When Mrs Parikh from Vile Parle West, Mumbai, submitted Schedule AL in her income tax return (ITR) for the first time after surpassing the Rs 50 lakh income threshold, the Income Tax Department discovered that she owned jewellery valued at Rs 67 lakh.
However, after AY 1997-1998, Mrs Parikh had stopped filing wealth tax returns disclosing such jewellery items. This led to the suspicion by Income Tax Department that Mrs Parikh might have sold the said jewellery and so she was sent a unexplained credit income tax notice for the jewellery.
The main dispute concerned the Rs 67.4 lakh jewellery and Rs 12 lakh property broker’s brokerage. The Income Tax Assessing Officer treated the jewellery as unexplained undisclosed assets under Section 69A as the records for this jewellery surfaced for the first time in her schedule AL.
Mrs Parikh told that a major portion of the jewellery represents her share in the jewllery owned by her late father-in-law, her mother-in-law and their family’s Hindu Undivided Family (HUF). However, the AO was not satisfied with her answers and opined that there is no evidence which proves that Mrs Parikh inherited the jewellery. So the AO, treated the jewellery as unexplained under Section 69A.
The second issue related to Rs 12 lakh brokerage payment claimed as part of the cost of investment in a new residential property.
Ultimately on September 1, 2026, Mrs Parikh succeeded on the jewellery issue but lost on the brokerage claim, as ITAT Mumbai partly allowed her appeal. Advocate Prakash Shah represented her before ITAT Mumbai.
What to do if you have ancestral jewellery?
Chartered Accountant Ashish Niraj, Partner, A S N & Company, said to ET Wealth Online: “This ITAT judgment again explains that big additions can be challenged with proper documentations. Following considerations to be kept in mind are as follows:-
- If property/Jewellery is inherited then you should keep copies of the will or succession certificate carefully.
- If property/Jewellery is received due to partition then you should keep partition-deed safely which is signed by all legal heirs as in this case ITAT gave much importance to this document.
- After every 15-20 years you should get property valuation done from registered valuer to keep your assets updated with market value. This valuation report must have details of your jewellery (item-wise) and its weight, purity and also if possible HD photos.
- For jewellery items which you got before April 1, 2001 from your ancestors you need to get a Fair Market Value (FMV) report. This FMV report states what was the value of your jewellery as of April 1, 2001. This FMV report can point out your cost of acquisition under Section 55(2)(b)(ii).
- You must retain any historical Wealth-tax returns or wealth-tax computation sheets filed by the ancestor, the HUF, or yourself (prior to the abolition of Wealth Tax in 2015).
- If your taxable income exceeds Rs 1 Crore in any financial year, disclosure of movable assets (including jewellery) under Schedule AL is mandatory. Earlier thus limit was Rs. 50 Lakh.
- At the time of sale of Jewellery you should Sell only to a GST-registered buyer or reputed jeweller who issues an official purchase memo/invoice containing your PAN and itemized weights.
- If you wish to save Long-Term Capital Gains (LTCG) tax, you can deploy the net sale consideration under Section 54F (purchase/construction of a residential house within the statutory timelines). So if you want to save capital gain tax you should plan a property purchase in advance.
Why did Mrs Parikh win the ancestral jewellery issue?
Chartered Accountant Suresh Surana says that during the assessment proceedings, when the AO asked Mrs Parikh about the bills, vouchers and bank statements for the jewellery, she explained that the jewellery is her own stridhan and ancestral jewellery inherited from her late father-in-law, mother-in-law and the family HUF.
However, since the jewellery had been acquired or inherited several decades earlier, Mrs Parikh could not produce purchase invoices for every item.
Instead, Mrs Parikh furnished old wealth-tax returns, valuation reports dating back to 1989, family distribution records and a registered valuer’s report confirming the jewellery in her possession. The AO did not accept this explanation.
However, the Income Tax Appellate Tribunal (ITAT) Mumbai found that Mrs Parikh had produced a documentary trail extending over almost three decades.
Surana says: “Her own wealth-tax return for AY 1997-98 recorded jewellery of Rs 19.55 lakh, while historical valuation reports and wealth-tax records supported the ancestral jewellery.”
Moreover, a family declaration also recorded the distribution of jewellery among the legal heirs in 2015, and the registered valuer confirmed that there had been no material change in the quantity of jewellery reflected in the earlier records.
So for this reason, ITAT Mumbai held that non-filing of wealth-tax returns after AY 1997-1998 could not, by itself, prove that Mrs Parikh had sold the jewellery.
Surana says that if the Income Tax Department wanted to take the view that Mrs Parikh had indeed sold off her jewellery after AY 1997-1998, it needed some independent evidence of a sale, disposal or receipt of consideration. However, the Income Tax Department had no such proof.
The ITAT Mumbai also recognised that taxpayers cannot always be expected to retain purchase bills and bank statements for jewellery acquired or inherited decades earlier, particularly where other reliable historical documents establish its source and ownership. Thus, Mrs Parikh won the 69A unexplained jewellery case.
Section 69A can apply where a taxpayer owns an asset but fails to satisfactorily explain its nature and source. However, Mrs Parikh had provided a consistent explanation supported by wealth-tax records, historical valuations, inheritance and family distribution documents.
The Income Tax Department could not reject that explanation merely on an assumption that the jewellery might have been sold sometime in the past. The ITAT therefore deleted the entire Rs 67.40 lakh addition.
Mrs Parikh did not win the Rs 12 lakh property broker brokerage dispute
Mrs Parikh however, did not succeed on the Rs 12 lakh brokerage payment made to HUF. She had claimed total brokerage of Rs 30 lakh in connection with the purchase of her new residential flat, including Rs 12 lakh paid to an individual, Mr Rao, and another Rs 12 lakh to HUF.
The ITAT Mumbai found no evidence showing that the HUF had provided any separate service or deployed its own funds or assets. Surana says: “The same individual through whom the HUF supposedly acted had already received Rs 12 lakh personally for the transaction.”
So in this context, ITAT Mumbai clarified that the fact that HUF got Rs 12 lakh and issued an invoice and paid tax on it only proves that the HUF got the money but it does not prove that the HUF had rendered a separate brokerage service. However, ITAT Mumbai also clarified that this does not create a finding that HUF can’t never get any brokerage.
Surana says: “The claim failed because Mrs Parikh could not establish distinct services by the HUF on the particular facts.”
To conclude, Mrs Parikh won the principal jewellery dispute because she could demonstrate the history and source of her jewellery through credible, long-standing records, while the Income Tax Department relied largely on assumptions without evidence of any subsequent sale or disposal.
Surana says: “At the same time, the case shows that proof of payment alone does not establish the deductibility of an expense and the taxpayer must also demonstrate the actual service for which the payment was made.”
What is the Rs 12 lakh brokerage issue?
From her ITR, the Income Tax Department also got to know that her family had sold their ancestral property for Rs 106 crore, of which her share is Rs 35 crore (1/3rd). For this property sale he had paid Rs 30 lakh brokerage (of which Rs 12 lakh is paid to HUF, Rs 12 lakh to an individual and remaining to another person).
The dispute is not about the property sale, as Mrs Parikh claimed Rs 50 lakh tax deduction under Section 54EC as she invested in REC bonds and used Rs 20.52 crore to buy a residential property in Juhu. For the remaining Rs 9.85 crore long term capital gain (LTCG), she paid the income tax.
For those who don’t know under Section 54EC if you buy eligible government bonds, you can prevent paying any income tax on LTCG, but it is upto Rs 50 lakh maximum.
