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TMI Blog2016 (1) TMI 245X X X X Extracts X X X X X X X X Extracts X X X X ..... fore due date of return. In view thereof this claim of the assessee is allowed. Increase in valuation of the closing stock - whether to be allowed in next year as increase in opening stock in next year i.e. 2010-11 - Held that:- It has not been disputed that the assessee has not claimed any benefit by increase in valuation of stock in subsequent year. Hence, the addition becomes revenue neutral. Consequently, respectfully following the decision of Hon'ble Supreme Court in the case of CIT vs. Excel Industries Ltd. (2013 (10) TMI 324 - SUPREME COURT ) the addition being tax neutral and the assessee having not derived any benefit, the addition is deleted. - ITA No. 479/JP/2013 - - - Dated:- 16-10-2015 - SHRI R.P. TOLANI, JM SHRI VIKRAM SINGH YADAV, AM For The Assessee : Shri G.G. Mundra, CA For The Revenue : Shri Raj Mehra, JCIT ORDER PER R.P. TOLANI, JM:- Both these appeals are the cross appeals filed against the order of the ld. CIT(A-III, Jaipur dated 13-02-2013 for the assessment year 2009- 10. Respective grounds are as under:- ITA No. 479/JP/2013 Revenue (i) The ld. CIT(A) has erred in fact and in law in allowing deduction u/s 10BA a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in holding that addition of ₹ 15,372/- u/s 15,372/- u/s 40A(3) of I. T. Act, 1961 is not eligible for deduction u/s 10BA of I. T. Act, 1961. 5. That on the facts and circumstances of the case the Ld. CIT (A) is wrong, unjust and has erred in law in holding that there was excess stock of ₹ 30,96,058/- as on the date of survey u/s 133A which is to be treated as unexplained investment of assessee u/s 69 of the Act and thereby confirming addition of ₹ 30,96,050/- in income of assessee as against addition of ₹ 32,47159/- made by A.O. as profit @ 17.20% on alleged shortage of stock of ₹ 1,88,78,833/- as on date of survey. 2.1 Brief facts of the case of the case are that the assessee is a proprietor of M/s. The Art Palace, an industrial undertaking engaged in the manufacturing and exporting of handmade articles using wood as main raw material. Some of the additions are claimed to be covered by earlier ITAT judgment. Ld. AO made above additions which have been confirmed by ld. CIT(A). Aggrieved both the parties are in appeal. 3.1 During the course of hearing, the ld. AR of the assessee has not pressed Ground Nos. 1 and 2. Hence, the same are dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due TDS from transportation charges was furnished. A certificate from M/s Sachin Cargo Movers to this effect is also on record. In these facts of the case the disallowance made u/s 40a(ia) by . A.O. in the hands of assessee is unjustified and bad in law. Ld. CIT (A) upheld the action of A.O. by holding that in effect, the transport charges were paid by appellant on which TDS was required to be made. If agent paid TDS on behalf of assessee it will not exonerate assessee from liability. It is submitted that both the authorities below did not appreciate that transportation charges were incurred by agent on behalf of assessee and relationship between assessee and agent is principal and agent and in such case assessee is not required to deduct tax at source and there can be no disallowance u/s 40 (a) (ia). The agent reimbursed only transport charges actually paid by him after deducting TDS and for his services charged assessee on which service tax was also paid. The ld. AR of the assessee relied on following decisions. (i) CIT Vs. Harbans Lal Malhotra Sons P. Ltd. (2013)262 CTR 94 (Cal). (ii) CIT Vs. Gujrat Narmada Valley Fertilisers Co. Ltd. (2014)361 ITR 192 (Guj). I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial and credit can be given to that extent only . (iii) There was difference of ₹ 21,03,292/- in the amount of direct expenses as adopted by the A.O. and as adopted by the appellant. These expenses included labour payments of ₹ 15,17,915/- which were not recorded in the books of accounts but claimed to have been incurred by the appellant before the date of survey. No bill/vouchers were found/impounded in support of such payments during survey. (iv) There was a difference of ₹ 4,09,79,894/- in the amount of sales adopted by the A.O. and that adopted by the appellant. The sale to the extent of ₹ 4,05,33,161/- is verifiable from the bills/produced as the same were export sales. Hence, the same should be considered for computing the book profit as on date of survey. The assessee on the above report of A.O. claimed before Ld. CIT (A) that in working of trading A/c by assessee as above the opening stock taken is closing stock as per Trading account as on 31-3-08 filed along with return of income for A.Y. 2008-09 and accepted in assessment. The purchase, sales and direct expenses up to 23-9-2008 are as per books of accounts produced before A.O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gligible the stock found in course survey valued at ₹ 1,77,14,473/- while as per books of accounts the same will work out ₹ 1,67,12,716/-. Thus the addition of ₹ 30,96,050/- confirmed by Ld. CIT on account of excess stock due to difference of valuation is wrong and not sustainable. Without prejudice to above, it is submitted that addition on account of excess stock for valuation difference is to be allowed to the assessee firm in next year as opening stock which will reduce profits of next year. The assessment of assessee for A.Y. 2010-11 has been completed u/s 143 (3) wherein opening stock was taken by assessee as that was shown by him as closing stock in this A.Y. 2009-10. Thus no benefit of enhancement of closing stock was claimed or allowed in A.Y. 2010-11. This exercise is essentially revenue neutral between two years and/or in subsequent years. The Hon ble Supreme Court in the case of CIT Vs. Excel Industries Ltd. (2013) 358 ITR 295 has held that addition in such revenue neutral exercise should not be made by department. Thus on both the counts, there is no justification to make addition for difference valuation of stock and Ld. CIT (A) is wrong and has erre ..... 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