S CHANDRA PRAKASH,CHENNAI V. ITO, CENTRAL CIRCLE-3(2), CHENNAI

ITA 2815/CHNY/2025

AI Insights

The case involves S. Chandra Prakash, a partner in M/s.Shuba Manggalam and M/s.Rajat Emporium, who was intercepted by the police during a routine check and found with gold jewellery. Following this, the Income-tax Department seized the jewellery and conducted an enquiry under section 131(1A) of the Income-tax Act, 1961. The assessee initially confessed that the jewellery was unexplained, but later retracted this statement, claiming it was made under duress. The Tribunal examined the circumstances of the confession, the subsequent retraction, and the supporting documents provided by the assessee, leading to the conclusion that the addition made by the Assessing Officer was not justified.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 827423 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2026
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2021-2022
• Appeal Filed On: 13-10-2025
• Other Referred Cases: Kailashben Manharlal Chokshi v. CIT, CIT vs. M.P. Scrap Traders, Harjeev Agrawal v. CIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R. ANITHA
• Assessee Lawyers: Y. SRIDHAR; F; DELETING
• Keywords: Additional evidence; Question of law; Onus to prove; Retraction; Principle of natural justice; Search and seizure; Valuation report; Block assessment; Application of stay

Judgement Text

" आयकर अपील य अ धकरण, ‘सी’ \u000eयायपीठ, चे\u000eनई IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI \u0015ी एबी ट वक\u001a, \u000eया\u001bयक सद य एवं \u0015ी एस. आर. रघुनाथा, लेखा सद य क े सम$ BEFORE SHRI ABY T VARKEY, JUDICIAL MEMBER AND SHRI S.R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.:2815/Chny/2025 & SA No.105/Chny/2025 \u001bनधा%रण वष% / Assessment Year: 2021-22 S.Chandra Prakash, No.13/5, Vritti Apartment, 2A, Ormes Road, 3rd Cross Street, Kilpauk S.O, Kilpauk, Chennai – 600 010. vs. ITO, Central Circle – 3(2), Chennai. [PAN: AAAPC-4541-Q] (अपीलाथ'/Appellant) (()यथ'/Respondent) अपीलाथ' क+ ओर से/Appellant by : Mr. Y. Sridhar, F.C.A. ()यथ' क+ ओर से/Respondent by : Ms. R. Anitha, Addl. CIT. सुनवाई क+ तार ख/Date of Hearing : 04.12.2025 घोषणा क+ तार ख/Date of Pronouncement : 05.01.2026 आदेश /O R D E R PER S. R. RAGHUNATHA, AM: This appeal and Stay Application filed by the assessee is against the order of the learned Commissioner of Income-tax (Appeals), Chennai - 20 (in short “CIT(A)”) passed u/s.250 of the Income-tax Act, 1961 (in short “the Act”) dated 08.08.2025 pertaining to Assessment Year (AY) 2021-22 against the order passed by the ACIT, Central Circle-3(2), Chennai, u/s.143(3) of the Act dated 30.12.2022. Printed from counselvise.com :-2-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 2. The brief facts emanating from the records are that the assessee is an individual and is a partner in the Firms M/s.Shuba Manggalam and M/s.Rajat Emporium. The business in respect of gold ornaments is undertaken by M/s.Shuba Manggalam, (AEBFS1291Q), while the gold-plated silver jewellery business is undertaken by M/s.Rajat Emporium. 3. The assessee was interrogated by the police while he was found carrying gold jewellery on 08th and 09th of March 2021 and thereafter the Income-tax Department on being informed, intervened into the process and an enquiry was conducted u/s.131(1A) of the Act. Based on the confession obtained u/s.131(1A) of the Act on 11.03.2021, the jewellery found in the possession of the assessee was requisitioned by the ADIT (Inv.) (OSD) and seized u/s.132A of the Act on 05.04.2021. 4. The Return of Income filed by the assessee for A.Y.2021-22 was taken up for scrutiny and the assessment was concluded, treating the entire jewellery found and seized to be unexplained and was thus brought to tax u/s.69 r.w.s 115BBE of the Act, in the order u/s.143(3) dated 30.12.2022 passed by the ACIT, Central Circle-3(2), Chennai. 5. The assessee had preferred an appeal before the ld.CIT(A) and the ld.CIT(A) in the order u/s.250 of the Act dated 08.08.2025, decided the appeal against the assessee and was dismissed. 6. Aggrieved by the said action of the ld.CIT(A), the assessee is in appeal before us and had professed the following grounds of appeal: 1. On the facts and in the circumstances of the case and in law the Ld. Commissioner of Income–tax (Appeals) erred in failing to appreciate that the Order passed u/s.143(3) of the Ld. Assessing Officer is erroneous on the facts and the merits of the case and provisions of Law as well and hence requires to be quashed. 2. That the Ld.CIT(A) erred in failing to appreciate that the assessment cannot be made solely based on the confession made while deposing a statement, without being corroborated further. Printed from counselvise.com :-3-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 3. That the Ld.CIT(A) erred in failing to appreciate that an assessment has no legs to stand when the confession is obtained under threat. 4. That the Ld.CIT(A) erred in failing to appreciate that a confession obtained during the period of detention by the police cannot possess evidentiary value, more particularly when it is proven that the same was obtained under excessive coercion. 5. That the Ld.CIT(A) erred in upholding the order of assessment which was framed, ignoring the statement retracted subsequently and the evidences brought on record to adduce the claims and contentions of the appellant made in such retracted statement. 6. That the Ld.CIT(A) erred in upholding the order of assessment, when the books of accounts and other records provided have not been destabilized or rejected either by the AO nor by the ld.CIT(A). Additional Legal Grounds 7. That the Ld.CIT(A) erred in failing to appreciate that the order passed by the AO in the hands of the appellant is invalid, when it was acknowledged by the Income-tax authorities that the stock of gold seized belongs to the firm in which the appellant is a partner. 8. That the Ld.CIT(A) erred in failing to appreciate that the order passed by the assessing officer stands vitiated when the law established in proviso to S.132(1)(iii) is violated. 9. For those and other reasons that may be adduced at the time of hearing, it is prayed by the Appellant that the Hon'ble Tribunal may be pleased to delete the unjust and inexplicable additions and thus render justice. 7. The ld.AR for the assessee submitted that M/s.Rajat Emporium is engaged in the retail trade of gold-plated silver jewellery, deploying its own stock-in-trade in the business, the business activity in the case of M/s.Shuba Manggalam is distinct. In respect of latter, the stock belonging to wholesalers is carried to the retailers in mofussil areas and once they are approved, such portion of approved stock is purchased by the assessee, hallmarked and thereafter sold to the retailer who has evinced interest in acquiring the same. Hence, M/s.Shuba Manggalam acts as a conduit, trading the goods, majority of which is not held by it as Stock-in-trade. 8. He submitted that on 08.03.2021, the assessee had taken 11.17 kgs of gold jewellery from M/s.Vithraag Jewels on approval basis and added to the stock of the firm M/s.Shuba Manggalam being 1.5 kgs, gold jewellery weighing Printed from counselvise.com :-4-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 12.65 kgs was taken by the assessee for marketing on 09.03.2021 to M/s.Sri Jain Jewellery, Virudachalam. 9. M/s.Sri Jain Jewellery had selected few items approximately weighing 1.2 kgs on 09.03.2021, equivalent to value of Rs.50 lakhs and had also paid an advance of Rs.12,50,234/-, at the rate of 25% of the gold’s worth to be acquired and transferred the same through banking channels. Since the acquisition was accorded approval by this customer, M/s.Sri Jain Jewellery, in order to hallmark the jewellery identified for purchase by M/s.Sri Jain Jewellery and also return the unutilized portion of the jewels taken for approval to M/s.Vithraag Jewels, the assessee returned to Chennai by bus to Koyambedu and travelled by auto to Kilpauk. 10. While the assessee was travelling by auto, he was intercepted by the police and based on the evidence provided in the form of Approval Issue Memo, Delivery Challan, e-way bill declaration etc. and based on the explanation provided in the form of a written submission, the assessee was allowed to proceed, as nothing adverse was noticed. 11. The ld.AR further submitted that, since it was election time and while the SST were interested in submitting boosted statistics of recovery made at the time of elections, the assessee was summoned on the next day and from the tone and tenor of the police authority who called the assessee, there was a premonition in the mind of the assessee that there would be a certain damage inflicted on the assessee, which may even result in seizure of the entire jewellery. Therefore, since the assessee cannot replace the jewellery belonging to a third party being M/s.Vithraag Jewels, if seized, the assessee was forced by compulsion to substitute the equivalent quantity of jewels with silver jewellery that belonged to the firm of the assessee, M/s.Rajat Emporium. However, despite the innocence of the assessee that the jewels carried to Virudachalam and brought back are truly explained with regard to its sources and were nothing Printed from counselvise.com :-5-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 to do with the election for the State Legislature, the assessee was beaten up by the police and detained in the police station on 10th and 11th of March 2021. 12. Since the assessee was unable to withstand the torture, the assessee was forced to hand over the gold jewels, which were possessed by M/s.Shuba Manggalam to the extent of 1.50 kgs and that of M/s.Vithraag Jewels to the extent of 11.17 kgs. Thereafter, the jewellery was valued by a valuer Shri G.Karthikeyan who determined the weight to be 12,652.350 grams of gold jewellery. This quantity was unjustly seized by the Inspector of Police, J3, Amaindakarai Police Station, Chennai – 600029 and the assessee was thereafter released. 13. The ld.AR further narrated that in the intervening period, a statement was recorded u/s.131(1A) of the Income-tax Act on 11.03.2021 by an authorized officer of the Income-tax Department and while the assessee was under immense duress and torment beyond compare, for having undergone the physical torture at the hands of the police and the officers of Income Tax department, the assessee, left with no other alternative had deposed then, that the entire jewellery found and seized by the police was unaccounted for the purpose of Income-tax. 14. While the assessee was kept in confinement at the police station for three consecutive days for no fault of him like a criminal, for a short intermittent period, the assessee was taken to the business premises of M/s.Shuba Manggalam at Sowcarpet by the authorized officer and a sworn statement was recorded on 11.03.2021. 15. The treatment inflicted by the officers of the Income-tax Department was not different and it is appalling to mention the dignity and modesty of the assessee was trampled by the Income-tax Officers and in the statement recorded u/s.131(1A) on 11.03.2021, the assessee was forced to confess under pressure that the entire jewellery belongs to the assessee and the same needs Printed from counselvise.com :-6-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 to be treated as unexplained income of the assessee. In order to prove the same, the authorized representative (AR) of the assessee had presented CCTV clips recorded at the time of enquiry. 16. Further, the ld.AR stated that the assessee was already detained in the police station and during such ordeal, the Income-tax Officers were no different and in such a traumatizing situation, the only way out to get rid of this exasperation was to confess against the assessee’s conscience despite being false. 17. It would not be out of context to mention that even in the statement recorded by the authorized officer, the events as narrated above have been clearly explained and also the fact that the jewellery belongs to the firm M/s.Shubh Manggalam and Shri Jayanthilal Group was not failed to be mentioned. M/s.Vithraag Jewels, from whom 11.17 kgs was obtained for taken for marketing on approval basis, is a firm in which Shri Rishub Challani, son of Shri Jayanthilal is a partner. 18. Therefore, ld.AR submitted that, it cannot be said that at the time of first confession, the actual facts were not stated. The only mistake was that instead of mentioning the exact name of the firm under such duress, the name of my brother-in-law Shri Jayanthilal was mentioned. Irrespective of the same, it was proven that but for a small quantity of 1.5 kgs that belongs to M/s.Shubh Manggalam, the entire balance belongs to others. 19. The ld.AR also stated that even this 1.5 kgs does not belong to the assessee but to M/s.Shubh Manggalam only. It is for such reason that the summon u/s.131(1A) was issued by the authorized officer Shri G.Kannan on 11.03.2021 to the assessee in his capacity as a partner of M/s.Shubh Manggalam only. Even the subsequent summon issued by Smt.Aruna Anandraj, ADIT (Inv) (OSD-3), was on 16.03.2021 also issued in the same Printed from counselvise.com :-7-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 capacity only. This proves that even at the time of the initial enquiry, it was evident and accepted that the jewellery does not belong to the assessee. 20. However, since there was a compulsion to boost the statistics of seizure at the time of elections, the authorized officer forced the assessee to confess the same to be the unexplained income of the assessee. When a person is detained in the police station for three days and nights continuously and when the Income-tax Department is also taking out a similar treatment, the state of mind would be addled and demented and the only recourse would be to wriggle out of the situation even at the cost of obfuscating the truth. 21. The ld.AR added that it was under such circumstances that a statement that suited the will and pleasure of the authorized officer was deposed. The documents in proof of movement of stock in the form of Approval Issue Memo, Delivery Challan, e-way bill declaration etc. were already in the possession of the police. Based on these documents only, did the police officer on the night of 09/03/2021 gave a green signal, but none of these documents seemed relevant to the Authorized Officer, because there was a single-minded focus to seize the jewellery, irrespective of its legality. 22. The enquiry is undertaken at the premises of M/s.Shubh Manggalam and if the Authorized officer was truly fair, he should have at least treated such portion being 1.5 Kgs of Gold Jewellery as explained and desisted from seizing it. But when the officer is premeditated to seize the entire stock, nothing could make him find any logic. 23. Further, the ld.AR stated that, in response to the second summon issued by Smt.Aruna Anandaraj, ADIT(Inv)(OSD-3), when the assessee was able to regain his mental faculties and was able to think clearly, the assessee was able to provide a clear and complete statement on 30.03.2021, together with supporting documentation, in proof of having taken the jewels that belonged to M/s.Vithraag Jewels for approval. Printed from counselvise.com :-8-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 24. However, without taking cognizance to the evidence provided vide communication dated 30.03.2021, the ADIT (Investigation) (OSD), proceeded to requisition the jewellery possessed by the Authority of the Corporation of Chennai and seized the same u/s.132A of the Act on 05.04.2021. As per the records of the police, the quantity of gold seized by them is 12,652.350 grams, while the quantities seized by the Department subsequently is 12,077.750 grams. 25. Later, the action u/s.132A of the Act was undertaken on 05.04.2021 and the clear and true version of the assessee with regard to the source of jewellery was provided on 30.03.2021 itself. As a natural consequence, the Investigating authorized officer, ought to have examined the claims of the assessee with regard to the sources. Even the ownership of the predominant portion of the jewellery seized which is vested with M/s.Vithraag Jewels has been brought on record. Obviously, an enquiry, with regard to the contention and the supporting documents ought to have been made by the Authorized officer, at the time of the seizure. However, in a mechanical manner, the entire gold jewellery was seized without any investigation into this essential aspect. 26. The assessee filed his Return of Income on 15.03.2022 for A.Y.2021-22 admitting an income of Rs.16,21,070/-. This return of income was taken up for compulsory scrutiny by issue of notice u/s.143(2) of the Act on 29.06.2022. During the course of scrutiny proceedings and in response to the notice u/s.142(1) of the Act, the entire evidence with regard to the source of gold possessed by the assessee and found at the time of first interception by the police on 09.03.2021 was submitted to the AO. 27. Further, the ld.AR submitted that the assessee reiterated by the explanation provided in the communication dated 30.03.2021 in which it was stated that out of the jewellery weighing 12,652.350 grams found by the police at the time of first interception, only 1.5 kgs belonged to M/s.Shubh Manggalam Printed from counselvise.com :-9-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 and the balance weighing 11.17 kgs was taken on a loan basis from M/s.Vithraag Jewels. 28. The ld.AR drew our attention to the page Nos.14 to 127 of the paper book filed, during the course of assessment, in support of the claim, the copy of the ledger of M/s.Vithraag Jewels as appearing in the books of M/s.Shubh Manggalam, the stock register of M/s.Shubh Manggalam and M/s.Vithraag Jewels, the copy of the ledger of M/s.Sri Jain Jewellery for the period from 01.04.2020 to 24.03.2021 as appearing in the books of M/s.Shubh Manggalam, the purchase register of M/s.Shubh Manggalam for the relevant period, sales register, stock transfer/approval issue memo and delivery challan dt. 08.03.2021 issued by M/s.Shubh Manggalam, were all provided to the assessing officer together with the copy of the letter dated 30.03.2021 filed in response to the summon u/s.131 of the Act dated 15.03.2021. Further, the ld.AR drew our attention to the Tax audit report dated 25.11.2021 for the A.Y.2021-22 of M/s.Vithraag Jewels (PAN – AAANFV5249H), wherein the Tax auditor in Form 3CB has clearly mentioned that the stock of 11,171.222 grams is with the department on account of seizure as detailed below: “Observation in Tax audit Report - Form 3CB 7. Observation in clause 35 – During the year, the assessee had sent Gold jewellery weighing about 11,171.222 Grams to M/s.Shuba Manggalam on Approval / return basis. M/s.Shuba Manggalam had in turn taken the goods to its customers on approval / return basis. However, while returning, the goods were initially taken to custody by the returning officer, Anna Nagar Assembly constituency (Election Officer) and was later handed over to Income Tax Department for further investigation. The said stock of gold jewellery weighing about 11,171.222 Grams is still lying confiscated with the Income Tax Department as on the date of signing of the Audit report. The closing stock as on 31.03.2021 includes the above confiscated gold jewellery.” 29. According to the ld.AR, the AO did not take cognizance of any of these documents and also the explanation provided by the assessee and passed an order u/s.143(3) of the Act on 30.12.2022 arriving at a taxable income of Rs.5,30,96,436/- after making an addition of Rs.5,14,75,370/- u/s.69 r.w.s 115BBE of the Act. Printed from counselvise.com :-10-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 30. According to the ld.AR, the AO did not proceed to make any inquiries into the claims made by the assessee and the supporting documentation provided but rather pitched the entire addition on two aspects being: a. That the appellant had attempted to deceive the police by substituting silver jewellery on 10.03.2021, while the jewellery found at the time of interception on 09.03.2021 was pure gold jewellery. b. That at the time of deposition u/s.131(1A) of the Income-tax Act on 11.03.2021, the appellant had not provided any evidence with regard to the source of jewellery and therefore the clarification provided subsequently on 30.03.2021 and during the course of assessment proceedings is an afterthought. 31. In the said order, the addition to the extent of Rs.5.15 crores was made by the AO which corresponds to 12,077.750 grams of gold jewellery, which is the value determined by the approved valuer Shri L.Ajay Mehtha appointed by the Income-tax Department for this purpose and not Rs.5,32,66,393/- that corresponds to 12,652.350 grams determined by the appraiser G.Karthikeyan appointed by the Corporation of Chennai. 32. As per the valuation report of Shri G.Karthikeyan, appraiser dated 12.03.2021, the approximate weight of 12.652 kgs of gold jewellery was Rs.5.33 crores, while as per the valuation report prepared by Shri Ajay Mehtha dt.06.04.2021, the weight of 12.077 kgs is Rs.5.15 crores. 33. Aggrieved by the addition made in the assessment order, which had failed to check the veracity of the claim made by the assessee through the communication dated 30.03.2021 and reiterated in response to the notice u/s.142(1), an appeal u/s.246A was preferred before the ld.CIT(A). 34. In the said appeal, the assessee, apart from contesting the action on part of the AO, who rejected the evidence brought on record, explaining the source of the entire jewellery, had also expressed his dissent in taking into consideration the weightage of jewellery of 12.077 kgs only as against the actual seizure by the AEE and Team Leader, FST-3, Anna Nagar Constituency being 12.652 kgs. Printed from counselvise.com :-11-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 35. The ld.CIT(A) was requested to appreciate that if a person is detained in the police station for three days and nights continuously, the state of mind would be perplexed and frantic and the only recourse would be to wriggle out of the situation even at the cost of obscuring reality. It was under such circumstances that a statement that suits the will and pleasure of the authorized officer was deposed. 36. However, when the assessee was able to regain his mental faculties and was able to think clearly, the assessee was able to provide a clear and complete statement on 30.03.2021, together with supporting documentation, in proof of having taken the jewels that belonged to M/s.Vithraag Jewels for approval. 37. According to the ld.AR, at least at this juncture, when the evidence with regard to the sources were provided, the AO should be dutiful in examining the claims of the assessee. However, no enquiry was conducted, as the AO was complacent since such an exercise was bound to disturb the premeditated mindset of the officer who was determined to make the addition u/s.69A of the Act, irrespective of the truth in the statement of the assessee. 38. Beyond the two unrelated findings of the Assessing Officer as stated above, the ld.AR states that there is not even an iota of evidence brought on record to substantiate that the claim of the assessee with regard to the source of jewellery found and seized on 11.03.2021 by the police was unexplained for the purpose of Income-tax. 39. The ld.AR contended that on the first aspect of attempting to substitute the silver jewellery instead of gold jewellery, it was explained by the assessee that the same cannot be treated as an act of deceit. The said jewellery found on 09.03.2021 in the possession of the assessee, belonged to the assessee and the assessee had not substituted the jewellery either belonging to the police or to the Income-tax Department or for the matter any government department Printed from counselvise.com :-12-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 or any third party with the silver jewellery. Therefore, there cannot be any offence committed, for if it were an offence, the police would have lodged an FIR to such effect. 40. It was further stated that there was reason to substitute the silver jewellery since there was a fear of seizure of gold jewellery to the entire extent. Since the assessee was detained in the police station for more than a period of 48 hours, it became public and therefore the police were precluded from such attempt. However, though their act of dereliction of duty and deceiving the assessee was not to an entire extent, they still managed to steal 500 grams of gold jewellery and the entire stock of silver jewellery which was originally brought to the police station as a substitute. To this day, the gold jewellery weighing 500 grams and silver jewellery weighing 12.6 kgs are untraceable. 41. The ld.AR submits that even if it were an issue which needs to be reprimanded, it is not clear as to how such an act of substitution would result in taxation of the value of gold jewellery, when the source of such gold is otherwise explained for the purpose of Income-tax. Reliance placed by the AO as expressed in the contents of the assessment order on this immaterial aspect is incongruous and therefore the addition made by the AO to treat the gold jewellery as unexplained to be brought to tax u/s.69A of the Act, is indecorous. 42. Now coming to the second aspect of basing the addition on a statement recorded on 11.03.2021 u/s.131(1A) of the Act alone and not travelling beyond and examining the correctness of the statement provided on 30.03.2021 and again at the time of assessment proceedings, and desisting from making any inquiry into the claims made in them, certainly enforces lack of credibility on the finding of the AO, which the assessee had hoped the ld.CIT(A) will appreciate. 43. Therefore, according to the ld.AR, it is clear from the contents of the assessment order that the addition u/s.69A is solidly pivoted to an event that occurred during torment by the police and when the assessee was under Printed from counselvise.com :-13-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 detention without reason and that there was a fear of misappropriation of the entire jewellery. Therefore, a statement given under duress, which was also retracted subsequently within a span of 17 days when the assessee was able to recover into some normalcy, cannot be the sole basis for making an addition and concluding the assessment, without making appropriate enquiries as it would deem fit. 44. The ld.AR submitted that nothing prevented the ADIT(Inv),(OSD) to enquire and destabilise the claims of the assessee when such evidence was submitted before the date of search u/s.132A of the Act or the AO at the time of Assessment proceedings. The action on part of the Authorized officer to have avoided enquiries and placing complete reliance on the statement deposed u/s.131(1A) of the Act in the presence of the police under threat, was stated to be against the intent and purpose of the Circular of CBDT in No.5-F.No. 286/98/2013-IT [lNV-II] dt. 18.12.2014 and F.No.286/2/2003 IT [INV]. 45. The assessee had also relied on the following decisions to prove their contentions: • Kailashben Manharlal Chokshi v. CIT (Guj. HC) • CIT vs. M.P. Scrap Traders 60 taxmann.com 205 (Gujarat)Harjeev Agrawal 241 Taxman 199(Delhi) 46. It is assumed by the assessee that the ld.CIT(A) would have been impressed that the assessment order does not have legs to stand, when the addition is solely based upon a standalone statement given under immense pressure and threat and therefore, would find it appropriate to cause necessary inquiries at least at this stage of appellate proceedings, in order to ascertain that the source of jewellery found by the police and seized by the Income-tax Department is explained completely for the purpose of Income-tax. 47. Further the ld.AR stated that the ld.CIT(A) was also appraised that when the enquiry revealed that the jewellery does not belong to the assessee but only Printed from counselvise.com :-14-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 that of M/s.Shubh Manggalam, the firm which is accepted to be in the business of gold jewellery, the assessment ought to have been passed in the hands of M/s.Shubh Manggalam and the order passed assessing wrongly in the hands of the assessee is invalid and thus the assessment order fails on yet another count. 48. It was submitted before the ld.CIT(A) that when the principles of natural justice have not been complied, the assessment order should stand vitiated and needs to be treated as void-ab-initio. 49. The ld.CIT(A), on perusal of the submissions and the representation made on behalf of the assessee and concluded against the assessee holding as under: 50. The ld.AR took us through the first issue of explanation with regard to the source of gold jewellery found of 12.65 kgs, the grounds of appeal of the assessee was dismissed and the finding in this regard by the ld.CIT(A), which is reproduced hereunder: “All the grounds raised by the appellant are against the addition of Rs.5,14,75,370/- as unexplained jewellery u/s.69A of the Act. During the appeal proceedings, the appellant has submitted that the appellant had received 11.17 kg of gold jewellery on behalf of his partnership firm, M/s.Shuba Manggalam, on 08.03.2021 from M/s.Vithraag Jewels on an approval basis. The appellant has further submitted that he carried total stock of 12.65 kgs of gold jewellery (11.17 kg belonging to M/s.Vithraag Jewels and 1.5 kg belonging to M/s Shuba Manggalam) to M/s.Jain Jewellery, Virudachalam on 09.03.2021, with the objective of marketing and facilitating sale on approval basis. During the said visit, M/s.Jain Jewellery selected approximately 1.2 kgs of jewellery valued at Rs.50,00,000/- and made advance payment of Rs.12,50,234/- through banking channel, representing 25% of the proposed transaction value and the transaction remained incomplete, pending final confirmation and hallmarking of the selected items. As per appellant, he returned to Chennai, to facilitate the hallmarking of the jewellery tentatively selected by M/s Jain Jewellery and to return the unselected jewellery back to M/s Vithraag Jewels. On the night of 09.03.2021, while returning from Virudachalam to Chennai by bus and subsequently continuing the journey via autorickshaw from Koyambedu to Kilpauk, the appellant was intercepted by the Sub-Inspector of Police at Anna Nagar, Chennai, during a routine election related surveillance check, who in turn immediately informed the Flying Squad Team upon discovering the gold jewellery. Printed from counselvise.com :-15-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 The appellant has also submitted that after verification of the documentary evidence like “Approval Issue Memo”, “Delivery Challan” and identity certificate in the name of M/s.Shuba Manggalam, the FST permitted the appellant to proceed to his residence with the ornaments. Further, the appellant has submitted that when he was called to appear before the Returning Officer along with the said jewellery for further verification on 10.03.2021, under the mistaken belief that the authorities might confiscate the gold jewellery belonging to third parties, he presented gold- plated silver jewellery weighing 12,110 grams belonging to another partnership firm, M/s Rajat Empourium along with corresponding stock transfer and delivery challan documents. The appellant has also submitted that the replacement was not an act of deception but was prompted by extreme mental stress and fear, which was done solely to avoid potential loss or confiscation of valuable property not belonging to him personally. The appellant has further submitted that he had explained before the Returning Officer also that out of 12.652 kgs of gold jewelley, 11.17 kgs belonged to M/s.Vithraag Jewels and approximately 1.5 kgs belonged to M/s.Shuba Manggalam. The appellant has contended that the subsequent statement u/s.131(1A) of the Act dated 11.03.2021 was recorded by the Nodal Officer of the Income Tax Department while the appellant was still under the severe mental and physical duress and the said statement was not voluntary, and therefore, the same cannot be regarded as a truthful or reliable account. The appellant has further submitted that once he regained his mental and physical composure, he submitted a clear and comprehensive statement on 30.03.2021, along with all supporting documents. The appellant has contended that the AO had made the addition solely on the basis of retracted statement. The appellant has also contended that the ownership and source of the seized jewellery is attributable to M/s.Shuba Manggalam, however, the AO has erroneously made the impugned addition in the hands of the appellant in his individual capacity. 6.1. In connection with the alleged 11.17 kg of gold jewellery belonging to M/s Vithraag Jewellers, the appellant has submitted that on 08.03.2021, M/s Vithraag Jewels handed over 11.17 kg of gold jewellery, being part of their stock in trade, to M/s Shuba Manggalam on a stock-on-approval basis. Acting on behalf of M/s Shuba Manggalam, the appellant was carrying the said jewellery, along with small quantity of additional stock belonging to M/s Shuba Manggalam, to M/s Jain Jewellery, Virudachalam for marketing and approval purposes. In support of this claim, the appellant has also submitted the following documents during the appeal proceedings: i. Approval Stock Outward Voucher of M/s Vithraag Jewels dated 08.03.2021 demonstrating that 11.17 kgs of jewellery was handed over to M/s Shuba Manggalam on an approval basis. ii. Stock Item Register of M/s Shuba Manggalam to substantiate that M/s Shuba Manggalam maintains regular business transactions with M/s Vithraag Jewels and frequently receives jewellery on approval basis. iii. Copy of approval issue memo dated 08.03.2021 which evidences that the jewellery was being transported to M/s Jain Jewellery, Virudhachalam for marketing purposes. iv. Copy of affidavit from M/s.Shuba Manggalam affirming that the appellant was carrying the jewellery stock on behalf of M/s Shuba Manggalam. v. Copy of affidavit of M/s.Vithraag Jewels confirming that the jewellery stock Printed from counselvise.com :-16-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 weighing 11.17 kg was handed over to M/s.Subha Manggalam on 08.03.2021 under a stock-on-approval arrangement. With reference to the statement recorded on 11.03.2021, wherein the appellant had stated that he handed over the jewellery to the partner, Shri Jayantilal, the appellant has clarified that Shri Jayanthilal Challani is the father of Shri Rushab Challani, who is a partner in M/s.Vithraag Jewels, the entity from whom the jewellery items were originally taken on an approval basis. The appellant has also submitted that since he interacted with Shri Jayanthilal Challani on a number of occasions during his visit to M/s.Vithraag Jewels presumed that Shri Jayanthilal Challani was a partner of the said firm. 6.2. I have considered the assessment order and the submissions made by the appellant during the appeal proceedings. On perusal, it emerges that the appellant was intercepted by the Sub-Inspector of Police and FST at late night on 09.03.2021 and 12.652 kgs of gold jewellery was found in his possession. The appellant was also carrying documents such as unsigned invoices, stock transfer approval issue memo and identity certificate in the name of Shuba Manggalam dated 08.03.2021 in the name of Shri George and Shri Bharathi. The appellant and the entire gold jewellery was released after taking photocopies the said documents, with a direction to appear for questioning when summoned. On 10.03.2021, as directed, the appellant appeared before the Returning Officer with 12.110 kgs of jewellery and different delivery challan and stock transfer/approval memo dated 08.03.2021 from M/s Rajat Emporium. However, when it was noticed by the authorities that this jewellery was different from the one intercepted on the previous night, the appellant accepted that he had replaced the original gold jewellery of 12.652 kgs with gold- plated silver jewellery of similar weight of 12.110 kgs. He had also accepted that he had destroyed the documents found in his possession on the initial interception. Further, upon receipts of information from the Returning Officer, the Nodal Officer of Income Tax Department issued summons to the appellant and recorded a statement u/s.131(1A) of the Act on 11.03.2021. The relevant portion of the said sworn statement is reproduced as under: “Q.No.15: Whether above said purchases have been registered in Purchase Register for FY 2020-21, if yes, please show the entry with the proof for purchase? Please also state the details of the person from whom you have purchased the gold jewellery worth of six crores? Ans: No. Since purchase bill has not been obtained, the purchase has not been recorded in purchase register. And hence, the details of supplier for this gold jewellery worth of Rs.6 crores could not be provided. Q.No.16: Whether the above said purchases have been registered in Stock Register for F.Y. 2020-21, if yes, please show the entry with the proof for purchase? Ans: No. As narrated in answer no.14 above, as the transactions have not been recorded in books. ……. Q.No.19: Please narrate the source for purchase of 12.5 kg of gold jewellery worth of Rs.6 crore? Printed from counselvise.com :-17-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 Ans: I received this gold jewellery from Shri Jayanti Lal on 08.03.2021 and since the sales did not materialize, I returned them to Shri Jayanti Lal on 10.03.2021. Hence, no money was involved. Q.No.20: I am showing the bill of approval and other documents you have submitted before FST team for release of jewellery. In none of the document, the name of Mr.Jayanti Lal has been mentioned. Only the names of M/s.ShubaManggalam and M/s.Jain Jewellery, Vridhachalam have been mentioned. In this background, how could you say that Mr.Jayanti Lal is involved in the transaction under consideration? Ans: I do not have any documents to prove my claim.” The above statement is very crucial as this is the first deposition made under oath by the appellant before the Income Tax Department. From the above statement, it is noted that in response to Q.No.15, the appellant had stated that the transaction for the purchase of the said gold jewellery had not been recorded in the books of accounts and the details of the supplier were not available. Further when the appellant was asked to explain the source for purchase of 12.5 kg of gold jewellery, he had stated that he had received the gold jewellery from one Shri Jayanti Lal but did not have any document to prove his claim. The appellant’s contention during the appeal proceedings is that he had mentioned Shri Jayanthi Lal instead of M/s Vithraag Jewels as son of Shri Jayanthilal Challani is a partner in M/s.Vithraag Jewels and the appellant had interacted with Shri Jayanthilal Challani during his visit to M/s.Vithraag Jewels, therefore, the appellant was under the presumption that he is also a partner of the M/s.Vithraag Jewels. Firstly, even if this contention of the appellant is accepted, it is peculiar to note that the appellant did not mention that 1.5 kg belonged to M/s.Shuba Manggalam and 11.17 kg was received from M/s.Vithraag Jewels. To the contrary, the appellant had stated that entire gold jewellery of 12.5 kg was received from Shri Jayanti Lal. Secondly, it is noted that on 10.03.2021, the appellant had produced gold-plated silver jewellery weighing 12,110 gms and had also produced fabricated stock transfer and delivery challans in respect of the silver jewellery of M/s.Rajat Empourium. Thirdly, it is noted that during the recording of statement u/s.131(1A) of the Act on 11.03.2021, the appellant did not mention the availability of any document let alone furnishing the documents in support of its claim that the jewellery was received from M/s.Vithraag Jewels. Fourthly, it is also noted that only on 01.04.2021, the appellant came up with the narrative of receiving 11.17 kg of gold jewellery from M/s.Vithraag Jewels for the first time and 1.5 kg of gold jewellery pertaining to M/s.Shuba Manggalam and also furnished few documents to support the same. Such claim was never made by the appellant from the date of interception by FST i.e. 09.03.2021 till 01.04.2021. Under these facts and circumstances, it is clear that the submissions and documents furnished by the appellant on 01.04.2021 are only an afterthought and prepared in the span of 20 days to accommodate the needs of the appellant. For these reasons, the documents furnished by the appellant during the assessment proceedings as well as the appeal proceedings cannot be treated as genuine. Furthermore, even if it is accepted that 11.17 kg of gold jewellery was actually received from M/s.Vithraaj Jewels, the same must have been shown in the books of accounts of M/s.Shuba Manggalam as on 08.03.2021 as the stock available in its possession on receipt of the same on approval basis M/s.Vithraag Jewels, which was not the case. The appellant himself did not divulge this fact from 10.03.2021 to 11.03.2021. If the appellant had claimed that he had received 11.17 kgs of gold jewellery from M/s.Vithraag Jewels at the time of enquiry conducted on 10.03.2021 & 11.03.2021, the claim of the appellant could have been very well examined with the said party i.e. M/s.Vithraag Jewels. Printed from counselvise.com :-18-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 However, the appellant had come up with the narrative only after 20 days wherein he had enough time to manipulate the books of accounts of M/s.Subha Manggalam as well as M/s.Vithraag Jewels, where the appellant’s brother-in-law is one of the partners and the appellant’s son, Shri Mohit, is working in the capacity of a Manager. It is also observed that had the gold jewellery been actually received from M/s.Vithraaj Jewels and properly accounted, the appellant would not have been fearful of any confiscation and would not have substituted the gold jewellery with gold-plated silver jewellery of equivalent weight accompanied by fabricated documents. Further, it is also noted that the appellant was carrying unsigned invoices, stock transfer approval issue memo and identity certificate dated 08.03.2021, which itself proves that these documents were not issued by M/s.Subha Manggalam and the appellant had taken the same with him to bring the color of genuineness to the transaction. 51. On the second issue of correct weighment of jewellery, which according to the assessee ought to be 12.652 kgs and not 12.077 kgs as adopted by the AO, the ld.CIT(A) found his reasoning to be as under: 6.3. Another contention of the appellant is that the police records indicate a total seizure of 12,652.350 grams of gold jewellery, whereas the quantity subsequently requisitioned and seized by the Income Tax Department is recorded as 12,077.750 grams. According to the appellant, this discrepancy remains unexplained. The appellant has not furnished copy of the police records relied on by him to state that 12,652.350 grams of gold jewellery was seized. Thus, it is not known whether 12,652.350 grams is the gross weight or net weight. Further, it is noticed that the AO in para 4.14 (i) on page 13 of the assessment order has clearly stated that at the time of requisition on 05.04.2021 from the Assistant Treasury Officer, Sub-Treasury, Perampur, Chennai - 600 011, the jewellery was valued by the Central Government Approved Valuer, Shri L. Ajay Mehtha and the net weight of gold jewellery was arrived at by him at 12,077.750 gms and the same has been valued by him at Rs.5,14,75,370/-, which was then requisitioned/seized vide ANN/AA/RO- 21/FST/MANIMOZHI/Jewellery/S dated 05.4.2021. Thus, the most plausible explanation for this discrepancy is that the alleged weight of 12,652.350 grams in the police records must be the gross weight or inaccuracy while finding out the weight by the police authorities, whereas the weight of 12,077.750 gms as per the records available with the AO is actually the net weight of the gold jewellery as certified by the Central Government Approved Valuer. 52. On the last issue of contending that the person who is to be rightly assessed, the findings of the ld.CIT(A) are reproduced below: 6.4. The last contention of the appellant is that the AO has made the addition by solely relying on the appellant’s statement dated 11.03.2021. In this regard, it is noted that the AO had made the addition on the basis of the gold jewellery seized from the appellant for which the appellant did not give any valid explanation or documentary evidence for around 20 days from the date of first interception. The documents furnished by the appellant during the assessment proceedings had rightly been treated by the AO as an afterthought. Had the documents been genuine, the same would have been readily available with the appellant and it would have been submitted in the first instance. However, the appellant did not Printed from counselvise.com :-19-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 furnish this explanation and said documents on 09.03.2021 or 10.03.2021 or 11.03.2021 and finally furnished these documents only on 01.04.2021 after manipulating the accounts of M/s.Shuba Manggalam and M/s.Vithraag Jewels. If this claim had been made by the appellant during recording of the statement on 11.03.2021, the same could have been verified immediately with M/s.Shuba Manggalam and M/s.Vithraag Jewels as the appellant could not have enough time make the adjustments in the books of account of the said parties. Since these details were furnished after around 20 days which is ample time to accommodate the said transaction in the books of account, there was no scope for any verification with the said parties. Thus, on the basis of the above discussion, it can be concluded that the gold jewellery found in possession of the appellant was his own unexplained jewellery and it did not belong to M/s.Shuba Manggalam and M/s.Vithraag Jewels. Therefore, I am of the opinion that the AO was justified in treating the seized gold jewellery of 12.077.750 grams as unexplained jewellery u/s.69A of the Act in the hands of the appellant. Accordingly, the addition made by the AO is confirmed and the grounds raised by the appellant are dismissed. 7. In result, the appeal is dismissed. 53. The ld.AR stated that in the proceedings before the ld.CIT(A), the assessee had provided written submissions clarifying that the sworn statement that too which is deposed under severe threat, cannot form the sole basis for addition to total income, in the absence of any corroborative evidence. The ld.AR had clarified that despite providing an explanation with regard to the source of gold jewellery in the possession of the assessee found at the time of police interception, immediately after the enquiry but certainly before the action u/s.132A, no attempt was made either by the authorized officer who undertook the search u/s.132A or by the AO, to disprove the contention of the assessee. 54. The ld.AR stated that the statement recorded u/s.131(1A) on 11.03.2021, is a lacklustre statement obtained in a lackadaisical manner. According to the ld.AR, the statement came to an abrupt conclusion which by itself is self- explanatory on the fact that the statement was not given voluntarily but obtained only by force. 55. There are totally 25 Q&A in the said statement recorded on 11.03.2021 and only the answer to Q.No.24, has concluded the position adversarial to the assessee. For ease of reference, the ld.AR read out the content of the said Q.No.24 which is reproduced below: Printed from counselvise.com :-20-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 “Q.No.24. For question no.20 you have answered that you don’t have record to prove that the gold jewellery worth Rs.6 crores belongs to Mr.Jayanthilal. Further the stock on 08.03.2021 does not include this 12.5 kg of gold jewellery. In this background the gold jewellery found at the time of interception by the FST in your hands shall be considered as valuable belonging to the firm M/s.Shuba Manggalam in the background that only the names of M/s.Shuba Manggalam and M/s.Jain Jewellery, Virudhachalam were there in the documents found along with jewellery at the time interception. And such valuables shall be treated as unexplained income. Please explain; Ans: I don’t have an explanation to this question.” 56. The ld.AR brought on record that the above query is a ‘Leading Question’ and when the answer is brief, the same cannot be considered to be affirmative under the Rule of Evidence. Questions that suggest a desired answer are inappropriate during direct examination of the deponent under oath, as they risk putting words in the witness's mouth and therefore cannot be considered as a reliable piece of evidence. 57. Further, he brought on record that the explanation provided subsequently on 30.03.2021 in response to the notice u/s.131 of the Act dt. 16.03.2021 cannot be treated as an afterthought, when certain events that are part of the transactions were already concluded prior to the interception by the police. 58. Further, the ld.AR contended that it is an undisputed fact that the assessee had travelled to Virudachalam, with the entire stock of gold jewellery and a portion of which equivalent to value of Rs.50 lakhs was also approved by M/s.Sri Jain Jewellery, Virudachalam. This customer had also paid an advance of Rs.12,50,234/-, at the rate of 25% of the gold’s worth to be acquired and transferred the same through banking channels. The amount of Rs.12,50,234/- was already credited to the bank account of the assessee before the police interception and hence, by no stretch of imagination can the explanation provided on 30.03.2021, according to the ld.AR, be classified as an afterthought. 59. According to the ld.AR, the transaction with M/s.Vithraag Jewels is not an isolated transaction, remaining confined to this transaction alone. And the copy Printed from counselvise.com :-21-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 of ledger folios of the assessee as appearing the books of M/s.Vithraag Jewels and the vice-versa reveals that is an on-going and continuous business transaction, and the documents contained in the paper book submitted before the AO and that of the ld.CIT(A) had proved this point and hence, it cannot be an accommodation entry as alleged by the revenue. 60. It was further stated that when the letter was provided on 30.03.2021, nothing prevented the ADIT(Inv.) and the ACIT, Central Circle 3(2), Chennai to undertake enquiries and thereafter the ld.CIT(A) to cause enquiries to check the veracity of the claims of the assessee and dislodge the claim. Their resolute avoidance construes that the claim of the assessee, as fostered in the letter dated 30.03.2021, is overwhelming. 61. The ld.AR further sought the attention of the bench, that two different yardsticks cannot be applied in respect of components of the same transaction. According to the ld.AR, the AO had gone astray to treat a reliable piece of evidence being the receipt of advance in banking channels before the interception event could unfold as “mere coincidence” but the clarification to be an “afterthought’. When M/s.Sri Jain Jewellery payment was not structured to suit the needs of the assessee, the movement of stock for approval and back, obviously is genuine, when the supporting documents were verified by the police on 09.03.2021 were found to be acceptable at the time of first interception and release. 62. The ld.AR travelled ahead to impress, that even the ld.CIT(A) had not supported this pretence of the AO, but indirectly supported the addition made by the AO, once again placing reliance on the contents of the deposition u/s.131(1A) of the Act, as the air was thick only to dislodge the claims of the assessee even at the cost of violating the principles of natural justice and rule of evidence. Printed from counselvise.com :-22-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 63. According to the ld.AR, the ld.CIT(A) failed to conceptualise the state of mind of the assessee when the statement was recorded u/s.131(1A), after being detained like a hard-core criminal for two days in the custody of the police, even though no grave crime was committed by the assessee. At the time of custodial unauthorised interrogation, it was natural to provide explanation which would help the assessee to get out the rigors of illegal confinement, but the same cannot be inviolable and ultimate, more particularly when the deposition followed a minor assault by one of the team members. The CCTV clip to accentuate the claim that there was a certain act of outraging the modesty of the assessee was also furnished by the ld.AR. 64. The ld.AR argued that there is nothing imperfect, in mentioning the name of Sri.Jayanthilal Challani, from whom a major portion of jewels was got on loan. The assessee had taken 11.17 kgs of jewellery from M/s.Vithraag Jewels on loan basis, the firm in which, Sri.Rishub Challani son of Sri. Jayanthilal Challani is a partner. Therefore, the ld.AR expressed there can be an aberration of facts but certainly, it is not a distortion of facts. This anomaly is undoubtedly not a case of falsification, and therefore the ld.CIT(A), according to ld.AR ought not to have merely relied on this deviance to fix the assessee and the claims made in the reply dated 30.03.2021 are unreliable. 65. Both the AO and ld.CIT(A) are duty-bound to travel beyond the deposition given and duress and highlight the inconsistencies if any, with regard to claims made in the reply dated 30.03.2021 and reiterated multiple times subsequently, at the time of investigation post search proceedings, assessment proceedings and first appellate proceedings. The ld.AR stated that when not one of them cared to be judicious in their approach but remain arbitrary, the addition made solely of the confession, which was retracted subsequently supported by satisfactory and statutory documentation, is whimsical and pleaded for its deletion. Printed from counselvise.com :-23-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 66. The ld.AR argued that as a natural consequence, the ld.CIT(A) ought to have been impressed that the assessment order does not have legs to stand, when the addition is solely based upon a standalone statement given under immense pressure and threat. On the contrary, the ld.CIT(A) dismissed the grounds of appeal of the assessee in toto. 67. The ld.AR further submitted that the books of account of M/s.Shubh Manggallam and the ledger folio of the firm as appearing in the books of account of M/s.Vithraag Jewels and various other records were provided at the time of search u/s.132A of the Act, before the conclusion of assessment and the Appellate proceedings as a paper book, a copy of which is also submitted before the bench. But not one of them were seriously concerned to be astute and incorporate the relevant findings in the report / assessment order / appellate order respectively, as such an exercise would be detrimental to their interest. On account of this action of the lower authorities, the stock worth Rs.5 crores approx. is lying idle for almost half a decade, and the business of the assessee is ravaged beyond the redemption. 68. The ld.AR stated that in the said order, the ld.CIT(A), merely reproduced the contents of the assessment order without destabilizing the claims of the assessee and had once again placed reliance on a cryptic reply forced to be given by the assessee on 11.03.2021 u/s. 131(1A) of the Act. The relevant contents of the statement, being answers to Q.Nos.15 to 20 were reproduced in the said order in Pg.No.11 & 12 of the appellate order, is the only material evidence which has been relied by the ld.CIT(A) to uphold the order of the assessing officer. 69. Neither the AO nor the ld.CIT(A) travelled beyond the statement obtained under duress, to unravel anything adverse against the claims and contentions of the assessee. The ld.AR forced his cause to state that the claims of the assessee would have been incorrect, if the following events had not occurred. Printed from counselvise.com :-24-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 a. That the police officer who intercepted the assessee on 09.03.2021, had found that the jewellery was otherwise unexplained. b. That the statement of the appellant is an afterthought if M/s.Sri Jain Jewellery, Virudachalam had not taken a small portion for purchase on approval and had also remitted 25% as advance, before even all these events could unfold. c. That the assessing officer who undertook the enquiry at the office premises had found anything untoward at the time of enquiry apart from this forced confessional statement. d. That the transactions with M/s.Vithraag Jewellers is peculiar and had not happened in the past. Since such transactions have also happened in the past and proven to be so, the transactions with M/s.Vithraag Jewellers cannot be an attempt or postscript to explain the source of jewellery found and seized. e. That the statement deposed u/s.131(1A) can still possess evidentiary value when obtained by way of threat and physical assault. f. That either the AO or the CIT(A) could counter the claims of the appellant in a fair and judicious manner. g. That either the AO or the CIT(A) could reject the books of account and other evidences and incorporate the relevant adverse findings in the respective orders passed. 70. When not one of these aspects could be accomplished and held against the assessee, the ld.AR prayed that the appellate order passed which upheld the illogical assessment order needs to be quashed. 71. The assessee had complained about the shortfall in quantity and value of gold jewellery seized by the Income Tax Department u/s.132A in comparison to the quantity and value of gold jewellery seized by the head of the FST Team Shri M.Manimozhi. The ld.AR stated that this issue was raised before the ld.CIT(A) only to nurture the point that there was a reason to substitute Silver for gold jewellery, when called by the police on 10.03.2021. 72. As per the valuation report of the approved valuer Shri G.Karthikeyan who undertook the valuation at the police station, certified that the total value of gold jewellery with 91.6% purity – 22 carat was 12,652.350 grams. This quantity of gold is seized by the DRO and held in his possession till it was handed over to the Income-tax Department. As per the mahzarnama of the Income-tax Department, the total value of jewellery received from the AEO and seized by Printed from counselvise.com :-25-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 the ITD u/s.132A of the Act was 12,077.750 grams. These discrepancies were brought to the notice of the ld.CIT(A), which according to the ld.AR was only to influence that there was a compulsion to substitute the gold-plated silver jewellery instead of gold jewellery as there was a threat of misappropriation and theft looming large, the fact that 500 grams of gold jewellery went untraceable was highlighted. 73. Though it was not a Ground of appeal but rather a submission of fact, to prove that there is no such act of deception, the ld.AR stated the ld.CIT(A) travelled beyond their realm and had himself concluded that the difference is because the first valuation report was as per gross weight and the second report is based on net weight. When Shri G.Karthikeyan has clearly certified that the purity of gold is 91.6%, that valuation is based on net weight only. 74. This is a criminal offense and the same is already challenged under the corresponding provision of law. To the ld.AR it was not clear as to why the ld.CIT(A) should come to the rescue of the head of the FST Team Shri M.Manimozhi and explain the reason for difference when the assessee had not sought any adjudication on this point by the ld.CIT(A) and the same is beyond his domain. This act of overstepping the boundaries explains that the jewellery of the assessee should remain seized and should not be released to the assessee at any cost. 75. Even if it were to be assumed but not accepted by the assessee to be a case of unexplained asset, when it is proven to be the stock that belongs to M/s.Shubh Manggalam, the assessment has to be passed in the hands of M/s.Shubh Manggalam only u/s.153C of the Act and not in the hands of the assessee. The ld.AR stated that the asset belongs to M/s.Shubh Manggalam, part of which being owned by it and major portion of which being taken on loan from M/s.Vithraag Jewels is also acknowledged by the IT Department, for if it were otherwise, the summons u/s.131(1A) on 11.03.2021 and u/s.131 on Printed from counselvise.com :-26-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 16.03.2021 would have been issued in the name of the assessee in his individual capacity and not in his capacity as partner of M/s.Shubh Manggalam. 76. When the officers of the Income-tax Department who undertook the enquiry and search u/s.132A of the Act were satisfied that the jewellery belongs to M/s.Shubh Manggalam only, the assessment ought to have been passed in the hands of M/s.Shubh Manggalam only and when the same is passed in the hands of the assessee, the ld.AR submitted that the order so passed is void- ab-initio. 77. It was argued that though this significant ground was raised on the aspect of the erroneous assessment in an individual capacity, the ld.CIT(A) totally ignored these essential features and in para 6.5 of the said order, had arbitrarily concluded that the order passed in the hands of the assessee is justified, as the same was found in his possession only. 78. At the time of hearing before us, a fresh legal ground was raised that the search proceeding is illegal and thus the consequential assessment order has to follow suit. According to the ld.AR, the enquiry team had visited the business premises of the firm in which the assessee is a partner. The series of events as detailed above, clearly illustrate that the gold jewellery seized irrespective of its nature, whether explained or otherwise is undoubtedly stock-in-trade of the firm. If it were to be otherwise, the advance consideration from M/s.Sri Jain Jewellery, Virudachalam of Rs.12,50,234/- would not have credited into the bank account held by the firm. 79. When the authorized officer was aware that the gold jewellery is held as stock-in-trade by the assessee, there is no provision under the law to seize the same. As per proviso to Section 132(1)(iii), jewellery being held as stock in trade of the business found as a result of search should not be seized by the authorized officer. When the stock-in-trade held by the firm has been seized, the entire procedure stands impaired and therefore the consequent assessment Printed from counselvise.com :-27-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 proceedings stand automatically vitiated and hence does not possess legitimacy. 80. In light of the above arguments the ld.AR prayed for deleting the additions made by the Assessing Officer by setting aside the order of the ld.CIT(A). 81. Per contra, the ld.DR asserted the action of the ld.CIT(A) in confirming the order of the Assessing Officer and prayed for confirming the order of the ld.CIT(A). 82. We have heard the rival contentions perused material available on record and gone through the orders of the authorities along with the written submission and paper book filed. The controversy before us revolves around the addition of Rs.5,14,75,370/- made u/s.69A r.w.s.115BBE of the Act in respect of gold jewellery weighing 12,077.750 grams seized u/s.132A of the Act, which has been sustained by the ld. CIT(A). 83. For the sake of brevity, the facts are not reproduced. It can be ascertained from the contents of the assessment order that the addition is made, based solely on two findings, being: a. That the assessee had attempted to deceive the police by substituting silver jewellery on 10.03.2021, while the jewellery found at the time of interception on 09.03.2021 was pure gold jewellery. b. That at the time of deposition u/s.131(1A) of the Act on 11.03.2021, the assessee had not provided any evidence with regard to the source of jewellery and therefore the clarification provided subsequently on 30.03.2021 and during the course of assessment proceedings is an afterthought. 84. On the first aspect of attempting to substitute the silver jewellery instead of gold jewellery, the same cannot be treated as an act of deceit. The said jewellery found on 09.03.2021 in the possession of the assessee, belonged to the assessee and the assessee had not substituted the jewellery either belonging to the police or to the Income-tax Department or for the matter any government department or any third party, with that of the silver jewellery. Therefore, there cannot be any offence committed, for if it were an offence, the Printed from counselvise.com :-28-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 police would have lodged an FIR to such effect. Needless to state that, even if it were an act of deceit, it certainly does not have any ramifications on the explanation with regard to the source of gold jewellery in the possession of the assessee. Therefore, it is found that this observation of the AO is insignificant in the case under adjudication. 85. On the second aspect of lack of supporting documentation at the time of enquiry on 11.03.2021, the ld.CIT(A) has also pivoted his upholding act to this feature, that the assessee had not provided any satisfactory documents at the time of interception and subsequent enquiry. The failure on part of the assessee cannot be treated as a serious discrepancy. Even otherwise, when evidence are brought on record, nothing prevented the AO and the ld.CIT(A) to logically destabilising the claims by proving that such evidence are unreliable and cannot be given credence. The AO and ld.CIT(A) stand fractured and disdain to travel beyond 11.03.2021. This action on the part of the revenue to desist from countering the evidence in a rational manner, and remain restrained to the initial statement and fail to cross this barrier is undesirable. 86. It is evident that at every level, the addition only revolves around the statement deposed u/s.131(1A) of the Act taken on 11.03.2021 and refuses to cross the obstacle created by the reply dated 30.03.2021, though made within 19 days of the sworn statement made u/s.131(1A) of the Act. The retraction dated 30.03.2021, was accompanied with supporting documentation, and in the absence of proper counter, the retraction is valid. 87. Once a statement is retracted, the burden shifts to the AO to establish its correctness with corroborative material and addition cannot rest solely on a retracted statement. In the absence of corroborative evidence, a retracted statement cannot be the sole basis for addition. 88. The Revenue neither at the time of post-search proceedings nor at the time of assessment proceedings, confronted the Deponent who retracted, by Printed from counselvise.com :-29-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 way of cross-examination, to establish that the retraction lacks basis, which is a violation of the decision of the Hon’ble Supreme Court in the case of M/s. Mehta Parikh (1956) 30 ITR 181. Though a deposition given u/s.131(1A) of the Act is crucial and an essential piece of evidence, it possesses evidentiary value only to the extent of it finds support through corroboration and additional evidence. Therefore, a statement can be retracted to the extent that it can be shown to be incorrect or involuntary, particularly if the retraction is supported by credible evidence. 89. The initial statement shifts the burden of proof to the person who made it. To successfully retract the statement, the assessee must provide cogent and sufficient evidence to prove that the earlier statement was factually incorrect or involuntary. In the case under consideration, certain aspects of the deposition, to such extent which is not supported were proven to be inconsistent and therefore it is found that complete reliance cannot be placed on this statement alone. Moreover, the assessee through CCTV video footage was able to demonstrate that the statement u/s.131(1A) was obtained after a minor assault. The fact that the assessee was kept under unauthorized confinement by the police also drives the point that the original statement was given under undue pressure. The confession obtained by posing leading questions in the impugned statement also classifies this statement to be an unreliable piece of evidence, and the AO and the ld.CIT(A) ought not to have got etched to this statement alone. 90. The arguments of the ld.AR that the evidence submitted on 30.03.2021 cannot be an afterthought is also accepted. The receipt of advance sum from M/s.Sri Jain Jewellery, Vridhachallam before all these vents got initiated proves the point that the same is not a coincidence as observed by the AO but an essential piece of evidence that rallies in favour of the assessee that it is genuine. Even if it were to be held otherwise, the AO is duty-bound to counter it systematically and cannot categorize it to be worthless without enquiry. Printed from counselvise.com :-30-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 91. Further the transactions with M/s.Vithraag Jewels are not an accommodation for the reason that similar transactions have happened in the past with the same party, moreover, the trips to mofussil stations including Virudachalam is not a falsification as the same was stated before the police on the first day. Further, the testimony that the jewels were taken for approval is also demonstrated that the advance to be paid @ 25% in respect of jewels approved for acquisition by M/s.Sri Jain Jewellery, Virudachalam was received through banking channels even before release of the assessee from police detention. Such evidence clearly rallies in favour of your assessee, and hence the conclusion drawn by the AO and supported by the ld.CIT(A) that the response dated 30.03.2021 is an afterthought and cannot be given weight, is overruled. 92. In the present case, we find that it is undisputed that the assessee, vide detailed communication dated 30.03.2021, much prior to the action u/s.132A of the Act, furnished a comprehensive explanation regarding the source of jewellery along with documentary evidences such as approval issue memos, stock registers, ledger accounts, affidavits from M/s.Shuba Manggalam and M/s.Vithraag Jewels and bank evidence of advance received from M/s.Sri Jain Jewellery. This evidence was also reiterated during the assessment proceedings in response to notices u/s.142(1) of the Act. 93. Coming to the aspect that the addition can still rest on the statement given on oath, the argument of the ld.AR that it is a settled legal proposition that a confession needs corroboration with evidence is accepted. Therefore, in the absence of any enquiry and affirmation, the confession cannot be taken as the sole basis for making the addition and reliance placed on the decision of the Hon’ble Supreme Court in the case of M/s.Pullangode Rubber Produce Co. Ltd. v. State of Kerala (1973) 91 ITR 18 get enforced. Further, this statement cannot be categorized to be a deposition that possesses evidentiary value, when the same is proven to be obtained by way of threat and coercion. The CBDT has Printed from counselvise.com :-31-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 issued instructions to curb the practice of obtaining forced confessions during search and seizure operations. CBDT Circular F. No. 286/2/2003-IT(Inv.), dated March 10, 2003, states that \"no attempt should be made to obtain confession/surrender as to the undisclosed income during search,\" and any action to the contrary will be viewed adversely. Therefore, a statement given under duress, which was also retracted subsequently within a span of 17 days when the assessee was found able to recover into some normalcy, cannot be the sole basis for making an addition and concluding the assessment, without additionally corroborating it. 94. In the present facts of the case, we are of the view that nothing prevented the ADIT(Inv.),(OSD) to enquire and destabilize the claims of the assessee when such evidence was submitted before the date of search u/s.132A of the Act or the AO at the time of Assessment proceedings. The action on part of the Authorized officer and the Assessing Officer to have avoided enquiries and placing complete reliance on the statement deposed u/s.131(1A) of the Act, is against the intent and purpose of the Circular of CBDT in No.5- F.No. 286/98/2013-IT [lNV-II] dt. 18.12.2014 and F.No.286/2/2003 IT [INV]. 95. In the case of Kailashben Manharlal Chokshi v. CIT1, the Hon’ble Gujarat High Court held that the additions could not be made only on the basis of admissions made by the assessee, in the absence of any corroborative material. The relevant paragraph No. 26 of the said decision has been reproduced here in below: - “26. In view of what has been stated hereinabove we are of the view that this explanation seems to be more convincing, has not been considered by the authorities below and additions were made and/or confirmed merely on the basis of statement recorded under section 132(4) of the Act. Despite the fact that the said statement was later on retracted no evidence has been led by the Revenue authority. We are, therefore, of the view that merely on the basis of admission the assessee could not have been subjected to such additions unless and until, some corroborative evidence is found in support of such admission. We are also of the view that from the statement recorded at such odd hours cannot be considered to be a voluntary statement, if it is subsequently retracted and necessary evidence is led contrary to such admission. Hence, there is no reason not to disbelieve the retraction made by the Assessing Officer and explanation duly supported by the evidence. We are, therefore, of the view that the Tribunal was Printed from counselvise.com :-32-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 not justified in making addition of Rs. 6 lakhs on the basis of statement recorded by the Assessing Officer under section 132(4) of the Act. The Tribunal has com mitted an error in ignoring the retraction made by the assessee.” 96. Furthermore, the Hon’ble Gujarat High Court in the case of CIT vs. M.P.Scrap Traders 60 taxmann.com 205 (Gujarat)[2014], while passing the order made the following observations: “6. In view of the aforesaid factual aspect, more particularly, when the Assessing Officer had no other material and/or corroborative material to justify the aforesaid additions except the confessional statement of Shri Kishorebhai Mohanlal Karia recorded on January 4, 2007, which was subsequently retracted within a period 19 days and the same came to be explained with respect to aforesaid additions, we are in complete agreement with the view taken by the learned Tribunal. We see no reasons to interfere with the impugned judgment and order passed by the learned Tribunal deleting the aforesaid additions. Under the circumstances, the proposed question of law are answered against the Revenue. Consequently, both the appeals deserve to be dismissed and are accordingly dismissed.” 97. The fact and circumstances in the present case are exactly identical to the cases cited above and therefore in the absence of independent enquiry into this claim of assessee, and decide the course of taxation, the addition cannot be sustained. 98. On the aspect of the evidentiary value that the statement given on force were to possess, the Hon'ble Delhi High Court in the case of Harjeev Agrawal 241 Taxman 199(Delhi) held as under: \"20. In our view, a plain reading of Section 158BB(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words \"evidence found as a result of search\" would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the explanation to Section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the AO to make a block assessment merely because any admission was made by the Assessee during search operation”. Printed from counselvise.com :-33-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 99. The standalone statement does not possess evidentiary value and therefore the order passed by the AO based on this standalone deposition is held to be bad in law. 100. We are of the opinion that in the present case, the statement dated 11.03.2021 stood retracted within a reasonable time and was followed by a detailed explanation supported by contemporaneous documentary evidence. We also find force in the argument of ld.AR that the Tax auditor has made note of the stock of gold which has been given by M/s.Vithraag Jewels (PAN – AANFV5249H), wherein the Tax auditor in Form 3CB has clearly mentioned that the stock of 11,171.222 grams is with the department on account of seizure as detailed below: “Observation in Tax audit Report - Form 3CB 7. Observation in clause 35 – During the year, the assessee had sent Gold jewellery weighing about 11,171.222 Grams to M/s.Shuba Manggalam on Approval / return basis. M/s.Shuba Manggalam had in turn taken the goods to its customers on approval / return basis. However, while returning, the goods were initially taken to custody by the returning officer, Anna Nagar Assembly constituency (Election Officer) and was later handed over to Income Tax Department for further investigation. The said stock of gold jewellery weighing about 11,171.222 Grams is still lying confiscated with the Income Tax Department as on the date of signing of the Audit report. The closing stock as on 31.03.2021 includes the above confiscated gold jewellery.” 100.1 Neither the AO nor the ld.CIT(A) has brought out any material on record to demonstrate that the subsequent explanation was false or fabricated, except making a bald allegation that it was an “afterthought”. 101. A perusal of the assessment order reveals that no enquiry whatsoever was conducted by the AO to verify the claims of the assessee with M/s.Vithraag Jewels, M/s.Shuba Manggalam or M/s.Sri Jain Jewellery, despite complete details being furnished. Even the advance payment of Rs.12,50,234/- received through banking channels prior to the interception, which corroborates the assessee’s explanation of movement of stock on approval basis, has not been disputed. Printed from counselvise.com :-34-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 102. The ld.CIT(A), instead of exercising his co-terminus powers, has merely endorsed the conclusions of the AO and rejected the evidence on presumptions and surmises, alleging manipulation of books without any tangible proof. Such an approach is contrary to the settled principles of appellate adjudication. 103. In view of the above discussion and findings, we are of the considered view that the addition to the tune of Rs.5,14,75,370/- u/s.69 r.w.s 115BBE of the Act in the hands of the assessee is not sustainable and we are setting aside the order of the ld.CIT(A) and delete the addition. 104. As a result, the Grounds 1 to 6 raised by the assessee are allowed. 105. Alternatively, the assessee claims that the gold jewellery seized belongs to M/s.Shuba Manggalam and therefore, the same irrespective of its characteristics, whether explained or not, has to be necessarily assessed in the hands of M/s.Shuba Manggalam and the assessment order passed in the case of the assessee is void. 106. The ld.CIT(A) did not favour this claim of the assessee and held that since it was found in the possession of the assessee at the time of interception and this fact of actual ownership was not brought to the notice of the Authorised Officer at the time of enquiry, the assessment passed in the hands of the assessee to be justified. 107. The written and oral arguments put forth by the ld.AR of the assessee was carefully considered. We are of the considered view that the finding of the ld.CIT(A) is erroneous. i. The summons u/s.131(1A) to record the sworn deposition on 11.03.2021 was issued to the assessee not in his individual capacity but as his capacity as partner in the firm M/s.Shuba Manggalam. ii. The summons u/s.131 seeking response and addition clarification was also issued on 16.03.2021 in the same status and capacity, “Shri. Chandraprakash Partner in M/s.Shuba Manggalam”. iii. The AO at the start of the Assessment order asserts that the firm M/s.Shuba Manggalam is the dealer in Gold Jewellery and does not specify that the assessee is the one dealing in this business. Printed from counselvise.com :-35-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 iv. The returns of income of the assessee reveal that the assessee is distanced from this business activity and is engaged in it, being a partner in the firm dealing in Gold Jewellery. v. The Authorised officer was fully aware that the jewellery whether explained or unexplained, belongs to M/s.Shuba Manggalam only and the contents of the Question No.24 which is already incorporated supra, affirms this contention of the ld.AR. 108. Notwithstanding the contention of the assessee that, even assuming without admitting that the income is liable to be brought to tax, the same ought to be assessed in the hands of the partnership firm M/s.Shuba Manggalam and not in the hands of the assessee in his individual capacity, we find that, in view of our categorical finding that the gold jewellery found and seized stands duly explained for the purposes of the Act, such contention raised vide Ground No. 7 becomes purely academic in nature. Accordingly, the said ground does not call for adjudication and is dismissed as infructuous. 109. The ld. AR contended that the enquiry team had visited the business premises of the firm in which the assessee is a partner and that the sequence of events clearly establishes that the gold jewellery seized, irrespective of whether explained or otherwise, constituted stock-in-trade of the partnership firm. It was further submitted that had the jewellery not represented business stock, the advance consideration of Rs.12,50,234/- received from M/s.Sri Jain Jewellery, Virudachalam would not have been credited to the bank account of the firm. 110. It was argued that once the authorized officer was aware that the gold jewellery was held as stock-in-trade, the seizure thereof was contrary to the proviso to section 132(1)(iii) of the Act, which expressly prohibits seizure of stock-in-trade of a business, and consequently, the entire seizure and the proceedings emanating therefrom stood vitiated. 111. However, in view of our finding on merits that the addition to total income is unsustainable and liable to be deleted, the adjudication of this legal contention does not survive independently. Accordingly, following the reasoning Printed from counselvise.com :-36-: ITA. No:2815/Chny/2025 & SA No.105//Chny/2025 adopted while disposing of Ground No.7, the issue raised vide Ground No.8 is rendered academic and is dismissed as such. 112. In view of the disposal of the appeal in favour of the assessee by deleting the impugned additions, the stay application filed by the assessee no longer survives for consideration and is, accordingly, dismissed as infructuous. 113. In the result, the appeal of the assessee is partly allowed, and the stay application is dismissed as infructuous. Order pronounced in the open court on 05th January, 2026 at Chennai. Sd/- Sd/- (एबी टी वक\u0007 ) (ABY T VARKEY) \bाियक सद\u000e/Judicial Member (एस. आर. रघुनाथा) (S. R. RAGHUNATHA) लेखासद\u000e/Accountant Member चे\u000eनई/Chennai, /दनांक/Dated, the 05th January, 2026 sp आदेश क+ (\u001bत1ल2प अ3े2षत/Copy to: 1. अपीलाथ'/Appellant 2. ()यथ'/Respondent 3.आयकर आयु4त/CIT– Chennai/Coimbatore/Madurai/Salem 4. 2वभागीय (\u001bत\u001bन ध/DR 5. गाड% फाईल/GF Printed from counselvise.com "