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2019 (6) TMI 388 - AT - Income TaxAddition being alleged excess value of stock calculated during the course of survey - rejection of books of account - G.P. estimation - HELD THAT:- We found that addition was made on the basis of statement of Director. However, later on the director retracted his statements. The assessee company with the help of complete working established that the statements at the time of survey with regard to processing cost was wrong. However, A.O. could not point out any defect or discrepancy in factual working so submitted and which were duly supported by audited accounts. A.O. solely relied only on the statements to make the additions and had no other evidence. Thus there is no merit for the addition made on account of processing rate difference in so far as all processes as envisaged by the department were not carried out on all the finished goods and only the process required by the customers were so carried out. Therefore, actual process cost as arrived in books of account is to be taken for valuation of stock. It is clear from the above chart that even if the tentative quantity taken by the department with the rates as per books of account is taken total stock works out at ₹ 7,87,86,680/- as against the stock as per books of account at ₹ 8,18,90,637/-. Thus, there is shortage of stock as on the date of survey amounting to ₹ 31,03,957/- which can be considered as having been sold but not recorded in the books of account on the date of survey. At the most, the department can add GP earned on such shortage of stock, in so far as the A.O. has not doubted that all the purchases had been recorded in the books of account. Once the purchases is found to be accounted for, addition can be made with respect to G.P. earned on such shortage of stock. The G.P. during the year is 7.48%. - Appeal of the assessee is allowed in part.
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