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2015 (7) TMI 646 - ITAT LUCKNOW

2015 (7) TMI 646 - ITAT LUCKNOW - TMI - Suppressed value of closing stock - AO noticed that the GP rate decline 6.55% in comparison to last year - CIT(A) deleted the addition - Held that:- The assessee has worked out the net realizable value of the closing stock as on 31/03/2010 by taking actual realization up to the date of finalization of balance sheet in the month of August 2010 and in respect of that portion of closing stock as on 31/03/2010 which remained unsold in August 2010 (when the bal .....

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goes to show that the assessee has taken advantage of falling prices to reduce the value of closing stock but the A.O. has correctly valued the closing stock on the basis of market price close to 31.03.2010. Hence, in the facts of the present case, this judgment of Hon'ble Apex Court rendered in the case of Chainrup Sampatram vs. CIT (1953 (10) TMI 2 - SUPREME Court) is also not applicable.

From this Para of AS – 2, it comes out that only those events occurring after Balance Sheet Dat .....

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ssee that there was any defect in the goods at balance sheet date or any other factor was existing at the balance sheet date for which, the prices had fallen after 02.04.2010 and hence, this Para of AS – 2 is also not applicable in the facts of the present case. In fact, this Para supports our observations in Para 7 above. In view of the above discussion, we hold that the order of Cit (A) on this issue is not sustainable. Hence, we reverse the same and restore the order of the A.O. on this issue .....

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the old plant & machinery has delivered the material to assessee’s site free of cost and therefore, the assessee was not required to pay any transportation cost. In spite of this, learned CIT(A) has confirmed the addition of ₹ 50,000/- on the basis that the assessee could not adduce sufficient evidence in support of its claim that the suppliers of old plant & machinery had delivered the material to the assessee’s site free of cost. Considering all these facts, we are of the considered opi .....

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is filed by the Revenue and the Cross Objection is filed by the assessee, which are directed against the order of CIT(A)-II, Lucknow dated 30/04/2014 for assessment year 2010-2011. 2. First we take up the appeal of the Revenue i.e. I.T.A. No.630/Lkw/2014. Ground No. 1 is as under: 1. The Commissioner of Income-tax (Appeals), Lucknow has erred in law and on facts of the case in deleting the addition without appreciating the facts of ₹ 63,05,208/- on account of suppressed value of closing st .....

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of CIT vs. British Paints India Ltd., reported in 188 ITR 44 (SC). 3. Learned D.R. of the Revenue supported the assessment order. He also placed reliance on a judgment of Hon'ble Apex Court rendered in the case of CIT vs. British Paints India Ltd. 188 ITR 44 (SC). 4. As against this, Learned A.R. of the assessee supported the order of learned CIT(A). He also placed reliance on a judgment of Hon'ble Apex Court rendered in the case of Chainrup Sampatram vs. CIT [1953] 24 ITR 481 (SC). He a .....

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have considered the rival submissions. We find that learned CIT(A) has followed the judgment of Hon'ble Apex Court rendered in the case of Chainrup Sampatram (supra) while deciding the issue in favour of the assessee and the A.O. has followed the judgment of Hon'ble Apex Court rendered in the case of CIT vs. British Paints India Ltd. (Supra). Now we examine the applicability of these judgments. The judgment of Hon'ble Apex Court cited by Learned D.R. of the Revenue is in the case of .....

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ment has no applicability in the present case. 6. Now, we examine the applicability of the judgment of Hon'ble Apex Court rendered in the case of Chainrup Sampatram vs. CIT (Supra). In this case, the dispute was that the assessee firm contended that part of silver stock was sold to partners of the assessee firm but the stand of the A.O. was that no sale has taken place and the A.O. considered the market value of the stock as value of stock and since the sale to partners was at lower price, t .....

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taking actual realization up to the date of finalization of balance sheet in the month of August 2010 and in respect of that portion of closing stock as on 31/03/2010 which remained unsold in August 2010 (when the balance sheet was prepared), the same was valued at average rate for the preceding period i.e. from 01/04/2010 to the date of finalisation of balance sheet in the month of August, 2010. We also find that as against the actual sale price realized by the assessee during April 2010 to Aug .....

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Court rendered in the case of Chainrup Sampatram vs. CIT (Supra) is also not applicable. 7. Now, we consider the purpose of valuing the closing stock at market price if it is lower than cost. This concept is to book loss, if any, which has taken place up to the balance sheet date due to fall in price up to that date. This cannot be stretched to include future losses because of fall in price after the balance sheet date because that loss is of the next year and should be considered in that year. .....

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if the entire fall in price is for the reason of exposure of stock to moisture. 8. Now we examine Para 22 of AS - 2, as appearing on page 74 of the paper book. This reads as under:- 22. Estimates of net realizable value are based on the most reliable evidence available at the time the estimates are made as to the amount the inventories are expected to realize. These estimates take into consideration fluctuations of price or cost directly relating to events occurring after the balance sheet date .....

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ditions existing at the balance Sheet Date and in that situation, such reduced prices can be adopted as price on balance sheet date but in the present case, this is not a claim of the assessee that there was any defect in the goods at balance sheet date or any other factor was existing at the balance sheet date for which, the prices had fallen after 02.04.2010 and hence, this Para of AS - 2 is also not applicable in the facts of the present case. In fact, this Para supports our observations in P .....

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eady given. 11. Ground No. 2 is as under: 2. The Commissioner of Income-tax (Appeals), Lucknow has erred in law and on facts of the case in deleting the addition made by the Assessing Officer of ₹ 1,00,000/- on account of Transportation and installation charge. During the assessment proceeding Assessing Officer has observed that the assessee has not debited transportation and installation charges in the profit and loss account. The CIT(A) has not appreciating the facts brought in the light .....

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esent year. Against this addition of ₹ 1,00,000/- made by the Assessing Officer on estimated basis, it was held by learned CIT(A) that looking into the facts of the case, it would be fair and reasonable if the disallowance is restricted to ₹ 50,000/-. In this manner, we find that the addition made by the Assessing Officer was on estimated basis without any evidence on record and the relief allowed by the Assessing Officer is also on estimated basis. This is very relevant to note that .....

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ost. Considering all these facts, we are of the considered opinion that no interference is called for in the order of CIT(A) because he has adopted one estimated figure as against the estimate of the A.O. and we feel that the estimate of CIT (A) is reasonable in the facts of the present case. Ground No. 2 is rejected. 14. In the result, the appeal of the Revenue stands partly allowed. 15. Now we take up the Cross Objection of the assessee i.e. C.O. No.35/Lkw/14. Ground No. 1 is as under: 1. Beca .....

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nd No. 2 is as under: 2.1 BECAUSE the Commissioner of Income-tax (Appeals), has erred in law and on facts in sustaining the addition on account of transportation charges of old Plant & Machinery, to the extent of ₹ 50,000/- (out of addition of ₹ 1,00,000/- made by the Assessing Officer). 2.2 Because in the absence of any material or evidence in the possession of Assessing Officer to suggest that the assessee itself had incurred expenditure on transportation of old Plant & Mac .....

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19. Learned D.R. of the Revenue supported the assessment order. 20. We have considered the rival submissions. We find that a clear finding has been given by learned CIT(A) that the assessee could not produce any evidence in support of its claim that the assessee did not incur any expenditure on transportation of old plant & machinery and the same was delivered by the supplier free of cost. Considering these facts, we do not find any reason to interfere in the order of CIT(A) on this issue. G .....

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