SMITA KELKAR,NAVI MUMBAI vs. DCIT/ACIT CENTRAL CIRCLE 8(1) MUMBAI, AAYAKAR BHAVAN

आदेश / ORDER PER MAKARAND VASANT MAHADEOKAR, AM:

This appeal by the assessee is directed against the order dated 28.01.2026 passed by the learned Commissioner of Income Tax (Appeals)-47, Mumbai [hereinafter referred to as "the CIT(A)"], under section 250 of the Income-tax Act, 1961[hereinafter referred to as "the Act"], for the assessment year 2019-20, arising out of the assessment order dated 11.04.2021 passed by the Assistant

2 ITA No. 3073/Mum/2026 Smita Kelkar Commissioner of Income Tax, Central Circle-8(1), Mumbai [hereinafter referred to as "Assessing Officer"], under section 143(3) of the Act.

Facts of the Case

3 ITA No. 3073/Mum/2026 Smita Kelkar 4.1 At the residence of the assessee, gold jewellery weighing 392.71 grams and valued at Rs.10,55,170/-, pure gold weighing 92 grams and valued at Rs.2,85,170/-, diamond jewellery containing diamonds weighing 27.4 carats with a gold component weighing 161.33 grams and valued at Rs.6,82,470/-, and silver articles and coins weighing 800 grams and valued at Rs.24,000/- were found. The aggregate value of the articles found at the residence was Rs.20,46,810/-.

4.2 In Locker No.634 maintained with Saraswat Bank, pure gold weighing 81 grams and valued at Rs.2,56,220/- and silver-mix articles weighing 400 grams and valued at Rs.11,100/- were found. The aggregate value of these articles was Rs.2,67,320/-. In Locker No.43 maintained with Nagrik Sahakari Bank, gold jewellery weighing 35 grams and valued at Rs.88,760/-, pure gold weighing 85 grams and valued at Rs.2,69,200/-, and silver-mix articles weighing 10,000 grams and valued at Rs.2,77,500/- were found. The aggregate value of the articles found in this locker was Rs.6,35,460/-.

4.3 Thus, the total jewellery and articles found during the search comprised gold jewellery weighing 427.71 grams and valued at Rs.11,43,930/-, pure gold weighing 258 grams and valued at Rs.8,10,590/-, diamond jewellery containing diamonds weighing 27.4 carats with a gold component weighing 161.33 grams and valued at Rs.6,82,470/-, and silver-mix articles weighing 11,200

4 ITA No. 3073/Mum/2026 Smita Kelkar grams and valued at Rs.3,12,600/-. The aggregate value thereof was Rs.29,49,590/-.

4.4 During the assessment proceedings, the Assessing Officer issued a show-cause notice to the assessee pointing out that, in the absence of purchase bills, the diamond jewellery, pure gold and silver articles remained unreconciled. The assessee was called upon to explain why the value of such articles should not be added to her total income.

4.5 In response, the assessee explained that she had been married for more than 35 years and that the jewellery had been accumulated over a long period. She stated that approximately 250 grams of jewellery had been received from her mother and other relatives on the occasion of her marriage on 19.06.1983. She further claimed to have received 150 grams of gold by way of inheritance upon the demise of her mother on 03.03.2002 and another 122 grams upon the demise of her mother-in-law on 12.12.2013. The assessee also claimed that 237.525 grams of gold had been purchased on various occasions and that the corresponding receipts had been furnished through the submission dated 17.02.2021 filed by her husband.

4.6 The assessee contended that it was customary for a married woman to receive jewellery in the form of streedhan at the time of marriage and on other family occasions. According to the assessee, the jewellery represented streedhan accumulated over more than

5 ITA No. 3073/Mum/2026 Smita Kelkar 35 years of married life and included jewellery received from her mother and mother-in-law. She further explained that precious metals were purchased by the family on birthdays, anniversaries and festivals such as Diwali.

4.7 The assessee also furnished the particulars of the income reported by her husband and herself for assessment years 2015- 16 to 2019-20. The aggregate gross total income reported by her husband during the said period was Rs.4,28,17,001/-, whereas the aggregate gross total income reported by the assessee was Rs.27,02,586/-. Thus, the aggregate gross total income of the family for the five-year period was Rs.4,55,19,587/-. It was contended that possession of jewellery and precious articles valued at Rs.29,49,590/- was commensurate with the income and standard of living of the family.

4.8 The Assessing Officer did not accept the explanation. He observed that the assessee had failed to furnish wealth-tax returns, a complete reconciliation with the valuation reports, purchase bills and evidence explaining the source and mode of acquisition of the entire jewellery. The Assessing Officer accepted purchase bills for gold jewellery weighing 195.996 grams. The balance gold jewellery weighing 231.714 grams was allowed by applying CBDT Instruction No.1916 dated 11.05.1994.

4.9 The Assessing Officer recorded that, under CBDT Instruction No.1916, the family was eligible for an aggregate allowance of 700

6 ITA No. 3073/Mum/2026 Smita Kelkar grams, comprising 500 grams for the assessee, being a married woman, and 100 grams each for her husband, Shri Raghunath Kelkar, and her son, Shri Kedar Kelkar. The Assessing Officer, however, held that diamond-studded jewellery, pure gold and silver articles were not covered by the said Instruction. He accordingly made an addition of Rs.18,05,660/- under section 69A of the Act, comprising diamond jewellery of Rs.6,82,470/-, pure gold of Rs.8,10,590/- and silver-mix articles of Rs.3,12,600/-. The addition was directed to be taxed under section 115BBE of the Act. The Assessing Officer determined the total income at Rs.19,40,475/-, rounded off under section 288A to Rs.19,40,480/. Penalty proceedings under section 271AAC of the Act were also initiated separately.

7 ITA No. 3073/Mum/2026 Smita Kelkar Accordingly, the learned CIT(A) directed deletion of the addition of Rs.6,82,470/- made in respect of the diamond jewellery. 6.1 As regards the silver-mix articles, the learned CIT(A) held that CBDT Instruction No.1916 specifically referred to gold jewellery and ornaments and did not cover silver coins or articles. He accordingly confirmed the addition of Rs.3,12,600/- made under section 69A of the Act.

6.2 The learned CIT(A) further held that pure gold weighing 258 grams and valued at Rs.8,10,590/- stood on a materially different footing, since it had been separately described as pure gold in the valuation reports and was not in the form of jewellery or ornaments. In the absence of specific corroborative evidence regarding its acquisition, the learned CIT(A) confirmed the addition of Rs.8,10,590/- under section 69A of the Act. The appeal of the assessee was thus partly allowed.

(2) Your appellant craves leave to add to, alter or amend the above ground of appeal, should it be found necessary.

8 ITA No. 3073/Mum/2026 Smita Kelkar 8. We note that Ground No.1 mentions the value of the silver articles as Rs.3,21,600/-, whereas the assessment order and the order of the learned CIT(A) record the corresponding amount as Rs.3,12,600/-. The ground has, however, been reproduced exactly as filed. We further note that the learned CIT(A) has already deleted the addition of Rs.6,82,470/- made in respect of diamond jewellery. Therefore, the dispute surviving before us is confined to the addition of Rs.8,10,590/- in respect of pure gold and Rs.3,12,600/- in respect of silver-mix articles, aggregating to Rs.11,23,190/-.

8.1 The learned Authorised Representative (AR) reiterated the facts and submissions advanced before the authorities below. He submitted that the learned CIT(A), while deleting the addition made in respect of diamond jewellery, had erred in confirming the additions of Rs.3,12,600/- in respect of silver-mix articles and Rs.8,10,590/- in respect of pure gold. The learned AR submitted that the benefit of CBDT Instruction No.1916 dated 11.05.1994 ought not to be confined narrowly to gold jewellery and ornaments. He contended that the Instruction should be applied having regard to Indian customs and traditions and should extend to the pure gold and silver articles accumulated by the assessee and her family over a long period.

8.2 In support of his contention concerning the silver articles, the learned AR placed reliance upon the decision of the Indore Bench of the Tribunal in Shri Dinkar Laxman Mujumdar v. DCIT

9 ITA No. 3073/Mum/2026 Smita Kelkar (Central)-I, ITA No.593/Ind/2017, for the assessment year 2015- 16, order dated 18.10.2018. He submitted that, in the said decision, the Tribunal had extended the benefit of CBDT Instruction No.1916 to silver articles and had deleted the addition made under section 69A of the Act.

10.1 The limited controversy before us is whether the addition of Rs.8,10,590/- in respect of pure gold weighing 258 grams and the addition of Rs.3,12,600/- in respect of silver-mix articles weighing 11,200 grams can be sustained under section 69A of the Act.

10.2 CBDT Instruction No.1916 dated 11.05.1994 was issued to provide a common approach in cases where jewellery of small quantity is found during the course of a search under section 132 of the Act. The material part of the Instruction reads as under: “Instances of seizure of jewellery of small quantity in the course of operation under section 132 have come to the notice of the Board. The question of a common approach to situation where search parties come

10 ITA No. 3073/Mum/2026 Smita Kelkar across items of jewellery has been examined by the Board and following guidelines are issued 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 at 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.” 10.3 The Instruction was originally issued for regulating seizure during search proceedings. It does not create an absolute exemption from assessment, nor does it prescribe a statutory ceiling upon the quantity of jewellery or precious articles that a person may lawfully possess. Nevertheless, the judicial approach has been to regard the prescribed quantities as a reasonable benchmark while examining whether possession of jewellery by family members can be accepted as explained, particularly where the explanation is founded upon marriage, streedhan, inheritance, family customs and social status.

10.4 Clause (iii) of the Instruction is also material. It expressly requires consideration of the status of the family, the customs and practices of the community to which the family

11 ITA No. 3073/Mum/2026 Smita Kelkar belongs and the other circumstances of the case. The Instruction, therefore, does not contemplate a purely mechanical or rigid application divorced from the surrounding facts. 10.5 The issue concerning silver articles is directly covered by the decision of the Indore Bench of the Tribunal in Shri Dinkar Laxman Mujumdar v. DCIT (Central)-I (supra). In that case, gold ornaments weighing 242 grams and silver articles or utensils weighing 1,812 grams were found during the search. The learned CIT(A) granted the benefit of CBDT Instruction No.1916 in respect of the gold jewellery but confirmed the addition made in respect of the silver articles. On further appeal, the Tribunal extended the benefit of the Instruction to the silver articles and deleted the addition.

10.6 The relevant findings contained in paragraphs 11 and 12 of the said decision are reproduced verbatim as under: “11. In the instant case Ld.CIT(A) following the above referred CBDT instructions allowed the claim of investment in gold jewellery weighing 242 gms but confirmed the addition for silver articles weighing 1812 gms. The above referred instructions refers only to ‘jewellery and ornaments’ and nowhere restrict it to gold jewellery. One cannot ignore the fact that in the Indian families there is a culture of giving silver ornaments and utensils on auspicious and marriage occasions. Restricting the limit of 500 gm/250 gm/100 gm only to the ‘gold jewellery ornaments’ will not serve the true purpose of the CBDT instructions and it has to be applied harmoniously in the light of the Indian culture and traditions. 12. We therefore in the given facts and circumstances of the case are of the considered view that the impugned silver jewellery weighing 1812 gms valuing at Rs.75,278/-should not have been added to the income of the assessee and the benefit of the CBDT Circular No. 1916 dated 11.5.1994 should also be spread so as to cover the silver articles weighing 1812 gms. We therefore set aside the orders of both the lower authorities and delete the addition of Rs.75,278/- for the alleged

12 ITA No. 3073/Mum/2026 Smita Kelkar unaccounted investment in silver articles and allow the grounds raised by the assessee.”

10.7 In the present case, the silver-mix articles weighed 11,200 grams and were valued at Rs.3,12,600/-. The assessee explained that these articles had been accumulated over a long period and included articles received on marriage, inheritance and other customary occasions. The assessee had been married for more than 35 years as on the date of the search. The family had reported an aggregate gross total income of Rs.4,55,19,587/- during the five assessment years immediately preceding and including the year under consideration.

10.8 The Assessing Officer rejected the explanation principally for want of purchase bills and other documentary evidence. However, in the case of articles stated to have been received on marriage, inheritance and customary occasions spread over several decades, insistence upon contemporaneous purchase bills for each article would overlook the realities of family life and customary practices. No material has been brought on record to show that the silver articles represented any recent acquisition made by the assessee out of undisclosed income during the relevant previous year.

13 ITA No. 3073/Mum/2026 Smita Kelkar following the aforesaid decision and having regard to the period of the assessee’s married life, the customs ordinarily associated with the receipt and accumulation of silver articles and the disclosed financial status of the family, we are of the considered view that the addition of Rs.3,12,600/- made in respect of the silver-mix articles cannot be sustained. The Assessing Officer is accordingly directed to delete the same.

11.1 The decision in Shri Dinkar Laxman Mujumdar v. DCIT (Central)-I (supra) specifically concerns silver articles and does not directly adjudicate whether pure gold or bullion, as a separate category, is covered by CBDT Instruction No.1916. The issue concerning pure gold, therefore, requires examination on the peculiar facts of the present case and on the general principles governing section 69A of the Act. The total gold components found during the search were as follows:

Particulars Weight Gold jewellery 427.71 grams Gold component in diamond jewellery 161.33 grams Pure gold 258.00 grams Total 847.04 grams

11.2 Out of the gold jewellery weighing 427.71 grams, the assessee produced purchase bills for 195.996 grams. The Assessing Officer accepted the said quantity as explained. The balance gold jewellery weighing 231.714 grams was accepted by applying CBDT Instruction No.1916. The learned CIT(A) thereafter

14 ITA No. 3073/Mum/2026 Smita Kelkar accepted the gold component weighing 161.33 grams embedded in the diamond-studded jewellery and deleted the corresponding addition of Rs.6,82,470/-. 11.3 Thus, after excluding the quantity of 195.996 grams supported by purchase bills, the remaining gold components were 651.044 grams, comprising gold jewellery weighing 231.714 grams, the gold component in diamond jewellery weighing 161.33 grams and pure gold weighing 258 grams. This aggregate quantity of 651.044 grams was within the family benchmark of 700 grams expressly recognised by the Assessing Officer himself under CBDT Instruction No.1916.

11.4 The Assessing Officer accepted the ordinary gold jewellery weighing 231.714 grams by applying the Instruction. The learned CIT(A) accepted the diamond-studded gold jewellery weighing 161.33 grams by applying the same Instruction read with the judicial precedents. However, the pure gold weighing 258 grams was rejected solely because it had been separately described as “pure gold” and was not in the form of jewellery or ornaments.

11.5 We are conscious that clause (ii) of CBDT Instruction No.1916 specifically uses the expression “gold jewellery and ornaments” and cannot automatically be read as granting a universal immunity to gold bullion or pure gold, irrespective of the surrounding facts. However, the Instruction is relevant as a benchmark of reasonable family holding. The addition under section 69A cannot be sustained merely by reference to the

15 ITA No. 3073/Mum/2026 Smita Kelkar nomenclature of an article where the assessee has furnished a plausible explanation regarding its source and possession and the surrounding circumstances support such explanation. 12. In the present case, the assessee had been married since 19.06.1983. She explained that the precious articles had been received at the time of marriage, by way of inheritance upon the demise of her mother and mother-in-law, and on other customary family occasions. She also furnished particulars showing an aggregate family income of Rs.4,55,19,587/- during five assessment years. The disputed pure gold was valued at Rs.8,10,590/-. Having regard to the income and financial status of the family, the value of the disputed pure gold cannot be said to be disproportionate or inherently improbable.

12.1 Significantly, neither the Assessing Officer nor the learned CIT(A) brought any material on record demonstrating that the pure gold represented a fresh acquisition made during the relevant previous year out of undisclosed income. The addition was sustained essentially because the assessee could not produce purchase bills and because the articles had been separately classified as pure gold in the valuation reports. The mere absence of old purchase bills, by itself, cannot be conclusive where the explanation relates to marriage gifts, inheritance and customary accumulation over several decades.

12.2 The Assessing Officer himself accepted the aggregate family entitlement of 700 grams. After excluding the gold jewellery

16 ITA No. 3073/Mum/2026 Smita Kelkar weighing 195.996 grams supported by bills, the balance gold components weighing 651.044 grams were within that benchmark. Once the gold jewellery and diamond-studded gold jewellery forming part of the same family holding have been accepted, the pure gold cannot, on the peculiar facts of this case, be treated as unexplained solely on account of its form, without any material indicating recent acquisition from an undisclosed source.

12.3 We clarify that our conclusion should not be understood as laying down a general proposition that all gold bullion or pure gold is automatically covered by CBDT Instruction No.1916. Our conclusion is confined to the facts of the present case, namely, the long duration of the assessee’s married life, the explanation of marriage gifts and inheritance, the disclosed financial capacity of the family, the aggregate family benchmark accepted by the Assessing Officer, and the absence of any material demonstrating acquisition from undisclosed income during the relevant previous year.

12.4 Considering the totality of the facts and circumstances, we are of the considered view that the explanation furnished by the assessee in respect of the pure gold was reasonable and ought to have been accepted. The addition of Rs.8,10,590/- sustained under section 69A of the Act is accordingly directed to be deleted.

12.5 In view of the foregoing discussion, the addition of Rs.3,12,600/- in respect of the silver-mix articles and the addition

17 ITA No. 3073/Mum/2026 Smita Kelkar of Rs.8,10,590/- in respect of pure gold, aggregating to Rs.11,23,190/-, are deleted. Ground No.1 raised by the assessee is allowed to the extent of the additions surviving after the order of the learned CIT(A). Ground No.2 is general in nature and does not require separate adjudication.

Order pronounced in the open court on 14.07.2026.

Sd/- Sd/- (NARENDER KUMAR CHOUDHRY) (MAKARAND VASANT MAHADEOKAR) JUDICIAL MEMBER ACCOUNTANT MEMBER

Mumbai, Dated 14/07/2026 PS आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��थ� / The Respondent. 2. संबंिधत आयकर आयु� / The CIT(A) 3. आयकर आयु�(अपील) / Concerned CIT 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, मु�ई / DR, ITAT, Mumbai 5. गाड� फाईल / Guard file. 6. आदेशानुसार/ BY ORDER, स�ािपत �ित //True Copy// 1. उप/सहायक पंजीकार ( Asst. Registrar) आयकर अपीलीय अिधकरण, मु�ई / ITAT, Mumbai