The Tax Publishers2021 TaxPub(DT) 0470 (Kol-Trib)

INCOME TAX ACT, 1961

Section 145

Where quantity of Kachha and Pucca bricks cannot be physically counted, when there was no such expertise in the members of the survey team and when there was no required manpower and exact quantum of earth and coal was not available and when AO had not pointed out any defects in these books and when he did not reject them, it was not open for AO to ignore these books of account and adopt the value of stock as estimated by the survey team, therefore, addition was deleted.

Accounting method - Addition on account of under-valuation of closing stock - AO exclusively relied on stock valuation made by survey team on date of survey -

Assessee was engaged in the manufacturing of bricks. A survey was conducted under section 133A on the assessee's business premises and its brick field. The return of income was taken up for scrutiny assessment by issue of a notice under section 143(2) and AO passed an order under section 143(3) inter alia making addition on account of undervaluation of closing stock. Held: The survey team had adopted rough method through guess work, to estimate virtually the closing stock of the assessee, as on the date of survey. The quantity of Kachha and Pucca bricks cannot be physically counted, when there was no such expertise in the members of the survey team and when there was no required manpower. The exact quantum of earth and coal was not available. When assessee was maintaining proper books of account and when AO had not pointed out any defects in these books and when he did not reject them, it was not open for AO to ignore these books of account and adopt the value of stock as estimated by the survey team. Thus, addition was deleted.

Followed:K.A. Wires Ltd. v. ITO 2020 TaxPub(DT) 1514 (Kol-Trib)

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2015-16


INCOME TAX ACT, 1961

Section 145

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