Excess stock reconciled by purchase records cannot be taxed as unexplained income under Section 69A.

Excess stock cannot be treated as unexplained income under Section 69A where the assessee reconciles the discrepancy with contemporaneous purchase invoices, advance and payment records, and supporting GST data. The record showed that two purchase transactions were entered in the books but omitted from the stock register, which explained the apparent difference between physical and book stock. On that basis, the stock discrepancy was accepted as reconciled and the addition was held unsustainable. The assessee accordingly succeeded on the issue.

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Issues: Whether the addition made on account of alleged excess stock as unexplained income under Section 69A of the Income-tax Act, 1961 was sustainable when the assessee produced purchase invoices and payment records showing that the stock discrepancy stood reconciled.

Analysis: The assessee explained that the apparent excess stock arose because two purchase transactions, though recorded in the books, were omitted from the stock register. The purchases were supported by invoices and advance/payment details made before the survey date. The record also indicated that the corresponding GST data had been uploaded in the relevant months, supporting the existence of the purchases before the survey. In these circumstances, the alleged discrepancy in physical and book stock was treated as explained and reconciled.

Conclusion: The addition under Section 69A was not justified and the assessee succeeded on the issue.

Ratio Decidendi: Where excess stock is satisfactorily reconciled by contemporaneous purchase records and payment evidence, an addition as unexplained stock under Section 69A cannot be sustained.

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