ITAT Upholds Rs 3.75 Crore Addition on Excess Gold Stock And Rejects Post Survey Gold Deposit Agreements

The Income Tax Appellate Tribunal (ITAT) Hyderabad has held that the excess stock found during the survey is corroborative evidence and that the subsequently produced gold deposit agreements were not credible and failed to explain the discrepancy.

The assessee is the proprietor of M/s Sunil Jewellers and filed his return of income for assessment year 2020-21 declaring a total income of Rs 2.57 crore. A survey under Section 133A of the Income Tax Act, 1961, was conducted on 11 March 2020, during which physical gold stock of 44,882.656 grams was found as against book stock of 26,497.255 grams, resulting in excess stock of 18,385.401 grams. During the survey proceedings, the assessee admitted additional income of Rs 5 crore; however, while filing the return of income, he disclosed only Rs 1.25 crore and sought to explain the balance difference through gold deposit agreements entered into with 15 individuals involving 13,613 grams of gold.

The AO rejected the explanation and treated the remaining amount of Rs 3.75 crore as an unexplained investment in excess stock. The addition was upheld by the CIT(A).

The Tribunal observed that there was no dispute regarding the existence of excess physical stock of 18,385.401 grams. The Tribunal noted that the plea regarding gold deposit agreements was raised two years after the survey and no such agreements were produced during the survey proceedings. There were no entries in the books of account regarding the alleged gold deposits, nor was any evidence produced to show that such a scheme had existed in earlier years. The Tribunal held that merely producing agreements and affidavits and payment of interest in subsequent years did not establish the genuineness of the transactions. In the absence of supporting evidence, the explanation offered for 13,613 grams of gold could not be accepted.

The Tribunal observed that no addition can be made solely on the basis of a statement recorded during the survey. However, in the present case, the addition is supported by independent evidence in the form of excess physical stock discovered during the survey. Accordingly, the Tribunal dismissed the appeal of the assessee and upheld the addition of Rs 3.75 crore.