Law:

Section:

Section 145 of the Income-tax Act, 1961 - Method of Accounting - Valuation of stock Addition in assessment year 1996-97 on account of plant and machinery purchased on 31-3-1996, which was in transit and which had not been reflected in closing stock by assessee on 31-3-1996, was not justified [Assessment year 1996-97] [In favour of assessee] CIT v. Rama Engineering Works [2009] 313 ITR 312 (Kar.) For the assessment year 1996-97 during the course of the scrutiny, it was noticed by the Assessing Officer that the plant and machinery of value of Rs. 3,41,659 purchased on 31-3-1996, was not reflected in the closing stock and similarly, the statement shown to the banker and in the return of income filed by the assessee before the Department there was a difference in value of closing stock to an extent of Rs. 5,65,000. Therefore, these two amounts viz., Rs. 3,41,659 and 5,65,000 were included as income of the assessee for the relevant assessment year. Held that it was not the case of the revenue that actually the plant and machinery were delivered to the assessee on 31-3-1996, at Bangalore. It was the specific case of the revenue that the plant and machinery were dispatched on 31-3-1996, from Poona and the same were required to be delivered to the assessee at Bangalore. Therefore, it was not the contention of the revenue that on the same day, the plant and machinery reached the assessee's premises. But, what was contended by the department before the court was that the plant and machinery were under transit and it was for the assessee to reflect the same in the books of account. It was no doubt true that the assessee had not done it. Merely because it had not been done, was not a ground to assess the value of the goods received by the assessee after 31-3-1996, as an income. As regards the addition of Rs. 5,65,000 both the appellate Commissioner as well as the Tribunal had given a categorical finding that the stocks available with the assessee were in the warehouse and governed by the excise rules and it was also expressed by both the parties that it was always possible for the assessee to show the value of the stock-in-trade based on the actual realizable value to the…

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