Whose gold is it? Tax dept seizes wife’s Rs 1.65 crore jewellery; husband challenges notice in ITAT and wins – explained

Gold jewellery worth Rs 1.65 crore and silver articles weighing 3 kg were seized from the residence of Suresh (name withheld) during an Income Tax Department search in November 2019. The Assessing Officer (AO) added the value to Suresh’s income as unexplained investment under Section 69 of the Income Tax Act, citing discrepancies between invoices, bank and credit card payments, and the inventory prepared during the search.Suresh contended that the jewellery belonged to his wife, Shubha Sunil, whose tax return had already disclosed the same assets. He also claimed that some of the jewellery was ancestral or received as gifts, though he did not provide documentary proof. Dissatisfied with the AO’s addition, Suresh appealed to the Commissioner of Appeals (CIT(A)) and subsequently to the Income Tax Appellate Tribunal (ITAT), Bangalore.Then on September 11, this year, the ITAT upheld the CIT(A) order, ruling in Suresh’s favour, according to an ET report. The Tribunal noted that the AO had already accepted the source and ownership of the jewellery in the wife’s assessment under Sections 143(3), 153C, and 153D. Since the same jewellery had already been accounted for in the spouse’s return, it could not be treated as unexplained in Suresh’s hands. The revenue department’s appeal was dismissed.The Tribunal also observed that the inventory, annexures, and descriptions of the seized jewellery were identical in both assessments, leaving no legal basis for a separate addition in the husband’s case.

Section 69 of the Income Tax Act deals with situations where an assessee makes investments in a financial year preceding the assessment year, but these investments are not recorded in their books of account and the source of funds cannot be satisfactorily explained to the satisfaction of the Assessing Officer. In such cases, the value of these investments may be treated as the assessee’s income for that financial year. The income so deemed is subject to taxation at a flat rate of 60 per cent, with an additional 25 per cent surcharge and 4 per cent Health and Education Cess, resulting in an effective tax rate of 78 per cent. Apart from the high tax rate, penalties may also be levied on the assessee for failing to disclose the source of such investments. This provision is often applied to high-value assets such as jewellery, cash, or other valuables, and is intended to ensure that all sources of wealth are properly accounted for and taxed.