Jewellery Trader’s ‘Job-Work’ Defence Rejected as Afterthought: Madras HC upholds AO’s Findings of Purchase and Sales Suppression [Read Order]
It was noted that the assessing officer had correctly relied on seized records and contemporaneous admissions to tax the suppressed turnover and levy penalty.
Jewellery - traders - Taxscan
Jewellery - traders - Taxscan
The Madras High Court has dismissed the plea of a jewellery trader who attempted to defend large-scale purchase and sales suppression of gold under the guise of job-work. The court observed that the plea of job work was made at the appellate stage, which was to be considered as ‘afterthought’.
Inspection conducted at Alagar Jewellery Mart, Tuticorin in November 1996 revealed serious discrepancies. Purchases of gold worth about ₹12 lakh issued to goldsmiths and corresponding sales of jewels of equal value were unrecorded in the books.
Further investigations unearthed unaccounted purchases of old jewels, unrecorded sales of converted ornaments, and stock variations amounting to over ₹60 lakh, which, when combined with connected omissions and an income tax raid seizure, pushed the total suppression to nearly ₹1.28 crore.
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Two private notebooks seized during inspection showed that 5,382 grams of old jewels were handed to 17 goldsmiths, but only 3,951 grams of new ornaments were returned, with no accounting trail.
At the time of inspection, the assessee admitted to the discrepancies, but later, before appellate authorities, claimed the entries reflected mere “coolie conversions” (job-work).
The High Court held that such an explanation, raised belatedly without supporting documents like vouchers or acknowledgments, was an afterthought designed to escape liability.
It was noted that the assessing officer had correctly relied on seized records and contemporaneous admissions to tax the suppressed turnover and levy penalty. The Tribunal and Appellate Assistant Commissioner, in accepting the assessee’s version without corroborative evidence, were found to have erred.
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Justices P. Velmurugan and K.K. Ramakrishnan noted that “It is also relevant that during the inspection, the respondent did not produce any supporting accounts, nor did he take the plea of coolie conversion. It was only at the appellate stage that he took this plea and attempted to adjust the accounts. This shows that the accounts were not properly maintained at the relevant time and were sought to be adjusted only after the discrepancies were discovered during inspection. Such conduct strengthens the conclusion that the suppression was deliberate.”
The Court restored the assessment and said that an admission made at the time of inspection carried great evidentiary value and could not be retracted without substantiation.
Consequently, the orders of the lower appellate forums were set aside, and the Assessing Officer’s findings were upheld and the tax case revision was allowed.
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