INCOME TAX ACT, 1961

Section 143

Account - Additions to income - Addition towards excess stock - Stock valued higher in survey

Assessee-company was engaged in business of jewellery. During course of survey, stock of the assessee was valued by Departmental Approved Valuer at Rs. 2,73,01,637 as against the stock as per books of account at Rs. 33,06,724 and consequently excess stock of Rs. 2,39,94,913 was found. Further, statement of the director of the assessee was recorded by the Department, who pointed out that some of purchase bills as well as sale bills were yet to be recorded in the books of account. Department accepted the purchases to the tune of Rs. 1,11,26,742 as the purchase bills were not recorded in the books of account at the time of survey and consequently AO gave credit of the said amount out of total excess stock of Rs. 2,39,94,913. Accordingly, the AO made addition on account of excess stock of Rs. 1,17,80,068. Further, the assessee to counter the valuation done by the Departmental Approved Valuer filed the valuation report of Registered Valuer. However, CIT (A) rejected the said report and confirmed the addition made by the AO. Held: It was found that Departmental Approved Valuer valued the stock by applying current market rate or the rate as found recorded in sale bills instead of cost price of the stock, which was the prescribed and appropriate method as per accounting standard. Further the purity of the gold in the articles/jewellery was also not considered correctly but standard 22 carat purity was taken by him. Such defects and discrepancies in the valuation were specifically highlighted by the assessee however, AO did not even make an attempt to examine and verify the correctness of the same. Further, the only reason cited by CIT (A) for rejecting the valuation report of Registered Valuer was delay in submitting the report. It was pertinent to note that the valuation report was not a document prepared by the assessee but it was a report of the Registered Valuer and therefore, if there was any delay in filing the same then it would not change the material fact as pointed out in such report. Accordingly, the CIT (A) was not justified in rejecting the valuation report filed by the assessee. Thus, it could be said that the addition was based only on the higher valuation done by the Departmental Approved Valuer as against the valuation recorded by the assessee in the books of account and purchase bills and hence, such addition was deleted.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2015-16

INCOME TAX ACT, 1961

Section 69

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