2019 (8) TMI 302 - HC - Income Tax

Addition on account of alleged suppression of the value of closing stock - Whether said addition is legally sustainable in view of the constantly followed and accepted method of accounting to value the closing stock in the past - HELD THAT - question No.1 is covered against the assessee by the decision in M/s Kishan Chand Co. Oil Inds. Ltd.' 2011 (12) TMI 243 - PUNJAB HARYANA HIGH COURT Accrual of interest on FDRs in the bank - when the assessee has been consistently following the cash system of accounting for the receipt of interest - HELD THAT - Tribunal noticed that the assessee had been using the approval system as a practice but had resorted to the cash system randomly and came to the conclusion that this could not be permissible. We have no hesitation in accepting this exposition of law and consequently uphold the findings of the Tribunal and decide the reference accordingly, with the caveat made by the counsel regarding payment of tax in subsequent years and its exigibility to adjustment.

Summary

Issues Involved:
1. Dismissal of ITR No. 226 of 1995 as infructuous.
2. Withdrawal of ITR No. 227 of 1995 due to taxable amount being less than ?50 lakh.
3. Disposal of ITR Nos. 224 and 225 of 1995 concerning addition of amounts on account of closing stock value and interest on FDRs.

Issue 1: Dismissal of ITR No. 226 of 1995
The counsel for the revenue conceded that no legal question arose in ITR No. 226 of 1995, leading to its dismissal as infructuous by the court.

Issue 2: Withdrawal of ITR No. 227 of 1995
In ITR No. 227 of 1995, the appellant's counsel sought permission to withdraw the reference due to the taxable amount being below ?50 lakh, in accordance with circular No. 3/2018. The court allowed the withdrawal, resulting in the dismissal of the reference.

Issue 3: Disposal of ITR Nos. 224 and 225 of 1995
The court addressed ITR Nos. 224 and 225 of 1995, focusing on two questions of law. The first question involved the addition of amounts due to alleged suppression of closing stock value, which was upheld by the Tribunal. The second question pertained to the accrual of interest on FDRs, which the Tribunal also upheld. The appellant conceded that the first question was settled against them by a previous decision. The remaining issue was whether interest on FDRs should be considered part of the income in the year of approval or receipt. The court agreed with the Tribunal's decision that such amounts should be included in the year of approval, not receipt. The court upheld the Tribunal's findings, emphasizing the need for tax adjustments if tax had been paid during the proceedings. The case was disposed of accordingly, with pending matters also resolved.

This detailed analysis of the judgment highlights the key issues addressed by the court and the decisions made regarding each issue, ensuring a comprehensive understanding of the legal proceedings.