2014 (5) TMI 428 - AT - Income Tax

Deletion in the value of closing stock Stock register not maintained - Disallowance of purchase Benefit of telescoping Held that - The assessee has offered additional income of Rs.25 lacs towards stock difference and other omissions noted during the survey - the CIT(A) s order show that on every count the CIT(A) has given a categorical findings of fact for sustaining the additions of Rs.23,26,514 - The assessee is not in appeal against this finding of the CIT(A) there was no error or infirmity in the findings of the CIT(A) for allowing the benefit of telescoping of additional income offered amounting to Rs.25 lacs to be set off against the total addition sustained by the CIT(A) at Rs.23,26,514 - It would be just and reasonable to allow such telescoping in order to ensure that the same income is not taxed twice Decided against Revenue.

Summary

Issues:
1. Valuation of closing stock without maintaining stock register.
2. Disallowance of purchase amount due to discrepancies in stock valuation.

Analysis:

Issue 1: Valuation of Closing Stock
The appeal by the revenue was against the order of the CIT(A) regarding the valuation of closing stock for A.Y. 2008-09. The assessee, a retailer, claimed errors in the valuation conducted during a survey, resulting in a significant difference. The AO made adjustments and additions based on indirect costs and errors in stock valuation. The CIT(A) considered the reconciliation provided by the assessee and accepted the errors in stock valuation, leading to a revised relief amount. The CIT(A) also approved adjustments towards direct costs related to inventory. The AO's failure to consider reconciliation of purchases was highlighted, with the CIT(A) allowing corrections in line with other figures. The CIT(A) concluded the sustained additions, including disallowances and adjustments, amounted to Rs.23,26,514. The CIT(A) observed the assessee's offer of additional income, not considered by the AO, and granted the benefit of telescoping to set off against sustained additions.

Issue 2: Disallowance of Purchase Amount
The dispute also involved the disallowance of purchase amounts due to discrepancies in stock valuation. The assessee contended that bills received post-survey corresponded to goods received before the survey date. The CIT(A) reviewed the reconciliation of purchases and allowed corrections similar to other figures. The disallowance on account of purchases was found to be in order only to a certain extent, as determined by the CIT(A). The sustained additions, including disallowances and adjustments, were detailed by the CIT(A), with the total amounting to Rs.23,26,514. The CIT(A) acknowledged the telescoping benefit for the assessee's additional income offer, ensuring no double taxation. The findings of the CIT(A) were upheld, and the appeal by the revenue was dismissed, confirming the benefit of telescoping and the sustained additions.

In summary, the judgment addressed issues related to the valuation of closing stock and the disallowance of purchase amounts, emphasizing the reconciliation provided by the assessee and the corrections allowed by the CIT(A) based on the findings and evidence presented during the proceedings.