ITA No.560/Coch/2023
Parties Involved
Facts Summary
The assessee filed a return of income declaring total income of Rs.11,17,510. The case was selected for scrutiny and the Assessing Officer (AO) determined the income at Rs.15,70,700 by making an addition under the head underreporting of closing stock. The AO added the value added tax along with the value shown in the closing stock and thereby estimated the additional income of Rs.4,53,230. The assessee filed an appeal before the Commissioner of Income Tax (Appeals) (CIT(A)), contending that the method adopted by the assessee by not including the value added tax in the value of the closing stock is correct since the assessee had adopted the practice of showing the value of the opening and closing stocks at cost price. The CIT(A) dismissed the appeal by relying on the findings of the AO, and therefore, the present appeal has been filed before the Tribunal. The assessee raised several grounds for appeal, including the incorrect calculation of VAT on the closing stock and the AO's failure to adjust the VAT for the opening stock.…
Decision in favour of
Assessee
Legal Issues
- 1. The learned Assessing Officer erred under circumstances and facts of the case and in law in making an addition of Rs. 4,53,230/- being incorrect calculation of VAT on the Closing stock and then application of section 145A which required disclosure as per Income Computation and Disclosure Standards II Valuation of Inventories (ICDS-II). The AO should have appreciated the fact that income Computation and Disclosure Standards II Valuation of Inventories prevails over the provisions of Section 145A of the Income Tax Act, 1961.
- 2. The learned AO arrived to the value of VAT on the closing stock on adhoc basis being 5% of the closing stock being Rs.4,53,230 instead of the amount certified by the Chartered accountant at Rs.1,35,826/-. The AO was duty bound to clearly mention in the Assessment order for the reasons of adopting a different figure as arrived to by him rather than the certified figure and the grounds for rejections for the certified figures, which was not done.
Judgment Outcome
Decided in favour of Assessee.
Precedents Relied Upon
4 precedents cited in this judgement.
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