2011 (12) TMI 521 - HC - Income Tax

Addition being the difference of value declared in the stock statement given to the Bank and the value of stock accounted for in the books of accounts - ITAT deleted the addition - Held that - We find no question of law arising. The assessee had been contending that the valuation of the stock supplied to the Bank did not reflect the accurate or the correct picture. The statement was drawn on the basis of estimation and such estimate is based on the higher side to borrow higher loan. The closing stock reflected in the books maintained for income-tax reflects the correct picture. The Tribunal accepted such version, taking note of various facts noted above including the discrepancy on the date of survey between the two statements as well as improved gross profit rate for the year under consideration.

Summary

Issues:
1. Valuation of closing stock for income-tax assessment purposes.
2. Discrepancy between stock value declared to the Bank and in books of accounts.
3. Applicability of judgment regarding valuation of stock in income-tax assessment proceedings.

Issue 1: Valuation of Closing Stock
The central issue in this case revolved around the valuation of the closing stock, specifically the difference between the value declared in the stock statement submitted to the Bank and the value accounted for in the books of accounts for income-tax assessment purposes. The Assessing Officer and CIT [A] contended that the stock statement sent to the Bank should not be considered an estimate, leading to additions in the assessment. However, the Tribunal disagreed, considering the statement to the Bank as an estimate made on the higher side to secure a larger loan facility.

Issue 2: Discrepancy in Stock Value
The discrepancy between the stock value declared to the Bank and in the books of accounts was significant, amounting to Rs. 46.55 lakhs. The Tribunal found that the statement provided to the Bank was indeed an estimate, as evidenced by the actual stock value found during a survey, which was lower than the value declared to the Bank. The Tribunal also noted an improved gross profit rate for the year under consideration, further supporting the assessee's claim.

Issue 3: Applicability of Precedent
The question of whether the Tribunal erred in ignoring a judgment of the Hon'ble High Court of Karnataka was raised. The Tribunal had to consider if the precedent regarding the valuation of stock in income-tax assessment proceedings applied to the present case. However, the Tribunal found that the assessee's explanation for the stock valuation was reasonable, similar to a previous decision upheld by the Court under comparable circumstances.

In conclusion, the High Court upheld the Tribunal's decision, dismissing the Revenue's appeal. The Court found no legal question arising from the case, as the Tribunal's acceptance of the assessee's version regarding the stock valuation was supported by various factual findings, including the discrepancy between the statements provided to the Bank and the actual stock value. The judgment highlighted the importance of considering all relevant factors in determining the accurate valuation of closing stock for income-tax assessment purposes.