2019 (6) TMI 828 - AT - Income Tax

Addition on account of difference in cash flow - HELD THAT - Assessee has supplied the computer generated statements and it was historically derived from the figures from profit and loss account and balance sheet which are very much available on record in the form of audit report u/s. 44AB. Since the audited books of accounts were not rejected and the book results stand accepted and also the alleged discrepancy stand duly reconciled. Therefore, we have no hesitation in deleting the addition. Thus this ground of appeal is allowed. Disallowance on account of cash shortage - HELD THAT - Assessee stated some of the amount was lying at the residence of the Director. As per impugned order Statement of Harkantbhai P. Vyas Accountant of the assessee company was recorded which revealed closing cash balance and as per prevailing system it is kept at the residence of the same director of the company. Revenue ought to have deputed to verify the statement of the Accountant but department did not deputed anyone so in these circumstances of the department cannot be accepted. Thus, this ground of appeal is allowed. Disallowance on account of stock difference - HELD THAT - Appellant was not provided a copy of alleged survey inventory nor a statement of recorded by the survey party and assessee retracted his submission by way of letter and same statement was also referred in the order of ld. CIT(A) and following stock transaction was recorded by the survey party. We just fail to understand how in a short span of time survey party made the statement after calculating and weighing the item and addition has been made solely on the accounting and weighing of the stock. Thus addition made by the department cannot sustain. Assessee has not given any explanation with regard to discrepancies in the total stock. Therefore, we delete the addition - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of sundry expenses
2. Disallowance of difference in bank balance
3. Disallowance of depreciation on factory shed
4. Disallowance of difference in cash flow
5. Disallowance of cash shortage
6. Disallowance of stock difference
7. Unexplained repair charges

Analysis:

1. The appellant challenged various disallowances made by the Assessing Officer (AO) in the assessment order. The issues included disallowances related to sundry expenses, depreciation on factory shed, difference in bank balance, cash flow, cash shortage, and stock difference. Some grounds were not pressed by the appellant due to the smallness of the tax effect.

2. The appellant, a domestic company engaged in manufacturing, submitted its return of income for A.Y. 2010-11, which was selected for scrutiny. The AO finalized the assessment with significant additions. The appellant appealed against the assessment order.

3. The Tribunal addressed the grounds related to the disallowance of cash flow difference. The AO had added a specific amount due to a deviation in cash flow. However, the appellant provided detailed computer-generated statements reconciling the figures, which were historically derived from audited reports. The Tribunal found no justification for the addition and deleted it.

4. The issue of disallowance of cash shortage was discussed next. The AO had noted a cash difference at the business premises, but the appellant explained that part of the amount was at the director's residence. The Tribunal observed that the revenue failed to verify the accountant's statement, leading to the allowance of this ground of appeal.

5. Moving on to the disallowance of stock difference, the Tribunal examined the director's statement and the survey inventory. The appellant was not provided with the survey inventory, and discrepancies were noted. The Tribunal found the addition unjustified, especially considering the retraction of the statement and the absence of discrepancies found by the excise department.

6. While most additions were deleted, a specific discrepancy in stock records remained unexplained by the appellant. As a result, the Tribunal confirmed the addition related to this remaining discrepancy.

7. In conclusion, the Tribunal partly allowed the appeal filed by the Assessee, ruling in favor of the appellant on several grounds while confirming a specific addition due to unexplained discrepancies in stock records.