TaxTMI 
TaxTMI 
2018 (6) TMI 414
X X X X Extracts X X X X
X X X X Extracts X X X X
....,58,525/- towards under valuation of Closing stock without considering the submission made at the time of proceedings. The appellant prays that the addition of Rs. 558525/- made in respect of undervaluation of stock be deleted. 3) On the facts and in the circumstances of the case, the Hon'ble C.I.T. (Appeals) has quite unjustfiedly confirmed the addition of Rs. 6,40,000/- paid as Salary to the ladies directors of the Company. The appellant prays to delete the disallowance of Rs. 640000/- made U/s. 40A(2) of the Income Tax Act, 1961. 4) On the facts and in the circumstances of the case, the Hon'ble C.I.T. (Appeals) was wrong and unjustified in confirming the addition of Rs. 3,07,487/- on depreciation without appreciating the facts of the case. The appellant prays that the addition of Rs. 307487/- on account of depreciation be deleted. 5) That the appellant craves leave to add or alter, amend and modify substantiate, delete and/or revise all or any of the grounds of appeal and or before the final hearing." 2. Ground No.1 relates to the addition on account of shortage of stock. The fact is this that the assessee company is engaged in fabrication from sheet metals ba....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y the ld. AO and the CIT(A) as well. The ld AR further submitted that the learned AO took the shortage of scraps as stock in hand and added back an amount of Rs. 95,68,468/- as income being the value of scrap shortage of 736036 kgs at an assumed rate of Rs. 13.00 per Kg. The ld. AO came to the conclusion that there was no loss through theft and considered the shortage of stock as undisclosed sales. In Tax Audit a reference was made to the audited accounts which is fully in agreement with the submission made before the Ld. AO but the Ld. AO did not consider the shortage of wrong cuts and scraps aggregating to 736.036 M.T. although supported by authentic evidences. On the contrary, the ld. DR vehemently argued in support of the orders passed by both the lower authorities by saying that no proper action has been taken by the assessee to stop such theft where more than 20% of the stock is found shortage due to theft as claimed by the assessee. He further ascertained that only general diary has been lodged against such theft but no FIR or proper complaint was made by the assessee which shows lacuna in justifying the genuineness of the explanation of shortage by theft as explained by th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tor has mentioned that the stock was valued by FIFO method. Details of such raw materials was verified with respect of relevant purchase bills during the assessment proceedings. The AO found some of the items was undervalued or not valued properly as per the method mentioned by the auditor in the audit report. The assesee was asked to furnish the true vlauation of stock by FIFO method. Fresh valuation was made by the assessee himself and the valuation of closing stock was determined at Rs. 1,84,98,910/-. The difference of Rs. 5,58,525/- has been added in the total income of the assesse by the AO for under valuation of the closing stock of raw material. 6.1. The assessee preferred an appeal against the said order before the ld. CIT(A) but without any result. 7. At the time of hearing of the instant appeal the ld. AR relied upon the audited balance sheet and profit and loss account along with the notes to the accounts for the year under consideration where it was mentioned "raw materials are valued at cost or market price whichever is lower. Cost of materials is determined on FIFO basis". He further added that on the basis of such noting the stock of raw material are to be valued a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....production, marketing and visiting customers office, collection and procurement of raw materials etc in those units. The company has engaged four female directors for adequate surveillance and supervising of official works including for duly timely compliance with statutory obligations in running the business. The ld. AO rejected the plea of the assessee for allowing such deduction; according to the AO such expenses shown as salary/remuneration to these directors are bogus expenditure. He then disallowed the total remuneration of Rs. 6,40,000/- and added in the total income invoking the provision of section 40(A)(2) of the Act. 10.1. The provision of section 40(A)(2) (b) of the I.T.Act lays that where an assessee incurs any expenditures in respect of which payment is required to be made or has been paid to any persons referred to income clause (b) to section 40(A)(2) of the Act and such expenditure is excessive, unreasonable having regard to (a) fair market value of goods, services or facilities for which payment is made or (b) legitimate need of the business of the assessee or (c) the benefits derived by or accruing to the assesee in receipt of such goods, services or facilities,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....these lady directors. This ground of appeal preferred by the assessee is partly allowed. 12. Ground No.4 relates to disallowance of depreciation of Rs. 3,07,487/-. In the instant case the assessee has acquired certain fixed assets on lease and has charged depreciation on the same. The assets being the godown building, office building, power house building, Weigh Bridge room and machinery. The ld. AO on the basis of the statement made by the director of the assessee company namely Shri D.K.Jaiswal that these assets cannot be put to use during the relevant year and disallowed the depreciation as claimed for. 12.1. The ld. CIT(A) upheld the order passed by the ld.AO on the ground that the assessee has failed to submit any direct evidence to establish that the relevant assets had been utilising during the year, and the evidence so submitted does not establish the use of assets in question. 13. It was the case of the ld. AR that these assets were not put to use but ready to use. The ld. AR further contended that the assessee was the owner of these assets and these assets were for the purpose of business of the assessee company which are not in dispute. Since these assets were ready t....