Unexplained Stock and Sales Suppression Additions: ITAT Upholds CIT(A)’s Order Citing Single CCTV Footage and Lack of Corroborative Evidence [Read Order]
The Tribunal upheld the deletion of additions totaling Rs. 10.91 crore on undisclosed sales and unexplained stock and ruled that estimations based on a single day CCTV footage and unreliable statements lacked corroborative evidence and rational basis.
![Unexplained Stock and Sales Suppression Additions: ITAT Upholds CIT(A)’s Order Citing Single CCTV Footage and Lack of Corroborative Evidence [Read Order]](https://images.taxscan.in/h-upload/2025/08/03/2072693-unexplained-stock-sales-suppression-additions-itat-cctv-footage-lack-of-corroborative-evidence-taxscan.webp "Unexplained Stock and Sales Suppression Additions: ITAT Upholds CIT(A)’s Order Citing Single CCTV Footage and Lack of Corroborative Evidence [Read Order]")
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) upheld the Commissioner of Income Tax (Appeals) [CIT(A)] order and ruled that the Assessing Officer's estimations, reliant on a single-day CCTV footage and contradictory statements, were unsustainable without supporting evidence. Ramesh Pannalal Ranawat (assessee), represented through Rahul Ramesh Ranawat, was engaged in...
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) upheld the Commissioner of Income Tax (Appeals) [CIT(A)] order and ruled that the Assessing Officer's estimations, reliant on a single-day CCTV footage and contradictory statements, were unsustainable without supporting evidence.
Ramesh Pannalal Ranawat (assessee), represented through Rahul Ramesh Ranawat, was engaged in the manufacture and sale of gold jewellery via proprietary concern M/s. Ramesh Zaveri & Co., with offices in Mumbai and a branch in Cuttack. For Assessment Year (AY) 2014-15, the assessee filed a return declaring income of Rs. 1,84,70,510.
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During proceedings, the Air Intelligence Unit intercepted an employee, Shri Yashwant Ganpat Rao Gujjar, carrying 11,912.400 grams of gold ornaments on 10.04.2014, claimed as stock transfer to the Cuttack branch. A survey under Section 133A was conducted at the Cuttack premises, recording statements and seizing CCTV footage from 31.03.2014 to 10.04.2014.
The Assessing Officer (AO) analyzed the 31.03.2014 CCTV footage, alleging 106 sale transactions, and extrapolated this to 310 working days, estimating undisclosed sales turnover at Rs. 72,78,44,283 with profit at 13.64%.
Additionally, relying on the employee's statement denying a 31.03.2014 stock return journey from Cuttack to Mumbai despite airline records confirming travel without check-in baggage, the AO treated 27 kg of gold ornaments valued at Rs. 7,25,24,488 as unexplained stock, adding profit of Rs. 98,92,329 under Section 69A of the Income Tax Act.
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Aggrieved by the AO’s order, the assessee appealed to the CIT(A). The assessee argued that separate audited books for Mumbai and Cuttack branches, supported by bank deposits and stock registers, recorded all transactions, including stock transfers via Form F declarations.
The CIT(A) deleted both additions, noting the absence of corroborative evidence, improper extrapolation from one-day footage, and acceptance of Mumbai books recording the stock receipt.
Aggrieved by the CIT(A)’s order, the Revenue appealed to the ITAT. The Revenue contended that the CCTV footage and statements justified the additions. The assessee’s counsel emphasized the lack of defects in books, no customer inquiries, and stock transfers backed by statutory forms and records.
The two-member bench, comprising Saktijit Dey (Vice President) and Girish Agrawal (Accountant Member), observed that the AO's sales estimation lacked rational basis, ignoring seasonal fluctuations, holidays, and customer behavior in jewellery trade.
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The bench noted no incriminating material from the survey beyond minor cash discrepancies, and the employee's denial of travel was contradicted by airline records, rendering his statement untrustworthy.
The bench held that stock transfers were duly recorded in accepted Mumbai books and supported by Form F, preventing selective rejection of Cuttack entries. It ruled that additions under Sections 69A and for undisclosed sales required ownership of unexplained assets or concrete proof, absent here.
The tribunal upheld the CIT(A)’s deletions, and dismissed the assessee’s cross-objection as infructuous. The appeal of the revenue was dismissed.
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