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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI MAHAVIR SINGH, JM & SHRI MANOJ KUMAR AGGARWAL,
O R D E R PER MANOJ KUMAR AGGARWAL (AM) :
The instant appeal has been filed by the assessee for AY 2010-11 assailing the order of Commissioner of Income Tax (Appeals) – 38, Mumbai [CIT(A)] raising the following Grounds of Appeal:- 1. “On the facts and circumstances of the case and in law, the CIT(A) erred in sustaining the addition of a sum of Rs. 10,52,036/- being difference in value of closing stock as on the date on survey i.e. 04-02-2010 and failed to appreciate the fact that the said difference was partly due to software error and partly due to late receipt of purchase invoice.
2. On the facts and circumstances of the case and in law, the ld. CIT(A) failed to appreciate that the survey party did not find any difference in the quantity of stock on the date of survey and the above-mentioned difference in the value of stock as alleged was only an interim difference i.e. on the day of the survey and the Ld. AO has not observed any discrepancy in the value of the stock at the year-end which has been accepted by him.”
Facts in brief are that the assessee is a resident firm who filed its Return of income for AY 2010-11 during September 2010 declaring total income at Rs. 1,59,09,170/-. The nature of business of assessee is consignment agent and trading in pharmaceuticals raw materials. A survey action u/s 133A was carried out on the assessee’s firm on 04/02/2010 by DDIT unit IV (3) Mumbai, consequent to the search action carried out on Alchem Group of Companies.
Accordingly, the case of assessee was taken up for scrutiny Assessment u/s 143(3) and the same was completed vide Assessing Officer (in short ‘AO’) order dated 08/03/2013. The primary addition of Rs. 10,25,036/- was made account on difference in valuation of stock on the date of survey. The income was recomputed at Rs. 1,69,69,680/- by the AO. During the assessment, assessee valued the stock as on the date of survey at Rs.1,90,88,995/- whereas the actual valuation as given on the date of survey was Rs. 1,80,36,959/- resulting into difference of Rs. 10,52,036/-. The assessee contended that difference in valuation has arisen only due to software error. He submitted that the valuation on the date of survey was done by the software automatically and the same was erroneous. AO concluded that onus to reconcile the difference in valuation wholly lied on the assessee and assessee failed to reconcile the same. Accordingly, he treated the difference in stock valuation as income of the assessee and added the same while completing the assessment.
Aggrieved, assessee preferred first appeal before CIT(A) and the same was disposed off vide CIT(A) dated 07/03/2014. The assessee made submissions to reconcile the stock valuation difference. One of the explanations offered was in respect of purchase made for Rs. 5,47,500/- just two days before the date of survey. During the survey, the material was in transit and not recorded in the purchase account of the assessee. The material was subsequently received after the date of survey and was booked as purchases by assessee as per the invoice date and hence the difference in stock valuation. The balance stock valuation difference was attributed to erroneous calculation by software. Further, assessee contended that quantity as per both stock valuations are the same and no discrepancies with respect to stock quantities could be found out by assessing authority. But the contentions of assessee could not find favour with the CIT(A) who affirmed the decision of the AO. Aggrieved, by the stand of the CIT(A), assessee is in second appeal before us.
The only dispute in the matter is with regard to stock valuation. The assessee has produced before us a detailed chart showing items wise stock quantity held by assessee on the date of survey and valuation thereof as calculated by the assessee and also as calculated by the software. We have perused the chart and notice that at many places the stock valuation as done by the software is shown as negative figures which can never be the case, the stock quantity being positive in nature. The assessee is able to reconcile the stock valuation differences and assessee has successfully demonstrated erroneous calculation by the software. The difference in stock valuation get fully reconciled upon perusal of the chart. The learned DR relied on the order of the CIT(A) and failed to point out any discrepancies in the submission of the assessee in any manner.
Accordingly, the addition of Rs. 10,52,036/- made on account of difference in amount of stock valuation is deleted and the appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 10th August, 2016.