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2019 (7) TMI 1269 - AT - Income TaxAddition on a/c of under valuation of closing stock - valuation of closing stock of raw material, finished goods and scrap - invoices of raw material are booked in the end of year against the material recd - HELD THAT:- Admittedly, no defect has been pointed out by the AO in the books of account except doubting the valuation of closing stock. We find the VAT authorities have scrutinized the records and have accepted the purchase, sales and closing stock without any mistake. The rate of net profit declared by the assessee at 2.43% for the impugned assessment year is higher than the rate of net profit declared in the immediately preceding four years. Further assessee during the course of hearing had demonstrated before us that the goods were received through challans earlier whereas the invoices were raised later and were entered in the books of account. Since AO in the instant case has not made any adjustment to the opening stock of the subsequent year and for assessment year 2012-13, no addition has been made in the order passed u/s 143(3) and the books of account were never rejected, therefore, we are of the considered opinion that the impugned addition should not have been made on account of valuation of closing stock. We further find merit in the argument of the ld. counsel that when the profit of the subsequent year is higher than the profit of the current year, there was no point on the part of the assessee to suppress its valuation of closing stock which would have become opening stock of the subsequent year. We also find merit in the argument of the ld. counsel that considering the size of business of the assessee it is not possible to receive 20% of the material in five days as against 80% of material in the whole year. In view of the above discussion, we are of the considered opinion that the ld.CIT(A) is not justified in sustaining the addition of ₹ 69,01,453/- on account of undervaluation of closing stock. Following the same reasoning, the addition of ₹ 91,963/- on account of finished stock is also deleted. Addition on account of valuation of scrap - we find identical issue had come up before the Tribunal in the case of sister concern of the assessee, namely, M/s Mahashakti Machines Pvt. Ltd. [2011 (4) TMI 1509 - ITAT DELHI] wherein the Tribunal deleted the addition made by the Assessing Officer. Tribunal in the case of sister concern of the assessee, we delete the addition on account of valuation of scrap. Grounds of appeal No.1 and 2 of the assessee are accordingly allowed. Addition of various expenses on ad hoc basis - some of the vouchers are improper and some of the expenses are unvouched - HELD THAT:- It is an admitted fact that the accounts of the assessee are audited and no defects are pointed out either by the auditors or the Revenue. We find the Assessing Officer disallowed the amount on estimate basis on the ground that the vouchers are improper or unvouched. When the vouchers are either not available or improper, the expenses cannot be allowed. It is the settled proposition of law that for allowing any expenditure the onus is always on the assessee to substantiate with evidence to the satisfaction of the AO regarding the allowability of such expenditure. Since, in the instant case, the assessee failed to satisfy the AO with proper vouchers, therefore, disallowance of expenses on estimate basis is justified. However, the disallowance appears to be on the higher side. Considering the totality of the facts of the case, we are of the considered opinion that an addition of ₹ 50,000/- on ad hoc basis under the facts and circumstances of the case will meet the ends of justice.
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