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2018 (4) TMI 1528 - AT - Income TaxBad debts - Additions made towards sundry balances written off - as per AO the said write off is not in accordance with the provisions of Section 36(1)(vii) r.w.s. 36(2), as the assessee has failed to prove that such debits are arisen out of the sales made in the earlier year - Held that:- No merit in the finding of the AO for the reason that, when the AO has accepted credit side of the Balance Sheet, there is no reason for the AO to reject the sundry balances written off appearing in the debit side of the Balance Sheet only on the ground that the assessee has failed to file necessary evidence to prove that such debts are arisen out of the sales made in the previous financial year. When the assessee has written off debit as well as credit balances, the net result of which may be debit or credit, it has to be treated either as income or expenses. The assessee has filed certain evidences to prove that such advances are outstanding for more than six years and are arisen out of normal course of business like advances for expenses and other advances which are irrecoverable. Therefore, AO was incorrect in disallowing sundry balances written off and claimed as bad debt under Section 36(1)(vii) - Decided in favour of assessee. Additions towards difference in valuation of closing stock - AO has considered the prevailing market rate in Indian market as on valuation date and then adopted cost to determine the cost or market rate whichever is less for valuing the closing stock - Held that:- For valuation of closing stock the assessee has to follow cost or market rate whichever is less and such market rate has to be determined on the basis of the prevailing market rate in Indian market as on the valuation date. If the assessee has considered the prevailing rate in Indian market to arrive at cost or market rate whichever is less, then there is no reason for the AO to deviate from the said method. But, the fact remains that as per the finding of the AO the assessee has determined a different market rate by adopting GJEPC rate to arrive at market rate which in our opinion is not in accordance with the prescribed method for valuation of closing stock. Therefore we set aside the issue to the file of the AO and direct him to determine the value of closing stock by adopting the cost or market rate whichever is less method as prescribed under Accounting Standard-2 for valuation of closing stock. - Decided in favour of assessee for statistical purposes.
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