The Madras High Court directed the Income Tax Settlement Commission to reconsider Khazana Jewellery’s settlement plea involving 268 kg undisclosed gold stock, quashing its 2020 rejection and ordering a fresh review to avert penalties, interest, and prosecution.
CHENNAI: The Madras High Court has instructed the Income Tax Settlement Commission to re-evaluate Khazana Jewellery’s settlement application concerning 268 kg of gold stock held by its employees, goldsmiths, and agents, which had not been voluntarily disclosed for tax purposes in 2016.
The First Division Bench, consisting of Chief Justice Manindra Mohan Shrivastava and Justice G. Arul Murugan, annulled the commission’s rejection order from June 2020 and mandated a fresh review of the application to prevent the jewellery firm from facing penalties, interest charges, and potential prosecution.
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This direction followed a writ appeal lodged by the jewellery firm, represented by its Managing Director Kishore Kumar Jain, against a single judge’s order from November 28, 2025, which declined to challenge the settlement commission’s decision on grounds of incomplete disclosure.
A.P. Srinivas, senior standing counsel for the Income Tax department, highlighted to the court that Khazana Jewellery Private Limited is a closely held company based in Chennai, with Mr. Jain serving as Managing Director alongside his family members as directors.
In April 2016, following a search operation by the I-T officials, Mr. Jain acknowledged having exaggerated the refinery loss, misappropriated excess gold, and sold it on the black market. He claimed that the earnings from this inflated refinery loss amounted to approximately Rs 70.66 crore over the past six years.
Later, in 2018, he submitted a settlement application concerning the Rs 70.66 crore and an additional income of Rs 80 crore related to the 268 kg of bullion, seeking to pay income tax at 30% by categorizing it as business income.
While the Settlement Commission accepted the application regarding the Rs 70.66 crore, it rejected the plea concerning the Rs 80 crore, citing a lack of full and truthful disclosure.
During the single judge’s consideration of the writ petition, the jewellery firm proposed to pay 60% tax under Sections 69B and 115BBE of the Income Tax Act, 1961. However, Mr. Srinivas contended that such a proposal should have been presented to the settlement commission rather than the court.
In its writ appeal deliberation, the Chief Justice-led Bench found that the settlement commission had not adequately reviewed the jewellery firm’s application, necessitating a reexamination of the matter.
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