2012 (12) TMI 329 - AT - Income Tax

Denial of claim of 50% discount in respect of valuation of stock - stock was obsolete and got out of fashion and as such it was put up for sale at 50% discount - Held that - This would not be possible as valuing part of the stock at market price and other part of the stock at cost price is not permissible in law. - in accordance with method of valuation of stock adopted by the assessee i.e. lower of cost or market value , no further deduction for discount sale could be allowed to the assessee - against assessee. Rejection of claim of the stock - bills for which were not credited in the books of accounts, pending for accounting - Held that - As the assessee has produced bills amounting to Rs.2,42,501/- and has claimed in its return of income before the department merely because there was delay in making the claim and the claim was not made at the time of survey itself or at the time of making statement of the partner of the assessee-firm, it could not be said that the facts should not have been verified by the AO and credit of the bills claimed to be available at the business premises of the assessee at the time of survey was not allowable. There is no material before us to suggest that any exercise to verify the genuineness of the bills was made by the AO at any stage of the assessment and no reason for not doing so could be assigned - in favour of assessee. Deletion of addition by CIT(A) - Revenue appeal - Held that - As admissibility of appeal filed by the Revenue in the light of various instructions issued by CBDT from time to time wherein monetary limits for filing departmental appeals (Income-tax matters) and other conditions were specified, restricting filing appeals before Appellate Tribunal. As tax effect in this case is less than Rs.2 lakhs therefore the present appeal of the department is not maintainable - in favour of assessee.

Issues:
1. Rejection of claim for 50% discount in stock valuation.
2. Rejection of claim for stock not credited in books.
3. Rejection of claim for value of closing stock and deduction of discount.
4. Revenue's appeal on additions made and applicability of section 145(3).

Analysis:

Issue 1: Rejection of claim for 50% discount in stock valuation

The assessee claimed a 50% discount in the valuation of obsolete stock, which was not accepted by the department. The ITAT held that the method of valuation of stock should be lower of cost or market value uniformly. The assessee had already deducted the gross profit from the sale price of the stock, indicating the cost price was considered. Therefore, the claim for further deduction for discount sale was not allowed, as it would result in valuing part of the stock at market price and part at cost price, which is impermissible.

Issue 2: Rejection of claim for stock not credited in books

The assessee presented bills for Rs.2,42,501 during a survey, which were not credited in the books. The department disallowed the claim due to an alleged inordinate delay in making the claim. However, the ITAT found that there was no verification of the genuineness of the bills by the Assessing Officer (AO). The addition made solely on suspicion without evidence to doubt the genuineness of the claim was deemed unsustainable, and the claim was allowed.

Issue 3: Rejection of claim for value of closing stock and deduction of discount

The grounds related to the value of closing stock and deduction of discount were not pressed by the assessee and were dismissed accordingly.

Issue 4: Revenue's appeal on additions made and applicability of section 145(3)

The Revenue's appeal contested various additions made, but the ITAT found that the appeal was not maintainable due to the disputed tax effect being less than Rs.2 lakhs. Citing CBDT circulars, the ITAT dismissed the Revenue's appeal on the grounds of restricted filing of appeals before the Appellate Tribunal based on monetary limits specified in the circulars.

In conclusion, the assessee's appeal was partly allowed, while the Revenue's appeal was dismissed due to the appeal not meeting the monetary limits set by CBDT circulars.

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