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Income Tax Appellate Tribunal, “C” BENCH KOLKATA
Before: Shri Sanjay Garg & Dr. Manish Borad
order : August 08, 2023 आदेश / ORDER संजय गग�, �या�यक सद�य �वारा / Per Sanjay Garg, Judicial Member: The captioned are cross-appeals, one by the assessee and the other by the revenue against the order dated 08.06.2018 of the Commissioner of Income Tax (Appeals)-4, Kolkata [hereinafter referred to as the ‘CIT(A)’] & Assessment year: 2012-13 M/s Subhlaxmi Chem Pvt. Ltd. passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). First, we take up the revenue’s appeal in ITA No.2023/Kol/2018.
ITA No.2023/Kol/2018 – The revenue in this appeal has taken the following grounds of appeal:
“1. That the ld. CIT(A) had erred in allowing relief to the assessee in respect of the addition of Rs.1,79,00,000/- on account of share application money pending allotment. 2. That the ld. CIT(A) had erred in allowing relief to the assessee in respect of the addition on account of under valuation of closing stock and restricting the addition to Rs.7,41,989/-. 3. That the appellant craves for leave to add, alter or amend any of the grounds of appeal before or at the time of hearing.”
3. Ground No.1 – The revenue vide Ground no.1 has contested the action of the CIT(A) in deleting the addition of Rs.1,79,00,000/- on account of share application money pending allotment.
4. The ld. DR, in this respect, has been fair enough to admit that the assessee during the year has neither received any share application money nor allotted any share against the alleged share application money nor converted the said share application money into unsecured loans. The alleged share application money was received in the past years. Some of the share application money was converted into unsecured loans in the subsequent years. Therefore, the ld. CIT(A) was justified in deleting the addition on account of share application money for the assessment year under consideration. Ground No.2 – Vide Ground No.2, the revenue has agitated the 5. action of the CIT(A) in deleting the addition made by the Assessing & Assessment year: 2012-13 M/s Subhlaxmi Chem Pvt. Ltd. Officer on account of valuation of closing stock and restricting the addition to Rs.7,41,989/-.
The ld. counsel for the assessee, in this respect, has brought out attention to the impugned order of the CIT(A) to submit that the ld. CIT(A) in this respect has relied upon the remand report of the Assessing Officer. The relevant part of the remand report is reproduced as under:
2. Addition of Rs.4,23,45,702/- on account of under valuation of closing stock - During the course of assessment proceedings, A.O. had made addition of Rs. 4,23,45,702/- on account of under valuation of closing stock. A.0. noticed that the total quantity of closing stock was 8,47,083.45 meters which was valued at Rs. 40,87,000/, That means the per unit value of closing stock was Rs. 4.82 which was much less than the cost of production of Rs. 54.81 per unit. Accordingly, A.O. calculated the undervaluation of closing stock at Rs.4,23,45,702/- (49.99 x 8,47,083.45) and added back the same to the total income of the assessee. During the course of remand report proceedings, it was found that as per Tax Audit report & Balance Sheet of the assessee for the financial year 2011-12, the actual quantity of closing stock of finished gray fabrics was 65,590.00 meters valuing Rs. 40,37,000/- and that of finished fabrics was 14,377.50 meters valuing RS. 7,41,989/- It appears that A.0. had miscalculated the quantity of annual closing stock by adding monthly closing stocks together, which is wrong. It was further noticed that, while calculating the net profit in P/L account, assessee has taken the closing stock value (Rs. 40,87, 000/-) of grey fabrics only. Assessee has suppressed the closing stock value of finished fabrics of Rs.7,41,989/- while arriving at its net profit in P/L account. The said facts are clear from the schedule M" of P/L account of assessee and Annexure "G" of Tax Audit Report (Copy enclosed). In that way assessee suppressed income to the tune of Rs.7,41,989/- by underreporting its closing stock. Hence, undervaluation of closing stock was found to be Rs, 7,41, 989/- and not Rs, 4,23,45,702/-."