TaxTMI 
TaxTMI 
2013 (4) TMI 1014
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....losing 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 that insurance of the goods in stock was taken for safety of the stock. The ass....
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....ent 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 observation made by the learned assessing officer for increase in the value of the closing stock in the light of certain expenses narrated in....
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....uced 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, without pointing out any specific defect in the books of accounts, method of accounting followed by the assessee during the preceding years based on hypothesis particularly when the g....
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.... 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) Ltd., Udaipur Stock statement Month : March 2008 Date : 31-03-2008 Item : Description Model Type Value Spare parts and accessories for all Atlas Cocpco Products. AC Assorted 64,78,160 Spare parts and accessories for all Ingersoll-Rand Products IR Assorted 13,12,637 Spare parts and accessories for all Escorts Construction Eqpt. Products ECE Assorted 31,22,739 Spare parts and accessories for all Volvo Products (trucks and bus....
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....ciated 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 addition, therefore, the said addition has been made merely on the basis of conjectures and surmises. It was submitted that the closing stock had been valued as per normal accounting principles at cost or market price, whichever is less and the said fact was also stated in the balance sheet appearing in the books of account. It was emphasised that the same practice had been consistently followed by the assessee without any change since Its inception, therefore, there was no justification for making the addition particularly when gross profit declared by the as....
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....ng 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 method of valuation of the assessee was cost or market price, whichever was less. This fact is also clear from col. 12(a) in Form 3CD which is part of tax audit report under section 44AB of the Act. In the said column the auditor mentioned that the valuation by the assessee is 'at cost including direct expenses or market value, whichever is less'. It is also mentioned in col. 12(b) that there was no deviation in the above method. It is also an admitted fact that the Department has accepted the tax audit report and pointed out no discrepancy in the said re....