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2022 (8) TMI 131 - ITAT SURATAddition on failure to show the “gitty’ expenses in Closing Stock or WIP - addition based on audit objection - material purchased from Udaipur on 31/02/2010, were in transit - CIT-A deleted the addition - HELD THAT:- AO is of the opinion that the purchases as per separate bills issued on 31/3/2010 were not consumed but represent the stock in transit, in that case, it was imperative on his part to cite cogent evidence in reassessment to prove that the material was not received earlier but retained in transit. It was held that there is no iota of evidence that the material was in transit. CIT(A) further held that the stand of assessee that he included the cost of material in sales is correct as it is evident in the ledger account of GHV India Private Limited and the sale consideration income of assessee took the amount as included in the sale construction income. CIT(A) appreciated the facts that the assessee is a contractor, the material which was used in the contract work and has been correspondingly billed and consequently stand included in sales. If the same is again added as closing stock in that case, the value of sales will have reduced by corresponding figure and the same does not have any tax effect - CIT(A) further held that if the addition amount is included in the value of closing stock in that case corresponding deduction is allowable to assessee in subsequent year by increasing of opening balance of stock. On the basis of aforesaid observation, CIT(A) held that explanation of assessee that supplier raised separate bills on account of supplies made on different dates through different challans appears to be quite legible, otherwise, the supplier would have raised only a single bill if the item is supplied on a particular day. We find that the CIT(A) also examined the facts of the case on other angle as well and held that, if the impugned amount is considered as closing stock in that case, the profit of assessee will go up to Rs. 50,88,594/- which is around 20% of sales, which is not feasible considering the fact that work was started only in the month of January, 2010. On observation of ld. CIT(A), we find that the Assessing Officer passed the order in haste and it seems that the addition is made only for the reasons that some audit objection was raised. We also perused the alleged audit objection and find that such objection is raised without application of mind. The assumption of audit objection might be based on the idea that the office of the assessee is situated in Surat, so the material could be in transit to Surat. Though, the facts on the records were otherwise. Thus, we affirm the order of ld. CIT(A) with this additional observation. - Decided against revenue.
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