PARAMESHWARA MANGALAM STEELS PRIVATE LIMITED,CHENNAI vs. DCIT CIRCLE 1, TRICHY

The assessee has more or less raised common grounds of appeal for both these assessment years, therefore, for the sake of brevity, grounds of appeal filed for the assessment year 2012-13 are reproduced as under:-

Whether the (earned Authorities below are justified to assess the income of the Appellant at Rs.14,05,17,960/-, when there is an inadvertent error in valuing the closing stock, under the facts and circumstances of the case.

The learned Authorities ought to have appreciated the fact that the value of closing stock adopted in the revised return was as per the method of accounting under section 145 of the Act, under the facts and circumstances of the case.

Brief facts of the case extracted from for assessment year 2012-13 are that the assessee is in the business of manufacturing steel filed its return of income for assessment year 2012-13 on 30.09.2012 declaring total income of Rs.14,05,17,960/-. The case was selected for scrutiny and during the course of assessment proceedings, the Assessing Officer noticed that survey was conducted in the business premises of the assessee on 12.02.2013 to collect details of bank accounts and sundry debtors for recovery of unpaid self-assessment tax. The Assessing Officer further noted that in the tax audit report, the assessee claims to have valued closing stock at lower of the cost or market price, however, in the return of income filed for the year closing stock was valued at market price. The said mistake was brought to the notice of the assessee for which the assessee has filed revised return on 18.09.2013 correcting valuation of closing stock by adopting cost or market price, whichever is less, which resulted in loss of Rs.10,11,80,412/- as against income declared at Rs.14,05,17,960/- in the original return of income filed for the year. During the course of assessment proceedings, the Assessing Officer recorded statement from Shri K.Thirupathaiah, C.A., who prepared final accounts of the company and tax audit report. In the said statement, he stated that closing stock of the company as on 31.03.2012 was valued at cost and was certified by the Managing Director. Further, Mr. Rajesh Jagind, who prepared second audit report in a statement recorded u/s.131 has stated that closing stock was valued at cost or market price, whichever is less and same was certified by the Managing Director. Based on the two sets of financial statements, the Assessing Officer noted that the assessee having open cash credit facility with Andhra Bank and said loan was primarily secured by hypothecation of stock. Therefore, based on the stock statement submitted to the bank, a proposal was sent to the assessee on 24.12.2015 to adopt closing stock value as stated in the original return along with a draft assessment order calling for objection, if any, from the assessee on or before 30.03.2015. Since, the assessee has not filed its objections before stated date, the Assessing Officer has adopted closing stock as per original return of income and assessed income as

4. Being aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). Before the learned CIT(A), the assessee neither filed any details nor justified its case, however, expressed its inability to furnish details on the ground that factory premises has been attached by banks for non-payment of loans. The learned CIT(A), after taking note of various facts brought out by the Assessing Officer and also assessee’s inability to furnish any further evidences, confirmed additions made by the Assessing Officer towards difference in value of closing stock on the ground that no evidence or details forthcoming from the assessee to justify adoption of different value for closing stock. Aggrieved by the learned CIT(A) order, the assessee is in appeal before us.

None appeared on behalf of the assessee. We have heard learned DR and perused materials available on record and gone through orders of the authorities below. Admittedly, there are two sets of financial statements prepared by the assessee, one filed along with original return of income and another was filed along with revised return of income and further, both financial statements are certified by two different Chartered Accountants. The case of the assessee before the Assessing Officer was that there is an error in valuation of closing stock, which resulted in higher income returned in original return of income. The assessee has further claimed that although, it has followed cost or market price whichever is less for valuation of closing stock, but by inadvertent error, market price has been adopted for valuation which resulted in higher value of closing stock. The assessee has further claimed that said anomaly was rectified by filing revised return of income. The Assessing Officer did not accept arguments of the assessee for simple reason that two sets of financial statements have been certified by two different Chartered Accountants and further, no evidence has been filed to justify said difference, even though the Assessing Officer has given a proposal for adoption of closing stock as per original return of income.

In the result, appeal filed by the assessee is dismissed (A.Y.2013-14): 7. The facts and issues involved in the present appeal are identical to the facts and issues which we have considered in 2012-13. The reasons given by us in preceding paragraph in ITA No.2075/Chny/2018 shall mutatis mutandis apply to this appeal, as well. Therefore, for similar reasons, we are inclined to uphold findings of the learned CIT(A) and dismiss appeal filed by the assessee.

In the result, appeals filed by the assessee for both assessment years are dismissed.