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Facts
The assessee claimed a loss of Rs. 99,03,460/- due to the valuation of closing stock of shares. This claim was initially made during a survey but later retracted, with the assessee arguing the loss was due to valuation and not sale of shares. A second issue involved an addition of Rs. 1,69,316/- related to a mismatch in TDS.
Held
The Tribunal held that the CIT(A) had not properly dealt with the evidence regarding the valuation of closing stock and the grounds for the claim of loss. Similarly, for the TDS mismatch, the CIT(A) had not fully examined the assessee's explanation. Therefore, both grounds were restored to the Assessing Officer for de-novo consideration.
Key Issues
Whether the loss claimed on account of valuation of closing stock of shares is a valid claim, and whether the addition on account of TDS mismatch was correctly confirmed without proper examination of evidence.
Sections Cited
131, 133A, 26AS, 44AB, 271(1)(c)
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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA & SHRI SIDDHARTHA NAUTIYAL
(Assessment Year: 2016-17) Vinodbhai Laxmanbhai Pithiya Vs. Deputy Commissioner of (Indiviaual), Income Tax, Anil R. Shah (C.A.), Shreeji House, Circle-1(1)(1), 4th Floor, B/h. M.J. Library, Ellis Vadodara Bridge, Ahmedabad-380006 (Previously known as Income Tax Officer, Ward- 1(2)(5), Vadodara) [PAN No.AIAPP8126E] (Appellant) .. (Respondent) Appellant by : Ms. Kinjal Shah, C.A. Respondent by: Shri Hargovind Singh, Sr. DR 11.06.2025 Date of Hearing Date of Pronouncement 18.06.2025 O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals)-11, (in short “Ld. CIT(A)”), Ahmedabad vide order dated 15.03.2024 passed for A.Y. 2016-17.
The Assessee has taken the following grounds of appeal:-
“1. (a) Your Appellant submits that CIT(A) has erred both in Law and in fact in rejecting Retraction/ Modification made by the Appellant of Statement recorded u/s.131 of the Act despite the binding judgement of Supreme Court relied by the Appellant in the case of CIT vs. Khadar Khan Son reported in 352 ITR page 480 and thereby upholding the order of Assessing Officer. (b) Your Appellant submits that while disposing off the Appeal the CIT(A) has not dealt with the above referred judgement and has without application of mind and facts of the case and provisions of Law and evidence before him he has confirmed addition made by the Assessing Officer of Rs.99,03,460/- and thereby disallowing claim of loss of your Appellant.
2. (a) Your Appellant also submits that CIT(A) having admitted that the Appellant has started Dealing in Shares at the end of the Accounting Year shares which are held by him as Stock-in-Trade were rightly valued on the accepted principle of accounting method of "Valuation of Closing Stock on cost or market value whichever is lower." (b) Your Appellant refers and relies on AS-13 of Institute of Chartered Accountants of India as well as know and accepted valuation Method, and Valuation done by Appellant in his Audited Books of Accounts duly accepted by Assessing Officer & Approval by the Chartered Accountant of your Appellant in Audit & Tax Audit. (c) Your Appellant also invites refers and relies on Supreme Court Judgement in the A.L.A Firm vs. CIT 55 Taxman 497 (SC) holding that for valuing closing stock cost or market value which ever is low is required to be followed as per Supreme Court Judgement in the case of Chainrup Sampatram vs. CIT 24 ITR page 481 (SC) (refer para 27) (d) Your Appellant submits that he has been maintaining regular books of Accounts duly audited and subject to Tax Audit and as per Accounting Method accepting the method by the Department the valuation of closing stock market value which ever is to be lower is required to be accepted and Loss of Rs.99,03,460/- be earned forward. II. The CIT(A) is also erred in upholding addition of Rs. 1,69,316/- being has difference in Tax at Source (TDS) as per Sec.26AS. Your Appellant submits that he has been maintaining proper and regular details and there is no difference as allegedly by CIT(A) and that on facts of the case and provisions of Law Rs.1,69,316/- requires to be deleted.”
The assessee has also raised the additional grounds of appeal:
“1. The CIT(A) has erred both in Law and in Fact in confirming addition of Rs.1,69,316/- being difference in account on account of TDS and mis-match in 26AS. The Assessing Officer had made the addition under the head ‘undisclosed contract receipt’ which is a misnoma and since your Appellant had filed all proof and evidence before Assessing Officer and CIT(A) no addition TDS, TCS in the Account of M.K.C. Infra Ltd. it should have been accepted by CIT(A) and addition of Rs.1,69,316/- shall have been deleted. It is therefore submitted that relief claimed above be allowed and the order of the Assessing Officer be modified accordingly. Your Appellant reserves right to add, alter, amend to withdraw any or all Ground of Appeal.”
4. The brief facts of the case are that the assessee is engaged in the business of transport in the name of M/s. Pramukh Transport. He also derived income from partnership firm. Further, during the impugned assessment year, the assessee was also engaged in the business of purchase and sale of shares. A survey under Section 133A of the Act was carried out in the case of the assessee on 06.03.2018. During the course of survey proceedings, in the statement recorded on oath under Section 131(1) of the Act, the assessee was asked to explain the adjustment of business losses of Rs. 89,39,413/- against Short Term Capital Gain (in short “STCG”) earned on sale of land, in his return of income. In response to the question asked by the Department, the assessee during the course of survey submitted that during the impugned Financial Year, the assessee had made purchase and sale of shares and the assessee had incurred losses on such sale of shares, which were adjusted against the capital gains. However, subsequently, the assessee retracted his statement made during the course of survey proceedings and vide “Retraction Affidavit” dated 26.03.2018, the assessee submitted that declaration of capital loss of Rs. 99,03,460/- is hereby retracted since the assessee had not sold nor transferred any shares and therefore, there is no question of any capital gains or losses arising from such sale of shares. In the retraction statement, the assessee submitted that he had started the business of purchase and sale of shares during the impugned assessment year and the assessee had valued his closing stock of shares of public companies on the basis of “cost or market whichever is lower” and on such valuation of closing Vinodbhai Laxmanbhai Pithiya (Individual) vs. DCIT Asst. Year –2016-17 - 4– stock shares, the assessee incurred loss of Rs. 99,03,460/- as per books of accounts regularly maintained by the assessee.
However, the Assessing Officer did not agree with the contentions made by the assessee and added a sum of Rs. 99,03,460/- to the income of the assessee with the following observations:
7.3 The assesses has not given any evidences in support of his above retraction. The retraction is found to be based on flimsy grounds and not based on true and correct evidences. Neither during the course of assessment proceedings, the assessee submitted any evidence in this regard. Script wise details of shares with date of purchases, value of purchases and their values as on 31.03.2016 have not been given by the assessee. Copy of demat account not submitted. The assessee in his retraction, is claiming business loss due to valuation of his holdings in shares as on 31.03.2016 without any true and correct evidences. Hence, retraction of admitted undisclosed income of Rs.99,03,460/- is rejected. The amount of admitted undisclosed income of Rs.99,03,460/- is brought to tax vide this order. Accordingly, addition of Rs.99,03,460/- is made to the total income of the assessee. Penalty proceedings u/s 271(1)(c) is initiated for concealment of income.
In appeal, Ld. CIT(A) confirmed the additions made by the Assessing Officer.
The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(A), confirming the additions made by the Assessing Officer. Before us, the Counsel for the assessee submitted that complete evidences on account of loss incurred by the assessee on account of revaluation of shares had been submitted by the assessee before Ld. CIT(A), during the course of appellate proceedings. The Counsel for the assessee drew our attention to pages 3-4 of the order passed by Ld. CIT(A), in which the additional evidences submitted by the assessee had been duly filed before Ld. CIT(A). However, the Counsel for the assessee submitted that while confirming the addition, the Ld. CIT(A) did not at all specifically deal with the evidences filed Vinodbhai Laxmanbhai Pithiya (Individual) vs. DCIT Asst. Year –2016-17 - 5– by the assessee and confirmed the addition made by the Assessing Officer without due application of mind. Further, the Counsel for the assessee also produced before us a working of the valuation of closing stock of shares held by the assessee as on 31.03.2016. The Counsel for the assessee submitted that the assessee had filed the working of valuation of closing stock before Ld. CIT(A) for his consideration and also submitted that such valuation of closing stock could also be seen from the reports of tax auditor filed by the assessee under Section 44AB of the Act in which the closing stock shares was valued at Rs. 49,47,000/-. The Counsel for the assessee submitted that the assessee had taken a consistent position with respect to valuation of closing stock of shares as per settled accounting principles and accordingly, looking into the instant facts, no addition is called for in the instant facts.
In response, Ld. D.R. placed reliance on the observations made by the Assessing Officer and Ld. CIT(A), in their respective orders.
On going through the facts of the case and also the relevant documents filed by the Counsel for the assessee, we observe that while passing the order, evidently Ld. CIT(A) had not taken into consideration the argument of the assessee that such loss had been incurred by the assessee on account of valuation of closing stock of shares held by the assessee as on 31.03.2016. Ld. CIT(A) proceeded to confirm the addition in the hands of the assessee on the basis that the assessee was not permitted to retract his earlier statement that such loss had been incurred on account of sale of shares. Evidently, the assessee had placed additional evidence on record to substantiate that such loss was on account of valuation of closing stock of shares, which had been Vinodbhai Laxmanbhai Pithiya (Individual) vs. DCIT Asst. Year –2016-17 - 6– recorded as per settled accounting principle. However, Ld. CIT(A) had omitted to deal with the arguments taken by the assessee during the course of appellate proceedings and had also not considered the additional evidences placed by the assessee on record. However, we also note that on perusal of the Audit Report filed by the assessee under Section 44AB of the Act, the Tax Auditor has not given any basis on how the shares were valued at the close of the Financial Year. Accordingly, looking into the instant facts, we are of the considered view that the matter needs a closer and detailed examination by the Tax Authorities and the contentions of the assessee regarding loss on account of valuation of closing stock needs to be adequately deal with. Further, the assessee is also directed to place a detailed working of the valuation of the closing stock of shares held by him at the close of the Financial Year and would also be at liberty to place on record any additional evidence in support of it’s case.
In the result, Ground No. 1 is restored to the file of Assessing Officer for de-novo consideration.
Ground No. 2: Addition of Rs. 1,69,316/- on account of difference in TDS as per Form 26AS.
The brief facts in relation to this ground of appeal are that during the course of assessment proceedings, the Assessing Officer had requested the assessee to explain the difference of Rs. 2,28,237/- being contractual receipts received by the assessee from two parties (as the amounts reflecting in Form 26AS) and income offered by the assessee in ITR. However, the assessee could not satisfactorily explain the said Vinodbhai Laxmanbhai Pithiya (Individual) vs. DCIT Asst. Year –2016-17 - 7– differences, alongwith supporting evidences. Accordingly, the Assessing Officer made addition of Rs. 2,28,237/- on account of undisclosed contractual receipts.
12. In appeal before Ld. CIT(A), the assessee submitted that he had provided transport services to M/s. Lalji Infrastructure, who had deducted TDS on actual payment of Rs. 5,03,196/- made during the impugned assessment year, which included certain opening balances, whereas the transportation services provided by the assessee during the year under consideration was only Rs. 4,44,275/- only. Therefore, since M/s. Lalji Infrastructure had deducted TDS on excess amount of Rs. 58,921/-, on payment basis, which was outstanding as on 01.04.2015, this mismatch had been duly explained by the assessee. Accordingly, for this amount, Ld. CIT(A) gave appropriate relief to the assessee. However, Ld. CIT(A) observed that with respect to TDS done by M/s. MKC Infra Ltd., the assessee had not furnished any supporting documents in order to justify the mismatch between the income and the TDS deducted by the said party. Accordingly, the addition of Rs. 1,69,316/- made on account of undisclosed contractual receipts from M/s. MKC Infra Ltd., was confirmed by Ld. CIT(A).
13. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(A).
14. On going through the facts of the instant case, and the arguments of the Counsel for the assessee that the assessee is in a position to fully explain the mismatch, in the interest of justice, the matter is hereby restored to the file of Assessing Officer for de-novo consideration. The assessee is given liberty to place any additional evidences on record, in support of it’s claim.
In the result, this ground of appeal filed by the assessee is allowed for statistical purposes.
In the combined result, the appeal of the assessee is allowed for statistical purposes. This Order pronounced in Open Court on 18/06/2025
Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 18/06/2025 TANMAY, Sr. PS TRUE COPY आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant ��थ� / The Respondent. 2. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A)- िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,