TaxTMI 
TaxTMI 
2026 (4) TMI 628
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....d Assessing Officer has not pointed out any defect / discrepancy in the evidence produced by the Appellant Assessee nor put forth any document or other evidence on the basis of which he believed that there has been an under-statement of Stocks. This being so the addition made to the returned income deserved to be deleted." 2. The background facts leading to present appeal are as under: (i) The assessee is a private limited company. For AY 2008-09, the assessee filed return declaring a total income of Rs. Nil which was assessed u/s 143(3) at a total income of Rs. 12,72,540/-. (ii) Subsequently, the AO conducted proceedings of re-assessment u/s 147 through a notice dated 28.03.2013 u/s 148 followed by notices u/s 143(2)/142(1). During such re-assessment proceedings, the AO raised a query to assessee that the closing stock disclosed in assessee's books as on 31.03.2008 was Rs. 3,22,08,975/- only as against the stock of Rs. 371.49 lakh disclosed to the bank, therefore why the difference between the stock recorded in books and stock disclosed to bank should not be treated as undisclosed income? The assessee filed reply but the AO passed summary order in following wo....
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....n not only estimated/raw figure of Closing stock but also estimated/raw figures of Sales, Sundry debtors and Sundry creditors also in the very same Statement. There are differences in all figures reported in the Statement vis-à-vis the final figures recorded in audited Balance-Sheet of assessee. To show this fact, Ld. AR referred various pages of Paper-Book as under: Paper-Book Pages Item Amount reported in statement (in lacs) Amount recorded in audited accounts (in lacs) 21, 30 Closing stock 371.49 322.09 20, 31, 38 Sales for the year 451.02 843.25 20, 30 Book debts (i.e. sundry debtors) 5.05 321.60 20, 30, 37 Sundry creditors 1.50 90.28 Therefore, there are variations in all data supplied by assessee to bank. Ld. AR also narrated two-fold reasons of these variations, namely (i) the assessee supplied estimated/raw data to bank within just 10 days after close of the financial year, and (ii) the business of assessee is such that it is executing work-contracts of Govt. at sites and there remained work done/completed at the year-end on 31.03.2008 for which the bills were approved by Govt. authorities after yea....
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....lue of the stocks as represented by the assessee through the stock statement dt. 19th Feb., 1979. The assessee also produced copy of the stock statement which was given to the bank on 19th Feb., 1979. It has been found by the CIT(A) that the goods hypothecated to the State Bank of India were the properties of the assessee which were purchased by them against the full payment. The goods were valued according to the market rate and were fully insured. The Tribunal observed that wrong declaration of the stock to the bank could not warrant any addition. It observed that the statement submitted by the assessee was not verified by the bank officials. The stocks were only hypothecated and not pledged. The ITO could not point out any defect in the trading account of the assessee and the books of account maintained by it which has also been accepted by the Central Excise Department as well as by the Sales-tax Department and could not be disbelieved. The Tribunal has placed reliance on the following cases : 1. India Motor Parts & Accessories (P) Ltd. v. CIT . 2. CIT v. Ram Krishna Mills (Coimbatore) Ltd. (1974) 93 ITR 49 (Mad). 3. Coimbatore Spinning & Weaving Comp....
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.... it would not yield additional tax to department. Ld. AR filed a Written-Synopsis in support of is stand; the same is scanned and re-produced below: BEFORE THE INCOME TAX APPELLATE TRUBUNAL INDORE BENCH, INDORE ITA No. 579/IND/2025 (A.Y. 2007-08) M/s Narmada Transmission Private Limited Appellant Vs Dy. Commissioner of Income Tax, Range-3, Bhopal Respondent Profit / Loss AY 2008-09 AY 2009-10 Profit 22,72,467.06 71,08,993.45 Tax Rate 30% + Surcharge 30% + Surcharge There is no loss to revenue on account of increase in stock value; the same ought to have been considered in opening stock by Assessing Officer in the next financial year; the addition made is revenue neutral and academic in nature. Case Laws Relied upon: I Dy. Commissioner of Income Tax, Central ... vs Shiv Shankar Plywood And Veneer House, ... on 18 October, 2024 INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE, T(SS)ANo.47 to 53/Ind/2023 23.1 The CLT(A) has specifically recorded the facts that there was no discrepancy in the quantity of stock as recorded in the books of accounts as well as found during the physical....
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....case of CIT v. Mahalaxmi Glass Works and a series of other decisions filed in the paper book. Referring to the decision of Hon'ble Supreme Court in the case of CIT v. Bilahari Investments (P) Ltd. Reported in [2008] 299 ITR 1 (SC) he submitted that once the Department has accepted the method of valuation adopted by the assessee over several years, the same cannot be substituted by another method in absence of any finding by the A.O. that the method adopted by the assessee distorts the profits of a particular year. He submitted that there will a chain effect if the method followed by the assessee is disturbed. According to him closing stock of this year will become opening balance of next year. Therefore unless the opening stock is also adjusted it will give distorted figure. Since the assessee has filed all the bills and no defect was pointed out by the department, therefore, there cannot be any addition on account of under- valuation of closing stock. III C.I.T Central-III vs M/S Excel Industries Ltd on 8 October, 2013 [AIRONLINE 2013 SC 175] 32. Thirdly, the real question concerning us is the year in which the assessee is required to pay tax. There is no dis....
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....gures furnished to bank were estimated/raw only and such explanation of assessee is very much credible and must be accepted. 8. We have considered rival contentions of both sides and perused the orders of lower-authorities as well as the material held on record to which our attention has been drawn. We have also considered the judicial decisions cited by both sides. The sole issue for our adjudication is whether the difference between the closing stock of Rs. 371.49 lakh reported by assessee to bank and the closing stock of Rs. 322.09 lakh recorded in audited books can be treated as undisclosed income of assessee in the facts of assessee's case. We present below our analysis and adjudication: (i) It is an undisputed fact that the assessee furnished a Statement titled "Selected Operational Data as on 31.03.2008" to its banker on 10.04.2008, i.e., within 10 days of the close of financial year. The said Statement contained figures of closing stock, sales, sundry debtors and sundry creditors. It is also not disputed that all these figures materially differ from the figures finally recorded in audited books of account. Thus, the discrepancy is not confined merely to closing ....
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.... to the bank as 'commercial immorality'. (b) Coimbatore Spinning & Weaving Co. Ltd. Vs. CIT (1974) 95 ITR 375 (Mad) - In this case, the assessee accepted that the figure submitted to bank was "inflated" in order to get higher overdraft facility. The Hon'ble Court considered this as a "substandard morality" of assessee. (c) B.T. Steels Ltd. Vs. CIT (2011) 196 Taxman 363 (Punjab & Haryana) - In this case, the bank officials made a physical verification of stock and confirmed the existence of higher stock declared in the statement. (d) Dhansiram Agarwalla Vs. CIT (1993) 201 ITR 192 (Gauhati) - This case basically deals with validity of re-opening u/s 147 on the basis of higher stock declared in bank statement and does not deal merit of the issue. Further, this case deals a situation of stock "pledged" by assessee to bank. However, in present case of assessee, none of these features exist. The variations are not confined to closing stock alone but extend to all financial figures furnished in the same Statement, showing that the entire data supplied to bank was provisional. The assessee's stock includes work-in-process and items not capable of exact measure....