First, physics:
Thermocouple (TC further) have cold and "hot" point. When you put Hot point on temperature T1, and cold on temperature T2, on cold point pins of TC you will get voltage Vtc = K*(T1-T2).
Problem is that cold point temperature usually are changing regards to athmosphere conditions and because of that there are many ways how to compensate cold junction temperature.
AD595 has cold junction temperature compensation inside (this means that this IC add or substract some voltage from measured value to get accurate measurement).
This means that cold junction and AD595 MUST BE as close at can, and must be on same temperature.
Mr.Cube