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2016 (2) TMI 384 - MADRAS HIGH COURT

2016 (2) TMI 384 - MADRAS HIGH COURT - TMI - Addition made towards difference in closing stock - assessment by Sales Tax Authorities - whether the stock statement submitted to the Sales Tax authorities was erroneous? - Held that:- As decided in The Commissioner of Income Tax Versus Smt. Sakuntala Devi Khetan [2013 (3) TMI 270 - MADRAS HIGH COURT] it has been held that the Assessing Officer has to adopt the figures and turn over finally assessed by the Sales Tax Authorities. This decision is bind .....

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a, J. ) The Assessee is the proprietor of M/s.Shah Sanitary Stores, Chennai. For the impugned Assessment Year (2002-2003), the Assessing Officer completed the 'scrutinity' assessment, by order dated 30.12.2009. During the course of scrutinity, the Assessing Officer found that the declared stock before the Bank (for availing cash credit facility) was ₹ 7,23,98,153/- and that it did not match with the stock enlisted in the books maintained by the Assessee. There was a difference to t .....

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stock of the Assessee was more than the book value, but, relied upon the fact that the assessee himself had declared stock of ₹ 7,23,98,153/- and held that the difference has to be added in the assessee's total income. 3. The Assessee once again filed an appeal before the Commissioner of Income Tax(Appeals) and the CIT(A) allowed the appeal and ordered deletion of the above addition. Aggrieved over the same, the Revenue filed an appeal before the Income Tax Appellate Tribunal. The Tri .....

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s right in upholding the order of the Commissioner of Income Tax (Appeals) directing the Assessing Officer to delete the addition made towards difference in closing stock? (ii) Whether under the facts and circumstances of the case, the Tribunal was correct in holding that the stock valuation accepted by the Sales Tax Authority is binding on the income tax authorities? 5. It is the case of the revenue that the stock statement furnished by the assessee to the Bank, at the time of availing loan fac .....

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26 ITR 159 (Pandit Bros. vs. CIT), wherein, it was held that, the fact that profit appeared too low or that no stock register was maintained would not be sufficient material to reject the books of account; these would only be material for provoking further enquiry; the Income Tax Officer must discover other materials and evidence to come to such conclusion. 5.2. When the books of account is good enough for provoking further enquiry and not liable to be rejected on moral views, is there any other .....

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not detected any mistake or omission in the books of accounts or stock records of the assessee. It is also not the case that bank authorities have verified the assessee's stock in relation to the position as at the close of the year. Under such circumstances, as expounded by the Hon'ble jurisdictional High Court in the case of CIT vs. N.Swamy 241 ITR 363, the burden was upon Revenue to prove that the stock submitted to the Revenue authorities was erroneous. This burden could not be disch .....

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e burden shifited on the revenue to prove that the stock statement submitted to the Sales Tax authorities was erroneous. There was no proof available for revenue to show that such statement to Sales Tax Authorities was wrong. Under such circumstances, the assessee contends that the inflated reporting of stock to the Bank should not be accepted, since the inflated statement was for the purpose of obtaining more cash credit facility. 5.5. Which out of the two authorities, whether the Bank Authorit .....

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