Vakil Ahmed Vs ITO (ITAT Delhi): Family Jewellery and Bank Withdrawals Cannot Be Treated as Unexplained Income on the Basis of Mere Assumption

Background and Case Overview

The Delhi Income Tax Appellate Tribunal, in Vakil Ahmed Vs ITO (ITA No. 2550/Del/2026), dealt with a significant question arising in the context of Assessment Year 2019-20: whether jewellery accumulated over decades through family customs and cash explained through documented bank withdrawals can be subjected to addition as unexplained investment or unexplained money, solely on the grounds that purchase bills are absent and that the amounts may have been spent.

The case originated from a search operation carried out by the National Investigation Agency (NIA) on 23 January 2019 at the assessee's residential premises. During the search, gold jewellery weighing approximately 3.9 kg and cash amounting to ₹21 lakh were recovered. The Assessing Officer, relying on this information, initiated reassessment proceedings after observing that the income declared by the assessee in his return for Assessment Year 2019-20, being ₹10,45,480/–, did not correspond with the quantum of jewellery and cash discovered.

Reassessment Proceedings Under Section 148A

Following the NIA search, a notice under Section 148A(b) of the Income Tax Act, 1961 was issued to the assessee on 23.02.2023, with prior approval of the competent authority. An order under Section 148A(d) was passed on 24.03.2023, noting the following:

• During the NIA search, cash of ₹21,00,000/– and gold jewellery worth approximately ₹1,56,00,000/– (3.9 kg) were seized from the assessee's premises.
• The income declared in the return for Assessment Year 2019-20 did not commensurate with the transactions, rendering the income chargeable to tax as having escaped assessment to the extent of ₹1,77,00,000/–.

Subsequently, a notice under Section 148 was issued on 24.03.2023, and the matter was transferred under the Faceless Scheme. The assessee filed a return admitting the income declared in the original return. Notices under Section 143(2) and Section 142(1) were issued and complied with.

Nature of the Two Additions Made by the Assessing Officer

Addition on Account of Jewellery — ₹92 Lakh Under Section 69

The assessee provided a person-wise account of the jewellery, stating it belonged to his late wife and three married daughters, received as gifts at the time of their respective marriages:

In support of his claim, the assessee furnished:

• Affidavits from family members and in-laws confirming the gift of jewellery at the time of the respective marriages
• Wedding photographs identifying specific ornaments correlated with the affidavits
• Bank statements of his daughters' accounts with Andhra Bank, Preet Vihar, showing regular withdrawals as evidence of their frequent visits to the parental home

The Assessing Officer acknowledged the submissions but rejected them, allowing credit for only 1,600 grams and treating the balance 2.3 kg, valued at ₹92 lakh, as unexplained investment under Section 69 of the Act. The primary grounds for rejection were:

• Absence of purchase bills or payment vouchers for the jewellery
• The view that married daughters would ordinarily maintain their ornaments at their matrimonial homes, not at their father's residence
• Affidavits being characterised as self-serving

Addition on Account of Cash — ₹21 Lakh Under Section 69A

The assessee produced bank statements and a detailed schedule of cash withdrawals amounting to ₹36,20,000/– made by him and various family members between 1 April 2018 and the date of the NIA search on 23 January 2019. The NFAC records also noted that total withdrawals from the family's bank accounts were ₹61,60,000/–.