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2014 (12) TMI 1017 - AT - Income TaxValuation of WIP - WIP was value of actual sales of moulds and not the cost of moulds or not - Restriction of addition of ₹ 20,97,008/- to R.4,14,403/- on unaccounted sales Facts and material properly appreciated or not Held that - CIT(A) rightly was of the view that the value of the mould could have been taken at Nil - these moulds have not been accounted for in stock - There is no reason to assume that the mould had been valued at Nil - these mould have also not been accounted for in the books of accounts of the appellant - the appellant has not accounted for these moulds in the books of accounts - no material could be produced to show that ₹ 45,06,566/- mentioned in the WIP was value of actual sales of moulds and not the cost of moulds which was transferred from WIP Decided against revenue. The assessee stated that the moulds of ₹ 4,14,403/- was defective and had no realizable value - the CIT(A) has held that the auditor of the assessee has denied to have received any information about moulds having Nil value - the CIT(A) opined that there is no plausible reason to value the moulds at Nil and the quantity of these moulds were not accounted for in the books of account - there is no plausible reasons for valuing these moulds at Nil - Since these moulds are also not accounted for in stock it stands to reason that these moulds have been sold outside books of accounts - the addition made by the AO on account of unaccounted sales is reduced from ₹ 20,97,008/- to ₹ 4,14,403/- revenue could not point out any specific mistake in the findings of the CIT(A) - No material has been brought to show that any error in the findings of the CIT(A) and to show that the moulds of ₹ 4,14,403/- were defective and their realizable value was Nil thus, the order of the CIT(A) is upheld Decided against assessee.
Issues:
1. Valuation of written off moulds and unaccounted sales. Detailed Analysis: 1. The judgment involves Cross Appeals by the Assessee and the Revenue against the order of CIT(A)-XX, Ahmedabad dated 10.12.2010. The Assessee's Appeal raised concerns about the addition on account of valuation of written off moulds, while the Revenue's Appeal focused on restricting the addition made by the AO on account of unaccounted sales. 2. The Assessing Officer made the addition based on discrepancies in the declared sales by the Assessee company and the actual sales recorded in the factory. The unaccounted sale amount was added to the total income of the Assessee company. 3. The Assessee contended that the moulds were duly written off due to technical defects and had no realizable value. Detailed explanations and documentation were provided to support this claim. 4. The CIT(A) analyzed the issue of sales of moulds and observed discrepancies in the AO's assessment. The CIT(A) noted that certain moulds were not sold but used for home production, leading to an increase in the value of finished goods in the balance sheet. The CIT(A) also highlighted that the auditor did not find any mention of moulds having nil value in the accounts. 5. The CIT(A) further emphasized that the moulds in question were not accounted for in the books of accounts, and there was no valid reason to value them at nil. The CIT(A) reduced the addition on unaccounted sales from Rs. 20,97,008 to Rs. 4,14,403. 6. During the proceedings, the Departmental Representative supported the AO's order, while the Authorized Representative of the Assessee reiterated their submissions. 7. The Tribunal found no merit in the Revenue's appeal as no material was presented to prove that the amount mentioned in the WIP represented actual sales of moulds. Similarly, in the Assessee's appeal, no evidence was provided to show that the moulds in question were defective and had nil realizable value. 8. Ultimately, the Tribunal upheld the CIT(A)'s order, dismissing both the Assessee's and Revenue's appeals, as no substantial evidence was presented to challenge the findings regarding the valuation of moulds and unaccounted sales. In conclusion, the judgment addressed the issues of valuation of written off moulds and unaccounted sales, highlighting the importance of providing concrete evidence and accounting for assets accurately in the books. The decision ultimately affirmed the CIT(A)'s order, emphasizing the lack of substantial proof to alter the initial assessment.
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