Excess stock found in search proceedings reversed after post search invoices and verifications; valuation-based addition deleted

Addition of unexplained income for excess stock seized during search was contested on grounds that post-search purchase invoices, inventory reconciliation, supplier confirmations and remand-stage verifications negated the presumption of undisclosed acquisition. The tribunal found the assessee produced corroborative evidence that was verified, and held the registered valuer's uniform market purity valuation (ignoring differing karat and jewellery versus bars) improper. Because the revenue failed to produce positive material rebutting invoices and confirmations, the valuation-based addition of Rs. 4,96,60,427 was deleted and the appeal allowed for the assessee.

---

---

Issues: Whether the addition of Rs. 4,96,60,427/- as unexplained income on account of excess stock found during search proceedings (including valuation of such stock at market value by the registered valuer) was justified, and whether the post-search invoices, supplier confirmations and remand-stage verifications discharged the assessee's onus to negate the addition.

Analysis: The assessee produced purchase invoices, inventory reconciliation, supplier confirmations and statements recorded post-search and at remand proceedings under section 131/133(6) which the Investigation Wing and the Assessing Officer had the opportunity to verify. The assessing officer's addition relied primarily on statements and valuation recorded at the time of search and on the registered valuer applying uniform market purity rates (24K/99.99%) without distinguishing actual composition of bars and jewellery. The Tribunal examined whether the post-search documentary evidence and confirmations rebutted the presumption of unexplained stock and whether valuation should follow actual cost/quality rather than a blanket market-purity application. The Tribunal found that the assessee reconciled quantities, produced corroborative invoices and confirmations which were verified, and that the valuer's methodology ignoring differing karat/purity and distinguishing between bars and jewellery was inappropriate. The department did not produce positive material to show acquisition from undisclosed sources nor successfully rebut the purchased invoices and confirmations.

Conclusion: The addition of Rs. 4,96,60,427/- on account of unexplained excess stock and the valuation-based difference is deleted; the appeal is allowed in favour of the assessee.

---