Income Tax Dept seized gold and silver from Mumbai woman; here’s why ITAT deleted ₹11.23 lakh tax addition

A Mumbai woman has won relief after the Income Tax Department treated part of the gold and silver found at her home and bank lockers as unexplained income.

In its order in ITA No. 3073/Mum/2026, pronounced on 14 July 2026, the Mumbai bench of the Income Tax Appellate Tribunal deleted tax additions totalling ₹11.23 lakh, after considering her explanation that the precious assets had accumulated through marriage gifts, inheritance and family acquisitions over several decades.

According to the ITAT order, the case concerned Smita Kelkar, a resident of Vashi, Navi Mumbai, whose residence and two bank lockers were searched during Income Tax Department proceedings.

Income Tax Department seized gold, diamonds and silver

During the search at her residence, officials found 392.71 grams of gold jewellery, 92 grams of pure gold, diamond jewellery containing 27.4 carats of diamonds with 161.33 grams of gold, and 800 grams of silver articles and coins.

The two bank lockers contained another 35 grams of gold jewellery, 166 grams of pure gold and 10.4 kg of silver-mix articles, the tribunal order said. The precious articles found during the search were valued at about ₹29.49 lakh.

Why did the tax department question the jewellery?

According to the tribunal order, Kelkar explained that the jewellery and other precious articles had accumulated over a long period. She had been married since 1983 and said around 250 grams of jewellery was received from her mother and other relatives at the time of her marriage.

She also claimed gold through inheritance following the deaths of her mother and mother-in-law, besides acquisitions made on family occasions over the years.

The ITAT order also records that Kelkar and her husband had reported aggregate gross total income of about ₹4.55 crore over five assessment years.

The Assessing Officer accepted purchase bills for 195.996 grams of gold jewellery and applied CBDT Instruction No. 1916 to another 231.714 grams. The AO considered a 700-gram family benchmark, comprising 500 grams for a married woman and 100 grams each for her husband and son.

However, the AO treated certain gold and silver articles as unexplained and made an addition of ₹18.05 lakh under Section 69A of the Income-tax Act.

The Commissioner of Income Tax (Appeals) later deleted the addition relating to diamond jewellery but sustained ₹8.10 lakh for 258 grams of pure gold and ₹3.12 lakh for silver articles.

Why did ITAT Mumbai delete the additions?

The tribunal examined the silver articles in the context of Kelkar's long married life, inheritance and customary family acquisitions. It noted that the taxpayer had explained that the silver had accumulated over several decades.

The ITAT also referred to an earlier Indore ITAT ruling in Dinkar Laxman Mujumdar v. DCIT, concerning silver articles. It found that the Revenue had not brought sufficient material to establish that Kelkar's silver represented a recent acquisition from undisclosed income.

The tribunal therefore deleted the ₹3.12 lakh addition for silver.

On the 258 grams of pure gold, the ITAT clarified that CBDT Instruction No. 1916 does not automatically exempt all pure gold or bullion. However, the quantities specified in the instruction can serve as a reasonable benchmark when examining a family's holdings.

After excluding the 195.996 grams supported by purchase bills, the remaining ordinary jewellery, gold in diamond jewellery and pure gold totalled 651.044 grams, below the 700-gram benchmark recognised by the AO.

The tribunal also noted that the tax authorities had not produced evidence showing that the pure gold was acquired during the relevant year from undisclosed income. The absence of old purchase bills alone was not enough to establish unexplained income where the explanation involved marriage gifts, inheritance and decades-long accumulation.

The ITAT therefore deleted the ₹8.10 lakh pure gold addition and allowed Kelkar's appeal, removing the surviving ₹11.23 lakh tax addition.

The tribunal specifically clarified that its decision was based on the facts of this case and does not mean that all pure gold or bullion automatically gets the benefit of CBDT Instruction No. 1916.