INDUS MOBILE DISTRIBUTION P LTD,CHENNAI vs. ACIT ,CC-1(1), CHENNAI

First, we will deal with assessee’s appeal in . The only issue in this appeal of assessee is as regards to the order of CIT(A) confirming the action of AO in making addition of stock pending with service centers and not treating the same as closing stock. For this, assessee has raised various argumentative grounds, which need not to be reproduced.

Brief facts are that a survey u/s.133A of the Act was conducted on the assessee on 06.01.2014 and AO while adjudicating the case made addition to the closing stock on the basis of statement recorded during the course of survey. The AO noticed that during survey it was noticed that defective mobiles lying with service centers was not included in the closing stock. According to him, such pending quantity as on 31.03.2009 was 1271 mobiles valued at Rs.16,71,673/-. The AO has not accepted & 522/Chny/2021 3 the reconciliation statement submitted by assessee. The relevant reconciliation submitted by assessee before CIT(A) reads as under:- “It is submitted that during the subject assessment year 1271 were not taken into account as closing stock the breakup of which is as under: ITEMS QUANTITY AMOUNT Accessories 67 68,940 Bluetooth headset 2 3,173 Gift 955 56,803 Handsets 237 15,42,422 Recharge Pack 8 - Scratch Guard 2 334 GRAND TOTAL 1271 16,71,673 It is submitted that out of the total 1271 items 237 were handsets and the others were accessories. Out of the total PRN Value of Rs.16,71,673/-:  Debit Note on the supplier was raised for 1148 PRN valuing Rs.8,58,560/-  The balance 123 PRN valuing Rs.4,48,564/- were not received from the service centre.

The detailed pending purchase return stock report was submitted during the assessment proceedings substantiating the appellant’s reasons for not adding these items in the closing stock.

Before us, the ld.AR for the assessee agreed that in case matter is set aside to the file of the AO, he can explain the quantity & 522/Chny/2021 4 of stock included in the closing stock and matter can be sorted out. When a query was put to ld. Senior DR, she only relied on the assessment order and that of the CIT(A).

After hearing rival contentions and going through the facts of the case, we noted that reconciliation is to be considered and hence, we set aside the order of AO and that of the CIT(A) and remand the matter back to the file of the AO for re-deciding after considering the re-conciliation submitted by the assessee. The appeal of the assessee is allowed for statistical purposes.

Coming to penalty appeal in we noted that penalty is levied by the AO u/s.271(1)(c) of the Act and confirmed by CIT(A) on this very addition on account of discrepancy in stock amounting to Rs.16,71,673/-. Since, we have set aside the assessment order and the order of CIT(A) in quantum, penalty will not survive and hence, penalty is deleted. Since, we have deleted the penalty and matter in regard to quantum addition is set aside to the AO, we caution the AO to reinitiate the penalty proceedings during the course of framing of set aside assessment proceedings, in case he finds there is any concealment of particulars of income or & 522/Chny/2021 5 furnishing of inaccurate particulars of income. Accordingly, the penalty is deleted and appeal of the assessee is allowed.

In the result, the appeals filed by the assessee in is allowed.