MATHA THANGA MALIGAI,KANYAKUMARI vs. ACIT, CIRCLE-1,, NAGERCOIL

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ITA 3861/CHNY/2025Status: DisposedITAT Chennai11 June 2026AY 2017-186 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the Assessing Officer and CIT(A) made the addition primarily based on the admission during the survey without adequately examining the details submitted by the assessee. The Tribunal decided to examine the issue afresh.

What were the facts?

During a survey, a jewellery firm admitted to undisclosed income of Rs. 1,07,18,593/- due to stock variations. The Assessing Officer made an addition based on this admission, and the CIT(A) upheld it, stating the admission was voluntary and unrebutted by cogent evidence.

What were the issues?

Whether the addition made solely on the basis of an admission during survey, without a thorough examination of submitted details and books of accounts, is sustainable?

Which sections of the Income-tax Act were involved?

Section 131,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI

Before: MS. PADMAVATHY.S & SHRI MANU KUMAR GIRI

For Respondent: Mr. E.Elango, JCIT

आदेश / O R D E R

PER PADMAVATHY.S, A.M: This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals), Chennai – 19 (in short "CIT(A)") passed u/s. 250 of the Income Tax Act, 1961 (in short "the Act") dated 24.10.2025 for Assessment Year (AY) 2017-18.

2.

The assessee is al partnership firm engaged in the business of jewellery. The assessee filed a return of income for AY 2017-18 on 31.10.2017 declaring total income of Rs.12,68,620/-. A survey was conducted on 23.03.2017 in the business premises of the assessee. The A.O found during

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the course of survey that there are variations in the physical stock maintained by the assessee. The A.O while concluding the assessment u/s. 143(3) made an addition of Rs.1,07,18,593/- stating that the assessee has admitted the said amount during the course of survey. Aggrieved, the assessee filed further appeal before the CIT(A). The assessee submitted various details pertaining to the stock before the CIT(A) and submitted that the same may be considered for the purpose of deleting the addition made by the A.O. The assessee further submitted that the A.O has not considered the financial statements, audit report and other details submitted before the A.O. The CIT(A) after considering the submissions of the assessee held that: “7.1 of stock was carried out in the presence of the partners of the firm, and stock was valued on the basis of prevailing market rates. Upon confrontation about the discrepancy between the physical stock found and that recorded in the books of account, the partner of the appellant firm voluntarily admitted undisclosed income of 1,07,18,593/- in a sworn statement recorded u/s 131 of the Act. The admission was made without any coercion and was based on facts verified during survey proceedings. The appellant also filed a revised computation of income admitting the said amount as additional income, which clearly establishes that the admission was voluntary. The contention raised now that the difference arose only because of non-availability of certain purchase invoices is an afterthought and cannot be accepted without supporting evidence. 7.2 It is a settled position of law that an admission is the best form of evidence against the maker, though it is open to rebuttal with cogent evidence. In the present case, apart from making a general allegation regarding alleged mistakes in stock taking and valuation, no reliable or contemporaneous evidence has been furnished by the appellant to substantiate the claim. Mere filing of a reconciliation statement or producing certain invoices long after the conclusion of the survey does not establish that the stock difference determined during survey was incorrect. Further, the alleged invoices now furnished were neither part of books of account at the time of survey nor produced before the survey team or during assessment with books-based reconciliation. Therefore, the explanation lacks credibility. 7.3 The Hon'ble Supreme Court in Pullangode Rubber Produce Co. Ltd. v. State of Kerala (91 ITR 18) has held that an admission is an extremely important piece of evidence, though it is open to the assessee to show that it is incorrect. Similarly, the Hon'ble Madras High Court in S.

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Khader Khan Son (300 ITR 157), as affirmed by the Hon'ble Supreme Court (352 ITR 480), has held that while a statement recorded during survey may not be conclusive, any retraction must be supported by strong and cogent evidence. In the present case, the appellant has failed to discharge this burden. No contemporaneous stock registers, purchase records, or third-party confirmations have been produced to substantiate the explanation that the stock difference was only on account of disallowance of purchases for want of bills.

7.4 The reliance placed by the appellant on the decision of the ITAT Mumbai Bench in the case of Glitter Jewels is misplaced as the facts of that case are distinguishable. In that case, the stock difference was found to be on estimate without any physical verification-based evidence. In the present case, the stock difference was quantified through physical verification, duly acknowledged by the appellant in the survey proceedings and admitted in the sworn statement. Therefore, the facts are materially different and the ratio of that decision is of that decision is not applicable.

7.5 The appellant's further contention that the addition should not have been made u/s 115BBE of the Act or that income cannot be taxed twice has no relevance to the present case. The AO has correctly treated the excess stock as undisclosed business income arising from unaccounted purchases made out of undeclared business receipts. The AO has not invoked section 69 or 69A, but has rightly assessed it as business income, which is in accordance with law. The reliance placed by the appellant on certain case laws such as CIT v. Vishal Exports Overseas Ltd. and CIT v. Kailash Jewellery House is also misplaced as those decisions pertain to addition of unexplained income under section 68/69 without business nexus. Here, the nexus of excess stock with business activity is clearly established.

7.6 The explanation of the appellant that the stock difference arose due to exclusion of stone weight from studded jewellery or totalling mistakes has been stated without any quantitative reconciliation or valuation working. No evidence was filed to demonstrate that valuation was excessive or that the stock recorded in books reflected true position. In these circumstances, the claim of retraction of admission is not supported by material facts and is liable to be rejected.

7.7 The grievances raised by the appellant regarding issues relating to filing of appeal within limitation, or opting for the Vivad se Vishwas Scheme (VSV), or failure to receive Form 3 under VSV are procedural matters not arising out of the grounds of appeal and do not have any bearing on the merits of the addition made. These matters are administrative in nature and beyond the scope of adjudication in the present appellate proceedings u/s 250 of the Act.

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7.8 In view of the above factual matrix and the judicial principles discussed, the undersigned is of the view that the addition made by the AO towards undisclosed excess stock of 1,07,18,593/- is based on material evidence found during survey, supported by voluntary admission and uncontroverted by credible evidence. Therefore, there exists no reason to interfere with the decision of the AO. Accordingly, the ground raised by the appellant is treated as dismissed.”

3.

We have heard the parties, and perused the material available on record. The primary contention of the assessee through various grounds is that the lower authorities have made the addition merely based on the declaration without considering the details submitted and without rejecting the books of accounts of the assessee. The Ld. Authorized Representative (AR) of the assessee during the course of hearing took our attention to the survey report where it has stated that: “6.1 This report has been prepared on a summary examination of the documents produced by the assessee. Hence, this report may not be taken as an exhaustive or conclusive one. The Assessing Officer is requested to examine all the material evidences before finalizing assessment proceedings.”

4.

The Ld. AR argued that the survey operations were conducted before the conclusion of the financial year and therefore the alleged difference in the stock is not the final number. From the perusal of the order of the A.O, we notice that the A.O has passed a very cryptic order without mentioning the details submitted by the assessee and the conclusions drawn by him after examining the said details. The A.O, we notice that has merely stated that the assessee has admitted the impugned amount and accordingly the same is added. The CIT(A) has sustained the addition made by the A.O on the ground that the amount voluntarily admitted in the statement recorded u/s. 131 of the Act has been rightly considered by the A.O as addition business income of the assessee. We in this regard notice that the CIT(A) also has not recorded any

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findings with regard to the books of accounts, financial statements etc. submitted by the assessee. Accordingly, we see merit in the submission of the Ld. AR that the impugned addition is made not based on any adverse findings with regard to the books of accounts or financial statements, but is merely based on the income admitted by the assessee during the survey. Considering the facts and circumstances of the case and in the interests of natural justice and fair play, we are of the view that the impugned addition has to be examined afresh on merits based on various details submitted by the assessee. Accordingly, we remit the appeal back to the A.O with a direction to examine the details already submitted afresh and may call for further details as may be required to decide the issue in accordance with law. Needless to say that the assessee be given a reasonable opportunity of being heard.

5.

In the result, the appeal of the assessee is allowed for statistical purposes.

Order pronounced on 11th day of June, 2026 at Chennai.

Sd/- Sd/- (मनु कुमार िग"र) (पदमावती यस) (Manu Kumar Giri) (Padmavathy.S) �याियक �याियक सद�य �याियक �याियक सद�य सद�य / Judicial Member सद�य लेखा लेखा सद�य लेखा लेखा सद�य सद�य /Accountant Member सद�य चे�नई/Chennai, �दनांक/Dated: 11th June, 2026. EDN, Sr. P.S

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आदेश क� �ितिल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकर आयु!/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय �ितिनिध/DR 5. गाड� फाईल/GF EJTADA Digitally signed by EJTADA DURGA NARESH DURGA Date: 2026.06.16 NARESH 12:29:51 +05'30'

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