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2015 (9) TMI 907 - AT - Income TaxAddition to the closing stock adopting cost of goods at the year end instead of adopting cost or realizable value followed by the assessee - Held that:- The assessee has valued the unsold stock by discounting purchase price at fixed percentage considering the age of the stock. However, this method of reduction is not following year by year. As seen from the above table, in the assessment year 2009-10, the assessee adopted the reduction of value of purchase price at 25%, when the stock is one year old. However, for the assessment year 2008-09, it was 50%, for the assessment year 2007-08 again 25% and for the assessment year 2006-07, the same was 50%. There is no explanation for such kind of arbitrary reduction of either 25% or 50%. There is no consistency in the method followed by the assessee for valuing the closing stock. The closing stock is to be valued at market price or cost whichever is less and that should be consistent from year to year. The assessee is not disputed that it has been followed the same method. However, consequent to search action, the assessee wanted to change the method of stock valuation for the first time, which is nothing but an after-thought so as to reduce the income which cannot be permitted at this point of time. - Decided against assessee. Disallowance of lease commitment charges - Held that:- tThough the assessee pleaded that the expenses were incurred for the purpose of business, absolutely nothing on record to indicate that the assessee did acquire any business advantage out of such expenditure. We do not find any expenses allowable under sec.37(1) of the Act and the assessee failed to explain that how it gained some business advantage by incurring that expenditure. Therefore, we are not inclined to uphold the argument of the ld. AR and we agree with the finding of the CIT(Appeals).- Decided against assessee. Regarding donations the assessee along with other partners paid ₹ 30 lakhs to two temples, viz., Mutharaman Temple, Palai and U & U Kattalai, Palai. The share of the assessee’s donation out of these, is ₹ 40,024/- and it cannot be allowed, as the same is added and the CIT(Appeals) has confirmed the same. Since, the assessee has not paid lease commitment charges, we reject this ground.- Decided against assessee. Addition towards stock discrepancy - Held that:- The physical stock of goods lying in Vannarapettai shop and also town shop was taken with the active participation of their staff under their own supervision and valuation thereof has also been checked, the same is found to be correct. Hence, subject to any duplicate entries or change in the dates as stated above, he accepted the value of excess stock found during the course of search to be out of their unrecorded income and agreed to pay the income-tax due on such income for the year. During the course of investigation vide letter dated 10.8.2009 submitted to the ADIT (Investigation) by Sri Shiva Kumar, no specific arguments relating to the figures of stock were raised except pointing out that the physical stock at Tirunelveli was mentioned in the tabulation reflecting the physical stock for the group as a whole. The said mistake was rectified by the AO while passing the order. The AO after considering the entire facts of the case, added ₹ 9,43,980/- as discrepancy found in the stock for this assessment year at Chennai Branch and determined at ₹ 1,11,827/- at Tirunelveli Branch and the same was brought to tax as unrecorded sales. No infirmity in the orders of the lower authorities - Decided against assessee. Allowing the claim of repairs on hired building - revenue expenditure or capital expenditure - Held that:- n order to find out the nature of expenditure, it is necessary to find out the nature of construction put up, the purpose of construction/renovation and the use to which the construction put up and also if it is a case of repair, replacement, addition or improvement has to be gone into. It is only on the aforesaid material, keeping in mind the principles enunciated in the judgments by the Supreme Court and keeping in mind section 37 and section 32 of the Act, that one has to determine whether the expenditure is revenue expenditure or capital expenditure. What would apply to civil work equally applies to electrical work or interior decoration. The assessee had not stated the nature of civil works constructed, the nature of interior decoration made to the leasehold premises and also the nature of electrical work undertaken. In the absence of that material and without proper application of mind, the assessing authority proceeded on the footing that the expenditure constituted capital expenditure. We remit the issue in dispute to AO to consider whether the expenditure is revenue or capital in nature and decide afresh - Decided in favour of assessee for statsitical purposes. Addition on account of expenditure by way of sundry supply to staff found to have been vouched by self-made vouchers - assessment u/s 153A - Held that:- While making the above additions, the AO has not established that there is incriminating material discovered during the course of search. Being so, in our opinion, when the original assessment has been completed u/s.143(3), the addition can be made on the basis of incriminating material found during the course of search. Admittedly, in this case, there is no mention of any incriminating material discovered during the course of search warranting addition, placing reliance on the order of the Special Bench in the case of Cargo Global Logistics Ltd. vs. DCIT (2012 (7) TMI 222 - ITAT MUMBAI(SB)), we are inclined to uphold the argument of the ld. AR. - Decided in favour of assessee. Unexplained expenditure u/s.69C - Held that:- This is a search assessment. The AO made an estimation of drawings. Without any incriminating material found during the search, the AO cannot make addition on account of poor cash drawings of the assessee. In such circumstances, it is not possible to sustain the addition made by the AO and confirmed by the CIT(Appeals). - Decided in favour of assessee.
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