2010 (9) TMI 1129 - AT - Income Tax

Tribunal partly allows appeal on stock valuation, rejects separate trading additions, upholds expenditure allowance.

Late Shri Khoob Chand Through, L/H Shri Virendra Kumar Jain, Prop. Jinendra Motors Versus Income Tax Officer, Barmer.

The appeal was partly allowed by the Tribunal. The addition of excess stock was deemed unjustified due to inaccurate valuation and lack of evidence of the ... - Issues involved: Appeal against CIT(A) order regarding addition of excess stock, additions to trading results in different branches, and part allowance of expenditure.Addition of Excess Stock:The appeal arose from CIT(A) order sustaining addition of excess stock found during a survey. The appellant argued that the inventory was incorrect due to improper calculations and weights. The appellant contended that the inventory valuation was flawed as weights and rates were rounded figures, which was not realistic for scrap materials purchased from government auctions. The appellant also highlighted that the inventory was not provided to them during the survey. The Departmental Representative argued that the inventory was signed by the appellant's son, and advance tax was paid based on the excess stock. The Tribunal found that the stock valuation was not accurate, especially with rounded figures for weights and rates. It was noted that no evidence showed the excess stock was entered in the books for sale. The Tribunal concluded that the addition of excess stock was not justified, as the appellant's statement was not recorded, and the son's statement did not bind the appellant.Additions to Trading Results:The appellant challenged additions made to trading results in different branches. The appellant argued that separate additions to the results of other branches were unwarranted. The Tribunal accepted this argument. Regarding the Gross Profit Ratio, the appellant suggested a reasonable ratio of 9.5%, which was deemed acceptable by the Tribunal. The Assessing Officer was directed to apply this ratio to determine the addition to the book results for the year.Part Allowance of Expenditure:The appellant contested the part allowance of expenditure, arguing for full allowance based on modest expenses relative to turnover. The Departmental Representative supported the Assessing Officer's order. The Tribunal found the expenditure reasonable and allowed it in full.In conclusion, the appeal was partly allowed based on the above considerations.