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TMI Blog2018 (10) TMI 931X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing officer is further directed to give the credit of the disallowance already offered by the assessee of ₹ 3 05815/– under section 14 A of the Act which is already offered by the assessee. If the above amount has already been added by the assessee in its computation of total income or during the course of assessment proceedings and is already taxed, the learned assessing officer is required to reduce the disallowance of ₹ 665592/– by the sum of ₹ 305815/–. Accordingly, ground No. 1 of the appeal of the revenue is partly allowed. Changed the method of valuation of the closing stock of shares from "at cost" to “at cost or market value, whichever is less” - Held that:- The valuation of the closing stock at cost or marke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld CIT(A) erred in deleting the addition of ₹ 40628975/- made by on account of suppression of stock. 3. The brief facts of the case shows that the assessee is a company engaged in the business of sale and purchase of shares and mutual funds. It filed its return of income on 25/8/2011 at Rs. Nil and carried forward loss of ₹ 141636242/-. Ld AO noted that the assessee has made investment of ₹ 18.60 crores and received the dividend of ₹ 59.62 lacs and therefore, asked the assessee to explain why not the disallowance u/s 14A read with Rule 8D should be made. The assessee submitted a calculation of disallowance of ₹ 305815/-. The ld AO verified the calculation and stated that the assessee has not included unqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arried the matter before the ld CIT(A), who deleted the disallowance u/s 14A of the Act. He held that as the assessee has voluntarily made the disallowance of ₹ 305815/- in its computation of total income, the disallowance to the extent of that sum should have been reduced. He further held that value of unquoted shares should not be considered while working out disallowance u/r 8D as those shares have not yielded any tax-free income during the year. He therefore, deleted the disallowance u/s 14A of ₹ 665592/-. 6. The ld CIT (A) with respect to the addition on account of change in the valuation of the closing stock held that it is correct method of valuation u/s 145A of the Act. He further noted that this method of valuation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the closing stock is bonafide. He further submitted that the ld AO has given the detailed reasons for disallowing the loss of ₹ 40628975/-. He relied heavily on the order of the ld AO. 9. The ld AR submitted that the assessee has itself disallowed a sum of ₹ 305815/- and therefore, to that extent the disallowance cannot be upheld. With respect to the other aspect, she stated that from the unquoted shares, the assessee has not received any income and therefore, the disallowance has been correctly deleted by the ld CIT (A). She heavily relied upon the order of the ld CIT (A). 10. On the issue of change in the method of valuation of stock from At cost to the at cost or market value , whichever is less‟ as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 14A of the act arises. Therefore, the ld AO asked the assessee to explain that why disallowance u/s 14A of the Act should not be made. In response to this question, assessee has suo motto offered the disallowance under Rule 8D of ₹ 305815/- in the submission. However, such disallowance was not originally made in the return of income, the computation submitted by the assessee was verified by the ld AO, and he noted that the assessee has excluded the investment in unquoted shares for calculation of disallowance u/s 14A of the Act. Therefore, he rejected the working, computed the disallowance himself, and made the addition accordingly. The learned Commissioner of income tax appeals has allowed the appeal of the assessee relying on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, ground No. 1 of the appeal of the revenue is partly allowed. 13. Coming to ground number 2 of the appeal it is apparent that for this year the assessee has changed the method of valuation of the closing stock of shares from at cost to at cost or market value, whichever is less. Though As-2 Issued by ICAI does not apply to shares held as stock in trade, however the basic principle of accounting of Prudence‟ explains that no income, which has accrued to the assessee, should not be recognized and valuation at cost or market value whichever is less is part of that principle. . It is also submitted before asked that assessee has followed that method consistently in subsequent years and the learned authorized representative suppor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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