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2019 (5) TMI 1767

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....ccount of inflated current liability in the books of accounts, without properly appreciating the facts of the case and the material brought on record. 3. The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs,3,08,000/- made on account of cessation of liability u/s41(l) of the IT. Act., without properly appreciating the facts of the case and the material brought on record. 4. On the facts and in the circumstances of the case, the Ld. CIT(A) ought to hax/e upheld the order of the Assessing Officer. 5. It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and th~t of the Assessing Officer may be restored to the above extent. The issue raised by the Revenue in ground no 1 is that the Ld. CIT (A) erred in deleting the addition made by the AO amounting to Rs. 1,16,65,245/- on account of suppression of closing stock 2. Briefly stated facts are that the assessee is a company and engaged in the business of manufacturing of HDPE/PP woven sacks & jacquard woven labels, trading of fabrics & labels. The assessee in the year under consideration has shown closing stock in its balance sheet ending on 31-03- 2009 amounting to Rs. 9,49,65,860/- where....

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....3-04-2009, the details of stock statement and book debts was as on 31-03-2009. 2) The assessee admitted in his submission that the stock of liner, PP Granules and masterbatch are not included in the stock statement given to the bank amounting to Rs. 3,63,296/- and Rs. 25,97, 610/- and 2,24,918 respectively. 3) If these amounts are not included in the stock statement submitted to the bank, the difference in the amount will increase by Rs. 31,85,824/-. In view of the above, the AO worked the value of the difference amounting to Rs. 1,16,65,245/- and added to the total income of the assessee on account of suppression of stock. 3. The aggrieved assessee preferred an appeal before the Ld.CIT (A). The assessee before the Ld.CIT (A) submitted as under: 1) It never submitted to the AO that the stock shown in the stock statement furnished to the bank includes the purchases up to 15-04- 2009. 2) Regard the stock lying at silisva unit; it was submitted that some error occurred while collecting the information for the valuation of stock lying at silisva unit. But the stock statement has to be furnished within 15 days from the closing of the month to the bank. Therefore it was not pos....

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....value of the stock furnished to the bank as on 31st March 2009. The sole basis of making the impugned addition was the stock statement furnished to the bank. As such the AO has not disputed the purchases and sales declared by the assessee in its books of accounts which were duly admitted in the assessment proceedings. Similarly, we note that the books of accounts of the assessee were subject to excise and VAT department, an audit under Companies and Income Tax Act and no discrepancy of whatsoever was pointed out by the AO during the assessment proceedings. 6.1 The stock shown by the assessee in its books of accounts is the result of purchases and sales made during the year under consideration. As such, we are of the view that the value of the closing stock cannot be disturbed without pointing out any defect in purchases and sales. 6.2 We also find it important to refer to the judgment of Hon'ble Gujarat High Court in case of CIT Vs. Arrow Exim Pvt Ltd. reported in 230 CTR 293 wherein it was held as under: "Where addition was made on account of excess stock as there was discrepancy between stock as per books of account and that shown in the statement given in bank allegedly to o....

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....he books of account by current liabilities of Rs. 4,14,60,254/- only. Thus the AO made the addition to the total income of the assessee. 8. The aggrieved assessee preferred an appeal before the Ld. CIT (A). The assessee before the Ld.CIT (A) submitted as under: 1) All the details of the current liabilities were furnished in schedule 11 of current liabilities and provisions of the financial statements. 2) All the details relating to purchasing, sundry creditors were already furnished during the assessment proceedings. 3) The AO had also conducted inquiries from the creditors by issuing notice u/s 133(6) of the Act and no discrepancy was noted by him. 4) The creditors shown in the statement furnished with the bank was to avail more credit facility from the bank. The creditors were shown in the round figure and on estimate basis without any name of the creditors in the statement furnished with the bank. 9. The Ld.CIT (A) after considering the submission of the assessee directed to AO to delete the addition made by him by observing as under: i. It is clear that the statement furnished with the bank was only to secure more credit facility and the creditors were furnished on ....

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....he above items of the current liabilities has not pointed out any defect during the assessment proceedings. In our considered view the AO before making any reliance on the statement furnished to the bank was to point out the defects/infirmities in the current liabilities and the provisions shown by the assessee in its balance sheet. We also note that the learned CIT (A) has given a finding that the creditors shown by the assessee in its books of accounts exist in the books of accounts. The learned DR for the Revenue has not disputed this finding of the learned CIT (A). In view of the above, we do not find any reason to disturb the finding of the learned CIT (A). Hence the ground of appeal of the Revenue is dismissed. The issue raised by the Revenue in the ground no. 3 is that the Ld. CIT (A) erred in deleting the addition made by the AO on account of the cession of liability u/s 41(1) of the Act amounting to Rs. 3,08,000/- only. 13. The AO during the assessment proceedings noticed that the assessee has not entered into a transaction with certain sundry creditors in the last three years. The details of the creditors stand as under: 1) Shivani travels 1,58,000/- 2) Desai tejbha....