Deviation from stock valuation method prescribed in Sec 145A cannot lead to addition if exclusive method followed
Brief of the case:
The ITAT Kolkata in the case of M/s Stone India Limited held that VAT and CST even if not included in value of closing stock do not result in undervaluation of closing stock because of its corresponding non-inclusion in Opening Stock , Purchases and Sales. Therefore, addition made on the ground of non-inclusion in the value of closing stock cannot be sustained as the same does not result in any understatement of incomes and profits.
Facts of the case:
- The assessee company was engaged in the business of manufacture and sale of equipments for railways and defence filed its return of income on 31.10.2007 declaring a loss of Rs.63,72,290/-.During the course of assessment proceedings, assessing officer on examination of valuation of closing stock observed that the CST and VAT component paid on the raw material to the extent, the same was lying in closing stock was not included by the assessee in the value of stock as required by the provisions of section 145A.
- He therefore, worked out such proportionate indirect taxes and added to them the value of closing stock which resulted in addition of income to the tune of Rs. 40,73,440/-.
- CIT(A) on appeal , deleted the addition made by AO and held that the CST had already been debited to P&L a/c in the year of purchase and non-inclusion of VAT in stock is made good by its non-inclusion in Sales & Purchase which makes the entire exercise revenue neutral.
- Aggrieved by the order of CIT (A), assessee is in appeal before ITAT.
Contention of the Assessee:
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