The Delhi bench of Income Tax Appellate Tribunal ( ITAT ) upheld the Commissioner Of Income Tax (Appeals) [CIT(A)]’s deletion of a Rs.1,36,08,090 addition, finding that the survey team had incorrectly used standard weights instead of accurate measurements. The tribunal confirmed that the revenue did not challenge the CIT(A)’s findings supported by excise records.
Rathi Special Steels Ltd, the respondent assessee,the revenue appellant had filed an appeal challenging the order passed by the CIT(A) regarding the deletion of addition of Rs. 1,36,08,090 made on account of a difference in stock.
The revenue appellant had filed an appeal challenging the deletion of an addition of Rs.1,36,08,090/- for stock discrepancy.
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The survey party identified four items but found no goods in transit. The major discrepancy was in Finished Goods of steel bars, with a physical count of 2796.921 MT against a book stock of 2425.22 MT, showing a difference of 371.701 MT.
Rathi Special Steels Ltd,the respondent-assessee claimed that the survey team used uniform weight assumptions for bars of varying weights and presented a chart showing a minor 1.203 MT difference. The Assessing Officer (AO) rejected this, lacking documentary evidence, and added Rs. 1,36,08,090/- to the income based on the survey team’s valuation.
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Before the CIT(A), the assessee argued that the survey team erred by using standard weights for bundles instead of weighing each one. They maintained that records were kept by weight, as shown by government excise records, and that this weight-based valuation had been consistently accepted in prior years.
The assessee contended that the AO’s weight estimation method was flawed and that the valuation used by the department was erroneous.
The CIT(A) agreed with the assessee, finding the survey team’s valuation flawed. The addition of Rs. 1,36,08,090/- was based on incorrect standard weights, ignoring variations in bundle weights. It was noted that the AO had previously accepted the weight-based valuation, leading to the deletion of the addition.
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The tribunal found that the CIT(A) correctly addressed the discrepancies in the AO’s weight determination, which followed the survey team’s erroneous method. The assessee’s weight-based valuation, consistent with ISI standards and accepted in subsequent assessments, was confirmed by excise records showing that goods were sold and stock maintained by weight. The two member bench comprising Saktijit Dey(Vice President) and M.Balaganesh (Accountant Member) dismissed the revenue appeal, noting no issues with the CIT(A)’s order, as the revenue did not contest the factual findings supported by excise records in RG23A.
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