2015 (6) TMI 834 - AT - Income Tax

Addition on account of difference in creditors account - Held that - The admitted fact remains that the assessee has not recorded the transaction in its books of accounts in the year under consideration. The assessee has made alternative submission that a direction be issued to the CIT(A) to exclude the amount from the total income of the assessment year 2008-09. Since the present appeal is related to AY 2007-08, the admitted facts are that the transactions were not recorded during the year under consideration. Therefore, we do not see any reason to interfere with the order of the ld.CIT(A) on this issue. - Decided against assessee. Addition made on account of undervaluation of closing stock - Held that - From the bills of job charges issued to the assessee company by process houses, produced by the assessee company, it was seen that the average rate of job charges at the end of the year is ₹ 7.25/mtr. Thus the average value of finished goods per meter works out to ₹ 18.10. As such, the value of the closing stock of 16,847.90 mts of finished goods lying with the assessee as on 31.03.2007 works out to ₹ 3,04,947/- (16,847.90 mts x ₹ 18.10). As such, the total value of closing stock with the assessee works out to ₹ 26,67,345/- (Rs.23,62,398/- ₹ 3,04,947), as against the value of ₹ 22,26,598/- disclosed by the assessee company in its return of income. In other words, the closing stock of the assessee company is suppressed by an amount of ₹ 4,40,747/- (Rs.26,67,345 (-) ₹ 22,26,598).The aforesaid finding of the Assessing Officer is not controverted by placing any material on record by the assessee. Therefore, we see no reason to interfere with the order of the authorities below. - Decided against assessee.

Summary

Issues:
1. Addition of Rs. 2,50,289 on account of difference in creditors account.
2. Disallowance of depreciation amounting to Rs. 1,679.
3. Addition of Rs. 4,40,747 on account of under valuation of closing stock.

Analysis:

Issue 1 - Addition of Rs. 2,50,289 on account of difference in creditors account:
The appellant contested the addition, arguing that the difference arose due to discounts not accounted for in the books. The appellant claimed the transactions were settled in the subsequent year and should not be taxed twice. However, the AO found the appellant had suppressed income by not crediting the discounts, justifying the addition. The CIT(A) upheld this decision, stating that discounts constitute income for the relevant financial year and must be taxed accordingly. The appellant's plea to exclude the amount from the income of the next assessment year was rejected as the transactions were not recorded in the year under review. The Tribunal upheld the CIT(A)'s order on this issue, dismissing the grounds of appeal.

Issue 2 - Disallowance of depreciation amounting to Rs. 1,679:
The appellant chose not to press this ground, leading to its rejection without further discussion.

Issue 3 - Addition of Rs. 4,40,747 on account of under valuation of closing stock:
The appellant argued against the addition, stating that the AO disregarded the meticulous stock register maintained by the company. The AO's valuation of the closing stock was challenged by the appellant, who suggested treating the addition as the opening stock of the subsequent year. The AO's findings indicated discrepancies in the closing stock valuation, leading to the addition. The Tribunal found no merit in the appellant's contentions, upholding the AO's decision. The Tribunal clarified that the AO should address the appellant's claim in accordance with the law. Consequently, the grounds related to the under valuation of closing stock were rejected.

The Tribunal dismissed the appeal, emphasizing that the decisions of the AO and CIT(A) were justified based on the evidence and legal provisions presented during the proceedings.