JYPORE MANUFACTURING JEWELLERS PRIVATE LIMITED,JAIPUR vs. DEPUTY COMMISSIONER OF INCOME TAX, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA No. 432/JP/2025 fu/kZkj.k o"kZ@Assessment Year : 2018-19 cuke Jypore Manufacturing Jewellers DCIT, Vs. Pvt. Ltd. Central Circle-01, Plot No. 1 and 2 Ratan Shiksha Jaipur Building, Near Gokhle Park, Janta Colony, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAACJ 4640 C vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. S. L. Poddar, Adv. jktLo dh vksj ls@ Revenue by : Mrs. Alka Gautam, CIT-DR lquokbZ dh rkjh[k@ Date of Hearing : 27/05/2025 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 25/06/2025 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM

By way of present appeal the assessee challenges the order of the learned Commissioner of Income Tax (Appeals), Jaipur -4 [ for short CIT(A) ] dated 19.03.2025 for assessment year 2018-19. The said order of the ld. CIT(A) arises as against the order dated 17.04.2021 passed under section Circle-01, Jaipur [ for short AO].

“1. In the facts and circumstances of the case the learned CIT(A) has erred in not passing the speaking order as the directions given by him are not clear and confusing.

2. In the facts and circumstances of the case the learned CIT(A) has erred in confirming the addition of Rs. 6,57,521/- made by the learned AO on account of excess cash found during the course of survey.

3. In the facts and circumstances of the case, the Assessing Officer has erred in not deleting the addition of Rs. 7,15,33,296/- made by the learned AO on account of excess stock found during the course of search which is only valuation difference. The direction of the learned CIT(A) are confusing and misleading.

3. Succinctly, the fact as culled out from the records is that appellant - assessee e-filed its return of income declaring total Income of Rs.

1,08,40,320/- on 29.10.2018. The case was selected for scrutiny under CASS and, therefore, notice under section 143(2) was issued on 28.09.2019 by the ACIT, Circle-5, Jaipur and the same was served upon the assessee through e-filing portal as well as through speed post.

Subsequently, the case was centralized with ACIT, Central Circle-1, Jaipur u/s 127 of the Act. Notice under section 142(1) of the Income-tax Act, 1961 served upon the assessee through e-filing portal. In response thereto, the assessee filed its reply/details and submissions from time to time, which were examined on a test check basis. The GP rate is the same as per preceding year. The assessee company derives income from manufacturing and sale of gold ornaments and jewellery, precious stones and semi-precious stones. During the year under consideration, the assessee has disclosed turnover of Rs.5,68,35,589/-, on which gross profit has been shown at Rs. 1,01,86,860/-, giving a gross profit rate of 47.55% as against gross profit rate of 46.98% disclosed on turnover of Rs.3,94,78,934/-. In the case of the assessee company, a survey under section 133A of the Act was also conducted on 09.3.2018. While survey, excess cash and excess stock were found.

3.1 Record reveals that cash of Rs. 17,95,840/- was found on physical verification at the showroom of the company, which was inventorised in Annexure CF. The cash, as per books of account on the date of survey, was found at Rs. 11,38,319/-, Thus, excess cash of Rs.6,57,521/- was found. Vide reply to question No.30 of statement recorded during survey, Ms. Monika Agarwal, daughter of director, Shri Radha Mohan Agarwal and belongs to the company, for which there is no explanation. Shri Radha Mohan Agarwal, director of the company, in his reply to question No. 18 of his statement recorded during survey also admitted that the excess cash was not recorded in the books of the assessee and this cash represents cash sale out of books. He surrendered that excess cash as unexplained cash for taxation.

3.2 Record also reveals that there was a excess stock found during the survey and the same was offered as income while recording the statement.

The assessee was asked to explain as to why the excess stock amount should not be added to assessee's total income. Vide reply dated 22/3/2021, the assessee has stated that the surrender of excess cash and stock found was a forced surrender done in pressure and misrepresentation and the departmental authorities had not considered the cash in hand of the directors and other members of family, whose cash was also lying with assessee company. It is further stated that this position was cleared vide retraction letter of the assessee dated 02.03.2021. Ld. AO noted that Shri Radha Mohan Agarwal, vide his statement recorded during post-survey proceedings on 13.3.2018 re-confirmed the statement recorded during the course of survey that the excess cash was not cash, was surrendered for tax. This being unexplained cash of Rs. 6,57,521/-, the same was added to assessee's total income under Section 69A of the Income Tax Act, 1961 and tax rate is also charged u/s 115BBE of the Act.

3.3 So far as to the stock at the showroom of the assessee situated at Ganpati Plaza, M. I. Road, Jaipur and registered office at 182, Ratansikha Building, Janta Colony, Jaipur, physical stock was taken and inventorised by the Approved Valuer in the presence of directors of the company and other employees. The stock of gold jewellery, gold jewellery studded with precious stones and silver utensils etc. found on physical verification was of the value of Rs.25,40,15,246/-(Rs.24,20,16,796/- at the showroom at Ganpati Plaza and Rs.1,19,98,450/- at registered office at Janta Colony).

The value of stock as per books of accounts on the date of survey was Rs. 18,24,81,950/-. The stock of inventory at show room was prepared in the presence of Ms. Monika Agarwal, daughter of Shri Radha Mohan Agarwal and also Manager of the company, admitted that stock valuation was correct and the same was taken and inventorized in the presence of herself along with other employees, viz., Shri Pawan and Shri Ashok. The stock of Shri Radha Mohan Agarwal, director, who too admitted that the stock inventory was correct and taken in his presence. He further admitted that the assessee company is indulged in sale out of books and this excess stock was purchased from unaccounted income and accordingly he surrendered this excess stock of Rs.7,15,33,296/- for taxation as per rules.

While assessment proceeding, the assessee's explanation was called for on this issue as the excess stock surrendered by the assessee was not found disclosed in the return of income. Vide reply filed on 22.03.2021, the assessee stated that the surrender of excess stock at the time of survey was a forced surrender done in pressure and misrepresentation. Therefore, the assessee has retracted from the surrender. However, at the time of audit and further verification of details, certain discrepancies were identified in quantity which has been recorded in books and accordingly income of Rs. 54,01,292/- has been included in the total income of the assessee apart from regular income. It is further stated that excess physical quantity of various inventory items of the value of Rs. 1,48,91,078/- has been accounted for as purchase from sundry suppliers by passing entry and book stock has been increased on account of such purchases and the difference has been dealt with accordingly. It is further stated that short has been accounted for as sales to sundry parties by passing necessary entries and book stock to that extent has been reduced accordingly. The net result of these entries is that an income of Rs. 54,01,292/-has been included in the total income.

3.4 Ld. AO considered the submission of the assessee, survey records and statement of the assessee and based on that he noted that the submissions made by the assessee are not found to be acceptable for the following reasons:-

(i) That during the course of survey, physical stock of gold jewellery, jewellery studded with precious stones, silver utensils etc. was taken at the showroom situated at Ganpati Plaza and registered office at Janta Colony in the presence of director and manager of the assessee. The stock inventory at the showroom was taken in the presence of Ms. Monika Agarwal, daughter of Shri Radha Mohan Agarwal, director of the company.

Ms. Monika was looking after the affairs of the company as Manager of M/s

In her statement recorded during the survey, she admitted that the valuation made was correct and that the stock was inventorised in her presence along with two other employees, vz., Shri Pawan and Shri Ashok.

Radha Mogan Agarwal, Director of the company, who also admitted that the stock inventory made, and valuation made is correct.

(ii) Further, Shri Radha Mohan Agarwal, vide reply to question No.17 of the statement recorded during the course of survey, admitted the excess stock of Rs,7,15,33,296/- found during the course of survey and stated that the assessee company is indulged in sale out of books and the excess stock was purchased from unaccounted income earned. He, therefore, surrendered the excess stock of Rs. 7,15,33,296/- for taxation.

(iii) That apart, in post-survey proceedings, the statement of Shri Radha Mohan Agarwal was recorded on 13.03.2018. In his statement, he re- affirmed that the stock was correctly taken and he has no objection in valuation of stock made at the time of survey. He again agreed for surrender of this excess stock for taxation and to pay due tax.

(iv) There is a clear admission from the director of the company, Shri Radha Mohan Agarwal that the assessee company is indulged in sale of out of books and the excess stock was purchased from unaccounted income earned. This fact is further corroborated from the papers found and impounded during the course of survey. The slip pads and papers found and impounded as per Annexure AS-10 show that the sale transactions regular books by the assessee company. The fact of having indulged in sale out of books has been re-affirmed by the director of the company in his statement with his categorical admission that the unaccounted income earned from such sales was invested in stock which was found excess during the course of survey.

3.5 Having regard to all these facts of the case, statements recorded during the course of survey and subsequently in post-survey proceedings, the retraction made by the assessee was considered as an after-thought with an intention to avoid payment of due tax on the surrendered amount.

The contention made during assessment proceedings of having taken excess stock of Rs. 1,48,91,078/-and short stock of Rs. 94,89,786/- is also an after-thought of the assessee with an intention to avoid paying the tax on the surrendered amount. Therefore, ld. AO noted that it is just jugglery of figures, without any proper justification and evidence to substantiate the contention made in this regard by the assessee. In view of this position, the excess stock of Rs. 7,15,33,296/- found and inventorised during the course of survey was added to assessee's total income u/s 69B of the Act and tax rate is also changed u/s 115BBE of the Act. before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below:

4.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-

As per the facts noted in assessment order, during survey action in the case of appellant, cash of Rs.17,95,840/- was found on physical verification whereas as per book there was cash balance of Rs. 11,38,319/-. Thus, excess cash of Rs.6,57,521/- was found. In this regard, Ms. Monika Agarwal, daughter of director, Shri Radha Mohan Agarwal and Manager looking after the showroom, vide reply to question No. 30 of statement recorded of her admitted that the excess cash found belongs to the company, for which there is no explanation. Shri Radha Mohan Agarwal, director of the company, in his reply to question No.18 of his statement recorded during the course of survey, also admitted that the excess cash was not recorded in the books of the assessee and this cash represents cash sale out of books. He surrendered this excess cash as unexplained cash for taxation.

During appellate proceedings, the appellant contended that surrender of excess cash found made during the course of survey was a forced surrender and confession in statement regarding surrender of excess cash found was recorded by exerting pressure. The appellant further contended that cash found at the shop included personal cash of the directors and manager of the company.

However, the contention of the appellant is not acceptable as both the directors and manager were present during survey and none of them could explain the reason of excess cash found of Rs.6,57,521/- and making argument at later stage that excess cash found during survey belong to personal cash of the director and manager of the company is just an argument without any merit which itself proves that this is nothing but an afterthought of the appellant. Accordingly, contention of the appellant is rejected.

This ground of appeal is dismissed.

Jypore Manufacturing Jewellers Pvt. Ltd. vs. DCIT 5.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-

On the issue the facts as per the assessment order are that during the course of survey at the showroom of the appellant situated at Ganpati Plaza, M. I. Road, Jaipur and registered office at 182, Ratansikha Building, Janta Colony, Jaipur, physical stock was taken and inventorised as the Approved Valuer in the presence of directors of the company and other employees. The stock of gold jewellery, gold jewellery studded with precious stones and silver utensils etc. found on physical verification was of the value of Rs.25,40,15,246/- (Rs.24.20,16,796/- at the showroom at Ganpati Plaza and Rs.11998450/- at registered office at Janta Colony). The value of stock as per books of accounts on the date of survey was of Rs. 18,24,81,950/-. The stock inventory at showroom was prepared in the presence of Ms. Monika Agarwal, daughter of ShriRadha Mohan Agarwal and also Manager of the company, admitted that stock valuation was correct and the same was taken and inventorized in the presence of herself along with other employees, viz., ShriPawan and Ashok. The stock of jewellery at registered office at Janta Colony was made in the presence of ShriRadha Mohan Agarwal, director, who too admitted that the stock inventory was correct and taken in his presence. He further admitted that the appellant company is indulged in sale out of books and this excess stock was purchased from unaccounted income earned and accordingly he surrendered this excess stock of Rs. 7,15,33,296/-for taxation as per rules.

As mentioned by the Id. AO, during the course of assessment proceedings, the appellant's explanation was called for on this issue as the excess stock surrendered by the appellant was not found disclosed in the return of income. Vide reply filed on 22/03/2021, the appellant stated that the surrender of excess stock at the time of survey was a forced surrender done in pressure and misrepresentation and. therefore, the appellant has retracted from the surrender. However, at the time of audit and further verification of details, certain discrepancies were identified in quantity which has been recorded in the books and accordingly income of Rs.54,01,292/- has been included in the total income of the appellant apart from regular income. It is further stated that excess physical quantity of various inventory items of the value of Rs. 1,48,91,078/- has been accounted for as purchase from sundry suppliers by passing entry and book stock has been increased on account of such purchases and the difference has been dealt with accordingly. It is further stated that short physical quantity of various Jypore Manufacturing Jewellers Pvt. Ltd. vs. DCIT inventory items of the value of Rs. 94,89,786/-has been accounted for as sales to sundry parties by passing necessary entries and book stock to that extent has been reduced accordingly. The net result of these entries is that an income of Rs.54,01,292/-has been included in the total income.

The Id. AO held that the contention made during the course of assessment proceedings of having taken excess stock of Rs. 1,48,91,078/- and short stock of Rs. 94,89,786/- is also an after-thought of the appellant with an intention to avoid paying the tax on the surrendered amount. It is just a jugglery of figures, without any proper justification and evidence to substantiate the contention made in this regard by the appellant. In conclusion, the excess stock of Rs. 7,15,33,296/- found and inventorised during the course of survey was added to appellant's total income u/s 69B of the IT Act, 1961.

Appellant's submissions in brief:-

In the appeal the appellant has contended that the survey team determined the stock as under.- (a) At Ganpati Plaza showroom:- (b) Stock found at Janta Colony:- GRAND TOTAL : (242016796 + 11998450 = Rs.25,40,15,246/-

The survey authorities also worked out the book position of stock and the same was determined at Rs. 18,24,81,950/- The Id. AO keeping in view the aforesaid position of stock made addition of Rs.7,15,33,296/- (Rs.254015246 - 182481950). The action of the Id. AO is totally based on (i) valuation of stock at the time of survey as well as on (ii) the statement of ShriRadha Mohan Agarwal. The Id. AO has further referred to some papers impounded as (iii) Annexure AS-10, which according to the Id. AO disclose transactions of sale not accounted for in the regular books of account.

The appellant has further contended that assessee has been doing the business of manufacture and sale of gold ornaments and jewellery for the last 12-15 years. It is usual in this line of business that some or the other stock becomes stale or out of fashion. Over the past years, such stock gets accumulated and becomes part of the almost dead stock. In the line of jewellery business, fashion undergoes fast change. However, during the stock taking, the revenue authorities have not given any benefit in valuation for the stock which is out of fashion or which has become dead stock for one or the other reason. Total stock found has been worked by the revenue authorities at Rs. 25,40,15,246/. The 15% of this stock would arrive at Rs. 3,81,02,287/-. In other words, stock to the extent of Rs. 3,81,02,287/- was dead and out of fashion stock. The valuation of this stock should be 75% of the valuation taken by the revenue authorities. In other words, the valuation of stock would be less by Rs. 95,25,571/-. This would result in total valuation of stock at Rs. 24,44,89,675/-(254015246-9525571). The appellant has contended that the assessee has surrendered extra weight found, otherwise it was only valuation difference.

Jypore Manufacturing Jewellers Pvt. Ltd. vs. DCIT It is also submitted for 'Gold ornaments account' (18ct)'by the appellant that the survey authorities had taken the weight of gold jewellery at 15990.600 and valued at the same at Rs.7,11,25,495/- (3,26,60,745 (Metal) + 3,84,64,750 (stones) = Rs.7,11,25,495/-). As against this, the book position of this stock reveals that as on 09/03/2018, there was stock weighing 17260.143 gms, and the book value of the same is Rs.4,14,29,696/-. Thus, it would be clear that weight-wise the book position reveals more stock, ie. 1269.543 gms) (17260.143-15990.600) But. the value is less by Rs.2,96,95,819/-. This is because of higher rate taken by the survey team. The survey team has valued the entire stock adopting the market rate as on 09/03/2018 whereas the stock was accumulated out of past several years. The survey team has valued 15990.600 gms for a sum of Rs.7,11,25,495/-, which gives rate of Rs.4447/- per gram whereas the book position discloses average rate of Rs.2400/- per gram. The net effect on account of higher valuation by the survey team in this account has resulted in difference of Rs.2,96,95,819/- with reference to book position.

It is further submitted by the appellant for 'Gold ornaments (22ct)' that survey authorities had taken the weight of gold ornemtns (22ct) at 60374.610 and valued the same at Rs. 16,59,22,548/-, As against this, the book position of this stock reveals that as on 09/03/2018, there was stock weighing 65374.531 gms. and the book value of the same is Rs.12,12,39,683/-. Thus, it would be clear that weight- wise the book position reveals more stock ie 4999.881 gms (65374.531- 60374.610). But, the value is less by Rs.4,46,82,865/- This is because of higher rate taken by the survey team. The survey team has valued 60734.610 gms for a sum of Rs. 16,59,22,548/-, which gives rate of Rs.2732 per gram whereas the book position discloses average rate of Rs. 1854/- per gram. This is the main reason of the over-valuation of the stock found at the time of survey. The survey team adopted the rate of 2732/- as on the date of survey as if the entire stock was purchased on 09/03/2018.

Appellant has also contended that soon after the completion of survey on 09/03/2018, the assessee furnished letter on 08/05/2018, retracting the surrender of income. In this letter, it has been mentioned that the surrender of income of Rs. 7.15,33,296/- was obtained by exerting pressure and oral threatening for dire consequences. It is submitted that there is no provision u/s 133 A of surrender of income. Further, confessional statements are discouraged by Board's circular.

Decision:-

The weight-wise position as claimed by the appellant is as under:-

In both the above cases it is noticed that the gross weight as per books of accounts is claimed to be more than the gross weight actually found. However the weight as per books of accounts as submitted by the appellant is not from verified records.

Quantity of stock items as per books of accounts as on date of survey:-

A specific query was raised to the appellant vide notice dated 21.02.2025 to explain how the item category-wise quantity of the stock items as per books of accounts was determined as on the date of survey was determined. In this regard the appellant has stated vide reply letter dated 25.02.2025 that "the quantity and weight of stock as per books was arrived by taking balancing figure from stock register by adding purchases and opening stock and subtracting sales. However the appellant has not submitted the calculation sheet is prepared during the course of survey and also not submitted the stock register as found during the course of survey. As such the statement is a self-serving statement and the appellant has concealed the details in this regard.

Further the appellant has not submitted the item category-wise verifiable records for working out the quantity purchased, quantity manufactured, quantity sold etc. during the financial year till the date of survey.

The appellant has placed on record the copies of audit report of the earlier years to show the quantitative details of the item categories, however the item category wise value of opening stock, value of purchases and sales amount are not available in the audit report, as the grossed up combined overall figures are reported in the trading account.

A specific query was raised to the appellant vide the notice dated 21.02.2025 to explain how the value of the stock as per books of accounts (Rs. 17.07.63,237/-)

Jypore Manufacturing Jewellers Pvt. Ltd. vs. DCIT was determined during the course of survey as is mentioned in the statements recorded during the course of survey and which has been accepted in the statements as the correct valuation of the stock as per books of accounts on the date of survey. However in reply the appellant has merely stated that: "the stock valuation was arrived on the basis of cost price and weight as per stock register on the date of survey. However neither the appellant submitted the valuation sheet as prepared during the course of survey in this regard and also did not submit the item category wise stock register (if any) as was found (if any) during the survey. As such the statement is a self-serving statement and the appellant has concealed the details in this regard

The appellant has submitted summary of quantitative purchase and sale and opening stock however the same are not verifiable and also apparently these were not submitted before the Id. AO and are in the nature of additional evidence but without relevant justification and reasoning and have to be rejected. Even these verifiable details were not given to the auditor of the appellant as is seen from the audit report.

In this regard the statutory auditor has stated in the audit report as under:-

"In the absence of sufficient and appropriate audit evidences for verification of above except examination of documents/papers prepared by IT authorities pursuant to survey proceedings. We are unable to verify and express our opinion on the said retraction of surrendered income and related accounting adjustments made by the company including its impact on the various components of the financial statements, as mentioned in the said Note."

Looking at the level of compliance and documentation, the auditor also stated that the appellant may be liable for additional income tax burden.

In view of the above discussion, the item category-wise quantity and valuation as prepared by the appellant for the date of survey and as submitted after the survey. valuing the total stock at Rs. 17,07,63,237/- as against the stock of Rs. 25,40,15,246/- as worked out during the course of survey is rejected as it is being apparently to adjust the quantities of the stock as per books of accounts on the date of survey.

In view of the above discussions, the quantitative details of the item category wise stock as per the books of accounts as submitted by the appellant for the date of survey are not reliable and are rejected.

As noted by the Id. AO, the stock of gold jewellery, gold jewellery studded with precious stones and silver utensils etc. found on physical verification was of the value of Rs. 25.40,15,246/- (Rs.24,20,16,796/- at the showroom at Ganpati Plaza and Rs.1,19,98,450/- at registered office at Janta Colony). The value of stock as per books of accounts on the date of survey was of Rs. 18,24,81,950/-

In the submissions the appellant has worked out the stock as per books of accounts even lower at Rs. 17,07,63,237.

The appellant has objected to the valuation rates of the jewellery items found during the course of survey.

The official valuer has used the following rates in the valuation report:- 22 Kt. Gold Rate Rs. 2850 per gram 18 Kt. Gold Rate Rs. 2340 per gram

As per website https://www.indgold.com/delhi-gold-rates-march-2018.htm the 22 K1 gold rate was 2965/2965 (morning and evening) per gram and as per website https://www.keralagold.com/kerala-gold-rate-per-gram-march-2018.htm the 22 Kt gold rate was 2820 per gram.

In view of the above it is prima facie correct that the valuation was done by the official valuer as per the gold rates on the date of survey.

In principle, to arrive at the unexplained investment component the cost valuation should be used to the extent of the quantity shown and items matching in the books of accounts as that is the business stock of the appellant.

Further, in principle, for the excess quantity found, as the same is unexplained, hence the application of gold price on the date of survey is appropriate as that is the date when the assessee is found to be the owner of such unexplained asset

Quantity of stock items as per actual physical inventory as on date of survey-

The highlights of the valuation of stock at Ganpati Plaza, MI Road as on date of survey are as under-

In the 18 Kt. Gold jewellery, there is extensive use of diamonds which forms part of gross weight and valuation of gross jewellery.

22 Kt. Gold Jewellery: Issue of jewellery released by Income Tax Department-

The appellant has claimed in the submissions (in summary annexure of quantitative details) during the course of appeal that 22Kt. jewellery having gross weight of 6874.510 grams having value of Rs. 71,04,606 was released by the Income Tax Department during the year (and also mentioned Ruby articles of weight 3906 grams having value of Rs. 74,046 released by the Income Tax Department).

In the audit report for the financial year 2017-18 it is seen that in note 2.20 the value as on 31.03.2017 of the stock is found during the course of search and seizure action has been shown at Rs. 74,86,490. This is not tallying with the amounts shown by the appellant in the summary sheet as submitted during the course of appeal.

However it is seen from the balance-sheet for the year filed by the appellant that such seized stock was already part of the opening balance-sheet for year (which is the closing balance sheet of the immediately preceding financial year). The appellant in the quantitative details has not shown that the jewellery released by the Income Tax Department was no part of the opening quantity of the stock as shown in the summary details.

The appellant has not placed on record the complete audit report for the year as the annexure showing the quantitative details (Annexure-H in earlier years) has not been placed on record for the year under appeal. Similarly for the earlier

Further it is a matter of common knowledge and record that when the jewellery would have been seized a detailed memo of item wise weight and design or item category (like ring, necklace, ear-ring etc.) would have been made and there would have been verified and mentioned at the time of release of the jewellery also. Whereas in the jewellery found during the course of survey there is no such mention of jewellery which was released by the Income Tax Department. There is no mention in this regard in the statements recorded during the course of survey and also there is no mention in this regard in the valuation sheet. The appellant has not placed on record item wise matching (weight, item-use category etc.) of the items which were seized during the course of old search and seizure action of the appellant with the items found during the course of survey as mentioned in the valuation sheet prepared by the official valuers and which is accepted from the side of the appellant also. The conclusion to be arrived at from this is that the released jewellery from earlier search and seizure action was not available at the premises of the appellant at the time of survey.

It is not known when such jewellery was released. The appellant has not placed on record any documents from the Income Tax Department in this regard. The possibility that the jewellery was released after the date of survey is also not ruled out. On this ground also the contention of the appellant regarding the availability of earlier seized jewellery on the date of survey is hereby rejected.

The appellant has taken that the jewellery released from the Income Tax Department was of 22 Kt. and the net weight of the same was 6874.510 grams, however no documentary evidence in this regard has been placed on record. These are merely self-serving claims of the appellant. Thus the benefit of deduction of 22 Kt, gold jewellery of 6874.510 grams as claimed by the appellant in the calculation cannot be allowed and is hereby rejected. The gold jewellery of this weight as physically found is unexplained. The sameis required to be taxed at the current prices on the date of survey and in this regard the approach in the assessment order is upheld.

22 Kt. Gold Jewellery: other jewellery:-

The other remaining jewellery of the 22 Kt Gold category is apparently the business stock of the appellant. As discussed above the valuation has been done by the official valuers taking the date of gold on the date of survey whereas for Jypore Manufacturing Jewellers Pvt. Ltd. vs. DCIT arriving at the cost or the investment value, the historical rates are to be applied or the effect of the increase in gold prices is to be removed. The appellant has maintained gross weight basis quantitative details which are not appropriate for valuation purpose in the present case.

Also, the appellant has done the valuation apparently on weighted average basis however the same is not verifiable as the stock registers and the stock statements are not placed on record by the appellant and also the category-wise (22 KI/18 KI) etc. purchase values and the sales values are not verifiable.

The valuation is to be done on FIFO basis. Thus applying the FIFO method to get gold jewellery of 22 Kt. 51343.7 grams (58218 210 less 6874 510 grams) on the basis of the quantity reported in the audit reports.

Since the gross quantities are available from appellant's audit reports, the net quantities for removing gold price rise are estimated at applying the ratio of 96.4283% (net weight of 22 Kt. jewellery found 58218.210 gms as percentage of gross weight of 22 Kt. jewellery found 60374.610 gms)

Following the FIFO, the same has been purchased / manufactured by the appellant as under:-

Jypore Manufacturing Jewellers Pvt. Ltd. vs. DCIT The above table shows acquisition period of the respective quantities of stock as available on date of survey; as per FIFO method; as the earliest purchased/manufactured items are deemed to have been sold as per FIFO.

As per this working, the balance of 22 KT gold jewellery comes to 37762.192 gms (58218.210-20456.018) as on 01.04.2013 as per FIFO ie. 37762.192 net jewellery out of stock on date of survey is treated to have been purchased as on 01.04.2013 and gold rate as on this date shall be applicable.

The Id. AO is directed to obtain the 22KT gold jewellery rates of Jaipur (average of the monthly average rates) and work out the valuation by applying yearly average rate in the above table. The appellant is directed to submit the details to the Id. AO within two weeks of this order. Further an estimated making charge of 5% is to be added on the metal value.

18 Kt. Gold Jewellerywith Diamond, other stones, etc. Issue of valuation of 18 Kt. Jewellery as on date of survey: The appellant has shown that the opening stock of the 18Kt. Gold jewellery as on 01.04.2017 was 17,916.188 grams (gross weight) and the value of the same is shown at Rs. 4,30,04,380.

Further the appellant has shown that the stock of the 18Kt. Gold jewellery as on date of survey (09.03.2018) was 17,260.143 grams (gross weight) and the value of the same is shown at Rs. 4,14,26,676.

As against this the official valuer has calculated as under:- Gross weight 15,990.600 grams Net weight 13957.684 grams Value of metal (net weight) = Rs. 3,26,60,745 Value of stones = Rs. 3,84,64,750

From the observation of the valuation sheet it is seen that most of the value of the stones is attributable to the diamonds. The official valuer has used a very reasonable rate of Rs. 25,000 per carat and 20,000 per carat (e.g. item number 50) and 15,000 per carat (e.g. item no. 51), apparently as per the physical attributes of diamonds used in the valuation.

The appellant has not placed on record any evidences regarding the purchase prices of the diamonds. Further it is explained during the hearing that the purchases of the appellant is made in terms of gross weight of the jewellery irrespective of the weight of the gold, diamond, tac, ruby etc. in each item.

The appellant has also not placed on record the making charges paid by him in the purchases. It is seen that the gross profit ratio of the appellant is very high which is shown to be above 40%. Such high gross profit ratio is possible in jewellery trading only in very high precision unique designs. This is directly correlated with the making charges involved whether paid separately by the appellant or paid indirectly as part of the overall purchase price of the jewellery item. In the official valuation as the made in the course of survey no addition or markup has been done to the raw material value (metal value, stones value, tac value) of the jewellery items. It is also a matter of common knowledge that making charges are higher in the diamond jewellery. Thus the valuation needs to be increased on this account. However from the above comparison of the valuation it is seen that the valuation of stones itself as worked out by the official valuer is Rs. 3,84,64,750 on the date of survey whereas the appellant has shown the value of the total 18Kt. jewellery including gold to be Rs. 4,14,26,676. Thus out of the total jewellery valued the value of the stones itself is almost 92.5% of the total value of the jewellery shown by the appellant. However the appellant has argued that the jewellery was purchased earlier when the rates were low and thus the valuation done on the date of survey at the rates prevalent on the date of survey needs to be reduced to take care of the old rates. However the appellant has not placed on record any verifiable information on the basis of which any relief could be allowed to the appellant. The claim of the appellant is a general claim without any working and supporting data.

Otherwise also, this argument of the appellant is not valid for the diamonds. This is because of the fact that the prices of the diamonds in the years preceding the year in which the survey took place (FY 2017-18) have not increased, or in other words, the value of the diamond on the date of survey reflects the value of the diamonds in the earlier years also. This view is arrived at from the following information in the public domain:-

As per the above chart (second and third and fourth line from the top in the graph) which is available in public domain the prices of the diamond during the period 2009 to 2018 have almost remained constant and conversely there is little fall in the prices. From the top first line in the above graph the prices of the highest grade diamonds were at their peak in the year 2012 and there was a gradual fall thereafter and there is rise only after year 2020.

From the above, the valuation of the stones (value mainly due to diamonds) as arrived at by the official valuer is upheld.

The conclusion to be arrived at from the above is that the valuation reflected by the appellant regarding the 18Kt jewellery is highly inaccurate.

It is also important to note that there was stock difference of 1270.143 grams of 18Kt. jewellery in terms of quantity during the course of survey as per appellants own submissions. The appellant is not maintaining item wise details in the stock register. No stock register has been filed. A generalised gross weight details have been submitted. At the same time it is indisputable an admitted fact from the side of the appellant that out of books sales have been made. Thus the stock position in terms of quantity and value as shown by the appellant does not show the stock position in terms of weight of diamonds is found actually during the course of survey.

Thus the valuation of 18 Kt. jewellery items is to be arrived at on component basis as has been done by the official valuer.

Since the gross quantities are available from appellant's audit reports, the net quantities for removing gold price rise are estimated at applying the ratio of 87.2868% (Net weight 13957.684 grams as % of Gross weight 15,990.600 grams)

Following the FIFO, the same has been purchased/manufactured by the appellant as under-

The above table shows acquisition period of the respective quantities of stock as available on date of survey, as per FIFO method; as the earliest purchased/manufactured items are deemed to have been sold as per FIFO.

As per this working, the balance of 18 KT gold jewellery comes to 9950.235 gms (13957.684-4007.449) as on 01.04.2013 as per FIFO ie. 9950.235 net jewellery out of stock on date of survey is treated to have been purchased as on 01.04.2013 and gold rate on this date shall be applicable.

The Id. AO is directed to obtain the 18KT gold jewellery rates of Jaipur (average of the monthly average rates) and work out the valuation by applying yearly average rate in the above table. The appellant is directed to submit the details to Jypore Manufacturing Jewellers Pvt. Ltd. vs. DCIT the Id. AO within two weeks of this order. Further an estimated making charge of 10% (as against 5% in 22 KT jewellery as in 18 KT jewellery there is substantial use of stones, tac etc. requiring higher making charges is to be added on the metal value.

“The assessee is a private limited company having income from manufacturing and sale of gold ornaments (18 & 22 Cts), jewellery studded with precious and semi-precious stones. The assessee company was incorporated on 04/09/1997. In this regard, a copy of memorandum of association and articles of association is available on Paper Book Page No.1-23. Survey under section 133A of the Income Tax Act, 1961 was carried out at the business premises of the assessee company on 09/03/2018. The assessee filed return declaring total income of Rs.1,08,40,320/- on 29/10/2018. Notice u/s 143(2) of the IT Act, 1961 was issued by the Learned Assessing Officer on 28/09/2019. The Learned Assessing Officer completed the assessment u/s 143(3) of the IT Act 1961 on 09/10/2019 determining the total income at Rs.8,30,58,250/- as against returned income of Rs.1,08,40,320/-, inter-alia, making the following additions :- a. Addition on account of excess cash found Rs.6,57,521/- b. Addition on account of excess stock u/s 69 B Rs.7,15,33,296/- c. Addition on account of late payment of PF u/s Rs. 27,114/- 36(1)(va)

Jypore Manufacturing Jewellers Pvt. Ltd. vs. DCIT Aggrieved with the order of the learned Assessing Officer the assessee preferred appeal before the Learned CIT(A)-4, Jaipur. The Learned CIT(A), vide appeal order dated 19/03/2025, has not quantified the relief given to the assessee or the addition sustained. The main issue is of addition of Rs. 7,15,33,296/- on account of valuation of gold ornaments, both 22 Ct & 19 ct. There is no dispute that there was no excess stock in terms of weight with reference to books of account. The Learned CIT(A) more or less has left the issue open of addition/relief on account of excess stock. The Learned CIT(A) has directed the Learned AO to work out the valuation of 20 ct. gold jewellery, weighing 37762.192 gms, on the basis of monthly average rates pertaining to the period 1/4/2013 to 31/3/2017. This has been directed so as to work out the book value of the stock on FIFO basis as on the date of survey. In the view of the Learned CIT(A), gold jewellery 22 ct. weighing 37762.192 gms was purchased by the assessee during 1/4/2013 to 31/3/2017. Similarly, the Learned CIT(A) has also directed the Learned Assessing Officer to find out the valuation in respect of 18 ct. gold jewellery weighing 9950.235 gms pertaining to the period 1/4/2013 to 31/3/2017. Instead of getting a remand report on the above issue, the Learned CIT(A) has passed the order giving the aforesaid directions to the Learned Assessing Officer. The directions given by the Learned CIT(A) are arbitrary inasmuch as when the assessee has got the purchase vouchers with the date of purchase of the aforesaid ornaments, both 22 ct and 18 ct, in the books of accounts maintained for the period 1/4/2013 to 31/3/2017, there was no occasion for directing to adopt average rate of purchase. Further, the order of the Learned CIT(A) is silent in respect of stock of gold ornaments both 22 Ct and 18 Ct which pertains to period earlier than 1/4/2013. It is submitted that the company stands incorporated with effect from 04/09/1997 and right from there, the business of gold ornaments is being continued. The stock as on 09/03/2018 has percolated right from the inception of the company. Therefore, the Learned CIT(A) was not correct in obtaining average cost of purchase of stock only for the period 1/4/2013 to 31/3/2017. Further, there was no justification for directing the Learned Assessing Officer for working out the valuation on monthly average basis, when the valuation as per books of account was not rejected u/s 145(3). Both the Learned Assessing Officer and the Learned CIT(A) have not been able to find any fault with the valuation of stock as per books of account. In view of this, the order of the Learned Assessing Officer is not in accordance with law. Therefore, the directions of the Learned CIT(A), being not in accordance with law, are unlawful, illegal and unjust.

Jypore Manufacturing Jewellers Pvt. Ltd. vs. DCIT Aggrieved with the order of the Learned CIT(A), the assessee has come in appeal before the Hon'ble ITAT. The individual grounds of appeal are discussed below :- GROUND NO.1 In the facts and circumstances of the case, the learned CIT(A) has erred in not passing the speaking order as the directions given are not clear and confusing. & GROUND NO.3 In the facts and circumstances of the case, the learned CIT(A) has erred in not deleting the addition of Rs 7,15,33,296/- made by the Learned Assessing Officer on account of excess stock found during the course of survey, which is only valuation difference. The direction of the Learned CIT(A) are confusing and misleading. The grounds No. 1 & 3 are taken together as the same are inter-related. The Learned CIT(A), vide appeal order dated 19/03/2025, has not quantified the relief given to the assessee or the addition sustained. The main issue is of addition of Rs. 7,15,33,296/- on account of valuation of gold ornaments, both

22. Ct & 19 ct. There is no dispute that there was no excess stock in terms of weight with reference to books of account. The entire dispute is regarding the valuation of the stock found. The assessee has been valuing stock as per cost whereas the valuer has valued the stock on the basis of rates as on the date of survey, i.e. 09/03/2018. It is submitted that valuation of stock at market rates as on the date of survey is done only when the stock is found in excess, i.e. when the stock has been purchased out of books or is not accounted for in the books of account. But when the stock is fully accounted for in the books of account, there was no occasion for valuing the same at the market rate. Further, this has been done without pointing any mistake in the valuation of stock by the assessee as per books. So much so books of accounts have also not been rejected. Therefore, the valuation done by the valuer is unlawful, illegal and unjust. It is submitted that no benefit has been given by the valuer of the stock being very old as well as being out of fashion. The Learned CIT(A) has also not considered the submissions made before him in a sympathetic manner. Copy of submissions made before the Learned CIT(A) along with paper book are available on Paper Book Page No. 24-65. The Learned CIT(A) has more or less left the issue open of addition/relief on account of excess stock. In the opinion of the Learned CIT(A), the jewellery weighing 37762.192 gms of 20 ct gold pertained to the period 1/4/2013 to Jypore Manufacturing Jewellers Pvt. Ltd. vs. DCIT 31/3/2017. Hence, the Learned CIT(A) has directed the Learned AO to work out the valuation of 20 ct. gold jewellery, weighing 37762.192 gms, on the basis of monthly average rates pertaining to the period 1/4/2013 to 31/3/2017. This has been directed so as to work out the book value of the stock on FIFO basis as on the date of survey. In the view of the Learned CIT(A), gold jewellery 22 ct. weighing 37762.192 gms was purchased by the assessee during 1/4/2013 to 31/3/2017. Similarly, the Learned CIT(A) has also directed the Learned Assessing Officer to find out the valuation in respect of 18 ct. gold jewellery weighing 9950.235 gms pertaining to the period 1/4/2013 to 31/3/2017. Instead of getting a remand report on the above issue, the Learned CIT(A) has passed the order giving the aforesaid directions to the Learned Assessing Officer. The directions given by the Learned CIT(A) are arbitrary inasmuch as when the assessee has got date of purchase of the aforesaid ornaments, both 22 ct and 18 ct, in the books of accounts maintained for the period 1/4/2013 to 31/3/2017, there was no occasion for directing to adopt average rate of purchase. Further, the order of the Learned CIT(A) is silent in respect of stock of gold ornaments both 22 Ct and 18 Ct which pertains to period earlier than 1/4/2013. It is relevant to add that the assessee company has been incorporated as back as 04/09/1997. The stock found as on the date of survey has percolated right from the inception of the company. Therefore, the directions of the Learned CIT(A), being not in accordance with law, are unlawful, illegal and unjust. It is submitted that the action of the Learned CIT(A) is not in order because he has not taken into consideration the stock lying with the assessee up to 31/3/2013. The assessee is submitting copy of audited accounts for the F.Y. 2011-12, which disclose position of stock as on 31/3/2011 and 31/3/2012. The relevant page of the audited account is scanned below :-

Jypore Manufacturing Jewellers Pvt. Ltd. vs. DCIT The above audited accounts disclose that as on 31/3/2011, the assessee was having opening stock of gold of Rs. 1,96,902/- and of various precious stones of Rs 17,48,860/-. It is common knowledge that in business, the old stock in some or other quantity continues to percolate from year to year and the value of the same is deteriorated. Therefore, the Learned CIT(A) also erred in directing the Learned Assessing Officer to work out the valuation of the stock for the period 1/4/2013 to 31/3/2017 on average basis. The assessee has maintained regular books of accounts, which stand audited u/s 44 AB. The Learned CIT(A) himself has mentioned that he has worked out the position of stock for the period 1/4/2013 to 31/3/2017 on the basis of audit reports, then there is no reason why the valuation shown by the assessee in the books of accounts is accepted. On top of all, the books of account maintained by the assessee during the course of business have not been rejected by the Learned Assessing Officer or by the Learned CIT(A). In these circumstances, the stock valuation reflected in the books of account of the assessee needed to be accepted. There was, therefore, no case for directing the Learned Assessing Officer for valuing the stock of the period 1/4/2013 to 31/3/2017 on average basis. In view of the above, the assessee submits that the valuation as per books of account required to be accepted on following counts :-

1. 1. The books of accounts were not rejected u/s 145(3).

2. There was no excess stock in terms of weight as on the date of survey, i.e. 09/03/2018.

3. The entire stock found stood fully accounted for in the books of accounts. It is not the case of the revenue there were unaccounted purchases.

4. The entire stock is backed up by vouched purchases.

5. The stock as on the date of survey contains old stock, which has percolated since the inception of the company, 04/09/1997.

6. It is not the case of the revenue that the assessee has valued the stock lesser than cost. The principles of accountancy permits the assessee to value the stock as per cost or market price, whichever is lower. In the case of the assessee, stock stood valued as per cost. In view of the above, the addition made of Rs.7,15,33,296/- made by the Learned Assessing Officer deserved to be deleted by the Learned CIT(A). GROUND NO.2 Jypore Manufacturing Jewellers Pvt. Ltd. vs. DCIT In the facts and circumstances of the case, the learned CIT(A) has erred in confirming the addition of Rs. 6,57,521/- made by the learned Assessing Officer on account of excess cash found during the course of survey. In this case, survey under section 133A was conducted by the Department on 09/03/2018. During the course of survey, on physical verification, cash of Rs.17,95,840/- was found as against book position of cash of Rs. 11,38,319/-. Thus, there was discrepancy of cash of Rs. 6,57,521/-, being in excess with reference to cash book. In view of this, the ld. AO has made addition of Rs. 6,57,521/- on account of unexplained cash u/s 69 A of the It Act, 1961. . The action of the ld. AO has been confirmed by the Learned CIT(A). In the assessment order the ld. AO has mentioned that at the time of survey, Ms. Monika Agarwal, D/o Shri Radha Mohan Agarwal, Director of the company was present there and she accepted that the excess cash belong to the company. It has further been mentioned by the ld. AO that Shri Radha Mohan Agarwal, Director also admitted in his statement that cash to the extent of Rs. 6,57,521/- was unexplained and the same was offered as income. In this regard, it is submitted that the statement recorded during the course of survey obtaining confessional surrender of income do not carry weight. These are recorded by exerting pressure. In the case of the assessee, soon after the survey proceedings, a retraction letter was filed before ITO, Ward 5(2) on 8/5/2018. A copy of this letter is available on paper book at Page 43-44. It has been submitted in this letter that cash found at the shop included personal cash of the directors and manager of the company and the same required to be excluded. If this is done, there is no excess cash. In view of this, the addition made by the Learned Assessing Officer and sustained by the Learned CIT(A) deserves to be deleted. GROUND No. 4 The assesse craves your indulgence to add, amend or alter all or any grounds of appeal before or at the time of hearing. The Hon'ble Tribunal is requested to decide the appeal in favour of the assessee by considering the grounds and submission made above and oblige.”

6. To support the contention so raised in the written submission reliance was placed on the following evidence / records:

Sr. Particular Page no. No.

1. Copy of memorandum of association and articles of association of the 1-23 assessee company, which was incorporated on 4/9/1997 2. Copy of submission along with paper book filed before the Learned 24-65 CIT(A), which includes copy of acknowledgement of return, computation of income, copy of retraction letter dated 8/5/2018, copy of valuation made of jewellery and ornaments at the time of survey by the regd. Valuer and copy of ledger account of items of jewellery and gold ornaments as per books of account as on the date of survey on 09/03/2018. • Case laws relied upon:

Sr.No. Particulars Page No. of paper book 1 1 to 18 Pr. CIT v. Roshan Lal Sancheti [IT Appeal No. 47 of 2018, dated 30.10.2018]

19 to 38 2 CIT, Bikaner Vs. Ravi Mathur 2017 (1) WLC (Raj.) 387 3 Bannalal Jat Constructions (P) Ltd V. Assistant Commissioner of Income-tax 39 to 46 [2019] 106 taxmann.com 128 (SC) 4. S. Shyam Kumar V. Assistant CIT, Central Circle-III(3), Chennai [2018] 99 taxmann.com 39 (Madras) 47 to 50 5. Narayan Bhagwantrao Gosavi, Balajiwale v. Gopal Vinayak Gosavi AIR 1960 51 to 72 SC 100 6. Fakir Mohmed Haji Hasan v. CIT [2002] 120 Taxman 1142001] 247 . ITR 290 (Guj), 73 to 75 7. Manharlal Kasturchand Chokshi v. Asstt. CIT [1997] 61 ITD 55 9Ahd.)

76 to 79 Param Anand Builders (P.) Ltd v. ITO [1996] 59 ITD 29 (ITAT Mum) 8. 80 to 94 9. Video Master v. Joint CIT [2002] 83 ITD 102 (Mum) ITAT, Mumbai 95 to 115 10. Hotel Kiran v ACIT [2002] 82 ITD 453 (Pune), 116 to 138

11 The Bombay High Court in the case of T. Lakhamshi Ladha & Co. v. CIT [2016] 386 ITR 245 (Bom) 139 to 146 12 Dhunjibhoy Stud & Agricultural Farm vs. DCIT, [2002] 82 ITD 18 (Pune) 147 to 161 13 Manmohansingh Vig vs. Deputy Commissioner of Income Tax, Circle 1(1), [2006] 6 SOT 18 (Mum) 162 to 181

7. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the assessee considering the cash on hand available with the family members the addition cannot be made in the hands of the assessee. The assessee in respect of the difference in purchase and sale has already offered the required income and the balance amount, being purely on account of difference in valuation, the same cannot be added in the hands of the assessee. To support this view, he relied upon the decision of our High Court in the case of PCIT Vs. M/s. Jewels Emporium in DB ITA no. 43/2001. He also submitted that the declaration was made on pressure and the same were retracted and no addition can be made merely based on the retracted statement. To support this view, he relied upon the decision of our High Court in the case of PCIT Vs. M/s. Esspal International P. Ltd. In DBITA no. 25/2024. He also filed a reconciliation chart to establish that the excess stock is derived merely on account of valuation difference of market rate with that of the book stock.

The ld. AR also submitted that their jewellery were released by the revenue difference in stock valuation based on the market price and at the stock at book value.

8. The ld. DR is heard who relied on the findings of the lower authorities and more particularly advanced the similar contentions as stated in the order of the ld. CIT(A). She vehemently argued that the stock was worked out in the presence of the director of the assessee company. There is no fault in the valuation and verification conducted by the revenue. The excess stock and excess cash were duly offered in the statement recorded at the time of the survey proceeding as income. Therefore, the assessee later on cannot merely by filling a simple retraction from the statement which was recorded based on the situation and fact prevailing at that time. The retraction statement does say that the surrender was forced one. No such proof was presented and therefore allegations are purely after thought. She stated that the retraction to be supported by evidence and for that she cited the judgment in the case Bannalal Jat Constructions (P) Ltd. Vs. ACIT (SC)

106 taxmann.com 128. As regards the cash on hand of family member she submitted that why the personal cash on hand was kept at the business premises. The contention is nothing but an afterthought and thereby she supported the finding recorded in the order of the ld. CIT(A). At the time of AO and for that she will file the same upon receipt of the same and ld. DR submitted that the report of the ld. AO be considered.

Ld. DR vide letter dated 17.06.2025 filed the comments of the ld. AO bearing letter dated 16.06.2025 which reads as under :

Sub:-Appeal before Hon'ble ITAT, Jaipur in ITA No.- 432/JPR/25 (A.Y. 2018-19) in the case of M/s Jypore Manufacturing Jewellers Pvt Ltd. PAN-AAACJ4640C) - regarding.- Madam, Kindly refer to your office letter No. 286 dated 28.05.2025 seeking comments/report and relevant documents on the submission filed by the appellant on the issue of excess stsock, on the points mentioned in the attached documents/papers (Annexure -1 to annexure V). In this regard, the comments of the undersigned are furnished as under:

1.

1. Regarding the allegation that the CIT(A)'s order is not a speaking or clear order: • The order of the Ld. CIT(A) is reasoned and justified, based on the facts brought on record. The CIT(A) acknowledged that there was no discrepancy in the weight of the stock found during survey, but clearly dealt with the valuation inconsistency as per book value versus market value. • The directions issued by the CIT(A) to the AO were not vague or embiguous, but rather aimed at ensuring a fair re-computation of the book value using the FIFO method and historical monthly average purchase rates for the relevant periods (FY 2013-17). This approach is a well-established and rational method of valuation in the absence of detailed item-wise purchase records. • The assessee's grievance appears to stem from disagreement with the methodology, not any lack of clarity. Hence, the allegation that the order is not a speaking order is misplaced and baseless.

2. On the assertion that the addition of Rs. 7,15,33,296/- is only a "valuation difference" and not excess stock Jypore Manufacturing Jewellers Pvt. Ltd. vs. DCIT The contention raised by the assessee before the Hon'ble ITAT is not acceptable owing to the following: a) Nature of Valuation Discrepancy: While it is true that no quantitative difference was noted, the material issue pertains to the valuation of the gold jewellery stock. The valuation adopted by the assessee is grossly understated compared to market rates on the date of survey. The department's valuer rightly considered the prevailing market rates to assess the correct financial position of the assessee on the date of survey. b) Justification for Market Value Adoption: As per established principles and CBDT guidelines, when there is a material discrepancy in the valuation of stock, particularly where the assessee fails to provide satisfactory evidence regarding old stock valuation and deterioration due to fashion changes, adoption of market rate is justified. The assessee's plea that valuation should be taken at cost is not applicable in this case since it resulted in suppression of stock value and consequently of profits. c) No Satisfactory Age-wise Inventory: The assessee has not furnished a clear age-wise inventory of the stock to substantiate its argument that the stock has percolated since inception. The direction of the Ld. CIT(A) to value the jewellery based on average monthly rates from FY 2013-17 is a fair and reasonable method given the absence of specific valuation data in the assessee's records. d) Books Not Rejected-Not Conclusive: The fact that the books were not formally rejected under section 145(3) does not prevent the Assessing Officer from identifying and taxing unrecorded or undervalued assets, especially during a validly conducted survey. The valuation adopted by the valuer based on current rates and further fine-tuned by the CIT(A) based on FIFO and average cost methodology is well within law and does not require formal rejection of books. Apart from the above, the assessee attempts to downplay the issue by labelling the entire addition as a mere "valuation difference." However, the magnitude of the discrepancy-over 27 crore-warrants close scrutiny and cannot be brushed aside on technical grounds. Valuation of inventory is a factual issue, and when during survey, the stock is found recorded in the books at significantly lower values than actual or market rates, and no detailed, age-wise, item-wise valuation records are maintained, it gives rise to justifiable suspicion of suppressed income or Jypore Manufacturing Jewellers Pvt. Ltd. vs. DCIT understated purchases. The assessee has not provided any reliable evidence of the actual cost of the jewellery items. No inventory register or item-wise valuation methodology was furnished during the survey or before the authorities. In such a scenario, application of average monthly purchase rates over prior years is a practical and reasonable approach adopted by the CIT(A) The assessee has also failed to provide any reliable computation of obsolescence, deterioration, or design devaluation to justify such depressed book values. Assertions that the stock is old and hence undervalued do not stand without objective supporting documentation. The assessee's repeated emphasis that books were not rejected under section 145(3) does not preclude the department from taxing unexplained or undervalued stock under section 69B. As held in various judgments, rejection of books is not a prerequisite for invoking section 69B, when a clear discrepancy in asset value is detected through survey'evidence. The valuer's report and findings during the survey clearly establish that the stock as per books is grossly undervalued. The adoption of FIFO-based historical cost valuation, as directed by the CIT(A), ensures a balanced and neutral approach without undue hardship to the assessee. The assessee's contentions under Grounds 1 and 3 are factually incorrect, legally untenable, and devoid of merit. The CIT(A)'s order is clear, reasoned, and appropriately directs the Assessing Officer to apply a fair valuation method in the absence of specific cost details. The addition made by the AO on account of undervaluation of stock is valid and should be sustained. Further, the assessee in its submission before the Hon'ble Bench at page No. 10 has submitted that the valuation as per books of account required to be accepted on below discussed counts. However, these are not acceptable owing to the following discussion. 1. "Books of accounts were not rejected u/s 145(3)." Non-rejection of books of account u/s 145(3) does not preclude the Assessing Officer from making additions where inconsistencies, understatements or anomalies are found. Section 693 empowers the Assessing Officer to make additions on account of undisclosed investments or unexplained valuation discrepancies, irrespective of formal rejection of books, In this case, the valuation difference is substantial, and arises from facts found during a valid survey w/s 1334 Thus, book entries cannot override factual findings of under-valuation. 2. "There was no excess stock in terms of weight as on the date of survey."

Jypore Manufacturing Jewellers Pvt. Ltd. vs. DCIT The issue is not quantitative excess, but valuation discrepancy. It is undisputed that the stock found during survey was valued significantly higher than what is recorded in the books. Therefore, even if there is no weight difference, the value of stock recorded is artificially suppressed, leading to undisclosed income. This directly attracts the provisions of section 69B. 3. "Entire stock stood fully accounted for in the books of accounts." Merely recording stock in the books does not establish that it has been correctly valued. If stock is entered at artificially low values or on outdated cost basis without considering current market realities especially when such stock comprises high-value items like gold ornaments the book valuation becomes misleading The presence of stock in the books does not immunize the assessee from scrutiny under section 69B when the declared value is inconsistent with ground realities. 4. "Entire stock is backed by vouched purchases." Even if purchases are vouched, the valuation of closing stock must reflect true and fair value, either on cost or market price, whichever is lower. Here, the assessee has failed to establish the actual cost of stock on a lot-wise or date-wise basis and has not furnished any concrete inventory aging or purchase register to prove the linkage. The use of vague, aggregated valuation methods undermines the reliability of book valuation. 5. "Stock as on the date of survey includes old stock percolated since inception in 1997." The assessee has not produced any inventory reconciliation, product-wise age analysis, or stock identification tags to prove that significant stock pertains to pre- 2013 years. The reference to audited accounts from carlier years without concrete item-wise identification is speculative. Moreover, even if some portion is old, no depreciation or obsolescence discount methodology has been presented. Therefore, this argument lacks evidentiary support. 6. "Stock is valued at cost and not less than cost; valuation is as per accounting standards." While valuing inventory at cost is permissible, the burden of proving that cost valuation is true, accurate, and consistent with reality lies on the assessee. The valuer's report and survey findings show a wide divergence between market value and book value. Additionally, since the assessee could not substantiate its cost basis for stock of different periods, the application of FIFO or average cost by CIT(A) is justified and reasonable. The assessee has failed to demonstrate that Jypore Manufacturing Jewellers Pvt. Ltd. vs. DCIT their valuation policy aligns with AS-2 (Valuation of Inventories) or is consistently applied. The assessee's plea that book valuation should be accepted ignores substantial undervaluation, lacks documentary support on stock ageing and cost base, and relies on general accounting principles without reconciling them to facts discovered during the survey. The rebutted grounds do not withstand scrutiny when measured against the actual findings. Therefore, the adoption of alternate valuation based on average historical rates or market value is lawful, fact-based, and justified. Addition of 6,57,521/-on Account of Excess Cash Found During Survey: The assessee contends that the addition made by the Assessing Officer and sustained by the Ld. CIT(A) under section 69A of the Income Tax Act, 1961, is unjustified. It argues that the cash found during the survey included personal cash of directors and staff and that the surrender made during the survey was obtained under pressure. A retraction letter was filed post-survey to this effect.

Jypore Manufacturing Jewellers Pvt. Ltd. vs. DCIT Judicial precedents (e.g., Pullangode Rubber Produce Co. Ltd. v. State of Kerala [91 ITR 18 (SC)]) affirm that a statement made by a person against his own interest is admissible unless retracted credibly and substantiated by evidence. Mere bald assertions made in a post-survey letter do not invalidate a voluntary admission.

4. Onus Lies on to Explain Excess Cash: Under section 69A, when an assessee is found to be the owner of money not recorded in the books of account and fails to offer a satisfactory explanation, such money is deemed to be undisclosed income. In this case, the assessee has not discharged the burden of proof to explain the excess cash found. Thus, the addition of ₹ 6,57,521/- on account of unexplained excess cash is justified, lawful, and sustainable. The explanations provided by the assessee are unsubstantiated, and the retraction is not backed by credible evidence. The action of the Assessing Officer in making the addition and the Ld. CIT(A) in confirming it is therefore correct and deserves to be upheld. Comments/report is submitted for kind perusal and further necessary action at your end.

9. In the hearing after completion of the arguments of the ld. DR, ld. AR of the assessee in the rejoinder submitted that the decision in the case of Bannalal Jat Constructions (P) Ltd., relates to search and here is the case of survey. Therefore, the facts of that case with that of the assessee are differentiated. He also submitted a chart stating that the amount added is merely on account of difference in valuation stock and he also submitted that revenue has before the survey released the jewellery which was found in stock that is how there exist a difference in valuation because there has been a much appreciation in the value of stock. The reconciliation chart reads as under:

11. Ground no. 2 relates to the addition of Rs. 6,57,521/- made by the learned AO on account of excess cash found during survey which was confirmed by the ld. CIT(A). Apropos to this addition we note that the ld.

CIT(A) has confirmed the addition merely on the contention that “the directors and manager were present during survey and none of them could explain the reason of excess cash found of Rs.6,57,521/- and making argument at later stage that excess cash found during survey belong to argument without any merit which itself proves that this is nothing but an afterthought of the appellant”.

The brief fact related to the dispute are that during the survey under section 133A conducted on 09.03.2018 physical verification, cash of Rs.17,95,840/- was found as against book position of cash of Rs.

11,38,319/-. Thus, there was a discrepancy of cash of Rs. 6,57,521/-, being in excess with reference to cash book. In view of this, the ld. AO has made addition of Rs. 6,57,521/- on account of unexplained cash u/s 69 A of the Act. Ld. AO while making the addition noted that in the survey proceeding Ms. Monika Agarwal, D/o Shri Radha Mohan Agarwal, Director of the company was present there and she accepted that the excess cash belong to the company. It has further been mentioned by the ld. AO that Shri Radha Mohan Agarwal, Director also admitted in his statement that cash to the extent of Rs. 6,57,521/- was unexplained and the same was offered as income. It was submitted that the statement recorded during the course of survey obtaining confessional surrender of income do not carry weight. These are recorded by exerting pressure. In the case of the assessee, soon after the survey proceedings, a retraction letter was filed before ITO, Ward 5(2) on 8.5.2018. A copy of this letter is available on found at the shop included personal cash of the directors and manager of the company and the same required to be excluded. If this is done, there is no excess cash. When the matter was carried out before the ld. CIT(A) the addition was confirmed by ld. CIT(A) stating that the contention raised was nothing but afterthought.

The ld. AR of the assessee submitted that the ld. AO made the addition and that of the ld. CIT(A) confirmed it considering as afterthought.

Lower authority did not appreciate the fact that no addition can be made on the retracted statement. The ld. AO did not make any independent enquiry and merely based on the statement made the addition which was retracted by the assessee before the completion of the assessment. Ld. AR of the assessee in support of the contention also filed a statement of availability of cash on hand in the hands of the family members which amounts to Rs. 15,43,769/- if that cash is considered there is no excess cash. He also submitted that the assessee company runs by a family the possibility of blending the cash of company and family members cannot disputed and the explanation after checking all the records retraction was made and that factual submission cannot be termed as afterthought. Considering that fact, the cash is available in the hands of the family members which justify the upon which the addition was proposed was retracted, we see no reason to sustain the addition and therefore, we direct the ld. AO to delete the addition of Rs. Rs. 6,57,521/-. In the light of these observations ground no. 2 raised by the assessee is allowed.

12. Ground no. 3 raised by the assessee deals with the addition of Rs. 7,15,33,296/- made by the learned AO and sustained by the ld. CIT(A) on account of excess stock found during the course of survey which is on account of the difference in valuation.

The brief facts related to this dispute are that a survey proceeding was conducted at the showroom of the assessee situated at Ganpati Plaza, M. I. Road, Jaipur and registered office at 182, Ratansikha Building, Janta Colony, Jaipur. The survey team took the physical stock and inventorised.

The stock was valued by the Approved Valuer in the presence of directors of the company and other employees. The stock of gold jewellery, gold jewellery studded with precious stones and silver utensils etc. found on physical verification was of the value of Rs.25,40,15,246/- (Rs.24,20,16,796/- at the showroom at Ganpati Plaza and Rs.1,19,98,450/- at registered office at Janta Colony). The value of stock as per books of inventory at show room was prepared in the presence of Ms. Monika Agarwal, daughter of Shri Radha Mohan Agarwal and also Manager of the company, admitted that stock valuation was correct and the same was taken and inventorized in the presence of herself along with other employees, viz., Shri Pawan and Shri Ashok. The stock of jewellery at registered office at Janta Colony was made in the presence of Shri Radha Mohan Agarwal, director, who too admitted that the stock inventory was correct and taken in his presence. He further admitted that the assessee company is indulged in sale out of books and this excess stock was purchased from unaccounted income and accordingly he surrendered this excess stock of Rs.7,15,33,296/- for taxation as per rules. While assessment proceeding, the assessee's explanation was called for on this issue as the excess stock surrendered by the assessee was not found disclosed in the return of income the assessee was called upon to explain the reasons.

Vide reply filed on 22.03.2021, the assessee stated that the surrender of excess stock at the time of survey was a forced surrender done in pressure and misrepresentation. Therefore, the assessee has retracted from the surrender. However, at the time of audit and further verification of recorded in books and accordingly income of Rs. 54,01,292/- has been included in the total income of the assessee apart from regular income. It is further stated that excess physical quantity of various inventory items of the value of Rs. 1,48,91,078/- has been accounted for as purchase from sundry suppliers by passing entry and book stock has been increased on account of such purchases and the difference has been dealt with accordingly. It is further stated that short physical quantity of various inventory items of the value of Rs. 94,89,786/- has been accounted for as sales to sundry parties by passing necessary entries and book stock to that extent has been reduced accordingly. The net result of these entries is that an income of Rs.

54,01,292/-has been included in the total income. Ld. AO considered the submission of the assessee, survey records and statement of the assessee and based on that he noted that the submissions made by the assessee are not found to be acceptable because the stock was taken in the presence of the director and his daughter. In the statement recorded that offered that difference as income earned out of the undisclosed source. Even in the post survey proceedings, the statement of Shri Radha Mohan Agarwal was recorded on 13.03.2018. In his statement, he re-affirmed that the stock was correctly taken and he has no objection in valuation of stock made at the taxation and to pay due tax and thereby he admitted that fact. This fact was further corroborated from the papers found and impounded during the course of survey. The slip pads and papers found and impounded as per Annexure AS-10 show that the sale transactions contained in these papers have not been taken into consideration in the regular books by the assessee company. The fact of having indulged in sale out of books has been re-affirmed by the director of the company in his statement with his categorical admission that the unaccounted income earned from such sales was invested in stock which was found excess during the course of survey.

Having regard to all these facts of the case, statements recorded during the course of survey and subsequently in post-survey proceedings, the retraction made by the assessee was considered as an after-thought with an intention to avoid payment of due tax on the surrendered amount. The contention made during assessment proceedings of having taken excess stock of Rs. 1,48,91,078/-and short stock of Rs. 94,89,786/- is also an after- thought of the assessee with an intention to avoid paying the tax on the surrendered amount. Therefore, ld. AO noted that it is just jugglery of figures, without any proper justification and evidence to substantiate the was not considered and the addition of Rs. 7,15,33,296/- was made.

When the matter carried before the ld. CIT(A) he has given direction to do the valuation on the monthly average and has not considered submission of the assessee even though he agreed that the valuation done by the survey team was at market value.

On the issue of the addition of Rs. 7,15,33,296/- we have gone through the chart submitted by the assessee so as to arrive the conclusion that in fact there is a difference in the valuation of stock merely on the market rate with that of the book rate or not. The bench also noted that there is no dispute about the quantity part [ even in the report of the ld. AO dated 16.06.2025 he did not dispute the quantity but he accept that is of valuation ] and therefore the rate which is derived as per book compared with that of the rate as computed by survey team the difference is arrived as under considering the chart submitted by the assessee :

Based on the above chart the bench derived the working as under so as to confirm the contention of the assessee Item/Quanity as Rate as per Rate as per Difference on Total amount of per survey books survey team account of such difference valuation as per on account of market rate taking market rate Gold 2400 4447 2047 3,27,31,530 Jewellery

Thus looking at the above difference which is arrived at Rs.

8,66,85,962/- is merely on account of valuation and the ld AO thus working the addition is of Rs. 7,15,33,296/- is nothing but the difference between the market value and the book value. Thus, we note that the difference is on account of the valuation only if we take the quantity as per the survey team and the rate as per book and rate as applied by the survey based on the prevailing market rate. The assessee is regularly following the method of accounting for stock and the revenue did not dispute the same. Thus, the difference of the alleged amount of Rs. 7,15,33,296/- is nothing but the difference between the market rate and book value. The addition of the stock in trade cannot be made as per provision of section 69B in such circumstances as the revenue failed to establish that the assessee has under recorded it purchase or making charges of the jewellery. Since the ld. AO made the addition u/s. 69B of the Act it would be appropriate to deal with the provision of section 69B of the Act which reads as under :

Amount of investments, etc., not fully disclosed in books of account.

Jypore Manufacturing Jewellers Pvt. Ltd. vs. DCIT 69B. Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable article, and the Assessing Officer finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year.

Here it is not a case of the revenue that the assessee expanded more then what is recorded in the books, as the assessee deals with the gold jewellery and ornaments and therefore, the assessee based on the method of accounting regularly employed accounted the stock at carrying cost whereas the revenue valued that stock at the market price which does not fall within the ambit of section 69B of the Act.

The similar issue was decided by the coordinate bench in the case of M/s Jewels Emporium vs. ACIT Central Circle-1, Jaipur in ITA 303/JP/2019 decided on 15.09.2020, wherein order of the Ld. CIT(A) deleting the addition on account of excess stock wherein the difference was on account of valuation was upheld. The relevant extract of the same is reiterated here in below:

“18. Rival contentions have been heard and record perused. Brief facts are that, during the course of search operation total stock found at the business premises of assessee firm situated at D-7, M.I. Road, Jaipur and shop titled as Boutique, Hotel Rambagh Palace, Jaipur was quantified and valued by departmental valuer at Rs. 26,62,93,376/-. The search team based on incomplete books of accounts worked out the cost of stock as per books as on the date of search i.e. on 18.12.2014 at Rs. 20,47,95,518/- and the differential amount of Rs. 6,14,97,858/- was alleged as Jypore Manufacturing Jewellers Pvt. Ltd. vs. DCIT excess unexplained stock and based on this working an admission of Shri Anup Bohra, one of the partners of assessee’s firm, was obtained in his statements recorded during the course of search as stated above. On the date of search books of the assessee were not complete and certain entries pertaining to cash sales made on 16.12.2014 remained to be incorporated therein, which fact is established from the copy of cash book print outs seized during the course of search where the cash balance as on 16.12.2014 is appearing in the Balance Sheet marked as Anx-1 page 22 from where the value of stock of Rs. 20,47,95,518.00 is taken by the search team. The other most important factor which is ignored by the department is that while valuing the stock found, the departmental valuer took the value of precious metal and other precious and semi-precious stones at prevailing market price as on the date of search (18.12.2014) whereas in accordance with the specified norms and accounting standards, the stock recorded in the books is at the cost price and or market value whichever is lower and since cost price is lower, same has been recorded at cost price in the books. It is relevant to state that there is no dispute in quantity measured by the departmental valuer. It was thus contended that since the stock found at the time of search was valued at prevailing market value and to compare the stock as per books of accounts which had always been recorded on cost price, the profit element embedded in value estimated by DVO to bring both the values in parity and make them comparable and thereafter the AO is required to find out any excess or any shortage of stock. It was also found that after giving effect to the cash sales made on 16.12.2014, entry of which were remained to be made in the books as on the date of search and further reducing the profit element from the gross value determined by departmental valuer, the total value of stock found as on the date of search was equal to the value of stock recorded in the books of the assessee and therefore no addition is warranted. However, the AO without appreciating the same and simply for the reason that one of the partners had admitted the same as unexplained in the statement recorded during the search, had made the addition. When all these facts alongwith the same evidences which were submitted before the AO during course of assessment proceedings were produced before the ld. CIT(A) in appellate proceedings, ld. CIT(A) after appreciating the same had deleted the addition made in this regard. Findings recorded by the ld. CIT(A) in this regard are as under:

“9.1 9.2 I have perused the written submissions submitted by the Ld. A/R and the order of AO. I have also gone through various judgments cited by the Ld. A/R and those contained in the order of AO. Briefly the facts related to the issue under consideration are that during the search operation stock found at the business premises of the appellant firm situated at D-7, M.I. Road, Jaipur and shop titled as "Boutique", Hotel Rambagh Palace, Jaipur was inventoried and valued by the departmental valuer at t 26,62,93,376/-, as against the above, the cost price of the stock as per books of accounts of the firm as on the date of search was worked out by considering opening stock, purchases and sales till the date of search and gross profit related to these sales, which came to 20,47,95,518/-. The AO has considered the difference between the two amounting to 6,14,97,858/- as excess unexplained stock found during the course of search, as the same was also admitted by Shri

9.3 It was submitted before me that stock inventory so prepared during the course of search has been valued at 'market value' and has not at all being valued at the 'cost price'. Accordingly the deduction of GP rate embedded in the value of physical stock is to be considered to arrive at the cost of stock physically found during the course of search for comparing the same with stock as per books of accounts. The working after deducting the Gross Profit embedded in the valuation of physical stock and after considering the same, it was submitted by the Ld. A/R that the cost of physical stock so found was more or less same as of the cost of stock as per books of accounts and rather the physical stock was slightly on lower side and the slight difference was only due to estimation of the valuation of the physical stock so done by the approved valuer. The AO has not accepted the argument of the Ld. A/R merely on the ground that the partner of the firm in his statement recorded at the time of search has admitted and surrendered the excess stock.

9.4 Accordingly in the return of income so filed by the appellant, no additional income was offered on the impugned excess stock and a note to this effect was also made in audited financial results. The Ld. A/R has also given the working of G.P. rate of last four preceding years other than the current year in order to fortify his argument about the G.P. rate in the current year being in the same range as that in earlier years. Moreover the Ld. A/R has also furnished raw material wise working of last six years in order to support his argument that the value so taken by the approved valuer has to be the market value and cannot be the cost price. In this connection it may be pointed out that said difference in value of stock in trade as per books of accounts and as per valuation report of registered valuer as on the date of search i.e. 17,12_2014. The AO has not held that there was any difference in quantity of stock as per Valuation report and as per books of accounts. The said stock in trade was of studded jewellery of gems stones, for which registered valuer adopts the value of studded stones on estimated basis at market value. Whereas the value as per books of accounts of the said items is supported by purchase bills and vouchers and is as per its cost to assessee as per regular books of accounts and valuation is made by valuer at market price i.e. at price which it will fetch in open market so profit margin is also there in the value assessed by the valuer. Thus there can be no addition simply on the basis of valuation unless excess quantity of stock is found.

It is a common practice that during the course of search valuation of stock so physically found at the business premises of any assessee is done on prevailing market value. On the other hand in the present case as in all the cases of jewellers, the assessee is not maintaining the stock register, then stock as per books of accounts as on the date of search could only be determined after considering the opening stock, adding the purchases in it and considering the sales till the date of search as well as the Gross Profit embedded in these sales. It will give us the value / cost of the stock as per books of accounts. Same has to be compared with the cost Jypore Manufacturing Jewellers Pvt. Ltd. vs. DCIT of physical stock so found, which has to be determined after giving deduction the Gross Profit embedded in the valuation of physical stock so done by the approved valuer. The working for the closing stock accordingly would be: No. Particulars Amount 1. 2. 3. 4. 5.

6. Valuation as done by DVO during the course of Search Less: Value of raw gold 7,68,96,472.00 Less: Value of raw silver 5,70,580.00 Market Value of Stock Less: G.P. @ 34.20% Cost Price of Stock physically found Add: Value of raw gold and silver Cost price of total goods physically found Stock as per books of accounts as on date of search Shortage of goods due to estimation [5-4] 26,62,93,376.00 7,74,67,052.00 18,88,26,324.00 6,45,78,603.00 12,42,47,721.00 7,74,67,052.00 20,17,14,773.00 20,47,95,518.00 30,80,754.00 18 ITA 303 & 234/JP/2019_ M/s Jewels Emporium Vs ACIT Thus there is actually a shortage of stock instead of surplus as is determined by the AO 9.7 This view was also taken by the Hon'ble ITAT in assessee's own case in A.Y. 1987 88, wherein similar issue of valuation of physical stock found during the search conducted was decided by holding that deduction of gross profit embedded in the market value of the physical stock should be given, copy of which was placed before me. In the order no. ITA /1529/JP/91 and ITA/JP/ 1617 dated 10/04/1995 the Hon'ble ITAT Jaipur has held as under: 7.

8. We hear the Id. Counsel for the parties at sufficient length. Whereas the Id. Counsel for the assessee mainly urged that the cost of the stock had been correctly estimated in the books and there was no justification at all for arriving at the cost of the stock by making the tag prices, which were in fact the asking price, as basis and supported his reasoning with Tribunal's approach in ACIT vs. Bhandari Jewellers (1994) Tax World 292 Sec. 1), the Id. D/R vehemently argued that in view of the statement of Sri Heera Lal employee the tag prices represented Singapore Dollars on verifiable Indian currency by a multiplier of 5.7 and therefore the AO was justified in valuing all the stock by the rates mentioned on the tag It is evident in the present case that the articles found either at the shop in the Ram bagh Palace Hotel or at the main show room at M.I. Road, Jaipur were valued by the two methods vis, on the basis or the prices mentioned the tags tied with the articles or by the estimate made by the approved value. The difference between the valuations as mentioned in the books and as arrived at either at the time or search or at the time of assessment was the result of the difference in the estimation of the cost of the articles made. After all it was the estimation of the cost or the articles one made by the assessee on the basis of his personal knowledge which was likely to be influenced by personal interest. The estimation of the cost made on the basis of the prices mentioned in the tags could not be, on the fact of it, indicative of the correct cost of the article. It was in the fact the asking price which is ordinarily subject to negotiation between the buyer and seller. Therefore, the estimation of cost made on the basis of the prices mentioned in the tags could not be accepted. The third name was the report of the Approved Valuer. An approved valuer having the special knowledge of the subject may be a better person than others to make 19 ITA 303 & 234/JP/2019_ M/s Jewels Emporium Vs ACIT estimation of the cost and gie his opinion. His opinion is in the nature of the opinion of an export and hence admissible and as such acceptable if it is uninterested, impartial and trustworthy. In the present case it is not shown that the approved valuer was in any way interested in either of the parties. The estimation made by him Jypore Manufacturing Jewellers Pvt. Ltd. vs. DCIT of the cost of untagged a articles was, therefore, acceptable. Incidentally such estimation, more or less, tallied with the estimation made by the assessee. Therefore, the cost of the stock declared by the assessee at the time of search must have been accepted. There are thus reasons to take the view that since the basis of the addition of Rs. 54,250/- was after all estimation of the cost of articles and such estimation was done at an intermediary stage of the accounting period it is not safe to declare that the assessee was having any stock in excess of that mentioned in the books. It may be mentioned that the cost of the stock was not arrived at itemwise or weightwise so as to pin point the excess articles or weight. Under such circumstances we find it difficult to uphold the sustained addition even. The addition sustained by the learned CIT(A) therefore deserved to be deleted. However, as detailed at page 69 and shown in the chart supplied to us during the course of argument at the most addition of Rs. 24,476/- only, as declared by the assessee may be and is hereby sustained. We think, we are fortified in our view, by the approach adopted by the Tribunal in M/s Bhandari Jewellers case (Supra) relied upon by Mr. N.C. Dhadda. Ground relating to this point in assessee's appeal are, therefore, partly allowed but in Revenue's appeal dismissed. 9.8 Accordingly I am of the considered opinion that AO should have considered the deduction of Gross Profit embedded in the valuation of physical stock so done. The meager difference of stock which is about 1.15% of the total valuation arrived at by the DVO may be ignored which may bound to occur on account of estimation while valuing fair market value of the precious and semi precious stones embedded in the jewellery. Further in my view even if addition is somehow made on account of said valuation of stock and sustained in assessment than credit of the same has to be allowed in year end while computing profit at year end which has not been allowed and as assessing officer accepted declared closing stock as on 31.3.2015 in books of accounts the addition of difference in value as on 17.12.2014 will get set off. The assessee carried forward the closing stock of this year end as declared in books of accounts as opening stock for next year. The AO neither allowed credit of difference while accepting closing stock at year end but accepted closing stock declared by the assessee which has been 20 ITA 303 & 234/JP/2019_ M/s Jewels Emporium Vs ACIT taken as op. stock in next year. In next year also no credit allowed for enhanced stock and even it is done it will be revenue neutral exercise. The Hon'ble ITAT in case of Manoj Kumar Johari (ITA No. 479/JP/ 13 & 383/JP/ 13 order dated 16-10-2015) has held that: "Apropos Ground No. 5 of the assessee, we find merit in the arguments of the Ld. counsel for the assessee that increase in valuation of the closing stock is to be allowed in next year as increase in opening stock in next year i.e. 2010-11. It has not been disputed that the assessee has not claimed any benefit by increase in valuation of stock in subsequent year. Hence, the addition becomes revenue neutral. Consequently, respectfully following the decision of Hon'ble Supreme Court in the case of CIT Vs. Excel Industries Ltd. (2013) 358 ITR 295, the addition being tax neutral and the assessee having not derived any benefit, the addition is deleted" Also in case of Paras Mal JaM vs ACIT (1TA No.916/JP/ 12 dated 17-10-2015 has held that: "Assuming an addition on account of closing stock is somehow made, the same is to be allowed to the assessee in the next year as opening stock which will reduce the profits of next year. This exercise is essentially Jypore Manufacturing Jewellers Pvt. Ltd. vs. DCIT revenue neutral between two years. The Hon'ble Supreme Court in the case of CIT vs. Excel India, 358 ITR 295 has held that addition in such revenue neutral exercise should not be made by the Department. Thus on both the counts, there is no justification in retaining the addition which is deleted." 9.9 19. In above para, accordingly the addition so made by the AO is deleted and these grounds of appeal of A/R on this issue are allowed. On the facts and in the circumstances of the case, the AO is directed to delete the addition of 6,14,97,858/-“

The said decision of the co-ordinate bench of ITAT has been upheld in appeal by our Hon’ble Jurisdictional High Court in DBITA No.

43/2021 while dismissing the revenue’s appeal wherein court further held that:

“6. Heard learned counsel for the parties and perused the pleadings.

7. The admitted facts are: (i) that at the time of the search the books of accounts were incomplete and certain entries pertaining to cash were to be made. (ii) the excess stock was result of difference in value as per valuation report compared with books of account. (iii) that the valuation was done on the basis of the current price and not on the cost price. (iv) the books were being maintained at cost price. (v) there was no quantitative difference either in the jewels or of the precious metal (vi) lastly no incriminating documents were found during the search to support the alleged excess stock.

8. The CIT(A) held that the statement of a partner recorded at the end of forty five hours long search cannot be the sole basis for making addition for excess stocks. Moreso, when there was no quantitative difference found, and difference was result of valuation being done on current market price and books being maintained on cost” Also, it is apposite to refer to the decision of our Hon’ble Jurisdictional High Court in the case of Smt. Amar Kumari Surana v. Commissioner of Income-tax [89 TAXMAN 544 (RAJ.)] wherein it has been held as under:

Jypore Manufacturing Jewellers Pvt. Ltd. vs. DCIT 5. In second appeal before the Tribunal, after considering the material on record, it gave a finding of fact that the correct value of the plot of land and sale consideration have not been shown by the assessee in her account-books and in any case the investment cannot be less than Rs. 68,400. Therefore, the Tribunal upheld the addition sustained by the AAC under section 69B.

10. Section 69B reads as under : "Amount of investments etc., not fully disclosed in books of account - Where in any financial year the assessee has made investments or is found to be the owner of any bullion jewellery, or other valuable article, and the Assessing Officer finds that Jypore Manufacturing Jewellers Pvt. Ltd. vs. DCIT the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year."

Jypore Manufacturing Jewellers Pvt. Ltd. vs. DCIT 14. In the valuation report, the costs have also been given of the neighbouring plots which were sold during the relevant period in C- scheme. One plot was purchased by Smt. Prem Kumari in that area at the rate of Rs. 75 per sq. yd. Smt. Padam Kumari had purchased the plot of land in that area at the rate of Rs. 60 per sq. yd. Smt. Shobha Kumari has purchased plot of land at the rate of Rs. 60 per sq. yds. As such the plot in question which was purchased by the assessee was measuring 1799.99 sq. yds. The value has been estimated by the Tribunal as Rs. 68,400. The cost of the land which has been shown by the assessee comes to Rs. 36 per sq. yd., that is, roughly half of the rate prevalent in C-scheme.

Based on the discussion so recorded herein above and respectfully following the binding precedent as discussed herein above of our Hon’ble Jurisdictional High Court in the case of M/s Jewels Emporium vs. ACIT Central Circle-1, Jaipur (Supra) in DBITA No. 43/2021 ground of appeal no. of the Act on this issue is directed to be deleted in entirety.

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

Order pronounced in the open court on 25/06/2025. Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 25/06/2025 *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Jypore Manufacturing Jewellers Private Limited, Jaipur 2. izR;FkhZ@ The Respondent- DCIT, Central Circle-01, Jaipur vk;dj vk;qDr@ The ld CIT 3. vk;dj vk;qDr¼vihy½@The ld CIT(A) 4. 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File (ITA No. 432/JP/2025) vkns'kkuqlkj@ By order,

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