INCOME TAX ACT, 1961

Section 45

Accounting method - Book not rejected - Addition to wards value of stock -

A search and seizure operation was carried out in case of assessee-company. AO found that closing stock of finished goods as shown in books was more than the stock found at the time of physical verification of stock during the search. Accordingly, the AO made addition on account of such difference. Further, CIT (A) sustained the addition made by the AO. Assessee submitted that the stock lying at outside factory premises and cold storage was not taken into account by the AO. It further, submitted that before the AO re-conciliation of stock found with stock as per stock register was produced. It further, submitted that as the amount of stock in the books was more, accordingly, the company had shown more profit in the books and as such the issue needed no adverse inference. Held: Assessee's books of account at any point of time were not rejected by AO. Further, there was no denial by the AO that stock was lying outside factory premises and cold storages and also the AO did not point out any defect in the reconciled stock. Further, the AO as well as the CIT (A) had also not taken the cognizance of proper GP rate applied by the assessee. Therefore, the AO and the CIT (A) both failed to consider the actual material in consonance with the physical stock. Further, the assessee justified the difference in stock through the documents, which was at no point of time doubted by any of the Revenue Authorities. Therefore, the AO was not justified in making addition on account of difference in stock.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2014-15

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