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2006 (12) TMI 527 - AT - Income Tax
Issues involved: Assessment order u/s 143(3) challenged for being set aside by CIT as erroneous and prejudicial to revenue.
Assessment of Share Capital:
- Assessee increased share capital by Rs. 14,91,000, but AO added only Rs. 4,00,000, leading to alleged concealed income of Rs. 10,91,000.
- CIT found discrepancies in share capital, questioning genuineness of investments and lack of inquiry by AO.
- CIT held assessment erroneous and prejudicial to revenue, directing fresh assessment.
- Assessee argued CIT did not independently examine submissions, citing various High Court judgments.
- Tribunal upheld CIT's decision, noting lack of inquiry by AO into share capital authenticity and upheld CIT's order.
Valuation of Closing Stock:
- Assessee declared closing stock at Rs. 11,82,000, but as per sec. 145A, value was Rs. 14,89,320, leading to alleged escaped taxable income of Rs. 3,07,320.
- CIT raised concerns over undervalued closing stock, questioning AO's assessment.
- Tribunal did not find any error in valuation of closing stock and upheld AO's decision on this issue.
Sale of Shares and Manufacturing Expenses:
- Assessee reflected profit of Rs. 2,36,09,293 on sale of shares without providing DeMat account, raising suspicions.
- AO accepted share profit without thorough inquiry, leading to concerns about genuineness.
- Tribunal found lack of inquiry by AO into share profit authenticity, supporting CIT's decision on this issue.
- Manufacturing expenses discrepancy also noted, but no error found in AO's assessment on this matter.
Electricity Charges and Contingent Liability:
- Assessee claimed electricity charges under 'contingent liability' and made provisions, but failed to explain the contingent liability.
- Tribunal found no material to dispute assessee's claim on electricity expenses or contingent liability, not upholding action u/s 263 on these grounds.
Conclusion:
- Tribunal partly allowed the appeal, upholding CIT's decision on issues related to share capital and share profit authenticity.
- No error found in AO's assessment regarding valuation of closing stock, manufacturing expenses, electricity charges, and contingent liability.
- Decision pronounced on 29 Dec. 2006.