ITAT Restricts Stock Addition to Rs. 19.46 Lakh; Survey Working Found Inflated

The assessee, a jeweller trading as Sharada Jewellers, was subjected to survey on 02.08.2017. During the survey, physical stock of gold and silver jewellery was inventorised and compared with the book stock computed on provisional figures, as the return for AY 2017-18 had not yet been filed. The survey team determined a stock difference of Rs. 54,69,543.

The assessee reconciled the figures and worked out actual excess stock at Rs. 19,46,342, which was offered in the return. However, in reassessment under Section 147, the Assessing Officer treated the entire Rs. 54,69,543 as unexplained investment under Section 69. The CIT(A) upheld the addition. Before the Tribunal, the assessee confined the challenge to the Section 69 addition.

Main Issue: Whether the entire survey difference of Rs. 54,69,543 was taxable under Section 69 or only the reconciled excess of Rs. 19,46,342 already offered by the assessee.

ITAT Ruled: The Tribunal noted that at the time of survey, the return for the earlier year had not been filed and stock figures were provisional. The audited financials later showed closing stock of Rs. 90,19,955 as on 31.03.2017, which had been accepted by the Department. Once correct opening stock was adopted, the working of stock as on the survey date showed an actual excess of only Rs. 19,46,342.

The Tribunal observed that this amount had already been offered by the assessee in his return, even though such return was treated as invalid. The Assessing Officer had computed income starting from the returned figure, which already included this excess stock.

Therefore, the Tribunal held that the further addition of Rs. 54,69,543 was unsustainable. The AO was directed to restrict the addition to Rs. 19,46,342 only. The appeal was partly allowed.

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