verify whether quantity as per invoices is independent of or overlaps with quantity recorded by valuer and whether same documents are claimed by other family members so that same quantity is not counted twice;

ii. reasonableness of holding of gold jewellery in excess of 950 gms and of precious stones and silver by the family considering its size and status along with decisions cited before us; and

iii. whether valuables found or their value of Rs. 47,23,844/- forms part of additional income offered by Rajlaxmi Group in settlement application and dealt with in settlement proceedings. If so ld. JAO shall decide accordingly so as to avoid taxing same income twice.

8.1 Assessee shall furnish all evidences in support of its claim before ld. JAO and shall cooperate in the proceedings without seeking unnecessary adjournments. Ld. JAO shall grant reasonable opportunity of being heard to assessee before passing the order. Ld. JAO is directed to decide the issue in accordance with law.

8.2 We clarify that we have not expressed any opinion on merits of the addition. All contentions of both sides are left open for consideration by ld. JAO. Accordingly, grounds 1 to 4 are allowed for statistical purposes.

8.3 Grounds 5 and 6 relating to levy of interest u/s 234B and initiation of penalty u/s 271AAB are consequential in nature and are therefore not adjudicated upon separately at this stage.

9. In the result, appeal of the assessee is allowed for statistical purposes.

Order pronounced in terms of Proviso to Rule 34(4) of Income Tax

(Appellate Tribunal) Rules, 1963 on 03 November, 2026