Avinash Aradhya Vs DCIT (ITAT Bangalore)
Conclusion: Addition made by AO on unexplained jewellery under section 69A was not justified as considering the amount of income declared by the family members of assessee and the family status, there was no gold available with assessee which could be termed as from unexplained source of income.
Held: During the course of search of assessee’s bank lockers, gold weighing 5213.78 grams was found. Out of this, 1511.65 grams were seized by the search team because they were unexplained. Assessee submitted that gold jewelry was his wife’s and mother’s stree dhan and he already disclosed a substantial amount of jewelry in his income tax return and his wife’s income tax return. Assessee also cited CBDT Instruction No. 1916, dated 11th May 1994, which permits family members to hold specific quantities of gold: 500 grams for each married female, 250 grams for each unmarried female, and 100 grams for each male member. However, AO rejected the submission and added Rs. 44,77,752 to the assessee’s total income under section 69A. CIT(A) confirmed the addition, referring to a Press Release dated 01.12.2016, which clarified that the CBDT Instruction No. 1916 did not provide a blanket exemption for all gold jewelry found during searches. Instead, it applied only in specific circumstances and for reasonable quantities. Assessee challenged CIT(A) order before the Bangalore Bench of ITAT arguing that 1450 grams of gold should not be considered unexplained as it fell within the permissible limits of CBDT Instruction No. 1916. Assessee submitted that family had substantial income over the years, making the claim for the gold jewelry credible and assessee’s mother had also disclosed gold under the VDIS scheme, 1997 supporting the claim that the gold was from legitimate sources. It was held that following the decision in the case of Ram Prakash Mahawar vs. DCIT, where it was held that gold jewelry acquired through legitimate means and documented with proof of purchase could not be classified as unexplained, regardless of CBDT Instruction limits. Therefore, considering the amount of income declared by the family members of assessee and the family status, there was no gold available with assessee which could be termed as from unexplained source of income.
