Tribunal allows appeal, discrepancies in stock details deemed errors, assessee's evidence accepted

The Tribunal found that discrepancies in stock details were due to errors in the conversion factor and total number of boxes accounted for. The Tribunal accepted the assessee's evidence and reconciliations, leading to the deletion of the addition made by the AO. The appeal was allowed, and the judgment was pronounced on 12th Dec, 2018.

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Issues Involved:
1. Confirmation of addition made by the AO on account of differences in quantitative details.
2. Justification of the conversion factor applied for Dettol Soap Fresh.
3. Error in the total number of boxes accounted for.
4. Reconciliation of discrepancies in stock details.

Issue-Wise Detailed Analysis:

1. Confirmation of Addition by AO:
The assessee challenged the confirmation of an arbitrary addition of Rs. 19,55,63,259/- made by the AO due to alleged discrepancies in the quantitative details of stock. The CIT(A) upheld this addition without considering the detailed submissions made by the assessee, leading to the present appeal.

2. Justification of Conversion Factor:
The primary dispute revolved around the conversion factor applied to Dettol Soap Fresh. The assessee used an erroneous conversion factor of 250 grams per cake instead of the correct 75 grams per cake. This error was attributed to a mix-up with the conversion factor for Dettol Liquid Soap, which is sold in 250 ml bottles. The Hon'ble Supreme Court directed the ITAT to re-examine this aspect, leading to the remand of the case to the AO for verification.

3. Error in Total Number of Boxes:
The assessee also admitted to an error in the total number of boxes accounted for. Instead of the correct figure of 49,681 boxes, the total was mistakenly taken as 52,404 boxes due to an arithmetical error. This contributed to the discrepancy in the stock details.

4. Reconciliation of Discrepancies:
The AO noted that the assessee's stock of Dettol Soap Fresh was shown as 766.73 MT, whereas the correct figure should have been negative 970.72 MT due to the erroneous conversion factor and the incorrect number of boxes. The assessee provided detailed reconciliations, demonstrating that the discrepancy was due to these errors and not due to any unaccounted purchases. The assessee argued that the difference in stock was entirely due to the erroneous application of the conversion factor and the error in the number of boxes, which had no impact on the value of closing stock or business profit.

Final Judgment:
The Tribunal found that the discrepancy of 1737.45 MT in the stock of Dettol Soap Fresh was due to the erroneous conversion factor and the incorrect number of boxes accounted for. The Tribunal noted that the assessee had provided sufficient evidence and reconciliations to support its claim. The Revenue could not controvert these facts. Consequently, the Tribunal deleted the addition of Rs. 19,55,63,259/- and allowed the appeal of the assessee.

Order:
The appeal of the assessee was allowed, and the addition made by the AO was deleted. The judgment was pronounced in the open court on 12th Dec, 2018.

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