2015 (7) TMI 688 - HC - Income Tax

Suppression of stock - whether ITAT correct in holding that the asseessee has sufficiently rebutted the finding of the Assessing Officer that the assessee has suppressed its stock worth ₹ 1,51,67,000/- from appearing in his books of account and thereby his income by that much amount? - Held that - The assessee s case is that the stock declared before the bank of ₹ 169.17 lacs was as on 30.03.2009 and that was for the purpose of raising a loan. The Tribunal also found that the assessee had submitted a stock statement to the bank as on 30.03.2009. The bank officer who was questioned by the Assessing Officer stated that the loan of ₹ 100 lacs was disbursed on 30.03.2009 on the basis of the inventory as on that day. He further stated that the inventory of stock was physically verified. On 31.03.2009, ₹ 166 lacs was booked as sales. The Tribunal has expressly noted that the sales were not doubted by the authorities and in fact had been accepted. As rightly pointed out by the respondents, had it not been so, the respondent s income itself would have reduced to that extent. In the circumstances, we are unable to say that the finding of the Tribunal is perverse or totally unsustainable. - Decided against revenue.

Summary

Issues:
- Discrepancy in closing stock value as on 31.03.2009
- Relevance of documents furnished for loan in determining closing stock value
- Validity of Tribunal's finding on stock value discrepancy

Analysis:

1. The appeal before the High Court concerned a dispute over the closing stock value as on 31.03.2009, with the Tribunal allowing the respondent's appeal against the Commissioner of Income Tax (Appeals) order adding approximately Rs. 1.51 crores to the respondent's income. The appellant raised questions regarding the correctness of the Tribunal's decision, specifically challenging the rebuttal of the Assessing Officer's finding of suppressed stock value and the admissibility of a reconcillation chart at the appellate stage.

2. The respondents argued that the closing stock value on 31.03.2009 was Rs. 17.50 lacs, while the Assessing Officer determined it to be Rs. 169.17 lacs based on documents submitted by the respondent for a bank loan. The Assessing Officer relied on these documents to assert the higher stock value, leading to the income addition. The discrepancy in stock value forms the crux of the dispute.

3. The pivotal issue revolves around the factual determination of the closing stock value on 31.03.2009. This factual inquiry necessitates an examination of the evidence on record to ascertain the accuracy of the stock valuation. The High Court must assess whether the Tribunal's finding on this matter is unreasonable or erroneous, constituting a crucial aspect of the case.

4. The assessee contended that the stock value declared to the bank for the loan was as of 30.03.2009, not 31.03.2009, emphasizing the loan purpose. The Tribunal acknowledged the submission of a stock statement to the bank on 30.03.2009, supporting the assessee's position. Furthermore, the bank officer confirmed the loan disbursement on 30.03.2009 based on stock inventory verification, with subsequent sales on 31.03.2009. Notably, the Tribunal upheld the sales figures, indicating their acceptance by the authorities.

5. Upon evaluating the facts and submissions, the High Court found no basis to deem the Tribunal's decision as unreasonable or unsustainable. The Tribunal's assessment of the stock value discrepancy and its reliance on the evidence presented appear justified, leading to the dismissal of the appeal challenging the Tribunal's ruling.

6. Consequently, the High Court upheld the Tribunal's decision, emphasizing the importance of factual accuracy and evidentiary support in resolving disputes related to stock valuation discrepancies. The dismissal of the appeal underscores the significance of thorough factual analysis and adherence to procedural requirements in tax matters.