ASSISTANT COMMISSIONER OF INCOME TAX 6(1)(1), MUMBAI, MUMBAI vs. ENTERTAINMENT WORLD DEVELOPERS AMRITSAR PRIVATE LIMITED, MUMBAI

At the very threshold, it is necessary to note that the disputed amount in the Revenue’s appeal stands at ₹1,81,76,852/–. Admittedly, this figure falls below the monetary threshold of ₹60,00,000/– prescribed by the CBDT for filing of departmental appeals before the Tribunal. The Assessing Officer himself, in his report dated 07/07/2025, has candidly acknowledged this position. In consequence, and in conformity with the settled position of law as well as the binding CBDT circular, the appeal filed by the Revenue is dismissed as not maintainable.

Turning now to the assessee’s appeal, the solitary issue that survives for adjudication relates to the addition of ₹2,34,04,792/– sustained by the learned CIT(A) on account of alleged revaluation of closing stock. All other grounds raised

The Assessing Officer, however, relying upon note 5 of Schedule 8 to the audited accounts, deduced that there was a revaluation of stock-in-trade undertaken on 30/06/2011 at net realisable value. On this premise, he observed that while the closing stock as on 31/03/2011 stood at ₹10,80,69,792/– the value as on 30/06/2011 was ₹8,46,65,000/–, thereby implying a downward revaluation by ₹2,34,04,792/–. Treating this difference as a loss debited to the profit and loss account, he disallowed the same and added it back to the returned income. The learned CIT(A), concurring with the Assessing Officer’s reasoning, confirmed the addition.

Before us, the learned Counsel for the assessee forcefully contended that both the authorities below had proceeded on a fundamental misinterpretation of the audited accounts. He demonstrated from the profit and loss account and the relevant notes to accounts that no claim of loss on account of revaluation had ever been debited or claimed by the assessee. On the contrary, the audited figures disclosed & 3563/Mum/2023 Entertainment World Development Amritsar Pvt. Ltd., that the closing stock as on 31/03/2011 was ₹10,80,69,792/– and as on 31/03/2012 stood at ₹11,66,28,950/–, reflecting an increase and not a diminution. The alleged revaluation of 30/06/2011 was merely an internal exercise, never recognised in the statutory accounts, nor reflected in the computation of income. He also drew our attention to the ledger accounts evidencing land purchases and sales, highlighting that the figure of ₹2,34,04,792/– represented actual sale of land during the year, duly credited in the profit and loss account, and not any revaluation adjustment.

At this juncture, it is appropriate to reproduce the relevant disclosure made in the audited accounts in Note 11 – Changes in Inventories of Finished Goods, Work-in-Progress and Stock-in-Trade, which reads as under: NOTE 11 OF CHANGES IN INVENTORIES OF FINISHED GOODS, WORK-IN-PROGRESS AND STOCK-IN-TRADE Particulars 31-3-2011 31-3-2012 A 116628950 108069792 ----------------- -------------- Inventories at the end of 116628950 108069792 the year Stock-In-Trade (A)

We have carefully considered the rival submissions and perused the assessment order, the impugned appellate order, and, most importantly, the audited financial statements and paper-book extracts placed before us. The Assessing Officer’s entire edifice rests on the premise that the assessee revalued its stock-in-trade on 30/06/2011 to ₹8,46,65,000 as against ₹10,80,69,792 on 31/03/2011, thereby booking a loss of ₹2,34,04,792 in the profit and loss account, which he proceeded to disallow. This premise traces to a reading of the notes to accounts and Schedule figures, and was affirmed by the learned CIT(A) in parity with the Assessing Officer’s inference.

On a closer scrutiny of the primary records, the inference does not withstand. The audited Note on “Changes in Inventories of Finished Goods, Work-in-Progress and Stock-in-Trade” (Note 11) explicitly shows (i) closing stock of stock-in-trade at ₹11,66,28,950 as on 31/03/2012 and (ii) opening stock at ₹10,80,69,792, with the net change in inventories reflected at ₹(85,59,158), a negative expense i.e., a credit to the profit and loss account. This accounting presentation is the very antithesis of any loss having been debited on account of revaluation; if anything, the movement has improved the result rather than depressed it.

The assessee’s explanation that the figure of ₹2,34,04,792 is not a “revaluation loss” at all but the sale value of land actually credited during the year finds direct corroboration in the ledger produced. The “Sale of Land” account records a credit entry of ₹2,34,04,792 (to Shri Venktesh Softech Pvt. Ltd.), with narration specifying the underlying Khasra particulars, and culminating in a closing balance tallying to the same amount. This is a revenue credit,

The audited financials also belie the hypothesis of a recognised revaluation loss. The assessee has specifically clarified and the accounts bear out that any interim management exercise of NRV estimation on 30/06/2011 was never carried through the statutory books for the year; no such loss was routed to the profit and loss account or to the computation of income. That position is plainly recorded: “no claim of loss has been made or debited in the profit and loss account revaluation was only for internal purpose no effect has been taken or charged to the profit and loss account.” In the absence of a debit or a deduction in the computation, there is nothing to disallow in law.

It also bears emphasis that the Assessing Officer’s presumption conflates (a) a mid-year internal NRV & 3563/Mum/2023 Entertainment World Development Amritsar Pvt. Ltd., assessment with (b) a year-end, audited, recognised expense. Taxability follows what has been recognised in the audited accounts and claimed in the computation for the relevant previous year. A mere internal estimate, not translated into a P&L debit, cannot be lifted out of context and added back as if it had reduced income. The schedule of inventories, as reproduced by the Assessing Officer himself, records no such diminution; indeed, the tabulation shows only nominal “For Others” entries (₹38,236 vis-à-vis ₹10,000), offering no foothold for the sweeping conclusion drawn.

The learned Departmental Representative suggested a remand for “verification.” We decline that invitation. The answer lies within the four corners of the record already before us: Note 11 and the Profit & Loss presentation demonstrate an increase in inventories credited to the result; the ledger unmistakably establishes that ₹2,34,04,792 pertains to sale proceeds; and the assessee’s categorical s tatement that no revaluation loss was booked is borne out by the audited statements. No further fact-finding is necessary to decide the point.

In the totality of the circumstances, we hold that the disallowance of ₹2,34,04,792 proceeds on a misappreciation of the audited accounts and the paper-book evidence and cannot be sustained. The addition is, therefore, deleted.

Since the assessee has not pressed the other grounds of appeal, the same are treated as dismissed.