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2014 (2) TMI 645 - AT - Income TaxDeletion made on account of shares not included in closing stock - Reduction of valuation of scripts - Held that - The assessee has been dealing into the business of shares through two share brokers namely M/s Vogue Commercial Co. Ltd. and M/s Divya Portfolio Pvt. Ltd. as is apparent from assessment order - The CIT(A) while giving relief to the assessee has relied upon only copy of Demat A/c with M/.s Vogue Commercial Co. Ltd. and Demat account with other broker i.e. M/s Divya Portfolio Pvt. Ltd. does not find its mention in the order of CIT(A) - The Assessing Officer has clearly mentioned number and names of scripts which were in the Demat Account of the assessee and were not part of list of closing stock submitted by the assessee - in the list of shares of closing stock prepared on estimated basis and on actual basis there is significant difference between the valuation of certain scripts though the quantities in both lists remained same - valuation of certain scripts were reduced to accommodate the valuation of additional scripts found in the Demat Account of assessee - This aspect of lower valuation has not been examined by CIT(A) thus, the matter remitted back to the CIT(A) who would require the assessee to file copy of Demat Account of assessee with M/s Divya Portfolio Pvt. Ltd. Decided in favour of Revenue.
Issues:
1. Valuation of closing stock in trading of shares. 2. Addition of undisclosed shares in revised closing stock list. 3. Appeal against the order of Ld CIT(A) regarding the additions made by the Assessing Officer. Issue 1: Valuation of closing stock in trading of shares The case involved an appeal by the revenue against the order of Ld CIT(A) regarding the valuation of closing stock in trading of shares. The Assessing Officer observed discrepancies in the closing stock of shares declared by the assessee. The assessee explained that the closing stock was based on the cost of purchase or market price, whichever was lower. The Assessing Officer made additions based on certain scripts not included in the revised list. The Ld CIT(A) deleted the additions, stating that the valuation shown by the assessee was correct as per the holding account submitted. The Tribunal noted discrepancies in the valuation of certain scripts and remitted the file back to the Ld CIT(A) for further examination. Issue 2: Addition of undisclosed shares in revised closing stock list The Assessing Officer found that certain shares were not included in the revised closing stock list, leading to an addition of Rs.1,90,442 and Rs.8,11,717. The Ld CIT(A) deleted these additions after considering the submissions and verifying the transaction statement from the National Security Depository Ltd. The Tribunal observed discrepancies in the valuation of certain scripts and directed the Ld CIT(A) to examine the market price or cost price to arrive at a conclusion. Issue 3: Appeal against the order of Ld CIT(A) The revenue appealed against the order of Ld CIT(A) claiming that the assessee had submitted wrong valuations and manipulated the closing stock list. The revenue argued that certain scripts were not adequately addressed by the Ld CIT(A) and requested the restoration of the Assessing Officer's order. The assessee, however, explained the discrepancies in the quantity of scripts and maintained that the total valuation of closing stock remained the same. The Tribunal found discrepancies in the valuation and directed further examination by the Ld CIT(A). In conclusion, the Tribunal allowed the appeal filed by the revenue for statistical purposes, remitting the file back to the Ld CIT(A) for a detailed examination of the valuation of shares and discrepancies in the closing stock list. The case highlighted the importance of accurate valuation and disclosure of shares in trading activities to avoid discrepancies and additions by the Assessing Officer.
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