M/S. JEWEL INDIA JEWELLERS,KOLKATA vs. DCIT, CENTRAL CIRCLE 4(4),, KOLKATA

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ITSSA 79/KOL/2025Status: DisposedITAT Kolkata11 December 2025AY 2016-20174 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the addition of ₹17,84,983/- as profit on assumed sale and ₹1,17,17,159/- on account of undisclosed investment was not justified. The Tribunal noted that a document (JIJPL/I) found during the search indicated jewellery was with the partner, Puja Baid. While the AO rejected this as the jewellery was not found with her and not disclosed in her statement, the Tribunal found this reasoning flawed. Crucially, the Tribunal observed that the very same jewellery was accepted by the AO as part of the closing stock at the year-end. The Tribunal also noted that other shortages were explained by the assessee and accepted by the AO as sales recorded on subsequent dates. Since no evidence of sale outside the books was found, and the sales declared were accepted by GST/VAT, the addition of gross profit on assumed sale was unjustified. Consequently, the addition on account of undisclosed investment, which was linked to this assumed sale, was also deleted. The Tribunal set aside the CIT(A)'s order and directed the AO to delete both additions.

What were the facts?

The assessee, M/s Jewel India Jewellers, is in appeal against the order of the Commissioner of Income-tax (Appeals) for Assessment Year 2016-17. A search action under Section 132 of the Income Tax Act was conducted on the assessee on August 12, 2015. A notice under Section 153A was issued on May 24, 2017, and the assessee filed a return of income declaring ₹3,47,55,900/-. During the search, discrepancies were found between the physical stock of jewellery and diamonds and the stock as per the assessee's books. The Assessing Officer (AO) made an addition of ₹17,84,983/- as profit on undisclosed sales and ₹1,17,17,159/- on account of investments in undisclosed purchases. The CIT(A) confirmed these additions.

What were the issues?

1. Whether the addition of ₹17,84,983/- as profit on undisclosed sales of jewellery and diamonds is justified, turning on the interpretation of evidence found during search and its reconciliation with book entries. 2. Whether the addition of ₹1,17,17,159/- on account of investments in undisclosed purchases of jewellery and diamonds is justified, arising from the same factual matrix as issue 1. Assessee's contentions: The assessee argued that a document marked JIJPL/I, pertaining to jewellery in possession of a partner, Puja Baid, should have been accepted. They contended that the jewellery remained in stock at the year-end and was included in closing stock, and no evidence of sale outside the books was found. Sales declared were accepted by GST/VAT authorities. The rejection of the explanation was unjustified, especially since the same jewellery was found in closing stock. Revenue's contentions: The revenue, through the AO and CIT(A), treated the discrepancies in physical stock (shortage of gold and diamond) as undisclosed sales and purchases. The AO noted that the partner did not disclose the jewellery in her statement under Section 132(4) and it was not found with her. The CIT(A) confirmed the additions based on the valuation of the shortage of stock.

Which sections of the Income-tax Act were involved?

Section 132,Section 153A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, KOLKATA

Before: SHRI RAJESH KUMAR, AM & SHRIPRADIP KUMAR CHOUBEY, JM

For Appellant: Shri S.M. Surana &
For Respondent: Shri P.N. Barnwal, DR
Hearing: 13.11.2025Pronounced: 11.12.2025

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRIPRADIP KUMAR CHOUBEY, JM

IT(SS)A No.79/KOL/2025 (Assessment Year: 2016-17) DCIT, CC 4(4) M/s Jewel India Jewellers Aaykar Bhawan Poorva, 41, Manohar Dass Street, Burra Shantipalli, 110, Eastern Bazar, Kolkata-700007, Metropolitan Bypass, Opposite Vs. West Bengal ruby Kasaba, Kolkata-700107, West Bengal (Appellant) (Respondent) PAN No. AACFJ4832H Assessee by : S/Shri S.M. Surana & Sunil Surana, Ars Revenue by : Shri P.N. Barnwal, DR Date of hearing: 13.11.2025 Date of pronouncement: 11.12.2025

O R D E R Per Rajesh Kumar, AM:

This is an appeal preferred by the assessee against the order of the Commissioner of Income-tax (Appeals), Kolkata-27(hereinafter referred to as the “Ld. CIT(A)”] dated 26.06.2025 for the AY 2016-17.

2.

The issue raised in ground no.1 is general in nature, hence, need no adjudication.

3.

The issues raised in ground no.2 ,3 and 4 to are against the order of learned CIT (A) confirming the addition of ₹17,84,983/- as made by the learned AO on account of profit of the undisclosed sales of jewellery and Rs. 1,17,17,159/- on account of investments in undisclosed purchases .

3.1. The facts in brief are that a search action u/s 132 of the Act was conducted on the assessee on 12.08.2015, and subsequent dates.

3.2. In the appellate proceedings, the learned CIT (A) confirmed the order of the learned AO by observing that there was shortage of stock of gold and diamond which were detected to the extent of 1189.580 grams of 22K gold and 959.620 grams of 18K gold and 201.445 carrat of diamond . The learned CIT (A) noted that the sale value of such shortage of stock was worked out at ₹1,35,02.143/-. The learned CIT (A) further noted that the profit was estimated at the rate of 13.22% and addition was made of ₹17,94,983/- to the

3.3. After hearing the rival contentions and perusing the materials available on record, we find that during the course of search a document was impounded marked as JIJPL/1. The said impounded paper JIJPL/I was with regard to the jewellery in possession of the partner Puja Baid. The Ld AO did not accept the same on the ground that jewellery was not found with the partner and further in the statement recorded u/s 132(4), no averment was made that the said jewellery was lying with the partner. However, the Ld. AO accepted the fact that the said jewellery remained in the stock as at the end of the year for which he had made addition as undisclosed investment. The statement was never given to the assessee. We also note that no question was raised about the jewellery claimed to have been taken by the partner. We further note that whatever other jewellery was found short, the assessee duly explained the same that the sale was recorded on subsequent date which has been accepted by the Ld AO. Therefore, the explanation that this jewellery was with the partner supported by paper JIJPL found in the course of search should not have been rejected simply because the same was not found with the partner or that the partner did not disclose the same in her statement cannot be a ground to treat the same as sale of jewellery outside the books particularly when the very same jewellery was found included in the closing stock at the end of the year. No evidence of any sale outside the books was found in the course of search. The sale declared by the assessee has been accepted in the GST/VAT. Thus, the addition of Gross profit on assumed sale is not

4.

The issue raised in Ground no. 5 is not pressed, hence, dismissed.

5.

In the result, the appeal of the assessee is partly allowed

Order pronounced in the open court on 11.12.2025.

Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated:11.12.2025 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT DR, ITAT, 4. 5. Guard file. BY ORDER, True Copy//

Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata

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