TaxTMI 
TaxTMI 
2019 (11) TMI 1055
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.... stated that "the quantitative details of the closing stock as mentioned in Form 3CD of the audit report need not be relied upon since a mistake had crept inadvertently as a result of which the same has wrongly been mentioned as 7,75,398 Kg instead of 90,620 Kg. In this connection, the CIT(A) ought to have noticed the scope and effect of the provisions of section 44AB of the Income tax Act 1961, at the time of insertion of this section, which is explained by the Board in the Circular no.387 dated 06.07.1984: "17.2. A proper audit for tax purposes would ensure that the books of accounts and other records are properly maintained, that they faithfully reflect the income of the tax payer and claims for deduction are correctly made by him. Such audit would also help in checking fraudulent practices. It can also facilitate the administration of tax laws by a proper presentation of the accounts before the tax authorities and considerably saving the time of assessing officers in carrying out routine verifications, like checking correctness of totals and verifying whether purchases and sales are properly vouched or not. The time of the assessing officers thus saved could be utilized for a....
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....ntity of shrimp sold, by 4,84,481 Kg (859705- 375224) without changing the purchase and sale values in the P&L account. This ought to have been taken as a wilful attempt to suppress the quantity of shrimp at the closing stock. 8. For these and other grounds that may be advanced at the time of hearing the order of the learned Commissioner of Income tax (Appeals), Thiruvananthapuram on the above points may be set aside and that of the Assessing Officer restored." 3. Briefly stated the facts of the case are as under:- 3.1 It all started with reopening the assessment u/s 148 which in turn has resulted in making an addition of Rs. 13,47,71,926/- on account of under valuation of closing stock. The assessment got reopened based on the observation that the closing stock as per the audit report is 7,75,398 kg and its value was taken at Rs. 2,49,56,300/-. The assessee had valued the same at Rs. 32.19 per kg which is very much on the lower side. As per the method of valuation regularly followed by the assessee, the closing stock should have been valued atleast at Rs. 206/- per kg. Instead, the stock was valued at Rs. 32.19/- per kg leaving a difference of Rs. 173.81/- per kg which in turn....
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....80 3555 31055 105680 December 2010 105680 1000 23000 83680 January 2011 83680 0 18500 65180 February 2011 65180 41500 42000 64680 March 2011 64680 83660 92340 56000 344570 369570 Shrimp Total 2) Tiger H/O Opening Stock (kg.) Production Sales Balance (kg.) April 2010 106612 19515 9000 117127 May 2010 117127 10000 35928 91199 June 2010 91199 32335 27500 96034 July 2010 96034 18378 30400 84012 August 2010 84012 73261 24542 132731 September 2010 132731 37200 32750 137181 October 2010 137181 1612 20400 118393 November 2010 118393 0 21600 96793 December 2010 96793 8188 14188 90793 January 2011 90793 17237.6 17000 91030.6 February 2011 91030.6 18589 18000 91619.6 March 2011 91619.6 4300 61300 34620 240616 312608 3.3. The crux of the issue to be answered in the background of foregoing is whether the assessee has had 7,75,398 kg of shrimps as closing stock at the end of the year under consideration or not. As long as the opening stock (187....
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....tity is added to the opening stock and the export sales quantity is reduced therefrom then, the resultant quantity is 90,620 kg only which is nothing but the closing stock as on 31.03.2011 but not 7,75,398 kg as considered for making the addition of Rs. 13,47,71,926/-. Accordingly the CIT(A) was of the opinion that the quantitative details of the closing stock as mentioned in Form 3CD of the audit report need not be relied upon since a mistake had crept inadvertently as a result of which the same has wrongly been mentioned as 7,75,398 kg instead of 90,620 kg. Hence, the addition made on account of difference in closing stock need be deleted since the same has not been justified by the Assessing Officer. 3.4 Another argument of the Assessing Officer that the assessee had valued the closing stock at Rs. 32.19/- per kg which is very much on the lower side and as per the method of accounting regularly followed by the assessee, the closing stock should have been valued atleast at Rs. 206/- per kg therefore, the under valuation involved is Rs. 173.81/- per kg, is also factually incorrect since the assessee has adopted the value of Rs. 275.39/- per kg which is more than Rs. 206/- per kg ....
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....ned AR has also filed a quantitative reconciliation statement as on 31.03.2011, as follows:- Quantity of stock disclosed shrimps originally as on 31.03.2011 7,75,398 kg. Actual quantity as per revised claim shrimps as on 31.03.2011 90,620 kg. Difference in quantity of stock excess Qty disclosed between original return and revised return 6,48,778 kg. Quantity of Shrimp Production quantity of shrimp as per original return 90,63,010 kg. Actual quantity of production of shrimp (Ref. revised claim) during the year (-)7,62,713 kg. Excess quantity shrimp of production disclosed originally. (A) 2,00,297 kg. Quantity of shrimp exported shown wrongly as per original return 3,75,224 kg. Actual quantity of shrimp exported (Ref. revised claim) (-)8,59,705 kg. Export quantity of shrimp short accounted in original return (B) 4,84,481 kg. Excess stock of shrimp originally shown as on 31.03.2011 (A) + (B) 6,48,778 kg. 5. We have heard the rival submissions and perused the material on record. In the present case, the closing stock of shrimps is amounting to 7,75,398 kgs. It was valued by the....
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....cally mentioned about this, however, as the Revenue Audit Party did not drop their Audit Query, he was compelled to proceed with the re-assessment, which is evident from page 5 of his reassessment order itself. Further, the registers maintained in respect of production and exports along with bills, were produced as additional evidence to prove that the quantitative particulars in Form No. 3CD was wrong. The A.O's admission in the re-assessment order is also valid evidence in support of the assessee's contentions and it was only because of compelling situations, the re-assessment was completed by him making an addition of Rs. 13,47,71,926/- to the income already assessed as per order dated 06/03/2014. The learned AR concluded that as there was no change in the closing stock value as per the original return and as per the return filed U/s 147, the re-assessment was itself not necessary. 6. Further, in the reassessment order, the A.O. accepted the contention of the assessee by observing as follows:- "The assessee submitted before me that the reason for the alleged escapement of income for the assessment year 2011- 12 was purely on account of the mistake in the quantitative part....