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2022 (3) TMI 1066 - AT - Income TaxDifference in closing stock held by the assessee as on the date of search, when compare to book stock - HELD THAT - Assessee has substantiated average mark-up of 32% with necessary evidences including sample purchase invoices, as per which, the average mark-up on various products ranges from 32% to 47.5%, whereas, the AO has taken average mark-up of 25% on the basis of mark-up allowed in other group concerns' case, but such rate is not supported with any evidences. There is no reason for the AO to deviate from the method followed by the Investigation Wing to quantify excess stock held by the assessee as on the date of search by allowing mark-up on tag price of 32% when the assessee has justified mark-up of 32% on tag price of closing stock held as on the date of search. The estimations made by the AO on difference in mark-up price of closing stock is purely on suspicion and surmises basis, without any evidence to suggest that the assessee is having average mark-up of 25% on all goods. Therefore, we are of the considered view that the AO is erred in making additions towards difference in mark-up price of closing stock by allowing 25% average mark-up of closing stock on tag price to determine closing stock as on the date of search. CIT(A) after considering relevant facts has rightly directed the AO to allow average mark-up of 32% to arrive at cost price of closing stock as on the date of search. Hence, we are inclined to uphold the findings of the Ld. CIT(A) and reject the ground taken by the Revenue. Disallowance of employees' contribution to PF u/s. 36(1)(va) r.w.s. 43B - HELD THAT - The coordinate Bench in the case of M/s. Adyar Anand Bhavan Sweets India Pvt. Ltd. v. ACIT 2021 (12) TMI 558 - ITAT CHENNAI had considered an identical issue and the Tribunal after considering the amendments to Sec. 36(1)(va) of the Act by the Finance Act, 2020 w.e.f. 01.04.2021, held that amendment inserted to Sec. 36(1)(va) of the Act, is prospective in nature which is applicable from the AYs 2020-21 onwards - we are of the considered view that there is no error in the findings given by the Ld. CIT(A) to delete the additions made towards disallowance of employees' contribution to PF u/s. 36(1)(va) r.w.s. 43B of the Act. Hence, we are inclined to uphold the findings of the Ld. CIT(A) and reject the ground taken by the Revenue.
Issues Involved:
1. Dispute over mark-up price on closing stock. 2. Disallowance of employees' contribution to Provident Fund. Analysis: Issue 1: Dispute over mark-up price on closing stock The Revenue challenged the CIT(A)'s order directing the AO to delete the addition made on account of mark-up price on closing stock. The AO reduced the closing stock value by allowing a 25% mark-up, while the assessee claimed a 32% mark-up based on the average mark-up on various products. The CIT(A) upheld the assessee's claim of 32% mark-up after considering sample purchase invoices. The Tribunal noted the difference in closing stock held by the assessee and book stock. The AO's method of reducing mark-up to 25% was based on suspicion without evidence, while the assessee substantiated a 32% mark-up. The Tribunal found the AO erred in making additions based on a 25% mark-up and upheld the CIT(A)'s decision to allow a 32% mark-up. Issue 2: Disallowance of employees' contribution to Provident Fund The AO disallowed employees' PF contribution based on belated remittances beyond the due date under the PF Act. However, the CIT(A) deleted these additions citing a decision of the Madras High Court that allowed deductions if contributions were made before the due date for filing income tax returns. The Tribunal referred to similar cases and held that contributions made before the due date for filing returns are allowable deductions. The Tribunal upheld the CIT(A)'s decision to delete the additions related to employees' PF contributions. In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decisions on both issues. This detailed analysis covers the disputes over mark-up price on closing stock and the disallowance of employees' contribution to Provident Fund, providing a comprehensive understanding of the judgment.
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