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2019 (11) TMI 1037 - ITAT CUTTACKValuation of closing stock - GP estimation - AO has applied Percentage Completion Method (PCM) and estimated @15% profit on the entire value of closing stock(WIP) as declared by the assessee in his profit and loss account and balance sheet - HELD THAT:- It is undisputed that the assessee has taken advance from customers i.e. the final sale value has not been recognized. We also notice from the order of AO that the assessee did not cooperate during the course of assessment proceedings for substantiating the valuation of closing stock(WIP) as shown in the profit and loss account. As per the profit and loss account filed before us by the assessee we find that the gross profit of the assessee comes to 6.45% on the assessee’s business for the year under consideration. Therefore, authorities below should apply the GP rate on the impugned amount @6.45%. Accordingly, we restrict the addition estimating @6.45% on the value of closing stock(WIP) as shown by the assessee in his profit and loss account. Hence, the profit on the closing stock of ₹ 1,88,08,700/- estimated @15% by the CIT(A) without any basis, is restricted to 6.45% and the profit is directed to be taxed in the impugned assessment year on the closing stock at ₹ 12,13,161/-. In regard to the contention of ld. AR that the assessee will get benefit of opening work-in-progress in the next year, it is made clear that the assessee has not cooperated during the course of assessment stage for substantiating the value shown in the profit and loss account of work-in-progress. The AO has added as unexplained closing stock (WIP) and the CIT(A) has observed that percentage completion method (PCM) has not been followed. Therefore, the contention of the assessee is not accepted. Accordingly, the grounds of appeal of the assessee are partly allowed.
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