Keeping gold within the limits prescribed by the government does not automatically protect a person from scrutiny over its source of income, the Supreme Court has ruled. The court has clarified that even if an individual possesses gold within the permissible limits, they may still be required to explain how it was acquired, particularly in cases involving allegations of disproportionate assets.
The ruling came while hearing a disproportionate assets case from Bihar. The Supreme Court set aside an earlier Patna High Court order that had quashed corruption proceedings against a woman, paving the way for the case to resume.
Gold Ownership Limits and Source of Income Are Two Different Matters
The Supreme Court observed that the prescribed limits for holding gold do not provide immunity from explaining its source in a disproportionate assets case.
It further clarified that government circulars and press releases permitting individuals to hold gold up to specified quantities cannot, by themselves, establish that the gold was acquired through legitimate sources of income.
The court’s ruling overturns the Patna High Court’s decision, which had quashed criminal proceedings against a Bihar woman accused of possessing assets disproportionate to her known sources of income.
What Are the Government’s Prescribed Limits for Holding Gold?
The issue involves an Income Tax Department instruction dated May 11, 1994, and a Central Board of Direct Taxes (CBDT) press release issued on December 1, 2016.
Under these guidelines, the prescribed limits for holding gold jewellery are:
- Married women: 500 grams
- Unmarried women: 250 grams
- Men: 100 grams
However, the Supreme Court has clarified that these limits do not automatically establish the lawful source of the gold in cases involving allegations of disproportionate assets.
What Was the Case? Why Did the Supreme Court Overturn the Patna High Court Order?
A bench comprising Justice K V Viswanathan and Justice Aravind Kumar (verify the second judge’s name against the original judgment) accepted the Bihar government’s appeal and set aside the Patna High Court’s order.
The case dates back to 2015, when an FIR was registered against Phoolpari Kumari and her husband at the Bihar Vigilance Police Station over allegations of possessing assets disproportionate to their known sources of income.
The key developments in the case were:
- May 11, 2015: An FIR was registered against Phoolpari Kumari and her husband over allegations of disproportionate assets.
- July 29, 2020: Following an investigation, a chargesheet was filed against Phoolpari Kumari alone.
- January 28, 2021: The Special Vigilance Court in Patna took cognisance of the case.
- May 14, 2026: The Patna High Court quashed the criminal proceedings against the woman.
Phoolpari Kumari had approached the Patna High Court challenging the lower court’s decision to take cognisance of the case. She argued that her gold holdings were within the limits prescribed by the Income Tax Department and CBDT, making further action against her unwarranted.
Accepting her argument, the High Court observed that she possessed less than 750 grams of gold and that the vigilance authorities had made errors in calculating the weight of the gold and the value of her assets. On this basis, it quashed the criminal proceedings on May 14, 2026.
Supreme Court Says Source of Disproportionate Assets Must Be Explained
The Bihar government challenged the Patna High Court’s order before the Supreme Court, arguing that the permissible limit for holding gold and the obligation to explain its source in a corruption case were two separate issues.
In its judgment dated November 2, the bench accepted the state’s argument and observed that an accused person facing disproportionate assets allegations must provide an explanation regarding the assets in question.
The court clarified that merely relying on government circulars or CBDT guidelines allowing individuals to hold gold up to specified limits does not amount to explaining how the gold was acquired.
The Supreme Court set aside the Patna High Court’s May 14, 2026, order and restored the cognisance taken by the Special Vigilance Court on January 28, 2021.
It directed that the proceedings resume from the stage at which they had been halted. However, the court also allowed Phoolpari Kumari to raise other legal arguments before the trial court. It clarified that those arguments must be considered independently and should not be influenced by the observations made by the Supreme Court or the High Court.