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2012 (11) TMI 501 - ITAT MUMBAIUndisclosed income u/s 158BC – Discrepancy in stock of finished products and work in progress – Addition on account of inter-se stock position at various stages in the production line - Held that:- As the stock register of furnished goods is kept for central excise purpose and products are not 100% pure & require further processing. Pre-shipment goods pending approval are recorded for MIS purposes but not for central excise purposes as it may require further processing in case the sample was not approved. As search occurred during the middle of year and sales made out of the stock of finished products have been only recorded later and exported and have been duly accounted for in books, there is no need to treat the value as undisclosed income. In favour of assessee Discrepancy in stock of raw materials – Assessee accepting that there is a discrepancy of 730 kgs in an item – But the AO was not agree with the view of assessee – Held that:- After considering the arguments and examining the documents placed on record, only addition of 730kgs value of HCO was required to be confirmed. Even though assessee explanation was that the stock could be out of earlier issued for process, the same cannot be accepted in the absence of reconciliation, so to that extent the addition required to be confirmed. Partly allowed in favour of assessee Discrepancy in stock valuation – Between MIS statement and books - No variation in quantities mentioned but only in valuation of the stock - Difference arose due to different valuation rate adopted – Held that:- Just because MIS statement prepared by factory manager was found, no addition can be made without examining whether the rates adopted on the quantity was not according to the accounting principles. No such exercise was undertaken by AO. Since assessee accounted the stock according to the principle of accountancy being followed and certified by management and auditors, we agree with the argument that variation cannot be brought to tax as undisclosed income on the basis of difference in valuation in books. In favour of assessee Deduction u/s 80HHC – AO argued that there are sales proceeds includes proceeds other then export proceeds - Held that:- Where book results can neither be altered nor have been rejected/altered by the revenue authority and which show export proceeds being received by the assessee. Therefore, the deduction as claimed u/s 80HHC should be allowed to the assessee, within the premise of section 158BH. In favour of assessee
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