A recent ruling by the Income Tax Appellate Tribunal (ITAT) has once again highlighted how Indian tax laws recognise the country’s long-standing cultural practice of holding gold within families, especially through marriage gifts and inheritance.
In the case of Ramnath Gupta Bysani vs JCIT (ITAT Bangalore) for Assessment Year 2019–20, the tribunal dealt with a common but often disputed issue — whether gold found during an Income Tax search can automatically be treated as unexplained income.
What triggered the tax dispute
The case goes back to a search conducted on February 20, 2019, at the assessee’s residence in Bangalore. During the search, officials found gold jewellery weighing 2,532.46 grams.
The taxpayer explained that the jewellery belonged to different family members and had been accumulated over the years through marriage gifts (streedhan), inheritance, and past purchases.
However, he could not produce complete purchase bills for all the jewellery.
Tax officer’s view on seized gold worth Rs 1.03 crore
The Assessing Officer (AO) was not convinced with the explanation. He treated the jewellery as unexplained investment under Section 69B and added Rs 1.03 crore to the taxpayer’s income.
This addition was later upheld by the Commissioner of Income Tax (Appeals).
What the taxpayer argued
Before the ITAT, the taxpayer relied on CBDT Instruction No. 1916 dated May 11, 1994, which lays down limits for jewellery that should not be seized during a search.
These limits are 500 grams for a married woman, 250 grams for an unmarried woman and 100 grams for a male member.
The argument was simple: if jewellery within these limits is considered reasonable during a search, it should not be treated as unexplained income either.
What ITAT said
The ITAT Bangalore bench examined the issue in detail and sided with the taxpayer — at least partially.
The tribunal observed that the CBDT instruction provides a reasonable and practical benchmark and it reflects Indian social realities, where gold is commonly received during marriages and family events.
It should not be restricted only to seizure during search, but can also guide tax assessment decisions, it said.
The tribunal also noted that the taxpayer had given a plausible explanation, supported by statements and family context, even if complete documentation was not available.
Final ITAT ruling
The ITAT directed that jewellery covered within the limits prescribed under CBDT Instruction 1916 should not be treated as unexplained income and the addition made by the tax officer should be deleted to that extent.
As a result, the appeal was partly allowed in favour of the taxpayer.
Why this ruling matters
This ruling is important because it clarifies that lack of bills alone does not automatically make jewellery taxable. Family-held gold, especially from weddings and inheritance, must be viewed in cultural and practical context. CBDT’s gold limits can act as a guiding principle even during assessment, not just during search.
At the same time, the ruling does not give blanket immunity — taxpayers are still expected to provide a reasonable explanation of ownership.
It is important to note that this is a ruling of the Income Tax Appellate Tribunal (ITAT). ITAT decisions can be challenged before the High Court and, thereafter, the Supreme Court. Therefore, legal positions may evolve depending on further appeals.
