TaxTMI 
TaxTMI 
2026 (9) TMI 1074
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.... purchase of raw cotton made from partners on mere assumption without considering the materials on record ? (B) Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal has substantially erred in confirming the addition to the extent of Rs. 2,16,342/- (20% of Rs.10,81,710/-) on account of purchase of raw cotton made from relatives of partners on mere assumption without considering the materials on record? (C) Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal has substantially erred in rejecting the Appellant's appeal without dealing with the specific case laws and arguments cited by the Appellant ? (D) Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal has made a serious error in confirming the addition to the extent of Rs. 67,59,613/- on account of suppression in the valuation of closing stock by ignoring the relevant decisions cited by the Appellant? (E) Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal has delivered a perverse finding of fact by completely ignoring relevant materials, arguments and case law ci....
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....ned under Section 40A(2)(b) of the Act as per the Statement No. 8 of the Tax Audit Report. The Assessing Officer therefore, directed the assessee to submit ledger accounts, name address etc. of the persons to whom the payment was made, confirmation of accounts etc. The assessee thereafter, placed on record the relevant documents and according to the Assessing Officer the partners were having agricultural land but they did not produce any evidence demonstrating the fact that the cotton was grown on agricultural land of the partners which was revealed from the Village Form No. 7/12 maintained by the State - Revenue. 6.2. As the assessee could not show that the partners have shown agricultural income in the original return, the Assessing Officer doubted the production of cotton by the partners and therefore, in absence of any documentary evidence of production of cotton in agricultural field of the partners which were sold by them to the assessee firm, the Assessing Officer disallowed the total purchase from the partners. Similarly, disallowance of Rs. 10,81,710/- was made out of the total purchases of Rs. 16,26,300/- from the relatives of the partners before the CIT (Appeals). The....
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....to the agriculture income. It was further submitted that the Assessing Officer or CIT (Appeals) have not disputed the sales of the assessee and therefore, the entire purchase could not have been disallowed and the Tribunal without any basis could not have restricted the additions to 20% in absence of any material on record to point out that the assessee has made payment for purchase of the raw cotton by making excessive payments to the partners and the relatives so as to disallow such excess payment under Section 40A(2)b) of the Act. 7.1. It was further submitted that the assessee has placed on record the entire evidence as called for by the Assessing Officer which was made available and there is nothing on record to point out that the purchases made by the assessee were not supported by any documents and the entire purchases were genuine purchases which has resulted into profit. It was, therefore submitted, that the additions sustained by the Tribunal to the extent of 20% of the purchases made from the partners and the relative is required to be deleted and, therefore, question nos. (A) and (B) may be admitted for consideration. 8. With regard to question no. (D), it was sub....
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....s.18.38 per kg., between Rs. 177.22 and Rs.153.84 per kg., as adopted by the assessee. The Assessing Officer has made analysis to arrive at a value of Rs. 172.22 per kg. as per the sales registers of the assessee and found that the value of Rs.153.84 per kg. adopted by the assessee is only on the estimated basis and not on the basis of the realizable value as on 31.03.2011. The CIT (Appeals) has upheld the order of the Assessing Officer and confirmed the additions by observing as under:- "19.8. In the case of the appellant the appellant has adopted the method of valuation of closing stock on the basis of net realization value. However, that system and method adopted for valuation of closing stock is purely guesswork and not supported with any documentary evidence or working. The appellant has not taken net realizable value on the date of completion of final account, however, on presumption basis taken the estimates sale price of the goods in future date. 19.10. However, it is seen that the appellant has not followed either of the method of valuation of closing stock. The appellant has followed rather the net realizable value which is purely on ad hoc method and wi....
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....ternational prices of zinc concentrates were lower than the domestic prices thereof. Further, in the past the assessee has been valuing zinc concentrates at net realizable value at the domestic prices It is for this reason that Auditors in their Report have categorically stated that if the net realizable value stood estimated in accordance with the past accounting policy (at domestic prices) the profits of the company would have been higher by Rs. 27.08 crores. This Report of the Auditors is not erroneous as it sought to be urged on behalf of the assessee. There is no rectification of the said Report. In the case of British Paints (Supra) it has held by this out that it the fall in the price has the effect of merely reducing the prospective profits (which appears to be the case if one looks at the Auditors' Report) there would be no justification to discard the valuation at Cost. Therefore, in our view, the present case in not the case of anticipated loss, it is the case of reduction in the prospective profits. 11. In the present case, learned CIT (A) has rightly observed that the assessee has not followed either of the method of valuation of closing stock i.e. either ....