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M/s Palco Automobiles Versus J.C.I.T, Range-1, Paschim Medinipur and A.C.I.T, Cir-1, Mednipur Versus M/s Palco Automobiles

2016 (1) TMI 408 - ITAT KOLKATA

Addition made towards difference in valuation of closing stock - Held that:- The method of valuation of closing stock adopted by the Learned AO in this assessment year should be adopted for valuation of opening stock for the assessment year under appeal. Hence we deem it fit and appropriate to set aside this issue to the file of the Learned AO to follow the aforesaid direction in respect of valuation of opening and closing stock of goods. - Decided in favour of assessee for statistical purposes. .....

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AO which are not rejected by the Learned AO. Hence in these facts and circumstances , we deem it fit and appropriate, in the interest of justice and fair play, to set aside this issue to the file of the Learned AO to decide this issue afresh in accordance with law. The assessee is at liberty to file additional evidences and documents to explain the cash found during the course of survey with reference to its cash book of various divisions before the Learned AO. - Decided in favour of assessee f .....

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of the Jurisdictional High Court in the case of CIT vs Crescent Export Syndicate (2013 (5) TMI 510 - CALCUTTA HIGH COURT ). Accordingly the ground raised by the revenue stands allowed. However, the alternative argument of the Learned AR that the second proviso to section 40(a)(ia) inserted with effect from 1.4.2013 in the statute wherein if the payee has included the relevant receipts in his books and filed returns thereon, then the assessee should not be invited with disallowance u/s 40(a)(ia) .....

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he Respondent : Shri Amitabh Roy, JCIT/ld.DR ORDER SHRI M.BALAGANESH, AM These appeals of both the assessee and the revenue arise out of the order of the Learned CIT(A)-XXXVI, Kolkata in Appeal No. 462/CIT(A)-XXXVI/Kol/R-1, Mid./11-12 dated 19/11/2012 against the order of assessment for the Asst Year 2009- 10 framed by the Learned AO u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). 2. Both the appeals arise out of the common order of the Learned CITA and they are tak .....

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the sum of ₹ 2,27,246/- towards difference in valuation of closing stock in the facts and circumstances of the case. 4.1. The brief facts of this issue is that the assessee is a partnership firm engaged in the trading of motor cycles, servicing and repairing, mobile services and authorized agent of P C Chandra Jewellery Apex P Ltd . The assessee has been valuing the closing stock by considering the cost price of the goods alone regularly over the years. The Learned AO during the course of .....

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wing ground:- 8. The CIT(A) is wrong to confirm the addition of ₹ 2,27,246/- to raise the value of the closing stock without corresponding direction that the opening stock for the next year would have arise with that addition. He also failed to hold valuation of closing stock made at cost or market price need not be disturbed . 4.2. The Learned AR argued that the valuation of closing stock has been made at the lower of cost or market price in accordance with the generally accepted business .....

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In response to this, the Learned DR vehemently supported the orders of the lower authorities. 4.3. We have heard the rival submissions and perused the materials available on record. At the outset, we find lot of force in the arguments of the Learned AR that the Learned AO had stated in the assessment order in respect of the additions made that the assessee had agreed for the disallowances. Hence the reliance placed by the Learned CITA on this aspect while upholding the additions is not apprecia .....

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assessee. We hold that the valuation method prescribed by the Learned AO is in order as the valuation of closing stock should be made at the lower of cost or market price. However, the components of cost would obviously include all the direct expenses incurred by the assessee for bringing the goods into working condition. We are in complete agreement with the arguments of the Learned AR that if the consistent method followed by the assessee is disturbed by the Learned AO for valuation of closin .....

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facts and circumstances of the case and in law, the hon'ble Tribunal was justified in confirming the order of the Commissioner of Income-tax (Appeals) whereby he directed the Assessing Officer to make adjustment of unutilized Modvat credit to the opening stock and thus ignoring the ratio laid down in Melmould Corporation v. CIT [1993] 202 ITR 789 (Bom) wherein it was held that changing the value of opening stock will lead to chain reaction and hence the same should not be done ?" 2. Thi .....

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as on March 31, 1999. The question before the Delhi High Court was that the adjustment of excise duty could be made in the opening stock also. In this connection, relying upon the decision of the Privy Council in the case of CIT v. Ahmedabad New Cotton Mills Co. Ltd. AIR 1930 PC 56, the Delhi High Court took a view that to give effect to section 145A, if there is any change in the closing stock at the end of the year then there must necessarily be a corresponding adjustment made in the opening .....

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not adopted it is perfectly plain that the profit which is brought forward is not the real one. It may be more or it may be less, but it has no relation to the true profit if the stock is valued on one basis when it goes out without considering the value of the stock when it comes in. When, therefore, there is undervaluation at one end, the effect is to cause both a smaller debit in respect of the stock introduced into the next account and a larger sum for profits realised by the sale, change i .....

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closing stock of the previous year be taken as opening stock of the next year and that the Assessing Officer be directed to establish the valuation for closing stock as opening stock of the next year, the Departmental representative stated that he has no objection for the same. This concession has been recorded in the order. Respectfully following the decision of Bombay High Court as stated supra, we hold that the method of valuation of closing stock adopted by the Learned AO in this assessment .....

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s cash found during the course of survey. 5.1. The brief facts of this issue is that during the course of survey, cash of ₹ 5,48,923/- in Automobiles Division and ₹ 2,33,519/- in Telecom Division was found and inventorised by the survey team. The Learned AO asked the assessee firm to reconcile the above cash found at the time of survey with its regular books of accounts and the assessee could not do so during assessment proceedings. Accordingly, an addition u/s 68 of the Act was made .....

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fficials did not leave any adverse remark or any appraisal report that the cash was not found to be not business cash but having come from some unknown source ; 5.2. The Learned AR argued that the survey team found these cash at the counter. There is no finding holding that the cash found did not relate to the business receipts and the business was not stopped while the survey was going on. Instead the business was allowed to be carried on by the survey team and cash found at the close of the su .....

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en produced by the assessee before the Learned AO which were not rejected by the Learned AO. Admittedly, the cash found during the survey stands explained from the cash book submitted before the Learned AO and hence there is no need to make any addition in this regard. In response to this, the Learned DR vehemently supported the orders of the lower authorities. 5.3. We have heard the rival submissions and perused the materials available on record. At the outset, we find that the Learned AO had w .....

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eam. Hence there could be a situation that certain business receipts and payments could not have been properly entered on the day of survey itself. However, the cash book has been prepared and final balance sheet is prepared later on and presented before the Learned AO which are not rejected by the Learned AO. Hence in these facts and circumstances , we deem it fit and appropriate, in the interest of justice and fair play, to set aside this issue to the file of the Learned AO to decide this issu .....

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s erred in Law and circumstances of this case in holding the provisions of sec.40A(ia) are applicable only to amounts of expenditure which are payable as on 31st March of every year and it cannot be invoked to disallow expenditure which has been actually paid during previous year without deduction of TDS. 6.1. We find that the provisions of section 40(a)(ia) of the Act have been held to be applicable even for amounts paid before the end of the previous year by the decision of the Jurisdictional .....

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. This amendment has been held to retrospective in nature by the decision of the Hon ble Delhi High Court in the case of CIT vs Ansal Land Mark Township (P) Ltd reported in 61 taxmann.com 45 (Del) wherein it was held as follows:- Section 40(a)(ia) was introduced by the Finance (No.2) Act, 2004 to ensure that an expenditure should not be allowed as deduction in the hands of an assessee in a situation where income embedded in such expenditure has remained untaxed due to tax withholding lapses by t .....

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