Jewellery seizure and addition under Income Tax: Validity and Limits

[Vivek Jalan]

There is no limit on holding of gold jewellery or ornaments by anybody provided it is acquired from explained sources of income including inheritance. Legitimate holding of jewellery up to any extent is fully protected. Further, w.r.t. seizure of jewellery during Search and seizure, CBDT Instruction 1994 dated 11-05-1994 prescribes the following additional guidelines for strict compliance -

(i) In the case of a wealth-tax assessee, gold jewellery and ornaments found in excess of the gross weight declared in the wealth-tax return only need to be seized.

(ii) In the case of a person not assessed to wealth-tax gold jewellery and ornaments to the extent of 500 gms. per married lady 250 gms per unmarried lady and 100 gms. per male member of the family, need not be seized.

(iii) The authorized officer may having regard to the status of the family and the customs and practices of the community to which the family belongs and other circumstances of the case, decide to exclude a larger quantity of jewellery and ornaments from seizure. This should be reported to the Director of Income-tax/Commissioner authorising the search all the time of furnishing the search report.

(iv) In all cases, a detailed inventory of the jewellery and ornaments found must be prepared to be used for assessment purposes.

Now, if the Assessee explains the source of the entire gold jewellery belonging to assessee being ancestral, parental and received on several occasions and some old jewellery being converted into new one on occasion of some family functions by paying making charges; Genuineness of vouchers/bills of making charges of converted new jewellery claimed by assessee is not disproved by causing enquiry/verification by AO/CIT(A), then there cannot be any demand on the same as held in the case of DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, UDAIPUR VERSUS ASHOK JAIN - 2024 (3) TMI 1003 - ITAT JODHPUR.

While there are divergent opinions on this issue, the one which is favorable to the assessee has to be followed and it gets support from the principle laid down by the Hon’ble Apex Court in the cases of COMMISSIONER OF INCOME-TAX, WEST BENGAL I VERSUS VEGETABLE PRODUCTS LIMITED - 1973 (1) TMI 1 - SUPREME COURT; COMMISSIONER OF INCOME-TAX, AMRITSAR VERSUS STRAWBOARD MANUFACTURING CO. LIMITED - 1989 (4) TMI 4 - SUPREME COURT and COMMISSIONER OF INCOME-TAX VERSUS AJ ABRAHAM ANTHRAPER AND ANOTHER. - 2004 (4) TMI 62 - KERALA HIGH COURT, in case of jewellery found during search and seizure.