2026 (3) TMI 1562 - AT - Income Tax

Survey declaration and unverified job-work jewellery records cannot by themselves sustain tax additions.

An ITAT note explains that an addition for alleged unexplained excess gold jewellery under section 69A was not finally sustained because the assessee ... Unexplained / excess stock of gold jewellery u/s 69A - addition of business income - Excess gold jewellery found during survey - non-inclusion of the excess stock of gold jewellery, which was admitted during the survey u/sec 133A - contentions raised by the assessee that the excess stock of gold jewellery belongs to the customers who has handed over gold for making of gold jewellery - AR submitted assessee is not the owner of the gold jewellery, but only providing job work services to the customers and earned the labour charges - HELD THAT: - The Tribunal noted the assessee's consistent case that the impugned jewellery was not owned by him but represented gold received from customers for making ornaments, with only labour charges being accounted in the books. It further recorded that detailed particulars of job work, including customer-wise details of receipt, return, quantity and labour charges, were produced before it, and that such material had not been examined by the lower authorities. Since the correctness of this explanation depended on verification of those records, the matter required fresh examination by the Assessing Officer in accordance with law, with adequate opportunity to the assessee. [Paras 7] The addition under section 69A in respect of excess gold jewellery was set aside for limited fresh adjudication by the Assessing Officer. Addition of difference in business income - A.R. contentions that the A.O has solely relied on the declaration in survey u/sec133A of the Act, whereas the assessee’s books of account are audited and the return of income is filed disclosing the real business income earned - HELD THAT: - Tribunal accepted the assessee's contention that the Assessing Officer had based the addition only on the declaration made in the course of survey, whereas the assessee's books were audited and the return had been filed disclosing the actual business income. On that factual basis, the Tribunal held that the addition for difference in business income was liable to be deleted. [Paras 7] The Assessing Officer was directed to delete the addition made towards difference in business income. Final Conclusion: The appeal was partly allowed. The addition relating to excess gold jewellery was restored to the Assessing Officer for fresh examination of the assessee's evidentiary explanation, while the addition towards difference in business income was deleted. Issues: (i) Whether the addition made under section 69A on account of alleged unexplained excess gold jewellery was sustainable or required fresh verification; (ii) Whether the addition made towards difference in business income could be sustained on the basis of the survey declaration.Issue (i): Whether the addition made under section 69A on account of alleged unexplained excess gold jewellery was sustainable or required fresh verification.Analysis: The disputed excess gold jewellery was claimed to have been received from customers for job work and not owned by the assessee. Fresh details of receipt, return, quantity, and labour charges were produced, but those particulars had not been examined by the lower authorities. In view of the additional material and the requirement of fair opportunity, the matter needed verification by the Assessing Officer.Conclusion: The issue was restored to the Assessing Officer for fresh adjudication and the relief was allowed for statistical purposes.Issue (ii): Whether the addition made towards difference in business income could be sustained on the basis of the survey declaration.Analysis: The addition was based only on the declaration recorded during survey, while the assessee's books were audited and the return disclosed the business income claimed to have actually been earned. On the facts placed, the survey declaration was not treated as sufficient to sustain the addition.Conclusion: The addition towards difference in business income was directed to be deleted and the issue was decided in favour of the assessee.Final Conclusion: The appeal succeeded only in part, with one issue remitted for reconsideration and the other resulting in deletion of the addition.Ratio Decidendi: Where material evidence supporting a job-work explanation has not been examined, and the assessee is afforded no effective verification of such evidence, the addition cannot be finally sustained without fresh inquiry; a survey declaration alone does not automatically justify a business-income addition when the audited books and return are otherwise relied upon.