Addition on account of stock received for Job work as unexplained stock is not permissible – ITAT

Brief of the Case

ITAT Ahmadabad held In the case of ACIT vs. M/s. Vipan Industries that where there are records available to show that the excess stock found during the survey not belong to the assessee but infact was of the other party who has taken said premises on lease, addition is not justified. It is clear in the current case that the job work stock of Rs.2,91,96,630/- pertains to M/s Colourtex Pvt. Ltd.

Facts of the Case

The assessee is a firm and member of Colourtex Group of Surat. A search under section 132 of the Income Tax Act was carried out at the Colourtex Group of Surat and its associated concern. The business premises of the assessee were covered under survey action under section 133A of the Income Tax Act, along with search carried out at other premises. This action was taken on 26.7.2006. The assessee has filed its return of income on 31.10.2007 declaring total income at NIL. The AO has passed the assessment order under section 143(3) of the Income Tax Act. He made addition of Rs.3,84,72,206/- on account of unexplained excess stock found during the course of survey.

However, while computing the total income, it has been accepted at NIL, because, Shri Jayantilal T. Jariwala who as the head of the group, according to the AO, made a disclosure of Rs.10 crores and set off of this addition be granted against that disclosure. Thus, the income of the assessee has ultimately been accepted at Rs.NIL.

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