Tribunal directs 25% deduction for rubber belting stock valuation, deletes Rs. 8,250 addition

The Tribunal allowed the appeal, directing the ITO to allow the deduction at the rate of 25% for the valuation of the closing stock of rubber belting and deleting the addition of Rs. 8,250 for the under-valuation of the closing stock of canvas cloth.

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Issues:
1. Valuation of closing stock of rubber belting - Deduction of 25% disputed.
2. Valuation of closing stock of canvas cloth - Discrepancy in stock figures.

Analysis:
1. The first issue revolves around the valuation of the closing stock of rubber belting. The assessee disputed the addition of Rs. 19,032, representing the under-valuation of the closing stock by 25%. The ITO disagreed with the assessee's submission and accepted a deduction of 15.8% instead of 25%. The AAC upheld the ITO's decision, stating that the gross profit figure shown by the appellant was a reasonable criterion for determining the value of the closing stock. However, the assessee contended that the 25% deduction was consistent with past practices and was based on valid reasons. The Tribunal found merit in the assessee's argument, noting that adopting a 15.8% deduction would unsettle past trading accounts. Consequently, the Tribunal directed the ITO to allow the deduction at the rate of 25%.

2. The second issue pertains to the valuation of the closing stock of canvas cloth, where an addition of Rs. 8,250 was made due to a discrepancy in stock figures. The ITO calculated a shortage of 750 meters of cloth, valuing it at Rs. 12 per meter, and added this amount to the assessee's income. The AAC reduced the quantum of addition to Rs. 8,250 but upheld the addition. The assessee argued that continuous purchases and sales throughout the year caused the discrepancy in stock figures. The Tribunal agreed with the assessee, noting that the stock certificate referred to by the Revenue only represented the position of stocks as of 15th March, 1976, and not 31st March, 1976. Without evidence to show that the stock remained unaltered, the Tribunal concluded that the addition of Rs. 8,250 could not be sustained and thus deleted the addition.

In conclusion, the Tribunal allowed the appeal, directing the ITO to allow the deduction at the rate of 25% for the valuation of the closing stock of rubber belting and deleting the addition of Rs. 8,250 for the under-valuation of the closing stock of canvas cloth.

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