Many people wonder whether keeping a large amount of gold at home can invite questions from the Income Tax Department.
A recent ruling by the Nagpur Income Tax Appellate Tribunal (ITAT) has brought some clarity.
The tribunal said that gold jewellery found during a search cannot automatically be treated as unexplained income.
Authorities must also examine who owns the jewellery, how it was acquired, and the family’s overall circumstances.
What Was the Case About?
The case involved Nagpur-based chartered accountant Nirmal Kumar Agarwal. During an Income Tax search conducted on July 26, 2016, officials found around 2.434 kg of gold jewellery worth about ₹90.59 lakh.
Out of this, 1.314 kg of jewellery was seized. The department also found ₹7.06 lakh in cash and seized ₹5 lakh.
Initially, the Income Tax Officer treated jewellery worth ₹50 lakh as unexplained income and added it to the tax assessment.
However, after appeals, the disputed amount was reduced to just ₹3.86 lakh. The matter eventually reached the ITAT.
ITAT: Wife’s Jewellery Cannot Be Treated as Husband’s Income
The tribunal found that around 55.8 grams of jewellery belonged to Agarwal’s wife.
The family explained that her parents had gifted the jewellery after the birth of their two daughters. The valuation report also recorded the jewellery in her name.
ITAT accepted this explanation and said that jewellery belonging to another family member cannot automatically be treated as the husband’s unexplained income if ownership and the source are reasonably established.
What About the Remaining Gold?
Agarwal personally owned 121.5 grams of jewellery.
Out of this, 72.6 grams had been purchased through banking channels between 2008 and 2011 and was properly recorded in his financial records.
This left only 48.9 grams whose source was questioned.
The ITAT ruled that 48.9 grams was not an unusual amount considering his age, married life, two daughters, and family background.
It also noted that this quantity was below the 100-gram benchmark mentioned for a male family member in CBDT Instruction No. 1916. Therefore, the tribunal treated this jewellery as reasonably explained.
Does This Mean 100 Grams of Gold Is Always Safe?
No. The ruling does not mean that anyone can keep up to 100 grams of gold at home without being questioned.
The tribunal used the CBDT guideline only as a reference point. In every case, the Income Tax Department can examine factors such as ownership, purchase records, source of funds, family circumstances, and how the jewellery was received.
Because of this, it is advisable to keep purchase bills, make payments through banking channels whenever possible, and maintain proper records of jewellery received as gifts or inherited from family members.
The ITAT also provided another relief in the case by ruling that the higher 60% tax rate introduced later cannot be applied to Income Tax searches conducted in 2016.
