2021 (2) TMI 222 - AT - Income Tax

Unexplained closing stock - discrepancy of the actual stock and the stock as recorded in the books of account of the assessee difference between the actual value of closing stock as on 23.3.2002 and the value of closing stock determined by the Department survey party - Contention of the assessee that the assessee makes the valuation of closing stock on the basis of purchase value of the materials and the department has determined the value of closing stock on the basis of sale value and has submitted copies of purchase and sale statement for the period from 1.4.2011 to 22.3.2012 and 1.4.2011 to 31.3.2012 and closing stock statements as on 22.3.2012 and 31.3.2012 - HELD THAT - Nowhere, in the assessment order, it is reflected that the assessee has furnished the above documents before the Assessing Officer. It is not disputed that the assessee has agreed before the survey team that there was excess stock of 17,18,792/-, and advance tax was paid by the assessee. The contention of the assessee that subsequently the stock was found tallied with its books of account is an afterthought and no evidence in this regard was produced before the lower authorities immediately after the survey. The survey was done in the presence of the assessee and hence, it cannot be alleged that the assessee was forced to sign the recorded statement. Find no infirmity in the order of the ld CIT(A) in confirming the addition made by the Assessing Officer. Dismiss the grounds of appeal of the assessee.

Summary

Issues Involved:
Appeal against CIT(A) order for assessment year 2012-13; Addition of unexplained closing stock; Validity of assessment under section 263; Discrepancy in valuation of closing stock; Allegation of coercion during survey; Confirmation of addition by ITAT.

Analysis:
1. The appeal was filed against the CIT(A) order for the assessment year 2012-13. The assessee raised various grounds challenging the addition of unexplained closing stock and the validity of the assessment under section 263 of the Income Tax Act, 1961.

2. The original assessment was completed under section 143(3) of the Act, determining the total income at a certain amount. Subsequently, the CIT observed unexplained closing stock during a survey, leading to a reassessment under section 263 and an addition to the total income. The Assessing Officer made the assessment, including the addition, which was upheld in the first appeal.

3. The assessee argued that regular books of account were produced during the original assessment, and explanations were provided, making the reassessment under section 263 unlawful and requesting its annulment.

4. The assessee contended that the valuation of closing stock was based on purchase value, while the Revenue Officers used the sale value during the survey, resulting in a discrepancy. The assessee claimed coercion during the survey, leading to the signing of statements and payment of advance tax, and requested the deletion of the addition made.

5. The Department supported the lower authorities' orders, stating that the assessee admitted to the excess stock during the assessment. They refuted the coercion claim, highlighting the lack of evidence supporting it.

6. The ITAT examined the discrepancy in the closing stock valuation, noting the difference between actual and recorded stock. The ITAT found no evidence that the assessee provided purchase and sale statements to the Assessing Officer during the assessment. The ITAT upheld the addition based on the excess stock admitted during the survey, dismissing the coercion claim and affirming the CIT(A)'s decision.

7. Ultimately, the ITAT dismissed the assessee's appeal, upholding the addition of unexplained closing stock and confirming the assessment. The decision was pronounced on a specific date in 2021.