Income tax - Stock valuation

Hello friends,

I have a query.

Whether Income tax department can make an addition based on high valuation of stocks shown in stock statements given to bank to avail high cash credit facilites?

Can the stock statement submitted to bank be a basis of addition ?

Please refer any case law in support of solution.
Replies (4)

If there is actually excess stock (even if it is not to the value shown to the bank but more as compared to the closing stock in your IT return), then you are in trouble.  But mere statement without any additional stock may not warrant any addition IMHO.  Can't recall any specific case laws right now, but the general judicial trend is as I said.

Dear Manmeet,

Agree with what my good friend "member" has to say....

If the actual stock with you tallies with the stock that you have shown in the return, there is no reason for the AO to make an addition. The stock that you have shown to the bank for availing credit facilities is totally immaterial for making the additions. Its a matter between you and the bank and the AO is not justified in making additions on the basis of such stock statement submitted to bank.

I 'll get back to you in a few minutes with a case law on this....

Chintan

In my opinion, yes you can but you should inform the Income tax officer for this with giving proper reason for the high valuation of stock.

It depends upon the AO and Circumstances...

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