ROOPCHAND JEWELLERS,NEW DELHI V. ACIT CIRCLE 52(1), NEW DELHI

CO 50/DEL/2022

AI Insights

The case involves M/s Roopchand Jewellers, which participated in the 36th Mideast Watch & Jewellery Show in Sharjah, UAE, taking a significant amount of jewellery valued at Rs.12,95,07,554. The Income Tax Department scrutinized the assessee's records due to discrepancies in reported purchases and customs data. The Assessing Officer (AO) rejected the books of account under Section 144, leading to an addition of Rs.12,95,07,554 as unaccounted stock. The CIT(A) later deleted this addition but upheld the rejection of the books. The Tribunal found that the CIT(A) correctly appreciated the facts and deleted the addition, leading to the cancellation of the penalty imposed under Section 271A.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 837667 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 3 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 20-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2015-2016
• Appeal Filed On: 17-05-2022
• Other Referred Cases: Commissioner of Income-tax-XII v. Smt. Poonam Rani, Jay tick Intermediates (P) Ltd. v. Assistant Commissioner of Income-tax, S.N. Namasivayam Chettiar v. Commissioner of Income-tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts
• Section: 144; 143(3)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F”: NEW DELHI BEFORE Ms. MADHUMITA ROY, JUDICIAL MEMBER AND SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER ITA No. 779/DEL/2019 Asstt. Yr: 2015-16 ACIT, Circle 52(1), New Delhi. Vs M/s Roopchand Jewellers, 13-C, Connaught Place, New Delhi-110001. PAN: AAIFR 7169 P APPELLANT RESPONDENT/ CROSS OBJECTOR C.O. No. 50/Del/2022 ( In ITA No. 779/DEL/2019) Asstt. Yr: 2015-16 ITA No. 2395/Del/2024 A.Yr. 2015-16 (U/s 271A) M/s Roopchand Jewellers, 13-C, Connaught Place, New Delhi-110001. PAN: AAIFR 7169 P Vs ACIT Circle 52(1), APPELLANT RESPONDENT Assessee represented by Shri Rajiv Khandelwal, Adv. Department represented by Shri Shrikant Namdeo, CIT(DR) Date of hearing 12.01.2026 Date of pronouncement 20.02.2026 O R D E R PER Ms. MADHUMITA ROY, JM: The captioned ITA No. 779/Del/2019 and C.O. No. 50/Del/2022, preferred by the Revenue and the assessee respectively are directed against the order dated Printed from counselvise.com 2 ITAs No. 779/Del/2019 & 2395/Del/2024; & CO No.50/Del/2022 02.11.2018 [Appeal No. 18/10143/2017-18], passed by the Commissioner of Income Tax (Appeals)-18, New Delhi, arising out of the assessment order dated 30.12.2017 passed by the Income Tax Officer, Ward-52(4), New Delhi in the proceedings under Section 144 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), for Assessment Year 2015-16. 1.1 ITA No. 2395/Del/2024 has been preferred by the assessee against the order dated 20.03.2024 passed by the NFAC, Delhi [DIN & Order No. ITBA/NFAC/S/250/2023-24/1062973842(1)] confirming the penalty of Rs. 25,000/- levied by the NeFAC under Section 271A of the Act. All these three matters have been heard analogously and are being disposed of by a composite order for the sake of convenience. ITA No. 779/Del/2019 (Revenue’s appeal): 2. In its appeal the Revenue has raised following grounds of appeal for adjudication: “(i) In view of the facts and circumstances of the case, whether the Ld.CIT(A) was justified in deleting the addition of Rs.12,95,07,554/-made by the A.O. on account of unaccounted stock of jewellery in the hands of the assessee in absence of proper stock register and rejection of books of account especially when the CIT(A) has himself corroborated the fact that the A.O. was right in rejecting the books of account of the assessee for the relevant year. (ii) In view of the facts and circumstances of the case, whether the CIT(A) was justified in directing that the assessment order may be treated as having Printed from counselvise.com 3 ITAs No. 779/Del/2019 & 2395/Del/2024; & CO No.50/Del/2022 been passed u/s 143(3) of the Act whereas the A.O. had passed the assessment order u/144 of the act keeping in view the provisions laid down u/s 145(3) of the Act, after rejecting the books of accounts being incomplete and incorrect.” 3. The brief facts of the case are that the case of the assessee was taken up for limited scrutiny on account of the following reasons:- i) Mismatch of purchases shown in the ITR with the invoice value of imports shown in the Export Import data and ii) Mismatch of customs duty paid as shown in the ITR with the duty paid as per Export Import data. 3.1 A show cause notice dated 28.08.2017 was issued to the assessee. The assessee, in fact, participated in an exhibition, namely, 36th Mideast Watch & Jewellery Show held at Expo Centre, Sharjah, UAE from 29th April, 2014 to 03rd May, 2014 and, for the particular purpose of sale of jewellery at the said exhibition, it had taken 263 items out of 282 items of finished jewellery having a book cost of Rs.6,89,69,000/- which were valued at realizable value by the Customs Appraiser at Rs.12,95,07,554/- as per the invoice dated 25.04.2014 duly stamped by the Jewellery Appraiser, New Delhi and verified by the Customs Officials at the Delhi Airport. The value of goods taken for the exhibition was at Rs.12,95,07,554/-, the goods sold at the exhibition was of Rs.8,69,824/- and the unsold goods re-imported was of Rs.12,86,37,730/-. The value of unsold goods on Printed from counselvise.com 4 ITAs No. 779/Del/2019 & 2395/Del/2024; & CO No.50/Del/2022 the date of report was shown as Rs.13,08,96,419/-. The assessee filed reply on 29.09.2017 with documentary evidences, including the Profit & Loss Account, balance sheet for the relevant period. The appellant had an opening stock of 282 items of finished jewellery having a cost of Rs.7,18,42,000/- plus gold, loose diamonds and precious stones of Rs.14,32,500/- as on 01.04.2014. Therefore, the total opening stock was valued at cost was of Rs.7,32,75,000. Out of this 282 items the assessee booked 263 items of jewellery appearing in the opening stock for the display in the said exhibition at Sharjah value whereof was Rs.6,89,69,000/-. Relevant to mention that as per the guidelines laid down by the Foreign Trade Policy, the jewellery items are to be valued at FOB value in the invoice and the shipping bills too and, therefore, the appellant prepared the duty free invoice dated 25.04.2014 and the goods taken for the exhibition were valued at FOB value/sale value of Rs.12,95,67,554/- whereas the cost of these items were much lower, i.e., at Rs.6,89,69,000/-. Out of these 263 items, 9 items were sold in the said exhibition having FOB value of Rs.8,69,824/- and the balance unsold items were brought back as ‘re-import’ and the FOB value whereof was Rs.12,86,37,730/-. It is the case of the assessee that the unsold items which were brought back are duly valued by the jewellery appraiser of Customs Department of the Airport the complete details whereof including the packing list, invoices, bills, bills of lading along with other documents in support of the contention made by the Printed from counselvise.com 5 ITAs No. 779/Del/2019 & 2395/Del/2024; & CO No.50/Del/2022 assessee were duly furnished before the Ld. CIT(A) and before us too. It is the further the case of the assessee that all the sales and purchase including the sales made during the exhibition at Sharjah was duly recorded in the books of account and, therefore, the AO has not appreciated that the opening stock in the P&L Account was valued at cost whereas the value declared in the invoice with respect to the goods taken for the exhibition was valued at FOB value including the carriage, insurance and freight and also profit margin. The case of the Revenue is that the assessee is required to value the goods which were taken to Sharjah for exhibition at FOB value and not at cost and even though various documents were submitted by the assessee before the said authorities, none of the documents were considered by the JCIT and directions under Section 144A of the Act was issued. Neither any reason is forthcoming for treating these stock taken for exhibition as unaccounted nor any reason to disbelieve the assessee that the valuation of opening stock and the stock taken for the exhibition was done by following different methods of valuation that was done on cost and also done at FOB value and simply both the Ld.AO and the Ld.JCIT has failed to appreciate that both the values cannot be compared as such. Before us, the assessee filed the complete reconciliation of jewellery which was brought to Sharjah for exhibition including its weight and value in Dollar terms which was filed with the Learned Assessing Officer vide its submissions dated 29.09.2017 available at Paper Book Pages 35- Printed from counselvise.com 6 ITAs No. 779/Del/2019 & 2395/Del/2024; & CO No.50/Del/2022 36. It was further explained that the invoice value of 21,51,132.61 USD was duly noted in the Import Certificate appearing at page 33 of the Paper Book wherein complete details in dollar terms having the invoice value of 21,51,132.61 USD has also been certified. This Certificate at Paper Book Page-33 also declares the assessable value at Rs.13,37,19,429/-. Similarly, the complete details duly audited and certified by the independent valuers as also acknowledged by the airport authorities was filed certifying the items taken out for exhibition and unsold items brought back were filed with the Assessing Officer. 3.2 It was explained that the assessee is carrying out a retail business of gold and silver jewellery for the last over 5 decades. The assessee for the first time ever opted to participate in a Trade Fair at Sharjah. For this purpose, the assessee had taken out its jewellery for exhibition at Sharjah. Out of such jewellery, only a very small portion was sold out in the exhibition and the balance unsold jewellery was brought back into India. Since taking the goods out of country for such purpose and bringing it back in India has to be done under the rules and regulations of the Custom Department, such custom clearance was obtained both at the time of taking the jewellery out of the country as also at the time when it was brought back to India. Printed from counselvise.com 7 ITAs No. 779/Del/2019 & 2395/Del/2024; & CO No.50/Del/2022 3.3 The Learned Assessing Officer further observed that the unsold goods reimported were for Rs. 12,86,37,730/- whereas as per the report of the Department, the value was Rs.13,08,96,419/- with assessable value at Rs. 13,37,19,430/-, which according to the Learned Assessing Officer represented a mismatch requiring further investigation. 3.4 A complete reconciliation and values was filed with the Assessing Officer with the clarity that difference represents only the difference in rate of currency in dollar terms and there is no difference in the quantity as reimported which was same and it was only unsold goods which were reimported back. Thereafter, the Learned Assessing Officer made some further observations and referred the matter to the JCIT for seeking his directions u/s 144A of the Income Tax Act. The assessee represented and clarified each and every aspect of the transaction to the Learned JCIT including filing of an affidavit on the complete item wise quantitative reconciliation of goods which were lying as opening stock with the assessee as on 01.04.2014, goods taken out, goods purchased during the year, goods sold during the year as well as goods which were reimported as also the closing stock as on 31.03.2015 as per the audited financials of the assessee. As regards the requirement of producing a stock register, the assessee clarified that it is not maintaining any formal stock register. However, keeping in mind the nature Printed from counselvise.com 8 ITAs No. 779/Del/2019 & 2395/Del/2024; & CO No.50/Del/2022 of business of the assessee, the assessee is carrying out a daily stock reconciliation and its showroom/shop is closed in the evening only after such reconciliation of stock is done at the end of each day. It was also clarified that in any case physical verification of stock is also carried out by the assessee on each day including at the year end. 3.5 However, the learned JCIT issued directions that in the absence of maintenance of a formal stock register, the goods which were taken out for exhibition valuing Rs. 12,95,07,554/- are to be treated as unexplained stock and addition should be made for the same by rejecting the books of accounts of the assessee. Finally, the assessment was completed rejecting the books of account of the assessee for the said amount of Rs.12,95,07,554/-. Further estimated addition on 3% of the net profit as against 2.24% declared by the assessee was made. The Ld. CIT(A) in appeal deleted the addition of Rs.12,95,07,554/- upon appreciation of the case made out by the assessee. However, he upheld the rejection of books made by the Ld. AO. 4. After hearing the matter at length and upon perusal of the documents we appreciate this particular fact that the assessee is having jewellery business for the five decades and for the first time participated in a trade fair at Sharjah and these jewellery taken to Sharjah only part of which was sold and the rest was brought Printed from counselvise.com 9 ITAs No. 779/Del/2019 & 2395/Del/2024; & CO No.50/Del/2022 back to India. We also find that for taking these jewellery out of India and for bringing it back to India the assessee had to go through different rules and regulations of the Customs Department; the clearance was to obtain for both taking the jewellery out of this country as well as for bringing the same back to India. The above reconciliation and the details of values were filed before the Ld. AO clarifying that different represents only the difference in the rate of currency in Dollar terms and there is no difference in the quantity as re-imported which was the same and it was only unsold goods which were re-imported back. A complete affidavit was also filed in regard to the item-wise quantity reconciliation of the goods which were lying as opening stock with the assessee as on 01.04.2014, goods taken out, goods purchased during the year, goods sold during the year and the goods which were re-imported to India as well as the closing stock as on 31.03.2015 as per the audited financials of the assessee and the stock mentioned. The details whereof is as follows:- (i). That the assessee had an opening stock of Rs.7,32,75,000/- as on 01.04.2014 as per its audited financials which is not in dispute - Paper Book Page-5. (ii) That the assessee has closing as on 31.03.2015 at Rs.7,84,25,000/- is not in dispute - Paper Book Page-5. Printed from counselvise.com 10 ITAs No. 779/Del/2019 & 2395/Del/2024; & CO No.50/Del/2022 (iii) That the opening stock as on 01.04.2014 amounting to Rs.7,32,75,000/- comprised of items are available at Paper Book Page-66 to 69A. (iv) The packing list with gross weight 18840.448 grams at a packing value on FOB basis at Rs.12,95,07,554/- for which cost value was Rs.6,89,69,000/- appearing at Pages 70 to 74 of the Paper Book. (v). We have further considered that the export Invoice duly certified by the independent jewellery appraiser, duly stamped at the IGI Airport dated 25.04.2014 appearing at page 75 of the Paper Book wherein the consigner and consignee of the jewellery is assessee only. It further clarifies that the FOB value of the jewellery is Rs. 12,95,07,554/- with gross weight of 18840.448 grams. (vi). The export invoice for taking out the jewellery duly certified by the jewellery appraiser at IGI Airport containing the similar details is at Paper Book Page-77. (vii). That the shipping detail and Export Declaration Form filled up by the assessee containing also the insurance cover at Paper Book Page-89 Printed from counselvise.com 11 ITAs No. 779/Del/2019 & 2395/Del/2024; & CO No.50/Del/2022 which declares the value of jewellery taken out at Rs. 12,95,07,554/- at Page-89 there are duly considered. (viii). The corresponding details of the items including the airway bills issued by Brinks including the value for custom purposes at US$ 2151454.45 is also mentioned in the said airways bill with corresponding list of items of jewellery reimported appearing at pages 33 to 37 of the paper book. Complete reconciliation of weight and value in US terms as also measured in India is annexed to the Paper Book Page at page 81. 5. The Ld. CIT(A) taking into consideration the entire aspect of the matter, concluded that the Ld. AO failed to bring any reason in treating this stock taken for exhibition as unaccounted or any further reason to disbelieve the appellant that the valuation of the opening stock and the stock taken for exhibition was done by following different methods of valuation i.e., one at cost and the other was at FOB value as per the Customs rules and regulations which admittedly cannot be compared and, therefore, deleted the addition made by the Ld. AO which, in our considered opinion found to be just and proper and does not warrant any interference. The order passed by the Ld.CIT(A) to this extent is confirmed. Printed from counselvise.com 12 ITAs No. 779/Del/2019 & 2395/Del/2024; & CO No.50/Del/2022 C.O. No. 50/Del/2022 (Assessee’s cross-objection): 6. The assessee has raised following grounds of cross objections for adjudication: “1) That the Ld. CIT(A) erred in law and on the facts and in the circumstance of the assessee's case in rejecting of books of accounts and upholding the Net Profit to be 3% of the Total Turnover as against Net Profit of 2.24% declared by the Assessee on the total turnover of Rs. 6,03,53,064/-, thereby confirming the net addition of 4,54,583/- on wholly erroneous, illegal and untenable grounds. 2) That the facts, it may please be held that the book of accounts could not be rejected and the addition made of Rs. 4,54,583/- by increasing Net Profit without any cogent reasons deserves be deleted.” 7. The AO rejected the books of account for the said amount of Rs.12,95,07,554/- and further made addition pertaining to net profit of the assessee and estimated the same at 3% as against 2.24% calculated by the assessee. In appeal, the Ld.CIT(A) confirmed the addition made by the AO estimating the profit at 3% with the following observations:- “7.3.1 It is also observed that the gross profit rate has also been shown by the appellant at a lower value of 21.24% in this year as against the value of 22.06% in the immediate previous year. Accordingly, I am of the view that the AO has rightly estimated the net profit at 3% which compensates for the fall in GP Rate shown by the appellant. In view of this, the addition made by the AO is upheld and the grounds of appeal are dismissed.” 8. As regards the maintenance of a stock register, it has been submitted that the assessee had explained that it is regularly doing business of retail sale of gold and Printed from counselvise.com 13 ITAs No. 779/Del/2019 & 2395/Del/2024; & CO No.50/Del/2022 diamond jewellery ornaments, gems and all other related items. The Ld. AR also submitted that for such nature of business, maintenance of a stock register is not a statutory requirement and has not been prescribed as a specified books of accounts under the provisions of Income Tax Act. However, the assessee is internally maintaining a regular stock sheet for the purposes of keeping a control of various stock items which are available in its shop. Reconciliation is carried out on a daily basis before the closure of the shop. In any case, non-maintenance of a stock register does not require the rejection of books of accounts as has been held, some of which are as under: (i). Commissioner of Income-tax-XII v. Smt. Poonam Rani [2010] 192 Taxman 167 (Delhi HC) In the said case the Hon’ble Delhi high Court held that if stock register is not maintained by assessee, that may put Assessing Officer on guard against falsity of return made by assessee and persuade him to carefully scrutinize account books of assessee, but absence of one register alone does not amount to such a material as would lead to a conclusion that account books were incomplete or inaccurate and thereby leading to the opinion of rejection of books of account is not justified. (ii). Jay tick Intermediates (P) Ltd. v. Assistant Commissioner of Income- tax [2016] 73 taxmann.com 195 (Gujarat) HIGH COURT OF GUJARAT Printed from counselvise.com 14 ITAs No. 779/Del/2019 & 2395/Del/2024; & CO No.50/Del/2022 It was held by the Hon ’ble Gujarat High Court that non-maintaining day to day stock register is not a ground to reject books of account. (iii). S.N. Namasivayam Chettiar v. Commissioner of Income-tax [1960] 38 ITR 579 (SC) It is observed by the Supreme Court that the power of rejection of books by the income tax officer arises only when no method of accounting has been regularly employed by assessee or where method employed is such that income, profits, or gain would not properly be deduced therefrom. Also income-tax authorities to consider material which is placed before them and, if, after taking into account in any case absence of a stock register coupled with other materials then only they are can arrive at the opinion that correct profits and gains cannot be deduced. 9. The Ld. CIT(A) has upheld the addition made by the AO without citing any cogent reason whatsoever. Having regard to the nature of business done by the assessee as already observed by us hereinabove we do not find any reason to uphold the order confirming addition on estimation of profit at 3% made by the Ld. AO and particularly keeping in view the ratio laid down by the different judicial forums as narrated hereinabove, the addition is found to be not sustainable, arbitrary, bad in law and, thus, deleted. The grounds preferred in the Cross Objection filed by the assessee are, thus, allowed. Printed from counselvise.com 15 ITAs No. 779/Del/2019 & 2395/Del/2024; & CO No.50/Del/2022 ITA No.2395/Del/2024 10. This is an appeal against the imposition of penalty u/s 271A of the Act by the AO for the impugned assessment year. Since the appeal of the assessee on quantum addition, which is the very basis of imposing the penalty, stands allowed by upholding the decision of the Ld. CIT(A) and further deletion of addition on estimated profit, the penalty does not survive and the same is hereby cancelled as such. This appeal is allowed. 11. In the result, the appeal of the Revenue in ITA No.779/Del/2019 is dismissed. The appeal in ITA No.2395/Del/2024 and the CO No.50/Del/2022 filed by the assessee are allowed. Order pronounced in open court on 20.02.2026. Sd/- Sd/- (AMITABH SHUKLA) (MS. MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 20th February, 2026. dk Printed from counselvise.com 16 ITAs No. 779/Del/2019 & 2395/Del/2024; & CO No.50/Del/2022 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "