Excess jewelry stock additions under sections 69A and 69B deleted after assessee provided corroborative evidence including supplier bills and GST returns

ITAT Raipur allowed the appeal regarding additions under sections 69A and 69B for excess jewelry stock found during search. The assessee successfully explained the difference between physical and recorded stock through corroborative evidence including supplier bills, GST returns, and confirmations obtained under section 133(6) proceedings. The tribunal found that revenue authorities failed to provide cogent evidence to counter the assessee's explanation and relied on presumptive thoughts without material support. The assessee's retraction was deemed valid as it was substantiated with documentary evidence. Consequently, the addition was deleted and section 115BBE provisions were held inapplicable.

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Issues Involved:

1. Confirmation of addition under Sections 69A and 69B on account of excess stock of jewellery.
2. Invocation of provisions of Section 115BBE.
3. Admission of additional grounds challenging the validity of the assessment due to alleged procedural lapses in the approval under Section 153D.

Issue-wise Detailed Analysis:

1. Confirmation of Addition under Sections 69A and 69B:

The core issue revolves around the addition of Rs. 9,19,34,043/- made by the Assessing Officer (AO) and partially sustained by the Commissioner of Income Tax (Appeals) [CIT(A)] under Sections 69A and 69B of the Income Tax Act. This addition was based on the excess stock of jewellery found during a search operation conducted on the assessee's premises. The AO's contention was that the jewellery found at the business and residential premises was unexplained and thus liable for addition under the aforementioned sections.

The assessee argued that the stock was part of the business inventory, received on approval basis, and not accounted for due to pending bills. The assessee provided a reconciliation statement and supporting documents, including confirmations from suppliers, to substantiate the claim that the stock was part of the business and not unexplained personal assets. The tribunal found merit in the assessee's argument, noting that the AO's reliance on the assessee's statement during the search was not corroborated by substantial evidence. The tribunal emphasized the necessity of corroborative evidence over mere statements, aligning with judicial precedents that caution against undue reliance on confessional statements obtained during search operations.

2. Invocation of Provisions of Section 115BBE:

The AO invoked Section 115BBE, which deals with the taxability of income referred to in Sections 68, 69, 69A, 69B, 69C, and 69D, at a higher rate. The tribunal's decision to vacate the addition under Sections 69A and 69B inherently nullified the applicability of Section 115BBE. The tribunal concluded that since the stock was part of the business inventory, the provisions of Section 115BBE were not applicable, thereby ruling in favor of the assessee.

3. Admission of Additional Grounds:

The assessee sought to introduce additional grounds challenging the validity of the assessment order due to alleged procedural lapses in obtaining approval under Section 153D. The assessee argued that the approval was granted mechanically without proper application of mind, violating the mandatory requirements of law. The tribunal admitted the additional grounds, acknowledging them as legal grounds that touch upon the jurisdictional aspect of the assessment. However, since the appeal was decided in favor of the assessee on the substantive issues, the tribunal refrained from adjudicating the additional grounds, leaving them open for consideration if necessary.

Conclusion:

The tribunal allowed the appeal in favor of the assessee, setting aside the additions made under Sections 69A and 69B and ruling out the applicability of Section 115BBE. The decision underscored the importance of corroborative evidence in substantiating additions based on search operations and highlighted procedural safeguards in obtaining statutory approvals. The tribunal's approach was consistent with established judicial principles, emphasizing the need for evidence-based assessments over reliance on statements obtained under duress.

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