2012 (11) TMI 473

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....nt 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 since long and the design and colours of materials of....

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....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 the sale is at price less than the market value, no add....