MADHUSUDAN ORGANICS LTD.,KOLKATA vs. ITO, WD-11(3), KOLKATA, KOLKATA

A.Y. 2010-11 Madhusudan Organics Ltd. Vs. ITO Wd-11(3) Kol. Page 2 2. Sole issue raised by assessee in this appeal is that Ld. CIT(A) erred in confirming the order of Assessing Officer by sustaining the addition of ₹3,04,280/- on account of suppression of closing stock.

Briefly, the facts are that assessee in the present case is a limited company and engaged in the manufacturing business of industrial oil and petroleum jelly. The assessee in its balance-sheet has shown closing stock of 70872 litres only but Assessing Officer observed the quantity of closing stock should have been at 79955 litres as per the excise return. Thus a difference in the quantity of closing stock was observed by AO for 9083 litres. The AO determined the value of suppressed closing stock at ₹33.50 per letres aggregating to ₹304280/- only. On being confronted, assessee submitted that it has received 9083 litres of stock from M/s Balmer Lawrie & Co. for some job work. The impugned stock was excisable items, therefore it was entered into excise record and no entry was made in the books of account of assessee as the assessee has not incurred any cost. Therefore, no closing stock was shown in its books of account. However, AO, during the course of assessment proceedings observed that the explanation furnished by assessee is not based on supporting any documentary evidence. Therefore, AO disregarded the contention of assessee and added sum of ₹3,04,280/- to the total income of assessee on account of suppressed closing stock.

Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that the impugned difference of closing stock has been carried over from the financial year ended 31.03.2008. Therefore, no addition on account of suppressed of closing stock can be made in the year under consideration. The stock was received from M/s Balmer Lawrie & Co. in the year 2008 to carry out some processing activities. But due to some problem the processing was not carried out and the stock was never returned back to M/s Balmer Lawrie & Co. As the stock was excisable item, therefore the same was entered into excise records but no entry was made in the books of account of assessee as no cost was incurred with regard to such stock. The assessee in A.Y. 2010-11 Madhusudan Organics Ltd. Vs. ITO Wd-11(3) Kol. Page 3 support of its claim also filed a confirmation from M/s Balmer Lawrie & Co. However, Ld. CIT(A) disregarded the contention of assessee and confirmed the order of AO by observing as under:- “10.2 I have considered the submission of the appellant’s AR on the issue at hand in the backdrop of the assessment order. I find from the assessment order that the AO has pointed out specific defect in the quantity of closing stock of 70872 liters when compared to the closing stock of 79,955 liters of closing stock as per the excise record maintained by the appellant. Neither before the AO not before me has the appellant explained this discrepancy. It is contended by the AR of the appellant that this discrepancy is carried forward from financial year ended 2008 and therefore no addition can be made during this year. However, the AR has failed to substantiate his claim with supporting evidences. Thus I am unable to accept the contentions of the AR of the appellant. This ground of appeal