ITAT Jaipur Scraps ₹13.05 Lakh Tax Addition as Mother Proves Gold Sale Gift

The Income Tax Appellate Tribunal’s Jaipur Bench deleted an unexplained cash deposit addition of ₹13,04,900 against an individual taxpayer, ruling that cash gifted by his elderly mother from the sale of her personal gold jewellery was legitimate and fully substantiated.

The verdict dismissed the tax department's challenge against the family transaction. The mother had backed the gift with an authenticated valuation report and a notarised deed. That legal trail settled the dispute.

The dispute began when tax authorities flagged high-value transactions conducted by the Jaipur resident, who had purchased real estate valued at ₹20,23,778 and deposited ₹13,04,900 in cash into his bank account without initially filing an income tax return. The Assessing Officer initiated an inquiry into the source of the capital. Although the taxpayer subsequently submitted a return declaring an annual income of ₹2,14,997, the assessing officer rejected the explanation. The officer classified both the real estate acquisition and the cash deposits as unexplained income, slapping an aggregate addition of ₹33,28,678 to the taxpayer’s taxable base.

The taxpayer contested the assessment before the Commissioner of Income Tax (Appeals). The appellate authority ruled in his favour regarding the real estate acquisition and removed the ₹20.23 lakh addition. But the authority sustained the ₹13.04 lakh addition for the cash deposits. The taxpayer then appealed to the ITAT Jaipur Bench to quash the remaining addition.

Bullion Trade Customs and Disputed Weight Records

Before the tribunal, legal counsel representing the taxpayer established that the taxpayer’s mother had liquidated 642.300 grams of her vintage gold jewellery to generate ₹16,10,567 in proceeds. From those sale proceeds, she gifted ₹16 lakh in cash to her son. The taxpayer placed reliance on an appraisal by an approved valuer who had assessed the jewellery's fair value at ₹18,36,230 in 2011.

The tax department resisted. The Assessing Officer argued that the jewellery sale invoices were defective because they failed to itemise individual ornaments. Furthermore, the tax officer pointed to a discrepancy between the total weight registered in the 2011 appraisal report and the exact quantity of bullion liquidated.

Counsel for the taxpayer dismantled that argument on commercial grounds. In the Indian bullion trade, jewellers purchase old ornaments on aggregate gross weight rather than cataloguing individual rings, bangles, or necklaces. To anchor the chain of custody, the assessee submitted a notarised gift deed witnessed by two signatories alongside bank records showing that the taxpayer deposited ₹16,05,000 into his bank account between February 4 and March 31, 2012.

Statutory Backing Under Section 2(41)

The ITAT Bench upheld the taxpayer's submissions in an order dated October 6, 2026, holding that the assessing officer had no legal basis to disregard contemporaneous evidence.

The bench struck down the entire addition of ₹13,04,900.

Chartered Accountant Varun Singhal noted that taxpayers citing family gifts to explain capital outlays must observe strict financial hygiene. Assessees must affirmatively prove the donor's capacity and the underlying source of the money rather than relying merely on a document stating that a gift occurred. Key safeguards include preserving valuation certificates, original purchase or sale receipts, contemporaneous notarised agreements, and financial statements showing that the sequence of cash withdrawals directly correlates with subsequent bank deposits.