TMI Blog2022 (1) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... 2012 has been arrived at after adding retrieval stock of 14,998 MT to the opening stock. Thus, the closing stock has been increased by this amount of quantity of retrieval stock. AO is not justified in observing that retrieval stock has given into manufacturing and P L account. Therefore there is no justification in recalling the claim of the assessee that retrieval stock has already gone into computation of income. We find no infirmity in the claim of the assessee. As the above statement produced by the tax auditor report u/s 44AB of the Act clearly demonstrate that retrieval stock has been gone into computation of closing stock and it has been included in the closing stock. The closing stock would only be 109419 MT instead of 124409 MT if it is not included in the closing stock arrived on 31.03.2012. As noticed from the G.P rate in the A.Y under consideration is it at 32.61% as against G.P rate at 16.62% in A.Y 2013-14. The Grosss profit rate in this A.Y 2012-13 has been increased due to retrieved stock gone in to computation of income. On this count also addition made by AO on this count to be deleted. Merely because the assessee agreed even after the retrieval stock in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll as the learned CIT (A) ought to have appreciated that retrieval of stock of 14990MT valued at ₹ 2,72,38,894/- as per the books of account and included in the closing stock, which has enhanced the net profit, could not be added as income again 2.2. The learned AO as well as the learned CIT(A) failed to understand the accounting treatment that the retrieval of stock is recorded in the books of account and offered to tax over and above the normal profits, and therefore, it could not be added again as income. 2.3. The learned AO as well as the learned CIT(A) failed to appreciate that the adding of retrieval of stock of 14990MT as income would result in double taxation of the same income. 2.4. The learned AO as well as the learned CIT(A) failed to appreciate that section 41(1)(a) has no application to retrieval of stock which is accounted and disclosed in the books of account. VALUATION OF CLOSING STOCK. 3. The learned AO as well as the learned CIT(A) failed to appreciate that the addition of ₹ 46,25,232/- as purported undervaluation of stock was unjustified. CESSATION OF LIABILITY. 4. The learned CIT(A) ought to have appreciated that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iv). Disallowance of interest paid on borrowed funds 7,97,049/- (v). Addition of Retrieval of Stock u/s 41(1)(a) 2,77,31,506/- (vi). Difference in valuation of closing stock 46,25,232/- Total 3,38,34,273/- 1.2. The assessee filed the appeal on the following issues: Sl. No. Particulars of Addition/Disallowance Amount (In Rs.) (i). Addition of liability ceased to be in existence u/s 41(1) 4,23,986/- (ii). Addition of Retrieval of Stock u/s 41(1)(a) 2,77,31,506/- (iii). Difference in valuation of closing stock 46,25,232/- 1.3. The learned CIT(A) partly allowed the appeal and further appeal is filed to the Tribunal on the following issues: Sl. No. Particulars of Addition/Disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R submitted that for the sake of removal of doubt, it would be appropriate if reference is made to the details of stock mentioned by the learned AO himself in para/serial No. (VI) of pages 7 8 of his order. The learned AO has noted down the quantity of opening stock, purchases, retrieval of stock and closing stock on the basis of the audited accounts. It may be seen that the learned AO has arrived at the closing stock of 124409 MT of iron ore after reducing the consumption from the opening stock of iron ore and thereafter, adding retrieved stock of 14990 MT and purchases during the year. 2.4. He submitted that a mere glance at the working of the learned AO does not leave any doubt that the said stock of 14990 MT retrieved from the stock yard is added in the closing stock and offered to tax. The working is as under: Particulars Quantity (In MT) Opening Stock 1,85,045 Add: Retrieved Stock (+)14,990 Add: Purchases during the year (+)60,019 Less: Consumption during th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,35,645 Balance 1,09,419 1,09,419 Add: Retrieved Stock Nil 14,990 Closing Stock 1,09,419 1,24,409 Difference 14,990 The fact that the learned AO has adopted 1,24,409 MT of iron ore as closing stock and not 1,09,419 MT in his own valuation for a separate addition of ₹ 46,25,232/- shows that the said retrieved stock was already included in the closing stock. 2.7. It is submitted that the books of account are audited u/s 44AB and the auditor s report in Form No.3CD was also filed along with the return of income. As per Clause 28(B) of the 3CD Report, a manufacturing concern is required to furnish the complete quantitative details of opening stock, purchases, consumption, sales, closing stock, yield etc. of the raw materials, finished products, by-products etc. The details were furnished in Annexure F to Tax Audit Report. As could be seen from this Annexure F , the closing stock of iron ore (ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock yard and on taking to Crushing and Screening plants. The loss of stock claimed over a period of years is treated as retrieval of stock (iron ore) and, accordingly, included in the Closing stock. Since the retrieval has a direct nexus to the loss of stocks of earlier years, it a matter to be considered under section 41(1) of the Income-tax Act. Accordingly, we agree to the proposal of treating the retrieval of stock as an income under section 41(1). We also accept the proposal that the value for retrieval of stock (iron ore) to be adopted is at the rate prevailing at the beginning of the year i.e., 2010-11. 4. The ld.DR submitted that the addition of ₹ 2,77,31,506/- is towards retrieval stock and the assessee vide its letter dated 24/2/2015 and 26/2/2015 had given its consent for AO to make an addition u/s 41(1)(a) of the Act. Once the assessee has given consent, the assessee cannot file appeal against that addition. For this purpose, he relied on the following judgments: a. The Madras High Court in the case of Ramanlal Kamdar Vs. CIT 108 ITR 73, the Hon'ble Court have held that: Once the assessee had stated that it had no objection to the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Hence, this ground of appeal of the assessee is to be dismissed. 6. We have heard both the parties and perused the materials on record. In this case, the addition was made by the AO on the reason that the retrieval stock is not shown in the trade as well as in the profit and loss account. Thus, he made addition of ₹ 2,77,31,506/-. 7. We have carefully gone through the computation of the closing stock by considering this retrieval stock and also without considering retrieval stock which is as follows: Particulars Without considering the retrieved stock (Quantity in MTs) With considering the retrieved stock (Quantity in MTs) Opening Stock 1,85,045 1,85,045 Add: Purchases during the year 60,019 60,019 Sub-total 2,45,064 2,45,064 Less: Consumption during the year 1,35,645 1,35,645 Balance 1,09,419 1,09,419 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2-13 has been increased due to retrieved stock gone in to computation of income. On this count also addition made by AO on this count to be deleted. 10. The other argument of the ld.DR is that this was agreed addition and assessee is precluded form challenging such addition. In our opinion, merely because the assessee agreed even after the retrieval stock included in the closing stock and considered for computation income in this Assessment year, then the department has no jurisdiction to tax that income in this assessment year, since legally such income do not gone out of income declared by the assessee. Therefore, the same income cannot be taxed twce by the Department. There cannot be any estoppel against statute. Article 265 of the Constitution of India in unmistakable terms provides that no tax shall be levied or collected except by the authority of law. Acquiescence cannot take away from a party relief the that he is entitled to where the tax, levied or collected without authority of law. 11. For this purpose, it is pertinent to mention the ratio laid down by the various Courts which are as under:- (i) The Hon ble Delhi High Court in the case of CIT v. Bharat General ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned AO added an amount of ₹ 46,25,232/- on the basis that the closing stock of 124409 MT require to be valued at cost. It may be seen that the learned AO has not given the consequential reduction in the subsequent assessment year, 2013-14. 1.1 It is submitted that the learned AO may be instructed to give consequential effect in the following assessment year. 15. The ld.DR relied on the orders of lower authorities. 16. We have heard the rival submissions and perused the material on record. The plea of the ld.AR on this issue before us is very limited. He wants to consider closing stock as on 31/3/2012 as opening stock as on 1/4/2012. Once the AO included a sum of ₹ 46,25,232 in the closing stock as on 31.03.212, the figures to be taken as opening stock as 01.04.2012 . This is the fair proposition for which the Revenue cannot have any grievance. Order accordingly. This ground of appeal is allowed. 17. The next ground is with regard to treatment of amount of ₹ 4,23,986/- due to SRMT Logistics, Bellary, as income on account of cessation of liability. 18. The ld.AR submitted that this amount has not been written off by the assessee in the asst. year und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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