The Income Tax Appellate Tribunal, Delhi, has clarified that the mere fact of a married daughter residing abroad does not invalidate her claim of ownership over jewellery kept with her parents, provided a credible affidavit supports it. This ruling reinforces the principle that tax authorities must evaluate explanations on their merits, not on stereotypical assumptions about family practices.
Background & Facts
The Dispute
The appellant, Rachit Gupta, faced an assessment under Section 69 of the Income Tax Act, 1961, for Assessment Year 2022-23, following a search operation conducted on 08.03.2022 under Section 132. During the search, a total of 1341.70 grams of gold jewellery was seized from his premises. The Assessing Officer (AO) attributed portions of this jewellery to family members - 100 grams to the appellant, 100 grams to his father, 500 grams to his mother, and 500 grams to his wife - totaling 1200 grams. The remaining 141.07 grams (valued at Rs. 6,58,056) was treated as unexplained income under Section 69.
The appellant also claimed that 300 grams of the seized jewellery belonged to his sister, Nikita Gupta, who resides in London. He submitted an affidavit from his sister confirming her ownership of the 300 grams. The AO rejected this claim, citing CBDT Instruction No. 1916 dated 11.05.1994, which presumes a maximum of 500 grams per married woman and 100 grams per male member in a family. The AO held it was "unusual" for a married daughter living abroad to retain jewellery with her parents.
Key Facts
- Total jewellery seized during search: 1341.70 grams
- Jewellery attributed by appellant: 1200 grams (100g self, 100g father, 500g mother, 500g wife)
- Claimed ownership by sister (Nikita Gupta): 300 grams, supported by affidavit dated 15.04.2022
- Balance jewellery treated as unexplained: 141.07 grams (Rs. 6,58,056)
- CBDT Instruction No. 1916 dated 11.05.1994 invoked by AO to cap jewellery per family member
- Sister’s affidavit explicitly stated: "I am the absolute owner of 300 grams of gold jewellery kept at my parents’ residence in India for safekeeping"
- Appellant’s family has a history of declared taxable income over multiple years
Procedural History
- 08.03.2022: Search conducted under Section 132 at appellant’s premises
- 15.04.2022: Affidavit from sister Nikita Gupta submitted to AO
- 15.09.2025: Order of Ld. Commissioner of Income Tax (Appeals)-3, Noida issued
- 15.09.2025: CIT(A) accepted 70 grams as belonging to sister, rejecting 230 grams without reasoning
- 02.02.2026: Hearing before ITAT Delhi
- 05.05.2026: Judgment pronounced by ITAT Delhi
Relief Sought
The appellant sought deletion of the entire addition of Rs. 6,58,056 under Section 69 and full recognition of 300 grams of jewellery as belonging to his sister, based on her affidavit and established family customs.
The Legal Issue
The central question was whether the CBDT Instruction No. 1916 operates as a rigid ceiling on jewellery ownership, and whether the mere fact of a married daughter residing abroad justifies rejection of her claim of ownership over jewellery kept with her parents, absent any contradictory evidence.
Arguments Presented
For the Appellant
The appellant’s counsel argued that the CIT(A)’s acceptance of only 70 grams of jewellery for the sister was arbitrary and unsupported by any reasoning. He relied on the jurisdictional ITAT Delhi decision in Kirti Singh v. ACIT [2023] 157 taxmann.com 298, which recognized that it is a common social practice in Indian families for married women - including those abroad - to keep jewellery with their parental homes for safety and cultural reasons. He emphasized that the sister’s affidavit was unchallenged, and the family’s declared income history corroborated the plausibility of owning such jewellery. The counsel contended that the CIT(A) failed to apply the principle of natural justice by not providing a speaking order for reducing the claim from 300 grams to 70 grams.
For the Respondent
The Revenue relied on CBDT Instruction No. 1916, which presumes a maximum of 500 grams per married woman and 100 grams per male member. It argued that since the sister was residing in London, her claim was inherently improbable and could not be accepted without corroborative evidence such as purchase receipts or marriage gifts. The Revenue maintained that the CIT(A)’s partial allowance of 70 grams was a reasonable compromise.
The Court's Analysis
The Tribunal examined both the CBDT Instruction and the precedent in Kirti Singh v. ACIT. It noted that the instruction is an administrative guideline meant to assist Assessing Officers in forming a prima facie view, not a statutory limit on ownership. The Tribunal emphasized that guidelines cannot override factual evidence.
"It is a common practice in joint family that even married daughters keep their valuable with their parents particularly in a situation they are living outside India. In this case also, Assessee's sister is staying in London and she had kept gold jewellery of 300 gms with her parent. In our considered view, there is nothing wrong and unusual in it."
The Tribunal found the CIT(A)’s reduction of the claim from 300 grams to 70 grams to be wholly inexplicable. No evidence was presented to dispute the sister’s affidavit, nor was any reason given for selecting 70 grams specifically. The Tribunal held that such a decision, without a speaking order, violates the principles of natural justice.
The Tribunal distinguished the AO’s reliance on the "unusual" nature of the claim, noting that globalization and migration patterns have rendered such assumptions outdated. The appellant’s family’s consistent tax compliance further supported the legitimacy of the jewellery’s origin.
The Verdict
The appellant’s appeal was partly allowed. The Tribunal set aside the CIT(A)’s order to the extent it restricted the sister’s claim to 70 grams. The AO is directed to allow the full 300 grams of jewellery as belonging to the sister, as per her affidavit. Consequently, the addition of Rs. 6,58,056 under Section 69 is reduced by Rs. 3,26,858 (value of 230 grams of gold at prevailing rates), and the remaining addition of Rs. 3,31,197 is upheld. The order is to be implemented within 45 days of the judgment.
What This Means For Similar Cases
Affidavits from Absent Family Members Are Valid Evidence
- Practitioners may now rely on sworn affidavits from family members residing abroad to establish ownership of seized assets
- No additional documentation (e.g., purchase receipts) is mandatory if the affidavit is unchallenged and consistent with family history
- Tax authorities cannot dismiss such claims based on cultural stereotypes
CBDT Instructions Are Presumptive, Not Conclusive
- CBDT Instruction No. 1916 cannot override actual proof of ownership
- Assessing Officers must treat guidelines as starting points, not ceilings
- Where credible evidence contradicts the presumption, the evidence prevails
Speaking Orders Are Mandatory for Partial Allowances
- Any partial acceptance or rejection of claims must be accompanied by reasoned findings
- Arbitrary reductions (e.g., 300g to 70g) without justification violate natural justice
- Tribunals will intervene where authorities fail to explain quantitative decisions
