No S.68 Addition on Sale of Inherited Jewellery Backed by Valuation Report: ITAT [Read Order]

The Income Tax Appellate Tribunal, Mumbai Bench (ITAT) has held that in the case where the sale of inherited jewellery is supported by a valuation report prepared by a government-approved valuer and are received through banking channels, no unexplained income addition can be made under Section 68 of the Income Tax Act, 1961.

The appellant, Priyanka Lalitkumar Raizada, filed her return of income for Assessment Year 2014-15 declaring total income along with a long-term capital loss arising from the sale of gold jewellery, received through an inheritance upon the death of her father. The sale consideration of ₹21,50,540 was credited through proper banking channels.

During assessment proceedings, the AO questioned the source of the jewellery and the sale proceeds, primarily on the ground that no documentary evidence showing acquisition of the jewellery by the appellant’s father were produced.

Despite the appellant furnishing a valuation report prepared in 2001 by a government-approved valuer, sale invoices matching the jewellery items, bank statements reflecting the sale proceeds, and a notarised affidavit from her mother confirming inheritance, the AO treated the entire sale consideration as unexplained cash credit under Section 68 of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, upheld the addition, leading the appellant to approach the Income Tax Appellate Tribunal.

On behalf of the appellant, Himanshu Gandhi submitted that the as jewellery sold was inherited from her deceased father therefore, the inheritance is a recognised mode of acquisition under tax law. And the absence of original purchase bills could not be a valid ground to doubt inheritance, notably when corroborative evidence was available such as sale invoices, bank statements evidencing receipt of sale proceeds, and a notarised affidavit from her mother confirming that the jewellery was bequeathed solely to the appellant.

Further, contended that the quantity of jewellery was well within the limits prescribed under Central Board of Direct Taxes Instruction No. 1916 dated 11.05.1994, and that the tax authorities had failed to disprove any of the documentary evidence on record or conduct meaningful inquiry.

The Bench of Sandeep Gosain, Judicial Member and Girish Agrawal, Accountant Member allowed the appeal and deleted the addition of ₹21.5 lakh, observing that the sale proceeds were received through proper banking channels. Noting that the jewellery items sold matched precisely with those mentioned in the valuation report prepared in 2001 by a government-approved valuer in the name of the appellant’s deceased father.

The Bench remarked that the quantity of jewellery was within the permissible limits prescribed by the Central Board of Direct Taxes. In the absence of any contrary evidence or discrepancy, the Tribunal agreed that the appellant was a regular taxpayer and had satisfactorily explained the source of the sale of the jewellery. Accordingly, the Bench ruled that the conditions for invoking Section 68 of the Income Tax Act, 1961 were not met.

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