TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
When case Id is present, search is done only for this
of 
of 
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of of 
All Case Laws
of of All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of <h1>ITAT decision: Penalty upheld for calculation error, deleted for undervaluation; valuation method not concealment</h1> <h3>M/s Singhal Natural Stones Pvt. Ltd. Versus ITO, Ward 4 (2), Jaipur</h3> M/s Singhal Natural Stones Pvt. Ltd. Versus ITO, Ward 4 (2), Jaipur - TMI Issues Involved:1. Levy of penalty under Section 271(1)(c) of the Income Tax Act.2. Undervaluation of closing stock.3. Calculation mistake in valuation of marble slabs.4. Valuation of old marble slabs and old tiles.Detailed Analysis:1. Levy of Penalty under Section 271(1)(c) of the Income Tax Act:The primary issue in this case is the confirmation of a penalty of Rs. 1,73,437/- under Section 271(1)(c) of the Income Tax Act for alleged concealment of income through undervaluation of closing stock. The assessee argued that the undervaluation was due to a bona fide mistake and not an intentional act to evade taxes. The CIT(A) upheld the penalty, stating that the undervaluation was a conscious and deliberate act, resulting in the suppression of income.2. Undervaluation of Closing Stock:The assessee declared an income of Rs. 1,02,540/-, which was assessed by the AO at Rs. 22,53,361/- due to an addition of Rs. 20,78,821/- on account of undervaluation of the closing stock. This addition was reduced to Rs. 5,15,259/- by the CIT(A) and confirmed by the ITAT. The breakdown of this addition includes Rs. 1,61,400/- due to a calculation mistake, Rs. 1,13,434/- for undervaluation of old marble slabs, and Rs. 2,39,865/- for undervaluation of old tiles.3. Calculation Mistake in Valuation of Marble Slabs:The assessee claimed that the undervaluation of marble slabs was due to a calculation mistake, where the average rate was taken as Rs. 488/sq.mtr. instead of Rs. 682/sq.mtr. However, the explanation provided by the assessee did not inspire confidence, as there was no substantiated basis for the value of Rs. 488/sq.mtr. Consequently, the penalty on the enhanced value of closing stock to the extent of Rs. 1,61,400/- was confirmed.4. Valuation of Old Marble Slabs and Old Tiles:The assessee valued old marble slabs and tiles at 25% of the average rate, while the CIT(A) and ITAT directed a valuation at 50% of the average rate. The assessee justified its valuation based on experience and subsequent sale invoices showing lower sale prices. The ITAT accepted the method of valuation and estimation of 50% of the stock as inferior quality but found the valuation of 25% of the average cost to be on the lower side, confirming the CIT(A)'s valuation at 50% of the average rate.Judgment:The ITAT concluded that the explanation provided by the assessee regarding the valuation of inferior stock was reasonable and supported by subsequent sale invoices. The difference in valuation was a matter of opinion and judgment rather than concealment of income. Therefore, the penalty on the additions for undervaluation of old marble slabs and old tiles amounting to Rs. 1,13,434/- and Rs. 2,39,865/- respectively was deleted. However, the penalty on the calculation mistake of Rs. 1,61,400/- was confirmed.Conclusion:The appeal of the assessee was partly allowed, with the penalty on the undervaluation of old marble slabs and tiles being deleted, while the penalty on the calculation mistake was upheld. The judgment emphasized that mere differences in opinion on valuation do not constitute concealment of income warranting a penalty under Section 271(1)(c) of the Income Tax Act.
TaxTMI 
TaxTMI 
