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.
2. The assessee has raised following grounds of appeal:-
1) The assessment order passed by Ld. AO states at para 5 that assesse received gift on his son s marriage which is factually incorrect. The assesse received these gifts on his own marriage in the year 1983. The basis on which addition has been made by Ld. AO is incorrect.
2) The Ld. CIT Appeals erred in law and on facts of the case making addition of Rs. 2 crores under section 68 of the IT Act as the amount of increase constituted the value of gold ornaments and silver utensils, mainly gifted to the assessee on his marriage way back in the year 1983, which was duly explained before the Ld. AO and to Ld. CIT Appeals.
3) The learned CIT Appeals failed to appreciate that section 68 applies only to cash credits and cannot be invoked in respect of introduction of capital represented by personal assets in kind gold jewelry and silver utensils, particularly when no cash was credited in the books during the year. The jewellery is related to the year 1983 and addition should be Rs. 12,90,000.00 approx not Rs. 2 crore which is as per current valuation.
4) The learned CIT Appeals failed to appreciate that receipt and holding of gold jewellery and silver utensils on the occasion of marriage, particularly in the year 1983, is a well recognized social custom in India and does not require contemporaneous documentary evidence, especially after the lapse of more than 4 decades. The investment as per the rates available for the year 1983 comes out to be Rs. 12,59,692.00 not Rs. 2 crore assessed and addition made by the A.O.
5) The Ld. CIT(A) erred in law and on facts of the case while confirming addition under section 68 since the assesse has duly shown valuation report stating the value of jewelry with the assesse as part of capital. The learned CIT Appeals erred in law and on facts in ignoring the appellant s explanation regarding valuation of gold and silver at prevailing market rates in FY 2016 17 and in not granting an opportunity to admit OR consider the valuation report obtained during the assessment proceedings.
6) The Ld. CIT Appeals erred in law and on facts of the case while confirming addition merely because wealth tax return was not filed. This fact cannot be sole reason to justify ownership of jewelry. The learned CIT Appeals has erred in law by placing an impossible and unreasonable burden of proof on the appellant to produce wealth tax returns, gift deeds, OR other documentary evidence from the year 1982 1983, which is impractical and contrary to settled Judicial Principles.
7) The Ld. CIT Appeals) erred in law and on facts of the case while calculating tax under section 115BBE at the rate 60 percent since the same is not applicable for the assessment year under appeal the same is applicable from AY 2018 19 as per various case laws by various Honourable Courts of India.
3. The only issue contested by the assessee through the above ground is regarding the decision of the Ld. CIT(A) in confirming an addition of Rs.2 crores made by the ld. Assessing Officer on the premise of unexplained capital accretion.
4. Brief factual matrix of the case is that the assessee had filed its Return of Income on 30.12.2017 declaring income of Rs.13,14,360/-. The assessee is a government contractor engaged in civil constructions activities in Haryana. The assessee had shown increase in its capital in the balance sheet as at 31.03.2017 of Rs.8,34,88,752/-, which included accretion of Rs.2 crores on account of introduction of Gold and other precious items. Upon noting the above entries, the ld. Assessing Officer requested for copies of wealth tax return and valuation report. The ld. Assessing Officer recorded the following observations on page-2 of his order dated 09.12.2019
“…3.2 He was required vide Notice dated 17.10.2019 to furnish the copies of wealth tax returns in which value of jewellery and other precious items were declared alongwith copy of valuation report. As the assessee had not provided the same, the source of capital introduction on account of gold jewellery remained unverified and unexplained on his part. Therefore, he was required vide notice dated 28.11.2016 to show cause as to why the said amount of Rs. 2.0 crores should not be added u/s 68 of the Income tax Act, 1961 to your total income for the A.Y. 2017-18.
4. In response to the same the assessee replied that ornaments weighing around 5.5 Kgs of Gold and Silver Utensils worth 4 Kgs were given to the assessee’s son and his newly wedded wife by his mother on his marriage in the year 1982 and he has included these amounts in his balance sheet as his capital in FY 2016-17 at approximate value of gold and silver at that time. He has also submitted that he is in the process of valuation done as on date and shall submit the same once done. He assured that the reply will be filed by 5th of December, 2016. However, the assessee has not filed any documentary evidence in support of ownership of such Gold or jewellery by the date chosen by him.
5. The reply of the assessee as well as supporting documents have been duly considered but not found tenable. The assessee has failed to submit Wealth Tax returns or any other documentary evidence in which value of jewellery and other precious items were declared alongwith copy of valuation report. The assessee’s submission that ornaments weighing around 5.5 Kgs of Gold and Silver Utensils worth 4 Kgs were given to the assessee son and his newly wedded wife by his mother on his marriage in the year 1982 without any documentary evidence is unacceptable. The introduction of such unverified assets as capital in Balance sheet is considered unexplained. Thus, the amount of Rs.2,00,00,000/- is being considered unexplained cash credit in his books of account for the year and the same is added u/s 68 of the Income Tax Act, 1961 to the total income of the assessee and will be taxed as per the provisions of Section 115BBE of the I.T.Act,1961….”
5. The assessee preferred appeal, wherein, the additions made by the ld. Assessing Officer were confirmed recording following observation on page-7 of the appellate order:-
“..6.1.3. During the course of appellate proceedings also, the appellant has reiterated the same as stated before the AO. He has not submitted any corroborative documentary evidence to show whether he had that much quantity of gold jewellery or precious item with him.
6.1.4. The reply of the appellant submitted during the course of appellate proceedings has been considered and I find that the Assessing Officer was justified in treating the capital introduction as unexplained cash credit because the appellant could not provide satisfactory documentary evidence to prove the source of the gold jewellery. While gold received as a wedding gift is tax-exempt, the appellant must still be able to prove its nature and source, especially for a high-value amount. The burden of proving that the gift was actually received and still held rests with the recipient. A claim from 1982 cannot be accepted as satisfactory proof at the time of assessment in 2019 without a robust paper trail.
The appellant was required to show that he legitimately possessed the gold. However, he could not furnish any documentary evidence, such as the required wealth tax returns, which would have established the existence and value of the gold over the years. Merely stating that the gold was received as a wedding gift decades ago is not sufficient proof. The claim of a gift received in 1982, without any supporting documentation, lacks credibility, especially given the significant value involved.
Crucially, the appellant could not produce a wedding gift deed, records from the gifting ceremony, or any other proof of ownership that would establish the existence of the gold with him since 1982. Even, the appellant could not furnish the wealth tax return filed by her mother to establish that she had such quantity of gold and other precious item to gift the appellant & his wife at the time of his marriage. In view of the above discussion, I didn’t find any infirmity in the addition of Rs. 2,00,00,000/- made by the AO u/s. 68 of the Act. Accordingly, the addition made by the appellant is upheld and the grounds of appeal are dismissed…..”
6. We have heard rival submissions in the light of material placed on records.
7. The ld. Counsel for the assessee argued that the ld. Assessing Officer has made addition by recording wrong facts. It was argued that vide his reply dated 11.06.2019, assessee had submitted that the impugned gold and other items of about Rs.2 Crores represented gifts received from family members on marriage of assessee in 1982 and as ancestral jewellery of death of mother. It was argued that in view of above reply, the observations of Ld. Assessing Officer and confirmed by the ld. CIT(A) that the impugned gold and other items were received at the time of assessee’s son’s marriage, are based upon incorrect appreciation of facts. On the issue of non-submission of valuation report, the assessee has submitted that it had procured a valuation report dated 06.12.2019 from reputed jewellery valuation of Karnal but the same could not be uploaded on the ITBA Portal as the portal for e-submission was closed by the Ld. Assessing Officer. As regards the issue of non-filing of wealth tax return, the assessee submitted that the same were not filed given no such legal requirements at the opportune time/threshold limit of holding gold jewellery and precious items. The ld. Counsel further argued that the addition made of Rs.2 Crores u/s 68 is untenable as in this case, the assessee has merely introduced its movable/immovable properties as capital accretion, whereas, section 68 talks of only cash credits. It was argued that the assessee has introduced capital represented by personal assets. The appellant has placed on record a paper book comprising submissions made before ld. Assessing Officer from June, 2019 to November, 2019, those before the ld. Cit(A) as well as the valuation reports. Reliance has also been placed on a catena of judgments reportedly favouring the assessee on facts of the case. It was accordingly requested that the order of the ld. CIT(A) may be set-aside.
8. The ld. DR placed reliance upon the order of the lower authorities. Full emphasis was placed upon contents of para 6.1.3 of the order of the ld. CIT(A)(supra).
9. As regards, the argument of ld. Counsel for the assessee regarding non- maintainability of addition u/s 68 of the Act on the premise that the said section talks of Cash credits only, we are not inclined to accept the impugned arguments. The said section 68 of the Act reads as under:-
“Cash credits.
68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year:
Provided that where the sum so credited consists of loan or borrowing or any such amount, by whatever name called, any explanation offered by such assessee shall be deemed to be not satisfactory, unless,—
(a) the person in whose name such credit is recorded in the books of such assessee also offers an explanation about the nature and source of such sum so credited; and
(b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:
Provided further that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless—
(a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and
(b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided also that nothing contained in the first proviso or second proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.”
10. A perusal of the above section shows that the section 68 talks of “any sum is found credited in the books of an assessee”. Thus, the primary requirement is that there some should be a sum of money credited to the books of accounts of the assessee. In the instant case, the value of jewellery introduced as capital accretion in the books of the assessee would be representing “any sum is found credited in the books of an assessee”. We have noted that in law, there is no such specific exemption available to an assessee who introduces capital by way of value of any jewellery or precious item. The argument taken by the ld. Counsel in its grounds of appeal therefore cannot be accepted.
11. Coming to the merits of the addition, we have noted that the case of the appellant stands on convincing footing. At the outset, we have noted merit in the argument of the appellant assessee regarding the misquoting of facts and non- application of mind by the ld. AO while making the impugned addition. The assessee had provided us specific evidences to allude that he had communicated to the ld. AO that the jewellery was gift received by him at the time of his own marriage in 1982 and as inherited ancestral property upon death of his mother. Consequently, the argument of the ld. AO regarding the same being received at the time of assessee’s son’s marriage is a clear case of reliance upon incorrect appreciation of facts and cannot be concurred. We have further noted that the assessee had attempted to file the valuation report of one OPS Jewellers dated 30.11.2019 before the AO, which could not be uploaded on account of technical glitches. On the issue of non-availability of wealth tax return, we find force in the
argument of the appellant that as to why they were not filed. Accordingly, we are of the considered view that the assessee had justified sources for the capital accretion of Rs.2 Crores in its books of accounts. We, therefore, set-aside the order of the lower authorities and direct the ld. AO to delete the impugned addition.
12. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 14th August, 2026.
