2012 (11) TMI 473

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....ion made by the A.O. of Rs.21,89,935/- on account of additional income on account of gross profit on sale of stock." 3. The assessment order reveals that the assessee is a company engaged in the business of trading of cloth. It filed e-return of income on 15-11-2007 declaring total loss of Rs.17,14,793/-.The case was selected for scrutiny and the assessment was framed u/s. 143(3) and taxable income was determined at Rs.4,75,140/-. 4. On scrutiny of the details furnished by assessee the A.O. observed that assessee had transferred closing stock of 3,37,000 meters valued Rs.1,48,36,961/- at cost to its sister concern (Airr Xmedia Ltd. ).The assessee submitted that the assessee had transferred the materials as it had stopped operations si....

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....2008-09 and 54,000 meters was sold in A.Y. 2009-10.The appellant argued that since such a small quantity has been sold, it shows that cloth was not easily saleable in the market. From this argument, it is also seen that the stock was not entirely non-saleable also. The appellant's sister concern has sold almost 1/3rd of the total stock and hence the appellant transferred this stock to the sister concern at book value which is not totally justifiable. However, this is not a question of undervaluation, the valuation of closing stock where the valuation can be corrected as per law. This is not a question of booking of loss or payment of expenses where provisions of Section 40A(2)(b) can be invoked. It is a case of sale to a sister concern. If ....