Tarapada Modern Rice Mills Vs ACIT (ITAT Kolkata)
The appeal filed by Tarapada Modern Rice Mills against the confirmation of an addition of Rs.50,03,733/- for the Assessment Year 2015-16 was allowed by the Income Tax Appellate Tribunal (ITAT), Kolkata Bench. The addition originated from a survey under Section 133A, where the Assessing Officer (AO) found a discrepancy in the stock of paddy, rice, and bran. The firm’s contention was that the excess stock should be treated as business income, and thus only the Gross Profit (GP) rate should be applied, particularly since the amount was offered for tax and advance tax was paid. However, both the AO and the Ld. CIT(A) rejected this, the latter dismissing the appeal on the grounds that the assessee failed to demonstrate how the excess stock had been reflected in the books of account and the Profit & Loss (P&L) account.
The ITAT reviewed the record and found that the assessee had indeed conceded the excess stock during the survey, offered the amount for tax, and paid the consequential advance tax. Crucially, the Tribunal observed that while the AO claimed the stock was undisclosed, documents indicated the stock was duly accounted for in the final accounts for the year ending 31.03.2015. The Tribunal noted a significant procedural lapse: the AO did not point out any specific defect or deficiency in the books of account, nor did the AO formally reject them. Instead, the AO simply made a direct addition of the full value of the excess stock. Since the books were audited and produced, and the AO failed to substantiate any defects or justify the rejection of the book results, the ITAT disagreed with the conclusions of the Ld. CIT(A). The Tribunal reversed the lower authority’s order and directed the deletion of the entire addition of Rs.50,03,733/-, allowing the assessee’s appeal.
