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Facts
The Revenue filed an appeal against the order of the CIT(A) who deleted an addition of Rs. 3,40,00,000/- made on account of undisclosed stock. The assessee, engaged in manufacturing and importing industrial products, had a mismatch in opening stock for AY 2014-15 compared to the closing stock of AY 2013-14.
Held
The CIT(A) correctly determined that the mismatch in opening stock was due to a clerical error in the income tax return and was substantiated by relevant documents. There was no discrepancy in the audited books of accounts or the balance sheet, and the overstated opening stock and understated purchases of the same amount did not affect the profit.
Key Issues
Whether the CIT(A) was justified in deleting the addition made by the AO due to a mismatch in opening stock, which was attributed to a clerical error in the return.
Sections Cited
143(3), 145(3)
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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY, HON’BLE & SHRI GIRISH AGRAWAL, HON’BLE
PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
This appeal filed by the revenue is against the order of National Faceless Appeal Centre/CIT(A), vide order no. ITBA/NFAC/S/250/2023-24/1058785577(1), dated 15.12.2023 passed against the assessment order by the Income Tax Officer - 25(1)(2), Mumbai, u/s. 143(3) of the Income-tax Act (hereinafter referred to as the "Act"), dated 30.12.2016 for Assessment Year 2014-15. 2. The sole grievance of the revenue is against the action of the ld. CIT(A) deleting the addition of Rs.3,40,00,000/- made on account of 2 undisclosed stock introduced in the books due to mismatch in closing stock for AY 2013-14 and opening stock for AY 2014-15. 3. Briefly stated, facts of the case are that assessee is engaged in the business of Manufacturer, Supplier & Importer of Industrial & Safety Product Like Industrial Gloves, Fire Welding Blankest & Fire Fighting Suit etc. Return of income for AY 2014-15, was filed on 17/11/2014 declaring total income at Rs.2,39,610/-. Case selected for scrutiny under CASS followed by issuance of statutory notices. Assessee complied to the notices by filing requisite details and attending the proceedings. However, learned AO did not consider the submissions filed by the authorized representative of the assessee and rejected the books of account by u/s 145(3) of the Act and made an addition of Rs. 3,40,00,000/- as undisclosed stock to the total income.
Assessee carried the matter in appeal before the ld. CIT(A), who after considering the submissions of the assessee and the relevant documentary evidences, granted relief to the assessee.
Aggrieved, the revenue is now in appeal before this Tribunal.
Heard rival contentions and perused the material available on record. The sole argument of the revenue was that the ld. CIT(A) has ignored the mismatch in closing stock for AY 2013-14 and opening stock for AY 2014-15 while deleting the addition of Rs.3,40,00,000/-. We find that the assessee before the ld. CIT(A) contended that the mismatch had occurred due to a typographical error in showing the stock and purchases in the Income-tax return form. However, there is no mismatch in the books of accounts which were duly audited and placed on record before the ld. CIT(A) as well as before us. Before the ld. CIT(A), the assessee also placed 3 on record a chart showing actual value of opening stock, purchase and closing stocks shown in Audited financials/Tax Audit report and value of these items shown in return of income of AY 2014-15. The chart is reproduced below for ready reference:-
1. The ld. CIT(A) after considering the submissions of the assessee as well as the relevant documents placed on record, came to the conclusion 4 that in the return of income for A.Y.2014-15, the value of opening stock has been shown at Rs.5,60,34,398/- whereas the value of closing stock shown in the return of A.Y. 2013-14 was Rs. 2,20,34,398/-. He considered the explanation of the assessee that, due to clerical error while filing income tax return for A.Y.2014-15, the opening stock was overstated by Rs.3,40,00,000/- and purchase was understated by the same amount of Rs.3,40,00,000/-, which was substantiated by relevant documents. The ld. CIT(A) found that there is no variation in the value of closing stock of Rs. 6,99,61,956/- which is same in both the return of income as well as in audited balance sheet. He held that it was erroneous on the part of the AO to reject the books of accounts merely because there was a difference in value of opening stocks without verifying the value of purchase shown in return of income and balance sheet and since both the figures of opening stock and purchase were overstated and understated by same amount of Rs.3,40,00,000/-, there was no effect on the profit. The ld. CIT(A) accordingly deleted the addition.
We are of the considered opinion that, the findings of the ld. CIT(A) are based on facts on record placed by the assessee during the appellate proceedings. The ld. CIT(A) while doing so has also ruled out any malafide intention on the part of the assessee to manipulate the statement of accounts, so as to gain anything out of it. The mismatch has occurred while filling in the data in return form only. There is no discrepancy in the duly audited financial statements drawn by the assessee from its audited books of account. Under these circumstances, we do not find any reason to interfere with the findings of the ld. CIT(A) while 5
deleting the addition of Rs.3,40,00,000/- and accordingly, the same is upheld. In the result, appeal of the revenue is dismissed.
Order pronounced in the Court on 31 July, 2024 at Mumbai. (NARENDER KUMAR CHOUDHRY) ACCOUNTANT MEMBER Mumbai, Dated 31/07/2024 *SC SrPs *SC SrPs *SC SrPs *SC SrPs
आदेश की "ितिलिप अ"ेिषत /Copy of the Order forwarded to : अपीलाथ" / The Appellant
""थ" / The Respondent 2. संबंिधत आयकर आयु" / Concerned Pr. CIT 3. 4. आयकर आयु" अपील ( ) / The CIT(A)- िवभागीय "ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 5. गाड" फाई/ Guard file. 6. आदेशानुसार/ BY ORDER,