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TMI Blog2017 (1) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim of the assessee with any positive findings to the effect that stock and financial books of accounts were found with discrepancies. Therefore, we are of the view that without any findings as to the correctness of books of accounts and stock registers, additions towards stock difference solely based on the stock statement filed with the bankers is incorrect. In view of the above, the A.O. has wrongly added the difference in the valuation as declared in the books of accounts and one which was recorded in the statements produced before the bank. Hence, the addition made by the A.O. towards stock difference is deleted. - Decided in favour of assessee Disallowance of amount paid to gratuity fund - assessee failed to furnish the copy of approval of gratuity fund from the competent authority - Held that:- As contended that its gratuity fund has been approved by the Principal Commissioner of Income-Tax-2, Visakhapatnam vide his order dated 29.3.2016 and the full benefit had been given w.e.f. 7.1.2001. To this effect, it has furnished copy of order approving the gratuity fund by the competent authority. We find that the gratuity fund of the assessee has been approved by the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the authorized representative of the assessee appeared from time to tome and furnished the books of accounts and other details called for. During the course of assessment proceedings, the A.O. noticed that on verification of books of accounts, there is a difference in closing stock between the books of accounts and the stock statement furnished to the bankers, therefore, issued a notice and asked to submit the reconciliation of stock statement with books of accounts. In response to notice, the A.R. of the assessee furnished stock reconciliation statement reconciling the difference between stock shown in the books of accounts and the stock statement furnished to the bankers and submitted that there is no difference in quantity of stock submitted to the bankers, but there is a difference in value of stock, which resulted in difference in stock between books of accounts and stock statement submitted to the bank. 4. The A.O. after considering the submissions of the assessee held that though there is no difference in quantity of stock, there is a difference in value of stock shown in the books of accounts and stock statement submitted to the bankers. The assessee has failed to off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatement on 31.3.2008, 31.3.2009 31.3.2010, it is seen that the assessee has claimed substantial amount of process loss for the year ended 31.3.2010 and for which no explanation is available in the details filed. The excess claim of process is a clear indication that the closing stock in process declared in the books of accounts is incorrect. In view of these discrepancies, the CIT(A) held that the A.O. is justified in making the impugned addition in regard to the difference in stock in process of ₹ 41,93,351/-, accordingly, directed the A.O. to delete additions made towards difference in value of stock in respect of raw materials and finished goods, however, confirmed addition made in respect of stock in process. In so far as disallowance of contribution to gratuity fund, the CIT(A) held that the assessee failed to furnish the copy of approval of gratuity fund from the competent authority. Therefore, the A.O. was right in disallowing the amount paid to gratuity fund. Aggrieved by the CIT(A) order, the assessee is in appeal before us. 7. The Ld. A.R. for the assessee submitted that the Ld. CIT(A) was erred in confirming the additions made by the A.O. towards difference i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of stock statement submitted to the bankers and the quantity of stocks disclosed in the books of accounts. Though the CIT(A) has pointed out a difference in quantity of stock in process, the assessee claims that the said mistake is an arithmetic error. We find merits in the arguments of the assessee for the reason that the value of stock submitted to the bank cannot be taken to be the exact value of the stock. This is the usual practice adopted by the businessmen by inflating the stock of the assets in order to avail better financial help from the banks. The A.O. has not mentioned or observed any deviation from accounting principles adopted by the assessee for valuation of closing stock. He had also not found any defects in the books of accounts of the assessee or any bogus purchases and sales to come to the conclusion that the books of accounts along with stock registers maintained by the assessee are incorrect. Ultimately, he reached the conclusion that there was no difference in the quantity as had been admitted by the assessee and the one shown in the statement submitted to the bank, except in the case of stock in process. The assessee explained that the stock in process was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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