Tribunal accepts assessee's stock valuation based on net realizable value, emphasizing Sales Tax Act authority's acceptance.

The Tribunal allowed the appeal, deleting the addition on account of stock valuation. It held that the assessee's valuation based on net realizable value was acceptable, especially as the sales tax returns were accepted by the commercial tax department. The Tribunal emphasized that unless the Sales Tax Act authority disputed the closing stock, the income tax authorities were bound by the commercial tax department's acceptance. The Assessing Officer lacked jurisdiction to challenge the accepted return, leading to the deletion of the addition in favor of the assessee.

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Issues involved:
The issues in the judgment involve the confirmation of addition on account of valuation of stock, with the main grievance of the assessee being against the said addition.

Assessment Proceedings:
During the assessment proceedings, the Assessing Officer (AO) alleged that the assessee had reflected a low value of closing stock, resulting in a shortage of Rs.197.29 Lacs. The assessee claimed that the finished cloth was damaged due to natural calamities, but failed to provide evidence to support this claim. The argument that sales tax returns were accepted by the commercial department and hence closing stock should also be accepted was rejected by the AO, as the onus was on the assessee to substantiate its claim. The impugned addition was made by the AO as the evidence provided was deemed insufficient.

Findings and Adjudication:
The Tribunal found that the assessee maintained proper books of accounts subjected to tax audit, with no identified discrepancies in the physical stock. The stock was valued based on net realizable value. The Tribunal noted that the assessee was registered with the commercial tax department and filed sales tax returns, which were accepted by the commercial department. Citing the decision of the Hon'ble High Court of Madras in a similar case, it was held that unless the competent authority under the Sales Tax Act differed with the closing stock, the return accepted by the Commercial Tax Department was binding on income-tax authorities. The Assessing Officer was found to lack jurisdiction to scrutinize the return submitted to the commercial tax department, which had been accepted. Therefore, the Tribunal deleted the impugned addition, allowing the appeal in favor of the assessee.

Order:
The appeal was allowed, and the impugned addition on account of valuation of stock was deleted. The order was pronounced on 26th July 2023.

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