April 2009
Unaccounted income : A.Y. 2001-02 : Value of closing stock given to bank higher than value as per books : Difference added as unaccounted income : Difference in value of closing stock should be reduced by similar difference in opening stock.
By K. B. Bhujle, Advocate
Reading Time 2 mins
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12 Unaccounted income : A.Y. 2001-02 : Value of closing stock given to bank
higher than value as per books : Difference added as unaccounted income :
Difference in value of closing stock should be reduced by similar difference
in opening stock.
[CIT v. Capital Tyres Manufacturing Unit, 176 Taxman
178 (Delhi)]
For the A.Y. 2001-02 the AO found that the assessee had
hypothecated its stock with the bank for availing overdraft facility and that
the value of the stock declared to the bank was much higher than the value of
stock declared in its books of account. The AO rejected the assessee’s
explanation in respect of the difference and made an addition of the
difference as unaccounted income. The CIT(A) held that the addition made on
account of the difference of valuation of the closing stock has to be reduced
by the similar difference in the opening stock. The Tribunal confirmed the
decision of the CIT(A).
On appeal by the Revenue, the Delhi High Court
upheld the decision of
the Tribunal and held : “Both the authorities had taken into account the
opening and closing stock of last year and had rightly excluded the inflated
stock pertaining to the immediately preceding year. Thus, the approach of the
Tribunal could not be said to be perverse or erroneous.”
