The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has given partial relief to a Mumbai taxpayer who was asked to explain jewellery worth Rs 67.39 lakh disclosed in her income tax return. The tribunal deleted the entire addition made under Section 69A of the Income Tax Act after finding that the tax department had relied largely on an inference that the jewellery must have been sold because the taxpayer had stopped filing wealth-tax returns.At the same time, however, the tribunal upheld a separate Rs 12 lakh disallowance relating to brokerage paid to an HUF. It found that the same individual who was said to have provided the brokerage service had already received an identical Rs 12 lakh payment in his individual capacity for the same property transaction.The order was passed on September 1, 2026, in the case of Anjani Ashok Parikh v. Income Tax Officer, Ward 34(1)(1), Mumbai, for assessment year 2021-22.Also Read | Tenant claims protection from eviction under unregistered rent agreement signed by owner’s brother; Madras High Court denies saying he failed to prove tenancy and was an unlawful occupant
What the case is about
The woman filed her income tax return for assessment year 2021-22 declaring a total income of Rs 10.21 crore. During the year, she and two other co-owners sold an immovable property in Mumbai for Rs 106 crore.The woman held a one-third share, giving her Rs 35.33 crore from the sale. After claiming deductions under Sections 54EC and 54 of the Income Tax Act, she declared net long-term capital gains of about Rs 9.85 crore.The assessment, however, threw up two separate issues from the point of view of the Income Tax Department.The first concerned jewellery worth Rs 67,39,949 that the woman had disclosed in Schedule AL of her income tax return. This was the first time she had made such a disclosure because her income had crossed the Rs 50 lakh threshold that required the schedule to be furnished.The assessing officer asked her to produce purchase bills, vouchers and bank statements for the jewellery. However, the woman explained that the jewellery had accumulated over several years and included ornaments that she had inherited from her ancestors and family HUF. Hence, she said it was difficult for her to produce purchase documents that would date back decades.She submitted older records, including her wealth-tax return for assessment year 1997-98, valuation reports and wealth-tax workings relating to ancestral estates and the HUF. She also produced a family declaration recording the distribution of ancestral jewellery among the legal heirs in 2015, along with a registered valuer’s report.However, the assessing officer was not convinced. One of the main reasons was that the woman had not filed wealth-tax returns after assessment year 1997-98. The officer inferred that her wealth must have fallen below the relevant threshold and, from that, concluded that the jewellery disclosed earlier may have been sold or otherwise disposed of.Also Read | He deposited Rs 14.96 lakh cash during demonetisation; landlord faced unexplained money tax notice under Section 69A, but ITAT Bangalore deletes addition on account of rental incomeThe entire Rs 67.39 lakh was consequently treated as unexplained money under Section 69A.The second dispute involved Rs 12 lakh paid as brokerage in connection with the woman’s acquisition of a residential flat. She had claimed total brokerage of Rs 30 lakh, including Rs 12 lakh paid to a person individually, another Rs 12 lakh to that person’s HUF and Rs 6 lakh to another person.The assessing officer accepted the other payments but disallowed the Rs 12 lakh paid to the HUF. The AO reasoned that the brokerage involved personal expertise and effort, while the individual through whom the HUF was said to have acted had already been separately paid Rs 12 lakh for the same transaction.
Why the woman won relief for ancestral jewellery
On the jewellery issue, the ITAT found that the department’s reasoning involved too many assumptions.The tribunal noted that the authorities had effectively reasoned that because the woman stopped filing wealth-tax returns, the jewellery declared in earlier years must have been sold. The tribunal did not accept that chain of reasoning.It pointed out that not filing a wealth-tax return establishes only that the taxpayer’s taxable wealth was below the applicable threshold. It does not, by itself, establish that a particular item of jewellery was sold or otherwise disposed of.The tribunal said there was no independent evidence showing that the jewellery had actually been sold or that the woman had received consideration from any such sale.Also Read | Man paid Rs 1.73 crore for Gurgaon flat, waited over a decade without possession; builder alleges homebuyer bought it for commercial gain, consumer commission awards refund with 12% interest & Rs 4 lakhMore importantly, the tribunal found that the woman had produced a documentary trail stretching back several decades. This included old valuation reports, her wealth-tax return, records relating to ancestral estates and the HUF, the 2015 family distribution declaration and a later registered valuer’s report.The tribunal made an important observation: when jewellery was acquired decades ago, the absence of original purchase bills and bank statements could not automatically make the taxpayer’s explanation unacceptable if other independent historical records supported ownership and lineage.“The essential requirement of section 69A is that assessee is found to be the owner of jewellery and offers no explanation, or an unsatisfactory explanation, as to its nature and source,” the tribunal observed.It ultimately concluded that the addition was based on inference rather than sufficient evidence. The Rs 67,39,949 addition was therefore deleted.Chartered Accountant Suresh Surana notes that ITAT Mumbai found that the woman had been able to establish a documentary trail covering nearly three decades.Surana told ET: “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.”There was also a family declaration from 2015 documenting the distribution of jewellery among the legal heirs. In addition, the registered valuer confirmed that there had been no material change in the quantity of jewellery compared with what was reflected in the earlier records.Also Read | Tax raid finds Rs 1.12 crore cash and Rs 4.34 lakh foreign currency at Delhi man’s home; he fights case twice, sister-in-law’s explanation helps brother-in-law win ITAT battle
Why she lost on the brokerage issue
The tribunal also examined whether the Rs 12 lakh paid to the HUF represented a genuine brokerage expense when the same person, the HUF’s Karta/coparcener, had already received another Rs 12 lakh for the same transaction.It referred to Supreme Court rulings dealing with the distinction between remuneration for an individual’s personal services and income attributable to an HUF’s funds. In this case, there was no evidence that any HUF funds or assets had been deployed to earn the brokerage.The tribunal noted that the services involved such as identifying the property, arranging visits and negotiating the price had been carried out by the broker and had already been paid Rs 12 lakh for those very services. The tribunal held that another identical payment routed through the HUF could not, on the evidence before it, be treated as a separate genuine service provided by the HUF.The fact that the HUF had confirmed receiving the money and had offered it to tax did not change the outcome. The tribunal said that merely establishing that the HUF received and declared the amount did not establish that it had itself rendered an additional service.Surana says: “The same individual through whom the HUF supposedly acted had already received Rs 12 lakh personally for the transaction.”Surana says: “The claim failed because she could not establish distinct services by the HUF on the particular facts.”As a result, the Rs 12 lakh disallowance was upheld.
