What did the Tribunal hold?

The Tribunal held that the addition on account of unexplained cash was explained by the cash in hand as per the assessee's books. It also held that the jewellery found was within the limits prescribed by CBDT Instruction No. 1916, thus no addition was warranted.

The assessee's appeal was against the CIT(A)'s order which deleted capital gains addition but upheld additions for unexplained investment in jewellery and unexplained cash. The ITAT had previously remanded the matter for fresh adjudication.

What were the issues?

Whether the addition on account of unexplained cash and unexplained investment in jewellery is justified when the cash in hand exceeds the seized amount and the jewellery is within prescribed limits?

Govardhannaidu Chintakunta… vs ITO | s.250 | ITAT Hyderabad 2026

Income Tax Appellate Tribunal, HYDERABAD

Before: SHRI VIJAY PAL RAO

Pronounced: 09.09.2026

आदेश / ORDER

PER VIJAY PAL RAO, VICE PRESIDENT:

This appeal is by the Assessee is directed against the Order dated 11.10.2025 of the Ld. CIT(A)-11, Hyderabad for the Assessment Year 2011-2012.

The assessee has raised the following grounds of appeal:

1) “The order of the CIT A passed u/s 250 of the Act dated 11/10/2025 is erroneous both on facts and in law to the extent the order is prejudice to the interests of the appellant. 2) The Ld. CIT(A) failed to properly appreciate and consider the order of the Honble ITAT in ITA No. 836/Hyd/2016 dated 12-10-2020, Without due consideration of the said binding order, the Ld. CIT(A), vide its order dated 11-10-2025, confined the adjudication only to the issue of addition of capital gains. 3) The Ld. CIT(A) erred in stating that the ITATs order is confined to the examination of capital gains only vide para no. 6.2.

4) The Ld. CIT(A) ought to have appreciated that the Honble ITAT, in its order dated 12-10-2020, did not restrict its examination solely to the issue of capital gains, it set aside the whole appeal to CIT(A). 5) The Ld. CIT(A) erred in not adjudicating the issues relating to addition of unexplained cash of Rs.3,88,000/- which out of past savings. 6) The Ld. CIT(A) Ought to have appreciated that the cash found of Rs.3,88,000/- represents the cash accumulation of day to day collections entered regularly in the books of account maintained. 7) The Ld. CIT(A) ought to have appreciated that the impugned cash of Rs.3,88,000/- tallies with the entries in the books of account maintained by the assessee. 8) The Ld. CIT(A) erred in not adjudicating the issues relating to addition of unexplained investments of Rs.16,01,975/-. 9) The Ld. CIT(A) Ought to have appreciated that the impugned jewellery belongs to the assessees family members and that it had been received by the family members on various occasions of the family as gifts. 10) Appellant may, add OR alter OR amend OR modify OR substitute OR delete and/OR rescind all OR any of the grounds of appeal at any time before OR at the time of hearing of the appeal.”

This is the second round of appeal as the Tribunal vide Order dated 12.10.2020 remanded the matter to the record of the learned CIT(A) with a direction to dispose of the appeal relating to the protective assessment along with the appeal relating to substantive assessment. In pursuance to the Order of this Tribunal, the learned CIT(A) has passed the order whereby the addition made by the Assessing Officer on account of long term capital gains has been deleted but the other two additions on account of unexplained investment for purchase of jewellery and unexplained cash found and seized during the course of search and seizure operation was upheld by the learned CIT(A). Thus, the grievance of the assessee against the impugned order in the present appeal is restricted only to two additions i.e., on account of unexplained investment of Rs.16,01,975/- and unexplained cash of Rs.3,88,000/-.

As regards addition on account of unexplained cash of Rs.3,88,000/-, the learned Authorised Representative of the Assessee has submitted that the assessee was having cash in hand of Rs.4,86,504/- as per the balance sheet placed at page no.10 of the paper book. Thus, the learned Authorised Representative of the Assessee has submitted that when the assessee was having the cash in hand which includes cash seized by the Income Tax Department then, the addition made by the Assessing Officer of Rs.3,88,000/- on account of cash seized during the search and seizure action is unjustified and liable to be deleted.

On the other hand, the learned DR has relied upon the orders of the authorities below and submitted that the assessee has failed to explain the source of the cash during the search proceedings as well as during the assessment proceedings. Thus, the learned DR has submitted that the addition made by the Assessing Officer as well as sustained by the learned CIT(A) is justified when the assessee failed to explain the source of the said cash.

I have considered the rival submissions as well as relevant material on record. In the first round of appeal, the Tribunal vide Order dated 12.10.2020 remanded the matter to the record of the learned CIT(A) by observing in para no.2 as under:

“2. At the outset, it is observed that the Ld. CIT (A) has disposed off the appeal relating to protective assessment made by the Ld. AO without looking into the merits of the case relating to the substantive addition. The Ld. AR further intimated the Bench that the appeal relating to the substantive addition is still pending before the Ld. CIT (A). In this situation, I am of the view that both the protective assessment and the substantive addition have to be disposed off by the Ld. CIT (A) together. The Id. DR also conceded for the same. Therefore, in the interest of justice, I hereby remit the matter back to the file of the Ld. CIT (A) in order to disposed off the appeal relating to the protective assessment along with the appeal relating to the substantive assessment. It is ordered accordingly.”

6.1. Thus, the matter was remanded back to the record of the learned CIT(A) for deciding the appeal of the assessee on the issue of protective assessment as well as substantive addition made by the Assessing Officer. It is pertinent to note that the Assessing Officer made protective addition on account of long-term capital gains of Rs.13,73,303/- which has been deleted by the learned CIT(A) while passing the impugned order in para no.6.1.9 as under:

“6.1.9. In view of the above binding decisions of the Hon'ble ITAT, particularly the order dated 13.09.2021 in ITA Nos. 832, 833 & 835/Hyd/2019 and the subsequent order dated 24.03.2025 in ITA No. 834/Hyd/2019, it is held that the impugned property at D.No. 5/19-2 and 5/19-3, Gandhi Road, Proddatur, was owned by the HUF and not by the appellant in his individual capacity. Consequently, the capital gains arising from its sale cannot be brought to tax in the individual hands of the appellant, even on a protective basis. Accordingly, the addition of Rs.13,73,303/-made towards long-term capital gain is directed to be deleted.”

6.2. Therefore, the said issue has attained finality at the level of the learned CIT(A) itself. As regards the other two additions made by the Assessing Officer, the learned CIT(A) has confirmed the same in para no.6.2 as under: “6.2. Since the Hon'ble ITATS order is limited to the examination of the capital gains relating to the protective assessment along with the appeal relating to the substantive assessment, only, the other issues not adjudicated separately. The decision given by the Ld. CIT(A) in his order dt. 29.03.2019, on the issues of addition of unexplained investment of Rs. 16,01,975/- and unexplained cash of Rs.3,88,000/-for grounds of appeal Nos.4, 5, 6 holds good.”

6.3. Thus, the learned CIT(A) has not discussed the facts relating to these two issues and particularly the explanation of the source by the assessee. Now the assessee has referred to the cash in hand as on 31.03.2011 as per the balance sheet placed at page no.10 as under:

6.4. Once the cash in hand is more than the cash found and seized during the search and seizure action then, the addition made by the Assessing Officer of Rs.3,88,000/- on account of unexplained cash found and seized during the search and seizure action stands explained by the fact of cash in hand as per the books of the assessee. Accordingly, in the facts and circumstances of the case, the addition made by the Assessing Officer on account of unexplained cash is deleted.

The next issue is regarding the addition of Rs.16,01,975/- on account of unexplained investment in jewellery.

The Assessing Officer has made this addition in para 3 of the order as under:

“3.Unexplained investment in Jewellery:

During the course of Search and Seizure operation on 25-11- 2010 at the residential premises of the assessee jewellery was found and was got valued by government approved/registered valuer. The total gross weight of the jewellery found was arrived at 1054.5gms and net weight at 807.5gms which was valued at Rs.16,01,975/-. During the assessment proceedings the assessee was asked to explain the sources for the said investment in jewellery. In his reply dated 05-03-2013, the assessee stated that the said jewellery belongs to his family members. The assessee also stated that the said jewellery includes the jewellery received by his wife and his other family members by way of gift on various occasions. He also stated that the total weight of jewellery was within the limits stipulated as per guidelines envisaged in Board Instruction No.1916 dated 11.05.1994.

The assessee's contention is not acceptable as the assessee simply stated that his family members received jewellery by way of gifts on various occasions. He falled to give the details as to when and how much gold was received by way of gift. The assessee also failed to produce any evidence to prove the sources for the investment in said jewellery. The limits stipulated in the Board instruction No.1916 dated 11.05.1994 are applicable to seizure of gold jewellery during the search operations and not for explanation to be given during the assessment proceedings. As the assessee failed to explain the sources for the investment of Rs.16,01,975/- in jewellery, the said amount of Rs.16,01,975/- is treated as unexplained investment in the hands of the assessee.”

Thus, the net weight of gold jewellery as found during the search was 807.5 grams which was explained by the assessee as belonging to his family members including his wife and other family members. The assessee has also claimed that the total weight of jewellery was within the limits stipulated as per the guidelines envisaged in Board’s Instruction no.1916 dated 11.05.1994. However, the Assessing Officer has not accepted the said contention of the assessee and made the addition.

10.

Before the Tribunal the learned Authorised Representative of the Assessee has submitted that the jewellery belongs to the wife and daughter of the assessee as well as the assessee himself and therefore, as per the said Instruction No.1916 dated 11.05.1994 the gold jewellery to the extent of 500 grams belonging to the wife and daughter to be allowed. Further, gold jewellery belonging to one un- married daughter is allowable to the extent of 250 grams and gold jewellery held by the assessee and his son to the extent of 250 grams each is also allowable under the aforesaid Instruction. The learned Authorised Representative of the Assessee has also relied upon various judgements in support of his contention as under: i. CIT, Alwar vs. Satya Narain Patel [2014] 366 ITR 325 (Raj.HC); ii. Order of ITAT, Delhi in the case of Smt. Ritu Bajaj, New Delhi vs. DCIT, Central Circle-5, New Delhi in ITA.No.4101/Del./2017, dated 09.03.2018; iii. Order of ITAT, Hyderabad in the case of C.M. Gopal, Hyderabad vs. DCIT, Central Circle-2, Hyderabad in ITA.No.884/Hyd./2019, dated 26.04.2021; iv. Order of ITAT, Hyderabad in the case of Shri Gajulapalli Shoban Babu, Hyderabad vs. DCIT, Central Circle-2(2), Tirupati in ITA.Nos.296, 297 & 298/Hyd./2020, dated 08.11.2024.

11.

The learned Authorised Representative of the Assessee then submitted that in case of C.M. Gopal vs. DCIT (supra), this Tribunal has considered an identical issue in para 12.2 and decided the same in favour of the assessee by giving the benefit of the instruction 1916 dated 1105 1994.

12.

On the other hand, the learned DR has submitted that the Instruction of the CBDT is relevant only for the purpose of seizure of jewellery at the time of search and seizure and therefore, it is not relevant for the addition on account of unexplained investment in jewellery. He has relied upon the Orders of the authorities below.

13.

I have considered the rival submissions as well as relevant material on record. Undisputedly, the total jewellery found during the search and seizure action was 807.5 grams whereas the assessee has explained that the jewellery belongs to wife, one married daughter and himself and son and therefore, as per the Board’s Instruction no.1916 dated 11.05.1994 the amount of jewellery as given in the said Instruction is treated as a reasonable quantity and for that no source is required to be explained. An identical issue has been considered by this Tribunal in case of C.M. Gopal (supra) as well as by Hon’ble High Courts as relied upon by the learned Authorised Representative of the Assessee. In the case of CM Gopal vs. DCIT (supra), this Tribunal has considered this issue in para no.12.2 as under:

“12.2. Considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. During the course of search, gross weight of jewellery at 751.5 grams were found. On perusal of the submissions made by the assessee before the CIT(A) that there are four members in his family consisting of his wife, unmarried daughter, son and himself. The AR of the assessee quoted Instruction No. 1916 of 11/05/1004 of CBDT and according to which, he is entitled to have 950 grams of jewellery and the assessee is having the less than the entitled quantity. However, the AO denied to give benefit as per the said Instruction of CBDT on the ground that as per the above Instruction certain jewellery not to be seized. We are of the view that various courts have decided the issue in favour of the assessee in the light of the above Instruction issued by the CBDT, which are as under: 1. CIT vs. Satya Narain Patni (2014) taxmann.com 440 (Rajasthan).

Sonia Magu vs. CIT [2009] 185 TAXMAN 402 (DELHI).

R. Umamaheshwar Vis DCIT, 60 taxmann.com 400 (Hyd.)

Smt. Ritu Bajaj V/s DCIT, Central Circle- 5,Delhi, ITA Nos. 4101/DEL/2017 (AY 2014-15).

Smt. Saran Kaur, Hyderabad vs. DCIT Circle 4 (1), Hyderabad, ITA Nos. 1402/Hyd12012 for the asst year 2008-09.

Respectfully following the ratios laid down in the said cases, we direct the AO to delete the addition of Rs.12,19,714/- made in the hands of the assessee on account of jewelley.”

14.

Accordingly, in view of the undisputed fact that the total jewellery found during the search and seizure action is below the limit provided in the CBDT Instruction no.1916 dated 11.05.1994 therefore, no addition is called for on account of investment in jewellery.

15.

In the result appeal of the assessee is allowed.

Order pronounced in the open court on 09.09.2026.

Sd/- VIJAY PAL RAO VICE PRESIDENT Hyderabad, Dated 09th day of September, 2026 VBP Copy to: GOVARDHANNAIDU CHINTAKUNTA, C/O. P.MURALI & CO., CHARTERED ACCOUNTANTS, 1 6-3-655/2/3, SOMAJIGUDA, HYDERABAD-500082, TELANGANA ITO ,WARD-1, OFFICE OF THE ITO 2 WARD-1, PRODDUTUR-, ANDHRA PRADESH 3 THE PR. CIT, KURNOOL. 4 THE D.R., ITAT, HYDERABAD SMC-BENCH 5 GUARD FILE TRUE COPY Digitally signed VADREVU by VADREVU PRASADA RAO PRASADA ASSISTANT REGISTRAR / Date: I.T.A.T., HYDERABAD RAO 2026.09.09 11:37:21 +05'30'

GOVARDHANNAIDU CHINTAKUNTA,HYDERABAD vs. ITO ,WARD-1, PRODDUTUR

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