Section 69 Addition Unjustified for Insignificant Discrepancy in 22 Kt Gold & Polki Jewellery Weight

Chawla Jewellers Vs DCIT (ITAT Delhi)

Conclusion: Addition made under Section 69 on account of the difference in excess stock of 22 Kt Gold and Polki Jewellery was not justified as the total weight of items of 22KT Gold jewelry and 22KT Gold Polki jewelry was 36,943 gms, and as per the estimated value, the difference was merely 113.50 gms, which was 0.32%. While weighing more than 34,000 gms of jewelry, the difference of 113 gms could be considered as an error, and no adverse inference could be drawn on this issue.

Held: Assessee was a corporate entity engaged the business of gold and diamond jewellery. The return of income at an income of Rs. 1,68,16,780/-. Assessee was carrying out the said business from two showrooms located at Karol Bagh and GK-1. A survey of the Act was carried out at business premises of the assessee where stock taking was done. On the basis of stock taking on the date of survey and stock position as calculated by the registered valuers on the day of survey, which had been alleged by the AO in the assessment order, were found and additions owards the difference between 22kt Gold Jewellery and 20kt Polki Studded Gold Jewellery had been made. In the instant case, the total weight of items of 22KT Gold jewllery and 22KT Gold Polki jewellery was 36,943 gms and as per the estimated value, the difference was of merely 113.50 gms. which was 0.32%. While weighing more than 34,000 gms of jewelley, the difference of 113 gms. could be considered as an error and no adverse inference could not be drawn on this issue. With regard to inter-mixing of gold jewellery of 18KT and 14KT, it was found that the combined weight of the jewellery was 77,962 gms. and the difference was 453 gms. which was 0.58%, hence, the difference of 453 gms. could be considered as an estimation error and no adverse inference could not be drawn on this issue. With regard to the difference in the weight of diamond in studded jewellery items of 18KT and 14 KT gold jewellery, the excess diamond had been determined at 723 carats. From examination of the valuation report prepared by the authorized valuer at the time of the survey, it was found that the diamonds had never been separated from the gold jewellery. The weight had been extracted from the gross weight. The total jewellery as per books was 72,962 gms. In the absence of specific findings and tags describing the weight of the jewellery in terms of gold and diamond separately, the weight stated in the valuation report could be considered as near estimations but not absolute weight. Under these factual circumstances, it was clear from the record that the weight of the diamond had not been arrived at fittingly. Hence, there had been excess diamonds determined at one showroom of 14KT and shortage determined at the another showroom and keeping in view the fact that the diamonds had not been separately weighed, no addition was called for on this ground.

FULL TEXT OF THE ORDER OF ITAT DELHI

The present appeal has been filed by assessee against the order of ld. CIT(A)-27, New Delhi dated 12.01.2023.

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