Discrepancy In Stock Sufficient Enough For Addition U/s 69B: Rajkot ITAT Confirms Estimation Of Gross Profit

Update: 2024-02-07 08:59 GMT
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On finding that the AO has rightly estimated the gross profit after finding discrepancy in stock, the Rajkot ITAT confirmed the addition made u/s 69B of Income tax Act, 1961.The Bench comprising Suchitra Kamble (Judicial Member) and Waseem Ahmed (Accountant Member) observed that, “The Assessing Officer has rightly estimated the gross profit by applying fair and reasonable ratio of gross...

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On finding that the AO has rightly estimated the gross profit after finding discrepancy in stock, the Rajkot ITAT confirmed the addition made u/s 69B of Income tax Act, 1961.

The Bench comprising Suchitra Kamble (Judicial Member) and Waseem Ahmed (Accountant Member) observed that, “The Assessing Officer has rightly estimated the gross profit by applying fair and reasonable ratio of gross profit at 8% instead of 6.25%. There is no need to interfere with the finding of the Assessing Officer as well as that of CIT(A).” (Para 7)

The bench also observed that, “the discrepancy in stock was also accepted by the director of the company and thus the addition made u/s. 69B as undisclosed stock was rightly confirmed by the CIT(A).”

As per the brief facts of the case, the Assessee filed a return which was accompanied with audit report in Form No. 3CA and Form No. 3CD. A notice u/s 143(2) along with notice u/s 142(1) was issued. The Authorized Representative of the assessee submitted the details i.e. copy of some details of fixed assets purchased during the year and ledger account of unsecured loans from its books of accounts, but the Assessing Officer observed that these details were not built. AO found a variation in Gross profit disclosed by assessee. The AO estimated the gross profit ratio at 8% instead of 6.25% as declared by the assessee. Thus, the AO made addition of difference amount and towards excess stock. The CIT(A) confirmed the addition made by AO.

The Coram noted that the AO after rejecting the book result, has categorically estimated the profit of business on the basis of data available on records.

The Bench observed that the contention of the assessee was dealt by the AO in his remand report and the CIT(A) has categorically held that by not producing books of accounts and requested details called for as per questionnaire.

Finding that addition of excess stock duly recorded in the books of assessee, the Coram categorically mentioned that the assessee has not explained the source of expenditure.

Therefore, on finding that CIT(A) has correctly analysis the discrepancy in stock, the ITAT dismissed the assessee's appeal.

Counsel for Appellant/ Taxpayer: None

Counsel for Respondent/ Department: Abhimanyu Singh Yadav

Case Title: Raghuvanshi Cotton Ginning & Pressing Pvt. verses Addl. CIT

Case Number: ITA No. 222/Rjt/2016

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