INCOME TAX ACT, 1961

Section 143(3)

Assessment - Additions to income - Difference in opening stock of the relevant year and closing stock - Books results were rejected under section 145(3) and AO had gone for estimation of profit

AO noticed that there was difference in opening stock and closing stock since opening stock as on 1-4-2010 was appearing at Rs. 12,15,76,258 whereas closing stock shown as on 31-3-2010 was Rs. 11,38,67,290. He, therefore, required assessee to substantiate the difference of Rs. 77,08,968. It was explained by assessee that during the year expenditure of Rs. 77,08,967 was incurred for completion of mall which was added to the opening stock while filing return of income electronically. However, AO was not satisfied with the argument advanced by assessee. According to him, after an expenditure was incurred during the year, same should have been booked as on date of incurring the expenditure and not in the opening stock as coming forward from preceding year. Rejecting various explanations given by assessee, AO made addition of Rs. 77,08,967 to income of assessee.Held: Assessee had explained the difference in closing stock figure of the last year and opening stock figure of the concerned year filed before AO. However, same was rejected on the ground that details of expenditure and date of incurring such expenditure along with the purpose was not given. However, at the same time, it is also an admitted fact that books results were rejected under section 145(3) and AO had gone for estimation of profit. Considering totality of the facts of case and considering that there was difference of Rs. 77,08,967 in closing stock of preceding year and opening stock of the relevant year, adoption of net profit rate of 3% on Rs. 2,16,78,967 (i.e., turnover of Rs. 1,39,70,000 + Rs. 77,08,967 being difference in stocks) would meet the ends of justice.

REFERRED :

FAVOUR : Partly in assesse's favour.

A.Y. :

Section 68

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