ASSISTANT COMMISSIONER OF INCOME TAX, BENGALURU vs. DAVANGERE SUGAR COMPANY LIMITED, DAVANGERE

ITA 1657/BANG/2025Status: DisposedITAT Bangalore09 October 2026AY 2017-187 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the addition made by the AO was unsustainable. It noted that the physical inventory of sugar and molasses tallied with the books of account. The difference arose solely from the valuation of stock on different dates (27.07.2016 versus 31.03.2016), which is a marketable commodity whose price fluctuates. The Managing Director's explanation for this valuation difference was accepted. Furthermore, the Tribunal found it significant that the AO, in its remand report after considering the ITSC order and additional evidence, agreed to allow the benefit of telescoping. Once the AO conceded to this position, the Revenue could not challenge it. Therefore, the grounds raised by the Revenue were dismissed. The deletion of the addition by the CIT(A) was upheld.

What were the facts?

The Revenue appealed the order of the CIT(A) for AY 2017-18, which deleted an addition of Rs. 2,06,88,995/-. This addition was made by the AO on account of excess stock found during a search and survey action on 27.07.2016. The physical stock of sugar and molasses was valued at Rs. 39,60,83,278/-, while the company's books showed Rs. 37,53,94,283/-. The Managing Director explained this difference as being due to valuation at market rates on the survey date versus book rates as of 31.03.2016. The assessee sought telescoping this amount against Rs. 1,86,58,60,000/- declared as unaccounted donations by the MD. The AO initially disallowed telescoping as the MD's assessment was not finalized, and made the addition. The CIT(A), after a remand report from the AO agreeing to telescoping based on an ITSC order, deleted the addition.

What were the issues?

1. Whether, on the facts and in law, the Ld. CIT(A) erred in allowing the benefit of telescoping of Rs. 2,06,88,995/- to the assessee company out of the total amount declared by Shri S S Ganesh before the Hon’ble Income Tax Settlement Commission (ITSC), when the ITSC had only allowed telescoping of certain undisclosed incomes and their taxability in the hands of individual assessees? 2. Whether, on the facts and in law, the Ld. CIT(A) erred in relying on the ITSC order, ignoring that the assessee company was discussed in the ITSC order concerning Shri S S Ganesh? Assessee's Contentions: - No difference in the quantity of stock was found; the addition was solely on account of valuation difference. - The Managing Director explained the valuation difference as due to fluctuations in rates between 31.03.2016 and 27.07.2016. - The AO agreed to grant the benefit of telescoping in its remand report, rendering the Revenue's appeal baseless. Revenue's Contentions: - The amount declared by the Managing Director was in his individual capacity and could not be telescoped against the impugned addition. - The ITSC order was not relevant to this issue.

Which sections of the Income-tax Act were involved?

Section 132,Section 133A,Section 143(3),Section 153D,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BANGALORE BENCHES, BANGALORE

Before: SHRI WASEEM AHMED & SHRI SANDEEP SINGH KARHAIL

For Respondent: Shri. Srinivasan V, Advocate

PER SANDEEP SINGH KARHAIL, JUDICIAL MEMBER:

The Revenue has filed the present appeal against the impugned order dated 30.05.2025 passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals) – 11, Bengaluru, [“learned CIT(A)”], for the assessment year 2017

The order continues below.

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