2024 (6) TMI 687

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....s, laminations, and ferrous and silicon steel/coils/strips, including HR/CR steel. The Assessee filed its return of income for the year under consideration on 30-11-2013 declaring loss of Rs. 3,91,59,525/- and the return was processed u/s 143(1) of the Act as per the returned income. Later on, the case was selected for scrutiny. The AO completed the assessment making an addition of Rs. 15,10,05,722/- The addition was made on account of under valuation of closing stock, disallowance u/s 14A of the Act, disallowance in respect of ESI, disallowance on account of interest on unpaid purchase price and disallowance towards insurance expenses. 3. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld.CIT(A), who partly allowed the appeal. Hence, the Revenue is in appeal before us with the following grounds of appeal: "1. The CIT(A) has erred in law and on facts of the case in deleting the Addition of Rs. 13,23,88,046/- without appreciating the fact that the decision of CIT(A) in the case of Riddhi Steels & Tubes Ltd. was not accepted and a SLP was proposed against the order of the Hon'ble High Court of Gujarat. 2. The CIT(A) has erred in law ....

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....of quantity of the material but due to adopting market value for submitting to the bank. e. In case of work-in-progress and finished goods also the difference was not account of quantity but due to difference in value adopted for valuation. In case of valuation for bank the value including excise duty and other elements were considered, whereas for the purpose of valuation for accounts the consistent method of valuation was adopted. f. In case of goods in transit the difference between stock as per books of accounts and as per stock statements submitted to bank was on account of ad hoc value adopted for submission to the bank. g. The AO has not found any defect in purchases, consumption and sales of stock. h. The stock statement submitted to bank is prepared on estimated and ad-hoc basis. As against that, book stock is accounted for in accordance with the accounting standards and also certified by Chartered Accountant. 5.1. He further stated that the AO, however, was not convinced with the assessee's submissions and proceeded to make an addition of Rs. 13,23,88,046/- on account of under-valuation of closing stock. The AO rejected the value....

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....uraj Bhan (Supra), the assessee could not explain the difference in the stock valuation. Also, no evidence was produced by the assessee of sale and purchase of raw material and finished goods. e. The difference between the book stock and the stock statement was duly reconciled, and the AO did not find any defects in the books of accounts. f. The addition for under-valuation of closing stock was made only for AY 2013-14, while in previous years no such additions were made despite similar differences. The principle of consistency demands that such an addition should not be made in isolation for one year. g. Auditor of the company has not given any adverse comments on such discrepancies. 6.1. While respecting the judgment of Hon'ble High Court of Gujarat in case of Riddhi Steel & Tube Pvt. Ltd. (Supra), for the sake of clarity, we reproduce the relevant part of the judgement - "9.1 Again, the Court cannot be oblivious of the fact that the assessee had been subjected to statutory audit under the Companies Act, 1956 and also tax audit under the Income-tax Act. No errors were found at any stage in the report submitted by these auditors and for the p....

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....ates to investments in equity shares of Posco-Poggen Amp Electrical Steel Pvt. Ltd. The appellant-company was holding 5750 equity shares of Rs. 100/- each of Poggen-Amp Nagarsheth Electricals Pvt. Ltd. This company was amalgamated with Posco-Poggen Amp Electrical Pvt. Ltd and the assessee received 30,18,750 Equity Shares of Rs. 10/- each against the 5,750 Equity Shares of Rs. 100/- each held by the company earlier. 7.1 The Ld.Counsel for the assessee contented that there was no fresh investment made by the assessee-company in equity shares. The Ld.Counsel further submitted that the addition is made out of expenses which are incurred wholly and exclusively for the purpose of earning the income which is chargeable to tax. He further submitted that during the year under consideration, the assessee has not earned any exempt income and the assessee has not claimed exemption in respect of any part of income earned by it. The assessee-company has neither incurred any expenditure, nor has it claimed any expenditure in relation to any exempt income. The Ld.Counsel for the assessee explained that the company has not incurred any expenditure or financial cost with respect to the investment....

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....ders Funds 27,98,83,070 26,82,45,607 B. Investments 10,80,49,400 13,06,000 C. Ratio of Interest free Funds and Investments (A/B) 2.59 times 205.39 times 10.2 It is also a settled law that when assessee has substantial interest free funds disallowance u/s.14A of the Act is unwarranted. We reproduce the relevant part of the judgment of Hon'ble High Court of Gujarat in the case of CIT Vs. Suzlon Energy Ltd. reported at [2013] 354 ITR 630 (Guj.). "3. Question (2) pertains to disallowances made by the assessing officer under section 14A of the Act in respect of interest expenses incurred for investments made in subsidiaries and administrative expenses. Commissioner (Appeals) deleted such disallowances, upon which, Revenue approached the Tribunal. The Tribunal rejected Revenues appeal, making following observations: - "3.5 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. Regarding the grounds raised by the revenue in respect of disallowance of interest expenditure made by the assessing officer under section 14A and deletion made by learned Commissioner (Appeals), we....

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....OSCO and as none of the vendors of the said raw-material used to give credit for purchase of said material and POSCO allowed the credit facility for purchase of raw material (but charged interest at the rate of 6% per annum), material was purchased from POSCO. Since there was a delay in payment to POSCO, assessee paid interest to POSCO. He further submitted that POSCO is not a related party. Such interest was paid to POSCO in earlier years also. Such interest was paid on account of contractual obligation at 6% per annum when interest paid to bank was at the rate of 15% or more per annum. POSCO is enjoying monopoly among suppliers of electrical steel coils and importantly purchases from POSCO have not been doubted by the AO. 13.1. The Ld.Counsel stated that the Ld.CIT(A) has deleted the addition considering these points and relying on the decision of co-ordinate bench in case of assessee itself in AY 2012-13. The ITAT had decided the issue in favour of assessee in AY 2012-13 in ITA No. 2446/Ahd/2016 dated 24-01-2019. 13.2. Considering the facts and the decision of Co-ordinate Bench, we dismiss this ground by upholding order passed by the Ld.CIT(A). On Ground No. 4: 14. T....