The assessee was found with excess stock of jewellery during a ...

Jeweller's excess stock not treated as undisclosed income due to corroborative evidence.

Case Laws     Income Tax

October 18, 2024

The assessee was found with excess stock of jewellery during a search operation. The Assessing Officer (AO) invoked provisions of Sections 69A and 69B, treating the excess stock as undisclosed income. The assessee explained that the difference between physical and recorded stock was due to goods received on approval but not entered in books, or bills pending from suppliers. The CIT(A) upheld the AO's action. The ITAT observed that as per CBDT circular, preference should be given to corroborative evidence over oral statements during searches. The assessee substantiated the transactions with evidence like supplier confirmations and GST returns, which the revenue could not dislodge. The retraction by the assessee was supported by evidence and cannot be rejected. The ITAT held that the excess stock pertained to the assessee's business, and the difference was duly explained and reconciled with evidence. The assessee had offered the unaccounted stock within 7 days of search, but it was not disposed of, violating principles of natural justice. The ITAT set aside the CIT(A)'s order sustaining the additions u/ss 69A and 69B. Since the excess stock pertained to business, provisions of Section 115BBE (deeming it as undisclosed income) cannot be invoked. The.

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