Tax dept seized wife’s Rs 1.65 crore worth of gold and silver jewellery, issued notice for…

Tax Authorities Seize Rs 1.65 Crore Worth of Gold and Silver Jewelry; Husband Wins ITAT Bengaluru Case

On November 14, 2019, the Income Tax Department conducted a search operation under Section 132(1) at the residence of Mr. Suresh (name withheld). The operation resulted in the seizure of several jewelry items, which were documented and inventorized.

Following this search, the Deputy Commissioner of Income Tax (DCIT), Central Circle – 1(1), Bengaluru, issued an order under Section 144(3) in conjunction with Section 153D on March 28, 2022. In the order, the tax assessing officer (AO) classified Rs 1.65 crore (1,65,45,323) as unexplained investment in jewelry under Section 69.

During the search, various pieces of jewelry were found and seized, and statements were recorded under Section 132(4), along with several statutory notices sent to Suresh.

In response to the ongoing assessment proceedings, Suresh contended that all the seized jewelry had been purchased legitimately through banking channels and credit cards.

Upon reviewing Suresh’s explanations, the tax officer discovered discrepancies between the jewelry items listed in Suresh’s response and the payments made from his bank account and credit cards.

Suresh provided invoices to corroborate his bank account and credit card purchases. However, a comparison between the inventory compiled during the search and the payment records showed that the invoices did not correspond to any of the seized items.

Furthermore, during the valuation process, the jewelry was assessed at Rs 1.65 crore (1,65,45,321), and in a sworn statement under Section 132, Suresh indicated that, lacking documentary proof, the unexplained investment in jewelry would be subject to taxation.

Despite this statement, Suresh did not file any income tax return disclosing the relevant wealth, and the submitted invoices failed to match the items listed in the inventory. Moreover, Suresh did not provide supporting evidence to convincingly link the inventory items found during the search with the submitted invoices and payments.

The income tax officer also noted that some transactions for the seized jewelry took place after the date of the search, which invalidated Suresh’s claims regarding those purchases as evidence for investments made prior to the search.

Although Suresh claimed that some jewelry was ancestral and that he had received certain pieces as gifts from family, relatives, and friends, he did not present any documentary confirmation from those who allegedly provided the gifts.

Consequently, the income tax officer concluded that Suresh failed to substantiate his claims regarding the provenance of his jewelry investments, deeming his explanations unsatisfactory. Additionally, Suresh had declared only Rs 5 lakh (5,20,140) in jewelry in his own name and Rs 98 lakh (98,52,400) in jewelry in his spouse’s name on his income tax return.

Furthermore, Suresh did not supply a balance sheet for the Assessment Year 2020-21 or a statement of affairs. The tax officer emphasized that Suresh had ample opportunities to prove the source of his jewelry investments totaling Rs 1.65 crore (1,65,45,323). Consequently, the income tax department classified this sum as unexplained under Section 69 of the Income Tax Act.

Unhappy with the outcome, Suresh appealed to the Commissioner of Appeals (CIT A) and won the case, leading the income tax department to escalate the matter to the Income Tax Appellate Tribunal (ITAT) in Bengaluru.

On September 11, 2025, Suresh achieved a favorable ruling from the ITAT Bangalore, which shed light on the rationale behind his victory.

Inventory of Seized Jewelry

In its judgment (ITA No.2168/Bang/2024) dated September 11, 2025, the ITAT Bangalore stated that during the income tax search operation, jewelry weighing 2487.100 grams and silver articles totaling 3.00 kilograms were seized, valued at Rs 1,75,45,323, as indicated in the Assessment Order (AO) prior to the issuance of notice under Section 143(2).

ITAT Bangalore’s Findings

The ITAT Bangalore observed that the learned Counsel highlighted that in the assessment of Suresh’s spouse, completed on March 28, 2022, under Section 143(3) in conjunction with Section 153D, a notice was also issued under Section 143(2), citing similar issues.

The ITAT concluded that since the same tax officer had accepted the spouse’s explanation, they could not categorize the jewelry listed in the annexures as unexplained belonging solely to Suresh.

The ITAT articulated: “The nature of the jewelry also relates to the lady. The satisfaction notes recorded by the same AO are identical, and the documents referred to are also the same.”

Judgment: “After reviewing the Order of the learned CIT(A), we found no flaws in their decision and affirmed the CIT(A)’s conclusions. Therefore, the revenue’s appeal is dismissed. Pronounced in open court on the date mentioned on the caption page.”