9911796707
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Issues Involved:
1. Deletion of additions related to profit on contract job work and work-in-progress. 2. Deletion of addition representing closing stock value of a bus purchased from KSRTC. 3. Deletion of addition representing stock transferred from head office to Trivandrum branch. Issue-wise Detailed Analysis: 1. Deletion of Additions Related to Profit on Contract Job Work and Work-in-Progress The first issue pertains to the deletion of additions amounting to Rs. 5,86,375, which includes Rs. 3,86,373 for profit on contract job work and Rs. 1,92,306 for work-in-progress. The Assessing Officer (AO) noticed that Popular Automobiles had undertaken job works and entrusted these to a sister concern, KER. The materials supplied were accounted by debiting the works contract and crediting the sales account. The AO argued that the work-in-progress was not considered, resulting in an addition of Rs. 5,86,373 to the returned income. The CIT (Appeals) deleted the addition, stating that the accounting system was consistently followed. The Tribunal upheld the CIT (Appeals)'s decision, noting that the same system was followed in subsequent years without dispute and that the income had already been recognized in the Profit and Loss Account. 2. Deletion of Addition Representing Closing Stock Value of a Bus Purchased from KSRTC The second issue involves the deletion of an addition of Rs. 1,46,880, representing the closing stock value of a bus purchased from KSRTC. The AO added this amount, stating that the bus was not included in the stock as on 31-3-1998. The CIT (Appeals) found that the bus was dismantled and its parts included in the closing stock, thus deleting the addition. The Tribunal upheld this decision, noting that the bus was indeed dismantled and its parts accounted for, and that the auditor had mistaken the date of purchase. 3. Deletion of Addition Representing Stock Transferred from Head Office to Trivandrum Branch The third issue concerns the deletion of an addition of Rs. 20,05,800, representing stock transferred from head office to Trivandrum branch. The AO suspected understatement of stock due to discrepancies in stock transfer records. The CIT (Appeals) deleted the addition, stating that inter-branch transfers were recorded at cost and had no effect on the consolidated Profit and Loss Account. The Tribunal upheld this decision, noting that the discrepancies were reconciled and corrected before closing the accounts, and that the transfers inward and outward tallied, nullifying any impact on profitability. Conclusion The Tribunal dismissed the revenue's appeal, upholding the CIT (Appeals)'s decisions on all three issues. The consistent accounting practices, proper reconciliation of stock transfers, and the correct inclusion of dismantled bus parts in the closing stock were key factors in the judgment.
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