TaxTMI 
TaxTMI 
2013 (4) TMI 1014
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....g officer noticed that the assessee had shown closing stock of Rs. 3,80,85,778 as on 31-3-2008. However, proportionate related expenses had not been taken into account by the assessee for valuing the closing stock as under: (i) Insurance-Goods in transit 19,010 (ii) Freight & inward handling 6,59,161 (iii) Entry-tax (purchase) 1,23,490 (iv) Channel finance bank interest 10,18,292 (v) Insurance-Goods in stock 94,342 The assessee explained that it was consistently following the same method as in the earlier years and that insurance for goods in transit is for covering transit risk purchase while freight and handling expenses had been incurred at the time of purchasing the goods. It was further stated that entry-tax had to be paid when the goods were brought into the local area for consumption and sale as per VAT Act. As regards to the channel finance bank interest, it was explained that the principal company provided 30 days against purchase of goods while Channel Finance Bank provided 60 days credit and the principal companies collect their receivables from the Channel Finance Bank, the interest was linked to the purchase of goods and ....
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....asthan VAT Act, 2003 and CST Act, 1956 and the trading results have been accepted by them as per copy of the assessment filed herewith for assessment year 2007-08 (1-4-2007 to 31-3-2008). The accounts are subject to Vat audit in which the trading results have been accepted by the Commercial Taxes Department. (Annex. 10) The contentions of the assessee are supported by CIT v. Anandha Metal Corporation (2005) 273 ITR 262 (Mad). (Case law 2) The assessing officer has relied on the case CIT v. British Paints India Ltd. (1991) 54 Taxman 499 (SC). The same is not applicable in the instant case because appellant is a trading concern. Whereas the above judgment referred the valuation of stock in processed and finished goods which has no relevance and the facts are totally different and the case was of a manufacturer and here is the case is of a trader and service provider and also backed by the earlier assessment of the assessing officer under scrutiny for assessment year 2004-05 duly supported by citation in the case of I.G.E. (India) Ltd. v. Joint CIT (2008) 26 SOT 367 (Mum) and decision of High Court of Allahabad CIT v. Ema India Ltd. (Case law 3) (E) The obse....
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....lue of the stock and interference in such method, adopted by the assessee, can only be made if it is found that the income of the trade cannot be properly deduced therefrom. The appellant has further relied on decision in case of Bombay High Court in CIT v. Tata Iron & Steel Co. Ltd. (1977) 106 ITR 363 (Bom); Gujarat High Court in Voltamp Transformers Ltd. v. CIT (2008) 327 ITR 360 (Guj). The Supreme Court in case of CIT v. Bilahari Investment (P) Ltd. (2008) 299 ITR 1 (SC); Bombay High Court in CIT v. Tata Iron & Steel Co. Ltd. (supra), and High Court of Rajasthan in Malawi Hamjivan Jagannath v. Asstt. CIT (2007) 207 CTR (Raj) 19. The appellant further mentioned as under: In the light of above for valuation of closing stock, rejection of audited accounts under section 145(3) by the learned assessing officer is not correct being whole thing is appearing on the face of the P&L a/c. Further, in addition to accounting principles and details, the arrived results matched with the earlier year results matching as per comparative GP chart enclosed. (Annexure 13) The assessing officer has grossly erred in applying the provisions of section 145(3) of the Act, with....
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.... Add : Expenses incurred during the year Insurance-Goods in transit 19.010 Freight & inward handling 6,59,161 Entry tax 1,23,490 Channel Finance Bank interest 10,18,292 18.19,955 1.18 Gross total Net purchase cost 15,38,41,481 Gross profit 1,77,15,919 Total 19,52,13,955 Total 19,52,13,955 From the above trading account, it is apparent that assessee has debited all these above expenses directly related to purchases of the goods while these expenses have not been taken into consideration while valuing the closing stock. The chart submitted for valuing the closing stock by the assessee is as under: Drillcon (Reg) (P) Lt....
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....6,573 on account of closing stock is upheld. Both the above grounds of appeal are dismissed. Now the assessee is in appeal. 6. The learned counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the assessing officer did not point out any defect in the books of account maintained by the assessee in the course of its regular business and also did not doubt the method of accounting consistently followed by the assessee. It was further stated that the learned Commissioner (Appeals) also had not appreciated the facts and the evidences of the case produced by the assessee and just confirmed the addition by relying on a single case i.e. CIT v. British Paints India Ltd. (supra) which in fact was not applicable to assessees case because the said judgment referred the valuation of stock while in assessees case the matter was related to the trading concern. It was contended that the learned Commissioner (Appeals) had also overlooked the assessees contention by not considering the relating expenses in closing stock valuation and since such expenses had already been included in the purchases, there was no question for its further a....
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.... Similar was the position with regard to freight and handing expenses. The assessee incurred freight and handling charges at the time of purchase of goods so it was directly connected with the cost of goods purchased, it was not to be again added while valuing the closing stock. As regards to the entry-tax, the explanation of the assessee that it was paid to the State Government when the goods specified in the list under VAT Act were brought to the local area for consumption or use, so it was directly related to the purchases and not to be added again while valuing the closing stock, appears to be plausible. Similarly channel finance bank interest was charged by the bank and in this regard the assessee has submitted that its principal companies collected their receivables from channel finance banks and it is mandatory. The principal companies provided 30 days credit facility against purchase of goods and at that stage it was part of the trading expenses which were already recorded by the assessee in its books of account. All the expenses which were added by the assessing officer on proportionate basis for the valuation of closing stock were already included in the purchase and the ....