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TMI Blog2015 (1) TMI 1302X X X X Extracts X X X X X X X X Extracts X X X X ..... lusion that the market rate on which the funds could be borrowed was 12% was not based on any material on record. He has further given a finding that Assessee had paid 18% interest to both related parties as well as the outside parties. Before us, no material has been placed on record by Revenue to controvert the findings of Ld. CIT(A). We therefore find no reason to interfere with the order of Ld. CIT(A) and thus this ground of Revenue is dismissed. Addition made on account of disallowance u/s. 40(a)(ia) - non deduction of tds - form No. 15G filed by Shri Gupta for non-deduction of TDS was invalid - Held that:- We find that while deleting the addition Ld. CIT(A) has noted that assessee had obtained form no. 15G from Shri Kamlesh Gupta and therefore there was no liability on the part of assessee to deduct TDS. Before us, Revenue has brought any material on record to controvert the findings of Ld. CIT(A). We therefore find no reason to interfere with the order of Ld. CIT(A) and thus this ground of revenue is dismissed. Confirming the addition made u/s. 68 - Held that:- We find that while confirming the addition, Ld. CIT(A) has noted that assessee had not made any attempt to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning to the closing stock which has been paid before the due date of filing of return. 2. The Ld. CIT(A) has erred in confirming the addition of ₹ 37,200/- made by the Assessing Officer for the alleged cash credits (unsecured loans) u/s. 68 of the Income Tax Act, 1961 being an amounts of ₹ 18650/- received form Vyas Upendrakumar Somershwar and ₹ 18,550/- from Vyas Mehul Upendrakumar. We first take up Revenue's appeal 4. First ground is with respect to deletion of addition of excise duty to closing stock. 5. During the course of assessment proceedings, AO noticed that assessee has valued closing stock after excluding Excise and VAT. He also noticed that excise receivable was ₹ 1,13,440/- and excise credit receivable was ₹ 4,49,253/-. AO was of the view that the non-inclusive method adopted by the assessee for valuation of closing stock has resulted into understatement of closing stock and thereby the correct profit. He was further of the view that provisions of section 145A of the Act requires that the tax/debts/cess/fees related to stock needs to be included in the value of closing stock. He accordingly made addition for ₹ 5,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the opening stock cannot be changed from the closing stock of the earlier year as per the basic accounting principle and as discussed by the Hon'ble ITAT in the case of West Cost Paper Mills Ltd. (Supra). This principle has been upheld by the Hon'ble ITAT, Ahmedabad also in the case of J.K. Paper Ltd. (supra) 2.3.4 In view of the above, it is clear that the requirement of Section 145A is that the assessee must include tax duties, cess etc. for valuing the closing stock. The assessee can follow the exclusive method for the book purposes but for the purpose of tax audit report and disallowance u/s. 43B it is necessary that the assessee must show the effect of Section 145A by following the inclusive method i.e. by including all tax, duties, cess etc. in the closing stock. These taxes, duties, etc, will have to be added to the closing stock of the current year in view of the above discussion. However, the assessee has to necessarily follow the closing stock of last year as opening stock of the current year. In view of this reason, the addition of excise duty to the closing stock is correct. However, as stated above, the same has to be allowed under section 43B on the payment b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the interest paid at 18% was excessive to the extent of 6%. He therefore considered the interest at 6% (difference between 18% paid by the assessee and 12% being the general rate as per AO) to be excessive and accordingly disallowed the excess interest paid of ₹ 3,61,872/-. Aggrieved by the order of AO, Assessee carried the matter before Ld. CIT(A), who deleted the addition made by the AO by holding as under:- 3.3 I have considered the submission made by the appellant and observation of the AO. The AO has brought no material on record to show that the market rate was 12%. Further, the appellant has paid 18% to both related parties as well as outside parties. Therefore the disallowance made by the AO is deleted and this ground of appeal is allowed. 11. Aggrieved by the order of Ld. CIT(A), Revenue is now in appeal before us. Before us, Ld. DR supported the order of AO. On the other hand Ld. AR supported the order of Ld. CIT(A). 12. We have heard the rival submissions and perused the material on record. We find that while deleting the addition Ld. CIT(A) has noted that AO's conclusion that the market rate on which the funds could be borrowed was 12% was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ismiss the present ground of assessee also. 19. Ground No. 2 is with respect to confirming the addition made u/s. 68 of the Act. 20. On perusing the details of unsecured loan accepted by the assessee, AO noticed that assessee has accepted aggregate amount of ₹ 37,200/- (From Vyas Upendrakumar. Someshwar and ₹ 18,550/- and from Vyas Mehul Upendrakumar). From the copy of the form filed by the assessee, AO noticed that these two parties have stated to have given loans in F.Y. 2007-08 and was also reflected in assessee's balance of F.Y. 2006-07. He therefore considered the aggregate amount of ₹ 37,200/- as unexplained cash credit and added u/s. 68 of the Act. Aggrieved by the order of AO, Assessee carried the matter before Ld. CIT(A). Ld. CIT(A) confirmed the addition by holding as under:- 5.3 I have considered the submission made by the appellant and observation of the AO. The appellant has not denied that the year mentioned is different and not the current year. The appellant has also not made any attempt to rectify the confirmation, and has therefore not filed any other evidence to show that the loan was taken during the year from these parties. Sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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