2026 (8) TMI 1103

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... of Rs. 2,85,065/- made by AO on account of disallowance u/s 36(1)(iii) of the Act, despite the fact that assessee has failed to establish business expediency to provide advances to the supplier against the interest bearing borrowings. (ii) The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 26,54,130/- made by AO on account of valuation of closing stock u/s 145A of the Act despite the fact that as per the provisions of section 145A of the Act which mandates that for the purpose of valuation of closing stock, all taxes paid or incurred to bring the goods to the place of location are to be included which the assessee has admittedly not done. (iii) The Ld. CIT(A) has erred in law and facts in deletin....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

..... The Ld. CIT(A)/NFAC noted from the facts submitted by the assessee that the amounts treated as loans and advances by the A.O. were in fact regular advances as part of business activity. The A.O. was therefore directed to delete the disallowance. 4. Before us, the Ld. CIT-DR Shri Kiran Unavekar, placed strong reliance on the assessment order to contend that the disallowance u/s 36(1)(iii) was justified. 5. Shri Mehul K. Patel, Advocate appearing for the assessee reiterated the submission that the advances were in connection with regular business activity and not loans. He submitted copy of the Ledger account of M/s. Umiya Tea Depo, which shows that the amount of Rs. 17,71,414/- stood as opening balance as on 01.04.2012. The advance, ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ordance with the provisions of section 145A, the same should be done even in respect of purchases and sales and if it is so done, there would be no impact on profit and loss of the year under consideration. The Ld. A.O. has not justified in adjusting the amount of tax/duty of Rs. 26,54,130/- of previous year VAT expense in the valuation of stock." 8.1. The Ld. CIT(A), after considering the assessee's submission, accepted the same as this was a tax neutral exercise. We are inclined to agree with the Ld. CIT(A). As per its regular practice the assessee does not include VAT in its opening stock or closing stock. Any charge to that practice will require a corresponding adjustment to the opening stock, too, and also an automatic char....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....CIT(A). 11. Before Ld. CIT(A), the assessee had relied upon decisions of the Hon'ble Gujarat High Court in the case of CIT-III v. Bhogilal Ramjibhai Atara [2014] 43 taxmann.com 55 (Gujarat) and in the case of PCIT v. Dharmendra Jagdishbhai Dubal, Tax Appeal No. 910 of 2017. 12. The Ld. CIT(A) concluded that on facts, it was evident that the assessee did not make adequate inquiries, apart from sending one letter to M/s. Young and Grow Marketing (I) Pvt. Ltd., and there was no cessation or remission of liability in favour of the assessee during the year under appeal. The Ld. CIT(A) also noted that with some of the creditors such as M/s. SDP Industries Pvt. Ltd. (Ahmedabad Branch) and SDP Industries Pvt. Ltd., (Mumbai Branch) there was c....