TaxTMI 
TaxTMI 
2014 (1) TMI 929
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.... appreciated the fact that by not including the stock in transit under the closing stock the income of the assessee is reduced to that extent in an accounting year. 3. The CIT(A) erred in pointing at the lapse on the Assessing Officer in not demonstrating how the method followed by the appellant every year consistently resulted in escapement of income instead of discussing the issue as to whether the stock in trade has to be considered in closing stock or not. 4. ....." 3. Facts of the case in brief are that the Assessing Officer, after observing from schedule 7-Inventories (at cost) forming part of the Balance Sheet as at 31.03.2005, that there is variation of Rs.2,46,61,046 out of which only Rs.11,43,455 was shown as increase in stocks....
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.... considered as closing stock, and accordingly the brought the stock in transit as difference in closing stock, and made addition to that extent. 5. On appeal, the CIT(A) taking note of the practice of the assessee to account for the stock in transit as part of the stock only on receipt, and till receipt to treat it simply as stock in transit, observed that the Assessing Officer cannot pick up the year under consideration alone to disturb the method regularly followed by the assessee to say that income has escaped assessment. For that very reason, he found no justification to sustain the addition made by the Assessing Officer for the year under appeal. In any event, he was of the view that any adjustment to the closing stock would result in....
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.... had not demonstrated how this method followed by the appellant every year consistently resulted in escapement of income. 5.3 The observation of the Assessing Officer in the assessment that by not accounting the stock-in-transit during the financial year, and accounting subsequently on a regular basis, and thereby showing the lesser amount of inventories every year is not amply substantiated. The stock in transit has to be treated as such and even otherwise, if the stock-in-transit is to be treated as purchases and eventually as closing stock, the same would have to be considered as opening stock for the subsequent year, i.e. by debiting with the same amount treated as credit for the previous year and this, in any way, does not theoretical....