The Income Tax Appellate Tribunal (ITAT), Delhi Bench, deleted the addition made under Section 69 of the Income Tax Act, 1961, on account of the difference in excess stock of 222Kt Gold and Polki Jewellery.
The assessee, Chawla Jewellers, is a corporate entity engaged in the business of gold and diamond jewellery. After filing the return of income, a survey of the Act was carried out at the business premises of the assessee on 03-01-2018, where stocktaking was done. Based on the stock taking on the date of the survey and the stock position calculated by registered valuers on the day of the survey, the Assessing Officer (AO) made an addition towards the difference between 22kt Gold Jewellery and 20kt Polki Studded Gold Jewellery. Aggrieved, the assessee filed a further appeal before the CIT(A), who dismissed the appeal.
Thereafter, the assessee filed a second appeal before the tribunal. During the proceedings, I. P. Bansal, Counsel for the assessee, argued that the combined weight of 22KT gold jewelry and 22KT polki jewelry is in consonance with the same items of jewelry in the books of account, except for a difference of 113.50 grams (22KT polki gold jewelry 8,129.170 grams (-) 8015.67 grams 22KT gold jewelry).
Further argued that the ITO has accepted the fact of mixing of both these items of jewelries at the time of valuation and considered the excess of 113.50 grams of gold for the purpose of making an addition, taking a rate of Rs. 2,959 per gram, making an addition of Rs. 3,35,846/- to the income of the assessee. The counsel argued that they are maintaining one account of 22KT gold jewelry, which includes 22KT gold polki jewelry as well as 22KT gold jewelry. Therefore, the combined weight of both these items of jewelry is 34,943.46 grams, and the difference as per estimated weight is only 113.50 grams. The percentage of such difference vis-a-vis gross weight of these items is only 0.32%, and it has been explained above in what manner the jewelry was weighed and valued.
There is every possibility of error in estimation, and it was argued that in such a large quantity, the difference of 113.50 grams must not be adversely taken to hold that the same is unexplained. Vivek K. Upadhyay, Counsel for Revenue, supported the order of CIT(A). The Tribunal observed that 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 is 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 can be drawn on this issue.
After reviewing the facts and records, the two-member bench of Dr. B. R. R. Kumar (Accountant Member) and Astha Chandra (Judicial Member) deleted the addition made under Section 69 of the Income Tax Act, 1961, on account of the difference in the excess stock of 222Kt Gold and Polki Jewellery. Therefore, the bench allowed the appeal filed by the assessee