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Facts
During a survey operation, excess stock of Rs. 1,13,941/- was found and surrendered by the assessee. The assessee is engaged in the business of manufacturing and trading bullion and jewellery. The Assessing Officer made an addition for the excess stock and taxed it under section 115BBE.
Held
The Tribunal held that the difference in stock valuation was minor and attributable to estimation differences in weight due to impurities in jewellery, which should be ignored. Therefore, the addition made by the AO was deleted.
Key Issues
Whether the addition on account of excess stock found during survey is sustainable, and if so, whether it is taxable under section 115BBE.
Sections Cited
133A, 143(3), 250, 69A, 69B, 115BBE, 68, 69
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI GAGAN GOYAL, AM vk;dj vihy la-@ITA No. 929/JPR/2025
14/08/2025 lquokbZ dh rkjh[k@Date of Hearing: ?kks"k.kk dh rkjh[k@Date of Pronouncement: 19/08/2025 vkns'k@ORDER PER DR. S. SEETHALAKSHMI, J.M. This appeal filed by the assessee against the order of Ld. Commissioner of Income tax (Appeals)-4, Jaipur [hereinafter referred to as ‘CIT(A)’] dated 15.05.2025 for A.Y. 2018-19 passed under section 250 of IT Act which in turn arise from the order dated 17.04.2021 passed u/s. 143(3) of the Act by the ACIT, Central Circle-1, Jaipur.
2. The brief facts of the case are that the assessee is an Individual and during the year under consideration he derived income from business of manufacturing & Mahendra Kumar Agarwal, Jaipur. trading of bullion, precious stones, diamond and Jewellery in his proprietorship concern M/s Mohan Lal Mahendra Kumar Jewellers and interest income from saving bank account. The assessee filed his return of total income on 30.10.2018 of total income of Rs. 4,66,890/-. A survey operation u/s 133A of the Act was conducted by the Income Tax department on the business premises of assessee on 06.10.2017. During survey, inventory of cash and stock physically found, was prepared. As a result of survey, the stock of Rs. 1,13,941/- and cash Rs. 2,865/- was found excess and the same was surrendered by assessee as his income. However, the assessee did not declare such income in his ITR. The Ld. A.O. made the addition of Rs. Rs. 2,865/- u/s 69A of the Act on a/c of excess cash found during survey and made addition of Rs. 1,13,941/- u/s 69B of the Act on account of excess stock found during survey. Further, the Ld. A.O. taxed the addition so made as per the provisions of section 115BBE of the Act. 2.1 The assessee being aggrieved from the additions made by Ld. A.O. preferred an appeal before Ld. CIT (A), who deleted the addition of Rs. 2,865/- and confirmed the addition of Rs. 1,13,941/-. Further, Ld. CIT (A) also confirmed the invocation of provisions of section 115BBE of the Act on the addition of Rs. 1,13,941/-. The addition was confirmed by CIT (A) on following footing: - Mahendra Kumar Agarwal, Jaipur. i) The stock was valued as per the details provided by the assessee and was agreed upon by the assessee. No anomalies in the same were pointed out by the assessee during survey and thereafter. ii) The taxability of addition u/s 115BBE of the Act was confirmed by holding that once the addition made u/s 68 and 69 is confirmed, section 115BBE is applicable for tax purpose. It was also held by Ld. CIT (A) that the case laws relied by the assessee are pertain to the position where the undisclosed income found has been accepted as well as declared by the assessee in the return of income after acknowledging the same in the books of accounts.
3. The assessee being aggrieved from the addition confirmed by Ld. CIT (A) preferred the present appeal before us. The assessee raised the following grounds of appeal: -
1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in confirming the addition of Rs.1,13,941/- made by the Ld. AO u/s 69B of the Act on account of alleged excess stock found during the course of survey and charging the tax by applying provisions of section 115BBE.
2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in confirming the addition of excess stock as income from other source which is completely disregards with the decision of Hon’ble Rajasthan High Court in the case of CIT v/s Bajrang Traders 2017 (11) TMI 388.
3. The appellant prays for leave to Add, to amend, to delete, or modify all or any grounds of appeal on or before the hearing of appeal.”
Mahendra Kumar Agarwal, Jaipur.
In ground No. 1 of the appeal the assessee challenged to the addition of Rs. 1,13,941/- confirmed by CIT (A). The Ld. A.R. filed the written submission and relied on the same. The written submission filed by Ld. A.R. in support of ground No. 1 of the appeal is as under: - 1. During the course of Survey, the department found the stock of Gold, Gold Jewellery, Silver, Silver Jewellery and Semi-precious stones valuation of which was made at market value amounting to Rs. 1,86,76,780/- (Copy of stock inventory is at PB Page 36 to 37) where stock as per books of accounts was Rs. 2,40,72,839/-. Regarding the difference of Rs. 53,96,059/- (1,86,76,780- 2,40,72,839) it was submitted by the assessee to Ld. A.O. that business of the proprietorship concern of assessee, M/s Mohan Lal Mahendra Kumar Jewellers and proprietorship concern of his Son Shri Peeyush Agarwal M/s KalakritiJewellers were being carried out from the same shop i.e. 197, Johari Bazar, Jaipur. As on the date of survey the stock of both these concerns were lying on this premises. The survey party while preparing the physical inventory of stock of concern M/s KalakritiJewellers (Prop. Shri Peeyush Agarwal), Gold Jewellery weighing about 2 Kg. and valuing 55,10,000/- pertaining to proprietorship concern of assessee M/s Mohan Lal Mahendra Kumar Jewellers included in the stock inventory of son Shri Peeyush Agarwal Prop of M/s KalakritiJewellers. During the course of survey itself, the assessee brought this fact in the knowledge of the survey party and the same is apparent from the answer to Q. No. 12 of statement of assessee recorded during survey. After verifying this fact, the survey party did not raise any further question from the assessee on this issue and the Ld. A.O. also accepted this. Thus, after considering this fact, the difference in stock only comes to Rs. 1,13,941/- (2,40,72,839- 1,86,76,780+55,10,000), which was treated by Ld. A.O. as excess and added in total income of the assessee.
Regarding the reasons of minor difference of Rs. 1,13,941/- the assessee explained that this excess is on account of: - i) weight difference in stock taken by the survey party. It is admitted fact that while taking the weight of Jewellery the deduction because of Dori and other impurities were reduced on estimation basis, which always ii) while taking the physical stock there always remains chances of some errors. Looking to the nature of business of the assessee, volume & nature of stock the meager difference which is only 0.47% of total stock found, which should be ignored.
The Ld. A.O. and CIT (A) did not consider the valid and plausible argument of the assessee and addition was made/sustain without considering the reply of the assessee and also strictly relying on the valuation of physical stock made at the time of survey. The undue and unwanted addition was made by taking the shelter of admission made by assessee during survey. However, it is an admitted position of law that there cannot be any estoppel against facts and evidences. In this regard this is to submit that the statement recorded during the course of survey always cannot be sacrosanct and if it is proven/explained that the admission made in such statement was not correct, then in such a case the assessment should have been made by taking into consideration the facts of the case and plausible submission of the assessee. The valid submission cannot be brushed aside and cannot be refuse to taken into consideration, on the ground that something wrong/undue/unwarranted has been surrendered during survey. It is also an admitted position of law that the statement recorded during survey does not carry an evidentiary value. It is also submitted that at the time of survey the statement be extempore and because of several reasons, such as tensed and fear atmosphere, sometime using of duress & coercion by search party, not having in possession the sufficient evidence to prove the facts, misrepresentation or misconception of facts, the party could not spell out the correct facts to the survey team and make the surrender. Further, the assessee did not honor the surrender, meaning which the same are deemed retracted and once the statement is retracted the same loose its evidentiary value.
The Ld. D.R. relied on assessment order as well as order of Ld. CIT (A).
We have considered the rival contention and perused the orders of the authorities, the material available on record, arguments advanced by both the parties. During the course of survey, at the business premises of the assessee the Mahendra Kumar Agarwal, Jaipur. total stock of Rs. 2,41,86,780/- pertaining to assessee was found and the stock as per books of accounts was of Rs. 2,40,72,839/-. Therefore, there is minor difference of Rs. 1,13,941/-, which is only 0.47% of total stock found. Regarding the difference, the assessee explained that the same is on account of weight difference because the deduction of Dori and other impurities in Jewellery which were reduced on estimation basis and when the estimation of something is made it may differ person to person who estimates. As per the stock inventory prepared during survey, it reveals that the stock so found was majorly of the Gold Jewellery. It is undisputed fact, that in gold Jewellery apart from the precious metal other impurities/material like Wax, Dori, beads etc. are also used and exact weight of such items used in Jewellery cannot be measured as the same are studded in the Jewellery. Therefore, the deduction of the same always allow by the valuer on estimation basis and once some kind of estimation is used by the valuer, the chances of minor difference in the actual weight on metal used in Jewellery and as weight measured by valuer will always remain. Therefore, in such a case, where reasonable and minor difference is found in the stock as per books of accounts and as valued by valuer the same should be ignored. In this case, the difference is of Rs. 1,13,941/-, which is only 0.47% of total Jewellery found during survey and it is a very minor difference, therefore the same should be ignored. In view of foregoing discussions, facts and circumstances Mahendra Kumar Agarwal, Jaipur. of the case we set aside the order passed by Ld. CIT (A) and direct the AO to delete the addition of Rs. 1,13,941/-. Since, we have deleted the addition, therefore the other arguments raised by the assessee regarding the legal admissibility of the surrender made during survey and addition made on the basis of such surrender became academic in nature only and hence not required any adjudication.
In ground No. 2 of the appeal the assessee challenged to taxing the excess stock of Rs. 1,13,941/- as per provisions of section 115BBE of the Act. Since, while deciding the ground No. 1 of the appeal, we have already deleted the addition of Rs. 1,13,941/-, therefore this ground now becomes infructuous and hence not required any separate adjudication, therefore the same is dismissed. In the result, the appeal of the assessee is partly allowed to the extent stated above. Order pronounced in the open court on 19/08/2025.