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Issues involved: Assessment order u/s 143(3) challenged for being set aside by CIT as erroneous and prejudicial to revenue.
Assessment of Share Capital: - Assessee increased share capital by Rs. 14,91,000, but AO added only Rs. 4,00,000, leading to alleged concealed income of Rs. 10,91,000. - CIT found discrepancies in share capital, questioning genuineness of investments and lack of inquiry by AO. - CIT held assessment erroneous and prejudicial to revenue, directing fresh assessment. - Assessee argued CIT did not independently examine submissions, citing various High Court judgments. - Tribunal upheld CIT's decision, noting lack of inquiry by AO into share capital authenticity and upheld CIT's order. Valuation of Closing Stock: - Assessee declared closing stock at Rs. 11,82,000, but as per sec. 145A, value was Rs. 14,89,320, leading to alleged escaped taxable income of Rs. 3,07,320. - CIT raised concerns over undervalued closing stock, questioning AO's assessment. - Tribunal did not find any error in valuation of closing stock and upheld AO's decision on this issue. Sale of Shares and Manufacturing Expenses: - Assessee reflected profit of Rs. 2,36,09,293 on sale of shares without providing DeMat account, raising suspicions. - AO accepted share profit without thorough inquiry, leading to concerns about genuineness. - Tribunal found lack of inquiry by AO into share profit authenticity, supporting CIT's decision on this issue. - Manufacturing expenses discrepancy also noted, but no error found in AO's assessment on this matter. Electricity Charges and Contingent Liability: - Assessee claimed electricity charges under 'contingent liability' and made provisions, but failed to explain the contingent liability. - Tribunal found no material to dispute assessee's claim on electricity expenses or contingent liability, not upholding action u/s 263 on these grounds. Conclusion: - Tribunal partly allowed the appeal, upholding CIT's decision on issues related to share capital and share profit authenticity. - No error found in AO's assessment regarding valuation of closing stock, manufacturing expenses, electricity charges, and contingent liability. - Decision pronounced on 29 Dec. 2006.
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