THE DCIT, CIRCLE-4(1)(2),, AHMEDABAD vs. TIGER SURGICAL DISPOSABLE PVT. LTD., AHMEDABAD

Appellant by : Shri V.K. Singh, Sr.D.R. Respondent by : Shri M.S. Chajad, A.R. Date of hearing : 04-08-2022 Date of pronouncement : 05-08-2022 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-

The present appeal has been filed by the Revenue against the order dated 07.06.2019 passed by the Commissioner of Income Tax (Appeals)-8, Ahmedabad, as against the Assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2012- 13.

Page No 2 DCIT vs. Tiger Surgical Disposable Pvt. Ltd.

3. The finding of the Ld. CIT(A) which reads as follows: 5.1 Appellant company is engaged in the business of manufacturing of surgical disposable items. It filed its return of income declaring a total income of Rs (- )3,14,72,613/-. It has also claimed brought forward losses. In the course of assessment proceedings AO based on the observation of the auditors required the appellant to furnish the details of the stock and excise return. No details of stock item wise was furnished and estimated 10% of the turnover as net taxable profit As per the appellant the excise authorities have accepted the excise return as well as no evidence to prove that appellant has earned income over and above what has been returned in the return of income. Appellant has also relied upon the various judgments to assert that the estimated addition cannot be made without any basis. I find that appellant has not been able to furnish the record of stock either before the statutory auditors or before the AO. However, no infirmity have been pointed out in the excise return and in fact the statutory auditors have pointed out that the quantity of closing stock does not match with the excise records. In this regard appellant has contended that certain items of stock are not excisable and hence, the books stock exceeds the excise records. Even after considering this contention the fact remains that appellant has not been able to furnish the quantitative details of stock either before the AO or before the statutory auditors. In absence of such details the correct value of closing stock cannot be verified. On facts except from the non furnishing of quantitative details of stock nothing adverse have been found by the AO as regards the purchases and sales. From the P&L A/c. it is seen that appellant has book loss of Rs.4/11,91,446/- and the total returned income is in negative amounting to Rs.3,14,72,613/-. After factoring in the estimated net taxable profit of Rs.51,76,167/- the gross profit of the appellant comes to more than 99%. Hence, I find force in the arguments of Ld. AR that the additions made have resulted into unimaginable GP. Considering the absence of stock records without which the correct value of stock cannot be verified and the fact that no other infirmity was noticed and overall facts and circumstances as above, in my view instead of estimating the net taxable income the @10% of the turnover, it would be fair and reasonable to add 20% to the value of closing stock as reported by the appellant in the P&L A/c. Appellant has, in schedule 14 to the Annual accounts reported a value of closing stock at Rs.2,90,14,269/-. AO is directed to add 20% to the value Page No 3 DCIT vs. Tiger Surgical Disposable Pvt. Ltd.

of this reported closing stock and re-compute the total income accordingly. Related Grounds of appeal are partly allowed.

Corporate Debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. (ii) on the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan; (iii) Consequently all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, including tax authorities if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 could be continued.

6.1. In this connection, it is imperative upon us to extract relevant observation of the Hon'ble Supreme Court in the case of Ghanshyam Mishra & Sons Vs. Edelweiss Asset Reconstruction (supra) contained in para-130 and 132 of the judgments, which are as follows: "130. In the foregoing paragraphs, we have held, that 2019 amendment to Section 31 of I&B Code is clarificatory and declaratory in nature and therefore will have a retrospective operation. As such, when the resolution plan is approved by NCLT, the claims, which are not part of the resolution plan, shall stand extinguished and the proceedings related thereto shall stand terminated. Since the subject matter of the petition are the proceedings, which relate to the claims of the respondents prior to the approval of the plan, in the light of the view taken by us, the same cannot be continued. Equally the claims, which are not part of the resolution plan, shall stand extinguished. 131. ........

'any debts owed to them from the Corporate Debtor accruing prior to the transfer date. Needless to state, that the consequences thereof shall follow.

6.1. In the light of the Apex Court Ruling and in view of overriding effect of IBC code to the Income Tax proceedings and the Resolution Plan approved by NCLT, wherein Revenue has not made any claim before Competent Authority and the same shall stand extinguished and the proceedings thereto stands terminated.