Income Tax Dept seized gold, diamonds and silver in a tax search operation from lady’s house and bank locker; she wins case in ITAT Mumbai

Mrs Kelkar who has been married for 35 years and lives with her husband in Vashi, Navi Mumbai got entangled in a tax dispute case where she had to fight in ITAT Mumbai to get back her seized jewellery items. To tell you more about how this dispute started, on August 12, 2019, she filed an income tax return (ITR) declaring Rs 1.34 lakh income, but about a year earlier, the Income Tax Department while searching a company's offices got to know some information about Mrs Kelkar.

The Income Tax Department suspected that Mrs Kelkar might have several high-value gold, diamond, and silver jewellery items. Thus on this suspicion, the Income Tax Department sent her multiple tax notices and then searched her house and bank lockers maintained with Saraswat Sahakari Bank also. During the search at her residence, the Income Tax officers found:

• 392.71 grams of gold jewellery
• 92 grams pure gold
• 27.4 carats diamond jewellery which had 161.33 grams gold
• 800 grams silver items and coins

During the search, from her bank lockers, the officers found:

• 166 (81+85) grams pure gold
• 10.4 Kg (10kg+400 grams) Silver mix articles
• 35 grams gold jewellery

All these items were seized, and the Income Tax Department assessing officer (AO) asked her to provide bills and other proof for these items. Mrs Kelkar explained that she has been married for 35 years and some of the jewellery was given as gifts by relatives during her marriage, and some were her inheritance and streedhan. Her husband also said that he reported Rs 4 crore income in his ITR and occasionally gave her gifts including a gold chain recently.

The Income Tax Assessing Officer did not fully believe Mrs Kelkar's explanation and relied on the Central Board of Direct Taxes (CBDT) instruction no. 1916 to rule that she has permission to keep 700 grams in total (500 grams for a married woman and 100 grams each for husband and son). The remaining quantity was deemed unexplained under Section 69A by the Income Tax Assessing Officer (AO).

The AO assessed her unexplained income at Rs 19.4 lakh and imposed tax on it as well as a penalty on her. Feeling aggrieved, she filed an appeal before the Commissioner of Appeals (CIT A). CIT (A) partly allowed her appeal but sustained the other additions. She then appealed to ITAT Mumbai and on July 14, 2026 fully won the case. Chartered Accountant Punit Shah represented her before ITAT Mumbai.

Also read: Tax dept seized mother’s 263 gram gold; son fights in ITAT Mumbai and wins: Know what CBDT gold jewellery circular says

How did Mrs Kelkar win the case?

Chartered Accountant Suresh Surana explained to ET Wealth Online why ITAT Mumbai decided the issue in favour of Mrs Kelkar and deleted surviving additions aggregating Rs 11.23 lakh.

According to Surana, Mrs Kelkar won the case in ITAT Mumbai because she could explain the source of the various gold, diamond, silver items. Mrs Kelkar had said that these items are her long-term accumulation and customary acquisitions which is normal in the context of the family's circumstances. The Income Tax Department had no counter argument proving recent undisclosed acquisition.

Thus ITAT Mumbai deleted additions of Rs 8.1 lakh for pure gold and Rs 3.12 lakh for silver articles, aggregating Rs 11,23,190, and allowed Mrs Kelkar's appeal.

Surana says that ITAT Mumbai expressly clarified that its ruling on pure gold was confined to the particular facts and should not be read as laying down a general proposition that all gold bullion or pure gold automatically falls within CBDT Instruction No. 1916.

Also read: Tax dept seized wife’s Rs 1.65 crore worth of gold and silver jewellery, issued notice for unexplained investment, husband filed case; wins in ITAT Bengaluru

Summary of what ITAT Mumbai held

Surana says that with respect to the silver articles, ITAT Mumbai accepted that possession had to be considered in the context of Indian family customs rather than insisting upon old purchase invoices.

ITAT Mumbai relied upon the Indore ITAT ruling in Shri Dinkar Laxman Mujumdar v. DCIT, where the benefit of CBDT Instruction No. 1916 had also been extended to silver articles.

So considering Mrs Kelkar's long married life, the customary receipt of silver articles on marriage, inheritance and other family occasions, as well as the financial standing of the family, ITAT Mumbai ruled that the silver articles could reasonably be regarded as explained.

Also read: Tax dept releases seized 6.8 kg gold as family pays Rs 2.5 crore advance tax and cited upcoming wedding as need for this gold

ITAT Mumbai separately examined 258 grams of pure gold and clarified that CBDT Instruction No. 1916 does not automatically provide immunity to all pure gold or bullion. However, the instruction can serve as a reasonable benchmark while examining family holdings. After excluding gold jewellery of 195.996 grams supported by purchase bills, the remaining gold components, including ordinary jewellery, the gold component of diamond jewellery and pure gold, totalled 651.044 grams.

Surana says ITAT observed that this was within the 700-gram family benchmark which the AO himself had recognised under the CBDT Instruction.

ITAT Mumbai also found it inconsistent to accept ordinary gold jewellery and diamond-studded gold jewellery forming part of the same family holding, but treating the pure gold as unexplained solely because of its physical form.

More importantly, Surana says ITAT Mumbai noted that neither the AO nor the CIT(A) had brought any material on record to establish that the pure gold was a fresh acquisition during the relevant year from undisclosed income.

The mere absence of old purchase bills was not considered conclusive where Mrs Kelkar's explanation was based on marriage gifts, inheritance and accumulation over several decades.

Thus, CBDT Instruction No. 1916 does not create an absolute tax exemption or statutory ceiling for jewellery holdings. Surana says “the quantities specified in the instruction provide a practical benchmark for assessing whether family possession of jewellery can reasonably be accepted as explained.”

This assessment must take into account the taxpayer's period of marriage, family customs, inheritance, streedhan, social and financial status and other surrounding circumstances.

Thus ITAT Mumbai ruled that an addition under Section 69A cannot be sustained merely because purchase invoices for assets accumulated over several decades are unavailable, particularly when there is no evidence of acquisition from undisclosed income during the relevant year.