2016 (9) TMI 1035 - HC - Income Tax

Differential value of stock - value as submitted before the banking authorities for procurement of credit facility vis a vis stock disclosed in the books of accounts - Held that - Having considered the decision in case of Nangalia Impex (2014 (11) TMI 1092 - GUJARAT HIGH COURT), this Court is of the opinion that the stock register which was maintained by the assessee; entries of which have been reflected in the Books of Account and the said aspect has been accepted by the authorities below and therefore, the view taken by the tribunal is just and proper in deleting the addition made on account of differential value of stock as submitted before the banking authorities for procurement of credit facility vis a vis stock disclosed in the books of accounts. - Decided against revenue

Summary

Issues:
Challenge to order passed by ITAT regarding addition made by the Department based on differential value of stock submitted for credit facility compared to stock disclosed in books of accounts.

Analysis:
The appellant-revenue challenged the ITAT's order which reversed the Assessing Officer's view, upheld by CIT (Appeals), stating that the addition made by the Department was impermissible once the books of account were accepted. The question of law framed was whether the Tribunal was correct in deleting the addition made on account of differential stock value submitted for credit facility versus stock disclosed in books.

The appellant's counsel argued that the Tribunal should have interfered based on observations by CIT (Appeals) regarding the inadequately maintained Stock Register by the assessee. The counsel contended that the A.O.'s view, confirmed by CIT (Appeals), should be reinstated.

On the contrary, the assessee's counsel argued that the books of account were accepted, and the entries were not doubted even though the stock register was not properly maintained. Reference was made to a similar case where the Tribunal found no error in the order based on the acceptance of entries in the books of account despite discrepancies in stock statements submitted to the Bank.

The High Court, after considering arguments and the precedent case, concluded that the stock register maintained by the assessee, with entries reflected in the Books of Account and accepted by lower authorities, justified the Tribunal's decision. Consequently, the appeal was dismissed, and the question of law was answered in favor of the assessee and against the revenue.