2023 (2) TMI 560 - AT - Income Tax

Addition of excess bagasse stock - revenue from suppressed sales of surplus stock of bagasse - method of valuation followed by the appellant - HELD THAT - From the audited financial statement it ostensibly transpires that, the appellant showed no closing stock of bagasse. The Ld. AO, underlining the absence of stock records, after allowing the standard consumption from the estimated production of bagasse, the revenue from the suppressed sales of surplus stock of bagasse has carried out the addition. Since the appellant failed to negate the estimation of excess stock of bagasse available for sale and its valuation with depreciative cogent material on record leaves the computation made by the Ld. AO doubtless, thus finds force in taxing the same as revenue from suppressed sales. And the said action of Ld. TAB finds force in the light of judgement of Hon ble Supreme Court in CIT Vs British Paints India Ltd. 1990 (12) TMI 2 - SUPREME COURT wherein held tha where accounts are prepared without disclosing the real cost of the stock-in-trade, albeit on sound expert advice in the interest of efficient administration of the company, it is the duty of the ITO to determine the taxable income by making such computation as he thinks fit. We see no reasons to interfere with the action of the Ld. TAB in bringing to tax the revenue from suppressed sales of surplus stock of bagasse, ergo we order accordingly.

Summary

Issues:
Challenge to the addition made by the Deputy Commissioner of Income Tax regarding bagasse stock valuation and suppression of sales.

Analysis:
1. The appellant challenged the addition of Rs. 35,04,060 towards bagasse stock not accounted for in the income. The appellant argued that the bagasse stock register was duly maintained and produced before the CIT(A). They contended that the addition to stock based on bagasse bailing expenses was not valid as these expenses are low cost and have multiple ingredients, making them unsuitable for comparison.

2. The main issue revolved around the impugned addition of excess bagasse stock without appreciating the regular valuation method followed by the appellant. The appellant argued that the estimation of bagasse production by the AO was incorrect and obtained a certificate supporting their claim. The Tribunal noted the absence of records regarding bagasse production, consumption, and sales, leading to the AO's estimation of available stock for sale.

3. The Tribunal found that the estimation of bagasse production by the AO closely matched the certificate obtained by the appellant. The AO's method of computing the stock available for sale based on industry standards and bailing expenses was deemed appropriate. The appellant's failure to provide substantial evidence to refute the excess stock valuation led to the confirmation of the addition by the Tribunal.

4. The Tribunal upheld the addition as revenue from suppressed sales of surplus bagasse stock, citing Section 145 of the Income Tax Act, which empowers the assessing officer to determine taxable income accurately. The Tribunal found no grounds to interfere with the AO's decision, ultimately dismissing the appellant's appeal.

This detailed analysis of the judgment highlights the key arguments presented by the parties, the Tribunal's assessment of the evidence and legal provisions, and the final decision rendered in the case.