2015 (6) TMI 886 - AT - Income Tax

Addition on account of stock discrepancy - CIT(A) deleted the addition of ₹ 23,38,317/- on the ground that it was covered by disclosure of additional income of ₹ 35 lakhs made by the assessee - Held that - DR could not cite any reason as to why the discrepancy of ₹ 23,38,317/- found by the AO on assessment could not be covered by the additional income of ₹ 35 lakhs, which was already offered by the assessee for taxation in the return of income. We find from the copy of computation of income filed with the return of income, copy of which is placed on record, that the assessee has separately offered for tax ₹ 35 lakhs as income apart from the income computed as per its books of accounts. In the absence of any material to show that any discrepancy of more than ₹ 35 lakhs was found in the books of accounts of the assessee, during the course of assessment, we do not find any error in the order of the CIT(A), which is hereby confirmed and the ground of appeal of the Revenue is dismissed. - Decided in favour of assessee.

Summary

Issues:
1. Appeal filed by Revenue against CIT(A) order to delete addition of Rs. 23,38,317 on stock discrepancy.
2. Cross Objection filed by assessee claiming discrepancies were reasonably explained, so no addition warranted.

Analysis:
1. The Revenue's appeal was based on the CIT(A) directing the AO to delete the addition of Rs. 23,38,317 made on account of stock discrepancy. The AO had made various additions related to stock differences found during a search, totaling the amount in question. The CIT(A) observed discrepancies in the AO's findings regarding raw material and finished goods stock, as well as the yield comparison. The CIT(A) noted the assessee's explanations and a disclosure of Rs. 35 lakhs as additional income, which covered the disputed amount. The CIT(A) held that since the total addition was less than the disclosed income, the addition was covered and deleted it.

2. The assessee's Cross Objection contended that the discrepancies were reasonably explained and no addition was justified. However, during the hearing, the AR did not provide any submissions on this point, leading to the dismissal of the Cross Objection for lack of prosecution.

In conclusion, the ITAT Ahmedabad upheld the CIT(A) order, dismissing the Revenue's appeal and the assessee's Cross Objection. The judgment highlighted the importance of disclosures and explanations in addressing discrepancies found during assessments.