ACIT Vs Shreenathji Extrusion (ITAT Ahmedabad)
ITAT Deletes Stock Addition Due to Estimated Search Verification Method; Section 41(1) Addition Deleted Because Liability Had Not Ceased; Section 153A Addition Fails Without Incriminating Material for Earlier Years
The case concerns cross appeals and cross objections arising from a search conducted on 24 October 2018 in the KAKA Group cases, covering the assessee, a partnership firm engaged in manufacturing aluminium products. Appeals for Assessment Years (AYs) 2015-16 to 2019-20 were heard together as they arose from the same search.
For AY 2019-20, the Assessing Officer (AO) made an addition of Rs. 1,33,70,910 on account of alleged excess stock based on physical verification during the search. The assessee argued that the stock verification was conducted using estimated methods rather than scientific weighing, that stock records were not fully updated on the date of search, and that pending purchase and stock entries were subsequently reconciled. The Tribunal observed that the stock verification was based on sample weighment and estimation, while the Revenue failed to provide any scientific basis or rebut the reconciliation submitted by the assessee. It held that an addition based merely on estimated stock difference without proper verification could not be sustained and deleted the addition.
