Smapath Raj Sunil Kumar Jain Vs DCIT (ITAT Hyderabad)
The Income Tax Appellate Tribunal (ITAT), Hyderabad, dismissed the assessee’s appeal and upheld the addition of ₹3.75 crore made on account of unexplained excess stock of gold found during a survey under Section 133A of the Income-tax Act. The Tribunal held that unsupported gold deposit agreements produced after the survey, along with subsequent payment of interest to alleged depositors, were insufficient to explain the excess stock discovered during the survey.
The assessee, proprietor of a jewellery business, was subjected to a survey on 11.03.2020. During the survey, physical gold stock of 44,882.656 grams was found against book stock of 26,497.255 grams, resulting in excess physical stock of 18,385.401 grams. The assessee initially stated that the stock required reconciliation because ornaments contained stones and other metals and were not of 24-carat purity. However, considering the discrepancies, he voluntarily offered additional income of ₹5 crore during the survey. Subsequently, while filing the return of income, the assessee offered only ₹1.25 crore, claiming that 13,613 grams of the excess stock represented gold received from 15 persons under “gold deposit agreements.”
The Assessing Officer rejected the explanation, observing that the gold deposit agreements appeared to be an afterthought. Most agreements were executed on the same day in February 2020, were not produced during the survey, and there was no evidence that such a gold deposit practice had existed in earlier years. The AO also noted that the assessee had himself valued the excess stock during the survey and therefore rejected the argument that valuation by a registered valuer was necessary. Accordingly, the AO added the balance amount of ₹3.75 crore, being the difference between the ₹5 crore offered during the survey and the ₹1.25 crore disclosed in the return. The Commissioner (Appeals) confirmed the addition after holding that the gold deposit agreements were unsupported by contemporaneous evidence and failed to establish the genuineness of the claimed deposits.
