₹3.88L cash, ₹16L jewellery; here’s why he won

On November 25, 2010, the Income Tax Department conducted a search at the residence of Chintakunta, a taxpayer, uncovering Rs 3.88 lakh in cash and jewelry valued at Rs 16.01 lakh. The department deemed both amounts as unexplained income added to his taxable income. Chintakunta contested the tax claim, stating that the cash was already accounted for in his books of accounts and that the jewelry belonged to his family, including his wife and children.

The case was appealed multiple times and eventually reached the Hyderabad Income Tax Appellate Tribunal (ITAT).

The tribunal ruled in Chintakunta's favor on September 9, 2026. The ITAT accepted Chintakunta's explanation that the cash was not unexplained because his books and balance sheet already showed a cash balance of Rs 4.86 lakh as of March 31, 2011. Since the cash found during the search was covered by the recorded cash balance, the ITAT deleted the entire cash addition.

Regarding the jewelry, the ITAT found that the quantity found was within the reasonable limits recognised under CBDT Instruction No. 1916 and supported by judicial precedent. The Assessee also argued that the jewelry had been received as gifts over time and was part of the family's reasonable holdings. The Tribunal accepted this argument and deleted the Rs 16.01 lakh addition to unexplained investment.

This decision was the second round of appeal before the ITAT, as the case had already been reviewed by the Commissioner of Income Tax (Appeals).

This ruling by the ITAT provides clarity to taxpayers, stating that gold jewelry found during a search, within the limits prescribed under CBDT Instruction No. 1916, will not be seized and may also be considered explained during assessment. Maintaining records of purchases, gifts, inheritance, and ownership will be crucial in substantiating the taxpayer's position. The acceptability of an explanation depends on the specific facts, supporting material, and applicable judicial precedents in each case.