The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has ruled that the Central Board of Direct Taxes’ (CBDT) guidelines on gold jewellery seizure cannot be applied as a fixed ceiling when assessing whether jewellery holdings are adequately explained. The decision clarifies the distinction between administrative guidelines for search operations and the assessment of unexplained assets under income-tax proceedings.

The case involved 3,877.5 grams of gold jewellery, valued at Rs 1.46 crore, found during an income-tax search at a family residence in Ghaziabad. The assessing officer accepted 2,250 grams for nine family members under CBDT Instruction No. 1916 and a subsequent press release. The balance of 1,627.5 grams, valued at Rs 61.35 lakh, was treated as unexplained, resulting in tax additions of Rs 20.45 lakh each to three family members.

The tribunal deleted the additions after considering the family’s declared income, financial history and explanation that the jewellery had accumulated through inheritance, weddings and customary gifts. Although the family did not produce purchase bills, wealth-tax records or valuation certificates establishing the source and acquisition date of the jewellery, its cumulative withdrawals over nine years exceeded Rs 13.50 crore.

For the jewellery trade, the ruling is relevant to the distinction between the quantity of gold jewellery that may be considered for seizure during a search and the assessment of its ownership and source. It indicates that the CBDT guidelines cannot, by themselves, establish that holdings above the prescribed quantities are unexplained.

The decision does not exempt gold holdings from scrutiny. Assessments may still consider the source of jewellery and the taxpayer’s financial circumstances, with the ruling underscoring that seizure guidelines alone cannot determine the outcome.