Case Law Details
Shyam Cotsyn India Ltd. Vs ITO (ITAT Ahmedabad)
Understatement of stock or unrecorded sale
If the assessee has overvalued its closing stock of the earlier assessment year which suggests that amount of profit was increased by that amount or the loss was decreased by the same amount of that assessment year. As such the effect of the closing stock of the earlier assessment year has already been given effect in that particular year which cannot be challenged in the year under consideration.
Under valuation of closing stock of Yarn
Regarding the under valuation of the closing stock, we note that the assessee has shown its opening quantity of stock at 68785 KGs valued at Rs. 45,40,197 showing the average cost of such opening stock at Rs. 66 per KG. The assessee during the year purchased the quantity of yarn at a higher value. As such the total quantity for the purchases of the yarn is 34964 whereas the total quantity of yarn sold/consumed during the year is 58902. Thus it is evident that the opening quantity of the stock was very much available in the closing quantity of the yarn shown by the assessee in its books of accounts. But the AO has not considered the opening value of the yarn stock while determining the closing value of the yarn as on 31 March 2012 which is not correct as per the valuation rules prescribed under the accounting standard as per the provisions of section 211 of the companies Act. All these facts can be verified from the order of the AO as recorded on page 7 of the assessment order. Accordingly, we are not convinced with the finding of the authorities below that the assessee has undervalued its closing stock.
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