Case Law Details
Sanjeev Motwani Vs ACIT (ITAT Mumbai)
Introduction: The case of Sanjeev Motwani Vs ACIT (ITAT Mumbai) revolves around the controversial addition of Rs. 10,01,280/- to the income of the assessee, Sanjeev Motwani, pertaining to the valuation of closing stock for the assessment year 2013-14. This article aims to dissect the court’s decision, especially focusing on how the Principle of Prudence was applied to support the assessee’s valuation of closing stock.
What Led to the Controversy?
Sanjeev Motwani, the proprietor of M/s Jeevat Construction, was engaged in construction contracts with the Indian Railways. However, the projects were not approved by the Railways and were put into arbitration. The assessee then adjusted the value of the closing stock, reducing it on the premise that its value had gone down over time.
AO and CIT(A)’s Stand: Both the Assessing Officer (AO) and the Commissioner of Income Tax Appeals (CIT-A) rejected the assessee’s valuation of closing stock. According to them, the assessee failed to produce any evidence to justify the revaluation, which was against the Accounting Standards.
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