M/S. INDUCTION EQUIPMENTS PVT.LTD,PUNE vs. INCOME-TAX OFFICER, PUNE

आदेश आदेश / ORDER आदेश आदेश

PER D. KARUNAKARA RAO, AM :

This is the appeal filed by the assessee against the order of CIT(A)-9,

Pune, dated 20-06-2016 for the Assessment Year 2010-11.

there was delay of 280 days in filing of the appeal. Ld. Counsel for the

assessee referred to the affidavit filed by the assessee dated 17-03-2017 and

submitted that the delay is due to changing of the Consultant of the company

and getting the required information regarding the appeal. After considering

the same and on finding that there was reasonable cause for delay in filing the

appeal, I am of the view that the delay needs to be condoned. Therefore, I

admit the appeal of the assessee for adjudication.

2 ITA No.964/PUN/2017 M/s. Induction Equipments Pvt. Ltd.,

“1. On the facts and the circumstances of the case the CIT has grossly erred in holding that, addition on account of inventory shortage on physical verification of Statutory Auditor is not deductible and should be added back to the returned income.”

company and is engaged in the business of manufacturing of induction heating

equipments and after sales support services. Assessee filed the return of

income on 04-10-2010 declaring total income of Rs.14,97,210/-. During the

year under consideration, it was noticed by the AO that assessee reflected the

gross receipts of Rs.11,09,58,359/-. Assessee declared gross profit at 45% on

the said gross receipts which works out to Rs.5,01,01,981/- and net profit at

3.91% which works out to Rs.43,39,906/-. On perusing the profit and loss

account, the AO noticed discrepancy in the claims relating to the stock account

amounting to Rs.7,52,973/-. Rejecting the explanation given by the assessee,

the AO made addition of Rs.7,52,973/-. Further, the AO made another addition

of Rs.91,466/- treating the same as the prior period one. AO also made

lumpsum addition of Rs.3,00,000/- on account of discrepancies in the

miscellaneous expenses account debited by the assessee to the profit and loss

account. AO opined that the said miscellaneous expenses are not fully

supported by proper bills and hence, not verifiable. Eventually, the AO made

total addition of Rs.11,44,439/- on all these accounts to the total income in the

assessment.

AO in making addition of Rs.7,52,973/- on account of inventory written off by

holding as under :

“5.3 I have considered carefully the facts of the case and submissions of the appellant on the issue. It is seen from the facts of the case as discussed in Para 4 of the assessment order that the appellant’s purchases during the year is inclusive of Rs.7,52,973/- being claimed as

3 ITA No.964/PUN/2017 M/s. Induction Equipments Pvt. Ltd.,

inventory written off on account of discrepancies found on physical verification. In respect of this, the appellant has submitted copy of purchase bills which pertains to the year 2007-08. I support the stand taken by the AO that the said purchases would have been accounted for in the relevant year as no contrary evidence has been produced by the appellant. Besides, no evidence that such inventories were consumed during the process of manufacturing but which were not taken into consideration has been produced. As regard the case laws relied upon by the appellant are concerned, facts of the instant case are different from those cases. In case of M/s. Exxon Mobile Lubricant Pvt. Ltd. the discrepancy on account of physical verification was a trading loss and in the case of Kersons manufacturing it was discrepancies in respect fixed asset. Thus, considering the totality of the facts, the addition made by the AO is upheld and appeal on this ground is dismissed.”

CIT(A) dismissed the said ground as the Ld. AR for the assessee did not press

the said ground before him. There is no discussion with regard to the addition

on account physical verification.

challenging the addition on account of inventory written off with the solitary

ground extracted above.

the issue relating to stock discrepancy/write off needs to revisit to the file of

CIT(A) for fresh adjudication in connection with the purchases amounting to

Rs.7,52,973/- made in the yester years. There is huge amount of confusion in

the mind of the assessee with regard to this entry in the stock register. Earlier

Chartered Accountant who recorded the books of account, is stated to have left

certain incorrect note in the financial statements and added confusion to the

whole claim qua the closing stock account. In this regard, assessee filed the

following written submission requesting to restore the issue to the file of AO.

For the sake of completeness, I proceed to extract the said submission as

under:

“In fact as per the certificate of CA and the stock statement (both enclosed), it can be seen that the said entry was included only once in Purchase Account in

4 ITA No.964/PUN/2017 M/s. Induction Equipments Pvt. Ltd.,

F.Y. 2007-08 and though the stock of raw material in question is mentioned as Rs.85,19,906/- is inclusive of the untraceable stock. So it is clearly indicates that loss was never claimed in A.Y. 2010-11.

In view of the above we kindly request you to restore the case to CIT(A) for examining the proof that showing that no loss was examined.”

filed by the Ld. Counsel for the assessee, I am of the opinion that the solitary

issue raised before me be remanded to the file of CIT(A) for examination of the

correct facts leading to the discrepancy in the inventory. Therefore, in the

interest of administration of justice, I restore the issue to the file of CIT(A) for

fresh adjudication and passing of a speaking order. Assessee is also directed

to file necessary documents before the CIT(A). Accordingly, the solitary ground

raised by the assessee is allowed for statistical purposes.

Order pronounced on this 25th day of May, 2018.

Sd/- (D.KARUNAKARA RAO) लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; �दनांक Dated : 25th May, 2018. Satish आदेश क� आदेश क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : आदेश आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत

अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-9, Pune 3. आयकर आयु� / The CIT-9, Pune 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “SMC” / 5. DR ‘SMC’, ITAT, Pune; गाड� फाईल / Guard file. 6.

आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार

स�यािपत �ित //True Copy// //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune