2014 (7) TMI 262 - HC - Income Tax

Restriction of addition on excess stock Held that - The Tribunal was of the view that there was an incongruity for which an addition is quite reasonable - owing to this calculation any leakage is covered up - An average rate of Finished, Semi Finished and raw material is 16.14/kg - This is to be applied on 24700 kg. In terms of amount the value comes to ₹ 4,07,303 - the issue is predominantly based on factual matrix - both the CIT(A) and the Tribunal have treated the issue elaborately and concluded in favour of the assessee - Tribunal had undertaken the entire exercise of computation - on examining the summary of stock valuation and other relevant materials, it reconciled the entire material and concluded that the AO was not right in making additions Thus, the order of the Tribunal is upheld Decided against Revenue.

Summary

Issues:
Challenge to the addition on account of excess stock valuation.

Analysis:
The case involves a challenge by the Revenue against the judgment of the Income Tax Appellate Tribunal regarding the addition on account of excess stock valuation. The Tribunal had restricted the addition to a specific amount, differing from the Assessing Officer's initial valuation. The dispute arose after a survey under section 133A was conducted, which led to the discovery of excess stock in the assessee's company engaged in manufacturing iron/steel products.

The Managing Director's statement under section 132(4) initially indicated that the excess stock represented unaccounted income. However, this statement was later retracted due to improper physical verification of the stock. The Assessing Officer, not convinced by the retracted statement, made an addition to the income on a substantive basis. This decision was challenged before the CIT(Appeals), who ultimately deleted the entire addition based on the lack of independent evidence supporting the Assessing Officer's findings.

The Tribunal concurred with the CIT(Appeals), highlighting the discrepancy in stock valuation and the lack of independent material to substantiate the Assessing Officer's addition. The Tribunal recalculated the addition based on the weight difference in stock and arrived at a reduced figure. The Tribunal's decision was based on the absence of concrete evidence supporting the initial addition made by the Assessing Officer.

The High Court, after reviewing the case, found no reason to interfere with the decisions of the lower authorities. The Court noted that the Assessing Officer primarily relied on the retracted statement, and the Tribunal's detailed computation justified the reduction in the addition. Consequently, the Court dismissed the Tax Appeal, concluding that no question of law arose from the factual matrix presented in the case.